<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 27, 1999
REGISTRATION NO. 333-76007
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
WILLIAMS COMMUNICATIONS GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 4813 73-1462856
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
ONE WILLIAMS CENTER
TULSA, OKLAHOMA 74172
(918) 573-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
WILLIAM G. VON GLAHN, ESQ.
SENIOR VICE PRESIDENT, LAW
WILLIAMS COMMUNICATIONS GROUP, INC.
ONE WILLIAMS CENTER
TULSA, OKLAHOMA 74172
(918) 573-2000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
RANDALL H. DOUD, ESQ. MARLENE ALVA, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP DAVIS POLK & WARDWELL
919 THIRD AVENUE 450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022 NEW YORK, NEW YORK 10017
(212) 735-3000 (212) 450-4000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE(2)
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<S> <C> <C>
Common stock, par value $0.01 per share(3).................. $750,000,000 $208,500
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</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457 promulgated under the Securities Act
of 1933.
(2) Previously paid.
(3) This registration statement also pertains to Rights to purchase Series A
Participating Preferred Stock of the registrant. Until the occurrence of
certain prescribed events the Rights are not exercisable, are evidenced by
the certificates for the Common Stock and will be transferred along with and
only with such securities. Thereafter, separate Rights certificates will be
issued representing one Right for each share of Common Stock held subject to
adjustment pursuant to anti-dilution provisions.
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 SPECIFICALLY STATING THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(a), MAY DETERMINE.
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<PAGE> 2
EXPLANATORY NOTE
This registration statement contains two forms of prospectus, one to be
used in connection with an offering in the United States and Canada and one to
be used in a concurrent international offering outside the United States and
Canada. The U.S. prospectus and the international prospectus will be identical
in all respects except for the front cover page and back cover page. The front
cover page and back cover page for the international prospectus included in this
registration statement are each labelled "Alternate International Page." The
form of U.S. prospectus is included in this registration statement and the form
of the front and back cover pages of the international prospectus follow the
U.S. prospectus.
<PAGE> 3
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED , 1999
PROSPECTUS
[WILLIAMS LOGO]
SHARES
WILLIAMS COMMUNICATIONS GROUP, INC.
COMMON STOCK
------------------
We are selling shares of our common stock. The underwriters
named in this prospectus may purchase up to additional shares of our
common stock from us under certain circumstances.
This is an initial public offering of our common stock. We currently expect
the initial public offering price to be between $ and $ per share, and we have
applied to have our common stock listed on the New York Stock Exchange under the
symbol "WCG."
------------------
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 9.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -----
<S> <C> <C>
Public Offering Price....................................... $ $
Underwriting Discount....................................... $ $
Proceeds, before expenses, to Williams Communications Group,
Inc. ..................................................... $ $
</TABLE>
The underwriters expect to deliver the shares to purchasers on or about
, 1999.
------------------
<TABLE>
<S> <C> <C>
Joint Book-Running Managers Co-Lead Manager
SALOMON SMITH BARNEY LEHMAN BROTHERS MERRILL LYNCH & CO.
Structural
Advisor
</TABLE>
, 1999
<PAGE> 4
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT
MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION PROVIDED BY THIS
PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THIS
PROSPECTUS.
------------------
TABLE OF CONTENTS
<TABLE>
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PAGE
----
<S> <C>
Prospectus Summary................. 1
Risk Factors....................... 9
This Prospectus Contains Forward-
Looking Statements............... 21
Use of Proceeds.................... 22
Dividend Policy.................... 22
Capitalization..................... 23
Dilution........................... 24
Selected Consolidated Financial and
Operating Data................... 25
Management's Discussion and
Analysis of Financial Condition
and Results of Operations........ 31
Industry Overview.................. 55
Business........................... 62
Regulation......................... 92
Management......................... 99
Principal Stockholders............. 114
</TABLE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Relationships and Related Party
Transactions..................... 117
Relationship Between Our Company
and Williams..................... 118
Description of Capital Stock....... 126
Description of Indebtedness and
Other Financing Arrangements..... 136
Shares Eligible for Future Sale.... 139
Important United States Federal Tax
Consequences of Our Common Stock
to Non-U.S. Holders.............. 141
Underwriting....................... 144
Legal Matters...................... 148
Experts............................ 149
Where You Can Find Additional
Information...................... 149
Index to Financial Statements...... F-1
</TABLE>
This prospectus contains the trademark of Williams which is the property of
Williams and is licensed to us.
Our principal executive offices are located at One Williams Center, Tulsa,
Oklahoma 74172 and our telephone number is (918) 573-2000.
Until __________, 1999, all dealers that buy, sell or trade our common
stock, whether or not participating in this offering, may be required to deliver
a prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
i
<PAGE> 5
PROSPECTUS SUMMARY
This is only a summary and does not contain all of the information that may
be important to you. You should read the entire prospectus, including the
section entitled "Risk Factors" and our consolidated financial statements and
related notes, before deciding to invest in our common stock.
Unless otherwise indicated, or the context otherwise requires, all
information in this prospectus assumes that the underwriters do not exercise
their over-allotment option.
WILLIAMS COMMUNICATIONS GROUP, INC.
We own, operate and are extending a nationwide fiber optic network focused
on providing voice, data, Internet and video services to communications service
providers. We also sell, install and maintain communications equipment and
network services that address the comprehensive voice and data needs of
organizations of all sizes. Our business units are Network, Solutions and
Strategic Investments.
Network offers voice, data, Internet and video services, as well as rights
of use in dark fiber, which is fiber optic cable that is sold without
transmission service, on our low-cost, high-capacity nationwide network. We
focus on providing these services to other communications companies as they seek
to benefit from the growth in communications demand. We plan to extend our
network to encompass a total of 32,000 route miles of fiber optic cable,
utilizing pipeline and other rights of way, to connect 125 cities by the end of
the year 2000.
Solutions distributes and integrates communications equipment from leading
vendors for the voice and data networks of businesses of all sizes as well as
governmental, educational and non-profit institutions. We provide planning,
design, implementation, management, maintenance and optimization services for
the full life cycle of these networks. We also sell the communications services
of select Network customers and other carriers to Solutions' customers.
Through Strategic Investments, we make investments in, or own and operate,
domestic and foreign businesses that create demand for capacity on the Williams
Network, increase our service capabilities, strengthen our customer
relationships, develop our expertise in advanced transmission electronics or
extend our reach. Our domestic strategic investments include our ownership of
Vyvx and minority interests in Concentric Network Corporation, UniDial
Communications, Inc. and UtiliCom Networks Inc. Our international strategic
investments include ownership interests in communications companies located in
Brazil, Australia and Chile.
We enter into strategic alliances with communications companies to secure
long-term, high-capacity commitments for traffic on the Williams Network and to
enhance our service offerings. We currently have strategic relationships with
SBC Communications Inc., Intel Corporation, Telefonos de Mexico, S.A. de C.V.,
known as Telmex, WinStar Communications, Inc., Metromedia Fiber Network, Inc.,
Intermedia Communications Inc. and U S WEST, Inc.
HISTORY OF BUILDING NETWORKS
In 1985, The Williams Companies, Inc. entered the communications business
by pioneering the placement of fiber optic cables in pipelines that were no
longer in use. By 1989, Williams had completed the fourth nationwide digital
fiber optic network covering approximately 9,700 route miles. In January 1995,
Williams sold the majority of its network business to LDDS Communications, Inc.
(now MCI WorldCom, Inc.) for approximately $2.5 billion. In January 1998, upon
the expiration of a non-compete agreement with MCI WorldCom, Williams reentered
the communications network business, announcing its plans to develop the
Williams
1
<PAGE> 6
Network. Many of our current employees worked with Williams in various
capacities during its original communications network build until the subsequent
sale to LDDS.
NETWORK
The Williams Network is a packet-based network which transports information
compressed as "packets" over circuits shared simultaneously by several users.
Newly developed equipment based on advanced communications technology enables
packet-based networks to carry voice and data more efficiently and at a lower
cost than traditional telephone networks. The packet-based technology we use is
known as asynchronous transfer mode, or ATM.
We are combining advanced transmission equipment with our innovative
network design to offer highly flexible, efficient and reliable network services
to our customers. Our innovative network design provides high-quality network
services to support voice, data, Internet and video traffic at a lower
investment than other currently deployed networks due to the elimination of
several layers of costly equipment.
The Williams Network currently consists of approximately 20,550 miles of
installed fiber optic cable, of which 18,600 are in operation, or lit. The
Williams Network currently consists of the following (numbers are approximate):
- 9,700 route miles retained from the sale to LDDS
- 5,300 route miles obtained from other carriers
- 5,550 route miles which we began to construct in January 1998
As a result of our focus on the development and expansion of the Williams
Network, we expect a significant change in our revenue mix over the next few
years. Beginning in 1999, we expect Network to contribute an increasing
percentage of our total revenues and by 2001 we expect Network to contribute the
largest percentage of our total revenues and to be the primary source of our
revenue growth.
NETWORK'S STRATEGY
Network's objective is to become the leading nationwide provider of voice,
data, Internet and video services to national and international communications
providers. To achieve this objective, we intend to:
- become the leading provider to communications carriers
- deploy a technologically advanced network
- pursue strategic alliances
- leverage network construction, operation and management experience
- utilize pipeline rights-of-way
- establish international connectivity
- establish a low-cost position
SOLUTIONS
Solutions' broad range of voice and data products and services allows us to
serve as a single-source provider for our customers' communications needs. We
distribute the products and services of a number of leading communications
suppliers and are therefore able to provide our customers with multiple options.
We serve an installed base of approximately 100,000 customer sites in the U.S.
and Canada and maintain a sales organization consisting of approximately 1,200
sales personnel and 110 sales and service offices.
2
<PAGE> 7
SOLUTIONS' STRATEGY
Our objective is to be the premier provider of advanced, integrated
communications solutions to businesses. To achieve this objective, we intend to:
- capitalize on converging voice, data, Internet and video needs
- leverage our engineering and technical resources
- provide advanced professional services
- utilize our nationwide presence and large, installed customer base
- extend the reach of Network's carrier customers
CONCURRENT INVESTMENTS IN OUR COMMON STOCK
SBC. On February 8, 1999, we entered into agreements with SBC under which:
- SBC must first seek to obtain domestic voice and data long distance
services from us for 20 years
- we must first seek to obtain select international wholesale services and
various other services, including toll-free, operator, calling card and
directory assistance services, from SBC for 20 years
- we and SBC will sell each other's products to our respective customers
and provide installation and maintenance of communications equipment and
other services
- SBC will invest $500 million in our company unless it agrees to reduce
its investment to $425 million, in which case the Telmex investment
described below would be increased to $100 million
Intel. On May 24, 1999, we entered into an agreement with Intel under
which:
- Intel Internet Data Services will purchase domestic transport services
from us and may purchase Internet connectivity services from us
- we will purchase from Intel Internet Data Services web hosting services
- Intel will invest $200 million in our company
Telmex. On May 25, 1999, we entered into an agreement with Telmex under
which:
- we and Telmex must each first seek to obtain select international
wholesale services and various other services from the other for 20 years
- we and Telmex will sell each other's products to our respective customers
and will negotiate the terms under which both parties will provide
installation and maintenance of communications equipment and other
services for the other
- Telmex will invest $25 million in our company, which may be increased to
$100 million if SBC agrees to reduce its investment as described above
Each of the concurrent investments by SBC, Intel and Telmex in our common
stock will be at the initial public offering price less the underwriting
discount. The consummation of the SBC investment, the equity offering and the
notes offering described below will occur simultaneously and are each contingent
upon each other. For more information about the concurrent investments, see the
section of this prospectus entitled "Business -- Strategic alliances."
CONCURRENT NOTES OFFERING
Concurrent with the equity offering, we are offering approximately $1.3
billion aggregate principal amount of ____% senior notes due 2009 by means of a
separate prospectus. The consummation of the equity and notes offerings will
occur simultaneously and are contingent upon each other.
3
<PAGE> 8
THE OFFERING
Common stock offered in the
equity offering........... ____________ shares
Common stock sold in the
concurrent investments.... ____________ shares
Subtotal................. ____________ shares
Class B common stock owned
by Williams.............. ____________ shares
Total capital stock to be
outstanding after the
equity offering and the
concurrent
investments............ 450 million shares
Use of proceeds............... We estimate that the net proceeds from the
equity offering will be approximately $610.7
million. We estimate that the net proceeds from
the notes offering will be approximately $1.3
billion and the net proceeds from the
concurrent investments will be approximately
$725 million. We intend to use these net
proceeds to develop and light the Williams
Network, to fund operating losses, to repay
portions of our debt and for working capital
and general corporate purposes. See the section
"Use of Proceeds" for more information.
Voting rights:
Common stock................ One vote per share
Class B common stock........ Ten votes per share
Other common stock
provisions.................... Apart from the different voting rights, the
holders of common stock and Class B common
stock generally have identical rights. See the
section "Description of Capital Stock" for more
information.
Proposed NYSE symbol.......... "WCG"
Dividend policy............... We do not intend to pay cash dividends on our
common stock in the foreseeable future. See the
section "Dividend Policy" for more information.
The number of shares of common stock to be outstanding immediately after
the equity offering and the concurrent investments does not take into account
the issuance of up to ________ shares of common stock which the underwriters
have the option to purchase solely to cover over-allotments, if any, or the
issuance of shares of common stock pursuant to deferred or restricted share
awards or option grants under our company's stock-based plans for directors,
officers and other employees. See the section "Management -- New stock-based and
incentive plans of our company" for more information.
RISK FACTORS
You should consider carefully the risks of an investment in our common
stock. See the section of this prospectus entitled "Risk Factors" for more
information.
4
<PAGE> 9
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
The following table presents summary consolidated financial and operating
data derived from our consolidated financial statements. You should read this
along with the section of this prospectus entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations," our consolidated
financial statements and related notes and information related to EBITDA below.
In January 1995, Williams sold the majority of its network business to LDDS
for approximately $2.5 billion. The sale included the bulk of Williams'
nationwide fiber optic network and the associated consumer, business and carrier
customers. Williams kept the Retained WilTel Network, which is an approximately
9,700 route-mile single fiber optic strand on its original nationwide network,
its telecommunications equipment distribution business and Vyvx, a leading
provider of multimedia fiber transmission for the broadcast industry. The
Retained WilTel Network, along with Vyvx, Solutions and a number of acquired
companies, formed the basis for what is today our company. See Note 2 to our
consolidated financial statements for a description of acquisitions in 1996
through 1998.
Williams has contributed international communications assets to our
company. When we talk about our company and in the presentation of our financial
information, we include the international assets which Williams has contributed
to us.
We have prepared the accompanying table to reflect the historical
consolidated financial information of our company as if we had operated as a
stand alone business throughout the periods presented. The historical financial
information may not be indicative of our future performance and does not
necessarily reflect what our financial position and results of operations would
have been had we operated as a stand alone entity during the periods covered.
The summary pro forma consolidated balance sheet data give effect to the
following transactions as if they had occurred on March 31, 1999:
- the equity offering
- the notes offering
- the concurrent investments
- the recharacterization of $500 million of paid-in capital to amounts due
to affiliates -- Williams
Pro forma earnings per share is based upon an assumed 450 million shares of
capital stock outstanding after the equity offering and the concurrent
investments and does not include any exercise of the underwriters'
over-allotment option or the issuance of shares of common stock pursuant to
deferred or restricted share awards or option grants under our company's
stock-based plans for directors, officers and other employees.
In connection with the equity offering, we will issue deferred shares of
our common stock and grant options to purchase our common stock to directors and
selected officers and other employees of our company and Williams. Some of the
deferred shares and options are expected to be issued or granted to electing
employees in exchange for existing deferred shares of Williams common stock or
options to purchase Williams common stock on a basis intended to preserve their
economic value and vesting and other terms. We will account for the options
granted in exchange for existing Williams options as new fixed awards and record
compensation expense over the remaining vesting period for the options based on
the difference between the initial public offering price and the exercise price
of the new options. Compensation expense for the deferred shares, whether issued
in exchange for Williams deferred shares or newly issued, will be recorded over
the remaining vesting period based on the initial public offering price. Our
accounting for these options and deferred shares is subject to change depending
upon the final
5
<PAGE> 10
guidance to be provided by the Financial Accounting Standards Board in its
Interpretation of Accounting Principles Board Opinion No. 25, which is expected
to be issued later this year. Assuming that employees elect to exchange all
eligible deferred shares and options and that the initial public offering price
is at the midpoint of the price range set forth on the cover page of this
prospectus, we estimate that the compensation expense relating to the options
and deferred shares will be approximately $____ million over the relevant
remaining vesting periods, of which we estimate that approximately $____ million
will be expensed during the remainder of 1999, and approximately $____ million
of the remaining amount will be expensed annually in 2000, 2001 and 2002.
The Statement of Operations Data reflects the following items and events
that affect comparability with other years:
- In April 1997, we purchased the equipment distribution business of Nortel
Networks Corporation, formerly known as Northern Telecom Limited. We then
consolidated this equipment distribution business with ours to create
Solutions LLC. This combination effectively doubled the size of our
Solutions segment.
- In October 1997, management and ownership of the Retained WilTel Network
were transferred from Strategic Investments to Network and intercompany
transfer pricing was established prospectively.
- In January 1998, the non-compete agreement with MCI WorldCom expired and
Network entered the communications network business.
- Other expense in 1997 includes $44.0 million of charges primarily related
to the decision to sell our learning content business and the write-down
of assets and development expenses associated with other activities in
the Strategic Investments segment. Other expense in 1998 includes a $23.2
million loss related to exiting a venture in the Strategic Investments
segment involved in the transmission of business information for news and
educational purposes.
- In the fourth quarter of 1998, we began to recognize revenues from sales
of dark fiber. Revenues from dark fiber sales for this period were $64.1
million. Revenues from dark fiber sales for the three months ended March
31, 1999 were $51.3 million.
Included in other financial data are EBITDA amounts. EBITDA stands for
earnings before interest, taxes, depreciation and amortization. Consistent with
industry practice, we calculate EBITDA as income or loss from operations
excluding equity earnings or losses, non-recurring or unusual charges included
in operating results, and depreciation and amortization. Accordingly, EBITDA is
calculated excluding non-operating income and expense items including interest
expense, investing income, minority interest in income or loss of consolidated
subsidiaries, gains on sales of subsidiaries or assets, other non-operating
income or expense and provisions or benefits for income taxes. EBITDA is used by
management and certain investors as an indicator of a company's historical
ability to service debt. Management believes that an increase in EBITDA is an
indicator of improved ability to service existing debt, to sustain potential
future increases in debt and to satisfy capital requirements. However, EBITDA is
not intended to represent cash flows for the period, nor has it been presented
as an alternative to either operating income (as determined by generally
accepted accounting principles) as an indicator of operating performance or cash
flows from operating, investing and financing activities (as determined by
generally accepted accounting principles) and is thus susceptible to varying
calculations. EBITDA as presented may not be comparable to other similarly
titled measures of other companies. We expect that under our permanent credit
facility, our discretionary use of funds reflected by EBITDA will be limited in
order to conserve funds for capital expenditures and debt service.
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<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
------------------------- ---------------------------------------
1999 1998 1998 1997 1996
----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues:
Network.............. $ 108,492 $ 21,166 $ 194,936 $ 43,013 $ 11,063
Solutions............ 337,292 327,446 1,367,404 1,189,798 568,072
Strategic
Investments....... 57,985 49,868 205,047 215,583 130,876
Eliminations......... (11,767) (12,187) (50,281) (22,264) (6,425)
----------- ----------- ----------- ----------- -----------
Total
revenues... 492,002 386,293 1,717,106 1,426,130 703,586
Operating expenses:
Cost of sales........ 389,747 288,553 1,294,583 1,043,932 517,222
Selling, general and
administrative.... 122,919 103,673 487,073 323,513 152,484
Provision for
doubtful
accounts.......... 8,437 1,483 21,591 7,837 2,694
Depreciation and
amortization...... 27,578 18,995 84,381 70,663 32,378
Other................ 300 (342) 34,245 45,269 500
----------- ----------- ----------- ----------- -----------
Total
operating
expenses... 548,981 412,362 1,921,873 1,491,214 705,278
----------- ----------- ----------- ----------- -----------
Loss from operations... $ (56,979) $ (26,069) $ (204,767) $ (65,084) $ (1,692)
=========== =========== =========== =========== ===========
Net loss............... $ (74,141) $ (26,498) $ (184,991) $ (35,843) $ (3,514)
=========== =========== =========== =========== ===========
Historical per share
data (basic):
Net loss............. $ (74,141) $ (26,498) $ (184,991) $ (35,843) $ (3,514)
Weighted average
shares
outstanding....... 1,000 1,000 1,000 1,000 1,000
Pro forma per share
data (basic):
Net loss............. $ (.16) $ (.06) $ (.41) $ (.08) $ (.01)
Weighted average
shares
outstanding....... 450,000,000 450,000,000 450,000,000 450,000,000 450,000,000
OTHER FINANCIAL DATA:
EBITDA................. $ (19,242) $ (5,595) $ (80,873) $ 52,005 $ 32,287
Deficiency of earnings
to fixed charges..... (56,505) (26,064) (204,945) (25,697) (1,545)
Net cash provided by
(used in) operating
activities........... (90,225) (109,877) (363,833) 147,858 (1,775)
Net cash provided by
financing
activities........... 587,656 222,691 890,623 225,953 226,009
Net cash used in
investing
activities........... (442,588) (112,491) (496,076) (363,494) (224,186)
Capital expenditures... 151,238 110,117 299,481 276,249 66,900
</TABLE>
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<TABLE>
<CAPTION>
AT MARCH 31, 1999
--------------------------
ACTUAL AS ADJUSTED
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 96,847 $2,417,521
Working capital........................................... 501,447 2,822,121
Property, plant and equipment, net........................ 781,324 781,324
Total assets.............................................. 2,868,859 5,189,533
Long-term debt, including long-term debt due within one
year.................................................... 1,144,056 2,629,056
Total liabilities......................................... 1,838,847 3,323,847
Total stockholders' equity................................ 1,030,012 1,865,686
</TABLE>
<TABLE>
<S> <C>
OPERATING DATA:
Planned route miles......................................... 32,000
Retained WilTel Network route miles....................... 9,700
Route miles to be acquired................................ 8,200
Route miles in construction............................... 14,100
Route miles in operation.................................... 18,600
Planned retained fiber miles................................ 407,000
</TABLE>
A route mile is an actual mile of the path over which the fiber optic cable
is installed. Planned route miles are the total route miles that we expect the
Williams Network to traverse upon completion. Retained WilTel Network route
miles are the route miles traversed by the single fiber optic strand that
Williams retained from the sale of its original network to LDDS in 1995. Route
miles to be acquired are those route miles that we plan to acquire through
purchases or exchanges in completing the Williams Network. Route miles in
construction are those route miles (beyond the Retained WilTel Network route
miles) that we either have constructed or plan to construct to complete the
Williams Network. Planned retained fiber miles are those fiber miles of our
completed network that we expect to retain for our use in serving our customers.
Fiber miles are calculated by multiplying the route miles traversed over a given
segment by the number of fibers contained within that segment.
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RISK FACTORS
You should carefully consider the risks described below before deciding
whether to invest in shares of our common stock.
RISKS RELATING TO OUR NETWORK BUSINESS
WE MUST COMPLETE THE WILLIAMS NETWORK EFFICIENTLY AND ON TIME TO INCREASE OUR
REVENUES BUT FACTORS OUTSIDE OUR CONTROL MAY PREVENT US FROM DOING SO, WHICH
WOULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS
Our ability to become a leading, coast-to-coast, facilities-based provider
of communications services to other communications providers and our ability to
increase our revenues will depend in large part upon the successful, timely and
cost-effective completion of the Williams Network. Difficulties in constructing
the Williams Network could increase its estimated costs and delay its scheduled
completion, either of which could have a material adverse effect on our
business.
Factors out of our control include:
- our ability to acquire sites, rights of way to use property of other
parties, or rights of way, and required permits from utilities,
railroads, private landowners and governmental authorities on
satisfactory terms and conditions
- our management of costs related to construction of route segments
- timely performance by contractors
- technical performance of the fiber and equipment used in the Williams
Network
- our ability to attract and retain qualified personnel
- our ability to obtain any needed additional financing
We have embarked upon an aggressive plan to build the Williams Network and
we cannot guarantee that we will be successful in completing the Williams
Network in the time planned.
WE NEED TO INCREASE THE VOLUME OF TRAFFIC ON THE WILLIAMS NETWORK OR THE
WILLIAMS NETWORK WILL NOT GENERATE PROFITS
We must substantially increase the current volume of voice, data, Internet
and video transmission on the Williams Network in order to realize the
anticipated cash flow, operating efficiencies and cost benefits of the Williams
Network. If we do not develop long-term commitments with new large-volume
customers as well as maintain our relationships with current customers, we will
be unable to increase traffic on the Williams Network, which would adversely
affect our profitability.
We believe that an important source of increased traffic will be from the
introduction by regional telephone companies of long distance services within
their historical service areas once they satisfy the applicable requirements
under the Telecommunications Act of 1996. Accordingly, delays in the
introduction of these services could have an adverse effect on our traffic flow.
See the section of this prospectus entitled "Regulation -- General regulatory
environment."
NETWORK OPERATES IN A HIGHLY COMPETITIVE INDUSTRY WITH PARTICIPANTS THAT HAVE
GREATER RESOURCES AND EXISTING CUSTOMERS THAN WE HAVE, WHICH COULD LIMIT OUR
ABILITY TO INCREASE OUR MARKET SHARE
Our success depends upon our ability to increase our share of the carrier
services market by providing high quality services at prices equal to or below
those of our competitors. Increased competition could lead to price reductions,
fewer large-volume sales, under-utilization of resources, reduced operating
margins and loss of market share. Many of our competitors have,
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<PAGE> 14
and some potential competitors are likely to enjoy, substantial competitive
advantages, including the following:
- greater name recognition
- greater financial, technical, marketing and other resources
- larger installed bases of customers
- well-established relationships with current and potential customers
- more extensive knowledge of the high-volume long distance services
industry
Our competitors include Qwest Communications International, Inc, Level 3
Communications, Inc., IXC Communications, Inc., as well as the three U.S. long
distance fiber optic networks that are owned by each of AT&T Corp., MCI
WorldCom, Inc. and Sprint Corp.
CONSOLIDATION WITHIN THE TELECOMMUNICATIONS INDUSTRY COULD REDUCE OUR MARKET
SHARE AND HARM OUR FINANCIAL PERFORMANCE
Consolidation of some of the major service providers and strategic
alliances in the communications industry have occurred in response to the
passage of the Telecommunications Act and further consolidation could lead to
fewer large-volume sales, reduced operating margins and loss of market share.
Regional telephone companies that fulfill required conditions under the
Telecommunications Act may choose to compete with us. In addition, significant
new and potentially larger competitors could enter our market as a result of
other regulatory changes, technological developments or the establishment of
cooperative relationships. Foreign carriers may also compete in the U.S. market.
PRICES FOR NETWORK SERVICES MAY DECLINE, WHICH MAY REDUCE OUR REVENUES
The prices we can charge our customers for transmission capacity on the
Williams Network could decline for the following reasons:
- installation by us and our competitors, some of which are expanding
capacity on their existing networks or developing new networks, of fiber
and related equipment that provides substantially more transmission
capacity than needed
- recent technological advances that enable substantial increases in, or
better usage of, the transmission capacity of both new and existing fiber
- strategic alliances or similar transactions that increase the parties'
purchasing power, such as purchasing alliances among regional telephone
companies for long distance capacity
If prices for network services decline, we may experience a decline in
revenues which would have a material adverse effect on our operations.
SERVICE INTERRUPTIONS ON THE WILLIAMS NETWORK COULD EXPOSE US TO LIABILITY OR
CAUSE US TO LOSE CUSTOMERS
Our operations depend on our ability to avoid and mitigate any damages from
power losses, excessive sustained or peak user demand, telecommunications
failures, network software flaws, transmission cable cuts or natural disasters.
The failure of any equipment or facility on the Williams Network could result in
the interruption of customer service until we make necessary repairs or install
replacement equipment. Additionally, if a carrier or other service provider
fails to provide the communications capacity that we have leased in order to
provide service to our customers, service to our customers would be interrupted.
If service is not restored in a timely manner, agreements with our customers may
obligate us to provide credits to them, which would reduce our revenues. Service
disruptions could also damage our reputation with customers,
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<PAGE> 15
causing us to lose existing customers or have difficulty attracting new ones.
Many of our customers' communications needs will be extremely time sensitive,
and delays in signal delivery may cause significant losses to a customer using
the Williams Network. The Williams Network may also contain undetected design
faults and software "bugs" that, despite our testing, may be discovered only
after the Williams Network has been completed and is in use.
WE MAY NEED TO EXPAND OR ADAPT THE WILLIAMS NETWORK IN THE FUTURE IN ORDER TO
REMAIN COMPETITIVE, WHICH COULD BE VERY COSTLY
Any expansion or adaptation of the Williams Network could require
substantial additional financial, operational and managerial resources which may
not be available to us. After we complete the Williams Network, we may have to
expand or adapt its components to respond to the following:
- an increasing number of customers
- demand for greater transmission capacity
- changes in our customers' service requirements
- technological advances
- government regulation
NETWORK HAS GENERATED LOSSES IN ITS LIMITED OPERATING HISTORY, WHICH WE EXPECT
WILL CONTINUE
Network has a limited operating history upon which you can base an
evaluation of our performance. In connection with developing the Williams
Network, we have incurred operating and net losses and working capital deficits
and we expect to continue to do so at least until completion of the Williams
Network. In 1998, Network experienced an operating loss of $27.7 million.
Continued operating losses could limit our ability to obtain the cash needed to
develop the Williams Network, make interest and principal payments on our debt
or fund our other business needs.
WE NEED TO OBTAIN AND MAINTAIN THE NECESSARY RIGHTS OF WAY FOR THE WILLIAMS
NETWORK IN ORDER TO OPERATE THE NETWORK
We must obtain rights of way, encroachment agreements and other permits
from private landowners, utilities, railroads, state highway authorities, local
governments and transit authorities in order to install conduit and related
telecommunications equipment. Rights of way are rights to use the property of
others which we obtain throughout the U.S. from various landowners. If we are
unable to maintain all of our existing rights and permits or obtain and maintain
the additional rights and permits needed to implement our business plan on
acceptable terms, our ability to operate the Williams Network would be
materially adversely affected.
LITIGATION MAY CHALLENGE OUR RIGHTS TO USE PROPERTY, WHICH COULD IMPAIR OUR
ABILITY TO OPERATE THE WILLIAMS NETWORK
Landholders who granted rights to use property to railroad companies in the
past have filed class action lawsuits against communications carriers that
received these rights from railroad companies in order to develop their fiber
optic networks. The landholders claim that these carriers should have obtained
rights to use property directly from the landholders, and not the railroad
companies, and that the carriers' rights to use property are therefore invalid.
Some of the carriers which have granted us fiber optic strands are subject to
these suits and a plaintiff in a similar lawsuit against our company is seeking
to have the matter certified as a class action.
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<PAGE> 16
WE NEED TO OBTAIN ADDITIONAL CAPACITY FOR THE WILLIAMS NETWORK FROM OTHER
PROVIDERS IN ORDER TO SERVE OUR CUSTOMERS AND KEEP OUR COSTS DOWN
We lease telecommunications capacity and obtain rights to use dark fiber
from both long distance and local telecommunications carriers in order to extend
the range of the Williams Network. Any failure by these companies to provide
service to us would adversely affect our ability to serve our customers or
increase our costs of doing so.
Costs of obtaining local services from other carriers comprise a
significant proportion of the operating expenses of long distance carriers,
including Network. Similarly, a large proportion of the costs of providing
international services consists of payments to other carriers. Changes in
regulation, particularly the regulation of local and international
telecommunications carriers, could indirectly but significantly affect Network's
competitive position; such changes could increase or decrease our costs,
relative to those of our competitors, of providing services.
RISKS RELATING TO OUR SOLUTIONS BUSINESS
SOLUTIONS HAS EXPERIENCED LOSSES WHICH MAY CONTINUE IN THE FUTURE
In 1998, Solutions incurred significant losses. We have had difficulties in
integrating our equipment distribution business with Nortel's equipment
distribution business and in managing the increased complexity of our business.
Since the new systems Solutions is implementing to address these problems have
not yet been fully implemented or tested, we expect that our financial results
in 1999 will continue to be adversely affected by these difficulties. These
difficulties have included an inability to operate and manage our business
effectively with multiple information systems, insufficient management
resources, internal control deficiencies, a high turnover of sales personnel,
lost sales, customer dissatisfaction and increased selling, general and
administrative costs. See the section of this prospectus entitled "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Overview -- Solutions" for more information.
TERMINATION OF RELATIONSHIPS WITH KEY VENDORS COULD RESULT IN DELAYS OR
INCREASED COSTS
We have a series of agreements which authorize us to act as a distributor
of communications products for a variety of vendors, most significantly Nortel,
as well as Cisco Systems, Inc., NEC Corp. and others. We cannot assure you that
any vendor with which we do business will elect to continue its relationship
with us on substantially the same terms and conditions. We believe that an
interruption, or substantial modification, of our distribution relationships,
particularly with Nortel, could have a material adverse effect on Solutions'
business, operating results and financial condition, in that we may no longer be
able to provide services and products to our customers, or the cost of doing so
may be more expensive. Periodically, our distribution agreements expire and we
must negotiate new agreements if we desire to continue distributing each
vendor's products at competitive prices. In addition, under our distribution
agreement with Nortel, if we do not purchase a minimum percentage of our total
product mix from Nortel, each party has the option to change the ownership
structure of Solutions LLC. If Nortel is no longer an owner of Solutions LLC,
there is no guarantee that Nortel would continue its distribution agreement with
Solutions once it is no longer required to do so under the terms of the
agreement. See the section of this prospectus entitled "Business --
Solutions -- LLC agreement with Nortel" for more information.
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<PAGE> 17
SOLUTIONS OPERATES IN A HIGHLY COMPETITIVE INDUSTRY, WHICH COULD REDUCE OUR
MARKET SHARE AND HARM OUR FINANCIAL PERFORMANCE
We face competition from communications equipment manufacturers and
distributors, as well as from network integrators. Increased competition could
lead to price reductions, fewer sales and client projects, under-utilization of
employees, reduced operating margins and loss of market share. Many of our
competitors have significantly greater financial, technical and marketing
resources or greater name recognition than we currently have. We also face
competition from lower cost providers and from new entrants to the market.
RISKS RELATING TO OUR COMPANY
AFTER THE OFFERINGS, WILLIAMS WILL NOT BE REQUIRED TO PROVIDE ADDITIONAL CAPITAL
OR CREDIT SUPPORT TO US, WHICH MAY ADVERSELY AFFECT OUR ABILITY TO MAKE FUTURE
BORROWINGS
We have funded our past capital needs mainly through borrowings or capital
contributions from Williams or through external financings guaranteed by
Williams. Following the offerings, Williams will not be required to provide us
with additional funding or credit support. Without Williams' support, we may
have less borrowing capacity and funds may only be available to us on less
favorable terms.
WE HAVE SUBSTANTIAL DEBT WHICH MAY HINDER OUR GROWTH AND PUT US AT A COMPETITIVE
DISADVANTAGE
Our substantial debt may have important consequences for us, including the
following:
- our ability to obtain additional financing for acquisitions, working
capital, investments and capital or other expenditures could be impaired
or financing may not be available on terms favorable to us
- a substantial portion of our cash flow will be used to make principal and
interest payments on our debt, reducing the funds that would otherwise be
available to us for our operations and future business opportunities
- a substantial decrease in our net operating cash flows or an increase in
our expenses could make it difficult for us to meet our debt service
requirements and force us to modify our operations
- we may have more debt than our competitors, which may place us at a
competitive disadvantage
- our substantial debt may make us more vulnerable to a downturn in our
business or the economy generally
We had substantial deficiencies of earnings to cover fixed charges of
$204.9 million in 1998, $25.7 million in 1997 and $1.5 million in 1996.
WE MAY NOT BE ABLE TO REPAY OUR EXISTING DEBT; FAILURE TO DO SO OR TO REFINANCE
OUR DEBT COULD PREVENT US FROM IMPLEMENTING OUR BUSINESS PLANS AND REALIZING
ANTICIPATED PROFITS
If we are unable to refinance our debt or to raise additional capital on
favorable terms, this may impair our ability to develop the Williams Network and
to implement our other business plans. Upon completion of the offerings and the
concurrent investments and after we pay related expenses, we estimate that we
will have approximately $2.6 billion of long-term debt, approximately $1.9
billion of stockholders' equity and a debt-to-equity ratio of approximately 1.41
to 1. In the future, we also expect to have borrowings under our new revolving
credit agreement which will increase the amount of our outstanding debt and our
debt-to-equity ratio. Our ability to make interest and principal payments on our
debt and borrow additional funds on
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<PAGE> 18
favorable terms depends on the future performance of our business. If we do not
have enough cash flow in the future to make interest or principal payments on
our debt, we may be required to refinance all or a part of our debt or to raise
additional capital. We do not know if refinancing our debt will be possible at
that time or if we will be able to find someone who will lend us more money, nor
do we know upon what terms we could borrow more money.
RESTRICTIONS AND COVENANTS IN OUR DEBT AGREEMENTS LIMIT OUR ABILITY TO CONDUCT
OUR BUSINESS AND COULD PREVENT US FROM OBTAINING FUNDS WHEN WE NEED THEM IN THE
FUTURE
The notes and some of our other debt and financing arrangements contain a
number of significant limitations that will restrict our ability to conduct our
business and to:
- borrow additional money
- pay dividends or other distributions to our stockholders
- make investments
- create liens on our assets
- sell assets
- enter into transactions with affiliates
- engage in mergers or consolidations
These restrictions may limit our ability to obtain future financing, fund
needed capital expenditures or withstand a future downturn in our business or
the economy.
IF WE ARE UNABLE TO COMPLY WITH THE RESTRICTIONS AND COVENANTS IN OUR DEBT
AGREEMENTS, THERE COULD BE A DEFAULT UNDER THE TERMS OF THESE AGREEMENTS, WHICH
COULD RESULT IN AN ACCELERATION OF PAYMENT DUE OF FUNDS THAT WE HAVE BORROWED
If we are unable to comply with the restrictions and covenants in our debt
agreements, there would be a default under the terms of our agreements. Some of
our debt agreements also require us and certain of our subsidiaries to maintain
specified financial ratios and satisfy financial tests. Our ability to meet
these financial ratios and tests may be affected by events beyond our control;
as a result, we cannot assure you that we will be able to meet such tests. In
the event of a default under these agreements, our lenders could terminate their
commitments to lend to us or accelerate the loans and declare all amounts
borrowed due and payable. Borrowings under other debt instruments that contain
cross-acceleration or cross-default provisions may also be accelerated and
become due and payable. If any of these events occur, we cannot assure you that
we would be able to make the necessary payments to the lenders or that we would
be able to find alternative financing. Even if we could obtain alternative
financing, we cannot assure you that it would be on terms that are favorable or
acceptable to us.
IF WE ARE UNABLE TO SECURE ANY NEEDED ADDITIONAL FINANCING OUR ABILITY TO
CONDUCT OUR BUSINESS COULD BE ADVERSELY AFFECTED
We may need additional capital to complete the build of the Williams
Network and meet our long-term business strategies. If we need additional funds,
our inability to raise them may have an adverse effect on our operations. If we
decide to raise funds through the incurrence of additional debt, we may become
subject to additional or more restrictive financial covenants and ratios. The
actual amount and timing of our future capital requirements may differ
materially from our estimates as a result of financial, business and other
factors, many of which are beyond our control. Our ability to arrange financing
and the costs of financing depend upon many factors, including:
- general economic and capital markets conditions
- conditions in the communications market
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<PAGE> 19
- regulatory developments
- credit availability from banks or other lenders
- investor confidence in the telecommunications industry and our company
- the success of the Williams Network
- provisions of tax and securities laws that are conducive to raising
capital
WE MUST ATTRACT AND RETAIN QUALIFIED EMPLOYEES TO ENSURE THE GROWTH AND SUCCESS
OF OUR COMPANY
We believe that our growth and future success will depend in large part on
our ability to attract and retain highly skilled and qualified personnel. Any
inability of ours in the future to hire, train and retain a sufficient number of
qualified employees could impair our ability to manage and maintain our business
and our customers' communications infrastructures. Some of the problems
experienced by Solutions in 1998 were due to high turnover of managerial,
technical and sales personnel, as well as insufficient management resources to
run our Solutions business. The competition for qualified personnel in the
communications industry is intense.
SBC COULD TERMINATE OUR STRATEGIC ALLIANCE WHICH COULD HARM OUR BUSINESS
If SBC terminates our strategic alliance, there could be a material adverse
effect on our business, financial condition and results of operations. Because
SBC is a major customer of ours, termination of our agreements with SBC would
result in decreased revenues and increased marginal costs. Our alliance
agreements with SBC are material to us and SBC may terminate these agreements in
certain cases, including the following:
- if SBC does not complete its proposed acquisition of Ameritech Corp. or
if regulators impose conditions on the acquisition that SBC refuses to
accept
- if we begin to offer retail long distance or local exchange services on
the Williams Network under some circumstances
- if the action or failure to act of any regulatory authority materially
frustrates or hinders the purpose of any of our agreements with SBC
- if we materially breach our agreements with SBC causing a material
adverse effect on the commercial value of the relationship to SBC
- if we have a change of control
- if SBC acquires an entity which owns a nationwide fiber optic network in
the U.S. and determines not to sell us several long distance assets
WE ARE DEPENDENT ON A SMALL NUMBER OF CUSTOMERS
We currently derive a large percentage of the revenue generated by Network
and Vyvx from a small number of customers. There is no guarantee that these
customers will continue to do business with us after the termination of their
commitments with us.
COMMUNICATIONS TECHNOLOGY CHANGES VERY RAPIDLY AND OUR TECHNOLOGY COULD BE
RENDERED OBSOLETE
We expect that new products and technologies will emerge and that existing
products and technologies, including voice transmission over the Internet and
high speed transmission of packets of data, will further develop. These new
products and technologies may reduce the prices for our services or they may be
superior to, and render obsolete, the products and services we offer and the
technologies we use. As a result, our most significant competitors in the future
may be new entrants to our markets which would not be burdened by an installed
base of older equipment. It may be very expensive for us to upgrade our products
and technology in order to continue to compete effectively. Our future success
depends, in part, on our ability to anticipate
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<PAGE> 20
and adapt in a timely manner to technological changes, including wider
acceptance and usage of voice transmission over the Internet.
OUR SYSTEMS MAY NOT BE YEAR 2000 COMPLIANT, WHICH COULD EXPOSE US TO LIABILITY
FROM THIRD PARTIES
We, and the companies with which we do business, must upgrade our computer
systems and software products to accept four-digit entries that distinguish the
year 2000 from the year 1900. Due to the limited availability and cost of
trained personnel, the difficulty in locating all relevant computer code and our
reliance on third-party suppliers and vendors, serious systems failures may
occur. These systems failures may result in litigation with our vendors,
suppliers or customers, particularly for Solutions, given the nature of its
extensive product offerings, its maintenance obligations and broad customer
base.
We cannot assure you that we will achieve full year 2000 compliance before
the end of 1999 or that we will develop and implement effective contingency
plans for all possible scenarios. We have identified two areas that would most
likely result in significant problems for our business. First, the system
replacements scheduled for completion during 1999 may be delayed. Second, we may
not be able to remedy a material systems failure. Either of these could lead to
lost revenues, increased operating costs, loss of customers or other business
interruptions of a material nature, and potential litigation claims including
mismanagement, misrepresentation or breach of contract. See the section of this
prospectus entitled "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Year 2000 readiness disclosure" for more
information.
IF WE DO NOT HAVE SOPHISTICATED INFORMATION AND BILLING SYSTEMS, WE MAY NOT BE
ABLE TO ACHIEVE DESIRED OPERATING EFFICIENCIES
Sophisticated information and billing systems are vital to our growth and
ability to monitor costs, bill customers, fulfill customer orders and achieve
operating efficiencies. Our plans for developing and implementing our
information and billing systems rely primarily on the delivery of products and
services by third party vendors. We may not be able to develop new business,
identify revenues and expenses, service customers, collect revenues or develop
and maintain an adequate work force if any of the following occur:
- vendors fail to deliver proposed products and services in a timely and
effective manner or at acceptable costs
- we fail to adequately identify all of our information and processing
needs
- our related processing or information systems fail
- we fail to upgrade systems when necessary
- we fail to integrate our systems with those of our major customers
OUR BUSINESS IS SUBJECT TO REGULATION THAT COULD CHANGE IN AN ADVERSE MANNER
The communications business is subject to federal, state, local and foreign
regulation. Regulation of the telecommunications industry is changing rapidly,
with ongoing effects on our opportunities, competition and other aspects of our
business. We cannot assure you that future regulatory, judicial or legislative
activities will not have a material adverse effect on us. The regulatory
environment varies substantially from state to state. Generally, we must obtain
and maintain certificates of authority from regulatory bodies in most states
where we offer intrastate services or in order to use eminent domain powers to
obtain rights-of-way. We also must obtain prior regulatory approval of tariffs
for our intrastate services in most of these jurisdictions. In addition, some of
our alliance partners are subject to extensive regulation, which could adversely
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<PAGE> 21
affect the expected benefits of our arrangements with them. For example, while
the terms of our agreements with SBC are intended to comply with restrictions on
SBC's provision of long distance services, various aspects of these arrangements
have not been tested under the Telecommunications Act.
FAILURE TO DEVELOP THE "WILLIAMS COMMUNICATIONS" BRAND COULD ADVERSELY AFFECT
OUR BUSINESS
We believe that brand recognition is very important in the communications
industry. If the "Williams Communications" brand awareness does not increase or
is weakened, it could decrease the attractiveness of our company's product and
service offerings to potential customers, which could result in decreased
revenues. We have licensed the use of the Williams trademark from Williams for
so long as Williams owns at least 50% of our outstanding capital stock. The loss
of this license would require us to establish a new brand and build new brand
recognition.
OUR INTERNATIONAL OPERATIONS AND INVESTMENTS MAY EXPOSE US TO RISKS WHICH COULD
HARM OUR BUSINESS
We have operations based in Canada, Australia and Mexico and investments in
companies with operations in Brazil and Chile. We are exposed to risks inherent
in international operations. These include:
- general economic, social and political conditions
- the difficulty of enforcing agreements and collecting receivables through
certain foreign legal systems
- tax rates in some foreign countries may exceed those in the United States
and foreign earnings may be subject to withholding requirements or the
imposition of tariffs, exchange controls or other restrictions
- required compliance with a variety of foreign laws and regulations which
impose a range of restrictions on the companies' operations, corporate
governance and shareholders, with penalties for noncompliance including
loss of license and monetary fines
- changes in United States laws and regulations relating to foreign trade
and investment
CURRENCY EXCHANGE RATE FLUCTUATIONS COULD ADVERSELY AFFECT OUR FINANCIAL RESULTS
Our international operations will cause our results of operations and the
value of our assets to be affected by the exchange rates between the U.S. dollar
and the currencies of the additional countries in which we have operations and
assets. Fluctuations in foreign currency rates may adversely affect reported
earnings and the comparability of period-to-period results of operations. On
January 13, 1999, the Brazilian Central Bank removed the limits on the valuation
of the Brazilian Real compared to the U.S. dollar, allowing free market
fluctuation of the exchange rate. As a result, the value of the Real in U.S.
dollars has declined approximately 30% from December 31, 1998 to March 31, 1999.
The ultimate duration and severity of the conditions in Brazil may have a
material adverse effect on our investments there. In addition, Mexico and Chile
have historically experienced exchange rate volatility. Changes in currency
exchange rates may affect the relative prices at which we and foreign
competitors sell products in the same market. In addition, changes in the value
of the relevant currencies may affect the cost of items required in our
operations.
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RISKS RELATING TO OUR RELATIONSHIP WITH WILLIAMS
WILLIAMS HAS SIGNIFICANT CONTROL OVER OUR COMPANY, WHICH COULD ADVERSELY AFFECT
OUR STOCKHOLDERS
After completion of the equity offering and the concurrent investments,
Williams will hold 100% of our Class B common stock and will therefore own
approximately ____% of the voting power of our company, or approximately ____%
of the voting power if the underwriters in the equity offering exercise their
over-allotment option in full.
As long as Williams continues to beneficially own shares of capital stock
representing more than 50% of the combined voting power of our outstanding
capital stock, Williams will be able to exercise a controlling influence over
our company, including:
- composition of our board of directors and, through it, the direction and
policies of our company, including the appointment and removal of
officers
- mergers or other business combinations involving our company
- acquisition or disposition of assets by our company
- future issuances of common stock or other securities of our company
- incurrence of debt by our company
- amendments, waivers and modifications to the agreements between us and
Williams being entered into in connection with the offerings
- payment of dividends on our common stock
- treatment of items in our tax returns that are consolidated or combined
with Williams' tax returns
CONFLICTS OF INTEREST MAY ARISE BETWEEN US AND WILLIAMS WHICH COULD BE RESOLVED
IN A MANNER UNFAVORABLE TO OUR COMPANY
Conflicts of interest could arise relating to the nature, quality and
pricing of services or products provided by us to Williams or by Williams to us,
any payment of dividends by us to Williams, any prepayment of the borrowings by
us from Williams and general issues relating to maintaining or increasing our
profitability. In addition, one of our directors is both a senior officer and
director, and six of our directors are also senior officers, of Williams and
some of these individuals and a number of our executive officers own substantial
amounts of Williams stock and options for shares of Williams stock. Although we
believe that these directors and officers will be able to fulfill their
fiduciary duties to our stockholders despite their positions with Williams and
their ownership of Williams stock, there could be potential conflicts of
interest when these directors and officers are faced with decisions that could
have different implications for our company and Williams.
We have agreed not to compete with Williams in the energy industry for five
years and Williams has agreed not to compete with us for five years in any area
of the telecommunications industry in which we currently have operations,
subject to some exceptions. During this five-year period, Williams will be able
to take advantage of a competitive corporate opportunity if we first decline to
act on the opportunity. After this period, Williams will have no obligation to
refrain from acting on corporate opportunities and may act on corporate
opportunities without liability to us or our stockholders, even if these
opportunities would seem to be natural extensions of our business or activities.
See the section of the prospectus entitled "Relationship Between Our Company and
Williams" for more information.
Our directors who are also directors or executive officers of Williams will
have obligations to both companies and may have conflicts of interest with
respect to matters potentially or actually involving or affecting us, such as
acquisitions, financings and other corporate opportunities that
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may be suitable for both us and Williams. Our restated certificate of
incorporation contains provisions designed to facilitate resolution of these
potential conflicts which we believe will assist the directors of our company in
fulfilling their fiduciary duties to our stockholders. By becoming a stockholder
in our company, you will be considered to have consented to these provisions of
our restated certificate of incorporation. Although these provisions are
designed to resolve conflicts between us and Williams fairly, we cannot assure
you that this will occur. See the section of this prospectus entitled
"Description of Capital Stock -- Provisions of our restated certificate of
incorporation and by-laws" for more information.
WE RELY ON WILLIAMS FOR ADMINISTRATIVE SERVICES WHICH WILLIAMS COULD CEASE TO
PROVIDE TO US
We have never operated as a stand alone company. While Williams is
contractually obligated to provide us with certain administrative services, we
cannot assure you that these services will be sustained at the same level as
when we were wholly owned by Williams or that we will obtain the same benefits.
We will also lease and sub-lease office and manufacturing facilities from
Williams. We cannot assure you that, after the expiration of these various
arrangements, we will be able to replace the administrative services or enter
into appropriate leases in a timely manner or on terms and conditions, including
cost, as favorable as those we will receive from Williams.
These agreements were made in the context of a parent-subsidiary
relationship. The prices charged to us under these agreements may be higher or
lower than the prices that may be charged by unaffiliated third parties for
similar services. For more information about these arrangements, see the section
of this prospectus entitled "Relationship Between Our Company and Williams."
RISKS RELATING TO OUR COMMON STOCK
THE POSSIBLE VOLATILITY OF OUR STOCK PRICE COULD ADVERSELY AFFECT OUR
STOCKHOLDERS
Prior to the equity offering, you could not buy or sell our common stock
publicly. Although an application will be made to list our shares of common
stock on the NYSE, an active public market for our common stock might not
develop or be sustained after the equity offering. Moreover, even if such a
market does develop, the market price of our common stock may decline below the
initial public offering price. The market price of our common stock could be
subject to significant fluctuations due to a variety of factors, including
actual or anticipated fluctuations in our operating results and financial
performance, announcements of technological innovations by our existing or
future competitors or changes in financial estimates by securities analysts.
Historically, the market prices for securities of emerging companies in the
communications industry have been highly volatile. In addition, the stock market
has experienced volatility that has affected the market prices of equity
securities of many companies and that often has been unrelated to the operating
performance of such companies. These broad market fluctuations may adversely
affect the market price of our common stock. Furthermore, following periods of
volatility in the market price of a company's securities, stockholders of such a
company have often instituted securities class action litigation against the
company. Any such litigation against our company could result in substantial
costs and a diversion of management's attention and resources, which could
adversely affect the conduct of our business.
19
<PAGE> 24
SHARES ELIGIBLE FOR PUBLIC SALE AFTER THIS OFFERING MAY ADVERSELY AFFECT OUR
STOCK PRICE
The market price of our common stock could drop in response to possible
sales of a large number of shares of common stock in the market after the equity
offering or to the perception that such sales could occur. As a result, we may
be unable to raise additional capital through the sale of equity at prices
acceptable to us. Following the equity offering and the concurrent investments,
we will have approximately ____ shares of common stock and Class B common stock
outstanding, or approximately ____ shares of common stock and Class B common
stock outstanding if the underwriters exercise their over-allotment option in
full. Of these shares, persons other than our affiliates as this term is defined
under the Securities Act, and which includes Williams, may freely transfer the
shares of common stock sold in the equity offering without restriction or
further registration under the Securities Act. In addition, the shares of common
stock acquired by SBC, Intel and Telmex will be restricted securities as this
term is defined under the Securities Act, and, as such, SBC, Intel and Telmex
may not sell these securities unless they are registered under the Securities
Act or unless an exemption from registration is available. See the section of
this prospectus entitled "Shares Eligible for Future Sale" for more information.
We have entered into a registration rights agreement with Williams which
enables Williams to require us to register shares of our common stock owned by
Williams and to include those shares in registrations of common stock made by us
in the future.
We have also entered into agreements with SBC, Intel and Telmex which
provide SBC, Intel and Telmex with registration rights and enable SBC, Intel and
Telmex to require us to register shares of our common stock owned by SBC, Intel
and Telmex.
ANTI-TAKEOVER PROVISIONS IN OUR CHARTER AND BY-LAWS COULD LIMIT OUR SHARE PRICE
AND DELAY A TAKEOVER OR CHANGE IN CONTROL OF OUR COMPANY
Our restated certificate of incorporation and by-laws include provisions
that could delay, deter or prevent a future takeover or change in control of our
company. These provisions include the disproportionate voting rights of the
Class B common stock (relative to the common stock) to elect a majority of the
members of our board of directors and the authorization of our board to issue,
without stockholder approval, one or more series of preferred stock. In
addition, our directors are organized into multiple classes and the members of
only one class are elected each year. These provisions and our stockholder
rights plan may have the effect of discouraging a third party from making a
tender offer or otherwise attempting to obtain control of our company, even
though such a change in ownership would be economically beneficial to our
company and our stockholders. See the section of this prospectus entitled
"Description of Capital Stock" for more information.
WE DO NOT ANTICIPATE PAYING CASH DIVIDENDS
We intend to retain future earnings, if any, to finance the operation and
expansion of our business and do not anticipate paying any cash dividends in the
foreseeable future. Our ability to pay dividends is limited by our debt
instruments. See the section of this prospectus entitled "Dividend Policy" for
more information.
20
<PAGE> 25
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. The forward-looking
statements are principally contained in the sections "Prospectus Summary,"
"Business" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations." These statements involve known and unknown risks,
uncertainties and other factors which may cause our actual results, performance
or achievements to be materially different from any future results, performances
or achievements expressed or implied by the forward-looking statements. Forward-
looking statements include but are not limited to:
- our expectations and estimates as to completion dates, construction costs
and subsequent maintenance and growth of the Williams Network
- our ability to implement successfully our operating strategy and attract
sufficient capacity volumes on the Williams Network
- future financial performance, including growth in net sales and earnings
- our continuing relationship with Williams
- our plan to address the Year 2000 issue, the costs associated with Year
2000 compliance and the results of Year 2000 non-compliance by us or one
or more of our customers, suppliers or other strategic business partners
In addition to factors that may be described in our filings with the
Securities and Exchange Commission and this prospectus, the following factors,
among others, could cause our actual results to differ materially from those
expressed in any forward-looking statements we make:
- the effects of and changes in political and/or economic conditions,
including inflation, interest rates and monetary conditions, and in
communications, trade, monetary, fiscal and tax policies in international
markets, including Mexico, Canada, Brazil, Australia and Chile
- changes in external competitive market factors or in our internal
budgeting process which might affect trends in our results of operations
- intense competition from other communications companies
- rapid, unpredictable and dramatic changes in the technological,
regulatory or business environment applicable to us or the communications
industry generally
- changes in the prices of equipment, supplies, rights of way or
construction expenses necessary to complete the Williams Network
You should carefully review our consolidated financial statements and
related notes included in this prospectus as well as the risk factors described
in this prospectus before deciding to invest in shares of our common stock.
We urge you to consider that statements which use the terms "believe," "do
not believe," "expect," "plan," "intend," "estimate," "anticipate" and similar
expressions, as they relate to our management, are intended to identify
forward-looking statements. These statements reflect our current views with
respect to future events and are based on assumptions and subject to risks and
uncertainties.
21
<PAGE> 26
USE OF PROCEEDS
We estimate that the net proceeds we will receive from the sale of the
________ shares of common stock will be approximately $610.7 million, or
approximately $702.9 million if the underwriters exercise their over-allotment
option in full, based on an assumed initial public offering price of
$________per share. We estimate that the net proceeds we will receive from the
notes offering will be approximately $1.3 billion. In addition, we estimate that
we will receive approximately $725 million in net proceeds from the concurrent
investments.
We intend to use the net proceeds from the offerings and the concurrent
investments to develop and light the Williams Network, to fund operating losses,
to repay portions of our debt and for working capital and general corporate
purposes.
At the time of the offerings we anticipate that we will have approximately
$900 million in borrowings outstanding under our interim loan facility. We plan
to repay borrowings outstanding under this interim loan facility with proceeds
from the offerings. The commitment under the interim loan facility bears
interest at a variable rate based on a spread over 3 month LIBOR per annum and
matures on September 30, 1999. Borrowings under the interim loan facility were
used to repay $385 million of bank borrowings under our revolving credit
facility to pay for Network's capital expenditures and to fund other cash needs.
DIVIDEND POLICY
We have not paid any cash dividends on our capital stock since 1997. We do
not expect to pay cash dividends on our capital stock in the foreseeable future.
The terms of the notes and our other debt agreements place limitations on the
payment of cash dividends. We currently intend to retain our future earnings, if
any, to finance the operation and development of our business. Future dividends,
if any, will be determined by our board of directors and will depend on the
success of our operations, capital needs, financial conditions, contractual
restrictions and other factors that our board of directors considers. See the
section of this prospectus entitled "Description of Indebtedness and Other
Financing Arrangements" for more information.
22
<PAGE> 27
CAPITALIZATION
The following table sets forth our capitalization at March 31, 1999 on an
actual basis and as adjusted to give effect to the equity offering, the notes
offering, the concurrent investments and the recharacterization of $500 million
of paid-in capital to amounts due to affiliates -- Williams, after deducting
underwriting discounts and commissions and estimated expenses, and after
application of the net proceeds to repay debt. The adjustments for the equity
offering are based on initial public offering price at the midpoint of the
proposed offering price range on the cover of this prospectus. The table assumes
that the underwriters do not exercise their over-allotment option. The table
does not take into consideration any additional shares of our common stock
issued pursuant to deferred or restricted share awards and does not take into
consideration any option grants as described in the section of this prospectus
entitled "Management -- New stock-based and incentive plans of our
company -- Treatment of specified Williams stock awards."
<TABLE>
<CAPTION>
MARCH 31, 1999
-------------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
Cash and cash equivalents.................................. $ 96,847 $2,417,521
========== ==========
Long-term debt due within one year......................... $ 622 $ 622
========== ==========
Long-term debt:
Due to affiliates........................................ $ 825,044 1,325,044
__% senior notes due 2009................................ -- 1,300,000
Other.................................................... 318,390 3,390
---------- ----------
Total long-term debt.................................. 1,143,434 2,628,434
Stockholders' equity:
Common stock, $0.01 par value per share:
________ and ________ shares authorized; 1,000 and
1,000 shares issued and outstanding................. 1
Class B common stock, $0.01 par value per share:
No shares authorized; and no shares issued and
outstanding......................................... --
Preferred stock, $0.01 par value per share:
No shares authorized; ________ shares issued or
outstanding......................................... -- --
Capital in excess of par value........................... 1,356,891
Accumulated deficit...................................... (396,153) (396,153)
Accumulated other comprehensive income................... 69,273 69,273
---------- ----------
Total stockholders' equity......................... 1,030,012 1,865,686
---------- ----------
Total capitalization............................ $2,173,446 $4,494,120
========== ==========
</TABLE>
23
<PAGE> 28
DILUTION
As of March 31, 1999, our consolidated net tangible book value was $610.1
million, or $ ____ per share of common stock. Consolidated net tangible book
value per share represents the total amount of our consolidated tangible assets,
reduced by the amount of total consolidated liabilities and divided by the
number of shares of common stock outstanding. Tangible assets are defined as our
consolidated assets, excluding intangible assets such as goodwill. After giving
effect to the equity offering, the concurrent investments and deferred or
restricted stock or option grants to our employees, after deducting underwriting
discounts and commissions and estimated expenses, the recharacterization of $500
million of paid-in capital to amounts due to affiliates -- Williams and after
application of the net proceeds from the offerings and the concurrent
investments, our net consolidated tangible book value at March 31, 1999 would
have been approximately $1.45 billion, or $ ____ per share. This represents an
immediate increase in consolidated net tangible book value of approximately $
____ per share to Williams and an immediate dilution of $ ____ per share to new
investors in the equity offering.
Dilution per share represents the difference between the price per share to
be paid by new investors and the net consolidated tangible book value per share
immediately after the equity offering, the concurrent investments and the grants
of deferred or restricted stock or options to our employees. The following table
illustrates the per share dilution.
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
----------
Consolidated net tangible book value before the equity
offering and the concurrent investments...................
-----
Consolidated increase per share attributable to new
investors.................................................
-----
Adjusted consolidated tangible book value per share after
the equity offering, the concurrent investments and the
recharacterization of $500 million of paid-in capital to
amounts due to affiliates -- Williams.....................
----------
Net consolidated tangible book value dilution per share to
new investors............................................. $
----------
</TABLE>
The following table sets forth, on a pro forma basis at March 31, 1999, the
number of shares of common stock purchased from us, the total consideration paid
to us and the average price per share paid to us by Williams, by SBC, by Intel,
by Telmex and by the new investors purchasing shares of common stock in the
equity offering, before deducting estimated underwriting discounts and
commissions and estimated expenses of the equity offering:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------- ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------- ------- -------- -------- -------------
<S> <C> <C> <C> <C> <C>
Williams.............................. % $ % $
SBC................................... $
Intel................................. $
Telmex................................
Investors in the equity offering...... $
------- ----- ------- -----
Total............................ 100.0% $ 100.0% $
======= ===== ======= =====
</TABLE>
This table does not take into account the issuance of deferred shares or
the exercise of options to be granted at the time of the completion of the
equity offering. See the section of this prospectus entitled "Management -- New
stock-based and incentive plans of our company." If these amounts had been taken
into consideration, assuming the exercise of all options and the receipt of the
full amount of cash consideration, the additional dilution per share to new
investors would have been $______ per share.
24
<PAGE> 29
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
In the table below, we provide you with historical selected consolidated
financial and operating data derived from our consolidated financial statements.
We have prepared the financial information using our consolidated financial
statements for the five years ended December 31, 1998 and the three months ended
March 31, 1999 and 1998. Our consolidated balance sheets as of December 31, 1998
and 1997 and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the three years in the period ended December
31, 1998 have been audited by Ernst & Young LLP, independent auditors, whose
report is based in part on the reports of Arthur Andersen S/C, independent
public accountants. When you read these historical selected consolidated
financial and operating data, it is important that you also read the section of
this prospectus entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and our consolidated financial statements
and related notes included in this prospectus.
In January 1995, Williams sold the majority of its network business to LDDS
for approximately $2.5 billion. The sale included the bulk of Williams'
nationwide fiber optic network and the associated consumer, business and carrier
customers. Williams continued to own the Retained WilTel Network, its
telecommunications equipment distribution business and Vyvx, a leading provider
of multimedia fiber transmission for the broadcast industry. The Retained WilTel
Network, along with Vyvx Services, Solutions and a number of acquired companies,
formed the basis for what is today our company. See Note 2 to our consolidated
financial statements for a description of acquisitions in 1996 through 1998.
Williams has contributed international communications assets to our
company. When we talk about our company and in the presentation of our financial
information, we include the international assets which Williams has contributed
to us.
We have prepared the accompanying table to reflect the historical
consolidated financial information of our company as if we had operated as a
stand alone business throughout the periods presented. The historical financial
information may not be indicative of our future performance and does not
necessarily reflect what our financial position and results of operations would
have been had we operated as a separate, stand alone entity during the periods
covered.
Pro forma earnings per share is based upon an assumed 450 million shares of
capital stock outstanding after the equity offering and the concurrent
investments and does not include any exercise of the underwriters' overallotment
option or the issuance of shares of common stock pursuant to deferred or
restricted share awards or option grants under our company's stock-based plans
for directors, officers and other employees.
In connection with the equity offering, we will issue deferred shares of
our common stock and grant options to purchase our common stock to directors and
selected officers and other employees of our company and Williams. Some of the
deferred shares and options are expected to be issued or granted to electing
employees in exchange for existing deferred shares of Williams common stock or
options to purchase Williams common stock on a basis intended to preserve their
economic value and vesting and other terms. We will account for the options
granted in exchange for existing Williams options as new fixed awards and record
compensation expense over the remaining vesting period for the options based on
the difference between the initial public offering price and the exercise price
of the new options. Compensation expense for the deferred shares, whether issued
in exchange for Williams deferred shares or newly issued, will be recorded over
the remaining vesting period based on the initial public offering price. Our
accounting for these options and deferred shares is subject to change depending
upon the final guidance to be provided by the Financial Accounting Standards
Board in its Interpretation of
25
<PAGE> 30
Accounting Principles Board Opinion No. 25, which is expected to be issued later
this year. Assuming that employees elect to exchange all eligible deferred
shares and options and that the initial public offering price is at the midpoint
of the price range set forth on the cover page of this prospectus, we estimate
that the compensation expense relating to the options and deferred shares will
be approximately $____ million over the relevant remaining vesting periods, of
which we estimate that approximately $ ____ million will be expensed during the
remainder of 1999, and approximately $ ____ million of the remaining amount will
be expensed annually in 2000, 2001 and 2002.
Included in other financial data are EBITDA amounts. EBITDA stands for
earnings before interest, taxes, depreciation and amortization. Consistent with
industry practice, we calculate EBITDA as income or loss from operations
excluding equity earnings or losses, non-recurring or unusual charges included
in operating results, and depreciation and amortization. Accordingly, EBITDA is
calculated excluding non-operating income and expense items including interest
expense, investing income, minority interest in income or loss of consolidated
subsidiaries, gains on sales of subsidiaries or assets, other non-operating
income or expense and provisions or benefits for income taxes. EBITDA is used by
management and certain investors as an indicator of a company's historical
ability to service debt. Management believes that an increase in EBITDA is an
indicator of improved ability to service existing debt, to sustain potential
future increases in debt and to satisfy capital requirements. However, EBITDA is
not intended to represent cash flows for the period, nor has it been presented
as an alternative to either operating income as determined by generally accepted
accounting principles nor as an indicator of operating performance or cash flows
from operating, investing and financing activities as determined by generally
accepted accounting principles. EBITDA is thus susceptible to varying
calculations. EBITDA as presented may not be comparable to other similarly
titled measures of other companies. We expect that under our permanent credit
facility, our discretionary use of funds reflected by EBITDA will be limited in
order to conserve funds for capital expenditures and debt service.
The Statement of Operations Data reflects the following items and events
that affect comparability with other years as follows:
- In January 1995, Williams sold the majority of its network business to
LDDS for approximately $2.5 billion. The sale included the bulk of
Williams' nationwide fiber optic network and the associated consumer,
business and carrier customers. We accounted for the sale as a disposal
of a business segment and accordingly have reported the results of the
sold business as discontinued operations.
- In 1996, we recognized a gain of $15.7 million from the sale of
communications frequency rights for approximately $38.0 million.
- In April 1997, we purchased Nortel's equipment distribution business,
which we then combined with our equipment distribution business to create
Solutions LLC. This combination effectively doubled the size of our
Solutions segment. We recorded the 30% ownership reduction in our
operations contributed to Solutions LLC as a sale to Nortel and
recognized a gain of $44.5 million based on the excess of the fair value
over the net book value. In 1997, we began to recognize a minority
interest in income (loss) of subsidiaries.
- In October 1997, management and ownership of the Retained WilTel Network
were transferred from Strategic Investments to Network and intercompany
transfer pricing was established prospectively. In addition, consulting,
outsourcing and the management of Williams' internal telephone
operations, activities previously performed within Strategic Investments,
were transferred to Network. For comparative purposes, the 1996 and 1997
26
<PAGE> 31
consulting, outsourcing and internal telephone management activities
previously performed in Strategic Investments that were transferred to
Network have been reflected in Network's segment results. See Note 3 to
our consolidated financial statements for more information regarding
segment disclosures.
- Other expense in 1997 includes $44.0 million of charges primarily related
to the decision to sell our learning content business and the write-down
of assets and development expenses associated with other activities in
the Strategic Investments segment. Other expense in 1998 includes a $23.2
million loss related to exiting a venture in the Strategic Investments
segment involved in the transmission of business information for news and
educational purposes.
- Williams has historically been the primary funding source for our
activities. In 1997, most of our funding was through direct capital
contributions. Prior to 1997 and in 1998, funding included
interest-bearing related party borrowings. In 1997 and 1998, we began the
process of capitalizing interest associated with the construction of
assets.
- In the fourth quarter of 1998, we began to recognize revenues from dark
fiber sales. Dark fiber revenues for this period were $64.1 million.
Revenues from dark fiber sales for the three months ended March 31, 1999
were $51.3 million.
- Under our tax sharing arrangement with Williams, after the equity
offering we will generally receive the benefit of net operating losses
only while we remain part of Williams' consolidated tax group and only to
the extent we would be able to utilize them if we filed separate income
tax returns. If we had filed separate federal income tax returns for 1997
and 1998, the deferred federal income tax benefit would have been
increased by approximately $12.8 million and $5.6 million. These amounts
reflect the benefit of a net deferred tax asset for federal net operating
loss carryforwards to the extent of the existing net deferred tax
liability that would have been reflected by us on a separate filing
basis.
27
<PAGE> 32
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31,
----------------------------- ---------------------------
1999 1998 1998 1997
------------- ------------- ------------ ------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Revenues:
Network................. $ 108,492 $ 21,166 $ 194,936 $ 43,013
Solutions............... 337,292 327,446 1,367,404 1,189,798
Strategic Investments... 57,985 49,868 205,047 215,583
Eliminations............ (11,767) (12,187) (50,281) (22,264)
------------ ------------ ------------ ------------
Total
revenues..... 492,002 386,293 1,717,106 1,426,130
Operating expenses:
Cost of sales........... 389,747 288,553 1,294,583 1,043,932
Selling, general and
administrative....... 122,919 103,673 487,073 323,513
Provision for doubtful
accounts............. 8,437 1,483 21,591 7,837
Depreciation and
amortization......... 27,578 18,995 84,381 70,663
Other................... 300 (342) 34,245 45,269
------------ ------------ ------------ ------------
Total operating
expenses..... 548,981 412,362 1,921,873 1,491,214
------------ ------------ ------------ ------------
Income (loss) from
operations.............. (56,979) (26,069) (204,767) (65,084)
Interest accrued.......... (10,536) (1,739) (18,650) (8,714)
Interest capitalized...... 4,135 1,739 15,575 7,781
Investing income.......... 1,025 369 1,931 670
Minority interest in
(income) loss of
subsidiaries............ 5,836 (1,460) 15,645 (13,506)
Gain on sale of interest
in subsidiary........... -- -- -- 44,540
Gain on sale of assets.... -- -- -- --
Other income (loss),
net..................... (174) (104) 178 508
------------ ------------ ------------ ------------
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1996 1995 1994
------------ ------------ ------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA AND RATIOS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS:
Revenues:
Network................. $ 11,063 $ -- $ --
Solutions............... 568,072 494,940 396,883
Strategic Investments... 130,876 43,907 18,247
Eliminations............ (6,425) -- --
------------ ------------ ------------
Total
revenues..... 703,586 538,847 415,130
Operating expenses:
Cost of sales........... 517,222 402,336 316,891
Selling, general and
administrative....... 152,484 93,560 78,552
Provision for doubtful
accounts............. 2,694 2,932 3,866
Depreciation and
amortization......... 32,378 21,050 18,554
Other................... 500 (1,240) (224)
------------ ------------ ------------
Total operating
expenses..... 705,278 518,638 417,639
------------ ------------ ------------
Income (loss) from
operations.............. (1,692) 20,209 (2,509)
Interest accrued.......... (17,367) (13,999) (7,405)
Interest capitalized...... -- -- --
Investing income.......... 296 405 41
Minority interest in
(income) loss of
subsidiaries............ -- -- --
Gain on sale of interest
in subsidiary........... -- -- --
Gain on sale of assets.... 15,725 -- --
Other income (loss),
net..................... (108) 148 44
------------ ------------ ------------
</TABLE>
28
<PAGE> 33
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31,
----------------------------- ---------------------------
1999 1998 1998 1997
------------- ------------- ------------ ------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C>
Income (loss) from
continuing operations
before income taxes..... (56,693) (27,264) (190,088) (33,805)
(Provision) benefit for
income taxes............ (17,448) 766 5,097 (2,038)
------------ ------------ ------------ ------------
Loss from continuing
operations.............. (74,141) (26,498) (184,991) (35,843)
Income from discontinued
operations.............. -- -- -- --
------------ ------------ ------------ ------------
Net income (loss)......... $ (74,141) $ (26,498) $ (184,991) $ (35,843)
============ ============ ============ ============
Historical per share data
(basic):
Loss from continuing
operations........... $ (74,141) $ (26,498) $ (184,991) $ (35,843)
Income from discontinued
operations........... $ -- $ -- $ -- $ --
Net income (loss)....... $ (74,141) $ (26,498) $ (184,991) $ (35,843)
Weighted average shares
outstanding.......... 1,000 1,000 1,000 1,000
Pro forma per share data
(basic):
Loss from continuing
operations........... $ (.16) $ (.06) $ (.41) $ (.08)
Income from discontinued
operations........... $ -- $ -- $ -- $ --
Net income (loss)....... $ (.16) $ (.06) $ (.41) $ (.08)
Weighted average shares
outstanding.......... 450,000,000 450,000,000 450,000,000 450,000,000
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1996 1995 1994
------------ ------------ ------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA AND RATIOS)
<S> <C> <C> <C>
Income (loss) from
continuing operations
before income taxes..... (3,146) 6,763 (9,829)
(Provision) benefit for
income taxes............ (368) (8,380) (2,710)
------------ ------------ ------------
Loss from continuing
operations.............. (3,514) (1,617) (12,539)
Income from discontinued
operations.............. -- 1,018,800 94,001
------------ ------------ ------------
Net income (loss)......... $ (3,514) $ 1,017,183 $ 81,462
============ ============ ============
Historical per share data
(basic):
Loss from continuing
operations........... $ (3,514) $ (1,614) $ (12,539)
Income from discontinued
operations........... $ -- $ 1,018,800 $ 94,001
Net income (loss)....... $ (3,514) $ 1,017,183 $ 81,462
Weighted average shares
outstanding.......... 1,000 1,000 1,000
Pro forma per share data
(basic):
Loss from continuing
operations........... $ (.01) $ -- $ (.03)
Income from discontinued
operations........... $ -- $ 2.26 $ .21
Net income (loss)....... $ (.01) $ 2.26 $ .18
Weighted average shares
outstanding.......... 450,000,000 450,000,000 450,000,000
</TABLE>
29
<PAGE> 34
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31,
----------------------------- ---------------------------
1999 1998 1998 1997
------------- ------------- ------------ ------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C>
OTHER FINANCIAL DATA:
EBITDA.................... $ (19,242) $ (5,595) $ (80,873) $ 52,005
Ratio of earnings to fixed
charges................. -- -- -- --
(Deficiency) excess of
earnings to cover fixed
charges................. $ (56,505) $ (26,064) $ (204,945) $ (25,697)
Net cash provided by (used
in) operating
activities.............. (90,225) (109,877) (363,833) 147,858
Net cash provided by
financing activities.... 587,656 222,691 890,623 225,953
Net cash used in investing
activities.............. (442,588) (112,491) (496,076) (363,494)
Capital expenditures...... 151,238 110,117 299,481 276,249
BALANCE SHEET DATA:
Working capital........... $ 501,447 $ 253,495 $ 330,533 $ 150,965
Net assets of discontinued
operations.............. -- -- -- --
Property, plant and
equipment, net.......... 781,324 503,091 695,725 407,652
Total assets.............. 2,868,859 1,557,337 2,333,484 1,506,034
Long-term debt, including
long-term debt due
within one year......... 1,144,056 128,708 624,420 126,941
Total liabilities......... 1,838,847 594,036 1,330,864 643,332
Total stockholders'
equity.................. 1,030,012 963,301 1,002,620 862,702
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1996 1995 1994
------------ ------------ ------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA AND RATIOS)
<S> <C> <C> <C>
OTHER FINANCIAL DATA:
EBITDA.................... $ 32,287 $ 41,331 $ 15,802
Ratio of earnings to fixed
charges................. -- 1.43 --
(Deficiency) excess of
earnings to cover fixed
charges................. $ (1,545) $ 6,856 $ (9,829)
Net cash provided by (used
in) operating
activities.............. (1,775) 34,144 41,389
Net cash provided by
financing activities.... 226,009 47,022 27,764
Net cash used in investing
activities.............. (224,186) (81,189) (58,844)
Capital expenditures...... 66,900 32,412 12,616
BALANCE SHEET DATA:
Working capital........... $ 145,865 $ 80,989 $ 64,110
Net assets of discontinued
operations.............. -- -- 743,622
Property, plant and
equipment, net.......... 174,091 98,128 70,415
Total assets.............. 721,687 413,630 1,086,329
Long-term debt, including
long-term debt due
within one year......... 2,702 189,031 164,067
Total liabilities......... 194,434 319,409 340,831
Total stockholders'
equity.................. 527,253 94,221 745,498
</TABLE>
30
<PAGE> 35
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis in conjunction with
our consolidated financial statements and related notes included in this
prospectus. You can find additional information concerning our businesses and
strategic investments and alliances in the section of this prospectus entitled
"Business."
OVERVIEW
We own, operate and are extending a nationwide fiber optic network and
provide a comprehensive array of communications products and services for
organizations of all sizes through our business units, Network and Solutions.
Through our third business unit, Strategic Investments, we make investments in,
or own and operate, domestic and foreign businesses that create demand for
capacity on the Williams Network, increase our service capabilities, strengthen
our customer relationships, develop our expertise in advanced transmission
electronics or extend our reach. We also enter into strategic alliances with
communications companies to secure long-term, high-capacity commitments for
traffic on the Williams Network and to enhance our service offerings.
In January 1995, Williams sold the majority of its network business to LDDS
for approximately $2.5 billion. The sale included the bulk of Williams'
nationwide fiber optic network and the associated consumer, business and carrier
customers. Williams continued to own the Retained WilTel Network, its
telecommunications equipment distribution business and Vyvx. The Retained WilTel
Network, along with Vyvx, Solutions and a number of acquired companies, formed
the basis for what is today our company. See Note 2 to our consolidated
financial statements for a description of acquisitions in 1996 through 1998.
Prior to the offerings, Williams will contribute international
communications assets to our company. When we talk about our company and in the
presentation of our financial information, we include the international assets
which Williams will contribute to us.
In October 1997, management and ownership of the Retained WilTel Network
were transferred from Strategic Investments to Network and intercompany transfer
pricing was established prospectively. In addition, consulting, outsourcing and
the management of Williams' internal telephone operations, activities previously
performed within Strategic Investments, were transferred to Network. For
comparative purposes, the 1996 and 1997 consulting, outsourcing and internal
telephone management activities previously performed in Strategic Investments
that were transferred to Network have been reflected in Network's segment
results. See Note 3 to our consolidated financial statements for more
information regarding segment disclosure.
Our consolidated financial statements and this section have been prepared
to reflect the historical consolidated financial information of our company as
if we had operated as a stand alone business throughout the periods presented.
As a result of the expansion of our fiber optic network, we expect a
significant change in our revenue mix over the next few years. In 1998, Network
contributed approximately 11% of our total consolidated revenues, Solutions
contributed approximately 80% of our total consolidated revenues and Strategic
Investments primarily contributed the remainder. Beginning in 1999, we expect
Network to contribute an increasing percentage of our total consolidated
revenues and by 2001 we expect Network to contribute the largest percentage of
our revenues and to be the primary source of our income from operations on a
consolidated basis. Over the next few years revenue increases in Solutions are
expected to be modest, with higher revenue growth expected during the same
period in Strategic Investments.
31
<PAGE> 36
NETWORK
Our Network business consists of network services and sales of dark fiber.
Network's services include:
- packet-based data services
- private line services
- voice services
- local services
- dim fiber leases
- network design and operational support
These services are provided under capacity service arrangements. Capacity
service arrangements typically have terms ranging from months to many years.
Pricing is generally based on the amount of capacity provided, minutes of use,
distance of communication, jurisdiction regulating the service and other
factors, and is often based on a form of agreement which requires minimum
payments regardless of the amount of service used. These agreements are known as
take-or-pay commitments. Customers are typically billed for capacity services on
a monthly basis and the agreements generally have payment terms of 30 days.
Network's revenues also include intercompany and affiliate revenues for our
management of Williams' internal telephone operations and our management of the
Retained WilTel Network. We also intend to engage in transactions that allow a
customer exclusive long-term use of a portion of the transmission capacity of a
fiber optic strand, rather than the entire fiber strand. These transactions are
called dim fiber leases.
Beginning in 1998, our revenues also included dark fiber sales. A dark
fiber sale conveys rights to use strands of fiber optic cable on the Williams
Network with the purchaser providing its own optical equipment to transmit light
signals over the fiber optic strands. An agreement for a dark fiber sale
typically has a term which approximates the economic life of a fiber optic
strand, which is generally 20 to 30 years. Usually, the customer pays for the
dark fiber with a down payment due upon execution of the agreement and the
balance due upon delivery to and acceptance by the customer of the fiber.
Revenue is generally recorded at the time of delivery and acceptance of the
fiber. The customer also pays for the use of equipment space in sites along the
route of the fiber optic cable and for Network's maintenance of the cable.
Network's cost of sales for capacity service arrangements include off-net
capacity costs, which are costs of network capacity attributable to using other
carrier networks, local access costs, which are the costs of connecting the
Williams Network to customer locations via local access facilities, and
operations and maintenance personnel costs. Construction costs associated with
the sale of dark fiber primarily include cable installation, construction of
buildings to house equipment, acquisition of rights-of-way and real estate
purchase costs determined on an average cost basis for the applicable portion of
the network route sold.
As a result of our expansion of the Williams Network and as a result of our
alliances with SBC, Intel and Telmex, we expect a significant change in our
Network revenue mix over the next few years. In 1998, approximately 33% of total
Network revenues were generated from sales of dark fiber. We expect that the
percentage of total Network revenues attributable to dark fiber sales will
increase in 1999 but will decrease as a percentage of total Network revenues
after 1999. By 2001, Network revenues are expected to consist primarily of
switched voice and data services.
32
<PAGE> 37
SOLUTIONS
Solutions' revenues primarily consist of sales and installation of voice
and data communications equipment and the service and maintenance of this
equipment. Revenues from voice equipment are derived from sales of private
branch exchange systems and key systems and the applications and upgrades
associated with these systems. A private branch exchange system is a switching
system within an office building which allows calls from outside the building to
be routed to the individual instead of through a central number. A key system is
an on-site telephone system for smaller organizations. Like a private branch
exchange system, a key system switches calls to and from the public network as
well as within an organization. Applications and upgrades associated with these
systems include voice messaging and call centers. Revenues from data equipment
consist mainly of the sale of routers, switches, hubs and other equipment that
comprise corporate networks.
We expect the provision of professional services will generate an
increasing portion of Solutions' revenue growth. Professional services include
enterprise data network design and maintenance, call center design and
installation and Internet network design and implementation. Professional
services are typically higher margin services due to the increased complexity
and expertise required. These services are billed in one of three ways:
- as part of an equipment or network package
- separately as a contract
- separately on an hourly basis
Solutions' cost of sales consists primarily of cost of goods, labor costs
for design and installation and operations and maintenance personnel costs.
Issues relating to Solutions' business performance. Solutions' sales and
operating losses were $1.37 billion and $59.0 million in 1998 compared to sales
and operating income of $1.19 billion and $37.1 million in 1997. In April 1997,
we purchased Nortel's equipment distribution business, which we then combined
with our equipment distribution business to create Solutions LLC. On a pro forma
basis assuming the two businesses had been combined for the entire year, sales
and operating income would have been $1.44 billion and $45.6 million in 1997. We
have experienced difficulties in integrating our equipment distribution business
with Nortel's equipment distribution business and in managing the increased
complexity of our business. These difficulties include:
- inability to operate and manage our business effectively with the
multiple non-integrated management information systems which we have as a
result of the combination with Nortel as well as acquisition activity by
both us and Nortel prior to our business combination
- insufficient resources at management levels to manage the operations and
finances of the combined business
- management turnover
- sales force turnover, including the loss of approximately 200 sales
representatives, or approximately 25% of our total of approximately 850
sales representatives, in the first quarter of 1998
- inability to accurately track customers' orders, billings and collections
- lack of brand recognition due to the change from the "WilTel" and
"Nortel" names
- lower customer satisfaction due to service and delivery disruptions and
billing errors
- inability to manage employee productivity and achieve operational
efficiencies
- inability to accurately track selling, general and administrative
expenses
33
<PAGE> 38
- inability to accurately calculate sales compensation in a timely manner
- increased selling, general and administrative costs
Solutions' operating results in 1998 were also negatively affected by the
expansion of our professional services business, which led to increased
administrative costs for 1998 without the corresponding revenue benefit we would
expect from this expenditure going forward.
We are taking the following initiatives to address these issues:
- implementing standard operating and financial management information
systems throughout our organization, a process which will continue
throughout 1999
- continuing to rebuild our sales force by adding approximately 200 sales
representatives in 1998, correcting sales compensation issues and
implementing sales training and development programs
- adding additional resources to address internal control issues
- realignment of our administrative and operating functions in the fourth
quarter of 1998, eliminating approximately $19 million of annualized
overhead costs
- hiring an external marketing consulting company and investing in an
advertising campaign, both of which will assist us in establishing brand
awareness and improving sales productivity
These and other initiatives began in the second quarter of 1998 and are
continuing throughout 1999. However, we expect that our financial results in
1999 will continue to be adversely affected by the difficulties outlined above.
STRATEGIC INVESTMENTS
We make investments in, or own and operate, companies that create demand
for capacity on the Williams Network, increase our service capabilities,
strengthen our customer relationships, develop our expertise in advanced
transmission electronics or extend our reach. We have investments in Concentric
Network Corporation, UniDial Communications, Inc. and UtiliCom Networks Inc. Our
investments in these three domestic companies represent less than a 20%
ownership, and accordingly we account for these investments using the cost
method of accounting. Under the cost method, our financial results are not
impacted by our percentage ownership interest in the results and operations of
these companies.
Prior to the offerings, Williams intends to contribute to us its interests
in communications ventures in Brazil, Australia and Chile. Our financial results
include the international assets which will be contributed to us. Our investment
in Brazil is accounted for under the equity method. Our investment in Australia
is consolidated. We account for our investment in Chile under the cost method.
In addition, Williams will grant us an option to acquire its entire equity and
debt interests in Lightel S.A. -- Tecnologia da Informacao, a Brazilian
telecommunications company, at net book value. We may exercise this option at
any time from January 1, 2000 to January 1, 2001 and pay the exercise price
entirely in our Class B common stock. See the section of this prospectus
entitled "Business -- Strategic Investments -- International -- Lightel" for
more information.
For segment reporting purposes, equity losses are accounted for as a
reduction of revenues and equity income is accounted for as an increase in
revenues.
In addition, revenues from Strategic Investments are derived from Vyvx and
other businesses which we own and operate. These businesses provide:
- distribution of video and audio signals of televised sports and news
events from live events to television networks
34
<PAGE> 39
- distribution of advertisements and other media to local television
stations
- audio and video conferencing services
- closed-circuit video broadcasting services for businesses
Strategic Investments' cost of sales consists primarily of off-net capacity
costs and operations and maintenance personnel costs.
Management is currently assessing some of the business activities within
Strategic Investments which may ultimately result in the impairment of or the
sale of these businesses. Although our evaluation of the future cash flows
attributable to the assets contemplated for possible sale continues to support
the carrying value of these assets, based on our expectation of the selling
price less costs to sell the assets, if such sale occurs, it could result in
losses of up to $30 million. No definitive agreements or formal plans have been
reached relating to the businesses under review.
RESULTS OF OPERATIONS
In order to meet our strategic objectives, we must increase substantially
the volume of traffic on the Williams Network. As a result, we do not believe
that our financial condition or results of operations for prior years serve as a
meaningful indication of our future financial condition or results of
operations. We expect to incur substantial net operating losses for the
foreseeable future and there can be no assurance that we will be able to achieve
or sustain operating profitability in the future.
The table below summarizes our percentage of revenue by source and
operating expenses as a percentage of total revenues:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------ ---------------------------
1999 1998 1998 1997 1996
------ ------ ----- ----- -----
<S> <C> <C> <C> <C> <C>
Revenues:
Network.......................... 22.0% 5.5% 11.4% 3.0% 1.6%
Solutions........................ 68.6 84.8 79.6 83.4 80.7
Strategic investments............ 11.8 12.9 11.9 15.1 18.6
Eliminations..................... (2.4) (3.2) (2.9) (1.5) (0.9)
----- ----- ----- ----- -----
Total revenues................ 100.0 100.0 100.0 100.0 100.0
Operating expenses:
Cost of sales.................... 79.2 74.7 75.4 73.2 73.5
Selling, general and
administrative................ 25.0 26.8 28.4 22.7 21.7
Provision for doubtful
accounts...................... 1.7 0.4 1.3 0.5 0.4
Depreciation and amortization.... 5.6 4.9 4.9 5.0 4.6
Other............................ 0.1 (0.1) 2.0 3.2 0.1
----- ----- ----- ----- -----
Total operating expenses...... 111.6 106.7 112.0 104.6 100.3
----- ----- ----- ----- -----
Loss from operations............... (11.6)% (6.7)% (12.0)% (4.6)% (0.3)%
===== ===== ===== ===== =====
</TABLE>
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998
CONSOLIDATED RESULTS
We experienced a net loss of $74.1 million for the three months ended March
31, 1999 compared to a net loss of $26.5 million for the three months ended
March 31, 1998, an increase of $47.6 million from the prior period. The increase
in net loss included an increase in losses from operations of $30.9 million and
increased net interest expense of $6.4 million, somewhat offset by a change in
minority interest results of $7.3 million. Net loss was also increased by
35
<PAGE> 40
$17.6 million of deferred taxes pursuant to our tax sharing agreement with
Williams and an increase in losses from operations. The depreciation scheduled
in 1999 on the Williams Network results in a significant deferred tax expense
for us in 1999 with no current benefit for the net operating losses generated
under the tax sharing agreement. Our provision for taxes for the three months
ended March 31, 1999 increased $18.2 million from a benefit of $0.8 million for
the three months ended March 31, 1998 to a provision of $17.4 million for the
three months ended March 31, 1999.
Network accounted for $9.6 million of the increase in losses from
operations, Solutions accounted for $10.7 million of the increase in losses from
operations and Strategic Investments accounted for $10.6 million of the increase
in losses from operations. We discuss these results in detail below by segment.
NETWORK
The table below summarizes Network's results for the three months ended
March 31, 1999 and 1998 and for the last three fiscal years:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------ ------------------------------
1999 1998 1998 1997 1996
-------- ------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues:
Dark fiber sales................... $ 51,321 $ -- $ 64,100 $ -- $ --
Leased capacity and other.......... 42,129 7,218 73,367 16,637 --
Intercompany....................... 11,633 12,070 49,759 21,159 6,145
Affiliates......................... 3,409 1,878 7,710 5,217 4,918
-------- ------- -------- -------- --------
Total revenues.................. 108,492 21,166 194,936 43,013 11,063
Operating expenses:
Cost of sales...................... 102,642 16,464 157,379 29,211 4,681
Selling, general and
administrative.................. 17,994 10,778 51,499 6,512 632
Provision for doubtful accounts.... 10 36 136 -- --
Depreciation and amortization...... 5,800 2,235 13,228 4,012 --
Other.............................. 2 -- 410 -- --
-------- ------- -------- -------- --------
Total operating expenses........ 126,448 29,513 222,652 39,735 5,313
-------- ------- -------- -------- --------
Income (loss) from operations........ $(17,956) $(8,347) $(27,716) $ 3,278 $ 5,750
======== ======= ======== ======== ========
</TABLE>
Network's revenues increased $87.3 million, or 412%, to $108.5 million for
the three months ended March 31, 1999 from $21.2 million for the same period in
1998. The increase was due primarily to $51.3 million of revenues from the sale
of dark fiber and $32.0 million of revenues from services provided to customers
of the Williams Network.
Network's gross profit increased to $5.9 million for the three months ended
March 31, 1999 from $4.7 million for the same period in 1998 while gross margin
decreased to 5.4% for the three months ended March 31, 1999 from 22.2% for the
three months ended March 31, 1998. Network's cost of sales increased $86.2
million, or 524%, to $102.6 million for the three months ended March 31, 1999
from $16.4 million for the same period in 1998, due primarily to $40.8 million
of construction costs associated with the sale of dark fiber, $29.4 million of
higher off-net capacity costs incurred prior to the completion of the Williams
Network and $5.9 million of higher operating and maintenance expenses.
Network's selling, general and administrative expenses increased $7.2
million, or 67%, to $18.0 million for the three months ended March 31, 1999 from
$10.8 million for the same period
36
<PAGE> 41
in 1998, due primarily to an increase in the number of employees and the
expansion of the infrastructure to support the Williams Network.
Network's depreciation and amortization increased $3.6 million, or 160%, to
$5.8 million for the three months ended March 31, 1999 from $2.2 million for the
same period in 1998, reflecting the impact of completing the construction of
various segments of the Williams Network.
SOLUTIONS
The table below summarizes Solutions' results for the three months ended
March 31, 1999 and 1998 and for the last three fiscal years:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------- ----------------------------------
1999 1998 1998 1997 1996
-------- -------- ---------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues:
New systems and upgrades....... $193,610 $179,587 $ 791,518 $ 674,604 $306,110
Maintenance and customer
service orders.............. 137,721 145,254 556,392 508,319 251,221
Other.......................... 4,717 1,835 16,029 5,363 9,379
Affiliates..................... 1,244 770 3,465 1,512 1,362
-------- -------- ---------- ---------- --------
Total revenues.............. 337,292 327,446 1,367,404 1,189,798 568,072
Operating expenses:
Cost of sales.................. 246,769 241,365 1,009,475 881,112 435,490
Selling, general and
administrative.............. 82,551 76,631 355,014 234,615 105,891
Provision for doubtful
accounts.................... 8,079 778 19,231 5,622 1,526
Depreciation and
amortization................ 10,571 9,018 36,637 30,142 16,023
Other.......................... 263 (132) 6,013 1,255 255
-------- -------- ---------- ---------- --------
Total operating expenses.... 348,233 327,660 1,426,370 1,152,746 559,185
-------- -------- ---------- ---------- --------
Income (loss) from operations.... $(10,941) $ (214) $ (58,966) $ 37,052 $ 8,887
======== ======== ========== ========== ========
</TABLE>
Solutions' revenues increased $9.8 million, or 3%, to $337.3 million for
the three months ended March 31, 1999 from $327.5 million for the same period in
1998. Increases in new systems and upgrades as well as increases in professional
services were offset by decreases in maintenance and customer service orders.
The increase in professional services is primarily attributable to the October
1998 acquisition of Computer Networking Group, Inc.
Solutions' gross profit increased to $90.5 million for the three months
ended March 31, 1999 from $86.1 million for the same period in 1998, while gross
margin increased to 26.8% for the three months ended March 31, 1999 from 26.3%
for the same period in 1998. Solutions' cost of sales increased $5.4 million, or
2.2%, to $246.8 million for the three months ended March 31, 1999 from $241.4
million for the same period in 1998, due primarily to the increased revenue.
Solutions' selling, general and administrative expenses increased $5.9
million, or 8%, to $82.6 million for the three months ended March 31, 1999 from
$76.6 million for the same period in 1998. Cost reduction initiatives
implemented in the fourth quarter of 1998 were offset by higher costs
attributable to the CNG acquisition and expansion of the professional services
business.
Solutions' provision for doubtful accounts increased $7.3 million to $8.1
million for the three months ended March 31, 1999 from $0.8 million for the same
period in 1998. The increase in
37
<PAGE> 42
the provision reflects adjustments to our reserves based on unresolved billing
and collection issues.
Solutions' depreciation and amortization increased $1.6 million, or 17%, to
$10.6 million for the three months ended March 31, 1999 from $9.0 million for
the same period in 1998, due primarily to the CNG acquisition and depreciation
related to systems infrastructure.
STRATEGIC INVESTMENTS
The table below summarizes Strategic Investments' results for the three
months ended March 31, 1999 and 1998 and for the last three fiscal years:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------- ---------------------------------
1999 1998 1998 1997 1996
-------- -------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues:
Vyvx services.................. $ 39,287 $ 40,130 $ 161,201 $ 162,009 $ 99,974
PowerTel....................... 11,542 -- 11,248
ATL and other equity losses.... (10,159) (1,479) (16,363) (2,383) (1,601)
Other.......................... 17,315 11,217 48,961 55,957 32,503
-------- -------- --------- --------- ---------
Total revenues.............. 57,985 49,868 205,047 215,583 130,876
Operating expenses:
Cost of sales.................. 52,103 42,911 178,010 155,873 83,476
Selling, general and
administrative.............. 22,373 16,262 80,560 82,386 45,961
Provision for doubtful
accounts.................... 348 669 2,224 2,215 1,168
Depreciation and
amortization................ 11,207 7,742 34,516 36,509 16,355
Other.......................... 36 (208) 27,822 44,014 245
-------- -------- --------- --------- ---------
Total operating expenses.... 86,067 67,376 323,132 320,997 147,205
-------- -------- --------- --------- ---------
Loss from operations............. $(28,082) $(17,508) $(118,085) $(105,414) $ (16,329)
======== ======== ========= ========= =========
</TABLE>
Strategic Investments' revenues increased $8.1 million, or 16%, to $58.0
million for the three months ended March 31, 1999 from $49.9 million for the
same period in 1998. The increase is primarily attributable to $11.5 million in
international activity as a result of the August 1998 acquisition of PowerTel
and $6.2 million in increases related to audio and video conferencing and
closed-circuit video broadcasting services for businesses. These increases are
offset by $8.7 million of increased equity losses attributable to the March 1998
investment in ATL-Algar Telecom Leste S.A. As described in Note 7 of notes to
the financial statements, our equity losses for the three months ended March 31,
1999 decreased by $12.5 million compared to the same period in 1998 as a result
of the adoption of a new accounting pronouncement which became effective January
1, 1999. For segment reporting purposes, equity losses are reported as
reductions of revenues and equity income is accounted for as an increase in
revenues.
Strategic Investments' gross profit decreased to $5.9 million for the three
months ended March 31, 1999 from $7.0 million for the same period in 1998, while
gross margin decreased to 10.1% for the three months ended March 31, 1999 from
14.0% for the same period in 1998. Strategic Investments' cost of sales
increased $9.2 million, or 21%, to $52.1 million for the three months ended
March 31, 1999 from $42.9 million for the same period in 1998, primarily due to
$11.7 million in increased costs attributable to the August 1998 acquisition of
PowerTel.
Strategic Investments' selling, general and administrative expenses
increased $6.1 million, or 38%, to $22.4 million for the three months ended
March 31, 1999 from $16.3 million for the
38
<PAGE> 43
same period in 1998, primarily as a result of the $5.3 million impact of the
August 1998 acquisition of PowerTel.
CONSOLIDATED NON-OPERATING COSTS
Our net interest expenses for the three months ended March 31, 1999
increased $6.4 million from the same period of the prior year as interest
expense incurred to finance operations and capital expenditures exceeded amounts
capitalized for the quarter by $6.4 million. Our minority interest (income) loss
is attributable to Nortel's 30% ownership of Solutions LLC as well as the other
stockholders' 78% ownership of PowerTel. The change in minority interest
resulted in an increase in income for the three months ended March 31, 1999 of
$5.8 million compared to a reduction in income for the same period in 1998 of
$1.5 million. The 1999 amount attributable to Nortel is $2.7 million and the
1999 amount attributable to PowerTel is $3.1 million. In 1998, the minority
interest amount was all attributable to Nortel.
For the three months ended March 31, 1999, we recorded a tax provision of
$17.4 million, compared to a tax benefit of $0.8 million for the same period in
1998. The increase in our tax provision is primarily due to an increase in our
deferred taxes pursuant to our tax sharing agreement with Williams. The
depreciation of the Williams Network that has begun resulted in a significant
deferred tax expense for us in 1999 with no current benefit for the net
operating losses generated under the tax sharing agreement. Under our tax
sharing agreement with Williams, after the equity offering we will generally
receive the benefit of net operating losses only while we remain part of the
Williams consolidated tax group and only to the extent we would be able to
utilize them if we filed separate income tax returns.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
CONSOLIDATED RESULTS
We experienced a net loss of $185.0 million in 1998 compared to a net loss
of $35.8 million in 1997, an increase of $149.2 million from 1997. The increase
in our net loss is primarily attributable to an increase in losses from
operations of $139.7 million, which we discuss in detail below by segment. The
increase in net loss is offset somewhat by a change in minority interest results
of $29.2 million and a tax benefit of $5.1 million compared with a tax expense
of $2.0 million in 1997. Our 1997 results were also affected by the occurrence
of a $44.5 million non-recurring gain on the sale of a 30% interest in Solutions
LLC to Nortel.
Network accounted for $31.0 million of the increase in losses from
operations, Solutions accounted for $96.0 million of the increase in losses from
operations and Strategic Investments accounted for $12.7 million of the increase
in losses from operations.
NETWORK
Network's revenues increased $151.9 million, or 353%, to $194.9 million in
1998 from $43.0 million in 1997. The increase in 1998 was due primarily to $64.1
million of revenues from the sale of dark fiber, $49.5 million of revenues from
services provided to new long-term customers of the Williams Network and $28.6
million higher intercompany revenues following the transfer of the Retained
WilTel Network from Applications to Network in October 1997 and the
establishment of intercompany transfer pricing.
Network's gross profit increased to $37.6 million in 1998 from $13.8
million in 1997, while gross margin decreased to 19.2% in 1998 from 32.1% in
1997. Network's cost of sales increased $128.2 million, or 439%, to $157.4
million in 1998 from $29.2 million in 1997, due primarily to $38.5 million of
construction costs associated with the sale of dark fiber, $54.8 million of
off-net capacity costs incurred prior to completion of the Williams Network and
$17.1 million of higher
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operating and maintenance expenses. Costs associated with higher intercompany
revenues primarily account for the remainder of the increased cost.
Network's selling, general and administrative expenses increased $45.0
million, or 692%, to $51.5 million in 1998 from $6.5 million in 1997, due
primarily to an increase in the number of employees and the expansion of the
infrastructure to support the Williams Network, including $8.0 million of
increased information systems costs and $8.0 million for a new national
advertising campaign.
Network's depreciation and amortization increased $9.2 million, or 230%, to
$13.2 million in 1998 from $4.0 million in 1997, due to the transfer of the
Retained WilTel Network from Strategic Investments to Network.
SOLUTIONS
In 1997 and 1998, several integration issues relating to the combination of
Nortel's equipment distribution business with ours had an adverse impact on
Solutions' operating results. Although these issues began in 1997, our financial
results were not materially adversely impacted until 1998. See the section above
entitled "-- Overview -- Solutions -- Issues relating to Solutions' business
performance." Write-offs of previously capitalized software costs in favor of
new systems, end of the year severance plans and the modification of an employee
benefit plan also had an adverse impact on the operating results. Consequently,
Solutions' total segment operating results declined from operating income of
$37.1 million in 1997 to an operating loss of $59.0 million in 1998.
Solutions' revenues increased $177.6 million, or 15%, to $1.37 billion in
1998 from $1.19 billion in 1997, due primarily to an increase of $195.5 million
arising from the additional four months of combined operations with Nortel's
equipment distribution business in 1998 as compared to 1997. While maintenance
contract revenues increased in 1998, the increase was offset by a reduction in
new system sales and fewer customer service orders due, in part, to competitive
pressures and the integration issues discussed above. See the section above
entitled "-- Overview -- Solutions -- Issues relating to Solutions' business
performance."
Solutions' gross profit increased to $357.9 million in 1998 from $308.7
million in 1997, while gross margin increased to 26.2% in 1998 from 25.9% in
1997. Solutions' cost of sales increased $128.4 million, or 15%, to $1.01
billion in 1998 from $881.1 million in 1997, due primarily to an increase of
$121.0 million arising from an additional four months of combined operations
with Nortel in 1998 as compared to 1997. $49.4 million of the increased costs
are attributable to direct costs associated with new systems and upgrades
revenues and $43.5 million of the increased costs are direct costs associated
with maintenance and customer service orders revenues. $31.6 million of the
increased costs are attributable to higher indirect costs which are primarily
attributable to maintenance and customer service orders revenues.
Solutions' selling, general and administrative expenses increased $120.4
million, or 51%, to $355.0 million in 1998 from $234.6 million in 1997. The
increase was due to an increase of $48.4 million arising from an additional four
months of combined operations with Nortel. Also contributing to the increase was
$23.0 million of increased information systems costs associated with
infrastructure expansion and enhancement and the continued costs of maintaining
multiple systems while common systems were being developed. In addition, $36.0
million of increased costs was due to additions to sales personnel and support
staff and higher sales commission rates than anticipated. Selling, general and
administrative costs in 1998 also included fourth quarter charges of $8.7
million. The charges consisted of $5.8 million related to the modification of
Solutions' employee benefits program to increase the number of vested days in
the new paid time off policy, including a change with regard to sick pay. The
remaining charge of $2.9 million was
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for the severance of 133 employees who were terminated in December 1998 and to
whom we paid severance benefits during January 1999. Additionally, an expansion
of our professional services business increased administrative expenses.
Provision for doubtful accounts increased $13.6 million, or 242%, to $19.2
million in 1998 from $5.6 million in 1997. This increase was due to our
inability to accurately bill our customers and to collect payment from our
customers in a timely manner.
Solutions' depreciation and amortization increased $6.5 million, or 22%, to
$36.6 million in 1998 from $30.1 million in 1997, due primarily to an increase
of $5.4 million arising from an additional four months of combined operations
with Nortel in 1998 as compared to 1997. The combination with Nortel resulted in
additional goodwill of approximately $180.0 million which is being amortized
over 25 years, resulting in annual amortization expense of approximately $7.2
million.
Solutions' other operating expense increased $4.7 million, or 379%, to $6.0
million in 1998 from $1.3 million in 1997, due primarily to a fourth quarter
non-cash charge of $5.6 million related to the abandonment of capitalized
software costs in favor of new systems.
STRATEGIC INVESTMENTS
Strategic Investments' revenues decreased $10.5 million, or 5%, to $205.0
million in 1998 from $215.6 million in 1997, due primarily to the $13.7 million
impact of exiting our learning content business. In late 1997, we decided to
sell our learning content business. During 1998, a substantial portion of the
learning content business was sold at its approximate carrying value. Partially
offsetting the decline in revenues was a $9.1 million increase from audio and
video conferencing and closed-circuit video broadcasting services for
businesses.
ATL-Algar Telecom Leste S.A. is a company formed in March 1998 to acquire a
concession for cellular licenses in Brazil in the states of Rio de Janeiro and
Espirito Santo. As of March 31, 1999, following the contribution from Williams,
our investment in ATL totaled $415 million, representing a 55% economic
interest, an option for an additional 10% economic interest, a 49% voting
interest and an option for an additional 30% voting interest. On March 25, 1999,
Williams pledged 49% of its common and all of its preferred stock as collateral
for a U.S. dollar-denominated $521 million loan from Ericsson Project Finance AB
to ATL. The loan matures on March 25, 2002.
For segment reporting purposes, equity losses are accounted for as a
reduction of revenues and equity income is accounted for as an increase in
revenues. Accordingly, the table above reflects 1998 equity losses in ATL of
$12.7 million. ATL incurred significant pre-operational losses in the
construction of a digital cellular network in 1998.
PowerTel Limited is a public company in Australia which plans to build, own
and operate communications networks serving the cities of Brisbane, Melbourne
and Sydney and which plans to provide local services in the central business
districts of these three cities. Following the contribution from Williams, our
total investment will represent a 36% economic interest in PowerTel, which will
increase to 45% after we make all of our required cash contributions of $65
million. Williams will also transfer to us options which, if exercised, would
increase our interest by 4%. PowerTel's revenues for the period from Williams'
investment on August 14, 1998 through December 31, 1998 consisted of fixed
telephone line revenues of $7.3 million and cellular phone revenues of $3.9
million. Since PowerTel is accounted for under the principles of consolidation
despite our less than 50% ownership, our consolidated financial statements
reflect revenues of $11.2 million and operating expenses of $14.5 million.
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Strategic Investments' gross profit decreased to $27.0 million in 1998 from
$59.7 million in 1997, while gross margin decreased to 13.2% in 1998 from 27.7%
in 1997. Strategic Investments' cost of sales increased $22.1 million, or 14%,
to $178.0 million in 1998 from $155.9 million in 1997, due primarily to $15.0
million of costs relating to the existence of intercompany transfer pricing
following the transfer of the Retained WilTel Network to Network in October 1997
and $9.9 million due to our investment in PowerTel. Cost of sales of PowerTel
included $6.8 million related to fixed telephone line revenues and $3.1 million
related to cellular telephone revenues. Other changes in Strategic Investments'
cost of sales included the $6.7 million impact of increased activity in audio
and video conferencing and closed-circuit video broadcasting services, partially
offset by $5.6 million in lower costs as a result of our exiting the learning
content business.
Strategic Investments' selling, general and administrative expenses
decreased $1.8 million, or 2%, to $80.6 million in 1998 from $82.4 million in
1997, due primarily to our exiting the learning content business, partially
offset by $3.7 million in expenses related to PowerTel.
Strategic Investments' depreciation and amortization decreased $2.0
million, or 5%, to $34.5 million in 1998 from $36.5 million in 1997, due
primarily to the absence of depreciation and amortization of $3.9 million
associated with our exiting the learning content business. Decreases in
depreciation associated with the transfer of the Retained WilTel Network to
Network in October 1997 were offset by increases related to new video and
teleport equipment. Depreciation and amortization related to PowerTel totaled
$0.9 million.
Strategic Investments' other operating expense decreased $16.2 million, or
37%, to $27.8 million in 1998 from $44.0 million in 1997. The 1998 amount
included a $23.2 million write-down related to our abandonment of a venture
involved in the technology and transmission of business information. The
write-down occurred as a result of our decision to exit the venture and not to
make further investments in the venture. The write-down was recorded in the
third quarter and we abandoned the venture during the fourth quarter. The
write-down primarily consisted of $17.0 million from the impairment of the total
carrying value of the investment and $5.0 million from the recognition of
contractual obligations that continued after the abandonment. During the fourth
quarter of 1998, $2.0 million of these contractual obligations were paid. Other
operating expenses in 1997 included charges totaling $44.0 million related to
our decision and commitment to sell the learning content business ($22.7
million) and the write-down of assets and development costs. The write-down of
assets and development costs was a result of management's evaluation of certain
business activities because of indications that their carrying values might not
be recoverable.
CONSOLIDATED NON-OPERATING COSTS
Our net interest expense increased $2.1 million to $3.0 million in 1998
from $0.9 million in 1997 as a result of our increased borrowings in 1998
compared to 1997, and was offset somewhat by increased capitalization of
interest related to assets under construction. Our cash from financing
activities increased $664.7 million, or 294%, to $890.6 million in 1998 from
$225.9 million in 1997. Most of our 1998 funding was provided by borrowings from
Williams, while most of our 1997 funding was provided by capital contributions
from Williams.
Our minority interest (income) loss is attributable to Nortel's 30%
ownership of Solutions LLC as well as the other stockholders' 78% ownership of
PowerTel. The change in minority interest resulted in an increase in income in
1998 of $15.6 million compared to a reduction of income in 1997 of $13.5
million. This change of $29.1 million was due primarily to operating losses
attributable to Solutions in 1998 as compared to operating profit in 1997. In
1997, we
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<PAGE> 47
recognized a $44.5 million gain on the sale of a 30% ownership in Solutions LLC
to Nortel based on the excess of the fair value over the net book value of the
assets conveyed to Nortel.
In 1998, we recorded a tax benefit of $5.1 million compared to a tax
provision of $2.0 million in 1997. The notes to our consolidated financial
statements include a reconciliation of the expected benefit for income taxes at
the federal statutory rate to the actual provision or benefit. In 1998, the
expected benefit was largely offset by unused operating losses.
Under our tax sharing agreement with Williams, after the equity offering we
will generally receive the benefit of net operating losses only while we remain
part of Williams' consolidated tax group and only to the extent we would be able
to utilize them if we filed separate income tax returns. If we had filed
separate federal income tax returns for 1997 and 1998, the provision (benefit)
for income taxes would generally be unchanged for 1997, and for 1998 the
deferred federal income tax benefit would have been increased by approximately
$5.6 million. This amount reflects the benefit of a net deferred tax asset for
federal net operating loss carryforwards to the extent of the existing net
deferred tax liability that would have been reflected by us on a separate filing
basis.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
CONSOLIDATED RESULTS
We incurred a net loss of $35.8 million in 1997 compared to a net loss of
$3.5 million in 1996, representing an increase in net loss of $32.3 million, or
920%, from the prior year. The increase in net loss was due to increased losses
from operations of $63.4 million and the recording of minority interest expense
of $13.5 million attributable to Nortel's 30% share of the 1997 results of
Solutions LLC. These results were offset by lower net interest expense of $16.4
million and the recognition of a $44.5 million gain on the sale of a 30%
interest in Solutions LLC to Nortel. Our 1996 results were affected by a
non-recurring gain on the sale of communications assets of $15.7 million.
Network accounted for $2.5 million of the increase in losses from
operations. These losses were offset somewhat by an increase in Solutions'
operating income of $28.2 million. Strategic Investments accounted for $89.1
million of the increase in losses from operations.
NETWORK
Network's revenues increased $31.9 million, or 289%, to $43.0 million in
1997 from $11.1 million in 1996, due primarily to $14.0 million in consulting
and outsourcing revenues attributable to the March 1997 acquisition of Critical
Technologies, Inc., a company which designs and manages outsourced
communications networks. The increase in revenues was also primarily due to an
increase of $15.0 million in intercompany revenues, including revenues from the
transfer of the Retained WilTel Network from Strategic Investments to Network in
October 1997.
Network's gross profit improved to $13.8 million in 1997 from $6.4 million
in 1996, while gross margin percentages declined to 32.1% in 1997 from 57.7% in
1996. Network's cost of sales increased $24.5 million, or 524%, to $29.2 million
in 1997 from $4.7 million in 1996, due primarily to the $15.0 million impact of
the transfer of the Retained WilTel Network from Strategic Investments to
Network and the $8.0 million impact of the acquisition of Critical Technologies.
Network's selling, general and administrative expenses increased $5.9
million to $6.5 million in 1997 from $0.6 million in 1996 as a result of the
acquisition of Critical Technologies.
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Network's depreciation and amortization was none in 1996 and increased to
$4.0 million in 1997 as a result of the transfer of the Retained WilTel Network
from Strategic Investments to Network and the acquisition of Critical
Technologies.
SOLUTIONS
Solutions' revenues increased $621.7 million, or 109%, to $1.19 billion in
1997 from $568.1 million in 1996, due primarily to acquisitions which
contributed revenues of approximately $556.0 million, including $536.0 million
from the April 1997 combination of Nortel's equipment distribution business with
ours.
During 1997, Solutions modified its basic contract structure for new
systems and upgrades to separately state prices for the equipment and services
portions of a contract. As a result of this contract structure, revenues related
to the equipment portion of new systems and upgrade contracts are recognized
when the equipment is received by, and title passes to, the customer. Revenues
related to the services portion of the new systems and upgrades contracts
continue to be recognized based on the relationship of the accumulated service
costs incurred to the estimated total service costs upon completion. This new
contract structure increased revenues by $38.0 million and operating profit by
$6.7 million in 1997. Increased business activity resulted in an $81.0 million
increase in new system sales, partially offset by a $46.0 million decrease in
system upgrade revenues.
Solutions' gross profit increased to $308.7 million in 1997 from $132.6
million in 1996, while gross margin percentages increased to 25.9% in 1997 from
23.3% in 1996. Solutions' cost of sales increased $445.6 million, or 102%, to
$881.1 million in 1997 from $435.5 million in 1996. The increase was due
primarily to the $393.0 million impact of the combination with Nortel. The
remaining increase was attributable to the modification of the contract
structure discussed above, resulting in increased costs of $31.3 million, and to
increased business activity.
Solutions' selling, general and administrative expenses increased $128.7
million, or 122%, to $234.6 million in 1997 from $105.9 million in 1996, due
primarily to the approximately $109.3 million impact of the combination with
Nortel with the remaining costs attributable to expanding the infrastructure and
sales support for anticipated future growth.
Solutions' depreciation and amortization increased $14.1 million, or 88%,
to $30.1 million in 1997 from $16.0 million in 1996, due primarily to the
combination with Nortel.
STRATEGIC INVESTMENTS
Strategic Investments' revenues increased $84.7 million, or 65%, to $215.6
million in 1997 from $130.9 million in 1996, due primarily to acquisitions which
contributed revenues of $81.0 million. Strategic Investments' revenues in 1997
also included revenues from our learning content business for which, in late
1997, we developed a plan for disposal and defined as an asset held for sale. As
detailed in our consolidated financial statements, a series of acquisitions were
completed in 1996 and 1997 which expanded Strategic Investments' product
offerings to include satellite links, audio and video conferencing,
closed-circuit video broadcasting for businesses and advertising distribution.
Strategic Investments' gross profit increased to $59.7 million in 1997 from
$47.4 million in 1996, while gross margins decreased to 27.7% in 1997 from 36.2%
in 1996. Cost of sales increased $72.4 million, or 87%, to $155.9 million in
1997 from $83.5 million in 1996, due primarily to the $68.0 million impact of
the acquired operations.
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Strategic Investments' selling, general and administrative expenses
increased $36.4 million, or 79%, to $82.4 million in 1997 from $46.0 million in
1996, primarily attributable to the acquired operations.
Strategic Investments' depreciation and amortization increased $20.1
million, or 123%, to $36.5 million in 1997 from $16.4 million in 1996, primarily
attributable to the acquired operations.
Strategic Investments' other expenses increased $43.8 million to $44.0
million from $0.2 million in 1996, due primarily to charges totaling $42.0
million in 1997 related to our decision and commitment to sell our learning
content business, resulting in a $22.7 million charge, and the write-down of
assets and development costs. The $22.7 million charge consisted of a $21.0
million impairment of the assets to fair value less cost to sell and recognition
of $1.7 million in exit costs, which primarily consisted of employee-related
costs and contractual obligations. Fair value was based on management's estimate
of the expected net proceeds to be received. The write-down of assets and
development costs was a result of management's evaluation of certain of
Strategic Investments' business activities because of indications that their
carrying values might not be recoverable. This resulted in impairments of $17.0
million based on management's estimate as to the ultimate recoverable value of
these business activities.
CONSOLIDATED NON-OPERATING COSTS
Our net interest expense decreased $16.4 million to $0.9 million in 1997
from $17.4 million in 1996 as a result of our funding needs and resources in
1997 as compared to 1996 and as a result of the capitalization of interest
beginning in 1997 for network construction projects. Our cash from financing
activities decreased $0.1 million to $225.9 million in 1997 from $226.0 million
in 1996. Most of our 1997 funding was provided by capital contributions from
Williams, while in 1996 funding included both borrowings and capital
contributions from Williams.
Our minority interest expense in 1997 is attributable to Nortel's 30%
ownership of Solutions LLC and resulted in expense in 1997 of $13.5 million
compared to none in 1996. This change was due to the April 1997 combination with
Nortel.
We recognized a $44.5 million gain in 1997 on the sale of the 30% ownership
interest in Solutions LLC to Nortel based on the excess of the fair value over
the net book value of the assets conveyed to Nortel. In 1996, we recorded a gain
of $15.7 million from the sale of communication assets for $38.0 million.
In 1997, we recorded a tax expense of $2.0 million compared to a tax
expense of $0.4 million in 1996. The notes to our consolidated financial
statements include a reconciliation of the expected benefit to the actual
provision or benefit. The 1997 and 1996 expenses reflect our inability to
utilize net operating losses under our tax sharing agreement with Williams.
LIQUIDITY AND CAPITAL RESOURCES
Our operations currently do not provide positive cash flow. Accordingly, we
have funded capital expenditures, acquisitions and other cash needs through a
combination of borrowings and capital contributions from Williams as well as
external borrowings when required. After the completion of the offerings, we
plan on financing future cash outlays through internally generated and external
funds without relying on cash advances, credit support or contributions from
Williams.
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HISTORICAL FUNDING SOURCES AND USES
Total cash expended from January 1, 1996 to March 31, 1999 to fund capital
expenditures and investments, pay debt and make acquisitions was approximately
$1.84 billion. Of this amount, approximately $795.6 million was expended for
acquisitions and approximately $793.9 million was used for capital expenditures,
of which approximately $747.0 million was spent to construct and light the
Williams Network. In addition, total cash used in operating activities was
approximately $308.0 million during the same period.
Cash provided during this same period by loans and capital contributions
from Williams totaled approximately $1.78 billion, of which approximately $380
million was for the buildout of the Williams Network. Total cash provided by
external borrowings was approximately $466.5 million. As of March 31, 1999,
working capital was $501.4 million. At December 31, 1998, 1997 and 1996, working
capital was approximately $330.5 million, $151.0 million and $145.9 million,
respectively.
Beginning in July 1997, Solutions became a borrower under the revolving
credit facility among Williams and other Williams subsidiaries. Solutions had a
commitment of $300 million under this credit facility. In January 1999, we also
became a borrower under this credit facility and agreed that our borrowings
under this facility would not exceed $400 million, including Solutions'
availability. Our borrowings under this facility other than borrowings by
Solutions are guaranteed by Williams. As of March 31, 1999, there were $315
million in borrowings outstanding. As of the date of this prospectus, there are
no borrowings outstanding under this facility.
During 1998, we entered into an asset defeasance program in the form of an
operating lease agreement covering a portion of the Williams Network with a
group of financial institutions. As of March 31, 1999, we had spent
approximately $368.1 million in cash under this program. Our obligations under
the lease are partially guaranteed by Williams.
In 1999, we accelerated the schedule for completion of the Williams
Network. In order to provide for additional financing needed prior to completion
of the offerings, we entered into a $1.4 billion interim loan facility on April
16, 1999. Our obligations under the interim loan facility are guaranteed by
Williams. The facility terminates on September 30, 1999. As of the date of this
prospectus, $450 million in principal was outstanding under the interim
facility.
We intend to replace the current revolving credit facility and interim loan
facility after the offerings, but on or before September 30, 1999, with a
permanent credit facility. Our permanent credit facility will not be guaranteed
by Williams.
Upon the completion of the offerings and the recharacterization of $500
million from paid in capital to amounts due to affiliates -- Williams, we
estimate we will have approximately $1.3 billion in borrowings from Williams. We
will pay a floating interest rate on borrowings from Williams equal to LIBOR
plus a margin based on our credit rating.
NETWORK CAPITAL EXPENDITURE PLAN
We have developed a capital expenditure plan totaling $4.7 billion which we
anticipate will fund capital expenditures related to the Williams Network
through December 31, 2000. Of the $4.7 billion total, we expect that
approximately $1.9 billion will be required for construction costs including the
purchase and deployment of fiber optic cable, approximately $2.6 billion will be
required for equipment costs and approximately $200 million will be required for
other costs, including capitalized interest and software. A significant portion
of the equipment costs will be for advanced optical electronics, voice switches
and routers, which will support increased capacity
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<PAGE> 51
on the Williams Network and additional network services particularly in the
areas of data and voice.
Network's construction contracts typically cover all or a portion of a
cable construction project. While Network may use the same contractors on
different projects, it has no long-term construction agreements. Network has
long-term equipment purchase contracts with Nortel and Ascend Communications,
Inc.
We intend to fund the $4.7 billion capital expenditure plan using the
sources set forth in the table below. As of March 31, 1999, we had expended
approximately $747.0 million of this $4.7 billion.
PLANNED FUNDING SOURCES
(IN MILLIONS)
<TABLE>
<S> <C>
Amount funded by Williams................................... $ 380
Borrowings under bank facilities............................ 795
Asset defeasance program.................................... 750
Net proceeds from the equity offering....................... 750
Net proceeds from the notes offering........................ 1,300
Net proceeds from the concurrent investments................ 725
------
Total............................................ $4,700
======
</TABLE>
We estimate that we will have spent approximately $1.4 billion under our
Network capital expenditure plan by June 30, 1999. Some of the capital
expenditures funding sources are described below.
- We intend to enter into a new permanent credit facility which we will use
to replace the current revolving credit facility and the $1.4 billion
interim loan facility. We will make new borrowings under this new
permanent credit facility as and when needed. Dark fiber sales may allow
us to reduce the amount of our borrowings.
- During 1998, we entered into an asset defeasance program in the form of
an operating lease agreement covering a portion of the Williams Network.
The total estimated cost of the network assets to be covered by this
lease agreement is $750 million. The lease term will include an interim
term, during which the covered network assets will be constructed, which
is anticipated to end no later than December 31, 1999, and a base term.
The interim and base terms are expected to total five years, and if
renewed, could total seven years. At March 31, 1999, $368.1 million of
construction costs had been incurred.
- Concurrently with the equity offering, we expect to issue in the notes
offering approximately $1.3 billion principal amount of publicly traded
debt securities with a ten-year maturity.
- We expect to receive approximately $725 million from the concurrent
investments.
OTHER CAPITAL COMMITMENTS
In addition to the Network capital expenditure plan described above, we
have the following other capital commitments which we plan to fund with
borrowings from our credit facilities if operating cash flows are not
sufficient:
With respect to Network, we have an approximately $316 million commitment
to acquire wireless capacity under our agreement with WinStar described in
"Business -- Strategic alliances -- WinStar," payable over the next four years.
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With respect to Solutions, we have committed approximately $50 million for
Solutions to complete its transition to common information systems during 1999.
We also have commitments to purchase Nortel's interest in Solutions under
certain circumstances. After 1999, Nortel may require us to purchase up to
one-third of its 30% interest in Solutions at the then-fair market value. Nortel
may also require us to purchase its entire interest in Solutions at market value
in the event of a change in control of either us or Nortel or in the event
Solutions' purchases of Nortel equipment do not meet certain targets. If
operating cash flows are not sufficient or if we are not able to borrow
sufficient funds for the purchase under our bank facilities, we would need to
obtain additional funding from other sources, including equity sales.
With respect to Strategic Investments, we expect to invest an additional
$33 million in PowerTel over the next year. We are also committed to making
additional capital contributions to ATL to the extent necessary for it to
maintain a 70-to-30 debt to contributed capital ratio.
In addition, the companies in which we have made strategic investments have
their own funding requirements. We expect that these companies will obtain
required funding from third parties to the extent sufficient funds are not
generated from internal operations. To the extent internally-generated funds or
third party borrowings are unavailable, we may invest additional funds or lend
additional money to these companies in order for them to meet their capital
needs. Anticipated funding needs of these companies include:
- approximately $805 million for ATL over the next three years, a portion
of which is to pay amounts required under its Brazilian cellular license
bid
- approximately $186 million for MetroCom over the next three years to
construct a network to provide communications services in the Santiago,
Chile metropolitan area
- approximately $225 million for PowerTel over the next three years to
construct communications networks to serve Brisbane, Melbourne and
Sydney, Australia
Our debt agreements will contain restrictive covenants and require us to
meet certain financial ratios and tests. These agreements will restrict our
ability to borrow additional money, pay dividends or other distributions to
stockholders, make investments, create liens on our assets and sell assets.
We believe that the financing sources described above will be sufficient to
satisfy our anticipated cash requirements at least through the end of 2000.
However, we cannot assure you that our capital expenditures will not exceed the
amounts we have estimated or that we will be able to obtain the required funds
on terms acceptable to us, either from the sources described above or other
sources. If we are unable to obtain the necessary funds, we may be required to
scale back or defer our planned capital expenditures and, depending on the cash
flow from our then-existing businesses, reduce the scope of our planned
operations. In addition, our ability to expand our business and enter into new
customer relationships may depend on our ability to obtain additional financing
for these projects.
For more detail regarding the financing arrangements referred to above that
will continue in place following the completion of the offerings, see the
section of this prospectus entitled "Description of Indebtedness and Other
Financing Arrangements." For more detail regarding the SBC investment, see the
section of this prospectus entitled "Business -- Strategic alliances -- SBC."
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INFLATION
Inflation has not significantly affected our operations during the past
three years.
ACCOUNTING PRONOUNCEMENTS
We adopted the American Institute of Certified Public Accountants'
Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities" (SOP
98-5) effective January 1, 1999. SOP 98-5 requires that all start-up costs be
expensed and that the effect of adopting SOP 98-5 be reported as the cumulative
effect of a change in accounting principle. The effect of adopting SOP 98-5 on
our results of operations was immaterial.
We adopted Statement of Financial Accounting Standards (SFAS) No. 131,
"Disclosures about Segments of an Enterprise and Related Information," during
the fourth quarter of 1998. SFAS No. 131 established standards for reporting
information about operating segments and related disclosures about products and
services, geographic areas and major customers.
On January 21, 1999, the Emerging Issues Task Force (EITF) of the Financial
Accounting Standards Board reached a consensus regarding EITF Issue 98-13,
"Accounting by an Equity Method Investor for Investee Losses When the Investor
Has Loans to and Investments in Other Securities of the Investee." EITF Issue
98-13 was applied prospectively beginning January 1, 1999 and reduces the equity
method interest used to record earnings and losses from ATL.
MARKET RISK DISCLOSURES
INTEREST RATE RISK
Our interest rate risk exposure primarily results from our debt portfolio
consisting principally of long-term debt due affiliates, representing variable
rate borrowings for which the carrying value of the obligation approximates fair
value. At March 31, 1999, long-term debt due to Williams of $818.1 million
accrued interest at a floating interest rate which is currently 5.65%.
FOREIGN CURRENCY RISK
We have international investments, primarily in Australia, Brazil, Canada
and Chile, that could affect our financial results if the investments incur a
permanent decline in value as a result of changes in foreign currency exchange
rates and the economic conditions in foreign countries.
At March 31, 1999, we had approximately $339 million in investments,
accounted for on the cost method, whose operations are located in South America.
Approximately 93% of these investments relate to a preferred stock investment in
a Brazilian telecommunications venture. Management believes the fair value of
these investments approximates their carrying value. However, estimating cash
distributions from these ventures by year is not practicable, given that the
time period for cash distributions from, or liquidation of, these investments is
uncertain. In recent months, the Brazilian economy has experienced significant
volatility resulting in a 30% reduction of the Brazilian Real against the U.S.
dollar. The ultimate duration and severity of the conditions in Brazil remains
uncertain, as does the long-term impact on our interest in this venture.
Management continues to monitor currency fluctuations in this region and
considers the employment of strategies to hedge currency movements when cash
flows from these investments warrant the need for such consideration.
At March 31, 1999, the net assets of operations located in various other
countries throughout the world approximated 6% of our total net assets. These
foreign operations, whose functional currency is the local currency, do not have
significant transactions or financial instruments denominated in other
currencies. However, these investments do have the potential
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to impact our financial position, due to fluctuations in these local currencies
arising from the process of remeasuring the local functional currency into the
U.S. dollar. Management continually monitors fluctuations in these respective
currencies and considers investment alternatives if any currency devaluation is
considered to be significant.
YEAR 2000 READINESS DISCLOSURE
OUR STATE OF READINESS
Beginning on January 1, 2000, installed computer systems and software
products must either accept four digit entries to distinguish the year 2000 and
all subsequent years from the year 1900 or be modified to recognize the change
of the century even though there are only two digits being used.
We, with Williams, established a plan in 1997 to address Year 2000 issues
relating to the areas of our business that could be impacted by the date and
time change from 1999 to 2000. We are reviewing our products and services as
well as our internal systems in order to identify and modify the products,
services and systems that are date-and time-sensitive. These areas include:
- traditional informational technology
- non-traditional informational technology
- external interfaces with our customers and vendors
Our traditional information technology, or IT, includes our software,
applications, data and related computer hardware equipment, such as mainframe
and personal or midrange computers. Our non-traditional technology, or Non-IT,
includes all computer hardware, network hardware, plant equipment and other
embedded items that contain date-sensitive code. Examples of Non-IT include
elevator control systems, card key access systems and telecommunications
equipment.
Also in 1997, Williams established a Year 2000 committee to oversee
management and execution of the plan. The Year 2000 issue is being addressed in
the following phases:
- awareness
- inventory and assessment
- renovation and replacement
- testing and validation
The initial phase, awareness, is a continuing process intended to heighten
awareness of Year 2000 issues both within our company and among our customers.
We have completed the inventory and assessment phase. During this phase, we
inventoried and classified all systems with possible Year 2000 implications into
the following categories:
- highest, compliance is business critical
- high, compliance necessary within a short period of time following
January 1, 2000
- medium, compliance necessary within 30 days from January 1, 2000
- low, compliance desirable but not required
- unnecessary
We designated the first three categories above as critical and as our major
focus. Critical systems are systems that directly support customer systems and
applications for our products and services customer base. Examples of critical
systems include Solutions' "SIMS" database which holds Solutions' customer
records and Network's provisioning and ordering fulfillment system.
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We split the inventory and assessment phase into two categories, IT and
Non-IT. We hired an external contractor as a consultant to provide support
services for the IT assessment. Third-party software information was compared
with the contractor's master product compliance database to determine Year 2000
compliance status. Vendors were contacted for software not found in this master
database. The systems identified in the assessment phase included all date-and
time-sensitive hardware and embedded items. The Non-IT assessment was developed
to ensure that all computer hardware, network hardware and plant equipment
continues to operate without interruption up to and beyond the rollover to the
year 2000. The systems identified in the assessment included both manned sites
and unmanned Network sites as well as other Non-IT systems.
For the testing and validation phases, a Year 2000 test lab capable of
testing almost any software is in place and operational. As of April 30, 1999,
approximately 70% of our IT systems have been fully tested or otherwise
validated as compliant. An example of another way a system is validated as
compliant is when a business process is determined not to be date- and time-
sensitive. Approximately 18% of our IT systems, which are deemed compliant by
vendors or employees, have not yet been validated; of this 18%, we have
categorized 87% as critical. Approximately 12% have been identified as not Year
2000 compliant; of this 12%, we have categorized 90% as critical. Approximately
79% of our Non-IT systems have been tested and were found to be compliant.
Approximately 16% remain to be tested; of this 16%, we have categorized 25% as
critical. The remaining 5% of the Non-IT systems are not compliant and have been
characterized as critical.
We expect to complete the renovation and replacement and testing and
validation phases for most of the critical systems by August 31, 1999. Some
non-critical systems that will not have a material impact on our business may
not be compliant until after January 1, 2000.
We have initiated a formal communications process with customers, vendors,
service providers and other companies to determine the extent to which these
companies are addressing Year 2000 compliance. In connection with this process,
as of April 30, 1999 we had sent approximately 7800 letters and questionnaires
to third parties who have conducted business with us during the last three
years. While the response rate has been 36% overall, the response rate is higher
from our critical business partners. For example, there is a 72% response rate
from our IT business partners, a 78% response rate from our Non-IT partners and
a 40% response rate from our lessors. Virtually all of these companies have
indicated that they are already compliant or will be compliant on a timely
basis. We have identified the most critical business partners and are currently
in the process of determining the amount of risk to which we may be exposed.
Where necessary, we will be working with key business partners to reduce the
risk of a break in service or supply and with non-compliant companies to
mitigate any material adverse effect on our business.
We have utilized both internal resources and external contractors to
complete the Year 2000 compliance project. We have a core group of 13 people who
are responsible for coordinating, organizing, managing, communicating, and
monitoring the project and another estimated 80 staff members are responsible
for completing the project. Depending on which phase the project is in and what
area is being focused on at any given point in time, there can be an additional
50 to 250 employees working on completion of the project. The estimated cost of
our external contractors is approximately $3.5 million.
COSTS OF YEAR 2000 COMPLIANCE
We expect to incur total costs of $11.8 million to address the Year 2000
issue. Of this total, approximately $2.2 million is expected to be incurred for
new software and hardware
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purchases and will be capitalized with the remaining amounts expensed.
Approximately $5.2 million has been expensed to date and $233,000 has been
capitalized. The $11.8 million in total costs has been or is expected to be
spent as follows:
- First quarter 1998. Prior to and during the first quarter of 1998, we
conducted the project awareness and inventory and assessment phases of
the project and incurred costs totaling $200,000.
- Second quarter 1998. We spent $700,000 on renovation and replacement and
the completion of the inventory and assessment phase.
- Third and fourth quarter 1998. We focused on the renovations and
replacement, and testing and validation phases in which a cost of
approximately $2.5 million was incurred.
- First quarter 1999. Renovations and replacement and testing and
validation continued, and contingency planning began. We spent
approximately $2 million during the first quarter of 1999.
- Second quarter 1999. Our primary focus will shift to testing and
validation, and contingency planning and final testing with $4 million
expected to be spent.
- Third and fourth quarters 1999. We will focus primarily on contingency
planning and final testing and estimate that we will spend $2.4 million.
Of the approximately $6.4 million of future costs necessary to complete the
project on schedule, approximately $4.4 million will be expensed and the
remainder capitalized. This estimate does not include our potential share of
Year 2000 costs that may be incurred by partnerships and joint ventures in which
we participate but are not the operator. The costs of previously planned system
replacements are not considered to be Year 2000 costs and are therefore excluded
from the amounts discussed above.
RISKS ASSOCIATED WITH YEAR 2000 ISSUES
Our estimates of costs associated with the project and of the completion
dates are based on our best estimates, which we derived utilizing numerous
assumptions of future events, including the continued availability of resources,
third-party Year 2000 compliance modifications plans and other factors. We
expect the necessary modifications will be made on a timely basis and do not
believe that the cost of these modifications will have a material adverse effect
on our business, financial conditions and operating results. However, in part
due to the unavailability and high cost of trained personnel, the difficulty
locating all relevant computer code, reliance on third-party suppliers and
vendors and the ability to implement interfaces between the new systems and the
systems being replaced, there is a possibility of service interruptions due to
non-compliance. For example, power failures along the Williams Network would
cause both customer and internal service interruptions. We cannot guarantee that
these estimates or completion dates will be achieved, and actual results could
differ materially from these estimates.
We have attempted to minimize our risks for the Year 2000 rollover by
taking actions, which include the following:
- following a comprehensive project methodology
- ongoing coordination with the legal and audit departments
- completing an audit of the software, hardware and firmware in use at our
facilities
- determining the business criticality of the items identified and
formulating appropriate action plans
- maintaining centralized storage of project documentation and
communication with critical files kept and logged as vital records
- contacting vendors, suppliers and business partners regarding their Year
2000 compliance efforts
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- issuing consistent and approved responses to external requests regarding
Year 2000 status
- conducting ongoing management reporting and awareness and training
programs for employees
- contacting customers and notifying them of plans and changes (potential
or tangible) relating to our business
- taking appropriate legal actions where required based on contractual
agreements, warranties and representations (including Year 2000 wording
in contracts, warranties, and purchase orders)
- preventing the purchase or construction of any system, tools or processes
that are not Year 2000 compliant or upgradeable before January 1, 2000
Although all critical systems over which we have control are planned to be
compliant and tested before the Year 2000, we have identified two areas of
concern. First is the possibility of service interruptions to us and/or our
customers due to non-compliance by third parties. Second is the delay in system
replacements scheduled for completion during 1999. We are closely monitoring the
status of these systems to reduce the chance of delays in completion. We believe
the most reasonably likely worst possible scenario would be a systems failure
beyond our control to remedy, which could materially prevent us from operating
our business. We believe that such a failure would likely lead to lost revenues,
increased operations costs, loss of customers or other business interruptions of
a material nature, in addition to potential claims including mismanagement,
misrepresentation or breach of contract.
CONTINGENCY PLANS
We began initial contingency planning during 1998 and significant focus on
that phase of the project is taking place in 1999. Guidelines for that process
were issued in January 1999 in the form of a formal business continuity plan. An
external contractor is working within each business unit to review existing
business continuity plans and to modify these plans to include Year 2000
contingency plans for the critical business processes, critical business
partners, suppliers and system replacements that may experience significant
delays.
Our Year 2000 contingency plan methodology is as follows:
- assess each business process for business risk and potential need for
contingency plans
- create business process contingency plans as needed based on the risk
analysis
- test the completed plans, evaluate the test results and revise plans
accordingly
- store completed plans both on-site and off-site
- maintain plan copies at the appropriate Year 2000 offices
- review and modify contingency plans as part of an ongoing change
management process
These plans should be defined by August 31, 1999 and implemented where
appropriate. However, due to the general uncertainty inherent in the Year 2000
issue and the inability to anticipate all potential risks, we cannot ensure our
ability to timely and cost effectively resolve all post-Year 2000 problems
associated with the Year 2000 issue that may affect our operations and business
or expose us to third party liability.
In addition to the Year 2000 committee which serves all of our business
units, Solutions has established a Year 2000 team to assist in making its
customer base Year 2000 compliant. The team consists of marketing, legal,
operations and other shared services personnel who assess, test and validate the
telecommunications products for Solutions' customer base. Monetary support for
the team and the Solutions Year 2000 project is provided for out of each
department's budget.
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The Solutions team's purpose is to educate and inform customers and
employees about Year 2000 related issues and proactively seek to implement
upgrades to bring our customers into compliance. The majority of the upgrades
and new products needed to support the customer migration are available from the
manufacturers. Solutions has launched extensive efforts including direct and
mass mailings to inform its customer base of the need to take action to assess
and if necessary, upgrade, their products to be Year 2000 compliant.
Although Solutions believes it has sufficient resources to provide timely
support to its customers that require product migrations or upgrades, Solutions
has set a June 30, 1999 target date for its products and services contingency
plan. This contingency plan will address both potential spikes in the demand for
customer support and potential problems with its suppliers. Based on customer
demand, Solutions will be reviewing its work projects to address customer
service. To ensure timely delivery from its suppliers, Solutions is proactively
monitoring and seeking assurances from its key suppliers. However, since the
effort to provide Year 2000 compliant products and essential services to its
customers is heavily dependent on its major suppliers, interruptions or
disruptions in this supply could have an adverse material impact on Solutions.
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INDUSTRY OVERVIEW
Telecommunications is the transmission of data, voice or video signals
across a distance. Data signals connect computers in networks such as the
Internet, or connect other devices, such as facsimile machines. Voice signals
usually connect people in telephone conversations. Video signals include video
conferencing and television signals. Telecommunications services are typically
divided into long distance and local services. The demand for all types of
telecommunications services has been increasing, with especially rapid growth in
high-speed data services, including the Internet. The telecommunications
industry includes telecommunications services, equipment, and technical services
for creating and operating telecommunications networks.
Recently, the telecommunications industry has been characterized by rapid
technological change, changes in the industry structure and increased demand for
services and equipment. A February 1999 report of the President's Council of
Economic Advisers estimated total U.S. telecommunications services and equipment
revenues in 1998 of $408 billion, up from approximately $250 billion in 1993.
Over the past several years, the telecommunications industry has undergone
significant structural change. Many of the largest equipment and service
providers have achieved growth through acquisitions and mergers. These
combinations have provided access to new markets, new products, and economies of
scale. Despite this consolidation, the number of new entrants is increasing and
small new entrants are gaining market share from the large and established
providers. In this highly competitive environment, telecommunications providers
are increasingly focusing on core activities and core competencies and
outsourcing non-core activities to other providers. This trend is a significant
change from the traditional integrated model that has prevailed in the industry
since its inception.
INDUSTRY TRENDS
ADVANCES IN TELECOMMUNICATIONS AND NETWORKING TECHNOLOGY
Telecommunications providers transmit voice, data and video signals
primarily over coaxial cable, copper cables, microwave systems, satellites and
fiber optic cables. Beginning in the 1960s, microwave systems began to replace
copper cable and by 1990, fiber optic cables had largely replaced copper cable
for long distance transmission. Fiber optic cables use light to transmit
information in digital format through ultra-thin strands of glass. Compared to
copper, fiber optic cables provide significantly greater capacity at lower cost
with fewer errors and increased reliability.
Several advances in switching and electronics have further increased the
bandwidth, or transmission capacity, of telecommunications networks. Dense
wavelength division multiplexing is a technology which allows the transmission
of multiple light signals through a single optical fiber and can currently
increase the bandwidth of fiber optic cables by up to 128 times the original
fiber optic technology.
Historically, carriers have built telecommunications networks based on
circuit switching. Circuit switching establishes and keeps open a dedicated path
until the call is terminated. While circuit switching has worked well for
decades to provide voice communications, it does not efficiently use
transmission capacity. Once a circuit is dedicated, it is unavailable to
transmit any other information, even when the particular users of that circuit
are not speaking or otherwise transmitting information. Packet switching is
replacing circuit switching. Packet switching divides data into small "packets"
which are then independently transmitted to their destination via the quickest
path. Upon their arrival, the packets are reassembled. Packet switching
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provides more efficient use of the capacity in the network because the network
does not establish inefficient dedicated circuits, which waste unused capacity.
The new packet networking technologies operate at very high speeds ranging
from 1.544 million bits per second, or DS-1, to 2.488 billion bits per second,
or OC-48, and beyond. A bit is the smallest unit of information a computer can
process and is the basic unit of data communications. By comparison, one voice
call requires roughly 64,000 bits per second. Packet networks are especially
efficient at carrying data signals.
CONVERGENCE OF VOICE AND DATA SERVICES
Telecommunications network designs have traditionally created separate
networks using separate equipment for voice, data and video signals. The
evolution from analog to digital technologies, which convert voice and other
signals into a stream of "1"s and "0"s, erases the traditional distinctions
between voice, data and video transmission services. High-bandwidth networks
that use advanced packet-switched technology transmit mixed digital voice, data
and video signals over the same network. This enables telecommunications
customers to use a single device for voice, data and video communications.
Although these devices are new to the market, customer interest and acceptance
are rapidly growing.
Each evolution, from copper to fiber optic cables, from one to many light
signals, from circuit switching to packet switching and from analog to digital
signals, has produced significant increases in network capacity. When considered
together, these evolutions have produced enormous increases in the ability to
transfer large amounts of information across vast distances almost
instantaneously. With each new leap in transmission capacity, end-users have
come to rely on their ability to access and manipulate ever greater amounts of
information quickly and easily. This reliance has consistently created demand
that outstrips the available capacity.
HISTORY OF THE MODERN TELECOMMUNICATIONS INDUSTRY
In the first half of the twentieth century, AT&T Corp. created the Bell
System, a nationwide collection of telecommunications network assets. For most
of the century, the Bell System operated as a regulated monopoly providing
telecommunications services in most areas of the U.S. Even in those areas where
a non-Bell System carrier, such as GTE Corp., provided local service, that local
carrier was a regulated monopoly providing local service, and AT&T provided
regulated monopoly long distance service.
The 1982 antitrust consent decree between AT&T and the U.S. Department of
Justice strongly influenced the current structure of the communications
industry. The consent decree was intended, among other things, to spur
competition in providing long distance service and supplying telecommunications
equipment. The decree required AT&T to divest its Bell Operating Companies to
seven newly created Regional Bell Operating Companies, or RBOCs, and divided the
country into approximately 200 local access and transport areas which delineate
the areas between which the RBOCs are prohibited from providing long distance
services and in which the RBOCs are authorized to provide local exchange
services. The RBOCs remained regulated monopolists, operating network assets and
providing exchange services, including local telecommunications service, access
to long distance carriers and toll service within the exchange area. However,
the RBOCs were prohibited from providing services between the different local
areas and from manufacturing telecommunications equipment. AT&T continued to
operate the long distance network assets and provide long distance services.
Long distance competition has increased significantly since the AT&T
divestiture. MCI, Sprint Corp. and Williams created nationwide fiber optic
networks to compete with AT&T. Other long distance providers purchased services
primarily from these three new networks or
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AT&T in order to compete for long distance market share. According to the
Federal Communications Commission, AT&T's market share fell from approximately
90% in 1984 to approximately 45% in 1997. In 1997, MCI, Sprint and LDDS, which
acquired Williams' original fiber optic network in 1995, had approximately 19%,
10%, and 7% market share respectively. All other long distance providers
accounted for the remaining 20% market share.
Similarly, supplying telecommunications equipment has become highly
competitive. Following the AT&T divestiture, the RBOCs were no longer required
to purchase from AT&T's equipment division (now Lucent Technologies Inc.). As a
result, other equipment providers, including Nortel, Siemens AG, and Alcatel
S.A. gained market share in both the carrier and business markets. Increasing
competition in all telecommunications segments encouraged innovation in
equipment features and helped the market grow. Until 1997, virtually all of
AT&T/Lucent's equipment sales to businesses were direct sales through
AT&T/Lucent's sales employees. Lucent is increasingly using independent vendors
to sell its products. Likewise, in 1997, Nortel shifted virtually all of its
business equipment sales to independent vendors.
The Telecommunications Act replaced the restrictions on the RBOCs from the
1982 consent decree and enhanced the development of competition in
telecommunications services. The Telecommunications Act:
- prohibits states from enforcing barriers to entry
- requires incumbent local exchange carriers, or ILECs, to interconnect
with competing carriers on non-discriminatory terms
- requires ILECs to lease parts of their networks, including the telephone
lines that connect an end-user to a local exchange carrier's switch, to
competing carriers at cost-based prices
- requires ILECs to provide service at wholesale rates to competing
carriers for resale to end-users
- allows an RBOC to provide interexchange services originating from
wireless equipment or from non-wireless equipment outside of the RBOC's
exchange areas. An RBOC will be allowed to provide interexchange service
originating from non-wireless equipment within its exchange areas if the
FCC finds that the RBOC has complied with certain requirements. See the
section of this prospectus entitled "Regulation -- General regulatory
environment" for more information.
By allowing providers to offer additional services, the Telecommunications
Act also stimulated competition for virtually all communications services,
including local exchange service, long distance service and enhanced services.
Providers are increasingly bundling these services and providing one-stop
shopping for end-user customers.
In the telecommunications market, a new industry model is replacing the
original model of a single regulated monopolist building and operating
end-to-end assets and providing all products and services. In this market,
carriers who do not operate their own nationwide transmission network serve an
increasing percentage of the market. The Telecommunications Act requirement that
RBOCs provide carrier services has led a large number of providers to offer
local services without owning local assets. Increasingly, providers are offering
telecommunications customers end-to-end services without having to own and
operate the end-to-end assets. Other companies are focusing on operating the
assets as efficiently and effectively as possible. In the equipment market,
independent network integrators are providing an increasing share of products to
businesses.
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RELEVANT MARKET SEGMENTS
THE MARKET FOR INTEREXCHANGE VOICE, DATA, INTERNET AND VIDEO SERVICES
Interexchange carriers provide telecommunications services between
exchanges. An exchange is a franchised geographical area within which a call
between any two exchange customers is considered a local call. Many
interexchange carriers offer some mix of retail services, which are those
provided directly to an end-user, and carrier services, which are those provided
to other carriers. Carriers provide interexchange services over their own
facilities, over the facilities of other carriers, or over a combination of
both.
The market for interexchange services has been growing rapidly due to lower
rates and increased transport of data. According to the President's Council of
Economic Advisers, in 1997 long distance usage was 500 billion minutes, up from
370 billion minutes in 1993. FCC statistics show that total operating revenues
for interexchange carriers increased to about $89 billion in 1997 from less than
$45 billion in 1987. Although much of the decline in AT&T's market share is
attributable to gains by MCI WorldCom and Sprint, the numerous interexchange
carriers with small individual market shares accounted for approximately 20% of
the market in 1997.
There has also been strong demand for increasing capacity in long distance
networks to accommodate the growth in Internet traffic. According to the
President's Council of Economic Advisers, the number of Internet host computers
was estimated at 35 million in early 1998, up from 20 million only six months
earlier and from fewer than 3 million in 1993. The U.S. Department of Commerce
in 1998 cited estimates that Internet traffic doubles every 100 days.
High-volume, high-speed and high-capacity interexchange services are almost
exclusively provided by facilities-based interexchange carriers such as AT&T,
MCI WorldCom and Sprint, which operate networks principally using their own
transmission facilities and extensive geographically dispersed switching
equipment. Recently, other interexchange carriers have been building national or
regional networks to provide service using primarily their own fiber optic
transmission facilities, including ourselves, Qwest, Level 3, IXC, GTE and
Frontier Corp.
All interexchange carriers lease some of their transmission facilities from
other carriers. The dependence of an interexchange carrier on leased facilities
varies widely:
- interexchange carriers with national networks that provide services
primarily using their own facilities still lease some amount of
transmission capacity from other carriers to back up their service
routing, augment areas where they may have traffic bottlenecks or cover a
particular geographic area not covered by their own networks
- many other interexchange carriers own switches but obtain transmission
capacity primarily by leasing other interexchange carriers' transmission
services
- other interexchange carriers depend entirely on leasing transmission and
switching services from other interexchange carriers
The types of high-volume interexchange services purchased by carriers also
vary widely. High-volume interexchange services can be priced based on minutes
of usage or amount of capacity leased. These leases can vary in duration from
one day to many years.
THE MARKET FOR EQUIPMENT MANUFACTURING AND DISTRIBUTION
The telecommunications equipment industry in the U.S. has grown
substantially in the last several years through sales to local and long distance
carriers, end-users, Internet and other data service providers. The President's
Council of Economic Advisers reports that total sales of
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telecommunications equipment in 1997 exceeded $70 billion and are estimated to
have reached $120 billion in 1998, up from a total of $40 billion in 1993. The
dramatic growth of the telecommunications and data networking equipment industry
stems in part from the development of new technologies, including technologies
which allow systems to provide integrated voice and data services, and from
increased capacity demands, which require both established and new carriers to
expand and upgrade their facilities. Manufacturers distribute telecommunications
equipment through their own sales forces as well as through agents.
THE MARKET FOR COMMUNICATIONS AND DATA SOLUTIONS
Businesses seek solutions to the challenges of selecting, maintaining and
upgrading information and communications technologies and services amid rapid
technological advances. Under these conditions, the demand for consultants'
services in systems integration and communications networks has been growing
strongly. Businesses such as Solutions, Norstan, Inc. and International Network
Services assess customers' communications and information technology needs,
evaluate equipment and services options, procure equipment and services,
implement efficient network solutions and manage the combination of
technologies.
THE MARKET FOR EXCHANGE SERVICES
Today, ILECs continue to provide the vast majority of exchange services
within their markets. However, as a result of regulatory and technological
changes over the past few years, a number of competitive local exchange
providers, or CLECs, have begun to compete with the ILECs.
The FCC reports that in 1996 local service revenues totaled approximately
$97 billion, with 109 CLECs accounting for about $1 billion in revenues. The
market share of CLECs has grown rapidly in the last few years. According to the
President's Council of Economic Advisers, at the end of 1998 CLECs served about
five million lines, or 2% to 3% of local lines in the U.S.; because CLECs have
focused on serving the largest and most profitable customers, CLECs accounted
for about 5% of the exchange services market by revenue in 1998.
Leading CLECs include MCI WorldCom (through its MFS Network Technologies,
Inc. and Brooks Fiber Properties, Inc. subsidiaries), AT&T (through its Teleport
Communications Group, Inc. subsidiary), WinStar, Intermedia and ICG
Communications, Inc. Often, in addition to exchange services, CLECs provide
interexchange services and other services such as mobile telephony, video and/or
Internet-related services. Cable television systems provide local
telecommunications services in many areas. Cellular and other wireless service
providers also provide exchange services.
THE U.S. MARKET FOR INTERNATIONAL LONG DISTANCE SERVICES
The U.S. international long distance market is growing due to increased
competition (including through World Trade Organization agreements),
deregulation, price decreases, growth in usage and revenues and development of
new services. According to the FCC, total international services revenues of
U.S. carriers exceeded $19 billion in 1997, up from about $5 billion in 1987.
The largest U.S. international carriers by market share in 1997 were AT&T, MCI
WorldCom and Sprint. Carriers with small individual market shares accounted for
a total market share of 21.8%.
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RELEVANT FOREIGN TELECOMMUNICATIONS MARKETS
We have significant investments and operations in foreign communications
carriers. For information regarding our investments in Brazil, Australia and
Chile, see the section of this prospectus entitled "Business -- Strategic
Investments."
Canada. Supplying telecommunications equipment and services is open to
competition in Canada. Competitive long distance carriers have been operating in
Canada since 1990 as resellers and since 1992 with their own facilities. The
national Canadian regulatory agency, CRTC, opened the local telecommunications
markets to competition in 1997, and allowed competition in the international
services market in 1998.
In addition to Solutions, leading providers of communications equipment to
businesses in Canada include Bell Canada, BCT. Telus Communications Inc., Lucent
Technologies Canada Inc. and Mitel Corporation.
Brazil. Until a few years ago, almost all telecommunications services in
Brazil were provided by government-owned monopoly carriers, the largest of which
were Telecomunicacoes Brasileiras S.A., known as Telebras, in local services,
and Empresa Brasileira de Telecomunicacoes S.A., known as Embratel, in long
distance services.
In recent years, the telecommunications sector in Brazil has been
progressively opened to competition and privatized. The Brazilian
telecommunications market experienced a sharp increase in demand in the 1990s,
which outstripped the capacity of the telecommunications infrastructure. The
desire to improve the networks' capacity to handle this increased demand,
accompanied by advances in telecommunications technology, led the government in
1998 to privatize the incumbent carriers. Buyers paid approximately $19 billion
to purchase these carriers. The twelve new carriers provide local, long distance
and cellular services and cover separate geographic regions. In addition, the
government is allowing private Brazilian and foreign companies to compete in the
telecommunications market through competitive wireless and non-wireless
licenses.
The Brazilian government auctioned additional regional licenses in 1997;
the new carriers began cellular service in 1998 and 1999. The government has
indicated that after 2000 it may sell additional licenses for wireless voice and
data services.
In 1997, Brazil had 2.75 mobile telephone subscribers per 100 inhabitants
and 10.66 non-wireless telephone access lines per 100 inhabitants for a total of
17 million access lines, according to the International Telecommunication Union.
We expect that the market for telecommunications services in Brazil will grow
rapidly as the private carriers expand their networks, improve service quality
and drive down prices through competition.
Australia. The Australian government has pursued a staged transition from
a government-owned monopoly of telecommunications services and infrastructure to
open competition. Between 1991 and 1997, the Australian government established a
duopoly between Telstra Corporation Limited and Cable & Wireless Optus Ltd. for
the provision of fixed telecommunications infrastructure. The Australian
government also established an oligopoly among Telstra, Optus and a subsidiary
of Vodafone Group PLC for the provision of mobile telephony services. On July 1,
1997, the Australian government opened all sectors of the Australian
telecommunications industry to competition. Telstra continues to be the dominant
non-wireless carrier.
The International Telecommunication Union reports that in 1997 Australia,
with a total of approximately 9 million non-wireless telephone access lines, had
50.45 telephone lines and 26.40 mobile telephone subscribers per 100
inhabitants.
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Chile. Chile was the first Latin American country to eliminate the state
monopoly provision of telecommunications services and today has the most
competitive telecommunications sector in Latin America. The process of
privatization and opening up of monopoly telecommunications markets in Chile
began in 1982 with the General Telecommunications Law, which allowed companies
to provide service and develop telecommunications infrastructure without
geographic restriction or exclusive rights to serve. There has been competition
in non-wireless services since 1994.
With privatization and competition, telecommunications has been one of the
most dynamic sectors in Chile's economy. By 1997, according to the International
Telecommunication Union, Chile's non-wireless network consisted of approximately
2.7 million lines, for a penetration rate of approximately 17.98 telephone lines
for every 100 inhabitants; Chile had a mobile telephone penetration of 2.80
cellular subscribers per 100 inhabitants.
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BUSINESS
WILLIAMS COMMUNICATIONS GROUP, INC.
We own, operate and are extending a nationwide fiber optic network focused
on providing voice, data, Internet and video services to communications service
providers. We also sell, install and maintain communications equipment and
network services that address the comprehensive voice and data needs of
organizations of all sizes. Our business units are Network, Solutions and
Strategic Investments.
Network offers voice, data, Internet and video services as well as rights
of use in dark fiber on our low-cost, high-capacity nationwide network, which is
based on a high-quality transmission technology using packet switching. The
communications companies we serve include long distance carriers, local service
providers, Internet service providers, international carriers and utilities.
Long distance carriers include providers which sell services on their own
networks or utilize other providers' networks to sell services. We plan to
extend the Williams Network to encompass a total of 32,000 route miles of fiber
optic cable, utilizing pipeline and other rights-of-way, to connect 125 cities
by the end of the year 2000. The Williams Network currently consists of
approximately 20,550 route miles of installed fiber optic cable, with 18,600 of
those miles in operation, or lit.
Solutions distributes and integrates communications equipment from leading
vendors for the voice and data networks of businesses of all sizes as well as
governmental, educational and non-profit institutions. We provide planning,
design, implementation, management, maintenance and optimization services for
the full life cycle of these networks. We also sell the communications services
of select Network customers and other carriers to Solutions' customers. We serve
an installed base of approximately 100,000 customer sites in the U.S. and
Canada. Solutions has approximately 1,200 sales personnel, approximately 2,400
technicians and approximately 800 engineering personnel in 110 offices.
Through Strategic Investments, we make investments in, or own and operate,
domestic and foreign businesses that create demand for capacity on the Williams
Network, increase our service capabilities, strengthen our customer
relationships, develop our expertise in advanced transmission electronics or
extend our reach. Our domestic strategic investments include ownership interests
in Concentric, UniDial and UtiliCom. Our international strategic investments
include ownership interests in communications companies located in Brazil,
Australia and Chile. Businesses we own and operate include Vyvx, a leading video
transmission service for major broadcasters and advertisers, and other
communications businesses.
We enter into strategic alliances with communications companies to secure
long-term, high-capacity commitments for traffic on the Williams Network and to
enhance our service offerings. We currently have strategic relationships with
SBC, Intel, Telmex, Metromedia Fiber Networks, WinStar, Intermedia and U S WEST.
We will continue to pursue additional strategic alliances.
HISTORY OF BUILDING NETWORKS
Williams began building gas and petroleum pipeline networks more than 80
years ago and is currently one of the largest volume transporters of natural gas
in the U.S. Over the years, Williams has constructed, acquired and managed over
100,000 miles of energy pipelines. In 1985, Williams entered the communications
business by pioneering the placement of fiber optic cables in pipelines no
longer in use. Williams also pioneered the strategy of providing services solely
to other communications providers. By 1989, through a combination of
construction projects and acquisitions, Williams had completed the fourth
nationwide digital fiber optic network, consisting of approximately 9,700 route
miles. The first three networks were
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constructed by AT&T, MCI WorldCom and Sprint. By 1994, WilTel, Williams'
communications subsidiary, was one of the top four providers of high capacity
data services, one of the top five providers of long distance voice services and
the first provider to offer nationwide frame relay transmission capacity, a
high-speed form of packet switching, well-suited for connecting computers to
each other, which supports data units of variable lengths. In 1994, WilTel had
approximately $1.3 billion in revenues and approximately 5,000 employees.
In January 1995, Williams sold the majority of the WilTel network business
to LDDS (now MCI WorldCom) for approximately $2.5 billion. The sale included the
bulk of the nationwide fiber optic network and the associated consumer, business
and carrier customers. Williams retained an approximately 9,700 route-mile
single fiber strand on the nationwide network, WilTel's telecommunications
equipment distribution business and Vyvx. Under agreements with MCI WorldCom,
this fiber strand can only be used to transmit video and multimedia services,
including Internet services, until July 1, 2001. Multimedia services integrate
various forms of media, including audio, video, text, graphics, fax and
Internet. After July 1, 2001, this fiber strand can be used for any purpose,
including voice and data tariffed services.
As part of the sale to LDDS, Williams agreed not to reenter the
communications network business until January 1998. In January 1998, Williams
reentered the communications network business, announcing its plans to develop
the Williams Network.
INDUSTRY AND MARKET OPPORTUNITIES
We believe we are uniquely positioned to take advantage of changes and
developments in the communications industry. These anticipated changes and
developments include:
- Innovations in technology. Technological innovations are increasing both
the supply of and demand for telecommunications transmission capacity
while also driving increased integration in voice and data networks.
Innovations in optics technologies, consisting of both higher quality
fiber optic cable and improved transmission electronics, have increased
the capacity and speed of advanced fiber optic networks while decreasing
the unit cost of transmission. This increased capacity and speed,
combined with continuing advancements in the power of microprocessors,
have resulted in the development of bandwidth-intensive applications,
growth in Internet usage and increases in the number of network users. We
are developing our advanced fiber optic network to meet the increasing
demand for transmission capacity.
- Increasing demand for communications services. We believe that there is
and will continue to be a significant growth in demand for long distance
data, Internet, voice and video services. The increase in computing
power, number of computers networked over the Internet and connection
speeds of networked computers are driving tremendous increases in
communications use for Internet and data services. Prices for cellular
and long distance voice services have decreased, resulting in increased
demand for these services. We believe video conferencing, digital
television and other multimedia applications being developed will
continue to increase demand for transmission capacity. We believe the
Williams Network is well positioned to capture this growing demand.
- Deregulation within the communications industry. Around the world, the
communications industry is experiencing liberalization. In the U.S., the
long distance market became highly competitive in the 1980s following the
break up of AT&T, and the Telecommunications Act was designed to open
local markets to competition. Many new companies have formed to compete
for markets that have been traditionally dominated by a very small number
of providers. Our full-service platform enables both new entrants to
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compete in this market and existing service providers to expand into new
markets. The Williams Network will offer an attractive alternative to
network ownership for these carriers.
- Increasing specialization within the communications industry. We believe
industry specialization will continue to occur as communications
companies focus on their core competencies and outsource non-core
activities. In the long distance services market, we anticipate that many
new entrants will focus on branding and retail distribution while
outsourcing the development of network infrastructure and services.
Similarly, we believe that some communications providers, such as
Internet service providers, will focus on developing value-added services
and will outsource long distance transmission services. As a result, we
believe there will be significant demand for a provider of advanced,
high-quality, low-cost communications services to other communications
companies. The Williams Network is well positioned to benefit from this
market opportunity.
NETWORK
We own, operate and are extending a nationwide fiber optic network. We
offer services over the Williams Network to communications companies, including
RBOCs, long distance carriers, CLECs, Internet service providers, international
carriers and utilities.
STRATEGY
Our objective is to become the leading nationwide provider of voice, data,
Internet and video services to national and international communications
providers. To achieve this objective, we intend to:
- Become the leading provider to communications carriers. We focus on
providing high-quality communications services to other carriers as they
seek to benefit from the growth in communications demand. We also offer
our customers the flexibility to control their own service platforms so
that they choose to buy services from us rather than build these
capabilities themselves. Since our Network business targets the carrier
market, we do not compete with our customers for retail end-users. By not
competing with our customers, we believe we can become the provider of
choice to other carriers.
- Deploy a technologically advanced network. We are combining advanced
optical and electronic transmission equipment with our innovative network
design to offer highly flexible, efficient and reliable network services
to our customers. Our innovative network design provides high-quality
network services to support voice, data, Internet and video traffic at a
lower investment than other currently deployed network architectures due
to the elimination of several layers of costly equipment. The Williams
Network design also provides our customers with control over the quality
of service they receive and provides us with the flexibility to introduce
new services.
- Pursue strategic alliances. We pursue strategic alliances with
communications providers which offer the potential for long-term,
high-capacity commitments for traffic on the Williams Network, resulting
in increased revenues and decreased unit costs. To date, we have entered
into strategic alliances with SBC, Intel, Telmex, Metromedia Fiber
Network, WinStar, Intermedia and U S WEST and others to provide network
services. Our strategic alliances also allow us to combine our
capabilities with those of our alliance partners and thereby offer our
customers a more complete product set, including local and international
capacity and Internet access services.
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- Leverage network construction, operation and management experience. We
are utilizing Williams' long history of constructing, operating and
managing communications and energy networks to develop the Williams
Network. By the time Williams sold the WilTel network in 1995 for
approximately $2.5 billion, WilTel had approximately $1.3 billion in
revenues, approximately 5,000 employees and operated approximately 9,700
route miles. Many of our current employees worked with Williams in
various capacities during the WilTel network build until its subsequent
sale to LDDS. This experience translates into expertise in planning,
designing, constructing and managing a cross-country network.
- Utilizing pipeline rights of way. Where feasible, we construct the
Williams Network along the rights of way of Williams and other pipeline
companies. We believe that use of pipeline rights of way gives us
inherent advantages over other systems built over more public rights of
way, such as railroads, highways, telephone poles or overhead power
transmission lines. These advantages include greater physical protection
of the fiber system, lower construction costs and lower operational
costs.
- Establish international connectivity. We pursue strategic relationships
that allow us to exchange capacity on the Williams Network for
cost-effective access and capacity on international networks or that
allow us to use our network construction and management experience to
construct international networks. We intend to establish alliances with
international carriers that will expand our capabilities throughout
Europe and other key markets. Select domestic alliances will also allow
us to provide international capabilities such as cost-effective use of
SBC's capacity on China-U.S. and Japan-U.S. submarine fiber optic cable
systems.
- Establish low-cost position. Our carrier market focus, network design
and strategic alliances as well as dark fiber sales enable us to
establish and maintain a low-cost position. Our carrier services focus
enables us to maintain small, focused marketing and customer service
departments, reducing our operating costs. Our advanced network design
eliminates several unnecessary layers of costly equipment. Our strategic
alliances drive our unit costs lower due to the purchases of large
volumes of services on the Williams Network. Dark fiber sales allow us to
reduce the capital investment in the Williams Network and share future
operating and maintenance costs with those companies to which we have
sold capacity.
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NETWORK INFRASTRUCTURE
We anticipate that the Williams Network will total approximately 32,000
route miles connecting 125 cities when completed by the end of the year 2000. We
intend to invest approximately $4.7 billion through December 31, 2000 developing
the Williams Network. The following table describes our network infrastructure
(numbers are approximate):
<TABLE>
<CAPTION>
AVERAGE AVERAGE
MILES IN NUMBER NUMBER OF AVERAGE NUMBER
ROUTE MILES OPERATION OF FIBERS FIBERS RETAINED OF SPARE CONDUITS
----------- --------- --------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
Retained WilTel Network(1)... 9,700 9,700 1 1 N/A
Acquired new fiber(2)........ 8,200 4,600 11 9 0.3
Completed fiber builds....... 4,600 4,300 102 21 1
Future fiber builds.......... 9,500 -- 100 24 2
------ ------
Total............. 32,000 18,600
====== ======
</TABLE>
- -------------------------
(1) We have the right to acquire from MCI WorldCom approximately 7,700
additional route miles of a single fiber optic strand which is restricted to
multimedia purposes until July 2001.
(2) This category consists of rights in dark fiber and conduits which we have
acquired or intend to acquire through purchases or exchanges. We have
already acquired approximately 6,600 route miles from IXC and other
carriers, of which 5,400 route miles has had fiber optic cable installed. We
intend to acquire an additional 2,000 route miles by the end of 2000.
We currently have approximately 20,550 route miles of fiber optic cable
primarily installed in the ground, with approximately 18,600 of those miles
currently in operation. Of the approximately 18,600 route miles currently in
operation, approximately 9,700 route miles consist of the Retained WilTel
Network. We are currently installing new transmission equipment on the Retained
WilTel Network to increase its transmission capacity and ensure its
compatibility with the newer portions of the Williams Network. Due to advances
in transmission electronics, it is now possible to carry as much traffic on this
single fiber optic strand as on 128 fiber optic strands four years ago. In
addition, the Retained WilTel Network will provide additional routes for the
Williams Network into select major markets.
We began building the newer portions of the Williams Network in January
1998 following the expiration of the non-compete agreement with MCI WorldCom. We
will expand the Williams Network through both new network construction and
acquisition of capacity on networks owned and to be constructed by others. We
have constructed and plan to construct approximately 73% of the Williams Network
and we have obtained and plan to obtain the remaining 27% through acquisitions
or exchanges. We manage the transmission equipment on the fiber optic strands we
obtain through acquisitions or exchanges. We typically pay maintenance fees to
other network providers to maintain the fiber optic strands and rights of way we
obtain through acquisitions or exchanges.
We lease capacity from both interexchange and local telecommunications
carriers, including our competitors, in order to meet the needs of our
customers. These leases are for areas where we do not have on-network portions,
or our on-network is not currently sufficient to meet the expected capacity.
This includes capacity to provide service from our facility to another
provider's facility. These leases of capacity may contain minimum commitments
that we will make in order to obtain better pricing. We attempt to balance our
off-network commitments with the expected requirements of our customers.
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Network design and infrastructure. The newer portions of the Williams
Network we are constructing have the following characteristics:
- Multi-service platform. A multi-service platform allows traditional
voice, data, Internet and video services to be provided on a single ATM
platform. Most other carriers use multiple platforms, which create
distinct networks and organizations for each service provided. Due to our
unified platform approach, we have greater efficiency and lower costs.
- ATM core switching. ATM core switching is a packet switching and
transmission technology based on sending various types of information,
including voice, data and video, in fixed-size cells. Packet-based
networks transport information compressed as "packets" over circuits
shared simultaneously by several users. Newly developed equipment based
on advanced communications standards enable packet-based networks to
carry voice and data more efficiently and at a lower cost than the
traditional telephone networks. We believe that utilizing ATM enables us
to provide higher-quality services than other packet technologies such as
Internet protocol, which do not currently send information in packets
with predictable characteristics.
- Advanced fiber optic cable. Fiber optic cable, including Corning's
LEAF(TM) fiber and Lucent TruWave(TM) fiber, which has a wider range of
spectrum than previously deployed fibers over which to send wavelengths
of light, enabling a greater number of wavelengths to be sent over long
distances.
- DWDM. Dense wave division multiplexing is a technology which allows
transmission of multiple waves of light over a single fiber optic strand,
thereby increasing network capacity. By using DWDM, we are able to derive
sixteen wavelengths, at OC-192 capacity per wavelength, over a single
fiber optic strand with current technology and plan to derive up to
thirty-two wavelengths over a single fiber optic strand by the end of
1999.
- Use of meshed SONET instead of SONET rings. Use of meshed SONET, which
allows every location on the Williams Network to be connected to multiple
other locations. Meshed SONET provides for more recovery options in the
case of a network failure, permits rapid provisioning of customer
services and allows for full utilization of capacity. Most other networks
use SONET rings, which automatically reverse signals at a specific point
along a network in the event of a network failure, providing for only one
recovery option. A SONET ring design also requires installation of up to
twice as much capacity for the same amount of traffic as compared to our
meshed SONET design.
- Closer spacing of transmission electronics. Spacing of transmission
electronics at 40-mile intervals. Most other fiber networks space their
electronics at 60-mile intervals. Our 40-mile spacing allows us to take
advantage of the latest advances in DWDM and other advances in optical
technology by reducing the distance over which light has to travel.
- Elimination of digital cross connect system. Exclusion of this system, a
high-cost, high-maintenance switching technology designed for
circuit-based systems. Circuit-based systems are the predecessor to the
ATM packet technologies we employ.
- Nortel DMS 250 switches. We will use the latest Nortel switching
technology to efficiently carry traditional voice services on our ATM
core network. At least seven Nortel DMS 250 voice switches will be
deployed on the Williams Network, enabling us to provide switched voice
services on the Williams Network. We will install the new
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switches in Anaheim, San Francisco, Kansas City, Houston, Chicago,
Atlanta and New York City.
The following is an example of how the Williams Network is designed
compared to traditional circuit-based networks.
The top portions of the diagram below reflect equipment which connects with
our customers. Each level of equipment interacts with the element below,
ultimately using the fiber for long distance transport. The contrast in the
number and width of each network element represented in the Traditional versus
the Williams Network diagram illustrates how the Williams Network collapses the
traditional dedicated network elements into shared, multi-service solutions
which simplify the network while increasing service flexibility. This unique
Williams Network design results in lower costs and faster development and
delivery of services versus traditional designs.
[Network Design Flow Chart]
Conduit and fiber optic cable. The newer portions of the Williams Network
that we are constructing are designed for expandability and flexibility and will
contain multiple conduits along approximately 70% of our routes. To construct
our fiber optic cable, fiber optic strands are placed inside small plastic tubes
and bundles of these tubes are wrapped with plastic and strengthened with metal.
We then place these bundles inside conduit, which is high-density polyethylene
hollow tubing 1 1/2 to 2 inches in diameter. Our conduit is generally pulled
through pipelines which are no longer used or it is buried approximately 42
inches underground along pipeline or other rights of way. We also use steel
casing in high-risk areas, including railroad crossings and high-population
areas, thereby providing for greater protection. The first conduit contains a
cable generally housing between 96 to 144 fibers, and the second conduit, or
third where constructed, serves as a spare. The spare conduit or conduits allows
for future technology upgrades, potential conduit sales and expansion of
capacity at costs significantly below the cost of new construction. After
existing and anticipated sales of dark fiber, we generally plan to retain
approximately 24 fibers for our own use on the Williams Network.
Points of presence. As of April 30, 1999, we had 38 points of presence or
POPs, which are environmentally-controlled, secure sites designed to house our
transmission, routing and switching equipment and local operational staff. We
plan to grow to 125 POPs by the end of 2000. A
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POP allows us to place customers' traffic onto the Williams Network. We are
designing our POPs with up to 50,000 square feet in order to provide colocation
services, which give our customers direct access to the Williams Network.
Colocation services provide our customers with access and space to install their
own equipment in our POPs. We intend to expand our network to include multiple
POPs within select major metropolitan areas in order to provide end-to-end
service offerings for our carrier customers.
Rights of way. The Williams Network is primarily constructed by digging
trenches along rights of way, rights to use the property of others which we
obtain throughout the U.S. from various landowners. Where feasible, we construct
along Williams' pipeline rights of way and the rights of way of other pipeline
companies. Approximately 27% of our rights of way are along Williams' pipeline
rights of way and the remainder are along the rights of way of third parties.
Rights of way from unaffiliated parties are generally for terms of at least 20
years and most cover distances of less than one mile. Where necessary or
economically preferable, we have other right of way agreements in place with
highway commissions, utilities, political subdivisions and others. As of May 21,
1999, we had agreements in place for approximately 89% of the rights-of-way
needed to complete the Williams Network. As of May 21, 1999, the remaining
rights of way needed for completion of the Williams Network consisted of
approximately 3,500 route miles located primarily in the Western U.S. Almost all
of our rights of way extend through at least 2018.
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The following table sets forth our current and future plans as of May 21,
1999 for the Williams Network build. This table does not include the routes of
the Retained WilTel Network.
<TABLE>
<CAPTION>
APPROXIMATE
ESTIMATED APPROXIMATE MILES IN
ROUTES COMPLETION DATE ROUTE MILES OPERATION
- ------ ----------------- ----------- -----------
<S> <C> <C> <C>
Atlanta -- Jacksonville Completed 370 370
Dallas -- Houston(1) Completed 250 250
Houston -- Atlanta -- Washington, D.C. Completed 1,830 1,830
Jacksonville -- Miami(2) Completed 330 330
Los Angeles -- New York City(1) Completed 4,370 4,370
Minneapolis -- Kansas City Completed 450 450
Portland -- Salt Lake City -- Los Angeles(3) Completed 1,320 1,320
Los Angeles -- San Diego(4) 2nd quarter 1999 150 --
Daytona -- Orlando -- Tampa 3rd quarter 1999 160 --
Detroit -- Cleveland(1) 3rd quarter 1999 200 --
Kansas City -- Denver 3rd quarter 1999 640 --
Los Angeles -- Sacramento -- Oakland -- San
Jose(5) 3rd quarter 1999 550 --
Portland -- Seattle(4) 3rd quarter 1999 180 --
Washington, D.C. -- New York City 3rd quarter 1999 350 --
Bakersfield -- San Luis Obispo -- Fresno 4th quarter 1999 310 --
Bandon, Oregon -- Eugene, Oregon 4th quarter 1999 270 --
Denver -- Salt Lake City 4th quarter 1999 570 --
Miami -- Tampa -- Tallahassee 4th quarter 1999 530 --
New Orleans -- Tallahassee 4th quarter 1999 480 --
Los Angeles -- Phoenix -- San Antonio --
Houston 1st quarter 2000 1,630 --
Sacramento -- Portland(5) 1st quarter 2000 530 --
New York -- Boston 2nd quarter 2000 250 --
Salt Lake City -- Sacramento -- San
Francisco 2nd quarter 2000 850 --
Albany -- Boston 4th quarter 2000 180 --
Atlanta -- Nashville -- Cincinnati -- Chicago 4th quarter 2000 850 --
Chicago -- Cleveland -- Pittsburgh -- Washington,
D.C. 4th quarter 2000 800 --
Chicago -- Detroit(1) 4th quarter 2000 280 --
Dallas -- Charlotte(1) 4th quarter 2000 1,250 --
Denver -- El Paso(1) 4th quarter 2000 750 --
Houston -- Kansas City -- St.
Louis -- Chicago 4th quarter 2000 1,300 --
Minneapolis -- Milwaukee -- Chicago(4) 4th quarter 2000 320 --
------ -----
TOTAL: 22,300 8,920
====== =====
</TABLE>
- -------------------------
(1) These routes were swapped or purchased by our company with no spare
conduits.
(2) We purchased this route along with one spare conduit.
(3) This route was jointly constructed by us, Enron Communications, Inc. and
Touch America, Inc. with no spare conduits.
(4) In addition to constructing one route with 2 spare conduits, we intend to
purchase 12 fibers along a diverse route between these cities.
(5) We purchased 12 fibers on these routes along with two spare conduits.
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Monitoring. We monitor the Williams Network 24 hours a day, seven days a
week from our network management centers in Tulsa, Oklahoma and St. Louis,
Missouri. Each network management center provides centralized network
surveillance, troubleshooting and customer service. The system currently allows
our technicians to detect a component malfunction in the Williams Network,
quickly reroute the customer's traffic to an available alternate path and effect
an expedited repair. Upon completion of the Williams Network, the rerouting
function will be fully automated and nearly instantaneous so that customers will
not experience any disruptions in service quality. We expect this will reduce
service costs and customer downtime. We have also implemented a program which
encourages people to phone a toll-free number prior to breaking ground, backed
up by Williams' "call before you dig" group to reduce the risk of damage to our
conduit or fiber system. Additionally, we place above-ground markers at frequent
intervals along the route of the Williams Network.
PRODUCTS AND SERVICES
Our network products and services fall into seven categories:
- packet-based data services
- private line services
- voice services
- local services
- dark fiber and conduit sales
- dim fiber leases
- network design and operational support
Packet-based data services. These services provide efficient connectivity
for data, Internet, voice and video networks at variable capacities across the
Williams Network to connect two or more points. Specific packet-based data
services include ATM, frame relay and Internet transport services. These
services primarily operate over the Williams Network and enable billing based on
quality of service and usage.
Private line services. We provide customers with fixed amounts of
point-to-point capacity across the Williams Network. We offer these services
both across the Williams Network and by purchasing capacity on other providers'
networks. As we complete the Williams Network, we will increase the percentage
of these services we provide on our network.
Voice services. We currently provide connectivity across the Williams
Network for our customers to complete long distance telephone calls using
capacity on other providers' networks. Our customers can use the Williams
Network to handle origination and termination of long distance phone calls. As
we complete deployment of our voice switches and obtain the necessary regulatory
approvals, we will provide these and other voice services on the Williams
Network and decrease our usage of other's networks. Other voice services will
include calling card, directory assistance, operator assistance, international
and toll-free services. As the traditional geographic boundaries for voice
services diminish, our voice platform will provide local, long distance and
international voice services.
Local services. We currently provide local connectivity for our carrier
customers through the resale of other providers' services. We have obtained
local capacity through our agreements with WinStar and can obtain local capacity
from SBC. We will develop specific products using this capacity to meet our
customers' local networking needs.
Dark fiber and conduit sales. We sell rights for dark fiber and related
services and may sell rights to a conduit in the future. Dark fiber consists of
fiber strands contained within a fiber optic cable which has been laid but does
not yet have its transmission electronics installed. A
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sale of dark fiber typically has a term which approximates the economic life of
a fiber optic strand (generally 20 to 30 years). Purchasers of dark fiber
typically install their own electrical and optical transmission equipment.
Substantially all of our current and planned builds include laying two spare
conduits, and we may sell rights to use at least one of them. A purchaser of
conduit typically lays its own cable inside the conduit. Related services for
both sales of rights for dark fiber and conduits include colocation of customer
equipment at our POPs and network equipment locations and maintenance of the
purchased fiber or conduit. In the past two years, we have entered into
approximately 15 agreements for sales of dark fiber with Frontier, IXC, WinStar
and others. Payment for dark fiber is generally made at the time of delivery and
acceptance of the fiber although other payment options may be available. In
addition, ongoing payments for maintenance services are required. These
transactions typically involve sales of contractual rights to use the fiber or
conduit, rather than sales of ownership interests.
Dim fiber leases. DWDM technology in the Williams Network will allow us to
sell a customer exclusive long-term use of a portion of the transmission
capacity of a fiber optic strand, rather than the entire fiber strand. This is
in addition to the capacity used by us to provide our other services. We are
able to derive sixteen wavelengths over a single fiber strand with current
technology and plan to derive up to thirty-two wavelengths over a single fiber
strand by the end of 1999. A purchaser of wavelength will install its own
electrical interface, switching and routing equipment and will share the fiber
and optical transmission equipment with other dim fiber users. We believe that
many potential customers will be interested in dim fiber because it allows a
customer to purchase capacity in smaller increments while retaining the added
control advantages of dark fiber.
Network design and operational support. We help our customers design and
operate their networks. We use our network management centers to monitor and
operate portions of their networks and use Solutions' resources to expand and
support our customers' networks. We are deploying new management tools,
including InSite(TM), our proprietary customer interface, which will give our
customers the ability to monitor network performance and reconfigure their
capacity from their own network management centers on an essentially real-time
basis and the ability to increase or reduce bandwidth rapidly to better match
their needs. InSite(TM) features equipment inventory management, bandwidth
inventory management, configuration management, fault isolation management and
alarm monitoring. In 1998, we provided network design and operational support
services primarily to Concentric and Savvis Communications Corporation, an
Internet service provider.
CUSTOMERS
We provide dedicated line and switched services to other communications
providers over our owned or leased fiber optic network facilities. Our customers
currently include RBOCs, Internet service providers, long distance carriers,
international carriers, utilities and other providers who desire high-speed
connectivity on a carrier services basis.
Sales to Intermedia accounted for approximately 31.2% of Network's revenues
from external customers in 1998. Sales to Qwest accounted for approximately
26.2% of Network's revenues from external customers in 1998. Sales to our next
three largest customers, Hyperion, Concentric and Frontier, together accounted
for approximately 29.0% of Network's revenues from external customers in 1998.
Our remaining customers each accounted for less than 3% of Network's revenues
from external customers in 1998.
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SALES AND MARKETING
We sell services and products to carriers through our sales organization.
Since we only sell to other communications carriers, our sales and marketing
department is small and focused, resulting in strong customer relationships and
lower operating costs. This organization consists of senior level management
personnel and experienced sales representatives with extensive knowledge of the
industry and our products and key contacts within the industry at various levels
in the carrier organizations. We position ourselves as the provider of choice
for communications carriers due to the quality of our service, the control we
provide customers over their service platforms, the reliability of our services
and our low cost position. We believe our cost advantages allow us to sell our
services on the Williams Network at prices which represent potentially
significant savings for our large-volume customers relative to their other
alternatives.
COMPETITION
The communications industry is highly competitive. Some competitors in the
markets of carrier services and fiber optic network providers may have
personnel, financial and other competitive advantages. New competitors may enter
the market because of increased consolidation and strategic alliances resulting
from the Telecommunications Act, as well as technological advances and further
deregulation. In the market for carrier services, we compete primarily with the
three traditional nationwide carriers, AT&T, MCI WorldCom and Sprint, and other
coast-to-coast and regional fiber optic network providers, such as Qwest, Level
3 and IXC. We compete primarily on the basis of pricing, transmission quality,
network reliability and customer service and support.
We believe that we have advantages over our competitors. AT&T, MCI WorldCom
and Sprint utilize systems that were constructed for the most part prior to
1990. We believe that the older systems operated by these carriers generally
face disadvantages when compared to the Williams Network, such as:
- lower transmission speeds
- lower overall capacity
- more costly maintenance requirements
- inefficiency due to design and competing traffic requirements
- greater susceptibility to systems interruption from physical damage to
the network infrastructure
Many older systems will face greater difficulty in upgrading to more
advanced fiber due to lack of a spare conduit. We are aware that other
competitors may employ advanced technology that is similar to that of the
Williams Network. Additional capacity that is expected to be available over the
next several years from competitors may cause significant decreases in prices
overall. For more information, see the section of this prospectus entitled "Risk
Factors -- Risks relating to our Network business."
We believe that our strategy of selling products and services to other
communications carriers gives us an advantage over other fiber optic network
providers who compete with their customers. We believe that communications
carriers prefer not to buy products and services from a competitor. We also do
not need a large sales, marketing and customer service staff in order to support
the retail markets that our competitors serve. We can effectively reach and
serve a relatively small group of large customers with our smaller, efficient
and focused team, resulting in reduced costs.
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RELATIONSHIP WITH MCI WORLDCOM
As part of our agreements with MCI WorldCom relating to the sale of the
majority of Williams' communications network business to LDDS, MCI WorldCom
granted us an option to purchase one fiber optic strand over approximately 7,700
miles of selected MCI WorldCom routes. In addition, we granted MCI WorldCom an
option to purchase one fiber optic strand over approximately 9,700 miles of
selected Williams Network routes on the portions of the Williams Network which
we began to develop in January 1998. The exercise price for each option is equal
to the capitalized cost attributable to the sold fiber plus a slight markup. Any
fiber optic strand we purchase pursuant to the option may only be used to
transmit video or multimedia services, including Internet services, until July
1, 2001. MCI WorldCom has agreed to provide private line, frame relay and
switched voice services for our and Williams' internal use through 2034. We have
agreed to pay MCI WorldCom its costs to unrelated third parties for these
services. Until July 1, 2003, we and MCI WorldCom have agreed not to solicit the
other's employees located in the Tulsa metropolitan area. Until August 1, 1999,
if either of us hires select key employees involved in network planning or in
management, the hiring company must pay to the other an amount equal to five
times the employee's annual compensation.
SOLUTIONS
We sell, install and maintain network services and the communications
equipment of leading vendors to address our customers' comprehensive voice and
data needs. Our expertise in communications and data networks permits us to
offer customers a wide range of professional services, including network
planning, design, implementation, management, maintenance and optimization. We
also distribute the products and services of select communications service
providers, including some of Network's customers. In April 1997, we purchased
Nortel's equipment distribution business, which we then combined with our
equipment distribution business to create Williams Communications Solutions,
LLC. We own 70% of Solutions LLC and Nortel owns the remaining 30%. Our
Solutions business unit consists primarily of Solutions LLC.
Our broad range of voice and data solutions allows us to serve as a
single-source provider for our customers' communications needs. We distribute
the products and services of a number of communications suppliers, primarily
Nortel, as well as Cisco, Octel (a division of Lucent), NEC, 3COM, Bell
Atlantic, SBC and U S WEST, and are therefore able to provide our customers with
multiple options. By offering equipment from a variety of vendors, we help
businesses optimize the productivity and reduce the cost of their communications
systems. We have expertise in the most complex network technologies to ensure
that products from various suppliers operate together effectively.
Selected statistics of our Solutions business as of March 31, 1999 include
(numbers are approximate):
<TABLE>
<S> <C>
Sales personnel........................ 1,200
Technicians............................ 2,400
Engineering personnel.................. 800
Operations support staff............... 1,400
Total customer sites................... 100,000
Sales and service locations............ 110
</TABLE>
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STRATEGY
Our objective is to be the premier provider of advanced, integrated
communications solutions to businesses. To achieve this objective, we intend to:
- Capitalize on converging voice, data, Internet and video needs. We
capitalize on the increased demand for new technologies as businesses
replace and upgrade existing communications infrastructure as a result of
an industry trend called convergence. Whereas in the past voice and data
equipment and networks were separate, convergence is the integration of
these separate technologies into a single communications environment. We
believe that our strong customer relationships, product portfolio and
technical experience provide us with an ideal platform to capitalize on
this trend.
- Leverage our engineering and technical resources. We have an experienced
staff of approximately 2,400 technicians and approximately 800
engineering personnel to design, install, manage and maintain our
customers' communications infrastructures. Our employees are trained to
address our customers' converged and complex communications needs, such
as Internet-connected call centers and voice over Internet protocol. As
technologies become more complex, the need for advanced communications
solutions such as these will continue to grow. Our engineering personnel
and technicians provide us with a competitive advantage in offering these
services.
- Provide advanced professional services. We provide comprehensive
services to assist customers in the design, engineering and operation of
their communications networks. Our services include advanced call center
applications, outsourcing, network engineering and network consulting. We
intend to continue to expand the professional services portion of our
business as customer demand for advanced communications and data network
solutions continues to grow.
- Utilize our nationwide presence and large, installed customer base. We
have approximately 110 sales and service locations throughout the U.S.
and Canada and approximately 100,000 customer sites. Our nationwide
presence allows us to better serve multi-location customers and makes us
a very attractive partner for leading communications equipment and
service providers. Our large, installed customer base provides us and
leading communications equipment and service providers with an existing
market to sell new products and services.
- Extend the reach of Network's carrier customers. We are able to
distribute the products and services of Network's customers to Solutions'
customer base. We are currently using Solutions' 1,200 sales personnel to
sell Concentric's Internet services and UniDial's long distance services.
In addition, we have agreed to offer SBC's network services as they are
made available to us. We believe that our ability to extend the reach of
Network's carrier customers provides Network with a valuable point of
differentiation.
PRODUCTS AND SERVICES
We provide a comprehensive array of communications products and services.
Our products and services fall into three categories:
- equipment sales and service
- professional services
- sale of carrier services
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Equipment sales and service. We sell and install voice and data
communications equipment and provide service, maintenance and support for our
customers' communications networks.
- Voice and video equipment. We offer our customers a variety of voice and
video equipment, which enables our customers to communicate more
effectively. We also install, configure and integrate all of the
equipment they purchase. The voice systems we sell range from systems for
small businesses to systems for large enterprise sites, requiring
anywhere between 15 and 50,000 internal telephone lines. This equipment
includes private branch exchange systems, key systems, building wiring,
call centers, voice mail systems and premise (as opposed to mobile)
wireless systems.
- Data equipment. We design, build and operate data networks as well as
integrated voice and data networks. To meet our customers' needs, we
evaluate technologies such as Internet protocol, frame relay and ATM and
then we select, integrate and deploy the appropriate routers, switches,
access devices and other required equipment. The networks we build range
from small local area networks supporting less than 50 users to wide area
networks supporting thousands of users and multiple technologies.
- Service and maintenance. We maintain and service our customers' networks
primarily through annual maintenance plans or through job-specific plans
based on time and materials. We remotely monitor and manage the voice and
data equipment and network connectivity of our customers 365 days a year,
24 hours a day through our advanced network management center. We are
able to resolve over 85% of all potential problems relating to data
equipment and over 25% relating to voice equipment without having to
dispatch a technician to the customer's site. When a skilled technician
is required, we have a staff of over 2,400 technicians available to meet
our customers' on-site service needs.
Professional services. We design, build and operate advanced voice, data
and integrated networks. Our professional services offerings include
outsourcing, advanced call center applications, network engineering and network
consulting. We will continue to expand these services as customer demand for
advanced communications solutions continues to grow.
- Outsourcing. We have over 400 engineers and on-site technicians to
support several large U.S. corporations which have elected to turn over
to us the management and operation of all or substantial portions of
their communications environments. Increasingly, these clients are
outsourcing their data networking requirements in addition to their
traditional voice communications requirements to expand network
capability, improve productivity and decrease costs.
- Advanced call center applications. Our call center applications team
consists of approximately 50 software applications developers and
engineers who design and implement customized call center solutions for
customers with complex requirements. We also maintain a computer
telephony integration lab with 30 specialists to test and develop custom
call center solutions.
- Network engineering. We have approximately 175 network engineers with
expertise in data as well as integrated voice and data networking. This
group designs networking solutions, implements those solutions and
provides ongoing operational support utilizing standard technologies. We
also provide engineers on a fee-for-service basis for customers who seek
to augment their own resources.
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- Network consulting. Our network consultants coordinate the operational
plans of our customers with their existing network capacity and
capability in order to determine the communications environment necessary
to meet their business needs. Our consultants provide a complete analysis
of existing network status and predict the impact of future changes on a
network and also develop sophisticated Internet applications.
Sale of carrier services. Our customers are increasingly demanding
"one-stop shopping" for communications services. We sell long distance, local
and Internet services offered by other carriers who are generally customers of
the Williams Network. This enables us to provide a complete communications
solution for our customers. We currently have agreements with SBC, Bell
Atlantic, U S WEST (in Arizona only), UniDial and Concentric to sell their
services.
ISSUES RELATING TO SOLUTIONS' BUSINESS PERFORMANCE
In 1997, we and Nortel combined our equipment distribution businesses to
create what is now Solutions LLC. The rationale for the combination was to
achieve the benefits of increasing the scale and national reach of our sales,
engineering and technical support staffs and our installed customer base and to
strengthen our relationship with our primary vendor. The combination was also
expected to provide the cost benefits of eliminating redundant operating and
overhead expenses. However, we have experienced difficulties in integrating
Nortel's equipment distribution business with ours and in managing the increased
complexity of our business. These difficulties have prevented us from fully
realizing the expected benefits of the combination and have adversely impacted
our financial results. For a detailed discussion of these issues, see the
section of this prospectus entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Overview -- Solutions."
VENDOR RELATIONSHIPS
We have agreements with the suppliers of the products and providers of the
services we sell to our customers. These agreements provide for our
distribution, resale or integration of products or our acting as agents for the
provider of services. Normally, we receive volume discounts off the list price
of the product or service we purchase from our vendors. We estimate that sales
of Nortel's products, consisting of primarily voice equipment, accounted for
approximately 40% of Solutions' revenues in 1998. We estimate that product sales
from the next three largest vendors accounted for approximately 6% of Solutions'
revenues in 1998.
Nortel. We distribute Nortel's voice, data and video products. We are the
largest U.S. distributor of Nortel's end-user voice products. The discounts we
receive vary based on our volume of purchases of a particular product line up to
a maximum discount. We have a commitment from Nortel that we may remain a
distributor of Nortel's products through at least 2002. While we have no
commitment to purchase a minimum number of products from Nortel, if we do not
maintain a minimum percentage of Nortel's products in our product mix, each
party has the option to change the ownership structure of Solutions LLC. See the
section below entitled "-- LLC Agreement with Nortel" for more information.
Cisco. We are a large U.S. distributor of Cisco's full line of data
networking products. We also distribute Cisco's voice over Internet protocol
products.
Lucent. We are one of the largest U.S. distributors of the voicemail
products of Lucent's Octel messaging division. We also distribute Lucent's
advanced premises wiring products.
NEC. We are one of the largest non-affiliated U.S. distributors of NEC
voice equipment. We have an agreement with NEC that requires us to purchase from
April 1, 1999 through March 31, 2001 annual minimum amounts which aggregate to a
minimum of $44 million of
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their products. If we do not fulfill our commitment to NEC, we are required to
pay 30% of any amounts we do not purchase.
CUSTOMERS
We have approximately 100,000 customer sites across a broad range of
industries, including businesses as well as educational, governmental and
non-profit institutions. These customers consist of small businesses (ten or
more employees), small sites of larger companies and large enterprise campus
sites (e.g., AT&T and the University of Dayton). We are one of the largest
providers in the U.S. of installation and maintenance services of communications
systems to business sites of over 10,000 telephone lines. We believe that our
customer service will enable us to capture an increasing portion of each
customer's communications budget in the future. We are not dependent on any one
customer or group of customers to achieve our desired results. Our top 25
customers combined accounted for less than 10% of revenue during 1998, with no
one customer accounting for more than 1%. Our customers include: AT&T, Bankers
Trust Corporation, BP Amoco P.L.C., Countrywide Credit Industries, Inc., Hewlett
Packard Company, Johnson & Johnson, Kaiser Permanente, Lockheed Martin
Corporation, Merrill Lynch & Co., Pfizer, Inc., Prudential Individual Insurance
Group, Shell Exploration and Production Technology Company, Staples, Inc., T.
Rowe Price International Technologies, Inc. and Texaco Inc.
SALES
We operate approximately 110 sales and service offices in the U.S. and
Canada staffed with approximately 1,200 sales personnel. Approximately 100 of
our sales personnel focus on large, national and government accounts. In
addition, we have representatives dedicated to making regular telephone contact
with our existing customers, providing enhanced customer service and a channel
for merchandise sales.
COMPETITION
Our competition comes from communications equipment distributors, network
integrators and manufacturers of equipment (including in some instances those
manufacturers whose products we also sell). Our competitors include Norstan,
Inc., Anixter Inc., Integrated Network Services, Lucent, Siemens, Cisco Systems
and the equipment divisions of GTE, Sprint and the RBOCs. Most equipment
distributors tend to be regionally focused and do not have our capability to
service a nationwide customer base. We believe our expertise in voice
technologies and our ability to provide comprehensive solutions give us an
advantage over network integrators. We realize that we operate in a highly
competitive industry and face competition from companies that may have
significantly greater financial technical and marketing resources. Most
manufacturers of equipment are focused on selling their own equipment and do not
provide converged solutions. By having relationships with multiple vendors, we
believe we can provide the best solution for each customer's specific needs. We
realize that an interruption, or substantial modification, of our distribution
relationships could have a material adverse effect on our business. For more
information, see the section of this prospectus entitled "Risk Factors -- Risks
relating to our Solutions business."
LLC AGREEMENT WITH NORTEL
In April 1997, we purchased Nortel's equipment distribution business, which
we then combined with ours to create Solutions LLC. Nortel's equipment
distribution business included the combined net assets of Nortel's direct sales
subsidiaries, Nortel Communications Systems, Inc., which includes Bell Atlantic
Meridian Systems, and TTS Meridian Systems, Inc.
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We have a 70% interest and Nortel has a 30% interest in Solutions LLC. In
the event of a change of control of either us or Nortel, Nortel may require us
to buy, or we may require Nortel to sell, Nortel's entire interest in Solutions
LLC at market value. If for two consecutive years the percentage of Nortel
products purchased by Solutions LLC compared with all Nortel and similar
products purchased by Solutions LLC falls below approximately 78% and the rate
of growth of the purchase of Nortel products by Solutions LLC during the
two-year period is below that of other Nortel distributors, Nortel may require
us to buy, or we may require Nortel to sell, Nortel's entire interest in
Solutions LLC at market value.
After 1999, Nortel may require us to purchase up to one-third of its
interest in Solutions LLC. Nortel must retain a 20% interest in Solutions LLC
for a period of 5 years after the date on which Nortel's ownership interest is
reduced to 20%. As long as Nortel retains 20%, we must retain at least a 50%
interest in Solutions LLC. Each party has a right of first refusal to purchase
the other party's interest in the event of a sale to a third party of all or any
part of the party's interest. For more information about our relationship with
Nortel, see the section above entitled "-- Vendor relationships."
We and Nortel have representation in proportion to our respective ownership
interest on the management committee of Solutions LLC. We currently appoint
seven representatives and Nortel appoints three representatives to this
committee. As long as Nortel's interest in Solutions LLC is at least 20%, Nortel
must approve, among other things:
- any changes to the scope of Solutions LLC's business
- any non-budgeted capital expenditure over $5 million, non-budgeted
acquisition, divestiture or any other obligation over $20 million
- the incurrence of long-term debt in excess of equity
Until May 2000, we and Nortel will not engage in direct sales to end-users of
Nortel's voice products or any similar voice products in the U.S. and Canada
outside Solutions LLC.
STRATEGIC INVESTMENTS
We make investments in, or own and operate, domestic and international
businesses that create demand for capacity on the Williams Network, increase our
service capabilities, strengthen our customer relationships, develop our
expertise in advanced transmission electronics or extend our reach.
DOMESTIC
Vyvx. We own Vyvx, a leading provider of integrated fiber optic, satellite
and teleport video transmission services. Through Vyvx, we have gained
experience in multimedia networks and have established high-speed connectivity
to the major news and sports venues throughout the country. Vyvx's broadcast
customers include all major broadcast and cable television networks, news
services and professional and collegiate sports organizations. In 1998, Vyvx
delivered the video and audio signals from live events to television networks
for approximately 85% of all major league sports events.
Concentric. Concentric Network Corporation is a provider of Internet-based
virtual and private networking services to business customers. We currently own
4,633,716 shares, or 11.5%, of Concentric's common stock, which we acquired over
the past two years for an aggregate of approximately $41.5 million. We also own
warrants to purchase an additional 710,036 shares of Concentric's common stock
at an exercise price of $3 per share by June 2002. Concentric has agreed to
purchase at least $21 million of services and equipment from us prior to
December 1, 2002. Through 2007, we are Concentric's preferred provider of
communications equipment and
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long distance multimedia network services. As a preferred provider, we retain a
right of last refusal to provide these services so long as the equipment and
services are competitive to the market in technology and price. Through 2007,
Concentric must first try to buy all services and equipment it requires from us
if we provide the products Concentric requires. Solutions has also entered into
an agreement with Concentric which provides that we will market and resell
Concentric's telecommunications services in the U.S. Our investment in
Concentric allows us to better understand the requirements of Internet service
providers so that we can scale these service offerings to better serve our
customers.
UniDial. UniDial Communications, Inc. is a reseller of long distance and
other communications products, including frame relay, Internet and conferencing
services. In October 1998, we purchased shares of preferred stock of UniDial for
$27 million. Dividends accrue at the rate of 10% per annum beginning October 1,
1999. The shares are convertible into common stock under certain circumstances,
with our resulting percentage being subject to various formulas and timing
restrictions. We currently estimate that our preferred stock would convert into
approximately 12% of UniDial's common stock. We entered into an agreement with
UniDial which provides for UniDial to buy all of its required carrier services
from us until October 2002. We must price our services at competitive market
levels. UniDial may not terminate the carrier services agreement, which
automatically renews for successive two-year periods, as long as we continue to
own all of our UniDial preferred stock or own at least 5% of UniDial's common
stock. We also have an additional agreement with UniDial which provides for
Solutions to sell UniDial's products and services and for UniDial to handle the
billing and collection relating to Solutions' sales of UniDial's services. Our
investment in UniDial allows us to better understand the reseller market and
enables us to better serve our customers.
UtiliCom. UtiliCom Networks Inc. partners with utilities to create joint
ventures offering local exchange and other communications services. We currently
own 469,154 shares of UtiliCom's common stock, which represents a 14.5% interest
(9.7% on a fully-diluted basis), though we expect our interests to be reduced to
6.7% (5.9% on a fully-diluted basis) in 1999 upon UtiliCom's receipt of
additional financing. We have provided a $1 million loan to UtiliCom that
matures in May 2003, which we may convert to UtiliCom common stock in the event
of an initial public offering of UtiliCom's common stock. We also provided an
additional $4 million loan that matures in June 1999. We hold 200,000 warrants
that are exercisable to purchase UtiliCom common stock at $3 per share. In
exchange for our financing and investments, UtiliCom has agreed to use
reasonable best efforts to utilize our communications services and equipment and
to cause each of its joint ventures to designate us as its vendor as long as we
offer the equipment and services on competitive terms. In addition, we and
UtiliCom agreed to market each other's products and services to each other's
customers. UtiliCom's first joint venture partner is a subsidiary of SIGCORP,
Inc., a utility in Evansville, Indiana. The new venture is preparing to provide
telephony and data services, Internet services and cable television services to
business and residential customers.
Other. We also own Williams Conferencing, Global Access, Telemetry and
ChoiceSeat. Williams Conferencing offers worldwide audio and video services,
special events management and video conferencing networks to businesses. Global
Access offers closed-circuit video broadcasting services for businesses,
universities and other large institutions. Telemetry provides wireless remote
monitoring and meter reading equipment and related services to industrial and
commercial customers, including Williams. ChoiceSeat deploys touch-screen
display units installed on stadium seats which provide access to statistics,
different views of the field, player-and venue-related information and access to
current information from other sports events.
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INTERNATIONAL
We own interests in communications ventures in Brazil, Australia and Chile
which consist of ATL, PowerTel and MetroCom. Williams has granted us an option
to acquire its interest in Lightel.
ATL. ATL-Algar Telecom Leste S.A. was formed in March 1998 to acquire the
concession for B-band cellular licenses in the Brazilian states of Rio de
Janeiro and Espirito Santo. ATL is owned by Williams, SKTI-US LLC and Lightel
S.A. -- Tecnologia da Informacao. As of March 31, 1999, Williams owned a 55%
direct interest in ATL and indirect interest in ATL through its ownership in
SKTI-US LLC. SKTI-US LLC is owned by Williams and SK Telecom Co., Ltd., Korea's
largest wireless telecommunications provider. Lightel is a holding company whose
subsidiaries are communications service providers in Brazil.
Williams has an option to acquire SK Telecom's interest in SKTI-US LLC once
permitted under Brazilian regulations. In April 1998, Williams acquired a 20%
non-voting economic interest in ATL. Also in April 1998, SKTI-US LLC acquired a
10% economic interest, representing a 30% voting interest, in ATL. On March 25,
1999, Williams purchased from Lightel for $265 million an additional 35%
economic interest, representing a 19% voting interest, in ATL. This investment
reduces Lightel's investment to a 35% economic interest, representing a 51%
voting interest, in ATL. As of March 31, 1999, Williams' investment in ATL
totaled $415 million.
On March 25, 1999, Williams pledged 49% of its common and all of its
preferred stock as collateral for a U.S. dollar-denominated $521 million loan
from Ericsson Project Finance AB to ATL. In addition, Lightel pledged 83% of its
initial investment in ATL's common and preferred stock as collateral for the
loan. The loan matures on March 25, 2002.
ATL provides digital cellular services in the Brazilian states of Rio de
Janeiro and Espirito Santo, covering a population of approximately 16.1 million
inhabitants. ATL started commercial operations on January 15, 1999 and had
approximately 340,000 subscribers as of March 31, 1999. ATL's only cellular
competitor in these areas is Tele Sudeste Celular Participacoes S.A., a former
subsidiary of Telebras currently controlled by a consortium led by Telefonica de
Espana. We believe these areas to be particularly attractive because of the high
unsatisfied demand for cellular services, large population base and relatively
high level of income per capita when compared to other Brazilian regions. ATL's
strategy is based on rapidly deploying a high-quality, 100% digital cellular
network, offering a broad range of enhanced services and providing excellent
customer service.
Lightel. Williams currently owns a 20% equity interest in Lightel. Algar
S.A. Empreendimentos e Participacoes, a Brazilian conglomerate, owns 74% of
Lightel. The remaining 6% of Lightel is owned by the International Finance
Corporation.
We will have the right during the period from January 1, 2000 through
January 1, 2001 to purchase all of Williams' equity and debt investments in
Lightel at the net book value of Williams' investment in Lightel at the time of
the purchase. At December 31, 1998, this net book value was approximately $170
million. The purchase price is payable in shares of Class B common stock valued
at the average closing sale price per share of our common stock over the twenty
trading-day period prior to the purchase. In the event that we exercise this
option, we would be required to assume any capital or other commitments that
Williams may have to Lightel at the time of the purchase.
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Williams purchased the 20% economic interest in Lightel, representing a 5%
voting interest, in January 1997 for approximately $65 million. In April 1998,
Williams invested an additional $100 million in the form of a redeemable
convertible bond. The bond bears interest at an annual rate of 10% compounded
quarterly in U.S. dollars and is convertible at any point over the next three
years. After the conversion of the bond, Williams would own an approximately 33%
economic interest, representing a 21% voting interest in Lightel. Beginning in
January 2002 and until an initial public offering of Lightel, Williams has a
right to sell its entire interest in Lightel to Algar for at least the amount of
Williams' investment plus interest. Williams has the ability to maintain its
ownership level in Lightel in the event of capital increases.
Lightel's main communications subsidiaries and investments as of March 31,
1999 include:
- 35% of ATL
- 70.9% of Companhia de Telecomunicacoes do Brasil Central
- 39.7% of Tess S.A.
Other majority-owned subsidiaries of Lightel include companies involved in
cable television services, design, maintenance and construction of
communications networks and provision of long distance services.
Companhia de Telecomunicacoes do Brasil Central provides local telephone
and cellular services in parts of the states of Minas Gerais, Sao Paulo, Goias
and Mato Grosso do Sul, covering 90,000 square kilometers with a population of
approximately 2.5 million people. This area of Brazil has recently experienced
higher rates of economic development than other regions of Brazil. As of
December 31, 1998, Companhia de Telecomunicacoes do Brasil Central had
approximately 403,000 fixed telephone lines in service and approximately 127,000
cellular subscribers.
Tess provides digital cellular services in Sao Paulo state outside the city
of Sao Paulo, covering a population of approximately 16.3 million inhabitants,
under a concession purchased from Brazil's federal government in 1997. We
believe this to be an attractive area because of the low penetration of fixed
telephone lines and the steady demand for telephone service. Tess's other
stockholders are Telia AB, the largest telecommunications operator in Sweden,
and Eriline Celular, a subsidiary of the Brazilian Eriline group. Tess began to
provide cellular service in December 1998.
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OWNERSHIP STRUCTURE OF STRATEGIC INVESTMENTS IN BRAZIL AS OF MARCH 31, 1999
SUBSIDIARIES FLOW CHART
PowerTel. In August 1998, Williams and a joint venture owned by three
large Australian electric utilities purchased equity interests in PowerTel
Limited (previously known as Spectrum Network Systems Limited), a public company
in Australia.
PowerTel plans to build, own and operate communications networks serving
the three cities of Brisbane, Melbourne and Sydney and plans to provide local
services in the central business districts of these cities. The three Australian
utilities have entered into a ten-year agreement with PowerTel which allows
PowerTel to use the utilities' ducts and to lay fiber optic cable alongside
their rights-of-way between the cities. PowerTel's strategy is to provide
high-quality, low-cost local voice, data and Internet services to the commercial
and carrier markets commencing in the second half of 1999.
Williams currently owns 159,544,468 shares, or 35%, of the common stock of
PowerTel and 31,914,894 shares, or 100%, of convertible cumulative preferred
stock of PowerTel. Williams' total investment represents a 36% economic interest
in PowerTel, which Williams purchased for 90 million Australian dollars. The
convertible cumulative preferred stock is convertible into an equivalent number
of shares of common stock at Williams' option at any time until August 2003.
Williams currently holds a majority of PowerTel's board seats, is entitled to
elect the majority of the directors of PowerTel, to appoint the executive
officers of PowerTel and operate the company. Williams is required to invest an
additional 60 million Australian dollars in cash by February 2000 in PowerTel
for 127,659,574 shares of convertible cumulative preferred stock. Williams'
ownership in PowerTel will increase to 45% after it has made all of its 60
million Australian dollar cash contributions. Williams also has options to
purchase 44,680,851 shares of common stock, which would increase its interest by
3%, at an exercise price of 0.47 Australian dollars per share. These options are
exercisable at any time until August 2003. Williams also has a 2.4% ownership
interest in PowerTel through an earlier investment.
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MetroCom. On March 30, 1999, Williams acquired a 19.9% equity interest in
MetroCom S.A. MetroCom is a Chilean company formed to build, own and operate a
communications network providing local, Internet, data and voice services to
businesses and residences in the Santiago metropolitan area. The remaining 80.1%
of MetroCom is owned by MetroGas S.A., a company which is constructing a natural
gas distribution system throughout the Santiago metropolitan area. MetroGas'
stockholders are several large international and Chilean electric utilities and
energy companies. MetroGas has granted MetroCom the right to utilize its
rights-of-way throughout Santiago. MetroCom's strategy is to provide
high-quality, low-cost local, Internet, data and voice services and to focus on
the commercial and high-end residential markets. MetroCom plans to complete its
fiber optic network and plans to commence services in late 1999.
Williams also has warrants to purchase shares of MetroCom's common stock
which would increase its interest to 50%. Williams purchased the common stock
and the warrants for $24.5 million. Williams is entitled to appoint the
executive officers of MetroCom and operate the company.
STRATEGIC ALLIANCES
We enter into strategic alliances with communications companies in order to
secure long-term, high-capacity commitments for traffic on the Williams Network
and to enhance our service offerings. The most significant of these alliances
are described briefly below.
SBC
SBC is a communications providers in the U.S. with 1998 revenues of
approximately $28.8 billion. SBC currently provides local services in the south
central region of the U.S. and in California, Nevada and Connecticut. SBC has a
pending agreement to acquire Ameritech, a communications provider in the Midwest
with 1998 revenues of approximately $17.2 billion.
On February 8, 1999, we entered into agreements with SBC under which:
- SBC must first seek to obtain domestic voice and data long distance
services from us for 20 years
- we must first seek to obtain select international wholesale services and
various other services, including toll-free, operator, calling card and
directory assistance services, from SBC for 20 years
- we and SBC will sell each other's products to our respective customers
and provide installation and maintenance of communications equipment and
other services
For the services each must seek to obtain from the other, the prices
generally will be equal to the cost of the product or service plus a specified
rate of return. However, these prices cannot be higher than prices charged to
other customers and in some circumstances cannot be higher than specific rates.
If either party can secure lower prices for comparable services which the other
party will not match, then that party is free to utilize the lowest cost
provider.
Both we and SBC can provide services or products to other persons. Each
party may also sell or utilize the products or services purchased from the other
to provide products or services to other persons. However, if SBC establishes a
wholesale distribution channel to resell the network capacity purchased from us
to another provider of carrier services, we have the right to increase the price
we charge SBC for the services SBC resells in this manner. While the terms of
our agreements with SBC are intended to comply with restrictions on SBC's
provision of long distance services, various aspects of these arrangements have
not been tested under the Telecommunications Act.
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We and SBC have agreed on a mechanism for the development of projects which
would allow the interconnection of the SBC network with the Williams Network
based on the unanimous decision of committees composed of an equal number of
representatives from our company and SBC. If a committee does not approve a
project, both we and SBC have the right to require the other party to develop a
project in exchange for payment of the direct costs and cost of capital required
to complete the project or pursue it on its own. In addition, upon SBC receiving
authorization from the FCC to provide long distance services in any state in its
traditional telephone exchange service region, SBC has the option to purchase
from us at net book value certain voice or data switching assets which are
physically located in that state and of which SBC has been the primary user.
This purchase option would not permit SBC to acquire any rights-of-way we use
for the Williams Network or other transport facilities which we maintain.
Upon termination of the alliance agreements with SBC, SBC has the right in
certain circumstances to purchase voice or data switching assets (including
transport facilities) of which SBC's usage represents 75% or more of the total
usage of these assets.
SBC may terminate the provider agreements if any of the following occurs:
- SBC does not acquire Ameritech or if regulators impose conditions on the
acquisition that SBC refuses to accept
- we begin to offer retail long distance voice transport or local exchange
services on the Williams Network except in limited circumstances
- we materially breach our agreements with SBC causing a material adverse
effect on the commercial value of the relationship to SBC
- we have a change of control
- SBC acquires an entity which owns a nationwide fiber optic network in the
U.S. and determines not to sell us long distance transport assets
We may terminate the provider agreements if any of the following occurs:
- SBC has a change of control
- there is a material breach by SBC of the agreements
Either party may terminate a particular provider agreement if the action or
failure to act of any regulatory authority materially frustrates or hinders the
purpose of that agreement. There is no monetary remedy for such a termination.
In the event of termination due to our actions, we could be required to pay
SBC's transition costs of up to $200 million. Similarly, in the event of
termination due to SBC's actions, SBC could be required to pay our transition
costs of up to $200 million, even though our costs may be higher.
On March 23, 1999, the U.S. Department of Justice completed its antitrust
review of the proposed merger of SBC and Ameritech. The DoJ approved the merger
subject to a consent decree agreed to by the parties that the companies would
sell one of their overlapping wireless systems in St. Louis, Chicago and some
other portions of Illinois. On April 5, 1999, Ameritech announced its agreement
with GTE to sell GTE these overlapping wireless systems and thus satisfy the
consent decree's condition to completing the merger of SBC and Ameritech. On
April 8, 1999, the Public Utilities Commission of Ohio approved the merger,
subject to certain conditions agreed to by SBC and Ameritech. The merger must
still be approved by the FCC and the Illinois Commerce Commission, which
generally have statutory mandates to review competition issues as well as other
aspects of the public interest related to the merger. These regulatory agencies
may approve, approve subject to certain conditions imposed on the
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companies, or deny approval of the merger. On April 2, 1999, the chairman of the
FCC released a letter to Ameritech and SBC indicating that he has serious
concerns regarding whether the proposed merger is in the public interest and
requesting Ameritech and SBC to engage in discussions regarding possible
conditions to the merger that would address his concerns. SBC and Ameritech
recently stated that they plan to close the merger by mid-1999, and that the
DoJ's approval will help obtain approval from the regulatory agencies.
SBC has also entered into a securities purchase agreement with us and
Williams to purchase from us at the closing of the equity offering the number of
shares of our common stock equal to the lesser of:
(a) $500 million divided by the initial public offering price less the
underwriting discount or
(b) 10% of our outstanding common stock immediately following the
consummation of the equity offering and the SBC investment.
Furthermore, if the underwriters in the equity offering exercise their
over-allotment option, SBC will also purchase the number of additional shares of
common stock it would have been required to purchase if the closing of the
over-allotment option had occurred simultaneously with the closing of the equity
offering. The obligation to make the SBC investment is subject to certain
conditions at closing, including that the agreement under which we provide
network transport services to SBC is in full effect.
In connection with its purchase of common stock SBC has agreed to certain
restrictions and will receive certain privileges, including the following:
- SBC has agreed not to acquire more than 10% of our common stock
- SBC has agreed not to transfer to anyone except affiliates any of its
shares of common stock for a period of three and a half years, but this
transfer restriction provision will be terminated if we have a change of
control
- SBC has the right to nominate a member of our board of directors so long
as SBC retains more than a 5% equity interest in our common stock and has
obtained and continues to have relief in any state from Section 271 of
the Telecommunications Act
- SBC has a right to increase its interest to 10% of our outstanding common
equity if it does not achieve that limit immediately following the
consummation of the purchase of common stock described above
- SBC has a pre-emptive right to maintain its equity interest in our common
stock, which would be forfeited if it were not exercised more than once.
Following a second failure to exercise, SBC has a pre-emptive right to
maintain its newly diluted position so long as it maintains at least a 3%
interest in our common stock
- SBC also has registration rights in connection with its holdings
We have a call option to purchase all the shares of the common stock
acquired by SBC under the securities purchase agreement in the event of the
termination of certain agreements with SBC. Williams, so long as it has a 50%
interest in our common stock, has a right of first purchase with respect to any
shares of our common stock that SBC should decide to offer. We also have a right
of first purchase with respect to any shares of common stock not purchased by
Williams.
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We are seeking to have SBC agree to reduce its investment from $500 million
to $425 million, in which event Telmex's investment would increase from $25
million to $100 million.
INTEL
Intel Corporation is a leading manufacturer of chips and other computer,
networking and communications products. Intel recently announced the formation
of its new business, Intel Internet Data Services, to provide Internet
web-hosting services by building and managing data centers around the world.
On May 24, 1999, we and Intel, on behalf of Intel Internet Data Services,
entered into a long-term master alliance agreement. The alliance agreement
provides that we and Intel Internet Data Services will purchase services from
one another pursuant to a service agreement and create a co-marketing
arrangement, each of which will have shorter terms than that of the master
alliance agreement. The parties' obligations under the alliance agreement are
subject to, among other conditions, completion of the service agreement and
co-marketing agreement by June 15, 1999. The services we will provide include
domestic transport services and may also include Internet connectivity. Intel
will provide web hosting services pursuant to the co-marketing arrangement.
Subject to our meeting pricing, quality of service and other specifications,
Intel Internet Data Services will purchase a significant portion of its yearly
domestic transport requirements from us.
Intel also entered into a securities purchase agreement with us and
Williams to purchase the number of shares of our common stock equal to $200
million divided by the initial public offering price less the underwriting
discount. The parties' obligations under the securities purchase agreement are
subject to closing conditions, including that the alliance agreement is in full
effect, that at least $500 million is raised in the equity offering and that
necessary governmental approvals have been obtained.
In connection with its purchase of common stock, Intel has agreed not to
transfer any of its shares of common stock to anyone except affiliates for a
period of eighteen months, but this transfer restriction provision will be
terminated if we have a change of control. In addition, the transfer restriction
does not prohibit Intel from participating in future registered offerings
initiated by us or from engaging in hedging transactions commencing six months
from the date of the equity offering. Intel also has registration rights in
connection with its holdings.
TELMEX
Telefonos de Mexico, S.A. de C.V., known as Telmex, is the largest
communications provider in Mexico. Telmex currently provides long distance and
local services primarily in Mexico.
On May 25, 1999, we entered into agreements with Telmex under which,
subject to any necessary U.S. and Mexican regulatory requirements:
- Telmex must first seek to obtain select international wholesale services
and various other services from us for 20 years
- we must first seek to obtain select international wholesale services and
various other services from Telmex for 20 years
- we and Telmex will sell each other's products to our respective customers
and will negotiate the terms under which both parties will provide
installation and maintenance of communications equipment and other
services for the other
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For the services each must seek to obtain from the other, the prices
generally will be established to reflect the strategic relationship and
commitments made to each other, subject to any applicable law or regulations
establishing the prices. If either party can secure lower prices for comparable
services which the other party will not match, then that party is free to
utilize the lowest cost provider. Both we and Telmex can provide services or
products to other persons. Each party may also sell or utilize the products or
services purchased from the other to provide products or services to other
persons.
We and Telmex have agreed on a mechanism for the development of mutually
beneficial projects intended to interconnect the Williams Network with the
Telmex network to provide seamless voice and data on both a nationwide and
international basis. Project decisions will be based on the unanimous decision
of committees composed of an equal number of representatives from our company
and Telmex.
Either party may terminate the alliance agreement if any of the following
occurs:
- the parties cannot execute implementing agreements within a specified
amount of time
- specified agreements to which Telmex is a party are not terminated prior
to the equity offering
- the action, or failure to act, of any regulatory authority or the passage
of a law or regulation materially frustrates or hinders the purpose of
any of our agreements
- either party experiences a change of control
One party may terminate the agreements if the other party materially
breaches them or is no longer able to deliver the products and services for a
period of 30 days.
We and Telmex recognize that certain provisions of the alliance agreement
may require further relaxation of existing regulatory requirements by either
U.S. or Mexican regulatory authorities before they may be implemented.
Telmex has also entered into a securities purchase agreement with us and
Williams to purchase from us the number of shares of our common stock equal to
$25 million divided by the initial public offering price less the underwriting
discount. If SBC agrees to reduce its investment to $425 million, Telmex's
investment would increase to $100 million.
The obligation to make the Telmex investment is subject to conditions at
closing, including that the alliance agreement with Telmex be in full effect.
In connection with its purchase of our common stock Telmex has agreed to
certain restrictions and will receive certain privileges, including the
following:
- Telmex has agreed not to acquire more than 10% of our common stock for a
period of 10 years
- Telmex has agreed not to transfer to anyone, except affiliates, any of
its shares of common stock for a period of 3 1/2 years, but this transfer
restriction provision will be terminated if we have a change of control
- Telmex has agreed that we have the right, for a period of 3 1/2 years, to
repurchase our stock at market value less the underwriter's discount if
the alliance agreement is terminated for any reason other than a breach
by us
Telmex also has registration rights in connection with its holdings.
METROMEDIA FIBER NETWORK
Metromedia Fiber Network is currently constructing local fiber optic
networks in 11 U.S. cities including New York, Boston, Philadelphia, Chicago,
Washington, D.C., Dallas,
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Houston, Atlanta, Seattle, Los Angeles and San Francisco. Metromedia has
indicated that it may announce additional cities for its network during the next
year. On May 21, 1999, we entered into two memoranda of understanding with
Metromedia under which we each agree to enter into 20-year agreements with the
other, providing for the following:
- Metromedia will lease to us up to 3,200 miles of dark fiber on its
local networks, six to 96 fibers per segment, and will provide us with
maintenance services and dark fiber connectivity to approximately 250
points of presence and data centers in exchange for approximately $317
million payable by us over the duration of the agreement
- we will lease to Metromedia six dark fibers over substantially all of
the fiber optic cable on the Williams Network and provide colocation
and maintenance services in exchange for approximately $317 million
payable by Metromedia over the duration of the agreement
Lease and maintenance payments will be based on the number of fiber miles
leased. We will lease fiber from Metromedia in all 11 of its current
metropolitan areas. In addition, we will have the right to select future
Metromedia market areas where we will lease fiber, when and if such cities are
announced. We will begin leasing fiber on constructed segments of the Metromedia
network upon acceptance by us in accordance with acceptance procedures as
provided in the agreement. Leases of fiber on additional segments will begin
following construction and acceptance. We anticipate that we will begin to lease
fiber from Metromedia during 1999.
Metromedia will begin leasing fiber on constructed segments of the Williams
Network upon acceptance by it pursuant to the acceptance procedures. Leases of
fiber on additional segments will begin following construction and acceptance.
We anticipate that Metromedia will begin to lease fiber from us during 1999.
WINSTAR
WinStar Communications, Inc. uses wireless technology to provide
high-capacity local exchange and Internet access services to companies located
generally in buildings not served by fiber optic cable. On December 17, 1998, we
entered into two agreements with WinStar under which:
- we have a 25-year right to use approximately 2% of WinStar's wireless
local capacity, which is planned to cover the top 50 U.S. markets, in
exchange for payments equal to $400 million over the next four years
- WinStar has a 25-year right to use four strands of our fiber optic cable
over 15,000 route miles on the Williams Network, a transmission capacity
agreement with an obligation to lease specified circuits from us for at
least 20-year terms and an agreement for colocation and maintenance
services in exchange for monthly payments equal to an aggregate of
approximately $644 million over the next seven years
WinStar has licenses from the FCC to operate in various frequencies in the
top 50 metropolitan markets in the U.S. WinStar has constructed approximately 60
hubs, or antenna sites, which are currently available to us. WinStar intends to
construct 270 hubs by the end of 2001 and we will have the ability to use all of
these hubs. We will pay WinStar the $400 million over the next four years as
WinStar completes construction of the hubs. As of March 31, 1999, we had paid
WinStar approximately $84 million.
We anticipate that the network fiber to be used by WinStar will be
completed in 2000. We will also be WinStar's preferred provider of domestic
communications requirements for 25 years.
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WinStar will pay us the $644 million in equal monthly installments over the next
seven years. As of March 31, 1999, we had received approximately $15.3 million.
In addition, we and WinStar are prohibited from directly competing with each
other for a period of three years.
U S WEST
U S WEST, Inc. is a communications provider with operations currently in
the western region of the U.S. We entered into an agreement with U S WEST,
effective January 1998, which provides that our two companies will work together
to provide data networking services to a variety of customers. We are marketing
out-of-region data networking services developed by U S WEST on a carrier
services basis. U S WEST has agreed to first seek to obtain services from us
through 2002 and is required to purchase at least $36.6 million of services and
equipment from us prior to June 30, 2003.
INTERMEDIA
Intermedia Communications Inc. provides a wide range of local, long
distance and Internet services. In April 1998, Intermedia executed an agreement
providing for a 20-year right to use our nationwide transmission capacity for
approximately $450 million payable over 20 years. This amount represents the
present value of the minimum amount Intermedia will pay over the life of the
agreement. To date, we have received approximately $57 million from Intermedia.
We will provide Intermedia with transmission capacity at rates up to 9.95
billion bits per second.
PROPERTIES
The Williams Network and its component assets are the principal properties
which we currently operate. We lease portions of the network and related
equipment pursuant to our operating lease with a financial institution, which
supplies funds to construct the Williams Network and purchase equipment. The
lease term is for five years with possible renewal for two additional one-year
terms. We have the rights to purchase, exchange and sell the leased property
during the lease term as well as to purchase the property at the end of the
lease term. The price at which we may purchase the property approximates its
original cost. In the event we do not purchase the property at the end of the
lease term, we are obligated to pay 89.9% of the original purchase cost of the
property.
Our installed fiber optic cable is laid under various rights of way. We
have agreements in place for approximately 87% of the rights of way needed to
complete the Williams Network. Almost all of our rights of way extend through at
least 2018. A significant portion of our rights of way are along Williams
pipeline easements.
We own or lease sites in approximately 100 U.S. cities on which we locate
or plan to locate transmission, routing and switching equipment. These sites
range in size from 2,000 square feet to 50,000 square feet and total
approximately 1,700,000 square feet. We also lease office space in various
locations including from Williams. We lease from Williams approximately
1,200,000 square feet of office space in Tulsa, Oklahoma and have entered into a
lease with Williams for an additional 350,000 square feet of office space to be
constructed. Solutions occupies approximately 192,000 square feet of office
space in Houston, Texas which it subleases from Williams.
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EMPLOYEES
As of March 31, 1999, excluding our unconsolidated strategic investments,
we had a total of 8,563 employees, 1,125 of whom were served by collective
bargaining agreements. The following shows the number of our employees broken
down by segment:
<TABLE>
<S> <C>
Network 854
Solutions 6,192
Strategic Investments 813
Corporate 704
-----
Total 8,563
=====
</TABLE>
LEGAL PROCEEDINGS
We are not a party to any material litigation and are not aware of any
pending or threatened litigation that would have a material adverse effect on us
or our business taken as a whole. However, class actions have been filed against
other communications carriers which challenge the carriers' rights to install
and operate fiber optic systems along easements that are similar to the
non-pipeline easements that we use. Some of the carriers which have granted us
rights in fiber optic strands are subject to these suits. It is possible we
could be involved in similar litigation in the future. See the section of this
prospectus entitled "Risk Factors -- Risks relating to our Network
business -- We need to obtain and maintain the necessary rights-of-way for the
Williams Network" for more information.
REPORTS TO STOCKHOLDERS
We intend to furnish our stockholders annual reports containing audited
financial statements examined by our independent auditors and quarterly reports
containing unaudited financial statements for each of the first three quarters
of each fiscal year.
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REGULATION
GENERAL REGULATORY ENVIRONMENT
We are subject to federal, state and local regulations that affect our
product offerings, competition, demand, costs and other aspects of our
operations. Federal laws and regulations generally apply to interstate
telecommunications, including international telecommunications that originate or
terminate in the United States, while state laws and regulations apply to
telecommunications terminating within the state of origination. The regulation
of the telecommunications industry is changing rapidly, and varies from state to
state. Our operations are also subject to a variety of environmental, safety,
health and other governmental regulations. We cannot guarantee that future
regulatory, judicial or legislative activities will not have a material adverse
effect on us, or that domestic or international regulators or third parties will
not raise material issues with regard to our compliance or noncompliance with
applicable regulations.
The Telecommunications Act seeks to promote competition in local and long
distance telecommunications services, including by allowing entities affiliated
with power utilities entry into providing telecommunications services and by
allowing GTE and, subject to certain limitations and conditions, the RBOCs'
entry into providing long distance services. We believe that the RBOCs' and
other companies' entry into providing long distance services will provide
opportunities for us to sell fiber or lease high-volume long distance capacity.
The Telecommunications Act allows an RBOC to provide long distance services
originating outside its traditional exchange service area or from mobile
services, and to own 10% or less of the equity of a long distance carrier
operating in its traditional service area. In addition, Section 271 of the
Telecommunications Act allows an RBOC to provide long distance services
originating in a state in its traditional exchange service area if it satisfies
several procedural and substantive requirements. These include obtaining FCC
approval upon a showing that the RBOC has entered into, or under some
circumstances has offered to enter into, interconnection agreements which
satisfy a 14-point "checklist" of competitive requirements. On February 22,
1999, the United States Supreme Court issued an order confirming the FCC's
authority to adopt requirements for compliance with the checklist. This order
reversed an earlier decision by the U.S. Court of Appeals for the Eighth Circuit
that required the FCC to defer to state determinations as to certain elements of
the checklist. To date, the FCC has not granted any petitions by RBOCs for entry
and has denied several of these petitions. We expect that additional petitions
for entry will be filed, and that the RBOCs will obtain approval to provide long
distance services in some states within the next two years.
Common carrier services to end-users and enhanced services providers are
subject to assessment for the FCC's Universal Service Fund, which assists in
ensuring the universal availability of basic telecommunications services at
affordable prices. The FCC has proposed assessments for the second quarter of
1999 of approximately 3.6% of gross interstate and 0.6% of gross intrastate
end-user revenues, which are slightly lower than previous assessments. These
assessments may be higher in subsequent years. Appeals of the FCC's universal
service order are pending in the U.S. Court of Appeals for the Fifth Circuit.
Reversal of the FCC's order or changes in the rules, especially changes that
affect the revenues on which universal service assessments are based, could have
an adverse impact on interstate carriers, including us. Certain of our services
may be subject to those assessments, which would increase our costs, and we may
also be liable for assessments by state commissions for state universal service
programs.
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FEDERAL REGULATION
Under the FCC's rules, we are a non-dominant carrier. Generally, the FCC
has chosen not to closely regulate the charges or practices of non-dominant
carriers. Although the FCC has the power to impose more stringent regulatory
requirements on us, we believe that the FCC is unlikely to do so. We are subject
to the regulatory requirements applicable to all common carriers, such as
providing services without unreasonable discrimination and charging reasonable
rates.
Federal regulation affects the cost and thus the demand for long distance
services through regulation of interstate access charges, which are the ILECs'
charges for use of their exchange facilities in originating or terminating
interstate transmissions. The FCC ordered a multi-year transition in the
structure of interstate access charges, leading to lower per-minute charges. The
FCC may adopt further changes in the structure of interstate access charges in
the future. The FCC also regulates the levels of interstate access charges
through price caps for larger ILECs and other rate regulation for smaller ILECs.
The FCC may adopt rules allowing ILECs further flexibility in setting interstate
access charges in the future, especially for high-speed data lines. On May 21,
1999, the U.S. Court of Appeals for the District of Columbia Circuit reversed
and remanded for reconsideration by the FCC the 6.5% inflation offset in the
current price cap rules.
The FCC has adopted rules for pricing the ILECs' unbundled network elements
and services to CLECs, which use these network elements and services to
interconnect with long distance carriers. These regulations affect the growth
opportunities for some of our customers and thus demand for our services. In
January 1999, the United States Supreme Court upheld the FCC's authority to
adopt pricing rules for unbundled network elements and resale by CLECs. However,
the Supreme Court instructed the FCC to reconsider an earlier determination
regarding the extent to which ILECs are required to unbundle elements of their
networks and provide those unbundled networks to CLECs. In addition, certain
ILECs have indicated in papers filed with the U.S. Court of Appeals for the
Eighth Circuit that they will seek additional judicial review of the FCC's
pricing rules on substantive grounds.
The FCC has to date treated Internet service providers as enhanced service
providers rather than common carriers. As such, Internet service providers have
been exempt from various federal and state regulations, including the obligation
to pay access charges and contribute to universal service funds. On February 25,
1999, the FCC adopted an order in which it determined that calls to Internet
service providers are interstate in nature and proposed rules to govern
compensation to carriers for transmitting these calls. Although the FCC does not
intend to require Internet service providers to pay access charges or to
contribute to universal service funds, the FCC's order could affect the costs
incurred by Internet service providers and the demand for the offerings of some
of our customers. Several appeals of the order have been filed in the U.S. Court
of Appeals for the District of Columbia Circuit.
The FCC has adopted rules for a multi-year transition to lower
international settlements payments by U.S. common carriers. We believe that
these rules are likely to lead to lower rates for certain international services
and increased demand for these services provided by certain of our customers.
The result is likely to be increased demand for capacity on the U.S. facilities,
including the Williams Network, which provide these services.
Rules adopted by the FCC in 1996 and 1997, which are subject to pending
appeals and a stay, could impose significant limits on the ability of carriers
to maintain tariffs for interstate long distance services and to rely on tariffs
to state the prices, terms and conditions under which they offer interstate
services. Additional rules, adopted by the FCC on March 18, 1999, will require
long distance carriers to make specified public disclosures of their rates,
terms and conditions for
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domestic interstate services, with the effective date for these rules delayed
until a court decision on the appeal of the FCC's 1996 detariffing order. These
regulations could affect how some of our customers provide services and the
demand for their offerings.
STATE REGULATION
The Telecommunications Act prohibits state and local governments from
enforcing any law, rule or legal requirement that prohibits or has the effect of
prohibiting any person from providing any interstate or intrastate
telecommunications service. However, states retain jurisdiction to adopt
regulations necessary to preserve universal service, protect public safety and
welfare, ensure the continued quality of communications services and safeguard
the rights of consumers.
Generally, we must obtain and maintain certificates of authority from
regulatory bodies in states in which we offer intrastate services. In most
states, we must also file and obtain prior regulatory approval of tariffs for
our intrastate services. Certificates of authority can generally be conditioned,
modified or revoked by state regulatory authorities for failure to comply with
state law or regulations. Fines and other penalties also may be imposed for such
violations. We are currently authorized to provide intrastate services in 37
states. We believe that most states do not regulate our provision of dark fiber.
If a state did regulate our provision of dark fiber, we could be required to
provide dark fiber in that state pursuant to tariffs, and at regulated rates.
State regulatory commissions generally regulate the rates ILECs charge for
intrastate services, including intrastate access services paid by providers of
intrastate long distance services. Intrastate access rates affect the costs of
carriers providing intrastate long distance services and demand for the services
we and other carriers provide. Under the Telecommunications Act, state
commissions have jurisdiction to arbitrate and review negotiations between ILECs
and CLECs regarding the prices ILECs charge for interconnection of network
elements with, and resale of, services by CLECs; however, the U.S. Supreme Court
has upheld the FCC's authority to adopt rules which the states must apply when
setting these prices. A state may also impose telecommunications taxes, and fees
related to the support for universal service, on providers of services within
that state.
LOCAL REGULATION
We are occasionally required to obtain street use and construction permits
and licenses and/or franchises to install and expand our fiber optic network
using municipal rights of way. Termination or failure to renew our existing
franchise or license agreements could have a material adverse effect on us. In
some municipalities where we have installed or anticipate constructing networks,
we are required to pay license or franchise fees based on a percentage of gross
revenue or on a per linear foot basis. We cannot guarantee that fees will remain
at their current levels following the expiration of existing franchises. In
addition, we could be at a competitive disadvantage if our competitors do not
pay the same level of fees as we do. However, the Telecommunications Act
requires municipalities to manage public rights of way in a competitively
neutral and non-discriminatory manner.
OTHER
Our operations are subject to a variety of federal, state, local and
foreign environmental, safety and health laws and governmental regulations.
These laws and regulations govern matters such as the generation, storage,
handling, use and transportation of hazardous materials, the emission and
discharge of hazardous materials into the atmosphere, the emission of
electromagnetic radiation, the protection of wetlands, historic sites and
endangered species and the health and safety of our employees.
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Although we monitor compliance with environmental, safety and health laws
and regulations, we cannot assure you that we have been or will be in complete
compliance with these laws and regulations. We may be subject to fines or other
sanctions imposed by governmental authorities if we fail to obtain certain
permits or violate the laws and regulations. We do not expect any capital or
other expenditures for compliance with laws, regulations or permits relating to
the environment, safety and health to be material in 1999 or 2000.
In addition, we may be subject to environmental laws requiring the
investigation and cleanup of contamination at sites we own or operate or at
third party waste disposal sites. These laws often impose liability even if the
owner or operator did not know of, or was not responsible for, the
contamination. Although we own or operate numerous sites in connection with our
operations, we are not aware of any liability relating to contamination at these
sites or third party waste disposal sites that could have a material adverse
effect on our company.
FOREIGN REGULATION
BRAZIL
Communications service in Brazil has until recently been primarily provided
by operating subsidiaries of Telebras, a state-owned holding company. In 1997,
the General Telecommunications Act provided for the restructuring and
privatization of the communications industry in Brazil. In 1998, Telebras was
split into 12 different holding companies -- one long distance carrier, three
local landline companies, and eight cellular companies. A governmental
regulatory agency, Agencia Nacional de Telecomunicacoes, known as Anatel, was
created to regulate the newly privatized industry and to facilitate competition.
One aspect of the restructuring and privatization process is the issuance
of licenses, through a bid process, to competing privately-owned carriers.
Licenses for "B-Band" cellular companies, including ATL and Tess, were issued in
1997 and 1998. Each cellular concession is a specific grant of authority to
supply cellular services within a defined region. In the case of ATL, this
region consists of the states of Rio de Janeiro and Espirito Santo. In the case
of Tess, this region consists of the state of Sao Paulo outside the city of Sao
Paulo.
A cellular concession has been granted to each of ATL and Tess for an
initial term of 15 years which may be renewed for equal periods at the
discretion of Anatel. Currently within each area only one cellular company may
operate in Band A and one in Band B; there are no personal communications
service carriers. The cellular concessions and other regulations impose a range
of restrictions on the companies' operations, corporate governance and
shareholders, with penalties for noncompliance, including loss of license and
monetary fines.
Long distance service is regulated pursuant to the General
Telecommunications Act. In April 1998, the government issued a general granting
plan for licenses, which split the country into four telecommunications areas.
Areas I and II include most of the states of the country. Area III corresponds
to the state of Sao Paulo. Area IV covers international calls and long distance
calls throughout the whole country. The operators in Areas I and II are also
able to provide long distance calls but only within the boundaries of the states
inside each area.
During 1999, the government of Brazil awarded through bid processes
licenses for other companies that will compete against the former Telebras
subsidiaries. Each company will be able to provide service in one of the four
areas. In 2000, the government may sell additional licenses in each wireless
market for personal communications service.
Each concession agreement establishes the service obligations for the
operator, based on the applicable legislation determined by Anatel. Anatel
defines maximum rates, but an operator can charge users lower rates. The rates
can be readjusted periodically but not less often than every
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12 months. ATL and Tess are subject to the rate parameters set out in their
concession agreements, based upon the bids they submitted to obtain the
concessions. Cellular service in Brazil is offered on a "calling party pays"
basis, where the cellular subscriber pays usage charges only for outgoing calls.
Roaming agreements between cellular carriers apply to services for subscribers
outside of their home regions.
Anatel also regulates cable television in Brazil. Each license is granted
for 15 years and renewable for equal periods. The service must be rendered
without discrimination, at reasonable prices and conditions and on a
non-exclusive basis. There is no specific regulation of rates for cable
services. There is a basic group of channels that must be provided to customers.
Competition for cable comes from microwave multichannel systems and satellite
television. Recently, bidding procedures took place for new licenses for both
cable and the microwave multichannel systems.
AUSTRALIA
On July 1, 1997, the Australian government opened all sectors of the
Australian communications industry to competition. Central elements of the new
regulatory regime include an unrestricted number of carrier licenses, increased
reliance on certain elements of the Australian Trade Practices Act and industry
self-regulation and retention of some carrier land access rights and statutory
immunities in relation to the construction of network facilities.
The Australian Competition and Consumer Commission (ACCC) is charged with
most competition-related regulatory functions and price control arrangements.
The Australian Communications Authority (ACA) is responsible for regulating the
non-competition aspects of the telecommunications industry, including carrier
licensing, technical regulation, preselection, and enforcing industry standards,
universal service, spectrum management and numbering. There also are
self-regulatory authorities that recommend telecommunications services for
regulation to the ACCC and that develop industry consumer, technical and
operational codes.
A carrier license is required for the ownership of most transmission
infrastructure used to provide telecommunications services to the public.
PowerTel holds a carrier license and is subject to regulation by the ACCC and
the ACA. PowerTel does not have any service coverage obligations. PowerTel does
not require any further regulatory approval for new services, except when new
services require new spectrum or equipment licenses for operating radio
communication facilities such as mobile services or microwave links. Each
licensed carrier pays an annual fee to cover the costs of industry regulation
based on a portion of the carrier's revenues.
Under the regulations, access to particular regulated carriage services and
other services which facilitate the supply of those regulated services must be
provided between operators on non-discriminatory technical and operational terms
and, in some circumstances, at cost-based prices. The ACCC determines which
services are regulated. Other services may be supplied on commercially
negotiated terms subject to the Australian Trade Practices Act. Any transmission
capacity of 2 or more megabits per second is regulated on all routes except
between Sydney, Canberra and Melbourne.
The ACCC is currently considering regulating local call resale and local
network unbundling. Regulation of switched interconnection at the local exchange
level would allow PowerTel and other competitors to reduce their access costs by
interconnecting with the Telstra Corporation Limited network closer to the
customer. The ACCC has issued a draft report in favor of regulating
noncompetitive access services with pricing based on total service long-run
incremental cost.
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Prior to July 1, 1997, carriers had extensive rights to install facilities
on land without the consent of the owner and with immunity from state and
territory environmental and planning laws. Under the new regulatory regime,
carriers, including PowerTel, must now generally comply with state and territory
environmental planning and property laws.
Telstra, the current national universal service provider, is required to
ensure that the standard telephone services, pay phones and any other regulated
services are reasonably accessible to all Australians on an equitable basis. All
carriers are required to contribute to the costs of providing universal service.
The ACA has required all carriers and carriage service providers to guarantee
timely service to customers. The Australian government has proposed amendments
to the communications legislation to strengthen competitive and consumer
safeguards. The proposals include enabling the ACCC to make binding legal
directions to parties to facilitate access negotiations, to publicly disclose or
require the disclosure of cost information and to specify the terms on which
carriers must disclose network planning information to each other. There are
also proposals to streamline the ACCC's ability to act when it believes that
anti-competitive conduct is taking place. There can be no assurance that the
proposed amendments will be enacted in their current form or at all.
PowerTel currently has entered into a facilities access agreement with
Telstra for access to Telstra's ducts, underground facilities and equipment
buildings. PowerTel also obtains services from Telstra through wholesale/resale
products, and is in the process of negotiating an agreement covering Telstra's
wireline and mobile originating and terminating access services.
Although the regulatory regime is structured to encourage new entrants,
PowerTel as well as other industry participants and the ACCC have expressed the
view that Telstra's interconnect and wholesale pricing is to high. The ACCC does
not currently have power to set interconnect prices generally. The ACCC is only
empowered to settle disputes between specific parties in relation to a limited
number of services. Even where the ACCC is able to arbitrate, in practice to
date it has been a lengthy process. The consequence of the current pricing
structure is to encourage new entrants such as PowerTel to construct alternative
infrastructures. The current pricing also adversely impacts the ability of new
entrants without significant infrastructure to substantially discount prices
below those of incumbent network owners.
PowerTel has entered into an asset use agreement with three electric
utilities which are indirect stockholders of PowerTel. Each agreement provides
PowerTel with access to each utility's facilities (ducts, poles, fiber optic
cable, towers, etc.) for the installation of telecommunications equipment.
PowerTel also has entered into a reseller agreement with each of these utilities
under which each utility is appointed a non-exclusive reseller of PowerTel's
telecommunications services to certain customers. The agreement provides for the
utility to be able to resell the full range of PowerTel's services, including
new services which become available from time to time, subject to any
prohibitions on resale in third-party agreements.
There are two marketing database agreements between each of the utilities
and PowerTel. The first provides PowerTel with access to each utility's database
of electricity customers to market telecommunications services. The second
provides each utility access to PowerTel's customer database to market
electricity. These agreements are subject to any applicable privacy laws.
CHILE
The process of privatization and opening up of monopoly telecommunications
markets in Chile began in 1982 with the General Telecommunications Law, which
allowed companies to
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provide service and develop telecommunications infrastructure without geographic
restriction or exclusive rights to serve.
Chile currently has a competitive, multi-carrier system for long distance
and local services. There is no regulatory limit on the number of concessions
that could be granted to companies that would compete against MetroCom.
Currently, there are five local service providers in Santiago. The largest
providers of local telecommunications services in Santiago are Compania de
Telecomunicaciones de Chile, Telefonica Manquehue and CMET.
MetroCom holds an intermediate service concession for the installation,
operation, and exploitation of a high-capacity fiber optic cable network in
Santiago and the towns surrounding it. Intermediate services are provided via
networks to satisfy the transmission or exchange service requirements of other
telecommunications providers. The concession is for a renewable 30-year term.
MetroCom's concession provides for network construction to end on December 23,
1998 and service to begin on January 23, 1999. The company requested an
extension of these terms, which was granted by the telecommunications authority
but is pending before the Republic Comptrollership's Office for formal amendment
of the concession.
The telecommunications law states that prices should be determined by
market forces in competitive markets; in markets with one dominant firm, maximum
rates are determined by the regulatory authorities. The regulatory authority has
declared that the conditions prevailing in the local (including Santiago) and
long distance markets, as well as in the market for intermediate services,
require rates to be determined by the regulatory authority. The maximum rate
structure is determined every five years.
Local service providers with concessions are obligated to provide service
to any customer who requests service within their service area, or to any
customer outside the service area of all concessionaires who is willing to pay
for an extension to get service. Local providers must also give long distance
service providers equal access to their network connections.
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MANAGEMENT
OUR DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information as of May 26, 1999
concerning our directors and executive officers.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Keith E. Bailey........................ 56 Director
John C. Bumgarner, Jr. ................ 56 Director and Senior Vice President, Strategic
Investments
James R. Herbster...................... 57 Director
Howard E. Janzen....................... 45 President, Chief Executive Officer and Director
Michael P. Johnson, Sr................. 51 Director
Steven J. Malcolm...................... 50 Director
Jack D. McCarthy....................... 56 Director
Brian E. O'Neill....................... 63 Director
Roy A. Wilkens......................... 56 Director (upon completion of the equity offering)
David P. Batow......................... 46 General Counsel
Mark A. Bender......................... 34 Vice President and Chief Information Officer
Delwin L. Bothof....................... 54 Senior Vice President, Domestic Strategic Investments
Matthew W. Bross....................... 38 Senior Vice President and Chief Technology Officer
Gerald L. Carson....................... 59 Senior Vice President, Human Resources
Kenneth R. Epps........................ 42 Senior Vice President, Strategic Marketing
Lawrence C. Littlefield, Jr. .......... 61 Senior Vice President and Chief Financial Officer
(until June 6, 1999); Senior Vice President and Group
Executive (effective June 7, 1999)
Garry K. McGuire....................... 52 Senior Vice President, Solutions
Patti L. Schmigle...................... 40 Senior Vice President and Chief Operations Officer,
Solutions
Scott E. Schubert...................... 46 Senior Vice President and Chief Financial Officer
(effective June 7, 1999)
Frank M. Semple........................ 47 Senior Vice President, Network
William G. von Glahn................... 55 Senior Vice President, Law
S. Miller Williams..................... 47 Senior Vice President and Senior Managing Director of
International Strategic Investments
</TABLE>
OUR DIRECTORS
Our restated certificate of incorporation provides that the number of
directors may be altered from time to time by a resolution adopted by our board
of directors. However, the number of directors may not be less than three.
Currently, we have eight directors on our board. Concurrently with completion of
the offerings, we intend to add two independent directors to our board of
directors so that our board will consist of ten members. SBC will be entitled to
designate a director for our board after the closing of the SBC investment so
long as SBC retains more than a 5% equity interest in our common stock and has
obtained and continues to provide long distance services in states within its
traditional exchange service area.
Our restated certificate of incorporation provides for a classified board
of directors, consisting of three classes as nearly equal in size as
practicable. Each class holds office until the third annual stockholders'
meeting for election of directors following the most recent election of that
class, except that the initial terms of the three classes expire in 2000, 2001
and 2002.
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The following individuals are our directors. Each director holds office
until his successor is duly elected and qualified or until his resignation or
removal, if earlier.
Keith E. Bailey is the Chairman of the Board, President and Chief Executive
Officer of Williams. Mr. Bailey has held various officer level positions with
Williams and its subsidiaries since 1975 and has served as a director of
Williams since 1988. Mr. Bailey has been a director of our company since 1994.
Mr. Bailey's term as a director expires at the annual stockholders' meeting in
2002.
John C. Bumgarner, Jr. is the Senior Vice President of Corporate
Development and Planning of Williams and President of Williams International
Company, a subsidiary of Williams. Mr. Bumgarner has held various officer level
positions with Williams since 1977. Mr. Bumgarner has been a director of our
company since 1997 and was named Senior Vice President, Strategic Investments of
our company in May 1999. Mr. Bumgarner's term as a director expires at the
annual stockholders' meeting in 2001.
James R. Herbster is the Senior Vice President of Administration of
Williams. Mr. Herbster has held various officer level positions with Williams
since 1981. Mr. Herbster has been a director of our company since 1997. Mr.
Herbster's term as a director expires at the annual stockholders' meeting in
2000.
Howard E. Janzen has been a director and the President and Chief Executive
Officer of our company since 1994. From April 1993 to December 1994, Mr. Janzen
served as Senior Vice President and General Manager of Williams Gas Pipelines
Central, Inc., an affiliate of Williams. Mr. Janzen has also held various other
management and officer level positions with Williams since 1979. Mr. Janzen also
serves on the board of directors of BOK Financial Corporation. Mr. Janzen's term
as a director expires at the annual stockholders' meeting in 2002.
Michael P. Johnson, Sr. is the Senior Vice President of Human Resources of
Williams and has been since May 1, 1999. Prior to joining Williams in December
1998 as Vice President of Human Resources, Mr. Johnson was a vice president of
human resources with Amoco Corporation, where he held various officer level
positions since 1991. Mr. Johnson has been a director of our company since May
1, 1999. Mr. Johnson's term as a director expires at the annual shareholders'
meeting in 2000.
Steven J. Malcolm is the President and Chief Executive Officer of Williams
Energy Services, a subsidiary of Williams. Mr. Malcolm has held various
management and officer level positions with subsidiaries of Williams since 1984.
Mr. Malcolm has been a director of our company since 1998. Mr. Malcolm's term as
a director expires at the annual stockholders' meeting in 2001.
Jack D. McCarthy is the Senior Vice President and Chief Financial Officer
of Williams. Mr. McCarthy has held various officer level positions with Williams
since 1986. Mr. McCarthy has been a director of our company since 1997. Mr.
McCarthy's term as a director expires at the annual stockholders' meeting in
2001.
Brian E. O'Neill is the President and Chief Executive Officer of each of
the interstate natural gas pipeline companies owned by Williams. Mr. O'Neill has
held various officer level positions with subsidiaries of Williams since 1988.
Mr. O'Neill also serves on the board of directors of Daniel Industries, Inc. Mr.
O'Neill has been a director of our company since 1997. Mr. O'Neill's term as a
director expires at the annual stockholders' meeting in 2000.
Roy A. Wilkens will be appointed as an independent director and
non-executive chairman of the board of our company concurrently with completion
of the offerings. Mr. Wilkens is a member of the board of directors of UniDial
Inc., Invensys Corporation Inc., and Splitrock
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Services, Inc. He is a former director of Qwest Communications and Paging
Network Inc. He was President of Williams Pipeline Company, a subsidiary of
Williams, when he founded WilTel, Inc., then a subsidiary of Williams, in 1985.
He served as Chief Executive Officer of WilTel from 1985 to 1997. In 1995, LDDS
Communications, which now operates under the name MCI WorldCom, acquired WilTel
from Williams. In 1997, Mr. Wilkens retired from WorldCom as Vice Chairman. In
1992, President George Bush appointed Mr. Wilkens to the National Security
Telecommunications Advisory Council. He has also served as chairman of both the
Competitive Telecommunications Association and the National Telecommunications
Network. Mr. Wilkens' term as a director of our company will expire at the
annual stockholders' meeting in 2002.
BOARD COMPENSATION AND BENEFITS
Messrs. Janzen and Bumgarner will not receive additional compensation for
serving on our board of directors or committees of the board. Directors who are
not our employees but who are employees of Williams will receive one time grants
of ten-year, fully exercisable options to purchase 50,000 shares of our common
stock, or in the case of Mr. Bailey, 100,000 shares of our common stock, at an
exercise price equal to the initial public offering of our common stock in the
equity offering. These individuals will not receive additional compensation for
serving on our board of directors or our committees.
Independent directors elected who are in office at the time of completion
of the equity offering will receive a one-time grant of options to purchase
10,000 shares of our common stock. Independent directors will also receive an
annual retainer of $12,000, ______ shares of our common stock and an annual
grant of ten-year, fully exercisable options to purchase ______ shares of our
common stock for so long as they are directors of our company. The exercise
price per share for these options will be set at the market price of our common
stock on the date of grant, which in the case of the independent directors
elected at the time of completion of the offerings will be deemed to be the
initial public offering price. Non-employee directors will also receive a
committee retainer of $4,000 for each committee assignment held and an
additional fee for attending board and committee meetings of $1,000 and $500,
respectively. Chairpersons of the audit/affiliated transactions and compensation
committees will be paid an additional annual fee of $2,500.
We expect that directors may elect to receive all or part of their cash
fees in the form of common stock or deferred stock. Individuals may defer stock
to any subsequent year or until that individual ceases to be a director. We will
pay dividend equivalents on deferred shares to the extent that dividends are
declared and paid on our common stock, and directors may elect to receive the
dividend equivalents in cash or in additional deferred shares.
We will reimburse all directors for reasonable out-of-pocket expenses
incurred in attending meetings of the board or any committee or otherwise
because of service as a director.
COMMITTEES OF THE BOARD
To date, our board has not had either an audit/affiliated transactions
committee or a compensation committee. The Williams compensation committee
determines the compensation for senior Williams officers and the presidents of
Williams' operating subsidiaries. Messrs. Janzen, Bumgarner and von Glahn are
the only named executive officers that fall into this category. The compensation
of the other named executive officers for 1998 was determined by Mr. Janzen and
Gerald Carson, our Senior Vice President for Human Resources, with input from
our human resources department and was based upon compensation survey
information relevant to companies of similar sizes in the communications
industry.
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Prior to the completion of the offerings, our board will establish an
audit/affiliated transactions committee and a compensation committee. Each
committee will be comprised solely of independent directors.
AUDIT/AFFILIATED TRANSACTIONS COMMITTEE RESPONSIBILITIES
Our audit/affiliated transactions committee will:
- - recommend to the board the selection, retention or termination of our
independent auditors
- - approve the level of non-audit services provided by the independent auditors
- - review the scope and results of the work of our internal auditors
- - review the scope and approve the estimated cost of the annual audit
- - review the annual financial statements and the results of the audit with
management and the independent auditors
- - review with management and the independent auditors the adequacy of our
internal accounting controls
- - review with management and the independent auditors the significant
recommendations made by the auditors with respect to changes in accounting
procedures and internal accounting controls
- - review and approve any transaction between us and Williams, or any entity in
which Williams has a 20% or greater ownership interest, where the transaction
is other than in the ordinary course of business and has a value of more than
$10 million
- - report to the board on its review and make such recommendations as it deems
appropriate
COMPENSATION COMMITTEE RESPONSIBILITIES
Our compensation committee will:
- - administer our stock plans and related programs
- - approve, or refer to the board of directors for approval, changes in these
plans and the compensation programs to which they relate
- - review and approve the compensation and development of our senior executives
OUR EXECUTIVE OFFICERS
In addition to Mr. Janzen and Mr. Bumgarner, the following persons are our
executive officers:
David P. Batow has been the general counsel of our company since 1996.
Prior to that time, he served as general counsel to Williams Gas Pipelines
Central, Inc., an affiliate of Williams, from 1993 to 1996. Mr. Batow joined
Williams in 1987.
Mark A. Bender has been Vice President and Chief Information Officer of our
company since March 1999. He has held various positions with other affiliates of
Williams since November 1993.
Delwin L. Bothof has been Senior Vice President, Domestic Strategic
Investments since May 1999 and was Senior Vice President, Applications of our
company since 1997. Mr. Bothof served as President of Vyvx, Inc., now known as
Williams Communications, Inc., from 1989 to 1997.
Matthew W. Bross has been Senior Vice President and Chief Technology
Officer of our company since May 1999 and was Vice President and Chief
Technology Officer of our company from 1998 to 1999. He joined our company in
1997 when our company acquired Critical Technologies, Inc., a company he founded
in 1991, that focused on large-scale, global
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telecommunications infrastructures with an emphasis on the Internet. Mr. Bross
served as Chief Executive Officer of Critical Technologies from 1991 until its
acquisition by our company and has more than 20 years of experience in the
telecommunications industry.
Gerald L. Carson has been Senior Vice President, Human Resources of our
company since May 1999 and Vice President Human Resources of our company from
1997 to 1999. Prior to that time, Mr. Carson held various management and human
resources positions with Williams since 1985.
Kenneth R. Epps has been Senior Vice President, Strategic Marketing of our
company since February 1999. Before joining Williams in February 1999, Mr. Epps
served as a vice president of Emerald Solutions, Inc., a start-up information
technology firm, from 1998 to 1999. Prior to that he was with AT&T for 13 years.
Lawrence C. Littlefield, Jr. has been Senior Vice President and Chief
Financial Officer of our company since 1997. Prior to that, Mr. Littlefield
served as Senior Vice President, Marketing, Strategic Sales and Operations and
as Vice President, Finance and Administration for a predecessor of Solutions.
From 1990 to 1995, he served as Vice President, Finance and Administration and
Chief Financial Officer of Williams Telecommunications Group, Inc., which was
then an affiliate of Williams. Effective June 7, 1999, Mr. Littlefield will
become Senior Vice President and Group Executive.
Garry K. McGuire has been Senior Vice President, Solutions of our company
since May 1997. Prior to joining our company, Mr. McGuire worked at Nortel for
14 years where he held various officer level positions.
Patti L. Schmigle has been Senior Vice President of our company since 1997
and has been Chief Operations Officer, Solutions since March 1999. Ms. Schmigle
has held various management and officer level positions with Williams since
1980, including Vice President of Performance Management of Williams from June
1996 to November 1997, Vice President of Operations and Engineering of Williams
Gas Pipeline Central, Inc., an affiliate of Williams, from 1995 to June 1996,
and Director of Engineering of Williams Pipe Line Company, also an affiliate of
Williams, from 1994 to 1995.
Scott E. Schubert will become Senior Vice President and Chief Financial
Officer of our company on June 7, 1999. Before joining our company, Mr. Schubert
was vice president of global accounting services and finance of BP Amoco. He has
23 years of experience with Amoco, including the past six years as an officer of
Amoco prior to its merger with British Petroleum.
Frank M. Semple has been Senior Vice President, Network of our company
since 1997. From 1995 to 1997, Mr. Semple served as Senior Vice President and
General Manager of Williams Gas Pipelines Central, Inc., an affiliate of
Williams. From 1994 to 1995, Mr. Semple served as Vice President of Operations
and Marketing for Northwest Pipeline Corporation, also an affiliate of Williams.
Mr. Semple has held various management and officer level positions with Williams
since 1979.
William G. von Glahn has been Senior Vice President, Law of our company
since March 1999. Mr. von Glahn is the general counsel of Williams and has been
since 1996. Mr. von Glahn joined Williams in 1984 as associate general counsel.
S. Miller Williams has been Senior Vice President and Senior Managing
Director of International Strategic Investments since May 1999 and was Senior
Vice President, Corporate Development of our company since 1996. From 1992
through 1996, Mr. Williams held various officer level positions with
predecessors of our company and WilTel, Inc.
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<PAGE> 108
STOCK OWNERSHIP OF OUR DIRECTORS AND EXECUTIVE OFFICERS
All of our capital stock is currently owned by Williams and therefore none
of our executive officers or directors own any of our capital stock. All of our
executive officers and directors will be granted options to purchase shares of
our common stock at the time of completion of the equity offering. In addition,
those individuals who were granted deferred shares or options under the Williams
Communications stock plan will have the right to receive deferred shares or
options to purchase our common stock in cancellation of deferred Williams shares
or options to purchase Williams common stock held by them. Mr. Janzen will have
the right to receive deferred shares in exchange for deferred shares of Williams
common stock held by him. Messrs. Littlefield and Schubert will receive grants
of deferred shares at the time of completion of the equity offering. In
addition, some or all of our executive officers and directors may purchase
shares of our common stock in the equity offering from the shares reserved for
employees and directors of our company and Williams. For more information, see
"New stock-based and incentive plans of our company" below and "Principal
Stockholders -- Ownership of our common stock and Class B common stock." At the
time of completion of the equity offering, no director or executive officer will
own or have options to purchase in excess of 1% of our common stock.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by our company to our
chief executive officer and four other most highly compensated executive
officers during our fiscal year ending December 31, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES
-------------------- STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS AWARDS(1)(2) OPTIONS COMPENSATION(3)
- --------------------------- -------- -------- ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C>
Howard E. Janzen.......... $400,000 $126,000 $2,574,000(4) 30,000 $12,050
President, Chief Executive
Officer and Director
Delwin L. Bothof.......... $210,000 $ 46,857 $ 650,082 15,000 $12,800
Senior Vice President,
Applications
Lawrence C. Littlefield,
Jr...................... $190,000 $ 42,394 $ 207,169 15,000 $12,800
Senior Vice President and
Chief Financial Officer
Garry K. McGuire.......... $290,000 $ 30,441 $ 643,046 15,000 $ 9,600
Senior Vice President,
Solutions
Frank M. Semple........... $240,000 $ 91,350 $ 669,150 15,000 $12,800
Senior Vice President,
Network
</TABLE>
- -------------------------
(1) Amounts reported in this column include the dollar value as of the date of
grant of Williams deferred stock awards under the terms of The Williams
Companies, Inc. 1996 stock plan and The Williams Companies, Inc. stock plan
for nonofficer employees. Amounts represent the value of awards granted in
fiscal year 1998 pursuant to the executive incentive compensation program.
Valuation of the awards is based on the 52-week average stock price for the
award year as follows: Mr. Janzen, 1,769 shares valued at $54,000; Mr.
Bothof, 658 shares valued at
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<PAGE> 109
$20,081; Mr. Littlefield, 596 shares valued at $18,169; Mr. McGuire, 428
shares valued at $13,046; and Mr. Semple, 1,283 shares valued at $39,150.
Receipt of deferred stock under the executive incentive compensation program
is approximately three years after the date of grant. Dividend equivalents
are paid on deferred stock at the same time and at the same rate as
dividends paid to stockholders generally.
(2) Amounts reported in this column include the dollar value as of the date of
grant of Williams deferred stock under the terms of the Williams
Communications stock plan. Amounts represent the value of stock awards
granted on May 21, 1998 as follows: Mr. Bothof, 20,000 shares valued at
$630,000, Mr. Littlefield, 6,000 shares valued at $189,000, Mr. McGuire,
20,000 shares valued at $630,000, and Mr. Semple, 20,000 shares valued at
$630,000. Receipt of deferred stock under the Williams Communications Stock
Plan is approximately five years after the date of grant. Dividend
equivalents are paid on deferred stock at the same time and at the same rate
as dividends paid to stockholders generally. Each individual will have the
right to receive deferred shares of our common stock in exchange for
deferred shares of Williams common stock as described in "-- New stock-based
and incentive plans of our company -- Treatment of specified Williams stock
awards" below.
(3) Amounts reported in this column represent the value of contributions made by
Williams to defined contribution pension plans, on behalf of each of our
executive officers named in the table.
(4) This amount includes a Williams deferred stock award of 80,000 shares
granted for retention purposes on May 21, 1998 under The Williams Companies,
Inc. 1996 stock plan. One-half of the shares vest five years after the date
of grant and one-half of the shares vest ten years after the date of grant.
The value of the award at the time of grant was $2,520,000. Dividend
equivalents are paid on deferred stock at the same time and at the same rate
as dividends paid to stockholders generally. Mr. Janzen will have the right
to receive deferred shares of our common stock in exchange for deferred
shares of Williams common stock as described in "-- New stock-based and
incentive plans of our company -- Treatment of specified Williams stock
awards" below.
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<PAGE> 110
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information regarding grants of stock options
made to the named executive officers during the 1998 fiscal year. All grants
relate to Williams common stock.
WILLIAMS OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
----------------------------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANTED
UNDERLYING TO EMPLOYEES EXERCISE PRICE EXPIRATION GRANT DATE
NAME OPTIONS GRANTED IN FISCAL YEAR (PER SHARE) DATE PRESENT VALUE(2)
- ---- --------------- --------------- -------------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Howard E. Janzen...... 10,000 0.20% $31.5625 03/30/08 $107,600
10,000 0.20 $34.3750 07/25/08 117,300
10,000 0.20 $30.0000 11/19/08 103,900
------ ---- --------
30,000 0.60% $328,800
Delwin L. Bothof...... 5,000 0.10% $31.5625 03/30/08 $ 53,800
5,000 0.10 $34.3750 07/25/08 58,650
5,000 0.10 $30.0000 11/19/08 51,950
------ ---- --------
15,000 0.30% $164,400
Lawrence C.
Littlefield, Jr..... 5,000 0.10% $31.5625 03/30/08 $ 53,800
5,000 0.10 $34.3750 07/25/08 58,650
5,000 0.10 $30.0000 11/19/08 51,950
------ ---- --------
15,000 0.30% $164,400
Garry K. McGuire...... 5,000 0.10% $31.5625 03/30/08 $ 53,800
5,000 0.10 $34.3750 07/25/08 58,650
5,000 0.10 $30.0000 11/19/08 51,950
------ ---- --------
15,000 0.30% $164,400
Frank M. Semple....... 5,000 0.10% $31.5625 03/30/08 $ 53,800
5,000 0.10 $34.3750 07/25/08 58,650
5,000 0.10 $30.0000 11/19/08 51,950
------ ---- --------
15,000 0.30% $164,400
</TABLE>
- -------------------------
(1) Options granted in 1998 vested pursuant to an accelerated vesting provision
that accelerates vesting if the average price of Williams common stock
reaches and maintains a specified target price for five out of ten
consecutive business days. Williams granted these options under The Williams
Companies, Inc. 1996 stock plan and The Williams Companies, Inc. stock plan
for nonofficer employees.
(2) The grant date present value is determined using the Black-Scholes option
pricing model and is based on assumptions about future stock price
volatility and dividend yield. The model does not take into account that the
stock options are subject to vesting restrictions and that executives cannot
sell their options. The calculations assume an expected volatility of 25%
"weighted-average," a risk-free rate of return of 5.3% "weighted-average," a
dividend yield of 2% and an exercise date at the end of the contractual term
in 2008. The actual value, if any, that may be realized by an executive will
depend on the market price of Williams common stock on the date of exercise.
The dollar amounts shown are not intended to forecast possible future
appreciation in Williams stock price.
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<PAGE> 111
WILLIAMS OPTION EXERCISES IN 1998
The following table provides certain information on stock option exercises
with respect to Williams common stock by our executive officers named in the
table above during our fiscal year ended December 31, 1998.
AGGREGATED WILLIAMS OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END(1)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Howard E. Janzen...... 52,194 $1,160,176 214,812 30,000 $3,214,637 $11,875
Delwin L. Bothof...... 76,000 $ 789,563 30,000 15,000 $ 205,000 $ 5,938
Lawrence C.
Littlefield, Jr..... 25,000 $ 415,625 86,000 15,000 $1,019,500 $ 5,938
Garry K. McGuire...... -- $ -- 50,000 15,000 $ 390,625 $ 5,938
Frank M. Semple....... 92,810 $1,278,281 140,000 15,000 $1,904,375 $ 5,938
</TABLE>
- -------------------------
(1) Based on the closing price of $31.1875 per share of Williams common stock at
December 31, 1998, less the exercise price. The values shown reflect the
value of options accumulated over periods of up to ten years. The values
reflected in the table had not been realized at that date and may not be
realized. In the event the options are exercised, their value will depend
upon the value of Williams common stock on the date of exercise.
Williams has extended to each of our directors and to some of our executive
officers loans in order to enable them to exercise stock options to purchase
Williams common stock. As of March 26, 1999, loans aggregating approximately
$29.9 million were outstanding to these directors and executive officers.
PENSION PLANS
At the time of the offerings, we will make available the same pension plans
in which eligible employees were participating immediately prior to the
offerings. Mr. Janzen, Mr. Bothof, Mr. Littlefield and Mr. Semple will continue
to participate in the Williams pension plan. Mr. McGuire will continue to
participate in the Solutions LLC pension plan.
WILLIAMS PENSION PLAN
The Williams pension plan is a non-contributory, tax-qualified cash balance
pension plan subject to the Employee Retirement Income Security Act of 1974. The
plan generally includes all of our salaried employees who are employed outside
of Solutions LLC and who have completed one year of service. Except as noted
below, our executive officers participate in the plan on the same terms as other
full-time employees.
Effective April 1, 1998, Williams converted the plan from a final average
pay plan to a cash balance pension plan. Each participant's accrued benefit as
of that date was converted to a beginning account balance. Account balances are
credited with an annual employer contribution and quarterly interest
allocations. Each year an employer contribution equal to a percentage of
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<PAGE> 112
eligible compensation is allocated to each employee's pension account. This
percentage is based upon each employee's age according to the following table:
<TABLE>
<CAPTION>
PERCENTAGE OF ELIGIBLE PAY
PERCENTAGE OF ALL GREATER THAN THE SOCIAL
AGE ELIGIBLE PAY SECURITY WAGE BASE
- --- ----------------- --------------------------
<S> <C> <C>
30 4.5% 1%
30-39 6% 2%
40-49 8% 3%
50+ 10% 5%
</TABLE>
For employees, including the executive officers who participate in the
plan, who were active employees and plan participants on March 31, 1998 and
April 1, 1998, the percentage of all eligible pay is increased by an amount
equal to the product of 0.3% multiplied by the participant's total years of
service prior to March 31, 1998. Interest is credited to account balances
quarterly at a rate determined annually in accordance with the terms of the
plan. The normal retirement benefit is a monthly annuity based on an
individual's account balance as of benefit commencement. The plan defines
eligible compensation to include salary and bonuses. Normal retirement age is
65. Early retirement may begin as early as age 55. At retirement, employees are
entitled to receive a single-life annuity or one of several optional forms of
payment having an equivalent actuarial value to the single-life annuity.
Participants who were age 50 or older as of March 31, 1998, were
grandfathered under a transitional provision that gives them the greater of the
benefit payable under the cash balance formula or the final average pay formula
based on all years of service and compensation. Mr. Bothof and Mr. Littlefield
are covered under this grandfather provision.
The Internal Revenue Code of 1986, as amended, currently limits the pension
benefits that can be paid from a tax-qualified pension plan to highly
compensated individuals. These limits prevent such individuals from receiving
the full pension benefit based on the same formula as is applicable to other
employees. As a result, Williams has adopted an unfunded supplemental retirement
plan to provide a supplemental retirement benefit equal to the amount of such
reduction to every employee whose benefit payable under the plan is reduced
because of these limitations, including the executive officers who participate
in this plan.
Total estimated annual benefits payable at normal retirement age under the
cash balance formula from both the tax qualified and the supplemental retirement
plans are as follows:
<TABLE>
<S> <C>
Howard E. Janzen............................................ $504,840
Delwin L. Bothof............................................ 92,319
Lawrence C. Littlefield, Jr................................. 44,394
Frank M. Semple............................................. 259,410
</TABLE>
The following table illustrates projected annual retirement benefits for
employees grandfathered under the final average pay formula, payable as a single
life annuity amount from both the tax-qualified and the supplemental retirement
plans based on various levels of final
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<PAGE> 113
average annual compensation and years of service. The benefits are not subject
to deduction for any offset amounts.
WILLIAMS PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
---------------------------------------------------------------
REMUNERATION 10 15 20 25 30 35
- ------------ -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$ 125,000 $ 20,966 $ 31,448 $ 41,931 $ 52,414 $ 62,897 $ 73,379
$ 175,000 $ 30,216 $ 45,323 $ 60,431 $ 75,539 $ 90,647 $105,754
$ 200,000 $ 34,840 $ 52,260 $ 69,680 $ 87,100 $104,520 $121,940
$ 250,000 $ 44,090 $ 66,135 $ 88,180 $110,225 $132,270 $154,315
$ 300,000 $ 53,340 $ 80,010 $106,681 $133,351 $160,022 $186,692
$ 400,000 $ 72,681 $109,022 $145,363 $181,703 $218,044 $254,385
$ 450,000 $ 81,090 $121,636 $162,181 $202,726 $243,272 $289,244
$ 500,000 $ 90,340 $135,510 $180,680 $225,850 $271,020 $316,190
</TABLE>
The estimated annual benefits payable at normal retirement age from both
the tax-qualified and the supplemental retirement plans as of December 31, 1998
would be based on average compensation of $267,705 for Mr. Bothof with 8 years
of credited service and $218,657 for Mr. Littlefield with 9 years of credited
service.
SOLUTIONS LLC PENSION PLAN
The Solutions LLC pension plan is a non-contributory, tax-qualified defined
benefit plan subject to ERISA. The plan generally includes all of our salaried
employees who work for Solutions LLC and who have completed one year of service.
Except as noted below, executive officers participate in the plan on the same
terms as other full-time employees.
The normal retirement benefit is a monthly annuity determined by averaging
compensation during the four calendar years of employment with the highest
compensation within the ten calendar years preceding retirement. Compensation
includes salary and bonuses. Normal retirement age is 65. Early retirement may
be taken with reduced benefits beginning as early as age 55. At retirement,
employees are entitled to receive a single-life annuity or one of several
optional forms of settlement having an equivalent actuarial value to the
single-life annuity.
The Internal Revenue Code currently limits the pension benefits that can be
paid from a tax-qualified defined benefit plan to highly compensated
individuals. These limits prevent such individuals from receiving the full
pension benefit based on the same formula as is applicable to other employees.
As a result, we have adopted an unfunded supplemental retirement plan to provide
a supplemental retirement benefit equal to the amount of such reduction to every
employee whose benefit payable under the plan is reduced by these limitations,
including the executive officers who participate in the plan.
The following table illustrates projected annual retirement benefits
payable as a single life annuity amount under both the tax-qualified and the
supplemental retirement plans based on
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<PAGE> 114
various levels of final average annual compensation and years of service. The
benefits are not subject to deduction for any offset amounts.
SOLUTIONS LLC PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------ ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 125,000 $17,340 $23,120 $ 28,900 $ 34,680 $ 40,460
$ 175,000 $25,012 $33,350 $ 41,687 $ 50,025 $ 58,362
$ 200,000 $28,849 $38,465 $ 48,081 $ 57,697 $ 67,313
$ 250,000 $36,521 $48,695 $ 60,869 $ 73,042 $ 85,216
$ 300,000 $44,194 $58,925 $ 73,042 $ 88,387 $103,118
$ 400,000 $59,539 $79,385 $ 99,231 $119,077 $138,923
$ 450,000 $67,211 $89,615 $112,019 $134,422 $156,826
$ 500,000 $74,884 $99,845 $124,806 $149,767 $174,728
</TABLE>
The estimated annual benefits payable from both the tax-qualified and the
supplemental retirement plans as of December 31, 1998 would be based on average
compensation of $267,239 for Mr. McGuire with 16 years of credited service.
WILLIAMS' PLANS
Prior to the offerings, stock options and deferred stock awards relating to
Williams common stock were made to our employees under The Williams Companies,
Inc. 1996 stock plan, The Williams Companies, Inc. stock plan for nonofficer
employees and the Williams Communications stock plan. These plans permit the
compensation committee of Williams' board of directors to grant different types
of stock-based awards, including deferred stock awards. They also provide for
stock option awards giving employees the right to purchase common stock over a
ten-year period at the market value per share of Williams common stock, as
defined by the plan, as of the date the option is granted. Stock options granted
under The Williams Companies, Inc. 1996 stock plan and The Williams Companies,
Inc. stock plan for nonofficer employees are subject to three-year vesting from
January 20 of the year the options are granted. Both plans provide for
accelerated vesting if the average price of Williams common stock reaches and
maintains a specified target price for five out of ten consecutive business
days. Options granted under the Williams Communications stock plan are generally
subject to five-year vesting, but provide for accelerated vesting based on the
attainment of various performance targets.
The compensation committee's objective with respect to stock option awards
is to provide a long-term component to overall compensation which aligns the
interests of executives with the interests of stockholders through stock
ownership. Compensation opportunities in the form of stock options serve this
purpose. The compensation committee has established stock option award targets
for each level of management participating in the stock option program. The
target levels for annual stock option grants have been established based on
competitive market practices and range from 50,000 shares for the chairman,
president and chief executive officer of Williams to 1,500 shares for
manager-level employees. In making decisions on stock option awards, the
compensation committee has available to it information on previous stock option
awards granted under the plans. Stock option awards are not tied to
preestablished performance targets.
The Williams stock plans also provide for awards of deferred stock which
the employee cannot otherwise dispose of prior to vesting. Williams' annual
incentive program requires that 30% of an executive's award be deferred in
Williams common stock. Deferred stock is normally forfeited if the executive
terminates employment for any reason other than retirement, disability
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<PAGE> 115
or death prior to the end of the deferral period. Executive officers also have
the option to defer all or a portion of the cash award. Participants who elect
to defer all or a portion of the cash award may elect to defer for up to five
years from the award date. Deferred stock cannot be sold or otherwise disposed
of until the applicable deferral period lapses. Dividend equivalents are paid on
deferred stock. The value of the deferred award is at risk during the deferral
period since the value is tied to the stock price. The compensation committee
also uses deferred stock awards to provide, on a selective basis, a vehicle for
tying an element of compensation to the employee's willingness to remain with
Williams in a way that aligns the employee's interests with those of the other
stockholders.
NEW CHANGE IN CONTROL SEVERANCE PLAN OF OUR COMPANY
We have established a change in control severance plan which covers our
executives, including the executive officers named in the summary compensation
table. The plan provides severance benefits if, within two years following a
change in control of Williams or our company, a participant's employment is
terminated either involuntarily, other than for cause, death, disability or the
sale of a business, or voluntarily for good reason. The severance benefit is a
lump sum payment equal to 100% of the participant's annual base salary, plus
100% of the participant's monthly base salary for each completed year of
service, subject to a maximum severance benefit equal to 200% of the
participant's annual base salary.
If necessary, a participant is entitled to receive a corresponding gross-up
payment sufficient to compensate for the amount of any excise tax imposed by
Section 4999 of the Internal Revenue Code and for any taxes imposed on the
additional payment. Amounts payable under the plan are in lieu of any payments
which may otherwise be payable under any other severance plan or program.
NEW STOCK-BASED AND INCENTIVE PLANS OF OUR COMPANY
Prior to the completion of the equity offering, we expect to adopt stock
plans which will authorize the grant of different types of stock-based awards to
our employees. The total number of shares of our common stock to be authorized
for issuance under these plans is expected to be approximately 36,000,000.
The terms of the plans will be substantially similar to those of the
Williams stock plans described above, except that stock option grants will
generally be subject to a three-year graded (one-third per year) vesting
requirement, and will not provide for performance-based accelerated vesting. The
plans will be administered by our compensation committee. Award agreements with
respect to awards granted under the plans to our employees are expected to
provide that in the event of certain terminations of a participant's employment
following a change in control of Williams, or of our company, awards will become
fully vested and exercisable and generally remain exercisable for a period of 18
months. Award agreements with respect to awards granted under the plan to
Williams' independent directors, Williams' executive officers and certain other
Williams employees are expected to provide that in the event of a change in
control of our company awards will become fully vested and exercisable and
generally remain exercisable for a period of 18 months.
STOCK OPTION AND DEFERRED SHARE GRANTS
As of the completion of the equity offering, we intend to make stock option
grants under a new stock plan to employees. These awards and subsequent awards
under the plan will be made to selected employees and will be targeted to be
competitive with equity-based awards of similar companies in our industry. The
initial options will have an exercise price equal to the initial
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<PAGE> 116
public offering price, the other options will have an exercise price equal to
the market price of the common stock on the date of grant and all of these
options will be subject to three-year graded vesting, which means that these
options will vest in three equal installments over three years. The total number
of shares covered by the initial awards is expected to be approximately
2,800,000.
We intend to make one-time stock option grants to our independent
directors, executive officers and other key employees as of the completion of
the equity offering. These options will have an exercise price equal to the
initial public offering price and, except for grants to independent directors
that will vest upon grant, be subject to five-year cliff vesting, which means
that all of these options will vest after five years. The total number of shares
covered by these one-time grants is expected to be approximately 2,380,000.
We also intend to make one-time stock option grants to Williams'
independent directors, Williams' executive officers and certain other Williams
employees. These options will have an exercise price equal to the initial public
offering price and, except for grants to independent directors that will vest
upon grant, be subject to five-year cliff vesting. The total number of shares
covered by these grants is expected to be approximately 974,000.
We also intend to make a one-time option grant to purchase shares of our
common stock to each of our regular employees who are not eligible to receive
annual grants under our stock plans. These options will have an exercise price
equal to the initial public offering price and be subject to three-year cliff
vesting. The total number of shares covered by these grants is expected to be
approximately 800,000.
Effective as of the completion of the equity offering, Mr. Littlefield will
receive an additional grant of 9,200 deferred shares and Mr. Schubert will
receive a grant of deferred shares with a value of $500,000 based on the initial
public offering price.
TREATMENT OF SPECIFIED WILLIAMS STOCK AWARDS
Prior to the closing of the equity offering, individuals who are actively
employed by us or Williams and who hold deferred shares of Williams common stock
or options to purchase shares of Williams common stock granted under the
Williams Communications stock plan will have the right to surrender for
cancellation each deferred Williams share or Williams option, whether or not
vested or exercisable, and, upon cancellation, we will issue or grant to these
individuals a deferred share or stock option in our company. Mr. Janzen will
also have the right to receive deferred shares in exchange for Williams deferred
shares held by him under The Williams Companies, Inc. 1996 stock plan. All of
these deferred shares or options will have the same deferral, vesting and
exercisability features as the deferred Williams share or Williams option
cancelled. The number of deferred shares that we issue or the number of shares
subject to each of the stock options that we grant and the exercise price per
share of our stock options will be determined in a manner that will reflect the
relative value between the Williams common stock and our common stock giving the
participant approximately equal value before and after the exchange.
As of the date of this prospectus, there are outstanding under the Williams
Communications stock plan approximately 175,000 deferred Williams shares and
approximately 510,000 Williams shares issuable under existing options which are
eligible to be exchanged for deferred shares or options to purchase our common
stock. Mr. Janzen holds 80,000 deferred shares under The Williams Companies,
Inc. 1996 stock plan. If all of the eligible employees were to exercise their
rights to exchange existing Williams awards for deferred shares or options to
purchase our
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<PAGE> 117
common stock, we would issue approximately ______ deferred shares and we would
grant options to purchase approximately ______ shares of our common stock.
DIRECTED STOCK PROGRAM
We intend to provide all regular domestic Williams employees, all of our
regular domestic employees, the independent directors of both companies and
selected suppliers and customers of our company with the opportunity to purchase
shares of our common stock. Employees who participate in certain 401(k) plans
will have the option to execute this purchase through the 401(k) plan. Up to
7.0% of the common stock constituting the equity offering will be available for
purchase under this program, with no more than 0.7% of the common stock
constituting the equity offering to be available for purchase under this program
by the independent directors or our suppliers and customers. See the section of
this prospectus entitled "Underwriting" for more information.
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<PAGE> 118
PRINCIPAL STOCKHOLDERS
OWNERSHIP OF OUR COMMON STOCK AND CLASS B COMMON STOCK
Prior to the equity offering, Williams owned 100% of our capital stock. In
the equity offering, we will be selling ____ shares, or ____%, of common stock
and in the concurrent investments we will be selling ____ shares, or %, of
common stock. Following the equity offering and the concurrent investments,
Williams will own 100% of our outstanding Class B common stock.
In connection with the offerings, we will grant directors and executive
officers options to purchase common stock and will grant some of the executive
officers deferred shares of our common stock. See the section of this prospectus
entitled "Management" for more information.
The following table first sets forth the expected ownership of class B
common stock by Williams, which is expected to be the only beneficial owner of
at least 5% of our common stock upon completion of the equity offering and the
concurrent investments. The table also sets forth the expected ownership by our
directors and executive officers of our common stock, or of options to purchase
our common stock as of the completion of the equity offering, based on the
assumption that all directors and executive officers elect to fully exchange
current Williams deferred share and option awards for our deferred share and
option awards to the extent that they are eligible to do so, but excluding
shares that executive officers and directors may purchase under the directed
stock program. For those individuals who hold deferred shares or options to
purchase Williams common stock that are eligible to be exchanged for deferred
shares or options to purchase our common stock, the number of shares indicated
below have been determined based on the midpoint of the range on the cover page
of this prospectus and trading prices of Williams common stock on the last
trading day prior to the date of this prospectus. Other than for Mr. Wilkens, a
significant percentage of the options to purchase common stock indicated for
each individual will not be exercisible at the time of, or within 60 days
following, the completion of the equity offering. Subject to applicable
community property laws, these persons have sole voting and investment power
with respect to all shares of our common stock shown as beneficially owned by
them. The address for Williams is The Williams Companies, Inc., One Williams
Center, Tulsa, Oklahoma 74172 and for the other stockholders is c/o Williams
Communications Group, Inc., One Williams Center, Tulsa, Oklahoma 74172. The
percent of class after the equity offering has been calculated with our common
stock and Class B common stock treated as the share class and without giving
effect to the issuance of any shares of our common stock upon exercise of the
underwriters' overallotment option.
<TABLE>
<CAPTION>
PERCENT OF CLASS
SHARES OF SHARES ---------------------------------
COMMON UNDERLYING PRIOR TO THE AFTER THE
STOCKHOLDER STOCK OWNED OPTIONS TOTAL EQUITY OFFERING EQUITY OFFERING
- ----------- ----------- ---------- ------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
The Williams Companies, Inc. ....... 100%
Keith E. Bailey..................... -- 100,000 100,000 * *
John C. Bumgarner, Jr. ............. 50,000 * *
James R. Herbster................... -- 50,000 50,000 * *
Howard E. Janzen.................... 300,000 * *
Michael P. Johnson, Sr. ............ -- 50,000 50,000 * *
Steven J. Malcolm................... -- 50,000 50,000 * *
Jack D. McCarthy.................... -- 50,000 50,000 * *
Brian E. O'Neill.................... -- 50,000 50,000 * *
Roy A. Wilkens...................... -- 10,000 10,000 * *
Delwin L. Bothof.................... 70,000 * *
Lawrence C. Littlefield, Jr. ....... 70,000 * *
</TABLE>
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<TABLE>
<CAPTION>
PERCENT OF CLASS
SHARES OF SHARES ---------------------------------
COMMON UNDERLYING PRIOR TO THE AFTER THE
STOCKHOLDER STOCK OWNED OPTIONS TOTAL EQUITY OFFERING EQUITY OFFERING
- ----------- ----------- ---------- ------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Garry K. McGuire.................... 70,000 * *
Frank M. Semple..................... 100,000 * *
All directors and executive officers
as a group (22 persons)........... * *
</TABLE>
- ---------------
* Less than 1%.
OWNERSHIP OF WILLIAMS COMMON STOCK
The following table sets forth, as of the date of this prospectus, the
beneficial ownership of Williams common stock, par value $0.01 per share, by
each of our executive officers named in the summary compensation table, each of
our directors and all of our directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules and regulations
of the Commission. Shares of Williams common stock subject to options that are
currently exercisable or exercisable within 60 days of March 31, 1999 are deemed
to be outstanding and beneficially owned by the person holding the options for
the purpose of computing the number of shares beneficially owned and the
percentage ownership of that person, but are not deemed to be outstanding for
the purpose of computing the percentage ownership of any other person. Except as
indicated in the text below this table, and subject to applicable community
property laws, these persons have sole voting and investment power with respect
to all shares of the Williams common stock shown as beneficially owned by them.
The address for the following stockholders is c/o Williams Communications Group,
Inc., One Williams Center, Tulsa, Oklahoma 74172.
Directors and executive officers as a group own less than 2% of outstanding
Williams common stock.
OWNERSHIP OF WILLIAMS COMMON STOCK BY OUR EXECUTIVE OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
SHARES
SHARES OF UNDERLYING
COMMON OPTIONS
STOCK OWNED EXERCISABLE
DIRECTLY OR WITHIN 60 PERCENT
NAME INDIRECTLY(1) DAYS(3) TOTAL OF CLASS
---- ------------- ----------- --------- --------
<S> <C> <C> <C> <C>
Keith E. Bailey............................ 1,886,001 325,002 2,211,003 *
John C. Bumgarner, Jr. .................... 977,891 70,000 1,047,891 *
James R. Herbster.......................... 166,085(2) 203,904 369,989 *
Howard E. Janzen........................... 242,717 200,006 442,723 *
Michael P. Johnson, Sr..................... 20,346 5,250 25,596 *
Steven J. Malcolm.......................... 55,114 138,938 194,052 *
Jack D. McCarthy........................... 211,044 30,000 241,044 *
Brian E. O'Neill........................... 123,526 324,404 447,930 *
Delwin L. Bothof........................... 132,981 52,500 185,481 *
Lawrence C. Littlefield, Jr. .............. 121,840 108,500 230,340 *
Garry K. McGuire........................... 35,592 73,500 109,092 *
Frank M. Semple............................ 61,685 162,500 224,185 *
All directors and executive officers as a
group (22 persons)....................... 4,644,023 2,232,119 6,876,142
</TABLE>
- ---------------
* Less than 1%.
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(1) Includes shares held under the terms of incentive and investment plans as
follows: Mr. Bailey, 621,287, including 175,873 over which he has sole
voting and investment power; Mr. Bumgarner, 382,824, including 221,863 over
which he has sole voting and investment power; Mr. Herbster, 89,816,
including 44,005 over which he has sole voting and investment power; Mr.
Janzen, 144,802, including 58,294 over which he has sole voting and
investment power; Mr. Johnson, 20,346, including 304 shares over which he
has sole investment and voting power; Mr. Malcolm, 36,138, including 31,662
over which he has sole voting and investment power; Mr. McCarthy, 94,975,
including 42,975 over which he has sole voting and investment power; Mr.
O'Neill, 62,760, including 12,928 over which he has sole voting and
investment power; Mr. Littlefield, 83,340, including 10,137 over which he
has sole voting and investment power; Mr. Semple, 85,034, including 53,334
over which he has sole voting and investment power; Mr. Bothof, 33,372,
including 10,115 over which he has sole voting and investment power; Mr.
McGuire, 35,592, including 1,194 over which he has sole voting and
investment power; and all executive officers as a group, 1,885,768,
including 749,971, over which each has sole voting and investment power as
to his or her shares.
(2) Includes 29,996 shares held in trust, over which Mr. Herbster has voting and
investment power.
(3) The Commission deems a person to have beneficial ownership of all shares
that the person has the right to acquire within 60 days. The shares
indicated represent stock options granted under the stock plans of The
Williams Companies, Inc. Shares subject to option cannot be voted.
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RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Included in our revenues are charges to Williams and its subsidiaries and
affiliates for managing their internal telephone operations of $7,710,000,
$5,217,000 and $4,918,000 for 1998, 1997 and 1996, respectively. In addition,
our revenues include charges to Williams' gas pipelines for managing microwave
frequencies of $4,254,000, $3,754,000 and $1,381,000 for 1998, 1997 and 1996,
respectively.
Williams grants our directors and officers loans in order to enable them to
exercise stock options to purchase Williams common stock. These loans use stock
certificates as collateral and may be for either a three- or five-year term.
Interest payments are due annually during the term of the loan and are based on
the minimum applicable federal rates required to avoid imputed income. The
principal amount is due at the end of the loan term, provided, however, that a
participant may request, prior to the end of a loan term, a new loan which may
be granted at the discretion of Williams. Participants who leave Williams during
the loan period are required to pay the loan balance and any accrued interest
within 30 days of termination. John C. Bumgarner, one of our directors and our
senior vice president of strategic investments, owns real estate and leases a
portion of it to subsidiaries of our company for use as office space. In 1998,
payments under these leases approximated $136,782. These leases remain in place,
and we expect the company's subsidiaries to make similar payments approximating
$60,000 per month for the term of the leases.
The following table describes details regarding these loans which have been
made to our directors or officers.
<TABLE>
<CAPTION>
TOTAL LARGEST
INTEREST AMOUNT AMOUNT
INTEREST OVER TERM DUE DURING OUTSTANDING
NAME RATE OF LOAN 1998 5/10/99
- ---- -------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Keith E. Bailey............. 6.28% $ 50,641.92 $ 171,408.39 $ 164,887.37
Keith E. Bailey............. 6.58% $ 71,656.20 $ 232,131.21 $ 222,904.28
Keith E. Bailey............. 6.42% $ 64,200.00 $ 266,050.00 $ 255,716.44
Keith E. Bailey............. 6.80% $ 144,190.19 $ 601,327.51 $ 576,677.18
Keith E. Bailey............. 5.68% $ 406,609.84 $ 1,472,720.00 $ 1,460,688.79
Keith E. Bailey............. 5.57% $1,026,811.18 $ 3,770,204.37 $ 3,760,076.92
Keith E. Bailey............. 5.54% $1,670,829.99 $ 6,143,571.06 $ 6,150,895.25
Total............ $3,434,939.32 $12,657,412.54 $12,591,846.23
John C. Bumgarner, Jr. ..... 5.91% $ 203,927.62 $ 1,218,159.86 $ 1,174,394.59
John C. Bumgarner, Jr. ..... 5.42% $ 559,102.89 $ 3,500,299.27 $ 3,504,894.64
Total............ $ 763,030.51 $ 4,718,459.13 $ 4,679,289.23
James R. Herbster........... 6.74% $ 17,864.37 $ 56,582.87 $ 54,282.53
James R. Herbster........... 6.49% $ 119,416.00 $ 391,883.22 $ 376,506.35
James R. Herbster........... 5.93% $ 77,115.43 $ 274,452.51 $ 265,578.93
Total............ $ 214,395.80 $ 722,918.60 $ 696,367.81
Howard E. Janzen............ 5.70% $ 80,997.64 $ 500,521.63 $ 483,286.56
Howard E. Janzen............ 5.69% $ 87,092.51 $ 320,823.16 $ 312,328.65
Howard E. Janzen............ 5.77% $ 38,864.87 $ 139,207.01 $ 137,482.06
Howard E. Janzen............ 4.71% $ 106,851.10 $ 0 $ 459,340.85
Howard E. Janzen............ 4.83% $ 114,621.70 $ 0 $ 477,261.87
Total............ $ 428,427.87 $ 960,551.80 $ 1,869,699.99
</TABLE>
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<PAGE> 122
<TABLE>
<CAPTION>
TOTAL LARGEST
INTEREST AMOUNT AMOUNT
INTEREST OVER TERM DUE DURING OUTSTANDING
NAME RATE OF LOAN 1998 5/10/99
- ---- -------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Jack D. McCarthy............ 6.23% $ 321,312.50 $ 1,095,763.30 $ 1,054,388.80
Jack D. McCarthy............ 6.42% $ 265,031.98 $ 878,651.17 $ 844,523.79
Jack D. McCarthy............ 5.59% $ 158,676.74 $ 696,532.02 $ 677,989.90
Jack D. McCarthy............ 4.83% $ 301,392.00 $ 0 $ 1,256,752.75
Total............ $1,046,413.21 $ 2,670,946.49 $ 3,833,655.24
William G. von Glahn........ 5.83% $ 73,234.13 $ 443,131.32 $ 427,414.47
William G. von Glahn........ 5.91% $ 6,240.96 $ 37,280.31 $ 35,940.94
William G. von Glahn........ 6.23% $ 23,624.16 $ 134,274.72 $ 129,204.70
William G. von Glahn........ 5.54% $ 56,063.91 $ 353,746.50 $ 343,983.99
William G. von Glahn........ 5.59% $ 39,174.72 $ 182.954.39 $ 178,688.16
William G. von Glahn........ 5.39% $ 11,670.00 $ 102,499.38 $ 100,191.16
William G. von Glahn........ 5.48% $ 76,281.60 $ 474,170.89 $ 473,056.26
William G. von Glahn........ 5.57% $ 55,700.00 $ 203,845.60 $ 203,967.67
William G. von Glahn........ 5.54% $ 113,547.84 $ 417,448.38 $ 418,008.34
William G. von Glahn........ 5.28% $ 36,960.00 $ 0 $ 175,886.03
Total............ $ 492,497.32 $ 2,349,351.47 $ 2,486,341.72
Delwin L. Bothof............ 5.42% $ 241,045.04 $ 1,507,316.76 $ 1,511,059.01
Delwin L. Bothof............ 4.67% $ 70,050.00 $ -- $ 604,298.96
Total............ $ 311,095.04 $ 1,507,316.76 $ 2,115,357.97
Gerald L. Carson............ 5.59% $ 183,874.33 $ 686,281.13 $ 670,966.70
Total............ $ 183,874.33 $ 686,281.13 $ 670,966.70
Lawrence C. Littlefield,
Jr........................ 5.54% $ 109,692.00 $ 691,254.73 $ 673,022.79
Total............ $ 109,692.00 $ 691,254.73 $ 673,022.79
Frank M. Semple............. 5.42% $ 180,664.33 $ 1,131,060.57 $ 1,132,545.46
Total............ $ 180,664.33 $ 1,131,060.57 $ 1,132,545.46
Grand Total................. $6,118,616.42 $25,424,606.73 $26,915,437.91
</TABLE>
Garry McGuire, our Senior Vice President, Solutions, has an interest-free
loan outstanding from Solutions LLC in the amount of $350,000. This loan was
made to enable Mr. McGuire to purchase a new principal residence upon his
relocation to Houston.
RELATIONSHIP BETWEEN OUR COMPANY AND WILLIAMS
Williams is currently the beneficial owner of all of our capital stock.
Following the completion of the equity offering and the SBC investment, Williams
will continue to be our controlling stockholder and will beneficially own 100%
of the outstanding Class B common stock, which will represent approximately
____% of the combined voting power of all of our outstanding capital stock and
approximately ____% of the economic interest in our company, or ____% and ____%
if the underwriters' over-allotment option is exercised in full.
For so long as Williams continues to beneficially own shares of capital
stock representing more than 50% of the combined voting power of our outstanding
capital stock, it will be able to approve any matter submitted to a vote of our
stockholders without the consent of our other stockholders, including, among
other things, the amendment of our restated certificate of incorporation and
by-laws and the election of all members of the board of directors. Williams has,
however, agreed to elect a director designated by SBC so long as SBC retains
more than a
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5% equity interest in our capital stock and satisfies the procedural and
substantive requirements to provide long distance services originating in a
state in its traditional exchange service area. In addition, through its
controlling beneficial ownership of us, as well as certain provisions of
intercompany agreements discussed below, Williams will be able to exercise a
controlling influence over our company, including determinations with respect to
mergers or other business combinations involving us, the acquisition or
disposition of assets by us, our access to the capital markets, the payment of
dividends and any change of control of our company. In these and other
situations, various conflicts of interest between us and Williams could arise.
Furthermore, ownership interests of our directors and officers in Williams'
common stock or service as a director or officer of both us and Williams could
create, or appear to create, potential conflicts of interest when directors and
officers are faced with decisions that could have different implications for us
and Williams. We cannot assure you that conflicts of interest will not arise or
will be resolved in a manner favorable to us.
Williams has advised us that its current intent is to continue to hold all
the Class B common stock beneficially owned by it following the equity offering.
However, Williams has no contractual obligation to retain its shares of Class B
common stock. Williams has agreed, subject to specified exceptions, not to sell
or otherwise dispose of any shares of our Class B common stock for a period of
180 days after the date of this prospectus without the prior written consent of
Salomon Smith Barney Inc. and Lehman Brothers Inc. on behalf of the
underwriters. As a result, there can be no assurance concerning the period of
time during which Williams will maintain its beneficial ownership of our Class B
common stock owned by it following the equity offering. In addition, we have
agreed that we will, upon the request of Williams, use our reasonable best
efforts to effect the registration under applicable federal and state securities
laws of any shares of common stock or Class B common stock held by Williams or
any of its affiliates.
The following are summaries of material provisions of the agreements to be
entered into by our company with Williams by the completion of the offerings,
forms of which we have filed as exhibits to the registration statement.
SEPARATION AGREEMENT
We have entered into a separation agreement with Williams relating to
various aspects of our companies' operations that will govern our relationship
with each other after the equity offering. Under the separation agreement, we
have agreed not to compete with Williams for five years in any area of the
energy industry in which Williams currently has operations and Williams has
agreed not to compete with us for five years in any area of the
telecommunications industry in which we currently have operations, subject to
specified exceptions. Under the separation agreement, if a party decides not to
pursue a business opportunity that it has the right to pursue to the exclusion
of the other party, it must promptly inform the other party of this decision.
The other party would then be free to pursue the opportunity.
Our restated certificate of incorporation provides that we may not bring
any claim against Williams or any of its officers, directors or other
affiliates, for breach of any duty, including, but not limited to, the duty of
loyalty or fair dealing on account of a diversion of a corporate business
opportunity to Williams, unless that opportunity relates solely to a business
that we have the right to elect to pursue to the exclusion of Williams pursuant
to the separation agreement. Notwithstanding the above, no claim may be made in
any event if our directors who are not employees of Williams disclaim the
opportunity by a unanimous vote.
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Other components of the separation agreement provide for the following:
- exchange of participation, service and compensation records of employees
who transfer between Williams and us
- filing of annual reports and compliance with other legal requirements
applicable to the parties' employee benefit plans
- allocation of assets and liabilities under various nonqualified pension
and deferred compensation plans maintained by Williams for the benefit of
employees and non-employee directors
- disposition of outstanding stock options, stock appreciation rights and
long-term incentive awards
- allocation of assets and liabilities pertaining to post-retirement life
insurance and health care benefits
- allocation of liabilities for accrued vacation, paid leave and certain
other benefits
- maintenance of insurance coverage consistent with past practices
- establishment of a separation committee to resolve disputes between us
and Williams and arbitration provisions
Our employees, other than those who work for Solutions, LLC, are jointly
employed by other subsidiaries of Williams which provide administrative services
related to their employment. We have entered into personnel services agreements
providing for reimbursement by us of the actual costs incurred by the services
companies related to our employees. Williams also pays the services companies a
fee for administration. Under the separation agreement, we have agreed to
reimburse Williams for our portion of the fee. A Williams subsidiary also
performs risk management services for us and other Williams subsidiaries.
Williams compensates the risk management subsidiary for its actual costs
incurred, a portion of which is related to our business. Under the separation
agreement, we have agreed to reimburse the risk management subsidiary for our
portion of the costs.
LIGHTEL CALL OPTION
We have entered into an agreement with Williams granting us the option to
acquire Williams' equity and debt interests in Lightel. For more information,
see the section of this prospectus entitled "Business -- Strategic
Investments -- International -- Lightel."
TAX SHARING AGREEMENT
In the past, we have been included in Williams' federal consolidated income
tax group. After the offerings and the closing of the SBC investment, it is
expected that we will continue to be included in the Williams federal
consolidated income tax group. In this case, our federal income tax liability
would be included in the consolidated federal income tax liability of Williams
and its subsidiaries. We also expect to be included with Williams and/or certain
of its subsidiaries in combined, consolidated or unitary income tax groups for
state income tax purposes. We have entered into a tax sharing agreement with
Williams under which we and Williams will make payments such that, for any
period, the amount of federal income taxes we will pay will, subject to certain
adjustments, generally be determined as though we were filing separate federal
income tax returns (including amounts determined to be due under such agreement
as a result of an audit or otherwise). Under the tax sharing agreement, our
losses or other similar tax attributes realized for periods prior to the equity
offering will be utilized or retained by the Williams group and thus will not be
available to us in order to reduce our hypothetical separate tax liability. We
will be responsible for any increases in federal income tax liabilities
resulting to Williams and its subsidiaries if these losses or attributes are
reduced by
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audit or otherwise. If, for any period after consummation of the equity
offering, we have a current realized operating loss determined on such a
hypothetical separate tax return basis, we will not owe any payments under the
tax sharing agreement for that tax year, and, in general, we will be allowed to
carry over the loss to other tax years in which we are a member of the Williams
federal consolidated income tax group in order to offset our income determined
on this hypothetical separate tax return basis for other tax years. However, if
we are unable to utilize any loss on a hypothetical separate tax return basis,
Williams will be entitled to utilize the loss without paying us for it. If we
cease to be included in the Williams federal consolidated income tax group, we
will not be entitled to receive the benefit of any carryforward of any loss to
offset our income for any tax years thereafter where such loss has been utilized
by the Williams group. We will also be required to pay Williams for any tax
attribute that we are entitled to use after leaving the Williams federal
consolidated income tax group if we have already received the benefit of this
tax attribute under the tax sharing agreement. Therefore, we generally will
receive the benefit of a loss only if we are able to offset the loss against our
income while we are a member of the Williams federal consolidated income tax
group. We cannot guarantee that we will earn any income against which we can
offset any loss while we are a member of the Williams federal consolidated
income tax group and, thus, that we will obtain any benefit from losses
generated while we are a member of the Williams group.
Since we expect to continue to be included in the Williams federal
consolidated income tax group, Williams will continue to have all the rights of
a parent of a consolidated group. Williams will have sole and absolute
responsibility for, and sole and absolute discretion with respect to, the
following:
- preparing any of our income and other tax returns, including, without
limitation, amended returns or claims for refunds
- representing us with respect to any tax audit or tax contest, including,
without limitation, settling or compromising any tax controversy
- engaging outside counsel and accountants with respect to tax matters
regarding us
- performing other acts and duties with respect to our tax returns as
Williams determines to be appropriate
- interpreting and applying the tax sharing agreement and determining any
disputes that arise under it
The general principles of the tax sharing agreement will also apply to
state income taxes (and, in the sole and absolute discretion of Williams, may
also apply to foreign, local, other state and other federal taxes) with respect
to which we are included with Williams and/or certain of its subsidiaries in
consolidated, combined or unitary groups. Thus, we will be responsible for any
foreign tax liability arising from our business activities.
To the extent permitted by applicable state laws, Williams will continue to
have all the rights of a parent of a combined, consolidated or unitary income
tax group. The tax sharing agreement will remain in effect so long as and to the
extent that we are included with Williams and/or any of its subsidiaries in any
combined, consolidated or unitary income tax group in any taxing jurisdiction
and the statute of limitations for these returns remains open.
Under the administrative services agreement, the amounts that we will pay
Williams will encompass reimbursement to Williams for all direct and indirect
costs and expenses incurred with respect to our share of the overall costs and
expenses incurred by Williams with respect to tax-related services.
In general, we will be included in Williams' consolidated group for federal
income tax purposes for so long as Williams beneficially owns at least 80% of
the total voting power and
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value of our outstanding common stock. Each member of a consolidated group is
jointly and severally liable for the federal income tax liability of the
consolidated group for the period during which it was a member of this
consolidated group. Accordingly, although the tax sharing agreement allocates
tax liabilities between us and Williams during the period in which we are
included in Williams' federal consolidated income tax group and provides that
Williams will indemnify us for any tax liabilities not allocated to us, we could
be liable for any federal income tax liabilities incurred, but not discharged,
by any other member of Williams' federal consolidated income tax group. Similar
principles may apply for combined, consolidated, or unitary state income tax
purposes.
INDEMNIFICATION AGREEMENT
We and Williams have entered into an indemnification agreement which
provides that each party to the agreement will indemnify the other party and its
directors, officers, employees, agents and representatives for liabilities under
federal or state securities laws as a result of the offerings, including
liabilities arising out of or based upon alleged misrepresentations in or
omissions from the registration statements. Each party will indemnify the other
party for liabilities, which also include taxes, that may be incurred by the
other party relating to, resulting from or arising out of the business and
operations conducted or formerly conducted, or assets formerly owned, by the
indemnifying party and its subsidiaries. However, where Williams is the
indemnifying party, it will not indemnify us for any liabilities relating to,
resulting from or arising out of our business and operations and assets. Each
party will indemnify the other party for liabilities, which also include taxes,
that may be incurred by that other party relating to, resulting from or arising
out of the failure by each party to comply with other agreements executed in
connection with the offerings, except to the extent caused by the other party.
The indemnification agreement also provides that we indemnify Williams for
any liabilities incurred by Williams under the guarantees of Williams'
obligations with respect to us or any other of our liabilities that are imposed
on Williams and that we will pay Williams for the direct cost, if any, of
maintaining these guarantees or for the costs of defending a claim asserting any
potentially covered liability.
Williams currently guarantees our obligations under the revolving credit
agreement, the bridge loan and the asset defeasance program, each of which we
describe in the section of this prospectus entitled "Description of Indebtedness
and Other Financing Arrangements." Williams' guarantee of our obligations under
the asset defeasance program will continue following the offerings. Williams'
guarantee of the revolving credit agreement and bridge loans will continue
following the offerings until these agreements are terminated and replaced by a
new permanent credit facility. Williams also has guaranteed and entered into
other contingent obligations in connection with financings by ATL in total
amount of approximately $100 million.
REGISTRATION RIGHTS AGREEMENT
We and Williams have entered into a registration rights agreement which
provides that, upon the request of Williams, we will use our reasonable efforts
to effect the registration under the applicable federal and state securities
laws of any shares of common stock, and any other securities issued in
connection in respect of or exchange for the common stock, held by Williams and
will take any other action necessary to permit the sale of these securities in
other jurisdictions, subject to certain specified limitations. However, Williams
has advised us that it has no current plan or intention to dispose of its shares
of our Class B common stock. For the foreseeable future, Williams will also have
the right, which it may exercise at any time and from time to time, to include
shares of common stock held by it in certain other registrations of our
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common equity securities we initiate on our own behalf or on behalf of other
stockholders. Williams will pay the out-of-pocket costs and expenses of
registration for registrations which it initiates. We have agreed to pay all
out-of-pocket costs and expenses, other than underwriting discounts and
commissions, in connection with the registrations we initiate in which Williams
participates. Our restated certificate of incorporation provides that any shares
of Class B common stock sold or otherwise transferred to any person other than a
Williams affiliate are automatically converted into common stock.
ADMINISTRATIVE SERVICES AGREEMENT
The administrative services agreement provides for Williams to continue to
provide similar financial management services, information services, legal and
contract services, risk management, human resources services, corporate planning
and other management support services to us as it has in the past. Under the
terms of the administrative services agreement, all of the services will be
rendered by Williams or subsidiaries of Williams subject to our oversight,
supervision and approval through our board of directors.
The administrative costs we will pay to Williams and its subsidiaries
pursuant to the administrative services agreement are allocated pursuant to an
established formula based on actual costs and is believed to be equal to or less
than the fees that would be paid if these services were to be provided by an
independent third party.
The administrative services agreement will become effective upon the
completion of the equity offering and shall terminate on December 31, 2005
unless earlier terminated by Williams or us. The administrative services
agreement would be automatically renewed for additional terms of two years
unless either party gives at least six months' written notice prior to a
scheduled termination date. The administrative services agreement can be
terminated upon a material breach by either party and will be terminated upon a
change of control of our company. A change of control shall be deemed to have
occurred if:
(a) Williams or the companies controlled by Williams should own shares
representing less than the majority of the voting power of our then-outstanding
common stock;
(b) the majority of the seats of our board of directors shall be occupied
by persons who are neither nominated by Williams or by our board of directors,
nor appointed by our directors so nominated; or
(c) any person or group other than Williams and the companies controlled by
Williams shall directly or indirectly have the power to exercise a controlling
influence over us.
Upon a change of control, we will enter into good faith negotiations with
Williams concerning an acceptable form of transition agreement providing for
Williams to make available, at cost, necessary services to us until a time when
we can provide these services for ourselves or obtain them from some other
source.
Williams and its affiliates incur certain costs on our behalf, primarily
insurance coverage and related risk management services provided by
non-affiliates, benefits provided to our employees under Williams' benefit
plans, payroll administration, bank fees, certain utility costs, employee
relocation and other costs. Williams and its affiliates either directly charge
these costs to us or, for a shared service or cost, allocate a portion of these
costs to us based for insurance coverage on various risk exposure factors and
otherwise primarily on actual usage.
The amount paid by us during the year ended December 31, 1998 for all of
the services provided during that year that in the future will be provided under
the administrative services agreement was approximately $25 million.
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SERVICE AGREEMENT
We have entered into a service agreement with Williams Information Services
Corporation, a wholly-owned subsidiary of Williams. Under this agreement, WISC
will provide data processing computer-related services to us. These services
include mainframe operations, help desk support, network services, mid-range
operations, general data center operations, disaster recovery, technical
support, development services and hardware and software procurement assistance.
Services are generally charged at cost on a usage basis plus a 15% management
fee. Any procured items are transferred at actual cost. The amount paid by us
during the year ended December 31, 1998 for all of the services provided during
that year that in the future will be provided under the service agreement was
$4,786,000.
LEASE AGREEMENT
We have leases with various Williams affiliates providing for the leasing
of office and other space. The total charges for leased space during the year
ended December 31, 1998 for leases provided during that year that in the future
will be provided under lease agreements was $3,971,000. The lease charges are
based on occupied square footage and terms approximate market. In addition, we
reimburse Williams affiliates for the cost of leased space utilized by our
employees at these affiliates' locations.
CROSS-LICENSE AGREEMENT
The cross-license agreement addresses Williams' and our respective rights
and obligations after the equity offering with respect to intellectual property,
inventions and trademarks and trade names as well as the use of proprietary
information by employees of Williams and us. Williams and WISC license at no
cost to us certain intellectual property to us, effective as of the equity
offering. Similarly we will cross license at no cost to Williams certain
intellectual property to Williams on the same terms as their license to us.
Among other things, for so long as Williams shall beneficially own at least 50%
of the voting power of our outstanding common stock, we are permitted to
continue our use of the Williams trademark and brand names.
TECHNICAL, MANAGEMENT AND ADMINISTRATIVE SERVICES AGREEMENT
The technical, management and administrative services agreement provides
for Williams to continue to provide to us the same management services relating
to our international operations and investments after the offerings as it has in
the past. Under the terms of the management agreement, all of the services will
be rendered by Williams or subsidiaries of Williams subject to our oversight,
supervision and approval through our board of directors.
The management costs we will pay to Williams and its subsidiaries pursuant
to the management agreement are allocated pursuant to an established formula
based on actual costs and is believed to be equal to or less than the fees that
would be paid if these services were to be provided by an independent third
party.
CONFLICTS OF INTEREST
Conflicts of interest may arise between us and Williams in a number of
areas relating to our past and ongoing relationships with Williams, including
potential acquisitions of businesses or properties or other corporate
opportunities, potential competitive business activities, the election of new or
additional directors, payment of dividends, incurrence or repayment of
indebtedness, tax matters, financial commitments, marketing functions, indemnity
arrangements, registration rights, administration of benefits plans, service
arrangements, issuances of our capital stock, sales or distributions by Williams
of its shares of our Class B common stock, the exercise of the right
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to purchase Williams' investment in Lightel and the exercise by Williams of its
ability to control our management and affairs. Although the separation agreement
contains certain non-compete provisions, in many circumstances we and Williams
are free to compete with one another.
We and Williams may enter into material transactions and agreements in the
future in addition to those described above. Our board of directors will utilize
procedures in evaluating the terms and provisions of any material transactions
between us and Williams or its affiliates as our board of directors may deem
appropriate in light of its fiduciary duties under state law. In any evaluation,
our board of directors may rely on management's statements and opinions and may
or may not utilize outside experts or consultants or obtain independent
appraisals or opinions. One of our directors is both a senior officer and
director, and six of our directors are also senior officers, of Williams. These
directors and officers may have conflicts of interest with respect to matters
potentially or actually involving or affecting us or Williams, such as
acquisitions, financing and other corporate opportunities that may be suitable
both for us and for Williams. To the extent that opportunities arise, these
directors may consult with their legal advisors and make a determination after
considering a number of factors, including whether such an opportunity is within
our line of business or consistent with our strategic objectives and whether we
will be able to undertake or benefit from a particular opportunity. In addition,
determinations may be made by our board of directors, and when appropriate, by
the vote of the disinterested directors only. Despite the foregoing, there can
be no assurance that conflicts will be resolved in our favor.
For so long as Williams controls at least 50% of the voting power of our
outstanding capital stock, our directors and officers will, subject to certain
limitations, be indemnified by Williams and insured under insurance policies
maintained by Williams against liability for actions taken, or omitted to be
taken, in their capacities as our directors and officers, including actions or
omissions that may be alleged to constitute breaches of the fiduciary duties
owed by our directors and officers to us and our stockholders. This insurance
may not be applicable to certain of the claims which Williams may have against
us under the indemnification agreement or otherwise.
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DESCRIPTION OF CAPITAL STOCK
Set forth below is a summary of the material provisions of our capital
stock. For a more detailed description, see our restated certificate of
incorporation and by-laws, copies of which we have filed as exhibits to the
registration statement, and the applicable provisions of Delaware law.
Immediately prior to the closing of the equity offering, we will restate
our certificate of incorporation to change our authorized capital stock to
________ shares of Class A common stock (which we refer to as common stock in
this prospectus), ________ shares of Class B common stock and ________ shares of
preferred stock, par value $0.01 per share, and to convert each outstanding
share of our current common stock into ________ shares of our newly created
Class B common stock (totaling ________ shares of Class B common stock).
COMMON STOCK AND CLASS B COMMON STOCK
GENERAL
The holders of common stock and Class B common stock have identical rights
except with respect to voting, conversion and transfer.
VOTING RIGHTS
Holders of our common stock are entitled to one vote per share on all
matters to be voted on by stockholders, while holders of Class B common stock
are entitled to ten votes per share. Holders of shares of common stock and Class
B common stock are not entitled to cumulate their votes in the election of
directors. Generally, all matters to be voted on by stockholders must be
approved by a majority of the votes entitled to be cast by all holders of common
stock and Class B common stock present in person or represented by proxy, voting
together as a single class, subject to any voting rights granted to holders of
any preferred stock. Except as otherwise provided by law or in our restated
certificate of incorporation, and subject to any voting rights granted to
holders of any outstanding preferred stock, amendments to our restated
certificate of incorporation must be approved by a majority of the votes
entitled to be cast by all holders of common stock and Class B common stock
present in person or represented by proxy, voting together as a single class.
However, amendments to our restated certificate of incorporation that would
alter or change the powers, preferences or special rights of the common stock so
as to affect them adversely also must be approved by a majority of the votes
entitled to be cast by the holders of the common stock, voting as a separate
class. Any amendment to our restated certificate of incorporation to increase
the authorized shares of any class requires the approval only of a majority of
the votes entitled to be cast by all holders of common stock and Class B common
stock present in person or represented by proxy, voting together as a single
class, subject to the rights set forth in any series of preferred stock created
as described below.
DIVIDENDS
Holders of our common stock and Class B common stock will share equally on
a per share basis in any dividend declared by the board of directors, subject to
any preferential rights of any outstanding preferred stock. Dividends consisting
of shares of common stock and Class B common stock may be paid only as follows:
(a) shares of common stock may be paid only to holders of common stock, and
shares of Class B common stock may be paid only to holders of Class B common
stock; and
(b) the number of shares so paid will be equal on a per share basis with
respect to each outstanding share of common stock and Class B common stock.
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We may not split, reclassify, subdivide or combine shares of either class
of common stock without at the same time proportionally reclassifying,
subdividing or combining shares of the other class.
ISSUANCE OF CLASS B COMMON STOCK, OPTIONS OR WARRANTS
Subject to certain provisions regarding dividends and other distributions
described above and except for payment of the purchase price for the Lightel
option, we will not be entitled to issue additional shares of Class B common
stock, or issue options, rights or warrants to subscribe for additional shares
of Class B common stock, except that we may make a pro rata offer to all holders
of common stock of rights to purchase additional shares of the class of common
stock held by them. The common stock and the Class B common stock will be
treated equally with respect to any offer we make to holders of common stock of
options, rights or warrants to subscribe for any of our other capital stock.
MERGER OR CONSOLIDATION
In the event of a merger or consolidation, the holders of common stock and
Class B common stock will be entitled to receive the same per share
consideration, if any, except that if the consideration includes voting
securities, or the right to acquire voting securities or securities exchangeable
for, or convertible into, voting securities, we may, but are not required to,
provide for the holders of Class B common stock to receive consideration
entitling them to ten times the number of votes per share as the consideration
being received by holders of the common stock.
CONVERSION OF CLASS B COMMON STOCK
Our Class B common stock will be convertible into common stock on a
share-for-share basis at the option of the holder at any time, or automatically
upon transfer to a person or entity which is not a permitted transferee. In
general, permitted transferees will include Williams, its direct and indirect
subsidiaries, any person or entity in which Williams or any successor
beneficially owns, directly or indirectly, at least 50% of the equity or the
voting securities, any successor of any of the foregoing and stockholders of
Williams who receive our Class B common stock in a tax-free spin-off. A tax-free
spin-off generally means a transaction in which stockholders of Williams receive
shares of our common stock or Class B common stock as a distribution with
respect to, or in exchange for, stock of Williams without being required to
recognize gain or loss for federal income tax purposes by reason of Section 355
of the Code (or any corresponding provision of any successor statute). Following
any distribution of Class B common stock to stockholders of Williams, shares of
Class B common stock will no longer be convertible into shares of common stock.
Shares of Class B common stock transferred to stockholders of Williams in a
tax-free spin-off will not be converted into shares of common stock and,
following a tax-free spin-off, shares of Class B common stock will be
transferable as Class B common stock, subject to applicable laws.
PREFERRED STOCK
Our board of directors is empowered, without approval of the stockholders,
to cause shares of preferred stock to be issued from time to time in one or more
series, and the board of directors may fix the numbers of shares of each series
and the designation, powers, privileges, preferences and rights and the
qualifications, limitations and restrictions of the shares of each series.
The specific matters that our board of directors may determine include the
following:
- the designation of each series
- the number of shares of each series
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- the rate of any dividends
- whether any dividends shall be cumulative or non-cumulative
- the terms of any redemption
- the amount payable in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of our company
- rights and terms of any conversion or exchange
- restrictions on the issuance of shares of the same series or any other
series
- any voting rights
The Series A preferred stock described below under "-- Stockholder rights
plan" is a series of preferred stock that has been authorized by our board.
Although no shares of preferred stock are currently outstanding and we have
no current plans to issue preferred stock, the issuance of shares of preferred
stock, or the issuance of rights to purchase shares of preferred stock, could be
used to discourage an unsolicited acquisition proposal. For example, a business
combination could be impeded by issuing a series of preferred stock containing
class voting rights that would enable the holder or holders of this series to
block such a transaction. Alternatively, a business combination could be
facilitated by issuing a series of preferred stock having sufficient voting
rights to provide a required percentage vote of the stockholders. In addition,
under certain circumstances, the issuance of preferred stock could adversely
affect the voting power and other rights of the holders of the common stock.
Although our board is required to make any determination to issue any preferred
stock based on its judgment as to the best interests of our stockholders, it
could act in a manner that would discourage an acquisition attempt or other
transaction that some, or a majority, of the stockholders might believe to be in
their best interests or in which stockholders might receive a premium for their
stock over prevailing market prices of the stock. Our board does not at present
intend to seek stockholder approval prior to any issuance of currently
authorized stock, unless otherwise required by law or applicable stock exchange
requirements.
LIMITATION ON LIABILITY OF DIRECTORS
Our restated certificate of incorporation provides, as authorized by
Section 102(b)(7) of the Delaware General Corporation Law, that our directors
will not be personally liable to us or our stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability imposed by law, as
in effect from time to time, for the following:
- any breach of the director's duty of loyalty to our company or our
stockholders
- any act or omission not in good faith or which involved intentional
misconduct or a knowing violation of law
- unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the DGCL
- any transaction from which the director derived an improper personal
benefit
The inclusion of this provision in our restated certificate of
incorporation may have the effect of reducing the likelihood of derivative
litigation against our directors, and may discourage or deter stockholders or
management from bringing a lawsuit against directors for breach of their duty of
care, even though such an action, if successful, might otherwise have benefitted
our company and our stockholders.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
We are a Delaware corporation and subject to Section 203 of the DGCL.
Generally, Section 203 prohibits a publicly held Delaware corporation from
engaging in a business combination with an interested stockholder for a period
of three years after the time a
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stockholder became an interested stockholder unless, as described below, certain
conditions are satisfied. Thus, it may make acquisition of control of our
company more difficult. See "-- Limitations on changes of control of our
company" below. The prohibitions in Section 203 of the DGCL do not apply if the
following occur:
- prior to the time the stockholder became an interested stockholder, our
board of directors approved either the business combination or the
transaction which resulted in the stockholder becoming an interested
stockholder
- upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of our company outstanding at the time the
transaction commenced
- at or subsequent to the time the stockholder became an interested
stockholder, the business combination is approved by our board of
directors and authorized by the affirmative vote of at least 66 2/3% of
the outstanding voting stock that is not owned by the interested
stockholder
Under Section 203 of the DGCL, a business combination includes the
following:
- any merger or consolidation of our company with the interested
stockholder
- any sale, lease, exchange or other disposition, except proportionately as
a stockholder of our company, to or with the interested stockholder of
assets of our company having an aggregate market value equal to 10% or
more of either the aggregate market value of all the assets of our
company or the aggregate market value of all the outstanding stock of our
company
- certain transactions resulting in the issuance or transfer by our company
of our stock to the interested stockholder
- certain transactions involving our company which have the effect of
increasing the proportionate share of the stock of any class or series of
our company which is owned by the interested stockholder
- certain transactions in which the interested stockholder receives
financial benefits provided by us
Under Section 203 of the DGCL, an interested stockholder generally is one
of the following:
- any person that owns 15% or more of the outstanding voting stock of our
company
- any person that is an affiliate or associate of our company and was the
owner of 15% or more of the outstanding voting stock of our company at
any time within the three-year period prior to the date on which it is
sought to be determined whether that person is an interested stockholder
- the affiliates or associates of that person
Because Williams will own more than 15% of our voting stock before we
become a public company and upon completion of the equity offering, Section 203
of the DGCL by its terms is currently not applicable to business combinations
with Williams even though Williams owns 15% or more of our outstanding stock. If
any other person acquires 15% or more of our outstanding stock, that person will
be subject to the provisions of Section 203 of the DGCL.
PROVISIONS OF OUR RESTATED CERTIFICATE OF INCORPORATION AND BY-LAWS
Our by-laws contain provisions requiring that advance notice be delivered
to us of any business to be brought by a stockholder before an annual or special
meeting of stockholders and providing for certain procedures to be followed by
stockholders in nominating persons for election
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to our board. Generally, these advance notice provisions require that the
stockholder must give written notice to the secretary of our company:
- in the case of an annual meeting, not less than 90 days nor more than 120
days before the first anniversary of the preceding year's annual meeting
of stockholders
- in the case of a special meeting, not less than 90 days, or, if later, 10
days after the first public announcement of the date of the special
meeting, nor more than 120 days prior to the scheduled date of such
special meeting
In each case, the notice must set forth specific information regarding the
stockholder giving the notice and each director nominee or other business
proposed by the stockholder, as applicable, as provided in our by-laws.
Notwithstanding the foregoing, any stockholder, including Williams, who together
with its affiliates owns capital stock entitled to exercise a majority of the
voting power in an election of directors, may nominate one or more individuals
for election as directors by giving notice to our company not later than five
days before the scheduled date for the election of directors. Generally, only
business set forth in the notice for a special meeting of stockholders may be
conducted at a special meeting.
Our by-laws provide, in accordance with our restated certificate of
incorporation, that except as may be provided in connection with the issuance of
any series of preferred stock, the number of directors shall be fixed from time
to time exclusively pursuant to a resolution adopted by a majority of the whole
board, as that term is defined in our restated certificate of incorporation. Our
restated certificate of incorporation provides for a classified board of
directors, consisting of three classes as nearly equal in size as practicable.
Each class holds office until the third annual stockholders' meeting for
election of directors following the most recent election of that class, except
that the initial terms of the three classes expire in 2000, 2001 and 2002. See
the section of the prospectus entitled "Management -- Our directors" for more
information.
Subject to the rights of the holders of any series of preferred stock to
elect and remove additional directors under specified circumstances, on or after
the time when Williams and its affiliates own less than 50% of the voting power
of our then-outstanding capital stock, a director of our company may be removed
only for cause by affirmative vote of the holders of at least a majority of the
voting power of all of our outstanding shares generally entitled to vote in the
election of directors, voting together as a single class, and vacancies on our
board may only be filled by the affirmative vote of a majority of the remaining
directors. Prior to the time when Williams and its affiliates own less than 50%
of our then-outstanding capital stock, subject to the rights of holders of any
series of preferred stock, a director of our company may be removed, with or
without cause, by the affirmative vote of the holders of at least a majority of
the voting power of all voting stock then outstanding, voting together as a
single class, and vacancies on our board may be filled only by the affirmative
vote of at least 80% of the remaining directors then in office.
Our restated certificate of incorporation provides that, on or after the
time when Williams and its affiliates own less than 50% of our then-outstanding
capital stock, stockholders may not act by written consent in lieu of a meeting.
On or after the time when Williams and its affiliates own less than 50% of our
then-outstanding capital stock, special meetings of the stockholders may be
called only by a majority of the whole board, but may not be called by
stockholders. Before the time when Williams and its affiliates own less than 50%
of our then-outstanding capital stock, the secretary of our company is required
to call a special meeting of the stockholders at the request of Williams or its
affiliates and stockholder action may be taken by written consent in lieu of a
meeting.
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In general, our by-laws may be altered or repealed and new by-laws adopted
by the holders of a majority of the voting stock or by a majority of the whole
board. However, certain provisions, including those relating to the limitation
of actions by stockholders taken by written consent, the calling of special
stockholder meetings, other stockholder actions and proposals and certain
matters related to our board, may be amended only by the affirmative vote of
holders of at least 80% of the total voting stock.
LIMITATIONS ON CHANGES OF CONTROL OF OUR COMPANY
The provisions of our restated certificate of incorporation and by-laws
described above, as well as the stockholder rights plan described below and the
provisions of Section 203 of the DGCL, could have the following effects, among
others:
- delaying, deferring or preventing a change in control
- delaying, deferring or preventing the removal of existing management
- deterring potential acquirors from making an offer to our stockholders
- limiting any opportunity of our stockholders to realize premiums over
prevailing market prices of our common stock in connection with offers by
potential acquirers
Any of the above could occur, notwithstanding that a majority of our
stockholders might benefit from such a change in control or offer.
TRANSACTIONS AND CORPORATE OPPORTUNITIES
Our restated certificate of incorporation includes provisions which
regulate and define the conduct of certain business and affairs of our company
from the time of the completion of the equity offering until the time Williams
ceases to be a significant stockholder of our company. These provisions serve to
determine and delineate the respective rights and duties of our company,
Williams, and some of our directors and officers in anticipation of the
following:
- directors, officers and/or employees of Williams may serve as directors
of our company
- Williams may engage in lines of business that are the same, similar or
related to, overlap or compete with our lines of business, subject to the
separation agreement
- our company and Williams will engage in material business transactions,
including pursuant to the various agreements described above
Our company may, from time to time, enter into and perform agreements with
Williams to engage in any transaction, and to agree to compete or not to compete
with each other, including to allocate, or to cause their respective directors,
officers and employees to allocate, corporate opportunities between themselves.
Our restated certificate of incorporation provides that no such agreement, or
its performance, shall be considered contrary to any fiduciary duty of Williams,
as the controlling stockholder of our company, or of any such director, officer
and/or employee, if any of the following conditions are satisfied:
- the agreement was entered into before our company ceased to be a
wholly-owned subsidiary of Williams and is continued in effect after this
time
- the agreement or transaction was approved, after being made aware of the
material facts of the relationship between our company and Williams and
the material terms and facts of the agreement or transaction, by:
- our board, by affirmative vote of a majority of directors who are not
interested persons
- by a committee of our board consisting of members who are not
interested persons, by affirmative vote of a majority of those members
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- by one or more of our officers or employees who is not an interested
person and who was authorized by our board or a board committee as
specified above or, in the case of an employee, to whom authority has
been delegated by an officer to whom the authority to approve such an
action has been so delegated
- the agreement or transaction was fair to our company as of the time it
was entered into by our company
- the agreement or transaction was approved by affirmative vote of a
majority of the shares of capital stock entitled to vote and who do vote
on the agreement or transaction, excluding Williams and any interested
person in respect of such agreement or transaction
For purposes of these provisions, an interested person is generally an
individual who has a personal financial interest in the relevant transaction.
The provisions of our restated certificate of incorporation with regard to
such transactions and/or corporate opportunities shall terminate when Williams,
together with its affiliates, ceases to be the owner of voting stock
representing 25% or more of the votes entitled to be cast by the holders of all
the then outstanding voting stock; provided, however, that the termination shall
not terminate the effect of these provisions with respect to any agreement
between our company and Williams that was entered into before the time of
termination or any transaction entered into in the performance of such
agreement, whether entered into before or after such time, or any transaction
entered into between our company and Williams or the allocation of any
opportunity between them before such time. These provisions do not alter the
fiduciary duty of loyalty of our directors under applicable Delaware law. By
becoming a stockholder in our company, you will be deemed to have notice of and
have consented to these provisions of our restated certificate of incorporation.
LISTING
We will apply for our common stock to be listed on the New York Stock
Exchange under the symbol "WCG."
TRANSFER AGENT
Our transfer agent and registrar for our common stock is The Bank of New
York.
STOCKHOLDER RIGHTS PLAN
Our board has adopted a stockholder rights plan. Pursuant to the rights
plan, one right will be issued and attached to each outstanding share of capital
stock. Each right will entitle the holder, in circumstances described below, to
purchase from our company a unit consisting of one one-hundredth of a share of
Series A junior preferred stock, par value $0.01 per share, at an exercise price
of $100 per right, subject to adjustment in certain events.
Initially, the rights will be attached to all certificates representing
outstanding shares of capital stock and will be transferred with and only with
these certificates. The rights will become exercisable and separately
certificated only upon the distribution date, which will occur upon the earlier
of the following:
- ten business days following a public announcement that a person or group
other than certain exempt persons has acquired or obtained the right to
acquire beneficial ownership of 15% or more of the shares of common stock
then outstanding
- ten business days, or later if determined by our board prior to any
person acquiring 15% or more of the shares of common stock then
outstanding, following the commencement or
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announcement of an intention to commence a tender offer or exchange offer
that would result in a person or group becoming an acquiring person
As soon as practicable after the distribution date, certificates will be
mailed to holders of record of capital stock as of the close of business on the
distribution date. From and after the distribution date, the separate
certificates alone will represent the rights. Prior to the distribution date,
all shares of capital stock issued will be issued with rights. Shares of capital
stock issued after the distribution date will not be issued with rights, except
that shares issued pursuant to any of the following that exist prior to the
distribution date may be issued with rights:
- the exercise of stock options that exist prior to the distribution date
- under employee plans or arrangements that exist prior to the distribution
date
- upon exercise, conversion or exchange of certain securities
- in other cases as may be deemed appropriate by our board
The final expiration date of the rights will be at the close of business on
June 30, 2009, unless earlier redeemed or exchanged by us as described below.
In the event that a person acquires 15% or more of the shares of common
stock then outstanding, except pursuant to any action or transaction approved by
our board before the person acquires 15% or more of the shares of common stock
then outstanding, each holder of a right other than that person and certain
related parties, whose rights will automatically become null and void, will
thereafter be entitled to receive, upon exercise of the right, a number of
shares of common stock, or, in certain circumstances, cash, property or other
securities of our company, having a current market price averaged over the
previous 30 consecutive trading days equal to two times the exercise price of
the right.
In the event that, at any time on or after a person acquires 15% or more of
the shares of common stock then outstanding, our company effects a merger or
other business combination in which it is not the surviving entity, or any
shares of our capital stock are changed into or exchanged for other securities,
or 50% or more of its assets, cash flow or earning power is sold or transferred,
then each holder of a right, except rights owned by any person who has acquired
15% or more of the shares of common stock then outstanding or certain related
parties, which will have become void as set forth above, shall thereafter have
the right to receive, upon exercise, a number of shares of common stock of the
acquiring company having a fair market value equal to two times the exercise
price of the right.
The exercise price payable, and the number of units of Series A preferred
stock, shares of capital stock or other securities or property issuable, upon
exercise of the rights are subject to adjustment from time to time to prevent
dilution in the event of a stock dividend or distribution on the capital stock,
a grant or distribution to holders of the capital stock of certain subscription
rights, warrants, evidence of indebtedness, cash or other assets, or other
similar events.
No fractional units will be issued. In lieu thereof, an adjustment in cash
will be made based on the market price of the common stock on the last trading
date prior to the date of exercise. Pursuant to the rights plan, we reserve the
right to require prior to the occurrence of one of the events that triggers the
ability to exercise the rights that, upon any exercise of rights, a number of
rights be exercised so that only whole shares of Series A preferred stock will
be issued.
We will also have the option, at any time after a person acquires 15% or
more of our capital stock as described above on and before that person becomes,
or simultaneously with that person becoming, the beneficial owner of 50% or more
or the shares of rights plan voting stock then outstanding, to exchange the
rights, other than rights owned by an acquiring person or certain
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related parties, which will have become void, in whole or in part, at an
exchange ratio of one share of capital stock, and/or other equity securities
deemed to have the same value as one share of capital stock, per right, subject
to adjustment.
At any time prior to the close of business on the tenth business day
following the stock acquisition date, our company, by vote of a majority of our
board, may redeem the rights in whole, but not in part, at a price of $0.01 per
right, payable, at our option, in cash, shares of capital stock or such other
consideration as our board may determine. The rights will terminate at the time
so designated by our board and thereafter the only right of the holders of
rights will be to receive the redemption price.
For as long as the rights are redeemable, our company may, except with
respect to the redemption price, amend the rights plan in any manner, including
to extend the time period in which the rights may be redeemed. After the time
the rights cease to be redeemable, we may amend the rights in any manner that
does not materially adversely affect the interests of holders of the rights as
such. Until a right is exercised, the holder, as such, will have no rights as a
stockholder of our company, including the right to vote or to receive dividends.
Our restated certificate of designations of the Series A preferred stock
provides that each share of Series A preferred stock that may be issued upon
exercise of the rights will be entitled to receive, when, as and if declared,
cash and non-cash dividends equal to:
- a dividend multiple of 100 times the aggregate per share amount of all
cash and non-cash dividends declared or paid on the common stock, subject
to adjustments for stock splits or dividends payable in common stock or
reclassifications of common stock
- preferential quarterly cash dividends of $.01 per share, less any
dividends received
Holders of Series A preferred stock will have a vote multiple of 100 votes
per share, subject to adjustments for stock splits or dividends payable in
common stock or reclassifications of common stock and, except as otherwise
provided by the certificate of designations, our restated certificate of
incorporation or applicable law, shall vote together with holders of capital
stock as a single class. In the event that the preferential quarterly cash
dividends are in arrears for six or more quarterly dividend payment periods,
holders of Series A preferred stock will have the right to elect two additional
members to our board, to serve until the next annual meeting of our company or
until such earlier time as all accrued and unpaid preferential quarterly cash
dividends are paid in full.
In the event of the liquidation, dissolution or winding up of our company,
after provision for liabilities and any preferential amounts payable with
respect to any preferred stock ranking senior to the Series A preferred stock,
the holders of any Series A preferred stock will be entitled to receive
liquidation payments per share in an amount equal to the greater of the
following:
- $100.00 plus an amount equal to accrued and unpaid dividends and
distributions thereon to the date of payment
- a liquidation multiple of 100 times the aggregate amount to be
distributed per share to holders of capital stock, subject to adjustments
for stock splits or dividends payable in common stock or
reclassifications of common stock
The rights of the Series A preferred stock as to dividends, voting and
liquidation are protected by antidilution provisions.
In the event of a consolidation, merger or other transaction in which the
shares of capital stock are exchanged, holders of shares of Series A preferred
stock will be entitled to receive the amount and type of consideration equal to
the per share amount received by the holders of the
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capital stock, multiplied by the highest of the dividend multiple, the vote
multiple or the liquidation multiple as in effect immediately prior to the
event.
Except for the acquisition of shares of Series A preferred stock in any
other manner permitted by law, our certificate of designations or our restated
certificate of incorporation, the shares of Series A preferred stock are not
redeemable at the option of our company or any holder thereof.
The rights will have certain anti-takeover effects. The rights will cause
substantial dilution to any person or group that attempts to acquire our company
without the approval of our board. As a result, the overall effect of the rights
may be to render more difficult or discourage any attempt to acquire our
company, even if such acquisition may be in the interest of our stockholders.
Because our board can redeem the rights or approve a permitted offer, the rights
will not interfere with a merger or other business combination approved by our
board.
The rights plan excludes Williams and its affiliates and associates from
being considered acquiring persons until Williams first ceases to beneficially
own 15% or more of the rights plan voting stock then outstanding.
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DESCRIPTION OF INDEBTEDNESS AND OTHER FINANCING ARRANGEMENTS
The following are summaries of the material provisions of our debt
agreements, copies of which we have filed as exhibits to the registration
statement of which this prospectus forms a part, and by the provisions of
applicable law. See the section of this prospectus entitled "Where You Can Find
Additional Information" for more information.
NOTES
GENERAL
The notes are to be issued under an indenture, to be dated as of
____________, 1999, between us and The Bank of New York, as trustee. The notes
are general unsecured senior obligations of ours, and will rank on a parity with
all our other unsecured senior indebtedness.
The notes will be limited to $1.3 billion aggregate principal amount and
will mature on ____________ , 2009. Interest on the notes will be payable on
____________ and ____________ of each year, commencing ____________ at the rate
of ____% per annum. At any time or from time to time prior to ____, 2002, we may
redeem up to 35% of the aggregate principal amount of the notes at a redemption
price equal to ______% of the principal amount of the notes so redeemed, with
the net cash proceeds of one or more offerings of common stock as described in
the indenture. In addition, the notes will be redeemable, at our option, in
whole or in part, at any time after ____________, 200__, at redemption prices
starting at ____% of their principal amount and declining to 100% of their
principal amount on or after ____________, plus accrued and unpaid interest. In
addition, upon a change of control of our company, each note holder will have
the right to require us to purchase that holder's notes.
COVENANTS
The indenture contains certain restrictive covenants, including, among
others, the following:
- a limitation on our ability and that of our Restricted Subsidiaries (as
defined in the indenture) to incur indebtedness
- a limitation on our ability and that of our Restricted Subsidiaries to,
directly or indirectly, make any Restricted Payment (as defined in the
indenture), including payment of dividends, prepayment of subordinated
indebtedness, the repurchase of capital stock and making of investments
- a limitation on our ability to allow to exist certain dividend and other
payment restrictions affecting our Restricted Subsidiaries
- a limitation on our ability to sell or to permit any Restricted
Subsidiary to issue or sell capital stock of a Restricted Subsidiary
- a limitation on our ability and that of our Restricted Subsidiaries to
consummate certain Asset Dispositions (as defined in the indenture)
unless certain conditions are fulfilled
- limitations on transactions with affiliates
- limitations on our ability and that of our Restricted Subsidiaries to
incur Liens (as defined in the Indenture).
In addition, the indenture limits our ability to merge with or to transfer
all or substantially all of our assets to another person. Except as set forth
above, the indenture does not contain any material quantitative financial
requirements. The notes provide for acceleration upon customary events of
default.
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REVOLVING CREDIT FACILITIES
We currently borrow under an unsecured revolving credit facility with
various banks which includes as borrowers Williams and some of its other
subsidiaries. This credit facility terminates in July 2002. Solutions may borrow
up to $300 million and we may borrow up to $400 million under this credit
facility. Our $400 million commitment is guaranteed by Williams. We have agreed
that our combined borrowings under this commitment will not exceed $400 million.
Borrowings under this credit facility are generally for 30 to 90 day terms and
bear interest at LIBOR plus 75 to 85 basis points. We currently have no
outstanding borrowings under this credit facility.
INTERIM CREDIT FACILITY
In April 1999, we entered into a $1.4 billion unsecured revolving interim
loan facility with two banks which terminates on September 30, 1999. Our interim
loan obligations are guaranteed by Williams. Borrowings under this interim loan
facility are generally for 30-day terms and bear interest at LIBOR plus 75 basis
points. We currently have $400 million in outstanding borrowings under this
credit facility. We intend to repay all of the then-outstanding borrowings under
this facility with the proceeds from the offerings and the concurrent
investments. The balance of any new borrowings will be repaid and the commitment
terminated upon implementation of our new permanent credit facility described
below.
PERMANENT CREDIT FACILITY
At the time of completion of the offerings, we expect to have a commitment
for a new $1.0 billion, six-year unsecured revolving credit facility which we
plan to put in place after the completion of the offerings but on or before
September 30, 1999. We expect to borrow the amount necessary under this
permanent credit facility to repay the bridge loan facility on or before that
date. Additional borrowings will be made under the permanent credit facility as
and when needed for our capital investment plan and for working capital and
general corporate purposes. We expect that the new permanent credit facility
will contain various restrictive covenants, including those described above for
the indenture governing the notes, and will provide that any outstanding
borrowings will become due upon a change of control of our company.
WILLIAMS NOTE
To fund our operations, we historically have received capital contributions
from Williams and interest-bearing advances from Williams and an affiliate of
Williams at floating rates of interest established at specified margins above
benchmark rates. As of December 31, 1998, Williams' total capital contributions
to us were approximately $1.3 billion and our borrowings provided by Williams
were $614.3 million at an annual interest rate of LIBOR plus 75 basis points,
the rate paid on our current credit facility. At the time of completion of the
offerings, we estimate that we will have approximately $1.3 billion in
borrowings from Williams. At that time, these borrowings will be converted into
a 6-year amortizing note that will bear interest at an annual rate based on our
credit rating, expected initially to be LIBOR plus ____ basis points. This note
will rank senior to the notes and will be made on market terms and conditions.
Principal will be due and payable quarterly beginning no earlier than June 30,
2000 based on an earnings formula, but we will pay not less than $12.5 million
in 2000 and $25 million in principal annually after 2000. The Williams Note will
be due and payable in full upon a change of control of our company. We plan to
amend the Williams Note to more closely resemble the terms and conditions of the
permanent credit facility after the offerings.
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ASSET DEFEASANCE PROGRAM
During 1998, we entered into an asset defeasance program in the form of an
operating lease agreement covering a portion of the Williams Network with a
group of financial institutions. The total estimated cost of the network assets
to be covered by this lease agreement is $750 million. The lease term will
include an interim term, during which the covered network assets will be
constructed, which is anticipated to end no later than December 31, 1999, and a
base term. The interim and base terms are expected to total five years and, if
renewed, could total seven years.
We have an option to purchase the covered network assets during the lease
term at an amount approximating the lessor's cost. Williams provides a residual
value guarantee equal to a maximum of 89.9% of the transaction. The residual
value guarantee is reduced by the present value of the actual lease payments. In
the event that we do not exercise the purchase option, we expect the fair market
value of the covered network assets to substantially reduce or eliminate
Williams' payment under the residual value guarantee. At March 31, 1999, $368.1
million of construction costs for the Williams Network had been incurred.
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SHARES ELIGIBLE FOR FUTURE SALE
After the equity offering and the concurrent investments, we will have
approximately ________ shares of common stock outstanding, ________ of which
will be owned by SBC, Intel and Telmex in the aggregate and up to ________ of
which will be owned by our directors and executive officers. If the underwriters
exercise their over-allotment option in full, we will have a total of
approximately ________ shares of common stock outstanding, of which ________
will be owned by SBC, Intel and Telmex in the aggregate and up to ________ of
which will be owned by our directors and executive officers. There will also be
outstanding options to purchase up to ________ shares of our common stock that
will be issued to directors and selected officers and other employees of our
company and Williams. In addition, we will have ________ shares of Class B
common stock outstanding, all of which will be owned by Williams. The Class B
common stock is convertible into common stock on a share-for-share basis at the
option of the holder at any time, or automatically upon transfer to a person or
entity which is not a permitted transferee. See the section of our prospectus of
"Description for Capital Stock" for more information. All of the common stock
sold in the equity offering will be freely transferable without restriction or
further registration under the Securities Act, except for shares acquired by our
directors and executive officers. The shares of Class B common stock to be
retained by Williams and the shares of common stock to be acquired the
concurrent investments are not being acquired under the equity offering and will
have restrictions on resale.
We, Williams, SBC, Intel, Telmex, our directors and executive officers and
selected customers and suppliers who are purchasing common stock in the equity
offering have agreed not to offer, sell, or otherwise dispose of any capital
stock for a period of 180 days after the date of this prospectus, without the
prior written consent of Salomon Smith Barney Inc. and Lehman Brothers Inc. on
behalf of the underwriters. Williams is not under any contractual obligation to
retain our common stock or Class B common stock, except during this 180-day
period. SBC has agreed to additional restrictions on transfer of its shares of
our common stock. We can give no assurance concerning how long these parties
will continue to hold their common stock after the equity offering.
The shares of common stock acquired by SBC, Intel and Telmex will be
restricted securities, and, as such, will be subject to the resale limitations
of Rule 144 of the Securities Act.
The shares of Class B common stock held by Williams and the shares of
common stock acquired by any of our other affiliates will also be subject to the
resale limitations of Rule 144 of the Securities Act. Rule 144 defines an
affiliate as a person that directly or indirectly, through one or more
intermediaries, controls or is controlled by, or is under common control with,
the issuer.
In general, a stockholder subject to Rule 144 who has owned common stock of
an issuer for at least one year may, within any three-month period, sell up to
the greater of:
- 1% of the total number of shares of common stock then outstanding; and
- the average weekly trading volume of the common stock during the four
weeks preceding the stockholder's required notice of sale.
Rule 144 requires stockholders to aggregate their sales with other
stockholders with which it is affiliated for purposes of complying with this
volume limitation. A stockholder who has owned common stock for at least two
years, and who has not been an affiliate of the issuer for at least 90 days, may
sell common stock free from the volume limitation and notice requirements of
Rule 144.
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Following expiration of the 180-day period noted above, Williams will be
entitled to require us to use our best efforts to register for sale under the
Securities Act any shares of common stock held by it or any of its affiliates or
that may be received by it upon conversion of its Class B common stock. SBC,
Intel and Telmex also have registration rights. See the sections of this
prospectus entitled "Relationship Between Our Company and Williams" and
"Business -- Strategic alliances."
We cannot estimate the number of shares of common stock that may be sold by
third parties in the future because these sales will depend on market prices and
other factors.
Prior to the equity offering, there has been no public market for our
common stock. We cannot predict the effect, if any, that future sales of shares
of our common stock or the availability of our shares for sale would have on the
prevailing market price of our common stock. Sales of a significant number of
shares of our common stock, or the perception that these sales could occur,
could adversely affect the prevailing market price of our common stock and could
impair our future ability to raise capital through an offering of equity
securities. See "Risk Factors -- Risks relating to our common stock -- Future
sales of stock may adversely affect our stock price."
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IMPORTANT UNITED STATES FEDERAL TAX CONSEQUENCES
OF OUR COMMON STOCK TO NON-U.S. HOLDERS
This is a general discussion of certain United States federal tax
consequences of the acquisition, ownership, and disposition of our common stock
by a holder that, for U.S. federal income tax purposes, is not a U.S. person as
we define that term below. A holder of our common stock who is not a U.S. person
is a non-U.S. holder. We assume in this discussion that you will hold our common
stock issued pursuant to the offering as a capital asset (generally, property
held for investment). We do not discuss all aspects of U.S. federal taxation
that may be important to you in light of your individual investment
circumstances, such as special tax rules that would apply to you, for example,
if you are a dealer in securities, financial institution, bank, insurance
company, tax-exempt organization, partnership or owner of more than 5% of our
common stock. Our discussion is based on current provisions of the Internal
Revenue Code of 1986, as amended, Treasury Regulations, judicial opinions,
published positions of the U.S. Internal Revenue Service and other applicable
authorities, all as in effect on the date of this prospectus and all of which
are subject to differing interpretations or change, possibly with retroactive
effect. We have not sought, and will not seek, any ruling from the IRS with
respect to the tax consequences discussed in this prospectus, and there can be
no assurance that the IRS will not take a position contrary to the tax
consequences discussed below or that any position taken by the IRS would not be
sustained. We urge you to consult your tax advisor about the U.S. federal tax
consequences of acquiring, holding, and disposing of our common stock, as well
as any tax consequences that may arise under the laws of any foreign, state,
local, or other taxing jurisdiction.
For purposes of this discussion, a U.S. person means any one of the
following:
- a citizen or resident of the U.S.
- a corporation, partnership, or other entity created or organized in the
U.S. or under the laws of the U.S. or of any political subdivision of the
U.S.
- an estate, the income of which is includible in gross income for U.S.
federal income tax purposes regardless of its source
- a trust, the administration of which is subject to the primary
supervision of a U.S. court and that has one or more U.S. persons who
have the authority to control all substantial decisions of the trust
DIVIDENDS
Dividends paid to a non-U.S. holder will generally be subject to
withholding of U.S. federal income tax at the rate of 30%. If, however, the
dividend is effectively connected with the conduct of a trade or business in the
U.S. by the non-U.S. holder, the dividend will be subject to U.S. federal income
tax imposed on net income on the same basis that applies to U.S. persons
generally, and, for corporate holders under certain circumstances, the branch
profits tax. Non-U.S. holders should consult any applicable income tax treaties
that may provide for a reduction of, or exemption from, withholding taxes. For
purposes of determining whether tax is to be withheld at a reduced rate as
specified by a treaty, we generally will presume that dividends we pay on or
before December 31, 2000, to an address in a foreign country are paid to a
resident of that country.
Under recently finalized Treasury regulations, which in general apply to
dividends that we pay after December 31, 2000, to obtain a reduced rate of
withholding under a treaty, a non-U.S. holder generally will be required to
provide certification as to that non-U.S. holder's entitlement to treaty
benefits. These regulations also provide special rules to determine whether,
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for purposes of applying a treaty, dividends that we pay to a non-U.S. holder
that is an entity should be treated as paid to holders of interests in that
entity.
GAIN ON DISPOSITION
A non-U.S. holder will generally not be subject to United States federal
income tax, including by way of withholding, on gain recognized on a sale or
other disposition of our common stock unless any one of the following is true:
- the gain is effectively connected with the conduct of a trade or business
in the U.S. by the non-U.S. holder
- the non-U.S. holder is a nonresident alien individual present in the U.S.
for 183 or more days in the taxable year of the disposition and certain
other requirements are met
- the non-U.S. holder is subject to tax pursuant to provisions of the U.S.
federal income tax law applicable to certain U.S. expatriates
- we are or have been during certain periods a "United States real property
holding corporation" for U.S. federal income tax purposes
If we are or have been a United States real property holding corporation, a
non-U.S. holder will generally not be subject to U.S. federal income tax on gain
recognized on a sale or other disposition of our common stock provided that:
- the non-U.S. holder does not hold, and has not held during certain
periods, directly or indirectly, more than 5% of our outstanding common
stock and
- our common stock is and continues to be traded on an established
securities market for U.S. federal income tax purposes
We believe that our common stock will be traded on an established securities
market for this purpose in any quarter during which it is listed on the NYSE.
If we are or have been during certain periods a U.S. real property holding
corporation and the above exception does not apply, a non-U.S. holder will be
subject to U.S. federal income tax with respect to gain realized on any sale or
other disposition of our common stock as well as to a withholding tax, generally
at a rate of 10% of the proceeds. Any amount withheld pursuant to a withholding
tax will be creditable against a non-U.S. holder's U.S. federal income tax
liability.
Gain that is effectively connected with the conduct of a trade or business
in the U.S. by the non-U.S. holder will be subject to the U.S. federal income
tax imposed on net income on the same basis that applies to U.S. persons
generally, and, for corporate holders under certain circumstances, the branch
profits tax, but will generally not be subject to withholding. Non-U.S. holders
should consult any applicable income tax treaties that may provide for different
rules.
UNITED STATES FEDERAL ESTATE TAXES
Our common stock that is owned or treated as owned by an individual who is
not a citizen or resident of the U.S., as specially defined for U.S. federal
estate tax purposes, on the date of that person's death will be included in his
or her estate for U.S. federal estate tax purposes, unless an applicable estate
tax treaty provides otherwise.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Generally, we must report annually to the IRS and to each non-U.S. holder
the amount of dividends that we paid to a holder, and the amount of tax that we
withheld on those dividends.
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This information may also be made available to the tax authorities of a country
in which the non-U.S. holder resides.
Under current U.S. Treasury regulations, U.S. information reporting
requirements and backup withholding tax will generally not apply to dividends
that we pay on our common stock to a non-U.S. holder at an address outside the
U.S. Payments of the proceeds of a sale or other taxable disposition of our
common stock by a U.S. office of a broker are subject to both backup withholding
at a rate of 31% and information reporting, unless the holder certifies as to
its non-U.S. holder status under penalties of perjury or otherwise establishes
an exemption. Information reporting requirements, but not backup withholding
tax, will also apply to payments of the proceeds of a sale or other taxable
disposition of our common stock by foreign offices of U.S. brokers or foreign
brokers with certain types of relationships to the U.S., unless the broker has
documentary evidence in its records that the holder is a non-U.S. holder and
certain other conditions are met or the holder otherwise established an
exemption.
Backup withholding is not an additional tax. Any amounts that we withhold
under the backup withholding rules will be refunded or credited against the
non-U.S. holder's U.S. federal income tax liability if certain required
information is furnished to the IRS.
The U.S. Treasury Department has promulgated final regulations regarding
the withholding and information reporting rules discussed above. In general,
those regulations do not significantly alter the substantive withholding and
information reporting requirements but unify current certification procedures
and forms and clarify reliance standards. The final regulations are generally
effective for payments made after December 31, 2000, subject to transition
rules.
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UNDERWRITING
Subject to the terms and conditions stated in the underwriting agreement
dated the date hereof, the underwriters of the equity offering in the United
States and Canada named below, for whom Salomon Smith Barney Inc., Lehman
Brothers Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated are acting
as U.S. representatives, and the underwriters of the concurrent equity offering
outside the United States and Canada named below, for whom Lehman Brothers
International (Europe), Salomon Brothers International Limited and Merrill Lynch
International are acting as international representatives, severally agreed to
purchase, and we have agreed to sell to the underwriters, the number of shares
set forth opposite the name of each underwriter.
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
---- ---------
<S> <C>
U.S. underwriters:
Salomon Smith Barney Inc. ................................
Lehman Brothers Inc. .....................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...............................
--------
Subtotal...............................................
--------
</TABLE>
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
---- ---------
<S> <C>
International underwriters:
Lehman Brothers International (Europe)....................
Salomon Brothers International Limited....................
Merrill Lynch International...............................
--------
Subtotal...............................................
--------
Total.......................................
========
</TABLE>
We refer to the U.S. underwriters and the international underwriters as the
underwriters and the U.S. representatives and international representatives as
the representatives. The underwriting agreement provides that the obligations of
the several underwriters to purchase the shares included in this offering are
subject to approval of legal matters by counsel as well as to other conditions.
The underwriters are obligated to purchase all the shares, other than those
covered by the over-allotment option described below, if they purchase any of
the shares. The offering price and underwriting discounts and commissions per
share for the U.S. offering and the international offering are identical. The
closing of the U.S. offering is a condition to the closing of the international
offering and the closing of the international offering is a condition to the
closing of the U.S. offering.
The underwriters propose to offer some of the shares directly to the public
at the public offering price set forth on the cover page of this prospectus and
some of the shares to certain dealers at the public offering price less a
concession not in excess of $____ per share. The underwriters may allow, and
such dealers may reallow, a concession not in excess of $____ per share on sales
to certain other dealers. If all of the shares are not sold at the initial
offering price, the representatives may change the public offering price and the
other selling terms. The representatives have advised us that the underwriters
do not intend to confirm any sales to any accounts over which they exercise
discretionary authority.
We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus, to purchase up to ________ additional shares of our
common stock at the public offering price less the underwriting discount. The
underwriters may exercise this option solely for
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the purpose of covering over-allotments, if any, in connection with this
offering. To the extent this option is exercised, each underwriter will be
obligated, subject to various conditions, to purchase a number of additional
shares approximately proportionate to its initial purchase commitment.
We, Williams, SBC and our executive officers and directors have agreed not
to do any of the following, whether any transaction described in clause (1), (2)
or (3) below is to be settled by delivery of common stock or other securities,
in cash or otherwise, in each case without the prior written consent of Salomon
Smith Barney Inc. and Lehman Brothers Inc., on behalf of the underwriters, for a
period of 180 days after the date of this prospectus:
(1) offer, sell, pledge, or otherwise dispose of, or enter into any transaction
or device which is designed or could be expected to, result in the
disposition by any person at any time in the future of, any shares of common
stock or securities convertible into or exchangeable for common stock, other
than any of the following:
- the common stock sold under this prospectus
- our issuance and sale of shares of common stock to SBC, Intel and Telmex
in connection with the concurrent investments
- our issuance of shares of Class B common stock to Williams in connection
with our exercise of the Lightel option
- shares of common stock we issue pursuant to employee benefit plans,
qualified stock option plans or other employee compensation plans
existing on the date of this prospectus or pursuant to currently
outstanding options, warrants or rights
- shares of common stock we use as consideration for acquisitions or that
we issue in connection with strategic alliances, provided that the
recipient of these shares of our common stock agrees to be bound by the
transfer restrictions set forth in this prospectus for the remaining term
(2) sell or grant options, rights or warrants for shares of our common stock or
securities convertible into or exchangeable for our common stock except for
common stock and options for common stock which we issue or grant to our
officers, directors or employees
(3) enter into any swap or other derivatives transaction that transfers to
another, in whole or in part, any of the economic benefits or risks of
ownership of shares of common stock
The U.S. underwriters and the international underwriters have entered into
an agreement among U.S. underwriters and international underwriters, pursuant to
which each U.S. underwriter has agreed that, as part of the distribution of the
shares of common stock offered in the U.S. offering:
- it is not purchasing any of these shares for the account of anyone other
than a U.S. Person (as defined below), and
- it has not offered or sold, will not offer, sell, resell or deliver,
directly or indirectly, any of these shares or distribute any prospectus
relating to the U.S. offering to anyone other than a U.S. Person
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<PAGE> 150
In addition, pursuant to the agreement, each international underwriter has
agreed that, as part of the distribution of the shares of common stock offered
in the international offering:
- it is not purchasing any of the shares for the account of a U.S. Person,
and
- it has not offered or sold, and will not offer, sell, resell or deliver,
directly or indirectly, any of these shares or distribute any prospectus
relating to the international offering to any U.S. Person
The limitations described above do not apply to stabilization transactions
or to other transactions specified in the underwriting agreement and the
agreement among U.S. underwriters and international underwriters, including:
- some purchases and sales between U.S. underwriters and the international
underwriters
- some offers, sales, resales, deliveries or distributions to or through
investment advisors or other persons exercising investments discretion
- purchases, offers or sales by a U.S. underwriter who is also acting as an
international underwriter or by an international underwriter who is also
acting as a U.S. underwriter
- other transactions specifically approved by the U.S. representatives and
the international representatives
As used in this section, the term "U.S. Person" means any resident or national
of the United States or Canada, any corporation, partnership or other entity
created or organized in or under the laws of the United States or Canada, or any
estate or trust the income of which is subject to United States or Canadian
federal income taxation regardless of the source, the term "United States" means
the United States of America (including the District of Columbia) and its
territories, its possessions and other areas subject to its jurisdiction, and
the term "Canada" means Canada, its provinces, its territories, its possessions
and other areas subject to its jurisdiction.
Any offer of the shares of common stock in Canada will be made only
pursuant to an exemption from the prospectus filing requirement and an exemption
from the dealer registration requirement (where such an exemption is not
available, offers shall be made only by a registered dealer) in the relevant
Canadian jurisdiction where any such offer is made.
Each international underwriter has represented and agreed to all of the
following:
- It has not offered or sold and, prior to the date six months after the
date of issue of the shares of common stock, will not offer or sell any
shares of common stock 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.
- It has complied and will comply with all applicable provisions of the
Financial Services Act 1986 and the Regulation with respect to anything
done by it in relation to the shares of common stock in, from or
otherwise involving the United Kingdom.
- It has only issued or passed on, and 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 shares of common stock 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 be issued or passed upon.
Under the agreement between the U.S. underwriters and the international
underwriters, each international underwriter has further represented that it has
not offered or sold, and has agreed
146
<PAGE> 151
not to offer or sell, directly or indirectly, in Japan or to or for the account
of any resident of Japan, any of the shares of common stock in connection with
the distribution contemplated by this prospectus, except for offers and sales to
Japanese international underwriters or dealers and except pursuant to any
exemption from the registration requirements of the Securities and Exchange Law
and otherwise in compliance with applicable provisions of Japanese law. Each
international underwriter has further agreed to send to any dealer who purchases
from it any of the shares of common stock a notice stating in substance that, by
purchasing these shares, the dealer represents and agrees that it has not
offered or sold, and will not offer or sell, any of these shares, directly or
indirectly, in Japan or to or for the account of any resident of Japan except
for offers or sales to Japanese international underwriters or dealers and except
pursuant to any exemption from the registration requirements of the Securities
and Exchange Law and otherwise in compliance with applicable provisions of
Japanese law, and that the dealer will send to any other dealer to whom it sells
any of these shares a notice containing substantially the same statements as set
forth in this sentence.
Pursuant to the agreement among the U.S. underwriters and international
underwriters, sales may be made between the U.S. underwriters and the
international underwriters of the number of shares of common stock as may be
mutually agreed. The price of any shares so sold shall be the public offering
price as then in effect for the shares of common stock being sold by the U.S.
underwriters and the international underwriters less an amount equal to the
selling concession allocable to those shares of common stock, unless otherwise
determined by mutual agreement. To the extent that there are sales between the
U.S. underwriters and the international underwriters pursuant to the agreement
among the U.S. underwriters and the international underwriters, the number of
shares of common stock available for sale by the U.S. underwriters or by the
international underwriters may be more or less than the amount specified on the
cover page of this prospectus.
In connection with the equity offering, Salomon Smith Barney Inc. and
Lehman Brothers Inc., on behalf of the underwriters, may purchase and sell
shares of our common stock in the open market. These transactions may include
over-allotment, syndicate covering transactions and stabilizing transactions.
Over-allotment involves syndicate sales of common stock in excess of the number
of shares to be purchased by the underwriters in the offering, which creates a
syndicate short position. Syndicate covering transactions involve purchases of
our common stock in the open market after the distribution has been completed in
order to cover syndicate short positions. Stabilizing transactions consist of
certain bids or purchases of our common stock made for the purpose of preventing
or retarding a decline in the market price of our common stock while this
offering is in progress.
The underwriters also may impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member when
Salomon Smith Barney Inc. and Lehman Brothers Inc., in covering syndicate short
positions or making stabilizing purchases, repurchase shares originally sold by
that syndicate member.
Any of these activities may cause the price of our common stock to be
higher than the price that otherwise would exist in the open market in the
absence of such transactions. These transactions may be effected on the NYSE, in
the over-the-counter market or otherwise and, if commenced, may be discontinued
at any time.
At our request, the underwriters have reserved up to ____________ shares of
common stock offered in this prospectus for sale to all of the regular domestic
employees and independent directors of our company and of Williams and selected
suppliers and customers of our company at the initial public offering price set
forth on the cover page of this prospectus. Up to 7.0% of
147
<PAGE> 152
the common stock constituting the equity offering will be available for purchase
under the program, with no more than 0.7% of the common stock constituting the
equity offering to be available for purchase by the independent directors or our
customers and suppliers. These persons must commit to purchase no later than the
close of business on the day following the date of this prospectus. The number
of shares available for sale to the general public will be reduced to the extent
these persons purchase reserved shares. Our suppliers and customers who purchase
shares of common stock will agree not to sell these shares for a period of 180
days after the date of this prospectus without the prior written consent of
Salomon Smith Barney Inc. and Lehman Brothers Inc., on behalf of the
underwriters.
Purchasers of the shares of common stock offered in this prospectus may be
required to pay stamp taxes and other charges in accordances with the laws and
practices of the country of purchase, in addition to the offering price set
forth on the cover of this prospectus.
Certain of the underwriters of the equity offering and their affiliates
engage in transactions with, and perform services for, our company in the
ordinary course of business and have engaged and may in the future engage in
commercial banking and investment banking transactions with us and with
Williams, for which they receive customary compensation. In addition, some of
the underwriters of the equity offering will act as underwriters for the notes
offering.
We have agreed to indemnify the underwriters against liabilities, including
liabilities under the Securities Act of 1933, or to contribute to payments the
underwriters may be required to make in respect of any of those liabilities.
LEGAL MATTERS
The validity of the common stock offered in this prospectus and certain
legal matters in connection with the offerings will be passed upon for us by our
Senior Vice President, Law, William von Glahn, and our special counsel, Skadden,
Arps, Slate, Meagher & Flom LLP, New York, New York. Skadden, Arps, Slate,
Meagher & Flom LLP has from time to time represented, and may continue to
represent, Williams and its affiliates in certain legal matters, and is one of
several firms that have provided advice on taxation matters in connection with
the formation of WCG. Certain legal matters in connection with the offerings
will be passed upon for the underwriters by Davis Polk & Wardwell, New York, New
York. Davis Polk & Wardwell has from time to time represented, and may continue
to represent, Williams and its affiliates in certain legal matters. As of the
date of this prospectus, Mr. von Glahn owns, directly or indirectly, 177,527
shares of common stock of Williams and has the right to exercise options to
receive an additional 93,838 shares. At the time of completion of the offerings,
our company will grant to Mr. von Glahn options to purchase 50,000 shares of our
common stock at an exercise price equal to the initial public offering price.
148
<PAGE> 153
EXPERTS
The consolidated financial statements and schedule of Williams
Communications Group, Inc. at December 31, 1998 and 1997, and for each of the
three years in the period ended December 31, 1998, appearing in this prospectus
and registration statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon appearing elsewhere herein
which, as to the year 1998, are based in part on the report of Arthur Andersen
S/C, independent public accountants. The financial statements and schedule
referred to above are included in reliance upon such reports given on the
authority of such firms as experts in accounting and auditing.
The combined financial statements of the Direct Sales Subsidiary, NCS
(including BA Meridian) and TTS of the Enterprise Network's division of Nortel
Networks Corporation, formerly Northern Telecom Limited, for the year ended
December 31, 1996 and the four-month period ended April 30, 1997 appearing in
this prospectus and registration statement have been audited by Deloitte &
Touche LLP, independent auditors, as set forth thereon appearing elsewhere
herein, and are included in reliance upon such report given on the authority of
such firm as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
This prospectus constitutes a part of a registration statement on Form S-1
(together with all amendments, supplements, schedules and exhibits to the
registration statement, referred to as the registration statement) which we have
filed with the Commission under the Securities Act, with respect to the common
stock offered in this prospectus. This prospectus does not contain all the
information which is in the registration statement. Certain parts of the
registration statement are omitted as allowed by the rules and regulations of
the Commission. We refer you to the registration statement for further
information about our company and the securities offered in this prospectus.
Statements contained in this prospectus concerning the provisions of documents
are not necessarily summaries of the material provisions of those documents, and
each statement is qualified in its entirety by reference to the copy of the
applicable document filed with the Commission. You can inspect and copy the
registration statement and the reports and other information we file with the
Commission under the Exchange Act at the public reference room maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549. You can obtain information on the operation of the public reference
room by calling the Commission at 1-800-SEC-0330. The same information will be
available for inspection and copying at the regional offices of the Commission
located at 7 World Trade Center, 13th Floor, New York, N.Y. 10048 and at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
You can also obtain copies of this material from the public reference room of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission also maintains a Web site which provides online access to
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission at the address
http://www.sec.gov.
Upon the effectiveness of the registration statement, we will become
subject to the information requirements of the Exchange Act. We will then file
reports, proxy statements and other information under the Exchange Act with the
Commission. In addition, Williams is subject to the information requirements of
the Exchange Act and files reports and other information under the Exchange Act
with the Commission. You can inspect and copy these reports and other
information of our company and Williams at the locations set forth above or
download these reports from the Commission's web site.
149
<PAGE> 154
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
WILLIAMS COMMUNICATIONS GROUP, INC.
Report of Ernst & Young LLP, Independent Auditors......... F-2
Report of Arthur Andersen S/C, Independent Public
Accountants............................................ F-3
Consolidated Statements of Operations for the years ended
December 31, 1998, 1997 and 1996 and the three months
ended March 31, 1999 and 1998 (unaudited).............. F-4
Consolidated Balance Sheets as of December 31, 1998 and
1997 and March 31, 1999 (unaudited).................... F-5
Consolidated Statements of Stockholder's Equity for the
years ended December 31, 1998, 1997 and 1996 and the
three months ended March 31, 1999 and 1998
(unaudited)............................................ F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996 and the three months
ended March 31, 1999 and 1998 (unaudited).............. F-7
Notes to Consolidated Financial Statements (Information as
of March 31, 1999 and for the three months ended March
31, 1999 and 1998 is unaudited)........................ F-8
DIRECT SALES SUBSIDIARY, NORTEL COMMUNICATIONS SYSTEMS, INC.
AND TTS MERIDIAN SYSTEMS, INC. OF ENTERPRISE NETWORKS OF
NORTHERN TELECOM LIMITED
Report of Deloitte & Touche LLP, Independent Auditors..... F-39
Combined Statements of Income and Changes in Net Assets
for the four months ended April 30, 1997 and year ended
December 31, 1996...................................... F-40
Combined Statements of Cash Flows for the four months
ended April 30, 1997 and year ended December 31,
1996................................................... F-41
Notes to the Financial Statements......................... F-42
</TABLE>
F-1
<PAGE> 155
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Williams Communications Group, Inc.
We have audited the accompanying consolidated balance sheets of Williams
Communications Group, Inc. as of December 31, 1998 and 1997, and the related
consolidated statements of operations, stockholder's equity, and cash flows for
each of the three years in the period ended December 31, 1998. 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 audits. The financial statements of ATL -- Algar Telecom Leste S.A. (an
entity in which the Company has a 30% interest at December 31, 1998) have been
audited by other auditors whose report has been furnished to us; insofar as our
opinion on the consolidated financial statements relates to data included for
ATL -- Algar Telecom Leste S.A., it is based solely on their report. In the
consolidated statement of operations for the year ended December 31, 1998, the
Company's equity in the net loss of ATL -- Algar Telecom Leste S.A. is
$12,683,000.
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 and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Williams
Communications Group at December 31, 1998 and 1997, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Tulsa, Oklahoma
April 7, 1999,
except for the matters described in the third paragraph of Note 10 and Note 17,
as to which the date is May 27, 1999
F-2
<PAGE> 156
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Management and Shareholders of
ATL -- Algar Telecom Leste S.A.:
We have audited the balance sheet of ATL -- ALGAR TELECOM LESTE S.A. (a
Brazilian corporation in the pre-operating stage) as of December 31, 1998, and
the related statements of income, changes in shareholders' investment and cash
flows for the period from inception (March 26, 1998) to December 31, 1998 (not
presented separately herein), all expressed in US dollars. 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 in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of ATL -- ALGAR TELECOM LESTE
S.A. (a pre-operating Company) as of December 31, 1998, and the results of its
operations and its cash flows for the period from inception (March 26, 1998) to
December 31, 1998, in conformity with generally accepted accounting principles
in the United States of America.
ARTHUR ANDERSEN S/C
Belo Horizonte, Brazil, January 29, 1999.
(except with respect to the matter
discussed in Note 8, as to which the
date is February 5, 1999)
F-3
<PAGE> 157
WILLIAMS COMMUNICATIONS GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, (UNAUDITED) YEAR ENDED DECEMBER 31,
------------------------- ---------------------------------------
1999 1998 1998 1997 1996
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenues (Note 3).............. $ 492,002 $ 386,293 $ 1,717,106 $ 1,426,130 $ 703,586
Operating expenses:
Cost of sales................ 389,747 288,553 1,294,583 1,043,932 517,222
Selling, general and
administrative............ 122,919 103,673 487,073 323,513 152,484
Provision for doubtful
accounts.................. 8,437 1,483 21,591 7,837 2,694
Depreciation and
amortization.............. 27,578 18,995 84,381 70,663 32,378
Other (Note 4)............... 300 (342) 34,245 45,269 500
----------- ----------- ----------- ----------- -----------
Total operating
expenses.......... 548,981 412,362 1,921,873 1,491,214 705,278
----------- ----------- ----------- ----------- -----------
Loss from operations (Note
3)........................... (56,979) (26,069) (204,767) (65,084) (1,692)
Interest accrued............... (10,536) (1,739) (18,650) (8,714) (17,367)
Interest capitalized........... 4,135 1,739 15,575 7,781 --
Investing income............... 1,025 369 1,931 670 296
Minority interest in (income)
loss of subsidiaries......... 5,836 (1,460) 15,645 (13,506) --
Gain on sale of interest in
subsidiary (Note 2).......... -- -- -- 44,540 --
Gain on sale of assets (Note
4)........................... -- -- -- -- 15,725
Other income (loss), net....... (174) (104) 178 508 (108)
----------- ----------- ----------- ----------- -----------
Loss before income taxes....... (56,693) (27,264) (190,088) (33,805) (3,146)
(Provision) benefit for income
taxes (Note 5)............... (17,448) 766 5,097 (2,038) (368)
----------- ----------- ----------- ----------- -----------
Net loss....................... $ (74,141) $ (26,498) $ (184,991) $ (35,843) $ (3,514)
=========== =========== =========== =========== ===========
Basic earnings per share:
Net loss..................... $ (74,141) $ (26,498) $ (184,991) $ (35,843) $ (3,514)
Weighted average shares
outstanding............... 1,000 1,000 1,000 1,000 1,000
Pro-forma earnings per share
(unaudited):
Net loss..................... $ (.16) $ (.06) $ (.41) $ (.08) $ (.01)
Weighted average shares
outstanding............... 450,000,000 450,000,000 450,000,000 450,000,000 450,000,000
</TABLE>
See accompanying notes.
F-4
<PAGE> 158
WILLIAMS COMMUNICATIONS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF AS OF DECEMBER 31,
MARCH 31, ---------------------------
1999 (UNAUDITED) 1998 1997
---------------- -------------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................ $ 96,847 $ 42,004 $ 11,290
Receivables less allowance of $33,241,000 (unaudited)
($23,576,000 in 1998 and $12,787,000 in 1997)..... 512,985 491,871 291,100
Due from affiliates (Note 14)........................ -- 3,881 --
Costs and estimated earnings in excess of billings... 176,728 185,922 144,575
Inventories.......................................... 73,609 67,699 63,484
Dark fiber held for sale............................. 41,079 46,175 --
Deferred income taxes (Note 5)....................... 40,132 23,829 20,090
Other................................................ 18,119 26,198 29,640
---------- ---------- ----------
Total current assets................................... 959,499 887,579 560,179
Investments (Note 7)................................... 635,004 261,155 28,170
Property, plant and equipment -- net (Note 8).......... 781,324 695,725 407,652
Goodwill and other intangibles, net of accumulated
amortization of $90,668,000 (unaudited) ($81,882,000
in 1998 and $55,136,000 in 1997)..................... 419,871 430,557 403,319
Due from affiliate (Note 14)........................... -- -- 97,097
Other assets and deferred charges...................... 73,161 58,468 9,617
---------- ---------- ----------
Total assets........................................... $2,868,859 $2,333,484 $1,506,034
========== ========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable (Note 9)............................ $ 140,723 $ 269,736 $ 59,402
Due to affiliates (Note 14).......................... 64,150 38,510 123,584
Accrued liabilities (Note 9)......................... 207,507 198,676 176,979
Billings in excess of costs and estimated earnings... 45,050 49,434 48,054
Long-term debt due within one year (Note 10)......... 622 690 1,195
---------- ---------- ----------
Total current liabilities.............................. 458,052 557,046 409,214
Long-term debt:
Affiliates (Note 14)................................. 825,044 620,710 --
Other (Note 10)...................................... 318,390 3,020 125,746
Deferred income taxes (Note 5)......................... 108,176 29,417 20,090
Other liabilities...................................... 11,995 10,595 5,126
Minority interest in subsidiaries...................... 117,190 110,076 83,156
Stockholder's equity:
Common stock, $1 per share par value, 1,000 shares
issued and authorized............................. 1 1 1
Capital in excess of par value....................... 1,356,891 1,299,871 1,000,348
Accumulated deficit.................................. (396,153) (321,958) (134,168)
Accumulated other comprehensive income (loss) (Note
11)............................................... 69,273 24,706 (3,479)
---------- ---------- ----------
Total stockholder's equity............................. 1,030,012 1,002,620 862,702
---------- ---------- ----------
Total liabilities and stockholder's equity............. $2,868,859 $2,333,484 $1,506,034
========== ========== ==========
</TABLE>
See accompanying notes.
F-5
<PAGE> 159
WILLIAMS COMMUNICATIONS GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
CAPITAL ACCUMULATED
IN OTHER
COMMON EXCESS OF ACCUMULATED COMPREHENSIVE
STOCK PAR VALUE DEFICIT INCOME(LOSS) TOTAL
------ ---------- ----------- ------------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995................ $1 $ 179,712 $ (85,492) $ -- $ 94,221
Net loss................................ -- -- (3,514) -- (3,514)
Capital contributions from parent....... -- 439,000 -- -- 439,000
Dividends to parent..................... -- -- (2,760) -- (2,760)
Other................................... -- 306 -- -- 306
-- ---------- --------- -------- ----------
Balance, December 31, 1996................ 1 619,018 (91,766) -- 527,253
Net loss................................ -- -- (35,843) -- (35,843)
Other comprehensive loss (Note 11):
Unrealized depreciation on marketable
equity securities................. -- -- -- (2,348) (2,348)
Foreign currency translation
adjustments....................... -- -- -- (1,131) (1,131)
----------
Comprehensive loss...................... (39,322)
Capital contributions from parent....... -- 366,130 -- -- 366,130
Acquisition of subsidiary with parent
stock................................ -- 15,200 -- -- 15,200
Dividends to parent..................... -- -- (6,559) -- (6,559)
-- ---------- --------- -------- ----------
Balance, December 31, 1997................ 1 1,000,348 (134,168) (3,479) 862,702
Net loss................................ -- -- (184,991) -- (184,991)
Other comprehensive income (loss) (Note
11):
Unrealized appreciation on marketable
equity securities................. -- -- -- 29,977 29,977
Foreign currency translation
adjustments....................... -- -- -- (1,792) (1,792)
----------
Comprehensive loss...................... (156,806)
Capital contributions from parent....... -- 299,493 -- -- 299,493
Noncash dividends to parent............. -- -- (2,799) -- (2,799)
Other................................... -- 30 -- -- 30
-- ---------- --------- -------- ----------
Balance, December 31, 1998................ 1 1,299,871 (321,958) 24,706 1,002,620
Net loss*............................... -- -- (74,141) -- (74,141)
Other comprehensive income (loss) (Note
11):
Unrealized appreciation on marketable
equity securities*................ -- -- -- 67,761 67,761
Foreign currency translation
adjustments*...................... -- -- -- (23,194) (23,194)
----------
Comprehensive loss*..................... (29,574)
Capital contributions from parent*...... -- 57,020 -- -- 57,020
Other*.................................. -- -- (54) -- (54)
-- ---------- --------- -------- ----------
Balance, March 31, 1999*.................. $1 $1,356,891 $(396,153) $ 69,273 $1,030,012
== ========== ========= ======== ==========
</TABLE>
- ---------------
* Amounts for the three months ended March 31, 1999 are unaudited.
See accompanying notes.
F-6
<PAGE> 160
WILLIAMS COMMUNICATIONS GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, (UNAUDITED) YEAR ENDED DECEMBER 31,
--------------------- ---------------------------------
1999 1998 1998 1997 1996
--------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss.......................................... $ (74,141) $ (26,498) $(184,991) $ (35,843) $ (3,514)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Change in accounting principle.................. 301 -- -- -- --
Depreciation.................................... 19,146 12,251 56,224 47,066 22,453
Amortization of goodwill and other
intangibles.................................. 8,432 6,744 28,157 23,597 9,925
Provision (benefit) for deferred income taxes... 16,486 (1,151) (7,781) (1,777) (1,600)
Provision for loss on property.................. -- -- -- 44,043 --
Provision for loss on investment................ -- -- 23,150 2,500 --
Provision for doubtful accounts................. 8,437 1,483 21,591 7,837 2,694
Equity losses................................... 10,159 1,479 16,363 2,383 1,601
Gain on disposition of interest in subsidiary... -- -- -- (44,540) --
Gain on sale of assets.......................... -- -- -- -- (15,725)
Minority interest in income (loss) of
subsidiaries................................. (5,836) 1,460 (15,645) 13,506 --
Cash provided (used) by changes in:
Receivables sold............................. (33,767) -- 8,103 25,664 --
Receivables.................................. 3,589 (18,316) (213,148) (34,127) (15,420)
Costs and estimated earnings in excess of
billings................................... 9,194 1,048 (41,298) (66,454) (8,753)
Inventories.................................. (5,910) 2,783 (2,347) (6,613) (1,896)
Dark fiber held for sale..................... 5,096 -- (46,175) -- --
Other current assets......................... 7,897 (8,328) (10,640) (1,790) (17,484)
Accounts payable............................. (79,844) 44,762 108,770 (24,349) 13,851
Accrued liabilities.......................... 5,831 (1,763) 18,226 42,480 11,715
Billings in excess of costs and estimated
earnings................................... (4,384) (14,675) 1,380 38,239 5,214
Due to/from affiliates....................... 29,521 (103,245) (89,870) 127,378 7,320
Other........................................ (10,432) (7,911) (33,902) (11,342) (12,156)
--------- --------- --------- --------- ---------
Net cash provided by (used in) operating
activities...................................... (90,225) (109,877) (363,833) 147,858 (1,775)
FINANCING ACTIVITIES
Proceeds from long-term debt...................... 315,477 -- -- 150,890 126
Payments on long-term debt........................ (175) (125,653) (126,677) (187,534) (1,353)
Capital contributions from parent................. 57,020 224,717 299,493 366,130 439,000
Contribution to subsidiary from minority interest
shareholders.................................... 11,000 -- -- -- --
Changes due to/from affiliates.................... 204,334 123,627 717,807 (96,974) (209,004)
Dividends to parent............................... -- -- -- (6,559) (2,760)
--------- --------- --------- --------- ---------
Net cash provided by financing activities......... 587,656 222,691 890,623 225,953 226,009
INVESTING ACTIVITIES
Property, plant and equipment:
Capital expenditures............................ (151,238) (110,117) (299,481) (276,249) (66,900)
Proceeds from sales............................. -- 506 1,512 15,292 23,010
Purchase of investments........................... (291,350) (11,800) (226,489) (25,345) (15,415)
Acquisition of businesses, net of cash acquired... -- -- 9,067 (81,192) (164,881)
Proceeds from sale of business.................... -- -- 10,000 -- --
Other............................................. -- 8,920 9,315 4,000 --
--------- --------- --------- --------- ---------
Net cash used in investing activities............. (442,588) (112,491) (496,076) (363,494) (224,186)
--------- --------- --------- --------- ---------
Increase in cash and cash equivalents............. 54,843 323 30,714 10,317 48
Cash and cash equivalents at beginning of year.... 42,004 11,290 11,290 973 925
--------- --------- --------- --------- ---------
Cash and cash equivalents at end of year.......... $ 96,847 $ 11,613 $ 42,004 $ 11,290 $ 973
========= ========= ========= ========= =========
</TABLE>
See accompanying notes.
F-7
<PAGE> 161
WILLIAMS COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996 (INFORMATION AS OF MARCH 31, 1999 AND FOR THE
THREE MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED.)
1. NATURE OF THE BUSINESS -- HISTORY AND FORMATION OF THE COMPANY -- BASIS OF
PRESENTATION -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF THE BUSINESS
Williams Communications Group, Inc. ("WCG" as described below) owns,
operates and is extending a nationwide fiber optic network focused on providing
voice, data, Internet and video services to communications service providers.
WCG also sells, installs and maintains equipment and network services that
address the comprehensive voice and data needs of organizations of all sizes.
WCG's primary business units are Williams Network ("Network") and Williams
Communications Solutions ("Solutions"). WCG also owns and operates businesses
that create demand for capacity on the Williams Network, create demand for
Solutions services or develop expertise in advanced transmission applications.
In addition, WCG has a number of investments in domestic and foreign businesses
that drive bandwidth usage on the Williams Network, increase service
capabilities, strengthen customer relationships or extend WCG's reach. These
businesses and investments are referred to as "Strategic Investments."
HISTORY AND FORMATION OF THE COMPANY
WCG is owned by The Williams Companies, Inc. ("Williams"). In 1985,
Williams entered the communications business by pioneering the placement of
fiber optic cables in decommissioned pipelines. By 1989, through a combination
of construction projects and acquisitions, Williams had completed the fourth
nationwide digital fiber optic network. The network consisted of approximately
9,700 route miles. By 1994, Williams, through its WilTel subsidiary, was one of
the top providers of broadband data services and long distance voice services as
well as the first provider to offer nationwide frame relay transmission
capacity.
In January 1995, Williams completed the sale of the majority of the WilTel
network business to LDDS Communications, Inc. (now MCI WorldCom, Inc.) for
approximately $2.5 billion. The sale included the bulk of the nationwide fiber
optic network and the associated consumer, business and carrier customers.
Williams retained an approximate 9,700 route mile single fiber strand on the
nationwide network (the "Retained WilTel Network"), WilTel's communications
equipment distribution business, and Vyvx, Inc. ("Vyvx"), a leading provider of
integrated fiber optic, satellite and teleport video transmission services. The
Retained WilTel Network, along with Vyvx, Solutions and a number of acquired
companies formed the initial basis for what is today WCG. See Note 2 for a
description of acquisitions in 1996 through 1998.
Under agreements with MCI WorldCom, Inc., the Retained WilTel Network can
only be used to transmit video and multimedia services, including Internet
services, until July 1, 2001. After July 1, 2001, the Retained WilTel Network
can be used for any purpose, including voice and data tariffed services. In
addition, as part of the sale to MCI WorldCom, Inc., Williams agreed not to
reenter the communications network business until January 1998.
In October 1997, management and ownership of the Retained WilTel Network
was transferred from Strategic Investments to Network and intercompany transfer
pricing was established prospectively. In addition, consulting, outsourcing and
the management of Williams' internal telephone operations, activities previously
performed within Strategic Investments, were transferred to Network. For
comparative purposes, the 1996 and 1997 consulting, outsourcing
F-8
<PAGE> 162
WILLIAMS COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and internal telephone management activities previously performed in Strategic
Investments that were transferred to Network have been reflected in Network's
segment results. See Note 3 for segment disclosures.
In January 1998, Williams reentered the communications network business,
announcing its plans to develop a fiber optic network consisting of 32,000 route
miles.
In November 1998, Williams announced its intention to sell a minority
interest in WCG through an initial public offering. Prior to the initial public
offering, Williams contributes certain international communications investments
held in Williams International Company to WCG for inclusion in the initial
public offering (see Note 17).
BASIS OF PRESENTATION
The accompanying consolidated financial statements have been retroactively
restated to reflect the historical consolidated financial position as of March
31, 1999 (unaudited) and December 31, 1998 and 1997 and the consolidated results
of operations and cash flows for the three months ended March 31, 1999 and 1998
(unaudited) and each of the three years in the period ended December 31, 1998 as
if the contribution of the international investments held in Williams
International Company to WCG described above had occurred and operated as a
stand alone business throughout the periods presented. The March 31, 1999 and
1998 financial statements have not been audited by independent auditors, but
include all normal recurring adjustments which, in the opinion of WCG's
management, are necessary to present fairly its financial position as of March
31, 1999 and results of operations and cash flows for the three months ended
March 31, 1999 and 1998. Williams Communications Group, Inc. and Williams
International Company are both wholly owned subsidiaries of Williams Holdings of
Delaware, Inc. ("Holdings"), which is a wholly owned subsidiary of Williams.
When the consolidated financial statements refer to WCG, references include both
Williams Communications Group, Inc. together with its subsidiaries and the
international assets contributed to the company from Williams. In addition, when
the consolidated financial statements refer to Williams, Holdings or parent, the
reference includes Williams, either alone or together with its consolidated
subsidiaries as the context requires, except for WCG.
The consolidated financial statements include the accounts of WCG and its
majority owned subsidiaries and subsidiaries that WCG controls but owns less
than 50% of the voting common stock. Companies in which WCG owns 20% to 50% of
the voting common stock, or otherwise has the ability to exercise significant
influence over the operating and financial policies of the company, are
accounted for under the equity method of accounting.
The specific international investments referred to above include the
interests in ATL-Algar Telecom Leste S.A. ("ATL") located in Brazil (see Note
7), and a 36% interest at March 31, 1999 (22% at December 31, 1998) in PowerTel
Limited ("PowerTel") located in Australia, accounted for under the principles of
consolidation inasmuch as WCG has control over the operations despite its less
than 50% ownership.
WCG is organized into three operating segments as follows: (1) Network,
which includes fiber optic construction, transmission and management services,
(2) Solutions, which includes distribution and integration of communications
equipment for voice and data networks, and (3) Strategic Investments, which
includes Vyvx services (video, advertising distribution and other multimedia
transmission services via terrestrial and satellite links for the broadcast
F-9
<PAGE> 163
WILLIAMS COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
industry), closed circuit video broadcasting services for businesses and audio
and video conferencing services, investments in domestic communications
companies and investments in foreign communications companies located in
Australia, Brazil and Chile.
WCG's operations do not currently provide positive cash flow. Accordingly,
Williams has historically funded WCG's capital expenditures and acquisitions
through a combination of advances and capital contributions. Williams will
continue to provide cash to WCG or assist in the attainment of bridge financing
up to the effective date of the public offering. Subsequent to that date, WCG
intends to finance future cash outlays through internally generated and external
funds without relying on cash advances or contributions from Williams.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
REVENUE RECOGNITION
Transmission and management services revenues are recognized monthly as the
services are provided. Amounts billed in advance of the service month are
recorded as deferred revenue.
Sales of constructed but unlit fiber, or dark fiber, are recognized at the
time of acceptance of the fiber by the customer.
New systems sales and upgrades revenues are recognized under the percentage
of completion method. The equipment portion of new systems sales and upgrades
revenues, when separately stated in the sales contract, is recognized when the
equipment is received by, and title passes to, the customer. The services
portion of new systems sales and upgrades revenues, and equipment when not
separately stated in the sales contract, is recognized based on the relationship
of the accumulated service costs incurred to the estimated total service costs
upon completion. Estimated losses on all contracts in progress are accrued when
the loss becomes known. Costs incurred and estimated earnings on contracts in
excess of billings are recorded and reflected as current assets in the balance
sheet. The billings associated with these contracts occur incrementally over the
term of the contract or upon completion of the contract, as provided in the
applicable contract. Billings to customers in excess of costs incurred and
estimated earnings are recorded and reflected as current liabilities.
Customer service order revenues are recognized under the completed contract
method. Customer service orders represent moves, adds or changes to existing
customer systems.
Revenues on contracts for maintenance of installed systems are deferred and
amortized on a straight-line basis over the lives of the related contracts.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include demand and time deposits, certificates of
deposit and other marketable securities with maturities of three months or less
when acquired.
F-10
<PAGE> 164
WILLIAMS COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INVENTORIES
Inventories consist primarily of purchased new and refurbished data, voice
and video equipment, and are stated at the lower of average cost or market.
DARK FIBER HELD FOR SALE
Dark fiber held for sale represents fibers constructed by WCG on the
network for sale to third parties. Dark fiber held for sale is in excess of
fiber to be retained, lit and utilized by WCG for the provisioning of services
to its customers. The carrying amount of dark fiber held for sale reflects an
allocation of the total costs of cable, cable installation and rights-of-way
based on fiber-miles of each network segment. Dark fiber held for sale included
in current assets represents amounts to be sold within one year. Amounts
expected to be sold beyond one year of $24,822,000 and $18,948,000 as of March
31, 1999 (unaudited) and December 31, 1998, respectively, are included in other
assets and deferred charges.
PROPERTY, PLANT AND EQUIPMENT
Property and equipment is recorded at cost. Depreciation is computed
primarily on the straight-line method over estimated useful lives.
GOODWILL AND OTHER INTANGIBLES
Goodwill is amortized on a straight-line basis over the estimated period of
benefit ranging from ten to twenty-five years. Other intangibles are amortized
on a straight-line basis over the estimated period of benefit ranging from five
to twenty years.
IMPAIRMENT OF LONG-LIVED ASSETS
WCG evaluates its long-lived assets, including related intangibles, of
identifiable business activities for impairment when events or changes in
circumstances indicate, in management's judgment, that the carrying value of
such assets may not be recoverable. The determination of whether an impairment
has occurred is based on management's estimate of undiscounted future cash flows
attributable to the assets as compared to the carrying value of the assets. If
an impairment has occurred, the amount of the impairment recognized is
determined by estimating the fair value for the assets and recording a provision
for loss if the carrying value is greater than fair value.
For assets identified to be disposed of in the future, the carrying value
of these assets is compared to the estimated fair value less the cost to sell to
determine if an impairment is required. Until the assets are disposed of, an
estimate of the fair value is redetermined when related events or circumstances
change.
INCOME TAXES
WCG's operations are included in the Williams' consolidated federal income
tax return. A tax sharing agreement exists between WCG and Williams to allocate
and settle among themselves the consolidated federal income tax liability (see
Note 5). Deferred income taxes are computed using the liability method and are
provided on all temporary differences between the financial basis and tax basis
of WCG's assets and liabilities. Valuation allowances are established to reduce
deferred tax assets to an amount that will more likely than not be realized.
F-11
<PAGE> 165
WILLIAMS COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
EARNINGS PER SHARE
Basic earnings per share are based on the 1,000 shares outstanding for all
periods presented. Diluted earnings per share are not presented as there are no
dilutive securities related to the WCG stock for the periods presented. The
pro-forma earnings per share was based on an assumed average shares outstanding
of 450,000,000. Stock options and awards have not been considered in calculating
the pro-forma net loss per share as their effect would be anti-dilutive.
FOREIGN CURRENCY TRANSLATION
The functional currency of WCG is the U.S. dollar. The functional currency
of WCG's foreign operations is the applicable local currency for each foreign
subsidiary and equity method investee, including the Australian dollar,
Brazilian real and Canadian dollar. Assets and liabilities of foreign
subsidiaries and equity investees are translated at the spot rate in effect at
the applicable reporting date, and the combined statements of operations and
WCG's share of the results of operations of its equity affiliates are translated
at the average exchange rates in effect during the applicable period. The
resulting cumulative translation adjustment is recorded as a separate component
of other comprehensive income.
Transactions denominated in currencies other than the functional currency
are recorded based on exchange rates at the time such transactions arise.
Subsequent changes in exchange rates result in transactions gains and losses
which are reflected in the statement of operations.
RECENT ACCOUNTING STANDARDS
On January 21, 1999, the Emerging Issues Task Force ("EITF") of the
Financial Accounting Standards Board reached a consensus regarding EITF Issue
98-13, "Accounting by an Equity Method Investor for Investee Losses When the
Investor Has Loans to and Investments in Other Securities of the Investee." EITF
98-13 was applied prospectively beginning January 1, 1999 and impacted WCG by
reducing the equity method interest used to record WCG's losses from ATL (see
Note 7).
WCG adopted the American Institute of Certified Public Accountants'
Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up
Activities," on January 1, 1999. The SOP requires that all start-up costs be
expensed as incurred and the expense related to the initial application of this
SOP was immaterial.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the 1999
presentation. Effective January 1, 1999, the segments previously known as
Applications and Strategic Investments were combined as they are now
collectively managed and reported under the name of Strategic Investments.
2. ACQUISITIONS
NORTEL
On April 30, 1997, WCG purchased Northern Telecom Limited's ("Nortel")
North American customer-premise equipment distribution business which was then
combined with WCG's equipment distribution business to create Williams
Communications Solutions, LLC.
F-12
<PAGE> 166
WILLIAMS COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
("Solutions LLC"). WCG owns 70% of Solutions LLC and Nortel owns the remaining
30%. WCG paid approximately $68 million to Nortel. WCG has accounted for its 70%
interest in the operations as a purchase business combination, and beginning May
1, 1997, has included the results of operations of the acquired company in WCG's
consolidated statement of operations. Accordingly, the acquired assets and
liabilities, including $168 million in accounts receivable, $68 million in
accounts payable and accrued liabilities and $161 million in debt obligations,
were recorded based on an allocation of the purchase price, with substantially
all of the cost in excess of historical carrying values allocated to
identifiable intangible assets and goodwill.
WCG recorded the 30% ownership reduction in its operations contributed to
Solutions LLC as a sale to Nortel. WCG recognized a gain of $44.5 million based
on the excess of the fair value over the net book value (approximately $71
million) of its operations conveyed to Nortel's minority interest. Income taxes
were not provided on the gain, because the transaction did not affect the
difference between the financial and tax bases of identifiable assets and
liabilities.
OTHER
During the three years ended December 31, 1998, WCG acquired 11 companies
in addition to the business combination involving Nortel. Each acquisition was
accounted for as a purchase business combination. The acquired assets and
liabilities have been recorded based on an allocation of the purchase price,
including identifiable intangibles with any remaining cost in excess of fair
value allocated to goodwill. WCG has included the results of operations of the
acquired entities in WCG's consolidated results of operations generally from the
date of acquisition. A summary of the acquisitions by segment is as follows:
NETWORK
On March 7, 1997, WCG acquired Critical Technologies, Inc., a company which
designs and manages outsourced communications networks, by utilizing a
$15,200,000 contribution of Williams common stock.
SOLUTIONS
In January 1996, WCG acquired Comlink, Inc., a voice and network systems
integration company, for approximately $13 million in cash.
On August 30, 1996, WCG acquired SoftIRON Systems, Inc., a network systems
integration company, for approximately $9 million in cash.
On October 13, 1998, WCG acquired Computer Networking Group, Inc., a
Canadian company which provides customers with comprehensive multimedia network
consulting and remote network management services, for approximately $13 million
to be paid over four years. Approximately $11 million of the acquisition price
was recorded at the acquisition date as the remaining $2 million is contingent
upon certain performance measures. Approximately $3 million of the acquisition
price was paid at the acquisition date with the remaining $7,700,000 payable on
the October 13 anniversary date as follows: 1999 -- $1,323,000,
2000 -- $1,667,000, 2001 -- $2,296,000 and 2002 -- $2,404,000.
F-13
<PAGE> 167
WILLIAMS COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
STRATEGIC INVESTMENTS
On May 1, 1996, WCG acquired Global Access Telecommunications Services,
Inc., a reseller of worldwide satellite video transmission services, for
approximately $22 million in cash.
On August 1, 1996, WCG acquired ITC Media Conferencing, a provider of audio
and video conferencing services, for approximately $48 million in cash.
On November 19, 1996, WCG acquired Cycle-Sat, Inc., a distributor of
television and radio commercials using satellite, fiber-optic and digital
technologies, for approximately $57 million in cash.
On December 31, 1996, WCG acquired Viacom MGS, an advertising distribution
services company, for approximately $15 million in cash.
On March 3, 1997, WCG acquired Satellite Management International, Inc., a
full service provider of closed-circuit video broadcasting services for
businesses, for approximately $6 million in cash.
On August 14, 1998, Williams International Company acquired 22% (based on
25% of the common shares and no preferred shares) of PowerTel, a publicly owned
telecommunications company in Australia, for approximately $25 million in cash
and subscribed to purchase additional common and preferred shares for
approximately $67 million to increase its combined ownership to approximately
45% by February 2000. WCG also received 44,680,851 options to purchase
additional common shares of PowerTel at 0.47 Australian dollars per share. The
options, which expire in 2003, are not publicly traded and do not have a readily
determinable fair value. On February 9, 1999, in accordance with the
subscription agreement, additional preferred and common shares were purchased at
a total cost of $31,845,000, increasing WCG's ownership to 35% of the common
shares. WCG consolidates its interest in PowerTel as WCG currently holds a
majority of PowerTel's board seats and exercises control over PowerTel's
operations. After WCG's initial investment, PowerTel had approximately $38
million in cash, which resulted in net cash acquired of approximately $13
million when consolidated by WCG.
On October 23, 1998, WCG acquired Intersys, a data systems integration, ATM
frame relay and professional development company based in Mexico, for
approximately $1 million in cash and conversion of the investment WCG had in
Intersys' parent.
Costs of acquisitions, net of cash acquired, for all acquisitions discussed
above are as follows for the years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
-------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Working capital............................. $ (3,048) $ 121,830 $ 16,862
Property and equipment...................... 4,567 21,211 17,790
Goodwill and other intangibles.............. 52,506 215,821 142,287
Long-term debt.............................. (3,446) (160,873) (1,234)
Minority interest........................... (49,137) (69,650) --
Other....................................... (10,509) (31,947) (10,824)
-------- --------- --------
Cost of acquisitions, net of cash
acquired.................................. $ (9,067) $ 96,392 $164,881
======== ========= ========
</TABLE>
F-14
<PAGE> 168
WILLIAMS COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following summarized unaudited pro forma financial information for the
years ended December 31 assumes each acquisition had occurred on January 1 of
the year immediately preceding the year of the acquisition:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues................................ $1,759,986 $1,753,870 $1,531,539
Net loss................................ $ (193,769) $ (37,615) $ (11,162)
</TABLE>
The pro forma results include operating results prior to the acquisitions
and adjustments to interest expense, goodwill amortization and income taxes. The
pro forma consolidated results do not purport to be indicative of results that
would have occurred had the acquisitions been in effect for the period
presented, nor do they purport to be indicative of the results that will be
obtained in the future.
3. SEGMENT DISCLOSURES
WCG adopted Statement of Financial Accounting Standards ("SFAS") No. 131,
"Disclosures about Segments of an Enterprise and Related Information," during
the fourth quarter of 1998. SFAS No. 131 establishes standards for reporting
information about operating segments and related disclosures about products and
services, geographic areas and major customers.
WCG evaluates performance based upon segment profit or loss from operations
which includes revenues from external and internal customers, equity earnings or
losses, operating costs and expenses, and depreciation and amortization and
excludes allocated charges from parent. The accounting policies of the segments
are the same as those described in Note 1. Intercompany sales are generally
accounted for as if the sales were to unaffiliated third parties, that is, at
current market prices.
F-15
<PAGE> 169
WILLIAMS COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table presents certain financial information concerning WCG's
reportable segments.
<TABLE>
<CAPTION>
STRATEGIC
NETWORK SOLUTIONS INVESTMENTS ELIMINATIONS TOTAL
-------- ---------- ----------- ------------ ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
MARCH 31, 1999 (UNAUDITED)
Revenues:
External customers:
Sales of dark fiber................................. $ 51,321 $ -- $ -- $ -- $ 51,321
Capacity and other.................................. 42,129 -- 68,010 -- 110,139
New systems sales and upgrades...................... -- 193,610 -- -- 193,610
Maintenance and customer service orders............. -- 137,721 -- -- 137,721
Other............................................... -- 4,717 -- -- 4,717
-------- ---------- ----------- ---------- ----------
Total external customers............................... 93,450 336,048 68,010 -- 497,508
Affiliates............................................. 3,409 1,244 -- -- 4,653
Intercompany........................................... 11,633 -- 134 (11,767) --
Equity losses.......................................... -- -- (10,159) -- (10,159)
-------- ---------- ----------- ---------- ----------
Total segment revenues................................... $108,492 $ 337,292 $ 57,985 $ (11,767) $ 492,002
======== ========== =========== ========== ==========
Costs of sales:
Sales of dark fiber.................................... $ 40,804 $ -- $ -- $ -- $ 40,804
Capacity and other..................................... 61,838 -- 42,808 -- 104,646
New systems sales and upgrades......................... -- 141,491 -- -- 141,491
Maintenance and customer service orders................ -- 73,566 -- -- 73,566
Indirect operating and maintenance..................... -- 29,240 -- 29,240
Intercompany........................................... -- 2,472 9,295 (11,767) --
-------- ---------- ----------- ---------- ----------
Total cost of sales...................................... $102,642 $ 246,769 $ 52,103 $ (11,767) $ 389,747
======== ========== =========== ========== ==========
Segment loss:
Loss from operations................................... $(17,956) $ (10,941) $ (28,082) $ -- $ (56,979)
Add back -- allocated charges from parent.............. 764 2,109 477 -- 3,350
-------- ---------- ----------- ---------- ----------
Total segment loss....................................... $(17,192) $ (8,832) $ (27,605) $ -- $ (53,629)
======== ========== =========== ========== ==========
Total assets............................................. $814,858 $ 951,883 $ 1,102,118 $ -- $2,868,859
Depreciation and amortization............................ $ 5,800 $ 10,571 $ 11,207 $ -- $ 27,578
</TABLE>
F-16
<PAGE> 170
WILLIAMS COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
STRATEGIC
NETWORK SOLUTIONS INVESTMENTS ELIMINATIONS TOTAL
-------- ---------- ----------- ------------ ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
MARCH 31, 1998 (UNAUDITED)
Revenues:
External customers:
Capacity and other................................... $ 7,218 $ -- $ 50,177 $ -- $ 57,395
New systems sales and upgrades....................... -- 179,587 -- -- 179,587
Maintenance and customer service orders.............. -- 145,254 -- -- 145,254
Other................................................ -- 1,835 -- -- 1,835
-------- ---------- ----------- ---------- ----------
Total external customers................................ 7,218 326,676 50,177 -- 384,071
Affiliates.............................................. 1,878 770 1,053 -- 3,701
Intercompany............................................ 12,070 -- 117 (12,187) --
Equity losses........................................... -- -- (1,479) -- (1,479)
-------- ---------- ----------- ---------- ----------
Total segment revenues.................................... $ 21,166 $ 327,446 $ 49,868 $ (12,187) $ 386,293
======== ========== =========== ========== ==========
Costs of sales:
Capacity and other...................................... $ 16,414 $ -- $ 32,759 $ -- $ 49,173
New systems sales and upgrades.......................... -- 128,608 -- -- 128,608
Maintenance and customer service orders................. -- 80,054 -- -- 80,054
Indirect operating and maintenance...................... -- 30,718 -- -- 30,718
Intercompany............................................ 50 1,985 10,152 (12,187) --
-------- ---------- ----------- ---------- ----------
Total cost of sales....................................... $ 16,464 $ 241,365 $ 42,911 $ (12,187) $ 288,553
======== ========== =========== ========== ==========
Segment loss:
Loss from operations.................................... $ (8,347) $ (214) $ (17,508) $ -- $ (26,069)
Add back -- allocated charges from parent............... 434 3,512 544 -- 4,490
-------- ---------- ----------- ---------- ----------
Total segment loss........................................ $ (7,913) $ 3,298 $ (16,964) $ -- $ (21,579)
======== ========== =========== ========== ==========
Depreciation and amortization............................. $ 2,235 $ 9,018 $ 7,742 $ -- $ 18,995
</TABLE>
F-17
<PAGE> 171
WILLIAMS COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
STRATEGIC
NETWORK SOLUTIONS INVESTMENTS ELIMINATIONS TOTAL
-------- ---------- ----------- ------------ ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
DECEMBER 31, 1998
Revenues:
External customers:
Sales of dark fiber.................................. $ 64,100 $ -- $ -- $ -- $ 64,100
Capacity and other................................... 73,367 -- 216,634 -- 290,001
New systems sales and upgrades....................... -- 791,518 -- -- 791,518
Maintenance and customer service orders.............. -- 556,392 -- -- 556,392
Other................................................ -- 16,029 -- -- 16,029
-------- ---------- ----------- ---------- ----------
Total external customers................................ 137,467 1,363,939 216,634 -- 1,718,040
Affiliates.............................................. 7,710 3,465 4,254 -- 15,429
Intercompany............................................ 49,759 -- 522 (50,281) --
Equity losses........................................... -- -- (16,363) -- (16,363)
-------- ---------- ----------- ---------- ----------
Total segment revenues.................................... $194,936 $1,367,404 $ 205,047 $ (50,281) $1,717,106
======== ========== =========== ========== ==========
Costs of sales:
Sales of dark fiber..................................... $ 38,500 $ -- $ -- $ -- $ 38,500
Capacity and other...................................... 118,627 -- 137,255 -- 255,882
New systems sales and upgrades.......................... -- 554,726 -- -- 554,726
Maintenance and customer service orders................. -- 311,258 -- -- 311,258
Indirect operating and maintenance...................... -- 134,217 -- -- 134,217
Intercompany............................................ 252 9,274 40,755 (50,281) --
-------- ---------- ----------- ---------- ----------
Total cost of sales....................................... $157,379 $1,009,475 $ 178,010 $ (50,281) $1,294,583
======== ========== =========== ========== ==========
Segment loss:
Loss from operations.................................... $(27,716) $ (58,966) $ (118,085) $ -- $ (204,767)
Add back -- allocated charges from parent............... 1,409 8,435 1,810 -- 11,654
-------- ---------- ----------- ---------- ----------
Total segment loss........................................ $(26,307) $ (50,531) $ (116,275) $ -- $ (193,113)
======== ========== =========== ========== ==========
Total assets.............................................. $727,119 $ 967,948 $ 638,417 $ -- $2,333,484
Equity method investments................................. $ -- $ -- $ 145,221 $ -- $ 145,221
Additions to long-lived assets............................ $246,626 $ 57,504 $ 97,824 $ -- $ 401,954
Depreciation and amortization............................. $ 13,230 $ 36,637 $ 34,514 $ -- $ 84,381
</TABLE>
F-18
<PAGE> 172
WILLIAMS COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
STRATEGIC
NETWORK SOLUTIONS INVESTMENTS ELIMINATIONS TOTAL
-------- ---------- ----------- ------------ ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
DECEMBER 31, 1997
Revenues:
External customers:
Capacity and other................................... $ 16,637 $ -- $ 213,098 $ -- $ 229,735
New systems sales and upgrades....................... -- 674,604 -- -- 674,604
Maintenance and customer service orders.............. -- 508,319 -- -- 508,319
Other................................................ -- 5,363 -- -- 5,363
-------- ---------- ----------- ---------- ----------
Total external customers................................ 16,637 1,188,286 213,098 -- 1,418,021
Affiliates.............................................. 5,217 1,512 3,763 -- 10,492
Intercompany............................................ 21,159 -- 1,105 (22,264) --
Equity earnings (losses)................................ -- -- (2,383) -- (2,383)
-------- ---------- ----------- ---------- ----------
Total segment revenues.................................... $ 43,013 $1,189,798 $ 215,583 $ (22,264) $1,426,130
======== ========== =========== ========== ==========
Cost of sales:
Capacity and other...................................... $ 28,657 $ -- $ 139,609 $ -- $ 168,266
New systems sales and upgrades.......................... -- 505,284 -- -- 505,284
Maintenance and customer service orders................. -- 267,775 -- -- 267,775
Indirect operating and maintenance...................... -- 102,607 -- -- 102,607
Intercompany............................................ 554 5,446 16,264 (22,264) --
-------- ---------- ----------- ---------- ----------
Total cost of sales....................................... $ 29,211 $ 881,112 $ 155,873 $ (22,264) $1,043,932
======== ========== =========== ========== ==========
Segment profit (loss):
Income (loss) from operations........................... $ 3,278 $ 37,052 $ (105,414) $ -- $ (65,084)
Add back -- allocated charges from parent............... -- 6,690 2,540 -- 9,230
-------- ---------- ----------- ---------- ----------
Total segment profit (loss)............................... $ 3,278 $ 43,742 $ (102,874) $ -- $ (55,854)
======== ========== =========== ========== ==========
Total assets.............................................. $246,317 $ 922,823 $ 336,894 $ -- $1,506,034
Equity method investments................................. $ 2,317 $ -- $ 3,815 $ -- $ 6,132
Additions to long-lived assets............................ $175,861 $ 236,000 $ 101,487 $ -- $ 513,348
Depreciation and amortization............................. $ 4,012 $ 30,142 $ 36,509 $ -- $ 70,663
</TABLE>
F-19
<PAGE> 173
WILLIAMS COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
STRATEGIC
NETWORK SOLUTIONS INVESTMENTS ELIMINATIONS TOTAL
-------- ---------- ----------- ------------ ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
DECEMBER 31, 1996
Revenues:
External customers:
Capacity and other................................... $ -- $ -- $ 130,816 $ -- $ 130,816
New systems sales and upgrades....................... -- 306,110 -- -- 306,110
Maintenance and customer service orders.............. -- 251,221 -- -- 251,221
Other................................................ -- 9,379 -- -- 9,379
-------- ---------- ----------- ---------- ----------
Total external customers................................ -- 566,710 130,816 -- 697,526
Affiliates.............................................. 4,918 1,362 1,381 -- 7,661
Intercompany............................................ 6,145 -- 280 (6,425) --
Equity losses........................................... -- -- (1,601) -- (1,601)
-------- ---------- ----------- ---------- ----------
Total segment revenues.................................... $ 11,063 $ 568,072 $ 130,876 $ (6,425) $ 703,586
======== ========== =========== ========== ==========
Cost of sales:
Capacity and other...................................... $ 4,681 $ -- $ 81,535 $ -- $ 86,216
New systems sales and upgrades.......................... -- 223,519 -- -- 223,519
Maintenance and customer service orders................. -- 155,130 -- -- 155,130
Indirect operating and maintenance...................... -- 52,357 -- -- 52,357
Intercompany............................................ -- 4,484 1,941 (6,425) --
-------- ---------- ----------- ---------- ----------
Total cost of sales....................................... $ 4,681 $ 435,490 $ 83,476 $ (6,425) $ 517,222
======== ========== =========== ========== ==========
Segment profit (loss):
Income (loss) from operations........................... $ 5,750 $ 8,887 $ (16,329) $ -- $ (1,692)
Add back -- allocated charges from parent............... -- 5,439 $ 1,204 -- 6,643
-------- ---------- ----------- ---------- ----------
Total segment profit (loss)............................... $ 5,750 $ 14,326 $ (15,125) $ -- $ 4,951
======== ========== =========== ========== ==========
Total assets.............................................. $228,455 $ 344,606 $ 148,626 $ -- $ 721,687
Equity method investments................................. $ -- $ -- $ 6,550 $ -- $ 6,550
Additions to long-lived assets............................ $ -- $ 34,906 $ 192,071 $ -- $ 226,977
Depreciation and amortization............................. $ -- $ 16,023 $ 16,355 $ -- $ 32,378
</TABLE>
F-20
<PAGE> 174
WILLIAMS COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following geographic area data includes revenues from external
customers based on product shipment origin for the years ended December 31 and
long-lived assets based upon physical location as of December 31.
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues from external customers:
United States........................... $1,591,779 $1,336,743 $693,943
Other................................... 126,261 81,278 3,583
---------- ---------- --------
Total..................................... $1,718,040 $1,418,021 $697,526
========== ========== ========
Long-lived assets:
United States........................... $1,070,772 $ 805,830 $374,439
Other................................... 55,510 5,141 1,244
---------- ---------- --------
Total..................................... $1,126,282 $ 810,971 $375,683
========== ========== ========
</TABLE>
Long-lived assets are comprised of property, plant and equipment and
goodwill and other intangible assets.
4. ASSET SALES AND WRITE-OFFS
Included in 1998 other operating expenses and Strategic Investments'
segment loss is a $23,150,000 loss related to abandoning an investment in a
venture involved in the technology and transmission of business information for
news and educational purposes. The loss occurred as a result of WCG's
re-evaluation and decision to exit the venture as WCG decided against making
further investments in the venture. WCG abandoned its entire ownership interest
in the venture in 1998. The loss primarily consists of $17 million from writing
off the entire carrying amount of the investment and $5 million from recognition
of contractual obligations that will continue after the abandonment. During
1998, $2 million of the contractual obligations were paid. WCG's share of losses
from the venture accounted for under the equity method were $3,670,000,
$2,269,000 and none in 1998, 1997 and 1996, respectively.
Included in 1997 other operating expenses and Strategic Investments'
segment loss are impairments and other charges totaling $42,043,000. In the
fourth quarter of 1997, WCG made the decision and committed to a plan to sell
the learning content business, which resulted in a loss of $22.7 million in
1997. The loss consisted of a $21 million impairment of the assets to fair value
less cost to sell and recognition of $1.7 million in costs associated with the
decision to sell the business. Fair value was based on management's estimate of
the expected net proceeds to be received. During 1998, a significant portion of
the learning content business was sold with a resulting $2 million reduction in
1998 expenses. The carrying amount of the learning content business at December
31, 1998 and 1997 is not significant to WCG's consolidated balance sheet. The
results of operations and effect of suspending amortization for the learning
content business included in the consolidated net loss are not significant for
any of the periods presented. Costs of $1.7 million recorded in 1997 primarily
consist of contractual obligations and employee termination costs. Additional
employee termination costs of $1 million were incurred in 1998. In 1997, WCG
also impaired a continuing Strategic Investments project resulting in a loss of
$13 million. Fair value for this project was based upon management's estimate as
to the ultimate recovery of the project. Additionally, WCG made the decision and
committed to a plan
F-21
<PAGE> 175
WILLIAMS COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
to sell the enhanced fax business, resulting in an impairment loss of $4 million
in 1997. Fair value was based on management's estimate of the expected proceeds
to be received. The fax business was sold in 1998 resulting in a $.5 million
reduction in 1998 expenses. In 1997, WCG also recorded $2 million of expenses
from cancellation payments for leases that are no longer being utilized in our
operations.
In 1996, WCG recognized a pre-tax gain of $15,725,000 from the sale of
certain communication rights (obtained from affiliates in 1995) for
approximately $38 million.
5. PROVISION (BENEFIT) FOR INCOME TAXES
WCG's operations are included in Williams' consolidated federal income tax
return. WCG has a tax sharing agreement with Williams under which the amount of
federal income taxes allocated to WCG is generally determined as though WCG were
filing a separate federal consolidated income tax return. Under the terms of the
tax sharing agreement, any loss or other similar tax attribute realized for
periods prior to the initial public offering will be allocated solely to
Williams. WCG will be responsible for any taxes resulting to Williams if the
loss or similar tax attribute is reduced by audit or otherwise. For any loss or
other similar tax attribute realized after the initial public offering, WCG will
receive the benefit of the loss or other similar tax attribute only if WCG is
able to carry forward the loss or other similar tax attribute against its
hypothetical separate return tax calculation for a period in which WCG remains a
member of Williams' consolidated federal income tax group. If WCG ceases to be a
member of Williams' consolidated federal income tax return, WCG will retain only
its allocable share under applicable law of any consolidated loss or other
similar tax attribute realized after the initial public offering to the extent
that it has not been treated as utilizing such loss or attribute on a
hypothetical separate tax return basis under the tax sharing agreement. Similar
concepts apply to allocate the state unitary, combined or consolidated, income
tax liability.
The provision (benefit) for income taxes for the three months ended March
31, 1999 and 1998 (unaudited) and the years ended December 31, 1998, 1997 and
1996 includes:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, (UNAUDITED) YEARS ENDED DECEMBER 31,
---------------------- ---------------------------
1999 1998 1998 1997 1996
-------- -------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Current:
Federal................. $ -- $ -- $ -- $ -- $ 1,810
State................... -- 23 162 2,081 158
Foreign................. 962 362 2,522 1,734 --
------- ------- ------- ------- -------
962 385 2,684 3,815 1,968
Deferred:
Federal................. 11,202 (846) (5,652) (2,761) (1,761)
State................... 5,284 (305) (2,129) 984 161
------- ------- ------- ------- -------
16,486 (1,151) (7,781) (1,777) (1,600)
------- ------- ------- ------- -------
Total provision
(benefit)............... $17,448 $ (766) $(5,097) $ 2,038 $ 368
======= ======= ======= ======= =======
</TABLE>
F-22
<PAGE> 176
WILLIAMS COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table presents the U.S. and foreign components of loss before
income taxes for the years ended December 31, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1998 1997 1996
--------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
United States................................ $(183,074) $(33,930) $(2,184)
Foreign...................................... (7,014) 125 (962)
--------- -------- -------
Total loss before taxes...................... $(190,088) $(33,805) $(3,146)
========= ======== =======
</TABLE>
Reconciliations from the benefit for income taxes at the federal statutory
rate to the provision (benefit) for income taxes for the three months ended
March 31, 1999 and 1998 (unaudited) and the years ended December 31, 1998, 1997
and 1996 are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, (UNAUDITED) YEARS ENDED DECEMBER 31,
--------------------- -----------------------------
1999 1998 1998 1997 1996
-------- ------- -------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Benefit at statutory
rate................. $(19,737) $(9,541) $(66,531) $(11,832) $(1,101)
Increases (reductions)
in taxes resulting
from:
State income taxes... 3,435 (184) (1,279) 1,992 207
Goodwill
amortization...... 812 762 5,286 2,675 1,469
Non-taxable gain from
the sale of
interest in
subsidiary........ -- -- -- (15,605) --
Change in valuation
allowance......... -- (1,256) (7,639) 10,827 --
Tax benefits
allocated to
Williams.......... 29,566 8,633 60,261 12,761 --
Other -- net......... 3,372 820 4,805 1,220 (207)
-------- ------- -------- -------- -------
Provision (benefit) for
income taxes......... $ 17,448 $ (766) $ (5,097) $ 2,038 $ 368
======== ======= ======== ======== =======
</TABLE>
F-23
<PAGE> 177
WILLIAMS COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Significant components of deferred tax assets and liabilities as of
December 31 are as follows:
<TABLE>
<CAPTION>
1998 1997
------- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Deferred revenues..................................... $14,321 $ 15,424
Impairment and other charges.......................... 3,880 17,441
Other................................................. 12,789 3,392
------- --------
30,990 36,257
Valuation allowance..................................... (3,188) (10,827)
------- --------
Total deferred tax assets............................... 27,802 25,430
Deferred tax liabilities:
Property, plant and equipment......................... 14,783 21,759
Securities available for sale......................... 13,763 (1,565)
Other................................................. 4,844 5,236
------- --------
Total deferred tax liabilities.......................... 33,390 25,430
------- --------
Net deferred tax liability.............................. $ 5,588 $ --
======= ========
</TABLE>
Valuation allowances have been established that reduce deferred tax assets
to an amount that will more likely than not be realized. Uncertainties that may
affect the realization of these assets include application of the tax sharing
agreement with Williams, tax law changes and expiration of carryforward periods.
The valuation allowance decreased during 1998 and increased during 1997,
primarily due to application of the tax sharing agreement with Williams.
If WCG had filed a separate federal income tax return for all periods
presented, the provision (benefit) for income taxes for 1998 and 1997 would
reflect additional benefit from the carryback or carryforward of federal net
operating losses that would have been recognized by WCG on a separate return
basis. The deferred federal income tax benefit for 1998 would have increased by
$5,588,000, to reflect the benefit of a deferred tax asset for the federal net
operating loss carryforward generated in 1998, to the extent of the existing net
deferred tax liability. A current federal income tax benefit for 1997 of
$12,761,000 would have been recognized to reflect the refund of tax from
carryback of the federal net operating loss generated in 1997. The provision
(benefit) for income taxes for 1996 would not change since a federal net
operating loss was not generated in 1996.
Cash payments for income taxes (net of refunds) were $2,067,000, $1,148,000
and $2,444,000 in 1998, 1997 and 1996, respectively.
6. EMPLOYEE BENEFIT PLANS
Substantially all of WCG's employees are covered by noncontributory defined
benefit pension plans. Effective August 1, 1997, separate plans were established
for the Solutions LLC union employees and Solutions LLC salaried employees.
Substantially all of the remaining WCG employees are covered by Williams'
noncontributory defined benefit pension plans in which WCG is included. WCG is
also included in Williams' health care plan that provides postretirement medical
benefits to certain retired employees.
F-24
<PAGE> 178
WILLIAMS COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Contributions for pension and postretirement medical benefits related to
WCG's participation in the Williams plans were $1,742,000, $357,000 and
$12,463,000 in 1998, 1997 and 1996, respectively. The change in contributions
from year to year is due to a change in the rate of pension contributions during
the periods. Contributions in excess of the minimum funding requirements were
made in 1996 and the resulting credit balances from 1996 were used to reduce the
required pension contributions in 1997.
The following table presents the changes in benefit obligations and plan
assets for pension benefits for the Solutions LLC plans for the years indicated.
It also presents a reconciliation of the funded status of these benefits to the
amount recognized in the accompanying consolidated balance sheet as of December
31 of each year indicated.
<TABLE>
<CAPTION>
PENSION BENEFITS
-----------------
1998 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year................ $41,987 $ --
Service cost........................................... 4,604 1,770
Interest cost.......................................... 2,972 1,130
Actuarial loss......................................... 2,566 497
Acquisition............................................ -- 38,663
Benefits paid.......................................... (234) (73)
------- -------
Benefit obligation at end of year........................ 51,895 41,987
------- -------
Change in plan assets:
Fair value of plan assets at beginning of year......... 42,971 --
Actual return on plan assets........................... 5,247 (956)
Acquisition............................................ 73 44,000
Employer contributions................................. 502 --
Benefits paid.......................................... (234) (73)
------- -------
Fair value of plan assets at end of year................. 48,559 42,971
------- -------
Funded status............................................ (3,336) 984
Unrecognized net actuarial loss.......................... 4,550 2,855
Unrecognized prior service credit........................ (1,230) (1,510)
------- -------
Net prepaid (accrued) benefit cost....................... $ (16) $ 2,329
======= =======
Included in the accompanying consolidated balance sheet
as follows:
Prepaid benefit cost................................... $ 2,196 $ 3,791
Accrued benefit cost................................... (2,212) (1,462)
------- -------
Net prepaid (accrued) benefit cost....................... $ (16) $ 2,329
======= =======
</TABLE>
F-25
<PAGE> 179
WILLIAMS COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
PENSION BENEFITS
-----------------
1998 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Net pension expense for the Solutions LLC plans consisted
of the following for the years ended December 31:
Components of net periodic pension expense:
Service cost........................................... $ 4,604 $ 1,770
Interest cost.......................................... 2,972 1,130
Expected return on plan assets......................... (4,293) (1,551)
Amortization of prior service credit................... (280) (117)
Recognized net actuarial gain.......................... (83) (18)
------- -------
Net periodic pension expense............................. $ 2,920 $ 1,214
======= =======
The following are the weighted-average assumptions
utilized as of December 31 of the year indicated:
Discount rate.......................................... 7.0% 7.1%
Expected return on plan assets......................... 10.0 10.0
Rate of compensation increase.......................... 5.0 5.0
</TABLE>
Williams maintains various defined contribution plans in which WCG is
included. WCG's costs related to these plans were $16,415,000, $9,564,000 and
$5,934,000 in 1998, 1997 and 1996, respectively. These costs increased over the
period from 1996 to 1998 primarily due to acquisitions (see Note 2).
Included in selling, general and administrative expenses for 1998 is an
accrual of $11,500,000 related to the modification of WCG's employee benefit
program associated with vesting of paid time off. In December 1998, WCG
increased the number of days in the new paid time off policy and changed the
benefits with regard to sick pay.
F-26
<PAGE> 180
WILLIAMS COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. INVESTMENTS
Investments as of March 31, 1999 (unaudited) and December 31, 1998 and 1997
are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, ------------------
1999 (UNAUDITED) 1998 1997
---------------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Equity method:
ATL.................................. $ 64,892 $144,767 $ --
Others............................... 463 454 6,132
-------- -------- -------
65,355 145,221 6,132
Cost method:
ATL.................................. 313,559 -- --
Others............................... 53,501 28,001 3,332
-------- -------- -------
367,060 28,001 3,332
Advances to investees................... 4,997 4,997 7,619
Marketable equity
securities -- Concentric Network
Corporation.......................... 197,592 82,936 11,087
-------- -------- -------
$635,004 $261,155 $28,170
======== ======== =======
</TABLE>
No dividends were received from investments in companies carried on the
equity basis for 1998, 1997 or 1996.
Included in the investments table above are noncurrent marketable equity
securities which are classified as available for sale under the scope of SFAS
No. 115, "Accounting for Certain Investments in Debt and Equity Securities." The
carrying amount of this investment is reported at fair value with net unrealized
appreciation or depreciation reported as a component of stockholder's equity. A
comparison of the carrying amount of this investment to cost as of March 31,
1999 (unaudited) and December 31, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
DECEMBER 31
MARCH 31, -------------------------------------------
1999 (UNAUDITED) 1998 1997
-------------------- -------------------- --------------------
FAIR VALUE FAIR VALUE FAIR VALUE
(CARRYING (CARRYING (CARRYING
COST AMOUNT) COST AMOUNT) COST AMOUNT)
------- ---------- ------- ---------- ------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Concentric Network
Corporation........ $41,543 $197,592 $41,543 $82,936 $15,000 $11,087
</TABLE>
WCG acquired 710,036 warrants to purchase common stock of Concentric
Network Corporation in connection with WCG's acquisition of Concentric Network
Corporation common stock in 1997. No basis was allocated to the warrants as the
fair value of the warrants was considered to be nominal at the date the warrants
were acquired. Each warrant entitles the holder thereof to purchase one share of
Concentric Network Corporation common stock for $3. The warrants expire in 2002.
As of May 26, 1999, the Concentric Network Corporation investment has
depreciated since March 31, 1999, to a fair value of $168,870,000 based upon the
May 26, 1999 stock price of $32.
F-27
<PAGE> 181
WILLIAMS COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On January 13, 1999, the Brazilian Central Bank removed the limits of
variations of the Brazilian Real compared to the U.S. dollar, allowing free
market fluctuation of the exchange rate. As a result, the value of the Real in
U.S. dollars has declined 30% from December 31, 1998 to March 31, 1999.
Williams has granted WCG an option to acquire Williams' entire equity and
debt interest in Lightel S.A. -- Tecnologia da Informacao, a Brazilian
telecommunications company, at net book value. The option is exercisable at any
time from January 1, 2000 to January 1, 2001 and is payable entirely in WCG's
Class B common stock. The net book value of Williams investment in Lightel as of
December 31, 1998 was approximately $170 million including advances of $100
million. WCG has not assigned any value to the option as of December 31, 1998.
At December 31, 1998, WCG owned 30% of the preferred shares in ATL and 30%
of the common stock through participation in a limited liability company.
Effective January 1, 1999, WCG adopted prospectively the provisions of the
consensus of EITF Issue No. 98-13. Prior to application of EITF 98-13, WCG
applied the equity method to its entire stock investment in ATL. As a result of
the adoption of EITF 98-13, WCG reclassified its $97 million preferred stock
investment, previously classified as an equity method investment, to a cost
method investment. On March 25, 1999, WCG invested $265 million in ATL to
acquire a 19% ownership in ATL's outstanding common stock and to increase WCG's
ownership in ATL's outstanding preferred stock to 73%. The impact of the
adoption of EITF 98-13 on results of operations for the three months ended March
31, 1999 was to decrease WCG's net loss by $12.5 million.
On March 25, 1999, WCG pledged 49% and 100% of its investment in ATL's
common and preferred stock, respectively, as collateral for a U.S. dollar
denominated $521 million loan from Ericsson Project Finance AB to ATL. In
addition, Lightel pledged 49% of its 51% investment in ATL common stock and 100%
of its 27% investment in ATL preferred stock as collateral for the loan. The
loan principal is due on March 25, 2002.
Summarized financial position as of December 31, 1998 and results of
operations for the period from inception (March 26, 1998) to December 31, 1998
for ATL are as follows (in thousands):
<TABLE>
<S> <C>
Current assets.............................................. $ 55,641
Noncurrent assets........................................... 1,572,276
Current liabilities......................................... (522,385)
Long-term debt.............................................. (26,427)
Other noncurrent liabilities................................ (649,743)
----------
Stockholders' equity........................................ $ 429,362
==========
Revenues.................................................... $ 29,953
Gross profit................................................ $ 281
Net loss.................................................... $ (42,277)
</TABLE>
On March 30, 1999, WCG acquired 19.9% of the common stock of Metrocom S.A.,
a start-up telecommunications company in Chile, for $15 million. WCG also paid
$9.5 million for warrants to purchase up to an additional 30.1% of Metrocom S.A.
The warrants have an aggregate exercise price of approximately $10 million and
expire March 30, 2002. The investment in Metrocom S.A. is accounted for under
the cost method.
F-28
<PAGE> 182
WILLIAMS COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment as of March 31, 1999 (unaudited) and December
31 is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
DEPRECIABLE MARCH 31, -----------------------
LIVES 1999 1998 1997
-------------- ----------- ----------- ---------
(IN YEARS) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Fiber........................ 25-30 $ 116,511 $ 116,439 $ 23,712
Optronics.................... 7-10 196,550 167,997 144,191
Right-of-way................. 20-40 135,113 135,113 5,291
Computer equipment........... 3 73,979 65,126 29,835
Customer premise equipment... 3 32,059 30,616 30,736
General office furniture and
fixtures................... 3-5 57,428 61,300 32,935
Buildings and leasehold 30 or life of
improvements............... lease 46,985 41,154 10,961
Construction in progress..... Not applicable 199,252 130,063 218,752
Other........................ Various 133,875 127,886 37,642
--------- --------- ---------
991,752 875,694 534,055
Less accumulated
depreciation and
amortization............ (210,428) (179,969) (126,403)
--------- --------- ---------
$ 781,324 $ 695,725 $ 407,652
========= ========= =========
</TABLE>
In 1996, WCG agreed to exchange dark fiber along one of its fiber routes
for dark fiber from another party's route. The agreement was subsequently
amended to include exchanges of both dark fiber and fiber capacity leases. In
the nonmonetary exchange of dark fiber, WCG assigned a basis of approximately
$50.6 million to the dark fiber received, representing the book value of the
dark fiber relinquished.
In connection with its fiber build projects, WCG periodically enters into
various agreements to obtain the use of property rights from Williams' pipeline
companies in exchange for telecommunications services. Under these agreements,
WCG commits to provide various levels and types of services as consideration for
the right-of-way obtained. As of December 31, 1998, such commitments were not
material.
Commitments for construction and acquisition of property, plant and
equipment are approximately $808,183,000 as of December 31, 1998. Included in
this amount is $470,440,000 for the purchase of optronics equipment from Nortel
to be used in building the network pursuant to an agreement with Nortel to
purchase $600 million of optronics equipment. In addition, included in the
commitments is $315,556,000 for the purchase of wireless capacity.
On December 17, 1998, WCG entered into two agreements with WinStar
Communications, Inc. ("WinStar"). WCG has a 25 year indefeasible right to use
approximately 2% of WinStar's wireless local capacity in exchange for payments
equal to $400 million. WinStar has a 25 year indefeasible right to use four
strands of WCG's fiber over 15,000 route miles on the network, a transmission
capacity agreement with a minimum commitment for approximately $120 million in
specified circuits over a twenty-year term and colocation space rental and
maintenance services
F-29
<PAGE> 183
WILLIAMS COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
in exchange for monthly payments equal to an aggregate of approximately $644
million over the next seven years. As of March 31, 1999, WinStar has paid WCG
approximately $15.3 million. WinStar has constructed approximately 60 hubs, or
antenna sites, which are currently available to WCG. WinStar intends to
construct 270 hubs by the end of 2001, and WCG will have the ability to use all
of these hubs. WCG will pay WinStar the $400 million over the next four years as
WinStar completes construction of the hubs. As of March 31, 1999, WCG has paid
WinStar approximately $84 million.
As a result of certain valuation matters and various timing differences
associated with the payment and receipt of cash, Williams cash payments to
WinStar represent cash advances. Accordingly, as WCG pays WinStar, a portion of
the payments will be recorded as an advance that will be returned based upon
WinStar's payment schedule.
9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Under Williams' centralized cash management system, WCG's cash accounts
reflect credit balances to the extent checks written have not been presented for
payment. The amount of these credit balances included in accounts payable is
$51,831,000 and $23,255,000 as of December 31, 1998 and 1997, respectively.
Accrued liabilities as of December 31 consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Employee costs......................................... $ 68,025 $ 49,276
Deferred revenue....................................... 67,228 45,601
Job costs and customer deposits........................ 19,161 19,258
Warranty............................................... 10,967 13,232
Other.................................................. 33,295 49,612
-------- --------
$198,676 $176,979
======== ========
</TABLE>
10. LONG-TERM DEBT
Long-term debt (excluding amounts due affiliates as disclosed in Note 14)
as of March 31, 1999 (unaudited) and December 31 consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, -----------------
1999 (UNAUDITED) 1998 1997
---------------- ------ --------
(IN THOUSANDS)
<S> <C> <C> <C>
Credit agreement......................... $315,000 $ -- $125,000
Other.................................... 4,012 3,710 1,941
-------- ------ --------
319,012 3,710 126,941
Current maturities....................... 622 690 1,195
-------- ------ --------
Long-term debt........................... $318,390 $3,020 $125,746
======== ====== ========
</TABLE>
In July 1997, Solutions LLC and Williams entered into an unsecured credit
agreement with a bank. Under the terms of the credit agreement, Solutions LLC
has access to $300,000,000. Interest is payable monthly and accrues at rates
which vary with current market conditions. At
F-30
<PAGE> 184
WILLIAMS COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 1997, the interest rate was 6.2%. On January 26, 1999, WCG was
added to the unsecured credit agreement and agreed that the aggregate borrowings
would not exceed $400,000,000, including Solutions LLC's availability. Williams
is the guarantor for WCG under the credit agreement. WCG and Solutions LLC's
availability under the credit agreement is subject to borrowings by other
Williams affiliates. On March 25, 1999, WCG borrowed $265 million under the
credit agreement for the additional investment in ATL described in Note 7. At
March 31, 1999, the interest rate was 7.75%.
On April 16, 1999, WCG entered into a $1.4 billion unsecured revolving
credit facility which is guaranteed by Williams. The facility will expire on
September 30, 1999. As of April 30, 1999, WCG has borrowed $300 million on this
facility, of which the proceeds were used to reduce the outstanding amount under
the July 1997 unsecured credit agreement.
Cash payments for interest were $2,427,000, $5,467,000 and $205,000 in
1998, 1997 and 1996, respectively.
11. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The table below presents changes in the components of accumulated other
comprehensive income (loss).
<TABLE>
<CAPTION>
UNREALIZED FOREIGN
APPRECIATION CURRENCY
(DEPRECIATION) TRANSLATION
ON SECURITIES ADJUSTMENTS TOTAL
-------------- ----------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance as of December 31, 1996............ $ -- $ -- $ --
Current period change:
Pre-income tax amount.................... (3,913) (1,131) (5,044)
Income tax benefit....................... 1,565 -- 1,565
-------- -------- --------
Balance as of December 31, 1997............ (2,348) (1,131) (3,479)
Current period change:
Pre-income tax amount.................... 45,305 (1,792) 43,513
Income tax expense....................... (15,328) -- (15,328)
-------- -------- --------
29,977 (1,792) 28,185
-------- -------- --------
Balance as of December 31, 1998............ 27,629 (2,923) 24,706
Current period change:
Pre-income tax amount (unaudited)........ 114,657 (23,194) 91,463
Income tax expense (unaudited)........... (46,896) -- (46,896)
-------- -------- --------
67,761 (23,194) 44,567
-------- -------- --------
Balance as of March 31, 1999 (unaudited)... $ 95,390 $(26,177) $ 69,273
======== ======== ========
</TABLE>
12. STOCK-BASED COMPENSATION
Williams and WCG have several plans providing for Williams
common-stock-based awards to its employees and employees of its subsidiaries.
The plans permit the granting of various types of awards including, but not
limited to, stock options, stock-appreciation rights, restricted stock and
deferred stock. Awards may be granted for no consideration other than prior and
future services or based on certain financial performance targets being
achieved. The purchase price per
F-31
<PAGE> 185
WILLIAMS COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
share for stock options and the grant price for stock-appreciation rights may
not be less than the market price of the underlying stock on the date of grant.
Depending upon terms of the respective plans, stock options become exercisable
after three or five years, subject to accelerated vesting if certain future
stock prices or specific financial performance targets are achieved. Stock
options expire ten years after grant.
Williams' employee stock-based awards are accounted for under provisions of
Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued
to Employees," and related interpretations. Williams' fixed plan common stock
options do not result in compensation expense, because the exercise price of the
stock options equals the market price of the underlying stock on the date of
grant.
SFAS No. 123, "Accounting For Stock-Based Compensation," requires that
companies who continue to apply APB Opinion No. 25 disclose pro forma net income
assuming that the fair-value method in SFAS No. 123 had been applied in
measuring compensation cost. Pro forma net loss for WCG was $194.4 million,
$40.5 million and $4.0 million for 1998, 1997 and 1996, respectively. Reported
net loss was $185.0 million, $35.8 million and $3.5 million for 1998, 1997 and
1996, respectively. Pro forma amounts for 1998 include the remaining total
compensation expense from the awards made in 1997, as these awards fully vested
in 1998 as a result of the accelerated vesting provision. Pro forma amounts for
1997 include the remaining total expense from the awards made in 1996, as these
awards fully vested in 1997 as a result of the accelerated vesting provisions.
Since compensation expense from stock options is recognized over the future
years' vesting period for pro forma disclosure purposes, and additional awards
generally are made each year, pro forma amounts may not be representative of
future years' amounts. The following summary represents stock option information
for WCG employees.
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
(OPTIONS IN THOUSANDS)
<S> <C> <C> <C>
Options granted.................................... 2,226 2,193 2,078
Weighted-average grant date fair value............. $ 8.19 $ 5.98 $ 3.92
Options outstanding -- December 31................. 5,897 4,954 3,015
Options exercisable -- December 31................. 3,800 2,726 962
</TABLE>
13. LEASES
Future minimum annual rentals under noncancellable operating leases as of
December 31, 1998 are payable as follows:
<TABLE>
<CAPTION>
OFF-NETWORK
OFFICE CAPACITY
RENTAL AND EQUIPMENT OTHER TOTAL
-------- ------------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1999............................. $ 24,756 $ 78,730 $ 5,019 $108,505
2000............................. 21,173 133,651 5,030 159,854
2001............................. 17,935 102,917 1,689 122,541
2002............................. 13,118 90,422 691 104,231
2003............................. 11,169 68,196 691 80,056
Thereafter....................... 38,825 450 9,788 49,063
-------- -------- ------- --------
Total minimum annual rentals..... $126,976 $474,366 $22,908 $624,250
======== ======== ======= ========
</TABLE>
F-32
<PAGE> 186
WILLIAMS COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
During 1998, WCG entered into an operating lease agreement covering a
portion of its fiber optic network. The total estimated cost of the network
assets to be covered by the lease agreement is $750 million. The lease term will
include an interim term, during which the covered network assets will be
constructed, that is anticipated to end no later than December 31, 1999, and a
base term. The interim and base terms are expected to total five years, and if
renewed, could total seven years.
WCG has an option to purchase the covered network assets during the lease
term at an amount approximating the lessor's cost. Williams provides a residual
value guarantee equal to a maximum of 89.9% of the transaction. The residual
value guarantee is reduced by the present value of the actual lease payments. In
the event that WCG does not exercise its purchase option, WCG expects the fair
market value of the covered network assets to substantially reduce Williams
payment under the residual value guarantee. WCG's disclosures for future minimum
annual rentals under noncancellable operating leases do not include amounts for
the residual value guarantee. As of March 31, 1999 (unaudited) and December 31,
1998, $368 million and $287 million, respectively, of costs have been incurred
by the lessor.
Total capacity expense incurred from leasing from a third party's network
(off-network capacity expense) was $110,804,000, $68,824,000 and $45,033,000 in
1998, 1997 and 1996, respectively. All other rent expense was $37,826,000,
$24,912,000 and $17,588,000 in 1998, 1997 and 1996, respectively. Included in
other rent expense is office space charged from affiliates of $3,664,000,
$2,475,000 and $2,247,000 in 1998, 1997 and 1996, respectively.
14. RELATED PARTY TRANSACTIONS
Williams charges its subsidiaries, including WCG, for certain corporate
administrative expenses, which are directly identifiable or allocable to the
subsidiaries. Nortel also charges Solutions LLC for certain corporate
administrative expenses which are directly identifiable or allocable to
Solutions LLC. Details of such charges for the three months ended March 31, 1999
and 1998 (unaudited) and the years ended December 31 are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, (UNAUDITED) YEAR ENDED DECEMBER 31,
---------------------- ---------------------------
1999 1998 1998 1997 1996
--------- --------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Direct costs, charged from:
Williams.................. $ 4,573 $ 2,783 $13,364 $ 8,418 $ 6,370
Nortel.................... 182 3,855 10,727 15,260 --
Allocated charges from
Williams.................. 3,350 4,492 11,654 9,230 6,643
------- ------- ------- ------- -------
$ 8,105 $11,130 $35,745 $32,908 $13,013
======= ======= ======= ======= =======
</TABLE>
The above costs are reflected in selling, general and administrative
expenses in the accompanying consolidated statements of operations. In
management's estimation, the allocation methodologies used are reasonable and
approximate amounts that would have been incurred on a stand-alone basis.
Included in WCG's revenues are charges to Williams and its subsidiaries and
affiliates for managing their internal telephone operations of $2,342,000,
$1,878,000, $7,710,000, $5,217,000 and $4,918,000 for the three months ended
March 31, 1999 and 1998 (unaudited) and the years
F-33
<PAGE> 187
WILLIAMS COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ended December 31, 1998, 1997 and 1996, respectively. In addition, WCG's
revenues include charges to Williams' gas pipelines for managing microwave
frequencies of $1,067,000, $1,053,000, $4,254,000, $3,754,000 and $1,381,000 for
the three months ended March 31, 1999 and 1998 (unaudited) and the years ended
December 31, 1998, 1997 and 1996, respectively.
As of March 31, 1999 (unaudited) and December 31, 1998 and 1997, WCG's net
amount due to or due from affiliates consists of an unsecured promissory note
agreement with Williams for both advances to and from Williams depending on the
respective cash positions of the companies. The agreement does not require
periodic principal payments or commitment fees and accordingly is normally
classified as noncurrent as periodic principal payments are not required.
Interest on noncurrent receivables and payables is accrued monthly and rates
vary with market conditions. The interest rate for noncurrent receivables and
payables with Williams at the end of the period was 5.6%, 5.8% and 6.2% for
March 31, 1999 (unaudited) and December 31, 1998 and 1997, respectively. In
addition, the net amount due to or from affiliates consists of normal course
receivables and payables resulting from the use of each others services. A
summary of these payables and receivables as of March 31, 1999 (unaudited) and
December 31 follows:
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, -------------------
1999 (UNAUDITED) 1998 1997
---------------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Due from Williams...................... $ -- $ 3,881 $ --
======== ======== ========
Due to affiliates:
Williams............................... $ 32,222 $ -- $ 24,636
Nortel................................. 30,685 37,187 98,948
Other.................................. 1,243 1,323 --
-------- -------- --------
Total due to affiliates.................. $ 64,150 $ 38,510 $123,584
======== ======== ========
Noncurrent:
Due from Williams...................... $ -- $ -- $ 97,097
======== ======== ========
Due to affiliates:
Williams............................ $818,114 $614,343 $ --
Other............................... 6,930 6,367 --
-------- -------- --------
Total due to affiliates.................. $825,044 $620,710 $ --
======== ======== ========
</TABLE>
Interest expense to Williams was $9,307,000, $467,000, $16,933,000,
$2,657,000 and $16,776,000 for the three months ended March 31, 1999 and 1998
(unaudited) and the years ended December 31, 1998, 1997 and 1996, respectively.
No amounts were paid to Williams for interest in the three months ended March
31, 1999 (unaudited) or the years ended December 31, 1998, 1997 and 1996.
Interest income from Williams was $2,932,000 in 1997. There was no interest
income from Williams for the three months ended March 31, 1999 (unaudited) or
the years ended December 31, 1998 and 1996.
In connection with the formation of Solutions LLC, a $160,873,000 note
payable to Nortel was established which was paid by Solutions LLC in August
1997. Total interest expensed and paid on the note during 1997 was $2,491,000.
F-34
<PAGE> 188
WILLIAMS COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Solutions LLC purchased inventory from Nortel for use in equipment
installations for $467,476,000 in 1998 and $310,599,000 for the period from
April 30, 1997 (date on which Nortel became a related party) to December 31,
1997. Solutions LLC has a distribution agreement with Nortel that extends
through December 2002. If for two consecutive years the percentage of Nortel
products purchased by Solutions LLC falls below approximately 78% and the rate
of growth of the purchase of Nortel products by Solutions LLC during the
two-year period is below that of other Nortel distributors, Nortel may require
WCG to buy, or WCG may require Nortel to sell, Nortel's entire interest in
Solutions LLC at market value.
In addition, Network purchased from Nortel optronics for use on its network
for $99,311,000 in 1998 and $30,241,000 for the period from April 30, 1997 to
December 31, 1997.
15. COMMITMENTS AND CONTINGENCIES
During 1998, Solutions LLC and one of its equipment suppliers amended an
existing take-or-pay contract for equipment purchases. The amended purchase
commitment terms require Solutions LLC equipment purchases from the supplier
totaling $10,000,000, $19,000,000 and $25,000,000 during the twelve-month
periods ended March 31, 1999, 2000 and 2001, respectively. Solutions LLC met its
March 31, 1999 commitment.
WCG is a party to various claims, legal actions and complaints arising in
the ordinary course of business. In the opinion of management, the ultimate
resolution of all claims, legal actions and complaints after consideration of
amounts accrued, insurance coverage, or other indemnification arrangements will
not have a materially adverse effect upon WCG's future financial position,
results of operations or cash flows.
16. FINANCIAL INSTRUMENTS
FAIR VALUE METHODS
The following methods and assumptions were used by WCG in estimating its
fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amounts reported in the
balance sheet approximate fair value due to the short-term maturity of
these instruments.
Investments -- cost method and advances to investees: Fair value of
other cost method investments and advances to investees are estimated to
approximate historically recorded amounts as the operations underlying
these investments are in their initial phases.
Long-term debt: WCG's long-term debt consists primarily of variable
rate borrowings, including amounts from affiliates, for which the carrying
value approximates the fair value.
OFF-BALANCE-SHEET CREDIT AND MARKET RISK
In 1997, WCG entered into an agreement with Williams whereby WCG would sell
to Williams, on an ongoing basis, certain of WCG's accounts receivable. At
December 31, 1998 and 1997, $33,767,000 and $25,664,000 of WCG's accounts
receivable have been sold, respectively, to Williams. On January 31, 1999, WCG's
agreement with Williams expired and was not renewed.
F-35
<PAGE> 189
WILLIAMS COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONCENTRATION OF CREDIT RISK
WCG's customers include numerous corporations. Approximately 68% and 86% of
receivables at December 31, 1998 and 1997, respectively, are for Solutions
related services. Approximately 25% and 3% of receivables at December 31, 1998
and 1997, respectively, are for Network related services. WCG serves a wide
range of customers, none of which is individually significant to its business.
While sales to these various customers are generally unsecured, the financial
condition and creditworthiness of customers are routinely evaluated.
17. SUBSEQUENT EVENTS
On February 8, 1999 WCG and SBC announced a series of alliance agreements
in addition to SBC's plans to acquire up to 10% of the common stock of WCG. The
private investment is expected to occur simultaneously with the initial public
offering. SBC's initial investment will be limited to $500 million, which will
be reinvested by WCG in its business. If SBC's investment equals less than 10%
of the common stock, SBC has the ability to purchase the remainder of the 10% in
subsequent public offerings, if they occur. SBC's purchase of WCG stock is
contingent upon due diligence, WCG completing its initial public offering and
the continuing existence of the agreement under which WCG provides network
transport services. The initial public offering price, less the underwriters'
discount will determine the price of the SBC shares.
Once SBC receives regulatory approval to enter the long-distance business
within one state in its local service territory, it will have one seat on the
WCG board of directors. WCG will serve as SBC's preferred provider for all
domestic U.S. transport services. SBC will be WCG's preferred provider for
platform products and certain international transport services, so long as such
preferred services are provided at mutually acceptable prices and regulations do
not prohibit such an arrangement. WCG will work with SBC to connect SBC's
international cables to WCG's domestic network. The agreement also will allow
both parties to cross-market certain of each others services, and specifically
enable Solutions to offer SBC-branded products and services as an addition to
its array of voice and data communication equipment products and network
services.
Williams has a call option to purchase not less than all of the shares of
stock acquired by SBC, in the event of the termination, other than due to a
breach by WCG, of certain agreements with SBC, provided that Williams has at
least a 50% interest in WCG. The purchase price is equal to the market price at
the time of exercise less the underwriting discounts and commissions applicable
to the shares at the time of the initial offering.
On May 21, 1999, WCG entered into two memoranda of understanding with
Metromedia Fiber Network, Inc. under which both parties agree to enter into
20-year agreements with the other, providing for the following:
- Metromedia will lease to WCG approximately 86,000 miles of dark fiber
on its local networks and will provide WCG with maintenance services
and dark fiber connectivity to approximately 250 points of presence
and data centers, in exchange for approximately $317 million payable
by WCG over the duration of the agreement
- Metromedia will lease from WCG six dark fibers over approximately
14,000 miles of fiber optic cable on the Williams Network and WCG will
provide colocation and maintenance services in exchange for
approximately $317 million payable by Metromedia over the duration of
the agreement
F-36
<PAGE> 190
WILLIAMS COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On May 24, 1999, WCG and Intel Corporation, on behalf of Intel Internet
Data Services, entered into a long-term master alliance agreement. The alliance
agreement provides that WCG and Intel Internet Data Services will purchase
services from one another pursuant to a service agreement and create a
co-marketing arrangement, each of which will have shorter terms than that of the
master alliance agreement. The parties' obligations under the alliance agreement
are subject to, among other conditions, completion of the service agreement and
co-marketing agreement by June 15, 1999. The services WCG will provide include
domestic transport services and may also include Internet connectivity. Intel
will provide web hosting services pursuant to the co-marketing arrangement.
Intel also entered into a securities purchase agreement with WCG and
Williams to purchase at the closing of this offering the number of shares of
common stock equal to $200 million divided by the initial public offering price
less the underwriting discount. The parties' obligations under the securities
purchase agreement are subject to closing conditions, including that the
alliance agreement is in full effect and that at least $500 million is raised in
this offering and that necessary governmental approvals have been obtained.
In connection with its purchase of common stock, Intel has agreed not to
transfer any of its shares of common stock to anyone except affiliates for a
period of eighteen months, but this transfer restriction provision will be
terminated if we have a change of control. In addition, the transfer restriction
does not prohibit Intel from participating in future registered offerings
initiated by us or from engaging in hedging transactions commencing six months
from the date of the equity offering. Intel also has registration rights in
connection with its holdings.
On May 25, 1999, WCG entered into various service and an alliance
agreements with TelMex.
In addition, on May 25, 1999, TelMex entered into a securities purchase
agreement with WCG and Williams to purchase at the closing of the equity
offering up to the number of shares of common stock equal to $100 million
divided by the initial public offering price less the underwriting discount.
TelMex's obligation and ability to make the investment is subject to
conditions at closing, including that the alliance agreement with TelMex be in
full effect and that SBC approves the portion of TelMex's investment that
exceeds $25 million, which would require SBC's investment to be limited to $425
million.
In connection with its purchase of WCG common stock TelMex has agreed to
certain restrictions and will receive certain privileges, including the
following:
- TelMex has agreed not to acquire more than 10% of WCG's common stock for
a period of 10 years
- TelMex has agreed not to transfer to anyone, except affiliates, any of
its shares of WCG's common stock for a period of 3 1/2 years, but this
transfer restriction provision will be terminated if WCG has a change of
control
- TelMex has agreed that WCG has the right, for a period of 3 1/2 years, to
repurchase WCG stock at market value less the underwriter's discount if
the alliance agreement is terminated for any reason other than a breach
by WCG
F-37
<PAGE> 191
WILLIAMS COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
TelMex also has registration rights in connection with its holdings.
On May 27, 1999, Williams contributed its investments in the holding
companies, which owned the investments in ATL, PowerTel and MetroCom, to WCG at
their historical book values.
F-38
<PAGE> 192
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
Williams Communications Group, Inc.
We have audited the accompanying combined statements of income and changes
in net assets and combined statements of cash flows of the Direct Sales
Subsidiary, Nortel Communications Systems ("NCS") and TTS Meridian Systems, Inc.
("TTS") (collectively, the "Business") of Enterprise Networks of Northern
Telecom Limited ("Nortel") for the four months ended April 30, 1997 and the year
ended December 31, 1996. These financial statements are the responsibility of
the Business' 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 in the United States. 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 disclosure 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 combined results of the Business' operations and
changes in net assets and its cash flows for the four months ended April 30,
1997 and the year ended December 31, 1996, in conformity with generally accepted
accounting principles in the United States.
DELOITTE & TOUCHE LLP
Toronto, Ontario
March 26, 1999
F-39
<PAGE> 193
DIRECT SALES SUBSIDIARY, NORTEL COMMUNICATIONS SYSTEMS, INC.
AND TTS MERIDIAN SYSTEMS, INC. OF ENTERPRISE NETWORKS OF
NORTHERN TELECOM LIMITED
COMBINED STATEMENTS OF INCOME AND CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOUR MONTHS
ENDED YEAR ENDED
APRIL 30, DECEMBER 31,
1997 1996
----------- ------------
(IN THOUSANDS)
<S> <C> <C>
Sales....................................................... $250,205 $733,111
Cost of Sales............................................... 182,539 527,980
-------- --------
Gross Profit................................................ 67,666 205,131
-------- --------
Selling, general and administrative......................... 55,242 167,234
Other....................................................... -- 1,023
-------- --------
Operating income............................................ 12,424 36,874
Interest income............................................. 592 1,405
-------- --------
Income before provision for income taxes.................... 13,016 38,279
Provision for income taxes (Note 5)......................... 5,330 16,018
-------- --------
Net income.................................................. $ 7,686 $ 22,261
======== ========
Net Assets:
Beginning of period......................................... $131,505 $140,201
Net Income.................................................. 7,686 22,261
Distribution from/(to) Nortel............................... 8,339 (30,957)
-------- --------
End of period............................................... $147,530 $131,505
======== ========
</TABLE>
F-40
<PAGE> 194
DIRECT SALES SUBSIDIARY, NORTEL COMMUNICATIONS SYSTEMS, INC.
AND TTS MERIDIAN SYSTEMS, INC. OF ENTERPRISE NETWORKS OF
NORTHERN TELECOM LIMITED
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOUR MONTHS
ENDED YEAR ENDED
APRIL 30, DECEMBER 31,
1997 1996
----------- ------------
(IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES
Net Income.................................................. $ 7,686 $ 22,261
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 2,121 6,993
Deferred taxes............................................ 705 (2,508)
Loss on write-down of property and equipment.............. -- 1,108
Cash provided (used) by changes in:
Receivables............................................ (12,859) 3,928
Inventories............................................ (1,873) (3,721)
Prepaid expenses....................................... 69 428
Accounts payable and accrued liabilities............... (2,832) 4,236
Distribution from/(to) Nortel.......................... 8,339 (30,957)
Other.................................................. 396 4,308
-------- --------
Net cash provided by operating activities................... 1,752 6,076
-------- --------
INVESTING ACTIVITIES
Payments for purchases of property and equipment............ (1,752) (6,076)
-------- --------
Net cash used by investing activities....................... (1,752) (6,076)
-------- --------
Increase in cash............................................ -- --
Cash at beginning of periods................................ -- --
-------- --------
Cash at end of periods...................................... $ -- $ --
======== ========
</TABLE>
F-41
<PAGE> 195
DIRECT SALES SUBSIDIARY, NORTEL COMMUNICATIONS SYSTEMS, INC.
AND TTS MERIDIAN SYSTEMS, INC. OF ENTERPRISE NETWORKS OF
NORTHERN TELECOM LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOUR MONTHS ENDED APRIL 30, 1997 AND YEAR ENDED DECEMBER 31, 1996
(THOUSANDS OF DOLLARS)
1. BASIS OF PRESENTATION OF THE COMBINED FINANCIAL STATEMENTS
On April 30, 1997 the combined net assets of the Direct Sales Subsidiary,
Nortel Communications Systems, Inc. ("NCS"), and TTS Meridian Systems, Inc.
("TTS"), (collectively the "Business") of Enterprise Networks of Northern
Telecom Limited ("Nortel") were sold to a newly formed entity. Under the terms
of the purchase and sale agreement, Williams Communications Group, Inc. ("WCG")
and Nortel formed a new entity, Wiltel Communications, LLC (today known as
Williams Communications Solutions, LLC or "WCS").
The accompanying combined statements of income and changes in net assets,
and combined statements of cash flows ("the statements") have been prepared to
reflect the income, changes in net assets and cash flows associated with the
Business as if it had operated on a stand alone basis rather than as part of
Nortel.
The Business is comprised of the following:
-- NCS, which includes the following divisions: NCS East and NCS West; and
the consolidated subsidiaries Nortel Federal Systems, Inc., and Bell
Atlantic Meridian Systems ("BA Meridian"). BA Meridian was a joint
venture general partnership previously owned 80% by NCS and 20% by Bell
Atlanticom Systems Inc. Immediately prior to transferring the combined
net assets of the Business to WCS, Nortel purchased the 20% interest in
BA Meridian held by Bell Atlanticom Systems Inc. On April 30, 1997, 100%
of BA Meridian's net assets were sold to WCS, as part of the combined
net assets contributed, and;
-- TTS
All transactions and balances between combined entities have been
eliminated.
The combined statements include 100% of the results of BA Meridian. The 20%
portion owned by Bell Atlanticom Systems Inc. and included in these combined
statements amounted to $386 and $2,089 of net income, for the four months ended
April 30, 1997 and the year ended December 31, 1996, respectively.
The transfer of the net assets of the Business was governed by the
following agreements: the Limited Liability Agreement of Wiltel Communications,
LLC, dated as of April 1, 1997; the Formation Agreement between Northern Telecom
Inc., and Williams Communications Group, Inc. dated as of April 1, 1997, and the
Share Purchase Agreements for TTS Meridian Systems, Inc., by and between
Northern Telecom Limited and Williams Telecommunications Systems, Inc. ("WTI"),
dated April 30, 1997, collectively referred to as the "Agreement."
2. THE BUSINESS
The Business' principal activity is the marketing, sales and distribution
of telecommunications equipment. The Business is highly dependent on Nortel, as
substantially all of the products distributed are purchased from Nortel.
F-42
<PAGE> 196
DIRECT SALES SUBSIDIARY, NORTEL COMMUNICATIONS SYSTEMS, INC.
AND TTS MERIDIAN SYSTEMS, INC. OF ENTERPRISE NETWORKS OF
NORTHERN TELECOM LIMITED
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
3. SIGNIFICANT ACCOUNTING POLICIES
REVENUES AND RELATED COST OF SALES
Revenues and related costs for contracts and customer service orders are
recognized on a percentage-of-completion basis for individual contracts or
elements thereof, based on work performed, date of delivery to customer site,
and the ratio of costs incurred, to total estimated costs. The equipment portion
of contracts is recognized upon shipment.
Maintenance contract revenue is deferred and recognized over the life of
the contract on a straight-line basis.
TRANSLATION OF FOREIGN CURRENCIES
Except for TTS, the functional currency of each of the combined entities is
the U.S. dollar. The functional currency of TTS is the Canadian dollar. TTS'
operations are translated as follows:
i. Assets and liabilities are translated at the exchange rates in
effect at the balance sheet date.
ii. Revenues and expenses, including gains and losses on foreign
exchange transactions, are translated at average rates for the period.
iii. The unrealized translation gains and losses on the Business' net
investment, including long-term intercompany advances, in these operations
are normally accumulated in a separate component of stockholders' equity,
which would be described as currency translation adjustment ("CTA").
For the purposes of these financial statements CTA was not material, and
has been included as part of the combined net assets.
DEPRECIATION
Depreciation is generally calculated under the straight-line method using
rates based on the expected useful lives of the assets of 5 to 10 years. The
underlying assets being depreciated consist principally of computers and
telecommunications equipment, furniture and fixtures, vehicles and leasehold
improvements.
The cost of maintenance and repairs, which do not significantly improve or
extend the life of the respective assets, is charged to expense as incurred.
GOODWILL
Goodwill represents the excess, at the dates of acquisition, of the costs
over the fair values of the net assets of certain companies acquired by the
Business, and is amortized on a straight-line basis over an estimated life of 3
years. The carrying value of goodwill is evaluated to determine whether a
potential permanent impairment exists, management considers the financial
condition and expected future earnings before tax using projected financial
performance. A permanent impairment in the value of goodwill is written off
against earnings in the year such impairment is identified.
F-43
<PAGE> 197
DIRECT SALES SUBSIDIARY, NORTEL COMMUNICATIONS SYSTEMS, INC.
AND TTS MERIDIAN SYSTEMS, INC. OF ENTERPRISE NETWORKS OF
NORTHERN TELECOM LIMITED
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
INCOME TAXES
The Business, except for the TTS portion, was not a taxable entity when
operated by Nortel; rather, its tax position was considered as part of the
consolidated tax calculation performed for Nortel. For the purposes of
presenting the Business as a stand alone entity an estimate of the tax position
has been calculated. The Business used the asset and liability method of
accounting for deferred income taxes. Under this method, deferred income tax
assets and liabilities are provided for temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes, computed based on the rates and
provisions as measured by tax laws.
USE OF ESTIMATES
The statements reflect the operations and cash flows of the Business. The
statements have been prepared from the books, records and accounts of the
Business (including combining workpapers and supporting entries) on the basis of
established accounting methods, policies, practices and procedures and the
judgements and estimation methodologies used by Nortel and the Business, in
accordance with the generally accepted accounting principles of the United
States. All of the allocations and estimates reflected in the statements are
based on assumptions and estimates that management believes to be reasonable.
Actual results could differ significantly from those estimates.
WARRANTIES
Warranty and product allowances on sales are estimated and charged to cost
of sales at the time the products are sold to customers.
RECENT ACCOUNTING STANDARDS
Due to the sale of the Business on April 30, 1997, the results of
operations, cash flows and financial position for the Business subsequent to
that date would be included in the financial statements of WCS. New accounting
standards would be taken into consideration by WCS in the preparation of their
financial statements.
4. GOODWILL
Total goodwill amortization charged to operations for the four months ended
April 30, 1997 and the year ended December 31, 1996 was $333 and $1,283,
respectively.
F-44
<PAGE> 198
DIRECT SALES SUBSIDIARY, NORTEL COMMUNICATIONS SYSTEMS, INC.
AND TTS MERIDIAN SYSTEMS, INC. OF ENTERPRISE NETWORKS OF
NORTHERN TELECOM LIMITED
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
5. INCOME TAXES
The provision for income taxes is comprised of the following:
<TABLE>
<CAPTION>
FOUR MONTHS ENDED YEAR ENDED
APRIL 30, 1997 DECEMBER 31, 1996
----------------- -----------------
<S> <C> <C>
Current
Federal..................................... $1,851 $13,868
State/Provincial............................ 601 2,150
------ -------
2,452 16,018
------ -------
Deferred
Federal..................................... 2,528 --
State/Provincial............................ 350 --
------ -------
2,878 --
------ -------
Total provision............................... $5,330 $16,018
====== =======
</TABLE>
Reconciliations of the benefit for income taxes from the statutory rate to
the provision for income taxes are as follows:
<TABLE>
<CAPTION>
FOUR MONTHS ENDED YEAR ENDED
APRIL 30, 1997 DECEMBER 31, 1996
----------------- -----------------
<S> <C> <C>
Statutory rate................................ 35.00% 35.00%
Increases (reductions) in taxes from:
State/Provincial rate....................... 7.78 5.43
Goodwill.................................... 0.13 0.66
Other....................................... 0.58 0.83
----- -----
Total provision............................... 43.49% 41.92%
===== =====
</TABLE>
The tax provision above is an estimate to reflect what the Business would
have paid had it been a stand alone company. Therefore, cash taxes paid are not
disclosed in these statements. Actual income taxes payable, if any, were paid by
Nortel, on behalf of the Business, on a consolidated basis.
6. PLANS FOR EMPLOYEES' PENSIONS
As the Business was part of Nortel as of April 30, 1997 and December 31,
1996, the eligible employees of the Business were members of the Nortel pension
plans. Nortel has non-contributory defined benefit pension plans covering
substantially all of its employees. The benefits are based on length of service
and rates of compensation.
Nortel's policy is to fund pensions based on widely used actuarial methods
as permitted by pension regulatory authorities. The funded amounts reflect
actuarial assumptions regarding compensation, interest, and other projections.
Plan assets are represented primarily by common stocks, bonds, debentures,
secured mortgages, and property.
Pension costs reflected in the combined statements of income are based on
the unit credit method of valuation of pension plan benefits.
F-45
<PAGE> 199
DIRECT SALES SUBSIDIARY, NORTEL COMMUNICATIONS SYSTEMS, INC.
AND TTS MERIDIAN SYSTEMS, INC. OF ENTERPRISE NETWORKS OF
NORTHERN TELECOM LIMITED
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
The following disclosure presents the estimated expense and funded status
reconciliations for the portions of the Nortel plan allocated to WCS employees
as if the Business had operated on a stand alone basis. Subsequent to April 30,
1997, WCS curtailed the plan relating to the transferred employees and later
settled the plan. As a result the plan as described below no longer exists.
<TABLE>
<CAPTION>
APRIL 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
PLAN ASSETS AND LIABILITIES:
Plan assets at fair value............................. $45,464 $43,069
------- -------
Actuarial present value of benefit obligation
Accumulated benefit obligation
Vested........................................... 21,507 20,228
Non-vested....................................... 4,534 4,266
Effect of salary projection......................... 17,322 16,299
------- -------
Projected benefit obligation.......................... 43,363 40,793
------- -------
Excess of plan assets at fair value over projected
benefit obligations................................. 2,101 2,276
Less:
Unrecognized net transition assets.................. 1,000 1,030
Unrecognized prior service costs.................... (1,225) (1,251)
Unrecognized net gains.............................. 557 557
------- -------
Pension asset....................................... $ 1,769 $ 1,940
======= =======
</TABLE>
<TABLE>
<CAPTION>
APRIL 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
PENSION EXPENSE:
Service cost -- benefits earned....................... $ 1,424 $ 3,702
Interest cost on projected plan benefits.............. 1,163 2,926
Estimated return on plan assets....................... (1,301) (3,254)
Other
Amortization of net asset........................... (29) (88)
Amortization of unrecognized prior service cost..... 26 59
Amortization of net loss............................ -- 2
------- -------
Total expense for the period.......................... $ 1,283 $ 3,347
======= =======
Assumptions:
Discount rates...................................... 7.75% 7.75%
Rate of return on assets............................ 9.00% 9.00%
Rate of compensation increase....................... 4.5% 4.5%
</TABLE>
F-46
<PAGE> 200
DIRECT SALES SUBSIDIARY, NORTEL COMMUNICATIONS SYSTEMS, INC.
AND TTS MERIDIAN SYSTEMS, INC. OF ENTERPRISE NETWORKS OF
NORTHERN TELECOM LIMITED
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
7. POST RETIREMENT BENEFITS
The eligible employees of the Business were included in the Nortel post
retirement plans. The plans provided certain benefits other than pension to the
employees. The net post retirement costs include the following components:
<TABLE>
<CAPTION>
APRIL 30, DECEMBER 31,
1997 1996
--------- ------------
<S> <C> <C>
PLAN ASSETS AND LIABILITIES:
Plan assets at fair value............................. $ -- $ --
Accumulated post retirement benefit obligation........ 14,435 13,621
-------- --------
Deficiency of plan assets at fair value over projected
benefit obligation.................................. (14,435) (13,621)
Unrecognized prior service costs...................... 4,447 4,548
Unrecognized net gains................................ (183) (183)
-------- --------
Post retirement liability............................. $(10,171) $ (9,256)
======== ========
</TABLE>
<TABLE>
<CAPTION>
APRIL 30, DECEMBER 31,
1997 1996
--------- ------------
<S> <C> <C>
POST RETIREMENT EXPENSE:
Service cost........................................... $429 $1,095
Interest cost.......................................... 385 966
Other
Amortization of unrecognized prior service costs..... 100 300
---- ------
Total expense for the period........................... $914 $2,361
==== ======
Assumptions:
Weighted average discount rate....................... 7.75% 7.75%
Rate of compensation increase........................ 4.50% 4.50%
</TABLE>
The effect of a 1% increase in the assumed health care cost trend is not
material. The plan was unfunded at April 30, 1997 and December 31, 1996.
8. RELATED PARTY TRANSACTIONS
Transactions with Nortel and affiliated companies are significant. These
transactions occur at prices established between the Business and Nortel.
The Business purchased equipment based on Distribution Agreements with
other Nortel operating units, in the amount of $91,500 for the four months ended
April 30, 1997 and $287,100 for the year ended December 31, 1996. These amounts
reflect transfer prices equivalent to amounts which would have been charged to
any other third party distributor.
Pursuant to service arrangements with Nortel the Business paid
approximately $15,309 to Nortel during the four months ended April 30, 1997 and
$50,867 during the year ended December 31, 1996 for fringe benefits, accounting,
computer and other administrative services provided by Nortel. The charges were
based on actual costs incurred or allocated costs based on relative factors such
as square foot occupancy or head count. In management's estimates, the allocated
methodologies used are reasonable. In addition these amounts reflect fair value,
and
F-47
<PAGE> 201
DIRECT SALES SUBSIDIARY, NORTEL COMMUNICATIONS SYSTEMS, INC.
AND TTS MERIDIAN SYSTEMS, INC. OF ENTERPRISE NETWORKS OF
NORTHERN TELECOM LIMITED
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
approximate amounts that would have been incurred by the Business had it
purchased these services from third parties.
9. INFORMATION ON BUSINESS SEGMENT BY GEOGRAPHIC AREA
The Business operates in one business segment, telecommunications
equipment, and its activity consists of the sales and distribution of Nortel
products in North America.
GEOGRAPHIC AREA
The point of origin (the location of the selling organization) of revenues
and the location of the assets determine the geographic areas. The following
table sets forth information by geographic area:
<TABLE>
<CAPTION>
FOUR MONTHS ENDED YEAR ENDED
APRIL 30, 1997 DECEMBER 31, 1996
----------------- -----------------
<S> <C> <C>
Total revenues:
United States............................... $223,860 $651,429
Canada...................................... 26,345 81.682
-------- --------
Total customer revenues....................... 250,205 733,111
-------- --------
Contribution to operating earnings:
United States............................... 56,599 172,558
Canada...................................... 11,067 32,573
-------- --------
67,666 205,131
General corporate expenses.................... 54,650 166,852
-------- --------
Income before income taxes.................... $ 13,016 $ 38,279
======== ========
</TABLE>
10. STOCK-BASED COMPENSATION
Certain employees of the Business were participants of the Northern Telecom
Limited 1986 Stock Option Plan As Amended and Restated ("the Plan"). Under the
Plan, options to purchase common shares of Nortel were granted at the market
value on the effective date of the grant. Generally, options become exercisable
over two or three years, depending on the year of the grant, and expire after
ten years.
The Business' employee stock-based awards were accounted for under
provisions of Accounting Principles Board (APB) Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations. Common stock options do
not result in compensation expense, because the exercise price of the stock
options equals the market price of the underlying stock on the effective date of
grant.
SFAS No. 123, "Accounting For Stock-Based Compensation," requires that
companies who continue to apply APB Opinion No. 25 disclose pro forma net income
assuming that the fair-value method in SFAS No. 123 had been applied in
measuring compensation cost. Pro forma net income for the Business was $6,376
and $20,987 for the four months ended April 30, 1997 and the year ended December
31, 1996, respectively. Reported net income was $7,686 and $22,261, for the four
months ended April 30, 1997, and the year ended December 31, 1996,
F-48
<PAGE> 202
DIRECT SALES SUBSIDIARY, NORTEL COMMUNICATIONS SYSTEMS, INC.
AND TTS MERIDIAN SYSTEMS, INC. OF ENTERPRISE NETWORKS OF
NORTHERN TELECOM LIMITED
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
respectively. Since compensation expense from stock options is recognized over
the future years' vesting period for pro forma disclosure purposes, and
additional awards generally are made each year, pro forma amounts may not be
representative of future years' amounts.
These options were not assumed by WCS on the transfer of the net assets of
the Business, and employees could continue to hold the options of Nortel common
shares under the Plan.
<TABLE>
<CAPTION>
APRIL 30, 1997 DECEMBER 31, 1996
-------------- -----------------
<S> <C> <C>
Options granted for the period.................... 144,200 135,900
Weighted-average grant date fair value............ $ 13.22 $ 9.92
Options outstanding at period end................. 282,600 240,286
Options exercisable at period end................. 60,850 54,786
</TABLE>
11. COMMITMENTS
As at April 30, 1997, the future minimum lease payments under operating
leases consisted of:
<TABLE>
<S> <C>
Remaining 8 months of 1997.................................. $10,017
1998........................................................ 12,276
1999........................................................ 8,330
2000........................................................ 5,276
2001........................................................ 1,532
Thereafter.................................................. 601
-------
Total....................................................... $38,032
=======
</TABLE>
Rent expense on operating leases for the four months ended April 30, 1997
and the year ended December 31, 1996 amounted to $4,738 and, $14,053,
respectively.
12. CONTINGENT LIABILITIES
The Business is, from time to time, a litigant in various claims and
proceedings arising from the normal course of business. Although the outcome of
these proceedings cannot be precisely determined, management believes, based on
currently known facts and circumstances, that the disposition of these matters
will not have a material adverse effect on the Business' financial position.
13. CREDIT RISK
The Business is exposed to credit risk from customers. Such risk is
minimized due to the nature of the telecommunications distribution business
which results in the Business transacting with a large number of diverse
customers.
F-49
<PAGE> 203
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES
WILLIAMS COMMUNICATIONS GROUP, INC.
COMMON STOCK
LOGO
------------
PROSPECTUS
, 1999
------------
SALOMON SMITH BARNEY
LEHMAN BROTHERS
MERRILL LYNCH & CO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 204
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY CHANGE. WE MAY NOT
SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL
OUR SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY
STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
[ALTERNATE INTERNATIONAL PAGE]
SUBJECT TO COMPLETION, , 1999
PROSPECTUS
SHARES
[WILLIAMS LOGO]
WILLIAMS COMMUNICATIONS GROUP, INC.
COMMON STOCK
- --------------------------------------------------------------------------------
This is our initial public offering of shares of common stock. We will apply for
listing on the New York Stock Exchange under the symbol "WCG." We anticipate
that the initial public offering price will be between $ and $ per
share.
We are offering shares. Of the shares being offered,
shares are being offered outside the United States and Canada
and shares are concurrently being offered in the United States
and Canada.
Investing in the shares involves risks. "Risk Factors" begin on page 9.
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -----
<S> <C> <C>
Public Offering Price....................................... $ $
Underwriting Discount....................................... $ $
Proceeds, before expenses, to Williams Communications Group,
Inc....................................................... $ $
</TABLE>
We have granted the underwriters a 30-day option to purchase up to
additional shares of common stock on the same terms and conditions as set forth
above solely to cover over-allotments, if any.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
Lehman Brothers expects to deliver the shares to purchasers on or about
, 1999.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Joint Book-Running Managers Co-Lead Manager
LEHMAN BROTHERS SALOMON SMITH BARNEY MERRILL LYNCH
Structural Advisor INTERNATIONAL INTERNATIONAL
</TABLE>
, 1999
<PAGE> 205
[ALTERNATE INTERNATIONAL PAGE]
SHARES
LOGO
WILLIAMS COMMUNICATIONS GROUP, INC.
COMMON STOCK
---------------------------------------
PROSPECTUS
, 1999
---------------------------------------
LEHMAN BROTHERS
SALOMON SMITH BARNEY INTERNATIONAL
MERRILL LYNCH INTERNATIONAL
<PAGE> 206
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The Registrant estimates that expenses payable by the Registrant in
connection with the equity offering described in this registration statement
(other than the underwriting discount and commissions) will be as follows*:
<TABLE>
<S> <C>
Securities and Exchange Commission filing fee............... $ 208,500
NASD filing fee............................................. 30,500
New York Stock Exchange listing fee......................... **
Blue sky fees and expenses.................................. 10,000
Accounting fees and expenses................................ 1,050,000
Legal fees and expenses..................................... 1,500,000
Printing and engraving fees................................. 1,000,000
Miscellaneous............................................... **
----------
Total.................................................. $ **
==========
</TABLE>
- -------------------------
* All fees except the Securities and Exchange Commission and NASD filing fees
are estimates.
** To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company is incorporated under the laws of the State of Delaware.
Section 145 ("Section 145") of the General Corporation Law of the State of
Delaware ("DGCL") provides that a Delaware corporation may indemnify any persons
who are, or are threatened to be made, parties to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such corporation), by
reason of the fact that such person is or was an officer, director, employee or
agent of such corporation, or is or was serving at the request of such
corporation as a director, officer, employee or agent of another corporation or
enterprise. The indemnity may include expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding provided such
person acted in good faith and in a manner he or she reasonably believed to be
in or not opposed to the corporation's best interests and, with respect to any
criminal action or proceeding, had no reasonable cause to believe that his or
her conduct was illegal. A Delaware corporation may indemnify any persons who
are, or are threatened to be made, a party to any threatened, pending or
completed action or suit by or in the right of the corporation by reason of the
fact that such person was a director, officer, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or settlement
of such action or suit, provided such person acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the corporation's best
interests except that no indemnification is permitted without judicial approval
if the officer or director is adjudged to be liable to the corporation. Where an
officer or director is successful on the merits or otherwise in the defense of
any action referred to above, the corporation must indemnify him or her against
the expenses which such officer or director has actually and reasonably
incurred.
II-1
<PAGE> 207
Section 145 further provides that the indemnification provisions of Section
145 shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any bylaw, agreement, vote of stockholders
or disinterested directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office. The Restated Certificate of Incorporation contains a provision
eliminating, to the fullest extent permitted by the DGCL as it exists or may in
the future be amended, the liability of a director to the Company and its
stockholders for monetary damages for breaches of fiduciary or other duty as a
director. However, the DGCL does not currently allow such provision to limit the
liability of a director for: (i) any breach of the director's duty of loyalty to
the Company or its stockholders; (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of laws; (iii)
payment of dividends, stock purchases or redemptions that violate the DGCL; or
(iv) any transaction from which the director derived an improper personal
benefit. Such limitation of liability also does not affect the availability of
equitable remedies such as injunctive relief or rescission.
The Restated Certificate of Incorporation and the By-Laws also provide
that, to the fullest extent permitted by the DGCL as it exists or may in the
future be amended, the Company will indemnify and hold harmless any director who
is or was made a party or is threatened to be made a party to or is involved in
any manner in any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that such person is or was a director or officer of the Company or its
subsidiaries, and any person serving at the request of the Company as an
officer, director, partner, member, employee or agent of another corporation,
partnership, limited liability company, joint venture, trust, employee benefit
plan or other enterprise and may indemnify any officer, employee or agent of the
Company; provided, however, that the Company will indemnify any such person
seeking indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors or is a proceeding to enforce such person's
claim to indemnification pursuant to the rights granted by the Restated
Certificate of Incorporation or By-Laws. In addition, the Company will pay the
expenses incurred by directors, and may pay the expenses incurred by other
persons that may be indemnified pursuant to the Restated Certificate and the
By-Laws, in defending any such proceeding in advance of its final disposition
upon receipt (unless the Company upon authorization of the Board of Directors
waives such requirement to the extent permitted by applicable law) of an
undertaking by or on behalf of such person to repay such amount if it is
ultimately determined that such person is not entitled to be indemnified by the
Company as authorized in the Restated Certificate of Incorporation or By-Laws or
otherwise. The Restated Certificate and the By-Laws also state that such
indemnification is not exclusive of any other rights of the indemnified party,
including rights under any indemnification agreements or otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
None.
II-2
<PAGE> 208
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement.*
3.1 Form of Restated Certificate of Incorporation of the
Company.
3.2 Form of Restated By-laws of the Company.
4.1 Specimen certificate of common stock.*
4.2 Specimen certificate of Class B common stock.*
4.3 Form of indenture governing notes.*
4.4 Form of note (contained in form of indenture filed as
Exhibit 4.3).
5.1 Opinion of William G. von Glahn, Esq.*
10.1 Securities Purchase Agreement among Williams Communications
Group, Inc., The Williams Companies, Inc. and Telefonos de
Mexico, S.A. de C.V., dated May 25, 1999
10.2 Alliance Agreement Between Telefonos De Mexico, S.A. de C.V.
and Williams Communications, Inc., dated May 25, 1999.
10.3 Securities Purchase Agreement dated as of May 24, 1999 by
and among Williams Communication Group, Inc., The Williams
Companies, Inc. and Intel Corporation.
10.4 Master Alliance Agreement Between Intel Internet Data
Services and Williams Communications, Inc., dated as of May
24, 1999.
10.5 Memorandum of Understanding Regarding the Lease of Fiber
Strands by Metromedia Fiber Network Services, Inc. to
Williams Communications, Inc., dated May 21, 1999.
10.6 Memorandum of Understanding Regarding the Lease of Fiber
Strands by Williams Communications, Inc. to Metromedia Fiber
Network Services, Inc., dated May 21, 1999.
10.7 Loan Agreement dated as of April 16, 1999 among Williams
Communications Group, Inc., Bank of America National Trust
and Savings Association, and the other financial
institutions party hereto, Nationsbanc Montgomery Securities
LLC, Chase Securities Inc., Bank of Montreal, and The Bank
of New York.
10.8 Shareholders Agreement by and among Metrogas S.A., Williams
International Telecom (Chile) Limited, and Metrocom S.A.,
dated March 30, 1999.
10.9 Share Purchase Agreement by and Among Lightel, S.A.
Technologia de Informacao, Williams International ATL
Limited, Johi Representacoes Ltda and ATL-Algar Telecom
Leste, S.A., dated as of March 25, 1999.
10.10 Master Alliance Agreement between SBC Communications Inc.
and Williams Communications, Inc. dated February 8, 1999.
10.11 Transport Services Agreement dated February 8, 1999, between
Southwestern Bell Communication Services, Inc. and Williams
Communications, Inc.
10.12 Securities Purchase Agreement dated February 8, 1999,
between SBC Communications Inc. and Williams Communications
Group, Inc.
</TABLE>
II-3
<PAGE> 209
<TABLE>
<C> <S>
10.13 Second Amended and Restated Credit Agreement dated as of
July 23, 1997 among The Williams Companies, Inc., Northwest
Pipeline Corporation, Transcontinental Gas Pipeline
Corporation, Texas Gas Transmission Corporation, Williams
Pipeline Company, Williams Holdings of Delaware, Inc.,
WilTel Communications, LLC, and Amendment thereto dated as
of January 26, 1999.
10.14 Amended and Restated Lease for Bank of Oklahoma Tower, as of
January 1, 1999, by and between Williams Headquarters
Building Company and The Williams Companies, Inc.
10.15 Lease as of January 1, 1999, for Williams Technology Center,
by and between Williams Headquarters Building Company and
Williams Communications Group, Inc.
10.16 Lease as of January 1, 1999, for Williams Resource Center,
by and between Williams Headquarters Building Company and
Williams Communications Group, Inc.
10.17 Wireless Fiber IRU Agreement by and between WinStar
Wireless, Inc. and Williams Communications, Inc., effective
as of December 17, 1998.
10.18 IRU Agreement between WinStar Wireless, Inc. and Williams
Communications, Inc., dated December 17, 1998 (long haul).
10.19 UtiliCom Networks, Inc. Note and Warrant Purchase Agreement
dated December 15, 1998, between
10.20 Consolidated IRU Agreement by and among IXC Carrier, Inc.,
Vyvx, Inc. and The WilTech Group, dated December 9, 1998.
10.21 Stock Purchase Agreement for CNG Computer Networking Group
Inc. by and among The Sellers (1310038 Ontario Inc., George
Johnston, Hayden Marcus, The H. Marcus Family Trust and Gary
White), WilTel Communications (Canada), Inc. and Williams
Communications Solutions, LLC, dated October 13, 1998.
10.22 Preferred Stock Purchase by and among UniDial Holdings, Inc.
and Williams Communications, Inc., dated October 2, 1998.
10.23 Amended and Restated Lease between State Street Bank & Trust
Co. of Connecticut, National Association, as Lessor, and
Williams Communications, Inc., as Lessee, as of September 2,
1998.
10.24 Amended and Restated Participation Agreement dated as of
September 2, 1998, among Williams Communications, Inc.;
State Street Bank & Trust Company of Conn., National
Association, as Trustee; Note Holders and Certificate
Holders; APA Purchasers; State Street Bank & Trust Co., as
Collateral Agent; and Citibank, N.A., as agent, with
Citibank, N.A. and Bank of Montreal as Co-Arrangers; Royal
Bank of Canada, as Documentation Agent; and Bank of America,
The Chase Manhattan Bank and Toronto Dominion, as Managing
Agents.
10.25 Capacity Purchase Agreement between Williams Communications,
Inc. and Intermedia Communications, Inc., dated January 5,
1998 and Amendment dated August 5, 1998.
10.26 Settlement and Release Agreement by and between WorldCom
Network Services, Inc. and Williams Communications, Inc.,
dated July 1, 1998.
</TABLE>
II-4
<PAGE> 210
<TABLE>
<C> <S>
10.27 Umbrella Agreement by and between DownTown Utilities Pty Limited, WilTel Communications
Pty Limited, Spectrum Network Systems Limited, CitiPower Pty, Energy Australia, South East
Queensland Electricity Corporation Limited, Williams Holdings of Delaware Inc. and
Williams International Services Company, dated June 19, 1998.
10.28 Carrier Services Agreement between Vyvx, Inc. and U S WEST Communications, Inc., dated
January 5, 1998.
10.29 Distributorship Agreement by and between Northern Telecom Limited and WilTel
Communications, L.L.C., dated January 1, 1998.
10.30 Common Stock and Warrant Purchase Agreement by and among Concentric Network Corporation
and Williams Communications Group, Inc., dated July 25, 1997.
10.31 Note and Warrant Purchase Agreement by and among Concentric Network Corporation and
Williams Communications Group, Inc., dated June 19, 1997.
10.32 Limited Liability Company Agreement of WilTel Communications, LLC, by and between Williams
Communication Group, Inc. and Northern Telecom, Inc., dated April 30, 1997.
10.33 Share Purchase Agreement for TTS Meridian Systems Inc. by and among Northern Telecom
Limited, WilTel Communications, LLC and 1228966 Ontario Inc., dated April 30, 1997.
10.34 Formation Agreement by and between Northern Telecom, Inc. and Williams Communications
Group, Inc., dated April 1, 1997.
10.35 Stock Purchase Agreement among ABC Industria e Comercio S.A.-ABC INCO, Lightel S.A.
Tecnologia da Informacao, Algar S.A.-Empreendimentos e Participacoes and Williams
International Telecom Limited, dated January 21, 1997.
10.36 Subscription and Shareholders Agreement among Lightel S.A. Tecnologia da Informacao, Algar
S.A.-Empreendimentos e Participacoes and Williams International Telecom Limited, dated
January 21, 1997.
10.37 Sublease Agreement as of June 1, 1996, by and between Transcontinental Gas Pipeline
Company and Williams Telecommunications Systems, Inc.
10.38 System Use and Service Agreement between WilTel, Inc. ("WilTel") and Vyvx, Inc. ("Vyvx")
effective as of January 1, 1994.
10.39 Form of administrative services agreement.
10.40 Form of service agreement.
10.41 Form of tax sharing agreement.
10.42 Form of indemnification agreement.
10.43 Form of rights agreement
10.44 Form of registration rights agreement
10.45 Form of separation agreement.*
10.46 Call option agreement by and among Williams Holdings of Delaware, Inc., Williams
International Company, Williams International Telecom Limited, and Williams Communications
Group, Inc. dated May 27, 1999
10.47 Form of cross-license agreement.
</TABLE>
II-5
<PAGE> 211
<TABLE>
.48 10 Form of technical, management and administrative services agreement.
<C> <S>
10.49 The Williams Companies, Inc. 1996 Stock Plan.
10.50 The Williams Companies, Inc. Stock Plan for Nonofficer Employees.
10.51 Williams Communications Stock Plan.
10.52 Williams Communication Group, Inc. 1999 Stock Plan.
10.53 Williams Pension Plan.
10.54 Solutions LLC Pension Plan.
10.55 Williams Communications Change in Control Severance Plan.*
12.1 Statement re: Computation of Ratios.
21 List of Subsidiaries.*
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Arthur Andersen S/C.
23.3 Consent of Deloitte & Touche LLP.
23.4 Consent of William G. von Glahn, Esq. (contained in opinion filed as
Exhibit 5.1).
+24 Power of Attorney.
27.1 Financial Data Schedule -- Three Months Ended March 31, 1999.
27.2 Financial Data Schedule -- Three Months Ended March 31, 1998.
27.3 Restated Financial Data Schedule -- December 31, 1998.
27.4 Restated Financial Data Schedule -- December 31, 1997.
27.5 Restated Financial Data Schedule -- December 31, 1996.
</TABLE>
- -------------------------
* To be filed by amendment.
+ Previously filed.
(b) Financial Statement Schedule
Schedule II -- Valuation and qualifying accounts and report of Ernst &
Young LLP thereon.
II-6
<PAGE> 212
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 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 Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(3) it will provide to the underwriters at the closing specified in the
underwriting agreement certificates in such denominations and registered in
such names as required by the underwriters to permit delivery to each
purchaser.
II-7
<PAGE> 213
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 1 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Tulsa, Oklahoma on the 27th day of May, 1999.
WILLIAMS COMMUNICATIONS GROUP, INC.
By: /s/ WILLIAM G. von GLAHN
-------------------------------------
William G. von Glahn
Senior Vice President, Law
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ * Chief Executive Officer and May 27, 1999
------------------------------------------------ President (Principal Executive
Howard E. Janzen Officer)
/s/ * Chief Financial Officer (Principal May 27, 1999
------------------------------------------------ Accounting and Financial Officer)
Lawrence C. Littlefield, Jr.
/s/ * Director May 27, 1999
------------------------------------------------
Keith E. Bailey
/s/ * Director May 27, 1999
------------------------------------------------
John C. Bumgarner, Jr.
/s/ * Director May 27, 1999
------------------------------------------------
Brian E. O'Neill
/s/ * Director May 27, 1999
------------------------------------------------
James R. Herbster
Director May , 1999
------------------------------------------------
Michael P. Johnson, Sr.
/s/ * Director May 27, 1999
------------------------------------------------
Steven J. Malcolm
/s/ * Director May 27, 1999
------------------------------------------------
Jack D. McCarthy
</TABLE>
* Pursuant to a power of attorney.
II-8
<PAGE> 214
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Williams Communications Group, Inc.
We have audited the consolidated financial statements of Williams
Communications Group, Inc. as of December 31, 1998 and 1997, and for each of the
three years in the period ended December 31, 1998, and have issued our report
thereon dated April 7, 1999, except for the matters described in the third
paragraph of Note 10 and Note 17, as to which the date is May 27, 1999 (included
elsewhere in this Registration Statement). The financial statements of ATL-Algar
Telecom Leste S.A., (an entity in which the Company has a 30% interest, at
December 31, 1998), have been audited by other auditors whose report has been
furnished to us; insofar as our opinion on the combined financial statements
relates to data included for ATL-Algar Telecom Leste S.A., it is based solely on
their report. Our audits also included the financial statement schedule listed
in Item 16(b) of this Registration Statement. This schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
Tulsa, Oklahoma
May 27, 1999
S-1
<PAGE> 215
WILLIAMS COMMUNICATIONS GROUP
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS(A)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
------------------
CHARGED TO
BEGINNING COSTS AND ENDING
BALANCE EXPENSES OTHER DEDUCTIONS(b) BALANCE
--------- ---------- ----- ------------- -------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
1998............................. 12,787 21,591 -- 10,802 23,576
1997............................. 4,950 7,837 7,799(c) 7,799 12,787
1996............................. 6,427 2,694 -- 4,171 4,950
</TABLE>
- ---------------
(a)Deducted from related assets.
(b)Represents balances written off, net of recoveries and reclassifications.
(c)Primarily relates to acquisitions of businesses.
S-2
<PAGE> 216
INDEX TO EXHIBITS
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement.*
3.1 Form of Restated Certificate of Incorporation of the
Company.
3.2 Form of Restated By-laws of the Company.
4.1 Specimen certificate of common stock.*
4.2 Specimen certificate of Class B common stock.*
4.3 Form of indenture governing notes.*
4.4 Form of note (contained in form of indenture filed as
Exhibit 4.3).
5.1 Opinion of William G. von Glahn, Esq.*
10.1 Securities Purchase Agreement among Williams Communications
Group, Inc., The Williams Companies, Inc. and Telefonos de
Mexico, S.A. de C.V., dated May 25, 1999
10.2 Alliance Agreement Between Telefonos De Mexico, S.A. de C.V.
and Williams Communications, Inc., dated May 25, 1999.
10.3 Securities Purchase Agreement dated as of May 24, 1999 by
and among Williams Communication Group, Inc., The Williams
Companies, Inc. and Intel Corporation.
10.4 Master Alliance Agreement Between Intel Internet Data
Services and Williams Communications, Inc., dated as of May
24, 1999.
10.5 Memorandum of Understanding Regarding the Lease of Fiber
Strands by Metromedia Fiber Network Services, Inc. to
Williams Communications, Inc., dated May 21, 1999.
10.6 Memorandum of Understanding Regarding the Lease of Fiber
Strands by Williams Communications, Inc. to Metromedia Fiber
Network Services, Inc., dated May 21, 1999.
10.7 Loan Agreement dated as of April 16, 1999 among Williams
Communications Group, Inc., Bank of America National Trust
and Savings Association, and the other financial
institutions party hereto, Nationsbanc Montgomery Securities
LLC, Chase Securities Inc., Bank of Montreal, and The Bank
of New York.
10.8 Shareholders Agreement by and among Metrogas S.A., Williams
International Telecom (Chile) Limited, and Metrocom S.A.,
dated March 30, 1999.
10.9 Share Purchase Agreement by and Among Lightel, S.A.
Technologia de Informacao, Williams International ATL
Limited, Johi Representacoes Ltda and ATL-Algar Telecom
Leste, S.A., dated as of March 25, 1999.
10.10 Master Alliance Agreement between SBC Communications Inc.
and Williams Communications, Inc. dated February 8, 1999.
10.11 Transport Services Agreement dated February 8, 1999, between
Southwestern Bell Communication Services, Inc. and Williams
Communications, Inc.
10.12 Securities Purchase Agreement dated February 8, 1999,
between SBC Communications Inc. and Williams Communications
Group, Inc.
</TABLE>
<PAGE> 217
<TABLE>
<C> <S>
10.13 Second Amended and Restated Credit Agreement dated as of
July 23, 1997 among The Williams Companies, Inc., Northwest
Pipeline Corporation, Transcontinental Gas Pipeline
Corporation, Texas Gas Transmission Corporation, Williams
Pipeline Company, Williams Holdings of Delaware, Inc.,
WilTel Communications, LLC, and Amendment thereto dated as
of January 26, 1999.
10.14 Amended and Restated Lease for Bank of Oklahoma Tower, as of
January 1, 1999, by and between Williams Headquarters
Building Company and The Williams Companies, Inc.
10.15 Lease as of January 1, 1999, for Williams Technology Center,
by and between Williams Headquarters Building Company and
Williams Communications Group, Inc.
10.16 Lease as of January 1, 1999, for Williams Resource Center,
by and between Williams Headquarters Building Company and
Williams Communications Group, Inc.
10.17 Wireless Fiber IRU Agreement by and between WinStar
Wireless, Inc. and Williams Communications, Inc., effective
as of December 17, 1998.
10.18 IRU Agreement between WinStar Wireless, Inc. and Williams
Communications, Inc., dated December 17, 1998 (long haul).
10.19 UtiliCom Networks, Inc. Note and Warrant Purchase Agreement
dated December 15, 1998, between
10.20 Consolidated IRU Agreement by and among IXC Carrier, Inc.,
Vyvx, Inc. and The WilTech Group, dated December 9, 1998.
10.21 Stock Purchase Agreement for CNG Computer Networking Group
Inc. by and among The Sellers (1310038 Ontario Inc., George
Johnston, Hayden Marcus, The H. Marcus Family Trust and Gary
White), WilTel Communications (Canada), Inc. and Williams
Communications Solutions, LLC, dated October 13, 1998.
10.22 Preferred Stock Purchase by and among UniDial Holdings, Inc.
and Williams Communications, Inc., dated October 2, 1998.
10.23 Amended and Restated Lease between State Street Bank & Trust
Co. of Connecticut, National Association, as Lessor, and
Williams Communications, Inc., as Lessee, as of September 2,
1998.
10.24 Amended and Restated Participation Agreement dated as of
September 2, 1998, among Williams Communications, Inc.;
State Street Bank & Trust Company of Conn., National
Association, as Trustee; Note Holders and Certificate
Holders; APA Purchasers; State Street Bank & Trust Co., as
Collateral Agent; and Citibank, N.A., as agent, with
Citibank, N.A. and Bank of Montreal as Co-Arrangers; Royal
Bank of Canada, as Documentation Agent; and Bank of America,
The Chase Manhattan Bank and Toronto Dominion, as Managing
Agents.
10.25 Capacity Purchase Agreement between Williams Communications,
Inc. and Intermedia Communications, Inc., dated January 5,
1998 and Amendment dated August 5, 1998.
10.26 Settlement and Release Agreement by and between WorldCom
Network Services, Inc. and Williams Communications, Inc.,
dated July 1, 1998.
</TABLE>
<PAGE> 218
<TABLE>
<C> <S>
10.27 Umbrella Agreement by and between DownTown Utilities Pty Limited, WilTel Communications
Pty Limited, Spectrum Network Systems Limited, CitiPower Pty, Energy Australia, South East
Queensland Electricity Corporation Limited, Williams Holdings of Delaware Inc. and
Williams International Services Company, dated June 19, 1998.
10.28 Carrier Services Agreement between Vyvx, Inc. and U S WEST Communications, Inc., dated
January 5, 1998.
10.29 Distributorship Agreement by and between Northern Telecom Limited and WilTel
Communications, L.L.C., dated January 1, 1998.
10.30 Common Stock and Warrant Purchase Agreement by and among Concentric Network Corporation
and Williams Communications Group, Inc., dated July 25, 1997.
10.31 Note and Warrant Purchase Agreement by and among Concentric Network Corporation and
Williams Communications Group, Inc., dated June 19, 1997.
10.32 Limited Liability Company Agreement of WilTel Communications, LLC, by and between Williams
Communication Group, Inc. and Northern Telecom, Inc., dated April 30, 1997.
10.33 Share Purchase Agreement for TTS Meridian Systems Inc. by and among Northern Telecom
Limited, WilTel Communications, LLC and 1228966 Ontario Inc., dated April 30, 1997.
10.34 Formation Agreement by and between Northern Telecom, Inc. and Williams Communications
Group, Inc., dated April 1, 1997.
10.35 Stock Purchase Agreement among ABC Industria e Comercio S.A.-ABC INCO, Lightel S.A.
Tecnologia da Informacao, Algar S.A.-Empreendimentos e Participacoes and Williams
International Telecom Limited, dated January 21, 1997.
10.36 Subscription and Shareholders Agreement among Lightel S.A. Tecnologia da Informacao, Algar
S.A.-Empreendimentos e Participacoes and Williams International Telecom Limited, dated
January 21, 1997.
10.37 Sublease Agreement as of June 1, 1996, by and between Transcontinental Gas Pipeline
Company and Williams Telecommunications Systems, Inc.
10.38 System Use and Service Agreement between WilTel, Inc. ("WilTel") and Vyvx, Inc. ("Vyvx")
effective as of January 1, 1994.
10.39 Form of administrative services agreement.
10.40 Form of service agreement.
10.41 Form of tax sharing agreement.
10.42 Form of indemnification agreement.
10.43 Form of rights agreement
10.44 Form of registration rights agreement
10.45 Form of separation agreement.*
10.46 Call Option Agreement by and among Williams Holdings of Delaware, Inc., Williams
International Company, Williams International Telecom Limited, and Williams Communications
Group, Inc. dated May 27, 1999
10.47 Form of cross-license agreement.
</TABLE>
<PAGE> 219
<TABLE>
<C> <S>
10.48 Form of technical, management and administrative services agreement.
10.49 The Williams Companies, Inc. 1996 Stock Plan.
10.50 The Williams Companies, Inc. Stock Plan for Nonofficer Employees.
10.51 Williams Communications Stock Plan.
10.52 Williams Communication Group, Inc. 1999 Stock Plan.
10.53 Williams Pension Plan.
10.54 Solutions LLC Pension Plan.
10.55 Williams Communications Change in Control Severance Plan.*
12.1 Statement re: Computation of Ratios.
21 List of Subsidiaries.*
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Arthur Andersen S/C.
23.3 Consent of Deloitte & Touche LLP.
23.4 Consent of William G. von Glahn, Esq. (contained in opinion filed as Exhibit 5.1).
+24 Power of Attorney.
27.1 Financial Data Schedule -- Three Months Ended March 31, 1999.
27.2 Financial Data Schedule -- Three Months Ended March 31, 1998.
27.3 Restated Financial Data Schedule -- December 31, 1998.
27.4 Restated Financial Data Schedule -- December 31, 1997.
27.5 Restated Financial Data Schedule -- December 31, 1996.
</TABLE>
- -------------------------
* To be filed by amendment.
+ Previously filed.
(b) Financial Statement Schedule
Schedule II -- Valuation and qualifying accounts and report of Ernst &
Young LLP thereon.
<PAGE> 1
Exhibit 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
WILLIAMS COMMUNICATIONS GROUP, INC.
The name of the corporation (which is hereinafter referred to as the
"Corporation") is "Williams Communications Group, Inc."
The original Certificate of Incorporation (the "Certificate of
Incorporation") was filed with the Secretary of State of the State of Delaware
on December 1, 1994, under the name "WilTel Technology Ventures, Inc." Such
Certificate of Incorporation was amended on September 20, 1995, and February 11,
1997.
This Restated Certificate of Incorporation, which restates, integrates
and amends the Certificate of Incorporation, has been duly adopted in accordance
with Sections 103, 242 and 245 of the General Corporation Law of the State of
Delaware. The text of the Certificate of Incorporation of the Corporation is
hereby amended and restated to read in its entirety as follows:
ARTICLE I
The name of this corporation (hereinafter called the "Corporation") is:
WILLIAMS COMMUNICATIONS GROUP, INC.
ARTICLE II
The purpose or purposes of this Corporation shall be to engage in any
lawful acts or activities for which corporations may be organized under the
General Corporation Law of the State of Delaware (the "Delaware Code").
ARTICLE III
The name and address of the Corporation's registered agent in the State
of Delaware is The Corporation Trust Company, Corporation Trust Center, 1209
Orange Street, Wilmington, Delaware 19801.
<PAGE> 2
ARTICLE IV
CAPITAL STOCK
SECTION 1. Authorized Stock.
The maximum number of shares of capital stock which this Corporation
shall have authority to issue is ** (**) consisting of ** (**) shares of class A
common stock, $.01 par value per share (the "Class A Common Stock"), ** (**)
shares of class B common stock, $.01 par value per share (the "Class B Common
Stock"), and ** (**) shares of preferred stock, $.01 par value per share (the
"Preferred Stock"). The Class A Common Stock and the Class B Common Stock are
hereinafter referred to collectively as the "Common Stock." The powers,
preferences and rights and the qualifications, limitations and restrictions in
respect of the shares of each class are set forth in the following Sections.
SECTION 2. Preferred Stock.
The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby expressly authorized, by resolution or
resolutions, to provide for the issuance of up to ** shares of Preferred Stock
in one or more series and, by filing a certificate pursuant to the Delaware Code
(hereinafter referred to as a "Preferred Stock Designation"), to establish from
time to time the number of shares constituting each such series and the
designation of such series, the voting powers (if any) of the shares of such
series, and the relative rights, powers, privileges, preferences and limitations
of the shares of such series. The authority of the Board of Directors with
respect to each series shall include, but not be limited to, determination of
the following:
(a) the designation of the series, which may be made by
distinguishing number, letter or title;
(b) the number of shares of the series, which number the Board
of Directors may thereafter (except where otherwise provided in the Preferred
Stock Designation) increase or decrease, but not below the number of shares
thereof then outstanding) in the manner permitted by law;
(c) the rate of any dividends (or method of determining the
dividends) payable to the holders of the shares of such series, any conditions
upon which such dividends shall be paid and the date or dates or the method for
determining the date or dates upon which such dividends shall be payable;
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(d) whether dividends, if any, shall be cumulative or
noncumulative, and, in the case of shares of any series having cumulative
dividend rights, the date or dates or method of determining the date or dates
from which dividends on the shares of such series shall cumulate;
(e) if the shares of such series may be redeemed by the
Corporation, the price or prices (or method of determining such price or prices)
at which, the form of payment of such price or prices (which may be cash,
property or rights, including securities of the Corporation or of another
corporation or other entity) for which, the period or periods within which and
the other terms and conditions upon which the shares of such series may be
redeemed, in whole or in part, at the option of the Corporation or at the option
of the holder or holders thereof or upon the happening of a specified event or
events, if any, including the obligation, if any, of the Corporation to purchase
or redeem shares of such series pursuant to a sinking fund or otherwise;
(f) the amount payable out of the assets of the Corporation to
the holders of shares of the series in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation;
(g) provisions, if any, for the conversion or exchange of the
shares of such series, at any time or times, at the option of the holder or
holders thereof or at the option of the Corporation or upon the happening of a
specified event or events, into shares of any other class or classes or any
other series of the same class of capital stock of the Corporation or into any
other security of the Corporation, or into the stock or other securities of any
other corporation or other entity, and the price or prices or rate or rates of
conversion or exchange and any adjustments applicable thereto, and all other
terms and conditions upon which such conversion or exchange may be made;
(h) restrictions on the issuance of shares of the same series
or of any other class or series of capital stock of the Corporation, if any; and
(i) the voting rights and powers, if any, of the holders of
shares of the series
Shares of Preferred Stock, regardless of series, that are converted in
to other securities or other consideration shall be retired and canceled and the
Corporation shall take all such actions as are necessary to cause such shares to
have the status of authorized but unissued shares of Preferred Stock, without
designation as to series.
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SECTION 3. Common Stock.
A. Voting Rights.
Subject to applicable law and the rights of any outstanding series of
Preferred Stock to vote as a separate class or series, the shares of Class A
Common Stock and Class B Common Stock shall vote together as a single class and
shall have the following voting rights: (i) each share of Class A Common Stock
shall entitle the holder thereof to one (1) vote upon all matters upon which
stockholders shall have the right to vote; and (ii) each share of Class B Common
Stock shall entitle the holder thereof to ten (10) votes upon all matters upon
which stockholders shall have the right to vote, subject to Section 3.E.8. of
this Article IV. The authorized number of shares of Class A Common Stock may be
increased or decreased (but not below the number of shares thereof then
outstanding or reserved for issuance upon conversion of the Class B Common Stock
or any other class or series of outstanding Stock) by the affirmative vote of
the holders of Common Stock entitled to cast a majority of the total votes
entitled to be cast by the holders of the Common Stock, voting as a single
class, without a separate class vote of the holders of the Class A Common Stock.
The Corporation may, as a condition to counting the votes cast by any holder of
shares of Class B Common Stock, require proof as set forth in Section 3.E.8 of
this Article IV that the shares of Class B Common Stock held by such holder have
not been converted into shares of Class A Common Stock. Except as otherwise
provided by law or by another provision of this Restated Certificate of
Incorporation or by a Preferred Stock Designation, the Common Stock shall have
the exclusive right to vote for the election of directors and on all other
matters or proposals presented to the stockholders and all matters to be voted
on by stockholders must be approved by a majority of such voters; provided,
however, that the holders of shares of Common Stock, as such, shall not be
entitled to vote on any amendment of this Restated Certificate of Incorporation
(including any amendment of any provision of a Preferred Stock Designation) that
solely relates to the powers, privileges, preferences or rights pertaining to
one or more outstanding series of Preferred Stock, or the number of shares of
any such series, and does not affect the number of authorized shares of
Preferred Stock or the powers, privileges and rights pertaining to the Common
Stock, if the holders of any of such series of Preferred Stock are entitled,
separately or together with the holders of any other series of Preferred Stock,
to vote thereon pursuant to this Restated Certificate of Incorporation
(including any Preferred Stock Designation) or pursuant to the Delaware Code,
unless a vote of holders of shares of Common Stock is otherwise required by any
provision of the
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Preferred Stock Designation for any such series or any other provision of this
Restated Certificate of Incorporation fixing the powers, privileges, and rights
of any such series or the qualifications, limitations or restrictions thereon or
is otherwise required by law. Holders of Preferred Stock of any series shall not
be entitled to receive notice of any meeting of stockholders at which they are
not entitled to vote, except as may be explicitly provided by any Preferred
Stock Designation. The number of authorized shares of Preferred Stock may be
increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock, without a vote of the holders of the
Preferred Stock, or any series thereof, unless a vote of any such holders is
required pursuant to another provision of this Restated Certificate of
Incorporation (including any Preferred Stock Designation). Except as otherwise
provided by law or in this Restated Certificate of Incorporation, and subject to
any voting rights granted to holders of any outstanding Preferred Stock,
amendments to this Restated Certificate of Incorporation must be approved by a
majority of the votes entitled to be cast by all shares of Class A Common Stock
and Class B Common Stock, voting together as a single class, provided, however,
that any amendment to this Restated Certificate of Incorporation that would
alter or change the powers, preferences or special rights of the Class A Common
Stock so as to affect them adversely also must be approved by a majority of the
votes entitled to be cast by the holders of the Class A Common Stock, voting as
a separate class. Any amendment to this Restated Certificate of Incorporation to
increase the authorized shares of any class requires the approval only of a
majority of the votes entitled to be cast by all shares of Class A Common Stock
and Class B Common Stock, voting together as a single class, subject to the
rights set forth in any series of Preferred Stock. Holders of shares of Common
Stock are not entitled to cumulate their votes in the election of directors.
B. Dividends and Distributions.
Subject to the preferential and other dividend rights of any
outstanding series of Preferred Stock, holders of Class A Common Stock and Class
B Common Stock shall be entitled to such dividends and other distributions in
cash, stock or property of the Corporation as may be declared thereon by the
Board of Directors from time to time out of assets or funds of the Corporation
legally available therefor. No dividend or other distribution may be declared or
paid on any share of Class A Common Stock unless a like dividend or other
distribution is simultaneously declared or paid, as the case may be, on each
share of Class B Common Stock, nor shall any dividend or other distribution be
declared or paid on any share of Class B Common Stock unless a like dividend or
other distribution is simultaneously declared or paid, as the case
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may be, on each share of Class A Common Stock, in each case without preference
or priority of any kind; provided, however, that all dividends and distributions
on the Class A Common Stock and Class B Common Stock payable in shares of Common
Stock of the Corporation shall be made in shares of Class A Common Stock and
Class B Common Stock, respectively. In no event will shares of either class of
Common Stock be reclassified, split, divided or combined unless the outstanding
shares of the other class of Common Stock shall be proportionately reclassified,
split, divided or combined.
In the event of a transaction as a result of which the shares of Class
A Common Stock are converted into or exchanged for one or more other securities,
cash or other property (a "Class A Conversion Event"), then from and after such
Class A Conversion Event, a holder of Class B Common Stock shall be entitled to
receive, upon the conversion of such Class B Common Stock pursuant to
Section3.E. of this Article IV, the amount of such securities, cash and other
property that such holder would have received if the conversion of such Class B
Common Stock had occurred immediately prior to the record date (or if there is
no record date, the effective date) of the Class A Conversion Event and if the
securities, cash or other property that the Class A Common Stock may be
converted into or exchanged for in a Class A Conversion Event is dependant upon
the holder of the Class A Common Stock making an election, the holder of the
Class A Common Stock had failed to make an election. This paragraph shall be
applicable in the same manner to all successive conversions or exchanges of
securities issued pursuant to any Class A Conversion Event. No adjustments in
respect of dividends shall be made upon the conversion of any share of Class B
Common Stock; provided, however, that if a share shall be converted after the
record date for the payment of a dividend or other distribution on shares of
Class B Common Stock but before such payment, then the record holder of such
share at the close of business on such record date shall be entitled to receive
the dividend or other distribution payable on such share of Class B Common Stock
on the payment date notwithstanding the conversion thereof.
C. Options, Rights or Warrants.
Subject to Section 3.B. of this Article IV , the Corporation shall not,
and shall not be entitled to, issue additional shares of Class B Common Stock,
or issue options, rights or warrants to subscribe for or purchase additional
shares of Class B Common Stock, except that the Corporation may (i) make a pro
rata offer to all holders of Common Stock of rights to subscribe for additional
shares of the class of Common Stock held by them and (ii) issue additional
shares of Class B Common Stock under the circumstances permitted by the
Separation Agreement (the "Separation
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Agreement"), dated as of , 1999, between the Corporation and The Williams
Companies, Inc. ("Williams"). The Corporation may make offerings of options,
rights or warrants to subscribe for or purchase shares of any class or classes
of capital stock (other than Class B Common Stock) to all holders of Class A
Common Stock or Class B Common Stock if an identical offering is made
simultaneously to all the holders of the other class of Common Stock. All
offerings of options, rights or warrants shall offer the respective holders of
Class A Common Stock and Class B Common Stock the right to subscribe or purchase
at the same consideration per share.
D. 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
been entitled to receive the same per share consideration as the per share
consideration, if any, received by the holders of each share of the other class
of Common Stock; provided that, if such consideration shall consist in any part
of voting securities (or of options, rights or warrants to purchase, or of
securities convertible into or exchangeable for, voting securities), then the
Corporation may provide in the applicable merger or such other agreement for the
holders of shares of Class B Common Stock to receive, on a per share basis,
voting securities with ten (10) times the number of votes per share as those
voting securities to be received by the holders of shares of Class A Common
Stock (or options, rights or warrants to purchase, or securities convertible
into or exchangeable for, voting securities with ten (10) times the number of
votes per share as those voting securities issuable upon exercise of the
options, rights or warrants to be received by the holders of the shares of Class
A Common Stock, or into which the convertible or exchangeable securities to be
received by the holders of the shares of Class A Common Stock may be converted
or exchanged).
E. Conversion of Class B Common Stock.
1. Voluntary Conversion.
Prior to the date on which shares of Class B Common
Stock are transferred to stockholders of Williams in a
Tax-Free Spin-Off (as defined in paragraph (E) (3)(a) below),
each share of Class B Common Stock shall be convertible, at
the option of its record holder, into one validly issued,
fully paid and non-assessable share of Class A Common Stock at
any time. Following a Tax-Free Spin-Off, shares of Class B
Common Stock shall no longer be convertible into shares of
Class A Common Stock.
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2. Voluntary Conversion Procedures.
At the time of a voluntary conversion, the record
holder of shares of Class B Common Stock shall deliver to the
principal office of the Corporation or any transfer agent for
shares of the Class A Common Stock (i) the certificate or
certificates representing the shares of Class B Common Stock
to be converted, duly endorsed in blank or accompanied by
proper instruments of transfer, and (ii) written notice to the
Corporation stating that the record holder elects to convert
such share or shares and stating the name or names and
denominations in which the certificate or certificates
representing the shares of Class A Common Stock issuable upon
the conversion are to be issued and including instructions for
the delivery thereof. Conversion shall be deemed to have been
effected at the time when delivery is made to the principal
office of the Corporation or the office of any transfer agent
for shares of Class A Common Stock of such written notice and
the certificate or certificates representing the shares of
Class B Common Stock to be converted, and as of such time,
each Person (as hereinafter defined) named in such written
notice as the Person to whom a certificate representing shares
of Class A Common Stock is to be issued shall be deemed to be
the holder of record of the number of shares of Class A Common
Stock to be evidenced by that certificate. Upon such delivery,
the Corporation or its transfer agent shall promptly issue and
deliver a certificate or certificates representing the number
of shares of Class A Common Stock to which such record holder
is entitled by reason of such conversion, and shall cause such
shares of Class A Common Stock to be registered in the name of
the record holder.
3. Automatic Conversion.
(a) Subject to Section 3.E.3.(b) of this
Article IV, prior to a Tax-Free Spin-Off, in the event of any
Transfer (as hereinafter defined) of any share of Class B
Common Stock to any Person, other than to the Williams Group
(as defined in paragraph (E)(9) below) such share of Class B
Common Stock shall automatically, without any further action,
convert into one share of Class A Common Stock.
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Notwithstanding anything to the contrary set forth in this
Restated Certificate of Incorporation, shares of Class B
Common stock shall not convert into shares of Class A Common
Stock (i) in any transfer effected in connection with a
distribution of Class B Common Stock to stockholders or
security holders of Williams in a transaction (including any
distribution in exchange for shares of capital stock or
securities of Williams) intended to qualify as a tax-free
distribution under Section 355 of the Internal Revenue Code of
1986, as amended (the "Code"), or any successor provision (a
"Tax-Free Spin-Off") or (ii) in any transfer after a Tax-Free
Spin-Off. For purposes of this paragraph (E), a Tax-Free
Spin-Off shall be deemed to have occurred at the time shares
are first transferred to stockholders or security holders of
Williams.
(b) Notwithstanding anything to the contrary
set forth in this Article IV, Section 3, a holder of shares of
Class B Common Stock may pledge such holder's shares of Class
B Common Stock to a financial institution pursuant to a bona
fide pledge of such shares of Class B Common Stock as
collateral security for any indebtedness or other obligation
of any Person (the "Pledged Stock") due to the pledgee or its
nominee; provided, however, that (i) such shares shall not be
voted by or registered in the name of the pledgee and shall
remain subject to the provisions of this Article IV, Section
3.E. and (ii) upon any foreclosure, realization or other
similar action by the pledgee prior to a Tax-Free Spin-Off,
such Pledged Stock shall automatically convert into shares of
Class A Common Stock on a share-for-share basis.
(c) The foregoing automatic conversion events
described in this Article IV, Section 3.E.3 shall be referred
to hereinafter as an "Event of Automatic Conversion." The
determination of whether an Event of Automatic Conversion
shall have occurred will be made by the Board of Directors or
a duly authorized committee thereof in accordance with Article
IV, Section 3.E.8 below.
4. Automatic Conversion Procedure.
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Any conversion pursuant to an Event of Automatic
Conversion shall be deemed to have been effected at the time
the Event of Automatic Conversion occurred (the "Conversion
Time"). At the Conversion Time, the certificate or
certificates that represented immediately prior thereto the
shares of Class B Common Stock that were so converted (the
"Converted Class B Common Stock") shall, automatically and
without further action, represent the same number of shares of
Class A Common Stock. Holders of Converted Class B Common
Stock shall deliver their certificates, duly endorsed in blank
or accompanied by proper instruments of transfer, to the
principal office of the Corporation or the office of any
transfer agent for shares of the Class A Common Stock,
together with a written notice setting out the name or names
(with addresses) and denominations in which the certificate or
certificates representing such shares of Class A Common Stock
are to be issued and including instructions for delivery
thereof. Upon such delivery, the Corporation or its transfer
agent shall promptly issue and deliver at such stated address
to such holder of shares of Class A Common Stock a certificate
or certificates representing the number of shares of Class A
Common Stock to which such holder is entitled by reason of
such conversion, and shall cause such shares of Class A Common
Stock to be registered in the name of such holder. The Person
entitled to receive the shares of Class A Common Stock
issuable upon such conversion shall be treated for all
purposes as the record holder of such shares of Class A Common
Stock at and as of the Conversion Time, and the rights of such
Person as a holder of shares of Class B Common Stock that have
been converted shall cease and terminate at and as of the
Conversion Time, in each case without regard to any failure by
such holder to deliver the certificates or the notice required
by this Section.
5. Unconverted Shares.
In the event of the conversion of less than all the
shares of Class B Common Stock evidenced by a certificate
surrendered to the Corporation in accordance with the
procedures of this Section 3.E., the Corporation shall execute
and deliver to, or upon the written order of, the holder of
such unconverted shares, without charge to such holder, a new
certificate evidencing the number of shares of Class B Common
Stock not converted.
6. Retired Shares.
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Shares of Class B Common Stock that are converted
into shares of Class A Common Stock as provided herein shall
be retired and canceled and the Corporation shall take all
such actions as are necessary to cause such shares to have the
status of authorized but unissued shares of Class B Common
Stock.
7. Reservation.
The Corporation shall at all times prior to a
Tax-Free Spin-Off 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 all
outstanding shares of Class B Common Stock. All the shares of
Class A Common Stock 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 such issuance.
8. Determination of Voting Rights and Event of Automatic
Conversion.
The Board of Directors of the Corporation or a duly
authorized committee thereof shall have the power to
determine, in good faith after reasonable inquiry, whether an
Event of Automatic Conversion has occurred with respect to any
share of Class B Common Stock. A determination by the Board of
Directors of the Corporation or such committee that an Event
of Automatic Conversion has occurred shall be conclusive. As a
condition to counting the votes cast by any holder of shares
of Class B Common Stock at any annual or special meeting
of stockholders, in connection with any written consent of
stockholders, as a condition to registration of transfer of
shares of Class B Common Stock, or for any other purpose, the
Board of Directors or a duly authorized committee thereof, in
its discretion, may require the holder of such shares to
furnish such affidavits or other proof as the Board of
Directors or such committee deems necessary or advisable to
determine whether an Event of Automatic Conversion shall have
occurred. If the Board of Directors or such committee shall
determine that a holder has substantially failed to comply
promptly with any request by the Board of Directors or such
committee for such proof, the shares held by such holder shall
be
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entitled to one (1) vote per share until such time as the
Board of Directors or such committee shall determine that such
holder has complied with such request. The Board of Directors
or a duly authorized committee thereof may exercise the
authority granted by this Article IV, Section 3.E.8 through
duly authorized officers or agents of the Corporation.
9. Definitions.
For purposes of this Article IV, Section E:
(a) Beneficial Owner.
A Person shall be deemed the "Beneficial Owner"
of, and to "Beneficially Own" and to have
"Beneficial Ownership" of, any share (i) which
such Person has the power to vote or dispose,
or to direct the voting or disposition of,
directly or indirectly, through any agreement,
arrangement or understanding (written or oral),
or (ii) which such Person has the right to
acquire (whether such right is exercisable
immediately or only after the passage of time)
pursuant to any agreement, arrangement or
understanding (written or oral), or upon the
exercise of conversion rights, exchange rights,
warrants or options, or otherwise.
(b) Nominee.
The term "Nominee" shall mean a Person that is
acting as a bona fide nominee for the
registration of record ownership of securities
Beneficially Owned by another Person.
(c) Subsidiary.
the term "subsidiary" shall mean, as to any
person or entity, a corporation, partnership,
joint venture, association or other entity in
which such person or entity beneficially owns
(directly or indirectly) 50% or more of the
outstanding voting stock, voting power,
partnership interests or similar voting
interests, or 50% or more of the value of the
equity of such entity.
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(d) Person.
The term "Person" means any natural person,
corporation, association, partnership, limited
liability company, organization, business,
government or political subdivision thereof or
governmental agency.
(e) Transfer.
The term "Transfer" shall mean any sale,
transfer (including a transfer made in whole
or in part without consideration as a gift),
exchange, assignment, pledge, encumbrance,
alienation or any other disposition or
hypothecation of record ownership or of
Beneficial Ownership of any share, whether by
operation of law or otherwise; provided,
however, that (i) a pledge of any share made
in accordance with the provisions of Article
IV, Section 3.E.3.(b). and (ii) a grant of a
revocable proxy, written consent or other
authorization with respect to any share to a
Person designated by the Board of Directors or
management of the Corporation who is
soliciting proxies on behalf of the
Corporation shall not be considered a
"Transfer"; and provided, further, that in the
case of any transferee of record ownership
that is a Nominee, such Transfer of record
ownership shall be deemed to be made to the
Person or Persons for whom such Nominee is
acting.
(f) Williams Group.
.
The term "Williams Group": shall mean Williams,
its direct and indirect subsidiaries, any
person or entity in which Williams or any
successor beneficially owns, directly or
indirectly, at least 50% of the equity or the
voting securities, any successor of any of the
foregoing and stockholders of Williams who
receive the Corporation's Class B Common Stock
in a transaction
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intended to qualify as a tax-free distribution
under section 355 of the Code, or any
corresponding provision of any successor
statute in a Tax-Free Spin-Off, but shall not
include the Corporation and its subsidiaries.
10. Stock Legend.
The Corporation shall include a legend on the
certificates representing shares of Class B Common Stock
stating the such shares are subject to automatic conversion in
certain circumstances as set forth in this Article IV, Section
3.E.
11. Taxes.
The issuance of a certificate representing shares of
Class A Common Stock issued upon conversion of shares of Class
B Common Stock shall be made without charge to the holder of
such shares for any stamp or other similar tax in respect of
such issuance. However, if any such certificate is to be
issued in a name other than that of the record holder of the
shares of Class B Common Stock converted, the Person or
Persons requesting the issuance thereof shall pay to the
Corporation the amount of any tax which may be payable in
respect of any Transfer involved in such issuance or shall
establish to the satisfaction of the Corporation that such tax
has been paid or is not required to be paid.
F. Liquidation.
In the event of any voluntary or involuntary liquidation, dissolution
or winding up of the Corporation, after distribution in full of the preferential
and/or other amounts to be distributed to the holders of shares of any
outstanding series of Preferred Stock, the holders of shares of Class A Stock
and Class B Common Stock shall be entitled to receive all of the remaining
assets of the Corporation available for distribution to its stockholders,
ratably in proportion to the number of shares of Common Stock held by them. In
any such distribution shares of Class A Common Stock and Class B Common Stock
shall be treated equally on a per share basis.
ARTICLE V
Purchase of Shares by Corporation
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The Corporation may purchase any shares of outstanding capital stock of
the Corporation or the right to purchase any such shares of capital stock from
any holder thereof on terms and conditions established by the Board of Directors
or a duly authorized committee thereof.
ARTICLE VI
Board of Directors
SECTION 1. Number and Terms.
Except as otherwise fixed by or pursuant to the provisions of this
Restated Certificate of Incorporation relating to the rights of the holders of
any class or series of Preferred Stock, the number of directors of the
Corporation shall be determined by resolution adopted by a majority of the
entire Board of Directors, but the number shall not be less than three;
provided, however, that (i) no reduction in the number of directors shall end
the term of office of any incumbent director prior to the date such director's
term of office would otherwise end, and (ii) the By-laws of the Corporation (the
"By-laws") may provided that the vote of a greater number of the directors may
be required for action of the Board of Directors changing the size of the Board
of Directors. The directors, other than those who may be elected by the holders
of any class or series of Preferred Stock, shall be classified by the Board of
Directors with respect to the time for which they severally hold office, into
three classes, as nearly equal in number as possible, one class to be originally
elected for a term expiring at the annual meeting of stockholders to be held in
2000, another class to be originally elected for a term expiring at the annual
meeting of stockholders to be held in 2001, and another class to be originally
elected for a term expiring at the annual meeting of stockholders to be held in
2002. Each director of the Corporation shall hold office until his or her
successor is duly elected and qualified, such classification to be effective
upon the date shares of Class a Common Stock are first publicly held. At each
succeeding annual meeting of stockholders, directors elected to succeed those
directors whose term then expire shall be elected for a term of office to expire
at the third annual meeting of stockholders following such director's election
and until such director's successor shall have been elected and qualified. No
decrease in the number of directors shall shorten the term of any incumbent
director. Unless and except to the extent that the By-laws shall so require, the
election of directors need not be by written ballot.
SECTION 2. Vacancies.
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Except as otherwise provided for or fixed by or pursuant to the
provisions of this Restated Certificate of Incorporation relating to the rights
of the holders of any series of Preferred Stock, any vacancy on the Board of
Directors of the Corporation resulting from death, resignation, removal or other
cause and any newly created directorship resulting from any increase in the
authorized number of directors between meetings of stockholders shall be filled
only by the affirmative vote of (i) at least 80% of the remaining directors then
in office if prior to the Trigger Date, or (ii) a majority of all the directors
then in office, even though less than a quorum if on or after the Trigger Date,
but in any event not by the stockholders. Any director so chosen shall hold
office for the remainder of the full term of the class of directors in which the
vacancy occurred or the new directorship was created and until a successor is
duly elected and qualified or until his or her earlier death, resignation or
removal from office in accordance with this Restated Certificate of
Incorporation or any applicable law or pursuant to an order of a court. If there
are no directors in office, then an election of directors may be held in the
manner provided by applicable law.
SECTION 3. Notice.
Advance notice of nominations for the election of directors and
business to be transacted at any stockholders' meeting shall be given in the
manner and to the extent provided in the By-laws.
SECTION 4. Removal.
Except as otherwise provided for or fixed by or pursuant to the
provisions of this Restated Certificate of Incorporation relating to the rights
of the holders of any series of Preferred Stock, (i) prior to the Trigger Date,
any director may be removed from office with or without cause but only by the
affirmative vote of the holders of a majority of the combined voting power of
the then outstanding shares of stock of the Corporation entitled to vote for the
election of directors, voting together as a single class, and (ii) on and after
the Trigger Date, any director may be removed from office only for cause by the
affirmative vote of the holders of at least a majority of the combined voting
power of the then outstanding shares of stock of the Corporation entitled to
vote for the election of directors, voting together as a single class.
SECTION 5. Amendment of this Article.
Notwithstanding anything to the contrary elsewhere contained in this
Restated Certificate of Incorporation, the affirmative vote of the holders of at
least 80% of the
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combined voting power of the then outstanding shares of stock of the Corporation
entitled to vote for the election of directors, voting together as a single
class, shall be required to alter, amend or repeal, or to adopt any provision
inconsistent with, this Article VI.
ARTICLE VII
Stockholder Action; No Cumulative Voting
SECTION 1. Action by Consent in Lieu of a Meeting.
Effective upon and commencing as of the day following the day on which
Williams, and any company that is directly or indirectly controlled by Williams
and of which at least a majority of the equity interests therein are directly or
indirectly beneficially owned by Williams shall first cease to be the owner, in
the aggregate, of at least a majority of the then outstanding shares of Common
Stock (the "Trigger Date"), and except as otherwise provided pursuant to the
provisions of this Restated Certificate of Incorporation (including any
Preferred Stock Designation) fixing the powers, privileges or rights of any
class or series of stock other than the Common Stock in respect of action by
written consent of the holders of such class or series of stock, 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 such holders and may not
be effected by any consent in writing by such holders. Prior to the Trigger
Date, the By-laws may provide that any action required to be taken any meeting
of stockholders may be taken without a meeting, without prior notice and without
a vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of shares of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares of stock entitled to vote were present and
voted, provided that prompt notice of the taking of the corporation action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
SECTION 2. Meetings.
Effective upon and commencing as of the Trigger Date, except as
otherwise required by law and subject to the rights of the holders of any class
or series of Preferred Stock, special meeting of stockholders of the Corporation
of any class or
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series for any purpose or purposes may be called only by the Board of Directors
pursuant to a resolution stating the purpose or purposes thereof approved by a
majority of the entire Board of Directors and, effective as of the Trigger Date,
any power of stockholders to call a special meeting is specifically denied. No
business other than that stated in the notice shall be transacted at any special
meeting.
Prior to the Trigger Date, subject to the rights of the holders of any
outstanding series of Preferred Stock, special meetings of stockholders of the
Corporation may be called only by the Secretary of the Corporation at the
request of Williams or its affiliates.
Notwithstanding the foregoing, whenever the holders of any one or more
outstanding series of Preferred Stock shall have the right, voting separately by
class or series, as applicable, to elect directors at an annual or special
meeting of stockholders, the calling of special meetings of the holders of such
class or series shall be governed by the terms of the applicable resolution or
resolutions of the Board of Directors establishing such series of Preferred
Stock pursuant to Article IV of this Restated Certificate of Incorporation.
SECTION 3. Stockholder Nomination of Director Candidates and other
Stockholder Proposals.
Advance notice of stockholder nominations for the election of directors
and of the proposal by stockholders of any other action to be taken by the
stockholders shall be given in such manner as shall be provided in the By-laws
(as amended and in effect from time to time).
SECTION 4. Amendment of this Article.
Notwithstanding anything to the contrary contained in this Restated
Certificate of Incorporation, the affirmative vote of the holders of at least
80% of the combined voting power of the then outstanding shares of stock of the
Corporation entitled to vote for the election of directors, voting together as a
single class, shall be required to alter, amend or repeal, or to adopt any
provision inconsistent with, this Article.
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ARTICLE VIII
By-laws
The Board of Directors shall have the power to adopt, alter, amend or
repeal the By-laws. The stockholders of the Corporation may adopt, amend or
repeal the By-laws but only by the affirmative vote of holders of at least a
majority of the combined voting power of the then-outstanding shares of capital
stock of all classes and series of the Corporation entitled to vote generally on
matters requiring the approval of stockholders, voting together as a single
class.
ARTICLE IX
Amendments
The Corporation reserves the right at any time from time to time to
amend, alter, change or repeal any provision contained in this Restated
Certificate of Incorporation, and any other provisions authorized by the laws of
the State of Delaware at the time in force may be added or inserted, in the
manner now or hereafter prescribed by law; and all rights, preferences and
privileges of whatsoever nature conferred upon stockholders, directors or any
other persons whomsoever by and pursuant to this Restated Certificate of
Incorporation in its present form or as hereafter amended are granted subject to
the right reserved in this Article IX.
ARTICLE X
Indemnification; Limitation of Liability.
SECTION 1. Indemnification.
A. Each person who was or is made a party or is threatened to be made a party to
or is otherwise involved in any action, suit, or proceeding, whether civil,
criminal, administrative, or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she is or was a director of the Corporation or any
of its direct or indirect subsidiaries or is or was serving at the request of
the Corporation as a director of any other corporation or of a partnership,
limited liability company, joint venture, trust, or other enterprise, including
service with respect to an employee benefit plan (hereinafter an "indemnitee"),
whether the basis of such proceeding is alleged action in an official capacity
as a director or in any other capacity while serving as a director, shall be
indemnified and held harmless by the Corporation to the fullest
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extent authorized by the Delaware Code, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification rights than
permitted prior thereto), against all expense, liability, and loss (including
attorneys' fees, judgments, fines, excise or other taxes assessed with respect
to an employee benefit plan, penalties, and amounts paid in settlement)
reasonably incurred or suffered by such indemnitee in connection therewith, and
such indemnification shall continue as to an indemnitee who has ceased to be a
director and shall inure to the benefit of the indemnitee's heirs, executors,
and administrators; provided, however, that, except as provided in Paragraph B
of this Section 1 with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such indemnitee in
connection with a proceeding (or part thereof) initiated by such indemnitee only
if such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation.
B. The right to indemnification conferred in Paragraph A of this Section 1 shall
include the right to be paid by the Corporation the expenses incurred in
defending any proceeding for which such right to indemnification is applicable
in advance of its final disposition (hereinafter an "advancement of expenses");
provided, however, that, if the Delaware Code requires, an advancement of
expenses incurred by an indemnitee in his or her capacity as a director (and not
in any other capacity in which service was or is rendered by such indemnitee,
including, without limitation, service to an employee benefit plan) shall be
made only upon delivery to the Corporation of an undertaking (hereinafter an
"undertaking"), by or on behalf of such indemnitee, to repay all amounts so
advanced if it shall ultimately be determined by final judicial decision from
which there is no further right to appeal (hereinafter a "final adjudication")
that such indemnitee is not entitled to be indemnified for such expenses under
this Section 1 or otherwise.
C. The rights to indemnification and to the advancement of expenses conferred in
Paragraphs A and B of this Section 1 shall be contract rights. If a claim under
Paragraph A or B of this Section 1 is not paid in full by the Corporation within
60 days after a written claim has been received by the Corporation, except in
the case of a claim for an advancement of expenses, in which case the applicable
period shall be 20 days, the indemnitee may at anytime thereafter bring suit
against the Corporation to recover the unpaid amount of the claim. If successful
in whole or in part in any such suit, or in a suit brought by the Corporation to
recover an advancement of expenses pursuant to the terms of an undertaking, the
indemnitee shall be entitled to be paid also the expense of prosecuting or
defending such suit. In (i) any suit brought by the indemnitee to enforce a
right to indemnification hereunder (but not in a suit
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brought by an indemnitee to enforce a right to an advancement of expenses) it
shall be a defense that the indemnitee has not met any applicable standard for
indemnification set forth in the Delaware Code, and (ii) any suit by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the Corporation shall be entitled to recover such expenses upon a
final adjudication that the indemnitee has not met any applicable standard for
indemnification set forth in the Delaware Code. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the Delaware Code, nor an actual determination by the Corporation (including its
Board of Directors, independent legal counsel, or its stockholders) that the
indemnitee has not met such applicable standard of conduct, shall create a
presumption that the indemnitee has not met the applicable standard of conduct
or, in the case of such a suit brought by the indemnitee to enforce a right to
indemnification or to an advancement of expenses hereunder, or by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the burden of proving that the indemnitee is not entitled to be
indemnified, or to such advancement of expenses, under this Section 1 or
otherwise, shall be on the Corporation.
D. The rights to indemnification and to the advancement of Expenses conferred
in this Section 1 shall not be exclusive of any right which any person may have
or hereafter acquire under any statute, this certificate of incorporation,
by-law, agreement, vote of stockholders or disinterested directors, or
otherwise.
E. The Corporation may maintain insurance, at its expense, to protect itself and
any director, officer, employee or agent of the Corporation or another
corporation, partnership, joint venture, trust, or other enterprise against any
expense, liability, or loss, whether or not the Corporation would have the power
to indemnify such person against such expense, liability, or loss under the
Delaware Code.
F. The Corporation's obligation, if any, to indemnify any person who was or is
serving as a director of any direct or indirect subsidiary of the Corporation
or, at the request of the Corporation, of any other corporation or of a
partnership, joint venture, trust, or other enterprise shall be reduced by any
amount such person may collect as indemnification from such other corporation,
partnership, joint venture, trust or other enterprise.
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G. Any repeal or modification of the foregoing provisions of this Section 1
shall not adversely affect any right or protection hereunder of any person in
respect of any act or omission occurring prior to the time of such repeal or
modification.
H. The Corporation may, to the extent authorized from time to time by the Board
of Directors, grant indemnification rights and rights to the advancement of
expenses to any officer, employee or agent of the Corporation to the fullest
extent of the provision of this Article with respect to the indemnification and
advancement of expenses to directors.
SECTION 2. Limited Liability.
No director of the Corporation shall be liable to the
Corporation or any of its stockholders for monetary damages for breach of
fiduciary duty as a director, provided that this provision does not eliminate
the liability of the director (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of Title B of the Delaware Code, or (iv) for any
transaction from which the director derived an improper personal benefit. For
purposes of the prior sentence, the term "damages" shall, to the extent
permitted by law, include without limitation, any judgment, fine amount paid in
settlement, penalty, punitive damages, excise or other tax assessed with respect
to an employee benefit plan, or expense of any nature (including, without
limitation, counsel fees and disbursements). Each person who serves as a
director of the Corporation while this Section 2 is in effect shall be deemed to
be doing so in reliance on the provisions of this Section 2, and neither the
amendment or repeal of this Section 2, nor the adoption of any provision of this
Restated Certificate of Incorporation inconsistent with this Section 2, shall
apply to or have any effect on the liability or alleged liability of any
director of the Corporation for, arising out of, based upon, or in connection
with any acts or omissions of such director occurring prior to such amendment,
repeal, or adoption of an inconsistent provision. The provisions of this Section
2 are cumulative and shall be in addition to and independent of any and all
other limitations on or eliminations of the liabilities of directors of the
Corporation, as such, whether such limitation or eliminations arise under or are
created by any law, rule, regulation, by-law, agreement, vote of stockholders or
disinterested directors, or otherwise.
ARTICLE XI
Certain Transactions With Stockholders and Corporation Opportunities.
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SECTION 1. Certain Acknowledgments; Certain Fiduciary Duties
In anticipation that (i) the Corporation will cease to be a wholly
owned subsidiary of Williams, but that Williams will remain a stockholder of the
Corporation and have continued contractual, corporate, and business relations
with the Corporation, and in anticipation that the Corporation and Williams may
enter into contracts or otherwise transact business with each other and that the
Corporation may derive benefits therefrom, (ii) that directors, officers and/or
employees of Williams or of Affiliated Companies (as defined below in this
Article XI) of Williams may serve as directors and/or officers of the
Corporation, (iii) that Williams and Affiliated Companies thereof engage and are
expected to continue to engage in the same, similar or related lines of business
as those in which the Corporation, directly or indirectly, may engage and/or
other business activities that overlap with or compete with those in which the
Corporation, directly or indirectly, may engage, subject to the Separation
Agreement, (iv) the Corporation may from time to time enter into contractual,
corporate or business relations with one or more of its directors, or one or
more corporations, partnerships, associations or other organizations in which
one or more of its directors have a financial interest (collectively, "Related
Entities"), the provisions of this Article XI Section 2. are set forth to
regulate and define certain contractual relations of the Corporation as they may
involve Williams, Related Entities, and their respective officers and directors,
and the powers, rights, duties and liabilities of the Corporation and its
officers, directors and stockholders in connection therewith. The provisions of
this Article XI, Section 2. are in addition to, and not in limitation of, the
provisions of the Delaware Code and the other provisions of this Restated
Certificate of Incorporation. Any contract or business relation that does not
comply with the procedures set forth in this Article XI., Section 2. shall not
by reason thereof be deemed void or voidable or result in any breach of
fiduciary duty or duty of loyalty or failure to act in good faith or in the best
interests of the Corporation or derivation of any improper personal benefit, but
shall be governed by the provisions of this Restated Certificate of
Incorporation, the By-laws, the Delaware Code, and other applicable law.
SECTION 2. Certain Agreements and Transactions Permitted;
No contract, agreement, arrangement or transaction (or any amendment,
modification or termination thereof) between the Corporation and Williams or
between the Corporation and one or more of the directors or officers of the
Corporation, Williams, or any Affiliated Company or between the Corporation and
any Affiliated Company shall be void or voidable solely for the reason that
Williams, any Affiliated Company, or any one or more of the officers or
directors of the
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Corporation, Williams, or any Affiliated Company are parties thereto, or solely
because any such directors or officers are present at or participate in the
meeting of the Board of Directors or committee thereof which authorizes the
contract, agreement, arrangement, or transaction (or the amendment, modification
or termination thereof), or solely because his or their votes are counted for
such purpose, and Williams, any Affiliated Company. Subject to Section 4 of this
Article, no such agreement (or the amendment, modification or termination
thereof), or the performance thereof by the Corporation or Williams, or any
Affiliated Company thereof, (a) shall be contrary to (i) any fiduciary duty that
Williams or any Affiliated Company thereof may owe to the Corporation or any
Affiliated Company thereof or to any stockholder or other owner of an equity
interest in the Corporation or any Affiliated Company thereof by reason of
Williams or any Affiliated Company thereof being a controlling stockholder of
the Corporation or participating in the control of the Corporation or of any
Affiliated Company thereof; or (ii) any fiduciary duty of any director or
officer of the Corporation or of any Affiliated Company thereof who is also a
director, officer or employee of William or any Affiliated company thereof to
the Corporation or such Affiliated Company, or to any stockholder thereof; and
Williams, any Affiliated Company, and such directors and officers (i) shall be
deemed to have acted in good faith and in a manner such persons reasonably
believe to be in and not opposed to the best interests of the Corporation and
(ii) shall be deemed not to have breached their duties of loyalty to the
Corporation and its stockholders and not to have derived in improper personal
benefit therefrom, if:
(i) such agreement shall have been entered into before
the Corporation ceased to be a wholly owned
subsidiary of Williams and continued in effect in
respect of any such transaction or opportunity after
such time;
(ii) the material facts as to the contract, agreement,
arrangement, transaction, amendment,
modification or termination are disclosed or are
known to the Board of Directors or the
committee thereof which authorizes the
contract, agreement, arrangement or transaction
(or the amendment, modification or termination
thereof), and the Board of Directors or such
committee in good faith authorizes the contract,
agreement, arrangement or transaction (or the
amendment, modification or termination
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thereof) is approved by (a) by the affirmative vote
of a majority of the disinterested directors, even
though the disinterested directors be less than a
quorum; (b) such committee of the Board of Directors
constituted solely of members who are not Interested
Persons in respect of such agreement by the
affirmative vote of a majority of the members of such
committee or (c) by one or more officers or employees
of the Corporation (including officers or employees
of the Corporation acting as directors, officers,
trustees, partners or members of, or in any similar
capacity on behalf of, any Affiliated Company of the
Corporation) who in each case is not an Interested
Person in respect of such agreement and to whom the
authority to approve such agreement has been
delegated either by the Board of Directors by the
same affirmative vote required by subclause (a) of
this subparagraph for approval of such agreement by
the Board of Directors or by a committee of the Board
of Directors constituted as provided by and acting by
the same affirmative vote as required by subclause
(b) of this subparagraph for approval of such
agreement by such committee or, in the case of an
employee, to whom such authority has been delegated
by an officer to whom authority to approve such
agreement has been so delegated;
(iii) the material facts as to the contract, agreement,
arrangement or transaction (or the amendment,
modification or termination thereof) are
disclosed or are known to the holders of voting
stock entitled to vote thereon, and the contract,
agreement, arrangement, or transaction (or the
amendment, modification or termination
thereof) is specifically approved in good faith
by vote of the holders of a majority of the then
outstanding voting stock not owned by
Williams or a Affiliated Company, as the case
may be; or
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(iv) such contract, agreement, arrangement or transaction
(or the amendment, modification or termination
thereof) is fair as to the Corporation as of the time
it is authorized, approved or ratified by the Board
of Directors, a committee thereof or the stockholders
of the Corporation; or
(v) in the case of any such transaction that was not
entered into in the performance of an agreement that
satisfied the requirements of clauses (i), (ii),
(iii) or (iv) of this sentence, such transaction
shall have been approved or ratified by (a) the Board
of Directors of the Corporation by the affirmative
vote of a majority of the members (even though less
than a quorum) who are not Interested Persons in
respect of such transaction or (b) by a committee of
the Board of Directors of the Corporation constituted
solely of members who are not Interested Persons in
respect of such transaction by the affirmative vote
of a majority of the members of such committee or (c)
by one or more officers or employees of the
Corporation (including officers or employees of the
Corporation acting as directors, officers, trustees,
partners or members of, or in any similar capacity on
behalf of, any Affiliated Company of the Corporation)
who in each case is not an Interested Person in
respect of such transaction and to whom the authority
to approve such transaction has been delegated either
by the Board of Directors by the same affirmative
vote required by subclause (a) of this subparagraph
for approval of such transaction of the Board of
Directors or a
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committee of the Board of Directors constituted as
provided by and acting by the same affirmative vote
as required by subclause (b) of this subparagraph for
approval of such transaction by such committee or, in
the case of an employee, to whom such authority has
been delegated by an officer to whom authority to
approve such transaction has been so delegate;,
provided, however, that, before such approval or
ratification, the material facts of the relationship
between the Corporation or such Affiliated Company
thereof, on the one hand, and Williams or such
Affiliated Company thereof, on the other hand, and
the material facts as to such transaction were
disclosed to or were known by the members of the
Board of directors or of such committee or the
officer or officers or employee or employees who
acted on approval or ratification of such
transaction, as the case may be; or
(vi) in the case of any such transaction that was not
entered into in the performance of an agreement that
satisfied the requirements of clause (i), (ii), (iii)
or (iv) of this sentence, such transaction was fair
to the Corporation as of the time it was entered into
by the Corporation; or
(vii) in the case of any such transaction that was not
entered into in the performance of an agreement
that satisfied the requirements of clause (a), (b),
(c) or (d) of this sentence, such transaction was
approved or ratified by the affirmative vote of
the holders of a majority of the shares of capital
stock of the Corporation entitled to vote
thereon and who do not vote thereon, exclusive
of Williams and any Affiliated Company
thereof and any Interested Person in respect of
such transaction.
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Subject to Section 4 of this Article XI, neither Williams nor any
Affiliated Company thereof, as a stockholder of the Corporation or participant
in control of the Corporation, shall have or be under any fiduciary duty to
refrain from entering into any agreement or participating in any transaction
that meets the requirements of any of clauses (i), (ii), (iii), (iv), (v), (vi)
or (vii) of the immediately preceding sentence and no director, officer or
employees of the Corporation who is also a director, officer or employee of
Williams or any Affiliated Company thereof shall have or be under any fiduciary
duty to the Corporation to refrain from acting on behalf of the Corporation or
any Affiliated Company thereof in respect of any such agreement or transaction
or performing any such agreement in accordance with its terms. Directors of the
Corporation who are also directors or officers of Williams or any Affiliated
Company may be counted in determining the presence of a quorum at a meeting of
the Board of Directors or of a committee which authorizes the contract,
agreement, arrangement, or transaction (or the amendment, modification or
termination thereof).Voting stock owned by Williams and any Affiliated Companies
thereof may be counted in determining the presence of a quorum at a meeting of
stockholders which authorizes the contract, agreement, arrangement or
transaction. Any person purchasing or otherwise acquiring any shares of capital
stock of the Corporation, or any interest therein, shall be deemed to have
notice of and to have consented to the provisions of this Article. The failure
of any agreement or transaction between the Corporation or an Affiliated Company
thereof, on the one hand, and Williams or an Affiliated Company thereof, on the
other hand, to satisfy the requirements of this Section shall not, by itself,
cause such agreement or transaction to constitute any breach of any fiduciary
duty to the Corporation or to any Affiliated Company thereof, or, any to
stockholder or other owner of an equity interest therein, by any controlling
stockholder of the Corporation or such Affiliated Company thereof or by any
director or officer of the Corporation.
For purposes of this Article XI, Section 2., any contract, agreement,
arrangement, or transaction (or amendment, modification, or termination thereof)
with any corporation, partnership, joint venture, association, or other entity
in which the Corporation owns (directly or indirectly) 50% or more of the
outstanding voting stock, voting power, partnership interests, or similar
ownership interests, or with any officer or director thereof, shall be deemed to
be a contract, agreement, arrangement or transaction with the Corporation.
SECTION 3. Certain Definitions.
For purposes of this Article, the following definitions shall apply:
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"Affiliated Company" shall mean in respect of Williams, any company
which is controlled by Williams controls Williams or is under common control
with Williams (other than the Corporation and any company that is controlled by
the Corporation) and in respect of the Corporation shall mean any company
controlled by the Corporation.
"Interested Person" in respect of an agreement or transaction referred
to in Section 2 of this Article XI shall mean any director, officer or employees
of Williams or an Affiliated Company thereof and any person who has a financial
interest that is material to such person in Williams or such Affiliated Company
or otherwise has a personal financial interest that is material to such person
in such agreement or transaction; provided, however, that no such financial
interest shall be considered material by reason of a person' ownership of
securities of Williams or an Affiliated Company thereof, if such ownership of
securities has been determined in good faith not to be reasonably likely to
influence such individual's decision on behalf of the Corporation or an
Affiliated Company thereof in respect of the agreement or transaction either in
the specific instance by, or pursuant to, a policy adopted by, the Board of
Directors of the Corporation by the affirmative vote of a majority of the
members (even though less than a quorum) who are not directors, officers or
employees of Williams or any Affiliated Company thereof or a committee of the
Board of Directors of the Corporation constituted solely of members who are not
directors, officers or employees of Williams or any Affiliated Company thereof
by the affirmative vote of a majority of such committee.
SECTION 4. Termination.
The provisions of this Article XI shall have no further force or effect
at such time as Williams and any company controlling, controlled by or under
common control with Williams shall first cease to be the owner, in the
aggregate, of stock representing 25% or more of the votes entitled to the bast
by the holders of all the then outstanding shares of stock entitled to vote;
provided, however, that such termination shall not terminate the effect of such
provisions with respect to (i) any agreement between the Corporation or an
Affiliated Company thereof and Williams or an Affiliated Company thereof that
was entered into before such time or any transaction entered into in the
performance of such agreement, whether entered into before or after such time,
or (ii) any transaction entered into between the Corporation or an Affiliated
Company thereof and Williams or an Affiliated Company thereof or the allocation
of any opportunity between them before such time.
SECTION 5. Amendment of this Article.
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Notwithstanding anything to the contrary elsewhere contained in this
Restated Certificate of Incorporation, the affirmative vote of the holders of at
least 80% of the combined voting power of the then outstanding shares of stock
of the Corporation entitled to vote for the election of directors, voting
together as a single class, shall be required to alter, amend or repeal, or to
adopt any provision inconsistent with, this Article XI.
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IN WITNESS WHEREOF, Williams Communications Group, Inc.
has caused this Restated Certificate of Incorporation to be signed by its Vice
President this _______ day of_________, 1999.
Williams Communications Group, Inc.
------------------------------------
Name:
Title
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<PAGE> 1
EXHIBIT 3.2
BY-LAWS
OF
WILLIAMS COMMUNICATIONS GROUP, INC.
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the
Corporation shall be in the City of Wilmington, County of New Castle, State of
Delaware.
Section 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.
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<PAGE> 2
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the stockholders for
the election of directors or for any other purpose shall be held at such time
and place, either within or without the State of Delaware as shall be designated
from time to time by the Board of Directors.
Section 2. Annual Meetings. The Annual Meetings of
stockholders for the election of directors shall be held on such date and at
such time as shall be designated from time to time by the Board of Directors.
Any other proper business may be transacted at the Annual Meeting of
stockholders. [The first Annual Meeting will be held on ,2000.]
Section 3. Special Meetings. Unless otherwise required by law
or the Restated Certificate of Incorporation of the Corporation, as it may be
amended or restated from time to time (the "Restated Certificate of
Incorporation"), and subject to the rights of the holders of any class or series
stock having a preference over the common stock as to dividends or distributions
upon liquidation, Special Meetings of stockholders, for any purpose or purposes,
may be called by either (i) the Chairman, if there be one, or (ii) the
President, (iii) any Vice President, if there be one, (iv) the Secretary or (v)
any Assistant Secretary, if there be one, and shall be called by any such
officer at the request in writing of (i) the Board of Directors, (ii) a
committee of
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the Board of Directors that has been duly designated by the Board of Directors
and whose powers and authority include the power to call such meetings, or (iii)
prior to the day following the day on which The Williams Companies, Inc.
("Williams"), and any company that is directly or indirectly controlled by
Williams and of which at least a majority of the equity interests therein are
directly or indirectly beneficially owned by Williams shall first cease to be
the owner, in the aggregate, of at least a majority of the then outstanding
shares of common stock (the "Trigger Date"), by Williams or its affiliates.
Following the Trigger Date, Special Meetings cannot be called by any
stockholder. Such request shall state the purpose or purposes of the proposed
meeting. At a Special Meeting of stockholders, only such business shall be
conducted as shall be specified in the notice of meeting (or any supplement
thereto).
Section 4. Notice. Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the meeting shall
be given which shall state the place, date and hour of the meeting, and, in the
case of a Special Meeting, the purpose or purposes for which the meeting is
called. Unless otherwise required by law, the written notice of any meeting
shall be given not less than ten nor more than sixty days before the date of the
meeting to each stockholder entitled to vote at such meeting.
Section 5. Adjournments. Any meeting of the stockholders may
be adjourned from time to time to reconvene at the same or some other place, and
notice
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need not be given of any such adjourned meeting if the time and place thereof
are announced at the meeting at which the adjournment is taken. At the adjourned
meeting, the Corporation may transact any business which might have been trans
acted at the original meeting. If the adjournment is for more than thirty days,
or if after the adjournment a new record date is fixed for the adjourned
meeting, notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
Section 6. Quorum. Unless otherwise required by law or the
Restated Certificate of Incorporation, the holders of a majority of the capital
stock issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. A quorum, once established, shall
not be broken by the withdrawal of enough votes to leave less than a quorum. If,
however, such quorum shall not be present or represented at any meeting of the
stockholders, the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting from time to time,
in the manner provided in Section 5, until a quorum shall be present or
represented.
Section 7. Nature of Business at Meetings of Stockholders.
(a) Nomination of Directors. Only persons who are nominated in
accordance with the following procedures shall be eligible for election as
directors of
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the Corporation, except as may be otherwise provided in the Corporation's
Restated Certificate of Incorporation with respect to the right of holders of
preferred stock of the Corporation to nominate and elect a specified number of
directors in certain circumstances. Nominations of persons for election to the
Board of Directors may be made at any Annual Meeting of stockholders, or at any
Special Meeting of stockholders called for the purpose of electing directors,
(a) by or at the direction of the Board of Directors (or any duly authorized
committee thereof) or (b) by any stockholder of the Corporation (i) who is a
stockholder of record on the date of the giving of the notice provided for in
this Section 7 and on the record date for the determination of stockholders
entitled to vote at such meeting and (ii) who complies with the notice
procedures set forth in this Section 7.
In addition to any other applicable requirements, for a
nomination to be made by a stockholder, such stockholder must have given timely
notice thereof in proper written form to the Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Corporation (a) in the case of an annual meeting, not less than ninety (90) days
nor more than one hundred and twenty (120) days prior to the anniversary date of
the immediately preceding Annual Meeting of stockholders; provided, however,
that in the event that the Annual Meeting is called for a date that is not
within thirty (30) days before or
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after such anniversary date, notice by the stockholder in order to be timely
must be so received not later than the close of business on the tenth (10th) day
following the day on which such notice of the date of the Annual Meeting was
mailed or such public disclosure of the date of the Annual Meeting was made,
whichever first occurs; and (b) in the case of a Special Meeting of stockholders
called for the purpose of electing directors, not less than ninety (90) days or,
if later, not later than the close of business on the tenth (10th) day following
the day on which notice of the date of the special meeting was mailed or public
disclosure of the date of the Special Meeting was made, whichever first occurs,
and not more than one hundred and twenty (120) days prior to the scheduled date
of the Special Meeting.
To be in proper written form, a stockholder's notice to the
Secretary must set forth (a) as to each person whom the stockholder proposes to
nominate for election as a director (i) the name, age, business address and
residence address of the person, (ii) the principal occupation or employment of
the person, (iii) the class or series and number of shares of capital stock of
the Corporation which are owned beneficially or of record by the person and (iv)
any other information relating to the person that would be required to be
disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant to
Section 14 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations promulgated thereunder; and (b)
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as to the stockholder giving the notice (i) the name and record address of such
stockholder, (ii) the class or series and number of shares of capital stock of
the Corporation which are owned beneficially or of record by such stockholder,
(iii) a description of all arrangements or understandings between such
stockholder and each proposed nominee and any other person or persons (including
their names) pursuant to which the nomination(s) are to be made by such
stockholder, (iv) a representation that such stockholder intends to appear in
person or by proxy at the meeting to nominate the persons named in its notice
and (v) any other information relating to such stockholder that would be
required to be disclosed in a proxy statement or other filings required to be
made in connection with solicitations of proxies for election of directors
pursuant to Section 14 of the Exchange Act and the rules and regulations
promulgated thereunder. Such notice must be accompanied by a written consent of
each proposed nominee to being named as a nominee and to serve as a director if
elected.
Notwithstanding the foregoing, any holder of common stock of
the Corporation, who together with its affiliates owns capital stock entitled to
exercise a majority of the voting power in an election of directors, may
nominate one or more individuals for election as directors by giving notice to
the Corporation not later than five days before the scheduled date for the
election of directors.
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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 7. If the Chairman of the meeting determines that a nomination was
not made in accordance with the foregoing procedures, the Chairman shall declare
to the meeting that the nomination was defective and such defective nomination
shall be disregarded.
(b) No business may be transacted at an Annual Meeting of
stock holders, other than business that is either (a) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board of
Directors (or any duly authorized committee thereof), (b) otherwise properly
brought before the annual meeting by or at the direction of the Board of
Directors (or any duly authorized committee thereof) or (c) otherwise properly
brought before the Annual Meeting by any stockholder of the Corporation (i) who
is a stockholder of record on the date of the giving of the notice provided for
in this Section 4 and on the record date for the determination of stockholders
entitled to vote at such annual meeting and (ii) who complies with the notice
procedures set forth in this Section 7.
In addition to any other applicable requirements, for any
other business to be properly brought before an annual meeting by a stockholder,
such stockholder must have given timely notice thereof in proper written form to
the Secretary of the Corporation.
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To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than ninety (90) days nor more than one hundred twenty
(120) days prior to the anniversary date of the immediately preceding annual
meeting of stockholders; [provided, however, that in the event that the annual
meeting is called for a date that is not within thirty (30) days before or after
such anniversary date, notice by the stockholder in order to be timely must be
so received not later than the close of business on the tenth (10th) day
following the day on which such notice of the date of the Annual Meeting was
mailed or such public disclosure of the date of the Annual Meeting was made,
whichever first occurs.
To be in proper written form, a stockholder's notice to the
Secretary must set forth as to each matter such stockholder proposes to bring
before the Annual Meeting (i) a brief description of the business desired to be
brought before the Annual Meeting and the reasons for conducting such business
at the Annual Meeting, (ii) the name and record address of such stockholder,
(iii) the class or series and number of shares of capital stock of the
Corporation which are owned beneficially or of record by such stockholder, (iv)
a description of all arrangements or understandings between such stockholder
and any other person or persons (including their names) in connection with the
proposal of such business by such stockholder and any material interest of such
stockholder in such business and (v) a representation that such
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stockholder intends to appear in person or by proxy at the Annual Meeting to
bring such business before the meeting.
No business shall be conducted at the Annual Meeting of
stockholders except business brought before the Annual Meeting in accordance
with the procedures set forth in this Section 7; provided, however, that, once
business has been properly brought before the annual meeting in accordance with
such procedures, nothing in this Section 7 shall be deemed to preclude
discussion by any stockholder of any such business. If the Chairman of an Annual
Meeting determines that business was not properly brought before the Annual
Meeting in accordance with the foregoing procedures, the Chairman shall declare
to the meeting that the business was not properly brought before the meeting and
such business shall not be trans acted.
Section 8. Voting. Unless otherwise required by law, the
Restated Certificate of Incorporation or these By-laws, any question brought
before any meeting of stockholders, other than the election of directors, shall
be decided by the vote of the holders of a majority of the total number of votes
of the capital stock represented and entitled to vote thereat, voting as a
single class. Unless otherwise provided in the Restated Certificate of
Incorporation, and subject to Section 5 of Article V hereof, each stockholder
represented at a meeting of stockholders shall be entitled to cast one vote for
each share of the capital stock entitled to vote thereat held by such
stockholder. Such votes may be cast in person or by proxy but no proxy
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shall be voted on or after three years from its date, unless such proxy provides
for a longer period. The Board of Directors, in its discretion, or the officer
of the Corporation presiding at a meeting of stockholders, in such officer's
discretion, may require that any votes cast at such meeting shall be cast by
written ballot.
Section 9. Consent of Stockholders in Lieu of Meeting. Except
as otherwise provided in the Restated Certificate of Incorporation, any action
required or permitted to be taken at any Annual or Special Meeting of
stockholders of the Corporation, may be taken without a meeting, without prior
notice and without a vote, if a consent or consents in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted and shall be delivered to the Corporation by delivery to
its registered office in the State of Delaware, its principal place of business,
or an officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to the
Corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. Every written consent shall bear the date of
signature of each stockholder who signs the consent and no written consent shall
be effective to take the corporate action referred to therein unless, within
sixty days of the earliest dated consent delivered in the manner required by
this Section 9 to the
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Corporation, written consents signed by a sufficient number of holders to take
action are delivered to the Corporation by delivery to its registered office in
the state of Delaware, its principal place of business, or an officer or agent
of the Corporation having custody of the book in which proceedings of meetings
of stockholders are recorded. Prompt notice of the taking of the corporate
action without a meeting by less than unanimous written consent shall be given
to those stockholders who have not consented in writing and who, if the action
had been taken at a meeting, would have been entitled to notice of the meeting
if the record date for such meeting had been the date that written consents
signed by a sufficient number of holders to take the action were delivered to
the Corporation as provided above in this Section 9.
[Section 10. In order that the corporation may determine the
stock holders 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 date shall not be more than ten (10) days
after the date upon which the resolution fixing the record date is adopted by
the Board of Directors. Any stockholder of record seeking to have the
stockholders authorize or take corporate action by written consent shall, by
written notice to the secretary, request the Board of Directors to fix a record
date. The Board of Directors shall promptly, but in all events within ten (10)
days after the date on which such a request is received, adopt a
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resolution fixing the record date. If no record date has been fixed by the Board
of Directors within ten (10) days of the date on which such a request is
received, 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 applicable 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 by delivery to its registered office in the State
of Delaware, its principal place of business, or an officer or agent of the
corporation having custody of the book in which proceedings of stockholders
meetings are recorded, to the attention of the Secretary of the corporation.
Delivery shall be by hand or by certified or registered mail, return receipt
requested. If no record date has been fixed by the Board of Directors and prior
action by the Board of Directors is required by applicable 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 date on which the
Board of Directors adopts the resolution taking such prior action.]
Section 11. List of Stockholders Entitled to Vote. The officer
of the Corporation who has charge of the stock ledger of the Corporation shall
prepare and make, at least ten days before every meeting of stockholders, a
complete list of the 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
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name of each stockholder. Such list shall be open to the examination of any
stock holder, 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
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder of the Corporation who is present.
Section 12. Stock Ledger. The stock ledger of the Corporation
shall be the only evidence as to who are the stockholders entitled to examine
the stock ledger, the list required by Section 9 of this Article II or the books
of the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
Section 13. Conduct of Meetings. The Board of Directors of the
Corporation may adopt by resolution such rules and regulations for the conduct
of the meeting of the stockholders as it shall deem appropriate. Except to the
extent inconsistent with such rules and regulations as adopted by the Board of
Directors, the chairman of any meeting of the stockholders shall have the right
and authority to prescribe such rules, regulations and procedures and to do all
such acts as, in the judgment of such chairman, are appropriate for the proper
conduct of the meeting. Such rules, regulations or procedures, whether adopted
by the Board of Directors or prescribed by the chairman of the meeting, may
include, without limitation, the
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following: (i) the establishment of an agenda or order of business for the
meeting; (ii) the determination of when the polls shall open and close for any
given matter to be voted on at the meeting; (iii) rules and procedures for
maintaining order at the meeting and the safety of those present; (iv)
limitations on attendance at or participation in the meeting to stockholders of
record of the corporation, their duly authorized and constituted proxies or such
other persons as the chairman of the meeting shall determine; (v) restrictions
on entry to the meeting after the time fixed for the commencement thereof; and
(vi) limitations on the time allotted to questions or comments by participants.
ARTICLE III
DIRECTORS
Section 1. Number and Election of Directors
The exact number of Directors on the Board of Directors shall
be fixed initially by resolution of a majority of the entire Board of Directors
in accordance with the Restated Certificate of Incorporation, but the number
shall not be less than three; provided, however, that (i) no reduction in the
number of directors shall end the term of office of any incumbent director prior
to the date such director's term of office would otherwise end; and (ii)
effective upon and commencing as of the Trigger Date, and except as otherwise
provided pursuant to the provisions of the Restated Certificate of Incorporation
fixing the powers, privileges or rights of any class or
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series of stock other than the common stock, action by the Board of Directors
fixing the number of directors shall require the affirmative vote of 80% of the
entire Board of Directors.
The directors, other than those who may be elected by the
holders of any class or series of preferred stock, shall be classified by the
Board of Directors shall be classified by the Board of Directors with respect to
the time for which they severally hold office, into three classes, as nearly
equal in number as possible, one class to be originally elected for a term
expiring at the annual meeting of stockholders to be held in 2000, another
class to be originally elected for a term expiring at the annual meeting of
stockholders to be held in 2001, and another class to be originally elected for
a term expiring at the annual meeting of stockholders to be held in 2002. Each
director of the Corporation shall hold office until his or her successor is duly
elected and qualified, such classification to be effective upon the date shares
of Class A Common Stock, par value $0.01 per share, are first publicly held. At
each succeeding annual meeting of stockholders, directors elected to succeed
those directors whose term then expire shall be elected for a term of office to
expire at the third annual meeting of stockholders following such director's
election and until such director's successor shall have been elected and
qualified, or until such director's earlier death, resignation or removal.
Except as provided in Section 2 of this Article III, directors shall be elected
by a plurality of the votes cast at the Annual Meetings of
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stockholders. Any director may resign at any time upon written notice to the
Corporation. Directors need not be stockholders.
Section 2. Vacancies. Except as otherwise provided for or
fixed by or pursuant to the provisions of the Restated Certificate of
Incorporation relating to the rights of the holders of any series of Preferred
Stock, prior to the Trigger Date, any vacancy on the Board of Directors of the
Corporation resulting from death, resignation, removal or other cause and any
newly created directorship resulting from any increase in the authorized number
of directors between meetings of stockholders shall be filled only by the
affirmative vote of 80% of all the directors then in office, but in any event
not by the stockholders. Following the Trigger Date, vacancies may only be
filled by the affirmative vote of a majority if the remaining directors. Any
director so chosen shall hold office for the remainder of the full term of the
class of directors in which the vacancy occurred or the new directorship was
created and until a successor is duly elected and qualified or until his or her
earlier death, resignation or removal from office in accordance with the
Restated Certificate of Incorporation or any applicable law or pursuant to an
order of a court. If there are no directors in office, then an election of
directors may be held in the manner provided by applicable law.
Section 3. Duties and Powers. The business and affairs of the
Corporation shall be managed by or under the direction of the Board of Directors
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which may exercise all such powers of the Corporation and do all such lawful
acts and things as are not by statute or by the Restated Certificate of
Incorporation or by these By-laws required to be exercised or done by the
stockholders.
Section 4. Removal of directors from the Board of Directors
shall be in accordance with the Restated Certificate of Incorporation.
Section 5. Meetings. The Board of Directors may hold meetings,
both regular and special, either within or without the State of Delaware.
Regular meetings of the Board of Directors may be held without notice at such
time and at such place as may from time to time be determined by the Board of
Directors. Special meetings of the Board of Directors may be called by the
Chairman, if there be one, the President, [or by any director]. Notice thereof
stating the place, date and hour of the meeting shall be given to each director
either by mail not less than forty-eight (48) hours before the date of the
meeting, by telephone or telegram on twenty-four (24) hours' notice, or on such
shorter notice as the person or persons calling such meeting may deem necessary
or appropriate in the circumstances.
Section 6. Quorum. Except as otherwise required by law or the
Restated Certificate of Incorporation, at all meetings of the Board of
Directors, a majority of the entire Board of Directors shall constitute a quorum
for the transaction of business and the act of a majority of the directors
present at any meeting at which there is a quorum shall be the act of the Board
of Directors. If a quorum shall not be
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present at any meeting of the Board of Directors, the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting of the time and place of the adjourned meeting,
until a quorum shall be present.
Section 7. Actions by Written Consent. Unless otherwise
provided in the Restated Certificate of Incorporation, or these By-laws, any
action required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a meeting, if all the
members of the Board of Directors or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the Board of Directors or committee.
Section 8. Meetings by Means of Conference Telephone. Unless
otherwise provided in the Restated Certificate of Incorporation, members of the
Board of Directors of the Corporation, or any committee thereof, may participate
in a meeting of the Board of Directors or such committee by means of a
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in a
meeting pursuant to this Section 8 shall constitute presence in person at such
meeting.
Section 9. Committees. The Board of Directors may designate
one or more committees, each committee to consist of one or more of the
directors of the
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Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of any such committee. In the absence or disqualification
of a member of a committee, and in the absence of a designation by the Board of
Directors of an alternate member to replace the absent or disqualified member,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not such member or members constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any absent or disqualified member. Any committee, to the
extent permitted by law and provided in the resolution establishing such
committee, 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. Each committee shall keep regular minutes and report to the
Board of Directors when required.
Section 10. Compensation. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors and
may be paid a fixed sum for attendance at each meeting of the Board of Directors
or a stated salary as director, payable in cash or securities. No such payment
shall preclude any compensation
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therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
ARTICLE IV
OFFICERS
Section 1. General. The officers of the Corporation shall be
chosen by the Board of Directors and shall be a President, a Secretary and a
Treasurer. The Board of Directors, in its discretion, also may choose a Chairman
of the Board of Directors (who must be a director) and one or more Vice
Presidents, Assistant Secretaries, Assistant Treasurers and other officers. Any
number of offices may be held by the same person, unless otherwise prohibited by
law or the Restated Certificate of Incorporation. The officers of the
Corporation need not be stockholders of the Corporation nor, except in the case
of the Chairman of the Board of Directors, need such officers be directors of
the Corporation.
Section 2. Election. The Board of Directors, at its first
meeting held after each Annual Meeting of Stockholders (or action by written
consent of stock holders in lieu of the Annual Meeting of Stockholders), shall
elect the officers of the Corporation who shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the Board of Directors; and all officers of the
Corporation shall hold office until their successors
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are chosen and qualified, or until their earlier death, resignation or removal.
Any officer elected by the Board of Directors may be removed at any time by the
affirmative vote of the Board of Directors. Any vacancy occurring in any office
of the Corporation shall be filled by the Board of Directors. The salaries of
all officers of the Corporation shall be fixed by the Board of Directors.
Section 3. Voting Securities Owned by the Corporation. Powers
of attorney, proxies, waivers of notice of meeting, consents and other
instruments relating to securities owned by the Corporation may be executed in
the name of and on behalf of the Corporation by the President or any Vice
President or any other officer authorized to do so by the Board of Directors and
any such officer may, in the name of and on behalf of the Corporation, take all
such action as any such officer may deem advisable to vote in person or by proxy
at any meeting of security holders of any corporation in which the Corporation
may own securities and at any such meeting shall possess and may exercise any
and all rights and power incident to the ownership of such securities and which,
as the owner thereof, the Corporation might have exercised and possessed if
present. The Board of Directors may, by resolution, from time to time confer
like powers upon any other person or persons.
Section 4. Chairman of the Board of Directors. The Chairman of
the Board of Directors, if there be one, shall preside at all meetings of the
stockholders and of the Board of Directors. The Chairman of the Board of
Directors shall be the
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Chief Executive Officer of the Corporation, unless the Board of Directors
designates the President as the Chief Executive Officer, and, except where by
law the signature of the President is required, the Chairman of the Board of
Directors shall possess the same power as the President to sign all contracts,
certificates and other instruments of the Corporation which may be authorized by
the Board of Directors. During the absence or disability of the President, the
Chairman of the Board of Directors shall exercise all the powers and discharge
all the duties of the President. The Chairman of the Board of Directors shall
also perform such other duties and may exercise such other powers as may from
time to time be assigned by these By-laws or by the Board of Directors.
Section 5. President. The President shall, subject to the
control of the Board of Directors and, if there be one, the Chairman of the
Board of Directors, have general supervision of the business of the Corporation
and shall see that all orders and resolutions of the Board of Directors are
carried into effect. The President shall execute all bonds, mortgages, contracts
and other instruments of the Corporation requiring a seal, under the seal of the
Corporation, except where required or permitted by law to be otherwise signed
and executed and except that the other officers of the Corporation may sign and
execute documents when so authorized by these Bylaws, the Board of Directors or
the President. In the absence or disability of the Chairman of the Board of
Directors, or if there be none, the President shall preside at
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all meetings of the stockholders and the Board of Directors. If there be no
Chairman of the Board of Directors, or if the Board of Directors shall otherwise
designate, the President shall be the Chief Executive Officer of the
Corporation. The President shall also perform such other duties and may exercise
such other powers as may from time to time be assigned to such officer by these
By-laws or by the Board of Directors.
Section 6. Vice Presidents. At the request of the President or
in the President's absence or in the event of the President's inability or
refusal to act (and if there be no Chairman of the Board of Directors), the Vice
President, or the Vice Presidents if there is more than one (in the order
designated by the Board of Directors), 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. Each Vice President shall perform such
other duties and have such other powers as the Board of Directors from time to
time may prescribe. If there be no Chairman of the Board of Directors and no
Vice President, the Board of Directors shall designate the officer of the
Corporation who, in the absence of the President or in the event of the
inability or refusal of the President to act, 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.
Section 7. Secretary. The Secretary shall attend all meetings
of the Board of Directors and all meetings of stockholders and record all the
proceedings
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thereat in a book or books to be kept for that purpose; the Secretary shall also
perform like duties for committees of the Board of Directors when required. The
Secretary shall give, or cause to be given, notice of all meetings of the
stockholders and special meetings of the Board of Directors, and shall perform
such other duties as may be prescribed by the Board of Directors, the Chairman
of the Board of Directors or the President, under whose supervision the
Secretary shall be. If the Secretary shall be unable or shall refuse to cause to
be given notice of all meetings of the stockholders and special meetings of the
Board of Directors, and if there be no Assistant Secretary, then either the
Board of Directors or the President may choose another officer to cause such
notice to be given. The Secretary shall have custody of the seal of the
Corporation and the Secretary or any Assistant Secretary, if there be one, shall
have authority to affix the same to any instrument requiring it and when so
affixed, it may be attested by the signature of the Secretary or by the
signature of any such Assistant Secretary. The Board of Directors may give
general authority to any other officer to affix the seal of the Corporation and
to attest to the affixing by such officer's signature. The Secretary shall see
that all books, reports, statements, certificates and other documents and
records required by law to be kept or filed are properly kept or filed, as the
case may be.
Section 8. Treasurer. The Treasurer shall have the custody of
the corporate funds and securities and shall keep full and accurate accounts of
receipts
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and disbursements in books belonging to the Corporation and shall deposit all
moneys and other valuable effects in the name and to the credit of the
Corporation in such depositories as may be designated by the Board of Directors.
The Treasurer shall disburse the funds of the Corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and shall
render to the President and the Board of Directors, at its regular meetings, or
when the Board of Directors so requires, an account of all transactions as
Treasurer and of the financial condition of the Corporation. If required by the
Board of Directors, the Treasurer shall give the Corporation a bond in such sum
and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of the office of the
Treasurer and for the restoration to the Corporation, in case of the Treasurer's
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in the Treasurer's
possession or under the Treasurer's control belonging to the Corporation.
Section 9. Assistant Secretaries. Assistant Secretaries, if
there be any, shall perform such duties and have such powers as from time to
time may be assigned to them by the Board of Directors, the President, any Vice
President, if there be one, or the Secretary, and in the absence of the
Secretary or in the event of the Secretary's disability or refusal to act, shall
perform the duties of the Secretary, and when so
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acting, shall have all the powers of and be subject to all the restrictions upon
the Secretary.
Section 10. Assistant Treasurers. Assistant Treasurers, if
there be any, shall perform such duties and have such powers as from time to
time may be assigned to them by the Board of Directors, the President, any Vice
President, if there be one, or the Treasurer, and in the absence of the
Treasurer or in the event of the Treasurer's disability or refusal to act, shall
perform the duties of the Treasurer, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the Treasurer. If required
by the Board of Directors, an Assistant Treasurer shall give the Corporation a
bond in such sum and with such surety or sureties as shall be satisfactory to
the Board of Directors for the faithful performance of the duties of the office
of Assistant Treasurer and for the restoration to the Corporation, in case of
the Assistant Treasurer's death, resignation, retirement or removal from office,
of all books, papers, vouchers, money and other property of whatever kind in the
Assistant Treasurer's possession or under the Assistant Treasurer's control
belonging to the Corporation.
Section 11. Other Officers. Such other officers as the Board
of Directors may choose shall perform such duties and have such powers as from
time to time may be assigned to them by the Board of Directors. The Board of
Directors may
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delegate to any other officer of the Corporation the power to choose such other
officers and to prescribe their respective duties and powers.
ARTICLE V
STOCK
Section 1. Form of Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed, in the name of the
Corporation (i) by the Chairman of the Board of Directors, the President or a
Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary of the Corporation, certifying the number of
shares owned by such stockholder in the Corporation.
Section 2. Signatures. Any or all of the signatures on a
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon 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.
Section 3. Lost Certificates. The Board of Directors may
direct a new certificate to be issued in place of any certificate theretofore
issued by the Corporation alleged to have been lost, stolen or destroyed, upon
the making of an
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affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or the owner's legal representative, to advertise the same in such
manner as the Board of Directors shall require and/or to give the Corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed or the issuance of such new certificate.
Section 4. Transfers. Stock of the Corporation shall be
transferable in the manner prescribed by law and in these By-laws. Transfers of
stock shall be made on the books of the Corporation only by the person named in
the certificate or by such person's attorney lawfully constituted in writing and
upon the surrender of the certificate therefor, which shall be cancelled before
a new certificate shall be issued. No transfer of stock shall be valid as
against the Corporation for any purpose until it shall have been entered in the
stock records of the Corporation by an entry showing from and to whom
transferred.
Section 5. Record Date.
(a) In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, the board of directors may fix a record date, which
record date shall not
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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 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 at 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; providing, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
(b) 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 law, shall be the first date on which a signed
written consent setting forth the action taken or proposed to
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be taken is delivered to the Corporation by delivery to its registered office in
this State, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to a corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the Board of Directors and prior action by
the Board of Directors is required by 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 resolutions taking such prior action.
(c) 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.
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Section 6. Record Owners. 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, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and 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 required by
law.
ARTICLE VI
NOTICES
Section 1. Notices. Whenever written notice is required by
law, the Restated Certificate of Incorporation or these By-laws, to be given to
any director, member of a committee or stockholder, such notice may be given by
mail, addressed to such director, member of a committee or stockholder, at such
person's address as it appears on the records of the Corporation, with postage
thereon prepaid, and such notice shall be deemed to be given at the time when
the same shall be deposited in the United States mail. Written notice may also
be given personally or by telegram, telex or cable.
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Section 2. Waivers of Notice. Whenever any notice is required
by law, the Certificate of Incorporation or these By-laws, to be given to any
director, member of a committee or stockholder, a waiver thereof in writing,
signed, by the person or persons entitled to said notice, whether before or
after the time stated therein, shall be deemed equivalent thereto. Attendance of
a person at a meeting, present in person or represented by proxy, shall
constitute a waiver of notice of such meeting, except where the person attends
the meeting for the express purpose of objecting at the beginning of the meeting
to the transaction of any business because the meeting is not lawfully called or
convened.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the requirements of the DGCL and the provisions of the
Restated Certificate of Incorporation, if any, may be declared by the Board of
Directors at any regular or special meeting of the Board of Directors (or any
action by written consent in lieu thereof in accordance with Section 6 of
Article III hereof), and
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may be paid in cash, in property, or in shares of the Corporation's capital
stock. Before payment of any dividend, there may be set aside out of any funds
of the Corporation available for dividends such sum or sums as the Board of
Directors from time to time, in its absolute discretion, deems proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for any proper
purpose, and the Board of Directors may modify or abolish any such reserve.
Section 2. Disbursements. All checks or demands for money and
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.
Section 3. Fiscal Year. The fiscal year of the Corporation
shall be fixed by resolution of the Board of Directors.
Section 4. Corporate Seal. The corporate seal shall have
inscribed thereon the name of the Corporation, the year of its organization and
the words "Corporate Seal, Delaware". The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
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ARTICLE VIII
INDEMNIFICATION
Section 1. Power to Indemnify in Actions, Suits or Proceedings
other than Those by or in the Right of the Corporation. Subject to Section 3 of
this Article VIII, the Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that such person is or was a director or officer of the
Corporation, or is or was a director or officer of the Corporation serving at
the request of the Corporation as a director or officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding if such person 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, or except as otherwise
provided in the Restated Certificate of Incorporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe such person's
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which such person reasonably believed to
be in or not opposed to the best interests of the
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Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that such person's conduct was unlawful.
Section 2. Power to Indemnify in Actions, Suits or Proceedings
by or in the Right of the Corporation. Subject to Section 3 of this Article
VIII, the Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that such person is or was a director or officer of the
Corporation, or is or was a director or officer of the Corporation serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or settlement
of such action or suit if such person 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; except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such
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person is fairly and reasonably entitled to indemnity for such expenses which
the Court of Chancery or such other court shall deem proper.
Section 3. Authorization of Indemnification. Any
indemnification under this Article VIII (unless ordered by a court) shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director or officer is proper in the
circumstances because such person has met the applicable standard of conduct set
forth in Section 1 or Section 2 of this Article VIII, as the case may be. Such
determination shall be made, with respect to a person who is a director or
officer at the time of such determination, (i) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even though
less than a quorum, or (ii) by a committee of such directors designated by a
majority vote of such directors, even though less than a quorum, or (iii) if
there are no such directors, or if such directors so direct, by independent
legal counsel in a written opinion or (iv) by the stockholders. Such
determination shall be made, with respect to former directors and officers, by
any person or persons having the authority to act on the matter on behalf of the
Corporation. To the extent, however, that a present or former director or
officer of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding described above, or in defense of any
claim, issue or matter therein, such person shall be indemnified against
expenses
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(including attorneys' fees) actually and reasonably incurred by such person in
connection therewith, without the necessity of authorization in the specific
case.
Section 4. Good Faith Defined. For purposes of any
determination under Section 3 of this Article VIII, a person shall be deemed to
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, or, with respect to
any criminal action or proceeding, to have had no reasonable cause to believe
such person's conduct was unlawful, if such person's action is based on the
records or books of account of the Corporation or another enterprise, or on
information supplied to such person by the officers of the Corporation or
another enterprise in the course of their duties, or on the advice of legal
counsel for the Corporation or another enterprise or on information or records
given or reports made to the Corporation or another enterprise by an independent
certified public accountant or by an appraiser or other expert selected with
reasonable care by the Corporation or another enterprise. The term "another
enterprise" as used in this Section 4 shall mean any other corporation or any
partnership, joint venture, trust, employee benefit plan or other enterprise of
which such person is or was serving at the request of the Corporation as a
director, officer, employee or agent. The provisions of this Section 4 shall not
be deemed to be exclusive or to limit in any way the circumstances in which a
person may be deemed to have met the applicable standard of conduct set forth in
Section 1 or 2 of this Article VIII, as the case may be.
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Section 5. Indemnification by a Court. Notwithstanding any
contrary determination in the specific case under Section 3 of this Article
VIII, and notwithstanding the absence of any determination thereunder, any
director or officer may apply to the Court of Chancery in the State of Delaware
for indemnification to the extent otherwise permissible under Sections 1 and 2
of this Article VIII. The basis of such indemnification by a court shall be a
determination by such court that indemnification of the director or officer is
proper in the circumstances because such person has met the applicable standards
of conduct set forth in Section 1 or 2 of this Article VIII, as the case may be.
Neither a contrary determination in the specific case under Section 3 of this
Article VIII nor the absence of any determination thereunder shall be a defense
to such application or create a presumption that the director or officer seeking
indemnification has not met any applicable standard of conduct. Notice of any
application for indemnification pursuant to this Section 5 shall be given to the
Corporation promptly upon the filing of such application. If successful, in
whole or in part, the director or officer seeking indemnification shall also be
entitled to be paid the expense of prosecuting such application.
Section 6. Expenses Payable in Advance. Expenses incurred by a
director or officer in defending any civil, criminal, administrative or
investigative action, suit or proceeding shall be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on
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behalf of such director or officer to repay such amount if it shall ultimately
be determined that such person is not entitled to be indemnified by the
Corporation as authorized in this Article VIII.
Section 7. Nonexclusivity of Indemnification and Advancement
of Expenses. The indemnification and advancement of expenses provided by or
granted pursuant to this Article VIII shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under the Restated Certificate of Incorporation, any By-law, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in such person's official capacity and as to action in another capacity while
holding such office, it being the policy of the Corporation that indemnification
of the persons specified in Sections 1 and 2 of this Article VIII shall be made
to the fullest extent permitted by law. The provisions of this Article VIII
shall not be deemed to preclude the indemnification of any person who is not
specified in Section 1 or 2 of this Article VIII but whom the Corporation has
the power or obligation to indemnify under the provisions of the General
Corporation Law of the State of Delaware, or otherwise.
Section 8. Insurance. The Corporation may purchase and
maintain insurance on behalf of any person who is or was a director or officer
of the Corporation, or is or was a director or officer of the Corporation
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership,
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joint venture, trust, employee benefit plan or other enterprise against any
liability asserted against such person and incurred by such person in any such
capacity, or arising out of such person's status as such, whether or not the
Corporation would have the power or the obligation to indemnify such person
against such liability under the provisions of this Article VIII.
Section 9. Certain Definitions. For purposes of this Article
VIII, references to "the Corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors or officers, so that any person who is or was a director or officer of
such constituent corporation, or is or was a director or officer of such
constituent corporation serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partner ship,
joint venture, trust, employee benefit plan or other enterprise, shall stand in
the same position under the provisions of this Article VIII with respect to the
resulting or surviving corporation as such person would have with respect to
such constituent corporation if its separate existence had continued. For
purposes of this Article VIII, references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the
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Corporation which imposes duties on, or involves services by, such director or
officer with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner such person
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this Article
VIII.
Section 10. Survival of Indemnification and Advancement of
Expenses. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article VIII shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director
or officer and shall inure to the benefit of the heirs, executors and
administrators of such a person.
Section 11. Limitation on Indemnification. Notwithstanding
anything contained in this Article VIII to the contrary, except for proceedings
to enforce rights to indemnification (which shall be governed by Section 5
hereof), the Corporation shall not be obligated to indemnify any director or
officer in connection with a proceeding (or part thereof) initiated by such
person unless such proceeding (or part thereof) was authorized or consented to
by the Board of Directors of the Corporation.
Section 12. Indemnification of Employees and Agents. The
Corporation may, to the extent authorized from time to time by the Board of
Directors,
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provide rights to indemnification and to the advancement of expenses to
employees and agents of the Corporation similar to those conferred in this
Article VIII to directors and officers of the Corporation.
ARTICLE IX
AMENDMENTS
Section 1. Amendments. These By-laws may be altered, amended
or repealed, in whole or in part, or new By-laws may be adopted by the
stockholders or by the Board of Directors, provided, however, that notice of
such alteration, amendment, repeal or adoption of new By-laws be contained in
the notice of such meeting of stockholders or Board of Directors as the case may
be. All such amendments must be approved by either the holders of a majority of
the outstanding capital stock entitled to vote thereon or by a majority of the
entire Board of Directors then in office; provided, however, that any proposed
alteration or repeal of, or the adoption of any By-law inconsistent with, any of
Section 3, 7 or 9 of Article II, Section 1 or 2 of Article III, or this Article
IX of these By-laws by the stockholders shall require the affirmative vote of at
least 80% of the voting power of all capital stock then out standing, voting
together as a single class; and provided further, that, in the case of any such
stockholder action at a Special Meeting of stockholders, notice of the
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proposed alteration, repeal or adoption of the new by-law or By-laws must be
contained in the notice of such Special Meeting.
Section 2. Entire Board of Directors. As used in this Article
IX and in these By-Laws generally, the term "entire Board of Directors" means
the total number of directors which the Corporation would have if there were no
vacancies.
* * *
Adopted as of: _____________________
Last Amended as of: ________________
<PAGE> 1
EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT dated as of May 25, 1999, among Williams
Communications Group, Inc., a Delaware corporation (the "Company"), The Williams
Companies, Inc., a Delaware corporation ("TWC"), and Telefonos de Mexico, S.A.
de C.V., a Mexican corporation ("TelMex" and together with any assignee thereof
pursuant to Section 15.13 hereof, the "Investor").
PREAMBLE
The Company wishes to obtain equity financing. The Investor is willing,
on the terms contained in this Agreement, to purchase Class A common stock, par
value $0.01 per share (the "Class A Common Stock"), of the Company having the
characteristics set forth in the Restated Certificate of Incorporation of the
Company (the "Restated Certificate"). The Company and TelMex or certain of their
Affiliates (as defined below) are entering into agreements, which include that
certain Alliance Agreement, under which the parties have set forth their
agreement to work together to enhance their respective abilities to meet
competitive opportunities for network services. In addition, the Company and SBC
Communications, Inc. ("SBC") have previously entered into an alliance agreement
and a securities purchase agreement which contemplated SBC purchasing $500
million of Class A Common Stock. SBC is also negotiating an alliance agreement
with TelMex (the "SBC/TelMex Agreement"). In order to induce TelMex to enter
into such alliance with SBC, SBC has agreed that, subject to the terms and
conditions of the SBC/TelMex Agreement, it may reduce its planned initial
investment in the Company by $75,000,000 and, subject to SBC's prior written
consent which may in SBC's sole discretion be granted to TelMex, permit the
Company to increase TelMex's investment hereunder by $75,000,000 over the amount
($25,000,000) TelMex otherwise would have been able to invest in the Company.
Certain capitalized terms are defined in the first Article. Exhibits are
incorporated by reference into this Agreement as though such exhibits were set
forth at the point of such reference.
ARTICLE I
DEFINED TERMS
The following terms, when used in this Agreement, have the following
meanings, unless the context otherwise indicates:
"10% Limit" shall mean 10% of the total number of issued and
outstanding shares of Common Stock of the Company calculated on a Fully-Diluted
Basis after giving effect to any concurrent transaction and the issuance of
shares of Common Stock to the Investor.
"33 Act" means the Securities Act of 1933, as amended, or any similar
federal law then in force.
"34 Act" means the Securities Exchange Act of 1934, as amended, or any
similar federal law then in force.
<PAGE> 2
"Affiliate" has the meaning ascribed to it in Rule 12b-2 under the 34
Act.
"Alliance Agreement" shall have the meaning set forth in the preamble
to this Agreement.
"Beneficially Own" means having the right to vote or dispose of, or
"beneficially own" as determined pursuant to Rule 13d-3 under the 34 Act as in
effect on the date of this Agreement, including pursuant to any agreement,
arrangement or understanding.
"Board of Directors" means the Board of Directors of the Company.
"Business Day" means a day other than a Saturday or Sunday or a day on
which banking institutions are authorized or required by law or executive order
to remain closed in New York, New York, Tulsa, Oklahoma or Mexico City, Mexico.
"Call Option" shall have the meaning set forth in Section 9.1(a) to
this Agreement.
"Change in Control Event" shall be deemed to have occurred with respect
to the Company if (i) there shall be consummated (x) any consolidation or merger
of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of Common Stock would be converted into
cash, securities or other property (provided, that a merger of the Company in
which the holders of such Common Stock immediately prior to the merger hold at
least 70% of the common stock of the surviving corporation immediately after the
merger shall not constitute a Change in Control Event), or (y) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the Company, or
(ii) the stockholders of the Company approved any plan or proposal for the
liquidation or dissolution of the Company, or (iii) any Person (other than TWC
or any majority-owned Subsidiary of TWC) shall Beneficially Own 30% or more of
the outstanding Common Stock (or 50% of the outstanding Common Stock if and so
long as TWC Beneficially Owns 30% of more of the outstanding Common Stock), or
(iv) during any period of two consecutive years, individuals who at the
beginning of such period constitute the entire Board of Directors shall cease
for any reason to constitute a majority thereof unless the election, or the
nomination for election by the Company's stockholders, of each new director was
approved by a vote of at least two-thirds of the directors then still in office
who were directors at the beginning of the period.
"Claims" shall have the meaning set forth in Section 11.1(a) to this
Agreement.
"Class A Common Stock" shall mean the Class A common stock, par value
$0.01 per share, of the Company and any Common Stock received in exchange for or
in respect of the Class A common stock.
"Class B Common Stock" shall mean the Class B common stock, par value
$0.01 per share, of the Company.
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"Closing" and "Closing Date" mean the consummation of the Company's
sale and the Investor's purchase of Class A Common Stock pursuant to this
Agreement, and the date or dates on which the same occurs or occurred,
respectively.
"Code" means the Internal Revenue Code of 1986, as amended, or any
similar federal law then in force.
"Common Stock" shall mean the Class A Common Stock and the Class B
Common Stock and any other series of common stock of the Company hereafter
issued. The term "Common Stock" shall include, except as otherwise provided
herein, any and all shares of common stock or other securities of the Company or
any successor or assign of the Company (whether by merger, consolidation, sale
of assets or otherwise), which may be issued in respect of, in exchange for, or
in substitution for any shares of Common Stock, by reason of any stock dividend,
split, reverse split, combination, recapitalization, reclassification, merger,
consolidation, partial or complete liquidation, sale of assets, spin-off,
distribution to stockholders or combination of the shares of Common Stock or any
other change in the Company's capital structure, in order to preserve fairly and
equitably as far as practicable, the original rights and obligations of the
parties hereto under this Agreement.
"Company Control Person" shall have the meaning set forth in Section
12.1(g)(ii) to this Agreement.
"Control Person" shall have the meaning set forth in Section 12.1(g)(i)
to this Agreement.
"Demand Registration Statement" shall have the meaning set forth in
Section 12.1(a) to this Agreement.
"Determination Period" shall have the meaning set forth in Section
9.1(c) to this Agreement.
"Duly Endorsed" means (i) duly endorsed in blank by the person or
persons in whose name a stock certificate or certificate representing a debt
security is registered or (ii) accompanied by a duly executed stock or security
assignment separate from the certificate, in each case with the signature(s)
thereon guaranteed by a commercial bank or trust company or a member of a
national securities exchange or of the National Association of Securities
Dealers, Inc.
"Employee Benefit Plan" means any plan regulated under ERISA.
"ERISA" means the Employee Retirement Income Security Act of 1974 (or
any successor legislation thereto), as amended from time to time.
"Fully-Diluted Basis" means, with respect to any calculation of the
outstanding amount of common equity of the Company, an amount equal to the total
outstanding number of shares of Common Stock, calculated without duplication and
assuming the conversion of all outstanding shares of convertible capital stock
and securities of the Company and the exercise of all warrants, options and
other rights (including, without limitation, employee stock options pursuant to
any
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stock option plan of the Company (except that, with respect to such options and
warrants, if any such options are finally determined to be less than 100% vested
or if any such warrants are finally determined to be less than 100% exercisable,
only those shares of Common Stock which may be exercised following such final
determination shall be included in such calculation)) to purchase shares of
Common Stock.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government (including, without limitation, the Federal Communications
Commission (or any successor thereto) and each applicable public utilities
commission).
"Holder" shall have the meaning set forth in Section 12.1(a) to this
Agreement.
"HSR Act" shall have the meaning set forth in Section 5.3(a) to this
Agreement.
"IPO" means the initial public offering of the Company pursuant to a
registration statement to be filed by the Company under the 33 Act.
"IPO Price" means the per share offering price for Class A Common Stock
stated on the face of the final prospectus relating to the IPO.
"Net IPO Price" means the IPO Price less any discounts or commissions
per share from the IPO Price to the underwriter or underwriters.
"Plan" means an employee benefit plan, as defined in Section 3(3) of
ERISA, which the Company maintains, contributes to or has an obligation to
contribute to on behalf of participants who are or were employed by the Company.
"Permitted Transfer Date" shall have the meaning set forth in Section
7.1(a) to this Agreement.
"Person" means any individual, corporation, partnership, limited
liability company or partnership, joint venture, association, governmental
entity, or any other entity.
"Piggyback Registration Statement" shall have the meaning set forth in
Section 12.1(b) to this Agreement.
"Potential Change in Control Event" means any one of the following
events: (a) the commencement of a tender offer or exchange offer (as such terms
are defined in the rules and regulations under the 34 Act) by any Person that
would, if consummated, constitute a Change in Control Event; (b) the
solicitation of proxies by any Person for the purpose of effecting a Change in
Control Event; (c) the disclosure by the Company of any material non-public
information to any Person for the purpose of assisting such Person in evaluating
whether to effect a Change in Control Event; (d) the commencement of substantive
discussions or negotiations (involving more than the Company responding to
inquiries) between the Company and any Person contemplating
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a Change in Control Event; or (e) the agreement by the Company, whether or not
in writing, to facilitate a Change in Control Event. For purposes of the above,
in no event shall the term "Person" include the Investor or any of its
Affiliates.
"Purchase Price" shall have the meaning set forth in Section 2.1(c) to
this Agreement.
"Registration Request" shall have the meaning set forth in Section
12.1(a) to this Agreement.
"Registration Statement" shall have the meaning set forth in Section
12.1(b) to this Agreement.
"Representative" shall have the meaning set forth in Section 14.1 to
this Agreement.
"Restated Certificate" shall have the meaning set forth in the preamble
to this Agreement.
"Restated Certificate Delivery Date" shall have the meaning set forth
in Section 3.2 of this Agreement.
"Restricted Security" shall have the meaning set forth in Section
7.1(b) to this Agreement.
"Right of First Offer Notice" shall have the meaning set forth in
Section 13.1(a) to this Agreement.
"Rule 144" means Rule 144 promulgated under the 33 Act, or any similar
or successor rule or regulation of the SEC then in force.
"SBC" shall mean SBC Communications, Inc., a Delaware corporation.
"SBC/TelMex Agreement" shall have the meaning set forth in the preamble
to this Agreement.
"SEC" means the Securities and Exchange Commission.
"Selling Stockholders" shall have the meaning set forth in Section
12.1(b) to this Agreement.
"Subsidiary" or "Subsidiaries" of any Person means any corporation or
other entity of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other Persons
performing similar functions are at the time directly or indirectly owned or
controlled by such Person or one or more Subsidiaries of such Person.
"Super Voting Rights" shall have the meaning set forth in Section 8.1
to this Agreement.
"Termination" shall have the meaning set forth in Section 9.1 to this
Agreement.
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"Third Party" means, with respect to the Company or the Investor, any
Person other than the Company's or the Investor's Affiliates, respectively;
provided further, that the Transfer to any such Person is in compliance with all
applicable federal, state and foreign securities laws.
"Trading Day" means a day on which the New York Stock Exchange is open
for the transaction of business.
"Transfer" means any direct or indirect sale, assignment, mortgage,
transfer, pledge, gift, hypothecation or other disposition of or transfer of
Common Stock.
"Transfer Offer" shall have the meaning set forth in Section 13.1(a) to
this Agreement.
"Transfer Stock" shall have the meaning set forth in Section 13.1(a) to
this Agreement.
"TWC" means The Williams Companies, Inc., a Delaware corporation.
"Underwriting Agreement" means the underwriting agreement among the
Company and Lehman Brothers Inc., Salomon Smith Barney and certain other
underwriters to be named therein, in connection with the IPO, with such changes
as shall be reflected in a draft to be delivered to the Investor pursuant to
Section 3.1. A draft of the Underwriting Agreement is attached as Exhibit 1.1.
"Underwriting Agreement Delivery Date" shall have the meaning set forth
in Section 3.1 to this Agreement.
"Volume-Weighted Average Trading Price" shall mean, for any Trading
Day, an amount equal to (a) the cumulative sum, for each trade of Class A Common
Stock during such Trading Day on the New York Stock Exchange (or, if such
security is not listed on the New York Stock Exchange, such other principal
exchange or over-the-counter market on which such security is listed), of the
product of: (i) the sale price times (ii) the number of shares of Class A Common
Stock sold at such price, divided by (b) the total number of shares of Class A
Common Stock so traded during the Trading Day. If, pursuant to the definition of
Class A Common Stock, the term "Class A Common Stock" encompasses more than one
class, series or other type of security, then the Volume Weighted Average
Trading Price shall be determined separately for each such class, series or
other type of security.
Additional defined terms are found in the body of the following text.
The masculine form of words includes the feminine and the neuter and
vice versa, and, unless the context otherwise requires, the singular form of
words includes the plural and vice versa. The words "herein," "hereof,"
"hereunder," and other words of similar import when used in this Agreement refer
to this Agreement as a whole, and not to any particular section or subsection.
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ARTICLE II
PURCHASE AND SALE TERMS; CLOSING
2.1 Purchase and Sale.
(a) The Board of Directors has authorized the sale and
issuance to the Investor pursuant to this Agreement of shares of its Class A
Common Stock, having the rights, privileges and restrictions set forth in the
Restated Certificate. Before the Closing Date, the Company will have adopted and
filed the Restated Certificate with the Delaware Secretary of State.
(b) Subject to the terms and conditions of this Agreement, at
the Closing, the Company shall issue and sell to the Investor, and the Investor
shall purchase from the Company, the number of shares of Class A Common Stock
equal to US$100,000,000 divided by the Net IPO Price.
(c) The aggregate purchase price (the "Purchase Price") for
the shares of Class A Common Stock to be purchased by the Investor shall be
US$100,000,000.
2.2 Payment. At the Closing, the Company shall deliver to Investor a
certificate (registered in the name of the Investor) representing the
appropriate number of shares of Class A Common Stock which the Investor is
purchasing against Investor's delivery to an account of the Company designated
to the Investor of a wire transfer in immediately available funds in U.S.
dollars in the amount of the Purchase Price therefor.
2.3 Closing. The purchase and sale of the Class A Common Stock to take
place at the Closing shall be held at the offices of Davis Polk & Wardwell, New
York, New York or such other place as the parties may agree. The Closing shall
occur on the date of and simultaneously with or no later than two Business Days
after, and shall be conditioned upon, the closing of the transactions
contemplated by the Underwriting Agreement relating to the IPO (the "Closing
Date"); provided, however, that (a) the Closing Date shall be extended as
reasonably necessary in order to obtain clearance under the HSR Act and (ii) the
Company will give the Investor at least three (3) Business Days advance notice
of the Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY;
DUE DILIGENCE
3.1 Delivery of Underwriting Agreement. The Company has delivered to
the Investor a substantially completed draft Underwriting Agreement in the form
set forth in Exhibit 1.2.
3.2 Delivery of Restated Certificate. The Company has delivered to the
Investor a substantially completed draft of the Restated Certificate in the form
set forth in Exhibit 1.1.
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3.3 Underwriting Agreement Representations and Warranties. In
connection with the sale of the Class A Common Stock to the Investor, the
Company will hereby be deemed to make representations and warranties to, and
agreements with, the Investor that are equivalent to those made for the benefit
of the underwriters as set forth in the Underwriting Agreement, and each such
representation, warranty and agreement is incorporated herein by reference,
except that (a) all references to "this Agreement" in the Underwriting Agreement
shall be deemed to mean this Agreement between the Company and the Investor
rather than the Underwriting Agreement, (b) all references to the "Stock" in the
Underwriting Agreement shall be deemed to mean the shares being sold by the
Company to the Investor pursuant to this Agreement, and (c) there shall be
deemed to have been made such other modifications as are reasonably necessary to
make such representations, warranties and agreements applicable to the
transactions contemplated by this Agreement.
3.4 Due Authorization, Etc. The shares of Class A Common Stock to be
issued and sold by the Company to the Investor pursuant to this Agreement have
been duly authorized and, will be validly issued, fully-paid and non-assessable.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
The Investor represents and warrants to the Company, as of the date
hereof and as of the date of the Closing that:
4.1 Existence. The Investor is constituted as a corporation according
to the articles of association number 34,726 dated December 23rd, 1947 which was
faced under the faith of No. 54 Public Notary of Distrito Federal, Licenciado
Graciano Contreras Saavedra; this document has been registered on Commerce
Section of the Mexico's City Property and Commerce national registry under
number 4 page 3 from third book, volume 238 and has the TME-840315KTG Registro
Federal de Contribuyentes. The Investor is current in payment of all taxes
properly payable pursuant to the laws of the jurisdiction of its organization.
The Investor has the requisite corporate power and authority to own and operate
its properties and assets and to carry on its business as presently conducted.
4.2 Power and Authority. The Investor has the requisite corporate power
and authority and has taken all required action necessary to authorize the
execution and delivery by it of this Agreement and all other documents or
instruments required by this Agreement, and to carry out the terms of this
Agreement and of all such other documents or instruments. This Agreement has
been duly executed and delivered by the Investor and (assuming the due
authorization, execution and delivery hereof by the Company and the other
parties thereto other than the Investor) constitutes the valid and binding
obligation of the Investor, enforceable against the Investor in accordance with
its terms.
4.3 Purchase for Investment. The Investor is purchasing its shares of
Class A Common Stock for investment, for its own account (not as a nominee or
agent) and not for the
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account of any Employee Benefit Plan (or if are being acquired for the account
of any such Plan, such acquisition does not involve a nonexempt prohibited
transaction within the meaning of Section 406 of ERISA or Section 4975 of the
Code) and not with a view to the resale or distribution of any part thereof,
except for transfers permitted hereunder, and the Investor has no present
intention of selling, granting any participation in or otherwise distributing
the same. By executing this Agreement, the Investor further represents that it
does not have any contract, undertaking, agreement or arrangement with any
Person to sell, Transfer or grant participation to such Person or to any third
person with respect to the Class A Common Stock.
4.4 Non-Contravention. The execution, delivery and performance of this
Agreement by the Investor and the consummation of any of the transactions
contemplated hereby by the Investor will not (a) conflict with or result in a
breach of any of the terms and provisions of, or constitute a default (or an
event which with notice or lapse of time, or both, would constitute a default)
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Investor pursuant to any
agreement, instrument, franchise, license or permit to which the Investor is a
party or by which any of its properties or assets may be bound or (b) violate or
conflict with any judgment, decree, order, statute, rule or regulation of any
court or any public, governmental or regulatory agency or body applicable to the
Investor or any of its properties or assets, other than such breaches, defaults
or violations that are not reasonably expected to impair the ability of the
Investor to consummate the transactions contemplated by this Agreement. The
execution, delivery and performance of this Agreement by the Investor and the
consummation of the transactions contemplated hereby by the Investor do not and
will not violate or conflict with any provision of the organizational documents
of the Investor, as currently in effect. Except for filings under the HSR Act,
no consent, approval, authorization, order, registration, filing, qualification,
license or permit of or with any court or any government agency or body
applicable to the Investor is required for the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby.
4.5 Financial Matters. The Investor, either alone or with its financial
advisor, has such knowledge and experience in financial and business matters
that it is capable of evaluating the merits and risks of the investment to be
made by it hereunder. The Investor represents that it is an "accredited
investor" as that term is defined in Regulation D promulgated under the 33 Act.
4.6 Restricted Securities. The Investor understands that its shares of
Class A Common Stock must be held indefinitely unless they are registered under
the 33 Act or an exemption from such registration becomes available, and that
its shares of Class A Common Stock may only be Transferred as provided in
Article VII of this Agreement. The Investor acknowledges and agrees to abide by
the restrictions on transfer set forth in Article VII of this Agreement. The
Investor understands that the shares of Class A Common Stock it is purchasing
are characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the 33 Act, only in
certain limited circumstances. In this connection, Investor represents that it
is familiar with Rule 144 under the 33 Act, as presently in effect, and
understands the resale limitations imposed thereby and by the 33 Act.
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4.7 Further Limitations on Disposition. Without in any way limiting the
representations set forth above, Investor further agrees not to make any
disposition in a private sale of all or any portion of the Class A Common Stock
purchased pursuant to this Agreement prior to the earlier of the Permitted
Transfer Date or a Change in Control Event unless and until the transferee has
agreed in writing for the benefit of the Company to be bound by this Section 4.7
and Article VII and (a) the Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (b) if
reasonably requested by the Company, the Investor shall have furnished the
Company with an opinion of counsel reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the 33 Act.
It is agreed that the Company will not require opinions of counsel for
transactions made pursuant to Rule 144.
ARTICLE V
COVENANTS OF THE COMPANY AND THE INVESTOR
5.1 Covenants of the Company Only.
(a) The Company will hereby be deemed to covenant and agree
with the Investor and to its benefit to comply with all agreements made for the
benefit of the underwriters as set forth in the Underwriting Agreement.
(b) The Company is currently engaged in discussions with
underwriters regarding the IPO and agrees that it will act in good faith to
effect the IPO and to undertake such steps as it shall deem necessary to
consummate the IPO. If the Company does not effect an IPO, the Company hereby
agrees that it will enter into discussions with Investor regarding Investor's
possible investment in the Company.
(c) The Company shall promptly notify Investor of any material
developments in connection with the IPO, and provide copies of any and all
filings, notices and other communications with the SEC relating thereto,
including copies of the registration statement filed with the SEC, and with any
Governmental Authority relating to the filings under the HSR Act as described in
Section 5.3(a) below. The Company shall also provide to Investor any such
filings, notices and other communications to Investor sufficiently for in
advance of their being filed or provided to the SEC or such Governmental
Authorities as described above so as to permit Investor sufficient opportunity
to review and comment on such drafts.
(d) The Company shall provide to Investor copies of any
notices, correspondence or other written communication from the SEC relating to
the IPO or from any Governmental Authority relating to the filings under the HSR
Act as described in Section 5.3(a) below promptly following receipt thereof.
(e) The Company shall promptly notify the Investor of any
Change in Control Event or Potential Change in Control Event of which the
Company becomes actually aware.
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5.2 Further Assurances. Subject to the terms and conditions provided
herein, each of the parties agrees to use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done as promptly as
practicable, all things necessary, proper or advisable under applicable laws and
regulations or otherwise to consummate and make effective the transactions
contemplated by this Agreement. The Company, at its expense, will promptly
execute and deliver to the Investor, and the Investor will, at its expense,
promptly execute and deliver to the Company, upon the other's reasonable
request, all such other and further documents, agreements and instruments in
compliance with or pursuant to its covenants and agreements herein, and will
make any recordings, file any notices, and obtain any consents as may be
necessary or appropriate in connection therewith, including without limitation,
applications under the HSR Act.
5.3 Filings and Consents.
(a) As soon as practicable after execution and delivery of
this Agreement, the Investor and the Company shall make all filings required
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), relating to the transactions contemplated hereby. In addition, the
Investor and the Company will each promptly furnish all information as may be
required by the Federal Trade Commission and the Department of Justice under the
HSR Act in order for the requisite approvals for the purchase and sale of the
Class A Common Stock, and the transactions contemplated hereby, to be obtained
or any applicable waiting periods to expire. Each of the parties hereto will
cooperate with each other with respect to obtaining, as promptly as practicable,
all necessary consents, approvals, authorizations and agreements of, and the
giving of all notices and making of all other filings with, any third parties,
including Governmental Authorities, necessary to authorize, approve or permit
the consummation of the transactions contemplated hereby.
(b) The Investor and the Company each will provide the other
such information and communications with respect to such approvals,
authorizations and consents as the other party may reasonably request or
require.
5.4 Covenant to Satisfy Conditions. Each party agrees to use all
reasonable efforts to insure that the conditions to the other party's
obligations hereunder set forth in Article VI, insofar as such matters are
within the control of such party, are satisfied. The Investor acknowledges
receipt of drafts of the Underwriting Agreement and Restated Certificate
(attached as exhibits hereto) and is satisfied with the content thereof.
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ARTICLE VI
CLOSING CONDITIONS
6.1 Conditions of the Investor's Obligations at Closing.
(a) Underwriting Agreement. The Investor's obligation to
purchase and pay for the Class A Common Stock to be purchased by it hereunder is
subject to (i) the Investor's determination that there has not been any material
revision to the Underwriting Agreement that is adverse to the Investor as it has
been executed by the Underwriters and the Company since the draft delivered to
the Investor pursuant to Section 3.1 hereof, and (ii) the receipt by the
Investor of all letters, opinions, and certificates that the Underwriters are
entitled to receive from the Company in connection with the closing of the IPO.
The Investor shall be entitled to rely upon such letters, opinions and
certificates with respect to the shares of Class A Common Stock being purchased
by the Investor hereunder.
(b) Receipt of Restated Certificate. The Investor shall have
received from the Company the Restated Certificate pursuant to Section 3.2 in
form and substance reasonably satisfactory to the Investor.
(c) Performance of Obligations. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing.
(d) Representations and Warranties. The representations and
warranties of the Company contained in Article III shall be true on and as of
the Closing with the same effect as though such representations and warranties
had been made on and as of the Closing.
(e) Legal Opinion. The Investor shall have received a legal
opinion from in-house counsel to the Company to the effect that the issuance of
the Class A Common Stock being purchased by it has been duly authorized and,
when issued in accordance with the terms of this Agreement, will be validly
issued, fully paid and non-assessable.
(f) Stock Certificate. The Company shall have delivered the
stock certificate representing the Class A Common Stock being purchased by the
Investor.
6.2 Conditions of the Company's Obligations at Closing. The obligations
of the Company to the Investor under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by the
Investor:
(a) Representations and Warranties. The representations and
warranties of the Investor contained in Article IV shall be true on and as of
the Closing with the same effect as though such representations and warranties
had been made on and as of the Closing.
(b) Payment of Purchase Price. The Investor shall have
delivered the Purchase Price pursuant to Section 2.2 of this Agreement.
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(c) Performance of Obligations. The Investor shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing.
(d) Legal Matters. The Company shall have received from the
Investor such legal opinions as shall be reasonably agreed upon by the Company
and the Investor and such other letters, opinions and certificates as the
Company shall reasonably request.
6.3 Conditions to Each Party's Obligation. The respective obligation of
each party to consummate the transactions contemplated hereby shall be subject
to the satisfaction at or prior to the Closing of each of the following
conditions:
(a) HSR Approval. The applicable waiting period (and any
extension thereof) under the HSR Act relating to the transactions contemplated
by this Agreement shall have been terminated or shall have expired.
(b) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing
consummation of the transactions contemplated hereby shall be in effect.
(c) Alliance Agreement. The Alliance Agreement shall have been
executed and remain in full force and effect.
(d) Consummation of IPO. The closing of the IPO as
contemplated by the Underwriting Agreement shall be consummated simultaneously
with or prior to the Closing.
(e) Approval of SBC. SBC shall have given its written approval
in accordance with the terms of the SBC/TelMex Agreement to the sale of the
shares of Class A Common Stock in excess of $25,000,000 to the Investor.
ARTICLE VII
TRANSFER RESTRICTIONS
7.1 Restrictions on Transfer; the 33 Act.
(a) Restrictions on Transfer; Restrictive Legends. The Class A
Common Stock purchased by the Investor pursuant to this Agreement shall not be
transferable except upon the conditions specified in this Article VII, which
conditions are intended to insure compliance with the provisions of the 33 Act
in respect of the Transfer of any such Class A Common Stock.
The Investor (including each assignee of the Investor under
this Agreement) hereby acknowledges and agrees that it is acquiring the shares
of Class A Common Stock
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pursuant to this Agreement in a transaction exempt from registration under the
33 Act and that no such shares of Class A Common Stock may be Transferred in the
absence of registration under the 33 Act or an applicable exemption therefrom.
The Investor also hereby agrees that it will, if requested by an underwriter in
connection with the IPO and any other registered public offerings in which the
Investor is participating, enter into a standard lock-up agreement preventing it
from offering, selling or granting any option for the sale of or disposing of
any of its shares of Common Stock for the same time period to which the Company
or TWC would be subject to under the underwriting agreement in connection with
such public offering, which period the Company shall use reasonable efforts to
limit to a period of not more than 90 days (except in the case of the IPO) and
which shall in no event be in excess of 180 days. The Investor also hereby
acknowledges and agrees that it shall not Transfer (other than to an Affiliate)
such shares of Class A Common Stock for a period of three years and six months
from the Closing Date (the "Permitted Transfer Date"). Each certificate
representing the Investor's shares of Class A Common Stock shall (unless
otherwise permitted by the provisions of this Article VII) be stamped or
otherwise imprinted with a legend in substantially the following form:
"THE SHARES OF COMMON STOCK OF THE ISSUER REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER ANY APPLICABLE
STATE LAW. THEY MAY NOT BE OFFERED FOR SALE, SOLD, OR TRANSFERRED EXCEPT (1)
PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND ANY APPLICABLE
STATE LAW, (2) PURSUANT TO RULE 144 PROMULGATED UNDER THE SECURITIES ACT OF 1933
(OR ANY SIMILAR OR SUCCESSOR RULE OR REGULATION OF THE SECURITIES AND EXCHANGE
COMMISSION), OR (3) WITH AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
WILLIAMS COMMUNICATIONS GROUP, INC. THAT SUCH REGISTRATION IS NOT REQUIRED
BECAUSE OF AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
OF 1933 AND ANY APPLICABLE STATE LAW. THE SHARES REPRESENTED BY THIS CERTIFICATE
ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE
SECURITIES PURCHASE AGREEMENT DATED AS OF _______, 1999, AS AMENDED FROM TIME TO
TIME, WHICH PROVIDES THAT SUCH SHARES MAY NOT BE TRANSFERRED UNTIL , 2002 (WHICH
DATE IS THREE YEARS AND SIX MONTHS FROM THE DATE OF ORIGINAL ISSUANCE HEREOF).
COPIES OF THE SECURITIES PURCHASE AGREEMENT MAY BE OBTAINED UPON REQUEST FROM
WILLIAMS COMMUNICATIONS GROUP, INC. AND ANY SUCCESSOR THERETO."
(b) Non-Applicability of Transfer Restrictions; Removal of
Legends. The restrictions imposed by Section 7.1 above upon the transferability
of any shares of Class A Common Stock represented by a certificate bearing the
restrictive legends set forth in such Section 7.1 (a "Restricted Security")
shall cease and terminate when such Restricted Security has been sold pursuant
to an effective registration statement under the 33 Act or transferred pursuant
to Rule 144 unless the holder thereof is an Affiliate of the Company. Upon a
Change in Control Event, the restriction on the Investor prohibiting the
Transfer of shares of Class A Common Stock prior to the Permitted Transfer Date
shall cease and terminate. The holder of any
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Restricted Security as to which any such restrictions shall have terminated
shall be entitled to receive from the Company, without expense, a new
certificate of the same type but not bearing the restrictive legend imposed by
Section 7.1 above (but only with respect to such restrictions which are no
longer applicable to the shares evidenced by such certificate).
ARTICLE VIII
VOTING RIGHTS
8.1 Voting Rights. The Investor acknowledges that the Restated
Certificate provides that Class A Shares shall have one-tenth the voting power
as Class B Shares. If at any time after the date hereof the Company issues to
any Person other than the Company or any Affiliate of the Company in a private
or public sale Common Stock with voting rights ("Super Voting Rights") that are
greater in any material respect than those the Investor has in its Class A
Common Stock, other than in connection with one or more employee or director
related plans or arrangements or in connection with a pro rata spin-off by the
Company of the Common Stock to its shareholders, the Investor will have the
right at its option to convert its shares of Class A Common Stock to new shares
of Common Stock with such Super Voting Rights. If such conversion occurs, all
references in this Agreement to Class A Common Stock shall be deemed to refer to
the Common Stock with Super Voting Rights.
ARTICLE IX
CALL OPTION
9.1 Call Option.
(a) In the event that the Alliance Agreement terminates prior
to the Permitted Transfer Date other than because of a breach of a
representation, warranty, covenant or other obligation by the Company (the
"Termination"), the Company shall have the right until the Permitted Transfer
Date to purchase (the "Call Option") from the Investor in accordance with the
provisions of this Article IX all, but not less than all, of the shares of Class
A Common Stock the Investor acquired pursuant to this Agreement and still owns
at the time of the Termination. The Company shall be able to assign its rights
under this Section 9.1 to TWC.
(b) The Call Option shall continue to be exercisable by the
Company until the earlier of (i) the Permitted Transfer Date (upon which date
the Call Option shall expire), (ii) the Transfer to a Third Party of shares of
Common Stock that the Investor acquired pursuant to this Agreement; provided,
however, that the Call Option shall only terminate with respect to such shares
of Common Stock that have been Transferred, (iii) a period of 120 Business Days
commencing on the first Business Day following the public announcement of the
Termination and shall expire if not exercised by written notice by the Company
to the Investor at the conclusion of such 120-day period, and (iv) a Change in
Control Event.
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(c) The purchase price per share for the shares of Class A
Common Stock purchased by the Company pursuant to the Call Option shall be equal
to the Volume-Weighted Average Trading Price of a share of Class A Common Stock
over a period of twenty consecutive Trading Days commencing on the first Trading
Day following the public announcement of the Termination (the "Determination
Period") less the difference between the IPO Price and the Net IPO Price. The
Investor hereby agrees that it will not sell, enter into any agreement to sell,
purchase or enter into any agreement to purchase any shares of Class A Common
Stock during the Determination Period.
(d) The purchase price for the shares of Class A Common Stock
to be purchased pursuant to the Call Option shall be paid by the Company to the
Investor in cash by wire transfer within ten Business Days of receipt by the
Investor of the notice by the Company of its election to exercise the Call
Option.
(e) The Investor shall, within three Business Days of receipt
of the full purchase price for exercise of the Call Option, return to the
Company the certificate or certificates for all of the shares of Class A Common
Stock which had been purchased pursuant to the Call Option.
ARTICLE X
TERMINATION
10.1 Termination. This Agreement may be terminated at any time prior to
the Closing:
(a) by mutual consent of the Investor and the Company;
(b) by either the Company or the Investor if the Closing shall
not have occurred by December 31, 1999, and this Agreement has not previously
been terminated, provided, however, that the failure to consummate the Closing
by such date is not a result of either the failure by the party so electing to
terminate this Agreement to perform any of its obligations hereunder or the
breach by the party so electing of its representations and warranties;
(c) if either the Investor or the Company terminates the
Alliance Agreement; or
(d) by either the Company or the Investor in the event any
court or governmental agency of competent jurisdiction shall have issued an
order, decree or ruling or taken any other action restricting, enjoining or
otherwise prohibiting the transactions contemplated hereby and such order,
decree, ruling or other action shall have become final and unappealable.
10.2 Effect of Termination. In the event that this Agreement shall be
terminated pursuant to this Article X, all further obligations of the parties
under this Agreement other than the obligations set forth in this Section 10.2
and Section 15.11 shall terminate and there shall be
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no liability of any party to another party except for a party's breach of any of
its obligations, representations or warranties under this Agreement prior to
such termination.
ARTICLE XI
INDEMNIFICATION
11.1 Indemnification.
(a) The Company hereby agrees to indemnify, defend and hold
harmless the Investor and each of its directors, officers and each Person, if
any, who controls (within the meaning of Section 15 of the 33 Act and Section 20
of the 34 Act) the Investor from and against all actual demands, claims, actions
or causes of action, assessments, losses, damages, liabilities, costs and
expenses (collectively, "Claims"), including without limitation interest,
penalties and reasonable attorneys' fees and expenses, asserted against,
resulting to, or imposed upon or incurred by the Investor, directly or
indirectly, by reason of or resulting from a breach of any covenant,
representation, warranty or agreement of the Company contained in or made
pursuant to this Agreement.
(b) The Investor hereby agrees to indemnify, defend and hold
harmless the Company and each Company Control Person from and against all
Claims), including without limitation interest, penalties and reasonable
attorneys' fees and expenses, asserted against, resulting to, or imposed upon or
incurred by the Company and each Company Control Person, directly or indirectly,
by reason of or resulting from a breach of any covenant, representation,
warranty or agreement of the Investor contained in or made pursuant to this
Agreement.
11.2 Terms of Indemnification. The obligations and liabilities of the
parties with respect to Claims by third parties will be subject to the following
terms and conditions:
(a) the indemnified party will give the indemnifying party
prompt notice of any Claims asserted against, resulting to, imposed upon or
incurred by the indemnified party, directly or indirectly, and the indemnifying
party will undertake the defense thereof by representatives of their own
choosing which are reasonably satisfactory to the indemnified party; provided
that the failure of the indemnified party to give notice as provided in this
Section 11.2 shall not relieve the indemnifying party of its obligations under
this Article XI, except to the extent that such failure has adversely affected
the rights of the indemnifying party;
(b) if within a reasonable time after notice of any Claim, the
indemnifying party fails to defend such Claim, the indemnified party will have
the right to undertake the defense, compromise or settlement of such Claim on
behalf of and for the account and at the risk of the indemnifying party, subject
to the right of the indemnifying party to assume the defense of such Claim at
any time prior to settlement, compromise or final determination thereof;
(c) if there is a reasonable probability that a Claim may
materially and adversely affect the indemnified party other than as a result of
money damages or other money payments, the indemnified party will have the right
at its own expense to defend (provided that
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the indemnifying party shall continue to control the defense and the indemnified
party shall have the right to participate in such defense), or co-defend, such
Claim;
(d) the indemnifying party on one hand and the indemnified
party on the other will not, without the prior written consent of the other,
settle or compromise any Claim or consent to entry of any judgment relating to
any such Claim;
(e) with respect to any Claims asserted against the
indemnified party, the indemnified party will have the right to employ one
counsel of its choice in each applicable jurisdiction (if more than one
jurisdiction is involved) to represent the indemnified party if, in the
indemnified party's reasonable judgment, a conflict of interest between the
indemnified party and the indemnifying party exists in respect of such Claims,
and in that event the fees and expenses of such separate counsel shall be paid
by such indemnifying party; and
(f) the indemnifying party will provide the indemnified party
reasonable access to all records and documents of the indemnifying party
relating to any Claim.
ARTICLE XII
REGISTRATION RIGHTS
12.1 Registration Rights.
(a) After the Permitted Transfer Date, Investor and any party
to which any rights under this Agreement have been transferred (Investor and
each transferee, a "Holder") shall have the right by written request (a
"Registration Request") of one or more Holders to the Company, to require the
Company to prepare a registration statement (the "Demand Registration
Statement") on the appropriate form under the 33 Act with respect to shares of
Class A Common Stock then owned by such Holders for use in connection with an
underwritten public distribution of all or part of such shares of Class A Common
Stock. The Holders shall be entitled to only one Demand Registration Statement
pursuant to this Section 12.1(a); provided, however, that unless the Demand
Registration Statement is actually declared effective and remains effective for
the period specified in Section 12.1(d)(iii), it shall not constitute a Demand
Registration Statement for purposes of this limitation, and the Holders shall
continue to have the right to a single Demand Registration Statement under this
Section 12.1(a).
(b) If at any time after the Permitted Transfer Date, the
Company shall propose to prepare on its own behalf or on behalf of any of its
holders of any of its Common Stock a registration statement in connection with
an underwritten public offering of any such shares of Common Stock, the Company
shall give each Holder written notice at least twenty or, in case of a
registration statement proposed to be filed pursuant to Rule 415 of the 33 Act,
ten Business Days before the anticipated filing date of such registration
statement. Should any Holder desire to have any shares of Class A Common Stock
included in such registration statement, such Holder shall so notify the Company
in writing (which notice, and the notice of all other Holders with respect to
such registration statement, shall be deemed to be a Registration
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Request) no later than ten or, in the case of a registration statement proposed
to be filed pursuant to Rule 415 of the 33 Act, five Business Days after the
Company's notice is given, setting forth the number of shares of Class A Common
Stock which such Holder requests to be included in the registration statement.
Any such registration statement that includes shares of Class A Common Stock
owned by any Holder is hereinafter referred to as a "Piggyback Registration
Statement." As used in this Article XII, the term "Registration Statement" shall
mean any Demand Registration Statement or Piggyback Registration Statement. Each
Holder who owns shares of Class A Common Stock included in a Registration
Statement shall be a "Selling Stockholder" with respect to such Registration
Statement.
(c) The Company may refuse to include in any Piggyback
Registration Statement Class A Common Stock owned by a Holder if in the
Company's reasonable judgment, based on advice of its investment bankers,
inclusion of such shares of Class A Common Stock would have an adverse effect on
the ability of the Company to complete such underwritten public offering. If in
accordance with a Piggyback Registration Request pursuant to Section 12.1(b),
the Company reduces the number of shares to be included in such Piggyback
Registration Statement in accordance with the foregoing, the Company will
include in such registration, to the extent of the number which the Company is
so advised can be sold in such offering, first, shares of Class A Common Stock
requested to be included in such registration by the Selling Stockholders and,
second, securities the Company proposes to sell and other securities of the
Company included in such registration by the holders thereof.
(d) With respect to any Registration Statement under this
Section 12.1, the Company will:
(i) prepare and file with the SEC the Registration
Statement within 90 days after a Selling Stockholders' notice requesting
registration or inclusion in a proposed registration, and use its reasonable
efforts to cause the securities covered by such Registration Statement to become
registered and such Registration Statement to be declared effective as
expeditiously as possible under the 33 Act or other applicable federal law and
regulations (and cause to be prepared and file any amendments or supplements
thereto as may be necessary to comply with applicable federal law and
regulations); provided, however, that the Company may be allowed to defer filing
of the Registration Statement: (A) if the general counsel or senior vice
president of law of the Company reasonably determines in good faith that it is
in the best interests of the Company not to disclose the existence of or facts
surrounding any proposed or pending material developments; (B) if the
underwriters have notified the Company that market conditions are such as to
recommend deferral; (C) pending the completion of year-end financial statements
or quarterly earnings releases; or (D) if an offering by the Company of any
securities is pending; provided, however, that any deferral pursuant to clauses
(A)-(D) of this paragraph shall not in the aggregate be for more than 120 days.
(ii) use its reasonable efforts to cause to be
registered or qualified the securities covered by such Registration Statement
under such securities or Blue Sky laws in such jurisdictions within the United
States as any Selling Stockholder may reasonably request; provided, however,
that the Company reserves the right, in its
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sole discretion, not to cause to be registered or qualified such securities in
any jurisdiction where the Company would be required in connection therewith to
execute a general consent to service or to qualify as a foreign corporation or
to subject itself to taxation;
(iii) maintain the effectiveness of any Registration
Statement hereunder for 90 days or such longer period as may be required by the
33 Act to enable any Selling Stockholder and the underwriters, if any, to
complete such offering;
(iv) promptly notify each Selling Stockholder of the
happening of any event as a result of which any preliminary prospectus or
prospectuses included in any Registration Statement hereunder includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements not misleading in light of
the circumstances then existing;
(v) have the right to reasonably approve the choice
of lead underwriter for the offering, if an underwritten offering;
(vi) furnish, at the request of any Selling
Stockholder, an opinion, dated the date the Registration Statement became
effective, of counsel representing the Company (which may be in-house counsel)
for the purposes of such registration, addressed to the underwriters, if any,
and to such Selling Stockholder as to such legal matters as such Selling
Stockholder shall reasonably request; and
(vii) furnish, at the request of any Selling
Stockholder, a letter, dated the date the Registration Statement became
effective, of independent certified public accountants of the Company, addressed
to the underwriters, if any, and to such Selling Stockholder as to such
accounting matters as such Selling Stockholder shall reasonably request.
(e) The obligations of the Company to cause a Registration
Statement to be prepared pursuant to the provisions of this Section 12.1 and
each Selling Stockholder's right to have shares of Class A Common Stock included
in any Registration Statement pursuant to the provisions of this Section 12.1
shall be subject to the following conditions:
(i) Each Selling Stockholder shall furnish to the
Company in writing such information and documents as, in the opinion of the
Company's counsel, may be reasonably required to properly cause to be prepared
such Registration Statement in accordance with applicable provisions of the 33
Act and the SEC's regulations thereunder or federal or state securities or Blue
Sky laws and regulations then in effect; and
(ii) If a Selling Stockholder desires to sell and
distribute such shares of Class A Common Stock over a period of time, or from
time to time, pursuant to a Registration Statement prepared pursuant to the
provisions of this Section 12.1, then such Selling Stockholder shall execute and
deliver to the Company such written
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undertakings as the Company and its counsel may reasonably require in order to
assure full compliance with the relevant provisions of the 33 Act and the SEC's
regulations thereunder or other federal or state securities or Blue Sky laws and
regulations as then in effect.
(f) Each Selling Stockholder will pay or cause to be paid all
fees and expenses (including all Blue Sky, New York Stock Exchange and National
Association of Securities Dealers, Inc. filing and registration fees, accounting
fees and disbursements, printing costs, attorneys' fees and disbursements)
arising out of the preparation, filing, amending and supplementing of a Demand
Registration Statement pursuant to Section 12.1(a) hereof and to the amount of
such fees and expenses that are reasonably allocable to the inclusion of the
Selling Stockholder for a Piggyback Registration Statement used under Section
12.1(b) based on the number of shares offered by the Selling Stockholder
relative to the number of other shares offered by the Company or on behalf of
any of its other holders.
(g) Indemnity.
(i) The Company agrees to indemnify and hold harmless
each Selling Stockholder and each Person, if any, who controls (within the
meaning of Section 15 of the 33 Act and Section 20 of the 34 Act) such Selling
Stockholder (a "Control Person") against any losses, claims, damages or
liabilities, joint or several, to which such Selling Stockholder or any such
Control Person may become subject, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any preliminary or final Registration Statement or prospectus with respect
thereto, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading;
and the Company will reimburse each Selling Stockholder and each Control Person
for any legal or other expenses reasonably incurred by such Selling Stockholder
or such Control Person in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the Company
will not be liable in any case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission from any of such documents in
reliance upon and in conformity with written information furnished by or on
behalf of such Selling Stockholder or any such Control Person specifically for
use in the preparation thereof.
(ii) Each Selling Stockholder will, severally and not
jointly, indemnify and hold harmless the Company and each of its directors,
officers and each Person, if any, who controls (within the meaning of Section 15
of the 33 Act and Section 20 of the 34 Act) the Company (a "Company Control
Person") to the same extent as set forth in the foregoing indemnity from the
Company to each Selling Stockholder but only with reference to written
information included in any preliminary or final Registration Statement or
prospectus with respect thereto, or amendment or supplement thereto, furnished
by or on behalf of such Selling Stockholder specifically for use in the
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preparation of such documents; and will reimburse the Company or any such
Company Control Person for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any loss, claim, damage,
liability or action for which such Selling Stockholder is obligated to indemnify
the Company or any Company Control Person.
(iii) Promptly after receipt by an indemnified party
under this Section 12.1(g) of notice of any claim or the commencement of any
action, such indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party under Section 12.1(g)(i) or (ii) above, notify the
indemnifying party of any claim or the commencement thereof; but the omission so
to notify the indemnifying party will not relieve it from any liability which it
may have to any indemnified party otherwise than under Section 12.1(g)(i) or
(ii) above. In case any such action is brought against any indemnified party and
it notifies an indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party (who shall not, except with the consent of the indemnified party, be
counsel to the indemnifying party), and after notice from the indemnifying party
to such indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party in connection
with the defense thereof other than reasonable costs of investigation. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened action 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 any claims that are the subject matter of such action.
(iv) If the indemnification provided for in
paragraphs (i) or (ii) of this Section 12.1(g) is unavailable or insufficient in
accordance with its terms in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits as well as the relative fault of the Company on the one hand
and the Selling Stockholder on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
consideration. The relative benefits received by the Company on the one hand and
the Selling Stockholder on the other shall be deemed to be in the same
proportion as (i) the total purchase price received by the Company from Investor
(based on the average purchase price paid by Investor times the number of shares
purchased) for the securities to be reoffered by the Selling Stockholder in such
offering bears to (ii) the total net proceeds received by the Selling
Stockholder in such offering. The relative fault 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 on the one hand or the Selling
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Stockholder on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
ARTICLE XIII
RIGHTS OF FIRST OFFER
13.1 Rights of First Offer Generally.
(a) Subject to the restrictions of Section 13.1 hereof and the
limitations of Section 13.4 hereof, if, at any time between the Permitted
Transfer Date and the tenth anniversary of the Closing Date, the Investor would
like to sell any shares of Class A Common Stock purchased under this Agreement
then owned by the Investor to a Third Party other than pursuant to a
Registration Statement or Rule 144 (the "Transfer Stock"), the Investor shall
provide a written notice (the "Right of First Offer Notice") stating the price
at which it would like to sell any such shares of Transfer Stock and the maximum
number of such shares they intend to sell (the "Transfer Offer") to TWC (so long
as TWC owns 50% of the Class B Common Stock) and to the Company thereafter. The
Right of First Offer Notice shall also contain an offer to sell the Transfer
Stock to TWC (so long as TWC Beneficially Owns more than 50% of the issued and
outstanding Class B Common Stock), or to the Company thereafter, or to any of
their designees (in the manner set forth below) at the same price and upon
substantially the same terms and conditions as the terms and conditions
contained in the Transfer Offer; provided, that, for purposes of this Article
XIII, the term the "Company" or "TWC" shall include any of their respective
designees.
(b) TWC (so long as TWC owns 50% of the Class B Common Stock)
and the Company thereafter shall have the right and option, within 10 Business
Days after the date the Right of First Offer Notice is received by TWC or the
Company, as the case may be, to accept irrevocably such offer in the aggregate,
as to all, but not less than all (unless otherwise consented to by the Investor)
shares of Transfer Stock. If TWC (so long as TWC Beneficially Owns 50% of the
Class B Common Stock) or the Company thereafter desires to exercise such option,
it shall provide the Investor with written notice (specifying the number of
shares of the Transfer Stock as to which it is accepting the offer) within such
10 Business Day period. Unless the Investor shall have otherwise consented to
the purchase of less than all of the shares of Transfer Stock, TWC (so long as
TWC owns 50% of the Class B Common Stock) or the Company thereafter shall not
have the right to acquire such shares of Transfer Stock unless all such shares
are being acquired by TWC or the Company, as the case may be, in the aggregate
pursuant to the provisions of this Article XIII.
(c) Notwithstanding anything to the contrary contained in this
Article XIII, there shall be no liability on the part of the Investor to either
the Company or TWC, as the case may be, in the event that the sale of Transfer
Stock contemplated pursuant to this Article XIII is not consummated for any
reason whatsoever. Whether a sale of Transfer Stock contemplated pursuant to
this Article XIII is effected by the Investor is in the sole and absolute
discretion of the Investor.
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13.2 Transfer Mechanics. The closing of the purchase of the Transfer
Stock by TWC or the Company, as the case may be, shall take place at the
principal executive offices of the Company as soon as practicable, but in no
event later than thirty Business Days after the expiration of the 10 Business
Day period after the giving of the Right of First Offer Notice (or such other
date as may be mutually agreed to by the parties to such transaction). At such
closing, TWC or the Company, as the case may be, shall deliver to the Investor
the appropriate per share cash consideration pursuant to a bank, cashier's or
certified check or by wire transfer of immediately available funds (unless
otherwise specified in the Right of First Offer Notice provided to TWC or the
Company, as the case may be), against delivery of certificates representing the
Transfer Stock so purchased Duly Endorsed. Any Transfer (other than to a Third
Party) pursuant to this Article XIII shall be made without any representations,
warranties, covenants or indemnities; except, that, each transferor shall be
deemed to have represented that (i) the transfer has been duly authorized by it,
(ii) that it has the capacity, power and authority to Transfer such shares and
(iii) that the acquirer shall obtain good title to such shares, free and clear
of any defects, encumbrances and adverse interests (other than as provided for
in this Agreement).
13.3 Transfers to Third Parties after TWC or the Company Declines
Rights of First Offer. Subject to the restrictions of Section 13.1, if at the
end of the 10 Business Day period following the giving of the Right of First
Offer Notice, TWC or the Company, as the case may be, shall not have accepted
the offer contained in such notice as to all shares of Transfer Stock covered
thereby, the Investor shall have 90 days in which to sell the Transfer Stock to
a Third Party, at a price that is no less than 95% of the price contained in the
Right of First Offer Notice and on terms and conditions not more favorable to
such Third Party than were contained in the Right of First Offer Notice.
Promptly after any sale pursuant to this Section 13.3, the Investor shall notify
TWC or the Company, as the case may be, of the consummation thereof and shall
furnish such evidence of the completion (including time of completion) of such
sale and of the terms and conditions thereof as TWC or the Company, as the case
may be, may reasonably request. If, at the end of such 90 day period, the
Investor has not completed the sale of the Transfer Stock, it shall no longer be
permitted to sell such shares pursuant to this Section 13.3 without again fully
complying with the provisions of this Article XIII and all the restrictions on
Transfer contained in this Agreement shall again be in effect with respect to
all such Person's shares of Class A Common Stock, including the Transfer Stock.
13.4 Exceptions to Rights of First Offer. The provisions of Sections
13.1 through 13.4 shall not be applicable to any Transfer of Class A Common
Stock from the Investor to its Affiliates, or from any Affiliate of the Investor
to the Investor.
ARTICLE XIV
STANDSTILL
14.1 Standstill Provision. The Investor agrees that until ten (10)
years from the Closing Date, it shall not, and shall cause each of its
directors, officers, employees, agents, Affiliates or
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representatives (any of the foregoing, a "Representative") not to, without the
prior written consent of the Board of Directors specifically expressed in a
resolution approved by a majority of the directors of the Company, directly or
indirectly, through one or more intermediaries or otherwise, (i) acquire, agree
to acquire or make any proposal to acquire any securities of the Company or any
of its Subsidiaries, any warrant or option to acquire any such securities, any
security convertible into or exchangeable for any such securities or any other
right to acquire any such securities in excess of the 10% Limit; (ii) seek or
propose any merger, consolidation, business combination, tender or exchange
offer, sale or purchase of assets or securities, dissolution, liquidation,
restructuring, recapitalization or similar transaction of or involving the
Company or any of its Subsidiaries; (iii) make, or in any way participate in,
any "solicitation" of proxies or consents (whether or not relating to the
election or removal of directors) within the meaning of Rule 14a-1 under the 34
Act with respect to any securities of the Company or any of its Subsidiaries, or
seek to advise or influence any person with respect to the voting of any
securities of the Company or any of its Subsidiaries or demand a copy of the
stock ledger, list of stockholders, or any other books and records of the
Company or any of its Subsidiaries; (iv) form, join or in any way participate in
a "group" (within the meaning of Section 13(d)(3) of the 34 Act), with respect
to any securities of the Company or any of its Subsidiaries; (v) otherwise act,
alone or in concert with others, to seek to control or influence, in any manner,
the management, Board of Directors or policies of the Company or any of its
Subsidiaries; (vi) deposit any Common Stock in any voting trust or subject any
Common Stock to any arrangement or agreement with respect to the voting of such
shares; (vii) call or seek to have called any meeting of the stockholders of the
Company or execute any written consent with respect to the Company or the Common
Stock; (viii) seek, alone or in concert with others, representation on the Board
of Directors or seek the removal of any member of such Board or a change in the
composition or size of such Board; (ix) have any discussions or enter into any
arrangements, understandings or agreements (whether written or oral) with, or
advise, finance, assist or encourage, any other persons in connection with any
of the foregoing, or make any investment in any other person that engages, or
offers or proposes to engage, in any of the foregoing; or (x) make any publicly
disclosed proposal regarding any of the foregoing. The provisions in this
Article XIV shall not apply in the event of a Potential Change in Control Event,
unless the activities defined in (a) or (b) of the definition of "Potential
Change in Control Event" which gave rise to the Potential Change in Control
Event are discontinued and remain so for one year without the occurrence of a
Potential Change in Control Event. In such event, the provisions of this Article
XIV shall be reinstated and remain in full force and effect thereafter, although
the 10% Limit shall be deemed to include any such shares of Common Stock the
Investor had acquired during the period in which the standstill provision was
not in effect. The Investor also agrees during such period not to make any
proposal, statement or inquiry, or disclose any intention, plan or arrangement
to the public or a Third Party (whether written or oral) inconsistent with the
foregoing.
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ARTICLE XV
MISCELLANEOUS
15.1 Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York (without giving effect to
conflicts of law principles thereof).
15.2 Remedies Cumulative. Except as herein provided, the remedies
provided herein shall be cumulative and shall not preclude assertion by any
party hereto of any other rights or the seeking of any other remedies against
the other party hereto.
15.3 Brokerage. Each party hereto will indemnify and hold harmless the
other against and in respect of any claim for brokerage or other commission
relative to this Agreement or to the transactions contemplated hereby, based in
any way on agreements, arrangements or understandings made or claimed to have
been made by such party with any third party.
15.4 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provisions shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
15.5 Notices. Notices required under this Agreement shall be deemed to
have been adequately given if delivered in person or sent to the recipient at
its address (or facsimile number, as the case may be) set forth in Exhibit 15.5
(with copies to the persons specified in Exhibit 15.5 at the respective
addresses for such persons specified in such Exhibit 15.5) or such other address
as such party may from time to time designate in writing by certified mail
(return receipt requested), facsimile or overnight courier.
15.6 No Waiver. No failure to exercise and no delay in exercising any
right, power or privilege granted under this Agreement shall operate as a waiver
of such right, power or privilege. No single or partial exercise of any right,
power or privilege granted under this Agreement shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
15.7 Amendments and Waivers. This Agreement may be modified or amended
only by a writing signed by the Company and by the Investor. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any shares of Class A Common Stock purchased under this Agreement at
the time outstanding, each future holder of all such shares, and the Company.
15.8 Rights of the Investor. Subject to the terms and conditions of
this Agreement, the Investor shall have the absolute right to exercise or
refrain from exercising any right or rights that such holder may have by reason
of this Agreement, including without limitation the right to consent to the
waiver of any obligation of the Company under this Agreement and to enter into
26
<PAGE> 27
an agreement with the Company for the purpose of modifying this Agreement or any
agreement effecting any such modification, and such holder shall not incur any
liability to any other holder or holders of Class A Common Stock with respect to
exercising or refraining from exercising any such right or rights.
15.9 Survival. All representations and warranties made by the Company
and the Investor contained in this Agreement, and the obligation of the parties
to indemnify each other pursuant to Section 11.1 hereof, shall survive the
execution and delivery of this Agreement, any examination or due diligence
inquiry by a party and the Closing until the date which is one year after the
Closing Date. All covenants and agreements of the Company and the Investor
contained in this Agreement (which terms do not include representations and
warranties) shall, except as provided in such covenant or agreement, survive the
Closing and shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of the Investor or any controlling Person
thereof or by or on behalf of the Company, any of its officers and directors or
any controlling Person thereof. The obligations to indemnify and hold harmless a
party hereto, pursuant to Article XI hereof, shall survive only until the
expiration of the applicable survival period for the representation and warranty
under which the claim for indemnification is being made; provided, however, that
such obligations to indemnify and hold harmless shall not terminate with respect
to any such item as to which the Person to be indemnified shall have, before the
expiration of the applicable period, previously made a claim by delivering a
notice (stating in reasonable detain the basis of such claim) to the party to be
providing the indemnification.
15.10 Entire Understanding. This Agreement and the agreements to be
executed in connection therewith on the Closing Date express the entire
understanding of the parties and supersede all prior and contemporaneous
agreements and undertakings of the parties with respect to the subject matter
hereof and thereof. Except as expressly provided herein, neither this Agreement
nor any term hereof may be amended, waived, discharged or terminated other than
by a written instrument signed by the party against whom enforcement of any such
amendment, waiver, discharge or termination is sought.
15.11 Expenses. Each party will pay all of its own expenses, including
attorney's fees incurred in connection with the negotiation of this Agreement,
the performance of its obligations hereunder and the consummation of
transactions contemplated by this Agreement.
15.12 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original but which taken together shall
constitute one agreement.
15.13 Assignment; No Third-Party Beneficiaries.
(a) Except as otherwise expressly provided herein, this
Agreement and the rights hereunder shall not be assignable or transferable by
either party without the prior written consent of the other; provided that, if
such assignment or transfer is consented to, such assignee or transferee
expressly assumes in writing all of the such party's obligations hereunder.
Subject to the preceding sentence, this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties hereto and their respective
successors and permitted assigns.
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(b) This Agreement is for the sole benefit of the parties
hereto and their respective successors and permitted assigns and nothing herein
expressed or implied shall give or be construed to give to any Person, other
than the parties hereto and such successors and permitted assigns, any legal or
equitable rights hereunder.
(c) The Investor shall be permitted, without the consent of
the Company, to assign all its rights and obligations under this Agreement,
including without limitation the right to purchase Class A Common Stock and
common equity securities under Article II and Article VIII, and registration
rights under Article XII, to any of its Affiliates; provided, however, that such
assignee expressly assumes in writing all of the Investor's obligations
hereunder; and provided, further that in the event of such assignment the
Investor shall notify the Company in writing of such assignment, and for all
purposes of this Agreement all references to the Investor shall mean such
Affiliate.
15.14 Press Releases and Announcements. All press releases and
announcements concerning the investment contemplated by this Agreement shall be
mutually agreed to by the Company and the Investor, except for any such
disclosure required by law which, in the case of such disclosure by the Company,
shall, to the extent practicable under the circumstances, be first discussed
with the Investor and, in the case of such disclosure by the Investor, shall, to
the extent practicable under the circumstances, be first discussed with the
Company. Without limiting the generality of the foregoing, the Company and the
Investor agree to issue jointly a press release announcing the execution of this
Agreement on the date hereof and that the Company may fully disclose this
Agreement, the Alliance Agreement and the transactions and relationships
contemplated herein and therein in connection with the IPO. The foregoing
provisions of this Section 15.14 shall not prohibit or restrict in any way
disclosure by a party with respect to this Agreement in connection with any
financing, strategic transaction, acquisition or disposition involving such
party or any of its Affiliates, provided that such disclosure shall be first
approved by the other party, which approval shall not be unreasonably withheld
or delayed.
15.15 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
15.16 Aggregation of Stock. All shares of the Class A Common Stock held
or acquired by Affiliates of the Investor shall be aggregated together for the
purpose of determining the availability of any rights or the applicability of
any obligations or restrictions under this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
WILLIAMS COMMUNICATIONS GROUP, INC.
By:
--------------------------------------------
THE WILLIAMS COMPANIES, INC.
By:
--------------------------------------------
TELEFONOS DE MEXICO, S.A. DE C.V.
By:
--------------------------------------------
<PAGE> 30
EXHIBIT 15.5
IF TO THE COMPANY OR TWC:
The Williams Companies, Inc. (T) (918) 573-2480
One Williams Center (F) (918) 573-5942
Tulsa, OK 74171
Attn: William von Glahn, Esq.
Williams Communications Group, Inc. (T) (918) 573-4205
One Williams Center (F) (918) 573-3005
Tulsa, OK 74171
Attn: David Batow, Esq.
with a copy (which shall not constitute notice) to:
Randall H. Doud (T) (212) 735-3000
Skadden, Arps, Slate, Meagher & Flom LLP (F) (212) 735-2000
919 Third Avenue
New York, NY 10022
IF TO TELMEX:
Telefonos de Mexico, S.A. de C.V. (T) (525) 2225780
Parque Via No. 190, piso 10 (F) (525) 2551776
Col. Cuauhtemoc
Mexico, 06599, D. F.
ATTN: General Counsel
<PAGE> 1
Redacted portions have been marked with asterisks (****). Confidential treatment
has been requested for the redacted portions. The confidential redacted portions
have been filed separately with the Securities and Exchange Commission.
EXHIBIT 10.2
final Proprietary and Confidential
ALLIANCE AGREEMENT
BETWEEN
TELEFONOS DE MEXICO, S.A. DE C.V.
AND
WILLIAMS COMMUNICATIONS, INC.
THIS ALLIANCE AGREEMENT (this "Agreement") between Williams
Communications, Inc., a Delaware corporation, and its Controlled
subsidiaries (collectively, "Williams") and Telefonos de Mexico, S.A.
de C.V., a Mexican corporation, and its Controlled subsidiaries
(collectively, "Telmex"), is effective May __, 1999 ("Effective Date").
Williams and Telmex are individually referred to as a "Party" and
collectively referred to as the "Parties." "Control or Controlled"
means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies by one person or
entity or a group of related persons or entities acting in concert;
provided, however, that the legal or beneficial ownership, directly or
indirectly by one person or entity or a group of related persons or
entities acting in concert, of more than fifty percent (50%) of the
voting stock for the election of directors of a party shall always be
deemed Control. Exhibit A lists subsidiaries of each Party that shall
not be classified as Controlled subsidiaries, even though they may meet
the definition thereof. Exhibit A may be amended by either Party to add
or delete a listed subsidiary with the written consent of the other
Party, which consent shall not be unreasonably withheld
RECITALS
WHEREAS, Telmex provides telecommunications, exchange access, information
access, network management, networking services and network analysis in Mexico
and other parts of the world, including the United States;
WHEREAS, Telmex has investments in global telecommunications systems and has
established direct operating agreements and interconnection to foreign
carriers;
WHEREAS, Telmex is a provider of business communications equipment and
integration services for data, voice, video and advanced applications;
WHEREAS, Telmex together with Williams desires to offer its customers global
solutions for their voice, data, video and advanced application communications
needs,
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and to implement a plan to enhance its competitive position in Mexico and the
United States;
WHEREAS, SBC Communications, Inc. owns equity in and has representation on the
board of directors of Telmex and intends to purchase equity in Williams;
WHEREAS, Williams is a nationwide, single source provider of business
communications equipment and integration services for data, voice, video and
advanced applications on a retail basis and a provider of facilities-based
network services for delivery of voice and data on a wholesale basis;
WHEREAS, Williams wishes to achieve additional geographic reach and economies
of scale that will enable Williams to lower its costs, increase its ability to
compete with established networks, and accelerate its construction program in
the wholesale market for voice and data network services in the United States
(the "United States" or the "U.S.") and use its domestic facilities to
interconnect with Telmex's Mexican network thereby providing seamless wholesale
services to its customers;
WHEREAS, the Parties are negotiating an alliance agreement with each other and
with SBC Communications Inc. (the "SBC/Telmex/WCI Alliance Agreement");
WHEREAS, the relationship contemplated by this Alliance will serve to broaden
the base of potential competitive opportunities for network services and other
applications for all market segments and to respond to the market's desire for
seamless product and service offerings throughout the United States and Mexico;
NOW THEREFORE, in consideration of the mutual covenants herein contained, and
subject to Telmex's and Williams' respective affiliates' contractual
obligations with third parties and to any applicable federal or state laws or
regulations, in both cases, either present or future, Telmex and Williams agree
as follows:
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1. PURPOSE OF THE ALLIANCE
The purpose of this Agreement is to define a strategic, non-exclusive alliance
between the Parties in order to offer products and services through the
cooperative deployment of facilities and interconnection of networks that will
be designed to carry voice and data on a seamless nationwide and international
basis (the "Alliance").
The Parties acknowledge that the activities and relationships addressed by the
Alliance are subject to statutes and regulations of Mexico and the United
States. Notwithstanding anything to the contrary contained in any agreement
between the Parties including the prospective SBC/Telmex/WCI Alliance Agreement
and this Agreement, the Parties will not take any action and will not be bound
to act in connection with the Alliance which would constitute a violation of
applicable law or take an action which requires governmental or any third party
approval without first obtaining such approval.
2. RELATIONSHIP OF THE PARTIES
2.1. Preferred Provider
If either Telmex or Williams is designated in this Agreement as the
supplying party (the "Supplying Party") for a product or service as
agreed in writing by each of the Parties ("Alliance Product or
Service"), then whenever the other Party needs such Alliance Product or
Service, such supplied party (the "Supplied Party") will first seek to
obtain the needed Alliance Product or Service from the Supplying Party,
and therefore, the Supplying Party shall be the provider to the
Supplied Party of the Alliance Products or Services, provided, however,
that the Supplied Party shall not be obligated to use the other Party
as the Supplying Party and will be entitled to use the facilities of
any other provider or, if specified by contract or governmental
regulation, a specific third party provider in the following cases:
(i) if any customer of either Telmex or Williams
specifically requests the use of another provider;
(ii) if pursuant to existing contracts with third parties
as described in Exhibit B the Supplied Party is
required to obtain the product or service from any
other source;
(iii) if pursuant to governmental or regulatory
restrictions the Supplied Party is required to obtain
the product or service from any other source;
(iv) if an exception is provided for in any agreements
between the Parties including the proposed
SBC/Telmex/WCI Alliance Agreement; or
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(v) if the Supplying Party is not offering Market Terms
and Conditions (as defined in the last paragraph of
this Section 2.1.), and technical performance or
quality comparable to competitive products and
services in accordance with the process in Section
3.3.
For purposes hereof, "Alliance Products and Services" specifically
shall include international switched voice traffic, international
private line, and international frame relay, as more fully described in
Section 1.1 and 1.2 of Schedule A which also includes current Alliance
pricing for them (including pricing for ancillary services) and the
identification of which Party is the Supplying Party. As contemplated
in Schedule A, the Parties agree to add to the Alliance Products and
Services any products that are developed and offered by either Party
during the term of this Agreement which products and services will be
made available to the other Party in accordance with the Preferred
Provider obligation. The Parties agree to exercise their best
reasonable efforts to develop and include new products, provided that,
no such product will be added without the prior agreement in writing by
both Parties. The product's description, pricing and performance
standards will be provided to the Supplied Party for review and
acceptance, in writing by both Parties, prior to such product being
added to the Alliance Products and Services. The term "Market Terms and
Conditions" shall mean the ****.
3. INTERNATIONAL WHOLESALE MARKET - MEXICAN ORIGINATED TRAFFIC BY TELMEX AND
U.S. ORIGINATED TRAFFIC BY WILLIAMS
3.1. Origin Country
This Section addresses the pricing and other terms and conditions
offered by each Party, as the Supplying Party, to the other for
Alliance Products and Services offered in connection with traffic
originated by a Party in its Origin Country for termination in the
other Party's Origin Country. Telmex's Origin Country is Mexico and
Williams' Origin Country is the United States. Unless otherwise
mutually agreed, traffic shall be designated as originating in the
country where the customer's principal place of business is located,
regardless of the city where the communications traffic is originated.
3.2. Most Favored Customer Treatment
The net settlements rate, inter-carrier pricing, revenue sharing
agreement, commission structure and other terms and conditions offered
by one Party to the other, for the Alliance Products and Services,
shall **** ("Most Favored Customer Treatment"), provided, however, that
such obligation will not be applicable in any of the following cases:
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final Proprietary and Confidential
(i) if more favorable terms and conditions are required
to be offered pursuant to existing contracts with
third parties as described in Exhibit B and/or in
accordance with governmental or regulatory
restrictions;
(ii) if an exception is provided for in any agreements
between the Parties including the proposed ****
Agreement or prohibited by any law or regulations;
or,
(iii) if the Supplied Party is not requesting technical
performance or quality comparable to competitive
products and services.
In the case of the Most Favored Customer Treatment offered to Williams
by Telmex, the term "like entity in the market" shall mean ****.
In the case of the Most Favored Customer Treatment offered to Telmex by
Williams, the term "like entity in the market" shall mean **** Williams
also recognizes that the value of the relationship is likely to
increase with the passage of time and regulatory liberalization.
Accordingly, Williams agrees annually to revisit the Most Favored
Customer Treatment accorded to Telmex in order to reflect growth of the
strategic and economic value to Williams.
3.3. Competitor's Pricing and Terms
If the Supplied Party receives a competing offer from another provider
offering to sell a product or service substantially similar to an
Alliance Product or Service upon terms and conditions that are better
than the Most Favored Customer Treatment offered by the Supplying
Party, the Supplied Party will, to the extent allowed by contract or
law, discuss with the Supplying Party the terms and conditions of
products and services offered by the competing provider and **** then
the Supplied Party shall be free to use the competing provider's
product or services in accordance with the terms and conditions of the
competing offer which had been presented to the Supplying Party.
3.4. Cooperative Effort
If either Party is pursuing an strategic opportunity using an Alliance
Product or Service and the Party pursuing the opportunity indicates to
the Supplying Party that capturing the business opportunity with the
customer requires different pricing or other terms, the Supplying Party
agrees to exercise its best reasonable efforts to modify the pricing or
other terms of the Alliance Product or Service in order for the Parties
to provide the most competitive solution for the customer presenting
the strategic opportunity. ****
3.5. Withdrawal of the Most Favored Customer Treatment
****
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final Proprietary and Confidential
4. WHOLESALE MARKET - TELMEX BRANDED SWITCHED VOICE TRAFFIC U.S. ORIGIN
With respect to Telmex Branded Wholesale U.S. Switched Voice Traffic
originating within the U.S., based upon Williams' voice services as described
in Section 1.2 of Schedule A, as further qualified in this paragraph (the
"Exempt Wholesale Service"), the parties agree to jointly develop this product.
Telmex may offer this Telmex branded service by means of a distribution channel
or similar business structure that is established or maintained in the United
States for the purpose of offering this Exempt Wholesale Service and/or other
products to customers whose principal place of business is in the United States
who seek to terminate traffic on the Telmex network in the Mexican and the
Latin American markets, provided that this exception from Section 3.5 for the
Exempt Wholesale Service may be withdrawn by Williams, as the Supplying Party,
if any of the following occurs:****. If either of provisos (a) or (b) should
occur, Williams shall, at its own discretion, (i) no longer be bound to offer
Exempt Wholesale Service Pricing (as defined in the following paragraph) with
respect to the Exempt Wholesale Service, and/or (ii) shall terminate offering
the Alliance Products and Services used by Telmex in offering the Exempt
Wholesale Service. Williams must exercise its rights in clauses (i) and (ii) set
forth directly above within sixty (60) days of when it learns or is otherwise
informed of the occurance of an event identified in provisos (a) or (b). No
failure to exercise or no delay in exercising the rights in clauses (i) or (ii)
shall operate as a waiver of such right in the future if a different situation
arises again permitting the exercise of such right.
Pricing for the Alliance Products and Services offered by Williams, as the
Supplying Party, which are used to jointly develop the Exempt Wholesale Service
shall be established through the mutual agreement of the Parties. Such pricing
will be set on an individual case basis with the goal of aggressively
addressing the target market. In this regard, Williams will exercise its best
reasonable efforts to offer pricing to Telmex that captures the opportunity and
yields acceptable returns to both Parties ("Exempt Wholesale Service Pricing").
In order to achieve the acceptable return anticipated by both Parties, ****
Telmex recognizes that Williams obligation under this Section is subject to the
exceptions listed in Section 2.1 above and Williams will be allowed to offer
other wholesale products into Mexico for customers under that provision.
****The term "Incremental Domestic Business" shall mean additional traffic
originating in the United States and terminating on the Williams network in the
U.S. from customers not previously utilizing the Williams network, which
additional traffic is secured in connection with such customer use of the Telmex
Branded Switched Voice Traffic U.S. Origin.
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final Proprietary and Confidential
5. RETAIL MARKET - TELMEX U. S. ORIGIN VOICE TRAFFIC
Williams agrees to develop with Telmex the Alliance Products and Services
identified in Section 1.2 of Schedule A so that Telmex can provide retail
service to customers originating traffic in the United States ("U. S. Retail
Voice Products"). The Parties will exercise their best reasonable efforts to
develop and deploy these U. S. Retail Voice Products in the market as soon as
possible.
****
6. USE OF FACILITIES
Nothing in any agreement between the Parties including the proposed
SBC/Telmex/WCI Alliance Agreement shall be construed to prohibit either Party
from using its own facilities or services owned or leased by itself or its
Controlled subsidiaries as of the Effective Date. Also the Supplying Party may
use its assets to provide services or products to any third parties.
7. OTHER ALLIANCE AGREEMENTS
In addition to this Agreement, the Parties will use their respective reasonable
best efforts to promptly negotiate and execute (i) an Interconnection
Agreement, (ii) a Sales and Marketing Agreement (including revenue sharing or
profit participation procedures as contemplated herein), and (iii) an
International Transport Services Agreement. The Parties intend to exercise
reasonable best efforts to complete these other "Alliance agreements" within
thirty (30) days after the "Closing" as that term is defined in the Securities
Purchase Agreement referenced in Section 8 of this Agreement. Further, the
Parties agree to discuss the benefits of negotiating a CPE Installation and
Maintenance Agreement and a Managed Services Agreement. With respect to the
Interconnection Agreement, ****. If the Parties can not agree on the settlement
pricing in any year, the last agreed upon price shall continue to apply until a
new settlement price is agreed upon (the "Interim Period"). Once the new
settlement price is agreed upon, the Parties shall apply the new settlement
price retroactively to the date of the Annual Settlement Price Adjustment and
shall issue any necessary credits for any overpayments made by a Party during
the Interim Period. The Parties also agree to exercise their reasonable best
efforts to renew and/or extend the term of the Interconnection Agreement so long
as this Agreement remains in force and effect.
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8. EQUITY INVESTMENT
Contemporaneously with this Agreement, Telmex and the parent company of
Williams are entering into a Securities Purchase Agreement of even date
herewith (the "Securities Purchase Agreement") whereby Telmex will purchase
equity (i.e., Class A common stock) in Williams Communications Group, Inc.
("WCG"), the parent company of Williams, in connection with the Initial Public
Offering of Williams Communications Group, Inc. stock ("IPO"). In recognition
of the strategic relationship set forth in this Agreement, if following the
IPO, Telmex owns Class A common stock and WCG plans to issue new or additional
common equity securities in a public offering solely for the purpose of raising
additional capital; WCG will negotiate with Telmex a right to purchase, with
respect to the issuance by the WCG of new or additional common equity
securities for cash, a portion of such new or additional equity securities in
order to reflect the development and the strength of the strategic relationship
formed by this Alliance. If the Parties agree that the strategic relationship
formed by this Alliance has been of increasing benefit to both Parties and that
additional equity is warranted by this increase in Alliance value, WCG shall
offer Telmex the right to purchase an agreed upon amount of such equity
securities, in a private transaction, at the price offered to the public in
connection with such issuance less any discounts or commissions per share from
the price offered to the public available to the underwriters.
9. GOVERNANCE
9.1. Alliance Governance
The Alliance shall be managed by an Alliance Council, Committees and
Alliance Managers.
9.2. Alliance Council
The "Alliance Council" shall consist of 3 members appointed by Telmex
and 3 members appointed by Williams. The Alliance shall be managed
under the direction of the Alliance Council, and the Alliance Council
shall have the authority to appoint, oversee, reorganize and direct the
activities of Committees (as defined below) provided that any binding
obligation will result only from the execution of a definitive
agreement by the Parties, if such an agreement is entered into. The
Alliance Council will also endeavor to resolve any disagreements
arising within a Committee. The Alliance Council shall meet every other
month for the first twelve months, and quarterly thereafter unless
otherwise agreed by the Parties. The initial chair of the Alliance
Council shall be appointed by Telmex for a one year term, and
thereafter the Party selecting the chair shall alternate between the
Parties each year.
9.3. Committees
The Alliance Council will form such other Alliance committees as to
which they may agree from time to time (the "Committees"). However, it
is anticipated that
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the Alliance Council will form Committees to address the design,
planning and implementation of network, operational support systems and
local access architectures and infrastructure associated with the
telecommunications facilities and associated services contemplated by
this Alliance. It is also expected that a Committee will be formed to
discuss common interfaces, methods and procedures, design, planning and
implementation of processes for service activation, service assurance,
capacity planning, billing and other operational functions.
The Alliance Council will establish Committee meeting times, Committee
objectives, initial "Projects" to be developed and other Committee
governance procedures when the Alliance Council creates a Committee. A
"Project" is a task pertaining to the telecommunications facilities and
services contemplated by the Alliance that is identified by the
Alliance Council or a Committee. The Project will be defined and
described in individual scope of work documents which shall be
developed by the Committee.
9.4. Regulatory Requirements
All activities of the Alliance Council and Committees shall be
conducted to ensure that both Parties are in full compliance with all
legal and regulatory requirements imposed upon either Party.
9.5. Timing and Notice
The Chairman of the Alliance Council shall determine the time and place
for meetings between the appointed representatives from each Party
("Meetings"). Meetings may also be called upon the agreement of any two
members provided that such two members were not appointed by the same
Party. Except in the event of an emergency, the Chairman or members
calling a Meeting shall provide each Committee or Alliance Council
member with at least fourteen (14) days advance written notice of the
time, place and agenda for such Meeting. No matter shall be finally
determined at any Meeting unless the matter was included in the agenda
distributed with the notice for that Meeting and described with
sufficient particularity to reasonably disclose the nature and
importance of the matter.
9.6. Quorum
At least one member appointed by each Party shall be required to be in
attendance in person or by phone in order to constitute a quorum for
any Meeting.
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9.7. Participation
Members may participate in a Meeting by teleconference or designate an
alternate member to participate in a Meeting on their behalf upon prior
written notice to the Chairman or members who called the Meeting.
9.8. Unanimous Vote
The Alliance Council and Committees shall act only by the unanimous
vote of all members participating in a Meeting upon a resolution
submitted in writing. Prior to the vote, the members will consult with
their respective Alliance Managers.
9.9. No Arbitration
The failure of a Committee or the Alliance Council to achieve a
unanimous vote with respect to a Project shall not be classified as a
Dispute subject to the arbitration procedures set forth in Section 11.4
and, if an unanimous vote cannot be attained, the Parties shall follow
the procedure set forth in Section 11.1 through 11.3 below and if a
unanimous vote still cannot be obtained, a Party's exclusive
alternative will be the ability to pursue the Project outside of the
Alliance pursuant to Section 9.10.
9.10. Further Cooperation
If a proposed Project and/or the scope of work associated with such
Project is not agreed to by both Parties, each Party will be free to
pursue such Project on its own or with third parties, subject only to
applicable restrictions on Confidential Information and use of
intellectual property. However, to the extent that the implementation
of the Project requires the cooperation of the other Party, each Party
will reasonably cooperate with the other in order to integrate the
Project into the Parties' networks.
10. ALLIANCE MANAGERS AND DEDICATED EMPLOYEES
10.1. Alliance Managers
The "Alliance Manager" is an individual appointed by each Party and
dedicated to managing the Alliance relationship. Telmex and Williams
will each designate one Alliance Manager from within their respective
organizations. It shall be the responsibility of the Alliance Manager
to:
10.1.1. Serve as the principal contact person for each Party to the other
concerning Alliance matters;
10.1.2. Expedite the accomplishment of accepted Projects;
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10.1.3. Coordinate the activities of the Parties in furtherance of the
goals of the Alliance;
10.1.4. Supervise dedicated employees that are employed by the Alliance
Manager's employer;
10.1.5. Consult with the members of the Alliance Council and keep them
informed of matters affecting the Alliance;
10.1.6. As agreed by the Parties, serve as spokespersons for the Alliance
in dealings with external constituencies; and
10.1.7. Seek any necessary internal approvals that may be necessary and
desirable to conduct the business of the Alliance.
10.1.8. Each Party will pay all the costs and expenses associated with
its Alliance Manager and dedicated employees, unless otherwise
specifically agreed.
11. DISPUTE RESOLUTION
11.1. Disputes.
The Parties shall attempt in good faith to resolve any controversy,
dispute or claim arising out of or relating to this Agreement or the
breach, termination, enforceability or validity thereof (collectively,
a "Dispute") promptly by negotiation between the Alliance Managers.
Either Party may give the other a written notice (a "Dispute Notice")
setting forth with reasonable specificity the nature of the Dispute and
the identity of any representative in addition to the Alliance Manager
who will attend and participate in the meetings at which the Parties
will attempt to settle the Dispute. Following the receipt of a Dispute
Notice, the representatives of both Parties shall meet as soon as is
practicable, but no later than in seven (7) days at a mutually
acceptable time and place to negotiate in good faith a settlement of
the Dispute, and shall meet thereafter as they reasonably deem
necessary.
11.2. Referral to CEO
If the Dispute has not been resolved within seven (7) days after
receipt of the Dispute Notice, then the Dispute shall be referred to
the Alliance Council to negotiate. If the Dispute can not be resolved
by the Alliance Council within seven (7) days after the referral, then
the Dispute shall be referred to the chief executive officer of the
ultimate parent corporation of each Party to the Dispute (the "CEO").
The CEOs shall promptly undertake good faith negotiations to settle
the Dispute, including meetings in person or by teleconference as the
CEOs may reasonably agree.
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11.3. Confidentiality of Negotiations
All negotiations pursuant to Sections 11.1 and 11.2 shall be
confidential and shall be treated as compromise and settlement
negotiations. Nothing said or disclosed, nor any document produced, in
the course of such negotiations which is not otherwise independently
discoverable shall be offered or received as evidence or used for
impeachment or for any other purpose in any current or future
arbitration or litigation.
11.4. Arbitration
If the Dispute is not resolved within sixty (60) days of the Dispute
Notice, the Parties agree that any controversies, disputes or claims
arising under or in connection with the scope of this Agreement, or
due to non-performance or breach hereof, shall be settled by
arbitration in accordance with the Rules of Arbitration of UNCITRAL
(United Nations Commission of International Trade Law).
Arbitration shall take place in the City of Toronto, Canada and three
arbitrators shall be designated as follows: One by Williams, another
by Telmex and a third arbitrator shall be appointed by the other two.
The arbitration award shall be issued no later than sixty (60) days
after the date arbitration was initiated and the resolution or award
shall be final and shall be in full force and effect.
The compensation and expenses of the arbitrators shall be borne
equally by the two Parties. Each Party to the dispute shall bear all
other expenses incurred by it, including its own attorney and witness
fees.
11.5. Waiver of Jury Trial
The Parties hereto hereby knowingly, voluntarily and intentionally
waive all right to trial by jury in any action, suit or proceeding
brought to resolve any Dispute whether sounding in contract, tort, or
otherwise, between the Parties here to arising out of, connected with,
related to, or incidental to this Agreement or the transactions
related hereto or any course or conduct, course of dealing, statements
(whether verbal or written) or actions of either Party. This provision
is a material inducement for the Parties hereto entering into this
Agreement.
11.6. Expenses
Except as otherwise expressly provided in this Agreement, each Party
hereto shall pay its own expenses incidental to the preparation of
this Agreement, the carrying out of the provisions hereof and the
consummation of the transactions contemplated hereby.
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11.7. Governing Law
This Agreement shall be governed by and construed in accordance with
the laws of the state of New York in the United States, without giving
effect to the conflict of law rules thereof.
12. CONFIDENTIAL INFORMATION
12.1. Telmex and Williams recognize and understand that it may be desirable
to exchange information deemed to be proprietary by either Williams or
Telmex ("Confidential Information"). The disclosing Party shall mark
the Confidential Information in a manner to indicate that it is
considered proprietary, confidential, trade secret or otherwise subject
to limited distribution as provided herein. When Confidential
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 as provided
herein. Such Confidential Information will be protected by the
receiving Party in the same manner as the receiving Party protects its
own Confidential Information. The receiving Party shall use any such
Confidential Information only in connection with this Agreement.
Upon the written request of the disclosing Party, the receiving Party
will return to the disclosing Party all writings and copies thereof
containing the Confidential Information of the disclosing Party or
destroy such information.
12.2. Notwithstanding any other provisions of this Agreement, the
obligations specified in Section 12.1 will not apply to any
information that:
12.2.1. Is already in the possession of the receiving Party, its parent,
subsidiaries or affiliates, without any corresponding non-disclosure
obligation,
12.2.2. Is independently developed by the receiving Party, its parent,
subsidiaries or affiliates,
12.2.3. Is or becomes publicly available without breach of this Agreement
12.2.4. Is rightfully received by the receiving Party from a third Party;
12.2.5. Is released for disclosure by the disclosing Party with its prior
written consent; or
12.2.6. Is disclosed in response to a valid order of a court or other
governmental body of Mexico or the United States or any political
subdivisions thereof; provided, however, that the receiving Party shall
first have given notice to the disclosing Party and made a reasonable
effort to
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obtain a protective order requiring that the information and/or
documents so disclosed be used only for the purposes for which the
order was issued.
13. TERM AND TERMINATION
13.1. Term
This Agreement shall remain in force and effect for twenty (20)
years, unless earlier terminated pursuant to the provisions of this
Agreement.
13.2. Termination Events Requiring Prior Notice
This Agreement may be terminated by the Notifying Party (as
hereinafter defined) by providing twenty (20) days prior written
notice to the other Party, if:
(i) ****;
(ii) the Parties can not execute the Interconnection
Agreement, the Sales and Marketing Agreement and the
International Transport Services Agreement within
thirty (30) days after the "Closing" as such term is
defined in the Securities Purchase Agreement or such
later time as the Parties may agree;
(iii) there is a "Change of Control" (as hereinafter
defined in Section 13.4) of either of the Parties;
(iv) if any change in law or regulation materially and
adversely affects the terms and conditions of the
Alliance;
(v) in the event that for any reason:
(a) the other Party fails to perform in any material
respect any of the terms of this Agreement or any of
the Alliance agreements, including, without
limitation, if such defaulting Party fails to make
any payment as agreed for any reason, including, but
not limited to, governmental monetary controls or
laws, regulations, decrees or restrictions of any
kind, and such default or breach shall continue
uncured for a period of thirty (30) days after the
non-defaulting Party gives the other written notice
of such default or breach;
(b) the other Party discontinues (after commencing)
the distribution of commercial quantities of any of
the Alliance Products or Services included in the
Alliance for any reason for a period of more than
thirty (30) days without the prior written consent of
the other Party, which consent shall not be
unreasonably withheld; or
(c) any part of this Agreement is not considered to
be, or ceases to be, in conformity with the laws,
regulations, consistent jurisprudence or court or
administrative decisions (relevant to this
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Agreement) of the territory of this Alliance and, as
a result thereof, any provision material to this
Agreement cannot be legally performed or enforced; or
(vi) In the event that Telmex is unable to terminate the
**** Agreements (as defined in Exhibit B) by the time
of "Closing" as that term is defined in the
Securities Purchase Agreement referenced in Section 8
of this Alliance Agreement, then either Williams or
Telmex shall have the right immediately to terminate
this Alliance Agreement.
Failure of any Party to terminate this Agreement shall not be deemed
a waiver of the right subsequently to do so under the same or any
other such reason. The Notifying Party shall exercise its termination
right within a reasonable period of time, but in no event more than
sixty (60) days from actual notice of the event or circumstances
permitting termination by such Party.
The "Notifying Party" shall be defined to mean either Party with
respect to the events set forth in Section 13.2 (ii), (iii), (iv),
(v) (c) and (vi). With respect to events in Section 13.2 (v) (a) or
(v) (b), the Notifying Party shall be the Party who has neither
defaulted nor failed to perform. With respect to Section 13.2 (i),
the Notifying Party shall be Williams.
13.3. Automatic Termination
This Agreement shall expire and terminate automatically and without
notice in the event that:
(i) any Party hereto commences a voluntary case or other
proceeding seeking liquidation, reorganization,
suspension of payments or other relief with respect
to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee,
receiver, liquidator, sindico, custodian or other
similar official of it or any substantial part of its
property, or consents to any such relief or to the
appointment of or taking possession by any such
official in an involuntary case or other proceeding
commenced against it, or makes a general assignment
for the benefit of creditors, or fails to pay a
substantial portion of its debts as they become due,
or takes any corporate action to authorize any of the
foregoing, or
(ii) any Party hereto or its business is nationalized, in
whole or part, or the shares of such Party or control
over such Party or over any substantial portion of
its assets or over its management is seized by any
government or any of its branches, departments or
agencies, including, but not limited to, the
military.
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13.4. Change of Control
A Change of Control means any transaction where one Party is acquired,
merged into or consolidated with or reorganized into another
corporation or legal entity and as a result of such transaction less
than a majority of the combined voting power of the then outstanding
securities of the Party immediately after the transaction are held in
the aggregate by the persons holding such securities immediately prior
to the transaction. A Change of Control shall not include any
transaction where the other party to the transaction is a wholly owned
subsidiary of the ultimate parent corporation of the Party.
13.5 Termination - Equity Investment
If this Agreement is terminated for any reason prior to the closing of
the IPO, then either Party shall have the option to terminate the
Securities Purchase Agreement.
13.6 Regulatory Frustration
In the event of any action or failure to act by any regulatory
authority that has the effect of materially frustrating or hindering
the purpose of one or more of the Alliance agreements or the ability
of the Parties to compete successfully by means of the Alliance, the
Parties will meet:
(i) to reevaluate the benefits of the Alliance,
(ii) to determine whether, and to what extent, the
Alliance may be continued, and
(iii) to negotiate in good faith regarding reasonable terms
and conditions for any termination of any of the
Alliance agreements or revisions to the Alliance
relationship.
If the Parties cannot reach agreement on the terms and conditions under
which the Alliance should continue, either Party shall have the right
to terminate the Alliance agreement which was the subject of such
action or failure to act by such regulatory authority upon twenty (20)
days prior written notice.
14. REPRESENTATIONS AND WARRANTIES OF TELMEX
Telmex hereby represents and warrants to Williams as follows:
14.1. Organization, Standing and Authority.
Telmex is a corporation duly organized, validly existing and in good
standing under the laws of Mexico. Telmex has all requisite corporate
power and authority
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to enter into this Agreement hereby and to consummate the transactions
contemplated herein. All corporate acts and other proceedings required
to be taken by Telmex to authorize the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly and properly taken. This Agreement
has been duly executed and delivered by Telmex and constitutes the
legal, valid and binding obligation of Telmex, enforceable against
Telmex in accordance with its terms.
14.2. No Violation
The execution and delivery by Telmex of this Agreement and the
consummation of the transactions contemplated hereby and compliance
with the terms thereof will not, (i) conflict with or result in any
violation of any provision of the articles of incorporation or
by-laws, or the comparable organizational documents, (ii) conflict
with, result in a violation or breach of, or constitute a default, or
give rise to any right of termination, revocation, cancellation, or
acceleration, under, any material contract, concession or permit
issued to Telmex, except for any such conflict, violation, breach,
default or right which is not reasonably likely to have a material
adverse effect on the ability of Telmex to consummate the material
transactions contemplated by this Agreement or (iii) conflict with or
result in a violation of any judgment, order, decree, writ,
injunction, statute, law, ordinance, concession, permit, rule or
regulation applicable to Telmex or to the property or assets of
Telmex, except for any such conflict or violation which is not
reasonably likely to have such a material adverse effect.
14.3. Consents and Approvals
No consent, approval, license, permit, order or authorization of,
registration, declaration or filing with, or notice to, any domestic
or foreign court, administrative or regulatory agency or commission or
other governmental authority or instrumentality (each, a "Governmental
Entity") is required to be obtained or made by or with respect to
Telmex in connection with the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby.
15. REPRESENTATIONS AND WARRANTIES OF WILLIAMS
Williams hereby represents and warrants to Telmex as follows:
15.1. Organization, Standing and Authority
Williams is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Williams has all
requisite corporate power and authority to enter into this Agreement
and to consummate the transactions
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contemplated hereby. All corporate acts and other proceedings required
to be taken by Williams to authorize the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated thereby have been duly and properly taken. This Agreement
has been duly executed and delivered by Williams and constitutes the
legal, valid and binding obligation of Williams, enforceable against it
in accordance with its terms.
15.2. No Violation
The execution and delivery by Williams of this Agreement does not, and
the consummation of the transactions contemplated thereby and
compliance with the thereof will not (i) conflict with or result in
any violation of any provision of the certificate of incorporation or
by-laws of Williams, (ii) conflict with, result in a violation or
breach of, or constitute a default, or give rise to any right of
termination, revocation, cancellation, or acceleration, under, any
material contract, concession or permit issued to Williams, except for
any such conflict, violation, breach, default or right which is not
reasonably likely to have a material adverse effect on the ability of
Williams to consummate the material transactions contemplated by this
Agreement or (iii) conflict with or result in a violation of any
judgment, order, decree, writ, injunction, statute, law, ordinance,
concession, permit, rule or regulation applicable to Williams or to
the property or assets of Williams, except for any such conflict or
violation which is not reasonably likely to have such a material
adverse effect.
15.3. Consents and Approvals
No consent, approval, license, permit, order or authorization of,
registration, declaration or filing with, or notice to, any
Governmental Entity is required to be obtained or made by or with
respect to Williams in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated
hereby.
16. GENERAL PROVISIONS
16.1. Assignment
Neither Party may assign nor delegate any of its rights or obligations
under this Agreement without the consent of the other Party.
16.2. Costs and Expenses
Except as otherwise specifically agreed to by the Parties in writing,
each Party will be responsible for its own expenses arising under this
Agreement.
16.3. Amendment
No amendment of this Agreement shall be valid or binding on the
Parties unless such amendment shall be in writing and duly executed by
an authorized representative of each Party.
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16.4. Headings
Headings contained herein shall in no way limit the subject matter
they introduce and shall not be used in construing this Agreement.
16.5. Publicity
Neither Party shall make a public announcement about this Agreement or
the Parties' discussions related to any aspect of it without the
written consent of the other Party on the exact wording of such public
announcement. Either of the Parties may at anytime make announcements
which are required by applicable law, regulatory bodies, or stock
exchange or stock association rules, so long as the Party so required
to make the announcement, promptly upon learning of such requirement,
notifies the other Party of such requirement and discusses with the
other Party in good faith that exact wording of any such announcement.
16.6. Execution
This Agreement shall be executed in two duplicate copies, one for each
Party, each of which copies shall be deemed an original.
16.7. Limitation of Liability
Except to the extent expressly set forth in one of the Alliance
agreements, neither Party, nor its officers, employees, agents,
partners, affiliates or subcontractors shall be liable to the other
Party, its officers, employees, agents, partners, affiliates or
subcontractors for claims for incidental, indirect, consequential,
exemplary, punitive, or other special damages, including, but not
limited to, damages for a loss of profits or opportunity costs,
connected with or resulting from any performance or lack of
performance under any Alliance agreement regardless of whether a claim
is based on contract, warranty, tort (including negligence), theory of
strict liability, or any other legal or equitable principle.
16.8. Force Majeure
Neither Party shall be liable to the other for any failure to perform
or delay in performance due to causes beyond its reasonable control,
provided however, that the Party whose performance is impeded or
delayed agrees to take reasonable steps to overcome the same and to
promptly notify the other Party of the condition causing such failure
or delay and of the reasonable steps being taken.
16.9. Relationship of Parties
This Agreement and the Alliance agreements individually or in the
aggregate shall not be construed to create a partnership, joint
venture, or any other form of legal entity.
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16.10. Notices
Any notice, request, instruction or other document to be given
hereunder by any Party to any other Party under any section of this
Agreement shall be in writing and shall be deemed given upon receipt
if delivered personally or by telex or facsimile, the next day if by
express mail or five (5) days after being sent by registered or
certified mail, return receipt requested, postage prepaid to the
following addresses (or at such other address for a Party as shall be
specified by like notice provided that such notice shall be effective
only after receipt thereof):
If to Telmex: Telefonos de Mexico, S.A. de C.V.
Parque Via No. 190, piso 10
Col. Cuauhtemoc
Mexico, 06599, D.F.
ATTN: General Counsel
Fax (525) 2551776
Telephone: (525) 222-57-80
If to Williams: Williams Communications, Inc.
One Williams Center, Suite 26-B
Tulsa, OK 74172
Attn: Contract Administration
Fax: 918-573-6578
Telephone: 918-573-6277
with a copy Williams Communications, Inc.
(which shall One Williams Center, Suite 4100
not constitute Tulsa, OK 74172
notice) to: Attn: General Counsel
Fax: 918-573-3005
Telephone: 918-573-4205
16.11. Severability
In case 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 by a court or other authority of competent
jurisdiction, 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 and, in lieu of each such illegal, invalid
or unenforceable provision, there shall be added automatically as a
part of this Agreement a provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible and be
legal, valid and enforceable, it being the intent of the Parties to
maintain the benefit of the bargain for both Parties.
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16.12. Rules of Construction
Words used in this Agreement, regardless of the gender and number
specifically used, shall be deemed and construed to include any other
gender and any other number, as the context requires. As used in this
Agreement, the word "including" is not limiting, and the word "or" is
not exclusive. Except as specifically otherwise provided in this
Agreement in a particular instance, a reference to a Section, Schedule
or Exhibit is a reference to a Section of this Agreement or a Schedule
or Exhibit hereto, and the terms "this Agreement," "hereof," "herein,"
and other like terms refer to this Agreement as a whole, including the
Schedules to this Agreement, and not solely to any particular part of
this Agreement. The descriptive headings in this Agreement are
inserted for convenience of reference only and are not intended to be
part of or to affect the meaning or interpretation of this Agreement.
The Parties to this Agreement do not intend that any other Person
shall obtain any rights as third party beneficiaries of this
Agreement.
This Agreement is executed in two counterparts this ____ of May 1999.
TELEFONOS DE MEXICO S.A. de C.V. WILLIAMS COMMUNICATIONS, INC.
- --------------------------------------- --------------------------------------
Signature of Authorized Representative Signature of Authorized Representative
- --------------------------------------- --------------------------------------
Printed Name Printed Name
- --------------------------------------- --------------------------------------
Title Title
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EXHIBIT A - EXCLUDED SUBSIDIARIES
TELMEX
****
WILLIAMS
****
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EXHIBIT B - EXISTING CONTRACTS
WILLIAMS COMMUNICATIONS:
****
TELMEX:
****
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SCHEDULE A--ALLIANCE PRODUCTS AND SERVICES
1. CURRENT ALLIANCE PRODUCTS AND SERVICES
1.1 Mutually Offered Services: Telmex and Williams will be the Supplying
Party to the other party for the following products and services.
1.1.1 Description of Private Line Service. Circuits which are
specifically dedicated to the use of Telmex or its customers and
Williams or its customers between a point on the Telmex network and a
point on the Williams network. Services are offered in DS-1, DS-3, and
optical SONET (OC-N) bandwidths in the US and E1, E3 and SDH (STM - X)
bandwidths in Mexico, with the required network interface being
applied at the network interconnection point to reconcile the
disparate national standards.
1.1.2 Description of Frame Relay Service. Frame Relay Service is a
multi-service technology that allows commercial end-users to use a
network of shared private lines to send and receive data from
geographically distant locations. Frame Relay can be defined as
packet-switched, multiplexed data networking technology supporting
connectivity between user equipment, such as routers, and a carrier's
frame relay network equipment. Description of International Frame
Relay Service. International Frame Relay Service is Frame Relay
Service offered between locations connected to the Telmex network and
locations connected to Williams network.
1.1.3 Description of International Switched Voice Service.
International Switched Voice Service is voice telecommunications
traffic which is transported over a public switched telephone network
in one country to a public switched telephone network in another
country. International Switched Voice Services include:
- International Direct Dial
- Home Country Direct
- International calling card calling
- International sent paid operator assisted calling
- International Toll-Free Service
1.2 Further Description of the Section 1.1.3 International Switched Voice
Service. The following are general descriptions of the individual
International switched voice services in Section 1.2.3 above. Detailed
product/service description will be defined in the International
Transport Services Agreement.
1.2.1. 1+ Voice Service - 1+ Voice Service provides On-Net
interexchange Service via Feature Group D in selected exchanges or
dedicated access lines for origination and transmission on the
Williams Network and termination of communications. Dedicated access
may be provided by Telmex, Williams or a
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Local Access Provider. Feature Group D access is provided by the Local
Exchange Carrier and allows Telmex to use its own CIC to route traffic
to Williams' facilities.
Except where Local Access Service is provided via dedicated access
facilities, Williams' 1+ Voice Service is available only in Feature
Group D local exchanges where the End User's telephone line(s) can be
programmed by the Local Exchange Carrier to automatically route "1+"
interLATA toll calls to the Williams Network.
Assuming CIP is provided by the originating office and each Telmex
Corporation Affiliate provides a separate CIC, PIC verification
(1-700-555-4141) will correctly brand the Services of Telmex and its
Affiliates, and such additional brands as Telmex or its Affiliates may
employ. The parties agree to explore and implement, if mutually
agreeable, a technical solution for such branding where alternative
solutions may be required.
Williams shall have principal responsibility for obtaining Local
Access facilities in the US for traffic originating on the Telmex US
or Mexico systems. Telmex shall have the principal responsibility for
obtaining Local Access facilities for traffic originating on the
Williams systems needing termination in Mexico.
1.2.2 Toll Free Service - offers Customers a toll free number (e.g.,
800, 888 or 877) and allows callers to reach the subscriber without
toll charges. The subscriber pays for all incoming calls made on its
assigned toll free number. Toll Free Service consists of a basic
service (assignment of a toll free telephone number and a toll free
calling area selected by the Customer) and additional features that
Customers can select.
1.2.3 Switched Toll Free Service - is an inbound long distance
service. This service terminates calls over the local telephone line
of Customer or its End Users, and calls are toll-free to the calling
party.
1.2.4 Dedicated Toll Free Service - is an inbound long distance
service. This service terminates calls over dedicated access lines
from Company's POP to the service location(s) of Customer or its End
Users, and calls are toll-free to the calling party.
1.2.5 Directory Assistance Service - offers Customers the ability to
provide their End Users with phone numbers, addresses and NPA/Country
codes and automatic call completion. A per-call charge is assessed
against the Customer for each call made by the Customer's
persubscribed End-Users. This charge applies whether or not the
Directory Assistance operator furnishes the requested telephone
number(s), e.g., the requested number is unlisted, non-published or no
record can be found. Requests for information other than telephone
numbers will be charged for as requests for telephone numbers.
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1.2.6 Directory Assistance Service - gives the option of completing a
call to the called station telephone number received from the
Directory Assistance operator without hanging up and originating a new
call. A call completion charge applies in addition to the Directory
Assistance per-call charge if the caller accepts the offer. The call
completion charge will not apply if the call cannot be completed.
1.2.7 Calling Card Service - is an inbound long distance service. This
service allows customer or its End Users to place long distance call
from locations other than their primary service location through the
use of 800 number network access and an authorization code.
1.2.8 Prepaid Calling Card Service - allows Telmex's End Users to
originate outbound, Direct Dial long distance call on a prepaid basis
via an 800 access number. All calls are rated on a flat-rate basis,
and are rounded for billing purposes to the next higher full minute.
Calls may only be charged against an account that has a sufficient
available balance. Customer shall be given notice two (2) minutes
before the available account balance is depleted, based upon the
applicable rates for the call in progress. When the available balance
is depleted, the call shall be terminated. A prepaid calling account
shall expire on the date specified on the card, unless replenished by
a charge to a commercial credit card as authorized by the Customer
beforehand. The End-User will use the access number on the Pre-Paid
Calling Card to access Williams Network. A flat per-minute rate will
be deducted on a real-time basis as the card is used until the full
amount of the card is exhausted.
1.2.9 Operator Service - consists of all call completion functions
performed either by a live operator or by automated systems. Such
functions include collect calling, third party billing and calling
card services. Access to Williams Operator Services can be obtained by
the following dialing methods: (A) "00" from a telephone subscribed to
Williams Network in a Feature Group D (FGD) area; (B) "0+
(NPA-NXX-XXXX)" from a telephone subscribed to Williams Network in a
FGD area; (C) "101XXXX+0: from any non-pay telephone in FGD area; and
(D) "1-800-XXXX" from an location.
2. PRODUCTS AND SERVICES TO BE CONSIDERED BY TELMEX AND WILLIAMS. The following
products and services are available to Telmex by Williams as the Supplying
Party. Telmex is not positioned to offer these products as a Supplying Party to
Williams at this point but has committed to submit these products and services
to Williams as Alliance Products and Services in accordance with the terms of
this Agreement as they are developed and offered within the Telmex markets.
2.1 Description of On-Net ATM Service. Asynchronous Transfer Mode Service
(the "ATM Service") is multi-service technology on the Williams Network
that provides
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integration of disparate networks onto a single communications
infrastructure and meets the Technical Specifications for ATM Service
set forth in Schedule B. ATM technology encapsulates user data into
53-byte cells and transmits them over an ATM network. Williams' On-Net
ATM Service is designed for two (2) primary applications. These
applications include ATM transport and backbone connectivity. ATM
transport provides multimedia aggregation and video transmission.
Multimedia transmission is suited for transporting voice, data and
video while video transmission is best designed for point-to-point
video services. Backbone connectivity provides for the interconnection
of local area networks ("LAN(s)") as well as interconnection of
existing network access points ("NAP(s)") or private peering backbones.
2.2 Description of Internet Services.
2.2.1 IP Transport - IP Transport service provides the user with the
capability to interconnect an ISP to a point on the provider's
network. This may include connectivity to another ISP for peering, to
a data center, telehousing facility, Network Access Point or Internet
exchange point facility. Typical capacity is in the DS3 to OCN levels.
2.2.2 IP Transit - Dedicated access connectivity at the IP layer to
provide full Internet access to the customer service provider. IP
packets exchanged between the customer network and external networks
traverse the provider network, using Border Gateway Protocol (BGP) or
a similar routing protocol to establish the appropriate routing.
Dedicated Internet access provides connectivity at speeds ranging from
DS1 to OC3. Connectivity is provided into the most available Williams
POP.
2.2.3 Dedicated Access - Dedicated Access connectivity at the IP layer
to connect one or more associated customer end user sites. Dedicated
access provides full Internet connectivity at speeds ranging from DS1
to OC3.
2.2.4 Remote Access - Remote access connectivity to provide
traditional analog and ISDN connectivity to the Williams IP Network.
This service will be available at speeds up to 56kb in most major MSAs
where Williams has a Williams POP.
2.3 Description of Collocation Service. Collocation Service is a service
pursuant to which Telmex and its customers may place equipment in a
facility owned, leased or licensed and operated by Williams for the
purpose of interconnecting that equipment, including switches and
associated equipment, with the Williams network, the network of Telmex
or any Controlled subsidiary, or other third party network ("Collocation
Service"), Telmex shall complete a mutually agreed upon Collocation
Service Order.
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final Proprietary and Confidential
3. ANCILLARY SERVICES. Ancillary Services are those services incidental to
Williams' provision of the Product or Service, as the Supplying Party, as such
Services are identified in Schedule A (e.g. reconfiguration), or services
incidental to service provided by a Third Party for which such party imposes a
fee as established by that party.
4. PRICING FOR ALLIANCE SERVICES AND PRODUCTS. See Exhibits I and II,
respectively, for the Williams and Telmex pricing for the Alliance Products and
Services.
DEFINITIONS
"CIC" means carrier identification code.
"CIP" means carrier identification parameter.
"End User" means a natural person or legal entity which either; (1) orders
service through Telmex or Williams or (2) uses Williams' Casual Calling service
directly as a customer through dialing Williams' designated access code or
other access number.
"Feature Group D" or "FGD" means such feature as defined in the tariff of the
National Exchange Carrier Association.
"InterLATA Service" means long distance telecommunications service between
local access transport areas in the United States.
"ISP" means Internet Service Provider.
"Local Access" means the intraLATA telecommunications facilities connecting an
End User, including a Buyer-designated termination point, to an interexchange
carrier's POP within the same LATA, including, but not limited to Seller's POP.
"Local Exchange Carrier" or "LEC" means the local telephone company that
provides exchange telephone services.
"NAP" means network access point
"Off-Net" means a circuit that is not On-Net.
"On-Net" means a circuit traversing the Seller's network both end points of
which originate or terminate at a Seller designated Seller POP.
"PIC" means primary interexchange carrier.
"POP" or "Point of Presence" means a point of presence as commonly understood in
the industry.
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final Proprietary and Confidential
EXHIBIT I TO SCHEDULE A
WILLIAMS'S NETWORK PRICING SCHEDULE
This Pricing Schedule is made as of this _____ day of ________________, 1999,
and is part of Schedule A to the Alliance Agreement by and between Williams's
Network, a division of Williams's Communications, Inc., a Delaware corporation
("Williams"), and Telefonos de Mexico, S.A. de C.V., a Mexican corporation
("Telmex"). The prices stated herein and any other term or condition of this
Schedule are applicable only to On-Net Services. Third-Party Services are
provided only on an individual case basis.
A. WILLIAMS ON-NET ATM SERVICES
1. Recurring Rates & Charges: ATM service has three basic rate elements;
Local Access, Port Connections, and Bandwidth.
a. Local Access. Pricing for Local Access is determined in
accordance with the terms and conditions set forth in
applicable Alliance Agreements.
b. UNI Port Connections. Pricing for User Network Interface (UNI)
Port Connections is determined on the port speed connections
selected by Telmex. UNI Port Connections are currently
available at DS3, OC3 and OC12 speeds. Monthly recurring
charges for Port Connections are set forth in Table A.1 below.
Table A.1 Monthly Recurring Port Charges
****
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c. Bandwidth.
final Proprietary and Confidential
(i) There are two types of Bandwidth which can be selected,
the Virtual Channel Connection (VCC) or the Virtual Path
Connection (VPC). The type of bandwidth selected by the
Telmex does not determine the price.
(ii) Pricing for Bandwidth is determined based on the Class
of Service (CoS). Two Classes of Service are offered by
Williams: Constant Bit Rate (CBR) and Variable Bit Ratenon
real time (VBRnrt). CoS charges are stated in Committed
Information Rates (CIR) which are stated in Megabit per
second (Mbps) increments for one-way (Simplex) VCCs or VPCs.
CIR increments are available in 1Mbps increments up to 40Mbps
for DS3 ports, 5 Mbps increments up to 150 Mpbs for OC3 ports
and 25 Mbps increments up to 600 Mbps for OC12 ports. Monthly
recurring charges for Bandwidth are set forth in Table A.2
below.
Table A.2 Monthly Recurring Bandwidth Charges
***
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final Proprietary and Confidential
2. Non-Recurring Charges:
Non-recurring charges include installation, configuration
changes, order cancellations, and order changes that may be
incurred for the Port, VCC or VPC. Such non-recurring charges
are set forth in Table A.3 below.
Table A.3
****
Configuration change charges are applied when the bandwidth
sizes of a VCC or VPC are changed.
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Order Cancellation Charges apply when a PVC, VP or Port has
been ordered and needs to be canceled prior to the PVC, VP,
or Port having been installed and accepted.
Port Order Change Charges apply when Telmex requests to
change the port size ordered. If the Port has been installed
and accepted, Telmex will be charged for a new port
installation.
B. WILLIAMS' ON-NET PRIVATE LINE SERVICES
1. Williams On-Net Private Line Service has three basic rate elements;
Interexchange charges, Local Access Charges and non-recurring charges.
a. Interexchange rates are determined in accordance with Table
B.3 below. Pricing for any Service not listed in such Table
is determined on an individual case basis and will be set
forth on Telmex's Service Order.
The minimum monthly charge for any Interexchange Circuit
ordered by Telmex shall be as follows:
Table B.1
****
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final Proprietary and Confidential
b. Non-Recurring Charges:
Table B.2
<TABLE>
<CAPTION>
- ---------------------------------------------- -------------- ------------- -------------- ------------- --------------
Non-Recurring Charges DS-1 DS-3 OC-3 OC-12 OC-48
- ---------------------------------------------- -------------- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
****
- ---------------------------------------------- ------------------------------------ -----------------------------------
</TABLE>
Installation charges shall apply to the normal installation
of equipment necessary to provide the requested Circuit to
the point of demarcation at the Telmex's premises. Additional
installation charges shall apply when Williams is required to
install equipment other than that normally required to
provide the Circuit or when Telmex requests special
equipment.
Non-recurring charges not described above will be considered
special requests and will be handled on an individual case
basis. All of the charges stated above are subject to change
with thirty (30) days' notice.
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final Proprietary and Confidential
Table B.3
- -------------------------------------------------------------------------------
Private Line Rates
- -------------------------------------------------------------------------------
****
C. WILLIAMS' ON-NET FRAME RELAY SERVICES
1. Rates & Charges: Williams's Network On-Net Frame Relay Service has
four principal rate elements: Local Access, Port Connections,
Permanent Virtual Circuits (PVCs), and Trunking charges.
Port Connections and PVCs can be categorized as being either a
User-to-Network Interface (UNI) type or Network-to-Network Interface
(NNI) type. An NNI port is defined as one end of a connection between
Williams's frame relay network and another carrier's network. The
connecting carrier could be either a customer or Off-Net service
provider. Similarly, an NNI PVC is defined as one which has each end
of the PVC residing in two different carrier's frame relay networks,
rather than the originating and terminating points being in the same
carrier's network.
2. Conventional Frame Relay Services:
a. Local Access: Pricing for Local Access is determined in accordance
with the Terms and Conditions set forth in the applicable Alliance
Agreement.
b. Port Connections: Both UNI and NNI port charges are based solely on
the speed of the port selected by the Telmex. Available port speeds
range from 64 Kilobits per second (Kbps) to 1.536 Megabits per second
(Mbps). Available speeds are set forth in Table C.1 below. Monthly
recurring charges and installation charges for frame relay ports are
set forth in Table C.1 below. Other non-recurring charges are set
forth in Table C.3 below.
c. Permanent Virtual Circuit (PVC) bandwidth charges: UNI and NNI PVC
charges are both based solely on the bandwidth selected by Telmex.
Bandwidth charges are stated in Committed Information Rates (CIR)
which are stated in Kbps increments for one-way (Simplex) PVCs.
Available PVC-CIR speeds range from 4 Kbps to 1.024 Mbps. Available
speeds are set forth in Table C.1 below. Monthly recurring charges and
installation charges for Frame Relay PVCs are set forth in Table C.1
below. Other non-recurring charges are set forth in Table C.3 below.
d. Trunking Charges: The trunking charge is for the communication line
between the Williams's Network switch and Telmex's switch. The
trunking charge is added to the rates set forth in Table C.1 below.
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final Proprietary and Confidential
Table C.1 Monthly Recurring Charges (MRC) and Installation Charges
<TABLE>
<CAPTION>
- --------------------------------------------------- ---------------- ---------------- ----------------
FRAME RELAY SERVICE SPEED/CIR 16.13. MRC 16.14.
COMPONENTS (KBPS) Install
- --------------------------------------------------- ---------------- ---------------- ----------------
<S> <C> <C> <C>
****
</TABLE>
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final Proprietary and Confidential
<TABLE>
<CAPTION>
------------------------------------------- ---------------- ---------------- ----------------
FRAME RELAY SERVICE SPEED/CIR 16.13. MRC 16.14.
COMPONENTS (KBPS) Install
------------------------------------------- ---------------- ---------------- ----------------
<S> <C> <C> <C>
****
</TABLE>
3. Enhanced On-Net Frame Relay Services:
a. Frame Relay/ATM Service Interworking:
Frame Relay/ATM Service Interworking ("FRASI") gives Telmex the
ability to communicate seamlessly between ATM and Frame Relay
locations. There is no additional charge for locations requiring ATM
beyond the standard ATM charges set forth in Section A of this Pricing
Schedule. Only Frame Relay PVCs can be
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final Proprietary and Confidential
used for FRASI service, as the smaller Frame Relay ports are unable to
handle the higher bandwidth ATM PVCs.
b. Flex-CIR Services: Williams's Flex-CIR Service is designed to help
end-users in two ways:
1. Telmex can reserve the exact amount of bandwidth needed by
the end-user during the hours it is most critical.
2. Telmex can minimize network costs by `turning off' excess
bandwidth during the hours when it is least required.
Specifically, Telmex will be able to plan adjustments to PVC speeds
(or CIR) at quarter-hour increments (e.g. 8:00, 8:15, 8:30, 8:45,
etc.). Once Telmex has made a speed change, Telmex will not be able to
make another change for at least two (2) hours. Telmex shall have the
option of establishing different speed schedules for the same PVC
depending on the day of the week (e.g. turning a Flex-CIR PVC down
from its `weekday speed' of 256 Kbps CIR to 64 Kbps CIR on the
weekend). Telmex and any end users will experience a momentary network
`hiccup' of one second or less at those predefined times when the
network adjusts the Telmex's CIR, per the Telmex's predefined
schedule, for a PVC which uses a Flex-CIR schedule. The configuration
charges for this Enhanced Frame Relay Service are provided in Table
C.2 below.
Table C.2
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
TIME-OF-DAY/DAY-OF-WEEK FLEX-CIR
PVC CHARGES
-------------------------------------------------------------------------------------
DESCRIPTION NRC (PER PVC) MRC (PER PVC)
-------------------------------------------------------------------------------------
<S> <C> <C>
****
</TABLE>
Example:
Pricing Step 1: Telmex establishes the necessary CIR and times for the
TOD Flex-CIR Service as follows:
8 a.m. to 5 p.m.:1.024Mbps
5 p.m. to 8 a.m.: 64 Kbps
Once the times and CIR are known, Williams and Telmex may then prorate
the charges, based on the percent of time each CIR speed is scheduled
for use. In this example, assuming the standard Monthly Recurring
Charges are $600 for a 1.024Mbps CIR and $40 for a 64Kbps CIR, the
prorated charge would be calculated as follows:
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final Proprietary and Confidential
Business Hours: 9/24 hours * $600 (1.024Mbps CIR) = $225
Nonbusiness Hours: 15/24 hours * $40 (64Kbps CIR) = $25
Total Prorated Flex-CIR Charge: = $250.00 per month
Pricing Step 2: Next, Williams adds the speed change configuration
charges. There is a $30 fee every time the CIR is changed during a
Time-of-Day (TOD) schedule. In this example, the CIR speed changes two
times each day (i.e. 8 a.m. to 5 p.m. and 5 p.m. to 8 a.m.). The TOD
configuration charges would be calculated as follows:
TOD Configuration Charge = $30/daily speed change * 2 Changes
= $60 per month
Pricing Step 3: In order to determine the total monthly Flex-CIR cost
for this PVC, the Williams adds the "Prorated Charge" calculated in
Step 1 with the "TOD Configuration Charge" calculated in Step 2.
Monthly Recurring Flex-CIR PVC Cost: $250 + $60 = $310 per
month
Pricing Step 4: In order to determine the non-recurring charges for
this example, you first determine the installation charges. The
Installation charges for PVC's are $25 (you would add to this the
installation charge for the ports chosen by Telmex as well. Since
ports were not part of this example, the Port installation charges and
MRC have not been included). Since there are 2 PVC's (64 & 1.024 Mbps)
the total installation charge for the PVC's is $50. In addition,
Telmex would pay a one time non-recurring charge of $40 for the TOD
configuration. Therefore, in this example, Telmex's non-recurring
charges for the PVC's only would be $90.
4. Additional Non-recurring Charges: In addition to the non-recurring
installation charges set forth in Tables C.1 & C.2 above, Telmex may
incur additional non-recurring charges as set forth in Table C.3
below.
Table C.3
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
Additional Non-Recurring Charges
---------------------------------------------------------------------------------
Description of Charge Charge
----------------------------------------- ---------------------------------------
<S> <C>
****
</TABLE>
Configuration charges are applied when the CIR of PVCs for Basic Frame
Relay Service are changed or when Telmex desires a change to the CIR
of PVCs in an
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final Proprietary and Confidential
already established Flex CIR Schedule (i.e. Telmex will not be charged
the $50 fee for changes to the CIR when establishing its initial
Flex-CIR schedule).
Order Cancellation Charges apply when a Telmex cancels an order prior
to its installation.
PVC Order Change Charges apply after design, but prior to installation
on a per PVC basis, when Telmex makes a change to the PVC size
ordered. If the PVC has been installed and accepted, Telmex will be
charged for a new PVC installation.
Port Order Change Charges apply after design, but prior to
installation on a per port basis, when Telmex requests to change the
port size ordered. If the Port has been installed and accepted, Telmex
will be charged for a new port installation.
D. VOICE SERVICES
Williams Network voice services will remain consistent with the
interconnect agreement until such time that the regulatory constraints
allow for a flexible international switched voice interconnect
settlement fee.
E. PRICING GENERAL CONDITIONS
1. All pricing set forth in Sections A, B and C above is Williams's
current pricing. Such pricing and discounts are subject to change upon
thirty (30) days written notice by Williams to Telmex. Price changes
shall only be effective on a going-forward basis and shall not apply
to Service Orders previously placed by Telmex and accepted by
Williams. All pricing is subject to Preferred Provider and other
applicable provisions, including but not limited to Sections 2 through
5 of this Alliance Agreement.
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final Proprietary and Confidential
EXHIBIT II TO SCHEDULE A (TELMEX PRICING)
PRIVATE LINE PRICING
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
TARIFFS: "LADA ENLACES" 2 MBPS (E1) INTERNATIONAL CIRCUIT
MONTHLY
INSTALLATION RECURRING
CHARGE: CHARGE: DISTANCE (KM) FIXED CHARGE CHARGE/KM
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
****
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
TARIFFS: "LADA ENLACES" N X 64 KPBS INTERNATIONAL CIRCUIT
MONTHLY
INSTALLATION RECURRING
CHARGE: CHARGE: DISTANCE (IN KM) FIXED CHARGE CHARGE/KM
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
****
</TABLE>
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final Proprietary and Confidential
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
TARIFFS: "LADA ENLACES" N X 64 KPBS INTERNATIONAL CIRCUIT
MONTHLY
INSTALLATION RECURRING
CHARGE: CHARGE: DISTANCE (IN KM) FIXED CHARGE CHARGE/KM
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
****
</TABLE>
PRIVATE LINE PRICING:
o Private Line pricing is composed of three separate charges:
o Non-Recurring Installation Charge
o Monthly Recurring Fixed Charge
o Additional charge per kilometer based on distance from Telmex POP to
nearest border crossing point
o Additional local access is required from Telmex POP to customer site
o Additional fees, terms and conditions are provided in the product
commercial policies document
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final Proprietary and Confidential
- -------------------------------------------------------------------------------
FRAME RELAY PRICING
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FRAME RELAY MONTHLY PVC RECURRING CHARGE
****
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
FRAME RELAY PRICING:
o Frame Relay pricing is composed of three separate charges:
o Non-Recurring Installation Charge
o Port Monthly Recurring Fixed Charge
o Monthly PVC Recurring Charge per kilometer based on distance from
Telmex POP to nearest border crossing point
o Additional local access is required from Telmex POP to customer site
o Additional fees, terms and conditions are provided in the product
commercial policies document
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<PAGE> 1
Redacted portions have been marked with asterisks (****). Confidential treatment
has been requested for the redacted portions. The confidential redacted portions
have been filed separately with the Securities and Exchange Commission.
CONFIDENTIAL TREATMENT
EXHIBIT 10.3
SECURITIES PURCHASE AGREEMENT
dated as of May __, 1999
by and among
WILLIAMS COMMUNICATIONS GROUP, INC.
(the "Company"),
THE WILLIAMS COMPANIES, INC.
("TWC")
and
INTEL CORPORATION
(the "Investor")
<PAGE> 2
Confidential & Proprietary
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
DEFINED TERMS 1
ARTICLE II
PURCHASE AND SALE TERMS; CLOSING 6
2.1 Purchase and Sale 6
2.2 Payment 6
2.3 Closing 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY 7
3.1 Delivery of Underwriting Agreement 7
3.2 Delivery of Articles 7
3.3 Underwriting Agreement Representations and Warranties 7
3.4 Power and Authority 7
3.5 Non-Contravention 7
3.6 Valid Issuance 8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR 8
4.1 Existence 8
4.2 Power and Authority 8
4.3 Purchase for Investment 8
4.4 Non-Contravention 9
4.5 Financial Matters 9
4.6 Restricted Securities 9
4.7 Further Limitations on Disposition 9
ARTICLE V
COVENANTS OF THE COMPANY AND THE INVESTOR 10
5.1 Covenants of the Company Only 10
5.2 Further Assurances 10
5.3 Filings and Consents 10
5.4 Covenant to Satisfy Conditions 11
5.5 Notification of Change in Control Event 11
5.6 Information Rights 11
ARTICLE VI
CLOSING CONDITIONS 12
6.1 Conditions of Investor's Obligations at Closing 12
</TABLE>
<PAGE> 3
Confidential & Proprietary
<TABLE>
<S> <C>
6.2 Conditions of the Company's Obligations at Closing 12
6.3 Conditions to Each Party's Obligation 13
ARTICLE VII
TRANSFER RESTRICTIONS 13
7.1 Restrictions on Transfer; the 33 Act 13
ARTICLE VIII
VOTING RIGHTS 15
8.1 Voting Rights 15
ARTICLE IX
TERMINATION 15
9.1 Termination 15
9.2 Effect of Termination 16
ARTICLE X
INDEMNIFICATION 16
10.1 Indemnification 16
10.2 Terms of Indemnification 16
ARTICLE XI
REGISTRATION RIGHTS 17
11.1 Registration Rights 17
ARTICLE XII
STANDSTILL 23
12.1 Standstill Provision 23
ARTICLE XIII
MISCELLANEOUS 24
13.1 Governing Law 24
13.2 Remedies Cumulative 24
13.3 Brokerage 24
13.4 Severability 25
13.5 Notices 25
13.6 No Waiver 25
13.7 Amendments and Waivers 25
13.8 Rights of the Investor 25
13.9 Survival 25
13.10 Entire Understanding 26
13.11 Expenses 26
13.12 Counterparts 26
13.13 Assignment; No Third-Party Beneficiaries 26
</TABLE>
ii
<PAGE> 4
Confidential & Proprietary
<TABLE>
<S> <C>
13.14 Confidentiality/Publicity 27
13.15 Titles and Subtitles 27
13.16 Aggregation of Stock 27
</TABLE>
EXHIBITS
Exhibit 1.1 Form of Articles
Exhibit 1.2 Form of Underwriting Agreement
Exhibit 13.5 Notices
iii
<PAGE> 5
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT dated as of May __, 1999, among Williams
Communications Group, Inc., a Delaware corporation (the "Company"), The Williams
Companies, Inc., a Delaware corporation ("TWC"), and Intel Corporation, a
Delaware corporation ("Intel" and together with any assignee thereof pursuant to
Section 13.13 hereof, the "Investor").
PREAMBLE
The Company wishes to obtain equity financing. The Investor is willing,
on the terms contained in this Agreement, to purchase Class A common stock, par
value $0.01 per share (the "Class A Common Stock"), of the Company having the
characteristics set forth in the Restated Articles of Incorporation of the
Company (the "Articles"). The Company and Intel or certain of their Affiliates
(as defined below) are entering into other agreements, which include that
certain Master Alliance Agreement ("Alliance Agreement"), under which the
parties are setting forth their agreement to work together with Intel building
Internet data center facilities, management and hosting platform systems and
Williams providing highly reliable network facilities. Certain capitalized terms
are defined in Article I. Exhibits are incorporated by reference into this
Agreement as though such exhibits were set forth at the point of such reference.
ARTICLE I
DEFINED TERMS
The following terms, when used in this Agreement, have the following
meanings, unless the context otherwise indicates:
"33 Act" means the Securities Act of 1933, as amended, or any similar
federal law then in force.
"34 Act" means the Securities Exchange Act of 1934, as amended, or any
similar federal law then in force.
"Affiliate" has the meaning ascribed to it in Rule 12b-2 under the 34
Act. Notwithstanding the foregoing, unless expressly provided to the contrary
herein, the term Affiliate shall exclude officers, directors and any employee
benefit plan or pension plan of a Person.
"Alliance Agreement" shall have the meaning set forth in the preamble
to this Agreement.
<PAGE> 6
Confidential & Proprietary
"Articles" shall have the meaning set forth in the preamble to this
Agreement. A draft of the Articles is attached as Exhibit 1.1.
"Beneficially Own" means having the right to vote or dispose of, or
"beneficially own" as determined pursuant to Rule 13d-3 under the 34 Act as in
effect on the date of this Agreement, including pursuant to any agreement,
arrangement or understanding.
"Board of Directors" means the board of directors of the Company.
"Business Day" means a day other than a Saturday or Sunday or a day on
which banking institutions are authorized or required by law or executive order
to remain closed in New York, New York, Tulsa, Oklahoma or San Francisco,
California.
"Change in Control Event" shall be deemed to have occurred with respect
to the Investor or the Company if (i) there shall be consummated (x) any
consolidation or merger of the Investor or the Company, as the case may be, in
which the Investor or the Company, as the case may be, is not the continuing or
surviving corporation or pursuant to which shares of the common stock of the
Investor or the Company, as the case may be, would be converted into cash,
securities or other property (provided, that a merger of the Investor or the
Company, as the case may be, in which the holders of such common stock
immediately prior to the merger hold at least 70% of the common stock of the
surviving corporation immediately after the merger shall not constitute a Change
in Control Event), or (y) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or substantially all,
of the assets of the Investor or the Company, as the case may be, or (ii) the
stockholders of the Investor or the Company, as the case may be, approved any
plan or proposal for the liquidation or dissolution of the Investor or the
Company, as the case may be, or (iii) any Person (other than TWC or any
Subsidiary of TWC in the case of the Company) shall Beneficially Own 30% or more
of the outstanding common stock of the Company or the Investor, as the case may
be (or, in the case of the Company, 50% of the outstanding Common Stock if and
so long as TWC Beneficially Owns 30% of more of the outstanding Common Stock of
the Company), or (iv) during any period of two consecutive years, individuals
who at the beginning of such period constitute the entire board of directors of
the Investor or the Company, as the case may be, shall cease for any reason to
constitute a majority thereof unless the election, or the nomination for
election by such company's stockholders, of each new director was approved by a
vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.
"Claims" shall have the meaning set forth in Section 10.1(a) to this
Agreement.
"Class A Common Stock" shall mean the Class A common stock, par value
$0.01 per share, of the Company and any Common Stock of the Company received in
exchange for the Class A Common Stock.
2
<PAGE> 7
Confidential & Proprietary
"Class B Common Stock" shall mean the Class B common stock, par value
$0.01 per share, of the Company.
"Closing" and "Closing Date" mean the consummation of the Company's
sale and the Investor's purchase of Class A Common Stock pursuant to this
Agreement, and the date or dates on which the same occurs or occurred,
respectively.
"Code" means the Internal Revenue Code of 1986, as amended, or any
similar federal law then in force.
"Common Stock" shall mean the Class A Common Stock and the Class B
Common Stock and any other series of common stock of the Company hereafter
issued. The term "Common Stock" shall include, except as otherwise provided
herein, any and all shares of common stock or other securities of the Company or
any successor or assign of the Company (whether by merger, consolidation, sale
of assets or otherwise), which may be issued in respect of, in exchange for, or
in substitution for any shares of Common Stock, by reason of any stock dividend,
split, reverse split, combination, recapitalization, reclassification, merger,
consolidation, partial or complete liquidation, sale of assets, spin-off,
distribution to stockholders or combination of the shares of Common Stock or any
other change in the Company's capital structure, in order to preserve fairly and
equitably as far as practicable, the original rights and obligations of the
parties hereto under this Agreement.
"Company Control Person" shall have the meaning set forth in Section
11.1(f)(ii) to this Agreement.
"Control Person" shall have the meaning set forth in Section 11.1(f)(i)
to this Agreement.
"Employee Benefit Plan" means any plan regulated under ERISA.
"ERISA" means the Employee Retirement Income Security Act of 1974 (or
any successor legislation thereto), as amended from time to time.
"Form S-3" means such form under the 33 Act as in effect on the date
hereof or any successor registration form under the 33 Act subsequently adopted
by the SEC which permits inclusion or incorporation of substantial information
by reference to other documents filed by the Company with the SEC.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government (including, without limitation, the Federal Communications
Commission (or any successor thereto) and each applicable public utilities
commission).
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"Hedging Transactions" means engaging in short sales and the purchase
and sale of puts and calls and other derivative securities, so long as Intel
retains Beneficial Ownership of the underlying shares and any and all such
transactions are made in accordance with all applicable law.
"HSR Act" shall have the meaning set forth in Section 5.3(a) to this
Agreement.
"IPO" means the initial public offering of the Company pursuant to a
registration statement filed by the Company under the 33 Act covering an
offering of at least $500 million of Class A Common Stock to the public.
"IPO Price" means the per share offering price for Class A Common Stock
stated on the face of the final prospectus relating to the IPO.
"Net IPO Price" means the IPO Price less any discounts or commissions
per share from the IPO Price to the underwriter or underwriters.
"Plan" means an employee benefit plan, as defined in Section 3(3) of
ERISA, which the Company maintains, contributes to or has an obligation to
contribute to on behalf of participants who are or were employed by the Company.
"Permitted Transfer Date" shall have the meaning set forth in Section
7.1(a) to this Agreement.
"Person" means any individual, corporation, partnership, limited
liability company or partnership, joint venture, association, governmental
entity, or any other entity.
"Potential Change in Control Event" means any one of the following
events: (a) the commencement of a tender offer or exchange offer (as such terms
are defined in the rules and regulations under the 34 Act) by any Person that
would, if consummated, constitute a Change in Control Event involving the
Company; (b) the solicitation of proxies by any Person for the purpose of
effecting a Change in Control Event involving the Company; (c) the disclosure by
the Company of any material non-public information to any Person for the purpose
of assisting such Person in evaluating whether to effect a Change in Control
Event involving the Company; (d) the commencement of substantive discussions or
negotiations (involving more than the Company responding to inquiries) between
the Company and any Person contemplating a Change in Control Event involving the
Company; or (e) the agreement by the Company, whether or not in writing, to
facilitate a Change in Control Event involving the Company. For purposes of the
above, in no event shall the term "Person" include the Investor or any of its
Affiliates.
"Purchase Price" shall have the meaning set forth in Section 2.1(c) to
this Agreement.
"Registrable Securities" shall mean: (a) all the shares of Class A
Common Stock issued or issuable under this Agreement and (b) any shares of
Common Stock issued as (or issuable upon
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the conversion or exercise of any warrant, right or other security which is
issued as) a dividend or other distribution with respect to, or in exchange for
or in replacement of, any such shares of Class A Common Stock described in
clause (a) of this definition. Notwithstanding the foregoing, "Registrable
Securities" shall exclude any otherwise registrable securities sold by a Person
in a transaction in which rights under Article XI hereof are not assigned in
accordance with this Agreement or any otherwise registrable securities sold in a
public offering, whether sold pursuant to Rule 144 promulgated under the 33 Act,
in a registered offering, or otherwise.
"Restricted Security" shall have the meaning set forth in Section
7.1(b) to this Agreement.
"SEC" means the Securities and Exchange Commission.
"Selling Stockholder(s)" shall mean any person owning of record
Registrable Securities or any permitted assignee of record of such Registrable
Securities to whom rights under Article XI hereof have been duly assigned in
accordance with this Agreement.
"Standstill Percentage" shall have the meaning set forth in Section
12.1 of this Agreement.
"Subsidiary" or "Subsidiaries" of any Person means any corporation or
other entity of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other Persons
performing similar functions are at the time directly or indirectly owned or
controlled by such Person or one or more Subsidiaries of such Person.
"Super Voting Rights" shall have the meaning set forth in Section 8.1
to this Agreement.
"Third Party" means, with respect to the Company or the Investor, any
Person other than the Company's or the Investor's Affiliates, respectively;
provided further, that the Transfer to any such Person is in compliance with all
applicable federal, state and foreign securities laws.
"Transfer" means any direct or indirect sale, assignment, mortgage,
transfer, pledge, gift, hypothecation or other disposition of or transfer of
Common Stock, but excludes Hedging Transactions.
"TWC" means The Williams Companies, Inc., a Delaware corporation.
"Underwriting Agreement" means the underwriting agreement among the
Company and Lehman Brothers Inc., Salomon Smith Barney and certain other
underwriters to be named therein, in connection with the IPO. A draft of the
Underwriting Agreement is attached as Exhibit 1.2.
"Volume-Weighted Average Trading Price" shall mean, for any day on
which the New York Stock Exchange is open for trading, an amount equal to (a)
the cumulative sum, for each
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trade of Class A Common Stock (or other class or series of capital stock) during
such trading day on the New York Stock Exchange (or, if such security is not
listed on the New York Stock Exchange, such other principal exchange or
over-the-counter market on which such security is listed), of the product of:
(i) the sale price times (ii) the number of shares of Class A Common Stock (or
such other class or series of capital stock) sold at such price, divided by (b)
the total number of shares of Class A Common Stock (or such other class or
series of capital stock) so traded during the trading day.
Additional defined terms are found in the body of the following text.
The masculine form of words includes the feminine and the neuter and
vice versa, and, unless the context otherwise requires, the singular form of
words includes the plural and vice versa. The words "herein," "hereof,"
"hereunder," and other words of similar import when used in this Agreement refer
to this Agreement as a whole, and not to any particular section or subsection.
ARTICLE II
PURCHASE AND SALE TERMS; CLOSING
2.1 Purchase and Sale.
(a) Before the Closing Date, the Company will have adopted and
filed the Articles with the Delaware Secretary of State.
(b) Subject to the terms and conditions of this Agreement, at
the Closing, the Company shall issue and sell to the Investor, and the Investor
shall purchase from the Company, the number of shares of Class A Common Stock
(rounded up to the next whole share) equal to Two Hundred Million Dollars
($200,000,000) divided by the Net IPO Price.
(c) The aggregate purchase price (the "Purchase Price") for
the shares of Class A Common Stock to be purchased by the Investor shall be Two
Hundred Million Dollars ($200,000,000).
2.2 Payment. At the Closing, the Company shall deliver to the Investor
a certificate (registered in the name of the Investor) representing the
appropriate number of shares of Class A Common Stock which the Investor is
purchasing against delivery to the Company by the Investor by wire transfer in
immediately available funds in U.S. dollars in the amount of the Purchase Price
therefor payable to the Company's order.
2.3 Closing. The purchase and sale of the Class A Common Stock to take
place at the Closing shall be held at the offices of Davis, Polk & Wardwell, New
York, New York, or such other place as the parties may agree. The Closing shall
occur on the date of and simultaneously with, or (at the Company's option
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with at least 24 hours' prior written notice to Intel) with two Business Days
after the consummation of the transactions contemplated by the Underwriting
Agreement relating to the IPO (the "Closing Date"). The Closing shall be
conditioned upon the closing of the transactions contemplated by the
Underwriting Agreement relating to the IPO.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1 Delivery of Underwriting Agreement. The Company has delivered to
the Investor a substantially completed draft Underwriting Agreement in the form
set forth in Exhibit 1.2.
3.2 Delivery of Articles. The Company has delivered to the Investor a
substantially completed draft of the Articles in the form set forth in Exhibit
1.1.
3.3 Underwriting Agreement Representations and Warranties. In
connection with the sale of the Class A Common Stock to the Investor, the
Company will hereby be deemed to make each of the representations and warranties
to, and agreements with, the Investor that are made for the benefit of the
underwriters as set forth in the Underwriting Agreement.
3.4 Power and Authority. The Company has the requisite corporate power
and authority and has taken all required action necessary to authorize the
execution and delivery by it of this Agreement and all other documents or
instruments required by this Agreement, and to carry out the terms of this
Agreement and of all such other documents or instruments. This Agreement has
been duly executed and delivered by the Company and (assuming the due
authorization, execution and delivery hereof by the Investor) constitutes the
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms.
3.5 Non-Contravention. The execution, delivery and performance of this
Agreement by the Company and the consummation of any of the transactions
contemplated hereby by the Company will not (a) conflict with or result in a
breach of any of the terms and provisions of, or constitute a default (or an
event which with notice or lapse of time, or both, would constitute a default)
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company pursuant to any
agreement, instrument, franchise, license or permit to which the Company is a
party or by which any of its properties or assets may be bound or (b) violate or
conflict with any judgment, decree, order, statute, rule or regulation of any
court or any public, governmental or regulatory agency or body applicable to the
Company or any of its properties or assets, other than such breaches, defaults
or violations that are not reasonably expected to impair the ability of the
Company to consummate the transactions contemplated by this Agreement. The
execution, delivery and performance of this Agreement by the Company and the
consummation of the transactions contemplated hereby by the Company do not and
will not violate or conflict with any provision of the Articles or by-laws of
the Company, as currently in effect. Except for filings under the HSR Act and
with respect to the IPO, no
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consent, approval, authorization, order, registration, filing, qualification,
license or permit of or with any court or any government agency or body
applicable to the Company is required for the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby.
3.6 Valid Issuance. The Class A Common Stock, when issued, sold and
delivered in accordance with the terms of this Agreement for the consideration
provided for herein, will be duly and validly issued, fully paid and
nonassessable.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
The Investor represents and warrants to the Company, as of the date
hereof and as of the date of the Closing, that:
4.1 Existence. The Investor is a company duly organized, validly
existing and current in payment of all taxes properly payable pursuant to the
laws of the jurisdiction of its organization. The Investor has the requisite
corporate power and authority to own and operate its properties and assets and
to carry on its business as presently conducted.
4.2 Power and Authority. The Investor has the requisite corporate power
and authority and has taken all required action necessary to authorize the
execution and delivery by it of this Agreement and all other documents or
instruments required by this Agreement, and to carry out the terms of this
Agreement and of all such other documents or instruments. This Agreement has
been duly executed and delivered by the Investor and (assuming the due
authorization, execution and delivery hereof by the Company and the other
parties thereto other than the Investor) constitutes the valid and binding
obligation of the Investor, enforceable against the Investor in accordance with
its terms.
4.3 Purchase for Investment. The Investor is purchasing its shares of
Class A Common Stock for investment, for its own account (not as a nominee or
agent) and not for the account of any Employee Benefit Plan (or, if being
acquired for the account of any such Plan, such acquisition does not involve a
nonexempt prohibited transaction within the meaning of Section 406 of ERISA or
Section 4975 of the Code) and not with a view to the resale or distribution of
any part thereof, except for transfers permitted hereunder, and the Investor has
no present intention of selling, granting any participation in or otherwise
distributing the same. By executing this Agreement, the Investor further
represents that it does not have any contract, undertaking, agreement or
arrangement with any Person to sell, Transfer or grant participation to such
Person or to any third person with respect to the Class A Common Stock.
4.4 Non-Contravention. The execution, delivery and performance of this
Agreement by the Investor and the consummation of any of the transactions
contemplated hereby by the
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Investor will not (a) conflict with or result in a breach of any of the terms
and provisions of, or constitute a default (or an event which with notice or
lapse of time, or both, would constitute a default) under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of the Investor pursuant to any agreement, instrument, franchise, license
or permit to which the Investor is a party or by which any of its properties or
assets may be bound or (b) violate or conflict with any judgment, decree, order,
statute, rule or regulation of any court or any public, governmental or
regulatory agency or body applicable to the Investor or any of its properties or
assets, other than such breaches, defaults or violations that are not reasonably
expected to impair the ability of the Investor to consummate the transactions
contemplated by this Agreement. The execution, delivery and performance of this
Agreement by the Investor and the consummation of the transactions contemplated
hereby by the Investor do not and will not violate or conflict with any
provision of the organizational documents of the Investor, as currently in
effect. Except for filings under the HSR Act, no consent, approval,
authorization, order, registration, filing, qualification, license or permit of
or with any court or any government agency or body applicable to the Investor is
required for the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby.
4.5 Financial Matters. The Investor, either alone or with its financial
advisor, has such knowledge and experience in financial and business matters
that it is capable of evaluating the merits and risks of the investment to be
made by it hereunder. The Investor represents that it is an "accredited
investor" as that term is defined in Regulation D promulgated under the 33 Act.
4.6 Restricted Securities. The Investor understands that its shares of
Class A Common Stock must be held indefinitely unless they are registered under
the 33 Act or an exemption from such registration becomes available, and that
its shares of Class A Common Stock may only be Transferred as provided in
Article VII of this Agreement. The Investor acknowledges and agrees to abide by
the restrictions on transfer set forth in Article VII of this Agreement. The
Investor understands that the shares of Class A Common Stock it is purchasing
are characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the 33 Act only in
certain limited circumstances. In this connection, the Investor represents that
it is familiar with Rule 144 promulgated under the 33 Act, as presently in
effect, and understands the resale limitations imposed thereby and by the 33
Act.
4.7 Further Limitations on Disposition. Without in any way limiting the
representations set forth above, the Investor further agrees that, in connection
with any proposed Transfer involving a private sale, the Investor shall notify
the Company of the proposed disposition and shall furnish the Company with a
detailed statement of the circumstances surrounding the proposed disposition
and, if reasonably requested by the Company, the Investor shall have furnished
the Company with an opinion of counsel reasonably satisfactory to the Company,
that such disposition will not require registration of such shares under the 33
Act.
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ARTICLE V
COVENANTS OF THE COMPANY AND THE INVESTOR
5.1 Covenants of the Company Only.
(a) The Company will hereby be deemed to covenant and agree
with the Investor and to its benefit to comply with all agreements made for the
benefit of the underwriters as set forth in the Underwriting Agreement.
(b) The Company shall promptly notify the Investor of any
material developments in connection with the IPO, and provide copies of any and
all filings, notices and other communications with the SEC relating thereto,
including copies of the registration statement filed with the SEC, and with any
Governmental Authority relating to the filings under the HSR Act as described in
Section 5.3(a) below. The Company shall also provide to the Investor any such
filings, notices and other communications sufficiently in advance of their being
filed or provided to the SEC or such Governmental Authorities as described above
so as to permit the Investor sufficient opportunity to review and comment on
such drafts.
(c) The Company shall provide to the Investor copies of any
notices, correspondence or other written communication from the SEC relating to
the IPO or from any Governmental Authority relating to the filings under the HSR
Act as described in Section 5.3(a) below promptly following receipt thereof.
5.2 Further Assurances. Subject to the terms and conditions provided
herein, each of the parties agrees to use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done as promptly as
practicable, all things necessary, proper or advisable under applicable laws and
regulations or otherwise to consummate and make effective the transactions
contemplated by this Agreement. The Company, at its expense, will promptly
execute and deliver to the Investor, and the Investor will, at its expense,
promptly execute and deliver to the Company, upon the other's reasonable
request, all such other and further documents, agreements and instruments in
compliance with or pursuant to its covenants and agreements herein, and will
make any recordings, file any notices, and obtain any consents as may be
necessary or appropriate in connection therewith, including without limitation,
applications under the HSR Act.
5.3 Filings and Consents.
(a) As soon as practicable after execution and delivery of
this Agreement, the Investor and the Company shall make all filings required
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), relating to the transactions contemplated hereby. In addition, the
Investor and the Company will each promptly furnish all information as may be
required by the Federal Trade Commission and the Department of Justice under the
HSR Act in order for the requisite approvals for the purchase and sale of the
Class A
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Common Stock, and the transactions contemplated hereby, to be obtained or any
applicable waiting periods to expire. Each of the parties hereto will cooperate
with each other with respect to obtaining, as promptly as practicable, all
necessary consents, approvals, authorizations and agreements of, and the giving
of all notices and making of all other filings with, any third parties,
including Governmental Authorities, necessary to authorize, approve or permit
the consummation of the transactions contemplated hereby.
(b) The Investor and the Company will provide such information
and communications to the Persons requiring such approvals, authorizations and
consents as reasonably required by such Person.
5.4 Covenant to Satisfy Conditions. Each party agrees to use all
reasonable efforts to insure that the conditions to the other party's
obligations hereunder set forth in Article VI, insofar as such matters are
within the control of such party, are satisfied. The Investor acknowledges
receipt of drafts of the Underwriting Agreement and Articles (attached as
exhibits hereto) and is satisfied with the content thereof.
5.5 Notification of Change in Control Event. Each party shall promptly
notify the other party of any Change in Control Event affecting the Company or
the Investor, as the case may be, and the Company shall promptly notify the
Investor of a Potential Change in Control Event of which it becomes actually
aware.
5.6 Information Rights. The Company covenants and agrees that,
commencing on the Closing and continuing for so long as the Investor owns at
least 50% of the shares initially purchased hereunder (as adjusted for stock
splits, stock dividends, and similar events), the Company shall:
(a) Annual Reports. Furnish to the Investor promptly following
the filing of such report with the SEC a copy of the Company's Annual Report on
Form 10-K for each fiscal year. In the event the Company shall no longer be
required to file Annual Reports on Form 10-K, the Company shall, within ninety
(90) days following the end of each respective fiscal year, deliver to the
Investor a copy of a consolidated balance sheet as of the end of such fiscal
year, a consolidated statement of income and a consolidated statement of cash
flows of the Company and its subsidiaries for such year, setting forth in each
case in comparative form the figures from the Company's previous fiscal year,
all prepared in accordance with generally accepted accounting principles and
practices and audited by nationally recognized independent certified public
accountants.
(b) Quarterly Reports. Furnish to the Investor promptly
following the filing of such report with the SEC, a copy of each of the
Company's Quarterly Reports on Form 10-Q. In the event the Company shall no
longer be required to file Quarterly Reports on Form 10-Q, the Company shall,
within forty-five (45) days following the end of each of the first three (3)
fiscal quarters of each fiscal year, deliver to the Investor a copy of a
consolidated balance sheet as of the end of the respective fiscal quarter,
consolidated statements of income and consolidated
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statements of cash flows of the Company and its subsidiaries for the respective
fiscal quarter and for the year to-date, setting forth in each case in
comparative form the figures from the comparable periods in the Company's
immediately preceding fiscal year, all prepared in accordance with generally
accepted accounting principles and practices, but all of which may be unaudited.
(c) Other SEC Filings. Furnish to the Investor promptly
following the filing of such documents with the SEC, copies of each proxy
statement and Report on Form 8-K filed with the SEC on a non-confidential basis.
ARTICLE VI
CLOSING CONDITIONS
6.1 Conditions of Investor's Obligations at Closing. The Investor's
obligation to purchase and pay for the Class A Common Stock to be purchased by
it hereunder is subject to satisfaction of the following conditions:
(a) Underwriting Agreement. (i) the Investor's determination
that there has not been any material revision to the Underwriting Agreement that
is adverse to the Investor as it has been executed by the Underwriters and the
Company since the draft delivered to the Investor pursuant to Section 3.1
hereof, and (ii) the receipt by the Investor of all letters, opinions and
certificates that the Underwriters are entitled to receive from the Company in
connection with the closing of the IPO. Investor shall be entitled to rely upon
such letters, opinions and certificates.
(b) Receipt of Articles. The Investor shall have received from
the Company the Articles pursuant to Section 3.2 in form and substance
reasonably satisfactory to the Investor.
(c) Board Approval. The board of directors of Intel shall have
approved and authorized the execution, delivery and performance of this
Agreement and the Alliance Agreement.
(d) Representations and Warranties. The representations and
warranties of the Company contained in Article III shall be true on and as of
the Closing with the same effect as though such representations and warranties
had been made on and as of the Closing.
(e) Legal Opinion. Investor shall have received a legal
opinion from in-house counsel to the Company to the effect that the issuance of
the Class A Common Stock being purchased by it has been duly authorized, and
when issued in accordance with the terms of this Agreement, will be validly
issued, fully paid and non-assessable.
(f) Stock Certificate. The Company shall have delivered the
stock certificate representing the Class A Common Stock being purchased by the
Investor.
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6.2 Conditions of the Company's Obligations at Closing. The obligations
of the Company to the Investor under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Investor contained in Article IV shall be true on and as of
the Closing with the same effect as though such representations and warranties
had been made on and as of the Closing.
(b) Payment of Purchase Price. The Investor shall have
delivered the Purchase Price.
(c) Performance of Obligations. The Investor shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing.
(d) Legal Matters. The Company shall have received from the
Investor such legal opinions as shall be reasonably agreed upon by the Company
and the Investor and such other letters, opinions and certificates as the
Company shall reasonably request.
(e) Board Approval. The boards of directors of the Company and
TWC shall have approved and authorized the execution, delivery and performance
of this Agreement and (if necessary) the Alliance Agreement.
6.3 Conditions to Each Party's Obligation. The respective obligation of
each party to consummate the transactions contemplated hereby shall be subject
to the satisfaction at or prior to the Closing of each of the following
conditions:
(a) HSR Approval. The applicable waiting period (and any
extension thereof) under the HSR Act relating to the transactions contemplated
by this Agreement shall have been terminated or shall have expired.
(b) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing
consummation of the transactions contemplated hereby shall be in effect.
(c) Alliance Agreement. The Alliance Agreement shall have been
executed and remain in full force and effect.
(d) Consummation of IPO. The closing of the IPO as
contemplated by the Underwriting Agreement shall be consummated simultaneously
with or prior to the Closing.
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ARTICLE VII
TRANSFER RESTRICTIONS
7.1 Restrictions on Transfer; the 33 Act.
(a) Restrictions on Transfer; Restrictive Legends. The Class A
Common Stock owned by the Investor shall not be transferable except upon the
conditions specified in this Article VII, which conditions are intended to
insure compliance with the provisions of the 33 Act in respect of the Transfer
of any such Class A Common Stock.
The Investor (including each assignee) hereby acknowledges and
agrees that it is acquiring the shares of Class A Common Stock in a transaction
exempt from registration under the 33 Act, and that no shares of Class A Common
Stock may be Transferred in the absence of registration under the 33 Act or an
applicable exemption therefrom. The Investor also hereby agrees that it will, if
requested by an underwriter in connection with a public offering of securities
(including the IPO), enter into a standard lock-up agreement for a period of up
to 180 days preventing it from offering, selling or granting any option for the
sale of or disposing of any of its shares of Common Stock for the same time
period to which the Company or TWC and the Company's executive officers and
directors would be subject under the underwriting agreement in connection with
such public offering, which period the Company shall use reasonable efforts to
limit to a period of not more than 90 days (except in the case of the IPO) and
which shall in no event be in excess of 180 days; provided, however, that
(except in the case of the IPO) Intel is participating in such offering, and
provided further, that, following the 180-day lock-up period in connection with
the IPO (during and prior to which Intel will not be permitted to engage in
Hedging Transactions), Intel and its Affiliates are permitted to enter into
Hedging Transactions. In addition, during any lock-up period in connection with
a secondary offering, Intel and its Affiliates shall be permitted to enter into
transactions that have the effect of maintaining or continuing pre-existing (as
of the time Investor is notified of the offering) Hedging Transaction positions
by continuing, renewing or replacing any such positions on substantially
equivalent terms. The Investor also hereby acknowledges and agrees that it shall
not Transfer (other than to an Affiliate) such shares of Class A Common Stock
for a period of eighteen (18) months from the Closing Date (the "Permitted
Transfer Date") except as permitted in Section 11.1(b). Each certificate
representing the Investor's shares of Class A Common Stock shall (unless
otherwise permitted by the provisions of this Article VII) be stamped or
otherwise imprinted with a legend in substantially the following form:
"THE SHARES OF COMMON STOCK OF THE ISSUER REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER ANY APPLICABLE
STATE LAW. THEY MAY NOT BE OFFERED FOR SALE, SOLD, OR TRANSFERRED WITHOUT (1)
REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE LAW OR
(2) AN OPINION OF COUNSEL SATISFACTORY TO WILLIAMS COMMUNICATIONS GROUP, INC.
THAT SUCH REGISTRATION IS NOT REQUIRED BECAUSE OF AN EXEMPTION FROM
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THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND ANY APPLICABLE
STATE LAW. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE SECURITIES PURCHASE
AGREEMENT DATED AS OF MAY __, 1999, AS AMENDED FROM TIME TO TIME, WHICH PROVIDES
THAT SUCH SHARES MAY NOT BE TRANSFERRED UNTIL NOVEMBER __, 2000 (WHICH DATE IS
EIGHTEEN MONTHS FROM THE DATE HEREOF). COPIES OF THE SECURITIES PURCHASE
AGREEMENT MAY BE OBTAINED UPON REQUEST FROM WILLIAMS COMMUNICATIONS GROUP, INC.
AND ANY SUCCESSOR THERETO."
(b) Non-Applicability of Transfer Restrictions; Removal of
Legends. The restrictions imposed by Section 7.1(a) above upon the
transferability of any shares of Class A Common Stock represented by a
certificate bearing the restrictive legends set forth in such Section 7.1(a) (a
"Restricted Security") shall cease and terminate when such Restricted Security
has been sold pursuant to an effective registration statement under the 33 Act
or transferred pursuant to Rule 144 (or any similar or successor rule thereto)
promulgated under the 33 Act unless the holder thereof is an Affiliate of the
Company. Upon a Change in Control Event of the Company, the restriction on the
Investor prohibiting the Transfer of shares of Class A Common Stock prior to the
Permitted Transfer Date shall cease and terminate. The holder of any Restricted
Security as to which such restrictions shall have terminated shall be entitled
to receive from the Company, without expense, a new certificate of the same type
but not bearing the restrictive legend set forth above and not containing any
other reference to the restrictions imposed by Section 7.1(a) above, provided
that a holder's right to receive, and the Company's obligation to issue, a new
certificate not bearing such restrictive legends and not containing any other
reference to the restrictions imposed by Section 7.1(a) above shall be subject,
in the Company's discretion, to the delivery to the Company of an opinion of
counsel of the transferor (which may include in-house counsel to the Investor)
that subsequent transfers of such Restricted Security by the proposed transferee
will not require registration under the 33 Act.
ARTICLE VIII
VOTING RIGHTS
8.1 Voting Rights. The Investor acknowledges that the Articles provide
that Class A Shares shall have one-tenth the voting power as Class B Shares. If
at any time after the date hereof the Company issues to any Person other than
the Company or any Affiliate of the Company in a private or public sale Common
Stock with voting rights ("Super Voting Rights") that are greater in any
material respect than those the Investor has in its Class A Common Stock, other
than in connection with one or more employee or director related plans or
arrangements or in connection with a spin-off by the Company of the Common Stock
to its shareholders, the Investor will have the right at its option to convert
its shares of Class A Common Stock to new shares of Common Stock with such Super
Voting Rights. If such conversion occurs, all
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references in this Agreement to Class A Common Stock shall be deemed to refer to
the Common Stock with Super Voting Rights.
ARTICLE IX
TERMINATION
9.1 Termination. This Agreement may be terminated at any time prior to
the Closing:
(a) by mutual consent of the Investor and the Company;
(b) by either the Company or the Investor if the Closing shall
not have occurred by December 31, 1999, and this Agreement has not previously
been terminated; provided, however, that the failure to consummate the Closing
by such date is not a result of either the failure by the party so electing to
terminate this Agreement to perform any of its obligations hereunder or the
breach by the party so electing of its representations and warranties;
(c) if either the Investor or the Company terminates the
Alliance Agreement;
(d) by either the Company or the Investor in the event any
court or governmental agency of competent jurisdiction shall have issued an
order, decree or ruling or taken any other action restricting, enjoining or
otherwise prohibiting the transactions contemplated hereby and such order,
decree, ruling or other action shall have become final and unappealable.
9.2 Effect of Termination. In the event that this Agreement shall be
terminated pursuant to this Article IX, all further obligations of the parties
under this Agreement other than the obligations set forth in this Section 9.2
and Sections 13.11 and 13.14 shall terminate and there shall be no liability of
any party to another party except for a party's breach of any of its
obligations, representations or warranties under this Agreement prior to such
termination.
ARTICLE X
INDEMNIFICATION
10.1 Indemnification.
(a) The Company hereby agrees to indemnify, defend and hold
harmless the Investor and each of its directors, officers and each Person, if
any, who controls (within the meaning of Section 15 of the 33 Act and Section 20
of the 34 Act) the Investor from and against all actual demands, claims, actions
or causes of action, assessments, losses, damages, liabilities, costs and
expenses (collectively, "Claims"), including without limitation interest,
penalties and
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reasonable attorneys' fees and expenses, asserted against, resulting to, or
imposed upon or incurred by the Investor, directly or indirectly, by reason of
or resulting from a breach of any covenant, representation, warranty or
agreement of the Company contained in or made pursuant to this Agreement or
otherwise in connection with the transactions contemplated hereby.
(b) The Investor hereby agrees to indemnify, defend and hold
harmless the Company and each Company Control Person from and against all
Claims, including without limitation interest, penalties and reasonable
attorneys' fees and expenses, asserted against, resulting to, or imposed upon or
incurred by the Company and each Company Control Person, directly or indirectly,
by reason of or resulting from a breach of any covenant, representation,
warranty or agreement of the Investor contained in or made pursuant to this
Agreement or otherwise in connection with the transactions contemplated hereby.
10.2 Terms of Indemnification. The obligations and liabilities of the
parties with respect to Claims by third parties will be subject to the following
terms and conditions:
(a) the indemnified party will give the indemnifying party
prompt written notice of any Claims asserted against, resulting to, imposed upon
or incurred by the indemnified party, directly or indirectly, and the
indemnifying party will undertake the defense thereof by representatives of
their own choosing which are reasonably satisfactory to the indemnified party;
provided that the failure of the indemnified party to give notice as provided in
this Section 10.2 shall not relieve the indemnifying party of its obligations
under this Article X, except to the extent that such failure has materially and
adversely affected the rights of the indemnifying party;
(b) if within a reasonable time after notice of any Claim, the
indemnifying party fails to defend such Claim, the indemnified party will have
the right to undertake the defense, compromise or settlement of such Claim on
behalf of and for the account and at the risk of the indemnifying party, subject
to the right of the indemnifying party to assume the defense of such Claim at
any time prior to settlement, compromise or final determination thereof;
(c) if there is a reasonable probability that a Claim may
materially and adversely affect the indemnified party other than as a result of
money damages or other money payments, the indemnified party will have the right
at its own expense to defend (provided that the indemnifying party shall
continue to control the defense and the indemnified party shall have the right
to participate in such defense), or co-defend, such Claim;
(d) the indemnifying party on one hand and the indemnified
party on the other hand will not, without the prior written consent of the
other, settle or compromise any Claim or consent to entry of any judgment
relating to any such Claim;
(e) with respect to any Claims asserted against the
indemnified party, the indemnified party will have the right to employ one
counsel of its choice in each applicable jurisdiction (if more than one
jurisdiction is involved) to represent the indemnified party if, in the
indemnified party's reasonable judgment, a conflict of interest between the
indemnified party and
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the indemnifying party exists in respect of such Claims, and in that event the
fees and expenses of such separate counsel shall be paid by such indemnifying
party; and
(f) the indemnifying party will provide the indemnified party
reasonable access to all records and documents of the indemnifying party
relating to any Claim.
ARTICLE XI
REGISTRATION RIGHTS
11.1 Registration Rights.
(a) Form S-3 Registration. In the event, at any time within
ninety (90) days prior to the Permitted Transfer Date, the Company shall receive
from any holder or holders of a majority of all Registrable Securities then
outstanding a written request or requests that the Company effect a registration
on Form S-3 and any related qualification or compliance with respect to all or a
part of the Registrable Securities owned by such Selling Stockholders, then the
Company shall:
(i) Notice. Promptly give written notice of the proposed
registration and the Selling Stockholders' request therefor, and any related
qualification or compliance, to all other holders of Registrable Securities; and
(ii) Registration. As soon as reasonably practicable (but in
no event prior to the Permitted Transfer Date), effect such registration and all
such qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such Selling
Stockholders' Registrable Securities as are specified in such request, together
with all or such portion of the Registrable Securities of any other holder
joining in such request as are specified in a written request given within
twenty (20) days after the Company provides the notice contemplated by Section
11.1(a)(i); provided, however, that the Company shall not be obligated to effect
any such registration, qualification or compliance pursuant to this Section
11.1(a):
(A) if the Selling Stockholders, together with the
holders of any other securities of the Company entitled to inclusion in such
registration, propose to sell Registrable Securities and such other securities
(if any) representing less than the larger of (I) 50% of the aggregate
Registrable Securities and such other securities then held by all Selling
Stockholders and such other holders, or (II) $50,000,000 of shares (determined
using the Volume-Weighted Average Trading Price); or
(B) if the Company has, within the six (6) month
period preceding the date of such request, already effected a registration under
the 33 Act other than a registration from which the Registrable Securities of
Selling Stockholders have been excluded
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(with respect to all or any portion of the Registrable Securities the Selling
Stockholders requested be included in such registration) pursuant to the
provisions of Section 11.1(b).
(iii) Unavailability of Form S-3. If the Company is not
eligible to use Form S-3, it shall file a Form S-1 in lieu of a Form S-3.
(b) Piggyback Registrations.
(i) Notice. The Company shall notify all holders of
Registrable Securities in writing at least twenty (20) or, in case of a
registration statement proposed to be filed pursuant to Rule 415 of the 33 Act,
ten (10) Business Days prior to filing any registration statement under the 33
Act (including but not limited to registration statements relating to secondary
offerings of securities of the Company before or after the Permitted Transfer
Date, but excluding registration statements relating to any registration under
subsection (a) of this Section 11.1, any employee benefit plan or any merger or
other corporate reorganization) for purposes of effecting a public offering of
securities of the Company in which the Investor is entitled to participate and,
if other stockholders of the Company also are participating in the registration
statement as selling stockholders (except in connection with an acquisition by
the Company), will afford each such holder an opportunity to include in such
registration statement all or any part of the Registrable Securities then held
by such holder. Each holder desiring to include in any such registration
statement all or any part of the Registrable Securities held by such holder
shall within ten (10) or, in the case of a registration statement proposed to be
filed pursuant to Rule 415 of the 33 Act, five (5) Business Days after receipt
of the above-described notice from the Company, so notify the Company in
writing, and in such notice shall inform the Company of the number of
Registrable Securities such holder wishes to include in such registration
statement. If a holder decides not to include all of its Registrable Securities
in any registration statement thereafter filed by the Company, such holder shall
nevertheless continue to have the right to include any Registrable Securities in
any subsequent registration statement or registration statements as may be filed
by the Company with respect to offerings of its securities, all upon the terms
and conditions set forth herein.
(ii) Underwriting. If a registration statement under which the
Company gives notice under this Section 11.1(b) is for an underwritten offering,
then the Company shall so advise the Selling Stockholders. In such event, the
right of any such Selling Stockholder to include its Registrable Securities in a
registration pursuant to this Section 11.1(b) shall be conditioned upon such
Selling Stockholder's participation in such underwriting and the inclusion of
such Selling Stockholder's Registrable Securities in the underwriting to the
extent provided herein. All Selling Stockholders proposing to distribute their
Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the managing underwriter or
underwriters selected for such underwriting. Notwithstanding any other provision
of this Agreement, if the managing underwriter determine(s) in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, then the managing underwriter(s) may exclude shares from the
registration and the underwriting, and the number of shares that may be included
in the registration and the underwriting shall be allocated,
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first to the Company, and second, to each of the Selling Stockholders and other
holders of registration rights on a parity with the Selling Stockholders
requesting inclusion of their Registrable Securities in such registration
statement on a pro rata basis based on the total number of Registrable
Securities and other securities entitled to registration then held by each such
holder or other holder; provided, however, that the right of the underwriters to
exclude shares (including Registrable Securities) from the registration and
underwriting as described above shall be restricted so that all shares that are
not Registrable Securities and are held by any other Person, including, without
limitation, any Person who is an employee, officer or director of the Company
(or any subsidiary of the Company) shall first be excluded from such
registration and underwriting before any Registrable Securities are so excluded
(other than to the extent that such Persons are non-employee directors or other
non-employees of the Company who hold registration rights on a parity with the
Selling Stockholders, such non-employee directors and other non-employees being
entitled to participate with the participating Selling Stockholders on the basis
described under "second" above). If any Selling Stockholder disapproves of the
terms of any such underwriting, such Selling Stockholder may elect to withdraw
therefrom by written notice to the Company and the underwriter delivered at
least ten (10) Business Days prior to the effective date of the registration
statement. Any Registrable Securities excluded or withdrawn from such
underwriting shall be excluded and withdrawn from the registration.
(c) Registration Obligations. With respect to any registration
statement contemplated in this Section 11.1, the Company will:
(i) prepare and file with the SEC the registration statement
within 90 days after a Selling Stockholders' notice requesting registration or
inclusion in a proposed registration, and use its reasonable efforts to cause
the Registrable Securities covered by such registration statement to become
registered and such registration statement to be declared effective as
expeditiously as possible under the 33 Act or other applicable federal law and
regulations (and cause to be prepared and file any amendments or supplements
thereto as may be necessary to comply with applicable federal law and
regulations); provided, however, that the Company may be allowed to defer filing
of the registration statement: (A) if the president or general counsel of the
Company reasonably determines in good faith that it is in the best interests of
the Company not to disclose the existence of or facts surrounding any proposed
or pending material developments; (B) if the underwriters have notified the
Company that market conditions are such as to recommend deferral; (C) pending
the completion of year-end financial statements or quarterly earnings releases;
or (D) if an offering by the Company of any securities is pending; provided,
however, that any deferral pursuant to clauses (A)-(D) of this paragraph shall
not in the aggregate be for more than 60 days.
(ii) use its reasonable efforts to cause to be registered or
qualified the Registrable Securities covered by such registration statement
under such securities or "blue sky" laws in such jurisdictions within the United
States as any Selling Stockholder may reasonably request; provided, however,
that the Company reserves the right, in its sole discretion, not to cause to be
registered or qualified such Registrable Securities in any jurisdiction where
the
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Company would be required in connection therewith to execute a general consent
to service or to qualify as a foreign corporation or to subject itself to
taxation;
(iii) maintain the effectiveness of any registration statement
hereunder for 90 days or such longer period as may be required by the 33 Act to
enable any Selling Stockholder and the underwriters, if any, to complete such
offering;
(iv) promptly notify each Selling Stockholder of the happening
of any event as a result of which any preliminary prospectus or prospectuses
included in any registration statement hereunder includes an untrue statement of
a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements not misleading in light of the
circumstances then existing (in such event, the Company shall prepare a
supplement or post-effective amendment to such registration statement or related
prospectus or file any other required document so that, as thereafter delivered
to the purchasers of Registrable Securities sold thereunder, the prospectus will
not contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading);
(v) have the right to reasonably approve the choice of lead
underwriter for the offering, if an underwritten offering;
(vi) furnish, at the request of any Selling Stockholder, an
opinion, dated the date the registration statement becomes effective, of counsel
representing the Company (which may be in-house counsel) for the purposes of
such registration, addressed to the underwriters, if any, and to such Selling
Stockholder as to such legal matters as such Selling Stockholder shall
reasonably request; and
(vii) furnish, at the request of any Selling Stockholder, a
letter, dated the date the registration statement becomes effective, of
independent certified public accountants of the Company, addressed to the
underwriters, if any, and to such Selling Stockholder as to such accounting
matters as such Selling Stockholder shall reasonably request.
(d) Conditions to Obligations. The obligations of the Company to cause
a registration statement to be prepared pursuant to the provisions of this
Section 11.1 and each Selling Stockholder's right to have Registrable Securities
included in any registration statement pursuant to the provisions of this
Section 11.1 shall be subject to the following conditions:
(i) Each Selling Stockholder shall furnish to the Company in
writing such information and documents as, in the opinion of the Company's
counsel, may be reasonably required to properly cause to be prepared such
registration statement in accordance with applicable provisions of the 33 Act
and the SEC's regulations thereunder or federal or state securities or blue sky
laws and regulations then in effect; and
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(ii) If a Selling Stockholder desires to sell and distribute
such Registrable Securities over a period of time, or from time to time,
pursuant to a registration statement prepared pursuant to the provisions of this
Section 11.1, then such Selling Stockholder shall execute and deliver to the
Company such written undertakings as the Company and its counsel may reasonably
require in order to assure full compliance with the relevant provisions of the
33 Act and the SEC's regulations thereunder or other federal or state securities
or blue sky laws and regulations as then in effect.
(e) ****
(f) Indemnity.
(i) The Company agrees to indemnify and hold harmless each
Selling Stockholder and each Person, if any, who controls (within the meaning of
Section 15 of the 33 Act and Section 20 of the 34 Act) such Selling Stockholder
(a "Control Person") against any losses, claims, damages or liabilities, joint
or several, to which such Selling Stockholder or any such Control Person may
become subject, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in any preliminary or
final registration statement or prospectus with respect thereto, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading; and the
Company will reimburse each Selling Stockholder and each Control Person for any
legal or other expenses reasonably incurred by such Selling Stockholder or such
Control Person in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company will not
be liable in any case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission from any of such documents in reliance
upon and in conformity with written information furnished by or on behalf of
such Selling Stockholder or any such Control Person specifically for use in the
preparation thereof.
(ii) Each Selling Stockholder will, severally and not jointly,
indemnify and hold harmless the Company and each of its directors, officers and
each Person, if any, who controls (within the meaning of Section 15 of the 33
Act and Section 20 of the 34 Act) the Company (a "Company Control Person") to
the same extent as set forth in the foregoing indemnity from the Company to each
Selling Stockholder but only with reference to written information included in
any preliminary or final registration statement or prospectus with respect
thereto, or amendment or supplement thereto, furnished by or on behalf of such
Selling Stockholder specifically for use in the preparation of such documents;
and will reimburse the
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Company or any such Company Control Person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
loss, claim, damage, liability or action for which such Selling Stockholder is
obligated to indemnify the Company or any Company Control Person.
(iii) Promptly after receipt by an indemnified party under
this Section 11.1(f) of notice of any claim or the commencement of any action,
such indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party under Section 11.1(f)(i) or (ii) above, notify the
indemnifying party of any claim or the commencement thereof; but the omission so
to notify the indemnifying party will not relieve it from any liability which it
may have to any indemnified party otherwise than under Section 11.1(f)(i) or
(ii) above. In case any such action is brought against any indemnified party and
it notifies an indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party (who shall not, except with the consent of the indemnified party, be
counsel to the indemnifying party), and after notice from the indemnifying party
to such indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party in connection
with the defense thereof other than reasonable costs of investigation. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened action 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 any claims that are the subject matter of such action.
(iv) If the indemnification provided for in paragraphs (i) or
(ii) of this Section 11.1(f) is unavailable or insufficient in accordance with
its terms in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits as well as
the relative fault of the Company on the one hand and the Selling Stockholder on
the other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions in respect thereof), as well
as any other relevant equitable consideration. The relative benefits received by
the Company on the one hand and the Selling Stockholder on the other shall be
deemed to be in the same proportion as (i) the total purchase price received by
the Company from the Investor (based on the average purchase price paid by the
Investor times the number of shares purchased) for the securities to be
reoffered by the Selling Stockholder in such offering bears to (ii) the total
net proceeds received by the Selling Stockholder in such offering. The relative
fault 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
on the one hand or the Selling Stockholder on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
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ARTICLE XII
STANDSTILL
12.1 Standstill Provision.
(a) The Investor agrees that for a period of **** from the
Closing Date, it shall not, and shall cause each of its Affiliates not to,
without the prior written consent of the Board of Directors specifically
expressed in a resolution approved by a majority of the directors of the
Company, directly or indirectly, through one or more intermediaries or
otherwise, (i) acquire, agree to acquire or make any proposal to acquire any
securities of the Company or any of its Subsidiaries, any warrant or option to
acquire any such securities, any security convertible into or exchangeable for
any such securities or any other right to acquire any such securities if the
effect of such acquisition would be to increase the beneficial ownership (as
defined in Rule 13d-3 promulgated under the 34 Act) of the Investor to a
percentage greater than **** (the "Standstill Percentage") of the then issued
and outstanding shares of Common Stock; (ii) seek or propose any merger,
consolidation, business combination, tender or exchange offer, sale or purchase
of assets or securities, dissolution, liquidation, restructuring,
recapitalization or similar transaction of or involving the Company or any of
its Subsidiaries; (iii) make, or in any way participate in, any "solicitation"
of proxies or consents (whether or not relating to the election or removal of
directors) within the meaning of Rule 14a-1 under the 34 Act with respect to any
securities of the Company or any of its Subsidiaries, or demand a copy of the
stock ledger, list of stockholders, or any other books and records of the
Company or any of its Subsidiaries; (iv) form, join or in any way participate in
a "group" (within the meaning of Section 13(d)(3) of the 34 Act), with respect
to any securities of the Company or any of its Subsidiaries; (v) otherwise act,
alone or in concert with others, to seek to control the management, Board of
Directors or policies of the Company or any of its Subsidiaries; (vi) deposit
any Common Stock in any voting trust or subject any Common Stock to any
arrangement or agreement with respect to the voting of such shares; (vii) call,
seek to have called or execute any written consent calling for any meeting of
the stockholders of the Company; (viii) seek, alone or in concert with others,
representation on the Board of Directors or seek the removal of any member of
such Board or a change in the composition or size of such Board; (ix) enter into
any agreements (whether written or oral) with, or finance or assist, any other
persons in connection with any of the foregoing, or (x) make any publicly
disclosed proposal regarding any of the foregoing. The provisions in this
Article XII shall not apply in the event of a Potential Change in Control Event,
unless the activities defined in (a) or (b) of the definition of "Potential
Change in Control Event" which gave rise to the Potential Change in Control
Event are discontinued and remain so for one year without the occurrence of a
Potential Change in Control Event. In such event, the provisions of this Article
XII shall be reinstated and remain in full force and effect thereafter.
(b) The Investor will not be obliged to dispose of any Common
Stock to the extent that the aggregate percentage of the Common Stock
represented by the Common Stock
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Beneficially Owned by the Investor or which the Investor has a right to acquire
is increased beyond the Standstill Percentage (i) as a result of a
recapitalization of the Company or a repurchase or exchange of securities by the
Company or any other action taken by the Company or its Affiliates; (ii) as a
result of any investment in any equity index (e.g., the S&P 500), provided that
Investor shall not vote such shares; (iii) by way of stock dividends or other
distributions or rights or offerings made available to holders of shares of
Common Stock generally; (iv) with the consent of a simple majority of the
members of the Company's Board of Directors; or (v) as part of a transaction on
behalf of Investor's Defined Benefit Pension Plan, Profit Sharing Retirement
Plan, 401(k) Savings Plan, Sheltered Employee Retirement Plan and Sheltered
Employee Retirement Plan Plus, or any successor or additional retirement plans
thereto (collectively, the "Retirement Plans") where the Company's shares in
such Retirement Plans are voted by a trustee for the benefit of Investor
employees or, for those Retirement Plans where Investor controls voting, where
Investor agrees not to vote any shares of such Retirement Plan Common Stock that
would cause Investor to exceed the Standstill Percentage.
12.2 Notice of Proposed Transfer. If, at any time after the Permitted
Transfer Date, the Investor intends to sell more than **** of the issued and
outstanding shares of Class A Common Stock to a Third Party other than pursuant
to a Registration Statement, the Investor shall provide a written notice of such
intent to the Company at least Two (2) Business Days prior to offering any such
shares to any Third Party.
ARTICLE XII
MISCELLANEOUS
13.1 Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York (without giving effect to
conflicts of law principles thereof).
13.2 Remedies Cumulative. Except as herein provided, the remedies
provided herein shall be cumulative and shall not preclude assertion by any
party hereto of any other rights or the seeking of any other remedies against
the other party hereto.
13.3 Brokerage. Each party hereto will indemnify and hold harmless the
other against and in respect of any claim for brokerage or other commission
relative to this Agreement or to the transactions contemplated hereby, based in
any way on agreements, arrangements or understandings made or claimed to have
been made by such party with any third party.
13.4 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provisions shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
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13.5 Notices. Notices required under this Agreement shall be deemed to
have been adequately given if delivered in person or sent to the recipient at
its address (or facsimile number, as the case may be) set forth in Exhibit 13.5
(with copies to the persons specified in Exhibit 13.5 at the respective
addresses for such persons specified in such Exhibit 13.5) or such other address
as such party may from time to time designate in writing by certified mail
(return receipt requested), facsimile or overnight courier.
13.6 No Waiver. No failure to exercise and no delay in exercising any
right, power or privilege granted under this Agreement shall operate as a waiver
of such right, power or privilege. No single or partial exercise of any right,
power or privilege granted under this Agreement shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
13.7 Amendments and Waivers. This Agreement may be modified or amended
only by a writing signed by the Company and by the Investor. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any shares of Class A Common Stock purchased under this Agreement at
the time outstanding, each future holder of all such shares, and the Company.
13.8 Rights of the Investor. Subject to the terms and conditions of
this Agreement, the Investor shall have the absolute right to exercise or
refrain from exercising any right or rights that such holder may have by reason
of this Agreement, including without limitation the right to consent to the
waiver of any obligation of the Company under this Agreement and to enter into
an agreement with the Company for the purpose of modifying this Agreement or any
agreement effecting any such modification, and such holder shall not incur any
liability to any other holder or holders of Class A Common Stock with respect to
exercising or refraining from exercising any such right or rights.
13.9 Survival. All representations and warranties made by the Company
and the Investor contained in this Agreement, and the obligation of the parties
to indemnify each other pursuant to Section 10.1 hereof, shall survive the
execution and delivery of this Agreement, any examination or due diligence
inquiry by a party and the Closing until the date which is one year after the
Closing Date. All covenants and agreements of the Company and the Investor
contained in this Agreement (which terms do not include representations and
warranties) shall, except as provided in such covenant or agreement, survive the
Closing and shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of the Investor or any controlling Person
thereof or by or on behalf of the Company, any of its officers and directors or
any controlling Person thereof. The obligations to indemnify and hold harmless a
party hereto, pursuant to Article X hereof, shall survive only until the
expiration of the applicable survival period for the representation and warranty
under which the claim for indemnification is being made; provided, however, that
such obligations to indemnify and hold harmless shall not terminate with respect
to any such item as to which the Person to be indemnified shall have, before the
expiration of the applicable period, previously made a claim by delivering a
notice
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Confidential & Proprietary
(stating in reasonable detain the basis of such claim) to the party to be
providing the indemnification.
13.10 Entire Understanding. This Agreement and the agreements to be
executed in connection therewith on the Closing Date express the entire
understanding of the parties and supersede all prior and contemporaneous
agreements and undertakings of the parties with respect to the subject matter
hereof and thereof. Except as expressly provided herein, neither this Agreement
nor any term hereof may be amended, waived, discharged or terminated other than
by a written instrument signed by the party against whom enforcement of any such
amendment, waiver, discharge or termination is sought.
13.11 Expenses. Each party will pay all of its own expenses, including
attorney's fees incurred in connection with the negotiation of this Agreement,
the performance of its obligations hereunder and the consummation of
transactions contemplated by this Agreement.
13.12 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original but which taken together shall
constitute one agreement.
13.13 Assignment; No Third-Party Beneficiaries.
(a) Except as otherwise expressly provided herein, this
Agreement and the rights hereunder shall not be assignable or transferable by
either party without the prior written consent of the other; provided that, if
such assignment or transfer is consented to, such assignee or transferee
expressly assumes in writing all of the such party's obligations hereunder.
Subject to the preceding sentence, this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties hereto and their respective
successors and permitted assigns.
(b) This Agreement is for the sole benefit of the parties
hereto and their respective successors and permitted assigns and nothing herein
expressed or implied shall give or be construed to give to any Person, other
than the parties hereto and such successors and permitted assigns, any legal or
equitable rights hereunder.
(c) Intel and the Investor shall be permitted, without the
consent of the Company, to transfer Class A Common Stock (subject to applicable
federal and state securities laws) and to assign all its rights and obligations
under this Agreement, including without limitation the right to purchase Class A
Common Stock and common equity securities under Article II and registration
rights under Article XI, to any of its Affiliates; provided, however, that such
assignee expressly assumes in writing all of Intel or the Investor's, as the
case may be, obligations hereunder; and provided, further that in the event of
such assignment Intel or the Investor, as the case may be, shall notify the
Company in writing of such assignment, and for all purposes of this Agreement
all references to Intel or the Investor shall mean such Affiliate.
13.14 Confidentiality/Publicity. Confidential or proprietary
information disclosed by either party under this Agreement shall be considered
confidential information (the "Confidential
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Confidential & Proprietary
Information") and shall not be disclosed by the Company or the Investor to any
third party, except as permitted hereunder.
(a) All press releases and announcements concerning the
investment contemplated by this Agreement shall be mutually agreed to by the
Company and the Investor except as otherwise provided in this Section.
(b) The Company may disclose the terms of the investment
contemplated by this Agreement and the terms of the Alliance Agreement in its
registration statement with respect to the IPO. Intel shall cooperate with the
Company in good faith in reviewing such disclosure; provided that Intel shall
have the right to approve such disclosure prior to the filing of any amendment
to the registration statement or prospectus that includes disclosure of the
relationship between the Company and Intel (such approval not to be unreasonably
delayed). The Company will provide Intel drafts of any such disclosure at least
Two (2) Business Days prior to the filing of any amendment to the registration
statement or prospectus. The Company may file this Agreement or the Alliance
Agreement as exhibits to the registration statement, but Intel shall have the
right to request that the Company seek confidential treatment of specified
information in the Alliance Agreement.
(c) In the event that the Company or the Investor is requested
or becomes legally compelled (by statute or regulation or by oral questions,
interrogatories, request for information or documents, subpoena, criminal or
civil investigative demand or similar process (including in connection with a
public offering of the Company's securities), to disclose any Confidential
Information not previously publicly disclosed, such party (the "Disclosing
Party") shall provide the other party (the Non-Disclosing Party") with prompt
written notice of that fact so that the other party may seek (with the
cooperation and reasonable efforts or the Disclosing Party) a protective order,
confidential treatment or other appropriate remedy. In such event, the
Disclosing Party shall furnish only that portion of the Confidential Information
which is legally required and shall exercise reasonable efforts to obtain
reliable assurance that confidential treatment will be accorded the Confidential
Information to the extent reasonably requested by the Non-Disclosing Party.
(d) The provisions of this Section 13.14 shall not prohibit or
restrict in any way disclosure by a party with respect to this Agreement in
connection with any financing, strategic transaction, acquisition or disposition
involving such party or any of its Affiliates, provided that such disclosure
shall be first approved by the other party, which approval shall not be
unreasonably withheld or delayed.
(e) The provisions of this Section 13.14 shall be in addition
to, and not in substitution for, the provisions of any separate nondisclosure
agreement executed by the parties hereto with respect to the transactions
contemplated hereby, except that, in the event of any contradiction between this
Section and any such agreement, this Section shall prevail.
13.15 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
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13.16 Aggregation of Stock. All shares of the Class A Common Stock held
or acquired by Affiliates or Persons shall be aggregated together for the
purpose of determining the availability of any rights under this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
WILLIAMS COMMUNICATIONS GROUP, INC.
By: _____________________________________
THE WILLIAMS COMPANIES, INC.
By: _____________________________________
INTEL CORPORATION
By: ______________________________________
Arvind Sodhani, Treasurer and Vice Presendent
SIGNATURE PAGE TO WILLIAMS COMMUNICATIONS GROUP, INC.
SECURITIES PURCHASE AGREEMENT DATED MAY 24, 1999
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Redacted portions have been marked with asterisks (****). Confidential treatment
has been requested for the redacted portions. The confidential redacted portions
have been filed separately with the Securities and Exchange Commission.
CONFIDENTIAL TREATMENT
EXHIBIT 10.4
Proprietary and Confidential
MASTER ALLIANCE AGREEMENT
BETWEEN
INTEL INTERNET DATA SERVICES
AND
WILLIAMS COMMUNICATIONS, INC.
THIS MASTER ALLIANCE AGREEMENT (this "Agreement") between Williams
Communications, Inc. ("Williams"), a Delaware corporation, and Intel Corporation
("Intel") on behalf of its Internet Data Services business, ("IDS"), is
effective May 24, 1999 ("Effective Date") contingent upon the Parties completing
their due diligence activities, to be concluded by June 15, 1999, and the
simultaneous execution by the Parties of the Securities Purchase Agreement.
Williams and Intel are individually referred to, together with their respective
Affiliates, as a "Party" and collectively referred to as the "Parties." Persons
or entities that Intel or Williams Controls are referred to as "Affiliates" of
such Controlling Party. Unless otherwise explicitly set forth, the use of
"Intel" or "Williams" shall be deemed to include the respective Affiliates of
such Party. Control means the possession, directly or indirectly, of the legal
power and authority to direct or cause the direction of the management and
policies by one person or entity or a group of related persons or entities
acting in concert; provided, however, that the legal or beneficial ownership of
more than fifty percent (50%) of any such person or entity shall be deemed
"Control".
RECITALS
WHEREAS, Intel directly or through its Affiliates intends to provide mission
critical Internet web-hosting services on a global basis;
WHEREAS, Williams directly or through its Affiliates is a nationwide, single
source provider of business communications equipment and integration services
for data, voice, video and advanced applications on a retail basis and a
provider of network services for delivery of voice and data on a wholesale basis
and intends to expand such business internationally;
WHEREAS, the capabilities of each Party are complementary, and the relationship
contemplated by this Agreement (the "Alliance") will serve to broaden the base
of potential competitive opportunities for network services and other
applications for all market segments;
WHEREAS, the Parties or their Affiliates are entering into additional agreements
to implement the Alliance;
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WHEREAS, the Parties are entering into this Master Alliance Agreement to set
forth general provisions concerning the Alliance; and
NOW THEREFORE, in consideration of the mutual covenants herein contained, Intel
and Williams agree as follows:
1. RELATIONSHIP OF THE PARTIES
1.1. Allocation of Responsibilities
1.1.1. Agreements
The Parties or their Affiliates are entering into the
following agreements to implement the Alliance, in addition
to this Agreement: (1) a Services Agreement ("SA") to cover
the following: (i) Williams' provision of domestic transport
services (with possibility of expansion to include
international transport services), (ii) Williams' provision
of professional consulting services, (iii) Williams'
provision of collocation opportunities, and (iv) Intel's
provision of IDS hosting services, and (2) a Co-Marketing
Agreement (the "CMA") to cover the sales and marketing
arrangement between Williams and IDS. Collectively, those two
Agreements, together with this Agreement, are referred to as
the "Alliance Agreements."
The Parties are in the process of negotiating the final terms
and conditions the Alliance Agreements. The Parties shall
complete and execute the Alliance Agreements by June 15,
1999, or such later date as the Parties may agree. In the
event the Parties cannot reach agreement by such date, either
Party may terminate the negotiations, in which event this
Master Alliance Agreement, and the Securities Purchase
Agreement shall terminate. Neither Party shall be liable for
any damages as a result of such termination.
1.1.2. Primary Responsibilities
Pursuant to the Alliance Agreements, Williams will be the
"Supplying Party" for (a) domestic transport services (and,
if applicable, international transport services) in
accordance with the SA, (b) professional consulting services
in accordance with the SA, and (c) collocation opportunities
in accordance with the SA. IDS will be the "Supplying Party"
for hosting services in accordance with the SA. The term
"Supplying Party" means the Party supplying a product or
service to the other Party under any of the Alliance
Agreements and the term "Procuring Party" means the Party
procuring a product or service from the Supplying Party under
any of the Alliance Agreements. The Parties will co-market
and sell each others services, as identified and as specified
in the CMA.
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1.2. Strategic Supplier Relationship
****
Notwithstanding the foregoing, subject to Williams' compliance with
pricing and quality of service provisions as further set forth in
Section 1.3, Intel will purchase from Williams **** of all IDS domestic
backbone transport requirements ("Domestic Commitment") as measured
annually based on the aggregate bandwidth miles IDS has agreed to
purchase over the preceding 12-month period.
Subject to pricing and quality of service provisions as set forth
herein, Intel will select Williams as one of its IDS IP transport
carriers. ****
1.3. Pricing of Products and Services
1.3.1. Subject to compliance with any minimum purchase commitment(s) as may be
set forth in the Alliance Agreements, a Party shall receive **** with
respect to any procurement under the Alliance Agreements. ****
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1.3.2. No Investment Obligation
The Supplied Party will not be required to make any initial capital or
ongoing investment beyond the commitment of business pursuant as
further set forth in Section 1.2 and the Alliance Agreements.
1.3.3. Condition Precedent of Procurement via Competitive Pricing
The Procuring Party shall not be obligated to purchase a
product or service from the Supplying Party unless the offered
price is as low as **** to ensure that competitive pricing is
maintained.
1.3.4. Resale Restrictions
If IDS resells the transport capacity acquired from Williams
pursuant to the SA ("SA Capacity") by means of a wholesale
distribution channel or similar business structure that is
established or maintained for the purpose of offering the SA
Capacity to customers doing business in the United States that
are primarily engaged in the business of distributing
transport capacity to other third parties (e.g., carriers),
then ****. If Williams resells the hosting services acquired
from Intel pursuant to the SA ("SA Hosting Service") except in
accordance with the provisions of the CMA, then Intel ****
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1.4. Future Services
The Parties recognize that the telecommunications industry is
undergoing dramatic transformation due to radical technological
improvements and regulatory developments. ****
1.5. Use of Facilities
Nothing in any Alliance Agreement shall be construed to prohibit either
Party from using its own facilities or services owned or leased as of
the Effective Date.
1.6. Ownership and Control
The Supplying Party will retain ownership and/or control of the assets
used to provide services or products to the Procuring Party and the
Supplying Party can use these assets to provide services or products to
third parties.
2. EFFECTIVE DATE AND TERM
This Agreement shall become effective on the Effective Date and shall
continue for a term of **** years (the "Term"). All other Alliance
Agreements shall have an initial term of **** years, ****
3. AUDIT RIGHTS
3.1. Audit
Supplying Party will maintain complete and accurate records of the
services performed under this Agreement for a period of three (3) years
after the completion of these services. Records relating to the
performance of this Agreement shall be made available to the Procuring
Party for audit upon reasonable notice. Each Party may, at any time,
but not more than once per calendar year request an audit of the other
Party (the "Audited Party"), with respect to services and other
deliverables provided under the Alliance Agreements (an "Audit"),
including, without limitation, to determine the accuracy and integrity
of any of the following:
3.1.1. The calculation of pricing as set forth in Section 1, including the
duty to provide MFC Pricing.
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3.2. Initiation
At the request of the Party requesting the Audit (the "Initiating
Party"), the Parties shall mutually agree on a nationally recognized
accounting firm as a third party auditor (the "Auditor") to Audit the
Audited Party's books, contracts and records with respect to the
matters specified in Section 3.1 (or any other matter as agreed by the
Parties). The Initiating Party shall request an Audit by giving written
notice of such request to the other Party, whereupon the Parties shall
enter into good faith negotiations to effectuate the Audit provisions
as set forth herein in a timely manner.
3.3. Engagement of Auditor
The Parties will agree on the scope and materiality standards aspects
of the Audit and jointly instruct the Auditor. The terms of the
engagement of the Auditor shall:
3.3.1. Specifically define the scope of the Audit and materiality standards.
3.3.2. Require, in the case of a quantitative evaluation, a valid statistical
sampling of any information reviewed.
3.4. Cooperation
The Audited Party shall cooperate fully with the Auditor and its
representatives in connection with any Audit, providing reasonable
access to any and all relevant books and records and causing its
employees, accountants and other representatives and agents to
cooperate fully with the Auditor.
3.5. Report
The Auditor shall provide a copy of its report to both Parties, and the
report shall specify the conformity or extent of non-conformity with
the Audited Party's obligations under an Alliance Agreement that were
the subject of the Audit. The Auditor must keep confidential the names
and specific pricing applicable to all other purchasers of similar
products and services from the Audited Party. The determination of the
Auditor will be final and binding on both Parties.
3.6. Cost
The Parties will share equally the cost of the Auditor, provided that
(1) if the net dollar amount of any identified errors favors the
Initiating Party and exceeds three percent (3%) of the total dollar
amount of billings covered by the Audit, then the Audited Party shall
pay all of the costs of the Audit, and (2) if the net dollar amount of
any identified errors does not favor the Initiating Party, then the
Initiating Party shall pay all of the costs of the Audit. In the event
that the Auditor determines that the Audited Party is not in compliance
with its obligations relating to pricing that were the subject of the
Audit, the Audited Party will adjust pricing on a retroactive basis in
accordance with the findings of the Auditor.
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4. DISPUTE RESOLUTION
4.1. Disputes.
Prior to initiating any litigation, the Parties shall attempt in good
faith to resolve any controversy, dispute or claim arising out of or
relating to any of the Alliance Agreements or the breach, termination,
enforceability or validity thereof (collectively, a "Dispute") as
follows:
The senior management of both Parties shall meet to attempt to resolve
such Disputes. If the Disputes cannot be resolved by the senior
management, either Party may make a written demand for formal Dispute
resolution and specify therein the scope of the Dispute. Within thirty
days after such written notification, the Parties agree to meet for one
day with an impartial mediator and consider Dispute resolution
alternatives other than litigation. If an alternative method of Dispute
resolution is not agreed upon within thirty days after the one day
mediation, either Party may begin litigation proceedings.
Notwithstanding the foregoing, either Party shall have the right,
without the requirement of first seeking a remedy through mediation, to
seek preliminary injunctive or other equitable relief in any proper
court in the event that such Party determines that eventual redress
through mediation will not provide a sufficient remedy for any
violation of an Alliance Agreement by the other Party. The Parties
agree that preliminary injunctive or other equitable relief will be a
necessary and proper remedy in the event of misuse by one Party of the
other Party's intellectual property. Each Party further agrees that in
the event such equitable relief is granted in the United States, it
will not object to Non-U.S. courts granting provisional remedies
enforcing such U.S. judgments.
All negotiations pursuant to this Section 4.1 shall be confidential and
shall be treated as compromise and settlement negotiations. Nothing
said or disclosed, nor any document produced, in the course of such
negotiations which is not otherwise independently discoverable shall be
offered or received as evidence or used for impeachment or for any
other purpose in any current or future alternate dispute resolution
process or litigation.
5. CONFIDENTIAL
5.1. General
The existence, terms, and conditions of this Agreement and of the
Alliance Agreements, together with any information exchanged by the
Parties in performance of their respective obligations hereunder, are
confidential and neither Party may make any
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disclosures with respect thereto without the express prior written
consent of the other, with the following exceptions:
a. subject to (c) below, as otherwise may be required by law or legal
process, to legal and financial advisors in their capacity of
advising a Party in such matters; or
b. any disclosure required by federal or state securities laws, or by
requirement of the Securities Exchange Commission or applicable
state blue sky commission; or
c. during the course of litigation so long as the disclosure of such
terms and conditions are restricted in the same manner as is the
confidential information of other litigating Parties and so long
as (i) the restrictions are embodied in a court-entered Protective
Order and (ii) the disclosing Party informs the other Party in
writing in advance of the disclosure; or
d. in confidence to its legal counsel, accountants, banks and
financing sources and their advisors solely in connection with
complying with financial requirements and transactions.
Disclosures of confidential and proprietary information by either Party
to the other Party shall otherwise be governed by the Intel/Williams
Corporate Non-disclosure Agreement ("CNDA") number _______, and related
Confidential Information Transmittal Records ("CITR(s)") or other
non-disclosure agreements as appropriate and executed in writing by the
Parties. Attached as Exhibit A is the above referenced CNDA.
5.2. Nondisclosure Agreements
To the extent that a disclosing Party agrees to allow the receiving
Party to disclose the disclosing Party's confidential information to
any third party person or entity, the receiving Party shall assure that
such third party agrees in writing to be bound to protect and not to
disclose such confidential information on substantially equivalent
conditions as exist between the Parties with respect to such
confidential information.
5.3. Other Agreements Regarding Confidentiality
The personnel of either Party may be required to enter into additional
agreements regarding confidential information as a pre-condition of
gaining access to the other Party's premises. Personnel of one Party
present at the premises of the other Party shall refrain from obtaining
access to information that is proprietary to the customers of the other
Party. Such personnel shall comply with the other Party's reasonable
measures established to restrict such access.
6. ADDITIONAL COVENANTS
6.1. Insurance
At all times during the term of the Alliance, each Party shall carry
and maintain workers' compensation and employers' liability insurance
adequate to insure fully
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against losses or damages to Intel's or Williams' personnel, customers,
property or other contractor's personnel or property caused by their
respective activities. If requested, each Party will furnish to the
other certificates of insurance or other appropriate documentation
(including evidence of renewal of insurance) evidencing all coverage
referenced above and naming the other Party as an additional insured.
Each Party will furnish the other notice of the expiration of
cancellation of any insurance policy required pursuant hereto.
6.2. ****
7. TERMINATION AND TRANSITION
7.1. General
While the Parties intend to develop a long term relationship, under the
following circumstances, the Alliance may be terminated in whole or in
part by either Party.
If either Party breaches any Alliance Agreement in a manner that has a
material adverse effect on the commercial value of the Alliance to the
other Party; **** Party, becomes incapable of meeting the requirements
set forth in the **** . In such event, the right to cure set as set
forth in Section 7.2 shall only apply if the condition giving rise to
the right to terminate is capable of being cured, without the
likelihood of its recurrence.
7.1.1. The Party having the right to terminate shall exercise its termination
right within a reasonable period of time, but in no event more than 180
days from actual notice of the event or circumstances permitting
termination by such Party.
7.2. The rights to terminate provided in this Section 7 are contingent upon
the Party seeking to terminate providing written notice of its intent
to terminate, and the passage of a sixty-day (60) period during which
the non-terminating Party, if applicable, may cure the conditions
giving rise to such right to terminate. Provision of such cure
extinguishes the right to terminate on the basis for which the cure has
been provided.
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8. REPRESENTATIONS AND WARRANTIES OF THE PARTIES
Intel hereby represents and warrants to Williams as follows:
8.1. Organization, Standing and Authority.
Intel, and each of its Affiliates executing an Alliance Agreement, has
all requisite corporate power and authority to enter into the Alliance
Agreement(s) to which it is a party and to consummate the transactions
contemplated thereby. All corporate acts and other proceedings required
to be taken by Intel and its Affiliates to authorize the execution,
delivery and performance of the Alliance Agreements to which it is a
party and the consummation of the transactions contemplated thereby
have been duly and properly taken. Each of the Alliance Agreements to
which it is a party has been duly executed and delivered by it and
constitutes the legal, valid and binding obligation of it, enforceable
against it in accordance with its terms.
8.2. No Violation
The execution and delivery by Intel and its Affiliates of the Alliance
Agreements to which it is a Party and the consummation of the
transactions contemplated thereby and compliance with the terms thereof
will not, (i) conflict with or result in any violation of any provision
of the certificate of incorporation or by-laws of any of them, or the
comparable organizational documents of any of them, (ii) conflict with,
result in a violation or breach of, or constitute a default, or give
rise to any right of termination, revocation, cancellation, or
acceleration, under, any material contract, except for any such
conflict, violation, breach, default or right which is not reasonably
likely to have a material adverse effect on the ability of Intel and
its Affiliates to consummate the material transactions contemplated by
the Alliance Agreements or (iii) conflict with or result in a violation
of any judgment, order, decree, writ, injunction, statute, law,
ordinance, rule or regulation applicable to Intel or any of its
Affiliates or to the property or assets of Intel or any of its
Affiliates, except for any such conflict or violation which is not
reasonably likely to have such a material adverse effect.
8.3. Consents and Approvals
Except as set forth in any Alliance Agreement, no consent, approval,
license, permit, order or authorization of, registration, declaration
or filing with, or notice to, any domestic or foreign court,
administrative or regulatory agency or commission or other governmental
authority or instrumentality (each, a "Governmental Entity") is
required to be obtained or made by or with respect to Intel or any of
Intel' Affiliates in connection with the execution and delivery of the
Alliance Agreements or the consummation of the transactions
contemplated thereby.
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9. REPRESENTATIONS AND WARRANTIES OF WILLIAMS
Williams hereby represents and warrants to Intel as follows:
9.1. Organization, Standing and Authority
Williams is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Williams has all
requisite corporate power and authority to enter into the Alliance
Agreements and to consummate the transactions contemplated thereby. All
corporate acts and other proceedings required to be taken by Williams
to authorize the execution, delivery and performance of the Agreement
and the Alliance Agreements to which it is a party and the consummation
of the transactions contemplated thereby have been duly and properly
taken. Each of the Alliance Agreements has been duly executed and
delivered by Williams and constitutes the legal, valid and binding
obligation of it, enforceable against it in accordance with its terms.
9.2. No Violation
The execution and delivery by Williams of the Alliance Agreements to
which it is a party do not, and the consummation of the transactions
contemplated thereby and compliance with the thereof will not (i)
conflict with or result in any violation of any provision of the
certificate of incorporation or by-laws of Williams, (ii) conflict
with, result in a violation or breach of, or constitute a default, or
give rise to any right of termination, revocation, cancellation, or
acceleration, under, any material contract, except for any such
conflict, violation, breach, default or right which is not reasonably
likely to have a material adverse effect on the ability of Williams to
consummate the material transactions contemplated by the Alliance
Agreements or (iii) conflict with or result in a violation of any
judgment, order, decree, writ, injunction, statute, law, ordinance,
rule or regulation applicable to Williams or to the property or assets
of Williams, except for any such conflict or violation which is not
reasonably likely to have such a material adverse effect.
9.3. Consents and Approvals
Except as set forth in any Alliance Agreement, no consent, approval,
license, permit, order or authorization of, registration, declaration
or filing with, or notice to, any Governmental Entity is required to be
obtained or made by or with respect to Williams in connection with the
execution and delivery of the Alliance Agreements or the consummation
of the transactions contemplated thereby.
10. ALLIANCE GOVERNANCE
During the Term, the Parties shall designate and maintain one
individual from each Williams to serve as its representative for the
activities of the Parties under this Master Alliance Agreement or any
of the Alliance Agreements (the "Representative"). Neither
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Representative need be dedicated to the Alliance, but needs to be
available as the primary day-to-day interface between the Parties.
Either Party may change their designated Representative upon notice to
the other Party pursuant to Section 12.13.
In addition, the Representative shall be responsible for initiating any
requests to form ad-hoc or permanent committees. If mutually agreed,
the Parties shall form such committees which would be empowered to
discuss and implement specific concepts or to oversee certain activity.
In any such event, the Parties will establish such committee by way of
written amendment to this Agreement (but not for regular meetings of
the Parties' employees in the ordinary course of doing business with
one another) specifying the purpose of the committee, membership,
meeting times, and any authority such committee may have.
11. ****
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12. GENERAL PROVISIONS
12.1. Further Agreements
Further agreements to implement the Alliance may be appropriate.
Therefore, upon reasonable request of a Party, the Parties shall meet
and negotiate in good faith to determine if additional Alliance
Agreements are appropriate and the terms and conditions of any such
agreements.
12.2. Assignment
Except for the assignment of the Agreement by either Party pursuant to
the sale or transfer of all or substantially all of such Party's
assets, neither Party may assign nor delegate any of its rights or
obligations under this Agreement without the written consent of the
other Party, provided that each Party may assign this Agreement to any
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Affiliate, so long as such assigning Party guarantees the Affiliate's
performance. Notwithstanding the foregoing, the Parties mutually Agree
that as of the Agreement Effective Date, Intel had not yet determined
the final legal entity status for its IDS business and that Intel
Corporation may assign this Agreement, including any Alliance
Agreements executed pursuant hereto, to such IDS legal entity when
finally determined and established by Intel.
12.3. Force Majeure
If either Party's performance of this Agreement or any obligation
(other than the obligation to make payments for services rendered under
one of the Alliance Agreements) hereunder is prevented, restricted or
interfered with by causes beyond its reasonable control including, but
not limited to, acts of God, fire, explosion, vandalism, power grid
outages (beyond any required battery back-up or generator capacity),
storm or other similar occurrence including rain fade or other
atmospheric conditions, any law, order, regulation, direction, action
or request of the United States Government or national, state or local
governments, 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, or by national
emergencies, insurrections, riots, wars, acts of terrorism, strikes,
lockouts or work stoppages or other labor difficulties, supplier
failures, shortages, breaches or delays, then the Party affected by
such force majeure event (the "Affected Party") shall be excused from
such performance for a time period commensurate with the duration of
such prevention, restriction or interference. The Affected Party shall
use commercially reasonable efforts under the circumstances to avoid
and remove such causes of non-performance and shall proceed to perform
with reasonable dispatch whenever such causes cease.
12.4. Regulatory Compliance
The Parties acknowledge that the services provided by Williams to Intel
under the Services Agreement are subject to federal and state statutes
and regulations, including without limitation the Communications Act of
1934 (as amended from time to time) (the "Act") and the regulations
promulgated by the Federal Communications Commission ("FCC").
Notwithstanding anything to the contrary contained in any Alliance
Agreement, the Parties will not take any action in connection with the
Alliance which would constitute a violation of applicable law or take an
action which requires FCC or other approval without first obtaining such
approval.
12.5. Third Party Warranties
Each Party shall enforce any rights, warranties, licenses, terms and
conditions and other benefits accruing to it under each of its
agreements with third parties participating in or providing equipment,
software or other services used in connection with the provision of
services under the Alliance Agreements wherever and whenever such
Party's failure to enforce any such rights, warranties, licenses,
terms, conditions and
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<PAGE> 15
Proprietary and Confidential
other benefits could materially impair its ability to provide such
services in accordance with the terms and conditions of the Alliance
Agreements.
12.6. Costs and Expenses
Except as otherwise specifically agreed to by the Parties in writing,
each Party will be responsible for its own expenses arising under this
Agreement.
12.7. Amendment
No amendment of this Agreement shall be valid or binding on the Parties
unless such amendment shall be in writing and duly executed by an
authorized representative of each Party.
12.8. Headings
Headings contained herein shall in no way limit the subject matter they
introduce and shall not be used in construing this Agreement.
12.9. Publicity
Neither Party shall make a public announcement or disclosure about this
Agreement or the Parties' discussions related to any aspect of it
without the written consent of the other Party. Subject to obligations
of confidentiality as set forth in Section __5__, either of the Parties
may at anytime make announcements which are required by applicable law,
regulatory bodies, or stock exchange or stock association rules, so
long as the Party so required to make the announcement, promptly upon
learning of such requirement, notifies the other Party of such
requirement and discusses with the other Party in good faith that exact
wording of any such announcement.
12.10. Execution
This Agreement shall be executed in two duplicate copies, one for each
Party, each of which copies shall be deemed an original.
12.11. Limitation of Liability
Except as may otherwise be expressly set forth in a specific Alliance
Agreements with regard thereto, neither Party, nor its officers,
employees, agents, partners, Affiliates or subcontractors shall be
liable to the other Party, its officers, employees, agents, partners,
Affiliates or subcontractors for claims for incidental, indirect,
consequential, exemplary, punitive, or other special damages,
including, but not limited to, damages for a loss of profits or
opportunity costs, connected with or resulting from any performance or
lack of performance under any Alliance Agreement regardless of whether
a claim is based on contract, warranty, tort (including negligence),
theory of strict liability, or any other legal or equitable principle.
-15-
<PAGE> 16
Proprietary and Confidential
12.12. Relationship of Parties
The Alliance Agreements individually or in the aggregate shall not be
construed to create a partnership, joint venture, or any other form of
legal entity.
12.13. Notices
Any notice, request, instruction or other document to be given
hereunder by any Party to any other Party under any section of this
Agreement shall be in writing and shall be deemed given upon receipt if
delivered personally or by telex or facsimile, the next day if by
express mail or three days after being sent by registered or certified
mail, return receipt requested, postage prepaid to the following
addresses (or at such other address for a Party as shall be specified
by like notice provided that such notice shall be effective only after
receipt thereof):
If to IDS: Intel Internet Data Services
20400 NW Amberwood Drive
Beaverton, OR 97006
Attn: General Manager
(408) 765-4280 - voice
(408)765-6767 - fax
with a copy
(which shall
not constitute
notice) to: Intel Corporation
2200 Mission College Blvd.
Santa Clara, CA 95052
Attn: General Counsel
(408) 765-1136 - voice
(408) 765-1859 - fax
If to Williams: Williams Communications, Inc.
One Williams Center, Suite 26-B
Tulsa, OK 74172
Attn: Contract Administration
Fax: 918-573-6578
Telephone: 918-573-6277
-16-
<PAGE> 17
Proprietary and Confidential
with a copy Williams Communications, Inc.
(which shall One Williams Center, Suite 4100
not constitute Tulsa, OK 74172
notice) to: Attn: General Counsel
Fax: 918-573-3005
Telephone: 918-573-4205
12.14. Severability
In case 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 by a court or other authority of competent jurisdiction,
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 and, in lieu of each such illegal, invalid or unenforceable
provision, there shall be added automatically as a part of this
Agreement a provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and
enforceable, it being the intent of the Parties to maintain the benefit
of the bargain for both Parties.
12.15. Governing Law
Any claims arising under or relating to this Agreement shall be
governed by the internal substantive laws of the State of Delaware or
federal courts located in Delaware, without regard to principles of
conflict of laws. Each Party hereby agrees to jurisdiction and venue in
the courts of the State of Delaware for all disputes and litigation
arising under or relating to this Agreement. This provision is meant to
comply with 6 Del. C. Section 2708(a).
12.16. Rules of Construction
Words used in this Agreement, regardless of the gender specifically
used, shall be deemed and construed to include any other gender as the
context requires. As used in this Agreement, the word "including" is
not limiting, and the word "or" is not exclusive. Except as
specifically otherwise provided in this Agreement in a particular
instance, a reference to a Section, Schedule or Exhibit is a reference
to a Section of this Agreement or a Schedule or Exhibit hereto, and the
terms "this Agreement," "hereof," "herein," and other like terms refer
to this Agreement as a whole, including the Schedules to this
Agreement, and not solely to any particular part of this Agreement. The
descriptive headings in this Agreement are inserted for convenience of
reference only and are not intended to be part of or to affect the
meaning or interpretation of this Agreement. The Parties to this
Agreement do not intend that any other Person shall obtain any rights
as third party beneficiaries of this Agreement.
-17-
<PAGE> 18
Proprietary and Confidential
12.17. Survival and Provisions Applicable to Other Alliance Agreements
Sections 1, 3, 4, 5, 8, 9, and 12 of this Agreement shall apply to and
be deemed incorporated into the other Alliance Agreements and shall
continue to be in force for the duration of such Alliance Agreements,
regardless of the term of this Agreement. Upon any expiration or
termination of this Agreement, Sections hereof which by their nature
ought to survive shall so survive.
INTEL CORPORATION WILLIAMS COMMUNICATIONS, INC.
- ------------------------------- ----------------------------------
Signature Signature
- ------------------------------- ----------------------------------
Printed Name Printed Name
- ------------------------------- ----------------------------------
Title Title
- ------------------------------- ----------------------------------
Date Date
-18-
<PAGE> 1
Redacted portions have been marked with asterisks (****). Confidential treatment
has been requested for the redacted portions. The confidential redacted portions
have been filed separately with the Securities and Exchange Commission.
CONFIDENTIAL TREATMENT
EXHIBIT 10.5
MEMORANDUM OF UNDERSTANDING (MOU)
REGARDING THE LEASE OF FIBER STRANDS
BY METROMEDIA FIBER NETWORK SERVICES, INC. TO WILLIAMS COMMUNICATIONS, INC.
Metromedia Fiber Network Services, Inc., a Delaware corporation ("MFN")
and Williams Communications, Inc., a Delaware corporation ("Williams") intend to
enter into one or more definitive written legal agreement(s) ("Definitive
Agreement") embodying the terms set forth below. MFN and Williams are
hereinafter collectively referred to as the "Parties." The Parties understand
that this MOU creates certain binding legal obligations on MFN and Williams.
The references made to Exhibits in this MOU are alphabetic references
to the Exhibits attached to that certain Draft Fiber Lease Agreement dated May
21, 1999, (the "Draft Agreement") and are not necessarily in alphabetical order.
BACKGROUND
MFN is establishing a local fiber optic communication system consisting
of metropolitan and city loops along the routes set forth in Exhibit A, (the
"MFN Branch A System").
MFN desires to lease to Williams certain optical fibers in the MFN
Branch A System and Williams desires to lease such fibers from MFN.
In addition, the Parties desire that MFN provide maintenance and
collocation services with respect to the fibers leased to Williams on the MFN
Branch A System and the fibers on the "Branch B Connections" (as such term is
hereinafter defined).
Further, MFN desires to lease to Williams and Williams desires to
accept a lease from MFN for interconnections between the MFN Branch A System to
certain other locations ("Branch B Connections").
PROPOSED TERMS
1. MFN Fiber Lease. MFN shall lease to Williams **** miles of fiber
on the MFN Branch A System, together with Branch B Connections, under
substantially the same terms and conditions set forth in the Draft Agreement.
The Parties shall execute a Definitive Agreement substantially consistent with
and in the form of the Draft Agreement.
1
<PAGE> 2
2. Collocation. MFN will provide rack space and certain other
associated collocation services (as specified in the Draft Agreement) to
Williams at all optical amplifier, regenerator, and junction sites and at
certain points of presence along the MFN System identified in Exhibit J to the
Draft Agreement. The charge for such services will be ****
3. Definitive Agreement. This MOU is intended to set forth the material
provisions that have been agreed to by the Parties that are to be incorporated
into the Definitive Agreement. The Definitive Agreement, when executed, shall
supersede any terms and conditions expressed in this MOU or any other
communication between the Parties. The Definitive Agreement shall consist of at
least the lease between the Parties described in Section 1 hereinabove.
4. Costs/Damages. The Parties shall each pay their respective costs
incurred to complete this transaction. Neither Party shall be liable to the
other party for any incidental, consequential, reliance or other special damages
if no Definitive Agreement is executed between the Parties.
5. Confidentiality. Except as required by law, (a) the terms of this
MOU and the fact of these negotiations shall be kept confidential between the
Parties; (b) neither Party shall disclose the terms of this MOU or the fact of
these negotiations to any third party; (c) no press release or other public
communication relating to this proposed transaction shall be made unless
approved by both Parties.
6. Execution of Definitive Agreement. The Parties shall undertake to
enter into a Definitive Agreement within twenty (20) days of the effective date
of this MOU.
7. Notices. Pending execution of the Definitive Agreement, all notices
and communications concerning this MOU shall be in writing and addressed to the
other Party as set forth below each Party's signature line or at such other
address as may be designated in writing to the other Party. Unless otherwise
provided herein, notices shall be hand delivered, sent by commercial overnight
delivery service, or transmitted by facsimile, and shall be deemed served or
delivered to the addressee or its office when received at the address for notice
specified above when hand delivered, upon confirmation of sending when sent by
facsimile, or on the day after being sent when sent by overnight delivery
service.
2
<PAGE> 3
8. Choice of Law. This MOU and the Definitive Agreement shall be
governed by and construed in accordance with the domestic laws of the State of
New York without reference to its choice of law principles.
9. Facsimile Signature. This MOU shall be effective upon signature by
both Parties. This MOU may be executed in two or more counterparts, all of which
taken together shall constitute one and the same instrument, and either of the
Parties hereto may execute this MOU by signing any such counterparts. This MOU
may be duly executed and delivered by a Party by execution and facsimile
delivery of the signature page of a counterpart to the other Party, provided
that, if delivery is made by facsimile, the executing party shall promptly
deliver a complete counterpart that it has executed to the other Party.
METROMEDIA FIBER
NETWORK SERVICES, INC. WILLIAMS COMMUNICATIONS, INC.
By: By:
------------------------- -------------------------
Title: Title:
---------------------- ----------------------
Date: Date:
----------------------- -----------------------
Notice Address: Notice Address:
Attn: Howard Finkelstein Attn: Todd Steele
President Director, Business Development and
Metromedia Fiber Network Services, Inc. Planning
One North Lexington Ave. Williams Communications, Inc
White Plains, NY 10601 One Williams Center, MD-RC-3
914-421-6777 (fax) Tulsa, Oklahoma 74172
918-573-0411
3
<PAGE> 1
Redacted portions have been marked with asterisks (****). Confidential treatment
has been requested for the redacted portions. The confidential redacted portions
have been filed separately with the Securities and Exchange Commission.
CONFIDENTIAL TREATMENT
EXHIBIT 10.6
MEMORANDUM OF UNDERSTANDING (MOU)
REGARDING THE LEASE OF FIBER STRANDS
BY WILLIAMS COMMUNICATIONS, INC. TO METROMEDIA FIBER NETWORK SERVICES, INC.
Williams Communications, Inc., a Delaware corporation ("Williams") and
Metromedia Fiber Network Services, Inc., a Delaware corporation, or a subsidiary
of MFN yet to be formed (collectively "MFN"), intend to enter into one or more
definitive written legal agreement(s) ("Definitive Agreement") embodying the
terms set forth below. MFN and Williams are hereinafter collectively referred to
as the "Parties." The Parties understand that this MOU creates certain binding
legal obligations on Metromedia Fiber Network Services, Inc. and Williams.
The references made to Exhibits in this MOU are alphabetic references
to drafts of Exhibits dated May 20, 1999 at 10:00 p.m. Central Time to be
attached to the Definitive Agreement which will reference such Exhibits
similarly to those made in that certain Draft Fiber Lease Agreement dated May
21, 1999, (the "Draft Agreement") and are not necessarily in alphabetical order.
BACKGROUND
Williams is establishing a national fiber optic communication system
consisting of the backbone and city spurs along the routes set forth on Exhibit
A (the "Williams Branch A System").
Williams desires to lease to MFN certain optical fibers in the Williams
Branch A System, and MFN desires to lease such fibers from Williams.
In addition, the Parties desire that Williams provide maintenance and
collocation services with respect to the fibers leased to MFN on the Williams
Branch A System.
Further, Williams desires to lease to MFN and MFN desires to accept a
lease from Williams of interconnections between the Williams Branch A System and
certain other locations ("Branch B Connections").
PROPOSED TERMS
1. Williams Fiber Lease. Williams shall lease to MFN **** miles of
fiber on the Williams Branch A System along each of the segments of the Williams
Branch A System identified
1
<PAGE> 2
in Exhibit D, together with any Branch B Connections that MFN desires (the
"Williams Fiber Lease"), under substantially the same terms and conditions set
forth in the Draft Agreement to the extent such terms and conditions are
applicable and are not inconsistent with the provisions relating to the Williams
Fiber Lease contained in this MOU, including the background provisions recited
hereinabove. The Parties shall execute a Definitive Agreement substantially
consistent with and in the form of the Draft Agreement.
2. Collocation. Williams will provide rack space and certain other
associated collocation services as specified in the Draft Agreement to MFN at
all optical amplifier, regenerator, and junction sites and at certain points of
presence along the Williams System identified in Exhibit J. The charge for such
services will be **** Prior to execution of the Definitive Agreement, MFN shall
determine the number of racks it will need at each site identified in Exhibit J.
**** MFN shall be required to pay for such number of racks at each site
identified in Exhibit J ****at each site set forth in Exhibit D for the minimum
term set forth in the Definitive Agreement.
3. Definitive Agreement. This MOU is intended to set forth the material
provisions that have been agreed to by the Parties that are to be incorporated
into the Definitive Agreement. The Definitive Agreement, when executed, shall
supersede any terms and conditions expressed in this MOU or any other
communication between the Parties. The Definitive Agreement shall consist of at
least the lease between the Parties described in Section 1. hereinabove.
4. Costs/Damages. The Parties shall each pay their respective costs
incurred to complete this transaction. Neither Party shall be liable to the
other party for any incidental, consequential, reliance or other special damages
if no Definitive Agreement is executed between the Parties.
5. Confidentiality. Except as required by law, (a) the terms of this
MOU and the fact of these negotiations shall be kept confidential between the
Parties; (b) neither Party shall disclose the terms of this MOU or the fact of
these negotiations to any third party; (c) no press release or other public
communication relating to this proposed transaction shall be made unless
approved by both Parties.
6. Execution of Definitive Agreement. The Parties shall undertake to
enter into a Definitive Agreement within twenty (20) days of the effective date
of this MOU.
2
<PAGE> 3
7. Notices. Pending execution of the Definitive Agreement, all notices
and communications concerning this MOU shall be in writing and addressed to the
other Party as set forth below each Party's signature line or at such other
address as may be designated in writing to the other Party. Unless otherwise
provided herein, notices shall be hand delivered, sent by commercial overnight
delivery service, or transmitted by facsimile, and shall be deemed served or
delivered to the addressee or its office when received at the address for notice
specified above when hand delivered, upon confirmation of sending when sent by
facsimile, or on the day after being sent when sent by overnight delivery
service.
8. Choice of Law. This MOU and the Definitive Agreement shall be
governed by and construed in accordance with the domestic laws of the State of
New York without reference to its choice of law principles.
9. Facsimile Signature. This MOU shall be effective upon signature by
both Parties. This MOU may be executed in two or more counterparts, all of which
taken together shall constitute one and the same instrument, and either of the
Parties hereto may execute this MOU by signing any such counterparts. This MOU
may be duly executed and delivered by a Party by execution and facsimile
delivery of the signature page of a counterpart to the other Party, provided
that, if delivery is made by facsimile, the executing party shall promptly
deliver a complete counterpart that it has executed to the other Party.
METROMEDIA FIBER
NETWORK SERVICES, INC. WILLIAMS COMMUNICATIONS, INC.
By: By:
------------------------------- --------------------------------
Title: Title:
---------------------------- -----------------------------
Date: Date:
----------------------------- ------------------------------
Notice Address: Notice Address:
Attn: Howard Finkelstein Attn: Todd Steele
President Director, Business Development and
Metromedia Fiber Network Services, Inc. Planning
One North Lexington Ave. Williams Communications, Inc
White Plains, NY 10601 One Williams Center, MD-RC-3
914-421-6777 (fax) Tulsa, Oklahoma 74172
918-573-0411
3
<PAGE> 1
EXHIBIT 10.7
- --------------------------------------------------------------------------------
LOAN AGREEMENT
Dated as of April 16, 1999
among
WILLIAMS COMMUNICATIONS GROUP, INC.,
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent
and
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
NATIONSBANC MONTGOMERY SECURITIES LLC
Joint Lead Arranger and Book Manager
CHASE SECURITIES INC.
Joint Lead Arranger and Book Manager and Syndication Agent
BANK OF MONTREAL
Co-Documentation Agent
THE BANK OF NEW YORK
Co-Documentation Agent
- --------------------------------------------------------------------------------
================================================================================
<PAGE> 2
LOAN AGREEMENT
This Agreement dated as of April 16, 1999, is entered into among Williams
Communications Group, Inc., a Delaware corporation (the "Borrower"), the
financial institutions from time to time party to this Agreement (the "Banks"),
Bank of America National Trust and Savings Association, a national banking
association, as administrative agent for the Banks (together with any successor
administrative agent hereunder, the "Administrative Agent"), Bank of Montreal,
as co-documentation agent, and The Bank of New York, as co-documentation agent
(together with Bank of Montreal, the "Co-Documentation Agents").
1. DEFINITIONS
All capitalized terms used but not defined herein shall have the meanings
set forth in Schedule 1 attached hereto.
2. LOAN AMOUNT AND TERMS
2.1 The Revolving Credit. Subject to the terms and conditions herein set
forth, each Bank severally agrees to make loans to the Borrower (each such loan,
a "Loan") from time to time on any Business Day prior to the Final Maturity Date
in an aggregate amount not to exceed at any time outstanding the amount set
forth on Schedule 2 (such amount, as the same may reduce pursuant to Section
3.10 or vary as a result of one or more assignments under Section 8.13, such
Bank's "Commitment"); provided, however, that the aggregate principal amount of
all outstanding Loans shall not at any time exceed the combined Commitments of
all of the Banks. Within the limits of each Bank's Commitment, and subject to
the other terms and conditions hereof, the Borrower may borrow under this
Section 2.1, prepay under Section 3.2 and reborrow under this Section 2.1.
2.2 Interest Rate. Subject to Section 3.6 hereof, the Loans shall bear
interest on the outstanding principal amount thereof at a rate per annum equal
to the Offshore Rate or the Base Rate, plus the Applicable Margin.
2.3 Procedure for Borrowing. Each request for borrowing shall be made by
the Borrower's irrevocable written notice delivered to the Administrative Agent
in the form attached hereto as Exhibit A (a "Notice of Borrowing") which Notice
of Borrowing must be received by the Administrative Agent prior to 11:00 a.m.
New York time (i) three (3) Business Days prior to the requested Borrowing Date,
in the case of an Offshore Rate Loan, and (ii) one (1) Business Day prior to the
requested Borrowing Date, in the case of a Base Rate Loan. Such a Notice of
Borrowing shall specify the amount of the borrowing (which shall be in an
aggregate minimum amount of $10,000,000, in the case of an Offshore Rate Loan,
and $5,000,000, in the case of a Base Rate Loan, or, in each case, a multiple of
$1,000,000 in excess thereof), the requested Borrowing Date and whether the Loan
shall constitute an Offshore Rate Loan or Base Rate Loan, and, to the extent
that such Loan shall constitute an Offshore Rate Loan, the initial Interest
Period therefor. The Administrative Agent will promptly notify each Bank of its
receipt of any Notice of Borrowing and of the amount of such Bank's Pro Rata
Share of that borrowing. Each Bank will make the amount of its Pro Rata Share of
each borrowing available to the Administrative Agent for the account of the
Borrower at the Administrative Agent's payment office by 11:00 a.m. New York
time on the specified Borrowing Date requested by the Borrower in funds
immediately available to the Administrative Agent.
2.4 Conversion and Continuation Elections. The Borrower may, upon
irrevocable written notice to the Administrative Agent in the form attached
hereto as Exhibit B (a "Notice of Conversion/Continuation"), elect as of any
Business Day, in the
<PAGE> 3
case of Base Rate Loans, or as of the last day of the applicable Interest
Period, in the case of Offshore Rate Loans, to convert any Loan to a Base Rate
Loan or, if there is no Default or Event of Default at the time of such notice
and at the Borrowing Date, to convert any Loan into, or continue any Loan as an
Offshore Rate Loan. The Borrower shall deliver a Notice of
Conversion/Continuation to be received by the Administrative Agent not later
than 11:00 a.m. New York time at least (i) three (3) Business Days in advance of
the conversion/continuation date, if the Loan is to be converted into or
continued as an Offshore Rate Loan, or (ii) at least one (1) Business Day prior
to the conversion/continuation date, if the Loan is to be converted to a Base
Rate Loan. If upon the expiration of any Interest Period during which interest
on any Loan is based on the Offshore Rate, the Borrower has failed to timely
select a new Interest Period to be applicable to such Offshore Rate Loan, the
Borrower shall be deemed to have elected to continue the Loan as an Offshore
Rate Loan with an Interest Period of one month effective as of the expiration of
such Interest Period; provided, however, that if any Default or Event of Default
then exists, the Borrower shall be deemed to have elected to convert any
Offshore Rate Loan to a Base Rate Loan effective as of the expiration date of
such Interest Period. The Administrative Agent will promptly notify each Bank of
its receipt of a Notice of Conversion/Continuation, or, if no timely notice is
provided by the Borrower, the Administrative Agent will promptly notify each
Bank of the details of any automatic conversion. All conversions and
continuations shall be made ratably according to the respective outstanding
principal amounts of the Loans with respect to which the notice was given held
by each Bank.
2.5 Limitation on Availability of Offshore Rate. No Bank shall have an
obligation to accept an election for an Offshore Rate Loan if any of the
following described events has occurred and is continuing: U.S. Dollar deposits
in the principal amount, and for periods equal to the interest period, of the
Loan are not available in the London interbank market; or the Offshore Rate does
not accurately reflect the cost of an Offshore Rate Loan; or any Bank determines
that it is unlawful for such Bank to make or to maintain Offshore Rate Loans. If
the obligation of any Bank to make an Offshore Rate Loan has been suspended
under this Section, the Administrative Agent shall so notify the Borrower and
the Borrower may elect, by giving notice to the Bank through the Administrative
Agent, that all Loans which would otherwise be made by that Bank as Offshore
Rate Loans shall be instead Base Rate Loans.
2.6 Interest Payments. Interest on each Loan shall be paid in arrears on
each Interest Payment Date. Interest shall also be paid on the date of any
prepayment of any Loan for the portion of the Loan so prepaid and upon payment
(including prepayment) in full thereof, and, during the existence of any Event
of Default, interest shall be paid on demand of the Administrative Agent at the
request or with the consent of the Majority Banks.
2.7 Maturity. The Borrower will repay to the Banks on the Final Maturity
Date the aggregate principal amount of Loans outstanding on such date. No
Interest Period for any Loan shall extend beyond the Final Maturity Date.
2.8 Commitment Fee. The Borrower shall pay to the Administrative Agent for
the account of each Bank a commitment fee on the average daily unused portion of
such Bank's Commitment, computed on a quarterly basis in arrears on the last
Business Day of each calendar quarter based upon the average of the daily
unutilized amounts during that quarter as calculated by the Administrative
Agent, equal to 0.125% per annum. Such commitment fee shall accrue from the date
hereof to the Final Maturity Date and shall be due and payable quarterly in
arrears on the last Business Day of each calendar quarter, with the final
payment to be made on the Final Maturity Date. The commitment fee shall accrue
at all times from the date hereof, including at any time during which one or
more conditions in Section 4 are not met.
-2-
<PAGE> 4
2.9 Utilization Fee. The Borrower also shall pay to the Administrative
Agent for the account of each Bank a utilization fee, based on the aggregate
principal amount of Loans outstanding, for each day during the term hereof that
the aggregate principal amount of Loans outstanding exceeds 50% of the combined
Commitments of the Banks, computed on the last Business Day of each calendar
quarter, equal to 0.125% per annum. Such utilization fee shall accrue from the
date hereof to the Final Maturity Date and shall be due and payable quarterly in
arrears on the last Business Day of each calendar quarter, with the final
payment to be made on the Final Maturity Date.
2.10 Arrangement, Agency Fees. The Borrower also shall pay the arrangement
fees and the administrative fee as required by the Fee Letters and other fees
referenced in Section 4.1(i) of this Agreement.
3. PAYMENTS AND COSTS
3.1 Notes. The Loans made by each Bank shall be evidenced by one or more
promissory notes (the "Notes"), each in the form attached hereto as Exhibit C.
Each such Bank shall endorse on the schedule annexed to its Note(s) the date,
amount and maturity of each Loan made by such Bank and the amount of each
payment of principal made by the Borrower with respect thereto. Each such Bank
is irrevocably authorized by the Borrower to endorse its Note(s) and each Bank's
record shall be conclusive absent manifest error; provided, however, that the
failure of a Bank to make, or an error in making, a notation thereon with
respect to any Loan shall not limit or otherwise affect the obligations of the
Borrower hereunder or under any such Note to such Bank.
3.2 Optional Prepayments. The Borrower may, at any time and from time to
time, upon not less than three (3) Business Days' irrevocable prior notice to
the Administrative Agent in the case of an Offshore Rate Loan, or one (1)
Business Day's irrevocable prior notice in the case of a Base Rate Loan, prepay
any Loan in minimum amounts of $10,000,000 in the case of an Offshore Rate Loan,
or $5,000,000 in the case of a Base Rate Loan, or, in each case, in multiples of
$1,000,000 in excess thereof. Such notice of prepayment shall specify the date
and amount of such prepayment and the type of Loan to be prepaid. The
Administrative Agent will promptly notify each Bank of its receipt of any such
notice, and of such Bank's Pro Rata Share of such prepayment. If such notice is
given by the Borrower, the Borrower shall make such prepayment and the payment
amount specified in such notice shall be due and payable on the date specified
therein, together with accrued interest to such date on the amount prepaid and
any amounts due as described in Section 3.7.
3.3 Taxes. (a) The Borrower will not deduct any foreign taxes from any
payments it makes to the Administrative Agent for the account of any Bank. If
any such taxes are imposed on any payments made by the Borrower (including
payments under this paragraph), the Borrower will pay the taxes and will also
pay to the Administrative Agent for the account of such Bank, at the time
interest is paid, any additional amount necessary to preserve the after-tax
yield the Bank would have received if such taxes had not been imposed. The
Borrower will confirm that it has paid the taxes by giving the Bank official tax
receipts (or notarized copies) within 30 days after the Borrower's receipt
thereof.
(b) Payments made by the Borrower to the Administrative Agent for the
account of any Bank will be made without deduction of United States withholding
or similar taxes. If the Borrower is required to pay U.S. withholding taxes, the
Borrower will pay such taxes in addition to the amounts due to the
Administrative Agent for the account of such Bank under this Agreement. If the
Borrower fails to make such tax payments when due, the Borrower agrees to
indemnify each Bank and the Administrative Agent against any liability for such
taxes, as well as for any related interest, expenses, additions to tax, or
penalties asserted against or suffered by the Administrative Agent or any Bank
with respect to such taxes.
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3.4 Additional Costs. The Borrower will pay the Administrative Agent for
the account of any Bank, on demand, an amount sufficient to compensate such Bank
for any increase in cost to such Bank of agreeing to make or making, funding or
maintaining Offshore Rate Loans, to the extent such increase is due to any new,
or change to any existing, statute, regulation or policy or the application or
interpretation thereof, or any request or requirement of a government, central
bank or regulatory agency which is applicable to banks or to companies that
control banks. Such costs will be allocated to a Bank's Loans in a manner
determined by the Bank, using any reasonable method.
3.5 Computation of Fees and Interest. All computations of interest
determined by reference to the Base Rate shall be made on the basis of a year of
365 or 366 days, as the case may be, if based on the reference rate and actual
days elapsed. Except as otherwise stated in this Agreement, all other interest
and fees, if any, will be computed on the basis of a 360-day year and the actual
number of days elapsed.
3.6 Default Rate. Upon the occurrence and during the continuation of any
Event of Default under this Agreement, all amounts outstanding under this
Agreement will bear interest at a rate per annum which is determined by adding
2% per annum to the Applicable Margin then in effect. This will not constitute a
waiver of any Event of Default.
3.7 Funding Losses. The Borrower shall reimburse each Bank for any amounts
required to compensate such Bank for any additional losses, costs or expenses
("Funding Losses") which it may reasonably incur as a consequence of: the
failure of the Borrower to make on a timely basis any payment of principal of
any Offshore Rate Loan; the failure of the Borrower to borrow, continue or
convert a Loan after the Borrower has given a Notice of Borrowing or a Notice of
Conversion/Continuation; the failure of the Borrower to make any prepayment in
accordance with any notice delivered pursuant to Section 3.2; or the prepayment
or other payment (including after acceleration thereof) of an Offshore Rate Loan
on any day that is not the last day of the relevant Interest Period. Funding
Losses shall include, without limitation, any loss, cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds obtained by
the Bank to fund or maintain its Offshore Rate Loans. In addition, the Borrower
shall reimburse each of the Banks named on the original Commitment schedule
attached hereto and hold each such Bank harmless from Funding Losses which such
Bank may sustain or incur as a consequence of the assignment of any portion of
its Loans and Commitment hereunder to one or more Eligible Assignees at any time
or times during the sixty (60) day period immediately following the date hereof.
3.8 Payments by the Borrower. (a) All payments by the Borrower hereunder
shall be in U.S. Dollars and in immediately available funds, and shall be made
by no later than 3:00 p.m. New York time on the date of payment specified
herein. All payments to be made by the Borrower shall be made without set-off,
recoupment or counterclaim. Except as otherwise expressly provided herein, all
payments by the Borrower shall be made to the Administrative Agent for the
account of the Banks at the Administrative Agent's payment office. The
Administrative Agent will promptly distribute to each Bank its Pro Rata Share
(or other applicable share as expressly provided herein) of such payment in like
funds as received. Any payment received by the Administrative Agent later than
3:00 p.m. New York time shall be deemed to have been received on the following
Business Day and any applicable interest or fee shall continue to accrue.
Subject to the provisions set forth in the definition of "Interest Period"
herein, whenever any payment is due on a day other than a Business Day, such
payment shall be made on the following Business Day, and such extension of time
shall in such case be included in the computation of interest or fees, as the
case may be.
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(b) Unless the Administrative Agent receives notice from the Borrower
prior to the date on which any payment is due to the Banks that the Borrower
will not make such payment in full as and when required, the Administrative
Agent may assume that the Borrower has made such payment in full to the
Administrative Agent on such date in immediately available funds and the
Administrative Agent may (but shall not be so required), in reliance upon such
assumption, distribute to each Bank on such due date an amount equal to the
amount then due such Bank. If and to the extent the Borrower has not made such
payment in full to the Administrative Agent, each Bank shall repay to the
Administrative Agent on demand such amount distributed to such Bank, together
with interest thereon at the Federal Funds Rate for each day from the date such
amount is distributed to such Bank until the date repaid.
3.9 Payments by the Banks to the Administrative Agent. (a) Unless the
Administrative Agent receives notice from a Bank on or prior to the initial
Borrowing Date or, with respect to any borrowing after the initial Borrowing
Date, at least one Business Day prior to the date of such borrowing, that such
Bank will not make available as and when required hereunder to the
Administrative Agent for the account of the Borrower the amount of that Bank's
Pro Rata Share of the borrowing, the Administrative Agent may assume that each
Bank has made such amount available to the Administrative Agent in immediately
available funds on the Borrowing Date and the Administrative Agent may (but
shall not be so required), in reliance upon such assumption, make available to
the Borrower on such date a corresponding amount. If and to the extent any Bank
shall not have made its full amount available to the Administrative Agent in
immediately available funds and the Administrative Agent in such circumstances
has made available to the Borrower such amount, that Bank shall on the Business
Day following such Borrowing Date make such amount available to the
Administrative Agent, together with interest at the Federal Funds Rate for each
day from the date of advancement by the Administrative Agent to the Borrower
until the date the Bank makes such amount available to the Administrative Agent.
A notice of the Administrative Agent submitted to any Bank with respect to
amounts owing under this subsection (a) shall be conclusive, absent manifest
error. If such amount is so made available, such payment to the Administrative
Agent shall constitute such Bank's Loan on the Borrowing Date for all purposes
of this Agreement. If such amount is not made available to the Administrative
Agent on the Business Day following the Borrowing Date, the Administrative Agent
will notify the Borrower of such failure to fund and, upon demand by the
Administrative Agent, the Borrower shall pay such amount to the Administrative
Agent for the Administrative Agent's account, together with interest thereon for
each day elapsed since the Borrowing Date, at a rate per annum equal to the
interest rate applicable at the time to the Loans comprising such borrowing.
(b) The failure of any Bank to make any Loan on any Borrowing Date
shall not relieve any other Bank of any obligation hereunder to make a Loan on
such Borrowing Date, but no Bank shall be responsible for the failure of any
other Bank to make the Loan to be made by such other Bank on any Borrowing Date.
3.10 Mandatory Prepayments; Mandatory Commitment Reductions. If the
Borrower shall issue or sell any bonds, notes or other evidence of indebtedness
for borrowed money (other than the Notes and the contemplated issuance of the
Borrower's high yield notes), or enter into any agreement pursuant to which
credit is extended to the Borrower by any bank or other financial institution or
institutions (other than short-term borrowings pursuant to uncommitted lines of
credit), the Borrower shall promptly notify the Administrative Agent of the
estimated net cash proceeds to be received by the Borrower in respect thereof.
Promptly upon, and in no event later than five (5) days after, receipt by the
Borrower of such proceeds, the Borrower shall prepay the Loans in an aggregate
amount equal to the amount of such proceeds (or such lesser amount as may be
required to prepay all Loans then outstanding, accrued interest thereon, any
amounts owed pursuant to Section 3.7, and all accrued commitment fees). Any
prepayment pursuant to
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this Section 3.10 shall be applied first to any Base Rate Loans then outstanding
and then to Offshore Rate Loans with the shortest Interest Periods remaining.
The Borrower shall pay, together with each prepayment under this Section 3.10,
accrued interest on the amount prepaid and any amounts required pursuant to
Section 3.7. The Commitment of each Bank shall automatically be reduced by an
amount equal to such Bank's ratable share of the proceeds received by the
Borrower, effective as of the earlier of the date that prepayment is made or the
date by which such prepayment is due and payable hereunder. All accrued
commitment fees to, but not including, the effective date of any reduction or
termination of Commitments, shall be paid on the effective date of such
reduction or termination.
3.11 Sharing of Payments, Etc. If, other than as expressly provided
elsewhere herein, any Bank shall obtain on account of the Loans made by it any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off or otherwise) in excess of its ratable share, such Bank shall
immediately (a) notify the Administrative Agent of such fact, and (b) purchase
from the other Banks such participations in the Loans made by them as shall be
necessary to cause such purchasing Bank to share the excess payment pro rata
with each of them; provided, however, that if all or any portion of such excess
payment is thereafter recovered from the purchasing Bank, such purchase shall to
that extent be rescinded and each other Bank shall repay to the purchasing Bank
the purchase price paid therefor, together with an amount equal to such paying
Bank's ratable share (according to the proportion of (i) the amount of such
paying Bank's required repayment to (ii) the total amount so recovered from the
purchasing Bank) of any interest or other amount paid or payable by the
purchasing Bank in respect of the total amount so recovered. The Borrower agrees
that any Bank so purchasing a participation from another Bank may, to the
fullest extent permitted by law, exercise all its rights of payment (including
the right of set-off) with respect to such participation as fully as if such
Bank were the direct creditor of the Borrower in the amount of such
participation. The Administrative Agent will keep records (which shall be
conclusive and binding in the absence of manifest error) of participations
purchased under this Section and will in each case notify the Banks following
any such purchase or repayment.
4. CONDITIONS
4.1 Conditions to Initial Loans. The obligation of each Bank to make its
initial Loan hereunder is subject to the conditions that the Administrative
Agent shall have received on or before the initial Borrowing Date all of the
following, in form and substance satisfactory to the Administrative Agent and
each Bank, and in sufficient copies or originals for each Bank:
(a) This Agreement, duly executed by each party hereto;
(b) Notes duly executed by the Borrower and payable to the order of
each of the Banks in the amount of such Bank's initial Commitment hereunder;
(c) The Guarantee (the "Guarantee") in form and substance
satisfactory to the Banks signed by The Williams Companies, Inc. (the
"Guarantor"), guarantying all obligations of the Borrower hereunder;
(d) A copy of the Borrower's certificate of incorporation and bylaws
and copies of resolutions of the Board of Directors of the Borrower approving
and authorizing the execution, delivery and performance of this Agreement and
the Notes, each certified as of the date hereof by the Borrower's Secretary or
Assistant Secretary, and a signature and incumbency certificate of the persons
duly authorized by the Borrower to execute and deliver this Agreement and the
Notes;
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(e) Copies of the certificate of incorporation and bylaws and
resolutions of the Board of Directors of the Guarantor approving and authorizing
the execution, delivery and performance of the Guarantee, and a signature and
incumbency certificate of the officer of the Guarantor executing and delivering
the Guarantee, certified as of the date hereof by the Secretary or an Assistant
Secretary of the Guarantor;
(f) A certificate of good standing dated as of a recent date for each
of the Borrower and the Guarantor, issued by its respective jurisdiction of
incorporation;
(g) A certificate of a responsible officer of the Guarantor dated as
of the date hereof certifying that, since December 31, 1998 there has not
occurred a material adverse change in the business, assets, liabilities (actual
or contingent), operations, condition (financial or otherwise) or prospects of
the Borrower or the Guarantor and its Subsidiaries taken as a whole or in the
facts and information regarding such entities as represented to date;
(h) An opinion of counsel for the Borrower and the Guarantor;
(i) Payment of fees required to be paid at closing pursuant to the Fee
Letters or pursuant to other agreements made prior to the date hereof pertaining
to the Commitments of the Banks hereunder; and
(j) Such other documents as the Administrative Agent or any Bank may
reasonably require.
4.2 Conditions to All Borrowings. The obligation of each Bank to make any
Loan to be made by it (including its initial Loan) or to continue or convert any
Loan under Section 2.4 is subject to the satisfaction of the following
conditions precedent on the Borrowing Date or date of conversion/continuation:
(a) The Administrative Agent shall have received a Notice of Borrowing
as required under Section 2.3;
(b) The representations and warranties of the Borrower contained in
Section 5 hereof, and the representations and warranties of the Guarantor
contained in the Guarantee, shall be true and correct on and as of such date
with the same effect as if made on and as of such date;
(c) No Default or Event of Default shall exist or shall result from
such borrowing or conversion or continuation; and
(d) The Administrative Agent shall have received such other documents
as any Bank or the Administrative Agent may reasonably require.
5. REPRESENTATIONS AND WARRANTIES
When the Borrower signs this Agreement, and until the Administrative Agent
and the Banks are repaid in full, the Borrower makes the following
representations and warranties. Each Notice of Borrowing hereunder and each
Notice of Conversion/Continuation constitutes a renewed representation:
5.1 Existence and Power; Compliance with Laws. The Borrower: (a) is a
company duly formed, validly existing and in good standing under the laws of the
State of Delaware; (b) is duly qualified and in good standing under the laws of
each jurisdiction where its ownership, lease or operation of property or the
conduct of its business requires such qualification or license; and (c) is in
compliance in all material respects with all
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requirements of law, except, to the extent that the failure to do so does not
have a Material Adverse Effect.
5.2 Authorization; No Contravention. The execution, delivery and
performance by the Borrower of this Agreement and the Notes has been duly
authorized by all necessary organizational action, and do not and will not
conflict with or result in any breach or contravention of, or the creation of
any lien under, any document evidencing any contractual obligation to which the
Borrower is a party or any order, injunction, writ or decree of any court or
other governmental authority to which the Borrower or its property is subject,
or violate any requirement of law.
5.3 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
governmental authority is necessary or required for the validity of the
execution, delivery or performance by, or enforcement against, the Borrower of
this Agreement and the Notes.
5.4 Binding Effect. Each of this Agreement and the Notes constitutes the
legal, valid and binding obligation of the Borrower, enforceable against the
Borrower in accordance with their respective terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, or similar laws affecting the
enforcement of creditors' rights generally or by equitable principles relating
to enforceability, and by judicial discretion regarding the enforcement of any
applicable laws affecting remedies (whether considered in a court of law or a
proceeding in equity).
5.5 No Default. No Default or Event of Default exists or would result from
the incurring of any obligations hereunder by the Borrower.
5.6 Litigation. Except as set forth in the Guarantor's Form 10-K for the
year ended December 31, 1998 or as otherwise disclosed in writing by the
Borrower to the Banks and the Administrative Agent after the date hereof and
approved by the Majority Banks, there is no pending or, to the knowledge of the
Borrower, threatened action or proceeding affecting the Borrower or any
Subsidiary of the Borrower before any court, governmental agency or arbitrator,
which could reasonably be expected to materially and adversely affect the
financial condition or operations of the Borrower and its Subsidiaries taken as
a whole or which purports to affect the legality, validity, binding effect or
enforceability of this Agreement or any Note.
5.7 Margin Stock. Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulation U issued by the Board of Governors of the Federal Reserve
System). Following the application of the proceeds of each Loan, not more than
25% of the value of the assets of the Borrower will be represented by such
margin stock and not more than 25% of the value of the assets of the Borrower
and its Subsidiaries will be represented by such margin stock.
5.8 Investment Company. None of the Borrower, any Person controlling the
Borrower, or any Subsidiary of the Borrower, is an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
5.9 Year 2000 Compliance. The Borrower has (i) reviewed the areas within
its business and operations and those of its Subsidiaries which could be
adversely affected by failure to become "Year 2000 Compliant" (that is, that
computer applications, imbedded microchips and other systems used by the
Borrower or its Subsidiaries or their material vendors, will be able properly to
recognize and perform date-sensitive functions involving certain dates prior to
and any date after December 31, 1999); (ii) developed a detailed plan and
timetable to become Year 2000 Compliant in a timely manner; and (iii) committed
adequate resources to support its plan to become Year 2000 Compliant in a
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timely manner. Based on such review and plan the Borrower reasonably believes
that it and its Subsidiaries will become Year 2000 Compliant on a timely basis
except to the extent that a failure to do so would not reasonably be expected to
have a material adverse effect on the business, assets or financial condition of
the Borrower and its Subsidiaries, taken as a whole, or on the ability of the
Borrower to perform its obligations hereunder.
6. COVENANTS
So long as any Bank shall have any Commitment hereunder, or any Loan or
other obligation shall remain unpaid or unsatisfied, unless the Majority Banks
waive compliance in writing:
6.1 Use of Proceeds. The Borrower will use the proceeds of the Loan (a)
for working capital, capital expenditures and other lawful corporate purposes
and (b) to refinance existing indebtedness of the Borrower.
6.2 Consolidations and Mergers; Disposition of Assets. The Borrower shall
not merge, consolidate with or into, or convey, transfer, lease or otherwise
dispose of (whether in one transaction or in a series of transactions) all or
substantially all of its assets (whether now owned or hereafter acquired) to or
in favor of any Person.
6.3 Compliance with Laws, Etc. The Borrower shall comply, and cause each
of its Subsidiaries to comply, in all material respects with all applicable
laws, rules, regulations and orders (except where failure to comply could not
reasonably be expected to have a material adverse effect on the business,
assets, condition or operations of the Borrower and its Subsidiaries taken as a
whole), such compliance to include, without limitation, the payment and
discharge before the same become delinquent of all taxes, assessments and
governmental charges or levies imposed upon it or any of its Subsidiaries or
upon any of its property or any property of any of its Subsidiaries, provided
that neither Borrower nor any of its Subsidiaries shall be required to pay any
such tax, assessment, charge, levy or claim which is being contested in good
faith and by proper proceedings and with respect to which reserves in conformity
with generally accepted accounting principles, if required by such principles,
have been provided on the books of the Borrower or such Subsidiary, as the case
may be.
7. DEFAULT
If any of the following events occurs (an "Event of Default"), the
Administrative Agent shall, at the request of, or may, with the consent of, the
Majority Banks do one or more of the following: declare the Commitment of each
Bank to make Loans hereunder to be terminated, whereupon such Commitments shall
be terminated, declare the unpaid principal amount of all outstanding Loans, all
interest accrued and unpaid thereon, and all other amounts owing or payable
hereunder to be immediately due and payable, without presentment, demand,
protest, notice of intent to accelerate, notice of acceleration or notice of any
kind, all of which are hereby expressly waived by the Borrower, and exercise on
behalf of itself and the Banks all rights and remedies available to it and the
Banks hereunder and under applicable law. If an Event of Default occurs under
subparagraphs (e), (f) or (h) below then the commitment of each Bank to make
Loans hereunder shall automatically terminate and the entire debt outstanding
under this Agreement and all other amounts owed under this Agreement and the
Notes will automatically be due and payable immediately without presentment,
demand, protest, notice of dishonor, notice of intention to accelerate, notice
of acceleration or otherwise, all of which is expressly waived by the Borrower.
(a) Failure to Pay. The Borrower fails to pay (i) when the same
becomes due, any amount of principal of any Loan, or (ii) within ten (10) days
after the same
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becomes due, any interest or other amount payable hereunder or under any other
Loan Document; or
(b) Representation or Warranty. Any representation or warranty by the
Borrower made or deemed made herein, or which is contained in any certificate,
document or financial or other written statement furnished at any time under
this Agreement or any other Loan Document, is incorrect in any material respect
on or as of the date made or deemed made or reaffirmed, as the case may be; or
(c) Other Defaults. The Borrower fails to perform or observe any other
term or covenant contained in this Agreement or any other Loan Document (and not
constituting an Event of Default under any other clause of this Section 7), and
such default shall continue unremedied for a period of 30 days after the date
upon which written notice thereof is given to the Borrower by the Administrative
Agent or any Bank; or
(d) Cross-Default - Borrower. Borrower or any Subsidiary of Borrower
shall fail to pay any principal of or premium or interest on any Indebtedness
which is outstanding in a principal amount of at least $60,000,000 in the
aggregate when the same become due and payable (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise), and such failure shall
continue after the applicable grace period, if any, specified in the agreement
or instrument relating to such Indebtedness; or any other event shall occur or
condition shall exist under any agreement or instrument relating to any such
Indebtedness and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such event or
condition is to accelerate, or permit the acceleration of, the maturity of such
Indebtedness, or any such Indebtedness shall be declared to be due and payable,
or required to be prepaid (other than by a regularly scheduled required
prepayment), prior to the stated maturity thereof; provided, however, that the
provisions of this Section 7(d) shall not apply to any non-recourse Indebtedness
of any Subsidiary of the Borrower; or
(e) Insolvency; Voluntary Proceedings. The Borrower or the Guarantor
(i) generally fails to pay, or admits in writing its inability to pay, its debts
as they become due, whether at stated maturity or otherwise; (ii) commences any
Insolvency Proceeding with respect to itself; or (iii) takes any action to
effectuate or authorize any of the foregoing; or
(f) Involuntary Proceedings. (i) Any involuntary Insolvency Proceeding
is commenced or filed against the Borrower or the Guarantor and any such
proceeding or petition shall not be dismissed, or such writ, judgment, warrant
of attachment, execution or similar process shall not be released, vacated or
fully bonded within 30 days after commencement, filing or levy; (ii) the
Borrower or the Guarantor admits the material allegations of a petition against
it in any Insolvency Proceeding, or an order for relief (or similar order under
non-U.S. law) is ordered in any Insolvency Proceeding; or (iii) the Borrower or
the Guarantor acquiesces in the appointment of a receiver, trustee, custodian,
conservator, liquidator, mortgagee in possession (or agent therefor), or other
similar person or entity for itself or a substantial portion of its property or
business; or
(g) Monetary Judgments - Borrower. One or more non-interlocutory
judgments (including judgments entered on arbitration awards) is entered against
Borrower involving in the aggregate a liability (to the extent not covered by
independent third-party insurance as to which the insurer does not dispute
coverage or effective indemnification) as to any single or related series of
transactions, incidents or conditions, of $60,000,000 or more, and the same
shall remain unsatisfied, unvacated or unstayed pending appeal for a period of
30 days after the entry thereof; or
(h) Dissolution. There occurs a dissolution or liquidation of the
Borrower; or
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(i) Guarantor Defaults. A "Guarantor Event of Default" (as defined in
the Guarantee) shall exist or occur which does not also constitute an Event of
Default under either of subsections (e) of (f) of this Section 7, or the
Guarantee is for any reason partially or wholly revoked or invalidated, or
otherwise ceases to be in full force and effect, or Guarantor denies that it has
any further liability or obligation thereunder; or
(j) Change of Control. There occurs any Change of Control.
8. ENFORCING THIS AGREEMENT; MISCELLANEOUS
8.1 GAAP. Except as otherwise stated in this Agreement, all financial
information provided to the Administrative Agent and/or the Banks will be made
under generally accepted accounting principles, consistently applied.
8.2 GOVERNING LAW AND JURISDICTION AND WAIVER OF JURY TRIAL. (a) THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK; PROVIDED THAT THE BANKS SHALL RETAIN ALL RIGHTS ARISING UNDER
FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY
BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR
THE SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH OF THE BORROWER, THE ADMINISTRATIVE AGENT AND THE BANKS
CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE
JURISDICTION OF THOSE COURTS. THE BORROWER, THE ADMINISTRATIVE AGENT AND THE
BANKS IRREVOCABLY WAIVE ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF
VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION
IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. 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 IT AT ITS ADDRESS
SET FORTH BELOW ITS SIGNATURE TO THIS AGREEMENT. NOTHING HEREIN SHALL AFFECT THE
RIGHT OF THE ADMINISTRATIVE AGENT OR THE BANKS TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED
AGAINST THE BORROWER IN ANY OTHER JURISDICTION. THE BORROWER, THE ADMINISTRATIVE
AGENT AND THE BANKS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR
OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW.
(c) THE BORROWER, THE ADMINISTRATIVE AGENT AND THE BANKS EACH WAIVE
THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, OR THE TRANSACTIONS
CONTEMPLATED HEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE
BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTICIPANT OR
ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE.
THE BORROWER, THE ADMINISTRATIVE AGENT AND THE BANKS AGREE THAT ANY SUCH CLAIM
OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT
LIMITING THE FOREGOING THE PARTIES FURTHER AGREE THAT
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THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION
AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN
PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY
PROVISION HEREOF.
8.3 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Borrower may not assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of the Administrative Agent and each Bank.
8.4 Severability. If any part of this Agreement is not enforceable, the
rest of the Agreement may be enforced.
8.5 One Agreement. This Agreement, the other Loan Documents and any
related security or other agreements required by this Agreement, collectively:
(a) represent the sum of the understandings and agreements among the
Administrative Agent, the Banks and the Borrower concerning this credit; (b)
replace any prior oral or written agreements among the Administrative Agent, the
Banks and the Borrower concerning this credit; and (c) are intended by the
Administrative Agent, the Banks and the Borrower as the final, complete and
exclusive statement of the terms agreed to by them. In the event of any conflict
between this Agreement and any other agreements required by this Agreement, this
Agreement will prevail.
8.6 Costs and Expenses. Whether or not the transactions contemplated
hereby are consummated, the Borrower shall reimburse the Administrative Agent
and the Arrangers within five (5) Business Days after demand for all reasonable
costs and expenses incurred by the Administrative Agent and the Arrangers in
connection with the preparation, due diligence, administration, syndication and
execution of, and any amendment, supplement, waiver or modification to, this
Agreement, including reasonable attorney's fees and disbursements. The Borrower
shall reimburse the Administrative Agent and each Bank upon demand for all costs
and expenses (including reasonable counsel fees and expenses) incurred by the
Administrative Agent and any Bank in connection with the enforcement,
renegotiation or rescheduling of any rights or remedies under this Agreement or
any other Loan Document.
8.7 Indemnification. The Borrower will indemnify and hold the
Administrative Agent, each Arranger and each Bank harmless from and against any
and all claims, damages, liabilities and out-of-pocket expenses of any kind
relating to or arising directly or indirectly out of (a) this Agreement or any
document required hereunder, (b) any credit extended or committed to the
Borrower hereunder, (c) any transaction in which all or any part of the proceeds
of the Loans are applied, and (d) any investigation or pending or threatened
litigation or proceeding (whether or not the Person to be so indemnified is a
party to any such investigation, litigation or proceeding) related to or arising
out of this Agreement, any such document, or any such credit (together,
"Indemnified Liabilities"). This indemnity includes but is not limited to
reasonable attorneys' fees and disbursements and any damages arising from the
use by others of information or other materials obtained through electronic,
telecommunications or other information transmission systems. This indemnity
extends to the Administrative Agent, each Arranger and each Bank, and to their
affiliates, directors, officers, employees, agents, successors, attorneys, and
assigns. This indemnity will survive repayment of the Borrower's obligations.
All sums due hereunder shall be obligations of the Borrower, due and payable
immediately without demand.
8.8 Notices. All notices required under this Agreement shall be personally
delivered or sent by first class mail, postage prepaid, to the addresses on the
signature
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<PAGE> 14
page of this Agreement, or to such other addresses as the Administrative Agent,
any Bank or the Borrower may specify from time to time in writing.
8.9 Headings; Counterparts. Article and paragraph headings are for
reference only and shall not affect the interpretation or meaning of any
provisions of this Agreement. This Agreement may be executed in as many
counterparts as necessary or convenient, and by the different parties on
separate counterparts each of which, when so executed, shall be deemed an
original but all such counterparts shall constitute but one and the same
agreement.
8.10 Interest. It is the intention of the parties hereto to comply with
applicable usury laws, if any. If any interest is called for, contracted for,
charged, taken, reserved, or received in connection with the Loan, or in the
event all or part of the principal or interest under this Agreement, shall be
prepaid or accelerated, so that under any of such circumstances or under any
other circumstance the amount of interest contracted for, charged, taken,
reserved, or received on the amount of principal actually outstanding from time
to time shall exceed the maximum amount of interest permitted by applicable
usury laws, if any, then in any such event it is agreed as follows: (i) the
provisions of this paragraph shall govern and control, (ii) neither the Borrower
nor any other person shall be obligated to pay the amount of such interest to
the extent such interest is in excess of the maximum amount of interest
permitted by applicable usury laws, (iii) any such excess which is or has been
received notwithstanding this paragraph shall be credited against the then
unpaid principal balance of the Loans, or if the Loans have been or would be
paid in full, refunded to the Borrower, and (iv) the provisions of this
Agreement shall immediately be deemed reformed and such excess interest reduced,
without the necessity of executing any other document, to the maximum lawful
rate allowed. Without limiting the foregoing, all calculations of the rate of
interest for the purpose of determining whether such rate exceeds the maximum
lawful rate shall be made to the extent permitted by applicable laws by
amortizing, prorating, allocating and spreading during the period of the full
term of the Loan, all interest at any time contracted for, charged, taken,
reserved, or received.
8.11 Amendments and Waivers. No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent with respect to any
departure by the Borrower therefrom, shall be effective unless the same shall be
in writing and signed by the Majority Banks (or by the Administrative Agent at
the written request of the Majority Banks) and the Borrower and acknowledged by
the Administrative Agent, and then any such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given;
provided, however, that no such waiver, amendment, or consent shall, unless in
writing and signed by all the Banks and the Borrower and acknowledged by the
Agent, do any of the following: (a) increase or extend the Commitment of any
Bank (or reinstate any Commitment terminated pursuant to Section 7) or otherwise
subject the Banks to additional obligations; (b) postpone or delay any date
fixed by this Agreement or any other Loan Document for any payment or prepayment
of principal, interest, fees or other amounts due to the Banks (or any of them)
hereunder or under any other Loan Document; (c) reduce the principal of, or the
rate of interest specified herein on any Loan, or (subject to clause (ii) below)
any fees or other amounts payable hereunder or under any other Loan Document;
(d) change the percentage of the Commitments or of the aggregate unpaid
principal amount of the Loans which is required for the Banks or any of them to
take any action hereunder; or (e) amend this Section, or Section 3.10, or any
provision herein providing for consent or other action by all Banks; or (f)
discharge any Guarantor; and, provided further, that (i) no amendment, waiver or
consent shall, unless in writing and signed by the Administrative Agent in
addition to the Majority Banks or all the Banks, as the case may be, affect the
rights or duties of the Agent under this Agreement or any other Loan Document,
and (ii) the Fee Letters may be amended, or rights or privileges thereunder
waived, in a writing executed by the parties thereto.
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<PAGE> 15
8.12 No Waiver; Cumulative Remedies. No failure to exercise and no delay in
exercising, on the part of the Administrative Agent or any Bank, any right,
remedy, power or privilege hereunder, shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege.
8.13 Assignments, Participations, etc. (a) Any Bank may, with the written
consent of the Borrower at all times other than during the existence of an Event
of Default and in all cases, with the written consent of the Administrative
Agent, which consents shall not be unreasonably withheld, at any time assign and
delegate to one or more Eligible Assignees (provided that no written consent of
the Borrower or the Administrative Agent shall be required in connection with
any assignment and delegation by a Bank to an Eligible Assignee that is an
affiliate of such Bank) (each an "Assignee") all, or any ratable part of all, of
the Loans, the Commitments and the other rights and obligations of such Bank
hereunder, in a minimum amount of $10,000,000; provided, however, that the
Borrower and the Administrative Agent may continue to deal solely and directly
with such Bank in connection with the interest so assigned to an Assignee until
(A) written notice of such assignment, together with payment instructions,
addresses and related information with respect to the Assignee, shall have been
given to the Borrower and the Administrative Agent by such Bank and the
Assignee; (B) such Bank and its Assignee shall have delivered to the Borrower
and the Administrative Agent an assignment and acceptance in the form of Exhibit
D ("Assignment and Acceptance") together with any Note or Notes subject to such
assignment and (C) the assignor Bank or Assignee has paid to the Agent a
processing fee in the amount of $3,500.
(b) From and after the date that the Administrative Agent notifies the
assignor Bank that it has received (and provided its consent with respect to) an
executed Assignment and Acceptance and payment of the above-referenced
processing fee, (i) the Assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment and Acceptance, shall have the rights and obligations of a
Bank under the Loan Documents, (ii) the assignor Bank shall, to the extent that
rights and obligations hereunder and under the other Loan Documents have been
assigned by it pursuant to such Assignment and Acceptance, relinquish its rights
and be released from its obligations under the Loan Documents; and (iii) this
Agreement shall be deemed to be amended to the extent, but only to the extent,
necessary to reflect the addition of the Assignee and the resulting adjustment
of the Commitments arising therefrom. The Commitment allocated to each Assignee
shall reduce such Commitments of the assigning Bank pro tanto.
(c) Within five Business Days after receipt of notice by the
Administrative Agent that it has received an executed Assignment and Acceptance
and payment of the processing fee (and provided that it consents to such
assignment in accordance with Subsection 8.13(a)), the Borrower shall execute
and deliver to the Agent, new Notes evidencing such Assignee's assigned Loans
and Commitment and, if the assignor Bank has retained a portion of its Loans and
its Commitment, replacement Notes in the principal amount of the Loans retained
by the assignor Bank (such Notes to be in exchange for, but not in payment of,
the Notes held by such Bank).
(d) Any Bank may at any time sell to one or more commercial banks or
other Persons not Affiliates of the Borrower (a "Participant") participating
interests in any Loans, the Commitment of that Bank and the other interests of
that Bank (the "originating Bank") hereunder and under the other Loan Documents;
provided, however, that (i) the originating Bank's obligations under this
Agreement shall remain unchanged, (ii) the originating Bank shall remain solely
responsible for the performance of such obligations, (iii) the Borrower and the
Administrative Agent shall continue to deal solely and directly with the
originating Bank in connection with the originating Bank's rights and
obligations
-14-
<PAGE> 16
under this Agreement and the other Loan Documents, and (iv) no Bank shall
transfer or grant any participating interest under which the Participant has
rights to approve any amendment to, or any consent or waiver with respect to,
this Agreement or any other Loan Document, except to the extent such amendment,
consent or waiver would require unanimous consent of the Banks as described in
the first proviso to Section 8.11. In the case of any such participation, the
Participant shall be entitled to the benefit of Sections 3.3, 3.4 and 8.7 as
though it were also a Bank hereunder, and if amounts outstanding under this
Agreement are due and unpaid, or shall have been declared or shall have become
due and payable upon the occurrence of an Event of Default, each Participant
shall be deemed to have the right of set-off in respect of its participating
interest in amounts owing under this Agreement to the same extent as if the
amount of its participating interest were owing directly to it as a Bank under
this Agreement.
(e) Notwithstanding any other provision in this Agreement, any Bank
may at any time create a security interest in, or pledge, all or any portion of
its rights under and interest in this Agreement and any Note held by it in favor
of any Federal Reserve Bank in accordance with Regulation A of the Board of
Governors of the Federal Reserve System or U.S. Treasury Regulation 31 CFR
ss.203.14, and such Federal Reserve Bank may enforce such pledge or security
interest in any manner permitted under applicable law.
8.14 Set-off. In addition to any rights and remedies of the Banks provided
by law, if an Event of Default exists or the Loans have been accelerated, each
Bank is authorized at any time and from time to time, without prior notice to
the Borrower, any such notice being waived by the Borrower to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held by, and other
indebtedness and obligations at any time owing by, such Bank to or for the
credit or the account of the Borrower against any and all indebtedness and
obligations owing to such Bank hereunder, now or hereafter existing,
irrespective of whether or not the Administrative Agent or such Bank shall have
made demand under this Agreement or any Loan Document and although such
indebtedness and obligations may be contingent or unmatured. Each Bank agrees
promptly to notify the Borrower and the Administrative Agent after any such
set-off and application made by such Bank; provided, however, that the failure
to give such notice shall not affect the validity of such set-off and
application. The rights of each Bank under this Section 8.14 are cumulative with
and in addition to other rights and remedies which the Bank may have.
8.15 Foreign Banks and Participants. Each Bank, and each holder of a
participation interest herein, that is a "foreign corporation, partnership or
trust" within the meaning of the Code shall deliver to the Administrative Agent,
within 20 days after the closing date (or after accepting an assignment or
receiving a participation interest herein) two duly signed completed copies of
either Form 1001 (relating to such Person and entitling it to a complete
exemption from withholding on all payments to be made to such Person by Borrower
pursuant to this Agreement) or Form 4224 (relating to all payments to be made to
such Person by Borrower pursuant to this Agreement) of the IRS or such other
evidence (including, if reasonably necessary, Form W-9) satisfactory to Borrower
and the Administrative Agent that no withholding under the federal income tax
laws is required with respect to such Person. Thereafter and from time to time,
each such Person shall (a) promptly submit to the Administrative Agent such
additional duly completed and signed copies of one of such forms (or such
successor forms as shall be adopted from time to time by the relevant United
States taxing authorities) as may then be available under then current United
States laws and regulations to avoid, or such evidence as is satisfactory to
Borrower and the Administrative Agent of any available exemption from, United
States withholding taxes in respect of all payments to be made to such Person by
Borrower pursuant to this Agreement and (b) take such steps as shall not be
materially disadvantageous to it, in the reasonable judgment of such Bank, and
as may be reasonably necessary (including the re-designation of its lending
office, if any) to avoid any
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<PAGE> 17
requirement of applicable laws that Borrower make any deduction or withholding
for taxes from amounts payable to such Person. If such Persons fails to deliver
the above forms or other documentation, then the Administrative Agent may
withhold from any interest payment to such Person an amount equivalent to the
applicable withholding tax imposed by Sections 1441 and 1442 of the Code,
without reduction. If any governmental authority asserts that the Administrative
Agent did not properly withhold any tax or other amount from payments made in
respect of such Person, such Person shall indemnify the Administrative Agent
therefor, including all penalties and interest and costs and expenses (including
reasonable counsel fees and expenses) of the Administrative Agent. The
obligation of the Banks under this subsection shall survive the payment of all
indebtedness and obligations hereunder and the resignation or replacement of the
Administrative Agent.
9. THE ADMINISTRATIVE AGENT
9.1 Appointment and Authorization; "Administrative Agent". Each Bank
hereby irrevocably (subject to Section 9.9) appoints, designates and authorizes
the Administrative Agent to take such action on its behalf under the provisions
of this Agreement and each other Loan Document and to exercise such powers and
perform such duties as are expressly delegated to it by the terms of this
Agreement or any other Loan Document, together with such powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
contained elsewhere in this Agreement or in any other Loan Document, the
Administrative Agent shall not have any duties or responsibilities, except those
expressly set forth herein, nor shall the Administrative Agent have or be deemed
to have any fiduciary relationship with any Bank, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Agreement or any other Loan Document or otherwise exist against the
Administrative Agent. Without limiting the generality of the foregoing sentence,
the use of the term "agent" in this Agreement with reference to the
Administrative Agent is not intended to connote any fiduciary or other implied
(or express) obligations arising under agency doctrine of any applicable law.
Instead, such term is used merely as a matter of market custom, and is intended
to create or reflect only an administrative relationship between independent
contracting parties.
9.2 Delegation of Duties. The Administrative Agent may execute any of its
duties under this Agreement or any other Loan Document by or through agents,
employees or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent shall
not be responsible for the negligence or misconduct of any agent or
attorney-in-fact that it selects with reasonable care.
9.3 Liability of Agent. None of the Agent-Related Persons shall (i) be
liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (ii) be responsible in any manner to any of the Banks for any recital,
statement, representation or warranty made by the Borrower or any Subsidiary or
affiliate of the Borrower, or any officer thereof, contained in this Agreement
or in any other Loan Document, or in any certificate, report, statement or other
document referred to or provided for in, or received by the Administrative Agent
under or in connection with, this Agreement or any other Loan Document, or for
the validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document, or for any failure of the Borrower or any
other party to any Loan Document to perform its obligations hereunder or
thereunder. No Agent-Related Person shall be under any obligation to any Bank to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of the Borrower or any
of the Borrower's Subsidiaries or affiliates.
-16-
<PAGE> 18
9.4 Reliance by Agent. (a) The Administrative Agent shall be entitled to
rely, and shall be fully protected in relying, upon any writing, resolution,
notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or
telephone message, statement 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
counsel to the Borrower), independent accountants and other experts selected by
the Administrative Agent. The Administrative Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other Loan
Document unless it shall first receive such advice or concurrence of the
Majority Banks as it deems appropriate and, if it so requests, it shall first be
indemnified to its satisfaction by the Banks 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, under this Agreement or any other Loan Document in
accordance with a request or consent of the Majority Banks and such request and
any action taken or failure to act pursuant thereto shall be binding upon all of
the Banks.
(b) For purposes of determining compliance with the conditions
specified in Section 4, each Bank that has executed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter either sent by the Administrative Agent to such Bank
for consent, approval, acceptance or satisfaction, or required thereunder to be
consented to or approved by or acceptable or satisfactory to the Bank.
9.5 Notice of Default. The Administrative Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default,
except with respect to defaults in the payment of principal, interest and fees
required to be paid to the Administrative Agent for the account of the Banks,
unless the Administrative Agent shall have received written notice from a Bank
or the Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". The
Administrative Agent will notify the Banks of its receipt of any such notice.
The Administrative Agent shall take such action with respect to such Default or
Event of Default as may be requested by the Majority Banks in accordance with
Section 7; provided, however, that unless and until the Administrative Agent has
received any such request, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable or in the best
interest of the Banks.
9.6 Credit Decision. Each Bank acknowledges that none of the Agent-Related
Persons has made any representation or warranty to it, and that no act by the
Administrative Agent hereinafter taken, including any review of the affairs of
the Borrower and its Subsidiaries, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Bank. Each Bank
represents to the Administrative Agent that it has, independently and without
reliance upon any Agent-Related Person and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial and
other condition and creditworthiness of the Borrower and its Subsidiaries, and
all applicable bank regulatory laws relating to the transactions contemplated
hereby, and made its own decision to enter into this Agreement and to extend
credit to the Borrower hereunder. Each Bank also represents that it will,
independently and without reliance upon any Agent-Related Person 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 Agreement and the other Loan Documents, and to make
such investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of the Borrower. Except for notices, reports and
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<PAGE> 19
other documents expressly herein required to be furnished to the Banks by the
Administrative Agent, the Administrative Agent shall not have any duty or
responsibility to provide any Bank with any credit or other information
concerning the business, prospects, operations, property, financial and other
condition or creditworthiness of the Borrower which may come into the possession
of any of the Agent-Related Persons.
9.7 Indemnification of Agent. Whether or not the transactions contemplated
hereby are consummated, the Banks shall indemnify upon demand the Agent-Related
Persons (to the extent not reimbursed by or on behalf of the Borrower and
without limiting the obligation of the Borrower to do so), pro rata, from and
against any and all Indemnified Liabilities; provided, however, that no Bank
shall be liable for the payment to the Agent-Related Persons of any portion of
such Indemnified Liabilities (as defined in Section 8.7) resulting solely from
such Person's gross negligence or willful misconduct. Without limitation of the
foregoing, each Bank shall reimburse the Agent upon demand for its ratable share
of any costs or out-of-pocket expenses (including attorney costs) incurred by
the Administrative Agent in connection with the preparation, execution,
delivery, administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, this Agreement, any other Loan
Document, or any document contemplated by or referred to herein, to the extent
that the Administrative Agent is not reimbursed for such expenses by or on
behalf of the Borrower. The undertaking in this Section shall survive the
payment of all obligations hereunder and the resignation or replacement of the
Administrative Agent.
9.8 Agent in Individual Capacity. The Administrative Agent and its
affiliates may make loans to, issue letters of credit for the account of, accept
deposits from, acquire equity interests in and generally engage in any kind of
banking, trust, financial advisory, underwriting or other business with the
Borrower and its Subsidiaries and affiliates as though the Administrative Agent
were not the Administrative Agent hereunder and without notice to or consent of
the Banks. The Banks acknowledge that, pursuant to such activities, the
Administrative Agent or its affiliates may receive information regarding the
Borrower or its affiliates (including information that may be subject to
confidentiality obligations in favor of the Borrower or such Subsidiary) and
acknowledge that the Administrative Agent shall be under no obligation to
provide such information to them. With respect to its Loans, the Administrative
Agent shall have the same rights and powers under this Agreement as any other
Bank and may exercise the same as though it were not the Administrative Agent,
and the terms "Bank" and "Banks" include the Administrative Agent in its
individual capacity.
9.9 Successor Agent. The Administrative Agent may, and at the request of
the Majority Banks shall, resign as Administrative Agent upon 30 days' notice to
the Banks. If the Administrative Agent resigns under this Agreement, the
Majority Banks shall appoint from among the Banks a successor agent for the
Banks which successor agent shall be approved by the Borrower. If no successor
agent is appointed prior to the effective date of the resignation of the
Administrative Agent, the Administrative Agent may appoint, after consulting
with the Banks and the Borrower, a successor agent from among the Banks. Upon
the acceptance of its appointment as successor agent hereunder, such successor
agent shall succeed to all the rights, powers and duties of the retiring
Administrative Agent and the term "Administrative Agent" shall mean such
successor agent and the retiring Administrative Agent's appointment, powers and
duties as Administrative Agent shall be terminated. After any retiring
Administrative Agent's resignation hereunder as Administrative Agent, the
provisions of this Section 9 and Sections 8.6 and 8.7 shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was Administrative
Agent under this Agreement. If no successor agent has accepted appointment as
Administrative Agent by the date which is 30 days following a retiring
Administrative Agent's notice of resignation, the retiring Administrative
Agent's resignation shall nevertheless thereupon become effective and the Banks
shall perform all
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<PAGE> 20
of the duties of the Administrative Agent hereunder until such time, if any, as
the Majority Banks appoint a successor agent as provided for above. The Borrower
agrees to pay fees to any successor administrative agent in amounts equal to no
less than the fees being paid to the Administrative Agent then being replaced.
9.10 Co-Agents; Lead Managers. None of the Persons identified on the facing
page or signature pages of this Agreement as a "co-agent," an "arranger," a
"syndication agent," a "book manager" or a "co-documentation agent" shall have
any right, power, obligation, liability, responsibility or duty under this
Agreement other than those applicable to all Banks as such. Without limiting the
foregoing, none of the Banks so identified as a "co-agent," an "arranger," a
"syndication agent," a "book manager" or a "co-documentation agent" shall have
or be deemed to have any fiduciary relationship with any Bank. Each Bank
acknowledges that it has not relied, and will not rely, on any of the Banks so
identified in deciding to enter into this Agreement or in taking or not taking
action hereunder.
[SIGNATURES BEGIN ON THE FOLLOWING PAGE]
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<PAGE> 21
NO ORAL AGREEMENTS. THIS LOAN AGREEMENT TOGETHER WITH THE OTHER LOAN
DOCUMENTS REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
This Agreement is executed effective as of the date stated at the top of
the first page.
WILLIAMS COMMUNICATIONS
GROUP, INC.
By /s/ G. L. BEST
------------------------------------
Name: G. L. Best
----------------------------------
Title: Treasurer
---------------------------------
Address where notices to the Borrower
are to be sent:
The Williams Companies, Inc.
---------------------------------------
One Williams Center
---------------------------------------
Tulsa, OK 74172
---------------------------------------
Attn: Treasurer
Chief Executive Office of the Borrower:
The Williams Companies, Inc.
---------------------------------------
One Williams Center
---------------------------------------
Tulsa, OK 74172
---------------------------------------
[THIS IS A SIGNATURE PAGE TO THE LOAN AGREEMENT]
<PAGE> 22
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION,
as Administrative Agent
By /S/ CLAIRE LIU
-------------------------------------
Claire M. Liu
Managing Director
Address where notices to the
Administrative Agent are to be sent:
Bank of America National Trust
and Savings Association
333 Clay Street, Suite 4550
Houston, Texas 77002
Attn: Ms. Claire M. Liu
Tel: (713) 651-4855
Fax: (713) 651-4807
Administrative Agent's Payment Office:
Bank of America National Trust
and Savings Association
1850 Gateway Boulevard, 4th Floor
Concord, CA 94520
Attn: Mr. Jon Kubokawa
Tel: (925) 675-8401
Fax: (925) 675-8500
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION,
as a Bank
By /S/ CLAIRE LIU
-------------------------------------
Claire M. Liu
Managing Director
Address where notices to the
Administrative Agent are to be sent:
Bank of America National Trust
and Savings Association
333 Clay Street, Suite 4550
Houston, Texas 77002
Attn: Ms. Claire M. Liu
Tel: (713) 651-4855
Fax: (713) 651-4807
[THIS IS A SIGNATURE PAGE TO THE LOAN AGREEMENT]
<PAGE> 23
THE CHASE MANHATTAN BANK,
as a Bank
By /s/ WILLIAM P. [ILLEGIBLE]
------------------------------------
Name: William P. [ILLEGIBLE]
----------------------------------
Title: Vice President
---------------------------------
Address where notices to the
Bank are to be sent:
270 Park Avenue, 21st Floor
New York, New York 10017
Attn: Global Oil and Gas
Tel: (212) 270-4676
Fax: (212) 270-3897
[THIS IS A SIGNATURE PAGE TO THE LOAN AGREEMENT]
<PAGE> 24
THE BANK OF NEW YORK,
as a Bank
By /s/ RAYMOND J. PALMER
------------------------------------
Name: Raymond J. Palmer
----------------------------------
Title: Vice President
---------------------------------
Address where notices to the
Bank are to be sent:
THE BANK OF NEW YORK
---------------------------------------
ONE WALL STREET - 19th FLOOR
---------------------------------------
NEW YORK, NEW YORK 10286
TEL. # 212-635-7834
FAX. # 212-635-7923/24
Attn: RAYMOND J. PALMER, VP
[THIS IS A SIGNATURE PAGE TO THE LOAN AGREEMENT]
<PAGE> 25
BANK OF MONTREAL,
as a Co-Documentation Agent and as a
Bank
By /s/ MARY LEE LATTA
------------------------------------
Name: Mary Lee Latta
----------------------------------
Title: Director
---------------------------------
Bank of Montreal
Address where notices to the
Bank are to be sent:
Bank of Montreal
115 S. LaSalle Street, 11 West
Chicago, Illinois 60603
Attn: Client Services - Farid Ali
Tel: (312) 750-3727
Fax: (312) 750-6061
With a copy to:
Bank of Montreal
700 Louisiana, Suite 4400
Houston, Texas 77002
Attn: Ms. Jane Wiley
Tel: (713) 546-9744/9753
Fax: (713) 225-1845
[THIS IS A SIGNATURE PAGE TO THE LOAN AGREEMENT]
<PAGE> 26
SCHEDULE 1
DEFINITIONS
"Agent-Related Person" means the Administrative Agent, together with their
respective affiliates, officers, directors, employees, agents, successors,
attorneys and assigns.
"Applicable Margin" means (a) as to Offshore Rate Loans (i) at all times
through and including June 30, 1999, 0.75% per annum; and (ii) at all times
thereafter, 0.875% per annum, and (b) as to Base Rate Loans 0% per annum.
"Arrangers" means NationsBanc Montgomery Securities LLC and Chase
Securities Inc.
"Base Rate" means, for any day, the higher of: (a) 0.50% per annum above
the latest Federal Funds Rate and (b) the rate per annum of interest in effect
for such day as publicly announced from time to time by the Administrative Agent
at its lead office, as its "reference rate." (The reference rate is a per annum
rate set by the Administrative Agent based upon various factors including the
Administrative Agent's costs and desired return, general economic conditions and
other factors, and is used as a reference point for pricing some loans, which
may be priced at, above, or below such announced rate.) Any change in the
reference rate announced by the Administrative Agent shall take effect at the
opening of business on the day specified in the public announcement of such
change.
"Base Rate Loan" means a loan that bears interest based on the Base Rate.
"Borrowing Date" means the date a Loan is made.
"Business Day" means any day other than a Saturday, Sunday or other day on
which commercial banks in New York, New York or San Francisco, California are
authorized or required by law to close and, if the applicable Business Day
relates to an Offshore Rate Loan, means such a day on which dealings are carried
on in the London interbank market.
"Change of Control" means the existence of any circumstance under which the
Guarantor ceases to own, with respect to each class of securities of the
Borrower, at least seventy percent (70%) of such class of securities.
"Code" means the Internal Revenue Code of 1986, and regulations promulgated
thereunder.
"Default" means an event or condition that, with the giving of notice or
the passage of time or both, would constitute an Event of Default.
"Eligible Assignee" means (a) a commercial bank organized under the laws of
the United States, or any state thereof, and having a combined capital and
surplus of at least $100,000,000; (b) a commercial bank organized under the laws
of any other country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of any such
country, and having combined capital and surplus of at least $100,000,000,
provided that such bank is acting through a branch or agency located in the
United States; and (c) a Person that is primarily engaged in the business of
commercial banking and that is (i) a Subsidiary of a Bank, (ii) a Subsidiary of
a Person of which a Bank is a Subsidiary, or (iii) a Person of which a Bank is a
Subsidiary.
Schedule 1 - Page 1
<PAGE> 27
"Federal Funds Rate" means, for any day, the per annum rate set forth in
the weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Bank of New York (including any
such successor, "H.15(519)") on the preceding Business Day opposite the caption
"Federal Funds (Effective)"; or, if for any relevant day such rate is not so
published on any such preceding Business Day, the rate for such day will be the
arithmetic mean as determined by the Administrative Agent of the rates for the
last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New
York City time) on that day by each of three leading brokers of Federal funds
transactions in New York City selected by the Administrative Agent.
"Fee Letters" means the letter agreement among the Borrower, the
Administrative Agent and NationsBanc Montgomery Securities LLC, and the letter
agreement among the Borrower, The Chase Manhattan Bank and Chase Securities
Inc., each dated April 12, 1999.
"Final Maturity Date" means September 30, 1999 or such earlier date as the
Loans may become due and payable pursuant to Section 7.
"Indebtedness," as applied to any person or entity, means without
duplication (a) all indebtedness for borrowed money of such person or entity;
(b) all obligations for the deferred purchase price of property or services
(other than trade payables entered into in the ordinary course of business on
ordinary terms); (c) all reimbursement or payment obligations of such person or
entity with respect to letters of credit (whether drawn or undrawn), bonds and
other surety instruments; (d) all obligations of such person or entity evidenced
by notes, bonds, debentures or similar instruments, including obligations so
evidenced incurred in connection with the acquisition of property, assets or
businesses; (e) all indebtedness created or arising under any conditional sale
or other title retention agreement entered into by such person or entity, or
incurred as financing, with respect to property acquired (even though the rights
and remedies of the seller or bank under such agreement in the event of default
are limited to repossession or sale of such property); (f) all obligations with
respect to capital leases; (g) all obligations in respect of swap contracts or
other derivative instruments; (h) all indebtedness referred to in clauses (a)
through (g) above secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any lien upon or
in property (including accounts and contracts rights) even though the owner of
the property has not assumed or become liable for the payment of such
Indebtedness; and (i) all guaranty obligations in respect of indebtedness or
obligations of others of the kinds referred to in clauses (a) through (h) above.
For purposes of this Agreement, the Indebtedness of any person or entity shall
include all recourse Indebtedness of any partnership or joint venture or limited
liability company in which such person or entity is a general partner or a joint
venturer or a member.
"Insolvency Proceeding" means (a) any case, action or proceeding before any
court or other governmental authority relating to bankruptcy, reorganization,
insolvency, liquidation, receivership, dissolution, winding-up or relief of
debtors, or (b) any general assignment for the benefit of creditors,
composition, marshalling of assets for creditors, or other, similar arrangement
in respect of its creditors generally or any substantial portion of its
creditors; undertaken under U.S. Federal, state or foreign law.
"Interest Payment Date" means at such times as the Loan is an Offshore Rate
Loan, the last day of each Interest Period applicable to the Loan and, at such
times as the Loan is a Base Rate Loan, the last Business Day of each calendar
quarter and each date the Loan is converted into an Offshore Rate Loan,
provided, however, that if any Interest Period for the Loan during which the
Loan is an Offshore Rate Loan exceeds three months, the date that falls three
months (as the case may be) after the beginning of such Interest Period and
after each Interest Payment Date thereafter is also an Interest Payment Date.
Schedule 1 - Page 2
<PAGE> 28
"Interest Period" means at such times as the Loan is an Offshore Rate Loan,
the period commencing on the Borrowing Date or on the date on which the Loan is
converted into or continued as an Offshore Rate Loan, and ending on the date
one, two or three months thereafter as selected by the Borrower in its notice of
borrowing or its notice of conversion/continuation. If any Interest Period would
otherwise end on a day that is not a Business Day, that Interest Period shall be
extended to the following Business Day unless the result of such extension would
be to carry such Interest Period into another calendar month, in which event
such Interest Period shall end on the preceding Business Day. Any Interest
Period that begins on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar month at the end
of such Interest Period) shall end on the last Business Day of the calendar
month at the end of such Interest Period.
"IRS" means the Internal Revenue Service, and any governmental authority
succeeding to any of its principal functions under the Code.
"Loan Documents" means this Agreement, the Guarantee, the Fee Letters and
the Notes.
"Majority Banks" means at any time Banks then holding in excess of 50% of
the then aggregate unpaid principal amount of the Loans, or, if no such
principal amount is then outstanding, Banks then having in excess of 50% of the
Commitments.
"Material Adverse Effect" means any material adverse effect on (a) the
business, operations, condition (financial or otherwise) or property of the
Borrower, (b) the ability of the Borrower or Guarantor to perform in a timely
manner its material obligations under any of the Loan Documents, (c) the
validity or enforceability of any material provision of any Loan Document, or
(d) the rights or remedies of the Administrative Agent or any Bank under any of
the Loan Documents.
"Offshore Rate" means, for any Interest Period, the rate of interest per
annum (rounded upward to the next 1/100th of 1%) determined by the
Administrative Agent as follows:
Offshore Rate = LIBOR
-------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means for any day for any Interest Period
the maximum reserve percentage (expressed as a decimal, rounded upward to
the next 1/100th of 1%) in effect on such day under regulations issued from
time to time by the Board of Governors of the Federal Reserve System for
determining the maximum reserve requirement (including any emergency,
supplemental or other marginal reserve requirement) with respect to
Eurocurrrency funding (currently referred to as "Eurocurrency
liabilities"); and
"LIBOR" means, for each day during any Interest Period, the rate of
interest per annum that is the offered rate per annum (rounded upwards to
the next higher 1/100th of 1% per annum) at which deposits in U.S. Dollars
appears on the Telerate page 3750 (or any successor page) as of 11:00 a.m.
(London time), two (2) Business Days prior to (and for value on) the
commencement of such Interest Period in an amount approximately equal to
the amount of the Offshore Rate Loans during such Interest Period and for a
period of time comparable to such Interest Period, or in the event such
offered rate is not available from the Telerate Page, then LIBOR shall be
equal to the rate per annum determined by the Administrative Agent to be
the average (rounded
Schedule 1 - Page 3
<PAGE> 29
upwards to the next higher 1/100 of 1%) of the respective rates per annum
shown on Reuter's Monitor Money Rates Service "LIBO" page at which deposits
in dollars are offered in the London Interbank Eurocurrency Market at or
about 11:00 a.m. (London time) two (2) Business Days prior to (and for
value on) the commencement of an Interest Period in an amount approximately
equal to the amount of the Offshore Rate Loan during such Interest Period
and for a period of time comparable to such Interest Period, and in the
event neither such Telerate nor such Reuter's rate is available from such
Telerate Page or such Reuter's Service, then LIBOR shall be equal to the
rate of interest per annum determined by the Administrative Agent to be the
arithmetic mean (rounded upward to the next 1/100th of 1%) of the rates of
interest per annum at which dollar deposits for such Interest Period and in
an amount approximately equal to the amount of the Offshore Rate Loan
during such Interest Period would be offered by the Administrative Agent to
major banks in the London eurodollar market at or about 11:00 a.m. (London
time) two (2) Business Days prior to the commencement of such Interest
Period.
"Offshore Rate Loan" means a loan that bears interest based on the Offshore
Rate.
"Person" means an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture or governmental authority.
"Pro Rata Share" means, as to any Bank at any time, the percentage
equivalent (expressed as a decimal, rounded to the ninth decimal place) at such
time of such Bank's Commitment divided by the combined Commitments of all Banks.
If the Commitments have terminated or expired, the Pro Rata Share shall be
determined based upon the Commitments most recently in effect, giving effect to
any assignments.
"Subsidiary" of a person or entity (the "Person") means any corporation,
association, partnership, limited liability company, joint venture or other
business entity of which more than 50% of the voting stock, or membership
interests or other equity interests, is owned or controlled directly or
indirectly by the Person, or one or more of the Subsidiaries of the Person, or a
combination thereof.
Schedule 1 - Page 4
<PAGE> 30
SCHEDULE 2
COMMITMENTS AND PRO RATA SHARES
<TABLE>
<CAPTION>
Bank Commitment Pro Rata Share
- ---- ------------------- --------------
<S> <C> <C>
Bank of America National $ 400,000,000 28.5714286%
Trust and Savings Association
The Chase Manhattan Bank 400,000,000 28.5714286%
The Bank of New York 300,000,000 21.4285714%
Bank of Montreal 300,000,000 21.4285714%
TOTAL $ 1,400,000,000 100%
===============
</TABLE>
Exhibit B - Page 1
<PAGE> 31
EXHIBIT "A"
FORM OF NOTICE OF BORROWING
Date:
--------------------
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Administrative Agent,
pursuant to the Loan Agreement, dated as of April 16, 1999 (as the same may be
amended, modified or restated from time to time, the "Loan Agreement"), among
WILLIAMS COMMUNICATIONS GROUP, INC. (the "Borrower"), the financial institutions
from time to time party thereto (the "Banks") and BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Administrative Agent for the Banks (the
"Administrative Agent")
Ladies and Gentlemen:
The undersigned refers to the Loan Agreement and hereby gives you notice
irrevocably, pursuant to Section 2.3 of the Loan Agreement, of the requested
borrowing specified below:
A. Amount of the Loan Requested: $
--------------------
B. Requested Interest Rate (check applicable items)
(a) Base Rate or Offshore Rate
----- -----
(b) If Subsection (a) indicates Offshore Rate Loan, indicate Interest
Period
one month
-----
two months
-----
three months
-----
(c) The proceeds of the Loan are to be made available by wire transfer
or credit, as applicable, to the following account:
Bank Name:
---------------------------------
ABA Number:
---------------------------------
Account Title:
---------------------------------
Account Number:
---------------------------------
The undersigned hereby certifies that the following statements are true on
the date hereof, and will be true on the date of the proposed borrowing, before
and after giving effect thereto and to the application of the proceeds
therefrom:
(a) For the initial Loans only: since December 31, 1998 there has not
occurred a material adverse change in the business, assets, liabilities (actual
or contingent), operations, condition (financial or otherwise) or prospects of
the Borrower or the Guarantor and its Subsidiaries taken as a whole;
Exhibit A - Page 1
<PAGE> 32
(b) the representations and warranties of the Borrower contained in
the Loan Agreement, and the representations and warranties of the Guarantor
contained in the Guarantee, are true and correct as though made on and as of
such date (except such representations and warranties which expressly refer to
an earlier date, which are true and correct as of such earlier date); and
(c) no Default or Event of Default has occurred and is continuing, or
would result from such proposed borrowing.
The undersigned agrees that if prior to the time of the borrowing requested
hereby any matter certified to by it will not be true and correct at such time
as if then made, it will immediately so notify the Administrative Agent.
Capitalized terms used herein without definition have the meanings assigned
to them in the Loan Agreement.
WILLIAMS COMMUNICATIONS
GROUP, INC.
By
------------------------------------
Name:
Title:
Exhibit A - Page 2
<PAGE> 33
EXHIBIT "B"
FORM OF NOTICE OF CONVERSION/CONTINUATION
Date:
--------------------
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Administrative Agent,
pursuant to the Loan Agreement, dated as of April 16, 1999 (as the same may be
amended, modified or restated from time to time, the "Loan Agreement"), among
WILLIAMS COMMUNICATIONS GROUP, INC. (the "Borrower"), the financial institutions
from time to time party thereto (the "Banks") and BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as administrative agent for the Banks (the
"Administrative Agent").
Ladies and Gentlemen:
The undersigned refers to the Loan Agreement and hereby gives you notice
irrevocably, pursuant to Section 2.4 of the Loan Agreement, of the [conversion]
[continuation] of the Loans specified below:
A. Amount of the Loans to be [converted] [continued]: $
---------------
B. Existing rate: Check applicable blank
----------------------
(a) Base Rate ----------
(b) Offshore Rate Loan with an Interest Period of:
(i) one month ----------
(ii) two months ----------
(iii) three months ----------
(1) If Offshore Rate, date of the last day of the current Interest Period
for the Loan: _________________, 199__
C. The Loans are to be [converted] [continued] as follows:
(1) Proposed conversion or continuation date: _____________, 199__ (the
"Continuation/Conversion Date")
(2) Amount: $
---------------
(3) Requested Interest Rate (check applicable items)
(a) Base Rate or Offshore Rate
----- -----
(b) If Subsection (a) indicates Offshore Rate Loan, indicate Interest
Period
one month
-----
Exhibit B - Page 1
<PAGE> 34
two months
-----
three months
-----
The undersigned hereby certifies that the following statements are true on
the date hereof, and will be true on the proposed Conversion/Continuation Date,
before and after giving effect to the Conversion/Continuation Date of the Loans
as herein specified:
(a) the representations and warranties of the Borrower contained in
the Loan Agreement, and the representations and warranties of the Guarantor
contained in the Guarantee, are true and correct as though made on and as of
such date (except such representations and warranties which expressly refer to
an earlier date, which are true and correct as of such earlier date); and
(b) no Default or Event of Default has occurred and is continuing, or
would result from such proposed [conversion] [continuation].
The undersigned agrees that if prior to the time of the conversion or
continuation of the Loan requested hereby any matter certified to by it will not
be true and correct at such time as if then made, it will immediately so notify
the Administrative Agent.
Capitalized terms used herein without definition have the meanings assigned
to them in the Loan Agreement.
WILLIAMS COMMUNICATIONS
GROUP, INC.
By
------------------------------------
Name:
Title:
Exhibit B - Page 2
<PAGE> 35
EXHIBIT "C"
FORM OF PROMISSORY NOTE
U.S. $ Date:
------------- --------------------
FOR VALUE RECEIVED, the undersigned, WILLIAMS COMMUNICATIONS GROUP, INC.,
a Delaware corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of
___________________ (the "Bank"), for the account of its applicable lending
office, on the Final Maturity Date (as defined in the Loan Agreement referred to
below), the principal amount of $________________, or, if less, the aggregate
principal amount of the Loans (as defined in the Loan Agreement referred to
below) owed to the Bank by the Borrower on such Final Maturity Date.
The Borrower promises to pay interest on the unpaid principal amount hereof
until such principal amount is paid in full, at such interest rates, and payable
at such times, as are specified in the Loan Agreement referred to below. Both
principal and interest are payable in lawful money of the United States of
America to Bank of America National Trust and Savings Association, as
Administrative Agent, 1850 Gateway Boulevard, 4th Floor, Concord, California
94520, in same day funds. Each Loan owed to the Bank by the Borrower, and all
payments made on account of principal thereof, shall be recorded by the Bank
and, prior to any transfer hereof, endorsed on the grid attached hereto which is
part of this Promissory Note.
This Promissory Note is one of the Notes referred to in, and is subject to
and entitled to the benefits of, the Loan Agreement dated as of April __, 1999
(as amended or otherwise modified from time to time, the "Loan Agreement") among
the Borrower, the Bank, certain other banks parties thereto and Bank of America
National Trust and Savings Association as Administrative Agent for the Bank and
such other banks. The Loan Agreement, among other things, (i) provides for the
making of Loans to the Borrower from time to time pursuant to Section 2.1 of the
Loan Agreement in an aggregate outstanding amount not to exceed at any time the
U.S. dollar amount first above mentioned, the indebtedness of the Borrower
resulting from each such advance owed to the Bank being evidenced by this
Promissory Note, and (ii) contains provisions for acceleration of the maturity
hereof upon the happening of certain stated events and also for prepayments on
account of principal hereof prior to the maturity hereof upon the terms and
conditions therein specified. Capitalized terms used herein which are not
defined herein and are defined in the Loan Agreement are used herein as therein
defined.
The Borrower hereby waives presentment, demand, protest, notice of
dishonor, notice of intent to accelerate, notice of acceleration and any other
notice of any kind, except as provided in the Loan Agreement. No failure to
exercise, and no delay in exercising, any rights hereunder on the part of the
holder hereof shall operate as a waiver of such rights.
This Promissory Note shall be governed by, and construed in accordance
with, the laws of the State of New York.
Exhibit C - Page 1
<PAGE> 36
WILLIAMS COMMUNICATIONS
GROUP, INC.
By
------------------------------------
Name:
Title:
Exhibit C - Page 2
<PAGE> 37
ADVANCES AND PAYMENTS OF PRINCIPAL
Amount of
Amount Principal Unpaid
of Paid or Principal Notation
Date Advance Prepaid Balance Made By
- ---- ------- ------- ------- -------
Exhibit C - Page 3
<PAGE> 38
EXHIBIT "D"
FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
This Assignment and Acceptance Agreement dated as of ____________(this
"Agreement"), is made by and among Williams Communications Group, Inc., a
Delaware corporation (the "Borrower"), Bank of America National Trust and
Savings Association, as Administrative Agent for the banks party to the Loan
Agreement dated as of April __, 1999 (as may be amended from time to time, the
"Loan Agreement") among the Borrower, such Administrative Agent and such banks,
______________ ("Assignor") and ______________ ("Assignee"). In consideration of
the mutual covenants herein contained, the parties hereto agree as set forth
herein.
1. Transfer. Pursuant to the last sentence of Section 8.13(a) of the Loan
Agreement, Assignor hereby assigns to Assignee (without representation or
warranty to Assignee and without Assignee having recourse against Assignor as a
result of such assignment), and Assignee hereby assumes, a constant ______% of
each of the Assignor's Commitment to the Borrower under the Loan Agreement, such
assignment from Assignor to Assignee being [all of Assignor's Commitment to the
Borrower] [$______________ of Assignor's $_____________ Commitment to Borrower
(the amount of such Commitment to the Borrower so assigned is called the
"Assigned Portion" of such Commitment)]. [The Assignee is already a Bank under
the Loan Agreement with a Commitment of $ to the Borrower prior to the
assumption contemplated hereby.] [The Assignee is hereby approved by the
Administrative Agent [and the Borrower] for purposes of the assignment and
assumption contemplated hereby.] As contemplated by such Section 8.13, it is
hereby agreed that:
(i) the Assignor is hereby released from all of its obligations under
the Loan Agreement with respect to or arising as a result of the
Assigned Portion of its Commitment assigned hereby;
(ii) the Assignee hereby becomes obligated for the Assigned Portion of
such Commitment and all other obligations of the Assignor
(including, without limitation, obligations to the Administrative
Agent under Section 9.7 of the Loan Agreement or otherwise) under
the Loan Agreement with respect to or arising as a result of the
Assigned Portion of such Commitment;
(iii) the Assignee is hereby assigned the right to vote or consent
under the Loan Agreement and the other rights and obligations of
the Assignor under the Loan Agreement, in each case to the extent
of the Assigned Portion of such Commitment;
(iv) The Borrower, contemporaneously with its execution and delivery
hereof, will deliver, in replacement of the Note of the Assignor
currently outstanding [(and in replacement of Assignee's existing
$__________ Note)] (a) to the Assignee, a new Note in the amount
of $______________ [(and the Assignee agrees to cancel and return
to the Borrower, with reasonable promptness following such
delivery, the Note of the Assignee being replaced thereby)] (b)
to the Assignor, a new Note in the amount of $______________ (and
the Assignor agrees to cancel and return to the Borrower, with
reasonable promptness following delivery of such new Note, the
Note of the Assignor being replaced thereby), and (c) to the
Administrative Agent, photocopies of all such new Notes and of
all such cancelled Notes;
Exhibit D - Page 1
<PAGE> 39
[(xi inasmuch as there are currently no outstanding Loans, no transfer
of Loans is hereby made];
[(xii) $_____________ of the Assignor's outstanding Loans to the
Borrower are hereby transferred to the Assignee, which amount
represents [the aggregate amount of all of the Assignor's
outstanding Loans to the Borrower] [the amount of the assigned
portion of the outstanding Loans of the Assignor to the Borrower,
there being hereby assigned to Assignee a portion of each such
Loan equal to the amount of such Loan multiplied by a fraction,
the numerator of which is the amount of the Assignor's Commitment
assumed hereby by the Assignee and the denominator of which is
the amount of the Assignor's Commitment immediately prior to such
assumption]; [and]
(xiii) the Assignee hereby confirms that it is a party to the Loan
Agreement as a Bank and agrees that after giving effect to this
Agreement its Commitment will be $ ; [and]
[(xiv) the Assignee hereby specifies the following offices as its
applicable lending offices under the Loan Agreement:
Domestic Eurodollar
Lending Office Lending Office
-------------- --------------
Attention: Attention:
------------------- -------------------
Telephone: Telephone:
------------------- -------------------
Telecopy: Telecopy:
-------------------- --------------------
Telex: Telex:
----------------------- -----------------------
Answerback: Answerback:
------------------ -----------------]
[(xv) the Assignee hereby specifies the following as its address for
notices and communications under the Loan Agreement:
[Assignee]
Attention:
-------------------
Telephone:
-------------------
Telecopy:
--------------------
Telex:
-----------------------
Answerback:
------------------
Exhibit D - Page 2
<PAGE> 40
2. Miscellaneous.
2.1 Amendments. Etc. This Agreement shall not be amended, waived or
otherwise modified except in writing executed by the parties hereto.
2.2 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
2.3 Definitions. Capitalized terms used herein which are defined in the
Loan Agreement and not defined herein are used herein as defined in the Loan
Agreement.
2.4 Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different 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
2.5 Effective Date. This Agreement shall be effective as of the date first
above written for purposes of computation of commitment fees under the Loan
Agreement and for all other relevant purposes.
2.6 Assignee Credit Decision. The Assignee acknowledges that it has,
independently and without reliance upon the Administrative Agent or any other
Bank and based on such financial statements and such other documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. The Assignee also acknowledges that it
will, independently and without reliance upon the Administrative Agent or any
other Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under any Note, the Loan Agreement or this Agreement.
2.7 Indemnity. The Assignee agrees to indemnify and hold the Assignor
harmless against any and all losses, costs and expenses (including without
limitation reasonable attorneys' fees) and liabilities incurred by the Assignor
in connection with or arising in any manner from the Assignee's performance or
non-performance of obligations assumed by Assignee under this Agreement.
Exhibit D - Page 3
<PAGE> 41
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers "hereunto duly authorized, as of the date first
above written.
WILLIAMS COMMUNICATIONS [NAME OF ASSIGNOR]
GROUP, INC.
By By
-------------------------------- --------------------------------
Name: Name:
----------------------------- -----------------------------
Title: Title:
---------------------------- ----------------------------
[NAME OF ASSIGNEE] BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent
By By
-------------------------------- --------------------------------
Name: Name:
----------------------------- -----------------------------
Title: Title:
---------------------------- ----------------------------
Exhibit D - Page 4
<PAGE> 1
Redacted portions have been marked with asterisks (****). Confidential treatment
has been requested for the redacted portions. The confidential redacted portions
have been filed separately with the Securities and Exchange Commission.
CONFIDENTIAL TREATMENT
EXHIBIT 10.8
SHAREHOLDERS AGREEMENT
BY AND AMONG
METROGAS S.A.
WILLIAMS INTERNATIONAL TELECOM (CHILE) LIMITED
AND
METROCOM S.A.
MARCH 30, 1999
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SHAREHOLDERS AGREEMENT
THIS SHAREHOLDERS AGREEMENT ("Agreement") is made and entered into in
Santiago, Chile, on this 30th day of March 1999, by and among (1) METROGAS S.A.,
a corporation duly organized under the laws of the Republic of Chile
("Metrogas"), (2) WILLIAMS INTERNATIONAL TELECOM (CHILE) LIMITED, a company duly
organized under the laws of the Cayman Islands, and a wholly-owned subsidiary of
Williams International Company ("Williams"); and (3) METROCOM S.A., a company
duly organized under the laws of the Republic of Chile ("Company").
RECITALS:
1. WHEREAS, Metrogas intends to develop and build an infrastructure
consisting of a network of ducts and associated chambers for communications (the
"Communications Infrastructure") parallel to and together with the natural gas
distribution network that Metrogas has built and is building within the
Metropolitan Region of Santiago, Chile. Metrogas created the Company as the
legal entity that shall own the Communications Infrastructure, the Concession,
and all other rights and obligations related thereto.
2. WHEREAS, Metrogas and the Company have executed a Communications
Infrastructure Purchase Agreement dated March 30, 1999 ("CIPA") pursuant to
which Metrocom purchased the Communications Infrastructure from Metrocom.
3. WHEREAS, in order to now ensure the successful development of the
Company into a communications company ("Project"), Metrogas wishes to join with
a reputable, international telecommunications operator that will provide
technical experience and know-how, as well as strategic investors that will
provide additional financial resources.
4. WHEREAS, Williams wishes to expand its Latin American
telecommunications operations into the Republic of Chile, views the
Communications Infrastructure and the Project as an attractive business, and
consequently wishes to contribute its technical skills, experience and know-how
in the telecommunications industry, as well as financial resources, to the
Project.
5. WHEREAS, the mutually-agreed objectives of the Parties for the time
period prior to commencement of roll-out of the network referred to in Whereas 1
and commercial operations of the Company are to actively seek and negotiate
vendor financing for the Project and to seek acquisitions in order to both
accelerate attainment of the goals and profitability of the Project.
6. WHEREAS, as at the date of this Agreement, the authorized capital of
the Company is Ch$31,041,118,060, divided into 128,160 Shares. 64,080 Shares
have been issued and subscribed by Metrogas, and 15,920 Shares have been issued
and subscribed by Williams, all of which have been fully paid up on
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or prior to the Closing Date (as defined herein). 48,160 Shares are authorized,
but have not yet been issued, subscribed or paid-up, and each of which is
subject to the warrant described in Section 3.6.
7. WHEREAS, in order to provide for the stability of the Company and to
promote continuity of its management and policies, the Shareholders have agreed
to execute this Agreement setting forth their mutual understanding with respect
to the organization, operation, objectives and mission of the Company, and with
respect to the respective rights and obligations of the Parties.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions hereinafter set forth, the parties hereto mutually agree as follows:
SECTION 1
DEFINITIONS
1.1. Affiliate. Unless otherwise defined herein, an "Affiliate" of a Person
shall mean any of the following: (i) a Person is affiliated with another Person
if one of them is the subsidiary of the other or both of them are subsidiaries
of the same Person. For this purpose, (a) a Person is a subsidiary of another
Person if it is directly or indirectly controlled by that other Person; (b) a
Person is directly controlled by another Person if securities of the Person to
which are attached more than fifty percent (50%) of the votes that may be cast
to elect directors of the Person are held, other than by way of security only,
by or for the benefit of that other Person, and the votes attached to those
securities are sufficient if exercised, to elect a majority of the directors of
the Person; and (c) a Person is indirectly controlled by another Person if
control, as described in Clause 1.1(b), is exercised through one or more other
Persons which are Affiliates or subject to a voting agreement, whether oral or
in writing; and (ii) a Person is affiliated with a partnership if the Person, or
another Person with which the Person is affiliated, is a member of the
partnership and owns more than fifty percent (50%) of that partnership interest.
1.2. Agreement. The "Agreement" shall mean this Shareholders' Agreement, as the
same may be amended from time to time hereafter, compliance with which shall be
binding upon the Parties and shall inure to the benefit of and be binding upon
any successors and assigns (including Transfers to an Affiliate) of any Party
that purchases Shares in accordance with Clauses 10.2 or 10.4, but not Clause
10.3 of this Agreement.
1.3. Board of Directors. The "Board of Directors" shall mean the Board of
Directors of the Company, as the same may be constituted from time to time
hereafter pursuant to applicable law and the By-Laws.
1.4. Bona Fide Offer. A "Bona Fide Offer" shall mean an offer in writing to a
Shareholder, offering to purchase all or any part of the Shares owned by such
Shareholder or any interest of the Shareholder therein and setting forth all the
relevant terms and conditions of the proposed purchase, from an offeror who is
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ready, willing and able to consummate the purchase and who is neither the
Company nor an Affiliate of such Shareholder.
1.5. Budget. The "Budget" shall mean the approved annual operating and capital
budgets of the Company, which forms part of the approved Business Plan.
1.6. Business. The "Business" shall mean the areas and scope of business of the
Company, which are the direct or indirect provision of local and long distance
telephony, cable television, internet, data, and other facilities-based wireline
and wireless and non-facilities based telecommunications and multimedia services
in both the Primary Territory and the Secondary Territory, as well as to hold
investments in communications businesses in both the Primary Territory and the
Secondary Territory, as the same may be modified from time to time by the mutual
agreement of the Shareholders.
1.7. Business Plan. The "Business Plan" shall mean the approved annual and long
term business plan of the Company, as detailed further in Section 5.1 of this
Agreement, and draft copies of which are attached as Annex A to this Agreement.
1.8. By-Laws. The "By-Laws" shall mean the by-laws of the Company in effect as
of the date hereof, a copy of which are attached as Annex B to this Agreement,
and as the same may be modified from time to time hereafter pursuant to
applicable law.
1.9. Ch$. "Ch$" shall mean the domestic currency of the Republic of Chile.
1.10. CIPA. The "CIPA" shall mean the Communications Infrastructure Purchase
Agreement that shall be executed on and dated March 30, 1999 between Metrogas
and the Company, under which Metrogas agrees to sell and the Company agreed to
purchase the existing and future Communications Infrastructure, in each case, on
the terms and conditions specified therein. A copy of the **** CIPA is attached
hereto as Annex C, which all Parties hereto acknowledge and agree as being the
final version, and agree to and accept all terms and conditions thereof.
1.11. Closing Date. The "Closing Date" shall mean Wednesday, March 30, 1999.
1.12. Concession. The "Concession" shall mean the authorization granted to the
Company in Supreme Decree No. 51 of February 19, 1997 by the Undersecretary of
Telecommunications, Ministry of Transport and Telecommunications, under which
the Company is authorized to install, operate and use an underground,
high-capacity, fiber-optic cable network within the Metropolitan Region of Chile
for a period of thirty (30) years from June 23, 1997. The authorized network has
a length of 155 kilometers, with a service zone corresponding to the provinces
of Santiago, Maipo and Cordillera, consisting of a principal network of two
rings, with some derivations, and a secondary network which is joined to the
principal network.
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1.13. Company. The "Company" shall mean the legal entity called Metrocom S.A.,
organized and existing in accordance with the laws of the Republic of Chile,
with Tax No. 96,790,850-9, incorporated under a public deed dated April 9, 1996
granted before Notary Public Raul Ivan Perry Pefaur, the extract of which was
registered on Folio 87,776 No. 7159 of the Commercial Registry of 1996,
published in the Official Gazette dated April 22, 1996, and protocolized on May
6, 1996 before Notary Public Raul Ivan Perry Pefaur. Throughout this Agreement,
any reference to "Company" or "Metrocom" shall also mean, interchangeably, any
subsidiary, as defined in Clause 1.1(i)(a), hereof.
1.14. Fair Market Value. The "Fair Market Value" of the Shares shall mean the
price at which the Shares would be exchanged between a willing buyer and a
willing seller, each having reasonable knowledge of all relevant facts
concerning the purchase and sale, neither acting under compulsion to consummate
the purchase and sale.
1.15. GAAP. "GAAP" shall have the meaning set forth in Section 7.1(b) of this
Agreement.
1.16. Metrogas. "Metrogas" shall mean the legal entity called Metrogas S.A.,
organized and existing in accordance with the Republic of Chile, with Tax No.
96.722.460-K, incorporated under a public deed dated May 26, 1994 granted before
Notary Public Victor Manuel Correa Valenzuela, the extract of which was
registered on Folio 8,420 No. 9,401 of the Commercial Registry of 1994,
published in the Official Gazette dated June 8, 1994.
1.17. Metrogas Shareholders. The "Metrogas Shareholders" shall mean,
collectively, Compania de Consumidores de Gas de Santiago S.A., Compania de
Petroleos de Chile S.A., Nova Gas Distribuidora de Chile S.A., Lone Star Gas
Chile S.A., Gener S.A., and Trigas S.A.
1.18. Party or Parties. The "Party" (if in the singular) or "Parties" (if in the
plural) shall mean each of Metrogas, Williams and the Company.
1.19. Person. A "Person" shall mean any entity, corporation, company,
association, joint venture, joint stock company, partnership, limited liability
company, trust, organization, individual (including personal representatives,
executors and heirs of a deceased individual), nation, state, government
(including agencies, departments, bureaus, boards, divisions and
instrumentalities thereof), trustee, receiver or liquidator.
1.20. Primary Territory. The "Primary Territory" shall mean the Republic of
Chile.
1.21. Public Offering. A "Public Offering" shall mean a public offering of
Shares or securities of the same class as the Shares pursuant to an effective
registration statement under the applicable securities law legislation that
allows the sale of Shares through a stock exchange.
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1.22. Rights of Way. The "Rights of Way" shall mean the rights of way which have
been or shall, in the future, be granted to the Company by virtue of: (i) the
agreements described in Annex D to this Agreement, and (ii) any other
authorization or permission that granted by any Person to Metrogas and/or the
Company for the purpose of granting rights of way, building permits, rights of
access, or other similar rights.
1.23. Secondary Territory. The "Secondary Territory" shall mean each of
Argentina, Bolivia, Brazil, Colombia, Ecuador, Paraguay, Peru, and Uruguay.
1.24. Shareholder. A "Shareholder" shall mean each of Williams, Metrogas, each
other Person who succeeds to the interest of such named Shareholders in and to
any Shares in a manner permitted by the provisions of this Agreement; and each
other Person who subscribes to new Shares in the Company.
1.25. Shares. The "Shares" shall mean the common shares of the capital stock of
the Company specified in Recital 6 above, together with any other shares of the
capital stock of the Company hereafter acquired by any Shareholder and any other
shares or securities thereafter issued in respect of such shares in any
reorganization, recapitalization, reclassification, readjustment or other change
in a capital structure of the Company.
1.26. Technical Services Agreement. The "Technical Services Agreement" shall
mean the technical services agreement that executed on March 30, 1999 between
the Company and Williams International Services Company, a wholly-owned
subsidiary of Williams International Company, under which Williams agreed to
provide for technical services to the Company on the terms and conditions
specified therein. A copy of the Technical Services Agreement is attached hereto
as Annex E, which all Parties hereto acknowledge and agree as such final
version, and agree to and accept all terms and conditions thereof.
1.27. Telecommunications Operator. A "Telecommunications Operator" shall mean
any Person that operates telecommunications and communications networks and/or
renders any telecommunications or communications services and/or conducts any
business anywhere in the world which is related or similar to the Business of
the Company.
1.28. Transfer. A "Transfer" of Shares or any interest of a Shareholder therein
shall mean and include any sale, assignment, transfer, disposition, pledge,
hypothecation or encumbrance, whether direct or indirect, voluntary, involuntary
or by operation of law, and whether or not for value, of such Shares or such
interest of a Shareholder therein.
1.29. USD. A "USD" shall mean United States Dollars. Where, throughout this
Agreement, a USD amount is required to be paid in Ch$, the amount to be paid in
Ch$ shall be calculated in accordance with the exchange rate known as the "dolar
observado", established by the Central Bank of Chile and published in the
Official Gazette on the date of payment.
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1.30. Williams. "Williams" shall mean the legal entity called Williams
International Telecom (Chile) Limited organized and existing in accordance with
the laws of the Cayman Islands, with a Certificate of Incorporation dated
September 29, 1998, and Memorandum and Articles of Association dated September
29, 1998.
SECTION 2
ORGANIZATION OF THE COMPANY
2.1. Organization. The Company is organized under the laws of the Republic of
Chile for the principal business purpose set forth in Section 2.6 below, and is
a party to this Agreement.
2.2. Name. The corporate designation of the Company is METROCOM S.A., as such
designation may be amended from time to time as may be mutually agreed to in
writing by the Shareholders.
2.3. Principal Office. The principal office and place of business of Company
shall be located in Santiago, Chile, or at such other place as may be mutually
agreed to by the Shareholders.
2.4. By-Laws. The By-Laws of Company shall be as attached hereto as Annex B, and
such By-Laws may be amended from time to time as may be mutually agreed to by
the Shareholders.
2.5. Fiscal Year. The fiscal year of the Company shall be from January 1 to
December 31, inclusive.
2.6. Business Purpose. The principal business purpose of the Company shall be to
engage in the Business by whatever lawful means, and to do all things necessary,
appropriate or advisable in furtherance thereof.
SECTION 3
CAPITALIZATION AND FINANCING OF THE COMPANY
3.1. Authorized and Actual Capital. The Company has an authorized capital of
Ch$31,041,118,060, divided into 128,160 Shares of common stock.
3.2. Subscription of Shares.
(a) 64,080 Shares have been issued and subscribed by Metrogas, of which 19,999
were subscribed and fully paid-up upon incorporation of the Company; 44,080 were
subscribed in accordance with the terms of the Stock Subscription Agreement
dated March 30, 1999 executed by Metrogas and the Company, all of
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which were fully paid-up in cash on the Closing Date; and 1 was purchased from
Francisco Gazmuri Schleyer (hereinafter referred to as "Gazmuri") in accordance
with the terms of the Stock Purchase Agreement dated March 30, 1999 executed by
Metrogas and Gazmuri;
(b) 15,920 Shares have been issued and subscribed by Williams in accordance with
the terms of the Stock Subscription Agreement dated March 30, 1999 executed by
Williams and the Company, all of which were fully paid-up in cash on **** the
Closing Date; and
(c) 48,160 Shares have been authorized, but have not yet been issued, subscribed
or paid-up, and each of which is subject to the warrant described in Section
3.6.
3.3. Future Capital Contributions, Shareholders' Loans, and/or Subordinated
Debt.
(a) No additional capital stock may be issued by Company other than by the
mutual written consent of the Shareholders. The Shareholders hereto shall meet
no less frequently than annually following the date of this Agreement to
determine the capital needs of the Company for the next succeeding year.
(b) The Shareholders may, but shall not be obligated to, mutually agree to make
additional equity capital contributions and/or shareholders' loans to the
Company in equal proportion to their respective shareholdings. Upon written
notification by the Board of Directors to the Shareholders that the Company does
not have sufficient capital to fund the activities of Company, the Shareholders
shall promptly meet with management of Company to ascertain the amount of
funding reasonably required by Company under the circumstances. The Shareholders
shall thereafter enter into a mutually acceptable agreement with respect to such
additional capital contributions, if any.
3.4. Withdrawals of Capital. Except as otherwise provided in this Agreement or
the By-Laws, no Shareholder shall have the right to withdraw or to demand a
return of all or any part of its capital contribution to the Company. In the
event of any conflict or discrepancy between this Agreement and the By-Laws on
this matter, the By-Laws shall take precedence.
3.5. Material Breach. Notwithstanding Section 13.1 of this Agreement, the
failure of any Shareholder to make a capital contribution or shareholders' loan
as required pursuant to this Section 3 shall constitute a material breach of
this Agreement.
3.6. Williams' Warrant. For these purposes, Williams, the Company and Metrogas
have entered into a Warrant Agreement dated March 30, 1999, pursuant to which
Williams may, if it so decides, subscribe to the 48,160 Shares, referred to in
Section 3.2(c) above, that have been authorized, but have not yet been issued,
subscribed, or paid-up.
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SECTION 4
MANAGEMENT AND CONTROL OF THE COMPANY
4.1. Resolutions requiring Special Majority of Directors or Shareholders
(a) Subject to the provisions of Clause 4.1(b), the Board of Directors or the
Shareholders must pass resolutions for the purpose of determining the following
matters, as and when necessary for the proper functioning and operation of the
Company.
(b) Notwithstanding anything contained in the By-laws or this Agreement to the
contrary, the Company must not take any of the following actions or take any
action with respect to any of the following matters without obtaining the prior
authorization of no less than six (6) members of the Board of Directors (in the
event that the By-laws provide that such actions are to be decided by the Board
of Directors) or 80.2% of the total issued Shares of the Company (in the event
that the By-laws provide that such actions are to be decided by the
Shareholders):
(i) Approval of Business Plan, which includes the Budget.
(ii) Approval of accounting policies to be applied and used by the
Company on a consistent basis, provided always that such accounting policies are
within the generally accepted accounting principles within the Republic of
Chile.
(iii) Any material changes, modifications, extensions to or reductions
of the scope of the Business.
(iv) Debt and financing policies of the Company, including debt
securities, indebtedness or pledges that are not included in the approved
Business Plan or Budget.
(v) The maximum ratio of debt to equity of the Company.
(vi) The minimum level of working capital available or liquidity ratio
of the Company.
(vii) Any action or inaction which would involve a variation of the
aforementioned debt to equity ratio and/or the minimum level of working capital
available or liquidity ratio above or below, as applicable, the levels
authorized by the Board of Directors or the Shareholders.
(viii) Capital expenditure of more than five percent (5%) of the
capital budget within the Budget, unless such expenditure is already included in
the approved Business Plan or Budget.
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(ix) Any Public Offering of all or part of the Shares.
(x) Any purchase, sale, lease, exchange or other acquisition or
disposition for a total value of more than five percent (5%) of all or
substantially all of the non-essential assets of the Company, unless such
purchase, sale, lease, exchange or other acquisition or disposition of all or
substantially all of the non-essential assets of the Company for a total value
of more than five percent (5%) of non-essential assets is already included in
the approved Business Plan or Budget.
Furthermore, any purchase, sale, lease, exchange or other
acquisition or disposition of any essential assets of the Company must be
approved by the Board of Directors or the Shareholders in accordance with this
Clause 4.1(b). For the purposes of this Clause 4.1(b), the term "essential
assets" shall mean any asset without which the Company would be unable to
conduct the Business.
(xi) Any material changes to or transfers of the Concession, or the
acquisition of new telecommunications concessions, excluding applications for
new licenses pursuant to the laws of the Republic of Chile.
(xii) Related party transactions. For this purpose, the term "related
party transaction" shall include the entering into or modification of the CIPA,
the Technical Services Agreement, and any other agreement or transaction between
the Company and any Shareholder, affiliate of the Company or any Shareholder, or
director, officer or employee of the Company, as well as the placing by the
Company of any Orders (as defined under the Technical Services Agreement) under
the Technical Services Agreement for more than US$100,000 per Order. For the
purposes of this Clause 4.1(b)(xii) only, an "affiliate" of a Person shall mean
a Person directly or indirectly controlling, controlled by or under common
control with such Person; or a Person owning or controlling 10% or more of the
outstanding voting securities of such Person.
(xiii) Appointment of external auditors of the Company.
(xiv) Appointment of the members of and delegation of powers to the
committees constituted by the Board of Directors in accordance with Clauses 4.4,
4.5, and 4.6 of this Agreement.
(xv) Any increase or decrease of the capital of the Company.
(xvi) The execution of any agreement which involves or implies the
Transfer, lease, rent, or use without payment of the existing and/or future
telecommunications infrastructure described in the CIPA.
(xvii) All matters specified in Article 67 of Law No. 18.046 of 1981
(Corporations Law) (Ley de Sociedad Anonimas N(0)18.046 de 1981).
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4.2. Board of Directors
(a) The By-laws shall provide that the Board of Directors shall consist of seven
(7) permanent directors and seven (7) alternate directors, of which two (2)
permanent and alternate director shall be nominated by Williams (one of which
shall be nominated by Williams through the use of its own voting rights, and one
of which shall be nominated by Metrogas, through the voting rights of Metrogas,
upon express instruction by Williams) and five (5) permanent and alternate
directors shall be nominated by Metrogas. For the purposes of Section 4.2(d) of
this Agreement, Williams shall be deemed to have nominated two (2) directors. In
the event, however, that the shareholding percentages in the Company of each of
Williams and Metrogas vary in any manner, the number of directors which each of
Williams and Metrogas are entitled to nominate to the Board of Directors and the
relevant quorum and voting percentages for both meetings of the Board of
Directors and Shareholders of the Company shall also vary in accordance with the
relevant change of shareholding percentages.
(b) For as long as Williams holds 19.9% or more of the Shares of the Company,
Williams shall be entitled to nominate the Chairman of the Board of Directors.
In the event that Williams does not hold 19.9% or more of the Shares of the
Company, the Chairman of the Board of Directors shall be nominated by a simple
majority of the members of the Board of Directors.
(c) In the event of a tie at any meeting of the Board of Directors, the chairman
shall have a second or casting vote.
(d) If a vacancy in any directorship should occur, for whatever reason, the
Shareholder who had nominated the former director shall nominate his
replacement. The Shareholders agree to vote their respective shares for the
election of such nominee. Vacancies shall be filled by vote of the Shareholders
as provided in the By-laws. A Shareholder may remove any director nominated by
such Shareholder, with or without cause, and may replace such director with his
or its nominee and the other Shareholder shall vote its shares to effect such
removal and replacement.
(e) The Board of Directors shall manage the business of Company and may exercise
all powers normally exercised by a Board of Directors, except for such powers as
are required to be exercised by Shareholders, all in accordance with the By-laws
and applicable statutes. All actions by the Board of Directors shall require the
affirmative vote of a majority of the total members of Board of Directors at a
meeting at which a quorum is present, except for such actions as to which a
higher than majority vote is required pursuant to the provisions of Clause
4.1(b) above of this Agreement, the By-laws or applicable law.
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(f) The initial seven (7) directors of the Company and their alternates shall be
the following:
(i) Nominated by Williams:
Permanent Directors:
Antonio Ortuzar Vicuna
Arturo Garnham Bravo
Alternate Directors:
Rodrigo Cuchacovich Aresti
Jaime Munro Cabezas
(ii) Nominated by Metrogas:
Permanent Directors:
Juan Claro Gonzalez
Jorge Bunster Betteley
Bruno Phillippi Irarrazabal
Gariel Leon Burgos
Carlos Alberto Cruz Claro
Alternate Directors:
Jorge Rosenblut Ratinoff
Eduardo Morande Montt
Francisco Gazmuri Schleyer
Ramiro Mendez Urrutia
Francisco Marin Jordan
(g) The composition of the board of directors of the Company may be modified
from time to time considering the new percentage allocated to the Parties during
a period.
4.3. Senior Officers and Managers.
(a) The senior officers of the Company, including, but not limited to the Chief
Executive Officer, Chief Operating Officer, Director of Engineering and
Construction, Chief Technology Officer, Director of Finance and Administration,
Chief Financial Officer, Chief Legal Officer, Company Secretary, and the
managers of the audit, regulatory, human resources and customer services
divisions of the Company shall be appointed by the Board of Directors having
regard to cost efficiency considerations, shall be remunerated by the Company in
accordance with prevailing market rates and employment arrangements as may be
required by the Company.
(b) Any two or more senior officer positions may be held by the same person.
(c) Notwithstanding Clause 4.3(a), the senior officers and managers of the
Company shall be nominated by Williams and appointed upon the affirmative vote
of any six (6) members of the Board of Directors. The removal of any senior
officer or manager of the Company shall be jointly approved by the Chief
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Executive Officers of Metrogas and Williams, prior to such removal being
effected. If the Chief Executive Officers are unable to reach mutual agreement,
the matter shall be referred to the Board of Directors for resolution, where the
decision to remove or not to remove the senior officer or manager in question
shall be resolved upon the affirmative vote of any six (6) members of the Board
of Directors.
(d) In the event that any senior officer or manager of the Company is removed in
accordance with Clause 4.3(c) above, it is expressly agreed that such senior
officer or manager may only be re-appointed to any senior officer or manager
position within the Company upon the affirmative vote of any four (4) members of
the Board of Directors.
4.4. Management Committee. Subject to review by the Board of Directors, a
Management Committee consisting of any number of directors, senior officers
and/or managers of the Company as are deemed necessary by the Board of Directors
shall be constituted with authority to decide such matters as may be delegated
to it from time to time by resolution of the Board of Directors, including the
following:
(a) Compensation, including salaries, bonuses and incentive compensation to be
received by the employees of the Company, other than officers;
(b) The appointment and removal of any employee of the Company;
(c) The establishment or modification of the Company's proposed annual budget
for consideration by the Board of Directors; and
(d) The recommendation to the Board of Directors of appropriate bookkeeping and
accounting policies, including the selection of the Company's bookkeeper.
Regular meetings of the Management Committee may be held at such time and place
as shall from time to time be fixed by such Management Committee and no notice
thereof shall be required.
4.5. Audit and Compliance and other Committees. Subject to review by the Board
of Directors, an Audit and Compliance Committee consisting of three (3)
Directors shall be constituted with authority to decide such audit and
compliance matters as may be delegated to it from time to time by resolution of
the Board of Directors.
SECTION 5
BUSINESS ACTIVITIES OF THE COMPANY
5.1. Business Plan.
(a) Following the execution of this Agreement, the Shareholders shall mutually
develop and agree upon the final Business Plan (both annual and long
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term) for the Company, the initial draft of which is attached as Annex A to this
Agreement. The Shareholders shall, by December 31 of each calendar year, adopt
the annual Business Plan corresponding to the subsequent calendar year.
(b) Without limitation, the Business Plan shall set forth in reasonable detail
the plans, goals and objectives of the Company, including the development plan,
operating plan, financing plan, marketing and sales plan, any capital and
operating expense budgets, cash flow statements, projected balance sheets and
profit and loss statements for each month and for the end of such year itemized
in such detail as the Shareholders may reasonably determine, the maximum ratio
of debt to equity of the Company, the minimum level of working capital available
or liquidity ratio of the Company, and such other matters as may be determined
by the Shareholders. The Shareholders shall meet no less frequently than
annually to review the approved Business Plan and develop and agree upon
subsequent Business Plans for the Company during the term of this Agreement.
5.2. Budget. The Budget, comprising the operating and capital budgets shall be
adopted by the Shareholders every twelve (12) months during the term of this
Agreement. Following the execution of this Agreement, the Shareholders shall
mutually develop and agree upon the final Budget for the Company for the 1999
calendar year.
5.3. Additional Business Activities. The Shareholders contemplate that there may
be additional opportunities for mutual development of other areas of interest by
the Company. At any time either of the Shareholders may suggest that further
discussions be conducted regarding such other opportunities. As a result of such
development of other areas of interest, the Company may be required to have a
capital increase which may dilute the interest of some shareholders and request
a reconstitution of the Board.
5.4. Compliance with Business Plan. The Company shall conduct the Business in
accordance with the Business Plan, unless prior authorization to vary the terms
of the Business Plan has been obtained under Clause 4.1 of this Agreement.
SECTION 6
OPERATIONAL ACTIVITIES OF THE COMPANY
Each of the Shareholders covenants and agrees to cause the management of the
Company to conduct the business of the Company in the following manner:
6.1. Corporate Existence. The Company shall maintain its corporate existence in
good standing and comply with all applicable laws and regulations of the
Republic of Chile or of any political subdivisions thereof and of any government
authority where failure to so comply would have a material adverse impact on the
continuation of the Company and/or its business or operations.
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6.2. Preparation of and Compliance with Budget. To the extent that it is
required to do so, the Company shall prepare the Budget in accordance with the
terms and within the framework of the Business Plan. Further, the Company shall
conduct the Business in strict accordance with the financial and other terms,
specifications, and limits specified in the Budget, unless prior authorization
to exceed such terms, specifications and limits has been obtained under Clause
4.1 of this Agreement.
6.3. Operation to Public Listing Standards. Unless provided otherwise in the
By-laws or this Agreement, and notwithstanding that the Company may not, at the
relevant time, be listed on one of the public stock exchanges in the Republic of
Chile or any other stock exchange, the Company shall conduct the Business at all
times in accordance with the regulations and legislation which are applicable to
companies that are listed on one of the public stock exchanges in the Republic
of Chile.
6.4. Accounting and Internal Controls.
(a) The Company shall conduct the Business at all times in accordance with high
standards of business ethics and to maintain Company's accounts in accordance
with generally accepted accounting principles consistently applied and,
specifically, shall:
(i) Maintain full and accurate books, records, and accounts which shall, in
reasonable detail, accurately and fairly reflect all transactions of Company and
shall be kept according to generally accepted accounting principles,
consistently applied, employing standards, procedures and forms conforming to
established practice internationally and in the Republic of Chile; and
(ii) Devise and maintain a system of internal accounting controls sufficient to
provide reasonable assurances that (A) transactions are executed in accordance
with general or specific authorizations, (B) transactions are recorded as
necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles, all tax returns and to maintain
accountability for assets, (C) access to assets is permitted only in accordance
with general or specific authorizations, and (D) the recorded accountability for
assets is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(b) The Company shall have its annual financial and accounting books and records
reviewed by the external auditors, appointed by the Board of Directors in
accordance with Clause 4.1(b)(xiii) of this Agreement, in accordance with
generally accepted auditing standards internationally and in the Republic of
Chile.
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6.5. Payment of Taxes and Maintenance of Properties.
The Company shall:
(a) pay and discharge promptly, or cause to be paid and discharged promptly when
due and payable, all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or upon any of its properties, other than
such taxes, assessments, charges or levies as the Company is contesting in good
faith through appropriate proceedings; and
(b) maintain and keep, or cause to be maintained and kept, its properties in
good repair, working order and condition.
6.6. Insurance. The Company will obtain and maintain in force such property
damage, public liability, business interruption, worker's compensation, and
other types of insurance as the Company's senior officers shall determine to be
necessary or appropriate, in accordance with insurance standards from time to
time existing within the Republic of Chile, to protect the Company from the
insurable hazards or risks associated with the conduct of the Company's
business. The senior officers shall periodically report to the Board of
Directors on the status of such insurance coverage. All such insurance policies
shall be maintained in at least such amounts and to such extent as shall be
determined to be reasonable by the Board of Directors. All such insurance shall
be effected and maintained in force under a policy or policies issued by
insurers of recognized responsibility, except that the Company may effect
worker's compensation or similar insurance in respect of operations in any other
jurisdiction either through an insurance fund operated in other jurisdiction or
by causing to be maintained a system or systems or self-insurance which is in
accord with applicable laws.
SECTION 7
FINANCIAL INFORMATION
7.1. Financial Information. The Company will furnish the following information
to the Board of Directors and each Director:
(a) As soon as practicable after the end of each fiscal year, and in any event
within 120 days thereafter, a balance sheet of the Company, as of the end of
such fiscal year, and a statement of income and a statement of changes in
financial position of the Company for such year, prepared in accordance with
generally accepted accounting principles and setting forth in each case in
comparative form the figures for the previous fiscal year, all in reasonable
detail and with an audit opinion thereon from independent auditors of recognized
international standing selected in accordance with Section 4.1(b)(xiii).
(b) As soon as practicable after the end of the first, second and third
quarterly accounting periods in each fiscal year of the Company, and in any
event within forty-five (45) days thereafter, a balance sheet of the Company as
of the end of each such quarterly period, and a statement of income and a
statement of changes in financial position of the Company for such period and
for the current fiscal year to date, prepared in accordance with United States
or international and Republic of Chile generally accepted accounting principles
consistently applied ("GAAP"), with the exception that no notes need be attached
to such
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<PAGE> 17
statements and year-end audit adjustments may not have been made. Said financial
statements shall be signed by an officer of the Company who shall state that
such financial statements are in accordance GAAP, with the exception that no
notes need be attached to such statements and year-end audit adjustments may not
have been made.
(c) As soon as practicable after the end of each fiscal month, and in any event
within fifteen (15) days thereafter, a balance sheet of the Company as at the
end of such month, and a statement of income of the Company for such month, and
for the current fiscal year to date, in each case setting forth in comparative
form the Company's projected balance sheets and projected statements of income
for the corresponding periods (as prepared pursuant to Section 5.1), prepared in
accordance with GAAP, all in reasonable detail and certified subject to changes
resulting from year-end audit adjustments, by the Chief Financial Officer of the
Company; provided, however, that any financial statements provided hereunder
need not contain any footnotes. To such financial statements there shall be
appended a discussion and analysis, in reasonable detail, of such financial
statements and the general business condition and prospects of the Company by
management of the Company so as to assist the recipients in understanding and
interpreting such financial statements.
(d) All such information and/or documents as may be required to permit the Board
of Directors and/or the Shareholders, as the case may be, to make informed
judgments with respect to the Company's annual Business Plan and all other
matters of interest to them.
(e) Each Shareholder agrees that it shall cause and ensure that any
confidential, proprietary or secret information which the Directors nominated by
such Shareholder to the Board of Directors may obtain from the Company, and
which the Company has prominently marked 'confidential', 'proprietary' or
'secret' or has otherwise identified as being such, pursuant to financial
statements, reports and other materials submitted by the Company as required
hereunder, or pursuant to visitation or inspection rights granted hereunder,
shall be deemed to be Confidential Information (as defined in Section 9 below).
SECTION 8
INDEPENDENT ENTERPRISE
8.1. Independent Enterprise. The Shareholders agree to cause Company at all
times to be conducted as an independent enterprise for profit. Except as
otherwise provided herein, all commercial transactions between Company and
either of the Shareholders (or their Affiliates) shall be conducted on an
arm's-length basis with neither granting to the other terms or conditions more
favorable than would be accorded non-related third-parties, except as the
Shareholders may otherwise mutually agree prior to such transaction.
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<PAGE> 18
SECTION 9
SHAREHOLDER RIGHTS, DUTIES AND OBLIGATIONS
9.1. Ownership Participation. The Shareholders expressly agree that the
ownership participation of Williams and Metrogas in the Company may be direct or
indirect through one or more of such Party's Affiliates; however,
notwithstanding the foregoing, Williams and Metrogas, respectively, shall remain
fully bound by and subject to the provisions of this Agreement both before and
after any Transfer to an Affiliate (if applicable), and the rights and
obligations herein.
9.2. Cooperation and Support. Each of the Shareholders agrees to cooperate fully
with each other to realize the purposes of the Company and the objectives
otherwise set forth in this Agreement, and shall assist the Company in complying
with all applicable state and local regulations with regard to the development
and scope of the Business.
9.3. Fiduciary Duties. The Shareholders, the officers and the directors of the
Company shall all have fiduciary responsibility for the safekeeping and use of
all of the funds and assets (including records) of the Company, whether or not
such funds or assets are in their immediate possession or control, for exclusive
benefit of the Company and the Shareholders.
9.4. Shareholder Obligations.
(a) Metrogas must fulfill its obligations under this Agreement and the CIPA;
however, any disputes arising between Metrogas and the Company with respect to
the CIPA or performance thereunder shall be resolved in accordance with the
provisions of such CIPA, and shall be subject to the remedies contained therein.
(b) Williams must fulfill or cause to be fulfilled its obligations under this
Agreement and the Technical Services Agreement; however, any disputes arising
between Williams and the Company with respect to the Technical Services
Agreement or performance thereunder shall be resolved in accordance with the
provisions of such Technical Services Agreement, and shall be subject to the
remedies contained therein.
(c) The Shareholders shall be obligated to undertake or cause to be undertaken
all acts necessary in order for the Business to be developed in accordance with
the terms of the Business Plan, unless otherwise prevented by reasons of Force
Majeure.
(d) The Shareholders shall be obligated to disclose to each other the existence
of any agreement, fact or situation of any nature whatsoever, whether such
agreement, fact or situation exists or has taken place within or outside of the
Republic of Chile, which has or may have any effect on the use or operation of
the Communications Infrastructure (as defined in the CIPA).
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<PAGE> 19
(e) In the event that Williams has not exercised the warrant referred to in
Section 3.6 of this Agreement by the third anniversary of the Closing Date, the
Shareholders shall be obligated to cause a special meeting of the Shareholders
to be held on such third anniversary of the Closing Date, or the next Business
Day thereafter, at which the Shareholders must (i) attend in order to form the
necessary quorum; (ii) use their voting rights to both annul the 48,160 Shares
that were authorized but not issued or subscribed at the Special Shareholders'
meeting held on March 1, 1999; and (iii) further authorize 48,160 new Shares,
over which Williams shall have the same right to subscribe as specified in
Section 3.6 of this Agreement, effective however only until the fourth
anniversary of the Closing Date.
(f) In the event however that, by the fourth anniversary of the Closing Date,
Williams has not subscribed the 48,160 authorized Shares referred to in Section
9.5(e)(iii) above, the Shareholders shall be obligated to cause a new special
meeting of the Shareholders to be held on such fourth anniversary of the Closing
Date, or the next Business Day thereafter, at which the Shareholders must (i)
attend in order to form the necessary quorum; (ii) use their voting rights to
annul the 48,160 authorized Shares referred to in Section 9.5(e)(iii) above; and
(iii) modify the By-Laws as required so as to be consistent with the following,
effective on and after the fourth anniversary of the Closing Date:
(i) Section 4.1(b) to be deleted in its entirety, and replaced with the
following: "All resolutions by the Board of Directors or the Shareholders shall
be passed by a simple majority of its members.".
(ii) Williams shall be entitled to nominate one (1) permanent director
and one alternate director.
(iii) The voting quorums specified in Sections 4.3(c) and (d) of this
Agreement that are required for the appointment, removal and re-appointment of
the senior officers and managers of the Company shall be a simple majority of
the members of the Board of Directors of the Company.
(iv) The following sentence from Section 4.2(a) to be deleted: "For the
purposes of Section 4.2(d) of this Agreement, Williams shall be deemed to have
nominated two (2) directors.".
(g) For the purposes of Sections 9.4(e) and (f), the Company Secretary of the
Company shall, no later than January 30, 2002 and also, if Williams has not
exercised the warrant referred to in Section 3.6 of this Agreement by the third
anniversary of the Closing Date, issue a written reminder notice no later than
January 30, 2003 to Williams. Notwithstanding the foregoing, the Parties
expressly acknowledge and agree that failure by the Company Secretary of the
Company to issue, or the failure by Williams to receive, such written reminder
notice shall not entitle Williams to any additional time period within which to
exercise the warrant referred to in Section 3.6 of this Agreement, nor shall it
entitle Williams to have any recourse, in any manner whatsoever, against the
Company or the officers, directors, or other shareholders thereof.
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<PAGE> 20
9.5. Referral of Opportunities.
(a) Within the Primary Territory, all telecommunications, communications and
entertainment projects and opportunities, which are in competition to and/or
within the Business of the Company, must be referred by the Shareholders to the
Company only. In the event that the Board of Directors or the Shareholders
decide that the Company shall not pursue the referred projects or opportunities,
any Shareholder who voted affirmatively or whose directors voted affirmatively
in favor of the Company pursuing the referred project or opportunity shall be
entitled to itself pursue such project or opportunity, independently of the
Business of the Company.
(b) Within the Secondary Territory, the Shareholders shall be obligated to
comply with Clause 9.5(a) above only where such new projects and opportunities
consist of telecommunications and/or other communications projects and
opportunities that are being developed "piggy back" with another natural gas
infrastructure or service.
(c) With respect to any new project or opportunity which consists of
telecommunications and/or other communications projects and opportunities that
are being developed "piggy back" with another utility infrastructure or service
(other than natural gas), the Shareholders shall only be obligated to comply
with Clause 9.5(a) above where such new project or opportunity is in the
Republic of Argentina and/or Peru.
9.6. Sale of Affiliate Shares. No Shareholder who holds ultimate, beneficial
ownership of its Shares through an Affiliate may Transfer its ownership interest
in such Affiliate to another Person without obtaining prior written permission
of the other Shareholders.
9.7. Entering into and Disclosure of Voting Agreements. Each Shareholder shall
be permitted to enter into any type of agreement, whether orally or in writing,
with another Shareholder, under which such Shareholder has a mutual
understanding with another Shareholders to use their votes in conjunction with
each other in any meeting of Shareholders or to cause the directors nominated by
such Shareholder, to use their votes in conjunction with each other in any
meeting of the Board of Directors, regardless of the subject matter of such
agreement. Notwithstanding the foregoing, if any Shareholder enters into any
type of voting agreement with another Shareholder, then such agreeing
Shareholders must immediately disclose as such to the other Shareholders.
9.8. Confidentiality and Non-Disclosure Obligation.
(a) The Shareholders agree, and each Shareholder agrees to cause its own
officers, directors, employees or representatives and the Company and the
officers, directors, employees or representatives of the Company, to preserve,
protect and keep secret all financial, technical, operating and other
information relating to (a) this Agreement and any aspect thereof, (b) the
Business, (c) the
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CIPA and the Technical Services Agreement, (d) any basic proprietary technology
developed or acquired by any of the Shareholders, and (d) any other matter that
is of a proprietary or confidential nature, and which has not previously been
made generally available to the public ("Confidential Information").
(b) The Shareholders agree, and each Shareholder agrees to cause the Company,
not to use the Confidential Information for any purpose unrelated to this
Agreement, the Business or the CIPA and the Technical Services Agreement, other
than as required by applicable laws. Further, the Shareholders agree, and each
Shareholder agrees to cause the Company, to safeguard and strictly control the
dissemination of the Confidential Information and not to disclose the
Confidential Information to any Person, other than as required by applicable
laws.
9.9. Employee Confidentiality Agreements. The Shareholders agree, and each
Shareholder agrees to cause the Company, to enter into with the respective
employees and consultants such proprietary information and confidentiality,
trade secret protection and non-competition agreements as are reasonably
determined to be appropriate from time to time by their respective Boards of
Directors.
SECTION 10
RESTRICTIONS ON TRANSFERABILITY OF SHARES
10.1. Third Party Shareholders. The Parties expressly agree that no Person other
than Williams, Metrogas, the Metrogas Shareholders or their respective
Affiliates thereof, shall be entitled to hold, directly or indirectly, more than
thirty percent (30%) of the total issued capital stock of the Company.
10.2. Transfers to Affiliates.
(a) Notwithstanding anything to the contrary contained in this Section 10, any
Shareholder shall be entitled to effect a Transfer of its Shares to an Affiliate
at any time during the term of this Agreement. In the case of Metrogas, the
Shareholders expressly agree that Metrogas shall be entitled to effect a
Transfer of its Shares to one or more Metrogas Shareholders or any Affiliate of
any of the Metrogas Shareholders. For the purpose of this Section 10.2(a), an
Affiliate of a Shareholder shall also include a Person directly or indirectly
controlling, controlled by or under common control with such Shareholder; or a
Person owning or controlling 10% or more of the outstanding voting securities of
such Shareholder.
(b) Further, in the event that any Shareholder wishes to effect a Transfer of
its Shares to an Affiliate during the After Lock Up Period (as defined in Clause
10.4 below), such Shareholder shall be not be obligated to comply with the right
of first notice provisions contained in Clause 10.4 or the "tag-along"
provisions contained in Clause 10.5.
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<PAGE> 22
(c) Any purchasing Affiliate must agree in writing to be bound jointly and
severally with the Shareholder effecting the Transfer by the terms and
conditions of this Agreement.
10.3. No Sale or Transfer for Five Years ("Lock Up Period").
(a) Without the prior written consent of the other Shareholders, and subject to
the exceptions specified in Clause 10.3(b), no Shareholder shall be entitled to
effect a Transfer of its Shares for a period of five (5) years from the date of
this Agreement (the "Lock Up Period"). Unless such prior written consent is
given, the proposed Transfer may not take place, and any attempted Transfer in
breach of this Clause 10.3(a) shall be deemed null and void, with the
Shareholders expressly agreeing that such attempted Transfer shall immediately
render the Shareholder that made such attempt in material breach of this
Agreement, and subject to the provisions of Clause 10.7 of this Agreement and
the respective consequences thereof.
(b) Notwithstanding Clause 10.3(a), any Shareholder may, during the Lock Up
Period, effect a Transfer of its Shares to any Person who is a financial
investor. For the purposes of this Agreement, the term "financial investor"
shall be understood to mean any Person which (i) is not a Telecommunications
Operator or utility company, or (ii) directly, or indirectly through Affiliates,
does not hold more than 50% of the issued shares of a Telecommunications
Operator, provided always, however, that where applicable, Williams and Metrogas
(whether directly or indirectly through Affiliates) together maintain ownership
of no less than 50.1% of the Shares of the Company.
(c) It is expressly stated by the Parties that any such financial investor shall
not be a Party to this Agreement, and that the financial investor shall not be
bound by the terms and conditions of this Agreement and, furthermore, that the
Shareholder effecting the Transfer to the financial investor shall not be
obligated to provide either a first notice or "tag-along" option referred to in
Clauses 10.4 and 10.5, respectively, to the other Shareholders.
10.4. Right of First Notice ("After Lock-Up Period").
(a) If, after five (5) years from the date of this Agreement ("After Lock Up
Period"), Williams or Metrogas shall desire to sell all or part of its Shares
other than in connection with a Public Offering (herein referred to as the
"selling Shareholder"), then the selling Shareholder shall first provide the
other Shareholders (hereinafter referred to as the "non-selling Shareholders")
with written notice ("First Notice") of its desire to sell, such notice which
shall include a description of the number of Shares to be sold, the sale price,
and the financial terms of sale.
(b) The non-selling Shareholders shall, for a period of ninety (90) days from
the date of receipt of the First Notice, be entitled to exercise the right to
purchase the Shares included in the First Notice, and on the same terms therein,
by delivering written acceptance to the selling Shareholder. If the more than
one
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<PAGE> 23
non-selling Shareholder wishes to exercise such right to purchase, the Shares
included in the First Notice shall be divided among the non-selling Shareholders
in accordance with their then-current shareholdings.
(c) If the non-selling Shareholders exercise such right of purchase, they shall
have an additional period of ninety (90) days after such exercise within which
to make payment for, and take title to, such Shares.
(d) If the non-selling Shareholders do not exercise such right of purchase
within the aforementioned period of ninety (90) days, the selling Shareholder
shall, for a period of 180 days be entitled to sell the Shares to any Person,
provided that the sale price and financial and other terms are no less favorable
than those specified in the First Notice. If no sale is effected during the
aforementioned period of 180 days, the selling Shareholder shall be obligated to
provide a new First Notice to the non-selling Shareholders in the event that the
selling Shareholder still wishes to sell its Shares.
(e) Any Person purchasing Shares under this Clause 10.4 must agree in writing to
be bound, jointly and severally with the selling Shareholder effecting the
Transfer, by the terms and conditions of this Agreement.
(f) In the event that any Shareholder receives a Bona Fide Offer from any Person
for its Shares, then the selling Shareholder shall first provide the non-selling
Shareholders with a copy of the Bona Fide Offer received, upon which the same
procedure as contained in Clauses 10.4(a) to (e) above must be carried out.
10.5. "Tag Along" Option for Metrogas and Williams.
(a) In the event that either Williams or Metrogas owns less than 50% of the
Shares of the Company, and the other Party (referred to in this Section 10.5 as
the "Transferring Party") wishes to effect a Transfer of all or part of its
Shares under Clause 10.4 during the After Lock Up Period, the non-Transferring
Party shall be entitled to a "tag along" option for all or part of its Shares,
at the sole option of the non-Transferring Party, on the same financial and
other terms and conditions as the Shares being sold by the Transferring Party.
(c) In this case, the Transferring Party shall first provide to the
non-Transferring Party written notice (the "Tag Along Notice") of either its
desire to sell or receipt of a Bona Fide Offer, including a description of the
number of Shares to be offered or purchased, their proposed or offered price,
the financial terms on which they will be offered or purchased and, in the case
of receipt of a Bona Fide Offer, the identity of the third party offeror.
(d) The non-Transferring Party may, not later than fifteen (15) days after
receipt of the Tag Along Notice, deliver to the Transferring Party notice in
writing irrevocably binding on the Transferring Party (to the extent and in a
manner consistent with applicable law) to sell all (not part) of the Shares
owned by the non-Transferring Party (the "Tag Along Shares") in accordance with
the
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provisions of this Clause 10.5. If the non-Transferring Party deliver such
written notice, the Transferring Party shall cause the third party offeror to
deliver to the non-Transferring Party a Bona Fide Offer in writing (the "Tag
Along Offer") to purchase the Tag Along Shares from the non-Transferring Party.
(e) The Tag Along Offer shall be binding upon the third party offeror and shall
contain only such terms and conditions as are identical to those upon which the
Transferring Party proposes to sell to the third party offeror.
(f) The closing date and other closing arrangements for the purchase and sale
transaction between the non-Transferring Party and the third party offeror shall
be specified in the Tag Along Offer and shall be the same as those specified
between the Transferring Party and the third party offeror.
(g) In the event that (i) the third party offeror does not deliver a Tag Along
Offer to the non-Transferring Party, (ii) the terms and conditions of the Tag
Along Offer are less favorable than those specified between the Transferring
Party and the third party offeror, or (iii) the third party offeror only wishes
to purchase part but not all of the Shares of the non-Transferring Party (where
the non-Transferring Party has elected to sell all of its Shares), then the
Transferring Party shall not be entitled to effect the proposed Transfer of its
own Shares to the third party offeror.
(h) Any Transfer by the Transferring Party of part or all of its Shares in
breach of the provisions of this Clause 10.5 shall be deemed null and void, with
the Shareholders expressly agreeing that such attempted Transfer shall
immediately render the Transferring Party in material breach of this Agreement,
and subject to the provisions of Clause 10.7 of this Agreement and the
respective consequences thereof.
(i) The Parties expressly acknowledge and agree that neither Metrogas nor
Williams, as the case may be, shall be entitled to the "tag along" option
specified in this Section 10.5 if it owns 50% or more of the Shares of the
Company.
10.6. Recording of Transfers; Endorsement of Certificates. The Company shall not
record the transfer of Shares by a Shareholder in violation of this Section 10,
and shall affix the following legend on any stock certificate representing
Shares subject to this Section 10:
"Any sale, assignment, transfer, pledge, bequest or other disposition
of the shares of stock represented by this Certificate is restricted by and
subject to the terms and provisions of a Shareholders Agreement dated September
30, 1998 by and among this Company, Williams International Telecom (Chile)
Limited and Metrogas S.A., a copy of which Agreement is on file in the principal
office of this Company, which Agreement may from time to time hereafter be
amended."
10.7. Option to Purchase Shares Upon Certain Events.
(a) Upon the occurrence of any of the following events:
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(i) the judicial declaration of bankruptcy of one of the Shareholders in
accordance with the General Law of Bankruptcy of the Republic of Chile and the
designation of a bankruptcy syndicate; or
(ii) the presentation to the courts of justice of an application for a judicial,
preventative agreement in accordance with the General Law of Bankruptcy of the
Republic of Chile;
then the Shareholders which have not suffered the event shall have the right,
exercisable in writing within sixty (60) days after the later of (A) receipt of
written notice of the occurrence of such event or (B) the conclusion of the
appraisal contemplated in Section 10.7(c) below, to purchase all of the Shares
held by the other Shareholder on the terms set forth below. Each Shareholder
agrees to promptly notify the other Shareholder in writing of the occurrence of
any of the events specified above.
(b) The purchase price for any Shares to be purchased hereunder shall be the
Fair Market Value of the Shares of the Shareholder, which has suffered the
event, as determined in accordance with Clause 10.7(c) below.
(c) Within sixty (60) days after the occurrence of the event described in (a)
above, the Shareholders either (A) shall jointly appoint an internationally
recognized investment banking firm, or (B) failing this joint action, each
separately shall designate an investment banking firm and, within thirty (30)
days after their appointment, the designated internationally recognized
investment banking firms shall designate an internationally-recognized
investment banking firm which shall make the final determination of value
('Neutral Investment Banker'). The failure by either of the Shareholders to
appoint an investment banking firm within the time allowed shall be deemed
equivalent to appointing the other Shareholder's investment banking firm as the
Neutral Investment Banker. Within sixty (60) days after the appointment of the
Neutral Investment Banker, the Neutral Investment Banker shall render its
appraisal of the fair market value of the Shares to be purchase, which appraisal
shall be binding and conclusive. The Company shall bear all costs and expenses
associated with the valuation and appraisal procedure specified herein.
(d) The payment date of the purchase price pursuant to this Section 10.7 shall
not be later than sixty (60) days after the final determination of value of the
Shares by the Neutral Investment Banker. Any purchase of Shares pursuant to this
Section 10.7 shall take place on the payment date thereof and the certificates
representing all of the Shares so purchased shall be duly endorsed and delivered
to the purchasing Shareholders on the payment date.
(e) If, upon the occurrence of one of the events specified in (a) above, a
Shareholder having the right to purchase the Shares of the other Shareholder
does not exercise such right within the sixty (60) day period specified above,
then this Company shall be liquidated and dissolved in the manner specified in
Section 14.
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10.8. Ownership through intermediaries. In accordance with Section 10.2 of this
Agreement, in the event that any Shareholder owns, whether presently or in the
future, Shares through an intermediary Person, and such Shareholder wishes at
any time to Transfer any or all of such Shares to one or more third parties that
do not fall within the definition of "Affiliate", the Shareholder or
Shareholders, as the case may be, must, previously to such Transfer, transfer
the Shares held such the intermediary Person back to the Shareholder or to the
controlling parent company of the Shareholder, in order to ensure continued
ownership of the Shares by the Shareholder or an Affiliate thereof.
SECTION 11
DISTRIBUTIONS OF DIVIDENDS AND APPLICATION OF FUNDS
11.1. Distributions of Dividends. Subject to the terms of any other contractual
agreement between the Shareholders, distributions of dividends shall be made to
the Shareholders on the basis of annual and retained profits, upon the
affirmative vote of a simple majority of the members of the Board of Directors.
SECTION 12
TERM AND TERMINATION
12.1. Term. This Agreement shall come into effect as of the date hereof and,
unless otherwise provided herein, shall remain in full force and effect until
the earlier of the following:
(a) the mutual written consent of eighty percent point two (80.2%) of the Shares
subject to this Agreement to terminate this Agreement;
(b) if either Metrogas or Williams, or their respective Affiliates, each hold
less than 19.9% of the total issued Shares of the Company; or
(c) the election of the non-breaching Shareholder to terminate this Agreement
upon the occurrence of one of the events specified in Sections 10.7(a) and
13.1(b).
12.2. Effect of Termination of the Agreement. The termination of this Agreement
shall not in any way operate to impair or destroy any of the rights or remedies
of either Shareholder, or to relieve any Shareholder of its obligations to
comply with any of the provisions of this Agreement, which shall have accrued
prior to the effective date of termination. Furthermore, the Shareholders
expressly agree that Clauses 10.7, 13.1 and any other Clauses of this Agreement,
which may, from time to time, be determined by mutual agreement of the
Shareholders, shall survive any termination for any reason whatsoever of this
Agreement. In the event that the Shares of the non-terminating Shareholder are
not purchased by the terminating Shareholder in the manner set forth in Section
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10.7, the Shareholders shall vote their respective Shares and cause the Board of
Directors to take such actions as are necessary to liquidate and dissolve the
Company in accordance with all applicable laws.
SECTION 13
MATERIAL BREACH
13.1. Material Breach.
(a) If any Shareholder claims that another Shareholder is in material breach of
this Agreement, the non-breaching Shareholder shall be entitled to submit its
claim for determination by the arbitration panel referred to in Clause 15.12 of
this Agreement.
(b) In the event that the aforementioned arbitration panel determines that any
Shareholder is in material breach of this Agreement, the Parties agree that any
damage caused by such material breach would be impracticable or extremely
difficult to fix and, accordingly, agree that the non-breaching Shareholder or
Shareholders shall be entitled to elect to (i) receive payment of an amount of
liquidated damages ("Liquidated Damages"), as determined by the arbitration
panel, or (ii) purchase all of the Shares of the breaching Shareholder at the
Fair Market Value of the Shares, as determined in accordance with Clause 10.7(c)
above, minus the amount of Liquidated Damages determined by the arbitration
panel, and terminate this Agreement.
(c) For the purposes of this Agreement, no Shareholder may invoke or exercise
any rights which it has due to or as a result of any material breach of this
Agreement by any other Shareholder until the existence or occurrence of such
material breach has been determined by the arbitration panel specified in Clause
15.12 of this Agreement.
SECTION 14
DISSOLUTION AND LIQUIDATION OF COMPANY
14.1. Financial Accounting and Tax Returns. Upon the dissolution of the Company,
a complete and accurate accounting shall be made by the Company's independent
auditing firm from the date of the last previous audit to the date of
dissolution and all required tax returns shall be timely filed in connection
therewith.
14.2. Dissolution and Liquidation Procedures. Upon the dissolution of Company,
the Shareholders shall each appoint one (1) individual who shall jointly act as
liquidator to wind up Company (collectively 'Liquidator'). The Liquidator shall
have full power and authority to take full account of Company's assets and
liabilities and to wind up and liquidate the affairs of Company in an orderly
and business-like manner as is consistent with obtaining the fair value thereof
upon dissolution. Company shall engage in no further business thereafter other
than
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as necessary to operate on an interim basis, collect its receivable, pay its
liabilities and liquidate its assets. All proceeds from liquidation shall be
distributed in the following order of priority: (i) first, to the payment of all
creditors of Company and the expenses of liquidator; and (ii) second, to the
establishing of a reserve which the Liquidator deems reasonably necessary for
any contingent, known or unforeseen liabilities or obligations of Company.
14.3. Cancellation of Certificates. Upon the completion of the distributions in
liquidation of the Company as provided in this Section 14, the Liquidator shall
cause the cancellation of all share certificates and shall take such other
actions as may be appropriate to finally dissolve and liquidate the Company.
SECTION 15
MISCELLANEOUS PROVISIONS
15.1. Notices. All notices, requests, demands and other communications required
or permitted to be given under this Agreement shall be in writing and shall be
mailed to the Party to whom notice is to be given, by telex or facsimile, and
confirmed by first class mail, registered or certified, return receipt
requested, postage prepaid, and properly addressed as follows (in which case
such notice shall be deemed to have been duly given on the third day following
the date of such sending):
If to Williams:
Williams International Company
Attn. Mr. John C. Bumgarner, Jr.
One Williams Center, Suite 4100
Tulsa, Oklahoma 74172
United States of America
Facsimile No. (+1) 918 573 8051
with a copy to
Mr. Antonio Ortuzar Vicuna
Cruzat, Ortuzar & MacKenna
Nueva Tajamar 481, Torre Norte, Piso 21
Las Condes
Santiago, Chile
Facsimile No. (+562) 362-9878
If to Metrogas:
Metrogas S.A.
Attn. Mr. Juan Claro Gonzalez
Avenida El Bosque Norte 0177, Piso 11
Las Condes
Santiago, Chile
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<PAGE> 29
Facsimile No. (+562) 337-8193
with a copy to:
Attn. Mr. Francisco Gazmuri Schleyer
Avenida El Bosque Norte 0177, Piso 11
Las Condes
Santiago, Chile
Facsimile No. (+562) 337-8193
If to Metrocom:
Metrocom S.A.
Attn. Mr. Jake Steelman, Jr.
Avenida El Bosque Norte 0177, Piso 15
Las Condes
Santiago, Chile
Facsimile No. (+562) 332-0344
with a copy to:
Attn.: Mr. Santiago Montt Vicuna
Montt, Iruarrizaga y Cia. S.A.
Los Conquistadores 1700, Piso 11
Santiago, Chile
Facsimile No. (+562) 231-5495
Any Party by giving notice to the others in the manner provided above may change
such Party's address for purposes of this Section 15.1.
15.2. Publicity and Disclosure. Subject to limitations placed upon Williams,
Metrogas and the Company by any applicable securities laws, the timing and
content of any announcements, press releases and public statements concerning
the transactions contemplated herein will be by mutual agreement of the
Shareholders and the Shareholders hereby agree, to the extent reasonable, to
keep the terms of this Agreement, the CIPA, the Technical Services Agreement and
any other agreements contemplated hereby confidential.
15.3. Entire Agreement. This Agreement (together with all Exhibits attached
hereto and all documents and instruments delivered in connection herewith) and
the By-Laws constitute the full and complete agreement and understanding between
the Shareholders and shall supersede any and all prior written and oral
agreements concerning the subject matter contained herein (including the
Memorandum of Agreement) provided, however, that any obligations of the
Shareholders contained in any confidentiality or non-disclosure agreement shall,
to the extent they are not inconsistent with this Agreement or any other
agreement contemplated hereby, remain in full force and effect.
15.4. Amendment or Modification. This Agreement may not be modified or amended
except in writing, duly signed by the authorized representatives of each of the
Shareholders, which are or become a Party hereto. Any condition or
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<PAGE> 30
provision of or in any document or communication whatsoever, other than a
writing amending or modifying this Agreement in accordance with the first
sentence of this Section 15.4, shall be deemed inapplicable to the obligations
between the Shareholders.
15.5. Severability. In the event any one or more of the non-material provisions
contained in this Agreement shall be invalid, illegal, or unenforceable in any
respect, the validity, legality, and/or enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby. In such event such non-material invalid provision or provisions shall
be validly reformed so as to approximate as nearly a possible the intent of the
Shareholders and, if unreformable, shall be severed and deleted from this
Agreement. In the event any one or more of the material provisions contained in
this Agreement shall be invalid, illegal or unenforceable in any material
respect, the Shareholders shall promptly meet to renegotiate the material
provisions of this Agreement.
15.6. Waiver. No failure or delay by any Shareholder to insist upon the strict
performance of any term, condition, covenant or agreement of this Agreement, or
to exercise any right, power or remedy hereunder or thereunder or consequent
upon a breach hereof or thereof shall constitute a waiver of any such term,
condition, covenant, agreement, right, power or remedy or of any such breach or
preclude such Shareholder from exercising any such right, power or remedy at any
later time or times.
15.7. Enforcement. The Shares are unique and cannot be readily purchased or sold
in the open market. For this reason, among others, the Shareholders hereto will
be irreparably damaged in the event that this Agreement is not deemed to be
specifically enforceable, and the Shareholders hereby agree that this Agreement
shall be specifically enforceable. Such remedy shall be cumulative and not
exclusive and shall be in addition to any other remedy that the Shareholders may
have.
15.8. Remedies. No right, power or remedy herein conferred upon or reserved to
any Shareholder is intended to be exclusive of any other right, power or remedy
or remedies, and each and every right, power and remedy of any Shareholder
pursuant to this Agreement or now or hereafter existing at law or in equity or
by statute or otherwise shall to the extent permitted by law be cumulative and
concurrent, and shall be in addition to every other right, power or remedy
pursuant to this Agreement, or now or hereafter existing at law or in equity or
by statute or otherwise and the exercise or beginning of the exercise by any
Shareholder of any one or more of such rights, powers or remedies shall not
preclude the simultaneous or later exercise by any Shareholder of any or all
such other rights, powers or remedies.
15.9. Headings. Headings in this Agreement are included herein for the
convenience of reference only and shall not constitute a part of this Agreement
for any purpose.
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<PAGE> 31
15.10. Attorneys' Fees and Costs. In the event of any action at law or in equity
between the Shareholders to enforce any of the provisions hereof, the
unsuccessful party or parties to such litigation shall pay to the successful
party or parties all costs and expenses, including actual attorneys' fees,
incurred therein by such successful party or parties; and if such successful
party or parties shall recover judgment in any such action or proceeding, such
costs, expenses and attorneys' fees may be included in and as part of such
judgment. The successful party shall be the party who is entitled to recover his
costs of suit, whether or not the suit proceeds to final judgment. A party not
entitled to recover his costs shall not recover attorneys' fees.
15.11. Governing Law and Domicile. This Agreement shall be construed in
accordance with the internal laws, and not the law of conflicts, of the Republic
of Chile applicable to agreements made and to be performed in such jurisdiction.
For all legal purposes, the Parties establish domicile as the city of Santiago,
Chile.
15.12. Disputes.
(a) In the event of any dispute arising out of or in relation to this Agreement,
or its complementary documents or amendments thereto, amongst the Parties,
whether with regard to its interpretation, fulfillment, validity, termination or
other cause related to this Agreement, the matter in question shall be submitted
firstly to the respective Presidents or Chief Executive Officers of the Parties
for resolution.
(b) If the Parties do not reach an agreement in accordance with paragraph (a)
the dispute shall be referred to the International Chamber of Commerce ("ICC")
for mediation which is to be conducted in accordance with the Mediation
Guidelines in force at the date of this Agreement (which set out the procedures
to be adopted, the process of selection of the mediator and the costs involved
in the mediation all of which are incorporated into this Agreement) provided
that such mediation must be completed within 45 Business Days. Failing
resolution as provided above the dispute shall be submitted to arbitration
before the ICC by a single arbitrator agreed to by the parties and failing
agreement within 30 days then appointed by the ICC. All mediation and
arbitration proceedings shall take place in New York, New York in the English
and Spanish languages.
15.13. Exhibits. All exhibits attached hereto and referred to herein are hereby
incorporated herein as though fully set forth in this Agreement.
15.14. Number and Gender. Words in the singular shall include the plural, and
words in a particular gender shall include either or both additional genders,
when the context in which such words are used indicates that such is the intent.
15.15. Counterparts. This Agreement may be executed in one or more counterparts
by the Parties hereto. All counterparts shall be construed together and shall
constitute one agreement.
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<PAGE> 32
15.16. Agreement to Perform Necessary Acts. Each Shareholder agrees to perform
any further acts and to execute and deliver any and all further documents and/or
instruments, which may be reasonably necessary to carry out the provisions of
this Agreement and to carry out the Business of the Company.
15.17. Force Majeure. Any Shareholder shall be excused for failures and delays
in performance of its respective obligations under this Agreement that are
caused by Force Majeure. This provision shall not, however, release such
Shareholder from using its best efforts to avoid or remove such cause and such
Shareholder shall continue performance hereunder with the utmost dispatch
whenever such causes are removed. Upon claiming any such excuse or delay for
non-performance, such Shareholder shall give prompt written notice thereof to
the other Shareholders. Notwithstanding the foregoing, should an event of Force
Majeure remain in effect for a period of three (3) months, then, in such event,
the Shareholders hereby agree to promptly renegotiate the terms of this
Agreement, and if no such agreement can be reached within sixty (60) days of
such three (3) month period, then this Agreement may be terminated automatically
upon notice by any unaffected Shareholder to the affected Shareholder and be of
no further force or effect. Nothing contained herein or elsewhere shall impose
any obligation on any Party to settle any labor difficulty. For the purposes of
this Section 15.17, the definition of the term "force majeure" shall, in
substitution of the definition under the Chilean Civil Code, mean acts of God,
fires, casualties, strikes, wars, riots, civil disorders, earthquakes,
volcanoes, lockouts, labor disturbances, slow downs, insurrections, any law,
order, proclamation, decree, regulation, ordinance, demand or requirement of any
governmental agency; failure to obtain necessary government approvals after
using reasonable best efforts; freight embargoes; or any similar condition or
occurrence beyond the reasonable control of a Party.
15.18. Costs and Expenses. The Shareholders shall each bear and pay for their
respective costs and expenses regarding the negotiation and preparation of this
Agreement and all documents, instruments and agreements related thereto. Costs
and expenses incurred by the Company after the date of this Agreement shall be
paid by the Company.
15.19. Representations. Each of the Parties to this Agreement represents that it
is duly organized and existing in accordance with the laws of the applicable
jurisdiction, and that the legal representative or representatives executing
this Agreement on its behalf are duly and fully authorized to do so.
15.20. Conflict with By-Laws. In the event of any conflict or discrepancy
between this Agreement, or the terms thereof, and the By-Laws, the terms of this
Agreement shall prevail. Within ninety (90) days of the receipt of written
notice from any Shareholder to the other Shareholders, notifying the latter of
such conflict or discrepancy, the Shareholders must (a) cause a special meeting
of the Shareholders to be held, (b) attend such special meeting in order to form
the necessary quorum, and (c) vote to modify the By-Laws as required so as to be
consistent with this Agreement, or the terms thereof.
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<PAGE> 33
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed by
their duly authorized representatives in the manner legally binding upon them.
/s/ CRAIG S. JONES
- -----------------------------------
Craig S Jones
WILLIAMS INTERNATIONAL TELECOM
(CHILE) LIMITED
/s/ JUAN CLARO GONZALEZ /s/ EDUARDO MORANDE MONTT
- ----------------------------------- -----------------------------------
Juan Claro Gonzalez Eduardo Morande Montt
Chairman of the Board Managing Director
METROGAS S.A. METROGAS S.A.
/s/ JORGE ROSENBLUT RATINOFF /s/ FRANCISCO GAZMURI SCHLEYER
- ----------------------------------- -----------------------------------
Jorge Rosenblut Ratinoff Francisco Gazmuri Schleyer
Managing Director Director
METROCOM S.A. METROCOM S.A.
32
<PAGE> 34
ANNEX A
DRAFT BUSINESS PLAN
****
33
<PAGE> 35
STOCK SUBSCRIPTION AGREEMENT
BY AND AMONG
WILLIAMS INTERNATIONAL TELECOM (CHILE) LIMITED
METROCOM, S.A.
AND
METROGAS S.A.
MARCH 30, 1999
<PAGE> 36
STOCK SUBSCRIPTION AGREEMENT
This STOCK SUBSCRIPTION AGREEMENT, entered into in Santiago, this 30th day
of March 1999, by and between METROCOM S.A., a company duly incorporated and
organized under the laws of the Republic of Chile, with its corporate domicile
at Avenida El Bosque Norte 0177 Piso 15, Santiago, Chile ("the Company");
WILLIAMS INTERNATIONAL TELECOM (CHILE) LIMITED, a limited partnership duly
established and organized under the laws of Cayman Islands, British West
Indies, with its corporate domicile at One Williams Center, Suite 4100, Tulsa,
Oklahoma, United States of America (the "Subscriber"); and METROGAS S.A., a
corporation duly incorporated and organized under the laws of the Republic of
Chile, with its corporate domicile at Avenida El Bosque Norte 0177 Piso 11,
Santiago, Chile ("Metrogas") (hereinafter all of the aforementioned to be
referred collectively as the "Parties").
WITNESSETH:
WHEREAS, the Special Shareholders' Meeting of the Company held on March
19th, 1999 (hereinafter the "Shareholders' Meeting"), has agreed to increase the
capital of the Company from Ch$1,118,060 divided into 20,000 (twenty thousand)
single-series, non-par-value shares of common stock to Ch$31,041,118,060,
divided into 128,160 single-series, non-par-value shares of common stock,
through the increase of Ch$31,040,000,000 divided into 108,160 single-series,
non-par-value shares of common stock.
WHEREAS, the Shareholders' Meeting authorized the issue of the new 108,160
shares in the manner and in accordance with the resolutions passed at the
Shareholders' Meeting.
WHEREAS, 60,000 (sixty thousand) of the new 108,160 single-series,
non-par-value, paid-up shares of common stock, were authorized to be issued at
the minimum subscription value of the Chilean peso equivalent, calculated in
accordance with the observed exchange rate of the day of payment, of U.S.
$404.90 per share, and in any event not less than Ch$196,376.50 per share.
WHEREAS, for the purposes of this Stock Subscription Agreement, the
"observed exchanged rate" shall mean the exchange rate parity established by
the Central Bank of Chile for the purposes of No. 6, Chapter 1, Title I of the
Compendium of Foreign Exchange Regulation, as published in the Official Gazette
on March 29, 1999.
WHEREAS, at the aforementioned Shareholders' Meeting, FRANCISCO GAZMURI
SCHLEYER entirely waived his preemptive right, to which he is entitled under
Article 25 of the Chilean Corporations Law No. 18,046 of 1981, to subscribe for
shares under this new issue.
WHEREAS, METROGAS S.A., at this same Shareholders' Meeting, partially
waived its preemptive right, to which it is entitled under Article 25 of the
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<PAGE> 37
Chilean Corporations Law No. 18.046 of 1981, to subscribe for shares under this
new issue in excess of 44,080 shares.
WHEREAS, the Company engages in the communications business in the
Republic of Chile (the "Business").
NOW, THEREFORE, in consideration of the above premises, the parties agree
as follows:
1. - SUBSCRIPTION AND PAYMENT. The Subscriber hereby subscribes for 15,920
(fifteen thousand nine hundred and twenty) single-series, non-par-value shares
of common stock under the new stock issue, which are hereby fully paid-up by
the Subscriber and received by the Company, to its full and final satisfaction.
As agreed at the Shareholders' Meeting, these 15,920 shares are subscribed for a
total minimum subscription value of the Chilean peso equivalent of
US$15,000,000, to be calculated in accordance with the observed exchange rate
published in the Official Gazette on March 29, 1999, and in any event not less
than Ch$7,275,000,000.
The total subscription value of the Chilean peso equivalent of US$15,000,000
comprises (a) the minimum subscription value of the Chilean peso equivalent of
US$404.90 per share, and in any event not less than Ch$196,376.50 per share,
plus (b) the premium payable by the Subscriber in addition to such minimum
subscription value of US$404.90 per share, of the Chilean peso equivalent of
US$537.31 per share, and in any event not less than Ch$260,595.35 per share, all
as calculated in accordance with the observed exchange rate published in the
Official Gazette on March 29, 1999.
2. - ACCEPTANCE OF BYLAWS AND SHAREHOLDERS' RESOLUTIONS. In accordance with the
provisions of Article 22 of the Chilean Corporations Law No. 18,046 of 1981,
the Subscriber hereby accepts the Bylaws of the closed company known as
"METROCOM S.A.". The Subscriber further represents that it accepts the
resolutions adopted by the Regular and Special Shareholders' Meetings held to
date, as well as the balance sheets of the Company as of the date hereof.
3. - CORPORATE DOCUMENTATION. The Company hereby represents and warrants that
the copy of the Bylaws hereby delivered to the Subscriber are its Bylaws as
currently in effect.
4. - REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND METROGAS. The Company
and Metrogas hereby represent and warrant the following (which representations
and warranties shall survive beyond the effective term of this instrument):
(a) Organization and Existence of the Company: The Company has been duly
incorporated and is validly existing in accordance with the laws of the
Republic of Chile, and it has met all corporate and other requirements in order
to
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<PAGE> 38
hold, operate and lease its assets and to conduct the Business substantially in
the manner that it has been held, operated and conducted through the date
hereof. The Company meets all requirements and holds all the faculties and
authorizations necessary to execute and deliver this agreement and to execute
and deliver all the documents and instruments required hereunder, and this
Agreement constitutes and each and every one of such documents and instruments,
when duly executed by the Company, shall constitute a valid and binding
obligation for the Company, in each case, enforceable against the Company in
accordance with its terms.
(b) Subsidiaries. The Company has no subsidiaries and does not hold any
right, title or interest in any capital shares, rights or investments in any
corporation, partnership, association or other business organization.
(c) Corporate Capital of the Company. The authorized capital of the
Company consists of 128,160 single-series, non-par-value shares of common
stock. Other than as provided for in the Warrant Agreement dated March 30, 1999
executed by and among the Company, the Subscriber, and Metrogas, neither
present nor past shareholders of the Company were or are entitled to demand
termination or to file any claim in respect of the Company's paid-up capital,
and all its shares have been offered, issued and extended by the Company free
and clear of liens, preferential rights, rights of first refusal, or other
encumbrances.
(d) Execution, Delivery and Performance. Neither the execution nor the
delivery of or performance under this agreement shall be in conflict with, or
shall result in attachments or liens under, the bylaws of the Company, nor
shall they affect any lease, license, mortgage, agreement, covenant, order or
judgment to which the Company is a party or to which the Company or its assets
may be bound. All corporate action required by the Company to authorize the
execution, delivery and performance of this agreement and all documents and
instruments in connection herewith have been duly adopted and no prior or later
consent is required from any governmental or state entity, institution or
authority with State involvement.
(e) Title to Assets. The Company holds good and marketable title, free
and clear of any and all liens and other encumbrances, to each and every one of
its assets (hereinafter collectively referred to as the "Assets"), including,
but not limited to, the following: (i) all the accounting and financial books
and documentation of the Company; (ii) the tangible and intangible assets,
including, but not limited to, all bank accounts, vehicles, equipment, cash and
other similar assets, inventories, office furniture and property repair
equipment, used or usable in accordance with the Company's current operating
capacities.
A detailed list of all assets of the Company is included in Exhibit I hereto.
(f) Contracts. All contracts in excess of USD 50,000 per contract, or USD
100,000 in aggregate, to which the Company is a party or in respect of
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<PAGE> 39
which it has furnished security are detailed in Exhibit II hereto and each of
these contracts is fully in effect and binding, valid and enforceable against
each party thereto. To the best of the Company's knowledge, no event has
occurred that has resulted in or is reasonably likely to result in a default
under any such contract. The Company has met all the provisions necessary, and
to the best of its knowledge, none of the other parties is in breach of such
contracts. Except for the contracts indicated in Exhibit II, the Company is
not a party to nor has it furnished security in any manner whatsoever in
connection with any written or oral agreement or contract in excess of USD
50,000 per contract, or USD 100,000 in aggregate.
(g) Taxes or Tax Refunds. The Company has paid all income, withholding,
and sales and services taxes, unemployment insurance and other taxes including
penalties and surcharges of any kind, if any, and fees due through this date in
the Republic of Chile or in any other jurisdiction required in connection with
the conduct of the Business. The Company has duly met all requirements to
secure all applicable tax refunds from governmental agencies and has paid to
this date or shall hereafter pay all the taxes as indicated in the respective
documents. No tax authority has filed any tax challenges.
(h) Litigation. There are no claims, actions, allegations or proceedings
pending against the Company in excess of USD 1,000 per claim or action, or USD
5,000 in aggregate, except as described in Exhibit III hereto. The Company is
not subject to any judgment, order, requirement, challenge or decree of any
court or other governmental agency.
(i) Compliance with the Law. The Company has complied with all the rules,
regulations, codes and laws affecting the Company and the Business, and the
Company is not in violation or breach of any provision or rule, regulation,
code or law in effect in the Republic of Chile.
(j) Licenses. The Company holds all the licenses, permits and other
authorizations from all governmental authorities such as are necessary or
appropriate to allow the same to engage in the Business as it is currently
operated and in all places and locations where it currently operates. All the
licenses, permits and other authorizations indicated in Exhibit IV are valid,
in full force and enforceable and not subject to any pending claim, action or
procedure.
(k) Balance Sheet. A copy of the financial statements (including the
balance sheet) of the Company as of December 31, 1998 is attached as Exhibit V
and forms part of this instrument. The audited financial statements (including
the balance sheet) of the Company for the periods up to December 31, 1996 and
December 31, 1997 have been delivered to the Subscriber for its review and
fairly reflect the financial position of the assets and liabilities of the
Company at their date of issuance.
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<PAGE> 40
(l) No Material Adverse Effect. There has been no material adverse change
in the business, conditions (financial or otherwise), operations, prospects or
properties of the Company since December 31, 1998.
(m) No Implicit Liabilities. Except for the litigation indicated in
Exhibit III and the liabilities mentioned in Exhibit V, as of the date hereof
the Company is not aware of any obligations or debts in excess of USD 50,000
per obligation or debt, or USD 50,000 in aggregate, secured or otherwise
(absolute, fixed, accrued, contingent or otherwise or enforceable or likely to
be enforceable).
(n) No Default. The Company has met and continues to meet its obligations
in all material respects and is not in default (nor is aware to the best of its
knowledge of any events or circumstances which could result in a default) in
respect of any note, debt instrument, security, purchase option, lease,
fiduciary obligation or mortgage or any other contract enforceable against the
Company, as the case may be, or the credits or properties thereunder, the
breach or default of which could have a material effect on the condition
(financial or otherwise), the Business, net worth, assets, properties,
operations or prospects of the Company.
(o) Insurance. The Company has taken out all insurance in connection with
its services and operations to the extent deemed reasonable for the type of
Business in which the Company engages.
(p) Leases. The Company enjoys peaceful and undisturbed possession over
all the tangible goods it leases or tangible personal property in respect of
which the Company is lessee; all such leases are legal, valid, binding and
enforceable in respect of the lessors in accordance with their terms; and the
Company is not in breach under any of these leases in any material respect.
(q) Employees. There are no strikes or material labor conflicts, claims
or disputes pending or threatened against the Company, and there are no pending
or threatened matters before any governmental or regulatory authority in the
Republic of Chile in connection with Company employees or practices, in excess
of USD 10,000 per dispute, claim, controversy or litigation, or USD 10,000 in
aggregate.
(r) Employee Benefits, Plans and Agreements. Exhibit VI attached hereto
contains a complete listing and an accurate summarized description of the
employees earning a gross annual salary in excess of USD 40,000 per employee,
or 40,000 in aggregate, including all employment and consultation agreements,
executives' compensation, severance pay, bonuses, deferred compensation,
retirement pension, profit sharing, performance units, stock purchase options
for employees or stock purchases and any other plan or agreement for additional
benefits, whether formal or informal, written or oral, contingent or fixed, and
any plan or agreement for whole-life, health or casualty insurance to which the
Company is bound and which provide benefits for the Company's employees. The
Company has no other benefit or retirement
5
<PAGE> 41
agreements with any employee, shareholder or agent of the Company or any former
employee, shareholder or agent.
(s) Accounts Receivable: Exhibit VII provides a listing of all accounts
receivable in excess of USD 10,000 per debtor, or USD 10,000 in aggregate, due
and payable to the Company as of January 21, 1999. All such accounts receivable
are valid, authentic and in existence, and none of them may be objected to or
counterclaimed.
(t) Registered Trademarks: The Company owns or has applied for the
ownership of all the patents, registered trademarks, industrial secrets,
formulas, service marks, trade names, copyrights, franchises, licenses and
rights in connection herewith (collectively defined as "registered
trademarks"), deemed reasonably necessary to conduct its Business as it is
presently conducted. A detailed listing of all the registered trademarks
registered or applied for is included in Exhibit I and there are no conflicting
rights of which the Company is aware other than those indicated in each case in
Exhibit I and, in each case, not subject to any sublicense, lien, pledge,
lease, encumbrance, security interest, title retention agreement or option. No
event whatsoever has occurred such as would, or following notice or the passage
of time or both may, result in the revocation or expiration of said registered
trademarks, or which has or would hereafter have a material adverse effect on
any of these registered trademarks. No other registered trademark is necessary
for the conduct of the Company's Business such as it is currently conducted.
(u) Disclosure: The Company has disclosed all the information, documents
and records deemed material in connection with its Business, and all such
information delivered to the Subscriber, whether written or oral, is true and
complete in all material respects, and does not contain any untrue statement of
a material fact or omit to state any material fact necessary to make such
information not misleading. All information provided by the company to the
Subscriber with respect to the Company was prepared in good faith and, to the
best of the Company's knowledge, was true and complete when received by the
Subscriber.
(v) Dividends: The Company has not declared or paid any dividend of any
kind since its date of incorporation and accepts not to declare or pay any
dividend starting on the date hereof through the date on which this Agreement
is executed.
4. APPLICABLE LEGISLATION. This Agreement shall be governed by and interpreted
in accordance with the internal laws (except for applicable conflict of laws
rules) of the Republic of Chile.
5. ARBITRATION.
(a) In the event of any dispute arising out of or in relation to this
Agreement, or its complementary documents or amendments thereto, amongst the
Parties,
6
<PAGE> 42
whether with regard to its interpretation, fulfillment, validity, termination
or other cause related to this Agreement, the matter in question shall be
submitted firstly to the respective Presidents or Chief Executive Officers of
the Parties for resolution.
(b) If the Parties do not reach an agreement in accordance with paragraph (a)
the dispute shall be referred to the International Chamber of Commerce ("ICC")
for mediation which is to be conducted in accordance with the Mediation
Guidelines in force at the date of this Agreement (which set out the procedures
to be adopted, the process of selection of the mediator and the costs involved
in the mediation all of which are incorporated into this Agreement) provided
that such mediation must be completed within 45 Business Days. Failing
resolution as provided above the dispute shall be submitted to arbitration
before the ICC by a single arbitrator agreed to by the parties and failing
agreement within 30 days then appointed by the ICC. All mediation and
arbitration proceedings shall take place in New York, New York in the English
and Spanish languages.
6. EXHIBITS. All exhibits attached hereto and referred to throughout this
Agreement are hereby incorporated as though fully set forth in this Agreement.
7. EXPENSES AND FEES. The Parties shall pay for their own expenses which are
associated with the preparation and execution of the transactions contemplated
herein, including all accountants' and attorneys' fees and expenses, regardless
of whether the transactions contemplated hereby are consummated or not.
8. BINDING EFFECT. This Agreement shall be binding on and inure to the benefit
of the Parties and their respective successors and assigns.
9. AMENDMENTS. The contents of this Agreement shall not be modified, other than
through a written amendment signed by both Parties.
10. NO ASSIGNMENT. None of the Parties may totally or partially assign this
Agreement without the prior, written consent of the other Parties.
11. NOTICES. All notices, requests, demands and other communications required
or permitted to be given under this Agreement shall be in writing and shall be
mailed to the Party to whom notice is to be given, by telex or facsimile, and
confirmed by first class mail, registered or certified, return receipt
requested, postage prepaid, and properly addressed as follows (in which case
such notice shall be deemed to have been duly given on the third day following
the date of such sending):
If to Williams:
Williams International Company
Attn. Mr. John C. Bumgarner, Jr.
One Williams Center, Suite 4100
Tulsa, Oklahoma 74172
7
<PAGE> 43
United States of America
Facsimile No. (+1) 918 573 8051
with a copy to:
Cruzat, Ortuzar & MacKenna
Attn. Mr. Antonio Ortuzar Vicuna
Nueva Tajamar 481, Torre Norte, Piso 21
Las Condes
Santiago, Chile
Facsimile No. (+562) 362-9878
If to Metrogas:
Metrogas S.A.
Attn. Mr. Juan Claro
Avenida El Bosque Norte 0177, Piso 11
Las Condes
Santiago, Chile
Facsimile No. (+562) 337-8193
with a copy to:
Metrogas S.A.
Attn. Mr. Francisco Gazmuri Schleyer
Avenida El Bosque Norte 0177, Piso 11
Las Condes
Santiago, Chile
Facsimile No. (+562) 337-8193
If to the Company:
Metrocom S.A.
Attn. Mr. Jake D. Steelman, Jr.
Avenida El Bosque Norte 0177, Piso 15
Las Condes
Santiago, Chile
Facsimile No. (+562) 332-0344
with a copy to:
Montt, Iruarrizaga y Cia. S.A.
Attn. Mr. Santiago Montt Vicuna
Los Conquistadores 1700, Piso 11
Santiago, Chile
Facsimile No. (+562) 231-5495
Any Party by giving notice to the others in the manner provided above may
change such Party's address for purposes of this Section 11.
8
<PAGE> 44
12. ENTIRE AGREEMENT. This Agreement, and its Exhibit delivered in connection
herewith, contain the entire understanding between the Parties in connection
with the subject matter hereof, and there are no representations, warranties,
covenants or understandings other than those expressly provided herein.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed
by their duly authorized representatives in the manner legally binding upon
them.
/s/ CRAIG S. JONES
- ------------------------------------
Craig S. Jones
WILLIAMS INTERNATIONAL TELECOM
(CHILE) LIMITED
/s/ JUAN CLARO GONZALEZ /s/ EDUARDO MORANDE MONTT
- ------------------------------------ -----------------------------------
Juan Claro Gonzalez Eduardo Morande Montt
Chairman of the Board Managing Director
METROGAS S.A. METROGAS S.A
/s/ JORGE ROSENBLUT RAFINOFF /s/ FRANCISCO GAZMURI SCHLEYER
- ------------------------------------ -----------------------------------
Jorge Rosenblut Rafinoff Francisco Gazmuri Schleyer
Managing Director Director
METROCOM S.A. METROCOM S.A
9
<PAGE> 1
EXHIBIT 10.9
EXECUTION COPY
SHARE PURCHASE AGREEMENT
BY AND AMONG
LIGHTEL S.A. TECNOLOGIA DA INFORMACAO,
WILLIAMS INTERNATIONAL ATL LIMITED,
JOHI REPRESENTACOES LTDA
AND
ATL-ALGAR TELECOM LESTE, S.A.
DATED AS OF MARCH 25, 1999
<PAGE> 2
SHARE PURCHASE AGREEMENT
SHARE PURCHASE AGREEMENT, dated as of March 25, 1999 ("Agreement") by
and among LIGHTEL S.A. TECNOLOGIA DA INFORMACAO, a Brazilian corporation
("Lightel"), WILLIAMS INTERNATIONAL ATL LIMITED, a Cayman Islands exempt limited
company ("Williams"), JOHI REPRESENTACOES LTDA., a Brazilian limited liability
company and wholly-owned subsidiary of Lightel ("Johi"), and ATL-ALGAR TELECOM
LESTE, S.A., a Brazilian corporation ("ATL").
WHEREAS, Williams has exercised its preferential right to acquire from
Lightel 899,523 voting common shares of ATL and 4,071,527 nonvoting preferred
shares of ATL (the "Offered Shares") proposed for transfer by Lightel upon the
terms and conditions (the "Terms and Conditions") referred to in a certain
letter from Lightel to Williams dated January 24, 1999 (the "Notice Letter");
WHEREAS, as a condition precedent to, and in order to effect, the
proposed transfer of the Offered Shares in accordance with such exercise, and
pursuant to the Terms and Conditions, certain agreements and consents need to be
entered into or given pursuant to the several other Transaction Agreements (as
hereinafter defined) concurrently herewith; and
WHEREAS, Williams, Lightel, Johi and ATL desire to enter into this
Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. DEFINITIONS AND INTERPRETATIONS.
The following terms will have the following meanings when used as
capitalized in this Agreement.
"ANATEL" means the Agencia Nacional de Telecomunicacoes, or such other
Governmental Authority which is then regulating the telecommunications business
activities of ATL and its Subsidiaries in Brazil.
"Ancillary Agreements" means Conditional Future Rights Agreement and the Put and
Call Agreement, including all exhibits, attachments, schedules and annexes
thereto, and a certain letter agreement of even date herewith entered into by
the parties hereto in connection with the transactions contemplated hereby.
"Assignment Agreement" means the assignment and release agreement, dated as set
forth in the Escrow Agreement, among Williams, Lightel, Lightel International
Ltd. and Citibank N.A., as administrative agent.
"Banco Central" means Banco Central do Brasil, the central bank of Brazil.
<PAGE> 3
"Capital Stock" means any and all shares, interests, quotas, participation or
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a corporation)
and any and all warrants or options to purchase any of the foregoing.
"Closing" means the consummation and completion of the purchase and sale of the
Offered Shares, the delivery and execution of the Share Purchase Agreement and
the Ancillary Agreements, and all other actions or transactions to be completed
and consummated by the Closing in accordance with this Agreement.
"Closing Date" is defined in Section 2.3 below.
"Concession Agreement" means the Concession Agreement dated April 2, 1998
between ATL and ANATEL, as the same may be amended, supplemented or otherwise
modified from time to time.
"Conditional Future Rights Agreement" means the Conditional Future Rights
Agreement dated as of March 24, 1999, among Lightel, Algar S.A.-Empreendimentos
E Participacoes, Johi and Williams.
"Contractual Obligation" means, as to any Person, any provision of any security
issued by any such Person or any agreement, instrument or other undertaking to
which such Person is a party or by which it or any of its property is bound.
"Conversion Closing" has the meaning given in the Escrow Agreement.
"Debt" of any Person means:
(a) all indebtedness of such Person for borrowed money;
(b) all Obligations of such Person for the deferred purchase price of
property of services (other than trade payables not overdue by more
than 60 days incurred in the ordinary course of such Person's
business);
(c) all Obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments;
(d) all Obligations of such Person created or arising under any
conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event
of default are limited to repossession or sale of such property);
(e) all Obligations of such Person under acceptance, letter of credit
or similar facilities;
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<PAGE> 4
(f) all Obligations of such Person to purchase, redeem, retire defease
or otherwise make any payment in respect of any equity interests in
such Person or any other Person or any warrants, rights, or options
to acquire such capital stock;
(g) all Obligations of such Person in respect of hedge agreements,
valued at the agreement value thereof; and
(h) all indebtedness and other payment Obligations referred to in
clauses (a) through (g) above of another Person secured by (or for
which the holder of such indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on property
(including, without limitation, accounts and contract rights) owned
by such Person, even though such Person has not assumed or become
liable for the payment of such indebtedness or other payment
Obligations;
Debt shall not include any deferred amounts owing (including related interest)
as a license fee in connection with the license and concession received by ATL
to provide Band B wireless communications in the States of Rio de Janeiro and
Espirito Santo or Subordinated Debt (as defined in the Ericsson Loan Agreement
(as defined below)) of the Shareholders.
"Debt Release Letter" means that certain debt release letter, dated as set forth
in the Escrow Agreement, among Williams and Lightel, pursuant to which Williams
releases Lightel from all of its Obligations under the Intercompany Note (as
defined in the Escrow Agreement).
"Ericsson Loan Documents" has the meaning given in the Ericsson Loan Agreement.
"Ericsson Loan Agreement" is defined in Section 3.1(b)(ii) below.
"Ericsson Security Documents" is defined in Section 3.1(b)(ii) below.
"Escrow Agent" has the meaning given in the Escrow Agreement.
"Escrow Agreement" means the escrow agreement, dated as of March 24, 1999, among
Johi, Lightel, Lightel International Ltd., Williams and Citibank, N.A., as
escrow agent and administrative agent under the Credit Agreement (as defined in
the Escrow Agreement).
"Escrow Property" has the meaning given in the Escrow Agreement.
"Financial Statements" is defined in Section 3.1(f) below.
"GAAP" means Brazilian generally accepted accounting principles as in effect
from time to time.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and includes, for all purposes hereof, ANATEL and the Ministry of
Communications.
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<PAGE> 5
"Johi Agreements" means the Assignment Agreement, the Escrow Agreement, the Johi
Amendment, the Resignations and the Powers of Attorney.
"Johi Amendment" means the amendment to the Articles of Association of Johi,
pursuant to which Lightel effectively agrees to transfer, or cause the transfer
of, all of the Johi Capital Stock to Williams.
"Johi Capital Stock" means all of the Capital Stock issued by Johi as of the
Closing Date.
"Lien" means any lien, security interest or other charge or encumbrance of any
kind, or any other type of preferential arrangement, including without
limitation, the lien or retained security title of a conditional vendor, any
easement, right of way or other encumbrance on title to real property.
"Material Adverse Change" means any material adverse change in the business,
condition (financial or otherwise), operations, performance, properties or
prospects of ATL or ATL and its Subsidiaries, taken as a whole.
"Material Adverse Effect" means a material adverse effect on (a) the business
condition (financial or otherwise), operations, performance, properties or
prospects of ATL or ATL and its Subsidiaries, taken as a whole, (b) the rights
and remedies of Williams hereunder and under any Ancillary Agreement or (c) the
ability of a Person to perform its Obligations under this Agreement or the
Ancillary Agreements to which it is a party.
"Material Contract" means with respect to any Person, each contract to which
such Person is a party involving aggregate consideration payable to or by such
Person of U.S.$10,000,000 or more or otherwise material to the business,
condition (financial or otherwise), operations, performance, properties or
prospects of such Person, including but not limited to, the Project Contracts.
"Ministry of Communications" means the Ministerio das Comunicacoes, the Ministry
of Communications of Brazil, or such other Governmental Authority which is then
regulating the cellular telecommunications business activities of ATL and its
Subsidiaries.
"Obligation" means with respect to any Person, any payment, performance or other
obligations of such Person of any kind, including, without limitation, any
liability of such Person on any claim, whether or not the right of any creditor
to payment in respect of such claim is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, disputed, undisputed, legal,
equitable, secured or unsecured, and whether or not such claim is discharged,
stayed or otherwise affected by any bankruptcy, insolvency or similar
proceeding. Without limitation, the generality of the foregoing, the obligations
of the parties to this Agreement and the Ancillary Agreements include:
(a) the obligation to pay principal, interest, charges, expenses, fees,
attorneys' fees and disbursements, indemnities and other amounts
payable by any party under this Agreement or any Ancillary
Agreement; and
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<PAGE> 6
(b) the obligation of any such party to reimburse any amount in respect
of any of the foregoing that another party, at the first party's
sole discretion, may elect to pay or advance on behalf of such
party.
"Offered Shares" is defined in the Recitals of this Agreement.
"Person" means an individual, partnership, corporation (including a business
trust), limited liability company, joint stock company, trust, unincorporated
association, joint venture or other entity, or a government or any political
subdivision or agency thereof.
"Power of Attorney" means the power of attorney from Lightel to Williams
authorizing the Johi Amendment and the filing thereof with the appropriate
Governmental Authority.
"Project Contracts" means the Concession Agreement and the Supply Agreements.
"Put and Call Agreement" means the Put and Call Agreement, dated as of March 24,
1999, among Lightel,Williams and Johi.
"Requirement of Law" means as to any Person, the partnership agreement, the
certificate of incorporation and bylaws, estatuto social or other organizational
or governing documents of such Person, and any law, treaty, rule or regulation
or determination of an arbitrator or a court or other Governmental Authority, in
each case applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
"Resignations" means the resignations of the General Manager and other officers
and directors of Johi effective as of the Conversion Closing.
"Shareholders" means Lightel, Johi, Williams, SKTI-US, LLC, a limited liability
company organized under the laws of the State of Delaware and any other Person
holding any Capital Stock of ATL.
"Subsidiary" of any Person means any corporation, partnership, joint venture,
limited liability company, trust or estate of which (or in which) more than 50%
of:
(a) the issued and outstanding Capital Stock having ordinary voting
power to elect a majority of the board of directors of a
corporation or similar such entity (irrespective of whether at the
time Capital Stock of any other class or classes of such
corporation shall or might have voting power upon the occurrence of
any contingency),
(b) the interest in the capital or profits of a partnership, joint
venture or limited liability company, or
(c) the beneficial interest in a trust or estate
is at the time directly or indirectly owned or controlled by such Person, by
such Person and one or more of its other Subsidiaries or by one or more of such
Person's other Subsidiaries.
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<PAGE> 7
"Supply Agreements" means the Services Supply Contract dated as of September 4,
1998, between ATL and Ericsson Telecomunicacoes S.A., the Network Operation and
Maintenance Services Agreement dated as of September 4, 1998, between ATL and
Ericsson Telecomunicacoes S.A. and the Supply and Implementation Contract dated
as of September 4, 1998 between ATL and Ericsson Telecomunicacoes S.A., in each
case as amended, modified and supplemented from time to time.
"Transaction Agreements" means the Agreement, the Ancillary Agreements, the Debt
Release Letter and the Johi Agreements.
"U.S. GAAP" means United States generally accepted accounting principles.
SECTION 2. PURCHASE OF JOHI CAPITAL STOCK.
2.1 PURCHASED SHARES. Subject to the terms and conditions of this
Agreement and the other Transaction Agreements, Williams hereby agrees to
purchase, and Lightel hereby agrees to sell to Williams, all of the Johi Capital
Stock.
2.2 PURCHASE PRICE. The purchase price (the "Purchase Price") for the
Johi Capital Stock will be US$265,000,000, payable as set forth in Section 2.3.
2.3 CLOSING. The Closing will take place on the date of this Agreement
by the execution, and delivery of this Agreement and the Ancillary Agreements by
the parties thereto and the deliveries of the Escrow Property pursuant to the
Escrow Agreement. In the event the conditions set forth in the Escrow Agreement
shall not occur on or prior to the date specified in the Escrow Agreement for
distribution of the Escrow Property as contemplated by Section 3 of the Escrow
Agreement, the Escrow Agreement will terminate and the Escrow Property will be
returned pursuant to Section 5 of the Escrow Agreement.
SECTION 3. REPRESENTATIONS AND WARRANTIES.
3.1 ATL'S REPRESENTATIONS AND WARRANTIES. To induce Williams to enter
into this Agreement and to complete the transactions required on the Closing
Date, ATL represents and warrants to Williams as of the date of this Agreement
that:
(a) Due Organization; Due Qualification; Requisite Power. Each of
ATL and its Subsidiaries (i) is an entity, duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization, (ii) is
duly qualified and in good standing as a foreign entity in each other
jurisdiction in which it owns or leases property or in which the conduct of its
business requires it to so qualify or be licensed, (iii) has all requisite
corporate power and authority (including, without limitation, except as
described on Schedule 3.1(a), all governmental licenses, permits and other
approvals) to own or lease and operate its properties and to carry on its
business as now conducted and as proposed to be conducted and (iv) is in
compliance with all material applicable laws, rules and regulations, charters
(except as described on Schedule 3.1), treaties and determinations of an
arbitrator or a court or other Governmental Authority.
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<PAGE> 8
(b) No Subsidiaries, Capital Stock.
(i) As of the date hereof, ATL does not have any Subsidiaries
other than ATL Cayman International ("ATL Cayman"), a Cayman Islands company.
The Shareholders (including directors appointed by Lightel) own directly 100% of
ATL. ATL owns directly 100% of the Capital Stock of ATL Cayman. Prior to the
completion of the transactions contemplated by the Agreement, Lightel and its
directors own 35% of the outstanding capital stock of ATL, consisting of
2,414,511 common shares and 2,556,539 preferred shares (including shares held by
directors of Lightel); Johi owns the Offered Shares comprising 35% of the
outstanding capital stock of ATL, and consisting of 899,523 common shares and
4,071,527 preferred shares; Williams owns 20% of the outstanding capital stock
of ATL, consisting of 2,840,600 preferred shares; and SKTI-US LLC ("LLC") owns
10% of the outstanding capital stock of ATL, consisting of 1,420,300 common
shares.
(ii) As of the date hereof, there is no issued or outstanding
Capital Stock of ATL or ATL Cayman other than as described in Section 3.1(b)(i).
All of the outstanding capital stock of ATL and ATL Cayman has been validly
issued, is fully paid and nonassessable and is owned by the Persons described,
in the amounts specified, in Section 3.1(b)(i) and is free and clear of all
Liens whatsoever, except Liens created pursuant to the Security Documents (as
defined in that certain Secured Loan Agreement (the "Ericsson Loan Agreement")
dated as of March 11, 1999, among ATL, ATL Cayman and Ericsson Project Finance
AB, as initial lender, collateral agent and administrative agent) and any other
agreements related to the Share Pledge Agreement and the Ericsson Loan Agreement
(the "Ericsson Security Documents").
(iii) Immediately after the Closing, the Offered Shares will
represent 35% of the outstanding capital stock of ATL, which total will include
the number of all common and preferred stock issued or otherwise issuable from
other forms of equity or of Debt, including other preferred shares, warrants,
convertible Debt and equity and options to purchase in ATL. The Offered Shares
will have been transferred directly to Johi at or prior to Closing by Lightel,
free and clear of all Liens (other than as set forth in the Ericsson Security
Documents), and upon such transfer Johi will be the sole record and beneficial
owner of the Offered Shares. All of the Offered Shares have been duly authorized
and, contemporaneously with the Closing, will be validly issued, fully paid and
nonassessable, all in compliance with Brazilian Requirements of Law.
(c) Due Authorization, No Violations or Defaults. The execution,
delivery and performance by ATL of this Agreement and the Ancillary Agreements
to which it is or is to be a party and the other transactions contemplated
thereby, are within such Person's powers, have been duly authorized by all
necessary corporate action, and do not violate any Requirement of Law or
Contractual Obligation of such Person or, except for the Liens created under the
Ericsson Security Documents, result in or require the creation or imposition of
any Lien upon or with respect to any of the properties of ATL or any of its
Subsidiaries. Neither ATL nor any of its Subsidiaries is in violation of any
Requirement of Law. No Default or Event of Default (as such terms are defined in
the Ericsson Loan Agreement) has occurred and is continuing.
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<PAGE> 9
(d) No Authorizations or Approvals. Except as described in Schedule
3.1, no authorization or approval, consent or other action by, and no notice to,
recordation with or filing with, any Governmental Authority or any other Person
is required in connection with the due execution, delivery, performance,
recordation, filing, legality, validity, admissibility in evidence or
enforceability of this Agreement or the Ancillary Agreements or the other
transactions contemplated hereby or thereby, except for (i) the issuance by
Banco Central of a certificate of registration in connection with the Offered
Shares; (ii) the authorization by Banco Central of payments abroad in connection
with the Offered Shares; (iii) the translation of this Agreement or any
Ancillary Agreement into Portuguese by a sworn translator, to the extent
required for such agreement to be in proper legal form under the laws of Brazil
for the enforcement thereof in any competent Brazilian court; (iv) the
notarization of signatures of parties to this Agreement and the Ancillary
Agreements signing outside of Brazil and the consularization of this Agreement
and the Ancillary Agreements executed outside of Brazil by a Brazilian consular
official; (v) the registration of this Agreement or any Ancillary Agreement in
the appropriate registry in Brazil or the corporate register of ATL (as the case
may be); (vi) the filing of the Johi Amendment and the Resignations with the
relevant Board of Trade and/or other Governmental Authority in Brazil; and (vii)
those authorizations, approvals, consents, actions, notices or filings which
have been duly obtained or made, as the case may be, and which remain in full
force and effect.
(e) Due Execution and Delivery; Enforceability. This Agreement and
the Ancillary Agreements to which ATL is a party have been duly executed and
delivered by ATL and are the legal, valid and binding obligation of ATL,
enforceable against ATL in accordance with its terms, subject to bankruptcy,
insolvency and other rules of general application applicable to creditors and
general principles of equity.
(f) Financial Statements. The financial statements of ATL as of
December 31, 1998 (the "Financial Statements"), have been prepared in accordance
with GAAP and U.S. GAAP, consistently applied. Such Financial Statements of ATL
as of December 31,1998 and all notes associated with said documents fairly
present the financial condition and the results of operations, and include
balance sheets, a statement of income (U.S. GAAP only), statements of changes in
shareholders' investment, sources and use of funds of ATL (GAAP only) and a
statement of cash flows (U.S. GAAP only), as at the respective dates of and for
the periods referred to in such documents. The U.S. GAAP Financial Statements
contain a note referring to differences from GAAP and are accompanied by a
convenience translation to U.S. Dollars, all in accordance with U.S. GAAP,
consistently applied. The Financial Statements are accompanied by an opinion of
Arthur Andersen S/C, independent public accountants.
(g) No Undisclosed Obligations. ATL and its Subsidiaries have no
material Obligations, except for obligations under Material Contracts (but not
Obligations for breach thereof), Obligations reflected or reserved against in
the Financial Statements and Obligations incurred in the ordinary course of
business since December 31, 1998, and Obligations incurred in connection with
the transactions contemplated by the Ericsson Loan Documents.
(h) Accuracy of Information Provided. The information, exhibits,
reports and schedules (collectively, "Information") furnished prior to the date
hereof by ATL to Ericsson Radio System AB or its affiliates ("Ericsson") in
connection with the negotiation of the Ericsson Loan Documents is true and
correct in every material respect and was prepared in good faith and
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<PAGE> 10
ATL has not failed to disclose any material fact to Ericsson that is necessary
to make such Information not misleading in light of conditions existing at the
time of delivery of such Information.
(i) No Material Litigation. There is no action, suit,
investigation, litigation or proceeding against ATL or any of its Subsidiaries
pending or, to the knowledge of ATL, threatened before any arbitrator or
Government Authority affecting ATL or any of its Subsidiaries that (a) is
reasonably likely to have a Material Adverse Effect, or (b) purports to affect
the legality, validity or enforceability of this Agreement or any Ancillary
Agreement or the consummation of the transactions contemplated hereby or
thereby.
(j) No Material Adverse Change. No Material Adverse Change has
occurred since December 31, 1998.
(k) Existing Debt. Set forth on Schedule 3.1(k) hereto is a
complete and accurate list of all existing Debt of the Company and its
Subsidiaries, showing as of the date hereof the principal amount outstanding
thereunder.
(l) Title to Properties. Each of ATL and its Subsidiaries has good
title to, or a valid leasehold interest in, all its real property, and good
title to, or a valid leasehold interest in, all its other property, (a) subject
to customary exceptions in accordance with accepted practices in Brazil for
leases of a similar nature in comparable locations, and none of such property is
subject to any Lien, other than Liens created or not prohibited by the Ericsson
Loan Documents, and (b) except to the extent that the failure to have such title
or interests could not reasonably be expected to have a Material Adverse Effect.
(m) Taxes. Each of ATL and its Subsidiaries has filed or caused to
be filed or has been included in all tax returns required to be filed and has
paid all taxes shown thereon to be due or on any assessment made against it or
any of its property, together with applicable interest and penalties and all
other taxes, fees or other charges imposed on it or any of its property by any
Governmental Authority (other than the amount or validity of which are currently
being contested in good faith by appropriate proceedings). As of the date
hereof, no taxes referred to in the preceding sentence are due and owing to any
Governmental Authority.
(n) Material Contracts. Set forth on Schedule 3.1(n) hereto is a
complete and accurate list of all Material Contracts of each of ATL and its
Subsidiaries, showing as of the date of such schedule the parties, subject
matter and term thereof. Each such Material Contract, except as stated on
Schedule 3.1(n), (a) has been duly authorized, executed and delivered by ATL or
the applicable Subsidiary party thereto and to the actual knowledge of ATL or
the applicable Subsidiary party thereto, but without any specific inquiry being
made, has been executed and delivered by all other parties thereto and (b) has
not been amended or otherwise modified, is in full force and effect and is
binding upon and enforceable against ATL or the applicable Subsidiary party
thereto and, to the knowledge of ATL or the applicable Subsidiary party thereto,
but without any specific inquiry being made, against all other parties thereto
in accordance with its terms. Except as stated on Schedule 3.1(n) there exists
no material default under any Material Contract by ATL or the applicable
Subsidiary party thereto or to the
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knowledge of ATL or the applicable Subsidiary party thereto, by any other
party thereto, which will have a Material Adverse Effect.
3.2 LIGHTEL REPRESENTATIONS AND WARRANTIES. Lightel represents and
warrants to Williams as of the date of this Agreement that:
(a) Due Incorporation. Lightel is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization, and
has the power and authority and the legal right to own and operate its property,
to lease the property it operates and to conduct the business in which it is
currently engaged;
(b) Due Authorization, No Violations or Defaults Lightel has the
power and authority and the legal right to execute and deliver and perform its
obligations under the Transaction Agreements to which Lightel is a party, and
has taken all necessary action to authorize their execution, delivery and
performance of the Transaction Agreements to which Lightel is a party.
(c) Due Execution and Delivery; Enforceability. The Transaction
Agreements to which Lightel is a party have been duly executed and delivered by
Lightel and are the legal, valid and binding obligation of Lightel, enforceable
against Lightel in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally and general equitable
principles (whether considered in a proceeding in equity or law);
(d) No Violation. The execution, delivery and performance of the
Transaction Agreements to which Lightel is a party will not violate in any
material respect any provision of any Requirement of Law or Contractual
Obligation of Lightel and will not result in or require the creation or
imposition of any Lien on any of the properties or revenues of Lightel pursuant
to any such Requirement of Law or Contractual Obligation of Lightel; and
(e) Governmental Authorizations. No material consent or
authorization of, filing with or other act by or in respect of any arbitrator or
Governmental Authority is required in connection with the execution, delivery,
performance, validity or enforceability of the Transaction Agreements to which
Lightel is a party, other than any of the foregoing that have been obtained and
are in full force and effect or are to be obtained pursuant to the Transaction
Agreements to which Lightel is a party.
(f) ATL Representations and Warranties. Lightel has no actual
knowledge that any of the representations and warranties of ATL set forth in
Section 3.1 hereof are not true and correct in all material respects as of the
date hereof, (without any representation or warranty that Lightel has conducted
any investigation in respect thereof, and without regard to any knowledge
Lightel may have been capable of having acquired at any time with respect
thereto).
3.3 WILLIAMS REPRESENTATIONS AND WARRANTIES. Williams represents and
warrants to Lightel as of the date of the Agreement that:
(a) Due Incorporation. Williams is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization, and
has the power and
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<PAGE> 12
authority and the legal right to own and operate its property, to lease the
property it operates and to conduct the business in which it is currently
engaged;
(b) Due Authorization, No Violations or Defaults Williams has the
power and authority and the legal right to execute and deliver and perform its
obligations under the Transaction Agreements to which it is a party, and has
taken all necessary action to authorize their execution, delivery and
performance of the Transaction Agreements to which it is a party;
(c) Due Execution and Delivery; Enforceability. The Transaction
Agreements to which it is a party have been duly executed and delivered by
Williams and are the legal, valid and binding obligation of Williams,
enforceable against Williams in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally and
general equitable principles (whether considered in a proceeding in equity or
law);
(d) No Violation. The execution, delivery and performance of the
Transaction Agreements to which it is a party will not violate in any material
respect any provision of any Requirement of Law (except Williams makes no such
representation in respect of Regulation 101, as adopted on February 4, 1999, by
ANATEL ("Regulation 101")) or Contractual Obligation of Williams and will not
result in or require the creation or imposition of any Lien on any of the
properties or revenues of Williams pursuant to any such Requirement of Law or
Contractual Obligation of Williams; and
(e) Governmental Authorizations. No material consent or
authorization of, filing with or other act by or in respect of any arbitrator or
Governmental Authority (except Williams makes no such representation in respect
of Regulation 101) is required in connection with the execution, delivery,
performance, validity or enforceability of the Transaction Agreements to which
it is a party, other than any of the foregoing that have been obtained and are
in full force and effect.
(f) ATL Representations and Warranties. Williams has no actual
knowledge that any of the representations and warranties of ATL set forth in
Section 3.1 hereof are not true and correct in all material respects as of the
date hereof (without any representation or warranty that Williams has conducted
any investigation in respect thereof, and without regard to any knowledge
Williams may have been capable of having acquired at any time with respect
thereto).
3.4 LIGHTEL'S AND JOHI'S REPRESENTATION AND WARRANTIES. Lightel and
Johi, jointly and severally, represent and warrant to Williams as of the date of
this Agreement that:
(a) Due Organization; Due Qualification; Requisite Power. Johi (i)
is an entity, duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, (ii) is duly qualified and in good
standing as a foreign entity in each other jurisdiction in which it owns or
leases property or in which the conduct of its business requires it to so
qualify or be licensed, (iii) has all requisite corporate power and authority
(including, without limitation all governmental licenses, permits and other
approvals) to own or lease and operate its properties and to carry on its
business as now conducted and as proposed to be
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<PAGE> 13
conducted and (iv) is in compliance with all material applicable laws, rules
and regulations, charters, treaties and determinations of an arbitrator or a
court or other Governmental Authority.
(b) No Subsidiaries, Capital Stock. As of the date hereof, Johi
does not have any Subsidiaries. Except for one quota owned by Mr. Aristeu da
Silva Grillo, Lightel owns all of the outstanding Johi Capital Stock, and as of
the date hereof, there is no other issued or outstanding Johi Capital Stock. All
of the outstanding Johi Capital Stock has been validly issued, is fully paid and
nonassessable and is free and clear of all Liens whatsoever.
(c) Due Authorization, No Violations or Defaults. The execution,
delivery and performance by Johi of the Transaction Agreements to which it is or
is to be a party and the transactions contemplated thereby are within such
Person's powers, have been duly authorized by all necessary corporate action,
and do not violate any Requirement of Law or Contractual Obligation of such
Person or result in or require the creation or imposition of any Lien upon or
with respect to any of the properties of Johi (other than pursuant to the terms
of the Escrow Agreement). Johi is not in violation of any Requirement of Law.
(d) No Authorizations or Approvals. Except as described in Section
9 below and as contemplated by the Johi Agreements, no authorization or
approval, consent or other action by, and no notice to, recordation with or
filing with, any Governmental Authority or any other person is required in
connection with the due execution, delivery, performance, recordation, filing,
legality, validity, admissibility in evidence or enforceability of the Johi
Agreements or the other transactions contemplated thereby, except for: (i) the
prior approval by Banco Central for the conversion of certain loans into equity
investments in Johi; (ii) the issuance by Banco Central of an equity certificate
of registration in connection with the Johi Capital Stock to allow Williams to
remit dividends and repatriate equity principal abroad; (iii) the translation of
such Agreements into Portuguese by a sworn translator, to the extent required
for such agreement to be in proper legal form under the laws of Brazil for the
enforcement thereof in any competent Brazilian court; (iv) the notarization of
signatures of parties to such Agreements signing outside of Brazil and the
consularization of such Agreements executed outside of Brazil by a Brazilian
consular official; (v) the registration of such Agreements in the appropriate
registry in Brazil or the corporate register of ATL (as the case may be); (vi)
the filing of the Johi Amendment and the Resignations with the relevant Board of
Trade and/or other Governmental Authority in Brazil; and (vii) those
authorizations, approvals, consents, actions, notices or filings which have been
duly obtained or made, as the case may be, and which remain in full force and
effect.
(e) Due Execution and Delivery; Enforceability. The Transaction
Agreements to which Johi is a party have been duly executed and delivered by
Johi and are the legal, valid and binding obligation of Johi, enforceable
against Johi in accordance with their terms, subject to bankruptcy, insolvency
and other rules of general application applicable to creditors and general
principles of equity.
(f) No Material Litigation. There is no action, suit,
investigation, litigation or proceeding against Johi pending or, to the
knowledge of Johi or Lightel, threatened before any arbitrator or Government
Authority affecting Johi that (i) is reasonably likely to have a Material
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<PAGE> 14
Adverse Effect on Johi, or (ii) purports to affect the legality, validity or
enforceability of any Transaction Agreement or the consummation of the
transactions contemplated thereby.
(g) Existing Obligations. Except for Obligations incurred in
connection with the Transaction Agreements and the transactions contemplated
thereby, Johi does not have any material Obligations.
(h) Title to Properties. Johi has good title to, or a valid
leasehold interest in, all its real property, and good title to, or a valid
leasehold interest in, all its other property, (a) subject to customary
exceptions in accordance with accepted practices in Brazil for Leases of a
similar nature in comparable locations, and none of such property is subject to
any Lien, (b) except to the extent that the failure to have such title or
interests could not reasonably be expected to have a Material Adverse Effect on
Johi.
(i) Taxes. Johi has filed or caused to be filed or has been
included in all tax returns required to be filed and has paid all taxes shown
thereon to be due or on any assessment made against it or any of its property,
together with applicable interest and penalties and all other taxes, fees or
other charges imposed on it or any of its property by any Governmental Authority
(other than the amount or validity of which are currently being contested in
good faith by appropriate proceedings). As of the date hereof, no taxes referred
to in the preceding sentence are due and owing to any Governmental Authority.
(j) Material Contracts. Set forth on Schedule 3.4 hereto is a
complete and accurate list of all Material Contracts of Johi (excluding the
Transaction Agreements), showing as of the date of such schedule, the parties,
subject matter and term thereof. Each such Material Contract, except as stated
on Schedule 3.4, (i) has been duly authorized, executed and delivered by Johi
and to the actual knowledge of Johi and Lightel, but without any specific
inquiry being made, has been executed and delivered by all other parties thereto
and (ii) has not been amended or otherwise modified, is in full force and effect
and is binding upon and enforceable against Johi and, to the knowledge of Johi,
but without any specific inquiry being made, against all other parties thereto
in accordance with its terms. Except as stated on Schedule 3.4 there exists no
material default under any Material Contract by Johi or to the knowledge of Johi
and Lightel, by any other party thereto, which will have a Material Adverse
Effect on Johi.
SECTION 4. [INTENTIONALLY OMITTED]
SECTION 5. [INTENTIONALLY OMITTED]
SECTION 6. [INTENTIONALLY OMITTED]
SECTION 7. INDEMNIFICATION; REMEDY.
7.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE. All
representations and warranties, if any, in each Transaction Agreement will
survive the Closing for one (1) year. If Williams had actual knowledge that a
representation or warranty by ATL herein was not true and correct in all
material respects as of the date hereof, Williams will not have any
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<PAGE> 15
right to indemnification, payment of loss or other remedy based on such
representation and warranty, but Williams' right to indemnification, payment
of loss or other remedy based on a representation or warranty will not be
affected by any investigation that Williams could have conducted or with
respect to any knowledge Williams may have been capable of having acquired at
any time, with respect to the accuracy or inaccuracy of or compliance with,
any such representation or warranty.
7.2 INDEMNIFICATION AND PAYMENT OF LOSS BY LIGHTEL. Lightel will
indemnify and hold harmless Williams and its officers, directors and
representatives (collectively, the "Williams Indemnified Persons") for, and will
pay to the Williams Indemnified Persons the amount of any loss, cost or expense
arising from or in connection with, except as specifically stated in the
Transaction Agreements:
(a) any material inaccuracy on the date hereof of any
representation or warranty made by Lightel in this Agreement or in any other
Transaction Agreement;
(b) any material breach by Lightel of any obligation of Lightel in
this Agreement or any other Transaction Agreement; or
(c) the Johi Agreements and the transactions contemplated thereby,
including any net increase in taxes or other charges imposed by any Governmental
Authority, payable by or assessed against Williams or Johi, that would not have
been owed by Williams if Williams had owned the Offered Shares directly,
including any withholding income tax or other tax in Brazil, and including from
any recharacterization of the transactions set forth in the Johi Agreements by
the authorities in Brazil, but excluding any such amounts arising from or in
connection with the operation of Johi, not contemplated by the Johi Agreements,
after the Conversion Closing.
7.3 INDEMNIFICATION AND PAYMENT OF LOSS BY ATL. ATL will indemnify and
hold harmless each Williams Indemnified Person for, and will pay to the Williams
Indemnified Persons the amount of any loss, cost or expense arising from or in
connection with:
(a) any material inaccuracy on the date hereof of any
representation or warranty made by ATL in this Agreement or any Ancillary
Agreement to which it is a party; or
(b) any material breach by ATL of any obligation of ATL in this
Agreement or any Ancillary Agreement to which it is a party.
7.4 INDEMNIFICATION AND PAYMENT OF LOSS BY WILLIAMS. Williams will
indemnify and hold harmless ATL and Lightel and their officers, directors and
representatives (collectively, the "A/L Indemnified Persons", and together with
the Williams Indemnified Persons, the "Indemnified Persons") for, and will pay
to the A/L Indemnified Persons the amount of any loss, cost or expense arising
from or in connection with:
(a) any material inaccuracy on the date hereof of any
representation or warranty made by Williams in this Agreement or in any other
Transaction Agreement; or
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<PAGE> 16
(b) any material breach by Williams of any obligation of Williams
in this Agreement or any other Transaction Agreement.
7.5 REMEDIES NOT EXCLUSIVE. If ATL has not complied with the provisions
of Section 9, then Williams may seek specific performance thereof to the fullest
extent permitted by applicable Brazilian law, including in accordance with the
provisions of Paragraph 3, Article 118, Brazilian Law No. 6,404 of December 15,
1976, if applicable and the specific performance provisions contained in
Articles 641, 642 and 798 of the Brazilian Code of Civil Procedure. Nothing in
this Agreement or any Ancillary Agreement shall reduce or diminish in any
respect any rights or remedies including specific performance Williams may have
under any other agreement with respect to ATL or Lightel to which Williams is a
party to the extent consistent herewith.
7.6 PROCEDURE FOR INDEMNIFICATION --THIRD PARTY CLAIMS.
(a) Promptly after receipt by an Indemnified Person of notice of
the commencement of any proceeding against it, such Indemnified Person will, if
a claim is to be made against an indemnifying Person hereunder, give notice to
the indemnifying Person of the commencement of such claim and the fact that such
notice is being provided pursuant to this Section 7.6(a), but the failure to so
notify the indemnifying person will not relieve the indemnifying Person of any
liability that it may have to any Indemnified Person, except to the extent that
the indemnifying Person demonstrates that the defense of such action is
prejudiced by the Indemnified Person's failure to give such notice.
(b) If notice is given to an indemnifying Person of the
commencement of any proceeding pursuant to Section 7.6(a) and the indemnifying
Person does not, within twenty (20) days after the Indemnified Person's notice
has been received, give notice to the Indemnified Person of its election to
assume the defense of such proceeding, then the indemnifying Person will be
bound by any determination made in such proceeding or any compromise or
settlement effected by the Indemnified Person.
(c) If any proceeding referred to in this Section 7.6 is brought
against an Indemnified Person, the indemnifying Person may retain counsel of its
choice, reasonably acceptable to the Indemnified Person, to represent the
Indemnified Person and any others the indemnifying Person may reasonably
designate in connection with such proceeding and will pay the fees and
disbursements of such counsel with regard thereto. Upon request by the
indemnifying Person, the Indemnified Person agrees (or, if such Person is not a
party hereto, the relevant party hereto agrees to cause such person) to
cooperate with the indemnifying Person and its counsel in contesting any
proceeding which the indemnifying Person defends, or, if appropriate and related
to the claim in question, in making any counterclaim against the person who
brought the proceeding or any cross-complaint against any person. No proceeding
or related claim or demand may be settled without the consent of the
indemnifying Person. Notwithstanding the foregoing, if a proceeding involves a
tax claim, or if an Indemnified Person determines in good faith that there is a
reasonable probability that a proceeding may adversely affect it or its
affiliates other than as a result of monetary damages for which it would be
entitled to indemnification under this Agreement, then the Indemnified Person
may, by notice to the indemnifying Person, assume the exclusive right to defend,
compromise, or settle such proceeding, but the indemnifying Person will not be
bound by
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<PAGE> 17
any determination of a proceeding so defended or any compromise or
settlement effected without its consent (which may not be unreasonably
withheld).
SECTION 8. NOTICES.
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when
actually received, and may be (a) delivered by hand, (b) sent by telecopier
(with written confirmation of receipt) or (c) sent by an internationally
recognized overnight delivery service (receipt requested), in each case to the
appropriate addresses and telecopier numbers set forth below (or to such other
addresses and telecopier numbers as a party may designate by notice to the other
parties):
If to Williams or, after the Conversion Closing, Johi, to:
Williams International ATL Limited
One Williams Center, Suite 4100
Tulsa, Oklahoma 74172
Attention: Jacob D. Steelman, Jr.
Facsimile No.: (918) 573-8051
If to Lightel or, before the Conversion Closing, Johi, to:
Lightel S.A. - Tecnologia Da Informacao
Avenue Comendador Alexandrino Garcia 2689
Uberlandia - MG Brazil CEP 38402-288
Attention: LouAngela Bianchinni
Facsimile No.: (55-34) 212-0862
with a copy to:
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 W. Wacker Drive, Suite 2100
Suite 2100
Chicago, IL 60606
Attention: Warren Lavey
Facsimile No.: (312) 407-0411
and
If to ATL, to:
ATL-ALGAR Telecom Leste, S.A.
Rua Mena Barreto, 42
6th Floor
Rio de Janeiro, Brazil
Attention: Louis Nelson Assis
Facsimile No.: (55-21) 528-9009
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<PAGE> 18
SECTION 9. OBLIGATIONS FOLLOWING THE CLOSING.
(a) Not later than sixty (60) days from the Closing Date, ATL shall
report the indirect transfer of Offered Shares to Williams in full compliance
with Section 40, third paragraph, of the Concession Agreement applicable to ATL,
and shall otherwise take all action and file all notices with each Governmental
Authority in accordance with all Requirement of Laws applicable to ATL.
(b) Within ten (10) days following the Closing Date, ATL and
Lightel agree to assist Williams in applying with the Banco Central for the
issuance of a Certificado de Registro to evidence the Offered Shares as a
foreign investment of Williams so as to allow Williams the receipt of dividends,
proceeds of sale and other shares of ATL received by Williams by way of stock
dividends, share splits or replacement shares. ATL and Lightel agree to provide
the Banco Central with any information and/or document that the Banco Central
may request and to comply with any requirement the Banco Central may make so as
to issue the Certificado de Registro. ATL shall be liable for the payment of any
penalty or fine that might be imposed by the Banco Central or any other
Governmental Authority as a result of an event attributable to ATL in case of
its failure to comply with the terms set forth in the applicable legislation for
the application for registration of foreign investments in Brazil and the
fulfillment of any requirement made by the Banco Central for such purpose or any
other purpose. ATL and Lightel each shall use all reasonable efforts to assist
Williams to cause the Banco Central to issue the Certificado de Registro
evidencing the Offered Shares within sixty (60) days following the Closing Date.
Within five (5) business days following the receipt of such Certificado de
Registro by ATL, ATL agrees to send a copy thereof to Williams. In connection
with the above registration procedures, ATL will bear all administrative costs
and filing fees imposed by the Banco Central, and Lightel, Johi and Williams
will bear its own expenses (including attorney's fees) as provided in Section
11(a) hereof. Lightel will pay the withholding taxes specified in the letter
from Banco Central to Lightel, dated March 16, 1999, payable in respect of the
Johi Agreements as provided in the conversion approval by the Banco Central.
Concurrently with the Closing, Williams will submit the debt equity swap request
with respect to the Lightel intercompany note (which is to be assigned to
Williams pursuant to the Assignment Agreement) on FIRC Communication No. 28
Forms to Banco Central and promptly upon approval of the request by Banco
Central, Williams will effect the conversion thereunder.
SECTION 10. JURISDICTION.
(a) This Agreement may be enforced in the courts of the city of New
York, State of New York located in the Southern District of New York, United
States of America, or in the central courts of the city of Sao Paulo, State of
Sao Paulo, Brazil. Final judgment issued by any of such courts shall be
conclusive and may be enforced in the other courts referred to herein, by suit
on the judgment, a certified or exemplified copy of which shall be conclusive
evidence of the judgment, or in any other manner provided by law.
(b) By the execution and delivery of this Agreement, each party
irrevocably submits to the jurisdiction of any such court in any action, suit or
proceeding arising out of or relating to this Agreement, and each of such
parties designates, appoints and empowers CT
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Corporation System, Inc. with an office at 1633 Broadway, New York, NY 10019,
United States of America as its authorized agent to receive for and on its
behalf service of any summons, complaint or other legal process in any such
action, suit or proceeding that another party elects to bring in the State of
New York. Notwithstanding the foregoing, each party hereto reserves the right
to make personal service on each other party of any summons, complaint or
other legal process in any such action, suit or proceeding.
(c) As long as the this Ancillary Agreements remain in force, each
party hereto shall maintain a duly appointed agent for the service of summons,
complaint and other legal process in New York, New York, United States of
America, for purposes of any legal action, suit or proceeding another party may
bring in the courts of the City of New York in respect of this Agreement to
which any of the above parties is a party. Each party shall keep each other
party advised of the identity and location of such agent.
(d) Each party hereto also irrevocably consents, if for any reason
such party's authorized agent for service of process of summons, complaint and
other legal process in any such action, suit or proceeding is not present in New
York, New York, to service of such papers being made out of those courts by
mailing copies of the papers by registered United States air mail, postage
prepaid, to the relevant party at its address specified in the opening of this
Agreement. In such a case, the relevant party shall also send by telex or
facsimile, or have sent by telex or facsimile, a copy of the papers to such
party.
(e) Service in the manner provided in Subsection (c) above in any
such action, suit or proceeding shall be deemed personal service, shall be
accepted by each party hereto, as such and shall be valid and binding upon the
relevant party for all purposes of any such action, suit or proceeding.
(f) Each party hereto irrevocably waives to the fullest extent
permitted by applicable law:
(i) any objection which it may have now or in the future to
the laying of the venue of any such action, suit or proceedings in any court
referred to in this Section;
(ii) any claim that any such action, suit or proceeding has
been brought in an inconvenient forum;
(iii) its right of removal of any matter commenced by a party
under this Section in the courts of the State of New York to any court of the
United States of America; and
(iv) any and all rights to demand a trial be jury in any such
action, suit or proceeding brought against a party by another party.
(g) To the extent that any party hereto may be entitled in any
jurisdiction referred to in Subsection (a) above to claim for itself or its
assets immunity in respect of its obligations under this Agreement or the
Ancillary Agreements from any suit, execution, attachment (whether provisional
or final, in aid of execution, before judgment or otherwise) or other legal
process or to the extent that in any such jurisdictions such immunity (whether
or not claimed) may be attributed to it or its assets, such party irrevocably
agrees not to claim and
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<PAGE> 20
irrevocably waives such immunity to the fullest extent permitted by the laws
of any of such jurisdictions.
(h) To the extent that a party hereto may, in any suit, action or
proceeding brought in any of the courts referred to in Subsection (a) above
arising out of or in connection with this Agreement be entitled to the benefit
of any provision of law requiring another party in such suit, action or
proceeding to post security for the costs of any of such parties (cautio
judicatum solvi), or to post a bond or to take similar action, each party hereby
irrevocably waives such benefit, in each case to the fullest extent now or in
the future permitted under the laws of the State of New York, United States of
America or Brazil.
(i) If a party hereto brings any legal action, suit or proceeding
arising out of or relating to this Agreement, in the central courts of the city
of Sao Paulo, State of Sao Paulo, Brazil, as referred to in Subsection (a), any
party hereto shall be entitled to claim in such Brazilian court the specific
performance of the obligations assumed by the other parties hereunder, or any
portion hereof or thereof, pursuant to the relevant articles of the Brazilian
Code of Civil Procedure, including, but not limited to, Articles 461, 632, 639,
as well as pursuant to Article 118 of Brazilian Law No. 6,404, enacted on
December 15, 1976.
SECTION 11. MISCELLANEOUS.
(a) Each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, negotiation, execution, and
performance of the Transaction Agreements and the transactions contemplated
thereby, including all fees and expenses of agents, representatives, counsel,
and accountants.
(b) This Agreement supersedes all prior agreements between the parties
with respect to its subject matter other than the other Transaction Agreements.
This Agreement may not be amended except by a written agreement of the parties.
Neither the failure nor any delay by any party in exercising any right, power,
or privilege under this Agreement or the agreements or documents referred to in
this Agreement will operate as a waiver of such right, power, or privilege, and
no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of the
Transaction Agreements can be discharged by one party, in whole or in part, by a
waiver or renunciation of such claim or right unless in writing signed by such
party; (b) no waiver that may be given by a party will be applicable except in
the specific instance for which it is given; and (c) no notice to or demand on
one party will be deemed to be a waiver of any obligation of such party or of
the right of the party giving such notice or demand to take further action
without notice or demand as provided in this Agreement or the documents referred
to in this Agreement.
(c) Each party to this Agreement agrees to execute, acknowledge,
deliver file and record such further certificates, amendments, instruments or
documents, and to do all such other acts and things, as may be required by law
or as may be necessary or advisable to carry out the intent and purpose of this
Agreement.
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(d) All headings and captions contained in this Agreement are inserted
for convenience only and shall not be deemed part of this Agreement.
(e) This Agreement shall be governed and construed in accordance with
the laws of the State of New York.
(f) This Agreement may be signed in one or more counterpart copies,
each of which shall constitute an original and all of which, when taken
together, shall constitute one agreement.
(g) For the purposes of Article 9 of Decree-Law No. 4657 dated
September 4, 1942, the transactions contemplated hereby have been proposed to
Lightel, ATL and Johi by Williams.
(h) Every provision of this Agreement is intended to be several. The
invalidity and unenforceability of any particular provision of this Agreement in
any jurisdiction shall not affect the other provisions hereof, and this
Agreement shall be construed in all respects as if such invalid or unenforceable
provision were omitted.
(i) This Agreement shall be binding upon the parties hereto, their
respective successors, executors, administrators, legal representatives, heirs
and legal assigns and shall inure to the benefit of the parties hereto and,
except as otherwise provided herein, their respective successors, executors,
administrators, legal representatives, heirs and legal assigns. No person other
than the parties hereto and their respective successors, executors,
administrators, legal representatives, heirs and legal assigns, shall have any
rights or claims under this Agreement.
(j) This Agreement constitutes the entire agreement of the parties
hereto on the subject matter hereof, and can only be amended by a written
instrument signed by all of the parties hereto. No party may assign any of its
rights under this Agreement without the prior written consent of the other
parties. Nothing expressed or referred to in this Agreement will be construed to
give any person, other than the parties hereto, any legal or equitable right,
remedy, or claim under or with respect to this Agreement or any provision of
this Agreement. This Agreement and all of its provisions and conditions are for
the sole and exclusive benefit of the parties to this Agreement and their
successors and assigns.
(k) The parties will use their best efforts to coordinate and harmonize
any public announcement or similar publicity with respect to the Transaction
Agreements or the transactions contemplated thereby. The terms hereof shall be
governed by the confidentiality and similar terms contained in the Shareholders'
Agreement, dated as of November 12, 1998, as amended, among the Shareholders of
ATL.
-20-
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto, acting through their duly
authorized representatives, have caused this Agreement to be duly executed as of
the date first above written.
LIGHTEL S.A.- TECNOLOGIA DA
INFORMACAO
/s/ [ILLEGIBLE]
-----------------------------------
Name:
On the ___ day of March, in the year nineteen hundred and ninety nine,
before me personally came ______________________________, ___________ Lightel
S.A. - Tecnologia Da Informacao, who signed her/his name thereto by order of the
Board of Directors of said corporation.
-------------------------------
Notary
WITNESSES:
- ------------------------------
Name:
CPF:
- ------------------------------
Name:
CPF:
One the ___ day of March, in the year nineteen hundred and
ninety nine, before me personally came ______________________ to me known to be
the individual described in, and who witnessed the execution of the foregoing
instrument.
-------------------------------
Notary
One the ___ day of March, in the year nineteen hundred and ninety nine,
before me personally came ______________________ to me known to be the
individual described in, and who witnessed the execution of the foregoing
instrument.
-------------------------------
Notary
-21-
<PAGE> 23
IN WITNESS WHEREOF, the parties hereto, acting through their duly
authorized representatives, have caused this Agreement to be duly executed as of
the date first above written.
WILLIAMS INTERNATIONAL ATL LIMITED
/s/ JOHN C. BAUMGARNER
--------------------------------
Name: John C. Baumgarner, Jr.
Title: President
On the 24TH day of March, in the year nineteen hundred and ninety nine,
before me personally came John C. Baumgarner, President of Williams
International ATL Limited, who signed his name thereto by order of the Board
of Directors of said corporation.
/s/ ANDREA GARCIA
------------------------------
Notary
My commission expires June 17, 2001
WITNESSES:
/s/ JAMES N.CUNDIFF
- ------------------------------
Name:
CPF:
/s/ SUSAN C. STRICKLAND
- ------------------------------
Name:
CPF:
On the 24th day of March, in the year nineteen hundred and
ninety nine, before me personally came James N. Cundiff to me known to be
the individual described in, and who witnessed the execution of the foregoing
instrument.
/s/ ANDREA GARCIA
----------------------------
Notary
One the 24th day of March, in the year nineteen hundred and ninety nine,
before me personally came Susan C. Strickland to me known to be the
individual described in, and who witnessed the execution of the foregoing
instrument.
/s/ ANDREA GARCIA
----------------------------
Notary
-22-
<PAGE> 24
IN WITNESS WHEREOF, the parties hereto, acting through their duly
authorized representatives, have caused this Agreement to be duly executed as of
the date first above written.
JOHI REPRESENTACOES LTDA
[ILLEGIBLE]
---------------------------------------
Name:
Title:
On the ____ day of March, in the year nineteen hundred and ninety nine,
before me personally came ______________________________, ___________ of Johi
Representacoes Ltda., who signed her/his name thereto by order of the Board of
Directors of said corporation.
---------------------------------
Notary
WITNESSES:
- ------------------------------
Name:
CPF:
- ------------------------------
Name:
CPF:
One the ___ day of March, in the year nineteen hundred and
ninety nine, before me personally came ______________________ to me known to be
the individual described in, and who witnessed the execution of the foregoing
instrument.
----------------------------
Notary
One the ___ day of March, in the year nineteen hundred and ninety nine,
before me personally came ______________________ to me known to be the
individual described in, and who witnessed the execution of the foregoing
instrument.
----------------------------
Notary
-23-
<PAGE> 25
IN WITNESS WHEREOF, the parties hereto, acting through their duly
authorized representatives, have caused this Agreement to be duly executed as of
the date first above written.
ATL-ALGAR TELECOM LESTE S.A.
/s/ [ILLEGIBLE]
--------------------------------
Name:
Title: Attorney-in-fact
On the ___ day of March, in the year nineteen hundred and ninety nine,
before me personally came ______________________________, ___________ of
ATL-ALGAR Telecom Leste S.A., who signed her/his name thereto by order of the
Board of Directors of said corporation.
----------------------------
Notary
WITNESSES:
/s/ [ILLEGIBLE]
- ------------------------------
Name:
CPF:
/s/ [ILLEGIBLE]
- ------------------------------
Name:
CPF:
One the ___ day of March, in the year nineteen hundred and
ninety nine, before me personally came ______________________ to me known to be
the individual described in, and who witnessed the execution of the foregoing
instrument.
--------------------------
Notary
One the ___ day of March, in the year nineteen hundred and ninety nine,
before me personally came ______________________ to me known to be the
individual described in, and who witnessed the execution of the foregoing
instrument.
-------------------------
Notary
-24-
<PAGE> 26
Schedule 3.1(a)
DUE ORGANIZATION: DUE QUALIFICATION: REQUISITE POWER
----------------------------------------------------
As of the date of this Share Purchase Agreement, the Company is in compliance
with all material provisions of its By-laws except with respect to the following
matters:
1. The Company has obtained importation credit in the amount of R$628,688.28
from International Importacao e Exportacao Ltda, by a purchase order for
certain equipment, signed on June 26, 1998 by Julio Cesar Pinto, Chief
Financial Officer of the Company. According to Article 20 of the Company's
By-laws, two officers' signatures were required.
The Company has all governmental licenses, permits and other approvals necessary
to operate its properties and carry on its business except for those licenses
and approvals described on Schedule 3.1(d).
<PAGE> 27
Schedule 3.1(d)
AUTHORIZATIONS AND APPROVALS NOT OBTAINED
-----------------------------------------
1. Cell Site Anatel Licenses: See attached Appendix 1 of cell sites for which
Anatel licenses are pending approval.
2. Cell Site Building Permits: Construction/installation/operation permits
("alvaras") were not obtained for some cell sites (see Appendix I hereto
for list of ell sites). These alvaras will not be obtained because the
construction phase of the cell sites has already terminated.
3. Cell Site Safety and Occupancy Permits: These permits ("habite-se") are
pending for all the cell sites (see attached Appendix 1 for list of cell
sites).
4. License from the Ministry of Aeronautics ("COMAR") for all cell sites. This
license is required to show that the signals and frequencies produced by
the cell sites do not interfere with course control devices of airplanes.
Currently, none of the cell sites are licensed (see Appendix 1).
5. Central Bank: The Registration Certificates of the foreign capital held by
Williams International Telecom Limited ("WITL"). Williams International ATL
Limited (as transferee of WITL's entire interest in the Company) and
SKTI-US, LLC have not yet been issued.
6. Network Interconnection: The following executed Network Interconnection
Agreements, by their respective terms, are not deemed to be in effect until
ratification ("homologacao") of the agreements has been granted by ANATEL.
Applications for such ratifications have been submitted and are pending
before ANATEL. Under its own regulations, ANATEL cannot interfere with or
impede interconnection of its concessionaires with networks necessary for
the concessionaires' operations; therefore, the parties are acting under
the agreements despite ANATEL'S delay in formally ratifying the agreements.
a. Network Interconnection Agreement with Empresa Brasileira de
Telcommunicacoes S.A. - Embratel. Aug. 16, 1998.
b. Network Interconnection Agreement with Telerj Celular S/A, Aug.
28, 1998
c. Network Interconnection Agreement with Telest Celular S/A, Aug.
28, 1998
d. Network Interconnection Agreement with Telerj S/A, Aug. 11, 1998
e. Network Interconnection Agreement with Telest S/A, Sept. 13, 1998.
<PAGE> 28
7. INPI - The Company is party to the following agreements which are pending
registration at the Industrial Property Institute of Brazil ("INPI"). INPI
registration is necessary to remit royalties abroad and to deduct the
royalty payments as an expense for tax purposes.
a. Software License and Services Agreement with Amdocs(UK) Limited,
dated June 12, 1998.
b. Technology Support Agreement among SKTI, LLC, the Company, Lightel
S.A.- Tecnologia da Informacao and Williams International Telecom
Limited, dated March 26, 1998.
<PAGE> 29
Schedule 3.1 (n)
MATERIAL CONTRACTS
------------------
I. Material Contracts of ATL-Cayman International:
As of the date of the Share Purchase Agreement, the Borrower is not party to
any Material Contracts except for the Loan Documents to which it is party.
II. Material Contracts of ATL-Algar Telecom Leste S.A.
A. As of the date of the Share Purchase Agreement, the Company is not a party
to any Material Contract except for the Loan Documents to which it is party and
the following agreements:
1. Concession Agreement between the Company and ANATEL, dated April 1,
1998, for a term of fifteen (15) years from date of agreement,
renewable for equal periods. Governs the exercise by the Company of
its concession rights to operate a cellular telephone service in Area
3 of the concession areas created by ANATEL in the States of Rio de
Janeiro and Espirito Santo.
2. Technology Support Agreement between the Company, SKTI,LLC, and, as
intervening parties, Lightel S.A. - Tecnologia da Informacao, and
Williams International Telecom Limited, dated March 26, 1998, for a
term of five (5) years from date of agreement. Governs the supply of
technology by SKTI,LLC to the company.
3. Supply and Implementation Agreement between the Company and Ericsson
Telecomunicacoes S.A., dated September 4, 1998, for a term of five (5)
years from date of agreement. Governs the supply by Ericsson
Telecomunicacoes S.A. of a cellular system to the Company for the
states of Rio de Janeiro and Espirito Santo.
4. Services Supply Contract between the Company and Ericsson
Telecomunicacoes S.A., dated September 4, 1998, for a term of five
(5) years from date of agreement. Governs the supply by Ericsson
Telecomunicacoes S.A. of technical assistance to the Company in
relation to the technology supplied under the agreement in item 3.
5. Network Operation and Maintenance Services Agreement between the
Company and Ericsson Telecomunicacoes S.A., dated September 4, 1998,
for a term of 24 months from the date of the agreement, automatically
extended for periods of a year each. Governs the supply by Ericsson
Telecomunicacoes S.A. to the Company of operation and maintenance
services related to its cellular system supplied under the agreement
described in item 3.
<PAGE> 30
6. Site Acquisition Agreement between the Company and Ericsson
Telecomunicacoes S.A., dated September 4, 1998, for a term equal to
that of the agreement described in item 3. Governs Ericsson
Telecomunicacoes S.A.'s providing services of negotiating cell site
leases and administering all technical requirements for the design of
such sites.
7. Software License and Services Agreement between the Company and
Amdocs, dated June 12, 1998, for a term of ten (10) years from date of
agreement. Governs the granting by Amdocs to the Company of a software
license for a billing system and the supply by Amdocs to the Company
of installation, operations and maintenance services related to such
system.
8. R/3 Software License between the Company and SAP Comercio e
Representacoes Ltda, dated July 9, 1998, for an undefined term.
Governs the license of software by SAP to the Company for the
Company's financial and accounting system.
9. Technical Consulting Services Agreement between the Company and SAP
Comercio e Representacoes Ltda, dated July 9, 1998, for an undefined
term. Governs the provision by SAP to the Company of technical
services related to the operation of the system under the agreement
described in item 9 above.
10. Supply of Equipment and Services Agreement between the Company and
Hewlett-Packard Brasil S/A, dated August 20, 1998, for an undefined
term (agreement makes reference to a term in "Annex I" which does not
contain any provision regarding term). Governs the supply of and
technical and maintenance services and related equipment related to
the majority of the personal computers in the Company's offices.
11. Network Interconnection Agreement between the Company and Empresa
Brasileira de Telecomunicacoes S.A. - Embratel, dated July 16, 1998,
for a term to last until either party's concession is terminated.
Governs the Company's interconnection and access to a cellular
telephone network.
12. Network Interconnection Agreement between the Company and Telerj
Celular S/A (with Tele Sudeste Celular Participacoes S.A. signing as
intervening party), dated July 28, 1998, for a term to last until
either party's concession is terminated. Governs the Company's
interconnection and access to a cellular telephone network.
13. Network Interconnection Agreement between the Company and Telest
Celular S/A (with Tele Sudeste Celular Participacoes S.A. signing as
intervening party), dated July 28, 1998, for a term to last until
either party's concession is
<PAGE> 31
terminated. Governs the Company's interconnection and access to a cellular
telephone network.
14. Network Interconnection Agreement between the Company and Telerj S/A (with
Tele Norte Leste Participacoes S.A. signing as intervening party), dated
August 11, 1998, for a term to last until either party's concession is
terminated. Governs the Company's interconnection and access to a cellular
telephone network.
15. Network Interconnection Agreement between the Company and Telest S/A (with
Tele Norte Leste Participacoes S.A. signing as intervening party), dated
August 13, 1998, for a term to last until either party's concession is
terminated. Governs the Company's interconnection and access to a cellular
telephone network.
16. Infrastructure Sharing Agreement between the Company and Embratel S.A.,
dated November 3, 1998, for a term of three (3) years as from the date of
the agreement. Governs the parties' mutual use of certain parts of their
respective cellular telephone network equipment and networks.
17. Clearinghouse Services Agreement between the Company and Embratel, S.A.,
dated July 28, 1998, for a term of three (3) years form the date of the
agreement. Governs the centralization and processing of charges for the
Company's use of different operators' cellular networks.
18. Services Agreement between the Company and Andersen Consulting do Brasil
Ltda., dated August 13, 1998, for a term from June 1, 1998 to February 28,
1999. Governs the provision of customer care and billing services by
Andersen to the Company.
19. Loan Agreement between the Company and Lightel S/A - Tecnologia da
Informacao, dated April 1, 1998, for a loan from Lightel up to the principal
amount of R$50,000,000.00 (fifty million reals), and all amendments
thereto, dated September, October, November and December, 1998 (providing
for interest rate readjustment). This agreement provided for payment to be
due on January 27, 1999. However, on January 27, 1999, the outstanding
amount due was consolidated with amounts due under a verbal loan
arrangement, which has no specified term or payment date, with Algar S/A
Empreendimentos e Participacoes. See the amount corresponding to "Algar" on
Schedule 3.9 for the consolidated outstanding debt related to this
agreement.
20. Agreement for Equipment Purchase and Supply of Consulting and
Installation Services, and Software License, between the Company and Lucent
Technologies Brasil Ltda., dated June 30, 1998, for an undefined term.
Governs the license of software, provision of equipment, and consulting and
installation service by Lucent to the Company.
<PAGE> 32
21. Term of Participation ("Termo de Ingresso") in the Cooperative
Arrangement ("Convenio") and in the Agreement for Use of Roaming
between the Company and Telerj Celular S/A, dated October 16, 1998, for
the same term as the Convenio (which is three (3) years from March 25,
1998, automatically renewable for equal periods of one (1) year).
Permits the Company to enter the cooperative arrangements for roaming
among other telephone networks.
22. "Internet IP Direct," Access and Dedicated Line Services Agreement
entered into with Empresa Brasileira de Telecomunicacoes S.A. -
Embratel, dated July 3, 1998, for an undefined term. Governs the use by
the Company of an exclusive telephone line for internet access.
B. Exceptions to due execution of Material Contracts
1. To the knowledge of the Company, all of the agreements under Section
II.A have been duly executed by all parties thereto, except for
agreement (11), which is missing the signature of Hewlett-Packard
Brasil S/A.
2. In addition, the Company is currently using and paying for exclusive
telephone line service (for internet access) with Telecomunicacoes do
Estado do Espirito Santo S.A. e Telecomunicacoes do Estado do Rio de
Janeiro S.A., although written agreements with such parties are still
being negotiated.
C. Exceptions to Enforceability
1. The following agreements under Section II.A above have not been signed
by two witnesses: (7), (8), (11), Exhibit 7 to agreement (13)
(Confidentiality Agreement), Exhibit 7 to agreement (16)
(Confidentiality Agreement), and (17). Under Brazilian law, any
agreement, with or without two witness' signatures, will be fully
enforceable extra-judicially and in ordinary judicial proceedings.
However, if the agreement provides for a certain price or sum to be
paid thereunder and a party thereto wishes to enforce such payment
provision, the agreement will not be eligible for enforcement through
summary proceedings unless it contains two witnesses' signatures.
2. The following documents are lacking formalities for enforcement under
Brazilian law: all exhibits to agreement (11) (neither dated, nor
initialed) and Exhibit 7 to agreement (15) (undated).
D. Material Contract Defaults
<PAGE> 33
Schedule 3.4(a)
DUE ORGANIZATION; DUE QUALIFICATION; REQUISITE POWER
----------------------------------------------------
As of the date hereof Johi Representacoes Ltda has all governmental licenses,
permits and other approvals necessary to own or lease and operate its properties
and to carry on its business as now conducted and as proposed to be conducted.
<PAGE> 34
Schedule 3.4(d)
NO AUTHORIZATIONS OR APPROVALS
------------------------------
As of the date hereof, no authorization or approval, consent or other Action by,
and no notice to, recordation with or filing with any governmental Authority or
any other Person is required in connection with the due execution, delivery,
performance, recordation, filing, legality, validity, admissibility in evidence
or enforceability of the Johi Agreements (other than the Johi Amendment which
shall be registered within the board of trade), as well as the Power of Attorney
thereby.
<PAGE> 35
Schedule 3.4(j)
MATERIAL CONTRACTS
------------------
As of the date hereof, Johi Representacoes Ltda is not party to any Material
Contract, except for the Transaction Agreements to which it is party.
<PAGE> 36
The company is aware of no material default under any of the Material Contracts
except for agreements (3) and (7) under Section II.A. above. Under Section 15.I
of agreement (3), Ericsson Telecomunicacoes S.A. ("Ericsson") agreed to deliver
5 mobile switch centers, 1 home location registry (client profile database) and
245 cell sites, all fully operational, by December 15, 1998. As of December 15,
1998, Ericsson had delivered only 2 mobile switch centers, one home location
registry and 14 cell sites. Under Section 2 of agreement (7), Ericsson agreed to
submit to ATL-Algar for review, by September 20, 1998, lease agreements related
to the cell sites and mobile switch centers to be delivered under agreement (3).
As of December 15, 1998, Ericsson had submitted only 90 lease agreements to
ATL-Algar for review.
<PAGE> 1
Redacted portions have been marked with asterisks (****). Confidential treatment
has been requested for the redacted portions. The confidential redacted portions
have been filed separately with the Securities and Exchange Commission.
EXHIBIT 10.10
CONFIDENTIAL TREATMENT
Proprietary and Confidential
MASTER ALLIANCE AGREEMENT
BETWEEN
SBC COMMUNICATIONS INC.
AND
WILLIAMS COMMUNICATIONS, INC.
THIS MASTER ALLIANCE AGREEMENT (this "Agreement") between Williams
Communications, Inc. ("Williams"), a Delaware corporation, and SBC
Communications Inc., a Delaware corporation, ("SBC"), is effective February 8,
1999 ("Effective Date"). Williams and SBC are individually referred to, together
with their respective Affiliates, as a "Party" and collectively referred to as
the "Parties." Persons or entities that SBC or Williams Controls are referred to
as "Affiliates" of such Controlling Party. Unless the context specifically
requires otherwise, the use of "SBC" or "Williams" shall be deemed to include
the respective Affiliates of such Party.
RECITALS
WHEREAS, SBC directly or through its Affiliates provides intraLATA
telecommunications, exchange access, information access, network management,
networking services and network analysis in certain regions of the United
States;
WHEREAS, SBC directly or through its Affiliates is a regional provider of
business communications equipment and integration services for data, voice,
video and advanced applications;
WHEREAS, SBC has entered into an Agreement and Plan of Merger (the "Ameritech
Merger") with Ameritech Corporation ("Ameritech") under which SBC will, subject
to regulatory approvals, merge with Ameritech;
WHEREAS, SBC directly or through its Affiliates desires to offer its customers
global solutions for their voice, data, video and advanced application
communications needs, and, following the close of the Ameritech Merger, to
implement a plan to compete in the 50 top markets in the U.S. and in various key
markets outside the U.S.;
WHEREAS, Williams directly or through its Affiliates is a nationwide, single
source provider of business communications equipment and integration services
for data,
<PAGE> 2
Proprietary and Confidential
voice, video and advanced applications on a retail basis and a provider of
network services for delivery of voice and data on a wholesale basis;
WHEREAS, Williams wishes to achieve additional geographic reach and economies of
scale that will enable Williams to lower its costs, increase its ability to
compete with established networks, and accelerate its construction program in
the wholesale market for voice and data network services;
WHEREAS, the capabilities of each Party are complementary, and the relationship
contemplated by this Agreement (the "Alliance") will serve to broaden the base
of potential competitive opportunities for network services and other
applications for all market segments;
WHEREAS, SBC directly or through its Affiliates intends to become a leading
global retail provider of differentiated data, voice, video, Internet, local
access and long distance products and services to national and multinational
business customers and to residential customers by means of the Ameritech merger
and by cooperatively building with Williams a world class supporting network
architecture and developing products and services which make use of this
network's infrastructure;
WHEREAS, through this joint Alliance undertaking, the Parties intend to
collaborate regarding their deployment of modern, high-speed, sophisticated
telecommunications capabilities through the cooperative deployment of facilities
as graphically described in Exhibit A hereto that will be designed to carry
voice and data on a nationwide and global basis and to facilitate SBC's ability
to implement its national/local strategy and assist Williams in deploying its
wholesale network;
WHEREAS, the Parties or their Affiliates are entering into a series of
additional agreements to implement the Alliance;
WHEREAS, the Parties are entering into this Master Alliance Agreement to set
forth general provisions concerning the Alliance; and
WHEREAS, the Parties intend that the activities of the Alliance shall be
conducted to ensure that the Parties comply in all respects with the
Telecommunications Act of 1996 (the "Act") and that SBC and its Affiliates
engage only in activities permitted by the Act.
NOW THEREFORE, in consideration of the mutual covenants herein contained, and
subject to SBC's and Williams' respective Affiliates' contractual obligations
with third parties and to any applicable federal or state laws or regulations,
SBC and Williams agree as follows:
-2-
<PAGE> 3
Proprietary and Confidential
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. TABLE OF DEFINED TERMS......................................................................................8
2. REGULATORY COMPLIANCE.......................................................................................9
3. RELATIONSHIP OF THE PARTIES.................................................................................9
3.1. ALLOCATION OF RESPONSIBILITIES...........................................................................9
3.2. OPERATIONS SUPPORT SYSTEMS..............................................................................10
3.3. PREFERRED PROVIDER......................................................................................11
3.4. PRICING OF PRODUCTS AND SERVICES........................................................................11
3.5. FUTURE SERVICES.........................................................................................12
3.6. INVESTMENT OBLIGATION...................................................................................13
3.7. USE OF FACILITIES.......................................................................................13
3.8. LOCAL ACCESS............................................................................................13
3.9. OWNERSHIP AND CONTROL...................................................................................13
4. GOVERNANCE.................................................................................................14
4.1. ALLIANCE MANAGEMENT.....................................................................................14
4.2. OFFICER REVIEW BOARD....................................................................................14
4.3. ALLIANCE COUNCIL........................................................................................15
4.4. COMMITTEES..............................................................................................15
4.5. REGULATORY REQUIREMENTS.................................................................................18
4.6. MEETINGS................................................................................................18
4.7. TIMING AND NOTICE.......................................................................................18
4.8. QUORUM..................................................................................................18
4.9. PARTICIPATION...........................................................................................18
4.10. UNANIMOUS VOTE..........................................................................................19
5. PROJECTS...................................................................................................19
</TABLE>
-3-
<PAGE> 4
Proprietary and Confidential
<TABLE>
<S> <C>
5.1. CLASSIFICATION AND SCOPE OF WORK........................................................................19
5.2. NO ARBITRATION..........................................................................................19
5.3. FURTHER COOPERATION.....................................................................................20
6. MANDATORY PROJECTS.........................................................................................20
6.1. DESIGNATION BY PROJECT SPONSOR..........................................................................20
6.2. COMPENSATION OF PROJECT EXECUTOR........................................................................20
6.3. EXCEPTIONS..............................................................................................21
6.4. INTELLECTUAL PROPERTY...................................................................................21
6.5. ACCOUNTING..............................................................................................21
7. ALLIANCE MANAGERS AND DEDICATED EMPLOYEES..................................................................21
7.1. ALLIANCE MANAGERS.......................................................................................21
7.2. DEDICATED EMPLOYEES.....................................................................................22
8. AUDIT RIGHTS...............................................................................................23
8.1. AUDIT...................................................................................................23
8.2. INITIATION..............................................................................................23
8.3. ENGAGEMENT OF AUDITOR...................................................................................23
8.4. COOPERATION.............................................................................................24
8.5. REPORT..................................................................................................24
8.6. COST....................................................................................................24
9. DISPUTE RESOLUTION.........................................................................................24
9.1. DISPUTES................................................................................................24
9.2. REFERRAL TO CEO.........................................................................................25
9.3. CONFIDENTIALITY OF NEGOTIATIONS.........................................................................25
9.4. ARBITRATION.............................................................................................25
9.5. ARBITRATORS.............................................................................................25
9.6. COSTS AND FEES..........................................................................................26
</TABLE>
-4-
<PAGE> 5
Proprietary and Confidential
<TABLE>
<S> <C>
9.7. BURDEN OF PROOF.........................................................................................26
9.8. AWARD...................................................................................................26
9.9. AGREEMENT CONTROLS......................................................................................26
10. CONFIDENTIAL INFORMATION...................................................................................26
10.1. GENERAL.................................................................................................26
10.2. OBLIGATION TO PROTECT PROPRIETARY INFORMATION...........................................................27
10.3. JUDICIAL OR ADMINISTRATIVE PROCEEDINGS..................................................................27
10.4. LOSS OR UNAUTHORIZED USE................................................................................27
10.5. PROPRIETARY INFORMATION EXCHANGE AGREEMENTS.............................................................27
10.6. NONDISCLOSURE AGREEMENTS................................................................................28
10.7. TERMINATION.............................................................................................28
10.8. IRREPARABLE INJURY BY DISCLOSURE TO COMPETITORS.........................................................28
10.9. SURVIVAL OF NONDISCLOSURE OBLIGATIONS...................................................................28
11. ADDITIONAL COVENANTS.......................................................................................28
11.1. INSURANCE...............................................................................................28
11.2. NO SOLICITATION.........................................................................................29
12. TERMINATION AND TRANSITION.................................................................................29
12.1. GENERAL.................................................................................................29
12.2. NEGOTIATIONS............................................................................................30
12.3. COMPENSATION............................................................................................31
12.4. USAGE RELATED TRANSITION COSTS..........................................................................32
12.5. APPLICATION TO ALL AGREEMENTS...........................................................................32
12.6. SECTION 271 AUTHORIZATION...............................................................................32
12.7. LONG DISTANCE TRANSPORT ASSETS..........................................................................33
12.8. REGULATORY FRUSTRATION..................................................................................33
13. REPRESENTATIONS AND WARRANTIES OF SBC......................................................................33
</TABLE>
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<TABLE>
<S> <C>
13.1. ORGANIZATION, STANDING AND AUTHORITY....................................................................33
13.2. NO VIOLATION............................................................................................34
13.3. CONSENTS AND APPROVALS..................................................................................34
14. REPRESENTATIONS AND WARRANTIES OF WILLIAMS.................................................................34
14.1. ORGANIZATION, STANDING AND AUTHORITY....................................................................34
14.2. NO VIOLATION............................................................................................35
14.3. CONSENTS AND APPROVALS..................................................................................35
15. GENERAL PROVISIONS.........................................................................................35
15.1. FURTHER AGREEMENTS......................................................................................35
15.2. ASSIGNMENT..............................................................................................35
15.3. TERMINATION OF MOU......................................................................................36
15.4. FORCE MAJEURE...........................................................................................36
15.5. THIRD PARTY WARRANTIES..................................................................................36
15.6. COSTS AND EXPENSES......................................................................................36
15.7. AMENDMENT...............................................................................................37
15.8. HEADINGS................................................................................................37
15.9. PUBLICITY...............................................................................................37
15.10. EXECUTION...............................................................................................37
15.11. TERM....................................................................................................37
15.12. LIMITATION OF LIABILITY.................................................................................37
15.13. RELATIONSHIP OF PARTIES.................................................................................38
15.14. NOTICES.................................................................................................38
15.15. SEVERABILITY............................................................................................39
15.16. GOVERNING LAW...........................................................................................39
15.17. RULES OF CONSTRUCTION...................................................................................39
15.18. PROVISIONS APPLICABLE TO OTHER ALLIANCE AGREEMENTS......................................................39
</TABLE>
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EXHIBIT A: NETWORK DIAGRAM
EXHIBIT B: EXISTING AGREEMENTS
EXHIBIT C: NETWORK DEVELOPMENT AND OPERATIONS AGREEMENT
EXHIBIT D: PLATFORM SERVICES AGREEMENT
EXHIBIT E: TRANSPORT SERVICES AGREEMENT
EXHIBIT F: SALES AND MARKETING AGREEMENT
EXHIBIT G: INTERNATIONAL SERVICES AGREEMENT
EXHIBIT H: CONSULTING SERVICES AGREEMENT
EXHIBIT I: CPE INSTALLATION AND MAINTENANCE AGREEMENT
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1. TABLE OF DEFINED TERMS
<TABLE>
<CAPTION>
Term Page
- ---- ----
<S> <C>
AAA..............................................................................................................25
Accepted Project.................................................................................................19
Act...............................................................................................................2
Affected Party...................................................................................................36
Affiliates........................................................................................................1
Agreement.........................................................................................................1
Alliance..........................................................................................................2
Alliance Agreements...............................................................................................9
Alliance Council.................................................................................................15
Alliance Manager.................................................................................................21
Alliance Pricing.................................................................................................11
Ameritech.........................................................................................................1
Ameritech Merger..................................................................................................1
Audit............................................................................................................23
Audited Party....................................................................................................23
Auditor..........................................................................................................23
Base Load........................................................................................................32
CEO..............................................................................................................25
Committees.......................................................................................................15
Control..........................................................................................................30
Cost Plus Model..................................................................................................11
Dedicated Employees..............................................................................................22
Dispute..........................................................................................................24
Dispute Notice...................................................................................................25
Effective Date....................................................................................................1
FCC...............................................................................................................9
Governmental Entity..............................................................................................34
Initiating Party.................................................................................................23
In-region States.................................................................................................10
ISA...............................................................................................................9
Mandatory Project................................................................................................19
Meetings.........................................................................................................18
MFN Pricing......................................................................................................12
NDOA..............................................................................................................9
Officer Review Board.............................................................................................14
OSS..............................................................................................................10
Party.............................................................................................................1
Project..........................................................................................................19
Project Executor.................................................................................................20
Project Sponsor..................................................................................................19
PSA...............................................................................................................9
</TABLE>
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<TABLE>
<S> <C>
SBC...............................................................................................................1
SBC ILEC.........................................................................................................13
SBC Transition Costs.............................................................................................31
Supplied Party...................................................................................................11
Supplying Party..................................................................................................10
TSA...............................................................................................................9
TSA Capacity.....................................................................................................12
Williams..........................................................................................................1
Williams Transition Costs........................................................................................32
</TABLE>
2. REGULATORY COMPLIANCE
The Parties acknowledge that the activities and relationships addressed by the
Alliance are subject to federal and state statutes and regulations, including
without limitation the Act and the regulations promulgated by the Federal
Communications Commission ("FCC"). Notwithstanding anything to the contrary
contained in any Alliance Agreement, the Parties will not take any action in
connection with the Alliance which would constitute a violation of applicable
law or take an action which requires FCC or other approval without first
obtaining such approval.
3. RELATIONSHIP OF THE PARTIES
3.1. Allocation of Responsibilities
3.1.1. Agreements
The Parties or their Affiliates are entering into the following
agreements to implement the Alliance, in addition to this
Agreement: (1) a Network Development and Operations Agreement
("NDOA"), (2) a Platform Services Agreement ("PSA"), (3) a
Transport Services Agreement ("TSA"), (4) a Sales and Marketing
Agreement, (5) an International Services Agreement ("ISA"), (6)
Consulting Services Agreements, and (7) a CPE Installation and
Maintenance Agreement. Collectively, those Agreements, together
with this Agreement, are referred to as the "Alliance Agreements."
Copies of the other Alliance Agreements are attached to this
Agreement as Exhibits C through I.
3.1.2. Primary Responsibilities
Pursuant to the Alliance Agreements, in general (a) Williams will
provide transport and switching services in accordance with the
TSA, (b) SBC will provide platforms and related services in
accordance with the PSA and international wholesale services in
accordance with the ISA, (c) Williams and SBC will cross-market
each others' services and (d) SBC and Williams will mutually
develop new features and functions and
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geographical expansions of their telecommunications facilities and
associated services contemplated by this Alliance as follows: (i)
SBC will be primarily responsible for designing and building
platforms as set forth in the PSA; (ii) SBC and Williams will
jointly design and plan switch capabilities, depending upon the
nature of the switches and the time that the switches need to be
deployed in accordance with the NDOA; (iii) Williams shall be
primarily responsible for building and installing the switches and
developing domestic interLATA transport capabilities in accordance
with the TSA; (iv) SBC will be primarily responsible for
developing international transport capabilities in accordance with
the ISA; (v) Williams will be primarily responsible for ordering,
provisioning, engineering, capacity management and operations
management in accordance with the TSA; and (vi) SBC will be
primarily responsible for providing local access services in all
portions of the United States other than In-region States to the
extent SBC offers such services in the future. The term "Supplying
Party" means (a) Williams as to the products and services
described in clauses (a), (d)(iii) and (d)(v) of the preceding
sentence, (b) SBC as to the products and services described in
clauses (b), (d)(i), (d)(iv), and d(vi) of the preceding sentence,
and (c) Williams or SBC as appropriate as to their respective
products and services described in clause (d)(ii) of the preceding
sentence.
3.1.3. InterLATA Services
Until SBC or its Bell operating company Affiliates (including in
the future Ameritech and other prospective Affiliates) have
authority to offer interLATA service in SBC's in-region states
("In-region States" as defined in Section 271(i)(l) of the Act),
and for so long as the Parties shall agree thereafter, only
Williams will be able to serve as a provider of originating
interLATA services in SBC's In-region States and no such services
shall be provided by SBC.
3.1.4. IntraLATA Services - In-region States
SBC or its Bell operating company Affiliates own and manage
intraLATA voice and data networks in SBC's In-region States. While
SBC will work with Williams to utilize SBC's intraLATA assets to
achieve network efficiencies, SBC will maintain absolute
discretion vis-a-vis Williams with regard to all aspects of the
current and future transport networks that SBC or its Affiliates
own in SBC's In-region States for such intraLATA networks; and
3.2. Operations Support Systems
SBC and Williams will jointly develop Operations Support Systems ("OSS") to
manage, operate, and maintain the telecommunications facilities and
associated
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services contemplated by this Alliance and provide world class billing and
customer network management tools.
3.3. Preferred Provider
The Parties will endeavor to ensure that the telecommunications
facilities and associated services contemplated by this Alliance are
constructed and operated in the most cost efficient manner possible. If
either SBC or Williams has been designated the Supplying Party for a
product or service, then whenever the other Party needs such product or
service (the "Supplied Party"), such Supplied Party will seek to obtain
the needed product or service from the Supplying Party. In such case,
the Supplying Party shall, except as set forth in Section 3.7 hereof
and subject to existing contracts and arrangements with third parties
in existence as of the date hereof and as set forth on Exhibit B, in
all cases be the provider to the Supplied Party of the products or
services so long as the Supplying Party is offering Alliance Pricing,
quality comparable to competitive products and services, and
commercially reasonable terms and conditions to the Supplied Party.
3.4. Pricing of Products and Services
3.4.1. Alliance Pricing
Unless otherwise provided in other Alliance Agreements, the
Supplying Party will make its products and services available
to the Supplied Party at its direct cost plus a reasonable
rate of return as described in this Section 3.4.1 and as may
be further specified in particular Alliance Agreements (the
"Cost Plus Model"), and subject to MFN Pricing as described in
Section 3.4.3 (collectively, "Alliance Pricing"). In this
context, "Cost" is intended to represent the ****. Direct
costs may either be costs that are directly attributable to
the provision of the product or service or, in the case of
costs that may reasonably apply across multiple products, an
allocation of those common costs. Only the direct costs
attributable to the sale of products and service to the
Supplied Party shall be included in the Cost Plus Model. As
set forth in Section 4.4.8, the Finance Committee shall
oversee and approve the methods for determining the Parties'
cost, including approving the chart of accounts and cost
centers for tracking costs and all changes thereto. The
Finance Committee shall also approve the allocation
methodology for assigning common costs to individual products
and services. Allocations of **** shall not be included as
direct product costs. Each Supplying Party shall offer
Alliance Pricing to designated Affiliates of the Supplied
Party. In addition, as to the local access services described
in clause 3.1.2(d)(vi), the Parties will negotiate a "cap" on
the prices in the applicable Cost Plus Model.
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3.4.2. Competitor's Pricing
The Supplied Party shall not be obligated to purchase a
product or service from the Supplying Party unless the offered
price is as low as the lowest price for which the Supplied
Party can acquire the product or service from third parties
with similar terms and conditions. In addition, the Supplying
Party will discuss with the Supplied Party any issues
pertaining to the pricing of products and services to be
provided to the Supplied Party compared to the market price
for comparable products and services otherwise available to
the Supplied Party to ensure that competitive pricing is
maintained.
3.4.3. MFN Pricing
**** Each quarter (or more frequently if the Parties agree)
the Supplying Party will review its pricing to the Supplied
Party hereunder and will certify to the Supplied Party that it
is in compliance with its obligation to offer MFN Pricing to
the Supplied Party, and will to the maximum extent permitted
by law and contractual agreements describe to the Supplied
Party the pricing under its contracts with third parties.
3.4.4. SBC Domestic Wholesale Entry
If SBC resells the transport capacity acquired from Williams
pursuant to the TSA ("TSA Capacity") by means of a wholesale
distribution channel or similar business structure that is
principally established or maintained for the purpose of
offering the TSA Capacity to customers located in the United
States that are primarily engaged in the business of
distributing transport capacity to other third parties (e.g.,
carriers), then Williams shall no longer be bound to offer
Alliance Pricing to SBC with respect to such resold TSA
Capacity.
3.5. Future Services
The Parties recognize that the telecommunications industry is
undergoing dramatic transformation due to radical technological
improvements and regulatory developments. Thus, notwithstanding the
Alliance Pricing system set forth in this Section, subject to
regulatory restraints, the Parties will develop a mechanism to pass
through to each other the benefits of increased efficiencies (e.g., due
to technology development or regulatory evolution) and of reduced unit
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costs created by the volume of traffic each places on the other's
network or other agreed upon factors in accordance with the Alliance
Agreements.
3.6. Investment Obligation
Except for those Projects which the Supplied Party will build or pay
for as a Mandatory Project, the Supplied Party will not be required to
make any initial capital or ongoing investment beyond the commitment of
business pursuant to the Alliance Pricing system and the Alliance
Agreements.
3.7. Use of Facilities
Nothing in any Alliance Agreement shall be construed to prohibit (i)
either Party from using its own facilities or services owned as of the
Effective Date or (ii) SBC from using its switching facilities or its
owned transport facilities in any In-region State, regardless of
whether such facilities are acquired now or in the future, for any
purpose in lieu of using Williams' facilities.
3.8. Local Access
Subject to any existing contractual obligations of Williams or its
Affiliates' with third parties, if an SBC Affiliate providing local
exchange services (an "SBC ILEC") is available to provide local access
(including switching and local transport), then in such SBC ILEC's
territory:
3.8.1. SBC may designate its local access provider of choice for (i)
any local access service used exclusively for traffic
originated by SBC or its customers; or (ii) any trunk group
carrying switched voice traffic where SBC (including its
customers) provides 75% or more of the minutes of use carried
by such trunk group. It is anticipated, but not required, that
in the ordinary course SBC will designate the SBC ILEC for use
by Williams so long as such SBC ILEC has network capacity
available. However, nothing herein shall in any way prevent
SBC from designating another local access provider.
3.8.2. In all other circumstances Williams shall use local access
services provided by an SBC ILEC unless either (i) that ILEC's
tariffed rate or other legally permissible price for such
access product is greater than the Alliance Price for such
access services; or (ii) the access service is used
exclusively for traffic originated by a party other than SBC
or its customers and that party specifically requests the use
of another access provider.
3.8.3. Williams will enter into separately negotiated agreements with
each SBC ILEC that, subject to all applicable regulatory
requirements, will permit Williams to meet its commitments
hereunder.
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3.8.4. In the event of any dispute regarding compliance by Williams
with its obligations pursuant to Section 3.8, the burden of
proof shall be on SBC to demonstrate that its tariffed rate or
other legally permissible price for local transport is equal
to or less than the Alliance Price for such service.
3.8.5. Nothing in any Alliance Agreement shall be construed to
require that any SBC ILEC is obligated to offer any particular
pricing to Williams, to deviate from its published tariffs in
any manner, or to act contrary to any duty of
nondiscrimination or other regulatory requirement. Any
agreement separately entered into between Williams and any SBC
ILEC to acquire local access shall not be deemed an Alliance
Agreement for any purpose.
3.9. Ownership and Control
The Supplying Party will retain ownership and control of the assets
used to provide services or products to the Supplied Party and the
Supplying Party can use these assets to provide services or products to
third parties, except as prohibited in any Alliance Agreement. Williams
shall have principal responsibility for obtaining local access
services. Notwithstanding the foregoing, SBC shall have final decision
making authority regarding architectural and design decisions for local
access facilities to the extent that the access costs which Williams
will charge to SBC pursuant to the TSA will be materially adversely
affected by Williams' decisions, provided that SBC's decision does not
have a material adverse affect on Williams. Any disagreement between
the Parties regarding architectural and design decisions for local
access facilities that have, or are alleged to have, a material adverse
effect on a Party shall be a Dispute subject to the procedures of
Section 9. SBC shall designate personnel and otherwise participate in
such architectural and design decisions in a manner that ensures SBC's
compliance with all structural separation or other regulatory
requirements.
4. GOVERNANCE
4.1. Alliance Management
The Alliance shall be managed by an Officer Review Board, an Alliance
Council, Committees and Alliance Managers.
4.2. Officer Review Board
The "Officer Review Board" shall consist of 3 members appointed by SBC
and 3 members appointed by Williams and shall meet at least annually.
The Officer Review Board will monitor, adjust and set the overall goals
and objectives of the Alliance. The initial chair of the Officer Review
Board shall be appointed by SBC for a one year term, and thereafter the
Party selecting the chair shall alternate between the Parties each
year.
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4.3. Alliance Council
The "Alliance Council" shall consist of 3 members appointed by SBC and
3 members appointed by Williams. The Alliance shall be managed under
the direction of the Alliance Council, and the Alliance Council shall
have the authority to oversee, reorganize and direct the activities of
Committees (as defined below). The Alliance Council shall meet every
other month for the first twelve months, and quarterly thereafter
unless otherwise agreed by the Parties. The initial chair of the
Alliance Council shall be appointed by Williams for a one year term,
and thereafter the Party selecting the chair shall alternate between
the Parties each year.
4.4. Committees
To the extent permitted by the Act, SBC and Williams will form the
following Alliance committees and such other Alliance committees as to
which they may agree from time to time (the "Committees"): the Network
Transport and Technology Committee, the Service Delivery Committee, the
Product Development Committee, the Marketing and Sales Committee, the
Platform/Wholesale Committee, the National/Local Operations Committee,
the International Committee and the Finance Committee. New Committees
may be established and existing Committees may be disbanded by action
of the Alliance Council. Unless otherwise determined by the Alliance
Council, each Committee shall be composed of 3 representatives from
each Party. The initial chair for each Committee will serve for one
year and will be appointed by SBC except for the Network Transport and
Technology Committee, whose chair will be appointed by Williams for the
first year. After each year, the Party selecting the chair of a
Committee will alternate to the other Party.
The designated disciplines and duties of Committee's shall be as
follows:
4.4.1. Network Transport and Technology Committee
The Network Transport and Technology Committee will be
responsible for the design, planning and implementation of
global network and local access architectures and
infrastructure associated with the telecommunications
facilities and associated services contemplated by this
Alliance that are expected to be beneficial to both Parties.
The Network Transport and Technology Committee, along with the
Service Delivery Committee, is also responsible for monitoring
the status of the facilities deployed by the Parties in
furtherance of the goals of the Alliance, including data
concerning network utilization, capacity, performance, service
delivery parameters, and the status of network development on
an ongoing basis.
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4.4.2. Service Delivery Committee
The Service Delivery Committee will be responsible for
cooperatively developing common interfaces, methods and
procedures, design, planning and implementation of processes
for service activation, service assurance, capacity planning,
billing and other operational functions expected to be
beneficial to both Parties in the implementation of the
telecommunications facilities and associated services
contemplated by this Alliance. Further, the Committee will
serve as the primary vehicle for identifying and resolving
performance issues between the two entities, prioritizing
joint development, and formulating and implementing operations
strategy.
4.4.3. Product Development Committee
The Product Development Committee will be responsible to
ensure the integration of the product development processes of
each Party, and that both Parties follow a clearly defined
product development process to address new products and
services, and time to market requirements. This Committee is
committed to continued process improvement and is responsible
for business case development of new products and service. SBC
will be the party responsible for delivering the products and
services requested by both Parties with joint development of
the core infrastructure by Williams. Key components of this
agreed upon process are: marketing service descriptions,
technical service description and intercompany teams. This
Committee will agree upon required resources and timelines
around each stage of the development process. This Committee
will ensure that SBC receives Alliance Pricing on all products
and services from Williams where Williams is the Supplying
Party, and that Williams receives Alliance Pricing on products
and services from SBC where SBC is the Supplying Party.
4.4.4. Marketing and Sales Committee
The Marketing and Sales Committee will be responsible for
establishing the goals and managing the marketing and sales
process in support of these goals. In addition, this Committee
will be responsible for the evaluation, description, and
prioritization of customer service requirements. This
Committee will ensure that each Party will share what products
are available where and will ensure that these products are
competitive. This Committee will ensure that these products
are offered to potential customers. This Committee will make
recommendations as to the marketing and sales efforts in the
markets where products or services will be sold exclusively
and the markets where products or services will be the lead
products. This Committee will be the means through which SBC
has the opportunity to jointly develop and participate in the
establishment
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of commission plans. This Committee will have the
responsibility of sharing and responding to sales experience
data, including monitoring sales levels of SBC products. If
necessary, this Committee will make recommendations in order
to improve these sales results through traditional marketing
means (e.g. increasing sales incentives, decreasing price,
etc.)
4.4.5. Platform/Wholesale Committee
The Platform/Wholesale Committee will be responsible for
developing service criteria, timelines, cost issues,
architecture if switch dependent, service metrics, price
points, and procedure for deployment with the intent to ensure
that the set of services requested by Williams are clearly
defined with consistent expectations of both Parties. This
Committee will seek to optimize performance and track actual
results against expected results.
4.4.6. National/Local Operations Committee
The National/Local Operations Committee will focus on the
future deployment for SBC out of region requirements. This
will include specifying geographic and real estate
requirements for the network, and required services. These
specifications will be considered in the Platform, Network
Transport and Technology, Service Delivery, and Product
Development Committee processes. Additionally, this Committee
will determine the processes to evaluate the use of Williams
resources and time, as well as the cost, capability, and
central office based support of Williams. This Committee will
also review the performance of the National/Local Operations
against expected results and seek to optimize performance.
4.4.7. International Committee
The International Committee will focus on the future
deployment and tracking of actual performance for the Parties'
international requirements. This will include defining service
criteria, timelines, and expected results. This Committee will
also review the performance of the international operations
against expected results and seek to optimize performance.
4.4.8. Finance Committee
The Finance Committee will be responsible for: (i) approving
changes to the chart of accounts and cost centers to be
included in the Cost Plus Model as described in Section 3.4.1,
(ii) approving the method for allocating common transport or
other common costs to individual products or services, (iii)
approving cost accounting procedures for Mandatory Projects,
and (iv) coordinating any matters involving the audit
procedures set forth in Section 8. If the Finance Committee
can not agree on whether
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to include or exclude an account, cost center or other area
within the Cost Plus Model, the issue shall be resolved in
accordance with Section 9. The Finance Committee will review
the implementation of the Williams/SBC margin analysis
methodology as it develops.
4.5. Regulatory Requirements
All activities of the Officer Review Board, Alliance Council and
Committees shall be conducted, and the SBC representatives shall be
selected, to ensure that SBC and its Affiliates are in full compliance
with all regulatory requirements imposed upon SBC or its Affiliates
regarding nondiscrimination, network disclosure, structural separation,
or other matters insofar as they relate to the activities of the
Alliance.
4.6. Meetings
The Committees will meet quarterly (or as otherwise agreed by the
Parties) to discuss issues, review performance, develop scope of work
documents for proposed Projects (as hereinafter defined) and make
Project decisions within their designated disciplines. A process will
be determined to resolve any issues that may arise if one Party
requests services that are inconsistent with the other Party's ability
to deliver such services.
4.7. Timing and Notice
The Chairman of the Officer Review Board, of the Alliance Council and
of each Committee shall determine the time and place for meetings
between the appointed representatives from each Party ("Meetings").
Meetings may also be called upon the agreement of any two members
provided that such two members were not appointed by the same Party.
Except in the event of an emergency, the Chairman or members calling a
Meeting shall provide each Committee member with at least 14 days
advance written notice of the time, place and agenda for such Meeting.
No matter shall be finally determined at any Meeting unless the matter
was included in the agenda distributed with the notice for that Meeting
and described with sufficient particularity to reasonably disclose the
nature and importance of the matter.
4.8. Quorum
Two members not appointed by the same Party shall constitute a quorum
for any Meeting.
4.9. Participation
Members may participate in a Meeting by teleconference or designate an
alternate member to participate in a Meeting on their behalf upon prior
written notice to the Chairman or members who called the Meeting.
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4.10. Unanimous Vote
The Officer Review Board, Alliance Council and Committees shall act
only by the unanimous vote of all members participating in a Meeting
upon a resolution submitted in writing, following those members'
consultation with the Alliance Manager appointed by the same Party,
except that a Mandatory Project may be undertaken at the initiative of
one Party as described below.
5. PROJECTS
5.1. Classification and Scope of Work
A "Project" is a task pertaining to the telecommunications facilities
and services contemplated by the Alliance that is identified by a
Committee and defined and described in individual scope of work
documents which shall be developed by the Committee. As further
specified in the Network Development and Operations Agreement, each
scope of work document shall specify the rights, responsibilities and
obligations of each Party relative to the Project and include at least
a detailed description of the Project concept and design, a proposed
development process, an implementation plan, financial terms, ownership
of assets, intellectual property rights, performance measurement
criteria and a plan for life cycle monitoring of performance. The
Parties will establish a commercially reasonable schedule for
completion of each of the Projects as well as the necessary performance
measurement tools. A decision of a Committee (signed by all members) to
accept a Project including its financial terms ("Accepted Project")
will bind the Parties unless the Project requires board of directors'
approval of either of the Parties, in which case the Committee will
recommend approval to the board of the Party or Parties involved. A
"Mandatory Project" is any Project other than an Accepted Project if
the Party that voted in favor of the Project (the "Project Sponsor"),
whether SBC or Williams, elects pursuant to Section 6 to require that
the Project be undertaken. The Parties shall each dedicate resources
sufficient to complete an Accepted or Mandatory Project. Any employees
who work on a Project shall remain the employees of the Party who
designated them to work on the Project and shall not be considered
employees of the other Party or the Alliance.
5.2. No Arbitration
Except as otherwise provided in Section 4.4.8, the failure of a
Committee, the Alliance Council or the Officer Review Board to achieve
an unanimous vote with respect to a Project shall not be classified as
a Dispute subject to the procedures set forth in Section 9 and, if an
unanimous vote cannot be attained, a Party's exclusive alternatives
will be the creation of a Mandatory Project or the ability to pursue
the Project outside of the Alliance pursuant to Section 5.3, subject
only to any applicable terms and conditions restricting such Parties'
activities with third parties.
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5.3. Further Cooperation
If a proposed Project does not become an Accepted Project or a
Mandatory Project, each Party will be free to pursue such Project on
its own or with third parties, subject only to applicable restrictions
on Confidential Information and Intellectual Property. However, to the
extent that the implementation of the Project requires the cooperation
of the other Party, each Party will provide such cooperation and use
its best reasonable efforts to integrate the Project into the Parties'
networks.
6. MANDATORY PROJECTS
6.1. Designation by Project Sponsor
The Project Sponsor can elect to designate a Project as a Mandatory
Project if the Committee to which the Project is proposed does not
approve the Project, provided that not more than twelve months have
elapsed since the Meeting at which the proposed Project failed to
receive approval as an Accepted Project. If the Project Sponsor
designates a Project as a Mandatory Project, the Project Sponsor, at
its option, may require the other Party (the "Project Executor") to
complete the Mandatory Project or the Project Sponsor may engage a
third party to complete the Mandatory Project. If more than twelve
months have elapsed since the Meeting at which a proposed Project
failed to receive approval as an Accepted Project, the Project Sponsor
may not then designate a Project as a Mandatory Project or engage a
third party to complete the Project unless the Project is first
resubmitted to the applicable Committee for consideration as an
Accepted Project. Each Party will cooperate with the other and use its
best reasonable efforts to integrate a Mandatory Project into the
existing infrastructure of the Parties' networks.
6.2. Compensation of Project Executor
If the Project Sponsor requires the Project Executor to complete a
Mandatory Project, the Project Sponsor shall pay the Project Executor
(i) all identifiable fully-loaded direct expenses associated with the
Mandatory Project, plus (ii) the cost of capital for any capital
investments required by the Mandatory Project, less (iii) any cost
savings, tax benefits or other benefits attributable to the Mandatory
Project and realized by the Project Executor, it being the intention of
the Parties that the Project Executor shall be financially held
harmless as a result of undertaking the Mandatory Project. Any payment
required by this Section 6.2 shall be made promptly pursuant to
invoices rendered by the Project Executor and on the basis of good
faith estimates regarding any cost savings, tax effects or other
benefits attributable to the Mandatory Project, provided that any such
estimated amounts shall be adjusted on the basis of actual data when it
becomes available and the Parties shall promptly make additional
payments or refunds as applicable.
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6.3. Exceptions
Notwithstanding the foregoing, the Project Executor shall not be
required to accept a Mandatory Project where such acceptance would (1)
in the reasonable opinion of the Project Executor, constitute a
potential violation of the Act, **** (ii) the Mandatory Project has
been promptly and reasonably submitted for approval to the Project
Executor's Board of Directors, and (iii) the Project Executor's Board
of Directors has failed to approve the Mandatory Project.
6.4. Intellectual Property
Whether the Project Sponsor completes the Mandatory Project through the
Project Executor or a third party, the Project Sponsor will own all
aspects of the Mandatory Project, including but not limited to, all
intellectual property rights developed as part of the Mandatory Project
and all rights to use the Mandatory Project and all rights to revenue
derived from the use of the Mandatory Project (subject to the Project
Executor's right to receive a royalty free license of any intellectual
property rights necessary for so long as such rights are necessary for
the performance of any continuing services required from the Project
Executor).
6.5. Accounting
Mandatory Projects as described in this Section 6 shall be subject to
the approval of accounting procedures for tracking product costs and
revenues by the Project Sponsor prior to undertaking the Project.
Ongoing accounting issues, including without limitation the method for
determining Project costs, shall be referred to the Finance Committee
and considered pursuant to Section 4.4.8.
7. ALLIANCE MANAGERS AND DEDICATED EMPLOYEES
7.1. Alliance Managers
The "Alliance Manager" is an individual appointed by each Party and
dedicated to managing the Alliance relationship. SBC and Williams will
each designate one full-time Alliance Manager from within their
respective organizations. It shall be the responsibility of the
Alliance Manager to:
7.1.1. Serve as the principal contact person for each Party to the
other concerning Alliance matters;
7.1.2. Expedite the accomplishment of Accepted or Mandatory Projects;
7.1.3. Coordinate the activities of the Parties in furtherance of the
goals of the Alliance;
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7.1.4. Supervise Dedicated Employees that are employed by the
Alliance Manager's employer;
7.1.5. Consult with the members of the Officer Review Board and
Alliance Council and keep them informed of matters affecting
the Alliance;
7.1.6. As agreed by the Parties, serve as spokespersons for the
Alliance in dealings with external constituencies; and
7.1.7. Seek any necessary internal approvals that may be necessary
and desirable to conduct the business of the Alliance.
7.2. Dedicated Employees
Each of the Parties will designate additional managers and technical
personnel as are reasonably necessary to coordinate the activities of
the Parties and accomplish the objectives of the Alliance ("Dedicated
Employees"). The Alliance Manager of each Party will have overall
responsibility for supervising that Party's Dedicated Employees.
7.2.1. Support Dedicated Employees appointed by one Party may be
located at the premises of the other Party as the Parties may
reasonably agree, and in such case the other Party will
provide to the Dedicated Employee, at such other Party's
expense, with reasonable office space, office furniture, power
and telecommunications access facilities. Each Party will
provide any necessary computers to be used by its Dedicated
Employees and will be solely responsible for the compensation
and benefits of its Dedicated Employees.
7.2.2. Indemnification - Damages
The Party providing Dedicated Employees shall indemnify the
other Party and its Affiliates against all claims, losses,
damages, or liabilities for personal injury, death or property
damage, including related attorney's fees and expenses of any
kind whatsoever, to the extent incurred by reason of or to the
extent arising out of any acts or omissions of the Alliance
Manager or any Dedicated Employee employed by such Party on or
off the premises of the other Party.
7.2.3. Indemnification - Claims
The Party providing Dedicated Employees shall indemnify the
other Party and its Affiliates against any claims, losses,
damages, liabilities, attorney's fees, or expenses of any kind
whatsoever arising from any workmen's compensation or other
claim made by a Dedicated Employee
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and relating to workmen's compensation or arising out of any
act or omission on the part of the Party providing office
facilities to a Dedicated Employee of the other Party.
8. AUDIT RIGHTS
8.1. Audit
Each Party may, at any time, but not more than once per calendar year
request an audit of the other Party (the "Audited Party"), with respect
to services and other deliverables provided under the Alliance
Agreements (an "Audit"), including, without limitation, to determine
the accuracy and integrity of any of the following:
8.1.1. The calculation of Alliance Pricing, including the duty to
provide MFN Pricing.
8.1.2. Access charge adjustments.
8.1.3. International pricing adjustments.
8.1.4. Matters not covered by the pre-bill certification process and
an audit of records relating to a Party's call detail.
8.2. Initiation
At the request of the Party requesting the audit (the "Initiating
Party"), the Finance Committee shall appoint a nationally recognized
accounting firm as a third party auditor (the "Auditor") to Audit the
Audited Party's books, contracts and records with respect to the
matters specified in Section 8.1 (or any other matter as agreed by the
Parties), provided that the Initiating Party may not request an Audit
on any particular subject more than once per calendar year. The
Initiating Party shall request an Audit by giving written notice of
such request to the members of the Finance Committee at least 14 days
in advance of the Finance Committee Meeting at which the appointment of
an Auditor shall be considered, and any such notice shall be sufficient
to include such Audit request as an agenda item for such Finance
Committee Meeting in compliance with Section 4.7.
8.3. Engagement of Auditor
The Parties will agree on the scope and materiality standards aspects
of the Audit and jointly instruct the Auditor. The terms of the
engagement of the Auditor shall:
8.3.1. Specifically define the scope of the Audit and materiality
standards.
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8.3.2. Require, in the case of a quantitative evaluation, a valid
statistical sampling of any information reviewed.
8.4. Cooperation
The Audited Party shall cooperate fully with the Auditor and its
representatives in connection with any Audit, providing reasonable
access to any and all relevant books and records and causing its
employees, accountants and other representatives and agents to
cooperate fully with the Auditor.
8.5. Report
The Auditor shall provide a copy of its report to both Parties, and the
report shall specify the conformity or extent of non-conformity with
the Audited Party's obligations under an Alliance Agreement that were
the subject of the Audit. The Auditor must keep confidential the names
and specific pricing applicable to all other purchasers of similar
products and services from the Audited Party. The determination of the
Auditor will be final and binding on both Parties.
8.6. Cost
The Parties will share equally the cost of the Auditor, provided that
(1) if the net dollar amount of any identified errors favors the
Initiating Party and exceeds three percent (3%) of the total dollar
amount of billings covered by the Audit, then the Audited Party shall
pay all of the costs of the Audit, and (2) if the net dollar amount of
any identified errors does not favor the Initiating Party, then the
Initiating Party shall pay all of the costs of the Audit. In the event
that the Auditor determines that the Audited Party is not in compliance
with its obligations relating to pricing that were the subject of the
Audit, the Audited Party will adjust pricing on a retroactive basis in
accordance with the findings of the Auditor.
9. DISPUTE RESOLUTION
9.1. Disputes.
The Parties shall attempt in good faith to resolve any controversy,
dispute or claim arising out of or relating to any of the Alliance
Agreements or the breach, termination, enforceability or validity
thereof (collectively, a "Dispute") promptly by negotiation between the
Alliance Managers, who shall have authority to settle the Dispute.
Either Party may give the other a written notice (a "Dispute Notice")
setting forth with reasonable specificity the nature of the Dispute and
the identity of any representative in addition to the Alliance Manager
who will attend and participate in the meetings at which the Parties
will attempt to settle the Dispute. Following the receipt of a Dispute
Notice, the representatives of both Parties shall meet as soon as is
practicable at a mutually acceptable time and place to negotiate in
good faith a settlement of the Dispute, and shall meet thereafter as
they reasonably deem necessary.
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9.2. Referral to CEO
If the Dispute has not been resolved within 30 days after receipt of
the Dispute Notice, then the Dispute shall be referred to the chief
executive officer of the ultimate parent corporation of each Party to
the Dispute (the "CEO"). The CEOs shall promptly undertake good faith
negotiations to settle the Dispute, including meetings in person or by
teleconference as the CEOs may reasonably agree.
9.3. Confidentiality of Negotiations
All negotiations pursuant to Sections 9.1 and 9.2 shall be confidential
and shall be treated as compromise and settlement negotiations. Nothing
said or disclosed, nor any document produced, in the course of such
negotiations which is not otherwise independently discoverable shall be
offered or received as evidence or used for impeachment or for any
other purpose in any current or future arbitration or litigation.
9.4. Arbitration
If the Dispute has not been resolved within 45 days after the receipt
of a Dispute Notice through negotiation or referral to the CEOs as
provided above, then the Dispute shall be finally settled by binding
arbitration in accordance with the commercial arbitration rules of the
American Arbitration Association ("AAA") then in effect. However, in
all events, the arbitration provisions in this Section shall govern
over any conflicting rules that may now or hereafter be contained in
the AAA rules. The arbitration shall be held in Dallas, Texas, unless
the Parties mutually agree to have the arbitration held elsewhere, and
judgment upon any award made therein may be entered by any court having
jurisdiction in the United States; provided, however, that nothing
contained in this Section shall be construed to limit or preclude a
Party from bringing any action in any court of competent jurisdiction
for injunctive or other provisional relief to compel the other Party to
comply with its obligations under this Agreement during the pendency of
the arbitration proceedings. The arbitrator shall have the authority to
grant any equitable and legal remedies that would be available in any
judicial proceeding instituted to resolve any Dispute hereunder.
9.5. Arbitrators
Any such arbitration will be conducted before three (3) arbitrators,
one of which shall be chosen by Williams, one of which shall be chosen
by SBC, and the third shall be chosen by the other two arbitrators.
Each person chosen to serve as an arbitrator shall be a neutral and
impartial attorney who has had training and experience as an
arbitrator. The decision of a majority of the arbitrators will be the
decision of the arbitrators. The arbitrators shall permit such
discovery of information related to the Dispute in arbitration as they
shall determine is
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appropriate in the circumstances, taking into account the needs of the
Parties and the desirability of making discovery expeditious and
cost-effective.
9.6. Costs and Fees
All fees and expenses of the arbitrators, expenses for hearing
facilities and other expenses of the arbitration shall be borne equally
by the Parties unless the arbitrators in the award assess such fees and
expenses other than equally against the Parties. Each Party shall bear
the fees and expenses of its own attorneys and witnesses except to the
extent otherwise provided in this Agreement or by law; provided, that
if the arbitrators determine that the claim or defense of any Party was
frivolous or lacked a reasonable basis in fact or law, the arbitrators
may assess against such Party all or part of the fees and expenses of
attorneys and witnesses for the other Party.
9.7. Burden of Proof
For any Dispute submitted to arbitration, the burden of proof will be
as it would be if the claim were litigated in a judicial proceeding.
9.8. Award
Upon the conclusion of any arbitration proceedings hereunder, the
arbitrators will render findings of fact and conclusions of law and a
written opinion setting forth the basis and reasons for any decision
reached and will deliver such documents to each Party to this Agreement
along with a signed copy of the award.
9.9. Agreement Controls
The arbitrators chosen in accordance with these provisions will not
have the power to alter, amend or otherwise affect the terms of these
arbitration provisions or the provisions of any Alliance Agreement.
10. CONFIDENTIAL INFORMATION
10.1. General
"Proprietary Information" means information which a Party deems
proprietary to it and, is of value to that Party and which that Party
maintains in confidence. Each Party shall hold in confidence and
withhold from third parties (other than as permitted below) any and all
Proprietary Information received pursuant to the Alliance and shall use
such Proprietary Information only to fulfill its obligations or enforce
its rights hereunder and for no other purposes unless the disclosing
Party shall otherwise agree in writing.
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10.2. Obligation to Protect Proprietary Information
Each Party shall use commercially reasonable efforts to safeguard any
Proprietary Information received pursuant to the Alliance from theft,
loss or disclosure to others, and to limit access to Proprietary
Information to those officers, directors, and employees within the
receiving Party's organization, and subcontractors, consultants,
investors, advisors, attorneys, service providers, business partners
and others who reasonably require access in order to accomplish the
aforesaid purposes. Proprietary Information shall be protected
hereunder only if it is in written or other permanent form and
identified as proprietary when provided. Any such information in other
than written or other permanent form when disclosed shall be considered
Proprietary Information that is protected hereunder, but only to the
extent identified as the originating Party's Proprietary Information at
the time of original disclosure and thereafter summarized in a written
form which clearly and conspicuously identifies the Proprietary
Information. Such summary shall be transmitted by the originating Party
to the receiving Party within thirty (30) days of the nonwritten
disclosure. The receiving Party shall not be liable for unauthorized
use or disclosure of any such Proprietary Information if it can
establish that the same: (i) is or becomes public knowledge or part of
the knowledge or literature within the telecommunications industry
without breach of an Alliance Agreement by the receiving Party; (ii) is
known to the receiving Party without restriction as to further
disclosure when received; (iii) is independently developed by the
receiving Party as demonstrated by written records; or (iv) is or
becomes known to the receiving Party from a third party who had a
lawful right to disclose it without breach of its contractual
obligations. Specific Proprietary Information shall not be deemed to be
available to the public or in the possession of the receiving Party
merely because it is embraced by more general information so available
or in the receiving Party's possession.
10.3. Judicial or Administrative Proceedings
Should the receiving Party be faced with judicial or administrative
governmental action to disclose Proprietary Information received
hereunder, said receiving Party shall use commercially reasonable
efforts to notify the originating Party in sufficient time to permit
the disclosing Party to intervene in response to such action.
10.4. Loss or Unauthorized Use
The receiving Party agrees promptly to notify the disclosing Party of
the loss or unauthorized use or disclosure of any Proprietary
Information.
10.5. Proprietary Information Exchange Agreements
Each Party shall ensure that all subcontractors providing Proprietary
Information to such Party in connection with the Alliance shall enter
into a "Proprietary
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Information Exchange Agreement" that provides that such Proprietary
Information may be disclosed and used by the Parties for the purposes
provided in this Article, subject to providing appropriate assurances
of confidentiality, but without requiring further permission from or
notice to such subcontractor.
10.6. Nondisclosure Agreements
Each Party shall have any third party person or entity to whom it
provides the Proprietary Information of the other agree in writing to
be bound to protect such Proprietary Information on the same conditions
as set forth herein.
10.7. Termination
Upon termination of the Alliance for any reason, the Parties shall
cease use of all Proprietary Information furnished by the other Party
and shall, at the direction of the furnishing Party, return to or
destroy all such Proprietary Information, together with all copies made
hereof, except to the extent that the receiving Party retains a license
to use such Proprietary Information. Upon request, the receiving Party
shall send the other Party a destruction certificate.
10.8. Irreparable Injury by Disclosure to Competitors
Specifically, but without limiting the foregoing, each Party agrees and
acknowledges that the disclosure by a Party of any Proprietary
Information to any competitor of a Party could cause irreparable harm
to such Party, and agrees not to make such a disclosure. Each Party
shall have the right to enforce the provision of this Article by
injunctive relief, including specific performance. Personnel of one
Party or its Affiliates present at the premises of the other Party or
its Affiliates shall refrain from obtaining access to information that
is proprietary to the customers of the other Party or its Affiliates.
Such personnel shall comply with the other Party's or its Affiliates'
reasonable measures established to restrict such access.
10.9. Survival of Nondisclosure Obligations
The obligations set forth in this Section 10 shall survive the
termination of this Agreement for two years.
11. ADDITIONAL COVENANTS
11.1. Insurance
At all times during the term of the Alliance, each Party shall carry
and maintain workers' compensation and employer's liability insurance
adequate to insure fully against losses or damages to SBC's or
Williams' personnel, customers, property or other contractor's
personnel or property caused by their respective activities. If
requested, each Party will furnish to the other certificates of
insurance or other
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appropriate documentation (including evidence of renewal of insurance)
evidencing all coverage referenced above and naming the Company as an
additional insured. Each Party will furnish the other notice of the
expiration of cancellation of any insurance policy required pursuant
hereto.
11.2. No Solicitation
During the term of the Alliance and for a period of twelve months
thereafter, neither Party nor such Party's Affiliates shall, directly
or indirectly, for itself or on behalf of any other person, induce or
attempt to induce any employee of the other Party's Affiliates engaged
in Alliance activities to leave his or her employment. However, general
employment advertisements in media of general or industry specific
circulation shall be permissible.
12. TERMINATION AND TRANSITION
12.1. General
While the Parties intend to develop a long term relationship, under the
following circumstances, the Alliance may be terminated in whole or in
part.
12.1.1. Termination By SBC
SBC may, but shall not be obligated to, terminate all or part
of the Alliance or all or certain aspects of the Alliance
Agreements or seek other remedies set forth in Sections 12.2
through 12.5:
12.1.1.1. If Williams begins to offer retail long distance
voice transport [or local exchange services],
provided that such right to terminate or seek other
remedies shall not come into effect if any one of
the following exceptions apply: ****
12.1.1.2. If Williams breaches any Alliance Agreement in a
manner that has a material adverse effect on the
commercial value of the Alliance to SBC;
12.1.1.3. If, without the prior consent of SBC, through merger
or acquisition or other means, there is a change in
the Control of Williams. "Control" means the
possession, directly or indirectly,
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of the power to direct or cause the direction of the
management and policies by one person or entity or a
group of related persons or entities acting in
concert; provided, however, that the legal or
beneficial ownership, directly or indirectly by one
person or entity or a group of related persons or
entities acting in concert, of more than fifty
percent (50%) of the voting stock for the election
of directors of a party shall always be deemed
Control; or
12.1.1.4. If regulatory authorities fail to approve (or
impose unaccepted material adverse conditions on the
approval of) the Ameritech Merger or if the
Agreement and Plan of Merger is terminated by SBC or
Ameritech; or
12.1.1.5. If SBC acquires Control of an entity which is or
owns a facilities-based nationwide interLATA
telecommunications carrier and determines not to
sell the long distance transport assets to Williams
in accordance with Section 12.7.
12.1.2. Termination By Williams
Williams may, but shall not be obligated to, terminate all or
part of the Alliance or all or certain aspects of the Alliance
Agreements or seek other remedies set forth in Sections 12.2
through 12.5:
12.1.2.1. If SBC breaches any Alliance Agreement in a manner
that has a material adverse effect on the commercial
value of the Alliance to Williams; or
12.1.2.2. If, without the prior consent of Williams, through
merger or acquisition or other means, there is a
change in the Control of SBC.
12.1.3. Timing
The Party having the right to terminate shall exercise its
termination right within a reasonable period of time, but in
no event more than 180 days from actual notice of the event or
circumstances permitting termination by such Party.
12.2. Negotiations
Should any of the circumstances outlined in Section 12.1 occur, the
Parties will consider and negotiate terms under which they may
terminate any or all of the Alliance Agreements or certain aspects of
them. The following principles shall govern such negotiations:
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12.2.1. Primary User
If a Supplied Party represents at least 75% of the usage of an
asset or facility of the Supplying Party or, in the case of
assets or facilities under construction by the Supplying
Party, the Supplied Party represents 75% of the intended usage
of such asset or facility, then the Supplied Party shall be
entitled to purchase that telecommunications asset or facility
(including electronics, but excluding fiber) previously
constructed or under construction at a price equal to its then
current net book value.
12.2.2. IRUs
SBC shall be entitled to acquire IRUs with benefit of all
transport upgrades in the transport elements of the Williams
network at a price to be specified in the TSA.
12.2.3. Migration
Each Party shall cooperate to accomplish any necessary
migration of the other Party's data and voice traffic to a
third party's network upon reasonable terms and conditions.
12.2.4. Intention
It is not the Parties' intent that all of these remedies apply
to each Section 12.1 event, but only that the Parties will
negotiate which of these remedies apply to the Section 12.1
event. Further, Williams will not be permitted to purchase any
local access or exchange assets from SBC. Any purchase price
paid pursuant to Sections 12.2.1 and 12.2.2 will not itself be
considered a Transition Cost for the purposes of Section 12.3,
but may be considered as a factor in the calculation of usage
related Transition Costs pursuant to Section 12.4.
12.3. Compensation
Should events in Section 12.1.1.1, 12.1.1.2, or 12.1.1.3 occur and
cause SBC to withdraw, Williams will compensate SBC for all costs SBC
incurs in terminating any Alliance Agreement, including, without
limitation, SBC's costs to transition to a new network and the
increased costs of using such new network ("SBC Transition Costs").
Should the events in Section 12.1.1.4 or 12.1.1.5 occur and cause SBC
to withdraw or the events in Section 12.1.2.1 or 12.1.2.2 occur causing
Williams to withdraw, SBC will compensate Williams for all costs
Williams incurs in terminating any Alliance Agreements including,
without limitation, the increased costs of the network facilities
remaining with Williams due to the loss of SBC traffic ("Williams
Transition Costs"). The one-time charges each Party may charge the
other as Transition Costs are specified in the Alliance Agreements.
There will be a $200,000,000 cap on SBC Transition Costs
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and on Williams Transition Costs, respectively. In no event, will the
actual Transition Costs paid by either Party ever exceed this amount.
12.4. Usage Related Transition Costs
For usage-related Transition Costs, SBC's costs of using a new network
and Williams' increased costs of its remaining network will be measured
over an 18 month period. For the first six months of the eighteen month
period, the traffic volume for each month will be calculated by
reference to the monthly average of SBC traffic over Williams' network
facilities for the immediately previous six month period ("Base Load").
For the second six month period, the traffic for each month will be
fifty (50%) of the Base Load. For the final six month period, the
traffic for each month will be twenty five percent (25%) of the Base
Load. For example, if SBC's transportation cost due to the termination
of the Alliance should increase by $.01, then this $.01 will be
multiplied by the Base Load for each of the first six months, by 50% of
the Base Load for each of the next six months and by 25% of the Base
Load for each of the last six months. Similarly, if Williams'
transportation cost should increase by $.01 due to the loss of the SBC
traffic, then a similar calculation would be performed.
12.5. Application to All Agreements
Notwithstanding anything to the contrary in Sections 12.1, 12.2 and
12.3, when all of the Alliance Agreements other than the TSA terminate,
either Party shall have the right to exercise rights set forth in
Section 12.2.1, 12.2.2 or 12.2.3.
12.6. Section 271 Authorization
At any time after SBC (or its Affiliate) receives authorization under
Section 271 of the Act to provide interLATA services in a particular
In-region State, SBC shall be entitled to purchase **** all assets
owned by Williams which are primarily used for voice or data switching
by SBC as the Supplied Party and which SBC is legally authorized to own
and operate pursuant to the Act in that state. This option shall be
exercisable by SBC within one (1) year of the receipt of authority
under ss. 271 of the Act for the particular state. Williams shall not
be required to transfer ownership of the voice or data switching assets
identified by SBC for a period of up to one year after receipt of SBC's
notice exercising the option in order that Williams can migrate
traffic, secure replacement assets and complete other transition
activities necessitated by sale of the voice or data switching assets
to SBC. Nevertheless, Williams agrees to exercise commercially
reasonable efforts to complete the transition activities as soon as
possible to allow the transfer of the voice or data switching assets to
SBC as soon as is practicable. For the sake of clarity, this Section
12.6 shall not be construed to give SBC any right to acquire fiber,
IRUs, or any other transport facilities owned by Williams.
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12.7. Long Distance Transport Assets
If SBC acquires Control of a nationwide interLATA telecommunications
carrier, SBC agrees to evaluate whether the objectives of attaining
Alliance Pricing and efficiencies have been achieved under the Alliance
Agreements. If they have and SBC determines that the sale of the long
distance transport assets of such carrier to Williams would also
support the achievement of these objectives, the Parties agree to enter
into good faith negotiations concerning the sale of the long distance
transport assets to Williams.
12.8. Regulatory Frustration
In the event of any action or failure to act by any regulatory
authority that has the effect of materially frustrating or hindering
the purpose of one or more of the Alliance Agreements or the ability of
the Parties to compete successfully by means of the Alliance, the
Parties will meet (i) to reevaluate the benefits of the Alliance, (ii)
to determine whether, and to what extent, the Alliance may be
continued, and (iii) to negotiate in good faith regarding reasonable
terms and conditions for any termination of any of the Alliance
Agreements or revisions to the Alliance relationship. If the Parties
can not reach agreement on the terms and conditions under which the
Alliance should continue, either Party shall have the right to
terminate the Alliance Agreement which was the subject of such action
or failure to act by such regulatory authority, pursuant to the
principles set forth in Section 12.2 insofar as they are applicable.
The Parties understand and agree that, prior to SBC's receipt of
authorization under Section 271 of the Act, there are significant
restraints on the ability of the Parties to engage in cooperative
marketing and sales activities, and such restraints as they exist on
the date of this Agreement shall not be deemed to be an event that
materially frustrates or hinders the purpose of the Alliance within the
meaning of this Section 12.8.
13. REPRESENTATIONS AND WARRANTIES OF SBC
SBC hereby represents and warrants to Williams as follows:
13.1. Organization, Standing and Authority.
SBC is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. SBC, and each of its
Affiliates executing an Alliance Agreement, has all requisite corporate
power and authority to enter into the Alliance Agreement(s) to which it
is a party and to consummate the transactions contemplated thereby. All
corporate acts and other proceedings required to be taken by SBC and
its Affiliates to authorize the execution, delivery and performance of
the Alliance Agreements to which it is a party and the consummation of
the transactions contemplated thereby have been duly and properly
taken. Each of the Alliance Agreements to which it is a party has been
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duly executed and delivered by it and constitutes the legal, valid and
binding obligation of it, enforceable against it in accordance with its
terms.
13.2. No Violation
The execution and delivery by SBC and its Affiliates of the Alliance
Agreements to which it is a party and the consummation of the
transactions contemplated thereby and compliance with the terms thereof
will not, (i) conflict with or result in any violation of any provision
of the certificate of incorporation or by-laws of any of them, or the
comparable organizational documents of any of them, (ii) conflict with,
result in a violation or breach of, or constitute a default, or give
rise to any right of termination, revocation, cancellation, or
acceleration, under, any material contract, except for any such
conflict, violation, breach, default or right which is not reasonably
likely to have a material adverse effect on the ability of SBC and its
Affiliates to consummate the material transactions contemplated by the
Alliance Agreements or (iii) conflict with or result in a violation of
any judgment, order, decree, writ, injunction, statute, law, ordinance,
rule or regulation applicable to SBC or any of its Affiliates or to the
property or assets of SBC or any of its Affiliates, except for any such
conflict or violation which is not reasonably likely to have such a
material adverse effect.
13.3. Consents and Approvals
Except as set forth in any Alliance Agreement, no consent, approval,
license, permit, order or authorization of, registration, declaration
or filing with, or notice to, any domestic or foreign court,
administrative or regulatory agency or commission or other governmental
authority or instrumentality (each, a "Governmental Entity") is
required to be obtained or made by or with respect to SBC or any of
SBC's Affiliates in connection with the execution and delivery of the
Alliance Agreements or the consummation of the transactions
contemplated thereby.
14. REPRESENTATIONS AND WARRANTIES OF WILLIAMS
Williams hereby represents and warrants to SBC as follows:
14.1. Organization, Standing and Authority
Williams is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Williams has all
requisite corporate power and authority to enter into the Alliance
Agreements and to consummate the transactions contemplated thereby. All
corporate acts and other proceedings required to be taken by Williams
to authorize the execution, delivery and performance of the Agreement
and the Alliance Agreements to which it is a party and the consummation
of the transactions contemplated thereby have been duly and properly
taken. Each of the Alliance Agreements has been duly executed
-34-
<PAGE> 35
Proprietary and Confidential
and delivered by Williams and constitutes the legal, valid and binding
obligation of it, enforceable against it in accordance with its terms.
14.2. No Violation
The execution and delivery by Williams of the Alliance Agreements to
which it is a party do not, and the consummation of the transactions
contemplated thereby and compliance with the thereof will not (i)
conflict with or result in any violation of any provision of the
certificate of incorporation or by-laws of Williams, (ii) conflict
with, result in a violation or breach of, or constitute a default, or
give rise to any right of termination, revocation, cancellation, or
acceleration, under, any material contract, except for any such
conflict, violation, breach, default or right which is not reasonably
likely to have a material adverse effect on the ability of Williams to
consummate the material transactions contemplated by the Alliance
Agreements or (iii) conflict with or result in a violation of any
judgment, order, decree, writ, injunction, statute, law, ordinance,
rule or regulation applicable to Williams or to the property or assets
of Williams, except for any such conflict or violation which is not
reasonably likely to have such a material adverse effect.
14.3. Consents and Approvals
Except as set forth in any Alliance Agreement, no consent, approval,
license, permit, order or authorization of, registration, declaration
or filing with, or notice to, any Governmental Entity is required to be
obtained or made by or with respect to Williams in connection with the
execution and delivery of the Alliance Agreements or the consummation
of the transactions contemplated thereby.
15. GENERAL PROVISIONS
15.1. Further Agreements
Further agreements to implement the Alliance may be appropriate.
Therefore, upon reasonable request of a Party, the Parties shall meet
and negotiate in good faith to determine if additional Alliance
agreements are appropriate and the terms and conditions of any such
agreements.
15.2. Assignment
Neither Party may assign nor delegate any of its rights or obligations
under this Agreement without the consent of the other Party, provided
that each Party may assign this Agreement to any Affiliate, so long as
such assigning Party guarantees the Affiliate's performance.
-35-
<PAGE> 36
Proprietary and Confidential
15.3. Termination of MOU
The Memorandum of Understanding dated December 12, 1998 by and between
SBC Operations, Inc. and Williams Communications, Inc. is terminated
and shall be of no further force and effect.
15.4. Force Majeure
If either Party's performance of this Agreement or any obligation
(other than the obligation to make payments for services rendered under
one of the Alliance Agreements) hereunder is prevented, restricted or
interfered with by causes beyond its reasonable control including, but
not limited to, acts of God, fire, explosion, vandalism, power outages,
cable cuts, storm or other similar occurrence including rain fade or
other atmospheric conditions, any law, order, regulation, direction,
action or request of the United States Government or national, state or
local governments, 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, or by national
emergencies, insurrections, riots, wars, acts of terrorism, strikes,
lockouts or work stoppages or other labor difficulties, supplier
failures, shortages, breaches or delays, then the Party affected by
such force majeure event (the "Affected Party") shall be excused from
such performance on a day-to-day basis to the extent of such
prevention, restriction or interference. The Affected Party shall use
commercially reasonable efforts under the circumstances to avoid and
remove such causes of non-performance and shall proceed to perform with
reasonable dispatch whenever such causes cease. Notwithstanding the
foregoing, a power outage or a cable cut shall not excuse the Affected
Party from liability to the other Party or its customers pursuant to
any Alliance Agreement, provided that the Affected Party shall not be
liable for any damages arising from the failure of the other Party to
undertake commercially reasonable efforts in accordance with past
practices to mitigate damages resulting from the cable cut or power
outage.
15.5. Third Party Warranties
Each Party shall enforce any rights, warranties, licenses, terms and
conditions and other benefits accruing to it under each of its
agreements with third parties participating in or providing equipment,
software or other services used in connection with the provision of
services under the Alliance Agreements wherever and whenever such
Party's failure to enforce any such rights, warranties, licenses,
terms, conditions and other benefits could materially impair its
ability to provide such services in accordance with the terms and
conditions of the Alliance Agreements.
15.6. Costs and Expenses
Except as otherwise specifically agreed to by the Parties in writing,
each Party will be responsible for its own expenses arising under this
Agreement.
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<PAGE> 37
Proprietary and Confidential
15.7. Amendment
No amendment of this Agreement shall be valid or binding on the Parties
unless such amendment shall be in writing and duly executed by an
authorized representative of each Party.
15.8. Headings
Headings contained herein shall in no way limit the subject matter they
introduce and shall not be used in construing this Agreement.
15.9. Publicity
Neither Party shall make a public announcement about this Agreement or
the Parties' discussions related to any aspect of it without the
written consent of the other Party. Either of the Parties may at
anytime make announcements which are required by applicable law,
regulatory bodies, or stock exchange or stock association rules, so
long as the Party so required to make the announcement, promptly upon
learning of such requirement, notifies the other Party of such
requirement and discusses with the other Party in good faith that exact
wording of any such announcement.
15.10. Execution
This Agreement shall be executed in two duplicate copies, one for each
Party, each of which copies shall be deemed an original.
15.11. Term
Unless otherwise specified in this Agreement, and except for those
provisions which by their nature should survive the termination of this
Agreement (including without limitation Sections 8 and 9 hereof), this
Agreement shall survive so long as any other Alliance Agreement is in
force and effect.
15.12. Limitation of Liability
Except to the extent expressly set forth in one of the Alliance
Agreements, neither Party, nor its officers, employees, agents,
partners, Affiliates or subcontractors shall be liable to the other
Party, its officers, employees, agents, partners, Affiliates or
subcontractors for claims for incidental, indirect, consequential,
exemplary, punitive, or other special damages, including, but not
limited to, damages for a loss of profits or opportunity costs,
connected with or resulting from any performance or lack of performance
under any Alliance Agreement regardless of whether a claim is based on
contract, warranty, tort (including negligence), theory of strict
liability, or any other legal or equitable principle.
-37-
<PAGE> 38
Proprietary and Confidential
15.13. Relationship of Parties
The Alliance Agreements individually or in the aggregate shall not be
construed to create a partnership, joint venture, or any other form of
legal entity.
15.14. Notices
Any notice, request, instruction or other document to be given
hereunder by any Party to any other Party under any section of this
Agreement shall be in writing and shall be deemed given upon receipt if
delivered personally or by telex or facsimile, the next day if by
express mail or three days after being sent by registered or certified
mail, return receipt requested, postage prepaid to the following
addresses (or at such other address for a Party as shall be specified
by like notice provided that such notice shall be effective only after
receipt thereof):
If to SBC: SBC Operations, Inc.
530 McCullough
San Antonio, TX 78215
Attn: J. Michael Turner, President
Fax: 210-886-3015
Telephone: 210-886-3000
with a copy SBC Operations, Inc.
(which shall 530 McCullough
not constitute San Antonio, TX 78215
notice) to: Attn: Alfred G. Richter, Jr.,
General Counsel - Operations
Fax: 210-886-3503
Telephone: 210-886-3500
If to Williams: Williams Communications, Inc.
One Williams Center, Suite 26-B
Tulsa, OK 74172
Attn: Contract Administration
Fax: 918-573-6578
Telephone: 918-573-6277
with a copy Williams Communications, Inc.
(which shall One Williams Center, Suite 4100
not constitute Tulsa, OK 74172
notice) to: Attn: General Counsel
Fax: 918-573-3005
Telephone: 918-573-4205
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<PAGE> 39
Proprietary and Confidential
15.15. Severability
In case 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 by a court or other authority of competent jurisdiction,
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 and, in lieu of each such illegal, invalid or unenforceable
provision, there shall be added automatically as a part of this
Agreement a provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and
enforceable, it being the intent of the Parties to maintain the benefit
of the bargain for both Parties.
15.16. Governing Law
This Agreement shall be construed in accordance with and governed by
the laws of the State of New York applicable to agreements made and to
be performed wholly within such jurisdiction.
15.17. Rules of Construction
Words used in this Agreement, regardless of the gender and number
specifically used, shall be deemed and construed to include any other
gender and any other number as the context requires. As used in this
Agreement, the word "including" is not limiting, and the word "or" is
not exclusive. Except as specifically otherwise provided in this
Agreement in a particular instance, a reference to a Section, Schedule
or Exhibit is a reference to a Section of this Agreement or a Schedule
or Exhibit hereto, and the terms "this Agreement," "hereof," "herein,"
and other like terms refer to this Agreement as a whole, including the
Schedules to this Agreement, and not solely to any particular part of
this Agreement. The descriptive headings in this Agreement are inserted
for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement. The Parties
to this Agreement do not intend that any other Person shall obtain any
rights as third party beneficiaries of this Agreement.
15.18. Provisions Applicable to Other Alliance Agreements
Sections 2, 8, 9, 10, 13, 14, and 15 (except for subsections 15.11 and
15.14) of this Agreement shall apply and be deemed incorporated into
the other Alliance Agreements.
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<PAGE> 40
Proprietary and Confidential
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
by their respective authorized representatives.
SBC COMMUNICATIONS INC. WILLIAMS COMMUNICATIONS, INC.
/s/ EDWARD E. [ILLEGIBLE], JR. /s/ KEITH E. BAILEY
- -------------------------------------- --------------------------------------
Signature of Authorized Representative Signature of Authorized Representative
EDWARD E. [ILLEGIBLE], JR. KEITH E. BAILEY
- -------------------------------------- --------------------------------------
Printed Name Printed Name
- -------------------------------------- --------------------------------------
Title Title
-40-
<PAGE> 41
EXHIBIT A
[FLOWCHART]
<PAGE> 42
EXHIBIT B
WILLIAMS:
<TABLE>
<CAPTION>
THIRD PARTY DATE AGREEMENT DESCRIPTION
SIGNED OR EFFECTIVE
<S> <C> <C>
National December 31, 1998 Alliance agreement whereby NTL is
Transcommunications preferred vendor of video circuits in
Limited Europe. As part of Alliance, Vyvx will
not sell transatlantic video services or video
services using Intelsat 57 East outside of the
Alliance's joint provision of those services.
- ---------------------------------------------------------------------------------------------------
Winstar Wireless, Inc. December 17, 1998 Wireless fiber IRU
agreement whereby Williams
acquired capacity equivalent
to 2% of Winstar's local
access capability which
capacity Williams can
resell.
- ---------------------------------------------------------------------------------------------------
Unidial Communications, October 2, 1998 Pursuant to Paragraph 5.1(h) of Preferred
Inc. Stock Purchase Agreement between Williams
Communications, Inc. and Unidial Holdings,
Inc., Williams Communications Solutions, LLC
and UniDial Communications, Inc. entered into
a Service Agreement (a non-exclusive agency
agreement) for WCS to market UniDial's
telecommunications services in the U.S.
- ---------------------------------------------------------------------------------------------------
Northern Telecom, Inc. September 23, 1993 Basic Supply Agreement and related Product
(base agreement) and Pricing Attachments for fiber, transmission
products and telecommunications switching
products.
- ---------------------------------------------------------------------------------------------------
ICG Access Services, April 1, 1996 Local Access Agreement establishing ICG as
Inc. preferred vendor for access between Vyxx
Television Switching Centers (video) and
customer premises.
- ---------------------------------------------------------------------------------------------------
Concentric Network July 25, 1997 Agency Agreement for Williams to market
Corporation (base agreement) Concentric's telecommunications services in
the U.S.
- ---------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 43
<TABLE>
<S> <C> <C>
Concentric Network July 25, 1997 Reseller Agreement for Williams to resell
Corporation (base agreement) Concentric's telecommunications services
in the U.S.
- ---------------------------------------------------------------------------------------------------
Northern Telecom, Inc. April 30, 1997 Limited Liability Company Agreement, 4-30-97,
between Williams Communications Group, Inc.
and Williams Communications Solutions, LLC ("WCS")
shall focus on sales of Nortel products at or
above a percentage threshold of its sales. If WCS
fails to hit this threshold for two years in a row,
Nortel can put, and Williams can call, Nortel's
interest in WCS to be purchased by Williams.
- ---------------------------------------------------------------------------------------------------
Bell Atlantic Network Renewal Effective Marketing agreement for telephone company retail
Services, Inc. 1-1-99 services in entire Bell Atlantic area.
- ---------------------------------------------------------------------------------------------------
SBC Effective 3-1-98 Authorized sales representative agreement in
SBC's core five-state area.
- ---------------------------------------------------------------------------------------------------
U.S. West Renewal Effective Strategic partner sales agreement to market U.S.
Communications, Inc. - 1-1-99 West's data and telecommunications services in
Federal Services Arizona.
- ---------------------------------------------------------------------------------------------------
Pacific Bell Renewal Effective Authorized sales representative agreement in
1-1-99 California.
- ---------------------------------------------------------------------------------------------------
Bell South Application pending Authorized sales representative agreement.
- ---------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SBC:
THIRD PARTY DATE AGREEMENT DESCRIPTION
SIGNED OR EFFECTIVE
<S> <C> <C>
Concentric MOU signed 10/98 SBC will rebrand and sell CNC
internet based services.
- ---------------------------------------------------------------------------------------------------
Lucent Initial Agreement Southwestern Bell will be a distributor for
signed 5/97. Lucent's key systems
- ---------------------------------------------------------------------------------------------------
Lucent Initial Agreement Southwestern Bell will exclusively
signed 3/97. Lucent's PBX line of products.
- ---------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 44
<TABLE>
<S> <C> <C>
Lucent Initial Agreement Pacific Bell will exclusively refer sales
signed 6/98. leads to Lucent for PBX sales opportunities.
- ---------------------------------------------------------------------------------------------------
IBM Initial Agreement Third party serves as a Global Service
signed 11/97. Provider for SBC Internet Services.
- ---------------------------------------------------------------------------------------------------
Digex Initial Agreement Third party serves as a Global Service
signed 7/97. Provider for SBC Internet Services.
- ---------------------------------------------------------------------------------------------------
Sprint Initial Agreement Third party serves as a Global Service
signed 4/97. Provider for SBC Internet Services.
- ---------------------------------------------------------------------------------------------------
Lucent Agreement effective Digital network deployment contract for
5/98. Southwestern Bell, Pacific Bell and Nevada
Bell to purchase switch-related hardware,
software to support new growth.
- ---------------------------------------------------------------------------------------------------
Nortel Agreement effective Digital network deployment contract for
7/98. Southwestern Bell, Pacific Bell and Nevada
Bell to purchase switch-related hardware,
software to support new growth.
- ---------------------------------------------------------------------------------------------------
China-US Cable Agreement signed Consortium of cooperative agreements between
12/97. US and foreign carriers to build capacity
between the US and Asia.
- ---------------------------------------------------------------------------------------------------
Japan-US Cable Agreement signed Consortium of cooperative agreements between
7/98. US and foreign carriers to build capacity
between the US and Asia.
- ---------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
Redacted portions have been marked with asterisks (****). Confidential treatment
has been requested for the redacted portions. The confidential redacted portions
have been filed separately with the Securities and Exchange Commission.
CONFIDENTIAL TREATMENT
EXHIBIT 10.11
TRANSPORT SERVICES AGREEMENT
AGREEMENT NO. _______________
This Transport Services Agreement (this "Agreement") is made as of the
Effective Date, by and between Williams Communications, Inc. d/b/a Williams
Network, a Delaware corporation ("Williams"), with its principal place of
business at One Williams Center, 26th Floor, Tulsa, Oklahoma 74172, and SBC
Operations, Inc. and Southwestern Bell Communications Services, Inc., Delaware
corporations (collectively "SBCS" and together with Williams, the "Parties"),
with their principal places of business at 175 East Houston, San Antonio, Texas
78205, for the provision of telecommunications services, subject to this
Agreement and as set forth in this Agreement.
WHEREAS, Williams and SBC Communications Inc. have entered
contemporaneously into that certain Master Alliance Agreement (as defined
herein), which sets forth a business relationship between the parties, and
which calls for the execution of this Agreement;
WHEREAS, SBCS's parent company, SBC Communications Inc. ("SBC"), is
executing a National-Local and Global Strategy under which it and certain of
its Affiliates are developing the capacity to "follow" large and mid-size
customers wherever they may go and provide them with a full range of local,
long distance, data and other services and, having secured these "anchor
tenants," then provide service to small business and residential customers
out-of-region; and
WHEREAS SBC has entered into an Agreement and Plan of Merger with
Ameritech Corporation ("Ameritech"), under which Ameritech will, subject to
regulatory approvals, become a wholly-owned subsidiary of SBC in order to
provide the customer base, human resources and financial resources needed to
execute the National-Local and Global Strategy; and
WHEREAS, Williams provides business communications equipment and
integration services for data, voice, video and advanced applications on a
retail basis, and network services for the delivery of voice and data on a
wholesale basis; and
WHEREAS, SBC and Williams, in light of their complementary
capabilities and goals, are entering into a Master Alliance Agreement to
establish an alliance pursuant to which the parties (subject in all events to
and consistent with the Telecommunications Act of 1996 and other applicable
law), can work together to strengthen their ability to meet the competitive
opportunities for network services to the markets that they serve and, assuming
the completion of the Ameritech merger, which will help make the National-Local
and Global Strategy viable; and
WHEREAS, the Master Alliance Agreement contemplates the execution of
this Agreement and other Alliance Agreements to implement the Alliance and
<PAGE> 2
WHEREAS, SBCS desires to order various telecommunications services as
identified herein;
WHEREAS, Williams desires to provide such services to SBCS;
NOW, THEREFORE, the parties agree that the provision of such
telecommunications services shall be pursuant to the terms and conditions
contained in this Agreement.
1. SCHEDULES AND DEFINITIONS
1.1 Schedules
The following schedules are attached to this Agreement and incorporated into
the Agreement as if fully set forth herein.
Schedule A - Williams Network Supplemental Product Description and Pricing
Schedule
Schedule B - Williams Network Technical Specifications
Schedule C - Williams Network Collocation Service
Schedule D - OSS Interoperability
Schedule E - Operations Schedule
Schedule F - Early Entry Support
Schedule G - Testing Requirements
Schedule H - Out-of-Region Services
Schedule I - Customer Network Management for On-Net Private Line and Data
Services, Description and Specifications
Schedule J - Williams On-Net City List
Schedule K - Comprehensive Cost Model Example and Explanation
Schedule L - Transition
Schedule M - Williams Intrastate Authorizations
2
<PAGE> 3
Schedule N - Access Agreement
1.2 Priority of Agreement and Schedules
In the event of any inconsistency between a schedule and this Agreement, the
terms and conditions of this Agreement shall control.
1.3 Definitions
Except as otherwise defined in this Agreement, the terms used in this Agreement
shall have the meanings given them in the Master Alliance Agreement.
"1+ Voice Service" as defined in Section 2.5 of this Agreement.
"271 Approval" - The grant of authority to SBC or any Affiliate of authority
pursuant to Section 271 of the Communications Act to provide InterLATA
telecommunications services originating in an in-region state.
"Access Costs" -means Access Costs as defined in Schedule N.
"Access Line" - means a facility arrangement which connects SBCS's or an End
User's location to Williams' network switching center.
"Actual Start Date" - as defined in Section 5.5 hereof.
"Additional Charges" - as defined in Section 9.1 hereof.
"Agreement" - as defined in the preamble hereof.
"Alliance Price" - means the rate for On-Net Transport Service or On-Net
Ancillary Service chargeable to SBCS during the **** using the lowest of ****.
"Ancillary Services" - as defined in Section 2.8 of this Agreement.
"ANI" - means automatic number identification or a call or line bearing such
automatic number identification.
"ATM Service" - means On-Net Service as defined in Section 2.2 of this
Agreement.
"Applicable Rates" - as defined in Section 3.3 of this Agreement, means the
then-current rates for On-Net Transport Services and On-Net Ancillary Services.
"Authorization Code" - means a numerical code, one or more of which are
available to SBCS's End Users to enable them to access the Williams' Network,
and which are used
3
<PAGE> 4
by Williams both to prevent unauthorized access to its facilities and to
identify End Users for billing purposes.
"Available" or "Availability" - means: (1) with respect to On-Net Services, the
condition in which Williams has the facilities necessary to provide On-Net
Service and such facilities are not already committed to other parties and are
accessible for On-Net Service to SBCS, as determined by Williams, in its sole
but reasonable discretion, directly from the Williams' Network in areas or
cities which are then in service by Williams; not including any areas or cities
for which facilities are planned but not yet completed, or any cities only
available through facilities leased from a Third Party; (2) with respect to any
Off-Net Services, the condition in which the Third Party Provider, including
any SBC LEC Affiliate, makes available such Off-Net Service.
"Business Day" - means a day other than a Saturday, Sunday, or other day on
which commercial banks in Tulsa, Oklahoma are authorized or required by law to
close.
"CAP" - means a competitive access provider.
"Cap Price" or "Price Cap" - means the maximum price, applicable only to On-Net
Transport Services or On-Net Ancillary Services as set forth in the relevant
portion of Schedule A, that SBCS will be charged by Williams based on volume as
set forth in Schedule A.
"Capacity" - means capacity which may be provided On-Net or Off-Net, for
telecommunications in DS-1, DS-3, OC-3, OC-12, OC-48 and OC-192 interexchange
carrier services, including ATM Service and Frame Relay Service.
"Casual Calling" - means access to Williams' Network and the subsequent use of
Service by an End User through the dialing of a carrier access code in the
format of 101XXXX, where the four (4) digits represented by the "X" are the
unique Carrier Identification Code (CIC) assigned to Williams or to SBCS or one
of its Affiliates.
"CIC" - means a carrier identification code.
"CIP" - means carrier identification parameter.
"Circuit" - means a dedicated communication path with a specified bandwidth.
"CLEC" - means a competitive local exchange carrier.
"Collocation Service Order" - means the order to be developed in accordance
with Section 5.1.
"Collocation Services" - as defined in Section 2.4 hereof.
4
<PAGE> 5
"Communications Act" - means the Communications Act of 1934, as amended from
time to time (including the Telecommunications Act of 1996).
"Cost" - has the meaning set forth in Section 3.5.1.
"Cost Plus" - means the price charged to SBCS for a service based ****
Williams **** cost ****
"Cross Connect" - means a physical connection between equipment collocated by
SBCS and an entity other than Williams through the Williams' cross connect
panel at a Williams POP.
"DS-0 Service" - means a dedicated, full duplex digital channel with nominal
line speeds of 2.4, 4.8, 9.6, 56 or 64 Kbps.
"DS-1" - means a dedicated, high capacity, full duplex channel with a nominal
line speed of 1.544 Mbps asynchronous serial data having a line signal format
of either alternate mark inversion (AMI) or B8ZS and either Superframe (D4) or
Extended Superframe formats. DS-1 Service has the equivalent capacity of 24
voice grade services or 24 DS-0 Services. AMI can support 24 56 Kbps channels
and (ESF) B8ZS can support 24 64 Kbps channels.
"DS-3" - means a two-point channel for the bidirectional transmission of
isochronous serial data/video at a nominal rate of 44.736 megabits per second.
(DS-3 Service is a dedicated, high capacity, full duplex channel with a line
speed of 44.736 Mbps asynchronous serial data having a line code of bipolar
with three zero substitution (B8ZS). DS-3 Service has the equivalent capacity
of 28 DS-1 Services at 1.544 Mbps or 672 voice grade equivalent (VG) services
or 672 DS-0 Services at 56/64 Kbps.)
"Due Date" - means the date, as set forth in Section 9.1, upon which payment of
charges shall be received by Williams.
"Effective Date" - as defined in Section 4.1 hereof.
"End User" - means the natural person or legal entity which either; (1) orders
service through SBCS or (2) uses the Williams' Casual Calling service directly
as a customer through dialing Williams' designated access code or other access
number.
"Escalation to Alliance Management" means weekly reports and readouts to the
Alliance Managers on the steps Williams is taking to eliminate provisioning
delays.
"FCC" - means the Federal Communications Commission, or any successor agency.
5
<PAGE> 6
"Feature Group C" - means such feature as defined in the tariff of the National
Exchange Carrier Association.
"Feature Group D" - means such feature as defined in the tariff of the National
Exchange Carrier Association.
"FOC" - means firm order commitment as defined in Section 5.2.1.
"Force Majeure Event" - means an event described in Section 15.4 of the Master
Alliance Agreement, incorporated herein by reference; provided, that: (1) a
power outage shall be an event of force majeure under this Agreement only to
the extent (a) that Williams has in place the power backup systems required
herein, and such backup systems have been exhausted, and (b) the cause of the
power outage is a grid-wide electricity failure; and, (2) a cable cut shall be
an event of force majeure under this Agreement only to the extent that it is
caused by an act of God . Rain fade shall be a Force Majeure Event under this
Agreement only with respect to wireless Services.
"Frame Relay Service" - means On-Net Service as defined in Section 2.3 of this
Agreement.
"ILEC" - means incumbent local exchange carrier as that term is defined in the
Communications Act.
"Individual Case Basis (ICB)" - means determinations involving situations where
nonstandard arrangements are required to satisfy specialized needs. The nature
of such Service requirements makes it difficult or impossible to establish
general provisions for such circumstances. When it becomes possible to
determine specific terms and conditions for such offerings, they shall be
offered pursuant to such terms and conditions as the parties may mutually agree
and set forth in writing.
"InterLATA Service" - means long distance telecommunications service between
local access transport areas.
"Legal or Regulatory Event" - means a situation where either Party reasonably
believes that the provision of a requested Service would violate any
governmental law, order, or regulation and which would trigger Williams' rights
to suspend or cancel Services or Ancillary Services under Sections 11 or 24
hereof, if the Parties were unable, after consultation prior to any suspension
or cancellation, to avoid the illegality or other situation which gave rise to
the concerned Party's reasonable belief that the situation would violate any
governmental law, order or regulation.
"Local Access Provider" - means an entity providing Local Access.
6
<PAGE> 7
"Local Access" - means the intraLATA telecommunications facilities connecting
an End User, including an SBCS-designated termination point, to an
interexchange carrier's POP within the same LATA, including, but not limited to
a Williams POP.
"Local Access Service" - means the provision of service for the purpose of
originating or terminating a toll telecommunication service between the End
User, including an SBCS-designated termination point, and an interexchange
carrier's POP, including, but not limited to any Williams POP.
"Local Exchange Carrier (LEC)" - means the local telephone company that
provides exchange telephone services.
"Master Alliance Agreement" - means the Master Alliance Agreement between SBC
Communications, Inc. and Williams of even date herewith.
"NDOA" - means the Network Development and Operation Agreement of even date
with this Agreement.
"Network Standards" or "Technical Specifications" - means those specifications
for digital telecommunications and analog video transmission services, as
applicable respectively, to the Williams Network and as set forth in Schedule
B.
"OC-3" - means On-Net Service as defined in Schedule B.
"OC-12" - means On-Net Service as defined in Schedule B.
"OC-48" - means On-Net Service as defined in Schedule B.
"Off-Net" - means a circuit that is not On-Net.
"On-Net" - means a circuit traversing the Williams Network or the Intermedia
Communications, Inc. ("ICI") network both end points of which originate or
terminate at a Williams designated Williams POP.
"On-Net Transport Services" - means the following On-Net Services: Private Line
Service as set forth in Section 2.1 of this Agreement; ATM Service as set forth
in Section 2.2 of this Agreement; Frame Relay Service as set forth in Section
2.3 of this Agreement; and, 1+ Voice Service as set forth in Section 2.5 of
this Agreement.
****
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"Payphone Charges" - means any telephone compensation charges or other
assessments attributable to origination of calls from a pay telephone to the
extent SBCS or its customers, or direct or indirect end users of such
customers, originate such calls.
"Performance Improvement Plan" means a plan developed by Williams and approved
by the Service Delivery Committee (defined in the NDOA), which will outline the
causes of, and propose remedies for, any Williams' process or activity which
has caused, or contributed significantly to, the delays in service activation.
This plan must be developed by Williams and submitted to the Service Delivery
Committee **** the failure to meet either the service performance levels as set
forth in Section 27 or the Service provisioning intervals set forth in Section
5, and shall be implemented promptly upon approval by the Service Delivery
Committee.
"Person" - means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"POP" or "Point of Presence" - means a point of presence as commonly understood
in the industry.
"Private Line Service" - means On-Net Service as defined in Section 2.1 of this
Agreement.
"Provider" - means Williams or any Third Party whose own service constitutes
part of the Service or whose own service is procured by Williams on behalf of
SBCS.
"Renewal Term" - means Renewal Term as defined in Section 4.1 hereof.
"Requested Start Date" - means the Requested Start Date as defined in Section
5.2.1 hereof.
"SBCS" - means the entities as identified in the preamble to this Agreement and
any Affiliate other than an SBCS LEC Affiliate; provided that SBCS, or its
designated Affiliate, shall in all instances serve as the single point of
contact to Williams.
"SBCS LEC Affiliate" - means a LEC which is an Affiliate of SBCS.
"Service Affecting" - means a condition in the Williams Network which results
in a loss or degradation of Service except for a loss or degradation of fifty
(50) milliseconds or less.
"Service Intervals" - means Williams' time periods for responding to SBCS's
requests for Capacity as defined in Section 5.3 hereof.
"Service Metric" - means the Williams' Network performance parameter set forth
in Schedule B to this Agreement.
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"Service Orders" - as defined in Section 5.1 hereof.
"Service" or "Services" - mean any service described in Section 2 hereof or any
additional or new services, features or function as the Parties may mutually
agree upon or is added pursuant to the NDOA.
"SLA" - means service level agreement, as that phrase is commonly understood in
the industry.
"Start of Service Date" - means the date On-Net Service begins in Section 5.5.
"Term" - as defined in Section 4.1 hereof.
"Third Party" - means a party which is not an Affiliate of the party in
question.
"Warranted Service" - means Service which Williams is obligated to have
available pursuant to an SBCS usage forecast as set forth in Section 26.1.
"Williams' Network" - means the fiber optic digital telecommunications
transmission system, switching infrastructure, network management systems,
operational support systems, and customer network management systems operated
by Williams and which is capable of providing and is used for the provision of
On-Net Service between the cities set forth in Schedule J (at the times
indicated for each Williams POP) or as subsequently expanded to other cities.
"Williams POP" - means a POP that is part of the Williams Network.
2. DESCRIPTION OF SERVICES
SBCS may order from Williams the Services set forth in this Section 2, the
terms and conditions of which are set forth in this Agreement and in the Master
Alliance Agreement. SBCS shall pay for Services in accordance with the terms of
this Agreement, and with respect to On-Net Services and On-Net Ancillary
Services at the rates set forth in Schedule A, as that Schedule may be amended
periodically by mutual agreement of the Parties, or pursuant to the NDOA, to
include new services, features or functions. All Services as defined in this
Section 2 are subject to Availability, except as provided in Schedule F or as
otherwise expressly set forth herein. Williams hereby covenants and agrees that
it shall keep the Williams Network upgraded with the most recent generic
releases of system operating software which are generally available, unless
otherwise agreed to pursuant to the NDOA.
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2.1 Description of On-Net Private Line Service. Williams
On-Net Private Line Service (the "Private Line Service") provides
domestic DS-1, DS-3, and optical SONET (OC-N) circuits which are
specifically dedicated to the use of SBCS or its customers between two
(2) points specified by the parties in a Service Order on the Williams
Network and meeting the Technical Specifications for Private Line
Service set forth in Schedule B.
2.2 Description of On-Net ATM Service. Williams On-Net
Asynchronous Transfer Mode Service (the "ATM Service") is
multi-service technology on the Williams Network that provides
integration of disparate networks onto a single communications
infrastructure and meets the Technical Specifications for ATM Service
set forth in Schedule B. ATM technology encapsulates user data into
53-byte cells and transmits them over an ATM network. Williams' On-Net
ATM Service is designed for two (2) primary applications. These
applications include ATM transport and backbone connectivity. ATM
transport provides multimedia aggregation and video transmission.
Multimedia transmission is suited for transporting voice, data and
video while video transmission is best designed for point-to-point
video services. Backbone connectivity provides for the interconnection
of local area networks ("LAN(s)") as well as interconnection of
existing network access points ("NAP(s)") or private peering
backbones.
2.3 Description of On-Net Frame Relay Service. Williams
On-Net Frame Relay Service ("Frame Relay Service") is a multi-service
technology that allows commercial end-users to use a network of shared
private lines to send and receive data from geographically distant
locations and meets the Technical Specifications for Frame Relay
Service set forth in Schedule B. Frame Relay can be defined as
packet-switched, multiplexed data networking technology supporting
connectivity between user equipment, such as routers, and a carrier's
frame relay network equipment.
2.4 Description of Collocation Service.Collocation Service is
a service, defined more specifically in Schedule C to this Agreement,
pursuant to which SBCS and its customers may place equipment in a
facility owned, leased or licensed and operated by Williams for the
purpose of interconnecting that equipment, including switches and
associated equipment, with the Williams Network, the network of SBCS
or any Affiliate, or other Third Party network ("Collocation
Service"), SBCS shall complete a mutually agreed upon Collocation
Service Order. The terms and conditions relating to Collocation
Service are attached hereto as Schedule C and are a part of this
Agreement and incorporated herein by reference.
2.5 Description of 1+ Voice Service. "1+ Voice Service"
provides On-Net interexchange Service via Feature Group D, Feature
Group C in selected exchanges or dedicated access lines for
origination and transmission on the Williams Network and termination
of communications. Dedicated access may be
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provided by SBCS, Williams or a Local Access Provider. Feature Group D
and Feature Group C access is provided by the Local Exchange Carrier
and allows SBCS to use its own CIC to route traffic to Williams'
facilities while allowing SBCS's End Users to recognize SBCS as the
End User's interexchange carrier or interexchange carrier carrying the
End User's Casual Call. Feature Group D and Feature Group C service in
In-region States of SBC will be provided in accordance with Sections
3.7 and Schedule N of this Agreement and Section 3.9 of the Master
Alliance Agreement. Dedicated Local Access Service will be provided in
accordance with Section 6.0 of this Agreement. Technical issues with
respect to Sub-CIC routing will be resolved by mutual agreement of the
parties pursuant to Section 23 or the NDOA.
2.5.1 Except where Local Access Service is provided
via dedicated access facilities, Williams' 1+ Voice Service
is available only in Feature Group D local exchanges where
the End User's telephone line(s) can be programmed by the
Local Exchange Carrier to automatically route "1+" interLATA
toll calls to the Williams Network; however, Williams will
provide 1+ Feature Group C Switched Service in California at
requested locations on ****.
2.5.2 Assuming CIP is provided by the originating
office and each SBC Affiliate provides a separate CIC, PIC
verification (1-700-555-4141) will correctly brand the
Services of SBCS and its Affiliates, and such additional
brands as SBCLD or its Affiliates may employ. The parties
agree to explore and implement, if mutually agreeable, a
technical solution for such branding where alternative
solutions may be required.
2.5.3 Williams shall have principal responsibility
for obtaining Local Access facilities. ****
2.5.4 The states in which Williams currently has
intrastate authority are listed in Schedule M.
2.6 Description of Wireless Local Access Services. Williams
will provide wireless Local Access in accordance with Schedule A ****, or as
mutually agreed.
2.7 Description of Third-Party Services
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2.7.1 Local Access Arrangements. Williams will
provide SBCS with access to and use of any Local Access
Services provided pursuant to any existing or future local
access arrangements and agreements Williams has or will have
with ILECs, CAPs, CLECs, wireless access providers and any
other Local Access Provider with which Williams has existing
and/or future agreements. Subject to non-disclosure or other
contractual obligations, Williams will make the terms of such
arrangements available to SBCS. This access will encompass
and include all service capabilities within those agreements
and will be provided by Williams to SBCS ****.
2.7.2 Other Local Access Services. Williams shall
provide switched Local Access Services in accordance with the
provisions of Section 3.8 of the Master Alliance Agreement
and pursuant to Section 3.7, of this Agreement and dedicated
Local Access Services in accordance with Section 6 of this
Agreement. Williams will use its reasonable best efforts, in
consultation with SBCS, to obtain Local Access Service for
SBCS at the lowest competitive rates for the quality of
access service required by SBCS, to configure Local Access
Service in a manner designed to minimize the costs of that
service and which meets SBCS's quality of service and
architecture requirements, provided that these requirements
do not adversely affect the cost to Williams or quality of
service received by Williams' other customers.
2.7.3 Off-Net InterLATA Services. Williams will
provide, upon SBCS's request, Off-Net InterLATA Services.
SBCS shall provide notice in its Service Order that Off-Net
InterLATA Services are requested and provide Williams with
such information as Williams may reasonably require to secure
such Service. SBCS shall be responsible for all charges,
including without limitation, monthly charges, usage charges,
installation charges, non-recurring charges, or applicable
termination/cancellation liabilities, of the Off-Net
InterLATA Service provider(s) on a ****.
2.7.4 Non-collocated Facilities. Where Williams and
SBCS facilities are located in the same community or market,
Williams will provide, on a Pass-Through Basis, leased
interconnection facilities between the SBCS and Williams'
equipment,. Any interconnection facility requiring
construction will be subject to mutual agreement.
2.8 Ancillary Services. Ancillary Services are those services
incidental to Williams' provision of the Service, as such
Services are identified in Schedule A (e.g. reconfiguration),
or services incidental to service provided by a Third Party,
including any SBC LEC Affiliate, for which such party imposes
a fee as established by that party.
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2.9 Services Generally
2.9.1 Origination or Termination of International
Service. The Services are available only within the United
States of America and its territories, but include the
origination or termination of international Service pursuant
to the International Services Agreement between the Parties
of even date.
2.9.2 Availability. The Private Line, Frame Relay,
and ATM Services set forth in this Section will be available
on the Effective Date at the locations and times specified in
Schedule J. ****
2.10 Use of SBCS Facilities. Nothing in this Agreement shall
preclude SBCS from using the facilities and networks of its Affiliates
in SBC States, as defined in the Master Alliance Agreement, to obtain
any of the Services Williams would otherwise provide under this
Agreement.
2.11 InterLATA CAP Facilities. Nothing in this Agreement
shall preclude SBCS or its Affiliates from using the interLATA
facilities of any CAP or CLEC, which, in either case, SBCS or its
Affiliates acquire or where Williams otherwise consents, such consent
not to be unreasonably withheld, conditioned or delayed.
2.12 Monitoring. As a part of providing its Services,
Williams shall: (i) actively monitor the Williams Network and respond
to alarms and troubleshoot problems; and (ii) serve as an interface to
Local Access Providers, and use reasonable efforts to troubleshoot
problems with the Local Access portion of a Service.
2.13 ****
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3. PRICING
3.1 Rates.
3.1.1 On-Net Transport Services and On-Net Ancillary
Services. The rates for On-Net Transport Services and On-Net
Ancillary Services are as stated in the relevant portion of
Schedule A, which shall serve as the **** for those On-Net
Transport Services and On-Net Ancillary Services.
3.1.2 Collocation Services. The rates for Collocation
Services shall be calculated based upon the Cost Plus Model.
The current estimated rates for Collocation Services are set
forth in Schedule A. Notwithstanding anything to the contrary
herein, no **** applies to Collocation Services.
3.1.3. Local Access Services. Section 6 Local Access Services
are provided ****. Section 3.7 Local Access shall be provided
in accordance with Schedule N. Notwithstanding anything to the
contrary herein, no **** applies to Local Access Services.
3.1.4 Off-Net InterLATA Services. Off-Net InterLATA Services
are provided ****. Notwithstanding anything to the contrary
herein, no **** applies to Off-Net InterLATA Services.
3.1.5 Ancillary Services. SBCS shall pay for (a) On-Net
Ancillary Services as provided in Section 3.1.1 of this
Agreement and (b) charges for Ancillary Services from ****
3.2 Rate Adjustment. The **** for On-Net Transport Services
and On-Net Ancillary Services set forth in Schedule A shall serve as
the rates for such Services as of the Effective Date, are firm for a
period of **** from the Effective Date of this Agreement and, subject
to the provisions of Schedule A for review of the Ancillary Service
charges (i.e. to assure they are at market rates), shall be deemed to
have satisfied the pricing criteria set forth in Sections 3.4.1 to
3.4.3 of the Master Alliance Agreement. Thereafter, the rates shall be
adjusted in accordance with the provisions of this Section 3.
3.3 Cost Plus Model Implementation. Following the six month
period after the Effective Date, Williams shall, fifteen (15) days
prior to the end of each calendar quarter, present to SBCS a schedule
showing the proposed rates for On-Net Transport Services and On-Net
Ancillary Services for the following quarter (the "Pricing Period")
based on the Cost Plus Model (the "Applicable Rates"). The analysis
period for determining the Applicable Rates under the Cost Plus Model
shall include the three (3) full months preceding the presentation of
the proposed Applicable Rates (the "Measurement Period"). Williams
shall provide
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the average of the Cost Plus pricing for the Measurement Period. The
Applicable Rates shall be modified at the beginning of each quarter to
reflect the lowest of the Price Cap as shown in Schedule A, the Cost
Plus pricing for the preceding Measurement Period, or the MFN Pricing
as described in Section 3.4.3. of the Master Alliance Agreement. The
parties shall document any revised pricing in writing.
3.4 True-Up
3.4.1 If, during the Pricing Period, the Applicable Rate
charged to SBC for any particular On-Net Transport
Service or On-Net Ancillary Service is determined
to exceed the Alliance Price, then Williams shall
provide a refund in the form of a credit equal to
the difference between the rate charged during the
Pricing Period and the price derived from the
Alliance Price for the applicable month times the
number of units billed to SBC during the month when
such difference exists. ****
3.4.2 If, during the Pricing Period, the Applicable Rate
charged to SBCS for any particular On-Net Transport
Service or On-Net Ancillary Service is lower than
the rate as determined using the Alliance Pricing
****, then Williams shall be entitled to bill the
difference between the rate charged during the
Pricing Period and the price derived from the
Alliance Price for the applicable months, ****,
times the number of units billed to SBCS during the
month when such difference exists. ****
3.5 Additional Provision. In addition to the principles of
the Cost Plus Model as set forth in Section 3.4.1 of the Master
Alliance Agreement, the following provisions shall apply to the
determination of product or service costs with respect to On-Net
Transport Services and On-Net Ancillary Services under the Cost Plus
Model:
3.5.1 The Cost Plus Model is intended to capture Williams cost
incurred to ****
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3.5.2 ****
3.5.3 Williams' capitalization policy is shown in Schedule
K(iii).
3.5.4 The allocation methodology for the Cost Plus Model is a
**** allocation of Williams' Cost ****
3.5.5 The rates charged under the Cost Plus Model will
reflect **** Costs plus **** with the following exceptions:
****
3.5.6 An example of the Cost Plus Model is included in
Schedule K.
3.5.7 All changes to the provisions outlined in this Section
3.5 must be approved by the Finance Committee under the
procedures set forth in the Master Alliance Agreement.
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3.6 Audit. SBCS shall have the right to conduct an audit of
the cost information utilized to produce the Williams Cost Plus Model
according to the provisions set forth in Section 8 of the Master
Alliance Agreement.
3.7 Access Charges.
Williams shall charge and SBCS shall pay for access services in
accordance with Schedule N.
3.8 Additional **** Charges. Williams will also charge SBCS
**** any interstate or intrastate charges assessed on Williams as a
result of Service taken under this Agreement by SBCS related to
****.
4. Effective Date, Term and Termination.
4.1 This Agreement shall become effective on the date on
which Williams and SBCS sign this Agreement ("Effective Date") and
shall continue for a term of twenty (20) years (the "Term"). Each
Service Order placed under this Agreement shall have its own term, as
indicated on such Service Order. This Agreement shall automatically
renew for successive one-year periods (the "Renewal Term(s)") unless
canceled by either party by giving written notice of such cancellation
not less than ninety (90) days before the end of the current Term, or
any Renewal Term. Unless Williams or SBCS is in default, any Service
being provided at the time of termination shall continue until the
natural end of such Service as specified in the applicable Service
Order upon the terms and conditions of this Agreement, unless the
parties mutually agree to terminate the Service at an earlier date.
4.2 The Parties recognize that the Services provided pursuant
to this Agreement are vital to SBCS and must be continued in
accordance with the terms of this Agreement after the Termination of
this Agreement while SBCS transitions to the new arrangements required
for its continued provision of service to its customers. Accordingly,
the Parties hereby agree, in addition to the provisions of Section 12
of the Master Alliance Agreement, to cooperate in developing and
implementing an orderly and efficient transition pursuant to the
provisions of Schedule L of this Agreement, that will minimize any
adverse effects (a) on the quality and availability of the Services,
(b) on SBCS' ability to provide the quality and variety of services
offered to its customers prior to termination, and (c) on SBCS'
customers. Unless SBCS is in material default on account of
non-payment, Williams will, as part of such transition and if
requested by SBCS prior to the end of the Term, continue to provide
the Services for a period of not less than nine (9) months after the
expiration of the then current Term on the terms and conditions
(including the rates and charges in effect at the
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date of the expiration of the Term, subject to such adjustments as may
be made under this Agreement pursuant to the Cost Plus Model, or on
**** pricing), without the introduction or imposition of any new or
additional charges, unless otherwise specifically allowed under this
Agreement. Beginning nine (9) months after the expiration of the then
current Term, the Applicable Rates shall no longer be in effect and
SBCS shall pay prevailing market prices charged to similarly situated
customers for any Services that it purchases.
4.3 In accordance with Section 12.2.2 of the Master Alliance
Agreement, Williams will, as part of the transition, make available to
SBCS **** in accordance with the terms and at the prices set forth in
Schedule L, subject to such other terms and conditions as the parties
may mutually agree upon.
5. Service Orders and Provisioning of Circuits
5.1 Services requested by SBCS hereunder shall be requested
on a mutually agreed upon Service Order form ("Service Order(s))".
Unless the Service to be provided is a Warranted Service or the
Service will be provided pursuant to Schedule F, Williams reserves the
right not to accept a Service Order under this Agreement if the
Service is not Available.
5.2 The Parties recognize that providing world class services
requires prompt and responsive services. **** In all events, the
Service Intervals for On-Net Transport Services shall not be longer
than those set forth in this Section 5. The On-Net Service Intervals
set forth in this Section 5 comport with industry standards today and
are not subject to change for 6 (six) months except by mutual
agreement.
5.2.1 When a Service Order is placed, SBCS will
indicate a requested start date (the "Requested Start Date")
for the On-Net Transport Service and, except for 1+ Voice
Services, the desired term of the On-Net Transport Service,
the specific city pairs, the applicable bandwidth and any
other information required pursuant to the Service Order form
developed pursuant to Section 5.1. Williams will acknowledge
receipt of a Service Order **** during Business Days of
receipt of such Service Order (the "Acknowledgment"). Within
**** of the Acknowledgment, Williams will issue a firm order
commitment (the "FOC") indicating the anticipated Start Date
for such On-Net Transport Service, and indicating the status,
if any, of any request for Local Access Services or Off-Net
InterLATA Services that SBCS requested in the Service Order.
Williams will make all reasonable efforts to meet SBCS's
Requested Start Date. In the event that SBCS requests a
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change in the Requested Start Date, SBCS's Requested Start
Date will be changed to reflect the number of days of delay,
or advance, as mutually agreed upon.
5.2.2 Williams will activate ANIs and will order
service from the Local Access Service Provider for 1+ Voice
Service within **** of the request for such Service, unless
otherwise specified by SBCS.
5.3 Standard On-Net Service Intervals
5.3.1 Williams' standard Service Interval for Williams POP to
Williams POP On-Net Transport Services will be:
****
5.3.2 The standard Service Interval for OC-N level Service
shall be mutually agreed upon.
5.3.3 The standard service implementation interval for
Off-Net Services either partially or wholly off of the
Williams' Network shall be determined on an Individual Case
Basis, but in no event shall it be longer than the service
implementation interval actually taken by the Third Party
provider.
5.4 Request for Expediting On-Net Service. SBCS may request
that a Service Order be expedited to permit the installation of the
Service in a time frame shorter than the Service Intervals set forth
above. In such case, the expedite charges set forth in Schedule A would
apply. Where Williams is arranging the provision of Local Access
Services, it will cooperate with SBCS in arranging for expedited
service from the Local Access Provider and order expedited service from
the Local Access Provider. SBCS shall reimburse Williams **** for any
expedite charges assessed by the Local Access Provider.
5.5 Start of Services. On-Net Services shall begin on the
date Williams issues notice that such On-Net Service is available (the
"Start of Service Notice" or "SOSN"), indicating that the On-Net
Service has been tested by Williams in accordance with the general
industry standards (DS-1, DS-3, and for OC-N level Service), and in
accordance with Williams' standard testing procedures and that the
On-Net Service meets or exceeds those Technical Specifications set
forth in Schedule B (the "Actual Start Date").
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5.5.1 SBCS shall notify Williams in writing within
**** after Williams issues the SOSN if the On-Net Service is
in material non-compliance with the applicable Technical
Specifications. Williams shall promptly correct the
deficiencies in the On-Net Service as noted by SBCS in its
notice and shall issue a new SOSN when it has satisfied SBCS'
concerns. SBCS shall have another **** to notify Williams'
whether the On-Net Service is in material non-compliance with
the applicable Technical Specifications, and, if so, the
procedures in the preceding sentence shall apply. ****.
5.5.2 Where SBCS notifies Williams in accordance
with Section 5.5.1 that the On-Net Service is in material
non-compliance with the Technical Specification, the Actual
Start Date shall be postponed until SBCS determines that the
On-Net Service is not materially non-complaint with the
Technical Specifications. Williams shall not charge for the
On-Net Service until the Actual Start Date as it may be
delayed as provided herein.
5.5.3 Where SBCS does not have its own facilities
(including Local Access ordered by SBCS) ready by the Actual
Start Date, Williams will provide SBCS with notice that
Williams is ready and able to commence its On-Net Service. If
SBCS is not ready to take such On-Net Service within
seventy-two (72) hours including for reasons such as untimely
installation or non-operation of its own facilities or those
of the Third Party provider (including any SBC LEC
Affiliate), Williams' may begin billing as of the end of such
seventy-two (72) hour period. Where Williams arranges Local
Access Services for SBCS, Williams will only begin billing
for the associated On-Net Transport Service at such time as
the Local Access Service is turned up by the Local Access
Service Provider.
5.6 Delays in Service.
5.6.1 On-Net Delays. SBCS may request a delay in the Actual Start Date
of a Service Order provided that (i) it provides Williams a written
delay request no later than **** for On-Net portions prior to the
Requested Start Date or the delayed Requested Start Date, as the case
may be, for On-Net portions (or no later than the applicable LEC tariff
or CAP notice period for delay requests for Local Access portions), and
(ii) the aggregate number of the days requested by such delay request
or requests do not **** from the
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Service Order's original Requested Start Date. At the expiration of the
first to occur of ****, SBCS may no longer delay the Actual Start Date
of such Service Order, and SBCS must cancel the order or Williams may
begin billing as of such date, unless otherwise mutually agreed upon.
5.6.2 Off-Net Delays. If SBCS requests a delay in the Actual Start
Date of a Service Order for Off-Net facilities or service, SBCS shall
have the rights to delay provided under the tariffs or service
agreements of the Third Party provider, including any SBC LEC
Affiliate, and shall reimburse Williams for the charges imposed by
that provider.
5.7 Unless the Service Order containing said specific term or
condition has been signed by an authorized headquarters representative
(director level or above) of Williams (a) the terms and conditions of
this Section 5 shall control over any terms or provision in a Service
Order or Acknowledgement and any conflicting, different or additional
terms and conditions contained in any Acknowledgement or Service Order
or elsewhere shall be null and void and shall not amend or alter the
terms of this Agreement and (b) no action by Williams (including,
without limitation, provision of Services to SBCS pursuant to such
Service Order) shall be construed as binding or estopping Williams
with respect to such term or condition.
5.8 If, notwithstanding Section 5.1, Williams' accepts an
order for a Service without a Service Order and provisions the Service
, the terms and conditions of this Agreement shall apply to such
Service as if a Service Order had been placed and accepted.
5.9 Remedies for Failure to Meet Service Intervals. In the
event that Williams fails to meet the Service Intervals set forth in
this Agreement for On-Net Transport Service or subsequently
established through mutual agreement for any On-Net Transport Service
under the Agreement, SBCS shall be due the following remedies:
5.9.1 ****.
5.9.2 ****.
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Provisioning Delay Remedies
All measurements are for On-Net Service only (assuming Availability). Events
that are excluded from these measurements are those defined in the Force
Majeure definition.
****
****
5.9.3 The foregoing remedy, together with other express remedies set
forth herein, are the sole and exclusive remedy for Williams' delay in
meeting the Service Intervals, unless the Parties otherwise mutually
agree. The Parties agree that the actual damages in the event of such
failure to activate service would be difficult or impossible to
ascertain, and that the charges in this Section 5.9.3 are intended,
therefore, to establish liquidated damages and are not intended as a
penalty.
5.9.4 Notwithstanding the above, Williams shall not
be held responsible for failure to meet Service Intervals
beyond the Start Date set forth in the FOC resulting from:
5.9.4.1 SBCS' personnel, applications, equipment, or
facilities;
5.9.4.2 The occurrence of a Force Majeure Event; or
5.9.4.3 The occurrence of a Legal or Regulatory
Event; or
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5.9.4.4 Delay resulting from the acts or omissions
of SBCS, its Affiliates, a Local Access Provider, or
a Third Party selected by SBCS.
6. Local Access Services
6.1 The provision of Local Access Service for Switched
Services will be governed by Section 3 of this Agreement. Williams
will arrange or provide Local Access Service for private line,
dedicated access, ATM, Frame Relay, and other data Services pursuant
to Sections 6.2 through 6.4 of this Agreement.
6.2 Unless the parties otherwise agree, Williams shall obtain
Local Access Service for SBCS in accordance with the provisions of
Section 3.8 of the Master Alliance Agreement. If SBCS orders its own
Local Access Service, SBCS shall be responsible for ensuring that such
services are turned up no later than the time the Services being
provided by Williams are ready for service. In the event the SBCS
ordered Local Access Services are not ready at such time as the
Services being provided by Williams, Williams shall have the right to
begin billing for such Services in accordance with Section 5.5.3 of
this Agreement and SBCS shall be liable for payment for such Services
as of such date.
6.3 Where Williams obtains Local Access Services for SBCS,
SBCS shall notify Williams of this fact as a part of its original
Service Order, specifying locations where Williams shall act as SBCS'
agent. In this situation, SBCS shall execute a Letter of Agency, on
such form as provided by Williams, authorizing Williams to interact
directly with the Local Access Provider(s) selected by SBCS to obtain
the Local Access Services, as applicable. SBCS shall request all Local
Access in writing to Williams. SBCS shall be responsible for all
charges, including without limitation, monthly charges, usage charges,
installation charges, non-recurring charges, or applicable
termination/cancellation liabilities, of the Local Access Provider(s)
****. In obtaining Local Access Services, Williams shall be responsible
for provisioning and the initial testing of an interconnection between
the InterLATA Service set forth in a Service Order and the Local
Access, in accordance with Section 3.8 of the Master Alliance
Agreement. Williams will coordinate the installation of the Local
Access Services with the InterLATA Service being provided by Williams.
Except as provided in Section 3.7, charges to SBCS for Local Access
Service administered by Williams on behalf of SBCS shall be ****.
6.4 Williams will notify SBCS within fifteen (15) days of its
receipt of any notice of an adjustment in the Local Access charges or
any invoice from the Local Access Provider, whichever is earlier, for
those Local Access Services provided by Williams to SBCS pursuant to
this Agreement. RECURRING CHARGES FOR LOCAL ACCESS SERVICES
ADMINISTERED BY WILLIAMS AND CHARGED TO SBCS SHALL BE SUBJECT TO
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ADJUSTMENT ONLY AT SUCH TIMES AS SUCH CHARGES ARE ADJUSTED BY THE
ENTITIES PROVIDING OF SUCH LOCAL ACCESS SERVICES. ANY ADJUSTMENTS
SHALL BE PASSED THROUGH TO SBCS CONTEMPORANEOUSLY WITH THE ADJUSTMENT.
****
7. (intentionally blank)
8. Changes in Service Parameters
8.1 Disconnection of Services. SBCS may disconnect any 1+
Voice Service **** to Williams other than any termination liability
imposed by a Local Access Provider, including an SBC LEC Affiliate or
any other Third Party provider including an Off-Net InterLATA Service
provider, which shall be charged ****. SBCS may disconnect any
non-voice On-Net Service provided hereunder by providing written
notification to Williams **** in advance of the effective date of
disconnect. In the event of such disconnection, SBCS shall pay to
Williams a disconnection charge in an amount equal to ****. The Parties
agrees that the actual damages in the event of such disconnection would
be difficult or impossible to ascertain, and that the disconnection
charge in this Section 8.1 is intended, therefore, to establish
liquidated damages and is not intended as a penalty.
8.1.1 SBCS may disconnect any Service after the
expiration of the Minimum Term on one day's notice. In the
event that SBCS disconnects pursuant to the previous
sentence, SBCS's liability to Williams shall be limited to
any amounts charged by Third Parties and SBCS LEC Affiliates,
which amounts shall be charged ****.
8.2 Minimum Terms. The Minimum Term associated with each
Private Line, Frame Relay, ATM Interexchange Service, and dedicated
access lines, is ****.
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9. Payment Terms:
9.1 Due Date and Invoice. Subject to the provisions of
Section 9.5, all amounts stated on each monthly invoice are due and
payable thirty (30) days from the date SBCS receives the invoice ("Due
Date"); provided, however, that SBCS may deduct from any amount due,
any credit or remedy amount authorized under Sections 5 or 27 for
Williams' failure to meet the identified performance specifications.
SBCS shall itemize the credit or remedies which are deducted from the
payment. SBCS shall remit payment to Williams at the remittance
address. In the event SBCS fails to make full payment the undisputed
amounts to the proper address by the Due Date, SBCS shall also pay a
late fee in the amount of the lesser of one and one-half percent (1
1/2%) of the unpaid balance per month or the maximum lawful rate under
applicable state law which shall accrue from the Due Date. SBCS
acknowledges and understands that all charges are computed exclusive
of any applicable federal, state or local use, excise, valued added,
gross receipts, sales and privilege taxes, tax or charge levied to
support the Universal Fund contemplated by the Communications Act,
taxes on Payphone Charges, duties, fees or similar liabilities (other
than general income or property taxes imposed on Williams), whether
charged to or against Williams, or SBCS associated with the Service or
Other Service provided to SBCS ("Additional Charges"). Such Additional
Charges are not classified as Service charges and shall be paid by
SBCS in addition to all other charges provided for herein.
9.2 Billing Periods. Williams will bill SBCS monthly for
Services provided hereunder. Charges for usage and all prorated
monthly recurring charges (charges for monthly Service provided for
less than a calendar month), installation and other non-recurring
charges shall be billed following the receipt of any such Services.
Charges for all monthly recurring charges for full months during which
Service are to be provided shall be billed in advance.
9.3 Timeliness. Williams will render invoices for Services not
later than **** in which any usage is recorded. Williams shall account,
and bill SBCS for, not less than (1)**** of all On-Net Service usage no
later than **** after the usage is recorded, (2) **** of all On-Net
Service usage no later than **** after the usage is recorded and (3)
**** of all On-Net Service usage no later than **** after the usage is
recorded. ****
9.4 Accuracy. Unless the Parties agree otherwise in writing,
with respect to any monthly billing cycle, the accuracy of the raw
billing information
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that Williams supplies to SBCS with respect to On-Net Service shall
not be less than ****.
9.5 Disputes. If SBCS in good faith disputes any portion of
an invoice it must pay the undisputed amount of the invoice on or
before its Due Date and provide written notice to Williams of the
billing dispute within sixty (60) days thereafter. Such notice must
include documentation substantiating the dispute. SBCS's failure to
notify Williams of a dispute shall be deemed to be SBCS's acceptance
of such charges. The parties will make a good faith effort to resolve
billing disputes expeditiously. If SBCS has already made payment of a
disputed charge and a dispute is resolved in favor of SBCS, SBCS shall
receive a credit on its next invoice for the amount determined to be
due, including interest in the amount of the lesser of one percent
(1%) per month or the maximum rate allowed by law from the date SBCS
paid the disputed amount.
9.6 Suspension of Service. In the event payment in full is
not received from SBCS on or before ninety (90) days following the Due
Date (less any amounts disputed pursuant to Section 9.5), Williams
shall have the right, after giving SBCS ten (10) days written notice,
to suspend all or any portion of the Services to SBCS. If only a
portion of the Services are suspended and SBCS does not cure within
ten days of such partial suspension of Service, Williams may suspend
all or any additional portion of the Services to SBCS. Williams may
continue suspension until such time as SBCS has paid in full all
charges (less any amounts disputed pursuant to Section 9.5), then due,
including any late fees as specified herein.
9.7 Adjustments. With respect to tariffed Third Party or SBC
LEC Affiliate services, or Off-Net InterLATA Service, Williams may
make billing adjustments for a period of two (2) years after the Due
Date of an invoice or two years after the date a service is rendered,
whichever is later.
10. Events of Default.
A party may terminate this Agreement immediately if the other party (i) ceases
to do business as a going concern; (ii) makes a general assignment for the
benefit of creditors in lieu thereof; (iii) is unable or admits in writing its
inability to pay its debts as they become due; (iv) is insolvent, bankrupt or
the subject of a receivership; (v) authorizes, applies for or consents to the
appointment of a trustee or liquidator of all, or a substantial part, of its
assets, or has proceedings seeking such appointment commenced against it which
are not terminated within ninety days of such commencement; (vi) files a
voluntary petition under any bankruptcy or insolvency law or files a voluntary
petition under the reorganization or arrangement provisions of the laws of the
United States pertaining to bankruptcy or any similar law of any jurisdiction
or has proceedings under any such law instituted against it which are not
terminated within 60 days of such commencement or (vii) has any substantial
part of its property subjected to any levy,
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seizure, assignment or sale for or by any creditor or governmental agency
without such levy, seizure, assignment or sale being released, lifted,
reversed, or satisfied within ten days.
11. Use of Services. Williams' obligation to provide Services to SBCS is
subject to the conditions that neither SBCS nor its Affiliates shall use the
Services for any unlawful purpose and that SBCS shall include in any tariffs or
contracts with its customers for the provision of service a condition that the
customers, their officers, directors, employees and agents shall not use the
service for any unlawful purpose.
12. Compliance with Section 211 of the Communications Act. The Parties hereby
agree that this Agreement and related documents, to the extent it is subject to
FCC regulation, are inter-carrier agreements not subject to the filing
requirements of Section 211(a) of the Communications Act of 1934, as amended.
****
14. Warranty and Disclaimer of Warranty.
Williams warrants that On-Net Services shall be provided to SBCS in
accordance with the applicable Technical Specifications set forth in
Schedule B. Williams shall use all commercially reasonable efforts under
the circumstances to remedy any delays, interruptions, omissions, mistakes,
accidents or errors in the Services and restore such Services to comply
with the terms hereof. THE FOREGOING WARRANTY, THE CREDITS, DELAY REMEDIES
AND OTHER PROVISIONS OF THIS AGREEMENT FOR THE FAILURE TO COMPLY WITH THIS
WARRANTY ARE THE EXCLUSIVE WARRANTY AND REMEDY PROVIDED TO SBCS FOR BREACH
OF THIS WARRANTY AND ARE IN LIEU OF ALL OTHER WARRANTIES OR REMEDIES,
WHETHER EXPRESS, IMPLIED OR STATUTORY, INCLUDING WITHOUT LIMITATION,
IMPLIED WARRANTIES OF MERCHANTABLITY AND FITNESS FOR A PARTICULAR PURPOSE.
15. Y2K Compliance and Test Requirements.
15.1. Williams represents and warrants that the On-Net Services to be
provided pursuant to this Agreement (including any software, firmware or
other products provided by Williams in connection therewith), will (a) have
any date handling
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characteristics provided in any agreed-upon description or specifications
therefor, (b) include the proper transmission of date data, like other
data, in accordance with any agreed-upon description or specifications
therefor, and (c) not experience or cause material computational, display,
storage or other errors, or fail to be available, due to the inability to
accurately or correctly handle dates, including dates in the year 2000 and
February 29, 2000. Williams does not represent or warrant that the On-Net
Services will be interoperable with software not provided by Williams that
may be used by SBCS to deliver data to Williams' Services, receive data
from Williams' On-Net Services or otherwise interact with Williams' On-Net
Services, or any other Service provided under this Agreement.
15.2. In the event of a breach of the foregoing representation and
warranty, SBCS' sole remedy will be for Williams to use reasonable efforts
promptly to remedy such breach. In such event, Williams shall make the
necessary modifications in the provision of the On-Net Services pursuant to
a schedule to be agreed to by the Parties. Williams agrees that there shall
be no additional charges to SBCS for such modifications.
15.3 SBCS acknowledges receipt of copies of Williams' Year 2000 Readiness
Disclosure which will be updated monthly and posted on the Williams
Internet Web Site at http://www.twc.com beginning no later than January 31,
1999 and Williams' Year 2000 Program Office Compliance Manual. SBCS agrees
that such documents serve as evidence of year 2000 compliance and/or the
compliance techniques and test procedures it has followed or intends to
follow to comply with all of the obligations contained herein. Williams
represents that the implementation of its Year 2000 Program Plan is
currently on schedule to meet the planned compliance date of June 30, 1999.
16. Indemnification
16.1 Each Party including any of its Affiliates shall defend, indemnify and
hold harmless the other Party, including any of its Affiliates, officers,
directors, shareholders, employees and agents, from and against any and all
claims, damages, losses, liabilities whatsoever, including reasonable legal
fees and any damages, arising out of, caused by, related to or based upon a
claim (a) by a third party for physical property damage, personal injury,
or wrongful death, whether sounding in tort or contract, claim of
defamation, invasion of privacy or similar claim based on any act or
omission of a the other Party, its employees, agents or Third Party
contractors in connection with this Agreement, (b) that the Indemnifying
Party's products or services (excluding Local Access Service, Off-Net
InterLATA Service, or any other Third Party Service) infringe or violate
any copyright, trade secret, trademark or service mark, United States
patent or other proprietary right of a Third Party, or (c) that the
claimant was "slammed" or "crammed," as those terms are understood in the
industry.
With respect to Third Parties, including any SBC LEC Affiliate,who use
Services through SBCS, SBCS shall defend, indemnify and hold Williams,
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including any of its Affiliates, officers, directors, shareholders,
employees and agents, and any Provider, harmless from and against any and
all claims, damages, losses, liabilities whatsoever, including reasonable
legal, fees and any damages, arising out of, caused by, related to or based
upon a claim that the Service was defective or on account of any failure to
provide Services, except to the extent of Williams' gross negligence or
willful misconduct.
With respect to the content of any transmission by SBCS, its
Affiliates (including any SBCS LEC Affiliate) or its End Users using the
Services, SBCS shall defend, indemnify and hold Williams, including any of
its Affiliates, officers, directors, shareholders, employees and agents,
and any Provider harmless from and against any and all claims, damages,
losses, liabilities whatsoever, including reasonable legal, fees and any
damages, arising out of, caused by, related to or based upon a claim that
such content was unlawful or violated any statutory or common law rights,
e.g. copyright.
16.2 The indemnified Party shall promptly notify the indemnifying Party in
writing of any claim which the indemnified Party reasonably considers
subject to the indemnity, giving a description in reasonable detail of the
relevant facts on which the claim is based. The indemnified Party shall to
provide the indemnifying Party with all reasonable assistance in
investigating, defending, and pursuing such claim at the indemnifying
Party's expense. The indemnifying Party shall not be required to indemnify
the indemnified Party for any settlement entered into without its consent
except to the extent set forth in Section 16.4.
16.3 The indemnifying Party shall assume the defense of any such claim or
any litigation resulting from such claim and shall have absolute control
over the litigation, including, but not limited to, the selection of
counsel, the legal strategy with respect to the claim, and the settlement
of such claim, either before or after litigation has commenced.
Notwithstanding the preceding sentence, (a) if there is a reasonable
probability that a claim may materially and adversely affect the
indemnified Party other than as a result of money damages or other money
payments, the indemnified Party shall have the right, at its own expense,
to defend or co-defend such claim, except that the indemnifying Party shall
continue to control the defense, and (b) to the extent any defense
applicable to the indemnified Party shall involve a conflict of interest
with the indemnifying Party, the indemnified Party shall have the right to
control such defense at the expense of the indemnifying Party.
16.4 If, within a reasonable period of time after notice of any claim, the
indemnifying party fails to defend such claim, the indemnified Party shall
have the right to undertake the defense, or settlement of such claim on
behalf of and for the account and at the risk of the indemnifying Party,
subject to the right of the indemnifying Party to assume the defense of
such claim at any time prior to settlement, compromise or final
determination of the claim, except to the extent set forth in the last
sentence of Section 16.3.
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16.5 In the case of a claim of infringement covered by Section 16.1
where a court of competent jurisdiction finds such infringement, the
indemnifying Party shall, at its option and expense, use all
reasonable efforts either (a) to procure for the indemnified Party the
right to continue to use the product, service or other item as
provided for herein, (b) to modify the infringing product, service or
other item so that it is noninfringing, without materially altering
its performance or function, or (c) to replace the infringing product,
service or other item with a substantially equivalent noninfringing
item.
16.6 Notwithstanding the foregoing, if a claim of infringement covered
by Section 16.1 also is covered by Section 9.1 of the Network
Development and Operation Agreement, and the indemnifying Party under
this Agreement is the indemnified Party under the Network Development
and Operation Agreement, then Section 9 of the Network Development and
Operation Agreement, and not this Section 16, shall apply.
17. Tariffs.
17.1 SBCS shall pay all applicable tariff charges including, but not
limited to, fixed charges, feature charges, , access facility charges,
and installation and other non-recurring charges. Additionally, SBCS
will pay, in accordance with applicable tariffs, any taxes, levies,
surcharges, or other costs that Williams is obligated to pay to any
governmental entity or other third party, provided that (i) such
obligation is imposed by legislation or regulation, and (ii) such
obligation arises out of the use of Services provided under this
Agreement.
17.2. Subject to the terms and conditions of the NDOA, Williams may
modify or withdraw tariffs from time to time which may result in the
discontinuation of any Service without Williams' liability.
17.3. In the event Williams withdraws its filed Tariffs the Tariff
terms and conditions in effect on the date of such withdrawal will
continue to apply to this Agreement. After withdrawal of the
applicable Tariffs, the terms of this Agreement will control over any
inconsistent provision in the former Tariffs, subject to standard
contract interpretation rules. Tariffs not withdrawn shall continue to
have the same force and effect.
18. SBCS Responsibilities.
18.1 SBCS will not be relieved of any duty, obligation or
responsibility hereunder due to the fact that Service is ultimately
provided to End-Users.
18.2 SBCS represents and warrants that it will comply with
all applicable laws and applicable rules and regulations promulgated
by federal and
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state regulatory agencies, including, but not limited to, those
concerning interexchange carrier selection. SBCS represents and
warrants that it will not submit to Williams an End User ANI for
activation without obtaining and maintaining a proper PIC Authorization
that complies with all applicable federal and state laws, rules and
regulations. SBCS shall produce for Williams's inspection, at SBCS's
expense, any PIC Authorization **** after Williams's oral or written
request, or within any shorter period required by a Local Access
Provider or regulatory agency. When a request for the PIC Authorization
is made by a Local Access Provider or regulatory agency, Williams will
cooperate with SBCS to obtain any reasonable extension of time SBCS may
require and to assist SBCS in the defense of any slamming or other
similar charge of unlawful actions by SBCS.
18.3 SBCS' failure to comply with Section 18.2 above will not
constitute a material breach of this Agreement. In such event Williams
may refuse to activate additional ANIs under SBCS's account if SBCS is
unable to cure such non-compliance **** of notice from Williams of such
non-compliance. Williams will resume accepting ANIs only after SBCS
produces evidence reasonably satisfactory to Williams that it is in
compliance with Section 18.2.
18.4 SBCS will reimburse Williams for any charge assessed by
a LEC for processing a PIC change due to a SBCS initiated dispute.
18.5 SBCS will be solely responsible for End User
solicitation, service requests, creditworthiness, SBCS service,
billing and collection, unless otherwise specifically set forth in
another Alliance Agreement. SBCS remains responsible for compliance
with all terms and conditions of this Agreement, including, but not
limited to, payment responsibilities, without regard to SBCS' ability
to charge for Services used by End Users or to collect payment from
End Users..
18.6 SBCS will be financially responsible for usage generated
by each End User ANI activated by Williams pursuant to a request by
SBCS until such ANI is presubscribed to another interexchange carrier
or SBCS requests that service be terminated. SBCS may request Williams
to block an ANI upon the End User's failure to pay SBCS, subject to
SBCS' prior certification to Williams that it has given the End User
any notice required by any applicable statute, rule or regulation.
SBCS will reimburse Williams for reasonable expenses incurred to block
an ANI. ****
18.7 SBCS has sole responsibility for installation, testing
and operation of facilities, services and equipment ("SBCS
Facilities") other than those specifically provided by Williams as
part of the Service as described in a Service Order. In no
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event will the untimely installation or non-operation of SBCS
Facilities relieve SBCS of its obligation to pay charges for the
Service after the Actual Start Date.
19. Intellectual Property Rights. Unless otherwise specifically agreed in
writing by the Parties, each Party shall retain all right, title and interest
in any intellectual property associated with the provision of Services under
this Agreement. If it should be necessary for a Party to practice any patent,
copyright, trade secret or other non-trademark intellectual property of the
other Party to avail itself of the Services to be provided hereunder, the
Parties shall negotiate in good faith a license with respect to such
intellectual property. Each Party acknowledges that the other Party's name is
proprietary to the other Party. This Agreement does not transfer, and confers
no right to use, the name, trademarks (including service marks), patents,
copyrights, trade secrets, other intellectual property or CIC of either Party,
except as expressly provided herein. Neither Party shall take any action
inconsistent with the intellectual property rights of the other Party.
20. Title to Equipment. Subject to SBCS' rights under Section 12 of the Master
Alliance Agreement, this Agreement shall not, and shall not be deemed to,
convey to SBCS title of any kind to any of the transmission facilities, digital
encoder/decoders, telephone lines, microwave facilities or other facilities
utilized in connection with the Services. Any equipment provided by SBCS must
be itemized on a schedule listing all such SBCS-provided equipment and appended
to the Service Order to which use of that equipment relates ("SBCS Equipment
Inventory"). Williams shall not be obligated to provide any Services for SBCS
if SBCS will be providing any of its own equipment unless and until such
equipment is itemized on the applicable SBCS Equipment Inventory.
21. SBCS Equipment. To the extent permitted by the Act, SBCS may, at its
option, choose to deploy its own switches and related management systems.
Williams will permit interconnection of these switches with SBCS' own network
or the Williams Network as required. These switches may, in accordance with
Schedule C, be collocated with Williams' switches in a Williams POP.
22. Merger/Integration. This Agreement, together with the other agreements
referred to herein and the schedules attached hereto, constitutes the entire
agreement, and supersedes all other prior agreements and undertakings, both
written and oral, among the Parties with respect to the subject matter hereof.
23. Processes to be Developed. By May 1, 1999 the Parties shall develop jointly
and maintain a procedures manual that shall address the following processes to
be used by the Parties: (a) Service Orders, (b) Addition of or Changes to
Service Metrics (subject to the mutual agreement of the parties), (c)
procedures to be followed to request or make inquiries concerning restoration
of Service Outages, (d) the form and medium by which Williams will report the
availability of dedicated service elements for acceptance testing by the SBCS,
(e) training, (f) billing, including billing detail, (g) optimization, (h)
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network management, (i) dispute resolution and escalation, (j) pre-bill
certification; (k) traffic, demand and capacity forecasts for voice and for
data (l) description of future services and mechanism for inclusion into
Agreement, (m) reports, including those set forth in Section __ of the NDOA,
and (n) all similar administrative and logistical matters related to the
provision of and payment for Services. The manual will be specific to SBCS's
needs and usage patterns; and, the parties shall update it as necessary.
24. Conflict of Law. Nothing in this Agreement shall obligate any Party to
take any action that violates any applicable governmental law, regulation or
order, including, but not limited to, the Act. In the event that either Party
believes that a project/Service would violate the Act or any other applicable
law, regulation or order, the Parties shall arrange for the appropriate
individuals within their respective organizations to consult with the other
Party to ascertain whether the project/Service will violate any such law,
regulation or order and, if so, how to bring the project/Service into
compliance with such law, regulation or order.
25. End-to-End Service. SBCS desires Williams to manage all relationships
with any LEC or alternate interexchange service provider to the extent
necessary to provide end-to-end service. SBCS acknowledges that Williams is
unable to guarantee the level of service provided by any such Local Access
Provider or Third Party provider, although Williams agrees that it will use its
reasonable best efforts to manage these relationships in such a manner so as to
ensure that the services meet the performance guarantees, if any, provided by
such Local Access Provider or alternate interexchange service provider.
26. Switched Services Forecasting.
****
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****
27. Performance Remedies SLAs..
27.1 General Service Level Policy. It is the objective of the Parties
to provide services pursuant to this Agreement and ultimately for SBCS
to provide services in turn to End Users that establishes industry
leadership with respect to competing products. Given the dynamic
nature of the telecommunications industry, the performance standards
necessary to meet that objective may improve over time. Thus, the
Parties agree to evaluate the performance standards in Schedule B, as
well as the remedies in this section, on an ongoing basis pursuant to
the NDOA to verify that this objective is being met and to change
accordingly the performance standards for the On-Net Services and,
where appropriate, the remedies for failing to meet such standards, to
assure, to the extent practicable, that the Parties are industry
leaders.
27.2 Failure to Meet Certain Due Dates.
27.2.1 The Parties agree that the following list of "ready dates" are
critical to the success of the relationship:
****
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****
27.3 Network-based Service Level Commitments for On-Net Service.
The table below sets forth the network-level SLAs that Williams will
provide for voice, data, and private line services. The performance
and reliability metrics for each service are set forth in Schedule B
of this Agreement. Network performance shall be computed by averaging
the service levels provided by all network elements (ports, switched,
circuits, etc.) used to provide service to SBCS or its customers.
Events that are excluded from these measurements are those defined in
the Force Majeure definition.
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****
27.3 Strategic Customer Service Level Commitments
Williams will also provide Service Level Agreements for individual
customers designated by SBCS as strategic, the standards for which
shall be mutually agreed upon pursuant to Section 23. SBCS is deemed
to be a strategic customer to the extent of its official corporate
services and where SBCS is itself the End User. The following table
specifies the metrics for individual private line, ATM, and Frame
Relay subscriber elements (e.g., private lines, data ports or PVCs,
etc.) for On-Net Service as well as the remedies for Williams' failure
to meet those metrics. The definition of the metrics for each On-Net
Service is set forth in Schedule B of the TSA. These performance
metrics are computed independently and separately each month for each
strategic SBCS customer. Remedies are applied on a per-customer basis.
Events that are excluded from these measurements are those defined in
the Force Majeure definition except that cable cuts and power outages
shall not be excluded. In the event that SBCS pays a customer
designated as strategic under this Section 27.3 an outage credit based
upon interruption of On-Net Service caused by a cable cut or power
outage (as
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defined in the definition of Force Majeure Event herein), and such
credit is commercially reasonable and is consistent with SBCS's
existing practice, Williams shall reimburse SBCS the amount of the
credit. The preceding sentence shall not apply where such cable cut or
power outage affects access facilities provided by a Third Party
including an SBC LEC Affiliate.
****
27.5 Individual Case Basis Service Levels
Williams and SBCS agree that, on a case-by-case basis, the service
level and/or the remedies for strategic or high value customers may be
have to be increased in order to win or retain a customer's business.
The Parties agree that, by mutual agreement, a higher level of
performance or stricter remedies than those set forth in this
Agreement may be offered to some SBCS customers.
27.6 Service Outage Credits.
SBC and Williams agree to take reasonable efforts to proactively
monitor the performance of its customers' circuits in order to take
corrective action before the customer's perceived service quality is
damaged. The Parties also recognize that on occasion individual,
non-strategic customers may suffer from chronically poor service
before the problem is identified or remedied. In these instances, SBC
may request a service outage credit from Williams to be passed through
to the customer in order to salvage a customer-perceived quality
problem. If the service problem is due to a fault in the Williams
Network, and the service relationship with the customer is in
jeopardy, Williams will provide a **** on the monthly
charge to SBC for that circuit. Chronically poor service is defined as
****
27.7 General Provisions regarding Outage Credits.
SBCS shall not receive an Outage Credit if the interruptions are (a)
of a duration of less than the threshold associated with a particular
On-Net Service, (b) caused by the negligence or willful misconduct of
SBCS, its Affiliates, or others authorized by SBCS to use the services
under this Agreement, (d) caused by the failure of access to the
Williams Network, (e) resultant from scheduled maintenance where SBCS
has been notified of scheduled maintenance in advance, or (f) the
result of a Force Majeure Event or a Legal or Regulatory Event. All
Outage Credits shall be credited on the next monthly invoice for the
affected Service. The remedies and credits set forth in this Section
27 shall be the sole
37
<PAGE> 38
and exclusive remedy of SBCS for any failure of Williams resulting in
such remedy or credit.
28. Interference. SBCS shall not use nor permit others to use the Service
in a manner that could interfere with Services provided to others or that could
harm the facilities of Williams or others.
29. Interconnections. Service furnished by Williams may be connected with
the services or facilities of other carriers. Except as otherwise provided in
this Agreement, SBCS shall be responsible, ****, for all charges billed by other
carriers in connection with the use of Service. Any special equipment or
facilities necessary to achieve compatibility between carriers are the sole
responsibility of SBCS, except as may otherwise be specifically provided in this
Agreement or subject of the Master Alliance Agreement.
30. Legal Compliance; Remedies for Non-Compliance.
30.1 SBCS represents and warrants that (a) it shall have
appropriate certificates of public convenience and necessity, licenses
and all required regulatory approvals and that it will be legally
authorized to provide service as contemplated under the terms and
conditions of this Agreement before such service is requested by SBCS
and (b) it will immediately notify Williams in the event such
certificates of public convenience and necessity, licenses or other
required regulatory approvals should be revoked, suspended or, for
whatever reason, cease to be effective.
30.2 SBCS's failure to comply with paragraph 30.1 above will
not constitute a material breach of this Agreement, however Williams
may reject End User ANIs submitted by SBCS for placement under its
account if SBCS is unable to cure such non-compliance **** of notice
from Williams of such non-compliance. Williams will resume accepting
ANIs only after SBCS produces evidence satisfactory to Williams that it
is in compliance with paragraph 30.1.
31 Training. Williams will train or arrange for the training of SBCS-
designated personnel so that SBCS can fully employ the various features and
functions of the Williams Network and can interface with Williams' personnel in
maintaining and monitoring the Williams Network. Williams will provide the
training to the SBCS personnel sufficiently in advance of **** so that they are
in the position to monitor the Williams Network and interface with Williams'
personnel once the Williams Network is ready for customer service. Williams
further agrees to maintain the training facility and to providing training to
SBCS personnel throughout the Term of this Agreement, unless otherwise advised
by SBCS. Williams may charge SBCS a fee for providing such training in
accordance with the Alliance Pricing formulas, but the expenses of trainees,
including travel, per diems, salary, etc. shall be borne by SBCS.
38
<PAGE> 39
The Parties shall mutually agree on the number of SBCS personnel to be trained
at any one time and the appropriate training period and curriculum.
32. SS7 Signaling and Local Number Portability. Prior to selecting a
solution for either SS7 signaling or local number portability for its switched
network, Williams shall evaluate the functionality, cost and overall
availability of the SS7 and the local number portability solutions employed by
Southern New England Telephone Company. If Williams selects the Southern New
England Telephone Company solution, the terms and conditions under which
Williams will obtain the SS7 service or the local number portability solution
will be negotiated between Williams and Southern New England Telephone Company.
However, the rates for those services shall be no more than the rates Williams
would pay if the rates were set pursuant to the pricing provisions of the
Master Alliance Agreement.
33. General Applicability of Provisions. Unless expressly excluded, all
terms of this Agreement are applicable to all sections of this Agreement,
notwithstanding the specific reference to such a term in any other particular
section.
34. Master Alliance Agreement. The following provisions of the Master
Alliance Agreement are incorporated herein, with the provisions applicable to
the Parties thereto applicable to the Parties hereto.
34.1 Acknowledgment of Regulatory Considerations. Section 2 of the
Master Alliance Agreement.
34.2 Amendment. Section 15.7 of the Master Alliance Agreement.
34.3 Assignment. Section 15.2 of the Master Alliance Agreement.
34.4 Confidential Information. Section 10 of the Master Alliance
Agreement.
34.5 Costs and Expenses. Section 15.6 of the Master Alliance
Agreement.
34.6 Dispute Resolution. Section 9 of the Master Alliance Agreement.
34.7 Execution. Section 15.10 of the Master Alliance Agreement.
34.8 Force Majeure. Section 15.4 of the Master Alliance Agreement.
34.9 Governing Law. Section 15.16 of the Master Alliance Agreement.
34.10 Headings. Section 15.8 of the Master Alliance Agreement.
34.11 Insurance. Section 11.1 of the Master Alliance Agreement.
34.12 No Solicitation. Section 11.2 of the Master Alliance Agreement.
34.13 Publicity. Section 15.9 of the Master Alliance Agreement.
34.14 Relationship of Parties. Section 15.13 of the Master Alliance
Agreement.
34.15 Rules of Construction. Section 15.17 of the Master Alliance
Agreement.
34.16 Severability. Section 15.15 of the Master Alliance Agreement.
34.17 Third Party Warranties. Section 15.5 of the Master Alliance
Agreement.
34.18 Limitation of Liability. Section 15.12 of the Master Alliance
Agreement.
Without limiting the foregoing, Section 15.18 of the Master Alliance Agreement
incorporates Sections 2, 8, 9, 10, 13, 14, and 15 (except 15.11 and 15.14) into
this TSA.
35. Notice
39
<PAGE> 40
Any notice, request, instruction or other document to be given hereunder by any
Party to any other Party under any section of this Agreement shall be in
writing and shall be deemed given (a) upon receipt, if delivered personally or
by telex or facsimile, (b) the next day, if by express mail, or (c) three days
after being sent, if by registered or certified mail, return receipt requested,
postage prepaid, to the following addresses (or such other address for a Party
as shall be specified by like notice, provided that such notice shall be
effective only after receipt thereof):
If to SBCS: Southwestern Bell Communications Services, Inc.
5850 West Las Positas Boulevard
Pleasanton, CA 94588
Attn: Ms. Virginia Vann, President
Telephone Number: 925 468-5000
Facsimile Number: 925 468-4700
and SBC Operations, Inc.
530 McCullough
San Antonio, TX 78215
Attn: J. Michael Turner, President
Fax: 210 886-3015
Telephone: 210 886-3000
with a copy SBC Communications Inc.
(which shall 175 East Houston Street, 11th Floor
not constitute San Antonio, TX 78205
notice) to: Attn: General Attorney - Mergers & Acquisitions
Telephone Number: (210) 351-2165
Facsimile Number: (210) 351-3488
If to Williams: Williams Communications, Inc.
One Williams Center, Suite 26-B
Tulsa, OK 74172
Attn: Contract Administrator
Telephone Number: (918) 573-6277
Facsimile Number: (918) 573-6578
with a copy Williams Communications, Inc.
(which shall One Williams Center, Suite 4100
not constitute Tulsa, OK 74172
notice) to: Attn: General Counsel
Telephone Number: (918) 573-4205
Facsimile Number: (918) 573-3005
40
<PAGE> 41
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their respective authorized representatives as of the date first
written above.
SBC OPERATIONS INC. WILLIAMS COMMUNICATIONS, INC.
/s/ J. MICHAEL TURNER /s/ GORDON MARTIN
- -------------------------------------- --------------------------------------
Signature of Authorized Representative Signature of Authorized Representative
J. MICHAEL TURNER Gordon Martin
- -------------------------------------- --------------------------------------
Printed Name Printed Name
EVP-CORP. PLANNING AND CAPITAL
MANAGEMENT Senior Vice President
- -------------------------------------- --------------------------------------
Title Title
SOUTHWESTERN BELL
COMMUNICATIONS SERVICES, INC.
/s/ VIRGINIA L. VANN
- --------------------------------------
Signature of Authorized Representative
VIRGINIA L. VANN
- --------------------------------------
Printed Name
PRESIDENT
- --------------------------------------
Title
41
<PAGE> 42
Schedule A-1
Williams Network Pricing Schedule
PRIVATE LINE PRICE CAPS
(in dollars per month per VGE/V&H Mile)
****
1
<PAGE> 43
<TABLE>
<CAPTION>
Non-Recurring Charges Cap DS-1 DS-3 OC-3 OC-12 OC-48
---- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C>
New Order Installation ****
Order Change (1st change free)
Order Cancellation
Pre-Engineering
Post-Engineering
ASR (new or disconnect) Special Access
ASR Supplement
Order Expedite
Reconfiguration
Additional Installation Maintenance Engineering
Additional Installation Maintenance Engineering (After Hours)
</TABLE>
Other Charges Cap
Cross-Connect Charges
<TABLE>
<CAPTION>
Monthly Securities Non-Securities
<S> <C> <C>
DS-1 ****
DS-3
OC-3
OC-12
OC-48
</TABLE>
2
<PAGE> 44
The parties shall reexamine these Non-Recurring Charges and Other Charges by
May 1, 1999 and make such adjustments as are necessary to conform them to
market rates in accordance with the provisions of the Master Alliance Agreement
for Alliance Pricing.
Cross connect charges apply when SBCS is connecting its collocated equipment
through the Williams' cross connect panel to a carrier other than Williams.
Cross connect charges specifically do not apply when the cross connect is part
of Service provided by Williams. A cross-connect also occurs between two
collocated customers who are tied together via a cross-connect at the Williams
common demarcation point. Two or more collocated customers are not allowed to
directly terminate cross-connects on each others equipment without connecting
at the Williams demarcation point. Cross connect charges do not apply to IXP or
Telehousing Services.
The cost associated with the cross-connect is per circuit.
Installation charges shall apply to the normal installation of equipment
necessary to provide the requested service to the point of demarcation at the
Customer's premises. Additional installation charges shall apply when Seller is
required to install equipment other than that normally required to provide the
service or when Customer requests special equipment.
Order Cancellation (post engineering) charges apply when a customer cancels a
circuit order after design but prior to installation.
Order Expedite charges apply when a customer requests a circuit due date that
is earlier then Williams' standard interval.
Reconfiguration charges apply when a customer requests modifications to a
circuit (change in end points for example) after the circuit has been
engineered.
Business Day as defined in the TSA definitions. Normal business hours are 8am -
5pm.
3
<PAGE> 45
SBC FRAME RELAY
NNI (SWITCH-TO-SWITCH) PRICE CAPS
I. Port Charges - MRC
SBC FRAME RELAY PRICE CAPS
****
4
<PAGE> 46
****
5
<PAGE> 47
SBC FRAME RELAY
UNI (RESELLER) PRICE CAPS
II. Port Charges - MRC
****
6
<PAGE> 48
****
7
<PAGE> 49
****
The parties shall reexamine these Frame Relay Ancillary Charges by May 1, 1999
and make such adjustments as are necessary to conform them to market rates in
accordance with the provisions of the Master Alliance Agreement for Alliance
Pricing.
****
Configuration charges are applied when the CIR of PVCs for basic Frame Relay
Service are changed or when SBCS desires a change to the CIR of PVCs in an
already
8
<PAGE> 50
established Flex CIR Schedule (i.e. SBCS will not be charged the **** fee for
changes to the CIR when establishing its initial Flex-CIR schedule).
Order Cancellation Charges apply when SBCS cancels an order after design but
prior to installation.
PVC Order Change Charges apply after design but prior to installation on a per
PVC basis when SBCS makes a change to the PVC size ordered. If the PVC has been
installed and accepted, SBCS will be charged for a new PVC installation.
Port Order Change Charges apply after design but prior to installation on a per
port basis when SBCS requests to change the port size ordered. If the Port has
been installed and accepted, SBCS will be charged for a new port installation.
9
<PAGE> 51
ATM PRICE CAPS
****
ATM PRICING SCHEDULES (FLAT RATE)
ATM Transport includes both recurring and non-recurring charges.
Recurring Charges
ATM pricing is based on flat monthly fee assessed per node, which includes a
flat port charge based on the port connection speed and a charge for each PVC's
CIR going out from the port. ATM Transport Service is priced simplex, meaning
that the price for a PVC's CIR includes the egress CIR. The CIR for the CBR
class of service (CoS) is the peak cell rate (PCR). The CIR for the VBRnrt
class of service is the sustained cell rate (SCR). The pricing below reflects
both VCCs and VPCs.
CIRs increments are available in 1 Meg increments up to 40Mbps for DS3 ports, 5
Meg increments up to 150 Mpbs for OC3 ports and 25 Meg increments up to 600
Mbps for OC12 ports.
****
10
<PAGE> 52
****
11
<PAGE> 53
ATM PRICE CAPS
****
ATM PRICING SCHEDULES (FLAT RATE)
ATM Transport includes both recurring and non-recurring charges.
Recurring Charges
ATM pricing is based on flat monthly fee assessed per node, which includes a
flat port charge based on the port connection speed and a charge for each PVC's
CIR going out from the port. ATM Transport Service is priced simplex, meaning
that the price of a PVC's CIR includes the egress CIR. The CIR for the CBR
class of service (CoS) is the peak cell rate (PCR). The CIR for the VBRnrt
class of service is the sustained cell rate (SCR). The pricing below reflects
both VCCs and VPCs.
CIRs increments are available in 1Meg increments up to 40Mbps for DS3 ports, 5
Meg increments up to 150 Mpbs for OC3 ports and 25 Meg increments up to 600
Mbps for OC12 ports.
****
12
<PAGE> 54
****
13
<PAGE> 55
ATM PRICE CAPS
****
ATM PRICING SCHEDULES (FLAT RATE)
ATM pricing is based on flat monthly fee assessed per node, which includes a
flat port charge based on the port connection speed and a charge for each PVC's
CIR going out from the port. ATM Transport Service is priced simplex, meaning
that the price for a PVC's CIR includes the egress CIR. The CIR for the CBR
class of service (CoS) is the peak cell rate (PCR). The CIR for the VBRnrt
class of service is the sustained cell rate (SCR). The pricing below reflects
both VCCs and VPCs.
CIRs increments are available in 1 Meg increments up to 40Mbps for DS3 ports, 5
Meg increments up to 150 Mpbs for OC3 ports and 25 Meg increments up to 600
Mbps for OC12 ports
****
14
<PAGE> 56
****
15
<PAGE> 57
ATM PRICE CAPS
****
ATM PRICING SCHEDULES (FLAT RATE)
ATM pricing is based on flat monthly fee assessed per node, which includes a
flat port charge based on the port connection speed and a charge for each PVC's
CIR going out from the port. ATM Transport Service is priced simplex, meaning
that the price for a PVC's CIR includes the egress CIR. The CIR for the CBR
class of service (CoS) is the peak cell rate (PCR). The CIR for the VBRnrt
class of service is the sustained cell rate (SCR). The pricing below reflects
both VCCs and VPCs.
CIRs increments are available in 1 Meg increments up to 40Mbps for DS3 ports, 5
Meg increments up to 150 Mpbs for OC3 ports and 25 Meg increments up to 600
Mbps for OC12 ports.
****
16
<PAGE> 58
****
17
<PAGE> 59
ATM Non Recurring On-Net Ancillary Charges
Non-recurring charges include installation, configuration changes,
cancellation, and order changes that may be incurred for the Port or PVC.
****
The parties shall reexamine these non-recurring charges by May 1, 1999 and make
such adjustments as are necessary to conform them to market rates in accordance
with the provisions of the Master Alliance Agreement for Alliance Pricing.
Configuration change charges are applied when the parameters of a PVC or VP are
changed.
Order Cancellation Charges apply when a PVC, VP or Port has been ordered and
needs to be canceled prior to the Service having been installed and accepted.
Port Order Change Charges apply after design but prior to installation on a per
port basis when Customer requests to change the port size ordered. If the Port
has been installed and accepted, Customer will be charged for a new port
installation.
PVC Order Change Charges apply after design but prior to installation on a per
PVC basis when Customer makes a change to the PVC size ordered. If the PVC has
been installed and accepted, Customer will be charged for a new PVC
installation.
18
<PAGE> 60
****
19
<PAGE> 61
****
20
<PAGE> 62
****
The prices stated on this page are only estimates, and are subject to change.
The parties will develop, as a part of the real estate forecasting mechanism, a
process which will allow SBCS to receive a firm price some time before proposed
occupancy of Space, which price is then only subject to change to the extent of
any change of any Cost in the Cost Plus model.
21
<PAGE> 63
Fixed Voice Transport Price Caps
****
SBCS shall pay **** any PIC processing fees charged by Local Exchange carriers.
****
22
<PAGE> 64
SCHEDULE A-2
****
23
<PAGE> 65
****
24
<PAGE> 66
SCHEDULE A-3
WIRELESS LOCAL ACCESS SERVICE DESCRIPTION
OVERVIEW
Through a recent agreement with WinStar, Williams provides local wireless
transmission services in the 38 GHz frequency band. With licenses in more than
160 major markets, including all of the top 50 cities, WinStar's network
footprint is planned to cover more than 60% of America's small to medium-sized
businesses. Exhibit A lists the cities designated as target markets.
1. Topology
WinStar's point-to-point local wireless service uses two dishes to transmit and
receive signals within a five-mile range. The service is designed to support
**** availability, with a **** rate and a ****-bit error rate.
The network topology consists of a centralized switching platform that provides
all of the features, services and switching functionality for customers in a
particular network serving area. Each switch delivers services to and from
Williams customers through interconnect facilities to and from the LEC, IXCs
and Internet Peering Points to which WinStar has connections. Today, switches
may connect to Hubs in both a hub-and-spoke and ring topology. Hubs connect to
Lit Buildings in a hub-and-spoke topology.
2. Hubs and Lit Buildings communicate via multiple DS3/DS1 radio links in the
38-40 Ghz portion of the spectrum. The Hubs function as concentrators for
these milliwave links, providing DS3 or DS1 service for Lit Buildings
within the Hub service area. The traffic from the Lit Buildings is bundled
into multiple DS3 links over a fiber SONET ring backbone, or connected by
lower frequency radio shots (i.e., 18 and 23 Ghz currently and 6 and 11 Ghz
in the future).
3. The network architecture features Lit Buildings as customer access points
for traffic, with Hubs transmitting and receiving traffic from Lit
Buildings via milliwave links. Hubs concentrate, transmit and receive that
traffic over fiber links to central office switch sites, other Hubs and
points of collocation (each a point of presence).
PRICING
Williams new Wireless Services are priced to be competitive for the following
applications:
(1) End-to-End connectivity in which the mileage portion of the local loop
exceeds 10 miles. This service is not competitive for local loops in the
zero-mile range.
(2) Intra-City Connectivity in which there is no wide area network connectivity
required.
SBCS Proprietary Price Caps for Williams Local Wireless Services can be found
in Exhibit B.
25
<PAGE> 67
OTHER TERMS AND CONDITIONS
The other terms and conditions governing the use of Wireless Local Access
provided by WinStar shall be as set forth in WinStar's general terms and
conditions of service as may be modified by the mutual agreement of SBCS,
Williams, and WinStar.
26
<PAGE> 68
EXHIBIT A
TARGET MARKET CITIES
****
27
<PAGE> 69
WIRELESS LOCAL ACCESS
PRICING
****
28
<PAGE> 70
Schedule B: Williams Network Technical Specifications
1.1. Private Line
1.1.1. TRANSMISSION RATES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
PRIVATE Characteristics Specifications/References
LINE
SERVICE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DS-1 o 1.544 Mbps bit rate o T1.107, "Digital Hierarchy - Formats Specifications"
o Extended o T1.403, "Network-to-Customer Installation - DS1 Metallic
Superframe Format (ESF) Interface"
o Bipolar 8 Zero o T1.408, "ISDN Primary Rate - Customer Installation Metallic
Substitution (B8ZS) Interfaces, Layer 1 Specification"
line coding o TR-NWT-000499, "Transport Systems Generic Requirements
(TSGR): Common Requirements," Issue 4, Bellcore
- -----------------------------------------------------------------------------------------------------------------------
DS-3 o 44.736 Mbps bit o T1.107, "Digital Hierarchy - Formats Specifications"
rate o T1.404, "Network-to-Customer Installation - DS3 Metallic
o C-bit parity Interface Specification"
o TR-NWT-000499, "Transport Systems Generic Requirements
(TSGR): Common Requirements," Issue 4, Bellcore
- -----------------------------------------------------------------------------------------------------------------------
OC-3c o 155.520 Mbps bit o T1.105, "American National Standard for Telecommunications
rate Digital Hierarchy Optical Interface Rates and Format
o SONET STS-3c frame Specification"
structure o TR-NWT-000499, "Transport Systems Generic Requirements
(TSGR): Common Requirements," Issue 4, Bellcore
o GR-253-CORE, "Synchronous Optical Network (SONET) Transport
Systems: Common Generic Criteria," Issue 1, Bellcore
- -----------------------------------------------------------------------------------------------------------------------
OC-12c o 622.080 Mbps bit o T1.105, "American National Standard for Telecommunications
rate Digital Hierarchy Optical Interface Rates and Format
o SONET STS-12c Specification"
frame structure o TR-NWT-000499, "Transport Systems Generic Requirements
(TSGR): Common Requirements," Issue 4, Bellcore
o GR-253-CORE, "Synchronous Optical Network (SONET) Transport
Systems: Common Generic Criteria," Issue 1, Bellcore
- -----------------------------------------------------------------------------------------------------------------------
OC-48 o 2,488.32 Mbps bit o T1.105, "American National Standard for Telecommunications
rate Digital Hierarchy Optical Interface Rates and Format
o SONET STS-48c Specification"
frame structure o TR-NWT-000499, "Transport Systems Generic Requirements
(TSGR): Common Requirements," Issue 4, Bellcore
- -----------------------------------------------------------------------------------------------------------------------
o GR-253-CORE, "Synchronous Optical Network (SONET) Transport
Systems: Common Generic Criteria," Issue 1, Bellcore
- -----------------------------------------------------------------------------------------------------------------------
Table 1
</TABLE>
29
<PAGE> 71
EXCEPTIONS TO THE ABOVE CHARACTERISTICS ARE:
OC-48c is unavailable at this time. Williams is able to provide OC-48 service
based on Availability and capacity. No time frame has been established for
providing OC48c service.
WILLIAMS AGREES TO THE SPECIFICATIONS AND REFERENCES LISTED WITH THE FOLLOWING
EXCEPTIONS:
DS-1 Service
T1.408 is addressed in the voice services and is not considered a specification
for private line service.
T1.105 is conformed to with minor exceptions as follows:
Synchronous Hierarchical Rates
Nortel Transportnode does not support OC-1 rate interfaces as well as OC-24
rate interfaces.
Tandem Connection Sublayer
Nortel's Transportnode products do not support tandem connections at this time.
Nortel will be pleased to discuss this requirement at a convenient time.
Line Overhead
Nortel does not currently support line DCC (D4-9) or line REI (M0) on the S/DMS
TransportNode product line.
STS Path Overhead
Nortel's Transportnode products do not support tandem connections. Nortel will
be pleased to discuss this requirement at a convenient time.
STS PTE Unequipped Indicator
Nortel TransportNode equipment transmits an all-ones pattern in unused overhead
bytes. Since there is a requirement to ignore values in undefined bytes, there
should be no operational issues if either a "ones" or "zeroes" pattern is
implemented.
Line Remote Defect Indication (RDI-L)
Nortel's Transportnode OC-48 does not support RDI-L indications. STS Path
Remote Defect Indication (RDI-P) Nortel's Transportnode OC-48 does not support
RDI-P indications.
30
<PAGE> 72
STS Path Payload Defect Indication (PDI-P)
Nortel's Transportnode products do not support PDI at this time. Nortel will be
pleased to discuss this requirement at a convenient time.
STS-1 Frame and OC-N Line Signal Composition
Nortel's Transportnode product line uses an all-1's pattern to indicate an STS
SPE unequipped condition instead of an all-0's pattern.
There are minor non-compliances to the portions of TR-NWT-000499 that are
relevant to S/DMS Transport node which include the following: Size of lettering
requirements for S/DMS Transportnode circuit packs and assemblies have been
adhered to wherever feasible but this is not always possible.
o Specifications for tributary rates on S/DMS Transportnode products are
complied with where applicable, or where that tributary rate is
offered on the particular line rate S/DMS Transportnode product. 2.
31
<PAGE> 73
Reliability, Performance and Service Metrics
PRIVATE LINE SERVICE
All measurements for On-Net Service only and exclude events of Force Majeure as
defined in this Agreement.
****
Note: MTTR (mean time to restore) applies to those failures not handled by
automatic error restoration techniques (e.g. 1+1 protection, SONET rings, ATM
rerouting, etc.).
32
<PAGE> 74
DS-n Services are provisioned over the Williams' ATM Network.
The parties agree to formulate an escalation procedure to discuss network
outages and to document such procedure by May 1, 1999.
33
<PAGE> 75
3. Frame Relay
3.1. Access rates, as defined in FRF1.1 for UNI or NNI
3.1.1. 56 or 64 kbps
3.1.2. n x DS0 for n=1 to 23
3.1.3. DS1 (1.544 Mbps)
3.1.4. DS-3 (45 Mbps), for NNI only.
3.2. Circuit types
3.2.1. Symmetric and asymmetric point to point PVCs
3.2.2. Multicast (available 1-1-2000)
3.3. Classes of Service
3.3.1. Initially, single QoS engineered to 200% over-subscription of
CIR per port
3.3.2. Frames in violation to be tagged as Discard Eligible
All measurements for On-Net Service only and exclude events of Force Majeure as
set forth in of the Master Alliance Agreement.
****
34
<PAGE> 76
4. ATM
4.1. ACCESS RATES, AS DEFINED IN ATM FORUM UNI 4.0 SPECIFICATION
4.1.1. DS3 Current standard is UNI 3.1, UNI 4.0 planned for 2Q99
4.1.2. OC-3c Current standard is UNI 3.1, UNI 4.0 planned for 2Q99
4.1.3. OC-12c
ATM UNI and NNI Service
4.1.4. Current standard is UNI 3.1, UNI 4.0 planned for 2Q99.
4.2. Circuit Types
4.2.1. Symmetric and asymmetric point to point.
4.2.2. Virtual paths and virtual circuits are supported.
4.3. Classes of Service
4.3.1. CBR: Policing for CBR uses discard
4.3.2. VBRnrt: Allows cell tagging for non-compliant cells
4.3.3. UBR In Development, planned availability 2Q99
4.3.4. SBCS will expect Williams to allow overbooking of UNIs and NNIs
for VBRnrt And UBR service classes Williams allows 2:1
oversubscription on VBRnrt ports. An UBR oversubscription factor
has not yet been established.
All measurements for On-Net Service only and exclude events of Force Majeure
as set forth in this Agreement.
****
35
<PAGE> 77
****
36
<PAGE> 78
5. SWITCHED SERVICE METRICS
Service Assurance - Switched
****
37
<PAGE> 79
SCHEDULE C
WILLIAMS NETWORK COLLOCATION SERVICES
SERVICES & TERMS
This Collocation Service Schedule ("Schedule") is made as of this ______day of
___________, 199_, and is subject to that Transport Services Agreement dated
January __, 1999, ("TSA") by and between Williams Communications, Inc. d/b/a
Williams Network, a Delaware corporation ("Williams"), and Southwestern Bell
Communications, Inc., a Delaware corporation ("SBCS").
INTRODUCTION. In accordance with the Master Alliance Agreement, SBCS shall have
the right to license collocation space at charges developed on the basis of the
Cost Plus Model. The prices will vary by city and are broken down into a
non-recurring installation fee and a monthly recurring charge. The monthly
recurring charge will include the lease expense, power usage, and maintenance.
1. COLLOCATION SERVICE:
1.1 COLLOCATION SERVICE DESCRIPTION ("COLLOCATION SERVICE").
Williams grants SBCS and its Affiliates a license to occupy, access
and locate within a portion of premises owned, leased, or licensed by
Williams currently or in the future ("Premises") telecommunications
transmission equipment and cabling owned by SBCS ("Equipment") for the
purpose of interconnecting the Equipment with Williams' Network, SBCS'
network and other telecommunications network. The parties shall
mutually-agree upon a Collocation Service Order to be used by SBCS on
behalf of itself, its Affiliates and any permitted Third Parties to
request collocation space. The portion of collocation space ("Space")
allocated is accepted "as-is" by SBCS and its Affiliates and Williams
makes no representation as to the fitness of the space for the SBCS's
or its Affiliates' intended purpose, except as expressly set forth in
Exhibit A. SBCS shall abide by, and ensure that its Affiliates abide
by, the standard specifications as set forth in the Technical
Specifications as attached hereto; and, Williams shall perform the
obligations also listed therein. Any work on a new Premises requires
execution of the Collocation Service Order or Williams' other written
consent.
SBCS agrees that it, or an entity designated by it, shall be the
single point of contact with Williams with respect to any Affiliates'
use of Collocation Service. SBCS, or its designee, shall provide
Williams a list of which Affiliates and which employees or
representatives of those Affiliates are to be permitted access to the
Space, which shall be updated from time to time.
****
2. EFFECTIVE DATE: The Effective Date is defined as the date identified
on the relevant Collocation Service Order as the date of Collocation
Service delivery, or the date upon which Williams delivers Collocation
Service, whichever is later.
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3. TERM: The Collocation Service Term shall commence upon the Effective
Date and shall continue for the duration specified within the relevant
Collocation Service Order.
4. RATES & CHARGES: SBCS shall pay Williams for the Collocation Services
rendered pursuant to this Schedule at the rates developed pursuant to
the Cost Plus Model, sample of which are set forth in Schedule A of
the TSA.; provided, however, that such rates are not subject to a
Price Cap.
4.1 SERVICE FEE.
The Service Fee is the amount to be invoiced SBCS on a monthly basis
for Collocation Service rendered including, but not limited to, space
and power use.
4.2 INSTALLATION FEE.
The Installation Fee, if applicable, is the amount to be
invoiced SBCS as a one time charge for Collocation Service
consisting of charges associated with the initial installation
of the Collocation Service.
4.3 BUILD-OUT FEE.
Build-Out Fees are those one-time charges applicable to
Collocation Services rendered that are outside the standard
Collocation offering. Build-Out fees are individually quoted
based on the Service Order. Build-out fees are payable in full
within thirty (30) days after SBCS receives the invoice for the
build-out. Build-Out Fees are calculated to SBCS on a Cost Plus
Basis, but are not subject to a Price Cap.
5. COLLOCATION.
5.1 SERVICE DELIVERY: Upon mutual acceptance of a Collocation
Service Order, Williams shall confirm the Effective Date, or
inform SBCS of the estimated date for the delivery of such
Collocation Service. Williams shall use reasonable efforts to
install each Collocation Service on or before the Effective
Date, but the inability of Williams to deliver a facility by
such date shall not be a default under this Schedule.
In the event Williams fails to tender possession of the Space
to SBCS by the Effective Date, SBCS shall not be obligated to
pay the Service Fee or Installation Fee until such time as
Williams tenders possession of the Space to SBCS.
5.2 COLLOCATION REQUIREMENTS: The power, building and security
specifications for Collocate Space shall be as set forth in
Exhibit A.
6. CONTRACT EXPIRATION: Following the expiration of the term or failure
of the parties to enter into any renewal periods, SBCS's license shall
continue in effect on a month-to month basis upon the same terms and
conditions specified within this Schedule and relevant Collocation
Service Order, unless terminated by either SBCS or Williams upon
ninety (90) days' prior written notice.
SBCS's option to renew its license to occupy the Space shall be
contingent on the election by Williams to continue to own, lease, or
license 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 Williams but subject to the terms of the Alliance
Agreements.
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7. EARLY TERMINATION: SBCS may terminate Collocation Service upon 30 days
written notice. Collocation Services will be terminated 30 days from
date of letter and SBCS will be liable for all charges due under the
remaining term of contract should SBCS terminate Collocation Service
prior to contract expiration, provided, however, that Williams shall
make reasonable efforts to mitigate SBCS' liability by actively
seeking to re-license the Space. Termination Liability will be
invoiced in lump sum in the billing period directly following
Collocation Service termination and shall be payable within 30 days of
the invoice date. Williams will rebate to SBCS any sums due SBCS as a
result of its re-licensing the Space.
8. INSURANCE: SBCS will maintain insurance as required in the Alliance
Agreement.
9. CHANGE OF COLLOCATION SERVICES:
9.1 CHANGE OF EFFECTIVE DATE (PRE-INSTALL). SBCS will be assessed
a Change of Effective Date Charge by Williams, which shall
not exceed comparable charges assessed by others in the
market for similar changes of effective dates, for any
changes of Effective Date requested within thirty (30) days
prior to original Effective Date. SBCS will also be charged
on a **** for any charges incurred by Williams from third
party providers as a result of a request by SBCS for a Change
of Effective Date, regardless of date of SBCS notification.
9.2 CHANGE OF COLLOCATION SERVICE ORDER (PRE-EFFECTIVE DATE). All
modifications to the information contained in an executed
Collocation Service Order will be reviewed on an individual
case basis and the Collocation Service Order shall be amended
accordingly upon Williams' acceptance of the Collocation
Service modifications, such acceptance will not be
unreasonably withheld, delayed or conditioned. Any
modifications may permit Williams to likewise amend the rates
and charges to alternate rates and charges based on the
Cost-Plus Model and Effective Date from the original rates
and Effective Date Collocation Service Order to the extent
they result in a change in Williams' costs. SBCS will also
be charged for any charges incurred by Williams from third
party providers as a result of a request by SBCS for a Change
of Collocation Service Order, regardless of date of SBCS
notification.
9.3 CHANGE OF COLLOCATION SERVICE (POST-EFFECTIVE DATE). If SBCS
requests a change to Collocation Services after such
Collocation Services have been installed, the request will be
reviewed by Williams on an individual case basis to determine
whether Williams has the ability to provide such enhanced
Collocation Service. All Change of Collocation Service
requests shall be authorized by Williams via a change
Collocation Service Order. SBCS may incur an additional
Collocation Service and/or Installation Fee(s) for the
amended Collocation Service based on the Cost-Plus Model.
SBCS will be assessed a one time fee for Collocation Service
changes. SBCS will also be charged for any charges incurred
by Williams from third party providers as a result of a
request by SBCS for a Change of Collocation Service,
regardless of date of SBCS notification.
9.4 REAL ESTATE PLANNING PROCESS. The Parties will establish a
real estate planning process pursuant to Section 24 of the
TSA for SBCS' real estate requirements other than those set
forth in the TSA. It is the intention of the Parties that
this process will assure that Williams is made whole for out
of pocket costs if SBCS does not use the facilities within a
reasonable amount of time.
10. IMPROVEMENTS TO SPACE: In the event SBCS desires to make improvements to
the Space which improvements are deemed material and substantial as reasonably
determined by Williams ("Material Improvements"), SBCS shall submit all plans
and specifications for such work to be performed in the Space
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to Williams for Williams' prior written approval, which approval shall not be
unreasonably withheld or delayed. No construction for Material Improvements may
commence until the foregoing consent is obtained. SBCS agrees that its use or
construction of the Space shall not interfere with Williams' use of its
Premises or other tenants' use of their premises in the building in which the
Premises are located.
SBCS shall not employ any contractor to perform material improvements
unless previously approved in writing by Williams which approval shall not be
unreasonably withheld, delayed or conditioned (and approved in writing by the
Landlord if required by Williams' lease or license). SBCS shall warrant or
shall obtain a warranty from each contractor and subcontractor participating in
performing material improvements that the work shall be free from all
mechanic's and/or materialman's 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 SBCS and Williams. The aforesaid warrantees of each
such contractor and subcontractor and SBCS 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 SBCS's work and shall be written so that they shall inure to the
benefit of Williams and SBCS as their respective interests may appear. Such
warrantees shall be so written that they can be directly enforced by either
SBCS or Williams, and SBCS shall give to Williams any assignment or other
assurance to effectuate the same.
It shall be SBCS's responsibility to cause each of SBCS's contractors
and subcontractors to maintain continuous protection of the premises adjacent
to the Space in such manner as to prevent any damage to such adjacent property
by reason of the performance of SBCS's work.
All of SBCS's work shall be coordinated with all work being performed
or to be performed by Williams 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 Williams and the Landlord of the
Premises for integration of SBCS'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 Williams at its
expense or at the expense of SBCS, or by SBCS at its expense or by previous
occupants of the Space, shall be and remain part of the Space and shall not be
removed by SBCS at the end of the Term of the license relevant to the Space.
Upon termination or expiration of the Term relevant to the Space, Williams
shall allow SBCS thirty (30) days after the date of such termination or
expiration, at SBCS's sole cost and expense, to remove all trade fixtures
(including, but not limited to, rectifiers/chargers, batteries, AC power
conditioning equipment, telecommunication switching equipment, channel banks,
etc.) installed by SBCS provided that the Space is restored by SBCS 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 Schedule. If SBCS 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 may, at Williams' option, become
the sole property of Williams, and Williams may dispose of such trade fixtures
as it deems appropriate. SBCS shall continue to pay the Service Fee specified
in the relevant Collocation Service Order until the earlier of: (i) SBCS's
removal of such trade fixtures and completion of such restoral or (ii)
Williams' taking possession of such trade fixtures as set forth above.
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
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the Premises and the Space from time to time and SBCS shall obtain and keep in
effect all licenses, permits and other authorizations required with respect to
the business conducted by SBCS within the Space.
11. SOLE USE OF SPACE BY SBCS: SBCS acknowledges that it and its Affiliates (as
designated by SBCS) have 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 Schedule nor any interest created herein shall be assigned,
mortgaged, subleased, encumbered or otherwise transferred, and that, except for
the assignment to a designated Affiliate, neither SBC nor its Affiliates neither
the Space nor any part thereof shall be encumbered in any manner by reason of
any act or omission on the part of SBCS, or used or occupied, or permitted to be
used or occupied, by anyone other than SBCS or its designated Affiliates. Any
attempt to allow the use or occupation of the Space by anyone other than SBCS or
its designated Affiliates, to assign, mortgage, sublease or encumber any rights
under this Schedule by SBCS or its designated Affiliates shall be void, unless
otherwise agreed to in writing by Williams. Such written agreement by Williams
shall not be unreasonably delayed, withheld, or conditioned.
12. 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 notice of the threat of such
taking) of all or any portion of the Premises so as to prevent, in Williams'
sole discretion, the utilization by SBCS of the Space in the Premises, relevant
Collocation Service Order(s) shall terminate as of the date of such taking or
conveyance with respect to the Space which is affected by such taking or
conveyance and the Service Fee paid or to be paid by SBCS shall be reduced
accordingly. Except as set forth below, SBCS shall have no claim against
Williams 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 Williams as a result
of any such payment for condemnation or damages. Nothing contained in this
Schedule should prohibit SBCS from seeking any relief or remedy against the
condemning authority in the event of an Eminent Domain proceeding or
condemnation which affects the Space. Notwithstanding anything to the contrary
in this paragraph, Williams and SBCS shall, during the Term of the TSA, work
cooperatively to find suitable alternative sites which meet the needs of both
Williams and SBCS and which will, to the extent feasible, permit the
continuation of Service by both parties without material impairment.
13. DAMAGE TO PREMISES: If the building in which the Premises are located is
damaged by fire or other casualty, Williams shall give immediate notice to SBCS
of such damage. If a Landlord or Williams exercises an option to terminate a
particular Lease or License due to damage or destruction of the Premises
subject to such Lease, or if Williams decides not to rebuild such building or
portion thereof in which the Space is located, the Parties shall cooperate with
each other to effect the orderly relocation of the Equipment and SBCS customer
equipment to another collocation site. SBCS shall not be liable for any
Collocation Service or other fees during the period of time any the Space is
not available. If neither the Landlord of the affected Premises nor Williams
exercises the right to terminate, Williams 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 Williams shall fail to complete
the repair within a reasonable time period, SBCS shall thereupon have the
option to terminate relevant Collocation Service Order(s) with respect to the
affected Space, which option shall be the sole remedy available to SBCS against
Williams under this Schedule relating to such failure. If the Space or any
portion thereof shall be rendered untenable by reason of such damage, the
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.
14. CONDUCT IN SPACE & PREMISES: SBCS shall abide by Williams' and applicable
landlord's rules with regard to conduct in the Premises. Such rules include,
but are not limited to, a prohibition against smoking in the Space or the
Premises by SBCS's employees, agents, representatives, contractors,
subcontractors,
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invitees or licensees. Further, SBCS shall maintain the Space in a safe
condition, including but not limited to the preclusion of storing combustible
materials in the Space.
****
IN WITNESS WHEREOF, the parties hereto have executed this Collocation Service
Schedule as of the day and year first above written.
<TABLE>
<CAPTION>
<S> <C>
SBC OPERATIONS, INC.: WILLIAMS COMMUNICATIONS, INC:
- ---------------------------------------- -----------------------------------------------------
Signature of Authorized Representative Signature of Authorized Representative
- ---------------------------------------- -----------------------------------------------------
Printed Name Printed Name
- ---------------------------------------- -----------------------------------------------------
Title Title
</TABLE>
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EXHIBIT A
TECHNICAL SPECIFICATION FOR COLLOCATION SERVICE
WILLIAMS NETWORK STANDARDS, DESCRIPTIONS & TASKS
o DC POWER
o Backup electrical power, including batteries and shared use of an
emergency generator to the extent such generator exists and is
maintained to support the Premises.
o DC power adequate for SBCS's consumption equated to power
specified in applicable Collocation Service Order. A low-voltage
and high-voltage battery alarm will be monitored by Williams.
o Nominal 50 +/- 6V DC battery and charger supply with a minimum
four (4) hour reserve will be provided by Williams.
o Redundant chargers of adequate size will be provided by Williams,
so that in the event of a charger failure the full load required
by SBCS' equipment will be available. A charger failure alarm will
be monitored by Williams.
o AC POWER
o A 20-amp four-plex AC receptacle will be available within reach of
the SBCS's Equipment. AC power and outlets for use with test
equipment only and is not provided to operate the Equipment. This
AC power is not provided over an Uninterruptable Power Source
(UPS).
o AC power supply to SBCS equipment is backed by generator where
available. This excludes utility outlets described in the
immediately preceding subsection 2.1.
o Power Generally
o All sites shall be equipped with 24/7 power and utilities services
o Standby generator equipped with remote alarm monitoring
o Eight hours of fuel reserves with delivery of additional fuel
triggered by a generator start, exclusive of routine testing. In
California sites, 16 hours of fuel reserve will be maintained.
o Lead alert will be handled by the NCC except where otherwise required
by law
o Master House Service Panel to be equipped with Auto Start/Auto
Transfer circuitry to automatically start the emergency generator and
transfer the load in the event of a commercial power failure
o All DC power plant alarms wired for remote alarm monitoring
o Power sites equipped with the latest personal safety and hazardous
material spill equipment
o All sites equipped with battery watering equipment
o Williams will provide uninterrupted critical AC power
o Power rooms equipped with storage lockers for spare parts.
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o ENVIRONMENTALS
o Pre-reaction sprinkler protection, where available. Smoke and fire
alarms monitored by Williams.
o Lighting.
o Ground Buss and cable interconnect.
o Grounding conductor will be supplied by Williams between the bus
bar and the SBCS's Equipment.
o Overhead cable ladder
o Interconnect signal and power cabling between Williams and SBCS.
o Concrete floors will be covered with vinyl tile.
o Ambient temperature will be maintained by Williams between
60-90(Degree)F with an objective of 35-65% humidity.
o General and administrative services directly relating to the
provision of the above listed Collocation Services.
o Building
o Dual feed conduits for entrance facilities, with structural
diversity on a go-forward basis (details of which will be agreed
in accordance with Section 24, Processes to be Developed, of this
Agreement).
o Fire alarm (equipped with dry contacts and wired for remote alarm
monitoring)
o Door Alarms monitored by NCC.
o Hi/low temperature alarm (equipped with dry contacts and wired for
remote alarm monitoring)
o Hi/low humidity alarm (equipped with dry contacts and wired for
remote alarm monitoring)
o Emergency (stumble) lighting powered from DC plant
o Air conditioning system equipped with dial up access (Landis &
Gyr)
o All sites equipped with the appropriate fire rated office
furniture (desks, chairs, bookcases, waste baskets, equipment
lockers, etc.)
o All sites equipped with designated area for trash collection
(exterior)
o All sites equipped with the designated parking areas
o All sites equipped with the proper fire extinguishers
o All sites shall comply with applicable ADA and building/seismic
code requirements
o All below grade floors equipped with sump pumps (equipped with dry
contacts and wired for remote alarm monitoring)
o All sites have loading docks where available
o All sites will have keypad access, and numbers for the Network
Control Center will be provided
o All sites have conduit runs from the main telecommunications
backboard to all other rooms within the building
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o Equipment and power rooms protected by a mutually agreed upon fire
suppression system
o All sites shall comply with all hazardous material laws and
disclosure of pre-existing conditions.
o Security: ACM 1600 or equivalent for dial up security.
In-Region Real Estate Requirements
o SBCLD will participate in the geographic and site locations for switch
placement. Site requirements range from **** square feet. SBCLD shall
provide a list of required locations on a quarterly basis. Should a
move be required, at Williams' direction, Williams will pay all costs
incurred to transfer all network and physical assets to the new
location unless otherwise mutually agreed to in writing.
****
o These switches must be ready for testing by the dates and as
described in Section 26.2.1 of the Agreement, and ready for
customer traffic by ****.
Out of Region Real Estate Requirements
****
REAL ESTATE REQUIREMENTS FORECAST: See Section 9.4 of the Collocation
Agreement. Williams shall have one year from the date of notification in
which to have any requested space completed, unless the Parties otherwise
agree.
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EXHIBIT B
TELEHOUSING REQUIREMENTS
****
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****
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SBCS STANDARDS, DESCRIPTIONS & TASKS FOR TELEHOUSING
1.0 EQUIPMENT SPECIFICATIONS
1.1 The Equipment should be designed to operate satisfactorily
between 60-90(Degree)F with 35-65% (non-condensing) humidity.
Low 60(Degree) and high 90(Degree) temperature alarms will be
monitored by Williams.
1.2 SBCS will ensure that their equipment and surrounding area do
not pose safety hazards to personnel. This includes exposed
AC electrical hazards, trip and slip hazards, hazardous
material storage deficiencies, improperly secured or
overloaded equipment racks or ladders, inadequate ingress and
egress space. OSHA and local codes will apply.
1.3 SBCS will notify Williams of any significant equipment
additions or deletions (i.e. shelf or rack). Installation and
removals will be coordinated with local Williams management.
2.0 SPACE SPECIFICATIONS
2.1 SBCS will not jeopardize Collocation Service or damage
property of other collocated customers, Williams, or landlord
in any manner.
2.2 SBCS will take precautions to protect Williams' and
landlord's common facility and nearby equipment belonging to
other customers. This includes floor, wall, and
telecommunication equipment protection while moving equipment
and notifying Williams of any major rearrangements of
equipment, drilling, power work, and etc.
2.3 SBCS will follow good housekeeping practices. All trash must
be disposed of daily at SBCS's expense. Any trash or empty
boxes not disposed of by SBCS is subject to removal by
Williams with any associated charges borne by SBCS.
2.4 Nothing may be stored outside of the assigned rack space. A
minimum of 2.5' of aisle space must be maintained at front
and rear of equipment.
2.5 No metal ladders, stools, or chairs may be used.
2.6 Combustible or hazardous material may not be stored in the
area.
2.7 All equipment must be installed within the assigned rack
footprint (i.e. UPS units, spare equipment).
2.8 All cabling will be terminated on DSX panels in the Williams
common area. Fiber will be terminated on an appropriate Fiber
Distribution Panel ("FDP"). Any panels for SBCS end will be
supplied at SBCS's expense.
2.9 SBCS is responsible for the termination of the A & B DC power
and signal cabling in its Equipment.
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2.10 Maximum DC power provided to SBCS as A & B power shall be
rated for the rating of a single feed. SBCS is liable for an
outage caused by the DC power exceeding the single feed
rating. SBCS will be responsible for payment of consumed
power exceeding the single feed rating specified in the
Collocation Service Order.
2.11 SBCS will follow normal telecommunications industry standards
with regards to equipment installation and removal in a
central office environment. Williams standards are to be
followed for connection of cables that interface with
Williams. All installations are subject to approval by
Williams.
2.12 Permanent use of extension cords is not allowed.
2.13 SBCS will not jeopardize Williams' ability to conduct
business in any manner.
2.14 All local, state, and federal laws will be obeyed. Local
requirements for union labor, especially for AC electrical
work, will be observed. Building management guidelines will
be followed.
2.15 SBCS will follow Williams sign-in procedures at all times.
Subject to the requirements of this Schedule, SBCS shall have
access to their equipment 24 hours a day, 365 days a year.
SBCS must coordinate their first visit to a particular
Williams' site with Williams' operations department, giving
at least five (5) days notice of such visit. For all
subsequent entries, SBCS will follow the procedure outlined
below:
2.15.1 At locations where SBCS's equipment is located in
caged space which is separate from Williams' equipment,
before entry SBCS will notify Williams' Network Control
Center at (800) 582-9069 and follow Williams' sign-in
procedures.
2.15.2 At locations where SBCS's equipment is not located in
caged space which is separate from Williams' equipment, SBCS
must be escorted by a Williams technician. SBCS may gain such
escort by notifying Williams' Network Control Center at (800)
582-9069 at least forty-eight hours prior to SBCS's desired
entry. In the case of an emergency, SBCS shall give as much
notice as is reasonably possible by contacting Williams'
Network Control Center at the number listed above. Williams'
Network Control Center shall work with SBCS to allow SBCS to
gain access as soon as reasonably possible.
2.16 If Williams notifies SBCS in writing of a violation of the
above rules, or any other unsafe or unacceptable situation or
practice, the SBCS must correct the problem within seven days
or provide a written plan for correction to Williams'
satisfaction and proposed completion date. Williams may agree
to additional time. If the problem is not resolved in seven
days or within the agreed upon time frame, which ever is
longer, Williams will have the option of either (i)
correcting the problem at SBCS's expense, or (ii) terminating
the contract and disconnecting power and signal connections
from the SBCS's equipment.
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3.0 EXTREME SAFETY CONDITIONS. Extreme safety violations are subject to
immediate correction by Williams without prior notice to SBCS. Corrections made
by Williams are at the SBCS's expense and will be billed to the SBCS on a time
and material basis.
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SCHEDULE D
****
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****
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SCHEDULE E
OPERATIONS SCHEDULE
1. ****
2. SBCS and Williams will jointly participate in the selection and
acquisition of a fraud management vendor.
3. Williams will provide fraud management through the Network Operating
Center(s) for the switching network on behalf of SBCS and SBCS will
provide fraud management through its platform(s) on behalf of Williams.
****
4. Williams will provide to SBCS its network engineering parameters and
guidelines which are developed in connection with growth planning for the
Williams Network.
5. It is William's objective to keep the network competitive by employing
equipment, current technology, and other services as necessary to maintain
an efficient cost structure, and superior customer service.
6. ****
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SCHEDULE F
EARLY ENTRY SUPPORT SCHEDULE
****
<PAGE> 97
****
<PAGE> 98
****
<PAGE> 99
SCHEDULE G
SCHEDULE OF TESTING REQUIREMENTS
1.1. SBCS requires Williams to operate with the following testing principles:
1.1.1. Functionality will be defined and built in components. It takes
multiple components to accomplish a business function.
1.1.2. Component testing will be conducted as early as possible.
1.1.3. Strings of component will be tested as early as possible.
1.1.4. Prior to launch, all functionality will be tested in the same
manner as it will operate at launch.
1.2. Testing will be conducted for all components, including:
1.2.1. Business systems
1.2.2. Operational Support Systems
1.2.3. Manual processes
1.3. ****
1.4. Pre-launch testing will be conducted in as "live-like" a manner as can be
practically supported. This includes the following:
1.4.1. All physical systems interfaces have been installed and tested.
1.4.2. All logical interfaces have been tested through up and down stream
processes.
1.4.3. All component testing has been completed.
1.4.4. All string testing of components has been completed in as large a
string as is practical to accomplish
1.5. Williams and SBCS will cooperate to establish a simulated training
environment for these systems to be maintained separately from any system
carrying live customer traffic.
<PAGE> 100
SCHEDULE H
SCHEDULE OF OUT-OF-REGION SERVICES
****
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****
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****
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SCHEDULE I
CUSTOMER NETWORK MANAGEMENT FOR ON-NET PRIVATE LINE AND DATA SERVICES,
DESCRIPTION AND SPECIFICATIONS
1.1. SBCS CNMS Capabilities
1.1.1. Williams will provide a web-based Customer Network Management
System to allow SBCS to access CNM data specific to SBCS and
monitor Private Line, Frame Relay, and ATM circuits in the
SBCS network.
1.1.2. The web-based CNMS will be made available to SBCS ****.
1.1.3. Voice features will be developed for later releases of the
CNMS:
1.1.3.1. Bulk order entry will be made available ****.
1.1.3.2. Bulk CDR information will be provided ****.
1.1.3.3. Remaining Voice features will be developed for ****, or
earlier, if possible.
1.1.4. For specific CNMS development, functionality, and
applications for the SBCS end-customer refer to Schedule D:
Schedule of OSS Interoperability, Item 1.7.
1.1.5. Williams recognizes that SBCS plans to provide Williams CNM
data to their end customer. Williams is not currently
developing any CNM application designed for the SBCS
customer. Williams will work with SBCS to develop tools for
SBCS to take Williams data and be able to format it for the
SBCS customer to have access to CNM data (TBD)
1.2. Service Description: Williams CNMS Features Available **** (Unless
otherwise specified) and for all data products including Frame Relay,
Private Line and ATM (Unless otherwise specified)
1.2.1. General Williams CNMS Features Available ****: The following
features will be available to all current and future Williams
products and Williams CNMS applications:
<TABLE>
<CAPTION>
FEATURES CUSTOMER BENEFIT
<S> <C>
Homepage ****
Customer Contact & ****
Account Information
Web Site Security ****
Reference 1.2.1.3
Network Access & ****
Customer Administration
On-Line Help ****
Application Environment ****
</TABLE>
1.2.1.1. Williams CNMS Homepage:
Williams customers will be greeted by a modern, well designed, highly
appealing, web site with standard navigation tools and web logic. The
home page provides the gateway for CNMS users to log-in to the system,
hyper-links to other Williams
59
<PAGE> 104
Internet resources such as the Williams Network web site, Customer
Care's Customer Handbook, etc., and access the CNMS next generation
network management features.
Williams CNMS provides for additional information, stored in external
information sources, to be provided to the customer. Information
specific to customers can be communicated directly to the web page
that highlights CNMS changes, new features or updates, and important
Williams Network announcements such as new pricing, new products, or
special offers. This feature allows personalized text messages to be
created by Customer Care to be displayed to Williams CNMS customers.
1.2.1.2. Customer Information:
Williams CNMS provides vital information the customer needs to conduct
business with Williams. The customer has ability to identify, locate
and contact vital Customer Care, Network Operations, and Billing
resources and information. CNMS users will be able to access the
Customer Care phone number and the NCC National 1-800#.
1.2.1.3. SECURITY MANAGEMENT
1.2.1.3.1. The Williams CNMS will be highly secure both from the
Internet and within the system databases beginning ****.
1.2.1.3.2. All user information will be partitioned by company or
user group. Individual users will only be able to access
information that the Williams CNMS Administrator and/or
the SBCS CNMS Administrator have determined to be eligible
for access.
1.2.1.3.3. There will be no limit on the number of SBCS logins at the
same time nor will there be any limit on the number of
SBCS users the administrator can create.
1.2.1.3.4. Specifically:
The user is reminded at login of the high level of
security Williams CNMS provides for customer data across
the Internet, within the CNMS application, and on the user
level.
The customer's information is secure from and across the
Internet. CNMS utilizes encrypted communications --
specifically 40 bit SSL (Secure Socket Layer) encryption.
Additionally the CNMS servers are designed for secure
Internet operation and protected by multiple firewalls
with extremely tight rule sets for access. CNMS creates
user passwords to insure against hacker attacks.
The customer's network information is secure from other
CNMS users. Information is customer partitioned on
multiple user levels. Williams CNMS provides a secure
environment for customers requiring users to enter a valid
username and password to gain access to system features
for which they are authorized (see following User
Administration section).
60
<PAGE> 105
1.2.1.4. User Administration:
Williams CNMS will utilize a custom security application
which will allow for access levels and users to be set on
the Williams Administrator Level, the Customer User
Administrator level and the individual user level.
The Williams Administrator will be able to setup new
customers and support the Customer User Administrators.
Multiple organizational hierarchies can be set-up for CNMS
to meet individual customers internal business situations
and realities.
o Customer administrators, and/or Williams
Administrators, can establish user "groups" and define
the security privileges available to those groups
within their organizational hierarchy. Users can be
added and assigned to defined security "groups" within
their organizational hierarchy.
o CNMS requires users to enter a valid username and
password to gain access to system features for which
they are authorized.
o Privileges within each group designation can be set
down to the feature (function) level within the
application. Read, insert, delete privileges are
established for certain functions through a user group
designation.
The reliance on Customer User Administrators will allow
Williams to keep administrative tasks and cost at a
minimum while providing a comprehensive product feature
set. The custom administrative application will allow
Williams CNMS to remain flexible with the addition of new
features, user requirements and user levels.
1.2.1.5. Online Help
Williams CNMS provides on line help information about how
to use the system. This will allow CNMS to eliminate
hard-copy user manuals and update distributions.
Help information will be available from any screen for
either the current screen, or for any other system
function via a table of contents.
1.2.1.6. Application Environment:
Williams will maintain a production environment and
support infrastructure for CNMS that will reasonably
guarantee system availability, data assurance, and system
support.
o Systems: The Williams CNMS servers and all network
pieces providing connectivity to them, will be geared
to provide a 24X7 level of service ****. Williams CNMS
will be connected to the Internet via redundant 5Mbit
connections. Servers will be clustered, redundant, and
load balanced, initially, however, no off-site
fail-over will be implemented. o Data Assurance: The
Williams user administrator will perform pre-release
and periodic in-service audits of customer & circuit
information to ensure data accuracy. o Help: Williams
maintains application support and user help in concert
with customer care.
61
<PAGE> 106
1.2.2. Williams CNMS Data Products Features Available ****
(Unless otherwise specified) A variety of customer network
management tools are provided by Williams CNMS to support
Network products. CNMS will constantly be enhanced and
will grow to meet current and future needs of the Williams
customer. The current (****)Williams CNMS features to
support Williams data products include:
FEATURES CUSTOMER BENEFIT
Network Monitoring ****
(Views & Alarms)
(re: 7.1.4 Fault
Management)
Action Tickets ****
(re: 7.1.4 Fault
Management)
Service Order Entry ****
(re: 7.1.1
Configuration
Management)
Customer Billing & ****
Account Review
Service Level ****
Statistics
(re: 7.1.2
Performance
Management)
Flex-CIRsm Interface ****
(Frame Relay)
(2Q/99)
Published API's ****
1.2.2.1. NETWORK MONITORING (VIEWS & ALARMS) FAULT MANAGEMENT
1.2.2.1.1. Williams will provide fault management in "near-real-time"
beginning ****.
1.2.2.1.2. Near Real Time: It is Williams intention to provide fault
information that is as "real-time" as possible to SBCS.
The Williams network fault information provided to SBCS
must be customer correlated and transmitted by Williams.
Williams will provide SBCS On-Net fault information ****.
Fault management will include a map view of circuits and
their status, alarm notifications by customer circuit, and
the ability to enter and monitor network trouble tickets
and their resolution.
1.2.2.1.3. Williams will provide all traffic alarms that are related
to SBCS circuits.
62
<PAGE> 107
1.2.2.1.4. Specifically:
CNMS provides a partitioned view into the Williams network
displaying a logical map of the customer's network, alarm
views by circuit, and views of specific alarms affecting
the customer's circuits.
The raw alarm and circuit information from Williams
internal Network Management infrastructure (OSI/NetExpert)
is correlated to the appropriate customer and provided via
CNMS to those customers.
Note: Williams CNMS will display alarms for all circuits
for which appropriate alarm information can be retrieved
from the OSI system. That means the Network elements must
be "visible" to OSI/NetExpert. Certain "off-net" circuits
will not receive alarms, but will be displayed as they are
defined in the Circuit Inventory (Metasolve/TBS).
CNMS will display network alarms for a given customer
organization in four distinct views:
63
<PAGE> 108
[U.S. MAP]
o A Map View, which plots all logical customer circuits with
TWC ID's and corresponding endpoints on a map of the USA,
in a various array of alarm states designated by color or
form. These alarms will be filtered to only indicate
service affecting alarms (see "Note").
o A Circuit View, which lists all logical customer circuits
with TWC ID's in a grid control and designates various
alarm states by color or form. This view will allow
sorting by each field. These alarms will be filtered to
only indicate service affecting alarms (see "Note").
64
<PAGE> 109
o An Alarm View, which drills down into a TWC circuit ID to
display details about the specific service in alarm. These
alarms will be filtered to only include service affecting
alarms (see "Note").
o A Circuit Detail Window (not available until ****), that
can be opened by "double-clicking" on the appropriate
circuit path on the map view. The Circuit detail window
will Identify the circuit or circuits represented on the
circuit path and will list them by number and alarm
severity. An additional "double-click will bring up the
Circuit View sorted by the identified circuit and allows
the customer to drill down to the Alarm View.
Note: "Service affecting" will be defined based on the
severity index attached to the alarm. The appropriate index
will be identified by Technical Development. This detail is
not yet available.
1.2.2.2. Action Tickets
Williams customers are able to monitor and create Action
Tickets (Trouble Tickets) for their Customer Care, Billing,
and Operations issues. This feature gives customers direct
access into the Williams Action Ticket System (Remedy) used
by Operations and Customer Care to resolve network and
customer issues. Customer can monitor the status, activities,
and projected resolution of their network issue.
Williams CNMS will interface with the Remedy system to allow
Customers to perform the following functions on-line:
o Create Action Tickets about their circuits or
administrative issues
o Add Log information about open action tickets on their
circuits or administrative issues.
o Review Open Action Tickets about their circuits or
administrative issues.
o Review Closed Action tickets about their circuits or
administrative issues.
o Void Action Tickets still in an unopened state about their
circuits or administrative issues.
When a customer "opens" an Action Ticket, Williams CNMS will
update a field in the Remedy system with the CNMS users name
for tracking purposes.
1.2.2.3. SERVICE ORDER ENTRY/CONFIGURATION MANAGEMENT
1.2.2.3.1. Upon **** release Williams CNMS will enable SBCS to enter
and change service orders (i.e. New & Add) Private Line,
Frame Relay, and ATM orders.
1.2.2.3.2. SBCS will be able to monitor the order status.
1.2.2.3.3. Change Orders and Voice features (TBD) will be available
****
1.2.2.3.4. Specifically:
Using the web interface, or the customers own proprietary
order entry interface via an CNMS API, the customer is able
to enter orders for network products and services directly
into the Williams systems (See
65
<PAGE> 110
"Note"). The customer can monitor a log of current orders
and filled orders (archive requirements defined by
system).
Williams CNMS will interface with the Intertech order
entry system to allow authorized customers to place new
orders for data and services online products (orders for
Private Line, Frame Relay, IP, and ATM). These orders will
be held in an Intertech pending table so a Customer Care
Representative can release them, upon validation.
Williams CNMS will update a field in the order entry
system with the CNMS users name for tracking purposes.
CNMS will include an API/interface for customers to submit
batch orders to William via Williams CNMS.
Williams CNMS will allow authorized customers to review
active & completed service orders in Intertech (only the
current Intertech provisioning status will be visible).
By populating the Intertech order entry system directly,
CNMS will save Customer Care valuable order entry time.
1.2.2.4. Billing
Williams CNMS allows customers to view and print formatted
summary invoice information from their company's most recent
invoice. The customer can download full detail Invoice
information in ASCII format to their local PC over the web
through CNMS.
Williams Network Billing will review and approve invoice
formats displayed through Williams CNMS.
1.2.2.5. SERVICE LEVEL STATISTICS/PERFORMANCE MANAGEMENT
Customers can access a collection of network statistics to
allow verification and monitoring of Product Specific Service
Level Agreements and evaluate network usage and performance.
1.2.2.5.1. The CNMS will allow SBCS to view the actual network
performance data for data products.
1.2.2.5.2. Some limited performance information is available with the
**** release of the CNMS:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
SERVICE STATISTIC OR SLA MEASUREMENT PERIOD
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ATM Throughput Sum of cells in and out ****
- ----------------------------------------------------------------------------------------------------------------------------
Frame Relay Transfer Delay by PVC Edge to edge ****
- ----------------------------------------------------------------------------------------------------------------------------
Frame Delivery Ratio by Within CIR, above CIR and
PVC overall delivery ****
- ----------------------------------------------------------------------------------------------------------------------------
Data delivery ratio by Within CIR, above CIR and
PVC overall delivery ****
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
66
<PAGE> 111
1.2.2.5.3. Additional performance data (as specified in Schedule B:
Williams Network Technical Specifications) will be
available via the CNMS by ****.
1.2.2.5.4. CNMS will be able to provide a limited historical view of
performance information via a data accumulator application
for the **** release (see above).
1.2.2.5.5. By **** the internal Williams SLATE (Service Level
Agreement Technical Environment) project will provide
enhanced performance statistics and expanded archiving.
Storage of historical data by Williams will not exceed
three years.
1.2.2.5.6. Specifically Customers can access a collection of network
statistics to allow verification and monitoring of Product
Specific Service Level Agreements and evaluate network
usage and performance.
1.2.2.5.7. ****
1.2.2.6. Flex-CIR Interface
CNMS will provide (****) a Flex-CIR interface
to allow Williams Frame Relay Flex-CIRsm customers to manage and
make changes to their flexible Committed Information Rate (CIR)
on a time-of-day and day-of-week basis.
1.2.2.7. Published API's
Williams will expose a complete, easy to use, set of application
program interfaces (API's) from the CNMS API Server which will
allow a customer's application to retrieve the same partitioned
information as is provided through the CNMS GUI. There will be
API's for each of the functions provided by CNMS.
An API gives the customer system interface information that
allows them to utilize the Williams CNMS client application or
their own existing customer applications to exchange information
with Williams.
1.2.2.7.1. The following is a schedule of API Development and
Availability:
<TABLE>
<CAPTION>
API'S AVAILABILITY
<S> <C>
Security/Login ****
Network Monitoring (Views & Alarms) ****
Action Tickets ****
Service Order Entry ****
Customer Billing & Account Review ****
Service Level Statistics ****
User Administration ****
</TABLE>
67
<PAGE> 112
As additional CNMS features and capabilities are
developed, API's will be written and provided to SBCS.
1.2.2.7.2. The Williams CNMS is built on a distributed "Middle Tier
system architecture to allow customer's existing
applications and/or systems to interact with the same data
interface used by the CNMS application. Clustered
transaction servers act as component based API engines.
CNMS API's can be used to integrate Williams network OSS
data into SBCS's new or existing applications or systems.
The CNMS interface supports a wide variety of client
technologies including Visual Basic, C++, Java,
Powerbuilder, etc., or any SQL compliant language (SQL
function calls).
1.2.3. CNMS Costs to SBCS
1.2.3.1. Current and planned Williams CNMS services, per this
agreement, will be provided to SBCS without charge.
1.2.3.2. At the request of SBCS certain modifications of the CNMS
or custom development may be initiated. For CNMS
development efforts conducted or additional services
provided by Williams specifically on behalf of SBCS,
SBCS will be charged ****.
1.2.3.3. For additional information related to the development of
system interfaces see Schedule D: Schedule of OSS
Interoperability, Section 1.8.1.
68
<PAGE> 113
SCHEDULE J
Williams On-Net City List
****
SCHEDULE J--PART 2
EXTENDED ON-NET (INTERMEDIA) FRAME RELAY SWITCH LIST
1. PRICING: ****
2. AVAILABLE SERVICES: CURRENTLY INCLUDES ONLY BASIC FRAME SERVICES -(I.E.
PORT SPEEDS = 64K - 1.536M, PVC SPEEDS = 4K - 1.024M [SIMPLEX & DUPLEX])
3. NETWORK AVAILABILITY: Currently includes cities listed below, but will
expand as Intermedia grows its own Frame Relay network
<TABLE>
<CAPTION>
CITY NPA-NXX CITY NPA-NXX
---- ------- ---- -------
<S> <C> <C> <C>
Albany, NY 518-474 Daytona Beach, 904-258
Augusta, GA 706-724 FL
Albany, NY 518-437 Dayton, OH 513-222
Albany, NY 518-437 Florence, SC 803-317
Glenmont, NY 518-432 Ft. Lauderdale, FL 954-523
Atlanta, GA 404-688 Ft. Lauderdale, FL 954-269
Atlanta, GA 404-688 Ft. Myers, FL 941-337
Atlanta, GA 770-661 Fayetteville, NC 910-306
Atlanta, GA 770-661 Greenville, NC 919-321
Atlanta, GA 770-661 Greenville, SC 864-242
Atlanta, GA 404-843 Greenville, SC 864-235
Austin, TX 512-795 Gainesville, FL 352-377
Baltimore, MD 410-331 Huntsville, AL 205-220
Buffalo, NY 716-849 Harrisburg, PA 717-214
Buffalo, NY 716-849 Houston, TX 713-229
Binghamton, NY 607-772 Houston, TX 713-227
Birmingham, AL 205-802 Houston, TX 713-654
Boston, MA 617-536 Hartford, CT 203-289
Boston, MA 617-536 Indianapolis, IN 317-638
Baton Rouge, LA 504-387 Jackson, MS 601-961
Chicago, IL 312-265 Jacksonville, FL 904-634
Chicago, IL 312-467 Jacksonville, FL 904-634
Chicago, IL 312-565 Jersey City, NJ 201-451
Charlotte, NC 704-358 Knoxville, TN 423-291
Charlotte, NC 704-342 Knoxville, TN 423-546
Charlotte, NC 704-333 Kansas City, MO 816-283
Chattanooga, TN 423-634 Los Angeles, CA 213-627
Charleston, SC 803-720 Los Angeles, CA 213-627
Cleveland, OH 216-265 Louisville, KY 502-587
Columbia, SC 803-779 Little Rock, AK 501-376
Columbia, SC 803-733 Miami, FL 305-350
Columbus, OH 614-221 Miami, FL 305-350
Cincinnati, OH 513-721 Miami, FL 305-594
Columbus, GA 706-321 Miami, FL 305-594
Dallas, TX 214-464 Memphis, TN 901-522
Dallas, TX 214-969 Montgomery, AL 334-269
Detroit, MI 313-222 Nashville, TN 615-555
</TABLE>
71
<PAGE> 114
<TABLE>
<CAPTION>
CITY NPA-NXX CITY NPA-NXX
---- ------- ---- -------
<S> <C> <C> <C>
New Orleans, LA 504-528 Syracuse, NY 315-471
New York City, 212-349 Syracuse, NY 315-471
NY Tampa, FL 813-225
New York City, 212-349 Tampa, FL 813-225
NY Tampa, FL 813-664
New York City, 212-349 Tampa, FL 813-664
NY Toledo, OH 419-726
Ocala, FL 352-351 Tallahassee, FL 904-681
Orlando, FL 407-648 Tallahassee, FL 904-681
Orlando, FL 407-648 Tulsa, OK 918-587
Orlando, FL 407-849 Vienna, VA 703-506
Philadelphia, PA 215-568 Washington DC, 202-789
Philadelphia, PA 215-568 MD
Pittsburgh, PA 412-471 Washington DC, 202-775
Poughkeepsie, NY 914-485 MD
Panama City, FL 904-522 Washington DC, 202-775
Pensacola, FL 904-430 MD
Providence, RI 401-331 Wilmington, NC 910-256
Richmond, VA 804-844 Winston-Salem, 910-730
Raleigh, NC 919-850 NC
Raleigh, NC 919-850 West Palm Beach, 407-832
Rochester, NY 716-454 FL
Shreveport, LA 318-424 West Palm Beach, 561-904
San Francisco, CA 415-362 FL
St. Louis, MO 314-421
St. Louis, MO 314-429
Savannah, GA 912-234
</TABLE>
72
<PAGE> 115
Schedule J - Part 3
Service Availability by City and Date
****
<PAGE> 116
Schedule J - Part 4
Service Availability by Quarter
****
<PAGE> 117
Schedule J - Part 5
Existing Switches
****
<PAGE> 118
SCHEDULE K (i) --
****
Cost Centers and Account Classification
Schedule K(i)
****
Depreciable Lives
Schedule K(ii)(a)
Dark Fiber Depreciation Guidelines
****
Schedule K(ii)(b)
Capitalization Policy
****
Schedule K(iii)
****
Schedule K(iv)
Intentionally left blank.
Schedule K(v)
Intentionally left blank.
Comprehensive Cost Model Example
Schedule K(vi)
****
SCHEDULE L - TRANSITION
****
SCHEDULE L - ATTACHMENT A
PRINCIPLES GOVERNING IRU ACQUISITION
****
<PAGE> 119
SCHEDULE M
WILLIAMS INTRASTATE AUTHORIZATIONS
As of January 31, 1999, Williams has authority to provide intrastate interLATA
switched services in the following states (subject to approval of any required
tariffs);
Alabama
Florida
Georgia
Iowa
Kansas
Maryland
Minnesota
Missouri
Mississippi
Montana
New York
South Carolina
Texas
Virginia
<PAGE> 120
SCHEDULE N
Williams/SBC
Access Agreement (B & D)
****
<PAGE> 121
Exhibit A
Williams Unbundled Pricing Proposal for
SBC Long Distance
****
<PAGE> 122
EXHIBIT B
Examples of Direct End Office Trunking (DEOT) Mou Cap
****
<PAGE> 123
EXHIBIT C
****
<PAGE> 124
EXHIBIT D
****
[FLOW CHART]
<PAGE> 125
EXHIBIT E
****
<PAGE> 1
EXHIBIT 10.12
SECURITIES PURCHASE AGREEMENT
dated as of February 8, 1999
by and among
WILLIAMS COMMUNICATIONS GROUP, INC.
(the "Company"),
THE WILLIAMS COMPANIES, INC.
and
SBC COMMUNICATIONS INC.
(the "Investor")
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
DEFINED TERMS..................................................................1
ARTICLE II
PURCHASE AND SALE TERMS; CLOSING...............................................8
2.1 Purchase and Sale................................................8
2.2 Payment..........................................................8
2.3 Closing..........................................................8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY; DUE DILIGENCE...................9
3.1 Delivery of Revised Underwriting Agreement ......................9
3.2 Delivery of Articles.............................................9
3.3 Underwriting Agreement Representations and Warranties............9
3.4 Investor Due Diligence...........................................9
3.5 Additional Representations and Warranties.......................10
3.6 Disclosure to the Investor......................................10
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR................................10
4.1 Existence.......................................................10
4.2 Power and Authority.............................................10
4.3 Purchase for Investment.........................................10
4.4 Non-Contravention...............................................11
4.5 Financial Matters...............................................11
4.6 Restricted Securities...........................................11
4.7 Further Limitations on Disposition..............................12
ARTICLE V
COVENANTS OF THE COMPANY AND THE INVESTOR.....................................12
5.1 Covenants of the Company Only...................................12
5.2 Further Assurances..............................................13
5.3 Filings and Consents............................................14
5.4 Accounting Treatment............................................14
5.5 Regulatory Risk.................................................14
5.6 Covenant to Satisfy Conditions..................................14
5.7 Notification of Change in Control Event.........................14
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE VI
CLOSING CONDITIONS............................................................15
6.1 Conditions of Investor's Obligations at Closing.................15
6.2 Conditions of the Company's Obligations at Closing..............15
6.3 Conditions to Each Party's Obligation...........................16
ARTICLE VII
TRANSFER RESTRICTIONS.........................................................16
7.1 Restrictions on Transfer; the 33 Act............................16
ARTICLE VIII
ANTI-DILUTION ADJUSTMENTS; PREEMPTIVE RIGHTS; VOTING RIGHTS;
BOARD REPRESENTATION.....................................................18
8.1 Anti-dilution Adjustments.......................................18
8.2 Preemptive Rights...............................................19
8.3 Offer Mechanics.................................................19
8.4 Exceptions to Preemptive Rights.................................20
8.5 Termination or Reduction of Preemptive Rights...................21
8.6 Voting Rights...................................................22
8.7 Board Representation............................................22
ARTICLE IX
CALL OPTION...................................................................23
9.1 Call Option.....................................................23
ARTICLE X
TERMINATION...................................................................24
10.1 Termination.....................................................24
10.2 Effect of Termination...........................................25
ARTICLE XI
INDEMNIFICATION...............................................................25
11.1 Indemnification.................................................25
11.2 Terms of Indemnification........................................26
ARTICLE XII
REGISTRATION RIGHTS...........................................................27
12.1 Registration Rights.............................................27
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE XIII
RIGHTS OF FIRST OFFER.........................................................32
13.1 Rights of First Offer Generally.................................32
13.2 Transfer Mechanics..............................................33
13.3 Transfers to Third Parties after TWC or the Company
Declines Rights of First Offer...............................34
13.4 Exceptions to Rights of First Offer.............................34
ARTICLE XIV
STANDSTILL....................................................................34
14.1 Standstill Provision............................................34
ARTICLE XV
MISCELLANEOUS.................................................................36
15.1 Governing Law...................................................36
15.2 Remedies Cumulative.............................................36
15.3 Brokerage.......................................................36
15.4 Severability....................................................36
15.5 Notices.........................................................36
15.6 No Waiver.......................................................36
15.7 Amendments and Waivers..........................................36
15.8 Rights of the Investor..........................................36
15.9 Survival........................................................37
15.10 Entire Understanding............................................37
15.11 Expenses........................................................37
15.12 Counterparts....................................................37
15.13 Assignment; No Third-Party Beneficiaries........................37
15.14 Press Releases and Announcements................................38
15.15 Titles and Subtitles............................................38
15.16 Aggregation of Stock............................................38
</TABLE>
<PAGE> 5
EXHIBITS
Exhibit 1.1 Lehman Brothers Standard Form of Underwriting Agreement
Exhibit 15.5 Notices
<PAGE> 6
SECURITIES PURCHASE AGREEMENT dated as of February 8, 1999, among
Williams Communications Group, Inc., a Delaware corporation (the "Company"), The
Williams Companies, Inc., a Delaware corporation ("TWC"), and SBC Communications
Inc., a Delaware corporation ("SBC" and together with any assignee thereof
pursuant to Section 15.13 hereof, the "Investor").
PREAMBLE
The Company wishes to obtain equity financing. The Investor is willing,
on the terms contained in this Agreement, to purchase Class A common stock, par
value $0.01 per share (the "Class A Common Stock"), of the Company having the
characteristics set forth in the Restated Articles of Incorporation of the
Company (the "Articles"). The Company and SBC or certain of their Affiliates (as
defined below) are entering into agreements, which include that certain
Transport Services Agreement between the Company and the Investor dated February
8, 1999 (the "Transport Services Agreement"), and that certain Master Alliance
Agreement between the Company and the Investor dated February 8, 1999 (the
"Alliance Agreement"), under which the parties have set forth their agreement to
work together to enhance their respective abilities to meet competitive
opportunities for network services. Certain capitalized terms are defined in the
first Article. Exhibits are incorporated by reference into this Agreement as
though such exhibits were set forth at the point of such reference.
ARTICLE I
DEFINED TERMS
The following terms, when used in this Agreement, have the following
meanings, unless the context otherwise indicates:
"10% Limit" shall mean 10% of the total number of issued and
outstanding shares of Common Stock of the Company calculated on a Fully-Diluted
Basis after giving effect to any concurrent transaction and the issuance of
shares of Common Stock to the Investor.
"33 Act" means the Securities Act of 1933, as amended, or any similar
federal law then in force.
"34 Act" means the Securities Exchange Act of 1934, as amended, or any
similar federal law then in force.
"Adverse Effect" shall have the meaning set forth in Section 5.5 to
this Agreement.
"Affiliate" has the meaning ascribed to it in Rule 12b-2 under the 34
Act.
"Alliance Agreement" shall have the meaning set forth in the preamble
to this Agreement.
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"Articles" shall have the meaning set forth in the preamble to this
Agreement.
"Articles Delivery Date" shall have the meaning set forth in Section
3.2 of this Agree ment.
"Beneficially Own" means having the right to vote or dispose of, or
"beneficially own" as determined pursuant to Rule 13d-3 under the 34 Act as in
effect on the date of this Agreement, including pursuant to any agreement,
arrangement or understanding.
"Bona Fide Offer" means any cash offer by a Third Party in writing,
setting forth a specific cash purchase price and a closing date of no more than
thirty days therefrom, which is fully financed and not subject to any material
conditions.
"Board of Directors" means the Board of Directors of the Company.
"Business Day" means a day other than a Saturday or Sunday or a day on
which banking institutions are authorized or required by law or executive order
to remain closed in New York, New York, Tulsa, Oklahoma or San Antonio, Texas.
"Call Option" shall have the meaning set forth in Section 9.1(a) to
this Agreement.
"Change in Control Event" shall be deemed to have occurred with respect
to the Investor or the Company if (i) there shall be consummated (x) any
consolidation or merger of the Investor or the Company, as the case may be, in
which the Investor or the Company, as the case may be, is not the continuing or
surviving corporation or pursuant to which shares of the common stock of the
Investor or the Company, as the case may be, would be converted into cash,
securities or other property (provided, that a merger of the Investor or the
Company, as the case may be, in which the holders of such common stock
immediately prior to the merger hold at least 70% of the common stock of the
surviving corporation immediately after the merger shall not constitute a Change
in Control Event), or (y) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or substantially all,
of the assets of the Investor or the Company, as the case may be, or (ii) the
stockholders of the Investor or the Company, as the case may be, approved any
plan or proposal for the liquidation or dissolution of the Investor or the
Company, as the case may be, or (iii) any Person (other than TWC or any
Subsidiary of TWC in the case of the Company) shall Beneficially Own 30% or more
of the outstanding common stock of the Company or the Investor, as the case may
be (or, in the case of the Company, 50% of the outstanding Common Stock if and
so long as TWC Beneficially Owns 30% of more of the outstanding Common Stock of
the Company), or (iv) during any period of two consecutive years, individuals
who at the beginning of such period constitute the entire Board of Directors of
the Investor or the Company, as the case may be, shall cease for any reason to
constitute a majority
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thereof unless the election, or the nomination for election by such company's
stockholders, of each new director was approved by a vote of at least two-thirds
of the directors then still in office who were directors at the beginning of the
period.
"Claims" shall have the meaning set forth in Section 11.1(a) to this
Agreement.
"Class A Common Stock" shall mean the Class A common stock, par value
$0.01 per share, of the Company and any common stock of the Company received in
exchange for the Class A common stock.
"Class B Common Stock" shall mean the Class B common stock, par value
$0.01 per share, of the Company.
"Closing" and "Closing Date" mean the consummation of the Company's
sale and the Investor's purchase of Class A Common Stock pursuant to this
Agreement, and the date or dates on which the same occurs or occurred,
respectively.
"Code" means the Internal Revenue Code of 1986, as amended, or any
similar federal law then in force.
"Common Stock" shall mean the Class A Common Stock and the Class B
Common Stock and any other series of common stock of the Company hereafter
issued. The term "Common Stock" shall include, except as otherwise provided
herein, any and all shares of common stock or other securities of the Company or
any successor or assign of the Company (whether by merger, consolidation, sale
of assets or otherwise), which may be issued in respect of, in exchange for, or
in substitution for any shares of Common Stock, by reason of any stock dividend,
split, reverse split, combination, recapitalization, reclassification, merger,
consolidation, partial or complete liquidation, sale of assets, spin-off,
distribution to stockholders or combination of the shares of Common Stock or any
other change in the Company's capital structure, in order to preserve fairly and
equitably as far as practicable, the original rights and obligations of the
parties hereto under this Agreement.
"Company Control Person" shall have the meaning set forth in Section
12.1(g)(ii) to this Agreement.
"Control Person" shall have the meaning set forth in Section 12.1(g)(i)
to this Agreement.
"Determination Period" shall have the meaning set forth in Section
9.1(c) to this Agreement.
"Dilution Offer" shall have the meaning set forth in Section 8.1(c) to
this Agreement.
"Duly Endorsed" means (i) duly endorsed in blank by the person or
persons in whose name a stock certificate or certificate representing a debt
security is registered or (ii) accompanied
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by a duly executed stock or security assignment separate from the certificate,
in each case with the signature(s) thereon guaranteed by a commercial bank or
trust company or a member of a national securities exchange or of the National
Association of Securities Dealers, Inc.
"Employee Benefit Plan" means any plan regulated under ERISA.
"ERISA" means the Employee Retirement Income Security Act of 1974 (or
any successor legislation thereto), as amended from time to time.
"Fully-Diluted Basis" means, with respect to any calculation of the
outstanding amount of common equity of the Company, an amount equal to the total
outstanding number of shares of Common Stock, calculated without duplication and
assuming the conversion of all outstanding shares of convertible capital stock
and securities of the Company and the exercise of all warrants, options and
other rights (including, without limitation, employee stock options pursuant to
any stock option plan of the Company (except that, with respect to such options
and warrants, if any such options are finally determined to be less than 100%
vested or if any such warrants are finally determined to be less than 100%
exercisable, only those shares of Common Stock which may be exercised following
such final determination shall be included in such calculation)) to purchase
shares of Common Stock.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government (including, without limitation, the Federal Communications
Commission (or any successor thereto) and each applicable public utilities
commission).
"Holder" shall have the meaning set forth in Section 12.1(a) to this
Agreement.
"HSR Act" shall have the meaning set forth in Section 5.3(a) to this
Agreement.
"Investor Limit" shall have the meaning set forth in Section 8.5(c) to
this Agreement.
"IPO" means the initial public offering of the Company pursuant to a
registration statement to be filed by the Company under the 33 Act.
"IPO Price" means the per share offering price for Class A Common Stock
stated on the face of the final prospectus relating to the IPO.
"Net IPO Price" means the IPO Price less any discounts or commissions
per share from the IPO Price to the underwriter or underwriters.
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"Outstanding Equity" shall mean the total number of issued and
outstanding shares of Common Stock of the Company immediately following the IPO
calculated on a Fully-Diluted Basis.
"Plan" means an employee benefit plan, as defined in Section 3(3) of
ERISA, which the Company maintains, contributes to or has an obligation to
contribute to on behalf of participants who are or were employed by the Company.
"Permitted Transfer Date" shall have the meaning set forth in Section
7.1(a) to this Agreement.
"Person" means any individual, corporation, partnership, limited
liability company or partnership, joint venture, association, governmental
entity, or any other entity.
"Pooling Treatment" means the accounting for a specific transaction
under the "pooling of interests" method under the requirements of Opinion No. 16
(Business Combinations) of the Accounting Principles Board of the American
Institute of Certified Public Accountants, the Financial Accounting Standards
Board, and the rules and regulations of the SEC.
"Potential Change in Control Event" means any one of the following
events: (a) the commencement of a tender offer or exchange offer (as such terms
are defined in the rules and regulations under the 34 Act) by any Person that
would, if consummated, constitute a Change in Control Event involving the
Company; (b) the solicitation of proxies by any Person for the purpose of
effecting a Change in Control Event involving the Company; (c) the disclosure by
the Company of any material non-public information to any Person for the purpose
of assisting such Person in evaluating whether to effect a Change in Control
Event involving the Company; (d) the commencement of substantive discussions or
negotiations (involving more than the Company responding to inquiries) between
the Company and any Person contemplating a Change in Control Event involving the
Company; or (e) the agreement by the Company, whether or not in writing, to
facilitate a Change in Control Event involving the Company. For purposes of the
above, in no event shall the term "Person" include the Investor or any of its
Affiliates.
"Preemptive Rights Notice" shall have the meaning set forth in Section
8.3(a) to this Agreement.
"Preemptive Rights Offer" shall have the meaning set forth in Section
8.3(a) to this Agreement.
"Purchase Agreement Addendum" shall have the meaning set forth in
Section 3.4 to this Agreement.
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"Purchase Agreement Addendum Delivery Date" shall have the meaning set
forth in Section 3.4 to this Agreement.
"Purchase Price" shall have the meaning set forth in Section 2.1(c) to
this Agreement.
"Registration Request" shall have the meaning set forth in Section
12.1(a) to this Agreement.
"Registration Statement" shall have the meaning set forth in Section
12.1(a) to this Agreement.
"Representative" shall have the meaning set forth in Section 14.1 to
this Agreement.
"Restricted Security" shall have the meaning set forth in Section
7.1(b) to this Agree ment.
"Revised Underwriting Agreement Delivery Date" shall have the meaning
set forth in Section 3.1 to this Agreement.
"Right of First Offer Notice" shall have the meaning set forth in
Section 13.1(a) to this Agreement.
"SBC Nominee" shall have the meaning set forth in Section 8.7(a) to
this Agreement.
"SEC" means the Securities and Exchange Commission.
"Selling Stockholders" shall have the meaning set forth in Section
12.1(a) to this Agreement.
"Subsidiary" or "Subsidiaries" of any Person means any corporation or
other entity of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other Persons
performing similar functions are at the time directly or indirectly owned or
controlled by such Person or one or more Subsidiaries of such Person.
"Super Voting Rights" shall have the meaning set forth in Section 8.6
to this Agreement.
"Termination" shall have the meaning set forth in Section 9.1 to this
Agreement.
"Third Party" means, with respect to the Company or the Investor, any
Person other than the Company's or the Investor's Affiliates, respectively;
provided further, that the Transfer to any such Person is in compliance with all
applicable federal, state and foreign securities laws.
"Trading Day" means a day on which the New York Stock Exchange is open
for the transaction of business.
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"Transfer" means any direct or indirect sale, assignment, mortgage,
transfer, pledge, gift, hypothecation or other disposition of or transfer of
Common Stock.
"Transfer Offer" shall have the meaning set forth in Section 13.1(a) to
this Agreement.
"Transfer Stock" shall have the meaning set forth in Section 13.1(a) to
this Agreement.
"Transport Services Agreement" shall have the meaning set forth in the
preamble to this Agreement.
"TWC" means The Williams Companies, Inc., a Delaware corporation.
"Underwriting Agreement" means the underwriting agreement among the
Company and Lehman Brothers Inc., Salomon Smith Barney and certain other
underwriters to be named therein, in connection with the IPO, with such changes
as shall be reflected in a draft to be delivered to the Investor pursuant to
Section 3.1. The Lehman Brothers standard form of underwriting agreement is
attached as Exhibit 1.1 for references purposes only.
"Volume-Weighted Average Trading Price" shall mean, for any Trading
Day, an amount equal to (a) the cumulative sum, for each trade of Class A Common
Stock (or other class or series of capital stock) during such Trading Day on the
New York Stock Exchange (or, if such security is not listed on the New York
Stock Exchange, such other principal exchange or over-the-counter market on
which such security is listed), of the product of: (i) the sale price times (ii)
the number of shares of Class A Common Stock (or such other class or series of
capital stock) sold at such price, divided by (b) the total number of shares of
Class A Common Stock (or such other class or series of capital stock) so traded
during the Trading Day.
Additional defined terms are found in the body of the following text.
The masculine form of words includes the feminine and the neuter and
vice versa, and, unless the context otherwise requires, the singular form of
words includes the plural and vice versa. The words "herein," "hereof,"
"hereunder," and other words of similar import when used in this Agreement refer
to this Agreement as a whole, and not to any particular section or subsection.
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ARTICLE II
PURCHASE AND SALE TERMS; CLOSING
2.1 Purchase and Sale.
(a) The Board of Directors of the Company has authorized the
sale and issuance to the Investor pursuant to this Agreement of up to 10% of its
shares of its Common Stock, having the rights, privileges and restrictions set
forth in the Articles of the Company. Before the Closing Date, the Company will
have adopted and filed the Articles with the Delaware Secretary of State.
(b) Subject to the terms and conditions of this Agreement, at
the Closing, the Company shall issue and sell to the Investor, and the Investor
shall purchase from the Company, the number of shares of Class A Common Stock
equal to the lesser of (i) $500,000,000 divided by the IPO Price or (ii) 10% of
the Outstanding Equity immediately following the consummation of the IPO and
after giving effect to the issuance of the Class A Common Stock to the Investor,
subject to adjustment as set forth in Article VIII below. Upon the exercise and
closing by the Underwriters of the over-allotment option as contemplated in the
Underwriting Agreement, the Investor shall purchase such additional shares of
Class A Common Stock from the Company (at a price equal to the number of shares
of Class A Common Stock to be acquired by the Investor multiplied by the lesser
of (x) the Net IPO Price or (y) the price paid by the Underwriters pursuant to
the over-allotment option) as such Investor would have been required to purchase
in accordance with the foregoing sentence if the closing of the over-allotment
option had occurred simultaneously with the Closing; provided that the
additional shares so purchased by the Investor shall not be part of the
over-allotment option but shall be other newly issued shares of the Company.
(c) The aggregate purchase price (the "Purchase Price") for
the shares of Class A Common Stock to be purchased by the Investor shall be an
amount equal to the product of the number of shares of Class A Common Stock to
be acquired by the Investor, as determined by Section 2.1(b) above, multiplied
by the Net IPO Price; provided, however that the Purchase Price to be paid in
connection with the exercise of any over-allotment option shall be determined
pursuant to Section 2.1(b).
2.2 Payment. At the Closing, the Company shall deliver to Investor a
certificate (registered in the name of the Investor) representing the
appropriate number of shares of Class A Common Stock which the Investor is
purchasing against delivery to the Company by the Investor by wire transfer in
immediately available funds in U.S. dollars in the amount of the Purchase Price
therefor payable to the Company's order.
2.3 Closing. The purchase and sale of the Class A Common Stock to take
place at the Closing shall be held at the offices of Davis Polk & Wardwell, New
York, New York or such other place as the parties may agree. The Closing shall
occur on the date of and simultaneously with the consummation of the
transactions contemplated by the Underwriting Agreement relating to the IPO (the
"Closing Date"). The Closing shall occur simultaneously with and shall be
conditioned upon the closing of the transactions contemplated by the
Underwriting Agreement relating to the IPO.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY;
DUE DILIGENCE
3.1 Delivery of Revised Underwriting Agreement. The Company shall
deliver to the Investor a revised and substantially completed draft Underwriting
Agreement on or before March 15, 1999, or such later time as the Company and the
Investor shall agree in writing (the "Revised Underwriting Agreement Delivery
Date"). Notwithstanding the foregoing, the Revised Underwriting Agreement
Delivery Date shall not be before March 8, 1999.
3.2 Delivery of Articles. The Company shall deliver to the Investor the
Articles on or before February 15, 1999, or such later time as the Company and
the Investor shall agree in writing (the "Articles Delivery Date"). The Investor
shall comment on the Articles within five Business Days following the Articles
Delivery Date and the Investor and the Company shall thereafter negotiate in
good faith to resolve any issues relating to the Articles.
3.3 Underwriting Agreement Representations and Warranties. In
connection with the sale of the Class A Common Stock to the Investor, the
Company will hereby be deemed to make each of the representations and warranties
to, and agreements with, the Investor that are made for the benefit of the
Underwriters as set forth in the Underwriting Agreement.
3.4 Investor Due Diligence. From the date hereof until the Closing
Date, the Company will grant the Investor and its representatives reasonable
access to all the premises, books, records, inventory and physical plant
relating to the Company. The Company shall cause its representatives and
independent auditors to furnish to the Investor such financial and other data
and information with respect to the Company as the Investor and/or its
independent accountants and counsel shall reasonably request, to the extent
permitted by law, in the opinion of the General Counsel of the Company, and in
compliance with applicable laws and regulations and with contractual obligations
to third parties including, without limitation, confidentiality and
non-disclosure restrictions. With respect to data requested by the Investor
which is subject to contractual restrictions on disclosure, the Company agrees
to exercise reasonable efforts in order to obtain the necessary permissions
which would allow the disclosure of such data or information to the Investor.
The Investor recognizes that certain data may be redacted to prevent the
disclosure of information that the Company is not legally or contractually
authorized to disclose.
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3.5 Additional Representations and Warranties. Unless waived by the
Investor in writing, the Company shall, by addendum ("Purchase Agreement
Addendum") to this Agreement delivered and dated not more than 15 days after the
Revised Underwriting Agreement Delivery Date, make such additional
representations and warranties, and provide for such terms and conditions
concerning such representations and warranties, as the Investor shall reasonably
request in writing five days after the Revised Underwriting Agreement Delivery
Date, and as the Company and the Investor shall agree upon (the date of delivery
by the Company and acceptance by the Investor of such addendum, or the date of
any waiver, being referred to as the "Purchase Agreement Addendum Delivery
Date").
3.6 Disclosure to the Investor. If during the course of the Investor's
due diligence as described in Section 3.4, the Investor discovers a fact or set
of facts which would cause or has caused a breach of one of the representations
and warranties of this Agreement or the Underwriting Agreement or which fact or
set of facts is viewed as significant by the Investor to require an additional
representation or warranty as described in Section 3.5, the Investor shall use
reasonable efforts to notify the Company as promptly as practicable concerning
such fact or set of facts.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
The Investor represents and warrants to the Company, as of the date
hereof and as of the date of the Closing that:
4.1 Existence. The Investor is a company duly organized, validly
existing and current in payment of all taxes properly payable pursuant to the
laws of the jurisdiction of its organization. The Investor has the requisite
corporate power and authority to own and operate its properties and assets and
to carry on its business as presently conducted.
4.2 Power and Authority. The Investor has the requisite corporate power
and authority and has taken all required action necessary to authorize the
execution and delivery by it of this Agreement and all other documents or
instruments required by this Agreement, and to carry out the terms of this
Agreement and of all such other documents or instruments. This Agreement has
been duly executed and delivered by the Investor and (assuming the due
authorization, execution and delivery hereof by the Company and the other
parties thereto other than the Investor) constitutes the valid and binding
obligation of the Investor, enforceable against the Investor in accordance with
its terms.
4.3 Purchase for Investment. The Investor is purchasing its shares of
Class A Common Stock for investment, for its own account (not as a nominee or
agent) and not for the account of any Employee Benefit Plan (or if are being
acquired for the account of any such Plan, such acquisition does not involve a
nonexempt prohibited transaction within the meaning of
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Section 406 of ERISA or Section 4975 of the Code) and not with a view to the
resale or distribution of any part thereof, except for transfers permitted
hereunder, and the Investor has no present intention of selling, granting any
participation in or otherwise distributing the same. By executing this
Agreement, the Investor further represents that it does not have any contract,
undertaking, agreement or arrangement with any Person to sell, Transfer or grant
participation to such Person or to any third person with respect to the Class A
Common Stock.
4.4 Non-Contravention. The execution, delivery and performance of this
Agreement by the Investor and the consummation of any of the transactions
contemplated hereby by the Investor will not (a) conflict with or result in a
breach of any of the terms and provisions of, or constitute a default (or an
event which with notice or lapse of time, or both, would constitute a default)
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Investor pursuant to any
agreement, instrument, franchise, license or permit to which the Investor is a
party or by which any of its properties or assets may be bound or (b) violate or
conflict with any judgment, decree, order, statute, rule or regulation of any
court or any public, governmental or regulatory agency or body applicable to the
Investor or any of its properties or assets, other than such breaches, defaults
or violations that are not reasonably expected to impair the ability of the
Investor to consummate the transactions contemplated by this Agreement. The
execution, delivery and performance of this Agreement by the Investor and the
consummation of the transactions contemplated hereby by the Investor do not and
will not violate or conflict with any provision of the organizational documents
of the Investor, as currently in effect. Except for filings under the HSR Act,
no consent, approval, authorization, order, registration, filing, qualification,
license or permit of or with any court or any government agency or body
applicable to the Investor is required for the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby.
4.5 Financial Matters. The Investor, either alone or with its financial
advisor, has such knowledge and experience in financial and business matters
that it is capable of evaluating the merits and risks of the investment to be
made by it hereunder. The Investor represents that it is an "accredited
investor" as that term is defined in Regulation D promulgated under the 33 Act.
4.6 Restricted Securities. The Investor understands that its shares of
Class A Common Stock must be held indefinitely unless they are registered under
the 33 Act or an exemption from such registration becomes available, and that
its shares of Class A Common Stock may only be Transferred as provided in
Article VII of this Agreement. The Investor acknowledges and agrees to abide by
the restrictions on transfer set forth in Article VII of this Agreement. The
Investor understands that the shares of Class A Common Stock it is purchasing
are characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the
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33 Act, only in certain limited circumstances. In this connection, Investor
represents that it is familiar with Rule 144 under the 33 Act, as presently in
effect, and understands the resale limitations imposed thereby and by the 33
Act.
4.7 Further Limitations on Disposition. Without in any way limiting the
representations set forth above, Investor further agrees not to make any
disposition of all or any portion of the Class A Common Stock unless and until
the transferee has agreed in writing for the benefit of the Company to be bound
by this Article IV and Article VII and:
(a) There is then in effect a registration statement under the
33 Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(b) (i) The Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition and (ii) if
reasonably requested by the Company, the Investor shall have furnished the
Company with an opinion of counsel reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the 33 Act.
It is agreed that the Company will not require opinions of counsel for
transactions made pursuant to Rule 144 except in unusual circumstances.
ARTICLE V
COVENANTS OF THE COMPANY AND THE INVESTOR
5.1 Covenants of the Company Only.
(a) The Company will hereby be deemed to covenant and agree
with the Investor and to its benefit to comply with all agreements made for the
benefit of the Underwriters as set forth in the Underwriting Agreement and shall
make such additional covenants as shall be agreed to by the Company and the
Investor in the Purchase Agreement Addendum.
(b) The Company is currently engaged in discussions with
underwriters regarding the IPO and agrees that it will act in good faith to
effect the IPO and to undertake such steps as it shall deem necessary to
consummate the IPO. If the Company does not effect an IPO, the Company hereby
agrees that it will enter into discussions with SBC regarding SBC's possible
investment in the Company.
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(c) The Company shall promptly notify SBC of any material
developments in connection with the IPO, and provide copies of any and all
filings, notices and other communications with the SEC relating thereto,
including copies of the registration statement filed with the SEC, and with any
Governmental Authority relating to the filings under the HSR Act as described in
Section 5.3(a) below. The Company shall also provide to SBC any such filings,
notices and other communications to SBC sufficiently for in advance of their
being filed or provided to the SEC or such Governmental Authorities as described
above so as to permit SBC sufficient opportunity to review and comment on such
drafts.
(d) The Company shall provide to SBC copies of any notices,
correspondence or other written communication from the SEC relating to the IPO
or from any Governmental Authority relating to the filings under the HSR Act as
described in Section 5.3(a) below promptly following receipt thereof.
5.2 Further Assurances. Subject to the terms and conditions provided
herein, each of the parties agrees to use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done as promptly as
practicable, all things necessary, proper or advisable under applicable laws and
regulations or otherwise to consummate and make effective the transactions
contemplated by this Agreement. The Company, at its expense, will promptly
execute and deliver to the Investor, and the Investor will, at its expense,
promptly execute and deliver to the Company, upon the other's reasonable
request, all such other and further documents, agreements and instruments in
compliance with or pursuant to its covenants and agreements herein, and will
make any recordings, file any notices, and obtain any consents as may be
necessary or appropriate in connection therewith, including without limitation,
applications under the HSR Act.
5.3 Filings and Consents.
(a) As soon as practicable after execution and delivery of
this Agreement, the Investor and the Company shall make all filings required
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), relating to the transactions contemplated hereby. In addition, the
Investor and the Company will each promptly furnish all information as may be
required by the Federal Trade Commission and the Department of Justice under the
HSR Act in order for the requisite approvals for the purchase and sale of the
Class A Common Stock, and the transactions contemplated hereby, to be obtained
or any applicable waiting periods to expire. Each of the parties hereto will
cooperate with each other with respect to obtaining, as promptly as practicable,
all necessary consents, approvals, authorizations and agreements of, and the
giving of all notices and making of all other filings with, any third parties,
including Governmental Authorities, necessary to authorize, approve or permit
the consummation of the transactions contemplated hereby.
(b) The Investor and the Company will provide such information
and communications to the Persons requiring such approvals, authorizations and
consents as reasonably required by such Person.
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5.4 Accounting Treatment.
(a) Except as permitted by Section 5.4(b), the Investor shall
not take any action and shall not fail to take any action which action or
failure to act would prevent, or would be reasonably likely to prevent, any
transaction of the Company from qualifying for Pooling Treatment.
(b) The Investor agrees that it will not, without the prior
written consent of the Company, Transfer any shares of Common Stock or any
securities convertible into or exercisable for shares of Common Stock owned by
it or with respect to which it has the power of disposition, whether directly or
indirectly, at any time, if in the reasonable judgment of the Company, such
restriction is deemed necessary in order to permit or preserve Pooling
Treatment; provided, however, that notwithstanding the foregoing, the Investor
shall not be prohibited from Transferring any shares of Common Stock, as a
result of the Company's need to permit or preserve Pooling Treatment, for more
than 120 days in any calendar year.
5.5 Regulatory Risk. Subject to Article XIII, if any regulatory issues,
whether by means of an order or request of a Governmental Authority or
otherwise, arise as a result of the Investor's ownership of the Class A Common
Stock, that causes or reasonably would be expected to cause the Company to be
subject to additional legal limitations or governmental regulation that have an
Adverse Effect, the Investor shall, from the date the Investor becomes aware
that a regulatory issue or issues would cause or reasonably would be expected to
cause such circumstances to exist, as promptly as reasonably practicable
Transfer (notwithstanding the restriction on Transfer prior to the Permitted
Transfer Date in Article VII) such number of shares of Class A Common Stock as
may be necessary to resolve such issues, or take such other action that the
Investor deems appropriate to resolve such issues; provided, however, that the
Investor shall only be liable to the Company for any losses or other expenses
associated with such additional legal limitations or governmental regulations if
due to the Investor's negligence or failure to act diligently in Transferring
such shares in accordance with the above. For purposes of this Section 5.5,
"Adverse Effect" means the imposition on the Company of actual out-of-pocket
costs in excess of $60 million or the required inclusion of a contingent
liability in excess of $60 million in the Company's financial statements
prepared consistent with generally accepted accounting principles.
5.6 Covenant to Satisfy Conditions. Each party agrees to use all
reasonable efforts to insure that the conditions to the other party's
obligations hereunder set forth in Article VI, insofar as such matters are
within the control of such party, are satisfied.
5.7 Notification of Change in Control Event. Each party shall promptly
notify the other party of any Change in Control Event affecting the Company or
the Investor, as the case may be, and the Company shall promptly notify the
Investor of a Potential Change in Control Event of which it becomes actually
aware.
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ARTICLE VI
CLOSING CONDITIONS
6.1 Conditions of Investor's Obligations at Closing.
(a) Underwriting Agreement. The Investor's obligation to
purchase and pay for the Class A Common Stock to be purchased by it hereunder is
subject to (i) the Investor's determination that there has not been any material
revision to the Underwriting Agreement that is adverse to the Investor as it has
been executed by the Underwriters and the Company since the draft delivered to
the Investor pursuant to Section 3.1 hereof, and (ii) the receipt by the
Investor of all letters, opinions, and certificates that the Underwriters are
entitled to receive from the Company in connection with the closing of the IPO.
(b) Receipt of Purchase Agreement Addendum. The Investor shall
have received from the Company the Purchase Agreement Addendum pursuant to
Section 3.5 hereof in form and substance reasonably satisfactory to the
Investor.
(c) Receipt of Articles. The Investor shall have received from
the Company the Articles pursuant to Section 3.2 in form and substance
reasonably satisfactory to the Investor.
6.2 Conditions of the Company's Obligations at Closing. The obligations
of the Company to the Investor under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by the
Investor:
(a) Representations and Warranties. The representations and
warranties of the Investor contained in Article IV shall be true on and as of
the Closing with the same effect as though such representations and warranties
had been made on and as of the Closing.
(b) Payment of Purchase Price. The Investor shall have
delivered the Purchase Price.
(c) Performance of Obligations. The Investor shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing.
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(d) Legal Matters. The Company shall have received from the
Investor such legal opinions as shall be reasonably agreed upon by the Company
and the Investor and such other letters, opinions and certificates as the
Company shall reasonably request.
6.3 Conditions to Each Party's Obligation. The respective obligation of
each party to consummate the transactions contemplated hereby shall be subject
to the satisfaction at or prior to the Closing of each of the following
conditions:
(a) HSR Approval. The applicable waiting period (and any
extension thereof) under the HSR Act relating to the transactions contemplated
by this Agreement shall have been terminated or shall have expired.
(b) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing
consummation of the transactions contemplated hereby shall be in effect.
(c) Transport Services Agreement. The Transport Services
Agreement shall have been executed and remain in full force and effect.
(d) Consummation of IPO. The closing of the IPO as
contemplated by the Underwriting Agreement shall be consummated simultaneously
with the Closing.
ARTICLE VII
TRANSFER RESTRICTIONS
7.1 Restrictions on Transfer; the 33 Act.
(a) Restrictions on Transfer; Restrictive Legends. The Class A
Common Stock owned by the Investor shall not be transferable except upon the
conditions specified in this Article VII, which conditions are intended to
insure compliance with the provisions of the 33 Act in respect of the Transfer
of any such Class A Common Stock.
The Investor (including each assignee) hereby acknowledges and
agrees that it is acquiring the shares of Class A Common Stock in a transaction
exempt from registration under the 33 Act and that no shares of Class A Common
Stock may be Transferred in the absence of registration under the 33 Act or an
applicable exemption therefrom. The Investor also hereby agrees that it will, if
requested by an underwriter in connection with a public offering of securities
(including the IPO), enter into a standard lock-up agreement preventing it from
offering, selling or granting any option for the sale of or disposing of any of
its shares of Common Stock for the same time period that the Company or TWC
would be subject to under the underwriting agreement in connection with such
public offering, which period the Company shall use reasonable efforts to limit
to a period of not more than 90 days (except in the case of the IPO) and
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which shall in no event be in excess of 180 days. The Investor also hereby
acknowledges and agrees that it shall not Transfer (other than to an Affiliate)
such shares of Class A Common Stock for a period of three years and six months
from the Closing Date (which date shall also be the closing of the IPO) (the
"Permitted Transfer Date"). Each certificate representing the Investor's shares
of Class A Common Stock shall (unless otherwise permitted by the provisions of
this Article VII) be stamped or otherwise imprinted with a legend in
substantially the following form:
"THE SHARES OF COMMON STOCK OF THE ISSUER REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER ANY APPLICABLE
STATE LAW. THEY MAY NOT BE OFFERED FOR SALE, SOLD, OR TRANSFERRED WITHOUT (1)
REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE LAW OR
(2) AN OPINION OF COUNSEL SATISFACTORY TO WILLIAMS COMMUNICATIONS GROUP, INC.
THAT SUCH REGISTRATION IS NOT REQUIRED BECAUSE OF AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE
LAW. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL
RESTRICTIONS ON TRANSFER AS SET FORTH IN THE SECURITIES PURCHASE AGREEMENT DATED
AS OF FEBRUARY __, 1999, AS AMENDED FROM TIME TO TIME, WHICH PROVIDES THAT SUCH
SHARES MAY NOT BE TRANSFERRED UNTIL AUGUST __, 2002 (WHICH DATE IS THREE YEARS
AND SIX MONTHS FROM THE DATE HEREOF). COPIES OF THE SECURITIES PURCHASE
AGREEMENT MAY BE OBTAINED UPON REQUEST FROM WILLIAMS COMMUNICATIONS GROUP, INC.
AND ANY SUCCESSOR THERETO."
(b) Non-Applicability of Transfer Restrictions; Removal of
Legends. The restrictions imposed by Section 7.1 above upon the transferability
of any shares of Class A Common Stock represented by a certificate bearing the
restrictive legends set forth in such Section 7.1 (a "Restricted Security")
shall cease and terminate when such Restricted Security has been sold pursuant
to an effective registration statement under the 33 Act or transferred pursuant
to Rule 144 (or any similar or successor rule thereto) promulgated under the 33
Act unless the holder thereof is an affiliate of the Company. Upon a Change in
Control Event of the Company, the restriction on the Investor prohibiting the
Transfer of shares of Class A Common Stock prior to the Permitted Transfer Date
shall cease and terminate. The holder of any Restricted Security as to which
such restrictions shall have terminated shall be entitled to receive from the
Company, without expense, a new security of the same type but not bearing the
restrictive legend set forth above and not containing any other reference to the
restrictions imposed by Section 7.1 above, provided that a holder's right to
receive, and the Company's obligation to issue, a new Security not bearing such
restrictive legends and not containing any other reference to the restrictions
imposed by Section 7.1 above shall be subject, in the Company's discretion, to
the delivery to the Company of an opinion of counsel of the transferor (which
may include in-house counsel to the Investor) that subsequent transfers of such
Restricted Security by the proposed transferee will not require registration
under the 33 Act.
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ARTICLE VIII
ANTI-DILUTION ADJUSTMENTS; PREEMPTIVE RIGHTS;
VOTING RIGHTS; BOARD REPRESENTATION
8.1 Anti-dilution Adjustments.
(a) If immediately following the IPO the Investor owns Class A
Common Stock which is less than the 10% Limit and the Company plans to issue
common equity securities in a public offering solely for the purpose of raising
additional capital, the Company will then grant to the Investor a right of first
refusal to purchase, with respect to the issuance by the Company of new or
additional common equity securities for cash, that portion of such new or
additional equity securities as may be necessary in order to permit the Investor
to attain the 10% Limit. This right of first refusal shall be offered in
accordance with the offer mechanics set forth in (c) below. The Company shall
offer the Investor the right to purchase such equity securities at the price
offered to the public in connection with such issuance less any discounts or
commissions per share from the price offered to the public to the underwriters.
Upon the exercise and closing by the Underwriters of the over-allotment option
as contemplated in the Underwriting Agreement, the Company shall grant the
Investor a right of first refusal to purchase such additional shares of Class A
Common Stock as such Investor would have had the right to purchase in order to
attain the 10% Limit if the closing of the over-allotment option had occurred
simultaneously with the Closing.
(b) The right granted to the Investor in Section 8.1(a) above
shall terminate when the Investor first reaches the 10% Limit and shall be
subject to Section 8.5. Once the 10% Limit is reached, the Investor will only
have such additional preemptive rights as set forth in Section 8.2.
(c) Offer Mechanics. The Company shall provide a written
notice to the Investor of its intention to issue common equity securities in a
public offering in accordance with, and at such price set forth in, Section
8.1(a) above (the "Dilution Offer"). The Investor will then have the right,
within ten Business Days after the date the Dilution Offer is received by the
Investor, to accept irrevocably such offer in the aggregate, as to all, but not
less than all (unless necessary in order not to exceed the 10% Limit), such
common equity securities. If the Investor desires to exercise its right to
purchase, it shall provide the Company with written notice (specifying the
amount of common equity securities as to which it is accepting the Dilution
Offer) within such 10 Business Day period; provided, however, that such
securities will then not be offered as part of such public offering but shall be
offered and sold to the Investor in a private transaction. If the Investor
declines the right to purchase, the Company shall continue with a public
offering as set forth in (e) below; provided, however, that in no event shall
the Investor purchase more than 50% of the common equity securities issued by
the Company at any one time,
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and provided, further, that the securities purchased by the Investor, if any,
will not be offered as part of such public offering but shall be offered and
sold to the Investor in a private transaction.
(d) The closing of the purchase of the common equity
securities by the Investor shall take place at the principal executive offices
of the Company as soon as practicable, but in no event later than thirty
Business Days after the expiration of the 10 Business Day period after the
giving of the Dilution Offer (or such other date as may be mutually agreed to by
the parties to such transaction). At such closing, the Investor shall deliver to
the Company the appropriate per share cash consideration pursuant to a bank,
cashier's or certified check or by wire transfer of immediately available funds
(unless otherwise specified in the Dilution Offer provided to the Investor),
against delivery of certificates representing the common equity securities so
purchased Duly Endorsed.
(e) Transfers to Public after the Investor Declines Dilution
Offer. If at the end of the 10 Business Day period following the giving of the
Dilution Offer, the Investor shall not have accepted the Dilution Offer as to
all shares of common equity securities covered thereby (unless less than all is
necessary in order not to exceed the 10% Limit), the Company shall have 90 days
in which to sell the common equity securities to the public, at a price to the
underwriters that is no less than 95% of the price contained in the Dilution
Offer and on terms and conditions not more favorable to the public than were
contained in the Dilution Offer. Promptly after any sale pursuant to this
subsection (e), the Company shall notify the Investor of the consummation
thereof and shall furnish such evidence of the completion (including time of
completion) of such sale and of the terms and conditions thereof as the Investor
may reasonably request. If, at the end of such 90 day period, the Company has
not completed the sale of such common equity securities, it shall no longer be
permitted to sell such shares pursuant to this Section 8.1(e) without again
fully complying with the provisions of this Section 8.1.
8.2 Preemptive Rights. Subject to Section 8.5, the Company hereby
grants to the Investor a right of first refusal to purchase, with respect to the
issuance by the Company to any person of any new or additional common equity
securities for cash, that portion of such new or additional common equity
securities as may be necessary in order to permit the Investor to attain and
maintain the 10% Limit. The Company shall offer the Investor the right to
purchase such equity securities at the same price as offered to such person.
8.3 Offer Mechanics.
(a) The rights of first refusal granted in Section 8.1 and 8.2
shall be offered to the Investor (such offer, the "Preemptive Rights Offer")
pursuant to a written notice from the Company offering the Investor such
securities on the same terms and conditions as offered to the other offeree(s)
(such written notice, the "Preemptive Rights Notice"). The Investor shall have
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15 days from the date of the Company's delivery of the Preemptive Rights Notice
to notify the Company in writing of its binding acceptance of such Preemptive
Rights Offer with respect to all (but not less than all unless less than all is
necessary to reach the 10% Limit) equity securities which are offered to the
Investor pursuant to such Preemptive Rights Offer; provided, however, that if
the Company is issuing additional common equity securities in connection with a
public offering, the Company may shorten such time period to a period reasonably
necessary in order to ensure that information regarding the Investor will be
properly disclosed in any registration statement covering such securities.
(b) If the Investor accepts the Preemptive Rights Offer in
accordance with the provisions of the preceding sentence, the Company shall have
30 days in which to consummate such binding agreement. In the event that the
Investor does not accept the Preemptive Rights Offer within such 15-day period
in accordance with the provisions of the preceding sentence or fails to
consummate any such purchase within such 30-day period, the Company would have
the right, but not the obligation, to issue such securities on terms and
conditions in the aggregate no more favorable to the other offeree(s) than those
set forth in the Preemptive Rights Notice, pursuant to a definitive agreement to
be entered into no later than 120 days after such date.
8.4 Exceptions to Preemptive Rights. Notwithstanding anything to the
contrary contained herein, no rights of first refusal pursuant to Section 8.1(a)
or 8.2 above would apply in the event of (i) any issuances or grants of equity
securities to the officers, directors or employees of the Company or any of its
Subsidiaries, either in connection with a benefit plan or otherwise, (ii) the
exercise of any employee or director options or the exercise or conversion of
any options, warrants or convertible securities in existence as of the date of
the Closing, or the issuance of any securities to the employees or directors of
the Company or its Subsidiaries pursuant to any restricted stock or other
incentive plan of the Company or any of its Subsidiaries or the issuance upon
the conversion or exercise of convertible securities or warrants the issuance of
which was subject to this Article VIII, (iii) the issuance of equity securities,
either directly or indirectly, in connection with the Company's acquisition of,
business combination with or investment in any party which is not prior to such
transaction an Affiliate of the Company (whether by merger, consolidation, stock
swap, sale of assets or securities, or otherwise), (iv) the issuance of
securities (including any convertible securities or options and the conversion
or exercise thereof) to any third party which is at such time a creditor of the
Company, in connection with the refinancing or restructuring of the indebtedness
owed to such third party, (v) an issuance of Class A Common Stock by the Company
in connection with the IPO, (vi) the distribution by the Company of its
securities to all of its stockholders on a pro rata basis or in exchange for
outstanding TWC equity securities, (vii) a spin-off or split-off of the equity
securities of the Company to its shareholders, or (viii) if the granting of such
rights would prevent, or would be reasonably likely to prevent, the Company from
receiving Pooling Treatment.
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8.5 Termination or Reduction of Preemptive Rights.
(a) The right of first refusal and pre-emptive rights granted
to the Investor in Sections 8.1 and 8.2 to allow the Investor to maintain the
10% Limit shall terminate:
(i) upon a Transfer of a number of shares of Class A
Common Stock by the Investor such that after the Transfer the Investor
Beneficially Owns less than 3% of the issued and outstanding shares of
Common Stock; or
(ii) if the Transport Services Agreement is no longer
in effect.
(b) The Investor may fail to exercise its rights pursuant to
Section 8.1 or 8.2 on one occasion without any effect whatsoever on the
Investor's rights hereunder except as provided in Section 8.5(c).
(c) If, after failing to exercise its rights under Section 8.1
or 8.2 on one occasion as permitted in Section 8.5(b), the Investor should again
fail on one or more occasions to exercise its rights under Section 8.1 or 8.2,
the Investor's right to purchase common equity securities under Section 8.1 and
8.2 shall be limited and reduced so as to permit the Investor to purchase only
such new or additional common equity securities as may be necessary in order to
permit the Investor to maintain only that percentage of the total number of
issued and outstanding shares of Common Stock of the Company calculated on a
Fully-Diluted Basis that the Investor Beneficially Owned immediately following
the particular event that gave rise to the right of first refusal or preemptive
right under Section 8.1 or 8.2 that the Investor failed to exercise (the
"Investor Limit"); provided however, that if the Investor shall have purchased
additional securities other than from the Company, such shares of Class A Common
Stock shall not be counted for calculating the Investor Limit but only such
shares of Class A Common Stock that the Investor shall have purchased directly
from the Company shall be counted in calculating the Investor Limit. In such
event and for such purposes, all references in Section 8.1 and 8.2 to "10%
Limit" shall mean the "Investor Limit." The Investor Limit shall be further
reduced on each and every occasion (following the first occasion as provided in
Section 8.5(b)) that the Investor fails to exercise its rights under Section 8.1
or 8.2.
(d) If and on each occasion that the Investor Transfers any
shares of Class A Common Stock it Beneficially Owns to anyone other than an
Affiliate, the Investor's right to purchase common equity securities under
Section 8.1 and 8.2 shall be limited and reduced to permit the Investor to
maintain only that percentage of the total number of issued and outstanding
shares of Common Stock of the Company calculated on a Fully-Diluted Basis that
the Investor Beneficially Owned immediately following the consummation of such
Transfer (the "Transfer Limit"). In such event and for such purposes, all
references in Section 8.1 and 8.2 to "10% Limit" (or, to the extent superseded
by Section 8.5(c), the "Investor Limit") shall mean the "Transfer Limit."
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(e) The Investor's right to purchase equity securities under
Section 8.1 and 8.2 shall be further limited and reduced upon the occurrence of
each event described in Section 8.5(c) and 8.5(d) and shall not be thereafter
increased.
8.6 Voting Rights. If at any time after the date hereof the Company
issues to any Person other than the Company or any Affiliate of the Company in a
private or public sale of Common Stock with voting rights ("Super Voting
Rights") that are greater in any material respect than those the Investor has in
its Class A Common Stock, other than in connection with one or more employee or
director related plans or arrangements or in connection with a spin-off by the
Company of the Common Stock to its shareholders, the Investor will have the
right at its option to convert its shares of Class A Common Stock to new shares
of Common Stock with such Super Voting Rights. If such conversion occurs, all
references in this Agreement to Class A Common Stock shall be deemed to refer to
the Common Stock with Super Voting Rights.
8.7 Board Representation.
(a) Upon written request of SBC, following the completion of
the IPO and as long as SBC Beneficially Owns more than 5% of the issued and
outstanding shares of Common Stock, the Company shall recommend to its Board of
Directors that the Board take such action as may be necessary to elect a
director to be named by SBC (the "SBC Nominee") to the Company's Board of
Directors; provided that such SBC Nominee shall be a person acceptable to the
Board of Directors in its reasonable discretion prior to such person's initial
appointment which right of approval shall not be unreasonably withheld.
Thereafter, so long as SBC continues to Beneficially Own more than 5% of the
issued and outstanding shares of Common Stock and TWC Beneficially Owns more
than 50% of the issued and outstanding Class B Common Stock, the Company shall
recommend to its Board of Directors that the Board recommend to its stockholders
the reelection to the Company's Board of Directors of the SBC Nominee, or such
other SBC Nominee as SBC shall designate to the Company in writing at least five
Business Days prior to the meeting of the Board of Directors at which the
directors consider nominations for election to the Board of Directors. The SBC
Nominee shall not receive any compensation, including any shares of Common
Stock, for his services as a member of the Board of Directors.
(b) The rights existing in Section 8.7(a) above shall only
inure to the benefit of SBC if SBC has obtained relief in any state from Section
271 of the Telecommunications Act of 1996, as amended from time to time, and
such relief continues to be in effect.
(c) SBC agrees to cause the SBC Nominee to sign any customary
agreement of the Company concerning the SBC Nominee's obligations as is signed
by other directors of the Company.
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(d) SBC agrees that the SBC Nominee shall not be entitled to
participate in and shall be required to excuse himself from any Board, committee
or other internal discussions and related vote if at any time the general
counsel of the Company or the senior vice president of law of the Company
decides that the participation of the SBC Nominee presents a conflict of
interest or a potential conflict of interest, whether the conflict arises out of
SBC's business, the Company's business or any other matter.
(e) The right of SBC to appoint the SBC Nominee shall be
terminated upon the following events:
(i) a termination by SBC of the Alliance Agreement
pursuant to Section 12.1.1.3 thereof;
(ii) a termination by the Company of the Alliance
Agreement pursuant to Section 12.1.2.2 thereof;
(iii) a termination by the Company of the Alliance
Agreement pursuant to Section 12.1.2.1 thereof;
(iv) a termination of the Alliance Agreement pursuant
to Section 12.1.1.5 thereof; or
(v) if the Investor owns less than 5% of the total
number of issued and outstanding shares of Common Stock of the Company
calculated on a Fully-Diluted Basis.
ARTICLE IX
CALL OPTION
9.1 Call Option.
(a) In the event that the Transport Services Agreement
terminates other than because of a breach of a representation, warranty,
covenant or other obligation by the Company (the "Termination"), the Company
shall have the right to purchase (the "Call Option") from the Investor all, but
not less than all, of the shares of Common Stock the Investor acquired pursuant
to this Agreement and still owns at the time of the Termination. The Company
shall be able to assign its rights under this Section 9.1 to TWC.
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(b) The Call Option shall continue to be exercisable by the
Company until the earlier of (i) the Transfer of shares of Common Stock to a
Third Party that the Investor acquired pursuant to this Agreement; provided,
however, that the Call Option shall only terminate with respect to such shares
of Common Stock that have been Transferred, and (ii) a period of 120 Business
Days commencing on the first Business Day following the public announcement of
the Termination and shall expire if not exercised by written notice by the
Company to the Investor at the conclusion of such 120-day period.
(c) The purchase price per share for the shares of Class A
Common Stock purchased by the Company pursuant to the Call Option shall be equal
to the Volume-Weighted Average Trading Price of a share of Class A Common Stock
over a period of twenty consecutive Trading Days commencing on the first Trading
Day following the public announcement of the Termination (the "Determination
Period") less the difference between the IPO Price and the Net IPO Price or, for
shares acquired by the Investor pursuant to Section 8.1(a), the price offered to
the public in connection with the issuance of equity securities less any
discounts or commissions off such price to the underwriters. The Investor hereby
agrees that it will not sell, enter into any agreement to sell, purchase or
enter into any agreement to purchase any shares of Class A Common Stock during
the Determination Period.
(d) The purchase price for the shares of Class A Common Stock
to be purchased pursuant to the Call Option shall be paid by the Company to the
Investor in cash by wire transfer within ten Business Days of receipt by the
Investor of the notice by the Company of its election to exercise the Call
Option.
(e) The Investor shall, within three Business Days of receipt
of the full purchase price for exercise of the Call Option, return to the
Company the certificate or certificates for all of the shares of Class A Common
Stock which had been purchased pursuant to the Call Option.
ARTICLE X
TERMINATION
10.1 Termination. This Agreement may be terminated at any time prior to
the Closing:
(a) by mutual consent of the Investor and the Company;
(b) by either the Company or the Investor if the Closing shall
not have occurred by December 31, 1999, and this Agreement has not previously
been terminated, provided, however, that the failure to consummate the Closing
by such date is not a result of either the failure by the party so electing to
terminate this Agreement to perform any of its obligations hereunder or the
breach by the party so electing of its representations and warranties;
(c) if either the Investor or the Company terminates the
Transport Services Agreement;
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(d) by either the Company or the Investor in the event any
court or governmental agency of competent jurisdiction shall have issued an
order, decree or ruling or taken any other action restricting, enjoining or
otherwise prohibiting the transactions contemplated hereby and such order,
decree, ruling or other action shall have become final and unappealable;
(e) at any time on or prior to five Business Days after the
Purchase Agreement Addendum Delivery Date, by the Investor in writing, if the
Investor determines in its sole good faith judgment that the financial
condition, business or prospects of the Company (as such condition, business or
prospects may affect the market price of the Common Stock) are materially
adversely different from what was reasonably expected by the Investor at the
execution of this Agreement; provided, that this Section 10.1(e) shall not limit
in any way the due diligence investigation of the Company which the Investor may
perform or otherwise affect any other rights which the Investor has after the
date hereof and after the Purchase Agreement Addendum Delivery Date, under the
terms of this Agreement; or
(f) on or before five Business Days after the Purchase
Agreement Addendum Delivery Date, by the Investor if the Company has not, if
requested to by the Investor, delivered a Purchase Agreement Addendum pursuant
to Section 3.4 that is, in the Investor's sole and absolute discretion,
satisfactory to the Investor.
10.2 Effect of Termination. In the event that this Agreement shall be
terminated pursuant to this Article X, all further obligations of the parties
under this Agreement other than the obligations set forth in this Section 10.2
and Section 15.14 shall terminate and there shall be no liability of any party
to another party except for a party's breach of any of its obligations,
representations or warranties under this Agreement prior to such termination.
ARTICLE XI
INDEMNIFICATION
11.1 Indemnification.
(a) The Company hereby agrees to indemnify, defend and hold
harmless the Investor and each of its directors, officers and each Person, if
any, who controls (within the meaning of Section 15 of the 33 Act and Section 20
of the 34 Act) the Investor from and against all actual demands, claims, actions
or causes of action, assessments, losses, damages, liabilities, costs and
expenses (collectively, "Claims"), including without limitation interest,
penalties and
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reasonable attorneys' fees and expenses, asserted against, resulting to, or
imposed upon or incurred by the Investor, directly or indirectly, by reason of
or resulting from a breach of any covenant, representation, warranty or
agreement of the Company contained in or made pursuant to this Agreement or
otherwise in connection with the transactions contemplated hereby, including,
without limitation, any claims relating to the Company or any properties (former
or current) owned, leased or managed by any of the foregoing.
(b) The Investor hereby agrees to indemnify, defend and hold
harmless the Company and each Company Control Person from and against all
Claims), including without limitation interest, penalties and reasonable
attorneys' fees and expenses, asserted against, resulting to, or imposed upon or
incurred by the Company and each Company Control Person, directly or indirectly,
by reason of or resulting from a breach of any covenant, representation,
warranty or agreement of the Investor contained in or made pursuant to this
Agreement or otherwise in connection with the transactions contemplated hereby.
11.2 Terms of Indemnification. The obligations and liabilities of the
parties with respect to Claims by third parties will be subject to the following
terms and conditions:
(a) the indemnified party will give the indemnifying party
prompt notice of any Claims asserted against, resulting to, imposed upon or
incurred by the indemnified party, directly or indirectly, and the indemnifying
party will undertake the defense thereof by representatives of their own
choosing which are reasonably satisfactory to the indemnified party; provided
that the failure of the indemnified party to give notice as provided in this
Section 11.2 shall not relieve the indemnifying party of its obligations under
this Article XI, except to the extent that such failure has materially and
adversely affected the rights of the indemnifying party;
(b) if within a reasonable time after notice of any Claim, the
indemnifying party fails to defend such Claim, the indemnified party will have
the right to undertake the defense, compromise or settlement of such Claim on
behalf of and for the account and at the risk of the indemnifying party, subject
to the right of the indemnifying party to assume the defense of such Claim at
any time prior to settlement, compromise or final determination thereof;
(c) if there is a reasonable probability that a Claim may
materially and adversely affect the indemnified party other than as a result of
money damages or other money payments, the indemnified party will have the right
at its own expense to defend (provided that the indemnifying party shall
continue to control the defense and the indemnified party shall have the right
to participate in such defense), or co-defend, such Claim;
(d) the indemnifying party on one hand and the indemnified
party on the other will not, without the prior written consent of the other,
settle or compromise any Claim or consent to entry of any judgment relating to
any such Claim;
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(e) with respect to any Claims asserted against the
indemnified party, the indemnified party will have the right to employ one
counsel of its choice in each applicable jurisdiction (if more than one
jurisdiction is involved) to represent the indemnified party if, in the
indemnified party's reasonable judgment, a conflict of interest between the
indemnified party and the indemnifying party exists in respect of such Claims,
and in that event the fees and expenses of such separate counsel shall be paid
by such indemnifying party; and
(f) the indemnifying party will provide the indemnified party
reasonable access to all records and documents of the indemnifying party
relating to any Claim.
ARTICLE XII
REGISTRATION RIGHTS
12.1 Registration Rights.
(a) After the Permitted Transfer Date, SBC and any party to
which any rights under this Agreement have been transferred (SBC and each
transferee, a "Holder") holding, in the aggregate, at least 3% of the shares of
Class A Common Stock then outstanding shall have the right, on one occasion
only, by written request (a "Registration Request") of one or more Holders (the
"Selling Stockholders") to the Company, to require the Company to prepare a
registration statement (the "Registration Statement") on the appropriate form
under the 33 Act with respect to shares of Class A Common Stock then owned by
such Selling Stockholders for use in connection with an underwritten public
distribution of all or part of such shares of Class A Common Stock.
(b) If at any time after the Permitted Transfer Date, the
Company shall propose to prepare on its own behalf or on behalf of any of its
holders of any of its Common Stock a registration statement in connection with
an underwritten public offering of any such shares of Common Stock, the Company
shall give each Holder written notice at least twenty or, in case of a
registration statement proposed to be filed pursuant to Rule 415 of the 33 Act,
ten Business Days before the anticipated filing date of such registration
statement. Should any Holder desire to have any shares of Class A Common Stock
included in such registration statement, such Holder shall so notify the Company
in writing (which notice, and the notice of all other Holders with respect to
such registration statement, shall be deemed to be a Registration Request) no
later than ten or, in the case of a registration statement proposed to be filed
pursuant to Rule 415 of the 33 Act, five Business Days after the Company's
notice is given, setting forth the number of shares of Class A Common Stock
which such Holder requests to be included in the registration statement. Any
such registration statement that includes shares of Class A Common Stock owned
by any Holder is hereinafter included in the term "Registration Statement" and
each Holder who owns shares of Class A Common Stock included in a Registration
Statement shall be a Selling Stockholder with respect to such Registration
Statement.
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(c) The Company may refuse to include in any such registration
statement Class A Common Stock owned by such Holder if in the Company's
reasonable judgment, based on advice of its investment bankers, inclusion of
such shares of Class A Common Stock would have an adverse effect on the ability
of the Company to complete such underwritten public offering. If in accordance
with a Registration Request pursuant to Section 12.1(a), the Company reduces the
number of shares to be included in any such Registration Statement in accordance
with the foregoing, the Company will include in such registration, to the extent
of the number which the Company is so advised can be sold in such offering,
first, shares of Class A Common Stock requested to be included in such
registration by the Selling Stockholders and, second, securities the Company
proposes to sell and other securities of the Company included in such
registration by the holders thereof. If, as a result of this Section 12.1(c),
the Selling Shareholders are not able to register all of their shares of Class A
Common Stock requested to be registered pursuant to Section 12.1(a), such
Registration Request will not be deemed a Registration Request for purposes of
Section 12.1(a) and the Holders' rights will be restored.
(d) With respect to any Registration Statement under this
Section 12.1, the Company will:
(i) prepare and file with the SEC the Registration
Statement within 90 days after a Selling Stockholders' notice
requesting registration or inclusion in a proposed registration, and
use its reasonable efforts to cause the securities covered by such
Registration Statement to become registered and such Registration
Statement to be declared effective as expeditiously as possible under
the 33 Act or other applicable federal law and regulations (and cause
to be prepared and file any amendments or supplements thereto as may be
necessary to comply with applicable federal law and regulations);
provided, however, that the Company may be allowed to defer filing of
the Registration Statement: (A) if the general counsel or senior vice
president of law of the Company reasonably determines in good faith
that it is in the best interests of the Company not to disclose the
existence of or facts surrounding any proposed or pending material
developments; (B) if the underwriters have notified the Company that
market conditions are such as to recommend deferral; (C) pending the
completion of year-end financial statements or quarterly earnings
releases; or (D) if an offering by the Company of any securities is
pending; provided, however, that any deferral pursuant to clauses
(A)-(D) of this paragraph shall not in the aggregate be for more than
120 days.
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(ii) use its reasonable efforts to cause to be
registered or qualified the securities covered by such Registration
Statement under such securities or Blue Sky laws in such jurisdictions
within the United States as any Selling Stockholder may reasonably
request; provided, however, that the Company reserves the right, in its
sole discretion, not to cause to be registered or qualified such
securities in any jurisdiction where the Company would be required in
connection therewith to execute a general consent to service or to
qualify as a foreign corporation or to subject itself to taxation;
(iii) maintain the effectiveness of any Registration
Statement hereunder for 90 days or such longer period as may be
required by the 33 Act to enable any Selling Stockholder and the
underwriters, if any, to complete such offering;
(iv) promptly notify each Selling Stockholder of the
happening of any event as a result of which any preliminary prospectus
or prospectuses included in any Registration Statement hereunder
includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements not misleading in light of the circumstances then existing;
(v) have the right to reasonably approve the choice
of lead underwriter for the offering, if an underwritten offering;
(vi) furnish, at the request of any Selling
Stockholder, an opinion, dated the date the Registration Statement
became effective, of counsel representing the Company (which may be
in-house counsel) for the purposes of such registration, addressed to
the underwriters, if any, and to such Selling Stockholder as to such
legal matters as such Selling Stockholder shall reasonably request; and
(vii) furnish, at the request of any Selling
Stockholder, a letter, dated the date the Registration Statement became
effective, of independent certified public accountants of the Company,
addressed to the underwriters, if any, and to such Selling Stockholder
as to such accounting matters as such Selling Stockholder shall
reasonably request.
(e) The obligations of the Company to cause a Registration
Statement to be prepared pursuant to the provisions of this Section 12.1 and
each Selling Stockholder's right to have shares of Class A Common Stock included
in any Registration Statement pursuant to the provisions of this Section 12.1
shall be subject to the following conditions:
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(i) Each Selling Stockholder shall furnish to the
Company in writing such information and documents as, in the opinion of
the Company's counsel, may be reasonably required to properly cause to
be prepared such Registration Statement in accordance with applicable
provisions of the 33 Act and the SEC's regulations thereunder or
federal or state securities or Blue Sky laws and regulations then in
effect; and
(ii) If a Selling Stockholder desires to sell and
distribute such shares of Class A Common Stock over a period of time,
or from time to time, pursuant to a Registration Statement prepared
pursuant to the provisions of this Section 12.1, then such Selling
Stockholder shall execute and deliver to the Company such written
undertakings as the Company and its counsel may reasonably require in
order to assure full compliance with the relevant provisions of the 33
Act and the SEC's regulations thereunder or other federal or state
securities or Blue Sky laws and regulations as then in effect.
(f) The Investor will pay or cause to be paid all fees and
expenses (including all Blue Sky, New York Stock Exchange and National
Association of Securities Dealers, Inc. filing and registration fees, accounting
fees and disbursements, printing costs, attorneys' fees and disbursements)
arising out of the preparation, filing, amending and supplementing of a
Registration Statement pursuant to Section 12.1(a) hereof and to the amount of
such fees and expenses that are reasonably allocable to the Selling Stockholder
for a Registration Statement used under Section 12.1(b) based on the number of
shares offered by the Selling Stockholders relative to the number of other
shares offered by the Company or on behalf of any of its other holders.
(g) Indemnity.
(i) The Company agrees to indemnify and hold harmless
each Selling Stockholder and each Person, if any, who controls (within
the meaning of Section 15 of the 33 Act and Section 20 of the 34 Act)
such Selling Stockholder (a "Control Person") against any losses,
claims, damages or liabilities, joint or several, to which such Selling
Stockholder or any such Control Person may become subject, insofar as
such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any preliminary or
final Registration Statement or prospectus with respect thereto, or any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading; and the Company will reimburse each Selling Stockholder and
each Control Person for any legal or other expenses reasonably incurred
by such Selling Stockholder or such Control Person in connection with
investigating or defending any such loss, claim, damage, liability or
action;
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provided, however, that the Company will not be liable in any case to
the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission from any of such documents in reliance
upon and in conformity with written information furnished by or on
behalf of such Selling Stockholder or any such Control Person
specifically for use in the preparation thereof.
(ii) Each Selling Stockholder will, severally and not
jointly, indemnify and hold harmless the Company and each of its
directors, officers and each Person, if any, who controls (within the
meaning of Section 15 of the 33 Act and Section 20 of the 34 Act) the
Company (a "Company Control Person") to the same extent as set forth in
the foregoing indemnity from the Company to each Selling Stockholder
but only with reference to written information included in any
preliminary or final Registration Statement or prospectus with respect
thereto, or amendment or supplement thereto, furnished by or on behalf
of such Selling Stockholder specifically for use in the preparation of
such documents; and will reimburse the Company or any such Company
Control Person for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any loss, claim,
damage, liability or action for which such Selling Stockholder is
obligated to indemnify the Company or any Company Control Person.
(iii) Promptly after receipt by an indemnified party
under this Section 12.1(g) of notice of any claim or the commencement
of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under Section
12.1(g)(i) or (ii) above, notify the indemnifying party of any claim or
the commencement thereof; but the omission so to notify the
indemnifying party will not relieve it from any liability which it may
have to any indemnified party otherwise than under Section 12.1(g)(i)
or (ii) above. In case any such action is brought against any
indemnified party and it notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with
any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party
(who shall not, except with the consent of the indemnified party, be
counsel to the indemnifying party), and after notice from the
indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable
to such indemnified party in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or
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threatened action 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 any claims that
are the subject matter of such action.
(iv) If the indemnification provided for in
paragraphs (i) or (ii) of this Section 12.1(g) is unavailable or
insufficient in accordance with its terms in respect of any losses,
claims, damages or liabilities (or actions in respect thereof) referred
to therein, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative benefits as well
as the relative fault of the Company on the one hand and the Selling
Stockholder on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
consideration. The relative benefits received by the Company on the one
hand and the Selling Stockholder on the other shall be deemed to be in
the same proportion as (i) the total purchase price received by the
Company from SBC (based on the average purchase price paid by SBC times
the number of shares purchased) for the securities to be reoffered by
the Selling Stockholder in such offering bears to (ii) the total net
proceeds received by the Selling Stockholder in such offering. The
relative fault 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 on the one hand or the Selling
Stockholder on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
statement or omission.
ARTICLE XIII
RIGHTS OF FIRST OFFER
13.1 Rights of First Offer Generally.
(a) Subject to the restrictions of Section 13.1 hereof and the
limitations of Section 13.4 hereof, if, at any time after the Permitted Transfer
Date, the Investor would like to sell any of its shares of Class A Common Stock
then owned by the Investor to a Third Party other than pursuant to a
Registration Statement (the "Transfer Stock"), the Investor shall provide a
written notice (the "Right of First Offer Notice") stating the price at which it
would like to sell any of its shares of Class A Common Stock and the maximum
number of shares they intend to sell (the "Transfer Offer") to TWC (so long as
TWC owns 50% of the Class B Common Stock) and to the Company thereafter. The
Right of First Offer Notice shall also contain an offer to sell the Transfer
Stock to TWC (so long as TWC Beneficially Owns more than 50% of the issued and
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outstanding Class B Common Stock), or to the Company thereafter, or to any of
their designees (in the manner set forth below) at the same price and upon
substantially the same terms and conditions as the terms and conditions
contained in the Transfer Offer; provided, that, for purposes of this Article
XIII, the term the "Company" or "TWC" shall include any of their respective
designees.
(b) TWC (so long as TWC owns 50% of the Class B Common Stock)
and the Company thereafter shall have the right and option, within 10 Business
Days after the date the Right of First Offer Notice is received by TWC or the
Company, as the case may be, to accept irrevocably such offer in the aggregate,
as to all, but not less than all (unless otherwise consented to by the Investor)
shares of Transfer Stock. If TWC (so long as TWC Beneficially Owns 50% of the
Class B Common Stock) or the Company thereafter desires to exercise such option,
it shall provide the Investor with written notice (specifying the number of
shares of the Transfer Stock as to which it is accepting the offer) within such
10 Business Day period. Unless the Investor shall have otherwise consented to
the purchase of less than all of the shares of Transfer Stock, TWC (so long as
TWC owns 50% of the Class B Common Stock) or the Company thereafter shall not
have the right to acquire such shares of Transfer Stock unless all such shares
are being acquired by TWC or the Company, as the case may be, in the aggregate
pursuant to the provisions of this Article XIII.
(c) Notwithstanding anything to the contrary contained in this
Article XIII, there shall be no liability on the part of the Investor to either
the Company or TWC, as the case may be, in the event that the sale of Transfer
Stock contemplated pursuant to this Article XIII is not consummated for any
reason whatsoever. Whether a sale of Transfer Stock contemplated pursuant to
this Article XIII is effected by the Investor is in the sole and absolute
discretion of the Investor.
13.2 Transfer Mechanics. The closing of the purchase of the Transfer
Stock by TWC or the Company, as the case may be, shall take place at the
principal executive offices of the Company as soon as practicable, but in no
event later than thirty Business Days after the expiration of the 10 Business
Day period after the giving of the Right of First Offer Notice (or such other
date as may be mutually agreed to by the parties to such transaction). At such
closing, TWC or the Company, as the case may be, shall deliver to the Investor
the appropriate per share cash consideration pursuant to a bank, cashier's or
certified check or by wire transfer of immediately available funds (unless
otherwise specified in the Right of First Offer Notice provided to TWC or the
Company, as the case may be), against delivery of certificates representing the
Transfer Stock so purchased Duly Endorsed. Any Transfer (other than to a Third
Party) pursuant to this Article XIII shall be made without any representations,
warranties, covenants or indemnities; except, that, each transferor shall be
deemed to have represented that (i) the transfer has been duly authorized by it,
(ii) that it has the capacity, power and authority to Transfer such shares and
(iii) that the acquiror shall obtain good title to such
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shares, free and clear of any defects, encumbrances and adverse interests (other
than as provided for in this Agreement).
13.3 Transfers to Third Parties after TWC or the Company Declines
Rights of First Offer. Subject to the restrictions of Section 13.1, if at the
end of the 10 Business Day period following the giving of the Right of First
Offer Notice, TWC or the Company, as the case may be, shall not have accepted
the offer contained in such notice as to all shares of Transfer Stock covered
thereby, the Investor shall have 90 days in which to sell the Transfer Stock to
a Third Party, at a price that is no less than 95% of the price contained in the
Right of First Offer Notice and on terms and conditions not more favorable to
such Third Party than were contained in the Right of First Offer Notice.
Promptly after any sale pursuant to this Section 13.3, the Investor shall notify
TWC or the Company, as the case may be, of the consummation thereof and shall
furnish such evidence of the completion (including time of completion) of such
sale and of the terms and conditions thereof as TWC or the Company, as the case
may be, may reasonably request. If, at the end of such 90 day period, the
Investor has not completed the sale of the Transfer Stock, it shall no longer be
permitted to sell such shares pursuant to this Section 13.3 without again fully
complying with the provisions of this Article XIII and all the restrictions on
Transfer contained in this Agreement shall again be in effect with respect to
all such Person's shares of Class A Common Stock, including the Transfer Stock.
13.4 Exceptions to Rights of First Offer. The provisions of Sections
13.1 through 13.4 shall not be applicable to any Transfer of Class A Common
Stock from the Investor to its Affiliates, or from any Affiliate of the Investor
to the Investor.
ARTICLE XIV
STANDSTILL
14.1 Standstill Provision. Except as contemplated by the Alliance
Agreement (and the other related agreements contemplated by the Alliance
Agreement), the Investor agrees that until the later of (A) February 8, 2009 or
(B) sixty days following the resignation or termination of service for any
reason of the SBC Nominee from the Board of Directors, it shall not, and shall
cause each of its directors, officers, employees, agents, Affiliates or
representatives (any of the foregoing, a "Representative") not to, without the
prior written consent of the Board of Directors specifically expressed in a
resolution approved by a majority of the directors of the Company, directly or
indirectly, through one or more intermediaries or otherwise, (i) acquire, agree
to ac quire or make any proposal to acquire any securities of the Company or any
of its Subsidiaries, any warrant or option to acquire any such securities, any
security convertible into or exchange able for any such securities or any other
right to acquire any such securities in excess of the 10%
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Limit; (ii) seek or propose any merger, consolidation, business combination,
tender or exchange offer, sale or purchase of assets or securities, dissolution,
liquidation, restructuring, recapitalization or similar transaction of or
involving the Company or any of its Subsidiaries; (iii) make, or in any way
participate in, any "solicitation" of proxies or consents (whether or not
relating to the election or removal of directors) within the meaning of Rule
14a-1 under the 34 Act with respect to any securities of the Company or any of
its Subsidiaries, or seek to advise or influence any person with respect to the
voting of any securities of the Company or any of its Subsidiaries or demand a
copy of the stock ledger, list of stockholders, or any other books and records
of the Company or any of its Subsidiaries; (iv) form, join or in any way
participate in a "group" (within the meaning of Section 13(d)(3) of the 34 Act),
with respect to any securities of the Company or any of its Subsidiaries; (v)
otherwise act, alone or in concert with others, to seek to control or influence,
in any manner, the management, Board of Directors or policies of the Company or
any of its Subsidiaries; (vi) deposit any Common Stock in any voting trust or
subject any Common Stock to any arrangement or agreement with respect to the
voting of such shares; (vii) call or seek to have called any meeting of the
stockholders of the Company or execute any written consent with respect to the
Company or the Common Stock; (viii) seek, alone or in concert with others,
representation on the Board of Directors (except as provided in Section 8.7 of
this Agreement), or seek the removal of any member of such Board or a change in
the composition or size of such Board; (ix) have any discussions or enter into
any arrangements, understandings or agreements (whether written or oral) with,
or advise, finance, assist or encourage, any other persons in connection with
any of the foregoing, or make any investment in any other person that engages,
or offers or proposes to engage, in any of the foregoing; or (x) make any
publicly disclosed proposal regarding any of the foregoing; provided that the
foregoing shall not prevent the SBC Nominee from exercising his fiduciary and
other duties in his capacity as a director (including by participating in any
Board deliberations or vote of the Board of Directors with respect to the
calling of any annual meeting of shareholders of the Company). The provisions in
this Article XIV shall not apply in the event of a Potential Change in Control
Event, unless the activities defined in (a) or (b) of the definition of
"Potential Change in Control Event" which gave rise to the Potential Change in
Control Event are discontinued and remain so for one year without the occurrence
of a Potential Change in Control Event. In such event, the provisions of this
Article XIV shall be reinstated and remain in full force and effect thereafter,
although the 10% Limit shall be deemed to include any such shares of Common
Stock the Investor had acquired during the period in which the standstill
provision was not in effect. The Investor also agrees during such period not to
make any proposal, statement or inquiry, or disclose any intention, plan or
arrangement to the public or a Third Party (whether written or oral)
inconsistent with the foregoing.
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ARTICLE XV
MISCELLANEOUS
15.1 Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York (without giving effect to
conflicts of law principles thereof).
15.2 Remedies Cumulative. Except as herein provided, the remedies
provided herein shall be cumulative and shall not preclude assertion by any
party hereto of any other rights or the seeking of any other remedies against
the other party hereto.
15.3 Brokerage. Each party hereto will indemnify and hold harmless the
other against and in respect of any claim for brokerage or other commission
relative to this Agreement or to the transactions contemplated hereby, based in
any way on agreements, arrangements or understandings made or claimed to have
been made by such party with any third party.
15.4 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provisions shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
15.5 Notices. Notices required under this Agreement shall be deemed to
have been adequately given if delivered in person or sent to the recipient at
its address (or facsimile number, as the case may be) set forth in Exhibit 15.5
(with copies to the persons specified in Exhibit 15.5 at the respective
addresses for such persons specified in such Exhibit 15.5) or such other address
as such party may from time to time designate in writing by certified mail
(return receipt requested), facsimile or overnight courier.
15.6 No Waiver. No failure to exercise and no delay in exercising any
right, power or privilege granted under this Agreement shall operate as a waiver
of such right, power or privilege. No single or partial exercise of any right,
power or privilege granted under this Agreement shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
15.7 Amendments and Waivers. This Agreement may be modified or amended
only by a writing signed by the Company and by the Investor. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any shares of Class A Common Stock purchased under this Agreement at
the time outstanding, each future holder of all such shares, and the Company.
15.8 Rights of the Investor. Subject to the terms and conditions of
this Agreement, the Investor shall have the absolute right to exercise or
refrain from exercising any right or rights that such holder may have by reason
of this Agreement, including without limitation the right to consent to the
waiver of any obligation of the Company under this Agreement and to enter into
an
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agreement with the Company for the purpose of modifying this Agreement or any
agreement effecting any such modification, and such holder shall not incur any
liability to any other holder or holders of Class A Common Stock with respect to
exercising or refraining from exercising any such right or rights.
15.9 Survival. All representations and warranties made by the Company
and the Investor contained in this Agreement, and the obligation of the parties
to indemnify each other pursuant to Section 11.1 hereof, shall survive the
execution and delivery of this Agreement, any examination or due diligence
inquiry by a party and the Closing until the date which is one year after the
Closing Date. All covenants and agreements of the Company and the Investor
contained in this Agreement (which terms do not include representations and
warranties) shall, except as provided in such covenant or agreement, survive the
Closing and shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of the Investor or any controlling Person
thereof or by or on behalf of the Company, any of its officers and directors or
any controlling Person thereof. The obligations to indemnify and hold harmless a
party hereto, pursuant to Article XI hereof, shall survive only until the
expiration of the applicable survival period for the representation and warranty
under which the claim for indemnification is being made; provided, however, that
such obligations to indemnify and hold harmless shall not terminate with respect
to any such item as to which the Person to be indemnified shall have, before
the expiration of the applicable period, previously made a claim by delivering a
notice (stating in reasonable detain the basis of such claim) to the party to be
providing the indemnification.
15.10 Entire Understanding. This Agreement and the agreements to be
executed in connection therewith on the Closing Date express the entire
understanding of the parties and supersede all prior and contemporaneous
agreements and undertakings of the parties with respect to the subject matter
hereof and thereof. Except as expressly provided herein, neither this Agreement
nor any term hereof may be amended, waived, discharged or terminated other than
by a written instrument signed by the party against whom enforcement of any such
amendment, waiver, discharge or termination is sought.
15.11 Expenses. Each party will pay all of its own expenses, including
attorney's fees incurred in connection with the negotiation of this Agreement,
the performance of its obligations hereunder and the consummation of
transactions contemplated by this Agreement.
15.12 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original but which taken together shall
constitute one agreement.
15.13 Assignment; No Third-Party Beneficiaries.
(a) Except as otherwise expressly provided herein, this
Agreement and the rights hereunder shall not be assignable or transferable by
either party without the prior written consent of the other; provided that, if
such assignment or transfer is consented to, such assignee or transferee
expressly assumes in writing all of the such party's obligations hereunder.
Subject to the preceding sentence, this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties hereto and their respective
successors and permitted assigns.
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(b) This Agreement is for the sole benefit of the parties
hereto and their respective successors and permitted assigns and nothing herein
expressed or implied shall give or be construed to give to any Person, other
than the parties hereto and such successors and permitted assigns, any legal or
equitable rights hereunder.
(c) SBC and the Investor shall be permitted, without the
consent of the Company, to assign all its rights and obligations under this
Agreement, including without limitation the right to purchase Class A Common
Stock and common equity securities under Article II and Article VIII, and
registration rights under Article XII, to any of its Affiliates; provided,
however, that such assignee expressly assumes in writing all of either SBC or
the Investor's obligations hereunder; and provided, further that in the event of
such assignment SBC or the Investor, as the case may be, shall notify the
Company in writing of such assignment, and for all purposes of this Agreement
all references to SBC or the Investor shall mean such Affiliate.
15.14 Press Releases and Announcements. All press releases and
announcements concerning the investment contemplated by this Agreement shall be
mutually agreed to by the Company and the Investor, except for any such
disclosure required by law which, in the case of such disclosure by the Company,
shall, to the extent practicable under the circumstances, be first discussed
with the Investor and, in the case of such disclosure by the Investor, shall, to
the extent practicable under the circumstances, be first discussed with the
Company. Without limiting the generality of the foregoing, the Company and the
Investor agree to issue jointly a press release announcing the execution of this
Agreement on the date hereof. The foregoing provisions of this Section 15.14
shall not prohibit or restrict in any way disclosure by a party with respect to
this Agreement in connection with any financing, strategic transaction,
acquisition or disposition involving such party or any of its Affiliates,
provided that such disclosure shall be first approved by the other party, which
approval shall not be unreasonably withheld or delayed.
15.15 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
15.16 Aggregation of Stock. All shares of the Class A Common Stock held
or acquired by Affiliates or Persons shall be aggregated together for the
purpose of determining the availability of any rights under this Agreement.
38
<PAGE> 44
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
WILLIAMS COMMUNICATIONS GROUP, INC.
By:
-------------------------------
THE WILLIAMS COMPANIES, INC.
By:
-------------------------------
SBC COMMUNICATIONS INC.
By:
-------------------------------
<PAGE> 45
EXHIBIT 15.5
The Williams Companies, Inc. (T) (918) 573-2480
One Williams Center (F) (918) 573-5942
Tulsa, OK 74171
Attn: William von Glahn, Esq.
Williams Communications Group, Inc. (T) (918) 573-4205
One Williams Center (F) (918) 573-3005
Tulsa, OK 74171
Attn: David Batow, Esq.
with a copy (which shall not constitute notice) to:
Randall H. Doud (T) (212) 735-3000
Skadden, Arps, Slate, Meagher & Flom LLP (F) (212) 735-2000
919 Third Avenue
New York, NY 10022
SBC Communications Inc. (T) (210) 351-5030
175 E. Houston Street (F) (210) 351-5034
Suite 1300
San Antonio, TX 78205
Attn.: Mr. James Kahan
Senior Vice President
Corporate Development
with a copy (which shall not constitute notice) to:
Michael A. Meyer (T) (210) 351-2165
General Attorney (F) (210) 351-3488
SBC Communications Inc.
175 E. Houston Street
San Antonio, TX 78205
<PAGE> 1
EXHIBIT 10.13
U.S. $1,000,000,000
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of July 23, 1997
Among
THE WILLIAMS COMPANIES, INC.
NORTHWEST PIPELINE CORPORATION
TRANSCONTINENTAL GAS PIPE LINE CORPORATION
TEXAS GAS TRANSMISSION CORPORATION
WILLIAMS PIPE LINE COMPANY
WILLIAMS HOLDINGS OF DELAWARE, INC.
WILTEL COMMUNICATIONS, LLC
as Borrowers
THE BANKS NAMED HEREIN
as Banks
and
CITIBANK, N.A.
as Agent
Co-Agents:
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
BANK OF MONTREAL
CREDIT LYONNAIS NEW YORK BRANCH
THE CHASE MANHATTAN BANK
CIBC INC.
THE FIRST NATIONAL BANK OF CHICAGO
ROYAL BANK OF CANADA
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.01. Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02. Computation of Time Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 1.03. Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 1.04. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 1.05. Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
Section 2.01. The A Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.02. Making the A Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.03. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.04. Reduction of the Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.05. Repayment of A Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.06. Interest on A Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.07. Additional Interest on Eurodollar Rate Advances . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.08. Interest Rate Determination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.09. Evidence of Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.10. Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.11. Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.12. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 2.13. Payments and Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 2.14. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 2.15. Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 2.16. The B Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 2.17. Optional Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 2.18. Extension of Termination Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 2.19. Voluntary Conversion of Advances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 2.20. Automatic Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE III
CONDITIONS
Section 3.01. Conditions Precedent to Initial Advances . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 3.02. Additional Conditions Precedent to Each A Borrowing . . . . . . . . . . . . . . . . . . . . . 29
Section 3.03. Conditions Precedent to Each B Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01. Representations and Warranties of the Borrowers . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE V
COVENANTS OF THE BORROWERS
Section 5.01. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 5.02. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE VI
EVENTS OF DEFAULT
Section 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE VII
THE AGENT
Section 7.01. Authorization and Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 7.02. Agent's Reliance, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 7.03. Citibank and Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 7.04. Bank Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 7.05. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 7.06. Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 8.02. Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 8.03. No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 8.04. Costs, Expenses and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 8.05. Right of Set-off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 8.06. Binding Effect; Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 8.07. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 8.08. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 8.09. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 8.10. Survival of Agreements, Representations and Warranties, Etc. . . . . . . . . . . . . . . . . 53
Section 8.11. Borrowers' Right to Apply Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 8.12. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 8.13. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 8.14. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
</TABLE>
Schedule I - Bank Information
Schedule II - Borrower Information
Schedule III - Permitted NWP Liens
Schedule IV - Permitted TGPL Liens
Schedule V - Permitted TGT Liens
Schedule VI - Permitted TWC Liens
-ii-
<PAGE> 4
Schedule VII - Permitted WPL Liens
Schedule VIII - Permitted WHD Liens
Schedule IX - Permitted WilTel Liens
Schedule X - Commitments
Schedule XI - Rating Categories
Exhibit A-1 - Form of A Note
Exhibit A-2 - Form of B Note
Exhibit B-1 - Notice of A Borrowing
Exhibit B-2 - Notice of B Borrowing
Exhibit C - Opinion of William G. von Glahn
Exhibit D - Opinion of Special Counsel to Agent
Exhibit E - Existing Transfer Restrictions
Exhibit F - Form of Transfer Agreement
-iii-
<PAGE> 5
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of July 23, 1997
This Second Amended and Restated Credit Agreement dated as of July 23,
1997, is by and among the Borrowers, the Agent and the Banks. In consideration
of the mutual covenants and agreements contained herein, the Borrowers, the
Agent and the Banks hereby agree as set forth herein.
PRELIMINARY STATEMENTS
1. The Borrowers, the Agent and certain of the Banks are parties
to the Amended and Restated Credit Agreement dated as of December 20, 1996 (the
"1996 Credit Agreement").
2. The Borrowers have requested that the 1996 Credit Agreement be
further amended and, as so further amended, be restated in its entirety, and
the parties hereto have agreed to do so on the terms and conditions set forth
herein.
3. The parties hereto have agreed to restate the 1996 Credit
Agreement in its entirety for convenience, and this Second Amended and Restated
Credit Agreement constitutes for all purposes an amendment to the 1996 Credit
Agreement, and each reference to an Advance or Borrowing herein shall include
each advance or borrowing made heretofore under the 1996 Credit Agreement as
well as each Advance or Borrowing made hereafter under this Agreement.
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.01. Certain Defined Terms. As used in this
Agreement, the following terms shall have the following meanings (such meanings
to be equally applicable to both the singular and plural forms of the terms
defined):
"A Advance" means an advance by a Bank to a Borrower as part
of an A Borrowing and refers to a Base Rate Advance or a Eurodollar
Rate Advance, each of which shall be a "Type" of A Advance.
"A Borrowing" means a borrowing consisting of simultaneous A
Advances of the same Type to the same Borrower made by each of the
Banks pursuant to Section 2.01.
"A Note" means a promissory note of a Borrower payable to the
order of any Bank, in substantially the form of Exhibit A-1 hereto,
evidencing the aggregate indebtedness of such Borrower to such Bank
resulting from the A Advances to such Borrower owed to such Bank.
"Advance" means an A Advance or a B Advance.
"Agent" means Citibank, N.A. in its capacity as agent pursuant
to Article VII hereof and any successor Agent pursuant to Section
7.06.
<PAGE> 6
"Agreement" means this Second Amended and Restated Credit
Agreement dated as of July 23, 1997, among the Borrowers, the Agent
and the Banks, as amended or modified from time to time.
"Applicable Commitment Fee Rate" means the rate per annum set
forth on Schedule XI under the heading "Applicable Commitment Fee
Rate" for the relevant Rating Category applicable to TWC from time to
time. The Applicable Commitment Fee Rate shall change when and as the
relevant Rating Category applicable to TWC changes.
"Applicable Lending Office" means, with respect to each Bank,
such Bank's Domestic Lending Office in the case of a Base Rate Advance
and such Bank's Eurodollar Lending Office in the case of a Eurodollar
Rate Advance and, in the case of a B Advance, the office of such Bank
notified by such Bank to the Agent as its Applicable Lending Office
with respect to such B Advance.
"Applicable Margin" means
(i) as to any Eurodollar Rate Advance to any Borrower (other than WPL during
such times as WPL is Unrated and WilTel during such times as WilTel is Unrated),
the rate per annum set forth in Schedule XI under the heading "Applicable
Margin" for the relevant Rating category applicable to such Borrower from time
to time;
(ii) for each day during such times as WPL is Unrated, as to any Eurodollar Rate
Advance to WPL, the rate per annum set forth in the following table for the
relevant amount of the Applicable WPL Debt to TNW Ratio for such day:
<TABLE>
<CAPTION>
Applicable
WPL Debt to Applicable
TNW Ratio Margin
----------- ----------
<S> <C>
Less than .55 .325%
.55 or greater and
less than .60 .40%
.60 or greater .65%
</TABLE>
and (iii) for each day during such times as WilTel is Unrated, as to any
Eurodollar Rate Advance to WilTel (A) as to the time from July 23, 1997, to and
including September 30, 1997, a rate per annum equal to .275%; (B) as to such
times subsequent to September 30, 1997, the rate per annum set forth in the
following table for the relevant amount of Applicable WilTel Debt to EBITDA
Ratio for such day:
-2-
<PAGE> 7
<TABLE>
<CAPTION>
Applicable
WilTel Debt to Applicable
EBITDA Margin
-------------- ----------
<S> <C>
Less than or equal to 1.00 .225%
Greater than 1.00 and less
than or equal to 1.75 .25%
Greater than 1.75 and less
than or equal to 2.50 .275%
Greater than 2.50 and less
than or equal to 3.50 .325%
Greater than 3.50 and less
than or equal to 4.50 .40%
Greater than 4.50 .65%
</TABLE>
The Applicable Margin determined pursuant to clause (i) of this definition for
any Eurodollar Rate Advance to any Borrower shall change when and as the
relevant Rating Category applicable to such Borrower changes. Furthermore, the
applicability of clause (i) or (ii) of this definition to WPL and of clause (i)
or (iii) of this definition to WilTel shall change when and as the status of WPL
or WilTel, as applicable, as Unrated or not Unrated changes. For example, if
WPL borrows on September 15 of a year a Eurodollar Rate Advance with a three
month Interest Period and WPL is Unrated from September 15 through October 15 of
such year and is not Unrated thereafter, then the Applicable Margin for such
Advance will be determined (1) pursuant to the foregoing clause (ii) from
September 15 through October 15 of such year (and the Applicable WPL Debt to TNW
Ratio (a) for the days from September 15 through September 30 will be the WPL
Debt to TNW Ratio on March 31 of such year and (b) for the days after September
30 will be the WPL Debt to TNW Ratio on June 30 of such year), and (2) pursuant
to the foregoing clause (i) during the other days of such Interest Period.
"Applicable WilTel Debt to EBITDA Ratio" for any day means the
WilTel Debt to EBITDA Ratio as of the end of the calendar quarter that is
the second calendar quarter prior to such day.
"Applicable WPL Debt to TNW Ratio" for any day means the WPL Debt
to TNW Ratio as of the end of the calendar quarter which is the second
calendar quarter prior to such day. For example, the Applicable WPL Debt
to TNW Ratio for any day in the calendar quarter ending September 30 of a
year will be the WPL Debt to TNW Ratio as of March 31 of such year.
"Arranger" means Citicorp Securities, Inc.
-3-
<PAGE> 8
"Attributable Obligation" of any Person means, with respect to
any Sale and Lease-Back Transaction of such Person as of any particular
time, the present value at such time discounted at the rate of interest
implicit in the terms of the lease of the obligations of the lessee under
such lease for net rental payments during the remaining term of the lease
(including any period for which such lease has been extended or may, at
the option of such Person, be extended).
"B Advance" means an advance by a Bank to a Borrower as part of a
B Borrowing resulting from the auction bidding procedure described in
Section 2.16.
"B Borrowing" means a borrowing consisting of simultaneous B
Advances to the same Borrower from each of the Banks whose offer to make
one or more B Advances as part of such borrowing has been accepted by such
Borrower under the auction bidding procedure described in Section 2.16.
"B Note" means a promissory note of a Borrower payable to the
order of any Bank, in substantially the form of Exhibit A-2 hereto, (or,
in the case of B Advances outstanding on July 23, 1997, in substantially
the form of Exhibit A-2 to the 1996 Credit Agreement) evidencing the
indebtedness of such Borrower to such Bank resulting from a B Advance made
to such Borrower by such Bank.
"B Reduction" has the meaning specified in Section 2.01.
"Banks" means the lenders listed on the signature pages hereof
and each other Person that becomes a Bank pursuant to the last sentence of
Section 8.06(a).
"Base Rate" means a fluctuating interest rate per annum as shall
be in effect from time to time which rate per annum shall at all times be
equal to the highest of:
(a) the rate of interest announced publicly by
Citibank in New York, New York, from time to time, as Citibank's
base rate; or
(b) 1/2 of one percent per annum above the latest
three-week moving average of secondary market morning offering
rates in the United States for three-month certificates of
deposit of major United States money market banks, such
three-week moving average being determined weekly on each Monday
(or, if any such day is not a Business Day, on the next
succeeding Business Day) for the three-week period ending on the
previous Friday by Citibank on the basis of such rates reported
by certificate of deposit dealers to and published by the Federal
Reserve Bank of New York or, if such publication shall be
suspended or terminated, on the basis of quotations for such
rates received by Citibank from three New York certificate of
deposit dealers of recognized standing selected by Citibank, in
either case adjusted to the nearest 1/4 of one percent or, if
there is no nearest 1/4 of one percent, to the next higher 1/4
of one percent; or
(c) 1/2 of one percent per annum above the Federal
Funds Rate in effect from time to time.
-4-
<PAGE> 9
"Base Rate Advance" means an A Advance which bears interest as
provided in Section 2.06(a).
"Borrowers" means TWC, WHD, NWP, TGPL, TGT, WilTel and WPL.
"Borrowing" means an A Borrowing or a B Borrowing.
"Business Day" means a day of the year on which banks are not
required or authorized to close in New York City and, if the applicable
Business Day relates to any Eurodollar Rate Advances or relates to any B
Advance as to which the related Notice of B Borrowing is delivered
pursuant to clause (B) of Section 2.16(a)(i), on which dealings are
carried on in the London interbank market.
"Citibank" means Citibank, N.A.
"Co-Agent" means each of Bank of America National Trust and
Savings Association, Bank of Montreal, Credit Lyonnais New York Branch,
The Chase Manhattan Bank, CIBC Inc., The First National Bank of Chicago,
and Royal Bank of Canada.
"Code" means, as appropriate, the Internal Revenue Code of 1986,
as amended, or any successor federal tax code, and any reference to any
statutory provision shall be deemed to be a reference to any successor
provision or provisions.
"Commitment" of any Bank to any Borrower means at any time the
lesser of (i) the amount set opposite or deemed (pursuant to clause (vii)
of the last sentence of Section 8.06(a) and as reflected in the relevant
Transfer Agreement referred to in such sentence) to be set opposite such
Bank's name for such Borrower on Schedule X as such amount may be
terminated, reduced or increased after July 23, 1997, pursuant to Section
2.04, Section 2.17, Section 6.01 or Section 8.06(a), or (ii) the amount of
the Commitment of such Bank to TWC at such time.
"Consolidated" refers to the consolidation of the accounts of any
Person and its subsidiaries in accordance with generally accepted
accounting principles.
"Consolidated Net Worth" of any Person means the Net Worth of
such Person and its Subsidiaries on a Consolidated basis.
"Consolidated Tangible Net Worth" of any Person means the
Tangible Net Worth of such Person and its Subsidiaries on a Consolidated
basis.
"Convert," "Conversion" and "Converted" each refers to a
conversion of Advances of one Type into Advances of the other Type
pursuant to Section 2.02, Section 2.19 or Section 2.20.
"Debt" means, in the case of any Person, (i) indebtedness of such
Person for borrowed money, (ii) obligations of such Person evidenced by
bonds, debentures or notes, (iii) obligations of such Person to pay the
deferred purchase price of property or services, (iv) monetary obligations
of such Person as lessee under leases that are, in accordance
-5-
<PAGE> 10
with generally accepted accounting principles, recorded as capital leases,
(v) obligations of such Person under guaranties in respect of, and
obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in clauses (i) through (iv)
or clause (vii) of this definition, (vi) indebtedness or obligations of
others of the kinds referred to in clauses (i) through (v) or clause (vii)
of this definition secured by any Lien on or in respect of any property of
such Person, and (vii) all liabilities of such Person in respect of
unfunded vested benefits under any Plan; provided, however, that Debt
shall not include any obligation under or resulting from any agreement
referred to in paragraph (y) of Schedule III; paragraph (y) of Schedule
IV; paragraph (y) of Schedule V; paragraph (y) of Schedule VI; paragraph
(h) of Schedule VII; paragraph (y) of Schedule VIII; or paragraph ( ) of
Schedule IX or under or resulting from any sale and leaseback referred to
in paragraph (aa) of Schedule III; paragraph (aa) of Schedule IV;
paragraph (aa) of Schedule V; paragraph (bb) of Schedule VI; paragraph (j)
of Schedule VII; paragraph (aa) of Schedule VIII or paragraph ( ) of
Schedule IX.
"Domestic Lending Office" means, with respect to any Bank, the
office of such Bank specified as its "Domestic Lending Office" opposite
its name on Schedule I hereto or pursuant to Section 8.06(a), or such
other office of such Bank as such Bank may from time to time specify to
the Borrowers and the Agent.
"EBITDA" means for any period the sum of (i) the Consolidated net
income (or loss) of WilTel and its Subsidiaries for such period determined
in accordance with generally accepted accounting principles plus (ii) to
the extent included in the determination of such net income (or loss), the
Consolidated charges for such period for interest, depreciation, depletion
and amortization, plus (or, if there is a benefit from income taxes,
minus) (iii) to the extent included in the determination of such net
income, the amount of the provision for or benefit from income interest;
provided, however, that in determining such Consolidated net income, such
Consolidated charges and such provision for or benefit from income taxes,
there shall be included therefrom (to the extent otherwise included
therein) (a) the net income (or loss) of, charges for interest,
depreciation, depletion and amortization of, and such provision for or
benefit from income taxes of, any Person acquired by WilTel or any
Subsidiary of WilTel in a pooling-of-interest transaction for any period
prior to the date of such transaction, (b) the net income (but not loss)
of, charges for interest, depreciation, depletion and amortization of, and
such provision for (but not benefit from) income taxes of, any Person
which is subject to any restriction which prevents the payment of
dividends or the making of distributions on the capital stock, partnership
interests or other ownership interests of such Person to the extent of
such restrictions, (c) pre-tax gains or losses on the sale, transfer or
other disposition of any property by WilTel or its Subsidiaries (other
than sales, transfer and other dispositions in the ordinary course of
business), (d) all reported extraordinary gains and reported extraordinary
losses, prior to applicable income taxes, and (e) any item constituting
the cumulative effect of a reported change in accounting principles, prior
to applicable income taxes.
"Environment" shall have the meaning set forth in 42 U.S.C.
Section 9601(8) as defined on the date of this Agreement, and
"Environmental" shall mean pertaining or relating to the Environment.
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"Environmental Protection Statute" shall mean any United States
local, state or federal, or any foreign, law, statute, regulation, order,
consent decree or other agreement or Governmental Requirement arising from
or in connection with or relating to the protection or regulation of the
Environment, including, without limitation, those laws, statutes,
regulations, orders, decrees, agreements and other Governmental
Requirements relating to the disposal, cleanup, production, storing,
refining, handling, transferring, processing or transporting of Hazardous
Waste, Hazardous Substances or any pollutant or contaminant, wherever
located.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder from time to time.
"ERISA Affiliate" of any Borrower means any trade or business
(whether or not incorporated) which is a member of a group of which such
Borrower is a member and which is under common control within the meaning
of the regulations under Section 414 of the Code.
"Eurocurrency Liabilities" has the meaning assigned to that term
in Regulation D of the Board of Governors of the Federal Reserve System,
as in effect from time to time.
"Eurodollar Lending Office" means, with respect to any Bank, the
office of such Bank specified as its "Eurodollar Lending Office" opposite
its name on Schedule I hereto or pursuant to Section 8.06(a) (or, if no
such office is specified, its Domestic Lending Office) or such other
office of such Bank as such Bank may from time to time specify to the
Borrowers and the Agent.
"Eurodollar Rate" means, for any Interest Period for each
Eurodollar Rate Advance comprising part of the same A Borrowing, an
interest rate per annum (rounded upward to the nearest whole multiple of
1/16 of 1% per annum, if such rate is not such a multiple) equal to the
rate per annum at which deposits in U.S. dollars are offered by the
principal office of Citibank in London, England, to prime banks in the
London interbank market at 11:00 A.M. (London time) two Business Days
before the first day of such Interest Period in an amount substantially
equal to the amount of the Eurodollar Rate Advance of Citibank comprising
part of such A Borrowing to be outstanding during such Interest Period and
for a period equal to such Interest Period.
"Eurodollar Rate Advance" means an A Advance that bears interest
as provided in Section 2.06(b).
"Eurodollar Rate Reserve Percentage" of any Bank for any Interest
Period for any Eurodollar Rate Advance means the reserve percentage
applicable during such Interest Period (or if more than one such
percentage shall be so applicable, the daily average of such percentages
for those days in such Interest Period during which any such percentage
shall be so applicable) 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 requirement (including, without
limitation, any emergency, supplemental or other marginal reserve
requirement) for such Bank with respect to
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liabilities or assets consisting of or including Eurocurrency Liabilities
having a term equal to such Interest Period.
"Events of Default" has the meaning specified in Section 6.01.
For purposes of clause (iv) of the definition herein of "Interest Period",
Section 2.19 and Section 6.01, an Event of Default exists as to a
particular Borrower if such Event of Default exists wholly or in part as a
result of any event, condition, action, inaction, representation or other
matter of, by or otherwise directly or indirectly pertaining to such
Borrower or any material Subsidiary of such Borrower. Without limiting
the foregoing and for purposes of further clarification, it is agreed that
inasmuch as each of WilTel, WHD, NWP, WPL, TGPL and TGT is a Subsidiary of
TWC, any Event of Default that exists as to any of WilTel, WHD, NWP, WPL,
TGPL or TGT also exists as to TWC.
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to 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 for such day (or, if such day is not a Business Day, for the
next preceding Business Day) by the Federal Reserve Bank of New York, or,
if such rate is not so published for any day which is a Business Day, the
average of the quotations for such day on such transactions received by
the Agent from three federal funds brokers of recognized standing selected
by it.
"Governmental Requirements" means all judgments, orders, writs,
injunctions, decrees, awards, laws, ordinances, statutes, regulations,
rules, franchises, permits, certificates, licenses, authorizations and the
like and any other requirements of any government or any commission,
board, court, agency, instrumentality or political subdivision thereof.
"Hazardous Substance" shall have the meaning set forth in 42
U.S.C. Section 9601(14) and shall also include each other substance
considered to be a hazardous substance under any Environmental Protection
Statute.
"Hazardous Waste" shall have the meaning set forth in 42 U.S.C.
Section 6903(5) and shall also include each other substance considered to
be a hazardous waste under any Environmental Protection Statute
(including, without limitation 40 C.F.R. Section 261.3).
"Insufficiency" means, with respect to any Plan, the amount, if
any, by which the present value of the vested benefits under such Plan
exceeds the fair market value of the assets of such Plan allocable to such
benefits.
"Interest Period" means, for each A Advance to a Borrower
comprising part of the same A Borrowing, the period commencing on the date
of such A Advance or the date of the Conversion of any Base Rate Advance
into a Eurodollar Rate Advance and ending on the last day of the period
selected by such Borrower pursuant to the provisions below and,
thereafter, each subsequent period commencing on the last day of the
immediately preceding Interest Period and ending on the last day of the
period selected by such Borrower pursuant to the provisions below. The
duration of each Interest Period shall be one, two, three or six months,
in each case as such Borrower may, upon notice
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received by the Agent not later than 11:00 A.M. (New York City time) on
the third Business Day prior to the first day of such Interest Period,
select (it being agreed that selection of a subsequent Interest Period for
an outstanding Eurodollar Rate Advance does not require that a Notice of A
Borrowing be given, inasmuch as no Advance is being requested or made as a
result of such selection); provided, however, that:
(i) Interest Periods commencing on the same date for
A Advances comprising part of the same A Borrowing shall be of
the same duration;
(ii) whenever the last day of any Interest Period
would otherwise occur on a day other than a Business Day, the
last day of such Interest Period shall be extended to occur on
the next succeeding Business Day, provided that if such extension
would cause the last day of such Interest Period to occur in the
next following calendar month, the last day of such Interest
Period shall occur on the next preceding Business Day;
(iii) any Interest Period which begins on the last
Business Day of a calendar month (or on a day for which there is
no numerically corresponding day in the calendar month at the end
of such Interest Period) shall end on the last Business Day of
the calendar month in which it would have ended if there were a
numerically corresponding day in such calendar month; and
(iv) no Borrower may select any Interest Period that
ends after the Termination Date, and no Borrower may select any
Interest Period if any Event of Default exists as to such
Borrower.
"Lien" means any mortgage, lien, pledge, charge, deed of trust,
security interest, encumbrance or other type of preferential arrangement
to secure or provide for the payment of any obligation of any Person,
whether arising by contract, operation of law or otherwise (including,
without limitation, the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention
agreement).
"Majority Banks" means at any time Banks holding at least 66-2/3%
of the then aggregate unpaid principal amount of the A Notes held by
Banks, or, if no such principal amount is then outstanding, Banks having
at least 66-2/3% of the Commitments or, if no such principal amount is
then outstanding and all Commitments have terminated, Banks holding at
least 66-2/3% of the then aggregate unpaid principal amount of the B Notes
held by Banks (provided that for purposes of this definition and Sections
2.17, 6.01 and 7.01 neither any Borrower nor any Subsidiary or Related
Party of any Borrower, if a Bank, shall be included in (i) the Banks
holding the A Notes or B Notes or (ii) determining the aggregate unpaid
principal amount of the A Notes or the B Notes or the amount of the
Commitments).
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA to which any Borrower or any ERISA Affiliate
of any Borrower is
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<PAGE> 14
making or accruing an obligation to make contributions, or has within any
of the preceding five plan years made or accrued an obligation to make
contributions.
"Multiple Employer Plan" means an employee benefit plan, other
than a Multiemployer Plan, subject to Title IV of ERISA to which any
Borrower or any ERISA Affiliate of any Borrower, and one or more employers
other than any Borrower or an ERISA Affiliate of any Borrower, is making
or accruing an obligation to make contributions or, in the event that any
such plan has been terminated, to which any Borrower or any ERISA
Affiliate of any Borrower made or accrued an obligation to make
contributions during any of the five plan years preceding the date of
termination of such plan.
"Net Worth" of any Person means, as of any date of determination,
the excess of total assets of such Person over total liabilities of such
Person, total assets and total liabilities each to be determined in
accordance with generally accepted accounting principles.
"1996 Credit Agreement" has the meaning specified in the
preliminary statements of this Agreement.
"Non-Borrowing Subsidiary" of any Borrower means a Subsidiary of
such Borrower which Subsidiary is not itself a Borrower.
"Non-Recourse Debt" means Debt incurred by any non-material,
Non-Borrowing Subsidiary to finance the acquisition (other than any
acquisition from TWC or any Subsidiary) or construction of a project,
which Debt does not permit or provide for recourse against TWC or any
Subsidiary of TWC (other than the Subsidiary that is to acquire or
construct such project) or any property or asset of TWC or any Subsidiary
of TWC (other than property or assets of the subsidiary that is to acquire
or construct such project).
"Note" means an A Note or a B Note.
"Notice of A Borrowing" has the meaning specified in Section
2.02(a).
"Notice of B Borrowing" has the meaning specified in Section
2.16(a).
"NWP" means Northwest Pipeline Corporation, a Delaware
corporation.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted NWP Liens" means Liens specifically described on
Schedule III.
"Permitted TGPL Liens" means Liens specifically described on
Schedule IV.
"Permitted TGT Liens" means Liens specifically described on
Schedule V.
"Permitted TWC Liens" means Liens specifically described on
Schedule VI.
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<PAGE> 15
"Permitted WHD Liens" means Liens specifically described on
Schedule VIII.
"Permitted WilTel Liens" means Liens specifically described on
Schedule IX.
"Permitted WPL Liens" means Liens specifically described on
Schedule VII.
"Person" means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust,
unincorporated association, joint venture or other entity, or a government
or any political subdivision or agency thereof.
"Plan" means an employee pension benefit plan (other than a
Multiemployer Plan) as defined in Section 3(2) of ERISA currently
maintained by, or to which contributions have been made at any time after
December 31, 1984, by, any Borrower or any ERISA Affiliate of any Borrower
for employees of a Borrower or any such ERISA Affiliate and covered by
Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code.
"Public Filings" means TWC's, NWP's, TGPL's and TGT's respective
annual reports on Form 10-K for the year ended December 31, 1996, and
TWC's, NWP's, TGPL's and TGT's respective quarterly reports on Form 10-Q
for the quarter ended March 31, 1997.
"Rating Category" means, as to any Borrower, the relevant
category applicable to such Borrower from time to time as set forth on
Schedule XI, which is based on the ratings (or lack thereof) of such
Borrower's senior unsecured long-term debt by S&P or Moody's.
"Related Party" of any Person means any corporation, partnership,
joint venture or other entity of which more than 10% of the outstanding
capital stock or other equity interests having ordinary voting power to
elect a majority of the board of directors of such corporation,
partnership, joint venture or other entity or others performing similar
functions (irrespective of whether or not at the time capital stock or
other equity interests of any other class or classes of such corporation,
partnership, joint venture or other entity shall or might have voting
power upon the occurrence of any contingency) is at the time directly or
indirectly owned by such Person or which owns at the time directly or
indirectly more than 10% of the outstanding capital stock or other equity
interests having ordinary voting power to elect a majority of the board of
directors of such Person or others performing similar functions
(irrespective of whether or not at the time capital stock or other equity
interests of any other class or classes of such corporation, partnership,
joint venture or other entity shall or might have voting power upon the
occurrence of any contingency); provided, however, that neither TWC nor
any Subsidiary of TWC shall be considered to be a Related Party of TWC or
any Subsidiary of TWC.
"S&P" means Standard & Poor's Ratings Group, a division of
Mc-Graw Hill, Inc. on the date hereof.
"Sale and Lease-Back Transaction" of any Person means any
arrangement entered into by such Person or any Subsidiary of such Person,
directly or indirectly, whereby such
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<PAGE> 16
Person or any Subsidiary of such Person shall sell or transfer any
property, whether now owned or hereafter acquired, and whereby such Person
or any Subsidiary of such Person shall then or thereafter rent or lease as
lessee such property or any part thereof or other property which such
Person or any Subsidiary of such Person intends to use for substantially
the same purpose or purposes as the property sold or transferred;
provided, however, that any sale and lease-back of cushion gas, whether
now or hereafter existing, shall not be considered to be a Sale and
Lease-Back Transaction and any sale and lease-back of inventory, whether
now or hereafter existing, by WPL or any of its Subsidiaries (other than
another Borrower) shall not be considered to be a Sale and Lease-Back
Transaction.
"Stated Termination Date" means July 31, 2002, or such later
date, if any as may be agreed to by the Borrowers and the Banks pursuant
to Section 2.18.
"Subordinated Debt" means any Debt of any Borrower which is
effectively subordinated to the obligations of such Borrower hereunder and
under the Notes.
"Subsidiary" of any Person means any corporation, partnership,
joint venture or other entity of which more than 50% of the outstanding
capital stock or other equity interests having ordinary voting power to
elect a majority of the board of directors of such corporation,
partnership, joint venture or other entity or others performing similar
functions (irrespective of whether or not at the time capital stock or
other equity interests of any other class or classes of such corporation,
partnership, joint venture or other entity shall or might have voting
power upon the occurrence of any contingency) is at the time directly or
indirectly owned by such Person.
"Tangible Net Worth" of any Person means, as of any date of
determination, the excess of total assets of such Person over total
liabilities of such Person, total assets and total liabilities each to be
determined in accordance with generally accepted accounting principles,
excluding, however, from the determination of total assets (i) patents,
patent applications, trademarks, copyrights and trade names, (ii)
goodwill, organizational, experimental, research and development expense
and other like intangibles, (iii) treasury stock, (iv) monies set apart
and held in a sinking or other analogous fund established for the
purchase, redemption or other retirement of capital stock or Subordinated
Debt, and (v) unamortized debt discount and expense.
"Termination Date" means the earlier of (i) the Stated
Termination Date or (ii) the date of termination in whole of the
Commitments pursuant to Section 2.04, 2.17 or 6.01.
"Termination Event" means (i) a "reportable event", as such term
is described in Section 4043 of ERISA (other than a "reportable event" not
subject to the provision for 30-day notice to the PBGC), or an event
described in Section 4062(f) of ERISA, or (ii) the withdrawal of any
Borrower or any ERISA Affiliate of any Borrower from a Multiple Employer
Plan during a plan year in which it was a "substantial employer," as such
term is defined in Section 4001(a)(2) of ERISA, or the incurrence of
liability by any Borrower or any ERISA Affiliate of any Borrower under
Section 4064 of ERISA upon the termination
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<PAGE> 17
of a Plan or Multiple Employer Plan, or (iii) the distribution of a notice
of intent to terminate a Plan pursuant to Section 4041(a)(2) of ERISA or
the treatment of a Plan amendment as a termination under Section 4041 of
ERISA, or (iv) the institution of proceedings to terminate a Plan by the
PBGC under Section 4042 of ERISA, or (v) any other event or condition
which might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan.
"TGPL" means Transcontinental Gas Pipe Line Corporation, a
Delaware corporation.
"TGT" means Texas Gas Transmission Corporation, a Delaware
corporation.
"Transfer Agreement" has the meaning specified in Section 8.06.
"TWC" means The Williams Companies, Inc., a Delaware corporation.
"Type" has the meaning set forth in the definition herein of A
Advance.
"Unrated" means, as to any Borrower, that no senior unsecured
long-term debt of such Borrower is rated by S&P and no senior unsecured
long-term debt of such Borrower is rated by Moody's.
"Wholly-Owned Subsidiary" of any Person means any Subsidiary of
such Person all of the capital stock and other equity interests of which
is owned by such Person or any Wholly-Owned Subsidiary of such Person.
"WilTel Pro Forma Income Statements" means the pro forma income
statements for the calendar quarters ended June 30, 1996, September 30,
1996, December 31, 1996, and March 31, 1997, included as Exhibit G hereto.
"Withdrawal Liability" shall have the meaning given such term
under Part I of Subtitle E of Title IV of ERISA.
"WFS" means Williams Field Services Group, Inc., a Delaware
corporation.
"WHD" means Williams Holdings of Delaware, Inc., a Delaware
corporation.
"WilTel" means WilTel Communications, LLC, a Delaware limited
liability company.
"WilTel Debt to EBITDA Ratio" means, as of the end of any
calendar quarter, the ratio of (i) the aggregate amount, as of the end of
such quarter, of all Debt of WilTel and its Subsidiaries on a Consolidated
basis to (ii) EBITDA for the period of four consecutive calendar quarters
ending on (and including) the last day of such calendar quarter; provided,
however, in calculating the WilTel Debt to EBITDA Ratio for calendar
quarters ending prior to and including June 30, 1998, the WilTel Debt to
EBITDA Ratio shall be determined based upon the WilTel Pro Forma Income
Statements to the extent necessary because actual income statements are
not available.
"WNG" means Williams Natural Gas Company, a Delaware corporation.
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"WPL" means Williams Pipe Line Company, a Delaware corporation.
"WPL Debt to TNW Ratio" means at any date the ratio of (i) the
aggregate amount at such date of all Debt of WPL and its Subsidiaries on a
Consolidated basis to (ii) the sum of the Consolidated Tangible Net Worth
at such date of WPL plus the aggregate amount at such date of all Debt of
WPL and its Subsidiaries on a Consolidated basis.
Section 1.02. Computation of Time Periods. In this Agreement in
the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and "until"
each means "to but excluding."
Section 1.03. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles, and each reference herein to "generally
accepted accounting principles" shall mean generally accepted accounting
principles consistent with those applied in the preparation of the financial
statements referred to in Section 4.01(e)(i).
Section 1.04. Miscellaneous. The words "hereof," "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement, and Article, Section, Schedule and Exhibit references are to
Articles and Sections of and Schedules and Exhibits to this Agreement, unless
otherwise specified.
Section 1.05. Ratings. A rating, whether public or private, by
S&P or Moody's shall be deemed to be in effect on the date of announcement or
publication by S&P or Moody's, as the case may be, of such rating or, in the
absence of such announcement or publication, on the effective date of such
rating and will remain in effect until the announcement or publication of, or
in the absence of such announcement or publication, the effective date of, any
change in, or withdrawal or termination of, such rating. In the event the
standards for any rating by Moody's or S&P are revised, or any such rating is
designated differently (such as by changing letter designations to different
letter designations or to numerical designations), the references herein to
such rating shall be deemed to refer to the revised or redesignated rating for
which the standards are closest to, but not lower than, the standards at the
date hereof for the rating which has been revised or redesignated, all as
determined by the Majority Banks in good faith. Long-term debt supported by a
letter of credit, guaranty, insurance or other similar credit enhancement
mechanism shall not be considered as senior unsecured long-term debt. If
either Moody's or S&P has at any time more than one rating applicable to senior
unsecured long-term debt of a Borrower, the lowest such rating shall be
applicable for purposes hereof. For example, if Moody's rates some senior
unsecured long-term debt of a Borrower Ba1 and other such debt of such Borrower
Ba2, the senior unsecured long-term debt of such Borrower shall be deemed to be
rated Ba2 by Moody's.
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ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
Section 2.01. The A Advances. Each Bank severally agrees, on
the terms and conditions hereinafter set forth, to make A Advances to each
Borrower from time to time on any Business Day during the period from the date
hereof until the Termination Date in an aggregate amount outstanding not to
exceed at any time such Bank's Commitment to such Borrower, provided that the
aggregate amount of the Commitments of the Banks to any Borrower shall, except
for purposes of Section 2.03(a), be deemed used from time to time to the extent
of the aggregate amount of the B Advances then outstanding to such Borrower and
such deemed use of the aggregate amount of such Commitments shall be applied to
the Banks ratably according to their respective Commitments to such Borrower
(such deemed use of the aggregate amount of the Commitments of any Borrower
being a "B Reduction"), and provided further that the aggregate amount of all A
Advances to all Borrowers by any Bank shall not exceed at any time outstanding
such Bank's Commitment to TWC (determined after giving effect to such Bank's
ratable share of all B Reductions). Each A Borrowing shall be in an aggregate
amount not less than $5,000,000 or an integral multiple of $1,000,000 in excess
thereof, and shall consist of A Advances of the same Type made to the same
Borrower on the same day by the Banks ratably according to their respective
Commitments. Within the limits of each Bank's Commitment to a Borrower, such
Borrower may borrow, prepay pursuant to Section 2.10 and reborrow under this
Section 2.01.
Section 2.02. Making the A Advances. (a) Each A Borrowing
shall be made on notice, given not later than (1) in the case of a proposed
Borrowing comprised of Eurodollar Rate Advances, 11:00 A.M. (New York City
time) at least three Business Days prior to the date of the proposed Borrowing,
and (2) in the case of a proposed Borrowing comprised of Base Rate Advances,
10:00 A.M. (New York City time) on the date of the proposed Borrowing, by the
Borrower requesting such A Borrowing to the Agent, which shall give to each
Bank prompt notice thereof by telecopy, telex or cable. Each such notice of an
A Borrowing (a "Notice of A Borrowing") shall be by telecopy, telex or cable,
confirmed immediately in writing, in substantially the form of Exhibit B-1
hereto, executed by the Borrower requesting such A Borrowing and specifying
therein the requested (i) date of such A Borrowing (which shall be a Business
Day), (ii) initial Type of A Advances comprising such A Borrowing, (iii)
aggregate amount of such A Borrowing, and (iv) in the case of an A Borrowing
comprised of Eurodollar Rate Advances, initial Interest Period for each such A
Advance. Each Bank shall, before 11:00 A.M. (New York City time) on the date
of such A Borrowing, make available for the account of its Applicable Lending
Office to the Agent at its New York address referred to in Section 8.02, in
same day funds, such Bank's ratable portion of such A Borrowing. After the
Agent's receipt of such funds and upon fulfillment of the applicable conditions
set forth in Article III, the Agent will make such funds available to the
Borrower requesting such A Borrowing at the Agent's aforesaid address.
Notwithstanding the other provisions hereof, each Bank that is to be paid by
any Borrower on July 23, 1997, any principal amount outstanding under the 1996
Credit Agreement as contemplated by Section 8.14 shall apply the proceeds of
any Advance to be made by it to such Borrower on such date to pay such amount
and only an amount equal to the difference (if any) between the amount of such
Advance and the principal amount being so paid shall be made available by such
Bank to the Agent as provided herein, or remitted by such Borrower to the Agent
as provided in Section 2.13, as the case may be.
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(b) Anything herein to the contrary notwithstanding:
(i) at no time shall there be outstanding to any one
Borrower more than six A Borrowings comprised of Eurodollar Rate Advances;
(ii) no Borrower may select Eurodollar Rate Advances for
any Borrowing if the aggregate amount of such Borrowing is less than (x)
if such Borrowing is made by WPL or WilTel, $5,000,000, and (y) if such
Borrowing is made by any other Borrower, $20,000,000;
(iii) if the Majority Banks shall notify the Agent that
either (A) the Eurodollar Rate for any Interest Period for any Eurodollar
Rate Advances will not adequately reflect the cost to such Banks of making
or funding their respective Eurodollar Rate Advances for such Interest
Period, or (B) that U.S. dollar deposits for the relevant amounts and
Interest Period for their respective Advances are not available to them in
the London interbank market, or it is otherwise impossible to have
Eurodollar Rate Advances, the Agent shall forthwith so notify the
Borrowers and the Banks, whereupon (I) each Eurodollar Rate Advance will
automatically, on the last day of the then existing Interest Period
therefor, Convert into a Base Rate Advance, and (II) the obligations of
the Banks to make, or to Convert Advances into, Eurodollar Rate Advances
shall be suspended until the Agent, at the request of the Majority Banks,
shall notify the Borrowers and the Banks that the circumstances causing
such suspension no longer exist, and, except as provided in Section
2.02(b)(v), each Advance comprising any requested A Borrowing shall be a
Base Rate Advance;
(iv) if the Agent is unable to determine the Eurodollar
Rate for Eurodollar Rate Advances, the obligation of the Banks to make, or
to Convert Advances into, Eurodollar Rate Advances shall be suspended
until the Agent shall notify the Borrowers and the Banks that the
circumstances causing such suspension no longer exist, and, except as
provided in Section 2.02(b)(v), each Advance comprising any requested A
Borrowing shall be a Base Rate Advance; and
(v) if a Borrower has requested a proposed A Borrowing
consisting of Eurodollar Rate Advances and as a result of circumstances
referred to in Section 2.02(b)(iii) or (iv) such A Borrowing would not
consist of Eurodollar Rate Advances, such Borrower may, by notice given
not later than 3:00 P.M. (New York City time) at least one Business Day
prior to the date such proposed A Borrowing would otherwise be made,
cancel such A Borrowing, in which case such A Borrowing shall be cancelled
and no Advances shall be made as a result of such requested A Borrowing,
but such Borrower shall indemnify the Banks in connection with such
cancellation as contemplated by Section 2.02(c).
(c) Each Notice of A Borrowing shall be irrevocable and
binding on the Borrowers, except as set forth in Section 2.02(b)(v). In the
case of any A Borrowing requested by a Borrower which the related Notice of A
Borrowing specifies is to be comprised of Eurodollar Rate Advances, such
Borrower shall indemnify each Bank against any loss, cost or expense incurred
by such Bank as a result of any failure to fulfill on or before the date
specified in such Notice of A Borrowing for such A Borrowing the applicable
conditions set forth in Article III,
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including, without limitation, any loss (including loss of reasonably
anticipated profits), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Bank to fund the A
Advance to be made by such Bank as part of such A Borrowing when such A
Advance, as a result of such failure, is not made on such date. A certificate
in reasonable detail as to the basis for and the amount of such loss, cost or
expense submitted to such Borrower and the Agent by such Bank shall be prima
facie evidence of the amount of such loss, cost or expense. If an A Borrowing
requested by a Borrower which the related Notice of A Borrowing specifies is to
be comprised of Eurodollar Rate Advances is not made as an A Borrowing
comprised of Eurodollar Rate Advances as a result of Section 2.02(b), such
Borrower shall indemnify each Bank against any loss (excluding loss of
profits), cost or expense incurred by such Bank by reason of the liquidation or
reemployment of deposits or other funds acquired by such Bank prior to the time
such Bank is actually aware that such A Borrowing will not be so made to fund
the A Advance to be made by such Bank as part of such A Borrowing. A
certificate in reasonable detail as to the basis for and the amount of such
loss, cost or expense submitted to such Borrower and the Agent by such Bank
shall be prima facie evidence of the amount of such loss, cost or expense.
(d) Unless the Agent shall have received notice from a Bank
prior to the date of any A Borrowing to a Borrower that such Bank will not make
available to the Agent such Bank's ratable portion of such A Borrowing, the
Agent may assume that such Bank has made such portion available to the Agent on
the date of such A Borrowing in accordance with subsection (a) of this Section
2.02 and the Agent may, in reliance upon such assumption, make available to
such Borrower requesting such A Borrowing on such date a corresponding amount.
If and to the extent that such Bank shall not have so made such ratable portion
available to the Agent, such Bank and such Borrower severally agree to repay to
the Agent forthwith on demand such corresponding amount together with interest
thereon, for each day from the date such amount is made available to such
Borrower until the date such amount is repaid to the Agent, at (i) in the case
of such Borrower, the interest rate applicable at the time to A Advances
comprising such A Borrowing and (ii) in the case of such Bank, the Federal
Funds Rate. If such Bank shall repay to the Agent such corresponding amount,
such amount so repaid shall constitute such Bank's A Advance as part of such A
Borrowing for purposes of this Agreement.
(e) The failure of any Bank to make the A Advance to be made
by it as part of any A Borrowing shall not relieve any other Bank of its
obligation, if any, hereunder to make its A Advance on the date of such A
Borrowing, but no Bank shall be responsible for the failure of any other Bank
to make the A Advance to be made by such other Bank on the date of any A
Borrowing.
Section 2.03. Fees.
(a) Commitment Fee. TWC agrees to pay to the Agent for the
account of each Bank a commitment fee on the average daily unused (for the
purposes of this Section 2.03(a), A Advances made to any Borrower shall be
considered to have been made to TWC, but B Advances to any Borrower shall not,
for purposes of this Section 2.03(a), be considered to be usage of any
Commitment) portion of such Bank's Commitment to TWC from the date hereof until
the Termination Date at a rate per annum from time to time equal to the
Applicable Commitment Fee Rate from time to time, payable in arrears on the
last day of each March, June,
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September and December during the term such Bank has any Commitment to any
Borrower and on the Termination Date.
(b) Agent's Fees. TWC agrees to pay to the Agent, for its sole
account, such fees as may be separately agreed to in writing by TWC and the
Agent.
Section 2.04. Reduction of the Commitments.
(a) Optional. Each Borrower shall have the right, upon at
least three Business Days notice to the Agent, to terminate in whole or reduce
ratably in part the unused portions of the respective Commitments of the Banks
to such Borrower, provided that each partial reduction shall be in the
aggregate amount of at least $20,000,000, and provided further, that the
aggregate amount of the Commitments of the Banks to any Borrower shall not be
reduced to an amount which is less than the aggregate principal amount of the
Advances then outstanding to such Borrower, and provided further, that the
aggregate amount of the Commitments of the Banks to TWC shall not be reduced to
an amount which is less than the aggregate principal amount of the Advances
then outstanding to the Borrower as to which the aggregate outstanding
principal amount of Advances is then the largest.
(b) Termination. If all of the Commitments of the Banks to a
Borrower (other than TWC) are terminated pursuant to Section 2.04(a) and such
Borrower has paid all principal, interest, fees, costs and other amounts owed
by it hereunder and under the Notes executed by it, such Borrower shall have
the right, upon at least three Business Days notice to the Agent, to elect to
cease to be a Borrower hereunder, except for purposes of the definition herein
of Majority Banks and for purposes of Sections 2.11, 2.14 and 8.04.
Section 2.05. Repayment of A Advances. Each Borrower shall
repay, on the Stated Termination Date or such earlier date as the Notes may be
declared due pursuant to Article VI, the unpaid principal amount of each A
Advance made by each Bank to such Borrower.
Section 2.06. Interest on A Advances. Each Borrower shall pay
interest on the unpaid principal amount of each A Advance made by each Bank to
such Borrower from the date of such A Advance until such principal amount shall
be paid in full, at the following rates per annum:
(a) Base Rate Advances. At such times as such A Advance is a
Base Rate Advance, a rate per annum equal at all times to the Base Rate in
effect from time to time, payable quarterly in arrears on the last day of
each March, June, September and December and on the date such Advance
shall be Converted or paid in full; provided that any amount of principal
of any Base Rate Advance, interest, fees and other amounts payable
hereunder (other than principal of any Eurodollar Rate Advance) which is
not paid when due (whether at stated maturity, by acceleration or
otherwise) shall bear interest, from the date on which such amount is due
until such amount is paid in full, payable on demand, at a rate per annum
equal at all times to the sum of the Base Rate in effect from time to time
plus 2% per annum.
(b) Eurodollar Rate Advances. At such times as such A
Advance is a Eurodollar Rate Advance, a rate per annum equal at all times
during each Interest Period
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for such A Advance to the sum of the Eurodollar Rate for such Interest
Period plus the Applicable Margin in effect from time to time for such A
Advance, payable on the last day of such Interest Period and, if such
Interest Period has a duration of more than three months, on each day
which occurs during such Interest Period every three months from the first
day of such Interest Period; provided that any amount of principal of any
Eurodollar Rate Advance which is not paid when due (whether at stated
maturity, by acceleration or otherwise) shall bear interest, from the date
on which such amount is due until such amount is paid in full, payable on
demand, at a rate per annum equal at all times to the greater of (x) the
sum of the Base Rate in effect from time to time plus 2% per annum and (y)
the sum of the rate per annum required to be paid on such A Advance
immediately prior to the date on which such amount became due plus 2% per
annum.
Section 2.07. Additional Interest on Eurodollar Rate Advances.
Each Borrower shall pay to each Bank, so long as such Bank shall be required
under regulations of the Board of Governors of the Federal Reserve System to
maintain reserves with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities, additional interest on the unpaid principal
amount of each Eurodollar Rate Advance of such Bank to such Borrower, from the
date of such Advance until such principal amount is paid in full, at an
interest rate per annum equal at all times to the remainder obtained by
subtracting (i) the Eurodollar Rate for the Interest Period for such Advance
from (ii) the rate obtained by dividing such Eurodollar Rate by a percentage
equal to 100% minus the Eurodollar Rate Reserve Percentage of such Bank for
such Interest Period, payable on each date on which interest is payable on such
Advance. Such additional interest shall be determined by such Bank and
notified to such Borrower through the Agent. A certificate as to the amount of
such additional interest submitted to such Borrower and the Agent by such Bank
shall be conclusive and binding for all purposes, absent manifest error. No
Bank shall have the right to recover any additional interest pursuant to this
Section 2.07 for any period more than 90 days prior to the date such Bank
notifies the Borrowers that additional interest may be charged pursuant to this
Section 2.07.
Section 2.08. Interest Rate Determination. The Agent shall give
prompt notice to the Borrower to which an A Advance is made and the Banks of
the applicable interest rate for each Eurodollar Rate Advance determined by the
Agent for purposes of Section 2.06(b).
Section 2.09. Evidence of Debt. The indebtedness of each
Borrower resulting from the A Advances owed to each Bank by such Borrower shall
be evidenced by an A Note of such Borrower payable to the order of such Bank.
Section 2.10. Prepayments.
(a) No Borrower shall have any right to prepay any principal
amount of any A Advance except as provided in this Section 2.10.
(b) Any Borrower may, in respect of Base Rate Advances upon
notice to the Agent before 10:00 A.M. (New York City time) on the date of
prepayment, and in respect of Eurodollar Rate Advances upon at least three
Business Days' notice to the Agent, in each case stating the proposed date
(which shall be a Business Day) and aggregate principal amount of the
prepayment, and if such notice is given such Borrower shall, prepay the
outstanding principal amounts of the A Advances comprising part of the same A
Borrowing in whole or ratably in part,
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together with accrued interest to the date of such prepayment on the principal
amount prepaid and amounts, if any, required to be paid pursuant to Section
8.04(b) as a result of such prepayment; provided, however, that each partial
prepayment pursuant to this Section 2.10(b) shall be in an aggregate principal
amount not less than $5,000,000 and in an aggregate principal amount such that
after giving effect thereto no A Borrowing comprised of Base Rate Advances
shall have a principal amount outstanding of less than $5,000,000 and no A
Borrowing comprised of Eurodollar Rate Advances shall have a principal amount
outstanding of less than (i) if such A Borrowing was made by WPL or WilTel,
$5,000,000, and (ii) if such A Borrowing was made by any other Borrower,
$20,000,000.
(c) Each Borrower will give notice to the Agent at or before
the time of each prepayment by such Borrower of Advances pursuant to this
Section 2.10 specifying the Advances which are to be prepaid and the amount of
such prepayment to be applied to such Advances, and each payment of any Advance
pursuant to this Section 2.10 or any other provision of this Agreement shall be
made in a manner such that all Advances comprising part of the same Borrowing
are paid in whole or ratably in part.
Section 2.11. Increased Costs.
(a) If, due to either (i) the introduction of or any change
(other than any change by way of imposition or increase of reserve requirements
included in the Eurodollar Rate Reserve Percentage) in or in the
interpretation, application or applicability of any law or regulation or (ii)
the compliance with any guideline or request from any central bank or other
governmental authority (whether or not having the force of law), there shall be
any increase in the cost to any Bank of agreeing to make or making, funding or
maintaining Eurodollar Rate Advances to any Borrower, then such Borrower shall
from time to time, upon demand by such Bank (with a copy of such demand to the
Agent), pay to the Agent for the account of such Bank additional amounts
sufficient to compensate such Bank for such increased cost. A certificate as
to the amount of such increased cost, submitted to such Borrower and the Agent
by such Bank, shall be prima facie evidence of the amount of such increased
cost. No Bank shall have the right to recover any such increased costs for any
period more than 90 days prior to the date such Bank notifies the Borrowers of
any such introduction, change, compliance or proposed compliance.
(b) If any Bank determines that compliance with any law or
regulation or any guideline or request from any central bank or other
governmental authority (whether or not having the force of law) affects or
would affect the amount of capital required or expected to be maintained by
such Bank or any corporation controlling such Bank and that the amount of such
capital is increased by or based upon the existence of such Bank's commitment
to lend to any Borrower hereunder and other commitments of this type, then,
upon demand by such Bank (with a copy of such demand to the Agent), such
Borrower shall immediately pay to the Agent for the account of such Bank, from
time to time as specified by such Bank, additional amounts sufficient to
compensate such Bank or such corporation in the light of such circumstances, to
the extent that such Bank reasonably determines such increase in capital to be
allocable to the existence of such Bank's commitment to lend hereunder. A
certificate as to the amount of such additional amounts, submitted to such
Borrower and the Agent by such Bank, shall be prima facie evidence of the
amount of such additional amounts. No Bank shall have any right to recover any
additional amounts under this Section 2.11(b) for any period more than 90 days
prior to the date such Bank notifies the Borrowers of any such compliance.
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(c) In the event that any Bank makes a demand for payment
under Section 2.07 or this Section 2.11, TWC may within ninety days of such
demand, if no Event of Default or event which, with the giving of notice or
lapse of time or both, would constitute an Event of Default then exists,
replace such Bank with another commercial bank in accordance with all of the
provisions of the last sentence of Section 8.06(a) (including execution of an
appropriate Transfer Agreement) provided that (i) all obligations of such Bank
to lend hereunder shall be terminated and the Notes payable to such Bank and
all other obligations owed to such Bank hereunder shall be purchased in full
without recourse at par plus accrued interest at or prior to such replacement,
(ii) such replacement bank shall be reasonably satisfactory to the Agent and
the Majority Banks, (iii) such replacement bank shall, from and after such
replacement, be deemed for all purposes to be a "Bank" hereunder with a
Commitment to each Borrower in the amount of the respective Commitment of such
Bank to such Borrower immediately prior to such replacement (plus, if such
replacement bank is already a Bank prior to such replacement the respective
Commitment of such Bank to such Borrower prior to such replacement), as such
amount may be changed from time to time pursuant hereto, and shall have all of
the rights, duties and obligations hereunder of the Bank being replaced, and
(iv) such other actions shall be taken by the Borrowers, such Bank and such
replacement bank as may be appropriate to effect the replacement of such Bank
with such replacement bank on terms such that such replacement bank has all of
the rights, duties and obligations hereunder as such Bank (including, without
limitation, execution and delivery of new Notes of each Borrower to such
replacement bank, redelivery to each Borrower in due course of the Notes of
such Borrower payable to such Bank and specification of the information
contemplated by Schedule I as to such replacement bank).
Section 2.12. Illegality. Notwithstanding any other provision
of this Agreement, if any Bank shall notify the Agent that the introduction of
or any change in or in the interpretation of any law or regulation shall make
it unlawful, or that any central bank or other governmental authority shall
assert that it is unlawful, for any Bank or its Eurodollar Lending Office to
perform its obligations hereunder to make, or Convert a Base Rate Advance into,
a Eurodollar Rate Advance or to continue to fund or maintain any Eurodollar
Rate Advance, then, on notice thereof to the Borrowers by the Agent, (i) the
obligation of each of the Banks to make, or to Convert Advances into,
Eurodollar Rate Advances shall be suspended until the Agent, at the request of
the Majority Banks, shall notify the Borrowers and the Banks that the
circumstances causing such suspension no longer exist, and (ii) the Borrowers
shall forthwith prepay in full all Eurodollar Rate Advances of all Banks then
outstanding together with all accrued interest thereon and all amounts payable
pursuant to Section 8.04(b), unless each Bank shall determine in good faith in
its sole opinion that it is lawful to maintain the Eurodollar Rate Advances
made by such Bank to the end of the respective Interest Periods then applicable
thereto or unless the Borrowers, within five Business Days of notice from the
Agent, Convert all Eurodollar Rate Advances of all Banks then outstanding into
Base Rate Advances in accordance with Section 2.19.
Section 2.13. Payments and Computations.
(a) Each Borrower shall make each payment hereunder and
under the Notes to be made by it not later than 11:00 A.M. (New York City time)
on the day when due in U.S. dollars to the Agent at its New York address
referred to in Section 8.02 in same day funds. The Agent will promptly
thereafter cause to be distributed like funds relating to the payment of
principal, interest or commitment fees ratably (other than amounts payable
pursuant to Section 2.07, 2.11, 2.14, 2.16 or 8.04(b)) to the Banks for the
account of their respective Applicable
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Lending Offices, and like funds relating to the payment of any other amount
payable to any Bank to such Bank for the account of its Applicable Lending
Office, in each case to be applied in accordance with the terms of this
Agreement. In no event shall any Bank be entitled to share any fee paid to the
Agent pursuant to Section 2.03(b), any auction fee paid to the Agent pursuant
to Section 2.16(a)(i) or any other fee paid to the Agent, as such.
(b) Each Borrower hereby authorizes each Bank, if and to the
extent payment owed to such Bank by such Borrower is not made when due
hereunder or under any Note of such Borrower held by such Bank, to charge from
time to time against any or all of such Borrower's accounts with such Bank any
amount so due.
(c) All computations of interest based on clause (a) or
clause (b) of the definition herein of Base Rate and of commitment fees shall
be made by the Agent on the basis of a year of 365 or 366 days, as the case may
be, and all computations of interest based on the Eurodollar Rate, the Federal
Funds Rate or clause (c) of the definition herein of Base Rate shall be made by
the Agent, and all computations of interest pursuant to Section 2.07 shall be
made by a Bank, on the basis of a year of 360 days, in each case for the actual
number of days (including the first day but excluding the last day) occurring
in the period for which such interest or commitment fees are payable. Each
determination by the Agent (or, in the case of Section 2.07, by a Bank) of an
interest rate hereunder shall be conclusive and binding for all purposes,
absent manifest error.
(d) Whenever any payment hereunder or under the Notes shall
be stated to be due on a day other than a Business Day, such payment shall be
made on the next succeeding Business Day, and such extension of time shall in
such case be included in the computation of payment of interest or commitment
fee, as the case may be; provided, however, if such extension would cause
payment of interest on or principal of Eurodollar Rate Advances to be made in
the next following calendar month, such payment shall be made on the next
preceding Business Day.
(e) Unless the Agent shall have received notice from a
Borrower prior to the date on which any payment is due by such Borrower to any
Bank hereunder that such Borrower will not make such payment in full, the Agent
may assume that such Borrower has made such payment in full to the Agent on
such date and the Agent may, in reliance upon such assumption, cause to be
distributed to each Bank on such due date an amount equal to the amount then
due such Bank hereunder. If and to the extent such Borrower shall not have so
made such payment in full to the Agent, each Bank shall repay to the Agent
forthwith on demand such amount distributed to such Bank together with interest
thereon, for each day from the date such amount is distributed to such Bank
until the date such Bank repays such amount to the Agent, at the Federal Funds
Rate.
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Section 2.14. Taxes.
(a) Any and all payments by any Borrower hereunder or under
the Notes shall be made, in accordance with Section 2.13, free and clear of and
without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings with respect thereto, and all liabilities
with respect thereto, excluding in the case of each Bank and the Agent, taxes
imposed on its income, and franchise taxes imposed on it, by the jurisdiction
under the laws of which such Bank or the Agent (as the case may be) is
organized or any political subdivision thereof and, in the case of each Bank,
taxes imposed on its income, and franchise taxes imposed on it, by the
jurisdiction of such Bank's Applicable Lending Office or any political
subdivision thereof (all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as
"Taxes"). If any Borrower shall be required by law to deduct any Taxes from or
in respect of any sum payable hereunder or under any Note to any Bank or the
Agent, (i) the sum payable shall be increased as may be necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section 2.14) such Bank or the Agent (as the case may
be) receives an amount equal to the sum it would have received had no such
deductions been made, (ii) such Borrower shall make such deductions and (iii)
such Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law.
(b) In addition, each Borrower agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes,
charges or similar levies which arise from any payment made by such Borrower
hereunder or under the Notes executed by it or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement or such Notes
(hereinafter referred to as "Other Taxes").
(c) Each Borrower will indemnify each Bank and the Agent for
the full amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
Section 2.14) owed and paid by such Bank or the Agent (as the case may be) and
any liability (including penalties, interest and expenses) arising therefrom or
with respect thereto. This indemnification shall be made within 30 days from
the date such Bank or the Agent (as the case may be) makes written demand
therefor.
(d) Within 30 days after the date of the payment of Taxes by
or at the direction of any Borrower, such Borrower will furnish to the Agent,
at its address referred to in Section 8.02, the original or a certified copy of
a receipt evidencing payment thereof. Should any Bank or the Agent ever
receive any refund, credit or deduction from any taxing authority to which such
Bank or the Agent would not be entitled but for the payment by a Borrower of
Taxes as required by this Section 2.14 (it being understood that the decision
as to whether or not to claim, and if claimed, as to the amount of any such
refund, credit or deduction shall be made by such Bank or the Agent, as the
case may be, in its sole discretion), such Bank or the Agent, as the case may
be, thereupon shall repay to such Borrower an amount with respect to such
refund, credit or deduction equal to any net reduction in taxes actually
obtained by such Bank or the Agent, as the case may be, and determined by such
Bank or the Agent, as the case may be, to be attributable to such refund,
credit or deduction.
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(e) Without prejudice to the survival of any other agreement
of the Borrowers hereunder, the agreements and obligations of the Borrowers
contained in this Section 2.14 shall survive the payment in full of principal
and interest hereunder and under the Notes.
Section 2.15. Sharing of Payments, Etc. If any Bank shall
obtain any payment (whether voluntary or involuntary, or through the exercise
of any right of set-off or otherwise) on account of the A Advances made by it
(other than pursuant to Section 2.07, 2.11, 2.14 or 8.04(b)) in excess of its
ratable share of payments on account of the A Advances obtained by all the
Banks, such Bank shall forthwith purchase from the other Banks such
participations in the A Advances owed to them as shall be necessary to cause
such purchasing Bank to share the excess payment ratably with each of them,
provided, however, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Bank, such purchase from each Bank
shall be rescinded and such Bank shall repay to the purchasing Bank the
purchase price to the extent of such Bank's ratable share (according to the
proportion of (i) the amount of the participation purchased from such Bank as a
result of such excess payment to (ii) the total amount of such excess payment)
of such recovery together with an amount equal to such Bank's ratable share
(according to the proportion of (i) the amount of such Bank's required
repayment to (ii) the total amount so recovered from the purchasing Bank) of
any interest or other amount paid or payable by the purchasing Bank in respect
of the total amount so recovered. Each Borrower agrees that any Bank so
purchasing a participation from another Bank pursuant to this Section 2.15 may,
to the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off) with respect to such participation as fully as
if such Bank were the direct creditor of such Borrower in the amount of such
participation.
Section 2.16. The B Advances.
(a) Each Bank severally agrees that each Borrower may make B
Borrowings under this Section 2.16 from time to time on any Business Day during
the period from the date hereof until the earlier of (I) the Termination Date
or (II) the date occurring 30 days prior to the Stated Termination Date in the
manner set forth below; provided that, following the making of each B
Borrowing, the aggregate amount of the Advances then outstanding to such
Borrower shall not exceed the aggregate amount of the Commitments of the Banks
to such Borrower (computed without regard to any B Reduction) and the aggregate
amount of all Advances then outstanding shall not exceed the aggregate amount
of the Commitments of the Banks to TWC (computed without regard to any B
Reduction).
(i) A Borrower may request a B Borrowing under this Section
2.16 by delivering to the Agent, by telecopier, telex or cable, confirmed
immediately in writing, a notice of a B Borrowing (a "Notice of B
Borrowing"), in substantially the form of Exhibit B-2 hereto, specifying
the date and aggregate amount of the proposed B Borrowing, the maturity
date for repayment of each B Advance to be made as part of such B
Borrowing (which maturity date may not be earlier than the date occurring
14 days after the date of such B Borrowing or later than the earlier of
(x) 6 months after the date of such B Borrowing or (y) the Stated
Termination Date), the interest payment date or dates relating thereto,
and any other terms to be applicable to such B Borrowing (including,
without limitation, the basis to be used by the Banks in determining the
rate or rates of interest to be offered by them as provided in paragraph
(ii) below and prepayment terms, if any, but excluding any waiver or other
modification to any of the
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<PAGE> 29
conditions set forth in Article III), not later than 10:00 A.M. (New York
City time) (A) at least one Business Day prior to the date of the proposed
B Borrowing, if such Borrower shall specify in the Notice of B Borrowing
that the rates of interest to be offered by the Banks shall be fixed rates
per annum and (B) at least five Business Days prior to the date of the
proposed B Borrowing, if such Borrower shall instead specify in the Notice
of B Borrowing the basis to be used by the Banks in determining the rates
of interest to be offered by them. The Agent shall in turn promptly
notify each Bank of each request for a B Borrowing received by it from a
Borrower by sending such Bank a copy of the related Notice of B Borrowing.
Each time that a Borrower gives a Notice of B Borrowing, such Borrower
shall pay to the Agent an auction fee equal to $2000.
(ii) Each Bank may, if in its sole discretion it elects to do
so, irrevocably offer to make one or more B Advances to a Borrower as part
of such proposed B Borrowing at a rate or rates of interest specified by
such Bank in its sole discretion, by notifying the Agent (which shall give
prompt notice thereof to such Borrower), before 10:00 A.M. (New York City
time) (x) on the date of such proposed B Borrowing, in the case of a
Notice of B Borrowing delivered pursuant to clause (A) of paragraph (i)
above, and (y) three Business Days before the date of such proposed B
Borrowing in the case of a Notice of B Borrowing delivered pursuant to
clause (B) of paragraph (i) above, of the minimum amount and maximum
amount of each B Advance which such Bank would be willing to make as part
of such proposed B Borrowing (which amounts may, subject to the proviso to
the first sentence of this Section 2.16(a), exceed such Bank's Commitment
to such Borrower), the rate or rates of interest therefor and such Bank's
Applicable Lending Office with respect to such B Advance; provided that if
the Agent in its capacity as a Bank shall, in its sole discretion, elect
to make any such offer, it shall notify such Borrower of such offer before
9:45 A.M. (New York City time) on the date on which notice of such
election is to be given to the Agent by the other Banks. If any Bank
shall elect not to make such an offer, such Bank shall so notify the
Agent, before 10:00 A.M. (New York City time) on the date on which notice
of such election is to be given to the Agent by the other Banks, and such
Bank shall not be obligated to, and shall not, make any B Advance as part
of such B Borrowing; provided that the failure by any Bank to give such
notice shall not cause such Bank to be obligated to make any B Advance as
part of such proposed B Borrowing.
(iii) The Borrower requesting such proposed B Borrowing shall,
in turn, before 11:00 A.M. (New York City time) (x) on the date of such
proposed B Borrowing in the case of a Notice of B Borrowing delivered
pursuant to clause (A) of paragraph (i) above and (y) three Business Days
before the date of such proposed B Borrowing in the case of a Notice of B
Borrowing delivered pursuant to clause (B) of paragraph (i) above, either
(A) cancel such B Borrowing by giving the Agent
notice to that effect, or
(B) accept one or more of the offers made by any
Bank or Banks pursuant to paragraph (ii) above, in order of the
lowest to highest rates of interest or margins (or, if two or
more Banks bid at the same rates of interest, and the amount of
accepted offers is less than the aggregate amount of such offers,
the amount to be borrowed from such Banks as part of such B
Borrowing shall be
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allocated among such Banks pro rata on the basis of the maximum
amount offered by such Banks at such rates or margin in
connection with such B Borrowing), in any aggregate amount up to
the aggregate amount initially requested by such Borrower in the
relevant Notice of B Borrowing, by giving notice to the Agent of
the amount of each B Advance (which amount shall be equal to or
greater than the minimum amount, and equal to or less than the
maximum amount, notified to such Borrower by the Agent on behalf
of such Bank for such B Advance pursuant to paragraph (ii) above)
to be made by each Bank as part of such B Borrowing, and reject
any remaining offers made by Banks pursuant to paragraph (ii)
above by giving the Agent notice to that effect.
(iv) If the Borrower requesting such B Borrowing notifies the
Agent that such B Borrowing is cancelled pursuant to paragraph (iii)(A)
above, the Agent shall give prompt notice thereof to the Banks and such B
Borrowing shall not be made.
(v) If the Borrower requesting such B Borrowing accepts one
or more of the offers made by any Bank or Banks pursuant to paragraph
(iii)(B) above, the Agent shall in turn promptly notify (A) each Bank that
has made an offer as described in paragraph (ii) above, of the date and
aggregate amount of such B Borrowing and whether or not any offer or
offers made by such Bank pursuant to paragraph (ii) above have been
accepted by such Borrower, (B) each Bank that is to make a B Advance as
part of such B Borrowing, of the amount of each B Advance to be made by
such Bank as part of such B Borrowing, and (C) each Bank that is to make a
B Advance as part of such B Borrowing, upon receipt, that the Agent has
received forms of documents appearing to fulfill the applicable conditions
set forth in Article III. Each Bank that is to make a B Advance as part
of such B Borrowing shall, before 12:00 noon (New York City time) on the
date of such B Borrowing specified in the notice received from the Agent
pursuant to clause (A) of the preceding sentence or any later time when
such Bank shall have received notice from the Agent pursuant to clause (C)
of the preceding sentence, make available for the account of its
Applicable Lending Office to the Agent at its New York address referred to
in Section 8.02 such Bank's portion of such B Borrowing, in same day
funds. Upon fulfillment of the applicable conditions set forth in Article
III and after receipt by the Agent of such funds, the Agent will make such
funds available to such Borrower at the Agent's aforesaid address.
Promptly after each B Borrowing the Agent will notify each Bank of the
amount of the B Borrowing, the Borrower to which such B Borrowing was
made, the consequent B Reduction and the dates upon which such B Reduction
commenced and will terminate.
(b) Each B Borrowing shall be in an aggregate amount of not
less than $5,000,000 or an integral multiple of $1,000,000 in excess
thereof. Each Borrower agrees that it will not request a B Borrowing
unless, upon the making of such B Borrowing, the limitations set forth in
the proviso to the first sentence of Section 2.16(a) are complied with.
(c) Within the limits and on the conditions set forth in this
Section 2.16, each Borrower may from time to time borrow under this
Section 2.16, repay or prepay pursuant to subsection (d) below, and
reborrow under this Section 2.16, provided that a
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B Borrowing shall not be made by any Borrower within three Business Days
of the date of another B Borrowing to such Borrower.
(d) Each Borrower shall repay to the Agent for the account of
each Bank which has made a B Advance to such Borrower, or each other
holder of a B Note of such Borrower, on the maturity date of each B
Advance made to such Borrower (such maturity date being that specified by
such Borrower for repayment of such B Advance in the related Notice of B
Borrowing delivered pursuant to subsection (a)(i) above and provided in
the B Note evidencing such B Advance) the then unpaid principal amount of
such B Advance. No Borrower shall have any right to prepay any principal
amount of any B Advance unless, and then only on the terms, specified by
such Borrower for such B Advance in the related Notice of B Borrowing
delivered pursuant to subsection (a)(i) above and set forth in the B Note
evidencing such B Advance.
(e) Each Borrower shall pay interest on the unpaid principal
amount of each B Advance made to such Borrower from the date of such B
Advance to the date the principal amount of such B Advance is repaid in
full, at the rate of interest for such B Advance specified by the Bank
making such B Advance in its notice with respect thereto delivered
pursuant to subsection (a)(ii) above, payable on the interest payment date
or dates specified by such Borrower for such B Advance in the related
Notice of B Borrowing delivered pursuant to subsection (a)(i) above, as
provided in the B Note evidencing such B Advance.
(f) The indebtedness of each Borrower resulting from each B
Advance made to such Borrower as part of a B Borrowing shall be evidenced
by a separate B Note of such Borrower payable to the order of the Bank
making such B Advance.
(g) The failure of any Bank to make the B Advance to be made
by it as part of any B Borrowing shall not relieve any other Bank of its
obligation, if any, hereunder to make its B Advance on the date of such B
Borrowing, but no Bank shall be responsible for the failure of any other
Bank to make the B Advance to be made by such other Bank on the date of
any B Borrowing.
Section 2.17. Optional Termination. Notwithstanding anything to
the contrary in this Agreement, if (v) any Person (other than a trustee or
other fiduciary holding securities under an employee benefit plan of TWC or of
any Subsidiary of TWC) or two or more Persons acting in concert (other than any
group of employees of TWC or of any of its Subsidiaries) shall have acquired
beneficial ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Securities Exchange Act of 1934), directly or
indirectly, of securities of TWC (or other securities convertible into such
securities) representing 20% or more of the combined voting power of all
securities of TWC entitled to vote in the election of directors, other than
securities having such power only by reason of the happening of a contingency,
or (vi) during any period of up to 24 consecutive months, commencing before or
after the date of this Agreement, individuals who at the beginning of such
24-month period were directors of TWC or who were elected by individuals who at
the beginning of such period were such directors or by individuals elected in
accordance with this clause (ii) shall cease for any reason to constitute a
majority of the board of directors of TWC, or (vii) any Person (other than TWC
or a Wholly-Owned Subsidiary of TWC) or two or more Persons acting in concert
shall have acquired by
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<PAGE> 32
contract or otherwise, or shall have entered into a contract or arrangement
which upon consummation will result in its or their acquisition of, the power
to exercise, directly or indirectly, a controlling influence over the
management or policies of any Borrower; then the Agent shall at the request, or
may with the consent, of the holders of at least 66-2/3% in principal amount of
the A Notes then outstanding or, if no A Notes are then outstanding, Banks
having at least 66-2/3% of the Commitments, by notice to the Borrowers, declare
all of the Commitments and the obligation of each Bank to make Advances to be
terminated, whereupon all of the Commitments and each such obligation shall
forthwith terminate, and no Borrower shall have any further right to borrow
hereunder.
Section 2.18. Extension of Termination Date. By notice given to
the Agent and the Banks, at least thirty days but not more than forty-five days
before July 1 of any year after 2000, the Borrowers may request the Banks to
extend the Stated Termination Date for an additional year to a date which is an
anniversary date of the Stated Termination Date. Within thirty days after
receipt of such request, each Bank that agrees, in its sole and absolute
discretion, to so extend the Stated Termination Date shall notify the Borrowers
and the Agent that it so agrees, and if all Banks so agree the Stated
Termination Date shall be so extended.
Section 2.19. Voluntary Conversion of Advances. Any Borrower
may on any Business Day, if no Event of Default then exists as to such
Borrower, upon notice (which shall be irrevocable) given to the Agent not later
than 11:00 A.M. (x) in the case of a proposed Conversion into Eurodollar Rate
Advances, on the third Business Day prior to the date of the proposed
conversion, and (y) in the case of a proposed Conversion into Base Rate
Advances, on the date of the proposed Conversion, and subject to the provisions
of Sections 2.02 and 2.12, Convert all Advances of one Type comprising the same
A Borrowing into Advances of the other Type; provided that (i) no Conversion of
any Eurodollar Rate Advances shall occur on a day other than the last day of an
Interest Period for such Eurodollar Rate Advances, except as contemplated by
Section 2.12, and (ii) Advances may not be Converted into Eurodollar Rate
Advances if the aggregate unpaid principal amount of the Advances is less than
$20,000,000. Each such notice of a Conversion shall, within the restrictions
specified above, specify (i) the date of such Conversion, (ii) the A Advances
to be Converted, and (iii) if such Conversion is into Eurodollar Rate Advances,
the duration of the Interest Period for each such Advance.
Section 2.20. Automatic Provisions.
(a) If any Borrower shall fail to select the duration of any
Interest Period for Eurodollar Rate Advances in accordance with the provisions
contained in the definition of "Interest Period" in Section 1.01, the Agent
will forthwith so notify such Borrower and the Banks, and such Advances will
automatically, on the last day of the then existing Interest Period therefor,
Convert into Base Rate Advances.
(b) On the date on which the aggregate unpaid principal
amount of the Eurodollar Rate Advances of any Borrower shall be reduced to less
than $20,000,000, all of such Eurodollar Rate Advances shall automatically
Convert into Base Rate Advances.
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<PAGE> 33
ARTICLE III
CONDITIONS
Section 3.01. Conditions Precedent to Initial Advances. The
obligation of each Bank to make its initial Advance on or after the date hereof
is subject to the condition precedent that the Agent shall have received on or
before the date hereof, each dated on or before such date, in form and
substance satisfactory to the Agent and (except for the Notes) in sufficient
copies for each Bank:
(a) The A Notes executed severally by each of the respective
Borrowers to the order of each of the respective Banks and this Agreement
executed by the Borrowers.
(b) Certified copies of the resolutions of the Board of
Directors, or the Executive Committee thereof, of each Borrower
authorizing the execution of this Agreement and the Notes to be executed
by such Borrower.
(c) A certificate of the Secretary or an Assistant Secretary
of each Borrower certifying (i) all changes, if any, that have been made
to the Certificate of Incorporation or Bylaws of such Borrower on or after
June 15, 1995, and (ii) the names and true signatures of the officers of
such Borrower authorized to sign this Agreement, Notices of A Borrowing,
Notices of B Borrowing and the Notes to be executed by such Borrower and
any other documents to be delivered hereunder by such Borrower.
(d) An opinion of William G. von Glahn, General Counsel of
TWC, substantially in the form of Exhibit C hereto and as to such other
matters as any Bank through the Agent may reasonably request.
(e) An opinion of Bracewell & Patterson, L.L.P., special
counsel to the Agent, substantially in the form of Exhibit D hereto.
(f) A certificate of an officer of each Borrower (other than
WPL and WilTel) stating the respective ratings by each of S&P and Moody's
of the senior unsecured long-term debt of such Borrower as in effect on
the date of this Agreement; a certificate of an officer of WPL stating
(and showing the calculation of) the WPL Debt to TNW Ratio as of March 31,
1997; and a certificate of an officer of WilTel stating (and showing the
calculation of) the WilTel Debt to EBITDA Ratio as of March 31, 1997.
Section 3.02. Additional Conditions Precedent to Each A
Borrowing. The obligation of each Bank to make an A Advance to a Borrower on
the occasion of any A Borrowing (including the initial A Borrowing) shall be
subject to the further conditions precedent that on the date of such A
Borrowing (a) the following statements shall be true (and each of the giving of
the applicable Notice of A Borrowing and the acceptance by such Borrower of the
proceeds of such A Borrowing shall constitute a representation and warranty by
such Borrower that on the date of such A Borrowing such statements are true):
(i) The representations and warranties contained in Section
4.01 pertaining to such Borrower and its Subsidiaries are correct in all
material respects on and as of the
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date of such A Borrowing, before and after giving effect to such A
Borrowing and to the application of the proceeds therefrom, as though made
on and as of such date,
(ii) No event has occurred and is continuing, or would result
from such A Borrowing or from the application of the proceeds therefrom,
which constitutes an Event of Default or which would constitute an Event
of Default but for the requirement that notice be given or time elapse or
both, and
(iii) After giving effect to such A Borrowing and all other
Borrowings which have been requested on or prior to such date but which
have not been made prior to such date, the aggregate principal amount of
all Advances will not exceed the aggregate of the Commitments of the Banks
to TWC (computed without regard to any B Reduction);
and (b) the Agent shall have received such other approvals, opinions or
documents as any Bank through the Agent may reasonably request.
Section 3.03. Conditions Precedent to Each B Borrowing. The
obligation of each Bank which is to make a B Advance to a Borrower on the
occasion of a B Borrowing (including the initial B Borrowing) to make such B
Advance as part of such B Borrowing is subject to the further conditions
precedent that (i) at or before the time required by paragraph (iii) of Section
2.16(a), the Agent shall have received the written confirmatory notice of such
B Borrowing contemplated by such paragraph, (ii) on or before the date of such
B Borrowing, but prior to such B Borrowing, the Agent shall have received a B
Note executed by such Borrower payable to the order of such Bank for each of
the one or more B Advances to be made by such Bank as part of such B Borrowing,
in a principal amount equal to the principal amount of the B Advance to be
evidenced thereby and otherwise on such terms as were agreed to for such B
Advance in accordance with Section 2.16, and (iii) on the date of such B
Borrowing (a) the following statements shall be true (and each of the giving of
the applicable Notice of B Borrowing and the acceptance by such Borrower of the
proceeds of such B Borrowing shall constitute a representation and warranty by
such Borrower that on the date of such B Borrowing such statements are true):
(1) The representations and warranties contained in Section
4.01 pertaining to such Borrower and its Subsidiaries are correct on and
as of the date of such B Borrowing, before and after giving effect to such
B Borrowing and to the application of the proceeds therefrom, as though
made on and as of such date,
(2) No event has occurred and is continuing, or would result
from such B Borrowing or from the application of the proceeds therefrom,
which constitutes an Event of Default or which would constitute an Event
of Default but for the requirement that notice be given or time elapse or
both,
(3) Following the making of such B Borrowing and all other
Borrowings to be made on the same day to such Borrower under this
Agreement, the aggregate principal amount of all Advances to such Borrower
then outstanding will not exceed the aggregate amount of the Commitments
to such Borrower (computed without regard to any B Reduction), and
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<PAGE> 35
(4) After giving effect to such B Borrowing and all other
Borrowings which have been requested on or prior to such date but which
have not been made prior to such date, the aggregate principal amount of
all Advances will not exceed the aggregate of the Commitments of the Banks
to TWC (computed without regard to any B Reduction);
and (b) the Agent shall have received such other approvals, opinions or
documents as any Bank through the Agent may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01. Representations and Warranties of the Borrowers.
Each Borrower represents and warrants as to itself and its Subsidiaries as
follows:
(a) Each Borrower is duly organized or validly formed,
validly existing and (if applicable) in good standing under the laws of
the State of Delaware and has all corporate or limited liability company
powers and all governmental licenses, authorizations, certificates,
consents and approvals required to carry on its business as now conducted
in all material respects, except for those licenses, authorizations,
certificates, consents and approvals the failure to have which could not
reasonably be expected to have a material adverse effect on the business,
assets, condition or operation of such Borrower and its Subsidiaries taken
as a whole. Each Subsidiary of each Borrower is duly organized or validly
formed, validly existing and (if applicable) in good standing under the
laws of its jurisdiction of incorporation or formation, except where the
failure to be so organized, existing and in good standing could not
reasonably be expected to have a material adverse effect on the business,
assets, condition or operations of such Borrower and its Subsidiaries
taken as a whole. Each Subsidiary of a Borrower has all corporate powers
and all governmental licenses, authorizations, certificates, consents and
approvals required to carry on its business as now conducted in all
material respects, except for those licenses, authorizations,
certificates, consents and approvals the failure to have which could not
reasonably be expected to have a material adverse effect on the business,
assets, condition or operation of such Borrower and its Subsidiaries taken
as a whole.
(b) The execution, delivery and performance by each Borrower
of this Agreement and the Notes and the consummation of the transactions
contemplated by this Agreement are within such Borrower's corporate or
limited liability company powers, have been duly authorized by all
necessary corporate or limited liability company action, do not contravene
(i) such Borrower's charter, by-laws, or formation agreement, or (ii) law
or any contractual restriction binding on or affecting such Borrower and
will not result in or require the creation or imposition of any Lien
prohibited by this Agreement. At the time of each borrowing of any
Advance by a Borrower, such borrowing and the use of the proceeds of such
Advance will be within such Borrower's corporate or limited liability
company powers, will have been duly authorized by all necessary corporate
or limited liability company action, will not contravene (i) such
Borrower's charter, by-laws, or formation agreement, or (ii) law or any
contractual restriction binding on or affecting such Borrower and will not
result in or require the creation or imposition of any Lien prohibited by
this Agreement.
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<PAGE> 36
(c) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required for the due execution, delivery and performance by any Borrower
of this Agreement or the Notes or the consummation of the transactions
contemplated by this Agreement. At the time of each borrowing of any
Advance by a Borrower, no authorization or approval or other action by,
and no notice to or filing with, any governmental authority or regulatory
body will be required for such borrowing or the use of the proceeds of
such Advance.
(d) This Agreement has been duly executed and delivered by
each Borrower. This Agreement is the legal, valid and binding obligation
of each Borrower enforceable against each Borrower in accordance with its
terms, except as such enforceability may be limited by any applicable
bankruptcy, insolvency, reorganization, moratorium or similar law
affecting creditors' rights generally and by general principles of equity.
The A Notes of each Borrower are, and when executed the B Notes of such
Borrower will be, the legal, valid and binding obligations of such
Borrower enforceable against such Borrower in accordance with their
respective terms, except as such enforceability may be limited by any
applicable bankruptcy, insolvency, reorganization, moratorium or similar
law affecting creditors' rights generally and by general principles of
equity.
(e) (i) The Consolidated and consolidating balance sheets of
TWC and its Subsidiaries as at December 31, 1996, and the related
Consolidated and consolidating statements of income and cash flows of TWC
and its Subsidiaries for the fiscal year then ended, copies of which have
been furnished to each Bank, and the Consolidated and consolidating
balance sheets of TWC and its Subsidiaries as at March 31, 1997, and the
related Consolidated and consolidating statements of income and cash flows
of TWC and its Subsidiaries for the three months then ended, duly
certified by an authorized financial officer of TWC, copies of which have
been furnished to each Bank, fairly present, subject, in the case of such
balance sheets as at March 31, 1997, and such statements of income and
cash flows for the three months then ended, to year-end audit adjustments,
the Consolidated and consolidating financial condition of TWC and its
Subsidiaries as at such dates and the Consolidated and consolidating
results of operations of TWC and its Subsidiaries for the year and three
month period, respectively, ended on such dates, all in accordance with
generally accepted accounting principles consistently applied. Since
March 31, 1997, there has been no material adverse change in the condition
or operations of TWC or its Subsidiaries.
(ii) The consolidating balance sheets of TWC and its
Subsidiaries as at December 31, 1996, and March 31, 1997, referred to in
Section 4.01(e)(i), and the related consolidating statements of income and
cash flows of TWC and its Subsidiaries for the fiscal year and three
months, respectively, then ended referred to in Section 4.01(e)(i), to the
extent such balance sheets and statements pertain to NWP, fairly present
(subject, in the case of such balance sheet as at March 31, 1997 and such
statements of income and cash flows for the three months then ended, to
year-end audit adjustments) the Consolidated financial condition of NWP
and its Subsidiaries as at such dates and the Consolidated results of
operations of NWP and its Subsidiaries for the year and three month
period, respectively, ended on such dates, all in accordance with
generally accepted accounting principles consistently applied. Since
March 31, 1997, there has been no material adverse change in the condition
or operations of NWP or its Subsidiaries.
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<PAGE> 37
(iii) The Consolidated balance sheet of WPL and its
Subsidiaries as at December 31, 1996, and the related Consolidated
statement of income and cash flows of WPL and its Subsidiaries for the
fiscal year then ended, copies of which have been furnished to each Bank,
and the Consolidated balance sheet of WPL and its Subsidiaries as at March
31, 1997, and the related Consolidated statement of income and cash flows
of WPL and its Subsidiaries for the three months then ended, duly
certified by an authorized financial officer of WPL, copies of which have
been furnished to each Bank, fairly present, subject, in the case of such
balance sheet as at March 31, 1997, and such statement of income and cash
flows for the three months then ended, to year-end audit adjustments, the
Consolidated financial condition of WPL and its Subsidiaries as at such
dates and the Consolidated results of operations of WPL and its
Subsidiaries for the year and three month period, respectively, ended on
such dates, all in accordance with generally accepted accounting
principles consistently applied. Since March 31, 1997, there has been no
material adverse change in the condition or operations of WPL or its
Subsidiaries.
(iv) The Consolidated balance sheet of TGPL and its
Subsidiaries as at December 31, 1996, and the related Consolidated
statement of income and cash flows of TGPL and its Subsidiaries for the
fiscal year then ended, copies of which have been furnished to each Bank,
and the Consolidated balance sheet of TGPL and its Subsidiaries as at
March 31, 1997, and the related Consolidated statement of income and cash
flows of TGPL and its Subsidiaries for the three months then ended, duly
certified by an authorized financial officer of TGPL, copies of which have
been furnished to each Bank, fairly present, subject, in the case of such
balance sheet as at March 31, 1997, and such statement of income and cash
flows for the three months then ended, to year-end audit adjustments, the
Consolidated financial condition of TGPL and its Subsidiaries as at such
dates and the Consolidated results of operations of TGPL and its
Subsidiaries for the year and three month period, respectively, ended on
such dates, all in accordance with generally accepted accounting
principles consistently applied. Since March 31, 1997, there has been no
material adverse change in the condition or operations of TGPL or its
Subsidiaries.
(v) The Consolidated balance sheet of TGT and its
Subsidiaries as at December 31, 1996, and the related Consolidated
statement of income and cash flows of TGT and its Subsidiaries for the
fiscal year then ended, copies of which have been furnished to each Bank,
and the Consolidated balance sheet of TGT and its Subsidiaries as at March
31, 1997, and the related Consolidated statement of income and cash flows
of TGT and its Subsidiaries for the three months then ended, duly
certified by an authorized financial officer of TGT, copies of which have
been furnished to each Bank, fairly present, subject, in the case of such
balance sheet as at March 31, 1997, and such statement of income and cash
flows for the three months then ended, to year-end audit adjustments, the
Consolidated financial condition of TGT and its Subsidiaries as at such
dates and the Consolidated results of operations of TGT and its
Subsidiaries for the year and three month period, respectively, ended on
such dates, all in accordance with generally accepted accounting
principles consistently applied. Since March 31, 1997, there has been no
material adverse change in the condition or operations of TGT or its
Subsidiaries.
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<PAGE> 38
(vi) The Consolidated balance sheet of WHD and its
Subsidiaries as at December 31, 1996, and the related Consolidated
statement of income and cash flows of WHD and its Subsidiaries for the
fiscal year then ended, copies of which have been furnished to each Bank,
and the Consolidated balance sheet of WHD and its Subsidiaries as at March
31, 1997, and the related Consolidated statement of income and cash flows
of WHD and its Subsidiaries for the three months then ended, duly
certified by an authorized financial officer of WHD, copies of which have
been furnished to each Bank, fairly present, subject, in the case of such
balance sheet as at March 31, 1997, and such statement of income and cash
flows for the three months then ended, to year-end audit adjustments, the
Consolidated financial condition of WHD and its Subsidiaries as at such
dates and the Consolidated results of operations of WHD and its
Subsidiaries for the year and three month period, respectively, ended on
such dates, all in accordance with generally accepted accounting
principles consistently applied. Since March 31, 1997, there has been no
material adverse change in the condition or operations of WHD or its
Subsidiaries.
(vii) The Consolidated balance sheet of Williams
Telecommunications Systems, Inc. ("WTS"), a predecessor of WilTel, as at
December 31, 1996, and the related Consolidated statement of income and
cash flows of WTS for the fiscal year then ended, copies of which have
been furnished to each Bank, and the Consolidated balance sheet of WTS as
at March 31, 1997, and the related Consolidated statement of income and
cash flows of WTS for the three months then ended, duly certified by an
authorized financial officer of WTS, copies of which have been furnished
to each Bank, fairly present, subject, in the case of such balance sheet
as at March 31, 1997, and such statement of income and cash flows for the
three months then ended, to year-end audit adjustments, the Consolidated
financial condition of WTS as at such dates and the Consolidated results
of operations of WTS for the year and three month period, respectively,
ended on such dates, all in accordance with generally accepted accounting
principles consistently applied. From March 31, 1997, to April 30, 1997,
there was no material adverse change in the condition or operations of
WTS, which was merged into WilTel on April 30, 1997. Since May 1, 1997,
there has been no material adverse change in the condition or operations
of WilTel.
(f) Except as set forth in the Public Filings or as otherwise
disclosed in writing by a Borrower to the Banks and the Agent after the
date hereof and approved by the Majority Banks, there is, as to each
Borrower, no pending or, to the knowledge of such Borrower, threatened
action or proceeding affecting such Borrower or any Subsidiary of such
Borrower before any court, governmental agency or arbitrator, which could
reasonably be expected to materially and adversely affect the financial
condition or operations of such Borrower and its Subsidiaries taken as a
whole or which purports to affect the legality, validity, binding effect
or enforceability of this Agreement or any Note.
(g) No proceeds of any Advance will be used for any purpose
or in any manner not permitted by Section 5.02(k).
(h) No Borrower is engaged in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulation U issued by the Board of Governors of the Federal
Reserve System), and no proceeds of any
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<PAGE> 39
Advance will be used to purchase or carry any such margin stock (other
than purchases of common stock expressly permitted by Section 5.02(k)) or
to extend credit to others for the purpose of purchasing or carrying any
such margin stock. Following the application of the proceeds of each
Advance, not more than 25% of the value of the assets of any Borrower will
be represented by such margin stock and not more than 25% of the value of
the assets of any Borrower and its Subsidiaries will be represented by
such margin stock.
(i) No Borrower is an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(j) No Termination Event has occurred or is reasonably
expected to occur with respect to any Plan for which an Insufficiency
exists. No Borrower nor any ERISA Affiliate of any Borrower has received
any notification that any Multiemployer Plan is in reorganization or has
been terminated, within the meaning of Title IV of ERISA, and no Borrower
is aware of any reason to expect that any Multiemployer Plan is to be in
reorganization or to be terminated within the meaning of Title IV of
ERISA.
(k) As of the date of this Agreement, the United States
federal income tax returns of each Borrower (other than WHD and WilTel)
and the material Subsidiaries of each Borrower (other than Subsidiaries
not in existence on December 31, 1989) have been examined through the
fiscal year ended December 31, 1989. Each Borrower and the Subsidiaries
of each Borrower have filed all United States Federal income tax returns
and all other material domestic tax returns which are required to be filed
by them and have paid, or provided for the payment before the same become
delinquent of, all taxes due pursuant to such returns or pursuant to any
assessment received by any Borrower or any such Subsidiary, other than
those taxes contested in good faith by appropriate proceedings. The
charges, accruals and reserves on the books of each Borrower and the
material Subsidiaries of each Borrower in respect of taxes are adequate.
(l) No Borrower is a "holding company," or a "subsidiary
company" of a "holding company," or an "affiliate" of a "holding company"
or of a "subsidiary company" of a "holding company," or a "public utility"
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
(m) Except as set forth in the Public Filings or as otherwise
disclosed in writing by a Borrower to the Banks and the Agent after the
date hereof and approved by the Majority Banks, the Borrowers and their
respective material Subsidiaries are in compliance in all material
respects with all Environmental Protection Statutes to the extent material
to their respective operations or financial condition. Except as set
forth in the Public Filings or as otherwise disclosed in writing by a
Borrower to the Banks and the Agent after the date hereof and approved by
the Majority Banks, the aggregate contingent and non-contingent
liabilities of each Borrower and its Subsidiaries (other than those
reserved for in accordance with generally accepted accounting principles
and set forth in the financial statements regarding such Borrower referred
to in Section 4.01(e) and delivered to each Bank) which are reasonably
expected to arise in connection with (i) the requirements of Environmental
Protection Statutes or (ii) any obligation or liability to any
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Person in connection with any Environmental matters (including, without
limitation, any release or threatened release (as such terms are defined
in the Comprehensive Environmental Response, Compensation and Liability
Act of 1980) of any Hazardous Waste, Hazardous Substance, other waste,
petroleum or petroleum products into the Environment) does not exceed 10%
of the Consolidated Tangible Net Worth of such Borrower (excluding
liabilities to the extent covered by insurance if the insurer has
confirmed that such insurance covers such liabilities or which such
Borrower reasonably expects to recover from ratepayers).
ARTICLE V
COVENANTS OF THE BORROWERS
Section 5.01. Affirmative Covenants. So long as any Note shall
remain unpaid or any Bank shall have any Commitment to any Borrower hereunder,
each Borrower will, unless the Majority Banks shall otherwise consent in
writing:
(a) Compliance with Laws, Etc. Comply, and cause each of its
Subsidiaries to comply, in all material respects with all applicable laws,
rules, regulations and orders (except where failure to comply could not
reasonably be expected to have a material adverse effect on the business,
assets, condition or operations of such Borrower and its Subsidiaries taken as
a whole), such compliance to include, without limitation, the payment and
discharge before the same become delinquent of all taxes, assessments and
governmental charges or levies imposed upon it or any of its Subsidiaries or
upon any of its property or any property of any of its Subsidiaries, and all
lawful claims which, if unpaid, might become a Lien upon any property of it or
any of its Subsidiaries, provided that no Borrower nor any Subsidiary of a
Borrower shall be required to pay any such tax, assessment, charge, levy or
claim which is being contested in good faith and by proper proceedings and with
respect to which reserves in conformity with generally accepted accounting
principles, if required by such principles, have been provided on the books of
such Borrower or such Subsidiary, as the case may be.
(b) Reporting Requirements. Furnish to each of the Banks:
(i) as soon as possible and in any event within five
days after the occurrence of each Event of Default or each event
which, with the giving of notice or lapse of time or both, would
constitute an Event of Default, continuing on the date of such
statement, a statement of an authorized financial officer of such
Borrower setting forth the details of such Event of Default or
event and the actions, if any, which such Borrower has taken and
proposes to take with respect thereto;
(ii) as soon as available and in any event not later
than 60 days after the end of each of the first three quarters of
each fiscal year of such Borrower, the Consolidated balance
sheets of such Borrower and its Subsidiaries as of the end of
such quarter and the Consolidated statements of income and cash
flows of such Borrower and its Subsidiaries for the period
commencing at the end of the previous year and ending with the
end of such quarter, all in reasonable detail and
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duly certified (subject to year-end audit adjustments) by an
authorized financial officer of such Borrower as having been
prepared in accordance with generally accepted accounting
principles, together with a certificate of said officer (a)
stating that he has no knowledge that an Event of Default, or an
event which, with notice or lapse of time or both, would
constitute an Event of Default has occurred and is continuing or,
if an Event of Default or such an event has occurred and is
continuing, a statement as to the nature thereof and the action,
if any, which such Borrower proposes to take with respect
thereto, and (b) showing in detail the calculation supporting
such statement in respect of Section 5.02(b);
(iii) as soon as available and in any event not later
than 105 days after the end of each fiscal year of such Borrower,
a copy of the annual audit report for such year for such Borrower
and its Subsidiaries, including therein Consolidated balance
sheets of such Borrower and its Subsidiaries as of the end of
such fiscal year and Consolidated statements of income and cash
flows of such Borrower and its Subsidiaries for such fiscal year,
in each case prepared in accordance with generally accepted
accounting principles and certified by Ernst & Young, LLP or
other independent certified public accountants of recognized
standing acceptable to the Majority Banks, together with a
certificate of such accounting firm to the Banks (a) stating
that, in the course of the regular audit of the business of such
Borrower and its Subsidiaries, which audit was conducted by such
accounting firm in accordance with generally accepted auditing
standards, such accounting firm has obtained no knowledge that an
Event of Default or an event which, with notice or lapse of time
or both, would constitute an Event of Default, has occurred and
is continuing, or if, in the opinion of such accounting firm, an
Event of Default or such an event has occurred and is continuing,
a statement as to the nature thereof, and (b) showing in detail
the calculations supporting such statement in respect of Section
5.02(b); provided, however, that in the case of NWP the primary
audited financial statements required by this Section
5.01(b)(iii) may be presented on a historical cost basis, but
such audited financial statements shall include, as additional
information, on a push-down basis reflecting the purchase price
of NWP paid by TWC, a Consolidated balance sheet, a Consolidated
statement of income and a Consolidated cash flow statement of NWP
and its Subsidiaries as of the end of and for the relevant fiscal
year, all prepared in accordance with generally accepted
accounting principles but excluding footnotes for the push-down
financial statements;
(iv) such other information respecting the business
or properties, or the condition or operations, financial or
otherwise, of such Borrower or any of its material Subsidiaries
as any Bank through the Agent may from time to time reasonably
request;
(v) promptly after the sending or filing thereof, copies
of all proxy material, reports and other information which such
Borrower sends to any of its security holders, and copies of all
final reports and final registration statements which such
Borrower or any material Subsidiary of such Borrower files with
the Securities and Exchange Commission or any national securities
exchange;
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<PAGE> 42
(vi) as soon as possible and in any event (A) within 30
Business Days after such Borrower or any ERISA Affiliate of such
Borrower knows or has reason to know that any Termination Event
described in clause (i) of the definition of Termination Event
with respect to any Plan has occurred and (B) within 30 Business
Days after such Borrower or any ERISA Affiliate of such Borrower
knows or has reason to know that any other Termination Event with
respect to any Plan has occurred or is reasonably expected to
occur, a statement of the chief financial officer or chief
accounting officer of such Borrower describing such Termination
Event and the action, if any, which such Borrower or such ERISA
Affiliate of such Borrower proposes to take with respect thereto;
(vii) promptly and in any event within 25 Business Days
after receipt thereof by such Borrower or any ERISA Affiliate of
such Borrower, copies of each notice received by such Borrower or
any ERISA Affiliate of such Borrower from the PBGC stating its
intention to terminate any Plan or to have a trustee appointed to
administer any Plan;
(viii) within 30 days following request therefor by any
Bank, copies of each Schedule B (Actuarial Information) to each
annual report (Form 5500 Series) of such Borrower or any ERISA
Affiliate of such Borrower with respect to each Plan;
(ix) promptly and in any event within 25 Business Days
after receipt thereof by such Borrower or any ERISA Affiliate of
such Borrower from the sponsor of a Multiemployer Plan, a copy of
each notice received by such Borrower or any ERISA Affiliate of
such Borrower concerning (A) the imposition of a Withdrawal
Liability by a Multiemployer Plan, (B) the determination that a
Multiemployer Plan is, or is expected to be, in reorganization
within the meaning of Title IV of ERISA, (C) the termination of a
Multiemployer Plan within the meaning of Title IV of ERISA, or
(D) the amount of liability incurred, or expected to be incurred,
by such Borrower or any ERISA Affiliate of such Borrower in
connection with any event described in clause (A), (B) or (C)
above;
(x) not more than 60 days (or 105 days in the case of
the last fiscal quarter of a fiscal year of such Borrower) after
the end of each fiscal quarter of such Borrower, a certificate of
an authorized financial officer of such Borrower (a) stating the
respective ratings, if any, by each of S&P and Moody's of the
senior unsecured long-term debt of such Borrower as of the last
day of such quarter, (b) if such Borrower is WPL and WPL is
Unrated, stating (and showing the calculation of) the WPL Debt to
TNW Ratio on the last day of such quarter, and (c) if such
Borrower is WilTel and WilTel is Unrated, stating (and showing
the calculation of) the WilTel Debt to EBITDA Ratio on the last
day of such quarter; and
(xi) promptly after any withdrawal or termination of the
letter referred to in the second to last sentence of Section 1.05
or any change in the indicated rating set forth therein or any
change in, or issuance, withdrawal or termination
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<PAGE> 43
of, the rating of any senior unsecured long-term debt of such
Borrower by S&P or Moody's, notice thereof.
(c) Maintenance of Insurance. Maintain, and cause each of
its material Subsidiaries to maintain, insurance with responsible and
reputable insurance companies or associations in such amounts and covering
such risks as is usually carried by companies engaged in similar
businesses and owning similar properties in the same general areas in
which such Borrower or its Subsidiaries operate, provided that such
Borrower or any of its Subsidiaries may self-insure to the extent and in
the manner normal for companies of like size, type and financial
condition.
(d) Preservation of Corporate Existence, Etc. Preserve and
maintain, and cause each of its Subsidiaries to preserve and maintain, its
corporate existence, rights, franchises and privileges in the jurisdiction
of its incorporation, and qualify and remain qualified, and cause each
Subsidiary to qualify and remain qualified, as a foreign corporation in
each jurisdiction in which qualification is necessary or desirable in view
of its business and operations or the ownership of its properties, except
(1) in the case of any Non-Borrowing Subsidiary of such Borrower, where
the failure of such Subsidiary to so preserve, maintain, qualify and
remain qualified could not reasonably be expected to have a material
adverse effect on the business, assets, condition or operations of such
Borrower and its Subsidiaries taken as a whole and (2) in the case of such
Borrower, where the failure of such Borrower to preserve and maintain such
rights, franchises and privileges and to so qualify and remain qualified
could not reasonably be expected to have a material adverse effect on the
business, assets, condition or operations of such Borrower and its
Subsidiaries taken as a whole.
Section 5.02. Negative Covenants. So long as any Note shall
remain unpaid or any Bank shall have any Commitment to any Borrower hereunder,
no Borrower will, without the written consent of the Majority Banks:
(a) Liens, Etc. Create, assume, incur or suffer to exist, or
permit any of its Subsidiaries to create, assume, incur or suffer to
exist, any Lien on or in respect of any of its property, whether now owned
or hereafter acquired, or assign or otherwise convey, or permit any such
Subsidiary to assign or otherwise convey, any right to receive income, in
each case to secure or provide for the payment of any Debt of any Person,
except that:
(i) TWC and its Non-Borrowing Subsidiaries which are
not Subsidiaries of any other Borrower may create, incur, assume
or suffer to exist Permitted TWC Liens;
(ii) WHD and its Non-Borrowing Subsidiaries which are
not Subsidiaries of any other Borrower (other than TWC) may
create, incur, assume or suffer to exist Permitted WHD Liens;
(iii) NWP and its Non-Borrowing Subsidiaries may
create, incur, assume or suffer to exist Permitted NWP Liens;
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(iv) TGPL and its Non-Borrowing Subsidiaries may
create, incur, assume or suffer to exist Permitted TGPL Liens;
(v) TGT and its Non-Borrowing Subsidiaries may
create, incur, assume or suffer to exist Permitted TGT Liens; and
(vi) WPL and its Non-Borrowing Subsidiaries may
create, incur, assume or suffer to exist Permitted WPL Liens.
(vii) WilTel and its Non-Borrowing Subsidiaries may
create, incur, assume or suffer to exist Permitted WilTel Liens.
(b) Debt. (i) In the case of TWC, permit the ratio of (A)
the aggregate amount of all Debt of TWC and its Subsidiaries on a
Consolidated basis to (B) the sum of the Consolidated Net Worth of TWC
plus the aggregate amount of all Debt of TWC and its Subsidiaries on a
Consolidated basis to exceed 0.65 to 1.0 at any time;
(ii) In the case of WHD, permit the ratio of (A) the aggregate
amount of all Debt of WHD and its Subsidiaries on a Consolidated basis to
(B) the sum of the Consolidated Net Worth of WHD plus the aggregate amount
of all Debt of WHD and its Subsidiaries on a Consolidated basis to exceed
0.55 to 1.0 at any time; and
(iii) In the case of any Borrower (other than TWC and WHD),
permit the ratio of (A) the aggregate amount of all Debt of such Borrower
and its Subsidiaries on a Consolidated basis to (B) the sum of the
Consolidated Net Worth of such Borrower plus the aggregate amount of all
Debt of such Borrower and its Subsidiaries on a Consolidated basis to
exceed 0.60 to 1.0 at any time.
(c) Merger and Sale of Assets. Merge or consolidate with or
into any other Person, or sell, lease or otherwise transfer all or
substantially all of its assets, or permit any of its material
Subsidiaries to merge or consolidate with or into any other Person, or
sell, lease or otherwise transfer all or substantially all of its assets,
except that this Section 5.02(c) shall not prohibit:
(i) any Borrower and its Subsidiaries from selling,
leasing or otherwise transferring their respective assets in the
ordinary course of business;
(ii) any merger, consolidation or sale, lease or other
transfer of assets involving only TWC and its Subsidiaries;
provided, however, that transactions under this paragraph (ii)
shall be permitted if, and only if, (x) there shall not exist or
result an Event of Default or an event which with notice or lapse
of time or both would constitute an Event of Default and (y) in
the case of each transaction referred to in this paragraph (ii)
involving any Borrower or any of its Subsidiaries, such
transaction could not reasonably be expected to impair materially
the ability of such Borrower to perform its obligations hereunder
and under the Notes and such Borrower shall continue to exist;
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<PAGE> 45
(iii) any Borrower and its Subsidiaries from selling,
leasing or otherwise transferring their respective gathering
assets and other production area facilities, or the stock of any
Person substantially all of the assets of which are gathering
assets and other production area facilities, to TWC or to any
Subsidiary of TWC for consideration that is not materially less
than the net book value of such assets and facilities; provided,
however, that transactions under this paragraph (iii) shall be
permitted if, and only if, there shall not exist or result an
Event of Default or an event which with notice or lapse of time
or both would constitute an Event of Default;
(iv) any sale and lease-back of cushion gas by any
Borrower or any of its Subsidiaries or any sale and lease-back of
inventory by WPL or any of its Subsidiaries (other than another
Borrower);
(v) sales of receivables of any kind; or
(vi) any sale, lease or other transfer of any stock
or assets of Transco Energy Company and its Subsidiaries;
provided, however, that transactions under this paragraph (vi)
shall be permitted if, and only if, prior to the time of such
transaction Transco Energy Company and its Subsidiaries shall
have transferred to TWC all of their respective interests in TGPL
and TGT and shall not have reacquired any such interest and there
shall not exist or result an Event of Default or an event which
with notice or lapse of time or both would constitute an Event of
Default.
(d) Agreements to Restrict Dividends and Certain Transfers.
Enter into or suffer to exist, or permit any of its Subsidiaries to enter
into or suffer to exist, any consensual encumbrance or restriction on the
ability of any Subsidiary of TWC (i) to pay, directly or indirectly,
dividends or make any other distributions in respect of its capital stock
or pay any Debt or other obligation owed to TWC or to any Subsidiary of
TWC; or (ii) to make loans or advances to TWC or any Subsidiary of TWC,
except (1) encumbrances and restrictions on any immaterial Non- Borrowing
Subsidiary of TWC (other than WNG and WFS), (2) those encumbrances and
restrictions existing on the date hereof and described in Exhibit E, (3)
other encumbrances and restrictions now or hereafter existing of any
Borrower or any of its Non-Borrowing Subsidiaries that are not more
restrictive in any material respect than the encumbrances and restrictions
with respect to such Borrower or its Non-Borrowing Subsidiaries described
in Exhibit E, and (4) any encumbrances and restrictions created in
connection with any sale and lease-back of cushion gas by any Borrower or
any Subsidiary of any Borrower or any sale and lease-back of inventory by
WPL or any of its Subsidiaries (other than another Borrower).
(e) Loans and Advances. Borrow or otherwise receive any loan
or advance from TWC, and TWC will not make or permit to remain outstanding
any loan or advance to, or own, purchase or acquire any obligations or
debt securities of, any Subsidiary of TWC, except that TWC may make and
permit to remain outstanding loans and advances to its Subsidiaries (and
such Subsidiaries may borrow or otherwise receive such loans and advances)
if each such loan or advance (excluding loans and advances to a Subsidiary
of
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TWC if the aggregate principal amount of all such excluded loans and
advances to such Subsidiary does not exceed $100,000) is evidenced by a
written instrument duly executed by the Subsidiary of TWC to which such
loan or advance is made, bears interest at TWC's or such Subsidiary's
market rate of interest and matures on or before the Termination Date.
(f) Maintenance of Ownership of Certain Subsidiaries. Sell,
issue or otherwise dispose of, or create, assume, incur or suffer to exist
any Lien on or in respect of, or permit any of its Subsidiaries to sell,
issue or otherwise dispose of or create, assume, incur or suffer to exist
any Lien on or in respect of, any shares of or any interest in any shares
of the capital stock of (1) WHD, WNG, WFS, WPL, TGPL, TGT or NWP or any of
their respective material Subsidiaries or (2) any Subsidiary of TWC at the
time it owns any shares of or any interest in any shares of the capital
stock of WHD, WNG, WFS, WPL, TGPL, TGT or NWP or any of their respective
material Subsidiaries; provided, however, that, this Section 5.02(f) shall
not prohibit the sale or other disposition of the stock of any Subsidiary
of TWC to TWC or any Wholly-Owned Subsidiary of TWC if, but only if, (x)
there shall not exist or result an Event of Default or an event which with
notice or lapse of time or both would constitute an Event of Default and
(y) in the case of each sale or other disposition referred to in this
proviso involving any Borrower or any of its Subsidiaries, such sale or
other disposition could not reasonably be expected to impair materially
the ability of such Borrower to perform its obligations hereunder and
under the Notes and such Borrower shall continue to exist.
(g) Compliance with ERISA. (i) Terminate, or permit any
ERISA Affiliate of such Borrower to terminate, any Plan so as to result in
any liability of such Borrower or any such ERISA Affiliate to the PBGC in
excess of $5,000,000, or (ii) permit to exist any occurrence of any
Termination Event with respect to a Plan for which there is an
Insufficiency in excess of $5,000,000.
(h) Transactions with Related Parties. Make any sale to,
make any purchase from, extend credit to, make payment for services
rendered by, or enter into any other transaction with, or permit any
material Subsidiary of such Borrower to make any sale to, make any
purchase from, extend credit to, make payment for services rendered by, or
enter into any other transaction with, any Related Party of such Borrower
or of such Subsidiary unless as a whole such sales, purchases, extensions
of credit, rendition of services and other transactions are (at the time
such sale, purchase, extension of credit, rendition of services or other
transaction is entered into) on terms and conditions reasonably fair in
all material respects to such Borrower or such Subsidiary in the good
faith judgment of such Borrower.
(i) Guarantees. Guarantee or otherwise become contingently
liable for, or permit any of its Subsidiaries to guarantee or otherwise
become contingently liable for, Debt of any Subsidiary of TWC (other than
Williams Energy Company and its Subsidiaries which are not Borrowers)
while an Event of Default is continuing.
(j) Sale and Lease-Back Transactions. Enter into, or permit
any of its Subsidiaries to enter into, any Sale and Lease-Back
Transaction, if after giving effect
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<PAGE> 47
thereto such Borrower would not be permitted to incur at least $1.00 of
additional Debt secured by a Lien permitted by (i) paragraph (z) of
Schedule III in the case of NWP and its Subsidiaries, (ii) paragraph (z)
of Schedule VI in the case of TWC and its Non-Borrowing Subsidiaries which
are not Subsidiaries of any other Borrower, (iii) paragraph (z) of
Schedule IV in the case of TGPL and its Subsidiaries, (iv) paragraph (z)
of Schedule V in the case of TGT and its Subsidiaries, (v) paragraph (i)
of Schedule VII in the case of WPL and its Subsidiaries, (vi) paragraph
(z) of Schedule VIII in the case of WHD and its Subsidiaries, and (vii)
paragraph ( ) of Schedule IX in the case of WilTel and its Subsidiaries.
(k) Use of Proceeds. Use any proceeds of any Advance for any
purpose other than general corporate purposes (including, without
limitation, repurchases by TWC of its capital stock, working capital and
capital expenditures) or use any such proceeds in any manner which
violates or results in a violation of law; provided, however that no
proceeds of any Advance will be used to acquire any equity security of a
class which is registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended, (other than any purchase of common stock
of any corporation, if such purchase is not subject to Sections 13 and 14
of the Securities Exchange Act of 1934 and is not opposed, resisted or
recommended against by such corporation or its management or directors,
provided that the aggregate amount of common stock of any corporation
(other than Apco Argentina Inc., a Cayman Islands corporation) purchased
during any calendar year shall not exceed 1% of the common stock of such
corporation issued and outstanding at the time of such purchase) or in any
manner which contravenes law, and no proceeds of any Advance will be used
to purchase or carry any margin stock (within the meaning of Regulation G
or Regulation U issued by the Board of Governors of the Federal Reserve
System), except purchases by TWC of its capital stock if, after giving
effect thereto, none of the Advances would constitute purpose credit
within the meaning of such Regulation U or purpose credit within the
meaning of such Regulation G.
ARTICLE VI
EVENTS OF DEFAULT
Section 6.01. Events of Default. If any of the following events
("Events of Default") shall occur and be continuing:
(a) Any Borrower shall fail to pay any principal of any Note
executed by it when the same becomes due and payable, or shall fail to pay
any interest on any such Note or any fee or other amount to be paid by it
hereunder within ten days after the same becomes due and payable; or
(b) Any certification, representation or warranty made by any
Borrower herein or by any Borrower (or any officer of any Borrower) in
writing under or in connection with any Note or this Agreement (including,
without limitation, representations and warranties deemed made pursuant to
Section 3.02 or 3.03) shall prove to have been incorrect in any material
respect when made or deemed made; or
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<PAGE> 48
(c) Any Borrower shall fail to perform or observe (i) any
term, covenant or agreement contained in Section 5.01(b) on its part to be
performed or observed and such failure shall continue for five Business
Days after the earlier of the date notice thereof shall have been given to
such Borrower by the Agent or any Bank or the date such Borrower shall
have knowledge of such failure, or (ii) any term, covenant or agreement
contained in this Agreement (other than a term, covenant or agreement
contained in Section 5.01(b)) or any Note on its part to be performed or
observed; or
(d) Any Borrower or any Subsidiary of any Borrower shall fail
to pay any principal of or premium or interest on any Debt which is
outstanding in a principal amount of at least $60,000,000 in the aggregate
(excluding Debt evidenced by the Notes) of such Borrower or such
Subsidiary (as the case may be), when the same becomes due and payable
(whether by scheduled maturity, required prepayment, acceleration, demand
or otherwise), and such failure shall continue after the applicable grace
period, if any, specified in the agreement or instrument relating to such
Debt; or any other event shall occur or condition shall exist under any
agreement or instrument relating to any such Debt and shall continue after
the applicable grace period, if any, specified in such agreement or
instrument, if the effect of such event or condition is to accelerate, or
to permit the acceleration of, the maturity of such Debt; or any such Debt
shall be declared to be due and payable, or required to be prepaid (other
than by a regularly scheduled required prepayment or as required pursuant
to an illegality event of the type set forth in Section 2.12), prior to
the stated maturity thereof; provided, however, that the provisions of
this Section 6.01(d) shall not apply to any Non-Recourse Debt of any
Subsidiary of a Borrower; or
(e) Any Borrower or any material Subsidiary of any Borrower
shall generally not pay its debts as such debts become due, or shall admit
in writing its inability to pay its debts generally, or shall make a
general assignment for the benefit of creditors; or any proceeding shall
be instituted by or against any Borrower or any material Subsidiary of any
Borrower seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors,
or seeking the entry of an order for relief or the appointment of a
receiver, trustee, or other similar official for it or for any substantial
part of its property and, in the case of any such proceeding instituted
against it (but not instituted by it), shall remain undismissed or
unstayed for a period of 30 days; or any Borrower or any material
Subsidiary of any Borrower shall take any action to authorize any of the
actions set forth above in this subsection (e); or
(f) Any judgment or order for the payment of money in excess
of $60,000,000 shall be rendered against any Borrower or any material
Subsidiary of any Borrower and remain unsatisfied and either (i)
enforcement proceedings shall have been commenced by any creditor upon
such judgment or order or (ii) there shall be any period of 30 consecutive
days during which a stay of enforcement of such judgment or order, by
reason of a pending appeal or otherwise, shall not be in effect; or
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(g) Any Termination Event with respect to a Plan shall have
occurred and, 30 days after notice thereof shall have been given to any
Borrower by the Agent, (i) such Termination Event shall still exist and
(ii) the sum (determined as of the date of occurrence of such Termination
Event) of the Insufficiency of such Plan and the Insufficiency of any and
all other Plans with respect to which a Termination Event shall have
occurred and then exist (or in the case of a Plan with respect to which a
Termination Event described in clause (ii) of the definition of
Termination Event shall have occurred and then exist, the liability
related thereto) is equal to or greater than $5,000,000; or
(h) Any Borrower or any ERISA Affiliate of any Borrower shall
have been notified by the sponsor of a Multiemployer Plan that it has
incurred Withdrawal Liability to such Multiemployer Plan in an amount
which, when aggregated with all other amounts required to be paid to
Multiemployer Plans in connection with Withdrawal Liabilities (determined
as of the date of such notification), exceeds $15,000,000 in the aggregate
or requires payments exceeding $10,000,000 per annum; or
(i) Any Borrower or any ERISA Affiliate of any Borrower shall
have been notified by the sponsor of a Multiemployer Plan that such
Multiemployer Plan is in reorganization or is being terminated, within the
meaning of Title IV of ERISA, if as a result of such reorganization or
termination the aggregate annual contributions of the Borrowers and their
respective ERISA Affiliates to all Multiemployer Plans which are then in
reorganization or being terminated have been or will be increased over the
amounts contributed to such Multiemployer Plans for the respective plan
years which include the date hereof by an amount exceeding $5,000,000;
then, and in any such event, the Agent (i) shall at the request, or may with
the consent, of the holders of at least 66-2/3% in principal amount of the A
Notes then outstanding or, if no A Notes are then outstanding, Banks having at
least 66-2/3% of the Commitments, by notice to the Borrowers, declare all of
the Commitments and the obligation of each Bank to make Advances to be
terminated, whereupon all of the Commitments and each such obligation shall
forthwith terminate, and (ii) shall at the request, or may with the consent, of
the holders of at least 66-2/3% in principal amount of the A Notes then
outstanding or if no A Notes are then outstanding, Banks having at least
66-2/3% of the Commitments, or, if no A Notes are then outstanding and all
Commitments have terminated, the holders of at least 66-2/3% in principal
amount of the B Notes then outstanding, by notice to the Borrower as to which
an Event of Default exists (determined as contemplated by the definition herein
of Events of Default), declare the Notes of such Borrower, all interest thereon
and all other amounts payable by such Borrower under this Agreement to be
forthwith due and payable, whereupon such Notes, such interest and all such
amounts shall become and be forthwith due and payable, without requirement of
any presentment, demand, protest, notice of intent to accelerate, further
notice of acceleration or other further notice of any kind (other than the
notice expressly provided for above), all of which are hereby expressly waived
by each Borrower; provided, however, that in the event of any Event of Default
described in Section 6.01(e), (A) the obligation of each Bank to make Advances
shall automatically be terminated and (B) the Notes, all such interest and all
such amounts shall automatically become and be due and payable, without
presentment, demand, protest, notice of intent to accelerate, notice of
acceleration or any other notice of any kind, all of which are hereby expressly
waived by each Borrower.
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ARTICLE VII
THE AGENT
Section 7.01. Authorization and Action. Each Bank hereby
appoints and authorizes the Agent to take such action as agent on its behalf
and to exercise such powers under this Agreement as are delegated to the Agent
by the terms hereof, together with such powers as are reasonably incidental
thereto. As to any matters not expressly provided for by this Agreement
(including, without limitation, enforcement or collection of the Notes), the
Agent shall not be required to exercise any discretion or take any action, but
shall be required to act or to refrain from acting (and shall be fully
protected in so acting or refraining from acting) upon the instructions of
holders of at least 66-2/3% in principal amount of the A Notes then outstanding
or, if no A Notes are then outstanding, Banks having at least 66-2/3% of the
Commitments (or, if no A Notes are then outstanding and all Commitments have
terminated, upon the instructions of holders of at least 66-2/3% in principal
amount of the B Notes then outstanding), and such instructions shall be binding
upon all Banks and all holders of Notes; provided, however, that the Agent
shall not be required to take any action which exposes the Agent to personal
liability or which is contrary to any Note, this Agreement or applicable law.
The Agent agrees to give to each Bank prompt notice of each notice given to it
by any Borrower pursuant to the terms of this Agreement.
Section 7.02. Agent's Reliance, Etc. Neither the Agent nor any
of its directors, officers, agents or employees shall be liable for any action
taken or omitted to be taken by it or them under or in connection with any Note
or this Agreement, except for its or their own gross negligence or willful
misconduct. Without limitation of the generality of the foregoing, the Agent:
(i) may treat the payee of any Note as the holder thereof until the Agent
receives and accepts a Transfer Agreement executed by a Borrower, the Bank
which is the payee of such Note, as assignor, and the assignee in accordance
with the last sentence of Section 8.06(a); (ii) may consult with legal counsel
(including counsel for any Borrower), independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (iii) makes no warranty or representation to any Bank
and shall not be responsible to any Bank for any statements, warranties or
representations (whether written or oral) made in or in connection with any
Note or this Agreement; (iv) shall not have any duty to ascertain or to inquire
as to the performance or observance of any of the terms, covenants or
conditions of any Note or this Agreement on the part of any Borrower or to
inspect the property (including the books and records) of any Borrower; (v)
shall not be responsible to any Bank for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of any Note or this Agreement
or any other instrument or document furnished pursuant hereto; and (vi) shall
incur no liability under or in respect of any Note or this Agreement by acting
upon any notice, consent, certificate or other instrument or writing (which may
be by telecopier, telegram, cable or telex) believed by it to be genuine and
signed or sent by the proper party or parties.
Section 7.03. Citibank and Affiliates. With respect to its
Commitments, the Advances made by it and the Notes issued to it, Citibank shall
have the same rights and powers under any Note and this Agreement as any other
Bank and may exercise the same as though it
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was not the Agent; and the term "Bank" or "Banks" shall, unless otherwise
expressly indicated, include Citibank in its individual capacity. Citibank and
its affiliates may accept deposits from, lend money to, act as trustee under
indentures of, and generally engage in any kind of business with, any Borrower,
any Subsidiary of any Borrower, any Person who may do business with or own,
directly or indirectly, securities of any Borrower or any such Subsidiary and
any other Person, all as if Citibank were not the Agent and without any duty to
account therefor to the Banks.
Section 7.04. Bank Credit Decision. Each Bank acknowledges that
it has, independently and without reliance upon the Agent or any other Bank and
based on the financial statements referred to in Section 4.01(e) and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon the Agent or
any other Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under any Note or this Agreement.
Section 7.05. Indemnification. The Banks agree to indemnify the
Agent (to the extent not reimbursed by the Borrowers), ratably according to the
respective principal amounts of the A Notes then held by each of them (or if no
A Notes are at the time outstanding or if any A Notes are held by Persons which
are not Banks, ratably according to either (i) the respective amounts of their
Commitments to TWC, or (ii) if all Commitments to TWC have terminated, the
respective amounts of the Commitments to TWC immediately prior to the time the
Commitments to TWC terminated), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against the Agent in any way relating to or
arising out of any Note or this Agreement or any action taken or omitted by the
Agent under any Note or this Agreement, provided that no Bank shall be liable
to the Agent for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Agent's gross negligence or willful misconduct. Without
limitation of the foregoing, each Bank agrees to reimburse the Agent promptly
upon demand for its ratable share of any out-of-pocket expenses (including
counsel fees) incurred by the Agent in connection with the preparation,
execution, delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, any Note or this
Agreement to the extent that the Agent is not reimbursed for such expenses by
the Borrowers.
Section 7.06. Successor Agent. The Agent may resign at any time
as Agent under this Agreement by giving written notice thereof to the Banks and
the Borrowers and may be removed at any time with or without cause by the
Majority Banks. Upon any such resignation or removal, the Majority Banks shall
have the right to appoint, with the consent of TWC (which consent shall not be
unreasonably withheld), a successor Agent from among the Banks. If no
successor Agent shall have been so appointed by the Majority Banks with such
consent, and shall have accepted such appointment, within 30 days after the
retiring Agent's giving of notice of resignation or the Majority Banks' removal
of the retiring Agent, then the retiring Agent may, on behalf of the Banks,
appoint a successor Agent, which shall be a Bank which is a commercial bank
organized under the laws of the United States of America or of any State
thereof and having
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a combined capital and surplus of at least $500,000,000. Upon the acceptance
of any appointment as Agent under this Agreement by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent and shall function
as the Agent under this Agreement, and the retiring Agent shall be discharged
from its duties and obligations as Agent under this Agreement. After any
retiring Agent's resignation or removal hereunder as Agent, the provisions of
this Article VII shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Agent under this Agreement.
Section 7.07. Liability of Co-Agents. No Co-Agent, in its
capacity as Co-Agent hereunder, shall have any duty or liability hereunder.
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Amendments, Etc. No amendment or waiver of any
provision of any Note or this Agreement, nor consent to any departure by any
Borrower therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Majority Banks, and then such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given; provided, however, that no amendment, waiver or consent shall,
unless in writing and signed by all the Banks, do any of the following: (a)
waive any of the conditions specified in Article III, (b) increase the
Commitments of the Banks or subject the Banks to any additional obligations,
(c) reduce the principal of, or interest on, the Notes or any fees or other
amounts payable hereunder, (d) postpone any date fixed for any payment of
principal of, or interest on, the Notes or any fees or other amounts payable
hereunder, (e) take any action which requires the signing of all the Banks
pursuant to the terms of this Agreement, (f) change the percentage of the
Commitments or of the aggregate unpaid principal amount of the A Notes or B
Notes, or the number of Banks, which shall be required for the Banks or any of
them to take any action under this Agreement, or (g) amend this Section 8.01;
and provided, further, that no amendment, waiver or consent shall, unless in
writing and signed by the Agent in addition to the Banks required above to take
such action, affect the rights or duties of the Agent under any Note or this
Agreement.
Section 8.02. Notices, Etc. All notices and other
communications provided for hereunder shall be in writing (including telecopy,
telegraphic, telex or cable communication) and mailed, telecopied, telegraphed,
telexed, cabled or delivered, if to any Bank, as specified opposite its name on
Schedule I hereto or specified pursuant to Section 8.06(a); if to any Borrower,
as specified opposite its name on Schedule II hereto; and if to Citibank, as
Agent, to its address at 399 Park Avenue, New York, New York 10043,
(telecopier number: (212) 527-1084), Attention: John Sahr, with a copy to
Citicorp North America, Inc., 1200 Smith Street, Suite 2000, Houston, Texas
77002 (telecopier number: (713) 654-2849; telex number 127001 (Attn: Route Code
HOUAA)), Attention: The Williams Companies, Inc. Account Officer; or, as to
any Borrower or the Agent, at such other address as shall be designated by such
party in a written notice to the other parties and, as to each other party, at
such other address as shall be designated by such party in a written notice to
the Borrowers and the Agent. All such notices and communications shall, when
mailed, telecopied, telegraphed, telexed or cabled, be effective when received
in the mail,
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sent by telecopier to any party to the telecopier number as set forth herein or
on Schedule I or Schedule II or specified pursuant to Section 8.06(a) (or other
telecopy number specified by such party in a written notice to the other
parties hereto), delivered to the telegraph company, telexed to any party to
the telex number set forth herein or on Schedule I or Schedule II or specified
pursuant to Section 8.06(a) (or other telex number designated by such party in
a written notice to the other parties hereto), confirmed by telex answerback,
or delivered to the cable company, respectively, except that notices and
communications to the Agent shall not be effective until received by the Agent.
Section 8.03. No Waiver; Remedies. No failure on the part of
any Bank or the Agent to exercise, and no delay in exercising, any right under
any Note or this Agreement shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies provided in
any Note and this Agreement are cumulative and not exclusive of any remedies
provided by law.
Section 8.04. Costs, Expenses and Taxes. (a)(i) TWC agrees to
pay on demand all reasonable out-of-pocket costs and expenses of the Arranger
and the Agent in connection with the preparation, execution, delivery,
administration, modification and amendment of this Agreement, the Notes and the
other documents to be delivered under this Agreement, including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel for the
Agent with respect thereto and with respect to advising the Agent as to its
rights and responsibilities under any Note and this Agreement, and (ii) each
Borrower agrees to pay on demand all costs and expenses, if any (including,
without limitation, reasonable counsel fees and expenses, which may include
allocated costs of in-house counsel), of the Agent and each Bank in connection
with the enforcement (whether through negotiations, legal proceedings or
otherwise) against such Borrower of any Note of such Borrower or this Agreement
and the other documents to be delivered by such Borrower under this Agreement.
(b) If any payment (or purchase pursuant to Section 2.11(c)
or Section 8.06(b)) of principal of, or Conversion of, any Eurodollar Rate
Advance or B Advance made to any Borrower is made other than on the last day of
an Interest Period relating to such Advance (or in the case of a B Advance,
other than on the original scheduled maturity date thereof), as a result of a
payment pursuant to Section 2.10 or 2.12 or acceleration of the maturity of the
Notes pursuant to Section 6.01 or for any other reason or as a result of any
such purchase or any Conversion, such Borrower shall, upon demand by any Bank
(with a copy of such demand to the Agent), pay to the Agent for the account of
such Bank any amounts required to compensate such Bank for any additional
losses, costs or expenses which it may reasonably incur as a result of any such
payment, purchase or Conversion, including, without limitation, any loss, cost
or expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by such Bank to fund or maintain such Advance.
(c) Each Borrower agrees, to the fullest extent permitted by
law, to indemnify and hold harmless the Agent, the Arranger and each Bank and
each of their respective directors, officers, employees and agents from and
against any and all claims, damages, liabilities and out-of-pocket expenses
(including, without limitation, reasonable fees and disbursements of counsel)
for which any of them may become liable or which may be incurred by or asserted
against the Agent, the Arranger or such Bank or any such director, officer,
employee or agent (other than by
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another Bank or any successor or assign of another Bank), in each case in
connection with or arising out of or by reason of any investigation,
litigation, or proceeding, whether or not the Agent, the Arranger or such Bank
or any such director, officer, employee or agent is a party thereto, arising
out of, related to or in connection with this Agreement or the Notes or any
transaction in which any proceeds of all or any part of the Advances are
applied (other than any such claim, damage, liability or expense to the extent
attributable to the gross negligence or willful misconduct of, or violation of
any law or regulation by, either the party seeking indemnity under this Section
8.04(c) or any of its directors, officers, employees or agents).
Section 8.05. Right of Set-off. Upon (i) the occurrence and
during the continuance of any Event of Default and (ii) the making of the
request or the granting of the consent specified by Section 6.01 to authorize
the Agent to declare the Notes of a Borrower due and payable pursuant to the
provisions of Section 6.01, each Bank is hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to set off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by such Bank to or for
the credit or the account of such Borrower against any and all of the
obligations of such Borrower now or hereafter existing under this Agreement and
the Notes held by such Bank, irrespective of whether or not such Bank shall
have made any demand under this Agreement or such Notes and although such
obligations may be unmatured. Each Bank agrees promptly to notify such
Borrower after such set-off and application made by such Bank, provided that
the failure to give such notice shall not affect the validity of such set-off
and application. The rights of each Bank under this Section are in addition to
other rights and remedies (including, without limitation, other rights of
set-off) which such Bank may have.
Section 8.06. Binding Effect; Transfers. (a) This Agreement
shall become effective when it shall have been executed by the Borrowers and
the Agent and when each Bank listed on the signature pages hereof has delivered
an executed counterpart hereof to the Agent, has sent to the Agent a facsimile
copy of its signature hereon or has notified the Agent that such Bank has
executed this Agreement and thereafter shall be binding upon and inure to the
benefit of the Borrowers, the Agent and each Bank and their respective
successors and assigns, except that the Borrowers shall not have the right to
assign any of their respective rights hereunder or any interest herein without
the prior written consent of the Banks. Each Bank may assign to one or more
banks, financial institutions or government entities all or any part of, or may
grant participations to one or more banks, financial institutions or government
entities in or to all or any part of, any Advance or Advances owing to such
Bank, any Note or Notes held by such Bank and all or any portion of such Bank's
Commitments, and to the extent of any such assignment or participation (unless
otherwise stated therein) the assignee or purchaser of such assignment or
participation shall, to the fullest extent permitted by law, have the same
rights and benefits hereunder and under such Note or Notes as it would have if
it were such Bank hereunder, provided that, except in the case of an assignment
meeting the requirements of the next sentence hereof, (1) such Bank's
obligations under this Agreement, including, without limitation, its
Commitments to the Borrowers hereunder, shall remain unchanged, such Bank shall
remain responsible for the performance thereof, such Bank shall remain the
holder of any such Note or Notes for all purposes under this Agreement, and the
Borrowers, the other Banks and the Agent shall continue to deal solely with and
directly with such Bank in connection with such Bank's rights and obligations
under this Agreement; and (2) no Bank shall assign or grant a participation
that conveys to the assignee or
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participant the right to vote or consent under this Agreement, other than the
right to vote upon or consent to (i) any increase in the amount of any
Commitment of such Bank; (ii) any reduction of the principal amount of, or
interest to be paid on, such Bank's Advance or Advances or Note or Notes; (iii)
any reduction of any fee or other amount payable hereunder to such Bank; or
(iv) any postponement of any date fixed for any payment of principal of, or
interest on, such Bank's Advance or Advances or Note or Notes or any fee or
other amount payable hereunder to such Bank.
If (I) the assignee of any Bank either (1) is another Bank or (2) is
approved in writing by the Agent and the Borrowers or (3) is approved in
writing by the Agent and either an Event of Default exists or the Borrowers
have relinquished the right to approve the assignment pursuant to Section
8.06(b), and (II) such assignee assumes all or any portion (which portion shall
be a constant, and not a varying, percentage, and the amount of the Commitment
to TWC assigned, whether all or a portion, shall be in a minimum amount of
$5,000,000 or such lesser amount as may be approved in writing by the Agent and
TWC for such assignment) of each of the Commitments of such assigning Bank to
the respective Borrowers (either all of each such Commitment shall be assigned
or the percentage portion of each such Commitment assigned shall be the same as
to each Borrower) by executing a document in the form of Exhibit F (or with
such changes thereto as have been approved in writing by the Agent in its sole
discretion as evidenced by its execution thereof) duly executed by the Agent,
the Borrowers (unless an Event of Default exists or the Borrowers have
relinquished the right to approve the assignment pursuant to Section 8.06(b)),
such assigning Bank and such assignee and delivered to the Agent ("Transfer
Agreement"), then upon such delivery, (i) such assigning Bank shall be released
from its obligations under this Agreement with respect to all or such portion,
as the case may be, of its Commitments, (ii) such assignee shall become
obligated for all or such portion, as the case may be, of such Commitments and
all other obligations of such assigning Bank hereunder with respect to or
arising as a result of all or such portion, as the case may be, of such
Commitments, (iii) such assignee shall be assigned the right to vote or consent
under this Agreement, to the extent of all or such portion, as the case may be,
of such Commitments, (iv) each Borrower shall deliver, in replacement of the A
Note of such Borrower to such assigning Bank then outstanding (a) to such
assignee, a new A Note of such Borrower in the amount of the Commitment of such
assigning Bank to such Borrower which is being so assumed by such assignee
plus, in the case of any assignee which is already a Bank hereunder, the amount
of such assignee's Commitment to such Borrower immediately prior to such
assignment (any such assignee which is already a Bank hereunder agrees to
cancel and return to such Borrower, with reasonable promptness following the
delivery of such new A Note, the A Note being replaced thereby), (b) to such
assigning Bank, a new A Note in the amount of the balance, if any, of the
Commitment of such assigning Bank to such Borrower (without giving effect to
any B Reduction) retained by such assigning Bank (and such assigning Bank
agrees to cancel and return to such Borrower, with reasonable promptness
following delivery of such new A Notes, the A Note being replaced thereby), and
(c) to the Agent, photocopies of such new A Notes, (v) if such assignment is of
all of such assigning Bank's Commitments to the Borrowers, all of the
outstanding A Advances made by such assigning Bank shall be transferred to such
assignee, (vi) if such assignment is not of all of such Commitments, a part of
each A Advance to each Borrower equal to the amount of such Advance multiplied
by a fraction, the numerator of which is the amount of such portion of such
assigning Bank's Commitment to such Borrower so assumed and the denominator of
which is the amount of the Commitment of such assigning Bank to such Borrower
(without giving effect to any B Reduction)
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immediately prior to such assumption, shall be transferred to such assignee and
evidenced by such assignee's A Note from such Borrower, and the balance of such
A Advance shall be evidenced by such assigning Bank's new A Note from such
Borrower delivered pursuant to clause (iv)(b) of this sentence, (vii) if such
assignee is not a "Bank" hereunder prior to such assignment, such assignee
shall become a party to this Agreement as a Bank and shall be deemed to be a
"Bank" hereunder, and the amount of all or such portion, as the case may be, of
the Commitment to each of the respective Borrowers so assumed shall be deemed
to be the amount for such Borrower set opposite such assigning Bank's name on
Schedule IX for purposes of this Agreement, and (viii) if such assignee is not
a Bank hereunder prior to such assignment, such assignee shall be deemed to
have specified the offices of such assignee named in the respective Transfer
Agreement as its "Domestic Lending Office" and "Eurodollar Lending Office" for
all purposes of this Agreement and to have specified for purposes of Section
8.02 the notice information set forth in such Transfer Agreement; and the Agent
shall promptly after execution of any Transfer Agreement by the Agent and the
other parties thereto notify the Banks of the parties to such Transfer
Agreement and the amounts of the assigning Bank's Commitments assumed thereby.
(b) If the Borrowers do not consent to a proposed assignment by a
Bank pursuant to the last sentence of Section 8.06(a), TWC may, within 15 days
of its receipt of a request that it consent to such assignment nominate by
notice to the Agent and such Bank a bank which, if it is not a Bank, is
acceptable to the Agent, and which unconditionally offers in writing (with a
copy to the Agent) to purchase and assume, to the extent of the amount of such
proposed assignment, in accordance with all of the provisions of the last
sentence of Section 8.06(a) (including execution of an appropriate Transfer
Agreement), all of such Bank's rights and obligations (including, without
limitation, its Commitments) hereunder and interest in the Advances owing to
such Bank and the Notes held by such Bank without recourse at par plus interest
accrued thereon to the date of such purchase on a date therein specified (not
less than three nor greater than five Business Days after such nomination).
Such Bank at its option may elect to accept or not accept such purchase offer.
If a Bank accepts such an offer and the bank first nominated by TWC pursuant to
this Section 8.06(b) fails to purchase such rights and interest on such
specified date in accordance with the terms of such offer, TWC may, within 15
days of such failure, repeat the process contemplated by the first sentence of
this Section 8.06(b) by nominating another bank for purposes of this Section
8.06(b) by notice to the Agent and such Bank. If TWC does not so nominate such
a bank within 15 days of its receipt of such request that it consent to such
assignment or if TWC fails to nominate another bank following such a failure to
purchase or if such second nominated bank fails to purchase in accordance with
the terms of an offer complying with the first sentence of this Section
8.06(b), the Borrowers shall be deemed to have relinquished their right to
consent to such assignment. If such Bank elects to not accept such a purchase
offer under this Section 8.06(b) as to a particular proposed assignment, the
Borrowers shall not be deemed to have relinquished their right to consent to
such assignment.
(c) The Borrowers agree to promptly execute the Transfer Agreement
pertaining to any assignment as to which approval by the Borrowers of the
assignee is not required by clause (I) of the last sentence of Section 8.06(a).
(d) Any Bank may assign, as collateral or otherwise, any of its
rights (including, without limitation, rights to payments of principal of
and/or interest on the Notes) under this
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Agreement or any of the Notes to any Federal Reserve Bank without notice to or
consent of any Borrower or the Agent.
Section 8.07. Governing Law. This Agreement and the Notes shall
be governed by, and construed in accordance with, the laws of the State of New
York.
Section 8.08. Interest. It is the intention of the parties
hereto that the Agent and each Bank shall conform strictly to usury laws
applicable to it, if any. Accordingly, if the transactions with the Agent or
any Bank contemplated hereby would be usurious under applicable law, then, in
that event, notwithstanding anything to the contrary in the Notes, this
Agreement or any other agreement entered into in connection with or as security
for this Agreement or the Notes, it is agreed as follows: (i) the aggregate of
all consideration which constitutes interest under applicable law that is
contracted for, taken, reserved, charged or received by the Agent or such Bank,
as the case may be, under the Notes, this Agreement or under any other
agreement entered into in connection with or as security for this Agreement or
the Notes shall under no circumstances exceed the maximum amount allowed by
such applicable law and any excess shall be cancelled automatically and, if
theretofore paid, shall at the option of the Agent or such Bank, as the case
may be, be credited by the Agent or such Bank, as the case may be, on the
principal amount of the obligations owed to the Agent or such Bank, as the case
may be, by the appropriate Borrower or refunded by the Agent or such Bank, as
the case may be, to the appropriate Borrower, and (ii) in the event that the
maturity of any Note or other obligation payable to the Agent or such Bank, as
the case may be, is accelerated or in the event of any required or permitted
prepayment, then such consideration that constitutes interest under law
applicable to the Agent or such Bank, as the case may be, may never include
more than the maximum amount allowed by such applicable law and excess
interest, if any, to the Agent or such Bank, as the case may be, provided for
in this Agreement or otherwise shall be cancelled automatically as of the date
of such acceleration or prepayment and, if theretofore paid, shall, at the
option of the Agent or such Bank, as the case may be, be credited by the Agent
or such Bank, as the case may be, on the principal amount of the obligations
owed to the Agent or such Bank, as the case may be, by the appropriate Borrower
or refunded by the Agent or such Bank, as the case may be, to the appropriate
Borrower.
Section 8.09. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different 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.
Section 8.10. Survival of Agreements, Representations and
Warranties, Etc. All warranties, representations and covenants made by any
Borrower or any officer of any Borrower herein or in any certificate or other
document delivered in connection with this Agreement shall be considered to
have been relied upon by the Banks and shall survive the issuance and delivery
of the Notes and the making of the Advances regardless of any investigation.
The indemnities and other payment obligations of each Borrower contained in
this Agreement, and the indemnities by the Banks in favor of the Agent and its
officers, directors, employees and agents, will survive the repayment of the
Advances and the termination of this Agreement.
-53-
<PAGE> 58
Section 8.11. Borrowers' Right to Apply Deposits. In the event
that any Bank is placed in receivership or enters a similar proceeding, each
Borrower may, to the full extent permitted by law, make any payment due to such
Bank hereunder, to the extent of finally collected unrestricted deposits of
such Borrower in U.S. dollars held by such Bank, by giving notice to the Agent
and such Bank directing such Bank to apply such deposits to such indebtedness.
If the amount of such deposits is insufficient to pay such indebtedness then
due and owing in full, such Borrower shall pay the balance of such
insufficiency in accordance with this Agreement.
Section 8.12. Confidentiality. Each Bank agrees that it will
use best efforts, to the extent not inconsistent with practical business
requirements, not to disclose without the prior consent of TWC (other than to
employees, auditors, accountants, counsel or other professional advisors of the
Agent or any Bank) any information with respect to the Borrowers or their
Subsidiaries which is furnished pursuant to this Agreement and which (i) the
Borrowers in good faith consider to be confidential and (ii) is either clearly
marked confidential or is designated by the Borrowers to the Agent or the Banks
in writing as confidential, provided that any Bank may disclose any such
information (a) as has become generally available to the public, (b) as may be
required or appropriate in any report, statement or testimony submitted to or
required by any municipal, state or Federal regulatory body having or claiming
to have jurisdiction over such Bank or submitted to or required by the Board of
Governors of the Federal Reserve System or the Federal Deposit Insurance
Corporation or similar organizations (whether in the United States or
elsewhere) or their successors, (c) as may be required or appropriate in
response to any summons or subpoena in connection with any litigation, (d) in
order to comply with any law, order, regulation or ruling applicable to such
Bank, (e) to the prospective transferee in connection with any contemplated
transfer of any of the Notes or any interest therein by such Bank, provided
that such prospective transferee executes an agreement with or for the benefit
of the Borrowers containing provisions substantially identical to those
contained in this Section 8.12, and provided further that if the contemplated
transfer is a grant of a participation in a Note (and not an assignment), no
such information shall be authorized to be delivered to such participant
pursuant to this clause (e) except (i) such information delivered pursuant to
Section 4.01(e) or Section 5.01(b) (other than paragraph (iv) thereof), and
(ii) if prior notice of the delivery thereof is given to TWC, such information
as may be required by law or regulation to be delivered, (f) in connection with
the exercise of any remedy by such Bank pertaining to this Agreement, any of
the Notes or any other document delivered in connection herewith, (g) in
connection with any litigation involving such Bank pertaining to this
Agreement, any of the Notes or any other document delivered in connection
herewith, (h) to any Bank or the Agent, or (i) to any affiliate of any Bank,
provided that such affiliate executes an agreement with or for the benefit of
the Borrowers containing provisions substantially identical to those contained
in this Section 8.12.
Section 8.13. WAIVER OF JURY TRIAL. THE BORROWERS, THE AGENT,
AND THE BANKS HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY NOTE OR
ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 8.14. Miscellaneous. This Agreement shall become
effective in accordance with the first sentence of Section 8.06(a). Subject to
compliance with such sentence,
-54-
<PAGE> 59
the amendments to the 1996 Credit Agreement effected by this Agreement
(including, without limitation, the amendments to the definition of "Applicable
Margin") shall for all purposes be effective as of July 23, 1997. On July 23,
1997, each Borrower will pay in full all principal, interest and fees owed by
it outstanding under the 1996 Credit Agreement.
-55-
<PAGE> 60
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly authorized, as of
the date first above written.
BORROWERS:
THE WILLIAMS COMPANIES, INC. TEXAS GAS TRANSMISSION
CORPORATION
By: By:
---------------------------- -------------------------
Name: Name:
-------------------------- -----------------------
Title: Title:
------------------------- ----------------------
TRANSCONTINENTAL GAS PIPE LINE WILLIAMS PIPE LINE COMPANY
CORPORATION
By: By:
---------------------------- -------------------------
Name: Name:
-------------------------- -----------------------
Title: Title:
------------------------- ----------------------
WILLIAMS HOLDINGS OF DELAWARE, INC. WILTEL COMMUNICATIONS, LLC
By:
---------------------------- By:
Name: -------------------------
-------------------------- Name:
Title: -----------------------
------------------------- Title:
----------------------
NORTHWEST PIPELINE CORPORATION
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
-56-
<PAGE> 61
AGENT:
CITIBANK, N.A., as Agent
By:
--------------------------
J Christopher Lyons
Vice President
BANKS:
CITIBANK, N.A.
By:
--------------------------
J. Christopher Lyons
Vice President
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By:
--------------------------
Authorized Officer
THE CHASE MANHATTAN BANK
By:
--------------------------
Authorized Officer
CIBC INC.
By:
--------------------------
Authorized Officer
-57-
<PAGE> 62
CREDIT LYONNAIS NEW YORK BRANCH
By:
--------------------------
Authorized Officer
THE FIRST NATIONAL BANK OF
CHICAGO
By:
--------------------------
Authorized Officer
BANK OF MONTREAL
By:
--------------------------
Authorized Officer
THE BANK OF NEW YORK
By:
--------------------------
Authorized Officer
THE BANK OF NOVA SCOTIA
By:
--------------------------
Authorized Officer
BARCLAYS BANK PLC
By:
--------------------------
Authorized Officer
-58-
<PAGE> 63
BOATMEN'S NATIONAL BANK
OF OKLAHOMA
By:
--------------------------
Authorized Officer
THE FIRST NATIONAL BANK OF
BOSTON
By:
--------------------------
Authorized Officer
THE FUJI BANK, LIMITED,
HOUSTON AGENCY
By:
--------------------------
Authorized Officer
MELLON BANK, N.A.
By:
--------------------------
Authorized Officer
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By:
--------------------------
Authorized Officer
ROYAL BANK OF CANADA
By:
--------------------------
Authorized Officer
-59-
<PAGE> 64
SOCIETE GENERALE,
SOUTHWEST AGENCY
By:
--------------------------
Authorized Officer
WELLS FARGO BANK, N.A.
By:
--------------------------
Authorized Officer
BANK OF OKLAHOMA, N.A.
By:
--------------------------
Authorized Officer
COMMERCE BANK, N.A.
By:
--------------------------
Authorized Officer
-60-
<PAGE> 65
EXHIBIT 10.22
SCHEDULE IX
PERMITTED WILTEL LIENS
(a) Any purchase money Lien created by WilTel or any of its Subsidiaries to
secure all or part of the purchase price of any property (or to secure a loan
made to enable WilTel or any of its Subsidiaries to acquire the property secured
by such Lien), provided that the principal amount of the Debt secured by any
such Lien, together with all other Debt secured by a Lien on such property,
shall not exceed the purchase price of the property acquired.
(b) Any Lien existing on any property at the time of the acquisition thereof
by WilTel or any of its Subsidiaries, whether or not assumed by WilTel or any of
its Subsidiaries, and any Lien on any property acquired or constructed by WilTel
or any of its Subsidiaries and created not later than 12 months after (i) such
acquisition or completion of such construction or (ii) commencement of full
operation of such property, whichever is later, provided, however, that if
assumed or created by WilTel or any of its Subsidiaries, the principal amount of
the Debt secured by such Lien, together with all other Debt secured by a Lien on
such property, shall not exceed the purchase price of the property acquired
and/or the cost of the property constructed.
(c) Any Lien created or assumed by WilTel or any of its Subsidiaries on any
contract for the sale of any product or service or any rights thereunder or any
proceeds therefrom, including accounts and other receivables, related to the
operation or use of any property acquired or constructed by WilTel or any of its
Subsidiaries and created not later than 12 months after (i) such acquisition or
completion of such construction or (ii) commencement of full operation of such
property, whichever is later, provided, however, that the principal amount of
the Debt secured by such mortgage together with all other Debt secured by any
such contract, rights or property, shall not exceed the purchase price of the
property acquired and/or the cost of the property constructed.
(d) Any Lien existing on any property of a Subsidiary of WilTel at the time
it becomes a Subsidiary of WilTel.
(e) Any refunding or extension of maturity, in whole or in part, of any Lien
created or assumed in accordance with the provisions of paragraph (a), (b), (c)
or (d) above, provided that the principal amount of the Debt secured by such
refunding Lien or extended Lien shall not exceed the principal amount of the
Debt secured by the Lien to be refunded or extended outstanding at the time of
such refunding or extension and that such refunding Lien or extended Lien shall
be limited to the same property that secured the Lien so refunded or extended.
(f) Mechanics' or materialmen's liens arising in the ordinary course of
business which are not more than 90 days past due or are being contested in good
faith by appropriate proceedings or any Lien arising by reason of pledges or
deposits to secure payment of workmen's compensation or other insurance, good
faith deposits in connection with tenders or leases of real estate, bids or
contracts (other
<PAGE> 66
than contracts for the payment of money), in each case to secure obligations of
TWC or any of its Subsidiaries.
(g) Deposits to secure public or statutory obligations, deposits to secure or
in lieu of surety, stay or appeal bonds and deposits as security for the payment
of taxes or assessments or other similar charges, in each case to secure
obligations of TWC or any of its Subsidiaries; provided, however, that the
aggregate amount of obligations secured by Liens permitted by this paragraph (g)
shall not exceed 10% of Consolidated Tangible Net Worth of TWC.
(h) Any Lien arising by reason of deposits with or the giving of any form of
security to any governmental agency or any body created or approved by law or
governmental regulation for any purpose at any time as required by law or
governmental regulation (i) as a condition to the transaction by TWC or any of
its Subsidiaries of any business or the exercise by TWC or any of its
Subsidiaries of any privilege or license, (ii) to enable TWC or any of its
Subsidiaries to maintain self-insurance or to participate in any fund for
liability on any insurance risks or (iii) in connection with workmen's
compensation, unemployment insurance, old age pensions or other social security
with respect to TWC or any of its Subsidiaries or to enable TWC or any of its
Subsidiaries to share in the privileges or benefits required for companies
participating in such arrangements.
(i) Liens incurred in the ordinary course of business upon rights-of-way.
(j) Undetermined mortgages and charges incidental to construction or
maintenance arising in the ordinary course of business which are not more than
90 days past due or are being contested in good faith by appropriate
proceedings.
(k) The right reserved to, or vested in, any municipality or governmental or
other public authority or railroad by the terms of any right, power, franchise,
grant, license, permit or by any provision of law, to terminate or to require
annual or other periodic payments as a condition to the continuance of such
right, power, franchise, grant, license or permit.
(1) The Lien of taxes and assessments which are not at the time delinquent.
(m) The Lien of specified taxes and assessments which are delinquent but the
validity of which is being contested in good faith by WilTel or any of its
Subsidiaries by appropriate proceedings and with respect to which reserves in
conformity with generally accepted accounting principles, if required by such
principles, have been provided on the books of WilTel or the relevant Subsidiary
of WilTel, as the case may be.
(n) The Lien reserved in leases entered into in the ordinary course of
business for rent and for compliance with the terms of the lease in the case of
real property leasehold estates.
(o) Defects and irregularities in the titles to any property (including
rights-of-way and easements) which are not material to the business, assets,
operations or financial condition of WilTel and its Subsidiaries considered as a
whole.
-2-
<PAGE> 67
(p) Any Liens securing Debt neither assumed nor guaranteed by WilTel or any
of its Subsidiaries nor on which any of them customarily pays interest, existing
upon real estate or rights in or relating to real estate (including
rights-of-way and easements) acquired by WilTel or any of its Subsidiaries for
pipeline, metering station or right-of-way purposes, which Liens were not
created in anticipation of such acquisition and do not materially impair the use
of such property for the purposes for which it is held by WilTel or such
Subsidiary.
(q) Easements, exceptions or reservations in any property of WilTel or any of
its Subsidiaries granted or reserved in the ordinary course of business for the
purpose of pipelines, roads, telecommunication equipment and cable, streets,
alleys, highways, railroads, the removal of oil, gas, coal or other minerals or
timber, and other like purposes, or for the joint or common use of real
property, facilities and equipment, which do not materially impair the use of
such property for the purposes for which it is held by WilTel or such
Subsidiary.
(r) Rights reserved to or vested in any municipality or public authority to
control or regulate any property of WilTel or any of its Subsidiaries, or to use
such property in any manner which does not materially impair the use of such
property for the purposes for which it is held by WilTel or such Subsidiary.
(s) Any obligations or duties, affecting the property of WilTel or any of its
Subsidiaries, to any municipality or public authority with respect to any
franchise, grant, license or permit.
(t) (i) The Liens of any judgments in an aggregate amount for WilTel and all
of its Subsidiaries not in excess of $5,000,000, execution of which has not been
stayed and (ii) the Liens of any judgments in an aggregate amount for WilTel and
all of its Subsidiaries not in excess of $25,000,000, the execution of which has
been stayed and which have been appealed and secured, if necessary and permitted
hereby, by the filing of an appeal bond.
(u) Zoning laws and ordinances.
(v) Any Lien existing on any office equipment, data processing equipment
(including computer and computer peripheral equipment), motor vehicles,
aircraft, marine vessels or similar transportation equipment.
(w) Any Lien consisting of interests in receivables in connection with
agreements for sales of receivables of any kind by WilTel or any of its
Subsidiaries for cash.
(x) Any Lien not permitted by paragraphs (a) through (w) above securing Debt
of WilTel and its Subsidiaries or securing any Debt of WilTel and its
Subsidiaries which constitutes a refunding or extension of any such Debt if at
the time of, and after giving effect to, the creation or assumption of any such
Lien, the sum of the aggregate of all Debt of WilTel and its Subsidiaries
secured by all such Liens not so permitted by paragraphs (a) through (w) above
plus the amount of Attributable Obligations of WilTel and its Subsidiaries in
respect of Sale and Lease-Back Transactions permitted by Section 5.020(j) does
not exceed 5% of the sum of (i) Consolidated Tangible Net Worth of WilTel plus
(ii) Debt of WilTel and its Subsidiaries on a Consolidated basis.
-3-
<PAGE> 68
EXHIBIT A-1
A PROMISSORY NOTE
U.S. $ Dated: ,
---------------- ----------- ------
FOR VALUE RECEIVED, the undersigned, [Borrower], a Delaware corporation
(the "Borrower"), HEREBY PROMISES TO PAY to the order of ________________ (the
"Bank"), for the account of its Applicable Lending Office (as defined in the
Credit Agreement referred to below), on the Stated Termination Date (as defined
in the Credit Agreement referred to below), the principal amount of
$____________, or, if less, the aggregate principal amount of the A Advances (as
defined in the Credit Agreement referred to below) owed to the Bank by the
Borrower on such Stated Termination Date.
The Borrower promises to pay interest on the unpaid principal amount hereof
until such principal amount is paid in full, at such interest rates, and payable
at such times, as are specified in the Credit Agreement referred to below. Both
principal and interest are payable in lawful money of the United States of
America to Citibank, N.A., as Agent, at 399 Park Avenue, New York, New York
10043, in same day funds. Each A Advance owed to the Bank by the Borrower, and
all payments made on account of principal thereof, shall be recorded by the Bank
and, prior to any transfer hereof, endorsed on the grid attached hereto which is
part of this A Promissory Note.
This A Promissory Note is one of the A Notes referred to in, and is subject
to and entitled to the benefits of, the Second Amended and Restated Credit
Agreement dated as of July 23, 1997 (as amended or otherwise modified from time
to time, the "Credit Agreement") among the Borrower, the Bank, certain other
borrowers parties thereto, certain other banks parties thereto and Citibank,
N.A., as Agent for the Bank and such other banks. The Credit Agreement, among
other things, (i) provides for the making of advances to the Borrower from time
to time pursuant to Section 2.01 of the Credit Agreement in an aggregate
outstanding amount not to exceed at any time the U.S. dollar amount first above
mentioned, the indebtedness of the Borrower resulting from each such advance
owed to the Bank being evidenced by this A Promissory Note, and (ii) contains
provisions for acceleration of the maturity hereof upon the happening of certain
stated events and also for prepayments on account of principal hereof prior to
the maturity hereof upon the terms and conditions therein specified. Capitalized
terms used herein which are not defined herein and are defined in the Credit
Agreement are used herein as therein defined.
The Borrower hereby waives presentment, demand, protest, notice of intent
to accelerate, notice of acceleration and any other notice of any kind, except
as provided in the Credit Agreement. No failure to exercise, and no delay in
exercising, any rights hereunder on the part of the holder hereof shall operate
as a waiver of such rights.
This A Promissory Note shall be governed by, and construed in accordance
with, the laws of the State of New York.
[BORROWER]
----------------------------------
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
<PAGE> 69
ADVANCES AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
Amount of
Amount Principal Unpaid
of Paid or Principal Notation
Date Advance Prepaid Balance Made By
---- ------- ------- ------- -------
<S> <C> <C> <C> <C>
</TABLE>
-2-
<PAGE> 70
EXHIBIT A-2
B PROMISSORY NOTE
U.S. $ Dated: ,
---------------- ----------- ------
FOR VALUE RECEIVED, the undersigned, [Borrower] , a Delaware corporation
(the "Borrower"), HEREBY PROMISES TO PAY to the order of
___________________________ (the "Bank") for the account of its Applicable
Lending Office (as defined in the Credit Agreement referred to below), on
________________, the principal amount of _________________________ U.S. Dollars
($___________).
The Borrower promises to pay interest on the unpaid principal amount
hereof from the date hereof until such principal amount is paid in full, at the
interest rate and payable on the interest payment date or dates provided below:
Interest Rate: ______% per annum (calculated on the basis of a year of ____
days for the actual number of days elapsed).
Interest Payment Date or Dates:
--------------------------
Both principal and interest are payable in lawful money of the United
States of America to Citibank, N.A., as Agent, for the account of the Bank at
the office of Citibank, N.A., at 399 Park Avenue, New York, New York 10043, in
same day funds.
This B Promissory Note is one of the B Notes referred to in, and is
entitled to the benefits of, the Second Amended and Restated Credit Agreement
dated as of July 23, 1997 (as amended or otherwise modified from time to time,
the "Credit Agreement") among the Borrower, the Bank, certain other borrowers
parties thereto, certain other banks parties thereto and Citibank, N.A., as
Agent for the Bank and such other banks. The Credit Agreement, among other
things, contains provisions for acceleration of the maturity hereof upon the
happening of certain stated events. Capitalized terms used herein which are not
defined herein and are defined in the Credit Agreement are used herein as
therein defined.
The Borrower hereby waives presentment, demand, protest, notice of
intent to accelerate, notice of acceleration and any other notice of any kind,
except as provided in the Credit Agreement. No failure to exercise, and no delay
in exercising, any rights hereunder on the part of the holder hereof shall
operate as a waiver of such rights.
This B Promissory Note shall be governed by, and construed in
accordance with, the laws of the State of New York.
[BORROWER]
----------------------------------
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
<PAGE> 1
EXHIBIT 10.14
BANK OF OKLAHOMA TOWER
TULSA, OKLAHOMA
AMENDED AND RESTATED
LEASE
THE WILLIAMS COMPANIES, INC.
THIS AMENDED AND RESTATED LEASE ("Lease"), dated for reference purposes
only, January 1, 1999, is made by and between WILLIAMS HEADQUARTERS BUILDING
COMPANY, a Delaware corporation ("Landlord") and THE WILLIAMS COMPANIES, INC.
("Tenant"), (collectively the "Parties", or individually a "Party").
WITNESSETH: Upon and subject to the terms of this Lease, Landlord
hereby leases to Tenant and Tenant hereby leases from Landlord, certain Premises
situated within the Building located at the Complex, for the Term, except that
Landlord reserves and Tenant shall have no right in and to (a) the use of the
exterior faces of all perimeter walls of the Building, (b) the use of the roof
of the Building except as otherwise expressly provided herein (if at all), or
(c) the use of the air space above the Building.
1. DEFINITIONS.
1.1 Special Lease Definitions.
1.1.1 Rent Adjustment Date: For each Lease Year, except the
first (1st) Lease Year, the first (1st) day of such Lease
Year.
1.1.2 Basic Rent: The amount equal to the product obtained by
multiplying the Rentable Area of the Leased Premises by the
Rent per Square Foot for such Lease Year.
1.1.3 Basic Rent per Square Foot: As of the Commencement Date,
the Basic Rent per Square Foot is $15.22.
1.1.4 Broker: Tenant's Broker is ____________. (Not
Applicable.)
1.1.5 Building: The Bank of Oklahoma Tower located at One
Williams Center, Tulsa, Oklahoma.
1.1.6 Commencement Date: The Commencement Date is January 1,
1999.
<PAGE> 2
1.1.7 Landlord's Notice and Rent Payment Address:
Williams Headquarters Building Company
One Williams Center
Suite 2200
Tulsa, Oklahoma 74172
Attn: Property Manager
1.1.8 Net Rentable Area: The sum of: (1) the Net Useable Area
which is computed by measuring from the inside face of the
exterior glass, to the exterior side of partitions which
separate the Premises from the Building's interior nonrentable
areas which are not within the Premises, and to the center of
partitions that separate the Premises from adjoining rentable
areas; plus (2) a pro-rata portion of the Building's floor
area used for corridors, elevator lobbies, ground floor
lobbies, vestibules, service and freight areas, restrooms,
elevator machine rooms, telephone closets, mechanical
equipment rooms and other similar facilities provided for the
benefit of all tenants of the Building, visitors to the
Building, or Landlord. No deduction shall be made for columns
or projections necessary to the Building. As of the
Commencement Date of this Lease the Premises' Net Rentable
Area is approximately 765,814.2 square feet.
1.1.9 Operating Expense Base: For each square foot of Building
Rentable Area, the sum of Landlord's Operating Expenses for
calendar year 1998, divided by the Building Rentable Area.
1.1.10 Operating Expense Increases: For the first complete
lease year (containing all 12 months, January through and
including December) and each complete lease year thereafter
commencing during the Term, an amount equal to Tenant's
Proportionate Share of the excess of Landlord's Operating
Expenses for such calendar year over the product obtained by
multiplying the Operating Expense Base by the Building
Rentable Area; provided, however, that Operating Expense
Increases for the any lease year which is not complete
(containing fewer than all 12 months) shall be determined in
accordance with the provisions of Section 5.2.
1.1.11 Premises: That certain portion of the Building located
on multiple floors consisting of approximately 765,814.2
rentable square feet, including all improvements therein or to
be provided by Landlord, if any, and including all common
areas of the Building and Complex which are for the
non-exclusive use of tenants in the Building. The Delineation
of the Premises is shown on Exhibit "A" attached hereto.
1.1.12 Real Estate Tax Base: For each square foot of Building
Rentable Area, the sum of Landlord's Real Estate Taxes for
calendar year 1998, divided by the Building Rentable Area.
2
<PAGE> 3
1.1.13 Renewal Periods: The two (2) additional periods of five
years each for which Tenant is permitted to extend the Term of
this Lease. The Option(s) to Renew terms and conditions are
set forth in Exhibit "E" attached hereto.
1.1.14 Rent Adjustment: On the fifth, tenth, and fifteenth
anniversary dates of the Commencement Date, the Basic Rent
shall increase either by (i) an amount equal to three percent
(3%) of the Basic Rent or (ii) an amount that will result in
the Basic Rent being equal the fair market rental value of the
Premises, whichever amount is greater. Fair market rental
value shall be established by the procedure set forth in
Exhibit "F".
1.1.15 Rent Adjustment Dates: The Rent Adjustment Dates shall
be the fifth, tenth, and fifteenth anniversary dates of the
Commencement Date.
1.1.16 Security Deposit:An amount of money paid by Tenant to
Landlord and thereafter, held by Landlord without liability
for interest, as security for the performance by Tenant of
Tenant's covenants and obligations.
1.1.17 Sole Permitted Use: The Premises are to be used and
continuously and completely occupied by Tenant solely for the
purpose of general office use.
1.1.18 Tenant's Notice Address:
After commencement:
The Williams Companies, Inc.
One Williams Center
Suite 4700
Tulsa, Oklahoma 74172
Attn: Director of Facilities Management
Prior to commencement:
The Williams Companies, Inc.
One Williams Center
Suite 4700
Tulsa, Oklahoma 74172
Attn: Director of Facilities Management
1.1.19 Tenant's Proportionate Share: Sixty-seven point one
four percent (67.14%). Tenant's Proportionate Share shall be
calculated in the proportion which Tenant's Net Rentable Area
bears to Building's Net Rentable Area.
1.1.20 Term: The period of time commencing on the Commencement
Date and ending on the Termination Date.
3
<PAGE> 4
1.1.21 Termination Date: The Termination Date is December 31,
2018.
1.2 General Lease Definitions.
1.2.1 Additional Charges: All amounts payable by Tenant to
Landlord under this Lease other than Basic Rent, including but
not limited to, Operating Expense and Real Estate Tax amounts,
and amounts payable under Section 14.3. All Additional Charges
shall be deemed to be additional rent and all remedies
applicable to the non-payment of Basic Rent shall be
applicable thereto.
1.2.2 Alterations: Any improvement, decoration, removal,
addition, installation or physical change made in, on or to
the Premises or any adjacent space.
1.2.3 Common Areas: All areas, improvements, space, equipment
and special services in or at the Building or at the Complex
provided by Landlord, at Landlord's discretion, for the common
or joint use and benefit of tenants, customers, and other
invitees of the Building, which may include lobbies, service
areas, connecting driveways, entrances and exits, retaining
walls, landscaped areas, malls, truck serviceways or tunnels,
loading docks, pedestrian walkways, atriums, walls,
courtyards, concourses, stairs, ramps, sidewalks, washrooms,
signs identifying or advertising the Building or Complex,
maintenance buildings, utility buildings, maintenance and
utility rooms and closets or hallways, elevators and their
housing and rooms, common window areas, walls and ceiling in
Common Areas, and trash or rubbish areas.
1.2.4 Complex: The group of buildings and connecting
concourses, courtyards, bridges, and green spaces known as the
Williams Center Complex.
1.2.5 Landlord: The landlord and the Building property manager
named herein and any successors thereto.
1.2.6 Landlord Group: Landlord's officers, directors,
shareholders, agents, partners, employees, contractors, and
any third party operator or manager of the Building and/or
Complex.
1.2.7 Operating Expenses: The aggregate of all costs and
expenses paid or incurred on an accrual basis by Landlord in
connection with the ownership, management, operation,
insurance (including the cost of self-insurance), and
maintenance of the Building and Complex including all utility
and central plant charges of the Building, the Complex, the
grounds and land on which they are situated, and the Common
Areas. If Landlord makes an expenditure for capital
improvements to the Building or Complex which are reasonably
intended to reduce Operating Expenses (which improvements are
commenced or completed during the Term) or to comply with the
request or directives of a governmental agency or body, and if
such expenditure is not a current expense under generally
accepted accounting principles, the cost thereof shall be
amortized over a period equal to the useful life of such
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improvements, determined in accordance with generally accepted
accounting principles, and the amortized cost allocated to
each calendar year during the Term shall be treated as an
Operating Expense.
1.2.8 Person: A natural person, a partnership, a corporation
or any other form of business or legal association or entity.
1.2.9 Real Estate Taxes: Any form of assessment, license fee,
commercial rental tax, levy, penalty, charge or tax (other
than taxes on general net income and inheritance and estate
taxes) imposed by any authority having the direct or indirect
power to tax, including any city, county, state or federal
government, or any school, agricultural, lighting, drainage,
flood control, transit, special benefit or other district, as
against any legal or equitable interest of Landlord in the
Premises or in the real property of which the Premises and the
Building are a part, or the Complex or as against Landlord's
right to rent or other income therefrom, or as against
Landlord's business of leasing the Premises or collecting
rent, or any tax imposed in substitution, partially or
totally, or any tax previously included in the definition of
"Real Estate Taxes", or any additional tax the nature of which
was previously included within the definition of "Real Estate
Taxes", and shall include any increases in such taxes, levies,
charges or assessments occasioned by increases in tax rates or
increases in assessed valuations, whether occurring by sale or
otherwise.
1.2.10 Tenant: The tenant named herein and any permitted
assignee under Section 10.
1.2.11 Tenant Group: Tenant's partners, directors, officers,
shareholders, employees, agents, contractors, servants,
licensees, invitees, visitors, and permitted subtenants and/or
assignees.
1.2.12 Tenant Improvements: That work necessary to complete
the Premises prior to the Commencement Date and accomplished
pursuant to the terms and conditions of the As-Is Work Letter
attached hereto as Exhibit "D".
1.2.13 Trade Fixtures: Tenant's machinery and equipment that
can be removed from the Premises without doing material damage
to the Premises.
1.2.14 Unavoidable Delays: Delays caused by strikes, acts of
God, lockouts, labor difficulties, riots, explosions,
sabotage, accidents, inability to obtain labor or materials,
governmental restrictions, enemy action, civil commotion,
fire, unavoidable casualty or any other cause beyond the
reasonable control of Landlord.
2. EXHIBITS. The following exhibits and riders are attached hereto and
incorporated herein by this reference:
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Exhibit "A" Delineation of the Premises
Exhibit "B" Rules and Regulations
Exhibit "C" Certificate of Insurance
Exhibit "D" Work Letter
Exhibit "E" Option(s) to Renew
Exhibit "F" Appraisal Procedure/Market Rate
Rider "1"
3. TERM.
3.1 The Term shall be twenty (20) years and zero (0) months commencing
on the Commencement Date and expiring on the Termination Date.
3.2 If Landlord is unable to give possession of the Premises on the
Commencement Date by reason of holding over of any Tenant or because
construction, repairs, or improvements being made or to be made by Landlord are
not substantially completed, rent shall abate for the period that possession by
Tenant is delayed unless Tenant caused (in whole or in part) such delay in which
case rent shall not abate, but under no circumstances shall Landlord be
responsible for direct or consequential damages because of its inability to
furnish possession to the Tenant by any particular date. Should Tenant occupy
the Premises prior to the Commencement Date, with such prior occupancy being in
all respects fully approved in writing by the Landlord, all terms of this Lease
shall then commence and the Term of this Lease and the rental provided herein
shall go into effect (being prorated if necessary) as of the date of such prior
occupancy. It is mutually agreed that the Commencement Date under such prior
occupancy shall be the date Tenant takes occupancy of the Premises and that the
Termination Date stated above shall remain in effect. When the Commencement Date
and Termination Date have been determined as provided herein, Landlord shall
deliver and Tenant shall execute a statement specifying the Commencement Date
and the Termination Date of the Term.
4. CONDITION.
4.1 It is hereby understood and acknowledged by Tenant that Landlord is
leasing the Premises to Tenant in "as is" condition with all faults and Landlord
has made no representation or warranty, express or implied, with respect to the
condition of the Premises, the Building or the Complex or with respect to their
suitability for the conduct of Tenant's business, except as expressly set forth
herein. Tenant acknowledges that Tenant has inspected the Premises, and that the
Premises are in a good and habitable condition. Except as expressly set forth
herein, Landlord shall have no liability to Tenant or any of Tenant's Group
arising from the condition of the Building or the Premises, and Tenant shall
defend, indemnify and hold Landlord harmless from and against any claims, causes
of action, damages and liability arising from the condition of the Premises.
4.2 At the time Tenant surrenders the Premises at the end of the Term,
or within three (3) days thereafter, Landlord and Tenant, or their respective
agents, shall make an inspection of the
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Premises and shall prepare and sign an inspection form to describe the condition
of the Premises at the time of surrender.
5. RENT.
5.1 Tenant shall pay Basic Rent for each Lease Year in equal monthly
installments in advance on the first day of each month during the Term. Basic
Rent for any period during the term hereof which is less than one full month
shall be prorated upon the actual number of days of the month involved. The
Basic Rent and all Additional Charges shall be promptly paid when due, in lawful
money of the United States, without notice or demand and without deduction,
diminution, abatement, counterclaim or setoff of any amount or for any reason
whatsoever, to Landlord at Landlord's Notice Address or at such other address or
to such other person as Landlord may from time to time designate. If Tenant
makes any payment to Landlord by check, such payment shall be by check of Tenant
and Landlord shall not be required to accept the check of any other person or
entity, and any check received by Landlord shall be deemed received subject to
collection. If any check is mailed by Tenant, Tenant shall post such check in
sufficient time prior to the date when payment is due so that such check will be
received by Landlord on or before the date when payment is due. Tenant shall
assume the risk of lateness or failure of delivery of the mails, and no lateness
or failure of the mails will excuse Tenant from its obligation to have made the
payment in question when required under this Lease. If during the Term, Landlord
receives a check from Tenant which is returned by Tenant's bank for insufficient
funds or is otherwise returned unpaid, Tenant agrees that all checks thereafter
shall either be bank certified, cashiers' or treasurers' checks. All bank
service charges resulting from any bad checks shall be borne by Tenant.
5.1.1 Tenant shall pay all Basic Rent Adjustments which shall
be determined as set forth in Section 1.1.14.
5.2 Tenant shall pay Tenant's Proportionate Share of all Increases
in Operating Expenses and Increases in Real Estate Taxes on a monthly basis in
advance, promptly on the first day of every month during the Term hereof, in
addition to installments of Rent. Tenant's Proportionate Share shall be the
percentage amount set forth in Section 1.1.9 as the same may be adjusted in the
event the Net Rentable Area of the Premises or the Building changes. Tenant's
monthly payment of Operating Expense Increases and Real Estate Tax Increases for
each year shall be determined by an estimated forecast reasonably prepared by
Landlord and submitted to Tenant in writing as soon as practicable near the
beginning of each calendar year. In no event shall Tenant's payment of its
Operating Expense Increase and Real Estate Tax Increase be less than an amount
equal to that amount paid by Tenant during the immediately preceding calendar
year. Tenant's obligation to pay its Operating Expense Increase and Real Estate
Tax Increase in any calendar year which contains less than twelve (12) full
calendar months shall be determined by multiplying the Operating Expense
Increase for such calendar year by a fraction, the numerator of which is the
number of days in such calendar year and the denominator of which is three
hundred and sixty-five (365).
5.2.1 In the event that at the end of any Lease Year
(including the expiration of the final lease year of the Term), Tenant's
Proportionate Share of the actual Increase in Real Estate Taxes and/or actual
Increase in Operating Expense exceed the amount paid by Tenant during the
period,
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Landlord shall promptly bill Tenant for such excess and Tenant shall promptly
pay such excess amount to Landlord in a lump sum payment. Should Tenant's
Proportionate Share of the actual Increase in Real Estate Taxes and/or actual
Increase in Operating Expense be less than the amount paid by Tenant during the
period, Landlord shall credit Tenant with such amout and at Landlord's option,
apply such credit to the payment of Rent or Additional Charges.
5.3 Tenant shall pay all license and permit fees required for the
operation of its business or equipment within the Premises, and all taxes and
increase in taxes, including but not limited to ad valorem taxes, levied and
assessed by any governmental body on the personal property located in the
Premises and on any special leasehold improvements installed in the Premises or
by virtue of Tenant conducting its described use, business or operation on the
Premises, the employment of agents, servants, or other third parties, the
bringing, keeping or selling of personal property or chattel, or whatsoever
nature from the Premises. The foregoing is intended to bind Tenant to pay, and
promptly discharge, all taxes and/or levies, together with related interest and
penalties, whether assessed by federal or state authority or any political
subdivision thereof, directly or indirectly related to its business,
improvements, functioning, employment, assets, existence, sales, entertainment
or the like. Tenant specifically agrees to reimburse Landlord for any increase
in ad valorem taxes resulting from use of fixtures or improvements by Tenant
which Landlord becomes obligated to pay (except Building Standard leasehold
improvements which by the terms of this Lease become a part of the Building upon
installation).
6. SECURITY DEPOSIT.
6.1 Tenant agrees to deposit with Landlord on the date it executes this
Lease an amount equal to the monthly Rent which sum shall be held by Landlord,
without obligation for interest, as security for the full, timely and faithful
performance of Tenant's covenants and obligations under this lease, it being
expressly understood and agreed that such deposit is not an advance rental
deposit or a measure of Landlord's damages in case of Tenant's default. Upon the
occurrence of any event of default by Tenant, Landlord may, from time to time,
without prejudice to any other remedy provided herein or provided by law, use
such fund to the extent necessary to make good any arrears of rent or other
payments due Landlord hereunder, and any other damage, injury, expense or
liability caused by any event of Tenant's default; and Tenant shall pay to
Landlord on demand the amount so applied in order to restore the security
deposit to its original amount. Although the security deposit shall be deemed
the property of the Landlord, and remaining balance of such deposit shall be
returned by landlord to Tenant at such time after termination of this lease when
Landlord shall have determined that all Tenant's obligations under this lease
have been fulfilled. Subject to the other terms and conditions contained in this
lease, if the Building is conveyed by Landlord, said deposit may be turned over
to Landlord's grantee, and if so, Tenant hereby releases Landlord from any and
all liability with respect to said deposit and its application or return.
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7. PERMITTED USE.
7.1 Tenant shall use and occupy the Premises only for the Permitted Use
set forth in Section 1.1.17 and for no other purpose. Tenant shall not use or
permit the use of the Premises in a manner that (i) violate any law or
requirement of public authorities, (ii) cause structural injury to the Building
or any part thereof, (iii) interfere with the normal operations of the HVAC,
plumbing or other mechanical or electrical systems of the Building or the
elevators installed therein, (iv) increase the ratio of employees to net
rentable area greater than one hundred forty (140) square feet per person; (v)
constitute a public or private nuisance, (vi) alter the appearance of the
exterior of the Building or of any portion of the interior other than the
Premises, (vii) violate or fail to comply with the Building Rules and
Regulations attached hereto as Exhibit "B", as they may be changed from time to
time by Landlord, Landlord to act reasonably in making such changes, or (viii)
cause or result in any occurrence which in the good faith judgment of Landlord,
is disreputable.
7.2 Tenant shall, at Tenant's sole cost and expense, fully, diligently
and in a timely manner, comply with all "Legal Requirements", which term is used
in this Lease to mean all laws, rules, regulations, ordinances, directives,
covenants, easements and restrictions of record, permits, the requirements of
any applicable fire, insurance, life or safety policy, underwriter or rating
bureau, and the reasonable recommendations of Landlord's engineers and/or
consultants as to any health, safety or environmental issue.
7.3 Tenant further represents, covenants and warrants that Tenant will
continuously occupy and do business from the entire Premises during the Term and
Tenant acknowledges that said representation is a material inducement to
Landlord to enter into this Lease.
8. UTILITIES AND SERVICES.
8.1 Throughout the Term, Landlord agrees that, subject to Legal
Requirements and the terms hereof, and during such time as Tenant is not in
default hereunder, Landlord shall furnish the following services:
(i) heat, air-conditioning and ventilation in the Premises, Monday
through Friday from 7:00 a.m. to 6:00 p.m. and Saturday from 7:00
a.m. to 1:00 p.m., excluding Sundays and national holidays, to the
extent necessary for the comfortable occupancy of the Premises
under normal business operations with customary office equipment
and in the absence of the use of any non-customary machines,
lights, equipment or devices which adversely affect the temperature
otherwise maintained in the Premises;
(ii) city water from the regular Building fixtures for drinking,
lavatory and toilet purposes only;
(iii) customary cleaning and janitorial services in the Premises
Monday through Friday, excluding national holidays. Janitorial
services shall be provided in a
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manner equivalent to other comparable office buildings in Tulsa,
subject to work limitations as may be set forth in any applicable
union or other collective bargaining agreement with Landlord. Such
services shall not include washing dishes, cups and/or similar
items;
(iv) subject to break-down, maintenance and repairs, normal
passenger elevator service and normal freight elevator service in
common with Landlord, other tenants and visitors to the Building,
Monday through Friday from 7:00 a.m. to 6:00 p.m. and on Saturdays
from 7:00 a.m. to 1:00 p.m., Sundays and national holidays
excepted. Such normal elevator service, if furnished at other
times, shall be optional with Landlord, and shall never be deemed a
continuing obligation. Landlord, however, shall provide limited
passenger elevator service daily at all times such normal passenger
service is not furnished subject to such reasonable security
regulations as may be prescribed by Landlord from time to time.
Operatorless automatic elevator service shall be deemed "elevator
service" within the meaning of this paragraph.
(v) electricity for normal business usage. Tenant's use of
electrical energy in the Premises shall not at any time exceed the
capacity of any of the electrical conductors and equipment in or
otherwise serving the Premises. Landlord shall furnish only 120/208
volt, single phase service to the Premises. Tenant shall not
utilize any electric equipment within the Premises with a rated
capacity in excess of 0.5 kilowatts. Lighting in the Premises shall
not exceed 2 watts per square foot and overall utilization of
electricity in the Premises shall not exceed 3 watts per square
foot. To insure that such capacity is not exceeded and to avert
possible adverse effects upon the Building electric service, Tenant
shall not connect additional reproducing equipment, electronic data
processing equipment, heating equipment, or special lighting in
excess of Building Standard.
8.2 Except as hereinafter provided, Landlord shall not be obligated to
furnish any services or utilities, other than those stated in Section 8.1 above.
If Landlord elects to furnish services requested by Tenant in addition to those
listed in Section 8.1, or at times other than those stated in Section 8.1,
Tenant shall pay to Landlord the prevailing charges in the Building for such
services on the due date of the next monthly installment of Base Rental.
Notwithstanding anything contained herein to the contrary and notwithstanding
any approval thereof by Landlord, all costs for extraordinary, unusual or
excessive demand for electrical or other utility service and all costs of
submetering or monitoring of such use shall be borne by Tenant and Landlord
reserves the right to impose an additional charge on tenant for extraordinary,
unusual or excessive demand for electrical or other utility service in an amount
reasonably determined by landlord to be due for such extraordinary, unusual or
excessive demand. These unusual costs include, but are not limited to, 24-hour
service, high consumption equipment, high concentration lighting, additional
HVAC supplement for equipment or lighting-induced heat build-up and installation
of metering equipment. Landlord reserves the right to install, at Tenant's sole
cost and expense, submeters and related equipment, relating to Tenant's use of
electrical or other utilities services. If Landlord consents thereto (which
consent may be withheld by Landlord for any reason whatsoever), additional
Building riser capacity for electricity or other utility services may be
provided, and the cost thereof, including twenty percent (20%) thereof for
overhead, shall be paid by Tenant
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upon Landlord's demand. If Tenant fails to make any payment hereunder, Landlord
may, without notice to Tenant and in addition to Landlord's other remedies under
this Lease, discontinue any or all of such additional or after-hour services.
8.3 Failure to any extent to furnish or any stoppage or interruption of
these defined services resulting from any cause beyond the reasonable control of
Landlord shall not render Landlord liable in any respect for damages to property
or business, nor be construed as an actual or constructive eviction, in whole or
in part, nor relieve Tenant from any of its obligations under this Lease, nor
entitle Tenant to any abatement or diminution of Rent.
9. QUIET ENJOYMENT.
9.1 Tenant, upon payment of the Rent and other charges as may be
provided in this Lease, and performing all covenants and agreement herein
contained on the part of Tenant as provided in this Lease, and subject in all
cases to the terms, covenants and conditions in this Lease, Tenant shall
peaceably and quietly have, hold and enjoy the Premises for the Term and subject
to the terms and provisions hereof, against all parties lawfully claiming
adversely thereto by, through or under Landlord.
10. ASSIGNMENT AND SUBLETTING.
10.1 Except as hereinafter provided, Tenant shall not, either
voluntarily or by operation of law, assign, mortgage, pledge, sell, hypothecate
or transfer this Lease, or sublet the Premises or any part thereof, or permit or
suffer the Premises or any part thereof to get used or occupied as work space,
storage space, concession or otherwise by anyone other than Tenant or Tenant's
employees, without the prior written consent of Landlord in each instance.
Landlord's consent required hereunder may be withheld for any reason whatsoever
in its sole, exclusive and absolute discretion.
10.2 Each request for consent to an assignment or subletting shall be
made in writing at least thirty (30) days before the proposed effective date,
and shall be accompanied by information relevant to Landlord's determination as
to the financial and operational responsibility and appropriateness of the
proposed assignee or sub-lessee, including but not limited to the intended use
and/or required modification of the Premises, if any, together with a
non-refundable deposit of $1,000, as reasonable consideration for Landlord's
consideration for Landlord's considering and processing the request for consent.
Tenant agrees to provide Landlord with such other and additional information
and/or documentation as may be reasonably requested by Landlord.
10.3 Any assignee or, or sub-lessee under, this Lease shall, by reason
of accepting such assignment or entering into such sublease, be deemed, for the
benefit of Landlord, to have assumed and agreed to conform and comply with each
and every term, covenant, condition and obligation herein to be observed or
performed by Landlord during the term of said assignment or sublease, other than
such obligations as are contrary to or inconsistent with provisions of an
assignment or sublease to which Landlord has specifically consented in writing.
10.4 If the rent specified in any such assignment or subletting
documents exceeds the rent specified to be paid by Tenant under this Lease,
and/or in the event additional consideration is paid or is payable to Tenant on
account of such assignment or subletting, the rent specified herein shall
thereupon
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be deemed to be increased in an amount equal to one hundred percent (100%) such
excess and/or such additional consideration (which consideration shall be
amortized over the balance of the unexpired Lease Term), as the case may be, and
Tenant shall thereafter be responsible for the prompt payment to Landlord of
such increased rent. In no event, however, shall Tenant execute an assignment or
sublease calling for the payment of Rent in an amount less than the Rent herein
specified. In the event of any approved sublease or assignment, Tenant shall not
be released or discharged from any liability, whether past, present or future,
under this Lease, including any renewal term of this Lease.
10.5 If Tenant is a corporation, any transfer of any of Tenant's issued
and outstanding capital stock or any issuance of additional capital stock, as a
result of which the majority of the issued and outstanding capital stock of
Tenant is held by a Person who does not hold a majority of the issued and
outstanding capital stock of Tenant on the date hereof shall constitute an
assignment. If Tenant is a partnership, any transfer of any interest in the
partnership or any other change in the composition of the partnership which
results in a change in the control of Tenant from the Person controlling the
partnership on the date hereof shall constitute an assignment. If Tenant is a
corporation whose shares of stock are not traded publicly, any transfer, on a
cumulative basis, of twenty-five percent (25%) or more of the voting control of
Tenant shall constitute an assignment.
10.6 Tenant hereby irrevocably assigns to Landlord all of Tenant's
right, title and interest in and to, and hereby grants to Landlord the right to
collect, all rents from any assignee of Tenant's interest in this Lease and from
any subtenant of all or any part of the Premises, whether or not such assignment
or sublease is in violation of this Section; provided that, so long as no Event
of Default is in existence hereunder, Tenant may continue to collect rent from
the assignee or sublessee, as the case may be. Landlord shall apply any amounts
collected pursuant to the preceding sentence to the rents reserved in this
Lease, but neither any such assignment, subletting, occupancy or use, whether
with or without Landlord's prior consent, nor any such collection or
application, shall be deemed a waiver of any term, covenant or condition of this
Lease or the acceptance by Landlord of such assignee, subtenant, occupant or
user as tenant.
10.7 Any sale, assignment, hypothecation or transfer of this Lease or
subletting of Premises that is not in compliance with this Section 10 shall be
void and shall, at the option of Landlord, terminate this Lease.
10.8 The consent by Landlord to an assignment or subletting shall not
relieve Tenant or any assignee of this Lease or sub-lessee of the Premises from
obtaining the consent of Landlord to any further assignment or subletting or as
releasing Tenant or any assignee or sub-lessee of Tenant from full and primary
liability.
11. RECAPTURE.
11.1 If Tenant desires to enter into any sublease or assignment of all
or any portion of the Premises, Landlord shall have the option to recapture from
the Premises covered by this Lease, the space proposed to be sublet or assigned
by Tenant, effective as of the proposed commencement date of sublease or
assignment of said space by Tenant. Landlord may exercise said option by giving
Tenant written notice after receipt by Landlord of Tenant's notice of the
proposed sublease or assignment or
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proposal to sublease or assign. If Landlord exercises said option, Tenant shall
surrender possession of the proposed sublease or assigned space to Landlord on
the effective date of recapture of said space from the Premises covered by this
Lease, and neither party hereto shall have any further rights or liabilities
with respect to said space under this Lease accruing after the effective date
thereof. Provided, however, such recapture shall not release or discharge either
party from any obligation that has accrued thereunder prior to such recapture.
Effective as of the date of recapture of any subleased space of any portion of
the Premises covered by this Lease pursuant to this paragraph, (i) the Rent
shall be reduced in the same proportion as the number of square feet of Net
Rentable Area contained in the portion of the Premises so recaptured bears to
the number of square feet of Net Rentable Area contained in the Premises
immediately prior to such recapture, and (ii) the Net Rentable Area of the
Premises specified in Section 1.1.8 shall be decreased by the number of square
feet of Net Rentable Area contained in the portion of the Premises so
recaptured.
12. MAINTENANCE AND REPAIRS.
12.1 Landlord shall repair and maintain the structural elements and
exterior windows of the Building and the Common Areas, and the electrical,
plumbing, heating, ventilation and air conditioning systems of the Building and
the Common Areas, except that:
(i) Landlord shall not be responsible for the maintenance, repair
or replacement of any such systems which are located within the
Premises which are supplemental or in addition to the Building's
standard systems, whether installed pursuant to the Work Letter or
otherwise; and
(ii) the cost of performing any of said maintenance or repairs
caused by the negligence of Tenant, its employees, agents,
servants, licensees, subtenants, contractors or invitees, or the
failure of Tenant to perform its obligations under this Lease
shall be paid by Tenant.
Landlord's obligations under the preceding sentence shall not accrue until after
notice by Tenant to Landlord of the necessity for any specific repair delivered
to the Landlord's Notice Address.
12.2 Except as otherwise set forth in Section 12.1, Tenant shall,
throughout the term of this Lease, at Tenant's sole cost and expense keep the
Premises and every part thereof in good condition and repair, except for
ordinary wear and tear. Tenant shall make all repairs and replacements to the
Premises necessitated or caused by the acts, omissions or negligence of Tenant,
Tenant's Group or any person or entity claiming through or under Tenant or any
of Tenant's Group or by the use or occupancy or manner of use or occupancy of
the Premises by Tenant or any such person or entity.
12.3 There shall be no abatement or diminution of rent and no liability
of Landlord by reason of any injury or interference with Tenant's business
arising from the making of any repairs or maintenance in or to any portion of
the Premises. If repairs or replacements become necessary which by the terms of
this Lease are the responsibility of Tenant and Tenant fails to make the repairs
or replacements, Landlord may make the repairs or replacements and Tenant shall
upon demand pay to Landlord one hundred and twenty percent (120%) of the
reasonable cost thereof.
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12.4 The Common Areas and Complex shall be subject to the control,
management, operation and maintenance of Landlord. Landlord shall have the right
to construct, maintain and operate lighting and other facilities in the Building
and in and on the Complex and Common Areas; to grant third-parties temporary
rights of use thereof; from time to time to change the area, level, location or
arrangement of parking areas and other facilities; to grant exclusive use of or
lease the Common Areas to other persons; to close all or any portion of the
Complex and Common Areas; to close all or any part of the parking areas or
parking facilities; and to do and perform such other acts in and to the
Building, the Complex and Common Areas as Landlord shall determine to be
advisable. Landlord will operate and maintain the Common Areas in such manner,
as Landlord, in its sole discretion, shall determine from time to time.
12.5 Tenant shall, and shall cause Tenant's Group to, comply with and
observe the Rules and Regulations which are attached hereto as Exhibit "B".
Landlord shall have the right from time to time to modify and enforce Rules and
Regulations with respect to the Complex, including the Common Areas, and to
assign its rights and responsibilities for the Common Areas and Complex to a
manager or other person.
13. ALTERATIONS.
13.1 Tenant's Alterations shall be subject to this Section 13 and to
any Work Letter as long as the terms of said Work Letter is consistent with this
Section 13. Tenant shall not make or cause to be made any Alteration in or to
the Premises, without the prior written consent of Landlord, which consent may
be withheld for any reason whatsoever. Tenant shall not be permitted to make any
Alteration to any life, safety, fire sprinkler, heating, ventilation, air
conditioning, electrical or plumbing system or equipment. Any modifications to
these systems will be performed by Landlord, and if such modifications are made
by Landlord at Tenant's request, or resulting from Tenant's Alterations on or to
the Premises, such modifications shall be at the sole cost and expense of Tenant
plus twenty percent (20%) representing Landlord's overhead costs.
13.2 Notwithstanding Landlord's consent to any Alterations, all
Alterations, whether made prior to or during the Term, shall be made and
performed in conformity with and subject to the following provisions:
(i) All Alterations shall be made and performed at Tenant's sole cost
and expense and at such time and in such manner as Landlord may
reasonably from time to time designate.
(ii) Alterations shall be made only by contractors or mechanics
approved by Landlord.
(iii) No Alteration shall adversely affect any part of the Building
other than the Premises or adversely affect any service required to be
furnished by Landlord to Tenant or to any other tenant or occupant of
the Building.
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(iv) All business machines and mechanical equipment shall be placed and
maintained by Tenant in settings sufficient in Landlord's reasonable
judgment to absorb and prevent vibration, noise and annoyance to other
tenants or occupants of the Building.
(v) Tenant shall submit to Landlord reasonably detailed plans and
specifications for each proposed Alteration and shall not commence any
such Alteration without first obtaining Landlord's written approval of
such plans and specifications.
(vi) All Alterations shall be made and in full compliance with all
Legal Requirements and in accordance with the Rules and Regulations.
(vii) All materials and equipment to be incorporated in the Premises as
a result of all Alterations shall be of good quality.
(viii) Tenant shall include in its contract documents for the
Alterations a requirement that any contractor performing Alterations to
carry and maintain at all times during the performance of the work, at
no expense to Landlord, a policy of commercial general liability
insurance, including contractor's liability coverage, contractual
liability coverage, completed operations coverage, contractor's
protective liability coverage, and a broad form property damage
endorsement, naming Landlord and any other person or entity as Landlord
may request, as additional insured(s), with such policy to afford
protection to a combined single limit of not less than $1,000,000 per
occurrence with respect to bodily injury or death or damage to
property; and workmen's compensation or similar insurance in the form
and amounts required by the laws of the State of Oklahoma, and shall
use all commercially reasonable efforts to enforce such requirement.
(ix) Tenant shall provide instruments of indemnification and defense
against any and all claims, costs, expenses, damages and liabilities
which may arise in connection with such work, all in such form, content
and amount as may be satisfactory to Landlord.
(x) Prior to commencement of any such work or delivery of any materials
into the Premises, Tenant shall provide Landlord with evidence
reasonably satisfactory to Landlord of Tenant's ability to pay for such
work and materials in full. At Landlord's option, Landlord may require
Tenant to secure at Tenant's own cost and expense a completion and lien
indemnity bond approved by Landlord, which approval will not be
unreasonably withheld.
13.3 Tenant shall permit Landlord, if Landlord so desires, to monitor
construction operations in connection with such work; provided, however, that
such monitoring or right to monitor by Landlord and the approval or disapproval
of plans and specifications for such work in any situation shall be for the
Landlord's sole benefit and shall not constitute any warranty by Landlord to
Tenant or any other person of the adequacy of the design, workmanship or quality
of such work or materials for Tenant's intended use or impose any liability upon
Landlord in connection with the performance of such work.
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13.4 Tenant shall, within thirty (30) days of completion of any of its
work, deliver to Landlord an "as-built" drawing and/or a CAD disk of such work
prepared and certified by a licensed architect.
13.5 Except for Tenant's Trade Fixtures, all Alterations to or on the
Premises (including but not limited to carpets, drapes and anything bolted,
nailed, plumbed or otherwise secured in a manner customarily deemed to be
permanent) shall be deemed to be a fixture inuring to the Building and becoming
a part of the Premises and shall be and remain the property of Landlord without
compensation or credit to Tenant; provided however, Landlord may waive its
ownership right as to any Alteration by written notification of same to Tenant.
Any replacements of any property of Landlord whether made at Tenant's expense or
otherwise, shall be and remain the property of Landlord. Unless otherwise
directed by Landlord, Tenant shall remove all Trade Fixtures and those
Alterations of which Landlord has waived ownership from the Premises, upon the
expiration or sooner termination of this Lease, at Tenant's expense, and subject
to the condition that (i) Tenant must repair any and all damage occasioned by
the installation, use and/or removal of such Alteration, and (ii) the Premises
must be immediately restored to its former condition. In the event Tenant shall
fail to remove the same, Landlord may do so on Tenant's behalf and at Tenant's
expense.
13.6 If Tenant defaults under this Section by reason of making of any
Alteration not hereby authorized or by reason of failure to give any notice or
to obtain any approval required herein, Tenant may cure such default by promptly
removing such Alteration and restoring the Leased Premises to their former
condition.
13.7 Tenant shall not erect or install any sign or other type display
whatsoever either upon the exterior of the Building or the Complex, upon or in
any window, or in any lobby, hallway or door therein located, without the prior
express written consent of Landlord. Landlord agrees to provide a directory of
the names and locations of its tenants and to maintain the same at a convenient
location in the lobby of the Building. The initial listing of the name and room
number of the tenant shall be furnished without charge to the Tenant. The
listing of additional names or room numbers and changes or revisions of listings
shall be made by Landlord at the cost of Tenant.
13.8 Tenant shall not permit any lien or claim for lien of any
mechanic, laborer or supplier or any other lien to be filed against the Complex,
the Building, the Common Areas, the land which comprises the Complex, the
Premises, or any part of such property arising out of work performed, or alleged
to have been performed by, or at the direction of, or on behalf of Tenant or
otherwise arising from the acts or omissions of Tenant. If any such lien or
claim for lien is filed, Tenant shall immediately give notice to Landlord and
Tenant shall within five (5) business days after such filing either have such
lien or claim for lien released of record or shall deliver to Landlord a bond or
other security in form, content, amount, and issued by a company satisfactory to
Landlord indemnifying Landlord, the Building manager and others designated by
Landlord against the total amount claimed and all costs and liabilities,
including attorneys' fees, which may result from such lien or claim for lien and
the foreclosure or attempted foreclosure thereof. If Tenant fails to have such
lien or claim for lien so released or to deliver such bond to Landlord,
Landlord, without investigating the validity of such lien, may pay or discharge
the same and Tenant shall reimburse Landlord upon demand for the amount so paid
by Landlord, including Landlord's expenses. including interest expense, and
attorneys' fees.
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14. ALLOCATION OF RISKS AND INDEMNIFICATION.
14.1 To the fullest extent permitted by law, Tenant waives the right
and covenants not to sue Landlord or Landlord's Group on any claim of any kind,
past, present, or future, arising from or allegedly arising from the condition
of the Premises, the Building, the Complex or adjoining or related areas or
equipment, from Tenant's use and occupancy of the Premises, from any accident in
or around the Premises, Building, or Complex or from the negligence or other
fault of Landlord or any other Person. Tenant also agrees and covenants not to
sue Landlord or Landlord's Group on any claim, past, present or future, for
inconvenience, interference, loss, or damage arising or allegedly arising from
work done in or about the Premises, the Building, the Complex or adjoining or
related areas and equipment or from any failure, delay, or interruption of any
service or services to be furnished pursuant to this Lease. This waiver and
covenant not to sue is intended to prevent any and all such claims by Tenant
against Landlord, whether for damage sustained by Tenant or for indemnification
or contribution or otherwise. Tenant agrees to insure itself against the above
claims, but this shall in no way limit the scope of Tenant's covenant not to
sue.
14.2 Tenant agrees to obtain from the insurance companies providing any
insurance coverages required herein permission to allow Tenant to waive its
rights of subrogation. Further, Tenant hereby releases and relieves Landlord and
waives its entire right to recover damages (whether in contract or in tort)
against the Landlord, for loss of or damage to Tenant's property arising out of
or incident to the perils required to be insured against under Section 15. The
effect of such release and waiver of the right to recover damages shall not be
limited by the amount of insurance carried or required, or by any deductibles
applicable thereto.
14.3 To the fullest extent permitted by law, Tenant covenants and
agrees to indemnify, defend and hold harmless Landlord and Landlord Group
against and from all claims, demands, liabilities, costs and expenses (including
reasonable attorneys' fees) arising from or alleged to arise from (i) any
occurrence in, upon or about the Premises or adjoining or related areas during
the term of this Lease, (ii) Tenant's use, occupancy, repairs, maintenance, or
Alteration of the Premises or adjoining or related areas and all improvements,
fixtures, equipment and personal property thereon, (iii) any act or omission of
Tenant or Tenant's Group, (iv) any default of Tenant hereunder, or (v) for any
other occurrence in any way related to the existence or performance of this
Lease. Both parties intend this indemnification agreement to be effective
regardless of the negligence or other fault of Landlord. Tenant agrees to insure
itself for its indemnification, defense and hold harmless agreements hereunder,
but this shall in no way limit the scope of Tenant's indemnification, defense
and hold harmless obligations hereunder. This indemnification shall survive the
expiration or sooner termination of this Lease.
14.4 In the event of Tenant's failure to perform in accordance with
this Section 14, Landlord, at its option, may so perform without relieving
Tenant of its obligations hereunder, and Tenant shall reimburse Landlord for all
costs and expenses, including attorneys' fees, incurred in so performing
together with interest on the amount of such costs and expenses at the highest
permissible legal rate, the prime rate of interest announced as charged from
time to time by Bank of Oklahoma Tulsa, N.A. to its preferred commercial
customers for ninety-day unsecured loans plus two (2) points
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(and if such rate ceases to be announced by Bank of Oklahoma Tulsa, N.A., then
eighteen percent (18%) per annum), payable from the date incurred by Landlord
until reimbursed by Tenant. To the fullest extent permitted by law, Landlord
covenants and agrees to indemnify, defend and hold harmless Tenant and Tenant's
Group against and from all claims, demands, liabilities, costs and expenses
arising from or alleged to arise from the gross negligence or willful misconduct
of Landlord; PROVIDED, HOWEVER, in no event shall Landlord be liable for injury
to business or loss of profits.
14.5 Security devices and services, if any, while intended to deter
crime may not in given instances prevent theft or other criminal acts and it is
agreed that Landlord shall not be liable for injuries or losses caused by
criminal acts of third parties and the risk that any security device or service
may malfunction or otherwise be circumvented by a criminal is assumed by Tenant.
Tenant shall at Tenant's cost obtain insurance coverage to the extent Tenant
desires protection against such criminal acts.
14.6 Landlord shall not be liable for any damages arising from any act
or neglect of any other tenant in the Building or Complex.
15. INSURANCE.
15.1 Tenant, at its expense, shall maintain in force during the Term:
(i) comprehensive general liability insurance, which shall include
coverage for contractual liability, broad form property damage,
products/complete operations, and independent contractors to cover
personal injury (with Exclusions pertaining to contractual and
employment liability deleted), bodily injury (including death) and
property damage, all on an occurrence basis with respect to the
business carried on, in or from the Premises and Tenant's use and
occupancy of the Premises with coverage for any one occurrence or
claim of $1,000,000 or such other amount as Landlord may
reasonably require of other tenants upon not less than six (6)
months' prior written notice;
(ii) insurance on an All Risk basis for the replacement value of
Tenant's property (including fixtures, leasehold improvements and
equipment which Tenant is required to replace under this Lease in
the event of loss, damage or destruction); located in the Premises
and such other insurance against such other perils and in such
amounts as Landlord may from time to time reasonably require upon
not less than 90 days' prior written notice.
15.2 All insurance required to be maintained by Tenant shall be on
terms and with insurers reasonably acceptable to Landlord. Each policy shall
contain a waiver by the insurer of any rights of subrogation or indemnity or any
other claim as provided in Section 11.2. These policies shall name Tenant and
Landlord as insured and shall name
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any other person, firms or corporations designated by Landlord in accordance
with the following endorsement to Tenant's insurance policies:
It is hereby agreed and understood that the following entities are
added as additional insured, and the Condition of this policy regarding
Other Insurance is deleted so that this insurance is primary insurance
for the following entities; provided, however, that the provisions of
this endorsement apply only to claims or losses arising out of or in
connection with any Lease between the Named Insured and Williams
Headquarters Building Company, its successors and assigns:
---------------------------------------
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It is further agreed and understood that with respect to the
above-named entities, being named herein as additional insured shall in
no way waive or prejudice their rights against the Named Insured or any
other Insured, such that for purposes of coverage hereunder, an action
by any of the above-named entities against any other Insured or the
Named Insured shall be treated as if a separate policy had been issued
to each; provided, however, that nothing herein shall be deemed to
increase the Company's limit of liability for all Insured beyond the
limit shown elsewhere in this policy.
15.3 Such insurance shall contain a clause that the policy will not
lapse, be canceled or be materially changed except after not less than 30 days
prior written notice to Landlord of the intended change, lapse or cancellation.
Upon execution of this Lease and annually thereafter, Tenant shall furnish to
Landlord certificates of insurance in the form of Exhibit "D" hereto duly
executed by or on behalf of Tenant's insurers. In the event of loss, Tenant
shall, upon written notice by Landlord, provide Landlord a certified copy of any
policy required hereunder within ten (10) days of the date of receipt of notice.
15.4 Tenant shall have the option to self-insure the above-required
insurance coverage of Tenant. Further, with respect to any insurance coverage
required to be maintained by Landlord, Landlord shall have the option to
self-insure.
16. DEFAULTS AND REMEDIES.
16.1 In the event of a default as herein described on the part of the
Tenant, Landlord shall have the following remedies:
16.1.1 Bankruptcy: If Tenant shall make an assignment for benefit
of creditors or like arrangements or composition, or file a petition in the
federal court for reorganization or otherwise seek relief under any bankruptcy
or insolvency law, federal or state, or be placed in the hands of a receiver or
trustee, then Landlord may, at its election and without further notice or
demand, and either with or without entry upon the Premises at its discretion, at
any time thereafter, cancel this Lease and be
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thereafter entitled to recover damages in an amount equal to the Rental which,
but for termination of this Lease, would have become due during the remainder of
the Term, which amount shall be accelerated and due in one lump sum payment upon
demand and shall bear interest at the prime rate of interest announced as
charged from time to time by Bank of Oklahoma Tulsa, N.A. to its preferred
commercial customers for ninety-day unsecured loans plus two (2) points (and if
such rate ceases to be announced by Bank of Oklahoma Tulsa, N.A., then eighteen
percent (18%) per annum), or the maximum legal rate allowable under then current
law, whichever is greater, from the date of default until paid.
16.1.2 Non-Payment of Rent and Other Defaults: If Tenant: (i)
fails at any time to pay rent upon the day the same shall become delinquent; or
(ii) fails to perform any of the other terms, conditions or covenants of the
Lease by said Tenant to be performed, and such failure shall continue for a
period of twenty (20) days (or shorter period in cases where it is necessary to
protect the peace, health or safety of the Building or of other tenants), after
service of written notice of such failure by Landlord to Tenant; then Landlord
may enter into and upon the Premises or any part thereof and repossess the same,
with or without terminating this Lease, and without prejudice to any of its
remedies for rent or breach of covenant, and, in any such event may, at its
option, terminate said Lease by giving written notice of its election so to do,
or may, at its option, lease the Premises or any part thereof as the agent of
Tenant, or otherwise. In the event rent for re-letting of the Premises is higher
than the Rental under the terms of this Lease, then such excess shall belong to
Landlord and Tenant shall have no claim thereto.
16.1.3 Non-Payment for Utilities and Services: In the event of
default by Tenant in the payment for utilities and services required hereunder,
including, without limitation, electricity, heat, air conditioning, water,
sewage, janitorial services, garbage disposal and other utilities and services,
Landlord may, in its sole discretion, and in addition to all other remedies
under this Lease cease to provide such services and utilities to the Premises,
upon five (5) days written notice to Tenant, without liability, directly or
indirectly, therefor, and Tenant shall not be entitled to any abatement or
reduction of rent by reason of Landlord's exercise of such right to discontinue
the foregoing services, nor shall any such stoppage or interruption be construed
as an eviction, or relieve Tenant from the obligation to perform any covenant or
agreement herein.
16.1.4 Right of Landlord to Make Repairs or Alterations: Landlord
shall have the right, at Tenant's cost, to make reasonable repairs, alterations
and additions to restore the Premises to its condition upon commencement of this
Lease, ordinary wear and tear excepted, (including, but not limited to, Work
Letter items) or, at Landlord's election, to Building Standard condition for the
purposes of re-letting the Premises.
16.1.5 Property of the Tenant: Any property belonging to Tenant or
to any person holding by, through or under Tenant, or otherwise found upon the
Premises at the time of termination by Landlord, may be removed therefrom and
stored in any warehouse, at the cost of and for the account of Tenant and
disposed of accordingly.
16.1.6 Re-letting, Costs of Alterations and Damages: Upon any
re-letting, Tenant shall be immediately liable to pay to Landlord, without
further demand or process of law, the cost and
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expense of such re-letting, the cost of any alterations and repairs deemed
necessary by Landlord to effect such re-letting, and the full amount, if any, by
which the Rental reserved in this Lease for the period of such reletting (but
not beyond the term of this Lease) exceeds the amount agreed to be paid as rent
for the Premises for such period of re-letting. If the Landlord elects to
terminate this Lease, Landlord may recover from Tenant all damages Landlord may
incur by reason of Tenant's failure to pay Rent reserved in this Lease for the
remainder of the stated term over the then reasonable rental value of the
Premises for the remainder of such term, all of which amount shall be
immediately due and payable by Tenant to Landlord.
16.1.7 Acceleration: If (i) Tenant fails to pay Basic Rent or
Additional Charges within five (5) days after the date on which such Basic Rent
or Additional Charges are due, and (ii) such failure to pay occurs two times
within any period of twelve (12) consecutive months, Landlord may, in addition
to its other remedies under this Lease, by written notice to Tenant, declare the
Basic Rent payable under this Lease for the next six (6) months (or at
Landlord's option, for a lesser period) to be due and payable within ten (10)
days after the date of such notice.
16.1.8 Additional Remedies: In the event of any breach or
threatened breach by Tenant of any covenants, agreements, terms or conditions
made in this Lease, Landlord shall be entitled to enjoin such breach or
threatened breach and, in addition to the rights and remedies provided
hereunder, shall have any other right or remedy allowed at law or equity, by
statute or otherwise. The provisions of this section shall be construed
consistent with the law of Oklahoma so that remedies of Landlord herein
described shall be available to Landlord to the full extent but only to the
extent that they are valid or enforceable under the law of Oklahoma.
16.1.9 Remedies Cumulative: The foregoing rights and remedies
given to Landlord are and shall be deemed to be cumulative, and the exercise of
any of them shall not be deemed to be an election excluding the exercise by
Landlord at any time, of a different or inconsistent remedy, and shall be deemed
to be given to Landlord in addition to any other and further rights granted to
said Landlord by the terms hereof, or by law, and the failure of Landlord at any
time to exercise any right or remedy herein granted or established by law shall
not be deemed to operate as a waiver of its right to exercise such right or
remedy at any other future time.
17. ATTORNEYS' FEES.
If legal counsel is retained by Landlord for the purpose of recovery of
possession of the Premises, for the recovery of Rent or any other amount due
under the provisions of this Lease, or because of Tenant's failure to keep or
perform any other covenant herein contained, Tenant agrees to pay all reasonable
legal expenses, including a reasonable attorneys' fees, incurred in connection
therewith.
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18. SURRENDER OF PREMISES.
18.1 Upon the expiration or termination of this Lease or termination of
Tenant's right of possession of the Premises, Tenant shall surrender and vacate
the Premises immediately and deliver possession thereof to Landlord in a clean,
good and tenantable condition, ordinary wear and tear excepted, and shall
surrender all keys for the Premises to Landlord at the place then fixed for the
payment of rent. Upon any termination which occurs other than by reason of
Tenant's default, Tenant shall be entitled to remove from the Premises all
unattached and movable Trade Fixtures, any Alterations owned by Tenant, and
personal property of Tenant ("Tenant Property") without credit or compensation
from Landlord for the costs of removal, provided Tenant immediately shall repair
all damage resulting from such removal and shall restore the Premises to its
pre-existing condition prior to removal. In the event possession of the Premises
is not immediately delivered to Landlord when due, or if Tenant, prior to such
time, shall fail to remove any Tenant Property, Landlord may remove same without
any liability to Tenant. Any such Tenant Property which may be removed prior to
the date of termination of the right of possession of the Premises by Tenant and
which are not so removed, shall, at the option of Landlord, be conclusively
presumed to have been abandoned by Tenant and title to such property shall pass
to Landlord without any payment or credit and Landlord may, at its option and at
Tenant's expense, store and/or dispose of such property, or Landlord may have
such fixtures and property removed and stored at Tenant's expense.
19. DAMAGE BY FIRE OR OTHER CASUALTY.
19.1 Substantial Untenantability: If either the Premises or the
Building is rendered substantially untenantable by fire or other casualty,
Landlord shall elect by giving Tenant written notice within sixty (60) days
after the date of said fire or casualty, either to:
(i) terminate this Lease as of the date of the fire or other casualty;
or
(ii) proceed to repair or restore the Premises or the Building (other
than leasehold improvements and personal property installed by or on
behalf of Tenant) to substantially the same condition as existed
immediately prior to such fire or casualty.
19.1.1 If Landlord elects to proceed pursuant to subsection (2)
above, Landlord's notice shall contain Landlord's reasonable estimate of the
time required to substantially complete such repair or restoration. If such
estimate indicates that the time so required will exceed 270 days from the date
of the notice, then Tenant shall have the right to terminate this Lease as of
the date of such casualty by giving written notice to Landlord not later than
twenty (20) days after the date of Landlord's notice which termination shall be
effective as of the later to occur of (i) the date of such casualty or (ii) the
date Tenant vacates the Premises. Tenant shall vacate the Premises within ten
(10) days of the date such notice of termination is given. If Landlord's
estimate indicates that the repair or restoration can be substantially completed
within 270 days, or if Tenant fails to exercise its said right to terminate this
Lease within the twenty (20) days as provided immediately above, this Lease
shall remain in force and effect.
19.2 Insubstantial Untenantability: If either the Premises or the
Building is damaged by fire or other casualty but is not rendered substantially
untenantable, then Landlord shall diligently proceed to repair and restore the
damaged portions thereof, other than the leasehold improvements and
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personal property installed by or on behalf of Tenant, to substantially the same
condition as such existed immediately prior to such fire or casualty, unless
such damage occurs during the last twelve (12) months of the Term, in which
event Landlord shall have the right to terminate this Lease as of the date of
such fire or other casualty by giving written notice to Tenant within thirty
(30) days after the date of such fire or other casualty.
19.2.1 Provided, however, in the event Landlord does so determine
to terminate this Lease in accordance with the provisions of this Section 19.2,
Landlord shall use reasonable efforts to relocate Tenant under this Lease to
other space in the Building for the balance of time remaining in the Lease Term
hereunder for the Premises. Any such relocation shall be at Tenant's expense,
subject to the rights of other tenants in the Building and the relocation space
shall be leased to Tenant on the same terms and conditions of this Lease in
"AS-IS/WHERE-IS" condition. If Landlord and Tenant do not agree on the space to
which the Premises are to be relocated or the timing of such relocation, this
Lease shall terminate on the date which is thirty (30) days after Tenant's
receipt of the foregoing Landlord's termination notices.
19.3 Rent Abatement: If all or any part of the Premises are damaged by
fire or other casualty and this Lease is not terminated as hereinabove provided,
Monthly Base Rental shall abate for that part of the Premise which are
untenantable on a per diem and proportionate area basis from the date three (3)
business days after the date of the fire or other casualty causing such damage
until such time as Landlord has substantially completed the repair and
restoration work in the Premises which it is required to perform, provided, that
as a result of such fire or other casualty, Tenant does not occupy the portion
of the Premises which are untenantable during such period.
19.4 Tenant's Restoration: If all or any part of the Premises are
damaged by fire or other casualty and this Lease is not terminated, Tenant shall
promptly and with due diligence repair and restore the leasehold improvements
(other than improvements which Tenant is permitted to remove in accordance with
the terms of this Lease upon expiration of the Lease) and personal property
previously installed by Tenant pursuant to this Lease.
19.5 In case of any insurance proceeds payable to Landlord and Tenant,
for damage to the lease hold improvements, Tenant agrees to endorse checks for
such sums promptly to the order of Landlord. Landlord shall retain such proceeds
if the Lease is terminated pursuant to the provisions hereinabove contained. If
however, the Lease is not terminated as provided hereinabove, Tenant or its
contractors shall be entitled to payment from such retained funds for repairing,
restoring or reconstructing the leasehold improvements promptly upon Tenant's
presenting to Landlord proper waivers of materialmen's and mechanic's liens or
claims and an itemized statement of work performed showing the amount charged
therefor. Further, such work shall be performed by Tenant in accordance with the
terms, provisions and conditions of a work letter agreement to be entered into
by the parties hereto at such time in a form then in general use by Landlord for
work performed in or upon the Building. If, upon completion of the repair or
restoration, any such insurance proceeds are left unexpended, Landlord shall pay
the same to Tenant, upon demand. If the insurance proceeds are insufficient for
the cost of the repair or restoration, Tenant shall pay the same to the extent
of such insufficiency.
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19.6 If Tenant does not commence promptly to repair or restore the
damage or destruction, or if, having commenced the repair or restoration, Tenant
does not proceed diligently to complete the same, Landlord shall be entitled at
any time thereafter to enter the Premises and repair or restore the damage or
destruction and to apply any insurance proceeds held by it as hereinabove
provided to the payment of the cost thereof. If the insurance proceeds are
insufficient for the cost of the repair or restoration, Tenant shall pay to
Landlord, upon demand and as additional rent as the work progresses, such
amounts as shall from time to time be shown to be due and payable by Tenant.
20. EMINENT DOMAIN.
20.1 Permanent Taking: If all or any part of the Premises, Complex or
the Building is permanently taken or condemned by any competent authority for
any public use or purpose (including a deed given in lieu of condemnation) which
renders the Premises substantially untenantable, this Lease shall terminate as
of the date title vests in such authority, and Monthly Base Rental shall be
apportioned as of such date.
20.2 Insubstantial Taking: If any part of the Premises is taken or
condemned for any public use or purpose (including a deed given in lieu of
condemnation) and this Lease is not terminated pursuant to Section 20.1, Monthly
Base Rent shall be reduced for the period of such taking by an amount which
bears the same ratio to the Monthly Base Rent then in effect as the number of
square feet of Net Rentable Area in the Premises so taken or condemned bears to
the number of square feet of Net Rentable Area specified in Section 2.1.2.
Landlord, upon receipt and to the extent of the award in condemnation or
proceeds of sale, shall make necessary repairs and restorations (exclusive of
leasehold improvements and personal property installed by Tenant) to restore the
Premises remaining to as near its former condition as circumstances will permit.
Upon the taking or condemnation described in this Section 20.2, the Net Rentable
Area of the premises stated in Section 2.1.2 shall be reduced for all purposes
under this Lease by the number of square feet of Net Rentable Area of the
Premises so taken or condemned as determined and certified by an independent,
professional architect selected by Landlord, at Landlord's expense.
20.3 Compensation: Landlord shall be entitled to receive the entire
price or award from any such sale, taking or condemnation without any payment to
Tenant, and Tenant hereby assigns to Landlord Tenant's interest, if any, in such
award.
21. RULES AND REGULATIONS.
21.1 Tenant agrees that it will abide by, and keep and observe all
reasonable rules and regulations ("Rules and Regulations") which Landlord may
make from time to time for the management, reputation, safety, care, or
cleanliness of the Building or Premises, or the operations and maintenance
thereof and the equipment therein, or for the comfort of Tenant and the other
tenants of the Building. Landlord shall have the right to change said rules and
waive in writing any or all of said rules in the case of any one or more
tenants. All such Rules and Regulations are of the essence hereof without which
this Lease would not have been entered into by the Landlord, and any breach of
any provision of these Rules and Regulations by the Tenant which is material in
the judgment of the Landlord shall constitute a default hereunder.
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22. LANDLORD'S RIGHTS.
22.1 Landlord shall have the following rights exercisable without
notice (except as expressly provided to the contrary), and without being deemed
an eviction or disturbance of Tenant's use or possession of the Premises or
giving rise to any claim for set-off or abatement of Rent: (1) To change the
name or street address of the Building or the Complex upon 30 days' prior
written notice to Tenant; (2) To designate and/or approve, install, affix and
maintain all signs, including Tenant plaques, logos and graphics, on the
exterior and/or interior of the Building and in and about the Complex; (3) To
designate and/or approve prior to installation, all types of signs, window
shades, blinds, drapes, awnings or other similar items, and all internal
lighting that may be visible from the exterior of the Premises; (4) To display
the Premises to prospective tenants at reasonable hours; (5) To change the
arrangement of entrances, doors, corridors, elevators and stairs in the
Building; (6) To grant to any party the exclusive right to conduct any business
or render any service in or to the Building; (7) To prohibit the placing of
vending or dispensing machines of-any kind in or about the Premises; (8) To have
access for Landlord and other tenants of the Building to any mail chutes and
boxes located in or on the Premises according to the rules of the United States
Post Office; (9) To close the Building after normal business hours, except that
Tenant and its employees and invitees shall be entitled to admission at all
times under such regulations as Landlord prescribes for security purposes; (10)
To take any and all reasonable measures, including inspections and repairs to
the Premises or to the Building, as may be necessary or desirable in the
operation or protection thereof; (11) To retain at all times master keys or pass
keys to the Premises; (12) To install, operate and maintain security systems
which monitor and identify, by closed circuit television or otherwise, all
persons entering and leaving the Building or the Complex; (13) To install and
maintain pipes, ducts, conduits, wires and structural elements located in the
Premises which serve other parts or other tenants of the Building or any other
property; (14) To reasonably alter, amend and change the rules and regulations
for protection of the health, safety and welfare of persons or property; and
(15) To enter the Premises at all reasonable times following notice of such
desired entry to Tenant provided that Tenant shall make available to Landlord a
designated individual within the Premises to accompany Landlord in such instance
to examine the Premises and to show such to prospective purchasers, mortgagees,
lessees, or tenants of Landlord, or to public officials lawfully having an
interest therein. In the event Tenant fails to make available to Landlord an
individual to accompany Landlord in any particular instance, Landlord shall not
be required to be accompanied by a tenant designee; and Landlord shall further
not be required to give notice of any such entry in the case of emergency as
reasonably determined by Landlord. Said enumerated rights are in addition to all
other rights of Landlord afforded under law and the terms of this Lease.
23. ESTOPPEL CERTIFICATE.
23.1 Each party hereto shall from time to time, upon no less than ten
(10) days' prior written request from the other or any mortgagee or ground
lessor of the Complex, deliver to the other or such mortgagee or ground lessor a
statement in writing certifying:
(i) That this Lease and the Work Letter are unmodified and in full
force and effect or, if there have been modifications, that this
Lease and the Work Letter, as modified, are in full force and
effect;
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(ii) The amount of Base Rent then payable under this Lease and the
date to which Rent has been paid;
(iii) That the requesting party is not in default under this Lease
or any work letter agreement, or, if in default, a detailed
description of such default(s);
(iv) That Tenant is or is not in possession of the Premises, as
the case may be; and,
(v) Such other information as may be reasonably requested.
24. REAL ESTATE BROKERS.
24.1 Tenant represents that, except for the broker, if any, identified
in Section 1.1.4 of this Lease as Tenant's Broker, Tenant has not dealt with any
real estate broker, salesperson, or finder in connection with this Lease, and no
such person initiated or participated in the negotiation of this Lease, or
showed the Premises to Tenant. Tenant agrees to indemnify, defend and hold
harmless Landlord and Landlord's Group from and against any and all liabilities
and claims for commissions and fees arising out of a breach of the foregoing
representation. Landlord shall only be responsible for the payment of all
commissions to the broker, if any, identified in Section 1.1.4 of this Lease,
based upon the leasing commission policy of Landlord applicable to the Building
or Complex as of the date of this Lease.
25. SUBORDINATION AND ATTORNMENT.
25.1 Subordination: It is understood and agreed that this Lease
(including all rights of the Tenant hereunder) is subject and subordinate to any
ground lease or underlying lease of the land comprising the Building or Complex
(hereinafter called "Ground Lease") which may now or hereafter affect the land
or Building or Complex of which the Premises form a part and is further subject
and subordinate to any mortgage or deed of trust or trust indenture (hereinafter
called "Mortgage") which may now or hereafter affect any such lease or the real
property of which the Premises form apart, and to any and all advances made
under any such mortgage and to the interest thereon, and all renewals,
replacements and extensions thereof. This section shall be self-operative and no
further instrument or subordination shall be required, but Tenant shall
nevertheless at any time hereafter, on the demand of Landlord, execute any
instruments, releases or other documents that may be required by any such
mortgage holder or ground lessor or any of their respective successors in
interest to evidence such subordination. If in connection with the financing
(existing or future financing) of the Building or Complex, the holder of any
such mortgage, or with respect to any bond financing, the trustee for any such
bond holders, shall request reasonable modifications in this Lease as a
condition of approval of such financing, Tenant will not unreasonably withhold,
delay or defer making such modifications, provided that they do not unreasonably
increase the obligations of Tenant hereunder or materially and adversely affect
the leasehold interest created by this Lease. In the event of termination of
this Lease through foreclosure of any mortgage to which this Lease is
subordinated, or if the ground lease is terminated, Tenant will upon the demand
of the purchaser of the Premises at the foreclosure sale
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thereof, or of the lessor under the ground lease, attorn to and accept such
purchaser or ground lessor as landlord under this Lease or, upon demand, enter
into a new Lease agreement with such purchaser or ground lessor for the
unexpired term of this Lease as extended pursuant to the terms hereunder at the
same rent and under the same provisions of this Lease. It is further agreed by
Tenant that this Lease shall be subject and subordinate at all times to any
other arrangement or right to possession under which Landlord is in control of
the Premises, and to the rights of the owner or owners of the Premises, the
Building, the Complex or the land of which the Building or Complex is a part.
25.1 Attornment: In the event of the cancellation or termination of any
such ground lease in accordance with its terms or by the surrender of such
ground leasehold estate, whether voluntary, involuntary or by operation of law,
or by summary proceedings, or the foreclosure of any such mortgage or deed of
trust by voluntary agreement or deed in lieu of foreclosure or otherwise, or the
commencement of any judicial action seeking such foreclosure, Tenant, at the
request of the then Landlord, shall attorn to and recognize such ground lessor,
mortgagee, beneficiary, or purchaser in foreclosure as Tenant's Landlord under
this Lease. Tenant agrees to execute and deliver at any time upon request of
such ground lessor, mortgagee, beneficiary, purchaser, or their successors, any
instrument to further evidence such attornment. Landlord shall be and hereby is
appointed Tenant's attorney-in-fact for the sole purpose of executing any
instrument to evidence such attornment upon request as herein provided.
26. NOTICES.
26.1 Any Notice which the Landlord may desire to or be required to give
to Tenant shall be deemed to be sufficiently given or rendered, if in writing,
hand delivered to Tenant by certified or registered mail, return receipt
requested, addressed to Tenant at the address shown in Section 1.1.18 hereof,
and any Notice which Tenant may desire or be required to give to Landlord shall
be deemed sufficiently given or rendered, if in writing, delivered to Landlord
by certified or registered mail, return receipt requested, at the address
provided in Section 1.1.7, or other such places as Tenant or Landlord may from
time to time designate in writing. Any Notice given hereunder shall be deemed
delivered when the return receipt is signed or refusal to accept the Notice is
noted thereon or five (5) days after mailing, if mailed as herein provided.
27. MISCELLANEOUS.
27.1 Parties: Except as otherwise expressly provided herein, if more
than one person or entity is named herein as either Landlord or Tenant, the
obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Landlord or
Tenant.
27.2 Non-Waiver: The failure of Landlord to seek redress for violation
of, or to insist upon the strict performance of, any covenant or condition of
the Lease or of any of the Rules and Regulations incorporated herein or
hereafter adopted by Landlord, shall not prevent a subsequent act, which would
have originally constituted a violation, from having all the force and effect of
an original violation. The receipt by Landlord of rent with knowledge of the
breach of any covenant of this Lease, or breach of the Rules and Regulations,
shall not be deemed a waiver of such breach. The failure of Landlord to enforce
any of the Rules and Regulations as incorporated herein or hereafter adopted
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against Tenant and/or any other tenant in the Building shall not be deemed a
waiver of any such Rules and Regulations.
No act or thing done or omitted to be done by Landlord or Landlord's
agents during the term of the Lease, which is necessary to enforce the terms of
the Lease, or the Building Rules and Regulations, shall constitute an eviction
by Landlord nor shall it be deemed an acceptance or surrender of said Premises,
and no agreement to accept such surrender shall be valid unless in writing
signed by Landlord. No employee of Landlord or Landlord's agent shall have any
power to accept the keys of said Premises prior to the termination of the Lease.
The delivery of keys to any employee of Landlord or Landlord's agents shall not
operate as a termination of the Lease or a surrender of the Premises.
27.3 Late Charges: All delinquent Rent shall bear interest at the
greater of (i) the highest rate permitted by law, or (ii) the prime rate of
interest announced as charged from time to time by Bank of Oklahoma Tulsa, N.A.
to its preferred commercial customers for ninety-day unsecured loans plus two
(2) points (and if such rate ceases to be announced by Bank of Oklahoma Tulsa,
N.A., then eighteen percent (18%) per annum), from the date due until paid.
27.4 Entire Agreement: This Lease, the Exhibits and any Riders
identified herein and attached hereto contain the entire agreement between
Landlord and Tenant concerning the Premises and there are no other
representations, promises or agreements, either oral or, written. All
negotiations, considerations, representations and understandings between the
parties are incorporated herein and are superseded hereby. There are no terms,
obligations, covenants, statements, representations, warranties or conditions
relating to the subject matters hereof other than those specifically contained
herein.
27.5 Landlord and Tenant Defined: The words "Landlord" and "Tenant",
wherever used in this Lease, shall be construed to mean Landlords and Tenants in
all cases where there is more than one landlord or tenant, and the necessary
grammatical changes required to make the provisions hereof apply either to
corporations or individuals, men or women, shall in all cases be assumed as
though in each case fully expressed. With respect to the provisions hereof
regarding indemnification or waiver of liability of the Landlord, the term
"Landlord" shall be deemed to include any third party operator or owner of the
Building.
27.6 No Reservation/Option: The execution of this Lease by Tenant and
delivery of same to Landlord or Manager does not constitute a reservation of or
option for the Premises or an agreement to enter into a Lease and this Lease
shall become effective only if and when Landlord executes and delivers same to
Tenant; provided, however, the execution and delivery by Tenant of this Lease to
Landlord or the Manager shall constitute an irrevocable offer by Tenant to lease
the Premises on the terms and conditions herein contained, which offer may not
be withdrawn or revoked for thirty (30) days after such execution and delivery.
If Tenant is a corporation, it shall, if requested by Landlord, deliver to
Landlord certified resolutions of Tenant's directors authorizing execution and
delivery of this Lease and the performance by Tenant of its obligations
hereunder. If Tenant is a partnership, every general partner thereof shall
execute this Lease, unless a lesser number is deemed sufficient in the
reasonable opinion of Landlord's legal counsel.
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27.7 Amendment: This Lease may not be amended or modified by any act or
conduct of the parties or by oral agreements unless reduced and agreed to in
writing signed by both Landlord and Tenant. No waiver of any of the terms of
this Lease by Landlord shall be binding upon Landlord unless reduced to writing
and signed by Landlord.
27.8 Consent: Unless otherwise expressly provided herein, Landlord may,
in its sole discretion, withhold consents or approvals required hereunder.
Notwithstanding anything to the contrary contained in this Lease, due to the
fact that damages are not readily ascertainable, if any provision of this Lease
obligates Landlord not to unreasonably withhold its consent or approval, an
action for declaratory judgment or specific performance will be Tenant's sole
right and remedy in any dispute as to whether Landlord has breached such
obligation.
27.9 Holdover: In the event Tenant remains in possession of the
Premises after the expiration or termination of the term, and without the
execution of a new lease, Tenant, at the option of Landlord, shall be deemed to
be occupying the Premises as a Tenant from month-to-month and the Rental due for
each month of continued occupancy shall be two hundred percent (200%) of the
immediately preceding month.
27.10 Accord and Satisfaction: No payment by Tenant or receipt by
Landlord of a lesser amount than any installment or payment of Rental due shall
be deemed to be other than on account of the amount due, and no endorsement or
statement on any check or any letter accompanying any check or payment of Rental
shall be deemed an accord and satisfaction, and Landlord may accept such check
or payment without prejudice to Landlord's right to recover the balance of such
installment or payment of Rental or pursue any other remedies available to
Landlord. No receipt of money by Landlord from Tenant after the termination of
this Lease or Tenant's right of possession of the Premises shall reinstate,
continue or extend the Term.
27.11 Binding Effect: This Lease shall be binding upon and inure to the
benefit of Landlord and Tenant and their respective heirs, legal
representatives, successors and permitted assigns.
27.12 Force Majeure: Landlord shall not be deemed in default with
respect to any of the terms, covenants and conditions of this Lease on
Landlord's part to be performed, if Landlord fails to timely perform same and
such failure is due in whole or in part to an Unavoidable Delay as defined in
Section 1.2.14 or by any act or omission caused directly or indirectly by Tenant
or Tenant's Group. In the event of an occurrence under this Section 27.12
preventing Landlord from performing any obligation as herein provided, Landlord
shall give Tenant notice thereof as soon as reasonably practicable and Landlord
shall exercise commercially reasonable efforts to resume performance hereunder.
27.13 Captions: The headings of the several articles, paragraphs and
sections contained herein are for convenience only and do not define, limit or
construe the content or scope of such articles, paragraphs and sections.
27.14 Applicable Law: This Lease shall be construed in accordance with
the laws of the State in which the Building is located.
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27.15 Time: Time is of the essence of this Lease and the performance of
all obligations hereunder.
27.16 Landlord's Right to Perform: If Tenant fails timely to perform
any of its duties under this Lease or any work letter, Landlord shall have the
right (but not the obligation), after the expiration of any grace period
elsewhere under this Lease or the work letter expressly granted to Tenant for
the performance of such duty, to perform such duty on behalf and at the expense
of Tenant without further prior notice to Tenant, and all reasonable sums
expended or expenses incurred by Landlord in performing such duty shall be
deemed to be additional Rent under this Lease and shall be due and payable upon
demand by Landlord.
27.17 Licenses and Permits: Tenant shall be solely responsible for
obtaining, all licenses and/or permits as may be required for Tenant to lawfully
conduct its business in the Premises.
28. SPECIAL PROVISIONS.
28.1 All exhibits and riders attached hereto, if any, shall form part
of this Lease as if same were embodied herein.
/ / /
/ / /
/ / /
/ / /
/ / /
/ / /
/ / /
29. OTHER.
This Lease was executed by the parties on the date first above written.
LANDLORD:
<TABLE>
<S> <C>
ATTEST: WILLIAMS HEADQUARTERS BUILDING COMPANY
a Delaware corporation
- -------------------
Secretary or Assistant Secretary [Seal]
By:
-----------------------------------
Printed:
------------------------------
Title:
-------------------------------
TENANT:
ATTEST: THE WILLIAMS COMPANIES, INC.,
a Delaware corporation
- -------------------
Secretary or Assistant Secretary [Seal]
By:
-----------------------------------
Printed:
------------------------------
Title:
-------------------------------
</TABLE>
The Lease must be executed for Tenant by the President or Vice-President and
must be attested by the Secretary or Assistant Secretary, unless the by-laws or
a resolution of the Board of Directors shall provide that other officers are
authorized to execute the Lease, in which event, a certified copy of the by-laws
or resolution, as the case may be, must be furnished. Tenant's corporate seal
must be affixed.
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EXHIBIT 10.15
WILLIAMS TECHNOLOGY CENTER
TULSA, OKLAHOMA
LEASE
THE WILLIAMS COMPANIES, INC.
THIS LEASE ("Lease"), dated for reference purposes only, January 1,
1999, is made by and between WILLIAMS HEADQUARTERS BUILDING COMPANY, a Delaware
corporation ("Landlord") and WILLIAMS COMMUNICATIONS GROUP, INC. ("Tenant"),
(collectively the "Parties", or individually a "Party").
WITNESSETH: Upon and subject to the terms of this Lease, Landlord
hereby leases to Tenant and Tenant hereby leases from Landlord, certain Premises
situated within the Building located at the Complex, for the Term, except that
Landlord reserves and Tenant shall have no right in and to (a) the use of the
exterior faces of all perimeter walls of the Building, (b) the use of the roof
of the Building except as otherwise expressly provided herein (if at all), or
(c) the use of the air space above the Building.
1. DEFINITIONS.
1.1 Special Lease Definitions.
1.1.1 Rent Adjustment Date: For each Lease Year, except the first (1st)
Lease Year, the first (1st) day of such Lease Year.
1.1.2 Basic Rent: The amount equal to the product obtained by multiplying
the Rentable Area of the Leased Premises by the Rent per Square Foot for
such Lease Year.
1.1.3 Basic Rent per Square Foot: As of the Commencement Date, the Basic
Rent per Square Foot is $19.50.
1.1.4 Broker: Tenant's Broker is __________. (Not Applicable.)
1.1.5 Building: Williams Technology Center located at One Williams
Center, Tulsa, Oklahoma.
1.1.6 Commencement Date: The Commencement Date is the date of Substantial
Completion of the Leased Premises.
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1.1.7 Landlord's Notice and Rent Payment Address:
Williams Headquarters Building Company
One Williams Center
Suite 2200
Tulsa, Oklahoma 74172
Attn: Property Manager
1.1.8 Net Rentable Area: The sum of: (1) the Net Useable Area which is
computed by measuring from the inside face of the exterior glass, to the
exterior side of partitions which separate the Premises from the
Building's interior nonrentable areas which are not within the Premises,
and to the center of partitions that separate the Premises from adjoining
rentable areas; plus (2) a pro-rata portion of the Building's floor area
used for corridors, elevator lobbies, ground floor lobbies, vestibules,
service and freight areas, restrooms, elevator machine rooms, telephone
closets, mechanical equipment rooms and other similar facilities provided
for the benefit of all tenants of the Building, visitors to the Building,
or Landlord. No deduction shall be made for columns or projections
necessary to the Building. As of the Commencement Date of this Lease the
Premises' Net Rentable Area is approximately 366,696 square feet.
1.1.9 Operating Expense Base: For each square foot of Building Rentable
Area, the sum of Landlord's Operating Expenses for calendar year 2001
divided by the Building Rentable Area.
1.1.10 Operating Expense Increases: For the first complete lease year
(containing all 12 months, January through and including December) and
each complete lease year thereafter commencing during the Term, an amount
equal to Tenant's Proportionate Share of the excess of Landlord's
Operating Expenses for such calendar year over the product obtained by
multiplying the Operating Expense Base by the Building Rentable Area;
provided, however, that Operating Expense Increases for the any lease
year which is not complete (containing fewer than all 12 months) shall be
determined in accordance with the provisions of Section 5.2.
1.1.11 Premises: That certain portion of the Building located on multiple
floors consisting of approximately 366,696 rentable square feet,
including all improvements therein or to be
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provided by Landlord, if any, and including all common areas of the
Building and Complex which are for the non-exclusive use of tenants in
the Building. The Delineation of the Premises is shown on Exhibit "A"
attached hereto.
1.1.12 Real Estate Tax Base: For each square foot of Building Rentable
Area, the sum of Landlord's Real Estate Taxes for calendar year 1998,
divided by the Building Rentable Area.
1.1.13 Renewal Periods: The two (2) additional periods of five years each
for which Tenant is permitted to extend the Term of this Lease. The
Option(s) to Renew terms and conditions are set forth in Exhibit "E"
attached hereto.
1.1.14 Rent Adjustment: On the fifth, tenth, and fifteenth anniversary
dates of the Commencement Date, the Basic Rent shall increase either by
(i) an amount equal to three percent (3%) of the Basic Rent or (ii) an
amount that will result in the Basic Rent being equal the fair market
rental value of the Premises, whichever amount is greater. Fair market
rental value shall be established by the procedure set forth in Exhibit
"F".
1.1.15 Rent Adjustment Dates: The Rent Adjustment Dates shall be the
fifth, tenth, and fifteenth anniversary dates of the Commencement Date.
1.1.16 Security Deposit: An amount of money paid by Tenant to Landlord
and thereafter, held by Landlord without liability for interest, as
security for the performance by Tenant of Tenant's covenants and
obligations.
1.1.17 Sole Permitted Use: The Premises are to be used and continuously
and completely occupied by Tenant solely for the purpose of general
office use.
1.1.18 Tenant's Notice Address:
After commencement:
Williams Communications Group, Inc.
One Williams Center
Suite _______
Tulsa, Oklahoma 74172
Attn: _____________________
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Prior to commencement:
Williams Communications Group, Inc.
One Williams Center
Suite _______
Tulsa, Oklahoma 74172
Attn: ______________________
1.1.19 Tenant's Proportionate Share: Fifty Percent (50%). Tenant's
Proportionate Share shall be calculated in the proportion which Tenant's
Net Rentable Area bears to Building's Net Rentable Area.
1.1.20 Term: The period of time commencing on the Commencement Date and
ending on the Termination Date.
1.1.21 Termination Date: The Termination Date is December 31, 2018.
1.2 General Lease Definitions.
1.2.1 Additional Charges: All amounts payable by Tenant to Landlord under
this Lease other than Basic Rent, including but not limited to, Operating
Expense and Real Estate Tax amounts, and amounts payable under Section
14.3. All Additional Charges shall be deemed to be additional rent and
all remedies applicable to the non-payment of Basic Rent shall be
applicable thereto.
1.2.2 Alterations: Any improvement, decoration, removal, addition,
installation or physical change made in, on or to the Premises or any
adjacent space.
1.2.3 Common Areas: All areas, improvements, space, equipment and special
services in or at the Building or at the Complex provided by Landlord, at
Landlord's discretion, for the common or joint use and benefit of
tenants, customers, and other invitees of the Building, which may include
lobbies, service areas, connecting driveways, entrances and exits,
retaining walls, landscaped areas, malls, truck serviceways or tunnels,
loading docks, pedestrian walkways, atriums, walls, courtyards,
concourses, stairs, ramps, sidewalks, washrooms, signs identifying or
advertising the Building or Complex, maintenance buildings, utility
buildings, maintenance and utility rooms and
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closets or hallways, elevators and their housing and rooms, common window
areas, walls and ceiling in Common Areas, and trash or rubbish areas.
1.2.4 Complex: The group of buildings and connecting concourses,
courtyards, bridges, and green spaces known as the Williams Center
Complex.
1.2.5 Landlord: The landlord and the Building property manager named
herein and any successors thereto.
1.2.6 Landlord Group: Landlord's officers, directors, shareholders,
agents, partners, employees, contractors, and any third party operator or
manager of the Building and/or Complex.
1.2.7 Operating Expenses: The aggregate of all costs and expenses paid or
incurred on an accrual basis by Landlord in connection with the
ownership, management, operation, insurance (including the cost of
self-insurance), and maintenance of the Building and Complex including
all utility and central plant charges of the Building, the Complex, the
grounds and land on which they are situated, and the Common Areas. If
Landlord makes an expenditure for capital improvements to the Building or
Complex which are reasonably intended to reduce Operating Expenses (which
improvements are commenced or completed during the Term) or to comply
with the request or directives of a governmental agency or body, and if
such expenditure is not a current expense under generally accepted
accounting principles, the cost thereof shall be amortized over a period
equal to the useful life of such improvements, determined in accordance
with generally accepted accounting principles, and the amortized cost
allocated to each calendar year during the Term shall be treated as an
Operating Expense.
1.2.8 Person: A natural person, a partnership, a corporation or any other
form of business or legal association or entity.
1.2.9 Real Estate Taxes: Any form of assessment, license fee, commercial
rental tax, levy, penalty, charge or tax (other than taxes on general net
income and inheritance and estate taxes) imposed by any authority having
the direct or indirect power to tax, including any city, county, state or
federal government, or any school, agricultural, lighting, drainage,
flood control, transit, special benefit or other district, as
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against any legal or equitable interest of Landlord in the Premises or in
the real property of which the Premises and the Building are a part, or
the Complex or as against Landlord's right to rent or other income
therefrom, or as against Landlord's business of leasing the Premises or
collecting rent, or any tax imposed in substitution, partially or
totally, or any tax previously included in the definition of "Real Estate
Taxes", or any additional tax the nature of which was previously included
within the definition of "Real Estate Taxes", and shall include any
increases in such taxes, levies, charges or assessments occasioned by
increases in tax rates or increases in assessed valuations, whether
occurring by sale or otherwise.
1.2.10 Tenant: The tenant named herein and any permitted assignee under
Section 10.
1.2.11 Tenant Group: Tenant's partners, directors, officers,
shareholders, employees, agents, contractors, servants, licensees,
invitees, visitors, and permitted subtenants and/or assignees.
1.2.12 Tenant Improvements: That work necessary to complete the Premises
prior to the Commencement Date and accomplished pursuant to the terms and
conditions of the As-Is Work Letter attached hereto as Exhibit "D".
1.2.13 Trade Fixtures: Tenant's machinery and equipment that can be
removed from the Premises without doing material damage to the Premises.
1.2.14 Unavoidable Delays: Delays caused by strikes, acts of God,
lockouts, labor difficulties, riots, explosions, sabotage, accidents,
inability to obtain labor or materials, governmental restrictions, enemy
action, civil commotion, fire, unavoidable casualty or any other cause
beyond the reasonable control of Landlord.
2. EXHIBITS. The following exhibits and riders are attached hereto and
incorporated herein by this reference:
Exhibit "A" Delineation of the Premises
Exhibit "B" Rules and Regulations
Exhibit "C" Certificate of Insurance
Exhibit "D" Work Letter
Exhibit "E" Option(s) to Renew
Exhibit "F" Appraisal Procedure/Market Rate
Rider "1"
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3. TERM.
3.1 The Term shall be twenty (20) years and zero (0) months commencing on the
Commencement Date and expiring on the Termination Date.
3.2 If Landlord is unable to give possession of the Premises on the
Commencement Date by reason of holding over of any Tenant or because
construction, repairs, or improvements being made or to be made by Landlord are
not substantially completed, rent shall abate for the period that possession by
Tenant is delayed unless Tenant caused (in whole or in part) such delay in which
case rent shall not abate, but under no circumstances shall Landlord be
responsible for direct or consequential damages because of its inability to
furnish possession to the Tenant by any particular date. Should Tenant occupy
the Premises prior to the Commencement Date, with such prior occupancy being in
all respects fully approved in writing by the Landlord, all terms of this Lease
shall then commence and the Term of this Lease and the rental provided herein
shall go into effect (being prorated if necessary) as of the date of such prior
occupancy. It is mutually agreed that the Commencement Date under such prior
occupancy shall be the date Tenant takes occupancy of the Premises and that the
Termination Date stated above shall remain in effect. When the Commencement Date
and Termination Date have been determined as provided herein, Landlord shall
deliver and Tenant shall execute a statement specifying the Commencement Date
and the Termination Date of the Term.
4. CONDITION.
4.1 It is hereby understood and acknowledged by Tenant that Landlord is
leasing the Premises to Tenant in "as is" condition with all faults and Landlord
has made no representation or warranty, express or implied, with respect to the
condition of the Premises, the Building or the Complex or with respect to their
suitability for the conduct of Tenant's business, except as expressly set forth
herein. Tenant acknowledges that Tenant has inspected the Premises, and that the
Premises are in a good and habitable condition. Except as expressly set forth
herein, Landlord shall have no liability to Tenant or any of Tenant's Group
arising from the condition of the Building or the Premises, and Tenant shall
defend, indemnify and hold Landlord harmless from and against any claims, causes
of action, damages and liability arising from the condition of the Premises.
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4.2 At the time Tenant surrenders the Premises at the end of the Term, or
within three (3) days thereafter, Landlord and Tenant, or their respective
agents, shall make an inspection of the Premises and shall prepare and sign an
inspection form to describe the condition of the Premises at the time of
surrender.
5. RENT.
5.1 Tenant shall pay Basic Rent for each Lease Year in equal monthly
installments in advance on the first day of each month during the Term. Basic
Rent for any period during the term hereof which is less than one full month
shall be prorated upon the actual number of days of the month involved. The
Basic Rent and all Additional Charges shall be promptly paid when due, in lawful
money of the United States, without notice or demand and without deduction,
diminution, abatement, counterclaim or setoff of any amount or for any reason
whatsoever, to Landlord at Landlord's Notice Address or at such other address or
to such other person as Landlord may from time to time designate. If Tenant
makes any payment to Landlord by check, such payment shall be by check of Tenant
and Landlord shall not be required to accept the check of any other person or
entity, and any check received by Landlord shall be deemed received subject to
collection. If any check is mailed by Tenant, Tenant shall post such check in
sufficient time prior to the date when payment is due so that such check will be
received by Landlord on or before the date when payment is due. Tenant shall
assume the risk of lateness or failure of delivery of the mails, and no lateness
or failure of the mails will excuse Tenant from its obligation to have made the
payment in question when required under this Lease. If during the Term, Landlord
receives a check from Tenant which is returned by Tenant's bank for insufficient
funds or is otherwise returned unpaid, Tenant agrees that all checks thereafter
shall either be bank certified, cashiers' or treasurers' checks. All bank
service charges resulting from any bad checks shall be borne by Tenant.
5.1.1 Tenant shall pay all Basic Rent Adjustments which shall be
determined as set forth in Section 1.1.14.
5.2 Tenant shall pay Tenant's Proportionate Share of all Increases in
Operating Expenses and Increases in Real Estate Taxes on a monthly basis in
advance, promptly on the first day of every month during the Term hereof, in
addition to installments of Rent. Tenant's Proportionate Share shall be the
percentage amount set forth in Section 1.1.9 as the same may be adjusted in the
event the Net Rentable Area of the Premises or the Building changes. Tenant's
monthly payment of Operating Expense Increases and Real Estate Tax Increases for
each year shall be determined by an estimated forecast reasonably prepared by
Landlord and submitted to
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Tenant in writing as soon as practicable near the beginning of each calendar
year. In no event shall Tenant's payment of its Operating Expense Increase and
Real Estate Tax Increase be less than an amount equal to that amount paid by
Tenant during the immediately preceding calendar year. Tenant's obligation to
pay its Operating Expense Increase and Real Estate Tax Increase in any calendar
year which contains less than twelve (12) full calendar months shall be
determined by multiplying the Operating Expense Increase for such calendar year
by a fraction, the numerator of which is the number of days in such calendar
year and the denominator of which is three hundred and sixty-five (365).
5.2.1 In the event that at the end of any Lease Year (including the
expiration of the final lease year of the Term), Tenant's Proportionate Share of
the actual Increase in Real Estate Taxes and/or actual Increase in Operating
Expense exceed the amount paid by Tenant during the period, Landlord shall
promptly bill Tenant for such excess and Tenant shall promptly pay such excess
amount to Landlord in a lump sum payment. Should Tenant's Proportionate Share of
the actual Increase in Real Estate Taxes and/or actual Increase in Operating
Expense be less than the amount paid by Tenant during the period, Landlord shall
credit Tenant with such amout and at Landlord's option, apply such credit to the
payment of Rent or Additional Charges.
5.3 Tenant shall pay all license and permit fees required for the operation
of its business or equipment within the Premises, and all taxes and increase in
taxes, including but not limited to ad valorem taxes, levied and assessed by any
governmental body on the personal property located in the Premises and on any
special leasehold improvements installed in the Premises or by virtue of Tenant
conducting its described use, business or operation on the Premises, the
employment of agents, servants, or other third parties, the bringing, keeping or
selling of personal property or chattel, or whatsoever nature from the Premises.
The foregoing is intended to bind Tenant to pay, and promptly discharge, all
taxes and/or levies, together with related interest and penalties, whether
assessed by federal or state authority or any political subdivision thereof,
directly or indirectly related to its business, improvements, functioning,
employment, assets, existence, sales, entertainment or the like. Tenant
specifically agrees to reimburse Landlord for any increase in ad valorem taxes
resulting from use of fixtures or improvements by Tenant which Landlord becomes
obligated to pay (except Building Standard leasehold improvements which by the
terms of this Lease become a part of the Building upon installation).
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6. SECURITY DEPOSIT.
6.1 Tenant agrees to deposit with Landlord on the date it executes this Lease
an amount equal to the monthly Rent which sum shall be held by Landlord, without
obligation for interest, as security for the full, timely and faithful
performance of Tenant's covenants and obligations under this lease, it being
expressly understood and agreed that such deposit is not an advance rental
deposit or a measure of Landlord's damages in case of Tenant's default. Upon the
occurrence of any event of default by Tenant, Landlord may, from time to time,
without prejudice to any other remedy provided herein or provided by law, use
such fund to the extent necessary to make good any arrears of rent or other
payments due Landlord hereunder, and any other damage, injury, expense or
liability caused by any event of Tenant's default; and Tenant shall pay to
Landlord on demand the amount so applied in order to restore the security
deposit to its original amount. Although the security deposit shall be deemed
the property of the Landlord, and remaining balance of such deposit shall be
returned by landlord to Tenant at such time after termination of this lease when
Landlord shall have determined that all Tenant's obligations under this lease
have been fulfilled. Subject to the other terms and conditions contained in this
lease, if the Building is conveyed by Landlord, said deposit may be turned over
to Landlord's grantee, and if so, Tenant hereby releases Landlord from any and
all liability with respect to said deposit and its application or return.
7. PERMITTED USE.
7.1 Tenant shall use and occupy the Premises only for the Permitted Use set
forth in Section 1.1.17 and for no other purpose. Tenant shall not use or permit
the use of the Premises in a manner that (i) violate any law or requirement of
public authorities, (ii) cause structural injury to the Building or any part
thereof, (iii) interfere with the normal operations of the HVAC, plumbing or
other mechanical or electrical systems of the Building or the elevators
installed therein, (iv) increase the ratio of employees to net rentable area
greater than one hundred forty (140) square feet per person; (v) constitute a
public or private nuisance, (vi) alter the appearance of the exterior of the
Building or of any portion of the interior other than the Premises, (vii)
violate or fail to comply with the Building Rules and Regulations attached
hereto as Exhibit "B", as they may be changed from time to time by Landlord,
Landlord to act reasonably in making such changes, or (viii) cause or result in
any occurrence which in the good faith judgment of Landlord, is disreputable.
7.2 Tenant shall, at Tenant's sole cost and expense, fully, diligently and in
a timely manner, comply with all "Legal Requirements", which term is used in
this Lease to mean all laws, rules, regulations, ordinances, directives,
covenants, easements and restrictions of record, permits, the
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requirements of any applicable fire, insurance, life or safety policy,
underwriter or rating bureau, and the reasonable recommendations of Landlord's
engineers and/or consultants as to any health, safety or environmental issue.
7.3 Tenant further represents, covenants and warrants that Tenant will
continuously occupy and do business from the entire Premises during the Term and
Tenant acknowledges that said representation is a material inducement to
Landlord to enter into this Lease.
8. UTILITIES AND SERVICES.
8.1 Throughout the Term, Landlord agrees that, subject to Legal Requirements
and the terms hereof, and during such time as Tenant is not in default
hereunder, Landlord shall furnish the following services:
(i) heat, air-conditioning and ventilation in the Premises, Monday
through Friday from 7:00 a.m. to 6:00 p.m. and Saturday from 7:00 a.m. to
1:00 p.m., excluding Sundays and national holidays, to the extent
necessary for the comfortable occupancy of the Premises under normal
business operations with customary office equipment and in the absence of
the use of any non-customary machines, lights, equipment or devices which
adversely affect the temperature otherwise maintained in the Premises;
(ii) city water from the regular Building fixtures for drinking, lavatory
and toilet purposes only;
(iii) customary cleaning and janitorial services in the Premises Monday
through Friday, excluding national holidays. Janitorial services shall be
provided in a manner equivalent to other comparable office buildings in
Tulsa, subject to work limitations as may be set forth in any applicable
union or other collective bargaining agreement with Landlord. Such
services shall not include washing dishes, cups and/or similar items;
(iv) subject to break-down, maintenance and repairs, normal passenger
elevator service and normal freight elevator service in common with
Landlord, other tenants and visitors to the Building, Monday through
Friday from 7:00 a.m. to 6:00 p.m. and on Saturdays from 7:00 a.m. to
1:00 p.m., Sundays and national holidays excepted. Such normal elevator
service, if furnished at other times, shall be optional with Landlord,
and shall never be deemed a continuing obligation. Landlord, however,
shall provide limited passenger elevator
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service daily at all times such normal passenger service is not furnished
subject to such reasonable security regulations as may be prescribed by
Landlord from time to time. Operatorless automatic elevator service shall
be deemed "elevator service" within the meaning of this paragraph.
(v) electricity for normal business usage. Tenant's use of electrical
energy in the Premises shall not at any time exceed the capacity of any
of the electrical conductors and equipment in or otherwise serving the
Premises. Landlord shall furnish only 120/208 volt, single phase service
to the Premises. Tenant shall not utilize any electric equipment within
the Premises with a rated capacity in excess of 0.5 kilowatts. Lighting
in the Premises shall not exceed 2 watts per square foot and overall
utilization of electricity in the Premises shall not exceed 3 watts per
square foot. To insure that such capacity is not exceeded and to avert
possible adverse effects upon the Building electric service, Tenant shall
not connect additional reproducing equipment, electronic data processing
equipment, heating equipment, or special lighting in excess of Building
Standard.
8.2 Except as hereinafter provided, Landlord shall not be obligated to
furnish any services or utilities, other than those stated in Section 8.1 above.
If Landlord elects to furnish services requested by Tenant in addition to those
listed in Section 8.1, or at times other than those stated in Section 8.1,
Tenant shall pay to Landlord the prevailing charges in the Building for such
services on the due date of the next monthly installment of Base Rental.
Notwithstanding anything contained herein to the contrary and notwithstanding
any approval thereof by Landlord, all costs for extraordinary, unusual or
excessive demand for electrical or other utility service and all costs of
submetering or monitoring of such use shall be borne by Tenant and Landlord
reserves the right to impose an additional charge on tenant for extraordinary,
unusual or excessive demand for electrical or other utility service in an amount
reasonably determined by landlord to be due for such extraordinary, unusual or
excessive demand. These unusual costs include, but are not limited to, 24-hour
service, high consumption equipment, high concentration lighting, additional
HVAC supplement for equipment or lighting-induced heat build-up and installation
of metering equipment. Landlord reserves the right to install, at Tenant's sole
cost and expense, submeters and related equipment, relating to Tenant's use of
electrical or other utilities services. If Landlord consents thereto (which
consent may be withheld by Landlord for any reason whatsoever), additional
Building riser capacity for electricity or other utility services may be
provided, and
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the cost thereof, including twenty percent (20%) thereof for overhead, shall be
paid by Tenant upon Landlord's demand. If Tenant fails to make any payment
hereunder, Landlord may, without notice to Tenant and in addition to Landlord's
other remedies under this Lease, discontinue any or all of such additional or
after-hour services.
8.3 Failure to any extent to furnish or any stoppage or interruption of
these defined services resulting from any cause beyond the reasonable control of
Landlord shall not render Landlord liable in any respect for damages to property
or business, nor be construed as an actual or constructive eviction, in whole or
in part, nor relieve Tenant from any of its obligations under this Lease, nor
entitle Tenant to any abatement or diminution of Rent.
9. QUIET ENJOYMENT.
9.1 Tenant, upon payment of the Rent and other charges as may be provided
in this Lease, and performing all covenants and agreement herein contained on
the part of Tenant as provided in this Lease, and subject in all cases to the
terms, covenants and conditions in this Lease, Tenant shall peaceably and
quietly have, hold and enjoy the Premises for the Term and subject to the terms
and provisions hereof, against all parties lawfully claiming adversely thereto
by, through or under Landlord.
10. ASSIGNMENT AND SUBLETTING.
10.1 Except as hereinafter provided, Tenant shall not, either voluntarily or
by operation of law, assign, mortgage, pledge, sell, hypothecate or transfer
this Lease, or sublet the Premises or any part thereof, or permit or suffer the
Premises or any part thereof to get used or occupied as work space, storage
space, concession or otherwise by anyone other than Tenant or Tenant's
employees, without the prior written consent of Landlord in each instance.
Landlord's consent required hereunder may be withheld for any reason whatsoever
in its sole, exclusive and absolute discretion.
10.2 Each request for consent to an assignment or subletting shall be made
in writing at least thirty (30) days before the proposed effective date, and
shall be accompanied by information relevant to Landlord's determination as to
the financial and operational responsibility and appropriateness of the proposed
assignee or sub-lessee, including but not limited to the intended use and/or
required modification of the Premises, if any, together with a non-refundable
deposit of $1,000, as reasonable consideration for Landlord's consideration for
Landlord's considering and processing the request for consent. Tenant agrees to
provide Landlord with
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such other and additional information and/or documentation as may be reasonably
requested by Landlord.
10.3 Any assignee or, or sub-lessee under, this Lease shall, by reason of
accepting such assignment or entering into such sublease, be deemed, for the
benefit of Landlord, to have assumed and agreed to conform and comply with each
and every term, covenant, condition and obligation herein to be observed or
performed by Landlord during the term of said assignment or sublease, other than
such obligations as are contrary to or inconsistent with provisions of an
assignment or sublease to which Landlord has specifically consented in writing.
10.4 If the rent specified in any such assignment or subletting documents
exceeds the rent specified to be paid by Tenant under this Lease, and/or in the
event additional consideration is paid or is payable to Tenant on account of
such assignment or subletting, the rent specified herein shall thereupon be
deemed to be increased in an amount equal to one hundred percent (100%) such
excess and/or such additional consideration (which consideration shall be
amortized over the balance of the unexpired Lease Term), as the case may be, and
Tenant shall thereafter be responsible for the prompt payment to Landlord of
such increased rent. In no event, however, shall Tenant execute an assignment or
sublease calling for the payment of Rent in an amount less than the Rent herein
specified. In the event of any approved sublease or assignment, Tenant shall not
be released or discharged from any liability, whether past, present or future,
under this Lease, including any renewal term of this Lease.
10.5 If Tenant is a corporation, any transfer of any of Tenant's issued and
outstanding capital stock or any issuance of additional capital stock, as a
result of which the majority of the issued and outstanding capital stock of
Tenant is held by a Person who does not hold a majority of the issued and
outstanding capital stock of Tenant on the date hereof shall constitute an
assignment. If Tenant is a partnership, any transfer of any interest in the
partnership or any other change in the composition of the partnership which
results in a change in the control of Tenant from the Person controlling the
partnership on the date hereof shall constitute an assignment. If Tenant is a
corporation whose shares of stock are not traded publicly, any transfer, on a
cumulative basis, of twenty-five percent (25%) or more of the voting control of
Tenant shall constitute an assignment.
10.6 Tenant hereby irrevocably assigns to Landlord all of Tenant's right,
title and interest in and to, and hereby grants to Landlord the right to
collect, all rents from any assignee of Tenant's interest in this Lease and from
any subtenant of all or any part of the Premises, whether or not
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such assignment or sublease is in violation of this Section; provided that, so
long as no Event of Default is in existence hereunder, Tenant may continue to
collect rent from the assignee or sublessee, as the case may be. Landlord shall
apply any amounts collected pursuant to the preceding sentence to the rents
reserved in this Lease, but neither any such assignment, subletting, occupancy
or use, whether with or without Landlord's prior consent, nor any such
collection or application, shall be deemed a waiver of any term, covenant or
condition of this Lease or the acceptance by Landlord of such assignee,
subtenant, occupant or user as tenant.
10.7 Any sale, assignment, hypothecation or transfer of this Lease or
subletting of Premises that is not in compliance with this Section 10 shall be
void and shall, at the option of Landlord, terminate this Lease.
10.8 The consent by Landlord to an assignment or subletting shall not
relieve Tenant or any assignee of this Lease or sub-lessee of the Premises from
obtaining the consent of Landlord to any further assignment or subletting or as
releasing Tenant or any assignee or sub-lessee of Tenant from full and primary
liability.
11. RECAPTURE.
11.1 If Tenant desires to enter into any sublease or assignment of all or
any portion of the Premises, Landlord shall have the option to recapture from
the Premises covered by this Lease, the space proposed to be sublet or assigned
by Tenant, effective as of the proposed commencement date of sublease or
assignment of said space by Tenant. Landlord may exercise said option by giving
Tenant written notice after receipt by Landlord of Tenant's notice of the
proposed sublease or assignment or proposal to sublease or assign. If Landlord
exercises said option, Tenant shall surrender possession of the proposed
sublease or assigned space to Landlord on the effective date of recapture of
said space from the Premises covered by this Lease, and neither party hereto
shall have any further rights or liabilities with respect to said space under
this Lease accruing after the effective date thereof. Provided, however, such
recapture shall not release or discharge either party from any obligation that
has accrued thereunder prior to such recapture. Effective as of the date of
recapture of any subleased space of any portion of the Premises covered by this
Lease pursuant to this paragraph, (i) the Rent shall be reduced in the same
proportion as the number of square feet of Net Rentable Area contained in the
portion of the Premises so recaptured bears to the number of square feet of Net
Rentable Area contained in the Premises immediately prior to such recapture, and
(ii) the Net Rentable Area of the Premises specified in Section 1.1.8 shall be
decreased by the
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number of square feet of Net Rentable Area contained in the portion of the
Premises so recaptured.
12. MAINTENANCE AND REPAIRS.
12.1 Landlord shall repair and maintain the structural elements and exterior
windows of the Building and the Common Areas, and the electrical, plumbing,
heating, ventilation and air conditioning systems of the Building and the Common
Areas, except that:
(i) Landlord shall not be responsible for the maintenance, repair or
replacement of any such systems which are located within the Premises
which are supplemental or in addition to the Building's standard
systems, whether installed pursuant to the Work Letter or otherwise;
and
(ii) the cost of performing any of said maintenance or repairs caused
by the negligence of Tenant, its employees, agents, servants,
licensees, subtenants, contractors or invitees, or the failure of
Tenant to perform its obligations under this Lease shall be paid by
Tenant.
Landlord's obligations under the preceding sentence shall not accrue until after
notice by Tenant to Landlord of the necessity for any specific repair delivered
to the Landlord's Notice Address.
12.2 Except as otherwise set forth in Section 12.1, Tenant shall, throughout
the term of this Lease, at Tenant's sole cost and expense keep the Premises and
every part thereof in good condition and repair, except for ordinary wear and
tear. Tenant shall make all repairs and replacements to the Premises
necessitated or caused by the acts, omissions or negligence of Tenant, Tenant's
Group or any person or entity claiming through or under Tenant or any of
Tenant's Group or by the use or occupancy or manner of use or occupancy of the
Premises by Tenant or any such person or entity.
12.3 There shall be no abatement or diminution of rent and no liability of
Landlord by reason of any injury or interference with Tenant's business arising
from the making of any repairs or maintenance in or to any portion of the
Premises. If repairs or replacements become necessary which by the terms of this
Lease are the responsibility of Tenant and Tenant fails to make the repairs or
replacements, Landlord may make the repairs or replacements and Tenant
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shall upon demand pay to Landlord one hundred and twenty percent (120%) of the
reasonable cost thereof.
12.4 The Common Areas and Complex shall be subject to the control,
management, operation and maintenance of Landlord. Landlord shall have the right
to construct, maintain and operate lighting and other facilities in the Building
and in and on the Complex and Common Areas; to grant third-parties temporary
rights of use thereof; from time to time to change the area, level, location or
arrangement of parking areas and other facilities; to grant exclusive use of or
lease the Common Areas to other persons; to close all or any portion of the
Complex and Common Areas; to close all or any part of the parking areas or
parking facilities; and to do and perform such other acts in and to the
Building, the Complex and Common Areas as Landlord shall determine to be
advisable. Landlord will operate and maintain the Common Areas in such manner,
as Landlord, in its sole discretion, shall determine from time to time.
12.5 Tenant shall, and shall cause Tenant's Group to, comply with and
observe the Rules and Regulations which are attached hereto as Exhibit "B".
Landlord shall have the right from time to time to modify and enforce Rules and
Regulations with respect to the Complex, including the Common Areas, and to
assign its rights and responsibilities for the Common Areas and Complex to a
manager or other person.
13. ALTERATIONS.
13.1 Tenant's Alterations shall be subject to this Section 13 and to any
Work Letter as long as the terms of said Work Letter is consistent with this
Section 13. Tenant shall not make or cause to be made any Alteration in or to
the Premises, without the prior written consent of Landlord, which consent may
be withheld for any reason whatsoever. Tenant shall not be permitted to make any
Alteration to any life, safety, fire sprinkler, heating, ventilation, air
conditioning, electrical or plumbing system or equipment. Any modifications to
these systems will be performed by Landlord, and if such modifications are made
by Landlord at Tenant's request, or resulting from Tenant's Alterations on or to
the Premises, such modifications shall be at the sole cost and expense of Tenant
plus twenty percent (20%) representing Landlord's overhead costs.
13.2 Notwithstanding Landlord's consent to any Alterations, all Alterations,
whether made prior to or during the Term, shall be made and performed in
conformity with and subject to the following provisions:
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(i) All Alterations shall be made and performed at Tenant's sole cost
and expense and at such time and in such manner as Landlord may
reasonably from time to time designate.
(ii) Alterations shall be made only by contractors or mechanics
approved by Landlord.
(iii) No Alteration shall adversely affect any part of the Building
other than the Premises or adversely affect any service required to be
furnished by Landlord to Tenant or to any other tenant or occupant of
the Building.
(iv) All business machines and mechanical equipment shall be placed and
maintained by Tenant in settings sufficient in Landlord's reasonable
judgment to absorb and prevent vibration, noise and annoyance to other
tenants or occupants of the Building.
(v) Tenant shall submit to Landlord reasonably detailed plans and
specifications for each proposed Alteration and shall not commence any
such Alteration without first obtaining Landlord's written approval of
such plans and specifications.
(vi) All Alterations shall be made and in full compliance with all
Legal Requirements and in accordance with the Rules and Regulations.
(vii) All materials and equipment to be incorporated in the Premises as
a result of all Alterations shall be of good quality.
(viii) Tenant shall include in its contract documents for the
Alterations a requirement that any contractor performing Alterations to
carry and maintain at all times during the performance of the work, at
no expense to Landlord, a policy of commercial general liability
insurance, including contractor's liability coverage, contractual
liability coverage, completed operations coverage, contractor's
protective liability coverage, and a broad form property damage
endorsement, naming Landlord and any other person or entity as Landlord
may request, as additional insured(s), with such policy to afford
protection to a combined single limit of not less than $1,000,000 per
occurrence with respect to bodily injury or death or damage to
property; and workmen's compensation or similar insurance in the form
and amounts required by the laws of the State of Oklahoma, and shall
use all commercially reasonable efforts to enforce such requirement.
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(ix) Tenant shall provide instruments of indemnification and defense
against any and all claims, costs, expenses, damages and liabilities
which may arise in connection with such work, all in such form, content
and amount as may be satisfactory to Landlord.
(x) Prior to commencement of any such work or delivery of any materials
into the Premises, Tenant shall provide Landlord with evidence
reasonably satisfactory to Landlord of Tenant's ability to pay for such
work and materials in full. At Landlord's option, Landlord may require
Tenant to secure at Tenant's own cost and expense a completion and lien
indemnity bond approved by Landlord, which approval will not be
unreasonably withheld.
13.3 Tenant shall permit Landlord, if Landlord so desires, to monitor
construction operations in connection with such work; provided, however, that
such monitoring or right to monitor by Landlord and the approval or disapproval
of plans and specifications for such work in any situation shall be for the
Landlord's sole benefit and shall not constitute any warranty by Landlord to
Tenant or any other person of the adequacy of the design, workmanship or quality
of such work or materials for Tenant's intended use or impose any liability upon
Landlord in connection with the performance of such work.
13.4 Tenant shall, within thirty (30) days of completion of any of its work,
deliver to Landlord an "as-built" drawing and/or a CAD disk of such work
prepared and certified by a licensed architect.
13.5 Except for Tenant's Trade Fixtures, all Alterations to or on the
Premises (including but not limited to carpets, drapes and anything bolted,
nailed, plumbed or otherwise secured in a manner customarily deemed to be
permanent) shall be deemed to be a fixture inuring to the Building and becoming
a part of the Premises and shall be and remain the property of Landlord without
compensation or credit to Tenant; provided however, Landlord may waive its
ownership right as to any Alteration by written notification of same to Tenant.
Any replacements of any property of Landlord whether made at Tenant's expense or
otherwise, shall be and remain the property of Landlord. Unless otherwise
directed by Landlord, Tenant shall remove all Trade Fixtures and those
Alterations of which Landlord has waived ownership from the Premises, upon the
expiration or sooner termination of this Lease, at Tenant's expense, and subject
to the condition that (i) Tenant must repair any and all damage occasioned by
the installation, use and/or removal of such Alteration, and (ii) the Premises
must be immediately restored to its former condition. In the event Tenant shall
fail to remove the
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same, Landlord may do so on Tenant's behalf and at Tenant's expense.
13.6 If Tenant defaults under this Section by reason of making of any
Alteration not hereby authorized or by reason of failure to give any notice or
to obtain any approval required herein, Tenant may cure such default by promptly
removing such Alteration and restoring the Leased Premises to their former
condition.
13.7 Tenant shall not erect or install any sign or other type display
whatsoever either upon the exterior of the Building or the Complex, upon or in
any window, or in any lobby, hallway or door therein located, without the prior
express written consent of Landlord. Landlord agrees to provide a directory of
the names and locations of its tenants and to maintain the same at a convenient
location in the lobby of the Building. The initial listing of the name and room
number of the tenant shall be furnished without charge to the Tenant. The
listing of additional names or room numbers and changes or revisions of listings
shall be made by Landlord at the cost of Tenant.
13.8 Tenant shall not permit any lien or claim for lien of any mechanic,
laborer or supplier or any other lien to be filed against the Complex, the
Building, the Common Areas, the land which comprises the Complex, the Premises,
or any part of such property arising out of work performed, or alleged to have
been performed by, or at the direction of, or on behalf of Tenant or otherwise
arising from the acts or omissions of Tenant. If any such lien or claim for lien
is filed, Tenant shall immediately give notice to Landlord and Tenant shall
within five (5) business days after such filing either have such lien or claim
for lien released of record or shall deliver to Landlord a bond or other
security in form, content, amount, and issued by a company satisfactory to
Landlord indemnifying Landlord, the Building manager and others designated by
Landlord against the total amount claimed and all costs and liabilities,
including attorneys' fees, which may result from such lien or claim for lien and
the foreclosure or attempted foreclosure thereof. If Tenant fails to have such
lien or claim for lien so released or to deliver such bond to Landlord,
Landlord, without investigating the validity of such lien, may pay or discharge
the same and Tenant shall reimburse Landlord upon demand for the amount so paid
by Landlord, including Landlord's expenses. including interest expense, and
attorneys' fees.
14. ALLOCATION OF RISKS AND INDEMNIFICATION.
14.1 To the fullest extent permitted by law, Tenant waives the right and
covenants not to sue Landlord or Landlord's Group on any claim of any kind,
past, present, or future, arising from or allegedly arising from the condition
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of the Premises, the Building, the Complex or adjoining or related areas or
equipment, from Tenant's use and occupancy of the Premises, from any accident in
or around the Premises, Building, or Complex or from the negligence or other
fault of Landlord or any other Person. Tenant also agrees and covenants not to
sue Landlord or Landlord's Group on any claim, past, present or future, for
inconvenience, interference, loss, or damage arising or allegedly arising from
work done in or about the Premises, the Building, the Complex or adjoining or
related areas and equipment or from any failure, delay, or interruption of any
service or services to be furnished pursuant to this Lease. This waiver and
covenant not to sue is intended to prevent any and all such claims by Tenant
against Landlord, whether for damage sustained by Tenant or for indemnification
or contribution or otherwise. Tenant agrees to insure itself against the above
claims, but this shall in no way limit the scope of Tenant's covenant not to
sue.
14.2 Tenant agrees to obtain from the insurance companies providing any
insurance coverages required herein permission to allow Tenant to waive its
rights of subrogation. Further, Tenant hereby releases and relieves Landlord and
waives its entire right to recover damages (whether in contract or in tort)
against the Landlord, for loss of or damage to Tenant's property arising out of
or incident to the perils required to be insured against under Section 15. The
effect of such release and waiver of the right to recover damages shall not be
limited by the amount of insurance carried or required, or by any deductibles
applicable thereto.
14.3 To the fullest extent permitted by law, Tenant covenants and agrees to
indemnify, defend and hold harmless Landlord and Landlord Group against and from
all claims, demands, liabilities, costs and expenses (including reasonable
attorneys' fees) arising from or alleged to arise from (i) any occurrence in,
upon or about the Premises or adjoining or related areas during the term of this
Lease, (ii) Tenant's use, occupancy, repairs, maintenance, or Alteration of the
Premises or adjoining or related areas and all improvements, fixtures, equipment
and personal property thereon, (iii) any act or omission of Tenant or Tenant's
Group, (iv) any default of Tenant hereunder, or (v) for any other occurrence in
any way related to the existence or performance of this Lease. Both parties
intend this indemnification agreement to be effective regardless of the
negligence or other fault of Landlord. Tenant agrees to insure itself for its
indemnification, defense and hold harmless agreements hereunder, but this shall
in no way limit the scope of Tenant's indemnification, defense and hold harmless
obligations hereunder. This indemnification shall survive the expiration or
sooner termination of this Lease.
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14.4 In the event of Tenant's failure to perform in accordance with this
Section 14, Landlord, at its option, may so perform without relieving Tenant of
its obligations hereunder, and Tenant shall reimburse Landlord for all costs and
expenses, including attorneys' fees, incurred in so performing together with
interest on the amount of such costs and expenses at the highest permissible
legal rate, the prime rate of interest announced as charged from time to time by
Bank of Oklahoma Tulsa, N.A. to its preferred commercial customers for
ninety-day unsecured loans plus two (2) points (and if such rate ceases to be
announced by Bank of Oklahoma Tulsa, N.A., then eighteen percent (18%) per
annum), payable from the date incurred by Landlord until reimbursed by Tenant.
To the fullest extent permitted by law, Landlord covenants and agrees to
indemnify, defend and hold harmless Tenant and Tenant's Group against and from
all claims, demands, liabilities, costs and expenses arising from or alleged to
arise from the gross negligence or willful misconduct of Landlord; PROVIDED,
HOWEVER, in no event shall Landlord be liable for injury to business or loss of
profits.
14.5 Security devices and services, if any, while intended to deter crime
may not in given instances prevent theft or other criminal acts and it is agreed
that Landlord shall not be liable for injuries or losses caused by criminal acts
of third parties and the risk that any security device or service may
malfunction or otherwise be circumvented by a criminal is assumed by Tenant.
Tenant shall at Tenant's cost obtain insurance coverage to the extent Tenant
desires protection against such criminal acts.
14.6 Landlord shall not be liable for any damages arising from any act or
neglect of any other tenant in the Building or Complex.
15. INSURANCE.
15.1 Tenant, at its expense, shall maintain in force during the Term:
(i) comprehensive general liability insurance, which shall include
coverage for contractual liability, broad form property damage,
products/complete operations, and independent contractors to cover
personal injury (with Exclusions pertaining to contractual and
employment liability deleted), bodily injury (including death) and
property damage, all on an occurrence basis with respect to the
business carried on, in or from the Premises and Tenant's use and
occupancy of the
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Premises with coverage for any one occurrence or claim of $1,000,000 or
such other amount as Landlord may reasonably require of other tenants
upon not less than six (6) months' prior written notice;
(ii) insurance on an All Risk basis for the replacement value of
Tenant's property (including fixtures, leasehold improvements and
equipment which Tenant is required to replace under this Lease in the
event of loss, damage or destruction); located in the Premises and such
other insurance against such other perils and in such amounts as
Landlord may from time to time reasonably require upon not less than 90
days' prior written notice.
15.2 All insurance required to be maintained by Tenant shall be on terms and
with insurers reasonably acceptable to Landlord. Each policy shall contain a
waiver by the insurer of any rights of subrogation or indemnity or any other
claim as provided in Section 11.2. These policies shall name Tenant and Landlord
as insured and shall name any other person, firms or corporations designated by
Landlord in accordance with the following endorsement to Tenant's insurance
policies:
It is hereby agreed and understood that the following entities are added
as additional insured, and the Condition of this policy regarding Other
Insurance is deleted so that this insurance is primary insurance for the
following entities; provided, however, that the provisions of this
endorsement apply only to claims or losses arising out of or in
connection with any Lease between the Named Insured and Williams
Headquarters Building Company, its successors and assigns:
------------------------------------
------------------------------------
------------------------------------
------------------------------------
It is further agreed and understood that with respect to the above-named
entities, being named herein as additional insured shall in no way waive
or prejudice their rights against the Named Insured or any other
Insured, such that for purposes of coverage hereunder, an action by any
of the above-named entities against any other Insured or the Named
Insured shall be treated as if a separate policy had been issued to
each; provided, however, that nothing herein shall be deemed to increase
the Company's limit of liability for all Insured beyond the limit shown
elsewhere in this policy.
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15.3 Such insurance shall contain a clause that the policy will not lapse,
be canceled or be materially changed except after not less than 30 days prior
written notice to Landlord of the intended change, lapse or cancellation. Upon
execution of this Lease and annually thereafter, Tenant shall furnish to
Landlord certificates of insurance in the form of Exhibit "D" hereto duly
executed by or on behalf of Tenant's insurers. In the event of loss, Tenant
shall, upon written notice by Landlord, provide Landlord a certified copy of any
policy required hereunder within ten (10) days of the date of receipt of notice.
15.4 Tenant shall have the option to self-insure the above-required
insurance coverage of Tenant. Further, with respect to any insurance coverage
required to be maintained by Landlord, Landlord shall have the option to
self-insure.
16. DEFAULTS AND REMEDIES.
16.1 In the event of a default as herein described on the part of the
Tenant, Landlord shall have the following remedies:
16.1.1 Bankruptcy: If Tenant shall make an assignment for benefit of
creditors or like arrangements or composition, or file a petition in the federal
court for reorganization or otherwise seek relief under any bankruptcy or
insolvency law, federal or state, or be placed in the hands of a receiver or
trustee, then Landlord may, at its election and without further notice or
demand, and either with or without entry upon the Premises at its discretion, at
any time thereafter, cancel this Lease and be thereafter entitled to recover
damages in an amount equal to the Rental which, but for termination of this
Lease, would have become due during the remainder of the Term, which amount
shall be accelerated and due in one lump sum payment upon demand and shall bear
interest at the prime rate of interest announced as charged from time to time by
Bank of Oklahoma Tulsa, N.A. to its preferred commercial customers for
ninety-day unsecured loans plus two (2) points (and if such rate ceases to be
announced by Bank of Oklahoma Tulsa, N.A., then eighteen percent (18%) per
annum), or the maximum legal rate allowable under then current law, whichever is
greater, from the date of default until paid.
16.1.2 Non-Payment of Rent and Other Defaults: If Tenant: (i) fails at
any time to pay rent upon the day the same shall become delinquent; or (ii)
fails to perform any of the other terms, conditions or covenants of the Lease by
said Tenant to be performed, and such failure shall continue for a period of
twenty (20) days (or shorter period in cases where it is necessary to protect
the peace, health or safety of the Building or of other tenants), after service
of written notice of such failure by Landlord to Tenant; then Landlord
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may enter into and upon the Premises or any part thereof and repossess the same,
with or without terminating this Lease, and without prejudice to any of its
remedies for rent or breach of covenant, and, in any such event may, at its
option, terminate said Lease by giving written notice of its election so to do,
or may, at its option, lease the Premises or any part thereof as the agent of
Tenant, or otherwise. In the event rent for re-letting of the Premises is higher
than the Rental under the terms of this Lease, then such excess shall belong to
Landlord and Tenant shall have no claim thereto.
16.1.3 Non-Payment for Utilities and Services: In the event of default
by Tenant in the payment for utilities and services required hereunder,
including, without limitation, electricity, heat, air conditioning, water,
sewage, janitorial services, garbage disposal and other utilities and services,
Landlord may, in its sole discretion, and in addition to all other remedies
under this Lease cease to provide such services and utilities to the Premises,
upon five (5) days written notice to Tenant, without liability, directly or
indirectly, therefor, and Tenant shall not be entitled to any abatement or
reduction of rent by reason of Landlord's exercise of such right to discontinue
the foregoing services, nor shall any such stoppage or interruption be construed
as an eviction, or relieve Tenant from the obligation to perform any covenant or
agreement herein.
16.1.4 Right of Landlord to Make Repairs or Alterations: Landlord shall
have the right, at Tenant's cost, to make reasonable repairs, alterations and
additions to restore the Premises to its condition upon commencement of this
Lease, ordinary wear and tear excepted, (including, but not limited to, Work
Letter items) or, at Landlord's election, to Building Standard condition for the
purposes of re-letting the Premises.
16.1.5 Property of the Tenant: Any property belonging to Tenant or to
any person holding by, through or under Tenant, or otherwise found upon the
Premises at the time of termination by Landlord, may be removed therefrom and
stored in any warehouse, at the cost of and for the account of Tenant and
disposed of accordingly.
16.1.6 Re-letting, Costs of Alterations and Damages: Upon any
re-letting, Tenant shall be immediately liable to pay to Landlord, without
further demand or process of law, the cost and expense of such re-letting, the
cost of any alterations and repairs deemed necessary by Landlord to effect such
re-letting, and the full amount, if any, by which the Rental reserved in this
Lease for the period of such reletting (but not beyond the term of this Lease)
exceeds the amount agreed to be paid as rent for the Premises for such
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period of re-letting. If the Landlord elects to terminate this Lease, Landlord
may recover from Tenant all damages Landlord may incur by reason of Tenant's
failure to pay Rent reserved in this Lease for the remainder of the stated term
over the then reasonable rental value of the Premises for the remainder of such
term, all of which amount shall be immediately due and payable by Tenant to
Landlord.
16.1.7 Acceleration: If (i) Tenant fails to pay Basic Rent or
Additional Charges within five (5) days after the date on which such Basic Rent
or Additional Charges are due, and (ii) such failure to pay occurs two times
within any period of twelve (12) consecutive months, Landlord may, in addition
to its other remedies under this Lease, by written notice to Tenant, declare the
Basic Rent payable under this Lease for the next six (6) months (or at
Landlord's option, for a lesser period) to be due and payable within ten (10)
days after the date of such notice.
16.1.8 Additional Remedies: In the event of any breach or threatened
breach by Tenant of any covenants, agreements, terms or conditions made in this
Lease, Landlord shall be entitled to enjoin such breach or threatened breach
and, in addition to the rights and remedies provided hereunder, shall have any
other right or remedy allowed at law or equity, by statute or otherwise. The
provisions of this section shall be construed consistent with the law of
Oklahoma so that remedies of Landlord herein described shall be available to
Landlord to the full extent but only to the extent that they are valid or
enforceable under the law of Oklahoma.
16.1.9 Remedies Cumulative: The foregoing rights and remedies given to
Landlord are and shall be deemed to be cumulative, and the exercise of any of
them shall not be deemed to be an election excluding the exercise by Landlord at
any time, of a different or inconsistent remedy, and shall be deemed to be given
to Landlord in addition to any other and further rights granted to said Landlord
by the terms hereof, or by law, and the failure of Landlord at any time to
exercise any right or remedy herein granted or established by law shall not be
deemed to operate as a waiver of its right to exercise such right or remedy at
any other future time.
17. ATTORNEYS' FEES.
17.1 If legal counsel is retained by Landlord for the purpose of recovery
of possession of the Premises, for the recovery of Rent or any other amount due
under the provisions of this Lease, or because of Tenant's failure to keep or
perform any other covenant herein contained, Tenant agrees to pay all reasonable
legal expenses, including a reasonable attorneys' fees, incurred in connection
therewith.
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18. SURRENDER OF PREMISES.
18.1 Upon the expiration or termination of this Lease or termination of
Tenant's right of possession of the Premises, Tenant shall surrender and vacate
the Premises immediately and deliver possession thereof to Landlord in a clean,
good and tenantable condition, ordinary wear and tear excepted, and shall
surrender all keys for the Premises to Landlord at the place then fixed for the
payment of rent. Upon any termination which occurs other than by reason of
Tenant's default, Tenant shall be entitled to remove from the Premises all
unattached and movable Trade Fixtures, any Alterations owned by Tenant, and
personal property of Tenant ("Tenant Property") without credit or compensation
from Landlord for the costs of removal, provided Tenant immediately shall repair
all damage resulting from such removal and shall restore the Premises to its
pre-existing condition prior to removal. In the event possession of the Premises
is not immediately delivered to Landlord when due, or if Tenant, prior to such
time, shall fail to remove any Tenant Property, Landlord may remove same without
any liability to Tenant. Any such Tenant Property which may be removed prior to
the date of termination of the right of possession of the Premises by Tenant and
which are not so removed, shall, at the option of Landlord, be conclusively
presumed to have been abandoned by Tenant and title to such property shall pass
to Landlord without any payment or credit and Landlord may, at its option and at
Tenant's expense, store and/or dispose of such property, or Landlord may have
such fixtures and property removed and stored at Tenant's expense.
19. DAMAGE BY FIRE OR OTHER CASUALTY.
19.1 Substantial Untenantability: If either the Premises or the Building is
rendered substantially untenantable by fire or other casualty, Landlord shall
elect by giving Tenant written notice within sixty (60) days after the date of
said fire or casualty, either to:
(i) terminate this Lease as of the date of the fire or other casualty; or
(ii) proceed to repair or restore the Premises or the Building (other than
leasehold improvements and personal property installed by or on behalf of
Tenant) to substantially the same condition as existed immediately prior to
such fire or casualty.
19.1.1 If Landlord elects to proceed pursuant to subsection (2) above,
Landlord's notice shall contain Landlord's reasonable estimate of the time
required to substantially complete such repair or restoration. If such estimate
indicates that the time so required will exceed 270
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days from the date of the notice, then Tenant shall have the right to terminate
this Lease as of the date of such casualty by giving written notice to Landlord
not later than twenty (20) days after the date of Landlord's notice which
termination shall be effective as of the later to occur of (i) the date of such
casualty or (ii) the date Tenant vacates the Premises. Tenant shall vacate the
Premises within ten (10) days of the date such notice of termination is given.
If Landlord's estimate indicates that the repair or restoration can be
substantially completed within 270 days, or if Tenant fails to exercise its said
right to terminate this Lease within the twenty (20) days as provided
immediately above, this Lease shall remain in force and effect.
19.2 Insubstantial Untenantability: If either the Premises or the Building
is damaged by fire or other casualty but is not rendered substantially
untenantable, then Landlord shall diligently proceed to repair and restore the
damaged portions thereof, other than the leasehold improvements and personal
property installed by or on behalf of Tenant, to substantially the same
condition as such existed immediately prior to such fire or casualty, unless
such damage occurs during the last twelve (12) months of the Term, in which
event Landlord shall have the right to terminate this Lease as of the date of
such fire or other casualty by giving written notice to Tenant within thirty
(30) days after the date of such fire or other casualty.
19.2.1 Provided, however, in the event Landlord does so determine to
terminate this Lease in accordance with the provisions of this Section 19.2,
Landlord shall use reasonable efforts to relocate Tenant under this Lease to
other space in the Building for the balance of time remaining in the Lease Term
hereunder for the Premises. Any such relocation shall be at Tenant's expense,
subject to the rights of other tenants in the Building and the relocation space
shall be leased to Tenant on the same terms and conditions of this Lease in
`AS-IS/WHERE-IS' condition. If Landlord and Tenant do not agree on the space to
which the Premises are to be relocated or the timing of such relocation, this
Lease shall terminate on the date which is thirty (30) days after Tenant's
receipt of the foregoing Landlord's termination notices.
19.3 Rent Abatement: If all or any part of the Premises are damaged by fire
or other casualty and this Lease is not terminated as hereinabove provided,
Monthly Base Rental shall abate for that part of the Premise which are
untenantable on a per diem and proportionate area basis from the date three (3)
business days after the date of the fire or other casualty causing such damage
until such time as Landlord has substantially completed the repair and
restoration work in the Premises which it is required to perform, provided, that
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as a result of such fire or other casualty, Tenant does not occupy the portion
of the Premises which are untenantable during such period.
19.4 Tenant's Restoration: If all or any part of the Premises are damaged by
fire or other casualty and this Lease is not terminated, Tenant shall promptly
and with due diligence repair and restore the leasehold improvements (other than
improvements which Tenant is permitted to remove in accordance with the terms of
this Lease upon expiration of the Lease) and personal property previously
installed by Tenant pursuant to this Lease.
19.5 In case of any insurance proceeds payable to Landlord and Tenant, for
damage to the lease hold improvements, Tenant agrees to endorse checks for such
sums promptly to the order of Landlord. Landlord shall retain such proceeds if
the Lease is terminated pursuant to the provisions hereinabove contained. If
however, the Lease is not terminated as provided hereinabove, Tenant or its
contractors shall be entitled to payment from such retained funds for repairing,
restoring or reconstructing the leasehold improvements promptly upon Tenant's
presenting to Landlord proper waivers of materialmen's and mechanic's liens or
claims and an itemized statement of work performed showing the amount charged
therefor. Further, such work shall be performed by Tenant in accordance with the
terms, provisions and conditions of a work letter agreement to be entered into
by the parties hereto at such time in a form then in general use by Landlord for
work performed in or upon the Building. If, upon completion of the repair or
restoration, any such insurance proceeds are left unexpended, Landlord shall pay
the same to Tenant, upon demand. If the insurance proceeds are insufficient for
the cost of the repair or restoration, Tenant shall pay the same to the extent
of such insufficiency.
19.6 If Tenant does not commence promptly to repair or restore the damage or
destruction, or if, having commenced the repair or restoration, Tenant does not
proceed diligently to complete the same, Landlord shall be entitled at any time
thereafter to enter the Premises and repair or restore the damage or destruction
and to apply any insurance proceeds held by it as hereinabove provided to the
payment of the cost thereof. If the insurance proceeds are insufficient for the
cost of the repair or restoration, Tenant shall pay to Landlord, upon demand and
as additional rent as the work progresses, such amounts as shall from time to
time be shown to be due and payable by Tenant.
20. EMINENT DOMAIN.
20.1 Permanent Taking: If all or any part of the Premises, Complex or the
Building is permanently taken or
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condemned by any competent authority for any public use or purpose (including a
deed given in lieu of condemnation) which renders the Premises substantially
untenantable, this Lease shall terminate as of the date title vests in such
authority, and Monthly Base Rental shall be apportioned as of such date.
20.2 Insubstantial Taking: If any part of the Premises is taken or condemned
for any public use or purpose (including a deed given in lieu of condemnation)
and this Lease is not terminated pursuant to Section 20.1, Monthly Base Rent
shall be reduced for the period of such taking by an amount which bears the same
ratio to the Monthly Base Rent then in effect as the number of square feet of
Net Rentable Area in the Premises so taken or condemned bears to the number of
square feet of Net Rentable Area specified in Section 2.1.2. Landlord, upon
receipt and to the extent of the award in condemnation or proceeds of sale,
shall make necessary repairs and restorations (exclusive of leasehold
improvements and personal property installed by Tenant) to restore the Premises
remaining to as near its former condition as circumstances will permit. Upon the
taking or condemnation described in this Section 20.2, the Net Rentable Area of
the premises stated in Section 2.1.2 shall be reduced for all purposes under
this Lease by the number of square feet of Net Rentable Area of the Premises so
taken or condemned as determined and certified by an independent, professional
architect selected by Landlord, at Landlord's expense.
20.3 Compensation: Landlord shall be entitled to receive the entire price or
award from any such sale, taking or condemnation without any payment to Tenant,
and Tenant hereby assigns to Landlord Tenant's interest, if any, in such award.
21. RULES AND REGULATIONS.
21.1 Tenant agrees that it will abide by, and keep and observe all
reasonable rules and regulations ("Rules and Regulations") which Landlord may
make from time to time for the management, reputation, safety, care, or
cleanliness of the Building or Premises, or the operations and maintenance
thereof and the equipment therein, or for the comfort of Tenant and the other
tenants of the Building. Landlord shall have the right to change said rules and
waive in writing any or all of said rules in the case of any one or more
tenants. All such Rules and Regulations are of the essence hereof without which
this Lease would not have been entered into by the Landlord, and any breach of
any provision of these Rules and Regulations by the Tenant which is material in
the judgment of the Landlord shall constitute a default hereunder.
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22. LANDLORD'S RIGHTS.
22.1 Landlord shall have the following rights exercisable without notice
(except as expressly provided to the contrary), and without being deemed an
eviction or disturbance of Tenant's use or possession of the Premises or giving
rise to any claim for set-off or abatement of Rent: (1) To change the name or
street address of the Building or the Complex upon 30 days' prior written notice
to Tenant; (2) To designate and/or approve, install, affix and maintain all
signs, including Tenant plaques, logos and graphics, on the exterior and/or
interior of the Building and in and about the Complex; (3) To designate and/or
approve prior to installation, all types of signs, window shades, blinds,
drapes, awnings or other similar items, and all internal lighting that may be
visible from the exterior of the Premises; (4) To display the Premises to
prospective tenants at reasonable hours; (5) To change the arrangement of
entrances, doors, corridors, elevators and stairs in the Building; (6) To grant
to any party the exclusive right to conduct any business or render any service
in or to the Building; (7) To prohibit the placing of vending or dispensing
machines of-any kind in or about the Premises; (8) To have access for Landlord
and other tenants of the Building to any mail chutes and boxes located in or on
the Premises according to the rules of the United States Post Office; (9) To
close the Building after normal business hours, except that Tenant and its
employees and invitees shall be entitled to admission at all times under such
regulations as Landlord prescribes for security purposes; (10) To take any and
all reasonable measures, including inspections and repairs to the Premises or to
the Building, as may be necessary or desirable in the operation or protection
thereof; (11) To retain at all times master keys or pass keys to the Premises;
(12) To install, operate and maintain security systems which monitor and
identify, by closed circuit television or otherwise, all persons entering and
leaving the Building or the Complex; (13) To install and maintain pipes, ducts,
conduits, wires and structural elements located in the Premises which serve
other parts or other tenants of the Building or any other property; (14) To
reasonably alter, amend and change the rules and regulations for protection of
the health, safety and welfare of persons or property; and (15) To enter the
Premises at all reasonable times following notice of such desired entry to
Tenant provided that Tenant shall make available to Landlord a designated
individual within the Premises to accompany Landlord in such instance to examine
the Premises and to show such to prospective purchasers, mortgagees, lessees, or
tenants of Landlord, or to public officials lawfully having an interest therein.
In the event Tenant fails to make available to Landlord an individual to
accompany Landlord in any particular instance, Landlord shall not be required to
be accompanied by a tenant designee; and Landlord shall further not be required
to give notice of any
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such entry in the case of emergency as reasonably determined by Landlord. Said
enumerated rights are in addition to all other rights of Landlord afforded under
law and the terms of this Lease.
23. ESTOPPEL CERTIFICATE.
23.1 Each party hereto shall from time to time, upon no less than ten (10)
days' prior written request from the other or any mortgagee or ground lessor of
the Complex, deliver to the other or such mortgagee or ground lessor a statement
in writing certifying:
(i) That this Lease and the Work Letter are unmodified and in full
force and effect or, if there have been modifications, that this Lease
and the Work Letter, as modified, are in full force and effect;
(ii) The amount of Base Rent then payable under this Lease and the date
to which Rent has been paid;
(iii) That the requesting party is not in default under this Lease or
any work letter agreement, or, if in default, a detailed description of
such default(s);
(iv) That Tenant is or is not in possession of the Premises, as the
case may be; and,
(v) Such other information as may be reasonably requested.
24. REAL ESTATE BROKERS.
24.1 Tenant represents that, except for the broker, if any, identified in
Section 1.1.4 of this Lease as Tenant's Broker, Tenant has not dealt with any
real estate broker, salesperson, or finder in connection with this Lease, and no
such person initiated or participated in the negotiation of this Lease, or
showed the Premises to Tenant. Tenant agrees to indemnify, defend and hold
harmless Landlord and Landlord's Group from and against any and all liabilities
and claims for commissions and fees arising out of a breach of the foregoing
representation. Landlord shall only be responsible for the payment of all
commissions to the broker, if any, identified in Section 1.1.4 of this Lease,
based upon the leasing commission policy of Landlord applicable to the Building
or Complex as of the date of this Lease.
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25. SUBORDINATION AND ATTORNMENT.
25.1 Subordination: It is understood and agreed that this Lease (including
all rights of the Tenant hereunder) is subject and subordinate to any ground
lease or underlying lease of the land comprising the Building or Complex
(hereinafter called "Ground Lease") which may now or hereafter affect the land
or Building or Complex of which the Premises form a part and is further subject
and subordinate to any mortgage or deed of trust or trust indenture (hereinafter
called "Mortgage") which may now or hereafter affect any such lease or the real
property of which the Premises form apart, and to any and all advances made
under any such mortgage and to the interest thereon, and all renewals,
replacements and extensions thereof. This section shall be self-operative and no
further instrument or subordination shall be required, but Tenant shall
nevertheless at any time hereafter, on the demand of Landlord, execute any
instruments, releases or other documents that may be required by any such
mortgage holder or ground lessor or any of their respective successors in
interest to evidence such subordination. If in connection with the financing
(existing or future financing) of the Building or Complex, the holder of any
such mortgage, or with respect to any bond financing, the trustee for any such
bond holders, shall request reasonable modifications in this Lease as a
condition of approval of such financing, Tenant will not unreasonably withhold,
delay or defer making such modifications, provided that they do not unreasonably
increase the obligations of Tenant hereunder or materially and adversely affect
the leasehold interest created by this Lease. In the event of termination of
this Lease through foreclosure of any mortgage to which this Lease is
subordinated, or if the ground lease is terminated, Tenant will upon the demand
of the purchaser of the Premises at the foreclosure sale thereof, or of the
lessor under the ground lease, attorn to and accept such purchaser or ground
lessor as landlord under this Lease or, upon demand, enter into a new Lease
agreement with such purchaser or ground lessor for the unexpired term of this
Lease as extended pursuant to the terms hereunder at the same rent and under the
same provisions of this Lease. It is further agreed by Tenant that this Lease
shall be subject and subordinate at all times to any other arrangement or right
to possession under which Landlord is in control of the Premises, and to the
rights of the owner or owners of the Premises, the Building, the Complex or the
land of which the Building or Complex is a part.
25.1 Attornment: In the event of the cancellation or termination of any such
ground lease in accordance with its terms or by the surrender of such ground
leasehold estate, whether voluntary, involuntary or by operation of law, or by
summary proceedings, or the foreclosure of any such mortgage or deed of trust by
voluntary agreement or deed in lieu of foreclosure or otherwise, or the
commencement of any judicial
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action seeking such foreclosure, Tenant, at the request of the then Landlord,
shall attorn to and recognize such ground lessor, mortgagee, beneficiary, or
purchaser in foreclosure as Tenant's Landlord under this Lease. Tenant agrees to
execute and deliver at any time upon request of such ground lessor, mortgagee,
beneficiary, purchaser, or their successors, any instrument to further evidence
such attornment. Landlord shall be and hereby is appointed Tenant's
attorney-in-fact for the sole purpose of executing any instrument to evidence
such attornment upon request as herein provided.
26. NOTICES.
26.1 Any Notice which the Landlord may desire to or be required to give to
Tenant shall be deemed to be sufficiently given or rendered, if in writing, hand
delivered to Tenant by certified or registered mail, return receipt requested,
addressed to Tenant at the address shown in Section 1.1.18 hereof, and any
Notice which Tenant may desire or be required to give to Landlord shall be
deemed sufficiently given or rendered, if in writing, delivered to Landlord by
certified or registered mail, return receipt requested, at the address provided
in Section 1.1.7, or other such places as Tenant or Landlord may from time to
time designate in writing. Any Notice given hereunder shall be deemed delivered
when the return receipt is signed or refusal to accept the Notice is noted
thereon or five (5) days after mailing, if mailed as herein provided.
27. MISCELLANEOUS.
27.1 Parties: Except as otherwise expressly provided herein, if more than
one person or entity is named herein as either Landlord or Tenant, the
obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Landlord or
Tenant.
27.2 Non-Waiver: The failure of Landlord to seek redress for violation of,
or to insist upon the strict performance of, any covenant or condition of the
Lease or of any of the Rules and Regulations incorporated herein or hereafter
adopted by Landlord, shall not prevent a subsequent act, which would have
originally constituted a violation, from having all the force and effect of an
original violation. The receipt by Landlord of rent with knowledge of the breach
of any covenant of this Lease, or breach of the Rules and Regulations, shall not
be deemed a waiver of such breach. The failure of Landlord to enforce any of the
Rules and Regulations as incorporated herein or hereafter adopted against Tenant
and/or any other tenant in the Building shall not be deemed a waiver of any such
Rules and Regulations.
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No act or thing done or omitted to be done by Landlord or Landlord's agents
during the term of the Lease, which is necessary to enforce the terms of the
Lease, or the Building Rules and Regulations, shall constitute an eviction by
Landlord nor shall it be deemed an acceptance or surrender of said Premises, and
no agreement to accept such surrender shall be valid unless in writing signed by
Landlord. No employee of Landlord or Landlord's agent shall have any power to
accept the keys of said Premises prior to the termination of the Lease. The
delivery of keys to any employee of Landlord or Landlord's agents shall not
operate as a termination of the Lease or a surrender of the Premises.
27.3 Late Charges: All delinquent Rent shall bear interest at the greater of
(i) the highest rate permitted by law, or (ii) the prime rate of interest
announced as charged from time to time by Bank of Oklahoma Tulsa, N.A. to its
preferred commercial customers for ninety-day unsecured loans plus two (2)
points (and if such rate ceases to be announced by Bank of Oklahoma Tulsa, N.A.,
then eighteen percent (18%) per annum), from the date due until paid.
27.4 Entire Agreement: This Lease, the Exhibits and any Riders identified
herein and attached hereto contain the entire agreement between Landlord and
Tenant concerning the Premises and there are no other representations, promises
or agreements, either oral or, written. All negotiations, considerations,
representations and understandings between the parties are incorporated herein
and are superseded hereby. There are no terms, obligations, covenants,
statements, representations, warranties or conditions relating to the subject
matters hereof other than those specifically contained herein.
27.5 Landlord and Tenant Defined: The words "Landlord" and "Tenant",
wherever used in this Lease, shall be construed to mean Landlords and Tenants in
all cases where there is more than one landlord or tenant, and the necessary
grammatical changes required to make the provisions hereof apply either to
corporations or individuals, men or women, shall in all cases be assumed as
though in each case fully expressed. With respect to the provisions hereof
regarding indemnification or waiver of liability of the Landlord, the term
"Landlord" shall be deemed to include any third party operator or owner of the
Building.
27.6 No Reservation/Option: The execution of this Lease by Tenant and
delivery of same to Landlord or Manager does not constitute a reservation of or
option for the Premises or an agreement to enter into a Lease and this Lease
shall become effective only if and when Landlord executes and delivers same to
Tenant; provided, however, the execution and delivery by Tenant of this Lease to
Landlord or the Manager shall constitute an irrevocable offer by Tenant to lease
the
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Premises on the terms and conditions herein contained, which offer may not
be withdrawn or revoked for thirty (30) days after such execution and delivery.
If Tenant is a corporation, it shall, if requested by Landlord, deliver to
Landlord certified resolutions of Tenant's directors authorizing execution and
delivery of this Lease and the performance by Tenant of its obligations
hereunder. If Tenant is a partnership, every general partner thereof shall
execute this Lease, unless a lesser number is deemed sufficient in the
reasonable opinion of Landlord's legal counsel.
27.7 Amendment: This Lease may not be amended or modified by any act or
conduct of the parties or by oral agreements unless reduced and agreed to in
writing signed by both Landlord and Tenant. No waiver of any of the terms of
this Lease by Landlord shall be binding upon Landlord unless reduced to writing
and signed by Landlord.
27.8 Consent: Unless otherwise expressly provided herein, Landlord may, in
its sole discretion, withhold consents or approvals required hereunder.
Notwithstanding anything to the contrary contained in this Lease, due to the
fact that damages are not readily ascertainable, if any provision of this Lease
obligates Landlord not to unreasonably withhold its consent or approval, an
action for declaratory judgment or specific performance will be Tenant's sole
right and remedy in any dispute as to whether Landlord has breached such
obligation.
27.9 Holdover: In the event Tenant remains in possession of the Premises
after the expiration or termination of the term, and without the execution of a
new lease, Tenant, at the option of Landlord, shall be deemed to be occupying
the Premises as a Tenant from month-to-month and the Rental due for each month
of continued occupancy shall be two hundred percent (200%) of the immediately
preceding month.
27.10 Accord and Satisfaction: No payment by Tenant or receipt by Landlord
of a lesser amount than any installment or payment of Rental due shall be deemed
to be other than on account of the amount due, and no endorsement or statement
on any check or any letter accompanying any check or payment of Rental shall be
deemed an accord and satisfaction, and Landlord may accept such check or payment
without prejudice to Landlord's right to recover the balance of such installment
or payment of Rental or pursue any other remedies available to Landlord. No
receipt of money by Landlord from Tenant after the termination of this Lease or
Tenant's right of possession of the Premises shall reinstate, continue or extend
the Term.
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27.11 Binding Effect: This Lease shall be binding upon and inure to the
benefit of Landlord and Tenant and their respective heirs, legal
representatives, successors and permitted assigns.
27.12 Force Majeure: Landlord shall not be deemed in default with respect to
any of the terms, covenants and conditions of this Lease on Landlord's part to
be performed, if Landlord fails to timely perform same and such failure is due
in whole or in part to an Unavoidable Delay as defined in Section 1.2.14 or by
any act or omission caused directly or indirectly by Tenant or Tenant's Group.
In the event of an occurrence under this Section 27.12 preventing Landlord from
performing any obligation as herein provided, Landlord shall give Tenant notice
thereof as soon as reasonably practicable and Landlord shall exercise
commercially reasonable efforts to resume performance hereunder.
27.13 Captions: The headings of the several articles, paragraphs and
sections contained herein are for convenience only and do not define, limit or
construe the content or scope of such articles, paragraphs and sections.
27.14 Applicable Law: This Lease shall be construed in accordance with the
laws of the State in which the Building is located.
27.15 Time: Time is of the essence of this Lease and the performance of all
obligations hereunder.
27.16 Landlord's Right to Perform: If Tenant fails timely to perform any of
its duties under this Lease or any work letter, Landlord shall have the right
(but not the obligation), after the expiration of any grace period elsewhere
under this Lease or the work letter expressly granted to Tenant for the
performance of such duty, to perform such duty on behalf and at the expense of
Tenant without further prior notice to Tenant, and all reasonable sums expended
or expenses incurred by Landlord in performing such duty shall be deemed to be
additional Rent under this Lease and shall be due and payable upon demand by
Landlord.
27.17 Licenses and Permits: Tenant shall be solely responsible for
obtaining, all licenses and/or permits as may be required for Tenant to lawfully
conduct its business in the Premises.
28. SPECIAL PROVISIONS.
28.1 All exhibits and riders attached hereto, if any, shall form part of
this Lease as if same were embodied herein.
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29. OTHER.
This Lease was executed by the parties on the date first above written.
LANDLORD:
ATTEST: WILLIAMS HEADQUARTERS BUILDING COMPANY
a Delaware corporation
- ----------------------------
Secretary or Asst. Secretary
[Seal]
By:
----------------------------------
Printed:
-----------------------------
Title:
-------------------------------
TENANT:
ATTEST: WILLIAMS COMMUNICATIONS GROUP, INC.
a Delaware corporation
- ----------------------------
Secretary or Asst. Secretary
[Seal]
By:
----------------------------------
Printed:
-----------------------------
Title:
-------------------------------
The Lease must be executed for Tenant by the President or Vice-President and
must be attested by the Secretary or Assistant Secretary, unless the by-laws or
a resolution of the Board of Directors shall provide that other officers are
authorized to execute the Lease, in which event, a certified copy of the by-laws
or resolution, as the case may be, must be furnished. Tenant's corporate seal
must be affixed.
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EXHIBIT 10.16
WILLIAMS RESOURCE CENTER
TULSA, OKLAHOMA
AMENDED AND RESTATED
LEASE
THE WILLIAMS COMPANIES, INC.
THIS AMENDED AND RESTATED LEASE ("Lease"), dated for reference purposes
only, January 1, 1999, is made by and between WILLIAMS HEADQUARTERS BUILDING
COMPANY, a Delaware corporation ("Landlord") and THE WILLIAMS COMPANIES, INC.
("Tenant"), (collectively the "Parties", or individually a "Party").
WITNESSETH: Upon and subject to the terms of this Lease, Landlord
hereby leases to Tenant and Tenant hereby leases from Landlord, certain Premises
situated within the Building located at the Complex, for the Term, except that
Landlord reserves and Tenant shall have no right in and to (a) the use of the
exterior faces of all perimeter walls of the Building, (b) the use of the roof
of the Building except as otherwise expressly provided herein (if at all), or
(c) the use of the air space above the Building.
1. DEFINITIONS.
1.1 Special Lease Definitions.
1.1.1 Rent Adjustment Date: For each Lease Year, except the first
(1st) Lease Year, the first (1st) day of such Lease Year.
1.1.2 Basic Rent: The amount equal to the product obtained by
multiplying the Rentable Area of the Leased Premises by the Rent
per Square Foot for such Lease Year.
1.1.3 Basic Rent per Square Foot: As of the Commencement Date, the
Basic Rent per Square Foot is $15.22.
1.1.4 Broker: Tenant's Broker is ____________. (Not Applicable.)
1.1.5 Building: Williams Resource Center located at One Williams
Center, Tulsa, Oklahoma.
1.1.6 Commencement Date: The Commencement Date is January 1, 1999.
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1.1.7 Landlord's Notice and Rent Payment Address:
Williams Headquarters Building Company
One Williams Center
Suite 2200
Tulsa, Oklahoma 74172
Attn: Property Manager
1.1.8 Net Rentable Area: The sum of: (1) the Net Useable Area
which is computed by measuring from the inside face of the
exterior glass, to the exterior side of partitions which
separate the Premises from the Building's interior nonrentable
areas which are not within the Premises, and to the center of
partitions that separate the Premises from adjoining rentable
areas; plus (2) a pro-rata portion of the Building's floor
area used for corridors, elevator lobbies, ground floor
lobbies, vestibules, service and freight areas, restrooms,
elevator machine rooms, telephone closets, mechanical
equipment rooms and other similar facilities provided for the
benefit of all tenants of the Building, visitors to the
Building, or Landlord. No deduction shall be made for columns
or projections necessary to the Building. As of the
Commencement Date of this Lease the Premises' Net Rentable
Area is approximately 227,543 square feet.
1.1.9 Operating Expense Base: For each square foot of Building
Rentable Area, the sum of Landlord's Operating Expenses for
calendar year 1998, divided by the Building Rentable Area.
1.1.10 Operating Expense Increases: For the first complete
lease year (containing all 12 months, January through and
including December) and each complete lease year thereafter
commencing during the Term, an amount equal to Tenant's
Proportionate Share of the excess of Landlord's Operating
Expenses for such calendar year over the product obtained by
multiplying the Operating Expense Base by the Building
Rentable Area; provided, however, that Operating Expense
Increases for the any lease year which is not complete
(containing fewer than all 12 months) shall be determined in
accordance with the provisions of Section 5.2.
1.1.11 Premises: That certain portion of the Building located
on multiple floors consisting of approximately 227,543
rentable square feet, including all improvements therein or to
be provided by Landlord, if any, and including all common
areas of the Building and Complex which are for the
non-exclusive use of tenants in the Building. The Delineation
of the Premises is shown on Exhibit "A" attached hereto.
1.1.12 Real Estate Tax Base: For each square foot of Building
Rentable Area, the sum of Landlord's Real Estate Taxes for
calendar year 1998, divided by the Building Rentable Area.
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1.1.13 Renewal Periods: The two (2) additional periods of five
years each for which Tenant is permitted to extend the Term of
this Lease. The Option(s) to Renew terms and conditions are
set forth in Exhibit "E" attached hereto.
1.1.14 Rent Adjustment: On the fifth, tenth, and fifteenth
anniversary dates of the Commencement Date, the Basic Rent
shall increase either by (i) an amount equal to three percent
(3%) of the Basic Rent or (ii) an amount that will result in
the Basic Rent being equal the fair market rental value of the
Premises, whichever amount is greater. Fair market rental
value shall be established by the procedure set forth in
Exhibit "F".
1.1.15 Rent Adjustment Dates: The Rent Adjustment Dates shall
be the fifth, tenth, and fifteenth anniversary dates of the
Commencement Date.
1.1.16 Security Deposit: An amount of money paid by Tenant to
Landlord and thereafter, held by Landlord without liability
for interest, as security for the performance by Tenant of
Tenant's covenants and obligations.
1.1.17 Sole Permitted Use: The Premises are to be used and
continuously and completely occupied by Tenant solely for the
purpose of general office use.
1.1.18 Tenant's Notice Address:
After commencement:
The Williams Companies, Inc.
One Williams Center
Suite 4700
Tulsa, Oklahoma 74172
Attn: Director of Facilities Management
Prior to commencement:
The Williams Companies, Inc.
One Williams Center
Suite 4700
Tulsa, Oklahoma 74172
Attn: Director of Facilities Management
1.1.19 Tenant's Proportionate Share: Ninety Eight Percent
(98%). Tenant's Proportionate Share shall be calculated in the
proportion which Tenant's Net Rentable Area bears to
Building's Net Rentable Area.
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1.1.20 Term: The period of time commencing on the Commencement
Date and ending on the Termination Date.
1.1.21 Termination Date:The Termination Date is December 31,
2018.
1.2 General Lease Definitions.
1.2.1 Additional Charges: All amounts payable by Tenant to
Landlord under this Lease other than Basic Rent, including but
not limited to, Operating Expense and Real Estate Tax amounts,
and amounts payable under Section 14.3. All Additional Charges
shall be deemed to be additional rent and all remedies
applicable to the non-payment of Basic Rent shall be
applicable thereto.
1.2.2 Alterations: Any improvement, decoration, removal,
addition, installation or physical change made in, on or to
the Premises or any adjacent space.
1.2.3 Common Areas: All areas, improvements, space, equipment
and special services in or at the Building or at the Complex
provided by Landlord, at Landlord's discretion, for the common
or joint use and benefit of tenants, customers, and other
invitees of the Building, which may include lobbies, service
areas, connecting driveways, entrances and exits, retaining
walls, landscaped areas, malls, truck serviceways or tunnels,
loading docks, pedestrian walkways, atriums, walls,
courtyards, concourses, stairs, ramps, sidewalks, washrooms,
signs identifying or advertising the Building or Complex,
maintenance buildings, utility buildings, maintenance and
utility rooms and closets or hallways, elevators and their
housing and rooms, common window areas, walls and ceiling in
Common Areas, and trash or rubbish areas.
1.2.4 Complex: The group of buildings and connecting
concourses, courtyards, bridges, and green spaces known as the
Williams Center Complex.
1.2.5 Landlord: The landlord and the Building property manager
named herein and any successors thereto.
1.2.6 Landlord Group: Landlord's officers, directors,
shareholders, agents, partners, employees, contractors, and
any third party operator or manager of the Building and/or
Complex.
1.2.7 Operating Expenses: The aggregate of all costs and
expenses paid or incurred on an accrual basis by Landlord in
connection with the ownership, management, operation,
insurance (including the cost of self-insurance), and
maintenance of the Building and Complex including all
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utility and central plant charges of the Building, the
Complex, the grounds and land on which they are situated, and
the Common Areas. If Landlord makes an expenditure for capital
improvements to the Building or Complex which are reasonably
intended to reduce Operating Expenses (which improvements are
commenced or completed during the Term) or to comply with the
request or directives of a governmental agency or body, and if
such expenditure is not a current expense under generally
accepted accounting principles, the cost thereof shall be
amortized over a period equal to the useful life of such
improvements, determined in accordance with generally accepted
accounting principles, and the amortized cost allocated to
each calendar year during the Term shall be treated as an
Operating Expense.
1.2.8 Person: A natural person, a partnership, a corporation
or any other form of business or legal association or entity.
1.2.9 Real Estate Taxes: Any form of assessment, license fee,
commercial rental tax, levy, penalty, charge or tax (other
than taxes on general net income and inheritance and estate
taxes) imposed by any authority having the direct or indirect
power to tax, including any city, county, state or federal
government, or any school, agricultural, lighting, drainage,
flood control, transit, special benefit or other district, as
against any legal or equitable interest of Landlord in the
Premises or in the real property of which the Premises and the
Building are a part, or the Complex or as against Landlord's
right to rent or other income therefrom, or as against
Landlord's business of leasing the Premises or collecting
rent, or any tax imposed in substitution, partially or
totally, or any tax previously included in the definition of
"Real Estate Taxes", or any additional tax the nature of which
was previously included within the definition of "Real Estate
Taxes", and shall include any increases in such taxes, levies,
charges or assessments occasioned by increases in tax rates or
increases in assessed valuations, whether occurring by sale or
otherwise.
1.2.10 Tenant: The tenant named herein and any permitted
assignee under Section 10.
1.2.11 Tenant Group: Tenant's partners, directors, officers,
shareholders, employees, agents, contractors, servants,
licensees, invitees, visitors, and permitted subtenants and/or
assignees.
1.2.12 Tenant Improvements: That work necessary to complete
the Premises prior to the Commencement Date and accomplished
pursuant to the terms and conditions of the As-Is Work Letter
attached hereto as Exhibit "D".
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1.2.13 Trade Fixtures: Tenant's machinery and equipment that
can be removed from the Premises without doing material damage
to the Premises.
1.2.14 Unavoidable Delays: Delays caused by strikes, acts of
God, lockouts, labor difficulties, riots, explosions,
sabotage, accidents, inability to obtain labor or materials,
governmental restrictions, enemy action, civil commotion,
fire, unavoidable casualty or any other cause beyond the
reasonable control of Landlord.
2. EXHIBITS. The following exhibits and riders are attached hereto and
incorporated herein by this reference:
Exhibit "A" Delineation of the Premises
Exhibit "B" Rules and Regulations
Exhibit "C" Certificate of Insurance
Exhibit "D" Work Letter
Exhibit "E" Option(s) to Renew
Exhibit "F" Appraisal Procedure/Market Rate
Rider "1"
3. TERM.
3.1 The Term shall be twenty (20) years and zero (0) months commencing
on the Commencement Date and expiring on the Termination Date.
3.2 If Landlord is unable to give possession of the Premises on the
Commencement Date by reason of holding over of any Tenant or because
construction, repairs, or improvements being made or to be made by Landlord are
not substantially completed, rent shall abate for the period that possession by
Tenant is delayed unless Tenant caused (in whole or in part) such delay in which
case rent shall not abate, but under no circumstances shall Landlord be
responsible for direct or consequential damages because of its inability to
furnish possession to the Tenant by any particular date. Should Tenant occupy
the Premises prior to the Commencement Date, with such prior occupancy being in
all respects fully approved in writing by the Landlord, all terms of this Lease
shall then commence and the Term of this Lease and the rental provided herein
shall go into effect (being prorated if necessary) as of the date of such prior
occupancy. It is mutually agreed that the Commencement Date under such prior
occupancy shall be the date Tenant takes occupancy of the Premises and that the
Termination Date stated above shall remain in effect. When the Commencement Date
and Termination Date have been determined as provided herein, Landlord shall
deliver and Tenant shall execute a statement specifying the Commencement Date
and the Termination Date of the Term.
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4. CONDITION.
4.1 It is hereby understood and acknowledged by Tenant that Landlord is
leasing the Premises to Tenant in "as is" condition with all faults and Landlord
has made no representation or warranty, express or implied, with respect to the
condition of the Premises, the Building or the Complex or with respect to their
suitability for the conduct of Tenant's business, except as expressly set forth
herein. Tenant acknowledges that Tenant has inspected the Premises, and that the
Premises are in a good and habitable condition. Except as expressly set forth
herein, Landlord shall have no liability to Tenant or any of Tenant's Group
arising from the condition of the Building or the Premises, and Tenant shall
defend, indemnify and hold Landlord harmless from and against any claims, causes
of action, damages and liability arising from the condition of the Premises.
4.2 At the time Tenant surrenders the Premises at the end of the Term,
or within three (3) days thereafter, Landlord and Tenant, or their respective
agents, shall make an inspection of the Premises and shall prepare and sign an
inspection form to describe the condition of the Premises at the time of
surrender.
5. RENT.
5.1 Tenant shall pay Basic Rent for each Lease Year in equal monthly
installments in advance on the first day of each month during the Term. Basic
Rent for any period during the term hereof which is less than one full month
shall be prorated upon the actual number of days of the month involved. The
Basic Rent and all Additional Charges shall be promptly paid when due, in lawful
money of the United States, without notice or demand and without deduction,
diminution, abatement, counterclaim or setoff of any amount or for any reason
whatsoever, to Landlord at Landlord's Notice Address or at such other address or
to such other person as Landlord may from time to time designate. If Tenant
makes any payment to Landlord by check, such payment shall be by check of Tenant
and Landlord shall not be required to accept the check of any other person or
entity, and any check received by Landlord shall be deemed received subject to
collection. If any check is mailed by Tenant, Tenant shall post such check in
sufficient time prior to the date when payment is due so that such check will be
received by Landlord on or before the date when payment is due. Tenant shall
assume the risk of lateness or failure of delivery of the mails, and no lateness
or failure of the mails will excuse Tenant from its obligation to have made the
payment in question when required under this Lease. If during the Term, Landlord
receives a check from Tenant which is returned by Tenant's bank for insufficient
funds or is otherwise returned unpaid, Tenant agrees that all checks thereafter
shall either be bank certified, cashiers' or treasurers' checks. All bank
service charges resulting from any bad checks shall be borne by Tenant.
5.1.1 Tenant shall pay all Basic Rent Adjustments which shall be
determined as set forth in Section 1.1.14.
5.2 Tenant shall pay Tenant's Proportionate Share of all Increases in
Operating Expenses and Increases in Real Estate Taxes on a monthly basis in
advance, promptly on
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the first day of every month during the Term hereof, in addition to installments
of Rent. Tenant's Proportionate Share shall be the percentage amount set forth
in Section 1.1.9 as the same may be adjusted in the event the Net Rentable Area
of the Premises or the Building changes. Tenant's monthly payment of Operating
Expense Increases and Real Estate Tax Increases for each year shall be
determined by an estimated forecast reasonably prepared by Landlord and
submitted to Tenant in writing as soon as practicable near the beginning of each
calendar year. In no event shall Tenant's payment of its Operating Expense
Increase and Real Estate Tax Increase be less than an amount equal to that
amount paid by Tenant during the immediately preceding calendar year. Tenant's
obligation to pay its Operating Expense Increase and Real Estate Tax Increase in
any calendar year which contains less than twelve (12) full calendar months
shall be determined by multiplying the Operating Expense Increase for such
calendar year by a fraction, the numerator of which is the number of days in
such calendar year and the denominator of which is three hundred and sixty-five
(365).
5.2.1 In the event that at the end of any Lease Year (including the
expiration of the final lease year of the Term), Tenant's Proportionate Share of
the actual Increase in Real Estate Taxes and/or actual Increase in Operating
Expense exceed the amount paid by Tenant during the period, Landlord shall
promptly bill Tenant for such excess and Tenant shall promptly pay such excess
amount to Landlord in a lump sum payment. Should Tenant's Proportionate Share of
the actual Increase in Real Estate Taxes and/or actual Increase in Operating
Expense be less than the amount paid by Tenant during the period, Landlord shall
credit Tenant with such amout and at Landlord's option, apply such credit to the
payment of Rent or Additional Charges.
5.3 Tenant shall pay all license and permit fees required for the
operation of its business or equipment within the Premises, and all taxes and
increase in taxes, including but not limited to ad valorem taxes, levied and
assessed by any governmental body on the personal property located in the
Premises and on any special leasehold improvements installed in the Premises or
by virtue of Tenant conducting its described use, business or operation on the
Premises, the employment of agents, servants, or other third parties, the
bringing, keeping or selling of personal property or chattel, or whatsoever
nature from the Premises. The foregoing is intended to bind Tenant to pay, and
promptly discharge, all taxes and/or levies, together with related interest and
penalties, whether assessed by federal or state authority or any political
subdivision thereof, directly or indirectly related to its business,
improvements, functioning, employment, assets, existence, sales, entertainment
or the like. Tenant specifically agrees to reimburse Landlord for any increase
in ad valorem taxes resulting from use of fixtures or improvements by Tenant
which Landlord becomes obligated to pay (except Building Standard leasehold
improvements which by the terms of this Lease become a part of the Building upon
installation).
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6. SECURITY DEPOSIT.
6.1 Tenant agrees to deposit with Landlord on the date it executes this
Lease an amount equal to the monthly Rent which sum shall be held by Landlord,
without obligation for interest, as security for the full, timely and faithful
performance of Tenant's covenants and obligations under this lease, it being
expressly understood and agreed that such deposit is not an advance rental
deposit or a measure of Landlord's damages in case of Tenant's default. Upon the
occurrence of any event of default by Tenant, Landlord may, from time to time,
without prejudice to any other remedy provided herein or provided by law, use
such fund to the extent necessary to make good any arrears of rent or other
payments due Landlord hereunder, and any other damage, injury, expense or
liability caused by any event of Tenant's default; and Tenant shall pay to
Landlord on demand the amount so applied in order to restore the security
deposit to its original amount. Although the security deposit shall be deemed
the property of the Landlord, and remaining balance of such deposit shall be
returned by landlord to Tenant at such time after termination of this lease when
Landlord shall have determined that all Tenant's obligations under this lease
have been fulfilled. Subject to the other terms and conditions contained in this
lease, if the Building is conveyed by Landlord, said deposit may be turned over
to Landlord's grantee, and if so, Tenant hereby releases Landlord from any and
all liability with respect to said deposit and its application or return.
7. PERMITTED USE.
7.1 Tenant shall use and occupy the Premises only for the Permitted Use
set forth in Section 1.1.17 and for no other purpose. Tenant shall not use or
permit the use of the Premises in a manner that (i) violate any law or
requirement of public authorities, (ii) cause structural injury to the Building
or any part thereof, (iii) interfere with the normal operations of the HVAC,
plumbing or other mechanical or electrical systems of the Building or the
elevators installed therein, (iv) increase the ratio of employees to net
rentable area greater than one hundred forty (140) square feet per person; (v)
constitute a public or private nuisance, (vi) alter the appearance of the
exterior of the Building or of any portion of the interior other than the
Premises, (vii) violate or fail to comply with the Building Rules and
Regulations attached hereto as Exhibit "B", as they may be changed from time to
time by Landlord, Landlord to act reasonably in making such changes, or (viii)
cause or result in any occurrence which in the good faith judgment of Landlord,
is disreputable.
7.2 Tenant shall, at Tenant's sole cost and expense, fully, diligently
and in a timely manner, comply with all "Legal Requirements", which term is used
in this Lease to mean all laws, rules, regulations, ordinances, directives,
covenants, easements and restrictions of record, permits, the requirements of
any applicable fire, insurance, life or safety policy, underwriter or rating
bureau, and the reasonable recommendations of Landlord's engineers and/or
consultants as to any health, safety or environmental issue.
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7.3 Tenant further represents, covenants and warrants that Tenant will
continuously occupy and do business from the entire Premises during the Term and
Tenant acknowledges that said representation is a material inducement to
Landlord to enter into this Lease.
8. UTILITIES AND SERVICES.
8.1 Throughout the Term, Landlord agrees that, subject to Legal
Requirements and the terms hereof, and during such time as Tenant is not in
default hereunder, Landlord shall furnish the following services:
(i) heat, air-conditioning and ventilation in the Premises, Monday
through Friday from 7:00 a.m. to 6:00 p.m. and Saturday from 7:00
a.m. to 1:00 p.m., excluding Sundays and national holidays, to the
extent necessary for the comfortable occupancy of the Premises
under normal business operations with customary office equipment
and in the absence of the use of any non-customary machines,
lights, equipment or devices which adversely affect the temperature
otherwise maintained in the Premises;
(ii) city water from the regular Building fixtures for drinking,
lavatory and toilet purposes only;
(iii) customary cleaning and janitorial services in the Premises
Monday through Friday, excluding national holidays. Janitorial
services shall be provided in a manner equivalent to other
comparable office buildings in Tulsa, subject to work limitations
as may be set forth in any applicable union or other collective
bargaining agreement with Landlord. Such services shall not include
washing dishes, cups and/or similar items;
(iv) subject to break-down, maintenance and repairs, normal
passenger elevator service and normal freight elevator service in
common with Landlord, other tenants and visitors to the Building,
Monday through Friday from 7:00 a.m. to 6:00 p.m. and on Saturdays
from 7:00 a.m. to 1:00 p.m., Sundays and national holidays
excepted. Such normal elevator service, if furnished at other
times, shall be optional with Landlord, and shall never be deemed a
continuing obligation. Landlord, however, shall provide limited
passenger elevator service daily at all times such normal passenger
service is not furnished subject to such reasonable security
regulations as may be prescribed by Landlord from time to time.
Operatorless automatic elevator service shall be deemed "elevator
service" within the meaning of this paragraph.
(v) electricity for normal business usage. Tenant's use of
electrical energy in the Premises shall not at any time exceed the
capacity of any of the electrical conductors and equipment in or
otherwise serving the Premises. Landlord shall furnish only 120/208
volt, single phase service to the
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Premises. Tenant shall not utilize any electric equipment within
the Premises with a rated capacity in excess of 0.5 kilowatts.
Lighting in the Premises shall not exceed 2 watts per square foot
and overall utilization of electricity in the Premises shall not
exceed 3 watts per square foot. To insure that such capacity is not
exceeded and to avert possible adverse effects upon the Building
electric service, Tenant shall not connect additional reproducing
equipment, electronic data processing equipment, heating equipment,
or special lighting in excess of Building Standard.
8.2 Except as hereinafter provided, Landlord shall not be obligated to
furnish any services or utilities, other than those stated in Section 8.1 above.
If Landlord elects to furnish services requested by Tenant in addition to those
listed in Section 8.1, or at times other than those stated in Section 8.1,
Tenant shall pay to Landlord the prevailing charges in the Building for such
services on the due date of the next monthly installment of Base Rental.
Notwithstanding anything contained herein to the contrary and notwithstanding
any approval thereof by Landlord, all costs for extraordinary, unusual or
excessive demand for electrical or other utility service and all costs of
submetering or monitoring of such use shall be borne by Tenant and Landlord
reserves the right to impose an additional charge on tenant for extraordinary,
unusual or excessive demand for electrical or other utility service in an amount
reasonably determined by landlord to be due for such extraordinary, unusual or
excessive demand. These unusual costs include, but are not limited to, 24-hour
service, high consumption equipment, high concentration lighting, additional
HVAC supplement for equipment or lighting-induced heat build-up and installation
of metering equipment. Landlord reserves the right to install, at Tenant's sole
cost and expense, submeters and related equipment, relating to Tenant's use of
electrical or other utilities services. If Landlord consents thereto (which
consent may be withheld by Landlord for any reason whatsoever), additional
Building riser capacity for electricity or other utility services may be
provided, and the cost thereof, including twenty percent (20%) thereof for
overhead, shall be paid by Tenant upon Landlord's demand. If Tenant fails to
make any payment hereunder, Landlord may, without notice to Tenant and in
addition to Landlord's other remedies under this Lease, discontinue any or all
of such additional or after-hour services.
8.3 Failure to any extent to furnish or any stoppage or interruption of
these defined services resulting from any cause beyond the reasonable control of
Landlord shall not render Landlord liable in any respect for damages to property
or business, nor be construed as an actual or constructive eviction, in whole or
in part, nor relieve Tenant from any of its obligations under this Lease, nor
entitle Tenant to any abatement or diminution of Rent.
9. QUIET ENJOYMENT.
9.1 Tenant, upon payment of the Rent and other charges as may be
provided in this Lease, and performing all covenants and agreement herein
contained on the part of Tenant as provided in this Lease, and subject in all
cases to the terms, covenants and conditions in this Lease, Tenant shall
peaceably and quietly have, hold and enjoy the
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Premises for the Term and subject to the terms and provisions hereof, against
all parties lawfully claiming adversely thereto by, through or under Landlord.
10. ASSIGNMENT AND SUBLETTING.
10.1 Except as hereinafter provided, Tenant shall not, either
voluntarily or by operation of law, assign, mortgage, pledge, sell, hypothecate
or transfer this Lease, or sublet the Premises or any part thereof, or permit or
suffer the Premises or any part thereof to get used or occupied as work space,
storage space, concession or otherwise by anyone other than Tenant or Tenant's
employees, without the prior written consent of Landlord in each instance.
Landlord's consent required hereunder may be withheld for any reason whatsoever
in its sole, exclusive and absolute discretion.
10.2 Each request for consent to an assignment or subletting shall be
made in writing at least thirty (30) days before the proposed effective date,
and shall be accompanied by information relevant to Landlord's determination as
to the financial and operational responsibility and appropriateness of the
proposed assignee or sub-lessee, including but not limited to the intended use
and/or required modification of the Premises, if any, together with a
non-refundable deposit of $1,000, as reasonable consideration for Landlord's
consideration for Landlord's considering and processing the request for consent.
Tenant agrees to provide Landlord with such other and additional information
and/or documentation as may be reasonably requested by Landlord.
10.3 Any assignee or, or sub-lessee under, this Lease shall, by reason
of accepting such assignment or entering into such sublease, be deemed, for the
benefit of Landlord, to have assumed and agreed to conform and comply with each
and every term, covenant, condition and obligation herein to be observed or
performed by Landlord during the term of said assignment or sublease, other than
such obligations as are contrary to or inconsistent with provisions of an
assignment or sublease to which Landlord has specifically consented in writing.
10.4 If the rent specified in any such assignment or subletting
documents exceeds the rent specified to be paid by Tenant under this Lease,
and/or in the event additional consideration is paid or is payable to Tenant on
account of such assignment or subletting, the rent specified herein shall
thereupon be deemed to be increased in an amount equal to one hundred percent
(100%) such excess and/or such additional consideration (which consideration
shall be amortized over the balance of the unexpired Lease Term), as the case
may be, and Tenant shall thereafter be responsible for the prompt payment to
Landlord of such increased rent. In no event, however, shall Tenant execute an
assignment or sublease calling for the payment of Rent in an amount less than
the Rent herein specified. In the event of any approved sublease or assignment,
Tenant shall not be released or discharged from any liability, whether past,
present or future, under this Lease, including any renewal term of this Lease.
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10.5 If Tenant is a corporation, any transfer of any of Tenant's issued
and outstanding capital stock or any issuance of additional capital stock, as a
result of which the majority of the issued and outstanding capital stock of
Tenant is held by a Person who does not hold a majority of the issued and
outstanding capital stock of Tenant on the date hereof shall constitute an
assignment. If Tenant is a partnership, any transfer of any interest in the
partnership or any other change in the composition of the partnership which
results in a change in the control of Tenant from the Person controlling the
partnership on the date hereof shall constitute an assignment. If Tenant is a
corporation whose shares of stock are not traded publicly, any transfer, on a
cumulative basis, of twenty-five percent (25%) or more of the voting control of
Tenant shall constitute an assignment.
10.6 Tenant hereby irrevocably assigns to Landlord all of Tenant's
right, title and interest in and to, and hereby grants to Landlord the right to
collect, all rents from any assignee of Tenant's interest in this Lease and from
any subtenant of all or any part of the Premises, whether or not such assignment
or sublease is in violation of this Section; provided that, so long as no Event
of Default is in existence hereunder, Tenant may continue to collect rent from
the assignee or sublessee, as the case may be. Landlord shall apply any amounts
collected pursuant to the preceding sentence to the rents reserved in this
Lease, but neither any such assignment, subletting, occupancy or use, whether
with or without Landlord's prior consent, nor any such collection or
application, shall be deemed a waiver of any term, covenant or condition of this
Lease or the acceptance by Landlord of such assignee, subtenant, occupant or
user as tenant.
10.7 Any sale, assignment, hypothecation or transfer of this Lease or
subletting of Premises that is not in compliance with this Section 10 shall be
void and shall, at the option of Landlord, terminate this Lease.
10.8 The consent by Landlord to an assignment or subletting shall not
relieve Tenant or any assignee of this Lease or sub-lessee of the Premises from
obtaining the consent of Landlord to any further assignment or subletting or as
releasing Tenant or any assignee or sub-lessee of Tenant from full and primary
liability.
11. RECAPTURE.
11.1 If Tenant desires to enter into any sublease or assignment of all
or any portion of the Premises, Landlord shall have the option to recapture from
the Premises covered by this Lease, the space proposed to be sublet or assigned
by Tenant, effective as of the proposed commencement date of sublease or
assignment of said space by Tenant. Landlord may exercise said option by giving
Tenant written notice after receipt by Landlord of Tenant's notice of the
proposed sublease or assignment or proposal to sublease or assign. If Landlord
exercises said option, Tenant shall surrender possession of the proposed
sublease or assigned space to Landlord on the effective date of recapture of
said space from the Premises covered by this Lease, and neither party hereto
shall have any further rights or liabilities with respect to said space under
this Lease accruing after the effective date thereof. Provided, however, such
recapture shall not release or discharge either party from any obligation that
has accrued thereunder prior to such recapture. Effective as of the date
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of recapture of any subleased space of any portion of the Premises covered by
this Lease pursuant to this paragraph, (i) the Rent shall be reduced in the same
proportion as the number of square feet of Net Rentable Area contained in the
portion of the Premises so recaptured bears to the number of square feet of Net
Rentable Area contained in the Premises immediately prior to such recapture, and
(ii) the Net Rentable Area of the Premises specified in Section 1.1.8 shall be
decreased by the number of square feet of Net Rentable Area contained in the
portion of the Premises so recaptured.
12. MAINTENANCE AND REPAIRS.
12.1 Landlord shall repair and maintain the structural elements and
exterior windows of the Building and the Common Areas, and the electrical,
plumbing, heating, ventilation and air conditioning systems of the Building and
the Common Areas, except that:
(i) Landlord shall not be responsible for the maintenance, repair
or replacement of any such systems which are located within the
Premises which are supplemental or in addition to the Building's
standard systems, whether installed pursuant to the Work Letter or
otherwise; and
(ii) the cost of performing any of said maintenance or repairs
caused by the negligence of Tenant, its employees, agents,
servants, licensees, subtenants, contractors or invitees, or the
failure of Tenant to perform its obligations under this Lease
shall be paid by Tenant.
Landlord's obligations under the preceding sentence shall not accrue until after
notice by Tenant to Landlord of the necessity for any specific repair delivered
to the Landlord's Notice Address.
12.2 Except as otherwise set forth in Section 12.1, Tenant shall,
throughout the term of this Lease, at Tenant's sole cost and expense keep the
Premises and every part thereof in good condition and repair, except for
ordinary wear and tear. Tenant shall make all repairs and replacements to the
Premises necessitated or caused by the acts, omissions or negligence of Tenant,
Tenant's Group or any person or entity claiming through or under Tenant or any
of Tenant's Group or by the use or occupancy or manner of use or occupancy of
the Premises by Tenant or any such person or entity.
12.3 There shall be no abatement or diminution of rent and no liability
of Landlord by reason of any injury or interference with Tenant's business
arising from the making of any repairs or maintenance in or to any portion of
the Premises. If repairs or replacements become necessary which by the terms of
this Lease are the responsibility of Tenant and Tenant fails to make the repairs
or replacements, Landlord may make the repairs or replacements and Tenant shall
upon demand pay to Landlord one hundred and twenty percent (120%) of the
reasonable cost thereof.
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12.4 The Common Areas and Complex shall be subject to the control,
management, operation and maintenance of Landlord. Landlord shall have the right
to construct, maintain and operate lighting and other facilities in the Building
and in and on the Complex and Common Areas; to grant third-parties temporary
rights of use thereof; from time to time to change the area, level, location or
arrangement of parking areas and other facilities; to grant exclusive use of or
lease the Common Areas to other persons; to close all or any portion of the
Complex and Common Areas; to close all or any part of the parking areas or
parking facilities; and to do and perform such other acts in and to the
Building, the Complex and Common Areas as Landlord shall determine to be
advisable. Landlord will operate and maintain the Common Areas in such manner,
as Landlord, in its sole discretion, shall determine from time to time.
12.5 Tenant shall, and shall cause Tenant's Group to, comply with and
observe the Rules and Regulations which are attached hereto as Exhibit "B".
Landlord shall have the right from time to time to modify and enforce Rules and
Regulations with respect to the Complex, including the Common Areas, and to
assign its rights and responsibilities for the Common Areas and Complex to a
manager or other person.
13. ALTERATIONS.
13.1 Tenant's Alterations shall be subject to this Section 13 and to
any Work Letter as long as the terms of said Work Letter is consistent with this
Section 13. Tenant shall not make or cause to be made any Alteration in or to
the Premises, without the prior written consent of Landlord, which consent may
be withheld for any reason whatsoever. Tenant shall not be permitted to make any
Alteration to any life, safety, fire sprinkler, heating, ventilation, air
conditioning, electrical or plumbing system or equipment. Any modifications to
these systems will be performed by Landlord, and if such modifications are made
by Landlord at Tenant's request, or resulting from Tenant's Alterations on or to
the Premises, such modifications shall be at the sole cost and expense of Tenant
plus twenty percent (20%) representing Landlord's overhead costs.
13.2 Notwithstanding Landlord's consent to any Alterations, all
Alterations, whether made prior to or during the Term, shall be made and
performed in conformity with and subject to the following provisions:
(i) All Alterations shall be made and performed at Tenant's sole cost
and expense and at such time and in such manner as Landlord may
reasonably from time to time designate.
(ii) Alterations shall be made only by contractors or mechanics
approved by Landlord.
(iii) No Alteration shall adversely affect any part of the Building
other than the Premises or adversely affect any service required to be
furnished by Landlord to Tenant or to any other tenant or occupant of
the Building.
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(iv) All business machines and mechanical equipment shall be placed and
maintained by Tenant in settings sufficient in Landlord's reasonable
judgment to absorb and prevent vibration, noise and annoyance to other
tenants or occupants of the Building.
(v) Tenant shall submit to Landlord reasonably detailed plans and
specifications for each proposed Alteration and shall not commence any
such Alteration without first obtaining Landlord's written approval of
such plans and specifications.
(vi) All Alterations shall be made and in full compliance with all
Legal Requirements and in accordance with the Rules and Regulations.
(vii) All materials and equipment to be incorporated in the Premises as
a result of all Alterations shall be of good quality.
(viii) Tenant shall include in its contract documents for the
Alterations a requirement that any contractor performing Alterations to
carry and maintain at all times during the performance of the work, at
no expense to Landlord, a policy of commercial general liability
insurance, including contractor's liability coverage, contractual
liability coverage, completed operations coverage, contractor's
protective liability coverage, and a broad form property damage
endorsement, naming Landlord and any other person or entity as Landlord
may request, as additional insured(s), with such policy to afford
protection to a combined single limit of not less than $1,000,000 per
occurrence with respect to bodily injury or death or damage to
property; and workmen's compensation or similar insurance in the form
and amounts required by the laws of the State of Oklahoma, and shall
use all commercially reasonable efforts to enforce such requirement.
(ix) Tenant shall provide instruments of indemnification and defense
against any and all claims, costs, expenses, damages and liabilities
which may arise in connection with such work, all in such form, content
and amount as may be satisfactory to Landlord.
(x) Prior to commencement of any such work or delivery of any materials
into the Premises, Tenant shall provide Landlord with evidence
reasonably satisfactory to Landlord of Tenant's ability to pay for such
work and materials in full. At Landlord's option, Landlord may require
Tenant to secure at Tenant's own cost and expense a completion and lien
indemnity bond approved by Landlord, which approval will not be
unreasonably withheld.
13.3 Tenant shall permit Landlord, if Landlord so desires, to monitor
construction operations in connection with such work; provided, however, that
such monitoring or right to monitor by Landlord and the approval or disapproval
of plans and specifications for such work in any situation shall be for the
Landlord's sole benefit and shall not constitute any warranty by Landlord to
Tenant or any other person of the adequacy of the design, workmanship or quality
of such work or materials for Tenant's intended use or impose any
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liability upon Landlord in connection with the performance of such work.
13.4 Tenant shall, within thirty (30) days of completion of any of its
work, deliver to Landlord an "as-built" drawing and/or a CAD disk of such work
prepared and certified by a licensed architect.
13.5 Except for Tenant's Trade Fixtures, all Alterations to or on the
Premises (including but not limited to carpets, drapes and anything bolted,
nailed, plumbed or otherwise secured in a manner customarily deemed to be
permanent) shall be deemed to be a fixture inuring to the Building and becoming
a part of the Premises and shall be and remain the property of Landlord without
compensation or credit to Tenant; provided however, Landlord may waive its
ownership right as to any Alteration by written notification of same to Tenant.
Any replacements of any property of Landlord whether made at Tenant's expense or
otherwise, shall be and remain the property of Landlord. Unless otherwise
directed by Landlord, Tenant shall remove all Trade Fixtures and those
Alterations of which Landlord has waived ownership from the Premises, upon the
expiration or sooner termination of this Lease, at Tenant's expense, and subject
to the condition that (i) Tenant must repair any and all damage occasioned by
the installation, use and/or removal of such Alteration, and (ii) the Premises
must be immediately restored to its former condition. In the event Tenant shall
fail to remove the same, Landlord may do so on Tenant's behalf and at Tenant's
expense.
13.6 If Tenant defaults under this Section by reason of making of any
Alteration not hereby authorized or by reason of failure to give any notice or
to obtain any approval required herein, Tenant may cure such default by promptly
removing such Alteration and restoring the Leased Premises to their former
condition.
13.7 Tenant shall not erect or install any sign or other type display
whatsoever either upon the exterior of the Building or the Complex, upon or in
any window, or in any lobby, hallway or door therein located, without the prior
express written consent of Landlord. Landlord agrees to provide a directory of
the names and locations of its tenants and to maintain the same at a convenient
location in the lobby of the Building. The initial listing of the name and room
number of the tenant shall be furnished without charge to the Tenant. The
listing of additional names or room numbers and changes or revisions of listings
shall be made by Landlord at the cost of Tenant.
13.8 Tenant shall not permit any lien or claim for lien of any
mechanic, laborer or supplier or any other lien to be filed against the Complex,
the Building, the Common Areas, the land which comprises the Complex, the
Premises, or any part of such property arising out of work performed, or alleged
to have been performed by, or at the direction of, or on behalf of Tenant or
otherwise arising from the acts or omissions of Tenant. If any such lien or
claim for lien is filed, Tenant shall immediately give notice to Landlord and
Tenant shall within five (5) business days after such filing either have such
lien or claim for lien released of record or shall deliver to Landlord a bond or
other security in form, content, amount, and issued by a company satisfactory to
Landlord indemnifying Landlord, the Building manager and others designated by
Landlord against the total amount claimed and all costs and
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liabilities, including attorneys' fees, which may result from such lien or claim
for lien and the foreclosure or attempted foreclosure thereof. If Tenant fails
to have such lien or claim for lien so released or to deliver such bond to
Landlord, Landlord, without investigating the validity of such lien, may pay or
discharge the same and Tenant shall reimburse Landlord upon demand for the
amount so paid by Landlord, including Landlord's expenses. including interest
expense, and attorneys' fees.
14. ALLOCATION OF RISKS AND INDEMNIFICATION.
14.1 To the fullest extent permitted by law, Tenant waives the right
and covenants not to sue Landlord or Landlord's Group on any claim of any kind,
past, present, or future, arising from or allegedly arising from the condition
of the Premises, the Building, the Complex or adjoining or related areas or
equipment, from Tenant's use and occupancy of the Premises, from any accident in
or around the Premises, Building, or Complex or from the negligence or other
fault of Landlord or any other Person. Tenant also agrees and covenants not to
sue Landlord or Landlord's Group on any claim, past, present or future, for
inconvenience, interference, loss, or damage arising or allegedly arising from
work done in or about the Premises, the Building, the Complex or adjoining or
related areas and equipment or from any failure, delay, or interruption of any
service or services to be furnished pursuant to this Lease. This waiver and
covenant not to sue is intended to prevent any and all such claims by Tenant
against Landlord, whether for damage sustained by Tenant or for indemnification
or contribution or otherwise. Tenant agrees to insure itself against the above
claims, but this shall in no way limit the scope of Tenant's covenant not to
sue.
14.2 Tenant agrees to obtain from the insurance companies providing any
insurance coverages required herein permission to allow Tenant to waive its
rights of subrogation. Further, Tenant hereby releases and relieves Landlord and
waives its entire right to recover damages (whether in contract or in tort)
against the Landlord, for loss of or damage to Tenant's property arising out of
or incident to the perils required to be insured against under Section 15. The
effect of such release and waiver of the right to recover damages shall not be
limited by the amount of insurance carried or required, or by any deductibles
applicable thereto.
14.3 To the fullest extent permitted by law, Tenant covenants and
agrees to indemnify, defend and hold harmless Landlord and Landlord Group
against and from all claims, demands, liabilities, costs and expenses (including
reasonable attorneys' fees) arising from or alleged to arise from (i) any
occurrence in, upon or about the Premises or adjoining or related areas during
the term of this Lease, (ii) Tenant's use, occupancy, repairs, maintenance, or
Alteration of the Premises or adjoining or related areas and all improvements,
fixtures, equipment and personal property thereon, (iii) any act or omission of
Tenant or Tenant's Group, (iv) any default of Tenant hereunder, or (v) for any
other occurrence in any way related to the existence or performance of this
Lease. Both parties intend this indemnification agreement to be effective
regardless of the negligence or other fault of Landlord. Tenant agrees to insure
itself for its indemnification, defense and hold harmless agreements hereunder,
but this shall in no way limit the scope of Tenant's
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indemnification, defense and hold harmless obligations hereunder. This
indemnification shall survive the expiration or sooner termination of this
Lease.
14.4 In the event of Tenant's failure to perform in accordance with
this Section 14, Landlord, at its option, may so perform without relieving
Tenant of its obligations hereunder, and Tenant shall reimburse Landlord for all
costs and expenses, including attorneys' fees, incurred in so performing
together with interest on the amount of such costs and expenses at the highest
permissible legal rate, the prime rate of interest announced as charged from
time to time by Bank of Oklahoma Tulsa, N.A. to its preferred commercial
customers for ninety-day unsecured loans plus two (2) points (and if such rate
ceases to be announced by Bank of Oklahoma Tulsa, N.A., then eighteen percent
(18%) per annum), payable from the date incurred by Landlord until reimbursed by
Tenant. To the fullest extent permitted by law, Landlord covenants and agrees to
indemnify, defend and hold harmless Tenant and Tenant's Group against and from
all claims, demands, liabilities, costs and expenses arising from or alleged to
arise from the gross negligence or willful misconduct of Landlord; PROVIDED,
HOWEVER, in no event shall Landlord be liable for injury to business or loss of
profits.
14.5 Security devices and services, if any, while intended to deter
crime may not in given instances prevent theft or other criminal acts and it is
agreed that Landlord shall not be liable for injuries or losses caused by
criminal acts of third parties and the risk that any security device or service
may malfunction or otherwise be circumvented by a criminal is assumed by Tenant.
Tenant shall at Tenant's cost obtain insurance coverage to the extent Tenant
desires protection against such criminal acts.
14.6 Landlord shall not be liable for any damages arising from any act
or neglect of any other tenant in the Building or Complex.
15. INSURANCE.
15.1 Tenant, at its expense, shall maintain in force during the Term:
(i) comprehensive general liability insurance, which shall include
coverage for contractual liability, broad form property damage,
products/complete operations, and independent contractors to cover
personal injury (with Exclusions pertaining to contractual and
employment liability deleted), bodily injury (including death) and
property damage, all on an occurrence basis with respect to the
business carried on, in or from the Premises and Tenant's use and
occupancy of the Premises with coverage for any one occurrence or
claim of $1,000,000 or such other amount as Landlord may
reasonably require of other tenants upon not less than six (6)
months' prior written notice;
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(ii) insurance on an All Risk basis for the replacement value of
Tenant's property (including fixtures, leasehold improvements and
equipment which Tenant is required to replace under this Lease in
the event of loss, damage or destruction); located in the Premises
and such other insurance against such other perils and in such
amounts as Landlord may from time to time reasonably require upon
not less than 90 days' prior written notice.
15.2 All insurance required to be maintained by Tenant shall be on
terms and with insurers reasonably acceptable to Landlord. Each policy shall
contain a waiver by the insurer of any rights of subrogation or indemnity or any
other claim as provided in Section 11.2. These policies shall name Tenant and
Landlord as insured and shall name any other person, firms or corporations
designated by Landlord in accordance with the following endorsement to Tenant's
insurance policies:
It is hereby agreed and understood that the following entities are
added as additional insured, and the Condition of this policy regarding
Other Insurance is deleted so that this insurance is primary insurance
for the following entities; provided, however, that the provisions of
this endorsement apply only to claims or losses arising out of or in
connection with any Lease between the Named Insured and Williams
Headquarters Building Company, its successors and assigns:
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
It is further agreed and understood that with respect to the
above-named entities, being named herein as additional insured shall in
no way waive or prejudice their rights against the Named Insured or any
other Insured, such that for purposes of coverage hereunder, an action
by any of the above-named entities against any other Insured or the
Named Insured shall be treated as if a separate policy had been issued
to each; provided, however, that nothing herein shall be deemed to
increase the Company's limit of liability for all Insured beyond the
limit shown elsewhere in this policy.
15.3 Such insurance shall contain a clause that the policy will not
lapse, be canceled or be materially changed except after not less than 30 days
prior written notice to Landlord of the intended change, lapse or cancellation.
Upon execution of this Lease and annually thereafter, Tenant shall furnish to
Landlord certificates of insurance in the form of Exhibit "D" hereto duly
executed by or on behalf of Tenant's insurers. In the event of loss, Tenant
shall, upon written notice by Landlord, provide Landlord a certified copy of any
policy required hereunder within ten (10) days of the date of receipt of notice.
15.4 Tenant shall have the option to self-insure the above-required
insurance coverage of Tenant. Further, with respect to any insurance coverage
required to be maintained by Landlord, Landlord shall have the option to
self-insure.
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16. DEFAULTS AND REMEDIES.
16.1 In the event of a default as herein described on the part of the
Tenant, Landlord shall have the following remedies:
16.1.1 Bankruptcy: If Tenant shall make an assignment for benefit
of creditors or like arrangements or composition, or file a petition in the
federal court for reorganization or otherwise seek relief under any bankruptcy
or insolvency law, federal or state, or be placed in the hands of a receiver or
trustee, then Landlord may, at its election and without further notice or
demand, and either with or without entry upon the Premises at its discretion, at
any time thereafter, cancel this Lease and be thereafter entitled to recover
damages in an amount equal to the Rental which, but for termination of this
Lease, would have become due during the remainder of the Term, which amount
shall be accelerated and due in one lump sum payment upon demand and shall bear
interest at the prime rate of interest announced as charged from time to time by
Bank of Oklahoma Tulsa, N.A. to its preferred commercial customers for
ninety-day unsecured loans plus two (2) points (and if such rate ceases to be
announced by Bank of Oklahoma Tulsa, N.A., then eighteen percent (18%) per
annum), or the maximum legal rate allowable under then current law, whichever is
greater, from the date of default until paid.
16.1.2 Non-Payment of Rent and Other Defaults: If Tenant: (i)
fails at any time to pay rent upon the day the same shall become delinquent; or
(ii) fails to perform any of the other terms, conditions or covenants of the
Lease by said Tenant to be performed, and such failure shall continue for a
period of twenty (20) days (or shorter period in cases where it is necessary to
protect the peace, health or safety of the Building or of other tenants), after
service of written notice of such failure by Landlord to Tenant; then Landlord
may enter into and upon the Premises or any part thereof and repossess the same,
with or without terminating this Lease, and without prejudice to any of its
remedies for rent or breach of covenant, and, in any such event may, at its
option, terminate said Lease by giving written notice of its election so to do,
or may, at its option, lease the Premises or any part thereof as the agent of
Tenant, or otherwise. In the event rent for re-letting of the Premises is higher
than the Rental under the terms of this Lease, then such excess shall belong to
Landlord and Tenant shall have no claim thereto.
16.1.3 Non-Payment for Utilities and Services: In the event of
default by Tenant in the payment for utilities and services required hereunder,
including, without limitation, electricity, heat, air conditioning, water,
sewage, janitorial services, garbage disposal and other utilities and services,
Landlord may, in its sole discretion, and in addition to all other remedies
under this Lease cease to provide such services and utilities to the Premises,
upon five (5) days written notice to Tenant, without liability, directly or
indirectly, therefor, and Tenant shall not be entitled to any abatement or
reduction of rent by reason of Landlord's exercise of such right to discontinue
the foregoing services, nor shall any such stoppage or interruption be construed
as an eviction, or relieve Tenant from the obligation to perform any covenant or
agreement herein.
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16.1.4 Right of Landlord to Make Repairs or Alterations: Landlord
shall have the right, at Tenant's cost, to make reasonable repairs, alterations
and additions to restore the Premises to its condition upon commencement of this
Lease, ordinary wear and tear excepted, (including, but not limited to, Work
Letter items) or, at Landlord's election, to Building Standard condition for the
purposes of re-letting the Premises.
16.1.5 Property of the Tenant: Any property belonging to Tenant or
to any person holding by, through or under Tenant, or otherwise found upon the
Premises at the time of termination by Landlord, may be removed therefrom and
stored in any warehouse, at the cost of and for the account of Tenant and
disposed of accordingly.
16.1.6 Re-letting, Costs of Alterations and Damages: Upon any
re-letting, Tenant shall be immediately liable to pay to Landlord, without
further demand or process of law, the cost and expense of such re-letting, the
cost of any alterations and repairs deemed necessary by Landlord to effect such
re-letting, and the full amount, if any, by which the Rental reserved in this
Lease for the period of such reletting (but not beyond the term of this Lease)
exceeds the amount agreed to be paid as rent for the Premises for such period of
re-letting. If the Landlord elects to terminate this Lease, Landlord may recover
from Tenant all damages Landlord may incur by reason of Tenant's failure to pay
Rent reserved in this Lease for the remainder of the stated term over the then
reasonable rental value of the Premises for the remainder of such term, all of
which amount shall be immediately due and payable by Tenant to Landlord.
16.1.7 Acceleration: If (i) Tenant fails to pay Basic Rent or
Additional Charges within five (5) days after the date on which such Basic Rent
or Additional Charges are due, and (ii) such failure to pay occurs two times
within any period of twelve (12) consecutive months, Landlord may, in addition
to its other remedies under this Lease, by written notice to Tenant, declare the
Basic Rent payable under this Lease for the next six (6) months (or at
Landlord's option, for a lesser period) to be due and payable within ten (10)
days after the date of such notice.
16.1.8 Additional Remedies: In the event of any breach or
threatened breach by Tenant of any covenants, agreements, terms or conditions
made in this Lease, Landlord shall be entitled to enjoin such breach or
threatened breach and, in addition to the rights and remedies provided
hereunder, shall have any other right or remedy allowed at law or equity, by
statute or otherwise. The provisions of this section shall be construed
consistent with the law of Oklahoma so that remedies of Landlord herein
described shall be available to Landlord to the full extent but only to the
extent that they are valid or enforceable under the law of Oklahoma.
16.1.9 Remedies Cumulative: The foregoing rights and remedies
given to Landlord are and shall be deemed to be cumulative, and the exercise of
any of them shall not be deemed to be an election excluding the exercise by
Landlord at any time, of a different or inconsistent remedy, and shall be deemed
to be given to Landlord in addition to any other and further rights granted to
said Landlord by the terms hereof, or by law, and the failure of Landlord at any
time to exercise any right or remedy herein granted or established
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by law shall not be deemed to operate as a waiver of its right to exercise such
right or remedy at any other future time.
17. ATTORNEYS' FEES.
If legal counsel is retained by Landlord for the purpose of recovery of
possession of the Premises, for the recovery of Rent or any other amount due
under the provisions of this Lease, or because of Tenant's failure to keep or
perform any other covenant herein contained, Tenant agrees to pay all reasonable
legal expenses, including a reasonable attorneys' fees, incurred in connection
therewith.
18. SURRENDER OF PREMISES.
18.1 Upon the expiration or termination of this Lease or termination of
Tenant's right of possession of the Premises, Tenant shall surrender and vacate
the Premises immediately and deliver possession thereof to Landlord in a clean,
good and tenantable condition, ordinary wear and tear excepted, and shall
surrender all keys for the Premises to Landlord at the place then fixed for the
payment of rent. Upon any termination which occurs other than by reason of
Tenant's default, Tenant shall be entitled to remove from the Premises all
unattached and movable Trade Fixtures, any Alterations owned by Tenant, and
personal property of Tenant ("Tenant Property") without credit or compensation
from Landlord for the costs of removal, provided Tenant immediately shall repair
all damage resulting from such removal and shall restore the Premises to its
pre-existing condition prior to removal. In the event possession of the Premises
is not immediately delivered to Landlord when due, or if Tenant, prior to such
time, shall fail to remove any Tenant Property, Landlord may remove same without
any liability to Tenant. Any such Tenant Property which may be removed prior to
the date of termination of the right of possession of the Premises by Tenant and
which are not so removed, shall, at the option of Landlord, be conclusively
presumed to have been abandoned by Tenant and title to such property shall pass
to Landlord without any payment or credit and Landlord may, at its option and at
Tenant's expense, store and/or dispose of such property, or Landlord may have
such fixtures and property removed and stored at Tenant's expense.
19. DAMAGE BY FIRE OR OTHER CASUALTY.
19.1 Substantial Untenantability: If either the Premises or the
Building is rendered substantially untenantable by fire or other casualty,
Landlord shall elect by giving Tenant written notice within sixty (60) days
after the date of said fire or casualty, either to:
(i) terminate this Lease as of the date of the fire or other casualty;
or
(ii) proceed to repair or restore the Premises or the Building (other
than leasehold improvements and personal property installed by or on
behalf of Tenant) to substantially the same condition as existed
immediately prior to such fire or casualty.
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19.1.1 If Landlord elects to proceed pursuant to subsection (2)
above, Landlord's notice shall contain Landlord's reasonable estimate of the
time required to substantially complete such repair or restoration. If such
estimate indicates that the time so required will exceed 270 days from the date
of the notice, then Tenant shall have the right to terminate this Lease as of
the date of such casualty by giving written notice to Landlord not later than
twenty (20) days after the date of Landlord's notice which termination shall be
effective as of the later to occur of (i) the date of such casualty or (ii) the
date Tenant vacates the Premises. Tenant shall vacate the Premises within ten
(10) days of the date such notice of termination is given. If Landlord's
estimate indicates that the repair or restoration can be substantially completed
within 270 days, or if Tenant fails to exercise its said right to terminate this
Lease within the twenty (20) days as provided immediately above, this Lease
shall remain in force and effect.
19.2 Insubstantial Untenantability: If either the Premises or the
Building is damaged by fire or other casualty but is not rendered substantially
untenantable, then Landlord shall diligently proceed to repair and restore the
damaged portions thereof, other than the leasehold improvements and personal
property installed by or on behalf of Tenant, to substantially the same
condition as such existed immediately prior to such fire or casualty, unless
such damage occurs during the last twelve (12) months of the Term, in which
event Landlord shall have the right to terminate this Lease as of the date of
such fire or other casualty by giving written notice to Tenant within thirty
(30) days after the date of such fire or other casualty.
19.2.1 Provided, however, in the event Landlord does so determine
to terminate this Lease in accordance with the provisions of this Section 19.2,
Landlord shall use reasonable efforts to relocate Tenant under this Lease to
other space in the Building for the balance of time remaining in the Lease Term
hereunder for the Premises. Any such relocation shall be at Tenant's expense,
subject to the rights of other tenants in the Building and the relocation space
shall be leased to Tenant on the same terms and conditions of this Lease in
`AS-IS/WHERE-IS' condition. If Landlord and Tenant do not agree on the space to
which the Premises are to be relocated or the timing of such relocation, this
Lease shall terminate on the date which is thirty (30) days after Tenant's
receipt of the foregoing Landlord's termination notices.
19.3 Rent Abatement: If all or any part of the Premises are damaged by
fire or other casualty and this Lease is not terminated as hereinabove provided,
Monthly Base Rental shall abate for that part of the Premise which are
untenantable on a per diem and proportionate area basis from the date three (3)
business days after the date of the fire or other casualty causing such damage
until such time as Landlord has substantially completed the repair and
restoration work in the Premises which it is required to perform, provided, that
as a result of such fire or other casualty, Tenant does not occupy the portion
of the Premises which are untenantable during such period.
19.4 Tenant's Restoration: If all or any part of the Premises are
damaged by fire or other casualty and this Lease is not terminated, Tenant shall
promptly and with due diligence repair and restore the leasehold improvements
(other than improvements which
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Tenant is permitted to remove in accordance with the terms of this Lease upon
expiration of the Lease) and personal property previously installed by Tenant
pursuant to this Lease.
19.5 In case of any insurance proceeds payable to Landlord and Tenant,
for damage to the lease hold improvements, Tenant agrees to endorse checks for
such sums promptly to the order of Landlord. Landlord shall retain such proceeds
if the Lease is terminated pursuant to the provisions hereinabove contained. If
however, the Lease is not terminated as provided hereinabove, Tenant or its
contractors shall be entitled to payment from such retained funds for repairing,
restoring or reconstructing the leasehold improvements promptly upon Tenant's
presenting to Landlord proper waivers of materialmen's and mechanic's liens or
claims and an itemized statement of work performed showing the amount charged
therefor. Further, such work shall be performed by Tenant in accordance with the
terms, provisions and conditions of a work letter agreement to be entered into
by the parties hereto at such time in a form then in general use by Landlord for
work performed in or upon the Building. If, upon completion of the repair or
restoration, any such insurance proceeds are left unexpended, Landlord shall pay
the same to Tenant, upon demand. If the insurance proceeds are insufficient for
the cost of the repair or restoration, Tenant shall pay the same to the extent
of such insufficiency.
19.6 If Tenant does not commence promptly to repair or restore the
damage or destruction, or if, having commenced the repair or restoration, Tenant
does not proceed diligently to complete the same, Landlord shall be entitled at
any time thereafter to enter the Premises and repair or restore the damage or
destruction and to apply any insurance proceeds held by it as hereinabove
provided to the payment of the cost thereof. If the insurance proceeds are
insufficient for the cost of the repair or restoration, Tenant shall pay to
Landlord, upon demand and as additional rent as the work progresses, such
amounts as shall from time to time be shown to be due and payable by Tenant.
20. EMINENT DOMAIN.
20.1 Permanent Taking: If all or any part of the Premises, Complex or
the Building is permanently taken or condemned by any competent authority for
any public use or purpose (including a deed given in lieu of condemnation) which
renders the Premises substantially untenantable, this Lease shall terminate as
of the date title vests in such authority, and Monthly Base Rental shall be
apportioned as of such date.
20.2 Insubstantial Taking: If any part of the Premises is taken or
condemned for any public use or purpose (including a deed given in lieu of
condemnation) and this Lease is not terminated pursuant to Section 20.1, Monthly
Base Rent shall be reduced for the period of such taking by an amount which
bears the same ratio to the Monthly Base Rent then in effect as the number of
square feet of Net Rentable Area in the Premises so taken or condemned bears to
the number of square feet of Net Rentable Area specified in Section 2.1.2.
Landlord, upon receipt and to the extent of the award in condemnation or
proceeds of sale, shall make necessary repairs and restorations (exclusive of
leasehold improvements and personal property installed by Tenant) to restore the
Premises remaining to as near its former condition as circumstances will permit.
Upon the taking or condemnation described
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in this Section 20.2, the Net Rentable Area of the premises stated in Section
2.1.2 shall be reduced for all purposes under this Lease by the number of square
feet of Net Rentable Area of the Premises so taken or condemned as determined
and certified by an independent, professional architect selected by Landlord, at
Landlord's expense.
20.3 Compensation: Landlord shall be entitled to receive the entire
price or award from any such sale, taking or condemnation without any payment to
Tenant, and Tenant hereby assigns to Landlord Tenant's interest, if any, in such
award.
21. RULES AND REGULATIONS.
21.1 Tenant agrees that it will abide by, and keep and observe all
reasonable rules and regulations ("Rules and Regulations") which Landlord may
make from time to time for the management, reputation, safety, care, or
cleanliness of the Building or Premises, or the operations and maintenance
thereof and the equipment therein, or for the comfort of Tenant and the other
tenants of the Building. Landlord shall have the right to change said rules and
waive in writing any or all of said rules in the case of any one or more
tenants. All such Rules and Regulations are of the essence hereof without which
this Lease would not have been entered into by the Landlord, and any breach of
any provision of these Rules and Regulations by the Tenant which is material in
the judgment of the Landlord shall constitute a default hereunder.
22. LANDLORD'S RIGHTS.
22.1 Landlord shall have the following rights exercisable without
notice (except as expressly provided to the contrary), and without being deemed
an eviction or disturbance of Tenant's use or possession of the Premises or
giving rise to any claim for set-off or abatement of Rent: (1) To change the
name or street address of the Building or the Complex upon 30 days' prior
written notice to Tenant; (2) To designate and/or approve, install, affix and
maintain all signs, including Tenant plaques, logos and graphics, on the
exterior and/or interior of the Building and in and about the Complex; (3) To
designate and/or approve prior to installation, all types of signs, window
shades, blinds, drapes, awnings or other similar items, and all internal
lighting that may be visible from the exterior of the Premises; (4) To display
the Premises to prospective tenants at reasonable hours; (5) To change the
arrangement of entrances, doors, corridors, elevators and stairs in the
Building; (6) To grant to any party the exclusive right to conduct any business
or render any service in or to the Building; (7) To prohibit the placing of
vending or dispensing machines of-any kind in or about the Premises; (8) To have
access for Landlord and other tenants of the Building to any mail chutes and
boxes located in or on the Premises according to the rules of the United States
Post Office; (9) To close the Building after normal business hours, except that
Tenant and its employees and invitees shall be entitled to admission at all
times under such regulations as Landlord prescribes for security purposes; (10)
To take any and all reasonable measures, including inspections and repairs to
the Premises or to the Building, as may be necessary or desirable in the
operation or protection thereof; (11) To retain at all times master keys or pass
keys to the Premises; (12) To install, operate and maintain security systems
which monitor and identify, by closed circuit television or otherwise, all
persons
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entering and leaving the Building or the Complex; (13) To install and maintain
pipes, ducts, conduits, wires and structural elements located in the Premises
which serve other parts or other tenants of the Building or any other property;
(14) To reasonably alter, amend and change the rules and regulations for
protection of the health, safety and welfare of persons or property; and (15) To
enter the Premises at all reasonable times following notice of such desired
entry to Tenant provided that Tenant shall make available to Landlord a
designated individual within the Premises to accompany Landlord in such instance
to examine the Premises and to show such to prospective purchasers, mortgagees,
lessees, or tenants of Landlord, or to public officials lawfully having an
interest therein. In the event Tenant fails to make available to Landlord an
individual to accompany Landlord in any particular instance, Landlord shall not
be required to be accompanied by a tenant designee; and Landlord shall further
not be required to give notice of any such entry in the case of emergency as
reasonably determined by Landlord. Said enumerated rights are in addition to all
other rights of Landlord afforded under law and the terms of this Lease.
23. ESTOPPEL CERTIFICATE.
23.1 Each party hereto shall from time to time, upon no less than ten
(10) days' prior written request from the other or any mortgagee or ground
lessor of the Complex, deliver to the other or such mortgagee or ground lessor a
statement in writing certifying:
(i) That this Lease and the Work Letter are unmodified and in full
force and effect or, if there have been modifications, that this
Lease and the Work Letter, as modified, are in full force and
effect;
(ii) The amount of Base Rent then payable under this Lease and the
date to which Rent has been paid;
(iii) That the requesting party is not in default under this Lease
or any work letter agreement, or, if in default, a detailed
description of such default(s);
(iv) That Tenant is or is not in possession of the Premises, as
the case may be; and,
(v) Such other information as may be reasonably requested.
24. REAL ESTATE BROKERS.
24.1 Tenant represents that, except for the broker, if any, identified
in Section 1.1.4 of this Lease as Tenant's Broker, Tenant has not dealt with any
real estate broker, salesperson, or finder in connection with this Lease, and no
such person initiated or participated in the negotiation of this Lease, or
showed the Premises to Tenant. Tenant agrees to indemnify, defend and hold
harmless Landlord and Landlord's Group from and against any and all liabilities
and claims for commissions and fees arising out of a breach of the foregoing
representation. Landlord shall only be responsible for the payment of all
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commissions to the broker, if any, identified in Section 1.1.4 of this Lease,
based upon the leasing commission policy of Landlord applicable to the Building
or Complex as of the date of this Lease.
25. SUBORDINATION AND ATTORNMENT.
25.1 Subordination: It is understood and agreed that this Lease
(including all rights of the Tenant hereunder) is subject and subordinate to any
ground lease or underlying lease of the land comprising the Building or Complex
(hereinafter called "Ground Lease") which may now or hereafter affect the land
or Building or Complex of which the Premises form a part and is further subject
and subordinate to any mortgage or deed of trust or trust indenture (hereinafter
called "Mortgage") which may now or hereafter affect any such lease or the real
property of which the Premises form apart, and to any and all advances made
under any such mortgage and to the interest thereon, and all renewals,
replacements and extensions thereof. This section shall be self-operative and no
further instrument or subordination shall be required, but Tenant shall
nevertheless at any time hereafter, on the demand of Landlord, execute any
instruments, releases or other documents that may be required by any such
mortgage holder or ground lessor or any of their respective successors in
interest to evidence such subordination. If in connection with the financing
(existing or future financing) of the Building or Complex, the holder of any
such mortgage, or with respect to any bond financing, the trustee for any such
bond holders, shall request reasonable modifications in this Lease as a
condition of approval of such financing, Tenant will not unreasonably withhold,
delay or defer making such modifications, provided that they do not unreasonably
increase the obligations of Tenant hereunder or materially and adversely affect
the leasehold interest created by this Lease. In the event of termination of
this Lease through foreclosure of any mortgage to which this Lease is
subordinated, or if the ground lease is terminated, Tenant will upon the demand
of the purchaser of the Premises at the foreclosure sale thereof, or of the
lessor under the ground lease, attorn to and accept such purchaser or ground
lessor as landlord under this Lease or, upon demand, enter into a new Lease
agreement with such purchaser or ground lessor for the unexpired term of this
Lease as extended pursuant to the terms hereunder at the same rent and under the
same provisions of this Lease. It is further agreed by Tenant that this Lease
shall be subject and subordinate at all times to any other arrangement or right
to possession under which Landlord is in control of the Premises, and to the
rights of the owner or owners of the Premises, the Building, the Complex or the
land of which the Building or Complex is a part.
25.1 Attornment: In the event of the cancellation or termination of any
such ground lease in accordance with its terms or by the surrender of such
ground leasehold estate, whether voluntary, involuntary or by operation of law,
or by summary proceedings, or the foreclosure of any such mortgage or deed of
trust by voluntary agreement or deed in lieu of foreclosure or otherwise, or the
commencement of any judicial action seeking such foreclosure, Tenant, at the
request of the then Landlord, shall attorn to and recognize such ground lessor,
mortgagee, beneficiary, or purchaser in foreclosure as Tenant's Landlord under
this Lease. Tenant agrees to execute and deliver at any time upon request of
such ground lessor, mortgagee, beneficiary, purchaser, or their successors, any
instrument to further evidence such attornment. Landlord shall be and hereby is
appointed Tenant's
28
<PAGE> 29
attorney-in-fact for the sole purpose of executing any instrument to evidence
such attornment upon request as herein provided.
26. NOTICES.
26.1 Any Notice which the Landlord may desire to or be required to give
to Tenant shall be deemed to be sufficiently given or rendered, if in writing,
hand delivered to Tenant by certified or registered mail, return receipt
requested, addressed to Tenant at the address shown in Section 1.1.18 hereof,
and any Notice which Tenant may desire or be required to give to Landlord shall
be deemed sufficiently given or rendered, if in writing, delivered to Landlord
by certified or registered mail, return receipt requested, at the address
provided in Section 1.1.7, or other such places as Tenant or Landlord may from
time to time designate in writing. Any Notice given hereunder shall be deemed
delivered when the return receipt is signed or refusal to accept the Notice is
noted thereon or five (5) days after mailing, if mailed as herein provided.
27. MISCELLANEOUS.
27.1 Parties: Except as otherwise expressly provided herein, if more
than one person or entity is named herein as either Landlord or Tenant, the
obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Landlord or
Tenant.
27.2 Non-Waiver: The failure of Landlord to seek redress for violation
of, or to insist upon the strict performance of, any covenant or condition of
the Lease or of any of the Rules and Regulations incorporated herein or
hereafter adopted by Landlord, shall not prevent a subsequent act, which would
have originally constituted a violation, from having all the force and effect of
an original violation. The receipt by Landlord of rent with knowledge of the
breach of any covenant of this Lease, or breach of the Rules and Regulations,
shall not be deemed a waiver of such breach. The failure of Landlord to enforce
any of the Rules and Regulations as incorporated herein or hereafter adopted
against Tenant and/or any other tenant in the Building shall not be deemed a
waiver of any such Rules and Regulations.
No act or thing done or omitted to be done by Landlord or Landlord's
agents during the term of the Lease, which is necessary to enforce the terms of
the Lease, or the Building Rules and Regulations, shall constitute an eviction
by Landlord nor shall it be deemed an acceptance or surrender of said Premises,
and no agreement to accept such surrender shall be valid unless in writing
signed by Landlord. No employee of Landlord or Landlord's agent shall have any
power to accept the keys of said Premises prior to the termination of the Lease.
The delivery of keys to any employee of Landlord or Landlord's agents shall not
operate as a termination of the Lease or a surrender of the Premises.
27.3 Late Charges: All delinquent Rent shall bear interest at the
greater of (i) the highest rate permitted by law, or (ii) the prime rate of
interest announced as charged from time to time by Bank of Oklahoma Tulsa, N.A.
to its preferred commercial customers for
29
<PAGE> 30
ninety-day unsecured loans plus two (2) points (and if such rate ceases to be
announced by Bank of Oklahoma Tulsa, N.A., then eighteen percent (18%) per
annum), from the date due until paid.
27.4 Entire Agreement: This Lease, the Exhibits and any Riders
identified herein and attached hereto contain the entire agreement between
Landlord and Tenant concerning the Premises and there are no other
representations, promises or agreements, either oral or, written. All
negotiations, considerations, representations and understandings between the
parties are incorporated herein and are superseded hereby. There are no terms,
obligations, covenants, statements, representations, warranties or conditions
relating to the subject matters hereof other than those specifically contained
herein.
27.5 Landlord and Tenant Defined: The words "Landlord" and "Tenant",
wherever used in this Lease, shall be construed to mean Landlords and Tenants in
all cases where there is more than one landlord or tenant, and the necessary
grammatical changes required to make the provisions hereof apply either to
corporations or individuals, men or women, shall in all cases be assumed as
though in each case fully expressed. With respect to the provisions hereof
regarding indemnification or waiver of liability of the Landlord, the term
"Landlord" shall be deemed to include any third party operator or owner of the
Building.
27.6 No Reservation/Option: The execution of this Lease by Tenant and
delivery of same to Landlord or Manager does not constitute a reservation of or
option for the Premises or an agreement to enter into a Lease and this Lease
shall become effective only if and when Landlord executes and delivers same to
Tenant; provided, however, the execution and delivery by Tenant of this Lease to
Landlord or the Manager shall constitute an irrevocable offer by Tenant to lease
the Premises on the terms and conditions herein contained, which offer may not
be withdrawn or revoked for thirty (30) days after such execution and delivery.
If Tenant is a corporation, it shall, if requested by Landlord, deliver to
Landlord certified resolutions of Tenant's directors authorizing execution and
delivery of this Lease and the performance by Tenant of its obligations
hereunder. If Tenant is a partnership, every general partner thereof shall
execute this Lease, unless a lesser number is deemed sufficient in the
reasonable opinion of Landlord's legal counsel.
27.7 Amendment: This Lease may not be amended or modified by any act or
conduct of the parties or by oral agreements unless reduced and agreed to in
writing signed by both Landlord and Tenant. No waiver of any of the terms of
this Lease by Landlord shall be binding upon Landlord unless reduced to writing
and signed by Landlord.
27.8 Consent: Unless otherwise expressly provided herein, Landlord may,
in its sole discretion, withhold consents or approvals required hereunder.
Notwithstanding anything to the contrary contained in this Lease, due to the
fact that damages are not readily ascertainable, if any provision of this Lease
obligates Landlord not to unreasonably withhold its consent or approval, an
action for declaratory judgment or specific performance will be Tenant's sole
right and remedy in any dispute as to whether Landlord has breached such
obligation.
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<PAGE> 31
27.9 Holdover: In the event Tenant remains in possession of the
Premises after the expiration or termination of the term, and without the
execution of a new lease, Tenant, at the option of Landlord, shall be deemed to
be occupying the Premises as a Tenant from month-to-month and the Rental due for
each month of continued occupancy shall be two hundred percent (200%) of the
immediately preceding month.
27.10 Accord and Satisfaction: No payment by Tenant or receipt by
Landlord of a lesser amount than any installment or payment of Rental due shall
be deemed to be other than on account of the amount due, and no endorsement or
statement on any check or any letter accompanying any check or payment of Rental
shall be deemed an accord and satisfaction, and Landlord may accept such check
or payment without prejudice to Landlord's right to recover the balance of such
installment or payment of Rental or pursue any other remedies available to
Landlord. No receipt of money by Landlord from Tenant after the termination of
this Lease or Tenant's right of possession of the Premises shall reinstate,
continue or extend the Term.
27.11 Binding Effect: This Lease shall be binding upon and inure to the
benefit of Landlord and Tenant and their respective heirs, legal
representatives, successors and permitted assigns.
27.12 Force Majeure: Landlord shall not be deemed in default with
respect to any of the terms, covenants and conditions of this Lease on
Landlord's part to be performed, if Landlord fails to timely perform same and
such failure is due in whole or in part to an Unavoidable Delay as defined in
Section 1.2.14 or by any act or omission caused directly or indirectly by Tenant
or Tenant's Group. In the event of an occurrence under this Section 27.12
preventing Landlord from performing any obligation as herein provided, Landlord
shall give Tenant notice thereof as soon as reasonably practicable and Landlord
shall exercise commercially reasonable efforts to resume performance hereunder.
27.13 Captions: The headings of the several articles, paragraphs and
sections contained herein are for convenience only and do not define, limit or
construe the content or scope of such articles, paragraphs and sections.
27.14 Applicable Law: This Lease shall be construed in accordance with
the laws of the State in which the Building is located.
27.15 Time: Time is of the essence of this Lease and the performance of
all obligations hereunder.
27.16 Landlord's Right to Perform: If Tenant fails timely to perform
any of its duties under this Lease or any work letter, Landlord shall have the
right (but not the obligation), after the expiration of any grace period
elsewhere under this Lease or the work letter expressly granted to Tenant for
the performance of such duty, to perform such duty on behalf and at the expense
of Tenant without further prior notice to Tenant, and all reasonable sums
expended or expenses incurred by Landlord in performing such duty shall be
deemed
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<PAGE> 32
to be additional Rent under this Lease and shall be due and payable upon demand
by Landlord.
27.17 Licenses and Permits: Tenant shall be solely responsible for
obtaining, all licenses and/or permits as may be required for Tenant to lawfully
conduct its business in the Premises.
28. SPECIAL PROVISIONS.
28.1 All exhibits and riders attached hereto, if any, shall form part
of this Lease as if same were embodied herein.
29. OTHER.
This Lease was executed by the parties on the date first above written.
LANDLORD:
ATTEST: WILLIAMS HEADQUARTERS BUILDING COMPANY
a Delaware corporation
- --------------------------------
Secretary or Assistant Secretary
[Seal]
By:
----------------------------------
Printed:
-----------------------------
Title:
-------------------------------
TENANT:
ATTEST: THE WILLIAMS COMPANIES, INC.,
a Delaware corporation
- --------------------------------
Secretary or Assistant Secretary
[Seal]
By:
----------------------------------
Printed:
-----------------------------
Title:
-------------------------------
The Lease must be executed for Tenant by the President or Vice-President and
must be attested by the Secretary or Assistant Secretary, unless the by-laws or
a resolution of the Board of Directors shall provide that other officers are
authorized to execute the Lease, in which event, a certified copy of the by-laws
or resolution, as the case may be, must be furnished. Tenant's corporate seal
must be affixed.
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<PAGE> 1
Redacted portions have been marked with asterisks (****). Confidential treatment
has been requested for the redacted portions. The confidential redacted portions
have been filed separately with the Securities and Exchange Commission.
CONFIDENTIAL TREATMENT
EXHIBIT 10.17
Confidential - WinStar/Williams
WIRELESS FIBERsm IRU AGREEMENT
BY AND BETWEEN
WINSTAR WIRELESS, INC.
AND
WILLIAMS COMMUNICATIONS, INC.
Effective as of December 17, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. DEFINITIONS..................................................................................................1
1.1. Particular Terms...........................................................................................1
1.2. Other Terms................................................................................................4
2. SCOPE AND STRUCTURE..........................................................................................4
2.1. General....................................................................................................4
2.2. Term.......................................................................................................5
2.3. Strategic Relationship.....................................................................................5
3. GRANTS, RIGHTS AND RESPONSIBILITIES..........................................................................6
3.1. WinStar Grant, Rights and Responsibilities.................................................................6
3.2. WinStar Acceptance and Testing.............................................................................7
3.3. Control of Facilities......................................................................................7
3.4. Provisioning of Williams T-1s..............................................................................8
3.5. Service Orders for Williams T-1s...........................................................................9
3.6. Changes in Service Parameters.............................................................................10
3.7. Delivery of Minimum Williams T-1 Inventory................................................................10
4. OTHER PERFORMANCE AND SERVICES..............................................................................11
4.1. Interconnection...........................................................................................11
4.2. Collocation...............................................................................................11
4.3. Maintenance...............................................................................................11
4.4. Routine Maintenance.......................................................................................11
4.5. Non-Routine Maintenance...................................................................................12
4.6. Subcontractors............................................................................................12
4.7. Williams Equipment........................................................................................12
4.8. Performance Standards.....................................................................................12
4.9. Disengagement Assistance..................................................................................12
4.10. Relocation................................................................................................12
4.11. Ancillary Services........................................................................................13
5. CONTRACT ADMINISTRATION.....................................................................................13
5.1. Reports and Meetings......................................................................................13
5.2. Confidentiality...........................................................................................14
6. CHARGES.....................................................................................................16
6.1. General...................................................................................................16
6.2. Taxes.....................................................................................................16
6.3. Pass-Through Expenses.....................................................................................17
6.4. Most Favored Customer Status..............................................................................17
6.5. Benchmarking..............................................................................................18
7. INVOICING AND PAYMENT.......................................................................................18
7.1. Invoicing.................................................................................................18
7.2. Payment Due...............................................................................................18
7.3. Disputed Charges..........................................................................................19
7.4. Late Interest.............................................................................................19
8. COVENANTS, REPRESENTATIONS AND WARRANTIES...................................................................19
8.1. Non-Infringement..........................................................................................19
8.2. Authorization.............................................................................................19
8.3. Wireless Fiber Connectivity...............................................................................20
8.4. Disclaimer................................................................................................20
9. INDEMNIFICATION.............................................................................................20
9.1. Indemnities by Williams...................................................................................20
9.2. Indemnities by WinStar....................................................................................21
9.3. Indemnification Procedures................................................................................22
</TABLE>
- i -
<PAGE> 3
<TABLE>
<S> <C>
10. LIABILITY, RISK OF LOSS AND INSURANCE.......................................................................22
10.1. General Intent............................................................................................22
10.2. Liability Restrictions....................................................................................23
10.3. Insurance Requirements....................................................................................23
10.4. Risk of Loss..............................................................................................24
10.5. Force Majeure.............................................................................................24
11. REMEDIES AND DISPUTE RESOLUTION.............................................................................25
11.1. Cumulative Nature.........................................................................................25
11.2. Informal Dispute Resolution...............................................................................25
11.3. Arbitration...............................................................................................26
11.4. Termination...............................................................................................27
11.5. Suspension of Service.....................................................................................27
11.6. Litigation................................................................................................27
11.7. Continued Performance.....................................................................................28
12. GENERAL.....................................................................................................28
12.1. Binding Nature and Assignment.............................................................................28
12.2. Entire Agreement..........................................................................................28
12.3. Tariff....................................................................................................28
12.4. Consents..................................................................................................29
12.5. Restriction of Transmissions..............................................................................29
12.6. Use and Ownership.........................................................................................29
12.7. Non-Solicitation..........................................................................................29
12.8. Notices...................................................................................................29
12.9. Counterparts..............................................................................................30
12.10. Relationship of Parties...................................................................................30
12.11. Severability..............................................................................................30
12.12. Reasonableness, Consents and Approval.....................................................................30
12.13. Waiver of Default.........................................................................................30
12.14. Survival..................................................................................................31
12.15. Public Disclosures........................................................................................31
12.16. Third Party Beneficiaries.................................................................................31
12.17. Amendment.................................................................................................31
12.18. Order of Precedence.......................................................................................31
12.19. Interpretation............................................................................................32
12.20. Covenant of Good Faith....................................................................................32
</TABLE>
ii
<PAGE> 4
WIRELESS FIBERsm IRU AGREEMENT
BY AND BETWEEN
WINSTAR WIRELESS, INC.
AND
WILLIAMS COMMUNICATIONS, INC.
This WIRELESS FIBER IRU AGREEMENT (including the Exhibits and Schedules
attached hereto, the "Agreement"), effective as of December 17, 1998 (the
"Effective Date"), is entered into by and between WINSTAR WIRELESS, INC., a
Delaware corporation with offices located at 230 Park Avenue, New York, New York
10169 ("WinStar"), and WILLIAMS COMMUNICATIONS, INC., a Delaware corporation
with offices located at One Williams Center, Tulsa, Oklahoma 74172 ("Williams").
WHEREAS, WinStar is a fixed wireless services telecommunications
provider currently planning to build-out in the domestic major metropolitan
markets set forth in Exhibit A-1;
WHEREAS, Williams is a provider of high capacity long haul fiber optic
network transport and desires to utilize WinStar's Wireless Fiber Connectivity
(as hereinafter defined) in conjunction with its long haul network services; and
WHEREAS, upon the terms and subject to the conditions set forth below,
Williams desires to acquire from WinStar, and WinStar desires to provide to
Williams, an exclusive, indefeasible right to use certain of WinStar's Wireless
Fiber Connectivity on a private, non-common-carrier basis.
NOW THEREFORE, in consideration of the mutual promises set forth below
and other good and valid consideration, the receipt of which is hereby
acknowledged, WinStar and Williams (collectively, the "Parties" and each, a
"Party") agree as follows:
1. DEFINITIONS
1.1. Particular Terms.
As used in this Agreement:
(a) "Acceptance" has the meaning set forth in Exhibit A-4.
(b) "Acceptance Date" means, for each Hub, the date of Acceptance as
provided in Exhibit A-4.
(c) "Acceptance Standards" means the standards set forth in Exhibit
A-4 with respect to the testing of the Hubs.
(d) "Affiliate" means, with respect to any entity, any other entity
that directly, or indirectly through one or more intermediaries,
Controls, or is Controlled by, or is under common Control with,
such entity.
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<PAGE> 5
(e) "Agreement" has the meaning set forth in the preamble to this
Agreement.
(f) "Confidential Information" has the meaning set forth in Section
5.2.
(g) "Control" and its derivatives means legal, beneficial or
equitable ownership, directly or indirectly, of more than fifty
percent (50%) of outstanding voting capital stock (or other
ownership interest, if not a corporation) of an entity or
management or operational control over such entity.
(h) "Cost" means actual, direct costs incurred and computed in
accordance with the established accounting procedures used by
WinStar to bill third parties for reimbursable projects. All
Costs shall be computed in accordance with generally accepted
accounting principles. Such actual, direct costs include:
(i) Labor costs, including wages and salaries, and benefits,
plus the overhead allocable to such labor costs (overhead
allocation percentage shall not exceed the lesser of: (i)
the percentage WinStar allocates to its internal projects;
or (ii) **** percent (****%)); and
(ii) Other direct costs and Out-of-Pocket Expenses on a
Pass-Through Expenses basis (such as equipment, materials,
supplies, contract services, costs of capital, Required
Rights, sales, use or similar taxes, etc.) plus ****
percent (****%) of such expenses, but
(iii) Less any cost or expense reimbursed by a third party.
(i) "Domestic Hub Capacity" means, at the time in question, the
aggregate capacity of WinStar's deployed Hubs within the United
States.
(j) "Effective Date" has the meaning set forth in the preamble to
this Agreement.
(k) "Governmental Authorizations" means all licenses, permits and
authorizations from the Federal Communications Commission,
Federal Aviation Administration, state public utility
commissions, municipal authorities or any other governmental body
that are materially necessary or required for or used in the
business and operations of WinStar or the provision of the
Wireless Fiber Connectivity.
(l) "Hub" has the meaning set forth in Schedule A.
(m) "Indefeasible Right of Use" or "IRU" means an exclusive,
indefeasible right to use the specified Wireless Fiber
Connectivity as contemplated by this Agreement.
(n) "Intellectual Property Rights" means patent, copyright,
trademark, trade secret or other proprietary rights with respect
to any work product in which such rights could inure.
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<PAGE> 6
(o) "Lit Building" means a building that, at the time in question, is
either a Hub provided by WinStar or equipped with a radio
connection to a Hub provided by WinStar utilizing spectrum in
which WinStar holds a license.
(p) "Losses" means all liabilities, damages and related costs and
expenses (including fines, levies, assessments, reasonable legal
fees and disbursements and costs of investigation, litigation,
settlement, judgment, interest and penalties) directly incurred
by a Party.
(q) "Maintenance" means the network operations, administration and
maintenance required for the continued performance of the WinStar
Fiberless Connectivity.
(r) "Minimum Williams T-1 Inventory" has the meaning set forth in
Exhibit A-6.
(s) "Out-of-Pocket Expenses" means reasonable and actual
out-of-pocket expenses incurred by a Party, but not including
that Party's overhead costs (or allocations thereof),
administrative expenses or other mark-ups.
(t) "Party" and "Parties" have the meanings set forth in the preamble
to this Agreement.
(u) "Pass-Through Expenses" means certain WinStar expenses, as agreed
to between the Parties in writing, which Williams agrees to pay
directly or reimburse on an Out-of-Pocket Expenses basis.
(v) "Prime Rate" means, in respect of any period, the rate published
as Chase Manhattan's prime rate in the Wall Street Journal, or
any successor publication thereto, from time to time during such
period.
(w) "Pro Rata Share" means a proportion equal, for Williams, to the
Williams Connectivity and, for WinStar, the complement of the
Williams Connectivity.
(x) "Qualified Building" means a building that, at the time in
question, has a verified line of sight (per WinStar's standard
practices) to a Hub provided by WinStar and for which the
necessary Required Rights have been obtained by, or provided to,
WinStar.
(y) "Required Rights" means leases or licenses for access to, and use
of, building roof areas and other antenna staging locations and
interior space and conduit rights as necessary to provide
Wireless Fiber Connectivity to a building.
(z) "Sector" means an area of coverage emanating off a
point-to-multipoint radio on a Hub.
(aa) "Sector Capacity" of any given Hub means, as of the date in
question, the transport capacity of the relevant Sector of that
Hub.
(bb) "Start Date" means, with respect to any Williams T-1, the first
day on which such service is provided.
(cc) "T-1" means a circuit (wire, fiber or spectrum) with a capacity
of 1.544 Mbps.
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<PAGE> 7
(dd) "Term" has the meaning set forth in Section 2.2.
(ee) "Williams" has the meaning set forth in the preamble to this
Agreement.
(ff) "Williams Connectivity" has the meaning given in Exhibit A-6.
(gg) "Williams IRU" has the meaning given in Section 3.1(a).
(hh) "Williams T-1" has the meaning given in Section 3.1(a). Each such
circuit shall traverse **** and shall be deemed provided when
approved by Williams in accordance with Section 3.5(e).
(ii) "WinStar" has the meaning set forth in the preamble to this
Agreement.
(jj) "WinStar Equipment" means the telecommunications equipment used
by WinStar to implement the Wireless Fiber Connectivity.
(kk) "WinStar Target Market" means a city listed in Exhibit A-2 where
WinStar has at least one Hub to provide the Wireless Fiber
Connectivity, which list may be amended by WinStar from time to
time with notice to Williams (in accordance with Exhibit A-2).
(ll) "Wireless Fiber Connectivity" means the Wireless Fibersm
connectivity, which WinStar is authorized to provide at certain
licensed radio frequency bandwidths.
1.2. Other Terms.
Other terms used in this Agreement are defined in the context in which
they are used and have the meanings there indicated.
2. SCOPE AND STRUCTURE
2.1. General.
(a) This Agreement sets forth the general terms and conditions under
which WinStar grants Williams specific rights to certain capacity
within the deployed Wireless Fiber Connectivity.
(b) The Parties acknowledge that this Agreement does not grant to
WinStar an exclusive privilege to sell or otherwise provide to
Williams any or all of the transport and services of the type
described in this Agreement. Williams may contract with other
suppliers for the procurement of comparable transport or
services. Subject to the Williams IRU granted by WinStar under
this Agreement, WinStar is not restricted from selling to other
entities any types of transport or services including the types
of transport or services that are provided to Williams hereunder.
4
<PAGE> 8
2.2. Term.
The term of this Agreement (the "Term"), with respect to each of the
initial two hundred and seventy (270) Hubs implemented by WinStar,
shall begin on the corresponding Acceptance Date and continue in
effect for twenty-five (25) years from that time.
2.3. Strategic Relationship.
(a) Resale of WinStar Product. Pursuant to terms to be agreed upon by
the Parties after the Effective Date, WinStar will grant Williams
the right to market and promote certain WinStar voice and data
products (e.g., wireless capacity, professional services and
Internet connectivity) through its sales channel.
(b) Williams-Provided Roof Rights and Building Access. If requested
by WinStar, Williams shall grant to WinStar, at no cost,
appropriate roof, riser, conduit rights and interior space (in
each case, in quantities to be mutually agreed upon on a
case-by-case basis) rights to buildings in the United States for
which Williams owns, leases or occupies, in whole or in part,
that Williams can obtain (at reasonable cost) or has such rights.
In addition, Williams shall assist WinStar in obtaining such
rights with respect to other buildings in the United States
leased or occupied, in whole or in part, by Williams or its
Affiliates, including by actively conveying to those Affiliates
the strategic and important nature of the relationship with
WinStar. Williams shall provide (and periodically update as
reasonably requested by WinStar) WinStar with a written list of
the addresses of all such real estate.
(c) Mutual Marketing Support. WinStar will provide Williams
reasonable marketing support in connection with Williams' sale of
the Williams T-1s and other WinStar voice and data products.
(d) Provisioning and Billing OSS. The Parties will work together in
order to interface their then-current provisioning and billing
operational support system information (e.g., network events and
statistics). The reasonable costs associated with these
activities shall be mutually shared between the Parties. If,
after consultation with Williams, WinStar is required to provide
provisioning and billing information unique to Williams'
wholesale activities, the reasonable costs of providing such
information shall be borne by Williams.
(e) Regulatory Assistance. If either Party affirmatively takes a
position in the domestic regulatory environment, it will be in
favor of a level playing field and in support of competition, as
such Party determines in its sole discretion. The Parties shall
periodically (but at least semi-annually) meet to discuss their
plans and objectives with respect to the regulatory environment.
3. GRANTS, RIGHTS AND RESPONSIBILITIES
3.1. WinStar Grant, Rights and Responsibilities.
(a) Effective as of the Acceptance Date, WinStar hereby grants to
Williams an exclusive Indefeasible Right of Use (the "Williams
IRU"), for the purposes described herein, in the Williams
5
<PAGE> 9
Connectivity as expressed in T-1 increments over time, as
provided in Exhibit A-6 (the "Williams T-1s"), subject to the
additional limitations set forth in Subsection (c) below. Such
grant does not convey any legal title to any real or personal
property, including the spectrum, physical equipment and
connections used to effect the Domestic Hub Capacity.
(b) Subject to the terms of this Agreement, Williams shall have
exclusive use of the Williams T-1s for any lawful purpose during
the Term.
(c) In addition to the Williams Connectivity limitation set forth in
Section 3.1(a), the Williams T-1s shall be subject to the
following limitations:
(i) Williams T-1s from any Lit Building that is connected to the
WinStar Hub through a point-to-point radio link may go up to
but shall not exceed **** percent (****%) of the bandwidth
capacity provided to that building notwithstanding WinStar's
usage of any or all of such capacity in that building.
(ii) Williams T-1s that are to be implemented using
point-to-multipoint links between Lit Buildings in a Sector
and a WinStar Hub may go up to but shall not exceed ****
percent (****%) of the relevant Sector Capacity of that Hub
notwithstanding WinStar's usage of any or all of such Sector
Capacity in the Sector.
(iii)For Qualified Buildings lit at Williams' expense pursuant to
Section 3.4(b)(ii), the limitation set forth in Subsection
(c)(i), if applicable, shall be increased to **** percent
(****%) for buildings lit point-to-point. In addition, only
**** percent (****%) of the Williams T-1s in such
buildings will count towards the Williams Connectivity
limitation set forth in Subsection (a) above.
(iv) In accordance with Section 3.6, each Williams T-1 shall
count against the limitations set forth above for ****
(****) ****, regardless of whether or not the duration of
its connectivity lasts less than **** (****) ****. After its
**** of connectivity, each Williams T-1 shall count
against such limitations until disconnected.
(v) Williams may order Williams Connectivity only in multiples
of T-1 line speeds. Orders for line speeds higher than T-1
will count proportionately toward the limitations set forth
in this Subsection (c). For example, a DS-3 will count as
**** (****) T-1s. Apart from the applicability of the
limitations, the line speeds of the circuits constituting
the Williams Connectivity shall have no effect on the
respective rights and obligations of the Parties.
3.2. WinStar Acceptance and Testing.
(a) As of the Effective Date, Williams hereby agrees that Acceptance
of the initial fifty-seven (57) Hubs (the "Initial Hubs")
deployed by WinStar is deemed to have occurred. WinStar
represents and warrants that the Initial Hubs have met the
Acceptance Standards as of the Effective Date.
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<PAGE> 10
(b) Prior to the use of each Hub deployed by WinStar following the
Effective Date, WinStar will have performed testing procedures in
accordance with Exhibit A-4, which are sufficient to verify
compliance with Acceptance Standards. Acceptance of each such Hub
shall occur as set forth in Exhibit A-4.
3.3. Control of Facilities.
Notwithstanding any other provision of this Agreement, WinStar has and
shall at all times continue to retain control over all FCC licenses,
equipment and facilities subject to this Agreement and shall have, at
all times, required access to all of the equipment and facilities
installed by it pursuant to this Agreement. In exercising this
control, WinStar will not disturb or interfere with the Williams T-1s
without good cause, such as a request from the FCC to shut down
interfering transmissions, emergency service restoration or correction
of other technical problems. WinStar shall provide Williams with as
much prior notice as is reasonably practicable in the case of
emergency disruptions of the Wireless Fiber Connectivity. WinStar
shall, with the reasonable cooperation and assistance of Williams, (i)
operate its business in all material respects in accordance with the
terms of the Governmental Authorizations and (ii) maintain the
validity of the Governmental Authorizations. WinStar agrees to provide
Williams with notice in the event matters come to WinStar's attention
that could materially prevent it from meeting its obligations under
this Agreement. In this regard, WinStar and Williams further agree as
follows:
(a) Williams shall not represent itself as the holder of any FCC
licenses issued to WinStar.
(b) Any communications by either Party with the FCC regarding the
subject matter of this Agreement shall require the other's prior
written approval.
(c) Neither WinStar nor Williams shall represent itself as the legal
representative of the other before the FCC or any state
regulatory body. Except as otherwise required by law, all filings
made before regulatory bodies with respect to WinStar's license
or the services provided hereunder shall be made by and in the
name of WinStar. WinStar and Williams will cooperate with each
other with respect to regulatory matters concerning WinStar's
licenses and the services provided pursuant to this Agreement;
provided, however, this will not relieve WinStar from complying
with the Governmental Authorizations.
(d) Nothing in this Agreement is intended to diminish or restrict
WinStar's obligations as an FCC licensee and both Parties desire
that this Agreement be in full compliance with the rules and
regulations of the FCC and any state or local jurisdiction. If
the FCC or any state regulatory body of competent jurisdiction
determines that any provision of this Agreement violates any
applicable rules, policies or regulations, both Parties shall
bear their respective Pro Rata Share of costs to immediately
bring this Agreement into compliance, consistent with the intent
of this Agreement.
(e) It is expressly understood by WinStar and Williams that nothing
in this Agreement is intended to give to Williams any right that
would be deemed to constitute a transfer of control (as "control"
is defined in the Communications Act of 1934, as amended, or any
applicable FCC rules or case law) of one or more of WinStar's
licenses from WinStar to Williams.
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3.4. Provisioning of Williams T-1s.
Except as otherwise provided in this Section 3.4, WinStar, at its own
expense, shall be solely responsible for obtaining and maintaining all
rights and privileges (including Required Rights, space and power)
that are necessary for WinStar to provide the Williams T-1s to the
WinStar common space.
(a) Subject to the limitations set forth in Section 3.1, Williams may
order T-1s to be connected to any Qualified Building (or a
building that would be a Qualified Building but for the obtaining
of Required Rights). If Williams orders Williams T-1s that are to
be connected to a Lit Building, WinStar will provision, on a
non-discriminatory basis, those T-1s to the common space at no
additional cost with an objective of completing that provisioning
within **** (****) days from the date of Williams' order.
(b) If Williams orders Williams T-1s that are to be connected to a
Qualified Building (or a building that would be a Qualified
Building but for the obtaining of Required Rights) that is not a
Lit Building:
(i) WinStar shall determine within **** (****) days of receipt
of notice from Williams whether, in its sole discretion, it
will light such building at its own expense. If WinStar so
elects, that notice shall set forth a target delivery date
and WinStar shall light that building and provision, on a
non-discriminatory basis, the T-1s to the common space with
the objective of completing such activities by the target
delivery date.
(ii) If WinStar elects not to light such building at its own
expense, WinStar will light the building upon Williams'
request, in accordance with a target delivery date
established by WinStar. Williams shall pay for such lighting
at WinStar's Cost of performance. Additionally, in such
event, Williams shall be responsible, with WinStar's
assistance, for obtaining and maintaining, at Williams'
expense, all necessary rights and privileges (including
Required Rights, space and power). Lighting, pursuant to
this Subsection 3.4(b)(ii), of more than **** (****)
buildings connected to a single Hub, whether singly or in
combination over any period of time, shall be subject to
WinStar's approval which shall not be unreasonably withheld.
(c) When WinStar lights a building for provisioning a Williams T-1,
Williams will either:
(i) Perform inside wiring for its customers in such building
subject both to obtaining any necessary consents and to
WinStar's then-current installation guidelines and
specifications; or
(ii) Have WinStar perform such wiring at WinStar's Cost.
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3.5. Service Orders for Williams T-1s.
(a) The implementation of a Williams T-1 to a Lit Building shall be
requested on WinStar's Service Order forms in effect from time to
time ("Service Orders"). Each Service Order shall reference this
Agreement. WinStar reserves the right not to accept a Service
Order that does not conform with the terms and conditions of this
Agreement and such non-conforming Service Order shall have no
force or effect hereunder.
(b) Each Service Order will indicate a requested Start Date (the
"Requested Start Date") for the implementation of the Williams
T-1s to a Lit Building, the desired term of the Williams T-1s,
and any other parameters required. WinStar shall acknowledge
receipt of the Service Order, on average, within forty-eight (48)
hours (an "Acknowledgement").
(c) Once a Service Order is placed, Williams may cancel it only by
notice of cancellation not less than **** (****) days prior to
delivery of the corresponding Williams T-1, and payment of any
specified cancellation fee. Williams agrees that the actual
damages in the event of such cancellation would be difficult or
impossible to ascertain, and that the cancellation charge
including those set forth herein is consequently intended to
establish liquidated damages and not a penalty.
(d) Any conflicting, different or additional terms and conditions
contained in Williams' acknowledgment or Service Order or
elsewhere are deemed objected to by WinStar and shall not
constitute part of this Agreement. No action by WinStar
(including fulfillment of such Service Order) shall be construed
as binding or estopping WinStar with respect to such conflicting,
different or additional term or condition, unless the Service
Order containing said term or condition has been signed by an
authorized representative of WinStar.
(e) WinStar shall make reasonable efforts to provide the Williams
T-1s within the service implementation interval set forth in
Section 3.5(b) or by Williams' Requested Start Date. Williams
T-1s shall begin on the date WinStar issues notice that service
is available (the "Start of Service Notice" or "SOSN"),
indicating the Williams T-1 has been tested by WinStar in
accordance with WinStar's standard specifications and that the
service meets or exceeds those specifications.
(f) Williams may reasonably request one or more delays in the
Requested Start Date of a Service Order, a move, or
rearrangement if WinStar receives the delay request at least
**** (****) days prior to the Requested Start Date and the
requested delay does not extend the Requested Start Date more
than **** (****) days from the original date thereof. If
Williams delays the Requested Start Date (or as gauged by the
SOSN, if issued for a date after the Requested Start Date) by
more than **** (****) days, the Williams T-1s will count
against the Minimum Williams T-1 Inventory and the Williams
Connectivity for a period of one (1) year. This count against
the Minimum Williams T-1 Inventory and Williams Connectivity
will be effective **** (****) days after the Requested Start
Date.
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3.6. Changes in Service Parameters.
Following the relevant Start Date for any Williams T-1, Williams may
disconnect or reconfigure that service upon sixty (60) days' prior
written notice. If that action relates to a Williams T-1 that has not
been in place for at least one (1) year from its Start Date, (i) such
Williams T-1 will continue to count against the Minimum Williams T-1
Inventory and Williams Connectivity for the remainder of the one (1)
year period; and (ii) Williams shall also pay WinStar the additional
charges incurred by WinStar that are associated with that
disconnection or reconfiguration. Subsection (ii) shall also apply
with respect to a cancellation as provided in Section 3.5(c).
3.7. Delivery of Minimum Williams T-1 Inventory.
(a) Availability Date. The "Availability Date" shall mean (i) the
Effective Date with respect to the Minimum Williams T-1 Inventory
identified in Exhibit A-6 to be provided to Williams as of the
Effective Date, and (ii) December 31st of each calendar year
following 1998 through the end of the Term with respect to each
annual number of Minimum Williams T-1 Inventory identified in
Exhibit A-6 for such calendar year. The "Deadline Date" shall be
sixty (60) days after the later of (i) such planned Availability
Date or (ii) the planned Availability Date as extended due to
unforeseen events not in the reasonable control of WinStar (other
than as due to WinStar's negligence), Force Majeure events or as
expressly permitted by this Agreement. WinStar shall make
available each of its annual Minimum Williams T-1 Inventories by
the applicable Deadline Date. WinStar shall give Williams as much
prior notice as reasonably possible if, to the best of WinStar's
knowledge, there is a foreseeable risk that it may miss a
Deadline Date for its Minimum Williams T-1 Inventory.
(b) Failure to Meet Deadline Date. If WinStar fails to make available
the Minimum Williams T-1 Inventory by its applicable Deadline
Date, and the Parties are unable, in good faith, to agree to an
alternative Deadline Date, Williams' sole and exclusive monetary
remedy for such failure shall be to obtain Cover (as hereinafter
defined) beginning on the Deadline Date for the number of T-1s
not made available. "Cover" shall be satisfied by obtaining, at
WinStar's expense, the number of T-1s that would have been
available had WinStar made available the entire applicable
Minimum Williams T-1 Inventory. Once WinStar makes such T-1s
available, the Parties will work together to migrate the T-1s to
WinStar at WinStar's sole cost and expense.
4. OTHER PERFORMANCE AND SERVICES
4.1. Interconnection.
(a) With respect to each of the WinStar Target Markets, the Parties
shall mutually determine the most efficient manner of providing
the required connectivity ("Interconnection") between the WinStar
and Williams points of presence, whether through then-existing
installed capacity, implementation of new capacity or third party
arrangements. In addition, the Parties shall set and periodically
review the schedule (timing and priority) of implementation of
those Interconnection facilities and shall adhere to that
schedule in implementing such facilities.
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(b) The Parties shall allocate the costs of each Interconnection
facility as follows:
(i) The Parties shall mutually agree upon a forecast of each
Party's usage of that Interconnection facility during the
first year after implementation (the "Forecast"). The
non-recurring costs associated with the implementation of
that facility and the recurring cost thereof in the first
month of operation (in aggregate, the "Start-up Costs") will
be allocated pro rata between the Parties based upon the
Forecast. One year thereafter the Parties shall re-calculate
the allocation of the Start-up Costs by substituting actual
usage during the preceding year in place of the Forecast.
Based upon that recalculation, Williams shall pay or receive
a refund, in either case equal to the difference between the
initial allocation of the Start-up Costs and the
recalculated amount, plus interest at the Prime Rate for the
applicable period.
(ii) On a quarterly basis, the Parties shall allocate the
periodic recurring costs of that Interconnection facility
pro rata between the Parties based upon actual usage during
the preceding quarter.
(iii)Following the Effective Date, the Parties will mutually
develop appropriate procedures to implement the foregoing.
4.2. Collocation.
Exhibit A-3 sets forth the collocation services, terms and conditions.
4.3. Maintenance.
WinStar shall be responsible for providing maintenance, repair and
testing on all WinStar Equipment used to provide the Williams T-1s, in
accordance with its then-current standard policies and procedures, a
portion of which is attached hereto as Exhibit A-4. Williams is
prohibited from providing any maintenance, repair or testing with
regard to WinStar Equipment.
4.4. Routine Maintenance.
During the Term, WinStar shall perform all required Routine
Maintenance Services at the charges set forth in Schedule C. "Routine
Maintenance Services" means the work specifically identified as
Routine Maintenance Services in Article 5 of Schedule A, provided that
Routine Maintenance Services excludes work for which Williams is
obligated to reimburse WinStar for all or a portion of the Costs
incurred pursuant to other provisions of this Agreement.
4.5. Non-Routine Maintenance.
Williams shall pay its Pro Rata Share of WinStar's direct Costs for
maintenance in respect of the Williams Connectivity other than Routine
Maintenance Services, if the Cost of such work relating to any single
event or multiple related events is greater than Five Thousand Dollars
($5,000.00).
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4.6. Subcontractors.
WinStar may subcontract provisioning, testing, maintenance, repair,
restoration, relocation or other operational and technical services it
is obligated to provide hereunder or may have the underlying facility
owner or its contractor perform such obligations. Such subcontracting
shall not relieve WinStar of any obligations under this Agreement.
4.7. Williams Equipment.
WinStar's maintenance and repair obligations under this Agreement
shall not include maintenance, repair or replacement of Williams'
equipment.
4.8. Performance Standards.
Except as otherwise set forth in Schedule B, for the purpose of this
Agreement the normal standards of performance within the
telecommunications industry in the relevant market shall be the
measure of whether a Party's performance is reasonable and timely.
4.9. Disengagement Assistance.
Upon termination or expiration of this Agreement, WinStar shall
provide Williams and its designated third party providers all
reasonable assistance as necessary to effect a smooth transition to a
new supplier.
4.10. Relocation.
(a) If WinStar determines for bona fide operational reasons, or is
required by a third party acting pursuant to condemnation or
similar authority or by a governmental entity, to relocate all or
any portion of a Hub or any of the facilities used or required in
providing Williams with the Williams IRU, WinStar shall, to the
extent practicable, provide Williams sixty (60) days' prior
notice and shall proceed with such relocation. WinStar shall have
the right to direct such relocation, including the right to
determine the extent of, the timing of, and methods to be used
for such relocation, provided that any such relocation:
(i) Shall be constructed and tested in accordance with the
specifications and requirements set forth in this Agreement
and applicable Exhibits;
(ii) Shall not result in a materially adverse change to the
operations or performance of the Hub, and
(iii) Shall not unreasonably interrupt service on the Hub.
For purposes of this Section 4.10, a WinStar relocation shall be
for bona fide operational reasons if it is undertaken in good
faith (i) to settle or avoid a bona fide threatened or filed
condemnation action or order by a governmental authority to
relocate, (ii) to reduce the likelihood of physical damage, (iii)
as the result of a Force Majeure Event, or (iv) for other
operational reasons to which Williams has consented, provided
that Williams shall not unreasonably withhold such consent.
WinStar shall use reasonable efforts to contest any exercise of
condemnation authority that would require a relocation pursuant
to this Section 4.10.
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(b) Unless such relocation is necessitated by a breach of WinStar's
obligations under this Agreement, Williams shall reimburse
WinStar for the Costs incurred in the same manner and to the same
extent as set forth for reimbursement for Costs of maintenance
other than for Routine Maintenance Services in Section 4.5.
4.11. Ancillary Services.
WinStar may also provide other services to Williams for reasons
including: (a) Williams' request to expedite Williams T-1 availability
to a date earlier than WinStar's published installation interval or a
previously accepted Start Date; (b) Williams T-1 redesign or other
activity occasioned by receipt of inaccurate information from
Williams; (c) Williams' request for use of facilities other than those
selected by WinStar for provision of the Wireless Fiber Connectivity
("facilities" for this purpose shall not include buildings that became
Lit Buildings pursuant to Section 3.4(b)(i)); and (d) other
circumstances in which extraordinary costs and expenses are generated
at the written request of Williams and incurred by WinStar
(collectively, "Ancillary Services").
5. CONTRACT ADMINISTRATION
5.1. Reports and Meetings.
(a) Within thirty (30) days of the Effective Date, the Parties shall
mutually agree upon a set of monthly reports to be issued by
WinStar to Williams. WinStar will provide Williams with suggested
formats for such reports for Williams' review and approval. As
one such report, WinStar will provide a monthly performance
report that describes WinStar's deployment of the Hubs,
availability of the applicable Minimum Williams T-1 Inventory and
a forecast of upcoming WinStar Target Market implementations
(including Hubs, buildings and addresses).
(b) Within thirty (30) days of the Effective Date, the Parties shall
mutually agree upon a set of regular management meetings. WinStar
will prepare and circulate an agenda sufficiently in advance of
each such meeting to give participants an opportunity to prepare
for the meeting and will incorporate into such agenda any items
that Williams desires to discuss. At Williams' request, WinStar
will prepare and circulate minutes promptly after a meeting.
5.2. Confidentiality.
(a) Confidential Information. Williams and WinStar each acknowledge
that they may be furnished with, receive or otherwise have access
to information of or concerning the other Party that such Party
considers to be confidential, proprietary, a trade secret or
otherwise restricted. As used in this Agreement and subject to
Section (c), "Confidential Information" means all information, in
any form, furnished or made available directly or indirectly by
one Party (the "Disclosing Party") to the other (the "Receiving
Party") that (i) concerns the operations, facilities, plans,
affairs and businesses of the Disclosing Party, the financial
affairs of the Disclosing Party, and the relations of the
Disclosing Party with its customers, employees and service
providers, or (ii) is marked confidential, restricted,
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proprietary, or with a similar designation. The terms and
conditions of this Agreement shall be deemed Confidential
Information, but may be disclosed pursuant to this Section 5.2 or
Section 12.15.
(b) Obligations.
(i) Each Party's Confidential Information shall remain the
property of that Party except as expressly provided
otherwise by the other provisions of this Agreement. Each
Party shall each use at least the same degree of care, but
in any event no less than a reasonable degree of care, to
prevent unauthorized disclosure of Confidential Information
as it employs to avoid unauthorized disclosure of its own
information of a similar nature. Except as otherwise
permitted hereunder, the Parties may disclose such
information (A) to their respective directors, officers,
managers, employees, agents, contractors and consultants
(collectively, "Representatives"), (B) to entities
performing services required hereunder only where: (1) use
of such entity is authorized under this Agreement, (2) such
disclosure is necessary or otherwise naturally occurs in
that entity's scope of responsibility, (3) the entity agrees
in writing to assume the obligations described in this
Subsection (b). Any disclosure to such entity shall be under
substantially the same confidentiality terms and conditions
set forth herein.
(ii) Each Party shall take reasonable steps to ensure that its
(and its Affiliates') Representatives comply with this
Subsection (b). In the event of any disclosure or loss of,
or inability to account for, any Confidential Information of
the Disclosing Party, the Receiving Party shall promptly, at
its own expense: (A) notify the Disclosing Party in writing;
and (B) take such actions as may be necessary and cooperate
in all reasonable respects with the Disclosing Party to
minimize the violation and any damage resulting therefrom.
(iii)Either Party may disclose the terms and conditions of this
Agreement to any third party that (A) has expressed a bona
fide interest in consummating a significant financing,
merger or acquisition or other corporate transaction between
such third party and such Party, (B) has a reasonable
ability (financial and otherwise) to consummate such
transaction, and (C) has executed a nondisclosure agreement
that includes within its scope the terms and conditions of
this Agreement and also includes a procedure to limit the
extent of copying and distribution thereof. Each Party shall
endeavor to delay the disclosure of the terms and conditions
of this Agreement until the status of discussions concerning
such transaction warrants such disclosure. In addition,
either party (or either party's Affiliates) may disclose the
terms and conditions of this Agreement as such party deems
appropriate to prepare for IPOs or major corporate
transactions. Any disclosure to such entity shall be
substantially under the same confidentiality terms and
conditions as provided herein.
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(c) Exclusions. "Confidential Information" shall exclude any
particular information that the Receiving Party can demonstrate:
(i) At the time of disclosure, was in the public domain or in
the rightful possession of the Receiving Party;
(ii) After disclosure, is published or otherwise becomes part of
the public domain through no fault of the Receiving Party;
(iii)Was received after disclosure from a third party who had a
lawful right to disclose such information to the Receiving
Party without any obligation to restrict its further use or
disclosure;
(iv) Was independently developed by the Receiving Party without
reference to Confidential Information of the Disclosing
Party; or
(v) Was required to be disclosed to satisfy a legal requirement
of a competent government body; provided that, immediately
upon receiving such request and to the extent that it may
legally do so, the Receiving Party advises the Disclosing
Party promptly and prior to making such disclosure in order
that the Disclosing Party may interpose an objection to such
disclosure, take action to assure confidential handling of
the Confidential Information, or take such other action as
it deems appropriate to protect the Confidential
Information.
(d) No Implied Rights. Nothing contained in this Section shall be
construed as obligating a Party to disclose its Confidential
Information to the other Party, or as granting to or conferring
on a Party, expressly or impliedly, any rights or license to the
Confidential Information of the other Party.
6. CHARGES
6.1. General.
The charging mechanisms and pricing methodologies for Wireless Fiber
Connectivity and maintenance and collocation services are set forth in
Schedule C.
6.2. Taxes.
The Parties' respective responsibilities for taxes arising under or in
connection with this Agreement shall be as follows:
(a) Each Party shall be responsible for personal property taxes on
property it owns or leases, for franchise and privilege taxes on
its business, and for taxes based on its net income or gross
receipts; provided, however, that Williams shall be responsible
for its proportionate share (based upon the proportion of the Hub
or building capacity used for Williams T-1) of any property taxes
(or similar levies) assessed as a result of the implementation of
any Williams T-1.
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(b) Williams shall timely report and pay any and all sales, use,
income, gross receipts, excise, transfer, ad valorem or other
taxes, and any and all franchise fees or similar fees assessed
against it due to the Williams IRU or its use of the Williams
T-1s.
(c) If a sales, use, excise, value-added, services, consumption, or
other tax is assessed on the provision of the Wireless Fiber
Connectivity, Maintenance or any other services, the Parties
shall work together to segregate the payments under this
Agreement into three (3) payment streams:
(i) Payments for taxable items;
(ii) Payments where Williams functions merely as a payment agent
for WinStar; and
(iii) Payments for other nontaxable items.
(d) The Parties agree to cooperate with each other to enable each to
determine more accurately its own tax liability and to minimize
such liability to the extent legally permissible. Each invoice
shall separately state the amounts of any taxes collected. Each
Party shall provide and make available to the other any resale
certificates and other exemption certificates or information
reasonably requested by either Party that is applicable to the
subject matter of this Agreement.
(e) Each Party shall promptly notify the other of, and coordinate the
response to and settlement of, any claim for taxes asserted by
applicable taxing authorities for which the other Party is
responsible hereunder. With respect to any claim arising out of a
form or return signed by a Party to this Agreement, such Party
shall have the right to elect to control the response to and
settlement of the claim, but the other Party shall have all
rights to participate in the responses and settlements that are
appropriate to its potential responsibilities or liabilities.
6.3. Pass-Through Expenses.
For each Pass-Through Expense, if any, WinStar shall review the
invoiced charges and determine whether such charges are proper and
valid. Unless the Parties mutually agree otherwise, Pass-Through
Expenses will be paid directly by Williams.
6.4. Most Favored Customer Status.
(a) Williams T-1s. With regard to the Williams Connectivity, Williams
shall have most favored customer protection as follows:
(i) ****
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(ii) ****
(b) Excess Connectivity. With regard to Wireless Fiber Connectivity
in excess of the Williams Connectivity or Williams T-1 Ceiling,
as appropriate ("Excess Connectivity"), Williams shall have most
favored customer protection as follows:
(i) ****
(ii) ****
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6.5. Benchmarking.
(a) Wireless Fiber Connectivity offered by WinStar in excess of the
Williams Connectivity, if any, shall be of equivalent or better
quality, availability and price when compared to similar
offerings in the marketplace. However, nothing in this Section
6.5 shall be deemed to require WinStar to sell more Wireless
Fiber Connectivity than the Williams Connectivity.
(b) Within 180 days after the Effective Date, the Parties will
jointly establish a benchmarking measurement and comparison
process (the "Benchmarking Process") designed to objectively
evaluate whether the Wireless Fiber Connectivity purchased by
Williams in excess of the Williams Connectivity is of equivalent
or better quality, availability and price as compared to similar
services generally available in the market for similar size and
scope requirements ("Market Level Charges"). The Benchmarking
Process will take into consideration relevant factors such as
quality and delivery terms.
7. INVOICING AND PAYMENT
7.1. Invoicing.
WinStar shall invoice Williams for all amounts due under this
Agreement prior to the payment dates set forth in Schedule C and on a
monthly basis in arrears for all other charges. Each invoice shall
show such details as reasonably requested by Williams, separately
state the amounts of any taxes collected and include the calculations
utilized to establish the charges.
7.2. Payment Due.
(a) Subject to the other provisions of this Article 7, invoices
provided for under Section 7.1 and properly submitted to Williams
pursuant to this Agreement shall be due and payable by Williams
within thirty (30) days after receipt thereof. Any amount due
under this Agreement for which a time for payment is not
otherwise specified shall be due and payable within thirty (30)
days after receipt of a proper invoice for such amount.
(b) To the extent a credit may be due Williams pursuant to this
Agreement, WinStar shall provide Williams with an appropriate
credit against amounts then due and owing; if no further payments
are due to WinStar, WinStar shall pay such amounts to Williams
within thirty (30) days.
(c) Williams shall make payments provided for under this Article 7 or
Schedule C by wire transfer of immediately available funds to the
account or accounts designated by WinStar. All other payments to
be made pursuant to this Agreement may be made by check or draft
of immediately available funds delivered to the address
designated in writing by the other Party (e.g., in a statement or
invoice) or, failing such designation, to the address for notice
to such other Party provided pursuant to Section 12.8.
(d) The first invoice provided under this Agreement shall be due and
payable within sixty (60) days of the Effective Date.
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7.3. Disputed Charges.
Williams shall pay undisputed charges when such payments are due under
this Agreement. Williams may withhold payment of particular charges
that Williams disputes in good faith and for which it promptly gives
written notice to WinStar, stating the details of such dispute. The
Parties shall promptly refer such matter to dispute resolution in
accordance with Section 11.2. If Williams withholds any disputed
charges and such charges are ultimately determined to be proper and
payable to WinStar, Williams shall pay such charges to WinStar plus
interest at the Prime Rate from the date such charges were originally
due until the date such charges are paid. WinStar agrees that no
payment dispute shall be grounds for WinStar to withhold or diminish
the quality or quantity of any of the connectivity and services
provided hereunder.
7.4. Late Interest.
If either Williams or WinStar fails to make any payment under this
Agreement when due, such amounts shall accrue interest, from the date
such payment is due until paid, including accrued interest, at the
Prime Rate.
8. COVENANTS, REPRESENTATIONS AND WARRANTIES
8.1. Non-Infringement.
Each Party represents, warrants and covenants to the other that it
shall perform its responsibilities under this Agreement in a manner
that does not infringe, or constitute an infringement or
misappropriation of, any Intellectual Property Rights of any third
party.
8.2. Authorization.
Each Party represents and warrants to the other that:
(a) It has the requisite corporate power and authority to enter into
this Agreement and to carry out the transactions contemplated by
this Agreement;
(b) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated by this Agreement
have been duly authorized by the requisite corporate action on
the part of such Party;
(c) This Agreement constitutes a legal, valid and binding obligation
enforceable against such party in accordance with its terms;
(d) Its execution of and performance under this Agreement shall not
violate any applicable existing regulations, rules, statutes, or
court orders of any local, state, or federal government agency,
court, or body;
(e) It is not subject to any contractual or other obligation that
would prevent it from entering into this relationship; and
(f) It has not offered or provided any inducements in violation of
law or the other Party's policies of which it has been given
notice, in connection with this Agreement.
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8.3. Wireless Fiber Connectivity.
Excluding services provided by third parties other than WinStar's
subcontractors, WinStar covenants that the Williams T-1s shall be
designed, engineered, installed, constructed and operated in
accordance with the specifications set forth in the applicable
services schedule. WinStar further covenants that it will use its
commercially reasonable efforts under the circumstances to remedy any
delays, interruptions, omissions, mistakes, accidents or errors in the
Williams T-1s provided hereunder and to restore such Williams T-1s to
compliance with the terms hereof.
8.4. Disclaimer.
EXCEPT AS SPECIFICALLY SET FORTH IN THIS AGREEMENT, THE PARTIES MAKE
NO WARRANTY TO EACH OTHER OR ANY OTHER ENTITY, WHETHER EXPRESS,
IMPLIED OR STATUTORY, AS TO THE MERCHANTABILITY OR FITNESS FOR ANY
PARTICULAR PURPOSE OF ANY WIRELESS FIBER CONNECTIVITY, WILLIAMS T-1s,
HUBS, ANCILLARY SERVICES OR ANY OTHER SERVICES PROVIDED HEREUNDER OR
DESCRIBED HEREIN, OR AS TO ANY OTHER MATTER, ALL OF WHICH WARRANTIES
ARE HEREBY EXPRESSLY EXCLUDED AND DISCLAIMED.
9. INDEMNIFICATION
9.1. Indemnities by Williams.
Williams agrees to indemnify, defend and hold harmless WinStar and its
Affiliates and their respective officers, directors, employees,
agents, successors, and assigns, from any and all Losses and
threatened Losses arising from, in connection with, or based on
allegations of, any of the following:
(a) Williams' failure to observe or perform its duties or obligations
to third parties (e.g., duties or obligations to subcontractors);
(b) Williams' infringement or misappropriation of any Intellectual
Property Rights of any third party;
(c) Williams' unexcused failure to abide by the terms and conditions
of the business relationship as mutually agreed to by the Parties
in writing;
(d) The death or bodily injury of any agent, employee, customer,
business invitee or any other person to the extent caused by the
tortious conduct of Williams;
(e) The damage, loss or destruction of any real or tangible personal
property to the extent caused by the tortious conduct of
Williams;
(f) Fines, penalties or other amounts payable due to Williams'
violation of applicable laws or regulations; and
(g) Any claim, demand, charge, action, cause of action, or other
proceeding asserted against WinStar but resulting from an act or
omission of Williams in its capacity as an employer of a person.
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<PAGE> 24
9.2. Indemnities by WinStar.
WinStar agrees to indemnify, defend and hold harmless Williams and its
Affiliates and their respective officers, directors, employees,
agents, successors, and assigns, from any and all Losses and
threatened Losses arising from, in connection with, or based on
allegations of, any of the following:
(a) WinStar's failure to observe or perform its duties or obligations
to third parties (e.g., duties or obligations to its customers);
(b) WinStar's infringement or misappropriation of Intellectual
Property Rights of any third party;
(c) WinStar's unexcused failure to abide by the terms and conditions
of the business relationship as mutually agreed to by the Parties
in writing;
(d) The death or bodily injury of any agent, employee, customer,
business invitee or any other person to the extent caused by the
tortious conduct of WinStar;
(e) The damage, loss or destruction of any real or tangible personal
property to the extent caused by the tortious conduct of WinStar;
(f) Fines, penalties or other amounts payable due to WinStar's
violation of applicable laws or regulation; and
(g) Any claim, demand, charge, action, cause of action, or other
proceeding asserted against Williams but resulting from an act or
omission of WinStar in its capacity as an employer of a person.
9.3. Indemnification Procedures.
With respect to third-party claims, the following procedures shall
apply:
(a) Promptly after receipt of notice of the commencement or
threatened commencement of any civil, criminal, administrative,
or investigative action or proceeding involving a claim in
respect of which the indemnitee will seek indemnification
pursuant to this Article 9, the indemnitee will notify the
indemnitor of such claim in writing. No failure to so notify the
indemnitor will relieve the indemnitor of its obligations under
this Agreement except to the extent that it can demonstrate
damages attributable to such failure. Within fifteen (15)
calendar days following receipt of written notice from the
indemnitee relating to any claim, but no later than ten (10)
calendar days before the date on which any response to a
complaint or summons is due, the indemnitor will notify the
indemnitee in writing if the indemnitor elects to assume control
of the defense and settlement of that claim (a "Notice of
Election").
(b) If the indemnitor delivers a Notice of Election relating to any
claim within the required notice period, the indemnitor shall be
entitled to have sole control over the defense and settlement of
such claim; provided that (i) the indemnitee shall be entitled to
21
<PAGE> 25
participate in the defense of such claim and to employ counsel at
its own expense to assist in the handling of such claim, and (ii)
the indemnitor shall obtain the prior written approval, not to be
unreasonably withheld or delayed, of the indemnitee before
entering into any settlement of such claim or ceasing to defend
against such claim. After the indemnitor has delivered a Notice
of Election relating to any claim in accordance with the
preceding paragraph, the indemnitor shall not be liable to the
indemnitee for any legal expenses incurred by the indemnitee in
connection with the defense of that claim. In addition, the
indemnitor shall not be required to indemnify the indemnitee for
any amount paid or payable by the indemnitee in the settlement of
any claim for which the indemnitor has delivered a timely Notice
of Election if such amount was agreed to without the written
consent of the indemnitor.
(c) If the indemnitor does not deliver a Notice of Election relating
to any claim within the required notice period, or ceases to
defend against the claim, the indemnitee shall have the right to
defend the claim in such manner as it may deem appropriate, at
the cost and expense of the indemnitor. The indemnitor shall
promptly reimburse the indemnitee for all such costs and
expenses.
10. LIABILITY, RISK OF LOSS AND INSURANCE
10.1. General Intent.
Subject to the specific provisions of this Article 10, it is the
intent of the Parties that each Party shall be liable to the other
Party for any actual damages incurred by the non-breaching Party as a
result of the breaching Party's failure to perform its obligations in
the manner required by this Agreement.
10.2. Liability Restrictions.
(a) IN NO EVENT, WHETHER IN CONTRACT OR IN TORT (INCLUDING BREACH OF
WARRANTY, NEGLIGENCE AND STRICT LIABILITY IN TORT), SHALL A PARTY
BE LIABLE FOR INDIRECT OR CONSEQUENTIAL, EXEMPLARY, PUNITIVE OR
SPECIAL DAMAGES EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES IN ADVANCE.
(b) Subject to Subsection (c), below, each Party's total liability to
the other, whether in contract or in tort (including breach of
warranty, negligence and strict liability in tort) shall be
limited to two hundred million dollars ($200,000,000).
(c) The limitation set forth in Subsections (b), above, shall not
apply with respect to: (i) third-party claims subject to
indemnification pursuant to the Agreement; (ii) fees due and
owing under this Agreement at the time of the claim; and (iii)
amounts subject of Cover as provided in Section 3.7(b).
(d) For the purposes of this Section 10.2, all amounts payable or
paid to third parties in connection with claims that are eligible
for indemnification pursuant to this Agreement shall be deemed
direct damages.
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<PAGE> 26
10.3. Insurance Requirements.
(a) During the Term, WinStar shall have and maintain in force the
following insurance coverages:
(i) Worker's Compensation and Employer's Liability. Worker's
Compensation Insurance in amounts required by applicable law
and Employers Liability Insurance with limits not less than
$1,000,000 each accident. If work is to be performed in
Nevada, North Dakota, Ohio, Washington, Wyoming or West
Virginia, the party shall participate in the appropriate
state fund(s) to cover all eligible employees and provide a
stop gap endorsement for these monopolistic states in
WinStar's Worker's Compensation Insurance Program.
(ii) Commercial General Liability. WinStar shall carry broadform
general liability insurance coverage for property damage,
bodily injury, personal injury, contractual liability and
accidental pollution legal liability with coverage of at
least $10,000,000 per occurrence and in the aggregate. Total
limits can be attained by the inclusion of an
Umbrella/Excess Liability policy.
(iii)Automobile Liability. WinStar shall carry automobile
liability insurance written on the occurrence form of
policy. The policy shall provide for bodily injury and
property damage liability covering the operation of all
automobiles used in connection with performing under the
Agreement and shall provide coverage of at least $2,000,000
per occurrence.
(b) WinStar shall cause its insurers to issue certificates of
insurance evidencing that the coverages required under this
Agreement are maintained in force. The minimum limits of coverage
specified herein are not intended, and shall not be construed, to
limit any liability or indemnity of WinStar under this Agreement.
(c) Nothing in this Agreement shall be construed to prevent WinStar
from satisfying its insurance obligations pursuant to this
Agreement under a blanket policy or policies of insurance that
meet or exceed the requirements of this Article.
10.4. Risk of Loss.
(a) Each Party shall promptly notify the other of any matters
pertaining to any damage or impending damage to or loss of
Wireless Fiber Connectivity known to it that could reasonably be
expected to adversely affect the Wireless Fiber Connectivity.
(b) Each Party shall take all reasonable precautions against, and
shall assume liability for, subject to the terms of this
Agreement, any damage caused by it to the property of the other
Party.
(c) Neither Party shall use, or allow others to use, equipment,
technologies, or methods of operation that interfere in any way
with or adversely affect the Williams Connectivity or the
permitted use thereof by Williams, WinStar or authorized third
parties.
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<PAGE> 27
(d) Williams shall not cause or permit any part of the Williams T-1s
to become subject to any mechanic's lien, materialman's lien,
vendor's lien or any similar lien or encumbrance whether by
operation of law or otherwise.
10.5. Force Majeure.
(a) No Party shall be liable for any default or delay in the
performance of its obligations under this Agreement if and to the
extent such default or delay is caused, directly or indirectly,
by fire, flood, lightning, earthquake, elements of nature or acts
of God, riots, civil disorders, rebellions or revolutions in any
country or any other cause beyond the reasonable control of such
Party; provided, however, that (i) the non-performing Party is
without fault in causing such default or delay, and (ii) such
default or delay could not have been prevented by reasonable
precautions and cannot reasonably be circumvented by the
non-performing Party through the use of alternate sources,
workaround plans or other means, including means contemplated by
applicable disaster recovery processes or procedures).
(b) In such event the non-performing Party shall be excused from
further performance or observance of the obligation(s) so
affected for as long as such circumstances prevail and such Party
continues to use commercially reasonable efforts to recommence
performance or observance whenever and to whatever extent
possible without delay. Any Party so delayed in its performance
shall immediately notify the other Party by telephone (to be
confirmed in writing within two (2) business days of the
inception of such delay) and describe at a reasonable level of
detail the circumstances causing such delay. The non-performing
party will provide the other party prompt written notice of the
cessation or termination of the force majeure event.
11. REMEDIES AND DISPUTE RESOLUTION
Any dispute between the Parties arising out of or relating to this
Agreement, including with respect to the interpretation of any provision of
this Agreement and with respect to the performance by Williams or WinStar,
shall be resolved as provided in this Article 11.
11.1. Cumulative Nature.
Except as otherwise expressly provided herein, all remedies provided
for in this Agreement shall be cumulative and in addition to and not
in lieu of any other remedies available to either Party at law, in
equity or otherwise.
11.2. Informal Dispute Resolution.
(a) Prior to the initiation of formal dispute resolution procedures
(i.e., arbitration), the Parties shall first attempt to resolve
their dispute at the senior manager level. If that level of
dispute resolution is not successful, the Parties shall proceed
informally, as follows:
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<PAGE> 28
(i) Upon the written request of either Party, each Party shall
appoint a designated representative who does not otherwise
devote substantially full time to performance under this
Agreement, whose task it will be to meet for the purpose of
endeavoring to resolve such dispute.
(ii) The designated representatives shall meet as often as the
Parties reasonably deem necessary in order to gather and
furnish to the other all information with respect to the
matter in issue that the Parties believe to be appropriate
and germane in connection with its resolution. The
representatives shall discuss the problem and attempt to
resolve the dispute without the necessity of any formal
proceeding.
(iii)During the course of discussion, all reasonable requests
made by one Party to another for non-privileged
non-confidential information reasonably related to this
Agreement shall be honored so that each of the Parties may
be fully advised of the other's position.
(iv) The specific format for the discussions shall be left to the
discretion of the designated representatives.
(b) Prior to instituting formal proceedings, the Parties will first
have their chief executive officers meet to discuss the dispute.
This requirement shall not delay the institution of formal
proceedings past any statute of limitations expiration or for
more than fifteen (15) days.
(c) Subject to Subsection (b), formal proceedings for the resolution
of a dispute may not be commenced until the earlier of:
(i) The designated representatives concluding in good faith that
amicable resolution through continued negotiation of the
matter does not appear likely; or
(ii) Thirty (30) days after the initial written request to
appoint a designated representative pursuant to Subsection
(a), above, (this period shall be deemed to run
notwithstanding any claim that the process described in this
Section 11.2 was not followed or completed).
(d) This Section 11.2 shall not be construed to prevent a Party from
instituting, and a Party is authorized to institute, formal
proceedings earlier to avoid the expiration of any applicable
limitations period, or to preserve a superior position with
respect to other creditors or as provided in Section 11.6(a).
11.3. Arbitration.
If the Parties are unable to resolve a dispute as contemplated by
Section 11.2, and that dispute is not subject to 11.6(a) of this
Agreement, then such dispute shall be submitted to mandatory and
binding arbitration at the election of either Party (the "Disputing
Party") pursuant to the following conditions:
(a) Selection of Arbitrator. The Disputing Party shall notify the
American Arbitration Association ("AAA") and the other Party,
describing in reasonable detail the nature of the dispute, (the
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<PAGE> 29
"Dispute Notice") and shall request that the AAA furnish a list
of five (5) possible arbitrators who have substantial experience
in the telecommunications industry. Each Party shall have fifteen
(15) days to reject two (2) of the proposed arbitrators. If only
one individual has not been so rejected, that person shall serve
as arbitrator; if two (2) or more individuals have not been so
rejected, the AAA shall select the arbitrator from those
individuals.
(b) Conduct of Arbitration. The arbitrator shall allow reasonable
discovery in the forms permitted by the Federal Rules of Civil
Procedure, to the extent consistent with the purpose of the
arbitration. The arbitrator shall have no power or authority to
amend or disregard any provision of this Section 11.3 or any
other provision of this Agreement. In particular, the arbitrator
shall not have the authority to exclude the right of a Party to
terminate this Agreement when a Party would otherwise have such
right. The arbitration hearing shall be commenced promptly and
conducted expeditiously.
(c) Replacement of Arbitrator. Should the arbitrator refuse or be
unable to proceed with arbitration proceedings as called for by
this Section, such arbitrator shall be replaced and a rehearing
shall take place in accordance with the provisions of this
Section. In such case, the replacement for the arbitrator shall
be either selected by the AAA from the original group of
potential arbitrators that were not rejected by the Parties or,
if there are no such arbitrators available, selected by repeating
the process of selection described in Subsection (a), above.
(d) Findings and Conclusions. The arbitrator rendering judgment upon
disputes between Parties as provided in this Section shall, after
reaching judgment and award, prepare and distribute to the
Parties a writing describing the findings of fact and conclusions
of law relevant to such judgment and award. The award of the
arbitrator shall be final and binding on the Parties, and
judgment thereon may be entered in a court of competent
jurisdiction.
(e) Place of Arbitration Hearings. Arbitration hearings hereunder
shall be held in Chicago, Illinois. If the Parties mutually
agree, arbitration hearings may be held in another location.
(f) Time of the Essence. The arbitrator is instructed that time is of
the essence in the arbitration proceeding, and that the
arbitrator shall have the right and authority to issue monetary
sanctions against either of the Parties if, upon a showing of
good cause, that Party is unreasonably delaying the proceeding.
Recognizing the express desire of the Parties for an expeditious
means of dispute resolution, the arbitrator shall limit or allow
the Parties to expand the scope of discovery as may be reasonable
under the circumstances.
11.4. Termination.
A Party shall not be in material breach of this Agreement unless and
until the other Party provides it written notice of default and the
non-performing party has failed to cure within thirty (30) days after
receipt of such notice. Any event of default may be waived in writing
at the non-defaulting Party's option. Upon the failure of a Party to
timely cure its material breach hereunder within the applicable cure
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<PAGE> 30
period, the non-defaulting Party shall have the right to (i) terminate
this Agreement or (ii) subject to the terms of this Article 11, pursue
any legal remedies it may have under applicable law or principles of
equity relating to such breach.
11.5. Suspension of Service.
If Williams does not make any undisputed payment of at least One
Hundred Thousand Dollars ($100,000) within thirty days of the payment
due date, WinStar may suspend service to all Williams T-1s upon five
(5) days' prior written notice if Williams does not cure within such
period. If such non-payment continues for more than thirty (30) days
after receipt of such notice, WinStar shall have the right to
terminate this Agreement.
11.6. Litigation.
(a) Immediate Injunctive Relief. The only circumstance in which
disputes between the Parties shall not be subject to the
provisions of Sections 11.2 and 11.3 is where a Party, in good
faith, determines that a temporary restraining order or other
injunctive relief is its only appropriate and adequate remedy. If
a Party seeks immediate injunctive relief and does not prevail in
substantial part, that Party shall pay the other Party's costs
and attorneys' fees to the extent incurred in responding to or
challenging the request for immediate injunctive relief.
(b) Jurisdiction. The Parties consent to the jurisdiction of the
courts of the State of New York and to jurisdiction and venue in
the United States District Court for the Southern District of New
York for all litigation that may be brought with respect to the
terms of, and the transactions and relationships contemplated by,
this Agreement. The Parties further consent to the jurisdiction
of any state court located within a district that encompasses
assets of a Party against which a judgment has been rendered for
the enforcement of such judgment or award against the assets of
such Party.
(c) Governing Law. This Agreement and performance under it shall be
governed by and construed in accordance with the laws of the
State of New York without regard to its choice of law principles.
11.7. Continued Performance.
Each Party agrees to continue performing its obligations under this
Agreement while any dispute is being resolved except to the extent the
issue in dispute precludes performance (dispute over payment shall not
be deemed to preclude performance except as provided in Section 11.5).
12. GENERAL
12.1. Binding Nature and Assignment.
(a) This Agreement shall accrue to the benefit of and be binding upon
the Parties hereto and any purchaser or any successor entity into
which either Party has been merged or consolidated or to which
either Party has sold or transferred all or substantially all of
its assets.
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(b) Neither Party may, or shall have the power to, assign this
Agreement or delegate such Party's obligations hereunder without
the prior written consent of the other, except to:
(i) An entity that acquires all or substantially all of the
assets of such Party,
(ii) Any Affiliate,
(iii) A successor in a merger or acquisition of either Party, or
(iv) In connection with any financing.
12.2. Entire Agreement.
This Agreement, including any attached Schedules, constitutes the
entire agreement between the Parties with respect to the subject
matter in this Agreement, and supersedes all prior agreements, whether
written or oral, with respect to the subject matter contained in this
Agreement.
12.3. Tariff.
WinStar acknowledges that this is a private non-common carrier
agreement and that any incorporation of WinStar tariff provisions is
done for the convenience of the Parties.
12.4. Consents.
As between the parties, Williams shall be responsible for all
arrangements with copyright holders, music licensing organizations,
performers' representatives or other parties for necessary
authorizations, clearances or consents with respect to transmission
contents.
12.5. Restriction of Transmissions.
Williams will not transmit content that violates applicable law or
carries an unreasonable risk of leading to criminal, civil or
administrative proceedings or investigations against Williams or
WinStar.
12.6. Use and Ownership.
Neither Party shall have any right, title or interest to the equipment
installed by the other Party.
12.7. Non-Solicitation.
Neither Party shall directly or indirectly solicit the other's
employees or contractors without the other Party's written consent,
which shall not be unreasonably withheld.
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12.8. Notices.
All notices, requests, demands, and determinations under this
Agreement (other than routine operational communications), shall be in
writing and shall be deemed duly given (i) when delivered by hand,
(ii) one (1) business day after being given to an express, overnight
courier with a system for tracking delivery, (iii) when sent by
confirmed facsimile with a copy delivered thereafter by another means
specified in this Section, or (iv) four (4) business days after the
day of mailing, when mailed by United States registered or certified
mail, return receipt requested, postage prepaid, and addressed as
follows:
If to WinStar: If to Williams:
WinStar Wireless, Inc. Williams Communications, Inc.
230 Park Avenue One Williams Center, Suite 26-5
New York, NY 10169 Tulsa, Oklahoma 74172
Attn: EVP, General Counsel Attn: Contract Administration
Facsimile: 212/922-1637 Facsimile: 918/573-6578
With a copy to: With a copy to:
WinStar Wireless, Inc. Williams Communications, Inc.
7799 Leesburg Pike One Williams Center, Suite 4100
Falls Church, Virginia 22043 Tulsa, Oklahoma 74172
Attn: VP, Commercial and Attn: General Counsel
Legal Operations
Facsimile: 703/288-6647 Facsimile: 918/573-3005
A Party may from time to time change its address or designee for
notification purposes by giving the other prior written notice of the
new address or designee and the date upon which it will become
effective.
12.9. Counterparts.
This Agreement may be executed in several counterparts, all of which
taken together shall constitute one single agreement between the
Parties hereto.
12.10. Relationship of Parties.
Each Party, in performing hereunder, is acting as an independent
contractor, and such Party's personnel (including its subcontractors)
shall not be considered or represented as employees or agents of the
other Party. Neither Party is an agent of the other and has no
authority to represent that Party as to any matters, except as
expressly authorized in this Agreement.
12.11. Severability.
If any provision of this Agreement conflicts with the law under which
this Agreement is to be construed or if any such provision is held
invalid by an arbitrator or a court with jurisdiction over the
Parties, such provision shall be deemed to be restated to reflect as
nearly as possible the original intentions of the Parties in
accordance with applicable law. The remainder of this Agreement shall
remain in full force and effect.
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<PAGE> 33
12.12. Reasonableness, Consents and Approval.
(a) Where this Agreement requires a Party to assist or
cooperate, such requirement shall not be interpreted to
require materially more than a commercially reasonable level
of effort (i.e. the standard applicable will not be "best
efforts" or "exhausting all available means").
(b) Except where expressly provided as being in the sole
discretion of a Party, where agreement, approval,
acceptance, consent, or similar action by either Party is
required under this Agreement, such action shall not be
unreasonably delayed or withheld. An approval or consent
given by a Party under this Agreement shall not relieve the
other Party from responsibility for complying with the
requirements of this Agreement, nor shall it be construed as
a waiver of any rights under this Agreement, except as and
to the extent otherwise expressly provided in such approval
or consent.
12.13. Waiver of Default.
No waiver or discharge hereof shall be valid unless in writing and
signed by an authorized representative of the Party against which such
amendment, waiver, or discharge is sought to be enforced. A delay or
omission by either Party hereto to exercise any right or power under
this Agreement shall not be construed to be a waiver thereof. A waiver
by either of the Parties hereto of any of the covenants to be
performed by the other or any breach thereof shall not be construed to
be a waiver of any succeeding breach thereof or of any other covenant
herein contained.
12.14. Survival.
No termination of this Agreement shall affect the rights or
obligations of any Party with respect to any other provisions of this
Agreement that contemplate performance or observance subsequent to any
termination or expiration of this Agreement.
12.15. Public Disclosures.
All media releases, public announcements, and public disclosures
relating to this Agreement or the subject matter of this Agreement,
including promotional or marketing material, but not including
announcements intended solely for internal distribution or disclosures
to the extent required to meet legal or regulatory requirements, shall
be coordinated with and shall be subject to approval by both Parties
prior to release.
12.16. Third Party Beneficiaries.
Except as otherwise provided in this Agreement, this Agreement shall
not be deemed to create any rights in third parties, including
suppliers and customers of a Party, or to create any obligations of a
Party to any such third parties.
12.17. Amendment.
(a) This Agreement shall not be modified, amended or in any way
altered except by an instrument in writing signed by both
Parties.
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(b) Unless otherwise expressly permitted in this Agreement, WinStar
shall not make any changes to the Exhibits or Schedules attached
hereto that may have a material adverse impact on the performance
or usability of Williams Connectivity without Williams' prior
written consent.
12.18. Order of Precedence.
In the event of a conflict, this Agreement shall take precedence over
the Schedules attached hereto, and the Schedules shall take precedence
over their attached Exhibits.
This order of precedence may be modified in a subsequently-added
Schedule or Exhibit if this modification is explicitly noted in the
corresponding amendment instrument.
12.19. Interpretation.
(a) Terms other than those defined in this Agreement shall be given
their plain English meaning, and those terms, acronyms and
phrases known in the telecommunications and information
technology services industries shall be interpreted in accordance
with their generally known meanings. Unless the context otherwise
requires, words importing the singular include the plural and
vice-versa.
(b) References to "Article," "Section," "Subsection" and "Schedule"
mean references to an article, section, subsection or schedule of
this Agreement, as appropriate, unless otherwise specifically
stated.
(c) The article and section headings in this Agreement are intended
to be for reference purposes only and shall in no way be
construed to modify or restrict any of the terms or provisions of
this Agreement.
(d) The words "include," "includes" and "including," when following a
general statement or term, are not to be construed as limiting
the general statement or term to any specific item or matter set
forth or to similar items or matters, but rather as permitting
the general statement or term to refer also to all other items or
matters that could reasonably fall within its broadest scope.
12.20. Covenant of Good Faith.
Each Party agrees that, in its respective dealings with the other
Party under or in connection with this Agreement, it will act in good
faith.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
undersigned officers, thereunto duly authorized, as of the date first written
above.
<TABLE>
<S> <C>
WINSTAR WIRELESS, INC. WILLIAMS COMMUNICATIONS, INC.
/s/ Timothy R. Graham /s/ Frank Semple
By: -------------------------------------------- By: ----------------------------------------
Timothy R. Graham Frank Semple
Name: -------------------------------------------- Name: ----------------------------------------
Vice President President, Williams Network
Title -------------------------------------------- Title: ----------------------------------------
December 17, 1998 December 17, 1998
Date: -------------------------------------------- Date: ----------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 10.18
Confidential - WinStar/Williams
IRU AGREEMENT
BETWEEN
WINSTAR WIRELESS, INC.
AND
WILLIAMS COMMUNICATIONS, INC.
Dated December 17, 1998
(Long-Haul)
<PAGE> 2
TABLE OF CONTENTS
1. DEFINITIONS...........................................................1
2. CONVEYANCE OF DARK FIBER IRUS AND GRANT OF OPTION.....................7
2.1. Grant of Network IRU................................................7
2.2. Option..............................................................8
2.3. Financing Arrangements..............................................8
2.4. Preferred Provider Status...........................................8
2.5. Most Favored Customer Provision.....................................9
2.6. No Title to Realty or Personalty....................................9
3. CONSIDERATION FOR IRUS................................................10
3.1. Contract Price......................................................10
3.2. Exercise Price......................................................10
4. CONSTRUCTION..........................................................10
4.1. Construction Representations, Warranties and Covenants..............10
4.2. Delivery of System Segments.........................................10
4.3. Renewal of Required Rights..........................................11
4.4. As-Built Drawings...................................................11
4.5. Third-Party Consents................................................11
5. ORDERING AND PROVISIONING.............................................12
5.1. Provision of Interim Service........................................12
5.2. Service Orders for Interim Services.................................12
5.3. Changes in Service Parameters.......................................14
5.4. Assignment and Assumption of Backbone Agreements....................15
6. CONNECTION TO THE SYSTEM AND COLLOCATION..............................17
6.1. Collocation.........................................................17
6.2. Interconnection.....................................................17
6.3. Ancillary Services..................................................18
7. ACCEPTANCE AND TESTING OF FIBERS......................................18
7.1. Overview............................................................18
7.2. SSPFAT by Williams..................................................19
7.3. SSPFAT by WinStar...................................................19
7.4. Failure Notice......................................................20
7.5. Correction..........................................................20
7.6. Testing by Third Party..............................................20
7.7. System Segment Fiber Acceptance Testing and Acceptance Date.........21
7.8. Testing of Option Fibers............................................21
8. USE OF THE SYSTEM.....................................................21
8.1. Use of WinStar Fibers...............................................21
8.2. Notice of Damage....................................................21
8.3. Precautions.........................................................21
8.4. Use of Equipment....................................................22
8.5. Liens...............................................................22
9. TERM..................................................................22
9.1. Agreement Term......................................................22
9.2. IRU Terms...........................................................22
9.3. Effect of Termination...............................................22
<PAGE> 3
10. OPERATION, MAINTENANCE, AND REPAIR OF THE SYSTEM......................23
10.1. Routine Maintenance.................................................23
10.2. Non-Routine Maintenance.............................................23
10.3. Subcontractors......................................................23
10.4. Continued Breach of Routine Maintenance Obligations................23
10.5. WinStar Equipment...................................................23
10.6 Access to Systems...................................................23
11. RELOCATION............................................................24
11.1. Relocation..........................................................24
11.2. Cost of Relocation..................................................24
11.3. Updated As-Built Drawings...........................................24
12. INVOICING AND PAYMENT.................................................25
12.1. Due Date and Invoice................................................25
12.2. Form of Payment.....................................................25
12.3. Disputed Charges....................................................25
12.4. Late Interest.......................................................26
12.5. Adjustments.........................................................26
13. DISCLAIMER OF WARRANTIES..............................................26
13.1. Parties.............................................................26
13.2. Facility Owners/Lenders.............................................26
14. AUDIT RIGHTS..........................................................26
15. INDEMNIFICATION.......................................................27
15.1. Indemnification.....................................................27
15.2. Third Party Claims..................................................27
15.3. Indemnification of Providers........................................28
15.4. WinStar Customers...................................................28
16. LIMITATION OF LIABILITY...............................................28
16.1. General Intent......................................................28
16.2. Liability Restrictions..............................................28
16.3. Released Parties....................................................29
17. INSURANCE.............................................................29
17.1. Insurance...........................................................29
17.2. Documentation.......................................................30
17.3. Certificates........................................................30
17.4. Blanket Policies....................................................30
18. TAXES AND GOVERNMENTAL FEES...........................................30
18.1. Payment by WinStar..................................................30
18.2. Payment by Williams.................................................31
18.3. Reimbursement.......................................................31
18.4. Cooperation.........................................................31
18.5. Services............................................................31
19. NOTICE................................................................31
20. CONFIDENTIALITY.......................................................32
20.1. Confidential Information............................................32
20.2. Obligations.........................................................32
20.3. Exclusions..........................................................33
20.4. No Implied Rights...................................................34
21. DEFAULT...............................................................34
22. FORCE MAJEURE.........................................................34
22.1. Excusable Delay.....................................................34
22.2. Notice and Remedy...................................................35
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23. REMEDIES AND DISPUTE RESOLUTION.......................................35
23.1. Dispute Resolution..................................................35
23.2. Cumulative Remedies.................................................35
23.3. Informal Dispute Resolution.........................................35
23.4. Arbitration.........................................................36
23.5. Continued Performance...............................................38
23.6. Immediate Injunctive Relief.........................................38
24. GENERAL...............................................................38
24.1. Rules of Construction...............................................38
24.2. Assignment..........................................................40
24.3. Relationship of the Parties.........................................42
24.4. Prohibition on Improper Payments....................................42
24.5. Entire Agreement; Amendment; Execution..............................42
25. REPRESENTATIONS, WARRANTIES AND COVENANTS.............................43
25.1. Representations and Warranties......................................43
25.2. Additional Williams Covenants.......................................43
25.3. Infringement of Intellectual Property Rights........................44
26. USE OF TELECOMMUNICATIONS AND OTHER SERVICES..........................44
26.1. Condition to Provision of Services..................................44
26.2. Intrastate Interexchange Services...................................44
26.3. WinStar Responsibilities............................................45
26.4. Consents............................................................45
26.5. Restriction of Transmissions........................................45
26.6. Reasonableness, Consents and Approval...............................45
EXHIBITS
Exhibit A Williams System
Part 1 -- Route Map
Part 2 -- System Segments
Exhibit B Williams Network Pricing Schedules and Technical Specifications
Exhibit C Collocation Provisions
Part 1 - Transmission Sites
Part 2 - POPs
Exhibit D Fiber Splicing, Testing, and Acceptance Standards
Exhibit E Fiber Specifications
Exhibit F Cable Installation Specifications
Exhibit G Transmission Site Specifications
Exhibit H As-Built Drawing Specifications
Exhibit I Operations Specifications
Exhibit J Intentionally omitted
Exhibit K Payment Terms
Exhibit L Intentionally Omitted
Exhibit M Intentionally Omitted
Exhibit N Intentionally Omitted
Exhibit O Williams Cities and Location of POPs
<PAGE> 5
IRU AGREEMENT
(Long-Haul)
THIS IRU AGREEMENT (including the Exhibits and Schedules attached
hereto, this "Agreement") is made as of the Effective Date (hereafter defined)
by and between WINSTAR WIRELESS, INC. ("WinStar"), a Delaware corporation having
its principal office at 230 Park Avenue, New York City, New York, and WILLIAMS
COMMUNICATIONS, INC. ("Williams"), a Delaware corporation, having its principal
office at One Williams Center, Tulsa, Oklahoma 74172.
W I T N E S S E T H:
WHEREAS, Williams has constructed or will construct or obtain rights of
use in a fiber optic communication system (the "System") located approximately
along the routes depicted in Exhibit A, Part 1 (the "Route") and consisting of
the System Segments, as defined below; and
WHEREAS, WinStar desires to acquire from Williams, and Williams desires
to provide to WinStar, the Network IRU as defined below upon the terms and
conditions set forth below;
NOW, THEREFORE, in consideration of the mutual promises set forth below
and other good and valuable consideration, the sufficiency of which is hereby
acknowledged, the parties hereby agree as follows:
1. DEFINITIONS
Capitalized terms and phrases used in this Agreement shall have the
following meanings:
(a) "Acceptance Date" means the date defined in Section 7.7 below.
(b) "Acceptance Standards" means the standards set forth in Exhibit D
with respect to the testing of the WinStar Fibers.
(c) "Additional Services" means telecommunications services in excess
of the Minimum Commitment, such excess is not included in the
Contract Price.
(d) "Affiliate" means, with respect to any entity, any other entity
Controlling, Controlled by or under common Control with such
entity, whether directly or indirectly through one or more
intermediaries.
(e) "Agreement" has the meaning set forth in the preamble to this
document.
(f) "Ancillary Collocation Services" has the meaning set forth in
Exhibit C, Part 1, Section 1(d).
(g) "Ancillary Services" has the meaning set forth in Section 6.3.
(h) "Assignment Agreement Effective Date" has the meaning set forth
in Section 5.4(a).
(i) "Assumed Backbone Agreement" means a Backbone Agreement that
WinStar assigns to Williams in accordance with Section 5.4.
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<PAGE> 6
(j) "Backbone Agreements" means the agreements designated by WinStar
that WinStar is a party to as of the Effective Date and which
WinStar intends to assign to Williams or have Williams act as a
payment agent.
(k) "Backbone Agreement Service Provider" means each provider of
telecommunications services (other than WinStar) who is a party
to a Backbone Agreement.
(l) "Cable" means fiber optic cable installed pursuant to this
Agreement as part of the System (including any replacement cable)
and fibers contained therein, including the WinStar Fibers, and
associated splicing connections, splice boxes and vaults, and
conduit.
(m) "Circuit" means a communications path with a specified bandwidth.
(n) "Claim" means any claim, action, dispute, or proceeding of any
kind between WinStar (or any of its Affiliates, successors or
assigns) and Williams (or any of its Affiliates, successors, or
assigns) and any other claim, transaction, occurrence, loss,
liability, expense or other matter arising out of, in connection
with, or in any way related to, the Network IRU, the System, this
Agreement or any other instrument, arrangement or understanding
related to the Network IRU.
(o) "Claimant" has the meaning set forth in Section 15.1.
(p) "Collocation Service" has the meaning set forth in Exhibit C,
Part 2.
(q) "Connecting Point" means a point where the network or facilities
of WinStar will connect to the System.
(r) "Contract Price" has the meaning set forth in Section 3.1.
(s) "Control" and its derivatives mean legal, beneficial or equitable
ownership, directly or indirectly, of more than fifty percent
(50%) of the outstanding voting capital stock (or other ownership
interest, if not a corporation) of an entity or management or
operational control over such entity.
(t) "Costs" means actual, direct costs incurred and computed in
accordance with the established accounting procedures used by
Williams to bill third parties for reimbursable projects. All
Costs shall be computed in accordance with generally accepted
accounting principles. Such actual, direct costs include the
following:
(i) Labor costs, including wages and salaries, and benefits,
plus the overhead allocable to such labor costs (overhead
allocation percentage shall not exceed the lesser of: (i)
the percentage Williams allocates to its internal projects;
or (ii) thirty percent (30%)); and
(ii) Other direct costs and out-of-pocket expenses on a
pass-through basis (such as equipment, materials, supplies,
contract services, costs of capital, Required Rights, sales,
use or similar taxes, etc.) plus ten percent (10%) of such
expenses; but,
(iii) Less any cost or expense reimbursed by a third party.
(u) "CPNIP" has the meaning set forth in Part I, Section 2.1 of
Schedule B, Williams Network Technical Specifications.
(v) "Deadline Date" has the meaning set forth in Section 4.2.
(w) "Deduction Sections" has the meaning set forth in Section
24.1(l).
(x) "Dispute Notice" has the meaning set forth in Section 23.4(a).
(y) "Disputing Party" has the meaning set forth in Section 23.4.
(z) "Due Date" has the meaning set forth in Section 12.1.
(aa) "Effective Date" means December 17, 1998.
(bb) "Equipment" has the meaning set forth in Section 1.1 of Schedule
C, Part 2.
(cc) "Exercise Date" means the date on which WinStar exercises its
Option in accordance with Section 2.2.
(dd) "Exercise Price" has the meaning set forth in Section 3.2.
(ee) "Facility Owners/Lenders" means any entity (other than Williams)
that: (a) owns any portion of the System or any property or
security interest therein, (b) leases to Williams, or provides an
IRU to Williams in, any portion of the System, or (c) is a Lender
with respect to Williams or any Affiliates of Williams.
(ff) "FCC" means the Federal Communications Commission.
(gg) "Fiber Acceptance Testing" means the fiber acceptance testing
described in Exhibit D and in Article 7.
(hh) "Fiber Collocation Provisions" means the provisions set forth in
Exhibit C, Part 1.
(ii) "Fibers" means any optical fibers contained in the System
including the WinStar Fibers, the fibers of Williams and the
fibers of any third party in the System excluding, however, any
fibers granted (whether through ownership, IRU, lease, or
otherwise) to governmental entities in exchange for the use of
streets, rights of way, or other property under the jurisdiction
of such entity.
(jj) "Force Majeure Events" has the meaning set forth in Article 22.
(kk) "Indefeasible Right of Use" or "IRU" means an exclusive,
indefeasible right to use the specified property or capacity in
the manner contemplated by this Agreement; provided, however,
that the grant of an IRU shall not convey title, ownership, or
rights of possession in the System, the WinStar Fibers, the
Cable, the Right-of-Way Agreements, or any other real or personal
property.
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<PAGE> 7
(ll) "Indemnitor" has the meaning set forth in Section 15.1.
(mm) "Initial WinStar Fibers" has the meaning set forth in Section
2.1.
(nn) "Intellectual Property Rights" means patent, copyright,
trademark, trade secret or other proprietary rights with respect
to any work product in which such rights could inure.
(oo) "Interconnect/Collocation Notice" has the meaning set forth in
Exhibit C, Part 1, Section 3.
(pp) "Interconnect Facility" has the meaning set forth in Exhibit C,
Part 1, Section 2(a).
(qq) "Interconnection" has the meaning set forth in Section 6.2.
(rr) "Interim IRU" has the meaning set forth in Section 2.1(b).
(ss) "IRU Term" has the meaning set forth in Section 9.2.
(tt) "LEC" means a local exchange carrier.
(uu) "Lender" has the meaning set forth in Section 2.3.
(vv) "Losses" means all liabilities, damages and related costs and
expenses (including fines, levies, assessments, reasonable legal
fees and disbursements and costs of investigation, litigation,
settlement, judgment, interest and penalties) directly incurred
by a party.
(ww) "Material Improvements" has the meaning set forth in Section 10
of Exhibit C, Part 2.
(xx) "Mean Time to Restore" has the meaning set forth in Exhibit B.
(yy) "Minimum Commitment" means One Hundred Twenty Million Dollars
($120,000,000), which is the minimum amount of On-Net
Telecommunications Services in United States dollars to be
purchased by WinStar pursuant to the terms hereof prior to the
expiration of the fifth anniversary of the Effective Date. Such
amount is included in the Contract Price.
(zz) "Minimum Term Liability" has the meaning set forth in Section
5.3(b).
(aaa)"NCC" means Network Control Center, as set forth in Exhibit I,
Section 1(A).
(bbb) "Network IRU" has the meaning set forth in Section 2.1.
(ccc)"Notice of Election" has the meaning set forth in Section
15.2(a).
(ddd)"OOS" means Out-of-Spec, as set forth in Exhibit D, Section
1(B).
(eee) "Off Net" means a Circuit that is not On Net.
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<PAGE> 8
(fff)"On Net" means a Circuit traversing the Williams Network between
two Williams points of presence.
(ggg) "Option Fibers" has the meaning set forth in Section 2.1.
(hhh) "Option" has the meaning set forth in Section 2.2.
(iii)"OTDR" means optical time domain reflectometer, as set forth in
Exhibit D, Section 1(A).
(jjj)"Other Services" means local access, Interconnection, Ancillary
Services and Collocation Services.
(kkk)"Payment Deductions" has the meaning set forth in Section
24.1(l).
(lll) "Payment Terms" has the meaning set forth in Section 3.1.
(mmm)"Point of Presence" means a specified location at which Williams
originates or terminates services.
(nnn) "Premises" has the meaning set forth in Exhibit C, Part 2.
(ooo)"Prime Rate" means, with respect of any period, the rate
published as Chase Manhattan's prime rate in the Wall Street
Journal, or any successor publication thereto, from time to time
during such period.
(ppp)"Pro-Rata Share" means a proportion equal to a fraction, the
numerator of which is the number of WinStar Fibers and the
denominator of which is all Fibers in the relevant System Segment
Portion(s). If this fraction varies over different System Segment
Portions, then the Pro Rata Share shall be equal to the weighted
average (weighted by length as set forth in Williams' as-built
drawings) of the relevant System Segment Portions. For example,
if the fraction for 100 feet of the relevant System Segment
Portion is 0.1 and the fraction for the remaining 50 feet of the
relevant System Segment Portion is 0.07, the weighted average for
the entire System Segment Portion would be 0.09.
(qqq)"Released Party" means each of the following (but excludes
Williams and WinStar):
(i) Any Affiliates or Lenders of the other party and any
Facility Owners/Lenders;
(ii) Any employee, officer, director, stockholder, partner,
member, or trustee of the other party or of its Affiliates,
Lenders, or Facility Owners/Lenders; or
(iii)Assignees of the entities included in the above
subparagraphs (a) or (b) and any employee, officer,
director, stockholder, partner, member, or trustee of such
assignees.
(rrr)"Renegotiated Backbone Agreement" means an Assumed Backbone
Agreement that Williams has renegotiated as set forth in Section
5.4(b).
5
<PAGE> 9
(sss) "Representatives" has the meaning set forth in Section 20.2.
(ttt)"Requested Start Date" has the meaning set forth in Section
5.2(b).
(uuu) "Required Rights" has the meaning set forth in Section 4.1.
(vvv) "Restricted Fiber" has the meaning set forth in Section 26.1.
(www)"Right-of-Way Agreements" means rights, licenses, authorizations,
easements, leases, fee interests, or agreements that provide for
the occupancy by the System of real property or fixtures (such as
conduit, bridges, river crossings, or transmission towers).
(xxx) "Route" has the meaning set forth in the Recitals above.
(yyy) "Routine Maintenance" has the meaning set forth in Section 10.1.
(zzz)"Service Orders" has the meaning set forth in Section 5.2(a).
(aaaa) "Service Term" means with respect to the provision of
Telecommunications Services, Additional Services or Other
Services, the length of time specified in the applicable Service
Order during which Williams will provide such Telecommunications
Services, Additional Services or Other Services.
(bbbb) "Space" has the meaning set forth in Section 1.1 of Schedule C,
Part 2.
(cccc) "Start Date" means, with respect to any Telecommunications
Services or Other Services WinStar requests Williams to provide
hereunder, the first day on which such services are provided.
(dddd) "Start of Service Notice" or "SOSN" has the meaning set forth
in Section 5.2(e) .
(eeee) "System" shall have the meaning set forth in the Recitals
above.
(ffff) "System Segment" means one of the System Segment Portions
identified as a System Segment in Exhibit A, Part 2.
(gggg) "System Segment Portion" means a discrete portion of the System
and may refer to a span (a portion of the System between two
Transmission Sites or between a Transmission Site and a point of
presence or System end point), a portion between two points of
presence or a point of presence and a System end point, or a
portion of the System affected by a relocation or other
circumstance.
(hhhh) "Telecommunications Services" means interexchange
telecommunications capacity on Williams' Network (or third
parties' telecommunications facilities) at the DS-3, OC-3, OC-12
and OC-48 levels but excluding Other Service.
(iiii) "Term" has the meaning set forth in Section 9.1.
(jjjj) "Third Party Service Provider" means any third party provider,
operator or maintenance repair contractor of facilities employed
by Williams in connection with the provision of the Network IRU,
Telecommunications Services or Other Services.
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<PAGE> 10
(kkkk) "Transmission Sites" means the optical amplifier, regenerator,
and junction sites along each System Segment.
(llll) "Williams" means Williams Communications, Inc., a Delaware
corporation, formerly known as Vyvx, Inc.
(mmmm) "Williams Network" means the telecommunications facilities
owned or operated by Williams and used to provide services
between the cities listed on Exhibit O, as such may be added to
as Williams grows its network during the Term.
(nnnn) "WinStar" has the meaning set forth in the first paragraph of
this document.
(oooo) "WinStar Equipment" means optronic (opto-electrical),
electronic, or optical equipment, or materials, facilities, or
other equipment (other than the System) owned, possessed, or
utilized by WinStar.
(pppp) "WinStar Facilities" has the meaning set forth in Section 26.3.
(qqqq) "WinStar Fibers" means the Initial WinStar Fibers and, upon
WinStar's exercise of the Option in accordance with Section 2.2,
the Option Fibers.
(rrrr) "WinStar IRU" has the meaning set forth in Section 2.1.
2. CONVEYANCE OF DARK FIBER IRUS AND GRANT OF OPTION
2.1. Grant of Network IRU.
Williams hereby grants the "Network IRU" to WinStar for the purposes
described herein and on the terms and subject to the conditions set forth
herein. The Network IRU comprises:
(a) An exclusive Indefeasible Right of Use (the "WinStar IRU"), effective
as of the Acceptance Date for each System Segment, in:
(i) Four (4) strands of optical fiber (the "Initial WinStar Fibers"),
as identified by Williams in each System Segment, throughout the
length of the Route; and
(ii) If the Exercise Date occurs, two (2) additional strands of
optical fiber (the "Option Fibers"), as identified by Williams in
each System Segment, throughout the length of the Route; and
(b) An exclusive Indefeasible Right of Use in On-Net Telecommunications
Services (the "Interim IRU"), effective as of the Effective Date,
which is further defined in Article 5.
2.2. Option.
(a) WinStar is hereby granted an option (the "Option") to an exclusive
Indefeasible Right of Use in the Option Fibers in all System Segments.
The Option is not divisible (i.e. it may not be exercised in part) by
System Segment or strand of Option Fiber. If not exercised, the Option
shall expire on the seventh (7th) anniversary of the Effective Date.
(b) WinStar may exercise the Option only by delivery of an irrevocable
written notice to that effect by an authorized representative. If
WinStar so exercises the Option:
(i) The Option Fibers will be deemed to be WinStar Fibers (except for
purposes of Article 7, for which separate treatment is indicated
in Section 7.8) and will be deemed to be subject to the WinStar
IRU; and
(ii) WinStar's rights to use the Option Fibers shall begin upon the
initial payment of the Exercise Price (or, if later, the
Acceptance Date for each System Segment) and shall continue until
the last day of the IRU Term of the corresponding System Segment.
2.3. Financing Arrangements.
Each party may, directly or through an Affiliate, enter into financing
arrangements (including secured loans, leases, sales with lease-back,
leases with lease-back arrangements, purchase-money or vendor financing,
conditional sales transactions or other arrangements) with one or more
financial institutions, vendors, suppliers or other financing sources (each
a "Lender"), that, with respect to Williams, relate to the System and, with
respect to WinStar, relate to the Network IRU (and not to any physical
property right in the System), subject to Williams' rights pursuant to the
Payment Terms.
2.4. Preferred Provider Status.
(a) During the Term, WinStar shall first seek to obtain its domestic
interexchange telecommunications requirements (including dark fiber,
data, voice and video circuits) from Williams. WinStar will fulfill
such requirements with Williams' telecommunications products if
Williams is responsive to WinStar's requests and those products, when
compared to similar offerings in the marketplace, are of equivalent or
better quality, availability and price.
(b) Within 180 days after the Effective Date, the parties will jointly
establish a benchmarking measurement and comparison process (the
"Benchmarking Process") designed to objectively evaluate whether the
Williams Telecommunications Services, Additional Services or Other
Services, as applicable, are of equivalent or better quality,
availability and price as compared to similar services generally
available in the market for similar size and scope requirements
("Market Level Charges"). The Benchmarking Process will take into
consideration relevant factors such as quality and delivery terms.
2.5. Most Favored Customer Provision.
During the Term, if Williams sells On-Net Telecommunications Services,
On-Net Additional Services, and/or Other Services (but not including any
local access or dark/dim fiber) to a third party on Financial Terms (as
hereinafter defined) that are not Comparable (as hereinafter defined) to
those provided hereunder, WinStar shall be entitled to an adjustment of the
amounts paid with regard to the On-Net Telecommunications Services, On-Net
Additional Services, and/or Other Services in question. Williams shall
promptly notify WinStar in writing of such more favorable Financial Terms.
Williams shall be under no obligation to disclose to WinStar the identity
of any such third party or any other provisions of such a contract that are
not more favorable than those provided to WinStar. Such adjustment shall be
equal to the aggregate amount necessary to make the Financial Terms
Comparable (pro rated to follow the cash timing of this Agreement). Upon
payment or credit of such adjustment to WinStar, the Financial Terms of
this Agreement shall be deemed to be those more favorable Financial Terms
for the purpose of future applications of this Section. Nothing in this
Section shall be deemed to require Williams to sell more than the Minimum
Commitment contained herein. "Comparable" means not less than the price,
after adjustments to take into account all differences attributable to
volume, terms and conditions, advances in technology, passage of time,
market conditions or strategic relationship value. "Financial Terms" means
the overall pricing of services to the third-party.
2.6 No Title to Realty or Personalty.
Neither this Agreement nor the grant of the Network IRU effected hereby
conveys any form or type of title in any real or personal property,
including the System or any portion thereof or in any transmission or other
facilities and equipment related to the provision of Telecommunications
Services, Other Services, or Additional Services. Williams and WinStar
intend that this Agreement constitutes a true lease of the WinStar Fibers
and not a sale of the WinStar Fibers. Notwithstanding such express intent
of the parties, if a court of competent jurisdiction determines that this
Agreement is not a true lease, but a security interest in the WinStar
Fibers, then solely in that event and solely for the limited purpose
thereof, WinStar shall be deemed to have granted Williams a security
interest as described in Section 7 of Exhibit K hereto. WinStar shall
provide an inventory of any equipment to be located on Williams' sites.
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<PAGE> 11
3. CONSIDERATION FOR IRUS
3.1. Contract Price.
As consideration for the Network IRU, WinStar shall pay Williams Five
Hundred and Fifty Million Dollars ($550,000,000) (the "Contract Price") in
accordance with the payment and other terms set forth in Exhibit K hereto
(the "Payment Terms"), plus the Exercise Price if the Option is exercised.
3.2. Exercise Price.
The price payable if WinStar exercises the Option (the "Exercise Price")
shall be Fifty-One Million Eight Hundred Thirty-Four Thousand One Hundred
Dollars ($51,834,100), allocated to each System Segment as set forth in
Exhibit A, Part 2. The Exercise Price for each System Segment shall be
chargeable upon the later of (a) the date WinStar exercises the Option or
(b) the Acceptance Date of that System Segment.
4. CONSTRUCTION
4.1. Construction Representations, Warranties and Covenants.
(a) Williams represents, warrants and covenants that, as of the Acceptance
Date for each System Segment, it (or the underlying facility owner on
Williams' behalf) shall have obtained the following rights
(collectively, the "Required Rights"):
(i) All Right-of-Way Agreements necessary for the installation and
use of that System Segment;
(ii) The rights to use those System Segment Portions it does not own
and the right to grant the Network IRU with respect to such
System Segment Portions;
(b) Williams represents, warrants and covenants that, for each System
Segment,
(i) That System Segment has been designed, engineered, installed, and
constructed in accordance with the specifications set forth in
Exhibits D, E, F and G; and
(ii) Throughout the relevant IRU Term, the exercise of rights by or on
behalf of Williams' Facilities Owners/Lenders shall not deprive
WinStar of the peaceful and quiet enjoyment of the WinStar IRU in
that System Segment.
4.2. Delivery of System Segments.
(a) Deadline Date. The planned Acceptance Date for each System Segment
shall be the date sixty (60) days after the Planned Construction Date
set forth as such in Exhibit A, Part 2. The "Deadline Date" shall be
sixty (60) days after the later of (a) such planned Acceptance Date or
(b) the planned Acceptance Date as extended due to unforseen events
not in the reasonable control of Williams (other than as due to
Williams' negligence), Force Majeure Events or as expressly permitted
by this Agreement. Williams shall implement each System Segment so
that it achieves its Acceptance Date by the Deadline Date. Williams
shall give WinStar as much prior notice as reasonably possible if , to
the best of Williams' knowledge, there is a forseeable risk that it
may miss a Deadline Date for any System Segment.
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<PAGE> 12
(b) Failure to Meet Deadline Date. If Williams does not meet the Deadline
Date for any System Segment, and the parties are unable, in good
faith, to agree to an alternative Deadline Date, WinStar's sole and
exclusive monetary remedy for such failure shall be to obtain Cover
(as hereinafter defined) beginning on the Deadline Date for the System
Segments not made available. Such "Cover" shall be satisfied by
Williams' providing, at Williams' expense: (a) such capacity as is
required for WinStar to carry those Circuits it would have migrated to
the WinStar Fibers, and (b) such other capacity as is needed to
fulfill WinStar's increase in usage (based on actual orders of its
customers), until Williams delivers the WinStar Fibers. In any event,
Williams will provide such Cover capacity in ATM, private line, or
frame relay formats, at WinStar's option.
4.3. Renewal of Required Rights.
Williams shall renew or replace existing Required Rights for each
System Segment through at least the applicable IRU Term.
4.4. As-Built Drawings.
Within six (6) months after the Acceptance Date for any System
Segment, Williams shall provide WinStar with as-built drawings for
that System Segment, in compliance with the specifications for
as-built drawings set forth in Exhibit H.
4.5. Third-Party Consents.
WinStar acknowledges that Williams requires the consent of a third
party in order to grant WinStar an IRU with respect to the
Washington-Houston and Houston-Dallas System Segments. WinStar shall
not unreasonably withhold consent to changes to this Agreement
required by such third party that do not adversely affect WinStar's
rights and obligations under this Agreement and do not require payment
of additional consideration by WinStar. If WinStar consents to such
changes, the parties shall execute an appropriate amendment. If
WinStar does not consent to such changes, or the Required Consents
cannot be obtained for other reasons, then the Contract Price and
Exercise Price shall each be reduced by the corresponding amount
allocated to the affected System Segment(s) in Exhibit A, Part 2.
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5. ORDERING AND PROVISIONING
5.1. Provision of Interim Service.
(a) Inasmuch as the deployment of the System does not currently reach all
locations set forth in Part 1 of Exhibit A, Williams shall provide,
subject to availability and on a non-discriminatory basis,
Telecommunications Services on the Williams Network in accordance with
the terms of this Agreement. Such Telecommunications Services may be
part of the Minimum Commitment or may be Additional Services.
(b) At the request of Williams, WinStar shall pay for Other Services or
Additional Services requested by WinStar in accordance with the terms
of this Agreement.
(c) Within ninety (90) days after each of the first five (5) anniversaries
of the Effective Date, Williams shall determine WinStar's actual use
of Minimum Commitment for the year ending on such anniversary and
shall send such information to WinStar for review. Irrespective of any
shortfall in Minimum Commitment actually used by WinStar during any
period, in no event shall any refund, rebate or reduction in the
Contract Price be granted or paid to WinStar as a result of any such
shortfall. Williams shall be obligated to accept any conforming
Service Orders issued by WinStar for On-Net Telecommunications
Services up to the Minimum Commitment during the first five
anniversaries of the Effective Date. Williams shall permit WinStar to
take up to two (2) months beyond the fifth anniversary beyond the
Effective Date to use Telecommunications Services requested and paid
for under a Service Order for On-Net Telecommunications Services
issued prior to the end of the fifth anniversary of the Effective Date
to enable WinStar to meet the Minimum Commitment. Notwithstanding the
foregoing, WinStar shall have additional time beyond the foregoing
five year period to meet the Minimum Commitment to the extent
WinStar's failure to meet the Minimum Commitment is due to delays by
Williams' in providing any of the On-Net Telecommunications Services
by the firm order commitment date issued by Williams during such five
year period.
5.2. Service Orders for Interim Services.
(a) Telecommunications Services, Additional Services, and Other Services
requested by WinStar hereunder shall be requested on Williams Service
Order forms in effect from time to time ("Service Orders"). Each
Service Order shall reference this Agreement. Williams reserves the
right not to accept a Service Order that does not conform with the
terms and conditions of this Agreement and such non-conforming Service
Order shall have no force or effect hereunder.
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(b) Each Service Order will indicate a requested due date (the "Requested
Start Date") for the Circuit, the desired term of the Circuit,
specific city pairs, applicable bandwidth, whether the Circuit(s) are
to be expedited or provided in normal intervals and any other
parameters required. Williams shall acknowledge receipt of the Service
Order, on average, within forty-eight (48) hours (an
"Acknowledgement"). Within four (4) business days of the
Acknowledgement, Williams will advise WinStar as to network
availability. With respect to On-Net Circuits, when WinStar requests
to order its own local loops Williams will provide a Letter of Agency
within seven to ten business days after Williams' receipt of the
Service Order. Within twenty-four (24) hours after Williams' receipt
of the Design Layout Record (as provided by the applicable local
access provider), Williams will provide a firm order commitment for
On-Net Circuits. All Service Order intervals for Off-net Circuits or
Backbone Agreement Circuits are on an individual case basis. Williams
will use reasonable efforts to assist WinStar in obtaining a Letter of
Agency and delivering service from a Third-Party Provider. All On-Net
DS-3/OC-3 Circuits ordered by WinStar pursuant to Service Orders under
this Agreement will be provisioned by Williams within a target
timeframe of forty-five (45) days from the date of the Service Order
for POP to POP service.
(c) Once a Service Order is placed, WinStar may cancel it only by notice
of cancellation not less then ten days prior to delivery of the
corresponding Circuit, and payment of any specified cancellation fee.
WinStar agrees that the actual damages in the event of such
cancellation would be difficult or impossible to ascertain, and that
the cancellation charge set forth in herein is consequently intended
to establish liquidated damages and not a penalty.
(d) Any conflicting, different or additional terms and conditions
contained in WinStar's acknowledgment or Service Order or elsewhere
are deemed objected to by Williams and shall not constitute part of
this Agreement. No action by Williams (including fulfillment of such
Service Order) shall be construed as binding or estopping Williams
with respect to such conflicting, different or additional term or
condition, unless the Service Order containing said term or condition
has been signed by an authorized representative of Williams.
(e) Williams shall make reasonable efforts to provide Telecommunications
Services, Other Services and Additional Services within its standard
service implementation interval, as set forth herein or on WinStar's
Requested Start Date. Telecommunications Services, Other Services or
Additional Services, as applicable, shall begin on the date Williams
issues a notice that service is available (the "Start of Service
Notice" or "SOSN"), indicating the service has been tested by Williams
in accordance with Williams' standard specifications and that the
service meets or exceeds those specifications.
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(f) WinStar may reasonably request one or more delays in the Requested
Start Date of a Service Order, a move, or rearrangement if Williams
receives the delay request at least fifteen (15) days prior to the
Requested Start Date and the requested delay does not extend the
Requested Start Date more than thirty (30) days from the original date
thereof. If WinStar delays the Requested Start Date (or as gauged by
the SOSN, if issued for a date after the Requested Start Date) by more
than thirty (30) days, WinStar has the option to (a) accept the
billing for the Service Order, (b) in the case of On-Net
Telecommunications Services, Other Services, or Additional Services,
cancel the Service Order and pay the applicable cancellation charges
for the facilities ordered, or (c) in the case of Off-Net
Telecommunications Services, Other Services, or Additional Services,
cancel the Service Order and pay any charges or other costs Williams
incurs as a result of such cancellation. The billing or cancellation
will be effective thirty (30) days after the Requested Start Date. If
WinStar elects to accept billing, the installation will be completed
as soon as reasonably practical after WinStar advises Williams that
the installation can be completed.
(g) Subject to the terms of Section 24.1(l), if, after the relevant Start
Date, Williams is in material breach of its obligation to issue a SOSN
for On-Net Telecommunications Services (excluding any breach arising
from delays in obtaining or failures to obtain or maintain service
such as local access or Off-Net service, but excluding POP-to-POP
On-Net service) for a period of more than one hundred twenty (120)
consecutive days after WinStar provides written notice of such breach,
WinStar may deduct from each succeeding monthly invoice, so long as
that breach continues, the amount by which such Telecommunications
Services would otherwise have contributed toward the Minimum
Commitment during any month following such one hundred twenty (120)
day period. Upon Williams' issuance of the corresponding SOSN, no
further deductions shall be available to WinStar for such
Telecommunications Services.
5.3. Changes in Service Parameters.
(a) WinStar may disconnect Off-Net Telecommunications Service, Other
Services, or Additional Services provided by a Third-Party Service
Provider pursuant to a Service Order by providing sixty (60) days'
prior written notice and paying any and all amounts properly due that
Provider for the affected Service Order.
(b) Following the relevant Start Date for any On-Net service, WinStar may
disconnect or reconfigure that service upon sixty (60) days' prior
written notice. If that action relates to a Circuit that has not been
in place for at least one (1) year from its Start Date, (i) WinStar
shall pay Williams an amount equal to the total of the monthly charges
for one year of service of such Circuit, less the amount of monthly
charges actually paid at the time of service disconnection (the
"Minimum Term Liability") and (ii), WinStar shall also pay Williams
the additional charges set forth in this Agreement that are associated
with that disconnection or reconfiguration. Subsection (ii) shall also
apply in the event of a cancellation in accordance with Section
5.2(c).
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5.4. Assignment and Assumption of Backbone Agreements.
(a) Assumption. Subject to subsection (i) below and WinStar obtaining any
necessary required consents, WinStar will assign to Williams pursuant
to a mutually acceptable assignment and assumption agreement, all
Backbone Agreements that can be assigned, to the extent that Williams
has the requisite intrastate or international authority to provide the
services encompassed by such Backbone Agreements. The date of the
assignment shall be the "Assignment Agreement Effective Date". After
such assumption, the terms and conditions of such Assumed Backbone
Agreements or such Renegotiated Backbone Agreement, as applicable,
(including all technical standards and service provisioning intervals)
shall prevail solely with regard to services provided by Williams to
WinStar thereunder, except as to any Circuit which has been migrated
on Williams Network as provided below.
(b) Renegotiation. Williams shall renegotiate the Assumed Backbone
Agreements, as it is reasonably able, to improve on the terms and
pricing thereof. Any such renegotiated terms shall only be applicable
to WinStar to the extent it improves the terms and pricing of the
Backbone Agreement as assigned to Williams. Once an Assumed Backbone
Agreement is renegotiated, it shall be considered a Renegotiated
Backbone Agreement for all purposes herein. Williams will only pass
through to WinStar, and WinStar shall be entitled to, its pro-rata
share of such cost savings achieved in any Renegotiated Backbone
Agreement. WinStar's pro-rata share will be determined by dividing the
then current WinStar Circuit or billing volumes by the total new
Circuit or billing volume under the Renegotiated Backbone Agreement.
(c) Payment Agent. WinStar shall designate Williams as its payment agent
with respect to all Backbone Agreements that cannot be assigned to
Williams pursuant to subsection (a) above.
(d) Payment and Minimum Commitments. WinStar shall pay Williams for
services rendered under the Assumed Backbone Agreements and
Renegotiated Backbone Agreements at the rates therein and shall also
remain responsible for meeting the associated minimum revenue or
volume commitments, if any (the "Minimums"). With respect to any
Renegotiated Backbone Agreement, WinStar shall abide by the
renegotiated terms and conditions, including paying the reduced price
as set forth in subsection (b) above. WinStar shall, in all instances
and to the extent such amounts are pre-calculated, pay the
non-recurring and monthly recurring charges to Williams in immediately
available funds at least one billing cycle prior to the date that
payment is due from Williams to the Backbone Agreement Service
Provider under an Assumed Backbone Agreement or a Renegotiated
Backbone Agreement.
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(e) Administration. The parties will work together to identify the
Circuits related to each Backbone Agreement and, after assignment,
minimum revenue or volume commitments of WinStar, if any, associated
with the Assumed Backbone Agreements and Renegotiated Backbone
Agreements. In no event shall WinStar be responsible for any minimum
revenue or volume commitments under a Renegotiated Backbone Agreement
beyond such commitments agreed to by WinStar prior the Effective Date.
Subject to WinStar's confidentiality obligations, WinStar will provide
Williams reasonable access to its records, books and other documents
and data related to each Backbone Agreement, Assumed Backbone
Agreement and Renegotiated Backbone Agreement. WinStar will also
cooperate with Williams in the administration of such agreements.
Williams is not obligated to assume any Circuit until such Circuit is
identified by the parties.
(f) WinStar Disputes. Williams will endeavor to resolve, on behalf of
WinStar and at WinStar's expense, any back-billing dispute which
accrued prior to the applicable Assignment Agreement Effective Date
(provided that notice of any such dispute is received by Williams
before any such Assignment Agreement Effective Date) and WinStar will
cooperate fully in any such effort.
(g) Orders Under Assumed and Renegotiated Backbone Agreements. Unless
otherwise permitted by Williams, WinStar will place orders under
Assumed Backbone Agreements and Renegotiated Backbone Agreements
through Williams. Williams will not be obligated to accept any Circuit
arranged by WinStar in contravention of this provision and such
Circuit will not become subject to the Assignment and Assumption
Agreement unless otherwise agreed to by Williams, such agreement not
to be unreasonably withheld.
(h) Relationship to the Minimum Commitment and Migration. Provision of
service under any Backbone Agreement (including the Assumed Backbone
Agreements and Renegotiated Backbone Agreements) will not count toward
satisfaction of the Minimum Commitment until such time as such
Circuits are migrated onto the Williams Network. Subject to WinStar's
prior approval in each instance, Williams shall migrate Circuits
provided under any Assumed Backbone Agreements or Renegotiated
Backbone Agreements as soon as reasonably possible, taking into
account any Circuit terms, early termination fees or Minimums.
(i) Assumption Proviso. Williams shall not be obligated to assume any
Backbone Agreement that would materially conflict with another
Williams contract, have a materially adverse effect on Williams, or
that contains any material usage commitment based upon a percentage of
WinStar's telecommunications needs. In the event Williams does not
assume such Backbone Agreement, Williams will act as a payment agent
as provided in Section 5.4(c).
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6. CONNECTION TO THE SYSTEM AND COLLOCATION
6.1. Collocation.
(a) WinStar shall have the right to use Transmission Sites along the Route
pursuant to the Fiber Collocation Provisions. Such Transmission Sites
shall meet or exceed the power and building requirements specified in
Exhibit G. WinStar shall provide, maintain, and for all purposes be
solely responsible for all WinStar Equipment at Transmission Sites or
other locations.
(b) Collocations in Williams Points of Presence will be provided in
accordance with the terms contained in Exhibit C, Part 2.
(c) Subject to the terms of Section 24.1(l), if, after the Acceptance Date
for any System Segment, Williams is in material breach of its
obligation to provide the rack space or square footage specified by
the Collocation Provisions at any Transmission Site (excluding
Transmission Sites on the Dallas-Houston System Segment) for a period
of more than one hundred twenty (120) consecutive days after WinStar
provides written notice of such breach, WinStar may deduct the
following amount from its monthly invoice, pro-rated for partial
months, so long as that material breach continues beyond such one
hundred twenty (120) day period: (i) Five Thousand Dollars ($5,000)
per month prior to the eighth anniversary of the relevant Acceptance
Date, (ii) one thousand dollars ($1,000) per month from the the eighth
anniversary of the relevant Acceptance Date up to but not including
the tenth anniversary of the relevant Acceptance Date, and (iii) five
hundred dollars ($500) per month thereafter. The preceding provision
shall apply on a per-Transmission Site basis for each relevant
Transmission Site.
6.2. Interconnection.
(a) With respect to each of the cities served by the WinStar Fibers, the
parties shall mutually determine the most efficient manner of
providing the required connectivity ("Interconnection") between the
WinStar and Williams points of presence, whether through then-existing
installed capacity, implementation of new capacity or third party
arrangements. In addition, the parties shall set and periodically
review the schedule (timing and priority) of implementation of those
Interconnection facilities and shall adhere to that schedule in
implementing such facilities.
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(b) The parties shall allocate the costs of each Interconnection facility
as follows:
(i) The parties shall mutually agree upon a forecast of each party's
usage of that Interconnection facility during the first year
after implementation (the "Forecast"). The non-recurring costs
associated with the implementation of that facility and the
recurring cost thereof in the first month of operation (in
aggregate, the "Start-up Costs") will be allocated pro rata
between the parties based upon the Forecast. One year thereafter
the parties shall re-calculate the allocation of the Start-up
Costs by substituting actual usage during the preceding year in
place of the Forecast. Based upon that recalculation, Williams
shall pay or receive a refund, in either case equal to the
difference between the initial allocation of the Start-up Costs
and the recalculated amount, plus interest at the Prime Rate for
the applicable period.
(ii) On a quarterly basis, the parties shall allocate the periodic
recurring costs of that Interconnection facility pro rata between
the parties based upon actual usage during the preceding quarter.
(iii)Following the Effective Date, the parties will mutually develop
appropriate procedures to implement the foregoing.
6.3. Ancillary Services.
Williams may also provide other services to WinStar for reasons
including, but not limited to: (a) WinStar's request to expedite
Telecommunications Services availability to a date earlier than
Williams' published installation interval or a previously accepted
Start Date; (b) Telecommunications Services redesign or other activity
occasioned by receipt of inaccurate information from WinStar; (c)
WinStar's request for use of routes or facilities other than those
selected by Williams for provision of the Telecommunications Services;
and (d) other circumstances in which extraordinary costs and expenses
are generated at the written request of WinStar and incurred by
Williams (collectively, "Ancillary Services").
7. ACCEPTANCE AND TESTING OF FIBERS
7.1. Overview.
Fiber Acceptance Testing of the WinStar Fibers shall be conducted for
each System Segment Portion ("System Segment Portion Fiber Acceptance
Testing" or "SSPFAT"). The provisions set forth below address the
acceptance procedures and provisions regarding failure notices,
corrections, third party testing and testing of the Option Fibers.
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7.2. SSPFAT by Williams.
Williams shall perform SSPFAT of the WinStar Fibers in accordance with
Exhibit D. SSPFAT shall progress System Segment Portion by System
Segment Portion along the Route of each System Segment as cable
splicing progresses, so that test results may be reviewed in a timely
manner. WinStar shall have the right, but not the obligation, to have
an individual present to observe Williams' SSPFAT or to conduct its
own SSPFAT in accordance with Section 7.3 below (except, in either
case, to the extent Williams' System Segment Portion Fiber Acceptance
Testing takes place prior to the period ending twenty (20) days after
the Effective Date). Williams shall provide WinStar at least ten (10)
days prior notice of Williams' testing schedule or any change thereto.
Within twenty (20) days after the conclusion of any SSPFAT of the
WinStar Fibers conducted by Williams in any given System Segment
Portion, Williams shall provide WinStar with a copy of the test
results provided that in no case shall Williams be obligated to
provide copies of such test results before January 11, 1999.
7.3. SSPFAT by WinStar.
WinStar shall have the right, but not the obligation, at its sole
expense, to conduct its own SSPFAT of the WinStar Fibers to verify
that they meet the Acceptance Standards. If WinStar elects to conduct
its own SSPFAT of the WinStar Fibers, it shall notify Williams of its
intent to do so (including dates and locations) at least three (3)
days prior to the date of Williams' scheduled commencement of the
SSPFAT of a particular System Segment Portion as specified in
Williams' ten day prior written notice to WinStar as provided in
Section 7.2. WinStar may elect to perform such testing (i) itself
subsequent to the Williams testing or (ii) concurrently with Williams'
testing (except to the extent Williams' testing take place prior to
the period ending twenty (20) days after the Effective Date), in which
case both parties shall reasonably cooperate with the other to
facilitate such concurrent testing. If WinStar elects to perform the
testing itself subsequent to Williams' testing, WinStar will complete
such testing within ten (10) days after Williams completes its SSPFAT
of the relevant System Segment Portion (except to the extent such
Williams testing takes place prior to the period ending twenty (20)
days after the Effective Date in which case WinStar shall complete
such SSPFAT by January 25, 1999). Williams shall have the right, but
not the obligation, to have an individual present to observe WinStar's
SSPFAT. Within twenty (20) days after the conclusion of WinStar's
SSPFAT of the WinStar Fibers, WinStar shall provide Williams with a
copy of the test results. WinStar's exercise or non-exercise of its
right to conduct SSPFAT shall not extend or shorten the time periods
for WinStar to determine, pursuant to Section 7.4, if the System
Segment Portion meets the Acceptance Standards. Williams shall
reasonably cooperate with WinStar to facilitate SSPFAT. Changes in
testing schedules may be mutually agreed upon by the Parties.
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7.4. Failure Notice.
If, within fourteen (14) days after the later of (i) receipt by
WinStar from Williams of the test results referred to in Section 7.2
or of the results of re-testing as set forth below and (ii) WinStar
conclusion of its own testing as provided in Section 7.3, WinStar
reasonably determines that Williams' or WinStar's test results show
that the System Segment Portion of the WinStar Fibers do not meet the
Acceptance Standards, WinStar shall, within such fourteen (14) day
period, notify Williams of such determination and shall identify in
writing the specific data that indicate such failure to meet the
Acceptance Standards. Notwithstanding the foregoing, if the fourteen
(14) day period ends prior to January 25, 1999 for any System Segment
Portion, WinStar will have until January 25, 1999 to give Williams
notice of failures of the System Segment Portion to meet the
Acceptance Standard.
7.5. Correction.
(a) Upon receiving notice pursuant to Section 7.4 that a System Segment
Portion of the WinStar Fibers do not meet the Acceptance Standards,
Williams shall either:
(i) Expeditiously take such action as reasonably necessary to cause
such System Segment Portion to meet the Acceptance Standards and
then re-test in accordance with the provisions of this Article;
or
(ii) Notify WinStar that Williams disputes WinStar's determination
that the System Segment Portion of the WinStar Fibers do not meet
the Acceptance Standards.
(b) After taking corrective actions and re-testing the WinStar Fibers (if
appropriate), Williams shall provide WinStar with a copy of the new
test results and WinStar shall again have all rights provided in this
Article with respect to such new test results. The cycle described
above of testing, taking corrective action and re-testing shall take
place until the WinStar Fibers meet the Acceptance Standards;
provided, however, repeating this cycle shall not in any manner
whatsoever limit any other right or remedy WinStar may have under this
Agreement.
7.6. Testing by Third Party.
If Williams provides notice to WinStar pursuant to Subsection
7.5(a)(ii), and the parties are unable to otherwise mutually agree,
the parties shall appoint a mutually acceptable fiber optic testing
company and such company shall re-test the applicable System Segment
Portion of the WinStar Fibers. If that test demonstrates that the
tested System Segment Portion of the WinStar Fibers meet the
Acceptance Standards without any changes to such portion by Williams
as tested by WinStar, then WinStar shall pay the testing company's
charges and shall be deemed to have accepted the relevant System
Segment Portion of the WinStar Fibers. If that test demonstrates that
the relevant System Segment Portion of the WinStar Fibers do not meet
the Acceptance Standards or that they do meet the Acceptance Standards
due to changes made by Williams following WinStar's acceptance
testing, then Williams shall pay the testing company's charges for
performing the testing and shall perform the corrective action and
re-testing set forth in Subsection 7.5(a)(i).
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7.7. System Segment Fiber Acceptance Testing and Acceptance Date.
If the Fiber Acceptance Testing for all System Segment Portions of a
System Segment shows that the WinStar Fibers meet the Acceptance
Standards and WinStar does not object to the results of any SSPFAT by
written notice within the time periods specified in Section 7.4,
WinStar shall be deemed to have accepted the particular System
Segment. The date of WinStar's notice accepting the System Segment of
the WinStar Fibers or the date of deemed acceptance under this Article
for the last of all of the System Segment Portions for a System
Segment to be accepted shall be the "Acceptance Date" of the WinStar
Fibers for that System Segment. The provisions of this Section shall
not be deemed to relieve Williams of its obligation to provide Routine
Maintenance or non-Routine Maintenance as set forth in this Agreement.
7.8. Testing of Option Fibers.
Williams shall include the Option Fibers in the SSPFAT of each System
Segment. Upon WinStar's exercise of the Option, Williams shall provide
copies of the results of all SSPFAT of the Option Fibers. The
provisions above shall be applicable to the Option Fibers if WinStar
exercises its Option.
8. USE OF THE SYSTEM
8.1. Use of WinStar Fibers.
WinStar may use the WinStar Fibers for any lawful purpose.
8.2. Notice of Damage.
WinStar shall promptly notify Williams of any matters pertaining to
any damage or impending damage to or loss of System that are actually
known to it and that could reasonably be expected to adversely affect
the System.
8.3. Precautions.
WinStar shall take all reasonable precautions against any damage
proximately caused by WinStar to the System or to fibers used or owned
by Williams or third parties.
8.4. Use of Equipment.
Neither party shall use, or allow others to use, equipment,
technologies, or methods of operation that adversely affect the
Williams Network or the System or the permitted use of the Williams
Network or the System by Williams or third parties or their respective
Fibers, equipment, or facilities associated therewith. If WinStar uses
equipment, technologies, and methods of operation that are
collectively either in accord with Williams' practices or generally
accepted industry standards, Williams shall have the burden of
demonstrating that WinStar has breached the requirements of the
preceding sentence.
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8.5. Liens.
WinStar shall not, directly or indirectly, cause any part of the
System to become subject to any mechanic's lien, materialman's lien,
vendor's lien, or any similar lien whether by operation of law or
otherwise. If WinStar becomes aware that it has breached its
obligations under this Section, it shall promptly: notify Williams in
writing, cause such lien to be discharged and released of record
without cost to Williams and indemnify Williams against all costs and
expenses (including reasonable attorneys' fees and court costs at
trial and on appeal) incurred in discharging and releasing such lien.
9. TERM
9.1. Agreement Term.
The term of this Agreement (the "Term") shall begin on the Effective
Date and shall end upon expiration of the last IRU Term to expire,
provided that, with respect to the Interim IRU, the Term shall extend
twenty-five years from the Effective Date.
9.2. IRU Terms.
The term of this Agreement in respect of each System Segment (the "IRU
Term") shall begin on the applicable Acceptance Date and shall end on
the twenty-fifth (25th) anniversary of such Acceptance Date.
9.3. Effect of Termination.
No termination of this Agreement, an IRU Term, or of the Interim IRU
shall affect the rights or obligations of any party hereto:
(a) With respect to any payment hereunder for services rendered during the
Term; or
(b) Pursuant to Articles 14, 15, 16, 17, 18, 20, 23 and 24.1 entitled
Audit Rights; Indemnification; Limitation of Liability; Insurance;
Taxes and Governmental Fees; Confidentiality; Remedies and Dispute
Resolution; and Rules of Construction, respectively.
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10. OPERATION, MAINTENANCE, AND REPAIR OF THE SYSTEM
10.1. Routine Maintenance.
During the IRU Term, Williams shall perform all required Routine
Maintenance at no additional cost to WinStar. "Routine Maintenance"
means the work specifically identified as Routine Maintenance in
Exhibit I, provided that Routine Maintenance excludes work for which
WinStar is obligated to reimburse Williams for all or a portion of the
Costs incurred pursuant to other Articles of this Agreement (including
the Fiber Collocation Provisions).
10.2. Non-Routine Maintenance.
WinStar shall pay its Pro-Rata Share of Williams' direct Costs of
non-Routine Maintenance of the System, if the Cost of such work
relating to any single event or multiple related events is greater
than five thousand dollars ($5,000.00).
10.3. Subcontractors.
Williams may subcontract provisioning, testing, maintenance, repair,
restoration, relocation, or other operational and technical services
it is obligated to provide hereunder or may have the underlying
facility owner or its contractor perform such obligations. Such
subcontracting shall not relieve Williams of any obligations under
this Agreement.
10.4. Continued Breach of Routine Maintenance Obligations.
Subject to the terms of Section 24.1(l), if, after the Acceptance Date
for any System Segment, Williams is in material breach of its
obligation to provide Routine Maintenance for a period of more than
one hundred twenty (120) consecutive days after WinStar provides
written notice of such breach, WinStar may deduct the following amount
per month, pro-rated for partial months, per each relevant Route mile
from its monthly invoice so long as that material breach continues
beyond such one hundred twenty (120) day period: (i) seventy dollars
($70) per month prior to the eighth anniversary of the relevant
Acceptance Date, (ii) ten dollars ($10) per month from the eighth
anniversary of the relevant Acceptance Date up to but not including
the tenth anniversary of the relevant Acceptance Date, and (iii) five
dollars ($5) per month thereafter.
10.5. WinStar Equipment.
Williams' maintenance and repair obligations under this Agreement
shall not include maintenance, repair or replacement of WinStar
Equipment.
10.6 Access to Systems.
WinStar shall not access any physical part of any System Segment
(other than pursuant to the Fiber Collocation Provisions) without the
prior written consent of Williams, and then only upon the terms and
conditions specified by Williams.
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11. RELOCATION
11.1. Relocation.
If, following the Acceptance Date for any System Segment, Williams
determines for bona fide operational reasons, or is required by a
third party acting pursuant to condemnation or similar authority or by
a governmental entity, to relocate all or any portion of such System
Segment or any of the facilities used or required in providing WinStar
with the WinStar IRU, Williams shall, to the extent practicable,
provide WinStar sixty (60) days' prior notice of any such relocation
and shall proceed with such relocation. Williams shall have the right
to direct such relocation, including the right to determine the extent
of, the timing of, and methods to be used for such relocation,
provided that any such relocation:
(a) Shall be constructed and tested in accordance with the
specifications and requirements set forth in this Agreement and
applicable Exhibits;
(b) Shall not result in a materially adverse change to the
operations, performance, Connecting Points with the network of
WinStar, or end points of the System Segment; and
(c) Shall not unreasonably interrupt service on the System Segment.
For purposes of this Section, a Williams' relocation shall be for bona
fide operational reasons if it is undertaken in good faith (i) to
settle or avoid a bona fide threatened or filed condemnation action or
order by a governmental authority to relocate, (ii) to reduce the
likelihood of physical damage to the System, (iii) as the result of a
Force Majeure Event, or (iv) for other operational reasons to which
WinStar has consented, provided that WinStar shall not unreasonably
withhold such consent. Williams shall use reasonable efforts to
contest any exercise of condemnation authority that would require a
relocation that would require WinStar to reimburse Williams pursuant
to this Article 11.
11.2. Cost of Relocation.
Unless such relocation is necessitated by a breach of Williams'
obligations under this Agreement, any Costs Williams incurs shall not
be Routine Maintenance Costs, and WinStar shall reimburse Williams for
the Costs incurred in the same manner and to the same extent as is set
forth for reimbursement of non-Routine Maintenance Costs in Section
10.2.
11.3. Updated As-Built Drawings.
At WinStar's written request, Williams shall deliver to WinStar
updated as-built drawings with respect to a relocated portion of the
System Segment within the later of one-hundred eighty (180) days
following the completion of such relocation or thirty (30) days after
receipt of WinStar's request.
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12. INVOICING AND PAYMENT
12.1. Due Date and Invoice.
(a) Payments of the Contract Price and Exercise Price shall be made
in accordance with the Payment Terms.
(b) All amounts stated on each monthly invoice are due and payable
thirty (30) days from WinStar's receipt of the invoice ("Due
Date"). WinStar agrees to remit payment to Williams at the
remittance address set forth in the applicable invoice.
12.2. Form of Payment.
WinStar shall pay the Contract Price and Exercise Price by wire
transfer of immediately available funds to the United States account
or accounts designated by Williams. All other payments to be made
pursuant to this Agreement may be made by check or draft of
immediately available funds delivered to the address designated in
writing by the other party (e.g., in a statement or invoice) or,
failing such designation, to the address for notice to such other
party provided pursuant to Article 19.
12.3. Disputed Charges.
(a) WinStar shall pay undisputed charges when such payments are due
under this Agreement. WinStar may withhold payment of particular
charges that WinStar disputes in good faith and for which it
promptly gives written notice to Williams, stating the details of
such dispute. The parties shall promptly refer such matter to
dispute resolution in accordance with Section 23. If WinStar
withholds any disputed charges and such charges are ultimately
determined to be proper and payable to Williams, WinStar shall
pay such charges to Williams plus interest at the Prime Rate from
the date such charges were originally due until the date such
charges are paid. No payment dispute shall be grounds for
Williams to withhold or diminish the quality or quantity of any
of the connectivity and services provided hereunder.
(b) If WinStar fails to pay undisputed charges provided for under
this Agreement when such charges are due, Williams may, in
addition to any other remedies that it may have under this
Agreement or by law, terminate this Agreement only as it applies
to the System Segment(s) or Telecommunications Services to which
such failure applies, upon at least thirty (30) days' notice, if
such payment (together with applicable interest) is not made
within such thirty (30) day notice period subject to WinStar's
thirty-day right to cure, provided however, that this remedy of
termination shall be available to Williams only with respect to
System Segments for which the unpaid amount exceeds two hundred
thousand dollars ($200,000) at the time of such notice.
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12.4. Late Interest.
If either Williams or WinStar fails to make any payment under this
Agreement when due, such amounts shall accrue interest, from the date
such payment is due until paid, including accrued interest, at the
Prime Rate.
12.5. Adjustments.
Williams may make corrections to its invoices to reflect undercharges
only for the period of two (2) years following the Due Date of each
invoice, or two (2) years following the date the corresponding service
is rendered, whichever is later.
13. DISCLAIMER OF WARRANTIES
13.1. Parties.
EXCEPT AS SPECIFICALLY SET FORTH IN THIS AGREEMENT, THE PARTIES MAKE
NO WARRANTY TO EACH OTHER OR ANY OTHER ENTITY, WHETHER EXPRESS,
IMPLIED OR STATUTORY, AS TO THE MERCHANTABILITY OR FITNESS FOR ANY
PARTICULAR PURPOSE OF ANY FIBERS, THE SYSTEM, THE TELECOMMUNICATIONS
SERVICES, ANY OTHER SERVICES OR ANY ADDITIONAL SERVICES PROVIDED
HEREUNDER OR DESCRIBED HEREIN, OR AS TO ANY OTHER MATTER, ALL OF WHICH
WARRANTIES ARE HEREBY EXPRESSLY EXCLUDED AND DISCLAIMED.
13.2. Facility Owners/Lenders.
NO FACILITY OWNERS/LENDERS HAVE MADE ANY REPRESENTATION OR WARRANTY OF
ANY KIND, EXPRESS OR IMPLIED, TO WINSTAR CONCERNING WILLIAMS, THE
WINSTAR FIBERS, THE CABLE, OR THE SYSTEM OR AS TO ANY OF THE MATTERS
SET FORTH IN SECTIONS 12.1 OR 24.2(a).
14. AUDIT RIGHTS
Each party shall keep such books and records (which shall be maintained on
a consistent basis and substantially in accordance with generally accepted
accounting principles) as shall readily disclose the basis for any charges
(except charges fixed in advance by this Agreement or by separate written
agreement of the parties) or credits, ordinary or extraordinary, billed or
due to the other party under this Agreement and shall make them available,
upon reasonable notice and during normal working hours, for examination,
audit, and reproduction by the other party and its agents for a period of
one (1) year after such charge or credit is billed or due.
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15. INDEMNIFICATION
15.1. Indemnification.
Each party ("Indemnitor") shall indemnify, defend, protect, and hold
harmless the other party, its employees, members, managers, officers,
agents, contractors, Facility Owners/Lenders, and Affiliates
(collectively and individually, "Claimant"), from and against any and
all Losses resulting or arising from, relating to or incurred in
connection with:
(a) The Indemnitor's failure to observe or perform its duties or
obligations to third parties (e.g., duties or obligations to its
customers);
(b) The Indemnitor's infringement or misappropriation of Intellectual
Property Rights of any third party;
(c) The death or bodily injury of any agent, employee, customer,
business invitee or any other person to the extent caused by the
tortious conduct of the Indemnitor;
(d) The damage, loss or destruction of any real or tangible personal
property to the extent caused by the tortious conduct of the
Indemnitor;
(e) Fines, penalties or other amounts payable due to the Indemnitor's
violation of applicable laws or regulation; and
(f) Any claim, demand, charge, action, cause of action, or other
proceeding asserted against the Claimant but resulting from an
act or omission of the Indemnitor in its capacity as an employer
of a person.
15.2. Third Party Claims.
With respect to third-party claims, the following procedures shall
apply:
(a) Promptly after receipt of notice of the commencement or
threatened commencement of any civil, criminal, administrative,
or investigative action or proceeding involving a claim in
respect of which the Claimant will seek indemnification pursuant
to this Article 15, the Claimant will notify the Indemnitor of
such claim in writing. No failure to so notify the Indemnitor
will relieve the Indemnitor of its obligations under this
Agreement except to the extent that its ability to defend such
claim is materially prejudiced by such failure. Within fifteen
(15) calendar days following receipt of written notice from the
Claimant relating to any claim, but no later than ten (10)
calendar days before the date on which any response to a
complaint or summons is due, the Indemnitor will notify the
Claimant in writing if the Indemnitor elects to assume control of
the defense and settlement of that claim (a "Notice of
Election").
(b) If the Indemnitor delivers a Notice of Election relating to any
claim within the required notice period, the Indemnitor shall be
entitled to have sole control over the defense and settlement of
such claim; provided that (i) the Claimant shall be entitled to
observe the defense of such claim and to employ counsel at its
own expense to observe the defense of such claim, and (ii) the
Indemnitor shall obtain the prior written approval, not to be
unreasonably withheld or delayed, of the Claimant before ceasing
to defend against such claim or entering into any settlement of
such claim. After the Indemnitor has delivered a Notice of
Election relating to any claim in accordance with the preceding
paragraph, the Indemnitor shall not be liable to the Claimant for
any legal expenses incurred by the Claimant in connection with
the defense of that claim. In addition, the Indemnitor shall not
be required to indemnify the Claimant for any amount paid or
payable by the Claimant in the settlement of any claim for which
the Indemnitor has delivered a timely Notice of Election if such
amount was agreed to without the written consent of the
Indemnitor.
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(c) If the Indemnitor does not deliver a Notice of Election relating
to any claim within the required notice period or after
delivering a Notice of Election fails to defend the claim, the
Claimant shall have the right to defend the claim in such manner
as it may deem appropriate. The Indemnitor shall promptly
reimburse the Claimant for all reasonable costs and expenses of
such defense.
15.3. Indemnification of Providers.
WinStar shall indemnify and hold harmless Williams and any Third Party
Service Providers from and against all Losses arising out of or
relating to the content of any transmission by WinStar, including
claims relating to any violation or alleged violation of export
control laws or other laws or failure to comply with WinStar's
obligations as set forth in Sections 26.4 and 26.5.
15.4. WinStar Customers.
WinStar shall indemnify and hold Williams harmless from and against
all Losses arising out of or relating to the use of the WinStar Fibers
by any WinStar customer.
16. LIMITATION OF LIABILITY
16.1. General Intent.
Subject to the specific provisions of this Article 16, it is the
intent of the Parties that each party shall be liable to the other
party for any actual damages incurred by the non-breaching party as a
result of the breaching party's failure to perform its obligations in
the manner required by this Agreement.
16.2. Liability Restrictions.
(a) IN NO EVENT, WHETHER IN CONTRACT OR IN TORT (INCLUDING BREACH OF
WARRANTY, NEGLIGENCE AND STRICT LIABILITY IN TORT), SHALL A PARTY
BE LIABLE FOR INDIRECT OR CONSEQUENTIAL, EXEMPLARY, PUNITIVE OR
SPECIAL DAMAGES EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES IN ADVANCE.
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(b) Subject to Subsection (c), below, each party's total liability to
the other, whether in contract or in tort (including breach of
warranty, negligence and strict liability in tort) shall be
limited to two hundred million dollars ($200,000,000).
(c) The limitation set forth in Subsections (b), above, shall not
apply with respect to: (i) third-party claims subject to
indemnification pursuant to the Agreement; (ii) fees due and
owing under this Agreement at the time of the claim; and (iii)
amounts subject of Cover as provided in Section 4.2(b).
(d) For the purposes of this Section 16.2, all amounts payable or
paid to third parties in connection with claims that are eligible
for indemnification pursuant to this Agreement shall be deemed
direct damages.
16.3. Released Parties.
Neither party shall have any recourse of any kind against any Released
Party or any assets of a Released Party in respect of any Claim that
is not directly or indirectly caused by the Released Party, it being
expressly agreed and understood that no liability whatsoever shall
attach to or be incurred by any Released Party in respect of any Claim
under or by reason of this Agreement or any other instrument,
arrangement or understanding relating to the Network IRU, the System,
the Interim IRU, the Telecommunications Services, the Other Services
or Additional Services, except to the extent such Claim is directly or
indirectly caused by the Released Party. Each party waives all such
recourse to the extent set forth in this Section on behalf of its
successors, assigns, and any entity claiming by, through, or under
such party.
17. INSURANCE
17.1. Insurance.
During the Term, the parties shall each obtain and maintain not less
than the following insurance:
(a) Commercial General Liability Insurance, including coverage for
sudden and accidental pollution legal liability, with a combined
single limit of $10,000,000 for bodily injury and property damage
per occurrence and in the aggregate.
(b) Worker's Compensation Insurance in amounts required by applicable
law and Employers Liability Insurance with limits not less than
$1,000,000 each accident. If work is to be performed in Nevada,
North Dakota, Ohio, Washington, Wyoming or West Virginia, the
party shall participate in the appropriate state fund(s) to cover
all eligible employees and provide a stop gap endorsement.
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(c) Automobile Liability Insurance with a combined single limit of
$2,000,000 for bodily injury and property damage per occurrence,
to include coverage for all owned, non-owned, and hired vehicles.
The limits set forth above are minimum limits and shall not be
construed to limit the liability of either party.
17.2. Documentation.
(a) Each party shall obtain and maintain the insurance policies
required above with companies rated A- or better by Best's Key
Rating Guide or with a similar rating by another generally
recognized rating agency. The other party, its Affiliates,
officers, directors, and employees, and any other party entitled
to indemnification hereunder shall be named as additional
insureds to the extent of such indemnification. Each party shall
provide the other party with an insurance certificate confirming
compliance with the insurance requirements of this Article. The
insurance certificate shall indicate that the other party shall
be notified not less than thirty (30) days prior to any
cancellation or material change in coverage.
(b) If either party provides any of the foregoing coverages through a
claims made policy basis, that party shall cause such policy or
policies to be maintained for at least three (3) years beyond the
expiration of this Agreement.
17.3. Certificates.
The parties shall each obtain from the insurance companies providing
the coverages required by this Agreement a waiver of all rights of
subrogation or recovery in favor of the other party and, as
applicable, its members, managers, shareholders, Affiliates,
assignees, officers, directors, and employees or any other party
entitled to indemnity under this Agreement to the extent of such
indemnity.
17.4. Blanket Policies.
Nothing in this Agreement shall be construed to prevent either party
from satisfying its insurance obligations pursuant to this Agreement
under a blanket policy or policies of insurance that meet or exceed
the requirements of this Article.
18. TAXES AND GOVERNMENTAL FEES
18.1. Payment by WinStar.
WinStar shall timely report and pay any and all sales, use, income,
gross receipts, excise, transfer, ad valorem, or other taxes, and any
and all franchise fees or similar fees, if any, assessed against it
due to its ownership of the Network IRU, its use of the WinStar
Fibers, including the provision of services over the WinStar Fibers,
its use of any other part of the System, or its ownership or use of
facilities connected to the WinStar Fibers.
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18.2. Payment by Williams.
Subject to Section 18.1 above, Williams shall timely report and pay
any and all sales, use, income, gross receipts, excise, transfer, ad
valorem or other taxes, and any and all franchise fees or similar fees
assessed against it due to its construction, ownership or use of the
System, provided that WinStar shall reimburse Williams for its
Pro-Rata Share of property taxes (including ad valorem, use, property,
or similar taxes, franchise fees, or assessments that are based on the
value of property or of a property right) attributable to the System,
including taxes based on the value, operation, or existence of the
System.
18.3. Reimbursement.
If Williams is assessed for any taxes or fees (a) related to WinStar's
ownership of the Network IRU, WinStar's use of or rights in the
WinStar Fibers, or (b) that WinStar is obligated to pay pursuant to
Sections 18.1 or 18.2, WinStar shall reimburse Williams for any
payment of such taxes or fees within thirty (30) days of receipt of
Williams' invoice.
18.4. Cooperation.
The parties shall cooperate in any contest of any taxes or fees so as
to avoid, to the extent reasonably possible, prejudicing the interests
of the other party.
18.5. Services.
If any sales taxes, valued added taxes or similar charges or
impositions are assessed against Williams after, or as a result of,
WinStar's use of Telecommunications Services, any Other Services or
the Additional Services by any local, state, national, international,
public or quasi-public governmental entity or foreign government or
its political subdivision, including any tax or charge levied to
support the Universal Service Fund contemplated by the
Telecommunications Act of 1996, WinStar shall be solely responsible
for and shall pay such taxes, charges or impositions and hold Williams
harmless from any liability or expense associated with such taxes,
charges or impositions.
19. NOTICE
Unless otherwise provided in this Agreement, all notices and communications
concerning this Agreement shall be in writing and addressed to the other
party as follows, or at such other address as may be designated in writing
to the other party:
If to WinStar: If to Williams:
WinStar Wireless, Inc. Williams Communications, Inc.
230 Park Avenue One Williams Center, Suite 26-5
New York, NY 10169 Tulsa, Oklahoma 74172
Attn: EVP, General Counsel Attn: Contract Administration
Facsimile: 212/922-1637 Facsimile: 918/573-6578
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With a copy to: With a copy to:
WinStar Wireless, Inc. Williams Communications, Inc.
7799 Leesburg Pike One Williams Center, Suite 4100
Falls Church, Virginia 22043 Tulsa, Oklahoma 74172
Attn: VP, Commercial and Attn: General Counsel
Legal Operations
Facsimile: 703/288-6647 Facsimile: 918/573-3005
Unless otherwise provided herein, notices shall be hand delivered,
sent by registered or certified U.S. Mail, postage prepaid, or by
commercial overnight delivery service, or transmitted by facsimile,
and shall be deemed served or delivered to the addressee or its office
when received at the address for notice specified above when hand
delivered, upon confirmation of sending when sent by facsimile, on the
day after being sent when sent by overnight delivery service, three
(3) days after deposit in the mail when sent by U.S. mail or, in the
case of invoices, upon the Due Date (as defined in the
Telecommunications Services Purchase Provision).
20. CONFIDENTIALITY
20.1. Confidential Information.
Williams and WinStar each acknowledge that they may be furnished with,
receive, or otherwise have access to information of or concerning the
other party that such party considers to be confidential, proprietary,
a trade secret or otherwise restricted. As used in this Agreement and
subject to Section 20.3, "Confidential Information" means all
information, in any form, furnished or made available directly or
indirectly by one party (the "Disclosing Party") to the other (the
"Receiving Party") that (i) concerns the operations, facilities,
plans, affairs and businesses of the Disclosing Party, the financial
affairs of the Disclosing Party, and the relations of the Disclosing
Party with its customers, employees and service providers, or (ii) is
marked confidential, restricted, proprietary, or with a similar
designation. The terms and conditions of this Agreement shall be
deemed Confidential Information, but may be disclosed as provided
below and Section 24.6.
20.2. Obligations.
(a) Each party's Confidential Information shall remain the property
of that party except as expressly provided otherwise by the other
provisions of this Agreement. Each party shall each use at least
the same degree of care, but in any event no less than a
reasonable degree of care, to prevent unauthorized disclosure of
Confidential Information as it employs to avoid unauthorized
disclosure of its own information of a similar nature. Except as
otherwise permitted hereunder, the parties may disclose such
information (A) to their respective directors, officers,
managers, employees, agents, contractors and consultants
(collectively, "Representatives") and (B) entities performing
services required hereunder only where: (i) use of such entity is
authorized under this Agreement, (ii) such disclosure is
necessary or otherwise naturally occurs in that entity's scope of
responsibility, and (iii) the entity agrees in writing to assume
the obligations described in this Section 20.2. Any disclosure to
such entity shall be under substantially the same confidentiality
terms and conditions as provided herein.
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(b) Each party shall take reasonable steps to ensure that its (and
its Affiliates') Representatives comply with this Section 20.2.
In the event of any disclosure or loss of, or inability to
account for, any Confidential Information of the Disclosing
Party, the Receiving Party shall promptly, at its own expense:
(i) notify the Disclosing Party in writing; (ii) take such
actions as may be necessary and cooperate in all reasonable
respects with the Disclosing Party to minimize the violation and
any damage resulting therefrom.
(c) Either party may disclose the terms and conditions of this
Agreement to any third party that (i) has expressed a bona fide
interest in consummating a significant financing, merger or
acquisition transaction or other corporate transaction between
the third party and such party, (ii) has a reasonable ability
(financial or otherwise) to consummate such transaction, and
(iii) has executed a nondisclosure agreement that includes within
its scope the terms and conditions of this Agreement and also
includes a procedure to limit the extent of copying and
distribution thereof. Each party shall endeavor to delay the
disclosure of the terms and conditions of this Agreement until
the status of discussions concerning such transaction warrants
such disclosure. In addition, either party (or either party's
Affiliates) may disclose the terms and conditions of this
Agreement as such party deems appropriate to prepare for IPOs or
major corporate transactions. Any disclosure to such entity shall
be substantially under the same confidentiality terms and
conditions as provided herein.
20.3. Exclusions.
"Confidential Information" shall exclude any particular information
that the Receiving Party can demonstrate:
(a) At the time of disclosure, was in the public domain or in the
rightful possession of the Receiving Party;
(b) After disclosure, is published or otherwise becomes part of the
public domain through no fault of the Receiving Party;
(c) Was received after disclosure from a third party who had a lawful
right to disclose such information to the Receiving Party without
any obligation to restrict its further use or disclosure;
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(d) Was independently developed by the Receiving Party without
reference to Confidential Information of the Disclosing Party; or
(e) Was required to be disclosed to satisfy a legal requirement of a
competent government body; provided that, immediately upon
receiving such request and to the extent that it may legally do
so, the Receiving Party advises the Disclosing Party promptly and
prior to making such disclosure in order that the Disclosing
Party may interpose an objection to such disclosure, take action
to assure confidential handling of the Confidential Information,
or take such other action as it deems appropriate to protect the
Confidential Information.
20.4. No Implied Rights.
Nothing contained in this Section shall be construed as obligating a
party to disclose its Confidential Information to the other party, or
as granting to or conferring on a party, expressly or impliedly, any
rights or license to the Confidential Information of the other party.
20.5 Communication With FCC.
Communications by either party with the FCC regarding the subject
matter of this Agreement shall require the other's prior written
approval.
21 . DEFAULT
A party shall not be in material breach of this Agreement unless and until
the other party provides it written notice of default and the
non-performing party has failed to cure within thirty (30) days after
receipt of such notice. Any event of default may be waived in writing at
the non-defaulting party's option. Upon the failure of a party to timely
cure its material breach hereunder within the applicable cure period, the
non-defaulting party shall have the right to (i) terminate this Agreement
or (ii) subject to the terms of Article 23, pursue any legal remedies it
may have under applicable law or principles of equity relating to such
breach.
22. FORCE MAJEURE
22.1. Excusable Delay.
Neither Williams nor WinStar shall be in default under this Agreement
as a result of any delay in its performance (other than a failure to
make payments when due) caused by any elements of nature or acts of
God, fire, explosion, vandalism, power outage, earthquake, flood or
lightning; any civil or military authority; by national emergency,
insurrection, rebellion, revolution, riot, civil disorders, war or act
of terrorism; by cable cuts; or any other cause beyond the reasonable
control of such party (collectively, "Force Majeure Events");
provided, however, that (i) the non-performing party is without fault
in causing such default or delay, and (ii) such default or delay could
not have been prevented by reasonable precautions and cannot
reasonably be circumvented by the non-performing party through the use
of alternate sources (e.g., other suppliers of telecommunications
services or capacity), workaround plans or other means, including
means contemplated by applicable disaster recovery processes or
procedures).
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22.2. Notice and Remedy.
In such event the non-performing party shall be excused from further
performance or observance of the obligation(s) so affected for as long
as such circumstances prevail and such party continues to use
commercially reasonable efforts to recommence performance or
observance whenever and to whatever extent possible without delay. The
non-performing party shall immediately notify the other party by
telephone (to be confirmed in writing within two (2) business days of
the inception of such delay) and describe at a reasonable level of
detail the Force Majeure Event causing such delay and the expected
duration of the Force Majeure Event. The non-performing party will
provide the other party prompt written notice of the cessation or
termination of the Force Majeure Event.
23. REMEDIES AND DISPUTE RESOLUTION
23.1. Dispute Resolution.
Any dispute between the Parties arising out of or relating to this
Agreement, the interpretation of any provision hereof or the
performance or failure to perform of Williams or WinStar shall be
resolved as provided in this Article 23.
23.2. Cumulative Remedies.
Except as otherwise expressly provided herein, all remedies provided
for in this Agreement shall be cumulative and in addition to and not
in lieu of any other remedies available to either party at law, in
equity or otherwise.
23.3. Informal Dispute Resolution.
(a) Prior to the initiation of formal dispute resolution procedures
(i.e., arbitration), the parties shall first attempt to resolve
their dispute at the senior manager level. If that level of
dispute resolution is not successful, the parties shall proceed
informally, as follows:
(i) Upon the written request of either party, each party shall
appoint a designated representative who does not otherwise
devote substantially full time to performance under this
Agreement, whose task it will be to meet for the purpose of
endeavoring to resolve such dispute.
(ii) The designated representatives shall meet as often as the
parties reasonably deem necessary in order to gather and
furnish to the other all information with respect to the
matter in issue that the parties believe to be appropriate
and germane in connection with its resolution. The
representatives shall discuss the problem and attempt to
resolve the dispute without the necessity of any formal
proceeding.
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(iii)During the course of discussion, all reasonable requests
made by one party to another for non-privileged
non-confidential information reasonably related to this
Agreement shall be honored so that each of the parties may
be fully advised of the other's position.
(iv) The specific format for the discussions shall be left to the
discretion of the designated representatives.
(b) Prior to instituting formal proceedings, the parties will first
have their chief executive officers meet to discuss the dispute.
This requirement shall not delay the institution of formal
proceedings past any statute of limitations expiration or for
more than fifteen (15) days.
(c) Subject to Subsection (b), formal proceedings for the resolution
of a dispute may not be commenced until the earlier of:
(i) The designated representatives concluding in good faith that
amicable resolution through continued negotiation of the
matter does not appear likely; or
(ii) Thirty (30) days after the initial written request to
appoint a designated representative pursuant to Subsection
(a), above, (this period shall be deemed to run
notwithstanding any claim that the process described in this
Section 23.3 was not followed or completed).
(d) This Section 23.3 shall not be construed to prevent a party from
instituting, and a party is authorized to institute, formal
proceedings earlier to avoid the expiration of any applicable
limitations period, or to preserve a superior position with
respect to other creditors or as provided in Section 23.6.
23.4. Arbitration.
If the Parties are unable to resolve a dispute as contemplated by
Section 23.3, then except as provided by Section 23.6, such dispute
shall be submitted to mandatory and binding arbitration at the
election of either WinStar or Williams (the "Disputing Party")
pursuant to the following conditions:
(a) The Disputing Party shall notify the American Arbitration
Association ("AAA") and the other party, describing in reasonable
detail the nature of the dispute (the "Dispute Notice"); and
shall request that the AAA furnish a list of five (5) possible
arbitrators who have substantial experience in the
telecommunications industry. Each party shall have fifteen (15)
days to reject two (2) of the proposed arbitrators. If only one
individual has not been so rejected, that person shall serve as
arbitrator; if two (2) or more individuals have not been so
rejected, the AAA shall select the arbitrator from those
individuals.
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(b) The arbitration shall take place in Chicago, Illinois, in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association in effect on the date that such notice is
provided. The arbitration shall be commenced promptly and
conducted expeditiously. The parties shall be entitled to submit
expert testimony and/or written documentation on such arbitration
proceeding. The decision of the arbitrator shall be final and
binding upon Williams and WinStar and shall include written
findings of law and fact, and judgment may be obtained thereon by
either Williams or WinStar in a court of competent jurisdiction.
Williams and WinStar shall each bear the cost of preparing and
presenting its own case. The cost of the arbitration, including
the fees and expenses of the arbitrator, shall be shared equally
by Williams and WinStar unless the award otherwise provides. The
arbitrator shall be instructed to establish procedures such that
a decision can be rendered within sixty (60) days of the
appointment of the arbitrator.
(c) The obligation to arbitrate shall not be binding upon any party
with respect to requests for preliminary injunctions, temporary
restraining orders, specific performance, or other procedures in
a court of competent jurisdiction to obtain interim relief when
deemed necessary by such court to preserve the status quo or
prevent irreparable injury pending resolution by arbitration of
the actual dispute.
(d) Any arbitrator appointed to act under this Article must agree to
be bound by the provisions of this Agreement and any information
obtained during the course of the arbitration proceedings. In
particular, the arbitrator shall not have the authority to
exclude the right of a Party to terminate this Agreement when a
Party would otherwise have such right. The arbitration hearing
shall be commenced promptly and conducted expeditiously.
(e) Should the arbitrator refuse or be unable to proceed with
arbitration proceedings as called for by this Section, such
arbitrator shall be replaced and a rehearing shall take place in
accordance with the provisions of this Section. In such case, the
replacement for the arbitrator shall be either selected by the
AAA from the original group of potential arbitrators that were
not rejected by the parties or, if there are no such arbitrators
available, selected by repeating the process of selection
described in 23.4(a).
(f) The arbitrator is instructed that time is of the essence in the
arbitration proceeding, and that the arbitrator shall have the
right and authority to issue monetary sanctions against either of
the parties if, upon a showing of good cause, that party is
unreasonably delaying the proceeding. Recognizing the express
desire of the parties for an expeditious means of dispute
resolution, the arbitrator shall limit or allow the parties to
expand the scope of discovery as may be reasonable under the
circumstances.
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23.5. Continued Performance.
Each party agrees to continue performing its obligations under this
Agreement while any dispute is being resolved except to the extent the
issue in dispute precludes performance.
23.6. Immediate Injunctive Relief.
The only circumstance in which disputes between the parties shall not
be subject to the provisions of Section 23.3 and 23.4 is where a
party, in good faith, determines that a temporary restraining order or
other injunctive relief is its only appropriate and adequate remedy.
If a party seeks immediate injunctive relief and does not prevail in
substantial part, that party shall pay the other party's costs and
attorneys' fees to the extent incurred in responding to or challenging
the request for immediate injunctive relief.
24. GENERAL
24.1. Rules of Construction.
(a) The captions or headings in this Agreement are strictly for
convenience and shall not be considered in interpreting this
Agreement or as amplifying or limiting any of its content. Words
in this Agreement that import the singular connotation shall be
interpreted as plural, and words that import the plural
connotation shall be interpreted as singular, as the identity of
the parties or objects referred to may require. References to
"person" or "entity" each include natural persons and legal
entities, including corporations, limited liability companies,
partnerships, sole proprietorships, business divisions,
unincorporated associations, governmental entities, and any
entities entitled to bring an action in, or that are subject to
suit in an action before, any state or federal court of the
United States.
(b) Unless expressly defined herein, words having well-known
technical or trade meanings shall be so construed.
(c) Except as set forth to the contrary herein, any right or remedy
of Williams or WinStar shall be cumulative and without prejudice
to any other right or remedy, whether contained herein or not.
(d) Nothing in this Agreement is intended to provide any legal rights
to anyone not an executing party of this Agreement except under
the indemnification and insurance provisions and except that (i)
the Released Parties shall have the benefit of Sections 16.3,
24.2(a) and 24.5(a) and (ii) the Facility Owners/Lenders shall be
entitled to rely on and have the benefit of Sections 13.2 and
24.5(b).
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<PAGE> 40
(e) This Agreement has been fully negotiated between Williams and
WinStar.
(f) In the event of a conflict between the provisions of this
Agreement and those of any Exhibit, the provisions of this
Agreement shall prevail and such Exhibit shall be corrected
accordingly, provided that the provisions of Exhibit K shall
prevail over conflicting provisions in the Agreement or in any
Exhibit. Notwithstanding the above, terms defined in Section 7 of
Exhibit K shall not supersede terms defined in the Agreement or
in other Exhibits except as used in Exhibit K.
(g) Except as otherwise set forth herein, for the purpose of this
Agreement the normal standards of performance within the
telecommunications industry in the relevant market shall be the
measure of whether a party's performance is reasonable and
timely.
(h) Except as the context otherwise indicates, all references to
Exhibits, Articles, Sections, Subsections, Clauses, and
Paragraphs refer to provisions of this Agreement.
(i) The failure of either Williams or WinStar 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 on its part of any such provision, but the same
shall nevertheless be and remain in full force and effect.
(j) This Agreement shall be governed by and construed in accordance
with the domestic laws of the State of New York without reference
to its choice of law principles. All disputes referred to
arbitration and the statute of limitations and the remedies for
any wrongs that may be found shall be governed by the laws of
such state. If a proceeding is brought for the enforcement of
this Agreement or because of any alleged or actual dispute,
breach, default or misrepresentation in connection with any of
the provisions of this Agreement, the prevailing party shall be
entitled to recover reasonable attorneys' fees and other costs
and expenses incurred in such action or proceeding in addition to
any other relief to which such party may be entitled.
(k) If any term, covenant or condition in this Agreement shall, to
any extent, be invalid or unenforceable in any respect under the
laws governing this Agreement, the remainder of this Agreement
shall not be affected thereby, and each term, covenant or
condition of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
(l) The parties acknowledge and agree that: (i) the payment
deductions ("Payment Deductions") set forth in Sections 5.2(g),
6.1(c) and 10.4 (collectively, the "Deduction Sections") shall
not limit Williams' liability or serve as a sole or exclusive
remedy for Williams' default under any portion of this Agreement;
(ii) WinStar may seek any other rights or remedies it may have
against Williams for any default hereunder; (iii) none of the
Deduction Sections modify or otherwise limit any other term or
condition of this Agreement; (iv) the one hundred and twenty
(120) day periods specified in the Deduction Sections shall only
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<PAGE> 41
be applicable with respect to the Deduction Sections and such
periods shall in no manner whatsoever be construed or interpreted
to extend Williams' cure periods or other timing of any other
obligation set forth in any other provision of this Agreement;
and (v) WinStar's compliance with the Deduction Sections shall
not constitute a breach of the Payment Terms. Williams hereby
waives any rights it may have to use the Deduction Sections as a
claim or defense against any other provision in this Agreement.
24.2. Assignment.
(a) Except to the extent permitted by Section 24.2(d), neither party
may, or shall have the power to, assign this Agreement or
delegate such party's obligations hereunder without the prior
written consent of the other except to:
(i) An entity that acquires all or substantially all of the
assets of such party,
(ii) Any Affiliate,
(iii) A successor in a merger or acquisition of such party, or
(iv) In connection with any financing.
(b) Notwithstanding the foregoing, no assignment or other transfer of
this Agreement shall be effective without the written agreement
of the assignee to be bound by the terms and conditions of this
Agreement including the indemnification provisions and
limitations on liability and recourse set forth in this Agreement
(including those benefiting the Released Parties).
(c) Except with respect to the assignment of less than all of a
party's rights or obligations under this Agreement and except as
set forth in Section 24.2(e), the non-assigning party shall not
unreasonably withhold its consent to an assignment if neither the
assigning party nor the proposed assignee is in material default
under this Agreement or any other agreement with the
non-assigning party.
(d) The provisions of Section 24.2(a) notwithstanding, Williams may
assign some or all of its rights and obligations hereunder to
State Street Bank and Trust Company of Connecticut, National
Association, in connection with a financing by Williams of
construction of its fiber optic network; in addition, State
Street Bank and Trust Company of Connecticut, National
Association, may further assign this Agreement as collateral for
such financing. If Williams makes an assignment pursuant to this
Subsection 24.2(d), Williams (or its assignee pursuant to an
assignment made under the other provisions of this Section 24.2)
shall guarantee performance of the assignee's obligations.
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<PAGE> 42
(e) Except in connection with an assignment of this Agreement as
provided herein, until the third (3rd) anniversary of the
Acceptance Date of any System Segment, WinStar shall not sell the
dark fiber, raw frequency (commonly known as "windows") but may
place optronics in such System Segment and resell capacity in any
increment. After such three (3) year period, WinStar may convey
such an interest provided that WinStar shall serve as the sole
point of contact with Williams and no party receiving such
interest shall have any contract rights against or be in privity
of contract with Williams as a result of such conveyance.
(f) This Agreement and the rights and obligations under this
Agreement (including the limitations on liability and recourse
set forth in this Agreement benefiting the other party and the
Released Parties) shall be binding upon and shall inure to the
benefit of Williams and WinStar and their respective permitted
successors and assigns.
(g) Neither the provisions of this Article nor any other provisions
of this Agreement shall limit the ability of any Facility
Owners/Lenders or of any Released Parties to assign their rights
under this Agreement and such Facility Owners/Lenders and
Released Parties may assign their rights hereunder at any time
and from time to time without the consent of, notice to, or any
other action by any other entity. The provisions of this
Agreement benefiting the Facility Owners/Lenders and Released
Parties shall inure to the benefit of such entities and their
respective Affiliates, successors, and assigns.
(h) Notwithstanding any presumptions under applicable state law that
a change in control of a party constitutes an assignment of an
agreement, a change in control of a party, not made for purposes
of circumventing restrictions on assignment or of depriving the
other party of rights under this Agreement, shall not be deemed
an assignment for purposes of this Agreement.
24.3. Relationship of the Parties.
The relationship between Williams and WinStar shall not be that of
partners, agents, or joint venturers for one another, and nothing
contained in this Agreement shall be deemed to constitute a
partnership or agency agreement between them for any purposes,
including federal income tax purposes. Williams and WinStar, in
performing any of their obligations hereunder, shall be independent
contractors or independent parties and shall discharge their
contractual obligations at their own risk.
24.4. Prohibition on Improper Payments.
Neither party shall use any funds received under this Agreement for
illegal or otherwise "improper" purposes. Neither party shall pay any
commission, fees or rebates to any employee of the other party. If
either party has reasonable cause to believe that one of the
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<PAGE> 43
provisions in this Article has been violated, it, or its
representative, may audit the books and records of the other party for
the sole purpose of establishing compliance with such provisions.
24.5. Entire Agreement; Amendment; Execution.
(a) This Agreement constitutes the entire and final agreement and
understanding between Williams and WinStar with respect to the
subject matter hereof and supersedes all prior agreements (oral
or written) relating to the subject matter hereof, which are of
no further force or effect (including, in particular, the
Customer Services Agreement between Williams and WinStar GoodNet,
dated July 16, 1998, Contract Number 98R0675.00, provided that
any undisputed payment obligations accruing prior to the
Effective Date, shall be due and owing under the terms of this
Agreement). The Exhibits referred to herein are integral parts
hereof and are made a part of this Agreement by reference.
(b) This Agreement may only be amended, modified, or supplemented by
an instrument in a single writing executed by duly authorized
representatives of Williams and WinStar. No such amendment,
modification, or supplement shall result in any modification of
(i) any indemnity benefiting any Facility Owners/Lenders or their
respective Affiliates or (ii) any limitation of liability or
recourse benefiting any Released Parties that is adverse to such
Released Parties.
(c) This Agreement may be executed in one or more counterparts, all
of which taken together shall constitute one and the same
instrument.
(d) This Agreement may be duly executed and delivered by a party by
execution and facsimile delivery of the signature page of a
counterpart to the other party, provided that, if delivery is
made by facsimile, the executing party shall promptly deliver a
complete counterpart that it has executed to the other party.
(e) Unless otherwise expressly permitted in this Agreement, Williams
shall not make any changes to the Exhibits or Schedules attached
hereto that may have a material adverse impact on the performance
or usability of the Telecommunications Services, Additional
Services or Other Services without WinStar's prior written
consent.
24.6 Public Disclosures.
All media releases, public announcements, and public disclosures
relating to this Agreement or the subject matter of this Agreement,
including promotional or marketing material, but not including
announcements intended solely for internal distribution or disclosures
to the extent required to meet legal or regulatory requirements shall
be coordinated with and shall be subject to approval by both parties
prior to release.
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25. REPRESENTATIONS, WARRANTIES AND COVENANTS
25.1. Representations and Warranties.
In addition to any other representations and warranties contained in
this Agreement, each party hereto represents and warrants to the other
that:
(a) It has the requisite corporate power to enter into, execute,
deliver, and perform its obligations under this Agreement;
(b) It has taken all requisite corporate action to approve the
execution, delivery, and performance of this Agreement;
(c) This Agreement constitutes a legal, valid and binding obligation
enforceable against such party in accordance with its terms;
(d) Its execution of and performance under this Agreement shall not
violate any applicable existing regulations, rules, statutes, or
court orders of any local, state, or federal government agency,
court, or body;
(e) It is not subject to any contractual or other obligation that
would prevent it from entering into this relationship; and
(f) It has not offered or provided any inducements in violation of
law or the other party's policies, of which it has been given
notice, in connection with this Agreement.
25.2. Additional Williams Covenants.
Excluding services provided by third parties other than Williams'
subcontractors, Williams covenants that Telecommunications Services,
Additional Services, and Other Services shall be provided to WinStar
in accordance with the technical parameters set forth in the
applicable service schedule. Williams further covenants that it shall
use commercially reasonable efforts under the circumstances to remedy
any delays, interruptions, omissions, mistakes, accidents or errors in
the Telecommunications Services, Additional Services or Other Services
provided hereunder and to restore such Telecommunications Services or
Other Services to compliance with the terms hereof.
25.3. Infringement of Intellectual Property Rights.
Each party represents, warrants and covenants to the other that it
shall perform its responsibilities under this Agreement in a manner
that does not infringe, or constitute an infringement or
misappropriation of, any Intellectual Property Rights of any third
party.
26. USE OF TELECOMMUNICATIONS AND OTHER SERVICES
26.1. Condition to Provision of Services.
Telecommunications Services or Other Services shall not be used for
any unlawful purpose. More than ten percent (10%) of the transmissions
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<PAGE> 45
will be interstate transmissions. The parties represent to each other
that this Agreement, to the extent it is subject to FCC regulation, is
an inter-carrier agreement not subject to the filing requirements of
Section 211 (a) of the Communications Act of 1934, as amended. One
strand of the Williams Network is contractually limited to use for
multimedia transmission (i.e. internet traffic, video and radio
transmission services and/or related applications, including, graphic,
visual, imaging, interactive and multimedia transmissions) (the
"Restricted Fiber"). If the parties want to use such Restricted Fiber,
upon request from Williams, WinStar agrees within a reasonable period
of time to identify the nature of its proposed use of the Other
Service so as to permit Williams to determine whether the Other
Service may be carried over the Restricted Fiber. The fact that
Williams may not utilize the Restricted Fiber for such transmissions
shall not affect Williams' obligation to provide Telecommunications
Services or Other Services unless otherwise specifically set forth in
this Agreement.
26.2. Intrastate Interexchange Services.
WinStar may use any interexchange service provided under this
Agreement including any service provided by means of a Backbone
Agreement only if such interexchange service is used for carrying
inter-state (as defined by the FCC) telecommunications (i.e.,
telecommunications subject to the jurisdiction of the Federal
Communications Commission). Williams and its Affiliates shall not be
obligated to make available Telecommunications Services, Additional
Services, or other interexchange service on a Circuit with end points
within a single state or service on a Circuit which
originates/terminates at points both of which are situated within a
single state unless WinStar represents in writing that such
interexchange service or Circuits shall be used to carry inter-state
telecommunications (as defined by the FCC).
26.3. WinStar Responsibilities.
WinStar has sole responsibility for installation, testing and
operation of facilities, services and equipment ("WinStar Facilities")
other than those specifically provided by Williams as part of the
Telecommunications Services or Other Services as described in a
Service Order. In no event will the untimely installation or
non-operation of WinStar Facilities relieve WinStar of its obligation
to pay charges for the Service or Other Service after the Requested
Start Date as set forth in the Service Order.
26.4. Consents.
As between the parties, WinStar shall be responsible for all
arrangements with copyright holders, music licensing organizations,
performers' representatives or other parties for necessary
authorizations, clearances or consents with respect to transmission
contents.
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26.5. Restriction of Transmissions.
WinStar will not transmit content, nor permit its customers to
transmit content that violates applicable law or carries an
unreasonable risk of leading to criminal, civil or administrative
proceedings or investigations against Williams or WinStar.
26.6 Compliance with Regulations.
If the FCC, any state regulatory body, or any court, in each case
having competent jurisdiction, determines that any provision of this
Agreement violates any applicable rules, policies, or regulations,
both parties shall reasonably cooperate to immediately bring this
Agreement into compliance, consistent with the intent of this
Agreement.
26.6. Reasonableness, Consents and Approval.
(a) Where this Agreement requires a party to assist or cooperate,
such requirement shall not be interpreted to require materially
more than a commercially reasonable level of effort (i.e. the
standard applicable will not be "best efforts" or "exhausting all
available means").
(b) Except where expressly provided as being in the sole discretion
of a party, where agreement, approval, acceptance, consent, or
similar action by either party is required under this Agreement,
such action shall not be unreasonably delayed or withheld. An
approval or consent given by a party under this Agreement shall
not relieve the other party from responsibility for complying
with the requirements of this Agreement, nor shall it be
construed as a waiver of any rights under this Agreement, except
as and to the extent otherwise expressly provided in such
approval or consent.
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IN WITNESS WHEREOF and in confirmation of their consent to the terms
and conditions contained in this Agreement and intending to be legally bound
hereby, Williams and WinStar have executed and delivered this Agreement as of
the dates set forth below.
<TABLE>
<S> <C>
WINSTAR WIRELESS, INC. WILLIAMS COMMUNICATIONS, INC.
/s/ Timothy R. Graham /s/ Frank Semple
By: -------------------------------------------- By: ----------------------------------------
Timothy R. Graham Frank Semple
Name: -------------------------------------------- Name: ----------------------------------------
Vice President President, Williams Network
Title -------------------------------------------- Title: ----------------------------------------
December 17, 1998 December 17, 1998
Date: -------------------------------------------- Date: ----------------------------------------
</TABLE>
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CONFIDENTIAL
CLARIFICATION AGREEMENT
TO
IRU AGREEMENT (LONG-HAUL)
BETWEEN
WINSTAR WIRELESS, INC.
AND
WILLIAMS COMMUNICATIONS, INC.
THIS CLARIFICATION AGREEMENT ("Clarification Agreement"), effective as of
December 17, 1998, to the IRU AGREEMENT (the "Agreement"), is between WINSTAR.
WIRELESS, INC. ("WinStar") and WILLIAMS COMMUNICATIONS, INC. ("Williams").
Capitalized terms not otherwise defined herein shall have the meaning given to
them in the Agreement.
WHEREAS, the parties agree that certain aspects of the Agreement require
clarification concerning the On-Net Telecommunications Services subject of the
Interim IRU, and the parties desire to clarify the Agreement as provided in this
Clarification Agreement.
NOW THEREFORE, the parties agree to clarify the Agreement as follows:
1. As provided in Section 2.1(b) of the Agreement, Williams has granted
WinStar an Interim IRU that is defined as an exclusive Indefeasible Right of
Use in On-Net Telecommunications Services as of the Effective Date. With
respect to the On-Net Telecommunications Services subject of the Interim
IRU, the parties agree to clarify the terms of the Agreement as follows:
1.1. Under each Service Order for On-Net Telecommunications Services
subject of the Interim IRU:
(a) Williams shall designate specific Circuits for WinStar on the
Williams Network between the specified cities and for the
bandwidth identified in the Service Order;
(b) Except as set forth in the Agreement, the Service Order for
each Circuit shall be non-cancelable by either party for the
term specified in the Service Order; and
(c) The term of the Service Order for each Circuit shall be no
longer than the Term for the Interim IRU specified in Section
9.1 of the Agreement (i.e., twenty-five years) and shall be no
shorter than a term equal to eighty percent of the Term (i.e.,
a term not less than twenty years).
1.2. Following provisioning of each Circuit, Williams agrees that it
has no right to use the Circuit for itself or for others.
1.3. Williams agrees that the Interim IRU granted to WinStar
includes the right for WinStar to resell, sublicense or
otherwise freely alienate each Circuit or any capacity thereof
for On-Net Telecommunications Services under the Interim IRU.
EXECUTION COPY 1
<PAGE> 49
CONFIDENTIAL
1.4. On-Net Telecommunications Services shall include the
telecommunications services purchased or otherwise obtained
from Williams as specified in Attachment 1 under this
Clarification Agreement.
2. Effective as of the Effective Date, the parties:
2.1. have entered into Service Orders for On-Net Telecommunications
Services which are the subject of the Interim IRU for those
Circuits specified in Attachment 1 to this Clarification
Agreement ("Initial Interim IRU Service Orders");
2.2. agree that all Initial Interim IRU Service Orders have terms
consistent with the terms set forth in Section 1 above; and
2.3. agree that the firm price for the Initial Interim IRU Service
Orders and associated Circuits equals ****. Additional
Telecommunications Services will be provided by Williams as
Additional Services and thus are not included in the Contract
Price and are separately chargeable.
3. The parties agree that the provisions of Section 5.1(c) of the
Agreement do not require WinStar to use the On-Net Telecommunications
Services in the amount of the Minimum Commitment prior to the
expiration of the **** anniversary of the Agreement. Rather, WinStar
is only required to place Service Orders for On-Net Telecommunications
Services amounting to the Minimum Commitment by the expiration of the
****.
4. The parties will make appropriate adjustments (payments or credits)
which are required to effect the intent of this Clarification
Agreement.
IN WITNESS WHEREOF, WinStar and Williams have each caused this
Clarification Agreement to the Agreement to be signed and delivered by its duly
authorized representatives as of the date first written above.
WINSTAR WIRELESS, INC. WILLIAMS COMMUNICATIONS, INC.
By: /s/ HOWARD E. TAYLOR By:
------------------------------- -------------------------------
Name: Howard E. Taylor Name:
------------------------------ ----------------------------
EXECUTION COPY 2
<PAGE> 50
3-31-99 SIDE AGREEMENT
In connection with (i) that certain IRU Agreement ("the IRU Agreement")
effective as of December 17, 1998, by and between WinStar Wireless, Inc.
("WinStar") and Williams Communications, Inc. ("Williams"), and (ii) the Partial
Assignment and Assumption Agreements and Assignment and Assumption Agreements
(collectively, the "Assignments") listed on Exhibit A hereto (and incorporated
herein by this reference) being entered into simultaneously herewith by and
between WinStar or its affiliates and Williams, among other parties, and for
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, WinStar and Williams hereby agree as follows:
1. Any capitalized terms used but not otherwise defined herein shall have the
meanings set forth in the IRU Agreement.
2. WinStar shall indemnify, defend and hold harmless Williams and its
Affiliates from and against any and all Losses incurred by Williams in
connection **** to the extent such Losses are incurred by Williams or such
Affiliates as a result of or in connection with an actual or alleged breach or
default by WinStar or its Affiliates prior to the date of this Side Agreement
with respect to or under ****.
3. Williams shall indemnify, defend and hold harmless WinStar and its
Affiliates from and against any and all Losses incurred by WinStar or such
Affiliates in connection with **** to the extent such Losses are incurred by
WinStar or such Affiliates as a result of or in connection with an actual or
alleged breach or default by WinStar or its Affiliates from and after the date
of this Side Agreement with respect to or under ****.
4. Any **** provided by Williams pursuant to the IRU Agreement shall be
provided to WinStar **** and shall be governed by the terms and conditions of
the ****.
5. Except as otherwise provided herein or as expressly agreed to in writing by
the parties, the terms and provisions of the IRU Agreement, as it may be amended
or modified from time to time, shall remain in full force and effect.
6. This Side Agreement shall be governed by, and construed and interpreted in
accordance with the law of the State of New York.
EXECUTED as of the 31st day of March, 1999.
WINSTAR WIRELESS INC. WILLIAMS COMMUNICATIONS, INC.
By: /s/ HOWARD E. TAYLOR By:
------------------------------- -------------------------------
Name: Howard E. Taylor Name:
----------------------------- -----------------------------
Title: Title:
---------------------------- ----------------------------
<PAGE> 1
Redacted portions have been marked with asterisks (****). Confidential treatment
has been requested for the redacted portions. The confidential redacted portions
have been filed separately with the Securities and Exchange Commission.
CONFIDENTIAL TREATMENT
EXHIBIT 10.19
UTILICOM NETWORKS, INC.
NOTE AND WARRANT PURCHASE AGREEMENT
DATED DECEMBER 15, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
1. Authorization and Sale of Securities.................................1
1.1 Authorization...............................................1
1.2 Purchase and Sale of Securities.............................2
1.3 Use of Proceeds.............................................2
1.4 Director....................................................2
2. Closing..............................................................2
2.1 Closing.....................................................2
2.2 Investment..................................................3
3. Representations and Warranties of the Company........................3
3.1 Organization and Standing...................................3
3.2 Capitalization..............................................3
3.3 Subsidiaries, Etc...........................................4
3.4 Stockholder List and Agreements.............................4
3.5 Issuance of Securities......................................4
3.6 Authority for Agreement.....................................4
3.7 Governmental Consents.......................................5
3.8 Litigation..................................................5
3.9 Financial Statements........................................5
3.10 Absence of Liabilities......................................5
3.11 Tax Returns.................................................6
3.12 Property and Assets.........................................6
3.13 Intellectual Property.......................................6
3.14 Material Contracts and Obligations..........................6
3.15 Compliance..................................................7
3.16 Employee Matters............................................7
3.17 ERISA.......................................................7
3.18 Books and Records...........................................7
3.19 Environmental Matters.......................................7
3.20 Indebtedness................................................7
</TABLE>
1
<PAGE> 3
<TABLE>
<S> <C>
4. Representations and Warranties of the Purchaser......................8
4.1 Information.................................................8
4.2 Authority...................................................8
4.3 Suitability.................................................8
4.4 Lack of Liquidity...........................................9
4.5 Investment Intent...........................................9
5. Conditions to the Obligations of the Purchasers......................9
5.1 Accuracy of Representations and Warranties..................9
5.2 Performance.................................................9
5.3 Opinion of Counsel..........................................9
5.4 Other Agreements...........................................10
5.5 Certificates and Documents.................................11
6. Conditions to the Obligations of the Company........................11
6.1 Accuracy of Representations and Warranties.................11
6.2 Amendment to Note Purchase Agreement.......................12
6.3 Side Letter Regarding Bariston, LLC Commitment.............12
6.4 AT&T Loan Agreement........................................12
6.5 SIGECO Contribution........................................12
7. Covenants of the Company............................................11
7.1 Reimbursement of Expenses..................................11
7.2 Restricted Payments........................................11
8. Miscellaneous.......................................................12
8.1 Successors and Assigns.....................................12
8.2 Confidentiality............................................12
8.3 Survival of Representations and Warranties.................12
8.4 Notices....................................................12
8.5 Brokers....................................................13
8.6 Entire Agreement...........................................14
8.7 Amendments and Waivers.....................................14
8.8 Counterparts...............................................14
8.9 Section Headings...........................................14
8.10 Severability...............................................14
8.11 Governing Law..............................................14
</TABLE>
2
<PAGE> 4
SCHEDULE I - PURCHASERS
EXHIBITS
<TABLE>
<CAPTION>
Schedule 1.3 - Indebtedness to be Repaid at Closing
<S> <C>
Exhibit A - Form of Note
Exhibit B - Form of Warrant
Exhibit C - Exceptions to Representations and Warranties
Exhibit D - List of Stockholders
Exhibit E - Termination of Pledge Agreement
Exhibit F - Indebtedness of the Company
Exhibit G - Refinancing Lender Notes and Warrants
Exhibit H - Side Letter Regarding SIGECOM, LLC Board Seat
Exhibit I - Side Letter Regarding Bariston Partners, LLC Commitment
Exhibit J - Employee and Attorney Notes
</TABLE>
3
<PAGE> 5
NOTE AND WARRANT PURCHASE AGREEMENT
This Note and Warrant Purchase Agreement ("Agreement") dated as of
December 15, 1998 is entered into by and among Utilicom Networks, Inc., a
Delaware corporation (the "Company"), and the purchasers listed on Schedule 1
attached hereto (each referred to as a "Purchaser" and collectively as the
"Purchasers"). Williams Communications, Inc., one of the Purchasers hereunder,
is sometimes referred to herein as "Williams".
In consideration of the mutual promises and covenants contained in
this Agreement, the parties hereto agree as follows:
1. Authorization and Sale of Securities.
1.1 Authorization. The Company has, or before the Closing (as
defined in Section 2.1) will have, duly authorized the sale and issuance,
pursuant to the terms of this Agreement, of the following securities:
(a) The Notes. Convertible and exchangeable promissory notes
having an aggregate principal amount of up to Ten Million Five Hundred Thousand
Dollars ($10,500,000) (collectively, the "Notes" and individually a "Note")
which Notes shall accrue interest at a rate of twelve percent (12%) per annum.
Each Note shall be due and payable, together with any accrued and unpaid
interest thereon, on the earlier of: (i) June 30, 1999 (as such date may be
extended to July 31, 1999 pursuant to the terms of the Side Letter Regarding
Bariston Partners, LLC Commitment, the "Maturity Date"); or (ii) the occurrence
of a Material Event of Default, as defined in the Notes. Upon the occurrence of
a Material Event of Default, as such term is defined in the Note, with respect
to any Note, such Note may at the option of the holder and for a period of 30
days after the Purchaser is notified of such Material Event of Default (the
Notice Date) beginning on the date of such Notice Date, (the "Option Period")
either be (A) automatically converted into Common Stock, $.01 par value, of the
Company (the "Common Stock") at a per share price of $3.00 or (B) automatically
exchanged for all membership interests held by the Company (collectively, the
"SIGECOM Membership Interests") in SIGECOM, LLC, a subsidiary of the Company
("SIGECOM, LLC"), all in accordance with the terms and conditions of the Notes.
If a Purchaser does not convert or exchange its Note during the Option Period
it will be deemed, without further action on the part of such Purchaser, that
the Purchaser has demanded payment of all amounts due under such Note.
Each Note shall be substantially in the form of Exhibit A hereto.
(b) The Warrants. Common Stock purchase warrants
substantially in the form of Exhibit B hereto (each a "Warrant" and
collectively, the "Warrants"), which Warrants will be exercisable, in the
aggregate, for a total of 525,000 shares of Common
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Stock (collectively, the "Warrant Shares"). The Warrant Shares shall be deemed
to be Conversion Shares as such term is defined in the Registration Rights
Agreement, dated as of May 8, 1998, among the Company and the Purchasers (the
"Registration Rights Agreement") and, upon issuance of the Warrant Shares, each
of the Purchasers as the holder of the Warrant Shares shall be entitled to
registration rights which are pari passu with those granted to the Purchasers
in the Registration Rights Agreement.
1.2 Purchase and Sale of Securities. In reliance upon the
representations and warranties and subject to the terms and conditions set
forth in this Agreement, at the Closing (as defined in Section 2.1) the Company
agrees to issue and sell to each of the Purchasers, and each of the Purchasers
agrees to purchase, the Notes and the Warrants set forth opposite such
Purchaser's name on Schedule I. The purchase price for the Notes shall be the
face value of such Note. The Warrants shall be issued to the Purchasers as
additional consideration for the purchase of the Notes. Each Purchaser will, as
consideration for the Company's delivery to each such Purchaser of Notes with a
face value of Two Hundred and Fifty Thousand Dollars ($250,000), deliver to the
Company for cancellation promissory notes issued by the Company to each such
Purchaser pursuant to an Interim Loan Agreement, dated October 30, 1998, among
the Company and the Purchasers (the "Interim Promissory Notes"). The accrued
and unpaid interest on the Interim Promissory Notes will be paid in cash to the
Purchasers on the Closing Date. The Notes and the Warrants being sold under
this Agreement and the Common Stock issuable upon exercise of the Warrants are
referred to in this Agreement as the "Securities". The Company's agreement with
each of the Purchasers is a separate agreement, and the sale of Securities to
each of the Purchasers is a separate sale.
1.3 Use of Proceeds. The Company shall use the proceeds from
the sale of the Notes and Warrants (the "Proceeds") as follows: (i) first, at
the Closing, the Company will fund an equity investment in SIGECOM, LLC of
Seven Million Three Hundred Thousand Dollars ($7,300,000) (the "SIGECOM
Investment") in accordance with the terms of the Operating Agreement dated May
8, 1998 between the Company and Sigeco (the "Operating Agreement"); (ii)
second, to repay the currently outstanding indebtedness of the Company listed
on Schedule 1.3 and (iii) finally, for general working capital purposes
consistent with the Company's 1998 Budget as approved by the Company's Board of
Directors (the "Board of Directors").
1.4 Director. Simultaneously with the Closing (as defined in
Section 2.1), the members of the Board of Directors of the Company will take
all necessary action to elect Andrew Goebel to the Board of Directors.
2. Closing.
2.1 Closing. The closing (the "Closing") of the purchase of
Notes and Warrants by the Purchasers under this Agreement shall take place at
the offices of Peabody
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& Arnold LLP, 50 Rowes Wharf, Boston, Massachusetts 02110, at 10:00 a.m. on
December 15, 1998, when the Purchasers shall have tendered their Investment, as
such term is defined in Section 2.2, or such other time, date and place
thereafter as the Company and the Purchasers may agree upon. At the Closing,
the Company shall deliver to the Purchasers their respective Notes and Warrants
against payment to the Company of the purchase price therefor, by wire
transfer, check, cancellation of the Interim Promissory Notes, or other method
acceptable to the Company. The date of the Closing is referred to herein as the
"Closing Date".
2.2 Investment. The term "Investment" shall mean, for each
Purchaser, the amount set forth opposite each Purchaser's name under "Total
Purchase Price" on Schedule 1 whether paid in cash or by exchange of Interim
Promissory Notes.
3. Representations and Warranties of the Company. Subject to and
except as disclosed by the Company in Exhibit C hereto, the Company hereby
represents and warrants to each of the Purchasers as follows:
3.1 Organization and Standing. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has full corporate power and authority to conduct its
business as presently conducted by it and to enter into and perform this
Agreement and to carry out the transactions contemplated by this Agreement. The
Company is duly qualified to do business as a foreign corporation and is in
good standing in every jurisdiction in which the failure to so qualify would
have a material adverse effect on the operations or financial condition of the
Company. The Company has furnished to the Purchasers true and complete copies
of its Certificate of Incorporation (the "Certificate of Incorporation") and
By-Laws (the "By-Laws"), each as amended to date and presently in effect.
3.2 Capitalization. Prior to the Closing, the authorized
capital stock of the Company consists of 20,000,000 shares of Common Stock, of
which 3,245,006 shares are issued and outstanding, and 5,000,000 shares of
preferred stock, $.01 par value (the "Preferred Stock"), of which 10,000 shares
have been designated as Series B Redeemable Preferred Stock, $.01 par value
(the "Redeemable Preferred Stock") of which 10,000 shares are issued and
outstanding. The Company has also reserved (i) 3,000,000 shares of Common Stock
for issuance under the Company's 1996 Stock Option Plan (the "Stock Option
Plan") (which number includes 2,334,126 shares of Common Stock issuable upon
the exercise of options granted under the Stock Option Plan); and (ii) 767,735
shares of Common Stock issuable upon the exercise of the warrants listed on
Exhibit D. All of the Company's issued and outstanding shares of capital stock
have been duly authorized and validly issued and are fully paid and
nonassessable. Except as set forth in Exhibit C hereto or provided in this
Agreement, (i) no subscription, warrant, option, convertible security or other
right (contingent or otherwise) to purchase or acquire any shares of capital
stock of the Company is authorized or outstanding, (ii) the Company has no
obligation (contingent or otherwise) to issue any subscription, warrant,
option, convertible security or other such right or to issue or distribute to
holders of any shares of its capital stock any evidences of indebtedness or
assets of the Company, and (iii) the Company has no obligation (contingent
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or otherwise) to purchase, redeem or otherwise acquire any shares of its
capital stock or any interest therein or to pay any dividend or make any other
distribution in respect thereof.
3.3 Subsidiaries, Etc. Except as listed on Exhibit C, the
Company has no subsidiaries and does not own or control, directly or
indirectly, any shares of capital stock of any other corporation or any
interest in any partnership, joint venture, limited liability company or other
non-corporate business enterprise.
3.4 Stockholder List and Agreements. Exhibit D attached
hereto sets forth a true and complete list of the stockholders of the Company,
showing the number of shares of Common Stock or other securities of the Company
held by each stockholder as of the date of this Agreement. Except as disclosed
in Exhibit C attached hereto or as provided in this Agreement, there are no
agreements, written or oral, between the Company and any holder of its capital
stock, or, to the best of the Company's knowledge, among any holders of its
capital stock, relating to the acquisition (including, without limitation,
rights of first refusal or pre-emptive rights), disposition, registration under
the Securities Act of 1933, as amended (the "Securities Act") or voting of the
capital stock of the Company.
3.5 Issuance of Securities. The issuance, sale and delivery
of the Securities in accordance with this Agreement have been, or will be on or
prior to the Closing, duly authorized by all necessary corporate action on the
part of the Company. The Securities when so issued, sold and delivered against
payment therefor in accordance with the provisions of this Agreement will be
duly and validly issued, fully paid and non-assessable. After consummation of
the transactions contemplated hereby, each purchaser shall own, beneficially
and of record and free and clear of any "Lien" (as defined below) that number
of Securities which each Purchaser purchases hereunder. "Lien" shall mean any
mortgage, lien, pledge, charge, security interest or encumbrance of any kind in
respect to an asset.
3.6 Authority for Agreement. The execution, delivery and
performance by the Company of this Agreement, the Notes, the Warrants, the
Termination of Pledge Agreement (the "Pledge Termination Agreement") dated of
even date herewith between the Company and Williams terminating the Pledge
Agreement dated May 8, 1998 between the Company and Williams and all other
agreements or documents required pursuant to Section 5.4 hereof (all of the
above described documents except this Agreement, the "Ancillary Documents") and
the consummation by the Company of the transactions contemplated hereby and
thereby, have been or will be prior to the Closing duly authorized by all
necessary corporate action. This Agreement and the Ancillary
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Documents have been or prior to the Closing will be duly executed and delivered
by the Company and constitute or will prior to the Closing constitute valid and
binding obligations of the Company enforceable against the Company in
accordance with their respective terms. Except as set forth in Exhibit C, the
execution of and performance of the transactions contemplated by this Agreement
and the Ancillary Documents and compliance with their provisions by the Company
will not violate any provision of law and will not conflict with or result in
any breach of any of the terms, conditions or provisions of, or constitute a
default under, or require a consent or waiver under, or result in the creation
of any Lien under its Certificate of Incorporation or By-laws or any indenture,
lease, agreement or other instrument to which the Company is a party or by
which it or any of its properties is bound, or any decree, judgment, order,
statute, rule or regulation applicable to the Company.
3.7 Governmental Consents. Subject to the accuracy of the
representations and warranties of each of the Purchasers as set forth in
Section 4, and, except for the filing of any notice subsequent to the Closing
that may be required under applicable state or Federal securities laws (which,
if required, shall be filed on a timely basis in accordance with applicable
regulations), no consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any governmental
authority is required on the part of the Company in connection with the
execution and delivery of this Agreement, the offer, issuance, sale and
delivery of the Securities, or the other transactions contemplated by this
Agreement, except such filings as shall have been made prior to and shall be
effective on and as of the Closing Date.
3.8 Litigation. Except as set forth in Exhibit C, there is no
action, suit or proceeding or governmental inquiry or investigation pending,
or, to the best of the Company's knowledge, any threat thereof, against the
Company, which questions the validity of this Agreement or the right of the
Company to enter into this Agreement, or which would result, either
individually or in the aggregate, in any material adverse effect on the
business, prospects, assets or condition, financial or otherwise, of the
Company.
3.9 Financial Statements. The Financial Statements (as
defined below) of the Company previously delivered to each of the Purchasers
present fairly the financial position of the Company as of the dates thereof
and its results of operations for the periods covered thereby and have been
prepared in accordance with generally accepted accounting principles ("GAAP")
consistently applied except that they contain no footnotes and may require
non-material adjustments to conform to GAAP. The Financial Statements are the
audited financial statements of the Company for the period from January 1, 1997
through December 31, 1997 and for the nine month period ended September 30,
1998 being unaudited and subject to year-end adjustments which in the aggregate
are not expected to be material. Since September 30, 1998 and except as set
forth on Exhibit C, (i) there has been no material adverse change in the
business, assets or condition, financial or otherwise, or operation of the
Company; (ii) neither the business, condition nor
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operations of the Company nor any of its properties or assets has been
materially adversely affected as a result of any legislative or regulatory
change, any revocation or change in any franchise, license or right to do
business, or any other event or occurrence, whether or not insured against; and
(iii) the Company has not entered into any material transaction or made any
distribution on its capital stock or other ownership interest.
3.10 Absence of Liabilities. Except as disclosed in Exhibit
C, the Company did not have, at September 30, 1998, any liabilities, Liens or
obligations of any type which in the aggregate exceeded $100,000, whether
absolute or contingent, which were not fully reflected on the Financial
Statements, and, since September 30, 1998, the Company has not incurred or
otherwise become subject to any such liabilities, Liens or obligations which in
the aggregate exceeded $100,000.
3.11 Tax Returns. The Company has completely and accurately
prepared and timely filed all Federal, state and other tax returns required by
law to be filed by it, and all taxes (including all withholding taxes) shown to
be due and all additional assessments have been paid or provisions made
therefor. The Company knows of no additional material assessments or
adjustments pending or threatened against the Company for any period, nor of
any basis for any such material assessment or adjustment.
3.12 Property and Assets. The Company has good and marketable
title to all of its material properties and assets, including but not limited
to all properties and assets reflected on the Financial Statements, and none of
such properties or assets is subject to any Lien or liability other than those,
if any, the material terms of which are described in the Financial Statements
or in Exhibit C.
3.13 Intellectual Property. Exhibit C sets forth a true and
complete list of all patents, patent applications, trademarks, service marks,
trademark and service mark applications, trade names, copyright registrations
and licenses presently used by the Company or necessary for the conduct of the
Company's business as presently conducted as well as any agreement under which
the Company has access to any confidential information used by the Company in
its business (the "Intellectual Property Rights"). The Company owns, or has the
right to use under the agreements or upon the terms described in Exhibit C, all
of the Intellectual Property Rights, and has taken all actions reasonably
necessary to protect and preserve the Intellectual Property Rights. To the
Company's knowledge, the business conducted by the Company does not and will
not cause the Company to infringe or violate any of the patents, trademarks,
service marks, trade names, copyrights, licenses, trade secrets or other
intellectual property rights of any other person or entity. To the Company's
knowledge, no other person or entity (including without limitation any prior
employer of any officer, director or employee of the Company) has the right to
use or any interest in any inventions, improvements, discoveries or other
confidential information utilized by the Company in its business, except as set
forth in Exhibit C.
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<PAGE> 11
3.14 Material Contracts and Obligations. Except for this
Agreement and the Ancillary Documents, Exhibit C sets forth a list of all
material agreements or commitments of any nature to which the Company is a
party or by which it is bound, including without limitation: (i) each agreement
which requires future expenditures by the Company in excess of $100,000 or
which might result in payments to the Company in excess of $100,000; (ii) all
employment and consulting agreements, employee benefit, bonus, pension,
profit-sharing, stock option, stock purchase and similar plans and
arrangements, and distributor and sales representative agreements; (iii) any
agreement with any stockholder, officer or director of the Company, or any
"affiliate" or "associate" of such persons (as such terms are defined in the
rules and regulations promulgated under the Securities Act), including without
limitation any agreement or other arrangement providing for the furnishing of
services by, rental of real or personal property from, or otherwise requiring
payment to, any such person or entity and (iv) any agreement relating to the
Intellectual Property Rights. The Company has delivered to the Purchasers
copies of such of the foregoing agreements to the extent such delivery has been
requested in writing. All of such agreements and contracts are valid, binding
and in full force and effect, and, except as set forth on Exhibit C, to the
Company's knowledge, no party is currently in breach or default thereunder.
3.15 Compliance. The Company has, in all material respects,
complied with all laws, regulations and orders applicable to its business and
has all material permits and licenses required thereby. There is no term or
provision of any mortgage, indenture, contract, agreement or instrument to
which the Company is a party or by which it is bound, or, to the best of the
Company's knowledge, of any provision of any state or Federal judgment, decree,
order, statute, rule or regulation applicable to or binding upon the Company,
with respect to which the Company is not in material compliance or which
materially adversely affects the business, prospects, assets or condition,
financial or otherwise, of the Company.
3.16 Employee Matters. None of the employees of the Company
is represented by any labor union, and there is no labor strike or other labor
trouble pending with respect to the Company (including, without limitation, any
organizational drive) or, to the best of the Company's knowledge, threatened.
3.17 ERISA. Effective November 1, 1998, the Company adopted a
401(k) Pension Plan which is subject to the Employee Retirement Income Security
Act of 1974, as amended.
3.18 Books and Records. The minute book of the Company
contains complete and accurate records of all meetings and other corporate
actions of its stockholders and its Board of Directors and any committees
thereof. The stock ledger of the Company is complete and reflects all
issuances, transfers, repurchases and
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cancellations of shares of capital stock of the Company.
3.19 Environmental Matters.
(a) The operation of the business is in all material
respects in compliance with all applicable environmental laws (whether federal,
state, local or foreign law (including common law), statute, code, ordinance,
rule, regulation or other requirement relating to the environment, natural
resources, or public and employee health and safety).
(b) To the Company's knowledge, all real property owned
or leased by the Company and, all property adjacent thereto, is free of
contamination by or from any hazardous materials at concentrations exceeding
those allowed by such environmental laws.
3.20 Indebtedness. A schedule of Indebtedness of the Company
is set forth in Exhibit F, and except as provided in Schedule 3.20, none of
such Indebtedness is currently in default. "Indebtedness" means all
obligations, contingent and otherwise, which should, in accordance with
generally accepted accounting principles consistently applied, be classified
upon the Company's balance sheet as liabilities, but in any event including,
without limitation, liabilities secured by any mortgage on property owned or
acquired subject to such mortgage, whether or not the liability secured thereby
shall have been assumed, and also including, without limitation: (i) all
guaranties, endorsements and other contingent obligations, in respect of
indebtedness of others, whether or not the same are or should be so reflected
in said balance sheet, except guaranties by endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business; and (ii) the present value of any lease payments due under
leases required to be capitalized in accordance with applicable Statements of
Financial Accounting Standards, determined in accordance with applicable
Statements of Financial Accounting Standards.
4. Representations and Warranties of the Purchasers. Each of the
Purchasers severally represents and warrants to the Company:
4.1 Information. The officers of the Company have made
available to each Purchaser any and all written information which such
Purchaser has requested and have answered, to such Purchaser's satisfaction,
all inquiries made by such Purchaser. Each Purchaser understands that no
Federal or state agency or authority has reviewed or passed upon the sale of
the Securities contemplated hereby.
4.2 Authority. Such Purchaser has full power and authority to
enter into and to perform this Agreement in accordance with its terms. The
execution of and the performance of the transactions contemplated by this
Agreement and the compliance by such Purchaser with the provisions thereof will
not violate, conflict with or result in
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a breach of any of the terms, conditions or provisions of, or constitute a
default under, or require a consent or waiver under any indenture, lease,
agreement or other instrument to which such Purchaser is a party or by which
such Purchaser or any of such Purchaser's properties are bound. Any Purchaser
which is a corporation, partnership or trust represents that it has not been
organized, reorganized or recapitalized specifically for the purpose of
investing in the Company.
4.3 Suitability. Such Purchaser has knowledge and experience
in financial and business matters which enable such Purchaser to evaluate the
merits and risks of making an investment in the Company. Such Purchaser has
made an independent examination of the investment, accounting and tax aspects
of the proposed purchase transaction having relied solely upon the advice, if
any, of such Purchaser's counsel, accountants, or business advisors with regard
to the various considerations involved in making an investment in the Company,
and agrees that the Company has no responsibility with respect to such matters
and any such advice. Such Purchaser hereby confirms to the Company that such
Purchaser has been granted an opportunity to ask questions of and receive
answers from officers and directors of the Company concerning the Company, the
terms and conditions of the Investment and other matters and to obtain all
additional information which such Purchaser deems necessary to evaluate the
merits and risks of making an investment in the Company. Such Purchaser
acknowledges and understands that the purchase of Securities is speculative and
involves a high degree of risk.
4.4 Lack of Liquidity. Such Purchaser has adequate means of
providing for current needs and possible contingencies without resorting to the
sale of the Securities and has no need for liquidity of the investment made in
the Company. In making this representation and warranty, such Purchaser
understands that an investment in the Company is an illiquid investment. In
particular, such Purchaser understands that the Securities are being offered
and sold without registration under the Securities Act, and, therefore, cannot
be resold unless they are subsequently registered under the Securities Act and
applicable state securities laws or unless an exemption from such registration
is available. Such Purchaser acknowledges that the Company is under no
obligation to comply with Regulation A or any other exemption requirement under
the Securities Act or to supply information necessary to permit routine sales
under Rule 144.
4.5 Investment Intent. Such Purchaser is acquiring the
Securities for such Purchaser's own account for investment and not with a view
to, or for sale in connection with, any distribution thereof, nor with any
present intention of distributing or selling the same; and, except as
contemplated by the Ancillary Documents, such Purchaser has no present or
contemplated agreement, undertaking, arrangement, obligation, indebtedness or
commitment providing for the disposition thereof.
5. Conditions to the Obligations of the Purchasers. The
obligation of each of the Purchasers to purchase Securities at the Closing is
subject to the fulfillment, or the
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waiver by such Purchaser, of each of the following conditions on or before the
Closing Date:
5.1 Accuracy of Representations and Warranties. Each
representation and warranty contained in Section 3 shall be true on and as of
the Closing Date with the same effect as though such representation and
warranty had been made on and as of that date.
5.2 Performance. The Company shall have performed and
complied with all agreements and conditions contained in this Agreement
required to be performed or complied with by the Company prior to or at the
Closing Date.
5.3 Opinion of Counsel. Each Purchaser shall have received an
opinion from Peabody & Arnold, counsel for the Company, dated as of the Closing
Date addressed to such Purchaser hereunder, substantially to the effect that:
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
full corporate power and authority to conduct its business as presently
conducted, to enter into and perform this Agreement and the Ancillary Documents
and to carry out the transactions contemplated by this Agreement and the
Ancillary Documents. Based solely on the representations of the Company in this
Agreement, the Company is duly qualified to do business and in good standing in
Delaware, and in every other jurisdiction in which the failure to so qualify
would have a material adverse effect on the operations or financial condition
of the Company.
(b) Based solely upon such counsel's review of the minute
books and stock records of the Company, and except for changes contemplated by
this Agreement, the authorized and issued and outstanding capital stock of the
Company is as described in Section 3.2 of this Agreement. Based solely upon
such counsel's review of the minute book and stock records of the Company, all
issued and outstanding shares of capital stock of the Company have been duly
authorized and are validly issued.
(c) The Securities have been duly authorized and, if
applicable, reserved for issuance, by all necessary corporate action on the
part of the Company. The Securities, when issued, sold and delivered against
payment therefor in accordance with the provisions of this Agreement, will be
validly issued, fully paid and non-assessable.
(d) The execution, delivery and performance by the
Company of this Agreement and the Ancillary Documents have been duly authorized
by all necessary corporate action and this Agreement and the Ancillary
Documents have been duly executed and delivered by the Company. This Agreement
and the Ancillary Documents constitute the valid and binding obligations of the
Company, enforceable against the
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Company in accordance with their respective terms, subject as to enforcement of
remedies to applicable bankruptcy, insolvency, reorganization or similar laws
affecting generally the enforcement of creditors' rights and subject to a
court's discretionary authority with respect to the granting of a decree
ordering specific performance or other equitable remedies. The execution and
delivery of this Agreement and the Ancillary Documents and the offer, issue and
sale of the Securities hereunder will not result in any breach of any of the
terms, conditions, or provisions of, or constitute a default under, the
Certificate of Incorporation or By-laws of the Company, each as amended as of
the Closing Date, or, based solely upon the Company's representations in this
Agreement and to such counsel's knowledge, any indenture, lease, agreement, or
other instrument to which the Company is a party or by which it or any of its
properties are bound, or any decree, judgment or order specifically naming the
Company of which such counsel is aware. (e) To such counsel's knowledge, there
is no action, suit or proceeding or governmental inquiry or investigation,
pending, or any threat thereof, against the Company, which questions the
validity of this Agreement or the Ancillary Documents or the right of the
Company to enter into such agreements, or which would result, if determined
adversely to the Company, either individually or in the aggregate, in any
material adverse change in the business, prospects, assets or condition,
financial or otherwise, of the Company, nor to such counsel's knowledge is
there any litigation pending or threatened against the Company, except as
disclosed in Exhibit C.
5.4 Other Agreements.
(a) The Termination of Pledge Agreement attached hereto as
Exhibit E, shall have been executed and delivered by the parties named therein.
(b) The Refinancing Lender Notes and Warrants each in the form
attached hereto as Exhibit G shall have been executed and delivered by the
parties named, and in the amounts noted, on Exhibit G.
(c) The Side Letter Regarding SIGECOM, LLC Board Seat, attached
hereto as Exhibit H, shall have been executed and delivered by the parties
named therein.
(d) The Side Letter Regarding the Bariston Partners, LLC
Commitment attached hereto as Exhibit I, shall have been executed and delivered
by the parties named therein.
(e) The Employee and Attorney Notes, each in the form attached
hereto as Exhibit J shall have been executed and delivered by the parties
named, and in the amounts noted, on Exhibit J.
(f) The Loan Agreement, dated as of the date hereof, among AT&T
Commercial Financial Corporation, SIGECOM, LLC and the other parties named
therein (the "AT&T Loan Agreement") shall have been executed and delivered by
the parties thereto and the
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initial Advance, as such term is defined in the AT&T Loan Agreement, shall have
been delivered to SIGECOM, LLC.
5.5 Certificates and Documents. The Company shall have
delivered to each of the Purchasers:
(a) A copy of the Certificate of Incorporation of the
Company, as amended and in effect as of the Closing Date, as certified by the
Secretary of the State of Delaware;
(b) Copies of certificates, as of the most recent
practicable dates, as to the corporate good standing of the Company issued by
the Delaware Secretary of State, the Secretary of State of the State of Indiana
and of The Commonwealth of Massachusetts;
(c) By-laws of the Company, certified by the Secretary of
the Company as of the Closing Date; and
(d) Resolutions of the Board of Directors of the Company,
authorizing and approving all matters in connection with this Agreement, the
Ancillary Documents, and the transactions contemplated hereby and thereby
certified by the Secretary of the Company as of the Closing Date.
6. Condition to the Obligations of the Company. The obligation
of the Company to issue and sell Securities at the Closing, to each of the
Purchasers is subject to fulfillment, or the waiver, of the following
conditions by each of the Purchasers on or before the Closing Date:
6.1 Accuracy of Representations and Warranties. The
representations and warranties of such Purchaser contained in Section 4 shall
be true on and as of the Closing Date with the same effect as through such
representations and warranties had been made on and as of that date.
6.2 Termination of Pledge Agreement. Williams shall have
executed and delivered to the Company the Termination of Pledge Agreement
substantially in the form of Exhibit E.
6.3 AT&T Loan Agreement. The AT&T Loan Agreement shall have
been executed and delivered and the initial Advance shall have been delivered
to SIGECOM, LLC.
6.4 SIGECO Contribution. SIGECO Advanced Communications, Inc.
("SIGECO"), a Purchaser hereunder, shall have delivered $7,300,000 to SIGECOM,
LLC as
- 12 -
<PAGE> 17
an equity investment in accordance with the terms of the Operating Agreement.
7. Covenants of the Company.
7.1 Reimbursement of Expenses. Within thirty (30) days after
receiving an invoice therefor and reasonable documentation thereof, the Company
shall reimburse the Purchasers for all of their out-of-pocket and third party
expenses (including, but not limited to, in-house counsel fees) in connection
with the transactions contemplated herein and in the Ancillary Documents.
7.2 Restricted Payments. The Company will not: (a) declare or
make any dividends on shares of capital stock of the Company, or (b) except
with respect to the Notes and the Indebtedness listed on Schedule 1.3 hereto,
purchase, redeem, retire, decease or otherwise acquire for value, deposit any
monies with any person with respect to, or make any voluntary payment or
prepayment of the principal of or interest on, or any other amount owing in
respect of, any indebtedness other than regularly scheduled payments of
principal or interest in respect thereof required to be made pursuant to the
instruments evidencing such indebtedness.
7.3 Notice. The Company shall give the Purchasers prompt
written notice of any Event of Default or Material Event of Default, as such
terms are defined in the Notes.
8. Miscellaneous.
8.1 Successors and Assigns. This Agreement, and the rights
and obligations of each Purchaser hereunder, may be assigned by such Purchaser
to any person or entity to which Securities are transferred by such Purchaser
not in violation of the terms of this Agreement or in violation of applicable
securities laws, and such transferee shall be deemed a "Purchaser" for purposes
of this Agreement; provided that the transferee provides written notice of such
assignment to the Company.
8.2 Confidentiality. Each Purchaser agrees that such
Purchaser shall keep confidential and will not disclose or divulge any
confidential, proprietary or secret information which such Purchaser may obtain
from the Company, including, without limitation, financial statements, reports
and other materials submitted by the Company to such Purchaser in connection
with the transactions contemplated by or pursuant to this Agreement, or
pursuant to visitation or inspection rights granted hereunder, unless such
information is known, or until such information becomes known, generally to the
public; provided, however, that a Purchaser may disclose such information (i)
to a Purchaser's attorneys, accountants, consultants, and other professionals
solely to the extent necessary to obtain their services in connection with its
investment in the Company, (ii) to any prospective purchaser of any Securities
from such Purchaser as long as such prospective
- 13 -
<PAGE> 18
purchaser agrees in advance and in writing (with a copy of such agreement and a
list identifying all materials proposed to be furnished provided first to the
Company) to be bound by the provisions of this Section 8.2, (iii) to any
affiliate of such Purchaser or to a member, partner, shareholder or subsidiary
of such Purchaser provided such person first agrees in writing to be bound by
this Section 8.2 and a copy of such writing is first furnished to the Company,
or (iv) if required to do so by an arbitration tribunal or a court of competent
jurisdiction or applicable law.
8.3 Survival of Representations and Warranties. All
agreements, representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Closing of the transactions
contemplated hereby.
8.4 Notices. All notices, requests, consents, and other
communications under this Agreement shall be in writing and shall be delivered
by hand, by overnight courier service, facsimile or mailed by first class
certified or registered mail, return receipt requested, postage prepaid, as
follows:
If to the Company, at 124 Grove Street, Suite 220, Franklin,
Massachusetts, 02038-3159, Facsimile Number (508) 553-7100 Attention: Charles
R. Cadle, President, or at such other address or addresses as may have been
furnished in writing by the Company to the Purchasers; or
If to a Purchaser, at the address set forth on such Purchaser's
counterpart signature page, or at such other address or addresses as may have
been furnished to the Company in writing by such Purchaser.
Notices provided in accordance with this Section 8.4 shall be deemed
delivered upon personal delivery, upon receipt of facsimile confirmation or two
business days after deposit in the mail.
8.5 Brokers. Except as set forth on Exhibit C, the Company
and each Purchaser (i) represents and warrants to the other parties hereto that
he, she or it has retained no finder or broker in connection with the
transactions contemplated by this Agreement, and (ii) will indemnify and save
the other parties harmless from and against any and all claims, liabilities or
obligations with respect to brokerage or finders' fees or commissions, or
consulting fees in connection with the transactions contemplated by this
Agreement asserted by any person on the basis of any statement or
representation alleged to have been made by such indemnifying party.
8.6 Entire Agreement. This Agreement, the Ancillary
Agreements, embody the entire agreement and understanding between the parties
hereto with respect to the subject matter hereof and supersede all prior
agreements and understandings relating to such subject matter.
- 14 -
<PAGE> 19
8.7 Amendments and Waivers. Except as otherwise expressly set
forth in this Agreement, any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in
a particular instance and either retroactively or prospectively) with the
written consent of the parties hereto. Any amendment or waiver effected in
accordance with this Section 8.7 shall be binding upon each holder of any
Securities, each future holder of such Securities and the Company. No waivers
of or exceptions to any term, condition or provision of this Agreement, in any
one or more instances, shall be deemed to be, or construed as, a further or
continuing waiver of any such term, condition or provision.
8.8 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 be one and the same document.
8.9 Section Headings. The section headings are for the
convenience of the parties and in no way alter, modify, amend, limit, or
restrict the contractual obligations of the parties.
8.10 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
8.11 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of The Commonwealth of Massachusetts,
excluding conflicts of law provisions.
8.12 Waiver of Jury Trial. The Company and each of the
Purchasers hereby irrevocably and unconditionally waives, to the fullest extent
it may legally and effectively do so, any right that it may have to a trial by
jury of any suit, action or proceeding (whether a claim in tort, contract,
equity, or otherwise) arising out of or relating to a dispute under this
Agreement, the Notes or the Warrants, and agrees that any such dispute shall be
tried before a judge sitting without a jury.
- 15 -
<PAGE> 20
This Agreement is hereby executed by the undersigned as of the day and
year first written above.
COMPANY:
UTILICOM NETWORKS, INC.
By:
----------------------------
Name: Charles R. Cadle
Title: President
<PAGE> 21
SECURITIES PURCHASE AGREEMENT
COUNTERPART PURCHASER SIGNATURE PAGE
Principal Amount of Notes Purchased:
Warrants Purchased: $ ****
-----------
Total purchase price: $ ****
-----------
Cash: $ ****
-----------
Interim Promissory Notes: $ ****
-----------
Entity Name: SIGECO ADVANCED COMMUNICATIONS, INC.
------------------------------------
By: /s/ANDREW E. GOEBEL
---------------------------------
Andrew E. Goebel
Its: Secretary
--------------------------------
Address: 20 N.W. Fourth Street
---------------------------
Evansville, IN 47735-0306
- -------------------------------------
<PAGE> 22
SECURITIES PURCHASE AGREEMENT
COUNTERPART PURCHASER SIGNATURE PAGE
Principal Amount of Notes Purchased:
Warrants Purchased: 200,000
Total purchase price: $ 4,000,000.00
------------
Cash: $ 3,750,000.00
------------
Interim Promissory Notes: $ 250,000.00
------------
Entity Name: Williams Communications, Inc.
------------------------------------
By: /s/ JAMES DUTTON
---------------------------------
Its: Vice President
--------------------------------
Address:
---------------------------
- -------------------------------------
Copies of all notices required or permitted hereunder shall
be sent to the following addresses or fax numbers:
Attn: James W. Dutton
Williams Communications, Inc.
One Williams Center, 26th Floor
Tulsa, Oklahoma 74172
Fax: 918-573-6216
With a
copy to: General Counsel
Williams Communications, Inc.
One Williams Center, 41st Floor
Tulsa, Oklahoma 74172
Fax: 918-573-3005
<PAGE> 23
EXHIBIT A
FORM OF NOTE
THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THIS PROMISSORY NOTE MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS PROMISSORY NOTE UNDER SAID ACT AND APPLICABLE
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
UTILICOM NETWORKS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
PROMISSORY NOTE
$ Date:
------------ ---------------
FOR VALUE RECEIVED, Utilicom Networks, Inc. a Delaware corporation (the
"Company") hereby promises to pay to the order of _____________, the principal
amount of ____ Dollars ($_____), plus interest as set forth herein on the
principal balance from time to time outstanding. Interest shall accrue on the
principal balance outstanding at a rate equal to 12% per annum (the "Interest
Rate"). Interest shall be calculated on the basis of actual number of days
elapsed over a year of 360 days. Notwithstanding any other provision of this
Promissory Note, the holder hereof does not intend to charge, and the Company
shall not be required to pay, any interest or other fees or charges in excess of
the maximum permitted by applicable law; and any payments in excess of such
maximum shall be refunded to the Company or credited to reduce principal
hereunder. All payments received by the holder hereunder will be applied first
to costs of collection, if any, then to interest and the balance to principal.
Payments of principal and interest will be made by check or wire transfer in
immediately available United States funds sent to the holder at the address or
pursuant to the wiring instructions furnished to the Company for that purpose.
The entire unpaid principal balance of this Promissory Note and all accrued
and unpaid interest thereon and all other fees, charges, costs and expenses
hereunder (the "Indebtedness") shall become immediately due and payable, without
demand, on the earlier of: (i) June 30, 1999 (as such date may be extended to
July 31, 1999 pursuant to the terms of the Bariston Side Letter (as defined
below) the "Maturity Date"); (ii) an Event of Default as defined in the Note
Purchase Agreement (the "Williams Note Purchase Agreement") dated as of May 8,
1998 between the Company and Williams Communications, Inc. ("Williams"); or
(iii) as pertains to the Company, upon the occurrence of any one or more of the
following events (a) the filing of any complaint, application or petition or the
entry of any order or judgment seeking or granting relief pursuant to Title 11
of the United States Code entitled "Bankruptcy", as amended from time to time,
or pursuant to any similar state or federal law or procedure for any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief for debtors; (b) the appointment of any trustee, receiver,
master.
<PAGE> 24
assignee, liquidator, custodian or other similar party: or (c) the assignment
for the benefit of creditors or creation of any trust mortgage or any other
rearrangement, extension or other arrangement for relief from or restructuring
of debts (the failure of the Company to pay the Indebtedness on or before the
Maturity Date and each of the events listed in (ii) and (iii) shall constitute
an "Event of Default"). The term "Bariston Side Letter" refers to the Side
Letter Regarding Bariston Partners, LLC Commitment, dated the date hereof, among
Bariston Partners, LLC ("Bariston") the Company, Williams and SIGECO Advanced
Communications, Inc. ("Sigeco").
Upon the occurrence of an Event of Default, the holder of this
Promissory Note may declare a default and demand payment of all amounts owing
hereunder. Upon the occurrence of a Material Event of Default (as defined
below), for a period of 30 days after the holder is notified of such Material
Event of Default (the "Option Period") the holder may at its option either: (i)
convert all of the then current outstanding principal balance of this Promissory
Note and all accrued interest hereon into such number of fully paid and
non-assessable shares of common stock, $.01 par value, of the Company (the
"Common Stock") at the rate of one share of Common Stock for each $3.00
converted; or (ii) exchange, on a pro rata basis with all other holders of
Promissory Notes issued pursuant to the terms of the Note and Warrant Purchase
Agreement, dated the date hereof, among the Company, Williams and Sigeco (the
"Note and Warrant Purchase Agreement"), the principal balance of this Promissory
Note (the "Conversion Balance") for all of SIGECOM, LLC Membership Interest
currently held by the Company. If the holder does not convert or exchange this
Promissory Note during the Option Period, then the holder of this Promissory
Note will be deemed to have demanded payment of all amounts then owing
hereunder. The term "Material Event of Default" as used herein means any of the
following: (a) the failure by the Company to pay all amounts owing hereunder on
the Maturity Date (b) a non-payment Event of Default, as such term is defined in
this Promissory Note, which is not cured within thirty (30) days of such Event
of Default; or (c) any Event of Default, as such term is defined in the Loan
Agreement dated the date hereof among SIGECOM, LLC, AT&T Commercial Financial
Corporation and the other parties named therein (the "Loan Agreement"), which
results in an acceleration of all amounts owed pursuant to the terms of the Loan
Agreement.
If the holder of this Promissory Note elects to exchange the Conversion
Balance into SIGECOM, LLC Membership Interest as set forth above then all
accrued and unpaid interest on this Promissory Note shall be paid, in cash, to
the holder on the date of such exchange.
No fractions of shares of Common Stock or scrip representing fractions
of shares of Common Stock or fractions or SIGECOM, LLC Membership Interests
shall be issued upon conversion or exchange, as applicable, of this Promissory
Note. If any fraction of a share of Common Stock or SIGECOM, LLC Membership
Interests would, except for the provisions of this paragraph, be deliverable on
the conversion or exchange, as applicable, of the Conversion Balance, the
Company shall make payment in lieu thereof in an amount of cash equal to the
value of such fractional share or SIGECOM, LLC Membership Interest.
2
<PAGE> 25
This Promissory Note may be prepaid at any time without premium or
penalty, in whole but not in part except as set forth below. Any prepayment
shall be accompanied by a payment of accrued interest in respect of the
principal being prepaid.
The Company shall prepay, in equal amounts, this Promissory Note and
by the Company pursuant to the terms of the Note and Warrant Purchase Agreement
with the proceeds of any Qualified Equity Financing which is completed by the
Company prior to the Maturity Date. As used herein, the term "Qualified Equity
Financing" shall mean any offering by the Company of equity securities of the
Company resulting in the receipt of cash proceeds by the Company which alone, or
when added to cash proceeds received by the Company in any other equity
financing completed by the Company on or after the date hereof through the
Maturity Date, equals at least One Million Dollars ($1,000,000).
****
[WILLIAMS ONLY In addition, if, at any time that principal or accrued
interest on this Promissory Note remains outstanding, the holder desires to
purchase one or more Notes pursuant to the terms of the Williams Note Purchase
Agreement then, at the option of the holder, the holder may apply any principal
and interest outstanding under this Promissory Note toward the purchase of such
Note or Notes.
This Promissory Note is one of the Promissory Notes of like tenor to be
issued to several holders pursuant to, and the holder is entitled to the
benefits of, the Note and Warrant Purchase Agreement, and the holder, by
acceptance of this Promissory Note, agrees to be bound by the provisions of the
Note and Warrant Purchase Agreement. This Promissory Note will be recorded on
the books of the Company or its agent as to principal and interest. Any transfer
of this Promissory Note will be effected only by surrender of this Promissory
Note to the Company and reissuance of a new note to the transferee.
The Company agrees to pay the holder's reasonable costs in collecting
and enforcing this Promissory Note, including reasonable attorney's fees.
No waiver of any obligation of the Company under this Promissory Note
shall be effective unless it is in a writing signed by the holder. A waiver by
the holder of any right or remedy under this Promissory Note on any occasion
shall not be a bar to exercise of the same right or remedy on any subsequent
occasion or of any other right or remedy at any time.
3
<PAGE> 26
Any notice required or permitted under this Promissory Note shall be in
writing and shall be deemed to have been given on the date of delivery, if
delivered personally or by overnight courier to the party to whom notice is to
be given at the address set forth in the Note and Warrant Purchase Agreement, or
on the third business day after mailing, if mailed to the party to whom notice
is to be given, by certified mail, return receipt requested, postage prepaid,
and addressed to the addressee at the address of the addressee set forth in the
Note Purchase Agreement, or, in each case, to the most recent address, specified
by written notice, given to the sender pursuant to this paragraph.
The Company hereby expressly waives presentment, demand, and protest,
notice of demand, dishonor and nonpayment of this Promissory Note, and all other
notices or demands of any kind in connection with the delivery, acceptance,
performance, default or enforcement hereof, and hereby consents to any delays,
extensions of time, renewals, waivers or modifications that may be granted or
consented to by the holder hereof with respect to the time of payment or any
other provision hereof.
In the event any one or more of the provisions of this Promissory Note
shall for any reason be held to be invalid, illegal or unenforceable, in whole
or in part or in any respect, or in the event that any one or more of the
provisions of this Promissory Note operate or would prospectively operate to
invalidate this Promissory Note, then and in any such event, such provision(s)
only shall be deemed null and void and shall not affect any other provision of
this Promissory Note and the remaining provisions of this Promissory Note shall
remain operative and in full force and effect and in no way shall be affected,
prejudiced, or disturbed thereby.
This Promissory Note shall not be assignable by a holder in whole or in
part, except to an affiliate of the holder, without the prior written consent of
the Company.
This Promissory Note shall be governed by and construed and enforced in
accordance with the laws of The Commonwealth of Massachusetts, without regard to
conflicts of law principles.
UTILICOM NETWORKS, INC.:
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
4
<PAGE> 27
EXHIBIT B
FORM OF WARRANT
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR
TRANSFERRED UNLESS SUCH SALE OR TRANSFER IS IN ACCORDANCE WITH THE REGISTRATION
REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS OR SOME OTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS IS AVAILABLE WITH
RESPECT THERETO.
COMMON STOCK PURCHASE WARRANT
Warrant No. ___ Number of Shares:___
UTILICOM NETWORKS, INC.
Void after December ___, 2008
1. Issuance. This Warrant is issued to _________ (the "Holder"), by
Utilicom, Networks, Inc., a Delaware corporation (hereinafter with its
successors called the "Company") as of December ___, 1998 (the "Original Issue
Date"). Reference is made to a Note and Warrant Purchase Agreement dated as of
the date hereof among the Company, the Holder and the other parties thereto
(the "Note and Warrant Purchase Agreement"), the terms of which are
incorporated herein by reference. Capitalized terms not otherwise defined
herein shall have the meaning ascribed to them in the Note and Warrant Purchase
Agreement.
2. Purchase Price; Number of Shares. Subject to the terms and conditions
hereinafter set forth and commencing on the date hereof, the registered holder
of this Warrant (the "Holder"), is entitled; upon surrender of this Warrant and
the subscription form annexed hereto duly executed and delivered to the office
of the Company, located at 124 Grove Street, Suite 220, Franklin, Massachusetts
02038, or such other office as the Company shall notify the Holder of in
writing, to purchase from the Company ____ shares (as adjusted for any stock
split, combination, consolidation, or stock distributions or stock dividends
with respect to such shares) of fully paid and nonassessable shares of Common
Stock, $.01 par value, of the Company (the "Common Stock") at a price per share
(the "Purchase Price") equal to the lower of (i) $3.00 per share of Common
Stock or (ii) Eighty Percent (80%) of the lowest price paid per share of Common
Stock or Convertible Securities (as defined herein) equivalent to one share of
Common Stock, by investors in any equity financing completed by the Company
prior to the Maturity Date. Until such time as this Warrant is exercised in
full or expires, the applicable Purchase Price and the securities issuable upon
exercise of this Warrant are subject to adjustment as hereinafter provided.
3. Payment of Purchase Price. The Purchase Price applicable in
accordance with Section 2 above may be paid (i) in cash or by check, (ii) by
the surrender by the Holder to the Company of any promissory notes or other
obligations issued by the Company, with all
<PAGE> 28
such notes and obligations so surrendered being credited against the applicable
Purchase Price in an amount equal to the principal amount thereof plus accrued
interest to the date of surrender or (iii) by any combination of the foregoing.
4. Net Issue Election. The Holder may elect to receive, without the
payment by the Holder of any additional consideration, shares equal to the
value of this Warrant or any portion hereof by the surrender of this Warrant or
such portion to the Company, with the net issue election notice annexed hereto
duly executed, at the office of the Company. Thereupon, the Company shall issue
to the Holder such number of fully paid and nonassessable shares of Common
Stock as is computed using the following formula:
X = Y (A - B)
---------
A
where X = the number of shares to be issued to the Holder pursuant to this
Section 4.
Y = the number of shares covered by this Warrant in respect of which the
net issue election is made pursuant to this Section 4.
A = the fair market value of one share of Common Stock, as determined in
good faith by the Board, as at the time the net issue election is made pursuant
to this Section 4.
B = the applicable purchase price in effect under this Warrant at the
time the net issue election is made pursuant to this Section 4.
The Board shall promptly respond in writing to an inquiry by the Holder as to
the fair market value of one share of Common Stock.
5. Partial Exercise. This Warrant may be exercised in part, and the
Holder shall be entitled to receive a new warrant, which shall be dated as of
the date of this Warrant, covering the number of shares in respect of which
this Warrant shall not have been exercised.
6. Issuance Date. The person or persons in whose name or names any
certificate representing shares of Common Stock is issued hereunder shall be
deemed to have become the holder of record of the shares represented thereby as
of the close of business on the date this Warrant is exercised with respect to
such shares, whether or not the transfer books of the Company shall be closed.
7. Expiration Date. This Warrant shall expire at the close of business
on December ____, 2008, and shall be void thereafter.
8. Reserved Shares; Valid Issuance. The Company covenants that it will
at all times from and after the date hereof reserve and keep available such
number of its authorized shares of Common Stock, free from all preemptive or
similar rights therein, as will be
-2-
<PAGE> 29
sufficient to permit the exercise of this Warrant in full. The Company further
covenants that such shares as may be issued pursuant to the exercise of this
Warrant will, upon issuance, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issuance thereof.
9. Adjustment for Stock Splits, Reverse Stock Splits or Stock Dividends.
If after the Original Issue Date (as defined in Section 1 hereof) the Company
shall subdivide the Common Stock, by split-up or otherwise, or combine the
Common Stock, or issue additional shares of Common Stock in payment of a stock
dividend on the Common Stock, the number of shares issuable on the exercise of
this Warrant shall forthwith be proportionately increased in the case of a
subdivision or stock dividend, or proportionately decreased in the case of a
combination, and the applicable Purchase Price shall forthwith be
proportionately decreased in the case of a subdivision or stock dividend, or
proportionately increased in the case of a combination.
10. Mergers and Reclassifications. If after the Original Issue Date there
shall be any reclassification, capital reorganization or change of the Common
Stock (other than as a result of a subdivision, combination or stock dividend
provided for in Section 9 hereof), or any consolidation of the Company with, or
merger of the Company into, another corporation or other business organization
(other than a consolidation or merger in which the Company is the continuing
corporation and which does not result in any reclassification or change of the
outstanding Common Stock), or any sale or conveyance to another corporation or
other business organization of all or substantially all of the assets of the
Company, then, as a condition of such reclassification, reorganization, change,
consolidation, merger, sale or conveyance, lawful provisions shall be made, and
duly executed documents evidencing the same from the Company or its successor
shall be delivered to the Holder, so that the Holder shall thereafter have the
right to purchase, at a total price not to exceed that payable upon the
exercise of this Warrant in full, the kind and amount of shares of stock and
other securities and property receivable upon such reclassification,
reorganization, change, consolidation, merger, sale or conveyance by a holder of
the number of shares of Common Stock which might have been purchased by the
Holder immediately prior to such reclassification, reorganization, change,
consolidation, merger, sale or conveyance, and in any such case appropriate
provisions shall be made with respect to the rights and interest of the Holder
to the end that the provisions hereof (including without limitation, provisions
for the adjustment of the Purchase Price and the number of shares issuable
hereunder) shall thereafter be applicable in relation to any shares of stock or
other securities and property thereafter deliverable upon exercise hereof.
11. Adjustments for Issuances Below Purchase Price. In case the Company
shall at any time or from time to time after the Original Issue Date issue or
sell any additional shares of Common Stock, other than Excluded Stock, as
defined below, (the "Additional Shares of Common Stock") for a consideration
per share less than or equal to the applicable Purchase Price in effect for
this Warrant immediately prior to the time of such issue or sale of such
additional shares of Common Stock (excluding transactions covered by Section 9
or 10
-3-
<PAGE> 30
hereof) then forthwith upon such issue or sale as the case may be, the
applicable Purchase Price shall be reduced to a price calculated as follows:
Adjusted Purchase Price = (Outstanding Stock x Purchase Price) - Additional
Stock Consideration
-------------------------------------------------
Outstanding Stock - No. of Additional Shares of
Common Stock
As used herein:
"Additional Stock Consideration" means the consideration received by the
Company upon the issuance of the Additional Shares of Common Stock.
"Convertible Securities" means any evidences of indebtedness, shares or
securities, in each case convertible into or exchangeable for Additional Shares
of Common Stock.
"Excluded Stock" means: (a) shares of Common Stock issued or issuable on
conversion of the Company's Series B Reedemable [sic] Preferred Stock issued and
outstanding as of the date hereof; (b) up to 3,000,000 shares of Common Stock
issued or issuable upon the exercise of stock options issued pursuant to the
Company's 1996 Employee Stock Option Plan, as amended from time to time; (c) all
shares of stock issued or issuable upon the exercise of Options of the Company
issued and outstanding as of the date hereof and (d) all shares of stock issued
or issuable upon the exercise of the Bariston Fee Warrants.
"No. of Additional Shares of Common Stock" means the number of shares of
Additional Shares of Common Stock issued in connection with the issuance of the
same.
"Options" means rights, options or warrants to subscribe for, purchase or
otherwise acquire Common Stock or Convertible Securities.
"Outstanding Stock" means the total number of shares of Common Stock
outstanding plus the total number of shares of Common Stock issuable upon
conversion or exercise of outstanding preferred stock or Convertible Securities
or Options (including this Warrant and all other warrants) immediately prior to
the issuance of the Additional Shares of Common Stock.
No adjustment in the Purchase Price need be made if such adjustment would
result in a change in the Purchase Price of less than $0.01. Any such adjustment
which is not made shall be carried forward and shall be made at the time of and
together with any subsequent adjustment which, on a cumulative basis, amounts to
an adjustment of $0.01 or more in the Purchase Price. No adjustment in the
Purchase Price of this Warrant shall be made in respect of the issuance of
Additional Shares of Common Stock unless the consideration per share for such
Additional Shares of Common Stock issued or deemed to be issued by the Company
is less than the Purchase Price then in effect on the date of, and immediately
prior to, such issue, for this Warrant.
-4-
<PAGE> 31
In the event of any adjustment in the Purchase Price pursuant to this
Section, the number of shares issuable upon exercise of this Warrant shall be
simultaneously adjusted to that number determined by dividing (a) the aggregate
Purchase Price which would have been payable had this Warrant been exercised in
full, for cash, immediately prior to such issuance, by (b) the Adjusted
Purchase Price.
For purposes of making any adjustment required under this Section, the
consideration received by the Company for any issue or sale of securities shall
(a) to the extent that it consists of cash be computed as the net amount of
cash received by the Company after deduction of any underwriting or similar
commissions, compensation or concessions paid or allowed by the Company in
connection with such issue or sale, (b) to the extent that it consists of
property other than cash, be computed at the fair market value of that property
as determined in good faith by the Board of Directors, and (c) if Additional
Shares of Common Stock, Convertible Securities or right or Options are issued
or sold together with other stock or securities or other assets of the Company
for a consideration which covers both, the consideration received shall be
computed (as provided in clauses (a) and (b) above) as the portion of the
consideration so received that may be reasonably determined in good faith by
the Board of Directors to be allocable to such Additional Shares of Common
Stock, Convertible Securities, or rights or Options.
For purposes of the adjustment required under this Section, if at any time
or from time to time after the date on which this Warrant is issued, the
Company issues or sells any Options or Convertible Securities, then in each
case the Company shall be deemed to have issued at the time of the issuance of
such Options or Convertible Securities the maximum number of Additional Shares
of Common Stock (as set forth in the instruments relating thereto, giving
effect to any provision contained therein for a subsequent upward adjustment of
such number) issuable upon exercise or conversion thereof and to have received
as consideration for the issuance of such shares an amount equal to the total
amount of consideration, if any, received by the Company for the issuance of
such Options or Convertible Securities plus, in the case of such Options, the
minimum amounts of consideration, if any (as set forth in the instruments
relating thereto, giving effect to any provision contained therein for a
subsequent downward adjustment of such consideration), payable to the Company
upon the exercise of such Options and, in the case of Convertible Securities,
the minimum amounts of consideration, if any, payable to the Company (other
than by cancellation of liabilities or obligations evidenced by such
Convertible Securities). No further adjustment of the Purchase Price, adjusted
upon the issuance of such Options or Convertible Securities, shall be made as a
result of the actual issuance of Additional Shares of Common Stock on the
exercise of any such Options or the conversion of any such Convertible
Securities. If any such Options or the conversion privilege represented by any
such Convertible Securities shall expire without having been exercised, the
Purchase Price adjusted upon the issuance of such Options or Convertible
Securities shall be readjusted to the Purchase Price which would have been in
effect had an adjustment been made on the basis that the only Additional Shares
of Common Stock so issued were the Additional Shares of Common Stock, if any,
actually issued or sold for the consideration received by the Company
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<PAGE> 32
for the granting of all such Options, whether or not exercised, plus the
consideration received for issuing or selling the Convertible Securities
actually converted plus the consideration, if any, actually received by the
Company (other than by cancellation of liabilities or obligations evidenced by
such Convertible Securities) on the conversion of such Convertible Securities.
12. Fractional Shares. In no event shall any fractional share of Common
Stock be issued upon any exercise of this Warrant. If, upon exercise of this
Warrant as an entirety, the Holder would, except as provided in this Section 12,
be entitled to receive a fractional share of Common Stock, then the Company
shall issue the next higher number of full shares of Common Stock, issuing a
full share with respect to such fractional share.
13. Certificate of Adjustment. Whenever the Purchase Price is adjusted, as
herein provided, the Company shall promptly deliver to the Holder a certificate
of a firm of independent public accountants setting forth the Purchase Price
after such adjustment and setting forth a brief statement of the facts requiring
such adjustment.
14. Notices of Record Date, Etc. In the event of:
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other right,
(b) any reclassification of the capital stock of the Company, capital
reorganization of the Company, consolidation or merger involving the
Company, or sale or conveyance of all or substantially all of its assets,
or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then and in each such event the Company will mail or cause to be mailed to the
Holder a notice specifying (i) the date on which any such record is to be taken
for the purpose of such dividend, distribution or right, and stating the amount
and character of such dividend, distribution or right, or (ii) the date on which
any such reclassification, reorganization, consolidation, merger, sale or
conveyance, dissolution, liquidation or winding-up is to take place, and the
time, if any is to be fixed, as of which the holders of record in respect of
such event are to be determined. Such notice shall be mailed at least 10 days
prior to the date specified in such notice on which any such action is to be
taken.
15. Amendment. The terms of this Warrant may be amended, modified or
waived only with the written consent of the Company and the Holder. No such
amendment, modification or waiver shall be effective as to this Warrant unless
the terms of such
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<PAGE> 33
amendment, modification or waiver shall apply with the same force and effect to
all of the other Warrants then outstanding.
16. Warrant Register; Transfers, Etc.
A. The Company will maintain a register containing the names and
addresses of the registered holders of the Warrants. The Holder may change its
address as shown on the warrant register by written notice to the Company
requesting such change. Any notice or written communication required or
permitted to be given to the Holder may be given by certified mail or delivered
to the Holder at its address as shown on the warrant register.
B. Subject to compliance with applicable federal and state securities
laws, this Warrant may be transferred by the Holder with respect to any or all
of the shares purchasable hereunder, provided, however, that the transferee
receive a Warrant to purchase no less than 50,000 shares of Common Stock. Upon
surrender of this Warrant to the Company, together with the assignment hereof
properly endorsed, for transfer of this Warrant as an entirety by the Holder,
the Company shall issue a new warrant of the same denomination to the assignee.
Upon surrender of this Warrant to the Company, together with the assignment
hereof properly endorsed, by the Holder for transfer with respect to a portion
of the shares of Common Stock purchasable hereunder, the Company shall issue a
new warrant to the assignee, in such denomination as shall be requested by the
Holder hereof, and shall issue to such Holder a new warrant covering the number
of shares in respect of which this Warrant shall not have been transferred.
C. In case this Warrant shall be mutilated, lost, stolen or destroyed,
the Company shall issue a new warrant of like tenor and denomination and
deliver the same (i) in exchange and substitution for and upon surrender and
cancellation of any mutilated Warrant, or (ii) in lieu of any Warrant lost,
stolen or destroyed, upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft or destruction of such Warrant (including a
reasonably detailed affidavit with respect to the circumstances of any loss,
theft or destruction) and of indemnity reasonably satisfactory to the Company.
17. No Impairment. The Company will not, by amendment of its Certificate
of Incorporation or through any reclassification, capital reorganization,
consolidation, merger, sale or conveyance of assets, dissolution, liquidation,
issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this Warrant, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of the Holder.
18. Governing Law. The provisions and terms of this Warrant shall be
governed by and construed in accordance with the internal laws of the
Commonwealth of Massachusetts.
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<PAGE> 34
19. Successors and Assigns. This Warrant shall be binding upon the
Company's successors and assigns and shall inure to the benefit of the Holder's
successors, legal representatives and permitted assigns.
20. Business Days. If the last or appointed day for the taking of any
action required or the expiration of any right granted herein shall be a
Saturday or Sunday or a legal holiday in the Commonwealth of Massachusetts, then
such action may be taken or right may be exercised on the next succeeding day
which is not a Saturday or Sunday or such a legal holiday.
Date: December __, 1998
UTILICOM NETWORKS, INC.
(Corporate Seal) By:
-------------------------------------
Attest: Title:
----------------------------------
- ----------------------------
Subscription
To: Date:
---------------------- --------------
The undersigned hereby subscribes for ________ shares of Common Stock
covered by this Warrant. The certificate(s) for such shares shall be issued in
the name of the undersigned or as otherwise indicated below:
-------------------------------
Signature
-------------------------------
Name for Registration
-------------------------------
Mailing Address
Net Issue Election Notice
To: Date:
---------------------- --------------
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<PAGE> 35
The undersigned hereby elects under Section 4 to surrender the right to
purchase ______ shares of Common Stock pursuant to this Warrant. The
certificate(s) for the shares issuable upon such net issue election shall be
issued in the name of the undersigned or as otherwise indicated below.
--------------------------------
Signature
--------------------------------
Name for Registration
--------------------------------
Mailing Address
Assignment
For value received ______________________ hereby sells, assigns and
transfers unto _________________________________________________________________
________________________________________________________________________________
Please print or typewrite name and address of Assignee
________________________________________________________________________________
the within Warrant, and does hereby irrevocably constitute and appoint
______________________ its attorney to transfer the within Warrant on the books
of the within named Company with full power of substitution on the premises.
Dated: __________________
__________________
In the Presence of:
_________________________
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<PAGE> 1
Redacted portions have been marked with asterisks (****). Confidential treatment
has been requested for the redacted portions. The confidential redacted portions
have been filed separately with the Securities and Exchange Commission.
CONFIDENTIAL TREATMENT
EXHIBIT 10.20
IRU AGREEMENT
(conformed version incorporating Amendments 1, 2 and 3 through 12/9/98)
THIS IRU AGREEMENT (this "Agreement") is made as of the 12 day of
December, 1996, (the "Effective Date") by and among IXC Carrier, Inc., a Nevada
corporation ("IXC") a wholly-owned subsidiary of IXC Communications, Inc.,
Vyvx, Inc., a Delaware corporation ("Vyvx") and The WilTech Group, a Delaware
corporation ("WilTech"), both Vyvx and WilTech are wholly-owned subsidiaries of
The Williams Companies, Inc.
BACKGROUND
A. IXC is constructing a fiber optic communication system as set forth
in Exhibit A attached hereto (the "IXC System").
B. Vyvx is constructing a fiber optic communication system as set forth
in Exhibit B attached hereto (the "Vyvx System").
C. The IXC System and the Vyvx System are each referred to as a "System."
Each party is referred to as the "Constructing Party" for its System and the
"Nonconstructing Party" for the other party's System.
D. IXC desires to lease to Vyvx an indefeasible right to use (an "IRU")
the Vyvx Leased Fibers (as defined below) in the IXC System, and Vyvx desires
to lease to IXC an IRU in the IXC IRU Fibers (as defined below) in the Vyvx
System, all upon the terms and conditions set forth below.
E. IXC desires to grant Vyvx an option to acquire an IRU in the Vyvx
Leased Fibers in the IXC System, and Vyvx desires to grant IXC an option to
acquire an IRU in the IXC IRU Fibers in the Vyvx System, all upon the terms and
conditions set forth below.
F. Vyvx's use of the Vyvx System and the Vyvx IRU Fibers (as defined
below) shall be in compliance with its contractural obligations to LDDS
Communications, Inc. under the Stock Purchase Agreement dated as of August 22,
1994, as amended.
TERMS OF THE AGREEMENT
Accordingly, in consideration of the mutual promises set forth below, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereby agree as follows:
1
<PAGE> 2
ARTICLE I. CONSTRUCTION
A. Upon the Both Party Completion Date (as defined below), IXC
warrants and represents that the IXC System, and Vyvx warrants and represents
that the Vyvx System, shall be designed, engineered, installed and constructed
(i) in compliance with any and all applicable building, construction and safety
codes for such construction and installation, as well as any and all other
applicable governmental laws, codes, ordinances, statutes and regulations; and
(ii) to perform in accordance with the specifications set forth in Exhibits C-1,
C-2, C-3, C-4, C-5, and C-6. The specifications set forth in Exhibits C-1
through C-6 shall be equivalent for both the IXC System and the Vyvx System.
B. On the Both Party Completion Date, each Constructing Party
warrants and represents that it has performed a complete detailed engineering
and design including development of system performance criteria for its System.
C. On the Both Party Completion Date, each Constructing Party
warrants and represents that it has performed all necessary surveying and
mapping for its System, including, without limitation:
1. A complete locations survey of the System route,
including staking and marking of the route, in accordance with standard
telecommunication engineering practices.
2. Field alignment maps showing the route of System and
property ownership, terrain description, materials and other System information.
3. Survey and staked the location of sites for
regeneration stations (for purposes of this Agreement, no distinction is made
between regenerator sites, regenerator stations and line amplifier sites) and
other facilities.
4. Railroad, highway and water crossing permit drawings.
5. Evaluation of as-built surveys of installations and
revision of records and drawings accordingly.
D. On the Both Party Completion Date, each Constructing Party
warrants and represents that it has performed all necessary actions regarding
acquisition of land and easements for its System, including, without limitation:
1. Such limited title searches to ascertain the validity
of title in present landowners along the route of the System as such party deems
necessary.
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<PAGE> 3
2. Acquired easements, IRU's, rights-of-way, conduit or
other leases, fee interests and other rights, which are recorded (as
applicable), in the Office of the Recorder of Deeds of the appropriate county
or in such other offices as may be appropriate, secured permits for highway,
railroad and waterway crossings as well as secured any and all other permits
necessary and requisite to the construction of the System. The Nonconstructing
Party shall have the right, but not the obligation, to inspect all right-of-way
Installations, splicing and testing of the System and the documents relating
thereto. Any inspection by the Nonconstructing Party shall be in compliance
with and subject to all R of W Agreements (as defined below).
E. Notwithstanding the above provisions, Vyvx's warranties and
representations set forth in Paragraphs A through D of this Article shall be
made as of the New Orleans Lateral Completion Date (as defined below) to the
extent such warranties and representations are made with respect to the New
Orleans Lateral (as defined below).
3
<PAGE> 4
ARTICLE II. ACQUISITION OF CABLE
Each party shall be responsible for acquiring the Cable that each
party is required to install under this Agreement in its respective System. IXC
shall use its commercially reasonable efforts to assist Vyvx in obtaining the
Cable necessary to construct the Vyvx System at an attractive price.
ARTICLE III. TEMPORARY LEASE
As portions of IXC's System become available for commercial use,
IXC shall promptly notify Vyvx and shall offer to lease to Vyvx the Vyvx IRU
Fibers in the quantity and along the routes desired to be leased by Vyvx (as
set forth in Exhibit A) for the Temporary Lease Term (as defined below). Upon
receipt of IXC's notice, Vyvx shall have thirty (30) days to respond to IXC's
notice with the quantity, route(s) and dates desired, if any. Vyvx shall pay
IXC **** per fiber per route mile per month during the Temporary Lease Term.
The Temporary Lease payment shall be prorated for partial months.
ARTICLE IV. PERMANENT LEASE
A. ****
4
<PAGE> 5
B. Beginning at the Both Party Completion Date, Vyvx grants IXC an option
(the "Additional Fiber Option") to purchase a **** undivided interest in an IRU
in the Additional Fibers (as defined below) in exchange for the grant by IXC of
an IRU in **** fibers on the IXC System (the "Vyvx IRU Grant Fibers"). The Vyvx
IRU Grant Fibers and the Vyvx Leased Fibers shall be referred to herein
collectively as the "Vyvx IRU Fibers." The Additional Fiber Option is further
described in Paragraph E of the Article entitled Option to Acquire IRU's and
Consideration.
C. The terms and conditions of this Agreement shall govern the conduct
of the Parties and the lease of the IRU's during the Permanent Lease Term.
D. **** In the event any such funds allocated to such a remaining term
were paid in advance to the Nonconstructing Party, they shall be paid by the
Nonconstructing Party to the Constructing Party within five (5) days of
expiration without renewal of the Permanent Lease Term. An IRU granted pursuant
to such power shall have commercially reasonable terms and conditions (from the
perspective of the grantor). The Nonconstructing Party shall assign such IRU's
to the Constructing Party effective as of the end of the Permanent Lease Term.
The Nonconstructing Party shall notify the Constructing Party within three days
of execution of a definitive agreement granting such an IRU; such notice shall
set forth the term and the number of fibers subject to the IRU.
ARTICLE V. OPTION TO ACQUIRE IRU'S AND CONSIDERATION
A. IXC hereby grants Vyvx an option to acquire an IRU in the Vyvx Leased
Fibers. Vyvx hereby grants IXC an option to acquire an IRU in the IXC IRU
Fibers. Either such IRU shall be subject to the provisions relating to
maintenance and repair (including the continuing obligation to make the
payments therefor pursuant to the Articles entitled Operation, Maintenance and
Repair of the IXC System and Operation, Maintenance and Repair of the Vyvx
System), and, except as expressly set forth herein, be subject to the other
terms and conditions set forth in this Agreement. Either such IRU shall be
conterminous with the Term of this Agreement (including any applicable Renewal
Term).
5
<PAGE> 6
B. Either IRU option set forth above shall be exercisable only: (i) upon
payment of the Parties' current estimate of the fair market value of such IRU's,
which is **** ("Cash Option") or (ii) **** for such fair market value amount.
****
C. Beginning thirteen (13) months after the Both Party Completion Date
and prior to the end of the twenty-fourth (24th) month of the Permanent Lease
Term, either Party (the "Electing Party") may indicate its intent to exercise
the Cash Option **** by serving written notice upon the other Party. Upon
receipt of such notice, the other Party shall have twenty (20) days to determine
whether it also wishes to exercise the Cash Option **** and provide written
notice of same to the Electing Party. Upon receipt of such notice by the
Electing Party, the elected options shall be deemed to have been exercised upon
payment in cash **** as provided in Paragraph B above and the Permanent Lease
Term shall expire with no further action required on the part of either Party. A
Party shall not have the right to exercise an option with respect to less than
all of the relevant fibers or to exercise the Cash Option with respect to some
fibers **** with respect to other fibers. A Party need not exercise either the
Cash Option ****.
D. If the non-Electing Party does not elect to exercise the Cash Option
**** within the twenty (20) day period described above, then, in that event, the
Electing Party shall have ten (10) days to withdraw its notice to exercise the
elected option by providing written notice of same to the non-Electing Party. If
the Electing Party does not withdraw its notice to exercise the elected option,
then upon the expiration of said ten (10) day withdrawal period, the option
shall be deemed to be exercised upon payment in cash **** as provided in
Paragraph B above.
E. IXC shall have the right to exercise the Additional Fiber Option with
respect to all, but not less than all, of the Additional Fibers that have not
been Sold (as defined below) at any time after the second anniversary of the
Both Party Completion Date, upon six (6) months' notice to Vyvx. Upon exercise
of such option, IXC shall pay Vyvx **** (as defined below) ****. IXC's
Additional Fiber Option shall terminate when all the Additional Fibers have been
Sold. Vyvx shall have the right to terminate IXC's Additional Fiber Option in
specific Additional Fibers prior to such time in conjunction with and to the
extent necessary to grant IRU's pursuant to Additional Fiber Transactions (as
defined below). ****
6
<PAGE> 7
ARTICLE VI. COMPLETION OF THE SYSTEMS
A. Subject to the provisions herein, each of IXC and Vyvx shall be
responsible for all costs to connect its System with the IXC IRU Fibers and the
Vyvx IRU Fibers, respectively. When connection is made in an existing building,
the connecting point will be at the fiber optic patch panel. Subject to
Exhibit E, each party (the "Connecting Party") may, at its sole option and at
any time during the Term, connect its System or other fiber optic systems.
7
<PAGE> 8
controlled by the party with the IXC IRU Fibers and the Vyvx IRU Fibers, as the
case may be, at the Connecting Party's sole cost, at any other existing splice
point (each a "Connecting Point") along the other party's System; provided,
however, any connection requiring a Cable or a splice to be entered will be
performed by the Constructing Party at the Connecting Party's sole expense. In
order to schedule a connection of this type the Connecting Party shall
coordinate the work at least thirty (30) days in advance of the date the
connection is requested to be completed. The Constructing Party will use its
commercially reasonable efforts to accommodate the request. Such work will be
restricted to Planned System Work Period (as defined in Exhibit E to this
Agreement) weekends unless otherwise agreed to in writing for specific
projects. The Connecting Party shall also be provided reasonable access by the
Constructing Party to any Connecting Point during the Term of this Agreement.
No connection will be allowed that the Constructing Party, in its reasonable
discretion, determines is likely to materially and adversely affect its System
or which is not permitted by the R of W Agreements with the underlying
right-of-way or property owner. Neither IXC nor Vyvx shall have any limitations
on the types of electronics or technologies employed to utilize the IXC IRU
Fibers or Vyvx IRU Fibers, respectively, subject to mutually agreeable safety
procedures and so long as such electronics or technologies do not interfere
with the use of the remaining fibers or present a risk of damage to the fibers
in the Vyvx System or the IXC System, respectively.
B. The scheduled completion date for completion of all
construction, installation and Fiber Acceptance Testing of each System shall
be December 31, 1997. Each party shall use its commercially reasonable best
efforts to complete all construction and testing obligations by such date.
However, both parties recognize that Vyvx has started the construction of its
System later than IXC and that a December 31, 1997 scheduled completion date
may not be achievable. In the event either party fails to complete its System
by July 1, 1998, (the "LD Delivery Date") then that party shall be designated
as a Late Party and the parties shall designate representatives to meet and
review the status of the Late Party's System. The Late Party shall provide
within 14 days of the LD Delivery Date, a plan and schedule to complete
construction, installation and testing on or prior to January 1, 1999.
C. ****
8
<PAGE> 9
****
D. In the event the Late Party does not have its Completion Date on or
before **** the Completing Party shall have the option, at its sole discretion,
to take over the design, engineering, installation and construction (including
all the activities referred to in the Article entitled Construction) of the Late
Party's System. If the Completing Party exercises this option, it will be
operating as an independent contractor for the Late Party, be subject to any
applicable R of W Agreements and be required to conduct its work in accordance
with applicable industry standards and the terms of this Agreement. The Late
Party will cooperate fully with the Completing Party to finish the Late Party's
System and shall directly pay when due for all reasonable, direct costs,
expenses and expenditures (including, without limitation, capital expenditures
and internal personnel and other internal and out-of-pocket costs of the
Completing Party) associated with, or incurred in connection with, the
completion of the Late Party's System. The Completing Party shall exercise
commercially reasonable efforts to reduce the costs associated with taking over
the design, engineering installation and construction.
E. Provided that the Late Party has completed its System by ****
the Completing Party's sole and exclusive remedies against the Late Party
for failure to meet the LD Delivery Date shall be as set forth in ****
9
<PAGE> 10
F. For purposes of Paragraphs B, C, D, and E of this Article,
"System" or "Vyvx System" shall not include the **** and the Vyvx System
will be deemed completed upon completion of the portions other than the
**** . The scheduled completion date for completion of all construction,
installation and Fiber Acceptance Testing of the **** shall be July 1,
1998. Vyvx shall use commercially reasonable best efforts to complete all
construction and testing obligations by such date.
G. ****
H. In the event Vyvx does not complete the **** on or before ****
IXC shall have the option, at its sole discretion, to take over the design,
engineering,
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<PAGE> 11
installation and construction (including all the activities referred to in
the Article entitled Construction) of the ****. If IXC exercises this
option, it will be operating as an independent contractor for Vyvx, be
subject to any applicable R of W Agreements and be required to conduct its
work in accordance with applicable industry standards and the terms of this
Agreement. Vyvx will cooperate fully with IXC to finish the **** and shall
directly pay when due for all reasonable, direct costs, expenses and
expenditures (including, without limitation, capital expenditures and
internal personnel and other internal and out-of-pocket costs of IXC)
associated with, or incurred in connection with, the completion of the
****. IXC shall exercise commercially reasonable efforts to reduce the
costs associated with taking over the design, engineering, installation and
construction.
I. Provided that Vyvx has completed the **** by ****, IXC's sole and
exclusive remedy against Vyvx for failure to meet the July 1, 1998
scheduled completion date for the **** shall be ****.
ARTICLE VII. ACCEPTANCE AND TESTING OF VYVX IRU FIBERS
A. IXC shall test the Vyvx IRU Fibers in accordance with the
procedures specified in Exhibit C-3 (Fiber Cable Splicing, Testing and
Acceptance Standards)("Fiber Acceptance Testing") to verify that the Vyvx IRU
Fibers are operating in accordance with the specifications in Exhibit C-3. Fiber
Acceptance Testing shall progress span by span along the System as cable
splicing progresses, so that test results may be reviewed in a timely manner.
Vyvx shall have the right, but not the obligation, to have a person or persons
present to observe IXC's Fiber Acceptance Testing and IXC agrees to provide Vyvx
prior notice of its testing
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<PAGE> 12
schedule. Within fourteen (14) days of the conclusion of IXC's Fiber Acceptance
Testing of the Vyvx IRU Fibers, IXC shall provide Vyvx with a copy of the test
results.
B. Upon the receipt by Vyvx from IXC of the initial test results referred
to above or of the results of re-testing as set forth below, Vyvx shall have the
right, but not the obligation, at its sole expense, to conduct its own Fiber
Acceptance Testing of the Vyvx IRU Fibers to verify that they are operating in
accordance with specifications in Exhibit C-3. Subject to paragraph D of this
Article, Vyvx shall commence its Fiber Acceptance Testing of the Vyvx IRU Fibers
within fourteen (14) days of receiving such results and complete such testing
within fourteen (14) days thereafter. Vyvx shall provide IXC with seven (7) days
notice prior to beginning Vyvx Fiber Acceptance Testing. IXC shall have the
right, but not the obligation, to have a person or persons present to observe
Vyvx Fiber Acceptance Testing. Within seven (7) days of the conclusion of Vyvx
Fiber Acceptance Testing of the Vyvx IRU Fibers, Vyvx shall provide IXC with a
copy of the test results.
C. In the event the results of the tests of the Vyvx IRU Fibers show the
Vyvx IRU Fibers not to be operating within the parameters of the applicable
specifications, Vyvx shall notify IXC in writing that some or all portions of
the Vyvx IRU Fibers are unacceptable. Thereupon, IXC shall expeditiously take
such action as shall be reasonably necessary with respect to such portion of
the Vyvx IRU Fibers as do not operate within the parameters of the applicable
specifications to bring the operating standards of such portion of the Vyvx IRU
Fibers within such parameters. After taking such actions and re-testing of the
Vyvx IRU Fibers, IXC shall provide Vyvx with a copy of the new test results and
Vyvx shall again have the right to conduct its own Fiber Acceptance Testing as
set forth above. The cycle described above of testing, taking corrective action
and re-testing shall take place as many times as necessary to ensure that the
Vyvx IRU Fibers do operate within the parameters of the applicable
specifications.
D. Vyvx shall be deemed to have accepted the Vyvx IRU Fibers unless it
notifies IXC within seven (7) days of receipt of IXC's Fiber Acceptance Testing
results that such results are unacceptable. If the test results of Vyvx Fiber
Acceptance Testing are within the parameters of the specifications in Exhibit
C, Vyvx shall, within seven (7) days of receipt of the test results, provide
IXC with a written notice accepting the Vyvx IRU Fibers. The date of this
notice or the date of deemed acceptance of the Vyvx IRU Fibers (for all spans
in the System), as the case may be, shall be the "Vyvx IRU Acceptance Date" or
the "IXC Completion Date."
ARTICLE VIII. ACCEPTANCE AND TESTING OF IXC IRU FIBERS
A. Vyvx shall test the IXC IRU Fibers in accordance with the Fiber
Acceptance Testing to verify that they are operating in accordance with the
specifications in Exhibit C-3. Fiber Acceptance Testing shall progress span by
span along the system as cable
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<PAGE> 13
splicing progresses, so that test results may be reviewed in a timely manner.
IXC shall have the right, but not the obligation, to have a person or persons
present to observe Vyvx Fiber Acceptance Testing and Vyvx agrees to provide IXC
prior notice of its testing schedule. Within fourteen (14) days of the
conclusion of Vyvx Fiber Acceptance Testing of the IXC IRU Fibers, Vyvx shall
provide IXC with a copy of the test results.
B. Upon the receipt by IXC from Vyvx of the initial test results
referred to above or of the results of re-testing as set forth below, IXC shall
have the right, but not the obligation, at its sole expense, to conduct its own
Fiber Acceptance Testing of the IXC IRU Fibers to verify that they are operating
in accordance with the specifications in Exhibit C-3. Subject to paragraph D of
this Article, IXC shall commence its Fiber Acceptance Testing of the IXC IRU
Fibers within fourteen (14) days of receiving such results and complete such
testing within fourteen (14) days thereafter. IXC shall provide Vyvx with seven
(7) days notice prior to beginning IXC's Fiber Acceptance Testing. Vyvx shall
have the right, but not the obligation, to have a person or persons present to
observe IXC's Fiber Acceptance Testing. Within seven (7) days of the conclusion
of IXC's Fiber Acceptance Testing of the IXC IRU Fibers, IXC shall provide Vyvx
with a copy of the test results.
C. In the event the results of the tests of the IXC IRU Fibers show
the IXC IRU Fibers not to be operating within the parameters of the applicable
specifications, IXC shall notify Vyvx in writing that the results with respect
to some or all portions of the IXC IRU Fibers are acceptable. Thereupon, Vyvx
shall expeditiously take such action as shall be reasonably necessary with
respect to such portion of the IXC IRU Fibers as do not operate within the
parameters of the specifications to bring type operating standards of such
portion of the IXC IRU Fibers within such parameters. After taking such actions
and re-testing of the IXC IRU Fibers, Vyvx shall provide IXC with a copy of the
new test results and IXC shall again have the right to conduct its own Fiber
Acceptance Testing as set forth above. The cycle described above of testing,
taking corrective action and re-testing shall take place as many times as
necessary to ensure that the IXC IRU Fibers do operate within the parameters of
the applicable specifications.
D. IXC shall be deemed to have accepted the IXC IRU Fibers unless it
notifies Vyvx within seven (7) days of receipt of Vyvx Fiber Acceptance Testing
results that such results are unacceptable. If the test results of IXC IRU Fiber
Acceptance Testing are with the parameters of the specifications in Exhibit C,
IXC shall, within seven (7) days of receipt of the test results, provide Vyvx
with a written notice accepting the IXC IRU Fibers.
The day of this notice or the date of deemed acceptance of the
IXC IRU Fibers (for all spans in the System excluding the New
Orleans Lateral), as the case may be, shall be the "IXC IRU
Acceptance Date" or the "Vyvx Completion Date." The date of
this notice or the date of deemed acceptance of the IXC IRU
Fibers for the New Orleans Lateral, as the case may be, shall
be the "New Orleans Lateral Completion Date."
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<PAGE> 14
ARTICLE IX. SYSTEM DOCUMENTATION
After the Both Party Completion Date (or, with respect to the
**** after the **** Completion Date) and upon thirty (30) days prior notice from
the other party, each party shall provide the other party with documentation
("Deliverables") which shall consist of the following:
1. As-built drawings as set forth in Exhibit D as available
for the IXC System or the Vyvx System, as the case may be.
2. Technical specifications of the optical fiber cable and
associated splices, regenerators and other equipment placed in the IXC
System or the Vyvx System, as the case may be.
ARTICLE X. SERVICE INTERRUPTIONS
***
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shall mean any natural disaster which causes a Service Interruption, including
but not limited to, floods, earthquakes, volcanic eruptions, avalanches, rock
slides, mud slides, tornados and forest fires. Natural Disaster shall not
include disasters or other conditions primarily involving man-made equipment,
structures or transportation, as for example, train wrecks, bomb damage,
building fires or bridge collapse (except if caused by an event constituting a
Natural Disaster).
ARTICLE XI. ADDITIONAL FIBER REVENUE
A. Vyvx shall pay all costs associated with the installation of all fibers
in the fiber bundle on the Vyvx System. All fibers in the initial fiber bundle
in excess of **** fibers shall be referred to as the "Additional Fibers." The
Additional Fibers shall be at least **** fibers and may be increased upon the
mutual consent of the Parties. **** Neither Party's approval to an Additional
Fiber Transaction shall be unreasonably withheld. As an example, and without
limitation as to other reasonable objections to a proposed Additional Fiber
Transaction, neither party shall be required to approve any Additional fiber
Transaction that would (i) cause a lien or any other encumbrance on the Vyvx
System or on the property of IXC or Vyvx, or their parents or affiliates or (ii)
in any way impair the operations of Vyvx, its parent, its affiliates or the Vyvx
System.
B. During the Term of this Agreement and the period before IRU's on all
the Additional Fibers are Sold, neither Party shall ****. The foregoing,
however, shall not limit the rights of either Party to sell, lease or trade
transmission capacity (as opposed to dark fiber transactions) on its fibers in
the IXC or Vyvx Systems. ****
C. Vyvx shall terminate IXC's Additional Fiber Option with respect to any
Additional Fibers prior to or contemporaneously with the grant of an IRU
pursuant to an
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<PAGE> 16
Additional Fiber Transaction. ****
****
D. ****. The Parties shall then distribute the Remaining Fibers, with IXC
having an undivided IRU interest (governed by the relevant provisions of this
Agreement) in the Remaining Fibers assigned to it and Williams having undivided
full use of the other Remaining Fibers unencumbered by the Additional Fiber
Option. The
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Remaining Fibers will then be distributed in accordance with the following steps
and in the following order of priority:
****
E. ****
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<PAGE> 18
****
F. If a party (the "Selling Party") submits a written request
for approval of an Additional Fiber Transaction to the other party,
preceded by or accompanied by the proposed IRU Agreement and all Exhibits
documenting such Additional Fiber Transaction, the Reviewing Party shall
respond, within fifteen (15) business days of receiving such request,
either approving such terms or providing specific changes to such terms.
After receipt of and subject to a letter of consent from the Reviewing
Party, the Selling Party may enter into an Additional Fiber Transaction
that complies with the provisions of this Agreement relating to Additional
Fiber Transactions, such consent not to be unreasonably delayed or
withheld.
G. ****
H. ****
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ARTICLE XII. TERM AND RENEWAL
A. The Initial Term of this Agreement shall begin on the Effective
Date and shall end on the earlier of: (i) the IXC ROW Termination Date or (ii)
twenty years from the Both Party Completion Date. The "IXC ROW Termination
Date" shall be the later of: (i) January 1, 2016 or (ii) the latest date
through which IXC is able (using its commercially reasonable efforts) to extend
the rights-of-way, IRU's or other underlying rights to continue to maintain the
IXC System in place.
B. Each party will exercise commercially reasonable efforts to
renew or replace existing right-of-way, IRU's or other underlying rights to
continue to maintain such party's System in place beyond the Initial Term. If
the Constructing Party determines it is not commercially practicable to renew or
replace its existing rights-of-way, IRU's or other underlying rights, then the
Constructing Party shall cooperate with the other party and allow such other
party to attempt to renew or replace such right-of-way, IRU's or other
underlying rights, but at such other party's sole expense. If both parties are
able to renew or replace all material existing rights-of-way, IRUs or other
underlying rights to continue to maintain each party's System in place for the
applicable term, this Agreement, including the leasehold interests or the IRUs
granted under this Agreement, may be renewed for two renewal terms of **** years
each or, if shorter, the term remaining under any material R of W Agreement, IRU
or other underlying right (a "Renewal Term"). Either party may renew this
Agreement at the end of the Initial Term or any Renewal Term by giving written
notice to the other party during the period between March 31 and July 1 of the
calendar year preceding the calendar year of the expiration of the Initial Term
or the then effective Renewal Term. All terms and conditions of this Agreement
shall be applicable to any Renewal Terms. The Initial Term and any Renewal Term
exercised under this Agreement shall be collectively referred to as the "Term."
C. ****
D. ****
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ARTICLE XIII. OPERATION, MAINTENANCE AND REPAIR OF THE IXC SYSTEM
A. During the Term hereof, IXC shall be responsible, at its sole
expense (including training), for the emergency and non-emergency maintenance
and repair of the IXC System, the Vyvx IRU Fibers and any common equipment of
IXC and Vyvx on the IXC System, all pursuant to the operations and
specifications set forth on Exhibit E so as to assure continuing conformity of
the IXC System and the Vyvx IRU Fibers with their respective specifications,
including replacement of individual fibers and any maintenance as is reasonably
necessary for the normal operation of the IXC System and the Vyvx IRU Fibers.
IXC, at Vyvx's sole expense and at IXC's then prevailing rates, shall perform
maintenance and repair necessitated by Vyvx's negligence or willful misconduct
or Vyvx's elective maintenance or repair requests. IXC shall not be responsible
for maintenance or repair of any Vyvx equipment except as set forth above.
B. IXC may subcontract for maintenance and restoration services
hereunder. Notwithstanding any other provisions of this Agreement, IXC shall
require the subcontractor(s) to meet maintenance and repair standards for the
IXC System which shall be at least as high as those standards utilized by IXC
for the maintenance and repair of other portions of its communications systems.
IXC shall be responsible for splicing of the cables in the IXC System so as to
assure continuing conformity with their respective specifications, including,
without limitation, conducting continual monitoring of the cable system
containing the Vyvx IRU Fibers in the IXC System, location of faults, splicing
and splice testing associated with any restoration, and procurement of
replacement cable used in restoration. IXC shall, at no charge to Vyvx, perform
or cause its subcontractor(s) to perform routine inspections of the IXC System
and routine right-of-way maintenance in accordance with its standard
maintenance procedures, including, without limitation, any flights that may be
made over the routes where the IXC System is located. The use of any such
subcontractor shall not relieve IXC of any of its obligations hereunder. In the
event IXC determines to Subcontract over half of its maintenance and/or
restoration work on its System, it shall give Vyvx the opportunity to perform
such work if Vyvx agrees to match the best rates and terms offered for such
work by a third party.
C. Vyvx will perform all maintenance on Vyvx equipment on the IXC
System, however, in the event IXC agrees to perform repair or maintenance with
respect to such Vyvx equipment, Vyvx shall pay for all repair and maintenance
of such equipment performed by IXC at IXC's rates then in effect. IXC shall, on
or before January 1 of each year during the Term, provide Vyvx notice of IXC's
rates for repair and maintenance for such calendar year. Vyvx reserves the
right to perform maintenance on any of its own equipment wherever located.
D. IXC shall use its best reasonable efforts to respond to any
interruption of service or a failure of the Vyvx IRU Fibers to perform in
accordance with the specifications in Exhibits C-1, C-3, C-4, C-5 and Exhibit E
(in any event, an "Outage") as quickly as possible in accordance with the
procedures set forth in Exhibit E. In the event the Outage is not cured
within ****, subject to the
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<PAGE> 21
provisions of applicable R of W Agreements. ****
E. IXC shall use such care in performing repair and maintenance pursuant
to this Agreement which equals or exceeds that which is normal and customary in
the telecommunications industry.
F. In the event of damage to the IXC System which results from a specific
accident or disaster, or deterioration of the fibers in IXC System requiring
the replacement of fibers ("IXC Damage or Deterioration"), Vyvx shall pay a
proportional amount (according to the number of Vyvx fibers (i.e., fibers in
which Vyvx owns or leases an IRU at the time of the incident) relative to the
total fibers in the IXC System) of any additional costs incurred in repairing
such IXC Damage or Deterioration, unless such IXC Damage or Deterioration is
due to ****. IXC agrees that no request for reimbursement from Vyvx shall be
made unless Vyvx's proportional amount of the repair or replacement cost for
such project exceeds ****.
G. Vyvx shall pay IXC's invoice for Vyvx's proportional amount of the cost
to repair the IXC Damage or Deterioration within thirty (30) days after receipt
of the invoice. Upon request by Vyvx, IXC will promptly provide the necessary
substantiating information which will allow Vyvx to verify the accuracy of the
invoice.
H. Vyvx shall pay IXC (1) **** per month, payable at the end of each month
and (2) **** (as defined below), for performance of the maintenance and
repair services (excluding the cost of repairing IXC Damage or Deterioration)
set forth in this Article. ****
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<PAGE> 22
ARTICLE XIV. OPERATION, MAINTENANCE AND REPAIR OF THE VYVX SYSTEM
A. During the term hereof, Vyvx shall be responsible, at its sole
expense (including training), for the maintenance and repair of the Vyvx
System, the IXC IRU Fibers and any common equipment of IXC and Vyvx on the
Vyvx System, all pursuant to the operations specifications set forth on Exhibit
E so as to assure continuing conformity of the Vyvx System and the IXC IRU
Fibers with their respective specifications, including replacement of
individual fibers and any maintenance as Vyvx is reasonably necessary for the
normal operation of the Vyvx System and the IXC IRU Fibers. Vyvx, at IXC's sole
expense and at Vyvx's then prevailing rates, shall perform maintenance and
repair necessitated by IXC's negligence or
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<PAGE> 23
willful misconduct or IXC's elective maintenance or repair requests. Vyvx shall
not be responsible for any maintenance or repair of any IXC equipment except as
set forth above.
B. Vyvx may subcontract for maintenance and restoration services
hereunder. Notwithstanding any other provisions of this Agreement, Vyvx shall
require the subcontractor(s) to meet maintenance and repair standards for the
Vyvx System which shall be at least as high as those standards utilized by Vyvx
for the maintenance and repair of other portions of its communications systems.
Vyvx shall be responsible for splicing of the cables in the Vyvx System so as
to assure continuing conformity with their respective specifications,
including, without limitation, conducting continual monitoring of the cable
system containing the IXC IRU Fibers in the Vyvx System, location of faults,
splicing and splice testing associated with any restoration, and procurement of
replacement cable used in restoration. Vyvx shall, at no charge to IXC, perform
or cause its subcontractor(s) to perform routine inspections of the Vyvx System
and routine right-of-way maintenance in accordance with its standard
maintenance procedures, including, without limitation, any flights that may be
made over the routes where the Vyvx System is located. The use of any such
subcontractor shall not relieve Vyvx of its obligations hereunder. In the event
Vyvx determines to subcontract over half of its maintenance and/or restoration
work on its System, it shall give IXC the opportunity to perform such work if
IXC agrees to match the best rates and terms offered for such work by a third
party.
C. IXC will perform all maintenance on IXC equipment on the Vyvx System,
however, in the event Vyvx agrees to perform repair or maintenance with respect
to such IXC equipment, IXC shall pay for all repair and maintenance of such
equipment performed by Vyvx at Vyvx rates then in effect. Vyvx shall, on or
before January 1 of each year during the Term, provide IXC notice of Vyvx rates
for repair and maintenance for such calendar year. IXC reserves the right to
perform maintenance on any of its own equipment wherever located.
D. Vyvx shall use its best reasonable efforts to respond to any Outage
on the IXC IRU Fibers as quickly as possible in accordance with the procedures
set forth in Exhibit E. In the event the Outage is not cured within **** subject
to the provisions of applicable R of W Agreements. In such event, ****
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<PAGE> 24
E. Vyvx shall use such care in performing repair and maintenance
pursuant to this Agreement which equals or exceeds that which is normal and
customary in the telecommunications industry.
F. In the event of damage to the Vyvx System which results from a
specific incident or disaster, or deterioration of the fibers in Vyvx System
requiring replacement of fibers ("Vyxx Damage or Deterioration"), IXC shall pay
a proportional amount (according to the number of IXC fibers (i.e., fibers in
which IXC owns or leases an IRU at the time of the incident) relative to the
total fibers in the Vyvx System) of any additional costs incurred in repairing
such Vyvx Damage or Deterioration, unless such Damage or Deterioration is due to
the ****. Vyvx agrees that no request for reimbursement from IXC shall be made
unless IXC's proportional amount of the repair or replacement cost for such
project exceeds ****
G. IXC shall pay Vyvx's invoice for IXC's proportional amount of
the cost to repair the Vyvx Damage or Deterioration within thirty (30) days
after receipt of the invoice. Upon request by IXC, Vyvx will promptly provide
the necessary substantiating information which will allow IXC to verify the
accuracy of the invoice.
H. IXC shall pay Vyvx **** per month, payable at the end of each
month, for performance of the maintenance and repair services (excluding the
cost of repairing Vyvx Damage or Deterioration) set forth in this Article.
<PAGE> 25
ARTICLE XV. PERMITS; PHYSICAL PLANT AND REQUIRED RIGHTS
A. As of the **** IXC will have obtained (and will cause to remain
effective through the Term of this Agreement) all R of W Agreements, including
without limitation, rights, licenses, authorizations, rights-of-way and other
agreements necessary for the use of poles, conduit, cable, wire or other
physical plant facilities, as well as any other such rights, licenses,
authorizations (including any necessary state, tribal or federal authorizations
such as environmental permits), rights-of-way and other agreements necessary for
the installation and use of the IXC System hereunder (all of which are referred
to as "IXC Required Rights"). Vyvx shall have the right to review all documents
reflecting the IXC Required Rights.
B. As of ****, Vyvx will have obtained (and will cause to remain
effective through the Term of this Agreement) all R of W Agreements, including
without limitation, rights, licenses, authorizations, rights-of-way and other
agreements necessary for the use of poles, conduit, cable, wire or other
physical plant facilities, as well as any other such rights, licenses,
authorizations (including any necessary state, tribal or federal authorizations
such as environmental permits), rights-of-way and other agreements necessary
for the installation and use of the Vyvx System hereunder (all of which are
referred to as "Vyvx Required Rights"). IXC shall have the right to review all
documents reflecting the Vyvx Required Rights.
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C. In the event of the Constructing Party's refusal or claimed
inability to take the steps described in paragraphs A or B, as applicable, such
circumstances shall be communicated to the Non-Constructing Party in writing,
and, if such circumstance is not either due to an event identified in the
Article entitled Force Majeure or due to the Non-Constructing Party's fault,
the Non-Constructing Party shall be entitled to obtain specific performance from
the Constructing Party in addition to any other remedies available at law or in
equity.
ARTICLE XVI. RELOCATION.
A. If, for any reason, either party (the "Relocating Party") is
required to relocate the Cable or any of the facilities used or required in
providing the other party with its IRU, the Relocating Party shall give the
other party sixty (60) days prior notice of any such relocation, if possible and
shall have the obligation to proceed with such relocation, including, but not
limited to, the right to determine the extent of, the timing of, and methods to
be used for such relocation; provided that any such relocation: (i) shall be
constructed and tested in accordance with the specifications and requirements
set forth in Exhibits C-1, C-2, C-3, C-4, C-5 and C-6, and (ii) shall not result
in an adverse change to the operations, performance, connection points with the
network of the other party, or end points of the applicable System. The
Relocating Party shall relocate the affected portion of its System and so long
as such relocation is not necessitated by a breach of the Relocating Party's
obligations under this Agreement, the other party shall reimburse the Relocating
Party for the other party's proportionate share of all Relocation Costs,
including, without limitation, fiber acquisition, splicing and testing, pro
rated based on the party's owned or leased IRUs to the total fiber count in the
affected Cable so relocated. In the event that a third party (which does not
have an interest in the fibers on the Cable) reimburses the Relocating Party for
all of or a portion of the cost to relocate the Relocating Party's System, then
this reimbursement amount shall reduce on a dollar for dollar basis the
aggregate amount of Relocation Costs deemed to have been spent by the Relocating
Party under this Article. The Relocating Party agrees that no request for
reimbursement from the other party shall be requested unless the other party's
proportional amount of the Relocation Costs for such project exceeds ****. The
Relocating Party shall deliver to the other party updated as-built drawings as
set forth in Exhibit D with respect to any relocated portion of its System not
later than one hundred eighty (180) days following the completion of such
relocation.
B. The Relocating Party's invoice for the other party's
proportional amount of the Relocation Costs shall be paid within thirty (30)
days after receipt of the invoice by such party. Upon request by such party, the
Relocating Party will promptly provide the necessary substantiating information
which will allow the other party to verify the accuracy of the invoice.
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ARTICLE XVII. USE OF IXC SYSTEM AND VYVX SYSTEM
A. Each of Vyvx and IXC warrants that its use of the IXC System and
the Vyvx System, respectively, shall comply with all applicable government
codes, ordinances, laws, rules, regulations and/or restrictions.
B. The IRUs to be leased or granted to each party hereunder shall
include, without limitation, the right to install additional equipment, or
replace existing equipment at each Transmission Site on the other party's
System. Each party shall provide the other party with space in regenerator,
optical/amplifier, and junction sites ****. Such Transmission Sites will meet or
exceed the power and building requirements specified in Exhibits C-5 and C-6.
All equipment installed at regenerator facilities shall be maintained in
accordance with the terms set forth herein. In addition, each party will have
the right, subject to availability, to space and power at the sites of the other
party listed in Exhibit A or Exhibit B, as applicable, at such other party's
then prevailing rates (which rates shall not be unreasonable).
C. Either party shall have the right to abandon its lease or
ownership of IRUs in the other party's System (in which event the right to the
use thereof would revert to the other party), at which time the abandoning
party shall have no further rights with respect to its IRU. Such abandonment
shall not reduce or otherwise affect the abandoning party's obligations to
continue to pay the Permanent Lease Fee or any other obligations hereunder.
D. Each Party may use its IRU or IRU lease for any lawful purpose.
During the term of any IRU grant or IRU lease, IXC agrees and acknowledges that
it has no right to use the Vyvx IRU Fibers subject to such grant or lease and
Vyvx agrees and acknowledges that it has no right to use the IXC IRU Fibers
subject to such grant or lease.
E. Vyvx and IXC shall promptly notify each other of any matters
pertaining to any damage or impending damage to or loss of the Vyvx System or
the IXC System, respectively, that are known to such party.
F. IXC shall respect Vyvx's right to its use of the Vyvx IRU
Fibers, and Vyvx shall respect IXC's right to its use of the IXC IRU Fibers.
Each Party shall take all reasonable precautions against, and assume liability,
subject to the terms herein, for, any damage caused by such Party to the fibers
in the IXC or Vyvx Cable that the other Party owns or in which it holds an IRU
or IRU lease.
G. Neither Party shall use fibers that it owns or in which it holds
an IRU or IRU lease in a way that interferes in any way with or adversely
affects the use of the fibers the other Party owns or in which the other Party
holds an IRU or IRU lease.
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H. Vyvx and IXC each agree to cooperate with and support the
other in complying with any requirements applicable to the fiber by any
governmental or regulatory agency or authority.
I. Subject to availability of space and power, either party
shall be entitled to collocate in locations of the other party at the then
currently published rates. Each party shall install its own equipment in each
location and regeneration station. The Constructing Party shall deliver all
power to the appropriate bays.
J. Except as otherwise explicitly set forth herein, neither
party shall charge the other party any maintenance charges arising from or
related to R of W Agreements.
ARTICLE XVIII. INDEMNIFICATION
A. IXC hereby releases and agrees to indemnify, defend, protect
and hold harmless Vyvx, its employees, officers, directors, agents, shareholders
and affiliates, from and against, and assumes liability for:
1. Any injury, death, loss or damage to any person,
tangible property or facilities of any person or entity (including reasonable
attorneys' fees and costs), to the extent arising out of or resulting from the
acts or omissions, negligent or otherwise, of IXC, its officers, employees,
servants, affiliates, agents or contractors in connection with its performance
under this Agreement;
2. Any claims, liabilities or damages arising out of any
violation by IXC of regulations, rules, statutes or court orders of any local,
state or federal governmental agency, court or body in connection with it's
performance under this Agreement; and
3. Any and all losses, damages, expenses, cost and
liabilities for anything and everything whatsoever arising in any way from or
out of the presence of any Hazardous Materials in, on, under, at or about the
IXC System route or originating in, on, under, at or about the IXC System route
and migrating offsite, regardless of the source of such Hazardous Materials,
including, without limitation, any damage to property or personal injury
incurred by any party; provided, however, that nothing contained herein shall
require IXC to remediate or indemnify, defend, protect or hold Vyvx harmless
from and against any loss, damage, expense, cost and/or liability arising in any
way from or out of any environmental condition arising out and to the extent of
the negligence or willful misconduct of Vyvx. The indemnity set forth in this
paragraph includes, without limitation, (i) any reasonable expense relating to
the time or travel of any employee or other individual involved in the defense
of a claim, reasonable costs associated with consultants or witnesses,
reasonable attorneys' fees and costs associated with investigation, preparation,
mediation, arbitration or litigation; (ii) all costs
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associated with remediation including but not limited to testing, sampling,
assessment, investigation, response, clean-up, detoxification, containment,
closure, restoration, repair, removal, transport, storage, or disposal or other
remedial work which is required or reasonably necessary to comply with any
environmental agency, any law or court order, or reasonably necessary in the
application of prudent environmental engineering standards; and (iii) costs
associated with claims for damage to persons, property or natural resources
related to the presence of any Hazardous Materials.
B. Vyvx hereby release and agrees to indemnify, defend, protect and hold
harmless IXC, its employees, officers, directors, agents, shareholders and
affiliates, from and against, and assumes liability for:
1. Any injury, death, loss or damage to any person, tangible
property or facilities of any person or entity (including reasonable attorneys'
fees and costs), to the extent arising out of or resulting from the acts or
omissions, negligent or otherwise, of Vyvx, its officers, employees, servants,
affiliates, agents or contractors in connection with its performance under this
Agreement;
2. Any claims, liabilities or damages arising out of any violation
by Vyvx or regulations, rules, statutes or court orders of any local, state or
federal governmental agency, court or body in connection with its performance
under this Agreement; and
3. Any and all losses, damages, expenses, cost and liabilities for
anything and everything whatsoever arising in any way from or out of the
presence of any Hazardous Materials in, on, under, at or about the Vyvx System
route or originating in, on, under, at or about the Vyvx System route and
migrating offsite, regardless of the source of such hazardous Materials,
including, without limitation, any damage to property or personal injury
incurred by any party; provided, however, that nothing contained herein shall
require Vyvx to remediate or indemnify, defend protect or hold IXC harmless from
and against any loss, damage, expense, cost and/or liability arising in any way
from or out of any environmental condition arising out and to the extent of the
negligence or willful misconduct of IXC. The indemnity set forth in this
paragraph includes, without limitation, (i) any reasonable expense relating to
the time or travel of any employee or other individual involved in the defense
of a claim, reasonable costs associated with consultants or witnesses,
reasonable attorneys' fees and costs associated with investigation, preparation,
mediation, arbitration or litigation; (ii) all costs associated with remediation
including but not limited to testing, sampling, assessment, investigation,
response, clean-up, detoxification, containment, closure, restoration, repair,
removal, transport, storage, or disposal or other remedial work which is
required or reasonably necessary to comply with any environmental agency, any
law or court order, or reasonably necessary in the application of prudent
environmental engineering standards; and (iii) costs associated with claims for
damage to persons, property or natural resources related to the presence of any
Hazardous Materials.
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C. The parties hereby expressly recognize and agree that each
party's 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, hereunder. In the event that a party shall
fail for any reason to so indemnify, defend, protect and save the other
harmless, the injured party hereby expressly recognizes that its sole remedy in
such event shall be the right to bring an arbitration proceeding pursuant to the
terms of this Agreement against the other party for its damages as a result of
the other party's said failure to indemnify, defend, protect and save harmless.
These obligations shall survive the expiration or termination of this Agreement.
D. Nothing contained herein shall operate as a limitation on the
right of either party hereto to bring an action for damages against any third
party, including indirect, special or consequential damages, based on any acts
or omissions of such third party as such acts or omissions may affect the
construction, operation or use of the Vyvx IRU Fibers or the IXC IRU Fibers, as
the case may be; provided, however, that each party hereto shall assign such
rights of claims, execute such documents and do whatever else may be reasonably
necessary to enable the other party to pursue any such action against such third
party.
ARTICLE XIX. INSURANCE
A. During the term of this Agreement, each party shall obtain and
maintain and shall require any of its permitted contractors to obtain and
maintain not less than the following insurance:
1. Commercial General Liability Insurance with a combined single
limit of $2,000,000 for bodily injury and property damage.
2. Worker's Compensation Insurance in amounts required by
applicable law and Employers Liability Insurance with limits not less than
$500,000 each accident. If work is to be performed in Nevada, North Dakota,
Ohio, Washington, Wyoming or West Virginia, the party will participate in the
appropriate state fund(s) to cover all eligible employees and provide a stop gap
endorsement.
3. Automobile Liability Insurance with a combined single limit of
$1,000,000 for bodily injury and property damage, to include coverage for all
owned, non-owned and hired vehicles.
The limits set forth above are minimum limits and will not be
construed to limit either party's liability.
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B. Unless otherwise agreed, the Vyvx insurance policies required above
shall be obtained and maintained with companies rated A or better by Best's Key
Rating Guide and IXC, its parent and affiliated companies will be named as
additional insureds as respects the indemnifications under this Agreement. Vyvx
shall provide IXC with an insurance certificate confirming compliance with the
insurance requirements in Article XVIII. The insurance certificate shall
indicate that IXC shall be notified not less than thirty (30) days prior to any
cancellation or material change in coverage.
C. Unless otherwise agreed, the IXC insurance policies required above
shall be obtained and maintained with companies rated A or better by Best's Key
Rating Guide and Vyvx, its parent and affiliated companies will be named as
additional insureds as respects the indemnifications under this Agreement. IXC
shall provide Vyvx with an insurance certificate confirming compliance with the
insurance requirements in Article XVIII. The insurance certificate shall
indicate that Vyvx shall be notified not less than thirty (30) days prior to any
cancellation or material change in coverage.
D. In the event coverage is denied or reimbursement of a properly
presented claim is disputed by the carrier for insurance provided above, the
party carrying such coverage shall make commercially reasonable efforts to
pursue such claim with its carrier.
E. Vyvx and IXC shall each obtain from the insurance companies providing
the coverages required by this Agreement a waiver of all rights of subrogation
or recovery in favor of the other party, its parent corporation, affiliates,
subsidiaries, assignees, officers, directors, and employees or any other party
entitled to indemnity under this Agreement.
ARTICLE XX. TAXES AND FRANCHISE, LICENSE AND PERMIT FEES
A. Each of IXC and Vyvx shall be responsible for and shall timely pay any
and all (i) taxes and franchise, license and permit fees based on the physical
location of the IXC System or the Vyvx System, respectively, and/or the
respective construction thereof in or on public roads, highways or
rights-of-way; and (ii) right-of-way payments on the IXC System or the Vyvx
System, respectively. Failure of either party to pay such taxes or payments
which continues after seven (7) days written notice thereof by the other party,
shall authorize, but not obligate, the other party to make such payments and
such other party will then have the right to be reimbursed for such payments by
the party which failed to pay such taxes.
B. Each of IXC and Vyvx shall be responsible for any and all sales, use,
income, gross receipts or other taxes assessed on the basis of revenues received
by such party due to its use of the IXC IRU Fibers or the Vyvx IRU Fibers
respectively.
C. Notwithstanding any provision herein to the contrary, Vyvx shall have
the right to protest by appropriate proceedings the imposition and/or amount of
any taxes or
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franchise, license or permit fees imposed on or assessed against Vyvx,
including, but not limited to, any taxes or franchise, license or permit fees
assessed on the basis of revenues received by Vyvx due to its use of the IXC
System and/or based on the physical location of the IXC System and/or the
construction thereof. In such event, Vyvx shall indemnify and hold IXC harmless
from any expense, legal action or cost, including reasonable attorneys' fees,
resulting from Vyvx's exercise of its rights hereunder. In the event of any
refund, rebate, reduction or abatement to Vyvx of such taxes or franchise,
license or permit fees. Vyvx shall be entitled to receive the entire benefit of
such refund, rebate, reduction, or abatement attributable to Vyvx's use of the
IXC System. In the event Vyvx has exhausted all its rights of appeal in
protesting any imposition or assessment of any taxes or franchise, license or
permit fees, as previously described herein and has failed to obtain the relief
sought in such proceedings or appeals ("Finally Determined Taxes and Fees"),
Vyvx and IXC may jointly agree, at a cost to be shared equally, or either Vyvx
or IXC may at its sole option and cost, agree to relocate a portion of the fiber
optic system so as to bypass the jurisdiction which had imposed or assessed such
Finally Determined Taxes and Fees. If Vyvx and IXC, or either of them, do not
determine to relocate the fiber optic system, Vyvx shall have the right to
terminate its use of all or a portion of the Vyvx IRU Fibers over all or the
portion of the system affected by the relocation, at its sole option, without
any effect on the IXC IRU Fibers. Such termination shall be effective on the
date specified by Vyvx in a notice of termination, which date shall be at least
ninety (90) days after the notice. After such termination, Vyvx's IRU in the IXC
System or any part thereof as applicable shall immediately terminate and all
rights of Vyvx to use the IXC System or any part thereof as applicable, shall
cease and IXC may thereafter disconnect, terminate or remove the affected Vyvx
IRU Fibers and the IXC System for any purpose without any liability or
obligation to Vyvx. The parties agree to modify this Agreement as necessary to
reflect the fact that Vyvx has ceased to use all or a part of the IXC System.
D. Notwithstanding any provision herein to the contrary, IXC shall have
the right to protest by appropriate proceedings the imposition and/or amount of
any taxes or franchise, license or permit fees imposed on or assessed against
IXC, including, but not limited to, any taxes or franchise, license or permit
fees assessed on the basis of revenues received by IXC due to its use of the
Vyvx System and/or based on the physical location of the Vyvx System and/or the
construction thereof. In such event, IXC shall indemnify and hold Vyvx harmless
from any expense, legal action or cost, including reasonable attorneys' fees,
resulting from IXC's exercise of its rights hereunder. In the event of any
refund, rebate, reduction or abatement to IXC of such taxes or franchise,
license or permit fees, IXC shall be entitled to receive the entire benefit of
such refund, rebate, reduction or abatement attributable to IXC's use of the
Vyvx System. In the event IXC has exhausted all its rights of appeal in
protesting any imposition or assessment of any Finally Determined Taxes and
Fees, IXC and Vyvx may jointly agree, at a cost to be shared equally, or either
IXC or Vyvx may at its sole option and cost, agree to relocate a portion of the
fiber optic system so as to bypass the jurisdiction which had imposed or
assessed such Finally Determined Taxes and Fees. If IXC and Vyvx, or either of
them, do not determine to relocate the fiber optic system, IXC shall have the
right to terminate its use of all or a portion
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of the IXC IRU Fibers over all or the portion of the System affected by the
relocation at its sole option without any effect on the Vyvx IRU Fibers. Such
termination shall be effective on the date specified by IXC in a notice of
termination, which date shall be at least ninety (90) days after the notice.
After such termination, IXC's IRU in the Vyvx System or any part thereof as
applicable shall immediately terminate and all rights of IXC to use the Vyvx
System or any part thereof as applicable, shall cease and Vyvx may thereafter
disconnect, terminate or remove the affected IXC IRU Fibers and the Vyvx System
for any purpose without any liability or obligation to IXC. The parties agree
to modify this Agreement as necessary to reflect the fact that IXC has ceased
to use all or part of the Vyvx System.
E. Without the prior consent of the other party, neither party
shall enter into any agreement relating to any easement, right-of-way (or
similar right) for its System which provides for payment for such easement,
right-of-way or similar right based upon System usage, revenues, profitability
or other similar compensation method.
ARTICLE XXI. DISCLAIMER OF WARRANTY; LIMITATION OF LIABILITY
EXCEPT AS OTHERWISE SPECIFICALLY SET FORTH IN THIS AGREEMENT,
NEITHER PARTY MAKES ANY WARRANTY TO THE OTHER PARTY OR ANY OTHER PERSON OR
ENTITY, WHETHER EXPRESS, IMPLIED OR STATUTORY, AS TO THE DESCRIPTION, QUALITY,
MERCHANTABILITY, COMPLETENESS OR FITNESS FOR ANY PURPOSE OF ANY FIBERS OR ANY
SERVICE PROVIDED HEREUNDER OR DESCRIBED HEREIN, OR AS TO ANY OTHER MATTER, ALL
OF WHICH WARRANTIES ARE HEREBY EXCLUDED AND DISCLAIMED.
NOTWITHSTANDING ANY PROVISION OF THIS AGREEMENT TO THE CONTRARY
OTHER THAN IN THE ARTICLE ENTITLED INDEMNIFICATION, IN NO EVENT SHALL EITHER
PARTY BE LIABLE TO THE OTHER PARTY FOR ANY SPECIAL, INCIDENTAL, INDIRECT,
PUNITIVE, RELIANCE OR CONSEQUENTIAL DAMAGES, WHETHER FORESEEABLE OR NOT,
ARISING OUT OF, OR IN CONNECTION WITH, TRANSMISSION INTERRUPTIONS OR PROBLEMS,
INCLUDING, BUT NOT LIMITED TO, DAMAGE OR LOSS OF PROPERTY OR EQUIPMENT, LOSS OF
PROFITS OR REVENUE, COST OF CAPITAL, COST OF REPLACEMENT SERVICES, OR CLAIMS OF
CUSTOMERS, WHETHER OCCASIONED BY ANY REPAIR OR MAINTENANCE PERFORMED BY, OR
FAILED TO BE PERFORMED BY, THE FIRST PARTY OR ANY OTHER CAUSE WHATSOEVER,
INCLUDING, WITHOUT LIMITATION, BREACH OF CONTRACT, BREACH OF WARRANTY,
NEGLIGENCE OR STRICT LIABILITY. THIS PARAGRAPH SHALL NOT BE CONSTRUED TO LIMIT
EITHER PARTY'S ABILITY TO RECOVER UNDER THE ARTICLE ENTITLED INDEMNIFICATION
WITH RESPECT TO CLAIMS OF THIRD PARTIES BROUGHT AGAINST SUCH PARTY OR THE RIGHT
TO RECOVER LIQUIDATED DAMAGES
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UNDER THE ARTICLES ENTITLED COMPLETION OF THE SYSTEMS AND SERVICE INTERRUPTIONS.
PURSUANT TO THIS ARTICLE, NO PARTY SHALL BE PREVENTED FROM MAKING A
CLAIM OR FILING SUIT AGAINST AN INDEPENDENT CONTRACTOR FOR SPECIAL, INCIDENTAL,
INDIRECT, PUNITIVE, RELIANCE OR CONSEQUENTIAL DAMAGES ARISING OUT OF SUCH
INDEPENDENT CONTRACTOR'S PERFORMANCE OF MAINTENANCE OR REPAIR SERVICES FOR THE
SYSTEM OWNER, BUT THE PARTY MAKING THE CLAIM OR FILING SUIT AGREES THAT IT WILL
NOT SEEK RECOVERY OF SUCH DAMAGES TO THE EXTENT SUCH INDEPENDENT CONTRACTOR HAS
A CONTRACTUAL OR COMMON LAW RIGHT OF RECOVERY AGAINST OR AN INDEMNITY FROM THE
SYSTEM OWNER.
ARTICLE XXII. NOTICE
A. Unless otherwise provided herein, all notices and communications
concerning this Agreement shall be in writing and addressed to the other party
as follows:
If to IXC: IXC Carrier, Inc.
Attn: Chief Financial Officer
5000 Plaza on the Lake
Suite 200
Austin, TX 78746
Facsimile No.: (512) 328-0239
with a copy to: Michael P. Whalen, Esq.
Riordan & McKinzie
695 Town Center Drive
Suite 1500
Costa Mesa, CA 92626
Facsimile No.: (714) 549-3244
If to Vyvx: Vyvx, Inc.
Attn: Chief Operating Officer
111 East First Street
Tulsa, OK 74103-2808
Facsimile No.: (918) 561-6024
and to: General Counsel
Vyvx, Inc.
One Williams Center
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Tulsa, OK 74172
Facsimile No.: (918) 588-3005
If to WilTech: The WilTech Group
Attn: Chief Operating Officer
111 East First Street
Tulsa, OK 74103-2808
Facsimile No.: (918) 561-6024
and to: General Counsel
The WilTech Group, Inc.
One Williams Center
Tulsa, OK 74172
Facsimile No.: (918) 588-3005
or at such other address as may be designated in writing to the other party.
B. Unless otherwise provided herein, notices shall be sent by
registered or certified U.S. Mail, postage prepaid, or by commercial overnight
delivery service, or by facsimile, and shall be deemed served or delivered to
the addressee or its office on the date of receipt acknowledgment or, if postal
claim notices are given, on the date of its return marked "unclaimed,"
provided, however, that upon receipt of a returned notice marked "unclaimed,"
the sending party shall make reasonable effort to contact and notify the other
party by telephone.
ARTICLE XXIII. CONFIDENTIALITY
A. If the parties to this Agreement have entered into (or later
enter into) a Confidentiality Agreement, the terms of such an agreement shall
control and paragraph B of this Article shall not apply; however, if any such
Confidentiality Agreement expires or is no longer effective at any time during
the Term of this Agreement, paragraph B of this Article shall be in effect
during those periods.
B. In the absence of a separate Confidentiality Agreement between
the parties, if either party provides confidential information to the other in
writing and identified as such, the receiving party shall protect the
confidential information from disclosure to third parties with the same degree
of care accorded its own confidential and proprietary information. Neither
party shall be required to hold confidential any information which (i) becomes
publicly available other than through the recipient; (ii) is required to be
disclosed by a governmental or judicial order, rule or regulation; (iii) is
independently developed by the disclosing party; or (iv) becomes
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available to the disclosing party without restriction from a third party. These
obligations shall survive expiration or termination of this Agreement.
C. Notwithstanding paragraph A and B of this Article, confidential
information shall not include information disclosed by the receiving party as
required by applicable law or regulation, provided, however, that the
information disclosed is limited to the existence and general nature of the
relationship between the parties, including, as required, the scope,
approximate revenues, purposes and expectations related to such relationship
and a description of any disputes relating thereto. Notwithstanding the
foregoing, this Agreement may be provided to any governmental agency or court
of competent jurisdiction to the extent required by applicable law.
D. Neither party, nor their respective affiliates, including any
shareholders, directors or officers of either of them, shall, without the
written consent of the other party, make any announcement or other disclosure
relating to the Agreement herein, except to their professional advisers, unless
otherwise required by law. In the event of such a disclosure required by law,
the disclosing party shall serve prompt notice on the nondisclosing party prior
to the required disclosure. Each party shall disclose the Agreement herein to
professional advisers and to their respective employees on a need-to-know basis
only, and shall instruct such persons to maintain confidentiality.
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ARTICLE XXIV. DEFAULT
A. Vyvx shall not be in default under this Agreement herein unless
and until IXC shall have given Vyvx written notice of such default and Vyvx
shall have failed to cure the same within thirty (30) days after receipt of such
notice; provided, however, that where such default cannot reasonably be cured
within such thirty (30) day period, if Vyvx shall proceed promptly to cure the
same and prosecute such curing with due diligence, the time for curing such
default shall be extended for a period no longer than sixty (60) days from the
date of the receipt of the default notice. Events of default shall include, but
not be limited to, the making by Vyvx of a general assignment for the benefit of
its creditors, the filing of a voluntary petition in bankruptcy or the filing of
a petition in bankruptcy or other insolvency protection against Vyvx which is
not dismissed within ninety (90) days thereafter, or the filing by Vyvx of any
petition or answer seeking, consenting to, or acquiescing in reorganization,
arrangement, adjustment, composition, liquidation, dissolution or similar
relief. Any event of default by Vyvx may be waived under the terms of this
Agreement at IXC's option. Upon the failure by Vyvx to timely cure any such
default after notice thereof from IXC, IXC may (i) take such action as it
determines, in its sole discretion, to be necessary to correct the default, and
(ii) pursue any legal remedies it may have under applicable law or principles of
equity relating to such breach. Notwithstanding the above, if Vyvx certifies to
IXC in writing that a default has been cured, such default shall be deemed to be
cured unless IXC otherwise notifies Vyvx in writing within fifteen (15) days of
receipt of such notice from Vyvx.
B. IXC shall not be in default under this Agreement herein unless
and until Vyvx shall have given IXC written notice of such default and IXC
shall have failed to cure the same within thirty (30) days after receipt of
such notice; provided, however, that where such default cannot reasonably be
cured within such thirty (30) day period, if IXC shall proceed promptly to cure
the same and prosecute such curing with due diligence, the time for curing such
default shall be extended for a period no longer than sixty (60) days from the
date of the receipt of the default notice. Events of default shall include, but
not be limited to, the making by IXC of
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a general assignment for the benefit of its creditors, the filing of a
voluntary petition in bankruptcy or the filing of a petition in bankruptcy or
other insolvency protection against IXC which is not dismissed within ninety
(90) days thereafter, or the filing by IXC of any petition or answer seeking,
consenting to, or acquiescing in reorganization, arrangement, adjustment,
composition, liquidation, dissolution or similar relief. Any event of default
by IXC may be waived under the terms of this Agreement at Vyvx option. Upon the
failure by IXC to timely cure any such default after notice thereof from Vyvx,
Vyvx may (i) take such action as it determines, in its sole discretion, to be
necessary to correct the default, and (ii) pursue any legal remedies it may
have under applicable law or principles of equity relating to such breach.
Notwithstanding the above, if IXC certifies to Vyvx in writing that a default
has been cured, such default shall be deemed to be cured unless Vyvx otherwise
notifies IXC in writing within fifteen (15) days of receipt of such notice from
IXC.
ARTICLE XXV. TERMINATION
A. Upon expiration of the Term of this Agreement, IXC's IRU (if any),
IRU leases, Cash Option, Note Option and Additional Fiber Option shall
immediately terminate (except to the extent they have already expired or
terminated) and all rights of IXC to use the Vyvx System, or any part thereof,
shall cease and Vyvx shall owe IXC no additional duties or consideration. IXC
shall remove all electronics and equipment from any Vyvx facilities at its sole
cost under Vyvx's supervision.
B. Upon expiration of the Term of this Agreement, Vyvx's IRU's, IRU
leases, Cash Option and Note Option, shall immediately terminate (except to the
extent they have already expired or terminated) and all rights of Vyvx to use
the IXC System, or any part thereof, shall cease and IXC shall owe Vyvx no
additional duties or consideration. Vyvx shall remove all electronics and
equipment from any IXC facilities at its sole cost under IXC's supervision.
C. Notwithstanding the foregoing, no termination of this Agreement shall
affect the rights or obligations of any party hereto with respect to any
payment hereunder for services rendered prior to the date of termination or
pursuant to the Articles entitled Indemnification, Insurance, Arbitration, and
Taxes and Franchise, License and Permit Fees herein.
ARTICLE XXVI. FORCE MAJEURE
Neither party shall be in default under this Agreement nor be
classified as a Late Party with respect to any delay in such party's
performance caused by any of the following conditions: (i) act of God, (ii)
fire, (iii) flood, (iv) material shortage or unavailability not resulting from
the responsible party's failure to timely place orders or take other necessary
actions therefor, (v) lack of transportation, (vi) legal inability to access
property,
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(vii) government codes, ordinances, laws, rules, regulations or restrictions
(collectively, "Regulations") (but not to the extent the delay caused by such
Regulations could be avoided by rerouting the Cable if such a reroute was
commercially reasonable), (viii) war or civil disorder, or (ix) any other cause
beyond the reasonable control of such party, provided that in order to be
classified as a force majeure event, the delay occasioned by the existence of
one of the events identified in (i) through (ix) shall have a duration of at
least thirty (30) consecutive days. The party claiming relief under this Article
shall promptly notify the other in writing of the existence of the event(s) (i)
through (ix) relied on, the expected duration of the force majeure event, and
the cessation or termination of said event. The party claiming relief under this
Article shall exercise commercially reasonable efforts to minimize the time for
any such delay. Notwithstanding the foregoing, except as set forth in the
Article entitled Service Interruptions with respect to Natural Disasters, no
event described in this Article shall effect or diminish the obligations of
either party with respect to Service Interruptions or Outage Damage Payments.
ARTICLE XXVII. ARBITRATION
A. Any dispute or disagreement arising between IXC and Vyvx
in connection with this Agreement which is not settled to the mutual
satisfaction of IXC and Vyvx within thirty (30) days from the date that either
party informs the other in writing that such dispute or disagreement exists,
shall be settled by arbitration in Dallas, Texas, in accordance with the
Commercial Arbitration Rules of the American Arbitration Association in effect
on the date that such notice is given. If the parties are unable to agree on a
single arbitrator within fifteen (15) days from the date of receipt of the
notice notifying a party of a dispute or disagreement, each party shall select
an arbitrator within fifteen (15) days and the two (2) arbitrators shall select
a third arbitrator within ten (10) days. The decision of the arbitrator(s) shall
be final and binding upon the parties and shall include written findings of law
and fact, and judgment may be obtained thereon by either party in a court of
competent jurisdiction. Each party shall bear the cost of preparing and
presenting its own case. The cost of the arbitration, including the fees and
expenses of the arbitrator(s), shall be shared equally by the parties hereto
unless the award otherwise provides. The arbitrator(s) shall be instructed by
the parties to establish procedures such that a decision can be rendered by the
arbitrator(s) within sixty (60) days of their appointment.
B. The obligation herein to arbitrate shall not be binding
upon any party with respect to requests for preliminary injunctions, temporary
restraining orders, specific performance or other procedures in a court of
competent jurisdiction to obtain interim relief when deemed necessary by such
court to preserve the status quo or prevent irreparable injury pending
resolution by arbitration of the actual dispute.
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ARTICLE XXVIII. WAIVER
The failure of either party hereto 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 on its part of any such
provision, but the same shall nevertheless be and remain in full force and
effect.
ARTICLE XXIX. GOVERNING LAW
This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Oklahoma without reference to
its choice of law principles.
ARTICLE XXX. RULES OF CONSTRUCTION
A. The captions or headings in this Agreement are strictly
for convenience and shall not be considered in interpreting this Agreement or as
amplifying or limiting any of its content. Words in this Agreement which import
the singular connotation shall be interpreted as plural, and words which import
the plural connotation shall be interpreted as singular, as the identity of the
parties or objects referred to may require.
B. Unless expressly defined herein, words having well-known
technical or trade meanings shall be so construed. All listing of items shall
not be taken to be exclusive, but shall include other items, whether similar or
dissimilar to those listed, as the context reasonably requires.
C. Except as set forth to the contrary herein, any right or
remedy of Vyvx or IXC shall be cumulative and without prejudice to any other
right or remedy, whether contained herein or not.
D. Nothing in this Agreement is intended to provide any
legal rights to anyone not an executing party of this Agreement.
E. This Agreement has been fully negotiated between and
jointly drafted by the parties.
F. In the event of a conflict between the provisions of this
Agreement and those of any Exhibit, the provisions of this Agreement shall
prevail and such Exhibits shall be corrected accordingly.
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G. All actions, activities, consents, approvals and other
undertakings of the parties in this Agreement shall be performed in a
reasonable and timely manner. Except as specifically set forth herein, for the
purpose of this Article the normal standards of performance within the
telecommunications industry in the relevant market shall be the measure of
whether a party's performance is reasonable and timely.
ARTICLE XXXI. ASSIGNMENT
A. Except as provided below, IXC shall not assign or
otherwise transfer this Agreement or its rights or obligations hereunder to any
other party (except to its corporate parent or to majority or wholly-owned
subsidiaries of IXC or its parent) without the prior written consent of Vyvx,
which will not be unreasonably withheld or delayed; provided, however, that
IXC may sell, lease or otherwise transfer all or a portion of its rights in any
of the IXC IRU Fibers or in its interest in the Additional Fibers without Vyvx
consent provided (i) it is in accordance with the Article entitled Additional
Fiber Revenue, and (ii) such third party lessee or IRU owner is subject to and
bound by provisions substantially the same as those set forth in Exhibit G. IXC
shall have the right, without Vyvx consent, to assign or otherwise transfer
this Agreement as collateral to any lender or to any parent, subsidiary or
affiliate of IXC or to any person, firm or corporation which shall control, be
under the control of or be under common control with IXC, or any corporation
into which IXC may be merged or consolidated or which purchases all or
substantially all of the assets of IXC; provided, however, (i) that any such
assignment or transfer shall be subject to Vyvx rights under this Agreement and
any assignee or transferee shall continue to perform IXC's obligations to Vyvx
under the terms and conditions of this Agreement and (ii) as a part of such
assignment, IXC shall require that no further assignments of this Agreement or
any of the rights and obligations under the Agreement be permitted except with
the prior written consent of Vyvx. In the event of any permitted partial
assignment of any rights hereunder or in any fibers, IXC shall remain the sole
point of contact with Vyvx.
B. Except as provided below, Vyvx shall not assign or otherwise
transfer this Agreement or its rights or obligations hereunder to any other
party (except to its corporate parent or majority or wholly-owned subsidiaries
of Vyvx or its parent) without the prior written consent of IXC, which will not
be unreasonably withheld or delayed; provided, however, that Vyvx may sell,
lease or otherwise transfer its rights in any of the Vyvx IRU Fibers without
IXC's consent so long as such third party lessee or IRU owner is subject to and
bound by provisions substantially the same as those set forth in Exhibit G. Vyvx
shall have the right, without IXC's consent, to assign or otherwise transfer
this Agreement as collateral to any institutional lender or to any parent,
subsidiary or affiliate of Vyvx or to any person, firm or corporation which
shall control, be under the control of or be under common control with Vyvx, or
any corporation into which Vyvx may be merged or consolidated or which
purchases all or substantially all of the assets of Vyvx; provided, however,
that (i) any such assignment or transfer shall be subject to
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IXC's rights under this Agreement and any assignee or transferee shall continue
to perform Vyvx obligations to IXC under the terms and conditions of this
Agreement and (ii) as a part of such assignment Vyvx shall require that no
further assignments of this Agreement or any of the rights and obligations
under the Agreement be permitted except with the prior written consent of IXC.
In the event of any permitted partial assignment of any rights hereunder or in
any fibers, Vyvx shall remain the sole point of contact with IXC.
C. This Agreement and each of the parties' respective rights and
obligations under this Agreement, shall be binding upon and shall inure to the
benefit of the parties hereto and each of their respective permitted successors
and assigns.
ARTICLE XXXII. REPRESENTATIONS AND WARRANTIES
Each party represents and warrants that:
1. It has the full right and authority to enter into, execute,
deliver and perform its obligations under this Agreement;
2. It has taken all requisite corporate action to approve the
execution, delivery and performance of this Agreement;
3. This Agreement constitutes a legal, valid and binding obligation
enforceable against such party in accordance with its terms; and
4. Its execution of and performance under this Agreement shall not
violate any applicable existing regulations, rules, statutes or court orders of
any local, state or federal government agency, court or body.
ARTICLE XXXIII. ENTIRE AGREEMENT: AMENDMENT
This Agreement constitutes the entire and final agreement and
understanding between the parties with respect to the subject matter hereof and
supersedes all prior agreements relating to the subject matter hereof, which
are of no further force or effect. The Exhibits referred to herein are integral
parts hereof and are hereby made a part of this Agreement. This Agreement may
only be modified or supplemented by an instrument in writing executed by a duly
authorized representative of each party.
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ARTICLE XXXIV. NO PERSONAL LIABILITY
Each action or claim against any party arising under or relating to
this Agreement shall be made only against such party as a corporation, and any
liability relating thereto shall be enforceable only against the corporate
assets of such party. No party shall seek to pierce the corporate veil or
otherwise seek to impose any liability relating to, or arising from, this
Agreement against any shareholder, employee, officer or director of the other
party. Each of such persons is an intended beneficiary of the mutual promises
set forth in this Article and shall be entitled to enforce the obligations of
this Article.
ARTICLE XXXV. CONFLICTS OF INTEREST
Neither party shall use any funds received under this Agreement for
illegal or otherwise "improper" purposes. Neither party shall pay any
commission, fees or rebates to any employee of the other party, or favor any
employee of such other party with gifts or entertainment of significant cost or
value. If either party has reasonable cause to believe that one of the
provisions in this Article has been violated, it, or its representative, may
audit the books and records of the other party for the sole purpose of
establishing compliance with such provisions.
ARTICLE XXXVI. RELATIONSHIP OF THE PARTIES
The relationship between Vyvx and IXC shall not be that of partners,
agents or joint venturers for one another, and nothing contained in this
Agreement shall be deemed to constitute a partnership or agency agreement
between them for any purposes, including, but not limited to federal income tax
purposes. Vyvx and IXC, in performing any of their obligations hereunder, shall
be independent contractors or independent parties and shall discharge their
contractual obligations at their own risk.
ARTICLE XXXVII. LATE PAYMENTS
In the event a party shall fail to make any payment under this
Agreement when due, such amounts shall accrue interest, from the date such
payment is due until paid, including accrued interest, at a rate equal to
eighteen percent (18%) per annum or, if lower, the highest percentage allowed
by law.
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<PAGE> 44
ARTICLE XXXVIII. SEVERABILITY
If any term, covenant or condition herein shall, to any extent, be
invalid or unenforceable in any respect under the laws governing this
Agreement, the remainder of this Agreement shall not be affected thereby, and
each term, covenant or condition of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
ARTICLE XXXIX. COUNTERPARTS
This Agreement may be executed in one or more counterparts, all of
which taken together shall constitute one and the same instrument.
ARTICLE XL. CERTAIN DEFINITIONS
The following terms shall have the stated definitions in this
Agreement.
A. "Additional Fibers" shall have the definition set forth in the
Article entitled Additional Fiber Revenue.
B. "Additional Fiber Transaction(s)" shall have the definition set
forth in the Article entitled Additional Fiber Revenue.
C. "Cable" means the fiber optic cable and the fibers contained
therein, and associated splicing connections, splice boxes and vaults, and
conduit, to be installed by IXC or Vyvx, as the case may be.
D. "Connecting Party" shall have the definition set forth in the
Article entitled Completion of the Systems.
E. "Connecting Point" shall have the definition set forth in the
Article entitled Completion of the Systems.
F. "Constructing Party" means IXC with respect to the IXC System
and Vyvx with respect to the Vyvx System.
G. "Deliverables" shall have the definition set forth in the
Article entitled System Documentation.
H. ****
44
<PAGE> 45
I. "Fiber Acceptance Testing" shall have the definition set forth in the
Article entitled Acceptance and Testing of Vyvx IRU Fibers.
J. "Finally Determined Taxes and Fees" shall have the definition set forth
in the Article entitled Taxes and Franchise, License and Permit Fees.
K. "Hazardous Materials" shall mean any substance which is or contains (i)
any "hazardous substance" as now or hereafter defined in Section 101(14) of the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended ("CERCLA); (ii) any "hazardous waste" as now or hereafter defined in
the Resource Conservation & Recovery Act ("RCRA") (42 U.S.C. Section 6901 et
seq.) or any regulations promulgated under RCRA; (iii) any substance regulated
by the Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.) or (iv)
any laws of any state the Vyvx or IXC System travels through or regulations
promulgated under any such state law; (v) natural gas, gasoline, diesel fuel,
oil, waste oil, fertilizer or components thereof or other petroleum
hydrocarbons or by-products; and (vi) any additional substances or materials
which are now or hereafter classified or treated as hazardous or toxic under
any law including court decisions.
L. "Indefeasible Right of Use" or "IRU" is an unrestricted indefeasible
right to use the fibers in which an IRU has been granted, provided however,
that granting of such IRU does not convey ownership of the fibers.
M. [Intentionally omitted]
N. "IXC Damage or Deterioration" shall have the definition set forth in
the Article entitled Operation, Maintenance and Repair of the IXC System.
O. "IXC IRU Acceptance Date" shall have the definition set forth in the
Article entitled Acceptance and Testing of IXC IRU Fibers.
P. "IXC IRU Fibers" shall have the definition set forth in the Article
entitled Permanent Lease.
Q. "IXC IRU" shall mean the IRU granted to IXC, if IXC exercises its Cash
Option or Note Option, in the IXC IRU Fibers.
R. "IXC Required Rights" shall have the definition set forth in the
Article entitled Permits: Physical Plant and Required Rights.
45
<PAGE> 46
S. "IXC System" shall have the definition set forth in Paragraph A of
Background.
T. ****
U. "Nonconstructing Party" means IXC with respect to the Vyvx System and
Vyvx with respect to the IXC System.
V. "Outage" shall have the definition set forth in the Article entitled
Operation, Maintenance and Repair of the IXC System.
W. "Permanent Lease Fee" shall have the definition set forth in the
Article entitled Permanent Lease.
X. "Permanent Lease Term" shall have the definition set forth in the
Article entitled Term and Renewal.
Y. "Purchase" shall have the definition set forth in the Article entitled
Additional Fiber Revenue.
Z. "Regulations" shall have the definition set forth in the Article
entitled Force Majeure.
AA. "Related Transaction Expenses" shall mean all costs incurred by either
party in the negotiation and documentation of any sale of an IRU in any
Additional Fibers, including, without limitation, attorney's fees.
BB. "Relocating Party" shall have the definition set forth in the Article
entitled Relocation.
CC. "Relocation Costs" means actual and related costs including, without
limitation, the following: (1) labor costs, including wages and salaries, and
benefits and overhead allocable to such labor costs (overhead allocation
percentage shall not exceed the lesser of (x) the percentage IXC or Vyvx, as
applicable, allocates to its internal projects or (y) one hundred and thirty
percent (130%), and (2) other direct costs and out-of-pocket expenses on a
pass-through basis (e.g., equipment, materials, supplies, contract services,
etc.).
DD. "Remaining Fibers" shall have the definition set forth in the Article
entitled Additional Fiber Revenue.
46
<PAGE> 47
EE. "Renewal Term" shall have the definition set forth in the Article
entitled Term and Renewal.
FF. "R of W Agreements" shall mean all agreements with right of way
owners, property owners, utilities, government entities or other parties which
the Constructing Party must reasonably obtain in order to get access to and/or
the authority to undertake activities on the route where the IXC System or Vyvx
System, as the case may be, is located.
GG. "Sale" or "Sold" shall have the definition set forth in the Article
entitled Additional Fiber Revenue.
HH. "System" shall have the definition set forth in Paragraph C of
Background.
II. "Service Interruption" means, with respect to the Vyvx IRU Fibers or
the IXC IRU Fibers, any complete interruption of transmission on any fiber
which, in the case of a fiber cut, is longer than four (4) hours or, in the case
of equipment (i.e, buildings, HVAC, power and uninterruptible power systems)
failure or human negligence, is longer than one (1) hour.
JJ. "Term" shall have the definition set forth in the Article entitled
Term and Renewal.
KK. "Transmission Site" shall mean a regenerator station optical amplifier
site, junction or a point of presence performing the same function as a
regeneration station or junction.
LL. "Vyvx Damage or Deterioration" shall have the definition set forth in
the Article entitled Operation, Maintenance and Repair of the Vyvx System.
MM. "Vyvx IRU Acceptance Date" shall have the definition set forth in the
Article entitled Acceptance and Testing of Vyvx IRU Fibers.
NN. "Vyvx IRU Fibers" shall have the definition set forth in the Article
entitled Permanent Lease.
OO. "Vyvx IRU" shall mean the IRU granted to Vyvx in the Vyvx IRU Grant
Fibers and, if Vyvx exercises its Cash Option or Note Option, in the Vyvx Leased
Fibers.
PP. "Vyvx Required Rights" shall have the definition set forth in the
Article entitled Permits, Physical Plant and Required Rights.
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<PAGE> 48
QQ. "Vyvx System" shall have the definition set forth in Paragraph B
of Background.
RR. "Additional Fiber Cost" shall have the definition set forth in the
Article entitled Additional Fiber Revenue.
SS. "Additional Laterals" means the following portions of the Vyvx
System:
1. The lateral extending between Jackson Junction and Jackson,
excluding those portions in Hinds County or in those portions of Rankin
County north of and outside of the Interstate 20 right-of-way;
2. The lateral extending between Raleigh Junction and Raleigh,
excluding those portions in Wake County; and
3. The lateral extending between Greensboro Junction and
Greensboro, North Carolina.
TT. ****
UU. "Incremental Cost" shall have the definition set forth in the
Article entitled Additional Fiber Revenue.
48
<PAGE> 49
VV. "Invoicing Party" shall have the definition set forth in the
Article entitled Right to Audit.
WW. "New Orleans Lateral" means those fiber optic communications
facilities on the Vyvx System between Baton Rouge Junction and New Orleans
excluding those facilities used to connect the Baton Rouge Junction to
Vyvx's Baton Rouge point of presence.
XX. "New Orleans Lateral Completion Date" shall have the definition
set forth in the Article entitled Acceptance and Testing of IXC IRU Fibers.
YY. ****
ZZ. "Additional Fiber Option" shall have the definition set forth in
the Article entitled Permanent Lease.
AAA. "Additional Vyvx Cable" shall have the definition set forth in
the Article entitled Additional Fiber Revenue.
BBB. "Cash Option" shall have the definition set forth in the Article
entitled Option to Acquire IRU's and Consideration.
CCC. "Electing Party" shall have the definition set forth in the
Article entitled Option to Acquire IRU's and Consideration.
DDD. "Maintenance Charges" shall have the definition set forth in the
Article entitled Operation, Maintenance and Repair of the IXC System.
EEE. ****
FFF. "Vyvx IRU Grant Fibers" shall have the definition set forth in
the Article entitled Permanent Lease.
GGG. "Vyvx Leased Fibers" shall have the definition set forth in the
Article entitled Permanent Lease.
49
<PAGE> 50
In the event any maintenance or repairs to the Vyvx System or the IXC
System are required as a result of a breach of any warranty made by any
manufacturers, contractors or vendors, Vyvx or IXC, as applicable, shall pursue
any remedies it may have against such manufacturers, contractors or vendors, and
the System owner shall reimburse the IRU owner's costs for any maintenance that
the IRU owner has incurred as a result of any such breach of warranty to the
extent the manufacturer, contractor or vendor has paid such costs.
ARTICLE XLII. RIGHT TO AUDIT
To the extent a party ("Invoicing Party") is entitled to charge another
party based on the Invoicing Party's costs, time, or materials, the Invoicing
Party shall keep such books and records (which books and records shall be
maintained on a consistent basis and substantially in accordance with generally
accepted accounting principles) as shall readily disclose the basis for any
charges or credits, ordinary or extraordinary, billed or due to the other party
under this Agreement and shall make them available for examination, audit, and
reproduction for a period of three (3) years after the Invoicing Party issues
any invoice including such charges or credits.
50
<PAGE> 51
In confirmation of their consent to the terms and conditions
contained in this Agreement and intending to be legally bound hereby, the
parties have executed this Agreement as of the date first above written.
"Vyvx"
Vyvx, Inc.
a Delaware corporation
By: /s/ HOWARD E. JANZEN
-------------------------------------
Name: Howard E. Janzen
-------------------------------
Title: Chairman
------------------------------
"IXC"
IXC CARRIER, INC.
a Nevada corporation
By: /s/ KENNETH E. HINTLER
-------------------------------------
Name: Kenneth E. Hintler
-------------------------------
Title: Exec VP. COO, Asst. Secy.
------------------------------
"WilTech"
The WilTech Group, Inc.
a Delaware corporation
By: /s/ S. MILLER WILLIAMS
-------------------------------------
Name: S. Miller Williams
-------------------------------
Title: Senior Vice President
------------------------------
51
<PAGE> 52
EXECUTION COPY
AMENDMENT NO. 4
TO
IRU AGREEMENT
This Amendment No. 4, effective December ___, 1998, revises the IRU
Agreement of December 12, 1996, by and among IXC Carrier, Inc. (a predecessor
to IXC Communications Services, Inc.), Vyvx, Inc. ("Vyvx"), (now known as
Williams Communications, Inc.), and The WilTech Group (now known as Williams
Communications Group, Inc.), as previously amended by Amendment No. 1,
Amendment No. 2, and Amendment No. 3 (as amended, the "IRU Agreement").
Capitalized terms used in this Amendment No. 4 shall have the same meaning as
in the IRU Agreement, subject to any amendment of such definitions contained
herein.
BACKGROUND
This Amendment No. 4 is made with reference to the following facts:
A. Article XI of the IRU Agreement provides IXC with an Additional Fiber
Option and obligates Williams to compensate IXC upon termination of such
Additional Fiber Option through the payment of a portion of Additional
Fiber Revenue.
B. ****
C. The parties desire to terminate or confirm the termination of, certain
restrictions on the sales of IRUs in fibers on portions of the Vyvx
System.
TERMS OF AMENDMENT NO. 4
Accordingly, in consideration of the mutual promises set forth below, the
parties hereto agree as follows:
I. TERMINATION OF ADDITIONAL FIBER OPTION
A. TERMINATION OF OPTION. As of December 31, 1998, and subject to
IXC's receipt of the consideration set forth below, IXC's Additional Fiber
Option shall be terminated with respect to the Supplemental Fibers. The
Supplemental Fibers shall ****
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<PAGE> 53
EXECUTION COPY
C. Upon determining that all the Additional Fibers on the portion of the
Vyvx System between Atlanta and Houston (including spurs) have been Sold,
Williams shall promptly notify IXC. Upon the date of such notice, all
restrictions on sales of IRU rights by Williams in the fibers owned by Williams
and not subject to IXC's IRU, or by IXC in the IXC IRU Fibers, shall expire
pursuant to Paragraph XI.B of the IRU Agreement. Subsequent sales of IRUs in
fibers on such portion of the Vyvx System by either party shall not require the
other party's approval and the resulting revenues shall not be deemed
Additional Fiber Revenues.
IN WITNESS WHEREOF the Parties have caused this Amendment No. 4 to be
executed by their duly authorized representatives as of the dates set forth
below.
IXC COMMUNICATIONS WILLIAMS COMMUNICATIONS,
SERVICES, INC. (successor to IXC INC. (formerly Vyvx, Inc.)
Carrier, Inc.)
By: /s/ JEFFREY C. SMITH By: /s/ S. MILLER WILLIAMS
---------------------------------- -------------------------
Name: Jeffrey C. Smith Name: S. Miller Williams
-------------------------------- -----------------------
Sr. Vice President, General
Title: Counsel and Secretary Title: Sr. Vice President
------------------------------- ----------------------
Date: December 22, 1998 Date: December 22, 1998
[SEAL]
WILLIAMS COMMUNICATIONS
GROUP, INC. (formerly The WilTech
Group, Inc.)
By: /s/ S. MILLER WILLIAMS
-------------------------
Name: S. Miller Williams
-----------------------
Title: Sr. Vice President
----------------------
Date: December 22, 1998
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<PAGE> 1
Redacted portions have been marked with asterisks (****). Confidential treatment
has been requested for the redacted portions. The confidential redacted portions
have been filed separately with the Securities and Exchange Commission.
CONFIDENTIAL TREATMENT
EXHIBIT 10.21
CONFIDENTIAL
STOCK PURCHASE AGREEMENT
FOR
CNG COMPUTER NETWORKING GROUP INC.
BY AND AMONG
THE SELLERS LISTED HEREIN
AND
WILTEL COMMUNICATIONS (CANADA), INC., AND
WILLIAMS COMMUNICATIONS SOLUTIONS, LLC
DATED AS OF OCTOBER 13, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
Page
----
<S> <C> <C>
PARTIES AND PREAMBLES ................................................... 1
ARTICLE I PURCHASE AND SALE OF THE SHARES ....................... 1
1.1 Purchase and Sale ..................................... 1
1.2 Consideration ......................................... 1
1.3 Closing ............................................... 2
1.4 Deliveries by Sellers ................................. 3
1.5 Deliveries by Buyer ................................... 3
ARTICLE II RELATED MATTERS ....................................... 4
2.1 Related Party Transactions ............................ 4
2.2 Non-Competition Agreements ............................ 4
2.3 Employee and Associate Plans .......................... 4
2.4 Service Credit ........................................ 5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF
SELLERS ........................................... 5
3.1 Organization .......................................... 5
3.2 Authorization ......................................... 6
3.3 Capitalization ........................................ 6
3.4 Consents and Approvals; No Violations ................. 6
3.5 Financial Statements .................................. 7
3.6 Absence of Undisclosed Liabilities .................... 7
3.7 Absence of Material Adverse and Other
Changes ...................................... 7
3.8 Title to Company Stock ................................ 8
3.9 Customers; Agreement .................................. 8
3.10 Property Leases ....................................... 8
3.11 Inventory; Fixed Assets; Accounts Receivable .......... 8
3.12 Licenses; Authorizations .............................. 9
3.13 Intellectual Property ................................. 9
3.14 Litigation ............................................ 9
3.15 Environmental and Safety Matters ...................... 9
3.16 Insurance ............................................. 9
3.17 Employment and Labor Matters .......................... 10
3.18 Minute Books .......................................... 13
3.19 Taxes ................................................. 14
3.20 Certain Fees .......................................... 14
3.21 Disclosure ............................................ 14
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER ............... 14
4.1 Organization and Authority of Buyer ................... 14
4.2 Consents and Approvals; No Violations ................. 14
4.3 Availability of Funds ................................. 15
4.4 Certain Fees .......................................... 15
4.5 Disclosure ............................................ 15
</TABLE>
<PAGE> 3
<TABLE>
ARTICLE V COVENANTS .............................................. 15
<S> <C> <C> <C>
5.1 Conduct of the Company ................................. 15
5.2 Access to Information; Confidential Information ........ 16
5.3 Consents ............................................... 17
5.4 Exclusive Negotiations ................................. 18
5.5 Covenant to Satisfy Conditions ......................... 18
5.6 Public Announcements ................................... 18
ARTICLE VI CERTAIN TAX MATTERS .................................... 18
6.1 Tax Matters ............................................ 18
6.2 Definitions ............................................ 20
ARTICLE VII CONDITIONS TO OBLIGATIONS OF THE PARTIES ............... 21
7.1 Conditions to Each Party's Obligations ................. 21
7.2 Conditions to Obligations of Sellers ................... 22
7.3 Conditions to Obligations of Buyer ..................... 22
ARTICLE VIII TERMINATION; AMENDMENT; WAIVER ......................... 22
8.1 Termination ............................................ 22
8.2 Effect of Termination .................................. 23
8.3 Amendment, Modification and Waiver ..................... 23
ARTICLE IX SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION ........... 23
9.1 Non-Survival of Representations,
Warranties and Agreements .............................. 23
9.2 Sellers' Agreement to Indemnify ........................ 24
9.3 Buyer's Agreement to Indemnify ......................... 25
9.4 Third Party Indemnification ............................ 25
ARTICLE X MISCELLANEOUS .......................................... 26
10.1 Fees and Expenses ...................................... 26
10.2 Further Assurances ..................................... 27
10.3 Notices ................................................ 27
10.4 Severability ........................................... 28
10.5 Binding Effect; Assignment ............................. 28
10.6 No Third Party Beneficiaries ........................... 28
10.7 Interpretation ......................................... 28
10.8 Entire Agreement ....................................... 29
10.9 Governing Law .......................................... 29
10.10 Resolution of Disagreements Among Parties .............. 29
10.11 Counterparts ........................................... 30
</TABLE>
<TABLE>
<CAPTION>
EXHIBITS Reference
---------
<S> <C> <C> <C>
A. Form of Certificate from Sellers 1.4(e)
B. Form of Certificate from the Company 1.4(e)
C. Form of Certificate from Buyer 1.5(b)
D. Form of Non-Competition Agreement 2.2
</TABLE>
SCHEDULES
3.3 Capitalization
3.4 Consents and Approvals
3.5 Supplement to Financial Statements
3.7 Absence of Material Adverse and Other Changes
<PAGE> 4
3.8 Ownership of Shares
3.9(a) Customers
3.9(b) Material Contracts
3.10 Property Leases
3.11(a) Inventory
3.11(b) Fixed Assets
3.11(c) Accounts Receivable
3.12 Licenses
3.14 Litigation (None)
3.16 Insurance
3.17(a) Employee List, Employment Agreements and Independent
Contractors
3.17(b) Employee Benefit Plans
3.17(d) Plan Disclosures
3.18 Taxes
4.2 Consents and Approvals
<PAGE> 5
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated October 13, 1998 (the "Agreement"), by
and among 1310038 Ontario Inc., George Johnston, Hayden Marcus, the H. Marcus
Family Trust and Gary White (collectively, "Sellers") and WilTel Communications
(Canada), Inc., a Canadian corporation ("Buyer") and Williams Communications
Solutions, LLC ("Parent").
WHEREAS, pursuant to the terms and conditions of this Agreement,
Sellers desire to sell to Buyer, and Buyer desires to purchase from Sellers, all
of the issued and outstanding shares (the "Shares") of the capital stock in CNG
Computer Networking Group Inc., an Ontario corporation (the "Company"); and
WHEREAS, Sellers desire Parent to perform certain of the obligations
and guaranty certain of the payments hereunder.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I
PURCHASE AND SALE OF THE SHARES
Section 1.1 Purchase and Sale. Subject to the terms and conditions of this
Agreement, at the Closing provided for in Section 1.3 hereof (the "Closing"),
Sellers will sell, convey, assign, transfer and deliver to Buyer, and Buyer will
purchase, acquire and accept from Sellers, the Shares. The total number and type
of Shares to be sold by each of the Sellers and the Purchase Price (defined in
Section 1.2) to be allocated to each of the Sellers hereunder is shown on
Schedule 1.1.
Section 1.2 Consideration. Subject to the terms and conditions of this
Agreement and in reliance upon the representations, warranties, covenants and
agreements of Sellers contained herein, in consideration of the aforesaid sale,
conveyance, assignment, transfer and delivery of the Shares, Buyer will deliver
or cause to be delivered to Sellers' Representative the following (the sum of
(a) and (b), the "Purchase Price"):
(a) **** in cash (unless otherwise indicated all dollar amounts in
this Agreement shall denote
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<PAGE> 6
Canadian dollars) at the Closing by wire transfer of immediately available funds
to such bank accounts as will be designated by Sellers prior to the Closing (the
"Initial Purchase Price"); and
(b) on the first anniversary of the Closing an amount equal to ****, on the
second anniversary of the Closing an amount equal to ****, on the third
anniversary of the Closing an amount equal to ****, and on the fourth
anniversary of the Closing an amount equal to ****; provided however that each
of such amounts will be reduced by an amount not to exceed **** annually for
failure to meet performance targets detailed in Schedule 1.2(b) attached
hereto; ****.
(c) Notwithstanding the foregoing, termination by the Company of
****' employment for reasons other than Cause (as defined below) or the death
or disability of **** shall not cause a forfeiture under Section 1.2(b). The
terms of employment of **** are as outlined in Exhibit A to the Non-Competition
Agreement signed by **** as referenced in Section 2.2. "Cause" shall mean (i)
failure, after notification, to perform assigned material duties diligently and
in the best interest of the Company and its affiliates, other than such failure
resulting from a disability covered by Buyer's disability plans, (ii)
negligence or willful misconduct, (iii) willful violation or disregard of the
Code of Business Conduct or other published policy of the Company or of its
affiliates which is applicable to the Company the violation or disregard of
which causes a Material Adverse Effect, or (iv) willful breach of a material
term of the Non-Competition Agreement executed by **** referenced in Section
2.2; provided however that Cause shall not mean a refusal to relocate from ****
provided that **** agrees to, and does spend, a sufficient amount of his time
at his assigned location (if other than ****) necessary to perform his assigned
duties, which unless the parties agree otherwise will be at least forty percent
(40%) with the understanding that ****' other travel requirements will be
somewhat (but not correspondingly) reduced.
(d) Parent guaranties the payment of the Purchase Price upon the same
terms as provided above.
Section 1.3 Closing. The Closing of the transactions contemplated by this
Agreement will take place on October 13, 1998, at 9:00 a.m., local time, at the
offices of
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<PAGE> 7
Soloway, Wright, in Ottawa, Ontario, or on such other date and at such other
time or place as the parties may agree. The date of the Closing is sometimes
referred to herein as the "Closing Date."
Section 1.4 Deliveries by Sellers. At the Closing, Sellers will deliver or
cause to be delivered to Buyer (unless delivered previously) the following:
(a) stock certificates (or similar evidence of ownership) representing
all of the Shares, accompanied by stock powers duly executed in blank or duly
executed stock transfer forms or instruments of transfer which validly transfer
title to such Shares;
(b) the resignations of all members of the Board of Directors of the
Company;
(c) the stock books, ledger books and corporate seals of the Company
and the Amalgamated Companies (defined in Section 2.1(c);
(d) executed Non-Competition Agreements, as referred to in Section
2.2;
(e) certificates, substantially in the form set forth as Exhibits A
and B attached hereto, from each of the Sellers and the Company, dated as of the
Closing Date and executed by each Seller and an authorized officer of the
Company, as the case may be;
(f) an opinion of counsel for Sellers and the Company reasonably
acceptable to Buyer; and
(g) all other documents, instruments and writings required to be
delivered by Sellers at or prior to the Closing pursuant to this Agreement or
otherwise required in connection herewith.
Section 1.5 Deliveries by Buyer. At the Closing, Buyer will deliver or
cause to be delivered to Sellers (unless delivered previously) the following:
(a) the Initial Purchase Price referred to in Section 1.2 hereof;
(b) a certificate, substantially in the form set forth as Exhibit C
attached hereto, dated as of the Closing and executed by an authorized officer
of Buyer; and
(c) an opinion of in-house counsel for Buyer, reasonably acceptable to
Sellers; and
(d) all other documents, instruments or writings required to be
delivered by Buyer at or prior to the Closing
3
<PAGE> 8
pursuant to this Agreement or otherwise required in connection herewith.
ARTICLE II
RELATED MATTERS
Section 2.1 Related Party Transactions. On or prior to the Closing Date,
all related party transactions between the Company, on the one hand, and Sellers
and their respective affiliates, on the other hand, shall be canceled or
settled. Any amounts owing by any of the Sellers to the Company which remain
outstanding as of the Closing Date will be reduced from the Initial Purchase
Price. Specific related party transactions to be canceled or settled include but
are not limited to the following:
(a) employment, consulting and/or management agreements between any of
the Sellers and the Company will be deemed cancelled as of the Closing Date;
(b) any and all loans made by various of the Sellers to the Company,
all of which are shown on Schedule 2.1(b), shall be paid by the Company within
fifteen (15) days of the Closing Date;
(c) 1065820 Ontario Inc., 1221827 Ontario Inc., Kendalmead Limited,
Anderson Telecommunications Consulting Inc., 1101501 Ontario Inc., and A&L Bowes
Consulting Ltd. (the "Amalgamated Companies") will be amalgamated with and into
the Company (the definition of which will be deemed to include the Amalgamated
Companies for all purposes under this Agreement unless the context clearly
requires otherwise) prior to Closing pursuant to the plan of amalgamation
attached as Schedule 2.1(c); and
(d) the Buyer shall cause the Guaranties listed on Schedule 2.1 (d) of
George Johnston and Hayden Marcus of certain of the Company's obligations to be
released within fifteen (15) days of the Closing Date.
Section 2.2 Non-Competition Agreements. Each of George Johnston, Hayden
Marcus, and Gary White will execute a Non-Competition Agreement substantially in
the form attached hereto as Exhibit D.
Section 2.3 Employee and Associate Plans. The Buyer and Parent shall
establish the Employee Stock Option Plan, Employee Incentive Plan and Associate
Incentive Plan in accordance with plan documents to be established by Buyer and
Parent with input from George Johnston and Hayden Marcus which provide for bonus
payments and stock options to be granted to the individuals, in the amounts and
for the periods shown on Schedule 2.3. The Signing Bonus is to be paid on or
before October 31, 1998; the Year 1 bonus is to
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be paid on or before October 31, 1999; the Year 2 bonus is to be paid on or
before October 31, 2000; and the Year 3 bonus is to be paid and on or before
October 31, 2001.
Section 2.4 Service Credit. Buyer or Parent, as appropriate, will provide
the employees of the Company with service credit for purposes of vesting in
Buyer's retirement savings program or Parent's 401k plan, and participation and
benefit levels in Buyer's or Parent's vacation policy equivalent to the credit
such employees had under the Company's respective plans.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each of the Sellers represent and warrant to Buyer, only to the extent that
such representations and warranties apply to themselves and George Johnston and
Hayden Marcus jointly and severally represent and warrant to Buyer, as such
representations and warranties apply to the Company, as applicable, as follows;
provided that any Schedules attached relating to Sections 3.4, 3.11, 3.16,
3.17(a) and 3.17(e), may provide disclosure as of the last day of the month
prior to Closing rather than on the Closing Date:
Section 3.1 Organization. The Company is a corporation duly organized,
validly existing, and a private company as that term is defined in the
Securities Act (Ontario), and is in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to own, lease and operate the Company's properties owned, leased and
operated by it and to carry on the operations of the Company as now being
conducted by it. The Company is duly qualified or licensed and in good standing
to do business in each jurisdiction in which the property owned, leased or
operated by it with respect to the Company or the nature of the business
conducted by it with respect to the Company makes such qualification necessary,
except in any such jurisdictions where the failure to be so duly qualified or
licensed and in good standing would not have a Material Adverse Effect. For
purposes of this Agreement, a "Material Adverse Effect" will be an event, or a
combination of events, which has an adverse effect in an amount, individually or
in the aggregate, equal to or greater than $50,000 on the business, results of
operations or financial condition of the Company; if an event is capable of
being cured it will not be considered to have a Material Adverse Effect until
after thirty (30) days prior written notice. Sellers have heretofore made
available to Buyer complete and correct copies of the Certificate of
Incorporation and By-laws or similar constituent documents, as the case may be,
of the Company as currently in effect.
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Section 3.2 Authorization. Each of the Sellers are not non-resident persons
within the meaning of section 116 of the Income Tax Act (Canada) and has the
requisite power and authority to execute and deliver this Agreement and
consummate the transactions contemplated hereby. This Agreement has been duly
executed and delivered by each of the Sellers and constitutes, and, when
executed and delivered, each of the other agreements, documents and instruments
to be executed and delivered by each of the Sellers pursuant hereto will
constitute, a valid and binding agreement of each of the Sellers, enforceable
against Sellers in accordance with its terms.
Section 3.3 Capitalization. The ownership of the Shares and the authorized
and issued share capital of the Company and any Shareholders Agreements
affecting the shares, which will be terminated at Closing, are set forth in
Schedule 3.3. All of the Shares are duly authorized, validly issued, fully paid
and non-assessable and are not subject to any contractual preemptive rights.
There are not now, and at Closing there will not be, (a) issued or outstanding
(i) any shares of capital stock or issued share capital of the Company except as
disclosed in Schedule 3.3 or (ii) any securities convertible into or
exchangeable for, or any options, warrants, calls, subscriptions or other rights
(preemptive or otherwise) to acquire, any shares of capital stock or issued
share capital of the Company, or (b) any agreements or contractual commitments
(other than this Agreement) obligating Sellers, or restricting Sellers' rights,
to transfer or sell the Shares or obligating the Company to issue securities.
There are no agreements, plans or arrangements in existence which pertain to the
dividend rights, voting, sale or transfer of any shares of capital stock or
issued share capital of the Company.
Section 3.4 Consents and Approvals; No Violations. Except as set forth in
Schedule 3.4, neither the execution and delivery of this Agreement, the
consummation by Sellers of the transactions contemplated hereby, nor, to the
best of their knowledge and belief, the amalgamation of the Company after
continuation into the Buyer will (a) conflict with or result in any breach of
any provision of the Certificate of Incorporation or By-Laws or similar
constituent documents, as the case may be, of the Company; (b) require on the
part of Sellers any filing with, or the obtaining of any permit, authorization,
consent or approval of, any governmental or regulatory authority, whether within
or outside Canada, the United States, or any third party; (c) result in the
breach of any term or provision of, or constitute a default (or give rise to any
right of termination, cancellation or acceleration) under, or result in the
creation or imposition of any lien, charge, pledge, security interest or other
encumbrance upon any part of the property of the Company or the Shares pursuant
to, any of the terms, conditions or
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provisions of any note, mortgage, other evidence of indebtedness, guarantee,
license, agreement, lease or other contract or instrument or obligation to which
Sellers or the Company is a party or by which Sellers, the Shares, the Company
or any of the Company's assets may be bound; or (d) to the best knowledge of
Sellers, violate any order, judgment, arbitration award, injunction, decree,
statute, rule or regulation applicable to Sellers or the Company.
Section 3.5 Financial Statements. Sellers have previously furnished to
Buyer true and accurate copies of the Company's (a) balance sheet as of August
31, 1998 (unaudited internal) and April 30, 1998 (audited), and (b) statements
of operations for the periods ended August 31, 1998 (unaudited internal) and
April 30, 1998 (audited) (the financial statements referred to in clauses (a)
and (b) above and the accompanying notes thereto are referred to herein
collectively as the "Financial Statements"). Except as disclosed in the
accompanying notes to the Financial Statements or in Schedule 3.5, such balance
sheets fairly present, in all material respects, the financial position of the
Company as of the respective dates thereof, and such statements of operations
fairly present, in all material respects, the results of operations of the
Company for the respective periods indicated, in each case in accordance with
Canadian generally accepted accounting principles, consistently applied
("GAAP").
Section 3.6 Absence of Undisclosed Liabilities. As of the Closing Date,
except (a) for liabilities incurred in the ordinary course of business and
consistent with past practice since April 30, 1998, and (b) as reported in the
Financial Statements or in the Schedules hereto, the Company has not incurred
any liabilities or obligations (whether direct, indirect, accrued or contingent)
that would be required to be reflected or reserved against in a balance sheet of
the Company prepared in accordance with GAAP, as used in preparing the Financial
Statements, or that would have a Material Adverse Effect. The Company is not a
party to or bound by any guarantee, indemnification, surety, or similar
obligation or any contract or commitment to pay any royalty, license fee or
management fee (other than the management fee owing to George Johnston and
Hayden Marcus for the period October 1-13, 1998).
Section 3.7 Absence of Material Adverse and Other Changes. Except as set
forth in Schedule 3.7, since April 30, 1998, there has not been any material
adverse change in the business, prospects, results of operations or financial
condition of the Company. Since April 30, 1998 the business of the Company has
been carried on in its usual and ordinary course and the Company has not entered
into any transaction out of the usual and ordinary course of business.
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Section 3.8 Title to Company Stock. Each Seller represents and warrants
that his portion of the Shares (a) is duly authorized, validly issued, fully
paid and nonassessable and is owned by such Seller free and clear of all liens,
encumbrances, charges, assessments and adverse claims, (b) is subject to no
restrictions with respect to transferability to Buyer in accordance with the
terms of this Agreement, and (c) upon transfer of such Shares, Buyer will, as a
result, receive good and marketable title to such Shares, free and clear of all
security interests, liens, encumbrances, charges, assessments, restrictions and
adverse claims. The number of Shares held by each Seller is set forth on
Schedule 3.8.
Section 3.9 Customers; Agreements. Schedule 3.9(a), to be attached at
Closing, will be a true and correct list of all customers with which the Company
has transacted business during the last three (3) year period, together with
summary information with respect to each customer's transactions with the
Company. Schedule 3.9(b) will list any agreement which (i) may not be terminated
by the Company on thirty (30) or fewer days' notice at any time without penalty,
including, without limitation, prepayment penalties, (ii) has a remaining term,
as of the date of this Agreement, of over one year (with respect to obligations
on the part of the Company) and (iii) involves the receipt or payment by the
Company after the date hereof of more than $100,000. Except as set forth in
either Schedule 3.4 or 3.9(b), to the best knowledge of Sellers, all agreements
with customers, or any other listed agreements, are valid, binding and
enforceable in accordance with their terms and the Company is not in default
under any of the aforesaid agreements other than such defaults, if any, which
would not, individually or in the aggregate, have a Material Adverse Effect.
Section 3.10 Property Leases. Schedule 3.10 is a complete list of the real
and personal property leases to which the Company is a party (the "Leases").
Each of the Leases is a valid and existing lease, enforceable in accordance with
its terms, and there are no existing defaults, events of default or events,
occurrence or acts that, with the giving of notice or lapse of time or both,
would constitute defaults, in each case by Seller and, to the knowledge of
Seller, by any other party thereto, under any of the Leases.
Section 3.11 Inventory; Fixed Assets; Accounts Receivable. Schedules
3.11(a), reflecting the inventory of the Company, and 3.11(b), reflecting the
fixed assets of the Company, collectively list as of August 31, 1998, all of the
assets and properties that are used, held for use, or useful in the conduct of
the Company's business. All equipment and other tangible assets listed are in
good operating condition and repair, other than items in transit to repair
facilities
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and other miscellaneous non-functional items. Attached hereto as Schedule
3.11(c) is a copy of the outstanding receivable balances for the Company as of
August 31, 1998. All accounts receivable listed on Schedule 3.11(c) represent
sales made in the ordinary course of the Company's business.
Section 3.12 Licenses; Authorizations. The Company holds all of the
material licenses, permits, approvals, authorizations and consents which are
necessary to conduct its business as presently conducted. Schedule 3.12 to be
attached at Closing, lists all of such licenses, permits, approvals,
authorizations and consents which are held by the Company as of the Closing
Date.
Section 3.13 Intellectual Property. The Company freely owns or possesses a
valid license to all the proprietary and technical information, patents,
copyrights, trademarks and trade names, service marks, trade secrets, manuals,
technologies, methods, formulations, product software (including documentation),
and other intellectual property which are used to conduct its business as
presently conducted.
Section 3.14 Litigation. The Company does not have any pending, nor is it
aware of any threatened, cause of action, litigation, arbitrations, claims, toll
fraud claims or complaints, grievances, unfair labor complaints, employee
benefit related complaints, employment discrimination complaints, other
employment related complaints, investigations or notices by any governmental
agency, demands, complaints, regulatory or administrative proceedings, nor are
any of the Sellers subject to any judgments, injunctions, court orders, consent
decrees or regulatory orders with respect to the Shares or the business or
assets of the Company. To the knowledge of Sellers, no basis for any action,
suit or proceeding against the Company exists.
Section 3.15 Environmental and Safety Matters. The Company is not in
violation of any statute, regulation, ordinance, order or judgment relating to
environmental protection or employee or workplace safety where such violation
would have a Material Adverse Effect.
Section 3.16 Insurance. Schedule 3.16 sets forth a complete and accurate
list of all policies (including their respective limits and expiration dates) of
first party property, liability, product liability, worker's compensation,
health, life, title and other forms of insurance in effect during the last five
(5) years with respect to the Company, its operations, and its employees, or for
which the Company is making payments or reimbursements.
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Section 3.17 Employment and Labor Matters.
(a) Attached hereto as Schedule 3.17(a)(i) is a true and complete list
of the employees as of August 31, 1998 (including regular full and part-time
employees) (the "Company Active Employees"), identified by name and employee
number, together with job titles and/or current assignment, compensation and
service information concerning such employees. Attached hereto as Schedule
3.17(a)(iii) is a true and complete list of the independent contractors
currently on assignment with the Company (the "Company Associates"), identified
by name and identification number, together with current assignment,
compensation and service information concerning such Company Associates. Except
as set forth on Schedule 3.17(a)(iii), Company is not a party to any employment
contract with and will not have any liability (other than accrued salary,
commissions, bonuses, draws, allowances, overtime, vacation pay and other
statutory amounts) to any Company Active Employees or any other employees, any
former employees or independent contractors of the Company (collectively,
"Company Employees").
(b) Except as set forth on Schedule 3.17(b), Company is not a party to
any collective bargaining agreement or union contract with respect to Company
Employees and no collective bargaining agreements are being negotiated by
Company with respect to any of the Company Employees; and no notice of a
proposed union certification or recognition election has been received by
Company or, to the best knowledge of Sellers, has there been any union
organizing activities at the Company during the last three years..
(c) No trade union, council of trade unions, employee bargaining
agency or affiliated bargaining agent:
(i) holds bargaining rights with respect to any Company Employees
by way of certification, interim certification, voluntary recognition,
designation or successor rights;
(ii) has applied to be certified as the bargaining agent of any
Company Employees; or
(iii) has applied to have Company declared a related employer or
successor employer pursuant to applicable labor legislation.
(d) Except as otherwise set forth on Schedule 3.17(d), no Company
Employees are currently on a leave of absence for any reason, including without
limitation sickness or disability, maternity/paternity and workers'
compensation, and no Claim is pending and, to the best knowledge of Sellers, no
Claim is expected to be made by any
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Company Employees or Company Associates for workers' compensation benefits.
(e) Company has complied in all material respects with all laws
relating to the employment of Company Employees.
(f) Attached hereto as Schedule 3.17(f) is a true and complete list of
each of the following which is, or has been, sponsored, maintained or
contributed to by Company or any of its Affiliates in respect of Company
Employees: each personnel policy, stock option plan, bonus plan or arrangement,
incentive award plan or arrangement, vacation policy, severance pay plan and/or
golden parachute agreement, policy, program or agreement, pension, retirement,
supplementary retirement, deferred compensation agreement or arrangement,
retiree benefit plan or arrangement, fringe benefit program or practice (whether
or not taxable), employee loan, consulting agreement, employment agreement and
each other employee benefit plan, agreement, arrangement, program, practice or
understanding ("Benefit Programs or Agreements").
(g) True, correct and complete copies or descriptions of all Benefit
Programs or Agreements and all amendments thereto along with the related funding
agreements, as amended, have been furnished or made available to Buyer by
Company.
(h) Sellers has no knowledge of any fact, condition or circumstance
since the date of the documents provided in accordance with Section 3.17(f)
which would materially affect the information contained therein and, in
particular, and without limiting the generality of the foregoing, no promises or
commitments have been made by Company to amend any Benefit Program or Agreement
or to provide increased benefits thereunder to any employee, dependant or
independent contractor, except as required by law.
(i) All Benefit Programs or Agreements have been maintained in
compliance with their respective terms and with the requirements prescribed by
any and all applicable statutes, orders, rules and regulations. Notice has not
been received of any pending investigations by any Authority involving or
relating to any Benefit Program or Agreement, there are no threatened or pending
Claims (except for Claims for benefits payable in the normal operation of the
Benefit Programs or Agreements), suits or proceedings against any Benefit
Program or Agreement or asserting any rights or claims to benefits under any
Benefit Program or Agreement that could give rise to a liability nor, to the
best knowledge of Sellers, are there any facts that could give rise to any
liability in the event of such investigation, claim, suit or proceeding. No
notice has been received by
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Company or its Affiliates of any complaints or other proceedings of any kind
involving Company or, to the best knowledge of Sellers, any Company Employees
before any Authority relating to any Benefit Program or Agreement.
(j) Each investment held in respect of a Benefit Program or Agreement
is a qualified or eligible investment, no investment held in respect of a
Benefit Program or Agreement is a prohibited investment under the terms of the
Benefit Program or Agreement and all supporting documents or any applicable
legislation, and each Benefit Program or Agreement has or had the power and
authority to make each investment and is permitted under all applicable
legislation and the terms of the Benefit Programs or Agreements and all
supporting documents to continue to hold such investments.
(k) Except as permitted by the Benefit Program or Agreement and
applicable legislation, there has been no withdrawal of assets or any other
amounts from any of the Benefit Programs or Agreements other than proper
payments of benefits to eligible beneficiaries, refunds of over-contributions to
plan members and permitted payments of reasonable expenses incurred by or in
respect of such Benefit Program or Agreement.
(l) All employer and, if applicable, employee contributions under the
Benefit Programs or Agreements have been remitted in a timely manner (other than
current contributions not in arrears), and the Benefit Programs or Agreements
have been funded in accordance with their respective terms.
(m) All returns, filings, reports and disclosures relating to the
Benefit Programs or Agreements required pursuant to the terms of the Benefit
Programs or Agreements, applicable legislation or any Authority, have been filed
or distributed in accordance with all requirements, all filing fees and levies
imposed on the Benefit Programs or Agreements by the applicable Authorities or
applicable legislation have been made on a timely basis and the funds of the
Benefit Programs or Agreements are not exposed to any late filing fees that have
not been remitted.
(n) No event has occurred and there has been no failure to act on the
part of Company, any funding agent or any administrator of any of the Benefit
Programs or Agreements that could subject Company or the fund of any Benefit
Program or Agreement to the imposition of any tax, penalty or other disability
with respect to any Benefit Programs or Agreements, whether by way of indemnity
or otherwise.
(o) No insurance contract or any other contract or agreement affecting
a Benefit Program or Agreement requires or permits a retroactive increase in
premiums or
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payments, loss sharing arrangement or other actual or contingent liability due
thereunder. The level of insurance reserves under each insured Benefit Program
or Agreement is reasonable and sufficient to provide for all incurred but
unreported claims.
(p) None of the Benefit Programs or Agreements provides benefit
increases or payments of any kind that are contingent upon or that will become
effective upon entering into this Agreement or the completion of the
transactions contemplated hereby.
(q) Attached hereto as Schedule 3.17(q) is a list of all employee
terminations and transfers out of the Company Business since January 1, 1997.
Section 3.18 Minute Books. The minute books of Company and any entities to
which it is the successor, including the Amalgamated Companies, copies of which
have heretofore been made available to Buyer, contain true and complete minutes
and records of all meetings, proceedings and other actions of shareholders and
the Board of Directors of Company and its predecessor entities, none of which
have been amended to the best knowledge of Sellers (except as set forth in such
copies) and are in full force and effect as of the date hereof.
Section 3.19 Taxes. Except as set forth in Schedule 3.19, the Company, or
each of the Sellers, as appropriate, has (i) duly and timely filed with the
appropriate tax authorities all Tax Returns (defined in Section 6.2), and such
Tax Returns are true, correct and complete in all material respects; and (ii)
paid or made adequate provision for the payment of all Taxes (defined in Section
6.2) and other amounts shown to be due on such Tax Returns. Except as set forth
in Schedule 3.19, neither the Company nor any of the Sellers has received any
written notice of deficiency or assessment from any federal, state, local or
foreign taxing authority with respect to liabilities for Taxes of the Company
which has not been fully paid or finally settled or accurately reflected in the
Financial Statements. There are no tax sharing agreements or arrangements
affecting the Company. There are no liens or encumbrances with respect to Taxes
upon any of the properties or assets of the Company.
Section 3.20 Certain Fees. None of the Sellers or the Company has employed
any broker, financial advisor or finder with respect to the Company or incurred
any liability for any brokers', financial advisory or finders' fees in
connection with this Agreement or the transactions contemplated hereby.
Section 3.21 Disclosure. No written representation, warranty or statement
made by the Company or any of the
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Sellers in (a) this Agreement, or (b) the exhibits or Schedules attached hereto,
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained therein not false or misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
Section 4.1 Organization and Authority of Buyer and Parent.
(a) Buyer is a corporation duly organized, validly existing and in
good standing under the laws of Canada.
(b) Parent is a limited liability company duly formed, validly
existing and in good standing under the laws of the state of Delaware.
(c) Each of Buyer and Parent has the requisite power and authority to
execute and deliver this Agreement and consummate the transactions contemplated
hereby. This Agreement has been duly executed and delivered by Buyer and Parent
and constitutes, and, when executed and delivered, each of the other agreements,
documents and instruments to be executed and delivered by Buyer and Parent
pursuant hereto will constitute, a valid and binding agreement of Buyer or
Parent, as applicable, enforceable against such in accordance with its terms.
Section 4.2 Consents and Approvals; No Violations. Except as set forth in
Schedule 4.2, neither the execution and delivery of this Agreement nor the
consummation by Buyer of the transactions contemplated hereby will (a) conflict
with or result in any breach of any provision of the Certificate of
Incorporation or By-Laws of Buyer; (b) require on the part of Buyer any filing
with, or the obtaining of any permit, authorization, license, consent or
approval of, any governmental or regulatory authority, whether within or outside
the United States, or any third party; (c) conform to Section 3.4(c) result in a
default (or give rise to any right of termination, cancellation or acceleration)
under any of the terms, conditions or provisions of any note, mortgage, other
evidence of indebtedness, guarantee, license, agreement, lease or other
instrument or obligation to which Buyer is a party or by which Buyer or any of
its assets may be bound; or (d) to the best knowledge of Buyer, violate any
order, judgment, arbitration award, injunction, decree, statute, rule or
regulation applicable to Buyer.
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Section 4.3 Availability of Funds. Buyer has on the date of execution of
this Agreement and will have at the Closing sufficient immediately available
funds, in cash or pursuant to credit agreements in effect on the date of this
Agreement, to pay the Purchase Price and any other amounts payable pursuant to
this Agreement and to effect the transactions contemplated hereby and by the
other agreements, documents and instruments to be executed and delivered by
Buyer pursuant hereto.
Section 4.4 Certain Fees. Neither Buyer nor any of its affiliates has
employed any broker, financial advisor or finder or incurred any liability for
any brokers', financial advisory or finders' fees in connection with this
Agreement or the transactions contemplated hereby.
Section 4.5 Disclosure. No written representation, warranty or statement
made Buyer in (a) this Agreement, or (b) the exhibits or Schedules attached
hereto, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained therein not false or
misleading.
ARTICLE V
COVENANTS
Section 5.1 Conduct of the Company. Sellers represent and agree that,
during the period from April 30, 1998, through the Closing, except as otherwise
contemplated by this Agreement or consented to by Buyer in writing:
(a) Sellers have caused and will cause the business operations of the
Company to be conducted in the ordinary course consistent with past practice and
preserve intact the Company's business organization in all material respects;
and
(b) Sellers have used and will use their best efforts not to (i)
permit or allow any of the properties or assets of the Company to be subjected
to any lien or encumbrance, whether or not in the ordinary course; (ii) sell or
dispose of any of the material properties or assets of the Company, other than
in the ordinary course; (iii) make any loans, advances (other than advances in
the ordinary course of business and consistent with past practice of the
Company) or capital contributions to, or investments in, any other person on
behalf of the Company; (iv) except as required by Section 2.1, terminate or
materially amend any of the material contracts, leases or licenses of the
Company, except in the ordinary course of business; (v) increase in any manner
the compensation of any of the directors, officers or other employees of the
Company, except such increases as are granted in the ordinary course of business
in accordance with its customary
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practices (which will include normal periodic performance reviews and related
compensation and benefit increases; (vi) adopt, grant, extend or increase the
rate or terms of any bonus, insurance, pension or other benefit programs or
agreements, payment or arrangement made to, for or with any such directors,
officers or employees of the Company, except (x) increases occurring in the
ordinary course of business in accordance with its customary practices, (y)
increases required by any applicable law, rule or regulation, or (z);changes
contemplated in this Agreement; (vii) make any change in any of the present
accounting methods and practices of the Company, except as required by GAAP; or
(viii) make any payment of bonus, dividends or return of capital to any of the
Sellers or affiliates of Sellers.
Section 5.2 Access to Information; Confidential Information. (a) Between
the date of this Agreement and the Closing, Sellers will (i) give Buyer and its
authorized representatives, including Buyer's independent auditors and Buyer's
employees who will be on Company's premises full-time, full and complete access
to all books, records, auditor's workpapers, offices and other facilities and
properties of the Company; (ii) permit Buyer to make such inspections thereof as
Buyer may request; and (iii) cause the officers of the Company and its outside
accountants and attorneys to furnish Buyer with the information in clause (i)
above within such person's control and such other financial and operating data
and other information with respect to the business and properties of the Company
as Buyer may from time to time request.
(b) The parties agree that the terms and conditions of this Agreement
and all information concerning Sellers or the Company furnished or provided by
Sellers or the Company or their affiliates to Buyer or its representatives
(whether furnished before or after the date of this Agreement) (the
"Confidential Information") will be kept confidential and will not be disclosed
to the public or to any persons other than directors, officers, employees,
affiliates or agents of the parties or to such other person who has entered into
a confidentiality agreement with the disclosing parties, unless otherwise
mutually agreed by the parties in writing. The parties further agree that any
news or press releases or other announcements to be made public with respect to
the existence of, or the matters set forth in, this Agreement will either be
jointly made or will be approved in writing by the party not making the news or
press release or other announcement.
(c) The restrictions on disclosure stated above will not prevent the
receiving Party from disclosing any Confidential Information where such
disclosure is required (i) in order to obtain the consents listed in Schedule
3.4, or (ii) by law or legal process or is made in a judicial proceeding to
enforce a party's rights under this Agreement.
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(d) If either party is required to disclose Confidential Information
to any regulatory or judicial authority, or pursuant to legal process, the
disclosing party will notify the other party in writing prior to such disclosure
in order to allow the other party the opportunity to request from the relevant
regulatory or judicial authority protection against public disclosure of any
such information.
(e) Either party's violation of the provisions of this Section 5.2
will subject such party to suit by the other party, provided, however, that
neither party will be liable for any incidental or consequential damages
relating to its obligations under this Section.
(f) The parties acknowledge that, because of the special and unique
nature of the Confidential Information, it would be difficult to measure the
damage to either party from any breach of the provisions of this Section 5.2 by
the other party, and that such aggrieved party, will suffer irreparable harm in
the event that the other party fails to comply with such provisions.
Accordingly, the parties agree that, in the event of a breach of any provision
of this Section 5.2 by either party, the other party will be entitled, in
addition to other remedies it may have in law or in equity, to injunctive or
other appropriate orders to restrain any such breach without showing or
providing any actual damage sustained by itself.
Section 5.3 Consents. Each of the Sellers and Buyer will cooperate and use
their respective best efforts to make all filings and obtain all licenses,
permits, consents, approvals, authorizations, qualifications and orders of
governmental authorities and other third parties necessary to consummate the
transactions contemplated by this Agreement. Each of the parties hereto will
furnish to the other party such necessary information and reasonable assistance
as such other party may reasonably request in connection with the foregoing and
will provide the other party with copies of all filings made by such party with
any governmental entity or any other information supplied by such party to a
governmental entity in connection with this Agreement and the transactions
contemplated hereby.
Section 5.4 Exclusive Negotiations. Each of the Sellers agree that neither
he nor it nor the Company will "shop" or in any other way solicit, entertain or
discuss the sale of the Company or its assets with any other party, whether
directly or indirectly, until October 31, 1998, or such other date as will be
agreed by the parties. The obligation under the preceding sentence will
automatically terminate pursuant to a termination under Section 8.1.
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Section 5.5 Covenant to Satisfy Conditions. Each of the Sellers and the
Company will use their respective best efforts to ensure that the conditions set
forth in Article VII hereof are satisfied, insofar as such matters are within
the control of Sellers or the Company, and Buyer will use its best efforts to
ensure that the conditions set forth in Article VII hereof are satisfied,
insofar as such matters are within the control of Buyer. Sellers and Buyer
further covenant and agree, with respect to a threatened or pending preliminary
or permanent injunction or other order, decree or ruling or statute, rule,
regulation or executive order that would adversely affect the ability of the
parties hereto to consummate the transactions contemplated hereby, to use all
reasonable efforts to prevent or lift the entry, enactment or promulgation
thereof, as the case may be.
Section 5.6 Public Announcements. The parties will not issue any report,
statement or press release or otherwise make any public statements with respect
to this Agreement and the transactions contemplated hereby, except as in the
reasonable judgment of the party may be required by law or in connection with
the obligations of a publicly-held, exchange-listed company, in which case the
language of any such report, statement or press release will be mutually agreed
to by the parties except as may be otherwise so required.
ARTICLE VI
CERTAIN TAX MATTERS
Section 6.1 Tax Matters. (a) Tax Returns, Payment of Taxes, Purchase Price
Adjustment. Tax Elections, and Refunds. (i) Buyer will cause to be prepared and
filed by McIntyre and McLarty all Tax Returns of the Company (including any
amendments thereto) with respect to any taxable period ending on or prior to the
Closing Date on a basis consistent with prior years, including any taxable
period ending as of the close of business on the Closing Date (any such period
being referred to herein as a "Pre-Closing Period"). The Company will pay such
Taxes and the Sellers will reimburse the Company for any Taxes for Pre-Closing
Periods in excess of the amounts accrued for periods up to the Closing Date on a
basis consistent with prior years in the ordinary course of business by the
Company prior to Closing (the "Accruals"). Buyer will pay, or will cause the
Company to pay, all Taxes reflected in the Accruals and for all taxable periods
which do not constitute Pre-Closing Periods.
(ii) Any refund of Taxes paid with respect to the Company shall
be for the account of Buyer. Sellers shall pay the Company the amount of any
such refund received by any Seller within fifteen (15) calendar days after
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receipt of such refund. Sellers, Buyer and the Company shall assist each other
in preparing, filing, obtaining, and defending any refund payable pursuant to
this Section 6.1(a)(iv).
(b) Control of Contest. Each party will have the right, at its own
expense, to control any audit or determination by any taxing authority, to
initiate any claim for refund or file any amended Tax Return, and to contest,
resolve and defend against any assessment, notice of deficiency, or other
adjustment or proposed adjustment of Taxes for any taxable period for which such
party (or any of its affiliates) is charged with responsibility for filing a Tax
Return under this Agreement (except that a party charged with payment
responsibility for Taxes under this Agreement will have such rights with respect
to any taxable period which includes a deemed Pre-Closing Period described in
Section 6.1(a)(ii) hereof); provided, however, that no party will have the right
to agree to any assessment, deficiency, settlement, or other adjustment or
proposed adjustment of Taxes that would adversely affect the interests of
another party without such other party's written consent, which consent will not
be unreasonably withheld. Buyer will promptly forward to Sellers all written
notifications and other written communications from any Taxing authority
received by Buyer or by a Company relating to any liability for Taxes for any
taxable period, including any Straddle Period, for which a Seller is charged
with payment responsibility under this Agreement. Buyer will assist the Sellers
and will cause the Company to assist the Sellers to enable the Sellers to take
any and all actions with respect to any proceedings for any such taxable period.
The failure by Buyer to provide any such notice to Sellers within twenty (20)
business days of receipt by Buyer or the Company of such notice will relieve
Sellers from any obligations with respect to the subject matter of any
notification not so forwarded.
(c) (i) Access to Information. Each of Buyer and Sellers will provide
the others, and Buyer will cause the Company to provide the Sellers, with the
right, at reasonable times and upon reasonable notice, to have access to and to
copy and use any records or information and personnel which may be relevant for
the taxable period for which the requesting party is charged with payment
responsibility for Taxes under this Agreement in connection with the preparation
of any Tax Returns, any audit or other examination by any taxing authority, the
filing of any claim for a refund of Tax or for the allowance of any Tax credit,
or any judicial or administrative proceedings relating to liability for Taxes.
The party requesting assistance hereunder will reimburse the other party for
reasonable expenses incurred in providing such assistance. Any information
obtained pursuant to this Section 6.1(c)(i) will be held in strict confidence
and will be used solely in
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<PAGE> 24
connection with the reason for which it was requested. Notwithstanding anything
to the contrary in this Agreement, none of the Sellers, Buyer or any affiliate
of the Sellers or Buyer will have any obligation to make available or provide a
copy of any consolidated, combined or unitary Tax Return filed by any of the
Sellers or Buyer, or any related materials.
(ii) Retention of Records. For a period of seven (7) years from
the Closing Date, Buyer will not, and will cause the Company not to, dispose of
or destroy any of the business records and files of the Company relating to
Taxes in existence on the Closing Date without first offering to turn over
possession thereof to Sellers by written notice to Sellers at least thirty (30)
days prior to the proposed date of such disposition or destruction.
Section 6.2 Definitions. For purposes of this Agreement:
(a) the term "Taxes" will mean all taxes, levies or other like
assessments, charges or fees (including estimated taxes, charges and fees),
including, without limitation, income, corporation, advance corporation, gross
receipts, transfer, excise, property, sales, use, value-added, license, payroll,
employer health tax, workplace insurance payments and premiums, pay as you earn
("PAYE"), withholding, social security and franchise or other governmental taxes
or charges imposed by Canada, the United States or any province, state, county,
local or foreign government or subdivision or agency thereof; and such term will
include any interest, penalties or additions to tax attributable to such Taxes;
(b) the term "Tax Return" will mean any report, return, statement or
other written information required to be supplied to a taxing authority by the
Company in connection with Taxes; and
(c) the term "Tax Benefit" will mean the incremental effect on the
liability for taxes associated with (i) a loss, deduction or credit for any Tax
purpose or (ii) a carry forward or carry back of a loss, deduction or credit for
any Tax purpose.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF THE PARTIES
Section 7.1 Conditions to Each Party's Obligations. The respective
obligation of each party to consummate the transactions contemplated herein is
subject to the satisfaction at or prior to the Closing of the following
conditions:
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(a) Any waiting periods applicable to the transactions contemplated
by this Agreement under applicable antitrust or trade regulation laws and
regulations, will have expired or been terminated and all governmental
authorizations or approvals required in connection with the transactions
contemplated by this Agreement will have been obtained or given;
(b) No statute, rule or regulation will have been enacted, entered,
promulgated or enforced by any court or governmental authority which prohibits
the consummation of the transactions contemplated hereby;
(c) There will not be in effect any judgment, order, injunction or
decree of any court of competent jurisdiction enjoining the consummation of the
transactions contemplated hereby;
(d) There will not be any suit, action, investigation, inquiry or
other proceeding instituted, pending or threatened by any governmental or other
regulatory or administrative agency or commission which seeks to enjoin or
otherwise prevent consummation of the transactions contemplated hereby;
(e) The consent of the parties to the agreements set forth in Schedule
3.4 will have been obtained; and
(f) The amalgamation of the Amalgamated Companies with and into the
Company shall have been completed.
Section 7.2 Conditions to Obligations of Sellers. The obligations of
Sellers to consummate the transactions contemplated herein are further subject
to the satisfaction (or waiver) at or prior to the Closing of the following
conditions:
(a) The representations and warranties of Buyer contained in this
Agreement will be true and correct at the date hereof and as of the Closing as
if made at and as of such time, except for changes permitted or contemplated
hereby and except for representations which are as of a specific date;
(b) Buyer will have performed in all material respects its obligations
under this Agreement required to be performed by it at or prior to the Closing
pursuant to the terms hereof; and
(c) Buyer will have delivered the items required under Section 1.5.
Section 7.3 Conditions to Obligations of Buyer. The obligations of Buyer to
consummate the transactions
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contemplated hereby are further subject to the satisfaction (or waiver) at or
prior to the Closing of the following conditions:
(a) The representations and warranties of Sellers contained in this
Agreement will be true and correct at the date hereof and as of the Closing as
if made at and as of such time, except for changes permitted or contemplated
hereby and except for representations which are as of a specific date;
(b) Sellers will have performed in all material respects each of their
obligations under this Agreement required to be performed by them at or prior to
the Closing pursuant to the terms hereof; and
(c) Each of the Sellers and the Company, as applicable, will have
delivered the items required under Section 1.4.
ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
Section 8.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned:
(a) at any time, by mutual written consent of Sellers and Buyer; or
(b) at any time after thirty (30) days following the date of execution
of this Agreement by Sellers, on the one hand acting jointly, or Buyer, on the
other hand, if through no fault of any party seeking termination the Closing has
not occurred on or prior to such date.
Section 8.2 Effect of Termination. There will be no liability or obligation
hereunder on the part of Sellers or Buyer or any of their respective directors,
officers, employees, affiliates, controlling persons, agents or representatives,
except that each of the Sellers, for his own actions, or Buyer, as the case may
be, may have liability, including under Article IX hereunder, to the other
Parties if the basis of termination is a willful, material breach by such Seller
or Buyer, as the case may be, of one or more of the provisions of this
Agreement, and except that the obligations provided for in Section 10.1 hereof
and the obligation to treat information in a confidential manner as set forth in
Section 5.2(b), will survive any such termination.
Section 8.3 Amendment, Modification and Waiver. This Agreement may be
amended, modified or supplemented at any
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time by written agreement of Sellers and Buyer. Any failure of Sellers, on the
one hand, or Buyer, on the other hand, to comply with any term or provision of
this Agreement may be waived, with respect to Buyer, by Sellers and, with
respect to Sellers, by Buyer, by an instrument in writing signed by or on behalf
of the appropriate party, but such waiver or failure to insist upon strict
compliance with such term or provision will not operate as a waiver of, or
estoppel with respect to, any subsequent or other failure to comply.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
Section 9.1 Non-Survival of Representations, Warranties and Agreements.
Except for Section 3.19, which will survive until the expiration of the
applicable statute of limitations, the representations, warranties and
agreements of Sellers and Buyer made in this Agreement, will survive the Closing
for a period of three (3) years from the Closing, but, except as provided in
Section 8.2 hereof, will not survive any termination of this Agreement. The
parties intend to shorten the statute of limitations and agree that no claims or
causes of action may be brought against Sellers, Buyer or any of their
directors, officers, employees, affiliates, controlling persons, agents or
representatives based upon, directly or indirectly, any of the representations,
warranties or agreements contained in this Agreement after the fourth
anniversary of the Closing or, except as provided in Section 8.2 hereof, any
termination of this Agreement. This Section 9.1 will not limit any covenant or
agreement of the parties which contemplates performance after the Closing,
including, without limitation, the covenants and agreements set forth in
Sections 9.2, 9.3 and 10.1 and Article VI hereof, it being understood that the
provisions of Article VI hereof will survive until the expiration of the
applicable statute of limitations.
Section 9.2 Sellers' Agreement to Indemnify.
(a) Subject to the terms and conditions set forth herein, George
Johnston and Hayden Marcus ("Seller Indemnitors") will jointly and severally
indemnify and hold harmless Buyer and its directors, officers, employees,
affiliates, controlling persons, agents and representatives and their successors
and assigns (collectively, the "Buyer Indemnitees") from and against all
liability, demands, claims, actions or causes of action, assessments, losses,
damages, costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses) (collectively, "Buyer Damages") asserted against
or incurred by any Buyer Indemnitee as a result of or arising out of (i) a
breach of
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any representation, warranty or agreement contained in this Agreement when made
or at and as of the Closing as though such representations, warranties and
agreements were made at and as of the Closing and (ii) any liability or
obligation of any of the Amalgamated Companies.
(b) Seller Indemnitors' obligations to indemnify the Buyer Indemnitees
are subject to the following limitations:
(i) No indemnification will be made by Seller Indemnitors unless
the aggregate amount of Buyer Damages exceeds $25,000 and, in such event,
indemnification will be made by Seller Indemnitors only to the extent that the
aggregate amount of Buyer Damages exceeds $25,000;
(ii) In no event will Seller Indemnitors' aggregate obligation to
indemnify the Buyer Indemnitees exceed the Purchase Price;
(iii) Seller Indemnitors will be obligated to indemnify the Buyer
Indemnitees only for those Buyer Damages as to which the Buyer Indemnitees have
given Seller Indemnitors written notice thereof on or prior to the third (3rd)
anniversary of the Closing. Any written notice delivered by a Buyer Indemnitee
to Seller Indemnitors with respect to Buyer Damages will set forth, with as much
specificity as is reasonably practicable, the basis of the claim for Buyer
Damages and, to the extent reasonably practicable, a reasonable estimate of the
amount thereof; and
(iv) Subject to Seller's right to arbitrate under Section 10.10
hereunder, Buyer may, but is not required to, set off any amounts due from
Seller Indemnitors pursuant to this Section 9.2 against any remaining payments
of Purchase Price to be made, if any.
Section 9.3 Buyer's Agreement to Indemnify.
(a) Subject to the terms and conditions set forth herein, Buyer will
indemnify and hold harmless Sellers and their directors, officers, employees,
affiliates, controlling persons, agents and representatives and their successors
and assigns (collectively, the "Seller Indemnitees") from and against all
liability, demands, claims, actions or causes of action, assessments, losses,
damages, costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses) (collectively, "Seller Damages") asserted against
or incurred by any Seller Indemnitee as a result of or arising out of (i) a
breach of any representation, warranty or agreement contained in this Agreement
when made or at and as of the Closing as though such representations, warranties
and agreements were made at and as of the Closing, and (ii) any negligent act or
willful
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misconduct of Buyer's employees given access to the Company's premises pursuant
to Section 5.2.
(b) Buyer's obligations to indemnify the Seller Indemnitees are
subject to the following limitations:
(i) No indemnification will be made by Buyer unless the aggregate
amount of Seller Damages exceeds $25,000 and, in such event, indemnification
will be made by Buyer only to the extent that the aggregate amount of Seller
Damages exceeds $25,000;
(ii) In no event will Buyer's aggregate obligation to indemnify
the Seller Indemnitees exceed the Purchase Price; and
(iii) Buyer will be obligated to indemnify the Seller Indemnitees
only for those Seller Damages as to which the Seller Indemnitees have given
Buyer written notice thereof on or prior to the third (3rd) anniversary of the
Closing. Any written notice delivered by a Seller Indemnitee to Buyer with
respect to Seller Damages will set forth, with as much specificity as is
reasonably practicable, the basis of the claim for Seller Damages and to the
extent reasonably practicable, a reasonable estimate of the amount thereof.
Section 9.4 Third Party Indemnification. The obligations of Sellers to
indemnify the Buyer Indemnitees under Section 9.2 hereof with respect to Buyer
Damages, and the obligations of Buyer to indemnify the Seller Indemnitees under
Section 9.3 hereof with respect to Seller Damages, in either case resulting from
the assertion of liability by third parties (each, as the case may be, a
"Claim"), will be subject to the following terms and conditions:
(a) Any party against whom any Claim is asserted will give the party
required to provide indemnity hereunder written notice of any such Claim
promptly after learning of such Claim, and the indemnifying party may at its
option undertake the defense thereof by representatives of its own choosing.
Failure to give prompt notice of a Claim hereunder will not affect the
indemnifying party's obligations under this Section 9.4, except to the extent
the indemnifying party is materially prejudiced by such failure to give prompt
notice. If the indemnifying party, within 30 days after notice of any such
Claim, or such shorter period as is reasonably required, fails to assume the
defense of such Claim, the Buyer Indemnitee or Seller Indemnitee, as the case
may be (each, an "Indemnitee"), against whom such Claim has been made will (upon
further notice to the indemnifying party) have the right to undertake the
defense, compromise or settlement of such Claim on behalf of and for the account
and risk, and at the expense, of the indemnifying party, subject to the right of
the indemnifying
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party to assume the defense of such Claim at any time prior to settlement,
compromise or final determination thereof.
(b) Anything in this Section 9.4 to the contrary notwithstanding, the
indemnifying party will not enter into any settlement or compromise of any
action, suit or proceeding or consent to the entry of any judgment (i) which
does not include as an unconditional term thereof the delivery by the claimant
or plaintiff to the Indemnitee of a written release from all liability in
respect of such action, suit or proceeding, or (ii) which contains terms or
conditions other than or in addition to monetary damages without the prior
written consent of the Indemnitee, which consent will not be unreasonably
withheld.
ARTICLE X
MISCELLANEOUS
Section 10.1 Fees and Expenses. Whether or not the transactions
contemplated herein are consummated pursuant hereto, except as otherwise
provided herein, each of Sellers and Buyer will pay all fees and expenses
incurred by, or on behalf of, him or it in connection with, or in anticipation
of, this Agreement and the consummation of the transactions contemplated hereby.
Each of Sellers and Buyer, will indemnify and hold harmless the other party or
parties, as the case may be, from and against any and all claims or liabilities
for brokers', financial advisory and finders' fees incurred by reason of any
action taken by such party or otherwise arising out of the transactions
contemplated by this Agreement by any person claiming to have been engaged by
such party.
Section 10.2 Further Assurances. From time to time after the Closing Date,
at the request of another party hereto and at the expense of the party so
requesting, each of the parties hereto will execute and deliver to such
requesting party such documents and take such other action as such requesting
party may reasonably request in order to consummate more effectively the
transactions contemplated hereby.
Section 10.3 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement will be in
writing and may be given by any of the following methods: (a) personal delivery;
(b) facsimile transmission; (c) registered or certified mail, postage prepaid,
return receipt requested; or (d) overnight delivery service. Notices will be
sent to the appropriate party at its address or facsimile number given below (or
at such other address or facsimile number for such party as will be specified by
notice given hereunder):
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If to Buyer, to:
WilTel Communications (Canada), Inc.
2800 Post Oak Blvd.
Houston, Texas 77056
Attn: Vice President, Finance and Administration
Fax: (713) 307-4080
With a copy to:
David P. Batow, General Counsel
Williams Communications Group, Inc.
One Williams Center, Suite 4100
Tulsa, Oklahoma 74172
Fax: (918) 573-3005
If to Sellers, to:
George Johnston
45 Banting Way
Kanata, Ontario K2K 1P7
Hayden Marcus
1845 Montereau Avenue
Gloucester, Ontario K1C 5X2
Gary White
15 Parkglen Drive
Nepean, Ontario K2G 3H1
with a copy to:
Gregory Sanders
Soloway, Wright
Suite 900 - 427 Laurier Ave. West
Ottawa, Ontario K1R 7Y2
Fax: (613) 238-8507
All such notices, requests, demands, waivers and communications will be deemed
received upon (i) actual receipt thereof by the addressee, (ii) actual delivery
thereof to the appropriate address, or (iii) in the case of a facsimile
transmission, upon transmission thereof by the sender and issuance by the
transmitting machine of a confirmation slip that the number of pages
constituting the notice have been transmitted without error.
Section 10.4 Severability. Should any provision of this Agreement for any
reason be declared invalid or unenforceable, such decision will not affect the
validity or enforceability of any of the other provisions of this
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Agreement, which remaining provisions will remain in full force and effect and
the application of such invalid or unenforceable provision to persons or
circumstances other than those as to which it is held invalid or unenforceable
will be valid and enforced to the fullest extent permitted by law.
Section 10.5 Binding Effect; Assignment. This Agreement and all of the
provisions hereof will be binding upon and will inure to the benefit of the
parties hereto and their respective personal representatives, successors and
permitted assigns. Neither this Agreement nor any of the rights, interests or
obligations hereunder will be assigned, directly or indirectly, including,
without limitation, by operation of law, by any party hereto without the prior
written consent of the other parties hereto.
Section 10.6 No Third Party Beneficiaries. This Agreement is solely for the
benefit of Sellers, and their respective personal representatives, successors
and permitted assigns, with respect to the obligations of Buyer under this
Agreement, and for the benefit of Buyer, and its successors and permitted
assigns, with respect to the obligations of Sellers. This Agreement will not be
deemed to confer upon or give to any third party any remedy, claim, liability,
reimbursement, cause of action or other right.
Section 10.7 Interpretation. (a) The article and section headings contained
in this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and will not in any way affect the meaning or
interpretation of this Agreement.
(b) As used in this Agreement, the term "person" will mean and include
an individual, a partnership, a joint venture, a corporation, a limited
liability company, a trust, an unincorporated organization and a government or
any department or agency thereof.
(c) As used in this Agreement, the term "affiliate" will have the
meaning set forth in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended.
(d) As used in this Agreement, the term "best efforts" with respect to
any party will mean the best efforts of a party without the requirement that
such party incur any nonanticipated (as of the date hereof), unreasonable,
out-of-pocket expenses or incur any other nonanticipated (as of the date
hereof), unreasonable burden or commence or pursue litigation in any action,
suit or proceeding, whether administrative, civil or criminal.
Section 10.8 Entire Agreement. This Agreement and the Schedules, Exhibits
and other documents referred to herein
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or delivered pursuant hereto which form a part hereof constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all other prior agreements and understandings, both written and oral,
between the parties or any of them with respect to the subject matter hereof.
Section 10.9 Governing Law. This Agreement will be governed by and
construed in accordance with the laws of the Province of Ontario (regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof) as to all matters, including but not limited to matters of
validity, construction, effect, performance and remedies.
Section 10.10 Resolution of Disagreements Among Parties. If Buyer or any of
the Sellers disagree as to any matter arising hereunder, Buyer and such Seller
will promptly consult with each other in an effort to resolve such dispute. If
any such disagreement cannot be resolved within fifteen (15) days after either
party asserts in writing that such dispute cannot be resolved, Buyer and such
Seller will jointly select an arbitrator (the "Arbitrator") pursuant to the
Arbitration Act of Ontario to resolve the disagreement. Arbitrator's
determination will be binding and conclusive, and any fees and expenses relating
to the engagement of the Arbitrator will be shared one-half by the Sellers and
one-half by Buyer. Upon the resolution of such dispute either by the parties or
by the Arbitrator, any amounts payable by a party hereto will be made to a bank
account designated by the payee no later than five (5) business days after such
resolution, together with interest at the Citibank base rate as adjusted from
time to time from the date the Arbitrator's decision indicates the payment under
dispute should have been made.
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Section 10.11 Counterparts. This Agreement may be executed in counterparts,
each of which will be deemed to be an original, but all of which will constitute
one and the same agreement.
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the date
first above written.
WILTEL COMMUNICATIONS (CANADA), INC.
By: /s/ LARRY JONES
-----------------------------------
Name: Larry Jones
Title: Vice President
WILLIAMS COMMUNICATIONS SOLUTIONS, LLC
By: /s/ LARRY JONES
-----------------------------------
Name: Larry Jones
Title: Vice President
1310038 ONTARIO INC.
By: /s/ GEORGE JOHNSTON
-----------------------------------
Name:George Johnston
Title:President
/s/ GEORGE JOHNSTON
-----------------------------------
GEORGE JOHNSTON
30
<PAGE> 35
H. MARCUS FAMILY TRUST
By: /s/ PATRICIA MARCUS
-----------------------------------
Name:Patricia Marcus
Title:Trustee
By: /s/ HAYDEN MARCUS
-----------------------------------
Name:Hayden Marcus
Title:Trustee
/s/ GEORGE JOHNSTON
-----------------------------------
HAYDEN MARCUS
/s/ GARY WHITE
-----------------------------------
GARY WHITE
31
<PAGE> 1
Redacted portions have been marked with asterisks (****). Confidential treatment
has been requested for the redacted portions. The confidential redacted portions
have been filed separately with the Securities and Exchange Commission.
EXHIBIT 10.22
CONFIDENTIAL TREATMENT
UNIDIAL HOLDINGS, INC.
PREFERRED STOCK PURCHASE AGREEMENT
THIS PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is entered
into as of October 2, 1998, by and among UNIDIAL HOLDINGS, INC., a Delaware
corporation (the "Company") and WILLIAMS COMMUNICATIONS, INC., a Delaware
corporation (the "Purchaser").
RECITALS
WHEREAS, the Company has authorized the sale and issuance of
an aggregate of 27 shares of its Series C Convertible Preferred Stock (the
"Series C Shares");
WHEREAS, the Purchaser desires to purchase the Series C Shares on the
terms and conditions set forth herein and enter into the Collateral Agreements
(as hereinafter defined); and
WHEREAS, the Company desires to issue and sell the Series C
Shares to the Purchaser on the terms and conditions set forth herein and enter
into the Collateral Agreements (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE/COLLATERAL AGREEMENTS.
1.1 AUTHORIZATION OF SHARES. On or before the Closing (as defined
in Article 2 below), the Company shall have authorized the sale and issuance to
the Purchaser of the Series C Shares having the rights, preferences, privileges
and restrictions set forth in the Certificate of Designations to the Certificate
of Incorporation of the Company in the form attached hereto as Exhibit A (the
"Preferred Share Certificate"). The Company has, or prior to the Closing will
have, adopted and filed the Preferred Share Certificate with the Secretary of
State of the State of Delaware.
1.2 SALE AND PURCHASE OF PREFERRED SHARES. Subject to the terms
and conditions hereof, the Company hereby agrees to issue and sell to the
Purchaser, and the Purchaser agrees to purchase from the Company, 27 Series C
Shares at a purchase price of **** per share.
1.3 COLLATERAL AGREEMENTS. The Collateral Agreements shall include
the Registration Rights Agreement, the Shareholders' Agreement, and the Services
Agreements (as hereinafter defined).
<PAGE> 2
2. CLOSING, DELIVERY AND PAYMENT.
The closing of the sale and purchase of the Series C Shares
under this Agreement (the "Closing") shall take place at 10:00 a.m., local time,
on October 2, 1998 at the offices of The Williams Companies, Inc., Legal
Department, One Williams Center, Suite 4100, Tulsa, Oklahoma 74172, or at such
other time or place as the Company and the Purchaser may mutually agree. At the
Closing, subject to the terms and conditions hereof, the Company will deliver to
the Purchaser certificates representing 27 Series C Shares, against payment in
cash by the Purchaser of the purchase price therefor.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
For the purposes of all the representations and warranties in
this Article 3, other than Section 3.2, when the term "Company" is used, it will
be deemed to include UniDial Communications, Inc. unless otherwise expressly
stated. Except as set forth on the Schedule of Exceptions attached hereto as
Exhibit B or as disclosed in the Financial Statements attached hereto as Exhibit
C, the Company hereby represents and warrants to the Purchaser as follows:
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is
a corporation duly organized and validly existing under the laws of the State of
Delaware. The Company has full power and authority to own and operate its
properties and assets, and to carry on its business as presently conducted. The
Company is duly qualified and is authorized to do business and is in good
standing as a foreign corporation in all jurisdictions in the aggregate in which
the nature of its activities and of its properties (both owned and leased) makes
such qualification necessary, except for those jurisdictions, in the aggregate,
in which failure to do so would not have a material adverse effect on the
Company or its business.
3.2 CAPITALIZATION. The authorized capital stock of the Company,
immediately prior to the Closing, consists of 2,000 shares of Common Stock, 954
shares of which are issued and outstanding and 32 of which are reserved for
issuance pursuant to the exercise of outstanding stock options; 10 shares of
Series A Convertible Preferred Stock, 60 shares of Series B Convertible
Preferred Stocks, and 430 shares of Preferred Stock, none of which are issued
and outstanding. Immediately prior to the Closing, 246 shares of Common Stock
are reserved for future issuance upon the conversion of the Series C Shares. All
issued and outstanding shares of the Company's Common Stock have been duly
authorized and validly issued, are fully paid and nonassessable, and were issued
in compliance with all applicable state and federal laws concerning the issuance
of securities. The rights, preferences, privileges and restrictions of the
Series C Shares are as stated in the Preferred Share Certificate. The shares of
Common Stock issuable upon the conversion of the Series C Shares (the
"Conversion Shares") have been duly and validly reserved for issuance and, when
issued in accordance with the Preferred Share Certificate, will be validly
issued, fully paid and nonassessable. Except for the specific matters identified
on Exhibit B and the shares reserved for issuance pursuant to the exercise of
outstanding stock options, there are no outstanding options, warrants, rights
(including conversion or preemptive rights), proxy or shareholder agreements, or
agreements of any kind for the purchase issue, transfer, delivery, sale or
acquisition from the Company of any of its securities.
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3.3 AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on
the part of the Company, its officers, directors and shareholders necessary for
the authorization, execution and delivery of this Agreement, the Collateral
Agreements in the form attached hereto, the Preferred Share Certificate, and the
sale and issuance of the Series C Shares and the Conversion Shares pursuant
hereto, and for the performance of the Company's obligations hereunder and under
the Collateral Agreements has been taken or will be taken prior to the Closing.
The Agreement and the Collateral Agreements when executed and delivered, will be
valid and binding obligations of UniDial Holdings, Inc. or UniDial
Communications, Inc., as appropriate, enforceable in accordance with their
terms.
The sale of the Series C Shares and the subsequent conversion of Series
C Shares into Conversion Shares are not and will not be subject to any
preemptive rights or rights of first refusal that have not been properly waived
or complied with. When issued, the Series C Shares and the Conversion Shares
will be validly issued, fully paid and nonassessable, and will be free of any
liens or encumbrances including, without limitation, call rights, warrants and
conversion rights except as expressly set forth in the Certificate of
Designation; provided, however, that the Series C Shares and the Conversion
Shares may be subject to restrictions on transfer under state and/or federal
securities laws as set forth herein or as otherwise required by such laws at the
time a transfer is proposed.
3.4 OBLIGATIONS TO RELATED PARTIES. No employee, officer, or
director of the Company or member of his or her immediate family is indebted to
the Company, nor is the Company indebted (or committed to make loans or extend
or guarantee credit) to any of them. To the best of the Company's knowledge,
none of such persons has any direct or indirect ownership interest in any firm
or corporation with which the Company is affiliated or with which the Company
has a business relationship, or any firm or corporation that competes with the
Company, except that employees, officers, or directors of the Company and
members of their immediate families may own stock in publicly traded companies
that may compete with the Company. No member of the immediate family of any
officer or director of the Company is directly or indirectly interested in any
contract with the Company with a value of more than $100,000.
3.5 FINANCIAL STATEMENTS. Attached hereto as Exhibit C are copies
of the unaudited balance sheet and income statement for the seven months ended
July 31, 1998 (the "Unaudited Financial Statements") and of the audited
financial statements for the twelve (12) months ended December 31, 1997 (the
"Financial Statements") of UniDial Communications, Inc., ("UniDial"), the
Company's wholly-owned subsidiary. The Financial Statements fairly present the
financial condition and operating results of UniDial as of the dates, and for
the periods, indicated therein and have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
throughout the period.
3.6 CHANGES. Except as disclosed in the Unaudited Financial
Statements and subject to the exceptions identified in Exhibit B, since the date
of the Financial Statements there has not been:
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(a) Any change in the assets, liabilities, financial
condition or operations of UniDial as shown on the balance sheet as of the date
of the Financial Statements, other than changes in the ordinary course of
business, none of which individually or in the aggregate has had or is expected
to have a material adverse effect on such assets, liabilities, financial
condition, or operations of the Company;
(b) Any change, except in the ordinary course of
business, in the contingent obligations of UniDial by way of guaranty,
endorsement, indemnity, warranty, or otherwise;
(c) Any damage, destruction, or loss, whether or not
covered by insurance, materially and adversely affecting the properties,
business, financial condition, operations or prospects of UniDial;
(d) Any waiver by UniDial of a material right or of a
material debt owed to it;
(e) Any direct or indirect loans made by UniDial to any
shareholder, employee, officer, or director of UniDial, other than advances made
in the ordinary course of business;
(f) Any declaration or payment of any dividend or other
distribution of the assets of UniDial;
(g) Any labor organization activity;
(h) Any debt, obligation, or liability incurred, assumed
or guaranteed by UniDial, except current liabilities incurred in the ordinary
course of business.
(i) Any adverse change in any material agreement to which
UniDial is a party or by which it or any of its assets are bound or subject,
including compensation agreements with UniDial's employees;
(j) To the best of the Company's knowledge, any other
event or condition of any character that, either individually or cumulatively,
has materially and adversely affected, or, so far as the Company may now
foresee, in the future may materially and adversely affect the business, assets,
liabilities, financial condition, operations or prospects of the Company;
(k) For the purposes of this Section 3.6, the terms
"material" or "materially" shall mean an affect on value of more than $100,000.
3.7 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company has
good and marketable title to its properties and assets, and good title to its
leasehold estates, in each case subject to no mortgage, pledge, lien, lease,
encumbrance, or charge, other than (i) those resulting from taxes which have not
yet become delinquent, (ii) liens and encumbrances which do not exceed $100,000
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on any property or asset or materially impair the operations of the Company,
(iii) liens and encumbrances in favor of Star Bank, and (iv) liens and
encumbrances in favor of WorldCom, Inc.
3.8 PATENTS AND TRADEMARKS. (a) The Company has sufficient title
and ownership of all trade names, copyrights, trade secrets, proprietary
information, patents, trademarks, service marks, rights and processes necessary
for its business as now conducted and as proposed to be conducted without any
conflict with or infringement of the rights of others. There are no outstanding
options, licenses, or agreements of any kind relating to the foregoing, nor is
the Company bound by or a party to any options, licenses or agreements of any
kind with respect to the patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information, proprietary rights and
processes of any other person or entity. The Company has not received any
communications alleging that the Company has violated or, by conducting its
business as proposed, would violate any of the patents, trademarks, service
marks, trade names, copyrights or trade secrets or other proprietary rights of
any other person or entity. The Company is not obligated under any contract
(including licenses, covenants or commitments of any nature) or other agreement
or subject to any judgment, decree or order of any court or administrative
agency, that would interfere materially with the Company's ability to pursue its
stated business objectives. Neither the execution nor delivery of this
Agreement, or the Collateral Agreements, nor the carrying on of the Company's
business by the employees of the Company, nor the conduct of the Company's
business as proposed, will, to the Company's knowledge, conflict with or result
in a breach of the terms, conditions or provisions of, or constitute a default
under, any contract, covenant or instrument under which any of such employees or
the Company is now obligated. The Company does not believe it is or will be
necessary to utilize any inventions of any of its employees (or people it
currently intends to hire) made prior to their employment by the Company.
(b) As part of the consideration for the Company entering this
Agreement, the Company shall license, or shall cause the necessary individuals
to license, the trademark known as "WillCall" on a non-exclusive, perpetual,
world-wide, non-recourse, basis to Purchaser.
3.9 The Company is not aware that any of its employees is
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of his
best efforts to promote the interests of the Company or that would conflict with
the Company's business as proposed to be conducted.
3.10 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation or default of any term of its Certificate of Incorporation (as amended
by the Preferred Share Certificate) or Bylaws or in any material respect of any
provision of any mortgage, indenture, agreement, instrument or contract to which
it is a party or by which it or its property is bound or, to the best of its
knowledge, of any federal, state or local judgment, order, writ, decree,
statute, rule or regulation applicable to the Company where such violation or
default would; or could reasonably be expected to, materially and adversely
affect the Company. The execution, delivery, and performance of and compliance
with this Agreement and the Collateral Agreements and the issuance and sale of
the Series C Shares pursuant hereto and of the Conversion Shares pursuant to the
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Preferred Share Certificate, will not result in any such violation, result in a
conflict with or constitute either a default under any such provision or an
event that results in the creation of any lien, charge, or encumbrance of more
than $100,000 upon any assets of the Company or the suspension, revocation,
impairment, forfeiture, or nonrenewal of any material permit, license,
authorization, or approval applicable to the Company, its business or
operations, or any of its assets or properties.
3.11 LITIGATION. There is no action, suit, proceeding or
investigation pending or currently threatened against the Company which (i)
questions the validity of this Agreement, the Collateral Agreements, or the
right of the Company to enter into them, or (ii) to consummate the transactions
contemplated hereby, or (iii) which might result, either individually or in the
aggregate, in any material adverse changes in the assets, condition, affairs or
prospects of the Company, financially or otherwise, or any change in the current
equity ownership of the Company, nor is the Company aware that there is any
basis for the foregoing. Without limiting the foregoing, there is no action,
suit, proceeding, or investigation with a potential exposure of $1,000,000 or
greater pending or currently threatened against the Company alleging that the
Company's sales agents program violates any federal or state securities laws.
The foregoing includes, without limitation, actions pending or threatened (or
any basis therefor known to the Company) involving the prior employment of any
of the Company's employees, their use in connection with the Company's business
of any information or techniques allegedly proprietary to any of their former
employers, or their obligations under any agreements with prior employers. The
Company is not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or which the Company intends to initiate.
3.12 TAX RETURNS AND PAYMENTS. The Company has filed all tax
returns (federal, state and local) required to be filed by it. All taxes shown
to be due and payable on such returns, any assessments imposed, and all other
taxes due and payable by the Company on or before the Closing have been paid or
will be paid prior to the time they become delinquent, except where the failure
thereof would not have a material and adverse effect on the financial condition,
operations or prospects of the Company. The Company has not elected pursuant to
the Internal Revenue Code of 1986, as amended ("Code"), to be treated as a
collapsible corporation or a Subchapter S corporation pursuant to Section 341(f)
or Section 1362(a) of the Code, nor has it made any other elections pursuant to
the Code (other than elections which relate solely to methods of accounting,
depreciation or amortization) which would have a material effect on the Company,
its financial condition, its business as presently conducted or proposed to be
conducted or on any of its properties or material assets.
3.13 REGISTRATION RIGHTS. Except for the registration rights
granted WorldCom, Inc. by Registration Rights Agreement dated November 30, 1997
and expected to be granted to Metracom, Inc., and the registration rights
granted to Purchaser by the Registration Rights Agreement of even date herewith,
the Company is presently not under any obligation, and has not granted any
rights, to register any of the Company's presently outstanding securities or any
of its securities that may hereafter be issued.
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3.14 COMPLIANCE WITH LAWS. The Company has complied in all material
respects with all applicable statutes, rules, regulations, orders and
restrictions of any domestic or foreign government or any instrumentality or
agency thereof in respect of the conduct of its business and ownership of its
properties including, without limitation, compliance with all applicable federal
and state securities laws with respect to Company's sales agents program. No
governmental orders, permissions, consents, approvals or authorizations are
required to be obtained and no registrations or declarations are required to be
filed in connection with the execution and delivery of this Agreement, the
Collateral Agreements, and the issuance of the Series C Shares or the Conversion
Shares, except such as have been duly and validly obtained or filed, or with
respect to any filings that must be made after the Closing, except such as will
be filed in a timely manner.
3.15 OFFERING VALID. Assuming the accuracy of the representations
and warranties of the Purchaser contained in Section 4.3 hereof, the offer, sale
and issuance of the Series C Shares and the Conversion Shares will be exempt
from the registration requirements of the Securities Act of 1933, as amended
(the "Securities Act") and will have been registered or qualified (or are exempt
from registration and qualification) under the registration, permit or
qualification requirements of all applicable state securities laws.
3.16 SECURITIES EXEMPTION. Neither the Company nor any agent on its
behalf has solicited or will solicit any offers to sell or has offered to sell
or will offer to sell all or any part of the Series C Shares to, or otherwise
approach or communicate in respect of all or any part of such Series C Shares
with, any person or persons so as to bring the sale of such Series C Shares by
the Company within the registration provisions of the Securities Act. The
Company shall seek and obtain all necessary permits and other authorizations or
orders of exemption as may be necessary or appropriate under the Kentucky
Securities Act and any other applicable state securities laws, with respect to
the Company's offer and sale of the Series C Shares and the Conversion Shares
3.17 COMPLIANCE WITH ERISA. No employee pension benefit plan
established or maintained by the Company or to which the Company is required to
make contributions (other, than a Multi-employer Plan), which is subject to Part
3 of Subtitle B of Title 1 of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")", or Section 412 of' the Internal Revenue Code of
1986 (as amended from time to time, the "Code"), had an accumulated funding
deficiency (as such term is defined in Section 302 of ERISA or Section 412 of
the. Code) as of the last day of the most recent fiscal year of such plan
heretofore ended. No liability to the Pension Benefit Guaranty Corporation
(other than required insurance premiums, all of which, to the extent due and
payable, have been paid) has been incurred with respect to any such plan (other
than a Multi-employer Plan) and there has not been any reportable event within
the meaning of ERISA, or any other event or condition, which presents a material
risk of termination of any such. plan (other than a Multi-employer Plan) by the
Pension Benefit Guaranty Corporation. The Company has not incurred and is not
reasonably expected to incur, any withdrawal liability (as defined in Title IV
of ERISA) to any Multi-employer Plan. The Company not has received any
notification that any Multi-employer Plan is in reorganization (as defined in
Section 4241 of ERISA), is insolvent (as defined in Section 4241 of ERISA) or
has been terminated, within the meaning of Title IV of ERISA, and no
Multi-employer Plan is reasonably expected to be in reorganization, insolvent or
terminated. To
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the knowledge of the Company, neither the Department of Labor, the Internal
Revenue Service nor any other governmental body has determined that any such
plan or any trust created thereunder, or any trustee or administrator thereof,
has engaged in a prohibited transaction with respect to any such plan, as such
term is defined in Section 4975 of the Code, that could subject any such plan,
trust, trustee, administrator, or the Company to any tax or penalty on
prohibited transactions imposed under said Section 4975 or ERISA, and the
Company is not aware of any facts that would constitute such a prohibited
transaction.
Except for COBRA continuation coverage and contingent obligations in
connection with the Company's health insurance program, the Company has no
extraordinary liabilities or other obligations, whether actual or contingent,
with respect to any employee benefit plan, including, without limitation,
liability for post-retirement medical benefits, post-retirement life insurance
benefits, or other similar benefits.
3.18 DISCLOSURE. This Agreement (including the schedules and
exhibits hereto), the Collateral Agreements, and any other documents,
certificates, instruments or other written materials or information furnished to
Purchaser by or on behalf of the Company in connection with the transactions
contemplated by this Agreement and the Collateral Agreements taken as a whole,
do not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements contained herein or
therein, in light of the circumstances in which they were made, not misleading.
There is no fact known to the Company which is materially adverse, or in the
future could reasonably be expected to be materially adverse, to the business
operations or financial performance of Company which has not been furnished to
Purchaser or set forth or reflected in this Agreement, the Collateral Agreements
or the other documents, certificates, and instruments referred to herein and
delivered to Purchaser by or on behalf of the Company in connection with the
transactions contemplated by this Agreement.
3.19 COMPLIANCE: GOVERNMENTAL AUTHORIZATIONS AND REGULATIONS. The
Company has all material licenses, franchises, permits, certificates and other
authorizations from all federal, state, municipal and other governmental
authorities having jurisdiction over its business. All such licenses,
franchises, permits, certificates and other governmental authorizations held by
the Company, in respect of its business are valid and sufficient to permit the
Company to conduct its operations as currently used or conducted except where
the failure to have such licenses, franchises, permits, certificates or other
governmental authorizations would not have a material adverse effect, and there
are no violations of any such licenses, franchises, permits, certificates and
other governmental authorizations, nor are there any proceedings, to the
knowledge of the Company, pending or threatened against the Company to revoke or
limit any such license, franchise, permit, certificate or other governmental
authorization.
3.20 INFORMATION SYSTEMS. The Company has information systems
capable of providing on a timely basis, current and accurate operating and
financial information, consistent with industry standards, which (a) allows
management of the Company to make reasoned and fully informed business
decisions, (b) allows the preparation of financial statements in a timely
fashion,
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(c) allows the provision of billing and customer service information, and (d) is
capable of reading and processing data within and between the years 1999 and
2000.
3.21 SHAREHOLDERS. The following Shareholders beneficially own the
number of shares of the Company's Common Stock set forth next to its name:
<TABLE>
<S> <C>
J. Sherman Henderson III ****
John S. Henderson IV ****
Kelly H. Duggins ****
N-TEL, LLC ****
WorldCom, Inc. ****
Remaining Shareholders ****
----
Total ****
</TABLE>
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser hereby represents and warrants to the Company as follows
(such representations and warranties do not lessen or obviate the
representations and warranties of the Company set forth in this Agreement):
4.1 REQUISITE POWER AND AUTHORITY. The Purchaser has all necessary
power and authority under all applicable provisions of law to execute and
deliver this Agreement, the Collateral Agreements and to carry out their
provisions. All action on Purchaser's part required for the lawful execution and
delivery of this Agreement and the Collateral Agreements has been or will be
effectively taken prior to the Closing. Upon their execution and delivery, this
Agreement and the Collateral Agreements will be valid and binding obligations of
Purchaser, enforceable in accordance with their terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application affecting enforcement of creditors' rights; (ii) general
principles of equity that restrict the availability of equitable remedies; and
(iii) to the extent that the enforceability of the indemnification provisions of
Section 1.9 of the Collateral Agreements may be limited by applicable laws.
4.2 CONSENTS. All consents, approvals, orders, authorizations,
registrations, qualifications, designations, declarations or filings with any
governmental authority on the part of the Purchaser required in connection with
the consummation of the transactions contemplated in the Agreement and the
Collateral Agreements have been or shall have been obtained prior to and be
effective as of the Closing.
4.3 INVESTMENT REPRESENTATIONS. The Purchaser understands that the
Series C Shares and Conversion Shares have not been registered under the
Securities Act. Purchaser also understands that the Series C Shares are being
offered and sold pursuant to an exemption from registration contained in the
Securities Act based in part upon Purchaser's representations contained in the
Agreement. The Purchaser hereby represents and warrants as follows:
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(a) PURCHASER BEARS ECONOMIC RISK. The Purchaser must
bear the economic risk of this investment indefinitely unless the Series C
Shares or the Conversion Shares are registered pursuant to the Securities Act,
or an exemption from registration is available. Purchaser understands that the
Company has no present intention of registering the Series C Shares, the
Conversion Shares or any shares of its Common Stock and that certificates
representing capital stock issued to the Purchaser will bear a restrictive
legend. The Purchaser understands that it has no registration rights with
respect to the Series C Shares or the Conversion Shares except as provided in
the Collateral Agreements. The Purchaser also understands that there is no
assurance that any exemption from registration under the Securities Act will be
available and that, even if available, such exemption may not allow the
Purchaser to transfer all or any portion of the Series C Shares or the
Conversion Shares under the circumstances, in the amounts or at the times the
Purchaser might propose.
The Purchaser further represents that the Purchaser is an
Accredited Investor within the meaning of Rule 501(a) of Regulation D under the
Securities Act.
(b) ACQUISITION FOR OWN ACCOUNT. The Purchaser is
acquiring the Series C Shares and the Conversion Shares for the Purchaser's own
account for investment only, and not with a view towards their distribution.
(c) PURCHASER CAN PROTECT ITS INTEREST. The Purchaser
represents that by reason of its management's business or financial experience,
Purchaser has the capacity to protect its own interests in connection with the
transactions contemplated in this Agreement and the Collateral Agreements.
Further, the Purchaser is aware of no publication of any advertisement in
connection with the transactions contemplated in this Agreement. The Purchaser
is not a corporation, trust or partnership specifically formed for the purpose
of consummating these transactions.
(d) COMPANY INFORMATION. The Purchaser has had an
opportunity to discuss the Company's business, management and financial affairs
with directors, officers and management of the Company and has had the
opportunity to review the Company's operations and facilities. The Purchaser has
also had the opportunity to ask questions of and receive answers from, the
Company and its management regarding the terms and conditions of this
investment.
5. CONDITIONS TO CLOSING.
5.1 CONDITIONS TO THE PURCHASER'S OBLIGATIONS AT THE CLOSING.
The Purchaser's obligations to purchase the Series C Shares at
the Closing are subject to the satisfaction, at or prior to the Closing, of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF
OBLIGATIONS. The representations and warranties made by the Company in Article 3
hereof shall be true and correct in all material respects as of the Closing with
the same force and effect as if they
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had been made as of the Closing, and the Company shall have performed all
obligations and conditions herein required to be performed or observed by it on
or prior to the Closing.
(b) CORPORATE DOCUMENTS. The Company shall have delivered
to the Purchaser or its counsel, copies of all corporate documents of the
Company as the Purchaser shall reasonably request.
(c) RESERVATION OF CONVERSION SHARES. The Conversion
Shares issuable upon conversion of the Series C Shares shall have been duly
authorized and reserved for issuance upon such exercise or conversion.
(d) FILING OF PREFERRED SHARE CERTIFICATE. The Preferred
Share Certificate shall have been filed with the Secretary of State of the State
of Delaware.
(e) COMPLIANCE CERTIFICATE. The Company shall have
delivered to the Purchaser a Compliance Certificate, executed by the President
and the Chief Financial Officer of the Company, dated the date of the Closing,
to the effect that the conditions specified in subparagraphs (a) through (d) of
this Section 5.1 have been satisfied.
(f) REGISTRATION RIGHTS AGREEMENT. The Registration
Rights Agreement shall have been executed and delivered by the parties thereto.
(g) SHAREHOLDER AGREEMENT. The Shareholder Agreement by
and among J. Sherman Henderson III (and members of his immediate family), N-TEL,
LLC and the Purchaser shall have been executed and delivered by the parties
thereto.
(h) SERVICES AGREEMENTS. The Company and the Purchaser
shall have executed and delivered (i) a carrier services agreement and (ii) a
software license agreement, (collectively, the "Services Agreements"). The
Company and Purchaser's affiliate, Williams Communications Solutions, LLC
("Solutions") have begun negotiations on a sales agency reseller and services
agreement, pursuant to which Solutions shall provide, in conjunction with
Purchaser, certain telecommunications services to customers of Solutions, for
which a Term Sheet has been prepared and is attached hereto as Exhibit D. The
parties agree to negotiate in good faith a definitive agreement incorporating
the terms and conditions contained in Exhibit D with a view toward executing one
or more definitive agreements; however, the parties are not obligated to enter
into any such definitive agreements.
(i) WORLDCOM AGREEMENT. The Purchaser and WorldCom, Inc.
shall have executed and delivered a switched services resale agreement upon such
terms and conditions satisfactory to the Purchaser in its sole discretion.
(j) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the Closing
hereby and all documents and instruments incident to such transactions shall be
reasonably satisfactory in substance and form to the Purchaser and its counsel,
and
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the Purchaser and its counsel shall have received all such counterpart originals
or certified or other copies of such documents as they may reasonably request.
5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's
obligation to issue and sell the Series C Shares at the Closing is subject to
the satisfaction, on or prior to the Closing, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The
representations and warranties made by the Purchaser in Article 4 hereof shall
be true and correct in all material respects at the date of the Closing, with
the same force and effect as if they had been made on and as of said date.
(b) PERFORMANCE OF OBLIGATIONS. The Purchaser shall have
performed and complied with all agreements and conditions herein required to be
performed or complied with by the Purchaser on or before the Closing.
(c) FILING OF PREFERRED SHARE CERTIFICATE. The Preferred
Share Certificate shall have been filed with the Secretary of State of the State
of Delaware. The Company agrees to use its best efforts to effect such action.
(d) REGISTRATION RIGHTS AGREEMENT. The Registration
Rights Agreement shall have been executed and delivered by the parties thereto.
The Company agrees to use its best efforts to effect such action.
(e) SERVICES AGREEMENTS. The Company and the Purchaser
shall have executed and delivered the Services Agreements.
6. COVENANTS OF THE COMPANY.
6.1 Until the earliest to occur of (i) the closing of a firm
commitment underwritten public offering (the "IPO") pursuant to an effective
registration statement under the Securities Act covering the offer and sale of
Common Stock for the account of the Company to the public with an aggregate
offering price to the public of not less than **** (before deduction of
underwriter commissions and offering expenses), (ii) the conversion of all of
the Series C Shares into shares of Common Stock, or (iii) the redemption of all
of the Series C Shares, the Company shall duly perform and observe each and all
of the following covenants and agreements:
(a) ATTENDANCE AT BOARD MEETINGS. The Purchaser shall
have the right to have a Purchaser designee attend and observe the proceedings
of meetings of the board of directors of the Company and the right to receive
any information furnished to said directors in connection with the meetings of
the board, except in cases where such attendance at the meetings or receipt of
information would cause the attorney-client privilege between the Company and
its counsel to be adversely affected or in cases in which the board of directors
is considering a contract or transaction between the Company and the Purchaser
or one of its affiliates or in which the
12
<PAGE> 13
Purchaser or one of its affiliates has a financial interest. The Purchaser
designee shall maintain the confidentiality of all financial and other
proprietary information discussed at meetings of the board of directors of the
Company or made known to the designee in connection with such meetings.
(b) RIGHTS OF APPROVAL. Without the Purchaser's prior
written consent, which shall not be unreasonably withheld, delayed or
conditioned, the Company and UniDial will not (i) make material expenditures
even if in the normal and ordinary course of business, except with respect to
payments made to WorldCom, Inc. or its affiliates on account of the purchase of
telecommunications services from WorldCom (ii) enter into an agreement to sell
or otherwise transfer any material part of its assets or ownership interests in
subsidiaries, (iii) enter into an agreement to make or suffer to remain
outstanding any material loan or advance to, or enter into an agreement to
receive a material loan or other extension of material credit, or purchase or
acquire for a material amount or by assumption of a material liability any
stock, bonds, notes or securities of, or any partnership interest or limited
liability company interest in, or make any material capital contribution to, any
other person, partnership, company, or other entity, (iv) appoint a person other
than J. Sherman Henderson III as chief executive officer, (v) materially modify
its agent program as currently in effect, (vi) change the independent
accountants of the Company nor engage any additional independent accountants, it
being understood that the independent accountants of the Company must be an
international firm of recognized prestige, (vii) increase the compensation of
any officer or executive by more than fifteen (15%) percent in any year, or
enter into any employment agreement, any severance agreement, or any material
transaction or series or related transactions with any of the Shareholders (as
defined in the Shareholder's Agreement) or any of their Affiliates (as defined
in the Shareholder's Agreement) except on terms that are at least as favorable
to the Company as could be obtained in an arms-length transaction, or enter into
an employment agreement or severance agreement that involves more than $100,000,
or (viii) initiate any litigation, or consent to the settlement or admit
liability with respect to or fail to diligently contest any litigation against
it, which involves more than $250,000. For purposes of subsections (i) through
(iii) of this Section 6.2, "material" shall mean an amount in excess of
$5,000,000.
(c) USE OF PROCEEDS. The Company will use the proceeds of
the sale of the Series C Shares as follows: (i) up to **** will be used in
satisfaction of certain contingent obligations of the Company to its agents
pursuant to a program approved by the Purchaser or as repayment of indebtedness
incurred by the Company in connection with such a program, (ii) **** to fund a
portion of the Company's acquisition of Metracom Corporation, and (iii) the
remainder for general corporate purposes.
(d) IPO INVESTMENT. The Company shall, at the beginning
of preparation for an IPO, deliver a letter from a nationally recognized
investment banking firm establishing the percentage ownership to be sold to the
public and the market capitalization of the Company ("IMC").
13
<PAGE> 14
**** The Company will provide the Purchaser with a copy of such registration
statement within two days following its filing with the SEC.
(e) FURTHER INVESTMENT. With respect to shares of the
Company (including securities convertible into shares of the Company) expected
to be issued to a third party, the Company will provide the Purchaser a fair and
reasonable opportunity to acquire all, but not less than all, such shares upon
the same terms and conditions as to be offered to the third party provided that
Purchaser continues to own the Series C Shares or at least 5% of the Company's
issued and outstanding common stock. The rights of the Purchaser pursuant to
this Section 6.1 shall not apply to any shares to be issued in the IPO, to any
shares issued pursuant an acquisition or merger that has been duly approved by
the Company's board of directors, or pursuant to employee or director or
consultant stock-based incentive plans duly adopted by the Company's board of
directors and shall expire upon the consummation of the IPO.
(f) MERGER RIGHT OF FIRST REFUSAL. If, before the
conversion of all shares of Series C Preferred Stock, the Corporation's Board of
Directors receives a bona fide offer from any entity other than the Purchaser
that it desires to accept (the "Offer to Purchase") to enter into a merger,
consolidation, exchange of shares, recapitalization, reorganization, or similar
event (a "Transaction") as a result of which shares of Common Stock of the
Corporation shall be changed into the same or a different number of shares of
the same or another class or classes of stock or securities of the Corporation
or another entity or the right to receive an amount in cash per share, or a
combination thereof, then the Board of Directors shall provide notice of the
proposed Transaction to the Purchaser and grant the Purchaser the exclusive
right to enter into a Transaction on substantially the same terms and conditions
as the Offer to Purchase. If the Purchaser declines to submit an offer within
fifteen (15) days of the date of the Board's notice of the proposed Transaction
to the Purchaser and the Corporation's Board of Directors affirmatively votes to
proceed with the Transaction, Purchaser shall have the right to convert all its
shares of Series C Preferred Stock into shares of Common Stock in accordance
with the terms of the Minimum Valuation formula of paragraph 4(A)(ii)(b) and
shall vote all of its shares of Series C Preferred Stock in favor of the
Transaction at any meeting of the shareholders held to consider the Transaction.
(g) FINANCIAL INFORMATION. So long as Purchaser owns the
Series C Shares, the Company will, and will cause each of its subsidiaries to,
maintain a system of accounting established and administered in accordance with
generally accepted accounting principles, and the Company will furnish to
Purchaser:
(i) Within 120 days after the close of each of its fiscal
years, an audit report certified by independent certified public accountants,
prepared in accordance with generally accepted accounting principles on a
consolidated basis for itself and its Subsidiaries, including balance sheets
14
<PAGE> 15
as of the end of such period, related profit and loss and statements of
stockholders' equity, and a statement of cash flow, accompanied by any
management letter prepared by said accountants and by a certificate of said
accountants that, in the course of their examination necessary for their
certification of the foregoing, they have obtained no knowledge of any unmatured
default or event of default, or if, in the opinion of such accountants, any
unmatured default or event of default shall exist, stating the nature and status
thereof;
(ii) Within 50 days after the close of the first three
quarterly periods of each of its fiscal years, for itself and subsidiaries,
consolidated unaudited balance sheets as at the close of each such period and
consolidated profit and loss and reconciliation of surplus statements and a
statement of cash flow for the period from the beginning of such fiscal year to
the end of such quarter, all certified by its chief financial officer;
(iii) Together with a certificate from the chief financial
officer of Company, and attested by the Company's Secretary the financial
statements required under clauses (a) and (b) of this Section 6.3, and stating
that no unmatured default or event of default exists under any material
agreement, or if any unmatured default or event or default exists, stating the
nature and status thereof;
(iv) Promptly upon the furnishing thereof to the
shareholders of the Company, copies of all financial statements, reports and
proxy statements so furnished;
(v) Promptly upon the filing thereof, copies of all
registration statements and annual, quarterly or other periodic reports which
the Company or any its subsidiaries files with the Securities and Exchange
Commission and copies of all material statements and reports which the Company
or any of its subsidiaries files with the Federal Communications Commission or
any other regulating body which are intended to be publicly available;
(vi) Promptly upon receipt of demand therefor, such other
information (including non-financial information) as Purchaser may from time to
time reasonably request; and
(vii) Promptly upon becoming aware of an unmatured default
or an event of default in any material agreement, but in no event later than
five (5) days after becoming aware of such event or condition, the Company will
provide written notice to Purchaser specifying the nature of the unmatured
default or event of default, as the case may be, the period of existence thereof
and what action the Company is taking or proposed to take with respect thereto.
The foregoing obligation shall be limited, once the Company becomes a "reporting
company" under the United States securities laws, to the extent necessary to the
comport with such laws.
(h) OTHER BUSINESS. Neither the Company nor any of its
subsidiaries shall engage in any business unrelated to its current business that
could reasonably be expected to materially and adversely affect its ability to
perform its obligations under this Agreement or the Collateral Agreements.
15
<PAGE> 16
(i) INSPECTION. The Company will, and will cause each of
its subsidiaries to, permit Purchaser, by its respective agents or
representatives, upon reasonable notice, to inspect any of the properties,
corporate books and financial records of the Company and its subsidiaries, to
examine and make copies of the books of accounts and other financial records of
the Company and its subsidiaries, and to discuss the affairs, finances and
accounts of the Company and its subsidiaries with, and to be advised as to the
same by, their respective officers at such reasonable times and intervals during
normal business hours as Purchaser may designate. Each person making such an
inspection agrees to maintain in confidence any information so obtained (except
for disclosures (i) to any prospective or actual assignee of the Series C Shares
who shall agree to maintain such information in confidence and to indemnify the
Company and its subsidiaries, (ii) to its auditors, attorneys and professional
advisers, and (iii) if legally required to be so disclosed, (A) to any
governmental authority having jurisdiction over it, (B) pursuant to any order or
legal process of any court or governmental agency, or (C) in connection with any
legal action arising out of this agreement or the Collateral Agreements) and
indemnify the Company and its subsidiaries against any loss or claim arising
from a failure to maintain such confidence. The foregoing obligation shall be
limited, once the Company becomes a "reporting company" under the United States
securities laws, to the extent necessary to the comport with such laws.
(j) ANTI-DILUTION RIGHTS. Prior to all of the Series C
Shares having been converted or redeemed, the Company agrees not to amend the
anti-dilution rights of or grant any new such rights to WorldCom.
(k) SECURITIES. The Company shall not redeem, repurchase,
or otherwise acquire any shares of the outstanding Common Stock of the Company
including without limitation call rights, warrants, options, and contracts or
other commitments to issue shares or securities convertible into Common Stock
(other than the Series C Shares) except (i) ratably from all holders thereof, or
(ii) from an employee or former employee pursuant to an employee benefit plan
approved by the board of directors of the Company or in connection with the
termination of the employee's employment.
7. EVENTS OF DEFAULT; REMEDIES.
7.1 EVENTS OF DEFAULT. If any of the following conditions or
events ("Events of Default") shall occur (whether voluntary or involuntary or
arising by operation of law or otherwise):
(a) Any representation or warranty made by the Company or
UniDial herein to Purchaser which is untrue or misleading in any material
respect as of the time such statement was made in light of the circumstances
then existing; or
(b) The Company or any subsidiary breaches or causes the
breach of any covenant(s) made by the Company or a subsidiary hereunder or is in
breach of or causes a default to occur in the performance of any material
covenant or obligation in any other agreements with Purchaser or Purchaser's
subsidiaries, which breach or default remains uncured for ten (10) days after
written notice of such breach or default is received by the Company.
16
<PAGE> 17
7.2 REMEDIES ON DEFAULT. If any Event of Default shall have
occurred and be continuing, Purchaser shall have all remedies that may be
available at law or in equity.
7.3 PRESERVATION OF RIGHTS. No delay or omission of Purchaser to
exercise any right under this Agreement shall impair such right to be construed
to be a waiver of any Event of Default or an acquiescence therein. Any single or
partial exercise of any such right shall not preclude other or further exercise
thereof or the exercise of any other right, and no waiver, amendment or other
variations of the terms, conditions or provisions of this Agreement whatsoever
shall be valid unless in writing signed by Purchaser, and then only to the
extent in such writing specifically set forth. All remedies contained in this
Agreement or by law afforded shall be cumulative and all shall be available to
Purchaser until all obligations hereunder have been satisfied.
8. MISCELLANEOUS.
8.1 GOVERNING LAW. This Agreement shall be governed in all
respects by the laws of the Commonwealth of Kentucky.
8.2 SURVIVAL. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by the Purchaser and
the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
8.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Series C Shares from time to time; provided,
however, that prior to the receipt by the Company of adequate written notice of
the transfer of any Series C Shares specifying the full name and address of the
transferee, the Company may deem and treat the person listed as the holder of
such Series C Shares in its records as the absolute owner and holder of such
Series C Shares for all purposes, the payment of any dividends or any redemption
price. Any sale or transfer of the Series C Shares shall be for not less than
all of such shares. The rights of the Purchaser under this Agreement may not be
assigned except to a purchaser or transferee of all the Series C Shares.
8.4 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules
hereto, the Collateral Agreements, and the other documents delivered pursuant
hereto constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and no party shall be liable or bound
to any other in any manner by any representations, warranties, covenants, and
agreements except as specifically set forth herein. Nothing in this Agreement or
the Collateral Agreements express or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors and
assigns, any rights, remedies, obligations, or liabilities under or by reason of
this Agreement or the Collateral Agreements, except as expressly provided
herein.
17
<PAGE> 18
8.5 SEVERABILITY. In case any provision of the Agreement 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.
8.6 AMENDMENT AND WAIVER.
(a) This Agreement may be amended or modified only upon
the written consent of the holders of not less than a majority in interest of
the Series C Shares (treated as if converted and including any Conversion Shares
into which the Series C Shares have been converted that have not been sold to
the public).
(b) The obligations of the Company and the rights of the
holders of the Series C Shares and the Conversion Shares under the Agreement may
be waived only as provided in the Preferred Share Certificate and in the
Shareholders' Agreement
(c) Except to the extent provided in this Section 8.6(c),
neither this Agreement nor any provision hereof may be changed, waived,
discharged, or terminated, except by a statement in writing signed by the party
against which enforcement of the change, waiver, discharge, or termination is
sought.
8.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to the Purchaser, upon any breach,
default or noncompliance of the Company under this Agreement, the Collateral
Agreements or the Preferred Share Certificate, shall impair any such right,
power, or remedy, nor shall it be construed to be a waiver of any such breach,
default or noncompliance, or any acquiescence therein, or of or in any similar
breach, default or noncompliance thereafter occurring. It is further agreed that
any waiver, permit, consent, or approval of any kind or character on the
Purchaser's part of any breach, default or noncompliance under this Agreement,
the Collateral Agreements or under the Preferred Share Certificate or any waiver
on the Purchaser's part of any provisions or conditions of the Agreement must be
in writing and shall be effective only to the extent specifically set forth in
such writing. All remedies, either under this Agreement, the Collateral
Agreements, the Preferred Share Certificate, by law, or otherwise afforded to
the Purchaser, shall be cumulative and not alternative.
8.8 NOTICES. All notices and other communications provided for or
permitted hereunder shall be made by hand delivery or registered first class
mail:
(a) If to the Purchaser:
Williams Communications, Inc.
One Williams Center, Suite 4100
Tulsa, Oklahoma 74172
Attention: S. Miller Williams, Sr. Vice President
18
<PAGE> 19
(b) If to another Holder of Registrable Shares, at the
most current address or addresses provided to the Company by such Holder;
(c) If to the Company:
UniDial Holdings, Inc.
9931 Corporate Campus Drive, Suite 3000
Louisville, Kentucky 40223
Attention: S. Andrew McKay, Chief Operating Officer
8.9 EXPENSES. The Company shall pay all costs and expenses that it
incurs with respect to the negotiation, execution, delivery and performance of
the Agreement, and the Purchaser shall pay all costs and expenses that it incurs
with respect to the negotiation, execution, delivery and performance of the
Agreement.
8.10 TITLES AND SUBTITLES. The titles of the paragraphs and
subparagraphs of the Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
8.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
8.12 BROKER'S FEES. Each party hereto represents and warrants that
no agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other commission directly or indirectly in connection with
the transactions contemplated herein. Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of the representation in this Section 8.12 being untrue.
19
<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have executed the Agreement as
of the date set forth in the first paragraph hereof.
COMPANY:
UNIDIAL HOLDINGS, INC.
9931 Corporate Campus Drive, Suite 3000
Louisville, Kentucky 40223
By
----------------------------
S. Andrew McKay
Chief Operating Officer
PURCHASER:
WILLIAMS COMMUNICATIONS, INC.
One Williams Center
Suite 2600
Tulsa, Oklahoma 74172
By
----------------------------
S. Miller Williams
Senior Vice President
20
<PAGE> 21
UNIDIAL HOLDINGS, INC.
PREFERRED STOCK PURCHASE AGREEMENT
LIST OF EXHIBITS
Exhibit A PREFERRED SHARE CERTIFICATE OF DESIGNATIONS
Exhibit B SCHEDULE OF EXCEPTIONS
Exhibit C FINANCIAL STATEMENTS OF THE COMPANY
Exhibit D TERMS SHEET FOR WCS SERVICES AGREEMENT
21
<PAGE> 1
Redacted portions have been marked with asterisks (****). Confidential treatment
has been requested for the redacted portions. The confidential redacted portions
have been filed separately with the Securities and Exchange Commission.
CONFIDENTIAL TREATMENT
EXHIBIT 10.23
EXECUTION COPY
This instrument prepared by:
Charles E. Hord, III, Esq.
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, New York 10112
AMENDED AND RESTATED LEASE
---------------------------------------------------
between
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION,
not in its individual capacity
but solely as trustee,
as Lessor
and
WILLIAMS COMMUNICATIONS, INC.
as Lessee
Dated: As of September 2, 1998
THIS AMENDED AND RESTATED LEASE HAS BEEN MANUALLY EXECUTED IN COUNTERPARTS
NUMBERED CONSECUTIVELY FROM l TO 4. TO THE EXTENT, IF ANY, THAT THIS AMENDED AND
RESTATED LEASE CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE UNIFORM
COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO SECURITY
INTEREST IN THIS AMENDED AND RESTATED LEASE MAY BE CREATED THROUGH THE TRANSFER
OR POSSESSION OF ANY COUNTERPART OF THIS AMENDED AND RESTATED LEASE OTHER THAN
COUNTERPART NO. 1.
This is Counterpart No.
-----
<PAGE> 2
TABLE OF CONTENTS
(Not a part of the Lease)
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I DEFINITIONS; RULES OF CONSTRUCTION.....................................................................1
Section 1.01 Definitions ...............................................................................1
Section 1.02 Computation of Time Periods................................................................1
Section 1.03 Accounting Terms...........................................................................1
Section 1.04 Use of Certain Terms.......................................................................1
Section 1.05 Headings and References....................................................................2
ARTICLE II THE PROPERTY..........................................................................................2
Section 2.01 Lease of the Property......................................................................2
Section 2.02 Use of Property............................................................................3
Section 2.03 Quiet Enjoyment............................................................................4
Section 2.04 Lease Schedules............................................................................5
ARTICLE III TERM.................................................................................................5
Section 3.01 Base Term..................................................................................5
Section 3.02 Extended Term..............................................................................5
Section 3.03 Lessee's Options Upon Expiration...........................................................7
Section 3.04 Property Sold..............................................................................8
Section 3.05 Non-Terminability..........................................................................8
ARTICLE IV RENT..................................................................................................9
Section 4.01 Fixed Rent.................................................................................9
Section 4.02 Additional Rent...........................................................................10
Section 4.03 Default Rate..............................................................................10
Section 4.04 Rent Payments.............................................................................10
Section 4.05 Other Payments............................................................................10
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE V SALES AND OTHER DISPOSITIONS OF PROPERTY..............................................................11
Section 5.01 Optional Purchase by Lessee of All Property...............................................11
Section 5.02 Optional Purchase by Lessee of Items of Property..........................................11
Section 5.03 Mandatory Purchase by the Lessee of all Property..........................................12
Section 5.04 Purchase Procedures.......................................................................12
Section 5.05 Exchanges and Substitutions of Items of Property..........................................14
Section 5.06 Alterations; Removal......................................................................16
Section 5.07 Subletting................................................................................17
Section 5.08 Redeployment of the Property..............................................................18
Section 5.09 Effect of Disposition.....................................................................24
ARTICLE VI CERTAIN COVENANTS OF THE LESSEE......................................................................24
Section 6.01 Taxes and Assessments.....................................................................24
Section 6.02 Compliance with Laws......................................................................26
Section 6.03 Certain Agreements........................................................................26
Section 6.04 Liens.....................................................................................26
Section 6.05 Insurance.................................................................................27
Section 6.06 Maintenance and Repair....................................................................30
Section 6.07 Inspection Rights.........................................................................32
Section 6.08 Assignments, Etc..........................................................................32
Section 6.09 Location..................................................................................32
ARTICLE VII CONDEMNATION AND CASUALTY...........................................................................33
Section 7.01 Condemnation and Casualty.................................................................33
Section 7.02 Condemnation or Casualty with Termination.................................................34
Section 7.03 Condemnation or Casualty Without Termination..............................................34
Section 7.04 Temporary Condemnation of Lease Termination...............................................36
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE VIII ENVIRONMENTAL MATTERS..............................................................................36
Section 8.01 Environmental Event.......................................................................36
Section 8.02 Environmental Trigger Termination.........................................................36
Section 8.03 Environmental Remediation.................................................................37
Section 8.04 Environmental Compliance..................................................................37
ARTICLE IX REMEDIES.............................................................................................37
Section 9.01 General Remedies..........................................................................37
Section 9.02 Default Remedies..........................................................................38
Section 9.03 Lessee Default Repurchase Option..........................................................40
Section 9.04 Payment on Default........................................................................40
Section 9.05 Additional Rights.........................................................................41
ARTICLE X SURRENDER.............................................................................................42
Section 10.01 Return of Property.......................................................................42
Section 10.02 No Liens.................................................................................43
Section 10.03 Environmental Compliance.................................................................43
Section 10.04 Removal of Other Property................................................................43
Section 10.05 Return Conditions........................................................................44
Section 10.06 Survival.................................................................................49
ARTICLE XI SECURITY.............................................................................................49
Section 11.01 Characterization.........................................................................49
Section 11.02 Mortgage.................................................................................50
Section 11.03 Security Agreement.......................................................................53
ARTICLE XII MISCELLANEOUS.......................................................................................54
Section 12.01 Notices, Demands and Other Instruments...................................................54
Section 12.02 No Default Certificate...................................................................54
Section 12.03 Severability.............................................................................54
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
Section 12.04 Binding Effect...........................................................................54
Section 12.05 Governing Law............................................................................55
Section 12.06 Counterparts.............................................................................55
Section 12.07 No Recourse..............................................................................55
Section 12.08 Lessor's Right to Cure Lessee's Default..................................................55
Section 12.09 Lessee's Right to Contest Property Taxes.................................................56
Section 12.10 Limitations on Amounts Payable...........................................................56
Section 12.11 Payments to the Agent....................................................................56
Section 12.12 Remaining Moneys.........................................................................56
Section 12.13 Waiver of Trial by Jury..................................................................57
Section 12.14 Exculpation of Lessor....................................................................57
Section 12.15 Prior Lease..............................................................................57
Schedule 1 - Fixed Rent and Additional Rent
Schedule 2.02(b) - Supplemental Use Restrictions
Schedule 5 - Form of IRU Agreement
Schedule 6.05(i) - All-Risk Property Insurance Exclusions
Schedule 6.05(ii) - General Liability Insurance Exclusions
Schedule 11.02(b) - Supplemental Mortgage Provisions
Schedule 11.03(c) - Supplemental Security Provisions
Schedule 12.15 - Acquisition Cost, Original Capitalized Cost and
Adjusted Capitalized Cost of Certain Property
Subject to Prior Lease
Exhibit A - Certificate of Acceptance
Exhibit B - Testing Procedures
</TABLE>
iv
<PAGE> 6
AMENDED AND RESTATED LEASE dated as of September 2, 1998 (this
"Lease") between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL
ASSOCIATION, not in its individual capacity but solely as trustee under the
Declaration, having an address at 225 Asylum Street, Goodwin Square, Hartford,
Connecticut 06103, Attention: Corporate/Muni Administration (the "Lessor") and
WILLIAMS COMMUNICATIONS, INC., a Delaware corporation having an address at One
Williams Center, Tulsa, Oklahoma 74172 (the "Lessee").
PRELIMINARY STATEMENT
The Lessee and the Lessor desire to enter into this Lease for
certain Network Assets (as defined below) (i) to amend and restate, as set forth
herein, the Lease dated as of May 6, 1998 between the Lessor and the Lessee, as
amended, by the First Amendment (as amended, the "Prior Lease") and (ii) in
connection with the transactions referred to in the Amended and Restated
Participation Agreement dated as of September 2, 1998 by and among the Lessee,
the Lessor, as Trustee, the Persons named therein as Note Holders, Certificate
Holders and APA Purchasers, State Street Bank and Trust Company, as the
Collateral Agent, and Citibank, N.A., as the Agent, (as it may be amended,
modified, restated or supplemented from time to time in accordance with the
terms thereof, the "Participation Agreement").
The parties, therefore, hereby agree as follows:
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
Section 1.01 Definitions. As used in this Agreement, terms
defined in the preceding paragraphs or in other sections of this Lease shall
have the meanings specified therein, the terms defined in Appendix A to the
Participation Agreement, and not otherwise defined herein, shall have the
meanings set forth therein.
Section 1.02 Computation of Time Periods. In this Lease in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" means
"to but excluding."
Section 1.03 Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP applied
consistently.
Section 1.04 Use of Certain Terms. Unless the context of this
Lease requires otherwise, the plural includes
<PAGE> 7
the singular, the singular includes the plural, the part includes the whole, and
"including" has the inclusive meaning of "including without limitation." The
words "hereof," "herein," "hereby," "hereunder," and other similar terms of this
Lease refer to this Lease as a whole and not exclusively to any particular
provision of this Lease. All pronouns and any variations thereof shall be deemed
to refer to masculine, feminine, or neuter, singular or plural, as the identity
of the person or persons may require.
Section 1.05 Headings and References. Section and other
headings are for reference only, and shall not affect the interpretation or
meaning of any provision of this Lease. Unless otherwise provided, references to
Articles, Sections, Schedules, and Exhibits shall be deemed references to
Articles, Sections, Schedules, and Exhibits of this Lease. References to this
Lease (and to any Articles, Sections, Schedules and Exhibits to this Lease)
include this Lease (and any Articles, Sections, Schedules and Exhibits to this
Lease) as the same may be modified, amended, restated or supplemented from time
to time pursuant to the provisions hereof. A reference to any law shall mean
that law as it may be amended, modified or supplemented from time to time, and
any successor law and to any applicable rules, regulations or orders as in
effect from time to time. A reference to a Person includes the successors and
assigns of such Person, except to the extent that this Lease, any other
Operative Document or any Securitization Document may restrict assignment or
rights of assignees. A reference in this Lease to any other Operative Document
or Securitization Document shall be deemed a reference to that Operative
Document or Securitization Document as it may be amended, modified or
supplemented from time to time.
ARTICLE II
THE PROPERTY
Section 2.01 Lease of the Property. (a) Subject to the terms
and conditions in this Lease, the Lessor hereby agrees to lease to the Lessee
and the Lessee hereby agrees to lease from the Lessor each Item of Property
listed on Schedule 1 of each Certificate of Acceptance, effective on the
Acceptance Date with respect to such Item of Property. No less often than once
per calendar quarter (ending March, June, September and December of each year),
the Lessee and the Lessor shall execute and deliver a Certificate of Acceptance
with respect to any Item of Property (i) for which a Certificate of Acceptance
has not previously been executed and delivered and (ii) which became subject to
this Lease in the previous three months.
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(b) Each Item of Property is leased to the Lessee subject to:
(i) all applicable Legal Requirements;
(ii) all applicable Insurance Requirements;
(iii) all terms, covenants and provisions in any applicable
Real Property Instrument;
(iv) all Trust Encumbrances (including the Security
Agreement);
(v) all terms, covenants and provisions in any contract,
lease (including any ground lease, sublease or overlease), agreement,
permit, right-of-way, license, order or other instrument (including any
IRU) governing or affecting any Item of Property; and
(vi) the terms, covenants and provisions of this Lease, the
other Operative Documents and the Securitization Documents.
(c) Each Item of Property is leased AS IS, WHERE IS, WITH ALL
FAULTS.
(d) THE LESSOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR
IMPLIED, WITH RESPECT TO THE PROPERTY OR ANY FIXTURE OR OTHER ITEM CONSTITUTING
A PORTION THEREOF, OR THE LOCATION, USE, DESCRIPTION, DESIGN, MERCHANTABILITY,
FITNESS FOR USE FOR ANY PARTICULAR PURPOSE, CONDITION OR DURABILITY THEREOF OR
AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, OR AS TO THE LESSOR'S
TITLE THERETO OR OWNERSHIP THEREOF OR OTHERWISE, IT BEING AGREED THAT ALL RISKS
INCIDENT THERETO ARE TO BE BORNE BY THE LESSEE. IN THE EVENT OF ANY DEFECT OR
DEFICIENCY OF ANY NATURE IN PROPERTY OR ANY FIXTURE OR OTHER ITEM CONSTITUTING A
PORTION THEREOF, OR LESSOR'S TITLE TO ANY OF THE SAME, WHETHER PATENT OR LATENT,
THE LESSOR SHALL HAVE NO RESPONSIBILITY OR LIABILITY WITH RESPECT THERETO. THE
PROVISIONS OF THIS SECTION 2.01(d) HAVE BEEN NEGOTIATED AND ARE INTENDED TO BE A
COMPLETE EXCLUSION AND NEGATION OF ANY AND ALL WARRANTIES AND REPRESENTATIONS,
EXPRESS OR IMPLIED, BY THE LESSOR WITH RESPECT TO PROPERTY (INCLUDING THE
IMPROVEMENTS) OR ANY FIXTURE OR OTHER ITEM CONSTITUTING A PORTION THEREOF,
WHETHER ARISING PURSUANT TO THE UCC OR ANY OTHER LAW, NOW OR HEREAFTER IN
EFFECT.
Section 2.02 Use of Property. (a) The Lessee shall use the
Property solely as telecommunications facilities and in a manner that (i) is in
compliance with each of the matters referred to in Section 2.01(b)(i) through
(vi) inclusive and (ii) will not subject the Lessor to any Trust Liability or
regulation by any Governmental Authority (other than federal and state banking
regulatory authorities in those jurisdictions in which the Lessor is otherwise
conducting
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operations unrelated to the ownership and leasing of the Property).
(b) The Lessee, shall, with respect to any Property that is
Regulated Property in any state or other jurisdiction, comply with the
provisions in Schedule 2.02(b) hereof, as such Schedule may be amended, modified
or supplemented from time to time in accordance with this Lease and the other
Operative Documents.
Section 2.03 Quiet Enjoyment. (a) During the Term, the Lessor
covenants that, unless a Default, an Event of Default or an Environmental
Trigger has occurred and is continuing, it will not, and will not permit any
Person (other than the Lessee) claiming by or under the Lessor to, (i) grant,
create or suffer to exist any Lien upon the Property (or any part thereof or
interest therein) other than the Permitted Encumbrances (excluding therefrom any
Liens created by the Lessor) or (ii) interfere with the peaceful and quiet
possession and enjoyment of the Property by the Lessee or the Lessee's permitted
assigns; provided, however, that nothing herein shall affect the exercise by any
of the Lessor Group of the inspection rights set forth in Section 6.07.
(b) During the Term, unless an Event of Default has occurred
and is continuing, the Lessor will not, and will not permit any Person claiming
by, through or under the Lessor to, assign, transfer, lease or convey the
Property or this Lease, or any part thereof or interest therein other than (i)
to the Lessee or by the Lessee to any other Person pursuant to the Services
Agreement, this Lease, any of the other Operative Documents or the
Securitization Documents and (ii) to the Collateral Agent or by the Collateral
Agent to any other Person pursuant to the Security Agreement, the Interparty
Agreement, any of the other Operative Documents or any of the Securitization
Documents; provided that any such assignment, transfer or conveyance to or by
the Collateral Agent (prior to the Expiration Date and so long as no Event of
Default has occurred and is continuing) is (x) expressly subordinate to the
rights of the Lessee under this Lease and (y) subject to the rights of the
Lessee to purchase, sell, lease, exchange, redeploy or otherwise deal with the
Property pursuant to the terms of this Lease and the other Operative Documents.
(c) The Lessor, at the Lessee's sole cost and expense, shall
cooperate or assist with the Lessee's efforts to obtain all services, Permits
and contracts necessary and useful for the acquisition, construction, operation
and maintenance of the Property for the intended purposes thereof, and the
Lessor may, and to the extent required in Section 6.04(c) shall, execute such
documents or papers as may be reasonably necessary for such purposes. The Lessee
covenants that it shall at its own cost and expense on behalf of and in the name
of the Lessor, apply for, obtain and maintain all
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Permits and Consents required in order to permit the lawful ownership of the
Property by the Lessor during the Term.
(d) Any failure by the Lessor or such other Person to comply
with the foregoing provisions of this Section 2.03 or any other provisions of
this Lease shall not give the Lessee any right to cancel or terminate this
Lease, or to abate, reduce or make deduction from or offset against any Fixed
Rent, Additional Rent or other sum payable under this Lease, or to fail to
perform or observe any other covenant, agreement or obligation hereunder.
Section 2.04 Lease Schedules. The Lessee shall amend and
supplement the schedules of this Lease (i) as may be reasonably requested by the
Lessor from time to time and (ii) as may be necessary or appropriate from time
to time to assure the continued accuracy in all material respects of any
representation or warranty made by the Lessee in this Lease, any Certificate of
Acceptance or any other Operative Document (whether or not any change has been
requested by the Lessor), including such changes as may be required in
connection with any acquisition, sale, exchange, change of location,
re-deployment, grant of an Approved IRU, alteration, substitution, purchase or
other disposition of any Item of Property or any change in any Law or any
ruling, directive or policy of any Governmental Authority (whether or not having
the force of Law) affecting any Item of Property in any way, including any
regulation of the operation or use of any such Item of Property, or any sale,
lease, exchange or other disposition of any such Item of Property, or the
existence, validity, enforceability, perfection or priority of any security
interest in, mortgage of, or Lien on any such Item of Property, or the taxation
or basis of taxation of any such Item of Property.
ARTICLE III
TERM
Section 3.01 Base Term. Each Item of Property is leased for a
term commencing on the Acceptance Date for such Item of Property and ending on
the Base Term Expiration Date (or any earlier Expiration Date), subject to the
provisions of Sections 3.02 and 3.04.
Section 3.02 Extended Term. (a) So long as no Default, Event
of Default or Environmental Trigger exists, the Lessee may request (in its sole
discretion) two successive 364 day extensions of the term of this Lease (each a
"Renewal Term"), by giving written notice to the Agent (i) at least twelve (12)
months prior to the Base Term Expiration Date, for the first such Renewal Term,
and (ii) on or prior to the Base Term Expiration Date, for the second such
Renewal Term.
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(b) Such request shall be accompanied by an Officer's
Certificate of the Lessee stating that, as of the date of such request, no
Default or Event of Default or Environmental Trigger has occurred and is
continuing or, if a Default or an Event of Default or Environmental Trigger
exists, setting forth the details thereof and the action, if any, the Lessee has
taken, is taking or proposes to take with respect thereto. Promptly upon receipt
of such request and the accompanying Officer's Certificate, the Agent shall
forward copies thereof to the Trustee and the Note and Certificate Holders. If,
by the date occurring thirty (30) days after the Lessee's delivery of the
extension request (the "Response Date"), Note Holders holding not less than 66
2/3% of the outstanding principal amount of the Notes and Certificate Holders
holding not less than 66 2/3% of the outstanding stated amount of the
Certificates consent to such extension, such extension shall become effective
under the Operative Documents as of the Base Term Expiration Date as to each
Extending Holder (as defined below) subject to the limitation set forth below;
provided, that, as of the Base Term Expiration Date (i) the representations and
warranties of the Lessee in the Operative Documents shall be true and correct in
all material respects, (ii) no Default or Event of Default or Environmental
Trigger shall exist and (iii) if a Default or an Event of Default or
Environmental Trigger existed at the time the request for the applicable
extension was made, then an Officer's Certificate of the Lessee shall be
delivered to the Agent certifying that such Default or Event of Default or
Environmental Trigger has been cured in accordance with the terms of the
Operative Documents. The Agent shall give prompt written notice of the
effectiveness of any such extensions to the Lessee, the Trustee, and the Note
and Certificate Holders. Notwithstanding anything to the contrary contained
herein, such extension shall be effective only as to each Note and Certificate
Holder (each, an "Extending Holder") which consented to such extension, but
shall not be effective as to any other Note or Certificate Holders (each, a
"Non-Extending Holder"). With respect to any Non-Extending Holder, the Base Term
Expiration Date shall continue to be the Expiration Date. If the Lessee fails to
obtain the requisite consents specified above by the Response Date, no extension
shall be granted. Each Holder shall be entitled to grant or withhold its consent
in its sole discretion to any extension of the Base Term Expiration Date
requested by the Lessee. Any Holder that fails to deliver its consent by the
Response Date shall be deemed to have withheld its consent. In the event that
the Lessee obtains the necessary consents specified above by the Response Date,
but there exists one or more Non-Extending Holders with respect to such
extension, the Agent will use reasonable efforts to assist the Lessee in
locating one or more Persons (whether such Persons are then current Holders or
otherwise) to replace the Non-Extending Holders (such Person or Persons being
"Replacement Holders"). If within thirty (30) days following the Response Date,
Replacement Holders have agreed to purchase
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in full the Non-Extending Holders' Notes and/or Certificates (as the case may
be), then the extension shall become effective as to the Replacement Holders. If
Replacement Holders have not so agreed by the end of such 30-day period, then no
extension shall be granted and Lessee shall elect the option under Section
3.03(a)(i) or (ii) within ten (10) days thereafter.
(c) The Lessor and the Lessee shall determine the Applicable
Rate, Fixed Rent and other terms and conditions (including the amount of the
remarketing fee in Section 3.02(c)) for the Extended Term, and the Lessee shall
take such actions and enter into all amendments and supplements to the Operative
Documents and such other agreements or documents as the Lessor in its sole
discretion determines to be necessary and appropriate in connection therewith
including, delivery to Agent of an Appraisal of the Property (satisfactory in
form and substance to the Agent in its sole discretion).
(d) If the Lease is extended for the Extended Term, the Lessee
shall pay the Agent a remarketing fee, the amount of which shall be determined
one month prior to the commencement of the Extended Term.
(e) If the Lessee does not accept the terms of the Extended
Term (including any proposed changes to the Operative Documents or the terms of
any additional agreements proposed by the Lessor), the Lessee may reject the
Extended Term and the Lessee shall be obligated to purchase the Property in
accordance with Section 3.03(a)(i).
Section 3.03 Lessee's Options Upon Expiration. (a) The Lessee
shall elect, by written notice given at least twelve (12) months prior to the
Expiration Date, either to:
(i) deliver an Offer to Purchase the Property in its
entirety and purchase the Property on the Expiration Date upon payment
of an amount equal to the Termination Value, in which case the transfer
of the Property shall be governed by the terms of Section 5.04; or
(ii) so long as no Default, Event of Default or
Environmental Trigger has occurred and is continuing, and subject to
the satisfaction of the conditions set forth in Section 3.03(b) and
Article X, terminate this Lease, release all of its interest in the
Property as of the Expiration Date and pay to the Agent, on behalf of
the Lessor on the Expiration Date, in addition to any Fixed Rent,
Additional Rent and any other amounts then due and payable to the
Lessor hereunder, an amount equal to the Residual Value Amount; or
(iii) subject to the conditions set forth in Section 3.02,
extend this Lease for up to two successive Renewal Terms.
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If the Lessee is unable to satisfy one or more of the conditions set forth
above, or fails to timely make an election as provided above, the Lessee shall
be deemed to have elected to proceed under Section 3.03(a)(i) hereof.
(b) Upon the Lessee's election to terminate this Lease
pursuant to and in compliance with Section 3.03(a)(ii), the Lessee shall use
reasonable efforts during the twelve-month period prior to the Expiration Date
("Remarketing Period") to obtain bids from unrelated third parties for the
Property. All bids received by the Lessee shall immediately be copied to the
Lessor and the Agent in writing, setting forth the amount of such bid and the
name and address of the person submitting such bid. The Lessor, the Agent, the
Certificate Holders and the B-Note Holders shall have the right, but not the
obligation, to seek bids for the Property during the Remarketing Period or at
any time thereafter. On the Expiration Date or at any time thereafter, the
Property shall be sold pursuant to the provisions of the Declaration (any such
sale, a "Qualified Sale"). The Lessee shall be entitled to receive from the
Lessor reasonable compensation for services rendered pursuant to this Section
3.03(b), in such amounts as may be agreed upon by the Lessor and the Lessee
prior to the commencement of the Remarketing Period.
Section 3.04 Property Sold. (a) The term of the Lease for any
Item of Property shall end on the date such Item of Property is sold, exchanged
or otherwise disposed of pursuant to Sections 5.02, 5.05 and 5.08(c), but there
shall be no abatement, reduction, adjustment or other change in Rent payable
pursuant to this Lease as a result of such sale, exchange or other disposal,
except as otherwise expressly provided in the Lease; provided, that with respect
to exchanges of Property made pursuant to Section 5.05, the term of the Lease
with respect to any Replacement Property (as defined below) shall commence on
the date the Item of Property which it replaces is exchanged.
(b) The term of this Lease for all of the Property shall end
on the date of any sale of all of the Property in accordance with, and subject
to the limitations set forth in, Section 5.04(d).
Section 3.05 Non-Terminability. (a) This Lease is a triple net
lease and, except as otherwise expressly provided in this Lease, any present or
future Law to the contrary notwithstanding, shall not terminate, nor shall the
Lessee be entitled to any abatement, reduction, set-off, counterclaim, defense
or deduction with respect to any Fixed Rent, Additional Rent or other sum
payable hereunder. Except as otherwise expressly provided in this Lease and
except to the extent due to the gross negligence or willful misconduct of the
Lessor, the obligations of the Lessee shall not be affected by reason of: (i)
any damage to or destruction of the Property or any part thereof by any cause
whatsoever
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(including by fire, Casualty or act of God or enemy or any other force majeure
event); (ii) any Condemnation, including a temporary Condemnation of the
Property or any part thereof; (iii) any prohibition, limitation, restriction or
prevention of the Lessee's use, occupancy or enjoyment of the Property or any
part thereof by any Person; (iv) any matter affecting title to the Property or
any part thereof; (v) any eviction of the Lessee from, or loss of possession by
the Lessee of, the Property or any part thereof, by reason of title paramount or
otherwise; (vi) any default by the Lessor hereunder or under any other Operative
Document or Securitization Document; (vii) the invalidity or unenforceability of
any provision hereof or in the other Operative Documents or Securitization
Documents or the impossibility or illegality of performance by the Lessor or the
Lessee or both; (viii) any action of any Federal, state or local governmental
authority; or (ix) any other cause or occurrence whatsoever, whether similar or
dissimilar to the foregoing. The parties intend that the obligations of the
Lessee hereunder shall continue unaffected unless such obligations shall have
been modified or terminated pursuant to an express provision of this Lease.
(b) The Lessee shall remain obligated under this Lease in
accordance with its terms and shall not take any action, unless otherwise
permitted by this Lease, to terminate, rescind or avoid this Lease,
notwithstanding any bankruptcy, insolvency, reorganization, liquidation,
dissolution or other proceeding affecting the Lessor or any action with respect
to this Lease which may be taken by any trustee, receiver or liquidator or by
any court. Except as expressly permitted in this Lease, the Lessee waives all
rights to terminate or surrender this Lease, or to any abatement or deferment of
Fixed Rent, Additional Rent or other sums payable hereunder or under the other
Operative Documents or the Securitization Documents. The Lessee shall remain
obligated under this Lease in accordance with its terms, and the Lessee hereby
waives any and all rights now or hereafter conferred by Law or otherwise to
modify or to avoid strict compliance with its obligations under this Lease. All
payments made to or for the benefit of the Lessor hereunder as required hereby
shall be final, and the Lessee shall not seek to recover any such payment or any
part thereof for any reason whatsoever, absent manifest error.
ARTICLE IV
RENT
Section 4.01 Fixed Rent. (a) During the Base Term and any
Renewal Term, the Lessee shall pay to the Agent, on behalf of the Lessor, Fixed
Rent on each Payment Date in the amounts determined in accordance with Schedule
1 hereto. The
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Lessee shall have no obligation to pay Fixed Rent during the Interim Term.
Section 4.02 Additional Rent. During the Term, the Lessee
shall pay to the Agent, on behalf of the Lessor, Additional Rent in the amounts
determined in accordance with (and at the times required under) the Operative
Documents and the Securitization Documents. The Lessor shall give the Lessee
notice of any Additional Rent due hereunder promptly after it has knowledge of
such Additional Rent, and shall use reasonable efforts to notify the Lessee in
advance of the due date and amount of such Additional Rent; provided that
failure to give such prompt notice shall not relieve the Lessee of its
obligation to pay such Additional Rent, subject to, as applicable, the Lessee's
rights, if any, under Section 6.01(b). Additional Rent shall be payable as
provided for in Schedule 1 hereto or as otherwise provided in this Lease, the
other Operative Documents and the Securitization Documents.
Section 4.03 Default Rate. During any period from and after
the date of the occurrence of an Event of Default until the earlier of (i) the
date such Event of Default has been waived or cured and (ii) the date all
amounts payable by the Lessee hereunder have been paid in full, the Lessee shall
pay to the Lessor, on demand, interest at the Default Rate on all amounts
payable by it hereunder.
Section 4.04 Rent Payments. All amounts payable by the Lessee
hereunder shall be paid in lawful money of the United States of America and in
immediately available funds by 11:00 a.m. (New York City time) on the applicable
Payment Date or on the date when due, unless any such due date is not a Business
Day, in which case payment shall be due and payable on the next succeeding
Business Day, at the Agent's address as set forth in Schedule I to the
Participation Agreement, or at such other address or to such other person in the
United States of America or in such other manner as the Lessor from time to time
may designate to the Lessee by written instructions.
Section 4.05 Other Payments. Except as otherwise provided in
this Lease or the other Operative Documents or the Securitization Documents, the
Lessee shall perform all of its obligations under this Lease at its sole cost
and expense and shall pay, when due and without notice or demand, all amounts
due hereunder or under the other Operative Documents (including amounts set
forth in Section 8.13 of the Participation Agreement) or the Securitization
Documents.
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ARTICLE V
SALES AND OTHER DISPOSITIONS OF PROPERTY
Section 5.01 Optional Purchase by Lessee of All Property. At
any time during the Term the Lessee may deliver to the Lessor and the Agent an
Offer to Purchase the Property in its entirety, at least 20 days in advance of
the Closing Date (as defined below), for an amount equal to the Termination
Value for the Property, upon and subject to the applicable terms of this Lease.
The Termination Value received by the Agent, on behalf of the Lessor, in
accordance with the provisions of this Section 5.01 and Section 5.04 shall be
applied to the payment of the Instruments in accordance with Sections 5.02(a)
and 6.01 of the Declaration and the other Operative Documents.
Section 5.02 Optional Purchase by Lessee of Items of Property.
(a) At any time during the Term, Lessee may deliver to the Lessor and the Agent,
an Offer to Purchase any Item of Property, at least 10 days in advance of the
Closing Date and at least 12 months prior to the Expiration Date (unless the
Lessee has given the notice referred to in Section 3.03(a)(i)), for an amount
equal to the Termination Value for the Item of Property identified in the Offer
to Purchase, upon and subject to the applicable terms of this Lease.
(b) The Lessee's right to deliver an Offer to Purchase
pursuant to Section 5.02(a) shall be subject to the satisfaction of the
following conditions (as determined by the Agent in its sole reasonable
discretion):
(i) No Default or Event of Default or Environmental
Trigger shall have occurred and be continuing.
(ii) The Item of Property identified in the Offer to
Purchase shall have been separately valued in an Appraisal and shall
have a minimum aggregate Termination Value of $5 million or any
integral multiple of $1 million in excess thereof.
(iii) After giving effect to the sale of the Item of
Property identified in the Offer to Purchase and any prior sales of
Property pursuant to this Section, any exchanges or substitutions of
Property pursuant to Section 5.05, any IRUs granted pursuant to Section
5.07 and any redeployment of Property pursuant to Section 5.08, on a
pro forma basis, the Property held by the Lessor shall have an
Appraised Value at least equal to the Appraised Value of the Property
held by the Lessor on the Completion Date.
(iv) The Agent and the Lessor shall have received a
certificate of a Responsible Officer of the Lessee,
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certifying as to the matters set forth in Section 5.02(b)(i), (ii) and
(iii).
(v) The Lessee shall have paid, or made arrangements
(satisfactory to the Lessor and the Agent, in their sole reasonable
discretion) to pay, any taxes, costs and expenses (including legal,
accounting and other professional fees and expenses) reasonably
incurred by the Lessor, the Agent and the Collateral Agent in
connection with such sale.
(c) The Termination Value received by the Agent on behalf of
the Lessor, in accordance with the provisions of this Section 5.02 and Section
5.04 shall be applied to the payment of the Instruments in accordance with
Section 5.10 of the Participation Agreement, Section 5.02(b) of the Declaration
and the other Operative Documents.
Section 5.03 Mandatory Purchase by the Lessee of all Property.
If any Termination Notice is issued pursuant to Sections 7.02 or 8.02 of this
Lease, the Lessee shall deliver (and shall be deemed to have delivered) to the
Lessor an Offer to Purchase the Property in its entirety for an amount equal to
the Termination Value for the Property, upon and subject to the applicable terms
of this Lease.
Section 5.04 Purchase Procedures. (a) The Lessee may assign to
any Person reasonably satisfactory to the Agent and the Lessor the right to
purchase property pursuant to Section 5.02. Notwithstanding any such assignment,
the Lessee shall remain liable to the Lessor for the prompt payment and
performance, as and when due, of all amounts payable (including the Termination
Value) and all obligations of the purchaser under this Lease, the other
Operative Documents and the Securitization Documents. No consent to any such
assignment, acceptance of payment from or performance by any assignee or other
action by or on behalf of the Lessor or the Agent shall release the Lessee of
any obligations under this Lease, the other Operative Documents or the
Securitization Documents, except upon full payment and performance as and when
due.
(b) Intentionally omitted.
(c) The Lessor shall be deemed to have accepted, on the date
of receipt, any Offer to Purchase the Property which materially satisfies the
conditions set forth in this Lease, including those set forth in Section 3.03
and this Article V, as applicable.
(d) The date of the closing of the Lessee's (or its
designee's) purchase of the Property or any Item of Property (the "Closing
Date") shall be (i) in the case of an Offer to Purchase made (or deemed made)
pursuant to Section 3.03(a)(i), the Expiration Date, or (ii) in the case of an
Offer to
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Purchase made (or deemed made) pursuant to Section 5.01 or 5.02, the next
scheduled Payment Date following the date of the Lessor's acceptance or deemed
acceptance of such Offer to Purchase, or (iii) in the case of an Offer to
Purchase made (or deemed made) pursuant to Section 5.03, the fifteenth day
following the date of Lessor's acceptance or deemed acceptance of such Offer to
Purchase (or if that day is not a Payment Date, the first scheduled Payment Date
following such fifteenth day), or (iv) if the Lessee shall pay the Termination
Value pursuant to Section 9.03 on the date of the Lessor's receipt of the
Termination Value.
(e) Intentionally omitted.
(f) On the Closing Date, the Lessee shall pay, or cause to be
paid, to the Agent (on behalf of the Lessor) the Termination Value, and the
Lessor shall simultaneously (i) deliver to the Lessee or its designee bills of
sale or other appropriate instruments of transfer reasonably necessary to assign
and convey to the Lessee or its designee the Property or Item of Property then
required to be assigned pursuant hereto without representation or warranty
(expressed or implied) of any kind except that the Property is free and clear of
Liens created by the Operative Documents and the Securitization Documents or
otherwise created by the Lessor (other than any Liens created by or through the
Lessee), and (ii) convey, or cause to be conveyed, to the Lessee or its designee
any Net Proceeds related to the Property and/or the right to receive the same.
Additionally, on the Closing Date, upon receipt of the Termination Value, the
Lessor and the Collateral Agent shall execute the releases and take the other
actions described in Section 8.21(b) of the Participation Agreement.
(g) Upon the completion of any purchase of the Property
pursuant to this Article V, but not prior thereto, this Lease shall terminate
except with respect to obligations and liabilities of the Lessee, actual or
contingent, which have arisen with respect to the Property or under the
Operative Documents or Securitization Documents on or prior to such date of
purchase, and except for indemnification and other obligations and liabilities
which by the terms of this Lease, the other Operative Documents or the
Securitization Documents survive termination of this Lease, the other Operative
Documents or the Securitization Documents.
(h) Notwithstanding any provisions of this Lease or the
Participation Agreement to the contrary, the Lessee shall not be required to
acquire title to the Property until such time that all necessary filings and
notifications under the HSR Act or any similar Law shall have been made
(including any filing or provision of required additional information or
documents) and the waiting period referred to in the HSR Act applicable to such
purchase shall have expired or been terminated (without any objection or
prohibition of such
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purchase). The Lessee hereby covenants to use its best efforts to secure the
prompt termination of such waiting period without objection or prohibition.
Notwithstanding the foregoing, if the Lessee is precluded from acquiring the
Property or any part thereof pursuant to the HSR Act or any similar Law, the
Lessee shall pay the Termination Value within the time and in the manner
described in this Article V as a consequence of the Lessee's exercise or deemed
exercise of its purchase option hereunder. However, if the Lessee pays the
Termination Value in compliance with the preceding sentence, then Lessee shall
be entitled to continue to lease the Property or any part thereof the Lessee is
precluded from acquiring for an additional rental payment of $1 per annum under
the terms and provisions of this Lease for an extended term expiring on the
earlier to occur of (i) one year from the date the Lessee delivers (or is deemed
to have delivered) the Offer to Purchase or (ii) the date that the Lessee is no
longer precluded from purchasing the Property pursuant to the HSR Act or any
similar Law. If Lessee (or its designee) does not purchase the Property prior to
the expiration of such extended term, then Lessor shall thereafter sell the
Property and distribute the proceeds from such sale in accordance with the
Interparty Agreement. If, prior to the voluntary exercise by the Lessee of the
purchase options hereunder, the Lessee is unable to obtain a ruling or an
unqualified legal opinion (in form and substance and from independent legal
counsel, in each case, reasonably satisfactory to the Agent) that a filing under
the HSR Act or any similar Law is not required in order to consummate such
purchase, then the Lessor shall execute such conditional sales contracts and
other documents necessary to permit the Lessee to complete such filing before
irrevocably exercising its purchase option. As a condition to executing such
conditional sales contracts and other documents, the Lessee shall deliver to the
Lessor an agreement obligating the Lessee to fully indemnify the Lessor from all
liabilities, damages, costs and expenses arising from the execution of such
documents and the completion of such filing.
Section 5.05 Exchanges and Substitutions of Items of Property.
At any time during the Term, Lessee may, upon not less than 30 days prior
written notice to the Agent and the Lessor, deliver to the Lessor replacement
Network Assets (the "Replacement Property") in exchange or substitution for any
Item of Property then held by the Lessor (the "Removed Property") subject to the
satisfaction of the following conditions (as determined by the Agent in its sole
reasonable discretion):
(i) No Default or Event of Default or Environmental
Trigger shall have occurred and be continuing.
(ii) The Removed Property shall have been separately valued
in an Appraisal.
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(iii) In the case of any Item of Property which has (a)
become obsolete, or (b) suffered a Casualty or Condemnation, or (c)
malfunctioned, the Replacement Property shall have a value, utility and
economic useful life at least equal to the original value, utility and
economic useful life of the Removed Property (as measured immediately
prior to such Item of Property becoming obsolete, suffering such
Casualty or Condemnation or malfunctioning).
(iv) Except for Replacement Property referred to in clause
(iii) above, the Replacement Property shall have a fair market value at
the time of the exchange or substitution at least equal to the
Termination Value for the Removed Property; provided, however, that
Replacement Property shall not consist of any Capacity Leases.
(v) After giving effect to the exchange or substitution
and any sales of Property pursuant to Section 5.02 and any prior
exchanges or substitutions of Property pursuant to Section 5.05, any
IRUs granted pursuant to Section 5.07 and any redeployment of Property
pursuant to Section 5.08, on a pro forma basis, the Property held by
the Lessor shall have an Appraised Value at least equal to the
Appraised Value of the Property held by the Lessor on the Completion
Date.
(vi) The Agent and the Lessor shall have received a
certificate of a Responsible Officer of the Lessee, certifying as to
the matters set forth in Section 5.05(i), (ii) and (iii).
(vii) The Lessee shall have paid, or made arrangements
(satisfactory to the Lessor and the Agent, in their sole reasonable
discretion) to pay, any taxes, costs and expenses (including legal,
accounting and other professional fees and expenses) reasonably
incurred by the Lessor, the Agent and the Collateral Agent in
connection with such redeployment.
(viii) On or prior to the date elected by the Lessee to
effect such substitution or exchange, a copy of a bill of sale or other
document transferring title in form and substance satisfactory to the
Agent and the Lessor, covering the replacement Item or Items of
Property, executed by the owner thereof in favor of the Lessor shall
have been duly authorized, executed and delivered and, if appropriate,
filed for recordation by the respective party or parties thereto and
shall be in full force and effect, and an executed counterpart of each
thereof shall be delivered to the Agent and the Lessor.
(ix) As soon as practicable, but no later than thirty (30)
days after the date elected by the Lessee to effect such substitution
or exchange, the following
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documents shall have been duly authorized, executed and delivered and,
if appropriate, filed for recordation by the respective party or
parties thereto and shall be in full force and effect, and an executed
counterpart of each thereof shall be delivered to the Agent and the
Lessor:
(1) a Certificate of Acceptance covering the
replacement Item or Items of Property, appropriately completed
and executed by the Lessee and Lessor;
(2) an Officer's Certificate from the Lessee
certifying that the replacement Item or Items of Property is
free and clear of all Liens other than Permitted Encumbrances;
(3) such mortgages, UCC financing statements and such
other filings covering the Item or Items of Property as are
deemed necessary or desirable by the Agent and Special
Counsel to establish and protect the security interests of
the Trustee, if any, the Agent and the Purchasers in respect
of the replacement Item or Items of Property; and
(4) such amendments and supplements of the Schedules
to this Lease covering the Item or Items of Property as are
deemed necessary or desirable by the Agent and Special
Counsel in respect of any Regulated Property or to establish
and protect the security interests of the Trustee, if any,
the Agent and the Purchasers in respect of the replacement
Item or Items of Property.
Section 5.06 Alterations; Removal. (a) At any time, so long as
no Default or Event of Default or Environmental Trigger shall have occurred and
be continuing, the Lessee may, at its sole cost and expense, make Alterations to
the Property or any part thereof; provided, however, that (i) the fair market
value of the Property shall not be lessened by such Alterations; (ii) such
Alterations shall not materially diminish the capacity, utility, efficiency, or
remaining useful life of the Property or any part thereof; and (iii) such work
shall be completed in a good and workmanlike manner free and clear of any Liens
for labor, services or materials (other than Permitted Encumbrances) and in
compliance with all applicable Legal Requirements and Insurance Requirements.
(b) Title to all Alterations shall vest in the Lessor (free
and clear of all Liens, except Permitted Encumbrances) subject to the right of
Lessee to remove such Alterations as provided hereunder. Upon any removal of the
Alterations permitted hereunder, the Lessor (at the sole cost and expense of the
Lessee) shall execute and deliver to the Lessee such instruments and releases as
are reasonably
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required to transfer the Alterations to the Lessee free and clear of Liens
created by the Operative Documents, the Securitization Documents or otherwise
created by the Lessor (other than any Liens created by or through the Lessee),
in each case, without representation or warranty (expressed or implied) of any
kind except that such Alterations are free and clear of any Lien created by the
Operative Documents, the Securitization Documents or otherwise created by the
Lessor (other than any Liens created by or through the Lessee).
(c) So long as no Default or Event of Default or Environmental
Trigger shall have occurred and be continuing, the Lessee shall be permitted at
any time during, or upon the expiration or termination of, the Term, and at its
sole cost and expense, to remove or demolish any Alterations in accordance with
prudent industry practices; provided, however, that, such removal shall not (i)
materially impair the intended use or materially reduce the fair market value of
the Property or any part thereof below its fair market value at the commencement
of the Term (less normal wear and tear); (ii) materially diminish the capacity,
efficiency, utility or remaining useful life of the Property or any part thereof
below the capacity, efficiency, utility or remaining useful life as of the
commencement of the Term; or (iii) cause a violation of any Legal Requirement or
Insurance Requirement or significantly increase any risk of liability under any
Environmental Law or any risk to human health or the environment. Any damage to
the Property or any part thereof caused by such removal shall promptly be
repaired by the Lessee and the Property (and each and every part thereof) shall
be restored to the condition (or the reasonable equivalent thereof) as it
existed immediately prior to the construction of such removed Alterations, at
the Lessee's sole cost and expense.
(d) In the event that the Lessee plans to incur expenses in
excess of $10 million for Alterations during any calendar year, then not less
than 30 days before the beginning of such calendar year, the Lessee shall
provide the Lessor and the Agent with a report of the Lessee's capital spending
plans for such calendar year for Alterations. Such report, if required, shall be
accompanied by a certification from the Lessee to the effect that all such
planned Alterations will comply with the standards set forth in Section 5.06(a).
Section 5.07 Subletting. (a) Except as provided in Section
5.07(b), the Lessee may not sublet the Property or any part thereof without the
prior written consent of the Lessor. Any sublease granted otherwise than as
expressly permitted by this Section 5.07 shall be null and void and of no force
or effect.
(b) The Lessor, at the request of the Lessee, may grant to any
Person ****
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****, as appropriate, provided that, after giving effect to such **** granted by
the Lessee, and any sales, exchanges or other dispositions of Network Assets
pursuant to Sections 5.02, 5.05 or 5.08, at least **** of the Network Assets
constituting Property are ****.
(c) An **** shall be treated hereunder, at the Lessee's sole
option, as (i) an optional purchase of an Item of Property subject to the
provisions of Section 5.02 or (ii) a redeployment of Property subject to the
provisions of Section 5.08(a)(ii).
(d) Except with respect to an ****, no **** shall modify or
limit any right or power of the Lessor hereunder or affect or reduce any
obligation of the Lessee hereunder, and all such obligations of the Lessee shall
continue in full force and effect as obligations of a principal and not of a
guarantor or surety, as though no **** had been granted.
(e) If the Lessee shall request, in connection with any ****,
that the Lessor execute an **** agreement with respect to such ****, the Lessor
shall consider each such **** on a case-by-case basis and may consent to its
execution and delivery of ****.
Section 5.08 Redeployment of the Property. (a) At any time
during the Term, the Lessee may redeploy Network Assets, either by (i) removing
and relocating such Property from one location and/or use to another location
and/or use as provided in Section 5.08(b) or (ii) buying or arranging for the
sale of such Property for cash and for the reinvestment of the proceeds of such
sale in other Network Assets and/or Permissible Investments, as provided in
Section 5.08(c).
(b) The Lessee may, at its sole cost and expense, change the
location or use of any Item of Property at any time, subject to satisfaction of
the following conditions:
(i) No Default or Event of Default or Environmental
Trigger shall have occurred and be continuing.
(ii) The new use and/or location of the Item of Property
shall comply in all respects with Section 2.02.
(iii) The Lessee shall have given the Lessor and the Agent a
reasonably detailed written notice describing the Item of Property
affected and the new use and/or location of such Item of Property and
any other relevant information, (x) in the case of any Signal
Equipment, no more than three Business Days after such change in
location and/or use or (y) in the case of any other Item
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of Property not less than 30 days prior to such change in the location
and/or use of such Item of Property and neither the Lessor nor the
Agent shall have objected in writing to such change.
(iv) The new use and/or location shall not have a material
adverse effect on the value, capacity, efficiency, utility or remaining
useful life of either (1) the Item of Property affected or (2) the
Property, taken as a whole.
(v) The new use and/or location shall not adversely affect
in any way the ability to satisfy the Return Conditions.
(vi) The Lessee shall have taken (or in the case of any
change in the location and/or use of Signal Equipment, shall take
within thirty (30) days after the change in location and/or use) such
actions and executed, delivered, filed and recorded such documents
(including any amendments or supplements of Schedules to this Lease the
Agent or Special Counsel may consider necessary or appropriate) and
obtained such Consents (or in the case of any change in the location
and/or use of Signal Equipment, shall execute, deliver, file and record
such documents and obtain such Consents within ten days after the
change in location and/or use) as may be required to assure that the
Lessor, the Agent, the Collateral Agent and the Purchasers continue to
have the same rights and remedies in respect of the affected Item of
Property and the other Property, taken as a whole, after giving effect
to the new use and/or location of the Property (including rights of
access to and perfected, first-priority security interests in the
affected Item of Property and the other Property and appropriate
supplemental restrictions with respect to any Regulated Property).
(vii) The new use and/or location will not have a Material
Adverse Effect.
(viii) The Item of Property shall not be moved to a location
outside the United States without the prior written consent of the
Lessor.
(ix) The Lessee shall have delivered (or in the case of any
change in the location and/or use of Signal Equipment, shall deliver
within ten days after the change in location and/or use) to the Lessor
and the Agent a certificate of a Responsible Officer of the Lessee
certifying the matters set forth in clauses (i), (ii), (iv), (v), (vii)
and (viii).
(x) The Lessee shall have paid, or made arrangements
(satisfactory to the Lessor and the Agent, in their sole reasonable
discretion) to pay, any taxes,
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costs and expenses (including legal, accounting and other professional
fees and expenses) reasonably incurred by the Lessor, the Agent and the
Collateral Agent in connection with such redeployment.
In addition, the Lessee may, at its sole cost and expense, change the location
and/or use of any Item of Property without satisfying one or more of the
conditions set forth above provided that the aggregate Appraised Value of all
Items of Property the Lessee has elected to relocate or use differently without
satisfying all of the conditions set forth above does not at any time exceed in
the aggregate $50,000,000.
(c) The Lessee may, at its sole cost and expense, buy or
arrange for the sale of any Item of Property for cash and for the reinvestment
of the proceeds of such sale at any time, subject to satisfaction of the
following conditions:
(i) Any sale of an Item of Property shall be (1) subject
to satisfaction of the conditions set forth in Section 5.02(a) and (b),
(2) for a purchase price, paid solely in immediately available funds,
at least equal to the Termination Value of the Item of Property to be
sold and (3) conditioned on the execution and delivery by the Lessee to
the Proceeds Trustee (or any designee of the Proceeds Trustee) of
customary fee, escrow, custody, control, security, indemnity and other
agreements governing the acquisition, custody, and disposition of
Permissible Investments, consistent with the terms in this Section, as
the Proceeds Trustee (or any designee of the Proceeds Trustee) and the
Agent and the Collateral Agent may reasonably request.
(ii) Any amounts received from the sale of an Item of
Property shall be paid over to the Proceeds Trustee and applied to
purchase such Permissible Investments as the Lessee may from time to
time direct in a written notice to the Agent and the Proceeds Trustee.
(iii) Any Permissible Investments held by the Proceeds
Trustee shall be applied as follows:
(A) During the period commencing on the date of
receipt of proceeds from any sale of an Item of Property and
ending on the first to occur of (x) the 270th day thereafter
and (y) the date which is 360 days prior to the Expiration
Date, and (z) the date any Default or Event of Default or
Environmental Trigger occurs:
(1) All amounts representing interest,
dividends, distributions or yield on or in respect of
any Permissible Investments shall be paid over, on
the Business Day preceding any Payment Date, to the
Lessee or, if so directed
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in writing by the Lessee, either (x) paid over to the
Lessor for application to amounts due in respect of
Rent hereunder or (y) applied to the purchase of
Permissible Investments.
(2) All amounts representing principal
of Permissible Investments shall either be (x)
reinvested in other Permissible Investments or (y)
paid over to the Lessor to be applied to purchase
replacement Network Assets in accordance with Section
5.08(c)(iv) or to repayment of the Instruments, in
accordance with such written directions as may be
given to the Proceeds Trustee, signed jointly by the
Lessee and the Agent.
(B) Promptly after the date which is the first
to occur of (x) 270 days after receipt of proceeds from the
sale of any such Item of Property or (y) the date any Default
or Event of Default or Environmental Trigger occurs or (z) 360
days prior to the Expiration Date:
(1) All Permissible Investments held by
the Proceeds Trustee in respect of such sale shall be
redeemed, tendered for payment (or payment demanded,
as the case may be), sold or otherwise converted to
cash on such terms as the Proceeds Trustee, in its
sole discretion, considers appropriate. Except for
the obligations (x) to exercise reasonable care in
the custody of the Permissible Investments and other
property actually in the possession and control of
the Proceeds Trustee and (y) to account for and pay
over (net of any brokerage, sales or other costs,
commissions or discounts paid or incurred) any
proceeds actually received from any sale or other
disposition of Permissible Investments, the Proceeds
Trustee shall have no liability or obligation of any
kind in connection with any such sale or other
disposition of Permissible Investments, including in
respect of (a) the timing, method or manner of sale
or other disposition selected (even if another time,
method or manner of sale or other disposition may
have yielded greater net proceeds) or (b) the amount
of net proceeds realized on any such sale or other
disposition.
(2) Any proceeds from the sale or other
disposition of Permissible Investments (together with
all amounts representing interest, dividends,
distributions or yield on or in respect of any
Permissible Investments then held by the Proceeds
Trustee) shall be
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paid over to the Lessor, or upon the written
instructions of the Agent, to the Collateral Agent,
to be held as collateral security for or applied to
the payment of the Instruments, in accordance with
Section 5.09 of the Participation Agreement and the
other Operative Documents.
(iv) Any amount received by the Lessor pursuant to Section
5.08(c)(iii)(A)(2)(y) shall be applied to purchase Network Assets, in
accordance with such written instructions as may be given by the
Lessee, subject to satisfaction of the following conditions:
(A) No Default or Event of Default or
Environmental Trigger shall have occurred and be continuing.
(B) Each Item of Property to be purchased shall
comply in all respects with Section 2.02.
(C) The Lessee shall have given the Lessor and
the Agent a reasonably detailed written notice describing each
Item of Property to be purchased, the use and location of such
Item of Property, the vendor, the purchase price, the terms
and conditions for the purchase and any other relevant
information, not less than 30 days prior to proposed date for
the purchase of such Item of Property and neither the Lessor
nor Agent shall have objected in writing to such acquisition.
(D) The fair market value of each Item of
Property to be purchased shall not be less than the
Termination Value of any similar Item of Property sold,
exchanged or otherwise disposed of pursuant to this Lease
within the 270 day period referred to in this Section.
(E) Each Item of Property to be purchased and
the proposed use and/or location of such Item of Property
shall not have a material adverse effect on the value,
capacity, efficiency, utility or remaining useful life of the
Property, taken as a whole.
(F) The Lessee shall have taken such actions and
executed, delivered, filed and recorded such documents (except
as otherwise provided in clause (K) below) and obtained or
made such Consents as may be required to assure that the
Lessor, the Agent, the Collateral Agent and the Purchasers
continue to have the same rights and remedies in respect of
each Item of Property to be purchased and the other Property,
taken as a whole, as they have in respect
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of the Property held on the Completion Date, after giving
effect to the acquisition, use and location of the Item of
Property to be purchased (including title and rights of access
to each Item of Property to be purchased and the other
Property.
(G) The acquisition, use and location of each
Item of Property to be purchased will not have a Material
Adverse Effect.
(H) The Lessee shall have delivered to the
Lessor and the Agent a certificate of a Responsible Officer of
the Lessor certifying the matters set forth in clauses (A)
through (G).
(I) The Lessee shall have paid, or made
arrangements (satisfactory to the Lessor and the Agent, in
their sole reasonable discretion) to pay, any taxes, costs and
expenses (including legal, accounting and other professional
fees and expenses) reasonably incurred by the Lessor, the
Agent and the Collateral Agent in connection with such
purchase.
(J) On or prior to the date elected by the
Lessee to effect such purchase of Network Assets, a copy of a
bill of sale or other document transferring title in form and
substance satisfactory to the Agent and the Lessor, covering
the Item or Items of Property, executed by the owner thereof
in favor of the Lessor shall have been duly authorized,
executed and delivered and, if appropriate, filed for
recordation by the respective party or parties thereto and
shall be in full force and effect, and an executed counterpart
of each thereof shall be delivered to the Agent and the
Lessor.
(K) As soon as practicable, but no later than
thirty (30) days after the date elected by the Lessee to
effect such purchase of Network Assets, the following
documents shall have been duly authorized, executed and
delivered and, if appropriate, filed for recordation by the
respective party or parties thereto and shall be in full force
and effect, and an executed counterpart of each thereof shall
be delivered to the Agent and the Lessor:
(1) a Certificate of Acceptance covering the Item or
Items of Property, appropriately completed and
executed by the Lessee and Lessor;
(2) an Officer's Certificate from the Lessee
certifying that the replacement Item or Items
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of Property is free and clear of all Liens other than
Permitted Encumbrances;
(3) such mortgages, UCC financing statements and such
other filings covering the Item or Items of Property
as are deemed necessary or desirable by Special
Counsel to establish and protect the security
interests of the Trustee, if any, the Agent and the
Purchasers in respect of the replacement Item or
Items of Property; and
(4) such amendments and supplements of the Schedules
to this Lease covering the Item or Items of Property
as are deemed necessary or desirable by Special
Counsel in respect of any Regulated Property or to
establish and protect the security interests of the
Trustee, if any, the Agent and the Purchasers in
respect of the replacement Item or Items of Property.
Section 5.09 Effect of Disposition. Except as otherwise
expressly provided in Section 3.04 in respect of the expiration of the Term of
this Lease for Property sold and in Section 5.04 in respect of Rent and other
obligations for Property sold and except to the extent that the Instruments have
been prepaid or retired in accordance with Sections 5.01, 5.02 and
5.08(c)(iii)(B)(2), no sale, exchange, substitution, alteration, removal, IRU,
redeployment or other disposition of the Property or any Item of Property
referred to in this Article V shall cause any abatement, reduction, adjustment
or other change in the Rent payable pursuant to this Lease or any other
diminution in the payment or other obligations of the Lessor hereunder.
ARTICLE VI
CERTAIN COVENANTS OF THE LESSEE
Section 6.01 Taxes and Assessments. (a) The Lessee shall pay
or cause to be paid, subject to Section 6.01(b), all Property Charges before the
same become delinquent. If any Property Charge may legally be paid in
installments, such Property Charge may be so paid in installments; provided
that, the Lessee shall pay all such installments on or before the Expiration
Date or earlier termination of this Lease.
(b) So long as (w) no Termination Notice has been delivered,
(x) no Default, Event of Default or Environmental Trigger has occurred and is
continuing, (y) the Lessee shall not have notified the Lessor pursuant to
Section 3.03(a)(ii) that it is terminating this Lease and releasing all of its
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interest in the Property or (z) the Lessee shall not have otherwise surrendered
or be required to surrender the Property to the Lessor for any reason (including
pursuant to Section 10.01), the Lessee shall not be required, nor shall the
Lessor have the right, to pay, discharge or remove any Charges or to comply or
cause the Property or any part thereof to comply with any applicable Legal
Requirement or to pay any materialman's, laborer's or undischarged or unremoved
Lien, as long as the Lessee shall at its sole cost and expense contest, or cause
to be contested, diligently and in good faith, the existence, amount or validity
thereof by appropriate proceedings, which shall (i) in the case of an unpaid
Property Charge or undischarged or unremoved Lien, prevent the collection
thereof from the Lessor or against the Property or any part thereof, (ii)
prevent the sale, forfeiture or loss of the Property or any part thereof, and
(iii) in the case of a Legal Requirement, not subject the Lessor, the Agent, the
Collateral Agent, the Certificate Holders, or the Note Holders to the risk of
any criminal liability or civil penalties or fines for failure to comply
therewith. The Lessee shall give such assurances as may be reasonably demanded
by the Lessor to insure ultimate payment of such Charges or the discharge or
removal of any such materialman's, laborer's or mechanic's Lien or to insure
compliance with such Legal Requirement and to prevent any sale or forfeiture of
the Property, or any part thereof, or any interference with or deductions from
any Fixed Rent, Additional Rent or any other sum required to be paid by the
Lessee hereunder by reason of such non-payment, non-discharge, non-removal or
non-compliance.
(c) The Lessor shall cooperate with the Lessee in any contest
and shall allow the Lessee to conduct such contest (in the name of the Lessor,
if necessary) at the Lessee's sole cost and expense; provided that the Lessor
shall not be required to execute any documents which would materially adversely
affect the fair market value, use or operation of the Property (or any part
thereof) or be reasonably likely to subject the Lessor, the Agent, the
Collateral Agent, any Certificate Holder or any Note Holder to any liability or
result in the admission of liability, guilt or culpability on the part of such
Persons. The Lessee shall notify the Lessor of each such proceeding at least ten
days prior to the commencement thereof, which notice shall describe such
proceeding in reasonable detail.
(d) The Lessee shall, promptly after the final determination
(including appeals) of any contest brought by it pursuant to this Section 6.01,
pay and discharge all amounts which shall be determined to be payable therein
and shall be entitled to receive and retain for its own account all amounts
refunded and/or rebated as a result of any such contest and if the Lessor
receives any amount as a result of such contest to which it is not otherwise
entitled pursuant to this Lease, it shall promptly return such amount to the
Lessee.
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(e) Except as otherwise specifically provided in this Lease,
this Section 6.01 shall not apply in the case of Charges upon, or in respect of,
any Person other than the Lessor or in respect of the property or income of any
such Person.
Section 6.02 Compliance with Laws. The Lessee shall, at the
Lessee's sole cost and expense, comply, and cause the Property to comply, in all
material respects, with all Legal Requirements.
Section 6.03 Certain Agreements. The Lessee shall, and (unless
a Default, an Event of Default or an Environmental Trigger has occurred and is
continuing and the Lessor has revoked such authority) is hereby authorized by
the Lessor to, fully and promptly keep, observe, perform and satisfy, on behalf
of the Lessor, any and all obligations, conditions, covenants and restrictions
of or on the Lessor under the Declaration and any and all other material
contracts involving the Property or any part thereof so that there will be no
default thereunder and so that the other parties thereunder shall be and remain
at all times obliged to perform their obligations thereunder, and the Lessee, to
the extent within its control, shall not permit to exist any condition, event or
fact that could reasonably allow or serve as a basis or justification for any
such Person to avoid such performance.
Section 6.04 Liens. (a) The Lessee shall not create or permit
to be created or exist, and shall promptly remove and discharge, any Lien upon
this Lease, the Property or any other part thereof or interest therein, or upon
any Fixed Rent, Additional Rent or other sum paid hereunder, which Lien arises
for any reason, including any and all Liens which arise out of the ownership,
leasing, use, condition, occupancy, demolition, construction, possession, repair
or rebuilding of the Property or any part thereof or by reason of the failure to
pay dues, fees or assessments under the Declaration or by reason of labor or
materials furnished or claimed to have been furnished to the Lessee, but
excluding Liens created by the Operative Documents or the Securitization
Documents and any other Permitted Encumbrances. Lessee's obligation to remove
any of the above-described Liens arising prior to the termination of this Lease
(or arising due to circumstances occurring prior to the termination of this
Lease) shall survive the termination of this Lease. Nothing contained in this
Lease shall be considered as constituting the consent or request of the Lessor,
express or implied, to or for the performance by any contractor, laborer,
materialman or vendor of any labor or services or for the furnishing of any
materials for any construction, alteration, addition, repair or demolition of or
to the Property or any part thereof.
(b) NOTICE IS HEREBY GIVEN THAT THE LESSOR IS NOT AND SHALL
NOT BE LIABLE TO ANY PARTY FURNISHING LABOR,
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SERVICES OR MATERIALS TO THE LESSEE, OR TO ANYONE HOLDING OR POSSESSING THE
PROPERTY OR ANY PART THEREOF THROUGH OR UNDER THE LESSEE, AND THAT NO MECHANIC'S
OR OTHER SIMILAR STATUTORY LIENS FOR ANY LABOR, SERVICES OR MATERIALS SHALL
ATTACH TO OR AFFECT THE LESSOR'S INTEREST OR ESTATE IN THE PROPERTY OR ANY PART
THEREOF.
(c) The Lessor agrees that the Lessee during the Term shall
have the exclusive right (so long as no Default, Event of Default or
Environmental Trigger has occurred and is continuing) to secure any Consents and
Permits necessary or desirable for the demolition, development, use, operation,
maintenance or condition of the Property or any part thereof; provided that the
fair market value, marketability or use of the Property is not materially
lessened by any such action. The Lessor agrees to execute such documents and
take all other actions as shall be reasonably requested, and otherwise cooperate
with the Lessee, in connection with the matters described above; provided,
however, that all reasonable costs and expenses incurred by the Lessor in
connection therewith shall be borne by the Lessee and that the Lessor shall not
be required to execute any documents which would, in the reasonable opinion of
the Agent or Lessor, materially adversely affect the value, marketability or use
of the Property, create any Trust Liability or otherwise adversely affect the
transactions contemplated by the Operative Documents or Securitization Documents
or the interests of the Lessor, the Certificate Holders or the Note Holders.
Section 6.05 Insurance. (a) The Lessee will purchase and
maintain, or cause to be purchased and maintained, insurance with respect to the
Property of the following types and in the following amounts, and in no event in
amounts less than those maintained by the Lessee or its Affiliates for other
similar facilities owned and/or operated by them:
(i) All-Risk Property Insurance: All-risk property insurance
against physical damage to the Property with a maximum self-insured
retention or deductible allowable of (i) $250,000 per occurrence prior
to the Completion Date and (ii) $5 million per occurrence on and after
the Completion Date (or as otherwise reasonably agreed to by the
Majority Holders), in each case, caused by perils now or hereafter
embraced by or defined in a manuscript "all risks" insurance policy,
including at least such perils as customarily insured for similar
Property. Prior to the Completion Date, such all-risk property
insurance shall not contain any exclusions to coverage other than the
exclusions (or exclusions that are substantially the same as those) set
forth on Schedule 6.05(a)(i), unless otherwise reasonably agreed to by
the Majority Holders;
(ii) General Liability Insurance: Comprehensive general
liability (including contractual, completed
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operations and product liability), insurance against claims for bodily
injury (including death), personal injury and property damage occurring
in respect of the Property or resulting from activities related to the
Property, in the minimum combined single limit amount of $50 million in
the annual aggregate for bodily injury (or death) and/or property
damage with (i) first-dollar coverage, no deductible or self-insured
retention allowable prior to the Completion Date and (ii) a maximum
self-insured retention allowable of $5 million on and after the
Completion Date (or as otherwise reasonably agreed to by the Majority
Holders). Prior to the Completion Date, such comprehensive general
liability insurance shall not contain any exclusions to coverage other
than the exclusions (or exclusions that are substantially the same as
those) set forth on Schedule 6.05(a)(ii), unless otherwise reasonably
agreed to by the Majority Holders; and
(iii) Other Insurance: Such other insurance, including
automobile liability, in such amounts and against such risks, as is
either (x) customarily carried by companies owning, operating or
leasing property or conducting businesses similar and/or similarly
situated to the Property and/or the Lessee, or (y) reasonably requested
from time to time by the Lessor.
Such insurance shall be written by companies that are
nationally recognized (including Lloyd's of London or other recognized
international insurers with an ISI rating of not less than BBB); primary
insurance shall be written by companies rated at least A-IX in the most recent
edition of Best's Key Rating Guide, or an equivalent rating from a nationally
recognized rating agency or as otherwise agreed to by the Agent, the Lessor and
the Purchasers, selected by the Lessee and, other than the insurance specified
in Section 6.05(a)(i), shall name SSBTC (in its individual capacity and as
Trustee) and the Agent, on its own behalf and on behalf of the Holders from time
to time of the Instruments and their assignees, as additional insureds, as their
interests may appear.
(b) The insurance referred to in Section 6.05(a)(i) may be a
blanket policy and shall (i) at all times be in a per occurrence amount at least
equal to the single largest possible loss or damage to the Property; (ii) cover
the full cost to replace or repair any loss or damage to the Property; (iii)
name the Lessor as an additional insured prior to the Completion Date; (iv)
include a lenders' loss payable endorsement in favor of the Lessor and any loss
or damage under such insurance policies shall be payable to the Lessor to be
held and applied pursuant to the terms of this Lease; (v) provide that the
interests of the Lessor, the Agent and the Holders from time to time of the
Instruments shall be insured regardless of any breach or violation by the Lessee
of
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any warranties, declarations or conditions contained in such insurance; (vi)
provide that such insurance shall not be invalidated by any act, omission or
negligence of the Lessee, the Lessor, the Agent or the Holders from time to time
of the Instruments, nor by any proceedings or notices thereof relating to the
Property or Item thereof, nor by legal title to, or ownership of the Property or
any Item thereof becoming vested in or by Lessor or its agents, nor by use of
the Property or any part thereof for purposes more hazardous than permitted by
such policy; and (vii) provide that all insurance claims pertaining to the
Property or any part thereof shall be adjusted by the insurers thereunder with
the Lessee and the Lessor may at its option participate with the Lessee and
their insurers in any compromise, adjustment or settlement.
All policies of insurance required to be maintained pursuant
to Section 6.05(a)(ii) which cover liability for bodily injury or property
damage shall provide that all provisions of such insurance, except the limits of
liability (which shall be applicable to all insureds as a group) and liability
premiums (which shall be solely a liability of the Lessee), shall operate in the
same manner as if there were a separate policy covering each such insured and/or
additional insured, without right of contribution from any other insurance which
may be carried by an insured and/or additional insured.
Every policy required under Section 6.05(a) shall (i)
expressly provide that it will not be canceled or terminated except upon 60
days' written notice to the Lessor and the Lessee, except in the case of
cancellation or termination due to a lapse for non-payment, in which case only
10 days' written notice shall be required; (ii) include a waiver of all rights
of subrogation against the Lessor, the Agent and the Holders from time to time
of the Instruments and any recourse against the Lessor, the Agent or the Holders
from time to time of the Instruments for payment of any premiums or assessments
under any policy; and (iii) not contain a provision relieving the insurer
thereunder of liability for any loss by reason of the existence of other
policies of insurance covering the Property or any Item thereof against the
peril involved, whether collectible or not, if such other policies do not name
the Lessor, the Agent and the Holders from time to time of the Instruments as
additional insureds with loss payable as provided in the Lease. The Lessee shall
advise the Lessor promptly of any policy cancellation or any change adversely
affecting the coverage provided thereby.
(c) The Lessee shall deliver to the Lessor and the Agent the
certificates of insurance evidencing the existence of all insurance which is
required to be maintained by the Lessee hereunder including descriptions of the
previously mentioned Insurance Requirements, such delivery to be made (i) as
provided in Section 2.01(j), 2.02(i) and 4.01 of the Participation Agreement,
(ii) at least twenty-one (21) days
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prior to the issuance of any additional policies or amendments or supplements to
any of such insurance, and (iii) upon the expiration date of any such insurance.
The Lessee shall notify the Lessor and Agent of any nonrenewal of any policy
required hereunder and shall cause each insurer under each policy required
hereunder to give the Lessor notice of any lapse under any such policy. The
Lessee shall not obtain or carry separate insurance concurrent in form, or
contributing in the event of loss, with that required by this Section 6.05
unless the Lessor, the Agent and the Holders from time to time of the
Instruments are named as additional insureds therein, with loss payable as
provided in this Lease. The Lessee shall immediately notify the Lessor, the
Agent and the Holders from time to time of the Instruments whenever any such
separate insurance is obtained and shall deliver to the Lessor the certificates
of insurance and any other documentation (other than blanket policies) required
by the Lessor evidencing the same as is required hereunder.
(d) The insurance requirements of this Section 6.05
(collectively, the "Insurance Requirements") shall not be construed to negate or
modify the Lessee's obligations under Section 4.01 of the Participation
Agreement.
Section 6.06 Maintenance and Repair. (a) The Lessee, at its
own cost and expense, will manage and maintain the Property in good mechanical
condition and repair (ordinary wear and tear excepted), in accordance with
prudent industry practice and in a manner consistent with that of other similar
properties owned or operated by it or its Affiliates similarly situated, and
will take all action, and will make all changes and repairs, structural and
nonstructural, foreseen and unforeseen, ordinary and extraordinary, which may be
required to maintain the Property in good mechanical condition and repair
(ordinary wear and tear excepted), in accordance with prudent industry practice,
and in compliance with (1) all Legal Requirements and Insurance Requirements at
any time in effect, and (2) any required maintenance procedures of the
manufacturers of Property relating to maintenance and operation (if and so long
as there are any manufacturer's warranties applicable) necessary to preserve the
manufacturer's warranties, if any, on the Property. The Lessee shall, in
accordance with prudent industry practice, repair or replace each Item of
Property that shall have become worn out, damaged, inoperative or obsolete in
whole or in part; provided, however, that (i) the fair market value,
marketability or use of the Property shall not be materially lessened and (ii)
such replacements shall be of a type currently used in the industry for the same
purpose and having a remaining useful life at least as long as that of the Item
of Property (or any part thereof), as the case may be, repaired or replaced
(prior to obsolescence, loss or damage and the like). All repairs, replacements
and rebuilding by the Lessee hereunder, to the extent permitted by Law, shall
immediately become and shall remain part of the Property of
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the Lessor, subject to this Lease. The Lessor shall not be required to, and
Lessee hereby waives any right to require the Lessor to, manage, maintain,
replace, repair or rebuild the Property or any part thereof and the Lessee
waives any and all rights it may now or hereafter have to make any repairs at
the cost and expense of the Lessor pursuant to any Legal Requirement, Insurance
Requirement, or otherwise, at any time in effect.
(b) All appliances, parts, instruments, appurtenances,
accessories, furnishings and other Property of whatever nature, which may from
time to time be incorporated or installed in or attached to any Item of Property
("Parts") (except for a temporary replacement Part) at any time removed from the
Property shall remain the property of the Lessor and subject to this Lease, no
matter where located, until such time as such Parts shall be replaced by Parts
that have been incorporated or installed in or attached to such Property and
that meet the requirements specified in the preceding paragraph. Immediately
upon any replacement Part (except for a temporary replacement Part) becoming
incorporated or installed in or attached to any Item of Property as provided
herein, without further act, (i) ownership of the replaced Part shall thereupon
vest in the Lessee or its designee, free and clear of all rights of the Lessor
and shall no longer be deemed a Part hereunder; (ii) ownership of such
replacement Part shall thereupon vest in the Lessor (subject only to Permitted
Encumbrances); and (iii) such replacement Part shall become subject to this
Lease and be deemed part of the Property for all purposes hereof to the same
extent as the Parts originally incorporated or installed in or attached to the
Property.
(c) Except for Permitted Encumbrances, in the event that all
or any part of the Property shall encroach upon any adjoining or adjacent
property or right-of-way, or shall violate any rights-of-way, permits, licenses,
agreements or conditions affecting the Property or any part thereof, or shall
obstruct any easement or right-of-way to which the Property or any part thereof
may be subject, then the Lessee shall, at its sole cost and expense, either (i)
contest such matter pursuant to 6.01(b) hereof, (ii) obtain valid and effective
Permits for or Consents to such encroachments and/or violations (without any
liability to the Lessor, the Agent, the Certificate Holders or the Note Holders
for which such parties are not indemnified by the Lessee) or waivers or
settlements of all claims, liabilities and damages resulting therefrom, or (iii)
make such changes, including alteration or removal, to the Property (as the case
may be) and take such other action as shall be reasonably necessary to rectify
such encroachments, violations, hindrances, obstructions or impairments, subject
to the Lessor's consent if and to the extent required by Section 6.01(b).
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Section 6.07 Inspection Rights. (a) Subject to any
restrictions that may be contained in any Real Property Instruments, the Lessor
Group shall have the right (which may be delegated to its consultants and
authorized representatives), but not the obligation, to inspect the Property and
any part thereof and records related to the construction, operation and use of
the Property and to discuss such of the affairs, finances, and accounts as are
relevant to the Operative Documents or the Securitization Documents with the
officers of Lessee, in all cases, at reasonable times in compliance with and
subject to Lessee's reasonable security and safety procedures, in effect from
time to time. Any such inspection shall be made after 10 days advance written
notice to the Lessee; provided, however, that no advance written notice need be
given if any member of the Lessor Group, in its reasonable discretion, has
reason to believe that a Default, Event of Default or Environmental Trigger has
occurred or other exigent or emergency conditions exist; and provided further,
that all such inspections upon the occurrence and during the continuance of a
Default, an Event of Default or a Environmental Trigger shall be at the expense
of the Lessee.
(b) If a Default, an Event of Default, or an Environmental
Trigger has occurred and is continuing or if the Lessee has exercised its option
to terminate this Lease pursuant to Section 3.03(a)(ii), then the Lessee shall
give or cause to be given to the Lessor Group such additional access to the
Property and to the Lessee's books and records relating to the management,
operation, use, maintenance, renovation, construction or occupancy of the
Property as it may require for any purpose, including for marketing, selling,
operating or otherwise disposing of the Property.
Section 6.08 Assignments, Etc. Except as expressly provided in
Section 5.04(a) or except in the case of the Lessee's grant of an Approved IRU,
the Lessee shall not mortgage, pledge, assign or otherwise encumber its interest
in and to this Lease or in and to any IRU or the rentals payable thereunder
without the prior written consent of the Lessor. Any mortgage, pledge or
assignment of the Lessee's interest hereunder or under any such IRU granted,
otherwise than as expressly permitted by this Section 6.08, shall be null and
void and of no force or effect. A Change in Control of Lessee by merger,
consolidation or any other means, or any assignment by operation of law shall be
deemed an assignment requiring the Lessor's prior written consent.
Section 6.09 Location. Except as expressly permitted by
Section 5.08 or other provisions of this Lease, the Lessee shall not change the
location of any Item of Property without the prior written consent of the
Lessor.
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ARTICLE VII
CONDEMNATION AND CASUALTY
Section 7.01 Condemnation and Casualty. (a) The Lessee hereby
irrevocably assigns to the Lessor any award or compensation or insurance payment
or other proceeds to which the Lessee may become entitled by reason of its
interest in the Property or any part thereof (other than proceeds from business
interruption insurance) if prior to the Expiration Date (i) the Property or any
part thereof is damaged or destroyed by fire or other casualty (each, a
"Casualty") or (ii) the use, occupancy or title of the Property or any part
thereof is taken or requisitioned or sold in, or on account of any actual or
threatened condemnation or eminent domain proceedings, or other action by any
Person having the power of eminent domain or condemnation (each, a
"Condemnation").
(b) The Lessee shall promptly notify the Lessor in writing of
any such Casualty or Condemnation and shall appear in any proceeding or action
to defend, negotiate, prosecute or adjust any claim for any award or
compensation or insurance payment on account of any Casualty or Condemnation and
shall take all appropriate action in connection with any Casualty or
Condemnation. The Lessor shall have the right to appear and participate and to
employ counsel in any such proceeding or action, and the fees and expenses of
such counsel shall be paid by the Lessor. If the Lessee shall elect not to
appear or shall fail to prosecute diligently, the Lessor may assume the
prosecution thereof and the Lessee shall pay all of the reasonable costs and
expenses of the Lessor (including, but not limited to, fees and expenses of
Lessor's Special Counsel) and the fees and expenses of Special Counsel. No
settlement of any such proceeding or action shall be made by the Lessee or the
Lessor without the written consent of the other party hereto, which consent
shall not unreasonably be withheld, conditioned or delayed.
(c) Any and all amounts representing proceeds paid in
connection with any such Condemnation or Casualty, as the case may be
(collectively, the "Proceeds"), shall be paid over to the Proceeds Trustee to be
held in trust by such Proceeds Trustee and distributed pursuant to this Section
7.01(c) and Sections 7.03 and 7.04, as appropriate (all such Proceeds, less the
costs and expenses incurred by the Lessor and the Lessee in collecting such
amounts, but including any reimbursement by the Lessee for costs and expenses in
connection therewith to which the Lessor, the Certificate Holders and the Note
Holders are entitled pursuant to the Operative Documents or Securitization
Documents, are the "Net Proceeds"). Any and all Proceeds received by the Lessee
in connection with any such proceeding or action shall be paid over to the
Lessor, shall be segregated from other funds of the Lessor and shall be
forthwith paid over to the Proceeds Trustee. The Lessee agrees that this Lease
shall control the
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rights of the Lessor and the Lessee in any such Proceeds, and any present or
future Law to the contrary is hereby waived. Any and all reasonable charges,
fees and expenses of the Proceeds Trustee shall be paid from the Net Proceeds.
Section 7.02 Condemnation or Casualty with Termination. If a
Casualty or Condemnation occurs during the Term and the Lessor has received an
opinion, which shall be at the Lessee's sole cost and expense, of the
Independent Engineer to the effect that the restoration of the Property could
not be expected to restore and rebuild the Property to an economic unit of
substantially the same capacity, efficiency and useful life as existed prior to
such Casualty or Condemnation or such restoration and rebuilding could not be
expected to be completed in full prior to the Expiration Date, then the Lessor
or Lessee shall have the option, in their sole discretion, to deliver a
Termination Notice.
Section 7.03 Condemnation or Casualty Without Termination. If,
after a Casualty or Condemnation, neither the Lessor nor the Lessee has given a
Termination Notice in accordance with 7.02, then this Lease shall continue in
full force and effect, and the Lessee shall, at its sole cost and expense,
promptly commence and diligently pursue to completion the rebuilding,
replacement or repair of any damage to the Property, caused by such event in
conformity with the requirements of Section 6.06, as applicable, in order to
restore the Property, (in the case of a Condemnation, as nearly as practicable)
to the value and operating condition thereof immediately prior to such event
(but in no event to a value less than the aggregate Original Capitalized Cost of
the Property (determined in accordance with Section I-B of Schedule 1)). In
connection with such restoration the Lessee shall, before beginning such
restoration, submit plans and specifications for such restoration, together with
an estimate of the cost thereof, and all necessary construction contracts
therefor for the Lessor's and the Independent Engineer's approval, which will
not be unreasonably withheld, conditioned or delayed; provided that (i) the
Property can be restored to an economic unit of substantially the same character
and fair market value as existed immediately prior to such Casualty or
Condemnation and (ii) if the estimated cost to complete such restoration exceeds
the amount of Net Proceeds, the Lessor is, in its sole judgment, satisfied that
the Lessee shall have sufficient funds (the "Excess Funds") available to pay
such excess, which Excess Funds shall be deposited by the Lessee with the
Proceeds Trustee and distributed to the Lessee as hereinafter provided. If the
conditions set forth in the foregoing proviso are not satisfied, the Lessor may
deliver a Termination Notice.
(b) Such work shall be completed in a good and workmanlike
manner free and clear of all Liens for labor, services or materials (except
Permitted Encumbrances) and in compliance with all applicable Legal Requirements
and
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Insurance Requirements. Upon completion of such work, the Lessee shall cause the
Independent Engineer to deliver a certificate to the effect that final
completion of the work has occurred and that the operating condition of the
Property, after taking into consideration the restoration, is equivalent to, or
better than, the operating condition that existed immediately prior to the
Casualty or Condemnation assuming compliance with Section 6.06. All fees and
expenses of the Independent Engineer in connection with any rebuilding and
restoration shall be at the Lessee's sole cost and expense.
(c) The Lessee shall be entitled to receive payment from the
Net Proceeds or the Excess Funds, as the case may be, from time to time as such
work of rebuilding, replacement or repair progresses, but only after
presentation of certificates of the Independent Engineer, delivered by the
Lessee to the Proceeds Trustee (with a copy to the Lessor) from time to time as
such work of rebuilding, replacement or repair progresses. Each such certificate
of the Independent Engineer shall describe the work for which the Lessee is
requesting permission to pay or requesting payment and the cost incurred by the
Lessee in connection therewith and shall state that such work has been properly
completed and that the Lessee has not theretofore received payment for such
work, and shall be accompanied by an Officer's Certificate of the Lessee
certifying that no Default, Event of Default or Environmental Trigger has
occurred and is continuing and that the Net Proceeds and Excess Funds held by
the Proceeds Trustee are to the best of its knowledge adequate to complete such
rebuilding, replacement or repair in accordance with this Section 7.03(c). Upon
completion of and final payment for such work, the Lessee's Officer's
Certificate shall be accompanied by duly executed Lien waivers executed by each
materialman or mechanic furnishing materials or labor for which the Lessee
requested permission to pay or requested payment.
(d) The Proceeds Trustee shall deliver, or cause to be
delivered, payment within five (5) Business Days after its receipt of the
certificates required above. In connection with such payments, the Proceeds
Trustee shall first apply the Excess Funds to the cost of such restoration prior
to the disbursement of any Net Proceeds by the Proceeds Trustee for such
purpose. Upon receipt by the Proceeds Trustee (with a copy to the Lessor) of an
Officer's Certificate from the Lessee, to the effect that final payment has been
made for any such work and stating that the rebuilding, replacement or repair
has been completed in compliance with the terms and conditions of this Lease,
the remaining amount of such Net Proceeds shall be paid to the Lessee. The
Lessee shall be responsible for the cost of any such repair, rebuilding or
restoration in excess of such Net Proceeds and Excess Funds, for which cost the
Lessee shall make adequate provision acceptable to the Lessor.
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Section 7.04 Temporary Condemnation or Lease Termination.
Notwithstanding any provision to the contrary contained in this Article VII, in
the event of any temporary Condemnation, this Lease shall remain in full force
and effect, and provided no Default, Event of Default or Environmental Trigger
has occurred and is continuing, the Lessee shall be entitled to receive the Net
Proceeds allocable to such temporary Condemnation, except that if this Lease
shall expire or terminate during such temporary Condemnation, then the Lessee
shall be entitled to the Net Proceeds allocable to the period after the
termination or expiration of this Lease only if it has paid the Termination
Value for the Property.
ARTICLE VIII
ENVIRONMENTAL MATTERS
Section 8.01 Environmental Event. (a) The Lessee shall
promptly, but in any case within five Business Days, notify the Lessor and the
Agent if (i) any environmental event has occurred or any environmental condition
is discovered in, on, beneath, from or involving the Property or any part
thereof (including, but not limited to, the presence, emission or release of
Hazardous Materials or the violation of any applicable Environmental Law) for
which a remediation or reporting could reasonably be required or (ii) the Lessee
has received notification that it, the Lessor, the Property or any part thereof
is the subject of an Environmental Action that could reasonably be expected to
result in any ordered remediation or corrective action or other liability (each
of (i) and (ii) an "Environmental Event").
Section 8.02 Environmental Trigger Termination. Following the
receipt of a notice pursuant to Section 8.01(a), the Lessor, the Agent, or the
Majority Holders, each in their sole discretion, may require the Lessee to cause
the Environmental Consultant to conduct an environmental audit of the Property,
having a scope designed to evaluate the existence and anticipated impact of the
Environmental Event at issue, at the cost and expense of the Lessee, and to
provide a copy of the Environmental Consultant's report on its audit to the
Lessor, the Majority Holders and the Agent. If it is the opinion of the Agent
and the Environmental Consultant that an Environmental Event has occurred or
exists that would result in a material adverse effect on the use, value or
condition of the Property, (an "Environmental Trigger"), the Lessor, the Agent
or the Majority Holders shall have the option, each in its sole discretion, to
deliver or cause the Lessor to deliver, within thirty days after receipt of such
report, a Termination Notice.
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Section 8.03 Environmental Remediation. Irrespective of
whether an Environmental Trigger has occurred, the Lessee shall immediately
commence, or cause to be commenced, at its sole cost and expense, such actions
as may be necessary to comply in all material respects with all applicable
Environmental Laws and to alleviate any significant risk to human health or the
environment if the same arises from a condition on or in respect of the Property
or any part thereof, whether existing prior to, on or after the date of this
Lease. Once the Lessee commences such actions, the Lessee shall thereafter
diligently and expeditiously proceed to comply in a timely manner with all
Environmental Laws and to eliminate any significant risk to human health or the
environment and shall, at the request of the Lessor or the Agent, give periodic
progress reports on its compliance efforts and actions.
Section 8.04 Environmental Compliance. The Lessee shall, and
it shall require and ensure that any and all sublessees, employees, contractors,
subcontractors, agents, representatives, affiliates, consultants, occupants and
any and all other Persons, (i) comply with all applicable Environmental Laws,
and (ii) use, employ, process, emit, generate, store, handle, transport, dispose
of and/or arrange for the disposal of any and all Hazardous Materials in, on or,
directly or indirectly, related to or in connection with the Property or any
part thereof in a manner consistent with prudent industry practice and in
compliance with all applicable Environmental Laws, and in a manner which does
not pose a significant risk to human health, safety (including occupational
health and safety) or the environment. The Lessor and the Lessee hereby
acknowledge and agree that the Lessee's obligations hereunder with respect to
Hazardous Materials and Environmental Laws are intended to bind the Lessee with
respect to matters and conditions on, in, under, beneath, from, with respect to,
affecting, related to, in connection with, or involving the Property or any part
thereof.
ARTICLE IX
REMEDIES
Section 9.01 General Remedies. In accordance with the terms
and conditions contained in this Lease, the Lessor may take all steps to protect
and enforce the rights of the Lessor or obligations of the Lessee hereunder,
whether by action, suit or proceeding at Law or in equity (for the specific
performance of any covenant, condition or agreement contained in this Lease, or
in aid of the execution of any power herein granted or for any foreclosure, or
for the enforcement of any other appropriate legal or equitable
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remedy) or otherwise as the Lessor shall deem necessary or advisable.
Section 9.02 Default Remedies. (a) Subject to Section 9.02(i),
if an Event of Default shall have occurred and be continuing, including an Event
of Default arising from the breach of a covenant, condition or other provision
hereof, then upon five Business Days' prior written notice by the Lessor to the
Lessee, in addition to all other rights, remedies or recourses available, the
Lessor may either (A) terminate this Lease by issuing a Termination Notice or
(B) terminate the Lessee's right to possession of the Property or any part
thereof.
(b) If the Lessor should elect to terminate this Lease as
provided in clause (A) of Section 9.02(a), then this Lease and the estate hereby
granted shall expire and terminate at midnight on the fifth Business Day (or
such later date as may be specified therein) after the date of such notice, as
fully and completely and with the same effect as if such date was the date
herein fixed for the expiration of the Term and all rights of the Lessee shall
terminate, but the Lessee shall remain liable as hereinafter provided.
(c) Should the Lessor elect not to terminate this Lease,
this Lease shall continue in effect and the Lessor may enforce all the Lessor's
rights and remedies under this Lease including the right to recover the Fixed
and Additional Rent as each becomes due under this Lease. For the purposes
hereof, the following do not constitute a termination of this Lease:
(i) Acts of maintenance or preservation of the Property or
any part thereof or efforts to relet the Property or any part thereof,
including termination of any sublease of the Property to a third party
and removal of such subtenant from the Property;
(ii) The appointment of a receiver upon initiative of the
Lessor to protect the Lessor's interest under this Lease; and/or
(iii) The exercise of any rights under Section 11.02.
(d) If an Event of Default shall have occurred and be
continuing, upon five Business Days' notice, the Lessor shall have (i) the
right, whether or not this Lease shall have been terminated pursuant to Section
9.02(a), to re-enter and repossess the Property or any part thereof, as the
Lessor may elect, by summary proceedings, ejectment, any other legal action or
in any other lawful manner the Lessor determines to be necessary or desirable
and (ii) the right to remove all Persons and property therefrom. The Lessor
shall be under no liability by reason of any such re-entry, repossession or
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removal. No such re-entry or repossession of the Property or any part thereof
shall be construed as an election by the Lessor to terminate this Lease unless a
Termination Notice is given to the Lessee pursuant to Section 9.02(a)(A), or
unless such termination is decreed by a court or other governmental tribunal of
competent jurisdiction. Should the Lessor elect to re-enter the Property as
herein provided or should the Lessor take possession pursuant to legal
proceedings or pursuant to any notice provided for by Law or upon termination of
this Lease of the Lessee's right to possession of the Property or any part
thereof pursuant to Section 9.02(a) or otherwise as permitted by Law, the Lessee
shall peaceably quit and surrender the Property or any part thereof to the
Lessor. In any such event, neither the Lessee nor any Person claiming through or
under the Lessee, by virtue of any Law, shall be entitled to possession or to
remain in possession of the Property or any such part thereof, but shall
forthwith quit and surrender the Property to the Lessor.
(e) At any time or from time to time after the re-entry or
repossession of the Property or any part thereof pursuant to Section 9.02(d),
whether or not this Lease shall have been terminated pursuant to Section
9.02(a), the Lessor may (but shall be under no obligation to) relet the Property
or any part thereof, for the account of the Lessee, without notice to the
Lessee, for such term or terms and on such conditions and for such uses as the
Lessor, in its sole and absolute discretion, may determine. The Lessor may
collect and receive any rents or other proceeds payable by reason of such
reletting. The Lessor shall not be liable for any failure to relet the Property
or any part thereof or for any failure to collect any rent due upon any such
reletting.
(f) No termination of this Lease or of the Lessee's right to
possession of the Property or any part thereof pursuant to Section 9.02(a), or
by operation of Law, and no re-entry or repossession of the Property or any part
thereof pursuant to Section 9.02(d), and no reletting of the Property or any
part thereof pursuant to Section 9.02(e), shall relieve the Lessee of its
liabilities and obligations hereunder, all of which shall survive such
termination, re-entry, repossession or reletting.
(g) In the event of any termination of this Lease or of the
Lessee's right to possession of the Property or any part thereof by reason of
the occurrence of any Event of Default, the Lessee shall pay to the Lessor all
Fixed Rent, Additional Rent and other sums required to be paid to and including
the date of such termination of this Lease or of the Lessee's right to
possession; and thereafter, until the end of the Term, whether or not the
Property or any part thereof shall have been relet, the Lessee to the extent
permitted by applicable Law shall be liable to the Lessor for, and shall pay to
the Agent (on behalf of the Lessor), on the days on which such amounts would be
payable under this Lease in the
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absence of such termination, re-entry or repossession, as agreed current damages
and not as a penalty: all Fixed Rent, Additional Rent and other sums which would
be payable under this Lease by the Lessee, in the absence of such termination,
re-entry or repossession, and all costs (including attorneys' fees and expenses)
incurred by the Lessor hereunder (payable on demand) and all costs of any
environmental remediation pursuant to Section 8.03.
(h) To the extent permitted by Law, at such time after the
termination or expiration of this Lease if the Lessee shall have paid all
amounts required to be paid by it under this Lease, the other Operative
Documents and the Securitization Documents and the Lessee shall have discharged
any and all obligations to the Lessor, the Certificate Holders and the Note
Holders, then the Lessor shall pay and assign to the Lessee, when received, the
net proceeds, if any, of any reletting effected for the account of the Lessee
pursuant to Section 9.02(e), and any residual interest in the Property after
deducting from such proceeds all of the Lessor's expenses in connection with
such reletting (including, but not limited to, all repossession costs, brokerage
commissions, attorneys' fees and expenses, employees' expenses, alteration costs
and expenses of preparation for such reletting and all costs of any
environmental remediation pursuant to Section 8.03).
(i) The Company may, at any time prior to exercise of any
remedies by the Lessor hereunder, elect to cure any Default, Event of Default or
Environmental Trigger by purchasing the Property or Item of Property to the
extent that such purchase would cure (to the Agent's sole satisfaction) a
Default or Event of Default or Environmental Trigger and for an amount equal to
such Property's Termination Value.
Section 9.03 Lessee Default Repurchase Option. Notwithstanding
the foregoing, if an Event of Default shall have occurred, the Lessee may within
five (5) Business Days after the earliest of the Lessor's or Agent's notice of
such occurrence thereafter pay to the Agent, on behalf of the Lessor, an amount
equal to the Termination Value for all of the Property in which event the Lessor
shall be obligated to convey the Property to the Lessee in compliance with
Section 5.04.
Section 9.04 Payment on Default. The Lessor shall be entitled
to recover from the Lessee, and the Lessee will pay to the Agent (on behalf of
the Lessor) on demand, such amounts set forth below in lieu of all liquidated
damages in respect of Fixed Rent beyond the date of such demand (but in addition
to any claim for current damages in respect of Fixed Rent or Additional Rent and
any other amounts due and payable to the Lessor hereunder (prior to the date of
such demand)), at any time after termination of the Term of this Lease or
re-entry
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or repossession of the Property, in any case, by reason of the occurrence of:
(i) an Event of Default (other than an Event of Default
under Section 6.01 **** or 6.01 **** of the Participation Agreement or
claims brought by the ****, an amount equal to the Residual Value
Amount, in which event the Lessee shall release all of its interest in
the Property;
(ii) an Event of Default under Section 6.01 **** or 6.01
**** of the Participation Agreement, or claims brought by the ****, an
amount equal to the ****, in which event the Lessor shall be obligated
to convey the Property to the Lessee in compliance with Section 5.04;
(iii) an Event of Default (other than under Section 6.01
**** or 6.01 **** of the Participation Agreement) ****, an amount equal
to the ****, in which event the Lessor shall be obligated to convey the
Property to the Lessee in compliance with Section 5.04; or
(iv) an Event of Default under Section 6.01 **** or 6.01
**** of the Participation Agreement, an amount equal to ****, in which
event the **** the Property;
provided, however, that with respect to clauses (i) and (iv), the Company shall
not be obligated to pay an amount in excess of **** calculated to include all
Rent and other amounts due and payable to the Lessor as if such amounts had been
paid by the Company prior thereto.
Section 9.05 Additional Rights. (a) No right or remedy
hereunder shall be exclusive of any other right or remedy, but shall be
cumulative and in addition to any other right or remedy hereunder or under the
other Operative Documents or Securitization Documents or now or hereafter
existing at Law or in equity and the exercise by the Lessor or the Collateral
Agent of any one or more of such rights, powers or remedies shall not preclude
the simultaneous exercise of any or all of such other rights, powers or
remedies. Failure to insist upon the strict performance of any provision hereof
or to exercise any option, right, power or remedy contained herein shall not
constitute a waiver or relinquishment thereof for the future. Receipt by the
Lessor (or by the Agent on behalf of the Lessor) of any Fixed Rent, Additional
Rent, Residual Value Amount, Termination Value or other sum payable hereunder or
under any other Operative Document or Securitization Documents with knowledge of
the breach by the
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Lessee of any provision hereof shall not constitute a waiver of such breach, and
no waiver by the Lessor of any provision hereof shall be deemed to have been
made unless made in writing. The Lessor shall be entitled to injunctive relief
in case of the violation or attempted or threatened violation of any of the
provisions hereof, a decree compelling performance of any of the provisions
hereof or any other remedy allowed to the Lessor at law or in equity.
(b) Except as otherwise provided in Section 9.03, the Lessee
hereby waives and surrenders for itself and all those claiming under it,
including creditors of all kinds, (i) any right and privilege which they may
have under any applicable Law or otherwise to redeem the Property or any part
thereof or to have a continuance of this Lease after termination of the Lessee's
right of occupancy by Law or by any legal process or writ, or under the terms of
this Lease, or after the termination of the Term of this Lease as herein
provided and (ii) the benefits of any Law which exempts property from liability
for debt or for distress for rent.
(c) If an Event of Default exists hereunder, the Lessee shall
pay to the Agent (on behalf of the Lessor) on demand all fees and out-of-pocket
expenses incurred by the Lessor in enforcing its rights under this Lease,
including attorneys' fees and expenses.
(d) The Lessee makes no representation or warranty concerning
the ability of the Lessor to reenter or repossess any portion of the Property
that may be located on Real Property to which access rights are restricted under
applicable Real Property Instruments.
ARTICLE X
SURRENDER
Section 10.01 Return of Property. (a) If upon the expiration
or termination of the Term or the termination of Lessee's possession of the
Property, Lessee or its designee has not purchased the Property as provided
hereunder, the Lessee shall surrender (i) all of the Property in the operating
condition, efficiency, utility and with the remaining useful life, it had upon
the commencement of the Term, acquisition or completion of construction, as the
case may be, except as repaired, rebuilt, renovated, altered, added to or built
as permitted or required hereby and except for ordinary wear and tear, and (ii)
the Alterations in good operating condition, in substantially the condition the
same were in when acquired, constructed or installed, except for ordinary wear
and tear. To the extent that the Property is not in compliance with the above
upon such expiration or termination (except as a consequence of a Casualty or
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Condemnation, as to which Article VII applies), the Lessee shall pay to the
Agent (on behalf of the Lessor) such additional amounts as are required to place
it in compliance therewith.
Section 10.02 No Liens. The Lessee shall also surrender the
Property to the Lessor free and clear of all Liens, easements, consents and
restrictive covenants and agreements affecting the Property other than Permitted
Encumbrances.
Section 10.03 Environmental Compliance. The Lessee shall also
surrender the Property in a condition such that it is in compliance with all
applicable Environmental Laws then enacted and all regulations then proposed at
the time of construction or "modification" (as such term is defined in 40 CFR
Section 51.165(a)(1)(v), Section 51.166(b)(2), Section 52.21(b)(2) and Section
60.14) of the Property by any governmental agency to the extent such regulations
contain retroactive requirements (irrespective of whether the deadline for such
compliance would otherwise expire after the end of the Term. Nothing contained
in this Section 10.01 shall relieve or discharge or in any way affect the
obligation of the Lessee to cure promptly pursuant to this Lease any violations
of Legal Requirements referred to in this Lease, or to pay and discharge any
Liens and Charges against the Property, subject, however, to the right of the
Lessee to contest the same pursuant to the provisions of Sections 12.09 and
6.01(b). Lessee shall cooperate, to the fullest extent permitted by Law, with
the Lessor, its subsequent lessees, operators or purchasers to effect the
transfer of all of Lessee's Consents and Permits for the Property to such
Persons.
Section 10.04 Removal of Other Property. The Lessee, at its
sole cost and expense, shall remove from the Property on or prior to such
expiration or termination, all property which is not owned by the Lessor and
shall repair any damage caused by such removal and shall restore the Property to
the condition and working order (or reasonable equivalent thereof) in which it
existed immediately prior to the installation or removal of such property,
except for ordinary wear and tear. Lessee shall indemnify and hold harmless the
Lessor, its successors and assigns against any loss, liability, cost, expense,
penalty or claim arising out of the Lessee's removal of such property from the
Property including any environmental liability arising therefrom. Any such
property of the Lessee not so removed shall become the property of the Lessor,
and the Lessor may cause such property to be removed and disposed of, and the
cost of any such removal and disposition of the Lessee's property and of
repairing any damage caused by such removal and of the restoration of the
Property to the condition and working order (or reasonable equivalent thereof)
in which it existed immediately prior to the installation or removal of such
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property, ordinary wear and tear excepted, shall be borne by the Lessee.
Section 10.05 Return Conditions. Upon the election of the
Lessee to terminate this Lease pursuant to Section 3.03(a)(ii), or upon other
termination of this Lease, provided that the Lessee or its designee does not
purchase the Property, the Lessee shall provide, or cause to be provided or
accomplished, at the sole cost and expense of the Lessee, to or for the benefit
of the Lessor and the holders of the Instruments, at least thirty (30) days but
not more than sixty (60) days prior to the Expiration Date or date of such other
termination of this Lease each of the following (collectively, the "Return
Conditions"):
(i) To the extent that the Property includes Real
Property, receipt by the Agent of an environmental audit, performed by
environmental consultants selected by the Lessor, satisfactory in scope
and content to the Agent, the Lessor, the Collateral Agent, each
Certificate Holder and each B-Note Holder, in each case, in their
reasonable discretion to the effect that (A) such Property is in
compliance with all applicable Environmental Laws, (B) such Property is
free from all Hazardous Materials, the presence of which could have a
Material Adverse Effect on the Property and (C) there is no pending or
threatened litigation, investigation or other legal proceeding that
could result in any liability to any B-Note Holder, Certificate Holder,
the Agent or the Lessor.
(ii) Receipt by the Agent of a report of the Appraiser
and/or the Independent Engineer, satisfactory in scope and content to
the Lessor, the Agent, the Certificate Holders and the B-Note Holders,
in each case, in their reasonable discretion, to the effect that (A)
the Projects have been constructed and maintained in accordance with
the terms and conditions of this Lease and the other Operative
Documents and the requirements of all Legal Requirements, Permits,
Consents and prudent industry standards; (B) all mechanical,
electrical, security, plumbing, fire safety, telecommunications,
structural and other systems in or constituting part of the Projects
are operating properly in accordance with standards and specifications
for such systems not less than those in effect on the commencement of
the Term, (and such other standards and specifications as may be
required by applicable Legal Requirements); and (C) no Condemnation or
Casualty or Environmental Trigger has occurred which has not been
remedied in accordance with the terms of the Operative Documents.
(iii) Receipt by the Agent of evidence satisfactory to the
Agent, the Lessor, the Certificate Holders and the B-Note Holders, in
each case, in their sole discretion, that the Lessee is, and (as of the
Expiration Date or
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date of such other termination of the Lease) will be, in full
compliance with the Services Agreement and has made arrangements
satisfactory to the Agent for the provision of services required
thereunder for the term thereof.
(iv) Receipt by the Agent of evidence satisfactory to the
Agent, the Lessor, the Certificate Holders and the B-Note Holders, in
each case, in their sole discretion, that the Lessor has a
first-priority, perfected security interest in all Network Assets held
by other Persons which are related to any IRU constituting a part of
the Property.
(v) If directed to do so by the Lessor, the Lessee (at its
sole cost and expense) shall execute and deliver any and all further
instruments, agreements and documents as may, in the reasonable opinion
of the Lessor, be necessary to confirm the termination and expiration
of this Lease and to acknowledge that the Lessee, from the date of
termination and expiration, ceases to have any interest in the Property
under this Lease and to confirm the Lessor's interest in the Property.
(vi) Receipt by the Agent of a report of an independent
appraiser and/or engineer chosen by the Lessor and satisfactory in
scope and content to the Lessor, the Agent, the B-Note Holders and the
Certificate Holders, in each case, in their sole discretion, to the
effect that the fair market value of any Property received in any
exchange, substitution, redeployment or similar transaction
contemplated by this Lease is at least equal to the fair market value
of any Property surrendered in such exchange, substitution,
redeployment or similar transaction contemplated by this Lease.
(vii) Receipt by the Lessor of the following, each in form and
substance satisfactory to the Lessor, the Agent, the B-Note Holders and
the Certificate Holders, in each case, in their sole discretion:
(A) a complete survey and title report with respect to any
Real Property in scope and content reasonably satisfactory to
the Agent, the B-Note Holders and the Certificate Holders and
in accordance with United States telecommunications industry
standards, together with all available information pertaining
to (i) ownership or right to use any specified right-of-way or
easement or other portion of Real Property, (ii) existing
agreements respecting any right-of-way or easement (including
utility crossings) or other use of any portion of the Real
Property and (iii) restrictions on the right to use or to
occupy any right-of-way or easement or other portion of the
Real Property for the purposes intended by the Operative
Documents;
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(B) conveyancing, assignment, transfer, and other documents
(including any required Consents or Permits) that are
sufficient to convey or assign to the Lessor (or its designee)
on the Expiration Date either (i) a non-exclusive license to
occupy and use any Real Property, including any easements,
rights-of-way, licenses, Permits or allowances and other
rights of use, (without regard to whether any such right is
based on historical use or direct grant of authority from the
property owner or applicable Governmental Authority) used by
the Lessee in connection with the operation of the Property,
to the same extent and in the same manner used by the Lessee
during the Term or (ii) a direct grant of authority or right
from the property owner or applicable Governmental Authority
to occupy and use any Real Property used by the Lessee in
connection with the operation of the Property, to the same
extent and in the same manner used by the Lessee during the
Term, together with amounts sufficient to pay any recording,
filing, transfer, documentary stamp or other transfer tax;
(C) a complete and current inventory of all Signal Equipment,
Racks, uninstalled Cable and other equipment constituting
Items of Property (including any Property acquired in exchange
or substitution for or redeployment or replacement thereof);
(D) detailed as-built maps (allignment sheets) showing the
location of all Cable, Conduit and Cable Facilities, including
Global Positioning System coordinates for (i) all Cable
Facilities and POPs, and (ii) all Cable at intervals of not
less than two miles and a detailed description of the identity
and location of any other easements, rights-of-way,
restrictions or other users of a specified portion or any Real
Property;
(E) as-built drawings, technical specifications and other
engineering data for all Cable Facilities, Racks and POPs;
(F) recent test reports covering the matters set forth in
Exhibit B and such other matters as the Agent, the Lessor or
any Holder of Notes or Certificates may request, each in their
sole discretion;
(G) true and complete original copies of all contracts, IRUs,
books and records, Permits, Consents, licenses, manuals,
drawings, blueprints, maps, surveys, specifications,
warranties by manufacturers, vendors or others, intellectual
property rights, Real Property Instruments and other
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documents relevant to the ownership, use and operation of the
Property.
(viii) Receipt by the Agent of evidence satisfactory to the
Lessor, the Agent, the B-Note Holders and Certificate Holders, in each
case, in their sole discretion, that:
(A) the Services Agreement is in full force and effect and
Williams and its Subsidiaries are capable of discharging, in a
timely and complete manner, all of their respective
obligations thereunder; and
(B) the Lessor otherwise has title to, or other rights in
respect of, in each case, satisfactory to the Lessor, the
Agent, the B-Note Holders and Certificate Holders, in each
case, in their sole discretion, all of the Property and other
assets or rights as may be necessary or appropriate either (1)
to operate the Property or (2) to sell, lease, exchange,
assign, grant rights to use, encumber or otherwise dispose of
all (as an operating business) or any portion of the Property,
in each case in conformity with all Legal Requirements,
applicable Insurance Requirements, Consents, Permits and
contractual commitments binding on the Property, including any
licenses (including any required license from the Federal
Communications Commission or other Governmental Authority),
easements, rights-of-way, and intellectual property rights.
(ix) Receipt of evidence satisfactory to the Lessor, the
Agent, the B-Note Holders and Certificate Holders, in each case, in
their sole discretion, that:
(A) all rights and obligations of the Lessor under the
Facility Agreements, other than the Surviving Facility
Agreements (as hereinafter defined) have been terminated
without cost, expense, recourse or other liability of any kind
to the Lessor, the Agent, or the Purchasers;
(B) the Surviving Facility Agreements and all other agreements
and arrangements contemplated thereby are in place, executed
by the parties thereto and are valid, enforceable and in full
force and effect (both before and immediately after the
Expiration Date);
(C) the Surviving Facility Agreements and such agreements and
arrangements adequately provide for the services and other
rights contemplated thereby; (iv) no default exists under any
of the Surviving Facility Agreements; and
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(D) none of the Surviving Facility Agreements have been
modified or amended or waived in violation of the provisions
of the Operative Documents. The "Surviving Facility
Agreements" means (x) the Services Agreement and (y) those
Facility Agreements that Lessor, the Agent and each Holder of
the B-Notes and Certificates selects (in their sole
discretion) to survive the Expiration Date.
(x) Receipt by the Agent of evidence satisfactory to the
Lessor, the Agent, the B-Note Holders and Certificate Holders, in each
case, in their sole discretion, that all outstanding obligations and
Charges relating to the Property (other than the B-Notes and the
Certificates) have been paid and discharged in full (including all such
outstanding obligations and Charges arising as a consequence of
satisfaction of the other Return Conditions under this Section).
(xi) Receipt by the Agent of an agreement (the "Return
Indemnity Agreement") executed by Williams and satisfactory in form and
substance to the Lessor, the Agent, the B-Note Holders and Certificate
Holders, in each case, in their sole discretion, pursuant to which
Williams (i) represents, warrants and covenants that the Return
Conditions have been satisfied and will remain satisfied through and
immediately after the Expiration Date and (ii) agrees to indemnify and
hold harmless the Lessor, the Agent and the Holders of the B-Notes and
the Certificates against any loss, cost, expense, (including fees and
expenses of legal counsel, accountants and other professionals), tax,
penalty or other liability of any kind incurred as a consequence of the
falsity or breach of the representations, warranties and covenants of
Williams described in clause (i) above. The rights of Lessor under the
Return Indemnity Agreement will be assignable to any purchaser of all
or any part of the Property (or any other successor or assignee of
Lessor).
(xii) Receipt of evidence satisfactory to the Lessor, the
Agent, the B-Note Holders and Certificate Holders, in each case, in
their sole discretion, that the Lessor will not be subject to
regulation by any Federal or state Governmental Authority as a common
carrier, public utility, intra or interstate telecommunications
provider, carrier or otherwise.
(xiii) Such other documents, instruments, legal opinions,
surveys, and other evidence establishing to the satisfaction of the
Lessor, the Agent, the B-Note Holders and Certificate Holders, in each
case, in their sole discretion, that (i) Lessor has all property,
services, permits, assets and rights necessary, to own, operate and
maintain the Property from and after the termination or expiration of
this Lease, (ii) no Default, Event of
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Default or Environmental Trigger then exists and (iii) the other Return
Conditions have been satisfied.
(xiv) If directed to do so by the Lessor, the Lessee (at its
expense) shall:
(A) Use its reasonable best efforts, available resources and
contacts with Governmental Authorities, owners of Real
Property and others, in a manner consistent with applicable
Laws, to assist the Trustee in obtaining any required
easements, rights-of-way, licenses, Consents, Permits or other
rights necessary to own, use, sell, operate or otherwise deal
with the Property.
(B) Pack and ship any or all Equipment to such location or
locations within the forty-eight contiguous United States as
the Lessor may direct.
(xv) Receipt by the Lessor in form and substance satisfactory
to the Lessor, the Agent, the B-Note Holders and the Certificate
Holders, in each case, in their sole discretion, of conveyancing,
assignment, transfer, and other documents (including any required
Consents or Permits) that are sufficient to convey to the Lessor (or
its designee) on the Expiration Date title to not less than ****) that
(A) constitute a ****, (B) have an aggregate appraised value at least
equal to the **** (utilizing substantially similar appraisal
methodologies and assumptions as used to ****) and (C) are conveyed
free of any ****.
Section 10.06 Survival. The obligations of the Lessee under
this Article X shall survive the expiration or any termination of the Term of
this Lease (whether by operation of Law or otherwise) for all matters described
in this Section which occur or arise prior to such expiration or termination or
arise out of or result from facts, events, claims, liabilities, actions or
conditions occurring, arising or existing on or before such expiration or
termination.
ARTICLE XI
SECURITY
Section 11.01 Characterization. The Lessor and the Lessee
intend that the Lessee shall treat this Lease, for accounting purposes, as an
operating lease. Notwithstanding the intent of the parties, if a court of
competent
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jurisdiction determines that the transaction represented by this Lease, the
other Operative Documents and the Securitization Documents will not be treated
as an operating lease but will be treated as a financing transaction, then the
parties hereto intend that (i) this Lease be treated as a mortgage and security
agreement encumbering the Property given by the Lessee to the Lessor in a
principal amount equal to the cost of acquisition and construction of the
Property plus any other amounts owing to the Lessor, the Agent, the Collateral
Agent, the Note Holders or the Certificate Holders (collectively, the "Secured
Party") under the Operative Documents and the Securitization Documents including
Fixed Rent, Additional Rent and the Termination Value (collectively, the
"Loan"), (ii) all payments of Fixed Rent, Additional Rent and the Termination
Value be treated as payments of principal, interest and other amounts owing with
respect to such Loan, respectively, (iii) the Lessee be treated as entitled to
all benefits of ownership of the Property or any part thereof, and (iv) this
Lease be treated as (x) a mortgage that has, in respect of the Property located
in any state (the "Relevant State"), the terms set forth in Section 11.02 and
(y) a security agreement that has the terms set forth in Section 11.03.
Section 11.02 Mortgage. (a) The Lessee, as mortgagor, hereby
has mortgaged, given, granted, bargained, sold, aliened, enfeoffed, conveyed,
confirmed and assigned and by these presents does hereby forever, mortgage,
give, grant, bargain, sell, alien, enfeoff, convey, confirm and assign unto the
Lessor, as mortgagee, or any successor thereto, for the benefit of the Secured
Party, a continuing lien upon and a security interest in and to all of the
Lessee's right, title and interest in and to the following property rights and
interests:
(i) all of the Property;
(ii) all of the estate, right, title, claim or demand of
any nature whatsoever of the Lessee, either in law or in equity, in
possession or expectancy, in and to the Property or any part thereof;
(iii) all machinery, apparatus, equipment, Parts, fittings,
fixtures and other property of every kind and nature whatsoever and all
additions thereto and renewals and replacements thereof, and all
substitutions therefor now owned or hereafter acquired by the Lessee,
or in which the Lessee has or shall have an interest, now or hereafter
located upon or in, or attached to, any portion of the Property, or
constituting a portion of the Property, or appurtenances thereto, and
the right, title and interest of the Lessee in and to any of the
foregoing which may be subject to any security agreements (as defined
in the Uniform Commercial Code of the State of New York);
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(iv) all awards or payments, including interest thereon,
and the right to receive the same, which may be made with respect to
the Property, whether from the exercise of the right of eminent domain
(including any transfer made in lieu of the exercise of said right), or
for any other injury to or decrease in the value of the Property;
(v) subject to Section 11.02(d), all leases, IRUs and
other agreements affecting the use or occupancy of the Property now or
hereafter entered into and all guaranties of any of the foregoing and
the right to receive and apply the rents, issues and profits of the
Property to the payment of the Loan;
(vi) subject to Section 11.02(d), all right, title and
interest of the Lessee in and to (x) all contracts from time to time
executed by the Lessee or any manager or agent on its behalf relating
to the ownership, demolition, construction, maintenance, repair,
operation, occupancy, sale or financing of the Property or any part
thereof and all agreements relating to the purchase or lease of any
portion of the Property or any property or rights relating to property
which is adjacent or peripheral to the Property (including development
rights and air rights), together with the right to exercise such
options and all leases of Equipment, (y) all consents, licenses,
building permits, certificates of occupancy and other governmental
approvals relating to construction, completion, occupancy, use or
operation of the Property or any part thereof, and (z) all drawings,
plans, specifications and similar or related items relating to the
Property;
(vii) all proceeds, both cash and non-cash, of the
foregoing;
(viii) all proceeds of and any unearned premiums on any
insurance policies covering the Property, including the right to
receive and apply the proceeds of any insurance, judgments, or
settlements made in lieu thereof, for damage to the Property; and
(ix) the right, in the name and on behalf of the Lessee, to
appear in and defend any action or proceeding brought with respect to
the Property and to commence any action or proceeding to protect the
interest of the Lessee in the Property.
To have and to hold the above granted and described Mortgaged Property unto and
to the proper use and benefit of the Lessor, and the successors and assigns of
the Lessor, forever.
(b) The Lessee, as mortgagor, hereby confirms that, with
respect to any Property located within a Relevant State,
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<PAGE> 57
the Lessor, as mortgagee, shall have, in addition to all other rights and
remedies provided in this Lease, or any other Operative Document or any
Securitization Documents, all of the rights and remedies with respect to such
Property as are provided:
(i) under the laws of the Relevant State governing
mortgages or deeds of trust; and
(ii) in any mortgage, deed of trust or similar document that
may be filed or recorded in any appropriate filing office in the
Relevant State in connection with the Property and the granting of the
security interest under the Lease; and
(iii) in the supplemental mortgage provisions for the Relevant
State, if any, annexed as Schedule 11.02(b) of this Lease.
(c) Notwithstanding any contrary provision in this Lease, the
amount of the Loan secured by any Property located within a Relevant State, and
the maximum amount that may be applied to pay the Loan from proceeds of any
foreclosure and sale of any Property located within a Relevant State, shall be
subject to the limitations in the supplemental mortgage provisions for the
Relevant State, if any, annexed as Schedule 2 of this Lease.
(d) This Section 11.02 shall not constitute an agreement to
assign, mortgage or otherwise encumber any agreement, contract, license or
interest relating to Real Property if such assignment, mortgage or other
encumbrance, without the Consent of the other party thereto, would constitute a
breach thereof, or would in any material way adversely affect the rights of the
Lessee thereunder; provided, however, that if any such Consent shall not be
obtained or any assignment, mortgage or other encumbrance would be ineffective,
or would impair the Lessee's rights thereunder so that the Lessor would not, in
effect, acquire the benefit of all such material rights, then the Lessee shall
use its best efforts to:
(i) provide to the Lessor the benefits of any such agreement,
contract, license, or interest therein;
(ii) cooperate in any reasonable and lawful arrangement
designed to provide such benefits to the Lessor; and
(iii) enforce, for the account of the Lessor, any rights of
the Lessee thereunder,
it being understood that, except upon return of the Property to the Lessor
pursuant to Section 3.03(a)(ii) or upon other termination of this Lease,
provided that the Lessee or its
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designee does not purchase the Property, such cooperation will not include any
requirement or obligation to pay any consideration, offer or grant any financial
accommodation or other benefit or release any claim or right in the absence of a
Default, Event of Default or Environmental Trigger.
(e) From the date hereof, if the Lessee enters into any new
Real Property Instrument or amends or otherwise modifies any existing Real
Property Instrument, in each case, with respect to a POP, then the Lessee shall
use its best efforts to cause such Real Property Instruments to permit an
assignment of such Real Property Instrument in favor of the Lessor and its
assigns.
Section 11.03 Security Agreement. (a) As security for the
Loan, the Lessee, as debtor, hereby grants to the Lessor, as secured party, for
the benefit of the Secured Party, a security interest in all of the Lessee's
right, title and interest in and to all personal property and all other rights
and interests, whether tangible or intangible in nature, comprising the
Property, whether now owned or hereafter acquired and all cash and non-cash
proceeds (including insurance proceeds) and products thereof (the "Collateral").
(b) If the Lessee shall default hereunder, the Lessor, in
addition to any other rights and remedies which it may have, shall have and may
exercise immediately and without demand, any and all rights and remedies granted
to a secured party upon default under the Uniform Commercial Code as in effect
at such time in New York, including, the right to take possession of the
Collateral or any part thereof, and to take such other measures as the Lessor
may deem necessary for the care, protection and preservation of the Collateral
and to sell, exchange, lease or otherwise realize on or dispose of the
Collateral. Any notice of sale, disposition or other intended action by the
Lessor with respect to the Collateral sent to the Lessee in accordance with the
provisions hereof at least seven days prior to the date of any such sale,
disposition or other action, shall constitute reasonable notice to the Lessee,
and the method of sale or disposition or other intended action set forth or
specified in such notice shall conclusively be deemed to be commercially
reasonable within the meaning of the Uniform Commercial Code unless objected to
in writing by the Lessee within five days after receipt by the Lessee of such
notice. The proceeds of any sale or disposition of the Collateral, or any part
thereof, may be applied by the Lessor to the payment of the Loan in such order,
priority and proportions as the Lessor in its discretion shall deem proper. The
Lessee shall remain liable for any deficiency between the proceeds of any sale
or other disposition of the Collateral and all unpaid amounts owed pursuant to
the Loan. The filing of a copy of this Lease (or a memorandum hereof) shall be
deemed to constitute the filing of a financing statement to perfect the security
interest in
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the Collateral and to secure the payment of all amounts due from time to time
from the Lessee to the Lessor under this Lease, the other Operative Documents
and the Securitization Documents. To the extent permitted by the Uniform
Commercial Code, the Lessor is hereby authorized to file a financing statement
covering the Collateral without the signature of the Lessee, as debtor.
(c) The Lessee, as debtor, hereby confirms that, with respect
to any Property located within a Relevant State, the provisions annexed as
Schedule 11.03(c) of this Lease shall apply.
ARTICLE XII
MISCELLANEOUS
Section 12.01 Notices, Demands and Other Instruments. All
notices, demands, offers, consents and other instruments given pursuant to this
Lease shall be sent to the parties hereto at the addresses set forth on Schedule
I to the Participation Agreement and shall be given in the manner and shall be
effective at the times and under the terms set forth in Section 8.02 of the
Participation Agreement. The Lessee shall send to the Agent copies of all
notices, demands, offers, consents, advices and other instruments hereunder sent
to the Lessor.
Section 12.02 No Default Certificate. Each party hereto shall,
at the reasonable request of the other party hereto, deliver to such other party
a certificate stating whether such first party has knowledge that, or has
received notice from any person that, any Casualty, Condemnation, Default,
Environmental Trigger or Event of Default has occurred and is continuing.
Section 12.03 Severability. Except as expressly provided
otherwise in this Lease, each provision hereof shall be separate and independent
and the breach of any such provision by the Lessee, or a breach of any
obligation hereunder by the Lessor, shall not discharge or relieve the Lessee
from its obligations to perform each and every covenant to be performed by the
Lessee hereunder. If any provision hereof or the application thereof to any
Person or circumstance shall be invalid or unenforceable, the remaining
provisions hereof, or the application of such provision to Persons or
circumstances other than those as to which it is invalid or unenforceable, shall
not be affected thereby, and each provision hereof shall be valid and shall be
enforceable to the extent permitted by Law.
Section 12.04 Binding Effect. All provisions contained in this
Lease shall be binding upon, inure to the
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benefit of and be enforceable by, the respective permitted successors and
assigns of the Lessor and the Lessee to the same extent as if each successor and
assignee were named as a party hereto. Except for subleases and assignments
permitted or created in accordance with Sections 5.07 and 6.08, the Lessee may
not assign its rights hereunder or any interest (by operation of law or
otherwise) herein without the prior written consent of the Lessor. Subject to
the provisions of Section 2.03 of this Lease, the other Operative Documents and
the Securitization Documents, the Lessor may assign all or any part of the
Property and/or its rights under this Lease. All amendments, waivers, consents
or approvals arising pursuant to this Lease shall be consummated in accordance
with the Participation Agreement. Any amendment, waiver, consent or approval
made otherwise than as expressly permitted by this Section 12.04 shall be null
and void.
Section 12.05 Governing Law. THIS LEASE SHALL BE GOVERNED BY
AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Section 12.06 Counterparts. The parties may sign this Lease in
any number of counterparts and on separate counterparts, each of which shall be
an original but all of which when taken together shall constitute one and the
same instrument, except that, if this Lease constitutes "chattel paper" within
the meaning of the UCC only one counterpart stamped or marked "COUNTERPART
NUMBER ONE" or "COUNTERPART NUMBER l" shall constitute, to the extent
applicable, "chattel paper" or other "collateral" within the meaning of the
Uniform Commercial Code in effect in any jurisdiction.
Section 12.07 No Recourse. No recourse shall be had against
the Lessor, the Agent, the Collateral Agent, the Proceeds Trustee, any
Certificate Holder or any Note Holder or their respective successors, assigns,
controlling persons, directors, officers, partners, employees, agents or
shareholders, and their successors and assigns for any claim based on any
failure by the Lessor in the performance or observance of any of the agreements,
covenants or provisions contained in this Lease and in the event of any such
failure, recourse shall be had solely against the Property; provided, however,
that nothing contained in this Lease shall be taken to prevent enforcement of
this Lease or of any claim against the Lessor or any other Person arising out of
or in connection with this Lease based on fraud, gross negligence or willful
misconduct of the Lessor or such other Person.
Section 12.08 Lessor's Right to Cure Lessee's Default. If the
Lessee shall fail to make any payment or perform any act required to be made or
performed under this Lease, the Lessor, without waiving any default or releasing
Lessee from any obligation, may (but shall be under no obligation to) make such
payment or perform such act for the
55
<PAGE> 61
account and at the cost and expense of the Lessee, and may enter upon the
Property for such purpose and take all such action thereon as, at the Lessor's
sole discretion, may be necessary or appropriate therefor. No such entry shall
be deemed an eviction of the Lessee or a breach of the Lessor's covenant for
quiet possession pursuant to Section 2.03. All sums so paid by the Lessor and
all costs and expenses (including reasonable attorneys' fees and expenses so
incurred, together with interest thereon at the Default Rate to the extent
permitted by Law) shall be paid by the Lessee to the Lessor on demand as
Additional Rent.
Section 12.09 Lessee's Right to Contest Property Taxes. The
Lessee, at its own cost and expense and in compliance with Section 6.01(c),
shall have the sole right, at any time, to seek, in good faith, a reduction in
the assessed valuation of the Property or any part thereof or to contest, in
good faith, any real or personal property taxes for the Property or any part
thereof or to contest, in good faith, any dues, fees or assessments payable
under the Declaration. The Lessor shall not be required to join in any
proceeding or contest brought by the Lessee unless the provisions of any Legal
Requirement require that the proceeding or contest be brought by or in the name
of the owner of the Property. In that case the Lessor shall join in the
proceeding or contest or permit it to be brought in the Lessor's name as long as
the Lessee reimburses the Lessor for any and all costs and expenses reasonably
incurred by the Lessor in connection therewith. The Lessee, on a final
non-appealable determination of the proceeding or contest, shall immediately
pay, discharge and satisfy any decision or judgment rendered, together with all
costs, interest and penalties incidental to the decision or judgment.
Section 12.10 Limitations on Amounts Payable. Notwithstanding
anything to the contrary contained in this Lease or any of the other Operative
Documents or the Securitization Documents, the amounts which the Lessee is
obliged to pay, as Fixed Rent pursuant to this Lease, the other Operative
Documents and the Securitization Documents, and the amounts which the Lessor,
the Agent, the Certificate Holders and the Note Holders are entitled to receive
as Fixed Rent pursuant to this Lease, the other Operative Documents and the
Securitization Documents, are subject to limitations pursuant to Section 8.17 of
the Participation Agreement.
Section 12.11 Payments to the Agent. The Lessee hereby
acknowledges, and the Lessor hereby directs, that all payments of Fixed Rent,
Additional Rent and other sums due to the Lessor hereunder shall be made to the
Agent, on behalf of the Lessor, to the account specified for the Agent in
Schedule I to the Participation Agreement.
Section 12.12 Remaining Moneys. Except as otherwise provided
for herein or in the Interparty Agreement,
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any and all moneys remaining, and all residual interests in the Property after
all payments of interest on and principal of the Notes, and all payments of
current yield on and the stated amount of the Certificates, all payments of
other sums due to the parties entitled thereto under the Operative Documents and
the Securitization Documents and all unpaid amounts in respect of Unreimbursed
Losses, have been made in accordance with the Operative Documents and the
Securitization Documents, shall be paid and assigned to the Lessee.
Section 12.13 Waiver of Trial by Jury. IN ANY ACTION OR
PROCEEDING UNDER OR RELATED TO THIS AGREEMENT, THE OPERATIVE DOCUMENTS OR ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION WITH THE FOREGOING, THE LESSOR AND THE LESSEE
HEREBY AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT
AND NOT BEFORE A JURY, IRRESPECTIVE OF WHICH PARTY COMMENCES SUCH ACTION OR
PROCEEDING.
Section 12.14 Exculpation of Lessor. It is expressly agreed,
anything herein to the contrary notwithstanding, that each and all of the
representations, warranties, covenants, undertakings and agreements herein made
on the part of Lessor are made and intended not as personal representations,
warranties, covenants, undertakings and agreements by Lessor, or for the purpose
or with the intention of binding Lessor, personally, but are made and intended
for the purpose of binding only the Trust Estate and this Lease is executed and
delivered by Lessor not in its own right but solely in the exercise of the
powers expressly conferred upon it as Trustee under the Declaration; and no
personal liability or personal responsibility is assumed by or shall at any time
be asserted or enforceable against Lessor on account of this Lease or on account
of any representation, warranty, covenant, undertaking or agreement of Lessor,
either expressed or implied herein, all such personal liability, if any, being
expressly waived and released by Lessee and by all Persons claiming by, through
or under it, and that all recourse against the Lessor under this Lease shall be
limited to the Trust Estate.
Section 12.15 Prior Lease. This Lease amends, restates,
supplements and replaces, in its entirety, the Lease dated as of May 6, 1998
between the Lessor and the Lessee (the "Prior Lease"); all Property subject to
the Prior Lease shall be Property subject to this Lease as of the date of this
Lease, without further action of any kind on the part of the Lessor or the
Lessee; all amounts owing as Fixed Rent, Additional Rent, indemnity payments or
other amounts under the Prior Lease (whether now due or to become due) shall, to
the extent unpaid on the date hereof, become Fixed Rent, Additional Rent,
indemnity payments or other amounts owing under this Lease; all Property subject
to the Prior Lease shall, from and after the date of this Lease, be governed by
the provisions of this Lease; as of the date of this Lease,
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the Prior Lease shall cease to have any further force or effect, except that any
references to the Prior Lease in any mortgage, financing statement or other
document filed or recorded in any jurisdiction shall be deemed a reference to
this Lease, until such time, if any, as a new mortgage, financing statement,
amendment or other document is executed, delivered, recorded and filed expressly
referring to this Lease; and all Property subject to the Prior Lease shall, for
purposes of this Lease, have an Acquisition Cost, Original Capitalized Cost and
Adjusted Capitalized Cost as set forth on Schedule 12.15.
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<PAGE> 64
IN WITNESS WHEREOF, the parties hereto have caused this Lease
to be duly executed by their respective Officers thereunto duly authorized as of
the date hereof.
LESSOR:
STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION, not in
its individual capacity but solely as
Trustee
By:
---------------------------------------
Name:
Title:
Witness:
- --------------------------------
Name:
Witness:
- --------------------------------
Name:
STATE OF CONNECTICUT )
: ss.:
COUNTY OF HARTFORD )
On this day of September, 1998, before me personally
came , to me known, who, being by me duly sworn, did
depose and say that he is of the State Street Bank
and Trust Company of Connecticut, National Association, the national banking
association described in and which executed the foregoing instrument; that he
knows the seal of such association; that the seal affixed to such instrument is
such association seal; that it was so affixed by order of the Board of Directors
of such association, and that he signed his name thereto by like order.
Notary Public
59
<PAGE> 65
LESSEE:
WILLIAMS COMMUNICATIONS, INC.
By:
---------------------------------------
Name:
Title:
Witness:
- --------------------------------
Name:
Witness:
- --------------------------------
Name:
STATE OF OKLAHOMA )
: ss.:
COUNTY OF TULSA )
On this day of September, 1998, before me personally
came , to me known, who, being by me duly
sworn, did depose and say that he is the of Williams
Communications, Inc., the corporation described in and which executed the
foregoing instrument; that he knows the seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
order of the Board of Directors of said corporation, and that he signed his name
thereto by like order.
----------------------------------------------
Notary Public
60
<PAGE> 66
The undersigned, as Agent, hereby agrees to those provisions
of this Lease applicable to the Agent.
CITIBANK, N.A.
By:
--------------------------------------
Name:
Title:
Witness:
- --------------------------------
Name:
Witness:
- --------------------------------
Name:
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this day of September, 1998, before me personally
came , to me known, who, being by me duly sworn, did
depose and say that he is of Citibank, N.A., the national
banking association described in and which executed the foregoing instrument;
that he knows the seal of such association; that the seal affixed to such
instrument is such association seal; that it was so affixed by order of the
Board of Directors of such association, and that he signed his name thereto by
like order.
----------------------------------------------
Notary Public
61
<PAGE> 67
The undersigned, as Collateral Agent and the Proceeds Trustee
hereby agrees to those provisions of this Lease applicable to the Collateral
Agent and the Proceeds Trustee.
STATE STREET BANK AND TRUST
COMPANY, NATIONAL
ASSOCIATION, not in its
individual capacity but
solely as Collateral Agent
and Proceeds Trustee
By:
---------------------------------------
Name:
Title:
Witness:
- --------------------------------
Name:
Witness:
- --------------------------------
Name:
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this day of September, 1998, before me personally
came , to me known, who, being by me duly sworn,
did depose and say that he is of State Street Bank
And Trust Company, National Association, the national banking association
described in and which executed the foregoing instrument; that he knows the seal
of such association; that the seal affixed to such instrument is such
association seal; that it was so affixed by order of the Board of Directors of
such association, and that he signed his name thereto by like order.
----------------------------------------------
Notary Public
62
<PAGE> 68
SCHEDULE 1
Fixed Rent and Additional Rent
Capitalized terms used herein and not defined herein shall
have the meanings assigned to them in the Lease (including terms defined by
reference in the Lease to the other Operative Documents and the Securitization
Documents).
I. Fixed Rent
A. "Fixed Rent" for each Payment Date during the Base Term and
any Renewal Term shall be an amount equal to the sum of:
(A) an amount equal to the sum of:
(x) the product of (i) the Series A Portion of the Original
Capitalized Cost of the Property, multiplied by (ii) the
Applicable Rate for the A-Notes during the period ended on
such Payment Date, plus
(y) the portion of the Fixed Securitization Costs attributable
to the A-Notes for the period ended on such Payment Date;
plus
(B) an amount equal to the sum of:
(x) the product of (i) the Series B Portion of the Original
Capitalized Cost of the Property, multiplied by (ii) the
Applicable Rate for the B-Notes during the period ended on
such Payment Date, plus
(y) the portion of the Fixed Securitization Costs attributable
to the B-Notes for the period ended on such Payment Date;
plus
(C) an amount equal to the product of:
(x) the Series C Portion of the Original Capitalized Cost of
the Property, multiplied by
<PAGE> 69
(y) the Applicable Rate for the Certificates during the period
ended on such Payment Date,
plus
(D) during the Extended Term, if any, an amount equal to the
Amortization Amount for the period ended on such Payment Date,
in each case calculated on the basis of a 360-day year (or 365 days if
the Applicable Rate is calculated by reference to the Base Rate) and
prorated for the actual number of days of such period.
B. The "Original Capitalized Cost" shall mean an amount equal
to the sum of:
(A) the Series A Portion of the Original Capitalized Cost of the
Property, plus
(B) the Series B Portion of the Original Capitalized Cost of the
Property, plus
(C) the Series C Portion of the Original Capitalized Cost of the
Property.
The "Series A Portion" of the Original Capitalized Cost of the
Property is equal to the then outstanding aggregate principal amount of the
A-Notes issued to finance the Acquisition Costs of the Property.
The "Series B Portion" of the Original Capitalized Cost of the
Property is equal to the then outstanding aggregate principal amount of the
B-Notes issued to finance the Acquisition Costs of the Property.
The "Series C Portion" of the Original Capitalized Cost of the
Property is equal to the then outstanding aggregate stated amount of the
Certificates issued to finance the Acquisition Costs of the Property.
C. The "Amortization Amount" for any Payment Date during any
Renewal Term shall be the amount determined pursuant to Section 3.02 of the
Lease (and the appraisal of the Property referred to therein).
II. Additional Rent
A. (1) In addition to such Additional Rent as may otherwise be
payable under the Lease, the Lessee shall pay, without duplication, within five
(5) days of a demand therefor (but subject in all cases to the rights of Lessee
<PAGE> 70
under, and the limitations on such payments contained in, the Operative
Documents and the Securitization Documents) as Additional Rent, without
duplication, all Additional Costs. Promptly after the Lessor receives notice
from any Certificate Holder or Note Holder or any other Person requesting
payment of any Additional Costs to be payable as Additional Rent the Lessor
shall notify Lessee of the same. The failure to provide such notice as to any
Additional Costs shall not affect any Certificate Holder's or any Note Holder's
right to recover Additional Rent for the same.
(2) On the last Business Day of each March, June,
September and December of each year, commencing September 30, 1998 and ending
June 30, 2001, an amount equal to $10,895.83.
(3) On the first Payment Date to occur after the
Completion Date, the Lessee shall pay as Additional Rent, an amount equal to the
Excess Certificate Amount.
B. Upon requesting that Lessee pay Additional Rent pursuant to
paragraph II. A. above, the Lessor shall deliver to the Lessee a certificate in
reasonable detail executed by the Certificate Holders, the Note Holders or such
other Persons requesting payment of Additional Costs, as the case may be,
charging such Additional Rent and (i) setting forth the basis for and the amount
of such Additional Rent, and (ii) in the case of Increased Costs, stating that
such Increased Costs are generally being charged by such Certificate Holder or
Note Holder to other similarly situated Persons under similar arrangements. Such
certificate shall be conclusive and binding for all purposes, absent manifest
error, unless such certificate fails to set forth the information required
above.
<PAGE> 71
SCHEDULE 2.02(b)
Supplemental Use Restrictions
1. The provisions in this Supplemental Section 2.02(b)(1) shall apply to the
Regulated Property described below in:
FLORIDA
1.1. The Regulated Property in Florida subject to the supplemental use
restrictions in this Supplemental Section 2.02(b)(1) is:
All Network Assets located in Florida.
1.2. The Lessee agrees, with respect to the Regulated Property
described in Section 1.1 above, that:
(a) On the date any portion of such Regulated Property becomes
capable of transmission, the Lessee shall secure a certificate
as a telecommunications company from the Florida Public
Service Commission and present to Lessor proof satisfactory to
the Lessor of Lessee's certification.
(b) During the Term, Lessee shall maintain its status as a
certificated telecommunications company in Florida.
<PAGE> 72
SCHEDULE 6.05(i)
ALL-RISK PROPERTY INSURANCE EXCLUSIONS
To be provided.
<PAGE> 73
SCHEDULE 6.05(ii)
GENERAL LIABILITY INSURANCE EXCLUSIONS
To be provided.
<PAGE> 74
SCHEDULE 11.02(b)
Supplemental Mortgage Provisions
FLORIDA
1. Property Description: The Property located in Florida which is subject to
Section 11.01 of this Lease is:
All of the Property purchased pursuant to the MediaOne
Agreement.
2. Supplemental Rights: With respect to the Property described in Item 1 above,
the Lessor shall have the right, if an Event of Default shall have occurred:
(i) to exercise any and all remedies described in the
Participation Agreement or the other Operative Documents.
(ii) to declare the entire unpaid balance of the Notes and all
other obligations of Lessee secured hereby immediately due and payable
without further notice.
(iii) to the extent permitted by law, to take immediate
possession of the Property or any part thereof (which Lessee agrees to
surrender to Lessor) and manage, control or lease same to such person
or persons and exercise all other rights granted pursuant to the Lease.
The taking of possession under this paragraph shall not prevent
concurrent or later proceedings for the foreclosure sale of the
Property as provided elsewhere herein.
(iv) to apply, on ex parte motion to any court of competent
jurisdiction, for the appointment of a receiver and shall be entitled
to the appointment of such receiver as a matter of right, without
regard to the value of the Property as security for the amount of the
Loan, or the solvency or insolvency of any person then liable for the
payment of the amount of the Loan. In addition to the rights of
protection afforded to Lessor by Section 697.07, Florida Statutes
(1997), as amended (and not as an election of remedies), Lessor shall
be entitled, as a matter of strict right and without regard to the
value or occupancy of any security for the obligations secured hereby,
to have a receiver appointed by a court, without notice to Lessee, to
enter upon and take possession of the Property, collect the rents
<PAGE> 75
therefrom and thereof and apply the same as the court may direct, such
receiver to have all the rights and powers permitted under the laws of
Florida. The expenses, including receiver's fees, reasonable attorneys'
fees (including any incurred in appeals), costs and agent's
compensation, incurred pursuant to the powers herein contained shall be
secured hereby. The right to enter and take possession of the Property,
to manage and operate the same, to collect the rents therefrom and
thereof, whether by a receiver or otherwise, shall be cumulative to any
other right or remedy hereunder or afforded by law, and may be
exercised concurrently therewith or independently thereof. Lessor shall
be liable to account only for such rents actually received by Lessor,
whether received pursuant to this paragraph or otherwise. The Lessee
hereby specifically waives the right to object to the appointment of a
receiver as aforesaid and hereby consents that such appointment shall
be made as an admitted equity and as a matter of absolute right to the
Lessor and that the same may be done without notice to the Lessee or
any other defendant to such suit.
(v) to foreclose on the mortgage granted hereby and in case of
sale in an action or proceeding to foreclose and Lessor shall have the
right to sell the Property in parts or as an entirety. It is intended
hereby to give to Lessor the widest possible discretion permitted by
law with respect to all aspects of any such sale or sales.
(vi) to exercise all other remedies available, whether at law
or equity, in such order as Lessor may elect. It shall also not be
necessary that Lessor pay any impositions, premiums or other charges
regarding which Lessee is in default before Lessor may invoke its
rights hereunder. All such other rights and remedies available to
Lessor hereunder shall be cumulative and may be pursued concurrently or
successively. The failure or omission on the part of Lessor to exercise
the option for acceleration of maturity and/or foreclosure or to timely
exercise any other option, right, or remedy conferred upon the Lessor
herein, or the acceptance by Lessor of partial payments hereunder,
shall not constitute a waiver of any default or the right to exercise
any such option, but such option shall remain continuously in force.
Acceleration of maturity, once claimed hereunder by Lessor, at the
option of Lessor, may be rescinded by written acknowledgment to that
2
<PAGE> 76
effect by Lessor, but the tender and acceptance of partial payments
alone shall not, in any way, effect or rescind such acceleration of
maturity. The obtaining of a judgment or decree on the amount of the
Loan, whether in the State of Florida or elsewhere, shall not in any
way affect the lien created hereby upon the Property, and any judgment
or decree so obtained shall be secured hereby to the same extent as the
Loan is now secured.
3. Limitation of Rights: With respect to the Property described in item 1 above,
the following provisions shall apply:
"Notwithstanding anything to the contrary contained in this Lease,
Lessee and Lessor have agreed that the portion of the Property located
in the State of Florida secures only a portion of the amount of the
Loan in the maximum amount of $38,000,000, and that the value of the
Property located in Florida is $38,000,000. Therefore, irrespective of
anything contained in this Lease to the contrary, in the event of
foreclosure and sale of that portion of the Property located in the
State of Florida, the maximum recovery of Lessor in the event of a sale
of that portion of the Property located in the State of Florida to any
purchaser other than Lessor, and the maximum credit allowed toward the
payment of the amount of the Loan in bidding upon the portion of the
Property located in the State of Florida at a foreclosure sale, shall
be $38,000,000, plus such amounts as interest, costs, attorneys' fees
and other monies advanced for insurance premiums, taxes and
preservation of that portion of the Property located in the State of
Florida."
3
<PAGE> 77
SCHEDULE 11.03(c)
Supplemental Security Provisions
FLORIDA
1. Property Description: The Property located in Florida which is subject to
Section 11.03 of this Lease is:
All of the Property purchased pursuant to the MediaOne
Agreement.
2. Supplemental Provisions: With respect to the Property described in Item 1
above:
(a) The Lessee covenants and agrees with the Lessor that from and after
the date of this Lease and until the repayment in full of the Loan:
(i) At any time and from time to time, upon the written
request of the Lessor and at the sole expense of the Lessee, the Lessee
shall promptly and duly execute and deliver any and all such further
instruments and documents and take such further action as the Lessor
may reasonably deem desirable to obtain the full benefits of this
agreement and of the rights and powers herein granted, including (A)
filing any financing or continuation statements under the Uniform
Commercial Code with respect to the liens and security interests
granted hereunder or under any other Loan Document, (B) transferring
the Collateral to Lender's possession (if such Collateral consists of
documents, instruments or chattel paper or if a security interest in
such Collateral can be perfected only by possession) and (C) to obtain
waivers of liens from landlords and mortgagees. The Lessee also hereby
authorizes the Lessor to file any such financing or continuation
statement without the signature of the Lessee to the extent permitted
by applicable law. The filing of a copy of this Lease (or a memorandum
hereof) shall be deemed to constitute the filing of a financing
statement to perfect the security interest in the Collateral and to
secure the payment of all amounts due from time to time from the Lessee
to the Lessor under this Lease and the other Operative Documents.
(ii) The Lessee shall not change its name, identity or
corporate structure in any manner which might make any financing or
continuation statement filed in connection herewith seriously
<PAGE> 78
misleading within the meaning of Section 9-402(7) of the Uniform
Commercial Code or any other then applicable provision of the Uniform
Commercial Code unless the Lessee shall have given the Lessor at least
thirty (30) days' prior written notice thereof and shall have taken all
action (or made arrangements to take such action substantially
simultaneously with such change if it is impossible to take such action
in advance) necessary or reasonably requested by the Lessor to amend
such financing statement or continuation statement so that it is not
seriously misleading.
(b) (i) The Lessee hereby irrevocably constitutes and appoints the
Lessor and any authorized officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of the Lessee
and in the name of the Lessee or in its own name, from time to time in
the Lessor's discretion, for the purpose of carrying out the terms of
this agreement, to take any and all appropriate action and to execute
and deliver any and all documents and instruments which may be
necessary or desirable to accomplish the purposes of this agreement
and, without limiting the generality of the foregoing, hereby grants to
the Lessor the power and right, on behalf of the Lessee, without notice
to or assent by the Lessee, and at any time, to do the following:
(A) in the name of the Lessee, in its own name or otherwise,
take possession of, endorse and receive payment of any checks, drafts,
notes, acceptances, or other instruments for the payment of monies due
under any of the Collateral;
(B) continue any insurance existing pursuant to the terms of
this agreement or any of the other Operative Documents, and pay all or
any part of the premiums therefor and the costs thereof; and
(C) receive payment of any and all monies, claims, and other
amounts due or to become due at any time arising out of or in respect
of any Collateral.
(ii) The Lessee hereby irrevocably constitutes and appoints
the Lessor and any authorized employee, officer or agent thereof, with
full power of substitution, as its true and lawful attorney-in-fact
with full irrevocable power and authority in the place and stead of the
Lessee and in the name of the Lessee
2
<PAGE> 79
or in its own name, from time to time in the Lessor's discretion, for
the purpose of carrying out the terms of this agreement, to take any
and all appropriate action and to execute and deliver any and all
documents and instruments which may be necessary or desirable to
accomplish the purposes of this agreement and, without limiting the
generality of the foregoing, hereby grants to the Lessor the power and
right, on behalf of the Lessee, without notice to or assent by the
Lessee, upon the occurrence and during the continuation of an Event of
Default, to do the following:
(A) ask, demand, collect, receive and give acquittances and
receipts for any and all money due or to become due under any of the
Collateral;
(B) pay or discharge taxes, liens, security interests, or
other encumbrances levied or placed on or threatened against the
Collateral;
(C) effect any repairs or obtain any insurance called for by
the terms of this agreement or any of the other Operative Documents and
pay all or any part of the premiums therefor and costs thereof;
(D) direct any party liable for any payment under or in
respect of any of the Collateral to make payment of any and all monies
due or to become due thereunder, directly to the Lessor or as the
Lessor shall direct;
(E) settle, compromise or adjust any suit, action, or
proceeding and, in connection therewith, give such discharges or
releases as the Lessor may deem appropriate;
(F) file any claim or take or commence any other action or
proceeding in any court of law or equity or otherwise deemed
appropriate by the Lessor for the purpose of collecting any and all
such monies due under any of the Collateral whenever payable;
(G) commence and prosecute any suits, actions or proceedings
of law or equity in any court of competent jurisdiction to collect the
Collateral or any part thereof and to enforce any other right in
respect of any of the Collateral;
(H) defend any suit, action or proceeding brought against the
Lessee with respect to any of the Collateral if the Lessee does not
defend such suit, action or proceeding or if the Lessor believes that
the Lessee is not pursuing such defense in a manner that will maximize
the recovery with respect to such Collateral; and
3
<PAGE> 80
(I) sell, transfer, pledge, make any agreement with respect
to, or otherwise deal with any of the Collateral as fully and
completely as though the Lessor were the absolute owner thereof for all
purposes, and to do, at the Lessor's option and the Lessee's expense,
at any time, or from time to time, all acts and things which the Lessor
reasonably deems necessary to perfect, preserve, or realize upon the
Collateral and the Lessor's security interest therein in order to
effect the intent of this agreement, all as fully and effectively as
the Lessee might do.
(iii) The Lessee hereby ratifies, to the extent permitted by
law, all that said attorneys shall lawfully do or cause to be done by
virtue hereof. The foregoing power of attorney is a power coupled with
an interest and shall be irrevocable until the repayment in full of the
Loan.
(iv) The powers conferred on the Lessor hereunder are solely
to protect the Lessor's security interests in the Collateral and shall
not impose any duty upon it to exercise any such powers. The Lessor
shall be accountable only for amounts that it actually receives as a
result of the exercise of such powers and none of its officers,
directors, employees, agents or representatives shall be responsible to
the Lessee for any act or failure to act, except for their own gross
negligence or willful misconduct as determined by a final judgment of a
court of competent jurisdiction.
(v) The Lessee also authorizes the Lessor, at any time and
from time to time, to (i) communicate in its own name with any party to
any contract with regard to the assignment of the right, title and
interest of the Lessee in and under such contracts and other matters
relating thereto and (ii) execute, in connection with the exercise of
its remedies provided for herein, any endorsements, assignments or
other instruments of conveyance or transfer with respect to the
Collateral.
(c) (i) If any Event of Default shall occur and be continuing, the
Lessor may exercise in addition to all other rights and remedies
granted to it under this agreement, the other Operative Documents and
under any other instrument or agreement securing, evidencing or
relating to the Loan, all rights and remedies of a secured party under
the Uniform Commercial Code as in effect at such time in the State of
New York (the "Uniform Commercial Code"). Without limiting the
generality of the foregoing, the Lessee expressly agrees that in any
such event the Lessor without demand of performance or other demand,
advertisement or notice of any kind (except the notice specified below
of time
4
<PAGE> 81
and place of public or private sale) to or upon the Lessee or any other
Person (all and each of which demands, advertisements and notices are
hereby expressly waived to the maximum extent permitted by the Uniform
Commercial Code and other applicable law), may forthwith enter upon the
premises of the Lessee where any Collateral is located through
self-help, without judicial process, without first obtaining a final
judgment or giving the Lessee notice and opportunity for a hearing on
the Lessor's claim or action, and without paying rent to the Lessee,
and collect, receive, assemble, process, appropriate and realize upon
the Collateral, or any part thereof, and may forthwith sell, lease,
assign, give an option or options to purchase, or sell or otherwise
dispose of and deliver said Collateral (or contract to do so), or any
part thereof, in one or more parcels at public or private sale or
sales, at any exchange at such prices as it may deem best, for cash or
on credit or for future delivery without assumption of any credit risk.
The Lessor shall have the right upon any such public sale or sales,
and, to the extent permitted by law, upon any such private sale or
sales, to purchase for its benefit the whole or any part of said
Collateral so sold, free of any right or equity of redemption, which
equity of redemption the Lessee hereby releases. Such sales may be
adjourned or continued from time to time with or without notice. The
Lessor shall have the right to conduct such sales on the Lessee's
premises or elsewhere and shall have the right to use the Lessee's
premises without charge for such sales for such time or times as the
Lessor deems necessary or advisable.
(ii) The Lessee further agrees, at the Lessor's request, to
assemble the Collateral and make it available to the Lessor at places
which the Lessor shall reasonably select, whether at the Lessee's
premises or elsewhere. Until the Lessor is able to effect a sale,
lease, or other disposition of the Collateral, the Lessor shall have
the right to use or operate the Collateral, or any part thereof, to the
extent that it deems appropriate for the purpose of preserving the
Collateral or its value or for any other purpose deemed appropriate by
the Lessor. The Lessor shall have no obligation to the Lessee to
maintain or preserve the rights of the Lessee as against third parties
with respect to the Collateral while the Collateral is in the
possession of the Lessor. The Lessor may, if it so elects, seek the
appointment of a receiver or keeper to take possession of the
Collateral and to enforce any of the Lessor's remedies with respect to
such appointment without prior notice or hearing. The Lessor shall
apply the net proceeds of any such collection, recovery, receipt,
appropriation,
5
<PAGE> 82
realization or sale, as provided in subsection (d)(iv) hereof, the
Lessee remaining liable for any deficiency remaining unpaid after such
application, and only after so paying over such net proceeds and after
the payment by the Lessor of any other amount required by any provision
of law, including section 9-504(1)(c) of the Uniform Commercial Code
(but only after the Lessor has received what the Lessor considers
reasonable proof of a subordinate party's security interest), need the
Lessor account for the surplus, if any, to the Lessee. To the maximum
extent permitted by applicable law, the Lessee waives all claims,
damages, and demands against the Lessor arising out of the
repossession, retention or sale of the Collateral except such which may
arise out of the gross negligence or willful misconduct of such party.
The Lessee agrees that ten (10) days' prior notice by the Lessor of the
time and place of any public sale or of the time after which a private
sale may take place is reasonable notification of such matters. The
Lessee shall remain liable for any deficiency if the proceeds of any
sale or disposition of the Collateral are insufficient to pay all
amounts to which the Lessor is entitled, the Lessee also being liable
for any reasonable outside attorneys' fees incurred by the Lessor to
collect such deficiency.
(iii) The Lessee agrees to pay any and all costs of the
Lessor, including, without limitation, reasonable outside attorneys'
fees, incurred in connection with the enforcement of any of its rights
and remedies hereunder.
(iv) Except as otherwise specifically provided herein, the
Lessee hereby waives presentment, demand, protest or any notice (to the
maximum extent permitted by applicable law) of any kind in connection
with this agreement or any of the Collateral.
(v) The proceeds of any sale, disposition or other realization
upon all or any part of the Collateral shall be applied by the Lessor
upon receipt, in the following order of priorities:
First, the payment in full of reasonable expenses of
the Lessor in connection with such sale, disposition or other
realization, including all expenses, liabilities and advances incurred
or made by the Lessor in connection therewith, including reasonable
outside attorney's fees;
Second, to the payment of accrued but unpaid interest
on the Loan;
6
<PAGE> 83
Third, to the payment of unpaid principal of the
Loan;
Fourth, to the payment of all other obligations
secured hereby until all such other obligations shall have been paid in
full; and
Finally, to payment to the Lessee, or its successors
or assigns, to any other party lawfully entitled thereto, or as a court
of competent jurisdiction may direct, of any surplus then remaining
from such proceeds.
(d) The Lessor shall use reasonable care with respect to the Collateral in its
possession or under its control. The Lessor shall not have any other duty as to
any Collateral in its possession or control or in the possession or control of
any agent or nominee of the Lessor, or any income thereon or as to the
preservation of rights against prior parties or any other rights pertaining
thereto. Upon request of the Lessee, the Lessor shall account for any monies
received by the Lessor in respect of any foreclosure on or disposition of the
Collateral.
(e) The Lessor shall not by any act, delay, omission or otherwise be deemed to
have waived any of its rights or remedies hereunder, and no waiver shall be
valid unless in writing, signed by the Lessor and then only to the extent
therein set forth. A waiver by the Lessor of any right or remedy hereunder on
any one occasion shall not be construed as a bar to any right or remedy which
the Lessor would otherwise have had on any future occasion. No failure to
exercise nor any delay in exercising on the part of the Lessor, any right, power
or privilege hereunder, shall operate as a waiver thereof, nor shall any single
or partial exercise of any right, power or privilege hereunder preclude any
other or future exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies hereunder provided are cumulative and may be
exercised singly or concurrently, and are not exclusive of any rights and
remedies provided by law. None of the terms or provisions of this agreement may
be waived, altered, modified or amended except by an instrument in writing, duly
executed by the Lessor and the Lessee.
3. Limitation of Rights: With respect to the Property described in item 1 above,
the following provisions shall apply:
"Notwithstanding anything to the contrary contained in this Lease,
Lessee and Lessor have agreed that the portion of the Property located
in the State of Florida secures only a portion of the amount of the
Loan in the maximum amount of
7
<PAGE> 84
$38,000,000, and that the value of the Property located in Florida is
$38,000,000. Therefore, irrespective of anything contained in this
Lease to the contrary, in the event of foreclosure and sale of that
portion of the Property located in the State of Florida, the maximum
recovery of Lessor in the event of a sale of that portion of the
Property located in the State of Florida to any purchaser other than
Lessor, and the maximum credit allowed toward the payment of the amount
of the Loan in bidding upon the portion of the Property located in the
State of Florida at a foreclosure sale, shall be $38,000,000, plus such
amounts as interest, costs, attorneys' fees and other monies advanced
for insurance premiums, taxes and preservation of that portion of the
Property located in the State of Florida."
8
<PAGE> 85
SCHEDULE 12.15
Acquisition Cost, Original Capitalized Cost and
Adjusted Capitalized Cost of Certain Property
Subject to Prior Lease
<TABLE>
<S> <C> <C>
1. Acquisition Cost (May 6, 1998): $ 25,772,580.41
2. Original Capitalized Cost.
a. Series A Portion $ 21,903,570.55
b. Series B Portion 2,953,647.37
c. Series C Portion 915,362.49
---------------
d. Total Original Capitalized
Cost (Sept. 2, 1998) $ 25,772,580.41
===============
3. Adjusted Capitalized Cost.
a. Series A Portion $ 21,929,857.84
b. Series B Portion 2,957,249.53
c. Series C Portion 916,916.35
---------------
d. Total Adjusted Capitalized
Cost (Sept. 2, 1998) $ 25,804,023.72
===============
</TABLE>
<PAGE> 86
EXHIBIT A
Form of Certificate of Acceptance
CERTIFICATE OF ACCEPTANCE, dated September 2, 1998, by
Williams Communications, Inc., a Delaware corporation (the "Lessee"). All
capitalized terms used herein, unless defined herein, shall have the respective
meanings set forth in the Amended and Restated Lease, dated as of September 2,
1998 (the "Lease"), among the Lessee and State Street Bank and Trust Company of
Connecticut, National Association, as Trustee (the "Lessor").
W I T N E S S E T H :
WHEREAS, the Lessor and the Lessee are parties to the Lease
which provides for, inter alia, the execution and delivery of a Certificate of
Acceptance for the purpose of acknowledging acceptance of specific Items of
Property under the Lease and acknowledging the leasing of such Items of Property
under the Lease in accordance with the terms thereof.
NOW, THEREFORE, in consideration of the premises and other
good and sufficient consideration, the Lessor and the Lessee hereby agree as
follows:
1. The Lessor and the Lessee hereby acknowledge and
confirm that the Lessee leases from the Lessor under the Lease the Items of
Property specified in Schedule I hereto.
2. The Lessee hereby confirms to the Lessor that the
Lessee has accepted such Items of Property for all purposes of the Lease as
being in good working order and repair and without defect or inherent vice in
condition, design, operation or fitness for use, and otherwise in full
compliance with the Lease; provided, however, that nothing contained herein or
in the Lease shall in any way diminish or otherwise affect any right the Lessee
may have with respect to such Property against any third party (other than the
Lessor Group).
3. The Lessee hereby confirms to the Lessor that:
(a) Such items of Property do not constitute
Regulated Property.
<PAGE> 87
(b) Schedule 2.02(b) of the Lease is hereby
amended and supplemented by adding thereto the
Supplemental Use Restrictions annexed as
Schedule II to this Certificate of Acceptance.
IN WITNESS WHEREOF, the Lessee has caused this Certificate of
Acceptance to be duly executed on the day and year first above written.
WILLIAMS COMMUNICATIONS, INC.
By:
----------------------------------------
Name:
Title:
ACCEPTED:
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION,
not in its individual
capacity, but solely as
Trustee
By:
------------------------------
Name:
Title:
2
<PAGE> 88
Schedule I to the Certificate of Acceptance
<TABLE>
<CAPTION>
Description Cost of Property Appraisal Value
of Property Quantity (per unit) (if any)(1)
- ------------------------ ------------- ------------------ --------------------
<S> <C> <C> <C>
</TABLE>
- --------
(1) Appraised Value as determined by the Appraiser.
<PAGE> 89
1 Schedule II to the Certificate of Acceptance
2 Supplemental Use Restrictions
<PAGE> 90
EXHIBIT B
Fiber Testing Standards
1. General. This exhibit defines the standard procedures for testing and
acceptance of the fiber and splices. In general, the Lessee (or its designee),
will perform all tests. The tests should follow standard industry requirements
and criteria. The Lessee will provide all test data to the Lessor upon request.
2. Initial Construction Testing
A. During initial construction, the Lessee (or its designee) shall use
an optical time domain reflectometer ("OTDR") to test splices and shall use an
OTDR and a 1-km launch reel to test pigtail connectors. Such initial
construction tests shall be uni-directional and performed at 1550 nm.
B. If the loss value of two connectors and the associated pigtail
splice exceeds 1 dB, the Lessee (or its designee) shall break the splice and
re-splice until the loss value is 1.0 dB or less. If the Lessee (or its
designee) is unable to achieve a loss value of 1.0 dB or less after five total
splicing attempts, the splice shall be marked as Out-of-Spec (OOS).
C. If the loss value for a splice, when measured in one direction with
an OTDR, exceeds 0.15 dB, the Lessee (or its designee) shall break the splice
and re-splice until the loss value is 0.15 dB or less, provided that, if the
Lessee (or its designee) is not able to achieve a loss value of 0.15 dB after
three total splicing attempts, then the maximum loss value shall be 0.3 dB. If,
after two additional resplicing attempts, the Lessee (or its designee) is not
able to achieve a loss value of 0.3 dB or less, then the Lessee (or its
designee) shall mark the splice as Out-of-Spec (OOS).
3. End-to-End Testing
A. After the Lessee (or its designee) has established end-to-end
connectivity on the fibers during initial construction, it shall:
o perform bi-directional end-to-end tests,
o test continuity to confirm that no fibers have been "frogged" or crossed in
any of the splice points,
<PAGE> 91
o record loss measurements using a light source and a power meter, and
o take OTDR traces and record splice loss measurements.
B. The Lessee (or its designee) shall perform the bi-directional
end-to-end tests and OTDR traces at both 1310 nm and 1550 nm. The Lessee (or its
designee) shall measure and verify losses for each splice point in both
directions and average the loss values. The Lessee (or its designee) shall mark
any splice points as Out-of-Spec (OOS) that have an average loss value, based on
bi-directional OTDR testing, in excess of 0.3 dB.
4. Post-Construction Testing
After performing permanent resplicing (in conjunction with repair of a
cable cut, replacement of a segment of cable, or other work after initial
installation and splicing of the cable), the test procedures set forth section 2
(End-to-End Testing), shall apply to the relevant fibers and cable segments. The
provisions in sections 4 (OTDR Equipment and Settings) and 5 (Acceptance Test
Deliverables), that are relevant to such testing shall also apply.
5. Out-of-Spec Splices
Out-of-Spec splices shall be noted, but shall not preclude acceptance
of a fiber if the Out-of-Spec condition does not affect transmission capability
(based on use of then-prevailing telecommunications industry standards
applicable to equipment generally used with the relevant type of fiber) or
create a significant possibility of an outage.
6. OTDR Equipment and Settings
A. The Lessee (or its designee) shall use OTDR equipment and settings
that are, in its reasonable opinion, suitable for performing accurate
measurements of the fiber installed. Such equipment and settings shall include,
without limitation, the equipment and settings described below.
B. The Lessee (or its designee) has approved the following OTDRs and
settings for acceptance testing: the Laser Precision TD3000 and CMA4000 models
and compatible models.
C. The Lessee (or its designee) has approved the following settings for
various OTDR tests:
<PAGE> 92
i. Index of refraction settings:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
1310 NM 1550 NM
------------------------------ ----------------------
<S> <C> <C>
Lucent Truwave 1.4738 1.4732
Corning SMF-28 1.4675 1.4681
Corning SMF-LS 1.471 1.470
Corning LEAF 1.470 1.469
Sumitomo fiber 1.4670 1.4670
- -------------------------------------------------------------------------------------------------
</TABLE>
ii. Tests of a pigtail connector and its associated splice:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TD3000 CMA4000
--------- -----------
<S> <C> <C>
4 km Range 4 km Range
50 ns Pulse 50 ns Pulse
1 m Resolution 1 m Resolution
Medium Averaging Medium Averaging
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 93
iii. End to End Segment OTDR Testing:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TD3000 CMA4000
------------- ----------------
<S> <C> <C>
64 km Range 100 km Range
500 ns Pulse 250 ns Pulse
4 m Resolution 4 m Resolution
Medium Averaging Medium Averaging
- --------------------------------------------------------------------------------
</TABLE>
Note: If the end points are more than 64 kilometers apart, the Lessee
(or its designee) currently uses a TD3000 set at 128 km range setting
and performs bi-directional testing only at 1550 nm.
7. Acceptance Test Deliverables
The Lessee (or its designee) shall provide data sheets or computer
media containing the following information for the relevant fibers and cable
segments:
A. Verification of end-to-end fiber continuity with power level
readings for each fiber taken with a light source and power meter.
B. Verification of loss at each splice point to be below 0.3 dB as well
as the final bi-directional OTDR test data, with distances.
C. Cable manufacturer, cable type (buffer/ribbon), fiber type, cable
reel number, number of fibers, number of fibers per tube, and distance of each
section of cable between splice points.
<PAGE> 94
Schedule 5
FORM OF IRU AGREEMENT
---------------------
IRU AGREEMENT
BETWEEN
, INC. ("GRANTEE")
-------------------------
AND
WILLIAMS COMMUNICATIONS, INC. ("WILLIAMS")
DATED
--------------------------
( to )
----------------- ------------------
<PAGE> 95
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE PAGE
- ------- ----
<S> <C> <C>
I DEFINITIONS......................................................................................
II CONVEYANCE OF IRU................................................................................
III CONSIDERATION....................................................................................
IV CONSTRUCTION.....................................................................................
V CONNECTION TO THE SYSTEM AND COLLOCATION VI......................................................
VI ACCEPTANCE AND TESTING OF FIBERS ................................................................
VII SYSTEM ROUTE.....................................................................................
VIII TERM.............................................................................................
IX OPERATION, MAINTENANCE, AND REPAIR OF THE SYSTEM.................................................
X RELOCATION.......................................................................................
XI USE OF THE SYSTEM................................................................................
XII AUDIT RIGHTS.....................................................................................
XIII INDEMNIFICATION..................................................................................
XIV LIMITATION OF LIABILITY..........................................................................
XV INSURANCE........................................................................................
XVI TAXES AND GOVERNMENTAL FEES......................................................................
XVII DISCLAIMER OF WARRANTIES.........................................................................
XVIII NOTICE...........................................................................................
XIX CONFIDENTIALITY..................................................................................
XX DEFAULT..........................................................................................
XXI FORCE MAJEURE....................................................................................
XXII ARBITRATION......................................................................................
XXIII RULES OF CONSTRUCTION............................................................................
</TABLE>
i
<PAGE> 96
<TABLE>
<S> <C> <C>
XXIV ASSIGNMENT.......................................................................................
XXV REPRESENTATIONS AND WARRANTIES...................................................................
XXVI RELATIONSHIP OF THE PARTIES......................................................................
XXVII PROHIBITION ON IMPROPER PAYMENTS.................................................................
XXVIII ENTIRE AGREEMENT; AMENDMENT; EXECUTION...........................................................
</TABLE>
<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
Exhibit A Williams System Route Map
Exhibit B Collocation Agreement
Exhibit C Fiber Splicing, Testing and Acceptance Standards
Exhibit D Fiber Specifications
Exhibit E Cable Installation Specifications
Exhibit F Transmission Site Specifications
Exhibit G AsBuilt Drawing Specifications
Exhibit H Operations Specifications
</TABLE>
ii
<PAGE> 97
IRU AGREEMENT
(__________________ to _________________)
THIS IRU AGREEMENT (this "Agreement") is made, as of the Effective Date
(hereafter defined), by and between ________________________________
("Grantee"), a ___________ corporation having its principal office at
________________________, _______________ and WILLIAMS COMMUNICATIONS, INC.
("Williams"), a Delaware corporation, having its principal office at One
Williams Center, Tulsa, Oklahoma 74172.
W I T N E S S E T H:
WHEREAS, Williams has constructed or will construct or obtain rights of
use in a fiber optic communication system (the "System") along the route
depicted in Exhibit A hereto (the "Route"); and
WHEREAS, Grantee desires to acquire from Williams, and Williams desires
to provide to Grantee, an exclusive, indefeasible right to use certain optical
fibers in the System along the Route as hereafter described upon the terms and
conditions set forth below;
NOW, THEREFORE, in consideration of the mutual promises set forth
below, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Capitalized terms and phrases used in this Agreement shall have the
following meanings:
"Acceptance Date" means the date defined in Section 6.6 below.
"Acceptance Standards" means the standards set forth in Exhibit C with
respect to the testing and condition of the Grantee Fibers.
"Affiliates" means, with respect to any entity, an entity controlling,
controlled by, or under common control with such entity by means of
direct or indirect majority equity ownership.
"Agreement" shall have the definition set forth in the first paragraph
of this document.
"Cable" means the fiber optic cable installed pursuant to this
Agreement as part of the System (including any replacement cable) and
fibers contained therein, including the Grantee Fibers, and associated
splicing connections, splice boxes and vaults, and conduit.
"Claim" means any claim, action, dispute, or proceeding of any kind
between the Grantee (or any of its Affiliates, successors or assigns)
and Williams (or any of its Affiliates, successors, or assigns) and any
other claim, transaction, occurrence, loss, liability, expense or other
matter arising out of, in connection with, or in any way related to,
the Grantee IRU, the Cable, the System, this Agreement or any other
instrument, arrangement or understanding related to the Grantee IRU.
"Claimant" shall have the definition set forth in Section 13.1.
"Collocation Agreement" means Exhibit B or an executed agreement in the
form of Exhibit B, as the context indicates.
"Connecting Point" means a point where the network or facilities of
Grantee will connect to the System.
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"Contract Price" shall have the definition set forth in Section 3.1.
"Costs" means actual, direct costs incurred and computed in accordance
with the established accounting procedures used by Williams to bill
third parties for reimbursable projects. All Costs shall be computed in
accordance with generally accepted accounting principles. Such actual,
direct costs include, without limitation, the following:
(a) Labor costs, including wages and salaries, and
benefits and overhead allocable to such labor costs
(overhead allocation percentage shall not exceed the
lesser of: (i) the percentage Williams allocates to
its internal projects; or (ii) one hundred thirty
percent (130%)); and
(b) Other direct costs and outofpocket expenses on a
passthrough basis (such as equipment, materials,
supplies, contract services, costs of capital,
Required Rights, sales, use or similar taxes, etc.).
"Deadline Date" shall have the definition set forth in Section 4.2.
"Effective Date" means the date on which this Agreement has been fully
executed by both parties.
"Facility Owners/Lenders" shall mean any entity (other than Williams):
(a) owning any portion of the System or any property or security
interest therein, (b) leasing to Williams, or providing an IRU to
Williams in, any portion of the System, or (c) that is a Lender with
respect to Williams or any Affiliates of Williams.
"Fiber Acceptance Testing" means the fiber acceptance testing described
in Exhibit C and in Article VI.
"Fibers" means any optical fibers contained in the System including the
Grantee Fibers, the fibers of Williams and the fibers of any third
party in the System excluding, however, any fibers granted (whether
through ownership, IRU, lease, or otherwise) to governmental entities
in exchange for use of streets, rights of way, or other property under
the jurisdiction of such entity.
"Force Majeure Event" shall have the definition set forth in Article
XXI.
"Grantee" means _________________, Inc., a _________ corporation.
"Grantee Equipment" shall mean optronic (opto-electrical), electronic,
or optical equipment, or materials, facilities, or other equipment
owned, possessed, or utilized (other than the System), by Grantee.
"Grantee Fibers" means those certain fibers described in Article II and
in which Grantee shall be granted an IRU hereunder.
"Grantee IRU" shall have the definition set forth in Article II.
"Indefeasible Right of Use" or "IRU" is an exclusive, indefeasible
right to use the specified property. The grant of an IRU does not
convey title or ownership of the covered property nor any interest in
real or personal property.
"Indemnitor" shall have the definition set forth in Section 13.1.
"Initial Term" shall have the definition set forth in Section 8.1.
"Lenders" shall have the definition set forth in Section 2.2.
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"Non-Routine Maintenance" shall have the definition set forth in
Section 9.1
"Pro-Rata Share" means a proportion equal to a fraction, the numerator
of which is the number of Grantee Fibers and the denominator of which
is all other Fibers in the Cable. If this fraction varies over
different portions of the System, then the Pro Rata Share shall be
equal to the weighted average (weighted by length as set forth in
Williams' as-built drawings) of the relevant portions. For example, if
the fraction for 100 feet of the affected Segment is 0.1 and the
fraction for the remaining 50 feet of the affected Segment is 0.07, the
weighted average for the entire Segment would be 0.09.
"Released Party" shall mean each of the following:
(a) any Affiliates, Lenders, and Facility Owners/Lenders
of the other party;
(b) any employee, officer, director, stockholder,
partner, member, or trustee of the other party or of
its Affiliates, Lenders, or Facility Owners/Lenders;
or
(c) assignees of the entities included in the above
subparagraphs (a) or (b) and any employee, officer,
director, stockholder, partner, member, or trustee of
such assignees.
"Representatives" shall have the definition set forth in Section 19.2.
"Required Rights" shall have the definition set forth in Section 7.1.
"Right-of-way Agreements" means rights, licenses, authorizations,
easements, leases, fee interests, or agreements that provide for the
occupancy by the System of real property or fixtures (such as conduit,
bridges, river crossings, or transmission towers).
"Route" shall have the meaning set forth in the Recitals above.
"Route Miles" means the actual miles traversed by the Cable (including
spurs) based on the asbuilt drawings.
"Routine Maintenance" shall have the definition set forth in Section
9.1.
"Segment" means a discrete portion of the System and may refer to a
span (a portion of the System between two Transmission Sites or between
a Transmission Site and a point of presence or System end point), a
portion between two points of presence or a point of presence and a
System end point, or a portion of the System affected by a relocation
or other circumstance.
"System" shall have the meaning set forth in the Recitals above.
"Term" means the term of this Agreement as defined in Section 8.1,
including the Initial Term and any effective extension of the Initial
Term.
"Transmission Sites" shall mean the optical amplifier, regenerator, and
junction sites along the Route associated with the Cable.
"Williams" means Williams Communications, Inc., a Delaware corporation,
formerly known as Vyvx, Inc.
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ARTICLE II
CONVEYANCE OF IRU
2.1 Effective as of the Acceptance Date, Williams hereby grants to
Grantee an exclusive Indefeasible Right of Use, for the purposes described
herein, in those certain _________ (__) strands of Fibers meeting the
specifications set forth in Exhibit D (the "Grantee Fibers") in the Cable on the
terms and subject to the conditions set forth herein (the "Grantee IRU"). Such
grant of an IRU does not convey any legal title to any real or personal
property, including the Fibers, the Cable, or the System. Grantee's IRU does not
include any equipment used to transmit capacity over or "light" the Fibers.
2.2 Either party shall have the right directly or through an Affiliate,
to enter into financing arrangements (including secured loans, leases, sales
with lease-back, or leases with lease-back arrangements, purchase-money or
vendor financing, conditional sales transactions, or other arrangements) with
one or more financial institutions, vendors, suppliers or other financing
sources (individually and collectively, "Lenders"), that, with respect to
Williams, relate to the System and, with respect to Grantee, relate to Grantee's
IRU rights (and not to any property right in the System).
ARTICLE III
CONSIDERATION
3.1 Grantee shall pay Williams the amount of $____________ per Route
Mile of the Grantee Fibers (the "Contract Price"), payable as follows:
(a) An initial deposit of ____ percent (__%) of the estimated
Contract Price, as determined by multiplying the Contract
Price by the total estimated Route Miles of the Cable, as set
forth on Exhibit A, shall be due three (3) banking days after
execution hereof.
(b) The remainder of the estimated Contract Price shall be due
five (5) banking days after the Acceptance Date.
3.2 At the time Williams provides Grantee the as-built drawings
pursuant to Section 7.2, it shall also provide Grantee with a statement of the
actual Route Miles and any amount to be paid by Williams to Grantee or by
Grantee to Williams to reflect any difference between the Contract Price (as
computed based on actual Cable Route Miles) and the estimated Contract Price.
Williams shall pay to Grantee (if the amounts Grantee paid exceed the Contract
Price) or Grantee shall pay to Williams (if the amounts Grantee paid are less
than the Contract Price) the difference between the estimated Contract Price and
the actual Contract Price within ten (10) days of the delivery of such
statement.
3.3 Grantee shall make all payments to Williams set forth in this
Article by wire transfer of immediately available funds to the United States
account or accounts designated by Williams. All other payments to be made
pursuant to this Agreement may be made by check or draft of immediately
available funds delivered to the address designated in writing by the other
party (e.g., in a statement or invoice) or, failing such designation, to the
address for notice to such other party provided pursuant to Article XVIII.
ARTICLE IV
CONSTRUCTION
4.1 Williams warrants and represents that, upon the Acceptance Date,
the System shall be designed, engineered, installed, and constructed in
accordance with the specifications set forth in Exhibits C, D, E, and F.
4.2 The planned Acceptance Date is ________________. The Deadline Date
shall be the later of one hundred eighty (180) days after (a) such planned
Acceptance Date or (b) the planned Acceptance Date as extended
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due to events described in Article XXI or as expressly permitted by this
Agreement. If the Acceptance Date does not occur by the Deadline Date, then
Grantee's payment obligation set forth in Section 3.1(b) shall be reduced by ten
thousand dollars ($10,000) per month for each month (pro-rated for partial
months) until the Acceptance Date occurs. Such reduction shall not exceed a
total of sixty thousand dollars ($60,000) (i.e., no further reductions shall
apply after the sixth (6th) month following the Deadline Date).
4.3 If the Acceptance Date does not occur within one hundred eighty
(180) days of the Deadline Date, Grantee may terminate the Agreement by notice
to Williams. Such notice shall specify whether Grantee elects to:
(a) have Williams refund the amounts paid by Grantee
pursuant to Article III, in which case, as Grantee's
exclusive remedy for such non-occurrence, Williams
shall refund such amounts within thirty (30) days of
receipt of such notice together with interest as
provided in Section 20.3, and the parties shall have
no further obligations under this Agreement; or
(b) pursue any available remedies (excluding those
remedies provided in Sections 4.2 and Subsection
4.3(a)), subject to the provisions of this Agreement.
ARTICLE V
CONNECTION TO THE SYSTEM AND COLLOCATION
5.1 Subject to the provisions herein, Grantee shall pay for and arrange
all connections of its facilities with the Grantee Fibers. Grantee shall
reimburse Williams for any Costs incurred within thirty (30) days after receipt
of Williams' invoice therefor. Such connections shall be made only as set forth
in Exhibits B or H.
5.2 Grantee shall have the right to use Transmission Sites along the
Route pursuant to the terms of a Collocation Agreement in the form set forth as
Exhibit B. Such Transmission Sites shall meet or exceed the power and building
requirements specified in Exhibit F. Grantee shall provide, maintain, and for
all purposes be solely responsible for all Grantee Equipment at Transmission
Sites or other locations.
ARTICLE VI
ACCEPTANCE AND TESTING OF FIBERS
6.1 Williams shall test the Grantee Fibers in accordance with Exhibit C
("Fiber Acceptance Testing"). Fiber Acceptance Testing shall progress Segment by
Segment along the Route as cable splicing progresses, so that test results may
be reviewed in a timely manner. Grantee shall have the right, but not the
obligation, to have an individual present to observe the Fiber Acceptance
Testing (except to the extent such testing takes place prior to the period
ending fourteen (14) days after the Effective Date) and Williams shall provide
Grantee prior notice of Williams' testing schedule. Within fourteen (14) days
after the conclusion of any Fiber Acceptance Testing of the Grantee Fibers
conducted by Williams in any given Segment (or, if later, within fourteen (14)
days of the Effective Date), Williams shall provide Grantee with a copy of the
test results.
6.2 Grantee shall have the right, but not the obligation, at its sole
expense, to conduct its own Fiber Acceptance Testing of the Grantee Fibers to
verify that they meet the standards set forth in Exhibit C. If Grantee elects to
conduct its own Fiber Acceptance Testing of the Grantee Fibers, it shall notify
Williams of its intent to do so (including dates and locations) during or prior
to the above ten (10) day review period and shall complete such testing within
fourteen (14) days after such notice to Williams. Williams shall have the right,
but not the obligation, to have an individual present to observe Grantee's Fiber
Acceptance Testing. Within fourteen (14) days after the conclusion of Grantee's
Fiber Acceptance Testing of the Grantee Fibers, Grantee shall provide Williams
with a copy of the test results. Grantee's exercise or non-exercise of its right
to conduct Fiber Acceptance Testing shall not extend or shorten the time periods
for Grantee to determine, pursuant to Section 6.3, if the Fibers meet the
Acceptance Standards.
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6.3 If, within ten (10) days after receipt by Grantee from Williams of
the test results referred to in Section 6.1 or of the results of retesting as
set forth below, Grantee reasonably determines that Williams' or Grantee's test
results show that the Grantee Fibers do not meet the Acceptance Standards,
Grantee shall, within such ten (10) day period, notify Williams of such
determination and shall identify in writing the specific data that indicate such
failure to meet the Acceptance Standards.
6.4 Upon receiving notice pursuant to Section 6.3 that the Grantee
Fibers do not meet the Acceptance Standards, Williams shall either:
(a) expeditiously take such action as shall be reasonably
necessary with respect to such portion of the Grantee Fibers
to cause such portion of the Grantee Fibers to meet the
Acceptance Standards and then re-test the Grantee Fibers in
accordance with the provisions of this Article; or
(b) notify Grantee that Williams disputes Grantee's determination
that the Grantee Fibers do not meet the Acceptance Standards.
After taking corrective actions and retesting the Grantee Fibers, Williams shall
provide Grantee with a copy of the new test results and Grantee shall again have
all rights provided in this Article with respect to such new test results. The
cycle described above of testing, taking corrective action and retesting shall
take place until the Grantee Fibers meet the Acceptance Standards.
6.5 If Williams provides notice to Grantee pursuant to Subsection
6.4(b), the parties shall agree upon on a mutually acceptable fiber optic
testing company and such company shall re-test the Grantee Fibers. If the
testing company, after testing the Grantee Fibers, determines that the Grantee
Fibers meet the Acceptance Standards, then Grantee shall pay the testing
company's charges for performing the testing and the Grantee shall be deemed to
have accepted the relevant portion of the Grantee Fibers. If the testing
company, after testing the Grantee Fibers, determines that the Grantee Fibers do
not meet the Acceptance Standards, then Williams shall pay the testing company's
charges for performing the testing and shall perform the corrective action and
re-testing set forth in Subsection 6.4(a).
6.6 If Grantee does not object to the results of any of Williams' Fiber
Acceptance Testing or its own Fiber Acceptance Testing by written notice within
the time periods specified in Section 6.3, Grantee shall be deemed to have
accepted the Grantee Fibers. The date of Grantee's notice accepting the Grantee
Fibers or the date of deemed acceptance under this Section for the last Segment
to be accepted shall be the "Acceptance Date" of the Grantee Fibers.
ARTICLE VII
SYSTEM ROUTE
7.1 As of the Acceptance Date Williams represents that:
a Williams or the underlying facility owner for any
portion of the System shall have obtained all
Right-of-way Agreements necessary for the
installation and use of the System hereunder; and
a Williams shall have obtained by IRU agreement, lease,
or otherwise the right to use portions of the System
it does not own.
The rights Williams is required to obtain pursuant to Subsections (a) and (b)
above are referred to as "Required Rights."
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7.2 Within six (6) months after the Acceptance Date, Williams shall
provide Grantee with asbuilt drawings for the System complying with the
specifications for asbuilt drawings set forth in Exhibit G.
ARTICLE VIII
TERM
8.1 The Term of this Agreement shall begin on the Effective Date and
shall end on _______________________ (the "Initial Term"). Subject to the
conditions set forth below, Grantee may, by written notice, extend the Term for
an additional ten (10) year period. Grantee shall provide the written notice at
least one year in advance of the date the Term would expire absent such notice.
8.2. Grantee may not exercise its right to extend the Agreement if, at
least six months prior to the date of the proposed extension of the Term,
Williams, based on its reasonable opinion, notifies Grantee that Williams has
determined that continued operation of the System or Williams' continued
performance under this Agreement during such extension would be commercially
impracticable because:
(a) the terms and conditions of any Required Rights will
not permit it to perform its obligations under this
Agreement during the extended Term and that it is not
commercially practicable to renew such Required
Rights permitting such performance during such
extended Term;
(b) the costs of continued use of Required Rights is in
excess of that which is commercially reasonable for
the System;
(c) operation or maintenance of the System will not be
technically practicable during such extended Term; or
(d) the Pro-Rata Share of Routine Maintenance Costs
exceeds the charges for Routine Maintenance (as
adjusted pursuant to Section 9.2) by more than twenty
percent (20%).
8.3. If Williams determines that continued performance under this
Agreement during a requested extension would be commercially impracticable,
Williams shall (a) assign its rights and obligations under this Agreement to an
entity that agrees to the requested extension, (b) offer to convey the Cable to
Grantee, (c) offer to convey the Grantee Fibers to Grantee, (d) offer to allow
Grantee, alone or together with other entities holding IRUs or ownership
interests in the System, to operate and maintain the System at Grantee's or such
entities' sole cost, or (e) propose refurbishment of the System if Williams
determines in its reasonable opinion that such refurbishment would be
cost-effective.
8.4 If Williams proposes refurbishment of the System, pursuant to
Subsection 8.3(e), it shall provide Grantee notice of such proposal at least one
hundred twenty (120) days prior to the date the Term would expire absent any
extension. The notice shall describe the refurbishment, state whether Williams
personnel or a contractor will perform the work, and provide an estimate of the
expected Costs thereof. Grantee shall, within thirty (30) days of receiving such
notice, notify Williams whether Grantee elects to participate in such
refurbishment. If Grantee so elects, the Term shall be extended and Grantee
shall reimburse Williams for its Pro-Rata Share of the Costs that are incurred.
If Grantee elects to participate in such refurbishment Williams shall provide
Grantee with monthly progress reports. Grantee shall pay its Pro-Rata Share of
the Costs from time to time within thirty (30) days of receipt of Williams'
invoices therefor.
8.5. Williams shall renew or replace existing Right-of-Way Agreements,
IRUs, or other underlying rights to continue to maintain the System in place
through at least the Initial Term.
8.6. No termination of this Agreement shall affect the rights or
obligations of any party hereto:
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(a) With respect to any payment hereunder for services rendered
prior to the date of termination;
(b) Pursuant to Articles XII, XIII, XIV, XV, XVI, XIX, XXII, and
XXIII entitled Audit Rights; Indemnification; Limitation of
Liability; Insurance; Taxes and Governmental Fees;
Confidentiality; Arbitration; and Rules of Construction,
respectively; or
(c) Pursuant to other provisions of this Agreement that, by their
sense and context, are intended to survive termination of this
Agreement.
ARTICLE IX
OPERATION, MAINTENANCE, AND REPAIR OF THE SYSTEM
9.1 During the Term of this Agreement, Williams shall perform all
required Routine Maintenance and Non-Routine Maintenance. "Non-Routine
Maintenance" means maintenance and repair work that Williams is obligated to
provide under this Agreement other than:
(a) The work specifically identified as Routine Maintenance in
Exhibit H;
(b) Work in which the aggregate amount of Costs incurred as a
result of any single event or multiple, closely related events
is less than or equal to five thousand dollars ($5,000.00); or
(c) Work for which Grantee is obligated to reimburse Williams for
all or a portion of the Costs incurred pursuant to other
Articles of this Agreement or a Collocation Agreement.
"Routine Maintenance" means maintenance and repair work that Williams is
obligated to provide under this Agreement and that is described in Subsections
9.1(a) or 9.1(b).
9.2 Grantee shall pay Williams _______________ dollars ($__.00) per
Route Mile per month throughout the Term of this Agreement for Routine
Maintenance. This amount shall be adjusted once each calendar year on a date
selected by Williams to reflect cumulative changes in the U.S. Producer Price
Index (Bureau of Labor Statistics "Finished Goods" Series - ID WPUSOP3000) since
the Acceptance Date, provided that in no event shall the above amount be less
than _________ dollars ($___.00) per Route Mile per month. Grantee shall pay
such amounts on or before the first day of each calendar month during the Term.
Payments shall be prorated, as necessary, for the first and last months of the
Term.
9.3 At the time Williams provides Grantee a statement of the actual
Route Miles pursuant to Section 3.2, it shall provide Grantee a statement of any
amount to be paid by Williams to Grantee or by Grantee to Williams to reflect
any difference between the Routine Maintenance charges (as computed based on
actual Cable Route Miles) and the estimated Routine Maintenance charges.
Williams shall pay to Grantee (if the cumulative amounts Grantee paid exceed the
estimated Routine Maintenance charges) or Grantee shall pay to Williams (if the
cumulative amounts Grantee paid are less than the estimated Routine Maintenance
charges) the difference the estimated Routine Maintenance charges and the actual
Routine Maintenance charges within ten (10) days of the delivery of such
statement.
9.4 Grantee shall pay its Pro-Rata Share of Williams' Costs of
performing Non-Routine Maintenance within thirty (30) days after receipt of
Williams' invoice therefor. Notwithstanding the foregoing, Williams shall repair
any damage caused by Grantee's negligence or willful misconduct at Grantee's
sole expense and at Williams' then-prevailing rates.
9.5 Williams may subcontract for maintenance, repair, restoration,
relocation, or other operational and technical services it is obligated to
provide hereunder or may have the underlying facility owner or its contractor
perform such obligations.
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9.6 Williams' maintenance and repair obligations under this Agreement
shall not include maintenance, repair or replacement of Grantee Equipment.
9.7 Grantee shall not access any part of the System (other than
pursuant to an executed and effective Collocation Agreement) without the prior
written consent of Williams, and then only upon the terms and conditions
specified by Williams.
ARTICLE X
RELOCATION
10.1 If, following the Acceptance Date, Williams determines in its
reasonable business judgment, or is required by a third party with legal
authority to do so, to relocate all or any portion of the System or any of the
facilities used or required in providing Grantee with the Grantee IRU, Williams
shall provide Grantee sixty (60) days' prior notice of any such relocation, if
possible, and shall proceed with such relocation. Williams shall have the right
to direct such relocation, including, but not limited to, the right to determine
the extent of, the timing of, and methods to be used for such relocation;
provided that any such relocation:
(a) Shall be constructed and tested in accordance with the
specifications and requirements set forth in this Agreement
and applicable Exhibits;
(b) Shall not result in a materially adverse change to the
operations, performance, Connecting Points with the network of
Grantee, or end points of the System; and
(c) Shall not unreasonably interrupt service on the System.
10.2 Unless such relocation is necessitated by a breach of Williams'
obligations under this Agreement, Grantee shall reimburse Williams for the Costs
incurred in the same manner as is set forth for reimbursement of Non-Routine
Maintenance Costs in Section 9.4.
10.3 At Grantee's request, Williams shall deliver to Grantee updated
asbuilt drawings with respect to a relocated portion of the System within the
later of one-hundred eighty (180) days following the completion of such
relocation or thirty (30) days after receipt of Grantee's request.
ARTICLE XI
USE OF THE SYSTEM
11.1 Grantee may use the Grantee Fibers for any lawful purpose.
Williams shall have no right to use the Grantee Fibers during the Term except in
the event of a Grantee default.
11.2 Grantee shall promptly notify Williams of any matters pertaining
to any damage or impending damage to or loss of System that are known to it and
that could reasonably be expected to adversely affect the System.
11.3 Grantee shall take all reasonable precautions against, and shall
assume liability for, subject to the terms of this Agreement, any damage caused
by Grantee to the System or to fibers used or owned by Williams or third
parties.
11.4 Grantee shall not use equipment, technologies, or methods of
operation that interfere in any way with or adversely affect the System or the
use of the System by Williams or third parties or their respective Fibers,
equipment, or facilities associated therewith.
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11.5 Grantee shall not cause or permit any part of the System to become
subject to any mechanic's lien, materialman's lien, vendor's lien, or any
similar lien whether by operation of law or otherwise. If Grantee breaches its
obligations under this Section, it shall immediately notify Williams in writing,
shall promptly cause such lien to be discharged and released of record without
cost to Williams, and shall indemnify Williams against all costs and expenses
(including reasonable attorneys' fees and court costs at trial and on appeal)
incurred in discharging and releasing such lien.
ARTICLE XII
AUDIT RIGHTS
12.1 Each party shall keep such books and records (which shall be
maintained on a consistent basis and substantially in accordance with generally
accepted accounting principles) as shall readily disclose the basis for any
charges (except charges fixed in advance by this Agreement or by separate
agreement of the parties) or credits, ordinary or extraordinary, billed or due
to the other party under this Agreement and shall make them available for
examination, audit, and reproduction by the other party and its agents for a
period of one (1) year after such charge or credit is billed or due.
ARTICLE XIII
INDEMNIFICATION
13.1 Each party ("Indemnitor") hereby releases and shall indemnify,
defend, protect, and hold harmless the other party, its employees, members,
managers, officers, agents, contractors, Facility Owners/Lenders, and Affiliates
(collectively and individually, "Claimant"), from and against, and assumes
liability for:
(a) Any injury, death, loss, or damage to any person, tangible
property, or facilities of any entity (including reasonable
attorneys' fees and costs at trial and appeal), to the extent
arising out of or resulting from the acts or omissions,
negligent or otherwise, of Indemnitor, its officers,
employees, servants, Affiliates, agents, contractors, or
underlying facility owners or from any entity for whom it is
in law responsible, or otherwise resulting from, arising in
connection with or relating to its performance (including
breach or failure thereto) under this Agreement;
(b) Any claims, liabilities or damages arising out of any
violation by Indemnitor of regulations, rules, statutes, or
court orders of any local, state, or federal governmental
agency, court, or body in connection with its performance
under this Agreement or otherwise; or
(c) Any liability to a third party arising directly or through one
or more intermediate parties, from an action or claim brought
by the Indemnitor, to the extent such third party has a right
of indemnification, impleader, crossclaim, contribution, or
other right of recovery against the Claimant for any indirect,
special, or consequential damages of the Indemnitor.
13.2 Each party's obligation to indemnify, defend, protect, and save
the Claimant harmless is a material obligation to the continuing performance of
the other party's obligations hereunder. The obligations of this Article shall
survive the expiration or earlier termination of this Agreement. The provisions
of Article XV shall not be construed as limiting the Indemnitor's obligations
pursuant to this Article or other provisions of this Agreement.
ARTICLE XIV
LIMITATION OF LIABILITY
14.1 NEITHER PARTY NOR ANY CLAIMANT (AS DEFINED ABOVE) AFFILIATED WITH
OR IN A CONTRACTUAL RELATIONSHIP WITH A PARTY SHALL BE LIABLE TO THE OTHER PARTY
FOR
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SPECIAL, PUNITIVE, EXEMPLARY, CONSEQUENTIAL, INCIDENTAL OR INDIRECT LOSSES OR
DAMAGES AS A RESULT OF THE PERFORMANCE OR NONPERFORMANCE OF ITS OBLIGATIONS
UNDER THIS AGREEMENT, OR ITS ACTS OR OMISSIONS RELATED TO THIS AGREEMENT OR ITS
USE OF THE SYSTEM, WHETHER OR NOT ARISING FROM SOLE, JOINT OR CONCURRENT
NEGLIGENCE, STRICT LIABILITY OR VIOLATION OF LAW.
14.2 Notwithstanding the provisions of Section 14.1 or any other
provision of this Agreement:
(a) except as set forth in Subsection 14.2(b), the limitations on
liability set forth in Section 14.1 shall apply to claims of a
party or third party arising from any defect, error,
interruption, delay, or attenuation of any telecommunications
service, capacity, data, or transmission; and
(b) liability arising from Grantee's failure to comply with the
provisions of Section 14.5 shall not be subject to the limits
on liability set forth in Section 14.1.
14.3 Neither party shall have any recourse of any kind against any
Released Party or any assets of a Released Party in respect of any Claim, it
being expressly agreed and understood that no liability whatever shall attach to
or be incurred by any Released Party in respect of any Claim under or by reason
of this Agreement or any other instrument, arrangement or understanding related
to the Grantee IRU. Each party waives all such recourse to the extent set forth
in this Section on behalf of its successors, assigns, and any entity claiming
by, through, or under such party.
14.4 Except as provided in Subsection 13.1(c) and Section 14.3, nothing
contained herein shall operate as a limitation on the right of either Williams
or Grantee to bring an action or claim for damages against any third party
(other than a Claimant affiliated with or in a contractual relationship with the
other party), including indirect, special, or consequential damages, based on
any acts or omissions of such third party as such acts or omissions may affect
the construction, operation or use of such party's fibers or the System. Each of
Williams and Grantee shall assign such rights of claims, execute such documents
and do whatever else may be reasonably necessary to enable the other (at such
other party's sole expense) to pursue any such action against such third party.
14.5 Grantee, in any contract or tariff offering of service, capacity,
or rights of use that in any of the preceding instances involves use of the
System, shall include in such contract or tariff a written limitation of
liability that is binding on Grantee's customers and in all material respects at
least as restrictive as the limitations set forth in Sections 14.1 and 14.3.
ARTICLE XV
INSURANCE
15.1 During the term of this Agreement, the parties shall each obtain
and maintain not less than the following insurance:
(a) Commercial General Liability Insurance, including coverage for
sudden and accidental pollution legal liability, with a
combined single limit of $10,000,000 for bodily injury and
property damage per occurrence and in the aggregate.
(b) Worker's Compensation Insurance in amounts required by
applicable law and Employers Liability Insurance with limits
not less than $1,000,000 each accident. If work is to be
performed in Nevada, North Dakota, Ohio, Washington, Wyoming
or West Virginia, the party shall participate in the
appropriate state fund(s) to cover all eligible employees and
provide a stop gap endorsement.
(c) Automobile Liability Insurance with a combined single limit of
$2,000,000 for bodily injury and property damage per
occurrence, to include coverage for all owned, nonowned, and
hired vehicles.
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The limits set forth above are minimum limits and shall not be construed to
limit the liability of either party.
15.2 Each party shall obtain and maintain the insurance policies
required above with companies rated A- or better by Best's Key Rating Guide or
with a similar rating by another generally recognized rating agency and the
other party, its Affiliates, officers, directors, and employees, and any other
party entitled to indemnification hereunder shall be named as additional
insureds to the extend of such indemnification. Each party shall provide the
other party with an insurance certificate confirming compliance with the
insurance requirements of this Article. The insurance certificate shall indicate
that the other party shall be notified not less than thirty (30) days prior to
any cancellation or material change in coverage.
15.3 If either party provides any of the foregoing coverages through a
claims made policy basis, that party shall cause such policy or policies to be
maintained for at least three (3) years beyond the expiration of this Agreement.
15.4 The parties shall each obtain from the insurance companies
providing the coverages required by this Agreement a waiver of all rights of
subrogation or recovery in favor of the other party and, as applicable, its
members, managers, shareholders, Affiliates, assignees, officers, directors, and
employees or any other party entitled to indemnity under this Agreement to the
extent of such indemnity.
15.6 Nothing in this Agreement shall be construed to prevent either
party from satisfying its insurance obligations pursuant to this Agreement under
a blanket policy or policies of insurance that meet or exceed the requirements
of this Article.
ARTICLE XVI
TAXES AND GOVERNMENTAL FEES
16.1 Grantee shall timely report and pay any and all sales, use,
income, gross receipts, excise, transfer, ad valorem or other taxes, and any and
all franchise fees or similar fees assessed against it due to its ownership of
the Grantee IRU, its use of the Grantee Fibers, including the provision of
services over the Grantee Fibers, its use of any other part of the System, or
its ownership or use of facilities connected to the Grantee Fibers.
16.2 Subject to Section 16.1 above, Williams shall timely report and
pay any and all sales, use, income, gross receipts, excise, transfer, ad valorem
or other taxes, and any and all franchise fees or similar fees assessed against
it due to its construction, ownership or use of the System, provided that
Grantee shall reimburse Williams for its Pro-Rata Share of property taxes
(including ad valorem, use, property, or similar taxes, franchise fees, or
assessments that are based on the value of property or of a property right)
attributable to the System, including taxes based on the value, operation, or
existence of the System.
16.3 If Williams is assessed for any taxes or fees related to Grantee's
ownership of the Grantee IRU or Grantee's use of the Grantee Fibers or that
Grantee is obligated to pay pursuant to Sections 16.1 or 16.2, Grantee shall
reimburse Williams for any payment of such taxes or fees within thirty (30) days
of receipt of Williams' invoice.
16.4 The parties shall cooperate in any contest of any taxes or fees so
as to avoid, to the extent reasonably possible, prejudicing the interests of the
other party.
16.5 If Williams determines that it should relocate a portion of the
System to bypass a jurisdiction that has imposed or assessed taxes or fees on
Williams or the System, Williams shall provide Grantee at least sixty (60) days
prior notice of the proposed relocation. After such 60-day period, Williams
shall proceed with the relocation as provided in, and Grantee shall bear its
Pro-Rata Share of the relocation Costs as set forth in, Article X.
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16.5 If the charges for Required Rights payable to governmental or
quasi-governmental agencies or for use of governmental or quasi-governmental
rights of way during a calendar year exceed twice the amount payable during the
first full calendar after the Acceptance Date, then Grantee shall pay its
Pro-Rata Share of such excess within thirty (30) days of receipt of Williams'
invoice therefor.
ARTICLE XVII
DISCLAIMER OF WARRANTIES
17.1 EXCEPT AS SPECIFICALLY SET FORTH IN THIS AGREEMENT, WILLIAMS MAKES
NO WARRANTY TO GRANTEE OR ANY OTHER ENTITY, WHETHER EXPRESS, IMPLIED OR
STATUTORY, AS TO THE INSTALLATION, DESCRIPTION, QUALITY, MERCHANTABILITY,
COMPLETENESS, OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY FIBERS, THE SYSTEM,
OR ANY SERVICE PROVIDED HEREUNDER OR DESCRIBED HEREIN, OR AS TO ANY OTHER
MATTER, ALL OF WHICH WARRANTIES ARE HEREBY EXPRESSLY EXCLUDED AND DISCLAIMED.
17.2 No Facility Owners/Lenders have made any representation or
warranty of any kind, express or implied, to Grantee concerning Williams, the
Grantee Fibers, the Cable, or the System or as to any of the matters set forth
in Sections 17.1 or 25.1. No Grantee Lenders have made any representation or
warranty of any kind, express or implied, to Williams concerning Grantee, the
Grantee Fibers, the Cable, or the System or as to any of the matters set forth
in Sections 17.1 or 25.1 OR AS TO ANY OTHER MATTER.
ARTICLE XVIII
NOTICE
18.1 Unless otherwise provided in this Agreement, all notices and
communications concerning this Agreement shall be in writing and addressed to
the other party as follows:
If to Grantee:
----------------------------
----------------------------
----------------------------
----------------------------
with a copy to: ----------------------------
----------------------------
----------------------------
----------------------------
If to Williams: Williams Communications, Inc.
Attn: ______________________
One Williams Center, Suite ____
Tulsa, Oklahoma 74172
Facsimile No.: (918) 573____
with a copy to: Williams Communications, Inc.
Attn: General Counsel
One Williams Center, Suite 4100
Tulsa, Oklahoma 74172
Facsimile No.: (918) 5733005
or at such other address as may be designated in writing to the other party.
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18.2 Unless otherwise provided herein, notices shall be hand delivered,
sent by registered or certified U.S. Mail, postage prepaid, or by commercial
overnight delivery service, or transmitted by facsimile, and shall be deemed
served or delivered to the addressee or its office when received at the address
for notice specified above when hand delivered, upon confirmation of sending
when sent by facsimile, on the day after being sent when sent by overnight
delivery service, or three (3) days after deposit in the mail when sent by U.S.
mail.
ARTICLE XIX
CONFIDENTIALITY
19.1 If the parties have entered into (or later enter into) a
Confidentiality Agreement, the terms of such an agreement shall control and
Section 19.2 shall not apply; however, if any such Confidentiality Agreement
expires or is no longer effective at any time during the Term of this Agreement,
Section 19.2 shall be in effect during those periods.
19.2 In the absence of a separate Confidentiality Agreement between the
parties, if either party provides confidential information to the other in
writing and identified as such or if in the course of performing under this
Agreement a party learns confidential information regarding the facilities or
plans of the other, the receiving party shall protect the confidential
information from disclosure to third parties with the same degree of care
accorded its own confidential and proprietary information; provided, however,
that the parties shall each be entitled to provide such confidential information
to their respective directors, officers, members, managers, employees, agents,
and contractors, consultants ("Representatives"), Affiliates, contractors,
financial institutions, underlying facility owners, potential assignees (who are
bound by a written agreement restricting use and disclosure of confidential
information) and Representatives of Affiliates, in each case whose access is
reasonably necessary. Each such recipient of confidential information shall be
informed by the party disclosing confidential information of its confidential
nature, and shall be directed to treat such information confidentially and shall
agree to abide by these provisions. In any event, each party shall be liable
(with respect to the other party) for any breach of this provision by any entity
to whom that party discloses confidential information. The terms of this
Agreement (but not its execution or existence) shall be considered confidential
information for purposes of this Article. Notwithstanding any other provision
herein, neither Williams nor Grantee shall be required to hold confidential any
information that:
(a) Becomes publicly available other than through the recipient;
(b) Is required to be disclosed by a governmental, regulatory
authority, or judicial order, rule, or regulation or
proceedings with respect to this Agreement or a party's
obligations as a publicly held company;
(c) Is independently developed by the disclosing party;
(d) Becomes available to the disclosing party without restriction
from a third party; or
(e) Is required by its lender and is given to such lender on a
confidential basis.
These obligations shall survive expiration or termination of this Agreement for
a period of two (2) years.
19.3 Notwithstanding Sections 19.1 and 19.2, confidential information
shall not include information disclosed by the receiving party as required by
applicable law or regulation; provided, however, that the information disclosed
is limited to the existence and general nature of the relationship between
Williams and Grantee, including, as required, the scope, approximate revenues,
purposes, and expectations related to such relationship and a description of any
disputes relating thereto. Notwithstanding the foregoing, this Agreement may be
provided to any governmental agency or court of competent jurisdiction to the
extent required by applicable law.
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19.4 Neither party shall use the name, trade name, service mark, or
trademark of the other in any promotional or advertising material without the
prior written consent of the other. The parties shall coordinate and cooperate
with each other when making public announcements related to the terms of this
Agreement and each party shall have the right to promptly review, comment upon,
and approve any publicity materials, press releases, or other public statements
by the other party that refer to, or that describe any aspect of, this
Agreement.
ARTICLE XX
DEFAULT
20.1 Except as set forth in Section 20.2, a party shall not be in
default under this Agreement unless and until the other party provides it
written notice of such default and the first party shall have failed to cure the
same within thirty (30) days after receipt of such notice; provided, however,
that where such default cannot reasonably be cured within such thirty (30) day
period, if the first party shall proceed promptly to cure the same and prosecute
such curing with due diligence, the time for curing such default shall be
extended for such period of time as may be necessary to complete such curing.
Any event of default may be waived at the non-defaulting party's option. Upon
the failure of a party to timely cure any such default after notice thereof from
the other party and expiration of the above cure periods, then the
non-defaulting party may, subject to the terms of Article XXII entitled
Arbitration, pursue any legal remedies it may have under applicable law or
principles of equity relating to such breach.
20.2 If Grantee fails to fully pay any required payment of the Contract
Price under Article III or any other payment required to be paid under this
Agreement when due, Williams may, in addition to any other remedies that it may
have under this Agreement or by law, in its sole discretion, terminate this
Agreement upon ten (10) days' notice if such payment (together with applicable
interest) is not made within such ten (10) day period.
20.3 If either Williams or Grantee fails to make any payment under this
Agreement when due, such amounts shall accrue interest, from the date such
payment is due until paid, including accrued interest, at a rate (unless
specifically described elsewhere in this Agreement) equal to eighteen percent
(18%) per annum or, if lower, the highest percentage allowed by law. No interest
charges shall apply to the periods provided for in Sections 3.2 or 9.3 for
payments due to adjustments arising from differences between the estimated Route
Miles and the actual Route Miles.
20.4 The deposit to be paid pursuant to Subsection 3.1(a) shall be
nonrefundable unless a court or arbitrator orders rescission of this Agreement
due to Williams' material breach of its obligations under this Agreement.
ARTICLE XXI
FORCE MAJEURE
21.1 Neither Williams nor Grantee shall be in default under this
Agreement with respect to any delay in its performance (other than a failure to
make payments when due) caused by any of the following conditions (each a "Force
Majeure Event"): (a) act of God; (b) fire; (c) flood; (d) material shortage or
unavailability not resulting from the responsible party's failure to timely
place orders or take other necessary actions therefor; (e) government codes,
ordinances, laws, rules, regulations, or restrictions; (f) war or civil
disorder; or (g) any other cause beyond the reasonable control of such party.
The party claiming relief under this Article shall promptly notify the other in
writing of the existence of the Force Majeure Event relied on, the expected
duration of the Force Majeure Event, and the cessation or termination of the
Force Majeure Event. The party claiming relief under this Article shall exercise
commercially reasonable efforts to minimize the time for any such delay.
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ARTICLE XXII
ARBITRATION
22.1 Any dispute arising between Williams and Grantee in connection
with this Agreement that is not settled to their mutual satisfaction within the
applicable notice or cure periods provided in this Agreement, shall be settled
by arbitration in Tulsa, Oklahoma, in accordance with the Commercial Arbitration
Rules of the American Arbitration Association in effect on the date that such
notice is provided. If Williams and Grantee cannot agree on a single arbitrator
within fifteen (15) days after the applicable notice or cure period has expired,
Williams and Grantee shall each select an arbitrator within such fifteen (15)
day period and the two (2) arbitrators shall select a third arbitrator within
ten (10) days. If the parties fail to appoint arbitrators or the arbitrators
cannot agree on a third arbitrator, then either party may request that the
American Arbitration Association select and appoint a neutral arbitrator who
shall act as the sole arbitrator. The parties shall be entitled to submit expert
testimony and/or written documentation on such arbitration proceeding. The
decision of the arbitrator or arbitrators shall be final and binding upon
Williams and Grantee and shall include written findings of law and fact, and
judgment may be obtained thereon by either Williams or Grantee in a court of
competent jurisdiction. Williams and Grantee shall each bear the cost of
preparing and presenting its own case. The cost of the arbitration, including
the fees and expenses of the arbitrator or arbitrators, shall be shared equally
by Williams and Grantee unless the award otherwise provides. The arbitrator or
arbitrators shall be instructed to establish procedures such that a decision can
be rendered within sixty (60) days of the appointment of the arbitrator or
arbitrators. In no event shall the arbitrator or arbitrators have the power to
award any damages described in and limited by Article XIV which Article shall be
binding on the arbitrator(s).
22.2 The obligation to arbitrate shall not be binding upon any party
with respect to requests for preliminary injunctions, temporary restraining
orders, specific performance, or other procedures in a court of competent
jurisdiction to obtain interim relief when deemed necessary by such court to
preserve the status quo or prevent irreparable injury pending resolution by
arbitration of the actual dispute.
22.3 Any arbitrator appointed to act under this Article must agree to
be bound to the provisions of Article XIX entitled Confidentiality with respect
to the terms of this Agreement and any information obtained during the course of
the arbitration proceedings.
ARTICLE XXIII
RULES OF CONSTRUCTION
23.1 The captions or headings in this Agreement are strictly for
convenience and shall not be considered in interpreting this Agreement or as
amplifying or limiting any of its content. Words in this Agreement that import
the singular connotation shall be interpreted as plural, and words that import
the plural connotation shall be interpreted as singular, as the identity of the
parties or objects referred to may require. References to "person" or "entity"
each include natural persons and legal entities, including but not limited to,
corporations, limited liability companies, partnerships, sole proprietorships,
business divisions, unincorporated associations, governmental entities, and any
entities entitled to bring an action in, or that are subject to suit in an
action before, any state or federal court of the United States.
23.2 Unless expressly defined herein, words having wellknown technical
or trade meanings shall be so construed.
23.3 Except as set forth to the contrary herein, any right or remedy of
Williams or Grantee shall be cumulative and without prejudice to any other right
or remedy, whether contained herein or not.
23.4 Nothing in this Agreement is intended to provide any legal rights
to anyone not an executing party of this Agreement except under the
indemnification and insurance provisions and except that (i) the Released
Parties shall have the benefit of Sections 14.3, 24.1, and 28.2 and (ii) the
Facility Owners/Lenders shall be entitled to rely on and have the benefit of
Sections 17.2 and 28.2.
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23.5 This Agreement has been fully negotiated between and jointly
drafted by Williams and Grantee.
23.6 In the event of a conflict between the provisions of this
Agreement and those of any Exhibit, the provisions of this Agreement shall
prevail and such Exhibits shall be corrected accordingly.
23.7 Except as otherwise set forth herein, for the purpose of this
Agreement the normal standards of performance within the telecommunications
industry in the relevant market shall be the measure of whether a party's
performance is reasonable and timely.
23.8 Except as the context otherwise indicates, all references to
Exhibits, Articles, Sections, Subsections, Clauses, and Paragraphs refer to
provisions of this Agreement.
23.9 The failure of either Williams or Grantee 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 on its part of any such
provision, but the same shall nevertheless be and remain in full force and
effect.
23.10 This Agreement shall be governed by and construed in accordance
with the domestic laws of the State of Oklahoma without reference to its choice
of law principles.
23.11 If any term, covenant or condition in this Agreement shall, to
any extent, be invalid or unenforceable in any respect under the laws governing
this Agreement, the remainder of this Agreement shall not be affected thereby,
and each term, covenant or condition of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
ARTICLE XXIV
ASSIGNMENT
24.1 An assignment (or other transfer) of this Agreement or a party's
rights or obligations hereunder to any other party shall not be effective
without (i) the prior written consent of the non-assigning party and (ii) the
written agreement of the assignee to be bound by the indemnification provisions
and limitations on liability and recourse set forth in this Agreement (including
those benefiting the Released Parties).
24.2 Except as set forth in Section 24.4, the non-assigning party may
withhold consent to an assignment in its sole discretion, if the assignment:
(a) is made by Grantee within one (1) year of the Effective Date,
other than as part of a sale of substantially all of Grantee's
assets; or
(b) is an assignment of less than all of a party's rights or
obligations hereunder.
24.3 Except to the extent Section 24.2 provides the non-assigning party
the right to withhold its consent in its sole discretion and except as set forth
in Section 24.5, the non-assigning party shall not unreasonably withhold its
consent to an assignment if neither the assigning party nor the proposed
assignee is in material default under this Agreement or any other agreement with
the non-assigning party.
24.4 The provisions of Section 24.2 notwithstanding:
(a) Williams may assign some or all of its rights and obligations
hereunder to State Street Bank and Trust Company of
Connecticut, National Association, in connection with a
financing by Williams of construction of its fiber optic
network; in addition, Street Bank and Trust Company of
Connecticut, National Association, may further assign this
Agreement as collateral for such
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financing. If Williams makes an assignment pursuant to this
Subsection 24.4(a), Williams (or its assignee pursuant to an
assignment made under the other provisions of this Article
XXIV) shall guarantee performance of the assignee's
obligations.
(b) Williams may assign all of its rights and obligations to the
underlying facilities owner or operator with respect to
portion(s) of the Route between two points of presence on the
System with the prior written consent of Grantee, which
consent shall not be unreasonably withheld if neither Williams
nor the proposed assignee is in material default under this
Agreement or any other agreement with the Grantee.
24.5 For a period of two (2) years after the Effective Date, Grantee
shall not convey any interest in the rights granted herein except by means of
the provision of capacity or a permitted assignment of this Agreement.
"Capacity" does not include IRU grants, sales, leases, assignments, or other
grants of rights in the form of "windows" or wavelengths in fiber strands, use
of optronic systems, "dark" fiber, "dim" fiber, or "lit" fiber. After such two
(2) year period, Grantee may convey such an interest provided that Grantee shall
serve as the sole point of contact with Williams and no party receiving such
interest shall have any contract rights against or be in privity of contract
with Williams as a result of such conveyance.
24.6 This Agreement and the rights and obligations under this Agreement
(including, without limitation, the limitations on liability and recourse set
forth in this Agreement benefiting the other party and the Released Parties)
shall be binding upon and shall inure to the benefit of Williams and Grantee and
their respective permitted successors and assigns.
24.7 Neither the provisions of this Article nor any other provisions of
this Agreement shall limit the ability of any Facility Owners/Lenders or of any
Released Parties to assign their rights under this Agreement and such Facility
Owners/Lenders and Released Parties may assign their rights hereunder at any
time and from time to time without the consent of, notice to, or any other
action by any other entity. The provisions of this Agreement benefiting the
Facility Owners/Lenders and Released Parties shall inure to the benefit of such
entities and their respective Affiliates, successors, and assigns.
ARTICLE XXV
REPRESENTATIONS AND WARRANTIES
25.1 In addition to any other representations and warranties contained
in this Agreement, each party hereto represents and warrants to the other that:
(a) It has the full right and authority to enter into, execute,
deliver, and perform its obligations under this Agreement;
(b) It has taken all requisite corporate action to approve the
execution, delivery, and performance of this Agreement;
(c) This Agreement constitutes a legal, valid and binding
obligation enforceable against such party in accordance with
its terms; and
(d) Its execution of and performance under this Agreement shall
not violate any applicable existing regulations, rules,
statutes, or court orders of any local, state, or federal
government agency, court, or body.
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ARTICLE XXVI
RELATIONSHIP OF THE PARTIES
26.1 The relationship between Williams and Grantee shall not be that of
partners, agents, or joint venturers for one another, and nothing contained in
this Agreement shall be deemed to constitute a partnership or agency agreement
between them for any purposes, including, but not limited to federal income tax
purposes. Williams and Grantee, in performing any of their obligations
hereunder, shall be independent contractors or independent parties and shall
discharge their contractual obligations at their own risk.
ARTICLE XXVII
PROHIBITION ON IMPROPER PAYMENTS
27.1 Neither party shall use any funds received under this Agreement
for illegal or otherwise "improper" purposes. Neither party shall pay any
commission, fees or rebates to any employee of the other party, or favor any
employee of such other party with gifts or entertainment of significant cost or
value. If either party has reasonable cause to believe that one of the
provisions in this Article has been violated, it, or its representative, may
audit the books and records of the other party for the sole purpose of
establishing compliance with such provisions.
ARTICLE XXVIII
ENTIRE AGREEMENT; AMENDMENT; EXECUTION
28.1 Except as set forth in Article XIX, this Agreement constitutes the
entire and final agreement and understanding between Williams and Grantee with
respect to the subject matter hereof and supersedes all prior agreements
relating to the subject matter hereof, which are of no further force or effect.
The Exhibits referred to herein are integral parts hereof and are made a part of
this Agreement by reference.
28.2 This Agreement may only be amended, modified, or supplemented by
an instrument in writing executed by duly authorized representatives of Williams
and Grantee. No such amendment, modification, or supplement shall result in any
modification of (i) any indemnity benefiting any Facility Owners/Lenders or
their respective Affiliates or (ii) any limitation of liability or recourse
benefiting any Released Parties that is adverse to such Released Parties.
28.3 This Agreement may be executed in one or more counterparts, all of
which taken together shall constitute one and the same instrument.
28.4 This Agreement may be duly executed and delivered by a party by
execution and facsimile delivery of the signature page of a counterpart to the
other party, provided that, if delivery is made by facsimile, the executing
party shall promptly deliver a complete counterpart that it has executed to the
other party.
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IN WITNESS WHEREOF and in confirmation of their consent to the terms
and conditions contained in this Agreement and intending to be legally bound
hereby, Williams and Grantee have executed this Agreement as of the dates set
forth below.
---------------------------------------
Date: By:
------------------- ------------------------------------
Print Name:
----------------------------
Title:
---------------------------------
WILLIAMS COMMUNICATIONS, INC.
Date: By:
------------------- ------------------------------------
Print Name:
----------------------------
Title:
---------------------------------
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SCHEDULE 11.02(b)
Supplemental Mortgage Provisions
FLORIDA
1. Property Description: The Property located in Florida which is subject to
Section 11.01 of this Lease is:
All of the Property purchased pursuant to the MediaOne Agreement.
2. Supplemental Rights: With respect to the Property described in Item 1
above, the Lessor shall have the right, if an Event of Default shall have
occurred:
(i) to exercise any and all remedies described in the Participation
Agreement or the other Operative Documents.
(ii) to declare the entire unpaid balance of the Notes and all other
obligations of Lessee secured hereby immediately due and payable without
further notice.
(iii) to the extent permitted by law, to take immediate possession of
the Property or any part thereof (which Lessee agrees to surrender to
Lessor) and manage, control or lease same to such person or persons and
exercise all other rights granted pursuant to the Lease. The taking of
possession under this paragraph shall not prevent concurrent or later
proceedings for the foreclosure sale of the Property as provided elsewhere
herein.
(iv) to apply, on ex parte motion to any court of competent
jurisdiction, for the appointment of a receiver and shall be entitled to
the appointment of such receiver as a matter of right, without regard to
the value of the Property as security for the amount of the Loan, or the
solvency or insolvency of any person then liable for the payment of the
amount of the Loan. In addition to the rights of protection afforded to
Lessor by Section 697.07, Florida Statutes (1997), as amended (and not as
an election of remedies), Lessor shall be entitled, as a matter of strict
right and without regard to the value or occupancy of any security for the
obligations secured hereby, to have a receiver appointed by a court without
notice to Lessee, to enter upon and take possession of the Property,
collect the rents therefrom and thereof and apply the same as the
<PAGE> 118
court may direct, such receiver to have all the rights and powers permitted
under the laws of Florida. The expenses, including receiver's fees,
reasonable attorneys' fees (including any incurred in appeals), costs and
agent's compensation, incurred pursuant to the powers herein contained
shall be secured hereby. The right to enter and take possession of the
Property, to manage and operate the same, to collect the rents therefrom
and thereof, whether by a receiver or otherwise, shall be cumulative to any
other right or remedy hereunder or afforded by law, and may be exercised
concurrently therewith or independently thereof Lessor shall be liable to
account only for such rents actually received by Lessor, whether received
pursuant to this paragraph or otherwise. The Lessee hereby specifically
waives the right to object to the appointment of a receiver as aforesaid
and hereby consents that such appointment shall be made as an admitted
equity and as a matter of absolute right to the Lessor and that the same
may be done without notice to the Lessee or any other defendant to such
suit.
(v) to foreclose on the mortgage granted hereby and in case of sale
in an action or proceeding to foreclose and Lessor shall have the right to
sell the Property in parts or as an entirety. It is intended hereby to give
to Lessor the widest possible discretion permitted by law with respect to
all aspects of any such sale or sales.
(vi) to exercise all other remedies available, whether at law or
equity, in such order as Lessor may elect. It shall also not be necessary
that Lessor pay any impositions, premiums or other charges regarding which
Lessee is in default before Lessor may invoke its rights hereunder. All
such other rights and remedies available to Lessor hereunder shall be
cumulative and may be pursued concurrently or successively. The failure or
omission on the part of Lessor to exercise the option for acceleration of
maturity and/or foreclosure or to timely exercise any other option, right,
or remedy conferred upon the Lessor herein, or the acceptance by Lessor of
partial payments hereunder, shall not constitute a waiver of any default or
the right to exercise any such option, but such option shall remain
continuously in force. Acceleration of maturity, once claimed hereunder by
Lessor, at the option of Lessor, may be rescinded by written acknowledgment
to that effect by Lessor, but the tender and acceptance of
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partial payments alone shall not, in any way, effect or rescind such
acceleration of maturity. The obtaining of a judgment or decree on the
amount of the Loan, whether in the State of Florida or elsewhere, shall not
in any way affect the lien created hereby upon the Property, and any
judgment or decree so obtained shall be secured hereby to the same extent
as the Loan is now secured.
3. Limitation of Rights: With respect to the Property described in item 1
above, the following provisions shall apply:
"Notwithstanding anything to the contrary contained in this Lease, Lessee
and Lessor have agreed that the portion of the Property located in the
State of Florida secures only a portion of the amount of the Loan in the
maximum amount of $38,000,000, and that the value of the Property located
in Florida is $38,000,000. Therefore, irrespective of anything contained in
this Lease to the contrary, in the event of foreclosure and sale of that
portion of the Property located in the State of Florida, the maximum
recovery of Lessor in the event of a sale of that portion of the Property
located in the State of Florida to any purchaser other than Lessor, and the
maximum credit allowed toward the payment of the amount of the Loan in
bidding upon the portion of the Property located in the State of Florida at
a foreclosure sale, shall be $38,000,000, plus such amounts as interest,
costs, attorneys' fees and other monies advanced for insurance premiums,
taxes and preservation of that portion of the Property located in the State
of Florida."
3
<PAGE> 120
SCHEDULE 11.03(c)
Supplemental Security Provisions
FLORIDA
1. Property Description: The Property located in Florida which is subject to
Section 11.03 of this Lease is:
All of the Property purchased pursuant to the MediaOne Agreement.
2. Supplemental Provisions: With respect to the Property described in Item 1
above:
(a) The Lessee covenants and agrees with the Lessor that from and after
the date of this Lease and until the repayment in full of the Loan:
(i) At any time and from time to time, upon the written request of
the Lessor and at the sole expense of the Lessee, the Lessee shall promptly
and duly execute and deliver any and all such further instruments and
documents and take such further action as the Lessor may reasonably deem
desirable to obtain the full benefits of this agreement and of the rights
and powers herein granted, including (A) filing any financing or
continuation statements under the Uniform Commercial Code with respect to
the liens and security interests granted hereunder or under any other Loan
Document, (B) transferring the Collateral to Lender's possession (if such
Collateral consists of documents, instruments or chattel paper or if a
security interest in such Collateral can be perfected only by possession)
and (C) to obtain waivers of liens from landlords and mortgagees. The
Lessee also hereby authorizes the Lessor to file any such financing or
continuation statement without the signature of the Lessee to the extent
permitted by applicable law. The filing of a copy of this Lease (or a
memorandum hereof) shall be deemed to constitute the filing of a financing
statement to perfect the security interest in the Collateral and to secure
the payment of all amounts due from time to time from the Lessee to the
Lessor under this Lease and the other Operative Documents.
(ii) The Lessee shall not change its name, identity or corporate
structure in any manner which might make any financing or continuation
statement filed in connection herewith seriously misleading within the
meaning of Section 9-402(7)
<PAGE> 121
of the Uniform Commercial Code or any other then applicable provision of
the Uniform Commercial Code unless the Lessee shall have given the Lessor
at least thirty (30) days' prior written notice thereof and shall have
taken all action (or made arrangements to take such action substantially
simultaneously with such change if it is impossible to take such action in
advance) necessary or reasonably requested by the Lessor to amend such
financing statement or continuation statement so that it is not seriously
misleading.
(b) (i) The Lessee hereby irrevocably constitutes and appoints the
Lessor and any authorized officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of the Lessee and in
the name of the Lessee or in its own name, from time to time in the
Lessor's discretion, for the purpose of carrying out the terms of this
agreement, to take any and all appropriate action and to execute and
deliver any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this agreement and, without
limiting the generality of the foregoing, hereby grants to the Lessor the
power and right, on behalf of the Lessee, without notice to or assent by
the Lessee, and at any time, to do the following:
(A) in the name of the Lessee, in its own name or otherwise, take
possession of, endorse and receive payment of any checks, drafts, notes,
acceptances, or other instruments for the payment of monies due under any
of the Collateral;
(B) continue any insurance existing pursuant to the terms of this
agreement or any of the other Operative Documents, and pay all or any part
of the premiums therefor and the costs thereof; and
(C) receive payment of any and all monies, claims, and other amounts
due or to become due at any time arising out of or in respect of any
Collateral.
(ii) The Lessee hereby irrevocably constitutes and appoints the
Lessor and any authorized employee, officer or agent thereof, with full
power of substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of the Lessee and in
the name of the Lessee or in its own name, from time to time in the
Lessor's
2
<PAGE> 122
discretion, for the purpose of carrying out the terms of this agreement, to
take any and all appropriate action and to execute and deliver any and all
documents and instruments which may be necessary or desirable to accomplish
the purposes of this agreement and, without limiting the generality of the
foregoing, hereby grants to the Lessor the power and right, on behalf of
the Lessee, without notice to or assent by the Lessee, upon the occurrence
and during the continuation of an Event of Default, to do the following:
(A) ask, demand, collect, receive and give acquittances and receipts
for any and all money due or to become due under any of the Collateral;
(B) pay or discharge taxes, liens, security interests, or other
encumbrances levied or placed on or threatened against the Collateral;
(C) effect any repairs or obtain any insurance called for by the
terms of this agreement or any of the other Operative Documents and pay all
or any part of the premiums therefor and costs thereof;
(D) direct any party liable for any payment under or in respect of
any of the Collateral to make payment of any and all monies due or to
become due thereunder, directly to the Lessor or as the Lessor shall
direct;
(E) settle, compromise or adjust any suit, action, or proceeding
and, in connection therewith, give such discharges or releases as the
Lessor may deem appropriate;
(F) file any claim or take or commence any other action or
proceeding in any court of law or equity or otherwise deemed appropriate by
the Lessor for the purpose of collecting any and all such monies due under
any of the Collateral whenever payable;
(G) commence and prosecute any suits, actions or proceedings of law
or equity in any court of competent jurisdiction to collect the Collateral
or any part thereof and to enforce any other right in respect of any of the
Collateral;
(H) defend any suit, action or proceeding brought against the Lessee
with respect to any of the Collateral if the Lessee does not defend such
suit, action or proceeding or if the Lessor believes that the Lessee is not
pursuing such defense in a manner that will maximize the recovery with
respect to such Collateral; and
3
<PAGE> 123
(I) sell, transfer, pledge, make any agreement with respect to, or
otherwise deal with any of the Collateral as fully and completely as though
the Lessor were the absolute owner thereof for all purposes, and to do, at
the Lessor's option and the Lessee's expense, at any time, or from time to
time, all acts and things which the Lessor reasonably deems necessary to
perfect, preserve, or realize upon the Collateral and the Lessor's security
interest therein in order to effect the intent of this agreement, all as
fully and effectively as the Lessee might do.
(iii) The Lessee hereby ratifies, to the extent permitted by law, all
that said attorneys shall lawfully do or cause to be done by virtue hereof.
The foregoing power of attorney is a power coupled with an interest and
shall be irrevocable until the repayment in full of the Loan.
(iv) The powers conferred on the Lessor hereunder are solely to
protect the Lessor's security interests in the Collateral and shall not
impose any duty upon it to exercise any such powers. The Lessor shall be
accountable only for amounts that it actually receives as a result of the
exercise of such powers and none of its officers, directors, employees,
agents or representatives shall be responsible to the Lessee for any act or
failure to act, except for their own gross negligence or willful misconduct
as determined by a final judgment of a court of competent jurisdiction.
(v) The Lessee also authorizes the Lessor, at any time and from time
to time, to (i) communicate in its own name with any party to any contract
with regard to the assignment of the right, title and interest of the
Lessee in and under such contracts and other matters relating thereto and
(ii) execute, in connection with the exercise of its remedies provided for
herein, any endorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral.
(c) (i) If any Event of Default shall occur and be continuing, the Lessor
may exercise in addition to all other rights and remedies granted to it
under this agreement, the other Operative Documents and under any other
instrument or agreement securing, evidencing or relating to the Loan, all
rights and remedies of a secured party under the Uniform Commercial Code as
in effect at such time in the State of New York (the "Uniform Commercial
Code"). Without limiting the generality of the foregoing, the Lessee
expressly agrees that in any such event the Lessor without demand of
performance or other demand, advertisement or notice of any kind (except
the notice specified below of time
4
<PAGE> 124
and place of public or private sale) to or upon the Lessee or any other Person
(all and each of which demands, advertisements and notices are hereby expressly
waived to the maximum extent permitted by the Uniform Commercial Code and other
applicable law), may forthwith enter upon the premises of the Lessee where any
Collateral is located through self-help, without judicial process, without
first obtaining a final judgment or giving the Lessee notice and opportunity for
a hearing on the Lessor's claim or action, and without paying rent to the
Lessee, and collect, receive, assemble, process, appropriate and realize upon
the Collateral, or any part thereof, and may forthwith sell, lease, assign, give
an option or options to purchase, or sell or otherwise dispose of and deliver
said Collateral (or contract to do so), or any part thereof, in one or more
parcels at public or private sale or sales, at any exchange at such prices as it
may deem best, for cash or on credit or for future delivery without assumption
of any credit risk. The Lessor shall have the right upon any such public sale or
sales, and, to the extent permitted by law, upon any such private sale or sales,
to purchase for its benefit the whole or any part of said Collateral so sold,
free of any right or equity of redemption, which equity of redemption the Lessee
hereby releases. Such sales may be adjourned or continued from time to time with
or without notice. The Lessor shall have the right to conduct such sales on the
Lessee's premises or elsewhere and shall have the right to use the Lessee's
premises without charge for such sales for such time or times as the Lessor
deems necessary or advisable.
(ii) The Lessee further agrees, at the Lessor's request, to assemble the
Collateral and make it available to the Lessor at places which the Lessor shall
reasonably select, whether at the Lessee's premises or elsewhere. Until the
Lessor is able to effect a sale, lease, or other disposition of the Collateral,
the Lessor shall have the right to use or operate the Collateral, or any part
thereof, to the extent that it deems appropriate for the purpose of preserving
the Collateral or its value or for any other purpose deemed appropriate by the
Lessor. The Lessor shall have no obligation to the Lessee to maintain or
preserve the rights of the Lessee as against third parties with respect to the
Collateral while the Collateral is in the possession of the Lessor. The Lessor
may, if it so elects, seek the appointment of a receiver or keeper to take
possession of the Collateral and to enforce any of the Lessor's remedies with
respect to such appointment without prior notice or hearing. The Lessor shall
apply the net proceeds of any such collection, recovery, receipt, appropriation,
5
<PAGE> 125
realization or sale, as provided in subsection (d) (iv) hereof, the Lessee
remaining liable for any deficiency remaining unpaid after such application, and
only after so paying over such net proceeds and after the payment by the Lessor
of any other amount required by any provision of law, including section
9-504(l)(c) of the Uniform Commercial Code (but only after the Lessor has
received what the Lessor considers reasonable proof of a subordinate party's
security interest), need the Lessor account for the surplus, if any, to the
Lessee. To the maximum extent permitted by applicable law, the Lessee waives all
claims, damages, and demands against the Lessor arising out of the repossession,
retention or sale of the Collateral except such which may arise out of the gross
negligence or willful misconduct of such party. The Lessee agrees that ten (10)
days' prior notice by the Lessor of the time and place of any public sale or of
the time after which a private sale may take place is reasonable notification of
such matters. The Lessee shall remain liable for any deficiency if the proceeds
of any sale or disposition of the Collateral are insufficient to pay all amounts
to which the Lessor is entitled, the Lessee also being liable for any reasonable
outside attorneys' fees incurred by the Lessor to collect such deficiency.
(iii) The Lessee agrees to pay any and all costs of the Lessor, including,
without limitation, reasonable outside attorneys' fees, incurred in connection
with the enforcement of any of its rights and remedies hereunder.
(iv) Except as otherwise specifically provided herein, the Lessee hereby
waives presentment, demand, protest or any notice (to the maximum extent
permitted by applicable law) of any kind in connection with this agreement or
any of the Collateral.
(v) The proceeds of any sale, disposition or other realization upon all or
any part of the Collateral shall be applied by the Lessor upon receipt, in the
following order of priorities:
First, the payment in full of reasonable expenses of the Lessor in
connection with such sale, disposition or other realization, including all
expenses, liabilities and advances incurred or made by the Lessor in connection
therewith, including reasonable outside attorney's fees;
Second, to the payment of accrued but unpaid interest on the Loan;
6
<PAGE> 126
Third, to the payment of unpaid principal of the Loan;
Fourth, to the payment of all other obligations secured hereby until
all such other obligations shall have been paid in full; and
Finally, to payment to the Lessee, or its successors or assigns, to any
other party lawfully entitled thereto, or as a court of competent jurisdiction
may direct, of any surplus then remaining from such proceeds.
(d) The Lessor shall use reasonable care with respect to the Collateral in its
possession or under its control. The Lessor shall not have any other duty as to
any Collateral in its possession or control or in the possession or control of
any agent or nominee of the Lessor, or any income thereon or as to the
preservation of rights against prior parties or any other rights pertaining
thereto. Upon request of the Lessee, the Lessor shall account for any monies
received by the Lessor in respect of any foreclosure on or disposition of the
Collateral.
(e) The Lessor shall not by any act, delay, omission or otherwise be deemed to
have waived any of its rights or remedies hereunder, and no waiver shall be
valid unless in writing, signed by the Lessor and then only to the extent
therein set forth. A waiver by the Lessor of any right or remedy hereunder on
any one occasion shall not be construed as a bar to any right or remedy which
the Lessor would otherwise have had on any future occasion. No failure to
exercise nor any delay in exercising on the part of the Lessor, any right, power
or privilege hereunder, shall operate as a waiver thereof, nor shall any single
or partial exercise of any right, power or privilege hereunder preclude any
other or future exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies hereunder provided are cumulative and may be
exercised singly or concurrently, and are not exclusive of any rights and
remedies provided by law. None of the terms or provisions of this agreement may
be waived, altered, modified or amended except by an instrument in writing, duly
executed by the Lessor and the Lessee.
3. Limitation of Rights: With respect to the Property described in item 1
above, the following provisions shall apply:
"Notwithstanding anything to the contrary contained in this Lease, Lessee
and Lessor have agreed that the portion of the Property located in the
State of Florida secures only a portion of the amount of the Loan in the
maximum amount of
7
<PAGE> 127
$38,000,000, and that the value of the Property located in Florida is
$38,000,000. Therefore, irrespective of anything contained in this Lease to the
contrary, in the event of foreclosure and sale of that portion of the Property
located in the State of Florida, the maximum recovery of Lessor in the event of
a sale of that portion of the Property located in the State of Florida to any
purchaser other than Lessor, and the maximum credit allowed toward the payment
of the amount of the Loan in bidding upon the portion of the Property located in
the State of Florida at a foreclosure sale, shall be $38,000,000, plus such
amounts as interest, costs, attorneys' fees and other monies advanced for
insurance premiums, taxes and preservation of that portion of the Property
located in the State of Florida."
8
<PAGE> 128
SCHEDULE 12.15
Acquisition Cost, Original Capitalized Cost and
Adjusted Capitalized Cost of Certain Property
Subject to Prior Lease
<TABLE>
<S> <C>
1. Acquisition Cost (May 6, 1998): $25,772,580.41
2. Original Capitalized Cost.
a. Series A Portion $21,903,570.55
b. Series B Portion 2,953,647.37
c. Series C Portion 915,362.49
--------------
d. Total Original Capitalized
Cost (Sept. 2, 1998) $25,772,580.41
==============
3. Adjusted Capitalized Cost.
a. Series A Portion $21,929,857.84
b. Series B Portion 2,957,249.53
c. Series C Portion 916,916.35
--------------
d. Total Adjusted Capitalized
Cost (Sept. 2, 1998) $25,804,023.72
==============
</TABLE>
<PAGE> 129
EXHIBIT A
Form of Certificate of Acceptance
CERTIFICATE OF ACCEPTANCE, dated September 2, 1998, by Williams
Communications, Inc., a Delaware corporation (the "Lessee"). All capitalized
terms used herein, unless defined herein, shall have the respective meanings set
forth in the Amended and Restated Lease, dated as of September 2, 1998 (the
"Lease"), among the Lessee and State Street Bank and Trust Company of
Connecticut, National Association, as Trustee (the "Lessor").
W I T N E S S E T H :
WHEREAS, the Lessor and the Lessee are parties to the Lease which
provides for, inter alia, the execution and delivery of a Certificate of
Acceptance for the purpose of acknowledging acceptance of specific Items of
Property under the Lease and acknowledging the leasing of such Items of Property
under the Lease in accordance with the terms thereof.
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, the Lessor and the Lessee hereby agree as follows:
1. The Lessor and the Lessee hereby acknowledge and confirm that the
Lessee leases from the Lessor under the Lease the Items of Property specified in
Schedule I hereto.
2. The Lessee hereby confirms to the Lessor that the Lessee has
accepted such Items of Property for all purposes of the Lease as being in good
working order and repair and without defect or inherent vice in condition,
design, operation or fitness for use, and otherwise in full compliance with the
Lease; provided, however, that nothing contained herein or in the Lease shall in
any way diminish or otherwise affect any right the Lessee may have with respect
to such Property against any third party (other than the Lessor Group).
3. The Lessee hereby confirms to the Lessor that:
(a) Such items of Property do not constitute Regulated Property.
<PAGE> 130
(b) Schedule 2.02(b) of the Lease is hereby amended and supplemented by
adding thereto the Supplemental Use Restrictions annexed as
Schedule II to this Certificate of Acceptance.
IN WITNESS WHEREOF, the Lessee has caused this Certificate of
Acceptance to be duly executed on the day and year first above written.
WILLIAMS COMMUNICATIONS, INC.
By:
-------------------------------
Name:
Title:
ACCEPTED:
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION,
not in its individual
capacity, but solely as
Trustee
By:
---------------------------
Name:
Title:
2
<PAGE> 131
Schedule I to the Certificate of Acceptance
<TABLE>
<CAPTION>
Description Cost of Property Appraisal Value
of Property Quantity (per unit) (if any)(l)
- ----------- -------- ---------------- ---------------
<S> <C> <C> <C>
</TABLE>
- ----------
(1) Appraised Value as determined by the Appraiser.
<PAGE> 132
1 Schedule II to the Certificate of Acceptance
2 Supplemental Use Restrictions
<PAGE> 133
EXHIBIT B
Fiber Testing Standards
1. General. This exhibit defines the standard procedures for testing and
acceptance of the fiber and splices. In general, the Lessee (or its designee),
will perform all tests. The tests should follow standard industry requirements
and criteria. The Lessee will provide all test data to the Lessor upon request.
2. Initial Construction Testing
A. During initial construction, the Lessee (or its designee) shall use an
optical time domain reflectometer ("OTDR") to test splices and shall use an OTDR
and a 1-km launch reel to test pigtail connectors. Such initial construction
tests shall be uni-directional and performed at 1550 nm.
B. If the loss value of two connectors and the associated pigtail splice
exceeds 1 dB, the Lessee (or its designee) shall break the splice and re-splice
until the loss value is 1.0 dB or less. If the Lessee (or its designee) is
unable to achieve a loss value of 1.0 dB or less after five total splicing
attempts, the splice shall be marked as Out-of-Spec (OOS).
C. If the loss value for a splice, when measured in one direction with an
OTDR, exceeds 0.15 dB, the Lessee (or its designee) shall break the splice and
re-splice until the loss value is 0.15 dB or less, provided that, if the Lessee
(or its designee) is not able to achieve a loss value of 0.15 dB after three
total splicing attempts, then the maximum loss value shall be 0.3 dB. If, after
two additional resplicing attempts, the Lessee (or its designee) is not able to
achieve a loss value of 0.3 dB or less, then the Lessee (or its designee) shall
mark the splice as Out-of-Spec (OOS).
3. End-to-End Testing
A. After the Lessee (or its designee) has established end-to-end connectivity
on the fibers during initial construction, it shall:
o perform bi-directional end-to-end tests,
o test continuity to confirm that no fibers have been "frogged" or crossed in
any of the splice points,
<PAGE> 134
o record loss measurements using a light source and a power meter, and
o take OTDR traces and record splice loss measurements.
B. The Lessee (or its designee) shall perform the bi-directional end-to-end
tests and OTDR traces at both 1310 nm and 1550 nm. The Lessee (or its designee)
shall measure and verify losses for each splice point in both directions and
average the loss values. The Lessee (or its designee) shall mark any splice
points as Out-of-Spec (OOS) that have an average loss value, based on
bi-directional OTDR testing, in excess of 0.3 dB.
4. Post-Construction Testing
After performing permanent resplicing (in conjunction with repair of a cable
cut, replacement of a segment of cable, or other work after initial installation
and splicing of the cable), the test procedures set forth section 2 (End-to-End
Testing), shall apply to the relevant fibers and cable segments. The provisions
in sections 4 (OTDR Equipment and Settings) and 5 (Acceptance Test
Deliverables), that are relevant to such testing shall also apply.
5. Out-of-Spec Splices
Out-of-Spec splices shall be noted, but shall not preclude acceptance of a
fiber if the Out-of-Spec condition does not affect transmission capability
(based on use of then-prevailing telecommunications industry standards
applicable to equipment generally used with the relevant type of fiber) or
create a significant possibility of an outage.
6. OTDR Equipment and Settings
A. The Lessee (or its designee) shall use OTDR equipment and settings that
are, in its reasonable opinion, suitable for performing accurate measurements of
the fiber installed. Such equipment and settings shall include, without
limitation, the equipment and settings described below.
B. The Lessee (or its designee) has approved the following OTDRs and settings
for acceptance testing: the Laser Precision TD3000 and CMA4000 models and
compatible models.
C. The Lessee (or its designee) has approved the following settings for
various OTDR tests:
<PAGE> 135
i. Index of refraction settings:
<TABLE>
<CAPTION>
1310 nm 1550 nm
------- -------
<S> <C> <C>
Lucent Truwave 1.4738 1.4732
Corning SMF-28 1.4675 1.4681
Corning SMF-LS 1.471 1.470
Corning LEAF 1.470 1.469
Sumitomo fiber 1.4670 1.4670
</TABLE>
ii. Tests of a pigtail connector and its associated splice:
<TABLE>
<CAPTION>
TD3000 CMA4000
-------------- ---------------
<S> <C>
4 km Range 4 km Range
50 ns Pulse 50 ns Pulse
1 m Resolution 1 m Resolution
Medium Medium
Averaging Averaging
</TABLE>
<PAGE> 136
iii. End to End Segment OTDR Testing:
<TABLE>
<CAPTION>
TD3000 CMA4000
-------------- ---------------
<S> <C>
64 km Range 100 km Range
500 ns Pulse 250 ns Pulse
4 m Resolution 4 m Resolution
Medium Medium
Averaging Averaging
</TABLE>
Note: If the end points are more than 64 kilometers apart, the
Lessee (or its designee) currently uses TD3000 set at 128 km
range setting and performs bi-directional testing only at 1550
nm.
7. Acceptance Test Deliverables
The Lessee (or its designee) shall provide data sheets or computer media
containing the following information for the relevant fibers and cable segments:
A. Verification of end-to-end fiber continuity with power level readings for
each fiber taken with a light source and power meter.
B. Verification of loss at each splice point to be below 0.3 dB as well as
the final bi-directional OTDR test data, with distances.
C. Cable manufacturer, cable type (buffer/ribbon), fiber type, cable reel
number, number of fibers, number of fibers per tube, and distance of each
section of cable between splice points.
<PAGE> 1
Redacted portions have been marked with asterisks (****). Confidential treatment
has been requested for the redacted portions. The confidential redacted portions
have been filed separately with the Securities and Exchange Commission.
CONFIDENTIAL TREATMENT
EXHIBIT 10.24
EXECUTION COPY
- --------------------------------------------------------------------------------
AMENDED AND RESTATED
PARTICIPATION AGREEMENT
dated as of September 2, 1998
among
WILLIAMS COMMUNICATIONS, INC.,
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION, not in its individual
capacity except as expressly set forth herein,
but solely as Trustee,
THE PERSONS NAMED HEREIN,
as Note Holders and Certificate Holders,
THE PERSONS NAMED HEREIN,
as APA Purchasers,
STATE STREET BANK AND TRUST COMPANY, not in
its individual capacity, but solely
as Collateral Agent,
and
CITIBANK, N.A.,
as Agent,
with
CITIBANK, N.A. and BANK OF MONTREAL,
as Co-Arrangers,
ROYAL BANK OF CANADA,
as Documentation Agent,
and
BANK OF AMERICA,
THE CHASE MANHATTAN BANK
and
TORONTO DOMINION,
as Managing Agents
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. FINANCING................................................................................1
SECTION 1.01. Note Advance Commitments.......................................................1
SECTION 1.02. Certificate Investment Commitments.............................................4
SECTION 1.03. Procedures for Advances and Investments........................................4
SECTION 1.04. Use of Proceeds................................................................6
SECTION 1.05. Optional Reduction of the Commitments..........................................7
SECTION 1.06. ****...........................................................................8
SECTION 1.07. ****...........................................................................9
SECTION 1.08. ****..........................................................................11
SECTION 1.09. Completion and Conversion of Interim Notes....................................12
SECTION 1.10. Excess Certificate Amount.....................................................13
ARTICLE II. CONDITIONS PRECEDENT....................................................................14
SECTION 2.01. Conditions Precedent to the Initial Funding...................................14
SECTION 2.02. Conditions Precedent to Fundings Subsequent to the Initial Funding Date.......20
ARTICLE III. REPRESENTATIONS AND WARRANTIES..........................................................23
SECTION 3.01. Representations and Warranties of the Company.................................23
SECTION 3.02. SSBTC Representations and Warranties..........................................32
SECTION 3.03. Collateral Agent Representations and Warranties...............................33
ARTICLE IV. COVENANTS...............................................................................35
SECTION 4.01. Covenants of the Company......................................................35
SECTION 4.02. Covenants of the Parties......................................................39
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE V. THE NOTES AND THE EQUITY INVESTMENT.....................................................40
SECTION 5.01. Applicable Rate...............................................................40
SECTION 5.02. Increased Costs, Illegality, Etc..............................................43
SECTION 5.03. Assignments and Participations................................................47
SECTION 5.04. Taxes ........................................................................52
SECTION 5.05. Tax Treatment ................................................................54
SECTION 5.06. Compensation .................................................................55
SECTION 5.07. Change of Applicable Lending Office...........................................56
SECTION 5.08. Sharing of Payments, Etc......................................................56
SECTION 5.09. Proceeds of Asset Sales.......................................................57
SECTION 5.10. Proceeds of Optional Purchase by Lessee of Items of Property..................58
SECTION 5.11. Prepayment of Notes and Cancellation of Certificates..........................60
ARTICLE VI. EVENTS OF DEFAULT; UNWIND EVENT.........................................................60
SECTION 6.01. Events of Default.............................................................60
SECTION 6.02. Remedies upon an Event of Default.............................................64
SECTION 6.03. Unwind Event .................................................................66
ARTICLE VII. THE AGENT...............................................................................66
SECTION 7.01. Authorization and Action......................................................66
SECTION 7.02. Agent's Reliance, Etc.........................................................67
SECTION 7.03. Citibank, N.A. and Affiliates.................................................68
SECTION 7.04. Note Holder and Certificate Holder Credit Decision............................68
SECTION 7.05. Indemnification...............................................................68
SECTION 7.06. Successor Agent...............................................................69
ARTICLE VIII. MISCELLANEOUS ..........................................................................70
SECTION 8.01. Survival .....................................................................70
SECTION 8.02. Notices ......................................................................71
SECTION 8.03. Severability .................................................................71
SECTION 8.04. Amendments, Etc...............................................................71
SECTION 8.05. Headings .....................................................................72
SECTION 8.06. Compliance Responsibility.....................................................72
SECTION 8.07. Definitions ..................................................................72
SECTION 8.08. Benefit ......................................................................73
SECTION 8.09. Place of Payment..............................................................73
</TABLE>
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<TABLE>
<S> <C>
SECTION 8.10. Counterparts .................................................................73
SECTION 8.11. Governing Law and Jurisdiction................................................73
SECTION 8.12. Time; Business Day............................................................74
SECTION 8.13. Transaction Costs; Fees.......................................................74
SECTION 8.14. Indemnification...............................................................75
SECTION 8.15. Operative Documents; Further Assurances.......................................81
SECTION 8.16. Confidentiality...............................................................81
SECTION 8.17. Interest .....................................................................82
SECTION 8.18. Financial Advisor.............................................................84
SECTION 8.19. Securities Representation.....................................................84
SECTION 8.20. The Collateral Agent..........................................................84
SECTION 8.21. Agreements with Respect to the Property.......................................85
SECTION 8.22. Ratings ......................................................................85
SECTION 8.23. Waiver of Trial by Jury.......................................................86
SECTION 8.24. Other Matters ................................................................86
SECTION 8.25. Protective Expenditures; Payment for Services.................................86
SECTION 8.26. Recording and Filing Documents................................................87
SECTION 8.27. Exculpation of Trustee........................................................87
SECTION 8.28. No Petition ..................................................................88
SECTION 8.29. No Recourse to the SPV........................................................88
SECTION 8.30. May Participation Agreement...................................................88
SECTION 8.31. ****..........................................................................89
SECTION 8.32. Managing Agent................................................................91
</TABLE>
Appendix A - Definitions
Schedule I - Manner of Payment and Communications to the Parties
Schedule II - Applicable Margin Chart; Commitment Fees
Schedule III - APA Purchasers
Exhibit A - Form of Requisition
Exhibit B - Form of Officer's Certificate of Completion
Exhibit C - Completion Date Conditions
Schedule 3.01 - Subsidiaries and Relevant Subsidiaries
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AMENDED AND RESTATED PARTICIPATION AGREEMENT (as it may be amended from
time to time, this "Agreement"), dated as of September 2, 1998 among Williams
Communications, Inc., a Delaware corporation (the "Company"); State Street Bank
and Trust Company of Connecticut, National Association ("SSBTC"), not in its
individual capacity except as expressly set forth herein, but solely as Trustee
(the "Trustee"); the Persons named from time to time on Schedule I hereto as
note purchasers and their permitted successors and assigns (collectively, the
"Note Holders"); the Persons named from time to time on Schedule I hereto as
certificate purchasers and their permitted successors and assigns (collectively,
the "Certificate Holders"); the Persons named from time to time on Schedule III
hereto as APA Purchasers and their permitted successors and assigns
(collectively, the "APA Purchasers"); State Street Bank and Trust Company
("State Street"), not in its individual capacity, but solely as Collateral Agent
(the "Collateral Agent"); and Citibank, N.A., in its capacity as agent for the
Note Holders and the Certificate Holders hereunder (the "Agent"). Capitalized
terms used herein but not otherwise defined in this Agreement shall have the
meanings set forth in Appendix A hereto.
PRELIMINARY STATEMENT
On May 6, 1998, the Company, SSBTC, as Trustee, the Persons named
therein as Note Holders and Certificate Holders, Citibank, N.A., as Collateral
Agent and Agent, executed and delivered a Participation Agreement (as amended,
the "May Participation Agreement"), pursuant to which the Original Note Holder
and the Original Certificate Holder made commitments to make Advances and
Investments to fund the acquisition of certain Property. The parties wish to
amend and restate the May Participation Agreement and the other May Operative
Documents as provided in this Agreement and the Operative Documents.
In consideration of the agreements herein and in the other Operative
Documents and in reliance upon the representations and warranties set forth
herein and therein, the parties agree as follows:
ARTICLE I.
FINANCING
SECTION 1.01. Note Advance Commitments.
(a) Interim Advances. Subject to the terms and conditions in this
Agreement, each Note Holder hereby agrees, severally and not jointly and
severally, to make an advance (each, an "Advance"), from time to time but not
more frequently
<PAGE> 6
than twice per month, on each Funding Date prior to the Commitment Termination
Date, in the manner provided in Section 1.03, in amounts equal to its Percentage
of Acquisition Costs (exclusive of Certificate Yield) specified in any
Requisition issued for such Funding Date.
(b) Certain Advances. Subject to the provisions of Section 4 of the
APA, each APA Purchaser agrees for the benefit of the Company to make each
Funding Purchase (as defined in the APA) requested by the SPV in the event that
CXC is unable or unwilling to make CXC Advances to the SPV to fund the portion
of any Advance to be funded by the SPV under Section 1.01(a).
(c) Limitations on Advance Commitment. The obligation of each Note
Holder to make Advances pursuant to Section 1.01(a) and 1.01(b) is subject to
the following:
(i) Each of the conditions precedent applicable to each such
Advance as set forth in Article II must be satisfied or waived in
accordance with such Article.
(ii) No Note Holder shall have any obligation to make any
Advance for any amount in excess of the lesser of (A) its aggregate
Note Commitment and (B) its Percentage of the aggregate amount of
Acquisition Costs (exclusive of Certificate Yield), less the aggregate
amount of all prior Advances made by such Note Holder.
(iii) The obligation of each Note Holder to make Advances will
automatically terminate and any remaining unused Interim Note
Commitment will be canceled on the first to occur of (A) the Commitment
Termination Date and (B) the Interim Note Maturity Date.
(d) Cash Secured Advances.
(i) The SPV agrees to make advances and the Trustee agrees to
borrow, in each case on the terms and conditions set forth in Section
1.07 (each a "Cash Secured Advance") on each Cash Secured Advance Date,
in an amount equal to the respective amounts deemed to have been
received by the SPV from the APA Purchasers pursuant to Section 1.07.
(ii) Until repaid in accordance with the terms of this
Agreement, each Cash Secured Advance shall bear interest at a rate
equal to the rate earned by the applicable APA Purchaser on the
investment of the credit balance of its Collateral Purchase Account
pursuant to Section 1.07(b). Such interest shall be payable only to the
extent of funds received as interest, yield, gain, or other amounts
realized by the applicable APA Purchaser on the investment of the
credit balance of its Collateral Purchase Account payable as and when
such funds are received by the
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<PAGE> 7
applicable APA Purchaser in respect of the investment of the credit
balance of its Collateral Purchase Account. In addition, the Company
shall pay to the Agent, for the account of each APA Purchaser, a fee on
the average daily credit balance (excluding investment earnings) of its
Collateral Purchase Account equal to 1.2 times the then applicable
Commitment Fee, which fee shall be paid at the times and in the manner
of payment of Commitment Fees.
(iii) To the extent not previously prepaid pursuant to Section
1.01(d)(iv) or Section 1.08, all Cash Secured Advances shall mature and
become due and payable in full on the earliest to occur of (A) an
Unwind Event, (B) the occurrence of an Event of Default and the
acceleration of the Interim Notes pursuant to Section 7.01(b) of the
Declaration and (C) the Commitment Termination Date. On such maturity,
each APA Purchaser shall release from its Collateral Purchase Account
the remaining credit balance in its Collateral Purchase Account, which
balance shall be retained by such APA Purchaser, shall constitute a
repayment by the Trustee of a Cash Secured Advance to the extent of
such amount (whether or not actually released by such APA Purchaser) on
account of the interest owned by such APA Purchaser in such Cash
Secured Advance, and shall constitute a payment by the SPV to such APA
Purchaser on account of the undivided interest owned by such APA
Purchaser in such Cash Secured Advance (whether or not such amount is
actually released by such APA Purchaser).
(iv) If the Company delivers a notice of optional reduction of
Commitments pursuant to Section 1.05 at any time when Cash Secured
Advances are outstanding (A) the Cash Secured Advances shall be prepaid
by the Trustee on the effective date of such Commitment reduction in an
aggregate principal amount equal to the amount of the resulting
reduction in the SPV's Note Commitment, and (B) on the effective date
of such Commitment reduction, each APA Purchaser shall release from its
Collateral Purchase Account an amount equal to the lesser of its
Percentage (as defined in the APA) of the amount described in clause
(A) of this Section 1.01(d) or the remaining credit balance in its
Collateral Purchase Account, which amount shall be retained by such APA
Purchaser, shall constitute a prepayment by the Trustee of a Cash
Secured Advance to the extent of such amount (whether or not actually
released by such APA Purchaser) on account of the interest owned by
such APA Purchaser in such Cash Secured Advance, and shall constitute a
payment by the SPV to such APA Purchaser on account of the undivided
interest owned by such APA Purchaser in such Cash Secured Advance
(whether or not such amount is actually released by such APA
Purchaser).
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<PAGE> 8
SECTION 1.02. Certificate Investment Commitments.
(a) Interim Investments. Subject to the terms and conditions in this
Agreement, each Certificate Holder hereby agrees, severally and not jointly and
severally, to make an investment (each, an "Investment"), from time to time but
not more frequently than twice per month, on each Funding Date prior to the
Commitment Termination Date, in the manner provided in Section 1.03, in amounts
equal to its Percentage of Acquisition Costs (exclusive of Certificate Yield)
specified in any Requisition issued for such Funding Date.
(b) Limitations on Investment Commitment. The obligation of each
Certificate Holder to make Investments pursuant to Section 1.02(a) is subject to
the following:
(i) Each of the conditions precedent applicable to each such
Investment as set forth in Article II must be satisfied or waived in
accordance with such Article.
(ii) No Certificate Holder shall have any obligation to make
any Investment for any amount in excess of the lesser of (A) its
aggregate Certificate Commitment and (B) its Percentage of the
aggregate amount of Acquisition Costs (exclusive of Certificate Yield),
less the aggregate amount of all prior Investments made by such
Certificate Holder.
(iii) The obligation of each Certificate Holder to make
Investments will automatically terminate and any remaining unused
Certificate Commitment will be canceled on the Commitment Termination
Date.
SECTION 1.03. Procedures for Advances and Investments.
(a) Requisitions. Not less than five (5) Business Days prior to each
Funding Date on which a Funding is desired, the Company must submit to the Agent
an irrevocable requisition for Acquisition Costs (the "Requisition")
substantially in the form attached as Exhibit A hereto. The Agent will give
notice of such Requisition to the Note Holders and the Certificate Holders not
less than three (3) Business Days (or two (2) Business Days in the case of the
Initial Funding) prior to the applicable Funding Date. Such notice by the Agent
shall specify the amount of the Advances to be made by each Note Holder and the
amount of the Investments to be made by each Certificate Holder.
Each Requisition (i) shall be irrevocable and executed by an authorized
Officer of the Company, (ii) must request a Funding of an amount at least equal
to $2,000,000 or such lesser amount as shall be equal to the aggregate amount of
the unused Total Commitment available at such time, and (iii) shall request that
the Note Holders make Advances and that the Certificate Holders make Investments
for Acquisition Costs incurred or to be
4
<PAGE> 9
incurred as specified in the Requisition. No more than two Requisitions may be
submitted during any calendar month. Each Requisition shall constitute a
representation and warranty by the Company that all the conditions precedent to
such Funding have been satisfied.
The Agent shall have no duty to verify any Requisition or the
authenticity of any signature appearing on any Requisition other than to compare
such signature with incumbency certificates provided by the Company listing
Officers of the Company authorized to execute Requisitions.
(b) Advances and Investments Without Requisition. No Requisition shall
be necessary to permit the Agent to request the Note Holders to make Advances
for the account of any or all Note Holders, to pay amounts for interest on the
Interim Notes or Commitment Fees and other fees and expenses of the Note Holders
due hereunder on or prior to the Completion Date, or to request the Certificate
Holders to make Investments to pay Commitment Fees and other fees and expenses
of the Certificate Holders due hereunder on or prior to the Completion Date;
provided, however, that the Note Holders and Certificate Holders shall make such
Advances or Investments, as the case may be, only (A) after the Agent has
notified the Note Holders, the Certificate Holders and the Company of the date
and the Applicable Rate set for such Funding and the amounts thereof due and
owing and unpaid to be made by each such Note Holder and Certificate Holder and
(B) on a Payment Date.
(c) Funding Advances and Investments. On the date specified for any
Funding, each Note Holder and Certificate Holder shall, before 10:00 A.M. (New
York City time) make available, or cause to be made available, to the Agent, on
behalf of the Trustee, an amount equal to the Advance or the Investment, as the
case may be, to be made by it on such date, at the Agent's address referred to
in Schedule I hereto, in immediately available funds.
Unless the Agent shall have received notice from a Note Holder or
Certificate Holder prior to the date of any Funding that such Note Holder or
Certificate Holder will not make available to the Agent an Advance or
Investment, as the case may be, the Agent may assume that such Note Holder or
Certificate Holder has made its funds available to the Agent on such date in
accordance with this Section 1.03(c) and the Agent may (but shall not be
required to), in reliance upon such assumption, make available to the Company on
such date a corresponding amount. If and to the extent that such Note Holder or
Certificate Holder shall not have so made such Advance available to the Agent on
such date, such Note Holder or Certificate Holder agrees to repay the Agent
forthwith on demand by the Agent such corresponding amount, together with
interest thereon, for each day from the date such amount is made available to
the Company, until the date
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<PAGE> 10
such amount is repaid to the Agent, at the Federal Funds Rate. If such Note
Holder or Certificate Holder shall repay to the Agent such corresponding amount,
such amount so repaid (excluding any amounts for interest paid to the Agent)
shall constitute such Note Holder's funding of its Advance or such Certificate
Holder's Investment, as the case may be, for purposes of this Agreement. The
failure of any Note Holder or Certificate Holder to make an Advance or
Investment, as the case may be, shall not relieve any other Note Holder or
Certificate Holder of its obligations, if any, hereunder to make an Advance or
Investment, as the case may be, but no Note Holder or Certificate Holder shall
be responsible for the failure of any other Note Holder or Certificate Holder to
make an Advance or Investment, as the case may be.
SECTION 1.04. Use of Proceeds. Upon the Agent's receipt of funds from
the Certificate Holders and the Note Holders for the applicable Funding and upon
fulfillment of the applicable conditions set forth in Article II, the Agent will
apply the funds as set forth in this Section 1.04 and pay the balance, if any,
of the funds representing such Funding to the Company in immediately available
funds.
(a) Initial Funding Date. The proceeds of Advances and Investments
made on the Initial Funding Date shall be applied by the Agent, on behalf of the
Trustee, as follows:
(i) Refinancing. First, to pay in full all obligations due and
owing as of the Initial Funding Date to the Original Note Holder, the
Original Certificate Holder, and to the Agent, the Trustee and the
Collateral Agent under the May Participation Agreement, including:
(A) The entire principal amount of, and accrued
and unpaid interest to the Initial Funding
Date on, and any Break Costs in respect of,
the Original Notes.
(B) The entire stated amount of, and accrued and
unpaid yield to the Initial Funding Date on,
and any Break Costs in respect of, the
Original Certificates.
(C) All other amounts, including, fees,
expenses, indemnification payments and taxes
due and unpaid as of the Initial Funding
Date.
(ii) Transaction Costs. Second, to pay all costs and expenses
required to be paid by the Company on the Initial Funding Date,
including:
(A) to Special Counsel, counsel for CXC's Credit
Enhancer and each other counsel delivering an opinion under
Section 2.01(c), the reasonable
6
<PAGE> 11
fees, expenses and disbursements of such counsel that are set
forth in invoices submitted by such counsel to the Company at
least two days prior to the Initial Funding Date;
(B) the Commitment Fees and other fees and expenses
payable on the Initial Funding Date; and
(C) any other fees and expenses payable by the
Company on the Initial Funding Date in accordance with the
terms of the Operative Documents and the Securitization
Documents.
(iii) Acquisition Costs. The balance as directed by the
Company in accordance with the Requisition and such other funding
instructions as may be given in writing by the Company to the Agent,
consistent with Section 4.01(e).
(b) Intentionally omitted.
(c) Interest and Expenses. The proceeds of Advances and Investments
made to pay interest on the Interim Notes, Commitment Fees on the Interim Notes
or the Certificates and other fees and expenses of the Note Holders or
Certificate Holders pursuant to Section 1.03(b)(i) shall be applied by the
Agent, on behalf of the Trustee, to pay the amounts for which the Advance or
Investment is made.
(d) Requisition Advances. The proceeds of Advances and Investments made
pursuant to any Requisition shall be applied by the Agent, on behalf of the
Trustee, in accordance with the Requisition and such other funding instructions
as may be given in writing by the Company to the Agent, consistent with Section
4.01(e).
(e) Payments by Agent. All such payments to be made by the Agent
pursuant to this Section 1.04 shall be made (i) solely to the extent of funds
received by the Agent from Advances and Investments and (ii) by transfer of
immediately available funds.
SECTION 1.05. Optional Reduction of the Commitments. The Company may,
upon at least ten Business Days' notice to the Agent, terminate in whole or
reduce in part the unused portions of the Commitments of the Holders; provided,
however, that each partial reduction of the Commitments of the Holders (i) shall
be in an aggregate amount of $5,000,000 or an integral multiple of $1,000,000 in
excess thereof, (ii) shall be made ratably among the Holders in accordance with
their Commitments and (iii) the Agent and the Majority Holders shall be
satisfied that the remaining Commitments are in the aggregate sufficient to pay
for all remaining Acquisition Costs incurred or to be incurred.
7
<PAGE> 12
SECTION 1.06. ****
8
<PAGE> 13
****
SECTION 1.07. ****
9
<PAGE> 14
****
10
<PAGE> 15
****
SECTION 1.08. ****
11
<PAGE> 16
****
SECTION 1.09. Completion and Conversion of Interim Notes. On the
Completion Date:
(a) Commitment Termination. The obligations of the Note Holders to make
Advances shall terminate, and the obligations of the Certificate Holders to make
Investments shall terminate, in each case, automatically and without notice or
other action of any kind on the part of any Person.
(b) Interim Notes Exchanged.
(i) Each Note Holder shall deliver to the Agent, acting on
behalf of the Trustee, (a) all original Interim Notes registered in the
name of such Note Holder duly endorsed, or accompanied by bond powers
or other instruments of transfer duly endorsed, by or on behalf of such
Note Holder, satisfactory to the Agent, to transfer such Interim Notes
to the Trustee and (b) such other agreements, instruments or documents
as the Agent may reasonably request to evidence the exchange and
transfer to the Trustee of such Interim Notes; provided, however, that
such exchange shall be made without recourse and without representation
or warranty of any kind by or on behalf of the Note Holders, except for
the warranties on presentment and transfer set forth in Section 3-417
of the UCC.
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<PAGE> 17
(ii) The Trustee shall issue and deliver, upon receipt by the
Agent of the instruments referred to in Section 1.09(b)(i), (A) to each
Holder of an Interim A-Note, one or more Series A Notes, each dated the
Interim Note Maturity Date, in an aggregate principal amount equal to
the then outstanding aggregate principal amount of the Interim A-Notes
held by such Note Holder and (B) to each Holder of an Interim B-Note,
one or more Series B Notes, each dated the Interim Note Maturity Date,
in an aggregate principal amount equal to the then outstanding
aggregate principal amount of the Interim B-Notes held by such Note
Holder; provided that if after giving effect to the issuance of Series
A Notes as described above, the aggregate principal amount of the
Series A Notes is less than 85% of the Acquisition Costs as of the
Interim Note Maturity Date (such deficiency, the "A-Note Deficiency"),
then Interim B-Notes shall be exchanged on the Interim Note Maturity
Date for additional Series A Notes in an amount equal to the A-Note
Deficiency.
(iii) The Note Holders shall accept the Series A Notes and
Series B Notes referred to in Section 1.09(b)(ii) in exchange for and
in full satisfaction of the Interim Notes surrendered pursuant to
Section 1.09(b)(i), and upon such exchange, the Trustee shall be fully
discharged from all obligations to pay principal, interest or other
amounts under the Interim Notes.
(iv) The Agent shall deliver to the Trustee the Interim Notes
(together with the transfer documentation referred to in Section
1.09(b)(i)), for cancellation by the Trustee.
SECTION 1.10. Excess Certificate Amount. On the first Payment Date
immediately following the Completion Date:
(a) Additional Rent. The Company shall pay to the Agent, on behalf of
the Trustee in accordance with Schedule I of the Lease, Additional Rent in an
amount equal to the Excess Certificate Amount and such other amounts (including
Fixed Rent) as shall be payable as provided for in the other Operative Documents
and the Securitization Documents.
(b) Certificate Repurchase. (i) The Agent, on behalf of the Trustee,
shall deliver to each Certificate Holder (A) a written statement setting forth
the Excess Certificate Amount, showing in reasonable detail the computation
thereof (which amount and computation shall, absent manifest error, be final and
binding on all parties), and (B) an amount, equal to each Certificate Holder's
pro rata portion of the Excess Certificate Amount by wire transfer of
immediately available funds to such account as may be designated from time to
time by such Certificate Holders.
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<PAGE> 18
(ii) The stated amount of the Certificates held by each
Certificate Holder shall, upon the making of the payment referred to in
Section 1.10(b)(i), be reduced, automatically and without notice or
further action of any kind by any Person, by an amount equal to the
payment made, and without any prepayment penalty or premium of any
kind.
ARTICLE II.
CONDITIONS PRECEDENT
SECTION 2.01. Conditions Precedent to the Initial Funding. The several
(and not joint and several) obligations of each of the Note Holders to make an
Advance and each of the Certificate Holders to make an Investment on the Initial
Funding Date as set forth in Article I shall be subject to the fulfillment, to
the satisfaction of the Agent, the Note Holders and the Certificate Holders, as
applicable, on or as of the Initial Funding Date, of the following conditions
precedent, and the Company and the Guarantor shall each have delivered an
Officer's Certificate dated as of the Initial Funding Date certifying that such
conditions precedent have been fulfilled:
(a) Due Authorization, Execution and Delivery. (i) The Operative
Documents shall have been duly authorized, executed and delivered by all parties
thereto, shall be in full force and effect and no condition or event shall exist
or have occurred (or would exist after giving effect to the transactions
contemplated thereby) which would constitute a Default or an Event of Default
under any of the Operative Documents by any party thereto. Each of the Company,
the Guarantor, the Collateral Agent and SSBTC shall have delivered an Officer's
Certificate dated as of the Initial Funding Date as to its respective compliance
with the Operative Documents to which it is a party.
(ii) The Securitization Documents shall have been duly
authorized, executed and delivered by all parties thereto, shall be in
full force and effect, no condition or event shall exist or have
occurred which would constitute a Default or Event of Default under any
of the Securitization Documents by any party thereto; and sufficient
funds shall have been made available to the SPV under the Finance
Facility to fund the Advances to be made by the SPV on the Initial
Funding Date.
(iii) Each of SSBTC, the Company, the Guarantor and State
Street shall have delivered a Secretary's Certificate dated as of the
Initial Funding Date certifying as to the following:
(A) the certificate of incorporation, certificate of
limited partnership, by-laws,
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<PAGE> 19
partnership agreement or other equivalent organizational
documents of each such Person;
(B) resolutions of the board of directors (or other
equivalent body) of each such Person authorizing (x) the
execution, delivery and performance of the Operative Documents
to which such Person is a party and (y) the consummation by
such Person of the transactions contemplated by the Operative
Documents; and
(C) the name, incumbency and signature of each
individual authorized to sign the Operative Documents to which
such Person is a party and the other documents or certificates
to be delivered pursuant thereto by such Person, which may be
conclusively relied upon until a revised certificate is
similarly so delivered;
(iv) good standing certificates and certificates of authority
to transact business as a foreign corporation with respect to the
Company and the Guarantor dated as of a recent date prior to the
Initial Funding Date;
(v) SSBTC shall have delivered a certificate of authority from
the Comptroller of the Currency dated as of a recent date prior to the
Initial Funding Date; and
(vi) State Street shall have delivered a certificate of
authority from the Office of the Commissioner of Banks of the
Commonwealth of Massachusetts dated as of recent date prior to the
Initial Funding Date.
(b) Representations and Warranties. The representations and warranties
of each of the Company, the Guarantor, SSBTC and the Collateral Agent,
respectively, set forth in the Operative Documents shall be true and correct as
if made on and as of the Initial Funding Date or, as applicable, on and as of
the date specified in such representation or warranty, and the Company, the
Guarantor, SSBTC and the Collateral Agent shall each have delivered an Officer's
Certificate dated as of the Initial Funding Date to such effect as to its
respective representations and warranties.
(c) Opinions. The following opinions dated as of the Initial Funding
Date addressed to the parties indicated below, shall have been delivered:
(i) an opinion of the General Counsel of the Company,
addressed to the Collateral Agent, the Agent, the Note Holders, the
Certificate Holders, the APA Purchasers, CXC's Credit Enhancer and the
Trustee, in form and substance reasonably satisfactory to the Agent,
the Trustee and Special Counsel;
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<PAGE> 20
(ii) an opinion of the General Counsel of the Guarantor,
addressed to the Collateral Agent, the Agent, the Note Holders, the
Certificate Holders, the APA Purchasers, CXC's Credit Enhancer and the
Trustee, in form and substance reasonably satisfactory to the Agent,
the Trustee and Special Counsel;
(iii) an opinion of Trustee's Counsel, addressed to the
Collateral Agent, the Agent, the Note Holders, the Certificate Holders,
CXC's Credit Enhancer and the Company, in form and substance reasonably
satisfactory to the Agent and Special Counsel;
(iv) an opinion of Chadbourne & Parke LLP, Special Counsel,
addressed to the APA Purchasers, CXC, CXC's Credit Enhancer, S&P and
Moody's, which opinion shall address the non-consolidation of SPV and
the Trustee and certain other matters, shall be in form and substance
reasonably satisfactory to S&P and Moody's;
(v) opinions of Loeb & Loeb, special counsel to the SPV, the
Member, and Lord Securities Corporation, addressed to CXC, the APA
Purchasers, CXC's Credit Enhancer, Moody's and S&P, which opinions
shall address (i) the non-consolidation of Lord Securities Corporation,
Broad Street Contract Services, Inc., the SPV and the Member; and (ii)
the due authorization, execution, delivery and enforceability of the
relevant Operative Documents and Securitization Documents with respect
to the SPV, the Member and Lord Securities Corporation;
(vi) an opinion of corporate counsel to the Credit Enhancer,
addressed to the APA Agent, the APA Purchasers, Citicorp North America,
Inc., as agent for CXC and the APA Purchasers, CXC, CXC's Credit
Enhancer, Moody's and S&P, which opinion shall be in form and substance
reasonably satisfactory to the APA Agent;
(vii) an opinion of corporate counsel to CXC's Credit
Enhancer, addressed to Citicorp North America, Inc., as agent CXC,
Moody's and S&P, which opinion shall be in form and substance
reasonably satisfactory to the APA Agent; and
(viii) such other opinions of counsel as the Agent, the
Trustee and Special Counsel may reasonably request, addressed to the
Collateral Agent, the Agent, the Note Holders, the APA Purchasers, the
Certificate Holders and the Trustee, and in form and substance
reasonably satisfactory to the Agent, the Trustee and Special Counsel.
(d) Proceedings Satisfactory and Other Evidence. All corporate,
partnership and other proceedings taken or to be taken in connection with the
transactions contemplated by the Operative Documents and the Securitization
Documents and all documents, papers and authorizations relating thereto shall be
satisfactory
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to the Agent, the Trustee, the Company and their respective counsel. The Agent
and Special Counsel shall have received an Officer's Certificate from each of
the Company, the Guarantor and the Trustee with respect to the due
authorization, execution and delivery of the Operative Documents executed and
delivered by the Company, the Guarantor, the Trustee and the Collateral Agent,
respectively, dated as of the Initial Funding Date. The Agent and the Company
and their respective counsel shall receive copies of such documents and papers
as they have reasonably requested, in form and substance reasonably satisfactory
to them.
(e) Legality. (i) The execution, delivery and issuance of the Notes and
Certificates by the Trustee and the purchase of the Notes and the funding of
Advances thereunder by the Note Holders and the purchase of the Certificates and
the funding and maintenance of Investments thereunder by the Certificate Holders
shall not be subject to the registration requirements of the Act or any state
securities or blue sky Law, and shall not be prohibited by any applicable Law
(including Regulation T, Regulation U or Regulation X and any applicable usury
Laws) and shall not subject any Note Holder or Certificate Holder to any Tax
(other than Excluded Charges or a Tax paid by the Company pursuant to Sections
5.04 and 8.13), penalty, liability or other onerous condition under or pursuant
to any applicable Law and the Agent and the Note Holders and Certificate Holders
shall receive such evidence as the Agent and the Note Holders and Certificate
Holders (through the Agent) may reasonably request to establish compliance with
this condition.
(ii) The execution and delivery of the Operative Documents and
the consummation of any of the transactions contemplated thereby shall
subject none of the Trustee, the Collateral Agent, the Note Holders,
the Certificate Holders or the Agent to (A) regulation by the FCC or
any other Governmental Authority as a common carrier,
telecommunications concern or public utility, or (B) any Laws
applicable to common carriers, telecommunications concerns or public
utilities.
(f) Closing Fees. The Company or the Guarantor shall have paid or
caused to be paid all fees, expenses and other amounts as the Company may be
required to pay on or before the Initial Funding Date in accordance with the
terms of the Operative Documents and the Securitization Documents.
(g) Compliance with Law. The Property shall be in material compliance
with all Laws.
(h) Permits and Certain Property Matters. (i) All Permits with respect
to the Property that are or will become Applicable Permits shall have been
obtained, except Applicable Permits customarily obtained or which are permitted
by Law to be obtained after the Initial Funding Date (in which case the Company,
having completed all appropriate diligence in connection
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therewith, shall have no reason to believe that such Permits will not be granted
in the usual course of business prior to the date that such Permits are required
by Law). All such obtained Permits shall be in proper form, shall be in full
force and effect and not subject to any further appeal, consent or further
contest or to any unsatisfied condition that may allow modification or
revocation.
(ii) No portion of the Property shall have suffered a
Condemnation and the Property shall not have suffered any Casualty or
any other damage or destruction which renders it unusable in whole or
in part and, under applicable Law, the Property may be used for the
purposes contemplated by the Company in accordance with the Lease, and
the Company shall certify the same in each Requisition.
(i) Documents Relating to the Property. The Company shall have
delivered, or caused to be delivered, to the Trustee, the Agent, the Collateral
Agent, the Note Holders and the Certificate Holders documentation with respect
to the acquisition, condition, installation, operation and use of the Property,
or any portion thereof, or the Taxes applicable to the Property, or any portion
thereof, as the Agent, the Trustee, the Collateral Agent, the Note Holders or
the Certificate Holders may reasonably request, in form and substance reasonably
acceptable to the Agent, the Trustee, the Collateral Agent, the Note Holders and
the Certificate Holders.
(j) Insurance. The Company shall (i) maintain insurance in accordance
with the provisions of the Lease and (ii) be in compliance with all Insurance
Requirements. The Company shall deliver, or cause to be delivered, to the
Trustee, the Collateral Agent and the Agent (i) certificates of insurance or
other satisfactory assurances evidencing the coverage of such policies in
compliance with the Insurance Requirements and (ii) copies of any exceptions to
coverage of such policies.
(k) Taxes. All Taxes (other than Excluded Charges), fees and other
charges which have become due and payable in connection with the execution,
delivery, recording, publishing, registering and filing of the Operative
Documents and the Securitization Documents or any memoranda thereof and any
financing statements shall have been paid by the Company. All Taxes (other than
Excluded Charges) which have become due and payable and that are payable by the
Company and related to the Property shall have been paid by the Company, subject
to the Company's rights of contest pursuant to the Lease.
(l) No Material Adverse Event. There shall exist no action, suit,
investigation, litigation or proceeding affecting the Company or the Guarantor
pending or, to the Company's or the Guarantor's knowledge, threatened, before
any court, governmental agency or arbitrator that (A) is reasonably likely to
have a
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<PAGE> 23
Material Adverse Effect or create any Trust Liability or (B) purports to affect
in any material respect the legality, validity or enforceability of this
Agreement, any other Operative Document or the Securitization Documents or the
consummation of the transactions contemplated hereby or thereby.
(m) Recording and Filing. The appropriate Operative Documents (or
memoranda thereof) and all Central Filings with respect to the Property shall
have been delivered in proper form to be duly recorded, published, registered
and filed by the Company (on behalf of the Trustee and the Collateral Agent)
with the Secretary of State of each State where it is anticipated that the
Projects and the Property shall be located, warehoused, stored, assembled,
constructed or installed by the Company and in such manner and in such places as
the Company, the Agent and Special Counsel shall determine to be necessary or
appropriate to establish, create, perfect, preserve, protect and publish notice
of a valid and effective first priority security interest and Lien on the
Property in such States in favor of the Trustee and the Collateral Agent
superior and prior to the rights of all third Persons and subject to no other
Liens except in each case for Permitted Encumbrances and Trust Encumbrances; and
all Taxes, fees and other charges payable in connection with such recording,
publishing, registration and filing shall have been paid, or caused to be paid,
by the Company (or provisions made to do so).
(n) Satisfaction with Contemplated Transactions. The Agent, the Note
Holders and the Certificate Holders shall be satisfied, each in its sole
reasonable discretion, with its review of the Property and all material matters
in connection therewith, including the leasing thereof by the Trustee.
(o) Additional Documents. The Agent shall have received such other
approvals, certificates or documents as the Agent may reasonably request to
evidence satisfaction of the conditions set forth in this Section 2.01.
(p) Appraisal. An Appraisal of each Project for which Acquisition Costs
are to be funded (as described in the Requisition provided by the Company to the
Agent) shall have been conducted by an Appraiser, at the sole cost and expense
of the Company, demonstrating that both the current Appraised Value of the
Project and the expected fair market value of such Project at the Expiration
Date or, to the extent possible, the sum of the values of the Items of Property
with respect to such Project, are at least equal to the estimated Acquisition
Costs of the Project or Items of Property, as applicable.
(q) POPs. Prior to the funding of any Acquisition Costs for the
acquisition of or leasing of real property in connection with the construction
or installation of a POP, a Phase I environmental audit (an "Environmental
Audit") of the real estate shall have been conducted by an Environmental
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<PAGE> 24
Consultant, at the sole cost and expense of the Company, which shall (i)
conclude that no environmental hazards exist on the Property that are
unacceptable to the Holders and the Agent and based upon anticipated and
permitted practices and procedures, there is not likely to exist on or in
respect of the POP any environmental hazards which are unacceptable to the
Holders or the Agent and (ii) otherwise be in form and substance satisfactory to
the Agent.
SECTION 2.02. Conditions Precedent to Fundings Subsequent to the
Initial Funding Date. The several (and not joint and several) obligations of
each of the Note Holders to make Advances and of each of the Certificate Holders
to make Investments subsequent to the Initial Funding Date as set forth in
Article I shall be subject to the fulfillment, to the satisfaction of the Agent,
the Note Holders and the Certificate Holders, as applicable, by, on or as of the
date of such Funding of the following conditions precedent:
(a) Compliance; No Default, etc. (i) Each of the Company, the Guarantor
and the Relevant Subsidiaries shall be in compliance with its obligations under
the Operative Documents on such date, (ii) the Operative Documents and the
Securitization Documents shall be in full force and effect on such date and
(iii) no condition or event shall exist or have occurred which would constitute
a Default, Event of Default or Environmental Trigger under any of the Operative
Documents.
(b) Representations and Warranties. The representations and warranties
of each of the Company, the Guarantor and SSBTC, respectively, set forth in the
Operative Documents shall be true and correct as if made on and as of the date
of such Funding or, as applicable, on and as of the date specified in such
representation or warranty.
(c) Requisition; Use of Investment Proceeds. The Agent shall have
received a timely and complete Requisition pursuant to and in compliance with
the terms of this Agreement. All proceeds of the Fundings expended, and all
proceeds of the Fundings to be expended, by or on behalf of the Company shall
have been or shall be (as the case may be) applied solely to Acquisition Costs,
and the Company shall certify the same in each Requisition and provide such
other evidence, with respect to the use of such proceeds (including but not
limited to, invoices for Acquisition Costs) as may be reasonably requested by
the Agent.
(d) Compliance with Law. The acquisition, installation, construction,
ownership and use of the Property by the Company shall be in material compliance
with all Laws.
(e) No Material Adverse Event. The Company shall certify in each
Requisition that (i) no action, suit, investigation, litigation or proceeding
affecting the Company or
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the Guarantor exists or is pending or, to the Company's knowledge, threatened
before any court, governmental agency or arbitrator that (A) is reasonably
likely to have a Material Adverse Effect or create any Trust Liability or (B)
purports to affect in any material respect the legality, validity or
enforceability of this Agreement, any other Operative Document or the
Securitization Documents or the consummation of the transactions contemplated
hereby or thereby and (ii) since the Initial Funding Date, there has been no
change with respect to the Company or the Guarantor that could be reasonably
likely to have a Material Adverse Effect.
(f) Legality. The making of any Advance or Investment, and the
maintenance thereof, by any Note Holder or Certificate Holder shall not (i) be
prohibited by any applicable Law (including Regulation T, Regulation U or
Regulation X and any applicable usury Laws) and shall not subject any Note
Holder or Certificate Holder to any Tax (other than Excluded Charges and any Tax
paid by the Company pursuant to Sections 5.04 and 8.13), penalty, liability or
other onerous condition under or pursuant to any applicable Law and (ii) subject
any of the Trustee, the Collateral Agent, the Note Holders, the Certificate
Holders or the Agent to (A) regulation by the FCC or any other Governmental
Authority as a common carrier, telecommunications concern or public utility or
(B) any Laws applicable to common carriers, telecommunications concerns or
public utilities.
(g) Permits and Certain Property Matters. (i) All Permits that are or
will become Applicable Permits shall have been obtained, except Applicable
Permits customarily obtained or which are permitted by Law to be obtained after
the applicable Funding Date (in which case the Company, having completed all
appropriate diligence in connection therewith, shall have no reason to believe
that such Permits will not be granted in the usual course of business prior to
the date that such Permits are required by Law). Each Permit shall be in proper
form, in full force and effect and not subject to any appeal, consent or contest
or to any condition that, if unsatisfied, is likely to result, in the Agent's
reasonable judgment, in the forfeiture or revocation of such Permit.
(ii) No portion of the Property shall have suffered a
Condemnation and the Property shall not have suffered any Casualty or
any other damage or destruction which renders it unusable in whole or
in part and, under applicable Law, the Property may be used for the
purposes contemplated by the Company in accordance with the Lease, and
the Company shall certify the same in each Requisition.
(h) Taxes. All Taxes (other than Excluded Charges), fees and other
charges which have become due and payable in connection with the execution,
delivery, recording, publishing, registering and filing of the Operative
Documents and the
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Securitization Documents or any memoranda thereof and any financing statements
shall have been paid by the Company. All Taxes (other than Excluded Charges)
which have become due and payable and that are payable by the Company and
related to the Property shall have been paid by the Company, subject to the
Company's rights of contest pursuant to the Lease.
(i) Insurance. The Company shall be in compliance with all Insurance
Requirements. The Company shall deliver, or cause to be delivered, to the
Trustee, the Collateral Agent and the Agent (to the extent not previously
delivered) (i) certificates of insurance or other satisfactory assurances
evidencing the coverage of such policies in compliance with the Insurance
Requirements and (ii) copies of any exceptions to coverage of such policies.
(j) Recording and Filing. The Company shall have executed and delivered
to the Agent with respect to the Property or any portion thereof all Central
Filings or continuation statements or amendments thereto under the UCC and any
Fixture Filings (in accordance with Section 4.01(h)), in each case, (i) in
proper form to be duly recorded, published, registered and filed by the Company
(on behalf of the Trustee and the Collateral Agent) and (ii) as are necessary or
appropriate to establish, create, perfect, preserve, protect and publish notice
of a valid and effective first priority security interest and Lien on all the
Property in favor of the Trustee and the Collateral Agent superior and prior to
the rights of all third Persons and subject to no other Liens except in each
case for Permitted Encumbrances and Trust Encumbrances. In addition, all Taxes
fees and other charges payable in connection with such recording, publishing,
registration and filing shall have been paid or caused to be paid by the Company
(or provisions have been made to do so).
(k) Appraisal. An Appraisal of each Project for which Acquisition Costs
are to be funded (as described in the Requisition provided by the Company to the
Agent) shall have been conducted by an Appraiser, at the sole cost and expense
of the Company, demonstrating that both the current Appraised Value of the
Project and the expected fair market value of such Project at the Expiration
Date or, to the extent possible, the sum of the values of the Item of Property
with respect to such Project, are at least equal to the estimated Acquisition
Costs of the Project or Items of Property, as applicable.
(l) POPs. Prior to the funding of any Acquisition Costs for the
acquisition of or leasing of real property in connection with the construction
or installation of a POP, an Environmental Audit of the real estate shall have
been conducted by an Environmental Consultant, at the sole cost and expense of
the Company, which shall (i) conclude that no environmental hazards exist on the
Property that are unacceptable to the Holders and the Agent and based upon
anticipated and permitted
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practices and procedures, there is not likely to exist on or in respect of the
POP any environmental hazards where are unacceptable to the Holders or the Agent
and (ii) otherwise be in form and substance satisfactory to the Agent.
(m) Additional Documents. The Agent shall have received such other
approvals, certificates or documents as the Agent may reasonably request to
evidence satisfaction of the conditions set forth in this Section 2.02.
SECTION 2.03. Obligation Subsequent. The Company shall deliver to the
Agent, no later than September 22, 1998, validly executed Assignments of
Purchase Agreements together with consents to the Assignments of Purchase
Agreements validly executed by the respective contract vendors thereunder and in
form satisfactory to the Agent.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Representations and Warranties of the Company. The
Company hereby represents and warrants to the Trustee, the Collateral Agent, the
Agent, the Note Holders, the Certificate Holders and the APA Purchasers that the
following shall be true and correct on and as of the Initial Funding Date and on
and as of each Funding Date on which a Funding shall occur:
(a) Existence. Each of the Company and the Relevant Subsidiaries: (i)
is a corporation, partnership or other entity duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization;
(ii) has all requisite corporate or other power and authority, and has all
material governmental licenses, authorizations and Consents necessary to own its
assets and carry on its business as now being or as proposed to be conducted;
and (iii) is qualified to do business and is in good standing in all
jurisdictions in which the nature of the business conducted by it makes such
qualification necessary and where failure so to qualify could (either
individually or in the aggregate) have a Material Adverse Effect.
(b) Action; Enforceability. Each of the Company and the Relevant
Subsidiaries has all necessary corporate power, authority and legal right to
execute, deliver and perform its obligations under each of the Operative
Documents to which it is a party; the execution, delivery and performance by the
Company and each Relevant Subsidiary of the Operative Documents to which it is a
party has been duly authorized by all necessary corporate
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action on its part (including, without limitation, any required shareholder
approvals); and this Agreement and each of the other Operative Documents have
been duly and validly executed and delivered by the Company and each Relevant
Subsidiary party thereto and constitute, its legal, valid and binding
obligation, enforceable against the Company and each Relevant Subsidiary, as
appropriate, in accordance with its terms, except as enforceability thereof may
be limited by the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar Laws affecting creditors' rights generally
and by general principles of equity.
(c) Approvals. No Consents of, and no filings or registrations with,
any Governmental Authority, any securities exchange or any third party, are
necessary for the execution and delivery by the Company and the Relevant
Subsidiaries of the Operative Documents or the performance by the Company and
the Relevant Subsidiaries of the transactions contemplated to be performed by
the Company and the Relevant Subsidiaries by the Operative Documents or for the
legality, validity or enforceability hereof or thereof, except for such as have
been made or obtained and are in full force and effect.
(d) Litigation. Except as disclosed in the Guarantor's Public Filings,
there are no actions, suits, arbitrations, investigations or proceedings pending
or, to its knowledge, threatened against any of the Company or any of its
Subsidiaries or Relevant Subsidiaries or affecting any of their property or
assets before any Governmental Authority, (i) as to which individually or in the
aggregate there is a reasonable likelihood of an adverse decision which would
have, individually or in the aggregate, a Material Adverse Effect or (ii) which
involves this Agreement, any of the other Operative Documents or the
Securitization Documents or the consummation of the transactions contemplated
hereby or thereby.
(e) No Breach. None of the execution and delivery of this Agreement,
the other Operative Documents, the consummation of the transactions herein and
therein contemplated or compliance with the terms and provisions hereof and
thereof will conflict with or result in a breach of, or require any consent
under, the charter or by-laws of the Company or any Relevant Subsidiary, or any
applicable Law, or any order, writ, injunction or decree of any Governmental
Authority, or any agreement or instrument to which any of the Company, its
Subsidiaries or any of the Relevant Subsidiaries is a party or by which any of
them or any of their property or assets are bound or to which any of them is
subject, or constitute a default under any such agreement or instrument, or
(except for any Lien created pursuant to the Operative Documents) result in the
creation or imposition of any Lien upon any of the properties or assets of any
of the Company, its Subsidiaries or the Relevant Subsidiaries pursuant to the
terms of any such agreement or instrument.
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(f) Margin Regulations. No part of the proceeds of any Advance or
Investment will be used, whether directly or indirectly, and whether
immediately, incidentally or ultimately, (A) to purchase or carry Margin Stock
or to extend credit to others for the purpose of purchasing or carrying Margin
Stock or to refund indebtedness originally incurred for such purpose, or (B) for
any purpose which entails a violation of, or which is inconsistent with, the
provisions of the Regulations of the Federal Reserve Board, including Regulation
T, U or X. None of the Advances or the Investments will be used to finance a
hostile transaction.
(g) ERISA. Each Plan of the Company and, to the knowledge of the
Company, each Multiemployer Plan, is in compliance in all material respects
with, and has been administered in all material respects in compliance with, the
applicable provisions of ERISA, the Code and any other Law.
(h) Taxes. The Company and its Subsidiaries have filed or caused to be
filed all federal income Tax returns and all other material Tax returns that are
required to be filed by them and have paid all taxes due pursuant to such
returns or pursuant to any assessment received by the Company or any of its
Subsidiaries, except for any such Taxes, if any, that are being appropriately
contested in good faith by appropriate proceedings diligently conducted and with
respect to which adequate reserves have been provided. All Taxes, fees and other
charges which have become due and payable in connection with the execution and
delivery of the Operative Documents (or any memorandum thereof) have been paid.
The charges, accruals and reserves on the books of the Company and its
Subsidiaries in respect of taxes and other governmental charges are, in the
opinion of the Company, adequate.
(i) Investment Company Act. None of the Company or its Subsidiaries is
an "investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended, and none
of the Company or its Subsidiaries is subject to any statute or regulation which
prohibits or restricts the incurrence of the obligations under the Operative
Documents. None of the Company or its Subsidiaries is a "holding company", a
"subsidiary company" of a "holding company", an "affiliate" of a "holding
company", or an "affiliate" of a "subsidiary company" of a "holding company", in
each case as such term is defined in the Public Utility Holdings Company Act of
1935.
(j) Compliance with Laws and Other Agreements.
(i) None of the Company, its Subsidiaries and the Relevant
Subsidiaries is in default with respect to any order, writ, injunction
or decree of any Governmental Authority, to the knowledge of the
Company, in violation of any Law to which the
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Company, any of its Subsidiaries or any Relevant Subsidiary or any of
their property or assets is or are subject, which default or violation
could reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect or create any Trust Liability.
(ii) Neither the Company nor any of its Subsidiaries is in
default in any manner under any provision of any indenture or other
agreement or instrument evidencing Indebtedness, or any other material
agreement, lease or instrument to which it is a party or by which it or
any of its properties or assets are or may be bound, where such default
could result, individually or in the aggregate, in a Material Adverse
Effect.
(k) Subsidiaries, Etc. Set forth in Schedule 3.01 hereto is a complete
and correct list, as of the Initial Funding Date, of all of the Subsidiaries and
the Relevant Subsidiaries of the Company and the Guarantor, together with, for
each such Subsidiary, (i) the jurisdiction of organization of such Subsidiary
and Relevant Subsidiary, (ii) each Person holding ownership interests in such
Subsidiary and (iii) the percentage of ownership of such Subsidiary and Relevant
Subsidiary represented by such ownership interests. The capital stock of each
such Subsidiary is duly authorized, validly issued and fully paid and
nonassessable.
(l) True and Complete Disclosure. The information, reports, financial
statements, exhibits and schedules furnished in writing by or on behalf of the
Company to the Agent, the Collateral Agent, the Trustee, the Appraiser, any Note
Holder, any Certificate Holder, any APA Purchaser or Special Counsel in
connection with the negotiation, preparation or delivery of this Agreement, the
other Operative Documents, the Securitization Documents or any transaction
contemplated hereby or thereby or included herein or therein or delivered
pursuant hereto or thereto, when taken as a whole do not contain any untrue
statement of material fact or omit to state any material fact necessary to make
the statements herein or therein, in light of the circumstances under which they
were made, not misleading. All written information furnished after the date
hereof by the Company, its Subsidiaries or Relevant Subsidiaries to the Agent,
the Collateral Agent, the Trustee, the Appraiser, any Note Holder, any
Certificate Holder or Special Counsel in connection with this Agreement, the
other Operative Documents, the Securitization Documents and the transactions
contemplated hereby and thereby will be true, complete and accurate in every
material respect, or (in the case of projections) based on reasonable estimates,
on the date as of which such information is stated or certified. There is no
fact known to the Company that could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect that has not been
disclosed herein, in the other Operative Documents, in the Guarantor's Public
Filings
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or in a report, financial statement, exhibit, schedule, disclosure letter or
other writing furnished to the Agent, the Collateral Agent, the Trustee, the
Appraiser, any Note Holder or any Certificate Holder for use in connection with
the transactions contemplated hereby or thereby.
(m) Use of Proceeds. All proceeds with respect to the Advances and
Investments have been or shall be applied solely toward Acquisition Costs in
accordance with Article I.
(n) No Default. No event or condition exists which would constitute a
Default or an Event of Default.
(o) Compliance with Laws With Respect to the Property. The Company is
not in violation of any Law with respect to the Property or any part thereof, or
with respect to the acquisition, leasing, installation, construction, ownership
or operation of the Property or any part thereof, or with respect to the conduct
of its business relating to the Property or any part thereof or with respect to
its assets. The Company has not received any notice of, or citation for, any
violation of any Law which has not been resolved, which notice or citation
relates to the acquisition, ownership, leasing, installation, construction or
operation of the Property or any part thereof. The acquisition, ownership,
leasing, installation, construction or operation of the Property or any part
thereof by the Trustee, in accordance with the terms of the Operative Documents,
will not violate any Law or create any Trust Liability. The Property is in
material compliance with all existing applicable Laws.
(p) Recording and Filing. The appropriate Operative Documents (or
memoranda thereof) mortgages, deeds of trust and all financing and continuance
statements under the UCC or amendments thereto recorded or filed, or caused to
be recorded or filed, or to be recorded or filed, by the Company hereunder or
pursuant to the transactions contemplated by the Operative Documents (i) have
been or shall have been duly recorded, published, registered and filed and (ii)
when recorded or filed (and when any prior Liens are released pursuant to
Section 4.01(h)(ii)), establish, create, perfect, preserve, protect and publish
notice of a valid and effective first priority security interest and Lien on all
the Property in favor of the Trustee and the Collateral Agent superior and prior
to the rights of all third Persons and subject to no other Liens except in each
case for Permitted Encumbrances and Trust Encumbrances and (iii) all Taxes, fees
and other charges payable in connection with the recording, publishing,
registration and filing thereof, have been or shall have been paid, or caused to
be paid, in full by the Company.
(q) Rights to Property, Etc. (i) The Trustee has, or, upon the
acquisition, installation or construction thereof, will
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have, good and marketable title to the Property free and clear of all Liens,
except for Permitted Encumbrances.
(ii) Each Assignment of Purchase Agreement, transfers, assigns
and sets over, or shall transfer, assign and set over, to the Trustee
all of the Company's right, title and interest in and to the
acquisition of the Property under the applicable Equipment Purchase
Agreement, free and clear of all liens, encumbrances and restrictions,
other than Permitted Encumbrances and no authorizations, approvals or
consents of any third party are, or shall be, required thereby, except
for such as have been or shall have been obtained and are in full force
and effect.
(iii) (A) The Equipment Purchase Agreements are in full force
and effect and have not been amended, modified or changed in any
manner, (B) the Company has not received any notice, and to the
Company's knowledge no action has been threatened, for the purposes of
terminating any Equipment Purchase Agreement and (C) there are no
offsets, counterclaims or defenses to the obligations of the Company,
or to the Company's knowledge, the vendor under any Equipment Purchase
Agreement. The Company has furnished or caused to be furnished, true,
complete and correct copies of the Equipment Purchase Agreements to the
Agent. The representations and warranties made by each of the parties
to the Equipment Purchase Agreements contained in such Equipment
Purchase Agreements are or will be, to the Company's knowledge, true
and correct and are hereby incorporated by reference and made by the
Company, to its knowledge, to the Trustee, the Collateral Agent, the
Agent, the Note Holders and the Certificate Holders.
(iv) To the Company's knowledge, each vendor or seller of
Property to the Trustee under the Equipment Purchase Agreements has
good and marketable title to such Items of Property and the right to
transfer the same to the Trustee free and clear of all Liens.
(v) None of the Permitted Encumbrances will interfere with the
use or possession of the Property or any part thereof or any other
asset used in connection therewith or the use of or the exercise by the
Trustee or the Collateral Agent of its rights either under any
Operative Document or to the Property.
(vi) There are no material agreements, consents, instruments,
easements, leases, right-of-way, Permits, consents, licenses or other
rights necessary to acquire, own, lease, install, construct, operate or
use the Property which the Company does not have or will not be able to
obtain prior to the Completion Date.
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(vii) On or prior to the Completion Date, each Project and the
Property, as applicable, shall be designed, engineered, installed, and
constructed in a good and workmanlike manner, in accordance with
prudent industry practice and in material compliance with any and all
applicable building, construction, and safety codes for such
construction and installation, as well as any and all other applicable
Laws. On or prior to the Completion Date, each Project and the
Property, as applicable, shall perform in accordance with the testing
and performance standards contained in Exhibit C and any other
specifications provided by the Company to the Trustee from time to
time.
(viii) The Company is not in default under any of the existing
Underlying Rights that would permit the grantor of such Underlying
Right to terminate such Underlying Right prior to its stated expiration
date, or would otherwise materially, adversely impair or affect the
Company's ability to use, lease or own any of the Property, or exercise
its rights with respect thereto, and, to the best of its knowledge,
none of the grantors are in default under the existing Underlying
Rights. The Company is not aware of any circumstance that would
materially, adversely impair or affect the Trustee's ability to use,
lease or own any of the Property, or exercise its rights with respect
thereto.
(ix) The Company has no knowledge of any proposed, pending or
threatened change in any Law or standard applicable to any of the
Property that is likely to adversely affect the use of the Property.
(r) Trade Secrets and Patents. (i) The ownership and leasing of the
Property by the Trustee and the leasing of the Property by the Company do not
and will not conflict with, infringe on, or otherwise violate any copyright,
trademark, trade name, trade secret or patent rights of any other Person.
(ii) The Company has all rights to all patents, patent
applications, trademarks (whether registered or not), trademark
applications, trade names, proprietary computer software, "know-how"
and copyrights used or to be used in the ordinary course of the
operation of the Property (the "Intellectual Property Rights") that are
necessary for the operation thereof, including the right to assign the
Intellectual Property Rights. There is no judicial proceeding pending
or, to the knowledge of the Company, threatened, involving any claim of
any infringement, misuse or misappropriation by the Company or any
Affiliate thereof of any patent, trademark, trade name, copyright,
license or similar intellectual property right owned by any third party
related to the Intellectual Property Rights.
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(s) Environmental Compliance.
(i) The Property complies in all material respects with all
Environmental Laws and all necessary Environmental Permits have been
obtained and are in effect with respect to the Property and no
circumstances exist that could be reasonably likely to (A) form the
basis of an Environmental Action against the Property or (B) cause the
Property to be subject to any restrictions on ownership, occupancy, use
or transferability under any Environmental Law.
(ii) No portion of the Property is listed or proposed for
listing on the NPL or on CERCLIS or any analogous state list of sites
requiring investigation or cleanup.
(iii) No Hazardous Materials that have been generated at or
transported from any portion of the Property have been disposed at any
location that is listed or proposed for listing on the NPL or on the
CERCLIS or any analogous state list, and all Hazardous Materials
generated, used, treated, handled or stored at or transported to or
from the Property and any property currently or formerly owned or
operated by the Company have been disposed of in compliance with all
Environmental Laws and Environmental Permits.
(iv) The Company has not received any written or other notice,
mandate, order, Lien or request which remains pending under an
Environmental Law concerning the Property or any part thereof or
relating to an alleged violation of an Environmental Law concerning the
Property or any part thereof or relating to any potential adverse
action in any way involving environmental, health or safety matters
affecting the Property or any part thereof.
(v) There is no proceeding pending or, to the knowledge of the
Company, threatened against the Company by any federal, state, or local
court, tribunal, administrative agency, department, commission, board
or other authority or instrumentality with respect to the presence or
release of any Hazardous Material from the Property or any part
thereof.
(vi) No Hazardous Materials have been released from or on the
Property or any part thereof for which remedial action could be
required under any Environmental Law or may be necessary to prevent or
eliminate a significant risk to human health or the environment.
(t) No Condemnation, Casualty or Force Majeure. No portion of the
Property has suffered a Condemnation nor has the Property suffered a Casualty or
any other damage or destruction which renders it unusable in whole or in
material part, and, under applicable Law, the Property may be used for the
purposes contemplated by the Company in accordance with the Lease. No
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event of Force Majeure has occurred and is continuing which would adversely
affect the operation of the Property or any part thereof.
(u) Permits. All Permits (including Environmental Permits) that are or
will become Applicable Permits have been obtained, except Applicable Permits
customarily obtained or which are permitted by Law to be obtained after the
Initial Funding Date or such Funding Date, as the case may be (in which case the
Company having completed all appropriate diligence in connection therewith, has
no reason to believe that such Permits will not be granted in the usual course
of business prior to the date that such Permits are required by Law). All such
obtained Permits are in proper form, in full force and effect and not subject to
any further appeal or further contest or to any unsatisfied condition that may
allow modification or revocation.
(v) Insurance. The Company is in compliance with all Insurance
Requirements, and all insurance policies required the Lease are in full force
and effect.
(w) No Material Adverse Event. No applicable Law prohibits, and no
litigation, governmental investigation or other proceeding is pending or overtly
threatened in which there is a reasonable possibility of an unfavorable
judgment, decree, order or other determination which could prevent or make
unlawful, or impose any material adverse condition upon the acquisition, use,
ownership, operation or leasing of, including the Lessor's ownership and leasing
of, the Property.
(x) Ownership. The Guarantor beneficially owns all of the authorized,
issued and outstanding shares of capital stock of the Company.
(y) Year 2000 Compliance. The Company has (i) initiated a review and
assessment of all areas within its and each of its Subsidiaries' business and
operations (including those affected by suppliers, vendors and customers) that
could be adversely affected by the "Year 2000 Problem" (that is, the risk that
computer applications used by the Company or any of its Subsidiaries (or
suppliers, vendors and customers thereof) may be unable to recognize and perform
properly date-sensitive functions involving certain dates prior to and any date
after December 31, 1999), (ii) developed a plan and timeline for addressing the
Year 2000 Problem on a timely basis, and (iii) to date, implemented that plan in
accordance with that timetable. Based on the foregoing, the Company believes
that all computer applications (including those of its and any of its
Subsidiaries' suppliers, vendors and customers) that are material to its or any
of its Subsidiaries' business and operations are reasonably expected on a timely
basis to be able to perform date-sensitive functions for all dates before and
after January 1, 2000, except to the extent
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that a failure to do so could not reasonably be expected to have a Material
Adverse Effect.
SECTION 3.02. SSBTC Representations and Warranties. SSBTC, in its
individual capacity and not as Trustee (with the exception of subsection (f),
which representation and warranty is made by SSBTC solely in its trust capacity)
represents and warrants to the Company, the Guarantor, the Note Holders, the APA
Purchasers, the Certificate Holders, the Agent and the Collateral Agent that the
following statements are and shall be true and correct on and as of the Initial
Funding Date and on and as of each Funding Date:
(a) Organization and Authority. (i) SSBTC is a national banking
association duly organized, validly existing and in good standing under the laws
of the United States of America.
(ii) SSBTC has all requisite corporate power and authority to
execute and deliver each Operative Document to which it is a party and
to comply with the terms thereof and perform its obligations
thereunder.
(b) Pending Litigation. There is no pending or, to SSBTC's knowledge,
threatened, action, suit, investigation, litigation or proceeding, including,
without limitation, any Environmental Action, affecting SSBTC before any court,
governmental agency or arbitrator that (i) could be reasonably likely to have a
material adverse effect on SSBTC or (ii) purports to affect the legality,
validity or enforceability of this Agreement or any of the other Operative
Documents, the Securitization Documents or the consummation of the transactions
contemplated hereby or thereby.
(c) Authorization; No Conflict. The execution and delivery by SSBTC of,
and compliance by SSBTC with all of the provisions of, each Operative Document
to which it is a party and any other agreement entered into by SSBTC in
connection with any transaction contemplated by the Operative Documents are
within the powers of SSBTC and are authorized by all proper and necessary
corporate action and will not conflict with, result in any breach of any of the
provisions of, or constitute a default under, any organization document of SSBTC
or any judgment, injunction, order or decree to which SSBTC may be bound or
which is applicable to any of SSBTC's property or result in a violation of any
applicable Connecticut or federal Law governing the banking or trust powers of
SSBTC or in the creation of any Lien on any asset of SSBTC (except as
contemplated by the Operative Documents).
(d) Enforceability. Each Operative Document to which SSBTC is a party
and any other agreement entered into by SSBTC in connection with any transaction
contemplated by the Operative Documents is the legal, valid and binding
obligation of SSBTC
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enforceable against SSBTC in accordance with its terms, except as enforceability
thereof may be limited by the effect of any applicable bankruptcy, insolvency
reorganization, moratorium or similar Laws affecting creditors' rights generally
and by general principles of equity.
(e) Consents. The nature of SSBTC, its execution, delivery and
performance of each Operative Document to which it is a party, its consummation
of the transactions contemplated thereby, its compliance with the terms thereof
or any circumstance in connection with the transactions contemplated thereby
does not require the consent of any Person or the approval or authorization of,
or filing, registration or qualification with, any Federal or state governmental
authority governing the banking or trust powers of SSBTC (other than such as
have been obtained) as a condition to such execution, delivery, performance and
compliance.
(f) Enforceability Against Trustee. As of the Initial Funding Date, the
Instruments have been duly authorized by all necessary corporate action on the
part of the Trustee and the Instruments constitute the legal, valid and binding
obligations of the Trustee (acting solely as Trustee under the Declaration, and
not in its individual capacity).
(g) No Default. No event has occurred and no condition exists which,
upon consummation of the transactions contemplated by any Operative Document,
would constitute a default by the Trustee. SSBTC is not in violation in any
respect of any agreement or any other instrument, nor is SSBTC in violation of
its articles of association or any other instrument to which it is a party or by
which it or any of its property may be bound or affected which would have a
material adverse effect on either the business, financial position or results of
operations of SSBTC or SSBTC's ability to perform its obligations as Trustee
under the Operative Documents.
SECTION 3.03. Collateral Agent Representations and Warranties. The
Collateral Agent represents and warrants to the Company, the Guarantor, the
Agent, the Trustee, the Note Holders and the Certificate Holders that the
following statements are and shall be true and correct on and as of the Initial
Funding Date and on and as of each Funding Date:
(a) Organization and Authority. (i) State Street is a state chartered
trust company duly organized, validly existing and in good standing under the
laws of the Commonwealth of Massachusetts.
(ii) The Collateral Agent has all requisite power and
authority to execute and deliver each Operative Document to which it is
a party and to comply with the terms thereof and perform its
obligations thereunder.
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(b) Pending Litigation. There is no pending or, to the Collateral
Agent's knowledge, threatened, action, suit, investigation, litigation or
proceeding, affecting the Collateral Agent before any court, governmental body
or arbitrator tribunal that could be reasonably likely to have a material
adverse effect on the Collateral Agent or the Collateral Agent's ability to
perform its obligations under the Operative Documents or any other agreement
which it has entered into in connection with any transaction contemplated hereby
or thereby.
(c) Authorization; No Conflict. The execution, delivery and performance
by the Collateral Agent of, and compliance by the Collateral Agent with, all of
the provisions of each Operative Document to which it is a party or any other
agreement which it has entered into in connection with any transaction
contemplated thereby are within the corporate powers of the Collateral Agent,
have been duly authorized by all necessary corporate action by the Collateral
Agent and do not contravene, or constitute a default under, any material
provision of applicable Federal or Massachusetts Law governing its banking or
trust powers or any organization documents of the Collateral Agent or any
material agreement, judgment, injunction, order or decree binding upon the
Collateral Agent or result in the creation or imposition of any Lien on any
asset of the Collateral Agent (except as contemplated by the Operative
Documents).
(d) Enforceability. Each of the Operative Documents to which the
Collateral Agent is a party is the legal, valid and binding obligation of the
Collateral Agent enforceable against the Collateral Agent in accordance with its
terms.
(e) Consents. The Collateral Agent's execution, delivery and
performance of each Operative Document to which it is a party, does not require
the consent of any Person or the approval or authorization of, or filing,
registration or qualification with, any Federal or Massachusetts state
governmental authority governing the banking or trust powers of the Collateral
Agent on the part of the Collateral Agent (other than such as have been
obtained) as a condition to such execution, delivery, performance and
compliance.
(f) No Default. No event has occurred and no condition exists which,
upon consummation of the transactions contemplated by any Operative Document,
would constitute a default by the Collateral Agent. The Collateral Agent is not
in violation in any respect of any agreement, its organizational documents or
any other instrument to which it is a party or by which it or any of its
property may be bound or affected which would have a material adverse effect on
either the business, financial position or results of operations of the
Collateral Agent or the Collateral Agent's ability to perform its obligations as
Collateral Agent under the Operative Documents.
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ARTICLE IV.
COVENANTS
SECTION 4.01. Covenants of the Company. The Company covenants and
agrees as follows so long as this Agreement shall remain in effect or the
principal of or interest on any Note, the stated amount of or any Distributions
on any Certificate, any fees or any other expenses or amounts payable under any
Operative Document shall be unpaid, unless the Majority Holders shall otherwise
consent in writing:
(a) Existence, Etc. The Company will, and will cause each of the
Relevant Subsidiaries to:
(i) preserve and maintain its legal existence and all of its
rights, privileges, licenses and franchises which are material or are
required to lease, use and operate the Property and carry on its
business in substantially the same manner and in substantially the same
fields as such business is now carried on; provided that nothing in
this Section 4.01(a) shall prohibit any transaction expressly permitted
under Section 4.01(c) hereof;
(ii) comply with and cause the Property to comply with the
requirements of all applicable Laws and orders of governmental or
regulatory authorities if failure to comply with such requirements
could (either individually or in the aggregate) have a Material Adverse
Effect or create a Trust Liability;
(iii) pay and discharge all Taxes, assessments and
governmental charges or levies imposed on it or on its income or
profits or on any of its property or assets prior to the date on which
penalties attach thereto, except for any such Tax, assessment, charge
or levy the payment of which is being contested in good faith and by
proper proceedings and against which adequate reserves are being
maintained;
(iv) maintain all of its properties and assets used or useful
in its business in good working order and condition, ordinary wear and
tear excepted;
(v) do or cause to be done all things necessary to obtain,
preserve, renew, extend and keep in full force and effect the rights,
licenses, rights-of-way, permits, franchises, authorizations, patents,
copyrights, trademarks and trade names material to the conduct of its
business or are required to lease, use and operate the Property;
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(vi) keep adequate records and books of account, in which
complete entries will be made in accordance with GAAP consistently
applied; and
(vii) permit representatives of any Note Holder, Certificate
Holder, the Trustee, the Collateral Agent or the Agent, during normal
business hours, to examine, copy and make extracts from its books and
records, to inspect any of its properties, and to discuss its business
and affairs with its officers, all to the extent reasonably requested
by such Note Holder, Certificate Holder, Trustee, Collateral Agent or
Agent (as the case may be), and permit any representatives of any Note
Holder or Certificate Holder to discuss the affairs, finances and
condition of such the Company and its Material Subsidiaries with the
independent accountants thereof.
(b) Litigation. The Company will, and will cause the Relevant
Subsidiaries promptly to, and in any event within fifteen (15) days, give to the
Agent, the Collateral Agent, the Trustee, the Certificate Holders and the Note
Holders notice of all legal or arbitral proceedings (including any proceeding or
investigation by or before any Governmental Authority) affecting the Company or
any of the Relevant Subsidiaries (i) that could (either individually or in the
aggregate) be reasonably expected to have a Material Adverse Effect or (ii) that
questions or challenges the validity or enforceability of any of the Operative
Documents and, to the extent permitted by Law, the Company shall include with
such notice a copy of all documents served on the Company or the Relevant
Subsidiaries relating to any such legal or arbitral proceeding.
(c) Prohibition of Fundamental Changes. The Company will not, nor will
it permit any of its Relevant Subsidiaries to, enter into any transaction of
merger or consolidation or amalgamation, or liquidate, wind up or dissolve
itself (or suffer any liquidation or dissolution) or sell all or substantially
all of its assets. Notwithstanding the foregoing provisions of this Section
4.01(c):
(i) the Company may be merged or consolidated with or into the
Guarantor;
(ii) any Relevant Subsidiary of the Company may be merged or
consolidated with or into: (A) the Company if the Company shall be the
continuing or surviving corporation or (B) any other Subsidiary of the
Company; provided that (x) if any such transaction shall be between a
Relevant Subsidiary and a Wholly-Owned Subsidiary, the Wholly-Owned
Subsidiary shall be the continuing or surviving corporation and (y) no
Default or Event of Default shall have occurred and be continuing or
would result therefrom; and
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(iii) the Company or any Relevant Subsidiary of the Company
may merge or consolidate with any other Person (other than the
Guarantor) if (A) in the case of a merger or consolidation of the
Company, the Company is the surviving corporation and, in the case of a
Relevant Subsidiary of the Company, the surviving corporation is a
Wholly-Owned Subsidiary of the Company, (B) in transactions involving
the Company, written notice thereof is provided to the Agent, the
Collateral Agent, the Trustee, the Note Holders and the Certificate
Holders at least 15 days in advance and (C) after giving effect thereto
no Default, Event of Default or Environmental Trigger shall have
occurred and be continuing or would result therefrom.
(d) Event of Default. As soon as possible and in any event within five
(5) days after the occurrence of, or within five (5) days of the date the
Company or the Guarantor becomes aware of the occurrence of, an Event of Default
or an event which, with the giving of notice or lapse of time or both, would
constitute an Event of Default, continuing on the date of such statement, a
statement of an Executive Officer of the Company setting forth the details of
such Event of Default or event and the actions, if any, which the Company has
taken and proposes to take with respect thereto.
(e) Use of Proceeds; Application of Proceeds to Acquisition Costs. The
Company shall use proceeds of the Advances and Investments received by it solely
to pay Acquisition Costs in accordance with Article I hereof. The Company shall
provide such evidence with respect to the use of such proceeds as may be
reasonably requested by the Agent. None of the Advances or the Investments will
be used in violation of any applicable Law, including Regulation D, Regulation
T, Regulation U and Regulation X.
(f) Liens. The Company shall not, directly or indirectly, sublease,
sell, assign, transfer or otherwise dispose of, or create or suffer to exist any
Lien encumbering the Lease or the Property or any interest therein or portion
thereof (except as otherwise permitted under the Operative Documents).
(g) Status. The Company shall not:
(i) Be or become an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended; or
(ii) Be or become a "holding company", or a "subsidiary
company" of a "holding company", or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company", or a
"public utility"
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within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
(h) Recording and Filing. (i) Within thirty (30) days of commencement
of installation in any county with respect to a Project, the Company shall cause
to be filed all Fixture Filings, continuance statements or amendments thereto
under the UCC as are necessary or appropriate to establish, create, perfect,
preserve, protect and publish notice of a valid and effective first priority
security interest and Lien on the Property constructed, installed or otherwise
located, or to be constructed, installed or otherwise located, in such county in
favor of the Trustee and the Collateral Agent superior and prior to the rights
of all third Persons and subject to no other Liens except, in each case, for
Permitted Encumbrances and Trust Encumbrances;
(ii) To the extent that any third Person shall have acquired a
security interest or Lien on any Property with respect to any such
Property, the Company shall cause such third Person's security interest
with respect to such Property to be released, removed or otherwise
canceled; and
(iii) Subject to the terms of the Lease, the Company at all
times shall maintain or shall cause to be maintained the Trustee's and
the Collateral Agent's first priority security interest in the Property
created under any Central Filing, Fixture Filing or otherwise pursuant
to the Operative Documents.
(i) Performance. The Company shall observe and perform, and cause each
of the Relevant Subsidiaries to observe and perform, all provisions to be
observed or performed by it contained in each Operative Document to which it is
a party, in accordance with the terms thereof and within the times permitted
thereby (including any grace or cure periods provided thereby) and will
maintain, or cause to be maintained, the validity and effectiveness of each such
Operative Document to which it is a party.
(j) Obligations and Taxes. The Company shall, and shall cause its
Subsidiaries to, pay its Indebtedness and other obligations promptly and in
accordance with their terms and pay and discharge promptly when due all Taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits or in respect of its property, before the same shall become
delinquent or in default, as well as all lawful claims for labor, materials and
supplies or otherwise which, if unpaid, might give rise to a Lien upon such
properties or any part thereof; provided, however, that such payment and
discharge shall not be required with respect to any such tax, assessment,
charge, levy or claim so long as the validity or amount thereof shall be
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contested in good faith by appropriate proceedings and the Company or such
Subsidiary shall have set aside on its respective books adequate reserves with
respect thereto.
(k) Pari Passu Ranking. The Company shall take, or cause to be taken,
all action that may be or become necessary or appropriate to ensure that its
obligations under the Operative Documents will continue to constitute its direct
and unconditional obligation, ranking at least pari passu in right of payment
with all other present and future unsecured Indebtedness of the Company.
(l) Action With Respect to the Property. The Company (i) shall use its
best efforts to cause the Equipment Purchase Agreements to remain in full force
and effect and (ii) shall not, without the prior written consent of the Trustee,
consent to, cause or allow any change order, change directive, amendment,
modification or other change in (or waiver or release of) the Equipment Purchase
Agreements which would (A) materially reduce the fair market value of the
Property; (B) materially reduce the capacity, efficiency or projected useful
life of the Property; (C) materially change the use of the Property; or (D)
result in the failure to complete the acquisition, installation, construction
and start-up of the Projects on or prior to the Date Certain free and clear of
any Liens for labor, services or materials or otherwise in compliance with the
requirements of the Operative Documents and all applicable Legal Requirements
and Insurance Requirements.
(m) Payment of Fees. The Company shall pay all Commitment Fees,
structuring fees, Trustee fees and other fees set forth in Schedule II, at the
times and in the manner set forth therein.
(n) Year 2000 Compliance. The Company shall promptly notify the Agent,
the Collateral Agent, the Trustee, the Certificate Holders and the Note Holders
if the Company discovers or determines that any computer application (including
those of its or any of its Subsidiaries' suppliers, vendors and customers) that
is material to its or any of its Subsidiaries' business and operations will not
be able to perform properly date-sensitive functions for all dates before and
after January 1, 2000, except to the extent that such failure could not
reasonably be expected to have a Material Adverse Effect.
SECTION 4.02. Covenants of the Parties. The Company, the Trustee, the
Note Holders, the Certificate Holders, the Collateral Agent and the Agent,
covenant and agree as follows so long as this Agreement or the Lease shall
remain in effect or the principal of or interest of any Note, the stated amount
of or any Distributions on any Certificate, any fees or any other expenses or
amounts payable under any Operative Document shall be unpaid, unless the
Majority Holders shall otherwise consent in writing:
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(a) Restructuring Covenant. At the written request of the Agent, if the
conditions precedent contained in Sections 2.01(e)(ii) and 2.02(f)(ii) hereof
cannot be fulfilled to the satisfaction of the Agent for any reason, the parties
will take such reasonable steps to (i) modify the structure of the transactions
contemplated by this Agreement and the other Operative Documents and (ii) amend,
restate or enter into such additional agreements as may be reasonably necessary
or appropriate (in the opinion of the Agent and Special Counsel) to ensure
fulfillment of the conditions precedent contained in Sections 2.01(e)(ii) and
2.02(f)(ii) hereof and will use their reasonable best efforts to maintain both
the respective economic interests of the parties hereto and the desired tax and
accounting treatments with respect to the Lease. The Company will be responsible
for all reasonable fees (including reasonable attorney's fees) and out-of-pocket
expenses of the Trustee, the Agent, the Collateral Agent, the Note Holders and
the Certificate Holders in connection therewith.
ARTICLE V.
THE NOTES AND THE EQUITY INVESTMENT
SECTION 5.01. Applicable Rate.
(a) Notes. (i) The outstanding principal amount of the Notes shall bear
interest at a rate per annum equal to the Applicable Rate.
The Applicable Rate on the Notes shall be:
(A) The Quoted Rate, except as provided in clause (B)
or (C) below;
(B) The APA Rate for (x) the Principal Portion of all
Percentage Interests acquired by the APA Purchasers and not
repurchased under the APA or repaid, and (y) the principal
amount of Notes attributable to CXC Advances or portion
thereof that has been assigned to CXC's Credit Enhancer or in
respect of which a draw has been made under the insurance
policy or surety bond issued under the Insurance Agreement; or
(C) The Default Rate, to the extent provided in
5.01(c).
(ii) CNAI shall deliver an APA Purchase Notice to the Agent
(and the Agent shall promptly deliver such notice to the Trustee and
the Company) on the date of each purchase (or as soon thereafter as
practicable) of a Percentage Interest pursuant to the APA. If an APA
Purchase Notice is delivered to an APA Purchaser not later than 12:00
Noon (New York time) on the third
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LIBO Business Day prior to the purchase date designated in such APA
Purchase Notice, the first Interest Period after the purchase of a
Percentage Interest shall be one month commencing on the date of such
purchase, and the APA Rate for such Interest Period with respect to the
Principal Portion of Percentage Interests purchased pursuant to such
APA Purchase Notice shall be the LIBO Rate for such Interest Period. If
an APA Purchase Notice is delivered to an APA Purchaser later than
12:00 Noon (New York time) on the third LIBO Business Day prior to the
purchase date designated in such APA Purchase Notice, the APA Rate for
the Principal Portion of the Percentage Interest purchased pursuant to
such APA Purchase Notice shall be determined by reference to the Base
Rate until such time as the Applicable Rate is determined by reference
to a LIBO Rate or the Quoted Rate pursuant to this Section 5.01.
(iii) In the event any Borrower Percentage Interests acquired
by the APA Purchasers are repurchased by the SPV pursuant to the APA
from proceeds of CXC Advances, the Applicable Rate with respect to the
principal portion of the Notes equal to the Principal Portion of the
Borrower Percentage Interests so repurchased shall be converted from
the APA Rate to the Quoted Rate effective as of the date of such
repurchase. CNAI shall deliver a copy of any notice of such repurchase
given by the SPV under the APA to the Agent (and the Agent shall
promptly deliver such notice to the Trustee and the Company) on the
date of each such repurchase of a Borrower Percentage Interest (or as
soon thereafter as practicable).
(iv) In the event CXC Advances (or any portion thereof) are
assigned to CXC's Credit Enhancer or a draw is made with respect
thereto under the insurance policy or surety bond issued under the
Insurance Agreement, CNAI shall deliver notice of such event to the
Agent (and the Agent shall promptly deliver such notice to the Trustee
and the Company) as soon as practicable. The APA Rate with respect to
the principal amount of Notes applicable thereto shall be determined by
reference to the Base Rate until such time as the Applicable Rate is
determined by reference to a LIBO Rate pursuant to this Section 5.01.
(b) Certificates. The stated amount of the Certificates shall earn
current yield at a rate per annum equal to the Applicable Rate.
The Applicable Rate on the Certificates, for any Interest Period, shall
be:
(i) The sum of (x) either the LIBO Rate or Base Rate, as
selected pursuant to Section 5.01(d), plus (y) the Applicable Margin,
except as provided in clause (ii) below; or
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(ii) The Default Rate, to the extent provided in Section
5.01(c).
(c) Default Rate. The Notes shall bear interest on the unpaid principal
amount thereof, and the Certificates shall bear yield on the unpaid stated
amount thereof, at a rate per annum equal to the Default Rate during any period
from and after the date any Event of Default has occurred until the earlier of
(x) the date such Event of Default has been waived or cured and (y) the date the
Notes or Certificates, as the case may be, (and other amounts due and owing
under the Operative Documents) have been paid in full. The Notes shall bear
interest on any amount of principal, premium or interest, and the Certificates
shall bear yield on any stated amount, premium or yield, which is not paid as
and when due, from the date such payment was due until such payment (together
with such interest or yield, as the case may be) is paid, at the Default Rate.
In no event shall the interest on the Notes or the yield on the Certificates
exceed the Maximum Rate.
(d) Determination of Rates. The Company shall select whether the
Applicable Rate for the Certificates and the APA Rate for the Notes will be
determined by reference to the LIBO Rate or the Base Rate by giving notice (by
telephone, promptly confirmed in writing) of that determination to the Trustee
and the Agent. Such notice shall be given no later than 12:00 Noon (New York
time) (i) in the case of the LIBO Rate designation on the third LIBO Business
Day before, and (ii) in the case of the Base Rate designation on, each Interest
Setting Date. If the Applicable Rate is to be determined by reference to the
LIBO Rate, the notice shall also specify the Interest Period selected by the
Company for which the LIBO Rate should be determined. If the Company fails to
timely give notice of such selection, the Company shall be deemed to have
selected for the Applicable Rate to be determined by reference to the LIBO Rate
for a one month Interest Period.
(e) Conversion of Applicable Rates. With respect to all Instruments
(other than the portion of the Notes bearing interest at the Quoted Rate) and
subject to the notice requirement set forth in Section 5.01(d) and to the
payment of all Break Costs required pursuant to Section 5.06, the Company may
elect to convert the reference for the Applicable Rate from the LIBO Rate to the
Base Rate, or elect a different Interest Period, on any Business Day with notice
to the Agent. Subject to the notice requirement set forth in Section 5.01(d),
the Company may elect to convert the reference for the Applicable Rate from the
Base Rate to the LIBO Rate on three Business Days prior notice to the Agent.
(f) Number of Elections. All elections by the Company hereunder shall
be subject to the limitations set forth in the definitions of Interest Period,
Interest Setting Date and Payment
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Date. Except as provided in Section 5.01(a)(ii), any Applicable Rate and
Interest Period selected by the Company shall apply to all outstanding Notes.
(g) Computations. All computations of interest and of any fee payable
hereunder and under any other Operative Document (other than computations made
for purposes of determining the Maximum Rate) shall be made by the Agent on the
basis of a year of 360 days (365 or 366 days, in the case of the computation of
interest if the Applicable Rate is determined by reference to the Base Rate),
for the actual number of days (including the first day but excluding the last
day) occurring in the period for which such interest or fee is payable.
(h) Rate Determination by Agent. On each Interest Setting Date
(applicable to an election of the Company to have the Applicable Rate determined
by reference to the LIBO Rate), the Agent shall calculate the LIBO Rate. Upon
determination of the LIBO Rate on the Interest Setting Date, the Agent shall
promptly notify the Holders and the Trustee and, (i) to the extent the Agent has
received an APA Purchase Notice (and has not received a notice of repurchase of
Borrower Percentage Interests as described in Section 5.01(a)(iii), with respect
thereto, the Agent shall also notify the applicable APA Purchasers and (ii) to
the extent the Agent has received a notice from CNAI as described in Section
5.01(a)(iv), the Agent shall also notify CXC's Credit Enhancer. Each
determination by the Agent of an interest rate hereunder or under any other
Operative Document shall be conclusive and binding for all purposes, absent
manifest error.
(i) Applicable Rate Not To Exceed Maximum Rate. The Applicable Rate
shall not exceed the Maximum Rate provided for in Section 8.17.
(j) Interest Payment. Interest and Certificate Yield accrued and unpaid
on the Notes and Certificates, respectively, shall be payable on each Payment
Date; provided, however, that Certificate Yield which accrues during the
Certificate Yield Capitalization Period shall not be paid in cash on any Payment
Date occurring during the Certificate Yield Capitalization Period and on each
Payment Date occurring during the Certificate Yield Capitalization Period, such
Certificate Yield shall be capitalized and added to the stated amount of such
Certificate Holder's Certificate on which such capitalized Certificate Yield
shall have accrued.
SECTION 5.02. Increased Costs, Illegality, Etc.
(a) LIBO Rate Unavailable. In the event any Note Holder or Certificate
Holder shall have determined (which determination shall, absent manifest error,
be final and conclusive and binding upon all parties but, with respect to the
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following clause (i), shall be made only after consultation with the Company and
the Agent):
(i) On any Interest Setting Date, that by reason of any
changes arising after the Initial Funding Date, adequate and fair means
do not exist for ascertaining the Applicable Rate by reference to the
LIBO Rate; or
(ii) At any time, that the relevant LIBO Rate shall not
represent the effective pricing for funding or maintaining any of the
Instruments held by such Holder because of (A) any change since the
Initial Funding Date in any applicable Law, including the introduction
of any new Law or governmental rule, regulation, guideline, order,
directive or policy (whether or not having the force of Law) (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 covered by Section 5.02(c) and changes in
United States federal income Tax Laws), or (B) other circumstances
affecting such Holder or the London interbank market or the position of
such Holder in such market (excluding, however, increased Funding Costs
of a specific Holder as a result of the credit standing of such
Holder); or
(iii) At any time, that the determination of the Applicable
Rate by reference to the LIBO Rate has become unlawful (as determined
by such Holder in good faith) or has become impracticable as a result
of a contingency occurring after the Initial Funding Date which
materially and adversely affects the London interbank market;
then, and in any such event, such Holder shall give notice (by telephone,
promptly confirmed in writing) to the Trustee, the Agent and the Company of such
determination. Thereafter (x) in the case of clauses (i) and (ii) above, the
Company shall pay to such Holder, upon written demand therefor, such additional
amounts (in the form of Additional Rent established as an increased rate of, or
a different method of calculating, interest or yield on such Holder's
Instruments or otherwise as such Holder in its sole discretion shall determine)
as shall be required to cause such Holder to receive interest or yield with
respect to its affected Instruments at a rate per annum which shall be equal to
the Applicable Margin in excess of the effective pricing to such Holder to
maintain such Instruments (a written notice as to the additional amounts owed
such Holder, showing the basis for the calculation thereof, submitted to the
Agent, the Trustee and the Company by such Holder shall, absent manifest error,
be final and conclusive and binding upon all of the parties) and (y) in the case
of clause (iii) above, the Company and such Holder shall convert the Applicable
Rate to an APA Rate (in the case of the Notes) or an Applicable Rate (in the
case of the Certificates) to be determined by reference to the Base Rate (as
specified in
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Section 5.02(b)) as promptly as possible and, in any event, within the time
period required by Law.
(b) Base Rate Conversion. At any time that any Holder is affected by
the circumstances described in Section 5.02(a), the Company may (and in the case
of a Holder affected pursuant to Section 5.02(a)(iii) the Company shall) have
the Applicable Rate on the Notes subject to the APA Rate or the Applicable Rate
on the Certificates held by such Holder redetermined by reference to the Base
Rate (rather than the LIBO Rate). If the Applicable Rate with respect to such
Instruments is redetermined, then the Fixed Rent under the Lease shall be
adjusted in a manner designated by the Agent to take such redetermination into
account.
(c) Reserves for Eurocurrency Liabilities. In the event that any Holder
shall determine (which determination shall, absent manifest error, be final and
conclusive and binding on all parties hereto) at any time that by reason of
Regulation D such Holder is required to maintain reserves in respect of
Eurocurrency Liabilities during any period that the Applicable Rate is
determined by reference to the LIBO Rate, then such Holder shall promptly notify
the Trustee, the Agent and the Company (by telephone, promptly confirmed in
writing) specifying the additional amounts required to indemnify such Holder
against the costs of maintaining such reserves (such written notice to provide
in sufficient detail a computation of such additional amounts) and the Company
shall pay such specified amounts as Additional Rent at the time that it is
otherwise required to pay Fixed Rent (or, if later, on demand).
(d) Capital Adequacy. If after the Initial Funding Date, any Holder
shall determine (which determination shall, absent manifest error, be final and
conclusive and binding on all parties hereto) that the introduction of any
applicable Law regarding capital adequacy, or any change therein, or any change
in the interpretation or administration thereof by any Governmental Authority
charged with the interpretation or administration thereof, or compliance by any
Holder (or its lending office) with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such Governmental
Authority affects or would affect the amount of capital required or expected to
be maintained by such Holder or any Person controlling such Holder and that the
amount of such capital is increased by or based upon the Instruments held by
such Holder or the existence of such Holder's Note Commitment and Certificate
Commitment and other commitments of this type, then from time to time after
demand for reimbursement by such Holder (with a copy to the Trustee and the
Agent), the Company shall pay to such Holder (as Additional Rent) such
additional amount or amounts as will compensate such Holder or such Person in
the light of such circumstances, to the extent that such Holder reasonably
determines such increase in capital to be allocable to
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the Instruments held by such Holder or the existence of such Holder's commitment
hereunder (for purposes of this Section 5.02(d), any increase in capital
allocable to, or compensation attributable to, a period prior to the publication
or effective date of such introduction, change, request, or directive shall be
deemed to be incurred on the later of such publication or effective date). Each
Holder, upon determining in good faith that any additional amounts will be
payable pursuant to this Section 5.02(d), will give prompt written notice
thereof to the Company with a copy to the Trustee and the Agent, which notice
shall show a reasonable basis for calculation of such additional amounts and
shall document that such amounts are generally being charged by such Holder to
other similarly situated Persons under similar credit facilities; provided that
the failure to give any such notice shall not, unless such notice fails to set
forth the information required above or except as otherwise expressly provided
in this Section 5.02(d), release or diminish any of the Company's obligations to
pay additional amounts pursuant to this Section 5.02(d) or the Lease. To the
extent the notice required by this Section 5.02(d) is given by any Holder more
than 90 days after the occurrence of the event giving rise to the additional
costs of the type described in this Section 5.02(d), such Holder shall not be
entitled to compensation under this Section 5.02(d) for any amounts incurred or
accruing for a period longer than 90 days prior to the giving of such notice to
the Company.
(e) Replacement Holder. If any Holder is owed Additional Costs under
Sections 5.02(a) or (d), the Company shall have the right (unless such Holder
withdraws its request for such Additional Costs), if no Default, Event of
Default or Environmental Trigger then exists, to replace such Holder with
another commercial bank reasonably acceptable to the Agent; provided that (i)
all amounts owed to the Holder being replaced under the Operative Documents
(including the principal, stated amount and accrued interest or yield under its
Instruments and all unpaid Additional Costs) shall be paid in full to such
Holder concurrently with such replacement, (ii) the replacement commercial bank
shall execute a document satisfactory to the Agent pursuant to which it becomes
a party hereto with a Note Commitment, a Certificate Commitment and Instruments
in a principal or stated amount equal to that of the Holder being replaced and
(iii) upon such execution of such documents referred to in clause (ii) and the
payment of amounts referred to in clause (i), the replacement commercial bank
shall constitute a "Holder" hereunder with commitments and Instruments as so
specified and the Holder being so replaced shall no longer constitute a "Holder"
hereunder. The provisions of this Section 5.02(e) shall not apply to APA
Purchasers holding Percentage Interests.
(f) Securitization Parties. For purposes of this Section 5.02, (i) each
APA Purchaser holding a Percentage Interest shall, to the extent and for so long
as it holds such
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Percentage Interest, be deemed a Note Holder with respect to the Principal
Portion of such Percentage Interest, and (ii) CXC's Credit Enhancer shall be
deemed a Note Holder to the extent of the principal amount of Notes attributable
to CXC Advances or portion thereof that has been assigned to CXC's Credit
Enhancer or in respect of which a draw has been made under the insurance policy
or surety bond issued under the Insurance Agreement, for so long as it holds any
such interest.
SECTION 5.03. Assignments and Participations.
(a) No Assignment by Company. The Company may not assign its rights or
delegate its obligations under this Agreement without the prior written consent
of the Agent, the Trustee and all of the Note Holders and the Certificate
Holders. Upon an assignment to and assumption by a Person of the rights and
obligations of the Company under and in compliance with this Agreement, the
representations, warranties and covenants of the Company and the conditions
applicable to the Company hereunder shall thereafter apply to such Person and
not to the Company.
(b) Assignment of Instruments and Commitments. In addition to the
assignments permitted under Section 5.03(h), each of the Note Holders and
Certificate Holders may assign to one or more Eligible Assignees all or a
portion of the Instruments then held by it and its rights and obligations
thereunder and under this Agreement (including, without limitation, all or a
portion of its Note Commitment and Certificate Commitment and/or the Advances
under its Notes and/or its Investment under its Certificates) and the other
Operative Documents; provided, however, that (i) each assignment of Certificates
shall be of a constant, and not a varying, percentage of all such rights and
obligations; (ii) each assignment of Notes shall be of a pro rata share of each
series of Notes then held by such Note Holder (it being understood that the
Certificates may be assigned independently of the Notes); (iii) at any time
following the termination of the APA in the case of an assignment of Notes, the
aggregate principal amount of the Notes being assigned pursuant to each such
assignment (determined as of the date of the Assignment and Acceptance
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with respect to such assignment) shall in no event be less than $5 million (or
$1 million, with respect to the Certificates) in original principal amount or
stated amount (as the case may be) and in integral multiples of $1 million in
excess thereof; (iv) at any time following the termination of the APA in the
case of an assignment of Notes, no such assignment shall be made if as a result
thereof after giving effect to such assignment, any assigning Note Holder's
aggregate Note Commitment or, after the Completion Date, aggregate principal
amounts of its Outstanding Notes is less than $5 million or any assigning
Certificate Holder's Certificate Commitment or, after the Completion Date,
aggregate stated amount of its Outstanding Certificates is less than $1 million
(in each case determined as of the date of the Assignment and Acceptance with
respect to such assignment); provided, however, that the required denominations
for portions of the Instruments being assigned under this Section 5.03(b) shall
not be construed to prevent an assignment of the entire principal and stated
amount of the Notes then held by a Note Holder or an assignment of all of the
Certificates then held by Certificate Holders; and (v) except in the case of an
assignment pursuant to the APA, the parties to each such assignment shall
execute and deliver to the Agent for its acceptance and recording in the Record
an amendment to this Agreement or a supplemental agreement with the assigning
Note Holder or Certificate Holders in form and substance satisfactory to the
Agent (the "Assignment and Acceptance"), with an administrative fee of $3,000 to
be paid by the Assignor (as defined below) to the Agent and (vi) in the case of
an assignment pursuant to the APA, if the parties to such assignment shall
execute and deliver a Purchaser Assignment (as defined in the APA), a
counterpart original of such Purchaser Assignment shall be delivered to the
Agent for its Recording in the Record and, upon receipt by the Agent, shall be
deemed to be an Assignment and Acceptance for the purposes of this Agreement.
Upon such execution, delivery, acceptance and recording, from and after the
effective date specified in each Assignment and Acceptance, (x) the assignee
thereunder (the "Assignee") shall be a party hereto and to the other Operative
Documents to which the Note Holders or the Certificate Holders (as the case may
be) are parties and, to the extent that rights and obligations hereunder have
been assigned to and assumed by it, have the rights and obligations of a Note
Holder or Certificate Holders (as the case may be) hereunder and under the
Operative Documents and (y) the assignor thereunder (the "Assignor") shall, to
the extent that rights and obligations hereunder have been assigned by it,
relinquish its rights (other than any rights to indemnification it may have
hereunder or under the Operative Documents) and be released from its obligations
under this Agreement (other than the confidentiality obligations set forth in
Section 8.16 hereof) and the other Operative Documents with respect to all or
such portion, as the case may be, of its Note Commitments or Certificate
Commitments (as the case may be) (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of Assignor's rights and
obligations under the Agreement and the other Operative Documents, such Assignor
shall, except as set forth above, cease to be a party hereto).
(c) Assignment and Acceptance. By executing and delivering an
Assignment and Acceptance, the Assignor thereunder and the Assignee thereunder
confirm to and agree with each other and the other parties hereto as follows:
(i) other than as provided in such Assignment and Acceptance, such Assignor
makes no representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in connection with
this Agreement and the other Operative Documents or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement,
the other
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Operative Documents or any other instrument or document furnished pursuant
hereto or thereto; (ii) such Assignor makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the Company
or the Guarantor or the performance or observance by the Company or the
Guarantor of any of their respective obligations under this Agreement or any
other Operative Document, or any other instrument or document furnished pursuant
hereto; (iii) such Assignee confirms that it has received a copy of this
Agreement, and such other documents and information as it has deemed appropriate
to make its own credit analysis and decision with respect to entering into such
Assignment and Acceptance; (iv) such Assignee will, independently and without
reliance upon the Agent, the Guarantor, the Company, the Trustee, the Collateral
Agent, such Assignor or any other Note Holder or Certificate Holders (as the
case may be) and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement; (v) such Assignee confirms that it is an
Eligible Assignee; (vi) such Assignee appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers under this
Agreement and the other Operative Documents as are delegated to the Agent by the
terms hereof and thereof, together with such powers as are reasonably incidental
thereto; and (vii) such Assignee agrees that it will perform in accordance with
their terms all of the obligations which by the terms of this Agreement are
required to be performed by it as a Note Holder or Certificate Holders (as the
case may be).
(d) Record. The Agent shall maintain at its address listed on Schedule
I hereto a copy of each Assignment and Acceptance delivered to and accepted by
it and a register for the recordation of the names and addresses of the Note
Holders and the Certificate Holders and the Note Commitment and the Certificate
Commitment of, and principal amount of the Advances and stated amount of the
Investment, as applicable, owing to, each Note Holder and Certificate Holder
from time to time (the "Record"). The entries in the Record shall be conclusive
and binding for all purposes, absent manifest error, and the Company, the
Guarantor, the Agent, the Trustee, the Collateral Agent, the Certificate Holder
and the Note Holders may treat each Person whose name is recorded in the Record
as a Note Holder or Certificate Holder (as the case may be) hereunder for all
purposes of this Agreement. The Record shall be available for inspection by the
Company or any Note Holder or Certificate Holders at any reasonable time and
from time to time upon reasonable prior notice.
(e) Assignment Procedures. Upon its receipt of an Assignment and
Acceptance executed by an Assignor and an Assignee representing that it is an
Eligible Assignee, the Agent shall, if such Assignment and Acceptance has been
completed, give prompt
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oral or written notice to the Company and the Trustee and (i) accept such
Assignment and Acceptance, and (ii) record the information contained therein in
the Record. The Agent shall provide the Company with a current list of all Note
Holders and Certificate Holders at the Company's reasonable request but no more
frequently than quarterly.
(f) Participations. Each Note Holder and Certificate Holder may sell
participations to one or more banks or other entities in or to all or a portion
of the Instruments then held by it and its rights and obligations thereunder and
under this Agreement and the other Operative Documents including, without
limitation, participations and other rights assigned or granted by the SPV
pursuant to the APA; provided, however, that (i) the obligations of such Note
Holder or Certificate Holder (as the case may be) under this Agreement
(including all or a portion of its Note Commitment or Certificate Commitment (as
the case may be)) and the other Operative Documents shall remain unchanged; (ii)
such Note Holder shall remain the Holder of such Note, and such Certificate
Holder shall remain the holder of such Certificate, for all purposes under this
Agreement and the other Operative Documents and the Company, the Guarantor, the
Agent, the Collateral Agent, the Trustee and the other Note Holders and
Certificate Holders shall continue to deal solely and directly with such Note
Holder or Certificate Holder (as the case may be) in connection with the rights
and obligations of such Note Holder or Certificate Holder (as the case may be)
under this Agreement; (iii) no such participant (other than an APA Purchaser and
CXC's Credit Enhancer) shall be entitled to receive any greater payment than
such Note Holder or Certificate Holder (as the case may be) would have been
entitled to receive with respect to the rights participated (including, without
limitation, payments for Taxes, Other Charges or Increased Costs) except as a
result of circumstances arising after the date of such participation to the
extent that such circumstances affect other Note Holders or Certificate Holders
(as the case may be) and participants generally; and (iv) no Certificate Holder
and, following the termination of the APA, no Note Holder, shall assign or grant
a participation that conveys to the participant the right to vote or consent
under this Agreement, other than the right to vote upon or consent to any
reduction of the principal or stated amount of or the interest or yield to be
paid on such Person's Instruments or any postponement of any date for the
payment of any amount payable in respect of such Person's Instruments. Any
participations and other rights assigned or granted by the SPV pursuant to the
APA may convey the right to direct the SPV to vote, approve, consent or
otherwise take any action under this Agreement as contemplated by the APA.
(g) Permitted Disclosure; Confidentiality. Any Note Holder or
Certificate Holder may, in connection with any assignment or participation or
proposed assignment or participation pursuant to this Section 5.03, disclose to
the
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assignee or participant or proposed assignee or participant any information
relating to the Company and the Guarantor furnished to such Note Holder or
Certificate Holder (as the case may be) by or on behalf of the Company or the
Guarantor; provided, that prior to any such disclosure, the assignee or
participant or proposed assignee or participant shall agree in writing with the
Company and the Agent to preserve the confidentiality of any confidential
information relating to the Company or the Guarantor or the transactions
contemplated by this Agreement (including, without limitation, the general
structure of this transaction) received by it from such Note Holder or
Certificate Holder (as the case may be) in a manner consistent with that set
forth in Section 8.16 hereof.
(h) Other Permitted Assignments. Anything in this Section 5.03 to the
contrary notwithstanding (except that at all times the requirements of Section
5.03(g) shall be satisfied), any Note Holder or Certificate Holder may assign
and pledge, as collateral or otherwise, without notice to or consent of the
Company, all or any of the Instruments held by it and any of its rights
(including, without limitation, rights to payment of the principal or stated
amount of and interest or yield on the Instruments) under this Agreement to (i)
in the case of a Note Holder at any time after the termination of the APA, or in
the case of a Certificate Holder at any time, any of its Affiliates and (ii) any
Federal Reserve Bank, the United States Treasury or to any other financial
institution as collateral security pursuant to Regulation A of the Federal
Reserve Board and any operating circular issued by the Federal Reserve System
and/or the Federal Reserve Bank or otherwise; and (iii) in the case of a Note
Holder, at any time prior to the termination of the APA, (A) the APA Agent for
its benefit and the benefit of the SPV, the APA Purchasers and CXC as provided
in the APA, and (B) following the occurrence of a Finance Facility Default (as
defined in the APA), any other Person; provided, that any payment made by the
Company or the Guarantor to the Trustee or the Trustee for the benefit of such
assigning and/or pledging Note Holder or Certificate Holder (as the case may be)
in accordance with the terms of the Operative Documents shall satisfy the
Company's or the Guarantor's obligations under the Operative Documents in
respect thereof to the extent of such payment. No such assignment and/or pledge
set forth in (ii) above shall release the assigning and/or pledging Note Holder
or Certificate Holder (as the case may be) from its obligations hereunder.
(i) No Assignment by Trustee. The Trustee may not assign its rights or
delegate its obligations under this Agreement and the other Operative Documents
without the consent of the Company and the Agent (which consent shall not be
unreasonably withheld by the Company or the Agent), except to another Trustee in
accordance with the provisions of Section 8.02 of the Declaration.
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(j) Expenses. Except as otherwise expressly provided herein, the
Company shall not be responsible for any fees and expenses incurred in
connection with an assignment or participation pursuant to this Section 5.03 (it
being understood that this Section 5.03(j) will in no way affect the Company's
responsibility to pay for any fees and expenses incurred in connection with an
assignment pursuant to Section 5.02(e) hereof).
SECTION 5.04. Taxes.
(a) Payments Free and Clear. All payments to or for the benefit of the
Trustee, the SPV, CXC, the Agent, the Collateral Agent or the Holders under the
Operative Documents or the Securitization Documents (including payments of Fixed
Rent and Additional Rent under the Lease, payments of principal and interest
under the Notes and payments of the stated amount and yield under the
Certificates) shall be made free and clear of and without deduction for any and
all present or future Charges. If the Company, the Guarantor, the Trustee, the
Agent, the Collateral Agent, the SPV, the Member, CXC, CXC's Credit Enhancer or
any other Person ("Applicable Payor") shall be required by Law to deduct any
Charges from or in respect of any amounts payable under any Operative Document
or Securitization Document to or for the benefit of a Holder, the Trustee, the
Agent, the Collateral Agent, the SPV or CXC ("Applicable Payee"), (A) the
amounts payable by the Company under the Operative Documents (as rent, interest
or otherwise) shall be increased by the amount necessary so that after making
all required deductions for (i) Charges, (including deductions applicable to
additional sums payable under this Section 5.04), and (ii) Excluded Charges
imposed with respect to the increase in amount payable pursuant to this
sentence, each Applicable Payee shall receive an amount equal to the sum it
would have received had no such deductions been made, (B) the Applicable Payor
shall make such deductions and (C) the Applicable Payor shall pay the full
amount deducted to the relevant taxing authority or other Governmental Authority
in accordance with all applicable Laws. The Company will indemnify each
Indemnified Party on demand for the full amount of any sums paid by them
pursuant to the second sentence of this Section 5.04(a).
(b) Other Charges. In addition, the Company shall pay any present or
future transfer, stamp or documentary Taxes, excise Taxes or any other property,
transfer, transfer gains or recording, publication or filing Taxes, charges or
similar levies imposed by any Governmental Authority, which arise from (i) the
acquisition, ownership, operation, occupancy, possession, use, non-use,
financing, leasing, subleasing, or disposition or condition of the Property, or
any other property or rights conveyed to the Trustee; (ii) any payment made
under the Operative Documents or the Securitization Documents; (iii) the
execution, delivery or registration of, or otherwise with respect
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to the Operative Documents or the Securitization Documents; (iv) the conveyance
or transfer of the Property (or any portion thereof) in compliance with any
requirement of the Operative Documents or the Securitization Documents; (v) the
recording of any mortgage, deed of trust, financing statement or other
collateral security document in any jurisdiction; or (vi) the transactions
contemplated by any of the Operative Documents or the Securitization Documents
(collectively, the "Other Taxes").
(c) Indemnification. The Company shall pay and indemnify, defend and
hold harmless each Indemnified Party from and against the full amount of all
Charges (including Other Taxes and any Charges imposed by any jurisdiction with
respect to amounts payable under this Section 5.04) required to be paid by such
Indemnified Party on its behalf or on behalf of any other Person, and any
liability (including penalties, interest and expenses, except those arising from
the gross negligence or willful misconduct of such Indemnified Party), arising
therefrom or with respect thereto (including from any obligation to file any Tax
return, report or statement with respect to any such Charges or Other Taxes and
any liability the Trustee may incur or be required to pay pursuant to Section
5.14 of the Interparty Agreement), whether or not such Charges (including Other
Taxes) were correctly or legally asserted (subject to the Lessee's contest
rights under Section 6.01(b) of the Lease). Any payment pursuant to such
indemnification shall be made upon demand by the Indemnified Party.
(d) Receipt. Within thirty (30) days after the date of any deduction of
any Charges pursuant to Section 5.04(a), the Company shall furnish to the
affected Holder, the Agent and the Trustee the original or a certified copy of a
receipt or other documentation evidencing payment thereof.
(e) Withholdings Tax Exemption. Notwithstanding the provisions of
Sections 5.04(a) and (c) to the contrary, the Company shall not be required to
pay to any Holder or APA Purchaser any additional amount pursuant to Section
5.04(a) or indemnify any Holder pursuant to Section 5.04(c) on account of any
Taxes required to be withheld or that are imposed by the United States to the
extent that such Holder or APA Purchaser (i) is not a domestic corporation (as
such term is defined in Section 7701 of the Code) for federal income Tax
purposes and (ii) is not entitled to submit a Prescribed Form to the Company on
the Initial Funding Date (or if such Holder or APA Purchaser is not a Holder or
APA Purchaser hereunder on the Initial Funding Date, on the date such Holder or
APA Purchaser becomes a Holder or APA Purchaser). Each Holder or APA Purchaser
that is not a domestic corporation (as described in clause (i) above) and that
is entitled to a total exemption from withholding evidenced by a Prescribed
Form, shall deliver to the Company, the Trustee and the Agent the Prescribed
Form in compliance with the Code.
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Each Holder or APA Purchaser organized under the laws of a jurisdiction
outside the United States, on or prior to the date of the assignment pursuant to
which it becomes a Holder or APA Purchaser and from time to time thereafter (not
more frequently than once in any 12 month period) if requested by the Company or
the Agent, shall provide the Agent and the Company with the Prescribed Forms or
other documents satisfactory to the Company and the Agent indicating that all
payments to be made to such Holder or APA Purchaser hereunder and under the
Instruments are subject to such Taxes at a rate reduced by an applicable Tax
treaty.
(f) Determinations. The determination of all Charges to be paid or
indemnified against by the Company under this Section 5.04 (including Excluded
Charges to be paid by the Company under the penultimate sentence of Section
5.04(a)) shall be made (in good faith) by the affected Applicable Payor. Such
determination shall, absent manifest error, be final and conclusive and binding
on the Company. In no event shall the Company, in connection with this Section
5.04 or for any other purpose whatsoever under any Operative Document or
Securitization Document have any right to examine any Tax return or related
books and records of any Applicable Payor.
(g) Survival. Without prejudice to the survival of any other agreement
of the Company hereunder, the agreements and obligations of the Company
contained in this Section 5.04 shall survive the payment in full of the
principal and interest on the Notes and Certificates.
SECTION 5.05. Tax Treatment.
(a) Financing. For purposes of federal, foreign, state and local income
Taxes, the parties hereto intend that (i) the Lease be treated as the repayment
and security provisions of a loan to the Company in the amount of the aggregate
principal and stated amount of the Notes and Certificates, and (ii) all payments
of Fixed Rent, Additional Rent and (if applicable) the Termination Value be
treated as payments of principal, interest and other amounts owing with respect
to such loan, respectively.
(b) Tax Reporting by Company. The Company agrees that (i) unless
compelled, in its reasonable opinion, by action of a Governmental Authority,
neither it nor any Affiliate (whether or not consolidated or combined returns
are filed with such Affiliate for federal, state or local income Tax purposes)
will at any time take any action, directly or indirectly, or file any return or
other document inconsistent with the intended income Tax treatment described in
Section 5.05(a), and (ii) it and its Affiliates will file such returns, maintain
such records, take such actions and execute such documents (as reasonably
requested by the Trustee, the Agent or the Holders from time to time) as
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may be appropriate to facilitate the realization of such intended income Tax
treatment.
(c) Tax Reporting by Trustee, Agent and Holders. Each of the Trustee,
the Agent and the Holders agrees that (i) unless compelled, in its reasonable
opinion, by action of a Governmental Authority, neither it nor any Affiliate
(whether or not consolidated or combined returns are filed with such Affiliate
for federal, state or local income Tax purposes) will at any time take any
action, directly or indirectly, or file any return or other document claiming,
or asserting that it is entitled to, the Tax benefits, deductions or credits
which, pursuant to the intended income Tax treatment described in Section
5.05(a), would otherwise be claimed or claimable by the Company, and (ii) it and
its Affiliates will file such returns, maintain such records, take such actions,
and execute such documents (as reasonably requested by the Company from time to
time) as may be appropriate (in the judgment of the Trustee, the Agent or the
applicable Holder) to facilitate the realization of, and as shall be consistent
with, such intended income Tax treatment; provided that neither the Trustee, the
Agent, any Holder nor any of its Affiliates shall be required to (A) take any
action which it believes would be disadvantageous to it, (B) disclose any
portion of any Tax return, or (C) engage or participate in any contest of such
Tax treatment. If any such filing, maintenance, action or execution requested by
the Company would result in any additional Tax liability payable by the
Indemnified Party, or could reasonably be expected to result in liability
payable by it, other than liability ordinarily related to the intended Tax
treatment described in Section 5.05(a), then the Company will provide an
indemnity against such unrelated Tax liability and any liability the Indemnified
Party may incur or be required to pay pursuant to Section 5.14(b) of the
Interparty Agreement satisfactory to the Indemnified Party, in its sole opinion,
exercised reasonably and in good faith.
SECTION 5.06. Compensation. The Company shall compensate each Holder,
upon its written request (which request shall also be sent to the Trustee and
the Agent and shall set forth the basis for requesting such amounts), for all
reasonable Losses and costs (including any interest paid by such Holder to
lenders of funds borrowed by it to purchase or carry its Instruments to the
extent not recovered by the Holder in connection with the re-employment of such
funds), which the Holder may sustain: (a) if, for any reason (other than a
default by such Holder or the Agent), a Funding or a selection affecting the
Applicable Rate does not occur on the date specified therefor in a Requisition
or in a notice delivered pursuant to Section 5.01(d) (as applicable, and whether
or not withdrawn), (b) if any Payment Date, payment under the Operative
Documents or change in the Applicable Rate with respect to such Holder's
Instruments occurs on a date which is not the last day of an Interest Period,
(c) if any payment of the Residual Value Amount or Termination
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Value occurs on a date that is not the last day of an Interest Period or on a
date different from the date required therefor under the Operative Documents or
(d) as a consequence of (i) any other Default, Event of Default or Environmental
Trigger or (ii) an election made by the Company pursuant to Section 5.02(b) or
5.02(e) or (iii) Section 5.09. Any determination by a Holder of Additional Costs
owed under this Section 5.06 shall, absent manifest error, be final and
conclusive and binding on all parties hereto.
SECTION 5.07. Change of Applicable Lending Office. Each Holder agrees
that, upon the occurrence of any event giving rise to the operation of Sections
5.02(a)(ii), 5.02(a)(iii), 5.02(c), 5.02(d) or 5.04 with respect to such Holder,
it will, if requested by the Company, use reasonable efforts (subject to overall
policy considerations of such Holder) to designate another lending office for
its Instruments; provided that no Certificate Holder may be replaced by the SPV;
and provided further that such designation is made on such terms that such
Holder and its 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 Sections. Nothing in this Section 5.07 shall
affect or postpone any of the obligations of the Company or the rights of any
Holder (or apply to any payment claimed by an APA Purchaser or CXC's Credit
Enhancer) provided in Section 5.02 or Section 5.04 or any inability by an APA
Purchaser or CXC's Credit Enhancer to maintain a LIBO Rate with respect to any
Percentage Interest pursuant to Section 5.02(a)(iii).
SECTION 5.08. Sharing of Payments, Etc. If any Note Holder or
Certificate Holder shall obtain any payment (whether voluntary or involuntary),
on account of the Instruments held by it (other than on account of Additional
Costs and other than pursuant to Section 5.05 or any indemnification provision
of the Operative Documents) in excess of its ratable share of payments on
account of the Instruments obtained by all the Note Holders and Certificate
Holders, such Note Holder or Certificate Holder (as the case may be) shall
forthwith purchase from the other Note Holders or Certificate Holders (as the
case may be) such participations in the Instruments held by them as shall be
necessary to cause such purchasing Note Holder or Certificate Holder (as the
case may be) to share the excess payment ratably with each of them; provided,
however, that if all or any portion of such excess payment is thereafter
recovered from such purchasing Note Holder or Certificate Holder (as the case
may be), such purchase from each Note Holder or Certificate Holder (as the case
may be) shall be rescinded and each Note Holder or Certificate Holder (as the
case may be) shall repay to the purchasing Note Holder or Certificate Holder (as
the case may be) the purchase price to the extent of such Note Holder's or
Certificate Holder's (as the case may be) ratable share (according to the
proportion of (i) the amount of the
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participation purchased from such Note Holder or Certificate Holder (as the case
may be) as a result of such excess payment to (ii) the total amount of the
participations purchased in respect of such excess payment) of such recovery
together with an amount equal to such Note Holder's or Certificate Holder's (as
the case may be) ratable share (according to the proportion of (i) the amount of
such Note Holder's or Certificate Holder's (as the case may be) required
repayment to (ii) the total amount so recovered from the purchasing Note Holder
or Certificate Holder (as the case may be)) of any interest or other amounts
paid or payable by the purchasing Note Holders or Certificate Holders (as the
case may be) in respect of the total amount so recovered. Notwithstanding that
such Note Holders or Certificate Holders (as the case may be) shall have
purchased a participation in such Instruments, the purchasing Note Holder or
Certificate Holder (as the case may be) shall be deemed to have acquired the
voting rights under such Instruments to the extent of, and for the duration of,
such participation, as if such Note Holder or Certificate Holder (as the case
may be) shall have been an Assignee thereof.
SECTION 5.09. Proceeds of Asset Sales. To the extent that there are
Excess Proceeds, the Instruments shall be prepaid and redeemed as follows:
(a) 85% of Excess Proceeds (the "A-Note Prepayment Amount") shall be
applied to prepay, without penalty or premium, the principal of the A-Notes,
together with (x) accrued and unpaid interest on the principal amount prepaid to
the date of prepayment and (y) all other amounts then due and owing in respect
of the A-Notes (including Break Costs, if any), and the A-Note Prepayment Amount
shall be distributed pro rata among all Holders of A-Notes, based on the
principal amount of A-Notes outstanding prior to giving effect to such
prepayment;
(b) 12% of Excess Proceeds (the "B-Note Prepayment Amount") shall be
applied to prepay, without penalty or premium, the principal of the B-Notes,
together with (x) accrued and unpaid interest on the principal amount prepaid to
the date of prepayment and (y) all other amounts then due and owing in respect
of the B-Notes (including Break Costs, if any), and the B-Note Prepayment Amount
shall be distributed pro rata among all Holders of B-Notes, based on the
principal amount of B-Notes outstanding prior to giving effect to such
prepayment;
(c) 3% of Excess Proceeds (the "Certificate Redemption Amount") shall
be applied to redeem, without penalty or premium, the stated amount of the
Certificates, together with (x) accrued and unpaid yield on the stated amount
redeemed to the date of redemption and (y) all other amounts then due and owing
in respect of the Certificates (including Break Costs, if any), and the
Certificate Redemption Amount shall be distributed pro rata among all Holders of
Certificates based on the stated amount of
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Certificates outstanding prior to giving effect to such redemption;
(d) The date for such prepayment and redemption shall be the first
Payment Date immediately after the 270-day period referred to in Section 5.08 of
the Lease (the "Retirement Date");
(e) The Agent, on behalf of the Trustee, shall give notice of such
mandatory prepayment and redemption to the Holders at their addresses shown in
the Record as soon as practicable prior to the Retirement Date. The notice shall
specify the Retirement Date, the aggregate amount of Excess Proceeds to be
applied to the prepayment and redemption of the Instruments and that the
prepayment and redemption is being done pursuant to this Section 5.09;
(f) Interest or yield on the Instruments subject to prepayment or
redemption shall cease to accrue or become due to the extent prepaid or redeemed
on the Retirement Date to the extent of such prepayment or redemption;
(g) On the Retirement Date, the Agent, on behalf of the Trustee, shall
(i) prepay and redeem the Instruments, on a pro rata basis as described above
and (ii) deliver to the Holders of the Instruments payment in an amount, in
Dollars, equal to the A-Note Prepayment Amount, B-Note Prepayment Amount and
Certificate Redemption Amount, as appropriate, by transferring immediately
available funds, to the account of the Instrument Holder in accordance with such
written instructions as the Holder may give to the Agent not later than two
Business Days prior to the due date for such payment.
(h) To the extent that the aggregate principal amount of the
Instruments is less than the Excess Proceeds, such amounts shall first go
towards payment of any outstanding fees or expenses owed by the Company under
the Operative Documents and the Securitization Documents, any unpaid amounts in
respect of Unreimbursed Losses and then to the Company which may use such funds
for general corporate purposes.
(i) Upon completion of such prepayment and redemption, the amount of
Excess Proceeds shall be reset to zero.
SECTION 5.10. Proceeds of Optional Purchase by Lessee of Items of
Property. To the extent that the Company or its designee shall deliver to the
Agent, on behalf of the Trustee, an amount equal to the Termination Value with
respect to any Item of Property ("Optional Purchase Proceeds") pursuant to the
terms and conditions of Section 5.02 of the Lease, the Instruments shall be
prepaid and redeemed as follows:
(a) 85% of the Optional Purchase Proceeds (the "A-Note Proceeds
Amount") shall be applied to prepay, without penalty or
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premium, the principal of the A-Notes, together with (x) accrued and unpaid
interest on the principal amount prepaid to the date of prepayment and (y) all
other amounts then due and owing in respect of the A-Notes (including Break
Costs, if any), and the A-Note Proceeds Amount shall be distributed pro rata
among all Holders of A-Notes, based on the principal amount of A-Notes
outstanding prior to giving effect to such prepayment;
(b) 12% of Optional Purchase Proceeds (the "B-Note Proceeds Amount")
shall be applied to prepay, without penalty or premium, the principal of the
B-Notes, together with (x) accrued and unpaid interest on the principal amount
prepaid to the date of prepayment and (y) all other amounts then due and owing
in respect of the B-Notes (including Break Costs, if any), and the B-Note
Proceeds Amount shall be distributed pro rata among all Holders of B-Notes,
based on the principal amount of B-Notes outstanding prior to giving effect to
such prepayment;
(c) 3% of the Optional Purchase Proceeds (the "Certificate Proceeds
Amount") shall be applied to redeem, without penalty or premium, the stated
amount of the Certificates, together with (x) accrued and unpaid yield on the
stated amount redeemed to the date of redemption and (y) all other amounts then
due and owing in respect of the Certificates (including Break Costs, if any),
and the Certificate Proceeds Amount shall be distributed pro rata among all
Holders of Certificates based on the stated amount of Certificates outstanding
prior to giving effect to such redemption;
(d) The date for such prepayment and redemption shall be on the first
Business Day following the next scheduled Payment Date following the date of the
Trustee's acceptance or deemed acceptance of such Offer to Purchase under the
Lease (the "Prepayment Date");
(e) The Agent, on behalf of the Trustee, shall give notice of such
prepayment and redemption to the Holders at their addresses shown in the Record
as soon as practicable prior to the Prepayment Date. The notice shall specify
the Prepayment Date, the aggregate amount of Optional Sales Proceeds to be
applied to the prepayment and redemption of the Instruments and that the
prepayment and redemption is being done pursuant to this Section 5.10;
(f) Interest or yield on the Instruments subject to prepayment or
redemption shall cease to accrue or become due to the extent prepaid or redeemed
on the Prepayment Date;
(g) On the Prepayment Date, the Agent, on behalf of the Trustee, shall
(i) prepay and redeem the Instruments, on a pro rata basis as described above
and (ii) deliver to the Holders of the Instruments payment in an amount, in
Dollars, equal to the A-Note Proceeds Amount, B-Note Proceeds Amount and
Certificate
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Proceeds Amount, as appropriate, by transferring immediately available funds, to
the account of the Instrument Holder in accordance with such written
instructions as the Holder may give to the Agent not later than two Business
Days prior to the due date for such payment.
(h) To the extent that the aggregate principal amount of the
Instruments is less than the Optional Purchase Proceeds, such amounts shall
first go towards payment of any outstanding fees or expenses owed by the Company
under the Operative Documents and the Securitization Documents, any unpaid
amounts in respect of Unreimbursed Losses and then to the Company which may use
such funds for general corporate purposes.
(i) Upon completion of such prepayment and redemption, the amount of
Optional Purchase Proceeds shall be reset to zero.
SECTION 5.11. Prepayment of Notes and Cancellation of Certificates.
Upon receipt by the Agent, on behalf of the Trustee, of the Termination Value
with respect to all of the Property in accordance with Section 5.01 or 5.03 of
the Lease, the Company may require the Trustee to give notice of prepayment of
the Notes or cancellation of the Certificates in accordance with Section 6.01(c)
of the Declaration.
ARTICLE VI.
EVENTS OF DEFAULT; UNWIND EVENT
SECTION 6.01. Events of Default. If any of the following events shall
occur and be continuing, it shall constitute an "Event of Default" hereunder:
(a) the Company shall fail to pay (i) any Fixed Rent within ten (10)
Business Days after the date on which such payment is due, (ii) the Termination
Value or the Residual Value Amount on the date on which payment is due, (iii)
any Additional Rent or any other sum required to be paid under the Lease within
ten (10) Business Days after the date on which such payment is due, (iv) any
Charges when such payment shall become due or within any grace period provided
for payment of such Charges, subject to the terms of the Lease relating to
permitted contests;
(b) the Company or the Guarantor shall fail to pay any amount required
to be paid by the Company or the Guarantor under any Operative Document, other
than amounts set forth in Section 6.01(a), when the same becomes due and
payable, and any such failure continues for a period of five (5) Business Days;
(c) any representation or warranty made or deemed made by the Guarantor
or the Company in or in connection with any Operative Document to which the
Guarantor or the Company is a
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party, or any representation, warranty, statement or information contained in
any report, certificate, financial statement or other instrument furnished in
connection with or pursuant to any such Operative Document, shall prove to have
been false in any material respect when so made, deemed made or furnished;
(d) default shall be made in the due observance or performance by the
Company or its Subsidiaries of any covenant, condition or agreement contained in
Sections 4.01(a)(i), 4.01(c), 4.01(d), 4.01(e), 4.01(f), 4.01(k), 4.01(l),
4.01(m) and 8.26;
(e) default shall be made in the due observance or performance by the
Company, any of its Subsidiaries or any Relevant Subsidiary of any covenant,
condition or agreement contained in Section 4.01 applicable to it (other than
those specified in Section 6.01(d) above) and such default shall continue
unremedied until the earlier or (i) the date occurring thirty (30) days after
notice thereof to the Company, such Subsidiary or Relevant Subsidiary by the
Agent or the Trustee and (ii) actual knowledge thereof by the Company, such
Subsidiary or Relevant Subsidiary;
(f) the Company or any of its Subsidiaries shall (i) fail to pay any
principal or interest, regardless of amount, due in respect of any Indebtedness
(other than Indebtedness evidenced by the Operative Documents) in a principal
amount of $60,000,000 or more, when and as the same shall become due and
payable, or (ii) fail to observe or perform any other term, covenant, condition
or agreement contained in any agreement or instrument evidencing or governing
any such Indebtedness if the effect of any failure referred to in this clause
(ii) is to cause, or to permit the holder or holders of such Indebtedness or a
trustee on its or their behalf (with or without the giving of notice, the lapse
of time or both) to cause, such Indebtedness to become due prior to its stated
maturity;
(g) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i) relief
in respect of the Company or any Material Subsidiary of the Company, or of a
substantial part of the property or assets of the Company or any Material
Subsidiary of the Company, under Title 11 of the United States Code, as now
constituted or hereafter amended, or any other federal or state bankruptcy,
insolvency, receivership or similar Law, (ii) the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official for the
Company or any Material Subsidiary of the Company or for a substantial part of
the property or assets of the Company or any Material Subsidiary of the Company
or (iii) the winding-up or liquidation of the Company or any Material Subsidiary
of the Company; and such proceeding or petition shall continue undismissed for
thirty (30) consecutive days or an order or decree approving or ordering any of
the foregoing shall be entered;
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(h) the Company or any Material Subsidiary of the Company shall (i)
voluntarily commence any proceeding or file any petition seeking relief under
Title 11 of the United States Code, as now constituted or hereafter amended, or
any other federal or state bankruptcy, insolvency, receivership or similar Law,
(ii) consent to the institution of, or fail to contest in a timely and
appropriate manner, any proceeding or the filing of any petition described in
(g) above, (iii) apply for or consent to the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for the Company or any
Material Subsidiary of the Company or for a substantial part of the property or
assets of the Company or any Material Subsidiary of the Company, (iv) file an
answer admitting the material allegations of a petition filed against it in any
such proceeding, (v) make a general assignment for the benefit of creditors,
(vi) become unable, admit in writing its inability or fail generally to pay its
debts as they become due or (vii) take any action for the purpose of effecting
any of the foregoing;
(i) one or more judgments for the payment of money in an aggregate
amount in excess of $60,000,000 shall be rendered against the Company, any of
its Subsidiaries or any combination thereof and the same shall remain
undischarged for a period of thirty (30) consecutive days during which execution
shall not be effectively stayed, or any action shall be legally taken by a
judgment creditor to levy upon assets or properties of the Company or any of its
Subsidiaries to enforce any such judgment;
(j) any order, judgment or decree shall be entered against the Company
decreeing the dissolution or split up of the Company and such order shall remain
undischarged or unstayed for a period in excess of thirty (30) consecutive days;
(k) any Termination Event with respect to a Plan shall have occurred
and, thirty (30) days after notice thereof shall have been given to the Company
by the Agent, (i) such Termination Event shall still exist and (ii) the sum
(determined as of the date of occurrence of such Termination Event) of the
Insufficiency of such Plan and the Insufficiency of any and all other Plans with
respect to which a Termination Event shall have occurred and then exist (or in
the case of a Plan with respect to which a Termination Event described in clause
(ii) of the definition of Termination Event shall have occurred and then exist,
the liability related thereto) is equal to or greater than $5,000,000;
(l) the Company or any ERISA Affiliate of the Company shall have been
notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal
Liability to such Multiemployer Plan in an amount which, when aggregated with
all other amounts required to be paid to Multiemployer Plans in connection with
Withdrawal Liabilities (determined as of the date of such
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notification), exceeds $15,000,000 in the aggregate or requires payments
exceeding $10,000,000 per annum;
(m) the Company or any ERISA Affiliate of the Company shall have been
notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is
in reorganization or is being terminated, within the meaning of title IV of
ERISA, if as a result of such reorganization or termination the aggregate annual
contributions of the Company and their respective ERISA Affiliates to all
Multiemployer Plans which are then in reorganization or being terminated have
been or will be increased over the amounts contributed to such Multiemployer
Plans for the respective plan years which include the date hereof by an amount
exceeding $5,000,000;
(n) the Company shall fail to comply with any Insurance Requirement;
(o) the Company shall fail to comply with the Return Conditions within
the time periods provided in the Lease;
(p) the Company shall fail to observe or perform any covenant,
condition or provision under the Lease other than those referred to in Sections
6.01(a), (b), (d), (e), (n) and (o), and such failure shall continue for thirty
(30) days after the earlier of (i) the date on which the Company becomes aware
of such failure or (ii) notice by the Trustee or the Agent to the Company of
such failure and such failure could reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect;
(q) (i) the Company shall fail to observe or perform any covenant,
condition or provision in any Operative Document other than those referred to in
Sections 6.01(a), (b), (d), (e), (n), (o) and (p), and such failure shall
continue for thirty (30) days after the earlier of (A) the date on which the
Company becomes aware of such failure or (B) notice by the Trustee or the Agent
to the Company or the Guarantor of such failure and such failure could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect; or (ii) the Guarantor shall fail to observe or perform any
covenant, condition or other provision in the Guaranty or in any other Operative
Document other than those referred to in Sections 6.01(a), (b), (d), (e), (n),
(o) and (p), and such failure shall continue for thirty (30) days after the
earlier of (A) the date on which either the Company or the Guarantor becomes
aware of such failure or (B) notice by the Trustee or the Agent to the Company
or the Guarantor of such failure;
(r) any Operative Document shall for any reason no longer be in full
force and effect in accordance with its terms, by operation of Law or by any
other means (except if such is the
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result of a purchase of the Property by the Company or its designee pursuant to
the Lease);
(s) the Company shall have abandoned the Property or any part thereof
at any time prior to the Expiration Date;
(t) an "Event of Default" (as defined in any other Operative Document)
under any other Operative Document or a Guaranty Default (as defined in the
Guaranty) shall have occurred;
(u) a Change in Control of the Company shall have occured;
(v) the Trustee or the Collateral Agent shall cease, for any reason
(other than directly through their own actions or omissions), to have a
perfected security interest in and Lien on all of the Property (other than an
immaterial portion of the Property), superior and prior to the rights of all
third Persons and subject to no other Liens, except in each case for Permitted
Encumbrances and Trust Encumbrances;
(w) any Operative Document or any obligation of the Company thereunder
shall be revoked or repudiated or attempted to be revoked or repudiated by the
Company or the Guarantor;
(x) the Company or the Guarantor shall be prevented or relieved by a
Governmental Authority from performing or observing any monetary payment or
repayment obligation evidenced by the Operative Documents;
(y) the failure or inability to restructure the transactions
contemplated by this Agreement and the other Operative Documents in accordance
with the provisions of Section 4.02(a) hereof; or
(z) the Company shall not have delivered (except to the extent that the
requirements of this Section 6.01(z) shall have been waived by the Majority
Holders with respect to any portion of a Project) to the Agent and the Trustee,
on or prior to the Date Certain, an Officer's Certificate of Completion
substantially in the form of Exhibit B hereto, certifying as to the matters set
forth in Exhibit C hereto (including that the final acquisition, construction,
installation and lighting of the Projects as discussed therein, have been
satisfactorily performed) and the total Acquisition Costs incurred.
SECTION 6.02. Remedies upon an Event of Default. (a) Subject to Section
6.02(e), if an Event of Default has occurred and is continuing, each of the
Trustee and the Collateral Agent may, and if directed in writing by the Majority
Holders shall, exercise any of the rights or remedies granted to it under the
Lease or any of the other Operative Documents, in
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addition to any rights or remedies of such parties set forth in this Agreement.
(b) Subject to Sections 6.02(e) and 6.03, if an Event of Default has
occurred and is continuing, then each of the Trustee, the Collateral Agent, the
Agent and the Note Holders and Certificate Holders may, and if directed in
writing by the Majority Holders shall, take all steps necessary or advisable to
protect and enforce its rights hereunder, whether by action, suit or proceeding
at Law or in equity, for the specific performance of any covenant, condition or
agreement contained herein, or in aid of the execution of any power herein
granted, or for the enforcement of any other appropriate legal or equitable
remedy or otherwise as such party shall deem necessary or advisable.
(c) If the Company shall fail to make any payment or perform any act
required to be made or performed under any Operative Document, the Trustee
(unless a Default, Event of Default or Environmental Trigger has occurred) upon
five (5) Business Days' notice and upon the failure of the Company to commence
and thereafter diligently prosecute the cure of such failure within such period,
without waiving any default or releasing the Company from any obligation may
(but shall be under no obligation to unless directed in writing by the Majority
Holders) make such payment and perform such act for the account and at the
expense of the Company, and may enter upon the Property for such purpose and
take all such action thereon as, at the Trustee's sole discretion, may be
necessary or appropriate therefor. All sums so paid by the Trustee and all costs
and expenses (including reasonable attorneys' fees and expenses so incurred,
together with interest thereon to the extent permitted by Law) shall be paid by
the Company to the Trustee on demand.
(d) No right or remedy hereunder or under any other Operative Document
shall be exclusive of any other right, power or remedy, but shall be cumulative
and in addition to any other right or remedy hereunder or now or hereafter
existing by Law or in equity, and the exercise by a party hereto of any one or
more of such rights, power or remedies shall not preclude the simultaneous
exercise of any or all of such other rights, powers or remedies. Any failure to
insist upon the strict performance of any provision hereof or to exercise any
option, right, power or remedy contained herein shall not constitute a waiver or
relinquishment thereof for the future. The Trustee, the Note Holders, the
Collateral Agent and the Agent shall be entitled to injunctive relief in case of
the violation or attempted or threatened violation of any of the provisions
hereof by any other party hereto, a decree compelling performance of any of the
provisions hereof or any other remedy allowed by Law or in equity.
(e) The Company may at any time prior to exercise of any remedies by
the Trustee, the Collateral Agent, the Agent and
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the Majority Holders elect to cure any Default, Event of Default or
Environmental Trigger by purchasing the Property or Item of Property to the
extent that such purchase would cure (to the Agent's sole satisfaction) such
Default or Event of Default or Environmental Trigger and for an amount equal to
such Property's Termination Value.
SECTION 6.03. Unwind Event. (a) Notwithstanding anything to the
contrary contained herein or in any other Operative Document, any Event of
Default arising under the provisions of Sections 6.01(y) or 6.01(z) to the
extent such Event of Default is the result of an act, circumstance or event
outside the control of the Company shall be deemed an "Unwind Event" and the
provisions of this Section 6.03 shall control.
(b) If an Unwind Event shall have occurred, the Company shall (i)
arrange to sell the Property on behalf of the Trustee to one or more third
parties in arms length transactions, such sale to close on or before ninety (90)
days after the occurrence of such Unwind Event, and pay to the Trustee within
five (5) days of the occurrence of such sale an amount equal to the Residual
Value Amount and shall also pay all Fixed Rent and Additional Rent due and
payable and all costs and expenses incidental to the sale of the Property,
including, without limitation, reasonable fees of Special Counsel and Trustee's
Counsel, provided, that such amount shall not exceed the Residual Value Amount
calculated to include all Rent due and payable and all costs and expenses
incidental to the sale of the Property as if paid by the Company prior thereto;
provided, further that to the extent the Property is not sold on behalf of the
Trustee to a third party, the Company shall, along with paying the Residual
Value Amount, satisfy each of the Return Conditions; or (ii) on or after the
Completion Date, deliver an Offer to Purchase the Property and purchase the
Property upon payment of the Termination Value.
ARTICLE VII.
THE AGENT
SECTION 7.01. Authorization and Action. Each Note Holder and
Certificate Holder hereby appoints and authorizes the Agent to take such action
as the Agent on such Note Holder's and Certificate Holder's behalf (including,
without limitation, the execution of the Interparty Agreement) and to exercise
such powers under this Agreement, the other Operative Documents and the
Securitization Documents as are delegated to the Agent by the terms hereof and
thereof, together with such powers as are reasonably incidental thereto
(including any delegation by the Trustee and the Collateral Agent of their
collection and disbursement functions). The Collateral Agent and the Trustee
hereby appoint and authorize the Agent to collect, disburse, invest and
otherwise administer on the Collateral Agent's and the
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Trustee's behalf all funds paid or payable to the Collateral Agent and the
Trustee hereunder or under any of the Operative Documents or the Securitization
Documents, in each case in accordance with the terms thereof, and the Collateral
Agent and the Trustee, in their individual capacities, and in their capacities
as Collateral Agent and Trustee, as applicable, shall not be liable for the
actions or inactions of the Agent in connection with the Agent's collection,
disbursement, investment and administration of such funds and shall have no duty
to supervise the actions of the Agent. As to any matters not expressly provided
for by this Agreement, the other Operative Documents and the Securitization
Documents, the Agent shall not be required to exercise any discretion or take
any action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Majority Holders (except actions requiring the consent of all Note Holders
and Certificate Holders, in which case the Agent shall act or refrain from
acting upon instructions consented to by all Note Holders and Certificate
Holders), and such instructions shall be binding upon all Note Holders and
Certificate Holders; provided, however, that the Agent may rely upon the
instructions of the Majority Holders or all Note Holders and Certificate
Holders, as the case may be, shall not be required to take any action which
exposes the Agent to personal liability or which is contrary to this Agreement
or applicable Law. The Agent agrees to give to each Note Holder and Certificate
Holder prompt notice of each notice given to it by the Company, the Guarantor,
the Trustee and the Collateral Agent pursuant to the terms of the Operative
Documents and any notice delivered pursuant to the terms of the Securitization
Documents.
SECTION 7.02. Agent's Reliance, Etc. NEITHER THE AGENT NOR ANY OF ITS
AFFILIATES OR SUBSIDIARIES, NOR ANY OF THE DIRECTORS, OFFICERS, AGENTS OR
EMPLOYEES OF ANY OF THEM, SHALL BE LIABLE FOR ANY ACTION TAKEN OR OMITTED TO BE
TAKEN BY IT OR THEM UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE OTHER
OPERATIVE DOCUMENTS OR THE SECURITIZATION DOCUMENTS, EXCEPT FOR ITS OR THEIR OWN
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, IT BEING THE INTENT THAT SUCH PERSONS
SHALL NOT BE LIABLE FOR ANY SUCH ACTION OR INACTION THAT CONSTITUTES ORDINARY
NEGLIGENCE. Without limiting the generality of the foregoing, the Agent: (i) may
consult with legal counsel, independent public accountants and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (ii) makes no warranty or representation to any Note
Holder or Certificate Holder and shall not be responsible to any Note Holder or
Certificate Holder for any statements, warranties or representations made in or
in connection with this Agreement or the other Operative Documents or the
Securitization Documents; (iii) shall not have any duty to ascertain or to
inquire as to the performance or observance of any of the terms, covenants or
conditions of this Agreement or the other Operative Documents on
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the part of the Company or the Guarantor (other than to monitor payments made by
the Company or the Guarantor to the Agent's account) or to inspect the property
(including the books and records) of the Company or the Guarantor; (iv) shall
not be responsible to any Note Holder or Certificate Holder for the due
execution, legality, validity, enforceability, genuineness, sufficiency or value
of this Agreement or the other Operative Documents or the Securitization
Documents or any other instrument or document furnished pursuant hereto or
thereto; and (v) shall incur no liability under or in respect of this Agreement
or the other Operative Documents or the Securitization Documents by acting upon
any notice, consent, certificate or other instrument or writing in accordance
with the terms hereof or thereof believed by it to be genuine and signed or sent
by the proper party or parties.
SECTION 7.03. Citibank, N.A. and Affiliates. Citibank, N.A. and any of
its Affiliates shall have the same rights and powers under any Instrument, this
Agreement the other Operative Documents as any other Note Holder or Certificate
Holder and may exercise the same as though Citibank, N.A. or such Affiliate were
not the Agent; and the terms "Note Holder" or "Note Holders" shall, unless
otherwise expressly indicated, include Citibank, N.A. in its individual capacity
or any such Affiliate, and Citibank, N.A. and its Affiliates may accept deposits
from, lend money to, act as trustee under indentures of, and generally engage in
any kind of business with, the Company, the Guarantor and any subsidiary thereof
and any Person who may do business with or own securities of the Company,
Guarantor or any subsidiary, all as if Citibank, N.A. were not the Agent and
without any duty to account therefor to the Note Holders and Certificate
Holders.
SECTION 7.04. Note Holder and Certificate Holder Credit Decision. Each
Note Holder and Certificate Holder acknowledges that it has, independently and
without reliance upon the Agent, the Trustee, the Collateral Agent or any other
Note Holder or Certificate Holder and based on the financial statements referred
to in Section 4.01(h) hereof and such other documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Note Holder and Certificate Holder also acknowledges that it
will, independently and without reliance upon the Agent, the Trustee, the
Collateral Agent or any other Note Holder or Certificate Holder and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions with respect to this Agreement or any
of the other Operative Documents or the Securitization Documents.
SECTION 7.05. Indemnification. The Note Holders and the Certificate
Holders agree to indemnify the Agent, ratably according to the respective
aggregate principal and stated amounts of the Instruments then held by each Note
Holder or
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Certificate Holder, as the case may be (or if the Notes and the Certificates
have been fully repaid and retired or if any Instruments are held by Persons
which are not Note Holders or Certificate Holders, ratably according to either
(i) the respective aggregate amounts of their Interim Note Commitments and Note
Commitments or Certificate Commitments, as the case may be, (ii) if all such
Interim Note Commitments and Note Commitments have terminated, the respective
amount of the Note Commitments or Certificate Commitments immediately prior to
the time the Interim Note Commitments and Note Commitments or Certificate
Commitments were terminated or (iii) if all such Certificate Commitments have
terminated, the Certificate Commitment immediately prior to the time the
Certificate Commitments were terminated), from and against any and all Losses of
any kind or nature whatsoever which may be imposed on, incurred by, or asserted
against the Agent in any way relating to or arising out of this Agreement, any
other Operative Document or the Securitization Documents or any action taken or
omitted by the Agent under this Agreement, any other Operative Document or the
Securitization Documents; provided, that neither any Note Holder nor any
Certificate Holder shall be liable to the Agent for any portion of such Losses
resulting from the Agent's gross negligence or willful misconduct. Without
limitation of the foregoing, each Note Holder and Certificate Holder agrees to
reimburse the Agent promptly upon demand for its ratable share of any
out-of-pocket expenses (including reasonable counsel fees) incurred by the Agent
in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Operative Document or the
Securitization Documents to the extent that the Agent is not reimbursed for such
expenses by the Company or the Guarantor.
SECTION 7.06. Successor Agent. The Agent may resign at any time as
Agent under this Agreement by giving written notice thereof to the Note Holders,
the Certificate Holders, the Trustee, the Collateral Agent and the Company and
may be removed at any time with or without cause by the Majority Holders. Upon
any such resignation or removal, the Majority Holders, subject to the consent of
the Company (which consent shall not be unreasonably withheld), shall have the
right to appoint a successor Agent which shall be a commercial bank or trust
company organized under the laws of the United States of America or any state
thereof (or otherwise authorized by law to conduct a banking business in the
United States or any State thereof) reasonably acceptable to the Company. If no
successor Agent shall have been so appointed by the Majority Holders, and shall
have accepted such appointment, or any successor Agent appointed shall not have
accepted such appointment, in either case, within 30 days after the retiring
Agent's giving of notice of resignation or the Majority Holders' removal of the
retiring
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Agent, then the retiring Agent may, on behalf of the Note Holders and
Certificate Holders, appoint a successor Agent, which shall be a Note Holder
which is a commercial bank organized under the laws of the United States of
America or of any State thereof and having a combined capital and surplus of at
least $250,000,000. The appointment of any successor Agent shall comply with
Section 16(d) of the APA. Upon the acceptance of any appointment as Agent under
this Agreement by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Agent and shall function as the Agent under this Agreement, and
the retiring Agent shall be discharged from its duties and obligations as Agent
(other than those which arise prior to such Agent's removal or resignation)
under this Agreement. After any retiring Agent's resignation hereunder as Agent,
the provisions of this Article VII shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement.
ARTICLE VIII.
MISCELLANEOUS
SECTION 8.01. Survival. Except as otherwise expressly provided, the
parties' obligations under this Agreement and in any certificate or other
instrument delivered by any party or on such party's behalf pursuant to this
Agreement shall terminate upon the payment in full of all amounts then and
thereafter due on the Notes and the Certificates and under any of the Operative
Documents and the Securitization Documents . The confidentiality and all
indemnification provisions contained in this Agreement, including the provisions
of Sections 5.04, 5.05, 8.06, 8.13, 8.14 and 8.16 hereof, shall each survive the
payment in full of all amounts then and thereafter due on the Notes and the
Certificates and due under any of the Operative Documents or Securitization
Documents. Such rights and obligations shall survive the execution and delivery
of any Operative Document, Securitization Document, any issuance or disposition
of any of the Notes, the Certificates or distribution relating thereto, any
disposition of any interest in the Property or the termination of any Operative
Document or Securitization Document and shall continue in effect regardless of
any investigation made by or on behalf of any party hereto and notwithstanding
that any party may waive compliance with any other provision of any Operative
Document or Securitization Document. To the extent that any payments made under
the Operative Documents or Securitization Documents are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, debtor in possession, receiver or other Person under any
Bankruptcy Law, common law or equitable cause, then to such extent, the
obligation so satisfied shall be revived and continue as if such payment had not
been received and the rights, powers
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and remedies under this Agreement and each Operative Document and Securitization
Document shall continue in full force and effect. In such event, the Operative
Documents and Securitization Documents shall be automatically reinstated and the
Company and the Guarantor shall take such action as may be reasonably requested
by the Agent and the Holders to effect such reinstatement.
SECTION 8.02. Notices. Unless otherwise specifically provided in any
Operative Document or Securitization Document, all notices, consents,
directions, approvals, instructions, requests and other communications given to
any party hereto under any Operative Document or Securitization Document shall
be in writing to such party at the address set forth in Schedule I hereto or at
such other address as such party shall designate by notice to each of the other
parties hereto and may be personally delivered (including delivery by private
courier services) or by telecopy (with a copy of such notice sent by private
courier service for overnight delivery or by registered or certified mail), to
the party entitled thereto, and shall be deemed to be duly given or made when
delivered by hand unless such day is not a Business Day, in which case such
delivery shall be deemed to be made as of the next succeeding Business Day or in
the case of telecopy (with a copy of such notice sent by private courier service
for overnight delivery or by registered or certified mail), when sent, so long
as it was received during normal business hours of the receiving party on a
Business Day and otherwise such delivery shall be deemed to be made as of the
next succeeding Business Day.
SECTION 8.03. Severability. If any provision hereof or the application
thereof to any Person or circumstance shall be invalid, illegal or
unenforceable, the remaining provisions or the application of such provision to
Persons or circumstances other than those as to which it is invalid or
enforceable, shall continue to be valid, legal and enforceable.
SECTION 8.04. Amendments, Etc. No amendment or waiver of any provision
of this Agreement or of any other Operative Document, nor consent to any
departure by the Company or the Guarantor therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Majority Holders
(unless the Agent is authorized hereunder or under any Operative Document to act
without joinder of the Majority Holders, in which case the Agent may take such
action), the Company, the Guarantor, the Trustee and the Collateral Agent and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given; provided, however, that, in addition
to the requirements above, no amendment, waiver or consent shall, unless in
writing and signed by all of the Note Holders and the Certificate Holders, do
any of the following: (a) increase the Interim Note Commitment of the Note
Holders or the Certificate Commitment or subject the Note Holders or the
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Certificate Holders to any additional obligations, (b) reduce the Applicable
Rate or any fees or other amounts payable hereunder or under any other Operative
Document or Securitization Document, (c) take action which requires the signing
by all the Note Holders or the Certificate Holders pursuant to the terms of this
Agreement, (d) postpone any date fixed for any payment of principal or stated
amount of, or interest or Distributions on the Notes or the Certificates or any
fees or other amounts payable under the Declaration, (e) release, postpone or
reduce the payment obligations of the Guarantor under the Guaranty, (f) release
any of the Liens created pursuant to the Operative Documents, or as a result of
the purchase of the Property or any portion thereof by the Company in compliance
with the Operative Documents, (g) amend this Section 8.04, (h) amend the
definition of Majority Holder or (i) amend the definition of Eligible Assignee
or any of the provisions of Section 5.03, provided, further, that in addition to
the requirements above, (A) no amendment, waiver or consent shall, unless in
writing and signed by the Agent in addition to the Trustee, the Note Holders and
the Certificate Holders required above to take such action, affect the rights or
duties of the Agent under this Agreement or any of the Operative Documents or
Securitization Documents and (B) no amendment, waiver or consent shall, unless
in writing and signed by the Collateral Agent in addition to the Trustee and the
Note Holders required above to take such action, affect the rights or duties of
the Collateral Agent under this Agreement or any of the Operative Documents. Any
action to be taken or consent to be given by the SPV pursuant to this Section
8.04 is subject to the terms and provisions of Section 11 of the APA.
SECTION 8.05. Headings. The table of contents and headings of the
Articles, Sections and subsections of this Agreement are for convenience only
and shall not affect the meaning of this Agreement.
SECTION 8.06. Compliance Responsibility. None of the Trustee
(notwithstanding the representations and warranties of SSBTC in Section 3.02
hereof), the Collateral Agent (notwithstanding the representations and
warranties of State Street in Section 3.03 hereof), the Agent, or any Note
Holder, any APA Purchaser or any Certificate Holder shall have any
responsibility for compliance by the Property or by the Company or the Guarantor
with any Law (including any FCC regulations), engineering standards or practices
or other matters. The Company expressly assumes such responsibilities and shall
indemnify and hold harmless the Trustee, the Collateral Agent, the Agent, the
Note Holders, the APA Purchasers and the Certificate Holders with respect
thereto in the manner provided in Section 8.14 hereof.
SECTION 8.07. Definitions. Except as otherwise expressly provided
herein, capitalized terms used in this Agreement and all schedules and exhibits
hereto shall have the respective meanings given in Appendix A hereto.
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SECTION 8.08. Benefit. The parties hereto and their permitted
successors and assigns, but no others (except as expressly set forth in this
Section 8.08), shall be bound hereby and entitled to the benefit hereof. The APA
Purchasers, CXC and CXC's Credit Enhancer shall be entitled to the benefit of
all provisions of this Agreement that specifically (whether directly or by
reference) include the APA Purchasers, CXC or CXC's Credit Enhancer, as the case
may be.
SECTION 8.09. Place of Payment. So long as a Note Holder, Certificate
Holder or an Affiliate of a Note Holder or Certificate Holder or a bank or
institutional investor is the owner of any beneficial interest in the
Instruments, the Agent will cause all amounts to be paid by the Trustee which
become due and payable or owing on such beneficial interest in the Notes to be
paid by bank wire transfer of immediately available funds or, at the option of
such Note Holder or Certificate Holder, such Affiliate, bank or institutional
investor, by check of the Agent (for the account of the Trustee) duly mailed,
delivered or made at the address or account referenced in Schedule I hereto or
provided in writing by such Person to the Agent, in all cases without
presentation of the underlying Instrument, provided, that upon receipt of
payment in full the underlying Instruments shall be returned by the respective
Holders thereof to the Trustee marked "canceled".
SECTION 8.10. Counterparts. The parties may sign this Agreement in any
number of counterparts and on separate counterparts, each of which shall be an
original, but all of which together shall constitute one and the same
instrument.
SECTION 8.11. Governing Law and Jurisdiction. (a) THIS AGREEMENT SHALL
BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
(b) Each of the parties hereto hereby irrevocably and unconditionally
submits, for itself and its property, to the non-exclusive jurisdiction of any
New York State court or federal court of the United States of America sitting in
New York City, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Agreement or any other Operative
Document or Securitization Document, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may be heard
and determined in any such New York State court or, to the extent permitted by
law, in such federal court. Each of the parties hereto agrees that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that any party
may otherwise have to bring any action or
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proceeding relating to this Agreement, the Notes or the Certificates in the
courts of any jurisdiction.
(c) Each of the parties hereto irrevocably and unconditionally waives,
to the fullest extent it may legally and effectively do so, any objection that
it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or any other Operative
Document or Securitization Document in any New York State or federal court
located in New York City. Each of the parties hereto hereby irrevocably waives,
to the fullest extent permitted by law, the defense of an inconvenient forum to
the maintenance of such action or proceeding in any such court.
SECTION 8.12. Time; Business Day. (a) TIME IS OF THE ESSENCE IN THIS
AGREEMENT, AND THE TERMS HEREOF SHALL BE SO CONSTRUED.
(b) If the date scheduled for any payment or action under any Operative
Document or Securitization Document shall not be a Business Day, then (unless
such Operative Document or Securitization Document provides otherwise) such
payment shall be made or such action shall be taken on the next succeeding
Business Day.
SECTION 8.13. Transaction Costs; Fees. Whether or not the transactions
contemplated by this Agreement are consummated, the Company shall pay on demand
and hold the Trustee, the Collateral Agent, the Agent, CXC, CXC's Credit
Enhancer, the Note Holders, the APA Purchasers and the Certificate Holders
harmless against any liability for the payment of all indemnity obligations,
charges, fees, expenses, disbursements and out-of-pocket costs incurred before,
on or after the date hereof in connection with the preparation, execution,
delivery, administration, performance and enforcement of any Operative Document,
Securitization Document, or any other agreement, arrangement, document or paper
relating to the transactions contemplated hereby or any modification, amendment
or supplement thereto or any waivers or enforcement thereof, including, but not
limited to:
(i) the reasonable fees, expenses and disbursements of each of
the Collateral Agent, the Agent, the Trustee, Special Counsel,
Trustee's Counsel, Collateral Agent's special counsel, CXC's Credit
Enhancer's special counsel, the SPV's special counsel, CXC's special
counsel, the Appraiser, the Independent Engineer and the Environmental
Consultant for services rendered to such parties in connection with
such transactions;
(ii) the reasonable expenses of the Collateral Agent, the
Trustee and the Agent incurred in connection with such transactions;
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(iii) the reasonable fees and expenses of the Collateral
Agent's special counsel, Special Counsel (and any local or regulatory
counsel), and Trustee's Counsel with respect to advising the Collateral
Agent, the Note Holders, Certificate Holders and the Trustee,
respectively, as to their rights and responsibilities under the
Operative Documents, and all reasonable costs and expenses, if any
(including reasonable attorneys' fees and expenses), in connection with
the enforcement (whether through negotiations, legal proceedings, or
otherwise) of the Operative Documents;
(iv) all fees and expenses of the Agent or the Collateral
Agent in connection with any printing and other document reproduction
and distribution expenses, stamp or other similar Taxes, fees or
excises, including interest and penalties, and all filing fees, Taxes,
and expenses in connection with (i) the recording or filing of
instruments and financing statements in connection with the
transactions described in this Agreement and (ii) the creation,
perfection, and maintenance of the security interests created by the
Operative Documents;
(v) the reasonable fees and expenses of the Collateral Agent
and the Agent in connection with the initial placement of the Notes and
Certificates;
(vi) the reasonable fees, expenses and disbursements of any
local or regulatory counsel of the Agent or Special Counsel, if any,
for services rendered during the term of the Operative Documents in
connection with the decision to file or not to file and the filing,
continuation or perfection of any mortgages, deeds of trust, the
Security Agreement and any UCC-1 financing statements or any other
document or instrument relating to the creation, perfection,
preservation protection, validity, effectiveness or enforcement
thereof; and
(vii) the fees and expenses as set forth in Schedule II hereto
and in the Securitization Fee Letter.
SECTION 8.14. INDEMNIFICATION. (a) THE COMPANY SHALL PAY, PROTECT,
INDEMNIFY AND HOLD HARMLESS EACH INDEMNIFIED PARTY FROM AND AGAINST, AND SHALL
DEFEND ALL ACTIONS AGAINST ANY INDEMNIFIED PARTY WITH RESPECT TO, ANY AND ALL
LIABILITIES (INCLUDING BUT NOT LIMITED TO LIABILITY FOR PATENT OR TRADEMARK
INFRINGEMENT OR MISUSE OR MISAPPROPRIATION OF ANY INTELLECTUAL PROPERTY RIGHTS,
LIABILITY IN TORT (STRICT OR OTHERWISE)), LOSSES, DAMAGES, COSTS, EXPENSES
(INCLUDING BUT NOT LIMITED TO ATTORNEYS' FEES AND EXPENSES OF COUNSEL), CAUSES
OF ACTION, SUITS, CLAIMS, DEMANDS OR JUDGMENTS OF ANY NATURE WHATSOEVER (WHETHER
OR NOT THE INDEMNIFIED PARTY IS NAMED AS OR OTHERWISE IS A PARTY THERETO)
(COLLECTIVELY, "LOSSES") WITH RESPECT TO THE
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TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND THE OPERATIVE DOCUMENTS BASED
UPON, ARISING OUT OF OR OTHERWISE RELATING TO OR IN RESPECT OF:
(i) ANY INJURY TO, OR DEATH OF, ANY NATURAL PERSON, OR DAMAGE
TO OR LOSS OF PROPERTY, OR ANY MATTERS OCCURRING ON OR RESULTING FROM
ACTIVITIES USING, ON OR RELATING TO THE PROPERTY OR ANY PART THEREOF;
(ii) THE ACQUISITION, OWNERSHIP, LEASING, SUBLEASING,
CONSTRUCTION, OPERATION, MANAGEMENT, MAINTENANCE, OCCUPANCY,
POSSESSION, USE, NON-USE OR CONDITION OF THE PROPERTY OR ANY PART
THEREOF;
(iii) ANY VIOLATION BY THE COMPANY OF ANY OF THE TERMS OR
CONDITIONS OF THIS AGREEMENT, THE LEASE, THE SERVICES AGREEMENT OR ANY
OF THE OTHER OPERATIVE DOCUMENTS OR THE SECURITIZATION DOCUMENTS;
(iv) ANY DEFAULT, EVENT OF DEFAULT OR ENVIRONMENTAL TRIGGER;
(v) ANY ACT OR OMISSION OF THE COMPANY OR THE GUARANTOR OR ANY
OF THEIR AGENTS, CONTRACTORS, LICENSEES, SUBLESSEES, INVITEES,
REPRESENTATIVES OR ANY PERSON FOR WHOSE CONDUCT THE COMPANY OR THE
GUARANTOR IS LEGALLY RESPONSIBLE OR OF THE OWNER IN SO FAR AS IT IS
ACTING ON BEHALF OF OR PURSUANT TO DIRECTIONS GIVEN BY OR ON BEHALF OF
ANY OF THE FOREGOING PERSONS OR SUCH ACT OR OMISSION IS CONTEMPLATED BY
THE TERMS OF THE OPERATIVE DOCUMENTS ON OR RELATING TO OR IN CONNECTION
WITH THE ACQUISITION, OWNERSHIP, LEASING, SUBLEASING, CONSTRUCTION,
OPERATION, MANAGEMENT, MAINTENANCE, OCCUPANCY, POSSESSION, USE, NON-USE
OR CONDITION OF THE PROPERTY OR ANY PART THEREOF;
(vi) THE PERFORMANCE OF ANY LABOR OR SERVICES OR FURNISHING OF
ANY MATERIALS OR OTHER PROPERTY IN RESPECT OF THE PROPERTY OR ANY PART
THEREOF;
(vii) ANY LIENS (INCLUDING, WITHOUT LIMITATION, ANY PERMITTED
ENCUMBRANCES) ON OR WITH RESPECT OF AND TO THE PROPERTY OR ANY PART
THEREOF;
(viii) ANY PERMITTED CONTEST REFERRED TO IN THE LEASE;
(ix) ANY BREACH, VIOLATION OR DEFAULT BY THE COMPANY OR ANY
RELEVANT SUBSIDIARIES OF ANY CONTRACT OR AGREEMENT DIRECTLY OR
INDIRECTLY RELATING TO THE PROPERTY OR THE TRANSACTIONS TO BE
CONSUMMATED PURSUANT TO THE OPERATIVE DOCUMENTS OR THE SECURITIZATION
DOCUMENTS TO WHICH THE COMPANY OR ANY RELEVANT SUBSIDIARY IS A PARTY
(OR ANY TRANSACTIONS IN WHICH ANY PROCEEDS OF ALL OR ANY PART OF
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THE PROCEEDS OF THE INSTRUMENTS ARE APPLIED) OR OF ANY LEGAL
REQUIREMENT OR INSURANCE REQUIREMENT;
(x) ANY TERMINATION OR INVALIDITY OF THE TRUSTEE'S INTEREST IN
THE PROPERTY OR ANY PART THEREOF (OTHER THAN AS A RESULT OF THE
PURCHASE OF THE PROPERTY BY THE COMPANY OR ITS DESIGNEE IN ACCORDANCE
WITH THE LEASE);
(xi) THE NON-OCCURRENCE OF ANY FUNDING AND BREAK COSTS
ASSOCIATED WITH ANY FUNDING BY THE NOTE HOLDERS OR THE CERTIFICATE
HOLDERS (OR ON THE NOTE HOLDERS' OR CERTIFICATE HOLDERS' BEHALF BY THE
SPV OR THE APA PURCHASERS) OF ADVANCES OR THE INVESTMENT ANTICIPATED TO
BE MADE ON ANY FUNDING DATE IN EACH CASE AFFECTING ANY INDEMNIFIED
PARTY, THE PROPERTY OR ANY PART THEREOF OR THE OWNERSHIP, MANAGEMENT,
MAINTENANCE, OCCUPANCY, POSSESSION, USE, NON-USE OR CONDITION THEREOF;
(xii) ANY ACTUAL OR PROPOSED USE BY THE COMPANY OR ANY OTHER
PERSON OF THE PROCEEDS OF ANY ADVANCE OR INVESTMENT;
(xiii) THE EXECUTION, DELIVERY, AND PERFORMANCE OF (OR IN ANY
OTHER WAY RELATED TO OR ARISING OUT OF) THE OPERATIVE DOCUMENTS OR
FACILITY AGREEMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY, OR ANY
VIOLATION OR BREACH OF SUCH DOCUMENTS AND AGREEMENTS;
(xiv) THE OPERATIONS OF THE BUSINESS OF THE COMPANY, THE
RELEVANT SUBSIDIARIES AND THEIR AFFILIATES;
(xv) THE IMPAIRMENT OF ALL ACCESS TO AND FROM THE PROPERTY OR
ANY PART THEREOF AS REQUIRED FOR THE EFFICIENT AND PROPER OPERATION OF
THE PROPERTY;
(xvi) NOT FILING AND RECORDING, OR NOT CAUSING THE FILING AND
RECORDING OF, THE LEASE (OR A MEMORANDUM THEREOF), ANY MORTGAGE, THE
SECURITY AGREEMENT, ANY UCC-1 FINANCING STATEMENT RELATING TO THE
FOREGOING, OR ANY OTHER DOCUMENT OR INSTRUMENT THAT MAY BE REQUIRED IN
ORDER TO PROTECT THE VALIDITY AND EFFECTIVENESS THEREOF OR TO
ESTABLISH, CREATE, PERFECT, PRESERVE, PROTECT OR ENFORCE THE RIGHTS OF
THE PARTIES THERETO OR THE INTERESTS OF THE TRUSTEE AND THE COLLATERAL
AGENT IN THE PROPERTY (INCLUDING, BUT NOT LIMITED TO, LOSSES RESULTING
FROM THE FAILURE OF THE COLLATERAL AGENT TO HAVE A FIRST PRIORITY
SECURITY INTEREST IN THE COLLATERAL UNDER THE SECURITY AGREEMENT);
(xvii) ANY DEFECT OR DEFICIENCY IN OR ANY LACK OF TITLE TO OR
RIGHT OF OCCUPANCY, ACCESS, POSSESSION OR USE OF ANY REAL PROPERTY OR
OTHER PROPERTY WHICH DEFECT, DEFICIENCY OR ABSENCE ADVERSELY AFFECTS
(A) THE VALUE, MARKETABILITY, CONDITION, USE, OWNERSHIP, LEASING,
SUBLEASING,
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CONSTRUCTION, OPERATION, MANAGEMENT, MAINTENANCE, OCCUPANCY,
POSSESSION, SALE OR DISPOSITION OF SUCH REAL PROPERTY OR OTHER PROPERTY
AS PART OF OR IN CONNECTION WITH THE OPERATION OF THE
TELECOMMUNICATIONS BUSINESS OR OTHER TRANSACTIONS CONTEMPLATED BY THE
OPERATIVE DOCUMENTS OR (B) THE PROPER AND EFFICIENT OPERATION OF THE
NETWORK ASSETS (OR ANY PORTION THEREOF), IN EITHER CASE, UPON ELECTION
OF THE COMPANY TO TERMINATE THE LEASE PURSUANT TO SECTION 3.03(a)(II)
OF THE LEASE, OR UPON OTHER TERMINATION OF THE LEASE, PROVIDED THAT THE
COMPANY OF ITS DESIGNEE DOES NOT PURCHASE THE PROPERTY;
(xviii) ANY BREACH, VIOLATION OR DEFAULT BY THE COMPANY OR ANY
RELEVANT SUBSIDIARIES OF ANY CAPACITY LEASES OF THE COMPANY OR ANY
RELEVANT SUBSIDIARIES, UPON ELECTION OF THE COMPANY TO TERMINATE THE
LEASE PURSUANT TO SECTION 3.03(a)(II) OF THE LEASE, OR UPON OTHER
TERMINATION OF THE LEASE, PROVIDED THAT THE COMPANY OF ITS DESIGNEE
DOES NOT PURCHASE THE PROPERTY; OR
(xix) ANY LOSS THE TRUSTEE MAY INCUR OR BE REQUIRED TO PAY
UNDER SECTION 5.13 OF THE INTERPARTY AGREEMENT, INCLUDING IN RESPECT OF
ITS INDEMNIFICATION OF THE INDEMNIFIED PARTIES (AS DEFINED THEREIN) FOR
THEIR LOSSES (AS DEFINED THEREIN) IN RESPECT OF MATTERS OF THE TYPE
REFERRED TO IN THE PRECEDING CLAUSES OF THIS SECTION 8.14(a) (INCLUDING
WITHOUT LIMITATION THE FEES AND EXPENSES OF SEPARATE COUNSEL FOR THE
INDEMNIFIED PARTIES (AS DEFINED THEREIN)), PLUS AN AMOUNT SUFFICIENT TO
REIMBURSE THE TRUSTEE FOR ANY TAX OF ANY KIND INCURRED OR REQUIRED TO
BE PAID BY THE TRUSTEE IN CONNECTION WITH THE RECEIPT OF
INDEMNIFICATION AMOUNTS (OR TAX GROSS-UP AMOUNTS) HEREUNDER.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT OR THE
OTHER OPERATIVE DOCUMENTS, THE COMPANY SHALL NOT BE REQUIRED TO INDEMNIFY OR
HOLD HARMLESS ANY INDEMNIFIED PARTY AGAINST ANY CLAIMS (X) TO THE EXTENT ARISING
SOLELY AS A RESULT OF THE FRAUD, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH
INDEMNIFIED PARTY OR (Y) TO THE EXTENT OF COSTS ARISING FROM THIRD-PARTY DAMAGE
CLAIMS OTHER THAN THOSE THIRD-PARTY CLAIMS CAUSED BY OR RESULTING FROM THE
ACTIONS OR FAILURES TO ACT OF THE COMPANY OR ANY OF ITS SUBCONTRACTORS WHILE IN
POSSESSION OR CONTROL OF THE PROPERTY (OR ANY PART THEREOF); PROVIDED THAT (1)
THIS CLAUSE (Y) SHALL CEASE TO HAVE ANY FORCE OR EFFECT ON AND AFTER THE
COMPLETION DATE AND (2) THIRD-PARTY CLAIMS CAUSED BY OR RESULTING FROM THE
COMPANY'S ACTIONS OR FAILURES TO ACT PURSUANT TO (OR ANY VIOLATION OR BREACH OF)
SECTION 1 OF THE SERVICES AGREEMENT SHALL BE DEEMED ACTIONS OR FAILURES TO ACT
OF THE COMPANY OR ITS SUBCONTRACTORS WHILE IN POSSESSION OR CONTROL OF THE
PROPERTY (OR ANY PART THEREOF) AND SHALL NOT BE EXCLUDED FROM THE COMPANY'S
INDEMNIFICATION OBLIGATIONS HEREUNDER. FOR PURPOSES OF THIS SECTION 8.14,
"INDEMNIFIED PARTY" MEANS EACH OF
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THE TRUSTEE (SOLELY IN ITS CAPACITY AS TRUSTEE) AND ITS SUCCESSORS AND ASSIGNS.
NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE CONTRARY, THE COMPANY SHALL NOT
BE REQUIRED TO INDEMNIFY OR HOLD HARMLESS ANY INDEMNIFIED PARTY FOR AMOUNTS IN
EXCESS OF THE RESIDUAL VALUE AMOUNT IN RESPECT OF A CLAIM FOR INDEMNIFICATION
FOR AN EVENT OF DEFAULT UNDER SECTION 6.01(z) OF THIS AGREEMENT.
(b) THE OBLIGATIONS OF THE COMPANY UNDER THIS SECTION 8.14 SHALL
SURVIVE THE EXPIRATION OR ANY TERMINATION OF THIS AGREEMENT, THE LEASE OR ANY
OTHER OPERATIVE DOCUMENT (WHETHER BY OPERATION OF LAW OR OTHERWISE) FOR ALL
MATTERS DESCRIBED IN THIS SECTION 8.14 WHICH OCCUR OR ARISE PRIOR TO SUCH
EXPIRATION OR TERMINATION OR ARISE OUT OF OR RESULT FROM FACTS, EVENTS, CLAIMS,
LIABILITIES, ACTIONS OR CONDITIONS OCCURRING, ARISING OR EXISTING ON OR BEFORE
SUCH EXPIRATION OR TERMINATION. IN CASE ANY ACTION SHALL BE BROUGHT AGAINST ANY
INDEMNIFIED PARTY IN RESPECT OF WHICH INDEMNITY MAY BE SOUGHT AGAINST THE
COMPANY, SUCH INDEMNIFIED PARTY SHALL PROMPTLY NOTIFY THE COMPANY IN WRITING,
BUT FAILURE TO GIVE SUCH PROMPT NOTICE SHALL NOT RELIEVE THE COMPANY FROM ANY
LIABILITY HEREUNDER. IF NO DEFAULT OR EVENT OF DEFAULT OR ENVIRONMENTAL TRIGGER
HAS OCCURRED AND IS CONTINUING HEREUNDER, THE COMPANY, AT ITS OWN EXPENSE, MAY
ELECT TO ASSUME THE DEFENSE OF ANY ACTION BROUGHT AGAINST AN INDEMNIFIED PARTY,
INCLUDING THE EMPLOYMENT OF COUNSEL REASONABLY SATISFACTORY TO SUCH INDEMNIFIED
PARTY AND THE PAYMENT BY THE COMPANY OF ALL EXPENSES THEREOF. ANY INDEMNIFIED
PARTY SHALL HAVE THE RIGHT TO EMPLOY SEPARATE COUNSEL AT ITS EXPENSE IN ANY SUCH
ACTION AND TO CONSULT WITH THE COMPANY REGARDING THE DEFENSE THEREOF; PROVIDED,
HOWEVER, THAT, EXCEPT AS OTHERWISE PROVIDED BELOW, THE COMPANY SHALL AT ALL
TIMES CONTROL SUCH DEFENSE. IF THE COMPANY SHALL HAVE FAILED TO EMPLOY COUNSEL
REASONABLY SATISFACTORY TO SUCH INDEMNIFIED PARTY, THE FEES AND EXPENSES OF
COUNSEL TO EACH INDEMNIFIED PARTY SHALL BE PAID BY THE COMPANY. IF THE COMPANY
SHALL ELECT IN WRITING NOT TO ASSUME THE DEFENSE OR SHALL FAIL TO PROSECUTE
DILIGENTLY SUCH DEFENSE THEREOF, AN INDEMNIFIED PARTY MAY, AFTER WRITTEN NOTICE
TO THE COMPANY AND THE COMPANY'S FAILURE TO REMEDY PROMPTLY THE SAME, ASSUME THE
DEFENSE THEREOF, INCLUDING THE EMPLOYMENT OF COUNSEL, IN WHICH CASE THE COMPANY
SHALL PAY ALL OF THE LOSSES OF SUCH INDEMNIFIED PARTY INCURRED IN RESPECT OF
SUCH DEFENSE. IF ANY INDEMNIFIED PARTY SHALL HAVE BEEN ADVISED BY COUNSEL CHOSEN
BY IT THAT THERE MAY BE ONE OR MORE LEGAL DEFENSES AVAILABLE TO SUCH INDEMNIFIED
PARTY THAT ARE DIFFERENT FROM OR ADDITIONAL TO THOSE AVAILABLE TO THE COMPANY OR
IT WOULD BE INAPPROPRIATE FOR SUCH COUNSEL TO CONTINUE TO REPRESENT SUCH
INDEMNIFIED PARTY IN RESPECT OF A PARTICULAR LEGAL OR FACTUAL ISSUE OR
OTHERWISE, EACH OF THE INDEMNIFIED PARTY AND THE COMPANY MAY RETAIN ADDITIONAL
AND SEPARATE COUNSEL TO REPRESENT IT OR, AT ITS OPTION, ASSUME THE DEFENSE OF
SUCH ACTION AND THE COMPANY WILL REIMBURSE SUCH INDEMNIFIED PARTY FOR THE
REASONABLE FEES AND EXPENSES OF ANY COUNSEL RETAINED BY THE INDEMNIFIED PARTY.
THE COMPANY SHALL NOT BE LIABLE FOR ANY SETTLEMENT OF ANY ACTION WITHOUT ITS
WRITTEN CONSENT. NO
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SETTLEMENT OF ANY SUCH ACTION MAY BE MADE BY THE COMPANY WITHOUT THE INDEMNIFIED
PARTY'S WRITTEN CONSENT; PROVIDED, HOWEVER, SUCH CONSENT SHALL NOT BE NECESSARY
IF THE SETTLEMENT RESULTS IN AN IRREVOCABLE AND UNCONDITIONAL RELEASE OF THE
INDEMNIFIED PARTY WITHOUT (I) THE ADMISSION BY THE INDEMNIFIED PARTY OF GUILT,
COMPLICITY OR CULPABILITY OR (II) THE INCURRENCE OF ANY PAYMENT OBLIGATION OR
OTHER CIVIL OR ANY CRIMINAL LIABILITY ON THE PART OF SUCH INDEMNIFIED PARTY
(UNLESS, WITH RESPECT TO PAYMENT OBLIGATIONS, THE SAME IS PAID BY THE COMPANY
HEREUNDER). IT IS UNDERSTOOD THAT THE COMPANY SHALL NOT, IN CONNECTION WITH ANY
ACTION OR RELATED ACTIONS IN THE SAME JURISDICTION, BE LIABLE FOR THE FEES AND
EXPENSES OF MORE THAN ONE SEPARATE FIRM FOR ALL INDEMNIFIED PARTIES, UNLESS THE
INDEMNIFIED PARTIES SHALL HAVE REASONABLY CONCLUDED THAT REPRESENTATION OF ALL
THE INDEMNIFIED PARTIES BY THE SAME COUNSEL WOULD BE INAPPROPRIATE DUE TO ACTUAL
OR POTENTIAL DIFFERING INTERESTS BETWEEN THEM.
(c) AN INDEMNIFIED PARTY MAY DEMAND PAYMENT FOR ANY LOSSES INCURRED BY
SUCH INDEMNIFIED PARTY, AS AND WHEN INCURRED, AND SUCH DEMAND FOR
INDEMNIFICATION SHALL BE ACCOMPANIED BY A BRIEF DESCRIPTION OF THE NATURE AND
EXTENT OF THE LOSSES AS WELL AS THE CIRCUMSTANCES UNDER WHICH INDEMNIFICATION IS
SOUGHT. THE COMPANY SHALL PAY WHEN DUE AND PAYABLE THE FULL AMOUNT OF SUCH
LOSSES TO THE APPROPRIATE PARTY. THE COMPANY SHALL NOT BE OBLIGATED TO PAY SUCH
LOSSES (OTHER THAN ATTORNEY'S FEES AND EXPENSES, TO THE EXTENT SUCH FEES AND
EXPENSES ARE INDEMNIFIED HEREUNDER) SO LONG AS (I) THE COMPANY SHALL HAVE
ASSUMED THE DEFENSE OF THE ACTION OR IS CONTESTING SUCH LOSSES FOR WHICH
INDEMNITY IS SOUGHT HEREUNDER AND (II) IS DILIGENTLY PROSECUTING THE SAME AND
THE COMPANY HAS TAKEN ALL ACTION AS MAY BE NECESSARY TO PREVENT (A) THE
COLLECTION OF SUCH LOSSES FROM THE INDEMNIFIED PARTY; (B) THE SALE, FORFEITURE
OR LOSS OF THE PROPERTY OR ANY PART THEREOF DURING SUCH DEFENSE OF THE SAME
ACTION; AND (C) THE IMPOSITION OF ANY CIVIL OR CRIMINAL LIABILITY FOR FAILURE TO
PAY SUCH LOSSES WHEN DUE AND PAYABLE.
(d) THE COMPANY ACKNOWLEDGES AND AGREES THAT (I) ITS OBLIGATIONS UNDER
THIS SECTION 8.14 ARE INTENDED TO INCLUDE AND EXTEND TO ANY AND ALL LIABILITIES,
SUMS PAID IN SETTLEMENT OF CLAIMS, OBLIGATIONS, CHARGES, ACTIONS, CLAIMS, LIENS,
TAXES AND DAMAGES (INCLUDING, WITHOUT LIMITATION, PUNITIVE DAMAGES, PENALTIES,
FINES, COURT COSTS, ADMINISTRATIVE SERVICE FEES, RESPONSE AND REMEDIATION COSTS,
STABILIZATION COSTS, ENCAPSULATION COSTS, TREATMENT, STORAGE OR DISPOSAL COSTS)
IMPOSED UPON OR INCURRED BY OR ASSERTED AT ANY TIME AGAINST ANY INDEMNIFIED
PARTY (WHETHER OR NOT INDEMNIFIED AGAINST BY ANY OTHER PARTY) ARISING DIRECTLY
OR INDIRECTLY OUT OF: (A) THE TREATMENT, STORAGE, DISPOSAL, GENERATION, USE,
TRANSPORT, MOVEMENT, PRESENCE, RELEASE, THREATENED RELEASE, SPILL, INSTALLATION,
SALE, EMISSION, INJECTION, LEACHING, DUMPING, ESCAPING OR SEEPING OF ANY
HAZARDOUS MATERIALS OR MATERIAL CONTAINING OR ALLEGED TO CONTAIN HAZARDOUS
MATERIALS AT, ON, UNDER, ONTO, THROUGH OR FROM ANY OF THE PROPERTY; (B) THE
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VIOLATION OR ALLEGED VIOLATION OF ANY ENVIRONMENTAL LAWS RELATING TO OR IN
CONNECTION WITH THE PROPERTY OR ANY PART THEREOF OR ANY ACTS OR OMISSIONS
THEREON OR RELATING THERETO; (C) ALL OTHER FEDERAL, STATE AND LOCAL LAWS
DESIGNED TO PROTECT THE ENVIRONMENT OR PERSONS OR PROPERTY THEREIN, WHETHER NOW
EXISTING OR HEREINAFTER ENACTED, PROMULGATED OR ISSUED BY ANY FEDERAL, STATE,
COUNTY, MUNICIPAL OR OTHER GOVERNMENTAL AUTHORITY; AND (D) THE COMPANY'S FAILURE
TO COMPLY WITH ITS OBLIGATIONS UNDER ARTICLE VIII OF THE LEASE AND (II) THE
INDEMNIFICATION PROVIDED FOR UNDER THIS SECTION 8.14(d) SHALL BE GOVERNED BY THE
PROCEDURES SET FORTH IN SECTIONS 8.14(b)-(c) HEREOF IN EACH CASE FROM AND AFTER
THE DATE HEREOF.
SECTION 8.15. Operative Documents; Further Assurances. Each of the
parties hereto does hereby covenant and agree to perform and be governed and
restricted by the Operative Documents to which it is a party and, subject to the
terms and conditions thereof, to take or cause to be taken, all actions and to
do, or cause to be done, all things necessary, proper or advisable in connection
therewith. Each of the parties hereto shall have the rights and obligations set
forth in the Interparty Agreement and the Declaration with respect to such party
notwithstanding that not all of such parties are signatories thereto. The
Company, the Trustee, the Collateral Agent, the Agent, the Guarantor, the Note
Holders and the Certificate Holders will, at the expense of the Company, execute
and deliver such further instruments and do such further acts as may be
reasonably necessary to carry out more effectively the purposes of the Operative
Documents and the transactions contemplated thereby. The Company, the Trustee,
the Agent, the Collateral Agent, the Guarantor, the Note Holders and the
Certificate Holders may at any time, subject to the conditions and restrictions
contained in the Operative Documents, enter into supplements which shall form a
part hereof, when required or permitted by any of the provisions of the
Operative Documents or to cure any ambiguity, or to cure, correct or supplement
any defective or inconsistent provision contained herein or in any other
Operative Document.
SECTION 8.16. Confidentiality. (a) Each of the parties hereto, other
than the Agent and, as applicable, its Affiliates, agrees that, subject to
Section 5.03, it will maintain the confidentiality of the structure of this
transaction developed exclusively by CSI.
(b) Each of the parties hereto agrees that unless otherwise required by
Law, by any governmental authority or body or by S&P or Moody's or any other
rating agency in connection with the APA or the Finance Facility or consented to
in writing by the Company and the Agent, it will maintain the confidentiality of
all non-public information (i) regarding the financial terms of this transaction
or (ii) regarding the Company, the Guarantor or the Property which shall be
furnished to it by or on behalf of the Company or the Guarantor in
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connection with the transactions contemplated by the Operative Documents and the
Securitization Documents, in accordance with the procedures it generally applies
to confidential material; provided, however, that if the Lease has been
terminated and the Company has not purchased the Property, then neither the Note
Holders, the Certificate Purchasers, the Agent, the Collateral Agent nor the
Trustee shall be bound by the confidentiality provisions of this Section
8.16(b).
(c) The parties hereto agree not to publish tombstones or other public
announcements in connection with the transactions contemplated hereby without
the consent of the Company, the Agent and the Note Holders.
SECTION 8.17. Interest. It is the intention of the parties hereto to
conform strictly to all usury Laws that are applicable to each such party, Note
or to the transactions contemplated by the Operative Documents and the
Securitization Documents (collectively, the "Transactions"). Accordingly,
notwithstanding anything to the contrary in the Instruments, this Agreement or
any other Operative Document or Securitization Document or agreement entered
into in connection with the Transactions (collectively, the "Transaction
Documents"), it is agreed as follows: (i) the aggregate of all consideration
which constitutes interest under Applicable Law (hereinafter defined) that is
contracted for, taken, reserved, charged or received by any party under the
Transaction Documents or otherwise in connection with the Transactions shall
under no circumstances exceed the maximum amount of interest that could lawfully
be charged by such party under Applicable Law, (ii) in the event that the
maturity of any indebtedness evidenced by or payable pursuant to the Transaction
Documents is accelerated for any reason, or in the event of any required or
permitted payment or prepayment of all or any part of such indebtedness
(including, without limitation and if applicable, any required or permitted
purchase of the Property, or any required or permitted payment of the Residual
Value Amount or Termination Value), then such consideration that constitutes
interest as to any such indebtedness under Applicable Law may never include more
than the maximum amount allowed by such Applicable Law, and (iii) if under any
circumstances the aggregate amounts paid on any Instrument prior to or incident
to the final payment thereof include any amounts which by Applicable Law would
be deemed interest in excess of the maximum amount of interest permitted by
Applicable Law, such excess amounts, if theretofore paid, shall be credited by
the recipient on the principal or stated amount of the affected indebtedness
(or, to the extent that the principal or stated amount of such indebtedness
shall have been or would thereby be paid in full, refunded by such recipient to
the party entitled thereto). If at any time the rate of interest or
Distributions contractually called for in any Transaction Document (as the same
may vary from time to time pursuant to the terms of such Transaction Document,
the "Stated Rate"), exceeds
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the maximum non-usurious rate of interest permitted by Applicable Law (the
"Maximum Rate") in respect of the indebtedness evidenced by such Transaction
Document, taking into account all other amounts paid or payable pursuant to the
Transaction Documents which constitute interest with respect to such
indebtedness under Applicable Law regardless of whether denominated as interest
or Distributions (collectively, the "Other Charges"), then the rate of interest
to accrue or Distributions owing on such indebtedness shall be limited to such
Maximum Rate (taking into account the Other Charges), but any subsequent
reduction in the Stated Rate applicable to such indebtedness shall not reduce
the rate of interest or Distributions to accrue on such indebtedness below such
Maximum Rate (taking into account the Other Charges) until such time as the
total amount of interest or Distributions on such indebtedness equals the amount
of interest or Distributions which would have accrued if the Stated Rate
applicable to such indebtedness had at all times been in effect. If at the
maturity or final payment of any indebtedness the total amount of interest or
Distributions paid or accrued on such indebtedness under the preceding sentence
is less than the total amount of interest or Distributions which would have
accrued if the Stated Rate applicable to such indebtedness had at all times been
in effect, then to the fullest extent permitted by Applicable Law there shall be
due and payable or owing with respect to such indebtedness an amount equal to
the excess, if any, of (a) the amount of interest or Distributions which would
have accrued on such indebtedness if the Stated Rate applicable to such
indebtedness had at all times been in effect, above (b) the amount of interest
or Distributions accrued in accordance with the provisions of the Transaction
Document evidencing such indebtedness after giving effect to the preceding
sentence. All amounts paid or agreed to be paid for the use, forbearance or
detention of sums pursuant to or in connection with the Transaction Documents
shall, to the extent permitted by Applicable Law, be amortized, prorated,
allocated and spread throughout the full term thereof so that the rate or amount
of interest paid or payable with respect to any amount of indebtedness evidenced
by or payable pursuant to the Transaction Documents does not exceed the
applicable usury ceiling, if any. As used herein, the term "Applicable Law"
means that law, if any, that is applicable to any particular Transaction and
that limits the maximum non-usurious rate of interest that may be taken,
contracted for, charged, reserved or received with respect to such Transaction,
including the law of the State of New York, the law of any other jurisdiction
that may be mandatorily applicable to such Transaction notwithstanding other
provisions of this Agreement and the other Transaction Documents, and the
federal Law of the United States. As used herein, the term "interest" means
interest as determined under Applicable Law, regardless of whether denominated
as interest in the Transaction Documents (except to the extent that this Section
8.17 specifically refers to interest denominated as interest). The right to
accelerate maturity of any indebtedness evidenced by any Instrument or other
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Transaction Document, and the right to demand payment of the Residual Value
Amount or Termination Value does not include the right to accelerate any
interest, or to receive any other amounts, which would cause the Transactions to
be usurious under Applicable Law. All computations of the maximum amount allowed
under Applicable Law, as well as all computations of interest at the Maximum
Rate, will be made on the basis of the actual number of days elapsed over a 365
or 366 day year, whichever is applicable pursuant to such Applicable Law. The
provisions of this Section 8.17 shall prevail over any contrary provisions in
this Agreement, the Instruments or any of the other Transaction Documents.
SECTION 8.18. Financial Advisor. The parties hereto (including, without
limitation, the Trustee and the Collateral Agent at the direction of the Note
Holders and the Certificate Holders) acknowledge and agree that neither CSI, the
Company's exclusive financial advisor for the transactions contemplated by the
Operative Documents, nor any of CSI's Affiliates, is making any representation
or warranty, or is required to make any disclosure, now or in the future, with
respect to the parties' tax or accounting treatment of the transactions
contemplated by the Operative Documents or the Securitization Documents. Each of
the parties hereto further acknowledges and agrees that neither CSI nor any of
its Affiliates is responsible, or will be responsible in the future, for tax and
accounting advice with respect to the transactions contemplated by the Operative
Documents or the Securitization Documents, and that it (i) has, independently
and without reliance on CSI or its Affiliates, made its own analysis and
decisions with respect to such matters and has had the benefit of the advice of
its own independent tax and accounting advisers with respect to such matters to
the extent it has deemed appropriate and (ii) will, independently and without
reliance on CSI or its Affiliates, continue to make its own analyses and
decisions with respect to such matters based on such information and advice as
it deems appropriate for such purposes.
SECTION 8.19. Securities Representation. Each Note Holder and
Certificate Holder hereby represents that it is acquiring its Instruments for
investment for its own account, and not with a view to or for sale in connection
with a distribution of any Note, except in compliance with all applicable
securities laws; provided, however, that, subject to Section 5.03, the
disposition of any Instrument held by that Note Holder or Certificate Holder
shall at all times be within its exclusive control.
SECTION 8.20. The Collateral Agent. Except for its own gross negligence
and willful misconduct and as otherwise provided in the Operative Documents, it
is expressly understood and agreed by the parties hereto that (a) this Agreement
is executed and delivered by the Collateral Agent, not in its individual
capacity but solely as Collateral Agent, under the
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Interparty Agreement, in the exercise of the powers and authority conferred and
vested in it as the Collateral Agent, (b) nothing herein contained shall be
construed as creating any liability on the Collateral Agent, individually or
personally, to perform any obligation of the Collateral Agent either expressed
or implied contained herein or in the Operative Documents, all such liability,
if any, being expressly waived by the parties to this Agreement and by any
Person claiming by, through or under the parties to this Agreement and (c) under
no circumstances shall the Collateral Agent be personally liable for the payment
of any indebtedness or expenses of the Collateral Agent or be liable for the
breach or failure of any obligation, representation, warranty or covenant made
or undertaken by the Collateral Agent under this Agreement or the other
Operative Documents except where such breach or failure is the result of the
Collateral Agent's willful misconduct or gross negligence.
SECTION 8.21. Agreements with Respect to the Property.
(a) Upon payment by the Company of the Termination Value and upon the
request of the Company, the Trustee will convey the Property to the Company in
the manner provided in the Lease without recourse, representation, or warranty
of any kind, except that such Property is free and clear of any Lien or other
adverse interest of any kind created by the Trustee or the Collateral Agent in
its individual capacity (except for Permitted Encumbrances or as consented to or
created by the Company and except as to any interest created by the Trustee upon
the exercise of any right under the Operative Documents upon any Default, Event
of Default or Environmental Trigger).
(b) Upon the consummation of the purchase of the Property by the
Company in compliance with the Operative Documents, at the request of the
Company or the Collateral Agent, as applicable, the Trustee and the Collateral
Agent shall execute all releases and termination statements required to release
or terminate the Liens granted under the Operative Documents with respect to
such Property. The Trustee shall execute the releases and termination statements
under the direction of the Collateral Agent (and the Agent is authorized
hereunder to so direct the Collateral Agent without joinder or approval of any
of the Note Holders). The Company shall pay all out-of-pocket costs required for
the preparation, execution, filing, and recording of such releases and
termination statements.
SECTION 8.22. Ratings. A rating, whether public or private, by S&P or
Moody's shall be deemed to be in effect on the date of announcement or
publication by S&P or Moody's, as the case may be, of such rating or, in the
absence of such announcement or publication, on the effective date of such
rating and will remain in effect until the date when any change in such rating
is deemed to be in effect. In the event any of the rating categories used by
Moody's or S&P is revised or designated
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differently (such as by changing letter designations to different letter
designations or to numerical designations), then the references herein to such
rating shall be changed to the revised or redesignated rating for which the
standards are closest to, but not lower than, the standards at the date hereof
for the rating which has been revised or redesignated. Long-term debt supported
by a letter of credit, guaranty, insurance or other similar credit enhancement
mechanism shall not be considered as senior unsecured long-term debt.
SECTION 8.23. Waiver of Trial by Jury. IN ANY ACTION OR PROCEEDING
UNDER OR RELATED TO THIS AGREEMENT, THE OPERATIVE DOCUMENTS OR ANY AMENDMENT,
INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE
DELIVERED IN CONNECTION WITH THE FOREGOING, THE COMPANY, THE GUARANTOR, THE
AGENT, THE COLLATERAL AGENT, THE TRUSTEE AND EACH NOTE HOLDER, APA PURCHASER AND
CERTIFICATE HOLDER HEREBY AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY, IRRESPECTIVE OF WHICH PARTY
COMMENCES SUCH ACTION OR PROCEEDING.
SECTION 8.24. Other Matters. Each of the Company and the Guarantor
acknowledges that neither any Note Holder, any APA Purchaser, any Certificate
Holder, the Trustee, the Collateral Agent, the Agent, or any Affiliate of any
thereof is making any representation, nor is it required to make any disclosure,
now or in the future, with respect to the parties' tax or accounting treatment
of the Property or the financing thereof, nor is any Note Holder, any APA
Purchaser, any Certificate Holder, the Trustee, the Collateral Agent, the Agent,
or any Affiliate of any thereof responsible, nor will it be responsible in the
future, for tax and accounting advice with respect to the Property or the
financing thereof, and the Company and the Guarantor have had or will have the
benefit of the advice of their own independent tax and accounting advisors with
respect to such matters.
SECTION 8.25. Protective Expenditures; Payment for Services. (a) At any
time after the expiration or other termination of the Lease, if the Lessee has
not purchased the Properties pursuant to the terms of the Lease, any Note
Holder, Certificate Holder or the Trustee shall have the right, but not the
obligation, to pay, or to fund the Collateral Agent's payment of, (i) real
estate Taxes due and owing with respect to the Properties or (ii) insurance
premiums required to maintain the coverage required during the term of the Lease
(each a "Protective Expenditure"). Reimbursement of Protective Expenditures made
by any Note Holder, any Certificate Holder or the Trustee in accordance with
this Section 8.25 shall be made upon a sale of the Property pursuant to the
provisions set forth in the Declaration.
(b) At any time after the expiration or other termination of the Lease,
the Majority Holders may (and shall if they have caused the Trustee to request
the Company to provide
86
<PAGE> 91
such services) fund the Trustee's payment of amounts due to the Company pursuant
to the Services Agreement. All amounts paid by the Majority Holders under this
section shall be deemed to be Protective Expenditures for purposes of
reimbursement pursuant to the Declaration.
SECTION 8.26. Recording and Filing Documents. In order to avoid
documentary Taxes in any State, the Agent, Note Holders, Certificate Holders,
Trustee and Collateral Agent have agreed that any document, including the Lease
(excepting, however UCC-1 financing statements) which may be required in order
to establish, create, perfect, preserve, protect or enforce the Liens, interests
and rights thereunder, shall not be recorded or filed, as the case may be, if
such recording or filing would require payment of any documentary recording Tax
in such State. However, at the request of the Agent such documents shall be
executed and delivered to the Agent on or prior to a Funding Date in form
suitable for recording or filing, as the case may be. If the rating of the
senior unsecured long-term debt securities of the Guarantor is less than BBB- by
S&P or less than Baa3 by Moody's, the Agent may, and upon written direction of
the Majority Holders shall, record and/or file the aforementioned documents. All
documentary stamp and intangible Taxes and all other fees, expenses, Taxes and
other costs relating to such recording and/or filing (the "Recording Charges")
shall be paid by the Company to the Agent immediately prior to such recording
and/or filing or at any time thereafter on demand by the Agent. Upon failure of
the Company to pay any Recording Charges under this Section 8.26, such Recording
Charges may be paid by the Note Holders and the Certificate Holders pro rata to
the Agent and if so paid to the Agent shall constitute Additional Rent
immediately payable by the Company as Lessee under the Lease. The Agent shall
not be obligated to record and/or file any of the aforementioned documents
unless all Recording Charges have been paid to the Agent.
SECTION 8.27. Exculpation of Trustee. Except for liability for its
representations and warranties in Section 3.02, and for its own gross negligence
and willful misconduct and as otherwise expressly provided in the Operative
Documents, it is expressly understood and agreed by the parties hereto that (a)
this Agreement is executed and delivered by SSBTC, not in its individual
capacity but solely as Trustee under the Declaration of Trust, in the exercise
of the powers and authority conferred and vested in it as the Trustee, (b) each
of the undertakings and agreements herein made on the part of the Trustee is
made and intended not as a personal representation, undertaking and agreement by
SSBTC but is made and intended for the purpose for binding only the Trust Estate
created by the Declaration of Trust, (c) nothing herein contained shall be
construed as creating any liability on SSBTC, individually or personally, to
perform any obligation of the Trustee either expressed or implied contained
herein or in the Operative Documents, all such
87
<PAGE> 92
liability, if any, being expressly waived by the parties to this Agreement and
by any Person lawfully claiming by, through or under the parties to this
Agreement and (d) under no circumstances shall SSBTC be personally liable for
the payment of any indebtedness or expenses of the Trustee or be liable for the
breach or failure of any obligation, representation, warranty or covenant made
or undertaken by the Trustee under the Operative Documents.
SECTION 8.28. No Petition. Each of the Company and the Trustee agrees
that it shall not institute against, or join any other Person in instituting
against, the SPV or CXC any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceeding, or other proceeding under any federal or state
bankruptcy or similar law, for one year and a day after the latest maturing (i)
commercial paper note issued by CXC under the Finance Facility and (ii) CXC
Advance is paid in full.
SECTION 8.29. No Recourse to the SPV. The obligations of the SPV under
this Agreement are solely the obligations of the SPV. No recourse to or against
any employee, officer, manager, Affiliate, member or agent of the SPV shall be
had for the payment of any amount owing by the SPV under this Agreement, or for
the payment by the SPV of any fee in respect hereof or any other obligation or
claim of or against the SPV arising out of or based upon this Agreement.
Notwithstanding any other provision of this Agreement or any other Operative
Document to the contrary, the SPV shall be required to pay any and all amounts
owing to the Agent or the Collateral Agent in respect of CXC Advances (or
interests therein) and interest thereon, and any other amounts owed to any
Person by the SPV under the Operative Documents, only to the extent the SPV has
received funds from the proceeds of CXC Advances or sales of Borrower Percentage
Interests, which funds are in excess of the amounts necessary to pay all amounts
owing to CXC and the APA Purchasers in respect of outstanding CXC Advances (or
interests therein) and interest thereon (such excess being referred to as "Extra
Funds"). In the event the SPV does not have Extra Funds in an amount sufficient
to pay in full such amounts due under this Agreement or any other Operative
Document, the excess of the amounts payable by the SPV over the amount of Extra
Funds shall not constitute a claim (as defined in Section 101(4) of the Federal
Bankruptcy Code) against the SPV until the earlier of such time, if any, as the
SPV has Extra Funds in an amount equal to such excess and such time as the SPV
is the subject of a bankruptcy or other similar proceeding.
SECTION 8.30. May Participation Agreement. This Participation Agreement
amends, restates, supplements and replaces, in its entirety, the May
Participation Agreement; all Property subject to the May Participation Agreement
and the other May Operative Documents shall be Property subject to this
Participation Agreement and the other Operative Documents as of
88
<PAGE> 93
the date hereof, without further action of any kind on the part of any of the
parties hereto; all amounts owing under the May Operative Documents (whether now
due or to become due) shall, to the extent unpaid on the date hereof, become
Fixed Rent, Additional Rent, indemnity payments or other amounts owing under
this Participation Agreement and the other Operative Documents; all Property
subject to the May Participation Agreement and the other May Operative Documents
shall from and after the date hereof, be governed by the provisions of this
Participation Agreement and the other Operative Documents; as of the date
hereof, the May Participation Agreement and the other May Operative Documents
shall cease to have any further force or effect, except that any references to
the May Participation Agreement or any other May Operative Document in any
mortgage, deed of trust, financing statement or other document filed or recorded
in any jurisdiction shall be deemed a reference to this Participation Agreement
or other Operative Document, as applicable, until such time, if any, as a new
mortgage, deed of trust, financing statement, amendment or other document is
executed, delivered, recorded and filed expressly referring to this
Participation Agreement or other Operative Document, as applicable, and except
as otherwise expressly provided in this Section 8.30 and any other Operative
Document (including the Guaranty).
SECTION 8.31. ****
89
<PAGE> 94
****
The term "Company's Independent Accountants" means Ernst & Young L.L.P.
(or such other firm of independent certified public accountants as may be
regularly engaged by the Company or its Affiliates to audit the financial
statements of the Company or such Affiliates).
The term "Purchasers' Accountants" means any firm of certified public
accountants of international standing selected by the Majority Holders, other
than the Company's Independent Accountants.
90
<PAGE> 95
SECTION 8.32. Managing Agent. The Managing Agents shall have no duties
or responsibilities hereunder solely in their capacities as Managing Agents.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their officers thereunto duly authorized as of the day and year
first above written.
91
<PAGE> 96
SIGNATURE PAGE FOR PARTICIPATION AGREEMENT
WILLIAMS COMMUNICATIONS, INC.
By:
------------------------------------
Name:
Title:
STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION
not in its individual capacity except as
expressly stated herein, but solely as
Trustee
By:
------------------------------------
Name:
Title:
STATE STREET BANK AND TRUST COMPANY, not
in its individual capacity, but solely
as Collateral Agent
By:
------------------------------------
Name:
Title:
<PAGE> 97
SIGNATURE PAGE FOR PARTICIPATION AGREEMENT
CITIBANK, N.A., as Agent
By:
------------------------------------
Name:
Title:
WC NETWORK FUNDING LLC, as Note Holder
By: WC Network Holdings, Inc.
its sole member
By:
------------------------------------
Name:
Title:
CITIBANK, N.A., as an APA Purchaser
By:
------------------------------------
Name:
Title:
<PAGE> 98
SIGNATURE PAGE FOR PARTICIPATION AGREEMENT
BANK OF MONTREAL, as an APA Purchaser
By:
------------------------------------
Name:
Title:
ROYAL BANK OF CANADA, as an APA Purchaser
By:
------------------------------------
Name:
Title:
BANK OF AMERICA NATIONAL TRUST &
SAVINGS ASSOCIATION, as an APA Purchaser
By:
------------------------------------
Name:
Title:
<PAGE> 99
SIGNATURE PAGE FOR PARTICIPATION AGREEMENT
THE CHASE MANHATTAN BANK, as an APA
Purchaser
By:
------------------------------------
Name:
Title:
TORONTO DOMINION (TEXAS), INC., as an
APA Purchaser
By:
------------------------------------
Name:
Title:
ABN AMRO BANK N.V., as an APA Purchaser
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
<PAGE> 100
SIGNATURE PAGE FOR PARTICIPATION AGREEMENT
THE BANK OF NOVA SCOTIA, as an APA
Purchaser
By:
------------------------------------
Name:
Title:
BANKBOSTON, N.A., as an APA Purchaser
By:
------------------------------------
Name:
Title:
BARCLAYS BANK PLC, as an APA Purchaser
By:
------------------------------------
Name:
Title:
<PAGE> 101
SIGNATURE PAGE FOR PARTICIPATION AGREEMENT
CIBC INC., as an APA Purchaser
By:
------------------------------------
Name:
Title:
THE BANK OF NEW YORK, as an APA Purchaser
By:
------------------------------------
Name:
Title:
BANQUE NATIONALE DE PARIS, HOUSTON
AGENCY, as an APA Purchaser
By:
------------------------------------
Name:
Title:
<PAGE> 102
SIGNATURE PAGE FOR PARTICIPATION AGREEMENT
COMMERZBANK, as an APA Purchaser
By:
------------------------------------
Name:
Title:
CREDIT AGRICOLE INDOSUEZ, as an APA
Purchaser
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
KBC BANK, N.V., as an APA Purchaser
By:
------------------------------------
Name:
Title:
<PAGE> 103
SIGNATURE PAGE FOR PARTICIPATION AGREEMENT
NATIONSBANK, as an APA Purchaser
By:
------------------------------------
Name:
Title:
FBTC LEASING CORP., as a Certificate
Holder
By:
------------------------------------
Name:
Title:
SCOTIABANC INC., as a Certificate Holder
By:
------------------------------------
Name:
Title:
<PAGE> 104
SCHEDULE I
MANNER OF PAYMENT
AND COMMUNICATIONS TO PARTIES
This Schedule I shows the names and addresses of the parties to the
foregoing Participation Agreement and the principal amounts of the Notes to be
purchased by the Note Holders.
Company:
(1) Address for all notices:
Williams Communications, Inc.
One Williams Center, 26th Floor
Tulsa, Oklahoma 74172
Attn.: G.L. Best, Vice President, Finance and
Administration
Fax No.: (918) 573-6024
(2) All payments to the Company with respect to the Operative Documents
shall be made by wire transfer of immediately available funds to
Account No. 0-106-4944-3 at Bank of Oklahoma, N.A., Tulsa, Oklahoma,
ABA# 1039-0003-6, with a reference to "WC Network Funding LLC" and with
sufficient information to identify the source and application of such
funds.
Guarantor:
(1) Address for all notices:
Williams Holdings of Delaware, Inc.
Treasury Department, 48th Floor
One Williams Center
Tulsa, Oklahoma 74172
Attn.: James G. Ivey, Treasurer
Fax No.: (918) 573-2065
(2) All payments to the Guarantor with respect to the Operative Documents
shall be made by wire transfer of immediately available funds to
Account No. 55-32167 at The First National Bank of Chicago, Chicago,
Illinois, ABA# 0710-0001-3, with a reference to "WC Network Funding
LLC" and with sufficient information to identify the source and
application of such funds.
<PAGE> 105
Trustee:
(1) Address for all notices:
State Street Bank and Trust Company of Connecticut, National
Association
c/o State Street Bank and Trust Company
Corporate Trust Department
Two International Place, 4th Floor
Boston, Massachusetts 02110
Fax. No.: (617) 664-5371
Tel. No.: (617) 664-5670
Attn.: Earl Dennison
(2) All payments to the Trustee with respect to the Operative Documents
shall be made by wire transfer of immediately available funds to
Account No. 9903-990-1 at State Street Bank and Trust Company, Boston,
MA, ABA# 011-000-028, with a reference to "Williams Synthetic" and
with sufficient information to identify the source and application of
such funds.
Collateral Agent:
(1) Address for all notices:
State Street Bank and Trust Company
Corporate Trust Department
Two International Place, 4th Floor
Boston, Massachusetts 02110
Fax No.: (617) 664-5371
Tel. No.: (617) 664-5670
Attn.: Earl Dennison
(2) All payments and transfers of funds to the Collateral Agent with
respect to the Operative Documents shall be made by wire transfer of
immediately available funds to Account No. 9903-990-1 at State Street
Bank and Trust Company, Boston, MA, ABA# 011-000-028, with a reference
to "Williams Synthetic" and with sufficient information to identify the
source and application of such funds.
2
<PAGE> 106
Agent:
(1) Address for all notices:
Citibank, N.A., as Agent
Two Penns Way, Suite 200
New Castle, Delaware 19720
Fax No.: (302) 894-6120
Tel. No.: (302) 894-6023
Attn: Brian Maxwell
With a copy to:
Fax No.: (713) 654-2849
Attn: Christopher Lyons
(2) All payments and transfers of funds to the Agent with respect to the
Operative Documents shall be made by wire transfer of immediately
available funds to Account No. 3614-3716 at Citibank, N.A., New York,
ABA# 021000089, Account Name: 1998 WCI Trust with a reference to
Williams SADP and with sufficient information to identify the source
and application of such funds.
3
<PAGE> 107
Note Holder:
WC NETWORK FUNDING LLC
<TABLE>
<CAPTION>
Amount
------
<S> <C>
Interim A-Note Commitment: $637,500,000
Interim B-note Commitment: 90,000,000
</TABLE>
(1) All payments with respect to the Operative Documents shall be made by
wire transfer of immediately available funds to Credit Account No.
36852248 at Citibank, N.A., ABA# 021000089, with a reference to
"Williams SADP" and with sufficient information to identify the source
and application of such funds.
(2) Address for all notices:
WC Network Funding LLC
c/o Lord Securities Corporation
Two Wall Street, 19th Floor
New York, New York 10005
Attn.: Dwight Jenkins
4
<PAGE> 108
Certificate Holder:
FBTC LEASING CORP.
<TABLE>
<S> <C>
Certificate Commitment $19,500,000
</TABLE>
(1) All payments with respect to the Operative Documents shall be made by
wire transfer of immediately available funds to Account No. 001-900269
at Fuji Bank and Trust Company, Account Name: FBTC Leasing Corp.,
Attention: Gail Hall, ABA# 02600-8905 and with sufficient information
to identify the source and application of such funds.
(2) Address for all notices:
FBTC Leasing Corp.
Two World Trade Center, 79th Floor
New York, New York 10048
Fax No.: (212) 775-7276
Tel. No.: (212) 898-2532
Attn.: Paula Kamuda and Gail Hall
5
<PAGE> 109
Certificate Holder:
SCOTIABANC INC.
<TABLE>
<S> <C>
Certificate Commitment $3,000,000
</TABLE>
(1) All payments with respect to the Operative Documents shall be made by
wire transfer of immediately available funds to Account No. 0735639 at
The Bank of Nova Scotia, NY, Attention: Scotiabanc Inc. Loan Admin.,
ABA# 026002532, with a reference to "1998 WCI Trust-Equity
Certificates" and with sufficient information to identify the source
and application of such funds.
(2) Address for all notices:
The Bank of Nova Scotia
1100 Louisiana Street
Suite 3000
Houston, TX 77002
Fax No.: (713) 752-2425
Tel. No.: (713) 752-0900
Attn.: Greg Smith
6
<PAGE> 110
SCHEDULE II
FEES AND MARGIN CHART
I. Fees Payable by Company on Initial Funding Date
A. The Company shall pay to the Agent on the Initial Funding Date
the fees payable to Citicorp and Bank of Montreal on such date
pursuant to the letter agreement dated May 20, 1998 between
The Williams Companies, Inc. and Citicorp Securities Inc.
B. Syndication and Letter of Credit Fees
The Company shall pay the Agent on the Initial Funding Date
$1,190,350 on account for syndication fees and letter of
credit fees payable to the APA Purchasers, Certificate
Purchasers and the issuer of the Letter of Credit,
respectively.
II. Fees Payable by the Company During the Term
A. Commitment Fee
From and after the Initial Funding Date, the Company shall pay
to the Agent for the account of each Note Holder (other than
the SPV), Certificate Holder and APA Purchaser, on the last
Business Day of each April, July, October and January in each
year commencing on October 31, 1998, and, in the case of the
Note Holders and the Certificate Holders, on the Commitment
Termination Date, and, in the case of the APA Purchasers, on
the Purchasers' Purchase Termination Date (as defined in the
APA) commitment fees ("Commitment Fees"), on the unused
portion of such Note Holder's respective Interim Note
Commitment, such Certificate Holder's Certificate Commitment
and such APA Purchaser's Maximum Purchase (as defined in the
APA), at the following rates:
<PAGE> 111
<TABLE>
<CAPTION>
------------- --------------
Commitment
Fee(2)
Ratings Level(1) (bps per annum)
------------- --------------
<S> <C>
A/A2 or Better 18.0
A-/A3 18.5
BBB+/Baal 19.5
BBB/Baa2 20.0
BBB-/Baa3 23.0
Lower than BBB-/Baa3 33.0
</TABLE>
B. Agency Fee
As invoiced to the Company from time to time.
C. Trustee Fee
As invoiced to the Company from time to time.
- ----------------------
(1) If WHD is split-rated, the higher rating level will apply.
(2) The Collateral Purchase Amount fee shall equal the Commitment/Liquidity
Backstop Fee multiplied by 1.2.
2
<PAGE> 112
III. Applicable Margin
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
PRICING
(bps per annum)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Interim Notes/
A-Notes B-Notes Certificates
Ratings Level(1) LIBOR+ LIBOR+ LIBOR+
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
A/A2 or Better 45.0 55.0 250.0
A-/A3 47.5 57.5 250.0
BBB+/Baal 50.0 60.0 250.0
BBB/Baa2 55.0 65.0 250.0
BBB-/Baa3 62.5 72.5 250.0
Lower than BBB-/Baa3 87.5 97.5 250.0
</TABLE>
(1) If WHD is split-rated, the higher rating level will apply.
3
<PAGE> 113
SCHEDULE III
APA PURCHASERS
1. Citibank, N.A.
2. Bank of Montreal
3. Royal Bank of Canada
4. Bank of America National Trust and Savings
Association
5. The Chase Manhattan Bank
6. Toronto Dominion (Texas), Inc.
7. ABN AMRO Bank N.V.
8. The Bank of Nova Scotia
9. BankBoston N.A.
10. Barclays Bank PLC
11. CIBC Inc.
12. The Bank of New York
13. Banque Nationale de Paris, Houston Agency
14. Commerzbank
15. Credit Agricole Indosuez
16. KBC Bank, N.V.
17. NationsBank
<PAGE> 114
EXHIBIT C to the
Participation Agreement
COMPLETION DATE CONDITIONS
Projects
Acquisition Costs have been used to design, engineer, install and
construct each Project in a good and workmanlike manner in accordance with
prudent United States telecommunications industry practice with at least such
number of Fibers, Signal Equipment and POPs as specified in Chart A below. In
addition, each Project contains approximately the number of route miles between
the cities as specified in Chart A and the Projects, in the aggregate, contain
at least 10,460 route miles.
Fiber
The majority of the Fiber miles in each Project (which is the product
of the number of strands of Fiber in such Project multiplied by the number of
route miles in such Project) (a) consist of Corning SMF-LS (Lambda Shifted) or
SMF-LEAF or such other types of Fiber that, based on United States
telecommunications industry standards, provide the same or superior quality and
transmission volume capabilities as Corning SMF-LS or SMF-LEAF Fiber and (b)
are capable of transporting 768 DS-3s (e.g., four OC-192 systems or one OC-768
system). This Fiber meets emerging 1550nm network design requirements that use
high output power erbium-doped fiber amplifiers and multi-channel dense
wavelength division multiplexing technology.
Fiber that is not lit may be standard single mode Fiber (rather than
SMF-LS or SMF-LEAF) or such other types of Fiber that, based on United States
telecommunications industry standards, provide the same or superior quality and
transmission volume capabilities as standard single mode Fiber.
At least two Fibers in each Project are lit and provide end-to-end and
point-to-point signal transmission capacity as specified in Chart B below or
greater between the cities as specified. The remaining Fibers (excluding any
Fibers in excess of the number of strands of Fiber set forth with respect to
each Project in Chart A) provide continuous end-to-end and point-to-point
connectivity between the cities specified on Chart A, except to the extent that
splices are left open (a) at (i) sites designed to support Signal Equipment,
(ii) points where the Company may connect the Fiber to other fiber optic
networks (including the Projects), (iii) points where a grantee of an Approved
IRU has requested the ability to connect to
<PAGE> 115
transmission equipment or other facilities and (iv) the end points of the
portion of the Fiber subject to an Approved IRU and (b) to facilitate testing or
for other prudent operational or engineering purposes in accordance with United
States telecommunications industry practice. All Fiber specified in Chart A has
met the appropriate Fiber testing standards set forth in Exhibit B to the Lease.
Signal Equipment and POPs
Installed on the lit Fibers at approximately 40-mile intervals are
regenerator and optronic amplifier equipment manufactured by Northern Telecom
Inc. ("Nortel") or other substantially equivalent equipment. The chart below
indicates the number of Nortel OC-192s, OC-48s, regenerators, optical
amplifiers and POPs that have been acquired, installed and tested with
Acquisition Costs with respect to each Project.
Also installed to use the capacity on the lit Fibers are Ascend GX 550
Smart Core Switches capable of operating at bit rates of 155.52 and 622.08
million bits per second with a continuous cell stream without gaps.
2
<PAGE> 116
CHART A
<TABLE>
<CAPTION>
SIGNAL EQUIPMENT (PROJECTED NUMBER OF)
--------------------------------------
TOTAL
PROJECTED NUMBER OF NUMBER
ROUTE STRANDS NORTEL NORTEL RE- OPTRONIC OF
PROJECT MILES OF FIBER OC-192 OC-48 GENERATOR AMPLIFIER POPS
------- --------- --------- ------ ------ --------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Atlanta-
Jacksonville 350 144 2 2 1 6 1
Daytona-
Orlando-
Tampa 160 96 4 4 0 3 2
Jacksonville-
Miami 350 180 10 10 0 4 6
Portland-
Salt Lake City
("SLC")-
Los Angeles 1,300 0 8 5 7 26 0
Minneapolis-
Kansas City-
Denver-
SLC 1,450 96 10 10 8 28 4
Los Angeles-
New York City 4,150 0 46 26 1 25 0
Washington,
D.C.-New
York City 300 144 10 10 0 4 4
Miami-Tampa-
Tallahassee 580 96 6 6 2 9 2
Houston-
Atlanta-
Washington,
D.C. 1,820 0 18 10 21 66 0
</TABLE>
CHART B
<TABLE>
<CAPTION>
PROJECT CAPACITY
------- --------
<S> <C>
Atlanta - Jacksonville 384 DS-3s
Daytona - Orlando - Tampa 384 DS-3s
Jacksonville - Miami 384 DS-3s
Portland - Salt Lake City (a) Portland- Las Vegas: 384 DS-3s
("SLC") - Los Angeles (b) Los Angeles - Las Vegas:
768 DS-3s*
Minneapolis - Kansas City - (a) Denver-SLC: 576 DS-3s
Denver - SLC (b) Minneapolis - Kansas City:
384 DS-3s
(c) Kansas City - Denver: 576 DS-3s
Los Angeles - New York City (a) Los Angeles - Las Vegas:
768 DS-3s*
(b) New York City - Los Vegas:
576 DS-3s
Washington, D.C. - New 768 DS-3s
York City
Miami-Tampa - Tallahassee 384 DS-3s
Houston - Atlanta - Washington, D.C. (a) Houston - Atlanta: 576 DS-3s
(b) Washington, D.C. - Atlanta:
768 DS-3s
</TABLE>
*these are the same equipment
3
<PAGE> 117
APPENDIX A TO THE PARTICIPATION AGREEMENT
This Appendix A to the Participation Agreement is a glossary of all or
substantially all of the defined terms used in the Operative Documents. Not all
of the terms defined in this Appendix A are used in the Participation
Agreement.
For purposes of the Operative Documents (i) all defined terms in the
Operative Documents referenced in the singular shall include the plural and
vice versa and words of one gender shall be held to include the other gender as
the context requires, (ii) the word "including" and words of similar import
when used in the Operative Documents shall mean "including, without
limitation," unless the context otherwise requires or unless otherwise
specified, (iii) the word "or" will not be exclusive and (iv) a reference to
any Operative Document or Securitization Document shall be deemed a reference
to that Operative Document or Securitization Document as it may be amended,
modified or supplemented from time to time.
"A-Note Deficiency" has the meaning set forth in Section 1.09(b) of
the Participation Agreement.
"A-Note Prepayment Amount" has the meaning set forth in Section
5.09(a) of the Participation Agreement.
"A-Note Proceeds Amount" has the meaning set forth in Section 5.10(a)
of the Participation Agreement.
"A-Notes" has the meaning set forth in Article I of the Declaration.
"Acceptance Date" means, with respect to any Item of Property, the
date title to or other ownership interest in such Item of Property vests in the
Lessor.
"Acquisition Costs" means (a) all amounts paid or payable to finance
the designing, engineering, acquisition, installation, construction,
maintenance, testing and lighting of the Property from the Initial Funding Date
through the Completion Date; (b) interest, fees and expenses paid or payable on
or with respect to the Notes from the Initial Funding Date through the
Completion Date; (c) Distributions, fees and expenses paid or payable on or
with respect to the Certificates from the Initial Funding Date through the
Completion Date; and (d) all fees and expenses incurred with respect to the
Appraisals; and (e) fees and expenses paid or payable on or with respect to the
Notes or
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the Certificates or otherwise related to the transactions contemplated by
the Participation Agreement.
"Act" means the Securities Act of 1933, as amended, and the Laws
promulgated or issued from time to time thereunder.
"Additional Costs" shall mean all Break Costs, Funding Costs, Reserve
Costs, Increased Costs, Unwind Fees, Charges, Other Charges, Other Taxes,
Illegality Costs, Contingent Rent, Variable Securitization Fees, and other
amounts required to be paid (or indemnified against) by the Lessee pursuant to
the Participation Agreement, the other Operative Documents or the
Securitization Documents.
"Additional Rent" means all amounts other than Fixed Rent which the
Lessee is required to pay to the Lessor pursuant to the Lease, including (i)
unpaid Charges and all amounts set forth in Section 4.05 of the Lease, (ii) all
sums, costs and expenses pursuant to Sections 10.01 and 12.08 of the Lease,
(iii) all taxes, costs and expenses relating to the Property or the Lessee's
use or the Lessor's leasehold interest or ownership thereof, (iv) any and all
amounts payable upon any purchase, sale, exchange, substitution, alteration,
redeployment or other transfer (or otherwise relating to) the Property,
together with every fine, penalty, interest and cost that may be added for
non-payment or late payment thereof, (v) all fees and expenses payable pursuant
to Sections 1.10 and 8.14 of the Participation Agreement, and (vi) all
Additional Costs.
"Adjusted Capitalized Cost" means, with respect to any Item of
Property, the sum of the Series A Portion, Series B Portion and Series C
Portion of the Adjusted Capitalized Cost of such Item of Property, and:
The "Series A Portion" of the Adjusted Capitalized
Cost of any Item of Property at any time shall be equal to the then
outstanding aggregate principal amount of the A-Notes issued to
finance the Acquisition Cost of such Item of Property (as set forth in
"Cost of Property" in Schedule I of the Certificate of Acceptance for
such Item of Property), together with interest accrued and unpaid and
all other amounts due thereon or with respect thereto;
The "Series B Portion" of the Adjusted Capitalized Cost of
any Item of Property at any time shall be equal to the then
outstanding aggregate principal amount of the B-Notes issued to
finance the Acquisition Cost of such Item of Property (as set forth
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in "Cost of Property" in Schedule I of the Certificate of Acceptance
for such Item of Property), together with interest accrued and unpaid
and all other amounts due thereon or with respect thereto; and
The "Series C Portion" of the Adjusted Capitalized Cost of
any Item of Property at any time shall be equal to the then
outstanding aggregate stated amount of the Certificates issued to
finance the Acquisition Cost of such Item of Property (as set forth in
"Cost of Property" in Schedule I of the Certificate of Acceptance for
such Item of Property), together with Distributions and all other
amounts due thereon or with respect thereto.
"Advance" has the meaning set forth in Section 1.01(a) of the
Participation Agreement.
"Advance Payment Fee" has the meaning assigned to such term in Section
7(c) of the APA.
"Affiliate" when used with respect to a Person, means any other Person
(a) which directly or indirectly through one or more intermediaries controls,
or is controlled by, or is under common control with, such Person, (b) which
beneficially owns or holds 5% or more of any class of the Voting Stock (or, in
the case of a Person that is not a corporation, 5% or more of the equity
interest) of such Person, or (c) 5% or more of the Voting Stock (or in the case
of a Person which is not a corporation, 5% or more of the equity interest) of
which is beneficially owned or held by such Person or any of its subsidiaries.
The term "control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting stock, by contract and otherwise;
provided, however, that under no circumstances shall the Note Holders or the
Certificate Holders be deemed to be Affiliates of the Trustee or vice versa.
"Agent" means Citibank, N.A., or any successor selected pursuant to
the Participation Agreement, acting in its capacity as administrative agent for
the Note Holders and the Certificate Holders.
"Alterations" means any and all additions to, alterations of or
replacements for the Property or any part thereof made by or for the Lessee, at
the sole cost and expense of the Lessee, excluding any replacements installed
as part of scheduled maintenance procedures.
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"APA" means the Asset Purchase Agreement dated September 2, 1998 among
CXC, the SPV, the APA Agent, the financial institutions named therein as APA
Purchasers, and Citicorp North America, Inc., as administrative agent for CXC
and as agent for the APA Purchasers and CXC with respect to the Residual Credit
Enhancement (as defined therein).
"APA Agent" means Citibank, N.A. or any successor agent selected
pursuant to the APA, acting as agent for the APA Purchasers.
"APA Purchase Notice" means a written notice to be delivered by CNAI
no later than 12:00 noon (New York City time), or as soon thereafter as is
practicable, on the effective date of each purchase of a Securitization
Percentage Interest or Borrower Percentage Interest pursuant to the APA.
"APA Purchasers" has the meaning set forth for the term "Purchasers"
in the APA.
"APA Purchaser's Price" has the meaning set forth in Section 1.07(a)
of the Participation Agreement.
"APA Rate" means, for each Interest Period, an interest rate per annum
equal to the sum of (i) (A) in respect of any Interest Period during which the
Applicable Rate is determined by reference to the LIBO Rate, the LIBO Rate in
effect for such Interest Period or (B) in respect of any Interest Period during
which the Applicable Rate is determined by reference to the Base Rate, the Base
Rate in effect from time to time during such Interest Period; plus (ii) the
Applicable Margin; plus (iii) the Securitization Percentage Interest Margin.
"Applicable Law" has the meaning set forth in Section 8.17 of the
Participation Agreement.
"Applicable Margin" means the percentage per annum applicable to the
relevant Instrument as shown on Schedule II to the Participation Agreement.
"Applicable Payee" has the meaning set forth in Section 5.04(a) of the
Participation Agreement.
"Applicable Payor" has the meaning set forth in Section 5.04(a) of the
Participation Agreement.
"Applicable Permit" means any Permit that is necessary to own,
construct, start up, test, maintain, operate, lease or use the Property or any
portion thereof or interest therein in accordance with any of the Operative
Documents.
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"Applicable Rate" means the rate applied pursuant to Section 5.01 of
the Participation Agreement.
"Appraisal" means a valuation of the Property, which shall satisfy all
bank regulatory requirements (including, but not limited to, FIRREA) and shall
otherwise be satisfactory in scope and content to the Majority Holders;
provided, however, that any appraisal of a POP shall satisfy FIRREA.
"Appraised Value" means, with respect to any Item of Property, either
(i) the valuation thereof, if any, set forth in the Appraisal referred to in
Sections 2.01(p) and 2.02(k) of the Participation Agreement or (ii) the
valuation thereof in any Appraisal conducted by the Appraiser at any time for
purposes of the Lease or any other Operative Document.
"Appraiser" means an independent MAI appraiser selected by the Agent
and reasonably satisfactory to the Company.
"Approved IRU" means any IRU which (a) in the case of any IRU held as
Network Assets by the Trustee, is approved by the Lessor, the Agent and the
Majority Holders (which approval may be conditioned on such IRU containing
provisions (including provisions for a perfected, first priority security
interest in the Fiber and related assets involved in such IRU and other terms)
satisfactory to the Lessor, the Agent and the Majority Holders in their
discretion and (b) in the case of any IRU granted in respect of any Network
Assets owned by the Trustee, is (i) approved by the Lessor, the Agent and the
Majority Holders or (ii) has terms and conditions that (x) are commercially
reasonable, (y) are normal and customary in the United States
telecommunications market for the location and Fiber involved and (z) contain
the provisions no less favorable with respect to the protections (including
indemnification and limitations on recourse) afforded to the Trustee, the Note
Holders, the Certificate Holders and the other persons referred to as "Facility
Owners/Lenders", "Released Parties" and "Affiliates" than those set forth in
the form of IRU Agreement annexed as Schedule 5 of the Lease.
"Assignee" has the meaning set forth in Section 5.03(b) of the
Participation Agreement.
"Assignment and Acceptance" has the meaning set forth in Section
5.03(b) of the Participation Agreement.
"Assignment of Purchase Agreement" means the Assignment of Purchase
Agreements between the Company, as assignor, and the Trustee, as assignee, with
respect to the
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Equipment Purchase Agreements, individually and collectively.
"Assignor" has the meaning set forth in Section 5.03(b) of the
Participation Agreement.
"B-Note Prepayment Amount" has the meaning set forth in Section
5.09(b) of the Participation Agreement.
"B-Note Proceeds Amount" has the meaning set forth in Section 5.10(b)
of the Participation Agreement.
"B-Notes" has the meaning set forth in Article I of the Declaration.
"Bankruptcy Law" means Title 11 of the United States Code, and any
applicable Federal, state or local insolvency, reorganization, moratorium,
fraudulent conveyance or similar Law now or hereafter in effect for the relief
of debtors.
"Base Rate" means, for any period, a fluctuating interest rate per
annum as shall be in effect from time to time which rate per annum shall at all
times be equal to the greater of:
(i) the rate of interest announced publicly by Citibank in
New York, New York, from time to time as Citibank's base rate (or
comparable rate, if Citibank does not so designate a base rate); or
(ii) l/2 of one percent per annum above the latest
three-week moving average of secondary market morning offering rates
in the United States for three-month certificates of deposit of major
United States money market banks, such three-week moving average being
determined weekly on each Monday (or, if any such day is not a
Business Day, on the next succeeding Business Day) for the three-week
period ending on the previous Friday by Citibank on the basis of such
rates reported by certificate of deposit dealers to and published by
the Federal Reserve Bank of New York or, if such publication shall be
suspended or terminated, on the basis of quotations for such rates
received by Citibank from three New York certificate of deposit
dealers of recognized standing selected by Citibank in either case
adjusted to the nearest 1/16 of one percent or, if there is no nearest
1/16 of one percent, to the next higher 1/16 of one percent; or
(iii) 1/2 of 1% per annum above the Federal Funds Rate.
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Changes in the Base Rate shall become effective on the date such
change is publicly announced by Citibank.
"Base Rate Period" means any Interest Period during which the
Applicable Rate is determined based upon the Base Rate pursuant to Section 5.01
of the Participation Agreement.
"Base Term" means the period commencing on the Completion Date and
ending on the Base Term Expiration Date, or any earlier Expiration Date.
"Base Term Expiration Date" means the date which is 1,810 days after
the date of the Lease.
"Best's" means Best's Insurance Reports published by A.M. Best
Company, Inc. or any successor thereto which is a nationally recognized
statistical rating organization.
"Borrower Percentage Interest" has the meaning set forth for such term
in the APA.
"Break Costs" means any loss, cost or expense (including, interest
payable on CXC Advances, including Capitalized Interest (as defined in the
Finance Facility), through the maturity dates thereof, and any loss, cost or
expense incurred by reason of the liquidation or redeployment of deposits or
funds acquired by any Note Holder or Certificate Holder (from third parties or
Affiliates) to fund or maintain the Notes or the Investments, as the case may
be) incurred by a Note Holder or a Certificate Holder as a result of (a) the
payment of the Residual Value Amount or the Termination Value on a date other
than on a Payment Date or in the case of the SPV, in a principal amount in
excess of the principal amount of CXC Advances maturing on the date of such
payment; (b) any conversion from a LIBO Rate Period pursuant to Section 5.01(e)
of the Participation Agreement on a date other than on the last day of a LIBO
Rate Period; (c) any purchase of an Instrument pursuant to Section 5.02(e) of
the Participation Agreement other than on a Payment Date; (d) any failure to
convert the amount set forth in a notice of conversion pursuant to Section
5.01(e) to a LIBO Rate Period on the date specified in such notice; (e) any
failure of a Funding to occur on the date specified in the Requisition
submitted in connection with such Funding; or (f) any acceleration of the
maturity of the Notes or the Certificates (regardless of whether such maturity,
as accelerated, constitutes a Payment Date).
"Business Day" means any day other than a Saturday, Sunday or any
other day on which banking institutions in New York, New York are required or
authorized by Law to suspend operations.
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"Cable" has the meaning set forth in the definition of Network Assets
set forth in this Appendix A.
"Cable Facilities" has the meaning set forth in the definition of
Network Assets set forth in this Appendix A.
"Capacity Lease" means an agreement to purchase a specified capacity
of telecommunications services, which is not associated with an interest in any
particular fiber optic network, Fiber, Signal Equipment or other Network Asset.
To the extent that such rights are associated with an IRU, such an agreement
will be deemed an IRU hereunder.
"Capital Lease Obligations" shall mean, for any Person, all
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) property or assets to the extent
such obligations are required to be classified and accounted for as a capital
lease on a balance sheet of such Person under GAAP, and, for purposes of the
Participation Agreement, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with GAAP.
"Cash Equivalents" means, as to any Person, (i) securities issued or
directly and fully guaranteed or insured by the United States or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States is pledged in support thereof) having maturities of not more than six
months from the date of acquisition, (ii) marketable direct obligations issued
by any state of the United States or any political subdivision or public
instrumentality of such state, in each case having maturities of not more than
six months from the date of acquisition and, at the time of acquisition
thereof, having one of the two highest ratings obtainable from either Standard
& Poor's or Moody's, (iii) Dollar denominated time deposits and certificates of
deposit of any commercial bank having, or which is the principal banking
subsidiary of a bank holding company having, a long-term unsecured debt rating
of at least "A" or the equivalent thereof from Standard & Poor's or "A2" or the
equivalent thereof from Moody's with maturities of not more than six months
from the date of acquisition by such Person, (iv) repurchase obligations with a
term of not more than seven days for underlying securities of the types
described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iii) above, (v) commercial paper issued by
any Person incorporated in the United States rated at least A-1 or the
equivalent thereof by Standard & Poor's or at least P-1 or the equivalent
thereof by Moody's and in each case maturing not more than six months after the
date of acquisition by such Person and (vi) investments in money market funds
substantially all of whose assets are comprised
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of securities of the types described in clauses (i) through (v) above.
"Cash Secured Advance" has the meaning set forth in Section 1.01(d) of
the Participation Agreement.
"Cash Secured Advance Date" has the meaning set forth in Section
1.07(a) of the Participation Agreement.
"Casualty" has the meaning set forth in Section 7.01 of the Lease.
"Central Filing" means, with respect to any State, a financing
statement filed under the UCC with the Department of State, in the office of
the Secretary of State, in order to perfect a State-wide security interest in
Property.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act, as amended by the Superfund Amendments and Reauthorization
Act, 42 U.S.C. Section 9601 et seq. and as further amended from time to time.
"CERCLIS" means the Comprehensive Environmental Response Compensation
and Liability Information System, which is a list maintained by the United
States Environmental Protection Agency of sites where there is a known or
suspected release or potential release of hazardous substances which may
require remediation.
"Certificate" has the meaning set forth in Section 1.01 of the
Declaration.
"Certificate Commitment" of any Certificate Holder means the
commitment of such Person to make Investments pursuant to Section 1.02(a) of
the Participation Agreement up to the aggregate stated amount set forth below
the name of such Person on Schedule I to the Participation Agreement under the
heading "Certificate Commitment", as the same may be adjusted from time to time
pursuant to any Assignment(s) and Acceptance(s) executed by such Certificate
Holder, which commitment shall expire on the Commitment Termination Date;
provided, however, that in no event shall any Certificate Holder be obligated
to make an Investment pursuant to Article I of the Participation Agreement if
after giving effect thereto, the sum of the stated amounts of such Certificate
Holder's Certificates would exceed the amount set forth below the name of such
Person on Schedule I to the Participation Agreement under the heading
"Certificate Commitment".
"Certificate Holder" means any Holder of the Certificates.
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"Certificate Liquidation Amount" has the meaning set forth in Article
I of the Declaration.
"Certificate of Acceptance" means any certificate of acceptance
substantially in the form annexed as Exhibit A of the Lease which is
appropriately completed, executed and delivered in accordance with the
provisions of the Lease.
"Certificate Purchasers" means any Purchaser that has a Certificate
Commitment or otherwise holds a Certificate.
"Certificate Proceeds Amount" has the meaning set forth in Section
5.10(c) of the Participation Agreement.
"Certificate Redemption Amount" has the meaning set forth in Section
5.09(c) of the Participation Agreement.
"Certificates" has the meaning set forth in Article I of the
Declaration.
"Certificate Yield" means Distributions and Commitment Fees payable in
respect of the Certificates.
"Certificate Yield Capitalization Period" means the period beginning
on the Initial Funding Date and ending on the Commitment Termination Date
during which time Certificate Yield accrues on the Certificates.
"Change of Control" means, with respect to the Company, any event or
circumstance whereby Williams no longer beneficially owns at least 50% of all
of the authorized, issued and outstanding shares of capital stock of the
Company.
"Charges" means all Taxes, assessments, levies, fees, inspection fees
and other authorization fees and all other governmental charges, general and
special, ordinary and extraordinary, foreseen and unforeseen, of every
character (including all penalties, additions to tax, fines or interest
thereon) arising directly or indirectly out of the transactions contemplated by
the Participation Agreement and the other Operative Documents or Securitization
Documents, including (a) those which, at any time prior to or during the Term,
may accrue with respect to, be imposed or levied upon or assessed against or be
a Lien upon (i) the Property or any part thereof, or the Operative Documents,
including the Notes and the Certificates, or the Securitization Documents, (ii)
the Trustee or the Collateral Trustee in connection with the transactions
contemplated by the Operative Documents or the Securitization Documents, or
(iii) the Lease, or the leasehold estates thereby created, or which arise in
respect of the acquisition, ownership, renovation, construction, operation,
occupancy, possession,
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disposition, use, non-use, financing, leasing, sub-leasing or condition of the
Property or any part thereof or of the execution, delivery, expiration or
termination of the Lease, the Notes, the Certificates or any other Operative
Document or Securitization Document; (b) those which may be imposed or levied
upon, assessed against or measured by any Fixed Rent, Additional Rent or other
sum payable under the Lease, the Notes, the Certificates, the Participation
Agreement or any other Operative Document or Securitization Document; (c) all
sales, value added, use and similar Taxes at any time levied, assessed or
payable on account of the ownership, operation, occupancy, use, leasing, or
subleasing of the Property or any part thereof; (d) all charges, levies, fees,
rents or assessments for or in respect of utilities, communications and other
services rendered or used on or about, the Property or any part thereof; and
(e) payments in lieu of each of the foregoing; and all liabilities with respect
to the foregoing other than Excluded Charges.
"Citibank" means Citibank, N.A.
"Closing Costs" means all charges incident to any sale, lease,
exchange, redeployment or other disposition of any Item of Property, including
reasonable attorneys' fees of Special Counsel and Trustee's Counsel and escrow
fees, recording fees, broker's fees, any out-of-pocket fees, costs (including,
without limitation, Break Costs) or expenses incurred by the Trustee in
connection with the same and with the release of any Operative Document, and
all applicable transfer taxes which may be imposed by reason of such sale and
conveyance and the delivery of any and all instruments in connection therewith.
"Closing Date" has the meaning set forth in Section 5.04(d) of the
Lease.
"CNAI" means Citicorp North America, Inc. as administrative agent for
CXC under the APA or any successor acting in such capacity.
"Code" means the Internal Revenue Code of 1986, as amended, and the
Laws promulgated or issued from time to time thereunder.
"Collateral" has the meaning set forth in Article I of the Interparty
Agreement.
"Collateral Agent" means State Street, or any successor selected
pursuant to the Interparty Agreement, not in its individual capacity, but
solely as collateral agent.
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"Collateral Purchase Account" has the meaning set forth in Section
1.07(b) of the Participation Agreement.
"Collateral Purchase Account Period" has the meaning set forth in
Section 1.08(a) of the Participation Agreement.
"Commission" shall mean the Securities and Exchange Commission, or any
regulatory body that succeeds to the functions thereof.
"Commitment Fees" has the meaning set forth in Schedule II to the
Participation Agreement.
"Commitments" means, collectively the Interim Note Commitments and the
Certificate Commitments.
"Commitment Termination Date" means the earliest of (i) the Completion
Date, (ii) the Date Certain, (iii) full utilization of the Commitments and (iv)
any other termination of the Commitments, including upon an Event of Default.
"Company" means Williams Communications, Inc., a Delaware corporation
formerly named Vyvx, Inc., and any permitted successor or assignee pursuant to
the terms of the Participation Agreement.
"Completion Date" means the date on and as of which the Company has
delivered to the Agent and the Trustee a fully executed Officer's Certificate
of Completion substantially in the form of Exhibit B to the Participation
Agreement, which date shall be no later than the Date Certain.
"Condemnation" has the meaning set forth in Section 7.01 of the Lease.
"Conduit" has the meaning set forth in the definition of Network
Assets set forth in this Appendix A.
"Consent" means any consent, approval, waiver, exemption, order, other
action by, and any notice to or filing with, any Governmental Authority or
other Person.
"Contingent Rent" has the meaning set forth in Section 3.03(b) of the
Lease.
"Conversion Date" means any date on which the basis for the
determination of the Applicable Rate is converted pursuant to Article V of the
Participation Agreement or for any other reason pursuant to the terms of the
Operative Documents from the Quoted Rate, the LIBO Rate or the Base Rate to
another of such rates.
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"Conveyance Documents" means, with respect to the Property, the
Assignments of Purchase Agreements, all financing and continuance statements
under the UCC or amendments thereto, the Security Agreement and any easement or
license agreement delivered in connection with the acquisition of the Property,
in each case individually and collectively.
"Credit Enhancer" means The Chase Manhattan Bank in its capacity as
the "Bank" as defined in the Residual Credit Enhancement Agreement.
"CSI" means Citicorp Securities, Inc.
"CXC" means CXC Incorporated, a Delaware corporation, together with
its successors and permitted assigns.
"CXC Advances" means advances made by CXC to the SPV pursuant to the
provisions of the Finance Facility.
"CXC's Credit Enhancer" means MBIA Insurance Corporation, a New York
stock insurance company, or another similar Person, who will provide credit
enhancement to CXC under the Insurance Agreement or under a similar agreement.
"Date Certain" means December 31, 1999.
"Declaration" or "Declaration of Trust" means the Amended and Restated
Declaration of Trust 1998 WCI Trust dated as of September 2, 1998 by the
Trustee, as trustee.
"Default" means an event which with the lapse of time, the giving of
notice or both would become an Event of Default.
"Default Rate" means the lesser of (i) the Maximum Rate and (ii) the
Applicable Margin plus 2 percent in excess of the Base Rate in effect from time
to time.
"Discount Rate" means 6.20% or such other percentage to which the
Lessee and the Co-Arrangers may agree.
"Distributions" means the distributions of current yield payable to
the Certificate Holders on each Payment Date, except that such amounts shall
accrue but not be payable during the Certificate Yield Capitalization Period.
"EITF-97-10" means FASB Emerging Issues Task Force Issue Number 97-10,
effective May 21, 1998.
"Eligible Assignee" means (a) with respect to any assignment by a
Certificate Holder, any Person approved by the Agent and the Company (such
approval not to be
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unreasonably withheld or delayed), (b) with respect to any assignment by a Note
Holder pursuant to the APA (i) any APA Purchaser, (ii) in connection with
repurchases of Borrower Percentage Interests under the APA, the SPV and (iii)
CXC's Credit Enhancer, and (c) with respect to any assignment by a Note Holder
other than pursuant to the APA (i) CXC's Credit Enhancer, (ii) Citibank, N.A.
or any of its Affiliates, or any Person managed by Citibank, N.A. or any of its
Affiliates, (iii) any APA Purchaser or (iv) with the consent of the Company and
the Agent, which will not be unreasonably withheld, any financial or other
institution which, prior to the termination of the APA, is acceptable to the
APA Agent, and which, in the case of any of (i)-(iv), is approved, prior to the
termination of the APA, by CXC, and (v) CXC's Credit Enhancer; provided,
however, that, prior to termination of the APA unless the APA Agent shall
otherwise consent in writing and shall have received written confirmation from
each Rating Agency (as such term is defined in the Finance Facility) that the
rating then applicable to any promissory notes issued to fund or maintain CXC
Advances will not be withdrawn or downgraded as a result of the applicable
Eligible Assignee not having the following ratings or not being rated by either
S&P or Moody's, each Eligible Assignee shall have, on the date of assignment
hereunder to such Eligible Assignee, ratings with respect to its unsecured
short-term debt securities of not lower than A-1 by S&P and P-1 by Moody's and
shall not, on the date of assignment hereunder to such Eligible Assignee, be
mentioned with negative or developing implications in "Credit Watch" by S&P or
a similar publication list by S&P or any other Rating Agency, while rated A-1
by S&P and P-1 by Moody's, as the case may be, or be unrated by either S&P or
Moody's.
"Environmental Action" means any administrative, regulatory or
judicial action, suit, demand, demand letter, claim, notice of non-compliance
or violation, notice of liability or potential liability, investigation,
proceeding, consent order or consent agreement arising under any Environmental
Law or Environmental Permit or relating to Hazardous Materials or arising from
alleged injury or threat of injury to health, safety or the environment,
including, without limitation, (a) by any governmental or regulatory authority
for enforcement, cleanup, removal, response, remedial or other actions or
damages and (b) by any governmental or regulatory authority or any third party
for damages, contribution, indemnification, cost recovery, compensation or
injunctive relief.
"Environmental Audit" has the meaning set forth in Section 2.01(q) of
the Participation Agreement.
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"Environmental Consultant" means any environmental consulting firm
reasonably satisfactory to the Agent, the Collateral Agent, the Majority
Holders and the Company.
"Environmental Event" has the meaning set forth in Section 8.01 of the
Lease.
"Environmental Laws" means any and all Federal, state and local Laws
(as well as obligations, duties and requirements relating thereto under common
law) relating to: (a) emissions, discharges, spills, releases or threatened
releases of pollutants, contaminants, Hazardous Materials, materials containing
Hazardous Materials, or hazardous or toxic materials or wastes into ambient
air, surface water, groundwater, watercourses, publicly or privately-owned
treatment works, drains, sewer systems, wetlands, septic systems or onto land;
(b) the use, treatment, storage, disposal, handling, manufacturing,
transportation, or shipment of Hazardous Materials, materials containing
Hazardous Materials or hazardous and/or toxic wastes, material, products or
by-products (or of equipment or apparatus containing Hazardous Materials); (c)
pollution or the protection of human health or the environment; or (d) land use
laws.
"Environmental Permit" means any Permit, approval, identification
number, license or other authorization required under any Environmental Law.
"Environmental Trigger" has the meaning set forth in Section 8.02 of
the Lease.
"Equipment Purchase Agreements" means (i) the Agreement for the Sale
and Purchase of Assets between MediaOne Florida Telecommunications, Inc. and
the Company dated as of March 3, 1998, as amended (the "MediaOne Agreement"),
(ii) The Williams Contract Agreement dated as of May 21, 1998 between Siecor
Operations, LLC and the Company, (iii) The Company Purchase and License
Agreement dated as of March 5, 1998 between Ascend Communications, Inc. and the
Company, together with Service Agreement dated as of March 5, 1998, (iv) Basic
Supply Agreement dated as of September 23, 1993 between Northern Telecom Inc.
and the Company, together with Attachments No. 2 and No. 3 thereto, and each of
the agreements for the purchase of Property or services related thereto to be
assigned to the Trustee or entered into by the Trustee subsequent to the
Initial Funding Date and prior to the Commitment Termination Date with respect
to the transactions contemplated by the Operative Documents, individually and
collectively.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, any
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regulations and the Laws promulgated or issued from time to time thereunder and
any successor legislation.
"ERISA Affiliate" means any corporation or trade or business that is a
member of any group of organizations (a) described in Section 414(b) or (c) of
the Code of which any Williams Entity is a member and (b) solely for purposes
of potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11)
of the Code and the lien created under Section 302(f) of ERISA and Section
412(n) of the Code, described in Section 414(m) or (o) of the Code of which
such Williams Entity is a member.
"Eurocurrency Liabilities" has the meaning assigned to the term
"Eurocurrency liabilities" in Regulation D of the Federal Reserve Board, as in
effect from time to time.
"Event of Default" has the meaning set forth in Section 6.01 of the
Participation Agreement.
"Excess Certificate Amount" means the amount by which the aggregate
stated amount of the Certificates exceeds three percent (3%) of the Acquisition
Costs on the Completion Date, plus yield to the date of payment of such excess
amount.
"Excess Funds" has the meaning set forth in Section 7.03 of the Lease.
"Excess Proceeds" means all of the proceeds from the sale, exchange or
other disposition of Network Assets which have not been used to acquire other
Network Assets in accordance with the provisions of Section 5.08(c)(iv) of the
Lease within the 270-day period referred to in Section 5.08 of the Lease.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Charges" means (a) Taxes imposed on the Agent's, the
Trustee's, CXC's or the Collateral Agent's net income, and franchise Taxes
imposed on such Person, to the extent such Tax is determined solely by
reference to the fees received by the Agent, the Trustee, CXC, CXC's Credit
Enhancer or the Collateral Agent under the Operative Documents or the
Securitization Documents; (b) United States federal income Taxes (other than
Taxes withheld at the source) imposed on a Note Holder (other than the SPV),
Certificate Holder or APA Purchaser to the extent that such Tax is determined
solely on the basis that such Note Holder, Certificate Holder or APA Purchaser,
as the case may be, is a creditor entitled to receive only payments of
interest, stated original issue discount, if any, and principal for
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such Tax purposes; (c) Taxes imposed on a Note Holder's, Certificate Holder's
(other than the SPV's) or APA Purchaser's net income and franchise Taxes
imposed on a Note Holder, Certificate Holder or APA Purchaser by the
jurisdiction under the Laws of which such Note Holder, Certificate Holder or
APA Purchaser, as the case may be, is organized or by any jurisdiction in which
such Note Holder, Certificate Holder or APA Purchaser, as the case may be, is
doing business or by any political subdivision of the foregoing, to the extent
that such Tax is determined solely on the basis that such Note Holder,
Certificate Holder or APA Purchaser, as the case may be, is a creditor entitled
to receive only payments of interest, stated original issue discount, if any,
and principal for such Tax purposes; and (d) any Taxes imposed by the United
States of America by means of withholding at the source if and to the extent
that (i) such Taxes are not attributable to a change in applicable Law after
the date hereof or the effective date of the Assignment and Acceptance pursuant
to which such Person became a Note Holder, Certificate Holder or APA Purchaser,
as the case may be, and (ii) such Taxes are determined solely on the basis that
a Note Holder, Certificate Holder or APA Purchaser is a creditor entitled to
receive only payments of interest, stated original issue discount, if any, and
principal for such Tax purposes; provided, however, that any such Taxes are not
incurred or increased directly or indirectly by actions of the Company on or
after the date of the Participation Agreement (other than actions specifically
required of the Company thereunder or under another Operative Document).
"Executive Officer" means, with respect to the Company and the
Guarantor, the chief executive officer, the chief operating officer, the chief
financial officer, the treasurer, the general counsel or the controller of such
entity.
"Expiration Date" means (i) the Base Term Expiration Date, (ii) any
Renewal Term Expiration Date and (iii) any other date on which the Lease is
terminated in accordance with its terms, individually and collectively.
"Facility Agreements" means the Services Agreement and any replacement
thereof or substitute therefor, individually and collectively.
"FASB" means the Financial Accounting Standards Board or any successor
thereto.
"FCC" means the Federal Communications Commission.
"Federal Funds Rate" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted average of
the rates on
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overnight Federal funds transactions with members of the Federal Reserve System
arranged by federal funds brokers, as published for such day (or, if such day
is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day
which is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three federal funds brokers of
recognized standing selected by it.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System or any successor thereto.
"Fiber" has the meaning set forth in the definition of Network Assets
set forth in this Appendix A.
"Finance Facility" means the uncommitted finance facility dated as of
the Initial Funding Date, among the SPV, CNAI and CXC.
"Financial Officer" of any corporation shall mean the chief financial
officer, principal accounting officer, treasurer or controller of such
corporation.
"FIRREA" means the Financial Institutions Reform and Recovery Act of
1989, 12 U.S.C. Section 1821 et seq., as amended from time to time.
"First Amendment" means the First Amendment dated as of July 31, 1998
among Williams, the Company, SSBTC, as trustee, the Original Note Holder, the
Original Certificate Holder and Citibank, as collateral agent and
administrative agent.
"Fixed Rent" has the meaning set forth in Section I of Schedule 1 to
the Lease.
"Fixed Securitization Costs" means certain fees and other fixed costs
related to the SPV, the APA or the Finance Facility, as set forth in the
Securitization Fee Letter, to the extent not included in the calculation of the
Quoted Rate.
"Fixture Filing" means a financing statement filed under the UCC in
order to perfect a security interest in Property, which is deemed to be so
related to particular real estate that an interest in such Property arises
under real estate Law.
"Force Majeure" means strikes, acts of God, acts of any governmental
authority, natural disaster, war, insurrection, riot, terrorist acts or civil
disobedience.
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"Funding" means a funding of Acquisition Costs specified in an
approved Requisition, which Funding shall consist of Advances made by the Note
Holders and Investments made by the Certificate Holders pursuant to Section
1.03 of the Participation Agreement and shall occur on a Funding Date.
"Funding Costs" means any actual loss, cost or expense incurred by any
Note Holder or Certificate Holder as a result of any failure to fulfill on or
before the date specified in any Requisition the applicable conditions set
forth in Article II of the Participation Agreement, including, without
limitation, any loss, cost or expense incurred by reason of the liquidation or
redeployment of deposits or other funds acquired by such Note Holder or
Certificate Holder (from third parties or Affiliates) to fund the Advance to be
made by such Note Holder or the Investment to be made by the Certificate Holder
when such Funding, as a result of such failure, is not made on such date.
"Funding Dates" means (a) the Initial Funding Date and (b) any other
dates on which a Funding occurs under Article I of the Participation Agreement.
"GAAP" means generally accepted accounting principles (including
principles of consolidation), in effect from time to time in the United States,
consistently applied.
"Governmental Authority" shall mean any Federal, state, local or
foreign court or governmental agency, authority, instrumentality or regulatory
body.
"Guarantee" shall mean, as to any Person, any obligation of such
Person directly or indirectly guaranteeing any Indebtedness of any other Person
or in any manner providing for the payment of any Indebtedness of any other
Person or otherwise protecting the holder of such Indebtedness against loss
(whether by virtue of partnership arrangements, by agreement to keep-well, to
purchase assets, goods, securities or services, or to take-or-pay or
otherwise), provided that the term "Guarantee" shall not include endorsements
for collection or deposit in the ordinary course of business. The amount of any
Guarantee of a Person shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Guarantee is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by such Person in good
faith. The terms "Guarantee" and "Guaranteed" used as verbs shall have
correlative meanings.
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"Guarantor" means Williams Holdings of Delaware, Inc., a Delaware
corporation.
"Guaranty" means the Amended and Restated Guaranty Agreement dated as
of September 2, 1998, by and between Williams, as the Guarantor, and the
Trustee, Citibank, N.A., as Agent, and State Street, as Collateral Agent.
"Hazardous Materials" means (a) hazardous materials, hazardous wastes,
and hazardous substances as those or similar terms are defined under any
Environmental Laws, including, but not limited to, the following: the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801 et seq., as amended from
time to time, the Resource Conservation and Recovery Act, 42 U.S.C. Section
6901 et seq., as amended from time to time, CERCLA, the Clean Water Act, 33
U.S.C. Section 1251 et seq., as amended from time to time, the Clean Air Act,
42 U.S.C. Section 7401 et seq., as amended from time to time and/or the Toxic
Substances Control Act, 15 U.S.C. Section 2601 et seq., as amended from time to
time; (b) petroleum and petroleum products including crude oil and any
fractions thereof; (c) natural gas, synthetic gas, and any mixtures thereof;
(d) asbestos and/or any material which contains any hydrated mineral silicate,
including, but not limited to, chrysolite, amosite, crocidolite, tremolite,
anthophylite and/or actinolite, whether friable or non-friable; (e)
polychlorinated biphenyls ("PCB's"), or PCB-containing materials, or fluids;
(f) radon; (g) any other hazardous radioactive, toxic or noxious substance,
material, pollutant, or solid, liquid or gaseous waste; and (h) any hazardous
substance that, whether by its nature or its use, is subject to regulation
under any Environmental Law or with respect to which any Federal, state or
local Environmental Law or governmental agency requires environmental
investigation, monitoring or remediation.
"Holder" has meaning set forth in Article I of the Declaration.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and all rules and regulations promulgated thereunder.
"Illegality Costs" means any additional amounts as may be necessary to
compensate any Note Holder or Certificate Holder for any losses, costs or
expenses actually incurred by it in making any conversion of the Applicable
Rate in accordance with Section 5.02(b) of the Participation Agreement.
"Increased Costs" means any additional amounts, as set forth in a
reasonably detailed certificate submitted to the Company as to the amounts and
basis for such amounts,
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sufficient to compensate any Note Holder or Certificate Holder for any
increased costs or reduced return on capital as a result of funding or
maintaining its Notes or Certificate as the case may be (including, without
limitation, any such increased costs that are a result of the imposition of any
reserve, special deposit, capital adequacy or similar requirement against
assets of, or deposits with or for the account of, or credit extended by such
Note Holder or Certificate Holder) as a result of (a) the introduction or
implementation after the Initial Funding Date of any applicable Law 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 (b) the compliance by any Note
Holder or Certificate Holder (or its purchasing office) with any guideline or
request (whether or not having the force of Law) of any such authority, central
bank or comparable agency, which becomes effective after the date hereof, and
has the effect of increasing the cost or reducing the rate of return on capital
to any Note Holder or Certificate Holder in respect of its agreeing to make,
making, funding or maintaining its Notes or the Certificates, as the case may
be. For purposes of this provision, (i) each APA Purchaser holding a Percentage
Interest shall, to the extent and for so long as it holds such Percentage
Interest, be deemed a Note Holder with respect to the Principal Portion of such
Percentage Interest, and (ii) CXC's Credit Enhancer shall be deemed a Note
Holder to the extent of the principal amount of Notes attributable to CXC
Advances or portion thereof that has been assigned to CXC's Credit Enhancer or
in respect of which a draw has been made under the insurance policy or surety
bond issued under the Insurance Agreement, for so long as it holds any such
interest.
"Indebtedness" shall mean, for any Person: (a) obligations created,
issued or incurred by such Person for borrowed money (whether by loan, the
issuance and sale of debt securities or the sale of property or assets to
another Person subject to an understanding or agreement, contingent or
otherwise, to repurchase such property or assets from such Person); (b)
obligations of such Person to pay the deferred purchase or acquisition price of
property or services, other than trade accounts payable (other than for
borrowed money) arising, and accrued expenses incurred, in the ordinary course
of business so long as such trade accounts payable are payable within 90 days
of the date the respective goods are delivered or the respective services are
rendered; (c) Indebtedness of others secured by a Lien on the property or
assets of such Person, whether or not the respective indebtedness so secured
has been assumed by such Person; (d) obligations of such Person in respect of
letters of credit or similar instruments issued or accepted by banks and other
financial institutions for account of such Person;
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(e) Capital Lease Obligations of such Person; (f) Indebtedness of others
Guaranteed by such Person; and (g) all obligations of such Person incurred in
connection with the acquisition or carrying of fixed assets by such Person.
"Indemnified Party" has the meaning set forth in Section 8.14(a) of
the Participation Agreement.
"Independent Engineer" means any construction engineering firm
reasonably satisfactory to the Agent, the Collateral Agent, the Majority
Holders and the Company.
"Initial Funding Date" means September 2, 1998 or such other date as
the Company and Agent may agree as the date for issuance of the Interim Notes
and the Certificates.
"Instruments" means, collectively, the Notes and the Certificates.
"Insufficiency" means, with respect to any Plan, the amount, if any,
by which the present value of the vested benefits under such Plan exceeds the
fair market value of the assets of such Plan allocable to such benefits.
"Insurance Agreement" means the Insurance Agreement dated as of the
Initial Funding Date, among CXC's Credit Enhancer, CXC, Citibank, and Citicorp
North America, Inc., as agent.
"Insurance Requirements" has the meaning set forth in Section 6.05 of
the Lease.
"Intellectual Property Rights" has the meaning set forth in Section
3.01(r)(ii) of the Participation Agreement.
"Interest" has the meaning set forth in Section 8.17 of the
Participation Agreement.
"Interest Period" means with respect to all Instruments (but excluding
the portion of the Notes to the extent that the Applicable Rate is determined
by reference to the Quoted Rate) the period commencing on the Initial Funding
Date or Conversion Date, as applicable, and (a) at any time that the Applicable
Rate is determined by reference to the LIBO Rate, ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter (except as otherwise, set forth in the last sentence of Section
5.01(a)(ii) with respect to the Notes) and each successive period commencing on
the last day of the preceding Interest Period and ending on the numerically
corresponding day of the calendar month that is one, two, three or six months
thereafter, in each case as the Company may select, and (b) at any time that
the
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Applicable Rate is determined by reference to the Base Rate, continuing
indefinitely until such time as the Applicable Rate is determined by reference
to a LIBO Rate or the Quoted Rate pursuant to Section 5.01 of the Participation
Agreement;
provided, however, that:
(i) if any Interest Period would otherwise end on a day
which is not a Business Day (and, in the case of a LIBO Rate Period, a
LIBO Business Day), that Interest Period shall be extended to the next
succeeding Business Day (or LIBO Business Day, as the case may be)
unless, in the case of a LIBO Rate Period, the result of such
extension would be to carry such Interest Period into another calendar
month, in which event such Interest Period shall end on the
immediately preceding LIBO Business Day;
(ii) any LIBO Rate Period that begins on the last Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of the then
commencing Interest Period) shall end on the last LIBO Business Day of
the calendar month at the end of such LIBO Rate Period;
(iii) no Interest Period shall extend beyond the Interim
Note Maturity Date (with respect to the Interim Notes only) or the
Expiration Date, as applicable;
(iv) for purposes of calculating interest for any Interest
Period, such calculations shall include the first day but exclude the
last day of any such Interest Period; and
(v) there shall not be more than four different Interest
Periods at any one time.
"Interest Setting Date" means, (i) with respect to the first Interest
Period after the Initial Funding Date, the date which is the first day of such
Interest Period, (ii) with respect to any LIBO Rate Period, the date which is
two LIBO Business Days before the first day of such LIBO Rate Period or (iii)
with respect to any Base Rate Period, the date specified by the Company in the
written notice delivered by the Company pursuant to Section 5.01 of the
Participation Agreement as the first day that such Applicable Rate is to apply.
"Interim A Notes" has the meaning set forth in Article I of the
Declaration.
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"Interim A-Note Commitment" of any Interim A-Note Holder means the
commitment of such Person to make Advances under such Person's Interim A-Note
to fund Actual Project Costs, up to the aggregate principal amount set forth
below the name of such Person on Schedule I to the Participation Agreement
under the heading "Interim A-Note Commitment", as the same may be adjusted from
time to time pursuant to any Assignment(s) and Acceptance(s) executed by such
A-Note Holder pursuant to the terms of the Participation Agreement, which
commitment shall expire on the Commitment Termination Date; provided, however,
that in no event shall any A-Note Holder be obligated to make an Advance under
such A-Note Holder's Interim A-Note if after giving effect thereto, the sum of
principal amounts outstanding under such Interim A-Note would exceed the amount
set forth below the name of such Person on Schedule I to the Participation
Agreement under the heading "Interim A-Note Commitment".
"Interim A-Notes" has the meaning set forth in Article I of the
Declaration.
"Interim A Trust Estate" has the meaning set forth in Article I of the
Declaration.
"Interim B Notes" has the meaning set forth in Article I of the
Declaration.
"Interim B-Note Commitment" of any Interim B-Note Holder means the
commitment of such Person to make Advances under such Person's Interim B-Note
to fund Actual Project Costs, up to the aggregate principal amount set forth
below the name of such Person on Schedule I to the Participation Agreement
under the heading "Interim B-Note Commitment", as the same may be adjusted from
time to time pursuant to any Assignment(s) and Acceptance(s) executed by such
B-Note Holder and pursuant to the terms of the Participation Agreement, which
commitment shall expire on the Commitment Termination Date; provided, however,
that in no event shall any B-Note Holder be obligated to make an Advance under
such B-Note Holder's Interim B-Note if after giving effect thereto, the sum of
principal amounts outstanding under such Interim B-Note would exceed the amount
set forth below the name of such Person on Schedule I to the Participation
Agreement under the heading "Interim B-Note Commitment".
"Interim B-Notes" has the meaning set forth in Article I of the
Declaration.
"Interim B Trust Estate" has the meaning set forth in Article I of the
Declaration.
"Interim Note Commitment" of any Note Holder means the aggregate of
the Interim A-Note Commitment and the Interim B-Note Commitment of such Note
Holder.
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"Interim Note Maturity Date" has the meaning set forth in Article I of
the Declaration.
"Interim Notes" has the meaning set forth in Article I of the
Declaration.
"Interim Term" means, with respect to any Item of Property, the period
commencing on the Acceptance Date for such Item of Property and ending on the
Completion Date, or any earlier Expiration Date.
"Interparty Agreement" means the Amended and Restated Collateral
Agency and Interparty Agreement dated as of September 2, 1998 among the
Trustee, the Note Holders, the Certificate Holders, the APA Purchasers, the
Agent, the Collateral Agent, CXC and CXC's Credit Enhancer.
"Investments" has the meaning set forth in Section 1.02(a) of the
Participation Agreement.
"IRU" means an exclusive, indefeasible right of use of a specified
Fiber or group of Fibers owned by another party, including, the Cable
Facilities directly associated with the use of such Fiber or group of Fibers
and any rights, licenses, Permits, rights-of-way and other agreements necessary
for the installation and continuance of use of the IRU (including access to the
Fiber at any splice point).
"Item of Property" means any Network Asset set forth on any
Certificate of Acceptance.
"Law" means any law (including, without limitation, any zoning law or
ordinance, ERISA, any Environmental Law, or Legal Requirements), treaty,
directive, statute, rule, regulation, ordinance, order, directive, code,
interpretation, judgment, decree, injunction, writ, determination, award,
Permit, license, authorization, direction, requirement or decision of or
agreement with or by any government or governmental department, commission,
board, court, authority, agency, official or officer having jurisdiction of the
matter in question.
"Lease" means the Amended and Restated Lease dated as of September 2,
1998 between the Trustee, as Lessor, and the Company, as Lessee.
"Legal Requirements" means (i) all Laws, foreseen or unforeseen,
ordinary or extraordinary, or arising from any restriction of record or
otherwise, which now or at any time hereafter may be applicable to (A) the
Lessor as the owner of the Property; (B) the Lessee, as lessee hereunder; or
(C) the Property or any part thereof, or the ownership,
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demolition, construction, operation, mortgaging, occupancy, possession, use,
non-use or condition of the Property or any part thereof and any other
governmental rules, orders and determinations now or hereafter enacted, made or
issued, and applicable to the Lessor, as owner of the Property, the Lessee, as
lessee hereunder, or the Property or any part thereof or the ownership,
demolition, construction, operation, mortgaging, occupancy, possession, use,
non-use or condition thereof whether or not presently contemplated; and (ii)
all agreements (including the Declaration), Permits, covenants and restrictions
applicable to the Property or any part thereof or the ownership, demolition,
construction, operation, mortgaging, occupancy, possession, use, non-use or
condition thereof.
"Lessee" means the Company, as Lessee under the Lease.
"Lessor" means the Trustee, as Lessor under the Lease.
"Lessor Group" means the Lessor, the Agent, the Collateral Agent, the
Independent Engineer, the Environmental Consultant, the Proceeds Trustee, the
Appraiser and their respective successors, assigns, representatives and agents,
individually and collectively.
"Letter of Credit" has the meaning set forth in Section 1.01 of the
Residual Credit Enhancement Agreement.
"LIBO Business Day" means a day of the year on which dealings are
carried on in the London interbank market and banks are open for business in
London and not required or authorized to close in New York City.
"LIBO Rate" for each LIBO Rate Period means an interest rate per annum
equal to the rate of interest per annum at which deposits in United States
dollars are offered to leading banks in the London interbank market at 11:00
a.m. (London time) on the Interest Setting Date in an amount approximately
equal to the applicable Instruments (or a portion thereof) and for a period
equal to such LIBO Rate Period, determined on the basis of the provisions set
forth below:
(a) On the Interest Setting Date the Agent will determine
the interest rate for deposits in U.S. Dollars for a period equal to
that of the LIBO Rate Period(s) to which such Interest Setting Date
relates which appears on the Telerate Page 3750 as of 11:00 a.m.
(London time) on such date or if such page on such service ceases to
display such information, such other page as may replace it on that
service for the purpose of display of such information (the
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"Telerate Rate"). If such rate does not appear on the Telerate, then
the rate will be determined in accordance with clause (b) below.
(b) If the Agent is unable to determine the Telerate Rate,
then on the Interest Setting Date, the Agent will determine the
arithmetic mean (rounded if necessary to the nearest one-hundredth
percent (1/100%)) of the interest rate for a period equal to that of
the LIBO Rate Period to which such Interest Setting Date relates
quoted on Reuters Screen page "LIBO" or (i) if such page on such
service ceases to display such information, such other page as may
replace it on that service for the purpose of displaying such
information or (ii) if that service ceases to display such
information, such page as displays such information on such service
(or, if more than one, that one approved by the Agent as may replace
the Reuters Screen) as at or about 11:00 a.m. (London time) on that
Interest Setting Date (the rate quoted as aforesaid being the "LIBOR
Screen Rate").
If the Agent is to make a determination pursuant to this paragraph and
one or more of the LIBO Screen Rates required for such determination shall be
unavailable, the determination shall be made on the basis of those rates which
are available and if no LIBO Screen Rate is then available, the LIBO Rate shall
be determined on the basis of the rate of interest per annum at which deposits
in United States dollars are offered by the Agent to leading banks in the
London interbank market at 11:00 a.m. (London time) on the Interest Setting
Date for a period equal to that of the LIBO Rate Period(s) to which such
Interest Setting Date applies.
"LIBO Rate Period" means any Interest Period during which the
Applicable Rate is determined based upon the LIBO Rate pursuant to Section 5.01
of the Participation Agreement.
"LIBO Rate Reserve Percentage" of any Note or Certificate for any LIBO
Rate Period means the reserve percentage applicable during such assessment
period under the regulations issued from time to time by the Federal Reserve
Board (or if more than one such percentage is so applicable, the daily average
for such percentages for those days in such LIBO Rate Period during which any
such percentage shall be so applicable) for determining the maximum reserve
requirement (including any emergency, supplemental or other marginal reserve
requirement) for such Note or Certificate in respect of liabilities or assets
consisting of or including Eurocurrency Liabilities having a term equal to such
LIBO Rate Period.
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"LIBOR Screen Rate" has the meaning set forth in the definition of
LIBO Rate.
"Lien" means any deed to secure debt, mortgage, deed of trust, pledge,
security interest, security title, encumbrance, lien, judgment lien, writ of
execution, attachment or charge of any kind, including without limitation any
agreement to give any of the foregoing, any conditional sale or other title
retention agreement, any lease in the nature thereof, and the filing of or
agreement to give, any security interest or financing statements under the UCC
or under any applicable personal property security act or any comparable Law of
any jurisdiction.
"Liquidation Event" has the meaning set forth in Article I of the
Declaration.
"lit" or "lighting" means, with respect to a Cable, the installation
of Signal Equipment on the Cable to effect the transmission of signals via such
Cable.
"Losses" has the meaning set forth in Section 8.14(a) of the
Participation Agreement.
"Loss Event" means any Casualty or Condemnation, individually and
collectively.
"Majority Holders" means, at any time prior to the Commitment
Termination Date, the Note Holders and the Certificate Holders holding at least
66-2/3% of the Interim Note Commitment and the Certificate Commitment, and at
any time on or after the Commitment Termination Date, the Note Holders and
Certificate Holders holding at least 66-2/3% of the aggregate unpaid principal
amount of the Notes and the unpaid stated amount of the Certificates.
"Management Agreement" means the Management Agreement dated as of the
Initial Funding Date, among the SPV, the Member and Lord Securities Corporation
and the related side letter regarding fees.
"Margin Stock" shall have the meaning provided in Regulations T, U and
X.
"Material Adverse Effect" shall mean a material adverse effect on any
of (a) the business, assets, operation or condition, financial or otherwise, of
the Guarantor and its Subsidiaries taken as a whole, (b) the ability of the
Guarantor or the Company to perform any of its obligations under any Operative
Document to which it is or will be a party, (c) the rights of or benefits
available to the Note Holders and Certificate Holders under any Operative
Document, (d) the value, condition, marketability or operation of the Property
or the Lessor's ownership or lease
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<PAGE> 145
thereof, or (e) the validity or enforceability of any of the Operative
Documents.
"Material Subsidiary" shall mean, with respect to any Person, each
Subsidiary of such Person that, as at any time, (a) contributed more than 10%
of such Person's net income during the period of four full consecutive fiscal
quarters of such Person immediately preceding such time, (b) has at such time
capital equal to more than 10% of the Consolidated Stockholder's Equity of such
Person at any time, (c) has at such time consolidated liabilities equal to more
than 10% of the consolidated liabilities of such Person or (d) has at such time
consolidated assets with a book value of more than 10% of the book value of the
consolidated assets of such Person and its Subsidiaries.
"Maturity Date" means the date 1,810 days after the Initial Funding
Date, subject to extension as provided in the Lease.
"Maximum Rate" has the meaning set forth in Section 8.17 of the
Participation Agreement.
"May Operative Documents" means (a) the May Participation Agreement,
(b) the Prior Lease, (c) the Notes and Certificates issued to Citicorp USA,
Inc. as Note Holder and Certificate Holder under the May Participation
Agreement, (d) the Guaranty Agreement dated as of May 6, 1998 between Williams,
SSBTC, as trustee, and Citibank, as collateral agent and administrative agent,
as amended by the First Amendment, (e) the Declaration of Trust of the 1998 WCI
Trust dated as of May 6, 1998, (f) the Interparty Agreement dated as of May 6,
1998 among SSBTC, as trustee, Citicorp USA, Inc., as Holders, and Citibank, as
collateral agent and administrative agent, as amended by the First Amendment,
(g) the Security Agreement dated as of May 6, 1998 between SSBTC, as trustee,
and Citibank, as collateral agent and (h) the Services Agreement dated as of
May 6, 1998 between the Company and SSBTC, as trustee, (i) the Conveyance
Documents (as defined in the May Participation Agreement).
"May Participation Agreement" means the Participation Agreement dated
as of May 6, 1998 among the Company, SSBTC, not in its individual capacity
except as expressly set forth therein, but solely as trustee, the Persons named
therein as Note Holders and Certificate Holders, Citibank, not in its
individual capacity, but solely as collateral agent, and Citibank, as
administrative agent, as amended by the First Amendment.
"MediaOne Agreement" has the meaning set forth in the definition of
Equipment Purchase Agreements.
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<PAGE> 146
"Member" means WC Network Holdings, Inc., a Delaware corporation,
which is the sole member of the SPV.
"Moody's" means Moody's Investors Service, Inc. and any successor
thereto which is a nationally recognized statistical rating organization.
"Multiemployer Plan" shall mean a multiemployer plan defined as such
in Section 3(37) of ERISA to which contributions have been made by any Williams
Entity or any ERISA Affiliate of such Williams Entity and that is covered by
Title IV of ERISA.
"Net Proceeds" has the meaning set forth in Section 7.01(c) of the
Lease.
"Network Assets" means, (i) fiber optic cable (including the optic
fibers ("Fibers") and sheathing) ("Cable"), (ii) conduit in which fiber optic
cable may be installed ("Conduit"), (iii) regenerator, terminal, splice and
junction facilities for fiber optic cable ("Cable Facilities"), (iv) switching,
electronic and optronic equipment and software to process signals and light the
optic fibers ("Signal Equipment"), (v) racks, power, alarm, HVAC and other
equipment and systems used to operate the Signal Equipment ("Racks"), (vi)
Approved IRUs and (vii) POPs. Network Assets do not include, for purposes of
the Operative Documents (unless otherwise expressly provided) (x) any Real
Property, (y) any underground or underwater ductwork, tunnels, vaults, landing
points or other structures in, to, through or under which fiber may be
installed, except in each case to the extent that any Approved IRU or POP may
include rights in respect of any of the foregoing.
"Note Holders" has the meaning set forth in Article I of the
Declaration.
"Note Purchaser" means any Person that has an Interim Note Commitment
or otherwise holds a Note.
"Notes" has the meaning set forth in Article I of the Declaration.
"NPL" means the National Priorities List.
"Offer to Purchase" means an irrevocable, written offer to purchase
the Property in its entirety or any Item of Property, as the case may be,
pursuant to Article III of the Lease.
"Officer" of any Person means the president, any vice president,
manager, in the case of a limited liability
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<PAGE> 147
company, or any other duly authorized and responsible officer of such Person.
"Officer's Certificate" or "Officers' Certificate" of a Person means a
certificate signed by an Officer or Officers of such Person.
"Operative Documents" means the Participation Agreement, the Lease,
the Notes, the Certificates, the Guaranty, the Declaration, the Conveyance
Documents, the Interparty Agreement, the Security Agreement and the Services
Agreement, in each case individually and collectively.
"Optional Purchase Proceeds" has the meaning set forth in Section 5.10
of the Participation Agreement.
"Original Certificate Holder" means Citicorp USA, Inc., the holder of
the Original Certificates.
"Original Certificates" means the Certificates issued by the Trustee
to Citicorp USA, Inc. on the Original Initial Funding Date pursuant to the
terms of the May Operative Documents.
"Original Initial Funding Date" means June 5, 1998.
"Original Note Holder" means Citicorp USA, Inc., the holder of the
Original Notes.
"Original Notes" means the A-Notes and B-Notes issued by the Trustee
to Citicorp USA, Inc. on the Original Initial Funding Date pursuant to the
terms of the May Operative Documents.
"Original Total Commitment" means the aggregate Note and Certificate
commitment of the Original Note Holder and Original Certificate Holder, not to
exceed $38,000,000.
"OTDR Test" means an optical time domain reflectometer test, which is
a test to determine the functionality of installed Fiber from end-to-end or
other basis such as splice point to splice point.
"Other Charges" has the meaning set forth in Section 8.17 of the
Participation Agreement.
"Other Taxes" has the meaning set forth in Section 5.04(b) of the
Participation Agreement.
"Outstanding", with respect to any Instrument, has the meaning set
forth in Article I of the Declaration.
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<PAGE> 148
"Participation Agreement" means the Amended and Restated Participation
Agreement dated as of September 2, 1998, by and among the Company, the Trustee,
the Persons named therein as Note Holders, Certificate Holders and APA
Purchasers, the Collateral Agent and the Agent.
"Payment Date" means with respect to the Notes and the Certificates
and with respect to Fixed Rent, (a) if the Applicable Rate is determined by
reference to the LIBO Rate, the Payment Date shall be each Conversion Date and
the last day of each Interest Period, but in no event less than quarterly; and
(b) if the Applicable Rate is determined by reference to the Base Rate, the
Payment Date shall be each Conversion Date and the last Business Day of each
March, June, September and December; and (c) if the Applicable Rate is
determined by reference to the Quoted Rate, the Payment Date shall be the
second Business Day of each month; and (d) in any case, the Expiration Date or,
if earlier, the termination of the Lease or the maturity of the Instruments. If
the Applicable Rate is determined by reference to the LIBO Rate and if a
Payment Date is not a LIBO Business Day, such Payment Date shall be the next
preceding LIBO Business Day. Otherwise, if a Payment Date is not a Business
Day, such Payment Date shall be the next succeeding Business Day.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Percentage" means, with respect to any Note Holder, the percentage
equal to its Note Commitment divided by the aggregate Total Commitment, as such
Percentage may be adjusted from time to time pursuant to any Assignment(s) and
Acceptance(s) executed by any such Note Holder, and with respect to any
Certificate Holder, the percentage equal to its Certificate Commitment divided
by the aggregate Total Commitment as such Percentage may be adjusted from time
to time pursuant to any Assignment(s) and Acceptance(s) executed by any such
Certificate Holder.
"Percentage Interests" means Borrower Percentage Interests and
Securitization Percentage Interests, individually and collectively.
"Permissible Investments" means (i) Cash Equivalents and (ii) senior,
unsecured demand notes issued by the Lessee and fully guaranteed as to payment
of principal, interest and all other amounts due thereunder by Williams, which
provide for current payments of interest at rates and times sufficient to pay
(as and when due) current interest and yield on the Instruments in an aggregate
amount equal to the principal amount of the Notes and Certificates (assuming
for this purpose that 85% of the Instruments are A-Notes, 12% of the
Instruments are B-Notes and 3% of the
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<PAGE> 149
Instruments are Certificates); provided, that such senior, unsecured demand
notes will be Permissible Investments only during any period that Williams has
credit ratings by (x) Moody's at least equal to Baa3 and (y) Standard & Poor's
at least equal to BBB-.
"Permit" means any approval, certificate of occupancy, consent,
waiver, exemption, variance, franchise, order, permit, authorization, right or
license of or from any Federal, state or local government or agency or
subdivision thereof, including the FCC and any equivalent state agency.
"Permitted Encumbrances" means, with respect to the Property, but only
to the extent applicable from time to time thereto, any of the following: (a)
rights reserved to or vested in any municipality or public authority, by the
terms of any franchise, grant, license, Permit or provision of Law, to
purchase, condemn, appropriate or recapture, or designate a purchaser of the
Property; (b) any liens thereon for Charges and any liens of mechanics,
materialmen and laborers for work or services performed or materials furnished
in connection with the Property, in each instance, which are not due and
payable, or which are being contested in good faith by the Lessee pursuant to
paragraphs 11 and 18 of the Lease; (c) rights reserved to or vested in any
municipality or public authority to control or regulate the use of the Property
or to use the Property in any manner; (d) easements, rights-of-way, servitudes,
restrictions and other minor defects, encumbrances and irregularities in title
to the Property which could not, individually or in the aggregate, materially
and adversely affect the value, condition, marketability or operation of the
Property or the Lessor's ownership or lease thereof and (e) the Operative
Documents.
"Permitted Investments" has the meaning set forth in Article I of the
Declaration.
"Person" means any individual, corporation, limited liability
partnership, limited liability company, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government.
"Plan" means an employee benefit or other plan established or
maintained by the Guarantor or the Company or any ERISA Affiliate of either and
that is covered by Title IV of ERISA, other than a Multiemployer Plan.
"POPs" means points of presence for Network Assets. Such points of
presence may include buildings, shelters and other structures housing equipment
racks, Signal Equipment and utility connections and other property used in the
operation of Signal Equipment.
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<PAGE> 150
"Prepayment Date" has the meaning set forth in Section 5.10(d) of the
Participation Agreement.
"Prescribed Forms" means such duly executed form(s) or statement(s),
and in such number of copies, which may, from time to time, be prescribed by
Law and which, pursuant to applicable provisions of (a) an income tax treaty
between the United States and the country of residence of the Note Holder or
Certificate Holder (as the case may be) providing the form(s) or statement(s),
(b) the Code, or (c) any applicable rule or regulation under the Code, permit
the Company and/or the Lessor to make payments under the Operative Documents
for the account of the Lessor and/or such Note Holder or Certificate Holder (as
the case may be) free of deduction or withholding of income or similar Taxes.
"Principal Portion" of a Securitization Percentage Interest or of a
Borrower Percentage Interest means the portion of such Percentage Interest that
is attributable to the principal amount of CXC Advances or Notes (or undivided
interests therein), as applicable, in respect of which the APA Purchasers have
purchased such Percentage Interest.
"Prior Lease" has the meaning set forth in Section 12.15 of the Lease.
"Proceeding" has the meaning set forth in Article I of the
Declaration.
"Proceeds" has the meaning set forth in Section 7.01(c) of the Lease.
"Proceeds Trustee" means the Collateral Agent or such other
independent bank or trust company as may be designated by the Lessor.
"Projects" means, individually and collectively, the
telecommunications networks providing point-to-point connectivity between the
cities specified in the chart below and the Property located thereon, that will
be designed, engineered, acquired, constructed, installed and lit (as
appropriate) in accordance with the terms and conditions set forth in the
Operative Documents:
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<PAGE> 151
<TABLE>
<CAPTION>
SIGNAL EQUIPMENT (PROJECTED NUMBER OF)
--------------------------------------
TOTAL
PROJECTED NUMBER OF NUMBER
ROUTE STRANDS NORTEL NORTEL RE- OPTRONIC OF
PROJECT MILES OF FIBER OC-192 OC-48 GENERATOR AMPLIFIPOPS POPS
------- --------- --------- ------ ------ --------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Atlanta-
Jacksonville 350 144 2 2 1 6 1
Daytona-
Orlando-
Tampa 160 96 4 4 0 3 2
Jacksonville-
Miami 350 180 10 10 0 4 6
Portland-
Salt Lake City
("SLC")-
Los Angeles 1,300 0 8 5 7 26 0
Minneapolis-
Kansas City-
Denver-
SLC 1,450 96 10 10 8 28 4
Los Angeles-
New York City 4,150 0 46 26 1 25 0
Washington,
D.C.-New
York City 300 144 10 10 0 4 4
Miami-Tampa-
Tallahassee 580 96 6 6 2 9 2
Houston-
Atlanta-
Washington,
D.C. 1,820 0 18 10 21 66 0
</TABLE>
"Property" means (i) each of the Equipment Purchase Agreements and the
rights thereunder, (ii) each Item of Property that is acquired pursuant to the
Equipment Purchase Agreements and set forth on any Certificate of Acceptance,
(iii) any Item of Property that is acquired in exchange or substitution for, or
redeployment or replacement of, other Network Assets in accordance with, and
subject to the limitations set forth in, the Lease, (iv) any cash proceeds
received by the Trustee in connection with any sale, lease, exchange,
substitution or redeployment of any Item of Property and (v) Permissible
Investments.
"Property Charges" means all Charges and any income, gross receipts,
franchise or similar Taxes.
"Protective Expenditure" has the meaning set forth in Section 8.25 of
the Participation Agreement.
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<PAGE> 152
"Public Filings" means Guarantor's Annual Report on Form 10-K for its
fiscal year ended December 31, 1997, Guarantor's Quarterly Reports on Form 10-Q
for the quarters ended March 31, 1998 and June 30, 1998 and Guarantor's Current
Reports on Form 8-K dated April 29, 1998, May 18, 1998 and July 22, 1998.
"Purchaser" means, when used with respect to any Instruments, the Note
Purchasers and Certificate Purchasers.
"Qualified Sale" has the meaning set forth in Section 3.03(b) of the
Lease.
"Quoted Rate" means, for any period, the rate per annum which will
result in the interest on the Notes for such period being equal to the interest
borne for such period by CXC Advances and "Capitalized Interest" (as such term
is defined in the Finance Facility) made (in the case of CXC Advances) or
selected (in the case of Capitalized Interest) from time to time by CXC under
the Finance Facility and funded by promissory notes issued by CXC from time to
time, as notified in writing by the Agent for such period, which notification
shall be conclusive and binding, absent manifest error.
"Real Property" means any land or interest in land, including any
ground lease, easement, right-of-way, license, use or possessory interest in,
to or under land or water, that is either (x) part of the Property or (y)
property on, in or under which any portion of the Property is located.
"Real Property Instrument" means any deed, mortgage, deed of trust,
easement, lease, franchise, license, right-of-way, covenant or any other
document, instrument or agreement affecting or relating to the Real Property.
"Record" has the meaning set forth in Section 5.03(d) of the
Participation Agreement.
"Recording Charges" has the meaning set forth in Section 8.26 of the
Participation Agreement.
"Regulated Property" means any Property the ownership, operation, use,
lease or possession of which is subject to regulation by any Governmental
Authority, including regulation as a common carrier, telecommunications
provider, or utility, but excluding regulations applicable to all business
operations generally.
"Regulation A, D, T, U, or X" means such Regulations of the Federal
Reserve Board, as in effect from time to time.
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<PAGE> 153
"Release Amount" has the meaning set forth in Section 1.08(a) of the
Participation Agreement.
"Relevant Subsidiaries" means collectively the Lessee and those
Affiliates performing services under the Services Agreement, each of which are
direct or indirect wholly-owned Subsidiaries of Williams.
"Remarketing Period" has the meaning set forth in Section 3.03(b) of
the Lease.
"Removed Property" has the meaning set forth in Section 5.05(a) of the
Lease.
"Renewal Term Expiration Date" means the date which is 364 days after
the Base Term Expiration Date or the last day of any preceding Renewal Term;
provided, that, no Renewal Term shall begin or end on any date after the date
which is 728 days following the Base Term Expiration Date.
"Rent" means all Fixed Rent and Additional Rent payable pursuant to
the Lease, individually and collectively.
"Replacement Property" has the meaning set forth in Section 5.05(a) of
the Lease.
"Requisition" has the meaning set forth in Section 1.03(a) of the
Participation Agreement.
"Reserve Costs" means, so long as a Note Holder or Certificate Holder
shall be required under regulations of the Federal Reserve Board to maintain
reserves with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities, additional amounts equal to the product of (i) such
Note Holder's or Certificate Holder's portion of the Adjusted Capitalized Cost
of the Property, multiplied by (ii) an interest rate per annum (at all times
during the portion of the LIBO Rate Period during which such reserves were
assessed) equal to the amount obtained by subtracting (a) the LIBO Rate for
such LIBO Rate Period from (b) the rate obtained by dividing such LIBO Rate for
such LIBO Rate Period by a percentage equal to 100% minus the LIBO Rate Reserve
Percentage applicable to such Note Holder or Certificate Holder (as the case
may be). For purposes of this provision, (i) each APA Purchaser holding a
Percentage Interest shall, to the extent and for so long as it holds such
Percentage Interest, be deemed a Note Holder with respect to the Principal
Portion of such Percentage Interest, and (ii) CXC's Credit Enhancer shall be
deemed a Note Holder to the extent of the principal amount of Notes
attributable to CXC Advances or portion thereof that has been assigned to CXC's
Credit Enhancer or in respect of which a draw has been made under the insurance
policy or
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<PAGE> 154
surety bond issued under the Insurance Agreement, for so long as it holds any
such interest.
"Residual Credit Enhancement Agreement" means the Residual Credit
Enhancement Agreement, dated as of the Initial Funding Date, between the SPV
and the Credit Enhancer.
"Residual Value Amount" means, at any date, that amount the present
value of which on such date, when added to the present value of all Rent paid by
the Company prior to such date ****, where the present value is determined using
the Discount Rate and discounting for the period from (x) the date any such Rent
payment is made to the Initial Funding Date or (y) the date the Residual Value
Amount is to be determined to the Initial Funding Date, as the case may be.
"Responsible Officer" means, with respect to the Company, any of the
chief executive officer, the chief operating officer, the chief financial
officer or the treasurer of the Lessee.
"Retirement Date" has the meaning set forth in Section 5.09(d) of the
Participation Agreement.
"Return Conditions" has the meaning set forth in Section 10.05 of the
Lease.
"S&P" means Standard & Poor's Ratings Group, a division of The
McGraw-Hill Companies, Inc., and any successor thereto which is a nationally
recognized statistical rating organization.
"Sales Proceeds" has the meaning set forth in Article I of the
Declaration.
"Securitization Company" means CXC.
"Securitization Documents" means the APA, the Finance Facility, the
Note (as defined in the Finance Facility), the Residual Credit Enhancement
Agreement and any letter of credit issued thereunder, the Management Agreement,
the Insurance Agreement and the insurance policy or surety bond issued
thereunder, the Servicing Agreement and the Securitization Fee Letter.
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<PAGE> 155
"Securitization Fee Letter" means the letter agreement dated as of the
Initial Funding Date, between the SPV and the APA Agent with respect to certain
fees payable in connection with CXC Advances and the Securitization Documents.
"Securitization Percentage Interest" has the meaning set forth for
such term in the APA.
"Securitization Percentage Interest Margin" means, (i) with respect to
any Percentage Interests in respect of CXC Advances or the Notes (or undivided
interests therein) acquired by the APA Purchasers, an interest rate per annum
calculated by the Agent for any applicable period such that, when multiplied by
the Principal Portion, and when pro rated for such applicable period, the
result equals the amount by which (A) the sum of (1) interest, accrued at the
applicable APA Rate, on the portion of the purchase price paid by the APA
Purchasers for such Percentage Interests that represents interest from the date
of such purchase to maturity on CXC Advances constituting a portion of such
Percentage Interests, plus (2) any Capitalized Interest (as defined in the
Finance Facility) on CXC Advances constituting a portion of such Percentage
Interests, exceeds (B) any Advance Payment Fees received by the APA Purchasers
pursuant to Section 7(c) of the APA, and (ii) with respect to any CXC Advance
or portion thereof that has been assigned to CXC's Credit Enhancer or in
respect of which a draw has been made under the insurance policy or surety bond
issued under the Insurance Agreement, an interest rate per annum calculated by
the Agent such that, when multiplied by the principal amount of such CXC
Advance (or such portion), and when pro rated for such applicable period, the
result equals the sum of (1) interest, accrued at the applicable APA Rate, on
the portion of the amount paid by CXC's Credit Enhancer in respect of such
assignment or such draw that represents interest from the date of such payment
to maturity on such CXC Advance (or such portion), plus (2) any Capitalized
Interest (as defined in the Finance Facility) on such CXC Advance (or such
portion).
"Security Agreement" means the Amended and Restated Security Agreement
dated as of September 2, 1998 between the Trustee, as debtor, and the
Collateral Agent, as secured party, for the ratable benefit of the Note Holders
and other beneficiaries named therein.
"Security Priority Trigger" has the meaning set forth in Article I of
the Declaration.
"Series A Note Holders" has the meaning set forth in Article I of the
Declaration.
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<PAGE> 156
"Series A Notes" has the meaning set forth in Article I of the
Declaration.
"Series A Trust Estate" has the meaning set forth in Article I of the
Declaration.
"Series B Note Holders" has the meaning set forth in Article I of the
Declaration.
"Series B Notes" has the meaning set forth in Article I of the
Declaration.
"Series B Trust Estate" has the meaning set forth in Article I of the
Declaration.
"Series C Trust Estate" has the meaning set forth in Article I of the
Declaration.
"Services Agreement" means the Amended and Restated Services Agreement
dated as of September 2, 1998 between the Company and the Trustee.
"Servicing Agreement" means the Servicing Agreement, dated as of the
Initial Funding Date, among the SPV, CNAI and Lord Securities.
"Signal Equipment" has the meaning set forth in the definition of
Network Assets set forth in this Appendix A.
"Special Counsel" means Chadbourne & Parke LLP or such other counsel
as shall be reasonably satisfactory to the Agent and the Note Holders, the APA
Purchasers and the Certificate Holders.
"SPV" means WC Network Funding LLC, a Delaware limited liability
company.
"SSBTC" means State Street Bank and Trust Company of Connecticut,
National Association.
"Stated Rate" has the meaning set forth in Section 8.17 of the
Participation Agreement.
"State Street" means State Street Bank and Trust Company, a
Massachusetts chartered trust company.
"State Street Guaranty" means the Amended and Restated Guaranty dated
as of September 2, 1998 by State Street of the obligations of the Trustee under
the Operative Documents.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association or other business
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<PAGE> 157
entity (a) of which securities or other ownership interests representing more
than 50% of the equity or more than 50% of the ordinary voting power or more
than 50% of the general partnership interests are, at the time any
determination is being made, owned, controlled or held, or (b) which is, at the
time any determination is made, otherwise Controlled by such Person or one or
more Subsidiaries of such Person or by such Person and one or more Subsidiaries
of such Person. "Controlled", for purposes of this definition, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"Tax" or "Taxes" means, without limitation, any fee (including
license, filing, recording, transfer and registration fees), foreign, Federal,
state or local tax (including any income, gross receipts, withholding,
franchise, excise, sales, use, value added, real, personal, tangible or
intangible property tax or any tax similar to any of the foregoing taxes),
interest equalization, recording, transfer or stamp tax, assessment (including
any maintenance charge, owner association dues or charges), levy, impost, duty,
charge or withholding of any kind or nature whatsoever, imposed or assessed by
any foreign, Federal, state or local government or agency, or governmental
authority, together with any addition to tax, penalty, fine or interest
thereon.
"Telerate Rate" has the meaning set forth in the definition of LIBO
Rate set forth in this Appendix A.
"Term" means the Interim Term, Base Term and any Renewal Term,
collectively.
"Termination Event" means (i) a "reportable event", as such term is
described in Section 4043 of ERISA (other than a "reportable event" not subject
to the provision for 30-day notice to the PBGC), or an event described in
Section 4062(f) of ERISA, or (ii) the withdrawal of any Borrower or any ERISA
Affiliate of any Borrower from a Multiple Employer Plan during a plan year in
which it was a "substantial employer", as such term is defined in Section
4001(a)(2) of ERISA, or the incurrence of liability by any Borrower or any
ERISA Affiliate of any Borrower under Section 4064 of ERISA upon the
termination of a Plan or Multiple Employer Plan, or (iii) the distribution of a
notice of intent to terminate a Plan pursuant to Section 4041(a)(2) of ERISA or
the treatment of a Plan amendment as a termination under Section 4041(a)(2) of
ERISA, or (iv) the institution of proceedings to terminate a Plan by the PBGC
under Section 4042 of ERISA, or (v) any other event or condition which might
constitute grounds
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<PAGE> 158
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan.
"Termination Notice" means any written notice of an intention to
terminate the Lease that may be issued by the Lessee or the Lessor pursuant to
Sections 7.02, 8.02 or 9.02(a) of the Lease.
"Termination Value" means (i) with respect to the Property in its
entirety, the sum of:
(a) the unpaid principal balance of the Notes and the unpaid
stated amounts of the Certificates, plus
(b) the interest accrued and unpaid on the Notes (including
any non-duplicative interest to maturity on Advances (as defined in
the APA) corresponding to the A-Notes and the B-Notes), plus
(c) the Certificate Yield accrued and unpaid on the
Certificates, plus
(d) all Closing Costs, plus
(e) all Break Costs, plus
(f) all other amounts owed by the Company and the Guarantor
under the Operative Documents and the Securitization Documents; and
(ii) with respect to any Item of Property, an amount equal to the
sum of:
(a) the product of (x) an amount equal to (1) the unpaid
principal amount of the Notes, plus (2) the unpaid stated amount of
the Certificates, plus (3) interest accrued and unpaid on the Notes to
the Closing Date, plus (4) the Certificate Yield accrued and unpaid on
the Certificates to the Closing Date, multiplied by (y) the fraction
the numerator of which is the Appraised Value of the Item of Property
and the denominator of which is the Appraised Value of the Property in
its entirety, plus
(b) all Closing Costs related to the sale of such Item of
Property, plus
(c) all Break Costs related to the sale of such Item of
Property, plus
(d) all other amounts owed by the Company and the Guarantor
under the Operative Documents and the Securitization Documents
attributable to such Item of Property.
42
<PAGE> 159
"Total Certificate Commitment" means the aggregate Certificate
Commitment of each Certificate Holder up to the aggregate amount of
$22,500,000.
"Total Commitment" means the aggregate Interim Note Commitment of each
Note Holder and the aggregate Certificate Commitment of each Certificate
Holder, not to exceed $750,000,000 in the aggregate.
"Total Note Commitment" means the aggregate Interim Note Commitment of
each Note Holder, not to exceed $727,500,000.
"Transaction Documents" has the meaning set forth in Section 8.17 of
the Participation Agreement.
"Transactions" has the meaning set forth in Section 8.17 of the
Participation Agreement.
"Trustee" means SSBTC, not it its individual capacity, but solely as
Trustee.
"Trustee's Counsel" means Bingham Dana LLP.
"Trust Encumbrances" means, with respect to the Operative Documents or
the Property, but only to the extent applicable from time to time thereto, any
of the following:
(a) the Permitted Encumbrances;
(b) the Security Agreement;
(c) any Lien or adverse interest or other right (including
any IRU) consented to or created, caused or permitted to exist by the
Company, any Relevant Subsidiary or any of their Affiliates; or
(d) any Lien or adverse interest created, caused or
permitted to exist by the Trustee (or Lessor) upon the exercise of any
right under the Operative Documents upon an Event of Default, an
Environmental Trigger, a Casualty or a Condemnation.
"Trust Estate" has the meaning set forth in Article I of the
Declaration.
"Trust Liability" means any material Losses incurred by (or any
material action, suit, proceeding or claim made, taken or asserted against) the
Trustee, the Agent or any Purchaser. For purposes of this definition,
materiality shall be determined in context of the transactions under the
Operative Documents, and any Losses or actions, suits or claims that could
create criminal or
43
<PAGE> 160
regulatory or administrative liability shall be deemed material.
"UCC" means the Uniform Commercial Code as in effect from time to time
in any jurisdiction whose Law governs the document in which such term is used
and/or rights thereunder.
"Underlying Rights" means, with respect to any portion of the
Property, all authorizations, rights, licenses, including all Permits,
rights-of-way, easements and other agreements necessary for the installation,
construction, use, maintenance and ownership of such Property.
"Unreimbursed Losses" means any and all Losses, Charges or other Tax
liability with respect to the transactions contemplated by the Operative
Documents incurred by an Indemnified Party referred to in Section 8.14(a) of
the Participation Agreement or Section 5.13(b) of the Interparty Agreement,
which Losses are not reimbursed by the Company pursuant to the provisions of
the Operative Documents.
"Unwind Event" has the meaning set forth in Section 6.03(a) of the
Participation Agreement.
"Variable Securitization Fees" means all costs, fees and expenses, to
the extent not included in the calculation of Fixed Securitization Costs,
incurred or payable by the SPV, CXC, any APA Purchasers or CXC's Credit
Enhancer, or any successor to, or assignee of, any such Person pursuant to the
Securitization Documents, including but not limited to, indemnity payments, tax
gross-up obligations, reasonable legal fees and expenses (to the extent such
legal fees and expenses are required to be paid by, and not otherwise
reimbursed to, any such Person in connection with the exercise of rights under,
or the waiver, amendment or other modification of, the Securitization Documents
or the Operative Documents) and the costs of additional credit enhancement for
CXC (except to the extent such credit enhancement is provided by CNAI or any of
its Affiliates).
"Voting Stock" means outstanding shares of stock having voting power
for the election of directors, whether at all times or only so long as no
senior class of stock has such voting power because of default in dividends or
some other default.
"WCG" means Williams Communications Group, Inc., a Delaware
corporation.
44
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"Wholly-Owned Subsidiary" shall mean, with respect to any Person, any
corporation, partnership or other entity of which all of the equity securities
or other ownership interests (other than, in the case of a corporation,
directors' qualifying shares) are directly or indirectly owned or controlled by
such Person or one or more Wholly-Owned Subsidiaries of such Person or by such
Person and one or more Wholly-Owned Subsidiaries of such Person.
"Williams" means Williams Holdings of Delaware, Inc., a Delaware
corporation.
"Withdrawal Liability" shall have the meaning given such term under
Part I of Subtitle E of Title IV of ERISA.
45
<PAGE> 1
Redacted portions have been marked with asterisks (****). Confidential treatment
has been requested for the redacted portions. The confidential redacted portions
have been filed separately with the Securities and Exchange Commission.
CONFIDENTIAL TREATMENT
EXHIBIT 10.25
EXECUTION COPY
CAPACITY PURCHASE AGREEMENT
THIS CAPACITY PURCHASE AGREEMENT (as amended, supplemented or otherwise
modified from time to time, this "Agreement"), is entered into as of January 5,
1998, between WILLIAMS COMMUNICATIONS, INC., a corporation organized and
existing under the laws of the State of Delaware (the "Grantor") and INTERMEDIA
COMMUNICATIONS INC. a corporation organized and existing under the laws of the
State of Delaware (the "Purchaser").
WITNESSETH:
WHEREAS, the Grantor owns the System (as defined herein);
WHEREAS, additional construction of the System by the Grantor is planned
and will be completed pursuant to the Network Deployment Plan (as defined
herein and as agreed to by the Purchaser and the Grantor in accordance with the
terms hereof); and
WHEREAS, the Purchaser desires to acquire rights with respect to the
Adjusted Purchased Capacity (as defined herein) on a non-cancelable
indefeasible right of use basis in fiber ("IRU") on the System;
NOW, THEREFORE, the parties hereto, in consideration of the mutual
convenants contained herein, covenant and agree with each other as follows:
Section 1. Attachments and Definitions
1.1 Attachments. (a) The following schedules are attached hereto and are
incorporated herein:
Schedule 1 Purchased Capacity, Associated Pricing, Service Intervals
and System Performance Standards;
Schedule 2 Network Deployment Plan;
Schedule 5 Management Fee.
(b) The parties hereto agree that, subject to each party's reasonable
agreement with the terms and contents of each of the following schedules and
exhibits, such schedules and exhibits shall, within thirty (30) days of the
Execution Date, be attached hereto and incorporated herein:
Schedule 3 Grantor Cities and Location of Grantor POPs;
Schedule 4 Collection Agreement and Collection Service Order;
Exhibit A Backbone Agreements (including each associated Assignment
and Assumption Agreements and Assigned Circuits;
Exhibit B Form of Service Order;
Exhibit C Form of Letter of Agency.
<PAGE> 2
2
1.2 Defined Terms. As used in this Agreement, the terms listed in this
Section 1.2 shall have the respective meanings set forth in this Section 1.2.
"Acknowledgment": as defined in Section 6.1(a) hereof.
"Actual Start Date": as defined in Section 6.1(b) hereof.
"Adjusted Purchased Capacity": the sum of Purchased Capacity and additional
Capacity purchased as Required Capacity on the System pursuant to the terms of
this Agreement.
"Affiliate": of any Person means any other Person which directly or
indirectly controls, or is controlled by, or is under common control with, such
Person. For purposes of this definition, the term "control" (including the
correlative meanings of the terms "controlled by" and "under common control
with"), as used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise. With respect to the Grantor, "Affiliate" means any Person
which may be consolidated with the Grantor for financial reporting purposes.
"Agreement": as defined in the preamble hereof.
"Ancillary Services": as defined in Section 7.1(c) hereof.
"Annual Commitment": as defined in Section 2.3(b) hereof.
"Annual Period": as defined in Section 2.3(b) hereof.
"Appraisal Procedure": means a procedure, initiated at the election of the
Purchaser, whereby an independent appraiser is selected by the Purchaser (the
"Purchaser Appraiser") to determine the market rate for Material Capacity. Upon
the Purchaser Appraiser's determination of the market rate for Material
Capacity, the Purchaser shall give the Grantor written notice of the rate so
determined by the Purchaser Appraiser. In the event that the Grantor declines to
accept the Purchaser Appraiser's determination of the market rate for Material
Capacity and to recalculate the Rates in accordance with Section 3.3(b) on the
basis of such rate, the Grantor shall, within ten (10) days of its receipt of
the foregoing notes from the Purchaser, select its own independent appraiser
(the "Grantor Appraiser") to determine the market rate for Material Capacity.
The Grantor Appraiser shall have thirty (30) days to make its determination of
the market rate for Material Capacity. Upon the Grantor's receipt of the Grantor
Appraiser's determination of the market rate for Material Capacity, the Grantor
shall forward such determination to the Purchaser. In the event that there is a
discrepancy between the rates determined by each appraiser, the Purchaser and
the Grantor shall select a mutually agreeable licensed arbitrator with knowledge
of the telecommunications industry (the "Arbitrator") to make a third
determination of the market rate for Material Capacity. The Arbitrator shall
then, within thirty (30) days of his or her selection and without reference
<PAGE> 3
3
to the rates determined by the Purchaser Appraiser or the Grantor Appraiser,
independently determine the market rate for Material Capacity. Upon the
Arbitrator's determination of the market rate for Material Capacity, the
Arbitrator shall compare the rate that he or she determined with that of the
rates determined by each of the Purchaser Appraiser and the Grantor Appraiser.
The new market rate shall then be deemed to be the rate of either the Purchaser
Appraiser or the Grantor Appraiser depending on which such rate is closest to
that determined by the Arbitrator. The party whose appraiser's determination is
ultimately rejected by the Arbitrator shall be responsible for all of the cost
and expense of the Arbitrator and for up to $75,000 of the cost and expense of
the other party's appraiser.
"Assignment Agreement Effective Date": as defined in Section 8.1(c) hereof.
"Assignment Agreement Execution Date": as defined in Section 8.2 hereof.
"Assignment and Assumption Agreement": these certain Assignment and
Assumption Agreements, which agreements shall be on terms and conditions
satisfactory to the Purchaser and the Grantor, providing for the assignment and
assumption of the Backbone Agreements and which such agreements shall be
included in Exhibit A.
"Backbone Agreement": (i) the Purchaser's backbone agreements with the
Backbone Agreement Service Providers, which such agreements are, or shall be,
the subject of the Assignment and Assumption Agreement and (ii) the MCI
Backbone Agreement (which may be the subject of an Assignment and Assumption
Agreement), all of which agreements described in clauses (i) and (ii) shall be
identified in Exhibit A.
"Backbone Agreement Service Provider": each provider of telecommunications
services, other than the Purchaser, party to a Backbone Agreement (i.e. MCI,
WorldCom, IPN, IXC, Cable & Wireless, Sprint and IPN/TPL).
"Backbone Payments": the Non-Recurring and Monthly Recurring Charges and
the Management Fee.
"Business Day": a day other than a Saturday, Sunday or other day on which
commercial banks in Tulsa, Oklahoma or Tampa, Florida are authorized or
required by law to close.
"Capacity": capacity on the System, which may be provided, On-Net or
Off-Net, for telecommunications in DS-3, OC-3, OC-12, OC-48 and OC-192
interexchange carrier services but excluding Other Services and Sub-D8-3
Capacity.
"Catch-Up Period": the sixth (6th) year of the Term.
"Circuit": a dedicated communications path with a specified bandwidth.
<PAGE> 4
4
"Collocation Agreement": a collocation agreement, a form of which shall be
attached hereto as part of Schedule 4.
"Collocation Service Order": a collocation service order, a form of which
shall be attached hereto as part of Schedule 4.
"Collocation Services": as defined in Section 7.2 hereof.
"Communications Act": the Communications Act of 1934, as amended.
"Confidential Information": as defined in Section 17.4 hereof.
"Connecting Facilities Assignment": the particular assignment per Circuit
on facilities where one carrier meets another carrier.
"Cross-Connect": a physical connection between two pieces of equipment
located in the same facility.
"Designated Capacity": Capacity which is indicated in the Initial Network
Deployment Plan under the columns headed "On-Net PLs Now" and "On-Net ATM Now"
and which the Granter shall be required as of the Execution Date, to provision
at the Rates provided for pursuant to the terms of this Agreement.
"Designated Capacity Exceptions": Grantor POPs (identified as "Williams
City Plan" in the Initial Network Deployment Plan) which first become available
in accordance with the scheduled availability set forth in the Initial Network
Deployment Plan and for which Off-Net Rates apply until the date of such
scheduled availability.
"Designated Off-Net Capacity": Capacity which is indicated in the Initial
Network Deployment Plan under the column headed "On-Net PLs 12 Mo." and with
respect to which for up to twelve (12) months from the Execution Date the
Grantor shall be entitled to provision to the Purchaser Off-Net and at rates
which pass through to the Purchaser the rates charged by the Third-Party
Service Provider for such Capacity (the "Off-Net Rate"); provided that, after
the expiration of such twelve (12) month period, or, in the event that the
Grantor can provision such Capacity On-Net prior to the expiration of such
twelve (12) month period, such Capacity shall become subject to the Rates
provided for pursuant to the terms of this Agreement.
"Design Layout Record": a record containing the technical information that
describes the telecommunication facilities and termination points provided by a
telecommunications customer to a carrier in order to enable the carrier to
design the overall service to be provided by the carrier to that customer.
"Due Date": the fifteenth of the month following the month in which an
invoice is issued; provided that the Purchaser's payments of the Non-Recurring
and Monthly Recurring Charges shall be received by the Grantor in immediately
available funds and
<PAGE> 5
5
at least one billing cycle prior to the date that payment is due from the
Grantor to the Backbone Agreement Service Provider.
"Effective Date": as defined in Section 4.1 hereof.
"Excess": as defined in Section 3.2 hereof.
"Execution Date": March 31, 1998.
"Extension Period": as defined in Section 4.1 hereof.
"FCC": the Federal Communications Commission.
"Force Majeure Event": circumstances which give rise to a party hereto
being unable to perform its obligations with respect to any provision of this
Agreement (other than the obligations to make payments with respect to
liabilities which accrued prior to a Force Majeure Event) due to such party
being prevented, restricted, or interfered with by causes beyond its reasonable
control, such causes shall be deemed to include (i) acts of God, (ii) fire,
(iii) explosions, (iv) vandalism, (v) cuts in telecommunications cable (which
such cuts could not have been prevented by the exercise of reasonable care),
(vi) power outages, (vii) storms or other similar occurrences or other
atmospheric conditions, (viii) any change in law, order, regulation, directive,
action or request of the United States government or of a state or local
government or any instrumentality of any one or more of said governments, or of
any civil or military authority, (ix) national emergencies, (x) insurrections,
(xi) riots, (xii) [illegible], (xiii) acts of terrorism, (xiv) strikes,
lockouts, work stoppages or other labor difficulties, (xv) Third Party Service
Provider or supplier failures, breaches or delays (so long as any such
Third-Party Service Provider or supplier was selected with reasonable care) and
(xvi) Third-Party Service Provider or supplier shortages of materials provided,
however, that the Grantor's dispute with WorldCom (as reflected in the Grantor's
filed lawsuit against WorldCom) shall not be considered a force majeure event.
"Grantor": as defined in the preamble hereof.
"Grantor City": a city which shall be listed as a "Grantor City" on
Schedule 3.
"Grantor POP" or "Grantor Point of Presence": a facility on the System in
a Grantor City designated by the Grantor for the origination or termination of
Capacity, as shall be set forth on Schedule 3.
<PAGE> 6
6
****
"Initial Network Deployment Plan": the Purchaser's initial Network
Deployment Plan which is attached hereto as Schedule 2.
"Initial Payment": $1,050,000.
"Initial Payment Date": the tenth (10th) Business Day after the Execution
Date.
"Interconnection Services": as defined in Section 7.1 hereof.
"Interconnection Cost": as defined in Section 7.1 hereof.
"Interexchange Service": long-distance telecommunications service between
local access transport areas.
"IRU": as defined in the recitals hereof.
"Link": as defined in Section 7.1 hereof.
"Local Access": as defined in Section 7.1 hereof.
"Management Fee": as defined in Section 8.4 hereof.
"Market Rate": the rate determined pursuant to the Appraisal Procedure.
"Material Capacity": (i) when used in connection with Most Favored Rate,
capacity provided by the Grantor to a customer other than capacity provided to a
customer which is being provided for (a) a longer period of time than the Term
and (b) the volume of which is greater than the Capacity being purchased by the
Purchaser hereunder and (ii) when used in connection with an Appraisal
Procedure, capacity with substantially similar technical and operational
specifications as the Capacity being purchased by the Purchaser hereunder
provided by a telecommunications service provider to a customer for a
comprehensive interexchange telecommunications network for a material length of
time and a material volume associated with the Capacity (it being understood
that a material length of time is for a term of (1) one year or more).
<PAGE> 7
7
"MCI Backbone Agreement": as defined in Section 8.1(d) hereof.
"Minimum": as defined in Section 8.2 hereof.
****
"Network Deployment Plan": the Purchaser's use of Capacity plan attached
hereto as Schedule 2 (which such plan as of the Execution Date is the Initial
Network Deployment Plan), which may, pursuant to the provisions of Section
2.5, be amended as of each Plan Adjustment Date.
"Non-Recurring and Monthly Recurring Charges": as defined in Section 8.4
hereof.
"Off-Net": a Circuit which is not On-Net.
"Off-Net Rate": as defined in the definition of "Designated Off-Net
Capacity".
"On-Net": (i) a Circuit traversing the System both end points of which
originate or terminate at a Grantor POP in a Grantor City or (ii) a Circuit
which the Grantor has use of as result of a swap of a Circuit of the type
described in the preceding clause (i) for a Circuit on another capacity
provider's network to the extent such capacity is available.
"Other Services": Local Access, Interconnection Services, Ancillary
Services and Collocation Services.
"Person": any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"Plan Adjustment Date": during the Term, each six (6) month anniversary of
the Execution Date, or such other date as the parties may mutually agree.
"Pricing Adjustment Date(s)": the fifth (5th), tenth (10th) and fifteenth
(15th) anniversaries of the Execution Date.
<PAGE> 8
8
"POP": a facility for the origination or termination of telecommunications
services.
"Purchase Price Payment": with respect to the IRU granted in respect of
the Capacity, each monthly amount payable on a Due Date by the Purchaser to the
Grantor in respect of the Capacity acquired.
"Purchased Capacity": the minimum Capacity (which shall include Capacity
provided pursuant to the Backbone Agreements in accordance with the provisions
of Section 8) in dollars to be acquired by the Purchaser on the Systems as set
forth on Schedule 1 hereto.
"Purchased Capacity Shortfall": as defined in Section 2.3.
"Purchaser": as defined in the preamble hereof.
"Purchaser Facilities": as defined in Section 17.2 hereof.
"Purchaser POP" or "Purchaser Point of Presence": a facility designated by
the Purchaser for the origination or termination of Capacity.
"Rates": the rates from which the Purchase Price Payments are derived
which rates, at the Execution Date and prior to any permitted or required
adjustments as provided for in this Agreement, are set forth in Schedule I
hereto.
"Renewal Term": as defined in Section 4.1 hereof.
"Representatives" as defined in Section 17.4 hereof.
"Requested Start Date": as defined in Section 6.1 hereof.
"Required Capacity": Capacity which the Grantor is required to provision
upon request by the Purchaser in accordance with the Network Deployment Plan
(and, if applicable, as reflected in specific Service Orders) at the Rates or,
in the case of that portion of Required Capacity which is also Designated
Off-Net Capacity, at the Off-Net Rate.
"Required Capacity Shortfall": as defined in Section 2.2 hereof.
"Second-in Party": as defined in Section 7.1 hereof.
"Service Affecting": a condition in the System which results in a loss or
degradation of service except for a loss or degradation of fifty (50)
milliseconds or less.
<PAGE> 9
9
"Service Intervals": the Grantor's time periods for responding to the
Purchaser's requests for Capacity as defined in Section 6.1 hereof.
"Service Intervals and System Performance Standards": the System
technical performance levels, specifications and service intervals as set
forth on Schedule 1.
"Service Orders": as defined in Section 6.1 hereof.
"Shortfall Carrier": as defined in Section 2.2 hereof.
"Sub-DS-3 Backbone Agreement": as defined in Section 9.1 hereof.
"Sub-DS-3 Capacity": as defined in Section 9.1 hereof.
"Sub-DS-3 Carrier": as defined in Section 9.1 hereof.
"System": the Grantor's existing multimedia backbone network and to
be constructed additional general use network facilities, including
optronics, digital encoders/decoders, telephone lines and microwave
facilities, and as described in Schedule 1. Except as expressly set forth
otherwise, the System shall be bounded in all cases at a Grantor POP. The
term "System" shall not be construed to include any Local Access.
"Taxes": as defined in Section 11.1 hereof.
"Term": as defined in Section 4.1 hereof.
"Third-Party Service Provider": a third-party provider of
telecommunications services which shall include all Backbone Agreement
Service Providers.
"Total Purchase Price": the sum of the Initial Payment and each
Purchase Price Payment payable by the Purchaser to the Grantor for the IRU
of the Capacity.
1.3 OTHER DEFINITIONAL PROVISIONS. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in any schedule, exhibit or annex or any certificate or other
document made or delivered pursuant hereto or thereto.
(b) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
(c) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms. The words
include, includes and including shall be deemed to be followed by the phrase
"without limitation."
<PAGE> 10
10
SECTION 2. IRU FOR CAPACITY
2.1 GRANT OF IRU. Effective on the Initial Payment Date, the Grantor
grants to the Purchaser, for the term of this Agreement, an IRU in the Adjusted
Purchased Capacity for which payment has been made and shall be made in
accordance with Sections 3.1 and 3.2 of this Agreement.
****
(b) Any Capacity that the Grantor provides Off-Net must at least meet
the minimum technical performance standards and service intervals that the
relevant Third-Party Service Provider regularly offers to its customers.
(c) Notwithstanding anything in this Agreement to the contrary, the
parties hereto agree that the Grantor shall only be obligated to provide
Capacity at the Rates at the times indicated by the Network Deployment Plan.
<PAGE> 11
11
2.3 PURCHASER FAILURE TO USE PURCHASED CAPACITY. ****
(b) As of and from the fifth (5th) anniversary of the Execution Date,
the Purchaser's Purchase Price Payments for each succeeding twelve (12) month
period (each, an "Annual Period") shall be at least equal to fifty-four million
dollars ($54,000,000) (the "Annual Commitment"). In the event that the Purchaser
fails to satisfy the Annual Commitment in any Annual Period on the date which is
forty-five (45) days after the expiration of any such Annual Period, the
Purchaser shall be required to pay to the Grantor an amount equal to the
difference between the Annual Commitment and the aggregate Purchase Price
Payments made during such Annual Period.
2.4 EARLY INCREASES IN USE OF CAPACITY. In any month that the
Purchaser's use of Capacity on the System reaches a month's Purchased Capacity
associated with a succeeding year, at the Purchaser's sole option and upon at
least five (5) days written notice to the Grantor, the Purchaser, commencing
with the next succeeding month, shall be subject to such future month's (and
each succeeding month's) Purchased Capacity and shall be entitled to the Rates
associated with such future time periods with respect to all subsequent
Purchased Capacity (including, if applicable, any Required Capacity that
exceeds the Purchased Capacity).
2.5 NETWORK DEPLOYMENT PLAN AMENDMENTS. (a) Generally. In conjunction
with each Plan Adjustment Date, the Purchaser shall have the right to propose
amendments to the Network Deployment Plan and the Grantor agrees to use
reasonable efforts to accommodate any amendments proposed by the Purchaser.
Proposed amendments to the Network Deployment Plan may relate to any of the
items described in the definition of Network Deployment Plan or included in the
Network Deployment Plan.
(b) Procedures for Amendments and Effectiveness. If the Purchaser
desires to amend the Network Deployment Plan, it shall, within ninety (90) days
prior to each Plan Adjustment Date, commence consultations with the Grantor
with respect to any proposed amendments to the Network Deployment Plan. If the
Grantor agrees to the proposed amendments, such amendments shall become
effective as of the Plan Adjustment Date and Schedule 2 shall be amended to
reflect the new Network Deployment Plan. Failure to agree to
<PAGE> 12
12
any amendment to the Network Deployment Plan shall not in any way reduce the
Purchaser's obligations with respect to Purchased Capacity. Notwithstanding
anything in this Agreement to the contrary, the Purchaser may place a Service
Order with respect to a Circuit which is not associated with Designated
Capacity or Designated Off-Net Capacity subject to availability and such
Service Order shall not be deemed to be an amendment of the Network Deployment
Plan as it relates to Designated Capacity and Designated Off-Net Capacity.
(c) Initial Network Deployment Plan. Notwithstanding anything in this
Agreement to the contrary, the Initial Network Deployment Plan shall include
Designated Capacity, Designated Off-Net Capacity and Designated Capacity
Exceptions.
2.6 PREFERRED CAPACITY PROVIDER. Provided that neither the Grantor nor the
Purchaser is in default with respect to any provision of this Agreement and the
Purchaser has fulfilled its obligations with respect to the Purchased Capacity,
the parties agree as follows: with respect to Capacity associated with city
pairs indicated in the Initial Network Deployment Plan under the columns headed
"On-Net PLs Now" and "On-Net PLs 12 Mo." and any additional Capacity added to
the Network Deployment Plan in accordance with the provisions of Section 2.5,
the Purchaser shall have the right to solicit bids relating to such Capacity
from Third-Party Service Providers and, in the event that the Purchaser shall
receive a bona fide written offer from such Third-Party Service Provider
relating to the provisioning of such Capacity, the Purchaser shall be obligated
to take such bona fide written offer to the Grantor and the Grantor shall have
a right of first refusal to match the price and terms of such bona fide written
offer. In the event that the Grantor elects to match the price and terms of
such bona fide written offer, the Purchaser shall be obligated to provision
such Capacity with the Grantor. Except as set forth in this Section and as
otherwise provided for pursuant to this Agreement, the Purchaser shall not be
obligated to provision capacity with the Grantor.
SECTION 3. PAYMENT FOR CAPACITY
3.1 INITIAL PAYMENT. Upon the execution and delivery of this Agreement,
the Purchaser shall make the Initial Payment to the Grantor's Account, in
immediately available funds.
3.2 PURCHASE PRICE PAYMENTS. In exchange for the IRU interest in the
Capacity granted pursuant to this Agreement, the Purchaser shall, on or before
each Due Date, pay to the Grantor's Account, in immediately available funds,
the applicable Purchase Price Payment. Except as set forth in Section 2.3 and
as otherwise specifically set forth in this Agreement, the Purchaser shall not
be relieved of its obligation to make the Purchase Price Payments to the
Grantor. Notwithstanding anything contained in this Agreement to the contrary,
upon the payment to the Grantor's Account of the Initial Payment with respect
to the Capacity, the Purchaser shall be permitted to use such Capacity in
accordance with the terms of this Agreement, including the procedures for
ordering services set forth in Section 6.
3.3 ****
<PAGE> 13
13
****
3.4 PAYMENTS FOR OTHER SERVICES. The Purchaser shall be required to
make, at the request of the Grantor, additional payments for Other Services
requested by the Purchaser in accordance with the terms of this Agreement.
3.5 PAYMENTS GENERALLY. All payments under this Agreement shall be
made in accordance with the provision of Section 11.
3.6 FILINGS. The Purchaser shall, at its expense, take all such
actions and make all such filings and recordings as are reasonably requested
by the Grantor to establish, perfect and protect the Grantor's interest in the
IRU and the Adjusted Purchased Capacity. The Purchaser hereby represents and
warrants that its chief executive office is located at the address indicated in
Section 17.5. The Purchaser agrees to promptly notify the Grantor of any change
in such location.
SECTION 4. DURATION OF AGREEMENT
4.1 TERM. This Agreement shall become effective on the day and year
set forth in the preamble hereof (the "Effective Date") and shall continue in
operation, unless suspended or terminated by either party in accordance with
Section 15, until the twentieth (20th) anniversary of the Execution Date (the
"Term") and shall, thereafter, be deemed to be renewed for successive one (1)
year periods (each, a "Renewal Term"), unless either party provides written
notice to the other party of its intent to terminate this Agreement not more
than ninety (90) or less than sixty (60) days prior to the beginning of any
Renewal Term. The suspension or termination of this Agreement (whether pursuant
to this Section or otherwise) shall not relieve the Purchaser or the Grantor
from any liabilities arising prior to such suspension or termination.
Notwithstanding the expiration of the Term pursuant to this Section 4.1, any
Circuit or Other Service being provided to the Purchaser pursuant to this
Agreement shall continue to be provided pursuant to the terms
<PAGE> 14
14
of this Agreement until the expiration date indicated in the relevant Service
Order (or service order relating to any Other Service) applicable to such
Circuit or Other Service (any such period, and "Extension Period"). The
Purchaser shall not be entitled to order any new Circuit or Other Service
during any such Extension Period.
SECTION 5. SYSTEM
OPERATION AND MAINTENANCE
5.1 SYSTEM OPERATION AND MAINTENANCE. (a) The Grantor shall use
commercially reasonable efforts to cause the System to be maintained in
efficient working order and in accordance with industry standards and the
standards set forth in Schedule 1 hereto; provided that the parties hereto
agree that the specifications set forth in Schedule 1 shall not apply to Local
Access or any service provided Off-Net. The Grantor represents that it will
provide routine, preventive and corrective maintenance for the System in a
manner at least in accordance with prudent industry standards.
(b) The Grantor shall have sole responsibility for negotiating, executing
and administering contracts and all other aspects related to the construction,
operation, maintenance and repair of the System.
(c) The Grantor shall initiate and coordinate planned maintenance (or
shall cause such action to occur), on the System (which may include the
deactivation of the affected part of the System). The Grantor shall advise the
Purchaser in writing at least twenty (20) days (or such shorter period as may be
agreed) prior to initiating a planned maintenance operation via E-Mail (or via
the Grantor's electronic trouble ticket system when implemented), of the timing
and scope of such planned maintenance operation. Within five (5) days of such
notice, the Purchaser shall respond to the Grantor with regard to such planned
maintenance operation and, in the event the Purchaser has objections to such
planned maintenance operation, within five (5) days of the Purchaser's response,
the parties shall mutually agree to a satisfactory approach to address the
Purchaser's concerns and to permit the planned maintenance operation to be
accomplished. The Grantor shall not be obligated to give notice of any planned
or unplanned service outage that is not Service Affecting.
(d) In the event of an emergency condition, as defined by the Grantor's
internal fiber maintenance procedures, the Grantor shall be entitled to take
whatever action it deems necessary to repair the cause of any such emergency
condition with or without advance notice to the Purchaser; provided, however,
that the Grantor (i) shall share, on a confidential basis, its definition of an
emergency condition under its internal fiber maintenance procedures (as such
definition may be amended from time to time), (ii) shall provide notice to the
Purchaser of such emergency condition as soon as possible and (iii) shall keep
the Purchaser apprised of the status of such emergency condition.
(e) In the event of disruption of service due to a Force Majeure Event or
other emergency, the Grantor shall use commercially reasonable efforts to cause
service to be restored as quickly as reasonably possible, and the Grantor shall
take such measures as are reasonably necessary to obtain such objective.
<PAGE> 15
(f) In no event shall the Grantor be liable to the Purchaser for any
credits or damages resulting from outage or degradation of service during a
planned maintenance operation.
SECTION 6. NOTIFICATION
OF USE OF CAPACITY
6.1 REQUESTS FOR CAPACITY AND SERVICE INTERVALS. (a) Orders for any
Circuits to be provided hereunder or increases in the Purchaser's use of
Capacity in accordance with Required Capacity (or otherwise) shall be requested
by the Purchaser hereunder on the Grantor's form of Service Order in effect from
time to time (the current form of which is attached hereto as Exhibit B) or on
the Purchaser's forms, in either case accepted in writing by the Grantor
("Service Orders"). Each Service Order shall reference this Agreement and will
indicate a requested start date (the "Requested Start Date") for the Circuit,
the desired term of the Circuit specific city pairs, applicable bandwidth,
whether the Circuit(s) are to be expedited or provided in normal intervals and
any other parameters required to be included in the Service Order. The Grantor
shall acknowledge receipt of the Service Order within twenty-four (24) hours (an
"Acknowledgement"). Within forty-eight (48) hours of Acknowledgement, the
Grantor shall advise the Purchaser as to availability of the Circuit and the
associated Capacity and if the Circuit and the associated Capacity and if the
Circuit and the associated Capacity is not to be provided On-Net, the carrier
providing the Circuit and the associated Capacity. Within three (3) days of
Acknowledgment, the Grantor shall advise as to the need for any Letter of Agency
or Connecting Facilities Assignment. Within seven (7) days of Acknowledgement,
the Grantor will provide a Design Layout Record. The Grantor shall be obligated
to meet the foregoing time frames and any additional time frames provided for in
Schedule 1 or be subject to the Purchaser's remedies as set forth in Schedule 1.
The parties agree that the inclusion of any Circuit on the Initial Network
Deployment Plan or subsequent Network Deployment Plans shall be deemed to be a
Service Order; provided that the preceding clause shall not (i) relieve the
Purchaser and the Grantor of their obligations to act in accordance with the
other agreements of this Section and (ii) limit the Purchaser's ability to order
Capacity in excess of that indicated in a Network Deployment Plan (orders for
Capacity in excess of that indicated in a Network Deployment Plan are subject to
availability).
(b) The Grantor shall make reasonable efforts to provide the requested
Circuit and the associated Capacity on the System on the Requested Start Date.
Service with respect to such Circuit and the associated Capacity shall be
deemed to begin on the date that (i) the Grantor provides the Purchaser with
written confirmation that the Grantor has tested the Circuit and that the
Circuit meets the Systems technical performance levels and specifications as
set forth in Schedule 1 and (ii) the Purchaser accepts the Circuit, such
acceptance not to be unreasonably withheld (the "Actual Start Date").
(c) The Purchaser may request one (1) or more delays in the Actual Start
Date of an individual Circuit provided that (i) it provides the Grantor a
written delay request no later than five (5) Business Days prior to the
Requested Start Date or the delayed Requested Start Date, as the case may be,
and (ii) the aggregate number of the days requested by such delay request or
requests do not exceed thirty (30) days from the Service Order's original
Requested Start Date. At the expiration of such thirty (30) day period, if the
Grantor has complied with the provisions of the preceding paragraph, the
Purchaser may no longer delay the Actual Start Date
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of such individual Curcuit and Purchase Price Payments with respect to such
Circuit shall commence accruing.
(d) Any conflicting, different or additional terms and conditions
contained in the Purchaser's acknowledgment or Service Order or elsewhere and
not contemplated by the terms of this Agreement are objected to by the Grantor
and shall not constitute a part of this Agreement. No action by the Grantor
(including provision of Capacity or Other Services to the Purchaser pursuant to
such Service Order) shall be construed as binding or estopping the Grantor with
respect to such term or condition, unless the Service Order containing said
specific term or condition has been signed by an authorized headquarters
representative of the Grantor.
SECTION 7. ADDITIONAL
SERVICES AND RELATED FEES
7.1 INTERCONNECTION, LOCAL ACCESS AND ANCILLARY SERVICES. (a)
Interconnection. (i) The Grantor shall, on behalf of and upon the request of the
Purchaser, obtain telecommunications facilities in a particular city to which
Capacity is to be provided pursuant to the Network Deployment Plan connecting a
Purchaser POP to a Grantor POP in a different location in the same city or
metropolitan area ("Interconnection") which interconnection shall be
substantially dedicated to origination or termination of Capacity provided to
the Purchaser pursuant to this Agreement. As applicable, the Purchaser will
execute a Letter of Agency (as shall be set forth in Exhibit C hereto)
authorizing the Grantor to interact directly with the provider or providers of
such Interconnection. **** Nothing here in shall prevent the Purchaser from
arranging for its own Interconnection at its sole cost and expense; provided
that the Grantor shall have the right to test such Interconnection for
conformance to its interconnection specifications and the Grantor shall not be
obligated to accept independently arranged Interconnection unless it meets the
Grantor's interconnection specifications.
(ii) If the Purchaser requests Interconnection to be provided by the
Grantor, the Grantor shall be responsible for the provisioning and the initial
testing of any such Interconnection, and any provisioning and initial testing
shall be reasonably coordinated with the applicable Requested Start Date.
(b) Local Access. (i) The Grantor shall, on behalf of and upon the
request of the Purchaser, obtain telecommunications facilities connecting a
Grantor POP to a designated customer of the Purchaser or other third-party
("Local Access"). As applicable, the Purchaser will execute a Letter of Agency
authorizing the Grantor to interact directly with the provider or providers of
such Local Access. The Purchaser shall be responsible for all fees and costs
<PAGE> 17
incurred by the Grantor for any such Local Access. Nothing herein shall prevent
the Purchaser from arranging for its own Local Access at its sole cost and
expense.
(ii) If the Purchaser requests Local Access to be provided by the
Grantor, the Grantor shall be responsible for the provisioning and the initial
testing of any such Local Access, and any provisioning and the initial testing
shall be reasonably coordinated with the applicable Requested Start Date.
(iii) The Grantor agrees that nay and all charges associated with
Local Access shall not exceed the sum of the costs that the Purchaser would
otherwise pay the same Third-Party Service Provider for the relevant Local
Access.
(c) Interconnection and Local Access Delays. In connection with
the provision of Interconnection and Local Access, the Purchaser acknowledges
that the timely provisioning of such services may be dependent on the
performance of a Third-Party Service Provider. The Grantor agrees that it shall
have a duty to exercise reasonable judgement in (i) the selection of all
Third-Party Service Providers and (ii) the monitoring and oversight of the
performance of any service provided by a Third-Party Provider. The Purchaser
agrees that, other than as set forth in the preceding sentence, the Grantor
shall have no liability whatsoever for delays occasioned by Third-Party Service
Providers.
(d) Ancillary Services and Fees. The parties acknowledge that the
Purchaser may also request certain other ancillary services ("Ancillary
Services") from the Grantor and the Grantor shall make reasonable efforts to
provide such service, which such Ancillary Services may consist of (i) requests
by the Purchaser to the Grantor to expedite the availability of Capacity to a
date earlier than in accordance with the Network Development Plan, (ii) a
request for a redesign of Capacity occasioned by the receipt of inaccurate
information from the Purchaser and (iii) a request by the Purchaser for the
Grantor to use routes or facilities other than those indicated by the Network
Development Plan.
(e) Establishment of Costs and Adjustments. Any recurring and
non-recurring charges related to either Interconnection, Local Access or
Ancillary Services shall be established as of the Grantor's acceptance of the
Service Order related thereto; provided that, in the case of Interconnection,
such charges shall also be subject to the provisions of Section 7.1(a). The
Grantor shall be entitled to pass through to the Purchaser fifty percent (50%)
of any increase in recurring costs related to Interconnection, and/or one
hundred percent (100%) of any increase in recurring costs related to Local
Access and/or Ancillary Services to the extent of any increases in such costs.
7.2 COLLOCATION SERVICES. In the event the parties should desire
to collocate facilities with one another ("Collocation Services"), the parties
will execute a Collocation Agreement and a Collocation Service Order
substantially in the form of the Collocation Agreement and Collocation Service
Order to be included in Schedule 4, upon the terms and at the prices set forth
in such Collocation Agreement and Collocation Service Order.
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SECTION 8. THE BACKBONE AGREEMENTS
8.1 THE BACKBONE AGREEMENTS. (a) Generally. In accordance with the terms
of this Section 8, the Grantor may provision Capacity to the Purchaser pursuant
the Backbone Agreements. Capacity provided to the Purchaser pursuant to the
Backbone Agreements shall be on the terms and conditions of each respective
Backbone Agreement and on the terms and conditions of this Agreement. In the
event of any conflict between the terms and conditions of a Backbone Agreement
and this Agreement, the terms and conditions of such Backbone Agreement shall
prevail (it being understood that this includes all technical standards and
service provisioning intervals included in each Backbone Agreement).
(b) Assignment and Assumption. Pursuant to the Assignment and Assumption
Agreements, the Purchaser shall assign to the Grantor, and the Grantor shall
assume, such of the Purchaser's right, title and interest in the Backbone
Agreements as is set forth in each Assignment and Assumption Agreement.
Notwithstanding the Assignment Agreement Execution Date, the Purchaser
covenants that each assignment and assumption of a Backbone Agreement shall
result in an assignment by the Purchaser and an assumption by the Grantor of a
Backbone Agreement which contains terms at least as favorable to the Grantor
on such date as the terms that the Purchaser was subject to as of December 31,
1997. The Grantor agrees that, upon the request of the Purchaser, it shall use
commercially reasonable efforts to assist the Purchaser in causing the
Third-Party Service Providers party to the Backbone Agreements to enter into
and execute the Assignment and Assumption Agreements.
(c) Liabilities Pre-Dating the Effectiveness of Assignment and
Assumption. The Purchaser shall retain any and all claims and/or liabilities
under each of the Backbone Agreements which accrued prior to the effective date
(an "Assignment Agreement Effective Date") of the relevant Assignment and
Assumption Agreement (regardless of the date on which such liability is
discovered). The Purchaser agrees that such liabilities may include, in each
case as of the Assignment Agreement Effective Date of the relevant Assignment
and Assumption Agreement, currently due and unpaid balances, any and all
delinquent payments and associated penalties and any and all back-billing
disputes. Without in any way limiting the effect of the preceding sentence, the
Grantor agrees to endeavor to resolve, on behalf of the Purchaser and at
Purchaser's expense, any back-billing dispute which accrued prior to any
relevant Assignment Agreement Effective Date relating to an affected Backbone
Agreement (provided that notice of any such dispute is received after any such
Assignment Agreement Effective Date) and the Purchaser agrees that it will
cooperate fully in any such effort.
(d) Arrangement with MCI. The parties hereto agree that with respect to
the Purchaser's existing contract with MCI (the "MCI Backbone Agreement"), the
Grantor and the Purchaser shall work together in good faith to enable either
(i) the Purchaser, the Grantor and MCI to enter into an Assignment and
Assumption Agreement with respect to the "private lines" portion of the MCI
Backbone Agreement or (ii) the Grantor and MCI to enter into a "private lines"
backbone service agreement upon terms and conditions satisfactory to the
Grantor and the Purchaser and such agreement shall be deemed to replace the MCI
Backbone Agreement.
<PAGE> 19
(e) Exhibit A. With respect to each Backbone Agreement, the parties
hereto agree to identify on Exhibit A and periodically update such exhibit in
order to ensure that it at all times reflects (i) all Circuits being provisioned
pursuant to each Backbone Agreement and (ii) the Minimum, if any, pursuant to
each Backbone Agreement. The Purchaser agrees that it shall, as of any
Assignment Agreement Execution Date, represent and warrant to the Grantor that
Exhibit A is materially accurate and complete; provided, however, that no
failure on the part of the Purchaser to identify a Circuit shall in any way
relieve the Purchaser of its responsibility to make payments with respect to
such Circuit.
(f) Access to Information and Continuing Cooperation. After the Initial
Payment Date, the Purchaser agrees to (i) provide the Grantor reasonable access
to its all of its records, books and all other documents and data associated
with each Backbone Agreement and (ii) cooperate, to the extent reasonably
requested by and at no cost to the Grantor, with the Grantor in the
administration of the Backbone Agreements, it being understood and agreed that
such cooperation may include the generation of certain information relating to
the Backbone Agreements required by the Grantor.
8.2 OTHER AGREEMENTS RELATING TO THE BACKBONE AGREEMENTS. Until such
time as the term of each of the Backbone Agreements (as of the date hereof)
shall expire, notwithstanding anything in this Agreement to the contrary, (i)
the Grantor shall be entitled to provide Capacity to the Purchaser pursuant to
this Agreement via the Backbone Agreements and the Purchaser shall pay for such
capacity at the rates stated in each relevant Backbone Agreement and shall use
(or pay for) at least the Minimum, if any, associated with each Backbone
Agreement, (ii) provided that the Purchaser is not in breach of any of its
payment obligations under this Agreement, the Grantor shall not be permitted to
disconnect any Capacity provided to the Purchaser pursuant to the Backbone
Agreements unless and until the Grantor can and does provision such Capacity
onto the System and will, in any event, ensure that all Purchased Capacity (and,
if necessary, Required Capacity) shall at least make use of the Minimums, (iii)
the Grantor shall be required to migrate any Capacity currently being provided
pursuant to each Backbone Agreement above the minimum commitment (the "Excess")
provided for therein onto the System prior to or upon the one (1) year
anniversary of the date on which the Assignment and Assumption Agreement
relating to each such Backbone Agreement is executed (an "Assignment Agreement
Execution Date") and, whether or not such migration is accomplished, as of such
date the Management Fee shall no longer apply to such Excess, and the Rates
shall apply to such Excess, (iv) subject to the provisions of the preceding
clause (ii) of this paragraph, the Grantor shall be required to migrate any
Capacity currently being provided pursuant to the Backbone Agreements
constituting the minimum commitments (the "Minimum") provided for therein onto
the System upon the two (2) year anniversary of each Assignment Agreement
Execution Date and, whether or not such migration is accomplished, as of such
date the Management Fee shall terminate, and the Rates shall apply to such
Minimum. In the event that the Grantor migrates Circuits which constitute the
Excess onto the System prior to the date referred to in the receding clause
(iii), the Capacity used in connection with such Circuit shall no longer be
subject to the Non-Recurring and Monthly Recurring Charges and shall be subject
to the Rates.
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8.3 EXPIRATION OF BACKBONE AGREEMENTS. Upon expiration of each of the
Backbone Agreements, the Capacity governed thereby shall be provisioned onto
the System or be provided Off-Net as provided for under this Agreement.
8.4 PAYMENTS RELATING TO THE BACKBONE AGREEMENTS. Subject to the
provisions of Section 8.2, the Purchaser agrees to pay to the Grantor (i) the
monthly recurring charges, non-recurring and other related charges, relating to
the use of Circuits and the associated capacity pursuant to each Backbone
Agreement (the "Non-Recurring and Monthly Recurring Charges") and (ii) a
management fee (the "Management Fee"). The Management Fee is set forth on
Schedule 5.
8.5 CHANGES IN THE GRANTOR'S CONTRACTUAL RELATIONS WITH BACKBONE AGREEMENT
SERVICE PROVIDERS. In the event that the Grantor (i) enters into any amendment
with a Backbone Agreement Service Provider to amend the terms of any Backbone
Agreement and such amendment results in more competitive pricing of the capacity
provided for pursuant to such Backbone Agreement or (ii) enters into an
additional contract or contracts with any Backbone Agreement Service Provider
for the provisioning of capacity and the effect of any such new agreement is to
lower the Grantor's overall cost of the total amount of capacity provided by
such Backbone Agreement Service Provider to the Grantor, the Grantor agrees that
it shall inform the Purchaser of any such circumstance described in either of
the preceding clauses (i) or (ii) and shall enter into discussions with the
Purchaser in order to renegotiate the Backbone Payments to a level that will
pass through to the Purchaser the benefit of such cost savings; provided,
however, that the Grantor shall not be obligated, as a result of one of the
circumstances described in the preceding clause (i) or (ii), to offer to the
Purchaser any cost savings that would result in rates lower than the Rates.
SECTION 9. SUB-DS-3 CAPACITY
9.1 CAPACITY BELOW DS-3 LEVEL. Notwithstanding anything in this Agreement
to the contrary, for at least as long as the current term of each Backbone
Agreement which provides for the provisioning of capacity below the DS-3 Level
(each such Backbone Agreement, a "Sub-DS-3 Backbone Agreement") is still in
effect, the Purchaser shall have the right to request the Grantor to order from
and negotiate with the carriers party to such Sub-DS-3 Backbone Agreements (each
such carrier, a "Sub-DS-3 Capacity"). Circuits and the associated capacity at a
level below DS-3 ("Sub-DS-3 Capacity"). Notwithstanding anything in this
Agreement to the contrary, (i) the Grantor shall not be permitted to disconnect
any Sub-DS-3 Capacity except in accordance with the provisions of the relevant
Sub-DS-3 Backbone Agreement, (ii) Sub-DS-3 Capacity shall not be subject to the
provisions of Section 8.2(iii) and (iv), (iii) the Purchaser's use of Sub-DS-3
Capacity shall be included when determining whether the Purchaser has (A) used
the Minimums provided for in a Sub-DS-3 Backbone Agreement and (B) fulfilled its
obligations to use the Purchased Capacity and (iv) Sub-DS-3 Capacity used by the
Purchaser shall not be considered Capacity and shall not be accorded the Rates
provided for pursuant to this Agreement and, accordingly, all pricing and rates
with respect to any such Sub-DS-3 Capacity shall consist solely of the charges
made to the Sub-DS-3 Carrier by the Grantor pursuant to the terms of the
relevant Sub-DS-3 Backbone Agreement plus the Management Fee. After the
expiration of the Sub-DS-3 Backbone Agreements, the Purchaser may provision
Sub-DS-3
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Capacity in any manner that it may choose and the capacity used under any such
arrangements shall no longer be included in the Purchaser's use of Capacity
when determining whether the Purchaser has used the Purchased Capacity.
SECTION 10. SERVICE
ORDER CANCELLATION
10.1 SERVICE ORDER CANCELLATION AND DISCONNECTION OF SERVICE. (a)
Service Order Cancellation. The Purchaser may cancel any Service Order for which
service has not yet been established by providing written notification to the
Grantor thereof five (5) days prior to the applicable Requested Start Date. In
the event of such cancellation, (i) if the Service Order relates to a Circuit
and associated Capacity to be provided On-Net, the Purchaser shall pay to the
Grantor a cancellation charge in an amount equal to the previously waived
installation fees as set forth in Schedule 1 and (ii) if the Service Order
relates to a Circuit and associated Capacity to be provided Off-Net, the
Purchaser shall pay any amounts due to any Third-Party Service Provider that
are contractually provided for in the Grantor's contracts with any such
Third-Party Service Provider relating to the Service Order so cancelled.
(b) Service Disconnection. Once service has been established pursuant
to any Service Order, the Purchaser may, with respect to any Off-Net service or
Other Services provided by a Third-Party Service Provider, disconnect any such
service by providing the notice described in the preceding paragraph (a) and
paying any and all amounts due to any affected Third-Party Service Provider that
are contractually provided for in the Grantor's contracts with any such
Third-Party Service Provider relating to the affected Service Order. Following
an Actual Start Date, the Purchaser may, with respect to any On-Net service,
disconnect or reconfigure any such Circuit or service by providing sixty (60)
days' prior written notice to the Grantor. If any such disconnected or
reconfigured Circuit is a DS-3, OC-3 or OC-12 Circuit, the Purchaser shall have
no liability with respect to such disconnection or reconfiguration. If any such
disconnected or reconfigured Circuit is an OC-48 or OC-192 Circuit, the Grantor
shall be obligated to use reasonable efforts to redeploy such disconnected or
reconfigured Circuit in such a manner that will enable it not to recognize any
loss due to the Purchaser's disconnection or reconfiguration: provided that,
after the expiration of sixty (60) days from the date on which the Purchaser
gave notice to the Grantor of its intent to disconnect or reconfigure such
Circuit, if the Grantor has been unable to mitigate its loss in manner described
in the preceding clause, the Purchaser shall reimburse the Grantor for its costs
associated with the disconnection or reconfiguration of any such Circuit.
(c) Excusable Cancellation. Notwithstanding the foregoing, and upon
thirty (30) day's prior written notice to the other party, either the Purchaser
or the Grantor shall have the right, without cancellation charge or other
liability to the other party, to cancel the affected Service Order, if the
Grantor is prohibited by governmental authority from furnishing or the Purchaser
is prohibited from using such portion, or if any material rate or term contained
herein and relevant to the affected portion of any Service Order is
substantially changed by order of a court of competent jurisdiction to
adjudicate the matter so long as all appeals have been exhausted, the FCC, or
other local, state or federal government authority. Nothing contained in
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this Section 10.1(c) shall in any way be construed to reduce or limit the
Purchaser's obligations pursuant to Sections 2.3 and 3.2 hereof.
SECTION 11. PAYMENT TERMS
11.1 DUE DATE, INVOICES AND TAXES. All amounts stated on each monthly
invoice are due on the Due Date and the Purchaser agrees to remit payment to
the Grantor's Account by the applicable Due Date, except with respect to any
amounts disputed in good faith pursuant to Section 11.2 hereof. In the event
the Purchaser fails to make full payment to the Grantor's Account by the Due
Date, the Purchaser shall also pay a late fee in the amount of the lesser of
one and one half percent (1 1/2%) of the unpaid balance per month or the
maximum lawful rate under applicable state law which shall accrue from the Due
Date, except with respect to any amounts disputed in good faith pursuant to
Section 11.2 hereof. The Purchaser acknowledges and understands that all
charges are computed exclusive of any applicable federal (if any), state or
local sales, use, excise, value added, gross receipts, or privilege taxes,
duties, fees or similar liabilities (other than general income, real or
personal property taxes or duties imposed on the Grantor)("Taxes"). Any taxes
shall be paid by the Purchaser in addition to all other charges provided for
herein. Payment for all prorated monthly recurring charges (charges for
Capacity or Other Services provided for less than a calendar month), shall be
billed following the receipt of any such Capacity or Other Service unless
and/or until a tax exemption certificate is provided to the Grantor by the
Purchaser. Monthly recurring charges for full months of service will be
invoiced in advance.
11.2 INVOICE ADJUSTMENTS. Either party hereto may, in good faith,
request a billing adjustment for a period of two (2) years after the Due Date of
an invoice, or two (2) years after the date a service is rendered, whichever is
later. Any notice of a billing dispute by a party hereto must be in writing and
must include documentation substantiating the dispute. The parties will make a
good faith effort to resolve billing disputes as expeditiously as possible. The
successful party in any billing dispute shall be entitled to interest at a rate
of 1.5% per month from the date the relevant dispute is raised on any amounts
withheld by the other party during the pendency of any dispute.
11.3 AFTER IMPOSED TAXES OR CHARGES. If any sales taxes, valued added
taxes or charges or impositions are asserted against the Grantor after, or as a
result of, the Purchaser's use of services or any Other Service by any local,
state, national, international, public or quasi-public governmental entity or
foreign government or its political subdivision, including, any tax or charge
levied to support the Universal Service Fund contemplated by the
Telecommunications Act of 1996, the Purchaser shall be solely responsible for
such taxes, charges or impositions and the Purchaser agrees to pay any such
taxes, charges or impositions and hold the Grantor harmless from any liability
or expense associated with such taxes, charges or impositions unless and/or
until a tax exemption certificate is provided to the Grantor by the Purchaser.
SECTION 12.
12.1 [this section has intentionally been left blank]
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SECTION 13. REPRESENTATIONS AND INDEMNITY
13.1 REPRESENTATIONS. (a) Representations of the Grantor. To induce
the Purchaser to enter into this Agreement, the Grantor hereby represents and
warrants to the Purchaser that:
(i) it is a corporation duly organized, validly existing and in good
standing under the laws of Delaware;
(ii) it has the corporate power and authority, and the legal right,
to own and operate its property, to lease the property it operates as
lessee and to conduct the business in which it is currently engaged;
(iii) it has the corporate power and authority, and the legal right,
to make, deliver and perform this Agreement and the Assignment and
Assumption Agreements and has taken all necessary corporate action to
authorize the transactions contemplated hereunder and under the Assignment
and Assumption Agreements on the terms and conditions of this Agreement
and the Assignment and Assumption Agreements and to authorize the
execution, delivery and performance of this Agreement and the Assignment
and Assumption Agreements;
(iv) no consent or authorization of, filing with, notice to or other
act by or in respect of, any governmental authority or any other Person is
required in connection with the transactions contemplated by this
Agreement or the Assignment and Assumption Agreements or with the
execution, delivery, performance, validity or enforceability of this
Agreement and the Assignment and Assumption Agreements;
(v) it is in compliance with all requirements of law except to the
extent that the failure to comply therewith could not, in the aggregate,
reasonably be expected to have a material adverse effect on the Grantor's
ability to perform its obligations hereunder and under the Assignment and
Assumption Agreements;
(vi) this Agreement and any Assignment and Assumption Agreement
entered into prior to or on the Execution Date has been duly executed and
delivered on behalf of the Grantor;
(vii) this Agreement and any Assignment and Assumption Agreement
entered into prior to or on the Execution Date constitute the legal, valid
and binding obligations of the Grantor enforceable against the Grantor in
accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in proceeding in equity or at
law) and an implied covenant of good faith and fair dealing;
(viii) the execution, delivery and performance of this Agreement and
any Assignment and Assumption Agreement entered into prior to or on the
Execution Date
<PAGE> 24
and the transactions contemplated hereunder and under the Assignment and
Assumption Agreements will not violate any requirement of law or
contractual obligation of the Grantor:
(ix) no litigation, investigation or proceeding of or before any
arbitrator or governmental authority is pending or, to the knowledge of the
Grantor, threatened by or against the Grantor or against any of its
respective properties or revenue (a) with respect to this Agreement or the
Assignment and Assumption Agreements or any of the transactions
contemplated hereby or thereby, or (b) which could reasonably be expected
to have a material adverse effect on the Grantor's ability to perform its
obligations hereunder and under the Assignment and Assumption Agreements;
(x) the Grantor is not in default and, to the best of its knowledge
after reasonable inquiry, knows of no existing circumstances that with the
passage of time or with notice would create a default under or with respect
to any of its contractual obligations in any respect which could reasonably
be expected to have a material adverse effect on the Grantor's ability to
perform its obligations hereunder and under the Assignment and Assumption
Agreements;
(xi) no requirement of law or contractual obligation of the Grantor
could reasonably be expected to have a material adverse effect on the
business, operations, property or condition (financial or otherwise) of the
Grantor; and
(xii) the Grantor or, pursuant to Section 16, its permitted assignee,
(A) is and, to the best of the Grantor's knowledge (or the knowledge of its
permitted assignee), shall remain the Person through which The Williams
Companies, Inc. engages in the telecommunications business, (B) owns all or
substantially all (whether directly or indirectly) of The Williams
Companies, Inc. telecommunications assets and (C) will inform the Purchaser
within a reasonable period of time of its knowledge of any proposed change
in The Williams Companies, Inc.'s corporate plans or strategy that would
impact the Grantor's ability (or its permitted assignee's ability, as the
case may be) to make the representations contained in the preceding clauses
(A) and/or (B).
(b) Representatives of the Purchaser. To induce the Grantor to enter
into this Agreement, the Purchaser hereby represents and warrants to the
Grantor that:
(i) it is a corporation duly organized, validly existing and in good
standing under the laws of Delaware;
(ii) it has the corporate power and authority, and the legal right,
to own and operate its property, to lease the property it operates as
lessee and to conduct the business in which it is currently engaged;
(iii) it has the corporate power and authority, and the legal right,
to make, deliver and perform this Agreement and the Assignment and
Assumption Agreements and has taken all necessary corporate action to
authorize the transactions contemplated hereunder
<PAGE> 25
25
and under the Assignment and Assumption Agreements on the terms and
conditions of this Agreement and the Assignment and Assumption Agreements
and to authorize the execution, delivery and performance of this Agreement
and the Assignment and Assumption Agreements;
(iv) no consent or authorization of, filing with, notice to or other
act by or in respect of, any governmental authority or any other Person is
required in connection with the transactions contemplated by this Agreement
or the Assignment and Assumption Agreements or with the execution,
delivery, performance, validity or enforceability of this Agreement and
the Assignment and Assumption Agreements;
(v) it is in compliance with all requirements of law except to the
extent that the failure to comply therewith could not, in the aggregate,
reasonably be expected to have a material adverse effect on the
Purchaser's ability to perform its obligations hereunder and under the
Assignment and Assumption Agreements;
(vi) this Agreement and any Assignment and Assumption Agreement
entered into prior to or on the Execution Date has been duly executed and
delivered on behalf of the Purchaser;
(vii) this Agreement and any Assignment and Assumption Agreement
entered into prior to or on the Execution Date constitute the legal, valid
and binding obligations of the Purchaser enforceable against the Purchaser
in accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at
law) and an implied covenant of good faith and fair dealing;
(viii) the execution, delivery and performance of this Agreement and
any Assignment and Assumption Agreement entered into prior to or on the
Execution Date and the transactions contemplated hereunder and under the
Assignment and Assumption Agreements will not violate any requirement of
law or contractual obligation of the Purchaser;
(ix) no litigation, investigation or proceeding of or before any
arbitrator or governmental authority is pending or, to the knowledge of
the Purchaser, threatened by or against the Purchaser or against any of
its respective properties or revenue (a) with respect to this Agreement or
the Assignment and Assumption Agreements or any of the transactions
contemplated hereby or thereby, or (b) which could reasonably be expected
to have a material adverse effect on the Purchaser's ability to perform
its obligations hereunder and under the Assignment and Assumption
Agreements;
(x) the Purchaser is not in default and, to the best of its knowledge
after reasonable inquiry, knows of no existing circumstances that with the
passage of time or with notice would create a default under or with
respect to any of its contractual obligations in any respect which could
reasonably be expected to have a material adverse
<PAGE> 26
26
effect on the Purchaser's ability to perform its obligations hereunder and
under the Assignment and Assumption Agreements;
(xi) no requirement of law or contractual obligation of the Purchaser
could reasonably be expected to have a material adverse effect on the
business, operations, property or condition (financial or otherwise) of
the Purchaser;
(xii) to the extent that the Purchaser is subject to regulation by
the FCC, this Agreement is an inter-carrier agreement not subject to the
filing requirements of Section 211(a) of the Communications Act; and
(xiii) the Purchaser, to its knowledge after reasonable inquiry, knows
of no event or basis which would prevent the Purchaser from meeting the
Minimums under the Backbone Agreements and, to its knowledge after
reasonable inquiry, knows of no dispute, claim or threatened action in
connection with the Backbone Agreements.
(c) Survival of Representations. The foregoing representations and
warranties shall survive the execution and delivery of this Agreement.
(d) Representations as of Each Plan Adjustment Date. As of each Plan
Adjustment Date, (i) the representations of the Grantor contained in clauses
(i), (ii), (v), (ix), (x), (xi) and (xii) of Section 13.1(a) shall be true and
correct in all material respects on and as of such date as if made on and as of
such date and (ii) the representations of the Purchaser contained in clauses
(i), (ii), (v), (ix), (x), (xi) and (xii) of Section 13.1(b) shall be true and
correct in all material respects on and as of such date as if made on and as of
such date.
13.2 INDEMNITIES. (a) Indemnification of the Grantor by the
Purchaser. Subject to Section 14, the Purchaser agrees to indemnify and hold
harmless the Grantor and its respective officers, directors, employees, agents
and representatives from and against any loss, damage, expense or cost arising
out of or in connection with: (i) any breach or violation by the Purchaser of
applicable law or governmental regulation, (ii) any claims of whatever nature
by third parties (including the Purchaser's customers) with respect to the
services provided by the Purchaser to such third parties, even if such services
incorporate the services of the Grantor and (iii) any breach or violation by
the Purchaser of its representations contained herein.
(b) Indemnification of the Purchaser by the Grantor. Subject to
Section 14, the Grantor agrees to indemnify and hold harmless the Purchaser and
its officers, directors, employees, agents and representatives from and
against any loss, damage, expense or cost arising out of or in connection with:
(i) any breach or violation by the Grantor of applicable law or governmental
regulation, (ii) any claims of whatever nature by third parties (including the
Grantor's customers) with respect to the services provided by the Grantors to
such third parties even if such service incorporate the services of the
Purchaser and (iii) any breach or violation by the Grantor of its
representations contained herein.
(c) Notification of Claim. In the event an indemnified party under
paragraph (a) or (b) above is notified of any action as to which it may seek to
be indemnified under such
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27
paragraph, it will promptly notify the party from which indemnification will be
sought and seek to consult with such party prior to taking any material action
with respect thereto.
SECTION 14. LIMITATIONS OF LIABILITY
14.1 LIMITATIONS OF LIABILITY. (a) Except as specifically provided for
otherwise in this Agreement, in no event shall the Purchaser or the Grantor be
liable to or through the other for consequential, incidental, indirect or
special damages, including loss of revenue, loss of business opportunity or the
costs associated with the use of external (outside the System) restoration
facilities including for any loss or damage sustained by reason of any failure
in or breakdown of the System or the facilities associated with the System or
for any interruption of service, whatever the cause and however long it shall
last.
(b) The Grantor shall not be liable to the Purchaser for any loss or
damage which may be suffered by the Purchaser as a result of, related to, or in
connection with, the Purchaser's compliance or non-compliance with any
applicable state or federal or other law related to the transfer of the IRU in,
or the use of, the Capacity.
(c) The Purchaser shall not be liable to the Grantor for any loss or
damage which may be suffered by the Grantor as a result of, related to, or in
connection with, the Grantor's non-compliance with any applicable state or
federal or other law related to the transfer by the Grantor of the IRU to the
Purchaser in, or the Grantor's operation, ownership or use of, the System.
(d) Neither the Purchaser nor the Grantor shall be liable to the other
for any loss or damage which may be suffered by such party by reason of any
Force Majeure Event. In the event of an occurrence of a Force Majeure Event, the
party claiming to be affected by a Force Majeure Event shall give prompt written
notice thereof to the other party, which such notice shall include a brief
description of the Force Majeure Event and shall, if possible, estimate the
duration of said Force Majeure Event. If the party affected by a Force Majeure
Event has complied with the provisions of the preceding sentence, such party
shall be excused from the performance of its obligations hereunder on a
day-to-day basis to the extent that the Force Majeure Event prevents, restricts
or interferes with such party's performance hereunder. The party affected by a
Force Majeure Event shall use commercially reasonable efforts under the
circumstances to avoid, rectify or remove the cause of such Force Majeure Event
and shall re-commence any prevented performance hereunder at the soonest
possible date.
(e) In no event shall the Grantor be liable to the Purchaser for any
credits or damages resulting from outage or degradation of service during a
planned maintenance operation.
SECTION 15. DEFAULT
15.1 PURCHASER DEFAULT. If the Purchaser fails to make any payment
(including any Backbone Payment) required by this Agreement on the applicable
Due Date, or if the Purchaser is otherwise in material breach of this Agreement,
and such payment default continues unremedied for a period of at least fifteen
(15) days or such other breach continues for a period
<PAGE> 28
28
of at least thirty (30) days, the Grantor may notify the Purchaser in writing of
such payment default or other breach and if full payment is not received or such
other breach is not fully remedied within ten (10) days of such notification,
the Grantor: (i) may suspend or terminate all or any portion of the Capacity or
Other Services provided to Purchaser hereunder, until such payment default or
other breach has been cured (including payment of default interest, if any) and
(ii) shall be entitled to pursue any and all rights and legal and equitable
remedies (including its rights and remedies to enforce the Purchaser's
obligations under this Agreement). The suspension or termination of this
Agreement shall not relieve the Purchaser of its obligation to make full payment
of all amounts incurred under this Agreement up to and including the date of
suspension. Following a suspension of service unless this Agreement has been
terminated, upon the Purchaser's payment in full of all amounts due hereunder in
accordance with the terms hereof, the Grantor shall be required to reinstitute
the Capacity or Other Services.
15.2 GRANTOR DEFAULT. (a) If the Grantor is in material breach of
this Agreement and such breach continues for a period of at least (30) days,
the Purchaser may notify the Grantor in writing of such breach and if such
breach is not fully remedied with fifteen (15) days of such notification, the
Purchaser shall, for so long as such breach continues, be entitled to pursue
any and all rights and legal and equitable remedies, including its rights and
remedies to enforce Grantor's obligations under this Agreement.
(b) Without in any way limiting the effect of the preceding
paragraph (a), the Grantor agrees that any breach of its representation or
change in circumstance which makes it impossible for its representations
contained in clause (xii) of Section 13.1(a) to be true and correct in all
material respects shall be deemed to be a default by the Grantor under this
Agreement.
SECTION 16. ASSIGNMENT AND
MERGER OR CONSOLIDATION
16.1 ASSIGNMENT. (a) This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns; provided that, except for the
assignment of the Purchaser's or the Grantor's rights under this Agreement to
one or more of the Purchaser's or the Grantor's lenders as security and except
as provided in paragraph (b) of this Section, neither this Agreement nor any of
the rights or interests hereunder shall be assigned, transferred or otherwise
disposed of or the obligations hereunder delegated by either party hereto
without the prior written consent of the other party, which consent shall not be
unreasonably withheld, conditioned or delayed. The filing of a bankruptcy
proceeding, voluntary or involuntary, shall constitute a notice of intent to
transfer under this Section.
(b) Each party hereto shall be permitted to assign, transfer or
otherwise dispose of any or all of their rights hereunder and delegate any or
all of their obligations hereunder to any entity controlled by, under the same
control as, or controlling, such party: provided, that any such assignment,
transfer or other disposition shall not release such party from its obligations
hereunder, unless the other party consents otherwise in writing, which consent
shall not be unreasonably withheld, conditioned or delayed (it being understood
that it is not unreasonable to
<PAGE> 29
29
withhold consent if the assignee or transferee is not as creditworthy as the
assignor). Each party shall give the party notice of any such assignment,
transfer or other disposition or any such delegation.
(c) Any transfer by a party to this Agreement of such party's
obligations or its rights hereunder which is in violation of this Section shall
be void and of no force and effect.
16.2 MERGER OR CONSOLIDATION. (a) Each of the Grantor and the
Purchaser covenants that it shall not consolidate or merge with or into any
Person, nor sell, transfer, convey or lease all or substantially all its
properties or assets as an entirety to any Person (any party the subject of such
a transaction, an "Affected Party"), unless: (i) the successor entity (the
"Successor Entity") formed by such consolidation or with or into which the
Affected Party is merged, or the Successor Entity that acquires by conveyance,
transfer or lease all or substantially all the Affected Party's assets as an
entirety, (A) shall be authorized under all applicable laws to perform the
obligations of the Affected Party under this Agreement to the same extent as the
Affected Party prior to such transaction, (B) shall not be financially insolvent
immediately after giving effect to such transaction, and (C) shall execute and
deliver to the other party hereto an agreement in form and substance reasonably
satisfactory to the other party hereto, containing an assumption by such
Successor Entity of the due and punctual performance of each provision of this
Agreement to be performed or observed by the Affected Party (which agreement
shall be deemed to be reasonably satisfactory to the other party hereto if such
party has not notified the Affected Party to the contrary within (30) days of
receipt thereof); and (ii) immediately prior to and immediately after giving
effect to such transaction, no default under this Agreement shall have occurred
and be continuing.
(b) Upon any such consolidation or merger, or any sale,
conveyance, transfer or lease of substantially all the assets of the Affected
Party in accordance with this Section 16.2, the Successor Entity formed by such
consolidation or with or into which the Affected Party shall be merged, or to
which such sale, conveyance, transfer or lease shall be made, shall succeed
to, and be substituted for, and may exercise every right and power and shall be
subject to each and every obligation of, the Affected Party under this
Agreement with same effect as if such Successor Entity had been a party to this
Agreement. No such sale, conveyance, transfer or lease of all or substantially
all the assets of the Affected Party shall have the effect of releasing the
Affected Party or any Successor Entity that shall theretofore have become such
in the manner prescribed in this Section 16.2 from its liability under this
Agreement.
SECTION 17. MISCELLANEOUS
17.1 CONTENT AND CERTAIN PARAMETERS REGARDING USE OF CAPACITY. The
Purchaser agrees (i) not to use the Capacity (or any Other Service) for any
unlawful purpose, including any use which constitutes or may constitute a
violation of any local, state or federal obscenity law and (ii) that, during
the Term, at least ten percent (10%) of its total use of Capacity shall
constitute interstate transmissions. The parties hereto acknowledge that from
time to time a portion or portions of the Purchaser's use of Capacity may be
intended for transmission upon a portion of the System that is a multimedia
fiber with respect to which the Grantor is contractually limited to use for
multimedia transmissions (i.e. video and radio transmission
<PAGE> 30
30
services and/or related applications, including, graphic, visual, imaging,
interactive and multimedia transmissions). In such event, the Purchaser agrees,
upon request from the Grantor , to identify the nature of its proposed use of
Capacity. Nothing in the preceding two sentences shall be construed in such a
manner as would relieve the Grantor of its obligation to provision Capacity on
the System pursuant to the terms of this Agreement.
17.2 PURCHASER FACILITIES. The Purchaser has sole responsibility
for installation, testing and operation of facilities, services and equipment
("Purchaser Facilities") other than those specifically provided by the Grantor
as part of the Capacity or Other Services as described in this Agreement or in
a Service Order. In no event will the untimely installation or non-operation of
the Purchaser Facilities relieve the Purchaser of its obligation to pay charges
for the Capacity or Other Services after the Actual Start Date.
17.3 TITLE TO EQUIPMENT. This Agreement shall not, and shall not
be deemed to, convey to the Purchaser title of any kind to any of the
transmission facilities, including all optronics, digital encoder/decoders,
telephone lines, microwave facilities or other facilities utilized in
connection with the Capacity; provided however that the Grantor acknowledges
that the Purchaser's IRU in the Capacity on the System entails the use of such
transmission facilities. Any equipment provided by the Purchaser must be
itemized on a schedule listing all such the Purchaser-provided equipment and
appended to the Service Order to which use of that equipment relates and the
Grantor shall not be obligated to provide any Ancillary Service for the
Purchaser if the Purchaser will be providing any of its own equipment unless
and until such equipment is itemized in accordance with this sentence.
17.4 PUBLICITY AND CONFIDENTIALITY. (a) Confidentiality. The
provisions of this Agreement and any non-public information, written or oral,
with respect to this Agreement ("Confidential Information") will be kept
confidential and shall not be disclosed, in whole or in part, to any Person
other than Affiliates, officers, directors, employees, agents or
representatives of a party (collectively, "Representatives") who need to know
such Confidential Information for the purpose of negotiating, executing and
implementing this Agreement. Each party agrees to inform each of its
Representatives of the non-public nature of the Confidential Information and to
direct such Persons to treat such Confidential Information in accordance with
the terms of this Section 17.4. Nothing herein shall prevent a party from
disclosing Confidential Information (i) upon the order of any court or
administrative agency, (ii) upon the request or demand of, or pursuant to
any law, regulation of any regulatory agency or authority (including any filing
that a party hereto may have to make with the Securities and Exchange
Commission of the United States), (iii) to the extent reasonably required in
connection with the exercise of any remedy hereunder, (iv) to a party's legal
counsel or independent auditors, (v) to prospective lenders to the Grantor or
the Purchaser, and (vi) to any actual or proposed assignee, transferee or
lessee of all or part of its rights hereunder provided that such actual or
proposed assignee agrees in writing to be bound by the provisions of this
Section 17.4; provided, however, that if a receiving party is ordered or
required to disclose Confidential Information pursuant to either of the
preceding clauses (i) or (ii), such party shall promptly notify the other party
of the order or request and permit the disclosing party (at its expense) to
seek an appropriate protective order. Notwithstanding anything herein to the
contrary, each of the following shall be deemed to be excluded from provisions
hereof: any Confidential Information that is (A) already in the
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31
possession of, is known to, or is independently developed by the receiving
party, (B) or becomes publicly available through no fault of the receiving
party, (C) obtained by the receiving party from a third-party without breach by
such third-party of an obligation of confidence with respect to the
Confidential Information disclosed. The parties acknowledge that the Purchaser
will need to and will be permitted to disclose Confidential Information
(including, specifically, the System's performance standards) to potential
customers of the Purchaser subject to the prior written consent of the Grantor.
The Purchaser may seek such consent, including consent to disclose a redacted
version of this Agreement to multiple customers, which consent shall not be
unreasonably withheld, conditioned or delayed by the Grantor.
(b) Effect of Termination. Upon termination or expiration of this
Agreement for any reason, or upon request of the disclosing party, all
Confidential Information, together with any copies thereof, shall be returned
to the disclosing party or certified destroyed by the receiving party.
(c) Equitable Relief. The parties acknowledge that in the event
of a breach or threatened breach of the provisions of this Section 17.4,
remedies at law will be inadequate and that either party shall be entitled to
an injunction or other specific performance to enforce this provision,
provided, however, that nothing herein shall be construed as precluding the
injured party from pursuing further remedies.
(d) Publicity. The foregoing shall not restrict either party from
publicly announcing that it has entered into this Agreement with the parties
hereto, but without including any details contained in this Agreement.
Notwithstanding the foregoing, however, neither party shall issue a press
release concerning the execution of this Agreement without the prior written
consent of the other party.
17.5 NOTICE. Each notice, demand, certification or other
communication given or made under this Agreement shall be in writing and shall
be delivered by hand or by a recognized overnight delivery service or sent by
registered mail or by facsimile transmission to the address of the respective
party as shown below (or such other address as may be designated in writing to
the other party hereto in accordance with the terms of this Section):
If to the Purchaser: 3625 Queen Palm Drive
Sabal VII Building
Tampa, Florida 33619
Attn: Divisional Vice President, Network Planning
Fax No.:
Telephone:
With a copy to: 3625 Queen Palm Drive
Sabal VII Building
Tampa, Florida 33619
Attn: General Counsel
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If to the Grantor: One Williams Center, 26th Floor
Tulsa, Oklahoma 74172
Attn: Contract Administration
Fax No.: (918) 561-6578
Telephone: (918) 588-5760
With a copy to: One Williams Center, Suite 4100
Tulsa, Oklahoma 74172
Attn: General Counsel
Any change to the name, address and facsimile numbers may be made at any time
by giving fifteen (15) days prior written notice in accordance with this
Section. Any such notice, demand or other communication shall be deemed to have
been received, if delivered by hand, at the time of delivery or, if sent by
overnight delivery service the date when delivered or, if posted, at the
expiration of seven (7) days after the envelope containing the same shall have
been deposited in the post maintained for such purpose, postage prepaid, or, if
sent by facsimile, at the date of transmission with written or telephone
confirmation of receipt.
17.6 INTEGRATION. This Agreement (including the attachments
hereto) represents the agreement of the parties hereto with respect to the
subject matter hereof, and there are no promises, undertakings, representations
or warranties by the parties hereto relative to the subject matter hereof not
expressly set forth or referred to herein or in the attachments hereto.
17.7 WRITTEN AMENDMENT. This Agreement shall not be modified or
amended except by a writing signed by authorized representatives of the parties
hereto.
17.8 RELATIONSHIP OF PARTIES. This Agreement shall not form a
joint venture or partnership or similar business arrangement among the Grantor
and the Purchaser and nothing contained herein shall be deemed to constitute a
partnership or joint venture or similar business arrangement nor shall any party
be deemed to be the agent or partner of any other party. No party shall have the
right to bind any other party.
17.9 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF OKLAHOMA.
17.10 NO THIRD PARTY BENEFICIARIES. This Agreement does not
provide and is not intended to provide third parties (including customers of the
Purchaser, any permitted transferee of the Capacity (other than a permitted
transferee of all the Purchaser's rights and obligations under this Agreement)
or any other permitted user of the Capacity) with any remedy, claim, liability,
reimbursement, cause of action, or any other right. Furthermore, the Purchaser
acknowledges that, except as set forth in any Service Order, it is not a third
party beneficiary of any agreement entered into by the Grantor.
17.11 ATTORNEYS' FEES. If a proceeding is brought for the
enforcement of this Agreement, the prevailing party shall be entitled to recover
reasonable attorneys' fees and other
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costs and expenses incurred in such action or proceeding in addition to any
other relief to which such party may be entitled.
17.12 SEVERABILITY. If any provision of this Agreement is found by an
arbitral, judicial or regulatory authority having jurisdiction to be void or
unenforceable, such provision shall be deemed to be deleted from this Agreement
and the remaining provisions shall continue in full force and effect.
17.13 NO WAIVER. The failure of either party to enforce any provision
hereof shall not constitute the permanent waiver of such provision.
17.14 SETTLEMENT OF DISPUTES. The parties hereto shall endeavor to settle
amicably by mutual discussions any disputes, differences, or claims whatsoever
related to this Agreement within sixty (60) days. The disputing party shall
give the other party written notice of the dispute in accordance with the
notice provision of this Agreement. The other party shall submit a response
within twenty (20) days after receiving said notice. The notice and response
shall include (a) a summary of the party's position and a summary of the
evidence and arguments supporting its position, and (b) the name of the
executive who will represent the party. The executives shall meet at a mutually
acceptable time and place within thirty (30) days of the disputing party's
notice and thereafter as often as they deem reasonably necessary to resolve the
dispute. If the matter has not been resolved within sixty (60) days of the
disputing party's notice, either party may pursue its rights and remedies
within a court of competent jurisdiction. All negotiations conducted pursuant
to this clause are confidential and shall be treated as compromise and
settlement negotiations for purposes of the Federal Rules of Evidence and state
rules of evidence.
17.15 RIGHT TO AUDIT. No more than two (2) times in any twelve (12) month
period, the Purchaser shall have the right, at its sole expense, to appoint a
third-party consultant to audit the books and records of the Grantor to ensure
the Grantor's compliance with Section 3.3 hereof and the accuracy of any pass
through pricing. Any consultant appointed pursuant to the preceding sentence
must agree to treat the Grantor's records and books as confidential pursuant to
the Grantor's standard confidentiality agreement and may only disclose to the
Purchaser the fact that the applicable costs charged to the Purchaser do not
correspond to the Grantor's records (such permissible disclosure shall include
the precise amount of any such variance).
17.16 INTRASTATE INTEREXCHANGE SERVICE. Notwithstanding anything in this
Agreement to the contrary, the Purchaser may use any Interexchange Service
provided under this Agreement only if such Interexchange Service is used for
carrying interstate telecommunications traffic subject to the jurisdiction of
the FCC. The Grantor and its Affiliates shall not be obligated to make
available Interexchange Service on a Circuit with end points within a single
state unless the Purchaser represents in writing to the Grantor that such
Interexchange Service shall be used to carry interstate telecommunications
traffic. If it is determined at any time that any Interexchange Service is
subject to applicable state laws, regulations and/or tariffs, the Grantor or
its Affiliates may (i) provide such Interexchange Service pursuant to such
applicable state laws, regulations and/or tariffs or (ii) discontinue provision
of the affected Interexchange Service.
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17.17 Conflict of Law. Notwithstanding anything in this Agreement to the
contrary, the Grantor may immediately suspend the provision of Capacity or any
Other Service to the Purchaser, in whole or in part, if (i) the Grantor
determines that the provision of such Capacity or Other Service violates the
Communications Act (including the Telecommunications Act of 1996) in any
material manner or (ii) a change in federal or state law or promulgation of any
rule, regulation or order of the FCC or other governmental instrumentality
makes the Grantor's performance hereunder commercially impracticable in any
material manner.
17.18 No Conflicting Tariffs. The Grantor does not intend to file any
tariff in any jurisdiction that would materially change the Rates and the terms
and conditions of this Agreement. If such tariff is filed, and if such tariff
has the effect of increasing the rates and charges that the Purchaser pays
under this Agreement, the Grantor will remit to the Purchaser the difference
between the Rates and charges in this Agreement, and any increased rates and
charges that the Purchaser pays as a result of the tariff filing, on a
month-to-month basis, thirty (30) days after the Purchaser pays the higher
rates or charges.
17.19 Compliance with Law. Each party hereto shall use reasonable efforts
to comply with all laws, orders, regulations, directories, actions or requests
of the United States government or of a state or local government or any
instrumentality thereof in order to enable it to comply with its obligations
hereunder.
[rest of page intentionally left blank]
<PAGE> 35
35
IN WITNESS WHEREOF, the parties have executed this Agreement
effective on the date first written above.
WILLIAMS COMMUNICATIONS, INC., as
Grantor
By: /s/ ILLEGIBLE
------------------------------
Name:
Title:
INTERMEDIA COMMUNICATIONS INC.,
as Purchaser
By: /s/ BOB ROUSE
------------------------------
Name: Bob Rouse
Title: EVP
<PAGE> 36
SCHEDULE 1
TO THE
CAPACITY PURCHASE AGREEMENT
DATED JANUARY 5, 1998
Grantor's Private Line and ATM Service
SERVICES & PRICING
This Private Line Service and ATM Services Schedule ("PLSS") is made as of this
5th day of January ___, 1998, and is subject to that Capacity Purchase
Agreement No. __________ (the "Capacity Agreement") by and between Williams
Communications, Inc. d/b/a Williams Network, a Delaware corporation
("Grantor"), and Intermedia Communications, Inc. a Delaware corporation
("Purchaser").
1. DESCRIPTION OF PRIVATE LINE SERVICE: With respect to On-Net Service,
Grantor's Private Line Service (in this Schedule, the "Private Line
Service" or "Service") provides domestic DS-3 and optical SONET (OC-N)
circuits which are specifically dedicated to Purchaser's use between two
(2) points specified by the Parties in a Service Order, accepted by
Grantor in accordance with the Capacity Agreement, and meeting the
technical requirements defined in the "Technical Specifications for
Private Line Service" attached hereto.
DESCRIPTION OF ATM SERVICE: Williams Network Asynchronous Transfer Mode
(ATM) is multi-service technology that provides integration of disparate
networks onto a single communications infrastructure provided in
accordance with the attached "Technical Specifications for Private Line
Service". ATM technology takes voice, data and video packets and divides
them into equally sized, 53-byte cells and transmits them over the
Williams Network ATM network.
2 RATES & CHARGES: Private Line Service has three basic rate elements; IXC
Charges, Local Access Charges, and Non-recurring Charges. Williams Network
ATM service has three basic rate elements; Access, Port Connections, and
either Committed Bit Rate (CBR), or Variable Bit Rate (VBR) Permanent
Virtual Circuits (PVCs) and Virtual Paths (VPs).
2.1 IXC. Monthly recurring IXC Charges for Private Line Service are determined
by multiplying the unit price, representing the charge for one Voice Grade
Equivalent Circuit over one vertical and horizontal mile or route mile, by
the number of Voice Grade Equivalent Circuits constituting the Circuit
ordered, as such appear in the pricing matrix attached to this Schedule 1.
ATM. Permanent virtual circuit (PVC) and Virtual Path (VP) bandwidth
charges. PVC and VP charges are based on the class of service (CoS) and
bandwidth selected. Bandwidth charges are stated in Committed Information
Rates (CIR) or Megabit per second (Mbps) increments for one-way, or
Simplex PVCs. CIR increments are available in 1Meg increments up to 40Mbps
for DS3 ports, 5 Meg increments up to 150 Mpbs for OC3 ports and 25 Meg
increments up to 600 Mbps for OC12 ports. Two Classes of Service are
offered; Constant Bit Rate (CBR) and Variable Bit Rate (non real time)
(VBRnrt). Monthly recurring charges for port, PVCs and VPs are as reflected
on the Attached pricing matrix.
2.2 Local Access Charges. Local Access Charges are based on the cost of
transmission capacity provided by Purchaser or a third party supplier to
extend the Services provided by Grantor from a Grantor Point of Presence to
any other location and are provided as set forth in the Capacity Agreement.
2.4 Non-Recurring Charges: Non-recurring charges for On-Net Service are as set
forth in the attached pricing matrix. Non-recurring charges for any
Service provided by a third-party, whether Off-Net Service, Local Access,
or other, are as established by the third-party providing such Service.
Installation charges shall apply to the normal installation of equipment
necessary to provide the requested service to the point of demarcation at
the Purchaser's premises. Additional Installation charges shall apply when
Grantor is required to install equipment other than that normally required
to provide the service or when Purchaser requests special equipment. The
non-recurring charges are subject to change, upon thirty (30) days prior
written notice from Grantor to Purchaser.
3. TERMS OF SERVICES:
<PAGE> 37
3.1 Upon acceptance of a Service Order, Grantor shall confirm Purchaser's
requested Start Date, or inform Purchaser of the estimated date for the
delivery of each service. Grantor shall use commercially reasonable efforts
to install each such service on or before the Start Date, but the inability
of Grantor to deliver a facility by such date shall not be a Default under
this Agreement provided that Grantor has coordinated closely with Purchaser
regarding the inability to deliver a facility or requested service. If
Grantor fails to make any facility available within thirty (30) days after
the Start Date, Purchaser's remedy shall include, but not be limited to,
cancellation of the Service Order which pertains to such Service by ten
(10) calendar days prior written notice to Grantor.
3.2 The effective date of each service (the "Service Effective Date") shall
begin as indicated in the Capacity Agreement.
4. CHANGE OF SERVICES:
4.1 Change of Service Date. If Purchaser desires to change the date on which
Purchaser has requested that Service be available, Purchaser will
coordinate such changes during the normal Network Deployment Plan update
process described in the Capacity Purchase Agreement. Purchaser may be
charged a Change of Service Date Charge only in the event that such prior
coordination has not occurred. Purchaser will also be charged for any
charges incurred by Grantor from third party providers as a result of
Purchaser's request for Change of Service Date.
4.2 Change of Service Order. If Purchaser requests a modification to the
information contained in a Service Order (other than a Change of Service
Date) prior to completion of installation of the Service, Purchaser will
incur a Change of Service Order Charge. No charge will be incurred if the
change is to the IXC part of the Service Order and is administrative in
nature (i.e. billing address, contact information, etc.). A charge will be
incurred if the administrative change relates to Local Access for which
Grantor is acting as agent.
Change of Service Order charges will be lower if the Purchaser requests
such change within five (5) business days after a Service Order has been
accepted by Grantor ("pre-engineering") and will be higher if such change
is received after that time ("post-engineering"). Any expedited order will
be considered to be in the post-engineering stage two (2) business days
after the Service Order is accepted by Grantor.
4.3 Change of Service Charges. If Purchaser requests a change to Services after
such Services have been installed, Purchaser will incur a Change of Service
Charge. If such Change of Service is administrative in nature, Purchaser
will not incur a charge, unless such administrative change applies to Local
Access services which have been ordered by Grantor as agent for Purchaser.
In addition to the Change of Service Charge, Purchaser will be responsible
for any charges due to re-engineering which is required as a result of
Purchaser's request for Change of Service.
5. OUTAGE CREDITS:
5.1 Purchaser acknowledges the possibility of an unscheduled, continuous and/or
interrupted period of time when a Service or Services are "UNAVAILABLE" (as
defined in the Specifications) for a continuous period of two (2) hours
(hereafter an "OUTAGE"). An Outage shall begin upon recognition by Grantor
or notice from Purchaser that the Service is interrupted. In the event of
an Outage, Purchaser shall be entitled to a credit (the "OUTAGE CREDIT") at
the rate of 1/720 of the monthly recurring charge for the IXC portion of
the circuit for each hour in excess of the first two (2) consecutive hours
that the affected service fails to conform to the Specifications.
5.2 Purchaser shall not receive an Outage Credit if the interruptions are (a)
of a duration of less than two (2) consecutive hours, (b) caused by the
negligence or willful misconduct of Purchaser or others authorized by
Purchaser to use the services under this Agreement, (c) due to the failure
of power, facilities, equipment, systems or connection not provided by
Seller, (d) caused by the failure of access to Seller's fiber optic
network, (e) resultant from scheduled maintenance where Purchaser has been
notified of scheduled maintenance in advance, (f) due to a Force Majeure
event as defined in Section 8.4 of the CAPACITY AGREEMENT.
5.3 All Outage Credits shall be credited on the next monthly invoice for the
affected Service.
5.4 The Outage Credit described in this Section 5 of this PLSS shall be the
sole and exclusive remedy of Purchaser in the event of any Outage, and
under no circumstance shall an outage be deemed a Default under this
Agreement.
6.0 Service Parameters
6.1 General: The service intervals and system performance standards
defined in this schedule apply to both existing circuits transferred
to the Grantor under terms of the IRU and to all new circuits ordered
from the
<PAGE> 38
Grantor subsequent to the execution of the IRU.
6.2 Service Intervals
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Ordering Timelines
- ------------------------------------------------------------------------------------------------------------
<S> <C>
Order Acknowledgment 24 hours
- ------------------------------------------------------------------------------------------------------------
Advanced Scheduled Maintenance Notification 20 calendar days
- ------------------------------------------------------------------------------------------------------------
Advanced Emergency Maintenance ASAP
Notification
- ------------------------------------------------------------------------------------------------------------
FOC, including carrier selection and containing 10 business days after submission to Grantor
due date confirmation
- ------------------------------------------------------------------------------------------------------------
LOA 3 business days
- ------------------------------------------------------------------------------------------------------------
Pop-to-Pop DLR (See paragraph 6, below) 5-7 after initial request
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Installation Timelines From Date Order Accepted
- ------------------------------------------------------------------------------------------------------------
<S> <C>
DS-0 To be negotiated
- ------------------------------------------------------------------------------------------------------------
DS-1 To be negotiated
- ------------------------------------------------------------------------------------------------------------
DS-3 21 Business Days
- ------------------------------------------------------------------------------------------------------------
OC-3 (but not OC-3c) 90 Business Days
- ------------------------------------------------------------------------------------------------------------
OC-12 (but not OC-12c) 90 Business Days
- ------------------------------------------------------------------------------------------------------------
OC-48 90 Business Days
- ------------------------------------------------------------------------------------------------------------
OC-192 To be negotiated
- ------------------------------------------------------------------------------------------------------------
</TABLE>
6.3 Technical Specifications:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
Transmission Rates
- -------------------------------------------------------------------------
Device Private Line (On-net)
- -------------------------------------------------------------------------
<S> <C>
DS-3 44.736 Mbps
- -------------------------------------------------------------------------
OC-3/3c 155.520 Mbps
- -------------------------------------------------------------------------
OC-12/12c 622.080 Mbps
- -------------------------------------------------------------------------
OC-48 9953.280 Mbps
- -------------------------------------------------------------------------
</TABLE>
6.4 Network Availability: 99.95% in calendar year 1998, and 99.995% thereafter.
Both percentages may be identified as "Network Availability". All Network
Availability is measured on a calendar year basis from POP to POP. The
Network Availability applies only to On-Net Service. Availability of
Off-Net Service, Local Access, or Interconnection is only as provided by
the applicable third-party carrier. Force Majeure Events will not be
included in the calculation of Network Availability.
6.5 Mean Time to Repair
a. Equipment - 2 hours.
b. Cable - 4 hours on site, 6 hours repairing first fiber.
6.6 Performance (% Error Free Seconds): 99.5% from POP to POP measured over a
calendar year (the "EFS"). The EFS will only apply to On-net Service. The
EFS of Off-Net Service, Local Access, or Interconnection is only as
provided by the applicable third-party carrier. Force Majeure Events will
not be included in the calculation of the EFS.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
Systems Availability Threshold Bit Error Rate Error Free Seconds
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Structurally Diverse Route 99.995% 10 * 99.95% 99.50%
- -------------------------------------------------------------------------------------------------------------
Non-Structurally Diverse Route 99.95% 10 * 99.95% 99.50%
- -------------------------------------------------------------------------------------------------------------
Structurally Diverse Spur 99.995% 10 * 99.95% 99.50%
- -------------------------------------------------------------------------------------------------------------
Non-Structurally Diverse Spur 99.95% 10 * 99.95% 99.50%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 39
6.7 Moves/Adds/Changes.
a. In addition to new service orders, Williams Communications shall issue a
POP-to-POP circuit design layout record when circuits are moved, added,
changed, rehomed, regroomed, 5-7 business days after initial request for
move, add, change, rehome, regroom, etc. is submitted Williams will submit
copies of LEC-issued circuit design layout records immediately upon
receipt from the LEC.
b. Grantor will provide a monthly DLR report summarizing all
moves/adds/changes to DLRs occurring in the previous month.
6.8 Grantor agrees to provide the following:
a. Priority Restoral Status for On-Net Service when electronic restoration
becomes available and structurally diverse paths and OSS restoration
applications are implemented.
a. An electronic view into that portion of the Grantor's Network utilized by
the purchaser under this agreement - including but not limited to trouble
tickets, alerts, and alarms, when such functionality is implemented by
the Grantor.
b. Proactive notice on all outages and expedited escalation thereof and
escalation pursuant to the Grantor's escalation procedures executed
through an assigned contact person for Purchaser.
c. Identification of underlying carriers as requested on circuit.
e. Circuit diversity, including proof of diversity, when ordered, by circuit,
and including verification of diversity following any moves, adds,
changes, regrooming, rehoming, etc. Purchaser will provide DLR for
circuits for which diversity is requested at the rates indicated in the
relevant Service Order set in accordance with the terms of the Capacity
Agreement. A diverse circuit is subject to On-Net or Off-Net Rates
additional to the original circuit.
d. Escalation lists up to and including the Vice-President of Operations and
Engineering of Grantor.
e. Regularly scheduled service review meetings with the Purchaser.
f. 30 minute callbacks with status notices or a similarly agreed upon update
mechanism during outages as required by the Purchaser.
g. Hotline call-in number to monitor restoral status.
g. Fully functional and tested disaster recovery NOC site in Tulsa and in
Houston backup center when implemented (Houston's planned implementation
in 1999).
j. Assigned service manager.
h. Regular performance reports on MTTR, % availability, distribution of
resolution codes, failure rates on particular equipment components
specific to Purchaser's network.
m. Assigned circuit provisioner.
n. Coordination of restoral procedures.
6.9 Failures and Response Times. Purchaser defines the classes of service
failures and response times as follows:
Type Failure Definition Response Time
MAJOR A major failure is defined as a service 4 Hours on site
affecting outage (e.g., a cut cable or major
equipment breakdown) or the loss of an entire
site, i.e., any failure affecting one or more
circuits.
<PAGE> 40
MINOR Any failure which has no effect on existing service. 24 hours
Such a failure includes a failed or loose termination.
Redundant system equipment or alternate path cabling
maintains service.
6.10 Remedies of Purchaser for Grantor Failure to Comply with Applicable
Standards. In the event that the Grantor fails to comply with applicable
Service Intervals, System Performance Standards and in any thirty (30) day
period with respect to On-Net Service, only, as stated in this schedule,
the following remedies shall apply:
a) Failure to Comply. Failure to comply is defined as the inability to
meet the agreed upon standards for Service Intervals and System
Performance Standards in any thirty (30) day period.
b) Remedy. In the event of a Failure to Comply, Grantor shall be
obligated to Purchaser as follows:
1) Failure to Comply with Service Intervals - Grantor shall waive
Williams installation fees and provide one month free service charged
by Williams on the affected customer order(s). Any fees charged to
Grantor by third party providers will not be waived.
2) Failure to Comply with System Performance Standards - Grantor
shall provide a credit of 15% of the monthly recurring charge
exclusive of local access to Purchaser's next bill on the affected
customer order(s).
<PAGE> 41
TECHNICAL SPECIFICATIONS FOR PRIVATE LINE SERVICE
-------------------------------------------------
1.0 Interconnection Specifications
1.1 DS-3. DS-3 service is provided in accordance with ANSI Standard T1.102
(formerly AT&T Compatibility Bullentin 119) and Technical Reference
54014'4. DS-3 Service operates at 44.736 Mbps.
1.2 Optical SONET Services (OC-N). Optical SONET Services are provided in
accordance with ANSI Standard T1.105. OC-3 Service operates at 155.520 Mbps
and is configured with 3 separate STS-1 signaling paths. OC-12 Service
operates at 622.080 Mbps with 12 separate STS-1 signaling paths. OC-12C
Service operates at 622.080 Mbps with 1 STS-12C signaling path (or 4
separate STS-3C signaling paths). OC-48 Service operates at 9953.280 Mbps
and is configured with 48 separate STS-1 signaling paths.
2.0 Quality Standards
2.1 General. DS-3 and Optical SONET Service standards apply on a one-way basis
between the Purchaser Premises Network Interface Points ("CPNIP") which are
connected to Local Access between which DS-3 and Optical SONET
Interexchange Service is provided (CPNIP to CPNIP or End-to-End) and
exclude nonperformance due to force majeure or planned interruptions for
necessary maintenance purposes. The actual end-to-end availability and
performance of DS-3 and Optical SONET Service may be affected by the
Purchaser provided equipment, dependent upon the type and quality of
Purchaser equipment used. (Purchaser provided Local Access may not meet
these specifications.)
2.2 Availability. Availability is a measurement of the percent of total time
that service is operative when measured over a calendar year period. DS-3
and Optical SONET Service is considered inoperative when there has been a
loss of signal or when two consecutive 15 second loop-back tests confirm
the observation of any severely errored seconds or a bit error rate equal
to or worse than 1 x (10 raised to -3). The Local Access availability
standards for DS-3 and Optical SONET Services or any Off-Net Service are
established by the Local Access Provider or Off-Net Service provider.
2.3 Performance (% Error Free Seconds, while Available). Performance is noted
in Error Free Seconds (EFS) which are a measure of the percentage of total
seconds when measured over a consecutive 24 hour period that do not contain
bit errors. Performance shall be measured on a one-way basis using a Pseudo
Random Bit Sequence test pattern as defined in CCITT Recommendation 0.151.
The Error Free Seconds standards for the Local Access for DS-3 and Optical
SONET Service or for Off-Net Service is established by the Local Access
Provider or Off-Net Service provider.
<PAGE> 42
- ------------------------------------------------------------------------------
Williams Network Asynchronous Transfer Mode Service
TECHNICAL SPECIFICATIONS
1.0 Definition. Williams Network technical specifications are stated as an
objective that the ATM network will perform in accordance with prevailing
telecommunications industry standards. Williams Network will use reasonable
efforts to remedy delays, interruptions, omissions or mistakes within the
ATM network.
1.1 Performance Objectives. All service provided under the Williams Network
Asynchronous Transfer Mode Service are measured using two variables:
Network availability and Mean-time-to-repair.
1.2 Network Availability is a measurement of actual service time to stated
service time. Network Availability objective: -99.99%
1.3 MTTR is the average time required to restore service and resume
availability and is stated in terms of equipment and cable outages. The
time is measured from the moment the outage is reported until the service
is available and applies specifically to equipment outages or failures.
MTTR objective: - 2 Hours (Equipment)
- 4 Hours (Cable)
1.4 Calculation. Williams Network calculates network availability on customer
action requests. The customer must notify Williams Network and initiate an
action request to determine if service level variables 1.2 & 1.3 were met.
Page 8 of 8
<PAGE> 43
Rates
<TABLE>
<CAPTION>
Private [illegible] unless otherwise specified
- --------------------------------------------------------------------------------------------------------
[illegible] [illegible] OC3 OC12 OC[illegible] OC192*
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
****
- --------------------------------------------------------------------------------------------------------
</TABLE>
*OC192 pricing is $/VGE route mile
<TABLE>
<CAPTION>
OS-3 Non-Recurring/Ancillary
- --------------------------------------------------------------------------------------------------------
IXC [illegible] Local Loop Admin
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
[illegible] $ 2,000.00 N/C $ 100.00
- --------------------------------------------------------------------------------------------------------
[illegible] N/C N/C $ 100.00
- --------------------------------------------------------------------------------------------------------
[illegible] $ 500.00 $ 250.00 $ 100.00
- --------------------------------------------------------------------------------------------------------
[illegible] N/C N/C $ 100.00
- --------------------------------------------------------------------------------------------------------
[illegible] $ 500.00 $ 250.00 $ 100.00
- --------------------------------------------------------------------------------------------------------
[illegible] $ 2,000.00 $ 500.00 $ 100.00
- --------------------------------------------------------------------------------------------------------
[illegible] $ 500.00 $ 250.00 $ 100.00
- --------------------------------------------------------------------------------------------------------
[illegible] $ 2,000.00 $ 500.00 $ 100.00
- --------------------------------------------------------------------------------------------------------
[illegible] N/C N/C $ 100.00
- --------------------------------------------------------------------------------------------------------
[illegible] $ 2,000.00 $ 500.00 $ 100.00
- --------------------------------------------------------------------------------------------------------
[illegible] Passthrough
- --------------------------------------------------------------------------------------------------------
[illegible] Passthrough
- --------------------------------------------------------------------------------------------------------
[illegible] 100% of remain contract life
- --------------------------------------------------------------------------------------------------------
Additional $100.00/Hr, $125.00/Hr After hours
- --------------------------------------------------------------------------------------------------------
Local Loop $ 150.00
- --------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
OC-3 Non-Recurring/Ancillary
- --------------------------------------------------------------------------------------------------------
IXC [illegible] Local Loop Admin
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
[illegible] $ 5,000.00 N/C $ 300.00
- --------------------------------------------------------------------------------------------------------
[illegible] N/C N/C $ 300.00
- --------------------------------------------------------------------------------------------------------
[illegible] $ 1,250.00 $ 500.00 $ 300.00
- --------------------------------------------------------------------------------------------------------
[illegible] N/C N/C $ 300.00
- --------------------------------------------------------------------------------------------------------
[illegible] $ 1,250.00 $ 500.00 $ 300.00
- --------------------------------------------------------------------------------------------------------
[illegible] $ 5,000.00 $ 1,250.00 $ 300.00
- --------------------------------------------------------------------------------------------------------
[illegible] $ 1,250.00 $ 500.00 $ 300.00
- --------------------------------------------------------------------------------------------------------
[illegible] $ 5,000.00 $ 1,250.00 $ 300.00
- --------------------------------------------------------------------------------------------------------
[illegible] N/C N/C $ 300.00
- --------------------------------------------------------------------------------------------------------
[illegible] $ 5,000.00 $ 1,250.00 $ 300.00
- --------------------------------------------------------------------------------------------------------
[illegible] Passthrough
- --------------------------------------------------------------------------------------------------------
[illegible] Passthrough
- --------------------------------------------------------------------------------------------------------
[illegible] 100% of remain contract life
- --------------------------------------------------------------------------------------------------------
Additional $100.00/Hr, $125.00/Hr After hours
- --------------------------------------------------------------------------------------------------------
Local Loop $ 150.00
- --------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 44
Rates
<TABLE>
<CAPTION>
OS-12 Non-recurring/Ancillary
- --------------------------------------------------------------------------------------------------------
[illegible] [illegible] [illegible]
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
[illegible] $ 18,000.00 N/C $ 1,000.00
- --------------------------------------------------------------------------------------------------------
[illegible] N/C N/C $ 1,000.00
- --------------------------------------------------------------------------------------------------------
[illegible] $ 3,500.00 $ 1,500.00 $ 1,000.00
- --------------------------------------------------------------------------------------------------------
[illegible] N/C N/C $ 1,000.00
- --------------------------------------------------------------------------------------------------------
[illegible] $ 3,500.00 $ 1,500.00 $ 1,000.00
- --------------------------------------------------------------------------------------------------------
[illegible] $ 18,000.00 $ 3,500.00 $ 1,000.00
- --------------------------------------------------------------------------------------------------------
[illegible] $ 3,500.00 $ 1,500.00 $ 1,000.00
- --------------------------------------------------------------------------------------------------------
[illegible] $ 18,000.00 $ 3,500.00 $ 1,000.00
- --------------------------------------------------------------------------------------------------------
[illegible] N/C N/C $ 1,000.00
- --------------------------------------------------------------------------------------------------------
[illegible] $ 18,000.00 $ 3,500.00 $ 1,000.00
- --------------------------------------------------------------------------------------------------------
[illegible] Passthrough
- --------------------------------------------------------------------------------------------------------
[illegible] Passthrough
- --------------------------------------------------------------------------------------------------------
[illegible] 100% of remain contract life
- --------------------------------------------------------------------------------------------------------
[illegible] $100.00/Hr, $125.00/Hr After hours
- --------------------------------------------------------------------------------------------------------
[illegible] $ 150.00
- --------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
[illegible] [illegible]
- --------------------------------------------------------------------------------------------------------
[illegible] [illegible] [illegible]
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
[illegible] $ 48,000.00 N/C $ 3,500.00
- --------------------------------------------------------------------------------------------------------
[illegible] N/C N/C $ 3,500.00
- --------------------------------------------------------------------------------------------------------
[illegible] $ 12,000.00 $ 5,000.00 $ 3,500.00
- --------------------------------------------------------------------------------------------------------
[illegible] N/C N/C $ 3,500.00
- --------------------------------------------------------------------------------------------------------
[illegible] $ 12,000.00 $ 5,000.00 $ 3,500.00
- --------------------------------------------------------------------------------------------------------
[illegible] $ 48,000.00 $ 12,000.00 $ 3,500.00
- --------------------------------------------------------------------------------------------------------
[illegible] $ 12,000.00 $ 5,000.00 $ 3,500.00
- --------------------------------------------------------------------------------------------------------
[illegible] $ 48,000.00 $ 12,000.00 $ 3,500.00
- --------------------------------------------------------------------------------------------------------
[illegible] N/C N/C $ 3,500.00
- --------------------------------------------------------------------------------------------------------
[illegible] $ 48,000.00 $ 12,000.00 $ 3,500.00
- --------------------------------------------------------------------------------------------------------
[illegible] Passthrough
- --------------------------------------------------------------------------------------------------------
[illegible] Passthrough
- --------------------------------------------------------------------------------------------------------
[illegible] 100% of remain contract life
- --------------------------------------------------------------------------------------------------------
[illegible] $100.00/Hr, $125.00/Hr After hours
- --------------------------------------------------------------------------------------------------------
[illegible] $ 150.00
- --------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 45
ATM PRICING
ATM VBR PRICING MONTHLY RECURRING CHARGES
<TABLE>
<CAPTION>
Port CIR(Mbps CIR HIGH Port CoS Price Per Meg
<S> <C> <C> <C> <C> <C>
DS3 1 9 $6,000 VBRnrt $325
10 19 $6,000 VBRnrt $312
20 29 $6,000 VBRnrt $306
30 40 $6,000 VBRnrt $299
OC3 5 25 $15,000 VBRnrt $312
25 35 $15,000 VBRnrt $306
40 55 $15,000 VBRnrt $299
60 75 $15,000 VBRnrt $293
80 95 $15,000 VBRnrt $286
100 120 $15,000 VBRnrt $280
125 150 $15,000 VBRnrt $273
OC12 ICB
</TABLE>
NON RECURRING CHARGES
Non-recurring charges include installation, configuration changes,
cancellation, order change that may be incurred for the Port or PVC.
Non Recurring Charges
Description of Charge Charges
Installation
<TABLE>
<S> <C>
45Mb Port $ 1,500
155Mb Port $ 4,000
622Mb Port $ 15,000
per VC $ 40
Ancillary
Configuration Change $ 50
Cancellation $ 250
PVC Order Change $ 50
Port Order Change $ 100
DS3 Cross Connect $ 500
OC3 Cross Connect $ 1,250
</TABLE>
DISCOUNT STRUCTURE
Contributing Williams network ATM Service charges include recurring port and
PVC charges. The discount structure is based on the monthly revenue commitment
(contributing charges) and the stated length of the contract established.
****
Term 2: ATM Service is limited to 18 months from execution date or otherwise
extended by mutual agreement by Intermedia and Williams
Term 3: CBR Pricing is subject to availability at the Rates
<PAGE> 46
SCHEDULE 2
TO THE CAPACITY PURCHASE AGREEMENT DATED JANUARY 5, 1998
- --------------------------------------------------------------------------------
INITIAL NETWORK DEPLOYMENT PLAN
Capacity requested by Purchaser shall be provided by Grantor to Purchaser at
either On-Net or Off-Net rates as indicated below. Column C ("On-Net Private
Lines Now") and Column D ("On-Net ATM Now") city pairs shall be available
immediately at the Rates provided for pursuant to the terms of this Agreement.
Column E ("On-Net Private Lines 12 Mo.") city pairs shall be available
immediately at a pass-through of Off-Net rates, and shall be subject to the
Rates provided for pursuant to the terms of this Agreement upon the earlier of
twelve (12) months or the date the city pairs become available On-Net. Column F
("Off-Net New Schedule in 30 Days") city pairs shall be immediately available at
pass-through of Off-Net rates. City pairs available under the Backbone
Agreements are by this reference deemed a part of Column F/the "Off-Net New
Schedule in 30 Days," subject to payment of the Management Fee and other
requirements of Section 8 of the Agreement.
City Pairs specifically identified in Schedule F will be included in a schedule
of SUSA overbuilds for On-Net rates within 30 days of execution of this
Agreement.
SUSA capacity is subject to availability.
<TABLE>
<CAPTION>
=======================================================================================================================
A B C D E F G H
On-Net On-Net On-Net Off-Net Minimum SUSA Availibity
Line PLs ATM PLs (New Schedule Facility ---------------
No. A Location Z Location Now Now 12 Mo. in 30 Days) Size Date Date Cap.
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Atlanta Birmingham 1 DS3 Nov
- -----------------------------------------------------------------------------------------------------------------------
2 Atlanta Chicago 1 OC3C Mar-99
- -----------------------------------------------------------------------------------------------------------------------
3 Atlanta Dallas 1 OC3C Sep
- -----------------------------------------------------------------------------------------------------------------------
4 Atlanta Los Angeles 1 DS3 Oct
- -----------------------------------------------------------------------------------------------------------------------
5 Atlanta Miami 1 x OC3C Dec Mar-98 3-DS3
- -----------------------------------------------------------------------------------------------------------------------
6 Atlanta New Orleans 1 x DS3 Oct Mar-98 1-DS3
- -----------------------------------------------------------------------------------------------------------------------
7 Atlanta New York 1 DS3 Dec
- -----------------------------------------------------------------------------------------------------------------------
8 Atlanta Orlando 1 OC12C Apr-99
- -----------------------------------------------------------------------------------------------------------------------
9 Atlanta Raleigh 1 OC12C Sep
- -----------------------------------------------------------------------------------------------------------------------
10 Atlanta Tallahassee x a OC3C Aug-99
- -----------------------------------------------------------------------------------------------------------------------
11 Atlanta Washington DC 1 x OC3C Dec Mar-98 2-OC3C
- -----------------------------------------------------------------------------------------------------------------------
12 Baltimore Washington DC 1 DS3 May-99 Mar-98 1-DS3
- -----------------------------------------------------------------------------------------------------------------------
13 Birmingham Dallas 1 DS3 Dec-98
- -----------------------------------------------------------------------------------------------------------------------
14 Boston Albany a DS3 Aug-99
- -----------------------------------------------------------------------------------------------------------------------
15 Boston Chicago a DS3 Aug-99
- -----------------------------------------------------------------------------------------------------------------------
16 Boston New York a 2-DS3 Aug-99
- -----------------------------------------------------------------------------------------------------------------------
17 Buffalo Cleveland a OC3C Oct
- -----------------------------------------------------------------------------------------------------------------------
18 Chicago Cincinnati 1 OC3C May-99
- -----------------------------------------------------------------------------------------------------------------------
19 Chicago Cleveland 1 x OC3C Oct Mar-98 2-DS3a
- -----------------------------------------------------------------------------------------------------------------------
20 Chicago Dallas 1 x OC3C Sep Mar-98 1-OC3C
- -----------------------------------------------------------------------------------------------------------------------
21 Chicago Detroit 1 DS3 Aug-99 Mar-98 1-DS3a
- -----------------------------------------------------------------------------------------------------------------------
22 Chicago Indianapolis 1 DS3 Sep
- -----------------------------------------------------------------------------------------------------------------------
23 Chicago Los Angeles 1 x DS3 Nov Mar-98 1-DS3
- -----------------------------------------------------------------------------------------------------------------------
24 Chicago Milwaukee a DS3 Aug-99
- -----------------------------------------------------------------------------------------------------------------------
25 Chicago Minneapolis 1 DS3 Apr-99
- -----------------------------------------------------------------------------------------------------------------------
26 Chicago New York 1 x a OC3C Sep Mar-98 13OCBR
- -----------------------------------------------------------------------------------------------------------------------
27 Chicago Pittsburgh 1 DS3 yr2000
- -----------------------------------------------------------------------------------------------------------------------
28 Chicago San Francisco 1 OC3C yr2000 Mar-98 1-OC3
- -----------------------------------------------------------------------------------------------------------------------
29 Chicago St Louis 1 OC3C Oct
- -----------------------------------------------------------------------------------------------------------------------
30 Chicago Washington DC 1 x a OC3C Apr-99
- -----------------------------------------------------------------------------------------------------------------------
31 Cincinnati Indianapolis 1 DS3 Apr-99
- -----------------------------------------------------------------------------------------------------------------------
32 Cincinnati Washington DC 1 OC3C Apr-99
- -----------------------------------------------------------------------------------------------------------------------
33 Cleveland New York 1 x DS3 Nov
- -----------------------------------------------------------------------------------------------------------------------
34 Cleveland Pittsburgh a DS3 yr2000
- -----------------------------------------------------------------------------------------------------------------------
35 Dallas Houston 1 OC3C Dec
- -----------------------------------------------------------------------------------------------------------------------
36 Dallas Los Angeles 1 DS3 Nov
- -----------------------------------------------------------------------------------------------------------------------
37 Dallas Minneapolis 1 DS3 Apr-99
- -----------------------------------------------------------------------------------------------------------------------
38 Dallas New Orleans 1 DS3 Dec
- -----------------------------------------------------------------------------------------------------------------------
39 Dallas New York 1 DS3 Dec
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 1
<PAGE> 47
SCHEDULE 2
TO THE CAPACITY PURCHASE AGREEMENT DATED JANUARY 5, 1998
<TABLE>
<CAPTION>
A B C D E F G H
On-Net On-Net On-Net Off-Net Minimum SUSA Availability
Line PLs ATM PLs (New Schedule Facility -----------------
No. A Location Z Location Now Now 12 Mo. in 30 Days) Size Date Date Cap.
- --- ---------- ------------- ------ ------ ------- ------------- -------- --------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
40 Dallas Oklahoma City 1 x 2-DS3 Dec Mar-98 2-DS3
41 Dallas Phoenix 1 DS3 Apr-99
42 Dallas San Francisco 1 a OC3C yr2000 Mar-98 LA/SF
43 Dallas Shreveport x a 1-DS3 Not Sched
44 Dallas Tulsa 1 x DS3 Aug Mar-98 1-DS3
45 Dallas Washington DC 1 0C3C Dec
46 Dayton Detroit 1 DS3 Mar-99
47 Denver Kansas City a OC3C Aug-99
48 Denver Minneapolis a DS3 Aug-99
49 Denver Salt Lake City 1 DS3 Aug-99 Mar-98 2-DS3
50 Hartford New York a DS3 Aug-99
51 Hartford Providence a DS3 Aug-99
52 Hayward Sacramento a DS3 yr2000
53 Houston New Orleans 1 DS3 Nov
54 Houston Tallahassee a OC3C Aug-99
55 Kansas City St Louis 1 OC3C Dec
56 Las Vegas Los Angeles 1 x DS3 Nov Mar-98 1-DS3
57 Las Vegas Salt Lake City 1 x OC3C Apr-99 Mar-98 1-DS3
58 Las Vegas San Francisco a OC3C yr2000
59 Los Angeles New York 1 DS3 Dec
60 Los Angeles Phoenix 1 DS3 Apr-99
61 Los Angeles San Francisco 1 OC3C Not Sched Mar-98 1-OC3C
62 Memphis Nashville a DS3 Not Sched
63 Memphis New Orleans a DS3 Not Sched
64 Miami Orlando 1 OC12C Apr-99
65 Miami Tampa 1 OC12C Apr-99
66 Milwaukee Minneapolis a DS3 Not Sched
67 New York Pittsburgh a DS3 Not Sched
68 New York Washington DC 1 x OC3C Apr-99
69 Orlando Tampa 1 OC12C Apr-99
70 Philadelphia New York 1 DS3 Apr-99
71 Philadelphia Washington DC 1 DS3 Apr-99
72 Pittsburgh Dayton/Waynsville a DS3 Not Sched
73 Pittsburgh Washington DC a DS3 yr2000
74 Portland San Francisco a DS3 Not Sched
75 Portland Seattle a DS3 Not Sched
76 Raleigh Washington DC 1 OC12C Dec
77 Sacramento Salt Lake City a DS3 Not Sched
78 Salt Lake City Seattle a DS3 Not Sched
79 San Francisco Washington DC 1 a OC3C Not Sched
80 Tallahassee Tampa 1 OC3C Aug-99
81 Sacramento San Francisco a DS3 Not Sched
TOTAL 17 5 33 0
</TABLE>
1 - Orders for capacity available now or within 12 months from execution.
x - Capacity available in 12 months or sooner; does not represent an order.
a - Subject to review for availability; not circuit orders.
Intermedia will issue ASR's in 3 weeks for all circuit orders
<PAGE> 48
SCHEDULE 2
WILLIAMS CITY PLAN
<TABLE>
<CAPTION>
No. City Locations Firm
In Service Dates
----------------------------------------------------------
<S> <C> <C>
1 Akron 10/01/99
------- ------------------------- -----------------
2 Albany, NY 12/20/98
------- ------------------------- -----------------
3 Atlanta 09/03/98
------- ------------------------- -----------------
4 Baltimore 05/22/99
------- ------------------------- -----------------
5 Baton Rouge 11/03/98
------- ------------------------- -----------------
6 Birmingham 11/10/98
------- ------------------------- -----------------
7 Boise 05/22/99
------- ------------------------- -----------------
8 Boston 08/01/99
------- ------------------------- -----------------
9 Buffalo 12/20/98
------- ------------------------- -----------------
10 Charlotte 10/20/98
------- ------------------------- -----------------
11 Chicago 08/17/98
------- ------------------------- -----------------
12 Cincinnati 04/22/99
------- ------------------------- -----------------
13 Cleveland 10/04/98
------- ------------------------- -----------------
14 Colorado Springs 08/01/99
------- ------------------------- -----------------
15 Columbus 03/22/99
------- ------------------------- -----------------
16 Dallas 08/17/98
------- ------------------------- -----------------
17 Dayton 02/20/99
------- ------------------------- -----------------
18 Daytona Beach 05/22/99
------- ------------------------- -----------------
19 Denver 08/01/99
------- ------------------------- -----------------
20 Des Moines 05/22/99
------- ------------------------- -----------------
21 Ft Meyers 05/06/99
------- ------------------------- -----------------
22 Ft. Lauderdale 05/23/99
------- ------------------------- -----------------
23 Greensboro 09/20/98
------- ------------------------- -----------------
24 Houston 11/05/98
------- ------------------------- -----------------
25 Indianapolis 08/17/98
------- ------------------------- -----------------
26 Jackson, MS 10/20/98
------- ------------------------- -----------------
27 Jacksonville 04/22/99
------- ------------------------- -----------------
28 Kansas City 11/03/98
------- ------------------------- -----------------
29 Las Vegas 10/01/98
------- ------------------------- -----------------
30 Los Angeles 11/03/98
------- ------------------------- -----------------
31 Melbourne 04/22/99
------- ------------------------- -----------------
32 Miami 05/22/99
------- ------------------------- -----------------
33 Minneapolis 07/01/99
------- ------------------------- -----------------
34 Mobile 05/22/99
------- ------------------------- -----------------
35 New Orleans 10/20/98
------- ------------------------- -----------------
36 New York 11/05/98
------- ------------------------- -----------------
37 Newark 05/22/99
------- ------------------------- -----------------
38 Oklahoma City 11/10/98
------- ------------------------- -----------------
39 Orlando 05/22/99
------- ------------------------- -----------------
40 Pensacola 05/06/99
----------------------------------------------------------
</TABLE>
Page 1 of 3
<PAGE> 49
SCHEDULE 2
WILLIAMS CITY PLAN
<TABLE>
<CAPTION>
Firm
NO. City Locations In Service Dates
----- --------------- ----------------
<S> <C> <C>
41 Philadelphia 05/23/98
----- --------------- ----------------
42 Phoenix 01/20/99
----- --------------- ----------------
43 Portland 04/01/99
----- --------------- ----------------
44 Raleigh 09/18/98
----- --------------- ----------------
45 Richmond 10/20/98
----- --------------- ----------------
46 Rochester 12/20/98
----- --------------- ----------------
47 Salt Lake City 08/01/99
----- --------------- ----------------
48 San Diego 12/01/00
----- --------------- ----------------
49 San Francisco 04/01/00
----- --------------- ----------------
50 San Jose 04/01/00
----- --------------- ----------------
51 Seattle 07/01/00
----- --------------- ----------------
52 Spartanburg 08/29/98
----- --------------- ----------------
53 St Louis 09/15/98
----- --------------- ----------------
54 Syracuse 02/20/99
----- --------------- ----------------
55 Tallahassee 05/22/99
----- --------------- ----------------
56 Tampa 05/22/99
----- --------------- ----------------
57 Tucson 03/22/99
----- --------------- ----------------
58 Tulsa 1 Oak 08/17/98
----- --------------- ----------------
59 Washington, DC 07/28/98
----- --------------- ----------------
60 West Palm Beach 04/22/99
----- --------------- ----------------
</TABLE>
<TABLE>
<CAPTION>
Estimated
In Service Dates
---- ----------------- ----------------
<S> <C> <C>
61 Albuquerque, NM 3Q01
---- ----------------- ----------------
62 Austin, TX 3Q01
---- ----------------- ----------------
63 Bakersfield, CA 1Q00
---- ----------------- ----------------
64 Detroit, MI 2Q00
---- ----------------- ----------------
65 El Paso, TX 2Q99
---- ----------------- ----------------
66 Fresno, CA 1Q00
---- ----------------- ----------------
67 Grand Rapids, MI 2Q00
---- ----------------- ----------------
68 Harrisburg, PA 3Q01
---- ----------------- ----------------
69 Hartford, CT 2Q99
---- ----------------- ----------------
70 Johnson City, TN 3Q01
---- ----------------- ----------------
71 Knoxville, TN 3Q01
---- ----------------- ----------------
72 Lansing, MI 2Q00
---- ----------------- ----------------
73 Little Rock, AR 3Q01
---- ----------------- ----------------
74 Louisville, KY 3Q01
---- ----------------- ----------------
75 Macon, GA 1Q99
---- ----------------- ----------------
76 Memphis, TN 3Q01
---- ----------------- ----------------
</TABLE>
Page 2 of 3
<PAGE> 50
SCHEDULE 2
WILLIAMS CITY PLAN
<TABLE>
<CAPTION>
NO. City Locations Firm
In Service Dates
<S> <C> <C>
--------------------------------------------------
77 Milwaukee, WI 3Q99
--------------------------------------------------
78 Montreal, Can 3Q00
--------------------------------------------------
79 Nashville, TN 3Q01
--------------------------------------------------
80 Norfolk, VA 3Q01
--------------------------------------------------
81 Oakland,CA 2Q00
--------------------------------------------------
82 Omaha, NE 3Q01
--------------------------------------------------
83 Ottawa, Can 3Q00
--------------------------------------------------
84 Pittsburg, PA 3Q01
--------------------------------------------------
85 Providence, RI 2Q99
--------------------------------------------------
86 Reno, NV 3Q00
--------------------------------------------------
87 Sacramento, CA 1Q00
--------------------------------------------------
88 San Antonio 3Q01
--------------------------------------------------
89 Sante Fe, NM 3Q01
--------------------------------------------------
90 Southbend, IN 3Q01
--------------------------------------------------
91 Springfield, MA 2Q01
--------------------------------------------------
92 Stockton, CA 1Q00
--------------------------------------------------
93 Toledo, OH 2Q01
--------------------------------------------------
94 Topeka, KS 2Q99
--------------------------------------------------
95 Toronto, Can 3Q00
--------------------------------------------------
96 Youngstown, OH 3Q01
--------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Other Estimated
Potential Cities In Service Dates
<S> <C> <C>
--------------------------------------------------
97 Asheville, NC 3Q01
--------------------------------------------------
98 Billings, MT 3Q01
--------------------------------------------------
99 Biloxi, MS 2Q99
--------------------------------------------------
100 Chattanooga, TN 3Q01
--------------------------------------------------
101 Chico, CA 3Q00
--------------------------------------------------
102 Coeur D'Alene 3Q01
--------------------------------------------------
103 Eau Claire, WI 3Q99
--------------------------------------------------
104 Eugene, OR 3Q00
--------------------------------------------------
105 Gainsville, FL 2Q99
--------------------------------------------------
106 Great Falls, MT 3Q01
--------------------------------------------------
107 Madison, WI 3Q99
--------------------------------------------------
108 Panama City, FL 2Q99
--------------------------------------------------
109 Sioux Falls, SD 3Q01
--------------------------------------------------
110 Spokane, WA 3Q01
--------------------------------------------------
111 St. Cloud, MI 3Q01
--------------------------------------------------
112 Waco, TX 3Q01
--------------------------------------------------
</TABLE>
Page 3 of 3
<PAGE> 51
****
<PAGE> 52
[INTERMEDIA COMMUNICATIONS LETTERHEAD]
March 31, 1999
Mr. Frank Semple
President, Williams Network
Williams Communications, Inc.
One Williams Center
Tulsa, OK 74172
Re: Capacity Purchase Agreement
Binding Interim Letter Amendment
Dear Frank:
This letter amendment ("Amendment"), effective March 31, 1999, shall constitute
a legally binding agreement between Intermedia Communications Inc.
("Intermedia") and Williams Communications, Inc. ("Williams") amending the
Capacity Purchase Agreement (the "CPA") between Intermedia and Williams entered
into as of January 5, 1998. It is the intent of the parties to negotiate and
execute a more comprehensive formal amendment to the CPA which, if and when it
is executed, shall thereafter supersede this Amendment and render this Amendment
of no legal force or effect.
Therefore, in consideration of the mutual terms and covenants set forth herein,
and for other good and valuable consideration, the adequacy and receipt of which
are hereby acknowledged, Intermedia and Williams agreeing to be legally bound
thereby, hereby amend the CPA as follows:
1. Any terms used in this Amendment which are defined terms in the CPA shall
have the same meaning herein as in the CPA.
2. To the extent of any conflict between any provisions of this Amendment and
the CPA, the provisions of this Amendment shall govern and control. Without
limiting the foregoing, the parties specifically agree that the following
provisions of the CPA are no longer in effect because they have been superseded
by this Amendment:
The following definitions in Section 1.2 of the CPA: "Adjusted Purchased
Capacity," "Capacity," "Most Favored Rate," "Network Deployment Plan,"
"On-Net," "Plan Adjustment Date," "Pricing Adjustment Date(s)," "Purchased
Capacity," "Purchased Capacity Shortfall," "Rates," "Required Capacity,"
"Shortfall Carrier," "Sub-DS-3 Backbone Agreement," "Sub-DS-3 Capacity" and
"Sub-DS-3 Carrier."
Sections 2.2, 2.3, 2.4, 2.5, 2.6, 3.3, 8 and 9.
<PAGE> 53
Letter Amendment
Page 2
3. Except as otherwise provided herein, all words used in this Amendment shall
have the meanings commonly understood and ascribed to them within the
telecommunications industry.
Nature of Capacity Purchase Agreement
4. The CPA shall remain a purchase by Intermedia of an indefeasible right to
use specified levels of capacity on the Williams network.
Parties' Ordering Rights and Obligations
5. Williams' rights as Preferred Capacity Provider pursuant to the CPA are
hereby deleted and replaced with the preferred provider rights set forth in
paragraph 6, below.
6. Williams and Intermedia shall retain a strategic relationship throughout
the term of the CPA. As described in paragraph 19, below, Intermedia will share
with Williams, on a quarterly basis, its forward plans for the leased Intermedia
backbone network (i.e., excluding fiber purchases and/or other Intermedia-owned
network). Williams will thereby have an opportunity to offer Intermedia the
required capacity to meet all such plans on the Williams network (Tier A cities
as described in paragraphs 9 and 10, below). Therefore, on a prospective basis,
beginning May 1, 1999, Intermedia will place at least **** of its new orders for
leased backbone network Tier A city capacity with Williams ****. The **** will
be measured in terms of DS-0 equivalent miles for orders placed each calendar
year (with calendar year 1999 being assessed from May 1st to December 31st). At
the quarterly planning reviews, Intermedia and Williams will review Intermedia's
"new orders" to determine the status of Intermedia's progress toward
satisfaction of the ****, and Intermedia will provide Williams with
sufficient information regarding Intermedia's new orders to allow a meaningful
review. Notwithstanding the foregoing, the **** shall automatically be deemed
satisfied in any calendar year in which Intermedia achieves **** of its
Minimum Commitment (as described in paragraph 14, below). Intermedia's
achievement of **** of its Minimum Commitment shall in no way constitute a
limitation on the nature or volume of the business that may be transacted
between Williams and Intermedia, nor shall it limit the scope of the parties'
strategic relationship.
****
<PAGE> 54
Letter Amendment
Page 3
****
Rates and Commitments
8. The Most Favored Rate obligations of Williams pursuant to the CPA are
hereby deleted.
9. Attached and hereby made a part hereof as Annexes 1 and 2 are the rate
tables for on-net capacity (On-Net Rate Tables) and off-net capacity (Off-Net
Rate Tables), respectively. The On-Net Rate Tables are ****. The Off-Net Rate
Tables are ****. Once effective, these rates shall supersede those in the CPA,
the rates shall apply to all circuits in the relevant category, and all circuits
shall be re-rated each time the rates are reduced.
10. For pricing purposes, the new rate tables define three tiers of cities as
follows: Tier A cities are those cities on the Williams network; Tier B cities
are those cities not on the Williams network which are set forth in Annex 2,
Table 2 (the "Tier B City List"); and all other cities are Tier C cities. All
circuits assigned to Williams pursuant to the Backbone Agreements shall be
deemed within Tier B cities and subject to the rates in Annex 2, Table 1 until
such time as they are groomed onto the Williams network regardless of whether or
not they are listed in the Tier B City List. Any Tier B or Tier C city circuits
shall be subject to the Tier A city On-Net Rate Tables effective immediately
upon the grooming of such circuits onto the Williams network.
****
<PAGE> 55
Letter Amendment
Page 4
****
<PAGE> 56
Letter Amendment
Page 5
****
<PAGE> 57
Letter Amendment
Page 6
****
Dark and Dim Fiber
15. Williams shall offer to Intermedia the opportunity to purchase dark or dim
fiber capacity from Williams. Such purchases, if any, shall be subject to
separate contracts; provided, however that:
****
****
16. ****
Performance Obligations and Credits
17. Performance credits due Intermedia, to the extent applicable, for Williams'
failure to meet On Time Delivery and Mean Time To Repair requirements will be
calculated on a quarterly basis as part of quarterly formal operational reviews.
Williams performance obligations and remedies for Williams' failure to meet such
obligations, to the extent applicable, are set forth in Annex 3 (Service
Ordering and Provisioning Metrics and Remedies) which is attached hereto and
hereby made a part hereof.
Operational Procedures
18. Intermedia and Williams will jointly develop an Operations Manual by May
15, 1999 or as soon as possible thereafter. The Operations Manual, which will be
jointly maintained, will contain all procedures to be used for circuit ordering,
provisioning, testing, acceptance, billing, customer care, fault reporting and
repair. The Operations
<PAGE> 58
Letter Amendment
Page 7
Manual also will include standard provisioning intervals, which the parties
intend to continually improve and periodically adjust accordingly.
Intermedia shall have the right to place orders with alternative providers
pursuant to Annex 2 (Off-Net Rate Tables), by either: (a) instructing Williams
to directly place the orders; or (b) on Williams' behalf under a Letter of
Agency from Williams, placing the orders through a third party provider mutually
agreeable to Williams and Intermedia, with all orders having a minimum term of
one (1) year unless otherwise agreed to by the parties on an individual case
basis.
Quarterly Planning Reviews
19. Formal quarterly planning reviews will be established. At these reviews,
Intermedia will provide Williams with its latest capacity forecast, and Williams
will provide Intermedia with its latest build program forecast.
Grooming Procedures
20. Intermedia and Williams will jointly develop and implement a grooming
program for calendar year 1999 with the objective of moving off-net circuits
onto the Williams network as quickly as possible. The requirements and timing of
the grooming program will be based on availability of on-net capacity and
interconnects between Intermedia's Points of Presence ("POP's") and Williams'
POP's. Under the grooming program, Intermedia will be responsible for placing
firm orders for on-net capacity, migrating the traffic and placing cease orders
for the associated off-net circuits. The existing management fee (Professional
Services) structure will be used to meet additional resource requirements.
Interconnect Program
21. Intermedia and Williams shall establish permanent interconnects between
their POP's as set forth in Annex 4 (Interconnect Cities Programmed for 1999)
which is attached hereto and hereby made a part hereof. The parties will agree
on a method of establishing the permanent interconnects and their approximate
cost before substantial work begins on establishing the permanent interconnects.
****
Additional interconnects will be determined during the formal quarterly planning
reviews (as described in paragraph 19, above) and will be subject to the process
outlined above.
<PAGE> 59
Letter Amendment
Page 8
****
****
Other Opportunities
23. Intermedia and Williams will in good faith explore other opportunities of
potential mutual benefit, including establishing a common ILEC collocation
program, the sharing of lab facilities for vendor equipment assessment, switched
voice services between the parties, and modifications to the parties' Master
Services Agreement for IXC Enhanced Data Transport Services.
If this Amendment accurately reflects our agreement to modify the CPA, please
countersign this letter below. Facsimile copies of this Amendment executed in
counterparts shall be deemed legally binding between the parties.
Sincerely,
INTERMEDIA COMMUNICATIONS INC.
By: /s/ RICHARD W. MARCHANT
-----------------------
Richard W. Marchant
Senior Vice President
Engineering
ACCEPTED AND AGREED TO:
WILLIAMS COMMUNICATIONS, INC.
By: /s/ FRANK SEMPLE
-----------------------
Frank Semple
President, Williams Network
<PAGE> 60
Letter Amendment
Page 9
ANNEXES
ANNEX 1 On-Net Rate Tables
ANNEX 2 Off-Net Rate Tables
ANNEX 3 Service Ordering and Provisioning Metrics and Remedies
ANNEX 4 Interconnect Cities Programmed for 1999
ANNEX 5 Ancillary Charges
ANNEX 6 Portability
<PAGE> 61
IN CONFIDENCE TO INTERMEDIA AND WILLIAMS
****
Page 1
<PAGE> 62
IN CONFIDENCE TO INTERMEDIA AND WILLIAMS ANNEX 1
Table 2 Tier A City List
<TABLE>
<S> <C> <C> <C>
Baltimore, MD. Denver, CO. New York, NY. Sacramento, CA.
Baton Rouge, LA. Detroit, MI. Miami, FL. Raleigh, NC.
Birmingham, AL. Greensboro, NC. Minneapolis, MN. San Diego, CA.
Boston, MA. Hartford, CT. Nashville, TN. San Francisco, CA.
Atlanta, GA Houston, TX. Newark, NJ. South Bend, IN.
Charlotte, NC. Jackson, MI. Oklahoma City, OK. Spartanburg, SC.
Chicago, IL. Kansas City, MO. Omaha, NE. St. Louis, MO.
Cleveland, OH. Indianapolis, IN. Orlando, FL. Tampa, FL.
Colorado Springs, CO. Las Vegas, NV. Philadelphia, PA. Toledo, OH.
Columbia, SC. Los Angeles, CA. Pittsburgh, PA. Tulsa, OK.
Dallas, TX. New Orleans, LA. Richmond, VA. Washington, D.C.
</TABLE>
4/23/99 Page 2
<PAGE> 63
IN CONFIDENCE TO INTERMEDIA AND WILLIAMS ANNEX 2
OFF-NET RATE TABLES
TABLE 1 - Off-net DS0 Equivalent Capacity Price Table for Tier B cities
****
Further Rate reductions for year 2002 and beyond will be established as
described in Paragraph 13 of the Amendment.
TABLE 2 - Tier B City List
<TABLE>
<CAPTION>
CITY STATE CITY STATE CITY STATE CITY STATE CITY STATE CITY STATE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ABILENE TX CHICAGO IL FT PIERCE FL LODI CA PEORIA IL SHREVEPORT LA
AKRON OH CINCINNATI OH FTN BEACH FL LONG BEACH CA PERRYMAN MD SIOUX FALLS SD
ALBANY GA CIRCLE CITY AZ FT WAYNE IN LONGVIEW TX PHOENIX AZ SMYRNA GA
ALBANY NY CLEARWATER FL FT WORTH TX LOS ANGELES CA PHILADELPHIA PA SOUTH BEND IN
ALBUQUERQUE NM CLEVELAND OH GAINESVILLE FL LOUISVILLE KY PITTSBURGH PA SOUTHFIELD MI
ANARBOR MI CLIMAX MI GAITHERSBURG MD LYNCHBURG VA PLANO TX SPARTANBURG SC
ARLINGTON VA COCKEYSVILLE MD GALION OH LYNN HAVEN FL PLEASANTON CA SPRINGFIELD IL
ASHEVILLE NC COCO FL GARDEN CITY NY MACON GA PORTLAND ME SPRINGFIELD MO
ATLANTA GA COLLEGE PARK MD GARY IN MAPLEWOOD MN POTTSTOWN PA ST AUGUSTINE FL
AUBURN CA COLORADO SPRINGS CO GIBSONIA PA MARTINSBURG WV POUGHKEEPSIE NY ST JOSEPH MO
AUGUSTA GA COLUMBIA MO GLENDALE CA MC CLEAN VA PROVIDENCE RI ST PAUL MN
AUSTIN TX COLUMBIA SC GRAND JUNCTION CO MC COMB OH PROVO UT ST PETERSBURG FL
AVON PARK FL COLUMBUS IN GREENSBORO NC MC MINNVILLE TN PUEBLO CO ST LOUIS MO
BAKERSFIELD CA COLUMBUS OH GREEN BAY WI MELBOURNE FL RALEIGH NC STAMFORD CT
BALTIMORE MD COMPTON CA GREENVILLE SC MEMPHIS TN RAMSEY NJ STEVENS POINT WI
BARTLESVILLE OK CONCORD NC GULFPORT MS MERCERVILLE NJ REDDING CA STOCKTON CA
BATON ROUGE LA CONOGA PARK CA HACKENSACK NJ MIDLAND TX REDMOND VA STORM LAKE IA
BEAUFORT SC CORPUS CHRISTI TX HAMPTON VA MILWAUKEE WI REDWOOD CITY CA STUART FL
BEAUMONT TX CULPEPPER VA HARLINGEN TX MOBILE AL RENO NV SUMMIT IL
BEAVERTON OR DALLAS TX HARTFORD CT MONTGOMERY AL RESTON VA SUNNYVALE CA
</TABLE>
4/23/99 PAGE 1
<PAGE> 64
ANNEX 2
IN CONFIDENCE TO INTERMEDIA AND WILLIAMS
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BELLEFONTAINE OH DANVILLE VA HARTWELL GA MORRISTOWN NJ RIALTO CA SYRACUSE NY
BELLEVUE WA DAVENPORT IA HAYWARD CA MOUNTAIN VIEW CA RICHMOND CA TACOMA WA
BELLINGHAM WA DAVIS CA HICKSVILLE NY NAPERVILLE IL RICHMOND VA THOUSAND OAKS CA
BELPRE OH DAYTON OH HIGHPOINT NC NASHUA NH RIVERDALE IL TOLEDO OH
BENSENVILLE IL DAYTONA BEACH FL HILBURN NY NASHVILLE TN ROANOKE AL TOPEKA KS
BEVERLY HILLS CA DEARBORN MI HOLLYWOOD CA NATICK MA ROCHESTER NY TRENTON NJ
BILLERICA MA DENVER CO HOUSTON TX NEW BRIGHTON MN ROCKVILLE MD TROUTVILLE VA
BINGHAMPTON NY DES MOINES IA HOPEWELL VA NEW BRUNSWICK NJ ROSEMAYNE OH TROY MI
BIRMINGHAM AL DETROIT MI INDIANAPOLIS IN NEW ORLEANS LA ROSEMADE CA TULSA OK
BIRMINGHAM MI DOWNER'S GROVE IL IOWA CITY IA NEW PALESTINE IN ROSEVILLE CA UTICA NY
BLOUNTSTOWN FL DOUGLASVILLE GA IRVING TX NEW YORK NY RUTHERFORD NJ VAN NUYS CA
BOCA RATON FL DUNWOODY GA JACKSON MI NEWARK NJ RYNEX NY VENTURA CA
BOISE ID DURHAM NC JOHNSON CITY TN NORFOLK VA SACRAMENTO CA VERO BEACH FL
BOSTON MA EDISON NJ JOPLIN MO NORTH DADE FL SALINAS CA WACO TX
BOULDER CO EL PASO TX KANSAS CITY MO NORTH ROYALTON OH SALISBURY CT WALNUT CREEK CA
BOUND BROOK NJ EL SEGUNDO CA KING OF PRUSSIA PA NORTH SACRAMENTO CA SAN ANTONIO TX WALTHAN MA
BROOK PARK OH EL TORO CA KIRKLAND WA OAK RIDGE TN SAN BRUNO CA WARREN MI
BUFFALO NY ELK GROVE IL KNOXVILLE TN OAKBROOK IL SAN CARLOS CA WARWICK NY
BURBANK CA EUCLID WI LACEY WA OCEANSIDE CA SAN DEIGO CA WASHINGTON DC
BURLINGTON NC EVANSVILLE IN LAKE CHARLES LA OKLAHOMA CITY OK SAN JOSE CA WATERLOO IA
BURLINGTON VT EVERETT WA LAKELAND FL OMAHA NE SANFORD NC WAYNE PA
CAMBRIDGE MA FAIR OAKS CA LANCASTER PA ONTARIO CA SANTA ANA CA WAYENSBORO VA
CARMEL IN FAIRFIELD CA LAS CRUCES NM ORANGEBURG SC SANTA BARBARA CA WEST ORANGE NJ
CARVALLIS OR FARMINGDALE BY LAS VEGAS NV OREGON IL SANTA CLARA CA WHEELING IL
CEDAR RAPIDS IA FLINT MI LAUREL SPRINGS NJ ORLANDO FL SANTA FE NM WHIPPANY NJ
CENTERVILLE VA FLORENCE SC LEBANON OH PALMDALE CA SANTA MARIA CA WHITE PLAINS NY
CHAMPAIGN IL FOLSOM CA LEMARS IA PALO ALTO CA SANTA MONICA CA WICHITA KS
CHAPEL HILL NC FOSTORIA OH LEXINGTON KY PAOLI PA SANTA ROSA CA WILLIAMSBURG VA
CHARLOTTE NC FRAMINGHAM MA LINCOLN NE PARK RIDGE IL SARASOTA FL WILMINGTON DE
CHARLOTTESVILLE VA FREDERICKSBURG VA LITTLE ROCK AR PAWTUCKET RI SAVANNAH GA WINCHESTER VA
CHARLTON MA FREMONT CA LITTLETON CO PEMBOKE NC SCHAUMBURG IL WINTER HAVEN FL
CHATTANOOGA TN FT LAUDERDALE FL LIVINGSTON NJ PENSACOLA FL SHERMAN OAKS CA WOODBRIDGE VA
WORCESTER MA
YORK PA
</TABLE>
4/23/99
Page 2
<PAGE> 65
IN CONFIDENCE TO INTERMEDIA AND WILLIAMS ANNEX 2
TABLE 3 - Off-net Capacity Price Table for Tier C cities
****
Notes:
1. The rates in Table 1 are applied to all capacity between:
a) Tier B cities listed in Table 2 above
b) Tier A cities (on-net) and Tier B cities
c) All assigned circuits provided through the Backbone Agreements (except
for the IFN FPL and MCI Sonet circuits), until migrated on-net
2. The rates in Table 3 are applied to all capacity between:
a) Tier C cities
b) Tier C cities and Tier B cities
c) Tier C cities and Tier A cities
3. All capacity will be provisioned on-net as far as geographically possible in
order to minimize off-net mileage.
4. Tier B cities may be duplicative of Tier A cities. In the event that
Williams is unable to provision an order from Intermedia for a circuit
between Tier A cities, for example, due to lack of capacity, Intermedia may
re-order the circuit with the request it be provisioned off-net, in which
case it will be treated as a Tier B or Tier C circuit, as applicable.
5. Further Tier B cities may be added to the Net in Table 2 by mutual agreement.
6. Rates for year 2002 and beyond will be established as described in Paragraph
13 of the Amendment.
7. The following circuits are subject to cost (pass-through) pricing until
migrated on-net: MCI SONET circuits and IFN FPL circuits
8. Ancillary Charges and Monthly Minimums of $50 DS-0, $250 DS-1, and $2,000
DS-3 Apply. The minimums for all OC services are ICB
4/23/99 Page 3
<PAGE> 66
SERVICE ORDERING AND PROVISIONING METRICS AND REMEDIES
****
<PAGE> 67
****
<PAGE> 68
****
<PAGE> 69
****
<PAGE> 70
SERVICE ORDERING AND PROVISIONING METRICS AND REMEDIES
ANNEX 3
****
<PAGE> 71
****
<PAGE> 72
ANNEX 4
INTERCONNECT CITIES PROGRAMMED FOR 1999
<TABLE>
<CAPTION>
CITY STATE TARGET DATE Note
<S> <C> <C> <C>
Albany New York TBD *
Atlanta Georgia Jun-99
Boston Massachusetts TBD *
Chicago Illinois Mar-99
Cincinatti Ohio TBD *
Cleveland Ohio TBD *
Dallas/Fort Worth Texas Apr-99
Denver Colorado TBD *
Houston Texas TBD *
Jacksonville Florida Apr-99
Kansas City Missouri Jul-99
Los Angeles California Apr-99
Miami Florida Sep-99
Minneapolis Minnesota TBD *
Nashville Tennessee TBD *
New York New York May-99
Orlando Florida Aug-99
Philadelphia Pennsylvania TBD *
Phoenix Arizona TBD *
Pittsburgh Pennsylvania TBD *
Raleigh North Carolina Apr-99
Richmond Virginia TBD *
Salt Lake City Utah TBD *
San Francisco California Aug-99
St. Louis Missouri Jun-99
Tallahassee Florida TBD *
Tampa Florida Aug-99
Washington DC Apr-99
</TABLE>
Note: * These interconnects and dates are under review
Based on our discussions the following cities have been removed from the
interconnect list
Birmingham Alabama
Indianapolis Indiana
Memphis Tennessee
New Orleans Louisiana
<PAGE> 73
****
<PAGE> 74
****
<PAGE> 75
****
<PAGE> 76
ANNEX 6
****
[To be provided by Williams]
<PAGE> 77
AMENDMENT NO. 1
THIS AMENDMENT ("Amendment") is made and entered into effective this 1st day of
August, 1998, by and between WILLIAMS COMMUNICATIONS, INC. ("Grantor")
and INTERMEDIA COMMUNICATIONS INC. ("Purchaser").
WHEREAS, Grantor and Purchaser are parties to that certain Capacity Purchase
Agreement entered into as of January 5, 1998, (the "Agreement"); and
WHEREAS, Grantor and Purchaser desire to amend the Agreement; and
NOW, THEREFORE in consideration of the foregoing premises and mutual promises
and covenants of the parties hereto, the receipt and sufficiency of which is
hereby acknowledged, Grantor and Purchaser agree to amend the Agreement as
follows:
1. The definition of "Due Date" in Section 1.2, "Defined Terms" shall be
amended to read as follows:
"Due Date": the twenty-third (23rd) of the month following the month in
which an invoice is issued for Circuits under the Backbone Agreements, or the
last day of the month following the month in which an invoice is issued for
On-Net Circuits; provided that the Purchaser's payments of the Non-Recurring and
Monthly Recurring Charges shall be received by the Grantor in immediately
available funds.
2. Except as specifically amended herein, all terms and conditions and
provisions contained in the Agreement shall remain unchanged and in full force
and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment on the day and year
first above set forth.
WILLIAMS COMMUNICATIONS, INC. INTERMEDIA COMMUNICATIONS INC.
/s/ David K. Parrack /s/ Richard Marchant
- ----------------------------------- -----------------------------------
(SIGNATURE) (SIGNATURE)
David K. Parrack Richard Marchant
- ----------------------------------- -----------------------------------
(PRINT) (PRINT)
Director, Accounting Services Vice President, Engineering
- ----------------------------------- -----------------------------------
(TITLE) (TITLE)
<PAGE> 1
Redacted portions have been marked with asterisks (****). Confidential treatment
has been requested for the redacted portions. The confidential redacted portions
have been filed separately with the Securities and Exchange Commission.
EXHIBIT 10.26
CONFIDENTIAL TREATMENT
SETTLEMENT AND RELEASE AGREEMENT
This SETTLEMENT AND RELEASE AGREEMENT (the "AGREEMENT") is made and
entered into as of the 1st day of July, 1998 (the "EFFECTIVE DATE"), by and
between WorldCom Network Services, Inc. ("WORLDCOM") and Williams
Communications, Inc. ("WILLIAMS").
RECITALS:
A. WilTel, Inc. (now known as WorldCom Network Services, Inc.) and
Vyvx. Inc. (now known as Williams Communications, Inc.) previously entered into
that certain System Use and Service Agreement dated effective as of January 1,
1994 (the "SUSA") and that certain Statement of Settlement dated December 23,
1996 (the "SETTLEMENT STATEMENT").
B. Certain disputes have arisen between the parties under the SUSA, the
Settlement Statement and with respect to certain other matters.
C. On or about March 20, 1998, Williams filed a Petition for
Declaratory Relief, Money Damages, and Other Relief (the "PETITION") in a case
styled Williams Communications, Inc. v. WorldCom Network Services, Inc., Case
No. CJ 98-1386 (the "LAWSUIT") alleging, among other things, WorldCom's failure
to pay charges for services provided and other breaches of the SUSA and
Settlement Statement.
D. On or about May 4, 1998, WorldCom filed an Answer and a Counterclaim
in the Lawsuit (collectively referred to as the "ANSWER AND COUNTERCLAIM")
alleging, among other things, Williams' failure to pay charges for services
provided and other breaches of the SUSA and the Settlement Statement.
E. WorldCom denies all of Williams' contentions described in the
Petition and Williams denies all of WorldCom's contentions described in the
Answer and Counterclaim.
F. The parties hereto have determined that it is in their respective
best interests to settle the Lawsuit and certain other disputes currently
existing between the parties upon the terms and conditions set forth in this
Agreement.
<PAGE> 2
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, WorldCom and Williams agree as
follows:
1. APPLICABLE PARTIES. Unless otherwise specifically defined
differently herein, references herein to "WorldCom" and "Williams" will be
deemed to include such parties and all parties previously, currently or in the
future Controlling, Controlled by or under common Control with such party. For
purposes of this Agreement, "CONTROL", whether used as a noun or a verb, means
to have the power, directly or indirectly, to cause the direction of the
management or policies of another party, whether through the ownership of voting
securities, by contract, agency or otherwise.
2. WILLIAMS FIBER.
(A) Williams and WorldCom acknowledge Williams' ownership of one (1)
single fiber (with continuation of protection switching for Williams
as described in Subsection 4.b. of Exhibit E, System Service
Statement, to the SUSA, the Settlement Statement and subject to
Paragraph 6 below) on the WilTel Network pursuant to the SUSA and
the Settlement Statement and defined therein as the "VYVX FIBER".
The "WILTEL NETWORK" is depicted graphically on Attachment 1 hereto
and consists of approximately 9,700 route miles. In lieu of any past
or future rights Williams may have or may claim to have to purchase
any additional fiber whatsoever under the SUSA, including but not
limited to Section 2.09 thereof, or the SOS or any other agreement,
which rights, if any, are extinguished and relinquished by Williams,
Williams and WorldCom agree that Williams has a right to purchase a
single fiber strand on those domestic buildouts (but not
acquisitions or mergers) to the WilTel Network (which buildout
routes are shown on Attachment 2 hereto and which consist of
approximately 7,721 route miles) ("BUILD-OUT FIBER"). The Network
routes depicted on Attachment 1 or described on Attachment 2 total
approximately 17,421 route miles. The Vyvx Fiber and the Build-Out
Fiber are hereinafter collectively and in total referred to as the
"WILLIAMS FIBER").
(B) Williams agrees that, except as provided in Subsection 2(A),
above it does not have and does and will not claim any further
rights to purchase any additional fiber on the WilTel Network, or
any fiber on any network owned, operated or affiliated with WorldCom
or any of its
2
<PAGE> 3
subsidiaries, affiliated or related entities, or any
predecessor or successor network or any network of entities
previously, currently or in the future Controlling, Controlled by or
under common Control with WorldCom, without regard to whether such
entity or network was obtained by acquisition, domestic expansion,
international expansion or otherwise.
(C) The purchase price for the Build-Out Fiber will be as set forth
in Section 2.09 of the SUSA to be modified as provided in Section 4
below (the "WILLIAMS FIBER CHARGE"). WorldCom agrees to give
Williams the final Williams Fiber Charge with respect to the routes
shown on Attachment 2 the later of (a) August 1, 1998, or (ii)
ninety (90) days following completion of such routes. Provided,
however, in determining the Williams Fiber Charge with respect to
such routes, WorldCom will exclude fifteen percent (15%) of the
fibers used for protect channels in calculating the total number of
fibers which are to be divided into one in order to establish the
percentage used to multiply by the net book value. Williams will
then have sixty (60) days after receipt of such final Williams Fiber
Charge to elect whether or not to purchase such Build-Out Fiber
subject to the right to dispute such Williams Fiber Charge as
described in Subsection 4(C) below. In the event Williams elects to
purchase a Build-Out Fiber on any route, Williams agrees to pay
WorldCom the applicable Williams Fiber Charge the later of (i)
thirty (30) days following such election, or (ii) three (3) days
following delivery of the Build-Out Fiber to Williams which
Build-Out Fiber meets generally accepted industry standards or the
Build-Out Fiber is used by Williams. In the event Williams elects
not to purchase a Build-Out Fiber on a specified route or fails to
respond within such sixty-day period, Williams will be deemed to
have waived its right to purchase a Build-Out Fiber on such route.
3. RESTRICTIONS OF WILLIAMS FIBER. WorldCom and Williams agree that
through and including June 30, 2001, Williams will restrict its usage and will
reasonably restrict its customers' usage of the Williams Fiber only to video and
radio transmission service, Internet Services (as further described herein),
and/or related applications including but not limited to graphic, visual
imaging, interactive and multimedia (collectively, the "PERMITTED SERVICES").
Further, during such period, without WorldCom's written consent, Williams will
not use the Williams Fiber for or in conjunction with cellular and personal
communications service applications or long distance data and voice applications
unless the data and voice applications are incidental to the Permitted Services
described above. After June 30, 2001, such contractual
3
<PAGE> 4
restrictions on Williams and its customers' use of the Williams Fiber will be
lifted and Section 4.04(a) of the SUSA (as modified herein) shall be of no
further force or effect. For purposes of this Agreement, "Internet Services"
shall mean the transmission between computers of data communications over the
public and private interconnected network of networks (or a component thereof)
known as the Internet and using a common network protocol which as of the date
of this Agreement is predominantly TCP/IP (Transmission Control
Protocol/Internet Protocol) and which may be over an ATM/SONET infrastructure or
its equivalent but shall specifically exclude voice or facsimile public switched
telephone network ("PSTN") calls.
4. WORLDCOM FIBER.
(A) Williams agrees to promptly allow WorldCom to purchase a single
fiber (or, if Williams is unable to transfer ownership using
reasonable commercial efforts, an indefeasible right of use ("IRU")
of the same, dependent upon the rights Williams is legally and
contractually able to transfer) (the "WORLDCOM FIBER"), on the fiber
builds identified in the route map shown on Attachment 3 hereto
which routes comprise approximately 9,701 route miles. This route
map includes routes that are planned but not yet constructed as well
as routes that are partially complete and nearing completion. The
purchase price shall be as reflected in Section 2.09 of the SUSA to
be modified to be reciprocal ****. Except as otherwise specifically
set forth herein, the other contractual terms applying to WorldCom
and governing the maintenance, operation and other issues related
to the WorldCom Fiber shall be the same as contained in the SUSA
and/or Settlement Statement and applying to Williams, unless the
parties otherwise expressly provide. It is expressly understood by
the parties that the WorldCom Fiber will not be subject to the use
limitations or restrictions set forth in Section 4.04(a) of the
SUSA such as those attendant to the Williams Fiber described in
Section 3 above.
4
<PAGE> 5
(B) Williams agrees to give WorldCom estimates of the WorldCom Fiber
Charge on a route by route basis when available and agrees to give
WorldCom the final WorldCom Fiber Charge within ninety (90) days
following completion of any route, except with respect to the
Dallas, TX-Washington, D.C. route where Williams is not required to
make one fiber available until the earlier of (i) December 31, 1999,
or (ii) the expiration of any existing obligations it may have with
IXC Communications, Inc. concerning the transfer of one fiber or an
IRU on such route. WorldCom will then have sixty (60) days after
receipt of such final WorldCom Fiber Charge to elect whether or not
to purchase such WorldCom Fiber subject to the right to dispute such
final WorldCom Fiber Charge as described in Subsection 4(C) below.
In the event WorldCom elects to purchase a WorldCom Fiber on any
route, WorldCom agrees to pay Williams the WorldCom Fiber Charge the
later of (i) thirty (30) days following such election, or (ii) three
(3) days after delivery of the fiber to WorldCom which WorldCom
Fiber meets generally accepted industry standards, or the WorldCom
Fiber is used by WorldCom. In the event WorldCom elects not to
purchase a WorldCom Fiber on a specified route or fails to respond
within such sixty-day period, WorldCom will be deemed to have waived
its right to purchase a WorldCom Fiber on such route. In the event
Williams fails (for whatever reason) to build any of the routes
shown as "Future Network Routes" in Attachment 3, Williams agrees to
offer WorldCom a fiber or fibers ("OTHER FIBERS") on other routes
acceptable to WorldCom that Williams is building (whether
individually or jointly with other entities) consisting of a similar
number of route miles to the route miles not completed by Williams
but in no event will the total number of route miles which WorldCom
is entitled in the aggregate exceed 9,701 route miles unless
otherwise agreed to in writing by the parties. Williams' obligation
to offer Other Fibers to WorldCom and WorldCom's obligation to
respond to such offer shall also be governed by the conditions
applicable to the offer and acceptance of the WorldCom Fiber.
Williams' obligation to offer WorldCom Other Fibers pursuant to this
Subsection (B) shall expire on June 30, 2003.
(C) ****
5
<PAGE> 6
****
(D) WorldCom's purchase of fiber pursuant to this Section 4 shall
not include purchase of any rights of protection services from
Williams and shall not include optronics, but instead shall be
"dark" fiber.
5. MIGRATION OF EXISTING SERVICES. WorldCom and Williams will create a
migration team that will cooperate to complete migration of Williams to a single
fiber onto the Williams Fiber described in Section 2 above. The migration will
be completed as soon as possible but in no event after June 30, 1999, unless
otherwise mutually agreed. The intent of the parties is to complete the
migration substantially sooner than June 30, 1999. WorldCom will provide
reasonable support for that migration including power, rollover fiber and
required space. During the reconfiguration process there will be no additional
charge for the use of additional fiber necessary to accommodate the
reconfiguration for traffic prior to completion of reconfiguration and no
charge shall be due for delay in the reconfiguration which is due to lack of
reasonable support for the reconfiguration by WorldCom. In the event either
party determines that the other party is failing to support the migration effort
described in this Section 5, such party shall notify the other party (i) in the
case of Williams, Howard Janzen, and (ii) in the case of WorldCom, Charles
Cannada, specifically describing the lack of support
6
<PAGE> 7
encountered by such party and such parties shall resolve such conflict through
such representatives.
6. PROTECTION SWITCHING. Williams shall use reasonable best efforts to
eliminate the need for WorldCom's obligation to provide protection switching on
or before June 30, 2001. Service Costs payable under the SUSA will be reduced
commensurately on a system segment by system segment basis when Williams has
notified WorldCom that a particular system segment no longer requires protection
service. In no event will WorldCom be under an obligation to continue providing
protection switching on any system segment after June 30, 2002, unless otherwise
mutually agreed.
7. SYSTEM SEGREGATION. The parties agree to make the necessary
amendments to the WilTel Collocate Agreement dated August 21, 1994 ("Collocate
Agreement") which was executed in connection with the SUSA to allow each party
to segregate its single fiber from the other's network to the extent
commercially practicable. It is the intent of the parties that WorldCom be able
to manage the WorldCom Fiber and Williams be able to manage the Williams Fiber
as systems independent of the network in which they are collocated to the
maximum extent commercially practicable. The parties also agree that WorldCom's
collocate rights and obligations for the WorldCom Fiber shall be governed by the
terms and conditions of the Collocate Agreement.
8. ADDITIONAL FIBER AND OTHER SERVICES. Each party will consider,
without obligation, requests by the other party to purchase additional fiber or
other products or services.
9. ADDITIONAL PURCHASE PRICE/VIDEOCONFERENCING CREDITS. Section 2.03 of
the SUSA relating to the Additional Purchase Price and videoconferencing credits
is hereby canceled and deleted including all alleged credits outstanding.
10. WAIVER OF CERTAIN CLAIMS AND AMOUNTS OWED; MUTUAL RELEASE.
(A) WorldCom and Williams agree that those claims which are
specifically set forth on Attachment 5 hereto and any related
finance charges or other penalty amounts are hereby waived (the
"RELEASED CLAIMS").
7
<PAGE> 8
(B) Notwithstanding Section 10.20 of the SUSA, from and after the
Effective Date hereof, with respect to charges for "Common
Facilities Cost" or "Costs" provided under the SUSA, Williams and
WorldCom hereby agree to pay backbills which are properly
substantiated so long as the charges do not relate to periods more
than one year prior to the date the invoice is sent. WorldCom and
Williams hereby also agree to pay backbills that relate to third
party charges, even after the expiration of the one-year period, so
long as the party invoices the third party charges to the other
party within six months of the date such party is first invoiced for
those third-party charges.
(C) Other than with respect to the Released Claims, if applicable,
this Agreement shall not affect or release any amounts owing under
agreements not related to the SUSA or the Settlement Statement such
as non-SUSA agreements for capacity service or agreements between
the parties even if such capacity has been provided to WorldCom over
the Williams Fiber.
(D) Nothing in this Section 10 of the Agreement is intended to
waive, release or modify any current or future obligation under the
SUSA or the Settlement Statement, except as otherwise provided for
in this Agreement.
(E) Upon execution hereof, WorldCom, on behalf of itself and its
officers, directors, partners, employees, agents, stockholders,
attorneys, predecessors, assigns, servants, insurers, and all
persons, partnerships, corporations or other entities acting in
concert or participating with them (hereinafter collectively
referred to the "WORLDCOM GROUP" hereby releases and discharges
fully and forever Williams and its officers, directors, partners,
employees, agents, stockholders, attorneys, predecessors, assigns,
servants, insurers, and all persons, partnerships, corporations or
other entities acting in concert or participating with them
(hereinafter collectively referred to the "WILLIAMS GROUP") of and
from any and all liabilities, claims, demands for damages, costs
(including, without limitation, attorneys' fees), indemnification,
contribution or any other thing whatsoever relating to the Released
Claims.
(F) Upon execution hereof, the Williams Group hereby releases and
discharges fully and forever the WorldCom Group of and from any and
all liabilities, claims, demands for damages, costs (including,
without
8
<PAGE> 9
limitation, attorneys' fees), indemnification, contribution or any
other thing whatsoever relating to the Released Claims.
(G) This Agreement effects the settlement of claims which are denied
and contested by the respective parties and nothing contained herein
shall be construed as an admission of liability by or on behalf of
any party, all of which expressly deny any such liability.
(H) Nothing in this Agreement shall have effect on any rights or
claims which any party may have against any other party or person
not released hereby.
(I) Each party covenants and agrees not to seek or initiate any
administrative proceeding, bring any claim, or assert any cause of
action released hereby against the other party concerning the
Lawsuit, the SUSA, the Settlement Statement or the Released Claims
arising prior to the Effective Date, and further covenants and
agrees that this Agreement shall be a bar to any such proceeding,
claim or cause of action thereon by any party hereto against the
other party.
11. ****
12. CONSENT TO ASSIGNMENT. WorldCom hereby (i) consents to the
assignment of the Intermedia contracts requested to date, (ii) agrees to
accommodate Williams' request for connections to Internet facilities at
Washington D.C. MAE or any other MAE facility in accordance with standard terms
and conditions applicable thereto, except as otherwise negotiated, and (iii)
agrees to accommodate Williams' request dated June 4, 1998, to the extent
legally permissible, for the assignment of certain telecom rights, pursuant to
Section 9 of the MidWest Cross Master Agreement dated December 11, 1986 between
Williams Pipeline Company and Williams Telecommunications Company (now
WorldCom).
13. NON-SOLICITATION. Without the other party's prior written consent,
WorldCom and Williams mutually agree not to solicit the other's employees
located in Tulsa County, Oklahoma and those counties contiguous to Tulsa County
for a period of five (5) years commencing July 1, 1998. Further, commencing
August 1, 1998 and continuing for a period of one (1) year thereafter, in the
event either party hires or engages, directly or indirectly, whether as an
employee, agent, contractor, consultant or otherwise, a Necessary Employee (as
defined herein) of the other party located in Tulsa County, Oklahoma and those
counties contiguous to Tulsa County and the other party does not consent in
writing to such hiring, the party hiring such employee, directly or indirectly,
agrees to pay the other party five (5) times the greater of (i) such employee's
annual total compensation package ****.
9
<PAGE> 10
****
14. DISMISSAL OF LAWSUIT. On or before July 15, 1998, the parties agree
to dismiss with prejudice the Lawsuit, with each party to bear its own costs and
attorney fees. Further, the parties agree to jointly issue a press release with
respect to the dismissal of the Lawsuit and will not, without the other party's
consent make any further announcements, whether public or private, concerning
the dismissal of the Lawsuit or the settlement thereof, except as required by
law. However, the parties may state that the settlement was beneficial to both
parties.
15. REPRESENTATIONS, WARRANTIES AND COVENANTS.
(A) Each party represents and warrants to the other party that it
has received independent legal advice from attorneys of its choice
with respect to the advisability of making the settlement and
release provided herein, and with respect to the advisability of
executing this Agreement, and prior to the execution of this
Agreement, its respective attorneys have reviewed this Agreement in
full and have made all desired changes thereto.
10
<PAGE> 11
(B) Except as set forth herein, there have been no other
representations, agreements or understandings between the parties
hereto, relating to this Agreement or the subject matter hereof.
(C) The terms of this Agreement are contractual, not a mere recital,
and are the result of arms-length negotiations between the parties
hereto. Each party agrees that the rules of construction to the
effect that any ambiguities in this Agreement are to be resolved
against the drafting party shall not be employed in the
interpretation of this Agreement.
(D) This Agreement has been carefully read by, the context hereof is
known and understood by, and is signed freely by the parties.
16. GENERAL PROVISIONS.
(A) No provision hereof may be waived unless in writing signed by
the party to be charged. Waiver of any one provision herein shall
not be deemed to be a waiver of any other provision herein. This
Agreement may be modified or amended only by a written agreement
executed by both parties.
(B) This Agreement shall be governed by and construed under and in
accordance with the internal laws (without regard to the laws of
conflicts) of the State of New York. Any action brought to enforce,
apply or interpret this Agreement or to resolve any dispute arising
out of or relating in any way to this Agreement shall be brought in
the District Court in Tulsa County, Oklahoma (or, if necessary, in
the courts in and for the United States of America for the Northern
District of Oklahoma) and all parties to this Agreement acknowledge
and agree that such courts have jurisdiction and are proper venues.
(C) This Agreement may be executed in one or more counterparts, each
of which shall be an original but all of which, together, shall be
deemed to constitute a single document.
(D) Titles or captions contained in this Agreement are inserted only
as matter of convenience and for reference and in no way define,
limit, extend or describe the scope of this Agreement or the intent
of any provision hereof.
11
<PAGE> 12
(E) Each party represents and warrants to each other that it is the
sole and lawful owner of all right, title and interest in and to
every claim and other matter which the party purports to release
herein and that such party has not heretofore assigned or
transferred, or purported to assign or transfer, to any other person
or entity any claims or other matters herein released.
(F) This Agreement shall inure to the benefit of and shall be
binding upon the predecessors, successors and assigns of the parties
hereto, and each of them. Except with respect to the parties
referenced in Section 1 above, this Settlement Agreement is not
intended to constitute a third party beneficiary contract.
(G) Except as may otherwise be expressly agreed in writing, the
parties hereto agree to bear their own costs and attorneys' fees in
connection with the Lawsuit, the SUSA, the Settlement Statement and
this Agreement.
(H) The warranties and representations of this Agreement are deemed
to survive the execution hereof.
(I) In the event that any of the terms or provisions of this
Agreement are found to be legally unenforceable by a court of
competent jurisdiction, then the remaining terms and conditions, if
capable of substantial performance, shall nevertheless remain in
full force and effect and such unenforceable provisions shall be
deemed to be restated to reflect the original intentions of the
parties as nearly as possible, in accordance with applicable law.
(J) In the event of a breach or threatened breach of this Agreement,
the non-defaulting party shall have the right to seek injunctive
relief without a showing of irreparable harm or injury and without
bond as well as the right to seek specific performance or monetary
damages against the party breaching or threatening to breach this
Agreement.
12
<PAGE> 13
IN WITNESS HEREOF, the parties hereto have approved and executed this
Agreement as of the Effective Date set forth above.
DATED: July 8, 1998 WORLDCOM NETWORK SERVICES, INC.
By:
-----------------------------------
Its:
-----------------------------------
DATED: July 8, 1998 WILLIAMS COMMUNICATIONS, INC.
By:
-----------------------------------
Its:
-----------------------------------
13
<PAGE> 14
ATTACHMENT 1
WILTEL NETWORK
[MAP]
ATTACHMENT 2
ADDITIONAL WILLIAMS ROUTES
Salt Lake City, UT - Seattle, WA/Portland, OR[1,048 Miles]
Salt Lake City, UT - Santa Clara, CA[871 Miles]
Santa Clara, CA - Portland, OR[782 Miles]
Dallas, TX - Houston, TX[269 Miles]
Las Vegas, NV - Phoenix, AR[363 Miles]
Denver, CO - El Paso, TX[749 Miles]
Shreveport, LA - Memphis, TN[340 Miles]
Memphis, TN - Charlotte, NC[722 Miles]
Charlotte, NC - Hamlet, NC[77 Miles]
Cleveland, OH - New York, NY[727 Miles]
Albany, NY - Boston, MA[201 Miles]
Anderson, MO - Cleveland, OH[1,076]
Riverdale, IL - Indianapolis, IN[191 Miles]
Houston, TX - Austin, TX/San Antonio, TX[305 Miles]
14
<PAGE> 15
ATTACHMENT 3
WORLDCOM FIBER NETWORK
Atlanta, GA - Washington, D.C.
Atlanta, GA - Houston, TX
Dallas, TX - Houston, TX
Atlanta, GA - Jacksonville, FL
Jacksonville, FL - Miami, FL
Daytona Beach, FL - Tampa, FL
New York City, NY - Washington, D.C.
New Orleans, LA - Tallahassee, FL
Tallahassee, FL - Miami, FL
Minneapolis, MN - Kansas City, MO
Kansas City, MO - Denver, CO
Denver, CO - Salt Lake City, UT
FUTURE NETWORK ROUTES
Sacramento, CA - Salt Lake City, UT
San Diego, CA - Phoenix, AR
Boston, MA - Albany, NY
Atlanta, GA - Nashville, TN
Nashville, TN - Louisville, KY
Louisville, KY - Cincinnati, OH
Denver, Co - El Paso, TX
Dallas, TX - Nashville, TN
Nashville, TN - Charlotte, NC
Cleveland, OH - Washington, DC.
15
<PAGE> 16
ATTACHMENT 4
COST CATEGORIES TO BE USED IN DETERMINING NET BOOK VALUE
CONSTRUCTION
Contract Labor/Construction Management
Engineering/Surveying/Drafting
Company Labor/Travel
Utilities/Rent to Field Offices and Warehouses
ROW Damages
Inspection
Railroad Flagging
Legal Fees
Bonding
REGENERATION SITES
Site Preparation
AC & DC Power
Buildings/Installation of Pre-Fabricated Buildings
Acquisition of Land/Site
Inspection
Utility Power
Engineering/Surveying/Drafting
Company Labor/Travel
Materials
ROW & PERMITTING (SWAP 0R PURCHASE)
Easement, Permit, License and Zoning Acquisition
Labor & Management of Labor
Environmental Surveys for Permitting
Franchise Fees for City Permitting
Legal Fees
Bonding
16
<PAGE> 17
FIBER CABLE
Fiber Cable and Associated Shipping and Tax
Materials (including conduit)
(NOTE: NET BOOK VALUE WILL ALSO INCLUDE ANY FEES, EXPENSES
AND/OR DAMAGES ASSESSED AGAINST OR INCURRED BY EITHER
ENTITY AFTER THE COMPLETION OF SUCH ROUTE PROVIDED
SUCH FEES, EXPENSES OR DAMAGES ARE PROPERLY
CAPITALIZED IN ACCORDANCE WITH GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES)
17
<PAGE> 18
ATTACHMENT 5
RELEASED CLAIMS
A. As of the Effective Date, the WorldCom Group agrees to release the
following claims it has or may have against the Williams Group:
1. The Total Previous Balance shown on Williams' Invoice dated
05/20/1998 for Account No. 00001476 (the "Williams Invoice") in the
amount of $5,870,694.99.
2. In addition to those claims included in the $5,870,694.89 in item 1,
any claims for "Costs" or "Common Facilities Costs" as defined in
the SUSA for the period prior to July 1, 1997 subject to the
backbill provision described in Subsection 10(B) of the Agreement.
3. All amounts charged by the WorldCom Group relating to Williams
Group's use of a second fiber as described in Mr. Barnett's letter
to Mr. Semple dated March 31, 1998.
4. All charges and amounts due and/or credits for videoconferencing
services provided pursuant to the SUSA or Settlement Statement prior
to the Effective Date.
5. Any claim the Williams Group violated the Non-Competition Agreement
dated January 5, 1995.
6. Any claims specifically alleged in the Lawsuit.
B. As of the Effective Date, the Williams Group agrees to release the
following claims it has or may have against the WorldCom Group:
1. All charges and amounts due for audioconferencing and fax services
provided pursuant to the SUSA or Settlement Statement prior to June
1, 1998, except for a payment due by WorldCom of $909,850 (which
amount Williams represents is for services provided and does not
contain any finance charges or other penalty amounts).
2. All charges and amounts due for videoconferencing services provided
pursuant to the SUSA or Settlement Statement prior to the Effective
18
<PAGE> 19
Date, except for a payment due by WorldCom of $279,551 for
maintenance, repair and set up services associated with
videoconferencing services provided by Williams to WorldCom (which
amount Williams represents is for services provided and does not
contain any finance charges or other penalty amounts.
3. Any claims relating to unfair competition or anticompetitive
conduct.
4. The Waterhouse Securities matter referenced in Mr. Hellwege's
February 19, 1998 letter to Mr. Rich Little.
5. Any Claims specifically alleged in the Lawsuit.
19
<PAGE> 1
EXHIBIT 10.27
UMBRELLA AGREEMENT
[FREEHILL HOLLINGDALE & PAGE]
MLC Centre Martin Place Sydney New South Wales 2000 Australia
Telephone (02) 9225 5000 Int + (61 2) 9225 5000
Facsimile (02) 9322 4000 DX 361 Sydney
Reference: LS:31C
SYDNEY MELBOURNE PERTH CANBERRA BRISBANE SINGAPORE HANOI HO CHI MINH CITY
CORRESPONDENT OFFICE IN JAKARTA
Liability is limited by the Solicitors Scheme under the
Professional Standards Act 1994 (NSW)
<PAGE> 2
UMBRELLA AGREEMENT
DOWNTOWN UTILITIES PTY LIMITED
ACN 082 754 407
WILTEL COMMUNICATIONS PTY LIMITED
ACN 081 547 042
SPECTRUM NETWORK SYSTEMS LIMITED
ACN 001 760 103
CITIPOWER PTY
ACN 064 651 056
ENERGYAUSTRALIA
SOUTH EAST QUEENSLAND ELECTRICITY CORPORATION LIMITED
ACN 078 849 055
WILLIAMS HOLDINGS OF DELAWARE INC
and
WILLIAMS INTERNATIONAL SERVICES COMPANY
<PAGE> 3
TABLE OF CONTENTS
Clause Page
----
1 DEFINITIONS AND INTERPRETATION 2
2 CONDITIONS PRECEDENT 5
3 TERMINATION 8
4 RELATIONSHIP BETWEEN PARTIES 9
5 NOTICES 9
6 GOVERNING LAW JURISDICTION AND SERVICE OF PROCESS 12
7 ILLEGALITY 12
8 GENERAL 12
9 FORCE MAJEURE 15
10 DTU SUBSCRIPTION AGREEMENT 15
<PAGE> 4
THIS AGREEMENT
is made on 1998 between the following parties:
--------------
1. DOWNTOWN UTILITIES PTY LIMITED as trustee under the
Declarations of Trust
ACN 082 754 407
of 570 George Street, Sydney, New South Wales
(DTU)
2. WILTEL COMMUNICATIONS PTY
ACN 081 547 042
with a registered office c/- Baker & McKenzie, Level
26, AMP Centre, 50 Bridge Street, Sydney, New South
Wales
(WILLIAMS)
3. SPECTRUM NETWORK SYSTEMS LIMITED
ACN 001 760 103
of 179 Elizabeth Street, Sydney, New South Wales
(SPECTRUM)
4. CITIPOWER PTY
ACN 064 651 056
of CitiPower House, 624 Bourke Street, Melbourne,
Victoria 3000
(CITIPOWER)
5. ENERGYAUSTRALIA
a statutory SOC under the State Owned Corporation Act
1989 (NSW) of 570 George Street, Sydney, New South
Wales, 2000 (ENERGYAUSTRALIA)
6. SOUTH EAST QUEENSLAND ELECTRICITY CORPORATION LIMITED
ACN 078 849 055
of 150 Charlotte Street, Brisbane, Queensland, 4000
(ENERGEX)
7. WILLIAMS HOLDINGS OF DELAWARE INC a company
incorporated in the State of Delaware, USA of Suite
4100, One Williams Centre, Tulsa, Oklahoma, 74172
(WILLIAMS PARENT)
8. WILLIAMS INTERNATIONAL SERVICES COMPANY a company
incorporated in the State of Nevada, USA of suite
4100, One Williams Centre, Tulsa, Oklahoma 74172
(WILLIAMS INTERNATIONAL)
RECITALS
The Parties have agreed:
A. to enter into the Project Agreements and the Equity
Documents; and
B. that those agreements will come into effect in the manner
set out in this agreement.
<PAGE> 5
THE PARTIES AGREE
in consideration of, among other things, the mutual promises
contained in this agreement:
1 DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
In this agreement:
APPROVALS means such regulatory approvals as may be required
in relation to the execution, delivery and performance of the
Project Agreements or Equity Documents.
ARTICLES means the articles of association of Spectrum.
ASC means Australian Securities Commission.
ASX means Australian Stock Exchange Limited.
BUSINESS DAY means a day other than a Saturday or Sunday on
which banks are open for business in Sydney and Tulsa.
COMMENCEMENT DATE has the meaning set out in clause 2.1.
CONDITIONS PRECEDENT means the conditions set out in clause
2.1.
DECLARATIONS OF TRUST means the declarations of trust to be
executed by DTU in favour of its shareholders.
DTU SUBSCRIPTION AGREEMENT means the Subscription Agreement to
be entered into between Spectrum and DTU by which DTU as
trustee under the Declarations of Trust agrees to subscribe
for ordinary shares and options in Spectrum.
EQUITY DOCUMENTS means the agreements listed in Schedule 1.
GOVERNMENTAL AGENCY means any government or any governmental,
semi-governmental, administrative, fiscal or judicial body,
department, commission, authority, tribunal, agency or entity.
HOLDING COMPANY has the same meaning as in the Corporations
Law.
INSOLVENCY EVENT in relation to a Party means the happening of
one or more of these events:
(a) an application is made to a court for an order that it
be wound up, declared bankrupt or that a provisional
liquidator or receiver or receiver and manager be
appointed, unless the application is withdraw, struck
out or dismissed within 7 days of it being made;
(b) a liquidator or provisional liquidator is appointed;
(c) a resolution is passed or a decision is taken by
anyone to appoint an administrator or there is a
controller in possession or control of any of its
assets;
(d) it is insolvent, as disclosed in its accounts or
otherwise, states that it is insolvent or it is
presumed to be insolvent under any applicable law;
-2-
<PAGE> 6
(e) it becomes an insolvent under administration as
defined in section 9 of the Corporations Law;
(f) as a result of the operation of the Corporations Law,
it is taken to have failed to comply with a statutory
demand;
(g) anything having a substantially similar effect to any
of the events specified above happens to it under the
law of any jurisdiction.
OPTIONS has the meaning set out in the Williams Subscription
Agreement.
PARTY means a party to this agreement.
PREFERENCE SHARES has the meaning set out in the Williams
Subscription Agreement.
PROJECT AGREEMENTS means the agreements listed in schedule 2
and any agreements entered into pursuant to those agreements.
RELATED BODY CORPORATE means "related body corporate" from
time to time, as that term is defined in the Corporations Law.
RESOLUTIONS means all Spectrum shareholder resolutions
necessary to:
(a) approve the allotment to Williams of the Subscription
Shares pursuant to section 623 of the Corporations Law
and any other relevant law or ASX requirement
including Listing Rule 7.1;
(b) approve the exercise of the Options, the conversion of
the Preference Shares, and the issue of ordinary
shares to discharge the cumulative dividend
entitlement in respect of the Preference Shares;
(c) approve the allotment to DTU of the shares and options
under the DTU Subscription Agreement pursuant to
section 623 of the Corporations law and any other
relevant law or ASX requirement;
(d) approve the exercise of the options granted to DTU
under the DTU Subscription Agreement;
(e) if necessary, amend the Articles to facilitate the
issue of the Preference Shares;
(f) change Spectrum's name to a name agreed between DTU
and Williams;
(g) approve the entry into and performance of the
obligations under the Spectrum Shareholders Agreement
by each of the parties thereto, including any of the
transfers of shares, exercise of options or
acquisitions of relevant interests contemplated by
that agreement;
(h) if necessary, approve any change to the nature and
scale of Spectrum's activities under ASX Listing Rule
11.1;
(i) appoint each of 4 persons nominated by Williams and
each of 2 persons nominated by DTU as directors of
Spectrum, in accordance with the Articles and ASX
Listing Rules; and
(j) give effect to the transactions contemplated by this
agreement, the other Equity Documents and the Project
Agreements (including, if necessary, under section
205(10) of the Corporations Law).
-3-
<PAGE> 7
SPECTRUM SHAREHOLDERS AGREEMENT means the agreement to be
entered into between the Utilities, DTU, Williams Parent and
Williams relating to their Shareholdings in Spectrum.
SUBSCRIPTION SHARES has the meaning set out in the Williams
Subscription Agreement.
UTILITIES means Energex, CitiPower and EnergyAustralia.
WILLIAMS SUBSCRIPTION AGREEMENT means the Subscription
Agreement to be entered into between Spectrum and Williams by
which Williams agree to subscribe for converting preference
shares, ordinary shares and options in Spectrum.
1.2 INTERPRETATION
HEADINGS are for convenience only and do not affect
interpretation. The following rules of interpretation apply
unless the context requires otherwise.
(a) The SINGULAR includes the plural and conversely.
(b) A GENDER includes all genders.
(c) Where a WORD or PHRASE is defined, its other
grammatical forms have a corresponding meaning.
(d) A reference to a PERSON includes a body corporate, an
unincorporated body or other entity and conversely.
(e) A reference to a CLAUSE or SCHEDULE is to a clause of
or schedule to this agreement.
(f) A reference to any PARTY to this agreement or any
other agreement or document includes the party's
successors and permitted assigns.
(g) A reference to any AGREEMENT or DOCUMENT is to that
agreement or document as amended, novated,
supplemented, varied or replaced from time to time,
except to the extent prohibited by this agreement or
that other agreement or document.
(h) A reference to any LEGISLATION or to any provision of
any legislation includes any modification or
re-enactment of it, any legislative provision
substituted for it and all regulations and statutory
instruments issued under it.
(i) A reference to a RIGHT or OBLIGATION of any 2 or more
persons confers that right, or imposes that
obligation, as the case may be, jointly and severally.
(j) A reference to CONDUCT includes any omission and any
statement or undertaking, whether or not in writing.
(k) Mentioning anything after INCLUDE, INCLUDES or
INCLUDING does not limit what else might be included.
1.3 BUSINESS DAY
Where the day on or by which any thing is to be done is not a
Business Day, that thing must be done on or by the following
Business Day.
-4-
<PAGE> 8
1.4 INCONSISTENCIES
If there are any inconsistencies between this agreement on the
one hand and any other Equity Document or Project Agreement on
the other hand, then this agreement prevails to the extent of
the inconsistency.
2 CONDITIONS PRECEDENT
2.1 COMMENCEMENT DATE
Commencement Date means the day which is 5 Business Days after
the date on which the last of the following Conditions
Precedent has been satisfied or waived in accordance with
clause 2.3:
(a) (APPROVAL OF THE RESOLUTIONS) Each of the Resolutions
is passed at a general meeting of Spectrum duly
convened with meeting documents in a form and with a
content approved by each of Williams and DTU, such
approval not to be unreasonably withheld.
(b) (FIRB) Either:
(1) (APPROVAL OBTAINED) Williams receives written
advice from the Australian Treasurer under
the Foreign Acquisitions and Takeovers Act
1975 to the effect that the Commonwealth
Government has no objection to the allotment
of the Subscription Shares to Williams under
the Williams Subscription Agreement, the
exercise of the Options, the conversion of
the Preference Shares, or the issue of
Spectrum ordinary shares to Williams to
discharge the cumulative dividend entitlement
in respect of the Preference Shares and the
execution and performance of the Equity
Documents and Project Agreements to which
Williams is a party (APPROVAL MATTERS), and
the notice is either unconditional or imposes
conditions which are not unacceptable to
Williams in its sole discretion; or
(2) (EXPIRY OF WAITING PERIOD) the period
provided under the Foreign Acquisitions and
Takeovers Act 1975, during which the
Treasurer may make an order under the Act
(including an interim order under section 22)
in relation to the Approval Matters passes
without such an order being made or, if an
interim order under section 22 is made, the
subsequent period for making a final order
prohibiting the Approval Matters passes
without a final order being made.
(c) (APPROVALS) All Approvals necessary for the entry into
and implementation of this agreement, the Equity
Documents and the Project Agreements are obtained
including any ASC or ASX modifications necessary for
the passing of the Resolutions.
(d) (SPECTRUM GUARANTEES) Spectrum receiving a guarantee
from each of EnergyAustralia, CitiPower and Energex of
the obligations of DTU under the DTU Subscription
Agreement (with EnergyAustralia, CitiPower and Energex
to each guarantee a proportion of the obligations of
DTU which represents their respective shareholdings in
DTU) and from Williams Parent
-5-
<PAGE> 9
of the obligations of Williams under the Williams
Subscription Agreement respectively in a form and
substance reasonably satisfactory to Spectrum.
(e) (LICENSING ISSUES) Spectrum providing documentary
evidence that it has obtained nominated carrier
declarations in forms reasonably satisfactory to DTU
and Williams.
(f) (OPINION) Williams providing a legal opinion with
respect to the obligations of Williams and Williams
Parent under the Project Agreements, and the Equity
Documents, and the guarantee referred to in (d), in a
form reasonably acceptable to DTU and addressed to
DTU, the Utilities and Spectrum.
(g) (AMR) Williams enters into an Automated Meter Reading
Agreement with each of EnergyAustralia, CitiPower and
Energex in a form reasonably satisfactory to each of
Williams, EnergyAustralia, CitiPower and Energex.
(h) (WILLIAMS COMMUNICATIONS, INC) Williams or Williams
International Services Company entering into an
agreement with Spectrum granting rights to Spectrum in
relation to telecommunications know-how in a form
reasonably satisfactory to DTU.
(i) (WILLIAMS TRAFFIC) Williams enters into an agreement
with Spectrum relating to originating and terminating
international traffic of the Williams group in a form
reasonably satisfactory to DTU.
(j) (DIRECTORS CERTIFICATES) Spectrum providing to each of
DTU and Williams a certificate signed by at least two
directors of Spectrum stating that the warranties in
clause 6 of the DTU Subscription Agreement and clause
6 of the Williams Subscription Agreement are correct
as at the date on which the last of all other
Conditions Precedent (other than that in (m) has been
satisfied.
(k) (S205 APPROVAL) 21 days pass from the date on which
the Resolutions are passed at a general meeting of
Spectrum (if such Resolutions include resolutions
relating to Section 205(10) of the Corporations Law),
without an application being made opposing any giving
of financial assistance or, if such an application or
applications have been made within that period, the
application or applications have been withdrawn or a
court has approved the giving of the financial
assistance.
(l) (UTILITIES OPINIONS) Each of EnergyAustralia,
CitiPower and Energex providing a legal opinion with
respect to their obligations under the Project
Agreements and Equity Documents in a form reasonably
acceptable to Williams and addressed to both Williams
and Spectrum.
(m) (NO BREACHES) No Party is in breach of any Equity
Document or Project Agreement on the date that all
other conditions have been satisfied and each document
is capable of coming into full force and effect on
that date.
(n) (DTU GUARANTEES) DTU and each Utility receives a
guarantee from Williams Parent of the obligations of
Williams under the Spectrum Shareholders Agreement and
this agreement in a form and substance reasonably
satisfactory to DTU and the Utilities.
(o) (WILLIAMS GUARANTEES) Williams and Williams Parent
receiving a guarantee from each of EnergyAustralia,
CitiPower and Energex of the obligations of DTU under
the Spectrum Shareholders Agreement and this
-6-
<PAGE> 10
agreement (with EnergyAustralia, CitiPower and Energex
to each guarantee a proportion of the obligations of
DTU which represents their respective shareholdings in
DTU) in a form and substance reasonably satisfactory
to Williams and Williams Parent.
(p) (POWERTEL NAME) Subject to reimbursement by Spectrum
of all Williams' documented costs in relation to the
POWERTEL company name, trade mark and domain name,
Williams will do all things reasonably necessary to
transfer its rights and interests in the POWERTEL
company name, trade mark and domain name to Spectrum,
with effect from the date agreed by Williams and DTU.
2.2 FURTHER ASSURANCES
(a) Each Party must use its respective reasonable
endeavours to ensure or give assistance in connection
with, the prompt and timely satisfaction of each of
the Conditions Precedent.
(b) Each Party must notify the other Party if it becomes
aware that:
(1) any of the Conditions Precedent becomes
incapable of being satisfied or becomes, in
its opinion, likely to be incapable of being
satisfied; or
(2) a Condition Precedent has been satisfied.
(c) During the period from execution of this agreement
until the Commencement Date or termination of this
agreement each Party must:
(1) ensure that it does not do or omit to do any
act or thing which would put it in material
breach of any Equity Document or Project
Agreement as at the Commencement Date; and
(2) not make any public statement inconsistent
with support for the project contemplated by
the Equity Documents or Project Agreements.
(d) Spectrum must provide to each of Williams and DTU
copies of draft meeting documents.
(e) On the date of its execution of this agreement each
Party must execute the Equity Documents and Project
Agreements to which it is a party.
2.3 WAIVER
(a) The Conditions Precedent in clauses 2.1 (f), (h),
(i) and (p) may only be waived in writing by DTU.
(b) The Conditions Precedent in clauses 2.1(d), (e) and
(j) may only be waived in writing by Williams and DTU.
(c) The Conditions Precedent in clauses 2.1(a) to (c), (k)
and (m) may only be waived in writing by all Parties.
(d) The Condition Precedent in clause 2.1(g) may only be
waived in writing by all of Williams, EnergyAustralia,
CitiPower and Energex.
(e) The Condition Precedent in clause 2.1(n) may only be
waived in writing by DTU and the Utilities.
-7-
<PAGE> 11
(f) The Conditions Precedent in clauses 2.1(o) may only be
waived in writing by Williams.
(g) A breach of an Equity Document or Project Agreement
may only be waived in writing by the Parties not in
breach provided that:
(1) the Utilities will not be required to waive a
breach DTU; and
(2) Williams, Williams Parent and Williams
International will not be required to waive a
breach by any of them.
2.4 EFFECT OF NON-FULFILMENT
If all of the Conditions Precedent are not satisfied (or
waived in accordance with clause 2.3) on or before 150 days
from the date of this agreement, then any Party may by giving
notice to each other Party terminate this agreement
immediately, in which case:
(a) this agreement, the other Equity Documents and the
Project Agreements are of no further force and effect
and no Party will have any further obligations under
such agreements; and
(b) termination will not affect any right or claim in
respect of any such agreement of any Party which has
arisen before termination.
3 TERMINATION
(a) Any Party may terminate this agreement, each other
Equity Document and the Project Agreements immediately
by giving notice to each other Party if an Insolvency
Event occurs in relation to any other Party prior to
the Commencement Date.
(b) Williams or DTU may terminate this agreement, each
Equity Document and Project Agreement immediately by
giving notice to each other Party if any of the
following events occurs prior to the Commencement
Date:
(1) the directors of Spectrum pass any resolution
or make any public announcement or
recommendation to shareholders which is
inconsistent with support for the project
contemplated by the Project Agreements and
Equity Documents; or
(2) any Party breaches any of the material
warranties or covenants in clauses 6 or 7 of
the DTU Subscription Agreement or Williams
Subscription Agreement and that Party is not
the Party seeking to terminate the
agreement.
4 RELATIONSHIP BETWEEN PARTIES
Nothing in this agreement, any other Equity Document or any
Project Agreement nor any transaction carried out with respect
to the matters contained in any of them, shall constitute any
Party as a principal, agent, partner, employer or employee of
any other Party and each Party disclaims any such
relationship.
-8-
<PAGE> 12
No Party shall make any warranty or
representation or incur any obligations on behalf of or in the
name of any other Party.
5 NOTICES
5.1 RULES
A notice:
(a) may be given by an authorised officer of the relevant
Party;
(b) must be in writing; and
(c) must be left at the address of the addressee or sent
by prepaid ordinary post (airmail if outside
Australia) or by facsimile to the facsimile number of
the addressee as follows:
<TABLE>
(1) in the case of Williams:
<S> <C> <C>
Addressee: The President
Williams Holdings of Delaware Inc
One Williams Center, Tulsa, Oklahoma 74172
USA
Telephone No: 0011-1-918-588-4216
Facsimile No: 0011 1 918 573-8051
Attention: Messrs Kolesnik and Steelman
With a copy to
Addressee: Company Secretary
C/- Baker & McKenzie
Level 26, AMP Centre
50 Bridge Street
Sydney NSW 2000
Telephone No: 9225 2000
Facsimile No: 9223 7711
Attention: The Company Secretary
(2) in the case of DTU:
Addressee: 570 George Street, Sydney, New South Wales, 2000
Telephone No: 9269 2773
Facsimile No: 9269 2717
Attention: Company Secretary
(3) in the case of Spectrum:
Addressee: Spectrum Network Systems Limited
179 Elizabeth Street, Sydney, New South Wales, 2000
Telephone No: (02) 9268 3607
Facsimile No: (02) 9264 5462
</TABLE>
-9-
<PAGE> 13
<TABLE>
<S> <C>
Attention: The Company Secretary
(4) in the case of CitiPower
Address: CitiPower House
624 Bourke Street
Melbourne VIC 3000
Telephone No:
Facsimile No:
Attention:
(5) in the case of EnergyAustralia
Address: 570 George Street
Sydney NSW 2000
Telephone No: 9269 2735
Facsimile No: 9269 2717
Attention: Michael Gale
(6) in the case of Williams Parent
Address: The President
Suite 4100,
One Williams Centre
Tulsa Oklahoma 74172
USA
Telephone No:
Facsimile No: 0011 1918 573-8051
Attention: Messrs Kolesnik and Steelman
(7) in the case of Energex
Address: 150 Charlotte Street
Brisbane Qld 4000
Telephone No: (07) 3407 4077
Facsimile No: (07) 3407 4603
Attention: Secretary
(8) in the case of Williams International
Address: The President
Suite 4100,
One Williams Centre
Tulsa Oklahoma 74172
USA
Telephone No:
Facsimile No: 0011 1918 573-8051
Attention: Messrs Kolesnik and Steelman
</TABLE>
-10-
<PAGE> 14
and in the event of change of such address or
facsimile number as last notified by the Party
affected by such change to the other.
5.2 WHEN NOTICE EFFECTIVE
Unless a later time is specified in a notice, the notice takes
effect from the time it is received by the person to whom is
in addressed as noted thereon.
5.3 WHEN NOTICE RECEIVED
A letter or facsimile is taken to be received:
(a) in the case of a letter on the third (seventh if
outside Australia) day after posting; and
(b) in the case of a facsimile on confirmation by the
recipient that it has been received. Each recipient of
a notice by facsimile must immediately confirm that it
has been received.
5.4 FACSIMILES
Any notice received by one Party bearing a facsimile of the
signature of an authorised officer of any other Party shall be
conclusive evidence for all purposes of the authenticity of
the notice and the receiving Party shall be entitled to rely
upon that notice.
5.5 CHANGE OF ADDRESS
In the event that a Party changes its address or other
relevant particulars in respect of its facsimile facilities it
must prior to the date of such change notify the other Party
in writing. Thereafter such new address or particulars shall
be the address or particulars as the case may be of that Party
for the purposes of this agreement.
6 GOVERNING LAW JURISDICTION AND SERVICE OF PROCESS
6.1 NSW LAW
This agreement shall in all respects be governed by and
construed in accordance with the laws in force in the State of
New South Wales.
6.2 SUBMISSION TO JURISDICTION
Each Party submits to the non-exclusive jurisdiction of the
courts of the State of New South Wales and the Commonwealth of
Australia and Courts of appeal from them in respect of all
matters or things arising out of this agreement or out of any
related document.
6.3 WAIVER
Without limitation to clause 6.2 each of the Parties waives
any right it has or may have to object to an action being
brought in any of the courts referred to in clause 6.2 to
claim that the action has been brought in an inconvenient
forum or to claim that any of those courts do not have
jurisdiction.
-11-
<PAGE> 15
6.4 SERVICE
(a) Without preventing any other mode of service any
document in an action (including without limitation
any writ of summons or other originating process or
any third or other Party notice) may be served on any
Party by being delivered to or left for that Party at
its address for service of notices under clause 5.
(b) Williams Parent and Williams International hereby
appoint Williams as their agent for service of process
under or in connection with this agreement, any other
Equity Document or Project Agreement.
7 ILLEGALITY
If the performance of all or a substantial portion of all of
the project as contemplated by the Project Agreements becomes
unlawful, any Party may terminate this agreement.
8 GENERAL
8.1 ENTIRE AGREEMENT
This agreement, the other Equity Documents and the Project
Agreements constitute the entire agreement between the Parties
relating to the subject matter of this agreement and supersede
all previous communications whether oral or written between
the Parties or their representatives with respect to that
subject matter.
8.2 COUNTERPARTS
This agreement may be signed in any number of counterparts
with the same effect as if the separate signatures or
executions were on the same instrument.
8.3 NO WAIVER
(a) Any failure to exercise or delay in exercising any
right power or remedy under this agreement by any
Party shall not operate as a waiver of that right
power or remedy or prevent its exercise nor shall any
single or partial exercise of any right power or
remedy preclude any other or further exercise of that
or any other right power or remedy. No Party shall be
liable for any loss caused by the exercise or
attempted exercise or failure to exercise a right
power or remedy.
(b) No waiver or variation of any provision of this
agreement shall be effective unless such waiver is in
writing and signed by each of the Parties against whom
such waiver is claimed.
(c) No waiver of any breach shall be deemed to be a waiver
of any other or subsequent breach.
(d) The right powers and remedies provided to any Party in
this agreement are cumulative and not exclusive of any
rights powers or remedies provided by law.
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<PAGE> 16
8.4 FURTHER ASSURANCES
At the request of the other Party, a Party to this agreement
shall at its own expense from time to time and at all times
after the execution of this agreement make do and execute or
cause to be made, done or executed all such acts instruments
assurances and writings as may be necessary or desirable to
perfect or give effect to the transactions contemplated by
this agreement.
8.5 SEVERABILITY
If any provision of this agreement shall be or be determined
to be illegal invalid void or voidable the legality or
validity of the remainder of the agreement shall not be
affected and the remainder of this agreement shall continue to
full force and effect.
8.6 NO IMPAIRMENT
In the absence of express provision to the contrary, failure
or omission by a Party at any time to enforce or require
strict or timeous compliance with any provision of this
agreement or any related document shall not impair the ability
of that Party to exercise the rights and remedies it otherwise
has in respect of a breach of any such provision.
8.7 NO MERGER
None of the provisions of this agreement will merge in or
upon:
(a) execution and sealing of this agreement; or
(b) any instrument document act matter or thing
contemplated by this agreement,
and will continue to remain in full force and effect
notwithstanding the execution and sealing of this agreement
and for so long as is necessary to give effect to the
provisions of this agreement.
8.8 FUTURE LEGISLATION
Any present or future legislation which operates to vary an
obligation or right power or remedy of a person in connection
with this agreement is excluded except to the extent that its
exclusion is prohibited or rendered ineffective by law.
8.9 CUMULATIVE RIGHTS/POWERS
The rights powers and remedies provided in this agreement are
cumulative with and not exclusive of the rights powers or
remedies provided by law independently of this agreement.
8.10 ASSIGNMENT
(A)(a) Subject to clause 8.10(B) and this clause
8.10(A), the rights and obligations of each
Party under this agreement, each Equity
Document and each Project Agreement are
personal. Unless otherwise provided in the
relevant agreement, they cannot be assigned,
novated, charged or otherwise dealt with
("assigned"), and no Party shall attempt or
purport to do so, without the prior written
consent of all the other Parties.
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<PAGE> 17
(b) No consent shall be required in respect
of any assignment brought about by a
Reorganisation of EnergyAustralia or Energex,
provided that the party to whom the relevant
agreements are assigned either enters into
deeds with the other parties to the relevant
agreements within 90 days of the date of the
Reorganisation under which it agrees to
assume all the obligations of EnergyAustralia
or Energex or automatically assumes those
obligations under statute or regulation.
(c) A "Reorganisation" for the purposes of this
clause means a transfer which the New South
Wales Minister for Energy or the Queensland
Minister for Mines and Energy, or successor,
certifies to be a Reorganisation and which
forms part of a corporatisation,
privatisation, boundary review or electricity
industry restructure programme (to be
certified to by the relevant Minister).
(d) Any entity to which the Project Agreements
and Equity Documents are to be assigned must
be technically and financially capable of
performing the obligations of the
organisation which is assigning the
agreements. Where there is more than one
entity to which a Project Agreement or Equity
Document may be assigned, the most
appropriate entity must be selected.
(e) A Party may only assign all (and not some) of
its Project Agreements and Equity Documents
pursuant to this clause. Despite the
foregoing, Energex may assign all of its
interests under all of the Project Agreements
without assigning its interest under the
Equity Documents where, in connection with a
Reorganisation:
(i) its beneficial interest in any
shares or options issued by Spectrum
are acquired or to be acquired under
clause 8.6 of the Spectrum
Shareholders Agreement; and
(ii) its shares in DTU are acquired or to
be acquired by the other Utilities
under clause 14.9 of the DTU
Shareholders Agreement.
(f) If the Reorganisation involves a boundary
review or change of franchise area, so that a
government entity takes over the current
business of either EnergyAustralia or Energex
in a geographic region, then (unless by
statute or regulation the entity in question
automatically assumes the obligations of the
relevant Utility under the Project Agreements
in respect of that geographic region) the
Utility involved must procure that the entity
taking over the substantive obligations of
that Utility in that geographic region enters
into agreements within 90 days of the date of
the Reorganisation in the same form as the
existing Project Agreements to which that
Utility is a party in respect of that
geographic region (so that the totality of
the rights that Williams, Williams Parent and
Spectrum enjoy are no different to those
which existed prior to the boundary review)
and Energex or EnergyAustralia (as relevant)
will be released from its obligations in
respect of that geographic region.
(g) Williams, Williams Parent and Spectrum agree
to enter into any agreements required to give
effect to this clause.
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<PAGE> 18
(B) Any Party may assign its rights or require the other
Parties to enter into an agreement novating its rights
and obligations under this agreement, any Equity
Document or Project Agreement to:
(1) a wholly owned subsidiary, providing that
subsidiary has assets of at least $50
million;
(2) its holding company;
(3) a wholly owned subsidiary of its holding
company providing that subsidiary has assets
of at least $50 million;
(4) a purchaser of substantially all of its
business;
(5) a purchaser of substantially all of its
business in a geographic region.
9 DTU SUBSCRIPTION AGREEMENT
If required by DTU, but only until despatch of meeting
documents relating to the Resolutions, the Parties agree to
discuss in good faith amendments to the Equity Documents and
Project Agreements to implement an alternative subscription or
investment structure which may be more advantageous to DTU and
the Utilities, but not any less advantageous to Williams,
Spectrum and its current shareholders.
10 TERMS OF PREFERENCE SHARES
If required by Spectrum or Williams, the Parties agree to
co-operate to take whatever actions are reasonably necessary
(and which do not disadvantage the other Parties) to ensure
that the necessary approvals and/or waivers are obtained to
give effect to the terms set out in the Williams Subscription
Agreement for the issue of ordinary shares in Spectrum in
respect of the arreared but unpaid dividends on the preference
shares.
11 TECHNICAL SERVICES AGREEMENT
Spectrum and Williams International agree for so long as DTU
is a Shareholder (as defined in the Spectrum Shareholder
Agreement) not to terminate or vary the Technical Services
Agreement between Spectrum and Williams International without
the prior written consent of DTU.
12 RESELLER AGREEMENT
(a) Each Utility and Spectrum agrees to carry out good
faith negotiations over a period of 3 months
commencing on the Business Day following the date of
acceptance of the Offer regarding the following issues
("Issues") in connection with the Reseller Agreement
between each Utility and Spectrum.
(b) The issues are as follows:
(1) The development of joint business processes
in the following areas:
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<PAGE> 19
(A) advertising and promotion;
(B) new product information;
(C) customer service and provisioning;
(D) billing;
(E) maintenance and fault handling; and
(F) the Utility's responsibility for
support, marketing, billing and
credit management function, amongst
other things.
(2) The level and basis of Spectrum's charges to
the Utility for the services provided under
the Reseller Agreement including what
competitive pricing guarantees will be
provided by Spectrum.
(3) The presentation and accuracy of call record
billing data provided by Spectrum to the
Utility.
(4) The evolution of the relationship to reflect
any transfer of responsibility in the areas
set out in clause (b)(1) above from Spectrum
to the Utility.
(5) The definition of CBD in the Reseller
Agreement.
(6) The use by the Utility of Spectrum's trade
marks.
(c) If a Utility and Spectrum are unable to reach
agreement on the Issues within that 3 month period:
(1) the rights and obligations of the Utility and
Spectrum under that Reseller Agreement shall
be suspended unless and until parties are
able to reach agreement on the Issues;
(2) the parties may continue to carry out good
faith negotiations if they both agree to do
so.
(d) If a Utility and Spectrum are unable to reach
agreement on the Issues within a further 3 months
after the end of that 3 month period, clauses 10.1 and
10.2 of the Spectrum Shareholders Agreement shall not
apply to the resale by that Utility or Williams of a
carriage service supplied by a third person or the
supply by that Utility or Williams of services which
are based upon a carriage service supplied by a third
person.
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<PAGE> 20
EXECUTED AS AN AGREEMENT:
The common seal of
DOWNTOWN UTILITIES PTY LIMITED
is affixed to this
document:
<TABLE>
<S> <C>
/s/ P.A. BROAD /s/ J. C. CANDE
- ------------------------------------------------ --------------------------------------------------
Secretary/Director Director
P. A. Broad J. C. Cande
- ------------------------------------------------ --------------------------------------------------
Name (please print) Name (please print)
The common seal of
WILTEL COMMUNICATIONS PTY LIMITED
is affixed to this
document:
/s/ J. D. STEELMAN, JR. /s/ HENRY A. KOLESNIK
- ------------------------------------------------ --------------------------------------------------
Secretary/Director Director
J. D. Steelman, Jr. Henry A. Kolesnik
- ------------------------------------------------ --------------------------------------------------
Name (please print) Name (please print)
The common seal of
SPECTRUM NETWORK SYSTEMS LIMITED
is affixed to this
document:
/s/ A. A. D'AZELADO /s/ DAVID ARCHER
- ------------------------------------------------ --------------------------------------------------
Secretary/Director Director
A. A. D'Azelado David Archer
- ------------------------------------------------ --------------------------------------------------
Name (please print) Name (please print)
The common seal of
CITIPOWER PTY
is affixed to this
document:
/s/ SIMON LUCAS /s/ THOMAS J. WRIGHT
- ------------------------------------------------ --------------------------------------------------
Secretary/Director Director
Simon Lucas Thomas J. Wright
- ------------------------------------------------ --------------------------------------------------
Name (please print) Name (please print)
</TABLE>
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<PAGE> 21
<TABLE>
<S> <C> <C>
THE COMMON SEAL of
ENERGYAUSTRALIA
is affixed to this
document:
/s/ P. A. BROAD /s/ J. C. CANDE
- ------------------------------------------------ --------------------------------------------------
Secretary/Director Director
P. A. Broad J. C. Cande
- ------------------------------------------------ --------------------------------------------------
Name (please print) Name (please print)
THE COMMON SEAL of
SOUTH EAST QUEENSLAND
ELECTRICITY CORPORATION LIMITED
is affixed to this
document:
/s/ JOHN T. YOUNG C. C. PUPPLE
- ------------------------------------------------ --------------------------------------------------
Secretary/Director Director
John T. Young C. C. Pupple
- ------------------------------------------------ --------------------------------------------------
Name (please print) Name (please print)
SIGNED SEALED AND DELIVERED FOR and on behalf of
WILLIAMS HOLDINGS OF DELAWARE INC
by its attorney in the presence of:
/s/ HENRY A. KOLESNIK /s/ J. D. STEELMAN, JR.
- ------------------------------------------------ --------------------------------------------------
Chairman Witness
Henry A. Kolesnik J. D. Steelman, Jr.
- ------------------------------------------------ --------------------------------------------------
Name (please print) Name (please print)
SIGNED SEALED AND DELIVERED FOR and on behalf of
WILLIAMS INTERNATIONAL SERVICES COMPANY
by its attorney in the presence of::
/s/ HENRY A. KOLESNIK /s/ J. D. STEELMAN, JR.
- ------------------------------------------------ --------------------------------------------------
Attorney Witness
Henry A. Kolesnik J. D. Steelman, Jr.
- ------------------------------------------------ --------------------------------------------------
Name (please print) Name (please print)
</TABLE>
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<PAGE> 1
Redacted portions have been marked with asterisks (****). Confidential treatment
has been requested for the redacted portions. The confidential redacted portions
have been filed separately with the Securities and Exchange Commission.
CONFIDENTIAL TREATMENT
EXHIBIT 10.28
CARRIER SERVICES AGREEMENT
(MULTIMEDIA)
Agreement No._________________
This Carrier Services Agreement (this "Agreement") is made this 5th day of
January, 1998, by and between Williams, Inc. d/b/a Williams Network, a Delaware
corporation ("Williams"), with its principal place of business at One Williams
Center, Tulsa, Oklahoma 74172 and U S WEST Communications, Inc. a Colorado,
corporation ("USWC"), with its principal place of business at 1801 California
Street, Denver, CO 80202, for the provision of multimedia telecommunications
services, subject to this Agreement and as set forth in this Agreement.
1.0 SCHEDULES AND EXHIBITS.
The Schedules attached to this Agreement and made a part hereof are:
Schedule A - Williams Network Private Line Service Schedule including Pricing
and Specifications
Exhibit I - Pricing Schedule
Schedule B - Sample Service Order Form
2.0 DESCRIPTION OF SERVICES AND PRICING.
USWC may order from Williams multimedia transmission services ("Services"), the
terms and conditions of which and the charges for which are set forth in
Williams' Multimedia Transmission Service Schedule relating to such Services
(the "Service Schedule"). Current Service Schedules are attached to this
Agreement, labeled as consecutive Schedules and incorporated herein by this
reference. Williams offers such Services, as defined in the applicable Service
Schedule, upon the terms and conditions set forth in the Service Schedule, this
Agreement. All Services and "Ancillary Services," as defined in Section 5.3,
are subject to availability.
3.0 EFFECTIVE DATE, TERM, COMMITMENT AND MOST FAVORED CUSTOMER.
3.1 This Agreement shall become effective on the date on which Williams and
USWC signs the Agreement ("Effective Date").
3.2 The duration of the Agreement shall continue for a term of five (5) years
(the "Initial Term"). This Agreement shall thereafter automatically renew for
successive one-year periods (each, a "Renewal Term") unless canceled by either
party by giving written notice of such cancellation not less than sixty (60)
days before the end of the Initial Term or any Renewal Term. The pricing for
Services during the Renewal Term shall be the lower of (i) the existing pricing
under this Agreement
<PAGE> 2
with the continuation of the Year 5 Minimum Obligation or (ii) negotiated
pricing based upon then existing market prices.
3.3 Commencing six (6) months after the Effective Date, USWC shall be obligated
to purchase on-network Services in the minimum amounts set forth in the
schedule below during the time period indicated. All dollar amounts in this
Agreement shall be determined in accordance with Exhibit I to schedule A
hereto, "Pricing Exhibit," or other express provision of the Agreement,
inclusive of any discounts applicable to USWC but exclusive of any credits to
which USWC may be entitled, late payment penalties, taxes and other government
imposed surcharges. USWC's purchases of Services shall also not include
payments made by USWC to Williams to reimburse Williams for third party costs
paid to unaffiliated entities, including but not limited to, local access
charges, taxes, installation charges, off-network charges, one time fees and
other similar costs all of which shall be billed to USWC at cost or as
otherwise set forth herein.
****
To the extent that, in any year during the Initial Term hereof (as measured at
the end of each of the one year periods set forth in the schedule above (a
"Commitment Year") and taking into account any credit for excess purchases from
another period during the Commitment Year only), USWC fails to purchase
Services from Williams greater than or equal to the Minimum Obligation for such
Commitment Year set forth in the schedule above, then, within thirty (30) days
after the completion of such year, USWC shall pay to Williams, as liquidated
damages for such failure, cash in an amount equal to the difference between the
Minimum Obligation for such Commitment Year and the amount of Services actually
purchased by USWC from Williams during such year. However, the dollar amount of
any "Equivalent Services" (as hereinafter defined), "Substitute Services"
and/or "Delayed Services" (as hereinafter defined) purchased by USWC shall
reduce dollar for dollar the Minimum Obligation for that Commitment Year. The
foregoing offset to USWC's Minimum Obligation shall be USWC's sole and
exclusive remedy in the event that USWC elects to purchase Equivalent Services,
Substitute Services or Delayed Services under this Agreement.
In any month of a Commitment Year during which USWC's actual usage of Services
meets another succeeding level of discounts set forth in the Commitment and
Pricing Matrix of Exhibit 1, (the "Next Level"), prices for Services shall, at
that point, be adjusted to those prices associated with the Next Level in the
Commitment and Pricing Matrix ("Next Level Pricing"). The Next Level Pricing
shall apply to Services through the end of the Commitment Year, even if USWC's
usage of Services in any month following the pricing adjustment Falls below the
monthly commitment amount associated with the Next Level Pricing ("Shortfall"),
subject always to the Minimum Obligation set forth in the schedule above for
that Commitment Year; provided, however, USWC shall pay to Williams within
thirty (30) days after the completion of the Commitment Year a deficiency
charge for each such month during the Commitment Year where a Shortfall occurs.
The deficiency charge for each such month shall be equal to the volume of
service in the month of the Shortfall multiplied by the absolute difference
between the rate applicable to the Next Level Pricing and the rate
2
<PAGE> 3
applicable to the discount level for which USWC has qualified for in that
Commitment Year. An example of this calculation is attached hereto.
3.4 Williams shall be USWC's primary provider of Services for the Term and any
Renewal Term, subject to the following three (3) exceptions ("Exceptions"):
Exception I - If, during the Term or any Renewal Term, the price charged by
Williams for the Services becomes higher than the price charged for Equivalent
Services from another provider, then the USWC shall send to Williams a written
summary of the material terms of the "competing offer" for the Equivalent
Services offered by the competing provider. Upon receipt of the summary,
Williams shall have five (5) days in which to determine whether there is a
competing offer is for Equivalent Services. If there is a competing offer is
for Equivalent Services, then at the end of such five (5) day period Williams
shall either match all the material terms of the competing offer or issue a
written statement that the USWC is free to contract with the competing provider
("Equivalent Services Contract"). Any competing offer shall be required to
contain specific monetary rates as the sole consideration and not involve
barter, exchange or lease of goods or services. Equivalent Services shall mean
communication services having similar performance characteristics as the
Services which services have reasonably equivalent or superior transport
reliability/security.
Exception II - If, during the Term or any Renewal Term, Williams has failed
to provide Services meeting or exceeding the specifications set forth in
Schedule A more than five (5) times during any one (1) month period
("Noncompliance Situation"), then USWC shall have the right to seek the
provision of communication services meeting the Agreement specifications for
Services from another carrier ("Substitute Services"). After the expiration of
the Substitute Services agreement, then Services shall again be provided under
this Agreement.
Exception III - If, during the Term or any Renewal Term, Williams is unable
to meet the Requested Start Date for any particular Service Order involving
on-network capacity, and does not commit and subsequently establish Service
with thirty (30) days of the Requested Start Date ("Delayed Services") USWC
shall have the right to obtain the Delayed Service from another carrier.
Nothing in this Section or in this Agreement shall be construed to require USWC
to terminate or modify any existing agreements with other entities.
In the case where Williams has declined to match a Competing Offer for
Equivalent Services or that USWC has elected to use Substitute Services,
Williams and USWC shall promptly make the necessary amendments to this
Agreement.
3.5 From the Effective Date until December 31, 2000, all Services shall be
priced on a "most favored customer" basis, which means that for so long as
USWC's total payments to Williams pursuant to this Agreement are equal to or
exceed USWC's Minimum Obligation set forth in Section 3.3 above, ****
3
<PAGE> 4
*****
This provision shall not apply with respect to any lower charges by Williams
to: (i) entities, business organizations or enterprises affiliated with
Williams; or (ii) any department, branch or agency of a federal, state or
provincial government.
USWC and Williams shall meet on an annual basis to discuss, among other things,
compliance with Sections 3.4 and 3.5.
In consideration of the foregoing covenant, if this provision were to be
triggered resulting in an adverse effect on Williams, Williams shall be
entitled at any time at its convenience to terminate this Agreement upon sixty
(60) days prior written notice.
4.0 SERVICE ORDERS.
Services requested by USWC hereunder shall be requested on Williams' Service
Order forms in effect from time to time (an example of Williams' current form
is attached as Schedule C or on USWC's forms accepted in writing by Williams
("Service Orders"). Each Service Order shall reference this Agreement and its
respective Agreement number.
When a Service Order is placed, the USWC will indicate a requested start date
("Requested Start Date"). Williams will make best reasonable efforts to meet
the Requested Start Date. In the event that a Requested Start Date is altered,
the actual Start Date will be changed to reflect the number of days of delay or
advance, as appropriate.
This Agreement shall apply to all Services and Ancillary Services provided by
Williams to the USWC whether pursuant to a Service Order or otherwise.
Any conflicting, different or additional terms and conditions contained in
USWC's acknowledgment or Service Order or elsewhere are objected to by Williams
and shall not constitute part of this Agreement. No action by Williams
(including, without limitation, provision of Services or Ancillary Services to
USWC pursuant to such Service Order) shall be construed as binding or estopping
Williams with respect to such term or condition, unless the Service Order
containing said specific term or condition has been signed by an authorized
headquarters representative of Williams.
Williams shall make best reasonable efforts to provide Services within its
standard service implementation interval or on USWC's requested Start Date.
Services shall begin on the date Williams issues notice that service is
available (the "Start of Service Notice" or "SOSN"), indicating the service has
been tested by Williams in accordance with Williams' standard specifications
and that the service meets or exceeds those specifications.
4
<PAGE> 5
USWC may request a delay in the Start Date of an order, a move, or
rearrangement when Williams receives the delay request a minimum of thirty (30)
days prior to the due date and the requested delay does not exceed thirty ('30)
cumulative days from the Service Order's initial Start Date. When USWC has
delayed a Service Order for the maximum thirty (30) cumulative calendar days,
the order may not be delayed again by USWC. Once the maximum thirty (30) day
delay has been achieved, USWC has the option to (a) accept the billing for the
Service Order, or (b) cancel the Service Order and pay the applicable
cancellation charges for the facilities ordered. The billing or cancellation is
effective on the 30th cumulative calendar of the delay. If USWC elects to
accept billing, the installation will be completed as soon as reasonably
practical after USWC advises Williams that the installation can be completed.
Within six months of the Effective Date, Williams will have in place a system
to permit electronic delivery and processing of Service Orders.
5.0 LOCAL ACCESS AND ANCILLARY SERVICES.
5.1 Williams shall, on behalf and upon request of USWC, obtain
telecommunications facilities connecting USWC with an approved vendor of
Williams to a Williams Point of Presence ("POP"). USWC will execute a Letter of
Agency, on such form as provided by Williams, authorizing Williams to interact
directly with the provider(s) of these access telecommunications facilities.
When Williams acts as USWC's agent, USWC is responsible for charges, including
without limitation, monthly charges, usage charges, installation charges,
non-recurring charges, or applicable termination/cancellation liabilities, of
the provider(s) of telecommunications facilities to Williams POPs all of which
shall be billed to USWC at cost.
5.2 In doing so, Williams shall be responsible for provisioning and the initial
testing of an interconnection (reasonably coordinated with Start of Service)
between such interexchange service set forth in the Service Order and a USWC
designated termination point ("Local Access"). Charges to USWC for Local Access
Service administered on behalf of USWC by Williams shall not exceed charges
USWC would otherwise pay the same Local Access Provider for the relevant
interconnec tion and/or service.
5.3 Williams may also provide other extraordinary service to USWC for reasons
including but not limited to: (a) USWC's request to expedite Service
availability to a date earlier than Williams' published installation interval
or a previously accepted Start Date; (b) Service redesign or other activity
occasioned by receipt of inaccurate information from USWC; (c) reinstallation
charges following any suspension of the Service for cause by Williams; (d)
USWC's request for use of routes or facilities other than those selected by
Williams for provision of the Service; and (e) other circumstances in which
extraordinary costs and expenses are generated by USWC and reasonably incurred
by Williams (services under this subsection 5.3 are collectively referred to
herein as "Ancillary Services").
5
<PAGE> 6
5.4 In the event a Service Order designates origination or termination not
currently on the Williams network, Williams shall on behalf of and upon USWC's
request obtain off-net circuits with another approved telecommunications
carrier ("Off-Net Capacity"). USWC will execute any necessary letter of agency
when Williams acts as USWC's agent. USWC is responsible for charges, including
without limitation, monthly charges, usage charges, installation charges,
non-recurring charges, or applicable termination/cancellation liabilities, of
the provider(s) of telecommunications facilities to Williams, all of which
shall be billed to USWC at cost plus an administrative fee which administrative
fee shall be agreed upon by the parties within thirty days of the Effective
Date of this Agreement.
5.5 Recurring and nonrecurring charges to USWC for Local and Ancillary Services
as well as Off-Net Capacity shall be established as of Williams' acceptance of
the Service Order relevant thereto. RECURRING CHARGES FOR LOCAL ACCESS BILLING
ADMINISTERED BY SELLER AND CHARGED TO USWC SHALL BE SUBJECT TO ADJUSTMENT AT
SUCH TIMES AS SELLER SHALL DETERMINE, NOT TO EXCEED THE PREVAILING CHARGES OF
SUCH LOCAL ACCESS PROVIDERS AS WOULD OTHERWISE BE PAID DIRECTLY BY USWC FOR THE
RELEVANT INTERCONNECTION OR SERVICE.
6.0 CHANGES IN SERVICE PARAMETERS.
6.1 Cancellation of Services. USWC may cancel any Service or Ancillary Service
provided hereunder by providing written notification to Williams thereof thirty
(30) days in advance of the effective date of cancellation. In the event of
such cancellation, USWC shall pay to Williams a cancellation charge in an
amount equal to any nonrecurring payments not yet paid together with any
termination liability associated with Local Access. USWC agrees that the actual
damages in the event of such cancellation would be difficult or impossible to
ascertain, and that the cancellation charge in this Section 6.1 is intended,
therefore, to establish liquidated damages and is not intended as a penalty.
Notwithstanding the foregoing, and upon thirty (30) days' prior written notice
to the other party, either USWC or Williams shall have the right, without
cancellation charge or other liability to the other party, to cancel the
affected portion of any Service or Ancillary Service, if Williams is prohibited
by governmental authority from furnishing or USWC is prohibited from using such
portion, or if any material rate or term contained herein and relevant to the
affected portion of any Service or Ancillary Service is substantially changed
by order of the highest court of competent jurisdiction to adjudicate the
matter, the Federal Communications Commission, or other local, state or federal
government authority.
7.0 PAYMENT TERMS.
7.1 Due Date and Invoice. All amounts stated on each monthly invoice are due
and payable thirty (30) days from the date of receipt of the invoice ("Due
Date"). USWC agrees to remit payment to Williams at the remittance address. In
the event USWC fails to make full payment to the proper address by the Due Date
Williams will provide notice of such non-payment. If USWC does not pay within
thirty (30) days of such notice, USWC shall also pay a late fee in the amount
of the lesser of
6
<PAGE> 7
one and one-half percent (1-1/2%) of the unpaid balance per month or the
maximum lawful rate under applicable state law which shall accrue from the Due
Date except as to any amount subject to a bona fide dispute and under
negotiation by the parties ("Disputed Amounts"). USWC acknowl edges and
understands that all charges are computed exclusive of any applicable federal,
state or local use, excise, valued added, gross receipts, sales and privilege
taxes, duties, fees or similar liabilities (other than general income or
property taxes imposed on Williams), whether charged to or against Williams,
its suppliers or affiliates or USWC associated with the Service or Ancillary
Service provided to USWC ("Additional Charges"). Such Additional Charges shall
be paid by USWC in addition to all other charges provided for herein.
Payment for all prorated monthly recurring charges (charges for monthly Service
or Ancillary Service provided for less than a calendar month), installation and
other non-recurring charges shall be billed following the receipt of any such
Services or Ancillary Service. Payment for all monthly recurring charges for
full months during which Service or Ancillary Service are to be provided shall
be due in advance.
If USWC in good faith disputes any portion of an invoice it must pay the
undisputed portion on or before its Due Date. Unless USWC is in good faith
unable to do so in any particular case notice of any billing dispute by USWC
must be provided in writing to Williams within sixty (60) days of the Due Date
of the invoice and must include documentation substantiating the dispute.
USWC's failure to notify Williams of a dispute within a reasonable period of
time shall be deemed to be USWC's acceptance of such charges. The parties will
make a good faith effort to resolve billing disputes as expeditiously as
possible.
7.2 Suspension of Service. Except for non-payment of Disputed Amounts, in the
event payment in full is not received from USWC on or before sixty (60) days
following the Due Date, Williams shall have the right, after giving USWC ten
(10) days' notice, to suspend all or any portion of the Services or Ancillary
Service to USWC. If only a portion of the Services or Ancillary Service are
suspended and USWC does not cure within ten days of such partial suspension of
Service, Williams may suspend all or any additional portion of the Services or
Ancillary Service to USWC. Williams may continue suspension until such time as
USWC has paid in full all charges then due, including any late fees as
specified herein. Following such payment, Williams shall be required to
reinstitute Service or Ancillary Service to USWC only on the provision by USWC
of satisfactory assurance, in Williams' sole discretion, of USWC's ability to
pay for Service or Ancillary Service. If USWC fails to provide such
satisfactory assurance by a date determined by and acceptable to Williams, USWC
shall be deemed to have canceled the Services or Ancillary Service provided
under this Agreement effective on the date of such suspension and shall remain
liable for all cancellation charges as set forth in Section 6.1.
7.3 Taxes. If any sales taxes, valued added taxes or similar charges or
impositions are asserted against Williams after, or as a result of, USWC's use
of Services or Ancillary Service by any local, state, national, international,
public or quasi-public governmental entity or foreign government or its
political subdivision, including without limitation, any tax or charge levied
to support the
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Universal Service Fund contemplated by the Telecommunications Act of 1996, USWC
shall be solely responsible for such taxes, charges or impositions. USWC agrees
to pay any such taxes, charges or impositions and hold Williams harmless from
any liability or expense associated with such taxes, charges or impositions.
7.4 Adjustments. Williams may make billing adjustments for a period of one
hundred twenty (120) days after the Due Date of an invoice, or one hundred
twenty (120) days after the date a service is rendered, whichever is later.
8.0 GENERAL AGREEMENT.
8.1 Warranty and Disclaimer of Warranty. Williams warrants that Services or
Ancillary Service shall be provided to USWC in accordance with the technical
parameters set forth in the applicable Service Schedule. Williams shall use
commercially reasonable efforts under the circumstances to remedy any delays,
interruptions, omissions, mistakes, accidents or errors in the Services or
Ancillary Service and restore such Services or Ancillary Service to comply with
the terms hereof.
THE FOREGOING WARRANTY AND THE OUTAGE CREDITS REMEDY PROVIDED TO USWC AS SET
FORTH IN THE APPLICABLE SERVICE SCHEDULE FOR THE FAILURE TO COMPLY WITH THIS
WARRANTY ARE EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES OR REMEDIES, WHETHER
EXPRESS, IMPLIED OR STATUTORY, INCLUDING WITHOUT LIMITATION, IMPLIED WARRANTIES
OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
8.2 Limitation of Liability. IN THE EVENT OF ANY BREACH OF THIS AGREEMENT OR
ANY FAILURE OF THE SERVICES OR THE ANCILLARY SERVICES, WHATSO EVER, NO PROVIDER
(AS DEFINED IN SECTION 8.3) SHALL BE LIABLE FOR ANY DIRECT, INDIRECT,
CONSEQUENTIAL, SPECIAL, ACTUAL, INCIDENTAL, PUNITIVE OR ANY OTHER DAMAGES, OR
FOR ANY LOST PROFITS OF ANY KIND OR
NATURE WHATSOEVER.
NEITHER USWC NOR ANY PROVIDER SHALL BE LIABLE TO THE OTHER FOR ANY
CONSEQUENTIAL, SPECIAL, INCIDENTAL, PUNITIVE OR ANY OTHER SIMILAR DAMAGES, OR
FOR ANY LOST PROFITS OF ANY KIND OR NATURE WHATSOEVER WITH RESPECT TO THIS
AGREEMENT OR FOR THE LOSS OR FAILURE OF THE SERVICES OR THE ANCILLARY SERVICES.
8.3 Customer Content and Indemnity. USWC shall make all arrangements with
copyright holders, music licensing organizations, performers' representatives
or other parties for necessary authorizations, clearances or consents with
respect to transmission contents ("Consents"). USWC shall indemnify and hold
harmless Williams and any third party or affiliated provider, operator or
maintenance/repair contractor of facilities employed in connection with the
provision of Services or Ancillary Service (all of which shall be referred to
as "Providers") against and from any court, administrative or agency action,
suit or similar proceeding, whether civil or criminal, private or
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public, brought against Providers arising out of or related to the contents
transmitted hereunder (over Williams' network or otherwise) including, but not
limited to, claims, actual or alleged, relating to any violation of copyright
law, export control laws, failure to procure Consents, failure to meet
governmental or other technical broadcast standards, or that such transmission
contents are libelous, slanderous, an invasion of privacy, pornographic, or
otherwise unauthorized or illegal. Williams may terminate or restrict any
transmissions over the network if, in its judgment, (a) such actions are
reasonably appropriate to avoid violation of applicable law; or (b) there is a
reasonable risk that criminal, civil or administrative proceedings or
investigations based upon the transmission contents shall be instituted against
Providers. USWC agrees not to use Services or Ancillary Service for any
unlawful purpose, including without limitation any use which constitutes or may
constitute a violation of any local, state or federal obscenity law.
8.4 a) USWC and Williams shall defend, indemnify and hold harmless the other
against and from any and all claims for physical property damage, physical
personal injury or wrongful death to the extent that such arises out of the
negligence or willful misconduct of the respective indemnifying party, its
employees, agents, or contractors in connection with the provision of Services,
Ancillary Services or other performance,
b) With respect to third parties that use Services or Ancillary Service through
USWC, USWC shall defend, indemnify and hold harmless Providers against any
claims by such third parties for damages arising or resulting from any defect
in or failure to provide Services or Ancillary Service.
c) USWC shall defend, indemnify and hold harmless Providers for any breach of
USWC's obligations under Section 8.3).
d) The indemnifying party agrees to defend the other against the claims as set
forth above and to pay all reasonable litigation costs, attorneys' fees, court
costs, settlement payments, and any damages awarded or resulting from any such
claims. The indemnified party shall promptly notify the indemnifying party in
writing of any such claims.
8.5 Force Majeure. If either party's performance of this Agreement or any
obligation (other than the obligation to make payments) hereunder is prevented,
restricted or interfered with by causes beyond its reasonable control
including, but not limited to, acts of God, fire, explosion, vandalism, cable
cut, power outage, storm or other similar occurrence including rain fade or
other atmospheric conditions, any law, order, regulation, direction, action or
request of the United States Government or state or local governments, or of
any department, agency, commission, court, bureau, corporation or other
instrumentality of any one or more said governments, or of any civil or
military authority, or by national emergencies, insurrections, riots, wars,
acts of terrorism, strikes, lockouts or work stoppages or other labor
difficulties, supplier failures, shortages, breaches or delays, then the
affected party shall be excused from such performance on a day-to-day basis to
the extent of such prevention, restriction or interference. The affected party
shall use commercially reasonable efforts under the circumstances to avoid and
remove such causes of non-performance and shall proceed to perform with
reasonable dispatch whenever such causes cease.
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8.6 Events of Default. If the quality of transmission provided under such
Service or Ancillary Service falls below the level of quality set forth in the
technical parameters applicable to such Service or Ancillary Service set forth
in the applicable Schedule, then USWC may terminate that Service or Ancillary
Service, provided that written notice is given to Williams setting forth the
specifics of a default and provided that Williams is unable to cure such
quality default within five (5) days after notice of the default is received by
Williams.
Either party may terminate this Agreement if the other is in default of any
material obligation contained herein, which default has not been cured within
fifteen (15) days following the receipt of notice of such default setting forth
the specifics of such default. Termination and receipt of any applicable refund
are USWCs remedies in the event of any such Williams' default.
8.7 Use of Services. Williams' obligation to provide Services or Ancillary
Service to USWC is subject to the following conditions: (a) Services or
Ancillary Service shall not be used for any unlawful purpose, (b) Services on
the limited-use portion of Williams network may be used only for multimedia
transmissions (i.e., video and radio transmission services and/or related
applications including, but not limited to, graphic, visual, imaging,
interactive and multimedia, frame relay services, ATM, LSS, and IP services)
and USWC agrees to identify when the Services it requests are multimedia ("Use
Representation"), (c) at least ten percent (10%) of the transmissions shall be
interstate transmissions, and (d) USWC further represents that this Agreement,
to the extent it is subject to FCC regulation, is an inter-carrier agreement
not subject to the filing requirements of Section 211(a) of the Communications
Act of 1934, as amended. Services on the full-use portion of the Williams
network are not subject to the limitation of subsection 8.7(b), and do not
require a "Use Representation."
To the extent USWC has made a Use Representation, Williams shall defend,
indemnify and hold harmless USWC from any claim, loss, suit, or other
proceeding by WorldCom, Inc., involving a challenge to the use of Williams'
network for such Service. USWC shall cooperate in the defense of any such
claim. In addition, if the challenge materially precludes Williams from
providing Services as requested by USWC or if USWC has not made a Use
Representation but Williams is unable to provide requested Services on its
full-use portion of its network either party shall be entitled to terminate
this Agreement with no further liability for either party on thirty (30) days
notice, which termination shall be the sole and exclusive remedy for liability
to provide the requested services.
8.8 Proprietary Information. USWC understands and agrees that the terms and
conditions of this Agreement and all documents referenced herein (including
invoices to USWC for Services or Ancillary Service provided hereunder) are
confidential as between USWC, Williams and its affiliates and shall not be
disclosed by USWC to any party other than the directors, officers, and
employees of USWC or agents of USWC who have specifically agreed to
nondisclosure of the terms and conditions hereof. Violation by USWC or its
agents of the foregoing provision shall entitle Williams, at its option, to
discontinue Services or Ancillary Service to USWC without further obligation or
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liability to USWC. USWC further agrees that any USWC generated press release,
advertisement or publication regarding this Agreement, Services or Ancillary
Service provided hereunder or in which Williams, or its affiliates are to be
mentioned, will be submitted to Williams for its written approval prior to
publication. USWC understands and agrees that Williams may disclose such
information as may be required under applicable law including, without
limitation, filing of tariffs.
Further, both parties agree that any confidential information (noted in writing
as being confidential) received from the other party pursuant to any activities
under this Agreement will be used only for the purposes of this Agreement and
will not be used for any other purposes on any other project(s) by either
party. Both parties agree that no confidential information will be transferred
to any person or entity on bound by the Nondisclosure Agreement dated October
22, 1997 (attached hereto as Schedule C), and incorporated into this Agreement
by reference. The terms of the October 22, 1997 Nondisclosure Agreement are
incorporated herein by reference and made applicable to this Agreement.
Any information exchanged between the parties which is confidential and which,
when disclosed, is noted in writing as being confidential, will be subject to
the terms of this Section and disclosed as permitted in the Nondisclosure
Agreement. Each party agrees that each of its employees receiving confidential
information will be informed that such information is subject to the
Nondisclosure Agreement and will be bound by Schedule C; that confidential
information will remain the property of the party disclosing it; that all
copies of confidential information will be returned upon request; that the
party receiving confidential information will treat it in the same degree of
care as it affords to its own confidential information of like character; and
that the receiving party will not reproduce confidential information except as
necessary to perform its duties under this Agreement or as otherwise
specifically authorized in writing. Further, the parties agree not to
disseminate confidential information to any employee or division not directly
involved in providing services under this Agreement. The provisions of the
Nondisclosure Agreement will survive the expiration of this Agreement for a
period of one year after the expiration or termination of this Agreement.
8.9 Intrastate Interexchange Services. USWC may use any interexchange Service
provided under this Agreement only if such interexchange Service is used for
carrying interstate telecommunications (i.e., telecommunications subject to the
jurisdiction of the Federal Communications Commission). Williams and its
affiliates shall not be obligated to make available interexchange Service on a
circuit with end points within a single state or service on a circuit which
originates/terminates at points both of which are situated within a single
state unless USWC represents in writing that such interexchange Service or
circuits shall be used to carry interstate telecommunications. If it is
determined at any time that such interexchange Service or circuit is subject to
state regulation, the interexchange Service or circuit may be provided by
Williams or its affiliates pursuant to applicable state laws, regulations and
applicable tariffs, or Williams and its affiliates may discontinue provision of
the affected interexchange Service or circuit.
8.10 Customer Responsibilities. USWC has sole responsibility for installation,
testing and operation of facilities, services and equipment ("USWC Facilities")
other than those specifically
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provided by Williams as part of the Service or Ancillary Service as described
in a Service Order. In no event will the untimely installation or nonoperation
of USWC Facilities relieve USWC of its obligation to pay charges for the
Service or Ancillary Service after the start of Services as set forth in the
Service Order.
9.0 MISCELLANEOUS PROVISIONS.
9.1 Title to Equipment. This Agreement shall not, and shall not be deemed to,
convey to USWC title of any kind to any of the transmission facilities, digital
encoder/decoders, telephone lines, microwave facilities or other facilities
utilized in connection with the Services or Ancillary Service. Any equipment
provided by USWC must be itemized on a schedule listing all such USWC-provided
equipment and appended to the Service Order to which use of that equipment
relates ("USWC Equipment Inventory"). Williams shall not be obligated to
provide any Services or Ancillary Service for USWC if USWC will be providing
any of its own equipment unless and until such equipment is itemized on the
applicable USWC Equipment Inventory.
9.2 NOTICE. All notices to be sent to a party pursuant to this Agreement shall
be in writing and deemed to be effective upon (i) personal delivery, (ii) three
days after mailing certified mail return receipt requested, (iii) on the day
when the notice has been telexed or telecopied if during business hours and
followed by express mail priority next-day delivery, or (iv) in the case of
invoices, upon the Due Date. In each case, the notice shall be sent to the
person identified in this Section at the Full Business Addresses of the parties
as they appear herein. The effective date for any notice under this Agreement
shall be the date of delivery of such notice, not the date of mailing.
The Full Business Address for purposes of notice under this Section as well as
telephone voice and facsimile numbers for reservation of services and
troubleshooting shall be:
One Williams Center, 26th Floor
Tulsa, Oklahoma 74172
Telephone: (918) 588-5760
Fax: (918) 561-6578
Attention: Contract Administration
USWC:
- ------------------------------------
- ------------------------------------
- ------------------------------------
Telephone:
------------------------
Fax:
--------------------------------
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9.3 Merger/Integration. This Agreement (including the attached Schedules, as
they may be modified from time to time) consists of all the terms and
conditions contained herein and in documents incorporated herein specifically
by reference. This Agreement constitutes the complete and exclusive statement
of the understanding between the parties and supersedes all proposals and prior
agreements (oral or written) between the parties relating to Services or
Ancillary Service provided hereunder.
9.4 Written Amendment. USWC agrees that any addition, deletion or modification
to this Agreement shall not be binding on Williams except by written agreement
executed by Williams.
9.5 No Venture. The provision of Services or Ancillary Service shall not create
a partnership or joint venture between the parties.
9.6 Conflict of Law. In addition to the nonpayment of any sum due hereunder,
Williams may immediately suspend Services or Ancillary Service in whole or part
if Williams determines that such Services or Ancillary Service violate the
Communications Act of 1934, as amended (including the Telecommunications Act of
1996), or that the imposition of any state or federal statute, or promulgation
of any rule, regulation, or order of the Federal Communications Commission
("FCC") or other governing body makes Williams's performance commercially
impracticable, as such laws may be in effect from time to time.
9.7 Assignment. USWC shall not assign or otherwise transfer (including without
limitation, a transfer due to a "Change of Control") its rights or obligations
under this Agreement without the prior written consent of Williams, which shall
not be unreasonably withheld. Any such assignment or transfer of USWC's rights
or obligations without such consent shall entitle Williams to terminate the
Services or Ancillary Service provided hereunder at its option upon ten (10)
days' prior written notice to USWC. A "Change in Control" shall be deemed to be
an assignment, merger, sale of a controlling interest or other transfer of a
controlling ownership interest. Notwithstanding the foregoing, the parties
recognize that other parties may, upon the mutual agreement of Williams and
USWC, be included as additional customers of the Services and Ancillary
Services under this Agreement and be entitled to the discounts hereunder.
Notwithstanding the foregoing, USWC may freely assign or transfer any of its
rights or obligations hereunder, in whole or part, to any wholly-owned
affiliate of US West Communications Group, Inc.
9.8 Choice of Law. This Agreement shall be governed by the laws of the State of
New York without regard to choice of law principles.
9.9 Interpretation. No rule of construction requiring interpretation against
the draftsman hereof shall apply in the Interpretation of this Agreement.
9.10 No Third Party Beneficiary. The provisions of this Agreement are for the
benefit only of the parties hereto, and no third party may seek to enforce or
benefit from these provisions.
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9.11 Attorney's Fees. If a proceeding is brought for the enforcement of this
Agreement or because of any alleged or actual dispute, breach, default or
misrepresentation in connection with any of the provisions of this Agreement,
the prevailing party shall be entitled to recover reasonable attorneys' fees
and other costs and expenses incurred in such action or proceeding in addition
to any other relief to which such party may be entitled.
9.12 Severability. In the event any provision of this Agreement conflicts with
any statute, rule or order of any governmental unit or regulatory body, or
tariff then, if required by law, such statute, rule, order or tariff shall
control.
9.13 No Waiver. The failure of either party to enforce any provision hereof
shall not constitute the permanent waiver of such provision.
9.14 Resolution of Disagreements Among Parties. No party to this Agreement
shall be entitled to take legal action with respect to any dispute relating to
this Agreement until it has complied in good faith with the following
alternative dispute resolution procedures. If a dispute, claim or controversy
arises with respect to or relates to any Section of this Agreement, then the
following dispute resolution procedures shall govern the parties' conduct:
(a) The parties shall attempt promptly and in good faith to
resolve any dispute arising out of or relating to this
Agreement through negotiations between representatives who
have authority to settle the controversy. Any party may give
the other party written notice of any such dispute not
resolved in the normal course of business. Negotiations
extending ten (10) days after the disputing party's notice
shall be deemed at an impasse, unless otherwise agreed by the
parties. If a negotiator intends to be accompanied at a
meeting by an attorney, the other negotiator(s) shall be
given at least two (2) working days notice of such intention
and may also be accompanied by an attorney. All negotiations
pursuant to this clause are confidential and shall be treated
as compromise and settlement negotiations for purposes of the
Federal and state Rules of Evidence.
(b) If a dispute is at an impasse (i.e., it has not been resolved
within ten (10) days of the disputing party's notice), the
dispute shall be settled by arbitration in Kansas City,
Missouri, administered by the American Arbitration
Association in accordance with the Commercial Arbitration
Rules of the American Arbitration Association in effect on
the date that such notice is given. If the parties are unable
to agree on a single arbitrator within ten (10) days from the
date of an impasse as set forth in Subsection (a), then USWC
and Williams shall each select one arbitrator within ten (10)
days and the two (2) arbitrators shall select a third
arbitrator within ten (10) days. If a party does not
designate an arbitrator or if the two appointed arbitrators
cannot agree on the final arbitrator within the foregoing
time periods, then the American Arbitration Association shall
select the arbitrator(s)upon request of either party. The
decision of the arbitrator(s) shall be final and binding upon
the parties and shall
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include written findings of law and fact, and judgment may be
obtained thereon by either party in a court of competent
jurisdiction. Each party shall bear the cost of preparing and
presenting its own case. The cost of the arbitration,
including the fees and expenses of the arbitrator(s), shall
be shared equally by the parties hereto unless the award
otherwise provides. The arbitrator(s) shall be instructed by
the parties to establish procedures such that a decision can
be rendered by the arbitrator(s) within sixty (60) days of
the date that the last arbitrator is selected.
(c) The obligation herein to arbitrate shall not be binding upon
any party with respect to requests for preliminary
injunctions, temporary restraining orders, specific
performance or other procedures in a court of competent
jurisdiction to obtain interim relief when deemed necessary
by such court to preserve the status quo or prevent
irreparable injury pending resolution by arbitration of the
actual dispute.
U S WEST COMMUNICATIONS, INC. VYVX, INC.
By: By:
-------------------------------- --------------------------------
Name: Name:
------------------------------- ------------------------------
Title: Title:
------------------------------ ------------------------------
Date: Date:
------------------------------ ------------------------------
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Schedule A
Williams Network Private Line Service
SERVICES & PRICING
This Private Line Service Schedule ("PLSS") is made as of this 5th day of
January, 1998, and is subject to that Carrier Services Agreement No.
________________ (the "CSA") by and between Vyvx, Inc. d/b/a Williams Network,
a Delaware corporation ("Williams"), and U S West Communications, Inc., a
Colorado corporation ("USWC").
1. DESCRIPTION: Williams Network Private Line Service (the "Service")
provides domestic circuits operating in forms specified on the
attached Pricing Exhibit for the route(s) specified in a Service Order
and meeting the technical requirements defined in the "Technical
Specifications for Private Line Service" attached hereto.
2. RATES & CHARGES: Williams Network Private Line Service has three basic
rate elements; IXC Charges, Local Access Charges, and Non-recurring
Charges.
2.1 IXC. IXC rates are determined by reference to Exhibit 1 hereto and
will be set forth on the Service Order.
2.2 Local Access Charges. Local Access Charges are based on the cost of
transmission capacity provided by USWC or a third parry supplier to
extend the Services provided by Williams from a Williams Point of
Presence to any other location ("Local Access Services"). Williams
shall use reasonable efforts to order Local Access services on behalf
and upon request of USWC, provided that USWC provides Williams with a
letter of agency. Where available, and if requested by USWC, Williams
will use reasonable efforts to use USWC's requested Local Access
provider. If Williams places an order for USWC for Local Access
Services, Williams will bill USWC for such services and USWC shall
hold harmless and indemnify Williams from any loss or liability
incurred by Williams as a result of Williams ordering any such Local
Access Services from a third party. USWC may, upon Williams' prior
written approval, order its own local access services. If USWC orders
its own Local Access Services, USWC shall be billed directly by the
supplier of such services and Williams shall not be responsible for
billing any such charges.
2.3 Non-recurring charges are as specified on Exhibit 1.
2.3.2 Additional Installation/Maintenance/Engineering are as specified on
Exhibit 1.
2.3.3 Local Loop Billing Administration is as specified on Exhibit 1.
The above non-recurring charges are subject to change, upon thirty
(30) days prior written notice from Williams to USWC.
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3. TERM OF SERVICES:
3.1 Upon acceptance of a Service Order, Williams shall confirm USWC's
requested Start Date, or inform USWC of the estimated date for the
delivery of each service. Williams shall use best reasonable efforts
to install each such service on or before the Start Date, but the
inability of Williams to deliver a facility by such date shall not be
a Default under this Agreement. If Williams fails to make any facility
available within thirty (30) days after the Start Date, USWC's sole
remedy shall be to cancel the Service Order which pertains to such
Service by ten (10) calendar days prior written notice to Williams.
3.2 The effective date of each service (the "Service Effective Date")
shall begin on the date on which USWC accepts delivery of such
Service. If USWC fails to give written notice that the Service is in
material non-compliance with the applicable technical specifications,
as modified from time to time by Williams (the "Specifications")
within fifteen (15) business days after notification to USWC by
Williams that the Service is available, USWC shall be deemed to have
accepted such Service, and the Service Effective Date shall commence
as of the fifteenth (15th) business day following such notification by
Williams. Following notice by USWC of material non-compliance as set
forth above, Williams shall promptly take such reasonable action as is
necessary to correct any such non-compliance in the Service and shall,
upon correction, notify USWC of a new Service Effective Date.
4. CHANGE OF SERVICES:
4.1 Change of Service Date. If USWC desires to change the date on which
USWC has requested that Service be available, USWC may be charged a
Change of Service Date Charge. Such charge will not apply to USWC's
first change request, as long as such request is made within fifteen
(15) business days prior to the original Requested Service Date. If
USWC makes a second change, or such change is requested after fifteen
(15) days prior to the original Requested Service Date, USWC will be
charged Williams' then applicable Change of Service Date Charge. USWC
will also be charged for any charges incurred by Williams from third
party providers as a result of USWC's request for Change of Service
Date.
4.2 Change of Service Order. If USWC requests a modification to the
information contained in a Service Order (other than a Change of
Service Date) prior to completion of installation of the Service, USWC
will incur a Change of Service Order Charge. No charge will be
incurred if the change is to the IXC part of the Service Order and is
administrative in nature (i.e., billing address, contact information,
etc.). A charge will be incurred if the administrative change relates
to Local Access for which Williams is acting as agent.
Change of Service Order charges will be lower if the USWC requests
such change within five (5) business days after a Service Order has
been accepted by Williams ("pre-engineering") and will be higher if
such change is received after that time ("post-engineering"). Any
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<PAGE> 18
expedited order will be considered to be in the post-engineering stage
two (2) business days after the Service Order is accepted by Williams.
4.3 Change of Service Charges. If USWC requests a change to Services after
such Services have been installed, USWC will incur a Change of Service
Charge. If such Change of Service is administrative in nature, USWC
will not incur a charge, unless such administrative change applies to
Local Access services which have been ordered by William as agent for
USWC. In addition to the Change of Service Charge, USWC will be
responsible for any charges due to re-engineering which is required as
a result of USWC's request for Change of Service.
5. OUTAGE CREDITS:
5.1 USWC acknowledges the possibility of an unscheduled, continuous and/or
interrupted period of time when a Service or Services are
"unavailable" (as defined in the Specifications) (hereafter an
"Outage"). An Outage shall begin upon recognition by Williams that the
Service is interrupted. In the event of an Outage, USWC shall be
entitled to a credit (the "Outage Credit") as follows: (i) for an
Outage lasting continuously for one (1) hour or less, ten percent
(10%) of the monthly recurring charge (as stated on the applicable
Service Order), or (ii) for an Outage lasting continuously more than
one (1) hour, one hundred percent (100%) of the monthly recurring
charge (as stated on the applicable Service Order).
5.2 USWC shall not receive an Outage Credit if the interruptions, (a)
caused by the negligence or willful misconduct of USWC or others
authorized by USWC to use the services under this Agreement, (b) due
to the failure of power, facilities, equipment, systems or connection
not provided by Williams, (c) caused by the failure of access to
Williams' fiber optic network, except for Williams' giving
pass-through credits from the access provider as available, (d)
resultant from scheduled maintenance where USWC has been notified of
scheduled maintenance in advance, (e) due to a Force Majeure event as
defined in Section 8.5 of the CSA.
5.3 All Outage Credits shall be credited on the next monthly invoice for
the affected Service.
5.4 The Outage Credit described in this Section 5 of this PLSS shall be
the sole and exclusive remedy of USWC in the event of any Outage, and
under no circumstance shall an outage be deemed a Default under this
Agreement.
SIGNATURE PAGES TO FOLLOW
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IN WITNESS WHEREOF, the parties hereto have executed this Private Line Service
Schedule as of the day and year first above written.
- -------------------------------------- -------------------------------------
U S WEST Communications, Inc.: VYVX, Inc.:
- -------------------------------------- -------------------------------------
Signature of Authorized Representative Signature of Authorized Representative
- -------------------------------------- -------------------------------------
Printed Name Printed Name
- -------------------------------------- -------------------------------------
Title Title
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EXHIBIT I TO SCHEDULE A
PRICING EXHIBIT
COMMITMENT AND PRICING MATRIX (ON NETWORK)
****
ON NETWORK BANDWIDTH PRICING FOR NON-RECURRING CHARGES
****
COLLOCATE
****
20
<PAGE> 1
Redacted portions have been marked with asterisks (****). Confidential treatment
has been requested for the redacted portions. The confidential redacted portions
have been filed separately with the Securities and Exchange Commission.
CONFIDENTIAL TREATMENT
EXHIBIT 10.29
WILTEL COMMUNICATIONS,
L.L.C.
&
NORTHERN TELECOM INC.
DISTRIBUTORSHIP AGREEMENT
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TABLE OF CONTENTS
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ARTICLE ONE
ESTABLISHMENT OF DISTRIBUTORSHIP
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Section 1.1 DEFINITIONS: Page 1
Section 1.2 EFFECTIVE DATE Page 5
Section 1.3 TERM, RENEWAL, REPLACEMENT, AND EXPIRATION Page 5
Section 1.4 GRANT OF DISTRIBUTION RIGHTS Page 6
Section 1.4.1 EXISTING DISTRIBUTORS Page 6
Section 1.4.2 RESERVATION OF RIGHTS Page 6
Section 1.5 NON-EXCLUSIVE RELATIONSHIP Page 6
Section 1.6 AFFILIATES OF DISTRIBUTOR Page 7
Section 1.7 NO FAVORED DISTRIBUTOR Page 7
ARTICLE TWO
OBLIGATIONS OF THE PARTIES
Section 2.1 DISTRIBUTOR'S OBLIGATIONS Page 8
Section 2.1.1 DISTRIBUTION STANDARDS Page 8
Section 2.1.1.1 DISTRIBUTION TO OTHER THAN END USERS Page 9
Section 2.1.1.2 SPECIFIC ACCOUNT PROGRAM (a) Page 10
Section 2.1.2 MINIMUM DISTRIBUTION LEVEL Page 11
Section 2.1.3 ADVERTISING AND PROMOTION Page 12
Section 2.1.4 USE OF MARKS Page 12
Section 2.1.5 OPERATING REQUIREMENTS Page 13
Section 2.1.5.1 SERVICE CENTERS Page 13
Section 2.1.5.2 SERVICE STANDARDS Page 13
Section 2.1.5.3 RIGHT TO ENSURE SERVICE Page 13
Section 2.1.5.4 RIGHT TO INSPECT INSTALLATIONS Page 14
Section 2.1.6 RECORD KEEPING AND REPORTING Page 14
Section 2.1.7 SUBCONTRACTING TO THIRD PARTIES Page 14
Section 2.1.8 SALES AGENT AUTHORIZATION Page 15
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ARTICLE THREE
OBLIGATIONS OF NORTEL
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SECTION 3.1 SUPPORT OF DISTRIBUTOR BY NORTEL Page 17
SECTION 3.2 ACCOUNT DIRECTOR/MANAGER Page 18
SECTION 3.3 TRAINING Page 18
SECTION 3.4 PRODUCT CATALOG Page 18
SECTION 3.5 NORTEL SUPPORT IN EVENT OF CATASTROPHE Page 18
SECTION 3.6 PROGRAMS OF SUPPORT Page 19
SECTION 3.7 PROTECTION AGAINST POTENTIAL LIABILITIES Page 19
ARTICLE FOUR
PROVISION OF PRODUCTS
SECTION 4.1 PRODUCT SPECIFICATIONS Page 19
SECTION 4.1.1 DRAWINGS AND SPECIFICATIONS Page 19
SECTION 4.1.2 FCC REGISTRATION Page 19
SECTION 4.1.3 RFE/EMI STANDARDS Page 19
SECTION 4.1.4 CHANGES IN DESIGN OR MANUFACTURE Page 20
SECTION 4.1.5 RETROFITS Page 20
SECTION 4.1.6 OCCUPATIONAL SAFETY AND HEALTH Page 21
SECTION 4.2 SALE AND PURCHASE OF PRODUCTS Page 21
SECTION 4.2.1 FORECAST OF ORDERS Page 21
SECTION 4.2.2 DELIVERY; TITLE; RISK OF LOSS; SECURITY INTEREST Page 21
SECTION 4.2.3 NET DISTRIBUTOR PRICE; TAXES; CHANGES IN PRICE Page 22
SECTION 4.2.4 PAYMENT TERMS Page 23
SECTION 4.3 SOFTWARE LICENSES Page 23
SECTION 4.4 LIMITED WARRANTIES Page 25
SECTION 4.4.1 LIMITED WARRANTY OF TITLE Page 25
SECTION 4.4.2 LIMITED HARDWARE AND SOFTWARE WARRANTIES; NO
SERVICE WARRANTY Page 25
SECTION 4.4.3 CONDITIONS PRECEDENT Page 25
SECTION 4.4.4 LIMITATION ON WARRANTIES Page 26
SECTION 4.4.5 POST WARRANTY SUPPORT Page 26
SECTION 4.4.6 LONG TERM SOFTWARE SUPPORT Page 27
SECTION 4.4.7 CESSATION OF MANUFACTURE; CHANGES IN DESIGN;
ALLOCATION OF PRODUCT; RELEASE OF NEW PRODUCTS Page 27
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ARTICLE FIVE
PROPRIETARY INFORMATION
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SECTION 5.1 DISCLOSURE OF PROPRIETARY INFORMATION 18
SECTION 5.2 APPLICATION OF RESTRICTION 18
SECTION 5.3 SURVIVAL OF RESTRICTION 18
ARTICLE SIX
COMPLIANCE WITH LAWS: GRATUITIES AND INSURANCE
SECTION 6.1 COMPLIANCE WITH LAWS 18
SECTION 6.2 GRATUITIES 18
SECTION 6.3 INSURANCE COVERAGE 18
SECTION 6.4 MISCELLANEOUS OBLIGATIONS
SECTION 6.4.1 RIGHT OF ACCESS/HARMONY 19
SECTION 6.4.2 PLANT AND WORK RULES 19
SECTION 6.4.3 PERSONAL RELEASES VOID 19
ARTICLE SEVEN
BREACH OF AGREEMENT: TERMINATION
SECTION 7.1 BREACH OF THIS AGREEMENT 19
SECTION 7.2 TERMINATION OF DISTRIBUTOR 19
SECTION 7.3 TERMINATION FOR STATED CAUSES 19
SECTION 7.4 SUPPORT OF DISTRIBUTOR AFTER TERMINATION 20
SECTION 7.5 FORCE MAJEURE 20
ARTICLE EIGHT
GENERAL TERMS AND CONDITIONS
SECTION 8.1 LIMITATION OF LIABILITIES 21
SECTION 8.2 GENERAL INDEMNITIES 21
SECTION 8.3 INTELLECTUAL PROPERTY INFRINGEMENT 21
SECTION 8.4 ENFORCEMENT OF INDEMNITIES
SECTION 8.4.1 NOTICE OF CLAIMS 22
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ARTICLE NINE
MISCELLANEOUS
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SECTION 9.1 ASSIGNMENT AND DELEGATION 23
SECTION 9.2 NOTICES 23
SECTION 9.2.1 ADDRESS FOR NORTEL 23
SECTION 9.2.2 ADDRESS FOR DISTRIBUTOR 23
SECTION 9.3 SURVIVAL OF SOFTWARE LICENSES AND SUBLICENSES 23
SECTION 9.4 ANNEXES INCORPORATED 24
SECTION 9.5 GOVERNING LAW 24
SECTION 9.6 PRINCIPLES OF INTERPRETATION
SECTION 9.6.1 SEVERABILITY 24
SECTION 9.6.2 HEADINGS FOR CONVENIENCE ONLY 24
SECTION 9.6.3 WAIVERS OR AMENDMENTS 24
SECTION 9.6.4 SURVIVAL OF OBLIGATIONS 24
SECTION 9.7 PRODUCT REFERENCE GUIDE AND PRODUCT CATALOG 24
SECTION 9.8 ENTIRE AGREEMENT 25
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DISTRIBUTORSHIP AGREEMENT
This Distributorship Agreement ("Agreement") is entered into by and between
Northern Telecom Inc., a corporation created and existing under the laws of the
State of Delaware ("Nortel"), and WilTel Communications, L.L.C., a limited
liability company created and existing under the laws of the State of Delaware
("Distributor").
Nortel desires to obtain assistance in the sale, installation, and maintenance
of its products covered by the terms of this Agreement within specified portions
of the United States.
Distributor desires to become one of Nortel's distributors, and to sell,
install, and maintain Nortel's products which are covered by the terms of this
Agreement within those specified portions of the United States.
Therefore, the Parties agree:
ARTICLE ONE
ESTABLISHMENT OF DISTRIBUTORSHIP
Section 1.1 DEFINITIONS:
For the purpose of this Agreement certain terms have been defined below:
"Affiliate" or "Affiliates": shall mean certain legal entities related to
Distributor and agreed to in writing in Annex C to this Agreement.
"Class A Corrective Retrofits": shall mean retrofits to Products shipped
pursuant to this Agreement which are designed to correct electrical or
mechanical conditions rendering the Product functionally inoperable or creating
a significant safety hazard.
"Class B Corrective Retrofits": shall mean retrofits to Products shipped
pursuant to this Agreement which are designed to correct conditions or
performance deficiencies not requiring a Class A Corrective Retrofit.
"Commercial List Price": shall mean the price or license fee in U.S. dollars
specified in the Product Catalog for the ordered Products, Software and/or
Services in effect on the date the order is accepted by Nortel.
"Designated Hardware": shall mean the Hardware for which specific Software was
supplied.
"Disclosing Party": shall mean that party to this Agreement which, in any
particular instance, discloses Proprietary Information to the other party.
"Distribute" or "Distribution": shall mean the offer or sale, lease, or rent of
Hardware, or the offer or transfer of a license to use Software in connection
with Designated Hardware as an agent for Nortel or Nortel's suppliers, to End
Users.
"Distributorship Agreement": shall mean this Agreement plus the version of the
Product Reference Guide, in effect from time to time, for Products made
available to Nortel Authorized Distributors under this Agreement. Nortel from
time to time may have contractual arrangements for the distribution of other
products or other terms and conditions, which will not be deemed subject to or
available under this Agreement.
"Distributor Discount": shall mean the amount in U.S. Dollars calculated by
multiplying the Commercial List Price by the distributor discount percentage
specified in the product Catalog for that particular Product.
"Effective Date": shall mean the date on which this document shall first become
an effective and binding obligation on the parties. The Effective Date shall be
determined as provided in Section 1.2.
"End User" or "End Users": shall mean a customer or customers buying, leasing,
or renting Hardware, and/or acquiring the right to use Software, for its own
use, or for the use of a related entity specifically identified to Distributor
in writing and for which the customer is acting, without charge, as a purchasing
agent. Lessors appearing in the chain of Distribution of the Product solely as
an incident of the provision of financing for the Distribution of the Product
shall be considered End Users but only for so long as only the lessor or the
lessee under such lease, but not both, shall have all rights against, and duties
to,
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Distributor and/or Nortel, as a result of the Software licensing procedures
permitted or required under this Distributorship Agreement. Except as provided
above, no customer buying in anticipation of Distributing such Products can be
an End User.
"Formal Notice": shall mean notice as defined in Section 9.2.
"Gross Distributor Price": shall mean the amount, in U.S. dollars, resulting
from the subtraction of the Distributor Discount from the Commercial List Price
for an order of a particular Product.
"Hardware": shall mean any physical portion of a Nortel or third party Product,
including money circuits and media upon which Software may be delivered, but
excluding Software.
"Mark": shall mean the trademarks, trade names and service marks now owned by,
licensed to, or hereafter obtained by Nortel or its suppliers for Products or
services or any portion thereof.
"Minimum Distribution Level": shall mean an amount of a particular Product,
measured at the Net Distributor Price, paid to Nortel, and established each year
by Nortel for each Product, as a measure of the minimum acceptable effectiveness
of Distributor in Distributing that Product within the Territory during a
specified period.
"Net Distributor Price": shall mean the amount, in U.S. dollars, resulting from
the subtraction of any applicable Other Discount from the Gross Distributor
Price for an order of a particular Product, and which a Distributor must pay to:
(1) acquire title to specific Hardware; or (2) acquire specific Software for
Distribution purposes or internal use purposes pursuant to a Software License.
"Nortel Authorized Distributor": shall mean, with respect to any particular
Product, any business entity with which Nortel shall have executed a
Distributorship Agreement for Distribution of that Product in the Territory
described in the Distribution Agreement.
"Other Discount": shall mean an amount, in U.S. dollars, calculated by
multiplying a designated percentage which may be specified from time to time by
Nortel in the Product Catalog or by other appropriate written notification to
Distributor. The concept of Other Discounts is intended to provide a means by
which Nortel management may, from time to time and at its discretion, institute
discounts on a Product in addition to the Distributor Discount. Other Discounts
are generally limited in time, location, purpose or type of intended End User.
"Product" or "Products": shall mean either Hardware or Software which
Distributor is authorized to Distribute pursuant to the terms of this Agreement.
"Product Catalog": shall mean that version of a Product Catalog, whether in hard
copy, or software on tangible media, or made available through on-line services
provided to authorized Distributors for Nortel Products, as the prime source of
pricing and ordering information which is in effect on the date of order
acceptance.
"Product Reference Guide": shall mean that version of a Product reference guide
that is provided to authorized Distributors as a source of Product information
and a reference guide to additional Product documentation which is in effect on
the date of order acceptance.
"Proprietary Information": shall mean any of: (1) information or data, in any
form (including but not limited to Software), which is either a trade secret of
the Disclosing Party or any of Nortel's suppliers, or in which the Disclosing
Party or any of Nortel's suppliers, holds any form of intellectual property
right, whether or not conspicuously marked to indicate its confidential or
proprietary nature; or (2) general business information, in any form not readily
available to the public which is of a nature that a reasonably prudent
businessperson would normally consider confidential, regarding the conduct of
business of the parties, and/or between the parties, and/or between the other
party and any End User (whether or not marked to indicate its nature); or (3)
any information regarding actual or potential future business and/or Product
plans of the other party (whether or not marked to indicate its nature) which is
not considered by all parties to this Agreement to be in the public domain.
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"Receiving Party": shall mean that party to this Agreement which, in any
particular instance, receives Proprietary Information.
"Regulatory Retrofits": shall mean retrofits to Products shipped pursuant to
this Agreement and which are designed to comply with changes in applicable
requirements imposed by appropriate governmental authority.
"Sales Agent": shall mean an individual or business entity with written
authorization from Distributor to act for Distributor in accordance with
Section 2.1.8 of this Agreement.
"Service Center": shall mean an appropriate physical facility, permanently
staffed with employees of Distributor, and meeting the Nortel requirements
specified in the Product Reference Guide.
"Significant Ownership Change": With regard to a Distributor, Significant
Ownership Change shall mean a transfer of a direct or beneficial interest (as
that term is defined for purposes of compliance with the regulations of the
U.S. Securities and Exchange Commission) in the control or profits of a
Distributor: (1) of 20% or greater; or (2) of any amount sufficient to cause a
change in majority ownership; whichever is leSection With regard to an
Affiliate, Significant Ownership Change shall mean a reduction of a direct or
beneficial interest (as that term is defined for purposes of compliance with
the regulations of the U.S. Securities and Exchange Commission) in the control
or profits of the Affiliate directly or indirectly held by Distributor or
Distributor's parent: (1) of 20% or greater; or (2) of any amount sufficient to
cause such beneficial interest to fall from a majority to less than a majority;
whichever is leSection
"Software": shall mean any set of one or more computer programs which is
composed of routines, subroutines, concepts, processes, algorithms, formulas,
ideas, know how, model, generated code, source code, and/or related
documentation, some or all of which are trade secrets and/or are copyrighted or
patented, in whole or in part, severally owned by or licensed to Nortel and/or
one or more of Nortel's suppliers, regardless of the particular delivery medium
in or on which such intangible assets licensed under this Agreement may be
embodied. The term Software shall also include any corrections, patches,
updates, or revisions to Software originally Distributed.
"Software Documentation": shall mean publications supplied with Software, which
may be in various media, to explain the construction, operation, and/or use of
the Software by the End User.
"Software License": shall mean the Nortel software license in Annex D of this
Agreement or as appropriate any applicable third party software license.
"Standard Lead Time": shall mean Nortel's most recent publicly announced
estimated interval between acceptance of an order for a particular Product by
Nortel and the expected date of shipment of that order to Distributor.
"Standard Price Item": shall mean any merchandise or service, other than
Hardware or Software, offered or provided to Distributor by Nortel in
furtherance of the purposes of this Distributorship Agreement.
"System": shall mean Hardware and Software necessary to deliver a particular
functioning configuration of Product to an End User specified by Nortel in the
applicable Product Catalog.
"Territory": may be described as: (1) a geographic area lying within the
boundaries of states and/or counties and/or cities; or (2) a geographic area
coextensive with a regulated utility serving area; or (3) a class list of
customers, or any combination of the three. Territory may consist of more than
one discrete geographical area and may be different for each authorized Product.
For purposes of this Agreement, "Territory" shall mean the Distributor's
authorized Territory for each authorized Product specified in Annex A to this
Agreement.
"United States": shall mean the fifty (50) states of the United States of
America and the District of Columbia.
"UTAM": shall mean the Unlicensed PCS (UPCS) Ad Hoc Committee for 1.9 GHz
Transition and Management. UTAM is designated by the FCC as the coordinator of
deployment of UPCS devices and relocation of incumbent microwave equipment in
the UPCS band.
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Section 1.2 EFFECTIVE DATE
This Agreement shall become effective on January 1, 1998 or the date this
Agreement is executed by a duly authorized Nortel representative, whichever is
later. The effective date for Territory and Product authorizations shall be the
effective dates specified in the relevant Annex A and Annex B to this Agreement.
Furthermore, Distributor agrees to be bound by the Product specific terms and
conditions in the Product Reference Guide that is in effect on the date the
Product order is accepted by Nortel.
Section 1.3 TERM, RENEWAL, REPLACEMENT, AND EXPIRATION
The term of this Agreement shall begin on the Effective Date and shall expire at
midnight, Central Time, December 31, 2000, unless sooner terminated in
accordance with the termination provisions of this Agreement, or renewed as
provided below. On or before October 1 of the year prior to the last calendar
year of an initial or renewal term, Nortel shall provide Formal Notice to
Distributor of Nortel's intention: (1) to renew this Agreement for an additional
three years from the end of the then current term; or (2) to replace this
Agreement, at the expiration of the then current term, with a different
Agreement (in which case Nortel shall attach a copy of the new Agreement to the
Formal Notice); or (3) to allow this Agreement, and the Distributor
relationship, to expire at the end of the then current term. Failure of Nortel
to provide such Formal Notice shall be deemed an election by Nortel of option
(1). If either option (1) or (2) is unacceptable to Distributor, or if Nortel
shall elect option (3), then the last calendar year of the then current term
shall be considered a "wind-down" or "disengagement" period. Distributor shall
notify Nortel within sixty (60) days of receipt of Nortel's Formal Notice of
Nortel's intent to pursue either option (1) or (2) if either option (1) or (2)
is unacceptable to Distributor.
Section 1.4 GRANT OF DISTRIBUTION RIGHTS
Nortel hereby grants to Distributor, for use only during the Term and only
within the Territory, a personal, non-transferable, non-exclusive right to: (1)
purchase Hardware in one or more of the product groups ("Product Groups") set
forth in Annex B from Nortel; (2) thereafter retain the Hardware for its own
use, for inventory purposes or to distribute the Hardware; (3) use Software for
Distributor's internal purposes pursuant to the terms and conditions of a
Software License; and (4) Distribute Software. Distributor's right to Distribute
Software shall include the right to order Software and retain same in inventory
solely for Distribution purposes.
The relationship of the parties under this Agreement shall be, and shall at all
times remain, one of independent contractors and not that of franchiser and
franchisee or joint venture. For the purpose of software licensing only, the
relationship of principal and agent is established. All persons furnished by
either party to accomplish the intent of this Agreement shall be considered
solely the furnishing party's employees or agents.
Section 1.4.1 EXISTING DISTRIBUTORS
Distributor acknowledges that Nortel has an existing network of
Distributors, some or all of which may have authorization to Distribute
within the Territory one or more of the Products covered by the terms
of this Agreement. Upon request, Nortel will provide Distributor with a
list of Nortel Authorized Distributors, sorted by state and county, and
the authorized Territory and Products of each.
Section 1.4.2 RESERVATION OF RIGHTS
Nortel may appoint additional Nortel Authorized Distributors, and may
itself and/or through any direct or indirect parent, subsidiary,
subsidiary of a parent, representative or agent Distribute the Products
covered by this Agreement, within the Territory and in competition with
Distributor, irrespective of the grant of rights to Distributor
contained within this Agreement.
Section 1.5 NON-EXCLUSIVE RELATIONSHIP
This Agreement is non-exclusive and, except as specifically provided otherwise
herein, shall not be construed: (1) to require Distributor to purchase only
from Nortel (except to the extent that new Nortel Products for resale may only
be purchased from Nortel, or in limited circumstances as described in Section
2.1.1.1 from other Nortel Authorized Distributors); (2) to require Distributor
to purchase any specific amount of Product from Nortel (except to the extent
that failure to purchase may result in termination of this Agreement); (3) to
require Nortel to sell all or any specific proportion of its output to
Distributor; or (4) to require Nortel to refrain from selling all or any
portion of its output to any other entity.
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Section 1.6 AFFILIATES OF DISTRIBUTOR
Affiliates initially agreed to by the parties are listed in Annex C. Provided
Distributor: (1) causes each Affiliate to agree in a writing addressed to Nortel
to be bound by all of the provisions of this Agreement (or if it does not obtain
such writing, shall be deemed to warrant that it has full rights, power to and
does sign this Agreement on behalf of itself and each named Affiliate), each of
which shall be bound by all of the provisions of this Agreement, and (2)
specifies and obtains Nortel's written authorization as to a Territory for each
named Affiliate, which Territory may extend no further than the boundaries of
Distributor's Territory, except to the extent restricted by the guaranteeing
Distributor in Annex C, then each such Affiliate shall have all rights of a
Nortel Authorized Distributor under this Agreement. By agreeing to list an
entity as an Affiliate, Distributor hereby guarantees the performance of its
Affiliates' obligations to Nortel and/or Nortel's suppliers. The provisions of
this Agreement shall apply to each Affiliate individually, but termination (by
either party) of this Agreement between Nortel and Distributor shall cause an
automatic termination with respect to all Affiliates. Affiliates may be added to
or deleted from Annex C by mutual written agreement.
Section 1.7 NO FAVORED DISTRIBUTOR
It is the intention of Nortel to execute a Distributorship Agreement with each
Nortel Authorized Distributor which, except for Territory, Affiliates, Products
and Sales Agents, is identical in substance to the Distributorship Agreement
between Nortel and every other Nortel Authorized Distributor. To that end,
Nortel shall promptly inform Distributor of al substantive differences between
this Agreement and any Distributorship Agreement executed by Nortel with any
other Nortel Authorized Distributor. Nortel and Distributor shall then execute a
new Agreement to replace this Agreement, and such new Agreement shall embody all
such changes which, in the reasonably exercised opinion of Distributor, do not
adversely affect Distributor's rights and obligations under this Agreement.
Nothing in this contractual provision shall be deemed to require either
Distributor or Nortel to renew or replace, or refrain from renewing or
replacing, this Agreement. Renewal or replacement shall be governed by the
provisions of Section 1.3.
ARTICLE TWO
OBLIGATIONS OF THE PARTIES
Section 2.1 DISTRIBUTOR'S OBLIGATIONS
Distributor hereby accepts appointment as a Nortel Authorized Distributor and
agrees, in accordance with the following standards, to devote all commercially
reasonable efforts to diligently promote the Distribution of the Products within
its authorized Territory and to satisfy the needs of its End Users within that
Territory.
Section 2.1.1 DISTRIBUTION STANDARDS
(a) DISTRIBUTOR SHALL:
(1) perform or comply with the required Product
training, pricing and support services specified in
the Product Reference Guide; and
(2) offer to all of its End Users a warranty for each
Product sold which is substantially as comprehensive
as the warranty extended to Distributor by Nortel
for the same Product; and
(3) be responsible for that portion of any warranty to
any End User which exceeds, whether in time or
scope, that provided for the applicable Product to
Distributor by Nortel under the terms of this
Agreement, and which was expressly granted or
implied to that End User by Distributor; and
(4) provide Nortel, upon Nortel's written request, with
a copy of an audited or certified financial
statement of Distributor, including a balance sheet,
income statement, and statement of changes in
financial position, for the most recent fiscal year
of Distributor ending not less than ninety days
before the date of Nortel's request; and
(5) comply with all federal, state and municipal laws
and regulations applicable to Distributor's
performance as a Distributor of the Product and
related services under this Agreement. Additionally,
Distributor shall comply with instructions given by
UTAM with respect to Distribution and deployment of
Products in the Unlicensed PCS Spectrum.
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(b) DISTRIBUTOR SHALL NOT:
(1) except as expressly allowed under Section 2.1.1.1,
Distribute Products to anyone whom Distributor knows
or reasonable should know are not End Users; or
(2) except as expressly allowed under Section 2.1.1.2
Distribute Products for installation outside the
Territory; or
(3) Distribute Products at locations within the
Territory at which Distributor is unable to provide
the service required by this Agreement; or
(4) convert, adjust, alter or modify Products, except to
the extent such action is in strict accord with the
provisions of the applicable Product Reference
Guide, or is authorized in writing by Nortel; or
(5) remove, alter, disconnect or negate any of the
safety features incorporated into Products; or
(6) Distribute any Product which is represented to an
End User to be a genuine, new and unused Product
unless it is known to Distributor to be, in fact,
genuine, new and unused because it was acquired from
Nortel by Distributor pursuant to this Agreement; or
(7) Distribute Software to anyone from whom Distributor
has not received and retained in its files a
properly executed Software License; provided,
however, that in the event Distributor installs
Software for an End User which requires acceptance
of the software license by opening a sealed package
or acceptance of an electronic software license
during installation, Distributor shall require End
User to accept such software license in the manner
indicated prior to installing the Software; or
(8) take any action which could reasonably be foreseen
to cause a material adverse effect upon the goodwill
of Nortel and/or the quality and functionality of
Nortel Products.
Section 2.1.1.1 DISTRIBUTION TO OTHER THAN END USERS
(a) Nortel recognizes that instances may arise in which
Distributor may wish to engage in forms of
Distribution not allowed by this Agreement, such as
some form of joint venture with or subcontract from
parties other than Nortel or another Nortel
Authorized Distributor, for the Distribution of a
limited amount of Products to a particular End User
in a transaction in which the contract signed by the
End User will be with an entity other than
Distributor or an Affiliate. If Distributor wishes
to engage in such Distribution, it shall submit to
Nortel a written request specifying: (1) the
proposed End User; (2) the party proposing to
contract with the End User; (3) the particular
configuration of Product involved; (4) the
installation location; (5) that Distributor will be
contractually bound, and contractually entitled, to
install the Products and to maintain them through
the end of the warranty period; (6) that Distributor
will offer to maintain the Product for the period
following the warranty period specified in the
Product Reference Guide, and, if Distributor intends
to subcontract the obligations of Section
2.1.1.1(a)(5) and Section 2.1.1.1.(a)(6) as allowed
by Section 2.1.7, then (7) the identity of the
subcontractor which will be used. Within ten
business days of receipt of such a request, Nortel
will notify Distributor of whether Nortel will
approve a deviation from the terms of this Agreement
based upon the information provided.
(b) In each instance in which Distributor is engaging in
activities contemplated by Section 2.1.1.1(a) and
provides Nortel with Formal Notice which would
constitute: (1) a representation that the value of
the portion of the prime contract with the End User
which is being subcontracted to Distributor
constitutes less than 33% of the total value of such
prime contract; (2) a representation that
Distributor will not further subcontract its
obligations to any entity except to Nortel or
another Nortel Authorized Distributor within that
Distributor's Territory and only if such other
Distributor has a service center appropriately
located to provide, at the installation location,
the level of service required by this Agreement; and
(3) representations providing to Nortel the
information requested bySection 2.1.1.1(a)(1)
throughSection 2.1.1.1(a)(7); then Nortel will not
object to such Distribution activity, and approval
may be considered automatic upon Nortel's receipt of
the required Formal Notice.
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Section 2.1.1.2 SPECIFIC ACCOUNT PROGRAM
(a) From time to time, Nortel may specify a limited
number of End User accounts which may be called
premier accounts, national accounts, major accounts,
large accounts, or other appropriate name, which
appear likely to purchase Nortel Products for
installation in widely dispersed geographic
locations within the United States. If Distributor's
Territory encompasses less than the entire United
States, then, at the request of such an account,
and/or at the request of Distributor, Nortel, in its
sole discretion, may name Distributor as authorized
to distribute to that End User account without
regard to the restrictions of Distributor's
Authorized Territory, but nevertheless only within
the United States. Any such designation shall only
be effective if made to Distributor, in writing, by
Nortel.
(b) Nortel will consider accounts for such designation:
(1) if the principal place of business of the End
User is within the Territory and (2) if Distributor
provides Nortel with a copy of a written request to
Distributor from the account demonstrating a
relationship and asking that Distributor offer to
provide the Products to the account wherever the
account may have operations within the United
States. If Distributor is designated by Nortel as a
supplier to such an account, then notwithstanding
Section 1.4, Distribution to that account will be
deemed to occur at the address of the principal
place of business of the account within the
Territory. However, for any Distribution of the
Products to that account by Distributor for
installation outside the Territory, the provisions
of Section 2.1.7(a)(3) shall not be available to
Distributor, and Distributor must either install the
Product itself or subcontract the installation to
Nortel or to a Nortel Authorized Distributor.
Establishment by Distributor of a Service Center
outside the Territory in order to service such a
specific account shall not be construed to authorize
Distribution to any other accounts outside the
Territory, except such other accounts as may be
specifically designated by Nortel pursuant to this
Section 2.1.1.2.
(c) Nortel may, in its discretion, appoint an account
manger for any account so designated, who shall be
responsible for coordinating Distributor sales to
that account, and who, in the course of such
coordination, shall engage in such direct contact
with the End User as may be reasonably necessary.
(d) Nortel may, in its sole discretion, revoke its
authorization to Distribution pursuant to
this Section 2.1.1.2 or its designation of any
account as a specific account at any time and for
any reason. Upon receipt of Formal Notice of such
revocation, Distributor shall immediately cease
Distributing to that account outside the Territory.
In such instance, Distributor may honor any formal
proposals for individual and specific installations
which had already been offered to the account as of
the date of receipt of the Formal Notice. In the
event of such a revocation, Nortel will offer to
Distributor Nortel's Support Agreement to allow
Distributor to continue to support those
installations of Products Distributed to the account
by Distributor outside its Territory during the
period the account was designated to be within the
scope of this section.
Section 2.1.2 MINIMUM DISTRIBUTION LEVEL
Nortel may establish, in writing, on or before October 1 of each year,
or subsequent to such date as appropriate, a product line ("Product
Line") and associated Minimum Distribution Level for that Product Line.
For ease of administration, the Minimum Distribution Level shall be
stated and measured in terms of the dollar value of each Product Line
for which Distributor shall have paid Nortel during the applicable
period or any pro rata portion thereof. In the event that Distributor
fails to meet the Minimum Distribution Level established by Nortel for
a particular year, Nortel shall have the right, in its sole discretion,
with or without other cause (1) to terminate this Agreement; or (2) to
terminate Distributor's right to Distribute Products for which Minimum
Distribution Levels have not been met; or (3) to assess **** in order
for Distributor to continue as a Nortel Authorized Distributor for the
remainder of the year following the year in which the Minimum
Distribution Level was not met.
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Section 2.1.3 ADVERTISING AND PROMOTION
Distributor shall not advertise or promote the Products outside the
Territory. Distributor shall not hold itself out within the Territory
as a Nortel Authorized Distributor or other than those Products as to
which Distributor has been authorized to Distribute in Annex B to this
Agreement. Distributor and Nortel shall regularly discuss planned
advertising and promotional efforts with respect to the Products.
Except as otherwise expressly agreed in writing, Distributor shall bear
all promotional, display and operating expenses incurred by it with
respect to the Distribution of the Products. Nothing contained in this
Section 2.1.3 shall imply any right in Nortel to pre-approve or screen
Distributor's advertising and/or promotional efforts. However, Nortel
shall have the right to prohibit the continued use by Distributor of
specific advertising and/or promotional materials which Nortel
reasonably believes will damage Nortel's reputation. Nortel shall not
use Distributor's name, tradename, or trademark in any advertising or
promotion without Distributor 's prior written consent.
Section 2.1.4 USE OF MARKS
(a) Distributor shall Distribute Products only under the Marks
used by Nortel and/or Nortel's suppliers, as appropriate.
Distributor shall make no use of the Marks which use would
imply that Distributor was a Nortel Authorized Distributor of
any products other than those Products as to which Distributor
has been authorized to Distribute in Annex B, hereto.
(b) From time to time, by use of the Products Catalog, or other
appropriate written notification, Nortel shall notify
Distributor of current Marks and any changes thereto.
Distributor shall not alter, obliterate, cover or remove any
Marks, serial number, or other symbols, characteristics or
legends appearing on any Product (including any associated
packaging, labels, manuals, and/or documentation). All Marks
are proprietary to Nortel or Nortel's suppliers, as the case
may be.
(c) This Section 2.1.4 shall not be construed to grant to
Distributor, or any End User, any general license to use such
Marks. Distributor shall not use or display any Marks except
in connection with the advertising, promotion or Distribution
of the Products within the Territory and in accordance with
the provisions of this Agreement. Distributor shall not use or
claim any Mark which is identical, or confusingly similar, to
any of Nortel's or Nortel's suppliers' Marks. Except as
expressly allowed by this Agreement, Distributor shall not
affix any different or additional Mark or other publicly
visible identifying Mark, symbol, logo or characteristic to
any Product. Distributor, in any of its advertising or
quotations to potential End Users which includes references to
any Mark, shall, at least once in a prominent place in each
such reference clearly indicate by the use of "(TM)", or
"(R)", as appropriate, that the particular Mark is that of
Nortel or of the particular Nortel supplier, as the case may
be. Upon termination or expiration of this Agreement
Distributor's privilege to use the Marks shall expire, and
Distributor shall immediately discontinue the active use of
same in connection with any business conducted by Distributor,
except for such use directly related to final disposal of any
inventory of Products held by Distributor on the date of
termination or expiration.
Section 2.1.5 OPERATING REQUIREMENTS
Section 2.1.5.1 SERVICE CENTERS
Distributor agrees to comply with the requirements for the
establishment and maintenance of Service Centers, service
standards and response time standards for each authorized
Product as specified in the Product Reference Guide.
Section 2.1.5.2 SERVICE STANDARDS
Nortel Products shall be Distributed, installed and maintained
in a manner which will neither damage the quality or
functionality of the Products or the reputation of Nortel nor
require extraordinary technical support from Nortel in order
to resolve installation and/or maintained problems.
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Section 2.1.5.3 RIGHT TO ENSURE SERVICE
In the event that Nortel shall have received a written
complaint from an aggrieved End User under warranty from
Distributor or maintenance contract with Distributor, which
compliant includes representations that the End User is not in
breach of its contract with Distributor and which leads Nortel
to reasonably believe that Distributor has failed to comply
with service standards and response standards as specified in
the Product Reference Guide, then Nortel may elect to provide
the required service itself or through such contractor or
contractors as Nortel may reasonably choose. Before acting on
an election under the preceding sentence, Nortel: (1) shall
notify Distributor of such election; and (2) shall notify
Distributor of Nortel's intention to wait 24 hours from the
time of such notice for Distributor to take corrective action
before itself taking any such action, except in circumstances
in which Nortel believes that failure to act immediately may
endanger life and/or property. Except to the extent that
Nortel is able to require the complaining End User to pay for
services Nortel chooses to provide, such services shall be
provided at Distributor's expense. In such case, Distributor
shall have no claim of any kind against Nortel.
Section 2.1.5.4 RIGHT TO INSPECT INSTALLATIONS
Subject to receipt of permission from the affected End User,
Nortel shall have the right, at any time and with reasonable
written notice to Distributor, to inspect any installation of
Products by Distributor, in order to ensure that the
requirements of this Agreement are being met. Upon receipt of
written request from Nortel, Distributor shall make all
commercially reasonable efforts to obtain any necessary
permission from the affected End User for such inspection and
to arrange a time permitting Distributor personnel to
accompany Nortel if Distributor so wishes. Nortel shall advise
Distributor of the results of any such inspection.
Section 2.1.6 RECORD KEEPING AND REPORTING
Distributor shall maintain a record of its Distribution of the Products
in order to comply with the requirements imposed upon Nortel by
Nortel's suppliers of Software and for Distributor's and Nortel's
protection in the event that products liability, copyright
infringement, trade secret misappropriation, or intellectual property
misuse claims related to the Products should arise. Such records shall
include: (1) documentation of Distributor's purchases of Hardware; (2)
documentation of Software ordered and received from Nortel from
Distribution and internal use purposes; (3) documentation of
Distributor's Distribution of Products to End Users; and (4) copies of
Software Licenses executed by each End User to which Software is
licensed. Distributor shall retain a copy of those records specified in
subsection (4) above and shall use all commercially reasonable efforts
to retain a copy of the records specified in subsections (1) (2) and
(3), for at least ten years from the date of Distribution of the
Product and such obligation shall survive the termination of this
Distributorship Agreement. Distributor may, upon termination of this
Agreement, satisfy the requirement to retain such records by delivering
complete and accurate copies of such records to Nortel and formally
assigning to Nortel all of Distributor's rights under all then
effective Software Licenses. Nortel, and any of Nortel's suppliers of
Software Distributed through Distributor which have ben identified to
Distributor in writing by Nortel and which are accompanied by Nortel
personnel, shall have a limited right, upon reasonable notice to
Distributor, to examine Distributor's records regarding the
Distribution of such Nortel or Nortel supplier generated Software
pursuant to the terms of this Agreement. Distributor will cooperate
fully with Nortel or any of its Software suppliers in the defense or
prosecution of any suit in which the existence or non-existence of a
Software License is either an issue or any aspect of such Software
License is in question.
Section 2.1.7 SUBCONTRACTING TO THIRD PARTIES
Distributor's obligations under this Agreement may be subcontracted
only as follows:
(a) Distributor may subcontract the installation, warrant period
maintenance, and post-warranty period maintenance of a Product
for which Distributor may contractually obligate itself, only
to: (1) Nortel; or (2) another Nortel Authorized Distributor
within that Distributor's Territory if such other Distributor
has a Service Center appropriately located to provide the
level of service required by the Product Reference Guide; or
(3) any other third party with the prior written approval of
Nortel, which approval may be withheld for any reason solely
in Nortel's discretion.
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(b) No subcontract shall relive Distributor of primary
responsibility to Nortel for the performance of Distributor's
obligations under this Agreement.
Section 2.1.8 SALES AGENT AUTHORIZATION
(a) If Distributor is authorized in Annex B to use Sales Agents in
the Distribution of a particular Product, then Distributor,
with Nortel's prior authorization with respect to each
proposed agent and subject to the provisions of subsections
2.1.8(b) through (f) below, may appoint Sales Agents for the
purpose of selling Products within the scope of the
Distributor's Product Authorization and Territory.
(b) Contracts between Sales Agents and the Distributor shall not
grant or purport to grant the right for Sales Agents to use
Nortel's trademarks, tradename or logos.
(c) Authorization by Nortel for Distributor to establish Sales
relationships by Nortel shall not constitute any release or
waiver by Nortel of any Distributor's covenants, obligations,
duties or indemnities under the Agreement.
(d) Distributor shall not give, disclose, provide copies or
otherwise make Nortel's Product Catalog, price manuals, price
lists, electronic pricing aids, or any other such forms of
documentation containing Nortel's prices or discounts to its
Sales Agents.
(e) When using Sales Agents, Distributor shall:
(1) Purchase all Products from Nortel. Nortel will not
accept any orders from a Sales Agent. Distributor
must pass title to Products (other than Software)
directly to the End User, and the Sales Agent may
not be in the chain of title. Distributor will be
responsible for assuring that each End User executes
appropriate Software Licenses as described elsewhere
in this Agreement.
(2) Remain responsible to the End User for the quality
and timeliness of all functions and work performed
by a Sales Agent.
(3) Place calls or other requests for support to Nortel.
Nortel support will be provided only to
Distributor's own employees. Nortel will not accept
calls or other requests for support from Sales
Agents.
(4) Appoint Sales Agents only pursuant to written
contracts reflecting fully the requirements of the
terms and conditions set forth in this Section 2.1.8
and, to the extent applicable, the terms and
conditions of this Agreement, and make them
available to Nortel for inspection upon request.
Further, such contracts shall prohibit Sales Agents
from altering or modifying Nortel Products.
(5) Provide adequate Product training to Sales Agents in
order to ensure they are fully capable of fulfilling
all requirements for which they are authorized.
(6) Require Sales Agents to participate in completing
Nortel's Customer Satisfaction Surveys.
(7) Provide to Nortel a monthly report or orders for
Products sold by each Sales Agent.
(8) Provide in contracts with Sales Agents that the
Sales Agents shall indemnify and hold Nortel
harmless from any liabilities, proceedings, damages
or costs arising out of or related to any
misrepresentation made about Nortel or the Products
to anyone or any act or omission related to or
arising from any failure to comply with the terms
and conditions of its contract with Distribu tor, or
its obligations related to this Agreement.
(9) Ensure Sales Agents are authorized to sell only
Products sold by Distributor within Distributor's
authorized Territory.
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(10) Provide in contracts with Sales Agents that their
appointment will terminate upon the earliest of
termination or expiration of this Agreement, or
Nortel's revocation of Distributor's right to
appoint Sales Agents.
(11) Indemnify, defend and hold Nortel harmless from any
claims, suits or proceedings, damages, liabilities,
and costs (including, without limitation, reasonable
attorneys' fees) which are attributable to any act
or omission of a Sales Agent, including, but not
limited to, any which arise from injury to or death
to persons or loss of or injury to property, which
are in any way connected with Sales Agent's
performance related to this Agreement or its
contract with Distributor.
(12) Remain responsible for all warranty obligations to
the End User and for all Product returns from the
End User in accordance with the terms and conditions
of this Agreement.
(13) Disclose to the End User that a Sales Agent may
perform the sales function only and may not perform
installation, diagnostic or maintenance services, or
work on-site.
(14) Advise the Sales Agent of all the limitations
imposed on Sales Agents by this Agreement
(including, without limitation, Nortel's right to
require the termination of a Sales Agent's
authorization).
(f) Nortel reserves the right to require Distributor to terminate
its relationship with a Sales Agent within thirty (30) days
following Formal Notice. Circumstances wherein Nortel in its
sole discretion may invoke such a right shall include, but are
not limited to:
(1) Failure of the Distributor or the Sales Agent to
abide by the terms and conditions specified herein;
or
(2) Failure of the Sales Agent to achieve satisfactory
ratings on Nortel's Customer Satisfaction Surveys;
or
(3) Misrepresentations by the Sales Agent to End Users,
potential End Users or others about the Products,
services and/or warranties available, or the
relationship the Sales Agent has with the
Distributor or Nortel; or
(4) Any other reason that in the sole judgment of Nortel
is necessary to achieve Nortel's distribution
strategy or to comply with the law.
ARTICLE THREE
OBLIGATIONS OF NORTEL
Section 3.1 SUPPORT OF DISTRIBUTOR BY NORTEL
Nortel shall provide Distribution and promotional support to Distributor as
provided in the following sections. Each item and type of support, except
provision of a Product or Product Catalog, is considered a Standard Price Item.
Nortel reserves the right: (1) to discontinue offering any Standard Price Item;
(2) to add any Standard Price Item; (3) to institute, raise or lower price for
any Standard Price Item; and (4) to announce and/or change the terms and
conditions upon which Standard Price Items are offered. Nortel will give
Distributor thirty (30) days prior Formal Notice of any such changes. In the
provision of such support, Nortel shall not take any action, other than as
authorized in this Agreement, which could reasonably be foreseen to cause a
material adverse effet upon the goodwill of the Distributor. A Standard Price
Item is not eligible for Distributor Discount or Other Discount.
Section 3.2 ACCOUNT DIRECTOR/MANAGER
Nortel shall appoint one or more Account Directors and/or Account Managers who
shall be responsible for providing administrative support and coordination to
Distributor. An Account Director or Manager may provide support to one or more
Distributors in connection with the Distribution of the Products. The Account
Director/Managers shall have no authority to interpret or vary the terms of this
Agreement or other notices or programs issued in support of this Agreement.
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Section 3.3 TRAINING
Nortel will provide access to Nortel's Training Centers for various forms of
training for employees of Distributor. Training shall be offered and provided on
such terms and conditions as Nortel may specify in technical training catalogs
or other appropriate forms of written notice to Distributor and, unless
otherwise specified by Nortel in the applicable technical training catalog,
shall be strictly limited to bona fide employees of Distributor and/or bona fide
employees of Distributor's subcontractors authorized by Nortel in accordance
with Section 2.1.7 and Section 2.1.8. In all cases in which Distributor wishes
Nortel to accept employees of subcontractors for training, Distributor shall
identify such employees, and Nortel shall invoice Distributor, which shall be
responsible for paying for such training.
Section 3.4 PRODUCT CATALOG
Nortel shall provide Distributors with a reasonable number of Product Catalogs,
as the price source of pricing and ordering terms and conditions on either paper
or electronic media. Each Product Catalog is considered proprietary and is
provided to Distributor as a loan. Upon termination of this Agreement,
Distributor shall promptly return all Product Catalogs to Nortel.
Section 3.5 NORTEL SUPPORT IN EVENT OF CATASTROPHE
Nortel will make all commercially reasonable efforts, at its then usual charges
(including, without limitation thereto, charges for overtime), to assist
Distributor in recovering from the effects of a catastrophic occurrence upon
Distributor's installed base of Products within the Territory. Nothing in this
Agreement shall require Nortel to maintain inventories or stand in any state of
readiness to assist Distributor. In the event of a catastrophe affecting the
installed base of Products of more than one Nortel Authorized Distributor,
Nortel may divide its support efforts among the affected Distributors as deemed
by Nortel to be most reasonable. In each instance in which Distributor requests
support in event of catastrophe, Distributor shall notify Nortel of the
existence or lack of written contractual Agreements between Distributor and the
End User needing such support which contract protects Nortel against liability
to such End Users for incidental, special and/or consequential damages arising
out of Nortel's performance. Nortel reserves the right to deny support in the
absence of such protection.
Section 3.6 PROGRAMS OF SUPPORT
From time to time, Nortel may announce programs of support to Distributors of
End Users. All of such programs are subject to all limitations of liability
contained in this Agreement.
Section 3.7 PROTECTION AGAINST POTENTIAL LIABILITIES
In any case in which Distributor requests and accepts any form of pre-sale or
post-sale support, which support involves direct contact between Nortel and an
End-User, Distributor shall obtain a written agreement with that End User which
includes both warranty and general contractual disclaimers as to any direct
Nortel liability for warranties or for any incidental and consequential losses,
damages or claims of that End User, or failing to do so shall indemnify and hold
Nortel harmless from such claims, demands or damages.
ARTICLE FOUR
PROVISION OF PRODUCTS
Section 4.1 PRODUCT SPECIFICATIONS
Section 4.1.1 DRAWINGS AND SPECIFICATIONS
Drawings and technical specifications for Products which are available
to Authorized Distributors are identified in the Product Reference
Guide.
Section 4.1.2 FCC REGISTRATION
Nortel represents and warrants that any Product sold to Distributor
pursuant to this Agreement which is subject to, and not exempted by,
Part 68 of the Rules and Regulations of the Federal Communications
Commission in effect at the time of such sale ("Part 68"), is
registered under and complies with Part 68, including (without
limitation
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thereto) all labeling and customer instruction requirements. In the
event of a breach of the warranty of this Section 4.1.2, a condition
precedent to any duty on the part of Nortel to remedy the breach and to
the indemnity stated herein, shall be that the Product was installed
within the Distributor's Territory in accordance with the terms of the
Agreement.
Section 4.1.3 RFE/EMI STANDARDS
Nortel represents and warrants that any Product sold to Distributor
pursuant to this Agreement which is subject to, and not exempted by,
Part 15, Subpart A & B of the Rules and Regulations of the Federal
Communications Commission in effect at the time of sale, will comply
with the requirements in Part 15, Subpart A & B of the Rules and
Regulations of the Federal Communications Commission. In the event of a
breach of the warranty of this Section 4.1.3, a condition precedent to
any duty on the part of Nortel to remedy the breach and to the
indemnity stated herein shall be that the Product was installed within
the Distributor's Territory in accordance with the terms of this
Agreement.
Section 4.1.4 CHANGES IN DESIGN OR MANUFACTURE
(a) Any Product shipped by Nortel in fulfillment of an accepted
order shall not contain any change from those design and/or
manufacturing specifications in place on the date the order
was accepted. For the purposes of this provision, a change is
defined as an action which materially, adversely, and
measurably impacts reliability, form, fit, or function.
(b) Nortel shall give Distributor thirty (30) days written notice
of Nortel's intent to commence accepting orders for Products
containing any change in the design and/or manufacture which
materially, adversely, or measurable impacts reliability,
form, fit, or function. For all changes in design and/or
manufacture of Products, Nortel shall provide Distributor with
revisions to the applicable Northern Telecom Practices manual
or other specifications as promptly as is reasonably possible.
Section 4.1.5 RETROFITS
****
Section 4.1.6 OCCUPATIONAL SAFETY AND HEALTH
When required by the Occupational Safety and Health Act, Nortel shall
provide to Distributor appropriate documentation for any Product
shipped to Distributor by Nortel.
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Section 4.2 SALE AND PURCHASE OF PRODUCTS
Section 4.2.1 FORECAST OF ORDERS
In order to assist Nortel in keeping the Products' price competitive in
the marketplace, the Distributor, on or before February 1, May 1,
August 1, and November 1 of each year, shall prepare and submit a
written "rolling" forecast of Distributor's anticipated orders of each
Product for the 12-month period beginning two months after the forecast
due date (i.e., beginning April 1, July 1, October 1, and January 1,
respectively).
Section 4.2.2 DELIVERY; TITLE; RISK OF LOSS; SECURITY INTEREST
(a) The Net Distributor Price of any ordered Products is based
upon delivery on board the carrier, which may be either a
carrier, which may be either a common carrier or may be
Nortel, at Nortel's factory or warehouse of origin, or for
Products imported from Nortel's factories located outside the
United States, at the United States port of entry. Title to
Hardware shall pass to Distributor, and tender and acceptance
shall occur when Nortel duly surrenders possession to the
common carrier, or if Nortel is acting as carrier, upon
departure from the factory or warehouse of origin loading dock
or port of entry as the case may be. Risk of loss to Product
shall pass to Distributor upon delivery at the destination
specified in Distributor's order. Provided Nortel shall
promptly make a replacement shipment of Products for any
Products lost for more than five business days or damaged in
shipment, Nortel shall have no liability to Distributor for
non-delivery or late delivery in such circumstances. Unless
otherwise requested by Distributor, Nortel will normally ship
all Products to Distributor by "best way" surface freight.
Nortel will prepay the common carrier, or if it acts as the
carrier will itself initially bear the cost of shipping, and
will in all cases invoice Distributor for all shipping charges
incurred in addition to the Net Distributor Price. If Nortel
acts as the carrier, Nortel may charge and invoice freight
charges not to exceed the then available comparable commercial
rates for the shortest usual commercial route from the
shipping point or port of entry to the point of destination
for such carriage, and shall assume all risks of carriage as
if it was a common carrier. If requested by Distributor,
Nortel will ship by air or other available means, but reserves
the right to assess and invoice additional handling charges
for non-standard shipment methods; such additional handling
charges shall be a Standard Price Item and will be listed in
the Product Catalog or Product Reference Guide or quoted to
Distributor in advance of shipment. Nortel reserves the right
to reject any order or portion thereof for any reason. If
Nortel is unable to fill an order in full, partial shipment
may be permitted. Provided Distributor authorizes a partial
shipment, then Nortel shall invoice Distributor for the
Products contained in the partial shipment and Distributor
will not withhold payment of such invoice because of the
remaining unfilled portion of the order.
(b) Upon request, Distributor shall grant to Nortel, in writing, a
security interest in all Products to be delivered to
Distributor pursuant to this Agreement, and any proceeds
thereof, to secure payment of the purchase price, and shall
sign appropriate financing statements naming Distributor as
debtor and Nortel as secured party, as may be necessary for
Nortel to perfect its security interest under Article 9 of the
Uniform Commercial Code. Upon receipt of payment in full of
the purchase price of the Product as to which the security
interest was granted, Nortel shall promptly file a
satisfaction of any financing statement filed with respect
thereto. Refusal or failure of Distributor to grant any
requested security interest and/or to sign any requested
financing statement shall entitle Nortel to refuse to ship any
order.
Section 4.2.3 NET DISTRIBUTOR PRICE; TAXES; CHANGES IN PRICE
(a) ****
(b) Nortel shall not invoice Distributor for any federal or state
sales, use, value added or privilege tax if Distributor has
provided Nortel with a valid exemption certificate from the
state imposing the tax (which usually will be the state to
which the order is shipped).
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(c) Nortel reserves the right to change the Commercial List Price,
and/or change or eliminate discounts.
Section 4.2.4 PAYMENT TERMS
****
Section 4.3 SOFTWARE LICENSES
(a) Distributor's failure to fully abide by all of the software
provisions of this Agreement shall be deemed in breach of this
Agreement and Nortel or an aggrieved Nortel supplier through
Nortel may, upon its election and in addition to any other
rights and remedies that it may have, require the termination
of Distributor's right to Distribute Software under this
Agreement. Such election may be made with respect to all
Software or only the affected Software supplied to Distributor
pursuant to this Agreement. Exercise of such option shall
require that Nortel give Distributor written notice of such
breach with no less than thirty days in which to cure,
specifying with reasonable particularity the nature of the
claimed breach and the Software with respect to which the
election is made.
(b) If Distributor's right to Distribute Software under this
Agreement shall have been terminated, then within thirty days
of such termination, Distributor shall deliver all affected
Software in Distributor's possession (including all back-up
copies) to Nortel for credit at a price equal to the price
paid by Distributor to Nortel, render unusable all portions of
the affected Software placed in any storage apparatus under
Distributor's control and certify such destruction to Nortel
in writing, and provide Nortel with originals of the Software
License for all copies of the affected Software previously
Distributed by Distributor. Distributor's obligations under
this Section 4.3 shall survive the expiration or termination
of this Agreement, regardless of the cause of such expiration
or termination.
(c) Nortel expressly reserves the right to modify the Nortel
Software License. Such modified Software License shall apply
to all Software transactions between Nortel and Distributor
and/or between Distributor and End User occurring after the
Formal Notice of the modification. Any such modification shall
not require the replacement of currently effective Software
Licenses until such time as such End Users order additional
Software.
(d) Distributor must Distribute Software only to End Users which:
(1) acquire from Distributor the title to the accompany
Hardware which was obtained by Distributor from Nortel by
means of a particular order issued pursuant to this Agreement
and installed within the authorized Territory; or (2) hold
title to Hardware acquired other than from Distributor but
installed within the authorized Territory; and (3) execute the
Nortel Software License. Distributor shall pay Nortel the
license fee designated in the Product Catalog. Distributor may
choose to absorb the majority of the fees charged by Nortel
and/or Nortel's suppliers or to pass those fees on to the End
User/Licensee, in part, unchanged, or marked-up, as
Distributor may see fit. However, Distributor must obtain
consideration for use of the Software.
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(e) Distributor shall maintain a properly executed Software
License from each End User ordering Software from Distributor.
Distributor shall use all commercially reasonable efforts to
ensure that each End User complies with all of the
requirements of the Software License. If Distributor becomes
aware of an End User breaching the Nortel Software License,
then Distributor shall promptly advise Nortel in writing of
the identity of such End User and the nature of the breach.
Distributor shall cooperate, in any commercially reasonable
manner requested, at the expense of Nortel and/or Nortel's
suppliers, in any legal action or potential legal action by
them against the End User in material breach, related to that
breach. Distributor shall indemnify and hold Nortel harmless
from any claims, demands or damages if Distributor violates
any provisions of this section.
Section 4.4 LIMITED WARRANTIES
Nortel warrants the Hardware and/or Software supplied to Distributor and
installed within the authorized Territory in accordance with the following
provisions and any additional Product specific warranty provisions in the
Product Reference Guide.
Section 4.4.1 LIMITED WARRANTY OF TITLE
Nortel warrants that it will deliver good title to all Hardware sold to
Distributor pursuant to this Agreement, free and clear of any claims,
liens, encumbrances, or security interests of any kind except any
security interest obtained from Distributor by Nortel pursuant to
Section 4.2.2(b). The exclusive remedy of Distributor for breach of the
warranty contained in this Section 4.4.1 shall be to require Nortel,
without cost to Distributor, to promptly clear the title to the
Hardware.
Section 4.4.2 LIMITED HARDWARE AND SOFTWARE WARRANTIES; NO SERVICE
WARRANTY
The Hardware and Software Limited Warranties, and exclusive remedies
with respect to each of them, are set forth in detail in the Product
Reference Guide by applicable Product Group.
Nortel provides no warranty in connection with or for any service
provided by it to Distributor.
Section 4.4.3 CONDITIONS PRECEDENT
In addition to any conditions precedent contained in the sections of
the Product Reference Guide describing each warranty, conditions
precedent to any obligation upon Nortel to remedy any breach of
warranty shall be that:
(a) Nortel shall not have declared a termination of this
Agreement;
(b) the particular item of Product with respect to which the
warranty is being invoked shall have been Distributed in
compliance with all requirements of this Agreement without
respect to the question of materiality to the whole of this
Agreement;
(c) the Product in question shall not have been altered, or
repaired by any party other than Nortel, and if a System is
involved, the System shall not have been maintained by any
other party other than Nortel, Distributor or another Nortel
Authorized Distributor, qualified with respect to that System
and under subcontract to Distributor, without Nortel's prior
written consent;
(d) Hardware defects, or Software failures shall not have been the
result of mishandling, abuse, misuse, improper storage,
improper installation, improper maintenance, or improper
operation (including use in conjunction with equipment
electrically or mechanically incompatible) by any party other
than Nortel;
(e) the Product shall not have been damaged by fire or explosion
(other than fire or explosion directly attributable to a
Product defect), power failure, lightning or other induced
power surge, act of God, or any other cause whatsoever not
attributable to Nortel;
(f) Nortel shall have received from Distributor, prior to the
expiration of the warranty period, written notice stating with
reasonable particularly the claimed breach of warranty;
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(g) The burden upon Distributor to prove compliance with the above
conditions precedent shall not arise unless and until Nortel
shall notify Distributor in writing that Nortel believes that
one or more of such conditions has not been met. Such notice
shall specify with reasonable particularity the alleged
failure to meet these conditions precedent.
Section 4.4.4 LIMITATION ON WARRANTIES
THE WARRANTIES AND REMEDIES CONTAINED IN THIS AGREEMENT AND THE PRODUCT
REFERENCE GUIDE CONSTITUTE THE ONLY WARRANTIES WITH RESPECT TO THE
PRODUCTS PROVIDED TO DISTRIBUTOR PURSUANT TO THIS AGREEMENT AND
DISTRIBUTOR'S EXCLUSIVE REMEDIES IF SUCH WARRANT TIES ARE BREACHED. THE
STATED WARRANTIES ARE IN LIEU OF ALL OTHER WARRANTIES, WRITTEN OR ORAL,
STATUTORY, EXPRESS, OR IMPLIED, INCLUDING, WITHOUT LIMITATION THERETO,
THE WARRANTY OF MERCHANTABILITY AND THE WARRANTY OF FITNESS FOR A
PARTICULAR PURPOSE. THERE ARE NO WARRANTIES WITH RESPECT TO SERVICES
PROVIDED BY NORTEL. NORTEL SHALL NOT BE LIABLE TO OR THROUGH
DISTRIBUTOR FOR ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY
NATURE OR FOR ANY REASON, ARISING OUT OF THIS AGREEMENT, EVEN IF NORTEL
HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THE NET
DISTRIBUTOR PRICE DESCRIBED ELSEWHERE IN THIS AGREEMENT IS BASED UPON
AND IS IN PARTIAL CONSIDERATION FOR THIS LIMITATION ON WARRANTIES AND
REMEDIES.
Section 4.4.5 POST WARRANTY SUPPORT
Nortel shall provide, at its then current prices, support for Nortel
Products for which the warranty period shall have expired in accordance
with the Product Reference Guide. For Products manufactured by third
parties, the manufacturer may discontinue their Products. Nortel makes
no guarantee as to the availability of any of these Products, whether
for new system sales or for installed base sales or whether the
Products are available in the U.S. Market. However, Products may be
returned for repair at prices established by Nortel if they are
repairable items for which necessary components are available to
Nortel.
Section 4.4.6 LONG TERM SOFTWARE SUPPORT
Long term software support shall be provided for each Product Group to
the extent defined in the then current Product Reference Guide.
Section 4.4.7 CESSATION OF MANUFACTURE; CHANGES IN DESIGN; ALLOCATION
OF PRODUCT; RELEASE OF NEW PRODUCTS
****
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ARTICLE FIVE
PROPRIETARY INFORMATION
Section 5.1 DISCLOSURE OF PROPRIETARY INFORMATION
Except as permitted otherwise by law, the Receiving Party shall keep
confidential Proprietary Information of the Disclosing Party and Nortel's
suppliers using the same degree of care that it uses to safeguard its own
Proprietary Information of a similar nature, but not less than reasonable care,
and shall not disclose Proprietary Information of the Disclosing Party or of
Nortel's suppliers, to any but its own employees with a need to know the
Proprietary Information in furtherance of the purposes of this Agreement. With
respect to Software, this obligation may be expanded, amplified or modified by
the terms of the Software License; in the event of a conflict between a Software
License and this Article 5, the Software License shall control.
Section 5.2 APPLICATION OF RESTRICTION
The restrictions of this article shall not apply: (1) to Proprietary Information
which enters the public domain without fault of the Receiving Party; or (2) to
Proprietary Information which the Receiving Party can prove was rightfully in
its possession prior to disclosure from the Disclosing Party or from Nortel's
supplies; or (3) to Proprietary Information which is independently developed by
the Receiving Party; or (4) if such restrictions would prevent required
compliance with applicable law, applicable governmental regulation, or an order
of a court of competent jurisdiction. A Receiving Party invoking exception (4)
above shall use all commercially reasonable efforts to notify the Disclosing
Party of any intended disclosure as far in advance of the date of required
compliance as is practicable and shall not make such disclosure in advance of
the date of required compliance, so that the Disclosing Party may have an
opportunity to take such steps as it deems appropriate to defend its interests;
provided, however, that in the event the Receiving Party invokes exception (4)
above and the Proprietary Information is that of a Nortel supplier, such
notification shall be made to Nortel.
Section 5.3 SURVIVAL OF RESTRICTION
Distributor's confidentiality obligations shall survive the termination of this
Agreement, regardless of the cause, and shall extend to the earlier of such
times as Proprietary Information and/or Software enters the public domain
through no fault of Distributor, or for Proprietary Information other than
Software, ten (10) years following the expiration or termination of this
Agreement.
ARTICLE SIX
COMPLIANCE WITH LAWS: GRATUITIES AND INSURANCE
Section 6.1 COMPLIANCE WITH LAWS
Nortel and Distributor shall comply with all applicable federal, state and local
laws and regulations regarding the general conduct of business whether or not
specifically related to the design, manufacturing, transportation, sale, lease,
installation, or maintenance of the Products. Additionally, Distributor shall
comply with instructions given by UTAM with respect to Distribution and
deployment of Products in the Unlicenced PCS Spectrum.
Section 6.2 GRATUITIES
Each party to this Agreement represents to the other that it has not offered or
given, and will not offer or give, to any employee of the other, any gratuity
with a view toward securing any business from the other or toward influencing
such person with respect to the terms, conditions or performance of this
Agreement. The foregoing provision shall not apply to any publicly announced
Nortel sales incentive plan in which Distributor may allow its employees to
participate.
Section 6.3 INSURANCE COVERAGE
Both Nortel and Distributor shall maintain, during the term of this Agreement,
all insurance and/or bonds required by any applicable law, including but not
limited to: (1) workers' compensation insurance as prescribed by the laws of all
states in which work pursuant to this Agreement is performed; (2) employer's
liability insurance with limits of at least $5 million per occurrence; (3)
comprehensive general liability insurance (including products liability
coverage, contractual liability,
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advertising liability, and comprehensive automobile liability coverage) with
each coverage having limits of at least $5 million per occurrence. Either party
shall furnish certificates or other adequate proof of such insurance to the
other upon written request. Proof of a program of self-insurance acceptable to
the requesting party (which shall not be unreasonably withheld) shall satisfy
any such request. Both Nortel and Distributor shall require any subcontractors
and Sales Agents involved with the performance of work pursuant to this
Agreement, to agree to maintain insurance coverage and to furnish certificates
or other adequate proof thereof to both Nortel and Distributor upon written
request.
Section 6.4 MISCELLANEOUS OBLIGATIONS
Section 6.4.1 RIGHT OF ACCESS/HARMONY
In order to carry out the intent of this Agreement, Nortel and
Distributor shall each have reasonable access, upon reasonable prior
notice, to the premises of the other during normal business hours and
at such other times as may be agreed upon. Whenever the employees
and/or agents of either party are working on the premises of the other
party, or on the premises of an End User, the employing party shall be
responsible for ensuring that such employees work in harmony with all
other individuals on such premises.
Section 6.4.2 PLANT AND WORK RULES
Whenever the employees and/or agents of either party are on the
premises of the other party, or on the premises of an End User, they
shall comply with all site rules and regulations (including, where
required by government regulations, submission of satisfactory
clearance from the U.S. Department of Defense and/or any other
governmental authorities concerned).
Section 6.4.3 PERSONAL RELEASES VOID
Neither Nortel nor Distributor shall require representatives of the
other any waivers or releases of any personal right in connection with
visits to its premises. Even if obtained, no such waivers or releases
shall be pleaded by either party in any action or proceeding.
ARTICLE SEVEN
BREACH OF AGREEMENT: TERMINATION
Section 7.1 BREACH OF THIS AGREEMENT
A material breach and default of this Agreement shall be deemed to have occurred
whenever: (1) one party shall have violated any material provision of this
entire Agreement; and (2) the violating party shall have received Formal Notice
from the other party stating the nature of the violation with reasonable
particularity and stating that the other party objects to the violation; and (3)
the violating party shall have failed to cure or correct the violation within
thirty (30) days of the receipt of such Formal Notice if the violation is
amenable to immediate correction; or (4) the violating party shall have failed
to commence cure or correction of the violation within thirty (30) days of the
receipt of such Formal Notice or to thereafter diligently pursue such cure or
correction, if the violation is not amenable to immediate correction. The date
of a breach shall be deemed to be the date on which the violating party
received the Formal Notice required under this Section 7.1. The non-breaching
party shall have the right to suspend performance of any executory obligation
under this Agreement from the date of such Formal Notice until the breach is
cured.
Section 7.2 TERMINATION OF DISTRIBUTOR
Distributor expressly recognizes the valid business need for, and hereby agrees
to, the termination provisions set forth below. Further, Distributor agrees
that it shall not be entitled to payment or compensation of any kind upon
termination of this Agreement under the provisions of Section 7.3 for: (1)
Distributor's prior efforts in promoting or creating goodwill for the Products
and/or for Nortel; (2) any of Distributor's costs incurred in the performance
of this Agreement; (3) any of Distributor's costs incurred because of the
termination; and (4) any loss of profit and/or potential profit caused by
termination.
Section 7.3 TERMINATION FOR STATED CAUSES
(a) Either party may unilaterally terminate this Agreement,
immediately but with Formal Notice to the other party, in the
event that the other party: (1) becomes insolvent or makes a
general assignment for the benefit
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of creditors; or (2) admits, in writing, its inability to pay
debts as they come due; or (3) has a trustee or receiver
appointed by any court with respect to it or any substantial
part of its assets; or (4) has bona fide action taken by or
against it under bankruptcy or insolvency laws; or (5)
transfers or assigns, or attempts to transfer or assign any of
its rights under this Agreement without obtaining the prior
written consent of the other party; or (6) except as expressly
authorized in this Agreement, delegates or attempts to
delegate any of its duties under this Agreement; or (7)
causes, agrees to, or suffers a Significant Ownership Change;
or (8) grants or makes, or attempts to grant or make, any
illegal or improper consideration or payment, including,
without limitation thereto, any bribe, inappropriate
commission, "pay-off", "kick-back" or payment of similar
nature in conjunction with the Distribution of any Product
under this Agreement; or (9) accepts, receives, or solicits
any illegal or improper consideration or payment, including,
without limitation thereto, any bribe, inappropriate
commission, "pay-off", "kick-back" or payment of similar
nature in conjunction with the Distribution of any Product
under this Agreement; or (10) makes payment of any fees for
services which are not actually rendered or pays any fees in
excess of the fair value of any services rendered, in
conjunction with the Distribution of any Product under this
Agreement. Any party becoming aware of evidence tending to
indicate the possible occurrence of any of the events
described in Section 7.3(a)(1) through Section 7.3(a)(10), and
involving its own employees or the employees of the other
party, shall cause its attorneys to notify the other party's
attorneys of such evidence, and, if appropriate, to request
that the other party's attorneys conduct and/or cooperate in
an investigation of the evidence in anticipation of
litigation. No such notification shall be deemed an admission
of the occurrence of any such event or of any possible
complicity therein. Nortel's rights with respect to situations
as provided above may be exercised, at Nortel's option, to
terminate some contractual provisions without terminating
others.
(b) Certain possible failures of Distributor to abide by the terms
of this Agreement are of sufficient importance to Nortel that
Nortel wishes to have the right to terminate this Agreement,
in whole or part, or portions thereof relating to specific
Product authorizations, or otherwise extend this Agreement
beyond the expiration of the Term, in any such case without
regard to an inquiry as to whether such failure might be
considered by a court as a material breach of the Agreement as
a whole. Accordingly, occurrence of any of the following
possible failures of Distributor to comply with this Agreement
shall afford Nortel the complete and unrestricted right to
declare a breach and default in accordance withSection 7.1,
without regard to the materiality requirement ofSection 7.1,
and to thereafter terminate this Agreement, and any subsequent
renewal agreement which may have been offered underSection
1.3, for breach, or to refuse to renew or otherwise extend
this Agreement beyond the expiration of the Term: (1) failure
to comply with the requirements ofSection 2.1.1: (2) failure
to meet, within the Territory, the Minimum Distribution Level
during any calendar year; (3) failure to comply with the
requirements ofSection 2.1.6: (4) failure to comply with the
requirements ofSection 4.3 (including all subsections
thereof).
(c) The enumerations of failures presumed material for purposes of
termination which are contained in Section 7.3(b) shall not be
deemed to exclude the possibility that other failures not
enumerated may be found to be material for purposes of
termination and/or for any other purpose. Invocation or
admission of any of the above failures shall not be deemed an
admission of materialtiy for any other purpose and in
particular for purposes of adjudication of any claim damages.
Section 7.4 SUPPORT OF DISTRIBUTOR AFTER TERMINATION
Nortel will not provide any post termination support to a Distributor if this
Agreement is terminated by Nortel in accordance with the provisions of Section
7.3. In the event of a termination of this Agreement by Distributor pursuant to
Section 7.1, or in the event of expiration of the Term of this Agreement, Nortel
will provide the Product specific level of support specified in the Product
Catalog.
Section 7.5 FORCE MAJEURE
Neither party shall be responsible for delays or failures in performance of this
Agreement resulting from: (1) acts or occurrences beyond the reasonable control
of such party (including, without limitation thereto, fire, explosion, power
failure, lightning, severe weather, acts of God, war, revolution, civil
commotion, infection of Products or tools by a software virus, any law, order,
regulation, ordinance, or requirement of any government or legal body (or any
representative of any such government or legal body)); or (2) labor unrest
(including, without limitation thereto, strikes, slowdowns, picket-lines, and
boycotts whether primary or secondary, and without regard to whether such labor
unrest could have been settled by acceding to the demands of a labor
organization). In such event, the party whose performance is directly affected
by any such
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circumstances shall be excused from such performance on a day-for-day basis to
the extent of the interference. If such excuse of the performance of the
directly affected party shall prevent related performance by the other party,
then the performance of the other party shall also be excused on a day-for-day
basis to the extent of the indirect interference. In the event that any such
event of force majeure shall continue for more than thirty days, then the
parties shall enter into good faith negotiations directed toward a mutually
acceptable resolution of outstanding obligations. If the event of force majeure
shall continue for more than sixty days, then any order by Distributor may be
considered terminated without any penalty to Distributor or Nortel.
ARTICLE EIGHT
GENERAL TERMS AND CONDITIONS
Section 8.1 LIMITATION OF LIABILITIES
NEITHER NORTEL NOR DISTRIBUTOR SHALL BE LIABLE TO THE OTHER FOR ANY
SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES OF ANY NATURE OR FOR ANY
REASON, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, NOR, EXCEPT
TO THE EXTENT EXPLICITLY PROVIDED FOR HEREIN, FOR ANY CLAIMS AGAINST
THE OTHER BY ANY THIRD PARTY. DISTRIBUTOR HEREBY WAIVES ANY CLAIMS IT
MAY ACQUIRE BY VIRTUE OF THIS AGREEMENT AGAINST NORTEL'S SOFTWARE
SUPPLIERS FOR ANY SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES
WHATSOEVER, ARISING OUT OF THE LICENSING OF SOFTWARE FOR THE
DISTRIBUTOR'S OWN USE OR DISTRIBUTION OF SOFTWARE BY DISTRIBUTOR AS
AGENT FOR NORTEL OF LICENSES TO END-USERS PURSUANT TO THIS AGREEMENT.
Section 8.2 GENERAL INDEMNITIES
(a) In addition to those indemnities set forth in Section 2.1.8(e)(11),
Section 3.7, and Section 4.3, each party shall indemnify the other with
respect to any third party claims, as follows:
(1) claims, suits, or proceedings threatened or brought alleging
bodily injury, including death, or damage to tangible property, to
the extent any damage is caused by the negligence or willful
misconduct of the indemnifying party (except that in all cases
Distributor shall indemnify Nortel with respect to any claim that
the installation or placement of a telephone instrument, console or
other device intended to be used by an individual user, including
any wires connected to it, caused the injury or damage);
(2) all other third party claims, suits, or proceedings threatened
or brought alleging damages, losses, costs or expenses arising out
of or related to the failure of the party against whom
indemnification is sought to properly and fully perform any
affirmative obligation undertaken by it in this Agreement (so long
as no corresponding and concurrent duty to perform the same
obligation, at the time of the act or omission complained of, by the
party seeking indemnification also exists in this Agreement), except
that with respect to intellectual property infringement claims,
Nortel's sole obligations shall be as defined in Section 8.3 below.
(b) ****
Section 8.3 INTELLECTUAL PROPERTY INFRINGEMENT
(a) ****
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****
Section 8.4 ENFORCEMENT OF INDEMNITIES
Section 8.4.1 NOTICE OF CLAIMS
(a) A party choosing to invoke an indemnity in a third
party claim situation shall provide Formal Notice to
the other party of the existence and basic nature of
the claim, suit, or proceeding against the invoking
party.
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(b) The party seeking indemnification must immediately turn
over full defense and settlement of the claim to the
party against whom indemnification is sought, and
cooperate fully with such party. The party against whom
indemnification is sought will not be liable for
indemnification of amounts settled or compromised
without its consent, or for judgments, decrees or
orders issued by a court or administrative agency of
competent jurisdiction to the extent it was not given
full defense of the matter.
ARTICLE NINE
MISCELLANEOUS
Section 9.1 ASSIGNMENT AND DELEGATION
Distributor may not assign any rights or delegate any duties arising out of this
Agreement without the prior written consent of Nortel. Any such attempted
assignment and/or delegation shall be void.
Section 9.2 NOTICES
Routine correspondence between the parties to this Agreement shall be in writing
and sent by appropriate mail, telegram, courier service, electronic communicator
or electronic mail system to the addresses specified in this Agreement. Formal
Notice shall be given whenever required by a provision of this Agreement. Formal
Notice shall be in writing, sent by certified or registered U.S. mail, or
express courier service, with postage prepaid, return receipt requested, to the
addresses listed below. Formal Notice shall be deemed delivered as of midnight,
Central Time, on the date mailed. In addition, any notice to be given may also
be given by facsimile or other electronic format provided that the party giving
the notice obtains acknowledgment by facsimile or other electronic format that
such notice has been received by the party to be notified. Notice given in this
manner shall be effective upon delivery of the Formal Notice.
Section 9.2.1 ADDRESS FOR NORTEL
MAILING ADDRESS STREET ADDRESS
NORTHERN TELECOM INC. NORTHERN TELECOM INC.
Distribution Management Distribution Management
P.O. Box 833858 2221 Lakeside Boulevard
Richardson, TX 75083-3858 Richardson, TX 75082-4399
Section 9.2.2 ADDRESS FOR DISTRIBUTOR
MAILING ADDRESS STREET ADDRESS
WilTel Communications, L.L.C. WilTel Communications, L.L.C.
2400 Camino Ramon, Suite 100 2400 Camino Ramon, Suite 100
San Ramon, CA 94583 San Ramon, CA 94583
Attn: Frank Lipari Attn: Frank Lipari
Title: Vice President of Title: Vice President of Marketing
Marketing
Section 9.3 SURVIVAL OF SOFTWARE LICENSES AND SUBLICENSES
If Distributor was a Distributor under a prior version (Version 2.00, 2.10,
3.00, 3.10) of this Agreement, and pursuant to that version granted licenses or
sublicenses of Software in conformance with the terms and conditions then in
effect, such terms and conditions of the prior version of this Agreement with
respect to such licensing or sublicensing shall survive and remain in full force
and effect for all licenses or sublicenses duly made and executed. However, all
Software replacements and/or upgrades shall be governed by the Nortel Software
License in Annex D to this Agreement and the other license terms of this
Agreement.
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Section 9.4 ANNEXES INCORPORATED
The following Annexes to this Agreement are incorporated herein by this
reference as if they had been fully set out within the main body. Each Nortel
Product which may be authorized for Distribution pursuant to this Agreement is
so authorized only pursuant to a duly executed Annex B.
Annex A: Territory
Annex B: Authorized Products
Annex C: Affiliates of Distributor
Annex D: Software License
Section 9.5 GOVERNING LAW
This Agreement shall be construed under, and enforced in accordance with, the
laws of the State of Texas (with the exception of such laws governing conflict
of law questions).
Section 9.6 PRINCIPLES OF INTERPRETATION
Section 9.6.1 SEVERABILITY
If any provision of this Agreement shall be found by a court of
competent jurisdiction to be invalid or unenforceable, such finding
shall not affect the validity and/or enforceability of the Agreement
as a whole or of any other part of the Agreement. In such case, the
parties will substitute a valid provision which most closely
achieves the intent of the invalid provision, and this Agreement
shall be construed and enforced as if it did not contain the invalid
and/or unenforceable provision.
Section 9.6.2 HEADINGS FOR CONVENIENCE ONLY
The Article and Section headings contained in this Agreement are
inserted for convenience only and shall not be considered to affect
the meaning of the provisions of the body of the Agreement.
Section 9.6.3 WAIVERS OR AMENDMENTS
No failure to enforce any provision, assert any right, or insist on
performance of any obligation under this Agreement, in any instance,
shall be deemed a waiver of the ability to enforce such provision,
assert such right, or insist on the performance of such obligation
in the future. No course of dealing, or informal communication of
any kind, shall be deemed to amend this Agreement. Except as stated
herein with respect to the Product Reference Guide, etc., this
Agreement may be amended only by a formal written amendment signed
by a duly authorized representative of both parties, and any oral
amendment shall be deemed void.
Section 9.6.4 SURVIVAL OF OBLIGATIONS
The provisions of any section of this Agreement which, by their
sense and context, appear to be intended to survive the termination
or expiration of this Agreement shall so survive.
Section 9.7 PRODUCT REFERENCE GUIDE AND PRODUCT CATALOG
The Product Reference Guide and the Product Catalog are both documents which are
intended to be modified and changed from time to time. References in this
Agreement to prices, descriptions, specifications, warranties, programs, or
other terms and conditions contained in either such document shall always be
deemed to apply to that version of the product Reference Guide or the Product
Catalog which is in effect on the date Nortel accepts an order for a Product or
service from the Distributor or Affiliate with respect to matters related to
that specific Product or service order. Certain programs may have defined
periods of effectiveness or applicability or may be terminated with a notice to
Distributor pursuant to their terms as defined in the document. Nortel reserves
the right to amend the Product Reference Guide and Product Catalog at any time
and from time to time.
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Section 9.8 ENTIRE AGREEMENT
This Agreement, together with the Product Reference Guide and other written
notifications from Nortel, shall constitute the entire Agreement between the
parties with respect to the contemplated Distribution relationship and
supersedes all previous negotiations, proposals, commitments, writings,
advertisements, publications, agreements and understandings of any nature
whatsoever related to the contemplated Distribution relationship. Except for
forms included in or referenced in this Agreement, provisions on either party's
forms used in conjunction with transactions pursuant to this Agreement shall not
be deemed to modify or add to this Agreement or to govern the transactions in
which used.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective duly authorized representatives.
NORTHERN TELECOM INC. WILTEL COMMUNICATIONS, L.L.C.
By: /s/ RADFORD L. KELLY By: /s/ GARRY K. MCGUIRE
--------------------------------------- --------------------------------
Name: Radford L. Kelly Name: Garry K. McGuire
------------------------------------ ------------------------------
Title: AVP, Distribution & Contracts Mgmt. Title: President & COO
----------------------------------- -----------------------------
Date: October 20, 1997 Date: November 3, 1997
----------------------------------- ------------------------------
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ANNEX A
TERRITORY
TO BE COMPLETED FOR DISTRIBUTOR AND EACH AFFILIATE SEPARATELY WHENEVER THE
TERRITORY OF EACH AFFILIATE IS NOT IDENTICAL TO DISTRIBUTOR'S TERRITORY. TO BE
COMPLETED FOR EACH PRODUCT SEPARATELY WHENEVER THE TERRITORY FOR ALL PRODUCTS
CARRIED IS NOT IDENTICAL. SEE ANNEX B FOR AUTHORIZED PRODUCTS.
Name of Distributor: WilTel Communications, L.L.C.
DEFINITION OF AUTHORIZED TERRITORY SHALL BE DEFINED AS FOLLOWS:
For M1, Meridian Safe for M1, TSAPI, Open IVR, VISIT Messenger,
SL-100, Meridian Safe for SL-100, Residential/Business Terminals,
Norstar, VISIT Voice/Video, National ISDN, COMPANION, Galileo,
911 CTI and MBA:
The fifty states of the United States and the District of Columbia.
For Meridian Digital Centrex, the Authorized Territory shall be
defined as that area in which WilTel Communications, L.L.C. or
its authorized Affiliates provide dial tone to the End User: (i)
through a central office owned and operated by WilTel
Communications, L.L.C., or (ii) as an agent for a local exchange
provider, or (iii) pursuant to interconnection agreements under
the Communications Act, as amended by the Telecommunications Act
of 1996.
Any failure to achieve the Minimum Distribution Level for a given
calendar year shall entitle Nortel to invoke its right to
terminate the Distributorship Agreement pursuant to the terms of
Section 2.1.2.
THIS ANNEX IS EFFECTIVE AS OF JANUARY 1, 1998
----------------------------
NORTHERN TELECOM INC. WILTEL COMMUNICATIONS, L.L.C.
By: /s/ DAVID E. CALKINS By: /s/ GARRY K. MCGUIRE
----------------------------------- --------------------------------
Name: David E. Calkins Name: Garry K. McGuire
--------------------------------- ------------------------------
Title: Dir. Market Channell Development Title: President & COO
& Distribution Contracts -----------------------------
--------------------------------
Date: October 20, 1997 Date: November 3, 1997
--------------------------------- ------------------------------
Annex A
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ANNEX B
AUTHORIZED PRODUCT(S)
Name of Distributor: WilTel Communications, L.L.C.
DEFINITION OF AUTHORIZED PRODUCT(S) SHALL BE DEFINED AS FOLLOWS:
Each Nortel Product which may be authorized for Distribution pursuant
to this Agreement is part of a Nortel Product Group. The following
matrix identifies the Products which have been authorized by Nortel
for Distribution, the applicable Product Group for the authorized
Product, the date each Product was authorized for Distribution, the
applicable Software License, Sales Agent authorization and the
applicable Product Catalog.
<TABLE>
<CAPTION>
PRODUCT DATE SOFTWARE SALES
PRODUCT GROUP AUTHORIZED LICENSE AGENT PRODUCT CATALOG
- ---------------------------- ------- ---------- ------------------ ------ -----------------------------------
<S> <C> <C> <C> <C> <C>
Residential/Business A 01/01/98 Not Required Yes Residential/Business Sets
Terminals
National ISDN A 01/01/98 Not Required Yes National ISDN
Meridian Digital Centrex B 01/01/98 Not Required Yes Meridian Business Sets
Meridian 1 (M1) C 01/01/98 Nortel's SW License No Meridian 1
Norstar C 01/01/98 Nortel's SW License Yes Norstar
COMPANION C 01/01/98 Nortel's SW License No COMPANION
Galileo C 01/01/98 Nortel's SW License No Galileo
Meridian Safe for M1 D 01/01/98 Nortel's SW License No Meridian 1
and Original Section : System Administration
Manufacturer's Products (Meridian Safe)
SW License
NetWare Telephony D 01/01/98 Nortel's SW License No Meridian 1
Services (TSAPI) Section : System Administration
Products-NetWare Telephony
Services (TSAPI)
Open IVR D 01/01/98 Nortel's SW License No Meridian 1
Section : Message Processing
Applications (Open IVR)
VISIT Messenger D 01/01/98 Nortel's SW License No Meridian 1
Section : Message Processing Applications
(VISIT Messenger)
VISIT Voice/Video D 01/01/98 Nortel's SW License No VISIT Multimedia Applications
</TABLE>
Annex B
Page 1 of 2
<PAGE> 33
ANNEX B
AUTHORIZED PRODUCT(S)
(CONTINUED)
<TABLE>
<CAPTION>
SALES
PRODUCT DATE SOFTWARE SALES AGENT PRODUCT CATALOG
- -------------------- ------- ---------- --------------------- -------- -----------------------
<S> <C> <C> <C> <C> <C>
CC MIS D Nortel's SW License No SL-100
Section : CC MIS
911 CTI D 01/01/98 Nortel's SW License No 911 Computer Telephony
Integrated Solutions
Multimedia Business D 01/01/98 Nortel's SW License No Multimedia Business
Applications (MBA) and Original Applications
Manufacturer's SW
License
Meridian Safe for SL-100 E 01/01/98 Nortel's SW License No SL-100
and Original
Manufacturer's SW
License
SL-100 E 1/01/98 Nortel's SW License No SL-100
</TABLE>
NORTHERN TELECOM INC. WILTEL COMMUNICATIONS, L.L.C.
By: /s/ RADFORD L. KELLY By: /s/ GARRY K. MCGUIRE
----------------------------------- --------------------------------
Name: Radford L. Kelly Name: Garry K. McGuire
--------------------------------- ------------------------------
Title: AVP, Distribution & Contract Title: President & Coo
Mgmt. -----------------------------
--------------------------------
Date: October 20, 1997 Date: November 3, 1997
--------------------------------- ------------------------------
Annex B
Page 2 of 2
<PAGE> 34
ANNEX C
****
<PAGE> 35
ANNEX D
****
<PAGE> 1
EXHIBIT 10.30
CONCENTRIC NETWORK CORPORATION
COMMON STOCK AND WARRANT PURCHASE AGREEMENT
JULY 25, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. AGREEMENT TO SELL AND PURCHASE ........................................... 1
1.1 Authorization Of Shares.............................................. 1
1.2 Sale And Purchase Of Common Stock.................................... 1
1.3 Sale and Purchase of Preferred Stock................................. 2
1.4 Warrant Coverage..................................................... 2
1.5 Hart-Scott-Rodino Compliance......................................... 2
2. CLOSING, DELIVERY AND PAYMENT............................................. 2
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................. 3
3.1 Organization, Good Standing And Qualification........................ 3
3.2 Authorization, Binding Obligations................................... 3
3.3 Compliance With Other Instruments.................................... 3
3.4 Securities Exemption................................................. 4
3.5 Full Disclosure...................................................... 4
3.6 Valid Issuance of Shares............................................. 4
3.7 Litigation, Etc...................................................... 5
3.8 Governmental Consent, etc............................................ 5
3.9 Termination of Employment............................................ 5
3.10 Intellectual Property Rights......................................... 5
3.11 Proprietary Information Agreements................................... 5
3.12 Lock-up Agreements................................................... 6
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER............................... 6
4.1 Requisite Power And Authority........................................ 6
4.2 Consents............................................................. 7
4.3 Investment Representations........................................... 7
(a) Purchaser Is An Accredited Investor.............................. 7
(b) Purchaser Bears Economic Risk.................................... 7
(c) Acquisition For Own Account...................................... 7
(d) Purchaser Can Protect Its Interest............................... 7
(e) Company Information.............................................. 7
4.4 Legends.............................................................. 7
4.5 Removal of Legend and Transfer Restrictions.......................... 8
</TABLE>
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<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
5. CONDITIONS TO CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.1 Conditions To Purchaser's Obligations At The Closing. . . . . . . . . . . . . . 8
(a) Concurrent Closing of Financing Event. . . . . . . . . . . . . . . . . . . 8
(b) Other Investor Participation . . . . . . . . . . . . . . . . . . . . . . . 8
(c) Representations And Warranties True; Performance Of Obligations. . . . . . 9
(d) Legal Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(e) Consents, Permits, And Waivers . . . . . . . . . . . . . . . . . . . . . . 9
(f) Certificate Of Status. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(g) Copies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(h) Proceedings and Documents. . . . . . . . . . . . . . . . . . . . . . . . . 9
(i) Outstanding Preferred Stock. . . . . . . . . . . . . . . . . . . . . . . . 9
(j) Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(k) Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.2 Conditions To Obligations Of The Company. . . . . . . . . . . . . . . . . . . .10
(a) Concurrent Closing of the Financing System. . . . . . . . . . . . . . . . 10
(b) Representations And Warranties True . . . . . . . . . . . . . . . . . . . 10
(c) Performance Of Obligations. . . . . . . . . . . . . . . . . . . . . . . . 10
6. COVENANTS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
6.1 Board Seat. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
6.2 Notice of Acquisition Offer . . . . . . . . . . . . . . . . . . . . . . . . . .10
6.3 Rule 144 Reporting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
7. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
7.1 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.2 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.4 Separability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.5 Amendment And Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.6 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.7 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.8 Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.9 Titles and Subtitles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
-ii-
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
7.11 Broker's Fees................................................................. 12
7.12 Termination................................................................... 13
7.13 Subsequent Consents, Permits and Waivers...................................... 13
</TABLE>
-iii-
<PAGE> 5
CONCENTRIC NETWORK CORPORATION
COMMON STOCK AND WARRANT PURCHASE AGREEMENT
THIS COMMON STOCK AND WARRANT PURCHASE AGREEMENT (the "Agreement") is
entered into as of July 25, 1997, by and between CONCENTRIC NETWORK CORPORATION,
a Florida corporation (the "Company") and WILLIAMS COMMUNICATIONS GROUP, INC., a
Delaware corporation ("Purchaser").
RECITALS
WHEREAS, the Company intends to reincorporate in Delaware by merger into
Concentric Network Corporation, a Delaware corporation that was formed for the
purpose of the reincorporation and that will be the surviving entity (the
"Company" as used in this Agreement refers to, prior to such merger, the Florida
corporation and, after such merger, the Delaware Corporation); and
WHEREAS, Purchaser desires to purchase shares of the Company's common stock
("Common Stock"), such purchase to be made in a private placement to close
concurrently with, but not before, the closing of the initial public offering of
the Company having an aggregate price to the public of $40 million (the "IPO")
pursuant to the registration statement filed on Form S-1 (File No. 333-27241)
with the Securities and Exchange Commission (the "Commission") (such
registration statement, as amended, shall be referred to herein as the
"Registration Statement"); and
WHEREAS, the Company desires to issue and sell the Shares (as defined
below) to Purchaser on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the parties hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE.
1.1 AUTHORIZATION OF SHARES. On or prior to the Closing (as defined in
Section 2 below), the Company shall have authorized the sale and issuance to
Purchaser of the Shares. Prior to the Closing the Company will have adopted and
filed a Certificate of Incorporation (the "Certificate of Incorporation") with
the Secretary of State of the State of Delaware authorizing sufficient shares of
Common Stock to cover the sale and issuance of the Shares to be purchased
hereunder.
1.2 SALE AND PURCHASE OF COMMON STOCK. Subject to the terms and conditions
hereof, the Company hereby agrees to issue and sell to Purchaser and Purchaser
agrees to purchase from the Company, at the Closing, a number of shares of
Common Stock of the Company equal to the Purchase Price (as hereafter defined)
divided by the Price to Public per share set forth on the cover
<PAGE> 6
page of the final Prospectus (as defined in Section 3.5 below), at an aggregate
purchase price of Eleven Million Nine Hundred Fifty Thousand Dollars
($11,950,000) (the "Purchase Price"). The shares of Common Stock to be
purchased hereunder are referred to as the "Shares." For purposes of this
Agreement, the $40 million aggregate price to the public of the IPO shall
include: (i) the $11,950,000 to be invested by Purchaser as provided in this
Agreement, (ii) the $3,000,000 principal amount of that certain note issued to
the Purchaser by the Company (the "Note"), and (iii) the value of certain
services to be provided by the Purchaser to the Company after Closing which
will be valued for purposes of this Agreement at $2,000,000.
1.3 SALE AND PURCHASE OF PREFERRED STOCK. In the event that an IPO does
not close prior to October 31, 1997, Purchaser agrees, in lieu of and not in
addition to its obligations under Section 1.2 above, to purchase $11,950,000 of
Preferred Stock in the Preferred Financing (as defined below) pursuant to a
separate purchase agreement according to terms negotiated by the lead investor
in the Preferred Financing which must be reasonably satisfactory to the
Purchaser. For purposes of this Agreement, the term "Preferred Financing" shall
mean the next Preferred Stock financing of the Company if any, after the date
hereof, but to be completed no later than October 31, 1997, in which at least
$40,000,000 is invested in such Preferred Stock (including: (i) the $11,950,000
to be invested by Purchaser as provided in this Agreement, (ii) the $3,000,000
principal amount of that certain note issued to the Purchaser by the Company and
(iii) the value of certain services to be provided by the Purchaser to the
Company which will be valued for purposes of this Agreement at $2,000,000). For
purposes of this Agreement, the IPO and the Preferred Financing shall be
referred to alternatively as the "Financing Event."
1.4 WARRANT COVERAGE. As an inducement to the Purchaser to participate
in the Financing Event, the Company shall issue at the closing to the Purchaser
a warrant to purchase up to the number of shares of Common Stock of the Company
set forth in the Common Stock Purchase Warrant in substantially the form
attached hereto as Exhibit A (the "Warrant").
1.5 HART-SCOTT-RODINO COMPLIANCE. Notwithstanding anything else in this
Agreement, if the sale and issuance of the Shares is subject to the premerger
notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), it shall be a condition to the Closing
that any waiting period under the HSR Act applicable to the purchase of the
Shares shall have expired or been terminated and any approvals required
thereunder shall have been obtained, and each of the parties hereby agree to
cooperate in promptly filing premerger reports and in taking all steps
reasonably necessary to obtain early termination of any applicable HSR Act
waiting periods. If any such waiting period shall not have expired or been
subject to early termination on or before the date ninety (90) days from the
date of this Agreement, either party may terminate this Agreement by giving
written notice to the other.
2. CLOSING, DELIVERY AND PAYMENT.
Subject to the terms of Section 5, the closing of the sale and purchase
of the Shares under this Agreement (the "Closing") shall take place
concurrently with, but not before, the closing of the IPO at the offices of
Wilson Sonsini Goodrich & Rosati, Professional Corporation, 650 Page Mill Road,
-2-
<PAGE> 7
Palo Alto, California 94304. The date of the Closing is referred to as the
"Closing Date." At the Closing, subject to the terms and conditions hereof, the
Company will deliver to Purchaser a certificate representing the number of
Shares to be purchased at the Closing against payment by or on behalf of
Purchaser of the Purchase Price therefor by cash, wire transfer, or by such
other means as shall be mutually agreeable to Purchaser and the Company.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth in the Schedule of Exceptions attached hereto as Annex
1 or as otherwise disclosed in the Registration Statement on Form S-1 (File No.
333-27241) filed with the Securities and Exchange Commission (the "Registration
Statement"), the Company hereby represents and warrants to Purchaser as follows:
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Florida, and will, as of the Closing Date, be a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company has full power and authority to own and operate its
properties and assets, and to carry on its business as presently conducted. The
Company is duly qualified, is authorized to do business and is in good standing
as a foreign corporation in all jurisdictions in which the nature of its
activities and of its properties (both owned and leased) makes such
qualification necessary, except for those jurisdictions, in the aggregate, in
which failure to do so would not have a material adverse effect on the Company
or its business.
3.2 AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on the part of
the Company, its officers, directors and shareholders necessary for the
authorization, execution and delivery of this Agreement and the Certificate of
Incorporation, for the sale and issuance of the Shares pursuant hereto and for
the performance of the Company's obligations hereunder has been taken or will be
taken prior to the Closing. This Agreement, when executed and delivered, will be
a valid and binding obligation of the Company enforceable in accordance with its
terms. The sale of the Shares is not and will not be subject to any preemptive
rights or rights of first refusal that have not been properly waived or complied
with. When issued in compliance with the provisions of this Agreement and the
Certificate of Incorporation, the Shares will be validly issued, fully paid and
nonassessable, and will be free of any liens or encumbrances; provided, however,
that the Shares may be subject to restrictions on transfer under state and/or
federal securities laws as set forth herein or as otherwise required by such
laws at the time a transfer is proposed.
3.3 COMPLIANCE WITH OTHER INSTRUMENTS. The execution, delivery and
performance of and compliance with this Agreement and the issuance and sale of
the Shares pursuant hereto will not (i) materially conflict with, or result in a
material breach or violation of, or constitute a material default under, or
result in the creation or imposition of any material lien, (ii) violate,
conflict with or result in the breach of any material terms of, or result in the
material modification of, any material contract or otherwise give any other
contracting party the right to terminate a material contract, or constitute (or
with notice or lapse of time both constitute) a material default under any
material contract to which the Company is a party or by or to which it or any of
its assets or properties may
-3-
<PAGE> 8
be bound or subject or (iii) result in any violation, or be in conflict with or
constitute a default under any term, of its charter or bylaws.
3.4 SECURITIES EXEMPTION. Assuming the accuracy of the representations
and warranties of the Purchaser contained in Section 4.3 hereof, the offer,
sale and issuance of the Shares will be exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and will have been registered or qualified (or are exempt from registration and
qualification) under the registration, permit or qualification requirements of
all applicable state securities laws.
3.5 FULL DISCLOSURE.
(a) The Company has delivered to Purchaser a draft of the
Registration Statement substantially in the form to be filed with the
Commission.
(b) The Company shall deliver the finalized text of the preliminary
prospectus included in a pre-effective amendment to the Registration Statement
that is to be printed by the Company for distribution to prospective purchasers
(the "Preliminary Prospectus"). When so delivered, the Preliminary Prospectus
shall be appended to this Agreement as Exhibit B and incorporated herein as if
delivered at the time this Agreement was executed. The Preliminary Prospectus
will contain all statements that are required to be stated therein in accordance
with, and will comply as to form in all material respects with, the Securities
Act and will not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading.
(c) When the Registration Statement becomes effective, and at all
times subsequent thereto, up to the Closing Date, (1) the Registration
Statement and the Prospectus (as hereinafter defined) and any amendments or
supplements thereto will contain substantially all statements that are required
to be stated therein in accordance with the Securities Act and will comply as
to form in all material respects with to the requirements of the Securities
Act, and (2) neither the Registration Statement nor the Prospectus, nor any
amendment or supplement thereto, will include any untrue statement of a
material fact or will omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading.
For purposes of this Agreement, "Prospectus" means the prospectus, as
amended, on file with the Commission at the time the Registration Statement
becomes effective, including the information deemed to be part of the
Registration Statement at the time of effectiveness pursuant to Rule 430A, if
applicable, except that if the Prospectus filed by the Company pursuant to Rule
424(b) differs from the prospectus on file at the time the Registration
Statement becomes effective, the term "Prospectus" shall refer to the Rule
424(b) Prospectus from and after the time it was filed with the Commission or
transmitted to the Commission for filing.
3.6 VALID ISSUANCE OF SHARES. The Shares which will be purchased by
Purchaser hereunder, when issued, sold and delivered in accordance with the
terms hereof for the consideration expressed herein, will be duly and validly
authorized and issued, fully paid and nonassessable.
-4-
<PAGE> 9
3.7 LITIGATION, ETC. There is no action, suit, proceeding nor, to the best
of the Company's knowledge, any investigation pending or currently threatened
against the Company, that questions the validity of this Agreement or the right
of the Company to enter into such agreements, or which might result, either
individually or in the aggregate, in any material adverse change in the assets,
condition, affairs or prospects of the Company, financial or otherwise.
3.8 GOVERNMENTAL CONSENT, ETC. No consent, approval or authorization of,
or designation, declaration or filing with, any governmental authority on the
part of the Company is required in connection with the valid execution,
delivery, and performance of this Agreement or the offer, sale or issuance of
the Shares, or the consummation of any other transaction contemplated by this
Agreement except certain filings as may be required under the Securities Act and
state securities laws and regulations, which filings will be made timely in
accordance with the applicable law or regulation.
3.9 TERMINATION OF EMPLOYMENT. The Company is not aware that any officer
or key employee, or that any group of key employees, intends to terminate their
employment with the Company, nor does the Company have a present intention to
terminate the employment of any of the foregoing. The employment of each officer
and employee of the Company is terminable at the will of the Company.
3.10 INTELLECTUAL PROPERTY RIGHTS. The Company (a) owns or has the right
to use, free and clear of all rights, liens, claims and restrictions, all
patents, trademarks, service marks, trade names, copyrights and other intangible
or intellectual property rights (and licenses with respect to the foregoing)
needed for or used in the conduct of its business as now conducted and as
proposed to be conducted without infringing upon or otherwise acting adversely
to the right or claimed right of any person under or with respect to any of the
foregoing and (b) does not and will not infringe any patents, copyrights,
trademarks or other intellectual property rights (including trade secrets),
privacy or similar rights of any third party, nor has any material claim
(whether embodied in an action, past or present) of such infringement been, to
the Company's knowledge, threatened or asserted nor is such a claim pending
against the Company. The Company owns or has the unrestricted right to use all
trade secrets, including know-how, inventions, designs, processes, and technical
data required for or incident to the development, manufacture, operation and
sale of all products and services sold or proposed to be sold by the Company and
all of the patents, trademarks, service marks, trade names, copyrights and trade
secrets of the Company are held by the Company free and clear of any rights,
liens or claims of others, including, without limitation, current and former
employees, former employers of all current and former employees, consultants,
officers, directors and shareholders of the Company. The Company has not
received any communications alleging that the Company has violated or, by
conducting its business as now conducted and as proposed to be conducted would
violate any of the patents, trademarks, service marks, trade names, copyrights
or trade secrets or other proprietary rights of any other person or entity.
3.11 PROPRIETARY INFORMATION AGREEMENTS. All employees and consultants
whom the Company considers to be key technical employees or consultants are
parties to a written agreement ("Proprietary Information and Inventions
Agreement") under which each such employee or
-5-
<PAGE> 10
consultant (i) is obligated to disclose and transfer to the Company, without the
receipt by such person of any additional value therefor (other than normal
salary or fees for consulting services), all inventions, developments and
discoveries which, during the period of employment with or performance of
services for the Company, he or she makes or conceives of either solely or
jointly with others, that relate to any subject matter which his or her work for
the Company may be concerned, or relate to or are connected with the business,
products or projects of the Company, or involve the use of the time, material or
facilities of the Company, and (ii) is obligated to maintain the confidentiality
of proprietary information of the Company. To the Company's knowledge, no
Company employee or consultant is in violation of the Proprietary Information
and Inventions Agreement to which such employee or consultant is a party. To the
Company's knowledge, no Company employee or consultant is obligated under any
contract (including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would conflict with their obligation to use their
best efforts to promote the interests of the Company or that would conflict with
the Company's business as conducted or as proposed to be conducted. Neither the
execution nor delivery of this Agreement nor the carrying on of the Company's
business by the employees and consultants of the Company, nor the conduct of the
Company's business as proposed, will, to the Company's knowledge, conflict with
or result in a breach of the terms, conditions or provisions of, or constitute a
default under, any contract, covenant or instrument under which any of such
employees and consultants is now obligated. The Company does not believe it is
or will be necessary to utilize any inventions of any of its employees and
consultants (or people it currently intends to hire) made prior to their
employment by the Company.
3.12 LOCK-UP AGREEMENTS. GS Capital Partners, L.P., Kleiner Perkins
Caufield & Byers VII, KPCB VII Founders Fund, KPCB Information Sciences
Zaibatsu Fund II and TMI Telemedia International Ltd. and the executive
officers of the Company have entered into 360 day lock-up agreements with the
Company and/or the underwriters of the IPO in substantially similar form to
that entered into by Purchaser and Racal Datacom Inc. will be, prior to the
effectiveness of the Registration Statement, subject to a 180 day lock-up
restriction.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Except as set forth in the Williams Holdings of Delaware, Inc.'s annual
report on Form 10-K for the year ended December 31, 1996 and its quarterly
report on Form 10-Q for the quarter ended March 31, 1997, Purchaser hereby
represents and warrants to the Company as follows (such representations and
warranties do not lessen or obviate the representations and warranties of the
Company set forth in this Agreement):
4.1 REQUISITE POWER AND AUTHORITY. Purchaser has all necessary power and
authority under all applicable provisions of law to execute and deliver this
Agreement and to carry out the provisions of this Agreement. All action on
Purchaser's part required for the lawful execution and delivery of this
Agreement has been or will be effectively taken prior to the Closing. This
Agreement, when executed and delivered, will be a valid and binding obligation
of Purchaser, enforceable in accordance with its terms, except (i) as limited
by applicable bankruptcy, insolvency,
-6-
<PAGE> 11
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights and (ii) general principles of equity that
restrict the availability of equitable remedies.
4.2 CONSENTS. All consents, approvals, orders, authorizations,
registrations, qualifications, designations, declarations or filings with any
governmental or banking authority on the part of Purchaser required in
connection with the consummation of the transactions contemplated in this
Agreement have been or shall have been obtained prior to and be effective as of
the Closing.
4.3 INVESTMENT REPRESENTATIONS. Purchaser understands that the Shares
have not been registered under the Securities Act. Purchaser also understands
that the Shares are being offered and sold pursuant to an exemption from
registration contained in the Securities Act based in part upon Purchaser's
representations contained in the Agreement. Purchaser hereby represents and
warrants as follows:
(a) PURCHASER IS AN ACCREDITED INVESTOR. Purchaser represents that
Purchaser is an Accredited Investor within the meaning of Rule 501(a) of
Regulation D under the Securities Act.
(b) PURCHASER BEARS ECONOMIC RISK. Purchaser understands that it must
bear the economic risk of this investment indefinitely unless the Shares are
registered pursuant to the Securities Act, or an exemption from registration is
available. Purchaser understands that it has no registration rights with
respect to the Shares. Purchaser also understands that there is no assurance
that any exemption from registration under the Securities Act will be available
and that, even if available, such exemption may not allow Purchaser to transfer
all or any portion of the Shares under the circumstances, in the amounts or at
the times Purchaser might propose.
(c) ACQUISITION FOR OWN ACCOUNT. Purchaser is acquiring the Shares for
Purchaser's own account for investment only, and not with a view towards their
distribution within the meaning of the Securities Act.
(d) PURCHASER CAN PROTECT ITS INTEREST. Purchaser represents that by
reason of its, or of its management's, business or financial experience,
Purchaser has the capacity to protect its own interests in connection with the
transactions contemplated in this Agreement. Purchaser is not a corporation,
trust or partnership specifically formed for the purpose of consummating these
transactions.
(e) COMPANY INFORMATION. Purchaser has had an opportunity to discuss
the Company's business, management and financial affairs with directors,
officers and management of the Company and has had the opportunity to review
the Company's operations and facilities. Purchaser has also had the opportunity
to ask questions of and receive answers from, the Company and its management
regarding the terms and conditions of this investment.
4.4 LEGENDS. Each certificate representing the Shares may be endorsed with
the following legends:
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<PAGE> 12
(a) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND ARE "RESTRICTED SECURITIES" AS DEFINED IN RULE 144
PROMULGATED UNDER THE ACT. THE SECURITIES MAY NOT BE SOLD OR
OFFERED FOR SALE OR OTHERWISE DISTRIBUTED EXCEPT (I) IN
CONJUNCTION WITH AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SHARES UNDER THE ACT, OR (II) IN COMPLIANCE WITH RULE 144 OR
(III) PURSUANT TO AN OPINION OF COUNSEL TO THE CORPORATION THAT
SUCH REGISTRATION OR COMPLIANCE IS NOT REQUIRED AS TO SUCH SALE,
OFFER OR DISTRIBUTION."
(b) Any other legends required by applicable federal or state
blue sky or securities laws.
The Company need not register a transfer of any Shares, and may also instruct
its transfer agent not to register the transfer of the Shares, unless the
conditions specified in the foregoing legends are satisfied.
4.5 REMOVAL OF LEGEND TRANSFER RESTRICTIONS.
(a) Any legend endorsed on a certificate pursuant to subsection
4.4(a) and the stop transfer instructions with respect to such Shares shall be
removed and the Company shall issue a certificate without such legend to the
holder thereof if such legend may be properly removed under the terms of Rule
144 promulgated under the Securities Act or if such holder provides the Company
with an opinion of counsel for such holder, reasonably satisfactory to legal
counsel for the Company, to the effect that a sale, transfer or assignment of
such Shares may be made without registration.
(b) Any legend endorsed on a certificate pursuant to subsection
4.4(b) and the stop transfer instructions with respect to such Shares shall be
removed upon receipt by the Company of an order of an appropriate state
securities authority authorizing such removal.
5. CONDITIONS TO CLOSING.
5.1 CONDITIONS TO PURCHASER'S OBLIGATIONS AT THE CLOSING. Purchaser's
obligation to purchase the Shares identified in Section 1.2 of the Agreement at
the Closing are subject to the satisfaction, at or prior to the Closing, of the
following conditions:
(a) CONCURRENT CLOSING OF FINANCING EVENT. The Closing shall
occur concurrently with, and not before, the closing of the IPO.
(b) OTHER INVESTOR PARTICIPATION. The Company will have a
binding commitment by other investors willing to purchase an additional $3
million of the Company's
-8-
<PAGE> 13
Common Stock in connection with the investment by the Purchaser hereunder,
pursuant to terms and conditions no more favorable to such investors than that
offered to Purchaser. The closing of this investment will occur concurrently
with, and not before the closing of the IPO.
(c) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF OBLIGATIONS.
The representations and warranties made by the Company in Section 3 (excepting
Section 3.5(b)) hereof shall be true and correct in all material respects as of
the Closing with the same force and effect as if they had been made as of the
Closing, and the Company shall have performed and complied with all obligations
and conditions herein required to be performed or complied with by it on or
prior to the Closing; provided, that the foregoing limitation as to "material
respects" shall not apply to those representations and warranties already
subject to a materiality qualifier.
(d) LEGAL INVESTMENT. At the time of the Closing, the sale and issuance
of the Shares shall be legally permitted by all laws and regulations to which
Purchaser and the Company are subject.
(e) CONSENTS, PERMITS, AND WAIVERS. The Company shall have obtained any
and all authorizations, approvals, consents, permits and waivers necessary or
appropriate for consummation of the transactions contemplated by this Agreement
(except for such as may be properly obtained subsequent to the Closing, and such
items shall be effective on and as of the Closing).
(f) CERTIFICATE OF STATUS. The Company shall have obtained a
Certificate of Status from the Delaware Secretary of State dated as of a recent
date prior to the Closing.
(g) COPIES. The Company shall have delivered to Purchaser a true and
complete copy of the Registration Statement and any amendments thereto, of each
exhibit filed therewith and of the Preliminary Prospectus and final form of
Prospectus.
(h) PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all documents
and instruments incident to such transactions shall be reasonably satisfactory
in form and substance to counsel to Purchaser, and counsel to Purchaser shall
have received all such counterpart originals or certified or other copies of
such documents as they may reasonably request.
(i) OUTSTANDING PREFERRED STOCK. The shares of Preferred Stock of the
Company, issued and outstanding as of the date of this Agreement, will convert
into shares of Common Stock in connection with the IPO.
(j) COMPLIANCE CERTIFICATE. The Company shall have delivered to
Purchaser a Compliance Certificate, executed by the President and the Chief
Financial Officer of the Company, dated the Closing Date, to the effect that the
conditions specified in subparagraphs (a) through (i) of this Section 5.1 have
been satisfied.
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<PAGE> 14
(k) LEGAL OPINION. The Company shall have delivered an opinion of
counsel to the Purchaser in substantially the form attached hereto as Exhibit C.
5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's obligation to
issue and sell the Shares at the Closing is subject to the satisfaction, on or
prior to the Closing of the following conditions:
(a) CONCURRENT CLOSING OF THE FINANCING EVENT. The Closing shall
occur concurrently with, but not before, the closing of the Financing Event.
(b) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties made by Purchaser in Section 4 hereof shall be true and correct in
all material respects at the date of the Closing, with the same force and
effect as if they had been made on and as of said date.
(c) PERFORMANCE OF OBLIGATIONS. Purchaser shall have performed and
complied with all agreements and conditions herein required to be performed or
complied with by Purchaser on or before the Closing.
6. COVENANTS OF THE COMPANY.
6.1 BOARD SEAT. The Company will place a designee of the Purchaser on the
Board of Directors of the Company to fill the vacancy left by the resignation of
Randy Maslow, which resignation is to be effective as of the closing of the IPO,
and will nominate a designee of the Purchaser to sit on the Board of Directors
so long as Purchaser holds at least 5% of the issued and outstanding capital
stock of the Company.
6.2 NOTICE OF ACQUISITION OFFER. The Company will provide a copy to
Purchaser of any notice delivered or required to be delivered to TMI Telemedia
International Ltd. ("TMI") pursuant to Section 1.0 of Annex 6 of that certain
Network Deployment, Services Distribution and Network Provision Agreement
between the Company and TMI immediately after such notice is delivered to TMI.
6.3 RULE 144 REPORTING. With a view to making available to Purchaser the
benefits of certain rules and regulations of the SEC which may permit the sale
of the Shares to the public without registration, the Company agrees at all
times after ninety (90) days after the effective date of the Registration
Statement to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144.
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
-10-
<PAGE> 15
(c) So long as Purchaser owns any Shares, to furnish to Purchaser
within a reasonable time upon a written request by Purchaser, a written
statement by the Company as to its compliance with the reporting requirements
of said Rule 144 (at any time after ninety (90) days after the effective date
of the first registration statement filed by the Company for an offering of its
securities to the general public) and of the Exchange Act (at any time after it
has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
so filed by the Company as Purchaser may reasonably request in complying with
any rule or regulation of the SEC allowing Purchaser to sell any such
securities without registration.
7. MISCELLANEOUS
7.1 GOVERNING LAW. This Agreement shall be governed in all respects by the
laws of the State of California.
7.2 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by Purchaser and the closing
of the transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument, except as
expressly provided otherwise in such certificate or instrument.
7.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Shares from time to time; provided,
however, that prior to the receipt by the Company of adequate written notice of
the transfer of any Shares specifying the full name and address of the
transferee, the Company may deem and treat the person listed as the holder of
such Shares in its records as the absolute owner and holder of such Shares for
all purposes, including the payment of any dividends or any redemption price.
7.4 SEPARABILITY. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, such provision shall, to the extent
practicable, be modified so as to make it valid, legal and enforceable and to
maintain as nearly as practicable the intent of the parties, and the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
7.5 AMENDMENT AND WAIVER.
(a) This Agreement may be amended or modified only upon the written
consent of the parties hereto.
-11-
<PAGE> 16
(b) The obligations of the Company and the rights of the holder of
the Shares under this Agreement may be waived only with the written consent of
the parties hereto.
(c) Except to the extent provided in this Section 7.5, neither this
Agreement nor any provision hereof may be changed, waived, discharged or
terminated, except by a statement in writing signed by the party against which
enforcement of the change, waiver, discharge or termination is sought.
(d) Any amendment or waiver effected in accordance with this Section
7.5 shall be binding upon any future holder of some or all of the Shares.
7.6 NOTICES. All notices and other communications required or permitted
hereunder shall be in writing and shall be deemed effectively given and received
(a) upon personal delivery, (b) on the fifth day following mailing sent by
registered or certified mail, return receipt requested, postage prepaid, (c)
upon confirmed delivery by means of a nationally recognized overnight courier
service or (d) upon confirmed transmission of facsimile addressed: (i) if to
Purchaser, at Purchaser's address as set forth on the Company's records, or at
such other address as Purchaser shall have furnished to the Company in writing
or (ii) if to the Company, at its address as set forth at the end of this
Agreement, or at such other address as the Company shall have furnished to
Purchaser in writing.
7.7 EXPENSES. The Company shall pay all costs and expenses that it incurs
with respect to the negotiation, execution, delivery and performance of the
Agreement, and Purchaser shall pay all costs and expenses that it incurs with
respect to the negotiation, execution, delivery and performance of this
Agreement.
7.8 ATTORNEYS' FEES. If legal action is brought to enforce or interpret
this Agreement, the prevailing party shall be entitled to recover its
reasonable attorneys' fees and legal costs in connection therewith.
7.9 TITLES AND SUBTITLES. The titles of the paragraphs and subparagraphs
of the Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
7.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.
7.11 BROKER'S FEES. Each party hereto represents and warrants that no
agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other commission directly or indirectly in connection with
the transactions contemplated herein. Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of the representation in this Section 7.11 being untrue.
-12-
<PAGE> 17
7.12 TERMINATION. If the Registration Statement for the IPO has not
become effective or the Preferred Financing has not closed by October 31, 1997,
Purchaser in its discretion may elect to terminate this Agreement by providing
written notice to the Company by November 10, 1997.
7.13 SUBSEQUENT CONSENTS, PERMITS AND WAIVERS. The Company shall obtain
promptly after the Closing all authorizations, approvals, consents, permits and
waivers that are necessary or applicable for consummation of the transactions
contemplated by this Agreement and that were not obtained prior to the Closing
because they may be properly obtained subsequent to the Closing.
-13-
<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth in the first paragraph hereof.
COMPANY:
CONCENTRIC NETWORK CORPORATION
10590 N. Tantau Avenue
Cupertino, CA 95014
By: /s/ HENRY R. NOTHHAFT
--------------------------------------
Henry R. Nothhaft
President and Chief Executive Officer
PURCHASER:
WILLIAMS COMMUNICATIONS GROUP, INC.
By: /s/ [ILLEGIBLE]
--------------------------------------
(Signature)
[APPROVED LEGAL DEPT. SEAL]
Its Senior Vice President
-------------------------------------
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<PAGE> 1
Redacted portions have been marked with asterisks (****). Confidential treatment
has been requested for the redacted portions. The confidential redacted portions
have been filed separately with the Securities and Exchange Commission.
CONFIDENTIAL TREATMENT
EXHIBIT 10.31
CONCENTRIC NETWORK CORPORATION
NOTE AND WARRANT PURCHASE AGREEMENT
THIS NOTE AND WARRANT PURCHASE AGREEMENT (this "Agreement") is made and
entered into as of the 19th day of June, 1997, by and among Concentric Network
Corporation, a Florida corporation (the "Company"), and Williams Communications
Group, Inc., a Delaware corporation (the "Purchaser").
In consideration of the mutual promises, covenants, and conditions
hereinafter set forth, the parties hereto mutually agree as follows:
1. The Loan and the Note. The Purchaser hereby agrees to lend to the
Company, on the date hereof, and on the terms of and conditions hereof, up to an
aggregate principal amount of **** (the "Loan"). The Loan made to the Company by
the Purchaser shall be evidenced by a secured promissory note in substantially
the form attached hereto as Exhibit A (the "Note").
2. The Warrant. As an inducement to the Purchaser to make the Loan, the
Company shall issue to the Purchaser a warrant to purchase up to the number of
shares of the Common Stock of the Company set forth in the Common Stock
Purchase Warrant in substantially the form attached hereto as Exhibit B (the
"Warrant").
3. Representations and Warranties of the Company. Except as set forth in
the Schedule of Exceptions attached hereto as Schedule 3, and except as
otherwise disclosed in the section captioned "Business--Legal Proceedings" of
the Registration Statement on Form S-1 filed with the Securities and Exchange
Commission by the Company, the Company hereby represents and warrants to the
Purchaser as follows:
3.1 Organization and Standing. The Company is a corporation duly
organized and validly existing under, and by virtue of, the laws of its
jurisdiction of incorporation and is in good standing under the laws of said
jurisdiction. The Company has requisite corporate power and authority to own
and operate its properties and assets and to carry on its business as currently
conducted. The Company is qualified to do business as a foreign corporation in
each jurisdiction in which the failure to be so qualified would have a material
adverse effect on its business.
3.2 Corporate Power; Authorization. The Company has all requisite
legal and corporate power to execute and deliver the Transaction Documents (as
defined in Section 5.4) and to carry out and perform all of its obligations
under the Transaction Documents. The execution, delivery and performance of the
Transaction Documents by the Company have been duly authorized by all requisite
corporate action. The Transaction Documents constitute the legal, valid and
binding obligations of the Company, enforceable in accordance with their
respective terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization or similar laws relating to or affecting
<PAGE> 2
the enforcement of creditors' rights, and (ii) as limited by equitable
principles generally.
3.3 Non-Contravention. The execution, delivery and performance of the
Transaction Documents and the compliance with the provisions thereof by the
Company do not (i) materially conflict with, or result in a material breach or
violation of, or constitute a material default under, or result in the creation
or imposition of any material lien, or (ii) violate, conflict with or result in
the breach of any material terms of, or result in the material modification of,
any material contract or otherwise give any other contracting party the right to
terminate a material contract, or constitute (or with notice or lapse of time
both constitute) a material default under any material contract to which the
Company is a party or by or to which it or any of its assets or properties may
be bound or subject.
3.4 Litigation. There is no material action, proceeding or
investigation pending against the Company or any of its properties or assets,
nor has the Company received any threat of action, proceeding or investigation,
that questions the validity of the Transaction Documents or any action taken or
to be taken in connection herewith or therewith, or that, alone or in the
aggregate, is reasonably likely to result in any material adverse effect on the
financial condition, assets, liabilities, earnings or business of the Company
and its subsidiaries taken as a whole, nor is the Company aware that there is
any material basis for the foregoing. The Company is not a party to or subject
to the provisions of any material order, writ, injunction judgment or decree of
any court or government agency or instrumentality that will have a material
effect on the operations or business of the Company.
4. Representation and Warranties of the Purchaser. The Purchaser
represents and warrants to the Company as follows:
4.1 Binding Obligations. The Purchaser has full legal capacity,
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement is a valid and binding obligation of the
Purchaser, enforceable in accordance with its terms, except as limited by
bankruptcy, insolvency or other laws of general application relating to or
affecting the enforcement of creditors' rights generally and general principles
of equity.
4.2 Securities Law Compliance. The Purchaser has been advised that
neither the Note nor the Warrant has been registered under the Securities Act of
1933, as amended (the "Act"), or any state securities laws and, therefore,
cannot be resold unless they are registered under the Act and applicable state
securities laws or unless an exemption from such registration requirements is
available. The Purchaser is aware that Company is under no obligation to effect
any such registration with respect to the Note or to file for or comply with any
exemption from registration. The Purchaser has not been formed solely for the
purpose of making this investment and is purchasing the Note to be acquired by
the Purchaser hereunder for its own account for investment, not as a nominee or
agent, and not with a view to, or for resale in connection with, the
distribution thereof. The Purchaser has such knowledge and experience in
financial and business matters that the Purchaser is capable of evaluating the
merits and risks of such investment, is able to incur a complete loss of such
2
<PAGE> 3
investment and is able to bear the economic risk of such investment for an
indefinite period of time. The Purchaser is an accredited investor as such term
is defined in Rule 501 of Regulation D under the Securities Act.
4.3 Access to Information. Such Purchaser acknowledges that Company
has given such Purchaser access to the corporate records and accounts of Company
and to all information in its possession relating to Company, has made its
officers and representatives available for interview by such Purchaser, and has
furnished such Purchaser with all documents and other information required for
such Purchaser to make an informed decision with respect to the purchase of the
Note and Warrant.
5. Conditions to Transaction. The obligation of the Purchaser to make the
Loan, and the obligations of the Company to issue the Note and Warrant, shall be
subject to each of the following conditions having been fulfilled on or before
such date:
5.1 Blue Sky. The Company shall have obtained all necessary Blue Sky
law permits and qualifications, or have the availability of exceptions
therefrom, required by any state for the offer and sale of the Note and Warrant
and the issuance of the shares of Common Stock, par value $.001 per share, of
the Company (the "Shares") upon exercise of the Warrant.
5.2 Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated hereby shall have been completed.
5.3 Consents and Waivers. The Company shall have obtained any and all
consents and waivers necessary or appropriate for consummation of the
transactions contemplated by this Agreement.
5.4 Transaction Documents. The Company shall have duly executed and
delivered to the Purchaser the following documents (the "Transaction
Documents"):
(a) this Agreement;
(b) the Note issued hereunder;
(c) the Warrant issued hereunder;
(d) the Security Agreement in the form of Exhibit C hereto (the
"Security Agreement") and any financing statements on form UCC-1
executed in connection herewith;
(f) the Technology Escrow Agreement in the form of Exhibit D
hereto; and
3
<PAGE> 4
(g) a Term Sheet in the form of Exhibit E hereto setting forth
the basic terms under which Purchaser would serve as an agent and a
reseller of the Company's products and services.
The agreement of the Purchaser to enter into this Agreement or any of the other
Transaction Documents does not obligate or require the Purchaser to enter into
any other contract, agreement or arrangement with the Company.
5.5 Accounts Payable. The Company shall have no accounts payable
outstanding to the Purchaser more than sixty days, or the Company shall have
made provision satisfactory to the Purchaser for the payment of such accounts
payable.
5.6 Opinion. The Company shall have delivered an opinion of its
counsel to the Purchaser in form and substance satisfactory to the Purchaser.
6. Investment Representations; Legends.
6.1 Investment Representations of the Purchaser. The Purchaser
hereby represents and warrants to the Company that the Purchaser is acquiring
the Note and the Warrant for its own account for investment and not with a view
toward the distribution thereof. The Purchaser understands that neither of the
Notes, the Warrant or the Shares have been registered under the Securities Act
of 1933, as amended (the "Act"), and that they are being offered and sold
pursuant to an exemption from registration contained in the Act based in part
upon the representations of the Purchaser contained herein.
6.2 Legends.
(a) The Note, the Warrant, and the certificates representing any
Shares will each be stamped or otherwise imprinted with legends as set forth in
the form of Note and Warrant attached as Exhibits A and B, respectively. Such
legends shall be removed by the Company from the Notes, the Warrant, or the
certificates representing the Shares upon delivery to it of an opinion of
counsel that a registration statement under the Act is at the time in effect
with respect to the legended security or that such security can be freely
transferred without such registration statement being in effect and that such
transfer will not jeopardize the exemption or exemptions from registration
pursuant to which the Note and Warrant were issued.
(b) The Note, the Warrant, and the certificates representing the
Shares shall also bear any legends required under applicable state securities
laws.
7. Modification: Waiver. No modification or waiver of any provision of
this Agreement or consent to departure therefrom shall be effective unless in
writing and signed by the Company and the Purchaser.
4
<PAGE> 5
8. Notices. Any notice or report herein required or permitted to be
given shall be given by depositing the same in the United States mail, postage
prepaid and addressed or confirmed facsimile transmission to the parties as
follows:
(a) To the Company:
Concentric Network Corporation
10590 N. Tantau Avenue
Cupertino, CA 95014
Attn: Michael F. Anthofer
(b) To the Purchaser:
Williams Communications Group, Inc.
111 East 1st Street
Tulsa, Oklahoma 74103
Attn: Vice President-Finance
or to such other place or places as any of the parties shall designate by
written notice to the others.
9. Successors and Assigns. All covenants and agreements of the parties
contained in this Agreement shall be binding and inure to the benefit of their
respective successors and assigns.
10. Governing Law. This Agreement shall in all respects be governed by
the laws of the State of California.
11. Section Headings. The section and paragraph headings contained herein
are for reference purposes only and shall not in any way affect the meaning and
interpretation of this Agreement.
12. Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed and delivered shall be
deemed an original, and such counterparts together shall constitute only one
instrument.
13. Expenses of Agreement. The parties to this Agreement shall each bear
their own expenses incurred in connection with the preparation, execution and
delivery of Transaction Documents.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
themselves
5
<PAGE> 6
or by their respective representatives thereunto duly authorized the day and
year first above written.
CONCENTRIC NETWORK CORPORATION
By: /s/
--------------------------------------
Henry R. Nothhaft, President and CEO
WILLIAMS COMMUNICATIONS GROUP, INC.
By: /s/
--------------------------------------
--------------------------------------
6
<PAGE> 1
Redacted portions have been marked with asterisks (****). Confidential treatment
has been requested for the redacted portions. The confidential redacted portions
have been filed separately with the Securities and Exchange Commission.
CONFIDENTIAL TREATMENT
EXHIBIT 10.32
LIMITED LIABILITY COMPANY AGREEMENT
OF
WILTEL COMMUNICATIONS, LLC,
A DELAWARE LIMITED LIABILITY COMPANY
EXECUTION COPY
-1-
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
Construction and Definitions...........................................................................2
1.1 Construction................................................................................2
1.2 References..................................................................................2
1.3 Headings....................................................................................2
1.4 Definitions.................................................................................2
1.5 Accounting Terms...........................................................................14
ARTICLE II
Organization..........................................................................................14
2.1 Formation..................................................................................14
2.2 Qualification in Other Jurisdictions.......................................................14
ARTICLE III
Name..................................................................................................14
ARTICLE IV
Purpose and Powers....................................................................................15
4.1 Purposes...................................................................................15
4.2 Powers of the Company......................................................................15
ARTICLE V
Registered Office; Registered Agent;Principal Office; Other Offices...................................15
ARTICLE VI
Term..................................................................................................16
ARTICLE VII
No State Law Partnership..............................................................................16
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
ARTICLE VIII
Capital Contributions; Capital Accounts...............................................................16
8.1 Capital Accounts...........................................................................16
8.2 Capital Contributions......................................................................17
8.3 Limitation on Liability of Members.........................................................17
8.4 Adjustment of Capital Accounts.............................................................18
8.5 Return of Contributions....................................................................18
8.6 Additional Capital Contributions...........................................................18
ARTICLE IX
Distributions; Repayment of Member Loans..............................................................19
9.1 Distributions..............................................................................19
9.2 No Interest on Unwithdrawn Share...........................................................20
9.3 Withholding................................................................................20
9.4 Limitations on Distributions...............................................................20
9.5 Repayment of Member Loans..................................................................20
ARTICLE X
Allocations of Income, Gains, Losses, Deductions and Credits..........................................21
10.1 General....................................................................................21
10.2 Allocations................................................................................22
10.3 Allocations for Income Tax Purposes........................................................24
10.4 Allocations for Financial Reporting........................................................24
10.5 Tax Matters Partner........................................................................24
10.6 Tax Elections..............................................................................26
ARTICLE XI
Books of Account, Records and Financial Information...................................................26
11.1 Books and Records..........................................................................26
11.2 Financial Information......................................................................26
11.3 1997 Provisional Operating Budget..........................................................27
ARTICLE XII
Fiscal Year...........................................................................................27
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE XIII
Company Funds.........................................................................................27
ARTICLE XIV
Meetings of Members...................................................................................28
14.1 Annual Meeting.............................................................................28
14.2 Special Meetings...........................................................................28
14.3 Notice of Meeting..........................................................................28
14.4 Waiver of Notice...........................................................................29
14.5 Quorum.....................................................................................29
14.6 Voting.....................................................................................29
14.7 Proxies....................................................................................29
14.8 Action Without a Meeting...................................................................29
14.9 Member's Power.............................................................................29
14.10 Contracts. ................................................................................30
ARTICLE XV
Management; Management Committee......................................................................30
15.1 Management by Management Committee.........................................................30
15.2 Organization of Management Committee.......................................................31
15.3 Third Parties Dealing with the Company.....................................................31
15.4 Duties and Powers of Management Committee..................................................32
15.5 Duties of Representatives..................................................................32
15.6 Qualification of Representatives...........................................................33
15.7 Action by Management Committee.............................................................33
15.8 Meetings of the Management Committee.......................................................33
15.9 Quorum.....................................................................................33
15.10 Technology, Human Resources and Audit Committees...........................................34
15.11 Other Committees...........................................................................34
15.12 Supermajority Approval by the Representatives..............................................34
15.13 Affiliated Transactions....................................................................37
ARTICLE XVI
Officers..............................................................................................38
16.1 Appointment and Tenure.....................................................................38
16.2 Removal....................................................................................38
16.3 Chairman of the Management Committee.......................................................38
16.4 Chief Executive Officer....................................................................39
16.5 President..................................................................................39
16.6 Chief Financial Officer....................................................................40
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16.7 Vice Presidents............................................................................40
16.8 Secretary; Assistant Secretaries...........................................................40
16.9 Treasurer; Assistant Treasurers............................................................40
16.10 Vacancies..................................................................................41
ARTICLE XVII
Liability and Exculpation.............................................................................41
17.1 Liability..................................................................................41
17.2 Exculpation................................................................................41
17.3 Duties and Liabilities of Covered Persons..................................................42
ARTICLE XVIII
Indemnification.......................................................................................43
18.1 Power to Indemnify in Actions, Suits or Proceedings Other Than
Those by or in the Right of the Company....................................................43
18.2 Power to Indemnify in Actions, Suits or Proceedings by or in the Right
of the Company.............................................................................43
18.3 Authorization of Indemnification...........................................................44
18.4 Good Faith Defined.........................................................................44
18.5 Indemnification by a Court.................................................................44
18.6 Expenses Payable in Advance................................................................45
18.7 Nonexclusivity of Indemnification and Advancement of Expenses..............................45
18.8 Insurance..................................................................................45
18.9 Meaning of "Company" and "Other Enterprises" for the Purposes of
Article XVIII..............................................................................45
18.10 Survival of Indemnification and Advancement of Expenses....................................46
ARTICLE XIX
Transfer of Interests by Members......................................................................46
19.1 Restrictions on Transfers..................................................................46
19.2 Prohibitions on Transfer by Williams Member................................................47
19.3 Prohibitions on Transfer by Nortel Member..................................................47
19.4 Purchase and Sale Rights...................................................................49
19.5 Terms of Purchase and Sale.................................................................51
19.6 Right of First Refusal.....................................................................52
19.7 Recognition of Members.....................................................................54
19.8 Prohibited Transfers.......................................................................54
19.9 Admission of Substituted Members...........................................................55
19.10 Compliance with Securities Laws............................................................55
19.11 Representations Regarding Transfers; Legend................................................56
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19.12 Distributions and Allocations in Respect of Transferred
Membership Interest. ......................................................................57
ARTICLE XX
Distributorship Agreement.............................................................................58
20.1 Company Right of Renewal...................................................................58
20.2 Company Right of Renewal after Put or Call.................................................58
20.3 Company Right to Distribute Products Not Covered
by the Distributorship Agreement...........................................................59
ARTICLE XXI
Additional Members....................................................................................59
ARTICLE XXII
Dissolution...........................................................................................60
22.1 Liquidating Events.........................................................................60
22.2 Judicial Dissolution.......................................................................60
22.3 Continuation of Business...................................................................60
22.4 Covenants Concerning Early Dissolution; Remedies Upon Breach...............................60
22.5 Option to Purchase Membership Interest of Bankrupt Member..................................61
ARTICLE XXIII
Winding Up and Termination of the Company.............................................................61
23.1 Liquidator.................................................................................61
23.2 Liquidation Reserves.......................................................................62
23.3 Liquidating Distributions..................................................................62
23.4 Accounting.................................................................................63
23.5 Recourse to Company Assets.................................................................63
23.6 Cancellation of Certificate................................................................63
ARTICLE XXIV
Notices...............................................................................................64
ARTICLE XXV
Representations, Warranties and Covenants.............................................................65
25.1 Representations and Warranties ............................................................65
25.2 Nondisclosure of Proprietary Information...................................................66
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ARTICLE XXVI
Dispute Resolution....................................................................................66
ARTICLE XXVII
Miscellaneous.........................................................................................66
27.1 No Partition...............................................................................66
27.2 Entire Agreement...........................................................................66
27.3 Governing Law..............................................................................67
27.4 Binding Effect.............................................................................67
27.5 Effect of Invalid Provision................................................................67
27.6 Counterparts...............................................................................67
27.7 Negotiated Transaction.....................................................................67
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EXHIBITS
Exhibit A Agreed Value of Initial Capital Contributions (Section 1.4)
Exhibit B Nortel Member Merger Agreement (Section 1.4)
Exhibit C Williams Member Merger Agreement (Section 1.4)
Exhibit D Percentage Interests (Section 1.4)
Exhibit E Illustration of Dilution Formula (Section 8.6(a))
Exhibit F 1997 Provisional Operating Budget (Section 11.3)
Exhibit G Representatives and Alternate Representatives (Section 15.2(b))
Exhibit H Functions and Scope of Technology Committee (Section 15.10(b))
Exhibit I Functions and Scope of Human Resources Committee (Section 15.10(c))
Exhibit J Functions and Scope of Audit Committee (Section 15.10(d))
Exhibit K Initial Scope of Business (Section 15.12(a)(ii))
Exhibit L Valuation Methodology (Section 19.3(a) Article XIX)
Exhibit M Registration Procedures for Delcorp Common Stock (Section 19.3(e))
Exhibit N Registration Procedures for Intended Listed Affiliate (Section 19.4(h))
Exhibit O Dispute Resolution Procedures (Article XXVI)
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THE MEMBERSHIP INTERESTS REPRESENTED BY THIS INSTRUMENT HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE. WITHOUT SUCH REGISTRATION, SUCH
MEMBERSHIP INTERESTS MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED EXCEPT UPON DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL
SATISFACTORY TO THE MEMBERS THAT REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER
OR THE SUBMISSION TO THE MEMBERS OF SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY
TO THE MEMBERS TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION
OF THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS
OR ANY RULE OR REGULATION PROMULGATED THEREUNDER. THE SALE AND TRANSFER OF THE
MEMBERSHIP INTERESTS IS ALSO SUBJECT TO CERTAIN RESTRICTIONS WHICH ARE SET
FORTH IN THIS AGREEMENT.
LIMITED LIABILITY COMPANY AGREEMENT
OF
WILTEL COMMUNICATIONS, LLC,
a Delaware Limited Liability Company
This Limited Liability Company Agreement of WilTel Communications,
LLC, a Delaware limited liability company (the "Company"), dated this 30th day
of April, 1997 and effective as of 12:01 a.m. on April 1, 1997 (as amended or
modified from time to time in accordance with Section 14.9 hereof, this
"Agreement"), is entered into by and between Northern Telecom, Inc. a Delaware
corporation (the "Nortel Member") and Williams Communications Group, Inc., a
Delaware corporation (the "Williams Member").
WHEREAS, the Nortel Member and the Williams Member have formed a
limited liability company under the Delaware Limited Liability Company Act
known as "WilTel Communications, LLC";
WHEREAS, pursuant to an Agreement and Plan of Merger dated as of the
date hereof between Nortel Communications Systems Inc., a Delaware corporation
("NCS"), and the Company, NCS has merged with and into the Company, with the
Company being the surviving entity; and
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WHEREAS, pursuant to an Agreement and Plan of Merger dated as of the
date hereof between Williams Telecommunications Systems, Inc., a Delaware
corporation ("WilTel"), and the Company, WilTel has merged with and into the
Company, with the Company being the surviving entity;
NOW, THEREFORE, in consideration of the premises and mutual
undertakings contained herein, the parties hereto agree as follows:
ARTICLE I
Construction and Definitions
1.1 Construction. Words used in this Agreement, regardless of the
number or gender specifically used, shall be deemed and construed to include
any other number, singular or plural, and any other gender, masculine, feminine
or neuter, as the context shall require.
1.2 References. As used in this Agreement, unless expressly stated
otherwise, references to "including" mean "including, without limitation."
Unless otherwise specified, all references in this Agreement to Articles,
Sections, Exhibits or paragraphs are deemed references to the corresponding
Articles, Sections, Exhibits or paragraphs in this Agreement.
1.3 Headings. The headings of the Articles, Sections and Exhibits of
this Agreement are included for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction or
interpretation hereof.
1.4 Definitions. The following definitions shall be applicable to the
terms set forth below as used in this Agreement:
"Accepting Offerees" shall have the meaning given that term in Section
19.6(d).
"Act" means the Delaware Limited Liability Company Act, Del. Code Ann.
tit. 6, Section 18-101, et seq. (1996), as amended from time to time (or any
corresponding provisions of any succeeding law).
"Adjusted Capital Account Deficit" means with respect to any Member,
the deficit balance, if any, in such Member's Capital Account as of the end of
the relevant fiscal year, after giving effect to the following adjustments:
(a) Increase such Capital Account by any amounts which such
Member is obligated to restore pursuant to any provision of this Agreement or
is deemed to be obligated to restore pursuant to Regulations section
1.704-1(b)(2)(ii)(c)
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and the penultimate sentences of Regulations sections 1.704-2(g)(1) and
1.704-2(i)(5); and
(b) Decrease such Capital Account by the items described in
Regulations sections 1.704-1(b)(2)(ii)(d)(4), (5), and (6).
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Regulations section 1.704-1(b)(2)(ii)(d) and
shall be interpreted consistently therewith.
"Affiliate" means, when used with respect to a specified Person, such
specified Person's Subsidiaries or other Persons which are or which could be
included on such Person's consolidated income statement for financial reporting
purposes pursuant to GAAP, and/or any third Person which does or which could
include such specified Person in such third Person's consolidated income
statement for financial reporting purposes pursuant to GAAP; provided that the
Company shall not be deemed to be an Affiliate of the Nortel Member, the
Williams Member or any of their respective Subsidiaries or Affiliates; and
provided further that NTL and BCE shall not be deemed to be Affiliates of the
Nortel Member.
"Agreed Allocation" shall have the meaning given that term in Section
10.2(i).
"Agreed Value" means, in the case of any contributions or
distributions of property, the fair market value of such property net of any
indebtedness or other liability either assumed or to which such property is
subject, as such fair market value is determined by the Members using such
reasonable method of valuation as they may mutually agree upon.
"Agreement" shall have the meaning given that term in the preamble
hereof.
"Audit Committee" shall have the meaning given that term in Section
15.10(a) hereof.
"Bankruptcy Code" means Title 11 of the United States Code, as now or
hereafter in effect, or any successor thereto.
"Bankruptcy Event" means, with respect to any Person, the occurrence
of any of the following events: such Person shall commence a voluntary case
concerning itself under the Bankruptcy Code; or an involuntary case under the
Bankruptcy Code is commenced against such Person and the petition is not
dismissed within 60 days after commencement of the case; or a custodian (as
defined in the Bankruptcy Code) is appointed for, or takes charge of, all or
substantially all of the property of such Person; or such Person commences any
other proceeding under any reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution, insolvency or
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liquidation or similar law of any jurisdiction whether now or hereafter in
effect relating to such Person, or there is commenced against such Person any
such proceeding which remains undismissed for a period of 60 days or such
Person is adjudicated insolvent or bankrupt; or any order for relief or other
order approving any such case or proceeding is entered; or such Person suffers
the appointment of any custodian or the like for it or any substantial part of
its property to continue undischarged or unstayed for a period of 90 days; or
such Person makes a general assignment for the benefit of creditors; or any
corporate or similar action is taken by such Person for the purpose of
effecting any of the foregoing.
"BCE" means BCE Inc., a Canadian corporation.
"Built-In Gain" attributable to any Contributed Property means, as of
the date of contribution, the excess of the fair market value of such property
over its adjusted federal income tax basis.
"Built-In Loss" attributable to any Contributed Property means, as of
the date of contribution, the excess of the adjusted federal income tax basis
of such property over its fair market value.
"Business Day" means any day on which federal commercial banks are
open for business for the purpose of sending and receiving wire transfers in
Tulsa, Oklahoma and Houston, Texas.
"Call Closing Date" shall have the meaning given that term in Section
19.5(b).
"Call Notice" shall have the meaning given that term in Section
19.5(b).
"Call Purchase Price" shall have the meaning given that term in
Section 19.5(b).
"Capital Account" shall have the meaning given that term in Section
8.1(a).
"Capital Contribution" means, with respect to any Member, the
contribution of cash and other property with an aggregate Agreed Value as set
forth on Exhibit A, as contributed to the Company by such Member as of the
effective date of this Agreement, and all subsequent contributions of cash and
other property contributed to the capital of the Company.
"Capital Expenditures" means, with respect to any Person, all
expenditures made by such Person which should be capitalized in accordance with
GAAP, including all such expenditures with respect to fixed or capital assets
(including, expenditures for maintenance and repairs which should be
capitalized in accordance with GAAP) and, without duplication, the amount of
all rental obligations incurred by such Person which, under GAAP, are or will
be required to be capitalized on the books of such
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Person, in each case taken at the amount thereof accounted as indebtedness in
accordance with GAAP.
"Carrying Value" means with respect to any Contributed Property, the
Agreed Value of such property reduced as of the time of determination by all
book depreciation, cost recovery and amortization deductions charged to the
Capital Accounts (which reductions are to correspond with the requirements of
the Regulations promulgated from time to time under Section 704(b) of the Code
with respect to such property) and an appropriate amount to reflect any sales,
retirements or other dispositions of assets included in such property and, with
respect to any other Company property, the adjusted basis of such property for
federal income tax purposes as of the time of determination. The Carrying
Values shall be further adjusted as provided in Section 8.4.
"Certificate" means the Certificate of Formation of the Company filed
with the Secretary of State of Delaware in accordance with the Act, as such
Certificate may be amended, restated or corrected from time to time.
"Change of Control" means, with respect to any Member, a change of
control of such Member or of any Person which directly or indirectly controls
such Member (each such Person, a "Parent"), that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A, as in
effect on the date hereof, promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"); provided that, without limitation, such
a Change of Control shall be deemed to have occurred if: (A) any "Person" (as
such term is used in section 13(d) and section 14(d) of the Exchange Act),
except for any employee benefit plan of such Member, any Parent or any
subsidiary or related corporation, or any entity holding voting securities of
such Member or any Parent for or pursuant to the terms of any such plan, is or
becomes the beneficial owner, directly or indirectly, of securities of any
Parent or of such Member representing 25% or more of the combined voting power
of such Parent's or such Member's then outstanding securities (except for, in
the case of any Member or any Parent (other than the Ultimate Parent of any
Member), its respective Parent and in the case of the Nortel Member, a Change
of Control of BCE shall not be deemed to be a Change of Control of the Nortel
Member and further, that for as long as BCE is the largest shareholder of NTL,
no Change of Control shall be deemed to have occurred unless a Person acquires
securities representing a greater share of the combined voting power of NTL
than BCE holds immediately prior to that time); (B) there occurs a contested
proxy solicitation of such Member's or any Parent's shareholders that results
in the contesting party obtaining the ability to vote securities representing
30% or more of the combined voting power of such Member's or such Parent's then
outstanding securities; (C) there occurs a sale, exchange, transfer or other
disposition of substantially all of the assets of such Member or any Parent to
another entity, except to an entity controlled directly or indirectly by such
Member or any Parent, or a merger, consolidation or other reorganization of
such Member or any
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Parent in which such Member or any Parent is not the surviving entity, or a
plan of liquidation or dissolution of such Member or any Parent other than
pursuant to bankruptcy or insolvency laws is adopted; or (D) during any period
of two consecutive years, individuals who at the beginning of such period
constituted the Board of Directors of such Member or any Parent cease for any
reason to constitute at least a majority thereof unless the election, or the
nomination for election by such Member's or such Parent's shareholders, of each
new director was approved by a vote of at least two-thirds (2/3rds) of the
directors then still in office who were directors at the beginning of the
period. For purposes of this definition "control", when used with respect to
any specified Person, means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract, by family relationship or otherwise; and the terms
"controlling" and "controlled" have the meanings correlative to the foregoing.
"Code" means the Internal Revenue Code of 1986, as amended, or any
amending or superseding tax laws of the United States of America.
"Company" shall have the meaning given that term in the preamble
hereof, and as the context requires for financial reporting or tax purposes
throughout this Agreement, the Company and its Subsidiaries on a consolidated
basis.
"Company Minimum Gain" shall have the meaning set forth with respect
to partnership minimum gain in Regulations sections 1.704-2(b)(2) and
1.704-2(d).
"Competitive Products" means telecommunications products manufactured
or produced by a Person other than the Nortel Member, any Affiliate of the
Nortel Member or NTL which are both like products of, and functionally
equivalent to, Existing Products or Emerging Products.
"Contributed Property" means any property contributed to the capital
of the Company other than cash.
"Covered Person" means any Member, an Affiliate of a Member or any
officer, Representative, director or shareholder of the Company or of a Member
or their respective Affiliates.
"CPE Agreement" means NTI's Customer Premises Equipment
Distributorship Agreement in the form currently in effect, and its subsequent
renewal forms or replacements as offered at or prior to the end of a term to
all United States Distributors (which may not have uniform products or
territory authorizations for all Distributors), but which when applied to the
Company shall be deemed to include (i) all product lines available to any of
the Distributors and (ii) the geographic territories in the United States of
America available to WilTel immediately prior to the date hereof.
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"Current Market Price" means, in respect of any shares of common stock
of any Person on any date, the average of the daily market prices for the 20
consecutive Business Days immediately preceding such date determined as
follows: the daily market price for each such Business Day shall be (i) the
last sale price on such day on the principal stock exchange on which such
common stock is then listed or admitted to trading, (ii) if no sales take place
on such day on any such exchange, the last reported sale price as officially
quoted on any such exchange, (iii) if such common stock is not then listed or
admitted to trading on any stock exchange, the last sale price on such day in
the over-the-counter market, as reported by the National Association of
Securities Dealers Automatic Quotation System ("NASDAQ"), or if such sale price
is not available on such date, the average of the closing bid and ask prices on
such date as reported by NASDAQ, or if not so reported, then as reported by the
National Quotation Bureau, Inc., (iv) if neither such firm at the time is
engaged in the business of reporting such prices, as furnished by any similar
firm then engaged in such business, or (v) if there is no such firm, as
furnished by any member of the National Association of Securities Dealers (the
"NASD") selected mutually by the Williams Member and the Nortel Member or, if
they cannot agree upon such selection, as selected by two such members of the
NASD, one of which shall be selected by the Williams Member and one of which
shall be selected by the Nortel Member.
"Debt" means (i) any indebtedness for borrowed money or the deferred
purchase price of property as evidenced by a note, bonds, or other instruments,
(ii) obligations as lessee under capital leases, (iii) obligations secured by
any mortgage, pledge, security interest, encumbrance, lien, or charge of any
kind existing on any asset owned or held by the Company whether or not the
Company has assumed or becomes liable for the obligations secured thereby, (iv)
any obligation under any interest rate swap agreement, and (v) obligations
under direct or indirect guarantees of (including obligations (contingent or
otherwise) to assure a creditor against loss in respect of) indebtedness or
obligations of the kinds referred to in clauses (i), (ii), (iii), and (iv),
above; provided that Debt shall not include obligations in respect of any
accounts payable that are incurred in the ordinary course of the Company's
business and are not delinquent nor being contested in good faith by
appropriate proceedings.
"Delcorp" shall have the meaning given that term in Section 19.3(e).
"Delcorp Common Stock" shall have the meaning given that term in
Section 19.3(e).
"Distributable Cash" means, at the time of determination, all cash
derived from the conduct of the Company's business activities, other than (i)
Capital Contributions, together with interest earned thereon pending
utilization thereof, (ii) financing proceeds, (iii) reserves for working
capital and (iv) other amounts that the
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<PAGE> 16
Management Committee reasonably determines to be necessary for the proper
operation of the Company's business and its winding up and liquidation.
"Distribution" shall mean the sale of Existing Products by
Distributors under the CPE Agreement; provided, however, that "Distribution"
shall not include sales of such products by Distributors as a reseller or
systems integrator or under an agreement other than the CPE Agreement.
"Distributors" means NTI's authorized distributors which have executed
a CPE Agreement.
"EBIT" means, for any period, net income (or loss) before provision
for income taxes of the Company for such period (i) before the total interest
expense of the Company (calculated without regard to any limitations on the
payment thereof) plus, without duplication, that portion of rental obligations
of the Company which, under GAAP, are or will be required to be capitalized on
the books of the Company, (in each case taken at the amount thereof accounted
for as indebtedness in accordance with GAAP), representing the interest factor
for such period, and (ii) without giving effect to any extraordinary gains or
losses or gains or losses from sales of assets other than in the ordinary
course of business.
"EBITDA" means, for any period, (i) EBIT plus (ii) the amount of all
amortization of intangibles and depreciation which were deducted in arriving at
EBIT.
"Effective Date" means April 1, 1997.
"Emerging Products" means products of NTL or its Affiliates which (i)
are covered by the Systems Integrator Agreement between NTI and WilTel dated
January 1, 1997, or (ii) are, or are being developed to be, sold primarily in
the Enterprise Commercial Market, but have not been put in Distribution by NTL
or its Affiliates.
"Enterprise Commercial Market" means the market for sale of business
telecommunications systems to end-users consisting of commercial for-profit and
not-for-profit corporations, partnerships and companies, educational
institutions, governmental institutions and agencies, and other similar
commercial enterprises purchasing such systems for their internal use and not
for resale, but excluding the sale of systems utilized for or in public
networks or in connection with the public carriage or transmission of local,
interconnect or long distance telecommunications traffic or services as a
carrier or transmission services provider or contractor.
"Existing Products"shall mean the products that are available to be
sold by any or all of the Distributors pursuant to the then current CPE
Agreement (which may include products which were formerly Emerging Products or
Competitive Products),
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excluding such products not originating from NTL's Enterprise Networks Group,
terminals and low-end systems of less than 10 lines;
"Exit Offer" shall have the meaning given that term in Section
19.3(b).
"Exit Purchase Price" shall have the meaning given that term in
Section 19.3(a).
"Firm Offer" shall have the meaning given that term in Section
19.6(b).
"Formation Agreement" means that certain Formation Agreement dated as
of April 1, 1997, by and between the Nortel Member and the Williams Member and
pertaining to the formation and operations of the Company.
"GAAP" shall mean generally accepted accounting principles in the
United States of America.
"Governmental Authority" means any entity of or pertaining to the
government, including any federal, state, local, other governmental or
administrative authority, agency, court, tribunal, arbitrator, commission,
board or bureau.
"Human Resources Committee" shall have the meaning given that term in
Section 15.10(a).
"Intended Listed Affiliate" shall have the meaning given that term in
Section 19.4(h).
"Intended Listed Affiliate Common Stock" shall have the meaning given
that term in Section 19.4(h).
"Leverage Ratio" means, at any time, the ratio of (A) all Long-Term
Debt of the Company (including the current portion thereof) to (B) the sum of
(x) all Long-Term Debt of the Company (including the current portion thereof)
and (y) Tangible Net Worth.
"Liquidating Events" shall have the meaning given that term in Section
22.1.
"Liquidator" shall have the meaning given to that term in Section 23.1.
"Long-Term Debt" means Debt with a remaining maturity of one year or
more.
"Majority in Interest of the Members" means, unless otherwise provided
in this Agreement, the Members whose aggregate Percentage Interest constitutes
more than fifty percent (50%) of the aggregate Percentage Interest of all
Members.
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"Management Committee" means the committee described in Section 15.2.
"Member" means each of the Nortel Member and the Williams Member and
any Person hereafter admitted to the Company as a member as provided in this
Agreement, but does not include any Person who has ceased to be a member in the
Company.
"Member Nonrecourse Debt" shall have the meaning set forth with
respect to partner nonrecourse debt in Regulations section 1.704-2(b)(4).
"Member Nonrecourse Debt Minimum Gain" means an amount, with respect
to each Member Nonrecourse Debt, equal to the Company Minimum Gain that would
result if such Member Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations section 1.704-2(i)(3).
"Member Nonrecourse Deductions" shall have the meaning set forth with
respect to partner nonrecourse deductions in Regulations sections 1.704-2(i)(1)
and 1.704-2(i)(2).
"Membership Interest" means the interest of a Member in the Company,
including the Member's rights to a share of the profits and losses of the
Company (in accordance with its Percentage Interest or as otherwise provided in
this Agreement), to receive distributions (liquidating or otherwise), to obtain
information and to consent to or approve actions by the Company.
"Merger Agreements" means the Agreement and Plan of Merger dated as of
the date hereof between the Company and NCS and the Agreement and Plan of
Merger dated as of the date hereof between WilTel and the Company, copies of
which are attached hereto as Exhibits B and C.
"Minimum Holding Period" shall have the meaning given that term in
Section 8.2(d).
"NCS" shall have the meaning given that term in the recitals hereto.
"NCS Business" shall have the meaning given that term in the Formation
Agreement.
"Net Purchase Price" means the price paid by the Company, or another
Distributor for purposes of Section 19.4(a), inclusive of all amounts paid to a
supplier or suppliers net of discounts and rebates, plus applicable freight,
duties and taxes.
"Non-Competition Agreement" means that certain Non-Competition
Agreement dated April 30, 1997 by and between The Williams Companies, Inc. and
NTL.
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"Nonrecourse Deductions" shall have the meaning set forth in
Regulations section 1.704-2(b)(1).
"Nonrecourse Liability" shall have the meaning set forth in
Regulations section 1.704-2(b)(3).
"Non-contributing Member" shall have the meaning given that term in
Section 8.6(a).
"Nortel Member" shall have the meaning given that term in the preamble
hereof or any Affiliate transferee of such initial Nortel Member.
"NTI" means Northern Telecom Inc., a Delaware corporation.
"NTL" means Northern Telecom Limited, a Canadian corporation.
"Offered Interest" shall have the meaning given that term in Section
19.6.
"Offeree" shall have the meaning given that term in Section 19.6(b).
"Offer Notice" shall have the meaning given that term in Section
19.6(b).
"Offer Period" shall have the meaning given that term in Section
19.6(c).
"Offer Price" shall have the meaning given that term in Section
19.6(a).
"Operating Budget" shall have the meaning given that term in Section
11.3.
"Percentage Interest" means the percentage interest of a Member in the
distributions, income, gains, losses, deductions, and credits of the Company,
as set forth on Exhibit D, as such percentage may be adjusted from time to time
in accordance with this Agreement.
"Person" means any individual, corporation, partnership, joint
venture, association, limited liability company, joint stock company, trust,
unincorporated organization, Governmental Authority or government (or agency or
political subdivision thereof).
"Product Mix" means, for any period, an amount, expressed as a
percentage, equal to a fraction, the numerator of which shall equal the
aggregate dollar amount of the Net Purchase Price paid to NTI and its
Affiliates during such period for Existing Products and Emerging Products and
the denominator of which shall equal the aggregate dollar amount of the Net
Purchase Price during such period for Existing Products, Emerging Products and
Competitive Products.
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"Product Mix Threshold" means, for any period, a Product Mix of 82.6%
unless the Members shall have agreed pursuant to Section 15.12 (a) (xiii) that
for a specified period the Product Mix Threshold shall be a percentage other
than 82.6% in which event the Product Mix Threshold for such period shall be
such other percentage.
"Purchase Offer" shall have the meaning given that term in Section
19.6(a).
"Purchaser" shall have the meaning given that term in Section 19.6(a).
"Put Closing Date" shall have the meaning given that term in Section
19.5(a).
"Put Notice" shall have the meaning given that term in Section
19.5(a).
"Put Purchase Price" shall have the meaning given that term in Section
19.5(a).
"Registration Notice" shall have the meaning given that term in
Section 19.3(e).
"Regulations" means the Income Tax Regulations, including Temporary
Regulations, promulgated under the Code, as such Regulations may be amended
from time to time (including corresponding provisions of succeeding
Regulations).
"Regulatory Allocations" shall have the meaning given that term in
Section 10.2(i).
"Representative" and "Representatives" shall have the meaning given
those terms in Section 15.2(b).
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations from time to time promulgated thereunder.
"Seller" shall have the meaning given that term in Section 19.6.
"Subsidiary" means, with respect to any Person, a corporation more
than 50% of the combined voting power of the outstanding stock of which is
owned, directly or indirectly, by such Person; provided that the Company shall
not be deemed to be a Subsidiary of The Williams Companies, Inc. or any of its
Subsidiaries or Affiliates.
"Supermajority of the Representatives" means eighty percent (80%) or
more of the Representatives so long as the number of Representatives is ten
(10). If the number of Representatives changes, the number required to
constitute a supermajority shall be a number that assures that at least one
Representative of the Nortel Member is necessary to constitute a supermajority,
provided that the Nortel Member has at least a twenty percent (20%) Percentage
Interest in the Company.
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"Tangible Net Worth" means, at any time, the difference between the
assets (excluding all intangible assets inclusive of goodwill) and liabilities
of the Company, determined in accordance with GAAP, and as set forth in the
most recent audited balance sheet of the Company.
"Technology Committee" shall have the meaning given to that term in
Section 15.10(a).
"TMP" shall have the meaning given that term in Section 10.5(a).
"Transfer" means: (x) as a noun, any voluntary or involuntary
transfer, sale, pledge, hypothecation or other disposition or encumbrance; and
(y) as a verb, voluntarily or involuntarily to transfer, sell, pledge,
hypothecate or otherwise dispose of or encumber.
"TTS Agreement" means that certain Share Purchase Agreement dated
April 30, 1997, between NTL and the Company regarding the purchase of the
shares of TTS.
"Ultimate Parent" means, with respect to any Person, the Person that
directly or indirectly owns or controls such Person and all other Persons with
a direct or indirect controlling interest in such Person, which, on the date
hereof, in the case of the Williams Member is The Williams Companies, Inc. and
in the case of the Nortel Member is NTL.
"Unrealized Gain" attributable to an asset of the Company means, as of
the date of determination, the excess of the fair market value of such asset as
of such date of determination over the Carrying Value of such asset as of such
date of determination.
"Unrealized Loss" attributable to an asset of the Company means, as of
the date of determination, the excess of the Carrying Value of such asset as of
such date of determination over the fair market value of such asset as of such
date of determination.
"Valuation Methodology" shall have the meaning given to that term in
Section 19.3(a).
"Williams Member" shall have the meaning given that term in the
preamble hereof or any Affiliate transferee of such initial Williams Member.
"WilTel" shall have the meaning given that term in the recitals hereto.
"WilTel Business" shall have the meaning given that term in the
Formation Agreement.
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" WilTel Distributorship Agreement" means the Customer Premises
Equipment Distributorship Agreement dated December 15, 1995 between NTI and
WilTel, as amended, restated, renewed, replaced or modified from time to time.
1.5 Accounting Terms. Any accounting terms used in this Agreement that
are not specifically defined herein shall have the meanings customarily given
to them in accordance with GAAP.
ARTICLE II
Organization
2.1 Formation. The Members hereby form a limited liability company
under and pursuant to the Act and agree that the rights, duties and liabilities
of the Members shall be as provided in the Act, except as otherwise provided
herein. The Certificate shall be filed in the office of the Secretary of State
of Delaware in accordance with the provisions of Act. The Management Committee
shall take any and all other action reasonably necessary to perfect and
maintain the status of the Company under the laws of the State of Delaware. The
Management Committee shall cause amendments to the Certificate to be filed
whenever required by the Act. Such amendments as have been agreed to by the
Management Committee may be executed by an officer of the Company.
2.2 Qualification in Other Jurisdictions. The Management Committee
shall cause the Company to be qualified, formed or registered in any
jurisdiction in the United States of America in which the Company transacts
business in which such qualification, formation or registration is required or
desirable including under any assumed or fictitious name statutes or similar
laws. Any member of the Management Committee may execute, deliver and file, or
cause the execution, delivery or filing of, any certificates (and any
amendments or restatements thereof) necessary for the Company to qualify to do
business in a jurisdiction in which the Company may wish to conduct business.
ARTICLE III
Name
The name of the Company is "WilTel Communications, LLC", and all
Company business may be conducted in that name or any other name that complies
with applicable law as the Management Committee may select from time to time.
The Company shall hold all of its property in the name of the Company and not
in the name of any Member.
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ARTICLE IV
Purpose and Powers
4.1 Purpose. The purpose of the Company is to carry on any lawful
business, purpose or activity for which limited liability companies may be
organized under the Act, except as otherwise provided in section 18-106 of the
Act.
4.2 Powers of the Company. Subject to the terms of this Agreement,
the Company shall have the power and authority to take any and all actions
necessary, appropriate, proper, advisable, convenient or incidental to or for
the furtherance of the purposes set forth in Section 4.1, including the power
to conduct the Company's business and to carry on the Company's operations. The
Company shall have and exercise the powers granted to a limited liability
company by the Act in any state, territory, district or possession of the
United States of America, or in any foreign country that may be necessary,
convenient or incidental to the accomplishment of the purposes of the Company.
ARTICLE V
Registered Office; Registered Agent;
Principal Office; Other Offices
The registered office of the Company required by the Act shall be c/o
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street,
Wilmington, New Castle County, Delaware 19801, or any other office (which need
not be a place of business of the Company) as the Management Committee may
designate from time to time in the manner provided by law. The name and address
of the registered agent of the Company in the State of Delaware shall be The
Corporation Trust Company, Corporation Trust Center, 1209 Orange Street,
Wilmington, New Castle County, Delaware 19801. The principal office of the
Company shall be at such place as the Management Committee may designate from
time to time, which need not be in the State of Delaware, and the Company shall
maintain records there as required by the Act. The Company may have such other
offices as the Management Committee may designate from time to time.
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ARTICLE VI
Term
The term of the Company shall be deemed to have commenced on April 1,
1997, and shall terminate when dissolved pursuant to Article XXII.
ARTICLE VII
No State Law Partnership
The Members intend that the Company not be a partnership (including a
limited partnership) or joint venture, and that no Member be a partner or joint
venturer of any other Member, for any purposes other than federal, state and
local tax purposes, and this Agreement shall not be construed to suggest
otherwise.
ARTICLE VIII
Capital Contributions; Capital Accounts
8.1 Capital Accounts.
(a) A capital account ("Capital Account") shall be established
for each Member and shall be maintained in such a manner as to correspond with
the requirements of the Regulations promulgated from time to time under section
704(b) of the Code. Subject to the provisions of Section 8.2(a) with respect to
the initial Capital Contribution of each Member, a Member's Capital Account
shall be credited with the amounts of cash and Agreed Value of property
contributed to the Company by such Member and with the amount of any Company
liabilities assumed by such Member or secured by any Company assets distributed
to such Member. A Member's Capital Account shall also be credited or charged,
as the case may be, with such Member's distributive share of Company items of
income, gains, losses, deductions, and credits for each fiscal year of the
Company determined pursuant to Article X below. Each Member's Capital Account
shall be charged with the amount of cash or Agreed Value of property
distributed to it and with the amount of any liabilities of such Member assumed
by the Company.
(b) In the event a Member transfers its Membership Interest in
the Company (or portion thereof) in accordance with the terms of this
Agreement, the transferee shall succeed to the Capital Account of such Member
to the extent such Capital Account relates to the transferred interest (or
portion thereof).
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8.2 Capital Contributions.
(a) Concurrently with the execution of this Agreement, the
Company and the Members are entering into the Merger Agreements. The Company
and the Members shall cause the transactions contemplated by the Merger
Agreements to be consummated as of the Effective Date in accordance with the
terms of the Merger Agreements in order to effectuate the contribution of the
NCS Business and the WilTel Business to the Company. Upon the consummation of
such transactions, the respective Capital Accounts of the Nortel Member and the
Williams Member shall be credited in the amounts of 30% and 70%, respectively,
of the aggregate Agreed Value of the Company (including TTS Meridian Systems,
Inc., which will be purchased by the Company pursuant to the TTS Agreement),
thus reflecting the Agreed Value of the respective initial Capital
Contributions of each Member.
(b) Subject to the provisions of Section 8.2(d), each Member
shall be required during each calendar year to make the additional Capital
Contributions (i) provided for in the Operating Budget for such calendar year
or any amendment thereto, in either case as approved by the Management
Committee pursuant to this Agreement or (ii) otherwise required by the
Management Committee. Unless otherwise provided in the approved Operating
Budget, each such contribution shall be made in cash within ten Business Days
after notice from the Company requesting that such contribution be made.
(c) Except as otherwise agreed to by the Members, any additional
Capital Contributions shall be made in accordance with the then applicable
Percentage Interest of each Member.
(d) The Nortel Member may elect not to participate in all or a
portion of any Capital Contribution that may otherwise be required so long as
after giving effect to the dilution required by Section 8.6(a)(i) the Nortel
Member's Percentage Interest would not fall below 20% during a period of five
(5) years following the earlier of: (i) December 31, 1999 or (ii) the date that
Nortel Member's Percentage Interest first is reduced to 20% (the "Minimum
Holding Period").
8.3 Limitation on Liability of Members. Except as provided in the
Formation Agreement or any other specific agreement between the Company and a
Member, the liability of each Member to the Company shall be limited to the
amount of its Capital Contribution made and required to be made pursuant to
Section 8.2 (subject to the exceptions stated therein) and no Member shall have
any further personal liability to contribute money to, or in respect of, the
liabilities or the obligations of the Company unless it agrees in writing to
make additional Capital Contributions to the Company, nor shall any Member be
personally liable for any obligations of the Company, except as may be provided
in the Act.
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8.4 Adjustment of Capital Accounts. If any additional Membership
Interests are to be issued in consideration for a contribution of property or
cash or if any Company property is to be distributed in liquidation of the
Company or a Membership Interest, the Capital Accounts of the Members (and the
amounts at which all Company properties are carried on its books and records)
shall, immediately prior to such issuance or distribution, as the case may be,
be adjusted (consistent with the provisions of section 704(b) of the Code and
the Regulations promulgated thereunder) upward or downward to reflect any
Unrealized Gain or Unrealized Loss attributable to all Company properties (as
if such Unrealized Gain or Unrealized Loss had been recognized upon actual sale
of such properties upon a liquidation of the Company immediately prior to such
issuance). If the Carrying Value of any property of the Company is properly
reflected on the books of the Company at a value that differs from the adjusted
tax basis of such property, this Section 8.4 shall be applied with reference to
such Carrying Value.
8.5 Return of Contributions. No Member shall be entitled to the return
of any part of its Capital Contribution or to be paid interest in respect of
either its Capital Account or any Capital Contribution made by such Member
except as provided in Section 23.3. No unrepaid Capital Contribution shall be
deemed or considered to be a liability of the Company or any Member. No Member
shall be required to contribute or lend any cash or property to the Company to
enable the Company to return any Member's Capital Contributions to the Member.
8.6 Additional Capital Contributions.
(a) In the event that the Members are required to make
additional Capital Contributions after the Effective Date pursuant to Section
8.2, and any Member (the "Non-contributing Member") does not contribute all or
a portion of such required additional Capital Contribution within the time
specified in Section 8.2:
(i) the Percentage Interests immediately following
the Capital Contribution will be determined for each of the Members by
the following formula, an illustration of the application of which is
set forth on Exhibit E:
****
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****
(ii) the other Member may, without the consent of
the Non-contributing Member or the Management Committee, elect to
advance the portion of the additional Capital Contribution payable by
the Non-contributing Member, which advance shall (1) constitute a loan
by such other Member to the Company in a principal amount equal to the
sum advanced, (2) be due and payable in full (together with all
accrued unpaid interest thereon) upon demand, and (3) bear interest at
a rate per annum equal to the base rate of Citibank, NA as announced
from time to time from the date of the making of such advance to the
date such advance is paid in full.
(b) Notwithstanding subsection 8.6(a), in the event that
after giving effect to the adjustments in the Members' Percentage Interests
provided in subsection 8.6(a) in respect of any additional Capital
Contribution, the Percentage Interest of the Nortel Member shall be less than
20%, the Williams Member may, provided that the Nortel Member has received
adequate notice and the effective opportunity to re-establish its Membership
Interest to 20%, purchase the Nortel Member's Member Interest pursuant to
Section 19.5(b).
ARTICLE IX
Distributions; Repayment of Member Loans
9.1 Distributions. Except as approved by the Management Committee in
accordance with Section 15.12(a)(vi) or as provided in Section 23.3, all
Distributable Cash shall be distributed to the Members in proportion to their
respective Percentage Interests, at such times as the Management Committee may
determine to be appropriate; provided however, subject to availability, the
Management Committee
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shall by March 15 of each year, declare a cash distribution in proportion to
their respective Percentage Interests of 40% of an amount equal to the sum
total of all Members' estimated taxable income for federal income tax purposes
that would result from their allocated shares of estimated income, gains,
losses and deductions (such amount shall be reduced by credits, if any) of the
Company as furnished by the national accounting firm pursuant to Section
10.5(f)(i).
9.2 No Interest on Unwithdrawn Share. If any Member does not withdraw
the whole or any part of his share of any cash distribution made pursuant to
Section 9.1, such Member shall not be entitled to receive any interest thereon.
9.3 Withholding. All amounts withheld pursuant to the Code or any
provision of any state or local law with respect to any payment, distribution
or allocation to the Company or the Members shall be treated as amounts
distributed to the Members pursuant to Section 9.1 for all purposes of this
Agreement. The TMP is authorized to withhold from distributions to the Members
and to pay over to any federal, state or local government any amounts required
to be so withheld pursuant to the Code or any provision of any other federal,
state or local law and shall allocate such amounts to those Members with
respect to which such amounts were withheld.
9.4 Limitations on Distributions. Notwithstanding any provision to the
contrary contained in this Agreement, the Company shall not make a distribution
to a Member to the extent that, at the time of the distribution, after giving
effect to the distribution, all liabilities of the Company, other than
liabilities to Members on account of their Membership Interests and liabilities
for which recourse of creditors is limited to specified property of the
Company, exceed the fair market value of the assets of the Company, provided
that the fair market value of property that is subject to a liability for which
the recourse of creditors is limited shall be included in the assets of the
Company only to the extent that the fair market value of such property exceeds
such liability. A Member who receives a distribution in violation of this
Section 9.4, and who (or whose Representatives) knew at the time of
distribution that the distribution violated this Section 9.4, shall be liable
to the Company for the amount of the distribution. A Member who receives a
distribution in violation of this Section 9.4, and who (or whose
Representatives) did not know at the time of the distribution that the
distribution violated this Section 9.4, shall not be liable for the amount of
the distribution.
9.5 Repayment of Member Loans. After Distributions are made under
Section 9.1, if, with the consent of the Management Committee in accordance
with Section 15.7 or pursuant to Section 8.6(a)(ii), any Member makes a loan to
or on behalf of the Company other than pursuant to the line of credit agreement
contemplated in section 10.1 of the Formation Agreement, all Distributable Cash
shall first be used to repay such loans, together with interest thereon and,
thereafter, any remaining Distributable Cash, if any, shall be distributed in
accordance with the terms
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of Section 9.1. If Distributable Cash is insufficient to repay in full all such
Member loans, the funds available for distribution from time to time shall
first be applied to repay and retire the loan with the highest interest rate
first and, if any funds thereafter remain available, such funds shall be
applied in a similar manner to remaining loans; provided, however, if two or
more loans have the same interest rate, such funds will be applied in
accordance with the order of the dates on which they were made.
ARTICLE X
Allocations of Income, Gains,
Losses, Deductions and Credits
10.1 General. Except as otherwise provided herein or unless another
allocation is required by the Regulations issued under section 704(b) of the
Code, all items of Company income, gains, losses, deductions and credits shall
be allocated among the Members as provided in Section 10.2, provided, however,
that such allocations shall not impact distributions or Membership Interests
except as provided in Section 23.3 or in connection with liquidations
generally. For purposes of computing the amount of each item of income, gains,
losses, deductions or credits to be charged or allocated to the Capital
Accounts of the Members, the determination, recognition and classification of
such item shall be the same as its determination, recognition and
classification for federal income tax purposes, provided that:
(a) Any deductions for depreciation, cost recovery, or
amortization attributable to any Company property shall be determined as if the
adjusted basis of such property were equal to the Carrying Value of such
property. Upon an adjustment to the Carrying Value of any Company property
subject to depreciation, cost recovery, or amortization pursuant to Section
8.4, any further deductions for such depreciation, cost recovery, or
amortization attributable to such property shall be determined as if the
adjusted basis of such property were equal to the Carrying Value of such
property immediately following such adjustment.
(b) Any income, gains, losses, deductions, and credits
attributable to the taxable disposition of any Company property shall be
determined by the Company as if the adjusted basis of such property as of such
date of disposition were equal in amount to the Carrying Value of such property
as of such date.
(c) All fees and other expenses incurred by the Company to
promote the sale of a Membership Interest that can neither be deducted nor
amortized under section 709 of the Code shall be treated as an item of
deduction.
(d) Computation of all items of income, gains, losses,
deductions, and credits shall be made without regard to any election under
section 754 of the Code which may be made by the Company and, as to those items
described in
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section 705(a)(1)(B) or section 705(a)(2)(B) of the Code, without regard to the
fact that such items are not includable in gross income or are neither
currently deductible nor capitalizable for federal income tax purposes.
10.2 Allocations.
(a) The provision of this Section 10.2 shall apply for the
purposes of (i) allocating the income, gains, losses, deductions, and credits
of the Company; (ii) maintaining the Members' Capital Accounts; and (iii)
determining the Members' interests in the liquidation proceeds of the Company.
All income, gains, losses, deductions, and credits of the Company, other than
gain or loss upon the sale of all or substantially all the assets in
dissolution and liquidation of the Company, shall be allocated to the Members
in proportion to their Percentage Interests.
(b) On the sale or distribution of all, or substantially all,
of the assets in connection with the dissolution and liquidation of the Company
or upon dilution as provided in Section 8.6(a) hereof, the gains and losses
resulting therefrom shall be allocated among the Members in the manner
necessary to cause, to the maximum extent possible, the credit balances in
their respective Capital Accounts to equal the respective amounts of
Distributable Cash that would be distributed to the Members under Section 9.1
if that Section applied to distributions in liquidation of the Company.
(c) Notwithstanding any provision set forth in this Section
10.2, no item of loss shall be allocated to a Member to the extent the
allocation would cause a Member to have an Adjusted Capital Account Deficit at
the end of any fiscal year. In the event some but not all of the Members would
have Adjusted Capital Account Deficits as a consequence of an allocation of
loss pursuant to this Section 10.2, the limitation set forth in this Section
10.2(c) shall be applied on a Member by Member basis and items of loss not
allocable to a Member as a result of such limitation shall be allocated to the
other Member in accordance with the positive balance in such Member's Capital
Account so as to allocate the maximum permissible loss to such Member under
Regulations section 1.702-1(b)(2)(ii)(d). In the event any loss shall be
specially allocated to a Member pursuant to either of the two preceding
sentences, an equal amount of income of the Company shall be specially
allocated to such Member prior to any allocation pursuant to Sections 10.2(a)
or (b).
(d) Except as otherwise provided in Regulations section
1.704-2(f), notwithstanding any other provision of this Section 10.2, if there
is a net decrease in Company Minimum Gain during any fiscal year, each Member
shall be specially allocated items of Company income and gain for such fiscal
year (and, if necessary, subsequent fiscal years) in an amount equal to such
Member's share of the net decrease in Company Minimum Gain, determined in
accordance with Regulations section 1.704-2(g). Allocations pursuant to the
previous sentence shall be made in proportion to the respective amounts
required to be allocated to each Member
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pursuant thereto. The items to be so allocated shall be determined in
accordance with Regulations sections 1.704-2(f)(6) and 1.704-2(j)(2). This
Section 10.2(d) is intended to comply with the minimum gain chargeback
requirement in Regulations section 1.704-2(f) and shall be interpreted
consistently therewith.
(e) Except as otherwise provided in Regulations section
1.704-2(i)(4), notwithstanding any other provision of this Section 10.2 (other
than Section 10.2(d)) if there is a net decrease in Member Nonrecourse Debt
Minimum Gain attributable to a Member Nonrecourse Debt during any fiscal year,
each Member who has a share of the Member Nonrecourse Debt Minimum Gain
attributable to such Member Nonrecourse Debt, determined in accordance with
Regulations section 1.704-2(i)(5), shall be specially allocated items of
Company income and gain for such fiscal year (and, if necessary, subsequent
fiscal years) in an amount equal to such Member's share of the net decrease in
Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse
Debt determined in accordance with Regulations section 1.704-2(i)(4).
Allocations pursuant to the previous sentence shall be made in proportion to
the respective amounts required to be allocated to each Member pursuant
thereto. The items to be so allocated shall be determined in accordance with
Regulations sections 1.704-2(i)(4) and 1.704-2(j)(2). This Section 10.2(e) is
intended to comply with the minimum gain chargeback requirement in Regulations
section 1.704-2(i)(4) of the Regulations and shall be interpreted consistently
therewith.
(f) Notwithstanding anything herein to the contrary, in the
event any Member unexpectedly receives any adjustments, allocations or
distributions described in paragraphs (b)(2)(ii)(d)(4), (5) or (6) of
Regulations section 1.704-1, there shall be specially allocated to such Member
such items of Company income and gain, at such times and in such amounts as
will eliminate as quickly as possible that portion of its Adjusted Capital
Account Deficit caused or increased by such adjustments, allocations or
distributions, provided that an allocation pursuant to this Section 10.2(f)
shall be made only if and to the extent that there would be a deficit in such
Member's Capital Account after all other allocations provided in this Section
10.2 have been tentatively made as if this Section 10.2(f) were not in the
Agreement.
(g) Nonrecourse Deductions for any fiscal year or other
period shall be specially allocated among the Members in proportion to their
Percentage Interests.
(h) Any Member Nonrecourse Deductions for any fiscal year
shall be specially allocated to the Member who bears the economic risk of loss
with respect to the Member Nonrecourse Debt to which such Member Nonrecourse
Deductions are attributable in accordance with Regulations section
1.704-2(i)(1).
(i) The allocations set forth in paragraphs (c) through (h)
of this Section 10.2 shall be referred to as the "Regulatory Allocations" and
paragraphs (a)
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and (b) shall be referred to as the "Agreed Allocations." The Regulatory
Allocations are intended to comply with certain requirements of Regulations
section 1.704-1(b). It is the intent of the Members that, to the extent
possible, all Regulatory Allocations shall be offset either with other
Regulatory Allocations or with special allocations of other items of Company
income, gains, losses, deductions, and credits pursuant to this paragraph.
Notwithstanding any other provisions of this Section 10.2, any Regulatory
Allocations that have taken place shall be taken into account in allocating
other items of income, gains, losses, deductions, and credits, so that, to the
extent possible, the net amount of such other allocations and the Regulatory
Allocations to each Member shall equal the net amount that would have been
allocated to each Member pursuant to the Agreed Allocation if the Regulatory
Allocation had not occurred.
10.3 Allocations for Income Tax Purposes.
(a) The Company shall, except to the extent such item is
subject to allocation pursuant to subsection 10.3(b), allocate each item of
income, gains, losses, deductions, and credits, as determined for federal and
other income tax purposes, in the same manner as such item was allocated under
Sections 10.1 and 10.2.
(b) The Company, for federal and other income tax purposes
shall, in the case of Contributed Properties, allocate items of income, gains,
losses, deductions, and credits, including, without limitation, depreciation
and cost recovery deductions, attributable to those properties with a Built-In
Gain or Built-In Loss pursuant to section 704(c) of the Code utilizing the
traditional method described in Regulations section 1.704-3(b).
10.4 Allocations for Financial Reporting. For purposes of reporting
the financial results of the Company by the Members in accordance with GAAP,
net income or loss shall be allocated in proportion to the Member's Percentage
Interest.
10.5 Tax Matters Partner.
(a) The Williams Member is designated tax matters partner
("TMP") as defined in section 6231(a)(7) of the Code. The TMP and the other
Member shall use their reasonable best efforts to comply with the
responsibilities outlined in this Section 10.5 and in sections 6222 through
6232 of the Code (including any Regulations promulgated thereunder) and in
doing so the TMP shall incur no liability to any other Member except for
instances of gross negligence or willful misconduct.
(b) If any Member intends to file a notice of inconsistent
treatment under section 6222(b) of the Code, such Member shall, prior to the
filing of such notice, notify the TMP of such intent and the manner in which
the Member's intended
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treatment of a partnership item is (or may be) inconsistent with the treatment
of that item by the Company.
(c) No Member other than the TMP shall file a request
pursuant to section 6227 of the Code for an administrative adjustment of
partnership items for any Company taxable year.
(d) No Member other than the TMP shall file a petition under
Code sections 6226, 6228 or other Code sections with respect to any partnership
item, or other tax matters involving the Company provided, however, that if the
TMP fails to file a petition under Code section 6226 within the time provided
in Code section 6226(a), then the Nortel Member may file a petition pursuant to
Code section 6226(b). In the case where the TMP files such a petition, it shall
determine the forum in which such petition will be filed. In carrying out its
duties, the TMP will act in the best interests of both Members and the Company.
(e) Without the prior written consent of the Nortel Member,
the TMP will:(i) not extend any federal statute of limitations with respect to
income taxation of a "partnership item," as defined in Code section 6231(a)(3)
and the Regulations thereunder, or (ii) not agree to the settlement of a tax
controversy concerning a partnership item with any federal, state, or local
taxing authority. At the request of the Nortel Member, the TMP will provide
information concerning federal, state, or local tax audits, appeals or
litigation of the Company.
(f) The TMP shall employ a national public accounting firm,
to be mutually agreed upon by the Nortel Member and the Williams Member to
prepare at the Company's expense the Federal income tax return of the Company.
The TMP shall further cause the accounting firm to:
(i) provide its best estimate of each Member's
distributive share of all income, gains, losses, deductions, and
credits of the Company for each taxable year within sixty (60) days
following the close of each taxable year, and
(ii) prepare and deliver to each Member within 150
days following the close of each taxable year, as set forth in Section
11.2(b), an information reporting return (Form 1065 K-1) reflecting
each Member's distributive share of all income, gains, losses,
deductions, and credits of the Company for each taxable year.
(g) No later than thirty (30) days prior to the filing of the
Company's federal income tax return (Form 1065), the TMP will furnish a draft
of such return and a list of all elections made on such return for which a
specific declaration is not required to the Nortel Member. Within fifteen (15)
days after receipt of the draft, the Nortel Member will provide notice to the
TMP as to whether the Nortel Member
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consents to the filing of the return consistent with the draft or objects to
the manner in which one or more partnership items are reflected in the return.
The Williams Member and the Nortel Member will jointly resolve any differences.
10.6 Tax Elections.
(a) The Company shall elect to use the calendar year as its
taxable year, and to report profit and loss under the accrual method of
accounting.
(b) The Company shall elect to deduct expenses incurred in
organizing the Company ratably over a sixty-month period as provided in section
709 of the Code.
(c) If requested by any Member, the TMP shall cause the
Company at the time and in the manner provided in Regulations section
1.754-1(b) (or any like statute or regulation then in effect), to make an
election to adjust the basis of the Company's property in the manner provided
in sections 734(b) and 743(b) of the Code (or any like statute or regulation
then in effect).
ARTICLE XI
Books of Account, Records and Financial Information
11.1 Books and Records. Proper and complete records and books of
account (including those required by the Act) shall be kept by the Company in
which shall be entered all transactions and other matters relative to the
Company's business as are usually entered into records and books of account
maintained by persons engaged in businesses of like character. The Company
books and records shall be maintained in accordance with GAAP, and shall be
kept on the accrual basis. The books and records shall at all times be made
available and shall be open to the reasonable inspection and examination by the
Members or their duly authorized representatives during the business hours of
the Company for any purpose reasonably related to the interest of such Member
as a Member in the Company.
11.2 Financial Information. The following financial information shall
be transmitted to each Member:
(a) as soon as available, but in any event within 60 days
after the end of each fiscal year of the Company, a copy of the balance sheet
of the Company as at the end of such fiscal year and the related statements of
income and cash flow and Members' capital and changes in Members' capital for
such fiscal year, setting forth, after fiscal year 1996, in each case in
comparative form, the figures for the previous
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year, reported on without qualification, or exception, as to the scope of the
audit, by the Company's auditors;
(b) as soon as available, but in any event not later than 10
Business Days after the end of each calendar month a report setting forth the
year-to-date revenues, operating expenses, general and administrative expenses,
Capital Expenditures of the Company, together with a comparison of the
Operating Budget for such period, and a projection of revenues and expenses for
the remainder of the Company's fiscal year, the unaudited balance sheet of the
Company as at the end of each such month and the related unaudited statements
of income and cash flow and Members' capital and changes in Members' capital of
the Company for such month and the portion of the fiscal year through such
date, setting forth, after fiscal year 1996, in each case in comparative form,
the figures for the previous year;
(c) not later than 30 days prior to the end of each fiscal
year of the Company, a copy of the preliminary annual operating plan (the
"Operating Budget") for the next fiscal year. Such plan shall contain, but not
be limited to, a complete set of financial statements including a balance
sheet, statements of income and cash flow and changes in Member's capital by
month in appropriate detail for Member review, a summary of Capital
Expenditures, the Product Mix, a human resources discussion summarizing
staffing level assumptions and an overall management summary addressing the
business operations and related strategic business assumptions;
(d) within a reasonable time, any other financial information
that may be reasonably requested from time to time by a Member.
11.3 1997 Provisional Operating Budget. The Provisional Operating
Budget for the Company's 1997 fiscal year is attached as Exhibit F.
ARTICLE XII
Fiscal Year
The fiscal year of the Company shall end on the thirty-first (3lst)
day of December in each calendar year.
ARTICLE XIII
Company Funds
The funds of the Company shall be deposited in such bank accounts, or
invested in such interest-bearing or non-interest-bearing accounts, as shall be
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designated by the Management Committee. All withdrawals from any such bank
accounts shall be made by the officers or other agent or agents duly authorized
by the Management Committee. Company funds shall not be commingled with those
of any other Person.
ARTICLE XIV
Meetings of Members
14.1 Annual Meeting. The annual meeting of the Members shall be held
each year at the place, time and date, as may be fixed by the Management
Committee. Members of the Company may participate in a meeting by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and such
participation shall constitute presence in person at such meeting. At the
annual meeting the Members will ratify the appointment of a national public
accounting firm as the Company's independent auditor to serve until the next
annual meeting. The initial independent auditors shall be Ernst & Young, LLP.
14.2 Special Meetings. A meeting of the Members for any purpose or
purposes may be called at any time by the Management Committee and shall be
called at any time by the Management Committee upon the written request of any
Member entitled to vote at such meeting. Such request shall state the purpose
for which such meeting is to be called.
14.3 Notice of Meeting. Every Member shall furnish the Company through
the Management Committee an address at which notices of meetings and all other
notices may be served on or mailed to it. Notice of each meeting of the Members
shall be given to each Member entitled to vote at such meeting not less than
ten (10) nor more than sixty (60) days before the date on which the meeting is
to be held, either by facsimile or by delivering written notice thereof by
mailing such notice in a first-class postage prepaid envelope addressed to such
member at its facsimile number or post-office address furnished by it to the
Company, or if it shall not have furnished to the Company its address, then at
its post-office address last known to the Company, or, in the absence of
knowledge on the part of the Company of any such post-office address, then at
the office of the Company. Notice of a meeting of the Members shall provide the
place, date and hour of the meeting, indicate that it is being issued by or at
the direction of the Person or Persons calling the meeting, and provide an
agenda which describes in detail the matters proposed to be considered at such
meeting. An affidavit of any Representative that notice has been given shall,
in the absence of fraud, be prima facie evidence of the facts stated therein.
When a meeting is adjourned to another time and place, it shall not be
necessary to give any notice, except for twenty-four hours notice to any absent
Member, of the adjourned meeting if the time and place to which the meeting is
adjourned are announced at the meeting
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at which the adjournment is taken, and at the adjourned meeting any business
may be transacted that might have been transacted at the original date of the
meeting but shall be limited to the items listed with specificity on the agenda
for the original date.
14.4 Waiver of Notice. Notice of a meeting need not be given to any
Member who submits a signed waiver of notice, in person or by proxy, whether
before or after the meeting. The attendance of any Member at a meeting, in
person or by proxy, without protesting prior to the conclusion of the meeting
the lack of notice of such meeting, shall constitute a waiver of notice by it.
14.5 Quorum. A Majority in Interest of the Members of the Company
entitled to vote at a meeting shall constitute a quorum for the transaction of
business when present at such meeting either in person or by proxy, provided
that for a meeting to be validly convened, at least one Representative of each
of the Members must be present at such meeting. If a Representative of one or
more of the Members is not present, a second meeting for which due notice has
been given may be validly held to address the same matters of business in which
a Majority in Interest of the Members of the Company entitled to vote at the
meeting shall constitute a quorum when present at such meeting either in person
or by proxy, irrespective of whether or not each Member is represented.
14.6 Voting.
(a) When voting on any matter that requires the vote at a
meeting of the Members pursuant to the Act, the Certificate or this Agreement,
each Member shall vote in proportion to such Member's Percentage Interest.
(b) Whenever any action is to be taken under the Act by the
Members, such action shall be authorized by a vote of the Majority in Interest
of the Members cast at a meeting of Members entitled to vote thereon.
14.7 Proxies. Each Member entitled to vote at any meeting of Members
may authorize another Person or Persons to act as its proxy by an instrument in
writing signed by such Member or its attorney-in-fact.
14.8 Action Without a Meeting. Whenever Members of the Company are
required or permitted to take any action by vote, such action may be taken
without a meeting, without prior notice and without a vote, if consent or
consents in writing, setting forth the action so taken shall be signed by all
the Members and shall be delivered to the office of the Company by hand or by
certified or registered mail, return receipt requested.
14.9 Member's Power. A Majority in Interest of the Members may amend
or modify this Agreement from time to time by a written agreement signed by
them, and
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any such action shall be binding on all Members and be as effective as if taken
by all Members, except that:
(a) at any time the Nortel Member, the Williams Member or an
Affiliate of either of them is a Member, this Agreement may not be amended or
modified without the consent of such Member or Members, as the case may be, but
the foregoing requirement shall not inure to the benefit of an assignee of
either the Nortel Member's or the Williams Member's Membership Interest other
than an Affiliate of the assignor;
(b) Articles VII, XIV, XV, and XX and Sections 2.1, 8.3, 9.1,
17.1, 19.2, 19.3, 19.4, 19.5 and 23.3 may be amended only if recommended for
approval by the affirmative vote of a Supermajority of the Representatives; and
(c) no amendment or modification of this Agreement shall
adversely affect any payments accrued and due or to be come due to any Member
or to the legal representative of a former Member or of its estate or
successor-in-interest, without the consent of such Member or such legal
representative.
The effective date of an amendment or modification, unless otherwise specified
therein, shall be the first day of the fiscal year in which such amendment or
modification was adopted.
14.10 Contracts. No Member will have the right to enter into contracts
or other commitments binding upon the Company.
ARTICLE XV
Management; Management Committee
15.1 Management by Management Committee. The business and affairs of
the Company shall be managed under the direction of the Management Committee in
accordance with the terms and provisions of this Agreement. Approval by or
action taken by the Management Committee in accordance with this Agreement
shall constitute approval or action by the Company and shall be binding on the
Members. No Member shall bind the Company or otherwise act on its behalf and no
Representative shall bind the Company or otherwise act on its behalf without
the prior authorization of the Management Committee to take such action. If any
Member breaches or threatens to breach the covenant provided in the preceding
sentence, the Company and the other Member may exercise any remedies available
to them in law or in equity, including seeking an injunction restraining such
Member from breaching such covenant.
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15.2 Organization of Management Committee.
(a) The Management Committee shall be composed of ten (10)
individuals.
(b) Each Member shall have the right to appoint an individual
or individuals to represent it on the Management Committee (individually, such
Member's "Representative" and collectively, such Member's "Representatives") in
accordance with this Section 15.2(b). The Nortel Member shall have the right to
appoint to the Management Committee three (3) Representatives so long as its
Percentage Interest is 20.0% or more, two (2) Representatives so long as its
Percentage Interest is equal to or more than 15.0% and one (1) Representative
so long as its Percentage Interest is equal to or more than 5.0%. The Williams
Member shall have the right to appoint the remaining Representatives of the
Management Committee. No individual may serve as the Representative of more
than one Member. As of the date hereof, each Member's Representatives are those
individuals listed on Exhibit G.
(c) Each Member reserves the right to remove any one or more
of its Representatives and to appoint successors and substitutes therefor, from
time to time, and any such change shall be effective upon such Member
delivering a written notice of such change to the other Member. Unless
otherwise removed in accordance with this Section 15.2(c), each Representative
shall serve until the earliest of such Representative's resignation, death, or
inability to serve. Any Representative may resign upon ten (10) business days
written notice to the Company.
(d) The individual serving as the Chairman of the
Management Committee of the Company shall be a member of the Management
Committee.
15.3 Third Parties Dealing with the Company
(a) To expedite the handling of Company business, it is
understood and agreed that any document executed by a Representative of a
Member shall, as to any third parties, be deemed to be the action of the Member
appointing such Representative. Further, any Person dealing with the Company
may rely upon a certificate signed by a Representative of each Member as to:
(b) the identity of the Members and their Representatives;
(c) the existence or nonexistence of any fact or facts that
constitute conditions precedent to acts by the Company or are in any other
manner related to the affairs of the Company;
(d) the Persons who are authorized to execute and deliver any
instrument or document of the Company;
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(e) any act or failure to act by the Company or the Management
Committee; or
(f) any other matter whatsoever involving the Company or the
Management Committee.
15.4 Duties and Powers of Management Committee. Subject to the terms
of this Agreement, the property, business and affairs of the Company will be
managed, and the conduct of its business will be controlled by, the Management
Committee. Except as otherwise provided hereunder, the Management Committee
shall have all of the rights, powers and obligations of a class of managers as
provided in the Act and as otherwise provided by law. Without limiting the
generality of the foregoing, the Management Committee shall have the following
powers and the Representatives are authorized on behalf of the Company to do or
cause to be done the following:
(a) to supervise the property, business and affairs of the
Company and hire, on behalf of the Company, such professionals or other experts
as may be necessary or desirable in connection therewith;
(b) to determine, in their sole judgment, the amount, manner
of payment and date of any distributions to be made to the Members hereunder
subject to the provisions of Article IX hereof;
(c) to approve the annual Operating Budget; and,
(d) to make the elections requested by a Member pursuant to
Section 10.6(c).
15.5 Duties of Representatives.
(a) Each Representative shall perform his duties in good faith
and with that degree of care that an ordinarily prudent person in a like
position would use under similar circumstances. In performing his duties, each
Representative shall be entitled to rely on information, opinions, reports or
statements, including financial statements and other financial data, in each
case prepared or presented by: (1) one or more agents or employees of the
Company, or (2) counsel, accountants or other Persons as the matters that such
Representative believes to be within such Person's professional or expert
competence, provided such Representative has no knowledge concerning the matter
in questions that would cause such reliance to be unwarranted. A Person who so
performs his duties in accordance with this Section 15.5(a) shall have no
liability by reason of being or having been a Representative of the Company.
(b) Notwithstanding Section 15.5(a), the liability of a
Representative shall not be eliminated or limited if a judgment or other final
adjudication adverse to
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him establishes that his acts or omissions were in bad faith or involved
intentional misconduct or a knowing violation of law or that he personally
gained in fact a financial profit or similar advantage to which he was not
legally entitled.
(c) The Representatives do not in any way guarantee the return
of any Member's Capital Contribution or a profit for the Members from the
Company's business.
15.6 Qualification of Representatives. Each Representative shall be an
employee, officer or director of a Member or of an Affiliate thereof or an
employee or officer of the Company.
15.7 Action by Management Committee. Except as otherwise provided in
this Agreement, the Management Committee shall manage the Company by the
affirmative vote of a majority of the Representatives. Any action required or
permitted to be taken by the Management Committee may be taken without a vote
if all of the Representatives consent thereto in writing and such writings are
filed with the records of the Company. The Representatives may participate in a
meeting by means of conference telephone or similar communications equipment by
means of which all persons participating in the meeting hear each other. Such
participation shall constitute presence in person at such meeting.
15.8 Meetings of the Management Committee. Regular meetings of the
Management Committee shall be held periodically, but no less frequently than
every second month, on such dates, at such times and at such locations as the
Management Committee shall from time to time determine, taking into account the
convenience of all parties. The individual then serving as the Chairman of the
Management Committee or any Representative may call a special meeting of the
Management Committee. Notice of any meeting shall include an agenda which
describes in detail the matters proposed to be considered at such meeting
(including, without limitation, whether such matters require the approval of a
Supermajority of the Representatives in accordance with Section 15.12(a))and
shall be given to all participants by the Person calling the meeting, under
normal circumstances at least ten (10) days prior to the meeting, although
shorter notice of a meeting (but not less than seventy-two hours) may be given
if the circumstances of urgency so require provided, however, that when a vote
of a Supermajority of the Representatives is required, ten (10) days notice
must be given. All notices of Management Committee meetings shall be given
either in writing, or by telephone if immediately followed by written
confirmation. Each Member agrees to use reasonable efforts to cause at least
one of its Representatives to attend, in the manner provided for herein, all
Management Committee meetings.
15.9 Quorum. A majority of the Representatives of the Management
Committee including at least one Representative of each of the Members shall
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constitute a quorum for the transaction of business when present at a meeting
in person (including by means of telephone conference or similar equipment). If
a Representative of one or more of the Members is not present, a second meeting
for which forty-eight hours notice has been given may be validly held to
address the same matters of business in which a majority of the Representatives
of the Management Committee shall constitute a quorum when present at such
meeting either in person (including by means of telephone conference or similar
equipment) or by proxy, irrespective of whether or not each Member is
represented.
15.10 Technology, Human Resources and Audit Committees.
(a) The Management Committee shall establish a Technology
Committee (the "Technology Committee"), a Human Resources Committee (the "Human
Resources Committee") and an Audit Committee (the "Audit Committee"). The
Technology Committee and Human Resources Committee both shall have four (4)
members, two of which shall be appointed by the Williams Member and two of
which shall be appointed by the Nortel Member. The Audit Committee shall have
four (4) members, two of which shall be appointed by the Williams Member and
two of which shall be appointed by the Nortel Member.
(b) The functions and scope of the Technology Committee shall
be as set forth on Exhibit H.
(c) The functions and scope of the Human Resources Committee
shall be as set forth on Exhibit I.
(d) The functions and scope of the Audit Committee shall be as
set forth on Exhibit J.
15.11 Other Committees. The Management Committee may establish other
committees from time to time as may be required by the operation of the
business of the Company whose functions shall be set forth in the resolutions
establishing such committees. The number of members of any such committee shall
be determined by the Management Committee and the individual members shall be
designated by the Management Committee from time to time.
15.12 Supermajority Approval by the Representatives.
(a) Notwithstanding any other provisions of this Agreement to
the contrary, for so long as either the Nortel Member's or the Williams
Member's Percentage Interest is not less than 20%, as the case may be, the
affirmative vote or written consent of a Supermajority of the Representatives,
shall be required to do or permit to be done any of the following acts with
respect to the Company, its business or assets:
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(i) Approve the first Annual Budget;
(ii) Approve or authorize any material act or
material activity of the Company not consistent with or outside the
scope of the business of the Company as described on Exhibit K hereto;
(iii) Dissolve or liquidate the Company or appoint a
Liquidator other than the Members; cause the Company to commence a
voluntary case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization or other similar law or of any
other voluntary case or proceeding to be adjudicated a bankrupt or
insolvent; cause the Company to make an assignment for the benefit of
creditors, or admit in writing its inability to pay its debts
generally as they become due, or to take action in furtherance of any
such action; cause the Company to consent to (1) the entry of a decree
or order for relief against the Company in an involuntary case or
proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization or other similar law, (2) the commencement
of any bankruptcy or insolvency case or proceeding against the
Company, (3) the filing of a petition or answer or consent seeking
reorganization or relief under any applicable federal or state law,
(4) the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or similar official of any
substantial part of the Company's property; cause the Company to file
a petition or answer or consent seeking reorganization or relief under
any applicable federal or state law, or (5) fail to pursue or decide
not to pursue an indemnity against a Member or any of its respective
Affiliates.
(iv) (A) Approve a merger or consolidation of the
Company with or into another Person if the surviving entity of such
merger or consolidation is not the Company, or (B) if the surviving
entity is the Company and (x) the consideration for such merger or
consolidation is in excess of $20,000,000 and (y) such merger or
consolidation was not included in the Operating Budget for the then
current fiscal year;
(v) Except as provided in Section 19.3(e), approve a
recapitalization or any change in the legal structure of the Company;
(vi) Approve any distribution of cash to the Members
if such distribution is not to be made in proportion to their
Percentage Interests;
(vii) Approve any distribution of assets or property
of the Company, other than cash, to the Members;
(viii) Approve (A) the Capital Expenditures of the
Company and (B) the purchases, acquisitions or investments of the type
described in
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paragraph (ix) below, or the mergers or consolidations of the type
described in clause (B) of paragraph (iv) above, set forth in the
Operating Budget for any fiscal year of the Company if the aggregate
amount of such Capital Expenditures, purchases, acquisitions including
any Debt assumed as part of an acquisition and any investments
required to sustain operations where cash flow deficiencies are
anticipated on a go-forward basis over the next three (3) years,
investments (including, without limitation, joint ventures), mergers
and consolidations for such fiscal year, as set forth in the Operating
Budget, is to be greater than EBITDA of the Company as set forth in
the most recent audited financial statements of the Company;
(ix) Purchase or otherwise acquire, or agree to
purchase or otherwise acquire, all or any part of the property, assets
or capital stock of any Person (other than purchases or other
acquisitions of inventory, materials, equipment and intangible assets
in the ordinary course of business) in one or a series of related
transactions, or make any investment (including, without limitation,
joint ventures) in any Person, or incur any other obligations (e.g.
guarantees) excluding those arising from the incurrence of Debt, in
each case involving in excess of $20,000,000, if such purchase,
acquisition, investment or obligation, as the case may be, was not
included in the Operating Budget for the then current fiscal year;
(x) Make or agree to make any individual Capital
Expenditure in excess of $5,000,000 if such Capital Expenditure was
not included in the Operating Budget for the then current fiscal year;
(xi) Sell or otherwise dispose of, or agree to sell
or otherwise dispose of, any of the assets of the Company (other than
sales of inventory, materials, equipment and intangible assets in the
ordinary course of business) in one or a series of related
transactions the aggregate of the greater of book or fair market value
of which is greater than $20,000,000, if such sale or other
disposition was not specifically identified in the Operating Budget
for the then current fiscal year;
(xii) Incur additional Long-Term Debt if, after
giving affect to such incurrence, the Leverage Ratio would be greater
than 1:2 for a period of greater than 30 days;
(xiii) Approve the Product Mix set forth in the
Operating Budget if it is less than the Product Mix Threshold; or
(xiv) Cause the Company to enter into any contract
to do any of the foregoing.
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The supermajority items set forth above shall apply individually, each one
irrespective of the other.
(b) Notwithstanding any other provisions of this Agreement to
the contrary and without prejudice to Sections 19.2, 19.3, and 19.6 hereof, for
so long as the Nortel Member's Percentage Interest or the Williams Member's
Percentage Interest is not less than 10%, the consent of the Nortel Member or
the Williams Member, as the case may be, shall be required to accept any
additional Members pursuant to Articles XIX or XXI, such consent not to be
unreasonably withheld; provided however, that (i) the Nortel Member may
withhold its consent in its sole discretion in the event that such proposed
additional Member is a competitor in the primary line(s) of business of the
Nortel Member or its Ultimate Parent, and (ii) the Williams Member may withhold
its consent in its sole discretion in the event that such proposed additional
Member is a competitor in the primary line(s) of business of the Williams
Member or its Ultimate Parent. The foregoing provision shall not inure to the
benefit of any assignee of the Nortel Member's Membership Interest other than
the Nortel Member, NTL or their Affiliates or any assignee of the Williams
Member's Percentage Interest other than an Affiliate of the Williams Member.
15.13 Affiliated Transactions. The Members agree that the Management
Committee may, from time to time, enter into arm's-length transactions on
behalf of the Company with the Williams Member, the Nortel Member, a new
Member, any substituted Member, and their respective Affiliates. "Arms-length
transaction" for purposes of this section shall mean market conditions or
better from the Company's perspective for services or products of the same or
better quality with a Member having the right to match any offer from a third
party vendor. The Williams Member or the Nortel Member shall be entitled to
charge the Company prices for those operating, management, and administrative
services utilized by the Company which are competitive with what the Company
could have obtained in similar transactions with unrelated third parties. In
addition, the Williams Member or the Nortel Member shall be entitled to charge
the Company for reasonable allocations of overhead from its parent company
directly applicable to the provision of operating, management, and
administrative services to the Company. Subject to the foregoing provisions of
this Section 15.13, the terms of any such arrangement and of other transactions
with the Williams Member, the Nortel Member, or their Affiliates, shall be as
determined by the Company, acting through the Management Committee, and the
other party. The Williams Member shall, not more than 30 days after the end of
each fiscal year of the Company, provide to the Audit Committee a description,
in reasonable detail, of the terms of each transaction between the Williams
Member or any of its Affiliates and the Company if the expenditure by the
Company related thereto will be in excess of $1,000,000 in any fiscal year. All
such transactions shall be reviewed as to appropriateness by the Audit
Committee, though such review may take place after the transaction has
occurred. The Audit Committee shall provide a summary report to the Management
Committee of all such transactions.
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ARTICLE XVI
Officers
16.1 Appointment and Tenure.
(a) Subject to the provisions hereof, the Management
Committee, shall from time to time designate officers of the Company to carry
out the day-to-day business of the Company.
(b) Subject to the provisions of Section 16.1(c), the officers
of the Company shall be comprised of one or more individuals designated from
time to time by the Management Committee. No officer need be a resident of the
State of Delaware. Each officer shall hold his offices for such terms and shall
have such authority and exercise such powers and perform such duties as shall
be determined from time to time by the Management Committee. Any number of
offices may be held by the same individual. The salaries or other compensation,
if any, of the officers and agents of the Company shall be fixed from time to
time by the Management Committee.
(c) The officers of the Company will include a Chairman of the
Management Committee, a Chief Executive Officer, a President, a Chief Financial
Officer, and a Secretary. The officers may also include a Treasurer, one or
more Vice Presidents, Assistant Secretaries and Assistant Treasurers. The
Management Committee may designate such other officers and assistant officers
and agents as the Management Committee shall deem necessary.
16.2 Removal. Any officer may be removed as such at any time by the
Management Committee, either with or without cause, in the discretion of the
Management Committee; provided, that such removal shall be without prejudice to
the contract rights, if any, of the Person so removed. Designation of an
officer shall not of itself create contract rights.
16.3 Chairman of the Management Committee. The Chairman of the
Management Committee shall direct the policy of the Company, subject, however,
to the control of the Management Committee. The Chairman shall, if present,
preside at all meetings of the Management Committee and of the Members. The
Chairman may sign and execute in the name of the Company deeds, mortgages,
bonds, contracts and other instruments, except in cases where the signing and
execution thereof shall be expressly delegated by the Management Committee to
some other officer or agent of the Company, or shall be required by law
otherwise to be signed or executed. The Chairman shall have the power to
appoint, determine the duties and fix the compensation of such agents and
employees as in the Chairman's judgment may be
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necessary or proper for the transaction of the business of the Company,
including the right of removal of any officer, with or without cause, and the
termination of employment of any employee. In general, the Chairman shall
perform all duties incident to the office of Chairman of the Management
Committee, and such other duties as may from time to time be assigned by the
Management Committee. The initial Chairman of the Management Committee shall be
Howard E. Janzen who shall serve until his successor is appointed by the
Management Committee or until his earlier resignation or removal.
16.4 Chief Executive Officer. The Chief Executive Officer may sign
and execute in the name of the Company deeds, mortgages, bonds, contracts and
other instruments, except in cases where the signing and execution thereof
shall be expressly delegated by the Management Committee to some other officer
or agent of the Company, or shall be required by law otherwise to be signed or
executed. The Chief Executive Officer shall have the power to appoint,
determine the duties and fix the compensation of such agents and employees as
in the judgment of the Chief Executive Officer may be necessary or proper for
the transaction of the business of the Company, including the right of removal
of any officer (other than the Chairman of the Management Committee), with or
without cause, and the termination of employment of any employee. In general,
the Chief Executive Officer shall perform all duties incident to the office and
such other duties as may from time to time be assigned by the Management
Committee or the Chairman of the Management Committee. The initial Chief
Executive Officer shall be Howard E. Janzen who shall serve until his successor
is appointed by the Management Committee or until his earlier resignation or
removal.
16.5 President. The President shall have general supervision of the
business of the Company. During the absence or disability of the Chairman of
the Management Committee and the Chief Executive Officer, the President shall
exercise all the powers and discharge all the duties of the Chairman of the
Management Committee and the Chief Executive Officer. The President may sign
and execute in the name of the Company deeds, mortgages, bonds, contracts and
other instruments, except in cases where the signing and execution thereof
shall be expressly delegated by the Management Committee to some other officer
or agent of the Company, or shall be required by law otherwise to be signed or
executed. The President shall have the power to appoint, determine the duties
and fix the compensation of such agents and employees as in the judgment of the
President may be necessary or proper for the transaction of the business of the
Company, including the right of removal of any officer (other than the Chairman
of the Management Committee and the Chief Executive Officer), with or without
cause, and the termination of employment of any employee. In general, the
President shall perform all duties incident to the office of President, and
such other duties as may from time to time be assigned by the Management
Committee or the Chairman of the Management Committee. The initial
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President shall be Garry K. McGuire who shall serve until his successor is
appointed by the Management Committee or until his earlier resignation or
removal.
16.6 Chief Financial Officer. The Chief Financial Officer shall
perform such duties and have such authority and powers as the Management
Committee may from time to time prescribe.
16.7 Vice Presidents. The Vice Presidents, if any are designated, in
the order of their seniority, unless otherwise determined by the Management
Committee, shall, in the absence or disability of the President, perform the
duties and have the authority and exercise the powers of the President. They
shall perform such other duties and have such other authority and powers as the
Management Committee may from time to time prescribe.
16.8 Secretary; Assistant Secretaries. The Secretary, if one is
designated, shall attend all meetings of the Management Committee and record
all of the proceedings of the meetings in a minute book to be kept for that
purpose and shall perform like duties for any committees that might be formed
by the Management Committee. The Secretary shall perform such other duties and
have such other powers as the Management Committee may from time to time
prescribe. The Assistant Secretaries, if any are designated, in the order of
their seniority, unless otherwise determined by the Management Committee,
shall, in the absence or disability of the Secretary, perform the duties and
exercise the powers of the Secretary. They shall perform such other duties and
have such other powers as the Management Committee may from time to time
prescribe.
16.9 Treasurer; Assistant Treasurers. The Treasurer, if one is
designated, shall have custody of the Company's funds and securities and shall
keep full and accurate accounts and records of receipts, disbursements and
other transactions in books belonging to the Company, and shall deposit all
moneys and other valuable effects in the name and to the credit of the Company
in such depositories as may be designated from time to time by the Management
Committee. The Treasurer shall disburse the funds of the Company as may be
ordered by the Management Committee, taking proper vouchers for such
disbursements, and shall render to the Chief Executive Officer, the President
and the Members, when so directed, an account of all his transactions as
Treasurer and of the financial condition of the Company. The Treasurer shall
perform such other duties and have such other powers as the Management
Committee may from time to time prescribe. If required by the Management
Committee, the Treasurer shall give the Company a bond of such type, character
and amount as the Management Committee may require. The Assistant Treasurers,
if any are designated, in the order of their seniority, unless otherwise
determined by the Management Committee, shall, in the absence or disability of
the Treasurer, perform the duties and exercise the powers of the Treasurer.
They shall
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perform such other duties and have such other powers as the Management
Committee may from time to time prescribe.
16.10 Vacancies. In case of a vacancy in any of the offices set forth
in Sections 16.3, 16.4 and 16.5, a successor officer shall be elected by the
Management Committee. The Management Committee may also elect a successor to
any other vacant office.
ARTICLE XVII
Liability and Exculpation
17.1 Liability.
(a) To the fullest extent permitted under the Act or any other
applicable law in effect on the date of this Agreement or hereafter in effect,
no Member or any agent acting on behalf of such Member or the Company
(including a Person having more than one such capacity) shall be liable for any
debts, obligations or liabilities of the Company or of each other, whether
arising in tort, contract or otherwise, solely by reason of being a Member or
agent or acting (or omitting to act) in such capacities or participating (as an
employee, consultant, contractor or otherwise) in the conduct of the business
of the Company. Each of the Members shall be liable only to make payment of its
respective initial Capital Contribution hereunder and other payments as
expressly provided in this Agreement. No Member shall be required to lend any
funds to the Company or, after such Member's initial Capital Contribution has
been made, except as provided by the provisions of section 18-607 of the Act
and Section 8.2(b), to make any further Capital Contribution or pay any
assessment or payment to the Company.
(b) No Member shall be liable for the return of any portion of
the Capital Contribution of any other Member. The return of Capital
Contributions shall be made solely from the assets of the Company. No Member
shall be required to pay the Company or any other Member any deficit in any
Member's Capital Account upon dissolution or otherwise.
17.2 Exculpation.
(a) No Covered Person shall be liable to the Company or any
Member under any theory of law, including tort, contract or otherwise,
including a Covered Person's own negligence, for any loss, damage or claim
incurred by reason of any act or omission (including decisions to vote for or
against any matter) performed or omitted by such Covered Person in good faith
on behalf of the Company and in a manner reasonably believed to be within the
scope of authority conferred on such
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Covered Person by this Agreement, except that a Covered Person shall be liable
for any such loss, damage or claim incurred by reason of such Covered Person's
gross negligence or willful misconduct.
(b) A Covered Person shall be fully protected in relying in
good faith upon the records of the Company and upon such information, opinions,
reports or statements presented to the Company by any Person as to matters the
Covered Person reasonably believes are within such other Person's professional
or expert competence and who has been selected with reasonable care by or on
behalf of the Company, including information, opinions, reports or statements
as to the value and amount of the assets, liabilities, profits, losses, or any
other facts pertinent to the existence and amount of assets from which
distributions to Members might properly be paid.
17.3 Duties and Liabilities of Covered Persons.
(a) To the extent that, at law or in equity, a Covered Person
has duties (including fiduciary duties) and liabilities relating thereto to the
Company or to any other Covered Person arising under this Agreement, a Covered
Person acting under this Agreement shall not be liable to the Company or to any
other Covered Person for actions (including decisions to vote for or against
any matter) taken by it in good faith reliance on the provisions of this
Agreement. The provisions of this Agreement, to the extent that they restrict
the duties and liabilities of a Covered Person otherwise existing at law or in
equity, are agreed by the parties hereto to replace such other duties and
liabilities of such Covered Person.
(b) Unless otherwise expressly provided herein, whenever a
conflict of interest exists or arises between a Covered Person and the Company
or a Member, the Covered Person shall disclose such conflict to the Management
Committee and shall resolve such conflict of interest, taking such action or
providing such terms, considering in each case the relative interest of each
party (including its own interest) to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interests, any
customary or accepted industry practices, and any applicable generally accepted
accounting practices or principles. In the absence of bad faith by the Covered
Person and subject to such disclosure, the resolution, action or term so made,
taken or provided by the Covered Person shall not constitute a breach of this
Agreement or any other agreement contemplated herein or of any duty or
obligation of the Covered Person at law or in equity or otherwise.
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ARTICLE XVIII
Indemnification
18.1 Power to Indemnify in Actions, Suits or Proceedings Other Than
Those by or in the Right of the Company. Subject to Section 18.3 of this
Agreement, the Company shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Company) by reason of the fact
that such person is or was a Representative, officer, employee or agent of the
Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with such action, suit or proceeding if such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe the conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which such person reasonably believed to be
in or not opposed to the best interests of the Company, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that the
conduct was unlawful.
18.2. Power to Indemnify in Actions, Suits or Proceedings by or in the
Right of the Company. Subject to Section 18.3 of this Agreement, the Company
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the Company to procure a judgment in its favor by reason of the fact that
such person is or was a Representative, officer, employee or agent of the
Company, or is or was serving at the request of the Company as a
Representative, officer, employee or agent of another Company, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred in connection with the defense or
settlement of such action or suit if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the Company; except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Company unless and only to the extent that the
Court of Chancery of the State of Delaware or the court in which such action or
suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnify for such expenses
which the Court of Chancery of the State of Delaware or such other court shall
deem proper.
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18.3. Authorization of Indemnification. Any indemnification under this
Agreement (unless ordered by a court) shall be made by the Company only as
authorized in the specific case upon a determination that indemnification of
the Representative, officer, employee or agent is proper in the circumstances
because such person has met the applicable standard of conduct set forth in
Section 18.1 or Section 18.2 of this Agreement, as the case may be. Such
determination shall be made (a) by the Management Committee by a majority vote
of a quorum consisting of Representatives who were not parties to or
financially interested in such action, suit or proceeding, or (b) if such a
quorum is not obtainable, or, even if obtainable a quorum of disinterested
Representatives so directs, by independent legal counsel in a written opinion,
or (c) by the Members. To the extent, however, that a Representative, officer,
employee or agent of the Company has been successful on the merits or otherwise
in defense of any action, suit or proceeding described above, or in defense of
any claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred in
connection therewith, without the necessity of authorization in the specific
case.
18.4. Good Faith Defined. For purposes of any determination under
Section 18.3 of this Agreement, a person shall be deemed to 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 Company, or, with respect to any criminal action
or proceeding, to have had no reasonable cause to believe such person's conduct
was unlawful, if such person's action is based on the records or books of
account of the Company or another enterprise, or on information supplied to
such person by the officers of the Company or another enterprise in the course
of their duties, or on the advice of legal counsel for the Company or another
enterprise or on information or records given or reports made to the Company or
another enterprise by an independent certified public accountant or by an
appraiser or other expert selected with reasonable care by the Company or
another enterprise. The term "another enterprise" as used in this Section 18.4
shall mean any other Company or any partnership, joint venture, trust or other
enterprise of which such person is or was serving at the request of the Company
as a Representative, officer, employee or agent. The provision of this Section
18.4 shall not be deemed to be exclusive or to limit in any way the
circumstances in which a person may be deemed to have met the applicable
standard of conduct set forth in Sections 18.1 or 18.2 of this Agreement, as
the case may be.
18.5. Indemnification by a Court. Notwithstanding any contrary
determination in the specific case under Section 18.3 of this Agreement, and
notwithstanding the absence of any determination thereunder, any
Representative, officer, employee or agent may apply to any court of competent
jurisdiction in the State of Delaware for indemnification to the extent
otherwise permissible under Sections 18.1 and 18.2 of this Agreement. The basis
of such indemnification by a court shall be a determination by such court that
indemnification of the Representative, officer, employee or agent is proper in
the circumstances because such person has met the applicable standards
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of conduct set forth in Sections 18.1 or 18.2 of this Agreement, as the case
may be. Notice of any application for indemnification pursuant to this Section
18.5 shall be given to the Company promptly upon the filing of such
application.
18.6. Expenses Payable in Advance. Expenses incurred by an officer or
Representative in defending a civil or criminal action, suit or proceeding may
be paid by the Company in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of the
Representative or officer to repay such amount if it shall ultimately be
determined that such person is not entitled to be indemnified by the Company as
authorized in this Article XVIII. Such expenses incurred by other employees and
agents shall be so paid upon such terms and conditions, if any, as the
Management Committee deems appropriate.
18.7. Nonexclusivity of Indemnification and Advancement of Expenses.
The indemnification and advancement of expenses provided by or granted pursuant
to this Agreement shall not be deemed exclusive of any other rights to which
those seeking indemnification or advancement of expenses may be entitled under
any By-law, agreement, contract, vote of Members or disinterested
Representatives or otherwise, both as to action in such person's official
capacity and as to action in another capacity while holding such office, it
being the policy of the Company that indemnification of the persons specified
in Sections 18.1 and 18.2 of this Agreement shall be made to the fullest extent
permitted by law. The provisions of this Agreement shall not be deemed to
preclude the indemnification of any person who is not specified in Sections
18.1 and 18.2 of this Agreement but whom the Company has the power or
obligation to indemnify under the provisions of the General Company Law of the
State of Delaware, or otherwise.
18.8. Insurance. The Company may purchase and maintain insurance on
behalf of any person who is or was a Representative, officer, employee or agent
of the Company, or is or was serving at the request of the Company as a
director, officer, employee or agent of another Company, partnership, joint
venture, trust or other enterprise against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the Company would have the power or the
obligation to indemnify such person against such liability under the provisions
of this Article XVIII.
18.9. Meaning of "Company" and "Other Enterprises" for the Purposes of
Article XVIII. For purposes of this Article XVIII, references to "the Company"
shall include, in addition to the resulting Company, any constituent Company
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its Representatives, officers, employees or agents so
that any person who is or was a director, officer, employee
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or agent of such constituent Company, or is or was serving at the request of
such constituent Company as a director, officer, employee or agent of another
Company, partnership, joint venture, trust or other enterprise, shall stand in
the same position under the provisions of this Article XVIII with respect to
the resulting or surviving Company as such person would have with respect to
such constituent Company if its separate existence had continued.
For purposes of this Article XVIII, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the Company" shall include any service
as a Representative, officer, employee or agent of the Company which imposes
duties on, or involves services by, such Representative, officer, employee or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner such person
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Company" as referred to in this Article
XVIII.
18.10. Survival of Indemnification and Advancement of Expenses. The
indemnification and advancement of expenses provided by, or granted pursuant
to, this Article XVIII shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a Representative,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person.
ARTICLE XIX
Transfer of Interests by Members
19.1 Restrictions on Transfers.
(a) Without prejudice to Section 15.12(b), no Member shall
have the right, directly or indirectly, to Transfer its interest in the
Company, or any portion thereof, without the prior written consent of the other
Member except as specifically provided in this Article XIX; provided however,
that no Member may unreasonably withhold its consent as to a proposed
transferee so long as Section 19.6 has been complied with and the terms of
Sections 19.2 and 19.3 would not be breached; and, provided further, that (i)
the Nortel Member may withhold its consent in its sole discretion in the event
that such proposed transferee is a competitor in the primary line(s) of
business of the Nortel Member or its Ultimate Parent, and (ii) the Williams
Member may withhold its consent in its sole discretion in the event that such
proposed transferee is a competitor in the primary line(s) of business of the
Williams Member or its Ultimate Parent. Any attempted transfer or assignment of
any interest in the Company in violation of the provisions of this Article XIX
shall be void and of no force and effect. Any permitted transferee of a
Membership Interest shall agree, prior to any sale, transfer, assignment or
conveyance, to become a party to this Agreement and agree to be bound by all
applicable terms and conditions, including this Article
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XIX. Upon becoming a party to this Agreement, each such purchaser or transferee
shall be substituted fully for, and shall enjoy the same rights and be subject
to the same duties and obligations as its predecessor hereunder.
(b) Either Member may Transfer all, but not less than all, of
its Membership Interest, and each Member's Ultimate Parent may Transfer, or
cause to be Transferred, all, but not less than all, of the capital stock of
such Member, to an Affiliate of such Member provided that (i) all the capital
stock or other equity interest of such Affiliate is owned, directly or
indirectly, by such Members' Ultimate Parent and (ii) each such purchaser or
transferee, prior to such sale, assignment or transfer, becomes a party to this
Agreement and agrees to be bound by all applicable terms and conditions,
including this Article XIX.
19.2 Prohibitions on Transfer by Williams Member. Subject to Section
19.4, the Williams Member shall not, during the Minimum Holding Period, but
only for so long as the Nortel Member's Percentage Interest is not less than
20%, Transfer all or a portion of its Membership Interest, if, after giving
effect to such Transfer, the Williams Member's Percentage Interest shall be 50%
or less.
19.3 Prohibitions on Transfer by Nortel Member.
(a) Subject to Section 19.4, the Nortel Member shall not
Transfer all or a portion of its Membership Interest other than pursuant to
Section 19.1(b) if, after giving effect to such Transfer, the Nortel Member's
Percentage Interest shall be less than 20%; provided, however, in the event
that the Nortel Member's Percentage Interest shall have been reduced to 20%,
the Nortel Member may, subject to the terms and conditions of this Article XIX,
Transfer all but not less than all of its Membership Interest at any time after
the date that is five (5) years after the date its Percentage Interest shall
have been reduced to 20%, to the Williams Member (or, in the sole discretion of
the Williams Member, an Affiliate of the Williams Member or the Company), for a
purchase price (the "Exit Purchase Price") equal to the fair market value of
such Membership Interest as determined by an investment banking firm of
international reputation mutually agreed upon by the Williams Member and the
Nortel Member using the valuation methodology set forth on Exhibit L (the
"Valuation Methodology"). The cost incurred by the engagement of such
investment banking firm shall be divided equally between the Williams Member
and the Nortel Member.
(b) If the Nortel Member shall determine to sell its
Membership Interest pursuant to Section 19.3(a), the Nortel Member shall
provide the Williams Member with a written offer (the "Exit Offer") to purchase
such Membership Interest on the terms and conditions set forth in this Section
19.3. The Williams Member shall, within sixty (60) days of receipt of the Exit
Offer, deliver written notice to the Nortel Member of its intention to accept
or reject the Exit Offer. Failure by the Williams Member to
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accept or reject the Exit Offer within such sixty-day period shall be deemed a
rejection of such offer.
(c) In the event that the Williams Member shall accept the
Exit Offer, the closing of the purchase by the Williams Member of the Nortel
Member's Membership Interest shall take place on the date that is ninety (90)
days after the date of such acceptance. At such closing, the Nortel Member
shall deliver to the Williams Member such instruments, documents and agreements
to evidence such Transfer as the Williams Member may reasonably request and the
Williams Member shall pay to the Nortel Member the Exit Purchase Price by, at
the sole option of the Williams Member, (x) wire transfer to the Nortel Member
of immediately available funds in an amount equal to the Exit Purchase Price or
(y) delivery to the Nortel Member of that number of shares of common stock, of
the class currently outstanding, of the Williams Member's Ultimate Parent (or
any Affiliate of the Williams Member's Ultimate Parent) the common stock of
which is unrestricted (subject to compliance with the Securities Act and
applicable state securities laws), actively traded on a national securities
exchange and registered under the Securities Act, the aggregate Current Market
Price of which shall equal the Exit Purchase Price, together with such
instruments of transfer or conveyance as the Nortel Member may reasonably
request.
(d) In the event that the Williams Member rejects the Exit
Offer, the Nortel Member may, at its sole option, (x) sell its Membership
Interest without regard to the restrictions set forth in this Section 19.3 (but
subject to the terms and conditions of this Article XIX, including Section
19.6, but only if the Williams Member reimburses the Nortel Member for all of
its expenses incurred in connection with the proposed sale pursuant to Section
19.6) or (y) cause the Company to convert to corporate form and register the
Nortel Member's resulting equity interest under the Securities Act as set out
in Section 19.3(e).
(e) If the Nortel Member elects to cause the Company to
convert to corporate form and register the Nortel Member's resulting equity
interest under the Securities Act pursuant to Section 19.3(d), the Nortel
Member shall provide written notice of such election (a "Registration Notice")
to the Williams Member and the Company. Within ninety (90) days of receipt of
the Registration Notice, the Company shall, and each Member shall cause the
Company to, organize under the Delaware General Corporation Law a wholly-owned
subsidiary ("Delcorp") and merge with and into Delcorp pursuant to Section 264
of the Delaware General Corporation Law and Section 18-209 of the Act, with
Delcorp being the surviving entity of such merger. Immediately upon the
consummation of such merger, the Members' Membership Interest shall be
converted into shares of common stock (the "Delcorp Common Stock") in such
amounts as shall reflect each Member's Percentage Interest immediately prior to
the consummation of such merger. The Members shall cause Delcorp to effect
registration under the Securities Act of the Delcorp Common Stock
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held by the Nortel Member as expeditiously as possible after such merger in
accordance with the registration procedures set forth on Exhibit M.
19.4 Purchase and Sale Rights.
(a) In the event that the Product Mix for any two (2)
consecutive fiscal years of the Company (the "Reference Period") shall be less
than the Product Mix Threshold by more than 5%, then, at any time during the
period commencing on the first day after the Product Mix numbers first become
available of the fiscal year immediately succeeding the second of such fiscal
years and ending on the date that is six (6) months thereafter, (i) the
Williams Member or the Company may purchase the Nortel Member's Membership
Interest in accordance with Section 19.5(b); or (ii) the Nortel Member may sell
its Membership Interest to the Williams Member or the Company in accordance
with Section 19.5(a); provided however, that the provisions of this Section
19.4(a) shall not apply in the event that the rate of growth for the Reference
Period, of the aggregate Net Purchase Price paid by the Company to NTI and its
Affiliates for Nortel's PBX and Key system products only of the Existing
Products (the "Voice Product Purchases"), is equal to or greater than (x) the
rate of growth for the Reference Period, of the aggregate Voice Product
Purchases by each and every Distributor which has a territory under its CPE
Agreement encompassing the entire United States of America whose Voice Product
Purchases per annum are greater than $50,000,000 and (y) the rate of growth for
the Reference Period of the aggregate Voice Product Purchases by all
non-national territory, regional Distributors measured as a whole; provided
further that both (x) and (y) in the preceding proviso will be subject to
certification at the request of the Company by the independent auditors of NTI.
(b) In the event of a Change of Control of the Williams
Member, the Nortel Member may sell its Membership Interest to the Williams
Member at any time during the period commencing on the date of such Change of
Control and ending on the date that is 180 days after such date in accordance
with the terms of Section 19.5(a).
(c) In the event of a Change of Control of the Nortel Member,
the Williams Member may purchase the Membership Interest of the Nortel Member
at any time during the period commencing on the date of such Change of Control
and ending on the date that is 180 days after such date in accordance with the
terms of Section 19.5(b).
(d) In the event that the Williams Member or any of its
Affiliates shall fail to perform or observe any material agreement contained in
the Formation Agreement or the Non-Competition Agreement or in the event that
the Company shall fail to perform or observe any material agreement contained
in the WilTel Distributorship Agreement or its then current successor
agreement, the guarantee
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given pursuant to Section 6.3(p) of the Formation Agreement, or this Agreement
which failure shall remain unremedied for a period of 60 days after notice
thereto shall have been given to the Williams Member by the Nortel Member, the
Nortel Member may sell its Membership Interest to the Williams Member at any
time during the period commencing on the date that is 61 days after the giving
of such notice and ending on the date that is 30 days thereafter in accordance
with Section 19.5(a).
(e) In the event that the Nortel Member or any of its
Affiliates shall fail to perform or observe any material agreement of the
Nortel Member contained in the Formation Agreement, the TTS Share Purchase
Agreement, the WilTel Distributorship Agreement, the Non-Competition Agreement,
or this Agreement, which failure shall remain unremedied for a period of 60
days after notice thereof shall have been given to the Nortel Member by the
Williams Member, the Williams Member may purchase the Nortel Member's
Membership Interest at any time during the period commencing on the date that
is 61 days after the giving of such notice and ending on the date that is 30
days thereafter in accordance with Section 19.5(b).
(f) At any time after the Nortel Member's Percentage Interest
shall be less than 20%, the Williams Member may purchase the Nortel Member's
Membership Interest in accordance with Section 19.5(b).
(g) On or after December 31, 1999, the Nortel Member will
have the right to sell to the Williams Member, the portion of the Nortel
Member's Membership Interest in the Company necessary to reduce the Nortel
Member's Percentage Interest down to 20% in accordance with the terms of
Section 19.5(a).
(h) In the event that registration and, if applicable,
admission to listing on a stock exchange, is planned for the common stock of an
Affiliate of the Williams Member, fifty percent (50%) or more of the value of
which consists of an interest in the Company (such Affiliate hereinafter
referred to as the "Intended Listed Affiliate"), the Nortel Member shall be
given the opportunity to exchange its interest in the Company for shares of
common stock of the Intended Listed Affiliate ("Intended Listed Affiliate
Common Stock"), and to have the Nortel Member's ensuing interest in the
Intended Listed Affiliate included in such registration and, if applicable,
listing application and, as the case may be, public offering, subject to any
statutory or reasonably agreed restrictions, provided, that the exchange
involved shall be carried through on the basis of (a) the fair market valuation
of the Company, as determined by an investment banking firm mutually agreed
upon by the Williams Member and the Nortel Member using the Valuation
Methodology (the cost of such valuation to be borne by the Nortel Member), and
(b) the initial public offering price (giving full effect to any discounts on a
pro rata basis) of the shares of common stock of the Intended Listed
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Affiliate. Upon the consummation of such exchange, this Agreement shall
terminate except for Article XVII, Article XVIII, Article XX, and Section 25.2
herein. The Williams Member shall use its reasonable best efforts to cause the
Intended Listed Affiliate to effect registration under the Securities Act of
the Intended Listed Affiliate Common Stock held by the Nortel Member as
expeditiously as possible after such exchange in accordance with the
registration procedures set forth in Exhibit N. In the event that (i) such
registration is not effected within a reasonable time after such exchange shall
have occurred; or (ii) after such exchange shall have occurred, the Intended
Listed Affiliate elects, in its sole discretion, not to effect such
registration; then the Nortel Member shall be entitled to return its Intended
Affiliate Common Stock in exchange for the interest in the Company previously
exchanged therefor, and this Agreement shall continue in full force and effect
as if the exchange provided for in this Section 19.4(h) had never occurred.
19.5 Terms of Purchase and Sale.
(a) In the event that the Nortel Member shall desire to sell
all of its Membership Interest to the Williams Member pursuant to Sections
19.4(a), 19.4(b), 19.4(d), or a portion of its Membership Interest pursuant to
Section 19.4(g) the Nortel Member may, by written notice (the "Put Notice") to
the Williams Member, demand that the Williams Member purchase all, but not less
than all (except in the case of a sale pursuant to Section 19.4(g)) of the
Nortel Member's Membership Interest for a purchase price (the "Put Purchase
Price") equal to the fair market value of the Nortel Member's Membership
Interest or such portion of the Nortel Member's Interest, as the case may be,
as determined by an investment banking firm of international reputation
mutually agreed upon by the Williams Member and the Nortel Member using the
Valuation Methodology the cost of such valuation to be borne by (i) the Company
if pursuant to Sections 19.4(a), (ii) the defaulting entity if pursuant to
Section 19.4(d), (iii) the Williams Member if pursuant to Section 19.4(b), or
(iv) as provided by the last sentence of Section 19.3(a) if pursuant to Section
19.4(g). The Nortel Member may withdraw its Put Notice after the determination
of the Put Purchase Price; provided, however, that in such event the Nortel
Member will pay the fees and expenses of the investment banking firm; and
provided, further, that the Nortel Member may not make another Put Notice
arising from the same event or based on the same provision hereof until a
period of six months has elapsed from the time of giving the previous Put
Notice. The Put Notice shall set forth the date (the "Put Closing Date") on
which such purchase shall occur, which date shall be not less than 120 days
after the date of the Put Notice. On the Put Closing Date, the Williams Member
(or in the sole discretion of the Williams Member, an Affiliate of the Williams
Member or the Company) shall purchase all, but not less than all (except in the
case of a sale pursuant to Section 19.4(g)), the Nortel Member's Membership
Interest and shall pay to the Nortel Member the Put Purchase Price as provided
in Section 19.5(c) and the Nortel Member shall execute and deliver to the
Williams Member (or such Affiliate or the Company) such instruments, documents
and agreements as the Williams Member may reasonably request to effectuate such
Transfer.
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(b) In the event that the Williams Member shall desire to
purchase the Nortel Member's Membership Interest pursuant to Sections 8.6(b),
19.4(a), 19.4(c), 19.4(e) or 19.4(f), the Williams Member may, by written
notice (the "Call Notice") to the Nortel Member, demand that the Nortel Member
sell all, but not less than all, of the Nortel Member's Membership Interest for
a purchase price (the "Call Purchase Price") equal to the fair market value of
the Nortel Member's Membership Interest as determined by an investment banking
firm of international reputation mutually agreed upon by the Williams Member
and the Nortel Member using the Valuation Methodology, the cost of such
valuation to be borne by (i) the Company if pursuant to Sections 19.4(a), (ii)
the defaulting entity if pursuant to Section 19.4(e), (iii) the Nortel Member
if pursuant to Section 19.4(c), or (iv) as provided by the last sentence of
Section 19.3(a) if pursuant to Sections 8.6(b) or 19.4(f). The Williams Member
may withdraw its Call Notice after the determination of the Call Purchase
Price; provided, however, that in such event the Williams Member will pay the
fees and expenses of the investment banking firm; and provided, further, that
the Williams Member may not make another Call Notice arising from the same
event or based on the same provision hereof until a period of six months has
elapsed from the time of giving the previous Call Notice. The Call Notice shall
set forth the date (the "Call Closing Date") on which such purchase shall
occur, which date shall be not less than 120 days after the date of the Call
Notice. On the Call Closing Date, the Williams Member shall tender the Call
Purchase Price as provided in Section 19.5(c) and the Nortel Member shall sell
to the Williams Member (or in the sole discretion of the Williams Member an
Affiliate of the Williams Member or the Company), all, but not less than all,
of the Nortel Membership Interest and shall execute and deliver to the Williams
Member (or such Affiliate or the Company), such instruments, documents and
agreements as the Williams Member may reasonably require to effectuate such
Transfer.
(c) The payment of the Put Purchase Price under Section
19.5(a) or the Call Purchase Price under Section 19.5(b) may be, at the sole
option of the Williams Member, paid in the same manner as the Exit Purchase
Price as provided in Section 19.3(c).
19.6 Right of First Refusal. Except as permitted by Section 19.1(b)
and without prejudice to Sections 19.2 or 19.3 hereof, no Member shall Transfer
its Membership Interest or any portion thereof (the "Offered Interest") to a
Person who is not a Member at the time of such proposed Transfer unless such
Member (the "Seller") first offers to sell the Offered Interest pursuant to the
terms of this Section 19.6.
(a) Limitation on Transfers. No Transfer may be made under
this Section 19.6 unless the Seller has received a bona fide written offer (the
"Purchase Offer") from a Person (the "Purchaser") to purchase the Offered
Interest for a purchase price (the "Offer Price"), which the Seller is prepared
to accept and which
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is denominated and payable in United States dollars at closing and which
requires the Purchaser to undertake no obligations nor assume any liabilities
other than payment of the Offer Price, the filing and prosecution of any
necessary notices to and applications for any necessary approvals of,
regulatory authorities, which offer shall be in writing signed by the Purchaser
and shall be irrevocable for a period ending no sooner than the Business Day
following the end of the Offer Period, as hereinafter defined.
(b) Offer Notice. Prior to making any Transfer that is
subject to the terms of this Section 19.6, the Seller shall give to the Company
and the other Member written notice (the "Offer Notice") which shall include a
copy of the Purchase Offer and an offer (the "Firm Offer") to sell the Offered
Interest to the Company or to the other Member (the "Offeree") for the Offer
Price, payable according to the same terms as those contained in the Purchase
Offer, provided that the Firm Offer shall be made without regard to the
requirement of any earnest money or similar deposit required of the Purchaser
prior to closing and without regard to any security (other than the Offered
Interest) to be provided by the Purchaser for any deferred portion of the Offer
Price.
(c) Offer Period. The Firm Offer shall be irrevocable for a
period (the "Offer Period") ending at 11:59 p.m., local time at the Company's
principal place of business, on the forty-fifth (45th) day following the date
of the Offer Notice.
(d) Acceptance of Firm Offer. At any time during the Offer
Period, the Offeree may accept the Firm Offer as to all of the Offered
Interest, by giving written notice of such acceptance to the Seller and to the
Company or the other Member, as the case may be, which notice shall indicate
the Membership Interest or any portion thereof that such Offeree is willing to
purchase. In the event that the Offerees ("Accepting Offerees"), in the
aggregate, accept the Firm Offer with respect to all of the Offered Interest,
the Firm Offer shall be deemed to be accepted and the Offered Interest shall be
apportioned pro rata according to the Percentage Interests of the Accepting
Offerees. If the Offerees do not accept the Firm Offer as to all of the Offered
Interest during the Offer Period, the Firm Offer shall be deemed to be rejected
in its entirety.
(e) Closing of Purchase Pursuant to Firm Offer. In the event
that the Firm Offer is accepted, the closing of the sale of the Offered
Interest shall take place within thirty (30) days after the Firm Offer is
accepted or, if later, the date of closing set forth in the Purchase Offer. The
Seller and all Accepting Offerees shall execute such documents and instruments
as may be necessary or appropriate to effect the sale of the Offered Interest
pursuant to the terms of the Firm Offer and this Section 19.6.
(f) Sale Pursuant to Purchase Offer If Firm Offer Rejected.
If the Firm Offer is declined or is not accepted in the manner provided in
Section 19.6(d), the
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Seller may sell the Offered Interest to the Purchaser at any time within sixty
(60) days after the last day of the Offer Period, provided that such sale shall
be made at the price and on the terms contained in the Purchase Offer and
provided further that such sale complies with other terms, conditions, and
restrictions of this Agreement that are not expressly made inapplicable to
sales occurring under this Section 19.6, including the consent requirement of
Section 19.1(a). In the event that the Offered Interest are not sold in
accordance with the terms of the preceding sentence, the Offered Interest shall
again become subject to all of the conditions and restrictions of this Section
19.6.
19.7 Recognition of Members. The Company shall not recognize for any
purpose any purported Transfer of all or part of a Membership Interest unless
such Transfer is made pursuant to the provisions of this Article XIX or Article
XXI and unless and until the provisions of Section 19.9 have been satisfied and
the Management Committee has received, on behalf of the Company, a document
that:
(a) is executed by both the Member effecting the disposition
and the Person to whom the Membership Interest or part thereof is transferred;
(b) includes the notice address of any Person to be admitted
to the Company as a Member and its agreement to be bound by this Agreement; and
(c) contains a representation and warranty in favor of the
other Member that the disposition was made in accordance with all material and
applicable laws and regulations including the Regulations.
19.8 Prohibited Transfers. Any purported Transfer of a Membership
Interest that is not made in accordance with the terms of this Article XIX
shall be null and void and of no force or effect whatever; provided that, if
the Company is required to recognize any such Transfer that is not made in
accordance with the terms of this Article XIX, the Membership Interest or any
portion thereof Transferred shall be strictly limited to the transferor's
rights to allocations and distributions as provided by this Agreement with
respect to the transferred Membership Interest or any portion thereof, which
allocations and distributions may be applied (without limiting any other legal
or equitable rights of the Company) to satisfy any debts, obligations, or
liabilities for damages that the transferor or transferee of such interest may
have to the Company. In the case of a Transfer or attempted Transfer of
Membership Interest or any portion thereof that is not made in accordance with
the terms of this Article XIX, the parties engaging or attempting to engage in
such Transfer shall indemnify and hold harmless the Company and the other
Members against all claims, costs, liabilities, and damages that any of such
indemnified Members may incur (including, incremental tax liabilities,
reasonable lawyers' fees, and expenses) as incurred as a result of such
Transfer or attempted Transfer and efforts to enforce the indemnity granted
hereby.
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19.9 Admission of Substituted Members. Subject to the other provisions
of this Article XIX, a transferee of a Membership Interest or any portion
thereof may be admitted to the Company as a substituted Member only upon
satisfaction of the conditions set forth in this Section 19.9 and Section
15.12(b):
(a) the Membership Interest or any portion thereof with
respect to which the transferee is being admitted was acquired in compliance
with the provisions of this Article XIX;
(b) the transferee of a Membership Interest or any portion
thereof (other than, with respect to clauses (i) and (ii) below, a transferee
that was a Member prior to the Transfer) shall, by written instrument in form
and substance reasonably satisfactory to the Management Committee (and, in the
case of clause (iii) below, the transferor Member), (i) make representations
and warranties to each nontransferring Member equivalent to those set forth in
Article XXV hereof, (ii) accept and adopt the terms and provisions of this
Agreement, including this Article XIX, and (iii) assume the obligations of the
transferor Member under this Agreement with respect to the transferred
Membership Interest or any portion thereof.
(c) the transferee shall pay or reimburse the Company for all
reasonable legal, filing, and publication costs that the Company incurs in
connection with the admission of the transferee as a Member with respect to the
transferred Membership Interest or any portion thereof;
(d) except in the case of an involuntary Transfer by
operation of law, if required by the Management Committee, the transferee
(other than a transferee that was a Member prior to the Transfer) shall deliver
to the Company evidence of the authority of such Person to become a Member and
to be bound by all of the terms and conditions of this Agreement, and the
transferee and transferor shall each execute and deliver such other instruments
as Management Committee reasonably deems necessary or appropriate to effect,
and as a condition to, such Transfer, including amendments to the Certificate
of Formation or any other instrument filed with the state of Delaware or any
other state or governmental authority; and
(e) approval of all the other Members subject, always to
Sections 15.12(b) and 19.1(a) hereof.
19.10 Compliance with Securities Laws. All Members acknowledge that
the Membership Interests have not been registered under (i) the Securities Act,
in reliance on the exemptions afforded by Section 4(2) of the Securities Act,
or (ii) applicable state securities laws in reliance on exemptions under such
laws. Therefore, to preserve said exemptions and notwithstanding anything
contained herein to the contrary, the Members hereby agree that interests of
the Members shall be nontransferable and nonassignable, except in compliance
with the registration
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provisions of the Securities Act and applicable state securities laws, or an
exemption or exemptions therefrom, and any attempted or purported transfer or
assignment in violation of the foregoing shall be void and of no effect.
Accordingly, as an additional condition precedent to any assignment or other
transfer of any interest in the Company, the Company may require an opinion of
counsel satisfactory to the Company that such assignment or transfer will be
made in compliance with the registration provisions of the Securities Act and
applicable state securities laws or exemption(s) therefrom, and such transferor
or assignor shall be responsible for paying said counsel's fee for the opinion.
The foregoing shall not limit the restrictive legend set forth at the beginning
of this Agreement.
19.11 Representations Regarding Transfers; Legend.
(a) Each Member hereby covenants and agrees with the Company
for the benefit of the Company and all Members, that (i) it is not currently
making a market in Membership Interests or any portion thereof and will not in
the future make a market in Membership Interests or any portion thereof, (ii)
it will not Transfer its Membership Interest or any portion thereof on an
established securities market, a secondary market (or the substantial
equivalent thereof) within the meaning of Code section 7704(b) (and any
Regulations, revenue rulings, or other official pronouncements of the Internal
Revenue Service or Treasury Department that may be promulgated or published
thereunder), and (iii) in the event such Regulations, revenue rulings, or other
pronouncements treat any or all arrangements which facilitate the selling of
Company interests and which are commonly referred to as "matching services" as
being a secondary market or substantial equivalent thereof, it will not
Transfer any Membership Interest or any portion thereof through a matching
service that is not approved in advance by the Company. Each Member further
agrees that it will not Transfer any Membership Interest or any portion thereof
to any Person unless such Person agrees to be bound by this Section 19.11(a)
and to Transfer such Membership Interest or any portion thereof only to Persons
who agree to be similarly bound.
(b) Each Member hereby represents and warrants to the Company
and the Members that such Member's acquisition of Membership Interest hereunder
is made as principal for such Member's own account and not for resale or
distribution of such Membership Interest or any portion thereof. Each Member
further hereby agrees that the following legends may be placed upon any
counterpart of this Agreement and shall be placed on any document or instrument
evidencing Membership Interests or any portion thereof:
"The Membership Interest or any portion thereof represented
by this document has not been registered under any securities
laws and the transferability of such Membership Interest or
any portion thereof is restricted. Such Membership Interest
or any portion thereof may not be
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sold, assigned, or transferred, nor will any assignee,
vendee, transferee, or endorsee thereof be recognized as
having acquired any such Membership Interest or any portion
thereof by the issuer for any purposes, unless (1) a
registration statement under the Securities Act of 1933, as
amended, with respect to such Membership Interest or any
portion thereof shall then be in effect and such transfer has
been qualified under all applicable state securities laws, or
(2) the availability of an exemption from such registration
and qualification shall be established to the satisfaction of
counsel to the Company."
"The Membership Interest or any portion thereof represented
by this document are subject to further restriction as to
their sale, transfer, hypothecation, or assignment as set
forth in the Limited Liability Company Agreement between
Northern Telecom Inc. and Williams Communications Group,
Inc., dated as of April 1, 1997, and agreed to by each
Member. Said restriction provides, among other things, that
no Membership Interest or any portion thereof may be
transferred without first offering such Membership Interest
or any portion thereof to the other Members, and that no
Membership Interest or any portion thereof may be transferred
except in accordance with the terms of said agreement."
19.12 Distributions and Allocations in Respect of Transferred
Membership Interest. If any Membership Interest or any portion thereof is
Transferred during any fiscal year in compliance with the provisions of this
Article XIX, items of income, gains, losses, deductions, and credits and all
other items attributable to the transferred Membership Interest or any portion
thereof for such fiscal year shall be divided and allocated between the
transferor and the transferee by taking into account their varying Membership
Interests during such fiscal year in accordance with Code section 706(d), using
any conventions permitted by law and selected by the Management Committee. All
distributions on or before the date of such Transfer shall be made to the
transferor, and all distributions thereafter shall be made to the transferee.
Solely for purposes of making such allocations and distributions, the Company
shall recognize such Transfer not later than the end of the calendar month
during which it is given notice of such Transfer, provided that, if the Company
is given notice of Transfer at least ten (10) days prior to the Transfer, the
Company shall recognize such Transfer as of the date of such Transfer, and
provided further that if the Company does not receive a notice stating the date
such Membership Interest or any portion thereof was transferred and such other
information as the Management Committee may reasonably require within thirty
(30) days after the end of the fiscal year during which the Transfer occurs,
then all such items shall be allocated, and all distributions shall be made, to
the Person who, according to the books and records of the Company, was the owner
of such Membership Interest or any portion thereof on the last day of such
fiscal year. Neither the Company, the Management Committee, any
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other committee of the Company, nor any Member shall incur any liability for
making allocations and distributions in accordance with the provisions of this
Section 19.12, whether or not any member of the Management Committee, Member, or
the Company has knowledge of any Transfer of ownership of any Membership
Interest or any portion thereof.
ARTICLE XX
Distributorship Agreement
20.1 Company Right of Renewal. For so long as the Nortel Member owns a
Membership Interest and subject to the condition that the Company shall not be
in material breach of any of its obligations under the WilTel Distributorship
Agreement or its then current successor agreement, the Nortel Member shall offer
to renew or cause to be renewed, and the Company shall renew, the WilTel
Distributorship Agreement or in the Nortel Member's discretion, offer such other
CPE Agreement as is offered to all other Distributors for successive terms of
years of as long a term as offered at the time to all other Distributors and on
terms and conditions such that the Company shall not be at a disadvantage to any
other Distributor; provided, however, ****
20.2 Company Right of Renewal after Put or Call. In the event of a
Transfer of a Member's Membership Interest pursuant to Sections 8.6(b), 19.3,
19.4 or 19.5, the Nortel Member shall offer to renew or cause to be renewed the
WilTel Distributorship Agreement or in the Nortel Member's discretion, offer
such other CPE Agreement as is offered to all other Distributors for an
additional term of years of as
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long a term as offered at the time to all other Distributors but such renewal
rights shall be extended for not less than three (3) years and on the expiration
of the then current term (or, in the event that the WilTel Distributorship
Agreement shall have been renewed prior to such Transfer but such renewal term
shall not have commenced, such additional term shall commence on the expiration
of such renewal term) on terms and conditions such that the Company shall not be
at a disadvantage to any other Distributor; provided, however, **** and provided
further, that the Company shall not be in material breach of its obligations
under the WilTel Distributorship Agreement or its then current successor.
20.3 Company Right to Distribute Products Not Covered by the
Distributorship Agreement. ****
ARTICLE XXI
Additional Members
No new Members having a Membership Interest or any portion thereof
shall be entitled to any retroactive allocation of any items of income, gains,
losses, deductions, and credits incurred by the Company. The TMP may, at the
time a Member is admitted, close the Company books (as though the Company's tax
year had ended) or make pro rata allocations of any items of income, gains,
losses, deductions, and credits to a new Member for that portion of the
Company's tax year in which a Member was admitted in accordance with the
provisions of section 706(d) of the Code and the Regulations promulgated
thereunder.
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ARTICLE XXII
Dissolution
22.1 Liquidating Events. The Company shall dissolve, without judicial
decree, upon the first to occur of any of the following ("Liquidating Events"):
(a) the sale of all or substantially all of the real and
personal property (tangible and intangible) of the
Company;
(b) the written consent of all Members;
(c) the happening of any event that makes it unlawful or
impossible to carry on the business of the Company; or
(d) the occurrence of a Bankruptcy Event with respect to any
Member.
22.2 Judicial Dissolution. On application by or for a Member or a
Representative, the Chancery Court of Delaware may decree dissolution of the
Company in accordance with section 18-802 of the Act.
22.3 Continuation of Business.
(a) In the event of the occurrence of any Liquidating Event
described in clauses (a) or (d) of Section 22.1, the Majority in Interest of
the Members and the Member(s) whose Capital Accounts constitute more than fifty
percent (50%) of the total combined Capital Accounts of the Company (in each
case excluding the Member involved in the Bankruptcy Event, if any), may
jointly decide to continue the business of the Company, in which event the
Company shall not dissolve upon the occurrence of the events specified in
clauses (a) or (d) of Section 22.1.
(b) Notwithstanding any provision of the Act, the Company
shall not dissolve prior to the occurrence of one or more Liquidating Events or
the entry by the Chancery Court of Delaware of a decree of dissolution.
22.4 Covenants Concerning Early Dissolution; Remedies Upon Breach. Each
Member agrees that without the prior written consent of all other Members it
shall not resign, retire or withdraw from the Company or voluntarily dissolve.
Any breach of this covenant shall be a material default under this Agreement.
The other Member may, as a result of such breach and without the consent of the
Management Committee, elect within 90 days of the occurrence of such breach to
continue the business of the Company and purchase the Membership Interest of
such breaching
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Member for a purchase price determined pursuant to the procedures set forth in
Section 19.5(a).
22.5 Option to Purchase Membership Interest of Bankrupt Member. If
within 60 days of the occurrence of a Bankruptcy Event with respect to any
Member, the other Member elects to continue the business of the Company, the
Bankruptcy Event shall be deemed to be an offer by the bankrupt Member of its
Membership Interest to the other Member at a price equal to the fair market
value of such bankrupt Member's Membership Interest determined by agreement
between the bankrupt Member (or its legal representative) and the other Member;
provided, however, if those Persons do not agree on the fair market value on or
before the 30th day following the election of the other Member to continue the
business of the Company, such value shall be determined pursuant to the
procedures set forth in Section 19.5(a).
ARTICLE XXIII
Winding Up and Termination of the Company
23.1 Liquidator. If the Company is dissolved for any reason, and the
business of the Company is not continued as provided in Sections 22.3, 22.4 and
22.5, a liquidator (the "Liquidator") shall commence to wind up the affairs of
the Company and to liquidate and sell its assets. The Members shall serve as the
Liquidator unless the dissolution occurred as a result of an event described in
subsection 22.1(d), in which case a Person designated by the Member who did not
cause the dissolution described in subsection 22.1(d) shall serve as the
Liquidator. The Liquidator shall have full right and discretion to determine the
time, manner and terms of sale or sales of Company property pursuant to such
liquidation having due regard to the activity and condition of the relevant
market and general financial and economic conditions. The Liquidator appointed
in the manner provided herein shall have and may exercise, without further
authorization or consent of any of the parties hereto or their legal
representatives or successors in interest, all of the powers conferred upon the
Members and the Management Committee under the terms of this Agreement to the
extent necessary or desirable in the good faith judgment of the Liquidator to
carry out the duties and functions of the Liquidator hereunder for and during
such period of time, not to exceed two (2) years after the date of dissolution
of the Company, as shall be reasonably required in the good faith judgment of
the Liquidator to complete the liquidation and dissolution of the Company as
provided for herein, including, without limitation, the following specific
powers:
(a) The power to continue to manage and operate any business
of the Company during the period of such liquidation or dissolution
proceedings, excluding, however, the power to make and enter into contracts
which may extend beyond the period of liquidation.
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(b) The power to make sales and incident thereto to make
deeds, bills of sale, assignments and transfers of assets and properties of the
Company; provided, that the Liquidator may not impose personal liability upon
any of the Members under any such instrument.
(c) The power to borrow funds as may, in the good faith
judgment of the Liquidator, be reasonably required to pay debts and obligations
of the Company or operating expenses, and to execute and/or grant deeds of
trust, mortgages, security agreements, pledges and collateral assignments upon
and encumbering any of the Company properties as security for repayment of such
loans or as security for payment of any other indebtedness of the Company;
provided, that the Liquidator shall not have the power to create any personal
obligation on any of the Members to repay such loans or indebtedness other than
out of available proceeds of foreclosure or sale of the properties or assets as
to which a lien or liens are granted as security for payment thereof.
(d) The power to settle, release, compromise or adjust any
claims asserted to be owing by or to the Company, and the right to file,
prosecute or defend lawsuits and legal proceedings in connection with any such
matters.
23.2 Liquidation Reserves. After making payment or provision for
payment of all debts and liabilities of the Company and all expenses of
liquidation, the Liquidator may set up, for a period not to exceed the aforesaid
two (2) years, such cash reserves as the Liquidator may deem reasonably
necessary for any contingent liabilities or obligations of the Company. Upon the
satisfaction or other discharge of such contingency, the amount of the reserves
not retired, if any, will be distributed in accordance with this Article XXIII.
23.3 Liquidating Distributions. Upon the winding up and termination of
the business and affairs of the Company, its assets (other than cash) shall be
sold as promptly as is consistent with obtaining the fair value thereof, and,
the net proceeds from such sales (after deducting all selling costs and expenses
in connection therewith), together with (at the expiration of the two (2) year
period referred to therein) the balance of the reserve account referred to in
Section 23.2, shall be applied and distributed:
(a) to creditors, including Members and Representatives who
are creditors, to the extent otherwise permitted by law, in satisfaction of
liabilities of the Company (whether by payment or the making of reasonable
provision of payment thereof) other than liabilities for which reasonable
provision for payment has been made and liabilities for distributions to
Members and former Members under sections 18-601 or 18-604 of the Act;
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(b) unless otherwise provided in this Agreement, to Members
and former Members in satisfaction of liabilities for distributions under
sections 18-601 or 18-604 of the Act; and
(c) unless otherwise provided in this Agreement, to Members
in accordance with the Members' respective positive balances in their Capital
Accounts as maintained in accordance with Section 8.1 and adjusted pursuant to
Section 10.2.
23.4 Accounting. Within a reasonable time following the completion of
the liquidation of the Company's properties, the Liquidator shall supply to each
of the Members a statement prepared by the Company's accountants prepared in
accordance with GAAP which shall set forth the assets and the liabilities of the
Company as of the date of complete liquidation, each Members's pro rata portion
of distributions pursuant to Section 23.3, and the amount retained as reserves
by the Liquidator pursuant to Section 23.2.
23.5 Recourse to Company Assets. Upon liquidation, each holder of a
Membership Interest in the Company shall look solely to the assets of the
Company for all distributions with respect to the Company and its Capital
Contribution thereto (including the return thereof) and share of profits or
losses thereof, and shall have no recourse therefor (upon dissolution or
otherwise) against the Company, the Members or the Liquidator. Upon liquidation,
reasonable efforts will be made to return tangible and intangible assets to the
extent feasible to the Member which contributed such assets upon such Member's
election.
23.6 Cancellation of Certificate.
(a) The Certificate shall be canceled upon the dissolution
and the completion of winding up the Company, or at any other time there are no
Members, or pursuant to section 18-104(d) of the Act, if the Company fails to
obtain and designate a new registered agent within 120 days after the existing
registered agent files a certificate of resignation, or pursuant to section
18-1108 of the Act, the Company fails to pay the annual tax due under section
18-1107 of the Act for a period of three (3) years from the date it is due, or
upon the filing of a certificate of merger or consolidation if the Company is
not the surviving or resulting entity in a merger or consolidation.
(b) A certificate of cancellation shall be filed in the
office of the Secretary of State of Delaware to accomplish the cancellation of
the Certificate upon the dissolution and the completion of winding up the
Company or at any other time there are no members and shall set forth:
(i) the name of the Company,
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(ii) the date the Certificate was filed;
(iii) the reason for filing the certificate of
cancellation,
(iv) the future effective date or time (which shall
be a date or time certain) of cancellation if it is not to be effective
upon the filing of the certificate; and
(v) any other information the person filing the
certificate of cancellation determines.
ARTICLE XXIV
Notices
All notices, requests, demands and other communications required or
permitted to be given under this Agreement shall be deemed to have been duly
given if in writing and delivered personally or sent via first-class, postage
prepaid, registered or certified mail (return receipt requested), or by
overnight delivery service or facsimile transmission (with confirmation notice
by registered or certified mail or overnight delivery service) addressed as
follows:
If to the Company:
One Williams Center
Tulsa, Oklahoma 74172
Attention: Howard Janzen, CEO
Facsimile Number: (918) 561-6024
and copy to:
One Williams Center, 41-3
Tulsa, Oklahoma 74172
Attention: David P. Batow, General Counsel
Facsimile Number: (918) 588-3005
If to the Nortel Member:
Northern Telecom Inc.
2221 Lakeside Boulevard
Richardson, Texas 75082
(Attention: Richard T. Faletti, Vice President)
Facsimile: (972) 684-3999
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and copy to:
Northern Telecom Inc.
2221 Lakeside Boulevard
Richardson, Texas 75082
(Attention: Richard R. Standel, Vice President,
Secretary and General-Counsel)
Facsimile: (972) 685-3011
If to the Williams Member:
One Williams Center
Tulsa, Oklahoma 74172
Attention: Howard Janzen, CEO
Facsimile Number: (918) 561-6024
and copy to:
One Williams Center, 41-3
Tulsa, Oklahoma 74172
Attention: David P. Batow, General Counsel
Facsimile Number: (918) 588-3005
Any Person may change the address to which the communications are to
be directed to it by giving notice to the other Persons listed above in the
manner provided in this Article XXIV. Notice by mail shall be deemed to have
been given and received on the third calendar day after posting. Notice by
overnight delivery service, facsimile transmission or personal delivery shall
be deemed given on the date of actual delivery.
ARTICLE XXV
Representations, Warranties and Covenants
25.1 Representations and Warranties. Each Member hereby respectively
represents and warrants to the other that (i) it is duly organized, validly
existing and in good standing under the jurisdiction of its organization, with
full power and authority to enter into and perform its obligations under this
Agreement; (ii) it has validly executed this Agreement, and upon delivery, this
Agreement shall be a binding obligation of such party, enforceable against such
party in accordance with its terms; and (iii) its entry into this Agreement and
the performance of its obligations hereunder will not require the approval of
any governmental body or regulatory authority and will
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not violate, conflict with or cause a default under, any of its organizational
documents, any contractual covenant or restriction by which such party is bound,
or any applicable law, regulation, rule, ordinance, order, judgment or decree.
25.2 Nondisclosure of Proprietary Information. Each of the Members
agrees that it and its Affiliates will apply the same standards and treat (i)
the Company's confidential or proprietary information and (ii) the terms and
conditions of this Agreement as it does its Affiliates' confidential or
proprietary information with respect to maintaining the confidentiality
thereof. Notwithstanding the foregoing, each Member and its Affiliates may
disclose information which (A) is required to be disclosed by applicable state
or federal tax or securities laws to the extent, and only to the extent, the
laws require the disclosure and such Member provides the Company and the other
Member prior written notice of its intent to provide the disclosure and the
general text of the disclosure, and the disclosure is consented to by the
Company and the other Member, which consent shall not be unreasonably withheld,
or (B) is required to be disclosed by a court or administrative body of
competent jurisdiction; provided that, if a Member or its Affiliates are served
or threatened with litigation that would require such Member or its Affiliate
to disclose the information, such Member or the Affiliate shall tender to the
Company or the other Member the opportunity to defend, at its cost, against the
disclosure.
ARTICLE XXVI
Dispute Resolution
Except as otherwise specifically provided in this Agreement, all
disputes under this Agreement shall be resolved in accordance with the
procedures set forth in Exhibit O hereto.
ARTICLE XXVII
Miscellaneous
27.1 No Partition. The Members agree that the Company properties are
not and will not be suitable for partition. Accordingly, each of the Members
hereby irrevocably waives any and all rights that he may have to maintain any
action for partition of any of the Company property.
27.2 Entire Agreement. This Agreement and the additional documents and
agreements referred to herein constitute the entire agreement among the parties.
It supersedes any prior agreement or understandings among them, and it may not
be modified or amended in any manner other than as set forth herein.
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27.3 Governing Law. This Agreement and the rights of the parties
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Delaware.
27.4 Binding Effect. Except as herein otherwise specifically provided,
this Agreement shall be binding upon and inure to the benefit of the parties and
their legal representatives, heirs, administrators, executors, successors and
assigns.
27.5 Effect of Invalid Provision. If any provision of this Agreement,
or the application of such provision to any person or circumstance, shall be
held invalid, the remainder of this Agreement, or the application of such
provision to persons or circumstances other than those to which it is held
invalid, shall not be affected thereby.
27.6 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument. It shall not be necessary for all
Members to execute the same counterpart hereof.
27.7 Negotiated Transaction. The provisions of this Agreement were
negotiated by the parties hereto, and this Agreement shall be deemed to have
been drafted by all of the parties hereto.
SIGNATURE PAGE TO FOLLOW
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
April 30, 1997, to be effective as of the time, day and in the year first above
written.
WILLIAMS COMMUNICATIONS GROUP, INC.
By: /s/ [ILLEGIBLE]
---------------------------------
Its: Senior Vice President
---------------------------------
NORTHERN TELECOM INC.
By: /s/ [ILLEGIBLE]
---------------------------------
Its: Vice President Distributor Sales
--------------------------------
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EXHIBIT K
INITIAL SCOPE OF BUSINESS
The Company will operate initially in the United States and Canada. The
Company's initial scope of business will include the businesses conducted by
WilTel and NCS and TTS today, which may include, without limitation, offering
its customers a full array of data, voice and video products and services
including digital key systems (generally designed for voice applications with
fewer than 100 lines), private branch exchange (PBX) systems (generally designed
for voice applications with greater than 100 lines), voice processing systems,
enterprise network monitoring and management systems, desktop video, routers,
channel banks, intelligent hubs and cabling and networks systems integration
activities. The Company shall focus on sales of Existing and Emerging Products
at or above the Product Mix Threshold as a key focus of its business. The
Company's services will also include the design, configuration and installation
of voice and data networks and the management of customers' telecommunications
operations and facilities. The Company's National Technical Resource Center may
provide customers with on-line order entry and trouble reporting services,
advanced technical assistance and training; other service capabilities of The
Company may include local area network remote monitoring, wide area network
remote monitoring and PBX remote monitoring and toll fraud detection and acting
as an agent for the sale of all forms of local, value added and long distance
telecommunications services. The Company will not enter into the
telecommunications product manufacturing business except that it may manufacture
voice and data application software only.
<PAGE> 1
Redacted portions have been marked with asterisks (****). Confidential treatment
has been requested for the redacted portions. The confidential redacted portions
have been filed separately with the Securities and Exchange Commission.
CONFIDENTIAL TREATMENT
EXHIBIT 10.33
================================================================================
SHARE PURCHASE AGREEMENT
FOR TTS MERIDIAN SYSTEMS INC.
BY AND AMONG
NORTHERN TELECOM LIMITED,
WILTEL COMMUNICATIONS, LLC
AND
1228966 ONTARIO INC.
DATED APRIL 30, 1997
================================================================================
<PAGE> 2
SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT (this "Agreement") dated April 30, 1997,
by and among Northern Telecom Limited, a Canadian corporation ("NTL"), WilTel
Communications, LLC, a Delaware limited liability company, and 1228966 Ontario
Inc., an Ontario corporation, its designee approved by NTL (the two latter
entities are referred to herein collectively as "Newco").
W I T N E S S E T H:
WHEREAS, (A) Northern Telecom Inc. ("NTI") and Williams Communications
Group, Inc. ("WCG") have entered into a Formation Agreement (the "Formation
Agreement") dated as of April 1, 1997, whereby Williams Telecommunications
Systems, Inc. ("WilTel") and Nortel Communications Systems Inc. ("NCS") will be
merged into Newco, which will be jointly owned by NTI and WCG, or a subsidiary
of each; and
(B) The Formation Agreement requires that Newco will purchase
the stock of TTS Meridian Systems, Inc., a Canadian corporation and wholly-owned
subsidiary of NTL ("TTS"), from NTL immediately after the merger of WilTel and
NCS into Newco, all as hereinafter provided.
NOW, THEREFORE, in consideration of the premises and the mutual
promises and obligations contained herein and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, NTL
and Newco agree as follows:
ARTICLE I
DEFINITIONS AND CONSTRUCTION
1.1 DEFINED TERMS. The capitalized terms used in this Agreement shall
have the meanings ascribed to them as follows:
"Affiliates" means, when used with respect to a specified
Person, such specified Person's Subsidiaries or other Persons which are
or which could be included on such Person's consolidated income
statement for financial reporting purposes pursuant to United States
generally accepted accounting principles, and/or any third Person which
does or which could include such specified Person in such third
Person's consolidated income statement for financial reporting purposes
pursuant to United States generally accepted accounting principles;
provided that Newco shall not be deemed to be an Affiliate of NTL, WCG
or any of their respective Subsidiaries or Affiliates;
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"Authority" means any governmental, regulatory or
administrative body, agency or authority, any court or judicial
authority, any arbitrator or any public, private or industry regulatory
authority, whether foreign, federal, state or local;
"Benefit Programs or Agreements" shall have the meaning given
that term in Section 3.12(f);
"Business Day" means any day on which federal commercial banks
are open for business for the purpose of sending and receiving wire
transfers in Tulsa, Oklahoma, Houston, Texas and Toronto, Ontario;
"Claim" means any demand, demand letter, claim or notice of
noncompliance or violation, in each case made in writing, or any
Proceeding;
"Claim Notice" shall have the meaning given that term in
Section 11.2(a);
"Closing" shall have the meaning given that term in Article
VII;
"Closing Date" means the date of Closing;
"Designee" shall have the meaning given that term in Section
2.1;
"Effective Date" shall mean April 1, 1997;
"Employment and Tax Representations and Covenants" shall have
the meaning given that term in Section 11.4;
"Environmental Law" shall have the meaning given that term in
Section 3.10(a)(i);
"Environmental Representations" shall have the meaning given
that term in Section 11.4;
"Formation Agreement" shall have the meaning given that term
in the preamble;
"Former TTS Real Property" shall have the meaning given that
term in Section 3.10(b);
"GAAP" means generally accepted accounting principles in
Canada;
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<PAGE> 4
"General Deductible" shall have the meaning given that term in
Section 11.1(e);
"Hazardous Substance" shall have the meaning given that term
in each of Section 3.10(a)(ii);
"Indemnified Party" and "Indemnifying Party" shall have the
respective meanings given those terms in Section 11.1(d);
"Intellectual Property" means Canadian and foreign patents,
patent applications, patent rights, trademarks, trademark applications,
trademark rights, service marks, service mark applications, service
mark rights, registered or common law copyrights, service names and
trade names;
"Intellectual Property License Agreement" shall have the
meaning given that term in the Formation Agreement;
"Income Tax Act" means the Income Tax Act of Canada, as
amended;
"Leases" shall have the meaning given that term in Section
3.9;
"Lien" means any mortgage, deed of trust, pledge, security
interest, encumbrance, lien or charge of any kind (including any
agreement to give any of the foregoing), any conditional sale or other
title retention agreement, any lease in the nature of any of the
foregoing, and the filing of or agreement to give any financing
statement under the personal property security legislation of any
jurisdiction;
"Litigation Claim" shall have the meaning given in Section
2.4(ii);
"Litigation Deductible" shall have the meaning given that term
in Section 11.1(f);
"LLC Agreement" means the Limited Liability Company Agreement
of Newco;
"Loss" or "Losses" means any and all damages, losses,
liabilities, judgments, payments, obligations, penalties, assessments,
costs, disbursements or expenses (including reasonable fees,
disbursements and expenses of attorneys, accountants and other
professional advisors and of expert witnesses and costs of
investigation and preparation of any kind or nature whatsoever) but
excluding indirect and consequential damages;
3
<PAGE> 5
"Material Adverse Change" means an event, circumstance,
condition or change that has a material adverse impact on the business
prospects, operations or financial condition of the affected Person, it
being understood that such event, circumstance, condition or change
shall be considered material only if (i) it has an impact on assets or
liabilities of **** or more, before tax effect; or (ii) it has a net
negative impact on the profit and loss statement of such Person for a
fiscal year of **** or more and is the result of a single event,
circumstance or condition specific to such Person (excluding results
from such person's general economic environment).
"Material Adverse Effect" means, an effect that results in or
causes, or has a reasonable likelihood of resulting in or causing an
adverse impact in the business, assets, results of operations (before
tax effect) or financial condition of such Person and its Subsidiaries,
taken as a whole, in an amount, individually equal to or greater than
$1,000,000;
"NCS" shall have the meaning given that term in the preamble.
"NCS Adjusted Effective Date Balance Sheet" shall have the
meaning given that term in the Formation Agreement;
"Newco" shall have the meaning given that term in the
preamble;
"NTI" shall have the meaning given that term in the preamble
and any successor or assign permitted by the Formation Agreement;
"NTL Retained Assets" shall have the meaning given that term
in Section 2.3;
"NTL Retained Liabilities" shall have the meaning given that
term in Section 2.4;
"NTL/TTS Distributor Agreement" shall have the meaning given
that term in Section 8.1;
"Order" means any decree, order, judgment, writ, award,
injunction, stipulation or consent of or by an Authority;
"Party" means NTL or Newco, as the case may be, and "Parties"
means NTL and Newco;
4
<PAGE> 6
"Party Indemnitees" means a Party's Affiliates and the
officers, directors, shareholders, agents, employees, representatives,
successors and assigns of each of them;
"Permit" means any license, permit, concession, warrant,
franchise or other governmental authorization or approval of any
Authority;
"Permitted Encumbrances" means (a) Liens for current taxes and
assessments not yet due, (b) inchoate mechanics and materialmen liens
for construction in progress, (c) inchoate workmen, repairmen,
warehousemen, customer, employee and carrier liens arising in the
ordinary course of business, (d) sellers' liens (on condition that the
payable involved is not overdue), or (e) other minor imperfections in
title that do not affect marketability or use;
"Person" means any individual, corporation, partnership, joint
venture, association, limited liability company, joint stock company,
trust, unincorporated organization, Authority or government (or agency
or political subdivision thereof);
"Pre-Effective Period" shall have the meaning given that term
in Section 10.5(a).
"Proceeding" means any action, suit, claim, investigation,
review or other judicial or administrative proceeding, at law or in
equity, before any Authority;
"Purchase Price" shall have the meaning given that term in
Section 2.2;
"Purchased Shares" means all of the issued and outstanding
shares of TTS;
"Records" means all material agreements, documents, books,
records and files relating to TTS, TTS Assets, TTS Business or the TTS
Contracts;
"Release" shall have the meaning given that term in Section
3.10(a)(iii);
"Relevant Adverse Effect" means an effect that results in or
causes, or has a reasonable likelihood of resulting in or causing, an
adverse impact in the business, assets, results of operations (before
tax effect) or financial condition of such Person and its subsidiaries,
taken as
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<PAGE> 7
a whole, in an amount, individually or in the aggregate, equal to or
greater than $150,000;
"Revenue Canada" means the Canadian government income tax
department;
"Software" means computer programs, including, object code and
source code (except in the case of software licensed to TTS, WilTel or
Newco with respect to which the source code is not included in the
applicable license), input and output formats, control programs,
program listings, general application and special application, system
and communications programs, routines, sub-routines, translations,
diagnostic activities, narrative descriptions, flow charts and
operating instructions, as well as any modifications relating thereto;
"Subsidiary" means, with respect to any Person, a corporation
more than 50% of the combined voting power of the outstanding stock of
which is owned, directly or indirectly, by such Person;
"Tax" or "Taxes" means any Canadian, U.S. or other foreign
federal, state, provincial or local income tax, ad valorem tax, excise
tax, sales tax, use tax, value added tax, franchise tax, real or
personal property tax, transfer tax, gross receipts tax, wage tax,
payroll tax, employer health tax, capital tax, stamp duty, withholding
tax, or other tax, social security and unemployment insurance charges,
assessment, duty, fee, levy or other governmental charge, together with
and including, any and all interest, fines, penalties, assessments,
reassessments, and additions to tax resulting from, relating to, or
incurred in connection with any of those or any contest or dispute
thereof;
"Tax Return" means any report, statement, form, return or
other document or information required to be supplied to a taxing
authority in connection with Taxes;
"Title Representations" shall have the meaning given that term
in Section 11.4;
"TTS" shall have the meaning given that term in the preamble;
"TTS Accounts Receivable Note" shall have the meaning given
that term in Section 2.2;
6
<PAGE> 8
"TTS Active Employees" shall have the meaning given that term
in Section 3.12(a);
"TTS Assets" means the rights, properties, assets, claims,
contracts and businesses of TTS of every kind, character or
description, whether tangible or intangible, wherever located,
excluding the NTL Retained Assets;
"TTS Business" means the business currently and heretofore
carried on by TTS, consisting of the sale, installation, servicing and
maintenance of business communications systems;
"TTS Contracts" means all agreements, contracts, licenses,
indentures, notes, including any instrument relating to the borrowing
of money, guarantee or commitment to which TTS is a party or by which
it or any of TTS Assets are bound, whether in writing or oral, but
excluding Benefit Programs or Agreements;
"TTS Employees" shall have the meaning given that term in
Section 3.12(a);
"TTS Licensed Intellectual Property and Software" shall have
the meaning given that term in Section 3.4(c);
"TTS Owned Intellectual Property and Software" shall have the
meaning given that term in Section 3.4(b);
"TTS Real Property" shall have the meaning given that term in
Section 3.10(b);
"WCG" shall have the meaning given that term in the preamble
and any successor or assign permitted by the Formation Agreement;
"WCG Retained Assets" shall have the meaning given that term
in Section 2.4(b) of the Formation Agreement;
"Williams" means The Williams Companies, Inc., a Delaware
corporation;
"WilTel" shall have the meaning given that term in the
preamble and any successor or assign permitted by the Formation
Agreement;
"WilTel Assets" means the rights, properties, assets, Claims,
contracts and businesses of WilTel and the WilTel Subsidiaries of every
kind, character
7
<PAGE> 9
or description, whether tangible or intangible, wherever located, but
excluding the WCG Retained Assets;
"WilTel Business" shall have the meaning given that term in
the Formation Agreement; and
"WilTel Subsidiaries" means WCS Microwave Services, Inc., a
Delaware corporation, and WCS, Inc., a Delaware corporation.
1.2 ACCOUNTING TERMS. Any accounting terms used in this Agreement that
are not specifically defined herein shall have the meanings customarily given to
them in accordance with GAAP as of the date of this Agreement.
1.3 REFERENCES. As used in this Agreement, unless expressly stated
otherwise, references to (a) "including" mean "including, without limitation",
and the words "hereof", "herein", and "hereunder", and similar words, refer to
this Agreement as a whole and not to any particular Article, provision, section
or paragraph of this Agreement, (b) "or" means "either or both", and (c)
"Dollar" or "$" means U.S. Dollars. Unless otherwise specified, all references
in this Agreement to Articles, Sections, paragraphs, Exhibits or Schedules are
deemed references to the corresponding Articles, Sections, paragraphs, Exhibits
or Schedules in this Agreement.
1.4 HEADINGS. The headings of the Articles and Sections of this
Agreement and of the Schedules and Exhibits are included for convenience only
and shall not be deemed to constitute part of this Agreement or to affect the
construction or interpretation hereof or thereof.
ARTICLE II
PURCHASE AND SALE OF PURCHASED SHARES
2.1 PURCHASE AND SALE OF PURCHASED SHARES. Subject to the terms and
conditions of this Agreement, NTL shall sell, assign and transfer to 1228966
Ontario Inc., Newco's designee approved by NTL (Newco's "Designee"), and Newco's
Designee shall purchase from NTL, the Purchased Shares on the Closing Date, but
effective on the Effective Date.
2.2 PURCHASE PRICE. The purchase price payable to NTL at Closing for
the Purchased Shares (the "Purchase Price") shall consist of ****
8
<PAGE> 10
2.3 RETAINED ASSETS. On or prior to the Closing, NTL shall cause TTS
to execute such documents as are necessary to assign, transfer or convey to NTL
or an Affiliate of NTL the following assets in order to exclude such assets from
the merger: (i) any rights in, to and under the trademarks, servicemarks and
tradenames Nortel, Nortel and Design(TM), Meridian, Meridian 1 and Meridian SL
(subject to Section 8.3) or any other trademark, servicemark or tradenames,
whether registered or otherwise, of NTL or their Affiliates, excluding, however,
the TTS trademarks listed in Schedule 2.3(i) and (ii) any intercompany notes
payable to, or to the order of, TTS listed on Schedule 2.3(ii) hereto
(collectively, the "NTL Retained Assets").
2.4 RETAINED LIABILITIES. Newco shall not assume, and on or prior to
the Closing Date NTL (or an Affiliate of NTL reasonably satisfactory to Newco)
shall assume and agree to pay, perform and discharge, the following liabilities
of TTS (the "NTL Retained Liabilities"):
****
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<PAGE> 11
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF NTL
NTL hereby makes the following representations and warranties to Newco,
each and all of which are true and correct on the Closing Date, except as set
forth in the disclosure schedule attached pertaining to such representation and
warranty:
3.1 CORPORATE MATTERS.
(a) Each of NTL and TTS is a corporation duly organized,
validly existing and in good standing under the laws of Canada having all
requisite corporate power and authority to own, operate and lease its properties
and assets and to carry on its business in the places and in the manner
currently conducted. Newco has been provided with a true and correct copy of the
Certificate of Incorporation and Bylaws, or other charter documents, of TTS as
currently in effect. NTL has all requisite corporate power and authority to
enter into this Agreement and to perform its obligations hereunder.
(b) All of the outstanding shares of capital stock of TTS have
been legally and validly authorized and issued, and are fully paid and
nonassessable. NTL is the sole stockholder of TTS holding the number and type of
shares set forth on Schedule 3.1(b). None of the capital stock of TTS is subject
to any option, warrant, right of conversion, exchange or purchase, or any
similar right.
(c) Except where the failure would not affect the validity of
this Agreement or have a Relevant Adverse Effect on the TTS Business or TTS
Assets, TTS is qualified to transact business as an extra-provincial corporation
and is in good standing in the jurisdictions, if any, specified in Schedule
3.1(c) attached hereto, and, to NTL's knowledge, there is no other jurisdiction
in which the nature or extent of the TTS Business or the character of the TTS
Assets makes such qualification necessary.
3.2 VALIDITY OF AGREEMENT; NO CONFLICT.
(a) This Agreement has been duly authorized, executed and
delivered by NTL and is a legal, valid and binding obligation of NTL enforceable
against it in accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
from time to time in effect that affect creditors' rights generally and by legal
and equitable limitations on the availability of specific remedies.
(b) The execution, delivery and performance of this Agreement
by NTL or TTS, as the case may be, and the other agreements and documents to be
delivered by NTL or TTS to Newco or WCG hereunder, the consummation of the
transactions
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<PAGE> 12
contemplated hereby or thereby, and the compliance with the provisions hereof or
thereof, by NTL or TTS will not, with or without the passage of time or the
giving of notice or both:
(i) except in the absence of required consents as set
forth on Schedules 3.3(a) or 3.5(d), conflict with, constitute a breach,
violation or termination of any provision of, or give rise to any right of
termination, cancellation or acceleration, or loss of any right or benefit or
both, under, any of the TTS Contracts listed in Schedule 3.5(a) or Schedule
3.5(b), TTS Permits, the TTS Owned Intellectual Property and Software or the TTS
Licensed Intellectual Property and Software;
(ii) conflict with or violate the Certificate of
Incorporation or Bylaws of NTL or TTS;
(iii) result in the creation or imposition of any
Lien or Claim on any of the TTS Assets; or
(iv) except as provided in Schedules 3.3(a), 3.4(b),
3.4(c) or 3.4(d), violate any law, statute, ordinance, regulation, judgment,
writ, injunction, rule, decree, order or any other restriction of any kind or
character applicable to NTL, TTS or the TTS Assets.
3.3 GOVERNMENTAL AND OTHER CONSENTS, APPROVALS AND AUTHORIZATIONS.
(a) Except as set forth in Schedule 3.3(a) or Schedule 3.5(d)
attached hereto or as would not significantly adversely impact Newco, the
transactions contemplated hereby, or any other agreement contemplated hereby, no
order, license to conduct or operate its business, consent, waiver,
authorization or approval of, or exemption by, or the giving of notice to, or
the registration with, or the taking of any other action in respect of, any
Person not a Party, including any Authority, and no filing, recording,
publication or registration in any public office or any other place is necessary
on behalf of TTS (i) to authorize the execution, delivery and performance of
this Agreement, or any other agreement contemplated hereby to be executed and
delivered by it, and the consummation of the transactions contemplated hereby or
thereby (including assignment of the NTL Retained Assets), or (ii) to effect the
legality, validity, binding effect or enforceability thereof.
(b) Except as set forth in Schedule 3.3(b), all Permits
required or necessary for TTS to own the TTS Assets or carry on the TTS Business
in the places and in the manner currently conducted have been duly obtained,
except where a failure to obtain any such Permit (considered individually) would
not have a Relevant Adverse Effect on the TTS Assets or the TTS Business, and
such Permits are in full force and effect. Except as set forth in Schedule
3.3(b), no violations are in existence or have been recorded with respect to
those Permits and no proceeding is pending or,
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to the knowledge of NTL, threatened with respect to the revocation or limitation
of any of such Permits, except where such violations, revocations or limitations
considered per permit would not result in a Relevant Adverse Effect on the TTS
Assets or the TTS Business. Except as set forth in Schedule 3.3(b) or as
otherwise described in the Schedules to this Agreement, TTS has complied in all
respects with all laws, rules, regulations and orders applicable to the TTS
Business, except where a failure to comply with such laws, rules, regulations
and orders would not result in a Relevant Adverse Effect on the TTS Assets or
the TTS Business.
3.4 TITLE TO AND CONDITION OF TTS ASSETS.
(a) A listing of substantially all of the items of equipment,
furniture or fixture, with an initial purchase price of One Thousand Dollars
($1,000) or more and a remaining useful life of more than one year, owned by TTS
as of March 31, 1997, constituting a part of the TTS Assets, is set forth in
Schedule 3.4(a) attached hereto. Substantially all of the assets are located at
the locations set forth in Schedule 3.4(a) or are in TTS' possession and
control. TTS has title to all such assets, free and clear of all Liens and
Claims, except for Permitted Encumbrances.
(b) Schedule 3.4(b) sets forth all Intellectual Property and
Software owned by TTS (the "TTS Owned Intellectual Property and Software").
Except as set forth on Schedule 3.4(b), TTS owns, free and clear from any claims
or rights of others, all TTS Owned Intellectual Property and Software. Except as
set forth on Schedule 3.4(b), none of the TTS Owned Intellectual Property and
Software has been declared invalid, or been limited in any respect by order of
any court or by agreement, or, to the best knowledge of NTL, is the subject of
any infringement, interference or similar proceeding or challenge. Except as set
forth on Schedule 3.4(b), neither TTS nor NTL has received any notice of
infringement, misappropriation or conflict from any other Person with respect to
the TTS Owned Intellectual Property and Software, and, to the best knowledge of
NTL, the conduct of the TTS Business has not infringed, misappropriated or
otherwise conflicted with any Intellectual Property or Software of any other
Person. To the best knowledge of NTL, each of the registrations for the patents,
trademarks and registered copyrights included in the TTS Owned Intellectual
Property and Software has been validly issued. All TTS Owned Intellectual
Property and Software that is licensed to a third party by TTS or in which TTS
has otherwise transferred an interest to a third party has been licensed or
transferred on a non-exclusive basis pursuant to valid and existing license
agreements. Except as set forth on Schedule 3.4(b), the transactions
contemplated by this Agreement will not result in any loss of any TTS Owned
Intellectual Property and Software or the loss of any right residing in TTS to
use, exploit or receive benefits with respect to such TTS Owned Intellectual
Property and Software.
(c) Schedule 3.4(c) sets forth all material Intellectual
Property and Software licensed to TTS (the "TTS Licensed Intellectual Property
and Software").
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Except as set forth on Schedule 3.4(c), TTS has the right to use, free and clear
from any claims or rights of others, except as reflected in the applicable
license, all TTS Licensed Intellectual Property and Software. Except as set
forth on Schedule 3.4(c), to the best knowledge of NTL, none of the TTS Licensed
Intellectual Property and Software has been declared invalid, or been limited in
any respect by order of any court or by agreement, or, is the subject of any
infringement, interference or similar proceeding or challenge. Except as set
forth on Schedule 3.4(c), neither TTS nor NTL has received any notice of
infringement, misappropriation or conflict from any other Person with respect to
the TTS Licensed Intellectual Property and Software. Except as set forth on
Schedule 3.4(c), the transactions contemplated by this Agreement will not result
in any loss of any TTS Licensed Intellectual Property and Software or the loss
of any right residing in TTS to use, exploit or receive benefits with respect to
such TTS Licensed Intellectual Property and Software, except to the extent that
any such loss would not have a Relevant Adverse Effect on the TTS Assets or the
TTS Business
(d) Except as set forth on Schedule 3.4(d), the TTS Assets
constitute substantially all of the assets (i) necessary for the conduct of the
TTS Business in the ordinary course consistent with past practices or (ii)
currently used by TTS in connection with the TTS Business. Except as set forth
on Schedule 3.4(d), the conduct of the TTS Business in the ordinary course is
not dependent upon the right to use the property of Persons other than TTS,
except such property as is leased or licensed to TTS pursuant to any of the TTS
Contracts or the absence of which would not have a Relevant Adverse Effect on
TTS. Except as set forth on Schedule 3.4(d), neither NTL nor any Affiliate of
NTL (other than TTS) owns or has any interest in any TTS Asset or any asset
currently used by TTS in the TTS Business, except the NTL Retained Assets, or
such assets as are leased or licensed to TTS pursuant to any of the TTS
Contracts or the loss of which would not have a Relevant Adverse Effect on TTS
or Newco.
(e) Except as set forth on Schedule 3.4 (e), the TTS Owned
Intellectual Property and Software, the TTS Licensed Intellectual Property and
Software, and the Intellectual Property and Software licensed pursuant to the
Intellectual Property License Agreement constitute all of the material
intellectual property rights used in the conduct of the TTS Business as
currently conducted.
3.5 CONTRACTS, COMMITMENTS AND CUSTOMERS.
(a) Set forth in Schedule 3.5(a) attached hereto is a list of
each of the following agreements between TTS and its customers: (i) service or
maintenance contracts with an annual revenue commitment of $500,000 or greater,
and (ii) purchase, lease or rental agreements for the installation or upgrade of
a PBX for which the customer has not been sent the final invoice with a total
purchase price of $1,000,000 or greater.
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(b) Set forth in Schedule 3.5(b) attached hereto is a list of
each TTS Contract, other than agreements with customers, which would create a
monetary obligation of TTS, or a right to receive funds by TTS, of greater than
$300,000 in the aggregate. Also set forth on Schedule 3.5(b) is a list of all
guarantees of the obligations of TTS by NTL or any NTL Affiliate.
(c) To the best knowledge of NTL and TTS, except as provided
in Schedule 3.5(c), TTS is not in breach of any provision of, or in default (or
knows of any event or circumstance that with notice or lapse of time or both
would constitute an event of default) under the terms of, any TTS Contract
except to the extent the loss of such TTS Contract would not have a Relevant
Adverse Effect on TTS. Except as set forth in Schedule 3.5(c), all of the TTS
Contracts listed in Schedule 3.5(a) and Schedule 3.5(b) are in full force and
effect, and neither NTL nor TTS is aware of any pending or overtly threatened
Claims or disputes with respect thereto. None of the customers or counterparties
under the TTS Contracts listed in Schedule 3.5(a) and Schedule 3.5(b) has
notified NTL or TTS in writing that it intends to discontinue its relationship
with TTS.
(d) Except as set forth on Schedule 3.5(d), or except where
the failure to obtain a consent or waiver would not have a Relevant Adverse
Effect on the TTS Business, the TTS Contracts listed in Schedule 3.5(a) and
Schedule 3.5(b) do not require the consent or waiver of any Person or Authority
prior to the consummation of the transactions contemplated by this Agreement.
(e) Except as set forth on Schedule 3.5(e), true and complete
copies of the TTS Contracts listed in Section 3.5(a) and Section 3.5(b) have
been made available to Newco prior to the date of this Agreement.
3.6 [This Section Intentionally Left Blank].
3.7 TAXES. Except as set forth in Schedule 3.7, TTS has timely
filed all Tax Returns with the appropriate federal, provincial or municipal
government agencies or instrumentalities required to be filed by it and has
timely paid, has caused to be timely paid, or has had timely paid on its behalf,
all Taxes which are due (whether or not shown on a Tax Return). Each of the Tax
Returns filed or as amended by TTS is accurate and complete in all material
respects. Except as described on Schedule 3.7, no material deficiencies
exceeding $1,000,000 for a single Tax or any Taxes have been proposed, asserted,
assessed or reassessed against TTS, and no requests for waivers of the time to
assess any such Taxes have been granted or are pending. Except as set forth in
Schedule 3.7, there are no current examinations of any Tax Return of TTS being
conducted, and there are no settlements or other agreements with any federal,
provincial or municipal taxing Authority or any prior examinations which could
reasonably be expected to have a Material Adverse Effect on TTS.
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3.8 NO VIOLATIONS OR LITIGATION.
(a) To the best knowledge of NTL, TTS has not violated, and,
except as provided in Schedule 3.3(a), the consummation of the transactions
contemplated hereby will not cause any violation of, any Permit, any order of
any Authority or any law, ordinance, regulation, order, requirement, statute,
rule, permit, concession, grant, franchise, license or other governmental
authorization relating or applicable to the TTS Business or any of TTS Assets or
that could have a Relevant Adverse Effect on the TTS Assets or the TTS Business.
(b) Except as set forth in Schedule 3.8(b) and except for
Claims and examinations relating to Taxes, to the best knowledge of NTL, there
is no Claim, or examination (including, without limitation, any change in any
zoning or building ordinance) pending or, to the best knowledge of NTL,
threatened against or affecting TTS, the TTS Business or any of the TTS Assets,
at law or in equity, before or by any Authority or any third party that could
have a Relevant Adverse Effect on TTS, the TTS Assets or the TTS Business.
(c) This Section 3.8 does not address environmental matters
within the scope of 3.10.
3.9 PROPERTY LEASES. Schedule 3.9 is a complete list of all real
property leases and those personal property leases with annual rental payments
equal to or greater than Three Hundred Thousand Dollars ($300,000) per annum to
which TTS is a party (the "Leases"). Each of the Leases is a valid and existing
lease, enforceable in accordance with its terms, and, to the best knowledge of
NTL, there are no existing defaults, events of default or events, occurrence or
acts that, with the giving of notice or lapse of time or both, would constitute
defaults, in each case by TTS and, to the best knowledge of NTL, by any other
party thereto, under any of the Leases.
3.10 ENVIRONMENTAL.
(a) Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
(i) The term "Environmental Law(s)" means each and
every law, Order, Permit, or similar requirement of each and every Authority,
pertaining to (A) the protection of human health, safety, the environment,
natural resources and wildlife, (B) the protection or use of surface water,
groundwater, rivers, and other bodies of water, (C) the management, manufacture,
possession, presence, use, generation, transportation, treatment, storage,
disposal, Release, threatened Release, abatement, removal, remediation or
handling of, or exposure to, any Hazardous Substance or (D) pollution.
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(ii) The term "Hazardous Substance" means any
substance which is (A) defined as a hazardous substance, hazardous material,
hazardous waste, pollutant or contaminant under any Environmental Laws, (B) a
petroleum hydrocarbon, including crude oil or any fraction thereof, (C)
hazardous, toxic, corrosive, flammable, explosive, infectious, radioactive or
carcinogenic or (D) regulated pursuant to any Environmental Laws.
(iii) The term "Release" means any spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping, or disposing into the environment (including without
limitation the abandonment or discarding of barrels, containers, and other
receptacles containing any Hazardous Substance).
(b) compliance with Environmental Laws. Except as disclosed on
Schedule 3.10(b), with respect to both (i) the operations conducted at and
conditions present at the real property currently used or occupied by TTS in
connection with the TTS Business (the "TTS Real Property"), and (ii) the
operations conducted at and the conditions present at any real property formerly
used or occupied by TTS in connection with the TTS Business (the "Former TTS
Real Property"), during the period of such use or occupancy by TTS, TTS was and
is in compliance with applicable Environmental Laws, except for such failures to
comply that, individually and in the aggregate, have not had and could not
reasonably be expected to have, a Material Adverse Effect on TTS.
(c) Environmental Liabilities. Except as disclosed on Schedule
3.10(c), there are no past or present conditions, circumstances, events,
activities, practices, or agreements arising out of, or related either to the
TTS Real Property or to the Former TTS Real Property, including but not limited
to any on-site or off-site Release of any Hazardous Substances, which have given
rise to or could reasonably be expected to give rise to: (i) liabilities or
obligations of TTS, NTL or its Affiliates for any clean-up, corrective action or
remedial activity under any Environmental Law; (ii) any Claim against TTS, NTL
or its Affiliates under any Environmental Law for personal injury, property
damage, or damage to natural resources, or (iii) the imposition of fines or
penalties on TTS, NTL or its Affiliates under any Environmental Law, where such
liabilities, obligations, Claims, fines or penalties, either individually or in
the aggregate, have had or could reasonably be expected to have a Material
Adverse Effect on TTS.
(d) Permits. Schedule 3.10(d) sets forth an accurate and
complete list of all material Permits issued to TTS, NTL or its Affiliates under
any Environmental Law for the operation of the TTS Business. Except as disclosed
on Schedule 3.10(d), TTS, NTL or its Affiliates have made all filings necessary
to request the timely renewal or issuance of all Permits necessary under
Environmental Laws for the continued use and operation of the TTS Real Property
and to conduct the TTS Business as it is presently being conducted.
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(e) Proceedings. Except as disclosed in Schedule 3.10(e),
there is no Claim or Proceeding pending or threatened against TTS, NTL or its
Affiliates, under or in connection with any Environmental Law, which could
reasonably be expected to result in a fine, penalty or other obligation, cost or
expense, except for such obligations, costs, or expenses that, individually or
in the aggregate, have not had and could not reasonably be expected to have a
Material Adverse Effect on TTS.
(f) Transfer Restrictions and Liens. Except as disclosed in
Schedule 3.10(f), neither the TTS Real Property nor the TTS Business (i) is
subject to, or would as a result of this transaction be subject to, applicable
Environmental Laws which would impose restrictions, such as notice, disclosure
or obtaining approval prior to this transaction, or (ii) is subject to, or could
reasonably be expected to become subject to, any Liens under any applicable
Environmental Laws.
(g) Documents. TTS, NTL or its Affiliates will have made
available by Closing to WCG any and all pleadings, reports, assessments,
analytical results, permits, and other material documents, correspondence and
records in their possession concerning Environmental Laws, Hazardous Substances,
or other environmental subjects in each case relating to the operation of the
TTS Business.
3.11 INSURANCE. Schedule 3.11 sets forth a complete and accurate
list of all policies (including their respective expiration dates) of property,
general liability, automobile liability, and other forms of insurance presently
in effect with respect to TTS, the TTS Business or any of the TTS Assets, its
operations, and its employees, excluding those policies relating to Benefit
Programs or Agreements. Such insurance will be terminated with respect to TTS,
the TTS Business and the TTS Assets as of Closing.
3.12 EMPLOYMENT AND LABOR MATTERS.
(a) Attached hereto as Schedule 3.12(a)(i) is a true and
complete list of the employees of the TTS Business as of December 31, 1996
(including regular full and part-time employees and employees seconded or
otherwise provided to TTS by NTL or any of its Affiliates) (the "TTS Active
Employees"), identified by name and employee number, together with job titles,
compensation and service information concerning such employees. Except as set
forth on Schedule 3.12(a)(ii), TTS is not a party to any employment contract
with and will not have any liability (other than accrued salary, commissions,
bonuses, draws, allowances, overtime, vacation pay and other statutory amounts,
or as described in Schedule 3.8(b)) to any TTS Active Employees or any other
employees, any former employees, or any independent and dependent contractors of
the TTS Business (collectively, "TTS Employees"). Attached hereto as Schedule
3.12(a)(iii) is a true and complete list of the independent and dependent
contractors of the TTS Business.
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(b) Except as set forth on Schedule 3.12(b), TTS is not a
party to any collective bargaining agreement or union contract with respect to
TTS Employees and no collective bargaining agreements are being negotiated by
TTS with respect to any of the TTS Employees; and no notice of a proposed union
certification or recognition election has been received by TTS.
(c) No trade union, council of trade unions, employee
bargaining agency or Affiliated bargaining agent:
(i) holds bargaining rights with respect to any
TTS Employees by way of certification,
interim certification, voluntary
recognition, designation or successor
rights;
(ii) has applied to be certified as the
bargaining agent of any TTS Employees; or
(iii) has applied to have TTS declared a related
employer or successor employer pursuant to
applicable labor legislation.
(d) Except as otherwise set forth on Schedule 3.12(d), no TTS
Employees are currently on a leave of absence for any reason, including without
limitation sickness or disability, maternity/paternity and workers'
compensation, and no Claim is pending and, to the best knowledge of NTL, no
Claim is expected to be made by any TTS Employees for workers? compensation
benefits.
(e) TTS has complied in all material respects with all laws
relating to the employment of TTS Employees.
(f) Attached hereto as Schedule 3.12(f) is a true and complete
list of each of the following which is, or has been, sponsored, maintained or
contributed to by TTS, NTL or any of its Affiliates in respect of TTS Employees:
each personnel policy, stock option plan, bonus plan or arrangement, incentive
award plan or arrangement, vacation policy, severance pay plan and/or golden
parachute agreement, policy, program or agreement, pension, retirement,
supplementary retirement, deferred compensation agreement or arrangement,
retiree benefit plan or arrangement, fringe benefit program or practice (whether
or not taxable), employee loan, consulting agreement, employment agreement and
each other employee benefit plan, agreement, arrangement, program, practice or
understanding ("Benefit Programs or Agreements").
(g) True, correct and complete copies or descriptions of all
Benefit Programs or Agreements and all amendments thereto along with the related
funding agreements, as amended, have been furnished or made available to WCG by
TTS.
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(h) TTS has no knowledge of any fact, condition or
circumstance since the date of the documents provided in accordance with Section
3.12(f) which would materially affect the information contained therein and, in
particular, and without limiting the generality of the foregoing, no promises or
commitments have been made by TTS to amend any Benefit Program or Agreement or
to provide increased benefits thereunder to any employee, dependant or
independent contractor, except as required by law.
(i) All Benefit Programs or Agreements have been maintained in
compliance with their respective terms and with the requirements prescribed by
any and all applicable statutes, orders, rules and regulations. Notice has not
been received of any pending investigations by any Authority involving or
relating to any Benefit Program or Agreement, there are no threatened or pending
Claims (except for Claims for benefits payable in the normal operation of the
Benefit Programs or Agreements), suits or proceedings against any Benefit
Program or Agreement or asserting any rights or claims to benefits under any
Benefit Program or Agreement that could give rise to a liability nor, to the
best knowledge of NTL, are there any facts that could give rise to any liability
in the event of such investigation, claim, suit or proceeding. No notice has
been received by TTS, NTL or its Affiliates of any complaints or other
proceedings of any kind involving TTS or, to the best knowledge of NTL, any TTS
Employees before any Authority relating to any Benefit Program or Agreement.
(j) Each investment held in respect of a Benefit Program or
Agreement is a qualified or eligible investment, no investment held in respect
of a Benefit Program or Agreement is a prohibited investment under the terms of
the Benefit Program or Agreement and all supporting documents or any applicable
legislation, and each Benefit Program or Agreement has or had the power and
authority to make each investment and is permitted under all applicable
legislation and the terms of the Benefit Programs or Agreements and all
supporting documents to continue to hold such investments.
(k) Except as permitted by the Benefit Program or Agreement
and applicable legislation, there has been no withdrawal of assets or any other
amounts from any of the Benefit Programs or Agreements other than proper
payments of benefits to eligible beneficiaries, refunds of over-contributions to
plan members and permitted payments of reasonable expenses incurred by or in
respect of such Benefit Program or Agreement.
(l) All employer and, if applicable, employee contributions
under the Benefit Programs or Agreements have been remitted in a timely manner
(other than current contributions not in arrears), and the Benefit Programs or
Agreements have been funded in accordance with their respective terms.
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(m) All returns, filings, reports and disclosures relating to
the Benefit Programs or Agreements required pursuant to the terms of the Benefit
Programs or Agreements, applicable legislation or any Authority, have been filed
or distributed in accordance with all requirements, all filing fees and levies
imposed on the Benefit Programs or Agreements by the applicable Authorities or
applicable legislation have been made on a timely basis and the funds of the
Benefit Programs or Agreements are not exposed to any late filing fees that have
not been remitted.
(n) No event has occurred and there has been no failure to act
on the part of TTS, any funding agent or any administrator of any of the Benefit
Programs or Agreements that could subject TTS or the fund of any Benefit Program
or Agreement to the imposition of any tax, penalty or other disability with
respect to any Benefit Programs or Agreements, whether by way of indemnity or
otherwise.
(o) No insurance contract or any other contract or agreement
affecting a Benefit Program or Agreement requires or permits a retroactive
increase in premiums or payments, loss sharing arrangement or other actual or
contingent liability due thereunder. The level of insurance reserves under each
insured Benefit Program or Agreement is reasonable and sufficient to provide for
all incurred but unreported claims.
(p) None of the Benefit Programs or Agreements provides
benefit increases or payments of any kind that are contingent upon or that will
become effective upon entering into this Agreement or the completion of the
transactions contemplated hereby.
(q) Attached hereto as Schedule 3.12(q) is a list of all
employee terminations and transfers out of the TTS Business since September 1,
1996.
3.13 FINDER'S FEE. Other than Smith Barney, Inc., no investment
banker, broker, finder or other Person is entitled to any brokerage or finder's
fee or similar commission from NTL or TTS in respect of the transactions
contemplated by this Agreement. NTL shall indemnify and hold Newco harmless from
and against any and all Claims, liabilities and obligations with respect to any
such fees, commissions or expenses asserted by any such Person on the basis of
any act, statement, agreement or commitment alleged to have been made by TTS,
NTL or any of its Affiliates with respect thereto.
3.14 MINUTE BOOKS. The minute books of TTS, copies of which have
heretofore been made available to Newco, contain true and complete minutes and
records of all meetings, proceedings and other actions of shareholders and the
Board of Directors of TTS, none of which have been amended to the best knowledge
of NTL (except as set forth in such copies) and are in full force and effect as
of the date hereof.
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3.15 ABSENCE OF CERTAIN CHANGES. Except as described in Schedule
3.15 and except for the consummation of the transactions contemplated by Article
II, since December 31, 1996, there has not been:
(a) Any mortgage, encumbrance or Lien placed on any of the TTS
Assets by or as a result of any act or omission of TTS which remains in
existence on the date hereof and remains in existence on the Closing Date,
except for Permitted Encumbrances;
(b) Any obligation or liability in excess of Two Hundred Fifty
Thousand Dollars ($250,000) incurred by TTS other than obligations and
liabilities incurred in accordance with past practice in the ordinary course of
business;
(c) Any purchase, sale or other disposition, or any agreement
or other arrangement for the purchase, sale or other disposition of any of the
TTS Assets for an amount in excess of One Hundred Thousand Dollars ($100,000),
other than in accordance with past practice in the ordinary course of business;
(d) Any damage, destruction or Loss in excess of One Hundred
Thousand Dollars ($100,000) per single event, whether or not covered by
insurance, affecting the TTS Assets or the TTS Business;
(e) Any strike, work stoppage, concerted work slow down,
grievance or arbitration proceeding, unfair labor practice charge or complaint
involving the TTS Business;
(f) Any material change in the Benefit Programs or Agreements
listed (or required to be listed) on Schedule 3.12(f) or any change in the
compensation payable or to become payable with respect to the TTS Business to
any present or former director, officer, employee, dependent or independent
contractor listed on Schedule 3.12(a)(iii) or agent of NTL or TTS, except
changes in compensation which occurred in the ordinary course of business and
which did not involve, in any case, an increase in compensation in excess of
Twenty Thousand Dollars ($20,000) per annum for any one employee.
(g) A cancellation of any debt in excess of One Hundred
Thousand Dollars ($100,000) owed to or a claim of TTS, or waiver of any right of
TTS, other than in accordance with past practice in the ordinary course of
business;
(h) Any extraordinary Losses of Fifty Thousand Dollars
($50,000) or more individually aggregating in excess of Seven Hundred Fifty
Thousand Dollars ($750,000) or more suffered by the TTS Business;
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(i) Any change in any method of accounting or accounting
practice by the TTS Business, except as may be required by GAAP; or
(j) Any other change in the financial condition, properties,
assets, liabilities, business or operations of the TTS Business which change, by
itself or in conjunction with all other such changes, whether or not arising in
the ordinary course of business, has been or is reasonably likely to have a
Material Adverse Effect with respect to the TTS Business or Newco.
3.16 NO UNTRUE STATEMENTS. This Agreement, the Exhibits and
Schedules hereto, and any certificate delivered to Newco or its representatives
in connection with this Agreement or the transactions contemplated hereby, do
not and will not contain when delivered any untrue statement of any material
fact and do not and will not omit to state a material fact necessary to make the
statements contained herein and therein taken as a whole not misleading. To the
best knowledge of NTL, there is no material fact that has not been disclosed in
writing to Newco by NTL or TTS that has or is expected to have a Material
Adverse Effect on TTS or Newco.
3.17 DISTRIBUTORSHIP TERMS. To the best knowledge of NTL, all of the
terms of the current distributorship agreements between NTL and TTS have been
substantially complied with by the parties.
3.18 RESIDENT STATUS. NTL is not a non-resident person within the
meaning of Section 116 of the Income Tax Act (Canada).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NEWCO
Newco hereby makes the following representations and warranties to NTL,
each and all of which are true and correct on the signing date hereof and on the
Closing Date, except as set forth in the disclosure schedule attached pertaining
to such representation and warranty:
4.1 CORPORATE MATTERS. WilTel Communications LLC and its Designee
each is duly organized, validly existing and in good standing under the laws of
the State of Delaware and of the Province of Ontario, respectively, having all
requisite power and authority to own, operate and lease its properties and
assets and to carry on its business in the places and in the manner currently
conducted. NTL has been provided with a true and correct copy of the charter
documents of Newco and its Designee as currently in effect. Newco and its
Designee each has all requisite power and authority to enter into this Agreement
and to perform its obligations hereunder.
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4.2 VALIDITY OF AGREEMENT; NO CONFLICT.
(a) This Agreement has been duly authorized, executed and
delivered by Newco and is a legal, valid and binding obligation of Newco
enforceable against it in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws from time to time in effect that affect creditors' rights
generally and by legal and equitable limitations on the availability of specific
remedies.
(b) The execution, delivery and performance of this Agreement
by Newco and the other agreements and documents to be delivered by Newco to NTL
hereunder, the consummation of the transactions contemplated hereby or thereby,
and the compliance with the provisions hereof or thereof by Newco, will not,
with or without the passage of time or the giving of notice or both:
(i) except in the absence of required consents as set
forth on Schedule 4.3(a), conflict with, constitute a breach, violation or
termination of any provision of, or give rise to any right of termination,
cancellation or acceleration, or loss of any right or benefit or both, under any
contract to which Newco is a party;
(ii) conflict with or violate the charter documents
of Newco;
(iii) result in the creation or imposition of any
Lien or Claim on any assets of Newco, except as contemplated herein; or
(iv) violate any law, statute, ordinance, regulation,
judgment, writ, injunction, rule, decree, order or any other restriction of any
kind or character applicable to Newco.
4.3 GOVERNMENTAL AND OTHER CONSENTS, APPROVALS AND AUTHORIZATIONS.
Except as set forth in Schedule 4.3 attached hereto or as would not
significantly adversely impact Newco, the transactions contemplated hereby or by
any other agreement contemplated hereby, no order, license to conduct or operate
its business, consent, waiver, authorization or approval of, or exemption by, or
the giving of notice to, or the registration with, or the taking of any other
action in respect of, any Person not a Party, including any Authority, and no
filing, recording, publication or registration in any public office or any other
place is necessary on behalf of Newco (i) to authorize the execution, delivery
and performance of this Agreement or any other agreement contemplated hereby to
be executed and delivered by it and the consummation of the transactions
contemplated hereby or thereby, or (ii) to effect the legality, validity,
binding effect or enforceability thereof.
4.4 ACQUISITION OF PURCHASED SHARES. The Purchased Shares are being
acquired by Newco or its Designee for its own account and not with a view to or
in
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connection with any disposition thereof in violation of the Securities Act of
1933, as amended, or the relevant regulations thereunder, or any state
securities or "blue sky" laws.
4.5 FINDER'S FEE. No investment banker, broker, finder or other Person
is entitled to any brokerage or finder's fee or similar commission from Newco in
respect of the transactions contemplated by this Agreement. Newco shall
indemnify and hold NTL and its Affiliates harmless from and against any and all
Claims, liabilities and obligations with respect to any such fees, commissions
or expenses asserted by any such Person on the basis of any act, statement,
agreement or commitment alleged to have been made by Newco or any of its
Affiliates with respect thereto.
4.6 NO UNTRUE STATEMENTS. This Agreement, the Exhibits and Schedules
hereto, and any certificate delivered to NTL and its representatives in
connection with this Agreement or the transactions contemplated hereby, do not
and will not contain when delivered any untrue statement of any material fact
and do not and will not omit to state a material fact necessary to make the
statements contained herein and therein taken as a whole not misleading. To the
best knowledge of Newco, there is no material fact that has not been disclosed
in writing to NTI or NTL by Newco that has or is expected to have a Material
Adverse Effect on Newco.
ARTICLE V
MATTERS PENDING CLOSING
[THIS ARTICLE INTENTIONALLY LEFT BLANK.]
ARTICLE VI
CONDITIONS TO CLOSING
6.1 CONDITIONS TO OBLIGATION OF THE PARTIES The obligations of the
Parties to effect the Closing shall be subject to the following conditions
unless waived in writing by all Parties:
(a) Formation Agreement. The transactions contemplated by
Sections 2.2 and 2.3 of the Formation Agreement shall have been consummated.
(b) Approvals and Consents. Any required consents, approvals
or authorizations of any Authority to the transfer or change in control
contemplated by this Agreement shall have been obtained or required statutory
waiting periods therefor shall have expired.
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(c) No Litigation. No Proceeding shall have been initiated by
any Authority or third party seeking to enjoin or otherwise restrain the
consummation of the transactions contemplated by this Agreement.
6.2 CONDITIONS TO OBLIGATION OF NEWCO. The obligation of Newco to
consummate the transactions contemplated hereby is subject to the satisfaction
on or prior to the date of the Closing of the following conditions, any one or
more of which may be waived in writing, in whole or in part, by Newco:
(a) Representations, Warranties and Covenants. NTL shall have
performed, satisfied, and complied with, in all material respects, all covenants
and agreements required by this Agreement to be performed, satisfied, or
complied with by it on or before the date of the Closing. All representations
and warranties of NTL contained in this Agreement or in any certificate,
document, instrument or writing delivered to Newco by or on behalf of NTL under
this Agreement shall be true and correct, in all material respects, on the date
of this Agreement and as of the date of the Closing with the same force and
effect as though they had been made on such date.
(b) No Material Adverse Change. From the date of this
Agreement to and including the Closing Date, there shall not have occurred any
Material Adverse Change in or with respect to the prospects of the TTS Business
or the TTS Assets, whether or not disclosed in any supplement or amendment to
the schedules to this Agreement.
(c) Good Standing. NTL shall have delivered to Newco
certificates issued by appropriate Authorities evidencing the good standing and
existence of each of NTL and TTS, as of a date not more than ten calendar days
prior to the date of Closing, in the jurisdictions in which it was organized.
(d) Consents of Third Persons. All consents from Persons that
are listed and identified in Schedule 3.3(a) attached hereto shall have been
obtained by TTS including by lapse of a contractual or statutory waiting period
and copies thereof shall have been delivered to Newco.
(e) Delivery of Other Agreements. NTL shall have executed and
delivered to Newco or its Designee the other agreements contemplated by this
Agreement.
(f) Review of Certain Contracts. NTL shall have made available
for review by Newco the contracts identified on Schedule 3.5(a).
(g) Secretary's Certificate. NTL shall have delivered to Newco
a certificate dated the Closing Date executed by the secretary or assistant
secretary of
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TTS certifying that attached thereto is: (1) a true, correct and complete
certified copy of the certificate of incorporation of TTS and all amendments
thereto; and (2) a true, correct and complete copy of the by-laws of TTS, and
all amendments thereto.
(h) Resolutions. NTL shall have delivered to Newco certified
resolutions of the Board of Directors of NTL approving the consummation of the
transactions contemplated hereby.
(i) NTL Retained Liabilities. NTL (or an Affiliate of NTL
reasonably acceptable to Newco) shall have assumed and agreed to pay, perform
and discharge the NTL Retained Liabilities pursuant to an assumption agreement
in form and substance satisfactory to Newco.
(j) Transfer of Purchased Shares. NTL shall have delivered to
Newco or its Designee all necessary transfers, assignments and other
documentation reasonably required to transfer the Purchased Shares to Newco or
its Designee with a good title, free and clear of all encumbrances.
(k) Officers and Directors Resignations. All directors and
officers of TTS shall have resigned in favor of nominees of Newco effective as
of the Closing.
6.3 CONDITIONS TO OBLIGATION OF NTL. The obligation of NTL to
consummate the transactions contemplated hereby is subject to the satisfaction
on or prior to the date of the Closing of the following conditions, any one or
more of which may be waived in writing, in whole or in part, by NTL:
(a) Representations, Warranties and Covenants. Newco shall
have performed, satisfied, and complied with, in all material respects, all
covenants and agreements required by this Agreement to be performed, satisfied,
or complied with by it on or before the date of the Closing. All representations
and warranties of Newco contained in this Agreement or in any certificate,
document, instrument or writing delivered to NTL by or on behalf of Newco under
this Agreement shall be true and correct, in all material respects, on the date
of this Agreement and as of the date of the Closing with the same force and
effect as though they had been made on such date.
(b) No Material Adverse Change. From the date of this
Agreement to and including the Closing Date, there shall not have occurred any
Material Adverse Change in or with respect to the prospects of the WilTel
Business or the WilTel Assets, whether or not disclosed in any supplement or
amendment to the schedules to this Agreement.
(c) Purchase Price. Newco shall have paid to NTL the Purchase
Price.
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(d) Officer's Certificate. Newco shall have delivered to NTL a
certificate dated the Closing Date executed by an officer of Newco certifying
that attached thereto is: (1) a true, correct and complete copy of the
certificate of formation of Newco certified by the Secretary of State of
Delaware and all amendments thereto; and (2) a true, correct and complete copy
of the LLC Agreement.
(e) Resolutions. Newco shall have delivered to NTL certified
resolutions of the management committee of Newco approving the consummation of
the transactions contemplated hereby.
(f) Insurance. Newco shall have provided evidence to NTL that
the insurance policies set forth on Schedule 4.11 of the Formation Agreement
have been amended to include Newco and TTS.
(g) Competition Bureau. WCG, WilTel or Newco shall have
proposed the transactions contemplated by this Agreement to the Canadian
Competition Bureau for its approval or advice that it will not oppose such
transactions.
ARTICLE VII
CLOSING
7.1 The consummation of the transactions provided for in Article II
(the "Closing") shall take place at the offices of The Williams Companies, Inc.,
One Williams Center, Suite 4100, Tulsa, Oklahoma 74172 on April 30, 1997, or at
such other time as the parties mutually agree.
ARTICLE VIII
DISTRIBUTORSHIP AGREEMENT
8.1 TTS RIGHT OF RENEWAL. At the time of Closing, NTL and TTS shall
enter into a new distributorship agreement with TTS to replace the current
distributorship agreements between NTL and TTS, substantially on the terms and
conditions attached hereto as Schedule 8.1 (the "NTL/TTS Distributor
Agreement").
8.2 TTS RIGHT OF RENEWAL AFTER TRANSFER. In the event of a Transfer of
a Member's Membership Interest (as defined in the LLC Agreement) pursuant to
Sections 8.6(b), 19.3, 19.4 or 19.5 of the LLC Agreement, NTL shall not
terminate the NTL/TTS Distributor Agreement for a period of three (3) years
after such Transfer unless (i) TTS is in material breach of the NTL/TTS
Distributor Agreement, (ii) Newco is in material breach of its distributorship
agreement with NTL, or (iii) control of TTS or a substantial interest in TTS is
sold, transferred or assigned by Newco to a competitor of NTL.
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8.3 USE OF MARKS. Newco acknowledges that NTL is the registered owner
of the following trademarks:
Meridian reg. no. 319540
Meridian 1 reg. no. 387807
Meridian SL reg. no. 383716
In addition to any trademark licenses granted pursuant to the terms of
the NTL/TTS Distributor Agreement, Nortel agrees that it will permit TTS to
continue using "Meridian" (the "Trademark") as part of its corporate name and as
otherwise used in the TTS Business in Canada prior to the date hereof but not
otherwise, until December 31, 1997.
Newco shall cause TTS to comply with NTL's instructions as to the form
and manner in which the Trademark shall be used and agrees that its use of the
Trademark shall conform in all respects to NTL's policies and guidelines in
place from time to time respecting the use of the Trademark.
Newco shall cause TTS to ensure that products sold by TTS in respect of
which the Trademark is used comply with all specifications and standards set
forth by NTL. NTL shall have the right to monitor and inspect products sold by
TTS at reasonable times for the purpose of enabling NTL to ensure such
compliance exists.
Newco shall cause TTS to cease using "Meridian" as part of its
corporate name and on signs, logos, telephone listings, business cards, customer
and supplier information or otherwise (except as permitted pursuant to the
NTL/TTS Distributor Agreement) as soon after Closing as reasonably possible, but
in no event later than December 31, 1997.
Newco acknowledges that the Trademark and all goodwill associated
therewith are, and shall remain, the sole property of NTL and no rights are
conferred upon TTS or Newco with respect to the Trademark except as specifically
set forth herein.
ARTICLE IX
EMPLOYEE MATTERS
9.1 EMPLOYMENT RELATED CLAIMS. On or prior to the Closing Date, NTL (or
an Affiliate of NTL reasonably satisfactory to Newco) shall assume and agree to
pay, perform and discharge, the following liabilities of TTS caused by actions
or omissions of TTS or NTL, or arising from facts occurring, on or prior to the
Closing Date:
(i) Any liability, Claim or obligation (whether
actual, contingent, known or unknown) in respect of employment
of the TTS Employees on
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or before the Closing Date, including without limitation
wages, costs of benefits or termination of employment; and
(ii) Any liability, Claim or obligation (whether
actual, contingent, known or unknown) in respect of the
persons listed on Schedule 9.1.
9.2 EMPLOYMENT TERMINATION NOTICES. Each Party acknowledges that it is
solely responsible for issuing, serving and delivering all orders and notices
required pursuant to applicable employment standards or labour legislation in
connection with the termination of its employees, if any, and for any financial
obligations and liabilities in connection therewith or otherwise required in
connection with the termination of its employees.
9.3 HIRING RESTRICTIONS. NTL and its Affiliates will not hire Newco
employees for a period of one (1) year from Closing.
9.4 SERVICES AGREEMENT. NTL shall continue to provide to TTS the
services of the persons listed on Schedule 9.1 pursuant to the terms of a
Services Agreement to be negotiated between NTL and TTS within thirty (30) days
after Closing.
ARTICLE X
ADDITIONAL AGREEMENTS
10.1 DELIVERY OF CORPORATE DOCUMENTS. NTL shall deliver to Newco or
TTS, on or before the Closing Date, all Records, including computer disks
reflecting any books or records, documents or other papers, or other information
or data relating to the operation of the TTS Business or the TTS Assets stored
on any electronic media, including computers. NTL shall be entitled to retain
the historical books and records relating to the TTS Business to the extent the
books and records are not necessary for the ongoing operations of the TTS
Business. NTL agrees that Newco and its authorized representatives shall have
the right to inspect and, at Newco's expense, copy, at any time during regular
business hours for any proper purpose, the corporate, accounting, auditing and
tax books, records (including work papers) and other books and records, but only
so far as they relate to TTS or the TTS Business, in the possession of NTL or
its Affiliates. For a period of seven years following the Effective Date, NTL
agrees that it will not dispose of or destroy any such books and records without
having first offered to deliver the same to Newco or TTS.
10.2 ACCESS TO INFORMATION. Newco covenants and agrees to cause TTS to
provide full and complete cooperation and assistance to NTL and its Affiliates
following the Closing and to provide full and complete access to the corporate,
accounting, auditing and tax books, records (including work papers) and other
books and records relating to TTS, and to TTS' premises and employees, to the
extent that
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NTL reasonably requires such information to complete tax returns, to verify and
honor the NTL Retained Liabilities and obtain the benefit of the NTL Retained
Assets, to investigate, enforce or defend against Claims for indemnification
pursuant to Article XI or third party Claims against any such Party or Parties,
or for similar purposes. For a period of seven years following the Effective
Date, Newco agrees that it will cause TTS not to dispose of or destroy any such
books and records without having first offered to deliver the same to NTL.
10.3 NONDISCLOSURE OF PROPRIETARY INFORMATION.
(a) Each of NTL and Newco agrees that, for a period beginning
on the Closing Date and ending on the second anniversary date of the Closing
Date, it and its Affiliates will apply the same standards and treat (i) TTS's
confidential or proprietary information and (ii) the terms and conditions of
this Agreement and the other agreements required pursuant hereto, as it does its
Affiliates' confidential or proprietary information with respect to maintaining
the confidentiality thereof. Notwithstanding the foregoing, each Party and its
Affiliates may disclose information that (A) is required to be disclosed by
applicable provincial, state, or federal tax or securities laws to the extent,
and only to the extent, the laws require the disclosure and such Party provides
TTS prior written notice of its intent to provide the disclosure and the general
text of the disclosure, and the disclosure is consented to by TTS, which consent
shall not be unreasonably withheld, or (B) is required to be disclosed by a
court or administrative body of competent jurisdiction; provided that, if a
Party or its Affiliates are served or threatened with litigation that would
require such Party or its Affiliate to disclose the information, such Party or
the Affiliate shall tender to TTS the opportunity to defend, at its cost,
against the disclosure.
(b) Each Party acknowledges that all documents and objects
containing or reflecting any TTS Owned Intellectual Property and Software,
whether developed by such Party or by someone else for it or any of its
Affiliates, will remain the exclusive property of TTS after the Effective Date
and will be delivered to TTS. TTS will not share such TTS Owned Intellectual
Property and Software with NTL or any of its Affiliates unless sold or licensed
in an arms length transaction, provided that any software effectively available
to NTL or its Affiliates as of February 28, 1997, will continue to be available
at the existing terms and conditions.
10.4 THIRD PARTY CONSENTS. Each of NTL and Newco shall use its
reasonable efforts to obtain the consents of third parties as are necessary for
the completion of the transactions contemplated by this Agreement.
10.5 TAX MATTERS.
(a) Tax Returns, Payment of Taxes, and Refunds. NTL will
prepare and file, or cause to be prepared and filed, on a timely basis, all Tax
Returns (including
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any amendments thereto), if any, for TTS for any taxable period ending on or
prior to the Effective Date, (any such period being referred to herein as a
"Pre-Effective Period"). TTS shall be responsible for and shall pay all Taxes
for such Pre-Effective Periods up to the amount accrued for such Taxes on the
NCS Adjusted Effective Date Balance Sheet. Any amount paid for Taxes with
respect to Pre-Effective Periods which exceeds the total amount of Taxes accrued
on the NCS Adjusted Effective Date Balance Sheet shall be reimbursed by NTL
promptly upon demand therefor. Newco shall, at its expense, cause TTS to
reasonably cooperate and execute such instruments as are required or desirable
in connection with the performance by NTL of its obligations under the
immediately preceding sentence. Newco will prepare and file, or will cause to be
prepared and filed, all Tax Returns relating to TTS for all subsequent periods,
and TTS will pay all Taxes for TTS for all taxable periods which do not
constitute Pre-Effective Periods.
(b) Control of Contest. Each of NTL and Newco will have the
right, at its own expense, to control any audit or determination by any taxing
authority, to initiate any claim for refund or file any amended Tax Return, and
to contest, resolve and defend against any assessment, notice of deficiency, or
other adjustment or proposed adjustment of Taxes for any taxable period for
which such party (or any of its Affiliates) is charged with responsibility for
filing a Tax Return under this Agreement. Newco will promptly forward or cause
TTS to forward to NTL all written notifications and other written communications
from any Taxing authority received by Newco or TTS relating to any liability for
Taxes for any Pre-Effective Periods. Newco will cause TTS to assist NTL, at TTS'
expense to take any and all actions with respect to any proceedings for any such
Pre-Effective Periods. The failure by Newco to provide any such notice to NTL
within twenty (20) Business Days of receipt by Newco or TTS of such notice will
relieve NTL from any obligations with respect to the subject matter of any
notification not so forwarded, but only to the extent that such late notice
materially prejudices NTL's ability to contest such assessment or Tax.
(c) (i) Access to Information. Newco will cause TTS to provide
NTL, and NTL will provide to TTS, the right, at reasonable times and upon
reasonable notice, to have access to and to copy and use any records or
information and personnel which may be relevant for the taxable period for which
the requesting party is charged with payment responsibility for Taxes under this
Agreement in connection with the preparation of any Tax Returns, any audit or
other examination by any taxing authority, the filing of any claim for a refund
of Tax or for the allowance of any Tax credit, or any judicial or administrative
proceedings relating to liability for Taxes. The party requesting assistance
hereunder will reimburse the other party for reasonable expenses incurred in
providing such assistance. Any information obtained pursuant to this Section
10.5(c)(i) will be treated as proprietary information and will be used solely in
connection with the matter for which it was requested.
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(ii) Retention of Records. For a period of seven (7) years
from the Closing Date, Newco will cause TTS not to dispose of or destroy any of
the business records or files of TTS in existence on the Closing Date directly
relating to Taxes without first offering to turn over possession thereof to NTL
by written notice to NTL at least thirty (30) days prior to the proposed date of
such disposition or destruction.
10.6 INSURANCE MATTERS. To the extent that insurance coverage
maintained by NTL is available, in excess of any deductible, retention or full
indemnity program, with respect to any Loss suffered by TTS in respect of an
event occurring on or before the Closing or relating to periods ending on or
before such date, at the request of TTS and subject to reimbursement of costs by
TTS, NTL shall make a claim against such insurance and any insurance proceeds
from such insurance will be for the benefit of TTS for any relevant Loss of TTS,
up to the amount of such Loss. NTL shall have the right to control, at its
expense, subject to consultation with TTS, the defense of third-party Claims in
respect of which NTL expects that insurance coverage under its policies may be
available in respect of all or a portion of such Claims (subject to any
applicable deductible under such insurance coverage).
ARTICLE XI
INDEMNIFICATION
XI.1 INDEMNITY OBLIGATION.
(a) NTL Indemnification. Subject to the provisions of this
Article XI, NTL shall indemnify and hold harmless Newco and its Party
Indemnitees against any and all Losses resulting from or arising out of:
(i) any breach of a representation or warranty
made by NTL in this Agreement or any Schedule or Exhibit
attached hereto;
(ii) the breach of any covenant, agreement or
obligation of NTL contained in this Agreement or any Schedule
or Exhibit hereto; and
(iii) the NTL Retained Liabilities.
The total obligation of NTL and/or any of its Affiliates to indemnify under this
Section and under Section 11.1(a) of the Formation Agreement shall not exceed
**** in the aggregate under any circumstances.
(b) Newco Indemnification. Subject to the provisions of this
Article XI, Newco shall indemnify and hold harmless NTL and its Party
Indemnitees against any and all Losses resulting from or arising out of:
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(i) any breach of a representation or warranty
made by Newco in this Agreement or any Schedule or Exhibit
attached hereto; or
(ii) the breach of any covenant, agreement or
obligation of Newco contained in this Agreement or any
Schedule or Exhibit hereto.
The total obligation of Newco and/or any of its Affiliates to indemnify
under subparagraph 11.1(b)(i) shall not exceed **** in the aggregate under any
circumstances.
(c) The breach of a specific representation, warranty or
agreement by a Party shall be determined whether or not, apart from such
specific representation, warranty or agreement, the transactions provided for in
this Agreement prove to be more favorable to the other Party, and whether or not
the facts and circumstances covered by one or more of the other representations,
warranties or agreements made by such Party prove to be more favorable than so
represented and warranted.
(d) All Claims for indemnification under this Section 11.1
(the party claiming indemnification and the party against whom such Claim for
indemnification is being made are hereinafter referred to as "Indemnified Party"
and the "Indemnifying Party", respectively) shall be reduced by the amount of
any insurance proceeds effectively received by or benefiting the Indemnified
Party with respect to the relevant Loss or liability subject, as the case may
be, to the application of Section 10.6.
(e) Except with respect to Claims under subparagraph (a)(iii)
of this Section 11.1, (i) no Claims shall be capable of assertion under Section
11.1 unless it pertains to a Loss with a monetary value of **** or more, on a
matter by matter basis (whereby a series of connected Losses that are
substantially identical in nature and that have arisen out of substantially
identical events, circumstances or conditions shall be deemed to constitute one
Loss); and (ii) a Party (including its Party Indemnitees) shall only be entitled
to indemnification under this Section 11.1 to the extent that the aggregate
amount of Losses suffered by it or its Party Indemnitees under both this
Agreement and the Formation Agreement as a result of misrepresentation or breach
by the other Party, exceed a deductible of **** (such deductible being
hereinafter referred to as the "General Deductible").
(f) Newco shall be entitled to indemnification under this
Section 11.1 with respect to Litigation Claims against a Party only to the
extent that the aggregate amount of Losses suffered by Newco arising out of
Litigation Claims (as defined in this Agreement and the Formation Agreement)
under both this Agreement and the Formation Agreement against such Party exceed
a deductible of **** (such deductible being hereinafter referred to as such
Party's "Litigation Deductible").
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11.2 PROCEDURE. All Claims for indemnification by a Person under this
Article XI shall be asserted and resolved as follows:
(a) Whenever any Claim, Litigation Claim or oral demand for
which an Indemnifying Party would be liable to an Indemnified Party hereunder
(which shall be deemed to include any Claim or Litigation Claim which falls
within, and exhausts any part of such Party's Deductible) is asserted against or
sought to be collected from such Indemnified Party by a third party, such
Indemnified Party shall, within 30 days of the receipt thereof, give notice (a
"Claim Notice") to the Indemnifying Party of such Claim, Litigation Claim or
oral demand, specifying the nature of and specific basis for such Claim,
Litigation Claim or oral demand and the amount or the estimated amount thereof
to the extent then feasible, which estimate shall not be binding upon the
Indemnified Party in its effort to collect indemnification hereunder in respect
such Claim, Litigation Claim or oral demand. To the extent the Indemnifying
Party is prejudiced thereby, the failure to so notify the Indemnifying Party of
any such Claims or oral demand shall relieve the Indemnifying Party from
liability that it may have to the Indemnified Party under the indemnification
provisions contained in this Article XI, but only to the extent of the Loss
directly attributable to such failure to notify, and shall not relieve the
Indemnifying Party from any liability that it may have to the Indemnified Party
otherwise than under this Article XI. The Indemnifying Party shall, within 20
days of the receipt of a Claim Notice, notify the Indemnified Party as to
whether it accepts, in whole or in part, its indemnity obligation under Section
11.1(a) or (b) (subject as the case may be, to the Indemnified Party's General
or Litigation Deductible), in which case, the Indemnifying Party shall assume
and thereafter conduct the defense thereof; provided that the Indemnified Party
shall be entitled to participate in the defense thereof at its own expense. If
the Indemnifying Party disputes liability under this Section 11.1(a) or (b), as
the case may be, or otherwise fails to defend within a reasonable time after
notice, the Indemnified Party will have the right to undertake the defense, at
the risk of the Indemnifying Party and subject, as the case may be, to the
Indemnified Party's right to claim indemnification from the Indemnifying Party
for the cost of defense. The consent to the entry of any judgment or settlement
of any claim hereunder by the Indemnifying Party may only be made upon the prior
approval by the Indemnified Party, which approval shall not be unreasonably
withheld, unless the judgment or proposed settlement involves only the payment
of money damages (which would be paid by the Indemnifying Party) with a full
release of the Indemnified Party, and does not impose any injunction,
conditions, or other equitable relief on the Indemnified Party in which case
consent is not required.
(b) If requested by the Indemnifying Party, the Indemnified
Party agrees to cooperate with the Indemnifying Party and its counsel in
contesting any Claim, Litigation Claim or oral demand that the Indemnifying
Party elects to contest, or, if appropriate and related to the Claim, Litigation
Claim or oral demand in question, in making any counterclaim against the Person
asserting the third party Claim or Litigation Claim or oral demand, or any
cross-complaint against any Person other than
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an Affiliate of the Indemnified Party. The Indemnifying Party shall reimburse
such Indemnified Party for reasonable out-of-pocket expenses incurred by the
Indemnified Party in such cooperation.
(c) If any Indemnified Party should have a claim against the
Indemnifying Party hereunder that does not involve a Claim, Litigation Claim or
oral demand being asserted against or sought to be collected from it by a third
party, the Indemnified Party shall send a Claim Notice with respect to such
claim to the Indemnifying Party. Subject always to application of the relevant
General or Litigation Deductible, reimbursement of any Losses incurred by the
Indemnified Party pursuant to this Article XI shall be made within 30 days after
documentation is sent to the Indemnifying Party by the Indemnified Party. If the
Indemnifying Party disputes such claim, such dispute shall be resolved in the
manner set forth in Article XIV hereof.
11.3 FAILURE TO PAY INDEMNIFICATION. If and to the extent the
Indemnified Party shall make written demand upon the Indemnifying Party for
indemnification pursuant to this Article XI, and the Indemnifying Party shall
refuse to accept its indemnity obligations under Section 11.1 (subject always to
applicable General or Litigation Deductibles) or otherwise fail to pay in full
within the period specified herein the amounts demanded pursuant hereto and in
accordance herewith, then the Indemnified Party may utilize any legal or
equitable remedy to collect from the Indemnifying Party the amount of its
damages plus all costs, including reasonable attorneys' fees incurred in
connection with such collection efforts. Nothing contained herein is intended to
limit or constrain the Indemnified Party's rights against the Indemnifying Party
for indemnity, the remedies herein being cumulative and in addition to all other
rights and remedies of the Indemnified Party.
11.4 SURVIVAL OF OBLIGATIONS. Except as otherwise expressly provided
for in the following sentence, the representations, warranties, covenants,
agreements and undertakings of NTL and Newco contained in this Agreement shall
be deemed remade at and shall survive the Closing until the expiration of
**** following the Closing. ****
35
<PAGE> 37
****
11.5 EXCLUSIVE REMEDY. With respect to all Losses indemnified under
this Article XI, the indemnities provided herein shall be deemed the sole and
exclusive remedies available to the Parties and their respective parents and
Affiliates, and to TTS.
ARTICLE XII
TERMINATION
[THIS ARTICLE INTENTIONALLY LEFT BLANK.]
ARTICLE XIII
EXPENSES
Except as otherwise set forth herein, and whether or not the
transactions contemplated by this Agreement shall be consummated, each Party
agrees to pay, without right of reimbursement from any other Party, the costs
incurred by the Party incident to the preparation and execution of this
Agreement and performance of its obligations hereunder, including the fees and
disbursements of legal counsel, accountants and consultants employed by the
Party in connection with the transactions contemplated by this Agreement.
ARTICLE XIV
RESOLUTION OF DISPUTES
The Parties agree that, except as otherwise specifically provided
herein, all disputes under this Agreement shall be resolved in accordance with
the procedures set forth in Exhibit N to the Formation Agreement.
36
<PAGE> 38
ARTICLE 15
GENERAL PROVISIONS
15.1 NOTICES. All notices, requests, demands and other communications
required or permitted to be given under this Agreement shall be deemed to have
been duly given if in writing and delivered personally or sent vi) first-class,
postage prepaid, registered or certified mail (return receipt requested), or by
overnight delivery service or facsimile transmission with confirmation by
certified mail or overnight delivery service addressed as follows:
If to NTL:
Northern Telecom Limited
8200 Dixie Road, Suite 100
Brampton, Ontario, Canada L6T5P6
Attention: Corporate Secretary
Facsimile: (905) 863-8386
and copy to:
Northern Telecom Inc.
2221 Lakeside Boulevard
Richardson, Texas 75082
(Attention: Richard R. Standel, Vice President,
Secretary and General-Counsel)
Facsimile: (972) 685-3011
If to Newco or its Designee:
111 E. 1st Street
Tulsa, Oklahoma 74103
Attention: Howard E. Janzen
Facsimile Number: (918) 561-6024
and copy to:
One Williams Center, 41-3
Tulsa, Oklahoma 74172
Attention: David P. Batow, General Counsel
Facsimile Number: (918) 588-3005
37
<PAGE> 39
Any Party may change the address to which the communications are to be
directed to it by giving notice to the other in the manner provided in this
Section 15.1. Notice by mail shall be deemed to have been given and received on
the third calendar day after posting. Notice by overnight delivery service,
facsimile transmission or personal delivery shall be deemed given on the date of
actual delivery.
15.2 GOVERNING LAW. This Agreement and the performance of the
transactions contemplated hereby shall be governed by and construed and enforced
in accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein, without regard to any conflict-of-laws provision thereof
that would otherwise require the application of the law of any other
jurisdiction.
15.3 ENTIRE AGREEMENT. Except for the Formation Agreement and the
agreements and documents contemplated thereby, (a) this Agreement and the
Exhibits hereto, together with the certificates, documents, instruments,
writings and any other agreements contemplated hereby that are delivered
pursuant hereto, set forth the entire agreement and understanding of the Parties
with respect to the transactions contemplated hereby and supersede all prior
agreements, arrangements and understandings relating to the subject matter
hereof; (b) no representation, promise, inducement or statement of intention
with respect to the subject matter of this Agreement has been made by any Party
that is not embodied in this Agreement and Exhibits hereto and the certificates,
documents, instruments, writings and any other agreements contemplated hereby
that are delivered pursuant hereto, and; (c) none of the Parties shall be bound
by or liable for any alleged representation, promise, inducement or statement of
intention not so set forth.
15.4 ASSIGNMENT. No Party to this Agreement may sell, transfer, assign,
pledge or hypothecate its or his rights, interests or obligations under this
Agreement without the prior written consent of the other Party, which may not be
unreasonably withheld.
15.5 SUCCESSORS. This Agreement shall inure to the benefit of, be
binding upon, and be enforceable by the parties hereto and their respective
successors and permitted assigns.
15.6 AMENDMENTS; WAIVER. This Agreement may be amended, superseded or
canceled, and any of the terms hereof may be waived, only by a written
instrument specifically stating that it amends, supersedes or cancels this
Agreement or waives any of the terms herein, executed by all Parties intended to
be bound thereby or, in the case of a waiver, by the Party waiving compliance.
The failure of any Party at any time to require performance of any provision
herein shall in no manner affect the right at a later time to enforce the same.
No waiver by any Party of any condition, or of any breach of any term, covenant,
representation or warranty, shall be deemed or constitute a waiver of any other
condition, or breach of any other term, covenant,
38
<PAGE> 40
representation or warranty, nor shall the waiver constitute a continuing waiver
unless otherwise expressly provided.
15.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
15.8 SEVERABILITY. Any provision hereof that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
15.9 NO THIRD PARTY BENEFICIARIES. Except to the extent an Affiliate is
expressly given rights herein, any agreement contained, expressed or implied in
this Agreement shall be only for the benefit of the Parties hereto and their
respective successors and assigns, and such agreements shall not inure to the
benefit of the obligees of any indebtedness of any Party hereto, it being the
intention of the Parties hereto that no Person or entity shall be deemed a third
party beneficiary of this Agreement, except to the extent a third party is
expressly given rights herein.
15.10 NEGOTIATED TRANSACTION. The provisions of this Agreement were
negotiated by the Parties hereto, and this Agreement shall be deemed to have
been drafted by all of the Parties hereto.
15.11 FURTHER ASSURANCES. Each Party shall, from time to time
subsequent to the Closing, at the request and expense of the requesting party,
execute and deliver all such documents, including without limitation, all such
additional conveyances, transfers, consents and other assurances and do all such
other acts and things as any other Party hereto, acting reasonably, may from
time to time request be executed or done in order to better evidence, perfect or
effectuate any provision of this Agreement
39
<PAGE> 41
or of any agreement or other document executed pursuant to this Agreement or any
of the respective obligations intended to be created hereby or thereby.
IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of
the date first set forth above.
"NTL"
NORTHERN TELECOM LIMITED
By: /s/ FRED WEBBER
-------------------------------------
Name: Fred Webber
-----------------------------------
Title: Attorney in Fact
----------------------------------
"NEWCO"
WILTEL COMMUNICATIONS, L.L.C.
By: /s/ S. MILLER WILLIAMS
-------------------------------------
[STAMP] Name: S. Miller Williams
-----------------------------------
Title: Senior Vice President
----------------------------------
"DESIGNEE"
1228966 ONTARIO INC.
By: /s/ S. MILLER WILLIAMS
-------------------------------------
[STAMP] Name: S. Miller Williams
-----------------------------------
Title: President
----------------------------------
40
<PAGE> 1
Redacted portions have been marked with asterisks (****). Confidential treatment
has been requested for the redacted portions. The confidential redacted portions
have been filed separately with the Securities and Exchange Commission.
CONFIDENTIAL TREATMENT
EXHIBIT 10.34
EXECUTION COPY
================================================================================
FORMATION AGREEMENT
BY AND BETWEEN
NORTHERN TELECOM INC.
AND
WILLIAMS COMMUNICATIONS GROUP, INC.
DATED AS OF APRIL 1, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Article I
Definitions and Construction............................................................................. 1
1.1 Defined Terms................................................................................... 1
1.2 Accounting Terms................................................................................ 11
1.3 References...................................................................................... 11
1.4 Headings........................................................................................ 11
Article II
Formation of Newco....................................................................................... 11
2.1 Initial Formation............................................................................... 11
2.2 Merger of NCS Into Newco and Cash Payment....................................................... 11
2.3 Merger of WilTel Into Newco..................................................................... 12
2.4 Retained Assets................................................................................. 12
2.5 Retained Liabilities............................................................................ 13
2.6 Purchase of TTS Shares.......................................................................... 14
2.7 Transfer of Certain NCS Assets.................................................................. 15
2.8 Net Asset Adjustments........................................................................... 16
Article III
Representations and Warranties of NTI.................................................................... 16
3.1 Corporate Matters............................................................................... 16
3.2 Validity of Agreement; No Conflict.............................................................. 17
3.3 Governmental and Other Consents, Approvals and Authorizations................................... 18
3.4 Title to and Condition of NCS Assets............................................................ 18
3.5 Contracts, Commitments and Customers............................................................ 20
3.6 Financial Statements............................................................................ 21
3.7 Taxes........................................................................................... 23
3.8 No Violations or Litigation..................................................................... 23
3.9 Property Leases................................................................................. 23
3.10 Environmental................................................................................... 24
3.11 Insurance....................................................................................... 26
3.12 Employment and Labor Matters.................................................................... 26
3.13 Finder's Fee.................................................................................... 28
3.14 Minute Books.................................................................................... 28
3.15 Absence of Certain Changes...................................................................... 29
3.16 No Untrue Statements............................................................................ 30
3.17 Distributorship Terms........................................................................... 30
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
Article IV
Representations and Warranties of WCG.................................................................... 30
4.1 Corporate Matters................................................................................. 30
4.2 Validity of Agreement; No Conflict.............................................................. 31
4.3 Governmental and Other Consents, Approvals and Authorizations................................... 32
4.4 Title to and Condition of WilTel Assets......................................................... 33
4.5 Contracts, Commitments and Customers............................................................ 34
4.6 Financial Statements............................................................................ 35
4.7 Taxes........................................................................................... 37
4.8 No Violations or Litigation..................................................................... 37
4.9 Property Leases................................................................................. 38
4.10 Environmental................................................................................... 38
4.11 Insurance....................................................................................... 40
4.12 Employment and Labor Matters.................................................................... 40
4.13 Finder's Fee.................................................................................... 42
4.14 Minute Books.................................................................................... 43
4.15 Absence of Certain Changes...................................................................... 43
4.16 No Untrue Statements............................................................................ 44
Article V
Matters Pending Closing.................................................................................. 44
5.1 NTI Actions Pending Closing..................................................................... 44
5.2 WCG Actions Pending Closing..................................................................... 48
Article VI
Conditions To Closing........................................................................................... 52
6.1 Conditions to Obligation of the Parties......................................................... 52
6.2 Conditions to Obligation of WCG................................................................. 52
6.3 Conditions to Obligation of NTI................................................................. 54
6.4 Closing Memorandum.............................................................................. 56
Article VII
Closing.................................................................................................. 56
Article VIII
Post-Closing Adjustment.................................................................................. 56
8.1 True-Up of Section 2.7 Transactions............................................................. 56
8.2 Tax Benefit Payment............................................................................. 57
8.3 Tax Equalization Payment for Interim Period Earnings............................................ 57
8.4 Netting of Post-Closing Adjustments............................................................. 58
Article IX
Employee Matters......................................................................................... 58
9.1 Employee Transfers and Plan Liabilities......................................................... 58
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
9.2 Employee Services Agreement..................................................................... 59
9.3 Reporting of Data............................................................................... 60
9.4 Employment Related Claims....................................................................... 60
9.5 Bonus Payments.................................................................................. 60
9.6 Hiring Restrictions............................................................................. 60
9.7 WARN Notices.................................................................................... 61
9.8 Benefit Issues.................................................................................. 61
9.9 Compensation.................................................................................... 63
9.10 Relocation...................................................................................... 63
Article X
Additional Agreements.................................................................................... 63
10.1 Line of Credit.................................................................................. 63
10.2 Network Services Agreement...................................................................... 63
10.3 Delivery of Corporate Documents................................................................. 64
10.4 Access to Information........................................................................... 64
10.5 Nondisclosure of Proprietary Information........................................................ 64
10.6 Administrative Services......................................................................... 65
10.7 Further Assurances by the Parties............................................................... 66
10.8 Third Party Consents............................................................................ 66
10.9 Intellectual Property License Agreement......................................................... 66
10.10 Tax Matters..................................................................................... 67
10.11 Insurance Matters............................................................................... 68
Article XI
Indemnification.......................................................................................... 68
11.1 Indemnity Obligation............................................................................ 68
11.2 Procedure....................................................................................... 70
11.3 Failure to Pay Indemnification.................................................................. 71
11.4 Survival of Obligations......................................................................... 72
11.5 Exclusive Remedy................................................................................ 72
Article XII
Termination.............................................................................................. 72
12.1 Efforts to Satisfy Conditions................................................................... 72
12.2 Termination..................................................................................... 73
12.3 Liability Upon Termination...................................................................... 73
Article XIII
Expenses................................................................................................. 73
Article XIV
Resolution of Disputes................................................................................... 74
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
Article XV
General Provisions....................................................................................... 74
15.1 Notices......................................................................................... 74
15.2 Governing Law................................................................................... 75
15.3 Entire Agreement................................................................................ 75
15.4 Assignment...................................................................................... 75
15.5 Successors...................................................................................... 76
15.6 Amendments; Waiver.............................................................................. 76
15.7 Counterparts.................................................................................... 76
15.8 Severability.................................................................................... 76
15.9 No Third Party Beneficiaries.................................................................... 76
15.10 Negotiated Transaction.......................................................................... 76
</TABLE>
iv
<PAGE> 6
EXHIBITS
Exhibit A Certificate of Formation (Section 1.1)
Exhibit B Certificate of Merger of WilTel (Section 1.1)
Exhibit C Certificate of Merger of NCS (Section 1.1)
Exhibit D LLC Agreement (Section 1.1)
Exhibit E Non-Competition Agreement (Section 1.1)
Exhibit F TTS Agreement (Section 2.6)
Exhibit G Accounts Receivable Note (Section 2.7(a))
Exhibit H Bill of Sale (Section 2.7(b))
Exhibit I Parent Guaranty (Section 6.3(o))
Exhibit J Employee Services Agreement (Section 9.2)
Exhibit K NTL Administrative Services Agreement (Section 10.6)
Exhibit L Williams Administrative Services Agreement
(Section 10.6)
Exhibit M Intellectual Property License Agreement
(Section 10.9)
Exhibit N Dispute Resolution Procedures (Article XIV)
v
<PAGE> 7
SCHEDULES
ARTICLE II: FORMATION OF NEWCO
Schedule
Number Description
- -----------------------------
2.2 Calculation of cash payment
2.4(a)(iii) NCS Intercompany Notes
2.4(a)(v) NTI Retained Assets
2.4(b)(iii) WilTel Intercompany Notes and Accounts Receivable
2.4(b)(v) WCG Retained Assets
ARTICLE III: REPRESENTATIONS AND WARRANTIES OF NTI
3.1(b) NCS stock ownership schedule
3.1(c) Jurisdictions in which NCS is qualified to do business and in
good standing
3.3(a) NCS Consents
3.3(b) NCS Permits
3.4(a) NCS Assets
3.4(b) NCS Owned Intellectual Property and Software
3.4(c) NCS Licensed Intellectual Property and Software
3.4(d) Essential Property of NCS not included in NCS Assets
3.4(e) Additional NCS Intellectual Property Rights
3.5(a) NCS Customer Agreements
3.5(b) NCS Contracts and Guarantees
3.5(c) NCS Customer Agreements and contracts not in full force and
effect
3.5(d) Consents/Waivers necessary for NCS Contracts
3.5(e) NCS Contracts not made available to WCG
3.6(a) NCS Year End Balance Sheet and NCS Financial Statements
3.6(b) NCS Adjusted Year End Balance Sheet
3.6(d) NCS Gross Revenue Schedule
3.6(e) NCS First Quarter Statements
3.6(f) NCS Adjusted Effective Date Balance Sheet
3.7(a) NCS Tax Schedule
3.8(b) NCS Claims
3.9 NCS Property Leases
3.10(b) NCS Environment Compliance
3.10(c) NCS Environmental Liabilities
3.10(d) NCS Environmental Permits
3.10(e) NCS Environmental claims and proceedings
3.10(f) NCS Transfer Restrictions and Liens
3.11 NCS Insurance
vi
<PAGE> 8
3.12(a)
3.12(a)(i) NCS Active Employees
3.12(a)(ii) NCS Employees
3.12(b) NCS Collective Bargaining Agreements
3.12(c) NCS Employee Leave Schedule
3.12(e) NCS ERISA Schedule
3.12(g) NCS ERISA Obligations
3.12(h) Transfer out of NCS Business since September 1, 1996
3.15 Certain changes by NCS
3.17 Distributorship Agreement and Systems Integrator Agreement
by and between NTI and NCS
ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF WCG
4.1(b) WilTel stock ownership schedule
4.1(c) Jurisdictions in which WilTel is qualified to do business and
is in good standing
4.3(a) WilTel Consents
4.3(b) WilTel Permits
4.4(a) WilTel Assets
4.4(b) WilTel Intellectual Property and Software
4.4(c) WilTel Licensed Intellectual Property and Software
4.4(d) Essential Property of WilTel not included in WilTel Assets
4.4(e) Additional WilTel Intellectual Property Rights
4.5(a) WilTel Customer Agreements
4.5(b) WilTel Contracts and Guarantees
4.5(c) WilTel Customer Agreements and not in full force and effect
4.5(d) Consents/Waivers necessary for WilTel Contracts
4.5(e) WilTel Contracts not made available to NTI
4.6(a) WilTel Year End Balance Sheet and WilTel Financial Statements
4.6(b) WilTel Adjusted Year End Balance Sheet
4.6(d) WilTel Gross Revenue Schedule
4.6(e) WilTel First Quarter Statement
4.6(f) WilTel Adjusted Effective Date Balance Sheet
4.7(a) WilTel Tax Schedule
4.8(b) WilTel Claims
4.9 WilTel Property Leases
4.10(b) WilTel Environmental Law Compliance
4.10(c) WilTel Environmental Liabilities
4.10(d) WilTel Environmental Permit
4.10(e) WilTel Environmental claims and proceedings
4.10(f) WilTel Transfer Restrictions and Liens
4.11 WilTel Insurance
4.12(a)
vii
<PAGE> 9
4.12(a)(i) WilTel Active Employees
4.12(a)(ii) WilTel Employees
4.12(b) WilTel Collective Bargaining Agreements
4.12(c) WilTel Employee Leave Schedule
4.12(e) WilTel ERISA Schedule
4.12(g) WilTel ERISA Obligations
4.12(h) Transfers out of WiTel Business since September 1, 1996
4.15 Certain changes by WilTel
ARTICLE V: MATTERS PENDING CLOSING
5.1(b) Permitted Transactions of NTI and NCS
5.2(b) Permitted Transactions of WCG and WilTel
ARTICLE IX:
9.1(a)
9.1(b) WilTel Employees
9.2 Fringe Benefits
9.6(b) Current NCS Employees
9.6(c) Newco officers and director-level employees that may be hired
by WCG and its affiliates
9.8(g) WilTel Union 401(k) Savings Plan
viii
<PAGE> 10
FORMATION AGREEMENT
THIS FORMATION AGREEMENT (this "Agreement") dated as of April 1, 1997,
by and between Northern Telecom Inc., a Delaware corporation ("NTI"), and
Williams Communications Group, Inc., a Delaware corporation ("WCG")
W I T N E S S E T H:
WHEREAS, (A) NTI desires to contribute its direct sales subsidiary,
NCS (including Bell Atlantic Meridian Systems, a partnership in which NCS is a
general partner and in which NCS will purchase the interest of the remaining
general partner prior to closing), but excluding the NTI Retained Assets and the
NTI Retained Liabilities (the "NCS Business");
(B) WCG desires to contribute WilTel, but excluding WilTel's
investment in Intersys and its Internet service provider line of business
(including WilTel's ownership of Digital Frontiers, LLC) and further excluding
the WCG Retained Assets and the WCG Retained Liabilities (the "WilTel
Business");
(C) NTI and WCG desire to combine the NCS Business and the
WilTel Business by forming a Delaware limited liability company ("Newco")
jointly owned by NTI and WCG, or a subsidiary of each, and to merge the WilTel
Business and the NCS Business into Newco; and
(D) Newco will purchase the stock of TTS from NTL immediately
after the merger of the WilTel Business and the NCS Business into Newco with
cash consideration provided by WCG, all as hereinafter provided.
NOW, THEREFORE, in consideration of the premises and the mutual
promises and obligations contained herein and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, NTI
and WCG agree as follows:
ARTICLE I
DEFINITIONS AND CONSTRUCTION
1.1 DEFINED TERMS. The capitalized terms used in this Agreement shall
have the meanings ascribed to them as follows:
"Accounts Receivable Note" shall have the meaning given that
term in Section 2.7(a) hereof;
1
<PAGE> 11
"Affiliates" means, when used with respect to a specified
Person, such specified Person's Subsidiaries or other Persons which are
or which could be included on such Person's consolidated income
statement for financial reporting purposes pursuant to GAAP, and/or any
third Person which does or which could include such specified Person in
such third Person's consolidated income statement for financial
reporting purposes pursuant to GAAP; provided that Newco shall not be
deemed to be an Affiliate of NTI, WCG or any of their respective
Subsidiaries or Affiliates;
"Authority" means any governmental, regulatory or
administrative body, agency or authority, any court or judicial
authority, any arbitrator or any public, private or industry regulatory
authority, whether foreign, federal, state or local;
"BA Meridian" means Bell Atlantic Meridian Systems, a
partnership in which NCS is a general partner;
"Benefit Program or Agreement" shall have the meaning given
that term in each of Section 3.12(e) and Section 4.12(e) hereof;
"Bill of Sale" shall have the meaning given that term in
Section 2.7 hereof;
"Business Day" means any day on which federal commercial banks
are open for business for the purpose of sending and receiving wire
transfers in Tulsa, Oklahoma and Houston, Texas.
"Cash Payment" shall have the meaning given that term in
Section 2.2 hereof;
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Sections 9601 et seq.;
"Certificate of Formation" means the certificate of formation
of Newco to be filed with the Secretary of State of Delaware in
accordance with the DLLCA in the form attached hereto as Exhibit A;
"Certificate of Merger" means the certificate of merger of
WilTel or NCS, as the case may be, and Newco to be filed with the
Delaware Secretary of State in accordance with the DLLCA in the forms
attached hereto as Exhibit B and Exhibit C, respectively;
2
<PAGE> 12
"Claim" means any demand, demand letter, claim or notice of
noncompliance or violation, in each case made in writing, or any
Proceeding;
"Claim Notice" shall have the meaning given that term in
Section 11.2(a) hereof;
"Closing" shall have the meaning given that term in Article
VII;
"Closing Date" means the date of Closing;
"Code" means the Internal Revenue Code of 1986, as amended;
"DLLCA" shall have the meaning given that term in Section 2.1
hereof;
"Effective Date" means April 1, 1997;
"Employee Benefit Plans" shall have the meaning given that
term in each of Section 3.12(e) and Section 4.12(e) hereof;
"Employee Services Agreement" shall have the meaning given
that term in Section 9.2 hereof;
"Employee Transfer Date" means the last day of the third month
following the Closing Date;
"Employment and Tax Representations and Covenants" shall have
the meaning given that term in Section 11.4 hereof;
"Environmental Law" shall have the meaning given that term in
each of Section 3.10(a)(i) and Section 4.10(a)(i) hereof;
"Environmental Representations" shall have the meaning given
that term in Section 11.4 hereof;
"ERISA" shall have the meaning given that term in Section
3.12(d) hereof;
"ERISA Affiliate" shall have the meaning given that term in
each of Section 3.12(e) and Section 4.12(e) hereof;
"GAAP" means generally accepted accounting principles in the
United States;
3
<PAGE> 13
"General Deductible" shall have the meaning given that term in
Section 11.1(e);
"Hazardous Substance" shall have the meaning given that term
in each of Section 3.10(a)(ii) and Section 4.10(a)(ii) hereof;
"Indemnified Party" shall have the meaning given that term in
Section 11.1(d);
"Indemnifying Party" shall have the meaning given that term in
Section 11.1(d);
"Intellectual Property" means U.S. and foreign patents, patent
applications, patent rights, trademarks, trademark applications,
trademark rights, service marks, service mark applications, service
mark rights, registered or common law copyrights, service names and
trade names;
"Intellectual Property License Agreement" shall have the
meaning set forth in Section 10.9;
"Intersys" means Intersys, S.A. de C.V., a Mexican
Corporation;
"IRS" means the Internal Revenue Service of the United States
of America;
"LLC Agreement" means the Limited Liability Company Agreement
of Newco, in the form attached as Exhibit D hereto;
"Leases" shall have the meaning given that term in each of
Section 3.9 and Section 4.9 hereof;
"Lien" means any mortgage, deed of trust, pledge, security
interest, encumbrance, lien or charge of any kind (including any
agreement to give any of the foregoing), any conditional sale or other
title retention agreement, any lease in the nature of any of the
foregoing, and the filing of or agreement to give any financing
statement under the Uniform Commercial Code of any jurisdiction;
"Litigation Claim" shall have the meaning given in each of
Section 2.5(a)(ii) and Section 2.5(b)(ii);
"Litigation Deductible" shall have the meaning given that term
in Section 11.1(f);
4
<PAGE> 14
"Loss" or "Losses" means any and all damages, losses,
liabilities, judgments, payments, obligations, penalties, assessments,
costs, disbursements or expenses (including reasonable fees,
disbursements and expenses of attorneys, accountants and other
professional advisors and of expert witnesses and costs of
investigation and preparation of any kind or nature whatsoever) but
excluding indirect and consequential damages;
"Material Adverse Change" means an event, circumstance,
condition or change that has a material adverse impact on the business
prospects, operations or financial condition of the affected Person, it
being understood that such event, circumstance, condition or change
shall be considered material only if (x) it has, or would have a
reasonable likelihood of resulting in, an impact on assets or
liabilities of **** or more, before tax effect; or (y) it has, or would
have a reasonable likelihood of resulting in, a net negative pre-tax
impact on the profit and loss statement of such Person of **** or more
and is the result of a single event, circumstance or condition specific
to such Person (excluding results from such person's general economic
environment);
"Material Adverse Effect" means, an effect that results in or
causes, or has a reasonable likelihood of resulting in or causing an
adverse impact in the business, assets, results of operations (before
tax effect) or financial condition of such Person and its subsidiaries,
taken as a whole, in an amount, individually equal to or greater than
****
"NCS" means Nortel Communications Systems Inc., a Delaware
corporation and a wholly owned subsidiary of NTI inclusive of BA
Meridian;
"NCS Active Employees" shall have the meaning given that term
in Section 3.12(a) hereof;
"NCS Adjusted Effective Date Balance Sheet" shall have the
meaning given that term in Section 3.6(f) hereof;
"NCS Adjusted Year End Balance Sheet" shall have the meaning
given that term in Section 3.6(b) hereof;
"NCS Adjustment" shall have the meaning given that term in
Section 2.8(a) hereof;
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"NCS Assets" means the rights, properties, assets, claims,
contracts and businesses of NCS of every kind, character or
description, whether tangible or intangible, wherever located, but
excluding the NTI Retained Assets;
"NCS Business" shall have the meaning given that term in the
recitals;
"NCS Contracts" means all agreements, contracts, licenses,
indentures, notes, including any instrument relating to the borrowing
of money, guarantee or commitment to which NCS is a party or by which
it or any of NCS Assets are bound, whether in writing or oral, but
excluding Employee Benefit Plans;
"NCS Employees" shall have the meaning given that term in
Sections 3.12(a) hereof;
"NCS Financial Statements" shall have the meaning given that
term in Section 3.6(a) hereof;
"NCS First Quarter Statements" shall have the meaning given
that term in Section 3.6(e) hereof;
"NCS Licensed Intellectual Property and Software" shall have
the meaning given that term in Section 3.4(c) hereof;
"NCS Owned Intellectual Property and Software" shall have the
meaning given that term in Section 3.4(b) hereof;
"NCS Real Property" shall have the meaning given that term in
Section 3.10(b) hereof;
"NCS Transferring Employees" shall have the meaning given that
term in Section 9.1;
"NCS Year End Balance Sheet" shall have the meaning given that
term in Section 3.6(a);
"Net Transferred Receivables" shall have the meaning given
that term in Section 2.7(a);
"Newco" shall have the meaning given that term in Section 2.1
hereof;
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"Non-Competition Agreement" means the Non-Competition
Agreement between Williams and NTL, in the form attached hereto as
Exhibit E;
"NTI" shall have the meaning given that term in the preamble
and any successor or assign permitted by this Agreement;
"NTI Retained Assets" shall have the meaning given that term
in Section 2.4(a) hereof;
"NTI Retained Liabilities" shall have the meaning given that
term in Section 2.5(a) hereof;
"NTL" means Northern Telecom Limited, a Canadian corporation;
"Order" means any decree, order, judgment, writ, award,
injunction, stipulation or consent of or by an Authority;
"Organizational Agreement" means the LLC Agreement or any
agreement contemplated thereby, and "Organizational Agreements" means
all of the foregoing agreements;
"Parent" means NTL or Williams, as the case may be;
"Party" means NTI or WCG, as the case may be, and "Parties"
means NTI and WCG;
"Party Indemnitees" means a Party's Affiliates and the
officers, directors, shareholders, agents, employees, representatives,
successors and assigns of each of them;
"PBGC" shall have the meaning given that term in Section
3.12(g) hereof;
"Permit" means any license, permit, concession, warrant,
franchise or other governmental authorization or approval of any
Authority;
"Permitted Encumbrances" means (a) Liens for current taxes and
assessments not yet due, (b) inchoate mechanics and materialmen liens
for construction in progress, (c) inchoate workmen, repairmen,
warehousemen, customer, employee and carrier liens arising in the
ordinary course of business, (d) sellers' liens (on condition that the
payable involved is not overdue), or (e) other minor imperfections in
title that do not affect marketability or use;
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"Person" means any individual, corporation, partnership, joint
venture, association, limited liability company, joint stock company,
trust, unincorporated organization, Authority or government (or agency
or political subdivision thereof);
"Plan" shall have the meaning given that term in each of
Section 3.12(e) and Section 4.12(e) hereof;
"Pre-Closing Period" shall have the meaning given that term in
Section 10.10(a);
"Proceeding" means any action, suit, claim, investigation,
review or other judicial or administrative proceeding, at law or in
equity, before any Authority;
"Records" means all material agreements, documents, books,
records and files relating to (i) with respect to NCS, NCS Assets, NCS
Business or the NCS Contracts, and (ii) with respect to WilTel, the
WilTel Assets, the WilTel Business or the WilTel Contracts;
"Release" shall have the meaning given that term in each of
Section 3.10(a)(iii) and Section 4.10(a)(iii) hereof;
"Relevant Adverse Effect" means, an effect that results in or
causes, or has a reasonable likelihood of resulting in or causing, an
adverse impact in the business, assets, results of operations (before
tax effect) or financial condition of such Person and its subsidiaries,
taken as a whole, in an amount, individually equal to or greater than
$150,000;
"Software" means computer programs, including, object code and
source code (except in the case of software licensed to NCS or WilTel
with respect to which the source code is not included in the applicable
license), input and output formats, control programs, program listings,
general application and special application, system and communications
programs, routines, sub-routines, translations, diagnostic activities,
narrative descriptions, flow charts and operating instructions, as well
as any modifications relating thereto;
"Subsidiary" means, with respect to any Person, a corporation
more than 50% of the combined voting power of the outstanding stock of
which is owned, directly or indirectly, by such Person;
"Tax" or "Taxes" means any United States or foreign federal,
state, provincial, or local income tax, ad valorem tax, excise tax,
sales
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tax, use tax, value added tax, franchise tax, real or personal property
tax, transfer tax, gross receipts tax or other tax, assessment, duty,
fee, levy or other governmental charge, together with and including,
any and all interest, fines, penalties, assessments, and additions to
tax resulting from, relating to, or incurred in connection with any of
those or any contest or dispute thereof;
"Tax Return" means any report, statement, form, return or
other document or information required to be supplied to a taxing
authority in connection with Taxes;
"Title Representations" shall have the meaning given that term
in Section 11.4 hereof;
"Transferred Hard Assets" shall have the meaning given that
term in Section 2.4(a);
"Transferred Receivables" shall have the meaning given that
term in Section 2.7(a);
"Transferring Employees" means both NCS Transferring Employees
and WilTel Transferring Employees;
"TTS" means TTS Meridian Systems, Inc., a Canadian corporation
and wholly owned subsidiary of NTL;
"TTS Agreement" shall have the meaning given that term in
Section 2.6 hereof;
"WCG" shall have the meaning given that term in the preamble
and any successor or assign permitted by this Agreement;
"WCG Retained Assets" shall have the meaning given that term
in Section 2.4(b) hereof;
"WCG Retained Liabilities" shall have the meaning given that
term in Section 2.5(b) hereof;
"Williams" means The Williams Companies, Inc., a Delaware
corporation;
"WilTel" means Williams Telecommunications Systems, Inc., a
Delaware corporation and wholly owned subsidiary of WCG;
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"WilTel Active Employees" shall have the meaning given that
term in Section 4.12(a) hereof;
"WilTel Adjusted Effective Date Balance Sheet" shall have the
meaning given that term in Section 4.6(f) hereof;
"WilTel Adjusted Year End Balance Sheet" shall have the
meaning given that term in Section 4.6(b) hereof;
"WilTel Adjustment" shall have the meaning given that term in
Section 2.8(b) hereof;
"WilTel Assets" means the rights, properties, assets, Claims,
contracts and businesses of WilTel and the WilTel Subsidiaries of every
kind, character or description, whether tangible or intangible,
wherever located, but excluding the WCG Retained Assets;
"WilTel Business" shall have the meaning given that term in
the recitals;
"WilTel Contracts" means all agreements, contracts, licenses,
indentures, notes, including any instrument relating to the borrowing
of money, guarantee or commitment to which WilTel is a party or by
which it or any of WilTel Assets are bound, whether in writing or oral
but excluding Employee Benefit Plans;
"WilTel Employees" shall have the meaning given that term in
Sections 4.12(a) hereof;
"WilTel Financial Statements" shall have the meaning given
that term in Section 4.6(a) hereof;
"WilTel First Quarter Statements" shall have the meaning given
that term in Section 4.6(e) hereof;
"WilTel Licensed Intellectual Property and Software" shall
have the meaning given that term in Section 4.4(c) hereof;
"WilTel Owned Intellectual Property and Software" shall have
the meaning given that term in Section 4.4(b) hereof;
"WilTel Real Property" shall have the meaning given that term
in Section 4.10(b) hereof;
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"WilTel Subsidiaries" means WCS Microwave Services, Inc., a
Delaware corporation, and WCS, Inc., a Delaware corporation;
"WilTel Transferring Employees" shall have the meaning given
that term in Section 9.1 hereof.
"WilTel Year End Balance Sheet" shall have the meaning given
that term in Section 4.6(a);
1.2 ACCOUNTING TERMS. Any accounting terms used in this Agreement that
are not specifically defined herein shall have the meanings customarily given to
them in accordance with GAAP as of the date of this Agreement.
1.3 REFERENCES. As used in this Agreement, unless expressly stated
otherwise, references to (a) "including" mean "including, without limitation",
and the words "hereof", "herein", and "hereunder", and similar words, refer to
this Agreement as a whole and not to any particular Article, provision, section
or paragraph of this Agreement, (b) "or" mean "either or both", and (c) "Dollar"
or "$" means U.S. Dollars. Unless otherwise specified, all references in this
Agreement to Articles, Sections, paragraphs, Exhibits or Schedules are deemed
references to the corresponding Articles, Sections, paragraphs, Exhibits or
Schedules in this Agreement.
1.4 HEADINGS. The headings of the Articles and Sections of this
Agreement and of the Schedules and Exhibits are included for convenience only
and shall not be deemed to constitute part of this Agreement or to affect the
construction or interpretation hereof or thereof.
ARTICLE II
FORMATION OF NEWCO
2.1 INITIAL FORMATION. At or prior to the Closing, NTI and WCG shall
form a limited liability company under the Delaware Limited Liability Company
Act (the "DLLCA"), to be called WilTel Communications, LLC (hereinafter referred
to as "Newco"). Newco shall elect to be treated as a partnership under the Code.
Each of NTI and WCG shall cause Newco to take all action, and execute and
deliver, record and file all instruments, documents and agreements, as may be
reasonably necessary to form Newco under the DLLCA, including, filing the
Certificate of Formation with the Secretary of State of Delaware.
2.2 MERGER OF NCS INTO NEWCO AND CASH PAYMENT. At the Closing, subject
to the terms and conditions of this Agreement, NTI shall cause NCS to merge with
and into Newco, with effect at the Effective Date, in exchange for a 30%
membership
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interest in Newco and the payment by WCG to NTI of cash (the "Cash Payment") in
an amount equal to the following:
****
****
2.3 MERGER OF WILTEL INTO NEWCO. At the Closing, subject to the terms
and conditions of this Agreement, WCG shall cause WilTel to merge with and into
Newco, with effect at the Effective Date, in exchange for a 70% membership
interest in Newco, and shall pay to NTI the Cash Payment.
2.4 RETAINED ASSETS.
(a) NTI Retained Assets. Prior to the Closing, NTI shall cause
NCS to execute such documents as are necessary to assign, transfer or convey to
NTI or an Affiliate of NTI the following assets in order to exclude such assets
from the merger: **** and (v) rights in and to the items listed on Schedule
2.4(a)(v) (collectively, the "NTI Retained Assets").
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(b) WCG Retained Assets. Prior to the Closing, WCG shall cause
WilTel to execute such documents as are necessary to assign, transfer or convey
to WCG or an Affiliate of WCG the following assets in order to exclude such
assets from the merger: **** and (v) rights in and to the items listed on
Schedule 2.4(b)(v) (collectively, the "WCG Retained Assets").
2.5 RETAINED LIABILITIES.
(a) NTI Retained Liabilities. Newco shall not assume, and on
or prior to the Closing Date NTI (or an Affiliate of NTI reasonably satisfactory
to WCG) shall assume and agree to pay, perform and discharge, the following
liabilities of NCS (the "NTI Retained Liabilities"):
****
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****
(b) WCG Retained Liabilities. Newco shall not assume, and on
or prior to the Closing Date WCG (or an Affiliate of WCG reasonably
satisfactory to NTI) shall assume and agree to pay, perform and
discharge, the following liabilities of WilTel (the "WCG Retained
Liabilities"):
****
2.6 PURCHASE OF TTS SHARES. As of the Closing Date immediately after
the transactions contemplated by Sections 2.2 and 2.3 are consummated, the
Parties shall
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cause Newco to purchase for cash consideration to be contributed by WCG into
Newco the shares of TTS from NTL pursuant to an agreement substantially in the
form of Exhibit F hereto (the "TTS Agreement").
2.7 TRANSFER OF CERTAIN NCS ASSETS.
(a) Transfer of NCS Receivables. In consideration for the
delivery by Newco of a note, in substantially the form attached as Exhibit G
hereto (the "Accounts Receivable Note"), on the Closing Date immediately prior
to the consummation of the transactions contemplated by Sections 2.2 and 2.3,
NCS shall transfer to Newco, pursuant to an assignment in form and substance
acceptable to the Parties, all accounts receivables, work-in-progress and
deposits related thereto of NCS (the "Transferred Receivables"). ****
The interest rate on the Accounts Receivable Note will be at the rate provided
for in B above. Any sales, use or other transfer taxes incurred on account of
the transfer pursuant to this Section 2.7(a) of the Transferred Receivables are
to be paid by NTI.
(b) Transfer of NCS Inventory and Fixed Assets. On the Closing
Date immediately prior to the consummation of the transactions contemplated by
Sections 2.2 and 2.3; pursuant to a bill of sale substantially in the form of
Exhibit H hereto (the "Bill of Sale"), NCS shall sell and the Parties shall
cause Newco to purchase for cash consideration to be contributed by WCG into
Newco all inventory and fixed assets of NCS on the Closing Date **** Any sales,
use or other transfer
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taxes incurred on account of the transfer pursuant to this Section 2.7(b) of the
NCS inventory and fixed assets are to be paid by NTI.
2.8 NET ASSET ADJUSTMENTS.
(a) Calculation of NCS Adjustment. ****
(b) Calculation of WilTel Adjustment. ****
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF NTI
NTI hereby makes the following representations and warranties to WCG,
each and all of which are true and correct on the signing date hereof and on the
Closing Date, except as set forth in the disclosure schedule attached pertaining
to such representation and warranty:
3.1 CORPORATE MATTERS.
(a) Each of NTI and NCS is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
having all requisite corporate power and authority to own, operate and lease its
properties and assets and to carry on its business in the places and in the
manner currently conducted. WCG has been provided with a true and correct copy
of the Certificate of Incorporation and Bylaws, or other charter documents, of
NCS as currently in effect. NTI has all requisite corporate power and authority
to enter into this Agreement and the Organizational Agreements and to perform
its obligations hereunder and thereunder.
(b) All of the outstanding shares of capital stock of NCS have
been legally and validly authorized and issued, and are fully paid and
nonassessable. NTI is the sole stockholder of NCS holding the number and type of
shares set forth on
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Schedule 3.1(b). None of the capital stock of NCS is subject to any option,
warrant, right of conversion, exchange or purchase, or any similar right.
(c) Except where the failure would not affect the validity of
this Agreement or have a Relevant Adverse Effect on the NCS Business or NCS
Assets, NCS is qualified to transact business as a foreign corporation and is in
good standing in the jurisdictions, if any, specified in Schedule 3.1(c)
attached hereto, and there is no other jurisdiction in which the nature or
extent of the NCS Business or the character of the NCS Assets makes such
qualification necessary.
3.2 VALIDITY OF AGREEMENT; NO CONFLICT.
(a) This Agreement has been duly authorized, executed and
delivered by NTI and is a legal, valid and binding obligation of NTI enforceable
against it in accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
from time to time in effect that affect creditors' rights generally and by legal
and equitable limitations on the availability of specific remedies.
(b) The Organizational Agreements have been duly authorized by
NTI or NCS, as the case may be, and upon execution and delivery thereof at or
prior to the Closing will be legal, valid and binding obligations of NTI or NCS
enforceable against it in accordance with their terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws from time to time in effect that affect creditors' rights
generally and by legal and equitable limitations on the availability of specific
remedies.
(c) The execution, delivery and performance of this Agreement
and the Organizational Agreements by NTI or NCS, as the case may be, and the
other agreements and documents to be delivered by NTI or NCS to Newco or WCG
hereunder, the consummation of the transactions contemplated hereby or thereby,
and the compliance with the provisions hereof or thereof, by NTI or NCS will
not, with or without the passage of time or the giving of notice or both:
(i) except in the absence of required consents as set
forth on Schedules 3.3(a), 3.4(b), 3.4(c), or 3.5(d), conflict with, constitute
a breach, violation or termination of any provision of, or give rise to any
right of termination, cancellation or acceleration, or loss of any right or
benefit or both, under any of the NCS Contracts listed in Schedule 3.5(a) or
Schedule 3.5(b), NCS Permits, the NCS Owned Intellectual Property and Software
or the NCS Licensed Intellectual Property and Software;
(ii) conflict with or violate the Certificate of
Incorporation or Bylaws of NTI or NCS;
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(iii) result in the creation or imposition of any
Lien or Claim on any of the NCS Assets; or
(iv) violate any law, statute, ordinance, regulation,
judgment, writ, injunction, rule, decree, order or any other restriction of any
kind or character applicable to NTI, NCS or the NCS Assets.
3.3 GOVERNMENTAL AND OTHER CONSENTS, APPROVALS AND AUTHORIZATIONS.
(a) Except as set forth in Schedule 3.3(a) or Schedule 3.5(d)
attached hereto or as would not significantly adversely impact Newco, the
transactions contemplated hereby, the Organizational Agreements or any other
agreement contemplated hereby or thereby, no order, license to conduct or
operate its business, consent, waiver, authorization or approval of, or
exemption by, or the giving of notice to, or the registration with, or the
taking of any other action in respect of, any Person not a Party, including any
Authority, and no filing, recording, publication or registration in any public
office or any other place is necessary on behalf of NCS (i) to authorize the
execution, delivery and performance of this Agreement, the Organizational
Agreements or any other agreement contemplated hereby or thereby to be executed
and delivered by it and the consummation of the transactions contemplated hereby
or thereby (including assignment of the NCS Assets), or (ii) to effect the
legality, validity, binding effect or enforceability thereof.
(b) Except as set forth in Schedule 3.3(b), all Permits
required or necessary for NCS to own the NCS Assets or carry on the NCS Business
in the places and in the manner currently conducted have been duly obtained,
except where a failure to obtain any such Permit (considered individually) would
not have a Relevant Adverse Effect on the NCS Assets or the NCS Business, and
such Permits are in full force and effect. Except as set forth in Schedule
3.3(b), no violations are in existence or have been recorded with respect to
those Permits and no proceeding is pending or, to the best knowledge of NTI,
threatened with respect to the revocation or limitation of any of such Permits,
except where such violations, revocations or limitations considered per Permit
would not result in a Relevant Adverse Effect on the NCS Assets or the NCS
Business. Except as set forth in Schedule 3.3(b) or as otherwise disclosed in
the Schedules to this Agreement, NCS has complied in all respects with all laws,
rules, regulations and orders applicable to the NCS Business, except where a
failure to comply with such laws, rules, regulations and orders would not result
in a Relevant Adverse Effect on the NCS Assets or the NCS Business.
3.4 TITLE TO AND CONDITION OF NCS ASSETS.
(a) A listing of substantially all of the items of equipment,
furniture or fixture, with an initial purchase price of One Thousand Dollars
($1,000) or more with a remaining useful life of more than one year owned by NCS
as of March 31, 1997,
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constituting a part of the NCS Assets, is set forth in Schedule 3.4(a) attached
hereto. Substantially all of the assets are located at the locations set forth
therein and are in NCS's possession and control. NCS has title to all such
assets, free and clear of all Liens and Claims, except for Permitted
Encumbrances.
(b) Schedule 3.4(b) sets forth all Intellectual Property and
Software owned by NCS (the "NCS Owned Intellectual Property and Software").
Except as set forth on Schedule 3.4(b), NCS owns, free and clear from any claims
or rights of others, all NCS Owned Intellectual Property and Software. Except as
set forth on Schedule 3.4(b), none of the NCS Owned Intellectual Property and
Software has been declared invalid, or been limited in any respect by order of
any court or by agreement, or, to the best knowledge of NTI, is the subject of
any infringement, interference or similar proceeding or challenge. Except as set
forth on Schedule 3.4(b), neither NCS nor NTI has received any notice of
infringement, misappropriation or conflict from any other Person with respect to
the NCS Owned Intellectual Property and Software, and, to the best knowledge of
NTI, the conduct of the NCS Business has not infringed, misappropriated or
otherwise conflicted with any Intellectual Property or Software of any other
Person. Each of the patents, trademarks and registered copyrights included in
the NCS Owned Intellectual Property and Software has been validly issued. All
NCS Owned Intellectual Property and Software that is licensed to a third party
by NCS or in which NCS has otherwise transferred an interest to a third party
has been licensed or transferred on a non-exclusive basis pursuant to valid and
existing license agreements. Except as set forth on Schedule 3.4(b), none of the
NCS Owned Intellectual Property and Software requires the consent or waiver of
any Person or Authority prior to the sale, assignment, transfer, conveyance or
delivery thereof to Newco pursuant to this Agreement and such sale, assignment,
transfer, conveyance and delivery to Newco and any of the other transactions
contemplated by this Agreement will not result in any loss of any NCS Owned
Intellectual Property and Software or any right to use, exploit or receive
benefits with respect to such NCS Owned Intellectual Property and Software.
(c) Schedule 3.4(c) sets forth all material Intellectual
Property and Software licensed to NCS (the "NCS Licensed Intellectual Property
and Software"). Except as set forth on Schedule 3.4(c), NCS has the right to
use, free and clear from any claims or rights of others, except as reflected in
the applicable license, all NCS Licensed Intellectual Property and Software.
Except as set forth on Schedule 3.4(c), none of the NCS Licensed Intellectual
Property and Software has been declared invalid, or been limited in any respect
by order of any court or by agreement, or, to the best knowledge of NTI, is the
subject of any infringement, interference or similar proceeding or challenge.
Except as set forth on Schedule 3.4(c), neither NCS nor NTI has received any
notice of infringement, misappropriation or conflict from any other Person with
respect to the NCS Licensed Intellectual Property and Software, and, to the best
knowledge of NTI, the conduct of the NCS Business has not infringed,
misappropriated or otherwise conflicted with any Intellectual Property or
Software of
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any other Person. Except as set forth on Schedule 3.4(c), none of the NCS
Licensed Intellectual Property and Software requires the consent or waiver of
any Person or Authority prior to the sale, assignment, transfer, conveyance or
delivery thereof to Newco pursuant to this Agreement and such sale, assignment,
transfer, conveyance and delivery to Newco will not result in any loss of any
NCS Licensed Intellectual Property and Software or any right to use, exploit or
receive benefits with respect to such NCS Licensed Intellectual Property and
Software, except where the failure to obtain such consent or waiver would not
have a Relevant Adverse Effect on the NCS Assets or the NCS Business.
(d) Except as set forth on Schedule 3.4(d), the NCS Assets
constitute substantially all of the assets (i) necessary for the conduct of the
NCS Business in the ordinary course consistent with past practices or (ii)
currently used by NCS in connection with the NCS Business. Except as set forth
on Schedule 3.4(d), the conduct of the NCS Business in the ordinary course is
not dependent upon the right to use the property of Persons other than NCS,
except such property as is leased or licensed to NCS pursuant to any of the NCS
Contracts or the absence of which would not have a Relevant Adverse Effect on
Newco. Except as set forth on Schedule 3.4(d), neither NTI nor any Affiliate of
NTI (other than NCS) owns or has any interest in any NCS Asset or any asset
currently used by NCS in the NCS Business, except the NTI Retained Assets, or
such assets as are leased or licensed to NCS pursuant to any of the NCS
Contracts or the loss of which would not have a Relevant Adverse Effect on NCS
or Newco.
(e) Except as set forth on Schedule 3.4 (e), the NCS Owned
Intellectual Property and Software, the NCS Licensed Intellectual Property and
Software, and the Intellectual Property and Software licensed pursuant to the
Intellectual Property License Agreement constitute all of the material
intellectual property rights used by NCS in the conduct of the NCS Business as
currently conducted.
3.5 CONTRACTS, COMMITMENTS AND CUSTOMERS.
(a) Set forth in Schedule 3.5(a) attached hereto is a list of
each of the following agreements between NCS and its customers: (i) service or
maintenance contracts with an annual revenue commitment of $500,000 or greater,
and (ii) purchase, lease or rental agreements for the installation or upgrade of
a PBX with a purchase price of $1,000,000 or greater for which the customer has
not been sent the final invoice.
(b) Set forth in Schedule 3.5(b) attached hereto is a list of
each NCS Contract, other than agreements with customers, which would create a
monetary obligation of NCS, or a right to receive funds by NCS, of greater than
$300,000 in the
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aggregate. Also set forth on Schedule 3.5(b) is a list of all guarantees of the
obligations of NCS by NTI or any NTI Affiliate.
(c) To the best knowledge of either NTI or NCS, neither NTI
nor NCS is in breach of any provision of, or in default (or knows of any event
or circumstance that with notice or lapse of time or both would constitute an
event of default) under the terms of, any NCS Contract except to the extent the
loss of such NCS Contract would not have a Relevant Adverse Effect on Newco.
Except as set forth in Schedule 3.5(c), all of the NCS Contracts listed in
Schedule 3.5(a) and Schedule 3.5(b) are in full force and effect, and neither
NTI nor NCS is aware of any pending or overtly threatened Claims or disputes
with respect thereto. None of the customers or counter parties under the NCS
Contracts listed in Schedule 3.5(a) and Schedule 3.5(b) has notified NTI or NCS
in writing that it intends to discontinue its relationship with the NCS
Business.
(d) Except as set forth on Schedule 3.5(d), and except to the
extent that failure to obtain consent or waiver can be remedied by means of the
mechanism set forth in Section 10.8 hereto without a Relevant Adverse Effect
upon Newco, the NCS Contracts listed in Schedule 3.5(a) and Schedule 3.5(b) do
not require the consent or waiver of any Person or Authority prior to the sale,
assignment, transfer, conveyance or delivery thereof pursuant to this Agreement.
(e) Except as set forth on Schedule 3.5(e), true and complete
copies of the NCS Contracts listed in Section 3.5(a) and Section 3.5(b) have
been made available to WCG prior to the date of this Agreement.
3.6 FINANCIAL STATEMENTS.
(a) Attached as Schedule 3.6(a) hereto is a copy of the
unaudited combined balance sheet of NCS, inclusive of TTS, as of December 31,
1996 (the "NCS Year End Balance Sheet") and the unaudited combined income
statement of NCS, inclusive of TTS, for the year ended on December 31, 1996 (the
"NCS Financial Statements"), which (except as noted therein):
(i) have been prepared in accordance with GAAP
applied on a basis consistent with the unconsolidated balance sheets of the NCS
Business and TTS as of December 31, 1995 and the unconsolidated income
statements of the NCS Business and TTS for the year ended December 31, 1995
(without change in the application of principles or the selection of methods of
calculation permitted by GAAP unless based solely upon changes in facts and
circumstances, required by changes in GAAP, or by the combination of such
financial statements) and fairly present the combined financial condition of NCS
and TTS as of the date thereof, the results of operations and the cash flows for
the period set forth therein, subject to normal year-end adjustments, footnotes
and other presentation items; and
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(ii) except with respect to Canadian, United States
federal and state income taxes, reflect all liabilities or obligations, whether
accrued, absolute, contingent or otherwise, of NCS as required under GAAP
consistently applied other than those liabilities incurred since the date
thereof, in the ordinary course of business consistent with past practice.
(b) Attached as Schedule 3.6(b) hereto is a copy of an audited
balance sheet of NCS as of December 31, 1996, which represents the audited
combined balance sheet of NCS, inclusive of TTS, as of December 31, 1996,
adjusted to exclude the net book values which those categories of items included
in the NTI Retained Assets and the NTI Retained Liabilities had as of December
31, 1996 (the "NCS Adjusted Year End Balance Sheet").
(c) The schedules provided to WCG detailing capitalized costs
with respect to Software owned or leased by NCS are true, correct and complete
in all material respects.
(d) Attached as Schedule 3.6(d) hereto are schedules
reflecting: (i) the gross revenues of the NCS Business for each of the years
ended December 31, 1995 and 1996, showing the portions thereof arising out of
each of (1) new systems and enhancements, (2) maintenance, and (3)
moves/adds/changes; and the portions of each such category of revenue arising
out of the geographic regions shown on such schedules; (ii) the cost of goods
sold for each of such years and each of such categories of revenue, and (iii)
actual product purchases from NTI for 1995 and 1996, and the forecast for
product purchases from NTI for 1997 as prepared by NTI. Except as otherwise
disclosed on Schedule 3.6(d), such schedules have been prepared on a basis
consistent with the NCS Financial Statements for the periods covered thereby and
fairly present the information contained therein.
(e) As soon as possible following execution of this Agreement,
and in no event less than five Business Days prior to the Closing Date, NTI
shall deliver to WCG the unaudited combined balance sheet of NCS, inclusive of
TTS, as of March 31, 1997, and the unaudited combined income statement of NCS,
inclusive of TTS, for the quarter then ended, prepared on a basis consistent in
all respects with the NCS Financial Statements (the "NCS First Quarter
Statements"). The NCS First Quarter Statements shall be attached hereto as
Schedule 3.6(e).
(f) As soon as possible following execution of this Agreement,
and in no event less than five Business Days prior to the Closing Date, NTI
shall deliver to WCG the unaudited combined balance sheet of NCS, inclusive of
TTS, as of March 31, 1997, adjusted to exclude the net book values which those
categories of items included in the NTI Retained Assets (taking into account bad
debt reserves) and the NTI Retained Liabilities had as of March 31, 1997,
prepared on a basis consistent in
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all respects with the NCS Adjusted Year End Balance Sheet (the "NCS Adjusted
Effective Date Balance Sheet"). The NCS Adjusted Effective Date Balance Sheet
shall be attached hereto as Schedule 3.6(f).
3.7 TAXES. Except as set forth in Schedule 3.7(a), NTI, NCS, and any
consolidated, combined, unitary or aggregate group for Tax purposes of which NTI
or NCS is or has been a member, have timely filed all Tax Returns required to be
filed by them with respect to the NCS Business and have timely paid, have caused
to be timely paid, or have had timely paid on their behalf all Taxes which are
due (whether or not shown on a Tax Return) with respect to the NCS Business.
Each of the Tax Returns filed by NTI or NCS is accurate and complete in all
material respects with respect to the NCS Business. Except as described on
Schedule 3.7(a), no material deficiencies exceeding $1,000,000 for a single Tax
for any Taxes have been proposed, asserted or assessed against NTI (with respect
to the income or operations of NCS), or NCS, and no requests for waivers of the
time to assess any such Taxes have been granted or are pending. Except as set
forth in Schedule 3.7(a), there are no current examinations of any Tax Return of
NTI (with respect to the income or operations of NCS) or NCS being conducted and
there are no settlements or any prior examinations which could reasonably be
expected to have a Material Adverse Effect on NTI (with respect to the income or
operation of NCS), or NCS.
3.8 NO VIOLATIONS OR LITIGATION.
(a) To the best knowledge of NTI, NCS has not violated, and
the consummation of the transactions contemplated hereby will not cause any
violation of, any Permit, any order of any Authority or any law, ordinance,
regulation, order, requirement, statute, rule, permit, concession, grant,
franchise, license or other governmental authorization relating or applicable to
the NCS Business or any of NCS Assets or that could have a Relevant Adverse
Effect on the NCS Assets or the NCS Business.
(b) Except as set forth in Schedule 3.8(b) hereto and except
for Claims and examinations relating to Taxes, to the best knowledge of NTI,
there is no Claim, or examination (including, without limitation, any change in
any zoning or building ordinance) pending or, to the best knowledge of NTI,
threatened against or affecting NCS, the NCS Business or any of the NCS Assets,
at law or in equity, before or by any Authority or any third party that could
have a Relevant Adverse Effect on NCS, the NCS Assets or the NCS Business.
(c) This Section 3.8 does not address environmental matters
within the scope of Section 3.10.
3.9 PROPERTY LEASES. Schedule 3.9 is a complete list of all real
property leases and those personal property leases with annual rental payments
equal to or
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greater than Three Hundred Thousand Dollars ($300,000) per annum to which NCS is
a party (the "Leases"). Each of the Leases is a valid and existing lease,
enforceable in accordance with its terms, and, to the best knowledge of NTI,
there are no existing defaults, events of default or events, occurrence or acts
that, with the giving of notice or lapse of time or both, would constitute
defaults, in each case by NCS and, to the best knowledge of NTI, by any other
party thereto, under any of the Leases.
3.10 ENVIRONMENTAL.
(a) Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
(i) The term "Environmental Law(s)" means each and
every law, Order, Permit, or similar requirement of each and every Authority,
pertaining to (A) the protection of human health, safety, the environment,
natural resources and wildlife, (B) the protection or use of surface water,
groundwater, rivers, and other bodies of water, (C) the management, manufacture,
possession, presence, use, generation, transportation, treatment, storage,
disposal, Release, threatened Release, abatement, removal, remediation or
handling of, or exposure to, any Hazardous Substance or (D) pollution, including
without limitation, as amended, CERCLA, the Solid Waste Disposal Act, 42 U.S.C.
Section 6901 et seq., the Clean Air Act, 42 U.S.C. Section 7401 et seq. and the
Federal Water Pollution Control Act, 33 U.S.C. Section 1251, et seq.
(ii) The term "Hazardous Substance" means any
substance which is (A) defined as a hazardous substance, hazardous material,
hazardous waste, pollutant or contaminant under any Environmental Laws, (B) a
petroleum hydrocarbon, including crude oil or any fraction thereof, (C)
hazardous, toxic, corrosive, flammable, explosive, infectious, radioactive or
carcinogenic or (D) regulated pursuant to any Environmental Laws.
(iii) The term "Release" means any spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping, or disposing into the environment (including without
limitation the abandonment or discarding of barrels, containers, and other
receptacles containing any Hazardous Substance).
(b) Compliance with Environmental Laws. Except as disclosed on
Schedule 3.10(b), with respect to both (i) the operations conducted at and
conditions present at the real property currently used or occupied in connection
with the NCS Business (the "NCS Real Property"), and (ii) the operations
conducted at and the conditions present at any real property formerly used or
occupied in connection with the NCS Business (the "Former NCS Real Property"),
during the period of such use or occupancy by NTI or its Affiliates, NTI or its
Affiliates were and are in compliance with applicable Environmental Laws, except
for such failures to comply that, individually
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and in the aggregate, have not had and could not reasonably be expected to have,
a Material Adverse Effect on NCS.
(c) Environmental Liabilities. Except as disclosed on Schedule
3.10(c), there are no past or present conditions, circumstances, events,
activities, practices, or agreements arising out of, or related either to the
NCS Real Property or to the Former NCS Real Property, including but not limited
to any on-site or off-site Release of any Hazardous Substances, which have given
rise to or could reasonably be expected to give rise to: (i) liabilities or
obligations of NTI or its Affiliates for any clean-up, corrective action or
remedial activity under any Environmental Law; (ii) any Claim against NTI or its
Affiliates under any Environmental Law for personal injury, property damage, or
damage to natural resources, or (iii) the imposition of fines or penalties on
NTI or its Affiliates under any Environmental Law, where such liabilities,
obligations, Claims, fines or penalties, either individually or in the
aggregate, have had or could reasonably be expected to have a Material Adverse
Effect on NCS.
(d) Permits. Schedule 3.10(d) sets forth an accurate and
complete list of all material Permits issued to NTI and its Affiliates under any
Environmental Law for the operation of the NCS Business. Except as disclosed on
Schedule 3.10(d), NTI or its Affiliates have made all filings necessary to
request the timely renewal or issuance of all Permits necessary under
Environmental Laws for the continued use and operation of the NCS Real Property
to conduct the NCS Business as it is presently being conducted.
(e) Proceedings. Except as disclosed in Schedule 3.10(e),
there is no Claim or Proceeding pending or threatened against NTI or its
Affiliates, under or in connection with any Environmental Law, which could
reasonably be expected to result in a fine, penalty or other obligation, cost or
expense, except for such obligations, costs, or expenses that, individually or
in the aggregate, have not had and could not reasonably be expected to have a
Material Adverse Effect on NCS.
(f) Transfer Restrictions and Liens. Except as disclosed in
Schedule 3.10(f), neither the NCS Real Property nor the NCS Business (i) is
subject to, or would as a result of this transaction be subject to, the New
Jersey Industrial Site Recovery Act, or any other state or local Environmental
Law which would impose restrictions, such as notice, disclosure or obtaining
approval prior to this transaction, or (ii) is subject to, or could reasonably
be expected to become subject to, any Liens under any Environmental Laws.
(g) Documents. NTI and its Affiliates will have made available
by Closing to WCG any and all pleadings, reports, assessments, analytical
results, permits, and other material documents, correspondence and records
concerning Environmental Laws, Hazardous Substances, or other environmental
subjects in each case relating to the operation of the NCS Business.
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3.11 INSURANCE. Schedule 3.11 sets forth a complete and accurate list
of all policies (including their respective expiration dates) of property,
general liability, automobile liability, worker's compensation, and other forms
of insurance presently in effect with respect to NCS, the NCS Business or any of
the NCS Assets, its operations, and its employees excluding those policies
relating to Employee Benefit Plans. Such insurance will be terminated as of the
Closing Date.
3.12 EMPLOYMENT AND LABOR MATTERS.
(a) Attached hereto as Schedule 3.12(a) (i) is a true and
complete list of the employees of the NCS Business (the "NCS Active Employees")
as of December 31, 1996, (including regular full and part-time employees)
identified by name and employee number, together with job titles, compensation
and service information concerning such employees. Except as set forth on
Schedule 3.12(a)(ii), NCS is not a party to any employment contract with and
will not have any liability (other than accrued salary, vacation pay,
commissions or as described in Schedule 3.8(b)) to any employees, any former
employees, or any independent contractors of the NCS Business (collectively ?NCS
Employees?).
(b) Except as set forth on Schedule 3.12(b), NCS is not a
party to any collective bargaining agreement or union contract with respect to
the employees and no collective bargaining agreements are being negotiated by
NCS with respect to any of the NCS Employees; and no notice of a proposed union
certification or recognition election has been received by NCS.
(c) Except as otherwise set forth on Schedule 3.12(c), no NCS
Employees are currently on a leave of absence due to sickness or disability and
no claim is pending and, to the best knowledge of NTI, no Claim is expected to
be made by any NCS Employees for workers? compensation benefits.
(d) NCS has complied in all material respects with all laws
relating to the employment of labor, including, without limitation, the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") and those laws
relating to wages, hours, collective bargaining, unemployment insurance,
worker's compensation, equal employment opportunity, payment and withholding of
taxes, the Immigration Reform and Control Act, the Workers Adjustment and
Retraining Act, the Occupational Safety and Health Act, the Drug Free Workplace
Act, and the National Labor Relations Act, as amended.
(e) Attached hereto as Schedule 3.12(e) is a true and complete
list of each of the following which is, or has been, sponsored, maintained or
contributed to by NCS or any trade or business, whether or not incorporated (an
"ERISA Affiliate") that together with NCS would be considered affiliated with
NCS under Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of
ERISA for the benefit of any
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person who, as of the Closing, is a NCS Employee: (i) each "employee benefit
plan," as such term is defined in Section 3(3) of ERISA, ("Plan"); and (ii) each
personnel policy, stock option plan, bonus plan or arrangement, incentive award
plan or arrangement, vacation policy, severance pay plan, policy, program or
agreement, deferred compensation agreement or arrangement, retiree benefit plan
or arrangement, fringe benefit program or practice (whether or not taxable),
employee loan, consulting agreement, employment agreement and each other
employee benefit plan, agreement, arrangement, program, practice or
understanding which is not described in Section 3.12(e)(i) ("Benefit Program or
Agreement") (such Plans and Benefit Programs or Agreement are sometimes
collectively referred to in this Agreement as the "Employee Benefit Plans").
(f) True, correct and complete copies of each of the current
Plans, and related trusts, if applicable, including all amendments thereto, have
been furnished or made available to WCG by NCS. There have also been furnished
to WCG by NCS, with respect to each Plan required to file such report and
description, the report on Form 5500 for the past two years and the most recent
summary plan description. True, correct and complete copies or descriptions of
all Benefit Programs or Agreements have also been furnished or made available to
WCG by NCS.
(g) Except as otherwise set forth on Schedule 3.12(g): (i)
none of NCS or any ERISA Affiliate contributes to or has an obligation to
contribute to, nor has at any time contributed to or had an obligation to
contribute to, a multi-employer plan within the meaning of Section 3(37) of
ERISA or any other plan subject to Title IV or ERISA; (ii) each of NCS and its
ERISA Affiliates has performed all obligations, whether arising by operation of
law or by contract, including, but not limited to, ERISA and the Code, required
to be performed by it in connection with the Employee Benefit Plans, and there
have been no defaults or violations by any other party to the Employee Benefit
Plans; (iii) all reports, returns, notices, disclosures and other documents
relating to the Plans required to be filed with or furnished to governmental
entities, plan participants or plan beneficiaries have been timely filed or
furnished in accordance with applicable law and each Employee Benefit Plan has
been administered in compliance with its governing written documents; (iv) each
of the Plans intended to be qualified under Section 401 of the Code satisfies
the requirements of such Section and has received a favorable determination
letter from the IRS regarding such qualified status and has not been amended,
operated or administered in a way which would adversely affect such qualified
status; (v) there are no actions, suits or claims pending (other than routine
claims for benefits) or, to the best knowledge of NTI, contemplated or
threatened against, or with respect to, any of the Employee Benefit Plans or
their assets; (vi) each trust maintained in connection with each Plan, which is
qualified under Section 401 of the Code, is tax exempt under Section 501 of the
Code; (vii) all contributions required to be made to the Employee Benefit Plans
have been made timely; (viii) no accumulated funding deficiency, whether or not
waived, within the meaning of Section 302 of ERISA or Section 412 of the Code
has been incurred, and
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there has been no termination or partial termination of any Plan within the
meaning of Section 411(d)(3) of the Code; (ix) no act, omission or transaction
has occurred which could result in imposition on the Sellers, NCS or its ERISA
Affiliates of (A) breach of fiduciary duty liability damages under Section 409
of ERISA, (B) a civil penalty assessed pursuant to subsections (c), (i) or (1)
of Section 502 of ERISA or (C) a tax imposed pursuant to Chapter 43 of Subtitle
D of the Code; (x) to the best knowledge of NTI, there is no matter pending with
respect to any of the Plans before the IRS, the Department of Labor or the
Pension Benefit Guaranty Corporation (the "PBGC"); (xi) each of the Employee
Benefit Plans complies in form and operation with the applicable provisions of
the Code and ERISA; (xii) each Employee Benefit Plan provides that it may be
unilaterally amended or terminated in its entirety without any liability or
other obligation except the liability set forth for benefits as described in the
plan upon such amendment or termination; (xiii) neither NTI nor NCS has made any
written or oral representations or promises to any present or former director,
officer, employee or other agent concerning his or her terms, conditions or
benefits of employment (other than communicating that which appears on Schedule
3.12(a)), including without limitation the tenure of any such employment or the
conditions under which such employment may be terminated by NCS or Newco which
will be binding upon or enforceable against Newco after the Closing; (xiv) the
actuarial present values of all accrued deferred compensation entitlement of all
NCS Employees and their respective beneficiaries, other than entitlement accrued
pursuant to funded retirement plans subject to the provisions of Section 412 of
the Code, have been fully reflected on the financial statements and balance
sheets attached as Schedule 3.6(a). Such entitlement includes, without
limitation, any entitlement under any executive compensation, supplemental
retirement or any employment continuity agreement; and (xv) all liabilities for
post-retirement benefits required to be booked under Statement of Financial
Standards No. 106 have been fully reflected on the financial statements and
balance sheets attached as Schedule 3.6(a).
(h) Attached hereto as Schedule 3.12 (h) is a list of all
transfers out of the NCS Business since September 1, 1996.
3.13 FINDER'S FEE. Other than Smith Barney Inc., no investment banker,
broker, finder or other Person is entitled to any brokerage or finder's fee or
similar commission from NTI or NCS in respect of the transactions contemplated
by this Agreement. NTI shall indemnify and hold WCG and its Affiliates harmless
from and against any and all Claims, liabilities and obligations with respect to
any such fees, commissions or expenses asserted by any such Person on the basis
of any act, statement, agreement or commitment alleged to have been made by NTI
or any of its Affiliates with respect thereto.
3.14 MINUTE BOOKS. The minute books of NCS, copies of which, certified
by NCS' secretary or assistant secretary, have heretofore been made available to
WCG, contain true and complete minutes and records of all meetings, proceedings
and other
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actions of shareholders and the Board of Directors of NCS, none of which have
been amended to the best knowledge of NTI (except as set forth in such copies)
and are in full force and effect as of the date hereof.
3.15 ABSENCE OF CERTAIN CHANGES. Except as described in Schedule 3.15
and except for the consummation of the transactions contemplated by Article II,
since December 31, 1996, there has not been:
(a) Any mortgage, encumbrance or Lien placed on any of the NCS
Assets by or as a result of any act or omission of NCS which remains in
existence on the date hereof or on the Closing Date, except for Permitted
Encumbrances;
(b) Any obligation or liability in excess of Two Hundred Fifty
Thousand Dollars ($250,000) incurred by NCS other than obligations and
liabilities incurred in accordance with past practice in the ordinary course of
business;
(c) Any purchase, sale or other disposition, or any agreement
or other arrangement for the purchase, sale or other disposition, of any of the
NCS Assets, for an amount in excess of One Hundred Thousand Dollars ($100,000),
other than in accordance with past practice in the ordinary course of business;
(d) Any damage, destruction or Loss in excess of One Hundred
Thousand Dollars ($100,000) per single event, whether or not covered by
insurance, affecting the NCS Assets;
(e) Any strike, work stoppage, concerted work slow down,
grievance or arbitration proceeding, unfair labor practice charge or complaint
involving the NCS Business;
(f) Any material change in the Employee Benefit Plans listed
(or required to be listed) on Schedule 3.12(e) or any change in the compensation
payable or to become payable with respect to the NCS Business to any officer,
employee or agent of NTI or NCS, except changes in compensation which occurred
in the ordinary course of business and which did not involve, in any case, an
increase in compensation in excess of Twenty Thousand Dollars ($20,000) per
annum for any one employee.
(g) A cancellation of any debt in excess of One Hundred
Thousand Dollars ($100,000) owed to or claim of NCS, or waiver of any right of
NCS, other than in accordance with past practice in the ordinary course
business;
(h) Any extraordinary Losses of Fifty Thousand Dollars
($50,000) or more individually aggregating in excess of Seven Hundred Fifty
Thousand Dollars ($750,000) or more suffered by the NCS Business;
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(i) Any change in any method of accounting or accounting
practice by the NCS Business, except as may be required by GAAP; or
(j) Any other change in the financial condition, properties,
assets, liabilities, business or operations of the NCS Business which change, by
itself or in conjunction with all other such changes, whether or not arising in
the ordinary course of business, has been or is reasonably likely to have a
Material Adverse Effect with respect to the NCS Business or Newco.
3.16 NO UNTRUE STATEMENTS. This Agreement, the Exhibits and Schedules
hereto, and any certificate delivered to WCG and its representatives in
connection with this Agreement or the transactions contemplated hereby, do not
and will not contain when delivered any untrue statement of any material fact
and do not and will not omit to state a material fact necessary to make the
statements contained herein and therein taken as a whole not misleading. To the
best knowledge of NTI, there is no material fact that has not been disclosed in
writing to WCG by NTI or NCS that has or is expected to have a Material Adverse
Effect on NCS or Newco.
3.17 DISTRIBUTORSHIP TERMS. Attached hereto as Schedule 3.17 are copies
of the current Distributorship Agreement and the current Systems Integrator
Agreement in place between NTI and NCS, all of the terms of which have been
substantially complied with by the parties.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF WCG
WCG hereby makes the following representations and warranties to NTI,
each and all of which are true and correct on the signing date hereof and on the
Closing Date, except as set forth in the disclosure schedule attached pertaining
to such representation and warranty:
4.1 CORPORATE MATTERS.
(a) Each of WCG and WilTel is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
having all requisite corporate power and authority to own, operate and lease its
properties and assets and to carry on its business in the places and in the
manner currently conducted. NTI has been provided with a true and correct copy
of the Certificate of Incorporation and Bylaws, or other charter documents, of
WilTel as currently in effect. WCG has all requisite corporate power and
authority to enter into this Agreement and the Organizational Agreements and to
perform its obligations hereunder and thereunder.
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(b) All of the outstanding shares of capital stock of WilTel
have been legally and validly authorized and issued, and are fully paid and
nonassessable. WCG is the sole stockholder of WilTel, holding the number and
type of shares set forth on Schedule 4.1(b). None of the capital stock of WilTel
is subject to any option, warrant, right of conversion, exchange or purchase or
any similar right.
(c) Except where the failure would not affect the validity of
this Agreement or have a Relevant Adverse Effect on the WilTel Business or the
WilTel Assets, WilTel is qualified to transact business as a foreign corporation
and is in good standing in the jurisdictions, if any, specified in Schedule
4.1(c) attached hereto, and there is no other jurisdiction in which the nature
or extent of the WilTel Business or the character of the WilTel Assets makes
such qualification necessary.
4.2 VALIDITY OF AGREEMENT; NO CONFLICT.
(a) This Agreement has been duly authorized, executed and
delivered by WCG and is a legal, valid and binding obligation of WCG enforceable
against it in accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
from time to time in effect that affect creditors' rights generally and by legal
and equitable limitations on the availability of specific remedies.
(b) The Organizational Agreements have been duly authorized by
WCG or WilTel, as the case may be, and upon execution and delivery thereof at or
prior to the Closing will be legal, valid and binding obligations of WCG or
WilTel enforceable against it in accordance with their terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws from time to time in effect that
affect creditors' rights generally and by legal and equitable limitations on the
availability of specific remedies.
(c) The execution, delivery and performance of this Agreement
and the Organizational Agreements by WCG or WilTel, as the case may be, and the
other agreements and documents to be delivered by WCG or WilTel to Newco or NTI
hereunder, the consummation of the transactions contemplated hereby or thereby,
and the compliance with the provisions hereof or thereof, by WCG or WilTel will
not, with or without the passage of time or the giving of notice or both:
(i) except in the absence of required consents as set
forth on Schedules 4.3(a), 4,4(b), 4.4(c) or 4.5(d), conflict with, constitute a
breach, violation or termination of any provision of, or give rise to any right
of termination, cancellation or acceleration, or loss of any right or benefit or
both, under, any of the WilTel Contracts listed in Schedule 4.5(a) or Schedule
4.5(b), WilTel's Permits, the WilTel Owned Intellectual Property and Software or
the WilTel Licensed Intellectual Property and Software;
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(ii) conflict with or violate the Certificate of
Incorporation or Bylaws of WCG or WilTel;
(iii) result in the creation or imposition of any
Lien or Claim on any of the WilTel Assets; or
(iv) violate any law, statute, ordinance, regulation,
judgment, writ, injunction, rule, decree, order or any other restriction of any
kind or character applicable to WCG, WilTel or the WilTel Assets.
4.3 GOVERNMENTAL AND OTHER CONSENTS, APPROVALS AND AUTHORIZATIONS.
(a) Except as set forth in Schedule 4.3(a) or Schedule 4.5(d)
attached hereto or as would not significantly adversely impact Newco, the
transactions contemplated hereby, the Organizational Agreements or any other
agreement contemplated hereby or thereby, no order, license to conduct or
operate its business, consent, waiver, authorization or approval of, or
exemption by, or the giving of notice to, or the registration with, or the
taking of any other action in respect of, any Person not a Party, including any
Authority, and no filing, recording, publication or registration in any public
office or any other place is necessary on behalf of WilTel (i) to authorize the
execution, delivery and performance of this Agreement, the Organizational
Agreements or any other agreement contemplated hereby or thereby to be executed
and delivered by it and the consummation of the transactions contemplated hereby
or thereby (including assignment of the WilTel Assets), or (ii) to effect the
legality, validity, binding effect or enforceability thereof.
(b) Except as set forth in Schedule 4.3(b), all Permits
required or necessary for WilTel to own the WilTel Assets or carry on WilTel
Business in the places and in the manner currently conducted have been duly
obtained, except where a failure to obtain any such Permit (considered
individually) would not have a Relevant Adverse Effect on the WilTel Assets or
the WilTel Business, and such Permits are in full force and effect. Except as
set forth in Schedule 4.3(b), no violations are in existence or have been
recorded with respect to those Permits and no proceeding is pending or, to the
best knowledge of WCG, threatened with respect to the revocation or limitation
of any of such Permits, except where such violations, revocations or limitations
considered per Permit would not result in a Relevant Adverse Effect on the
WilTel Assets or the WilTel Business. Except as set forth in Schedule 4.3(b) or
as otherwise disclosed in the Schedules to this Agreement, WilTel has complied
in all respects with all laws, rules, regulations and orders applicable the
WilTel Business, except where the failure to comply with such laws, rules,
regulations and orders would not result in a Relevant Adverse Effect on the
WilTel Assets or the WilTel Business.
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4.4 TITLE TO AND CONDITION OF WILTEL ASSETS.
(a) A listing of substantially all of the items of equipment,
furniture or fixture, with an initial purchase price of One Thousand Dollars
($1,000) or more with a remaining useful life of more than one year owned by
WilTel as of March 31, 1997, constituting a part of the WilTel Assets is set
forth in Schedule 4.4(a) attached hereto. Substantially all of the assets are
located at the locations set forth therein and are in WilTel's possession and
control. WilTel has title to all such assets, free and clear of all Liens and
Claims, except for Permitted Encumbrances.
(b) Schedule 4.4(b) sets forth all Intellectual Property and
Software owned by WilTel (the "WilTel Owned Intellectual Property and
Software"). Except as set forth on Schedule 4.4(b), WilTel owns, free and clear
from any claims or rights of others, all WilTel Owned Intellectual Property and
Software. Except as set forth on Schedule 4.4(b), none of the WilTel Owned
Intellectual Property and Software has been declared invalid, or been limited in
any respect by order of any court or by agreement, or, to the best knowledge of
WCG, is the subject of any infringement, interference or similar proceeding or
challenge. Except as set forth on Schedule 4.4(b), neither WilTel nor WCG has
received any notice of infringement, misappropriation or conflict from any other
Person with respect to the WilTel Owned Intellectual Property and Software, and,
to the best knowledge of WCG, the conduct of the WilTel Business has not
infringed, misappropriated or otherwise conflicted with any Intellectual
Property or Software of any other Person. Each of the patents, trademarks and
registered copyrights included in the WilTel Owned Intellectual Property and
Software has been validly issued. All WilTel Owned Intellectual Property and
Software that is licensed to a third party by WilTel or in which WilTel has
otherwise transferred an interest to a third party has been licensed or
transferred on a non-exclusive basis pursuant to valid and existing license
agreements. Except as set forth on Schedule 4.4(b), none of the WilTel Owned
Intellectual Property and Software requires the consent or waiver of any Person
or Authority prior to the sale, assignment, transfer, conveyance or delivery
thereof to Newco pursuant to this Agreement and such sale, assignment, transfer,
conveyance and delivery to Newco and any of the other transactions contemplated
by this Agreement will not result in any loss of any WilTel Owned Intellectual
Property and Software or any right to use, exploit or receive benefits with
respect to such WilTel Owned Intellectual Property and Software.
(c) Schedule 4.4(c) sets forth all material Intellectual
Property and Software licensed to WilTel (the "WilTel Licensed Intellectual
Property and Software"). Except as set forth on Schedule 4.4(c), WilTel has the
right to use, free and clear from any claims or rights of others, except as
reflected in the applicable license, all WilTel Licensed Intellectual Property
and Software. Except as set forth on Schedule 4.4(c), none of the WilTel
Licensed Intellectual Property and Software has been declared invalid, or been
limited in any respect by order of any court or by agreement, or, to
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the best knowledge of WCG, is the subject of any infringement, interference or
similar proceeding or challenge. Except as set forth on Schedule 4.4(c), neither
WilTel nor WCG has received any notice of infringement, misappropriation or
conflict from any other Person with respect to the WilTel Licensed Intellectual
Property and Software, and, to the best knowledge of WCG, the conduct of the
WilTel Business has not infringed, misappropriated or otherwise conflicted with
any Intellectual Property or Software of any other Person. Except as set forth
on Schedule 4.4(c), none of the WilTel Licensed Intellectual Property and
Software requires the consent or waiver of any Person or Authority prior to the
sale, assignment, transfer, conveyance or delivery thereof to Newco pursuant to
this Agreement and such sale, assignment, transfer, conveyance and delivery to
Newco will not result in any loss of any WilTel Licensed Intellectual Property
and Software or any right to use, exploit or receive benefits with respect to
such WilTel Licensed Intellectual Property and Software, except where the
failure to obtain such consent or waiver would not have a Relevant Adverse
Effect on the WilTel Assets or WilTel Business.
(d) Except as set forth on Schedule 4.4(d), the WilTel Assets
constitute substantially all of the assets (i) necessary for the conduct of the
WilTel Business in the ordinary course consistent with past practices or (ii)
currently used by WilTel in connection with the WilTel Business. Except as set
forth on Schedule 4.4(d), the conduct of the WilTel Business in the ordinary
course is not dependent upon the right to use the property of Persons other than
WilTel, except such property as is leased or licensed to WilTel pursuant to any
of the WilTel Contracts or the absence of which would not have a Relevant
Adverse Effect on Newco. Except as set forth on Schedule 4.4(d), neither WCG nor
any Affiliate of WCG (other than WilTel) owns or has any interest in any WilTel
Asset or any asset currently used by WilTel in the WilTel Business, except the
WCG Retained Assets, or such assets as are leased or licensed to WilTel pursuant
to any of the WilTel Contracts or the loss of which would not have a Relevant
Adverse Effect on WilTel or Newco.
(e) Except as set forth on Schedule 4.4 (e), the WilTel Owned
Intellectual Property and Software, the WilTel Licensed Intellectual Property
and Software, constitute all of the material intellectual property rights used
by WilTel in the conduct of the WilTel Business as currently conducted.
4.5 CONTRACTS, COMMITMENTS AND CUSTOMERS.
(a) Set forth in Schedule 4.5(a) attached hereto is a list of
each of the following agreements between WilTel and its customers: (i) service
or maintenance contracts with an annual revenue commitment of $500,000 or
greater, and (ii) purchase, lease or rental agreements for the installation or
upgrade of a PBX with a purchase price of $1,000,000 or greater for which the
customer has not been sent the final invoice.
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<PAGE> 44
(b) Set forth in Schedule 4.5(b) attached hereto is a list of
each WilTel Contract, other than agreements with customers, which would create a
monetary obligation of WilTel, or a right to receive funds by WilTel, of greater
than $300,000 in the aggregate. Also set forth on Schedule 4.5(b) is a list of
all guarantees of the obligations of WilTel by WCG or any WCG Affiliate.
(c) To the best knowledge of either WCG or WilTel, neither WCG
nor WilTel is in breach of any provision of, or in default (or knows of any
event or circumstance that with notice or lapse of time or both would constitute
an event of default) under the terms of, any WilTel Contract except to the
extent the loss of such WilTel Contract would not have a Relevant Adverse Effect
on Newco. Except as set forth in Schedule 4.5(c), all of the WilTel Contracts
listed in Schedule 4.5(a) and Schedule 4.5(b) are in full force and effect, and
neither WCG nor WilTel is aware of any pending or overtly threatened Claims or
disputes with respect thereto. None of the customers or counter parties under
the WilTel Contracts listed in Schedule 4.5(a) and Schedule 4.5(b) has notified
WCG or WilTel in writing that it intends to discontinue its relationship with
the WilTel Business.
(d) Except as set forth on Schedule 4.5(d), and except to the
extent that failure to obtain consent or waiver can be remedied by means of the
mechanism set forth in Section 10.8 hereto without a Relevant Adverse Effect
upon Newco, the WilTel Contracts listed in Schedule 4.5(a) and Schedule 4.5(b)
do not require the consent or waiver of any Person or Authority prior to the
sale, assignment, transfer, conveyance or delivery thereof pursuant to this
Agreement.
(e) Except as set forth in Schedule 4.5(e), true and complete
copies of the WilTel Contracts listed in Schedule 4.5(a) and Schedule 4.5(b)
have been made available to NTI prior to the date of this Agreement.
4.6 FINANCIAL STATEMENTS.
(a) Attached as Schedule 4.6(a) hereto is a copy of the
unaudited consolidated balance sheet of WilTel as of December 31, 1996 (the
"WilTel Year End Balance Sheet") and the unaudited consolidated income statement
of WilTel for the year ended on December 31, 1996 (the "WilTel Financial
Statements"), which (except as noted therein):
(i) have been prepared in accordance with GAAP
applied on a basis consistent with the consolidated balance sheet of the WilTel
Business as of December 31, 1995 and the consolidated income statement of WilTel
for the year ended December 31, 1995 (without change in the application of
principles or the selection of methods of calculation permitted by GAAP unless
based solely upon changes in facts and circumstances or required by changes in
GAAP) and fairly present the consolidated financial condition of WilTel as of
the date thereof, the
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results of operations and the cash flows for the period set forth therein,
subject to normal year-end adjustments, footnotes and other presentation items;
and
(ii) except with respect to United States federal and
state income taxes, reflect all liabilities or obligations, whether accrued,
absolute, contingent or otherwise, of WilTel as required under GAAP consistently
applied other than those liabilities incurred since the date thereof, in the
ordinary course of business consistent with past practice.
(b) Attached as Schedule 4.6(b) hereto is a copy of an audited
balance sheet of WilTel as of December 31, 1996, which represents the audited
consolidated balance sheet of WilTel as of December 31, 1996, adjusted to
exclude the net book values which those categories of items included in the WCG
Retained Assets and WCG Retained Liabilities had as of December 31, 1996 (the
"WilTel Adjusted Year End Balance Sheet").
(c) The schedules provided to NTI detailing capitalized costs
with respect to Software owned or leased by WilTel are true, correct and
complete in all material respects and accurately reflect the information
purported to be set forth therein in accordance with GAAP.
(d) Attached as Schedule 4.6(d) hereto are schedules
reflecting: (i) the gross revenues of the WilTel Business for each of the years
ended December 31, 1995 and 1996, showing the portions thereof arising out of
each of (1) new systems and enhancements, (2) maintenance, and (3)
moves/adds/changes; and the portions of each such category of revenue arising
out of the geographic regions shown on such schedules; (ii) the cost of goods
sold for each of such years and each of such categories of revenue, and (iii)
actual product purchases from NTI for 1995 and 1996, and the forecast for
product purchases from NTI for 1997 as prepared by WilTel. Except as otherwise
disclosed on Schedule 4.6(d), such schedules have been prepared on a basis
consistent with the WilTel Financial Statements for the periods covered thereby
and fairly present the information contained therein.
(e) As soon as possible following execution of this Agreement,
and in no event less than five Business Days prior to the Closing Date, WCG
shall deliver to NTI the unaudited consolidated balance sheet of WilTel as of
March 31, 1997, and the unaudited consolidated income statement of WilTel for
the quarter then ended, prepared on a basis consistent in all respects with the
WilTel Financial Statements (the "WilTel First Quarter Statements"). The WilTel
First Quarter Statements shall be attached hereto as Schedule 4.6(e).
(f) As soon as possible following execution of this Agreement,
and in no event less than five Business Days prior to the Closing Date, WCG
shall deliver to NTI the unaudited consolidated balance sheet of WilTel as of
March 31, 1997,
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adjusted to exclude the net book values which those categories of items included
in the WCG Retained Assets and the WCG Retained Liabilities had as of March 31,
1997, prepared on a basis consistent in all respects with the WilTel Adjusted
Year End Balance Sheet (the "WilTel Adjusted Effective Date Balance Sheet"). The
WilTel Adjusted Effective Date Balance Sheet shall be attached hereto as
Schedule 4.6(f).
4.7 TAXES. Except as set forth in Schedule 4.7 (a), WCG, WilTel, and
any consolidated, combined, unitary or aggregate group for Tax purposes of which
WCG or WilTel is or has been a member, have timely filed all Tax Returns
required to be filed by them with respect to the WilTel Business and have timely
paid, have caused to be timely paid, or have had timely paid on their behalf all
Taxes which are due (whether or not shown on a Tax Return with respect to the
WilTel Business). Each of the Tax Returns filed by WCG or WilTel is accurate and
complete in all material respects with respect to the WilTel Business. Except as
described on Schedule 4.7(a), no material deficiencies exceeding $1,000,000 for
a single Tax for any Taxes have been proposed, asserted or assessed against
Williams (with respect to the income or operations of WilTel), or WilTel, and no
requests for waivers of the time to assess any such Taxes have been granted or
are pending. Except as set forth in Schedule 4.7(a), there are no current
examinations of any Tax Return of Williams (with respect to the income or
operations of WilTel), or WilTel being conducted and there are no settlements or
any prior examinations which could reasonably be expected to have a Material
Adverse Effect on WCG (with respect to the income or operation of WilTel) or
WilTel.
4.8 NO VIOLATIONS OR LITIGATION.
(a) To the best knowledge of WCG, WilTel has not violated, and
the consummation of the transactions contemplated hereby will not cause any
violation of, any Permit, any order of any Authority or any law, ordinance,
regulation, order, requirement, statute, rule, permit, concession, grant,
franchise, license or other governmental authorization relating or applicable to
the WilTel Business or any of the WilTel Assets or that could have a Relevant
Adverse Effect on the WilTel Assets or the WilTel Business.
(b) Except as set forth in Schedule 4.8(b) hereto and except
for Claims and examinations relating to Taxes, to the best knowledge of WCG,
there is no Claim, or examination (including, without limitation, any change in
any zoning or building ordinance) pending or, to the best knowledge of WCG,
threatened against or affecting WilTel, the WilTel Business, or any of the
WilTel Assets, at law or in equity, before or by any Authority or any third
party that could have a Relevant Adverse Effect on WilTel, the WilTel Assets or
the WilTel Business.
(c) This Section 4.8 does not address environmental matters
within the scope of Section 4.10.
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4.9 PROPERTY LEASES. Schedule 4.9 is a complete list of all real
property leases and those personal property leases with annual rental payments
equal to or greater than Three Hundred Thousand Dollars ($300,000) per annum to
which WilTel is a party (the "Leases"). Each of the Leases is a valid and
existing lease, enforceable in accordance with its terms, and, to the best
knowledge of WCG, there are no existing defaults, events of default or events,
occurrence or acts that, with the giving of notice or lapse of time or both,
would constitute defaults, in each case by WilTel and, to the best knowledge of
WCG, by any other party thereto, under any of the Leases.
4.10 ENVIRONMENTAL.
(a) Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
(i) The term "Environmental Law(s)" means each and
every law, Order, Permit, or similar requirement of each and every Authority,
pertaining to (A) the protection of human health, safety, the environment,
natural resources and wildlife, (B) the protection or use of surface water,
groundwater, rivers, and other bodies of water, (C) the management, manufacture,
possession, presence, use, generation, transportation, treatment, storage,
disposal, Release, threatened Release, abatement, removal, remediation or
handling of, or exposure to, any Hazardous Substance or (D) pollution, including
without limitation, as amended, CERCLA, the Solid Waste Disposal Act, 42 U.S.C.
? 6901 et seq., the Clean Air Act, 42 U.S.C. ? 7401 et seq. and the Federal
Water Pollution Control Act, 33 U.S.C. ? 1251, et seq.
(ii) The term "Hazardous Substance" means any
substance which is (A) defined as a hazardous substance, hazardous material,
hazardous waste, pollutant or contaminant under any Environmental Laws, (B) a
petroleum hydrocarbon, including crude oil or any fraction thereof, (C)
hazardous, toxic, corrosive, flammable, explosive, infectious, radioactive or
carcinogenic or (D) regulated pursuant to any Environmental Laws.
(iii) The term "Release" means any spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping, or disposing into the environment (including without
limitation the abandonment or discarding of barrels, containers, and other
receptacles containing any Hazardous Substance).
(b) Compliance with Environmental Laws. Except as disclosed on
Schedule 4.10(b), with respect to both (i) the operations conducted at and
conditions present at the real property currently used or occupied in connection
with the WilTel Business (the "WilTel Real Property"), and (ii) the operations
conducted at and the
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conditions present at any real property formerly used or occupied in connection
with the WilTel Business (the "Former WilTel Real Property"), during the period
of such use or occupancy by WCG or its Affiliates, WCG or its Affiliates were
and are in compliance with applicable Environmental Laws, except for such
failures to comply that, individually and in the aggregate, have not had and
could not reasonably be expected to have, a Material Adverse Effect on WilTel.
(c) Environmental Liabilities. Except as disclosed on Schedule
4.10(c), there are no past or present conditions, circumstances, events,
activities, practices, or agreements arising out of, or related either to the
WilTel Real Property or to the Former WilTel Real Property, including but not
limited to any on-site or off-site Release of any Hazardous Substances, which
have given rise to or could reasonably be expected to give rise to: (i)
liabilities or obligations of WCG or its Affiliates for any clean-up, corrective
action or remedial activity under any Environmental Law; (ii) any Claim against
WCG or its Affiliates under any Environmental Law for personal injury, property
damage, or damage to natural resources, or (iii) the imposition of fines or
penalties on WCG or its Affiliates under any Environmental Law, where such
liabilities, obligations, Claims, fines or penalties, either individually or in
the aggregate, have had or could reasonably be expected to have a Material
Adverse Effect on WilTel.
(d) Permits. Schedule 4.10(d) sets forth an accurate and
complete list of all material Permits issued to WCG and its Affiliates under any
Environmental Law for the operation of the WilTel Business with respect to the
operations conducted at and conditions present at the WilTel Real Property.
Except as disclosed on Schedule 4.10(d), WCG or its Affiliates have made all
filings necessary to request the timely renewal or issuance of all Permits
necessary under Environmental Laws for the continued use and operation of the
WilTel Real Property to conduct the WilTel Business as it is presently being
conducted.
(e) Proceedings. Except as disclosed in Schedule 4.10(e),
there is no Claim or Proceeding pending or threatened against WCG or its
Affiliates, under or in connection with any Environmental Law, which could
reasonably be expected to result in a fine, penalty or other obligation, cost or
expense, except for such obligations, costs, or expenses that, individually or
in the aggregate, have not had and could not reasonably be expected to have a
Material Adverse Effect on WilTel.
(f) Transfer Restrictions and Liens. Except as disclosed in
Schedule 4.10(f), neither the WilTel Real Property nor the WilTel Business (i)
is subject to, or would as a result of this transaction be subject to, the New
Jersey Industrial Site Recovery Act, or any other state or local Environmental
Law which would impose restrictions, such as notice, disclosure or obtaining
approval prior to this transaction, or (ii) is subject to, or could reasonably
be expected to become subject to, any Liens under any Environmental Laws.
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(g) Documents. WCG and its Affiliates will have made available
by Closing to NTI any and all pleadings, reports, assessments, analytical
results, permits, and other material documents, correspondence and records
concerning Environmental Laws, Hazardous Substances, or other environmental
subjects in each case relating to the operation of the WilTel Business.
4.11 INSURANCE. Schedule 4.11 sets forth a complete and accurate list
of all policies (including their respective expiration dates) of property,
general liability, automobile liability, worker's compensation, and other forms
of insurance presently in effect with respect to WilTel, the WilTel Business or
any of the WilTel Assets, its operations, and its employees excluding those
policies relating to Employee Benefit Plans. To the best knowledge of WCG, there
are no facts or circumstances which would prevent the extension of such
insurance policies for the benefit of Newco after the Closing.
4.12 EMPLOYMENT AND LABOR MATTERS.
(a) Attached hereto as Schedule 4.12(a)(i) is a true and
complete list of the employees of the WilTel Business (the "WilTel Active
Employees") as of December 31, 1996, (including regular full time and part-time
employees), identified by name and employee number, together with job titles,
compensation and service information concerning such employees. Except as set
forth on Schedule 4.12(a)(ii), WilTel is not a party to any employment contract
with and will not have any liability (other than accrued salary, vacation pay,
commissions or as described in Schedule 4.8(b)) to any employees, any former
employees, or any independent contractors of the WilTel Business (collectively
?WilTel Employees?).
(b) Except as set forth on Schedule 4.12(b), WilTel is not a
party to any collective bargaining agreement or union contract with respect to
the employees and no collective bargaining agreements are being negotiated by
WilTel with respect to any of the WilTel Employees; and no notice of a proposed
union certification or recognition election has been received by WilTel.
(c) Except as otherwise set forth on Schedule 4.12(c), no
WilTel Employees are currently on a leave of absence due to sickness or
disability and no claim is pending and to the best knowledge of WCG, no Claim is
expected to be made by any WilTel Employees for workers? compensation benefits.
(d) WilTel has complied in all material respects with all laws
relating to the employment of labor, including, without limitation, ERISA and
those laws relating to wages, hours, collective bargaining, unemployment
insurance, worker's compensation, equal employment opportunity, payment and
withholding of taxes, the Immigration Reform and Control Act, the Workers
Adjustment and Retraining Act, the
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Occupational Safety and Health Act, the Drug Free Workplace Act, and the
National Labor Relations Act, as amended.
(e) Attached hereto as Schedule 4.12(e) is a true and complete
list of each of the following which is, or has been, sponsored, maintained or
contributed to by WilTel or any trade or business, whether or not incorporated
(an "ERISA Affiliate") that together with WilTel would be considered affiliated
with WilTel under Section 414(b), (c), (m) or (o) of the Code or Section
4001(b)(1) of ERISA for the benefit of any person who, as of the Closing, is a
WilTel Employee: (i) each "employee benefit plan," as such term is defined in
Section 3(3) of ERISA, ("Plan"); and (ii) each personnel policy, stock option
plan, bonus plan or arrangement, incentive award plan or arrangement, vacation
policy, severance pay plan, policy, program or agreement, deferred compensation
agreement or arrangement, retiree benefit plan or arrangement, fringe benefit
program or practice (whether or not taxable), employee loan, consulting
agreement, employment agreement and each other employee benefit plan, agreement,
arrangement, program, practice or understanding which is not described in
Section 4.12(e)(i) ("Benefit Program or Agreement") (such Plans and Benefit
Programs or Agreement are sometimes collectively referred to in this Agreement
as the "Employee Benefit Plans").
(f) True, correct and complete copies of each of the current
Plans, and related trusts, if applicable, including all amendments thereto, have
been furnished or made available to NCS by WCG. There have also been furnished
to NCS by WCG, with respect to each Plan required to file such report and
description, the report on Form 5500 for the past two years and the most recent
summary plan description. True, correct and complete copies or descriptions of
all Benefit Programs or Agreements have also been furnished or made available to
NCS by WCG.
(g) Except as otherwise set forth on Schedule 4.12(g): (i)
none of WilTel or any ERISA Affiliate contributes to or has an obligation to
contribute to, nor has at any time contributed to or had an obligation to
contribute to, a multi-employer plan within the meaning of Section 3(37) of
ERISA or any other plan subject to Title IV or ERISA; (ii) each of WilTel and
its ERISA Affiliates has performed all obligations, whether arising by operation
of law or by contract, including, but not limited to, ERISA and the Code,
required to be performed by it in connection with the Employee Benefit Plans,
and there have been no defaults or violations by any other party to the Employee
Benefit Plans; (iii) all reports, returns, notices, disclosures and other
documents relating to the Plans required to be filed with or furnished to
governmental entities, plan participants or plan beneficiaries have been timely
filed or furnished in accordance with applicable law and each Employee Benefit
Plan has been administered in compliance with its governing written documents;
(iv) each of the Plans intended to be qualified under Section 401 of the Code
satisfies the requirements of such Section and has received a favorable
determination letter from the IRS regarding such qualified status and has not
been amended, operated or administered in a way which
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would adversely affect such qualified status; (v) there are no actions, suits or
claims pending (other than routine claims for benefits) or, to the best
knowledge of WCG, contemplated or threatened against, or with respect to, any of
the Employee Benefit Plans or their assets; (vi) each trust maintained in
connection with each Plan, which is qualified under Section 401 of the Code, is
tax exempt under Section 501 of the Code; (vii) all contributions required to be
made to the Employee Benefit Plans have been made timely; (viii) no accumulated
funding deficiency, whether or not waived, within the meaning of Section 302 of
ERISA or Section 412 of the Code has been incurred, and there has been no
termination or partial termination of any Plan within the meaning of Section
411(d)(3) of the Code; (ix) no act, omission or transaction has occurred which
could result in imposition on the Sellers, WilTel or its ERISA Affiliates of (A)
breach of fiduciary duty liability damages under Section 409 of ERISA, (B) a
civil penalty assessed pursuant to subsections (c), (i) or (1) of Section 502 of
ERISA or (C) a tax imposed pursuant to Chapter 43 of Subtitle D of the Code; (x)
to the best knowledge of WCG, there is no matter pending with respect to any of
the Plans before the IRS, the Department of Labor or the PBGC; (xi) each of the
Employee Benefit Plans complies in form and operation with the applicable
provisions of the Code and ERISA; (xii) each Employee Benefit Plan provides that
it may be unilaterally amended or terminated in its entirety without any
liability or other obligation except the liability set forth for benefits as
described in the plan upon such amendment or termination; (xiii) neither WCG nor
WilTel has made any written or oral representations or promises to any present
or former director, officer, employee or other agent concerning his or her
terms, conditions or benefits of employment (other than communicating that which
appears on Schedule 4.12(a)), including without limitation the tenure of any
such employment or the conditions under which such employment may be terminated
by WilTel or Newco which will be binding upon or enforceable against Newco after
the Closing; (xiv) the actuarial present values of all accrued deferred
compensation entitlement of all WilTel Employees and their respective
beneficiaries, other than entitlement accrued pursuant to funded retirement
plans subject to the provisions of Section 412 of the Code, have been fully
reflected on the financial statements and balance sheets attached as Schedule
4.6(a). Such entitlement includes, without limitation, any entitlement under any
executive compensation, supplemental retirement or any employment continuity
agreement; and (xv) all liabilities for post-retirement benefits required to be
booked under Statement of Financial Standards No. 106 have been fully reflected
on the financial statements and balance sheets attached as Schedule 4.6(a).
(h) Attached as hereto as Schedule 4.12(h) is a list of all
transfers out of the WilTel Business since September 1, 1996.
4.13 FINDER'S FEE. Other than Salomon Brothers Inc, no investment
banker, broker, finder or other Person is entitled to any brokerage or finder's
fee or similar commission from WCG or WilTel in respect of the transactions
contemplated by this Agreement. WCG shall indemnify and hold NTI and its
Affiliates harmless from and
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against any and all Claims, liabilities and obligations with respect to any such
fees, commissions or expenses asserted by any such Person on the basis of any
act, statement, agreement or commitment alleged to have been made by WCG or any
of its Affiliates with respect thereto.
4.14 MINUTE BOOKS. The minute books of WilTel, copies of which,
certified by WilTel's secretary or assistant secretary, have heretofore been
made available to NTI, contain true and complete minutes and records of all
meetings, proceedings and other actions of shareholders and the Board of
Directors of WilTel, none of which have been amended to the best knowledge of
WCG (except as set forth in such copies) and are in full force and effect as of
the date hereof.
4.15 ABSENCE OF CERTAIN CHANGES. Except as described in Schedule 4.15
and except for the consummation of the transactions contemplated by Article II,
since December 31, 1996, there has not been:
(a) Any mortgage, encumbrance or Lien placed on any of the
WilTel Assets by or as a result of any act or omission of WilTel which remains
in existence on the date hereof or on the Closing Date, except for Permitted
Encumbrances;
(b) Any obligation or liability in excess of Two Hundred Fifty
Thousand Dollars ($250,000) incurred by WilTel other than obligations and
liabilities incurred in accordance with past practice in the ordinary course of
business;
(c) Any purchase, sale or other disposition, or any agreement
or other arrangement for the purchase, sale or other disposition, of any of the
WilTel Assets, for an amount in excess of One Hundred Thousand Dollars
($100,000), other than in accordance with past practice in the ordinary course
of business;
(d) Any damage, destruction or Loss in excess of One Hundred
Thousand Dollars ($100,000) per single event, whether or not covered by
insurance, affecting the WilTel Assets;
(e) Any strike, work stoppage, concerted work slow down,
grievance or arbitration proceeding, unfair labor practice charge or complaint
involving the WilTel Business;
(f) Any material change in the Employee Benefit Plans listed
(or required to be listed) on Schedule 4.12(e) or any change in the compensation
payable or to become payable with respect to the WilTel Business to any officer,
employee or agent of WilTel or WCG; except changes in compensation which
occurred in the ordinary course of business and which did not involve, in any
case, an increase in compensation in excess of Twenty Thousand Dollars ($20,000)
per annum for any one employee.
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(g) A cancellation of any debt in excess of One Hundred
Thousand Dollars ($100,000) owed to or claim of WilTel, or waiver of any right
of WilTel, other than in accordance with past practice in the ordinary course
business;
(h) Any extraordinary Losses in excess of Fifty Thousand
Dollars ($50,000) or more individually aggregating in excess of Seven Hundred
Fifty Thousand Dollars ($750,000) or more suffered by the WilTel Business;
(i) Any change in any method of accounting or accounting
practice by the WilTel Business, except as may be required by GAAP; or
(j) Any other change in the financial condition, properties,
assets, liabilities, business or operations of the WilTel Business which change,
by itself or in conjunction with all other such changes, whether or not arising
in the ordinary course of business, has been or is reasonably likely to have a
Material Adverse Effect with respect to the WilTel Business or Newco.
4.16 NO UNTRUE STATEMENTS. This Agreement, the Exhibits and Schedules
hereto, and any certificate delivered to NTI and its representatives in
connection with this Agreement or the transactions contemplated hereby, do not
and will not contain when delivered any untrue statement of any material fact
and do not and will not omit to state a material fact necessary to make the
statements contained herein and therein taken as a whole not misleading. To the
best knowledge of WCG, there is no material fact that has not been disclosed in
writing to NTI by WCG that has or is expected to have a Material Adverse Effect
on WilTel or Newco.
ARTICLE V
MATTERS PENDING CLOSING
5.1 NTI ACTIONS PENDING CLOSING. From the date hereof until the later
of Closing and the Effective Time, except as expressly contemplated by this
Agreement or to the extent WCG shall otherwise consent in writing:
(a) NTI shall and shall cause its appropriate Affiliates to,
in a timely, accurate and complete manner (i) make such filings and secure any
consents, approvals or authorizations of any Authority required to be obtained
by it or such Affiliates or which may be necessary for the consummation of the
transactions contemplated by this Agreement; and (ii) provide to WCG such
information as WCG may require to assist NTI and NCS to make such filings as may
be required for the consummation of the transactions contemplated by this
Agreement.
(b) Except as set forth in Schedule 5.1(b) attached hereto or
with the other party's consent not to be unreasonably withheld, NTI, NCS and
their respective
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Affiliates from and after the date of this Agreement shall not and shall not
permit NCS or an Affiliate of NTI or NCS to do or agree to do, any of the
following in respect of the NCS Business:
(i) Transfer, sell, assign or otherwise dispose of
any material assets other than in the ordinary course of its
business;
(ii) Create, incur, assume or suffer to exist upon
any assets of the NCS Business any Liens arising through any
act or omission of NTI, NCS or any Affiliate of NCS except
Liens securing indebtedness disclosed herein or Permitted
Encumbrances;
(iii) Create, incur, assume or suffer to exist any
indebtedness, liability or obligation in excess of One Hundred
Thousand Dollars ($100,000) except current liabilities (other
than for borrowed money) incurred in the ordinary course of
business;
(iv) Assume, guarantee, endorse or become liable on,
or agree to repurchase the obligation of any Person, firm or
corporation, except for the endorsement of negotiable
instruments for deposit or collection in the ordinary course
of business;
(v) Merge or consolidate with or into any Person
(other than Newco);
(vi) Declare or pay any dividend of any kind (except
as otherwise specifically contemplated hereby), or make any
other distribution in respect of, or purchase, redeem or
otherwise acquire, any of its shares;
(vii) Make any loan or advance to, or make any
investment in any Person, whether by acquisition of stock or
indebtedness, by loan, guarantee or otherwise, except for
advances in the ordinary course of business;
(viii) Make any capital expenditure in an amount in
excess of One Hundred Thousand Dollars ($100,000) per item or
One Million Dollars ($1,000,000) in the aggregate with respect
to all capital expenditures;
(ix) Materially change the Employee Benefit Plans
listed (or required to be listed) on Schedule 3.12(e) or
change the compensation payable or to become payable with
respect to the NCS Business to any officer, employee or agent
of NTI or NCS except changes in compensation which occur in
the ordinary course of business and which
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do not involve, in any case, an increase in compensation in
excess of twenty thousand dollars ($20,000) per annum for any
one employee.
(x) Amend its certificate of incorporation or
by-laws;
(xi) Waive any of its rights or Claims having a value
in the aggregate in excess of One Million Dollars
($1,000,000);
(xii) Enter into any transaction having a Relevant
Adverse Effect other than in the ordinary course of business;
(xiii) Except as provided for in Section 3.11, permit
to be canceled or terminated any insurance policy covering the
business, assets, operations or employees of NCS, or permit
any of the coverage thereunder to lapse, unless simultaneously
with such termination, cancellation or lapse replacement
policies providing substantially the same coverage are in full
force and effect;
(xiv) Change in any respect any of its accounting
principles, policies or procedures, except as may be required
by GAAP, in respect of the NCS Business;
(xv) Settle or compromise any suit or Claim or
threatened suit or Claim in each case involving Two Hundred
Thousand Dollars ($200,000) or more not covered by insurance
relating to the NCS Business;
(xvi) Modify, amend or terminate any material
contract or agreement relating to the NCS Business; or waive,
release, relinquish or assign any material contract or
agreement or other right or claim related to the NCS Business;
or cancel or forgive any indebtedness of One Hundred Thousand
Dollars ($100,000) or more owed to NTI or NCS which would be
included in the NCS Assets; or
(xvii) Take any action that could reasonably be
expected to result in any of the conditions to the obligations
of WCG set forth in Article VI not being satisfied or that
would materially impact the ability of NTI to consummate the
transactions contemplated herein in accordance with the terms
hereof or that would materially delay such consummation.
(c) From and after the date of this Agreement until the
Closing, NTI shall and shall cause each of NCS and NTI's or NCS' Affiliates to
do all of the following in respect of the NCS Business:
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(i) Carry on the NCS Business in substantially the
same manner as heretofore conducted and not make any purchase
or sale, or introduce any method of management or operation in
respect of its business or properties, except in a manner
consistent with its prior practice;
(ii) (A) Maintain and preserve its business
organization intact, including, without limiting the
generality of the foregoing, preserving any confidential
information and trade secrets; (B) substantially maintain its
relationships with its suppliers and customers and others
having business relations with it so that they will be
preserved for Newco on and after the Closing; and (C) use its
best reasonable efforts to retain its present employees so
that they will be available to Newco on and after the Closing;
(iii) Do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate
existence and all franchises, rights and privileges necessary
for the conduct of its business, including, without limiting
the generality of the foregoing, all licenses and permits, and
comply with the requirements of all applicable laws and all
rules, regulations and orders of all Authorities having
jurisdiction over it or its properties;
(iv) Pay and discharge, or cause to be paid and
discharged, all lawful taxes, assessments and governmental
charges or levies imposed upon it or upon its income or
property, prior to the date upon which penalties attach
thereto, except any of the foregoing being contested by NTI,
NCS or such Affiliate in good faith;
(v) Promptly notify WCG in writing of any
investigation, action, suit or proceeding commenced against it
before any court or any Authority;
(vi) Maintain its books, accounts and records in the
usual, regular and ordinary manner, on a basis consistent with
prior years;
(vii) Maintain its inventory levels at levels
consistent with the normal and ordinary course of operation as
the NCS Business has been operated prior to the date hereof;
(viii) Promptly notify WCG of the operating results
of the NCS Business and of any extraordinary loss suffered by
the NCS Business; and
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(ix) Refrain from doing any act or omitting to do any
act, or permitting any act or omission to act, which will
cause a material breach of any of NCS' material contracts,
commitments or obligations.
(d) Between the date of this Agreement and the Closing, NTI,
NCS and their Affiliates during ordinary business hours shall (i) give WCG and
its authorized representatives and agents reasonable access to all books,
records, offices and other facilities and properties of NCS relating to the NCS
Business, (ii) permit WCG and its employees and agents to make such inspections
thereof as WCG may reasonably request, and (iii) cause its officers and
authorize NCS' accountants to furnish WCG and its employees and agents with such
financial and operating data and other information with respect to the financial
statements, business and properties of NCS relating to the NCS Business as WCG
may from time to time reasonably request.
V.2 WCG ACTIONS PENDING CLOSING. From the date hereof until the later
of Closing and Effective Time, except as expressly contemplated by this
Agreement or to the extent NTI shall otherwise consent in writing:
(a) WCG shall and shall cause its appropriate Affiliates to,
in a timely, accurate and complete manner (i) make such filings and secure any
consents, approvals or authorizations of any Authority required to be obtained
by it or such Affiliates or which may be necessary for the consummation of the
transactions contemplated by this Agreement; and (ii) provide to NTI such
information as NTI may require to assist WCG to make such filings as may be
required for the consummation of the transactions contemplated by this
Agreement.
(b) Except as set forth in Schedule 5.2(b) attached hereto or
with the other party's consent not to be unreasonably withheld, WCG, WilTel and
their respective Affiliates from and after the date of this Agreement shall not
and shall not permit WilTel or an Affiliate of WCG or WilTel to do or agree to
do, any of the following in respect of the WilTel Business:
(i) Transfer, sell, assign or otherwise dispose of
any material assets other than in the ordinary course of its
business;
(ii) Create, incur, assume or suffer to exist upon
any assets of the WilTel Business any Liens arising through
any act or omission of WilTel or any Affiliate of WilTel
except Liens securing indebtedness disclosed herein or
Permitted Encumbrances;
(iii) Create, incur, assume or suffer to exist any
indebtedness, liability or obligation in excess of One Hundred
Thousand Dollars ($100,000) except current liabilities (other
than for borrowed money) incurred in the ordinary course of
business;
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(iv) Assume, guarantee, endorse or become liable on,
or agree to repurchase the obligation of any Person, firm or
corporation, except for the endorsement of negotiable
instruments for deposit or collection in the ordinary course
of business;
(v) Merge or consolidate with or into any Person
(other than Newco);
(vi) Declare or pay any dividend of any kind (except
as otherwise specifically contemplated hereby), or make any
other distribution in respect of, or purchase, redeem or
otherwise acquire, any of its shares;
(vii) Make any loan or advance to, or make any
investment in any Person, whether by acquisition of stock or
indebtedness, by loan, guarantee or otherwise, except for
advances in the ordinary course of business;
(viii) Make any capital expenditure in an amount in
excess of One Hundred Thousand Dollars ($100,000) per item or
One Million Dollars ($1,000,000) in the aggregate with respect
to all capital expenditures;
(ix) Materially change the Employee Benefit Plans
listed (or required to be listed) on Schedule 4.12(e) or
change the compensation payable or to become payable with
respect to the WilTel Business to any officer, employee or
agent of WilTel or WCG except changes in compensation which
occur in the ordinary course of business and which do not
involve, in any case, an increase in compensation in excess of
twenty thousand dollars ($20,000) per annum for any one
employee.
(x) Amend its certificate of incorporation or
by-laws;
(xi) Waive any of its rights or Claims having a value
in the aggregate in excess of One Million Dollars
($1,000,000);
(xii) Enter into any transaction having a Relevant
Adverse Effect, other than in the ordinary course of business;
(xiii) Permit to be canceled or terminated any
insurance policy covering the business, assets, operations or
employees of WilTel, or permit any of the coverage thereunder
to lapse, unless simultaneously with such termination,
cancellation or lapse replacement policies providing
substantially the same coverage are in full force and effect;
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(xiv) Change in any respect any of its accounting
principles, policies or procedures, except as may be required
by GAAP, in respect of the WilTel Business;
(xv) Settle or compromise any suit or Claim or
threatened suit or Claim in each case involving Two Hundred
Thousand Dollars ($200,000) or more not covered by insurance
relating to the WilTel Business;
(xvi) Modify, amend or terminate any material
contract or agreement relating to the WilTel Business; or
waive, release, relinquish or assign any material contract or
agreement or other right or claim related to the WilTel
Business; or cancel or forgive any indebtedness of One Hundred
Thousand Dollars ($100,000) or more owed to WilTel which would
be included in the WilTel Assets; or
(xvii) Take any action that could reasonably be
expected to result in any of the conditions to the obligations
of NTI set forth in Article VI not being satisfied or that
would materially impact the ability of WCG to consummate the
transactions contemplated herein in accordance with the terms
hereof or that would materially delay such consummation.
(c) From and after the date of this Agreement until the
Closing, WCG shall and shall cause each of WilTel and WCG's and WilTel's
Affiliates to do all of the following in respect of the WilTel Business:
(i) Carry on the WilTel Business in substantially the
same manner as heretofore conducted and not make any purchase
or sale, or introduce any method of management or operation in
respect of its business or properties, except in a manner
consistent with its prior practice;
(ii) (A) Maintain and preserve its business
organization intact, including, without limiting the
generality of the foregoing, preserving any confidential
information and trade secrets; (B) substantially maintain its
relationships with its suppliers and customers and others
having business relations with it so that they will be
preserved for Newco on and after the Closing; and (C) use its
best reasonable efforts to retain its present employees so
that they will be available to Newco on and after the Closing;
(iii) Do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate
existence and all franchises, rights and privileges necessary
for the conduct of its business, including, without limiting
the generality of the foregoing, all licenses and permits,
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and comply with the requirements of all applicable laws and
all rules, regulations and orders of all Authorities having
jurisdiction over it or its properties;
(iv) Pay and discharge, or cause to be paid and
discharged, all lawful taxes, assessments and governmental
charges or levies imposed upon it or upon its income or
property, prior to the date upon which penalties attach
thereto, except any of the foregoing being contested by WilTel
in good faith;
(v) Promptly notify NTI in writing of any
investigation, action, suit or proceeding commenced against it
before any court or any Authority;
(vi) Maintain its books, accounts and records in the
usual, regular and ordinary manner, on a basis consistent with
prior years;
(vii) Maintain its inventory levels at levels
consistent with the normal and ordinary course of operation as
the WilTel Business has been operated prior to the date
hereof;
(viii) Promptly notify NTI of the operating results
of the WilTel Business and of any extraordinary loss suffered
by WilTel; and
(ix) Refrain from doing any act or omitting to do any
act, or permitting any act or omission to act, which will
cause a material breach of any of WilTel's material contracts,
commitments or obligations.
(d) Between the date of this Agreement and the Closing, WCG
and WilTel during ordinary business hours shall (i) give NTI and its authorized
representatives and the agents reasonable access to all books, records, offices
and other facilities and properties of WilTel relating to the WilTel Business,
(ii) permit NTI and its employees and agents to make such inspections thereof as
NTI may reasonably request, and (iii) cause its officers and authorize WilTel's
accountants to furnish NTI and its employees and agents with such financial and
operating data and other information with respect to the financial statements,
business and properties of WilTel relating to the WilTel Business as NTI may
from time to time reasonably request.
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ARTICLE VI
CONDITIONS TO CLOSING
6.1 CONDITIONS TO OBLIGATION OF THE PARTIES The obligations of the
Parties to effect the Closing shall be subject to the following conditions
unless waived in writing by all Parties:
(a) Formation of LLC. The Certificate of Formation shall have
been filed with the Secretary of State of Delaware and all other acts necessary
to form Newco shall have been taken.
(b) Approvals and Consents. Any required consents, approvals
or authorizations of any Authority to the transfer or change in control
contemplated by this Agreement shall have been obtained.
(c) No Litigation. No Proceeding shall have been initiated by
any Authority or third party seeking to enjoin or otherwise restrain the
consummation of the transactions contemplated by this Agreement.
(d) TTS Agreement. The Parties shall have caused Newco to
execute and deliver the TTS Agreement, and the transactions contemplated thereby
shall have been consummated.
(e) Section 2.7 Transactions. NCS shall have executed and
delivered the Bill of Sale and the assignment covering the Transferred
Receivables; Newco shall have made and delivered the Accounts Receivable Note to
NCS and paid to NCS the cash (contributed by WilTel) provided for in Section
2.7; and NCS shall have delivered the Accounts Receivable Note and cash to NTI.
6.2 CONDITIONS TO OBLIGATION OF WCG. The obligation of WCG to
consummate the transactions contemplated hereby is subject to the satisfaction
on or prior to the date of the Closing of the following conditions, any one or
more of which may be waived in writing, in whole or in part, by WCG:
(a) Representations, Warranties and Covenants. NTI shall have
performed, satisfied, and complied with, in all material respects, all covenants
and agreements required by this Agreement to be performed, satisfied, or
complied with by it on or before the date of the Closing. All representations
and warranties of NTI contained in this Agreement or in any certificate,
document, instrument or writing delivered to WCG by or on behalf of NTI under
this Agreement shall be true and correct, in all material respects, on the date
of this Agreement and (except with respect to Section 3.15(h) and the second
sentence of Section 3.16) as of the date of the Closing with the same force and
effect as though they had been made on such date and NTI shall have delivered a
certificate to the foregoing effect.
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(b) No Material Adverse Change. From the date of this
Agreement to and including the Closing Date, there shall not have occurred any
Material Adverse Change in or with respect to the NCS Business or the NCS
Assets, whether or not disclosed in any supplement or amendment to the schedules
to this Agreement.
(c) Good Standing. NTI shall have delivered to WCG
certificates issued by appropriate Authorities evidencing the good standing and
existence of each of NTI and NCS, as of a date not more than ten calendar days
prior to the date of Closing, in the states in which it was organized or
qualified to do business as a foreign corporation.
(d) Consents of Third Persons. All consents from Persons that
are listed and identified in Schedule 3.3(a) attached hereto shall have been
obtained by NCS including by lapse of a contractual or statutory waiting period
and copies thereof shall have been delivered to WCG.
(e) Delivery of Other Agreements. NTI shall have executed and
delivered to Newco the other agreements contemplated by this Agreement.
(f) Review of Certain Contracts. NTI shall have made available
for review by WCG the contracts identified on Schedule 3.5(a) and Schedule
3.5(b).
(g) Merger of NCS into Newco. NCS shall have signed and
delivered to WCG the Certificate of Merger which upon filing with the Secretary
of State of Delaware will cause NCS to merge with and into Newco.
(h) LLC Agreement. NTI shall have executed and delivered to
WCG the LLC Agreement.
(i) TTS Agreement. NTL and TTS shall have executed and
delivered the TTS Agreement.
(j) BA Meridian. NTI shall have delivered evidence
satisfactory to WCG of the completion of the acquisition by NCS of the interest
of Bell Atlanticom Systems, Inc. in BA Meridian and a copy of the definitive
agreements related thereto.
(k) Secretary's Certificate. NCS shall have delivered to WCG a
certificate dated the Effective Date executed by the secretary or assistant
secretary of NCS certifying that attached thereto is: (1) a true, correct and
complete copy of the certificate of incorporation of NCS certified by the
Secretary of State of Delaware and all amendments thereto; and (2) a true,
correct and complete copy of the by-laws of NCS, and all amendments thereto. NTI
shall have delivered to WCG a certificate dated the Effective Date executed by
the secretary or assistant secretary of NTI certifying the name and title of,
and bearing the signature of, each officer of NTI individually
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authorized to execute and deliver this Agreement and the other agreements,
documents and instruments contemplated hereby.
(l) Resolutions. NTI shall have delivered to WCG certified
resolutions of the respective Boards of Directors of NTI and NCS approving the
consummation of the transactions contemplated hereby.
(m) NTI Retained Liabilities. NTI (or an Affiliate of NTI
reasonably acceptable to WCG) shall have assumed and agreed to pay, perform and
discharge the NTI Retained Liabilities pursuant to an assumption agreement in
form and substance satisfactory to WCG.
(n) Non-Competition Agreement. NTL shall have executed and
delivered the Non-Competition Agreement.
6.3 CONDITIONS TO OBLIGATION OF NTI. The obligation of NTI to
consummate the transactions contemplated hereby is subject to the satisfaction
on or prior to the date of the Closing of the following conditions, any one or
more of which may be waived in writing, in whole or in part, by NTI:
(a) Representations, Warranties and Covenants. WCG shall have
performed, satisfied, and complied with, in all material respects, all covenants
and agreements required by this Agreement to be performed, satisfied, or
complied with by it on or before the date of the Closing. All representations
and warranties of WCG contained in this Agreement or in any certificate,
document, instrument or writing delivered to NTI by or on behalf of WCG under
this Agreement shall be true and correct, in all material respects, on the date
of this Agreement and (except with respect to Section 4.15(h) and the second
sentence of Section 4.16) as of the date of the Closing with the same force and
effect as though they had been made on such date and NTI shall have delivered a
certificate to the foregoing effect.
(b) No Material Adverse Change. From the date of this
Agreement to and including the Closing Date, there shall not have occurred any
Material Adverse Change in or with respect to the WilTel Business or the WilTel
Assets, whether or not disclosed in any supplement or amendment to the schedules
to this Agreement.
(c) Good Standing. WCG shall have delivered to NTI
certificates issued by appropriate Authorities evidencing the good standing and
existence of each of WCG and WilTel, as of a date not more than ten calendar
days prior to the date of Closing, in the states in which it was organized or
qualified to do business as a foreign corporation.
(d) Consents of Third Persons. All consents from Persons that
are listed and identified in Schedule 4.3(a) attached hereto shall have been
obtained by
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WCG including by lapse of a contractual or statutory waiting period and copies
thereof shall have been delivered to NTI.
(e) Delivery of Other Agreements. WCG shall have executed and
delivered to Newco the other agreements contemplated by this Agreement.
(f) Review of Certain Contracts. WCG shall have made available
for review by NTI the contracts identified on Schedule 4.5(a) and Schedule
4.5(b).
(g) Merger of WilTel into Newco. WilTel shall have signed and
delivered to NTI the Certificate of Merger which upon filing with the Secretary
of State of Delaware will cause WilTel to merge with and into Newco.
(h) LLC Agreement. WCG shall have executed and delivered to
NTI the LLC Agreement.
(i) Cash Payment. WCG shall have paid to NTI the Cash Payment.
(j) Secretary's Certificate. WCG shall have delivered to NTI a
certificate dated the Effective Date executed by the secretary or assistant
secretary of WilTel certifying that attached thereto is: (1) a true, correct and
complete copy of the certificate of incorporation of WilTel certified by the
Secretary of State of Delaware and all amendments thereto; and (2) a true,
correct and complete copy of the by-laws of WilTel, and all amendments thereto.
WCG shall have delivered to NTI a certificate dated the Effective Date executed
by the secretary or assistant secretary of WCG certifying the name and title of,
and bearing the signature of, each officer of WCG individually authorized to
execute and deliver this Agreement and the other agreements, documents and
instruments contemplated hereby.
(k) Resolutions. WCG shall have delivered to NTI certified
resolutions of the respective Boards of Directors of WCG and WilTel approving
the consummation of the transactions contemplated hereby.
(l) WCG Retained Liabilities. WCG (or an Affiliate of WCG
reasonably acceptable to NTI) shall have assumed and agreed to pay, perform and
discharge the WCG Retained Liabilities pursuant to an assumption agreement in
form and substance satisfactory to NTI.
(m) Non-Competition Agreement. Williams shall have executed
and delivered the Non-Competition Agreement.
(n) Insurance. WCG shall have provided evidence that the
insurance policies set forth on Schedule 4.11 have been amended to include
Newco.
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(o) Parent Guaranty. WCG shall have delivered a guaranty by
Williams Holdings of Delaware, Inc., of WCG's performance of all financial
obligations under this Agreement and the LLC Agreement and 70% of Newco's
obligations under the Accounts Receivable Note, substantially in the form of
Exhibit I hereof.
6.4 CLOSING MEMORANDUM. Promptly following execution and delivery
hereof, the parties shall draw up a mutually agreed upon closing memorandum
setting forth the mechanism for completion of the transactions contemplated
hereby.
ARTICLE VII
CLOSING
Unless this Agreement shall have been terminated pursuant to the
provisions of Article XII, the consummation of the transactions provided for in
Article II (other than the formation of Newco) (the "Closing") shall take place
at the offices of The Williams Companies, Inc., One Williams Center, Suite 4100,
Tulsa, Oklahoma 74172 on April 30, 1997 or at such other time as the parties
mutually agree; provided that NCS shall have been able to close its acquisition
of the interest of Bell Atlanticom Systems, Inc. in BA Meridian prior to the
Closing, failing which the Closing shall be rescheduled for a Business Day to be
mutually agreed as soon as possible following the satisfaction of the conditions
set forth in this proviso.
ARTICLE VIII
POST-CLOSING ADJUSTMENT
8.1 TRUE-UP OF SECTION 2.7 TRANSACTIONS. The actual amount of Net
Transferred Receivables and the actual amount due under Section 2.7(b) will be
mutually determined by the Parties within 60 days after the Closing Date. The
principal amount owing under the Accounts Receivable Note will be recomputed
pursuant to the formula in Section 2.7(a), and the Parties shall cause Newco to
issue a replacement Accounts Receivable Note (for the same due date) and NTI
shall cause the original Accounts Receivable Note issued at Closing to be
cancelled. The Cash Payment will also be recomputed based on the formula
provided in Section 2.2 using the principal amount of the replacement Accounts
Receivable Note and the actual amount due under Section 2.7(b) rather than the
estimated amounts (the "Recomputed Cash Payment"). If the Recomputed Cash
Payment is greater than the Cash Payment made at Closing, WCG shall pay NTI the
difference within 90 days from the Closing Date. If the Recomputed Cash Payment
is less than the Cash Payment made at Closing, NTI shall pay WCG the difference
within 90 days from the Closing Date.
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8.2 TAX BENEFIT PAYMENT. Within 90 days after the Closing Date, NTI
shall pay to WCG an amount equal to the present value (discounted at 10%) of the
difference in the tax effect of the deductions allocable for federal income tax
purposes to WCG (the "Tax Effect") under the following two alternative sets of
conditions:
(1) A hypothetical scenario assuming that the Transferred Receivables, and
inventory and fixed assets of NCS went into Newco by operation of law
as a result of the merger of NCS with and into Newco and WCG had paid
an amount of cash to NTI to adjust NTI's ownership percentage to 30%;
and,
(2) The actual transactions as agreed to by the parties.
All amounts used in the calculation of the Tax Benefit Payment shall be based on
net book values or tax basis, as appropriate, at the Closing Date and shall be
made in accordance with the Code and Tax Regulations, including, but not limited
to, section 707 and the regulations thereunder. If any alternatives are allowed
by the Code and regulations, the alternative which will produce the smallest
possible Tax Benefit Payment will be selected.
The tax rate to be applied to the difference in allocable deductions in the
determination of the Tax Effect will be 25% for the first four taxable years (a
"Taxable Year") beginning with the year in which the closing occurs. In the
fifth Taxable Year, the Tax Effect will be the sum of the difference in
allocable deductions for that year multiplied by 40% plus the sum of differences
in allocable deductions for the first four Taxable Years multiplied by 15%. For
the sixth Taxable Year and all subsequent Taxable Years, the Tax Effect will be
the difference in allocable deductions for such year multiplied by forty percent
(40%).
In the event that WCG is able to claim any tax benefits for which it has
received a Tax Benefit Payment from NTI pursuant to this Section 8.2, WCG shall
refund all or a portion of such payment to NTI, including interest at the
federal rate for tax deficiencies. The national public accounting firm which
prepares Newco's federal income tax return shall calculate the payment to be
made by WCG to NTI pursuant to this paragraph, subject to the review of WCG and
NTI.
8.3 TAX EQUALIZATION PAYMENT FOR INTERIM PERIOD EARNINGS. Within 90
days after the Closing Date, WCG will pay to NTI an amount equal to the (i) the
Interim Period Taxable Income of NCS multiplied by 28% minus (ii) the Interim
Period Taxable Income of WilTel multiplied by 10.5%. The "Interim Period Taxable
Income" is the taxable income of NCS or WilTel, as applicable, during the period
between the Effective Date and the Closing Date without giving effect to any
gain or loss relating to the transactions arising from this Agreement. The
purpose of this payment is to true-up the federal and state income taxes each of
the Parties will be required to pay on the Interim Period Taxable Income of NCS
or WilTel, as appropriate, to its allocable
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share of the federal and state income taxes on the combined Interim Period
Taxable Income of NCS and WilTel. The cash payment will be adjusted as necessary
to yield such amount net of any income tax effect it may cause.
8.4 NETTING OF POST-CLOSING ADJUSTMENTS. The Recomputed Cash Payment
under Section 8.1 and the amounts to be paid pursuant to Sections 8.2 and 8.3
will be netted against each other to result in one payment by either NTI or WCG,
as the case may be, to the other Party.
ARTICLE IX
EMPLOYEE MATTERS
9.1 EMPLOYEE TRANSFERS AND PLAN LIABILITIES. Immediately prior to the
Closing: (i) all NCS Employees, and all NTI Employees who support the NCS
Business and are identified on Schedule 9.1(a) (hereinafter referred to as the
"NCS Transferring Employees), all labor contracts of NCS and all of NCS's
liabilities and other obligations (whether actual, contingent, known or unknown)
of any nature whatsoever under or relating to the NCS Employees and such labor
contracts shall be transferred from NCS to Nortel Communications Personnel
Services Inc., a new subsidiary to be created by NTI; (ii) all WilTel Employees
other than those identified on Schedule 9.1(b), all labor contracts of WilTel
and all of WilTel 's liabilities and other obligations (whether actual,
contingent, known or unknown) of any nature whatsoever under or relating to the
WilTel Employees and such labor contracts shall be transferred from WilTel to
WilTel Services, Inc., a new subsidiary to be created by WCG; (iii) NCS shall
transfer its interest in and all of its liabilities and other obligations
(whether actual, contingent, known or unknown) of any nature whatsoever under or
relating to the Employee Benefit Plans listed (or required to be listed) on
Schedule 3.12(e) to Nortel Communications Personnel Services Inc.; (iv) WilTel
shall transfer its interest in and all of its liabilities and other obligations
(whether actual, contingent, known or unknown) of any nature whatsoever under or
relating to the Employee Benefit Plans listed (or required to be listed) on
Schedule 4.12(e) to WilTel Services, Inc. For a period ending on the Employee
Transfer Date, Nortel Communications Personnel Services Inc. and WilTel
Services, Inc. shall provide employee services to Newco pursuant to the terms of
the Employee Services Agreement. Subject to the rights of Nortel Communications
Personnel Services Inc. and WilTel Services, Inc. under the Employee Services
Agreement and the provisions of Section 9.8(c) with respect to individuals
qualifying for long-term disability benefits, upon the expiration of such
contract; (i) all NCS Active Employees still employed by Nortel Communications
Personnel Services Inc., all WilTel Active Employees still employed by WilTel,
Services Inc., and all employees hired by Nortel Communications Personnel
Services Inc. or WilTel Services, Inc. under the service contract who are still
employed, shall be transferred to Newco; (ii) all labor contracts and
multi-employer plan obligations of Nortel Communications Personnel Services Inc.
and all labor contracts and multi-employer plan obligations of WilTel Services,
Inc. shall be transferred to Newco, and
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(iii) Newco shall establish employee benefit plans and programs for the benefit
of its employees provided that the transfer of employees and labor contracts
shall not transfer any NTI Retained Liabilities or any WCG Retained Liabilities
to Newco.
9.2 EMPLOYEE SERVICES AGREEMENT. The Employee Services Agreement,
substantially in the form attached as Exhibit J, among Newco, Nortel
Communications Personnel Services Inc., and WilTel Services, Inc. shall be
executed prior to Closing and shall permit Newco to obtain the services of all
employees of Nortel Communications Personnel Services Inc., of all employees of
WilTel Services, Inc., and of various individuals employed by WCG (or its
Affiliates) or NTI (or its Affiliates). The Employee Services Agreement shall
require Newco to pay Nortel Communications Personnel Services Inc. and WilTel
Services, Inc. for all costs associated with their respective employees during
the period of such contract, including, but not limited to compensation,
employment taxes, employee benefits, workers compensation, employment litigation
and any other litigation related to the services provided under the services
contract; provided that Newco shall not be required to pay either (i) for any
costs associated with the retirement of any employees of Nortel Communications
Personnel Services Inc., WilTel Services, Inc., WCG (or its Affiliates) or NTI
(or its Affiliates) (including, but not limited to, retiree medical, life,
long-term care or pension costs), or (ii) for any costs associated with the
fringe benefits described on Schedule 9.2 to the extent such costs exceed the
fringe benefit reimbursement rates set forth on such Schedule 9.2. Newco shall
be required to pay WCG and NTI for the services of any of their employees under
the terms of the Employee Services Agreement. Newco shall also be required to
indemnify Nortel Communications Personnel Services Inc., WilTel Services, Inc.,
WCG (or its Affiliates) and NTI (or its Affiliates) for any and all Claims and
liabilities (including any legal fees and costs incurred by them) arising out of
the employment of the employees of Nortel Communications Personnel Services Inc.
and WilTel Services, Inc. during the period following the Closing to the
Employee Transfer Date and arising out of the services agreement described in
this Section 9.2; provided that Newco shall not be required to provide
indemnification for any Claims or liabilities associated either (i) with the
retirement of any employees of Nortel Communications Personnel Services Inc.,
WilTel Services, Inc., WCG or NTI, or (ii) with the fringe benefits described on
Schedule 9.2. Subject to the limitations set forth in the preceding sentence,
such Claims and liabilities shall include, but not be limited to, all costs
associated with the employment of such employees during the period
(compensation, incentives, benefits, perquisites), the termination of employment
of any such employees (including severance benefits), and claims by such
employees for employment-related liabilities (including worker's compensation,
wrongful terminations, discrimination, etc.). Such Claims and liabilities for
which Newco shall provide indemnification shall also include Claims by Newco or
by third parties related to the services provided by the employees to Newco or
its clients pursuant to the Employee Services Agreement described in this
Section 9.2.
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During the term of the Employee Services Agreement, Nortel Communications
Personnel Services Inc. and WilTel Services, Inc. shall permit all of their
respective employees to participate in employee benefit plans, compensation
programs, and personnel policies which are substantially similar to those in
effect for their respective employees at the Closing.
9.3 REPORTING OF DATA. Each of NTI, WCG and Newco shall complete and
furnish to each other such employee and employee related data as shall be
reasonably required from time to time for each Party to perform and fulfill its
obligations under this Agreement, under the Employee Services Agreement, and
under applicable law.
9.4 EMPLOYMENT RELATED CLAIMS. Subject to Section 9.3, Newco shall be
solely responsible for all liability, costs and expenses (including attorneys'
fees) for all employment Claims relating to arbitrations, unfair labor practices
and Claims, employment discrimination charges, wrongful termination Claims,
workers' compensation Claims, any employment-related tort Claim or other Claims
or charges of or by any employee of Newco arising out of acts, conditions or
omissions occurring on or after such employee's date of employment by Newco.
9.5 BONUS PAYMENTS. The Parties acknowledge that the incentive bonus
programs utilized by each involves the determination and payment of cash bonuses
in the early part of each year, which rewards services rendered in the preceding
calendar year. Each of NTI and WCG agree and acknowledge that, all employees of
NTI, NCS and WilTel who are transferred to Nortel Communications Personnel
Services Inc., or WilTel Services, Inc. ("Transferred Employees") and who are
eligible to receive a bonus should continue to be eligible to receive a bonus
relative to services rendered to NTI, NCS or WilTel as the case may be, on or
prior to the Closing Date in accordance with the terms and conditions of a bonus
plan to be adopted by Newco. On and after the Employee Transfer Date, Nortel
Communications Personnel Services Inc. and WilTel Services, Inc. will have no
continuing obligation or responsibility for the payment of any compensation to
employees transferring to Newco, (including any annual management bonuses
payable in 1998 for performance at any time during 1997.) Newco shall be solely
responsible for such payment in accordance with the terms and conditions of a
bonus plan to be adopted by Newco.
9.6 HIRING RESTRICTIONS.
(a) Subject to subsection 9.6(b), NTI and its Affiliates
will not hire Newco employees for a period of one (1) year from Closing.
(b) Attached as Schedule 9.6(b) is a list of current NCS
employees, who at such employee's option, will have the right to rejoin NTI or
an NTI Affiliate within two (2) years from Closing without loss of seniority and
with compensation for lost benefits credit to be paid by NTI; provided, however
that such employees will remain
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with Newco for a minimum 18-month transition period or until released by Newco,
if earlier.
(c) For a period of two (2) years from Closing, WCG and its
Affiliates will not hire any of Newco's officers and director-level employees,
except for those employees listed on the attached Schedule 9.6(c).
9.7 WARN NOTICES. Each Party acknowledges that it is solely responsible
for issuing, serving and delivering all orders and notices required pursuant to
the Worker Adjustment and Retraining Notification Act ("WARN") in connection
with the termination of its employees, if any, and for any financial obligations
and liabilities in connection therewith or otherwise required in connection with
the termination of its employees.
9.8 BENEFIT ISSUES. Each of Nortel Communications Personnel Services
Inc. and WilTel Services, Inc. will be responsible for the provision of benefits
to NCS Transferring Employees and WilTel Transferring Employees (as identified
in Section 9.1 hereof), as the case may be, in respect of periods prior to the
Closing Date. Benefits will be provided to such Transferring Employees and to
other employees of Nortel Communications Personnel Services Inc. and WilTel
Services, Inc. after the Closing Date in accordance with the provision of
Section 9.1 and this Section 9.8.
(a) General. The participation of such employees in
employee benefit plans maintained by NTI and WCG will
terminate no later than the Employee Transfer Date.
(b) Qualified Retirement Plans. The benefits such
employees earn pursuant to the Code Section 401(a) qualified
retirement Plans maintained by Nortel Communications Personnel
Services Inc. and WilTel Services, Inc. (including
union-negotiated plans) will be paid in accordance with the
terms of such plans.
Distribution of benefits from such plans shall be made in the
form and at the time determined under the provisions of such
plans.
****
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****
(d) Time Off. The liability for accrued vacations for
such employees will be transferred to Newco as of the Employee
Transfer Date. At that time, all Newco employees will become
subject to the Newco vacation schedule and the Newco holiday
schedule.
(e) Ancillary. Educational Assistance commenced by
such employees before the Transfer Date will become the
liability of Newco on the Employee Transfer Date.
****
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(h) Newco Benefits. The employee benefit plans
maintained by Newco on and after the Employee Transfer Date
with respect to such employees, will recognize the service of
such employees with NTI/NCS/Nortel Communications Personnel
Services Inc. and WCG/WilTel/WilTel Services, Inc. for all
purposes under such plans, with the exception of (i) service
for benefit accrual under any defined benefit plan, or (ii)
eligibility for retiree medical, if any.
Newco benefit plans which contain deductible benefit limits
will provide credit for eligible amounts previously paid
during 1997 as deductibles by employees who were covered by
the Nortel Communications Personnel Services Inc. or WilTel
Services, Inc. benefit plans as of the Employee Transfer Date.
9.9 COMPENSATION. Salary increase programs for Transferring Employees
originally scheduled to occur in 1997 after the Employee Transfer Date will be
implemented as previously scheduled.
9.10 RELOCATION. Nortel Communications Personnel Services Inc. and
WilTel Services, Inc. will complete the relocation of NCS Transferring Employees
and WilTel Transferring Employees whose relocations have commenced prior to the
Closing Date, in accordance with the policies and procedures of the respective
company which initiated the relocation. Nortel Communications Personnel Services
Inc. and WilTel Services, Inc. will consult with Newco during the period between
the Closing Date and the Employee Transfer Date concerning the relocation of any
employees whose relocation has not commenced prior to the Closing Date. The
expense of any such relocation, whether commenced before or after the Closing
Date, shall be reimbursed by Newco.
ARTICLE X
ADDITIONAL AGREEMENTS
10.1 LINE OF CREDIT. NTI and WCG agree to use reasonable efforts to
negotiate mutually acceptable credit agreements in an appropriate amount (or
other standby credit arrangements), which will provide Newco financing for a
period up to twelve months following the Effective Date. Nothing herein shall be
construed as to require NTI or any of its Affiliates, or WCG or any of its
Affiliates, to provide credit support of any kind to Newco.
10.2 NETWORK SERVICES AGREEMENT. For so long as an Affiliate of
Williams is a member of Newco, Newco will use WCG, or a WCG Affiliate, as
Newco's vendor-of-choice for telecommunications network services (subject,
however, to Newco's reasonable requirements for network and vendor diversity),
provided that WCG offers
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such services necessary or desirable to the operation by Newco of its network
(i) that are substantially equivalent, in quality, performance and scope, to
those offered by other providers of such services, and (ii) at prices and on
terms at least as favorable as those offered by other providers of such
services.
10.3 DELIVERY OF CORPORATE DOCUMENTS. Each of NTI and WCG shall deliver
to Newco, on or before the Closing Date, all Records, including computer disks
reflecting any books or records, documents or other papers, or other information
or data relating to the operation of the NCS Business or the NCS Assets or the
WilTel Business or the WilTel Assets, respectively, stored on any electronic
media, including computers. NTI and WCG shall be entitled to retain the
historical books and records relating to the NCS Business and WilTel Business,
respectively, to the extent the books and records are not necessary for the
ongoing operations of the NCS Business and WilTel Business by Newco. NTI and WCG
shall provide to Newco copies of all personnel and employee benefit files with
respect to any Transferred Employees of such companies. Each of NTI and WCG
agrees that Newco and its authorized representatives shall have the right to
inspect and, at Newco's expense, copy, at any time during regular business hours
for any proper purpose, the corporate, accounting, auditing and tax books,
records (including work papers) and other books and records but only so far as
they relate to NCS, the NCS Business, the NCS Assets or the NCS Transferred
Employees in the possession of NTI or its Affiliates, and as they relate to
WilTel, the WilTel Business, the WilTel Assets or the WilTel Transferred
Employees in the possession of WCG or its Affiliates. For a period of seven
years following the Effective Date, NTI and WCG agree that they will not dispose
of or destroy any such books and records without having first offered to deliver
the same to Newco.
10.4 ACCESS TO INFORMATION. Each Party covenants and agrees to cause
Newco to provide full and complete cooperation and assistance to each of the
Parties and its Affiliates following the Closing and to provide full and
complete access to the corporate, accounting, auditing and tax books, records
(including work papers) and other books and records relating to Newco, and to
Newco's premises and employees, to the extent that such Party or Parties
reasonably require such information to complete tax returns, to verify the
Product Mix as defined in the LLC Agreement, to investigate, enforce or defend
against Claims for indemnification pursuant to Article XI or third party Claims
against any such Party or Parties, or for similar purposes. For a period of
seven years following the Effective Date, each of NTI and WCG agree to cooperate
to cause Newco not to dispose of or destroy any such books and records without
having first offered to deliver the same to NTI and WCG, respectively.
10.5 NONDISCLOSURE OF PROPRIETARY INFORMATION.
(a) Each of NTI and WCG agrees that, for a period beginning on
the Closing Date and ending on the second anniversary date of the disposition by
NTI or WCG, respectively (or, to the extent such interest has been transferred
to an Affiliate
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of such Party as permitted by the LLC Agreement, by such Affiliate), of its
interest in Newco to a Person that is not a wholly owned subsidiary of such
Party's Parent, it and its Affiliates will apply the same standards and treat
(i) Newco's confidential or proprietary information and (ii) the terms and
conditions of this Agreement and the other agreements required pursuant hereto
as it does its Affiliates' confidential or proprietary information with respect
to maintaining the confidentiality thereof. Notwithstanding the foregoing, each
Party and its Affiliates may disclose information that (A) is required to be
disclosed by applicable state or federal tax or securities laws to the extent,
and only to the extent, the laws require the disclosure and such Party provides
Newco prior written notice of its intent to provide the disclosure and the
general text of the disclosure, and the disclosure is consented to by Newco,
which consent shall not be unreasonably withheld, or (B) is required to be
disclosed by a court or administrative body of competent jurisdiction; provided
that, if a Party or its Affiliates are served or threatened with litigation that
would require such Party or its Affiliate to disclose the information, such
Party or the Affiliate shall tender to Newco the opportunity to defend, at its
cost, against the disclosure.
(b) Each Party acknowledges that all documents and objects
containing or reflecting any NCS Owned Intellectual Property and Software or
WilTel Owned Intellectual Property and Software, whether developed by such Party
or by someone else for it or any of its Affiliates, will become the exclusive
property of Newco after the Effective Time and will be delivered to Newco. Newco
will not share such NCS Owned Intellectual Property and Software or WilTel Owned
Intellectual Property and Software with NTI, WCG or any of their Affiliates
unless sold or licensed in an arms length transaction, provided, however, that
any software effectively available to any Affiliate as of February 28, 1997,
will continue to be available at the existing terms and conditions.
10.6 ADMINISTRATIVE SERVICES. Each of NTI and WCG agrees that it, or
its respective Affiliates, will make available to Newco, for a period of twelve
months following the Effective Date, certain administrative services including,
advertising, public relations, and accounting, at such Party's cost (including a
reasonable overhead allocation), not to exceed the amounts charged to NCS or
WilTel, respectively, during 1996 as reflected in the NCS Financial Statements
or the WilTel Financial Statements, as the case may be, and subject to the
provision that such administrative services, as a whole, shall be generally
rendered on a basis not less favorable to Newco than on a competitive basis and
on arm's-length conditions for services of the same or better quality. The terms
and conditions under which such services shall be made available and provided to
Newco will be set forth in Administrative Services Agreements, in substantially
the forms attached hereto as Exhibits K and L. In no event will either Party be
obligated to provide any services to Newco that are not currently being provided
to such Party by its Parent or its Affiliates.
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10.7 FURTHER ASSURANCES BY THE PARTIES. Each of the Parties to this
Agreement, at any time or times, on and after the Closing Date, shall, without
further consideration, execute, acknowledge and deliver any further bills of
sales, assignments, conveyances and other assurances, documents and instruments
of transfer reasonably requested by Newco, and shall take any other action
consistent with the terms of this Agreement that may be reasonably requested by
Newco, (i) for the purpose of assigning, transferring, granting, conveying,
vesting, confirming to and merging with Newco, as the case may be, or reducing
to its possession, any or all of the NCS Assets, the WilTel Assets and (ii) for
effectuating the transfer of operational control of the NCS Business and the
WilTel Business, and (iii) for the purpose of enabling Newco to comply with,
defend against, or contest any claim of violation of any contract, federal,
state or municipal law, ordinance, directive, order, regulation or requirement.
Each of the Parties shall, after the Closing, also furnish Newco with such
information and documents in such Party's possession or under such Party's
control or which any of the Parties can execute or cause to be executed, as will
enable Newco to prosecute any and all pending Claims, applications and the like
which may be assigned hereunder.
10.8 THIRD PARTY CONSENTS. Each of NTI and WCG shall use its reasonable
efforts to obtain the consents of third parties as are necessary for the
assignment and/or merger of NCS Assets and the merger of WilTel, respectively.
To the extent that any of NCS Assets are not assignable by the terms thereof or
consents to the assignment thereof cannot be obtained and the respective
condition to Closing has been waived by WCG, such assets shall be held by NTI in
trust for Newco and shall be performed by Newco in the name of NTI and all
benefits and obligations derived thereunder shall be for the account of Newco,
and, to the extent that any of the WilTel Assets are not assignable by merger by
the terms thereof or consents to the merger cannot be obtained and the
respective condition to closing has been waived by NTI, such assets shall be
held by WCG or the respective WCG Subsidiary, as the case may be, in trust for
Newco and shall be performed by Newco in the name of WCG, or such WCG
Subsidiary, and all benefits and obligations derived thereunder shall be for the
account of Newco; provided that where entitlement of Newco to those NCS Assets
or WilTel Assets is not recognized by any third party, NTI or WCG, or the WCG
Subsidiaries, as the case may be, shall, at the request of Newco, enforce in a
reasonable manner, for the account of Newco, any and all rights of NTI or WCG,
or the WCG Subsidiaries, as the case may be, against the third party. All
reasonable costs and expenses incurred by NTI or WCG, or the WCG Subsidiaries
or, with respect to the performance or enforcement of the above-described NCS
Assets and WilTel Assets, respectively, shall be paid or reimbursed by Newco.
10.9 INTELLECTUAL PROPERTY LICENSE AGREEMENT. NTI or its Affiliates
shall allow Newco to use the tradenames Nortel and Nortel Design? and related
logos and designs to facilitate the orderly change of signs, stationery and
promotional material used in connection with the NCS Business to those of Newco,
until December 31, 1997, and
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certain other Intellectual Property and Software as provided in the Intellectual
Property License Agreement substantially in the form attached hereto as Exhibit
M.
10.10 TAX MATTERS.
(a) Tax Returns and Payment of Taxes. NTI and WCG will prepare
and file, or cause to be prepared and filed, on a timely basis, all Tax Returns
(including any amendments thereto) for their respective Affiliates for any
taxable period ending on or prior to the Closing Date, (any such period being
referred to herein as a "Pre-Closing Period") and will pay all Taxes for their
respective Affiliates for Pre-Closing Periods. As provided in and subject to the
terms of the LLC Agreement, Newco will prepare and file, or will cause to be
prepared and filed, all Tax Returns relating to Newco for all subsequent
periods, and Newco will pay all Taxes for all taxable periods which do not
constitute Pre-Closing Periods. Real property taxes will be allocated among NTI,
WCG and Newco in accordance with Section 164(d) of the Code.
(b) Control of Contest. Each of NTI, WCG and Newco will have
the right, at its own expense, to control any audit or determination by any
taxing authority, to initiate any claim for refund or file any amended Tax
Return, and to contest, resolve and defend against any assessment, notice of
deficiency, or other adjustment or proposed adjustment of Taxes for any taxable
period for which such party (or any of its affiliates) is charged with
responsibility for filing a Tax Return under this Agreement. Newco will promptly
forward to NTI and WCG all written notifications and other written
communications from any Taxing authority received by Newco relating to any
liability for Taxes for any taxable period for which NTI or WCG is charged with
payment responsibility under this Agreement. Newco will assist NTI and WCG to
take any and all actions with respect to any proceedings for any such taxable
period. The failure by Newco to provide any such notice to NTI or WCG within
twenty (20) Business Days of receipt by Newco of such notice will relieve NTI
and WCG from any obligations with respect to the subject matter of any
notification not so forwarded, but only to the extent that such late notice
materially prejudices NTI's or WCG's ability to contest such assessment or Tax.
(c) (i) Access to Information. Newco will provide NTI and WCG,
and NTI and WCG will provide to Newco, with the right, at reasonable times and
upon reasonable notice, to have access to and to copy and use any records or
information and personnel which may be relevant for the taxable period for which
the requesting party is charged with payment responsibility for Taxes under this
Agreement in connection with the preparation of any Tax Returns, any audit or
other examination by any taxing authority, the filing of any claim for a refund
of Tax or for the allowance of any Tax credit, or any judicial or administrative
proceedings relating to liability for Taxes. The party requesting assistance
hereunder will reimburse the other party for reasonable expenses incurred in
providing such assistance. Any information obtained
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pursuant to this Section 10.10 (c)(i) will be treated as confidential
information and will be used solely in connection with the matter for which it
was requested.
(ii) Retention of Records. For a period of seven (7)
years from the Closing Date, Newco will not dispose of or destroy any of the
business records or files of NTI and WCG in existence on the Closing Date
directly relating to Taxes without first offering to turn over possession
thereof to NTI and WCG by written notice to NTI and WCG at least thirty (30)
days prior to the proposed date of such disposition or destruction.
10.11 INSURANCE MATTERS. To the extent that insurance coverage
maintained by either WCG or NTI is available, in excess of any deductible,
retention or full indemnity program, with respect to any Loss suffered by Newco
in respect of an event occurring on or before the Closing or relating to periods
ending on or before such date, at the request of Newco and subject to
reimbursement of costs by Newco, NTI or WCG, as appropriate, shall make a claim
against such insurance and any insurance proceeds from such insurance will be
for the benefit of Newco for any relevant Loss of Newco, up to the amount of
such Loss. Each of the Parties shall have the right to control, at its expense,
subject to consultation with Newco, the defense of third-party Claims in respect
of which such Party expects that insurance coverage under its policies may be
available in respect of all or a portion of such claims (subject to any
applicable deductible under such insurance coverage).
ARTICLE XI
INDEMNIFICATION
11.1 INDEMNITY OBLIGATION.
(a) NTI Indemnification. Subject to the provisions of this
Article XI, NTI shall indemnify and hold harmless WCG, its Party Indemnitees and
Newco against any and all Losses resulting from or arising out of:
(i) any breach of a representation or warranty made
by NTI in this Agreement or any Schedule or Exhibit hereto;
(ii) the breach of any covenant, agreement or
obligation of NTI contained in this Agreement or any Schedule
or Exhibit hereto; and
(iii) the NTI Retained Liabilities.
NTI shall compensate directly WCG for 70% of any Losses resulting from or
arising out of any matter described in subparagraphs (a)(i) of this Section 11.1
and Newco shall be deemed to be compensated thereby and shall have no right of
recovery with respect to any such matters.
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NTI shall compensate directly Newco for any Losses resulting from or arising out
of any matter described in subparagraph (a)(iii) of this Section 11.1 and WCG
shall be deemed to be compensated thereby and shall have no right of recovery
with respect to any such matter.
The total obligation of NTI and NTL taken together to indemnify under this
Section and under Section 11.1(a) of the TTS Agreement, shall in no event
exceed ****.
(b) WCG Indemnification. Subject to the provisions of this
Article XI, WCG shall indemnify and hold harmless NTI, its Party Indemnitees and
Newco against any and all Losses resulting from or arising out of:
(i) any breach of a representation or warranty made
by WCG in this Agreement or any Schedule or Exhibit hereto;
(ii) the breach of any covenant, agreement or
obligation of WCG contained in this Agreement or any Schedule
or Exhibit hereto; and
(iii) the WCG Retained Liabilities.
WCG shall compensate directly NTI for 30% of any Losses resulting from or
arising out of any matter described in subparagraph (b)(i) of this Section 11.1
and Newco shall be deemed to be compensated thereby and shall have no right of
recovery with respect to any such matters.
WCG shall compensate directly Newco for any Losses resulting from or arising out
of any matter described in subparagraph (b)(iii) of this Section 11.1 and NTI
shall be deemed to be compensated thereby and shall have no right of recovery
with respect to any such matter.
The total obligation of WCG to indemnify under subparagraph 11.1(b)(i) shall in
no event exceed ****.
(c) The breach of a specific representation, warranty or
agreement by a Party shall be determined whether or not, apart from such
specific representation, warranty or agreement, the transactions provided for in
this Agreement prove to be more favorable to the other Party, and whether or not
the facts and circumstances covered by one or more of the other representations,
warranties or agreements made by such Party prove to be more favorable than so
represented and warranted.
(d) All Claims for indemnification under this Section 11.1
(the party claiming indemnification and the party against whom such Claim for
indemnification is being made are hereinafter referred to as "Indemnified Party"
and the "Indemnifying Party", respectively) shall be reduced by the amount of
any insurance proceeds
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effectively received by or benefiting the Indemnified Party with respect to the
relevant Loss or liability subject, as the case may be, to the application of
Section 10.11.
(e) Except with respect to Claims under subparagraphs (a)(iii)
and (b)(iii) of this Section 11.1, (i) no Claim shall be capable of assertion
under Section 11.1 unless it pertains to a Loss with a monetary value of ****
or more, on a matter by matter basis (whereby a series of connected Losses that
are substantially identical in nature and that have arisen out of substantially
identical events, circumstances or conditions shall be deemed to constitute one
Loss); and (ii) a Party (including its Party Indemnitees) shall only be entitled
to indemnification under this Section 11.1 to the extent that the total amount
of Losses suffered by it, its Party Indemnitees or Newco as a result of
misrepresentation or breach by the other Party, exceed a deductible of ****
(such deductible being hereinafter referred to as the " General Deductible").
(f) Newco shall be entitled to indemnification under this
Section 11.1 with respect to Litigation Claims against a Party only to the
extent that the total amount of Losses suffered by Newco arising out of
Litigation Claims against such Party exceed a deductible of **** (such
deductible being hereinafter referred to as such Party's "Litigation
Deductible").
11.2 PROCEDURE. All Claims for indemnification by a Person under this
Article XI shall be asserted and resolved as follows:
(a) Whenever any Claim, Litigation Claim or oral demand for
which an Indemnifying Party would be liable to an Indemnified Party hereunder
(which shall be deemed to include any Claim or Litigation Claim which falls
within, and exhausts any part of such Party's Deductible) is asserted against or
sought to be collected from such Indemnified Party by a third party, such
Indemnified Party shall, within 30 days of the receipt thereof, give notice (a
"Claim Notice") to the Indemnifying Party of such Claim, Litigation Claim or
oral demand, specifying the nature of and specific basis for such Claim,
Litigation Claim or oral demand and the amount or the estimated amount thereof
to the extent then feasible, which estimate shall not be binding upon the
Indemnified Party in its effort to collect indemnification hereunder in respect
of such Claim, Litigation Claim or oral demand. To the extent the Indemnifying
Party is prejudiced thereby, the failure to so notify the Indemnifying Party of
any such Claims or oral demands shall relieve the Indemnifying Party from
liability that it may have to the Indemnified Party under the indemnification
provisions contained in this Article XI, but only to the extent of the Loss
directly attributable to such failure to notify, and shall not relieve the
Indemnifying Party from any liability that it may have to the Indemnified Party
otherwise than under this Article XI. The Indemnifying Party shall, within 20
days of the receipt of a Claim Notice, notify the Indemnified Party as to
whether it accepts, in whole or in part, its indemnity obligation under Section
11.1(a) or (b) (subject, as the case may be, to the Indemnified Party's General
or Litigation
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Deductible), in which case, the Indemnifying Party shall assume and thereafter
conduct the defense thereof; provided that the Indemnified Party shall be
entitled to participate in the defense thereof at its own expense. If the
Indemnifying Party disputes liability under this Section 11.1(a) or (b), as the
case may be, or otherwise fails to defend within a reasonable time after notice,
the Indemnified Party will have the right to undertake the defense, at the risk
of the Indemnifying Party and subject, as the case may be, to the Indemnified
Party's right to claim indemnification from the Indemnifying Party for the cost
of defense. The consent to the entry of any judgment or settlement of any claim
hereunder by the Indemnifying Party may only be made upon the prior approval by
the Indemnified Party, which approval shall not be unreasonably withheld, unless
the judgment or proposed settlement involves only the payment of money damages
(which would be paid by the Indemnifying Party) with a full release of the
Indemnified Party, and does not impose any injunction, conditions, or other
equitable relief on the Indemnified Party in which case consent is not required.
(b) If requested by the Indemnifying Party, the Indemnified
Party agrees to cooperate with the Indemnifying Party and its counsel in
contesting any Claim, Litigation Claim or oral demand that the Indemnifying
Party elects to contest, or, if appropriate and related to the Claim, Litigation
Claim or oral demand in question, in making any counterclaim against the Person
asserting the third party Claim, Litigation Claim or oral demand, or any
cross-complaint against any Person other than an Affiliate of the Indemnified
Party. The Indemnifying Party shall reimburse such Indemnified Party for
reasonable out-of-pocket expenses incurred by the Indemnified Party in such
cooperation.
(c) If any Indemnified Party should have a claim against the
Indemnifying Party hereunder that does not involve a Claim, Litigation Claim or
oral demand being asserted against or sought to be collected from it by a third
party, the Indemnified Party shall send a Claim Notice with respect to such
claim to the Indemnifying Party. Subject always to application of the relevant
General or Litigation Deductible, reimbursement of any Losses incurred by the
Indemnified Party pursuant to this Article XI shall be made within 30 days after
documentation is sent to the Indemnifying Party by the Indemnified Party. If the
Indemnifying Party disputes such claim, such dispute shall be resolved in the
manner set forth in Article XIV hereof.
11.3 FAILURE TO PAY INDEMNIFICATION. If and to the extent the
Indemnified Party shall make written demand upon the Indemnifying Party for
indemnification pursuant to this Article XI, and the Indemnifying Party shall
refuse to accept its indemnity obligations under Section 11.1 (subject always to
applicable General or Litigation Deductibles) or otherwise fail to pay in full
within the period specified herein the amounts demanded pursuant hereto and in
accordance herewith, then the Indemnified Party may utilize any legal or
equitable remedy to collect from the Indemnifying Party the amount of its
damages to the extent covered by such indemnities plus all costs, including
reasonable attorneys' fees incurred in connection with such collection
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efforts. Nothing contained herein is intended to limit or constrain the
Indemnified Party's rights against the Indemnifying Party for indemnity, the
remedies herein being cumulative and in addition to all other rights and
remedies of the Indemnified Party.
11.4 SURVIVAL OF OBLIGATIONS. Except as otherwise expressly provided
for in the following sentence, the representations, warranties, covenants,
agreements and undertakings of NTI and WCG contained in this Agreement shall be
deemed remade at and shall survive the Closing until the expiration of
**** following the Closing. ****
11.5 EXCLUSIVE REMEDY. With respect to all Losses indemnified under
this Article XI, the indemnities provided herein shall be deemed the sole and
exclusive remedies available to the Members, their respective parents and
Affiliates, and to Newco.
ARTICLE XII
TERMINATION
12.1 EFFORTS TO SATISFY CONDITIONS. WCG and NTI shall agree to use
their reasonable efforts to bring about the satisfaction of the conditions
specified in Article VI hereof.
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12.2 TERMINATION. The obligations to close the transactions
contemplated by this Agreement may be terminated by:
(a) mutual agreement of WCG and NTI;
(b) WCG, if a default shall be made by NTI in the observance
or performance by it of any agreements and covenants of NTI herein contained, or
if there shall have been a misrepresentation made in Article III by NTI,
provided that with respects to any such default or misrepresentation WCG shall
have provided five (5) Business Days notice with an opportunity for NTI to cure
within such period if capable of cure;
(c) NTI, if a default shall be made by WCG in the observance
or performance by it of any agreements and covenants of WCG herein contained, or
if there shall have been a misrepresentation made in Article IV by WCG provided
that with respect to any such default or misrepresentation NTI shall have
provided five (5) Business Days notice with an opportunity for WCG to cure
within such period if capable of cure; or
(d) By either WCG or NTI if the Closing shall not have
occurred by July 1, 1997.
XII.3 LIABILITY UPON TERMINATION. If the obligation to close the
transactions contemplated by this Agreement is terminated pursuant to any
provision of Section 12.2(a) and (d), then neither party shall be under any
liability to the other party hereto; provided, however, that nothing herein
shall relieve any party from liability for any breach of or default under this
Agreement occurring prior to such termination. Except as set forth in this
Section 12.3, the rights of the parties shall not terminate upon the failure to
close the transactions contemplated hereby.
ARTICLE XIII
EXPENSES
Except as otherwise set forth herein, and whether or not the
transactions contemplated by this Agreement shall be consummated, each Party
agrees to pay, without right of reimbursement from any other Party, the costs
incurred by the Party incident to the preparation and execution of this
Agreement and performance of its obligations hereunder, including the fees and
disbursements of legal counsel, accountants and consultants employed by the
Party in connection with the transactions contemplated by this Agreement. The
pre-formation and pre-organization costs of Newco shall be shared equally by NTI
and WCG; provided that the incurrence of any such costs shall be pre-approved in
writing by NTI and WCG.
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ARTICLE XIV
RESOLUTION OF DISPUTES
The Parties agree that, except as otherwise specifically provided
herein, all disputes under this Agreement shall be resolved in accordance with
the procedures set forth in Exhibit N hereto.
ARTICLE XV
GENERAL PROVISIONS
15.1 NOTICES. All notices, requests, demands and other communications
required or permitted to be given under this Agreement shall be deemed to have
been duly given if in writing and delivered personally or sent via first-class,
postage prepaid, registered or certified mail (return receipt requested), or by
overnight delivery service or facsimile transmission with confirmation by
certified mail or overnight delivery service addressed as follows:
If to NTI:
Northern Telecom Inc.
2221 Lakeside Boulevard
Richardson, Texas 75082
(Attention: Richard T. Faletti, Vice President)
Facsimile: (972) 684-3999
and copy to:
Northern Telecom Inc.
2221 Lakeside Boulevard
Richardson, Texas 75082
(Attention: Richard R. Standel, Vice President,
Secretary and General-Counsel)
Facsimile: (972) 685-3011
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If to WCG:
One Williams Center
Tulsa, Oklahoma 74172
Attention: Henry C. Hirsch, CEO
Facsimile Number: (918) 561-6024
and copy to:
One Williams Center, 41-3
Tulsa, Oklahoma 74172
Attention: David P. Batow, General Counsel
Facsimile Number: (918) 588-3005
Any Party may change the address to which the communications are to be
directed to it by giving notice to the other in the manner provided in this
Section 15.1. Notice by mail shall be deemed to have been given and received on
the third calendar day after posting. Notice by overnight delivery service,
facsimile transmission or personal delivery shall be deemed given on the date of
actual delivery.
15.2 GOVERNING LAW. This Agreement and the performance of the
transactions contemplated hereby shall be governed by and construed and enforced
in accordance with the laws of the State of New York, without regard to any
conflict-of-laws provision thereof that would otherwise require the application
of the law of any other jurisdiction.
15.3 ENTIRE AGREEMENT. This Agreement and the Exhibits hereto, together
with the certificates, documents, instruments, writings and any other agreements
contemplated hereby that are delivered pursuant hereto, set forth the entire
agreement and understanding of the Parties with respect to the transactions
contemplated hereby and supersede all prior agreements, arrangements and
understandings relating to the subject matter hereof. No representation,
promise, inducement or statement of intention with respect to the subject matter
of this Agreement has been made by any Party that is not embodied in this
Agreement and Exhibits hereto and the Organizational Agreements, the
certificates, documents, instruments, writings and any other agreements
contemplated hereby that are delivered pursuant hereto, and none of the Parties
shall be bound by or liable for any alleged representation, promise, inducement
or statement of intention not so set forth.
15.4 ASSIGNMENT. No Party to this Agreement may sell, transfer, assign,
pledge or hypothecate its or his rights, interests or obligations under this
Agreement. Nothing herein is intended to restrict the transferability of the
Membership Interests (as defined in the LLC Agreement), which is governed by the
LLC Agreement.
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<PAGE> 85
15.5 SUCCESSORS. This Agreement shall inure to the benefit of, be
binding upon, and be enforceable by the parties hereto and their respective
successors and permitted assigns.
15.6 AMENDMENTS; WAIVER. This Agreement may be amended, superseded or
canceled, and any of the terms hereof may be waived, only by a written
instrument specifically stating that it amends, supersedes or cancels this
Agreement or waives any of the terms herein, executed by all Parties intended to
be bound thereby or, in the case of a waiver, by the Party waiving compliance.
The failure of any Party at any time to require performance of any provision
herein shall in no manner affect the right at a later time to enforce the same.
No waiver by any Party of any condition, or of any breach of any term, covenant,
representation or warranty, shall be deemed or constitute a waiver of any other
condition, or breach of any other term, covenant, representation or warranty,
nor shall the waiver constitute a continuing waiver unless otherwise expressly
provided.
15.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
15.8 SEVERABILITY. Any provision hereof that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
15.9 NO THIRD PARTY BENEFICIARIES. Except for Newco, or to the extent
an Affiliate of either Party is expressly given rights herein, any agreement
contained, expressed or implied in this Agreement shall be only for the benefit
of the Parties hereto and their respective successors and assigns, and such
agreements shall not inure to the benefit of the obligees of any indebtedness of
any Party hereto, it being the intention of the Parties hereto that no Person or
entity shall be deemed a third party beneficiary of this Agreement, except to
the extent a third party is expressly given rights herein.
15.10 NEGOTIATED TRANSACTION. The provisions of this Agreement were
negotiated by the Parties hereto, and this Agreement shall be deemed to have
been drafted by all of the Parties hereto.
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IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of
the date first set forth above.
NORTHERN TELECOM INC.
By: /s/ [ILLEGIBLE]
---------------------------------------
Its: Vice President
--------------------------------------
WILLIAMS COMMUNICATIONS GROUP, INC.
By: /s/ [S. ILLEGIBLE WILLIAMS]
---------------------------------------
Its: Senior Vice President
--------------------------------------
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<PAGE> 1
EXHIBIT 10.35
STOCK PURCHASE AGREEMENT
AGREEMENT (this "Agreement") as of January 21, 1997, among ABC
Industria e Comercio S.A. - ABC INCO, a Brazilian corporation ("Seller"),
Lightel S.A. Tecnologia da Informacao, a Brazilian closed corporation
("Company"), Algar S.A. - Empreendimentos e Participacoes, a Brazilian
corporation ("Sponsor"), and Williams International Telecom Limited, a Cayman
Islands company ("Williams").
WHEREAS, Company, Sponsor and Williams have concurrently herewith
entered into the Subscription and Shareholders Agreement pursuant to which
Williams shall subscribe to twenty-one million, nine hundred ninety-three
thousand, twenty-nine (21,993,029) Shares; and
WHEREAS, as part of such transaction, Seller shall sell to Williams
thirty-one million, two hundred five thousand, three hundred eighty-six
(31,205,386) Shares pursuant to this Agreement; and
WHEREAS, on the basis of the representations and warranties and subject
to the conditions set forth herein, Seller desires to sell to Williams and
Williams desires to purchase from Seller the Shares.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
Section 1.1 Definitions. Unless otherwise defined herein, the
capitalized terms used herein shall have the meanings given them in the
Subscription and Shareholders Agreement ("Subscription and Shareholders
Agreement") dated January 21, 1997 among Lightel S.A. Tecnologia da Informacao,
Algar S.A. - Empreendimentos e Participacoes and Williams International Telecom
Limited.
Section 1.2 Interpretation.
(a) headings and underlinings are for convenience only and do not
affect the interpretation of this Agreement;
(b) words importing the singular include the plural and vice versa;
(c) words importing a gender include any gender;
(d) an expression importing a natural person includes any company,
partnership, trust, joint venture, association, corporation or other body
corporate and any Authority;
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(e) a reference to a (i) Section, Article or party is a reference to
that Section or Article of, or that party, to this Agreement; and (ii) Exhibit,
Annex or Schedule is a reference to that Exhibit, Annex or Schedule to the
Subscription and Shareholders Agreement;
(f) a reference to a document includes an amendment or supplement to,
or replacement or novation of, that document but disregarding any amendment,
supplement, replacement or novation made in breach of this Agreement;
(g) a reference to a party to any document includes that party's
successors and permitted assigns.
(h) a reference to an agreement includes an undertaking, deed,
agreement or legally enforceable arrangement or undertaking in writing; and
(i) a reference to a document includes any agreement in writing, or any
certificate, notices instrument or other document of any kind.
ARTICLE 2
PURCHASE AND SALE; PROJECT
Section 2.1 Purchase and Sale.
(a) Subject to the terms and conditions set forth herein, on the
Closing, Williams shall purchase from Seller and Seller shall sell to Williams
thirty-one million, two hundred five thousand, three hundred eighty-six
(31,205,386) Shares, constituting eleven and seventy-three hundredths percent
(11.73%) of all of the issued and outstanding Shares. The Shares to be acquired
by Williams shall consist of Williams Common Shares and Williams Preferred
Shares. For the purpose of this Agreement, "Williams Common Shares" means three
million, seven hundred fifty-five thousand, three hundred one (3,755,301) voting
common Shares to be acquired by Williams under this Agreement, and representing,
after giving effect to the Williams Subscription, the provisions of Exhibit 14.2
of the Subscription and Shareholders Agreement, and the acquisition of such
Shares under this Agreement, five percent (5%) of the total issued and
outstanding Common Shares of the Company. For the purpose of this Agreement,
"Williams Preferred Shares" means twenty-seven million, four hundred fifty
thousand, eighty-five (27,450,085) non-voting preferred Shares to be acquired by
Williams under this Agreement, and representing, after giving effect to the
Williams Subscription, the provisions of Exhibit 14.2 of the Subscription and
Shareholders Agreement, and the acquisition of such Shares under this Agreement,
seventy-two and eighty-two hundredths percent (72.82%) of the total issued and
outstanding preferred Shares of the Company. The Williams Preferred Shares
shall be of the same class as and having the same rights as all other existing
or future preferred Shares of the Company including, without limitation,
preferred Shares of the Company held by the IFC.
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(b) The purchase price for the Shares shall be twenty-eight million,
one hundred fifty-six thousand, four hundred eight dollars and fifty-six cents
(US$28,156,408.56), payable at the Closing.
Section 2.2 The Project. Seller covenants that the Project to be funded
shall be as described in Article 2 of the Subscription and Shareholders
Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Section 3.1 Representations and Warranties of the Company. The Company
represents and warrants that:
(a) it is a corporation duly incorporated and validly existing under
the laws of Brazil and has the corporate power to own its assets, conduct its
business as presently conducted and to enter into and perform its obligations
under this Agreement, each Transaction Document to which it is a party, and any
agreements in implementation hereof and thereof. Exhibit 3.1(a) is a copy of the
By-laws of the Company and each of its Subsidiaries, together with all
amendments to date, which are duly registered with the competent commercial
registry;
(b) it has full power and authority to undertake the obligations under
this Agreement, each Transaction Document to which it is a party, and any
agreements in implementation hereof and thereof, to execute and deliver this
Agreement and each such Transaction Document, to perform its obligations
hereunder and thereunder and observe the terms and provisions mentioned herein
and therein;
(c) the authorized share capital of the Company is three hundred
million one hundred and twenty thousand (300,120,000) common and preferred
registered Shares of no par value of which two hundred million (200,000,000)
common Shares and twelve million seven hundred ninety-three thousand six hundred
fifty-eight (12,793,658) preferred Shares have been issued and fully paid, and
no options, warrants, rights or other capital stock of the Company are
outstanding. Set forth in Schedule 3.1(c) is the authorized and issued share
capital of each of the Subsidiaries of the Company, which issued share capital
is fully paid;
(d) the Williams Shares, after giving effect to the Williams
Subscription under the Subscription and Shareholders Agreement, the provisions
of Side Letters 1, 2 and 3 set forth in Exhibit 14.2, and the acquisition of the
Williams Shares hereunder, shall represent twenty percent (20%) of the total
issued and outstanding Shares of the Company. Except as set forth in Schedule
3.1(d), the Williams Shares shall be available at the Closing for (i)
subscription by Williams under the Williams Subscription; (ii) acquisition by
Williams under this Agreement; and (iii) issuance to Williams under the
provisions of Side Letters 1, 2 and
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3 set forth in Exhibit 14.2, and shall be free from any preemptive rights,
Liens, charges or encumbrances whatsoever;
(e) the execution and delivery of each Transaction Document to which it
is a party, including this Agreement, and the performance of the obligations set
forth herein and therein, have been duly authorized by all necessary action on
its part and constitutes valid and legally binding obligations of the Company,
enforceable in accordance with their terms;
(f) the execution and delivery of any Transaction Document to which it
is a party, including this Agreement, and the performance of its obligations
hereunder and thereunder shall not conflict with or result in a breach of any of
the terms, conditions or provisions of, or constitute a default or require any
consent under (i) any provision of its Estatuto Social; (ii) any provision of
any applicable law, regulation, rule, decree, judgment or order to which it is
subject; or (iii) any indenture, mortgage, agreement or other instrument or
arrangement to which the Company is a party or by which it is bound;
(g) all dealings between any company of the Algar Group, including the
Company and any of the Sponsor's Subsidiaries and Affiliates, on the one hand,
and any company of the Company Group, on the other hand, shall be remain on
normal arm's-length terms as if between unrelated parties; all such transactions
which occurred during 1996 are summarized in Schedule 3.1(g);
(h) neither the Company nor any of its property enjoys any right of
immunity from set-off, suit or execution in respect of its assets or its
obligations under any Transaction Document;
(i) all governmental, corporate, shareholders' and creditors'
authorizations, consents, approvals, waivers and licenses required for the
execution and delivery of this Agreement and the performance of its obligations
hereunder have been duly obtained or granted and are in full force and effect;
(j) it has made the notifications to the Brazilian competent Authority,
which are required to be made pursuant to applicable law (and has caused its
Subsidiaries engaged in the Telecommunications and Information Technology Sector
to also notify the Brazilian competent Authority) of any and all changes in
their respective shareholdings as a result of each corporate restructuring which
has been undertaken by the Company and its Subsidiaries since the date of the
organization of the Company and each of its Subsidiaries to date;
(k) except as set forth in Schedule 3.1(k), it has complied with and is
in compliance in all material respects with all applicable laws, regulations,
ordinances, rules, orders, judgments, decrees and awards of any Authority in
connection with its assets, properties and business. It has not received any
notice of any failure to comply with, nor
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are there any circumstances which indicate that it is in violation of
any such laws, regulations, ordinances, orders, judgments or decrees;
(l) it has not, nor has any of its directors, officers, managers,
employees, agents or representatives directly or indirectly, offered, paid or
promised to pay, or authorized the payment of any money or other thing of value
(including any fee, gift, sample, travel expense, or entertainment with a value
in excess of US$250 or the equivalent thereof in any currency) to any person who
is an official, officer, agent, employee or representative of any government or
instrumentality thereof or of any government-owned or non-government owned
existing or prospective customer, to any political party or official thereof, to
any candidate for political or political party office, or to any other person or
Authority while knowing or having reason to believe that all or any portion of
such money or thing of value would be offered, given or promised, directly or
indirectly, to any such official, officer, agent, employee, representative,
political party, political party official or candidate, to obtain or retain
business. All payments made by the Company to third parties are made by check
mailed or otherwise delivered to the principal place of business of a party; or
by wire transfer to a bank located in the same jurisdiction as such place of
business of a party, in all cases in the name of such third party;
(m) each transaction of the Company has been properly and accurately
recorded on the books and records of the Company, and each document (including
any contract, invoice or receipt) on which entries in the Company's books and
records are based is complete and accurate in all respects. The Company has
maintained a system of internal accounting controls adequate to insure that each
maintains no off-the-books accounts and the assets of the Company are used only
in accordance with the directives of the Company's management;
(n) the Company has at all times during the previous five-year period
complied with the export control laws of the United States with respect to
products, services and technology obtained from the United States, and with
those of any other jurisdictions, to the extent such U.S. and other laws were or
are applicable. Except as set forth in Schedule 3.1(n) no product sold or
service performed by the Company in the previous five-year period has been sold
or performed, directly or indirectly, to or for the benefit of, nor has the
Company had any business dealings whatsoever with, any person of or in Cuba,
Iran, Iraq, Libya, Serbia, Montenegro or Serbian-controlled portions of Croatia
or Bosnia, or North Korea, or any person owned or controlled by any of the
foregoing (including without limitation "specially designated nationals").
Except as set forth on Schedule 3.1(n), no product sold or service performed by
the Company during the previous five-year period has contained more than ten
percent (10%) U.S. content by value or was manufactured or provided using any
U.S. origin technical data;
(o) except as set forth on Schedule 3.1(o), during the previous
five-year period, no product has been sold or service performed by the Company
to or for the benefit of
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customers in Bahrain, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia,
Sudan, Syria, United Arab Emirates, or Yemen; and
(p) the representations referred to in Subsections (a) through (o)
above are also made on behalf of each Subsidiary and Affiliate of the Company
and therefore applicable to each of such Subsidiaries and Affiliates "mutatis
mutandis?.
Section 3.2 Representations and Warranties of the Sponsor. The Sponsor
hereby represents and warrants to Williams that:
(a) it is a corporation duly incorporated and validly existing under
the laws of Brazil and has the corporate power to own its assets, conduct its
business as presently conducted and to enter into this Agreement and any
agreements in implementation hereof;
(b) it has full power and authority to undertake the obligations
hereunder, to execute and deliver this Agreement, to perform its obligations and
observe the terms and provisions mentioned herein;
(c) the execution and delivery of this Agreement and the performance of
the obligations set forth herein have been duly authorized by all necessary
action on its part and constitute valid and legally binding obligations of the
Sponsor, enforceable in accordance with its terms;
(d) the execution and delivery of this Agreement and the performance of
its obligations hereunder shall not conflict with or result in a breach of any
of the terms, conditions or provisions of, or constitute a default or require a
consent under (i) any provision of its Estatuto Social; (ii) any provision of
any applicable law, regulation, rule, decree, judgment or order to which it is
subject; (iii) any provision of any indenture, mortgage, agreement or other
instrument or arrangement to which it is a party, or which is binding upon it or
any of its assets;
(e) all governmental, corporate, shareholders?, and creditors?
authorizations, consents, approvals, waivers and licenses required for the
execution and delivery of this Agreement and the performance of its obligations
hereunder have been duly obtained or granted and are in full force and effect;
(f) except as set forth in Schedule 3.2(f), neither the Sponsor nor any
Subsidiary or Affiliate of the Sponsor, except the Company, nor any statutory
director ("conselheiro") or officer ("diretor") of any of the Sponsor, the
Seller, the Company or CTBC, has acquired any shares in CTBC or any options,
warrants or other rights in respect of such shares, from subscribers of CTBC or
otherwise. Schedule 3.2(f) sets forth all of the purchases, options or rights,
whether written or oral, to acquire any shares in CTBC, held, owned or
controlled by the Sponsor, any company of the Algar Group or their respective
Subsidiaries or Affiliates;
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(g) when delivered at the Closing, the report on CTBC shares described
in Section 5.1(o) shall be true and correct in all respects; and
(h) it is the lawful owner, free and clear of all Liens, of one hundred
ninety-nine million, nine hundred ninety-nine thousand, nine hundred and
ninety-five (199,999,995) common voting Shares and zero (0) preferred non-voting
Shares representing approximately ninety three point ninety nine percent
(93.99%) of the total number of issued and outstanding share capital of the
Company on the date of this Agreement.
Section 3.3 Representations and Warranties of the Seller. The Seller
hereby represents and warrants to Williams that:
(a) it is a corporation duly incorporated and validly existing under
the laws of Brazil and has the corporate power to own its assets, conduct its
business as presently conducted and to enter into this Agreement and any
agreements in implementation hereof.
(b) it has full power and authority to undertake the obligations
hereunder, to execute and deliver this Agreement, to perform its obligations and
observe the terms and provisions mentioned herein.
(c) the execution and delivery of this Agreement and the performance of
the obligations set forth herein have been duly authorized by all necessary
action on its part and constitute valid and legally binding obligations of the
Seller enforceable in accordance with its terms.
(d) the execution and delivery of this Agreement and the performance of
its obligations hereunder shall not conflict with or result in a breach of any
of the terms, conditions or provisions of, or constitute a default or require a
consent under (i) any provision of its Estatuto Social; (ii) any provision of
any applicable law, regulation, rule, decree, judgment or order to which it is
subject; (iii) any provision of any indenture, mortgage, agreement or other
instrument or arrangement to which it is a party, or which is binding upon it or
any of its assets.
(e) all governmental, corporate, shareholders', and creditors'
authorizations, consents, approvals, waivers and licenses required for the
execution and delivery of this Agreement and the performance of its obligations
hereunder have been duly obtained or granted and are in full force and effect.
(f) it is the lawful owner, free and clear of all Liens, of three
million, seven hundred fifty-five thousand, three hundred one (3,755,301) common
voting Shares and twenty-seven million, four hundred fifty thousand, eighty-five
(27,450,085) Preferred non-voting Shares representing approximately eleven and
seventy-three hundreds percent (11.73%) of the total number of issued and
outstanding share capital of the Company on the date of this Agreement.
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Section 3.4 Representations and Warranties of the Company, the Seller
and the Sponsor. Without limiting the contents of the representations and
warranties contained in Sections 3.1, 3.2 and 3.4 of this Agreement, the
Company, the Seller and the Sponsor, jointly and severally, further represent
and warrant to Williams that:
(a) Schedule 3.3(a) are the lists of the present shareholders of each
of the Company and its Subsidiaries including CTBC. Each of the Seller, Sponsor,
the Company and the Subsidiaries and Affiliates of the Seller, Sponsor and the
Company, and the shareholders of such entities, have no other direct and/or
indirect equity or quasi-equity interest in any direct and/or indirect
Subsidiary of the Company, including CTBC, except as set forth in Schedule
3.3(a);
(b) under prevailing legislation, the subscribers of CTBC have the
right to receive shares in exchange for subscribers' fees already paid to CTBC
for the right to use the respective telephone line. The shares, to be subscribed
for by the new subscribers, can be common voting shares and/or preferred
non-voting shares, with due observance of the limits set forth in the Brazilian
Corporate Law (Lei das Sociedades Anonimas). Except for these shares and capital
increases, there exists no other options, warrants or any other rights which
might result in the effective reduction of the percentage equity interest of the
Company in any of its Subsidiaries and Affiliates;
(c) a copy of the audited consolidated financial statements of Lightel
Servicos and its Subsidiaries as of December 31, 1995 and the unaudited
consolidated financial statements of the Company and its Subsidiaries as of
September 30, 1996, are set forth in Exhibit 3.3(c). Such documents fairly
completely and accurately present the financial position of Lightel Servicos and
the Company and their respective Subsidiaries at the relative dates and for the
respective periods covered, and have been prepared in conformity with accounting
principles generally accepted in Brazil and applied on a consistent basis
throughout the periods involved. Except as set forth in Schedule 3.3(c), Lightel
Servicos owns no other assets, equity or business;
(d) since the date of the financial statements drawn up on September
30, 1996, the Company and each of its Subsidiaries and Affiliates have not
suffered any material adverse change in their business prospects or financial
condition or incurred any substantial or unusual loss or liability. For the
purposes hereof, the term "material" means any transaction (or a series of
related transactions) valued at or an event (or series of related events)
resulting in a loss or liability or change in financial position (or which can
reasonably be expected to result in a loss or liability or change in financial
position) equal to or exceeding five million U.S. dollars (US$5,000,000) or its
Dollar Equivalent in Reais. Since such date, the Company and each of its
Subsidiaries and Affiliates have not undertaken or agreed to undertake any
substantial obligation outside the ordinary course of business;
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(e) the books and records of the Company and each of its Subsidiaries
and Affiliates have been prepared and maintained in accordance with accounting
principles generally accepted in Brazil and consistently applied. The books of
account of the Company and its Subsidiaries and Affiliates comply with the
requirements of Brazilian law and are not affected by any extraordinary or
non-recurring item;
(f) since the date of the formation of the Company and of each of its
Subsidiaries and Affiliates, there have been no liabilities, asserted
liabilities or obligations of any nature affecting the Company or such
Subsidiary or Affiliate, respectively, whether absolute, accrued, contingent or
otherwise, other than those disclosed or reflected: (i) on each of the audited
financial statements of the Company or such Subsidiary or Affiliate; or (ii) if
arising after the date of the most recent audited financial statements of such
entity, in the most recent unaudited financial statements of such entity, or
(iii) if arising after the date of the most recent unaudited financial
statements of such entity, in the books and records of such entity;
(g) since the date of its formation, the Company has ascertained and
paid all taxes and quasi-tax contributions measured on its profits or levied by
virtue of corporate restructurings and has further timely and punctually filed
any tax returns required by the federal, state and municipal laws in Brazil;
(h) all tax returns and reports of the Company and each of its
Subsidiaries and Affiliates required by law to be filed have been duly filed and
all tax assessments, fees and other governmental charges upon the Company and
each of its Subsidiaries and Affiliates, or their properties, or their income or
assets, which are due and payable, have been paid, other than those presently
payable without penalty or interest. If such taxes are not yet due, adequate
provisions have been made in the accounting records of the Company and each of
its Subsidiaries and Affiliates for the payment of such taxes;
(i) except as set forth in Schedule 3.3(i), the Company and each of its
Subsidiaries and Affiliates are not engaged in nor, to the best of their
knowledge, threatened by, any litigation, arbitration or administrative
proceeding the outcome of which might materially and adversely affect their
business prospects or financial position. To the best of their knowledge and
belief, the Company and each of its Subsidiaries and Affiliates are not in
violation of any statute or regulation of any governmental authority and no
judgement or order has been issued which has or is likely to have any materially
adverse effect on the Company's and each Subsidiary's and Affiliate's business
prospects or financial position;
(j) the Company and each of its Subsidiaries and Affiliates have good
and unencumbered title to all of the properties at which their business are
carried on or are proposed to be carried on for the purposes of the Project;
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(k) the Company and each of its Subsidiaries and Affiliates have the
right to all concessions, permissions, authorizations, trademarks, trade names,
patents and license agreements necessary for the conduct of their business as
now conducted and as proposed to be conducted, without any known conflict with
the rights of others;
(l) no person, firm or company has (other than as a shareholder and,
according to law, as an employee) any right to participate in the profits of the
Company and any Subsidiary or Affiliate. The Company and each of its
Subsidiaries and Affiliates are not managed by any third party;
(m) since the date of its formation, the Company has not engaged in any
transaction or operation inconsistent with its status of a holding company;
(n) except as set forth in Schedule 3.3(n), neither the Company nor any
of its Subsidiaries or Affiliates is a party to any labor suit brought against
it by any of its former employees claiming in court any payments associated with
the labor relationship with the Company or any Subsidiary or Affiliate, nor is
the Company or any Subsidiary or Affiliate a party to any legal action
instituted by any third party;
(o) except as set forth in Schedule 3.3(o), neither the Company nor any
of its Subsidiaries or Affiliates is a party to, or committed to enter into, any
material contract (i.e., contract other than in the ordinary course of
business), which would or might affect the judgment of a prospective investor;
(p) except as set forth in Schedule 3.3(p), neither the Company nor any
of its Subsidiaries or Affiliates have any outstanding mortgage, charge or other
Lien on any of their respective assets, and no contract or arrangement,
conditional or unconditional, exists for the creation by any of such entities of
any mortgage, charge or other Lien;
(q) the Sponsor, the Seller, the Company and CTBC are in compliance in
all respects with, and no breach has occurred with respect to, their respective
obligations under the mortgages, charges, or other Liens and contracts or
arrangements, conditional or unconditional, set forth in Schedule 3.3(p) and
under the following agreements, entered into with the International Finance
Corporation, all of which are dated July 18, 1996: (i) Common Terms Agreement;
(ii) Subscription and Shareholders Agreement; (iii) Loan Agreement; (iv) Put
Option Agreement; and (v) Guarantee Agreement; and any other agreement entered
into with the International Finance Corporation by such entities;
(r) except as set forth in Schedule 3.3(r), there are no contracts or
other arrangements, written or oral, regarding the contribution or transfer of
CTBC shares to Lightel;
(s) the Sponsor and the Seller agree to indemnify, defend and hold
Williams and its Affiliates harmless from any damages, losses, lost profits,
liabilities and contingencies
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<PAGE> 11
of any nature whatsoever derived from (i) any corporate restructuring that
either the Company or any of its Subsidiaries (which are engaged in the
Telecommunications and Information Technology Sector) might have undertaken
to date; (ii) the inaccuracy of any representations and warranties contained
in this Agreement; (iii) the breach of any covenant or agreement of the
Sponsor, the Seller or the Company under this Agreement; and (iv) all
undisclosed liabilities of the Company, its Subsidiaries or Affiliates
arising prior to the Closing.
Section 3.5 Exercise of Sponsor's and Seller's Voting Rights. Each of
the Sponsor and Seller agree to exercise its voting rights and/or any other
rights granted to it by law or otherwise, so as to permit the Company the
fulfillment of all of its obligations hereunder and to achieve the prompt and
effective implementation of this Agreement.
Section 3.6 Warranty. Each of the Company, the Sponsor and the Seller
acknowledges that it has made the representations and warranties referred to in
Sections 3.1 through 3.5 with the intention of persuading Williams to enter into
this Agreement and that Williams has entered into this Agreement on the basis
of, and in full reliance on, each of such representations and warranties. Each
of the Company, the Seller and the Sponsor warrants to Williams that each of
such representations and warranties is true and correct in all material respects
as of the date of this Agreement and that none of them omits any matter the
omission of which makes any of such representations or warranties misleading.
For the purposes hereof the phrase "in all material respects" means the absence
of any event, condition or circumstance which might jeopardize the transactions
contemplated in this Agreement, the Williams Subscription or the ownership by
Williams of the Williams Shares, or the knowledge of which would cause a
reasonable investor to refrain from making an investment such as the Williams
Subscription, on the existing terms set forth herein.
Section 3.7 Rights and Remedies not Limited. William's rights and
remedies in relation to any misrepresentation or breach of warranty on the part
of the Company, the Seller or the Sponsor are not prejudiced:
(a) by an investigation by or on behalf of Williams into the affairs of
the Company;
(b) by the execution or the performance of this Agreement; or
(c) by any other act or thing which may be done by or on behalf of
Williams in connection with this Agreement and which might, apart from this
Section, prejudice such rights or remedies.
Section 3.8 Representations and Warranties for Williams Acquisition.
For the purpose of the acquisition and payment for the Williams Shares, the
Company shall represent and warrant that:
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(a) the representations and warranties made or confirmed in Sections
3.1, 3.2, 3.3, 3.4 and 3.6 continue to be true;
(b) no Event of Suspension and/or Cancellation has happened and is
continuing;
(c) since the date of this Agreement, nothing has occurred which might
materially adversely affect the carrying out of the Project or the Company's
business prospects or financial condition or the business prospects or financial
condition of each of its Subsidiaries and Affiliates, or make it improbable that
the Company or any of its Subsidiaries or Affiliates shall be able to fulfill
any of its obligations under any agreement to which the Company, each Subsidiary
or Affiliate is a party, including this Agreement; nor has the Company or any
Subsidiary or Affiliate incurred any substantial or unusual loss or liability.
For the purposes hereof the phrase "materially adversely affect" means any
event, condition or circumstance which might jeopardize the transactions
contemplated in this Agreement, Williams' acquisition or the ownership by
Williams of the Williams Shares, or the knowledge of which would cause a
reasonable investor to refrain from making an investment such as Williams'
acquisition of the Williams Purchased Shares, on the existing terms set forth
herein; and
(d) the proceeds from the acquisition and payment are, at the date of
the relevant request, needed by the Company for the purposes of the Project, the
details of which are set forth in Schedule 2.1, or shall be needed for that
purpose within three (3) months of such date.
Section 3.9 Representations and Warranties of Williams. Williams hereby
represents and warrants to the Sponsor, Seller and the Company that:
(a) it is a limited company duly incorporated and validly existing
under the laws of the Cayman Islands, British West Indies, and has the corporate
power to own its assets, conduct its business as presently conducted and to
enter into this Agreement and any agreements in implementation hereof;
(b) it has full power and authority to undertake the obligations
hereunder, to execute and deliver this Agreement, to perform its obligations and
observe the terms and provisions mentioned herein;
(c) the execution and delivery of this Agreement and the performance of
the obligations set forth herein have been duly authorized by all necessary
action on its part and constitute valid and legally binding obligations of
Williams, enforceable in accordance with its terms;
(d) the execution and delivery of this Agreement and the performance of
its obligations hereunder shall not conflict with or result in a breach of any
of the terms, conditions or provisions of, or constitute a default or require a
consent under (i) any
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provision of its Memorandum and Articles of Association; (ii) any provision of
any applicable law, regulation, rule, decree, judgment or order to which it is
subject; (iii) any provision of any indenture, mortgage, agreement or other
instrument or arrangement to which it is a party, or which is binding upon it
or any of its assets; and
(e) all governmental, corporate, shareholders?, and creditors?
authorizations, consents, approvals, waivers and licenses required for the
execution and delivery of this Agreement and the performance of its obligations
hereunder have been duly obtained or granted and are in full force and effect.
ARTICLE 4
WILLIAMS ACQUISITION OF SHARES
Section 4.1 Acquisition of Shares by Williams.
(a) On the terms and subject to the conditions of this Agreement,
Williams shall have the right to acquire the Williams Preferred Shares and the
Williams Common Shares (collectively, the "Williams Purchased Shares") and pay
therefor an aggregate price not to exceed twenty-eight million, one hundred
fifty-six thousand, four hundred eight dollars and fifty-six cents
($28,156,408.56). After giving effect to the acquisition of the Williams Shares
pursuant to this Agreement, the provisions of Exhibit 14.2 of the Subscription
and Shareholders Agreement and the Williams Subscription, together the Williams
Shares shall represent twenty percent (20%) of the total issued and outstanding
Shares of the Company.
(b) The Seller shall request Williams to acquire the totality of the
Williams Purchased Shares by delivering to Williams, at least seven (7) Business
Days prior to the proposed date of acquisition, a request substantially in the
form of Exhibit 4.1(b).
(c) Williams shall pay the aggregate of the acquisition price of the
Williams Purchased Shares in one lump sum to the credit of the Company at the
bank specified in the request for acquisition or at such other bank in such
place as Williams and the Seller from time to time agree.
(d) Notwithstanding anything contained in this Agreement, Williams may,
at any time and from time to time, in its discretion and without request by the
Seller, acquire and pay, on the terms set out in Subsection (a) above, for any
or all of the Williams Purchased Shares; provided that Williams may not acquire
Shares after giving effect to the acquisition of the Williams Purchased Shares
hereunder, and the Williams Subscription, the provisions of Exhibit 14.2 of the
Subscription and Shareholders Agreement representing more than twenty per cent
(20%) of the total issued and outstanding share capital of the Company pursuant
to this Section.
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<PAGE> 14
(e) Upon the acquisition and payment by Williams under this Section,
the Seller shall:
(i) transfer to Williams the number of Williams Purchased Shares so
acquired free of all Liens and which shall rank, pari passu in all respects with
all other Shares of the same category of Williams Purchased Shares and deliver
to Williams two (2) share certificates evidencing valid title to such number of
Williams Preferred Shares and Williams Common Shares, respectively; and
(ii) furnish to Williams evidence that the Williams Shares have
been duly and validly authorized, issued and delivered in compliance with
Brazilian law and that all other legal requirements in connection with the
authorization, issue and delivery have been duly satisfied, including the making
of the proper entries in the shareholders registry book of the Company.
Section 4.2 Actions Prohibited until Williams Purchased Shares
Acquired. Until all of the Williams Purchased Shares have been acquired or the
acquisition and payment of the Williams Purchased Shares hereunder has been
canceled as provided in Section 4.3 whichever first occurs:
(a) the Company shall not, unless Williams otherwise agrees:
(i) issue any Shares of any class, except in accordance with the
Financial Plan;
(ii) increase its subscribed, paid in and authorized capital except
in accordance with the provisions of this Agreement;
(iii) change the rights attached to, any of its Shares of any
class; or
(iv) take any other action by amendment of its Estatuto Social or
through reorganization, consolidation, merger or sale of assets, or otherwise
which might result in the equity interest in the Company represented by the
Williams Shares being equivalent to less than twenty percent (20%) of the total
issued and outstanding Shares of the Company.
Section 4.3 Suspension and Cancellation of Williams Acquisition. (a)
Williams may, by notice to the Seller, suspend or cancel the acquisition of the
Williams Purchased Shares:
if:
(i) by February 28, 1997 any of the conditions of acquisition and
payment under this Agreement as set forth in Section 5.1 has not been met; or
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(ii) the Seller has not made available the Shares for the
acquisition by Williams;
(iii) if any Event of Suspension and/or Cancellation has occurred
and is continuing, or if the Event of Suspension and/or Cancellations specified
in Section 6.1 (m) is, in the reasonable opinion of Williams, imminent; or
(iv) if, at any time, in the reasonable opinion of Williams, there
exists any situation which indicates that performance by each the Company or
Seller of any of its obligations under this Agreement cannot be expected.
(b) The exercise by Williams of its right of suspension does not
preclude Williams from exercising its right of cancellation, either for the same
or another reason. A suspension does not limit any other provision of this
Agreement.
Section 4.4 Obligations of the Company after Williams Acquires the
Williams Shares.
(a) Within ten (10) Business Days following the acquisition and payment
for the Williams Purchased Shares, the Seller and the Company each agrees to
assist Williams in applying with the Banco Central for the issuance of the
Certificado de Registro to evidence the Williams Purchased Shares as a foreign
investment of Williams so as to allow Williams the receipt of dividends,
proceeds of sale of the Williams Purchased Shares and any other Shares of the
Company received by Williams by way of stock dividends, share splits or
replacement shares.
(b) The Seller and the Company each agrees to provide the Banco Central
with any information and/or document that the Banco Central may request and to
comply with any requirement the Banco Central may make so as to issue the
Certificado de Registro.
(c) The Seller and the Company shall be liable for the payment of any
penalty or fine that might be imposed by the Banco Central as a result of an
event attributable to the Company in case of its failure to comply with the
terms set forth in the applicable legislation for the application for
registration of foreign investments in Brazil and the fulfillment of any
requirement made by the Banco Central for such purpose or any other purpose.
(d) The Seller and the Company shall each make its best efforts to
assist Williams to cause the Banco Central to issue the Certificado de Registro
evidencing the Williams Purchased Shares within sixty (60) days following the
Closing. Within two (2) Business Days following the receipt of such Certificado
de Registro by the Company, the Company agrees to send the original copy thereof
to Williams.
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ARTICLE 5
CONDITIONS OF WILLIAMS' ACQUISITION OF WILLIAMS PURCHASED SHARES
Section 5.1 Conditions of the Williams' Acquisition. The obligation of
Williams to make the acquisition and payment hereunder is subject to the
fulfillment, in a manner satisfactory to Williams, prior to or concurrently with
the making of such acquisition and payment, of the following conditions:
(a) the Sponsor, the Company, its Subsidiaries and Affiliates have
performed all of their respective obligations due to be performed under the
Transaction Documents, including this Agreement, in each case due to be
performed prior to the disbursement;
(b) arrangements have been made by the Company and by each of its
Subsidiaries and Affiliates with respect to the installation and operation of an
accounting and cost control system and a management information system
satisfactory to Williams and for the confirmation of Arthur Andersen as Auditors
for the Company and for each of its Subsidiaries and Affiliates;
(c) the Company, each of its Subsidiaries and Affiliates have insured
their respective properties and business with adequate coverage covering risks
normally covered by companies engaged in the relevant Telecommunications and
Information Technology Sector pursuant to the minimum insurance requirements set
forth in Schedule 5.1(c) and Williams has been provided with copies of all
insurance policies together with a certificate of the insurer confirming that
such policies are in effect;
(d) all the Transactions Documents have been entered into by all
parties to them, have become (or, as the case may be, remain) unconditional and
fully effective in accordance with their respective terms; and, if Williams
requires, Williams has received a copy of each Transaction Document to which it
is not a party, certified as a true and complete copy by the Company;
(e) the Board of Directors of the Company shall have: (i) convened an
Extraordinary Shareholders Meeting of the Company to be held on the Closing
Date, at which the Sponsor shall vote to appoint the Williams Director to the
Board of Directors of the Company; and (ii) adopted a Board resolution stating
the policy of the Company regarding CTBC shares in the terms described in
Section 10.11;
(f) the Seller and the Company have obtained, or made adequate
arrangements for obtaining, all Authorizations and other necessary approvals or
consents for:
(i) the acquisition of the Williams Purchased Shares;
(ii) the carrying on of the business of the Company as it is
presently carried on and is contemplated to be carried on;
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<PAGE> 17
(iii) the carrying out of the Project and the implementation of the
Financial Plan; and
(iv) the due execution and delivery of, and performance under, the
Transaction Documents, and any documents necessary or desirable in their
implementation and delivery of the Williams Purchased Shares;
(g) and has provided Williams with copies of those Authorizations,
certified as true and complete copies by the Company, if Williams so requires;
(h) Williams has received a legal opinion substantially in the form of
Exhibit 5.1(h) from the Sponsor's and the Company's in-house general counsel,
with respect to:
(i) the organization, existence, operations and corporate
restructurings of each of the Company, its Subsidiaries and Affiliates, and the
formation of their respective authorized, subscribed and paid-in share capital;
(ii) the matters referred to in Subsections (d), (e) and (f) above;
(iii) the title of the Company, each of its Subsidiaries and
Affiliates to, or other interest of the Company, each of its Subsidiaries and
Affiliates in their respective immovable and moveable assets;
(iv) the authorization, execution, validity and enforceability of
this Agreement, and any documents in implementation of this Agreement;
(v) the validity, effectiveness and enforceability of the
Concessions and the Portarias;
(vi) the terms and conditions for the payment of the compensation
due to CTBC in the event the Concession Agreement is terminated for any reason
whatsoever;
(vii) the representations and warranties of the Sponsor and the
Company contained in this Agreement are true and accurate in all respects as of
the Closing Date and the Sponsor and the Company are in full compliance in all
respects with the covenants contained in this Agreement as of the Closing Date;
and
(viii) such other matters relating to the transactions contemplated
by this Agreement, and any other Transaction Documents as Williams reasonably
requests;
(i) Williams has received (if Williams so requires) reimbursement of
fees and expenses of Williams' counsel and other expenses as provided in Section
10.9 unless paid beforehand directly to such counsel upon the request of
Williams;
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(j) Williams has received the Certificate of Incumbency and Authority;
(k) the Company and each of its Subsidiaries and Affiliates shall be in
compliance with national and local environmental, safety and health laws and
standards and the relevant World Bank Guidelines;
(l) since the date of the latest financial statements attached hereto,
the Company has not, nor has any of its Subsidiaries and Affiliates, incurred
any loss or liability;
(m) after giving effect to the acquisition of the Williams Purchased
Shares, the Company shall not be in violation of:
(i) its Estatuto Social;
(ii) any provision contained in any document to which the Company
is a party (including this Agreement) or by which the Company is bound; or
(iii) any applicable Brazilian law, rule or regulation;
(n) immediately after the acquisition of the Williams Purchased Shares
and having given effect to the Williams Subscription, Williams shall not have
acquired or paid for a higher proportion of the Williams Purchased Shares than
the proportion which all of the remaining Shareholders of the Company have by
then subscribed or paid for of the total number of Shares to be subscribed by
them in accordance with the Financial Plan;
(o) the Sponsor shall have delivered to Williams a true and correct
report of all shares of CTBC acquired by the Sponsor, the Company or any their
respective Subsidiaries or Affiliates, from a non-Affiliate from the date hereof
until the Closing Date, indicating the number and class of shares acquired, the
identity of the purchaser and of any subsequent transferees or assignees of such
shares, the date of the purchases and subsequent transfers or assignments of
such shares, if any, and the effective net price paid for such shares upon
initial purchase and any subsequent transfers or assignments;
(p) no Event of Suspension and/or Cancellation shall have occurred and
be continuing; and
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(q) the Sponsor shall have delivered to Williams an update of Schedule
3.1(g), to reflect any additional transactions which have occurred between the
date hereof and the Closing Date;
Section 5.2 Company Certification. Seller shall have caused the Company
to deliver to Williams as part of the request for the subscription and
disbursement under the Williams Subscription a certification, substantially in
the form of Exhibit 4.1(b) signed by the President of the Company with respect
to the matters referred to in Section 3.8 and the conditions specified in
Section 5.1, expressed to be effective as of the date of the subscription and
disbursement under the Williams Subscription; and such evidence as Williams
reasonably requests of the proposed utilization of the proceeds of the
acquisition and payment for the Williams Purchased Shares.
Section 5.3 Conditions for Williams Benefit. The conditions in Sections
5.1 and 5.2 are for the benefit of Williams and may be waived only by Williams
at its sole discretion.
Section 5.4 Saving of Rights. Unless Williams otherwise notifies the
Seller and the Company, and without limiting the generality of Section 10.12,
the right of Williams to require compliance with any condition under this
Agreement which Williams waives in respect of the acquisition hereunder is
preserved for the purpose of the future exercise of any other right of Williams
hereunder.
ARTICLE 6
EVENTS OF SUSPENSION AND/OR CANCELLATION
OF WILLIAMS ACQUISITION
Section 6.1 Events of Suspension and/or Cancellation. Each of the
following events constitutes an Event of Suspension and/or Cancellation:
(a) if the Company, any Subsidiary or Affiliate fails to carry out the
Project and conduct its business with due diligence and efficiency in accordance
with sound engineering, financial and business practices; if the Company fails
to carry out the Project in accordance with the Project description which is
contained in Schedule 2.1 (subject to any modifications to which Williams may
agree); or fails to cause the funding specified in the Financial Plan to be
applied exclusively to the Project;
(b) if the Company, any of its Subsidiaries or Affiliates fails to
maintain at all times a firm of independent public accountants of international
standing and sound reputation as auditors of each of such companies;
(c) if the Company, any Subsidiary or Affiliate fails to design,
construct, operate and maintain all plant and equipment in compliance with the
applicable environmental,
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occupational health and safety requirements of the Government of Brazil and
the local authorities, and applicable World Bank Guidelines;
(d) except to the extent required by Brazilian laws, if the Company
declares or pays any dividend or makes directly or indirectly any distribution
on its share capital, or purchases, redeems or otherwise acquires any Shares of
the Company or any option over the same prior to Closing or the cancellation by
Williams of the acquisition of the Williams Shares, as the case may be;
(e) if either the Company or any Subsidiary or Affiliate enters into
any transaction with any person other than in the ordinary course of business,
on ordinary commercial terms and on the basis of arm's-length arrangements;
(f) if either the Company or any Subsidiary or Affiliate enters into
any partnership (except for the purpose of carrying out the Project),
profit-sharing or royalty agreement or other similar arrangement whereby the
Company's or any Subsidiary's or Affiliate's income or profits are, or might be,
shared with any other person; or if the Company or any Subsidiary or Affiliate
enters into any management contract or similar arrangement whereby the business
or operations of the relevant company are managed by any other person;
(g) if the Company forms any Subsidiary or acquires shares of any
company, unless each of such Subsidiary and company is designed to be a company
of the Company Group;
(h) if the Company changes its Estatuto Social in any manner which
would be inconsistent with the provisions of any Transaction Document; changes
its Fiscal Year; changes the nature of its present and contemplated business or
operations or change the nature or scope of the Project; sells, transfers,
leases or otherwise disposes of all or a substantial part of its assets (whether
in a single transaction or in a series of transactions, related or otherwise)
other than sales, transfers, leases or other forms of disposal in the ordinary
course of business; or undertakes or permits any merger, consolidation, spin-off
or the transformation of the legal structure of any company of the Company Group
into any other structure;
(i) if the Company terminates, amends or grants any waiver in respect
of any provision of any Transaction Document;
(j) if the Sponsor, any Subsidiary or Affiliate of the Company fails to
perform any obligation under any Transaction Document to which it is a party;
(k) if the Sponsor, the Company or any of their respective Subsidiaries
or Affiliates fails to perform any of its obligations under this Agreement or
any other
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agreement between the Sponsor, the Company or such Subsidiary or Affiliate,
on the one hand, and Williams, on the other hand;
(l) if any representation or warranty confirmed or made in Article 3 or
in connection with the execution and delivery of this Agreement, or in
connection with the request for acquisition and payment under this Agreement,
shall be found to be incorrect in any material respect. For the purposes hereof
the phrase "in any material respect" means the existence of any event, condition
or circumstance which might jeopardize the transactions contemplated in this
Agreement, the Williams Subscription or the ownership by Williams of the
Williams Shares, or the knowledge of which would cause a reasonable investor to
refrain from making an investment such as the acquisition of the Williams
Shares, on the existing terms set forth herein;
(m) if any government or governmental Authority shall have condemned,
nationalized, seized, or otherwise expropriated (including in any gradual or
progressive manner), all or any substantial part of the property or other assets
of the Sponsor, the Company, any Subsidiary or Affiliate or of the share capital
of the relevant company or shall have assumed custody or control of such
property or other assets or of the business or operations of the Sponsor, the
Company, any Subsidiary or Affiliate or of the share capital of the relevant
company, or shall have taken any action for the dissolution or disestablishment
of the Sponsor, the Company, any Subsidiary or Affiliate or any action that
would prevent any of such companies or its officers from carrying on its
business or operations or a substantial part thereof;
(n) if a decree or order by a court is entered against the Company, the
Sponsor, any of the Company's Subsidiaries or Affiliates:
(i) adjudging the Company, the Sponsor, any of the Company's
Subsidiaries or Affiliate, "concordatarias", bankrupt or insolvent;
(ii) approving as properly filed a petition seeking reorganization,
"concordata" arrangement, adjustment or composition of, or in respect of, the
Company, the Sponsor, any of the Company's Subsidiaries or Affiliates under any
applicable law;
(iii) appointing a receiver, liquidator, assignee, trustee,
"comissario," sequestrator (or other similar official) of the Company, the
Sponsor, any of the Company's Subsidiaries or Affiliates or of any substantial
part of the property or other assets owned by any of such persons; or
(iv) ordering the dissolution, winding up or liquidation of the
affairs of the Company, the Sponsor, any of the Company's Subsidiaries, or any
Affiliate;
(v) or any petition is filed seeking any of the above and is not
dismissed within thirty (30) days;
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<PAGE> 22
(o) if the Company, the Sponsor, any of the Company's Subsidiaries or
Affiliates:
(i) requests a moratorium or suspension of payment of debts from
any court;
(ii) institutes proceedings or takes any form of corporate action
to be liquidated, adjudicated bankrupt or insolvent;
(iii) consents to the institution of bankruptcy or insolvency
proceedings against it;
(iv) files a petition or answer or consent seeking reorganization
("concordata") or relief under any applicable law, consents to the filing of any
such petition or to the appointment of a receiver, liquidator, "comissario"
assignee, trustee, sequestrator (or other similar official) of the Company, the
Sponsor, any of the Company's Subsidiaries or Affiliates, or of substantial part
of their respective properties;
(v) makes a general assignment for the benefit of creditors; or
(vi) admits in writing its inability to pay its debts generally as
they become due or otherwise becomes insolvent;
(p) if an attachment or analogous process is levied or enforced upon or
issued against any of the assets of the Company, the Sponsor, any of the
Company's Subsidiaries or Affiliates, is not discharged within thirty (30) days;
(q) if any other event occurs which under any applicable law would have
an effect analogous to any of those events listed in Subsections (n), (o), and
(p) above;
(r) if any provision of any Transaction Document is revoked, terminated
or ceases to be in full force and effect or the performance of the obligations
of any party to such agreements becomes unlawful or any such document is
declared to be void or is repudiated or its validity or enforceability at any
time is contested by any person and the provision is not restored or replaced by
a provision acceptable to Williams, or such repudiation or challenge withdrawn
within thirty (30) days of Williams' notice to the Company requiring that
restoration, replacement or withdrawal;
(s) if this Agreement, any Concession, the Concession Agreement, or any
Portaria:
(i) is breached by the relevant party to it and such breach may
have an adverse effect on the ability of the Company to perform and observe its
obligations under any Transaction Document; or
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(ii) is revoked, terminated or ceases to be in full force and
effect without the prior consent of Williams, or performance of the obligations
under this Agreement, any Concession, Concession Agreement or under any of the
Portarias becomes unlawful; or any of such agreements, concessions or Portarias
is declared to be void or is repudiated or its validity or enforceability at any
time is contested by any party to it.
(t) if a default shall have occurred with respect to any indebtedness
of the Company or under any agreement pursuant to which there is outstanding any
such indebtedness of the Company, and such default shall have continued for more
than any applicable period of grace;
(u) if any Authorization necessary for the carrying out of the Project
and the Company's business and operations generally, as well as the business and
operations of each of its Subsidiaries or Affiliates or for the performance by
the Company, each Subsidiary or Affiliate of its obligations under each
Transaction Document is not obtained when required or otherwise at any time
ceases to be in full force and effect, including in respect of the remittance to
Williams or its assigns in freely convertible currency any amounts of dividends
on, or proceeds of sale of, the Williams Shares and the relevant Authorization
is not restored or reinstated within thirty (30) days of notice by Williams to
the Company requiring that restoration or reinstatement;
(v) if any provision of this Agreement is or becomes invalid, illegal
or unenforceable;
(w) if any of the Sponsor, the Company or CTBC are not in compliance in
all respects with their obligations under mortgages, charges or other liens and
contracts or arrangements, conditional or unconditional, set forth in Schedule
3.3(p) and the agreements with the International Finance Corporation mentioned
in Section 3.3(q);
(x) if any occurrences, events, circumstances or conditions which,
individually or in the aggregate, constitute a material adverse change, shall
have occurred or arisen after the date hereof, including any occurrences,
events, circumstances or conditions which, notwithstanding the Sponsor's or the
Company's disclosure to Williams prior to the Closing Date, have or with the
passage of time or the giving of notice or both, would have a material adverse
effect on William's rights under this Agreement or a material adverse effect on
either the Company taken as a whole or on CTBC; or
(y) if after the date hereof, the Sponsor or any of its Subsidiaries or
Affiliates, excluding the Company, shall have acquired by any means, directly or
indirectly, any shares of CTBC other than those expressly disclosed in this
Agreement to be held, directly or indirectly, legally or beneficially, by such
persons and entities.
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ARTICLE 7
CERTAIN RIGHTS AND OBLIGATIONS OF THE PARTIES
Section 7.1 Tag Along Rights; Preemptive Rights; Williams Director.
With respect to the Williams Shares acquired hereunder, Williams shall have the
same rights as it has under Articles 7 and 8 of the Subscription and
Shareholders Agreement.
Section 7.2 Rights of First Notice. With respect to the Williams Shares
acquired hereunder, Sponsor shall have the same rights as it has under Section
7.9 of the Subscription and Shareholders Agreement.
Section 7.3 Public Offering. With respect to the Williams Shares
acquired hereunder, Williams shall have the same rights as it has under Article
9 of the Subscription and Shareholders Agreement.
Section 7.4 Miscellaneous Obligations. Seller and Sponsor hereby
covenant and agree to be bound by and perform the obligations of Sponsor and
Company set forth in Articles 10 and 11 of the Subscription and Shareholders
Agreement and with respect to the Williams Shares acquired hereunder, Williams
shall have the same rights as it has under Articles 10 and 11 of the
Subscription and Shareholders Agreement.
ARTICLE 8
OBLIGATIONS OF THE COMPANY
Section 8.1 Termination of the Concession. If during the term of this
Agreement the Concession Agreement is terminated for whatever reason, the
proceeds derived from the termination of said agreement ("Termination Proceeds")
payable to the Company by CTBC in accordance with the Concession Agreement and
the applicable laws shall be immediately distributed by the Company to its
Shareholders as cash dividends.
Section 8.2 Vote on Cash Dividend Distribution. In the capacity of
controlling Shareholder of the Company, the Sponsor hereby agrees to vote its
shares in favor of the cash dividends distribution referred to in Section 8
and to cause the Company to hold the relevant shareholders meeting within thirty
(30) days following the actual receipt of the Termination Proceeds by the
Company.
Section 8.3 Affirmative Covenants. Unless Williams otherwise agrees,
the Company shall, and shall cause each of its Subsidiaries and Affiliates to:
(a) carry out the Project and conduct its business with due diligence
and efficiency and in accordance with sound engineering, financial and business
practices and maintain adequate insurance coverage of its business and assets
pursuant to the minimum insurance requirements set forth in Schedule 5.1(c)
hereto and Subsection (y) below;
(b) carry out the Project in accordance with the Project description in
Schedule 2.1;
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(c) cause the financing specified in the Financial Plan to be applied
exclusively to the Project;
(d) promptly install and maintain the accounting and cost control
system and management information system referred to in Section 5.1(b) of this
Agreement, and maintain books of account and other records adequate to reflect
truly and fairly its financial condition and the results of its operations
(including the progress of the Project) in conformity with accounting principles
which are generally accepted in Brazil, consistently applied;
(e) maintain a Debt to Shareholders Equity Ratio not greater than
50/50;
(f) as soon as available, but in any event within sixty (60) days after
the end of each quarter of each Fiscal Year, deliver to Williams, in English at
the Company's expense:
(i) two (2) copies of the Company's complete Financial Statements
and the complete Financial Statements of each of its Subsidiaries for such
quarter prepared in conformity with accounting principles which are generally
accepted in Brazil, consistently applied and, if requested by Williams,
certified by an officer of the relevant company;
(ii) a report on any factors materially affecting or which might
materially affect the Company's business and operations or the business and
operations of any of its Subsidiaries or its financial condition;
(iii) during implementation of the Project, a report, in a form
satisfactory to Williams, on the implementation and progress of the Project,
including any factors materially affecting or which might materially affect the
Project or the implementation of the Financial Plan;
(iv) as requested by Williams, a semi-annual statement by the
Company of all material transactions between the Company, any Subsidiary or
Affiliate and any company of the Algar Group, and a certification by the chief
financial officer of the Company and its Auditors that those transactions were
and remain on the basis of arms'-length arrangements. For the purposes hereof,
the term "material" shall mean any transaction (or a series of related
transactions) valued at or resulting in a liability equal to or exceeding One
Hundred Thousand U.S. Dollars (U.S.$100,000) or its Dollar Equivalent in Reais.
For the purposes of such Auditor's certifications, the Auditors shall adhere to
the reporting standards established (A) by the securities laws and regulations
and stock exchange rules then in effect in Brazil, including without limitation,
the rules and regulations promulgated by the Comisao de Valores Mobiliarios
(CVM) and (B) by December 31, 1997, by the securities laws and regulations and
stock exchange rules then in effect in the United States of America, including
without limitation, the rules and regulations promulgated under the Securities
Acts of 1933 and 1934 and by the U.S. Securities and Exchange Commission; and
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<PAGE> 26
(v) a statement of all shares, if any, of CTBC acquired during such
quarter by the Sponsor or any of its Subsidiaries or Affiliates;
(g) as soon as available but in any event within one hundred and twenty
(120) days after the end of each Fiscal Year, deliver to Williams, in English at
the Company's expense:
(i) two (2) copies of the complete Financial Statements of the
Company and each of its Subsidiaries for such Fiscal Year (which are in
agreement with its books of account and prepared in accordance with accounting
principles which are generally accepted in Brazil, consistently applied),
together with an audit report on them;
(ii) a copy of any management letter or other communication from
the Auditors to the Company or to any of its Subsidiaries commenting, with
respect to such Fiscal Year, on, among other things, the adequacy of the
relevant company's financial control procedures and accounting systems and
management information system;
(iii) a report by the Auditors certifying that, based on the
relevant financial statements, the Company and its Subsidiaries were in
compliance with the financial covenant contained in Subsection (e) above as of
the end of the relevant Fiscal Year or, as the case may be, detailing any
non-compliance;
(iv) a review of the operations of both the Company and its
Subsidiaries during such Fiscal Year, in a form satisfactory to Williams,
containing the information listed in Schedule 12.3(g)(iv); and
(v) a statement by the Company of all transactions between the
Company, any Subsidiary or Affiliate and any company of the Algar Group during
such Fiscal Year and a certification by the chief financial officer of the
Company and its Auditors that those transactions were and remain on the basis of
arms'-length arrangements; for the purposes of such Auditor's certifications,
the Auditors shall adhere to the reporting standards established (A) by the
securities laws and regulations and stock exchange rules then in effect in
Brazil, including without limitation, the rules and regulations promulgated by
the Comisao de Valores Mobiliarios (CVM) and (B) by December 31, 1997, by the
securities laws and regulations and stock exchange rules then in effect in the
United States of America, including without limitation, the rules and
regulations promulgated under the Securities Acts of 1933 and 1934 and by the
U.S. Securities and Exchange Commission; and
(h) the Company shall request and make best efforts to obtain from its
Affiliates as soon as possible the information and documentation referred to in
Subsection (f) (i) and (ii) and Subsection (g) (i) through (iv) above and shall
provide Williams with the relevant information and documentation as soon as they
are available;
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(i) deliver to Williams promptly following receipt a copy of any
management letter or other communication sent by the Auditors or any accountants
retained by the Company and the Subsidiaries to the relevant company or to its
management in relation to the financial, accounting and other systems,
management or accounts of the relevant company if not provided pursuant to
Subsection (g) (ii) above, in English at the Company's expense;
(j) promptly notify Williams by facsimile not less than ten (10) days
before any meeting of the Board of Directors and shareholders? meetings of the
Company including the agenda of such meetings;
(k) promptly deliver to Williams two (2) copies, in English at the
Company's expense of:
(i) all notices, reports and other communications of the Company to
its shareholders; and
(ii) the minutes of all board of directors? and shareholders'
meetings;
(l) promptly provide to Williams such information as Williams from time
to time shall reasonably request about the Company and any company of the
Company Group;
(m) permit representatives of Williams to visit any of the premises
where the businesses of the Company and its Subsidiaries are conducted and to
have access to the books of account and records of the relevant company to the
extent necessary to permit Williams an evaluation of the performance of the
relevant company; provided that Williams notifies the Company in writing of the
purpose of any of such visit at least fifteen (15) calendar days prior to the
date of the proposed visit;
(n) promptly notify Williams of any proposed change in the nature or
scope of the Project or the business or operations of the Company and of any
event or condition which might materially and adversely affect the carrying out
of the Project or the carrying on of the Company's business or operations or the
operations and business of any of its Subsidiaries or Affiliates;
(o) promptly notify Williams by facsimile as soon as it becomes aware
of any litigation or administrative proceedings before any Authority or arbitral
body which materially and adversely affects or may have a material and adverse
effect on the Company, any Subsidiary or Affiliate, its assets or the Project or
on the ability of the relevant company to perform and observe its obligations
under any Transaction Document, including this Agreement;
(p) design, construct, operate and maintain all of its plant
and equipment in compliance with the applicable laws and regulations, as well
as the applicable
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environmental, occupational health and safety requirements of the Government
of Brazil, the local authorities and applicable World Bank Guidelines;
(q) within forty-five (45) calendar days after the end of each Fiscal
Year, deliver to Williams an annual monitoring report, in the form specified by
the International Finance Corporation, confirming compliance with the applicable
national and local requirements and standards, as well as the compliance with
the World Bank Guidelines referred to in Subsection (p) above or, as the case
may be, detailing any non compliance together with the action being taken to
ensure compliance;
(r) if Arthur Andersen ceases to be the Auditors of the Company for any
reason, appoint and maintain as the auditors of the Company another firm of
independent public accountants of international standing and sound reputation;
(s) obtain and maintain in force (or where appropriate, promptly renew)
all Authorizations necessary for carrying out the Project and the Company's
business and operations generally;
(t) perform and observe all the conditions and restrictions contained
in, or imposed on the Company by, any such Authorizations;
(u) provide Williams within thirty (30) days prior to the start of each
Fiscal Year with a plan detailing the Company Group's investment program in the
Telecommunications and Information Technology Sector and funding of such program
for the relevant Fiscal Year;
(v) file all relevant tax returns and pay all taxes promptly upon the
same becoming due except to the extent that the taxes are being contested in
good faith and by appropriate means and an adequate reserve has been set aside
with respect thereto;
(w) cause its Subsidiaries and Affiliates to negotiate in good faith
access and interconnect agreements with any other telecommunications operators
in Brazil as may be required by the relevant Authorities;
(x) contest where practicable all acts or proceedings by any
governmental Authorities that might reasonably be expected to adversely affect
any Concession, Portaria, license or consent necessary for the conduct of the
operations of any company of the Company Group or the performance of the
obligations of the relevant company in respect of the transactions contemplated
hereby;
(y) insure its assets and properties against general third party,
including product liability covering all of its activities, with a minimum loss
limit of one million Dollars ($1,000,000) Equivalent, naming Williams as
"additional insured" under the liability policy
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and provide Williams with a statement of the Company's overall insurance
strategy for the protection of its assets and operations;
(z) comply with and cause its subsidiaries and Affiliates to comply
with all of the provisions of the mortgages, charges and other liens or
contracts and arrangements set forth in Schedule 3.3(p) and all of the
agreements entered into with the International Finance Corporation mentioned in
Section 3.4(q);
(aa) all: (i) dealings between the Sponsor or any of its Subsidiaries
or Affiliates, on the one hand, and the Company or any company of the Company
Group, on the other hand; and (ii) investments in any company of the Company
Group, made directly or indirectly by shareholders, directors, officers and
other top-level management personnel of any company of the Algar Group, shall
be: (A) established and remain on normal arm's-length terms as if between
unrelated parties and in accordance with the provisions of Brazilian corporate
law regarding fiduciary duties of administrators in respect of Business
Opportunities, and regarding the protection of minority shareholders' rights;
and (B) disclosed to Williams in writing on a timely basis and in accordance
with the reporting standards established by the securities laws and regulations
and stock exchange rules then in effect in Brazil and the United States of
America;
(ab) prior to or at the Closing adopt a Board resolution substantially
identical to the resolution described in Section 10.11 of the Subscription and
Shareholders Agreement; and
(ac) the Company shall take and it shall cause its Subsidiaries and
Affiliates to take any action that Williams may reasonably request to give
effect to the provisions contained in this Agreement, providing Williams with
evidence thereof.
Section 8.4 Negative Covenant. Unless Williams agrees, the Company
shall not and shall cause each of its Subsidiaries not to: (a) sell, transfer,
lease or otherwise dispose of all or a substantial part of its assets (whether
in a single transaction or in a series of transactions, related or otherwise)
other than sales, transfers, leases or other forms of disposal in the ordinary
course of business; (b) create or permit to exist any Lien on any of, its
property, revenues or other assets, present or future, except for security
created to secure all or any part of indebtedness incurred or assumed by the
Company or by any of its Subsidiaries to pay all or any part of the purchase
price of any property or assets acquired by the Company or by any of its
Subsidiaries after the date of this Agreement, provided that any such security
shall be confined solely to the property or asset so acquired; or (c) propose or
vote in favor of any shareholder or Board resolution of the Company to increase
the capital of the Company, if such resolution is in conflict with the
anti-dilution rights of Williams under Brazilian law, the Estatuto Social of the
Company, or the provisions of this Agreement, including without limitation,
Sections 3.1(d), 4.1, 4.2(b)(iv), 7.8, 10.3(a)(ii), 10.6 and 10.7 of the
Subscription and Shareholders Agreement.
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ARTICLE 9
WILLIAMS PUT OPTION
Section 9.1 Williams shall have the option, exercisable in its
discretion, at any time during the Exercise Period, by delivering to the Sponsor
a Notice of Exercise, with a copy to the Company, to sell to the Sponsor all,
but not less than all, of the Option Shares then held by Williams at the greater
of the Exercise Price or the Floor Price, and otherwise upon the terms and
conditions of this Agreement, and the Sponsor hereby agrees to purchase and pay
for such Option Shares in accordance herewith.
Section 9.2 After receiving the Notice of Exercise, the Sponsor shall
on the Settlement Date and at the Settlement Place, pay to Williams in full, in
Dollars, in immediately available funds, to the bank account in the City of New
York, New York, United States of America, designated by Williams, the Exercise
Price.
Section 9.3 Williams shall, on the Settlement Date at the Settlement
Place, against payment in full of the Exercise Price for the Option Shares,
execute in the relevant corporate books of the Company deeds of transfer for the
Option Shares purchased by the Sponsor and shall, as appropriate, endorse in the
name of the Sponsor or deliver to the Company for cancellation the share
certificates (or the provisional share certificates) issued by the Company
representing such Option Shares, free and clear of all Liens, together with all
documents required to transfer title to such Option Shares to the Sponsor.
Section 9.4 Without prejudice to any remedies available to Williams
under this Agreement or otherwise, in the event that, after Williams shall have
delivered a Notice of Exercise of the Sponsor, the Sponsor shall fail to
purchase and pay for all or any of the Option Shares specified in the Notice of
Exercise as herein provided, Williams shall be free to sell, transfer or
otherwise dispose of any such unpurchased and unpaid Option Shares to a third
party willing to purchase such unpurchased and unpaid Option Shares, without
affecting any rights Williams may have against the Sponsor for the failure to
purchase or pay for the Option Shares specified in the Notice of Exercise,
including the rights set forth in Section 10.3(i) hereof.
Section 9.5 Nothing in this Agreement shall limit the right of
Williams, at any time, to sell, transfer or otherwise dispose of all of its
Option Shares which are not then subject to a Notice of Exercise.
Section 9.6 (a) The Sponsor shall not take any action, including,
without limitation, voting in favor of any resolution of the Shareholders of the
Company, which would permit the Estatuto Social of the Company to be amended in
a way that may impair the exercise of, or that may alter or prejudice the rights
of Williams in relation to the Put Option.
(b) The Sponsor shall procure that any Shareholder of the Company
waives whatever right of first refusal such Shareholder may have in respect of
the transfer of the
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Option Shares to the Sponsor (whether set out in the Estatuto Social of the
Company or otherwise) insofar as it is necessary so to do in order to give
effect to the provisions of the Put Option.
ARTICLE 10
MISCELLANEOUS
Section 10.1 Information to Third Party. The Seller, the Company and
the Sponsor agree to inform any Third Party and Investor of this Agreement and
to cause the relevant party to adhere and be bound by all the terms and
conditions set forth herein as a condition precedent to the actual acquisition
and/or subscription of any Share of the Company.
Section 10.2 Entire Agreement. This Agreement and the Subscription and
Shareholders Agreement, and their respective Schedules and Exhibits, and all
other documents delivered at the Closing, constitute the entire agreement of the
parties hereto on the subject matter hereof, and can only be amended by a
written instrument signed by all of the parties hereto.
Section 10.3 Jurisdiction.
(a) At the option of Williams, this Agreement may be enforced in the
courts of the city of New York, State of New York located in the Southern
District of New York, United States of America, or in the central courts of the
city of Sao Paulo, State of Sao Paulo, Brazil. Final judgment issued by any of
such courts shall be conclusive and may be enforced in the other courts referred
to herein, by suit on the judgment, a certified or exemplified copy of which
shall be conclusive evidence of the judgment, or in any other manner provided by
law.
(b) By the execution and delivery of this Agreement, each of the
Seller, the Company and the Sponsor irrevocably submits to the jurisdiction of
any such court in any action, suit or proceeding arising out of or relating to
this Agreement or any other Transaction Document to which any of such party is a
party and each of such parties designates, appoints and empowers CT Corporation
System, Inc. with an office at 1633 Broadway, New York, NY 10019, United States
of America as its authorized agent to receive for and on its behalf service of
any summons, complaint or other legal process in any such action, suit or
proceeding that Williams elects to bring in the State of New York.
Notwithstanding the foregoing, Williams reserves the right to make personal
service on each of the Seller, the Company and the Sponsor of any summons,
complaint or other legal process in any action, suit or proceeding.
(c) As long as this Agreement remains in force, each of the
Seller, the Company and the Sponsor shall maintain a duly appointed agent
for the service of summons, complaint and other legal process in New York,
New York, United States of America, for purposes of any legal action,
suit or proceeding Williams may bring in the courts of the City
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of New York in respect of this Agreement or any other Transaction Document to
which any of the above parties is a party. The Seller, the Company and the
Sponsor shall keep Williams advised of the identity and location of such agent.
(d) Each of the Seller, the Company and the Sponsor also irrevocably
consents, if for any reason the Seller's, the Company's or the Sponsor?s
authorized agent for service of process of summons, complaint and other legal
process in any such action, suit or proceeding is not present in New York, New
York, to service of such papers being made out of those courts by mailing copies
of the papers by registered United States air mail, postage prepaid, to the
relevant party at its address specified in the opening of this Agreement. In
such a case, Williams shall also send by telex or facsimile, or have sent by
telex or facsimile, a copy of the papers to the Seller, the Company or the
Sponsor, as the case may be.
(e) Service in the manner provided in Subsection (c) above in any such
action, suit or proceeding shall be deemed personal service, shall be accepted
by the Seller, the Company or the Sponsor, as the case may be, as such and shall
be valid and binding upon the relevant party for all purposes of any such
action, suit or proceeding.
(f) Each of the Seller, the Company and the Sponsor irrevocably waives
to the fullest extent permitted by applicable law:
(i) any objection which it may have now or in the future to the
laying of the venue of any such action, suit or proceedings in any court
referred to in this Section;
(ii) any claim that any such action, suit or proceeding has been
brought in an inconvenient forum;
(iii) its right of removal of any matter commenced by Williams in
the courts of the State of New York to any court of the United States of
America; and
(iv) any and all rights to demand a trial be jury in any such
action, suit or proceeding brought against the Seller and/or the Company and/or
the Sponsor by Williams.
(g) To the extent that any of the Seller, the Company or the Sponsor
may be entitled in any jurisdiction referred to in Subsection (a) above to claim
for itself or its assets immunity in respect of its obligations under this
Agreement or any other Transaction Document to which any of the above parties is
a party from any suit, execution, attachment (whether provisional or final, in
aid of execution, before judgment or otherwise) or other legal process or to the
extent that in any such jurisdictions such immunity (whether or not claimed) may
be attributed to it or its assets, each of the Seller, the Company and the
Sponsor irrevocably agrees not to claim and irrevocably waives such immunity to
the fullest extent permitted by the laws of any of such jurisdictions.
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<PAGE> 33
(h) To the extent that the Seller, the Company and/or the Sponsor may,
in any suit, action or proceeding brought in any of the courts referred to in
Subsection (a) above arising out of or in connection with this Agreement or any
other Transaction Document to which the Seller, the Company and/or the Sponsor
is a party, be entitled to the benefit of any provision of law requiring
Williams in such suit, action or proceeding to post security for the costs of
any of such parties (cautio judicatum solvi), or to post a bond or to take
similar action, each of the Seller, the Company and the Sponsor hereby
irrevocably waives such benefit, in each case to the fullest extent now or in
the future permitted under the laws of the State of New York, United States of
America or Brazil.
(i) If Williams brings any legal action, suit or proceeding arising out
of or relating to this Agreement or any other Transaction Document to which the
Seller, the Company or the Sponsor is a party, in the central courts of the city
of Sao Paulo, State of Sao Paulo, Brazil, as referred to in Subsection (a), any
party hereto shall be entitled to claim in such Brazilian court the specific
performance of the obligations assumed by the other parties hereunder or under
any of the Transaction Documents, or any portion hereof or thereof, pursuant to
the relevant articles of the Brazilian Code of Civil Procedure, including, but
not limited to, Articles 461, 632, 639, as well as pursuant to Article 118 of
Brazilian Law No. 6,404, enacted on December 15, 1976.
(j) The parties hereto hereby acknowledge that the mere payment of
damages by the defaulting party to the non-defaulting parties shall not be
deemed appropriate indemnification for the failure by such defaulting party to
comply with its obligations hereunder or under any of the Transaction Documents.
Section 10.4 Counterparts. This Agreement may be signed in one or more
counterpart copies all of which, when taken together, shall constitute one
document.
Section 10.5 Assignment. This Agreement shall bind and inure to the
benefit of the parties hereto, their successors and assigns. No party may assign
or transfer any of its rights and obligations hereunder, provided that Williams
may assign, in whole or in part, the Shares it comes to hold in the Company; and
provided, further, that Williams may also assign to any Third Party which comes
to acquire at least fifty per cent (50%) of the Williams Shares acquired
hereunder the rights mentioned in Articles 7 and 9, but no other rights.
Section 10.6 Translation and Registration. The Company agrees to effect
an official translation of this Agreement into Portuguese, and subject to the
prior review and approval of such translation by Williams or its advisors, to
register this Agreement with the Cartorio de Registro de Titulos e Documentos in
the relevant jurisdiction and to provide Williams with a copy of such
translation and satisfactory evidence of the registration of this Agreement with
the above mentioned "Cartorio".
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<PAGE> 34
Section 10.7 Translation and Registration Costs. The Company agrees to
bear all the costs and expenses and to pay any and all taxes, charges or fees
that may be levied or assessed on the translation and registration of this
Agreement with the "Cartorio" referred to in the preceding Section.
Section 10.8 Taxes. The Company shall also pay all taxes (including
stamp taxes), duties, fees or other charges payable on or in connection with the
execution, issue and delivery of the Williams Shares and the translation,
registration or notarization of any documents related to this Agreement or to
the Williams Shares, and shall, upon notice from Williams, reimburse Williams or
its assigns for any such taxes, duties, fees or other charges paid by Williams
or its assigns thereon. The Sponsor shall pay all taxes, duties, fees and other
charges incurred in connection with the enforcement, sale, transfer or delivery
of the Option Shares and any documents related thereto so that Williams receives
in its bank account the Exercise Price without deduction for or on account of
any such taxes, duties, fees or other charges. The Company or the Sponsor, as
the case may be, shall reimburse Williams for any such charges paid by Williams
thereon.
Section 10.9 Fees and Expenses. The Company shall pay or cause to be
paid to Williams or as Williams may direct:
(a) the fees and expenses of Williams' counsel in Brazil incurred in
connection with: (i) the preparation of Williams' investment in the Company;
(ii) the preparation, review, execution and, where appropriate, registration,
delivery and translation of each Transaction Document, including this Agreement,
the Williams Shares and any other documents related to this Agreement or the
Williams Shares; (iii) the giving of any legal opinion required by Williams
under this Agreement; (iv) any amendment or modification to, or waiver under,
this Agreement; (v) the registration (where appropriate) and delivery of the
evidences of payments by or to Williams in relation to the Williams acquisition
hereunder; and (vi) the exercise by Williams of its rights or powers consequent
upon, or arising out of, the occurrence of any Event of Suspension and/or
Cancellation; and
(b) all of Williams' reasonable costs and expenses, including legal
fees, incurred by Williams in relation to the protection or enforcement, or
attempted protection or enforcement, of any rights under this Agreement.
Section 10.10 Notices and Requests. Any notice, request or other
communication to be given or made under this Agreement shall be in writing and
except as otherwise provided in this Agreement it shall be deemed to have been
duly given or made when it shall be delivered by hand, mail (or airmail if sent
to another country), cable, telex or telecopier to the party to which it is
required or permitted to be given or made at the relevant address for
communications of such party which is specified at the opening of this Agreement
or at such other address for communication as any party shall have designated by
notice to the parties giving or making such notice, request or other
communication.
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<PAGE> 35
Section 10.11 Evidence of Authority. The Seller shall furnish to
Williams the Certificate of Incumbency and Authority, that is, a certificate, in
the form of Exhibit 1.1(v) and in substance satisfactory to Williams, evidencing
the authority of the person or persons who will, on behalf of the Seller, sign
the requests and certifications provided for in this Agreement, or take any
other action or execute any other document required or permitted to be taken or
executed by the Seller under this Agreement, and the authenticated specimen
signature of each such person.
Section 10.12 Saving of Rights.
(a) No course of dealing or waiver by Williams in connection with any
condition of Williams acquisition of the Williams Purchased Shares shall impair
any right, power or remedy of Williams with respect to any other condition, or
be construed to be a waiver thereof.
(b) Unless otherwise notified to the Seller, the Company or the Sponsor
by Williams and without prejudice to the generality of Subsection (a) above, the
right of Williams to require compliance with any condition under this Agreement
which may be waived by Williams in respect of the Williams acquisition of the
Williams Purchased Shares or in connection with any right granted to Williams
hereunder is expressly preserved for the purposes of future exercise of any of
the Williams' rights hereunder.
(c) No course of dealing and no delay in exercising, or omission to
exercise, any right, power or remedy accruing to Williams upon any default under
this Agreement or any other agreement, including the other Transaction
Documents, shall impair any such right, power or remedy or be construed to be a
waiver thereof or an acquiescence therein; nor shall the action of Williams in
respect of any such default, or any acquiescence by it therein, affect or impair
any right, power or remedy of Williams in respect of any other default.
(d) Waiver of a breach of this Agreement or of any power, right
authority, discretion or remedy arising upon a breach of this Agreement must be
in writing and signed by the party granting the waiver. A breach of this
Agreement is not waived by any failure or delay in exercise, or partial
exercise, of any power, right, authority, discretion or remedy. A power, right,
authority, discretion or remedy created or arising upon a breach of this
Agreement is not waived by any failure or delay in the exercise, or a partial
exercise, of that or any other power, right, authority, discretion or remedy.
Section 10.13 English Language. All documents to be furnished or
communications to be given or made under this Agreement shall be in the English
language or, if in another language, shall be accompanied by a translation into
English certified by a representative of the Company or the Sponsor, as the case
may be, which English translations shall be the governing version between the
parties hereto.
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<PAGE> 36
Section 10.14 Term of Validity. This Agreement shall be valid as of the
date of its signing and shall continue to be in full force until the earlier of
(i) ten (10) years after the date of its signing, or (ii) the date on which
Williams ceases to hold at least fifty per cent (50%) of the Williams Shares
subscribed pursuant to this Agreement.
Section 10.15 No Deduction. Any payments to Williams hereunder
associated with or resulting from the implementation of any transaction
contemplated to herein shall be made without deduction on or for the account of
any taxes, fees, duties or other charges.
IN WITNESS WHEREOF, the parties hereto, acting through their duly
authorized representatives, have caused this Agreement to be signed in its
names, as of the date first above written.
ABC INDUSTRIA E COMERCIO S.A. - ABC INCO
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
LIGHTEL S.A. TECNOLOGIA DA INFORMACAO
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
ALGAR S.A. - EMPREEENDIMENTOS E PARTICIPACOES
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
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<PAGE> 37
WILLIAMS INTERNATIONAL TELECOM LIMITED
By: /s/ JOHN C. BUMGARNER, JR.
----------------------------------------
Name:
---------------------------------------
Title:
---------------------------------------
Witnesses:
1.
---------------------------
Name
ID No.
2.
----------------------------
Name
ID No.
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<PAGE> 1
EXHIBIT 10.36
SUBSCRIPTION AND SHAREHOLDERS AGREEMENT
AGREEMENT, dated as of January 21, 1997, among LIGHTEL S.A. TECNOLOGIA DA
INFORMACAO, a closed corporation ("socieda de anonima fechada") organized under
the laws of Brazil enrolled with the Income Taxpayers Registry ("C.G.C.M.F.")
under No. 71.208.516/0001-74 (herein called the "Company").
Addresses for communications:
Mail: Av. Industrial 2689, Distrito Industrial
Uberlandia, M.G., Brazil
CEP 38405-323
Alternative Address for communications by telecopier:
(55-34) 212-2955
ALGAR S.A. - EMPREENDIMENTOS E PARTICIPACOES, a corporation organized
under the laws of Brazil, enrolled with the Income Taxpayers Registry
("C.G.C.M.F.") under No. 17.835.026/0001-52 (hereinafter referred to as the
"Sponsor")
Address for communications:
Mail: Av. Industrial 2689, Distrito Industrial
Uberlandia, M.G., Brazil
CEP 38405-323
Alternative Address for communications by telecopier:
(55-34) 212-0110
and WILLIAMS INTERNATIONAL TELECOM LIMITED, a private company organized under
the laws of the Cayman Islands, British West Indies (herein called "Williams")
which is an indirect wholly-owned subsidiary of The Williams Companies, Inc.
("TWC"), as reflected on the organization chart attached hereto as Exhibit A.
Addresses for communications:
Mail: c/o Maples and Calder
Ugland House
P.O. Box 309
<PAGE> 2
George Town
Grand Cayman
Cayman Islands,
B.W.I
with copy to:
Williams International
4100 One Williams Center
Tulsa, Oklahoma 74172
United States of America
Alternative address for communications by telecopier:
(918) 588-4190
WHEREAS:
(A) The Company is a controlled subsidiary of the Sponsor and is the
direct controlling shareholder of the Subsidiaries including CTBC;
(B) The Sponsor is engaged in an array of activities, which include
activities within the Telecommunications and Information Technology Sector
carried on, inter alia, by the Subsidiaries of the Company, including CTBC, and
intends to foster the activities of Algar Group in the Telecommunications and
Information Technology Sector, through the Company and its Subsidiaries,
including CTBC;
(C) For the purpose referred to in the preceding Clause (B), the
Sponsor requires funding from sources other than its own, and has approached
TWC to discuss an investment of Williams in the Company in the
Telecommunications and Information Technology Sector;
(D) Williams has agreed to help fund the expansion and modernization
needs of the Company within the Telecommunications and Information Technology
Sector, by making an equity investment in the Company of nineteen million,
eight hundred forty-three thousand, five hundred ninety-one dollars and
forty-four cents ($19,843,591.44) plus amounts under the Stock Purchase
Agreement and Side Letters 1, 2 and 3 set forth in Exhibit 14.2 to acquire
twenty percent (20%) of the total issued and outstanding share capital of the
Company.
(E) The authorized share capital of the Company is three hundred
million one hundred and twenty thousand (300,120,000) common and preferred
registered Shares of no par value, of
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<PAGE> 3
which two hundred million (200,000,000) common Shares, and twelve million seven
hundred ninety three thousand six hundred fifty eight (12,793,658) preferred
Shares, are issued and fully paid and there are no options, warrants, rights or
other capital stock of the Company outstanding, except as contemplated in this
Agreement;
(F) Subject to the terms and conditions of this Agreement, Williams
has accepted to subscribe and pay for (i) sixteen million, four hundred
ninety-four thousand, seven hundred seventy-one (16,494,771) non-voting
preferred Shares in the capital of the Company as shall equal, after giving
effect to the Williams Subscription, six and twenty hundredths percent (6.20%)
of the total issued and outstanding Shares of the Company; and (ii) five
million, four hundred ninety-eight thousand, two hundred fifty-eight
(5,498,258) voting common Shares in the capital of the Company as shall equal,
after giving effect to the Williams Subscription two and seven hundredths
percent (2.07%) of the total issued and outstanding Shares of the Company;
(G) Williams and the Sponsor will as a result of the Williams
Subscription, hold collectively ninety-five and nineteen hundredths percent
(95.19%) of the issued and outstanding shares of the Company; and
(H) Williams, the Sponsor and the Company wish to establish their
respective rights and obligations and certain terms and conditions regarding
the transfer of the Company's shares and the exercise of voting rights.
NOW, THEREFORE, Williams, the Sponsor and the Company have decided to
execute this Subscription and Shareholders' Agreement pursuant to the
provisions contained in Article 118 of Brazilian Law No. 6,404, enacted on
December 15, 1976, which shall be governed by the following terms and
conditions:
ARTICLE 1
DEFINITIONS AND INTERPRETATIONS
Section 1.1 Definitions. Wherever used in this Agreement, unless the
context otherwise requires, the following terms shall have the meanings herein:
(a) "ABC Cristais" - means ABC Cristais Microeletronica S.A., a
corporation organized under the laws of Brazil;
(b) "ABC EMEP" - means ABC EMEP - Eletronica e Mecanica de Precisao
S.A., a corporation organized under the laws of Brazil;
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<PAGE> 4
(c) "ABC XTAL Microeletronica" - means ABC XTAL Microeletronica S.A.,
a corporation organized under the laws of Brazil;
(d) "Affected Shareholder" - shall have the meaning set forth in
Section 11.3(a).
(e) "Affiliate" - means, with respect to any person, (i) any other
person directly or indirectly controlling, controlled by or under common
control with such relevant person; or (ii) any statutory director
("conselheiro"), officer ("diretor") or shareholder of such person, or of any
person described in clause (i) hereof. Specifically with respect to
transactions involving (A) the acquisition or ownership by one person of
250,000 or more shares of CTBC (such limit shall be automatically adjusted at
any time and from time to time in the event of any stock splits, stock
dividends or reclassification affecting the capital stock of CTBC), and (B) the
matters specified in Article 10 and provisions in this Agreement related to the
foregoing, the term "Affiliate" shall also mean, with respect to the Sponsor,
the Company and CTBC and its shareholders, statutory directors ("conselheiros")
and officers ("diretores"), the relatives, including without limitation, the
spouse, parent, aunt, uncle, sibling, first cousin, son, daughter, nephew,
niece, grandchild, grandnephew or grandniece and whether such relatives are
related by blood or by marriage ("in-law" and "step" relations) of such person
or of any person described in clause (i) or clause (ii). For the purposes of
this definition, "control" shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
an entity, whether through ownership of voting securities or otherwise. For the
avoidance of doubt, CTBC shall be included among the Affiliates of the Sponsor
and the Company.
(f) "Algar Bull" - means Algar Bull Computers & Communications S.A., a
corporation organized under the laws of Brazil and all of its Subsidiaries as
listed in Schedule 1.1(f) hereto;
(g) "Algar Group" - means each of the companies listed in Schedule
1.1(g) hereto and any Affiliate of such company or of the Sponsor;
(h) "Americatel" - means Americatel Brasil S.A., a corporation
organized under the laws of Brazil;
(i) "Arm's Length" - means transactions deemed to occur between
unrelated and willing parties in a competitive market (i) in the case of the
Sponsor or the Company which do not provide products or services to
non-Affiliates, at the lower of actual cost or fair market value including
appropriate discounts; (ii) in the case of Subsidiaries and Affiliates of the
Sponsor or the Company which do not provide products or services to
non-Affiliates, then at the price agreed to by Williams; and (iii) in the case
of Subsidiaries and Affiliates of the Sponsor or the Company which do provide
products or services to non-Affiliates, at the lowest price, including
discounts, offered for such product or service to any such non-Affiliate.
4
<PAGE> 5
(j) "Auditors" - means Arthur Andersen, or such other firm of
independent public accountants of international standing and sound reputation
as the relevant company of Algar Group, from time to time appoints as its
auditors;
(k) "Authority" - means any government or governmental,
administrative, fiscal, judicial, or government-owned body, department,
commission, authority, tribunal, agency or entity;
(l) "Authorization" - includes any consent, registration, filing,
agreement, notarization, certificate, license, approval, permit, authority or
exemption from, by or with any Authority, whether given or withheld by express
action or deemed given or withheld by failure to act within any specified time
period and all corporate, creditors, shareholders' and other third parties'
approvals or consents;
(m) "Authorized Representative" - means any of the persons designated
in the Certificate of Incumbency and Authority;
(n) "Banco Central" - means Banco Central do Brasil, and/or any other
Brazilian governmental Authority which may succeed to the exchange control
functions, duties and authority of Banco Central do Brasil;
(o) "Banco do Brasil" - means Banco do Brasil S.A., a state-owned
financial institution, organized under the laws of Brazil;
(p) "Book Value" - means (in relation to any person) an amount equal
to the Dollar Equivalent of the sum of (i) paid-in capital; (ii) capital
surplus; (iii) reserves appropriated and set aside; (iv) statutory reserves (if
any); (v) unappropriated surplus and retained earnings; and (vi) any reserves
by way of revaluation of assets of that person; (vii) less any losses, all as
evidenced in the Put Option Financial Statements of such person;
(q) "Brazil" - means the Federative Republic of Brazil;
(r) "Business Opportunities" - means the business, commercial or
investment opportunities of a company, in the broadest sense attributed to such
terms under the corporate laws of Brazil and the United States of America, and
by custom and usage in those countries;
(s) "Business Day" - (for any purpose) means a day when banks are open
for business in New York, New York and in any of the jurisdictions in which the
parties hereto are organized;
(t) "Cartorio de Registro de Titulos e Documentos" - means the
"Cartorio" with the functions to register and give publicity to documents in
Brazil;
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<PAGE> 6
(u) "Certificado de Registro" - means each of the documents to be
issued by the Banco Central registering the Williams Shares and authorizing
Williams to receive any amounts due to Williams pursuant to this Agreement;
(v) "Certificate of Incumbency and Authority" - means the certificate
to be provided to Williams by the Company pursuant to Section 5.1(j) of this
Agreement, in the form and content attached hereto as Exhibit 1.1(v);
(w) "Closing" - means the date on which Williams subscribes and pays
for the Williams Shares under the Williams Subscription;
(x) "Company" - means Lightel S.A. Tecnologia da Informacao, a
corporation organized under the laws of Brazil;
(y) "Company Group" - means the Company, each of its Subsidiaries
listed in Schedule 1.1(y) hereto, and any company in which the Company and/or
any of its Subsidiaries acquires, subscribes for and/or receives as
contribution in kind an equity interest after the date of this Agreement;
(z) "Company Investment Value" - means for each Subsidiary and/or
Affiliate, the Dollar Equivalent of the amount obtained by multiplying the
value of the said Subsidiary and/or Affiliate by the Relevant Percentage. For
purposes of this definition, each Subsidiary and/or Affiliate shall be valued
as follows: (a) if publicly held, the value shall be its Market Value; or (b)
if closely held, the value shall be: (i) the sum of its Book Value and ten (10)
times its Net Income, (ii) divided by two (2);
(aa) "Concession" - means each of (i) the concession granted by the
Uniao Federal to CTBC to operate telephone business in the area described in
the Concession Agreement in accordance with Decree of December 13, 1994; (ii)
the permission granted by the Brazilian Telecommunications Ministry
("Ministerio das Comunicacoes") to CTBC pursuant to Portaria No. 1690 of
November 23, 1993 to operate a cellular telephone business; (iii) the
concession granted by the Brazilian Telecommunications Ministry ("Ministerio
das Comunicacoes") to TV Video Cabo to operate a cable television business
pursuant to Portaria No. 1.920 of December 5, 1996; and (iv) the permission
granted by the Brazilian Telecommunications Ministry ("Ministerio das
Comunicacoes") to TV Video Cabo de Uberlandia Ltda. to operate a cable
television business pursuant to Portaria No. 017 of November 27, 1990.
(ab) "Concession Agreement" - means the agreement entered into between
the Uniao Federal and CTBC on December 15, 1994 setting forth the terms and
conditions for the operation of fixed and cellular telephone business;
6
<PAGE> 7
(ac) "CTBC" - means Companhia de Telefones do Brasil Central, a
corporation organized under the laws of Brazil;
(ad) "Debt" - means the aggregate (as of the relevant date of
calculation) of the Dollar Equivalent of all obligations (whether actual or
contingent) of a person to pay or repay money including, without limitation:
(i) all Indebtedness for Money Borrowed;
(ii) the aggregate amount then outstanding of all liabilities of
any party to the extent the relevant person guarantees
them; and
(iii) all liabilities of a person (actual or contingent) under
any conditional sale or a transfer with recourse or
obligation to repurchase, including, without limitation, by
way of discount or factoring of book debts or receivables;
(iv) notwithstanding the foregoing, Debt will not include: (A)
operating expenses of each of the Company and CTBC; (B)
contingencies as evidenced on the audited balance sheet of
each of the Company and the CTBC for the fiscal year ended
December 31, 1995; and (C) provisions for contingencies
that are made from time to time by each of the Company and
the CTBC in accordance with the generally accepted
accounting principles in Brazil, consistently applied.
(ae) "Debt to Shareholders Equity Ratio" - (in relation to any person
as of the relevant date for calculation) means the result obtained by dividing
the Debt by the Shareholders Equity;
(af) "Dollars" and the sign "$" - mean the lawful currency of the
United States of America;
(ag) "Dollar Equivalent" - (as of the relevant date of calculation)
means the equivalent in Dollars of any amount expressed in Reais by converting
Reais into Dollars by using the Exchange Rate (this term generally will be used
with a specific amount appearing between the words "Dollars" and "Equivalent");
(ah) "Dollars Equivalent in Reais" - (as of the relevant date of
calculation) means the equivalent in Reais of any amount expressed in Dollars
by converting Dollars into Reais by using the Exchange Rate.
(ai) "Estatuto Social" - means, as the context requires, the By-laws
of each of the Company, CTBC, each of the Company's Subsidiaries and Affiliates
and all amendments thereto, all in form and substance satisfactory to Williams;
7
<PAGE> 8
(aj) "Event of Suspension and/or Cancellation" - any of the events
specified in Section 6.1 of this Agreement;
(ak) "Exercise Period" - means the period, if any, commencing on the
date of the fifth anniversary of this Agreement and ending on the IPO Date;
(al) "Exercise Price" - means the Dollar Equivalent equal to the
Williams Pro Rata Share multiplied by the aggregate of all the Company
Investment Values;
(am) "Exchange Rate" - (i) the official (A) rate for exchanging Reais
into Dollars (with respect to any Dollar Equivalent) or (B) rate for exchanging
Dollars into Reais (with respect to any Dollars Equivalent in Reais)
denominated as PTAX-800, option 5, for the relevant date of calculation
reported by the Banco Central on such bank's SISBACEN Data System and set forth
on Reuters page BRFR, published on the Brazilian business day following the
relevant date of calculation and applicable for the remittance of funds (X)
outside Brazil (with respect to any Dollar Equivalent or (Y) into Brazil (with
respect to any Dollars Equivalent in Reais), or (ii) if for the relevant date
of calculation the PTAX-800 is unavailable on the above-mentioned data system,
then the Exchange Rate shall be the PCOT-390, option 3, reported by the Banco
Central on the SISBACEN Data System. If the PCOT-390 rate is unavailable, then
the Exchange Rate shall be the official rate for exchanging Reais into Dollars
(with respect to any Dollar Equivalent) or for exchanging Dollars into Reais
(with respect to any Dollars Equivalent in Reais) as published in the "Diario
Oficial da Uniao" (Official Gazette-Brazilian Government official publication)
on the date following the day on which such exchange rate is to be determined.
In the case that none of the above exchange rates are available, the Exchange
Rate shall be the average of the offer side of the interbank exchange rate
replacing the PTAX-800 rate, obtained from three major financial institutions
making a market in Reais. In the event that this rate is unavailable, a
mutually acceptable substitute shall be determined;
(an) "Financial Plan" - means the financing for the Project set out in
Section 2.2(b) of this Agreement;
(ao) "Financial Statements" - (in relation to any person) means the
audited financial statements of such person for the last complete Fiscal Year;
(ap) "Fiscal Year" - means the accounting year of each company of the
Algar Group commencing on January 1 and ending on December 31 of each year, or
such other accounting period of each company of the Algar Group as, with
Williams's consent, such company from time to time designates as its accounting
year;
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<PAGE> 9
(aq) "Floor Price" - means the Dollar amount equal to the original
investment under this Agreement, the Stock Purchase Agreement and Side Letters
1, 2 and 3 set forth in Exhibit 14.2 plus accrued interest during the period
beginning on the date of the Closing and ending on the date Williams exercises
the Put Option (including both days). Interest shall accrue on the original
investment amount under this Agreement, the Stock Purchase Agreement and Side
Letters 1, 2 and 3 set forth in Exhibit 14.2 at an annual rate of LIBOR plus an
additional one point five percent (1.5%) of the original investment amount, and
shall be compounded monthly during the foregoing period.
(ar) "Indebtedness for Money Borrowed" - all obligations of a person
to repay money including, without limitation, in respect of (i) borrowed money,
(ii) the outstanding principal amount of any bonds, notes, loan stock,
commercial paper, acceptance credits, debentures and bills or promissory notes
drawn, accepted, endorsed or issued by such person, (iii) any credit to that
person from a supplier of goods or under any installment purchase or other
similar arrangement in respect of goods or services (except trade accounts
payable within ninety (90) days in the ordinary course of business), (iv)
noncontingent obligations of such person to reimburse any other person in
respect of amounts paid under a letter of credit or similar instrument
(excluding any such letter of credit or similar instrument issued for the
benefit of such person in respect of trade accounts in the ordinary course of
business), (v) amounts raised under any other transaction having the commercial
effect of a borrowing and which would be classified as a borrowing (and not as
an off-balance sheet financing) under accounting principles generally accepted
in Brazil consistently applied including, without limitation, under leases or
similar arrangements entered into primarily as a means of financing the
acquisition of the asset leased; and (vi) any fixed or minimum premium payable
on a redemption or replacement of any of the foregoing obligations;
(as) "International Finance Corporation" or "IFC" - means the
International Finance Corporation, an international organization established by
Articles of Agreement among its member countries;
(at) "Investor" - means any third party (not a Shareholder as of the
date hereof) that subscribes for any Share of the Company during the term of
this Agreement;
(au) "IPO" or "Initial Public Offering" - means the process
comprising: (i) the transformation of the Company into an open capital company
("sociedade anonima de capital aberto"); (ii) the listing and offering of the
Shares; (iii) the actual and continuous availability for trading of the listed
and actually traded Shares of the Company on the Sao Paulo Stock Exchange, the
Rio de Janeiro Stock Exchange, or any other major Brazilian and/or
international stock exchange in the aggregate trading value of at least forty
million Dollars ($40,000,000) Equivalent provided that at least seventy-five
percent (75%) of such aggregate trading value is attributable to preferred
shares of the same type and class as the Williams Preferred Shares; and (iv)
the underwriting of the offering referred to in (ii) above by firms of
recognized standing in Brazil or in the United States of America;
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<PAGE> 10
(av) "IPO Date" means the date, any time after the Closing, on which
the IPO has been completed;
(aw) "LIBOR" - means the London Interbank Offered Rate for one month
deposits;
(ax) "Lien" - any mortgage, pledge, charge, assignment, hypothecation,
usufruct, security interest, title retention, preferential right, trust
arrangement, right of setoff, counterclaim or bankers lien, privilege or
priority of any kind having the effect of security, including, without
limitation, any designation of loss payees or beneficiaries or any similar
arrangement under any insurance policy relating to the transactions
contemplated by this Agreement;
(ay) "Lightel Servicos" - shall have the meaning set forth in Section
10.3(a)(iv).
(az) "Market Value" - means, for each publicly held Affiliate and/or
Subsidiary of the Company, the Dollar Equivalent of the amount obtained by
multiplying the Trading Price of one share of each Subsidiary and/or Affiliate
by the total issued and outstanding shares of such Subsidiary and/or Affiliate;
(ba) "Net Income" - means (in relation to any person) the Dollar
Equivalent of the net after-tax income of that person for the last four
complete calendar quarters immediately preceding the date of the issuance of
the Notice of Exercise, as set forth in the Put Option Financial Statements of
such person;
(bb) "Notice of Exercise" - means the notice given by Williams to the
Sponsor pursuant to Section 13.1, which shall set forth:
(i) the number of the Option Shares to be purchased by the
Sponsor under the Put Option;
(ii) the Settlement Date;
(iii) the Settlement Place; and
(iv) the Exercise Price and the manner in which it has been or
shall be determined;
(bc) "Offered Price" - means the price the Sponsor is willing to
receive and a Third Party is willing to pay for the Sponsor Disposition
Percentage;
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<PAGE> 11
(bd) "Option Shares" - means:
(i) the Williams Shares;
(ii) all Shares subscribed or acquired by Williams pursuant to
the exercise of preemptive rights, options or warrants
accruing to Williams in relation to any of the Option
Shares;
(iii) all Shares received by Williams as a result of stock
splits or stock dividends on any Option Shares; and
(iv) all Shares received by Williams in exchange, replacement or
substitution of Option Shares;
(be) "Other Shareholder" - shall have the meaning set forth in Section
11.3(a).
(bf) "Piggy-Back Registration" - shall have the meaning set forth in
Section 9.1(a).
(bg) "Portarias" - means each of (i) Portaria No. 1.920 of December 5,
1996, (ii) Portaria No. 017, of November 27, 1990, and (iii) Portaria 1690, of
November 23, 1993, entitling TV Video Cabo, TV Video Cabo de Uberlandia Ltda.,
and CTBC, respectively, to operate the cable television business (TV Video Cabo
and TV Video Cabo de Uberlandia Ltda.) and the cellular telephone business
(CTBC) in the territories described in each of such Portarias; the term
"Portaria(s)" shall be deemed to include all permits, licenses and
authorizations granted by any Authority pursuant to either Portaria, or
otherwise related thereto;
(bh) "Price Per Share" - has the meaning set forth in Section 7.4 of
this Agreement;
(bi) "Project" - means the project to be carried out by the Company
and CTBC as described in Section 2.1 of this Agreement;
(bj) "Project Cost"- means the cost of the Project as set forth in
Section 2.2(a) of this Agreement;
(bk) "Put Option" - means the option of Williams to sell the Option
Shares to the Sponsor according to the terms set out in Article 13 hereof;
(bl) "Put Option Financial Statements" - means the audited financial
statements of each of the Company, its Subsidiaries and Affiliates, as the
context shall require, for the last four complete calendar quarters immediately
preceding the date of the issuance of the Notice of Exercise;
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<PAGE> 12
(bm) "Real", "Reais" or the sign "R$" - means the lawful currency of
Brazil and includes any currency which, from time to time, may replace the Real
as the lawful currency of Brazil;
(bn) "Relevant Percentage" - means (in relation to each Subsidiary
and/or Affiliate of the Company) the percentage obtained by dividing the number
of shares held by the Company in such Subsidiary and/or Affiliate by the total
issued and outstanding shares of such Subsidiary and/or Affiliate;
(bo) "Sabe" - means Sociedade Anonima Brasileira de Empreendimentos, a
corporation organized under the laws of Brazil;
(bp) "Settlement Date" - means the date specified in the Notice of
Exercise, which shall be not more than ninety (90) days after the date of the
issuance of the Notice of Exercise;
(bq) "Settlement Place" - means the place in Brazil designated in the
Notice of Exercise where payment of the Exercise Price for the Option Shares is
to be made and the Option Shares are to be delivered;
(br) "Shareholders" - means the persons listed in Schedule 1.1(bq)
hereto and any person, including any Third Party and/or Investor, that is
admitted as a Shareholder of the Company after the date of this Agreement;
(bs) "Shareholders Equity" - means the aggregate (as of the relevant
date for calculation and in relation to any person) of:
(i) the amount paid up on the share capital of such person; and
(ii) the amount standing to the credit of the reserves (except
for revaluation reserves) of such person (including, without
limitation, any share premium account and capital redemption
reserve funds); after deducting from such aggregate any
impairment of the issued share capital of such person,
amounts set aside for dividends or taxation (including
deferred taxation);
(bt) "Shares" - means any issued and issuable shares in the capital of
the Company or in any other company into which the assets or equity of the
Company have been transferred or spun off, without par value, both common and
preferred, voting and nonvoting, the shares of the same category all ranking
equally in all respects;
(bu) "Spin-off" - means the operation under Brazilian corporate law
("cisao") whereby a company transfers all or part of its assets ("patrimonio")
to one or more companies, organized
12
<PAGE> 13
for such purpose or already existing, and further defined and described in
Articles 223 through 234 and related provisions of Law No. 6.404 of December
15, 1976, and related provisions of other Brazilian laws.
(bv) "Sponsor Disposition Percentage" - means the percentage obtained
by dividing the number of Shares that the Sponsor intends to sell and a Third
Party proposes to purchase from the Sponsor by the total amount of Shares then
held by the Sponsor in the share capital of the Company;
(bw) "Sponsor" - means Algar S.A. Empreendimentos e Participacoes, a
corporation organized under the laws of Brazil;
(bx) "Stock Purchase Agreement" - means that certain Stock Purchase
Agreement of even date herewith, among Williams, the Company, the Sponsor and
ABC Industrial e Comercio S.A. - ABC INCO, attached hereto as Exhibit 1.1(bx);
(by) "Subsidiary" - means (in relation to any company of the Algar
Group, the Company Group or Williams) any entity: (i) over fifty percent (50%)
of whose voting capital is owned, directly or indirectly, by the relevant
company; (ii) for which the relevant company may nominate or appoint more than
fifty percent (50%) of the members of the board of directors or persons
performing similar functions; or (iii) which is otherwise effectively
controlled by the relevant company. For the avoidance of doubt, CTBC shall be
included among the Subsidiaries of the Sponsor and the Company.
(bz) "Tag Along Notice" - means each of the notices the Sponsor shall
issue to Williams, at any time after the Closing, pursuant to this Agreement,
informing Williams of its intention to dispose of and the willingness of a
Third Party to purchase the Sponsor Disposition Percentage; each such notice
shall be substantially in the form and content set forth in Exhibit 1.1(bx),
and shall set forth at minimum:
(i) the Offered Price, as well as other terms and conditions of
the sale;
(ii) the name of the Third Party; and
(iii) any other relevant aspect of the transaction, including,
but not limited to, the indication of the place and date
for the sale of such Sponsor Disposition Percentage;
(ca) "Tag Along Right" - means the right that the Sponsor grants to
Williams so that, at any time after the Closing, if Williams so wishes, the
Sponsor shall procure that Williams may join the Sponsor in any sale to a Third
Party of the Sponsor Disposition Percentage as provided in this Agreement;
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<PAGE> 14
(cb) "Telecommunications and Information Technology Sector" - means
any and all activity within the telecommunications and information technology
sectors, including by way of example, without limitation: (i) all forms of
wireline, electrical, fiber optic, lightwave, or wireless (whether by means of
radio waves, infrared waves, or other means and whether through the earth,
atmosphere, water, buildings, pipelines, conduits or otherwise)
telecommunications products or services; (ii) any form of the following
services: satellite or cable television, telephone, telegraph, telex, audio or
video distribution, paging, or data transmission services, and access and
transmission products and services related to the above services; (iii)
electronic mail, access to the Internet or similar services, and on-line
computer-access services; (iv) all value-added services provided by means of or
in connection with telecommunications services or facilities, including but not
limited to: data processing services, video services, conferencing services,
data storage services, database services, protocol conversion, call center
services, and answering services; (v) the sale, rental, lease, distribution,
installation, repair, or maintenance of computer or telecommunications hardware
or software; (vi) installation, construction, rental or sale of
telecommunications facilities (or any right of use therein) described in,
listed in, or used to provide the services described or listed in subsections
(i) through (v); and (vii) consulting or management services provided to
existing or proposed telecommunications companies or relating to
telecommunications products (excluding manufacturing of products manufactured
by CTBC, the Company Group or the Algar Group) or services described or listed
in subsections (i) through (vi).
(cc) "Third Party" - means any person, other than any party to any of
the Transaction Documents, that proposes to acquire a Sponsor Disposition
Percentage after the date of this Agreement;
(cd) "Trading Price" - means for each publicly held Subsidiary and/or
Affiliate of the Company, the average of the Dollar Equivalent of the daily
closing price per share of such Subsidiary and/or Affiliate over the period of
thirty (30) trading days ending on the Business Day immediately preceding the
date of the issuance of the Notice of Exercise;
(ce) "Transaction Documents" - means (i) this Agreement, (ii) the
Stock Purchase Agreement; (iii) the Concession Agreement, and (iv) the
Portarias;
(cf) "TV Video Cabo" - means T.V. Video Cabo de Minas Gerais Ltda., a
Brazilian "sociedade por quotas de responsabilidade limitada" organized in
accordance with the laws of Brazil;
(cg) "Williams" - means Williams International Telecom Limited, a
private company organized under the laws of the Cayman Islands, British West
Indies, which is an indirect wholly-owned subsidiary of The Williams Companies,
Inc. ("TWC"), as reflected in the organization chart attached hereto as Exhibit
A;
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<PAGE> 15
(ch) "Williams Additional Shares" - means the Shares of the Company to
be acquired by Williams pursuant to Exhibit 14.2;
(ci) "Williams Common Shares" - means five million, four hundred
ninety-eight thousand, two hundred fifty-eight (5,498,258) voting common Shares
to be subscribed for by Williams pursuant to the Williams Subscription under
this Agreement, and representing, after giving effect to the Williams
Subscription, two and seven hundredths percent (2.07%) of the total issued and
outstanding Shares of the Company;
(cj) "Williams Director" - shall have the meaning set forth in Section
8.1(a);
(ck) "Williams Notice" - means each of the notices Williams may send
to the Sponsor informing it of Williams' decision to also sell to the relevant
Third Party the Williams Tag Along Shares (or not to sell, as the case may be)
pursuant to this Agreement;
(cl) "Williams Offered Price" - has the meaning set forth in Section
7.4 of this Agreement;
(cm) "Williams Piggy-Back Notice" - means each of the notices Williams
may send to the Company for the purpose set forth in Section 9.1 of this
Agreement;
(cn) "Williams Piggy-Back Shares" - means the number of Shares
obtained by multiplying the Williams Total Equity by a fraction the numerator
of which is the number of Shares subject to the public offering referred to in
Section 9.1 of this Agreement and the denominator of which is the total issued
and outstanding Shares of the Company less the Williams Total Equity on the
relevant date;
(co) "Williams Preferred Shares" - means sixteen million, four hundred
ninety-four thousand, seven hundred seventy-one (16,494,771) non-voting
preferred Shares of the same class as and having the same rights as all other
existing or future preferred Shares of the Company including without limitation
preferred Shares of the Company held by the IFC, to be subscribed for by
Williams pursuant to the Williams Subscription under this Agreement, and
representing, after giving effect to the Williams Subscription, six and twenty
hundredths percent (6.20%) of the total issued and outstanding Shares of the
Company;
(cp) "Williams Preferred Shares Rights" - each of the following
rights:
(i) a minimum cumulative compulsory dividend of twenty-five
percent (25%) of the net profits per Share of the Company
ascertained at the end of each Fiscal Year according to Law
No. 6404, of December 15, 1976, or any other percentage of
such profits set forth from time to time with Williams'
prior consent;
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<PAGE> 16
(ii) priority vis-a-vis the common Shares in the distribution of
the cash dividend referred to in (i);
(iii) participation in the balance of the net profits eligible
for distribution as cash dividends pari passu with the
common Shares, after the payment of the minimum compulsory
dividend to the common Shares;
(iv) priority vis-a-vis the common Shares in the reimbursement
of capital without premium in the event of liquidation of
the Company and;
(v) the Williams Preferred Shares shall rank pari passu with
all other issued and outstanding preferred Shares of the
Company, whether issued prior to, contemporaneously with or
at any time subsequent to the Williams Subscription.
(cq) "Williams Pro Rata Share" - means a fraction the numerator of
which shall be the number of the Option Shares, and the denominator of which
shall be the total issued and outstanding Shares of the Company;
(cr) "Williams Purchased Shares" - means the Shares of the Company to
be purchased by Williams pursuant to the Stock Purchase Agreement;
(cs) "Williams Shares" - means the Williams Common Shares, the
Williams Preferred Shares, Williams Additional Shares and Williams Purchased
Shares;
(ct) "Williams Subscription" - means the subscription for Shares by
Williams provided for in Article 4 of this Agreement;
(cu) "Williams Swap Notice" - means each of the notices Williams may
send to the Company for the purposes set forth in Section 10.7 of this
Agreement;
(cv) "Williams Tag Along Shares" - means the number of shares obtained
by multiplying the relevant Sponsor Disposition Percentage by the Williams
Total Equity;
(cw) "Williams Total Equity" - means, for purposes of this Agreement,
the total number of Shares held by Williams in the capital of the Company or in
any other company into which the assets or equity of the Company have been
transferred or spun off, at the time of the issuance of any relevant Williams
Tag Along Notice(s), Williams Piggy-Back Notice(s), or Williams Swap Notice(s);
(cx) "World Bank Guidelines" - means the set of policies and
guidelines laid down from
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<PAGE> 17
time to time by the World Bank setting forth the environmental, safety and
health requirements of the World Bank;
(cy) "World Bank" - means the International Bank for Reconstruction
and Development, an international organization established by Articles of
Agreement among its member countries;
(cz) "Xtal S.A." - means Xtal Fibras Opticas S.A., a corporation
organized under the laws of Brazil.
Section 1.2 Interpretation. In this Agreement, unless the context
otherwise requires:
(a) headings and underlinings are for convenience only and do not
affect the interpretation of this Agreement;
(b) words importing the singular include the plural and vice versa;
(c) words importing a gender include any gender;
(d) an expression importing a natural person includes any company,
partnership, trust, joint venture, association, corporation or other body
corporate and any Authority;
(e) a reference to a Section, Article, party, Exhibit, Annex or
Schedule is a reference to that Section or Article of, or that party, Exhibit,
Annex or Schedule to, this Agreement;
(f) a reference to a document includes an amendment or supplement to,
or replacement or novation of, that document but disregarding any amendment,
supplement, replacement or novation made in breach of this Agreement;
(g) a reference to a party to any document includes that party's
successors and permitted assigns.
(h) a reference to an agreement includes an undertaking, deed,
agreement or legally enforceable arrangement or undertaking in writing;
(i) a reference to a document includes any agreement in writing, or
any certificate, notices instrument or other document of any kind; and
(j) A reference to this Agreement includes all of the Schedules and
Exhibits hereto and any other document executed and delivered by the parties at
the Closing.
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<PAGE> 18
ARTICLE 2
DESCRIPTION OF THE PROJECT, PROJECT COST AND FINANCIAL PLAN
Section 2.1 The Project. The Project to be funded consists of the
provision of equity funds to the Company to make equity investments in its
direct and/or indirect Subsidiaries and Affiliates so that each of such
Subsidiaries and Affiliates may build and operate telecommunications networks
in Brazil and so that CTBC may build and operate fixed and cellular telephone
networks in Brazil. Details of the Project are described in the Schedule 2.1
hereto.
Section 2.2 Project Cost and Financial Plan.
Amounts in US$ Million
(a) The total estimated cost of the Project, is the equivalent of
US$298.5 million, as follows:
<TABLE>
<CAPTION>
Basic Services 1996-97 Total % of Total
------------- ----------
<S> <C> <C>
Expansion 46.9 15.7%
Transmission Digitalization 83.5 28.0%
Data Communication 5.5 1.8%
Informatic 20.0 6.7%
SIPT (customer services) 4.0 1.3%
Modernization 18.1 6.1%
Building 5.9 2.0%
Others (vehicle, 12.7 4.3%
office equipment, building
reformation, etc.)
Total Basic Service Equipment 196.6 65.9%
Cellular Services Expansion 58.5 19.6%
Engeset & TV de MG 6.1 2.0%
TV Video Cabo de Uberlandia 30.3 10.2%
Working Capital 7.0 2.3%
------ -----
Total Project Cost 298.5 100.0%
</TABLE>
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<PAGE> 19
(b) The proposed sources of financing for the Project are as follows:
Amounts in US$ Million
<TABLE>
<CAPTION>
Equity 1996-97 Total % of Total
- ------ ------------- ----------
<S> <C> <C>
IFC Equity 10.0 3.4%
Williams Equity 48.0 16.00%
Subscribers Connection Fees 29.1 9.80%
------ ------
Total 87.1 29.20%
Internal Cash Generation 149.9 50.20%
------ ------
Total Equity 237.0 79.40%
Debt
IFC Loan 25.0 8.40%
Supplier/Local Financing 36.5 12.20%
------ ------
Total Debt 61.5 20.60%
Total Project Funding 298.5 100.00%
</TABLE>
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE PARTIES
Section 3.1 Representations and Warranties of the Company. The Company
represents and warrants that:
(a) it is a corporation duly incorporated and validly existing under
the laws of Brazil and has the corporate power to own its assets, conduct its
business as presently conducted and to enter into and perform its obligations
under this Agreement, each Transaction Document to which it is a party, and any
agreements in implementation hereof and thereof. Attached as Exhibit 3.1(a) is
a copy of the By-laws of the Company and each of its Subsidiaries, together
with all amendments to date, which are duly registered with the competent
commercial registry;
(b) it has full power and authority to undertake the obligations under
this Agreement, each Transaction Document to which it is a party, and any
agreements in implementation hereof and thereof, to execute and deliver this
Agreement and each such Transaction Document, to perform its obligations
hereunder and thereunder and observe the terms and provisions mentioned herein
and therein;
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<PAGE> 20
(c) the authorized share capital of the Company is three hundred
million one hundred and twenty thousand (300,120,000) common and preferred
registered Shares of no par value of which two hundred million (200,000,000)
common Shares and twelve million seven hundred ninety-three thousand six
hundred fifty-eight (12,793,658) preferred Shares have been issued and fully
paid, and no options, warrants, rights or other capital stock of the Company
are outstanding. Set forth in Schedule 3.1(c) is the authorized and issued
share capital of each of the Subsidiaries of the Company, which issued share
capital is fully paid;
(d) the Williams Shares, after giving effect to the Williams
Subscription under this Agreement to the Stock Purchase Agreement and to the
provisions of Side Letters 1, 2 and 3 set forth in Exhibit 14.2, shall
represent twenty percent (20%) of the total issued and outstanding Shares of
the Company. Except as set forth in Schedule 3.1(d), the Williams Shares shall
be available at the Closing for: (i) subscription by Williams under the
Williams Subscription; (ii) for purchase by Williams under the Stock Purchase
Agreement; and (iii) for issuance to Williams under the provisions of Side
Letters 1, 2 and 3 set forth in Exhibit 14.2, and shall be free from any
preemptive rights, Liens, charges or encumbrances whatsoever;
(e) the execution and delivery of each Transaction Document to which
it is a party, including this Agreement, and the performance of the obligations
set forth herein and therein, have been duly authorized by all necessary action
on its part and constitutes valid and legally binding obligations of the
Company, enforceable in accordance with their terms;
(f) the execution and delivery of any Transaction Document to which it
is a party, including this Agreement, and the performance of its obligations
hereunder and thereunder shall not conflict with or result in a breach of any
of the terms, conditions or provisions of, or constitute a default or require
any consent under (i) any provision of its Estatuto Social; (ii) any provision
of any applicable law, regulation, rule, decree, judgment or order to which it
is subject; or (iii) any indenture, mortgage, agreement or other instrument or
arrangement to which the Company is a party or by which it is bound;
(g) all dealings between any company of the Algar Group, including the
Company and any of the Sponsor's Subsidiaries and Affiliates, on the one hand,
and any company of the Company Group, on the other hand, have been established
and shall remain on normal arm's-length terms as if between unrelated parties;
all such transactions which occurred during 1996 are summarized in Schedule
3.1(g);
(h) neither the Company nor any of its property enjoys any right of
immunity from set-off, suit or execution in respect of its assets or its
obligations under any Transaction Document;
(i) all governmental, corporate, shareholders' and creditors'
authorizations, consents, approvals, waivers and licenses required for the
execution and delivery of this Agreement and the
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<PAGE> 21
performance of its obligations hereunder have been duly obtained or granted and
are in full force and effect;
(j) it has made the notifications to the Brazilian competent
Authority, which are required to be made pursuant to applicable law (and has
caused its Subsidiaries engaged in the Telecommunications and Information
Technology Sector to also notify the Brazilian competent Authority) of any and
all changes in their respective shareholdings as a result of each corporate
restructuring which has been undertaken by the Company and its Subsidiaries
since the date of the organization of the Company and each of its Subsidiaries
to date;
(k) except as set forth in Schedule 3.1(k), it has complied with and
is in compliance in all material respects with all applicable laws,
regulations, ordinances, rules, orders, judgments, decrees and awards of any
Authority in connection with its assets, properties and business. It has not
received any notice of any failure to comply with, nor are there any
circumstances which indicate that it is in violation of any such laws,
regulations, ordinances, orders, judgments or decrees;
(l) it has not, nor has any of its directors, officers, managers,
employees, agents or representatives directly or indirectly, offered, paid or
promised to pay, or authorized the payment of any money or other thing of value
(including any fee, gift, sample, travel expense, or entertainment with a value
in excess of US$250 or the equivalent thereof in any currency) to any person
who is an official, officer, agent, employee or representative of any
government or instrumentality thereof or of any government-owned or
non-government owned existing or prospective customer, to any political party
or official thereof, to any candidate for political or political party office,
or to any other person or Authority while knowing or having reason to believe
that all or any portion of such money or thing of value would be offered, given
or promised, directly or indirectly, to any such official, officer, agent,
employee, representative, political party, political party official or
candidate, to obtain or retain business. All payments made by the Company to
third parties are made by check mailed or otherwise delivered to the principal
place of business of a party; or by wire transfer to a bank located in the same
jurisdiction as such place of business of a party, in all cases in the name of
such third party;
(m) each transaction of the Company has been properly and accurately
recorded on the books and records of the Company, and each document (including
any contract, invoice or receipt) on which entries in the Company's books and
records are based is complete and accurate in all respects. The Company has
maintained a system of internal accounting controls adequate to insure that
each maintains no off-the-books accounts and the assets of the Company are used
only in accordance with the directives of the Company's management;
(n) the Company has at all times during the previous five-year period
complied with the export control laws of the United States with respect to
products, services and technology obtained from the United States, and with
those of any other jurisdictions, to the extent such U.S. and other
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<PAGE> 22
laws were or are applicable. Except as set forth in Schedule 3.1(n) no product
sold or service performed by the Company in the previous five-year period has
been sold or performed, directly or indirectly, to or for the benefit of, nor
has the Company had any business dealings whatsoever with, any person of or in
Cuba, Iran, Iraq, Libya, Serbia, Montenegro or Serbian-controlled portions of
Croatia or Bosnia, or North Korea, or any person owned or controlled by any of
the foregoing (including without limitation "specially designated nationals").
Except as set forth on Schedule 3.1(n), no product sold or service performed by
the Company during the previous five-year period has contained more than ten
percent (10%) U.S. content by value or was manufactured or provided using any
U.S. origin technical data;
(o) except as set forth on Schedule 3.1(o), during the previous
five-year period, no product has been sold or service performed by the Company
to or for the benefit of customers in Bahrain, Jordan, Kuwait, Lebanon, Oman,
Qatar, Saudi Arabia, Sudan, Syria, United Arab Emirates, or Yemen; and
(p) the representations referred to in Subsections (a) through (o)
above are also made on behalf of each Subsidiary and Affiliate of the Company
and therefore applicable to each of such Subsidiaries and Affiliates "mutatis
mutandis".
Section 3.2 Representations and Warranties of the Sponsor. The Sponsor
hereby represents and warrants to Williams that:
(a) it is a corporation duly incorporated and validly existing under
the laws of Brazil and has the corporate power to own its assets, conduct its
business as presently conducted and to enter into this Agreement and any
agreements in implementation hereof;
(b) it has full power and authority to undertake the obligations
hereunder, to execute and deliver this Agreement, to perform its obligations
and observe the terms and provisions mentioned herein;
(c) the execution and delivery of this Agreement and the performance
of the obligations set forth herein have been duly authorized by all necessary
action on its part and constitute valid and legally binding obligations of the
Sponsor, enforceable in accordance with its terms;
(d) the execution and delivery of this Agreement and the performance
of its obligations hereunder shall not conflict with or result in a breach of
any of the terms, conditions or provisions of, or constitute a default or
require a consent under (i) any provision of its Estatuto Social; (ii) any
provision of any applicable law, regulation, rule, decree, judgment or order to
which it is subject; (iii) any provision of any indenture, mortgage, agreement
or other instrument or arrangement to which it is a party, or which is binding
upon it or any of its assets;
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(e) all governmental, corporate, shareholders', and creditors'
authorizations, consents, approvals, waivers and licenses required for the
execution and delivery of this Agreement and the performance of its obligations
hereunder have been duly obtained or granted and are in full force and effect;
(f) except as set forth in Schedule 3.2(f), neither the Sponsor nor
any Subsidiary or Affiliate of the Sponsor, except the Company, nor any
statutory director ("conselheiro") or officer ("diretor") of any of the
Sponsor, the Company or CTBC, has acquired any shares in CTBC or any options,
warrants or other rights in respect of such shares, from subscribers of CTBC or
otherwise. Schedule 3.2(f) sets forth all of the purchases, options or rights,
whether written or oral, to acquire any shares in CTBC, held, owned or
controlled by the Sponsor, any company of the Algar Group or their respective
Subsidiaries or Affiliates;
(g) when delivered at the Closing, the report on CTBC shares described
in Section 5.1(o) shall be true and correct in all respects; and
(h) it is the lawful owner, free and clear of all Liens, of one
hundred ninety nine million, nine hundred ninety nine thousand, nine hundred
and ninety five (199,999,995) common voting Shares and zero (0) preferred
non-voting Shares representing approximately ninety three point ninety nine
percent (93.99%) of the total number of issued and outstanding share capital of
the Company on the date of this Agreement.
Section 3.3 Representations and Warranties of the Company and the
Sponsor. Without limiting the contents of the representations and warranties
contained in Sections 3.1 and 3.2 of this Agreement, the Company and the
Sponsor, jointly and severally, further represent and warrant to Williams that:
(a) attached as Schedule 3.3(a) are the lists of the present
shareholders of each of the Company and its Subsidiaries, including CTBC. Each
of the Sponsor, the Company and the Subsidiaries and Affiliates of the Sponsor
and the Company, and the shareholders of such entities, have no other direct
and/or indirect equity or quasi-equity interest in any direct and/or indirect
Subsidiary of the Company, including CTBC, except as set forth on Schedule
3.3(a) hereto;
(b) under prevailing legislation, the subscribers of CTBC have the
right to receive shares in exchange for the subscribers' fees already paid to
CTBC for the right to use the respective telephone line. The shares, to be
subscribed for by the new subscribers, can be common voting shares and/or
preferred non voting shares, with due observance of the limits set forth in the
Brazilian Corporate Law (Lei das Sociedades Anonimas). Except for these shares
and capital increases, there exists no other options, warrants or any other
rights which might result in the effective reduction of the percentage equity
interest of the Company in any of its Subsidiaries and Affiliates;
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(c) a copy of the audited consolidated financial statements of Lightel
Servicos and its Subsidiaries as of December 31, 1995 and the unaudited
consolidated financial statements of the Company and its Subsidiaries as of
September 30, 1996, are attached hereto as Exhibit 3.3(c). Such documents
fairly completely and accurately present the financial position of Lightel
Servicos and the Company and their respective Subsidiaries at the relative
dates and for the respective periods covered, and have been prepared in
conformity with accounting principles generally accepted in Brazil and applied
on a consistent basis throughout the periods involved. Except as set forth in
Schedule 3.3(c), Lightel Servicos owns no other assets, equity or business;
(d) since the date of the financial statements drawn up on September
30, 1996, the Company and each of its Subsidiaries and Affiliates have not
suffered any material adverse change in their business prospects or financial
condition or incurred any substantial or unusual loss or liability. For the
purposes hereof the term "material" means any transaction (or a series of
related transactions) valued at or an event (or series of related events)
resulting in a loss or liability or change in financial position (or which can
be reasonably be expected to result in a loss or liability or change in
financial position) equal to or exceeding Five Million U.S. Dollars
(U.S.$5,000,000) or its Dollar Equivalent in Reais. Since such date, the
Company and each of its Subsidiaries and Affiliates have not undertaken or
agreed to undertake any substantial obligation outside the ordinary course of
business.
(e) the books and records of the Company and each of its Subsidiaries
and Affiliates have been prepared and maintained in accordance with accounting
principles generally accepted in Brazil and consistently applied. The books of
account of the Company and its Subsidiaries and Affiliates comply with the
requirements of Brazilian law and are not affected by any extraordinary or
non-recurring item;
(f) since the date of the formation of the Company and of each of its
Subsidiaries and Affiliates, there have been no liabilities, asserted
liabilities or obligations of any nature affecting the Company or such
Subsidiary or Affiliate, respectively, whether absolute, accrued, contingent or
otherwise, other than those disclosed or reflected: (i) on each of the audited
financial statements of the Company or such Subsidiary or Affiliate; or (ii) if
arising after the date of the most recent audited financial statements of such
entity, in the most recent unaudited financial statements of such entity; or
(iii) if arising after the date of the most recent unaudited financial
statements of such entity, in the books and records of such entity;
(g) since the date of its formation, the Company has ascertained and
paid all taxes and quasi-tax contributions measured on its profits or levied by
virtue of corporate restructurings and has further timely and punctually filed
any tax returns required by the federal, state and municipal laws in Brazil;
(h) all tax returns and reports of the Company and each of its
Subsidiaries and Affiliates
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required by law to be filed have been duly filed and all tax assessments, fees
and other governmental charges upon the Company and each of its Subsidiaries
and Affiliates, or their properties, or their income or assets, which are due
and payable, have been, paid, other than those presently payable without
penalty or interest. If such taxes are not yet due, adequate provisions have
been made in the accounting records of the Company and each of its Subsidiaries
and Affiliates for the payment of such taxes;
(i) except as set forth in Schedule 3.3(i), the Company and each of
its Subsidiaries and Affiliates are not engaged in nor, to the best of their
knowledge, threatened by, any litigation, arbitration or administrative
proceeding the outcome of which might materially and adversely affect their
business prospects or financial position. To the best of their knowledge and
belief, the Company and each of its Subsidiaries and Affiliates are not in
violation of any statute or regulation of any governmental authority and no
judgement or order has been issued which has or is likely to have any
materially adverse effect on the Company's and each Subsidiary's and
Affiliate's business prospects or financial position;
(j) the Company and each of its Subsidiaries and Affiliates have good
and unencumbered title to all of the properties at which their business are
carried on or are proposed to be carried on for the purposes of the Project;
(k) the Company and each of its Subsidiaries and Affiliates have the
right to all concessions, permissions, authorizations, trademarks, trade names,
patents and license agreements necessary for the conduct of their business as
now conducted and as proposed to be conducted, without any known conflict with
the rights of others;
(l) no person, firm or company has (other than as a shareholder and,
according to law, as an employee) any right to participate in the profits of
the Company and any Subsidiary or Affiliate. The Company and each of its
Subsidiaries and Affiliates are not managed by any third party;
(m) since the date of its formation, the Company has not engaged in
any transaction or operation inconsistent with its status of a holding company;
(n) except as set forth in Schedule 3.3(n), neither the Company nor
any of its Subsidiaries or Affiliates is a party to any labor suit brought
against it by any of its former employees claiming in court any payments
associated with the labor relationship with the Company or any Subsidiary or
Affiliate, nor is the Company or any Subsidiary or Affiliate a party to any
legal action instituted by any third party;
(o) except as set forth in Schedule 3.3(o), neither the Company nor
any of its Subsidiaries or Affiliates is a party to, or committed to enter
into, any material contract (i.e., contract other than
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<PAGE> 26
in the ordinary course of business), which would or might affect the judgment
of a prospective investor;
(p) except as set forth in Schedule 3.3(p) neither the Company nor any
of its Subsidiaries or Affiliates have any outstanding mortgage, charge or
other Lien on any of their respective assets, and no contract or arrangement,
conditional or unconditional, exists for the creation by any of such entities
of any mortgage, charge or other Lien;
(q) the Sponsor, the Company and CTBC are in compliance in all
respects with, and no breach has occurred with respect to, their respective
obligations under the mortgages, charges, or other Liens and contracts or
arrangements, conditional or unconditional, set forth in Schedule 3.3(p) and
under the following agreements, entered into with the International Finance
Corporation, all of which are dated July 18, 1996: (i) Common Terms Agreement;
(ii) Subscription and Shareholders Agreement; (iii) Loan Agreement; (iv) Put
Option Agreement; and (v) Guarantee Agreement; and any other agreement entered
into with the International Finance Corporation by such entities;
(r) except as set forth in Schedule 3.3(r), there are no contracts or
other arrangements, written or oral, regarding the contribution or transfer of
CTBC shares to Lightel;
(s) the Sponsor agrees to indemnify, defend and hold Williams and its
Affiliates harmless from any damages, losses, lost profits, liabilities and
contingencies of any nature whatsoever derived from (i) any corporate
restructuring that either the Company or any of its Subsidiaries (which are
engaged in the Telecommunications and Information Technology Sector) might have
undertaken to date; (ii) the inaccuracy of any representations and warranties
contained in this Agreement; (iii) the breach of any covenant or agreement of
the Sponsor or the Company under this Agreement; and (iv) all undisclosed
liabilities of the Company, its Subsidiaries or Affiliates arising prior to the
Closing.
Section 3.4 Exercise of Sponsor's Voting Rights. The Sponsor agrees to
exercise its voting rights and/or any other rights granted to it by law or
otherwise, so as to permit the Company the fulfillment of all of its
obligations hereunder and to achieve the prompt and effective implementation of
this Agreement;
Section 3.5 Warranty. Each of the Company and the Sponsor acknowledges
that it has made the representations and warranties referred to in Sections 3.1
through 3.4 with the intention of persuading Williams to enter into this
Agreement and that Williams has entered into this Agreement on the basis of,
and in full reliance on, each of such representations and warranties. Each of
the Company and the Sponsor warrants to Williams that each of such
representations and warranties is true and correct in all material respects as
of the date of this Agreement and that none of them omits any matter the
omission of which makes any of such representations or warranties misleading.
For the purposes hereof the phrase "in all material respects" means the absence
of any event, condition or circumstance which might jeopardize the transactions
contemplated in this
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Agreement, the Williams Subscription or the ownership by Williams of the
Williams Shares, or the knowledge of which would cause a reasonable investor to
refrain from making an investment such as the Williams Subscription, on the
existing terms set forth herein.
Section 3.6 Rights and Remedies not Limited. Williams' rights and
remedies in relation to any misrepresentation or breach of warranty on the part
of the Company or the Sponsor are not prejudiced:
(a) by any investigation by or on behalf of Williams into the affairs
of the Company;
(b) by the execution or the performance of this Agreement; or
(c) by any other act or thing which may be done by or on behalf of
Williams in connection with this Agreement and which might, apart from this
Section, prejudice such rights or remedies.
Section 3.7 Representations and Warranties for Williams Subscription.
For the purpose of the single subscription and payment of the Williams Shares,
the Company shall represent and warrant that:
(a) the representations and warranties made or confirmed in Sections
3.1, 3.2, 3.3 and 3.5 continue to be true;
(b) no Event of Suspension and/or Cancellation has happened and is
continuing;
(c) since the date of this Agreement, nothing has occurred which might
materially adversely affect the carrying out of the Project or the Company's
business prospects or financial condition or the business prospects or
financial condition of each of its Subsidiaries and Affiliates, or make it
improbable that the Company or any of its Subsidiaries or Affiliates shall be
able to fulfill any of its obligations under any agreement to which the
Company, each Subsidiary or Affiliate is a party, including this Agreement; nor
has the Company or any Subsidiary or Affiliate incurred any substantial or
unusual loss or liability. For the purposes hereof the phrase "materially
adversely affect" means any event, condition or circumstance which might
jeopardize the transactions contemplated in this Agreement, the Williams
Subscription or the ownership by Williams of the Williams Shares, or the
knowledge of which would cause a reasonable investor to refrain from making an
investment such as the Williams Subscription, on the existing terms set forth
herein; and
(d) the proceeds of the subscription and payment are, at the date of
the relevant request, needed by the Company for the purposes of the Project,
the details of which are set forth in Schedule 2.1 hereto, or shall be needed
for that purpose within three (3) months of such date.
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Section 3.8 Representations and Warranties of Williams. Williams
hereby represents and warrants to the Sponsor and the Company that:
(a) it is a limited company duly incorporated and validly existing
under the laws of the Cayman Islands, British West Indies, and has the
corporate power to own its assets, conduct its business as presently conducted
and to enter into this Agreement and any agreements in implementation hereof;
(b) it has full power and authority to undertake the obligations
hereunder, to execute and deliver this Agreement, to perform its obligations
and observe the terms and provisions mentioned herein;
(c) the execution and delivery of this Agreement and the performance
of the obligations set forth herein have been duly authorized by all necessary
action on its part and constitute valid and legally binding obligations of
Williams, enforceable in accordance with its terms;
(d) the execution and delivery of this Agreement and the performance
of its obligations hereunder shall not conflict with or result in a breach of
any of the terms, conditions or provisions of, or constitute a default or
require a consent under (i) any provision of its Memorandum and Articles of
Association; (ii) any provision of any applicable law, regulation, rule,
decree, judgment or order to which it is subject; (iii) any provision of any
indenture, mortgage, agreement or other instrument or arrangement to which it
is a party, or which is binding upon it or any of its assets; and
(e) all governmental, corporate, shareholders', and creditors'
authorizations, consents, approvals, waivers and licenses required for the
execution and delivery of this Agreement and the performance of its obligations
hereunder have been duly obtained or granted and are in full force and effect.
ARTICLE 4
WILLIAMS SUBSCRIPTION
Section 4.1 Subscription by Williams.
(a) On the terms and subject to the conditions of this Agreement,
Williams shall have the right to subscribe for the Williams Preferred Shares
and the Williams Common Shares and pay therefor an aggregate price not to
exceed nineteen million, eight hundred forty-three thousand, five hundred
ninety-one dollars and forty-four cents ($19,843,591.44). After giving effect
to the Williams Subscription, the Stock Purchase Agreement and the provisions
of Side Letters 1, 2 and 3 set forth in Exhibit 14.2, the Williams Shares shall
represent twenty percent (20%) of the total issued and outstanding Shares of
the Company.
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(b) The Company shall request Williams to subscribe for the totality
of the Williams Shares by delivering to Williams, at least seven (7) Business
Days prior to the proposed date of subscription, a request in the form of
Exhibit 4.1(b).
(c) Williams shall disburse the aggregate of the subscription price of
the Williams Shares in one lump sum to the credit of the Company at the bank
specified in the request for subscription or at such other bank in such place
as Williams and the Company from time to time agree.
(d) Notwithstanding anything contained in this Agreement, Williams
may, at any time and from time to time, in its discretion and without request
by the Company, subscribe and pay, on the terms set out in Subsection (a)
above, for any or all of the Williams Shares; provided that Williams may not
subscribe for Shares representing more than twenty per cent (20%) of the total
issued and outstanding share capital of the Company pursuant to this Section.
(e) Upon the subscription and payment by Williams under this Section,
the Company shall:
(i) issue to Williams the number of Williams Shares so
subscribed free of all Liens and which shall rank, pari passu in all respects
with all other Shares of the same category of Williams Shares and deliver to
Williams two (2) share certificates evidencing valid title to such number of
Williams Preferred Shares and Williams Common Shares, respectively; and
(ii) furnish to Williams evidence that the Williams Shares
have been duly and validly authorized, issued and delivered in compliance with
Brazilian law and that all other legal requirements in connection with the
authorization, issue and delivery have been duly satisfied, including the
making of the proper entries in the shareholders registry book of the Company.
Section 4.2 Actions Prohibited until Williams Shares Issued. Until all
of the Williams Shares have been subscribed or the right of the Company to the
subscription and disbursement under the Williams Subscription has been canceled
as provided in Section 4.3 whichever first occurs:
(a) the Company shall maintain a sufficient number of authorized and
unissued Shares to satisfy in full the exercise of Williams's rights under the
Williams Subscription; and
(b) the Company shall not, unless Williams otherwise agrees:
(i) issue any Shares of any class, except in accordance with
the Financial Plan;
(ii) increase its subscribed, paid in and authorized capital
except in accordance with the provisions of this Agreement;
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(iii) change the rights attached to, any of its Shares of any
class; or
(iv) take any other action by amendment of its Estatuto Social
or through reorganization, consolidation, merger or sale of assets, or
otherwise which might result in the equity interest in the Company represented
by the Williams Shares being equivalent to less than twenty percent (20%) of
the total issued and outstanding Shares of the Company.
Section 4.3 Suspension and Cancellation of Williams Subscription. (a)
Williams may, by notice to the Company, suspend or cancel the right of the
Company to the Williams Subscription:
if:
(i) by February 28, 1997 any of the conditions of subscription
and payment under the Williams Subscription as set forth in Section 5.1 has not
been met; or
(ii) the Company has not requested the subscription and
disbursement under the Williams Subscription by such date;
(iii) if any Event of Suspension and/or Cancellation has
occurred and is continuing, or if the Event of Suspension and/or Cancellations
specified in Section 6.1 (m) is, in the reasonable opinion of Williams,
imminent; or
(iv) if, at any time, in the reasonable opinion of Williams,
there exists any situation which indicates that performance by the Company of
any of its obligations under this Agreement cannot be expected.
(b) The exercise by Williams of its right of suspension does not
preclude Williams from exercising its right of cancellation, either for the
same or another reason. A suspension does not limit any other provision of this
Agreement.
Section 4.4 Obligations of the Company after the Making of the
Williams Subscription.
(a) Within ten (10) Business Days following the subscription and
payment for the Williams Shares, the Company agrees to assist Williams in
applying with the Banco Central for the issuance of the Certificado de Registro
to evidence the Williams Shares as a foreign investment of Williams so as to
allow Williams the receipt of dividends, proceeds of sale of the Williams
Shares and any other Shares of the Company received by Williams by way of stock
dividends, share splits or replacement shares.
(b) The Company agrees to provide the Banco Central with any
information and/or document that the Banco Central
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may request and to comply with any requirement the Banco Central may make so as
to issue the Certificado de Registro.
(c) The Company shall be liable for the payment of any penalty or fine
that might be imposed by the Banco Central as a result of an event attributable
to the Company in case of its failure to comply with the terms set forth in the
applicable legislation for the application for registration of foreign
investments in Brazil and the fulfillment of any requirement made by the Banco
Central for such purpose or any other purpose.
(d) The Company shall make its best efforts to assist Williams to
cause the Banco Central to issue the Certificado de Registro evidencing the
Williams Shares within sixty (60) days following the Closing. Within two (2)
Business Days following the receipt of such Certificado de Registro by the
Company, the Company agrees to send the original copy thereof to Williams.
ARTICLE 5
CONDITIONS OF WILLIAMS SUBSCRIPTION AND PAYMENT
Section 5.1 Conditions of the Williams Subscription. The obligation of
Williams to make subscription and disbursement under the Williams Subscription
is subject to the fulfillment, in a manner satisfactory to Williams, prior to
or concurrently with the making of such subscription and disbursement, of the
following conditions:
(a) the Sponsor, the Company, its Subsidiaries and Affiliates have
performed all of their respective obligations due to be performed under the
Transaction Documents, including this Agreement, in each case due to be
performed prior to the disbursement;
(b) arrangements have been made by the Company and by each of its
Subsidiaries and Affiliates with respect to the installation and operation of
an accounting and cost control system and a management information system
satisfactory to Williams and for the confirmation of Arthur Andersen as
Auditors for the Company and for each of its Subsidiaries and Affiliates;
(c) the Company, each of its Subsidiaries and Affiliates have insured
their respective properties and business with adequate coverage covering risks
normally covered by companies engaged in the relevant Telecommunications and
Information Technology Sector pursuant to the minimum insurance requirements
set forth in Schedule 5.1(c) hereto and Williams has been provided with copies
of all insurance policies together with a certificate of the insurer confirming
that such policies are in effect;
(d) all the Transactions Documents have been entered into by all
parties to them, have become (or, as the case may be, remain) unconditional and
fully effective in accordance with their
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respective terms; and, if Williams requires, Williams has received a copy of
each Transaction Document to which it is not a party, certified as a true and
complete copy by the Company;
(e) the Board of Directors of the Company shall have: (i) convened an
Extraordinary Shareholders Meeting of the Company to be held on the Closing
Date, at which the Sponsor shall vote to appoint the Williams Director to the
Board of Directors of the Company; and (ii) adopted a Board resolution stating
the policy of the Company regarding CTBC shares in the terms described in
Section 10.11;
(f) the Company has obtained, or made adequate arrangements for
obtaining, all Authorizations and other necessary approvals or consents for:
(i) the Williams Subscription;
(ii) the carrying on of the business of the Company as it is
presently carried on and is contemplated to be carried on;
(iii) the carrying out of the Project and the implementation
of the Financial Plan; and
(iv) the due execution and delivery of, and performance under,
the Transaction Documents, and any documents necessary or desirable in their
implementation and delivery of the Williams Shares;
(g) and has provided Williams with copies of those Authorizations,
certified as true and complete copies by the Company, if Williams so requires;
(h) Williams has received a legal opinion substantially in the form of
Exhibit 5.1(h) hereto from the Sponsor's and the Company's in-house general
counsel, with respect to:
(i) the organization, existence, operations and corporate
restructurings of each of the Company, its Subsidiaries and Affiliates, and the
formation of their respective authorized, subscribed and paid-in share capital;
(ii) the matters referred to in Subsections (d), (e) and (f)
above;
(iii) the title of the Company, each of its Subsidiaries and
Affiliates to, or other interest of the Company, each of its Subsidiaries and
Affiliates in their respective immovable and moveable assets;
(iv) the authorization, execution, validity and enforceability
of this Agreement, and any documents in implementation of this Agreement;
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(v) the validity, effectiveness and enforceability of the
Concessions and the Portarias;
(vi) the terms and conditions for the payment of the
compensation due to CTBC in the event the Concession Agreement is terminated
for any reason whatsoever;
(vii) the representations and warranties of the Sponsor and
the Company contained in this Agreement are true and accurate in all respects
as of the Closing Date and the Sponsor and the Company are in full compliance
in all respects with the covenants contained in this Agreement as of the
Closing Date; and
(viii) such other matters relating to the transactions
contemplated by this Agreement, and any other Transaction Documents as Williams
reasonably requests;
(i) Williams has received (if Williams so requires) reimbursement of
fees and expenses of Williams' counsel and other expenses as provided in
Section 14.9 unless paid beforehand directly to such counsel upon the request
of Williams;
(j) Williams has received the Certificate of Incumbency and Authority;
(k) the Company and each of its Subsidiaries and Affiliates shall be
in compliance with national and local environmental, safety and health laws and
standards and the relevant World Bank Guidelines;
(l) since the date of the latest financial statements attached hereto,
the Company has not, nor has any of its Subsidiaries and Affiliates, incurred
any loss or liability;
(m) after giving effect to the Williams Subscription, the Company
shall not be in violation of:
(i) its Estatuto Social;
(ii) any provision contained in any document to which the
Company is a party (including this Agreement) or by which the Company is bound;
or
(iii) any applicable Brazilian law, rule or regulation;
(n) immediately after the Williams Subscription, Williams shall not
have subscribed or paid for a higher proportion of the Williams Shares than the
proportion which all of the remaining
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<PAGE> 34
Shareholders of the Company have by then subscribed or paid for of the total
number of Shares to be subscribed by them in accordance with the Financial
Plan;
(o) the Sponsor shall have delivered to Williams a true and correct
report of all shares of CTBC acquired by the Sponsor, the Company or any their
respective Subsidiaries or Affiliates, from a non-Affiliate from the date
hereof until the Closing Date, indicating the number and class of shares
acquired, the identity of the purchaser and of any subsequent transferees or
assignees of such shares, the date of the purchases and subsequent transfers or
assignments of such shares, if any, and the effective net price paid for such
shares upon initial purchase and any subsequent transfers or assignments;
(p) no Event of Suspension and/or Cancellation shall have occurred and
be continuing;
(q) the Sponsor shall have delivered to Williams an update of Schedule
3.1(g), to reflect any additional transactions which have occurred between the
date hereof and the Closing Date; and
(r) the Stock Purchase Agreement shall have been executed and
delivered by the Sponsor, the Company and ABC Industrial e Comercio S.A. - ABC
INCO, and the Shares to be purchased by Williams thereunder shall be available
for purchase by Williams thereunder at the Closing free from any preemptive
rights, Liens, charges or encumbrances whatsoever.
Section 5.2 Company Certification. The Company shall deliver to
Williams:
(a) as part of the request for the subscription and disbursement under
the Williams Subscription a certification, substantially in the form of Exhibit
4.1(b) signed by the Chairman with respect to the matters referred to in
Section 3.7 and the conditions specified in Section 5.1, expressed to be
effective as of the date of the subscription and disbursement under the
Williams Subscription; and
(b) such evidence as Williams reasonably requests of the proposed
utilization of the proceeds of the subscription and disbursement under the
Williams Subscription.
Section 5.3 Conditions for Williams Benefit. The conditions in
Sections 5.1 and 5.2 are for the benefit of Williams and may be waived only by
Williams at its sole discretion.
Section 5.4 Saving of Rights. Unless Williams otherwise notifies the
Company, and without limiting the generality of Section 14.12, the right of
Williams to require compliance with any condition under this Agreement which
Williams waives in respect of the subscription and disbursement under the
Williams Subscription is preserved for the purpose of the future exercise of
any other right of Williams hereunder.
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ARTICLE 6
EVENTS OF SUSPENSION AND/OR CANCELLATION OF THE WILLIAMS SUBSCRIPTION
Section 6.1 Events of Suspension and/or Cancellation. Each of the
following events constitutes an Event of Suspension and/or Cancellation:
(a) if the Company, any Subsidiary or Affiliate fails to carry out the
Project and conduct its business with due diligence and efficiency in
accordance with sound engineering, financial and business practices; if the
Company fails to carry out the Project in accordance with the Project
description which is contained in Schedule 2.1 (subject to any modifications to
which Williams may agree); or fails to cause the funding specified in the
Financial Plan to be applied exclusively to the Project;
(b) if the Company, any of its Subsidiaries or Affiliates fails to
maintain at all times a firm of independent public accountants of international
standing and sound reputation as auditors of each of such companies;
(c) if the Company, any Subsidiary or Affiliate fails to design,
construct, operate and maintain all plant and equipment in compliance with the
applicable environmental, occupational health and safety requirements of the
Government of Brazil and the local authorities, and applicable World Bank
Guidelines;
(d) except to the extent required by Brazilian laws, if the Company
declares or pays any dividend or makes directly or indirectly any distribution
on its share capital, or purchases, redeems or otherwise acquires any Shares of
the Company or any option over the same prior to Closing or the cancellation by
Williams of the Williams Subscription, as the case may be;
(e) if either the Company or any Subsidiary or Affiliate enters into
any transaction with any person other than in the ordinary course of business,
on ordinary commercial terms and on the basis of arm's-length arrangements;
(f) if either the Company or any Subsidiary or Affiliate enters into
any partnership (except for the purpose of carrying out the Project),
profit-sharing or royalty agreement or other similar arrangement whereby the
Company's or any Subsidiary's or Affiliate's income or profits are, or might
be, shared with any other person; or if the Company or any Subsidiary or
Affiliate enters into any management contract or similar arrangement whereby
the business or operations of the relevant company are managed by any other
person;
(g) if the Company forms any Subsidiary or acquires shares of any
company, unless each of such Subsidiary and company is designed to be a company
of the Company Group;
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(h) if the Company changes its Estatuto Social in any manner which
would be inconsistent with the provisions of any Transaction Document; changes
its Fiscal Year; changes the nature of its present and contemplated business or
operations or change the nature or scope of the Project; sells, transfers,
leases or otherwise disposes of all or a substantial part of its assets
(whether in a single transaction or in a series of transactions, related or
otherwise) other than sales, transfers, leases or other forms of disposal in
the ordinary course of business; or undertakes or permits any merger,
consolidation, spin-off or the transformation of the legal structure of any
company of the Company Group into any other structure;
(i) if the Company terminates, amends or grants any waiver in respect
of any provision of any Transaction Document;
(j) if the Sponsor, any Subsidiary or Affiliate of the Company fails
to perform any obligation under any Transaction Document to which it is a
party;
(k) if the Sponsor, the Company or any of their respective
Subsidiaries or Affiliates fails to perform any of its obligations under this
Agreement or any other agreement between the Sponsor, the Company or such
Subsidiary or Affiliate, on the one hand, and Williams, on the other hand;
(l) if any representation or warranty confirmed or made in Article 3
or in connection with the execution and delivery of this Agreement, or in
connection with the request for subscription and disbursement under this
Agreement, shall be found to be incorrect in any material respect. For the
purposes hereof the phrase "in any material respect" means the existence of any
event, condition or circumstance which might jeopardize the transactions
contemplated in this Agreement, the Williams Subscription or the ownership by
Williams of the Williams Shares, or the knowledge of which would cause a
reasonable investor to refrain from making an investment such as the Williams
Subscription, on the existing terms set forth herein.
(m) if any government or governmental Authority shall have condemned,
nationalized, seized, or otherwise expropriated (including in any gradual or
progressive manner), all or any substantial part of the property or other
assets of the Sponsor, the Company, any Subsidiary or Affiliate or of the share
capital of the relevant company or shall have assumed custody or control of
such property or other assets or of the business or operations of the Sponsor,
the Company, any Subsidiary or Affiliate or of the share capital of the
relevant company, or shall have taken any action for the dissolution or
disestablishment of the Sponsor, the Company, any Subsidiary or Affiliate or
any action that would prevent any of such companies or its officers from
carrying on its business or operations or a substantial part thereof;
(n) if a decree or order by a court is entered against the Company,
the Sponsor, any of the Company's Subsidiaries or Affiliates:
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(i) adjudging the Company, the Sponsor, any of the Company's
Subsidiaries or Affiliate, "concordatarias", bankrupt or insolvent;
(ii) approving as properly filed a petition seeking
reorganization, "concordata" arrangement, adjustment or composition of, or in
respect of, the Company, the Sponsor, any of the Company's Subsidiaries or
Affiliates under any applicable law;
(iii) appointing a receiver, liquidator, assignee, trustee,
"comissario," sequestrator (or other similar official) of the Company, the
Sponsor, any of the Company's Subsidiaries or Affiliates or of any substantial
part of the property or other assets owned by any of such persons; or
(iv) ordering the dissolution, winding up or liquidation of
the affairs of the Company, the Sponsor, any of the Company's Subsidiaries, or
any Affiliate;
(v) or any petition is filed seeking any of the above and is
not dismissed within thirty (30) days;
(o) if the Company, the Sponsor, any of the Company's Subsidiaries or
Affiliates:
(i) requests a moratorium or suspension of payment of debts
from any court;
(ii) institutes proceedings or takes any form of corporate
action to be liquidated, adjudicated bankrupt or insolvent;
(iii) consents to the institution of bankruptcy or insolvency
proceedings against it;
(iv) files a petition or answer or consent seeking
reorganization ("concordata") or relief under any applicable law, consents to
the filing of any such petition or to the appointment of a receiver,
liquidator, "comissario" assignee, trustee, sequestrator (or other similar
official) of the Company, the Sponsor, any of the Company's Subsidiaries or
Affiliates, or of substantial part of their respective properties;
(v) makes a general assignment for the benefit of creditors;
or
(vi) admits in writing its inability to pay its debts
generally as they become due or otherwise becomes insolvent;
(p) if an attachment or analogous process is levied or enforced upon
or issued against any of the assets of the Company, the Sponsor, any of the
Company's Subsidiaries or Affiliates, is not discharged within thirty (30)
days;
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(q) if any other event occurs which under any applicable law would
have an effect analogous to any of those events listed in Subsections (n), (o),
and (p) above;
(r) if any provision of any Transaction Document is revoked,
terminated or ceases to be in full force and effect or the performance of the
obligations of any party to such agreements becomes unlawful or any such
document is declared to be void or is repudiated or its validity or
enforceability at any time is contested by any person and the provision is not
restored or replaced by a provision acceptable to Williams, or such repudiation
or challenge withdrawn within thirty (30) days of Williams' notice to the
Company requiring that restoration, replacement or withdrawal;
(s) if this Agreement, any Concession, the Concession Agreement, or
any Portaria:
(i) is breached by the relevant party to it and such breach
may have an adverse effect on the ability of the Company to perform and observe
its obligations under any Transaction Document; or
(ii) is revoked, terminated or ceases to be in full force and
effect without the prior consent of Williams, or performance of the obligations
under this Agreement, any Concession, Concession Agreement or under any of the
Portarias becomes unlawful; or any of such agreements, concessions or Portarias
is declared to be void or is repudiated or its validity or enforceability at
any time is contested by any party to it.
(t) if a default shall have occurred with respect to any indebtedness
of the Company or under any agreement pursuant to which there is outstanding
any such indebtedness of the Company, and such default shall have continued for
more than any applicable period of grace;
(u) if any Authorization necessary for the carrying out of the Project
and the Company's business and operations generally, as well as the business
and operations of each of its Subsidiaries or Affiliates or for the performance
by the Company, each Subsidiary or Affiliate of its obligations under each
Transaction Document is not obtained when required or otherwise at any time
ceases to be in full force and effect, including in respect of the remittance
to Williams or its assigns in freely convertible currency any amounts of
dividends on, or proceeds of sale of, the Williams Shares and the relevant
Authorization is not restored or reinstated within thirty (30) days of notice
by Williams to the Company requiring that restoration or reinstatement;
(v) if any provision of this Agreement is or becomes invalid, illegal
or unenforceable;
(w) if any of the Sponsor, the Company or CTBC are not in compliance
in all respects with their obligations under mortgages, charges or other liens
and contracts or arrangements, conditional or unconditional, set forth in
Schedule 3.3(p) and the agreements with the International Finance Corporation
mentioned in Section 3.3(q);
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(x) if any occurrences, events, circumstances or conditions which,
individually or in the aggregate, constitute a material adverse change, shall
have occurred or arisen after the date hereof, including any occurrences,
events, circumstances or conditions which, notwithstanding the Sponsor's or the
Company's disclosure to Williams prior to the Closing Date, have or with the
passage of time or the giving of notice or both, would have a material adverse
effect on William's rights under this Agreement or a material adverse effect on
either the Company taken as a whole or on CTBC; or
(y) if after the date hereof, the Sponsor or any of its Subsidiaries
or Affiliates, excluding the Company, shall have acquired by any means,
directly or indirectly, any shares of CTBC other than those expressly disclosed
in this Agreement to be held, directly or indirectly, legally or beneficially,
by such persons and entities.
ARTICLE 7
TAG ALONG RIGHTS AND PREEMPTIVE RIGHTS
Section 7.1 Sale of Sponsor's Shares. In the event that at any time
after the Closing the Sponsor proposes to sell to a Third Party or receives an
offer from a Third Party to purchase a Sponsor Disposition Percentage, the
Sponsor agrees to deliver to Williams the Tag Along Notice.
Section 7.2 Procedure.
(a) Within thirty (30) days following the receipt by Williams of the
Tag Along Notice, Williams shall send a Williams Notice to the Sponsor,
informing it whether Williams wishes or not to also sell the Williams Tag Along
Shares to such Third Party.
(b) In the event that Williams decides not to sell the Williams Tag
Along Shares to such Third Party, or if Williams fails to give the Williams
Notice within the period mentioned in Subsection (a) above, the Sponsor shall
(subject to the "Estatuto Social" of the Company) be free to dispose of the
relevant Sponsor Disposition Percentage to such Third Party.
Section 7.3 Obligation of the Sponsor. In order to comply with the
provisions of Section 7.1, the Sponsor agrees that no disposal of any Sponsor
Disposition Percentage may be made and no offer received by it from a Third
Party to purchase any of such Sponsor Disposition Percentage may be accepted,
unless Williams fails to give within the period established in Section 7.2 (a)
the Williams Notice or Williams delivers to the Sponsor a Williams Notice
advising it of its decision not to sell the Williams Tag Along Shares to such
Third Party.
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Section 7.4 Price of the Williams Tag Along Shares. The parties agree
that in the event Williams decides to sell the Williams Tag Along Shares to
such Third Party the price payable therefor shall be the price in Dollars (the
"Williams Offered Price") determined as follows:
(a) the Offered Price shall be divided by the number of shares
corresponding to the relevant Sponsor Disposition Percentage, so as to
ascertain the price per share implied therein (the "Price Per Share");
(b) the Price Per Share (if denominated in Reais) shall be converted
into its Dollar Equivalent by using the Exchange Rate prevailing on the
Business Day immediately preceding the date the Sponsor sends to Williams the
Tag Along Notice; and
(c) The Price Per Share shall be then multiplied by the number of
Williams Tag Along Shares and the result shall be the Williams Offered Price.
Section 7.5 Savings of Rights. The decision by Williams not to
exercise its rights in respect of any one Tag Along Notice under this Article 7
shall not impair or affect the exercise of such rights in respect of any future
Tag Along Notice.
Section 7.6 Tag Along Rights Interpretation. Nothing contained in this
Article 7 should be interpreted as obligating Williams to sell any Williams Tag
Along Shares to any Third Party.
Section 7.7 No Obligation. The Sponsor expressly acknowledges that
should Williams wish to sell the Williams Total Equity, in whole or in part, or
should Williams receive an offer from a person to purchase the relevant portion
of the Williams Total Equity, Williams has no obligation whatsoever to require
such person to acquire a pro-rata number of shares then held by the Sponsor in
the Company.
Section 7.8 Pre-emptive Rights. After the Closing, Williams shall be
assured the right to, at its discretion, (i) subscribe for Shares in any
increase of the Company's subscribed capital pro-rata to its then equity
participation in the Company's share capital and (ii) effect the payment for
such new Shares under the same terms and conditions as the other Shareholders.
Section 7.9 Right of First Notice. In the event that Williams intends
to sell all or a portion of the Williams Shares, then Williams shall first
notify the Sponsor of such intention by providing the Sponsor with all relevant
information for the Sponsor to make a competitive offer thirty (30) days prior
to offering such Williams Shares for sale and Sponsor shall have ten (10) days
from the date of such notice to submit to Williams a competitive offer for the
purchase by Sponsor of such Williams shares. If the Sponsor submits to Williams
an offer that is equal to or better in all respects than every other offer
received by Williams, then Williams shall accept the Sponsor's offer over such
other offer(s); provided, however, that Williams shall not be required to
accept the Sponsor's offer if Williams does not receive any other offer or
decides to retain the Williams Shares.
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ARTICLE 8
BOARD OF DIRECTORS
Section 8.1 Williams' Director.
(a) At any time on or after the Closing, and until the earlier of five
(5) years from the date hereof or the termination of this Agreement, Williams
shall be entitled to appoint in consultation with the Company one individual
(the "Williams Director"), who shall be a full voting member of the Board of
Directors of the Company, and one individual to be an alternate to the Williams
Director, to vote when the Williams Director is not available to attend.
Williams shall be entitled to substitute, remove and/or dismiss the Williams'
Director and his/her alternate so appointed at any time. Williams shall also be
entitled to have an observer (a Williams employee) attend all Meetings of the
Board of Directors of the Company, who shall not have any voting rights.
(b) Williams agrees to make best efforts to appoint as the Williams
Director an individual who is able to discuss business in Portuguese provided
that, in the event Williams does not appoint a Williams Director (or
alternative Williams Director) who is able to discuss business in Portuguese
then in that event the Company shall furnish an interpreter at the Company's
expense or conduct the meetings in the English language.
Section 8.2 Expenses. The Company agrees to pay or reimburse Williams
for the reasonable expenses that the Williams Director and his/her alternate
may incur to attend the meetings of the Board of Directors.
ARTICLE 9
PUBLIC OFFERING
Section 9.1 Piggy-Back Rights.
(a) If at any time after Closing the Company proposes to make a public
offering of its Shares, the Company shall give written notice to Williams of
such proposed public offering as soon as practicable but in no event less than
ninety (90) days prior to the first of any proposed filing with applicable
regulatory Authorities in connection with such proposed public offering (a
"Piggy-Back Registration"). Williams shall have the right to sell in such
proposed public offering, and register with applicable regulatory Authorities,
the Williams Piggy-
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Back Shares by sending the Company the Williams Piggy-Back Notice. The Company
shall cause the managing underwriter or underwriters of the proposed public
offering to include in such public offering the Williams Piggy-Back Shares
requested to be included by Williams in the Williams Piggy-Back Notice on the
same terms and conditions as the Company's Shares. Ten (10) Business Days prior
to the date the public offering becomes effective Williams may withdraw its
request for inclusion of the Williams Piggy-Back Shares in the proposed public
offering by giving written notice to the Company of its request to withdraw.
The Company may withdraw a Piggy-Back Registration at any time prior to the
time it becomes effective under applicable law.
(b) The Company shall use its best efforts to cause all Shares
included in the Piggy-Back Registration to be listed on the Rio de Janeiro
Stock Exchange; on the Sao Paulo Stock Exchange; or on any other major
Brazilian and/or international Stock Exchange.
Section 9.2 Restriction on Sale by the Company. The Company agrees not
to effect any sale or distribution of any securities similar to Shares, or any
securities convertible into or exchangeable or exercisable for Shares, during
the 14-day period prior to, and during the 90-day period beginning on, the
later of (a) the effective date of any registration statement (except as part
of such registration statement) and (b) the commencement of a public
distribution of Shares.
ARTICLE 10
OBLIGATIONS OF THE SPONSOR
Section 10.1 Obligation Not to Compete
(a) The Sponsor covenants and agrees not to compete directly or
indirectly, and shall cause its Subsidiaries and Affiliates and the directors
and officers of the Sponsor and such Subsidiaries and Affiliates, not to
compete directly or indirectly, with the business of the Company, and covenants
and agrees that, except as provided in Section 10.2(a), the Company shall be
the sole vehicle for all investments of the Algar Group and its shareholders in
the Telecommunications and Information Technology Sector and therefore agrees
to and shall cause its Subsidiaries and Affiliates, and the directors and
officers of the Sponsor and such Subsidiaries and Affiliates, to channel
through the Company all present and contemplated business, Business
Opportunities, commercial activities and operations of the Algar Group in the
Telecommunications and Information Technology Sector; and in furtherance of its
covenant under this Section 10.1(a), and not in limitation thereof, the Sponsor
covenants and agrees to Williams that it shall not, and shall cause its
Subsidiaries and Affiliates not to, directly and/or indirectly, (i) form any
other company; or (ii) otherwise subscribe for and/or purchase any share of any
company; or (iii) acquire any quasi-equity interest, or otherwise participate
in any company which is actually engaged or proposes to be engaged in the
Telecommunications and Information Technology Sector, unless any new company
referred to in (i) above is designed to be a Subsidiary of the Company or of
any company of the Company Group.
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(b) Moreover, and without limitation of Section 10.1(a), for the
purposes of this Section, the Sponsor or any of its Subsidiaries or Affiliates
shall be considered as competing with the business of the Company if:
(i) the Sponsor or such Subsidiary or Affiliate is retained
by any company engaged in the Telecommunications and Information Technology
Sector as a provider of managerial, technical and/or consulting services (in
this latter case including, but not limited to, specialized services), whether
evidenced in written agreements or otherwise, on a full or part time basis; or
(ii) the Sponsor or such Subsidiary or Affiliate agrees to be
a party to any enterprise, venture or special purpose company carrying on or
proposing to carry on specific telecommunications project in any capacity,
including, but not limited to, in the capacity of beneficial owner of such
enterprise, venture or special purpose company; or
(iii) the Sponsor or any of its Subsidiaries or Affiliates,
other than the Company or a company of the Company Group, contracts with the
Company or a company of the Company Group, to provide any product or service on
other than arm's length terms (except as otherwise provided in this Agreement),
or on terms and conditions less favorable to the Company or such company of the
Company Group than those offered or available from third parties in the
relevant market for such product or service; or
(iv) the Sponsor or any of its Subsidiaries or Affiliates,
except for the Company, acquires by any means, directly or indirectly, shares
of CTBC in excess of the amount set forth in Section 10.2(b).
(c) For purposes of the provisions contained in this Section 10.1, the
Sponsor agrees that the obligation not to compete with the Company as set forth
herein includes any company of the Algar Group.
Section 10.2 Permitted Equity Interests. The parties agree that the
Sponsor shall not be deemed to be competing with the Company as a result of:
(a) the activities conducted by ABC XTAL Microeletronica, Algar Bull,
ABC Cristais, Americatel, ABC EMEP, Sabe and Xtal S.A.; and
(b) subject to Section 10.3(a)(iii), the aggregate equity interest
held by the Sponsor in CTBC which is represented by and shall not exceed thirty
six million two hundred eighty-eight thousand four hundred fifty (36,288,450)
shares equivalent to fourteen point three five (14.35%) of the total issued and
outstanding shares of CTBC, consisting of eighteen million four hundred seventy
two thousand one hundred ninety four (18,472,194) common shares and seventeen
million eight hundred sixteen thousand two hundred fifty six (17,816,256)
preferred shares, but only to the extent
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the Sponsor is required to hold these shares to meet the relevant requirements
of the Concession Agreement and provided, that any equity interest held by the
Sponsor or its Affiliates in CTBC in excess of the amount so required to be
held shall be considered a breach of the Sponsor's covenants under this Article
10.
Section 10.3 Covenant on Transfer of Equity Interests.
(a) Notwithstanding the provisions of Section 10.2 above, in order to
comply with the obligation undertaken pursuant to Section 10.1, the Sponsor
agrees to:
(i) cause the Company, directly and/or indirectly, to
subscribe for or otherwise acquire the totality of shares of the share capital
of the companies of Algar Group engaged in the Telecommunications and
Information Technology Sector and which are not part of Company Group, in a
manner which shall be satisfactory to Williams in both form and substance
including value and as soon as it is legally allowed or not prohibited after
the date of this Agreement, but in any event within fifteen (15) months
following the date of this Agreement;
(ii) subject to Section 10.3(a)(iii), transfer, or, as the
case may be, cause to be transferred to the Company or to any company of the
Company Group (A) the aggregate of its equity interest in CTBC (at the
Sponsor's or Affiliate's actual purchase price for such interest of CTBC paid
to the subscriber to whom CTBC issued such shares) except for the Shares the
Sponsor is required to hold to meet the relevant requirements of the Concession
Agreement, if any, as described in Section 10.2(b), within ninety (90) days
from the date hereof; and (B) all the business and operations of Algar Bull and
Americatel, in a manner which shall be satisfactory to Williams in both form
and substance including value and as soon as it is legally allowed or not
prohibited after the date of this Agreement, but in any event within fifteen
(15) months following the date of this Agreement; provided, however, that in
both cases (A) and (B) of this Section 10.3(a)(ii), such transfer shall not
result in the equity interest in the Company represented by the Williams Shares
being equivalent to less than twenty percent (20%) of the total issued and
outstanding Shares of the Company, unless (i) Williams shall have received
thirty (30) days prior written notice of such proposed transaction contemplated
herein sufficient to allow Williams to properly evaluate the effects of such
transaction on the Company in order for Williams to determine whether or not to
exercise its preemptive rights provided hereunder; (ii) such proposed
transaction complies with Brazilian law with respect to minority shareholders;
and (iii) within thirty (30) days of receipt of such notice, Williams fails to
notify or notifies Company that Williams does not intend to elect to exercise
its preemptive rights hereunder to prevent such dilution of its equity interest
in the Company;
(iii) at the Closing, transfer, or, as the case may be, cause
to be transferred to the Company, or transfer to Williams, those shares of CTBC
described in Exhibit 14.2, in accordance with the provisions of said Exhibit.
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(iv) cause Lightel Servicos de Tecnologia da Informacao S.A.
("Lightel Servicos") to transfer the aggregate of its quotas in TV Video Cabo
to the Company, without issuance of Shares or payment of any other
consideration to Lightel Servicos in respect thereof as soon as it is legally
allowed or not prohibited after the date of this Agreement; and
(v) as from the date hereof, refrain from acquiring and cause
its Subsidiaries and Affiliates except the Company, as well as the statutory
directors ("conselheiros") and officers ("diretores") of the Sponsor, the
Company and CTBC, from acquiring additional shares of CTBC, whether from the
subscribers of CTBC or otherwise. Likewise, each of the Sponsor, the Company
and CTBC shall promptly following the Closing implement a policy to discourage
employees of each such company from acquiring such shares of CTBC and providing
for Company to acquire all such shares of CTBC held by any employees of each
such company and also encourage the employees of the Sponsor and Subsidiaries
to purchase shares of the Company should it become public to the extent
permitted by applicable law.
(b) For the purposes referred to herein, the Sponsor agrees that each
of the transactions referred to in Subsection (a) shall be in form and
substance satisfactory to Williams.
(c) If sixty (60) days prior to the expiration of the fifteen (15)
month period referred to in Subsections (a)(i) and (a)(ii) above, the Sponsor
is prevented by circumstances out of the control of the Sponsor or any of its
Affiliates from performing or causing to be performed any of the actions
required to be performed under the aforementioned Sections, the Sponsor agrees
to inform Williams of the nature and extent of its inability to perform or
cause to be performed any of such actions and to discuss with Williams in good
faith an alternative course of action (if at all) to comply with the
obligations under Subsection (a) above. Notwithstanding the foregoing, nothing
in this Subsection (c) shall relieve the Sponsor of its obligations established
in this Section 10.3.
Section 10.4 Activities of the Company. The Sponsor, in the capacity
of leading company of the Algar Group, hereby agrees and represents that the
activities and businesses of the companies of the Company Group shall be
restricted to the Telecommunications and Information Technology Sector.
Section 10.5 Share Retention. During the term of this Agreement the
Sponsor shall not:
(a) transfer, assign, sell, pledge, or in any manner dispose of or
encumber or permit to exist any Lien or encumbrance on any Share it now owns or
comes to own in the Company, directly and/or indirectly, at any time after the
signing of this Agreement (whether as a result of subscription, share split,
stock dividend or howsoever otherwise), in the event that any of the above
transactions reduce the equity participation of the Sponsor to less than
fifty-one per cent (51%) of the Company's total voting capital; and
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(b) under the relevant provisions of the "Estatuto Social" of the
Company, approve or vote in favor of any approval of any transfer of Shares
proposed to be made in violation of the provisions of this Section.
Section 10.6 Actions Prohibited. During the term of this Agreement,
unless Williams otherwise agrees in writing, the Company shall not, and the
Sponsor shall cause (i) the Company not to, recognize any purported sale,
transfer, assignment, disposal, pledge or any kind of encumbrance of the Shares
held by the Sponsor in the Company's capital in violation of Section 10.5; and
(ii) the Sponsor's Affiliates, including the Company, not to take any action
which would result in the equity interest in the Company represented by the
Williams Shares being equivalent to less than twenty percent (20%) of the total
issued and outstanding Shares of the Company, unless (i) Williams shall have
received thirty (30) days prior written notice of such proposed transaction
contemplated herein sufficient to allow Williams to properly evaluate the
effects of such transaction on the Company in order for Williams to determine
whether or not to exercise its preemptive rights provided hereunder; (ii) such
proposed transaction complies with Brazilian law with respect to minority
shareholders; and (iii) within thirty (30) days of receipt of such notice,
Williams fails to notify or notifies Company that Williams does not intend to
elect to exercise its preemptive rights hereunder to prevent such dilution of
its twenty percent (20%) equity interest in the Company. The Company agrees to
promptly give written notice to Williams of any request received to record any
of the transactions referred to in Section 10.5 in violation of the provisions
set forth therein and the Company shall, to the extent permitted by law, refuse
to make any such registration in violation of the said provisions.
Section 10.7 Share Swap.
(a) In the event that the listed and actually traded Shares are not
the same class and type of the Williams Shares; or if the shares of one or more
companies of the Company Group (other than Shares of the Company) are listed
and actually traded prior to the listing and trading of the Shares, with due
observance of the provisions set forth in Subsections (b) and (c) below, the
Company hereby grants Williams the right, at any time after Closing, at
Williams's sole discretion, to swap, in whole or in part, the Williams Total
Equity into (i) the same type and class of Shares of the Company which have
been listed and continuously and actively traded on the Sao Paulo Stock
Exchange, Rio de Janeiro Stock Exchange or on any other major Brazilian and/or
international Stock Exchanges; or (ii) a pro rata number of shares of one or
more companies of the Company Group, whose shares have been listed and actually
traded; provided, however, that no such swap shall result in the equity
interest in the Company represented by the Williams Shares being less than the
percentage of the total issued and outstanding Shares of the Company held by
Williams immediately prior to such swap.
(b) Williams shall notify the Company of its intention to exercise its
rights under Subsection (a) above, by sending the Company the Williams Swap
Notice.
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(c) In the event that the IPO does not occur within sixty (60) days
following the date of the issuance of the Williams Swap Notice, the right
assured to Williams pursuant to Subsection (a) above shall be enforceable and
the Williams Swap Notice shall be deemed fully effective after the expiration
of such 60-day period, entitling Williams to effect the swap of the Williams
Shares under the terms and conditions set forth herein.
(d) For purposes of Section 10.7 (a) the Company shall be valued at
its Book Value on the date of the issuance of the Williams Swap Notice.
Section 10.8 IPO. The Sponsor agrees to inform Williams of any
proposed IPO of the Shares approximately one hundred and twenty (120) days
prior to the planned IPO Date.
Section 10.9 Management Fees. The current arrangement regarding the
five percent (5%) management fee that is paid from the Company's Subsidiaries
and Affiliates (in particular, CTBC) to the Sponsor shall be modified so that,
for calendar year 1997, such management fee shall be paid by CTBC or such other
Subsidiary or Affiliate to the Company instead of the Sponsor, and the Company
shall pay to the Sponsor its actual costs without markup or fair market value,
whichever is less, for providing such services, but the cost of such services
shall not exceed twelve million two hundred fifty thousand Dollars
($12,250,000) (5% of $245,000,000). For 1998 and the following years, the
Company's cost for any services from the Sponsor shall be equal to the
Sponsor's actual cost or fair market arm's length value, whichever is less.
Section 10.10 Intercompany Leases. All real estate leases between the
Sponsor or any its Subsidiaries and Affiliates, on the one hand, and the
Company, CTBC or any of the other Subsidiaries of the Company, on the other
hand, shall be renewed at the end of their present terms for four (4)
additional five (5) year terms, with the rental payments payable during the
first such renewal term being no greater than the current rates, adjusted for
inflation from the base year for each such lease or from a base year of 1996,
whichever is more favorable for the Company, as based on the IGP-M ("Indice
Geral de Precos de Mercado" of the "Fundacao Getulio Vargas" or any other index
that may replace the IGP-M), and the rentals for subsequent renewal terms being
based on prevailing fair market arm's length rates for similar real properties.
Section 10.11 Affirmative Covenants; Negative Covenant. Unless
Williams otherwise agrees, the Sponsor shall cause the Company and each of the
Company's Subsidiaries and Affiliates to comply with the affirmative covenants
set forth in Section 12.3 and the negative covenant set forth in Section 12.4.
In addition, the Sponsor shall adopt a Board resolution stating that it is the
policy of the Sponsor and of the Algar Group generally that all shares of CTBC
available for purchase from subscribers of CTBC or otherwise shall be acquired
by the Company and by not the Sponsor or any of its Affiliates, and that the
Company shall not pay more for such shares, than the actual amount paid by the
Sponsor or any Affiliate for such shares.
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ARTICLE 11
SPECIAL PROVISIONS CONCERNING WILLIAMS AS A SHAREHOLDER
Section 11.1 New Investors.
(a) Williams and the Sponsor acknowledge that Investors may be
admitted as Shareholders of the Company so as to foster the Company's business
in the Telecommunications and Information Technology Sector. For such purposes,
the parties anticipate that new Investors shall be admitted as Shareholders of
the Company by subscribing for new Shares to be issued as a result of future
capital increases of the Company with due observance of the provisions of this
Article 11.
(b) Williams and the Sponsor agree that in the event any potential
Investor is proposing to invest in the Company, Williams may exercise its
pre-emptive rights to the subscription of new Shares.
(c) The Sponsor and Williams further agree that any potential Investor
may only be admitted as a Shareholder of the Company if (i) the Closing shall
have occurred, and (ii) the equity participation of the Sponsor in the Company
shall not be less than fifty-one per cent (51%) of the Company's total issued
and outstanding voting share capital.
(d) Competition by Williams. In each instance in which Williams owns a
majority interest and operates a company in Brazil, in the Telecommunication
and Information Technology Sector, Williams covenants and agrees not to compete
directly or indirectly, and shall cause its Williams Subsidiaries and
Affiliates and the directors and officers of Williams and Williams Subsidiaries
and Affiliates, not to compete directly or indirectly, with the business of the
Company, but only so long as Williams owns more than ten percent (10%) of the
Shares of the Company.
Section 11.2 No Better Subscription Terms. As controlling Shareholder
of the Company, the Sponsor hereby represents and warrants to Williams that for
a period of one (1) year after Closing, no Third Party and/or Investor shall be
offered better terms and conditions for the subscription of Shares of the
Company or shareholder rights than the terms and conditions offered to Williams
for the subscription of the Williams Shares under this Agreement and the
shareholder rights of Williams set forth in this Subscription and Shareholders
Agreement, unless Williams gives its prior written consent. In the event that
Williams elects to consent to the granting of such better terms, conditions or
rights to the Third Party and/or Investor, prior to undertaking any binding
commitment with such Third Party and/or Investor, the Sponsor and the Company
shall execute an amendment of this Agreement extending to Williams such better
terms, conditions or rights.
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Section 11.3 Company Shares Seized Judicially.
(a) If any Shares owned by the Sponsor or Williams are seized
judicially for whatever reason and the affected Shareholder (the "Affected
Shareholder") fails to replace the Shares with a guarantee or another asset
before auction (which may occur after (i) entering of a final decision or (ii)
through a temporary injunction), the affected Shares shall be deemed to have
been offered to the other shareholder (as between the Sponsor and Williams;
hereafter the "Other Shareholder") on a pro rata basis with regard to such
Other Shareholder's equity interest in the Company. The Other Shareholder who
wishes to accept the offer to purchase such Shares shall first place cash or
other security at the disposal of the court or tribunal. For this purpose, the
Affected Shareholder undertakes to use its best efforts to cause a sale to be
effected to the Other Shareholder accepting the offer.
(b) The Sponsor and Williams shall jointly appoint an
independent auditor from among one of the six largest internationally
recognized public accounting firms to appraise the Market Value of the Shares.
(c) If the amount paid or deposited with the court or
tribunal (less any amount to cover court costs and attorneys' fees) for the
affected Shares in Reais is greater than the Market Value of the Shares, as
determined pursuant to the appraisal, the Affected Shareholder shall pay to the
Other Shareholder posting such security the balance, indexed pursuant to the
currency index used by the Company in preparing its Financial Statements. If
applicable, and in accordance with Brazilian law regulating indexing, the
indexing period shall commence on the date the payment or deposit is made with
the court and shall end on the date of reimbursement to the Other Shareholder.
(d) If the amount paid or deposited with the court (minus
court costs and attorneys' fees) represents less than the Market Value of the
Company Shares, the Other Shareholder who accepted the offer shall pay the
balance to the Affected Shareholder, indexed pursuant to the currency index
used by the Company in preparing its Financial Statements and in accordance
with Brazilian law regulating indexing. This payment to the Affected
Shareholder shall be made within thirty (30) calendar days after receipt by the
Sponsor and Williams of the appraisal.
Section 11.4 Spin-off of Company Subsidiaries. The Company shall not
Spin-Off, directly or indirectly, any of its Subsidiaries or transfer such
Subsidiary's shares or all or a substantial portion of such Subsidiary's assets
to any other company or person outside the Company, without the prior written
consent of Williams, which shall not be unreasonably withheld. Williams shall
be entitled to: (i) thirty (30) days advance written notice of any proposed
Spin-Off; (ii) as provided by Brazilian law, an equity interest in such other
company or person not less than the equity interest then held by Williams in
the Company; (iii) representation on the board of directors of such other
company not less than the representation then held by Williams on the Board of
Directors of the Company; and (iv) all such other rights and interests in such
other company of the same nature and to the same
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extent as Williams then has in the Company under the Estatuto Social of the
Company, under this Agreement, the laws of Brazil or otherwise.
ARTICLE 12
OBLIGATIONS OF THE COMPANY
Section 12.1 Termination of the Concession. If during the term of this
Agreement the Concession Agreement is terminated for whatever reason, the
proceeds derived from the termination of said agreement ("Termination
Proceeds") payable to the Company by CTBC in accordance with the Concession
Agreement and the applicable laws shall be immediately distributed by the
Company to its Shareholders as cash dividends.
Section 12.2 Vote on Cash Dividend Distribution. In the capacity of
controlling Shareholder of the Company, the Sponsor hereby agrees to vote its
shares in favor of the cash dividends distribution referred to in Section 12.1
and to cause the Company to hold the relevant shareholders meeting within
thirty (30) days following the actual receipt of the Termination Proceeds by
the Company.
Section 12.3 Affirmative Covenants. Unless Williams otherwise agrees,
the Company shall, and shall cause each of its Subsidiaries and Affiliates to:
(a) carry out the Project and conduct its business with due diligence
and efficiency and in accordance with sound engineering, financial and business
practices and maintain adequate insurance coverage of its business and assets
pursuant to the minimum insurance requirements set forth in Schedule 5.1(c)
hereto and Subsection (y) below;
(b) carry out the Project in accordance with the Project description
in Schedule 2.1.
(c) cause the financing specified in the Financial Plan to be applied
exclusively to the Project;
(d) promptly install and maintain the accounting and cost control
system and management information system referred to in Section 5.1(b) of this
Agreement, and maintain books of account and other records adequate to reflect
truly and fairly its financial condition and the results of its operations
(including the progress of the Project) in conformity with accounting
principles which are generally accepted in Brazil, consistently applied;
(e) maintain a Debt to Shareholders Equity Ratio not greater than
50/50;
(f) as soon as available, but in any event within sixty (60) days
after the end of each
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quarter of each Fiscal Year, deliver to Williams, in English at the Company's
expense:
(i) two (2) copies of the Company's complete Financial
Statements and the complete Financial Statements of each of its Subsidiaries
for such quarter prepared in conformity with accounting principles which are
generally accepted in Brazil, consistently applied and, if requested by
Williams, certified by an officer of the relevant company;
(ii) a report on any factors materially affecting or which
might materially affect the Company's business and operations or the business
and operations of any of its Subsidiaries or its financial condition;
(iii) during implementation of the Project, a report, in a
form satisfactory to Williams, on the implementation and progress of the
Project, including any factors materially affecting or which might materially
affect the Project or the implementation of the Financial Plan;
(iv) as requested by Williams, a semi-annual statement by the
Company of all material transactions between the Company, any Subsidiary or
Affiliate and any company of the Algar Group, and a certification by the chief
financial officer of the Company and its Auditors that those transactions were
and remain on the basis of arms'-length arrangements. For the purposes hereof,
the term "material" shall mean any transaction (or a series of related
transactions) valued at or resulting in a liability equal to or exceeding One
Hundred Thousand U.S. Dollars (U.S.$100,000) or its Dollar Equivalent in Reais.
For the purposes of such Auditor's certifications, the Auditors shall adhere to
the reporting standards established (A) by the securities laws and regulations
and stock exchange rules then in effect in Brazil, including without
limitation, the rules and regulations promulgated by the Comisao de Valores
Mobiliarios (CVM) and (B) by December 31, 1997, by the securities laws and
regulations and stock exchange rules then in effect in the United States of
America, including without limitation, the rules and regulations promulgated
under the Securities Acts of 1933 and 1934 and by the U.S. Securities and
Exchange Commission; and
(v) a statement of all shares, if any, of CTBC acquired
during such quarter by the Sponsor or any of its Subsidiaries or Affiliates;
(g) as soon as available but in any event within one hundred and
twenty (120) days after the end of each Fiscal Year, deliver to Williams, in
English at the Company's expense:
(i) two (2) copies of the complete Financial Statements of
the Company and each of its Subsidiaries for such Fiscal Year (which are in
agreement with its books of account and prepared in accordance with accounting
principles which are generally accepted in Brazil, consistently applied),
together with an audit report on them;
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(ii) a copy of any management letter or other communication
from the Auditors to the Company or to any of its Subsidiaries commenting, with
respect to such Fiscal Year, on, among other things, the adequacy of the
relevant company's financial control procedures and accounting systems and
management information system;
(iii) a report by the Auditors certifying that, based on the
relevant financial statements, the Company and its Subsidiaries were in
compliance with the financial covenant contained in Subsection (e) above as of
the end of the relevant Fiscal Year or, as the case may be, detailing any
non-compliance;
(iv) a review of the operations of both the Company and its
Subsidiaries during such Fiscal Year, in a form satisfactory to Williams,
containing the information listed in Schedule 12.3(g)(iv); and
(v) a statement by the Company of all transactions between
the Company, any Subsidiary or Affiliate and any company of the Algar Group
during such Fiscal Year and a certification by the chief financial officer of
the Company and its Auditors that those transactions were and remain on the
basis of arms'-length arrangements; for the purposes of such Auditor's
certifications, the Auditors shall adhere to the reporting standards
established (A) by the securities laws and regulations and stock exchange rules
then in effect in Brazil, including without limitation, the rules and
regulations promulgated by the Comisao de Valores Mobiliarios (CVM) and (B) by
December 31, 1997, by the securities laws and regulations and stock exchange
rules then in effect in the United States of America, including without
limitation, the rules and regulations promulgated under the Securities Acts of
1933 and 1934 and by the U.S. Securities and Exchange Commission; and
(h) the Company shall request and make best efforts to obtain from its
Affiliates as soon as possible the information and documentation referred to in
Subsection (f) (i) and (ii) and Subsection (g) (i) through (iv) above and shall
provide Williams with the relevant information and documentation as soon as
they are available;
(i) deliver to Williams promptly following receipt a copy of any
management letter or other communication sent by the Auditors or any
accountants retained by the Company and the Subsidiaries to the relevant
company or to its management in relation to the financial, accounting and other
systems, management or accounts of the relevant company if not provided
pursuant to Subsection (g) (ii) above, in English at the Company's expense;
(j) promptly notify Williams by facsimile not less than ten (10) days
before any meeting of the Board of Directors and shareholders' meetings of the
Company including the agenda of such meetings;
(k) promptly deliver to Williams two (2) copies, in English at the
Company's expense of:
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(i) all notices, reports and other communications of the
Company to its shareholders; and
(ii) the minutes of all board of directors' and shareholders'
meetings;
(l) promptly provide to Williams such information as Williams from
time to time shall reasonably request about the Company and any company of the
Company Group;
(m) permit representatives of Williams to visit any of the premises
where the businesses of the Company and its Subsidiaries are conducted and to
have access to the books of account and records of the relevant company to the
extent necessary to permit Williams an evaluation of the performance of the
relevant company; provided that Williams notifies the Company in writing of the
purpose of any of such visit at least fifteen (15) calendar days prior to the
date of the proposed visit;
(n) promptly notify Williams of any proposed change in the nature or
scope of the Project or the business or operations of the Company and of any
event or condition which might materially and adversely affect the carrying out
of the Project or the carrying on of the Company's business or operations or
the operations and business of any of its Subsidiaries or Affiliates;
(o) promptly notify Williams by facsimile as soon as it becomes aware
of any litigation or administrative proceedings before any Authority or
arbitral body which materially and adversely affects or may have a material and
adverse effect on the Company, any Subsidiary or Affiliate, its assets or the
Project or on the ability of the relevant company to perform and observe its
obligations under any Transaction Document, including this Agreement;
(p) design, construct, operate and maintain all of its plant and
equipment in compliance with the applicable laws and regulations, as well as
the applicable environmental, occupational health and safety requirements of
the Government of Brazil, the local authorities and applicable World Bank
Guidelines;
(q) within forty-five (45) calendar days after the end of each Fiscal
Year, deliver to Williams an annual monitoring report, in the form specified by
the International Finance Corporation, confirming compliance with the
applicable national and local requirements and standards, as well as the
compliance with the World Bank Guidelines referred to in Subsection (p) above
or, as the case may be, detailing any non compliance together with the action
being taken to ensure compliance;
(r) if Arthur Andersen ceases to be the Auditors of the Company for
any reason, appoint
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and maintain as the auditors of the Company another firm of independent public
accountants of international standing and sound reputation;
(s) obtain and maintain in force (or where appropriate, promptly
renew) all Authorizations necessary for carrying out the Project and the
Company's business and operations generally;
(t) perform and observe all the conditions and restrictions contained
in, or imposed on the Company by, any such Authorizations;
(u) provide Williams within thirty (30) days prior to the start of
each Fiscal Year with a plan detailing the Company Group's investment program
in the Telecommunications and Information Technology Sector and funding of such
program for the relevant Fiscal Year;
(v) file all relevant tax returns and pay all taxes promptly upon the
same becoming due except to the extent that the taxes are being contested in
good faith and by appropriate means and an adequate reserve has been set aside
with respect thereto;
(w) cause its Subsidiaries and Affiliates to negotiate in good faith
access and interconnect agreements with any other telecommunications operators
in Brazil as may be required by the relevant Authorities;
(x) contest where practicable all acts or proceedings by any
governmental Authorities that might reasonably be expected to adversely affect
any Concession, Portaria, license or consent necessary for the conduct of the
operations of any company of the Company Group or the performance of the
obligations of the relevant company in respect of the transactions contemplated
hereby;
(y) insure its assets and properties against general third party,
including product liability covering all of its activities, with a minimum loss
limit of one million Dollars ($1,000,000) Equivalent, naming Williams as
"additional insured" under the liability policy and provide Williams with a
statement of the Company's overall insurance strategy for the protection of its
assets and operations;
(z) comply with and cause its subsidiaries and Affiliates to comply
with all of the provisions of the mortgages, charges and other liens or
contracts and arrangements set forth in Schedule 3.3(p) and all of the
agreements entered into with the International Finance Corporation mentioned in
Section 3.3(q);
(aa) all: (i) dealings between the Sponsor or any of its Subsidiaries
or Affiliates, on the one hand, and the Company or any company of the Company
Group, on the other hand; and (ii)
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investments in any company of the Company Group, made directly or indirectly by
shareholders, directors, officers and other top-level management personnel of
any company of the Algar Group, shall be: (A) established and remain on normal
arm's-length terms as if between unrelated parties and in accordance with the
provisions of Brazilian corporate law regarding fiduciary duties of
administrators in respect of Business Opportunities, and regarding the
protection of minority shareholders' rights; and (B) disclosed to Williams in
writing on a timely basis and in accordance with the reporting standards
established by the securities laws and regulations and stock exchange rules
then in effect in Brazil and the United States of America;
(ab) prior to or at the Closing adopt a Board resolution substantially
identical to the resolution described in Section 10.11; and
(ac) the Company shall take and it shall cause its Subsidiaries and
Affiliates to take any action that Williams may reasonably request to give
effect to the provisions contained in this Agreement, providing Williams with
evidence thereof;
Section 12.4 Negative Covenant. Unless Williams agrees, the Company
shall not and shall cause each of its Subsidiaries not to: (a) sell, transfer,
lease or otherwise dispose of all or a substantial part of its assets (whether
in a single transaction or in a series of transactions, related or otherwise)
other than sales, transfers, leases or other forms of disposal in the ordinary
course of business; (b) create or permit to exist any Lien on any of, its
property, revenues or other assets, present or future, except for security
created to secure all or any part of indebtedness incurred or assumed by the
Company or by any of its Subsidiaries to pay all or any part of the purchase
price of any property or assets acquired by the Company or by any of its
Subsidiaries after the date of this Agreement, provided that any such security
shall be confined solely to the property or asset so acquired; or (c) propose
or vote in favor of any shareholder or Board resolution of the Company to
increase the capital of the Company, if such resolution is in conflict with the
anti-dilution rights of Williams under Brazilian law, the Estatuto Social of
the Company, or the provisions of this Agreement, including without limitation,
Sections 3.1(d), 4.1, 4.2(b)(iv), 7.8, 10.3(a)(ii), 10.6 and 10.7 hereof.
ARTICLE 13
WILLIAMS PUT OPTION
Section 13.1 Williams shall have the option, exercisable in its
discretion, at any time during the Exercise Period, by delivering to the
Sponsor a Notice of Exercise, with a copy to the Company, to sell to the
Sponsor all, but not less than all, of the Option Shares then held by Williams
at the greater of the Exercise Price or the Floor Price, and otherwise upon the
terms and conditions of this Agreement, and the Sponsor hereby agrees to
purchase and pay for such Option Shares in accordance herewith.
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Section 13.2 After receiving the Notice of Exercise, the Sponsor shall
on the Settlement Date and at the Settlement Place, pay to Williams in full, in
Dollars, in immediately available funds, to the bank account in the City of New
York, New York, United States of America, designated by Williams, the Exercise
Price.
Section 13.3 Williams shall, on the Settlement Date at the Settlement
Place, against payment in full of the Exercise Price for the Option Shares,
execute in the relevant corporate books of the Company deeds of transfer for
the Option Shares purchased by the Sponsor and shall, as appropriate, endorse
in the name of the Sponsor or deliver to the Company for cancellation the share
certificates (or the provisional share certificates) issued by the Company
representing such Option Shares, free and clear of all Liens, together with all
documents required to transfer title to such Option Shares to the Sponsor.
Section 13.4 Without prejudice to any remedies available to Williams
under this Agreement or otherwise, in the event that, after Williams shall have
delivered a Notice of Exercise of the Sponsor, the Sponsor shall fail to
purchase and pay for all or any of the Option Shares specified in the Notice of
Exercise as herein provided, Williams shall be free to sell, transfer or
otherwise dispose of any such unpurchased and unpaid Option Shares to a third
party willing to purchase such unpurchased and unpaid Option Shares, without
affecting any rights Williams may have against the Sponsor for the failure to
purchase or pay for the Option Shares specified in the Notice of Exercise,
including the rights set forth in Section 14.3(i) hereof.
Section 13.5 Nothing in this Agreement shall limit the right of
Williams, at any time, to sell, transfer or otherwise dispose of all of its
Option Shares which are not then subject to a Notice of Exercise.
Section 13.6 (a) The Sponsor shall not take any action, including,
without limitation, voting in favor of any resolution of the Shareholders of
the Company, which would permit the Estatuto Social of the Company to be
amended in a way that may impair the exercise of, or that may alter or
prejudice the rights of Williams in relation to the Put Option.
(b) The Sponsor shall procure that any Shareholder of the
Company waives whatever right of first refusal such Shareholder may have in
respect of the transfer of the Option Shares to the Sponsor (whether set out in
the Estatuto Social of the Company or otherwise) insofar as it is necessary so
to do in order to give effect to the provisions of the Put Option.
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ARTICLE 14
MISCELLANEOUS
Section 14.1 Information to Third Party. The Sponsor agrees to inform
any Third Party and Investor of this Agreement and to cause the relevant party
to adhere and be bound by all the terms and conditions set forth herein as a
condition precedent to the actual acquisition and/or subscription of any Share
of the Company.
Section 14.2 Entire Agreement. This Agreement and its Schedules and
Exhibits, and all other documents delivered at the Closing, including Exhibit
14.2 hereto, constitute the entire agreement of the parties hereto on the
subject matter hereof, and can only be amended by a written instrument signed
by all of the parties hereto. The parties have agreed that Williams shall
acquire the Williams Additional Shares pursuant to the provisions of Side
Letters 1, 2 and 3 set forth in Exhibit 14.2 attached hereto.
Section 14.3 Jurisdiction.
(a) At the option of Williams, this Agreement may be enforced in the
courts of the city of New York, State of New York located in the Southern
District of New York, United States of America, or in the central courts of the
city of Sao Paulo, State of Sao Paulo, Brazil. Final judgment issued by any of
such courts shall be conclusive and may be enforced in the other courts
referred to herein, by suit on the judgment, a certified or exemplified copy of
which shall be conclusive evidence of the judgment, or in any other manner
provided by law.
(b) By the execution and delivery of this Agreement, each of the
Company and the Sponsor irrevocably submits to the jurisdiction of any such
court in any action, suit or proceeding arising out of or relating to this
Agreement or any other Transaction Document to which any of such party is a
party and each of such parties designates, appoints and empowers CT Corporation
System, Inc. with an office at 1633 Broadway, New York, NY 10019, United States
of America as its authorized agent to receive for and on its behalf service of
any summons, complaint or other legal process in any such action, suit or
proceeding that Williams elects to bring in the State of New York.
Notwithstanding the foregoing, Williams reserves the right to make personal
service on each of the Company and the Sponsor of any summons, complaint or
other legal process in any action, suit or proceeding.
(c) As long as this Agreement remains in force, each of the Company
and the Sponsor shall maintain a duly appointed agent for the service of
summons, complaint and other legal process in New York, New York, United States
of America, for purposes of any legal action, suit or proceeding Williams may
bring in the courts of the City of New York in respect of this Agreement or any
other Transaction Document to which any of the above parties is a party. The
Company and
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the Sponsor shall keep Williams advised of the identity and location of such
agent.
(d) Each of the Company and the Sponsor also irrevocably consents, if
for any reason the Company's and the Sponsor's authorized agent for service of
process of summons, complaint and other legal process in any such action, suit
or proceeding is not present in New York, New York, to service of such papers
being made out of those courts by mailing copies of the papers by registered
United States air mail, postage prepaid, to the relevant party at its address
specified in the opening of this Agreement. In such a case, Williams shall also
send by telex or facsimile, or have sent by telex or facsimile, a copy of the
papers to the Company or the Sponsor, as the case may be.
(e) Service in the manner provided in Subsection (c) above in any such
action, suit or proceeding shall be deemed personal service, shall be accepted
by the Company or the Sponsor, as the case may be, as such and shall be valid
and binding upon the relevant party for all purposes of any such action, suit
or proceeding.
(f) Each of the Company and the Sponsor irrevocably waives to the
fullest extent permitted by applicable law:
(i) any objection which it may have now or in the future to
the laying of the venue of any such action, suit or proceedings in any court
referred to in this Section;
(ii) any claim that any such action, suit or proceeding has
been brought in an inconvenient forum;
(iii) its right of removal of any matter commenced by
Williams in the courts of the State of New York to any court of the United
States of America; and
(iv) any and all rights to demand a trial be jury in any such
action, suit or proceeding brought against the Company and/or the Sponsor by
Williams.
(g) To the extent that either the Company or the Sponsor may be
entitled in any jurisdiction referred to in Subsection (a) above to claim for
itself or its assets immunity in respect of its obligations under this
Agreement or any other Transaction Document to which any of the above parties
is a party from any suit, execution, attachment (whether provisional or final,
in aid of execution, before judgment or otherwise) or other legal process or to
the extent that in any such jurisdictions such immunity (whether or not
claimed) may be attributed to it or its assets, each of the Company and the
Sponsor irrevocably agrees not to claim and irrevocably waives such immunity to
the fullest extent permitted by the laws of any of such jurisdictions.
(h) To the extent that the Company and/or the Sponsor may, in any
suit, action or proceeding brought in any of the courts referred to in
Subsection (a) above arising out of or in
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connection with this Agreement or any other Transaction Document to which the
Company and/or the Sponsor is a party, be entitled to the benefit of any
provision of law requiring Williams in such suit, action or proceeding to post
security for the costs of any of such parties (cautio judicatum solvi), or to
post a bond or to take similar action, each of the Company and the Sponsor
hereby irrevocably waives such benefit, in each case to the fullest extent now
or in the future permitted under the laws of the State of New York, United
States of America or Brazil.
(i) If Williams brings any legal action, suit or proceeding arising
out of or relating to this Agreement or any other Transaction Document to which
the Company or the Sponsor is a party, in the central courts of the city of Sao
Paulo, State of Sao Paulo, Brazil, as referred to in Subsection (a), any party
hereto shall be entitled to claim in such Brazilian court the specific
performance of the obligations assumed by the other parties hereunder or under
any of the Transaction Documents, or any portion hereof or thereof, pursuant to
the relevant articles of the Brazilian Code of Civil Procedure, including, but
not limited to, Articles 461, 632, 639, as well as pursuant to Article 118 of
Brazilian Law No. 6,404, enacted on December 15, 1976.
(j) The parties hereto hereby acknowledge that the mere payment of
damages by the defaulting party to the non-defaulting parties shall not be
deemed appropriate indemnification for the failure by such defaulting party to
comply with its obligations hereunder or under any of the Transaction
Documents.
Section 14.4 Counterparts. This Agreement may be signed in one or more
counterpart copies all of which, when taken together, shall constitute one
document.
Section 14.5 Assignment. This Agreement shall bind and inure to the
benefit of the parties hereto, their successors and assigns. No party may
assign or transfer any of its rights and obligations hereunder, provided that
Williams may assign, in whole or in part, the Shares it comes to hold in the
Company; and provided, further, that Williams may also assign to any Third
Party which comes to acquire at least fifty per cent (50%) of the Williams
Shares subscribed hereunder the rights mentioned in Articles 7 and 9, but no
other rights.
Section 14.6 Translation and Registration. The Company agrees to
effect an official translation of this Agreement into Portuguese, and subject
to the prior review and approval of such translation by Williams or its
advisors, to register this Agreement with the Cartorio de Registro de Titulos e
Documentos in the relevant jurisdiction and to provide Williams with a copy of
such translation and satisfactory evidence of the registration of this
Agreement with the above mentioned "Cartorio".
Section 14.7 Translation and Registration Costs. The Company agrees to
bear all the costs and expenses and to pay any and all taxes, charges or fees
that may be levied or assessed on the translation and registration of this
Agreement with the "Cartorio" referred to in the preceding Section.
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Section 14.8 Taxes. The Company shall also pay all taxes (including
stamp taxes), duties, fees or other charges payable on or in connection with
the execution, issue and delivery of the Williams Shares and the translation,
registration or notarization of any documents related to this Agreement or to
the Williams Shares, and shall, upon notice from Williams, reimburse Williams
or its assigns for any such taxes, duties, fees or other charges paid by
Williams or its assigns thereon. The Sponsor shall pay all taxes, duties, fees
and other charges incurred in connection with the enforcement, sale, transfer
or delivery of the Option Shares and any documents related thereto so that
Williams receives in its bank account the Exercise Price without deduction for
or on account of any such taxes, duties, fees or other charges. The Company or
the Sponsor, as the case may be, shall reimburse Williams for any such charges
paid by Williams thereon.
Section 14.9 Fees and expenses. The Company shall pay or cause to be
paid to Williams or as Williams may direct:
(a) the fees and expenses of Williams' counsel in Brazil incurred in
connection with: (i) the preparation of Williams' investment in the Company;
(ii) the preparation, review, execution and, where appropriate, registration,
delivery and translation of each Transaction Document, including this
Agreement, the Williams Shares and any other documents related to this
Agreement or the Williams Shares; (iii) the giving of any legal opinion
required by Williams under this Agreement; (iv) any amendment or modification
to, or waiver under, this Agreement; (v) the registration (where appropriate)
and delivery of the evidences of payments by or to Williams in relation to the
Williams Subscription; and (vi) the exercise by Williams of its rights or
powers consequent upon, or arising out of, the occurrence of any Event of
Suspension and/or Cancellation; and
(b) all of Williams' reasonable costs and expenses, including legal
fees, incurred by Williams in relation to the protection or enforcement, or
attempted protection or enforcement, of any rights under this Agreement.
Section 14.10 Notices and Requests. Any notice, request or other
communication to be given or made under this Agreement shall be in writing and
except as otherwise provided in this Agreement it shall be deemed to have been
duly given or made when it shall be delivered by hand, mail (or airmail if sent
to another country), cable, telex or telecopier to the party to which it is
required or permitted to be given or made at the relevant address for
communications of such party which is specified at the opening of this
Agreement or at such other address for communication as any party shall have
designated by notice to the parties giving or making such notice, request or
other communication.
Section 14.11 Evidence of Authority. The Company shall furnish to
Williams the Certificate of Incumbency and Authority, that is, a certificate,
in the form of Exhibit 1.1(v) and in substance
60
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satisfactory to Williams, evidencing the authority of the person or persons who
will, on behalf of the Company, sign the requests and certifications provided
for in this Agreement, or take any other action or execute any other document
required or permitted to be taken or executed by the Company under this
Agreement, and the authenticated specimen signature of each such person.
Section 14.12 Saving of Rights.
(a) no course of dealing or waiver by Williams in connection with any
condition of Williams Subscription shall impair any right, power or remedy of
Williams with respect to any other condition, or be construed to be a waiver
thereof;
(b) unless otherwise notified to the Company or to the Sponsor by
Williams and without prejudice to the generality of Subsection (a) above, the
right of Williams to require compliance with any condition under this Agreement
which may be waived by Williams in respect of the Williams Subscription or in
connection with any right granted to Williams hereunder is expressly preserved
for the purposes of future exercise of any of the Williams' rights hereunder.
(c) no course of dealing and no delay in exercising, or omission to
exercise, any right, power or remedy accruing to Williams upon any default
under this Agreement or any other agreement, including the other Transaction
Documents, shall impair any such right, power or remedy or be construed to be a
waiver thereof or an acquiescence therein; nor shall the action of Williams in
respect of any such default, or any acquiescence by it therein, affect or
impair any right, power or remedy of Williams in respect of any other default.
(d) waiver of a breach of this Agreement or of any power, right
authority, discretion or remedy arising upon a breach of this Agreement must be
in writing and signed by the party granting the waiver. A breach of this
Agreement is not waived by any failure or delay in exercise, or partial
exercise, of any power, right, authority, discretion or remedy. A power, right,
authority, discretion or remedy created or arising upon a breach of this
Agreement is not waived by any failure or delay in the exercise, or a partial
exercise, of that or any other power, right, authority, discretion or remedy.
Section 14.13 English Language. All documents to be furnished or
communications to be given or made under this Agreement shall be in the English
language or, if in another language, shall be accompanied by a translation into
English certified by a representative of the Company or the Sponsor, as the
case may be, which English translations shall be the governing version between
the parties hereto.
Section 14.14 Filing at the Company's Head Office. The Company hereby
agrees to file one integral copy of this Agreement at its head office for the
purposes mentioned in Article 118 of Law No. 6.404, of December 15, 1976.
61
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Section 14.15 Term of Validity. This Agreement shall be valid as of
the date of its signing and shall continue to be in full force until the
earlier of (i) ten (10) years after the date of its signing, or (ii) the date
on which Williams ceases to hold at least fifty per cent (50%) of the Williams
Shares subscribed pursuant to this Agreement.
Section 14.16 No Deduction. Any payments to Williams hereunder
associated with or resulting from the implementation of any transaction
contemplated to herein shall be made without deduction on or for the account of
any taxes, fees, duties or other charges.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
62
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IN WITNESS WHEREOF, the parties hereto, acting through their duly
authorized representatives, have caused this Agreement to be signed in its
names, as of the date first above written.
LIGHTEL S.A. TECNOLOGIA DA INFORMACAO
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
ALGAR S.A. - EMPREEENDIMENTOS E PARTICIPACOES
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
WILLIAMS INTERNATIONAL TELECOM LIMITED
By: /s/ [ILLEGIBLE]
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
Witnesses:
1.
---------------------
Name
ID No.
2.
---------------------
Name
ID No.
63
<PAGE> 64
AMENDMENT NO. 1 TO SUBSCRIPTION AND SHAREHOLDERS AGREEMENT
AMENDMENT NO. 1, dated as of March 30, 1998 ("Amendment") to
SUBSCRIPTION AND SHAREHOLDERS AGREEMENT, dated as of January 21, 1997
("Agreement"), by and among LIGHTEL S.A. TECNOLOGIA DA INFORMACAO, a Brazilian
corporation (the "Company"), ALGAR S.A. - EMPREENDIMENTOS E PARTICIPACOES, a
Brazilian corporation ("Algar"), and WILLIAMS INTERNATIONAL TELECOM LIMITED, a
Cayman Islands exempt limited company ("Williams").
WHEREAS, Algar and the Company have agreed to fund the acquisition of
an interest in the B-Band Cellular Concession for Area 3 in the States of Rio
de Janeiro and Espirito Santo, Brazil and/or to fund the acquisition of an
interest in the B-Band Cellular Concession for Area 2 in the State of Sao
Paulo;
WHEREAS, the Company wishes to borrow U.S.$100,000,000 (the "Loan")
from Williams to finance all or part of the funding requirements referred to in
the first recital hereto;
WHEREAS, Algar acknowledges the importance to the Company in obtaining
such Loan from Williams, in order to pay the Brazilian government in relation
to the above-mentioned concessions;
WHEREAS, Algar is in agreement with the aforementioned Loan and grant
of rights, and agrees to guarantee the Loan from Williams to the Company and to
assign its preemptive rights to subscribe to any shares issued by the Company
pursuant to Williams' exercise of share subscription rights provided under such
loan agreement and hereunder;
WHEREAS, Algar is committed to supplement Williams share subscription
rights with the share purchase option set out below;
NOW, THEREFORE, Williams, Algar and the Company have agreed to execute
this Amendment, and to modify, supplement and amend the Agreement, with the
specific intent of having the following terms and conditions governed by the
dispositions of Chapter X, section V of, and pursuant to the provisions
contained in Article 118 of, Brazilian Law No. 6,404, enacted on December 15,
1976, which shall be governed by the following terms and conditions (certain
terms hereof are defined in Section 11):
<PAGE> 65
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SECTION 1. LOAN AGREEMENT. Algar, in its capacity as a shareholder of
the Company, agrees to take all necessary corporate action, including any
necessary amendments to the Estatuto Social of the Company, to approve the
execution, delivery and performance by the Company of a Loan Agreement, dated
March 30, 1998 among the Company, as borrower, Algar as guarantor and Williams
as lender, substantially in the form and content attached hereto as Exhibit 1
(the "Loan Agreement"), and to cause the Company to execute, deliver and
perform the Loan Agreement in accordance with its terms, including the
borrowing of the Loan and the performance of the conversion option granted to
Williams therein, providing for the conversion of the Loan into shares of the
Company as set forth therein.
SECTION 2. WILLIAMS SHARE SUBSCRIPTION RIGHTS.
(a) Algar agrees that, if the Company does not otherwise hold such a
meeting, Williams shall have the right at any time to call a board of directors
meeting (or if necessary, a general shareholders meeting) of the Company to
deliberate an increase in the capital of the Company in an amount of the Reais
Equivalent to US$100,000,000 (the "Subscription Price"), and the subscription
by Williams of the Conversion Shares by virtue of the exercise by Williams of
its right to convert the Loan under the Loan Agreement into the Conversion
Shares.
(b) Algar and the Company agree that, in the event that the Banco
Central for any reason does not approve the conversion of the Loan in
accordance with the terms of the Loan Agreement referred to in paragraph (a)
above, Williams, at its option and in lieu of pursuing exercise of conversion
rights under the Loan Agreement and as a separate contractual right provided to
Williams hereunder and independent from its rights under the Loan Agreement, is
hereby given a subscription right for an amount of shares of the Company, which
may be voting or non-voting, common and/or preferred shares as selected by
Williams in its discretion, equal to the Conversion Shares, and Williams, to
the extent permitted by applicable law, may elect to subscribe and pay for up
to an amount of shares of the Company equivalent to the Conversion Shares by
capitalizing in the Company for the Subscription Price with the principal of
the Loan paid or prepaid by the Company to Williams under the Loan Agreement.
The subscription right provided in this paragraph 2(b) shall continue in full
force and effect to and until the maturity date for repayment of the Loan,
provided, however, in the event the approval of the Central Bank to the
conversion of the Loan into a capital increase of the Company is required and
not obtained or available at such time as Williams exercises its conversion
right on or prior to maturity of the Debt, then, at Williams' election the
Company shall not repay the Loan on the maturity date, the conversion rights
and Williams' rights hereunder shall not terminate and Williams shall exercise
the conversion rights as soon as practicable following such maturity date, and
until such time Williams shall have the full economic and other benefits of the
Required Percentage ownership of equity shares of the Company from the date of
execution of the conversion right as if the conversion had been accomplished.
The Company is obligated to use its best efforts to effect the obtaining of all
such regulatory approvals at the earliest date possible and Williams shall
fully cooperate with the Company in this regard.
<PAGE> 66
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(c) If any change of law or circumstances should occur that would
reduce the number of shares Williams is entitled to receive pursuant to its
conversion rights under the Loan Agreement or pursuant to the foregoing share
subscription rights to an amount of shares of the Company that is less than the
full amount of Conversion Shares provided under the Loan Agreement and
hereunder, then Algar agrees that Williams' exercise of such rights and the
corresponding capital increase and share subscription shall be deemed to have
occurred one day prior to such change of law or circumstances.
(d) Algar hereby waives and agrees to express such waiver in the
corresponding deliberation, of all formalities of advance notice, notice
periods or publication required for the aforementioned board or shareholders
meetings by the Estatuto Social of the Company or by law, to the extent
permitted by law. Algar also agrees to authorize and cause any Algar-designated
directors of the Company to authorize and direct the Company to provide to
Williams the economic and other benefits provided in the last sentence of
Section 2(b) above.
(e) Algar assures that Williams shall be entitled to subscribe to 100%
of the shares provided to be issued pursuant to Section 2(a), (b) or (f). Algar
hereby assigns to Williams any and all preemptive rights to subscribe to any
such shares, and agrees to express such assignment of preemptive rights in any
corporate actions taken by the Company to approve the issuance of shares upon
Williams' exercise of its share subscription rights under Section 2(a), (b) or
(f).
(f) Subject at such time to the Company obtaining any and all required
regulatory approvals, in the event, at any time following fifteen (15) months
from the date hereof, (a) the Company definitively in good faith plans an
Initial Public Offering (as defined in the Loan Agreement) of its common or
preferred shares, as the case may be, and a listing thereof on the New York
Stock Exchange and on a recognized public exchange in Brazil, and (b) the total
equity market value of the Company's outstanding shares of common and preferred
shares at such time is US$750,000,000 or more, upon not less than ninety (90)
days prior written notice to Williams, Williams agrees to make, and the Company
may cause, a conversion of the Loan as a capital increase of the Company into
the Conversion Shares, when the provisions of the Loan Agreement shall be
applicable as if Williams had exercised the option without the Company's
request. If, at the time of the required exercise of the option by Williams or
such conversion of the Loan, the Company is subject to any legal inability
which prevents the Company from issuing to Williams the common and/or preferred
shares required hereby, the provisions of Section 4 hereto shall be applicable
and Williams shall be able to purchase Company shares owned by Algar as set
forth in Section 4. The Company is obligated to use its best efforts to effect
the obtaining of all such regulatory approvals at the earliest date possible
and Williams shall fully cooperate with the Company in this regard.
SECTION 3. VOTING AGREEMENT. Algar agrees to attend and to cause the
Algar-appointed directors to attend, the general shareholders meetings and
board of directors meetings (as the case may be) described in Section 2 and any
other meetings that may be required in relation thereto, and to vote and cause
the Algar-appointed directors to vote, in favor of all necessary corporate
actions, including any necessary amendments to the Estatuto Social of the
Company, to approve the increase
<PAGE> 67
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of capital of the Company, if necessary, and the subscription of shares by
Williams provided for in Section 2(a), (b) or (f) above, and to cause the
Company to issue the above-mentioned shares to Williams.
SECTION 4. WILLIAMS CALL OPTION ON ALGAR SHARES. In order to assure to
Williams that it will obtain the benefit bargained for by Williams under the
Loan Agreement and hereunder to be able to subscribe for the Required
Percentage of shares of the Company, Algar hereby grants to Williams a separate
call option to purchase from Algar a number of Company shares owned by Algar
(the "Call Option Shares") equal to (a) the total amount of Conversion Shares
as Williams is entitled to subscribe from the Company pursuant to Section 2(a),
(b) or (f) above, less (b) the actual number of shares Williams is able to
subscribe for under the provisions of Section 2(a), (b) or (f). Such option for
the Call Option Shares may only be exercised by Williams if at the time that
Williams exercises its share subscription rights under Section 2(a), (b) or
(f), there exists any legal impediment to the Company issuing to Williams for
the Subscription Price a total number of such shares equal at least to the
Required Percentage. Algar shall sell to Williams the Call Option Shares at a
cash purchase price of US$1.00 per share (the "Call Price"). Algar shall
contribute the Call Price to the Company as an increase of capital without any
resulting dilution of Williams share ownership in the Company of greater than
0.5%. The call option provided herein shall be exercised by Williams as soon as
practicable after the final determination of the amount of shares of the
Company that Williams is able to subscribe from the Company by virtue of its
conversion rights pursuant to Sections 2(a), (b) or (f). In addition, Algar
shall provide to Williams the economic and other benefits of the Call Option
Shares from the time that Williams exercises its share subscription rights
under Section 2(a), (b) or (f) as if the conversion by Williams had been
accomplished.
SECTION 5. LIMIT ON CAPITAL INCREASES. Algar agrees that to and until
completion by the Company of an Initial Public Offering, the Company shall
issue subscription rights for additional capital, whether common or preferred
shares, only at an equity value for the Company of US$750,000,000 or more, and
Algar shall refrain from voting in favor of any corporate action permitting any
issuance in violation thereof.
SECTION 6. WILLIAMS SUPERMAJORITY PROVISIONS. Algar hereby consents to
and agrees to abide by the supermajority voting provisions provided for in the
Loan Agreement, in favor of Williams in its capacity as creditor of the
Company, to vote to amend the Estatuto Social of the Company in accordance
therewith, and to refrain from voting contrary to such provisions.
SECTION 7. RIGHTS UNDER AGREEMENT. The parties hereto agree that any
shares of the Company purchased by Williams hereunder shall be included within
the number of shares of the Company owned by Williams (the "Williams Shares")
for purposes of the Agreement and Williams shall be entitled to the full
benefits of the Agreement with respect to such shares; provided, however, for
purposes of Section 14.5 of the Agreement, following Williams acquisition of
shares of the Company pursuant to the Loan Agreement or hereunder, the
percentage referred to in the last sentence of Section 14.5 shall be 25% rather
than 50% of the William Shares. In addition, in the
<PAGE> 68
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event Williams assigns all or part of the shares of the Company acquired by
Williams under the Loan Agreement or hereunder, or all or part of Williams'
interest in the Loan and the Loan Agreement, to any third party, such third
party, at Williams option, shall be entitled to all of the benefits and subject
to the obligations of this Amendment and the benefits of Articles 7 and 9 of
the Agreement as specified in Section 14.5 of the Agreement but no other
rights.
SECTION 8. IFC AGREEMENT. The International Finance Corporation
("IFC") is also a shareholder of the Company. Algar and the Company agree to
use their best efforts to obtain the agreement of the IFC to the rights of
Williams provided to it under the Loan Agreement and hereunder. In the event
the IFC does not grant its agreement and consent to the terms hereof, Algar
agrees as a separate and independent obligation hereunder, by exercising its
voting rights as a shareholder, by transferring or selling shares of the
Company other than as specifically provided herein, or to take such other
action, as shall make available to Williams the benefits of the Loan Agreement
and this Amendment, including assuring to Williams its ability to acquire the
Required Percentage of the Company for the Conversion Price.
SECTION 9. PENALTY PROVISIONS.
(a) In the event that Algar does not exercise its obligations
hereunder to vote shares of the Company or to make available and sell to
Williams shares in exercise by Williams of its call option for the Call Option
Shares, or otherwise fails to perform its obligation under this Amendment, and
if such failure continues for a period of thirty (30) days following demand by
Williams, Algar shall be liable to pay to Williams a penalty amount of
US$100,000,000 as payment to Williams of part of its damages resulting from
such failure. Williams also shall be able to seek such other damages and other
remedies as are available to Williams in respect of any breach by Algar of its
obligations hereunder. This penalty obligation shall be independent from
Algar's obligation as guarantor under the Loan Agreement and nothing herein
shall affect the obligation of the Company to repay the Loan or Algar's
obligation to guarantee repayment of the Loan.
(b) In the event that Williams does not give a request to convert the
Loan into the Conversion Shares upon due notice from the Company pursuant to
Section 2(f) above and/or fails to execute the formal documents necessary for
full accomplishment of the conversion of the Loan into Conversion Shares as
provided in Section 2(f) herein, and if such failure continues for a period of
thirty (30) days following demand by the Company, Williams shall be liable to
pay to the Company a penalty amount of US$100,000,000 as payment to the Company
of part of its damages resulting from such failure. The Company also shall be
able to seek such other damages and other remedies as are available to the
Company in respect of any breach by Williams of its obligations hereunder.
SECTION 10. JURISDICTION.
(a) At the option of Williams, this Agreement may be enforced in the
courts of the city of New York, State of New York located in the Southern
District of New York, United States of
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America, or in the central courts of the city of Sao Paulo, State of Sao Paulo,
Brazil. Final judgment issued by any of such courts shall be conclusive and may
be enforced in the other courts referred to herein, by suit on the judgment, a
certified or exemplified copy of which shall be conclusive evidence of the
judgment, or in any other manner provided by law.
(b) By the execution and delivery of this Agreement, each of the
Company and Algar irrevocably submits to the jurisdiction of any such court in
any action, suit or proceeding arising out of or relating to this Agreement and
each of such parties designates, appoints and empowers CT Corporation System,
Inc. with an office at 1633 Broadway, New York, NY 10019, United States of
America as its authorized agent to receive for and on its behalf service of any
summons, complaint or other legal process in any such action, suit or
proceeding that Williams elects to bring in the State of New York.
Notwithstanding the foregoing, Williams reserves the right to make personal
service on each of the Company and Algar of any summons, complaint or other
legal process in any action, suit or proceeding.
(c) As long as this Amendment remains in force, each of the Company
and Algar shall maintain a duly appointed agent for the service of summons,
complaint and other legal process in New York, New York, United States of
America, for purposes of any legal action, suit or proceeding Williams may
bring in the courts of the City of New York in respect of this Agreement to
which any of the above parties is a party. The Company and Algar shall keep
Williams advised of the identity and location of such agent.
(d) Each of the Company and Algar also irrevocably consents, if for
any reason the Company's and Algar's authorized agent for service of process of
summons, complaint and other legal process in any such action, suit or
proceeding is not present in New York, New York, to service of such papers
being made out of those courts by mailing copies of the papers by registered
United States air mail, postage prepaid, to the relevant party at its address
specified in the Agreement. In such a case, Williams shall also send by telex
or facsimile, or have sent by telex or facsimile, a copy of the papers to the
Company or Algar, as the case may be.
(e) Service in the manner provided in Subsection (c) above in any such
action, suit or proceeding shall be deemed personal service, shall be accepted
by the Company or Algar, as the case may be, as such and shall be valid and
binding upon the relevant party for all purposes of any such action, suit or
proceeding.
(f) Each of the Company and Algar irrevocably waives to the fullest
extent permitted by applicable law:
(i) any objection which it may have now or in the future to
the laying of the venue of any such action, suit or proceedings in any court
referred to in this Section;
(ii) any claim that any such action, suit or proceeding has
been brought in an inconvenient forum;
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(iii) its right of removal of any matter commenced by
Williams in the courts of the State of New York to any court of the United
States of America; and
(iv) any and all rights to demand a trial by jury in any such
action, suit or proceeding brought against the Company and/or Algar by
Williams.
(g) To the extent that either the Company or Algar may be entitled in
any jurisdiction referred to in Subsection (a) above to claim for itself or its
assets immunity in respect of its obligations under this Amendment from any
suit, execution, attachment (whether provisional or final, in aid of execution,
before judgment or otherwise) or other legal process or to the extent that in
any such jurisdictions such immunity (whether or not claimed) may be attributed
to it or its assets, each of the Company and Algar irrevocably agrees not to
claim and irrevocably waives such immunity to the fullest extent permitted by
the laws of any of such jurisdictions.
(h) To the extent that the Company and/or Algar may, in any suit,
action or proceeding brought in any of the courts referred to in Subsection (a)
above arising out of or in connection with this Amendment be entitled to the
benefit of any provision of law requiring Williams in such suit, action or
proceeding to post security for the costs of any of such parties (cautio
judicatum solvi), or to post a bond or to take similar action, each of the
Company and Algar hereby irrevocably waives such benefit, in each case to the
fullest extent now or in the future permitted under the laws of the State of
New York, United States of America or Brazil.
(i) If Williams brings any legal action, suit or proceeding arising
out of or relating to this Amendment, in the central courts of the city of Sao
Paulo, State of Sao Paulo, Brazil, as referred to in Subsection (a), any party
hereto shall be entitled to claim in such Brazilian court the specific
performance of the obligations assumed by the other parties hereunder, or any
portion hereof or thereof, pursuant to the relevant articles of the Brazilian
Code of Civil Procedure, including, but not limited to, Articles 461, 632, 639,
and 798 as well as pursuant to Article 118 of Brazilian Law No. 6,404, enacted
on December 15, 1976.
(j) The parties hereto hereby acknowledge that the mere payment of
damages by the defaulting party to the non-defaulting parties shall not be
deemed appropriate indemnification for the failure by such defaulting party to
comply with its obligations hereunder.
(k) Each of the parties hereto acknowledges and agrees that in the
event of any breach of this Amendment, the non-breaching party or parties would
suffer irreparable harm, and no adequate remedy at law would exist and damages
would be difficult to determined. Accordingly, the parties agree that, in the
event of a breach of any provision of this Amendment, the injured party(ies)
shall be entitled to demand in court the fulfillment of all obligations of the
breaching party under this Amendment in accordance with the provisions of
Paragraph 3, Article 118, Law No. 6,404 of December 15, 1976, if applicable. In
addition the injured party(ies) may avail itself or themselves of the specific
performance provisions contained in Articles 461, 632, 639 and 798 of the
Brazilian Code of Civil Procedure.
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SECTION 11. MISCELLANEOUS.
(a) Whenever used in this Amendment, unless the context otherwise
requires, the following terms shall have the meanings herein:
"Conversion Shares" - means the number of shares to be issued and
outstanding of common and/or preferred stock of the Company, which shall be
voting and/or non-voting as selected by Williams in its discretion,
representing, on the date of the conversion the Required Percentage of the
total number of shares of the Company's common and preferred stock, but not
less than 73,179,311 shares of the Company.
"Dollar Equivalent" - (as of the relevant date of calculation) means
the equivalent in Dollars of any amount expressed in Reais by converting Reais
into Dollars by using the Exchange Rate.
"Exchange Rate" - (i) the official (A) rate for exchanging Reais into
Dollars (with respect to any Dollar Equivalent) or (B) rate for exchanging
Dollars into Reais (with respect to any Reais Equivalent) denominated as
PTAX-800, option 5, for the relevant date of calculation reported by the Banco
Central on such bank's SISBACEN Data System and set forth on Reuters page BRFR,
published on the Brazilian business day following the relevant date of
calculation and applicable for the remittance of funds (X) outside Brazil (with
respect to any Dollar Equivalent or (Y) into Brazil (with respect to any Reais
Equivalent), or (ii) if for the relevant date of calculation the PTAX-800 is
unavailable on the above-mentioned data system, then the Exchange Rate shall be
the PCOT-390, option 3, reported by the Banco Central on the SISBACEN Data
System. If the PCOT-390 rate is unavailable, then the Exchange Rate shall be
the official rate for exchanging Reais into Dollars (with respect to any Dollar
Equivalent) or for exchanging Dollars into Reais (with respect to any Reais
Equivalent) as published in the "Diario Oficial da Uniao" (Official
Gazette-Brazilian Government official publication) on the date following the
day on which such exchange rate is to be determined. In the case that none of
the above exchange rates are available, the Exchange Rate shall be the average
of the offer side of the interbank exchange rate replacing the PTAX-800 rate,
obtained from three major financial institutions making a market in Reais. In
the event that this rate is unavailable, a mutually acceptable substitute shall
be determined.
"Reais Equivalent" - (as of the relevant date of calculation) means
the equivalent in Reais of any amount expressed in Dollars by converting
Dollars into Reais by using the Exchange Rate.
"Required Percentage" - (as of the relevant date of calculation) means
twenty percent (20%) of the total number of shares of the Company's common
stock and preferred stock that is issued and outstanding immediately prior to
such conversion, which total shall include the number of all common stock and
preferred stock that could be converted or otherwise issuable from other forms
of equity or of Debt, including but not limited to other preferred shares,
warrants, convertible debt, and options to purchase in the Company or in any
other company into which assets or equity of the Borrower have been transferred
or spun off, but which shall not include the shares to be issued in connection
with such conversion or exercise by Williams of its subscription rights under
the Loan
<PAGE> 72
-9-
Agreement and hereunder. If in the period of time from April 1, 1998 until
Williams exercises its rights hereunder, (a) a strategic investor is issued as
a capital increase common or preferred equity shares in the Company and the
percentage of the total number of common or preferred shares of the Company at
such time so issued to such strategic investor equals or is less than (i) the
Dollar Equivalent amount of the new investment by the strategic investor
divided by (ii) US $750,000,000 then (b) the number of new shares issued to
such strategic investor shall be excluded from the number of shares subject to
the determination of the Required Percentage. The interest and Required
Percentage referred to in this Amendment is in addition to any other share
ownership in Company by Williams
(b) The parties hereto agree that the Agreement as amended hereby
continues in full force and effect and that the provisions of the Agreement are
valid and enforceable and remain in effect except as specifically amended,
modified or supplemented hereby. From and after the date hereof, references to
the Agreement shall refer to the Agreement as amended, modified and
supplemented by this Amendment.
(c) Each party to this Amendment agrees to execute, acknowledge,
deliver file and record such further certificates, amendments, instruments or
documents, and to do all such other acts and things, as may be required by law
or as may be necessary or advisable to carry out the intent and purpose of this
Amendment, including the Loan Agreement attached hereto and provided for
herein.
(d) All headings and captions contained in this Amendment are inserted
for convenience only and shall not be deemed part of this Amendment.
(e) This Amendment shall be governed and construed in accordance with
the laws of the Federative Republic of Brazil.
(f) This Amendment may be signed in one or more counterpart copies,
each of which shall constitute an original and all of which, when taken
together, shall constitute one agreement.
(g) Every provision of this Amendment is intended to be several. The
invalidity and unenforceability of any particular provision of this Amendment
in any jurisdiction shall not affect the other provisions hereof, and this
Amendment shall be construed in all respects as if such invalid or
unenforceable provision were omitted.
(h) This Amendment shall be binding upon the parties hereto, their
respective successors, executors, administrators, legal representatives, heirs
and legal assigns and shall inure to the benefit of the parties hereto and,
except as otherwise provided herein, their respective successors, executors,
administrators, legal representatives, heirs and legal assigns. No person other
than the parties hereto and their respective successors, executors,
administrators, legal representatives, heirs and legal assigns, shall have any
rights or claims under this Amendment.
<PAGE> 73
-10-
(i) Algar hereby agrees to file one integral copy of this Amendment
with the Company at its head office for the purposes mentioned in Article 118
of Law No. 6.404, of December 15, 1976.
(j) The Company is party hereto in order to acknowledge the
obligations of the parties hereto.
(k) This Amendment and its Exhibit, constitute the entire agreement of
the parties hereto on the subject matter hereof, and can only be amended by a
written instrument signed by all of the parties hereto.
<PAGE> 74
-11-
IN WITNESS WHEREOF, the parties hereto, acting through their duly
authorized representatives, have caused this Amendment to be duly executed as
of the date first above written.
LIGHTEL S.A. TECNOLOGIA DA INFORMACAO
By: /s/ [ILLEGIBLE] /s/ C. VIKBERG
-------------------------------------------------------
Name: [ILLEGIBLE] C. Vikberg
-------------------------------------------------------
Title: Chief Financial Officer President
-------------------------------------------------------
ALGAR S.A. - EMPREEENDIMENTOS E PARTICIPACOES
By: /s/ [ILLEGIBLE] /s/ C. VIKBERG
-------------------------------------------------------
Name: [ILLEGIBLE] C. Vikberg
-------------------------------------------------------
Title: Chief Financial Officer Exec. Vice President
-------------------------------------------------------
WILLIAMS INTERNATIONAL TELECOM LIMITED
By: /s/ JOHN C. BUMGARNER, JR.
-------------------------------------------------------
Name: John C. Bumgarner, Jr.
-------------------------------------------------------
Title: President
-------------------------------------------------------
Witnesses:
1. /s/ [ILLEGIBLE] 1.
------------------------ --------------------------
Name [ILLEGIBLE] Name
ID No. RG. 2095 Passport No.
2. /s/ [ILLEGIBLE] 2.
------------------------ --------------------------
Name [ILLEGIBLE] Name
ID No. CS. M.S. 349920 Passport No.
<PAGE> 75
STATE OF OKLAHOMA )
) ss.
County of Tulsa )
Before me, the undersigned, a Notary Public, in and for said County
and State, on this 1st day of April, 1998, personally appeared John C.
Burngarner, Jr., to me known to be the identical person who executed the within
and foregoing instrument as President of Williams International Telecom Limited
and acknowledged to me that he executed the same as his free and voluntary act
and deed for the uses and purposes wherein set forth and as the free and
voluntary act and deed of such corporation.
Given under my hand and seal of office the day and year above written.
/s/ MARILYN J. MOORE
[SEAL] --------------------------------
Marilyn J. Moore
My Commission Expires: Notary Public
April 30, 1998
<PAGE> 1
EXHIBIT 10.37
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT ("Agreement") made and entered into as of this
_____ day of ___________ , 1996, by and between TRANSCONTINENTAL GAS PIPE LINE
COMPANY, a _________ corporation ("Sublessor"), and WILLIAMS TELECOMMUNICATIONS
SYSTEMS, INC. a Delaware corporation ("Sublessee");
W I T N E S S E T H:
WHEREAS, by Lease dated as of the 5th day of October, 1981 (the "Lease"),
Sublessor leased from Post Oak Alabama Partnership, a Texas general
partnership, as Landlord, certain premises (the "Premises") comprising a
portion of that certain high rise office building known as Transco Tower
Building, Houston, Texas; and
WHEREAS, Sublessor desires to sublease a portion of said Premises to
Sublessee; and
WHEREAS, Sublessee desires to sublease a portion of said Premises from
Sublessor;
WHEREAS, Sublessor and Sublessee are Affiliates as that term is defined in
the Lease in that Sublessee is under common control with Sublessor.
NOW, THEREFORE, in consideration of the promises and the mutual covenants
contained herein, the parties hereto do hereby agree as follows:
1. Premises. Sublessor hereby subleases to Sublessee, and Sublessee hereby
subleases from Sublessor the total of 127,439 square feet of Net Rentable Area
of the Building as shown on Exhibit "A" attached hereto and made a part hereof
(collectively the "Subleased Premises"). The Subleased Premises will also
include any expansion space leased by Sublessee if and when the Sublessee
exercises its expansion option as set forth in Section 6 hereof.
2. Term. Unless earlier terminated as hereinafter provided, this Agreement
shall become effective as of the dates first written above and unless sooner
terminated in accordance with the Lease terms, this Agreement shall expire on
March 29, 2004.
3. Rent. For and during the term of this Agreement and while Sublessee and
Sublessor are Affiliates as that term is defined in the Lease, Sublessee shall
pay to Sublessor a rental rate or amount (the "Rental" or "Rent") which shall
include a Base Rent component, and an Additional Rent component. Sublessee shall
pay to Sublessor as Base Rent for the Subleased Premises a Rental of $9.50 per
square foot of Net Rentable Area for an annual total of $1,210,670.00 or
$100,899.00 monthly payable in advance on the 1st day of each month of the term
hereof, which Sublessee agrees to pay in lawful money of the United States to
Sublessor at the Premises, or at such other place designated in writing by
<PAGE> 2
Sublessor, without any setoff or deduction. Included in this Base Rent is a
tenant improvement allowance equal to $10.00 per square foot of Net Rentable
Area. Notwithstanding, Sublessee shall not be required to pay Base Rent for
12,000 square feet of Net Rentable Area for the first five years of this
sublease term. The monthly abatement will be $9,500.00 for a total abatement of
$570,000 during such time.
4. Additional Rent. Sublessee further agrees to pay, as "Additional
Rent", Sublessor's pro rata share of operating expense and tax expense and any
other additional rentals or pass-throughs above the 1995 actual expenses,
estimates or actuals, owing with respect to and attributable to the Subleased
Premises under the terms and conditions of the Lease.
5. Amortization of Leasehold Expenses. Sublessee shall have the right to
amortize additions and Sublessee improvements on a dollar for dollar basis over
the remaining term of the Lease. Such allowance will be limited to actual costs
incurred with the construction of the premises and shall not include
Sublessee's cost associated with furniture, telecommunications equipment and
trade fixtures. The amortization of these costs will be included as Additional
Rent. Further, in the event that Sublessee in [sic] sold or acquired by another
corporation or business entity so that it is no longer an Affiliate of
Sublessor, these amounts will not constitute Rental but rather they will be
deemed to be a payback of unamortized improvements.
6. Expansion Option. Should Sublessee desire to expand the Net Rentable
Area subleased hereunder, Sublessee shall notify Sublessor in writing of its
request for expansion. Sublessor will approve such expansion provided that
additional space is available to Sublessor, may be subleased under the Lease
and Sublessee agrees to pay for such expansion space a Base Rent of $9.50 plus
its then current Additional Rent for the Subleased Premises. However if
Sublessor has a bona fide third party offer for the expansion space requested,
Sublessee agrees to meet that offer or release such space.
7. Services. As it relates to services provided by the Landlord, it is
understood and agreed that Sublessor will not directly provide any services to
Sublessee, but rather that Sublessor will make available to Sublessee on the
same basis as to Sublessor all services provided by Landlord to Sublessor.
Sublessee may communicate with Landlord for the provision of such services.
Sublessee shall also have the use of Sublessor's cafeteria, executive
dining rooms, lounges, fitness center, and meeting rooms located on floor 5 of
the Building, together with the 200 seat auditorium located on floor 2. Use of
these facilities will be provided on an "as available" basis at no cost to
Sublessee except for Sublessee's variable cost so long as such additional
facilities are under the control of Sublessor.
-2-
<PAGE> 3
8. Shared Services. It is anticipated as part of this Agreement that
the parties will enter into a separate Shared Services Agreement to set forth
their understanding of services to be provided by Sublessor to Sublessee as to
the Security system, Print/Copy center, Mail Room/Distribution, and UPS and
Redundant HVAC System.
9. Parking. Sublessor agrees to furnish Sublessee ten (10) executive or
reserved Parking Spaces located in the TGPL Parking Area of the Garage and
unreserved parking spaces as available for Sublessee's employees for the
parking of automobiles in the Garage pursuant to the terms of the Lease at no
charge to Sublessee's employees. Parking space will be provided to Sublessee's
employees at no charge for as long as Sublessor provides parking at no charge
to its own employees.
10. Compliance With Lease. A conformed copy of the Lease and any
amendments thereto are attached hereto as Exhibit "B" and Sublessee agrees to
comply with the terms thereof the same as if it were the "Tenant" thereunder,
insofar as the terms of the Lease are not inconsistent herewith. Terms used
herein which are defined in the Lease, unless otherwise defined herein or
unless the context otherwise requires, shall have the same meaning and such
terms are incorporated herein by reference.
11. Repairs. To the extent that the same are not the responsibility of
the Landlord, repairs are to be made at the Sublessee's expense. Sublessee
agrees to keep the Subleased Premises in good repair, ordinary wear and tear
excepted, and, at the expiration of the term, to remove its goods and effects
and peaceably yield up the Subleased Premises to the Sublessor in as good
condition as when delivered to the Sublessee, ordinary wear and tear, damage by
fire, the elements, act of the public enemy, or casualty excepted. All notices
to quit or vacate are hereby expressly waived, any law, usage or custom to the
contrary notwithstanding.
12. Improvements. Except for the initial improvements for the Subleased
Premises which are detailed in the Build-Out Plan attached as Exhibit C, and
non-structural, non-mechanical day-to-day improvements such as moving work
stations and subject to the terms of the Lease, no alteration, addition or
improvement to the Subleased Premises shall be made by the Sublessee without
the written consent of Sublessor and Landlord. Sublessor will make reasonable
efforts to assist and cooperate with Sublessee in its efforts to obtain
Landlord's consent. Except for trade fixtures, alterations, additions or
improvements related to the Sublessee's Technical Assistance Center which may
be removed at Sublessee's sole cost and expense, any alteration, addition or
improvement made by the Sublessee after such consent shall have been given, and
any fixtures installed as part thereof, shall, at the Sublessor's option,
become the property of the Sublessor upon the expiration or other sooner
termination of this Agreement; provided, however, that the Sublessor shall
have the right to require the Sublessee to
-3-
<PAGE> 4
remove such fixtures, at the Sublessee's Cost, upon such termination of this
Agreement. Notwithstanding the above, if Landlord does not require the removal
of such fixtures, Sublessor will not require the removal of such fixtures.
13. Sale of Sublessee. It is understood and agreed that if fifty percent or
more of Sublessee is sold to or acquired by another corporation or business
entity so that it is no longer an Affiliate of Sublessor, Sublessee agrees to
comply with the Lease including full payment of Rental, Additional Rent,
expenses and any other amounts due as required by the Lease as if Sublessee were
"Tenant" under the Lease for that portion of said premises subleased to
Sublessee.
14. Sublessee Indemnity. The Sublessor shall not be responsible for any
defect or change of condition in said Subleased Premises, nor for any damage
thereto, nor to any person, nor to goods or things contained therein due to any
cause whatsoever, and the Sublessee will defend, indemnify and hold harmless the
Sublessor from any claims, demands and actions arising in connection with
Sublessee's use of or activities in connection with the Subleased Premises, or
the use by any person occupying said Subleased Premises during the term hereof,
or by reason of any breach or non-performance of any covenant herein, or the
violation of any law or regulation by the Sublessee.
15. Sublessor Indemnity. Sublessor will defend, indemnify and hold harmless
the Sublessee from any claims, demands and actions arising in connection with
Sublessor's use of, or arising out of any activities by Sublessor in the
Subleased Premises, or by reason of any breach or nonperformance by Sublessor of
any covenant herein, or the violation of any law or regulation by the Sublessor.
16. Entire Agreement. This Agreement, together with any Exhibits attached
hereto and made a part hereof, contain and embody the entire agreement of the
parties hereto and no representations, inducements or other agreements, or
otherwise between the parties not contained and embodied in said Agreement and
exhibits, shall be of any force and effect, and the same may not be modified,
changed Or terminated in whole or in part in any manner other than by an
agreement in writing duly signed by all parties hereto. Sublessor will use its
best efforts to cause the Landlord under the Lease to perform its obligations
under the Lease. Where Sublessor is obligated to perform under the Lease as
Tenant, Sublessee under this Agreement shall so perform. Additionally, Sublessee
shall be bound to comply with all terms of the Lease which Sublessor is
obligated to comply with as Tenant under the Lease. Sublessee acknowledges that
it has no right or interest greater than that possessed by Sublessor as Tenant
under the Lease.
17. Default and Assignment. The parties hereto agree that any event of
default by Sublessee under the Lease shall be an event of default hereunder
entitling Sublessor to terminate this Agreement. Sublessee covenants and agrees
that it will not assign
-4-
<PAGE> 5
this Agreement or any interest in it or sublet the premises or any part of them
or allow any person to occupy or use the premises without the written consent
of the Sublessor, and the written consent of the Landlord. No assignment or
subletting shall relieve Sublessee from its duty to perform fully all of the
covenants and conditions set forth in this Agreement.
18. Insurance. Sublessee hereby agrees, at its sole cost and expense,
during the term of this Agreement to maintain in full force and effect
insurance coverages in form and substance as required of Tenant pursuant to the
terms and conditions contained in the Lease. A satisfactory certificate(s) of
insurance shall be delivered to Sublessor and Landlord.
19. Headings. The headings in this Agreement are for reference only and do
not expand or limit the terms agreed to by the parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and sealed by their respective representatives, thereunto duly
authorized, as of the day and year first above written.
"SUBLESSOR"
TRANSCONTINENTAL GAS PIPE LINE CORPORATION
A ____________________________ Corporation
ATTEST:
By: /s/ CUBA WADDLINGTON, JR.
- --------------------------------- -----------------------------------
_______________________ Secretary Senior Vice President and General
Manager
"SUBLESSEE"
WILLIAMS TELECOMMUNICATIONS SYSTEMS,
INC.
A Delaware Corporation
ATTEST:
By: [ILLEGIBLE]
_________________________________ ______________________________________
_______________________ Secretary President
-5-
<PAGE> 6
STATE OF _______________ )
) ss.
County of ______________ )
Before me a Notary Public in and for said County and State, on this
_____ day of _____________, 199__, personally appeared ____________________,
to me known to be the identical person who subscribed the name of
TRANSCONTINENTAL GAS PIPE LINE CORPORATION, a _____________ corporation,
thereof to the foregoing instrument as its ______ President, and acknowledged
to me that he/she executed the same as his/her free and voluntary act and deed
and as the free and voluntary act and deed of such corporation, for the uses
and purposes therein set forth.
____________________________
Notary Public
My Commission expires:
_____________________
STATE OF _______________ )
) ss.
County of ______________ )
Before me a Notary Public in and for said County and State, on this
_____ day of _____________, 199__, personally appeared ____________________,
to me known to be the identical person who subscribed the name of
WILLIAMS TELECOMMUNICATIONS SYSTEMS, INC., a Delaware corporation,
thereof to the foregoing instrument as its ______ President, and acknowledged
to me that he/she executed the same as his/her free and voluntary act and deed
and as the free and voluntary act and deed of such corporation, for the uses
and purposes therein set forth.
____________________________
Notary Public
My Commission expires:
_____________________
-6-
<PAGE> 7
"EXHIBIT A"
PREMISES
24th Floor 21,849 N.R.A.
25th Floor 22,784 N.R.A.
26th Floor 22,682 N.R.A.
27th Floor 22,682 N.R.A.
2nd Floor 9,148 N.R.A.
3rd Floor 28,293 N.R.A.
TOTAL 127,439 N.R.A.
<PAGE> 8
FIRST AMENDMENT TO SUBLEASE AGREEMENT
THIS FIRST AMENDMENT TO SUBLEASE AGREEMENT (this "First Amendment") is made
effective this 1st day of March, 1998 (the "Effective Date"), by and between
TRANSCONTINENTAL GAS PIPE LINE CORPORATION, a Delaware corporation ("Landlord")
and WILLIAMS COMMUNICATIONS SOLUTIONS, LLC., a Delaware limited liability
company (formerly WILLIAMS TELECOMMUNICATIONS SYSTEMS, INC., a Delaware
corporation), ("Tenant").
W I T N E S S E T H:
WHEREAS, Post Oak/Alabama Partnership, as landlord ("Post Oak" and Landlord,
as Tenant, entered into that certain Lease Agreement dated August 5, 1981 (as
amended the "Prime Lease"), whereby Landlord leased certain space in the
Building (as defined in the Prime Lease) from Post Oak, all as more particularly
described in the Prime Lease; and
WHEREAS, Landlord and Tenant entered into that certain Sublease Agreement
(the "Sublease") whereby Landlord subleased to Tenant approximately 127,439
square feet of Net Rentable Area in the Building, as more fully described in the
Sublease;
WHEREAS, Tenant has leased an additional 3,645 square feet of Net Rentable
Area located on Level 22 and Landlord and Tenant desire to amend the Sublease
effective as of June 1, 1997 to reflect an increase in (i) the Demised Premises,
and (ii) the Annual Basic Rent and Monthly Base Rent; and
WHEREAS, Tenant has leased an additional 22,682 square feet of Net Rentable
Area located on Level 28 and Landlord and Tenant desire to amend the Sublease
effective as of September 1, 1997 to reflect an increase in (i) the Demised
Premises, and (ii) the Annual Basic Rent and Monthly Base Rent;
WHEREAS, Tenant has requested to lease an additional 22,658 square feet of
Net Rentable Area located on Level 29 and Landlord and Tenant desire to amend
the Sublease effective as of March 1, 1998 to reflect an increase in (i) the
Demised Premises, and (ii) the Annual Rent and Monthly Base Rent; and
WHEREAS, Tenant has requested to lease an additional 22,298 square feet of
Net Rentable Area located on Level 31 and Landlord and Tenant desire to amend
the Sublease effective March 1, 1998 to reflect an increase in (i) the Demised
Premises, and (ii) the Annual Basic Rent and Monthly Base Rent;
NOW, THEREFORE, in consideration of Ten and No/100 Dollars ($10.00) and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
<PAGE> 9
1. The above recitals are incorporated herein by reference.
2. As defined in Paragraph 1 of the Sublease, the Demised Premises shall
increase from 127,439 square feet of Net Rentable Area to (a) 131,084 square
feet of Net Rentable Area as of June 1, 1997 (Level 22), (b) 153,766 square Feet
of Net Rentable Area as of September 1, 1997 (addition of Level 28), (c) 176,424
square feet of Net Rentable Area as of March 1, 1998 (addition of Level 29
space), and (d) 198,722 square feet of Net Rentable Area as of March 1, 1998
(addition of Level 31 space).
3. As defined in Paragraph 3 of the Sublease, Sublessee agrees to pay Rent
as follows:
(a) 127,439 square feet of Net Rentable Area @ $9.50 per square foot less an
abatement for 12,000 square feet of Net Rentable Area @ $9.50 per square foot
which equals an annual Rent of $1,096,670.5 or $91,389.21 per month. This Rent
shall continue for the first five (5) lease years.
(b) Effective June 1, 1997, for an additional 3,645 square feet of Net
Rentable Area located on Level 22 @ $15.00 per square foot which equals an
additional annual Rent of $54,675 or $4,556.25 per month.
(c) Effective September 1, 1997, for an additional 22,682 square feet of net
Rentable Area located on Level 28 @ $9.50 per square foot which equals an
additional annual Rent of $215,479 or $17,956.58 per month.
(d) Effective March 1, 1998, for an additional 22,658 square feet of Net
Rentable Area located on Level 29 @ $15.00 per square foot which equals an
additional annual Rent of $339,870 or $28,322.50 per month
(e) At such time as beneficial occupancy of the space occurs, for an
additional 22,298 square feet of Net Rentable Area located on Level 31 @
$15.00 per square foot which equals an additional annual Rent of $334,470 or
$27,872.50 per month.
4. As defined in Paragraph 4 of the Sublease, Sublessee agrees to pay
Additional Rent for all additional Net Rentable Areas in the Demised Premises.
5. The total square feet of Net Rentable Area in the Demised Premises shall
increase from 127,439 square feet of Net Rentable Area to 198,722 square feet of
Net Rentable Area.
6. Except as expressly amended hereby, all other items and provisions of the
Sublease remain unchanged and continue to be in full force and effect and are
hereby ratified and confirmed by Landlord and Tenant and the execution of this
amendment shall in no event be deemed to constitute a waiver of any right or
claim of either Landlord or Tenant under or by virtue of the Sublease.
-2-
<PAGE> 10
7. This First Amendment may be executed in multiple counterparts, and by
the parties hereto on separate counterparts, each of which shall be deemed to
be an original, and all of which together shall constitute but one agreement.
8. The terms of this First Amendment shall control over any conflicts
between the terms of the Sublease and this First Amendment.
9. This First Amendment sets forth all covenants, agreements and
understandings between Landlord and Tenant with respect to the subject matter
hereof and there are no other covenants, conditions or understandings, either
written or oral, between the parties hereto except as set forth in the Sublease
and this First Amendment.
10. Tenant warrants and represents unto Landlord that (i) Tenant is a
duly organized and existing legal entity, in good standing in the State of
Texas, (ii) Tenant has full right and authority to execute, deliver and perform
this Second Amendment; (iii) the person executing this Second Amendment was
authorized to do so; and (iv) upon request of Landlord, such person will
deliver to Landlord satisfactory evidence of his or her authority to execute
this First Amendment on behalf of Tenant.
11. This Second Amendment shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns.
IN WITNESS WHEREOF, Landlord and Tenant have duly caused this Amendment to
be executed by their respective representatives, thereunto duly authorized, as
of the day and year first above written.
"Landlord"
ATTEST: TRANSCONTINENTAL GAS PIPE LINE CORPORATION,
a Delaware corporation
- ---------------------------- By: /s/ CUBA WADLINGTON JR.
Secretary ------------------------------------------
- ------------------ Printed: CUBA WADLINGTON JR.
-------------------------------------
Title: Senior Vice President & General Manager
---------------------------------------
Date: 3-13-98
---------------------------------------
-3-
<PAGE> 11
"Tenant"
WILLIAMS COMMUNICATIONS SOLUTIONS, LLC
ATTEST: A Delaware limited liability company
STEVEN E. LINDSTROM By: /s/ B. T. HOPKINSON
- ------------------------------- -------------------------------------
Secretary Printed: B. T. Hopkinson
---------------------- ---------------------------------
Title: V.P. and Chief Financial Officer
-----------------------------------
Date: March 13, 1998
-----------------------------------
<PAGE> 12
STATE OF TEXAS }
} ss.
COUNTY OF HARRIS }
Before me, a Notary Public in and for said County and State, on this 13th
day of March, 1998, personally appeared Cuba Wadlington, Jr., to me known to be
the identical person who subscribed the name of TRANSCONTINENTAL GAS PIPELINE
CORPORATION, a Delaware corporation, thereof to the foregoing instrument as its
______ President and acknowledged to me that he/she executed the same as his/her
free and voluntary act and deed and as the free and voluntary act and deed of
such corporation, for the uses and purposes therein set forth.
/s/ HELEN M. DWORSKY
--------------------------------------
Notary Public
[SEAL]
My Commission Expires:
03-24-02
- -----------------------------
STATE OF TEXAS }
} ss.
COUNTY OF HARRIS }
Before me, a Notary Public in and for said County and State, on this 13th
day of March, 1998, personally appeared B. T. Hopkinson, to me known to be the
identical person who subscribed the name of Williams Communications Solutions,
LLC, a Delaware limited liability company, thereof to the foregoing instrument
as its ______ President, and acknowledged to me that he/she executed the same as
his/her free and voluntary act and deed and as the free and voluntary act and
deed of such corporation, for the uses and purposes therein set forth.
[ILLEGIBLE SIGNATURE]
--------------------------------------
Notary Public
My Commission Expires:
07-20-99
- -----------------------------
-5-
<PAGE> 1
Redacted portions have been marked with asterisks (****). Confidential treatment
has been requested for the redacted portions. The confidential redacted portions
have been filed separately with the Securities and Exchange Commission.
CONFIDENTIAL TREATMENT
EXHIBIT 10.38
SYSTEM USE AND
SERVICE AGREEMENT
BETWEEN
WILTEL, INC. ("WILTEL")
AND
VYVX, INC. ("VYVX")
EFFECTIVE
AS OF
JANUARY 1, 1994
EXECUTION COPY
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Section 1 DEFINITIONS AND EXHIBITS....................................................1
Section 1.01 Definitions...................................................1
Section 1.02 Exhibits......................................................9
Section 1.03 Section References...........................................10
Section 2 PURCHASE AND USE OF THE WILTEL NETWORK.....................................10
Section 2.01 Network Purchase.............................................10
Section 2.02 Right to Use.................................................10
Section 2.03 Additional Purchase Price................................... 10
Section 2.04 Transition...................................................11
Section 2.05 Use by WilTel................................................11
Section 2.06 Rights-of-way................................................12
Section 2.07 Additional Vyvx Equipment....................................12
Section 2.08 WilTel Added Equipment.......................................14
Section 2.09 Replacement and Expansion of the WilTel Network..............14
Section 2.10 Addition of Drop Points......................................15
Section 2.11 Access.......................................................16
Section 2.12 Salvage Rights...............................................16
Section 3 SERVICES AND SERVICE COSTS.................................................17
Section 3.01 Agreement to Provide Services and Pay Service Costs..........17
Section 3.02 Description of Services......................................17
</TABLE>
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<TABLE>
<S> <C> <C>
Section 3.03 Payment of Service Costs.....................................18
Section 3.04 Rights Transfer Costs........................................18
Section 3.05 Shared Project Costs.........................................19
Section 3.06 Provisioning of Off-Network Services.........................20
Section 3.07 Commencement of Services and Term of Agreement...............20
Section 4 RISK OF LOSS, INDEMNIFICATION, AND
USE OF THE VYVX PROPERTY.......................................................21
Section 4.01 Risk of Loss and WilTel Liability............................21
Section 4.02 Vyvx Indemnification.........................................21
Section 4.03 WilTel Indemnification.......................................22
Section 4.04 Use of the Vyvx Property.....................................22
Section 5 INSPECTION OF FACILITIES AND AUDITS.......................................23
Section 5.01 Inspection of Equipment......................................23
Section 5.02 Audits.......................................................23
Section 5.03 Cooperation of the Parties...................................23
Section 6 BANKRUPTCY.................................................................24
Section 7 TAXES......................................................................25
Section 8 REGULATION.................................................................26
Section 9 OVERDUE PAYMENT CHARGES....................................................26
Section 10 MISCELLANEOUS PROVISIONS...................................................27
Section 10.01 Limitation of Liability .....................................27
Section 10.02 Successors in Interest; Transfers ...........................28
Section 10.03 Resolution of Disputes ......................................29
</TABLE>
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<TABLE>
<S> <C> <C>
Section 10.04 Force Majeure ...............................................29
Section 10.05 Change in Technology ........................................30
Section 10.06 Payments ....................................................30
Section 10.07 Partial Network Operations ..................................30
Section 10.08 Disclosure ..................................................30
Section 10.09 Authority and Approval ......................................32
Section 10.10 Governing Law ...............................................33
Section 10.11 Execution in Counterparts ...................................33
Section 10.12 Integration; Amendments .....................................33
Section 10.13 Severability ................................................33
Section 10.14 Waivers .....................................................33
Section 10.15 Indemnification of Third Parties by WilTel...................34
Section 10.16 Headings ....................................................34
Section 10.17 Rights and Remedies Cumulative ..............................34
Section 10.18 Notices .....................................................34
Section 10.19 WilTel Abandonment of Service ...............................34
Section 10.20 Invoices and Access to Books and Records.....................36
</TABLE>
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LIST OF EXHIBITS
EXHIBIT A WILTEL NETWORK
EXHIBIT B VYVX EQUIPMENT
EXHIBIT C VYVX FIBER
EXHIBIT D SYSTEM SEGMENTS
EXHIBIT E SYSTEM SERVICE STATEMENT
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<PAGE> 6
SYSTEM USE AND SERVICE AGREEMENT
AGREEMENT executed this ___ day of _____________ 199_ and effective as
of January 1, 1994, by and between WilTel, Inc. ("WilTel"), a Delaware
corporation having its principal place of business at One Williams Center,
Tulsa, Oklahoma 74172; and Vyvx, Inc. ("Vyvx"), a Delaware corporation having
its principal place of business at Tulsa Union Depot, 111 East First Street,
Tulsa, Oklahoma 74103.
W I T N E S S E T H:
WHEREAS, WilTel sold a fiber strand and equipment to Vyvx effective as
of January 1, 1994, pursuant to an agreement (short form) as of that date (the
"Initial Agreement"); and
WHEREAS, WilTel and Vyvx acknowledge their continuing obligations to
each other under the Initial Agreement, but desire to further define their
respective rights and obligations thereunder and thereby permanently amend,
restate, and supersede in its entirety the Initial Agreement as it relates to
future rights and obligations of the Parties;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, WilTel and Vyvx, intending legally to be bound, agree as
follows:
SECTION 1
DEFINITIONS AND EXHIBITS
Section 1.01. Definitions. Unless otherwise defined herein, the terms
used in this Agreement will have their normal or common meanings. In addition,
the following terms will have the following meanings for the purposes of this
Agreement including Exhibits A through E:
(a) "Additional Purchase Price" is as defined in Section 2.04.
(b) "Additional Purchase Price Credits" is as defined in Section 2.04.
(c) "Additional Service Costs" is as defined in Section 3.03.
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<PAGE> 7
(d) "Additional Vyvx Fiber" is as defined in Section 2.09.
(e) "Affiliate" of Vyvx or WilTel, as the case may be, means any
person which directly or indirectly through one or more intermediaries controls,
or is controlled by, or is under common control with, such person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of any person, whether through the ownership of
securities, by contract, or otherwise. The term "person" means an individual,
partnership, joint venture, corporation, trust, unincorporated organization or a
government or any department or agency thereof.
(f) "Agreement" means this System Use and Service Agreement, of which
this Section 1.01 is a part, including the attached Exhibits.
(g) "Change of Control" means (i) any transaction in which WilTel, or
any direct or indirect parent corporation of WilTel, is, directly or indirectly,
acquired by, merged into or consolidated with, or reorganized into, another
corporation or other legal entity, and as a result of such acquisition, merger,
consolidation or reorganization less than a majority of the combined voting
power of the then-outstanding securities of WilTel, or any direct or indirect
parent corporation of WilTel, as the case may be, immediately after the
transaction are held in the aggregate by the persons holding such securities
immediately prior to the event; or (ii) any transaction in which WilTel, or any
direct or indirect parent corporation of WilTel, sells or otherwise transfers
all or substantially all of its assets to any other corporation or other person,
if less than a majority of the combined voting power of the then-outstanding
securities of such other person is held in the aggregate by the holders of
voting stock of WilTel, or any direct or indirect parent corporation of WilTel,
as the case may be; provided, however, that any such transactions will not
include a transaction where the other party to the transaction is a WilTel
Affiliate prior to the transaction in question.
(h) "Collocate Agreement" means the Collocate Agreement between Vyvx
and WilTel executed concurrently herewith whereby Vyvx may locate certain of its
own property inside a POP.
(i) "Common Facilities" means the common mechanical, electrical, and
environmental equipment, located in a Regenerator Location or POP, maintained by
WilTel as well as the building structures and areas surrounding them, and
includes, but is not limited to, batteries, generators, rectifiers, monitoring
and control equipment, and the environmental alarm system. Common Facilities
will include that equipment which provides, or contributes to, the environmental
control of the
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<PAGE> 8
space and the provision of AC or DC power, but specifically does not include
either Parties' fiber optic transmission system equipment or equipment
specifically and uniquely deployed for the purpose of monitoring, controlling
and operating either Parties' fiber optic transmission system equipment.
(j) "Common Facilities Costs" means the Costs incurred by WilTel
associated with the addition of capital assets to the Common Facilities on the
WilTel Network in order to accommodate Vyvx's request to add Vyvx Equipment
pursuant to Section 2.07 hereof or WilTel's addition of electronics pursuant to
Section 2.08 hereof.
(k) "Confidential Information" means (i) all documents, materials and
other information (whether or not reduced to tangible form), including, but not
limited to, information transmitted over the WilTel Network, which either Party
acquires from the other Party, and which the receiving Party knows, or
reasonably should know, are confidential and proprietary; or (ii) all documents
and materials which either Party provides to the other Party and which the
disclosing Party clearly identifies in writing on such documents or materials as
being "Proprietary" or "Confidential". "Confidential Information" will not
include information generally employed by the communications industry which is
in the public domain or information which is independently developed, rightfully
acquired from third parties or approved for disclosure by the prior written
authorization of the disclosing Party.
(l) "Costs"
(i) WilTel's actual costs reasonably incurred and directly
attributable to the performance of a Project on the WilTel Network defined as
the sum of the following:
(A) "Direct Labor Costs" means the actual direct cost
(i.e., wages or salaries) of engineering, craft and immediate craft supervision
as specifically applicable to the performance of the Project as recorded through
WilTel's positive labor time reporting system, and will not include any WilTel
mark-up, margin or profit.
(B) "Direct Material Costs" means the actual invoiced cost
or material transfer cost (including freight costs) for material used in
performance of the Project and will not include any WilTel mark-up, margin or
profit.
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<PAGE> 9
(C) "Overhead" means the overhead allocation on Direct
Labor Costs in accordance with the established accounting procedure used by
WilTel which it utilizes in billing third parties for Reimbursable Projects.
(D) "Subcontractor Payments" means the actual amounts paid
by WilTel to subcontractors for the performance of work included in a Project
and will not include any WilTel mark-up, margin or profit.
(ii) For the purposes of calculating the Costs, all trade
discounts, rebates and refunds and all returns from the sale of surplus
materials and supplies, will be deducted from the cost of Direct Material
described above.
(iii) Costs will not include any expenses or costs incurred that
are due to the negligence of WilTel, any WilTel subcontractor, or anyone
directly or indirectly employed by any of them, or for whose acts any of them
are liable.
(m) "Day" or "day" means any part or fraction of a calendar day
commencing at twelve (12) -------------- o'clock midnight, local time.
(n) "Demand Maintenance" means all corrective maintenance actions to
be performed by WilTel pursuant to this Agreement necessitated by indications,
either electrically, mechanically, or optically, that corrective measures are
clearly required in order to restore the affected system or subsystem to normal
operating condition, including but not limited to cable restoration, battery
failure, HVAC failure, etc.; provided, however, Demand Maintenance does not mean
improvements to Vyvx Property, except incidental improvements.
(o) "Demarcation Point" means a Jack within a POP, Fiber Distribution
Panel within a Regenerator Location and elsewhere at a Drop Point.
(p) "Drop Point" means the point other than at a Fiber Distribution
Panel where a Vyvx Fiber is terminated on the WilTel Network. Each Drop Point
will be at a Splice Location.
(q) "DS3" means a digital signal having a bit rate of 44.736 Mb/s in
accordance with ANSI Standard T1.102 (formerly AT&T Compatibility Bulletin 119
dated October 1979) and Technical
Page 4 of 37
<PAGE> 10
Reference PUB 54014. As applied to the computation of the Vyvx Percentage, the
number of DS3s will be expressed as the total manufacturer's designed capacity
(including protection) of the installed equipment, whether or not fully
operational to the maximum designed capacity.
(r) "DS3 Mile" is a measure of optical transmitting capacity equal to
the transmission of (or ability to transmit) one (1) DS3 signal over a distance
of one (1) mile.
(s) "Expansion Fee" is the amount calculated by multiplying the Vyvx
Percentage by all Common Facilities Costs.
(t) "Expiration Date" is as defined in Section 3.08.
(u) "Fiber Distribution Panel" or "FDP" means the fiber distribution
panel, fiber organizing and storage cabinet, or such other similar demarcation
point.
(v) "Force Majeure" has the meaning set forth in Section 10.04 hereof.
(w) "GDP Index" means the "Fixed-Weighted Price Index for the Gross
Domestic Product, 1987 Weights" published by the United States Department of
Commerce.
(x) "Hurdle" is as defined in Section 3.06.
(y) "Inflation Adjustment" is as defined in Section 3.03.
(z) "Initial Service Costs" is as defined in Section 3.03.
(aa) "Jack" means a DS3 coaxial electrical interconnection point on a
DSX-3 cross-connect panel.
(ab) "Month" or "month" means a calendar month.
(ac) "Off-network Services" is as defined in Section 3.07.
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<PAGE> 11
(ad) "Other Maintenance" means any maintenance requested by Vyvx to be
performed by WilTel which is not Routine Maintenance or Demand Maintenance but
that which Vyvx has deemed necessary for the proper operation of the Vyvx
Property, including, but not limited to, addition of a Drop Point, splicing of
Vyvx Fiber (excluding repair in a Demand Maintenance situation or reconnection
associated with a cable relocation) or any other manipulation of the Vyvx Fiber,
maintenance, assembly or disassembly of Vyvx Equipment, installation or removal
of Vyvx Equipment, wiring of installed Vyvx Equipment, testing and acceptance of
Vyvx Equipment, trouble resolution of installed systems or rearrangement and
splicing of fiber jumpers. Vyvx will provide WilTel a written request for Other
Maintenance along with a description of the maintenance requested and the
desired time frame for completion.
(ae) "Other Networks" means fiber-optic communications systems on the
WilTel Network, other than the Vyvx Property, owned by parties other than
WilTel.
(af) "Party" or "Parties" means either WilTel or Vyvx or both, as the
context requires.
(ag) "POP" means a WilTel "POP" or "Point of Presence" as that term is
used by WilTel to describe certain of its facilities.
(ah) "Project" means only the following described projects for which
Vyvx may be required to pay Costs in addition to the annual Service Costs:
(i) an acquisition of ROW's under Section 2.06; or
(ii) a Common Facility expansion required under Section 2.07 or
Section 2.08 in which an Expansion Fee is charged; or
(iii) a Network Replacement or WilTel Expansion under Section
2.09; or
(iv) Rights Transfer Costs under Section 3.04; or
(v) a Shared Project as described in Section 3.05; or
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<PAGE> 12
(vi) provisioning of Off-network Services under Section 3.06; or
(vii) Other Maintenance in accordance with Section 2.07 and
Section 1.g. of the System Service Statement.
The above-defined Projects are intended to include all projects for which Vyvx
is required to pay Costs, but does not set forth all circumstances in which Vyvx
is required to make other payments (other than Costs) under this Agreement.
(ai) "Reconfiguration Date" is as defined in Section 2.04.
(aj) "Regenerator Location" means a controlled environmental vault,
regenerator hut or other facility other than a POP located on the WilTel Network
where optical communications signals are transmitted.
(ak) "Reimbursable Projects" means those projects, whether requested by
a third party or necessitated by the negligence or malfeasance of a third party
which the Costs of said project may be potentially reimbursable, either in whole
or in part, by such third party.
(al) "Renewal Term" is as defined in Section 3.07.
(am) "Rights Transfer" is as defined in Section 2.02.
(an) "Rights Transfer Costs" is as defined in Section 3.04.
(ao) "Routine Maintenance" means all routine prevention and routine
maintenance actions prescribed by either the original equipment manufacturer or
industry practice including, but not limited to, those actions that involve the
visual inspection and recording of meter readings on power equipment and other
ancillary support equipment, maintenance items necessary to the proper
operation, service and maintenance of a fiber optic transmission system, cable
locates, surveillance and cable relocates (except for cable relocates that
qualify as Shared Projects under Section 3.05 or are requested by Vyvx as Other
Maintenance).
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(ap) "ROW" means a right-of-way, right-of-occupancy, right-of-use,
easement, license or similar right obtained by WilTel over the WilTel Routes.
(aq) "Service Costs" means the Service Costs, including any Additional
Service Costs, for a Service Period charged to Vyvx by WilTel for the services
rendered by WilTel pursuant to Section 3 of this Agreement and which is
calculated in accordance with the provisions of Section 3.03.
(ar) "Splice Location" means a point where cable ends are joined
together.
(as) "System Service Statement" means the "System Service Statement"
attached as Exhibit E.
(at) "V & H" means on a Vertical and Horizontal basis.
(au) "VGE" means Voice Grade Equivalent.
(av) "Video Use" is as defined in Section 4.04.
(aw) "Vyvx Contact" means the single point of contact(s) staffed
twenty-four (24) hours a day with a toll free telephone number identified in
Attachment 2 to the System Service Statement, to whom all notifications by
WilTel will be given.
(ax) "Vyvx Equipment" means the fiber optic transmission system
equipment identified on Exhibit B and all other articles of property hereafter
installed by Vyvx which is utilized by Vyvx to provide optical transmission over
the Vyvx Fiber.
(ay) "Vyvx Fiber" means the single mode optic fiber strand owned by
Vyvx contained in the WilTel Cable as solely identified in Exhibit C.
(az) "Vyvx Percentage" means the percentage derived by:
(i) as applied to the Vyvx Fiber, and all fiber related Costs,
dividing one by the number of total fibers (excluding fibers used for protect
channels) in the WilTel Cable along the applicable segment of the WilTel
Network, and multiplying the result by 100;
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(ii) as applied to Vyvx Equipment and all equipment-related
Costs, dividing the number of DS3s allocable to the Vyvx Equipment by the total
number of DS3s (excluding protect channels) on the WilTel Network at the
relevant Regenerator Location or POP and multiplying the result by 100.
(ba) "Vyvx Property" means the communications property on the WilTel
Network comprised entirely and only of the Vyvx Fiber and Vyvx Equipment.
(bb) "WilTel Cable" means the multifiber single mode optical fiber
cable located on the WilTel Route linking Regenerator Locations and POPs which
contains the Vyvx Fiber and fibers owned by WilTel and owners of Other Networks
and which specifically includes, but is not limited to, the sheath, conduit,
manholes/hand holes, splice closures, signage, splice vaults, protection
devices, markers and bounds associated with such cable.
(bc) "WilTel Expansion" is as defined in Section 2.09.
(bd) "WilTel Network" means the fiber-optic transmission systems,
including the Common Facilities, linked by the WilTel Cable, including the Vyvx
Property and all Other Networks constructed or managed by WilTel, which are,
except for the Vyvx Property and all Other Networks, owned by WilTel. The WilTel
Network is graphically represented in Exhibit A hereto. The WilTel Network is
bounded by the Demarcation Points.
(be) "WilTel Route" means the course over which the WilTel Network
runs on the ROWs.
Section 1.02. Exhibits. All of the exhibits to this Agreement are
hereby incorporated by reference in this Agreement and will, together with this
Agreement, be deemed one and the same instrument.
Section 1.03. Section References. Unless otherwise indicated, all
"Section" references are to the applicable Sections of this Agreement.
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<PAGE> 15
SECTION 2
PURCHASE AND USE OF THE WILTEL NETWORK
Section 2.01 Network Purchase. Vyvx has purchased from WilTel and
WilTel has sold to Vyvx the fiber optic communication system which consist of
the Vyvx Equipment (as detailed in Exhibit B) and Vyvx Fiber (as detailed in
Exhibit C) along the routes described in Exhibit D. Except as provided by
Section 2.02, WilTel, by bill of sale to Vyvx, will deliver title to the Vyvx
Property on an "AS-IS, WHERE-IS" basis.
Section 2.02 Right to Use. Along any portion of any of the routes where
WilTel does not own fee title to the Vyvx property or where WilTel's contractual
obligations preclude a transfer of title, WilTel hereby assigns to Vyvx an
indefeasible right to use ("Rights Transfer") of the Vyvx Property which will
include all rights WilTel may legally and contractually transfer in the Vyvx
Property. Such Rights Transfer includes a proportionate assignment of purchase
options. If WilTel elects not to exercise any purchase option covering property
which includes any Vyvx Property at the end of a term of the contract, WilTel
will notify Vyvx in writing and by such written notice will assign to Vyvx such
purchase option in total.
****
Section 2.04. Transition. WilTel and Vyvx will each use its respective
best efforts to devise and implement by a date as soon as practical, but no
later than August 31, 1995 (the "Reconfiguration Date"), a plan of
reconfiguration that will place the telecommunications service requirements of
Vyvx on the Vyvx Property, or as otherwise provided by Section 2.05, in a manner
that
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<PAGE> 16
will not interrupt the services provided to other customers by either WilTel or
Vyvx. Through the Reconfiguration Date, Vyvx grants WilTel the right to use and
manage the Vyvx Property, and if WilTel is utilizing any of the Vyvx Property
for its own use, WilTel will provide to Vyvx, within WilTel's normal
provisioning interval provided to its customers with capacity over the WilTel
Network similar in total amount to Vyvx, the use of any of WilTel's property on
the WilTel Network in order to provide to Vyvx the telecommunications services
necessary for Vyvx's operations.
Section 2.05. Use by WilTel. On and after the Reconfiguration Date:
(a) Each Party will provide to the other the use of any spare capacity
such Party may have over either the WilTel Network or Vyvx Property, as the case
may be, **** the purpose of providing protection switching and
redundancy to the other Party's customers.
(b) Vyvx will provide to WilTel, at WilTel's request, the use of any
spare capacity Vyvx may have over the Vyvx Property at a rate of **** per V&H
VGE mile/month for the purpose of WilTel's resale on a short-term basis to its
customers.
(c) Each Party will provide to the other fifteen (15) days prior to
the beginning of each quarter commencing on or after the Reconfiguration Date a
forecast of its spare capacity for such quarter.
(d) Nothing herein is intended to imply an obligation on the part of
either Party to maintain any spare capacity.
(e) In order to provide diversity for both Vyvx and WilTel, one Party
may request the other to swap capacity over the other's Network for an equal
amount of capacity over other working systems or fibers along the same route
over the WilTel Network.
Section 2.06. Rights-of-Way. In the event any problem arises
concerning either the adequacy or validity of such ROW's or their termination,
WilTel will obtain all ROW's necessary to permit the continuous operation of the
WilTel Network over the WilTel Route or an alternate route which provides
connectivity to the same major POP locations; provided, however, that WilTel
will not have any obligation to Vyvx under this Section 2.06 to the extent that
such problem is due to Vyvx's violation of this Agreement or to Vyvx's
intentional or negligent act or omission. Vyvx will pay the Vyvx Percentage
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of all Costs (not otherwise included in Rights Transfer Costs) incurred by
WilTel in obtaining the necessary ROW's.
Section 2.07. Additional Vyvx Equipment.
(a) Vyvx may, by written notice, at any time, request WilTel to allow
installation of additional Vyvx Equipment or reconfiguration of its existing
Vyvx Equipment (the "Initial Notice"). Vyvx will be authorized to use any type
of equipment offered by any supplier, provided, however, that due to space
restrictions and compatibility requirements, the equipment must be fiber optic
transmission system equipment (i) which has been recently (within the previous
eighteen months) purchased, (ii) which is of the current generation of
technology commercially available, (iii) which is compatible with WilTel's
operation and maintenance procedures and with the available space, common
facilities, and other equipment maintained by WilTel on the WilTel Network at
the location(s) designated for the additional Vyvx Equipment and (iv) the use of
which will not cause interference to others, including WilTel, on the WilTel
Network. In the Initial Notice, Vyvx will provide WilTel with a scope of work
(including locations and estimated in-service dates) and other technical data
necessary for the replacement, removal and/or installation of the Vyvx
Equipment. Following receipt of Vyvx's Initial Notice, WilTel and Vyvx will
determine the Vyvx Percentage, the estimated Common Facilities Costs and other
estimated expenses associated with expanding the WilTel Network.
(b) WilTel, or any party designated by WilTel will perform all work
involved in installing additional Vyvx Equipment, including Common Facilities
work, if such work impacts Common Facilities. Otherwise, Vyvx may perform such
installation work itself or request WilTel to perform pursuant to a request for
Other Maintenance.
(c) If the Parties agree upon the design, the Vyvx Percentage and
Common Facilities Costs and other expenses associated with the addition of Vyvx
Equipment and the in-service dates, Vyvx may notify WilTel in writing of its
decision to add the additional Vyvx Equipment (the "Second Notice") according to
the agreed upon plan.
(d) If Vyvx decides that the plan to which WilTel will agree is not
adequate to meet its future needs, it may volunteer and WilTel will accept
payment of one hundred percent (100%) of any additional Common Facilities Costs
required to implement a Vyvx plan ("Vyvx Plan"), which Vyvx Plan must be
acceptable to WilTel. If the plan is not acceptable to WilTel, then the Parties
will utilize the Dispute Resolution procedures provided in Section 10.03.
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(e) Within a reasonable time period after receipt of the Second Notice
or Vyvx Plan by WilTel, WilTel will commence and perform the work to be provided
according to the agreed upon design pursuant to Section 2.07(c) hereof or the
Vyvx Plan.
(f) The Second Notice or Vyvx Plan must be received by WilTel within
sixty (60) days from when an agreed upon design is reached or rejected by Vyvx.
Upon receipt of the Second Notice by WilTel, Vyvx will become obligated to pay
the Expansion Fee; upon receipt of the Vyvx Plan by WilTel, Vyvx will become
obligated to pay its one hundred percent (100%) of the estimated Common
Facilities Costs. Vyvx will pay the Expansion Fee within thirty (30) days of
receipt of an invoice from WilTel setting forth the Expansion Fee.
(g) In the event WilTel incurs any Costs, other than Common Facilities
Costs, in connection with the installation of Vyvx Property pursuant to the
provisions of this Section 2.07, Vyvx will make payment of such Costs within
thirty (30) days of the date of mailing or dispatch to Vyvx of an invoice from
WilTel for such Costs.
(h) In connection with its work, WilTel will also return to Vyvx, at
Vyvx's cost, any Vyvx Property that is no longer required for the operation of
the Vyvx Network. WilTel will provide Vyvx with available documentation
describing the returned property. Nothing in the preceding sentence, however,
will impose on WilTel any obligation to disclose any information which WilTel is
obligated either by law or by contract not to disclose.
(i) WilTel will have no liability for any delay in the installation of
any equipment pursuant to this Section 2.07, or for any portion of such a delay,
which is attributable to a Force Majeure event or which is attributable to Vyvx,
an Affiliate of Vyvx, the employees, agents or servants of either of the
foregoing, any party with whom the preceding parties have contracted and any
other cause within the control of or for which responsibility rests with any of
the preceding parties.
(j) If WilTel begins using any Common Facilities or Vyvx Equipment
added pursuant to a Vyvx Plan, for itself or its customer's other than Vyvx,
WilTel will pay Vyvx an amount equal to the net book value of such space or
equipment as recorded on the books of Vyvx, less the Vyvx Percentage.
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Section 2.08. WilTel Added Equipment.
(a) WilTel may, at its discretion, add equipment on the WilTel
Network. If Common Facilities Costs are to be incurred, WilTel will notify Vyvx
in writing of the estimated Common Facilities Costs, the Vyvx Percentage and the
estimated Expansion Fee sufficiently in advance of WilTel's plan to add
equipment so that Vyvx may determine whether it desires to add or reconfigure
equipment in conjunction with WilTel's intended plan.
(b) Vyvx and WilTel agree to cooperate in the performance of any
required Common Facilities work, including relocating and rearranging property,
in order to best utilize space and minimize cost.
(c) Vyvx will pay the Expansion Fee within thirty (30) days of receipt
of an invoice therefor.
(d) The payment by Vyvx required in this Section will not grant,
provide or otherwise transfer to Vyvx any ownership interest in any of the
Common Facilities, equipment or electronics installed by WilTel.
Section 2.09. Replacement and Expansion of the WilTel Network.
(a) Except as provided in Sections 2.09(a) and (b), if WilTel, or its
Affiliates, replaces any portion of the existing WilTel Network (e.g.,
substitution of last-mile facilities or replacement of the fiber optic cable
along the same or similar routes) (a "Network Replacement"), or expands the
WilTel Network (a "WilTel Expansion"), whether through installation of
additional fiber optic cable, purchasing a partial interest or right of use in a
fiber optic cable or multiple fiber optic strands or through acquisition of, or
merger with, a company with additional on-net fiber, WilTel will sell to Vyvx
one fiber strand (an "Additional Vyvx Fiber") ****.
(b) In the event of a WilTel Expansion where the purchase by Vyvx of
an Additional Vyvx Fiber would result in a capacity constraint over any
particular segment of such WilTel Expansion, and Vyvx desires to purchase an
Additional Vyvx Fiber over such segment, WilTel will use reasonable
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efforts to acquire sufficient capacity to remedy the constraint over such
segment, and Vyvx will reimburse WilTel the Costs of such remedial measures.
(c) Vyvx will have no rights to purchase, and WilTel and its
Affiliates will have no obligation to sell, an Additional Vyvx Fiber of any
portion of a WilTel Expansion which results from a Change of Control, and
following the date of any such Change of Control, Vyvx will have no rights to
purchase, and neither WilTel nor any of its Affiliates will have any obligation
to sell, an Additional Vyvx Fiber of any portion of a WilTel Expansion effected
by any Affiliate of WilTel which was not an Affiliate of WilTel immediately
prior to such Change of Control. Notwithstanding the preceding sentence, Vyvx
will retain any of its rights for spare capacity as contemplated by Section 2.05
under any contract between WilTel and the acquiring party in any such Change of
Control in effect prior to the date of such Change of Control, or under a
replacement arrangement on the same terms and conditions in the event such
contract is terminated in conjunction with or after such a Change of Control.
(d) From and after the date of the acquisition of an Additional Vyvx
Fiber as a result of a WilTel Expansion, Vyvx will pay additional Service Costs
as provided in Section 3.03(d).
Section 2.10. Addition of Drop Points.
(a) Vyvx will have no right to access Vyvx Fiber located within the
WilTel Cable other than as provided herein. Vyvx will provide WilTel a request
for Other Maintenance. Such request will detail the Splice Location and set
forth the work required to be performed. Vyvx will provide a cable adequate to
reach the Splice Location with an additional length (minimum 25 meters)
sufficient for WilTel to splice into the Vyvx Fiber at the designated Splice
Location.
(b) Vyvx will obtain the necessary rights-of-way (or other rights) and
be responsible for the installation of fiber cable connecting to the Drop
Points.
(c) Vyvx will pay to WilTel all Costs incurred by WilTel associated
with the addition of Drop Points within thirty (30) days of receipt of an
invoice from WilTel setting forth the calculation of such Costs.
(d) WilTel will not be obligated to add a Drop Point at a particular
Splice Location if there is undue risk to the WilTel Cable or a significant
technical impediment involved at such Splice
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<PAGE> 21
Location. At Vyvx's request, the nearest Splice Location at which such
conditions do not exist will be used as an alternate.
Section 2.11. Access. WilTel will provide Vyvx with reasonable access
to POPs and Regenerator Locations during regular business days between the hours
of 8:00 AM and 5:00 PM to the extent that such access is related to the
installation, operation, maintenance or repair of the Vyvx Equipment. WilTel
will make reasonable efforts to grant Vyvx access to the POPs and Regenerator
Locations and the Vyvx Equipment at other times upon twenty-four (24) hour
notice and to designate WilTel personnel. In case of emergency, WilTel will make
reasonable efforts to provide Vyvx access to the POPs and Regenerator Locations
and Vyvx Equipment upon two (2) hours notice to WilTel personnel. During such
access, WilTel personnel may be present at all times. Vyvx will reimburse WilTel
for all costs relating to such access, including labor, associated with
non-business day access as follows: **** for 5:00 p.m. to 8:00 a.m., local time,
Monday - Friday and **** on weekends; such rates to be reasonably adjusted from
time to time to reflect changes in WilTel's labor Costs. WilTel will provide
"view only" electronic access for Vyvx to WilTel's Network Management System
subject to any technological limitations.
Section 2.12. Salvage Rights. Prior to the final expiration of any ROW
over which the Vyvx Property runs, WilTel will, at Vyvx's election and expense,
employ an independent consultant who will determine no later than six (6) months
before such expiration whether salvage of any or all of the WilTel Network
affected by such expiration, including the property owned by Vyvx and others, is
feasible. If salvage is feasible, then the consultant will determine whether
such salvage is economic, i.e., whether there are likely to be net salvage
proceeds after costs of salvage (including costs of hiring the consultant) are
deducted. To the extent practicable, WilTel will employ the independent
consultant no later than two (2) years prior to any such expiration of a ROW.
If either (i) the consultant, in accordance with the provisions of this
Section 2.12, concludes that salvage is either not feasible or not economic (as
defined above), or (ii) WilTel did not have adequate notice of a termination or
early expiration of the particular ROW, that portion of the Vyvx Property which
runs over that ROW will be abandoned upon expiration of that ROW.
Notwithstanding any provision in this Agreement to the contrary, if any
grantor of a ROW over which the Vyvx Property runs has the right to require the
removal of property comprising the WilTel Network at the expiration of the ROW,
and if such grantor exercises such right, WilTel will
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remove and dispose of such property and take all other required actions
including restoration, if applicable, and Vyvx will pay its pro rata share
(based on an applicable percentage of DS3 Miles) of the attendant Costs within
thirty (30) days following receipt of the applicable WilTel invoice.
If the consultant, in accordance with the provisions of this Section
2.12, determines that salvage of the affected portion of the WilTel Network is
both feasible and economic (as defined above), WilTel will undertake the
appropriate salvage and deduct all costs of salvage from the salvage proceeds,
unless prior to the expiration of the affected ROW, WilTel, pursuant to Section
3.08, notifies Vyvx that the ROW has been extended or renewed. Each owner of
salvaged property will receive the net salvage proceeds of its property as
determined by the independent consultant, whose determination will be final and
binding on each such owner.
SECTION 3
SERVICES AND SERVICE COSTS
Section 3.01. Agreement to Provide Services and Pay Service Costs.
During the term of this Agreement, WilTel will provide the services specified in
Section 3.02 to Vyvx with respect to the Vyvx Property, and Vyvx will pay
monthly an amount equal to the Service Costs for such services. Payment of the
Service Costs will be made in accordance with the provisions of Section 3.03.
Section 3.02. Description of Services. The services to be provided by
WilTel are as set forth in the System Service Statement attached as Exhibit E or
as provided in Section 3.07. Vyvx will cooperate with WilTel in connection with
WilTel's performance of its responsibilities under this Agreement with respect
to the Vyvx Property. WilTel will not be in breach of this Agreement (including
the System Service Statement) if its failure to provide services is attributable
to (i) a Force Majeure event, (ii) any defective performance of any equipment
selected or supplied by Vyvx which defective performance is not caused by WilTel
or its subcontractors, or (iii) any installation or maintenance of Vyvx
Equipment by Vyvx or its own subcontractors (other than WilTel or its
subcontractors).
Section 3.03. Payment of Service Costs.
(a) Beginning January 1, 1994, Vyvx will pay to WilTel Service Costs
at the initial rate of **** **** ("Initial Service Costs") annually in
arrears. Effective for the three year period beginning January 1, 1997, and for
every three year period thereafter the Service Costs will be adjusted (the
"Inflation Adjustment") based on the percentage
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<PAGE> 23
increase (decrease) during the preceding three year period in the GDP Index. In
the event that the base year used as part of the calculation of the GDP Index is
changed, the calculation of Service Costs will be adjusted to ensure that WilTel
receives the same Service Costs amounts as it would have had the base year not
been changed. In the event the Department of Commerce or any successor
organization no longer publishes the GDP Index, the Parties will designate the
statistical index they reasonably and mutually agree to be most appropriate for
calculation of Service Costs adjustments, and from the date the GDP Index ceased
to be published, such index will be used to make adjustments in Service Costs
under this Section 3.03.
(b) Payment of Service Costs by Vyvx described in this Section 3.03
for any particular year will be due in full on December 31st of such year.
(c) During 1997, and every third year thereafter, Vyvx and WilTel will
review the cost savings and/or increases realized by WilTel in providing the
services which result solely from technology advances. WilTel and Vyvx will
negotiate in good faith appropriate revisions to the Service Costs provided,
however, that if the Parties fail to reach an agreement, then the then existing
Service Costs plus or minus any Inflation Adjustment provided above, would
remain in effect.
(d) Following the acquisition of any Additional Vyvx Fiber as a result
of a WilTel Expansion pursuant to Section 2.09, Vyvx will pay additional Service
Costs in an amount equal to **** (as adjusted by the Inflation Adjustment) per
route mile of Additional Vyvx Fiber per year ("Additional Service Costs").
Section 3.04. Rights Transfer Costs. Vyvx will pay an amount equal to
the Vyvx Percentage of all current and actual charges, recurring or otherwise,
paid by WilTel relating to Vyvx Property transferred by means of a Rights
Transfer ("Rights Transfer Costs"). This is intended to include lease payments
or purchase price under a purchase option pursuant to a leveraged lease
facility.
Section 3.05. Shared Project Costs.
(a) Except as otherwise expressly provided 2.07, 2.08 and 2.09 and the
System Service Statement attached as Exhibit E, in the event that WilTel
undertakes a Shared Project (as defined below) in connection with the
restoration, repair, relocation or replacement (including any incidental
improvement) of any portion of the WilTel Network (excluding any portion of the
WilTel Network which does not include any Vyvx Property), then Vyvx will
reimburse WilTel for the Vyvx Percentage of those
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<PAGE> 24
Net Costs incurred by WilTel in connection with such Shared Project, if
such Net Costs exceed the Hurdle in effect as of the date of substantial
completion of an individual Shared Project. For purposes of this Section, the
"Hurdle" will be established at **** and will escalate by the Inflation
Adjustment at the same time the Service Costs are adjusted under Section 3.03.
"Net Costs" will, for purposes of this Section 3.05, include all Costs
applicable to the Shared Project less any amounts for which WilTel has actually
received reimbursement from a third party where such reimbursement is reduced by
the amount of the direct expenses incurred by WilTel in collecting such third
party reimbursement, including legal expenses.
(b) For purposes of this Section 3.05, "Shared Project" means any work
consisting of the restoration, repair, relocation or replacement of any portion
of the WilTel Network undertaken by means of a single project or a group of
related projects arising out of a single event or occurrence, a cause of common
origin or a common scheme or plan. Such event or occurrence will include, but
not be limited to a natural catastrophe, calamitous event or other similar
circumstance such as Acts of God (including, but not limited to, a hurricane,
flood, tornado, earthquake or fire), explosion, collisions or derailment.
(c) Notwithstanding the foregoing, it is expressly understood by the
Parties that this Section 3.06 is not intended to provide WilTel with an
opportunity to unilaterally decide to effect improvements of the WilTel Network
at the expense of Vyvx, except incidental improvements. Instead, this provision
is intended to cover situations where there is an interruption of service or
other dysfunction or where there is an outside influence that would or might
require a major restoration, repair, relocation or replacement of a portion of
the WilTel Network (such as, for example, where a governmental agency requires
the relocation of a portion of the WilTel Network to accommodate a new highway)
and could cause such a disturbance or interruption or a threat to the continued
operation of the WilTel Network.
(d) WilTel will invoice Vyvx for the Vyvx Percentage of the Net Costs
upon final completion of the Shared Project. Vyvx will pay such invoice within
thirty (30) days of receipt thereof.
Section 3.06. Provisioning of Off-network Services. WilTel will use its
best efforts to obtain for Vyvx, upon Vyvx's request, telecommunications
services other than over the WilTel Network ("Off-network Services") through
service providers with whom WilTel has a then-existing arrangement whereby
WilTel may place a service order for service to be resold to WilTel's customers.
Vyvx will pay
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<PAGE> 25
to WilTel an amount equal to ****.
Section 3.07. Commencement of Services and Term of Agreement.
(a) The services to be provided by WilTel pursuant to this Agreement
will commence on January 1, 1994. This Agreement will automatically renew for
one year terms each January 1st unless Vyvx provides six months prior written
notice of its intent to terminate. The last day of this Agreement (i.e., the
date upon which Vyvx's termination becomes effective) will be referred to in
this Section as the "Expiration Date."
(b) The WilTel Network, which includes the Vyvx Property and all Other
Networks, constitutes an integrated telecommunications system and the integrity
of the WilTel Network must be preserved. Accordingly, Vyvx will, upon the
Expiration Date, be deemed to have abandoned its right, title and interest in
all Vyvx Fiber on the WilTel Network and Vyvx's right, title and interest
therein will be deemed to be conveyed to WilTel without any further action on
behalf of either Party. Nevertheless, Vyvx further agrees to execute any
documents which WilTel may reasonably request to reflect this conveyance. As to
any abandoned Vyvx Fiber, Vyvx will retain its rights to salvage proceeds (if
any) pursuant to Section 2.12 hereof upon final expiration of the applicable
ROWs.
(c) WilTel will, within one hundred twenty (120) days following the
Expiration Date, deliver to one or more mutually agreed upon location(s) for
Vyvx to pick up all affected Vyvx Property (excluding Vyvx Fiber) on the WilTel
Network that readily can be removed without disturbing the operation of the rest
of the WilTel Network (the "Returned Property"). WilTel will have no
responsibility for any Returned Property that is not picked up by Vyvx within
ninety (90) days following the date of WilTel's advice to Vyvx of the
availability of the Returned Property for pick up. Any affected Vyvx Property on
the WilTel Network not readily removable will be deemed to have been abandoned
and Vyvx's right, title and interest therein will be deemed to be conveyed to
WilTel without any further action on behalf of either Party. Nonetheless, Vyvx
further agrees to execute any documents which WilTel may reasonably request to
reflect this conveyance. Any such Vyvx Property which is not readily removable
will remain subject to the provisions of Section 2.12 upon the final expiration
of the ROWs.
(d) Except for claims by WilTel or Vyvx for payments due under this
Agreement (which claims must be presented in writing within one (1) year of the
Expiration Date), upon final
Page 20 of 37
<PAGE> 26
termination of this Agreement, all of the respective rights and obligations of
Vyvx and WilTel hereunder will terminate and be null and void and of no force
and effect. Neither Party will have any further obligation or liability whether
in contract, tort, warranty or otherwise, to the other related to the Vyvx
Property or arising out of this Agreement, except that all provisions in this
Agreement relating to salvage, disclosures, limitations of liability,
indemnification or waivers of rights and any other provisions that survive the
expiration of this Agreement will continue in force in accordance with their
terms.
(e) Any nonvested interest, if any, under this agreement including,
but not limited to, interests under this Section 3.07 and Section 2.09, which
has not vested within twenty-one (21) years after the death of the last to die
of the descendants of Rose Kennedy (Mother of John Fitzgerald Kennedy, former
38th President of the United States) alive at the execution of this Agreement,
will terminate and the property in which such nonvested interest existed will
vest in WilTel, Inc., its successors and assigns.
SECTION 4
RISK OF LOSS, INDEMNIFICATION, AND
USE OF THE VYVX PROPERTY
Section 4.01. Risk of Loss and WilTel Liability. Vyvx will bear any
risk of loss or damage to Vyvx property; provided, however, that if in
connection with the performance of its obligations under this Agreement, WilTel
damages or destroys Vyvx Equipment as a result of negligent or willful acts of
WilTel, then WilTel will, at Vyvx's election, either (i) repair the damaged Vyvx
Equipment (or replace the destroyed Vyvx Equipment) or (ii) reimburse Vyvx for
any reasonable costs incurred by Vyvx in repairing or replacing such Vyvx
Equipment.
Section 4.02. Vyvx Indemnification.
(a) Vyvx will indemnify, defend, release and hold WilTel, its
officers, directors and employees, WilTel Affiliates and directors, officers and
employees of such Affiliates, harmless against any claim by, judgment for, or
liability to any person using part or all of the Vyvx Property for transmission
purposes to the extent such claim, judgment, liability or costs are related to
such use of the Vyvx Property.
(b) Vyvx will indemnify, defend, release and hold WilTel, its
directors, officers and employees, WilTel Affiliates, and directors, officers,
and employees of such WilTel Affiliates, harmless against any claim, judgment,
liability or costs that results from any claim by, judgment for, or liability
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<PAGE> 27
to third parties (including Vyvx Affiliates) arising out of property damage or
bodily injury caused directly or indirectly by Vyvx's acts or omissions related
to this Agreement.
Section 4.03. WilTel Indemnification.
(a) WilTel will indemnify, defend, release and hold Vyvx, its
directors, officers and employees, Vyvx Affiliates, or Vyvx parent or partners,
and directors, officers and employees of such partners, parents or Affiliates,
harmless against any claim by, judgment for, or liability to any person using
part or all of the WilTel Network, other than that portion of the WilTel Network
comprised of the Vyvx Property, for transmission purposes, to the extent such
claim, judgment, liability or costs are related to such use of the WilTel
Network.
(b) WilTel also will indemnify, defend, release and hold Vyvx, its
directors, officers and employees, any Vyvx Affiliates, or its partners or
parents, and directors, officers, and employees of such partners or parents and
Affiliates, harmless against any liability, claim, judgment, or costs that
result from any claim by, judgment for, or liability to third parties (including
WilTel Affiliates) arising out of property damage or bodily injury caused
directly or indirectly by WilTel's acts or omissions related to this Agreement.
Section 4.04. Use of the Vyvx Property.
(a) Vyvx agrees to use the Vyvx Property, and will reasonably restrict
its customers to use of Vyvx services, only for video and radio transmission
services and/or related applications (including, but not limited to, graphic,
visual, imaging, interactive and multimedia) ("Video Use"). Unless Vyvx and
WilTel agree otherwise in writing, Vyvx may not use the Vyvx Property for or in
conjunction with cellular and personal communications service applications or
long distance data and voice applications unless the data and voice applications
are incidental to the video or radio transmission services provided for in the
preceding sentence.
(b) All owners and users of the WilTel Network, including Vyvx, will
comply with ANSI Standard T1.102 (formerly AT&T Compatibility Bulletin No. 119
dated October 1979) and Technical Reference PUB 54014, and the system
performance specifications relevant to their operations over the WilTel Network
at all times. Vyvx also agrees to connect to any electronic equipment associated
with the Vyvx Fiber, only apparatus that will operate in accordance with the
limits specified in ANSI Standard T1.102 (formerly AT&T Compatibility Bulletin
No. 119 dated October 1979) and Technical Reference PUB 54014. Vyvx further
agrees to release WilTel, and any Affiliates, and hold
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WilTel and any Affiliates harmless from any claim, liability, judgment or costs
which result from Vyvx's misuse, abuse, misapplication or improper use of the
Vyvx Property.
SECTION 5
INSPECTION OF FACILITIES AND AUDITS
Section 5.01. Inspection of Equipment. In order for WilTel to perform
its service obligations set forth in Sections 3.01 and 3.02, Vyvx agrees to make
the Vyvx Property and, to the extent necessary, other Vyvx property directly
connected (whether electrically, optically or otherwise) to the Vyvx Property,
available to WilTel for inspection, measurements and evaluation at all
reasonable times. Vyvx and WilTel will mutually agree on the timing of any
inspection, measurement or evaluation of the Vyvx Property.
Vyvx also agrees to provide WilTel a single telephone point of contact,
the Vyvx Contact, designed to be available on a twenty-four (24) hour per day
basis to receive and respond to communications from WilTel concerning the Vyvx
Property.
Section 5.02. Audits. If Vyvx so requests and at Vyvx's expense, WilTel
will perform an audit to determine the condition and location of the equipment
that constitutes the Vyvx Property. Such audit will be performed with an
observer from Vyvx or an independent consultant appointed by Vyvx and approved
by WilTel, which approval will not be unreasonably withheld.
Section 5.03. Cooperation of the Parties. WilTel and Vyvx each agree to
reasonably cooperate with each other in the performance of WilTel of its
services hereunder including its performance of Routine Maintenance, Demand
Maintenance and Other Maintenance. Such cooperation will extend, but not be
limited to, (i) allowing an observer of the other Party to be present during the
performance by a Party of its respective services, so long as such observer does
not interfere with the Party's performance of such services, and (ii) the
allowing of Vyvx to perform tests of Vyvx Fiber, so long as Vyvx accesses the
Vyvx Fiber on the Vyvx side of a Demarcation Point.
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<PAGE> 29
SECTION 6
BANKRUPTCY
In the event that WilTel, under state insolvency laws, will commit an
act of insolvency or bankruptcy or make an assignment for the benefit of
creditors, or WilTel will become subject to any bankruptcy or insolvency
proceeding under federal laws, and if WilTel rejects this Agreement under state
insolvency law or federal bankruptcy law, or if WilTel's interest in this
Agreement is assigned under state insolvency law or federal bankruptcy law, the
Parties hereto acknowledge and agree (a) that continued access to the Vyvx
Property on the part of a qualified servicing agent will be necessary to the
continued operation of the WilTel Network and to the continued use by Vyvx of
the Vyvx Property; and (b) that because of the physical proximity of the Vyvx
Property to other parts of the WilTel Network, it would be inappropriate for
there to be a multiplicity of servicing agents; and, accordingly, in such event,
it would be in the best interests of Vyvx and the owners of the Other Networks
if a single servicing agent assumed the remaining obligations hereunder and
under other system purchase and service agreements with terms similar to the
terms of this Agreement relating to any part of the WilTel Network. To the
extent not inconsistent with applicable bankruptcy law, such a servicing agent
may be selected by a vote of the owners of the Networks managed by WilTel under
this Agreement and other similar agreements ("Network Owners"), by majority
vote, with each Network Owner being entitled to cast the number of votes equal
to the number of DS3 Miles in such owner's network. Where applicable, any such
substitute operator, however selected, will be vested with such rights of access
to the WilTel Network as will be assigned to it by order of any court having
jurisdiction over any WilTel bankruptcy or insolvency proceedings. The Parties
agree that herein and no owners will be entitled to any votes for any DS3 Miles
derived from protection fibers.
Nothing in this Section will be construed to prohibit Vyvx from
exercising its discretion to petition any court having jurisdiction over any
WilTel bankruptcy or insolvency proceeding to take action Vyvx deems advisable
on any matter whatsoever pertaining to this Agreement.
SECTION 7
TAXES
(a) Vyvx will be fully responsible for the payment of any and all ad
valorem, property, franchise, gross receipts, value-added, sales, use, and other
taxes directly applicable to the Vyvx Property and the services it purchases
pursuant to Section 3 of this Agreement (except income taxes
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on the revenue of WilTel), notwithstanding that the incidence thereof may be on
WilTel. Vyvx will be responsible for such taxes applicable to the Vyvx Property.
Vyvx will be responsible for such taxes applicable to the services purchased
under this Agreement from the date WilTel commences to provide such services. To
the extent that WilTel is billed for or actually pays any ad valorem, property,
franchise, gross receipts, sales, use or other such taxes in respect of the Vyvx
Property or the services purchased by Vyvx pursuant to this Agreement, Vyvx will
make payment to WilTel of the full amount of any such taxes (including any
interest and penalties) which have been paid or are due. Vyvx will make payments
required under this Section 7 prior to the later of (i) thirty (30) days from
the date of mailing or dispatch of a WilTel invoice billing Vyvx for the amount
of such taxes or (ii) thirty (30) days prior to the due date of such taxes.
Without limiting the other remedies available to WilTel, if any payments under
this Section 7, including any applicable overdue payment charges, are more than
one hundred twenty (120) days late, WilTel may discontinue the provision of
services with respect to the Vyvx Property and Vyvx will not be entitled to use
the Vyvx Property until such payment, including any applicable overdue payment
charge calculated pursuant to Section 9 hereof, has been made.
In the event, and only to the extent, WilTel will have received a
refund or credit of taxes described in this Section 7 and attributable to taxes
paid, directly or indirectly, by Vyvx with respect to the Vyvx Property or the
services it purchases pursuant to Section 3 of this Agreement, WilTel will
either make payment to Vyvx of, or, if WilTel so chooses, credit against any
payment due or the next payment to become due under this Agreement to WilTel
from Vyvx, the amount of the refund or credit together with any interest
received by WilTel in connection with the taxes in question.
WilTel agrees to cooperate with Vyvx, at Vyvx's sole expense, in the
protest of or prosecution of any claim for refund, rebate, reduction or
abatement of taxes for which Vyvx is responsible for payment under this Section
7.
(b) WilTel will be fully responsible for the payment of any and all ad
valorem, property, franchise, gross receipts, value-added, sales, use and other
taxes directly applicable to any and all property owned by WilTel which is part
of the WilTel Network. To the extent that Vyvx is billed for or actually pays
any ad valorem, property, franchise, gross receipts, sales, use or other such
taxes in respect of property owned by WilTel which is part of the WilTel
Network, WilTel will make payment to Vyvx of the full amount of any such taxes
(including any interest and penalties, but only to the extent WilTel is
responsible) which have been paid or are due. WilTel will make payments required
under this
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Section 7 prior to the later of (i) thirty (30) days from the date of mailing or
dispatch of a Vyvx invoice billing WilTel for the amount of such taxes of (ii)
thirty (30) days prior to the due date of such taxes.
SECTION 8
REGULATION
WilTel and Vyvx agree that this Agreement is for the provision by
WilTel to Vyvx of non-common carrier services, and therefore it is not subject
to the filing requirements of Section 211(a) of the Communications Act of 1934
(47 U.S.C. ' 211(a)) as implemented in 47 C.F.R. Section 43.51. WilTel believes
that it is a nondominant common carrier authorized to construct domestic
facilities and provide domestic interstate services pursuant to 47 C.F.R. '
63.07; as such, it believes it is not required to obtain specific authorization
from the Federal Communications Commission to construct the domestic WilTel
Network. Vyvx represents that the Vyvx Property will be used to provide
interstate services and that interstate and intrastate message signal bits will
be commingled over the Vyvx Property.
SECTION 9
OVERDUE PAYMENT CHARGES
In the event that any payment due under this Agreement is not paid by
the required date, the payee-Party will be entitled to an overdue payment charge
at the rate of one and one-half percent (12%) per month or, if less, the maximum
allowable interest rate under applicable law, on the unpaid portion of such
payment through and including the day on which the final payment for such
overdue amount (including the overdue payment charge) is received by the
payee-Party.
SECTION 10
MISCELLANEOUS PROVISIONS
Section 10.01. Limitation of Liability. EXCEPT AS OTHERWISE EXPRESSLY
PROVIDED IN THIS AGREEMENT, WILTEL'S LIABILITY TO VYVX UNDER THIS AGREEMENT Will
BE LIMITED TO SPECIFIC PERFORMANCE OR, WHERE SUCH REMEDY IS NOT REASONABLY
AVAILABLE, TO MONETARY DAMAGES IN ACCORDANCE WITH SECTION 3.05 OF THE AGREEMENT.
WILTEL AND VYVX ACKNOWLEDGE AND AGREE THAT ANY DAMAGES APPLICABLE TO THE
PROVISIONS OF THIS AGREEMENT ARE DIFFICULT, IF
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NOT IMPOSSIBLE, TO CALCULATE AND THAT THE PAYMENT ADJUSTMENTS UNDER SECTION 3.05
HEREOF Will CONSTITUTE LIQUIDATED DAMAGES AND ARE (i) BASED ON GOOD FAITH
ESTIMATES OF, AND BEAR A REASONABLE RELATIONSHIP TO, THE ACTUAL DAMAGES
ANTICIPATED AND (ii) DO NOT REPRESENT A PENALTY OF ANY KIND. SUCH PAYMENT Will,
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, BE VYVX'S SOLE AND
EXCLUSIVE REMEDY.
IN NO EVENT Will EITHER PARTY, ITS RESPECTIVE DIRECTORS, OFFICERS,
SHAREHOLDERS AND EMPLOYEES, AFFILIATES, OR ANY DIRECTOR, OFFICER, SHAREHOLDER OR
EMPLOYEE OF SUCH AFFILIATES, BE LIABLE TO THE OTHER OR IT'S CUSTOMERS FOR ANY
INCIDENTAL OR CONSEQUENTIAL DAMAGES, WHETHER FORESEEABLE OR NOT, INCLUDING, BUT
NOT LIMITED TO DAMAGE OR LOSS OF PROPERTY OR EQUIPMENT, LOSS OF PROFITS OR
REVENUE, COST OF CAPITAL, COST OF REPLACEMENT PROPERTY OR SERVICES, OR CLAIMS OF
CUSTOMERS FOR SERVICE INTERRUPTIONS OR TRANSMISSION PROBLEMS, OCCASIONED BY ANY
DEFECT IN THE WILTEL NETWORK, DELAY IN DELIVERY, FAILURE OF THE VYVX PROPERTY TO
PERFORM OR ANY OTHER CAUSE WHATSOEVER.
WILTEL MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, TO ANY
OTHER PERSON OR ENTITY CONCERNING THE VYVX PROPERTY AND VYVX Will DEFEND,
INDEMNIFY AND HOLD WILTEL, ITS DIRECTORS, OFFICERS, SHAREHOLDERS AND EMPLOYEES,
AFFILIATES OF WILTEL OR ANY DIRECTOR, OFFICER, SHAREHOLDER OR EMPLOYEE OF SUCH
AFFILIATES, HARMLESS FROM ANY CLAIMS MADE UNDER ANY WARRANTY OR REPRESENTATION
BY VYVX TO ANY THIRD PARTY.
VYVX AND WILTEL EACH ACKNOWLEDGES THAT IT HAS NOT RELIED ON ANY WRITTEN
OR ORAL REPRESENTATIONS BY THE OTHER PARTY CONCERNING THE SUBJECT OF THIS
AGREEMENT OTHER THAN THOSE EXPRESSED IN THIS AGREEMENT.
Section 10.02. Successors in Interest; Transfers.
(a) Vyvx may assign or transfer (hereafter "transfer") its rights and
obligations under this Agreement to a third party, including an Affiliate,
provided that at least thirty (30) days prior to such transfer Vyvx delivers to
WilTel a binding agreement in writing from the transferee to WilTel stating that
the transferee will assume all current, future, and outstanding past obligations
of Vyvx under this
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<PAGE> 33
Agreement as if such transferee had originally executed this agreement in Vyvx's
place. Notwithstanding such delivery and assumption of obligations, unless
WilTel agrees otherwise in writing (which agreement WilTel will not unreasonably
withhold), Vyvx will remain primarily liable for all obligations under this
Agreement. WilTel will have no responsibility for any liabilities which result
from any such transfer by Vyvx. Vyvx will indemnify, defend and release WilTel
and hold WilTel harmless from any claim, liability, judgment or costs which
result from any such transfer, but will not release WilTel or hold WilTel
harmless from any claim, liability, judgment or costs which arise out of any of
WilTel's obligations under this Agreement that are owed to a transferee of Vyvx
following transfer in accordance with this Section.
(b) WilTel may transfer or assign (hereafter "transfer") its rights
and obligations under this Agreement to any third party, including an Affiliate,
provided that, in the case of a transfer of obligations, at least thirty (30)
days prior to such transfer, WilTel delivers to Vyvx a binding agreement from
the transferee to Vyvx stating that the transferee will assume all current,
future and outstanding past obligations of WilTel under this Agreement that are
being transferred as if such transferee originally had executed this Agreement
in WilTel's place. Notwithstanding such delivery and assumption of obligations,
unless Vyvx agrees otherwise in writing (which agreement Vyvx will not
unreasonably withhold), WilTel will remain primarily liable for all obligations
under this Agreement. Vyvx will have no responsibility for any liabilities which
result from any such transfer by WilTel. WilTel will indemnify, defend and
release Vyvx and hold Vyvx harmless from any claim, liability, judgment or costs
which result from any such transfer, but will not release Vyvx or hold Vyvx
harmless from any claim, liability, judgment or costs which arise out of any of
Vyvx's obligations under this Agreement that are owed to a transferee of WilTel
following transfer in accordance with this Section.
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<PAGE> 34
Section 10.03. Resolution of Disputes.
(a) Negotiations. Vyvx and WilTel will attempt in good faith to
resolve any dispute arising out of or relating to the Agreement (a "Dispute") by
negotiations between senior executives of the ultimate parent entity of each of
such Parties. Such negotiations may be commenced by either such Party by written
notice to the other Party (the "Negotiation Request"). In the event that such
Dispute has not been resolved by such negotiations within 30 days of the
delivery of the Negotiation Request, and one Party hereto requests non-binding
mediation by written notice to the other Party given prior to the end of such
30-day period, Vyvx and WilTel will attempt in good faith to resolve such
Dispute by non-binding mediation before a mediator mutually agreeable to Vyvx
and WilTel in their reasonable judgment. Neither Party will be required to
continue with such negotiations or with such non-binding mediation for more than
180 days after the delivery of the Negotiation Request. All such negotiations
and mediation proceedings will be confidential, and will be treated as
compromise and settlement negotiations for all evidentiary purposes, including
but not limited to for purposes of the Federal Rules of Evidence and any state
rules of evidence.
(b) Other Remedies. The Parties hereto will not initiate litigation
with respect to the Dispute unless the Dispute has not been resolved within 180
days of the delivery of the Negotiation Request, and will not initiate
litigation with respect to such Dispute except upon 5 days' prior written notice
to the other Party; provided that (i) if one such Party has delivered a
Negotiation Request or has so requested non-binding mediation and the other such
Party has not responded to any such request within 10 days of its receipt or is
failing to participate in good faith in the procedures specified in Section
10.03(a), the requesting Party may initiate litigation prior to the expiration
of such 180-day period, and (ii) either such Party may at any time or without
notice file a complaint or seek an injunction or provisional judicial relief, if
in such Party's sole judgment such action is necessary to avoid irreparable
damage or to preserve the status quo (including but not limited to for statute
of limitations reasons or to preserve any defense based upon the passage of
time). Despite such action Vyvx and WilTel will continue to participate in the
procedures specified in this Section 10.03 for so long and to the extent so
specified.
Section 10.04. Force Majeure. Any failure of a Party to perform its
obligations under this Agreement will not be a breach of this Agreement, will
not trigger any rights or remedies, and will not subject WilTel to any liability
whatsoever if such failure results from, without limitations, Acts of God,
governmental action (whether in sovereign or contractual capacity), adverse
weather conditions not reasonably anticipatable (including, but not limited to a
hurricane, flood, tornado, earthquake or fire),
Page 29 of 37
<PAGE> 35
explosions, train collisions or derailments, animal infestation, labor strikes,
failure of supplies or supplier, third party negligence or malfeasance or any
other circumstance, including cable cuts not directly or proximately caused by
WilTel's negligence or wanton conduct, which is reasonably beyond the control of
WilTel.
Section 10.05 Change in Technology. The Parties recognize that
technology may change, rendering obsolete the use of a DS3 (whether for actual
capacity transmission or protection) on the WilTel Network as a measurement
basis for the Vyvx Percentage as well as other Agreement provisions using DS3's.
In the event advances in technology do make the use of DS3's inappropriate or
obsolete, WilTel or Vyvx may propose a method of measuring relative bandwidth
capacity as a substitute for DS3's and request the other's consent to use such
substitute measurement which consent will not be unreasonably withheld.
Section 10.06. Payments. Unless otherwise provided for in this
Agreement, all payments required under this Agreement will be made by the
deposit of immediately available funds in a bank account designated by the
payee-Party, or, in the absence of such designation, full payment by check. Any
payment required under this Agreement for which a specific due date is not
specified will be due thirty (30) days after the date on which the payor-Party
either became aware or should have become aware of its obligation to make such
payment.
Section 10.07. Partial Network Operations. If, as a result of an event
of Force Majeure, operation of the WilTel Network must be curtailed in any
manner, WilTel, in its reasonable discretion, will determine how the WilTel
Network will be operated and affected by such curtailment of operations. Vyvx
agrees to release WilTel and hold WilTel harmless from any claim, liability,
judgment or cost made by Vyvx or Vyvx customer which result from any reasonable
action or decision taken by WilTel under this Section 10.07 related to the Vyvx
Property. Notwithstanding anything in this Agreement to the contrary, nothing in
this Section 10.07 will affect the remedies available to Vyvx under Section
3.05.
Section 10.08. Disclosure.
(a) If either Party to this Agreement acquires or is exposed to the
other Party's Confidential Information, such receiving Party will hold in
confidence such Confidential Information, and will neither (i) directly or
indirectly reveal, report, publish, disclose or transfer any such Confidential
Information to any person or entity, except personnel of the receiving Party who
have a need to know such Confidential Information for the purpose of enabling
the receiving Party to perform its obligations
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<PAGE> 36
or exercise its rights under this Agreement; nor (ii) utilize any such
Confidential Information for its own benefit or for any other purpose, except
for the purpose of enabling it to perform its obligations or exercise its rights
under this Agreement. In maintaining the confidentiality of the disclosing
Party's Confidential Information, the receiving Party will use the greater of
(i) the standard of care that would be used by a reasonably prudent man under
similar circumstances, or (ii) the same standard of care as the receiving Party
generally applies to its own confidential or proprietary information.
The Parties' rights and obligations under this Section 10.08(a) will
remain in full force and effect for a period of five (5) years from the date on
which the receiving Party acquires or is exposed to such Confidential
Information, except with respect to information transmitted over the WilTel
Network, for which such rights and obligations will not expire.
(b) All materials and records which constitute Confidential
Information will be and remain the property of and belong exclusively to the
disclosing Party, and the receiving Party agrees to return or to destroy all
such materials and records which it may possess or control upon request of the
disclosing Party.
(c) Notwithstanding any provision in Section 10.08(a) to the contrary,
the receiving Party may disclose to its Affiliates or employees of such
Affiliates the other Party's Confidential Information to the extent that such
disclosure is required to enable the receiving Party to perform its obligations
or exercise its rights under this Agreement, provided that each such Affiliate
will have first agreed in writing, with respect to such other Party's
Confidential Information, to be bound by the applicable terms and conditions of
this Section.
(d) The Parties agree that the terms and conditions of this Agreement
will be kept confidential and will not be disclosed to the public or to any
persons other than directors, officers, employees or agents of the Parties
pursuant to this Section 10.08 or to such other person who has entered into a
Confidentiality Agreement with the disclosing Party, unless otherwise mutually
agreed by the Parties in writing, except as required by applicable law or stock
exchange regulations. The Parties further agree that any news or press releases
or other announcements to be made public with respect to the existence of, or
the matters set forth in, this Agreement will either be jointly made or will be
approved in writing by the Party not making the news or press release or other
announcement, such approval not to be unreasonably withheld.
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<PAGE> 37
(e) Subject to the provisions of Section 10.08(f), the restrictions on
disclosure stated above in this Section 10.08 will not prevent the receiving
Party from disclosing any Confidential Information or information where such
disclosure is required by law or legal process or is made in a judicial
proceeding to enforce a Party's rights under this Agreement.
(f) If either Party is required to disclose Confidential Information
which is subject to the non-disclosure provisions of Section 10.08(a), or
information which is subject to the non-disclosure provisions of Section
10.08(d), to any regulatory or judicial authority, or pursuant to legal process,
the disclosing Party will notify the other Party in writing prior to such
disclosure in order to allow the other Party the opportunity to request from the
relevant regulatory or judicial authority protection against public disclosure
of any such information.
(g) Either Party's violation of the provisions of this Section 10.08
will subject such Party to suit by the other Party, provided, however, that
neither Party will be liable for any incidental or consequential damages
relating to its obligations under this Section.
(h) The Parties acknowledge that, because of the special and unique
nature of the Confidential Information and the information which is subject to
the non-disclosure provisions of Section 10.08(d), it would be difficult to
measure the damage to either Party, its customers and/or the owners of the Other
Networks as the case may be, from any breach of the provisions of this Section
10.08 by the other Party, and that such aggrieved Party, its customers and/or
the owners of the Other Networks will suffer irreparable harm in the event that
the other Party fails to comply with such provisions. Accordingly, the Parties
agree that, in the event of a breach of any provision of this Section 10.08 by
either Party, the other Party will be entitled, in addition to other remedies it
may have in law or in equity, to injunctive or other appropriate orders to
restrain any such breach without showing or providing any actual damage
sustained by itself, its customers and/or the owners of the Other Networks.
(i) The rights and obligations of the Parties contained in this
Section 10.08 regarding non-disclosure of Confidential Information and
information described in Section 10.08(d) will survive any expiration or
termination of this Agreement until such rights and obligations expire according
to their own terms.
Section 10.09. Authority and Approval. Each Party represents and
warrants to the other that it has the right, power and authority to enter into,
and perform its obligations under this Agreement.
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<PAGE> 38
Each Party further represents and warrants to the other that it has taken all
requisite corporate and other necessary action to approve the execution,
delivery and performance of this Agreement and that this Agreement constitutes a
legal, valid and binding obligation upon itself in accordance with the terms of
this Agreement.
Section 10.10. Governing Law. This Agreement will be construed in
accordance with, and governed in all respects by, the laws of the State of New
York without regard to its choice of law principles.
Section 10.11. Execution in Counterparts. This Agreement may be
executed in one or more counterparts, but in such event each counterpart will
constitute an original agreement and all of such counterparts will constitute
one agreement.
Section 10.12. Integration; Amendments. This Agreement together with
the Exhibits hereto and the Collocate Agreement executed concurrently herewith
constitutes the entire agreement between the Parties pertaining to the subject
matter hereof and supersedes all prior and contemporaneous agreements and
understandings of such Parties, including the Initial Agreement. Any amendment
or supplement made to this Agreement will not be valid and binding unless it is
in writing signed by both Parties.
Section 10.13. Severability. Any provisions of this Agreement which is
invalid, illegal, or unenforceable in any respect in any jurisdiction will be,
as to such jurisdiction, ineffective to the extent of such invalidity,
illegality or unenforceability without in any way affecting the validity,
legality or enforceability of the remaining provisions hereof, and any such
invalidity, illegality or unenforceability in any jurisdiction will not
invalidate or in any way affect the validity, legality or enforceability of such
provisions in any other jurisdiction.
Section 10.14. Waivers. The failure of either Party to seek redress for
violations, or to insist upon the strict performance, of any covenant or
condition of this Agreement will not prevent a subsequent act, which otherwise
would have constituted a violation, from having such effect. No waiver of any of
the terms, conditions or provisions of this Agreement will be effective unless
it is in writing signed by the waiving Party.
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Section 10.15. Indemnification of Third Parties by WilTel. To the
extent that WilTel indemnifies any third party who has granted WilTel ROWs upon
which the Vyvx Property is located against a claim by, or liability to, or
judgment in favor of Vyvx with respect to acts which occur on or adjacent to
ROWs, Vyvx waives its right to make any claims or obtain relief against such
third party except to the extent it could make such claim or obtain such relief
against WilTel under this Agreement.
Section 10.16. Headings. The headings in this Agreement are inserted
for convenience and identification only and are in no way intended to describe,
interpret, define, or limit the scope, extent, or intent of this Agreement of
any provision thereof.
Section 10.17. Rights and Remedies Cumulative. Except as otherwise
provided in this Agreement, the rights and remedies provided by this Agreement
are cumulative and the use of any one right or remedy by any Party will not
preclude or waive its rights to use any or all other remedies. Said rights and
remedies are given in addition to any other rights such Party may have by laws,
statute, ordinance or otherwise.
Section 10.18. Notices. All notices and other communications from
either Party to the other hereunder will be in writing and will be deemed
received upon actual receipt. Unless changed by either Party by notice in
writing to the other, all notices will be addressed to the other Party as
follows:
If to WilTel: Roy A. Wilkens
Chairman and CEO
One Williams Center
Suite 2600 (26-2)
Tulsa, Oklahoma 74172
If to Vyvx: Del Bothof
President
Tulsa Union Depot
111 East First Street
Tulsa, Oklahoma 74103
Section 10.19. WilTel Abandonment of Service. In the event that WilTel
or any assignee of WilTel abandons its maintenance and repair services to a
particular part or all of the WilTel Network ("Non-Serviced Property"), any
person owning an interest in part or all of the Non-Serviced Property to whom
WilTel was providing such services ("Network Owner") may call a meeting for the
purpose of selecting a single servicing agent to assume WilTel's remaining
maintenance and repair obligations related
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<PAGE> 40
to the Non-Serviced Property ("Servicing Agent"), by sending written notice to
all other Network Owners at least twenty-one (21) days before the date of such
meeting. The notice will state the purpose, date, time and place of the meeting.
At the meeting described in the preceding paragraph, each Network Owner
present or represented will be entitled to propose a Servicing Agent. A
Servicing Agent will be selected by a majority vote of the Network Owners who
attend or send a representative to the meeting, with each such Network Owner
being entitled to cast the number of votes equal to the number of DS3 Miles
derived from its property in the Non-Serviced Property; provided, however, that
no Servicing Agent will be selected without the prior approval of those owners
of ROW's whose approval is required under the terms of their property right
grants to WilTel related to the WilTel Network. The Parties agree that for
purposes of determining the number of Vyvx's votes under this paragraph, Vyvx
will not be entitled to any votes for DS3 Miles derived from subtending and
distribution fibers, and no Network Owner will be entitled to any votes for any
DS3 Miles derived from protection fibers.
WilTel will transfer to such Servicing Agent all WilTel rights related
to the Non-Serviced Property necessary to allow the Servicing Agent to assume
WilTel's maintenance and repair obligations related to the Non-Serviced
Property.
WilTel will have no responsibility for any liabilities related to the
development or performance of such alternative servicing arrangements, except
that WilTel will be responsible for any failure to meet its obligations under
the preceding paragraph. Vyvx will indemnify and release WilTel and defend and
hold WilTel harmless from any claim, liability, judgment or costs in favor of
Vyvx or Vyvx customers which arise out of any such servicing arrangement in
which Vyvx participates that do not arise out of WilTel's failure to meet its
obligations under this Agreement.
This Section 10.19 will not be triggered by any transfer by WilTel
under Section 10.02, or by any events covered under Section 6.
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Section 10.20. Invoices and Access to Books and Records.
(a) All invoices sent by WilTel to Vyvx for Costs or Common Facilities
Costs will contain a description of the project.
(b) Upon written notice received by WilTel within thirty (30) days
after the end of a calendar year, WilTel will, within a reasonable period of
time, provide to Vyvx access to WilTel's records, receipts, invoices, time cards
and other documentation reasonably related to the calculation of Common
Facilities Costs or Costs for such year. Information provided to Vyvx under this
Section will be designated as "Confidential Information." If Vyvx's review of
the WilTel documentation reveals, and WilTel concurs, that any cost item
comprising the Common Facilities Costs or Costs, respectively are inappropriate,
were improperly classified, such cost item or items will be removed.
Notwithstanding the foregoing, the size, magnitude, reasonableness, prudence or
necessity of any cost item will not be subject to question or challenge by Vyvx.
The only inquiry will be whether the cost item or items were properly placed or
accounted for in one or more of the accounts comprising the Common Facilities
Costs or Costs, respectively. If Vyvx fails to notify WilTel in writing within
ninety (90) days of the end of the subject Service Period that any cost item or
items have been improperly classified in the Common Facilities Costs or Costs,
respectively, the Parties will be deemed to have agreed on the calculation of
Common Facilities Costs or Costs, respectively, for such year.
(c) If Vyvx and WilTel do not agree as to whether a cost item has been
properly placed in either Common Facilities Costs or Costs, respectively; WilTel
will engage a nationally recognized firm of independent outside certified public
accountants to review the questioned cost item or items to determine whether
such cost item(s) could have been reasonably placed or accounted for in Common
Facilities Costs or Costs, respectively, in accordance with the definitions of
such terms in this Agreement. The independent accountants will act as an
arbitrator and their determination will be final, binding and conclusive. Vyvx
will pay the costs of the accountants' special report.
(d) Other than the access to records specifically permitted pursuant
to subsection (b) hereof, Vyvx agrees that it will not have access to, or the
right to review any of WilTel's books, records, receipts, invoices, time cards
or other documentation relating to any other cost, charge or fee under this
Agreement.
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<PAGE> 42
IN WITNESS WHEREOF, each of the Parties hereto has duly executed and
delivered this Agreement as of the date first above written.
ATTEST: WILTEL, INC.
/s/ [ILLEGIBLE] BY: /s/ [ILLEGIBLE]
- ----------------------------- --------------------------------
Vice President
ATTEST: VYVX, INC.
/s/ [ILLEGIBLE] BY: /s/ [ILLEGIBLE]
- ----------------------------- --------------------------------
President
Page 37 of 37
<PAGE> 43
EXHIBIT D
SYSTEM SEGMENTS
<TABLE>
<S> <C> <C> <C>
New York City, NY - White Plains, NY DeQuincy, LA - Shreveport, LA
Stamford, CT - White Plains, NY Beaumont, TX - DeQuincy, LA
Hartford, CT - Springfield, MA Beaumont, TX - Houston, TX
Boston, MA - Springfield, MA Houston, TX - San Antonio, TX
*New York City, NY - Newark, NJ Dallas, TX - Panova, OK
*Newark, NJ - Trenton, NJ Panova, OK - Oklahoma City, OK
*Philadelphia, PA - Trenton, NJ Panova, OK - Tulsa, OK
*Philadelphia, PA - Baltimore, MD Tulsa, OK (ONEOK POP) - Tulsa, OK (WLMS. CTR.)
*Baltimore, MD - Washington, DC Tulsa, OK - Joplin, MO
New York City, NY - Bear Creek, PA Kansas City, MO - Joplin, MO
Bear Creek, PA - Cleveland, OH Columbia, MO - Kansas City, MO
Cleveland, OH - Toledo, OH Columbia, MO - St. Louis, MO
South Bend, IN - Toledo, OH *Chicago, IL - Fostoria, OH
Chicago, IL - South Bend, IN *Akron, OH - Fostoria, OH
Bear Creek, PA - Pittsburgh, PA *Akron, OH - Cleveland, OH
Detroit, MI - Toledo, OH *Akron, OH - Pittsburgh, PA
*Richmond, VA - Washington, DC *Pittsburgh, PA - Washington, DC
*Richmond, VA - Raleigh, NC *Detroit, MI - Fostoria, OH
*Columbia, SC - Raleigh, NC Chicago, IL - Donahue, IA
*Columbia, SC - Fairfax, SC Cedar Rapids, IA - Coralville, IA
*Augusta, GA - Fairfax, SC Coralville, IA - Donahue, IA
*Augusta, GA - Atlanta, GA Coralville, IA - Pleasant Hill, IA
*Fairfax, GA - Savannah, GA Coralville, IA - Iowa City, IA
Jacksonville, FL - Savannah, GA Davenport, IA - Donahue, IA
*Jacksonville, FL - Orlando, FL Des Moines, IA - Pleasant Hill, IA
*Auburndale, FL - Orlando, FL Fairfax, KS - Pleasant Hill, IA
*Auburndale, FL - Tampa, FL Omaha, NE - Pleasant Hill, IA
*Auburndale, FL - West Palm Beach, FL Fairfax, KS - Kansas City, MO
*Fort Lauderdale, FL - West Palm Beach, FL Alden, IA - Pleasant Hill, LA
*Fort Lauderdale, FL - Miami, FL Alden, IA - Minneapolis, MN
*Chicago, IL - Indianapolis, IN Fairfax, KS - Tecumseh, KS
*Evansville, IN - Indianapolis, IN Tecumseh, KS - Topeka, KS
*Evansville, IN - Nashville, TN Houston, KS - Tecumseh, KS
*Chattanooga, TN - Nashville, TN Houston, KS - Wichita, KS
*Atlanta, GA - Chattanooga, TX Houston, KS - Terry Ranch, WY
*Atlanta, GA - Montgomery, AL Evanston, WY - Terry Ranch, WY
*Mobile, AL - Montgomery, AL Evanston, WY - Salt Lake City, UT
*Mobile, AL - New Orleans, LA Las Vegas, NV - Salt Lake City, UT
Baton Rouge, LA - New Orleans, LA Los Angeles, CA - Las Vegas, NV
Baton Rouge, LA - DeQuincy, LA Los Angeles, CA - Santa Clara, CA
Dallas, TX - Longview, TX San Francisco, CA - Santa Clara, CA
Longview, TX - Shreveport, LA Denver, CO - Terry Ranch, WY
- Detroit, MI
- Windsor, Ontario
</TABLE>
(*) Indicates segments upon which an Additional Purchase Price may be required
to upgrade equipment.
(/) Indicates Vyvx cross border system.
<PAGE> 44
EXHIBIT E
SYSTEM SERVICE STATEMENT
This System Service Statement specifies terms and conditions for the
maintenance, repair and provision of services for the Vyvx Property and Common
Facilities.
1. GENERAL
a. WilTel will operate and maintain a Network Control Center
("NCC") staffed twenty-four (24) hours a day by trained and qualified
personnel. WilTel will maintain a toll-free telephone number to contact
personnel at the NCC. WilTel's NCC personnel will dispatch maintenance
and repair personnel along the Vyvx Fibers to handle repair and other
problems detected through the NCC's remote surveillance equipment or
otherwise.
b. WilTel maintenance employees will be available for dispatch
twenty-four (24) hours a day, seven (7) days a week. WilTel will use
reasonable efforts to have its first maintenance employee at the site
requiring Demand Maintenance within two (2) hours from the time of
alarm identification by WilTel's NCC or from the time of notification
by Vyvx's Network Operations Center (NOC), whichever occurs first.
c. Vyvx will utilize Attachment 1, WilTel Operations
Escalation List, to report and seek immediate initial redress of
exceptions noted in the performance of WilTel in meeting maintenance
service objectives.
d. In performing its services hereunder, WilTel will take
workmanlike care to prevent impairment to the signal continuity and
performance of the Vyvx Property. The precautions to be taken by WilTel
will include notification to the Vyvx Contact. In addition, WilTel will
reasonably cooperate with Vyvx in sharing information and analyzing the
disturbances regarding Vyvx Property or the WilTel Network. This
cooperation will include providing a summary of alarms relating to a
specific event within 5 business days of a request by Vyvx. Nothing
contained herein will make WilTel responsible for the Vyvx Equipment.
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<PAGE> 45
e. WilTel will avoid taking any maintenance action between
0700-2400 local time, Monday through Friday, inclusive, and on Sundays
during the National Football League season, that will have a disruptive
impact on the continuity or performance level of the Vyvx Property.
Restricted activities will include manually initiated actions that will
cause operation of the automatic fiber electronics protection switching
equipment. However, specifically excluded from restricted activities
are any actions required to restore continuity to a severed or
partially severed fiber optic cable, restore dysfunctional power and
ancillary support equipment, and to correct any potential jeopardy
conditions.
f. WilTel will coordinate with the Vyvx Contact no later than
two (2) business days prior to the date of any planned non-emergency
maintenance activity to be accomplished that is reasonably expected to
produce any signal discontinuity including that imposed by the
operation of fiber electronics protection switching equipment. In the
event that a WilTel planned activity is canceled or delayed for
whatever reason as previously notified, WilTel will notify the Vyvx
Contact at WilTel's earliest opportunity and will comply with the
provisions of the previous sentence to reschedule any delayed
activity.
g. Upon written request by Vyvx to the Outside Plant Contact
identified in Attachment 1, WilTel will perform Other Maintenance.
WilTel will have twenty (20) business days to respond with a firm
scheduled completion date. The timely approval, scheduling and
completion of all Other Maintenance requests will not be unreasonably
withheld. Vyvx will pay WilTel the Costs of Other Maintenance.
h. WilTel will provide access to Vyvx to as-built drawings for
outside plant and will provide Vyvx redline as-built drawings
reflecting engineering changes affecting Vyvx Equipment within sixty
(60) days of a request by Vyvx.
2. COMMON FACILITIES
a. WilTel will maintain all Common Facilities at Regenerator
Locations and POPs in a manner which will permit the normal operation
of the Vyvx Property.
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<PAGE> 46
b. WilTel will provide all power and associated environmental
control systems necessary at POP's (subject to provisions of applicable
Collocate Agreements) and Regenerator Locations for the operation of
Vyvx Equipment associated with the Vyvx Fiber in accordance with the
Common Facilities Specifications provided in Attachment 3. In addition,
WilTel will maintain battery backup for POPs and Regenerator Locations
as follows:
i. Each POP will be supplied with an emergency battery
power supply having a reserve equal to the reserve required by the
practices and procedures of WilTel in effect at the commencement
of the Agreement.
ii. Each Regenerator Location will be supplied with an
emergency battery power supply having a reserve equal to the
reserve required by the practices and procedures of WilTel in
effect at the commencement of the Agreement. In addition, WilTel
will use its best efforts to provide within four (4) hours after a
power outage at a Regenerator Location emergency generators with
sufficient capability to restore one (1) unit of all redundant
HVAC systems and one (1) rectifier.
c. WilTel will perform appropriate Routine Maintenance on
Common Facilities and POPs in accordance with WilTel's then current
preventive maintenance procedures which will not substantially deviate
from industry practice and will be responsible for correcting Common
Facilities dysfunctions.
d. At a minimum, WilTel's NCC will monitor alarms for
intrusion, high/low temperature, fire or smoke, toxic/explosive gas
(where applicable), DC and commercial AC power, and high water (where
applicable). Upon receipt of an alarm, WilTel will take appropriate
action.
3. VYVX FIBERS
a. Subject to the provisions of Paragraph 3.b. hereof, WilTel
will maintain the Vyvx Fibers in good and operable condition, will
repair the Vyvx Fibers in a workmanlike manner, and will comply with
the Splicing Specifications as provided in Attachment 4, as may be
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<PAGE> 47
reasonably modified by WilTel. However, WilTel responsibilities with
respect to the maintenance and repair of Vyvx Fibers will end at the
Demarcation Point(s).
b. WilTel will have no obligation (including, but not limited
to, any obligation for any cost of repair or replacement) with respect
to defects in the material or workmanship of the Vyvx Fibers
(excluding the workmanship of splices which workmanship will meet the
standards provided in paragraph 3.a.). WilTel agrees, however, to
perform replacements or make any reasonable repairs required to the
Vyvx Fibers due to defects in the material or workmanship of the Vyvx
Fibers. Vyvx will pay WilTel the Costs of such replacements or
repairs, even if such replacement or repair is initiated through a
request for Routine Maintenance or Demand Maintenance.
c. WilTel will perform any maintenance or repair work as
required under this System Service Statement on the Vyvx Fibers if such
work is necessitated by Vyvx's negligent or improper use of Vyvx
Fibers. However, Vyvx will pay WilTel the Costs of such maintenance or
repairs including any maintenance or repairs to the WilTel Network, or
any portion thereof.
d. WilTel maintenance employees will be responsible for
correcting or repairing Vyvx Fiber discontinuity or damage, including
but not limited to the emergency repair of the Vyvx Fibers within the
WilTel Cable between the Demarcation Points. Wiltel will use reasonable
efforts to repair Vyvx Fiber traffic affecting discontinuity within six
(6) hours after the WilTel maintenance employee's arrival at the
problem site. WilTel will maintain sufficient capability to
teleconference with the Vyvx Contact during an emergency repair in
order to provide continuous communication. Within twenty-four (24)
hours after completion of an emergency repair, WilTel will commence its
planning for permanent repair, will notify the Vyvx Contact of such
plans, and will implement such permanent repair within an appropriate
time thereafter.
e. WilTel will prioritize the Routine Maintenance and Demand
Maintenance to be performed by WilTel on Vyvx Fibers and other fibers
within the WilTel Cable predicated on overall expediency regardless of
ownership.
Page 4 of 5
<PAGE> 48
4. VYVX EQUIPMENT
a. WilTel will maintain the Vyvx Equipment so as to permit the
effective transmission of communications signals over the Vyvx
Equipment so that the one-way quality of transmissions over the Vyvx
Property will meet the technical standards for DS3 Service as provided
in Attachment 5. Upon a reasonable request by Vyvx, WilTel will perform
additional specific Routine Maintenance functions. WilTel's
responsibility to maintain Vyvx Equipment ends at Demarcation Points.
b. WilTel will provide protection switching for the Vyvx
Equipment. Vyvx will have priority for access to protection
transmission equipment to the extent of the Vyvx Percentage. WilTel
will provide a level of protection switching capability in accordance
with the manufacturer's specifications.
Page 5 of 5
<PAGE> 1
EXHIBIT 10.39
ADMINISTRATIVE SERVICES AGREEMENT
THIS ADMINISTRATIVE SERVICES AGREEMENT (this "Agreement") is made and
entered into as of the _____ day of _____, 1999, by and between The Williams
Companies, Inc., a Delaware corporation ("Williams"), those certain subsidiaries
of Williams listed on the Signature Pages of this Agreement (collectively the
"Williams Subsidiaries" and together with Williams, the "Williams Group"),
Williams Communications Group, Inc., a Delaware corporation, ("Communications")
and those certain subsidiaries of Communications listed on the Signature Pages
of this Agreement (collectively the "Communications Subsidiaries").
WITNESSETH:
WHEREAS, Communications plans to sell shares of its Series A Common
Stock to the public in an underwritten Initial Public Offering on the one hand
and to SBC Communications, Inc., pursuant to a Securities Purchase Agreement on
the other, and
WHEREAS, Williams will continue to hold all of the issued and
outstanding Series B Common Stock of Communications after the closing of these
sales of the Series A Common Stock, and
WHEREAS, Communications desires to continue for the term of this
Agreement to obtain certain Support Services from Williams and the Williams
Subsidiaries to facilitate the operations of Communications and the
Communications Subsidiaries (collectively the "Communications Group") upon the
terms and subject to the conditions that are set forth in this Agreement;
NOW, THEREFORE, for good and valuable consideration (the receipt and
sufficiency of which are hereby acknowledged), and in consideration of the
foregoing premises and the mutual promises and obligations contained herein, the
Parties hereto agree as follows:
1. Support Services. For so long as and to the extent that Williams or
any of the Williams Subsidiaries (or any of their respective subsidiaries or
affiliates) perform the Support Services for themselves or provide the Support
Services (as hereinafter defined) to their respective subsidiaries or
affiliates, Williams and Williams Subsidiaries will provide Support Services to
the Communications Group in accordance with the terms and subject to the
conditions set forth in this Agreement.
The term "Support Services" as used in this Agreement means the
services provided by each of the cost centers identified on Attachment A to the
same extent provided to Williams and the Williams Subsidiaries and use of the
applicable facilities and employees for other services performed by Williams or
the Williams Subsidiaries for the Communications Group during the 12-month
period ended on the date hereof.
Page 1 of 10
<PAGE> 2
Any additional leases, licenses or purchases specifically required by
Williams or the Williams Subsidiaries to provide Support Services to the
Communications Group at any time during the term of this Agreement and not
specifically covered under any other Agreement will be charged directly to the
Communications Group on an actual cost basis. Communications Group will be given
written notification of these charges by Williams in the first invoice for
service charges reflecting these costs.
2. Reimbursement for Support Services. In consideration of the
performance of the Support Services on the part of the Williams Group,
Communications agrees to pay or reimburse Williams for Support Services rendered
by the Williams Group on the Communications Group's behalf at the same rate
Williams charges its Tulsa based operating companies, as such rates may be
revised from time to time, which charges shall be consistent with past practices
regarding the treatment of any overrecoveries or underrecoveries of cost, which
rates and treatment shall be subject to good faith negotiations between Williams
and Communications consistent with Williams' policies and practices, as applied
to all Williams Subsidiaries (the "Services Charges"). For informational
purposes only, Williams has set forth the current allocation or charge method
and the related logic for Support Services on Attachment A. The intent of the
parties with respect to payment for Support Services performed hereunder is that
(i) the Service Charges will be remitted to Williams, (ii) other reasonable
out-of-pocket expenses incurred by Williams or any Williams Subsidiaries, and
reasonable expenses with respect to travel and charges by third parties incurred
by Williams or Williams Subsidiaries on Communications Group's behalf will be
reimbursed to Williams and (iii) amounts expended by Williams or Williams
Subsidiaries on Communications Group's behalf with respect to claims and
litigation (including settlement costs and reasonable expenses associated
therewith including attorneys' fees and expenses and court costs) pertaining to
the Communications Group will be reimbursed to Williams.
With respect to the Service Charges, Williams will submit invoices to
Communications on at least a monthly basis in the amounts determined in
accordance with this Section 2. Communications will pay or cause to be paid each
invoice submitted to Communications pursuant to the foregoing sentence within
fifteen (15) business days after the receipt by Communications of such invoice
(except with respect to amounts in any such invoice that are manifestly in
error). In the event that Communications questions the amount of any such bill,
the manner of its computation, or the underlying data on which the bill was
based, it will pay the related invoice in accordance with the preceding sentence
(except with respect to amounts in any such invoice that are manifestly in
error) and thereafter notify Williams of such questions and, for a period of 30
days thereafter, Williams will make or cause to be made available to
Communications, its employees and designees, at a location in Williams
headquarters designated by Williams during normal business hours, all
documentation necessary for Communications to review the bill, the computation
and the data. If, upon completion of the review, Williams and Communications are
not in agreement upon the amount of the bill, the amount will be referred to a
nationally recognized firm of certified public accountants selected by mutual
agreement of Williams and Communications, which firm will make a final binding
decision as to the correct amount of the bill. In the event that it is
Page 2 of 10
<PAGE> 3
determined that the correct amount of the bill is less than the amount that was
paid by Communications with regard thereto, the excess amount will be promptly
refunded to Communications by Williams. Williams and Communications will equally
share in the cost associated with retaining such firm of certified public
accountants. Nothing herein will be deemed to prevent either party from
proposing adjustments to prior Communication invoices that were inadvertently
omitted from the prior invoices that were sent to Communications by Williams.
If either Williams or Communications fails to pay as and when due and
payable any amount hereunder (including, without limitation, the Service
Charges), then either Williams or Communications, as the case may be, shall pay
interest on such amount from the due date up to and including the date when such
amount and all interest thereon are paid in full at the rate per annum equal to
the prime rate of Citibank N.A., plus one percent (1%). For the purposes hereof,
the "prime rate of Citibank N.A." shall mean the annual rate of interest
announced from time to time by Citibank N.A. as a reference rate then in effect
for determining annual interest rates of U.S. dollar commercial loans.
3. Manner and Time of Performance. The Williams Group will perform or
cause to be performed the Support Services hereunder with the same degree of
care, skill and diligence with which they perform or would perform similar
services for themselves and their respective subsidiaries and affiliates
consistent with past practices (including, without limitation, with respect to
the type, quantity, quality and timeliness of such services).
4. Books and Records. The Williams Group will maintain books, records,
documents and other written evidence, consistent with their normal accounting
procedures and practices, sufficient to accurately, completely and properly
reflect the performance of the Support Services hereunder and the amounts due in
accordance with any provision of this Agreement (collectively, the "Services
Evidence"). The members of the Communications Group and their respective
representatives will be given access subject to reasonable notice at all times
during normal business hours to the Services Evidence for any purpose deemed
appropriate by Communications relating to the confirming, checking, reviewing,
examining, auditing or verifying the accuracy of the invoices submitted to them.
5. Independent Contractor. In performing the Support Services
hereunder, each member of the Williams Group will operate as and have the status
of an independent contractor, subject only to the general direction of the
Communications Group regarding the Support Services to be rendered as opposed to
the method of performance of the Support Services.
6. Confidentiality. All non-public information provided by any member
of the Communications Group or by any of their respective representatives
pursuant to this Agreement will be confidential and not disclosed to any person
except with the consent of Communications. All non-public information provided
by any member of the Williams Group
Page 3 of 10
<PAGE> 4
or by any of their respective representatives pursuant to this Agreement will be
confidential and not disclosed to any person except with the consent of
Williams.
7. Term of Agreement. The terms of Section 1 of this Agreement will
continue in force for an initial term of five (5) years after the date hereof
(the "Initial Term"), and will automatically renew for one(1) additional one (1)
year term thereafter (the "Renewal Term"); provided, however, that either
Communications or Williams may terminate Section 1 hereof, in whole or with
respect to any Support Service being provided at any time and from time to time,
at the end of the Initial Term or during the Renewal Term by providing six (6)
months advance written notice of such termination to the other party. Any such
termination will be effective on the time and date stated therein.
Either Communications or Williams may terminate this Agreement or any
addendum to this Agreement for any material breach or default of the other party
if such breach or default is not corrected within thirty (30) days of giving
written notice of such breach or default to the defaulting party.
Upon termination of Section 1, Communications agrees to reimburse
Williams for all unpaid amounts due as provided for in Section 2 (with any usage
fees which are fixed monthly fees being prorated to the date of termination
thereof) incurred by the Williams Group up to such date of termination; provided
that if Williams has received more than the portion of such unpaid amounts due
as provided for under Section 2 as of the date of termination, Williams will
reimburse Communications the portion of such unpaid amounts to which it is not
entitled under Section 2. In the event that Communications fails to pay any
amount that is required to be paid hereunder when due and such payment is not
thereafter made within fifteen (15) business days after the date on which
Williams has notified Communications in writing of such failure to pay, Williams
may at its option and without further notice immediately terminate the Support
Services after the expiration of such fifteen (15) business day period, without
prejudice to any other remedies that Williams has at law or in equity.
Upon termination of this Agreement, the Williams Group will, at the
request of a member of the Communications Group, transfer to such member of the
Communications Group historical data then in Williams' custody of the
Communications Group relating to the Support Services provided hereunder.
8. Assignment. Neither Williams, any Williams Subsidiary,
Communications, nor any Communications Subsidiary, will assign, in whole or in
part, any of the rights, obligations or benefits of this Agreement without the
prior written consent of the other parties, except that Williams may assign its
rights (but not Williams' obligations) hereunder to any of its affiliates or
majority owned subsidiaries.
9. Indemnification. Communications and each member of the
Communications Group will, jointly and severally, and to the fullest extent
permitted by applicable law, indemnify and hold harmless Williams, Williams
Subsidiaries and their respective officers,
Page 4 of 10
<PAGE> 5
directors, agents and employees (collectively, the "Williams Indemnitees") from
and against all claims, demands, damages, losses, liabilities, costs or expenses
(including, without limitation, reasonable attorneys' fees and expenses)
(collectively, "Costs") incurred or suffered by an Williams Indemnitee as a
result of the Support Services; provided, however, that the foregoing terms of
this sentence will not apply to the extent such Costs result from or arise out
of the negligence or willful misconduct of the Williams Group or any member
thereof. Williams will, to the fullest extent permitted by applicable law,
indemnify and hold harmless the members of the Communications Group and their
respective officers, directors, agents and employees (collectively, the
"Communications Indemnitees") from and against all Costs incurred or suffered by
any Communications Indemnitee as a result of the Support Services to the extent
such Costs result from or arise out of the gross negligence or willful
misconduct of the Williams Group or any member thereof. In no case will Costs be
deemed to include Service Charges. This Section 9 will survive the termination
of the other terms of this Agreement.
10. Delegation. Subject to Section 3 above, Communications delegates to
Williams final, binding, and exclusive authority, responsibility, and discretion
to interpret and construe the provisions of employee welfare benefit plans in
which Communications has elected to participate and which are administered by
Williams under this Agreement (collectively, "Employee Welfare Plans"). Williams
may further delegate such authority to plan administrators to:
(i) provide administrative and other services;
(ii) reach factually supported conclusions consistent with the terms of
the Employee Welfare Plans;
(iii) make a full and fair review of each claim denial and decision
related to the provision of benefits provided or arranged for under the
Employee Welfare Plans, pursuant to the requirements of ERISA, if
within sixty days after receipt of the notice of denial, a claimant
requests in writing a review for reconsideration of such decisions. The
administrator shall notify the claimant in writing of its decision on
review. Such notice shall satisfy all ERISA requirements relating
thereto; and
(iv) notify the claimant in writing of its decision on review.
11. Williams Litigation. In the event that any litigation, proceeding,
or investigation by or before any court or governmental agency or body is
commenced or threatened against Williams or any member of the Williams Group
after the effective date of this Agreement and which relates to Support Services
rendered hereunder and arises out of or is based solely upon the past, present,
or future business or operations of Communications or of any member of the
Communications Group, then at Williams' option, Williams and Communications
shall use their best reasonable efforts to have Communications or the relevant
member of the Communications Group, as the case may be, substituted in the place
of and for
Page 5 of 10
<PAGE> 6
Williams or the relevant member of the Williams Group, as the case may be, and
to have Williams or the relevant member of the Williams Group, as the case may
be, removed as a party, as promptly as is practicable. Pending such
substitution, and in the cases where such substitution cannot be effected,
Communications, with the full cooperation of Williams and the Williams Group,
shall promptly assume and direct the defense, prosecution, and/or settlement of
the claims concerned, employing for such purpose counsel reasonably satisfactory
to Williams, and shall pay all expenses related thereto. To the extent that any
such expenses are paid by Williams or the relevant member of the Williams Group,
as the case may be, Communications shall promptly reimburse Williams or the
relevant member of the Williams Group, as the case may be, therefor.
12. Communications Litigation. In the event that any litigation,
proceeding, or investigation by or before any court or governmental agency or
body is commenced or threatened against Communications or a member of the
Communications Group after the effective date of this Agreement and which
relates to Support Services rendered hereunder and arises out of or is based
solely upon the past, present, or future business or operations of Williams or
any member of the Williams Group but not of Communications or a member of the
Communications Group, then at Communications' option, Communications and
Williams shall use their best reasonable efforts to have Williams or the
relevant member of the Williams Group, as the case may be, substituted in the
place of and for Communications or the relevant member of the Communications
Group, as the case may be, and to have Communications or the relevant member of
the Communications Group, as the case may be, removed as a party, as promptly as
is practicable. Pending such substitution and in cases where such substitution
cannot be effected, Williams shall, with the full cooperation of Communications
and Communications Group, promptly assume and direct the defense, prosecution,
and/or settlement of the claims concerned, employing for such purpose counsel
reasonable satisfactory to Communications, and shall pay all expenses related
thereto. To the extent that any such expenses are paid by Communications or the
relevant member of the Communications Group, Williams shall promptly reimburse
Communications or the relevant member of the Communications Group, as the case
may be, therefor.
13. Compliance with Laws. Williams and Communications agree to comply
and each of Williams and Communications agrees to cause compliance by the
Williams Group and the Communications Group, respectively, providing or
receiving, as the case may be, Support Services hereunder, with all applicable
federal, state, and local laws and regulations in the performance of this
Agreement.
14. Governing Law. This Agreement will be construed in accordance with,
and all disputes hereunder will be governed by, the laws of the State of
Oklahoma, without giving regard to its conflicts of laws principles.
Page 6 of 10
<PAGE> 7
15. Notices. Any notice, request, instruction, correspondence, document
or other communication to be given hereunder by any party to another (herein
collectively called a "Notice") will be in writing and delivered personally or
mailed by certified mail, postage prepared and return receipt requested, or by
facsimile, as follows:
If to Williams or any Williams Subsidiary:
The Williams Companies, Inc. (or if to a Williams
One Williams Center Subsidiary, to it in care
Tulsa, Oklahoma 74172 of Williams)
Attention: General Counsel
Facsimile No. 918/573-5942
with a copy to Corporate Controller
If to Communications:
Williams Communications Group, Inc.
One Williams Center
Tulsa, Oklahoma 74172
Attention: General Counsel
Notice given by personal delivery will be effective upon actual
receipt. Notice given by mail will be effective upon forty-eight (48) hours
after it is placed in a mailbox for mailing. Notice given by facsimile will be
effective upon actual receipt if received during the recipient's normal business
hours, or at the beginning of the recipient's next business day after receipt if
not received during the recipient's normal business hours; provided that Notices
by facsimile are confirmed promptly after transmission by delivery to the
recipient of a copy thereof in writing by certified mail or personal delivery.
Any party may change any address to which Notice is to be given to it by giving
Notice as provided above of such change of address. For purposes of this
Agreement, the term "business day" means any day other than a Saturday, Sunday
or a day on which national banks in the State of Oklahoma are permitted or
required by law to close.
16. Mutual Cooperation. Williams and Communications will provide each
other with such assistance as may reasonably be required by any of them in
connection with the performance of all obligations under this Agreement.
17. Waiver. No waiver by any party of any term or breach of this
Agreement will be effective unless in writing and signed by the person against
whom such waiver is asserted, and a waiver of any one term or breach may not be
construed as a waiver of any other term or breach hereof or of the same or a
similar term or breach on any other occasion; provided, however, Williams may
effect waivers or amendments for any member of the Williams Group or Williams
Indemnitee, and Communications may effect waivers or amendments for any member
of the Communications Group.
Page 7 of 10
<PAGE> 8
18. Dispute Resolutions. The parties agree to attempt to resolve any
disagreement they may have under this Agreement through a mutually acceptable
form of alternative dispute resolution prior to initiating litigation in respect
of such dispute.
19. Construction. Except where otherwise expressly provided, all
references to Sections, paragraphs and Schedules in this Agreement will be
deemed to be references to such Sections and paragraphs of this Agreement or
Attachment A attached to this Agreement, respectively. The terms "hereof,"
"herein," "hereunder" and other terms of similar import will be deemed to refer
to this Agreement in its entirety, and not to any Section or paragraph.
20. Force Majeure. For purposes of this Section, "force majeure" means
an event beyond the control of either party, which by its nature could not have
been foreseen by such party, or if it could have been foreseen, was unavoidable,
and includes without limitation, acts of God, storms, floods, riots, fires,
sabotage, civil commotion or civil unrest, interference by civil or military
authorities, acts of war (declared or undeclared) and failure of energy sources.
Neither party shall be under any liability for failure to fulfill any
obligation under this Agreement, so long as and to the extent to which the
fulfillment of such obligation is prevented, frustrated, hindered, or delayed as
a consequence of circumstances of force majeure, provided always that such party
shall have exercised all due diligence to minimize to the greatest extent
possible the effect of force majeure on its obligations hereunder.
Promptly on becoming aware of force majeure causing a delay in
performance or preventing performance of any obligations imposed by this
Agreement (and termination of such delay), the party affected shall give written
notice to the other party giving details of the same, including particulars of
the actual and, if applicable, estimated continuing effects of such force
majeure on the obligations of the party whose performance is prevented or
delayed. If such notice shall have been duly given, and actual delay resulting
from such force majeure shall be deemed not to be a breach of this Agreement,
and the period for performance of the obligation to which it relates shall be
extended accordingly, provided that if force majeure results in the performance
of a party being delayed by more than 60 days, the other party shall have the
right to terminate this Agreement with respect to any Support Service effected
by such delay forthwith by written notice.
21. Amendment. No modification or amendment of this Agreement will be
binding upon any party unless in writing and signed by the party against which
the modification or amendment is asserted.
22. Entire Agreement. This Agreement and Attachment A (which is hereby
incorporated herein), constitute the entire understanding of the parties with
respect to the subject matter hereof, superseding all negotiations, prior
discussions and preliminary agreements, if any.
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<PAGE> 9
23. Severability. Any Section or any other provision of this Agreement
which is, or becomes, illegal, invalid or unenforceable shall be severed
herefrom and shall be ineffective to the extent of such illegality, invalidity
or unenforceability and shall not affect or impair the remaining provisions
hereof, which provisions shall (a) be severed from any illegal, invalid or
unenforceable Section or any other provision of this Agreement, and (b)
otherwise remain in full force and effect; provided, however, that the parties
shall use their best efforts to achieve the purpose of the invalid or
unenforceable provision or part thereof by a new valid and enforceable
stipulation.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the date and year first-above written.
WILLIAMS:
THE WILLIAMS COMPANIES, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
WILLIAMS SUBSIDIARIES:
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COMMUNICATIONS:
WILLIAMS TELECOMMUNICATIONS GROUP, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Page 9 of 10
<PAGE> 10
COMMUNICATION SUBSIDIARIES:
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Page 10 of 10
<PAGE> 1
EXHIBIT 10.40
SERVICE AGREEMENT
BETWEEN
WILLIAMS INFORMATION SERVICES CORPORATION
AND
WILLIAMS COMMUNICATIONS GROUP, INC.
THIS SERVICE AGREEMENT ("Agreement") is effective as of the ____ of
_______________, 1999, by and between WILLIAMS INFORMATION SERVICES CORPORATION,
a Delaware corporation, hereinafter referred to as "WISC" and WILLIAMS
COMMUNICATIONS GROUP, INC., a Delaware corporation, and its majority owned
subsidiaries, hereinafter referred to as "Customer." WISC and Customer are each
a "Party" and together are the "Parties" to this Agreement.
RECITALS:
WHEREAS, WISC has been providing Data Processing and Computer-related
services to Customer and Customer desires to continue purchasing such services,
solely for its internal use and the internal use of its subsidiaries in which
Customer possesses fifty percent (50%) or greater ownership interest;
WHEREAS, the Parties desire to establish the service levels provided
under this Agreement, the reimbursable commitments due upon termination of this
Agreement and other issues related to the provision of Services hereunder.
NOW, THEREFORE, in consideration of the foregoing, of the mutual
promises hereinafter set forth, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Parties agree
as follows:
1. SERVICES. WISC agrees, during the term of this Agreement, to provide
use of WISC employees, facilities and systems in the performance and
coordination of data processing and computer-related services to Customer. Such
non-exclusive service, as more particularly described in Attachment B (the
"Services Profile"), attached hereto and incorporated by reference, includes,
but is not limited to, mainframe operations, payroll processing and support,
technical staff support, data center operations and floorspace, special
processing requirements, system backups, network services, telephone services
and Enterprise services including Help Desk, IT Sourcing and Y2K Compliance
Program (the "Services" or "Service"). The Service provided by WISC will be
provided in accordance with the Service Level Agreements to be developed and
mutually agreed to by the Parties and attached hereto as Attachment A. The
Services Profile and the Service Level Agreements shall be updated or amended
from time to time.
2. LIAISON. Customer will designate a person to act as a liaison
("Liaison") for all contact with WISC. The Liaison has authority to make
requests for all Service and has authority to approve all commitments made by
WISC on Customer's behalf. Approval of all costs, expenditures, expenses,
contractual obligations, and other commitments will be in writing by the
designated Liaison.
B-1
<PAGE> 2
3. COMMITMENT LIST. All hardware, software, and Services Customer has
previously committed to pay for ("Existing Commitments") will be listed in a
commitment list ("Commitment List") provided to Customer, a summary of which is
attached hereto as Attachment C, and incorporated by reference. The Commitments
List includes amounts for: (1) estimated taxes; (2) leased equipment; (3) fixed
assets; (4) facilities improvements; (5) third party software; and (6)
miscellaneous expenses. WISC will continue to update the Commitments List each
quarter to add new commitments and to decrease other commitments.
Certain commitments will decrease as a result of WISC fulfilling its
obligations under the commitment. For example, a contractual obligation which
presently has a two (2) year commitment, will be reduced each quarter as WISC
performs the obligations required for that quarter.
Customer will have thirty (30) days after receiving the revised
Commitments List to object to any item on the Commitments List. After this
thirty (30) day review period has passed, Customer will be deemed to have
accepted all items on the Commitments List.
4. FEES AND PAYMENTS. In consideration of WISC entering into purchase,
lease, development and other obligations necessary to perform Services hereunder
for Customer, Customer agrees to pay all costs incurred by WISC and approved in
writing by Liaison including, but not limited to, all costs for equipment,
software, personnel, or other contractual obligations for which WISC has already
paid or remains obligated to pay, arising in connection with the provision of
Services hereunder. All costs for such equipment, software, personnel or other
contractual obligations, will be listed on the Commitment List.
A. ALLOCATION CHARGES AND FEES. In addition to the obligations
and charges set forth in this Agreement, Customer agrees to pay WISC
the allocation amounts per month for the allocated Services set out in
the Services Profile, as well as the amounts per month for other
Services used by Customer at the published rates also set out in the
Services Profile. The Services Profile will be provided annually on or
before August 1.
B. MISCELLANEOUS CHARGES AND FEES. Customer will reimburse
WISC for WISC's actual cost for certain items used in providing
services to Customer including but not limited to the following items:
Custom forms (except when forms are purchased or supplied by Customer),
the lease of terminal equipment used on Customer's premises, telephone
lines and telephone equipment related to the Customer's processing and
all microfiche charges related to Customer's reports.
C. TAXES. Customer agrees to pay or reimburse WISC for all
taxes for goods or services procured by WISC pursuant to performance of
this Agreement for Customer.
D. BILLING. Customer shall be billed every month for amounts
due for the previous month. Payment is due thirty (30) days after
Customer's receipt of invoice. Undisputed payments not received by the
due date shall accrue interest at a rate of one and one half percent
(1.5%) per month or the highest rate allowed by law whichever is less.
B-2
<PAGE> 3
E. DISPUTED CHARGES. As to disputed amounts, Customer will
place the disputed amount in an escrow account and provide WISC written
notice, which includes a summary of its dispute, within thirty (30)
days of the due date. Any amount for which Customer does not give
notice of a dispute within thirty (30) days of the due date will be
deemed to be an undisputed amount. As to disputed amounts the Parties
will attempt to resolve the dispute in accordance with Section 23,
Dispute Resolution.
5. TERM. The term of this Agreement will begin April ____, 1999, and
will remain in effect until April _____, 2004 (the "Initial Term"), and will
automatically renew for additional terms of twelve (12) months each.
Notwithstanding the foregoing, either Party may terminate this Agreement, at any
time, by giving twelve (12) months prior written notice to the other Party.
6. BACKUP AND RECOVERY PLAN. Customer and WISC, as timing allows, shall
jointly develop and maintain a backup and recovery plan mutually satisfactory to
the Parties which details specific responsibilities and recovery objectives.
WISC will incorporate Customer's backup and recovery priorities in its published
overall disaster and recovery plan which is currently being revised and updated.
The WISC disaster and recovery plan includes a listing of those persons
authorized to declare a disaster. Customer will have the option to contract for
its own disaster recovery services with a vendor of its choice for those
services for which WISC is not directly responsible. This option, however, will
not relieve Customer of any obligations for disaster recovery services on the
Commitments List.
7. PROCESSING STANDARDS. Customer will be subject to all reasonable
processing standards and procedures as set forth in the WISC Data Center
Standards and Operating Procedures Manual. WISC will copy all Customer mainframe
software and ensure synchronization with Customer Data maintained by WISC,
semi-annually, including updates and documentation, and will store in such data
WISC's offsite facility, and will provide Customer with access to such copies
upon request. As to data, programs and software supplied by WISC to Customer,
which are licensed from third party vendors, the Parties recognize that use is
subject to the license agreements for each software product and the Parties
agree to be bound by such agreements. Upon request WISC shall provide to
Customer copies of the terms and conditions of such license agreements.
8. CONFIDENTIAL AND PROPRIETARY INFORMATION. The Parties will take all
reasonable precautions to protect the security of the other Party's confidential
information, including making reasonable efforts to cause its directors,
employees and agents to abide by the terms of this Agreement. Confidential
information ("Confidential Information") shall include, but not be limited to,
the following: business and financial methods; records and practices; pricing
and selling techniques; file or data base materials; price lists; software;
computer programs; credit and financial data; as well as similar information
relating to the parent, subsidiaries and affiliates of either Party. Nothing in
this Agreement shall prohibit or restrict WISC's right to use general ideas,
concepts, methods, expressions, know-how and techniques related to the scope of
WISC's Services and used in the course of its Services that are not unique to
the Confidential Information, or do not include specific elements of the
Confidential Information. Nothing in this Agreement shall prohibit or restrict
WISC's rights to provide to third parties services which are similar to those it
provides to Customer, so long as such provision of services does not breach this
Agreement. Neither
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Party will make copies of the other Party's Confidential Information for its own
use without the prior written permission of the other. The Parties may copy the
software of the other only as permitted in applicable license agreements and
only as reasonably necessary to support authorized use and shall not make such
software available to any person other than employees or agents whose job
performance requires such access.
Files containing Customer's systems inputs and outputs are, and shall
remain, the property of Customer and shall be returned to Customer at its
request. Physical media produced by WISC for Customer must be purchased by
Customer or returned to WISC within thirty (30) days after Customer's receipt of
same.
The Parties hereto may exchange certain Confidential Information for
the purpose of implementing this Agreement. In consideration of the receipt of
such Confidential Information, the Parties agree as follows:
1. Each Party shall retain all rights to its Confidential Information.
Each receiving Party agrees to take such reasonable measures to prevent
the unauthorized disclosure to third parties of Confidential
Information as it would take to prevent disclosure of its own
proprietary or Confidential Information. Disclosure will be limited to
such employees and agents as necessary to perform under this Agreement.
To the extent practicable, information protected by this Agreement
shall be marked "Confidential." Except as necessary for proper
evaluation, documents containing Confidential Information obtained
pursuant to this Agreement may not be duplicated in any manner without
the written permission of the originating Party.
2. The Parties agree to keep all Confidential Information confidential
for seven (7) years after the expiration or termination of this
Agreement. Information obtained by receiving Party that (1) is or
becomes generally known or available to the public without breach or
any obligation of confidentiality; (2) is lawfully known to it at the
time of receipt as evidenced by the receiving Party's written records;
or (3) is subsequently furnished to it lawfully by a third party, to
the best of the receiving Party's knowledge, without restriction and
without breach or any obligation of confidentiality; will not be deemed
confidential and may be used without restriction. If disclosure of
Confidential Information is required pursuant to a valid court order or
subpoena, receiving Party shall give the disclosing Party prior written
notification of such order or subpoena, and then shall disclose the
Confidential Information only to the extent necessary to comply with
the governmental agency's request. Confidential Information disclosed
pursuant to a valid court order or subpoena does not lose its
confidential status as to third parties. Unless expressly agreed
otherwise, the Parties shall also keep confidential the terms and
conditions of this Agreement and the exchange of information.
Upon reasonable notice, Customer's internal and external auditors shall
have the right during normal working hours to review The Williams Companies,
Inc.'s internal audit department work papers, program design flow charts,
programs and other documents, materials and information relating to the Customer
as may reasonably be requested by Customer's internal and external auditors in
connection with the preparation of a certified financial audit of Customer. All
documents, materials and information made available to or
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disclosed to Customer's internal and external auditors under this Section shall
be kept confidential by Customer's internal and external auditors.
9. IMPROPER PAYMENTS. Neither Customer nor WISC will use any funds
received under the Agreement for illegal or otherwise improper purposes. Neither
Customer nor WISC will pay any commissions, fees or rebates to the other, nor
favor any employee of the other with gifts or entertainment of significant cost
or value. If either Customer or WISC has reasonable cause to believe that
provisions of this paragraph have been violated, such Party may audit the
records of the other, for the sole purpose of establishing compliance with such
provisions.
10. WARRANTIES. WISC warrants that the services provided hereunder will
be provided in a workmanlike manner. Services not provided in a workmanlike
manner will be retendered. WISC also agrees that as to software programs and
equipment purchased or acquired for Customer pursuant to this Agreement that
WISC will seek repair, replacement or refund on behalf of Customer pursuant to
the terms of the applicable agreement if such products do not conform to the
vendor or manufacturer warranty. WISC MAKES NO OTHER WARRANTIES OR
REPRESENTATIONS, EXPRESSED OR IMPLIED, IN FACT OR IN LAW, INCLUDING THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT
TO ANY SERVICE, PROGRAM OR EQUIPMENT AVAILABLE THROUGH WISC, WHETHER DEVELOPED
BY WISC OR LICENSED, PURCHASED, OR OTHERWISE OBTAINED BY WISC FROM A THIRD
PARTY. CUSTOMER, IN USING A PROGRAM, SERVICE OR EQUIPMENT PROVIDED BY WISC, WILL
BE DEEMED TO HAVE ACKNOWLEDGED THE ADEQUACY OF THE PROGRAM, SERVICE OR EQUIPMENT
FOR ITS INTENDED USE AFTER SEVEN (7) DAYS USE BY CUSTOMER. IN ADDITION, WISC
SHALL ONLY BE REQUIRED TO PASS THROUGH THE MANUFACTURER OR VENDOR WARRANTY
GRANTED TO WISC. CUSTOMER IS NOT WAIVING ANY MANUFACTURER OR VENDOR WARRANTIES
IF MADE AVAILABLE TO CUSTOMER BY ANY MANUFACTURER OR VENDOR.
11. LIMITATION OF LIABILITY. BECAUSE OF THE DIFFICULTY OF ASCERTAINING
AND MEASURING DAMAGES HEREUNDER, IT IS AGREED THAT EACH PARTIES' LIABILITY TO
THE OTHER FOR ANY TYPE OF COSTS, LOSSES, DAMAGES OR EXPENSES, ARISING OUT OF
THIS AGREEMENT OR THE SERVICES PROVIDED HEREUNDER SHALL NOT EXCEED ONE MILLION
DOLLARS ($1,000,000). THIS LIMIT OF LIABILITY DOES NOT APPLY TO AND IN NO WAY
LIMITS CUSTOMER'S OBLIGATIONS TO PAY FOR ALL ITEMS ON THE FINAL COMMITMENTS LIST
AND ALL AMOUNTS DUE FOR SERVICES HEREUNDER. WISC WILL NOT BE RESPONSIBLE FOR ANY
LOSS OR DAMAGE TO PROPERTY OF ANY KIND OWNED OR LEASED BY CUSTOMER EXCEPT AND TO
THE EXTENT SUCH LOSS OR DAMAGE TO PROPERTY IS CAUSED BY WISC'S NEGLIGENCE OR
WILLFUL MISCONDUCT. IN NO EVENT SHALL EITHER WISC OR CUSTOMER BE LIABLE FOR ANY
INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES SUCH AS LOSS OF PROFITS OR
ANTICIPATED PROFITS, LOSS OF USE OR DATA IN CONNECTION WITH, OR ARISING OUT OF
THE SERVICES PROVIDED UNDER THIS AGREEMENT WHETHER BASED UPON ANY THEORY IN
CONTRACT OR IN TORT
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AND WHETHER THE PARTIES HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH LOSS.
12. INDEMNIFICATION. Subject to Paragraph 11, the Customer will,
jointly and severally, and to the fullest extent permitted by applicable law,
indemnify and hold harmless WISC, The Williams Companies Inc. and any of its
subsidiaries and their respective officers, directors, agents and employees
(collectively, the "WISC Indemnitees") from and against all claims, demands,
damages, losses, liabilities, costs or expenses (including, without limitation,
reasonable attorney's fees and expenses) (collectively, "Costs") incurred or
suffered by any WISC Indemnitee which result from or arise out of the negligent
or willful misconduct of Customer regarding the Services.
Subject to Paragraph 11, WISC will, jointly and severally, and to the
fullest extent permitted by applicable law, indemnify and hold harmless Customer
and any of its subsidiaries and their respective officers, directors, agents and
employees (collectively, the "Customer Indemnities") from and against all
claims, demands, damages, losses, liabilities, costs or expenses (including,
without limitation, reasonable attorney's fees and expenses) (collectively,
"Costs") incurred or suffered by any Customer Indemnitee which result from or
arise out of the negligent or willful misconduct of WISC regarding the Services.
13. TERMINATION.
A. WISC shall have the right to terminate this Agreement (i) after
sixty (60) days written notice upon the failure of Customer to timely and fully
pay any undisputed amounts in any invoice within thirty (30) days of the due
date; or (ii) immediately and without notice upon insolvency or the commencement
of any proceedings under any bankruptcy or insolvency laws by or against
Customer; or (iii) immediately and without notice upon the assignment by
Customer of all or substantially all of its property for the benefit of its
creditors.
B. Customer shall have the right to terminate this Agreement or seek
specific performance or pursue other legal remedies upon failure of WISC to cure
any default in the performance of its obligations hereunder after sixty (60)
days of WISC's receipt of written notice regarding such default. Customer shall
further have the right to terminate this agreement (i) immediately and without
notice upon the insolvency or the commencement of any proceedings under any
bankruptcy or insolvency laws by or against WISC; and (ii) immediately and
without notice upon the assignment by WISC of all or substantially all of its
property for the benefit of its creditors.
C. Notwithstanding subsections A, and B above, either Party may
terminate this Agreement by giving twelve (12) months prior written notice.
14. FEES AND COSTS UPON TERMINATION
A. Costs. Upon termination of this Agreement at any time, Customer
agrees to pay WISC the following amounts:
(1) all items listed on the final Commitments List;
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(2) all amounts due for Services hereunder as of the date of
termination.
B. Ownership. Upon the termination of this Agreement and upon payment
by Customer of all amounts due, all WISC-owned equipment acquired solely for use
by Customer, excluding leasehold equipment and improvements, for which Customer
remains obligated to pay the entire amount (full purchase price) or for which
Customer has already paid the entire amount (full purchase price) under this
Agreement, shall become the sole property of Customer as well as all other
property and rights due Customer at termination and WISC shall have no ownership
or proprietary rights to such equipment. This Agreement shall serve as the
document of assignment and title transfer of such property and rights to
Customer free and clear of all claims, except as provided to the contrary in
this Agreement. As to software licensed to WISC, solely for the benefit of
Customer, WISC will use its best efforts to assign such software to Customer,
provided the Parties agree to be bound by the license agreements in transferring
or assigning any rights or obligations.
C. Historical Data Services. Upon termination of this Agreement and
payment by Customer of all amounts due, payment of any termination fee, payment
for all commitments listed on the Commitments List, WISC shall supply Customer
with historical data relating to the Services provided hereunder.
15. FORCE MAJEURE. Neither Party will be liable to the other by reason
of failure in performance of this agreement if the failure arises out of acts of
God, acts of the other Party, acts of governmental authority, strikes, fires,
delays in transportation, unavailability of communications or energy sources,
sabotage, riots, or war or any other Force Majeure cause. An event of Force
Majeure shall not operate to relieve the Party affected from the payment of any
fees for services previously rendered under this Agreement or for items on the
Commitments List. However, the party affected by the Force Majeure event shall
promptly notify the other Party and take all reasonable actions to promptly
remedy or remove the Force Majeure situation. If the Force Majeure situation is
not remedied within 30 days, the other Party shall have right to seek
termination of this Agreement.
16. ASSIGNMENT. Customer shall not have the right to assign this
Agreement without the prior written consent of WISC, which consent will not be
unreasonably withheld; provided that either Party may assign this Agreement,
without the consent of the other party, to a successor or a surviving
corporation in a merger or consolidation in which it is a Party or to any person
that acquires all or a majority of its stock or assets. WISC shall not have the
right to assign its obligations under this Agreement, except to a subsidiary or
affiliate, without the prior written consent of Customer, which consent will not
be unreasonably withheld.
17. INSURANCE. Both Parties will procure, pay for and maintain the
following insurance during the term of this Agreement and provide to the other
certificates of insurance with insurance companies satisfactory to each Party
evidencing the maintenance of insurance coverages indicated below:
Certificates shall include a 30-day notice of cancellation in favor of
the other Party, except in the event of non-payment of premium in which case a
ten (10) day notice of cancellation will be acceptable.
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Workers' Compensation Insurance complying with the laws of the state or
states in which work is to be performed, whether or not Customer or its
subcontractors are required by such laws to maintain such insurance and
employer's liability insurance with limits of $100,000 each accident, including
occupational disease coverage with a limit of $100,000 each employee and
$500,000 disease policy limit.
Commercial or Comprehensive General Liability insurance on an
occurrence form with a combined single limit for bodily injury and property
damage of $1,000,000 each occurrence and $2,000,000 annual aggregate, including
coverage for premises operations, independent contractors, personal injury,
products/completed operations, broad form contractual, broad form property
damage and advertising injury.
WISC and Customer waive their rights, and, to the extent possible,
their underwriter's rights, of subrogation against the other, and the other's
officers, directors, agents and employees thereof, and corporate shareholders
and corporate shareholder's officers, directors, agents and employees, providing
that such waiver in writing, prior to loss, does not void or alter coverage.
Such waiver shall also extend to companies and legal entities that control, are
controlled by, are subsidiaries of or are affiliated with the other Party and
the other Party's respective officers, directors, agents, employees and
shareholders of such companies or entities.
In the event coverage is denied or reimbursement of a properly
presented claim is disputed by a Party's insurance carrier(s), the Party shall,
upon written request, provide the other Party with a certified copy of the
involved insurance policy or policies within ten (10) business days of receipt
of such request.
The maintenance of insurance shall in no way limit or affect the extent
of either Party's liability.
18. ENTIRE AGREEMENT. Customer represents that it has read this
Agreement, understands it and agrees to be bound by its terms and conditions.
Customer further agrees that this Agreement constitutes the entire agreement
between the Parties with respect to the subject matter hereof and that this
Agreement supersedes all proposals oral or written, all previous negotiations
and agreements and all other communications between the Parties with respect to
the subject matter hereof. The Parties further agree that any terms and
conditions of any purchase order or other instrument issued by either Party in
connection with this Agreement which are in addition to, or inconsistent with,
terms and conditions of this Agreement, shall not be binding upon either Party
unless signed by both Parties.
19. AMENDMENTS. This Agreement may be modified only by a written
instrument duly executed by an authorized representative of WISC and Customer.
20. GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Oklahoma, without regard to its choice of law
provisions. Should any conflict arise concerning the terms of this Agreement
which shall result in litigation, the Parties agree that the exclusive
jurisdiction and venue for such litigation shall be in the applicable state or
federal courts in Tulsa, Oklahoma and the Parties hereby expressly waive
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any and all objections to the exclusive jurisdiction and venue of any such
litigation in Tulsa, Oklahoma.
21. SEVERABILITY. If, but only to the extent that, any provision of
this Agreement is declared or found by a court of competent jurisdiction to be
illegal, unenforceable, or void, then both Parties shall be relieved of all
obligations arising under such provision, it being the intent and agreement of
the Parties that this Agreement shall be deemed amended as it related to the
jurisdiction involved by modifying such provision to the extent necessary to
make it legal and enforceable while preserving its intent. If that is not
possible, another provision that is legal and enforceable and achieves the same
objective shall be substituted. If the remainder of this Agreement is not
affected by such declaration or finding and is capable of substantial
performance, then the remainder shall be enforced to the extent permitted by
law.
22. INDEPENDENT CONTRACTOR. In performing the services hereunder, WISC
shall operate as and have the status of an independent contractor, subject only
to the general direction of the Customer regarding the Services to be rendered
as opposed to the method of performance of the Services.
23. DISPUTE RESOLUTION. The Parties will attempt in good faith to
resolve any claim or controversy arising out of this Agreement by negotiations
between senior executives of the Parties who have settlement authority and who
do not have direct responsibility for the administration of this Agreement. If
the matter has not been resolved within sixty (60) days from the date either
Party notified the other of its dispute, either Party may initiate other means
of alternative dispute resolution of the controversy in accordance with the then
appropriate rules and procedures of the Center for Public Resources or American
Arbitration Association or pursue its rights and remedies with a court of
competent jurisdiction.
24. CONSTRUCTION. Except where otherwise expressly provided, all
references to sections, paragraphs or attachments in this Agreement will be
deemed to be references to such sections and paragraphs of this Agreement or the
attachments to this Agreement, respectively. The recitals are incorporated
herein by reference as though repeated fully.
25. WAIVER. Any waiver of this Agreement or of any covenant, condition,
or agreement to be performed by a Party under this Agreement shall (i) only be
valid if the waiver is in writing and signed by an authorized representative of
the Party against which such waiver is sought to be enforced, and (ii) apply
only to the specific covenant, condition or agreement to be performed, the
specific instance or specific breach thereof and not to any other instance or
breach thereof or subsequent instance or breach.
26. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original and all of which shall
together constitute one and the same document.
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27. NOTICES. Any notice required or permitted to be made or given to
either Party hereto shall be in writing, and will be deemed sufficiently served
if dispatched by certified mail, return receipt requested; hand delivered; sent
by overnight delivery service; or facsimile with confirmation of receipt to the
addresses specified below:
If notice is from WISC to Customer:
VICE PRESIDENT, APPLICATIONS-NETWORK
WILLIAMS COMMUNICATIONS GROUP, INC.
ONE WILLIAMS CENTER
TULSA, OK 74172
If notice is from Customer to WISC:
SUPERVISOR, CONTRACT ADMINISTRATION MD 33-1
WILLIAMS INFORMATION SERVICES CORPORATION
ONE WILLIAMS CENTER
P.O. BOX 2400
TULSA OK 74172
AGREED AND ACCEPTED as of the day and year first above written.
"WISC" "CUSTOMER"
WILLIAMS INFORMATION SERVICES WILLIAMS COMMUNICATIONS
CORPORATION GROUP, INC.
By: By:
----------------------------------- --------------------------------
Authorized Signature Authorized Signature
Typed Name: Typed Name:
--------------------------- -------------------------
Title: Title:
-------------------------------- ------------------------------
Date: Date:
--------------------------------- -------------------------------
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<PAGE> 11
SERVICE AGREEMENT
BETWEEN
WILLIAMS INFORMATION SERVICES CORPORATION
AND
WILLIAMS COMMUNICATIONS GROUP, INC.
ATTACHMENT A
(SERVICE LEVEL AGREEMENTS)
[TO BE DEVELOPED]
APPROVED: APPROVED:
"WISC" "CUSTOMER"
WILLIAMS INFORMATION SERVICES WILLIAMS COMMUNICATIONS
CORPORATION GROUP, INC.
By: By:
----------------------------------- --------------------------------
Typed Name: Typed Name:
--------------------------- -------------------------
Title: Title:
-------------------------------- ------------------------------
Date: Date:
--------------------------------- -------------------------------
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<PAGE> 12
SERVICE AGREEMENT
BETWEEN
WILLIAMS INFORMATION SERVICES CORPORATION
AND
WILLIAMS COMMUNICATIONS GROUP, INC.
ATTACHMENT B
(SERVICES PROFILE)
APPROVED: APPROVED:
"WISC" "CUSTOMER"
WILLIAMS INFORMATION SERVICES WILLIAMS COMMUNICATIONS
CORPORATION GROUP, INC.
By: By:
----------------------------------- --------------------------------
Typed Name: Typed Name:
--------------------------- -------------------------
Title: Title:
-------------------------------- ------------------------------
Date: Date:
--------------------------------- -------------------------------
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SERVICE AGREEMENT
BETWEEN
WILLIAMS INFORMATION SERVICES CORPORATION
AND
WILLIAMS COMMUNICATIONS GROUP, INC.
ATTACHMENT C
(COMMITMENT LIST)
[TO BE DEVELOPED]
APPROVED: APPROVED:
"WISC" "CUSTOMER"
WILLIAMS INFORMATION SERVICES WILLIAMS COMMUNICATIONS
CORPORATION GROUP, INC.
By: By:
----------------------------------- --------------------------------
Typed Name: Typed Name:
--------------------------- -------------------------
Title: Title:
-------------------------------- ------------------------------
Date: Date:
--------------------------------- -------------------------------
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<PAGE> 14
[WILLIAMS LOGO]
1999 SERVICES PROFILE
for
COMMUNICATIONS
CORPORATE
ENERGY SERVICES
GAS PIPELINES
<PAGE> 15
WILLIAMS 1999
SERVICES
INFORMATION SERVICES PROFILE
================================================================================
<TABLE>
<S> <C>
TABLE OF CONTENTS
1XXX OPERATIONS (MAINFRAME BASELINE BILLING)...............................2
2XXX STAFF TIME............................................................5
2001 SYSTEMS DEVELOPMENT................................................5
2003 DOCUMENTATION......................................................6
2004 TECHNICAL SUPPORT..................................................8
2005 TRAINING...........................................................8
2008 NETWORK SERVICES ANALYSTS..........................................9
2009 MID-RANGE SYSTEMS SUPPORT..........................................9
2011 NETWORK OPERATIONS TECHNICIANS....................................10
2012 DESKTOP SUPPORT SERVICES..........................................10
2013 LAN/INTERNET APPLICATIONS.........................................10
2014 DISASTER RECOVERY.................................................11
2015 CAPACITY PLANNING.................................................11
2099 DATA ENTRY........................................................12
3XXX REPORTING FORMS......................................................13
4XXX SOFTWARE/HARDWARE AMORTIZATION AND MAINTENANCE.......................14
5XXX MISCELLANEOUS........................................................15
5001 DATA CENTER FLOORSPACE............................................15
5006 NEWSEDGE SUBSCRIPTION.............................................16
5007 T-MAN MONITORING FOR WES ENERGY MARKETING & TRADING...............17
5008 COMMUNICATION SOLUTIONS INFOFLOW MONITORING APPLICATION...........17
5009 AIMS PROCESSING FOR COMMUNICATIONS SOLUTIONS......................18
5050 WILLIAMS SOLUTION CENTER SPECIAL SERVICES.........................18
5051 SECURITY SERVICES FOR WGP CENTRAL.................................18
5096 MIDRANGE BACKUP...................................................19
5097 -5128 EQUIPMENT LEASE............................................19
6XXX NETWORK..............................................................20
6001 NETWORK PORT CHARGES..............................................20
6002 WILLIAMS WIDE AREA NETWORK (TWC NET).............................20
6003 NETWORK-BASED OPERATIONS (ALLOCATION).............................20
6005 INTERNET CONNECTION...............................................21
6006 FIBER BACKBONE (TULSA TOWER)......................................21
NETWORK POOLED BILLING.................................................21
8XXX TEAM W ENTERPRISE SERVICES...........................................22
8002 WILLIAMS SOLUTION CENTER..........................................22
8003 CLIENT SERVER BACKUP..............................................22
8004 CLIENT SERVER STORAGE.............................................23
8005 LAN AND WEB APPLICATIONS/HARDWARE/SOFTWARE........................23
8006 IT STRATEGIC SOURCING SERVICES....................................23
8007 ENTERPRISE MODEM POOL.............................................24
DIRECT BILLED JOURNAL VOUCHERS.........................................25
DIRECT BILLED ACCOUNTS PAYABLE.........................................26
TELEPHONE AND LONG DISTANCE SERVICES...................................27
YEAR 2000 (Y2K) EXPENSE RECOVERY.......................................28
</TABLE>
================================================================================
1999 WISC Services Page 1
<PAGE> 16
1XXX OPERATIONS (MAINFRAME BASELINE BILLING)
Tracy Harris, Director of Enterprise Operations
Enterprise Operations charges are billed by the Service Baseline method. To
establish the baseline, the total of all costs associated with Operations
Services is used to determine the unit cost necessary to recover expenses. The
expenses to be recovered are allocated to 14 cost pools, which represent the
various available resources. The unit cost is then applied to utilization of
that pool as reported by System Management Facility (SMF) records.* The
resources consumed in a given month are totaled and billed in baseline billing.
In this way expenses incurred to provide resources are recovered based on
consumption. Baseline rates are reviewed and adjusted quarterly by actual
expense. WISC accounting reviews the actual cost of providing resources and
makes adjustments as required on a quarterly basis.
Description
1001 Batch processing CPU consumption.
1002 Time sharing processor consumption.
1003 IMS Processor consumption.
1004 CICS processor consumption.
1005 CPU consumption by Datacomm/DB Multi-User Facility (MUF).
1006 DISK storage usage.
1007 Tape input and output.
1008 Tape mounts.
1009 Tape storage.
1010 Disk storage based on tracks occupancy per minute.
1011 Local printer usage.
1012 Remote printer usage.
1013 DB2 usage.
1014 CPU consumption related to IDMS processing.
Terminology
CICS- IBM mainframe based online transaction control and monitoring product.
CPU- Central Processing Unit. This is the instruction processor used to
perform arithmetic operations and control processes such as adding
fields together, initiating updates to disk etc... DB2- IBM mainframe
based database product.
EXCP- Execute Channel Program. This is the count of reads and writes to a
particular device.
MUF- Computer Associates' database product. Multi User Facility (MUF). MUF
is associated with Datacomm/DB processing.
OTHER BILLING METHODS
Some modified billing agreements are currently in place. Specifically, TRANSCO,
WES (former MAPCO mainframe) and WCS AIMS processing have agreements that differ
slightly from the baseline method described above.
- ----------
* SMF is the mainframe-based accounting facility that captures and records
utilization of resources. The SMF data is then used to determine the
percentage of utilization for a particular business unit on a monthly
basis. This percentage determines the distribution of the expense base to
the various business units.
1999 WISC Services Page 2
<PAGE> 17
WCS
See "5009 AIMS Processing" for a description of AIMS billing.
TRANSCO
WISC provides dedicated operations support in Houston for Transco. This service
includes mainframe, midrange and network systems scheduling, monitoring and
backup on a 7 by 24 basis. The cost for the Houston Computer Operations group
(salaries, benefits, etc.) is included in the baseline rate for CPUD. Additional
support provided includes:
o High speed printer/print distribution
o Printer support for user printers
o Transit hardware support
o Facilities management through Transco's Facility group
These expenses as well as the expense of mainframe hardware, software and
technical support are recovered in TRANSCO's baseline bill.
WILLIAMS ENERGY SERVICES (FORMER MAPCO MAINFRAME & COMPUTER OPERATIONS BASELINE)
WISC provides support for all mainframe processing required by the former MAPCO
business units that are now part of Energy Services. All costs to provide these
services are totaled and billed to the appropriate WES business units at a flat
monthly rate based on a percentage of utilization. Additional operations
services are provided to WES at the Williams South II Data Center.
The customer is billed monthly for the following services:
o Mainframe processing, Production Control Services, Monitoring and
Scheduling activities.
o Technical support for mainframe software
o Database Analyst support for Datacomm/DB
o Hardware and software expense to provide the MVS platform
o Facilities Management (See Description Under "Data Center Floor Space")
o Operations support for Mid-Range (AIX) and Server based systems (NetWare
and NT), includes Management of and cost associated with operations of data
center facilities.
o Electrical costs associated with providing electrical service up to
connection to the client's equipment located with in the data center,
including UPS / Generator costs.
o Fire Detection and suppression systems for Data Center and UPS equipment
room.
o Raised Floor Environment within WS-II 3rd floor Data Center.
o Administration of security for access to Data Center as well as the Y2K and
SE Labs.
o Weekend and Evening environment provisions for Y2K Lab.
o Routine tape media replacement costs for established backups using 8mm and
DLT tapes
o Monitoring activities for LAN Servers and AIX systems
o Operator handling and monitoring of LAN and AIX backup jobs/processes
o AIX Scheduling services
o Vaulting of Mainframe, 8mm and DLT tapes per customer's data requirements.
o Print Services and Report Distribution
1999 WISC Services Page 3
<PAGE> 18
OTHER EXPECTED 1999 BASELINE ADJUSTMENTS*
WES Petroleum Services' ATLAS Application
A reduction in baseline billing is expected in 1999 due to ATLAS application
migration to a distributed platform (ATLAS 2000 project). This reduction is
expected to begin in June 1999 with the full year net impact being $531,879.
Additional reductions are expected beyond 1999. 1999 Impact:
<TABLE>
<S> <C>
January-May $ 9,240
June-December $ 550,226
----------
Total $ 559,466
</TABLE>
Adjusted for tape and DASD retention: 559,466 - 27587 = Net Impact of $531,879
This reduction assumes that the ATLAS 2000 project remains on schedule and is
based on information provided by WES Petroleum Services IS.
CHRIS (Operations billing only)
The mainframe-based payroll system CHRIS is migrating to a distributed platform
using the PeopleSoft H/R payroll system. Complete migration is expected by
January 2000 at which point the mainframe based CHRIS application will remain
dormant but accessible until 1Q2000. As represented below, it is anticipated
that cost recovery of CHRIS-related mainframe processing will be reduced during
1999. These amounts represent total CHRIS costs for ALL WILLIAMS BUSINESS UNITS
AND CORPORATE. The actual projected reduction for each business unit can be
found in budget planning data provided for each business unit.
<TABLE>
<CAPTION>
1999 est. billing % of 1998 billing 1998 est. billing
----------------- ----------------- -----------------
<S> <C> <C> <C>
1Q99 $ 180,917 50% $ 361,834
2Q99 $ 95,481 25% $ 381,927
3Q99 $ 37,188 10% $ 371,880
4Q99 $ 37,188 10% $ 371,880
- ---- ---------- ----------
Total $ 350,774 $1,487,521
</TABLE>
Net baseline reduction for 1999 of $1,136,747.
The reduction assumes the CHRIS to PeopleSoft conversion project remains on
schedule.
- ----------
* Anticipated reductions to baseline are based on a combination of known
events and "planned" events. The information shown here is based on our
best current information. Changes to these expected reductions will be
quantified, communicated and agreed upon by WISC and our client when they
are encountered.
1999 WISC Services Page 4
<PAGE> 19
2XXX STAFF TIME
Williams Information Services provides Williams Operating Groups and their
Business Divisions with support and services that are billed under various staff
time billing categories. These categories are detailed by billing number in the
following sections.
The hourly rate includes salary, fringe benefits, other employee expenses,
office space, workstation/software, management overhead, etc. Operations costs,
travel, and training to support these efforts, if applicable, will be charged.
Flat bill invoicing options are available to maintain steady costs, thereby
avoiding monthly billing spikes. Rates are established by creating a set charge
per month, based upon volume of FTE hours over a historical period, and
supplementing for new projected support areas. The flat bill arrangement can be
for a portion or all of projected FTE's needed.
If external contractors are used on a project, actual fees, plus administrative
overhead to cover supervision, office space, computer, telephone, etc. will be
passed through to the client.
2001 SYSTEMS DEVELOPMENT
ALICE ANN HUNTER, MANAGER INTERNAL SYSTEMS
BRENDA DELUCA, MANAGER PAYROLL
Rate = $63 per hour.
The Systems Development Groups offer industry-wide competitive consulting
services and computer systems support for the following IS/IT areas:
o Intranet and web-based applications o SmartStream financial systems
o Lawpack
o Williams Relocation system
o Business Partners and Common Inventory
o Health Track
o Integral's Payroll/Personnel system
o PowerBuilder/Sybase systems
o Data administration for Sybase and Oracle
o Microsoft Access
o SQL, COBOL, and Microfocus COBOL projects
o PeopleSoft HR/Payroll
o PeopleSoft Financials
The groups actively support applications running on mainframe, midrange, and
local area network/personal computer environments.
1999 WISC Services Page 5
<PAGE> 20
2003 DOCUMENTATION
STEVE HUFF, DIRECTOR OF CUSTOMER SERVICE
Technical Writing
Rate = $42 per hour
WISC's technical writers can provide the following services for all Williams
platforms and operating groups:
o Online and hardcopy user and system documentation, including Online
Help and Intranet-based documentation
o Standards and policy/procedure documentation
o Presentations and graphics
o Training documentation
o Workflow and task procedures
1998 COMPLETED AND ONGOING TECHNICAL WRITING PROJECTS
<TABLE>
<CAPTION>
OPERATING GROUP/ BUSINESS UNIT PROJECT OR DEPARTMENT TYPE OF DOCUMENTATION
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Communications ADs Installation, Operations, and
User
Audiomation (Global Access) User
Choice Seat User
Customer Care Customer and Intranet Homepage
Siebel (CAM) SPEC (Project Development)
SIMS System
Wingate Installation
- ---------------------------------------------------------------------------------------------------------
Corporate InTime User Documentation and
Training
Investor Relations Presentations:
o Analysts' Meetings
(Quarterly
Results)
o Energy Conferences
- ---------------------------------------------------------------------------------------------------------
</TABLE>
1999 WISC Services Page 6
<PAGE> 21
<TABLE>
<CAPTION>
OPERATING GROUP/ BUSINESS UNIT PROJECT OR DEPARTMENT TYPE OF DOCUMENTATION
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
0 Sr. Officers/Board
of
Directors'
Corporate (cont.) Treasury Meetings
Rating Agency Presentations
PeopleSoft Reference/Training
Documentation
Williams Performance Network SPEC Intranet site
Sr. Officers on the Intranet Intranet site
- ---------------------------------------------------------------------------------------------------------
Energy Services ARAMCO (for Williams Intl.) Dispatch and Scheduling
Training Documentation
ATLAS 2000 application Online Help
CIS application Online Help
MAGIC (Automated Forecasting User Documentation
System)
- ---------------------------------------------------------------------------------------------------------
Gas Pipelines Central Gas Measurement Manual Update
- ---------------------------------------------------------------------------------------------------------
</TABLE>
1999 WISC Services Page 7
<PAGE> 22
2004 TECHNICAL SUPPORT
LAN Operating Systems
Donna Hall, Manager MVS/LAN Operating Systems
Rate = $63 per hour
The service includes but is not limited to the following:
o Novell and NT operating systems configuration and support
o Product research (pricing, availability, bench marking results,
usability assessment with current network configurations)
Database Administration/Online Systems
STEVE NUCKOLLS, MANAGER DBA/ONLINE SYSTEMS
Rate = $63 per hour
The service includes but is not limited to the following:
o Evaluation, installation, and maintenance of client-requested products
o Customization of any product for the benefit of a client
o Maintenance of any back-leveled product whenever a client's
application environment prohibits new release implementation
o Services outside the WISC mainframe domain (i.e., Sybase DBA support,
Oracle DBA support)
o DBA support services include, but are not limited to, database design,
performance, and 24 x 7 system suppport.
2005 TRAINING
Training can be provided on an "as needed" basis for WISC supported products and
applications. Rates will be based on the specific resources utilized to provide
the training.
1999 WISC Services Page 8
<PAGE> 23
2008 NETWORK SERVICES ANALYSTS
Bob Sarge, Manager Network Services
Rate = $63 per hour
The service includes but is not limited to the following:
o Network design, testing and implementation
o WAN services
o Network product evaluations
o Network monitoring
o Mainframe network services
o Project management
2009 MID-RANGE SYSTEMS SUPPORT
Keith Jones, Manager Midrange Support
Rick McCharen, Manager Midrange Support
Rate = $63 per hour
Flatbill = $9,100 per logical FTE, per month
Midrange Systems offers midrange consulting services and computer system
services and support for the following IS/IT areas:
o UNIX system management/administration
o HP/MPE system management/administration
o DEC/VMS system management/administration
o DEC/RSX system management/administration
o Data Center operations support of midrange servers
o Technical application support of midrange servers
o Facilities management of midrange servers
o Security management/administration of midrange servers
o Networking support of midrange servers
o Database administration of midrange servers
o Contract administration of midrange servers
o Technical project work
WISC's system administrators support Hewlett-Packard (HP/UX and HP/MPE), Digital
Equipment (Alpha/UNIX, PDP/RSX and VAX/VMS), IBM (RS/6000 and AS/400), SUN,
Sequent, and Data General (DG/UX), among others.
1999 WISC Services Page 9
<PAGE> 24
2011 NETWORK OPERATIONS TECHNICIANS
Bob Sarge, Manager Network Services
Keith Walters, Supervisor Network Operations
Rate = $37 per hour
Network-Technicians provide technical services such as, but not limited to, the
following:
o Cable management
o Communications equipment installation
o Floor build-out
o Dedicated Datacom support
2012 DESKTOP SUPPORT SERVICES
Ralph Poplin, Supervisor Desktop Support
Rate = $55 per hour
The service includes but is not limited to the following:
o All PC hardware support
o Level Two software support
o Product research (pricing, availability, bench marking results,
usability assessment with current network configurations)
o Desktop application services for spreadsheet, word processing, and
graphics products
NOTE: SPECIAL PROJECT WORK WILL BE BILLED OUT AT THE PUBLISHED RATE OF $55 PER
HOUR.
2013 LAN/INTERNET APPLICATIONS
Marty Trogdon, Manager LAN/Internet Applications
Rate = $63 per hour
The service includes but is not limited to the following:
o Client-server business applications
o Internet / Intranet development, HTML coding, and supporT
o Product research for major software development tools of an enterprise
nature, new hardware technology
o Testing and evaluation of hardware and software products
o Document management/imaging services
o Email administration and support
1999 WISC Services Page 10
<PAGE> 25
2014 DISASTER RECOVERY
Steve Huff, Director Customer Service
Rate = $63 per hour.
WISC Disaster Recovery Planning Services is in place to provide a service
function to the companies within Williams in preparing Disaster Recovery Plans.
Goals of the Service are to:
o Produce a Business Impact Analysis (BIA) for each company within Williams
o Produce Strategy and Cost Alternatives for management decisions
o Produce a Disaster Recovery Plan (DRP) for each company within Williams
o Produce a DRP for each corporate location
o Produce the process to maintain the plans
The service is intended to be a full-service, continuing process that will
establish the criteria for the plans, put the plans in place and to maintain the
plans on an on-going basis.
2015 CAPACITY PLANNING
Jay Pottorf, Account Manager
Rate = $63 per hour.
Capacity Planning is the process of predicting if and when system saturation
will occur. This includes determining the maximum user load and through put of
your system. The evolution of workload due to existing and new application and
the desired performance is also considered. Capacity Planning forecasts the
information technology resources required to satisfy future needs. The objective
of the capacity planning function is to analyze current workloads and reserve
capacity, provide estimates of workload growth and sizing of new applications,
and based on that information, provide estimates of the resources required to
support future workloads.
Capacity Management is the process of planning enhancements to existing systems
or evaluating the design of new systems to determine the necessary resources
required to provide adequate stability and performance at a reasonable price.
Capacity management is the function that controls, measures, and plans the
information technology resources required to meet current and future information
processing needs.
Capacity Planning focus areas include:
o Track usage by Application & Business Unit
o Include "What If" modeling
o Identify and resolve systems bottlenecks (tuning)
o Perform predictive analysis for current workloads
o Execute Saturation Analyses
o Perform historical trend analysis
1999 WISC Services Page 11
<PAGE> 26
2099 DATA ENTRY
Tracy Harris, Director Enterprise Operations
Rate = $38.00 per hour
Electronic key entry and verifying of data from user supplied documents, which
is required to feed applications processing on the mainframe platform for
internal Williams business units.
1999 WISC Services Page 12
<PAGE> 27
3XXX REPORTING FORMS
Tracy Harris, Director Enterprise Operations
Business divisions that use paper sheets and stock forms for mainframe and
midrange applications output are rebilled for these resources based on actual
usage.
<TABLE>
<S> <C> <C>
3001 Paper Sheets 0-Hole (Laser): 11.65(cents) per 1,000 sheets
3001 Paper Sheets 3-Hole (Laser): 12.35(cents) per 1,000 sheets
3002 Stock Forms (Impact 1Part): 17.03(cents) per 1,000 sheets
3002 Stock Forms (Impact Other): 2pt. 34.23(cents) per 1,000 sheets
3pt. 60.67(cents) per 1,000 sheets
4pt. 84.14(cents) per 1,000 sheets
</TABLE>
Note: The charges vary as volume varies. Duplexing reports results in
significant savings to Williams and is encouraged.
1999 WISC Services Page 13
<PAGE> 28
4XXX SOFTWARE/HARDWARE AMORTIZATION AND MAINTENANCE
Donna Hall, Manager MVS/LAN Operating Systems
Direct billed software and maintenance surcharges will be based on the Direct
Bill Schedule developed during the budget process. Clients will be invoiced
according to the schedule, with adjustments to the schedule being made based on
software additions, actual expense increases or decreases, or any of the
following applicable conditions:
o Expenses include software amortization, rental, maintenance, and
applicable Technical Support and Network Services labor and
maintenance surcharges.
o Any single-client software will be direct billed to the using client.
o Any software that is used by multiple clients can be split-billed
between clients or included in the Operations Rates. This
determination is made by the IS Executive Council and the VP General
Manager of WISC. New software will be direct billed until it can be
included in the Operations Rates.
o When a client discontinues use of split-billed software, that client
is responsible for their portion of the software's expense until the
new budget year. This should allow the remaining clients time to
investigate their alternatives and not incur an out-of-budget
condition.
o When a client begins using single or split-billed software, the client
will be responsible for a portion of the software's expense as
negotiated between the using clients. Negotiation includes allocation
percentage and commencement date.
o Any software, recovered through Operations rates, that becomes a
single-client used software during a budget year will become direct
billed to the client the following year and will be excluded from the
Operations Rates.
DIRECT-BILLED PRODUCTS*
4020 TPX Products
4023 TCP/IP 4062 GEAC SmartStream System
4034 U/ACR -Unitech Systems 4093-CA PHO
4034 U/DRF- Unitech Systems 4094-QUICKFETCH/PMO
4037-4th Dimension Software 4096-CA DISSPLA
4039-Xerox HFDL/MVS Host 4098-SYSTEMWARE
4040-Cybermation DJC 4099-ROSCOE
4042-IBM - Basic/MVS 4998 PC Estimacs/Planmacs/MicroMan
4058 Gentran/NT Hardware Allocation
1999 WISC Services Page 14
<PAGE> 29
<TABLE>
<CAPTION>
3/31/99 3/31/04
WCG WCG
EXPENSES COMMITMENT COMMITMENT
-------- ---------- ----------
<S> <C> <C>
Property and Use Taxes through 1999 $ 23,779 $ 11,889
Third-Party Software Commitments $ 41,427 $ --
Miscellaneous Expenses $ -- $ --
Fixed Assets Commitments $ -- $ --
Facilities Improvements $ -- $ --
Lease Commitments $ 2,166,876 $ --
- -----------------------------------------------------------------------
TOTAL COMMITMENTS $ 2,232,082 $ 11,889
</TABLE>
<PAGE> 30
<TABLE>
<CAPTION>
3/31/99
WCG
TAX TYPE TAX YEAR COMMITMENT
<S> <C> <C>
Estimated Property Taxes - Leased Equipment 1999 $ 5,945
Estimated Property Taxes - Leased Equipment 2000 $ 5,945
Estimated Property Taxes - Leased Equipment 2001 $ 5,945
Estimated Property Taxes - Leased Equipment 2002 $ 5,945
Estimated Property Taxes - Leased Equipment 2003 $ --
Estimated Property Taxes - Leased Equipment 2004 $ --
SUBTOTAL LEASE TAXES $23,779
Estimated Property Taxes - Owned Equipment 1999 $ --
Estimated Property Taxes - Owned Equipment 2000 $ --
Estimated Property Taxes - Owned Equipment 2001 $ --
Estimated Property Taxes - Owned Equipment 2002 $ --
Estimated Property Taxes - Owned Equipment 2003 $ --
Estimated Property Taxes - Owned Equipment 2004 $ --
SUBTOTAL OWNED TAXES $ --
TOTAL TAX COMMITMENTS $23,779
</TABLE>
Lease Equipment use taxes are estimated for the years through the longest lease
term.
<PAGE> 31
<TABLE>
<CAPTION>
3/31/99
WCG
SOFTWARE NAME VENDOR END DATE COMMITMENT
<S> <C> <C> <C>
DIRECT REBILLS (SOFTWARE, RENTALS, MAINTENANCE, AMORTIZATION)
Gentrans/NT Hardware Allocation 25% Sterling Commerce 12/31/99 $ 1,827
PeopleSoft - Annual Maintenance (WCG 00645) PeopleSoft 9/30/99 $ 8,166
PeopleSoft - Annual Maintenance (WCG 00533) PeopleSoft 9/30/99 $ 31,434
TOTAL THIRD-PARTY SOFTWARE COMMITMENTS $ 41,427
</TABLE>
<PAGE> 32
FIRST QUARTER 1999 WCG COMMITMENTS
MISCELLANEOUS SERVICES AND EXPENSES
<TABLE>
<CAPTION>
CONTRACT FIXED/ 3/31/99
EXPIRE DEDICATED/ VARIABLE MONTHLY WCG TOTAL
MISCELLANEOUS SERVICES VENDOR DATE SHARED EXPENSE AMOUNT COMMITMENT
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL MISCELLANEOUS COMMITMENTS $ - $ -
</TABLE>
CONFIDENTIAL 5/26/99 Page 4 of 10
<PAGE> 33
FIRST QUARTER 1999 WCG COMMITMENTS
FIXED ASSETS DEPRECIATION
<TABLE>
<CAPTION>
3/31/99 3/31/99
ASSET SERIAL DATE INITIAL MONTHLY BOOK WCG TOTAL
NUMBER ASSET DESCRIPTION NUMBER ACQUIRED VALUE DEPRE VALUE COMMITMENT
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL FIXED ASSET DEPRECIATION COMMITMENT $ - $ - $ - $ -
</TABLE>
CONFIDENTIAL 5/26/99 Page 5 of 10
<PAGE> 34
FIRST QUARTER 1999 WCG COMMITMENTS
FACILITIES IMPROVEMENTS DEPRECIATION
<TABLE>
<CAPTION>
MONTHLY 3/31/99 3/31/99
ASSET SERIAL DATE INITIAL DEPRE/ BOOK WCG TOTAL
NUMBER ASSET DESCRIPTION NUMBER ACQUIRED VALUE MAINT VALUE COMMITMENT
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL FACULTY COMMITMENTS $ - $ - $ - $ -
</TABLE>
CONFIDENTIAL 5/26/99 Page 6 of 10
<PAGE> 35
<TABLE>
<CAPTION>
SERIAL LEASE LEASE
LOCATION TYPE ADDITIONAL INFORMATION NUMBER LESSOR SCH START END
- -------- ---- ---------------------- ------ ------ --- ----- ---
<S> <C> <C> <C> <C> <C> <C> <C>
WCS Houston 1174 Controller 36281 WISC Pool mtm
WCS Houston 1324 Controller 24981 WISC Pool mtm
WCS Houston 1472 Terminal 206207 WISC Pool mtm
WCS Houston 1472 Terminal 279866 WISC Pool mtm
WCS Houston 3174 Controller 23-KC525 WISC Pool mtm
WCS Houston 4028 Printer 01-N2641 WISC Pool mtm
WCS Houston 4028 Printer 01-03194 WISC Pool mtm
WCG HP HP hardware for SATCOM Platform - WISC HW-97089 5/30/97 4/30/00
Boston Teleport - HP Service Guard
WCG HP HP hardware & software for four WISC HW-97090 5/30/97 4/30/00
SATCOM teleports
WCG HP HP contract 460 two-way server WISC HW-97091 6/1/97 5/30/01
configuration for F & E platform
WCG HP HP hardware & software dual 979 WISC HW-97092 7/19/97 2/28/02
contracts for CYCLESAT platform
WCG HP Dual K420 Lease of Hewlett Packard Dual K420 to WISC HW-97127 12/1/96 1/2/02
support & develop VBUS
WCG Sun Lease of two Sun 4000 servers & one WISC HW-97131 11/1/97 9/30/00
Sun Ultra 2300 for OSI for Network Services
WCG Sun Lease of Sun Ultra 2-1300 server for WISC HW-97147 12/17/97 3/1/01
Williams Wireless Oracle JAVA application
WCG Sun Lease of Sun Ultra 2-1200 server for WISC HW-97148 12/17/97 3/1/01
Williams Wireless Oracle JAVA application
WCG DEC Alphas Two DEC alphas 4100 5/3000 for ABUS WISC HW-97153 3/1/97 1/27/02
project
WCG HP K460 Purchase leaseback (FMA Sch. NG) of WISC HW-98064 11/1/97 10/30/00
HP K460 server and periphals
WCG HP D270 HP D270 Openview server for ET WISC HW-990205 CHR 5/1/98 4/30/00
WCG IBM 43 Comlink IBM 43 Comlink for CS WISC HW-990205-1 CHR 5/1/98 4/30/00
WCG HP D270 HP D270 Ace Comm WISC HW-990205-2 CHR 5/1/98 4/30/00
WCG HP K410 HP K410 BUCS WISC HW-990205-4 CHR 5/1/97 4/30/00
WCG HP 979KS HP 979KS for CycleSat WISC HW-990205-6 CHR 3/1/97 2/28/02
</TABLE>
<TABLE>
<CAPTION>
MONTHLY MONTHLY WCG
LEASE MAINT COMMITMENT
LOCATION TYPE AMOUNT AMOUNT 3/31/99
- -------- ---- ------ ------ -------
<S> <C> <C> <C> <C>
WCS Houston 1174 $ 204 $ 23 $ 311
WCS Houston 1324 $ 145 $ 43 $ 273
WCS Houston 1472 $ 36 $ 11 $ 132
WCS Houston 1472 $ 36 $ 11 $ 132
WCS Houston 3174 $ 493 $ 12 $ 655
WCS Houston 4028 $ 173 $ 50 $ 308
WCS Houston 4028 $ 93 $ 50 $ 228
WCG HP $ 2,912 $ 200 $ 41,557
WCG HP $ 8,310 $ 200 $ 111,739
WCG HP $ 2,300 $ 200 $ 67,205
WCG HP $ 9,738 $ 200 $ 350,818
WCG HP Dual K420 $ 9,973 $ 200 $ 348,772
WCG Sun $ 8,990 $ 200 $ 166,946
WCG Sun $ 824 $ 200 $ 26,617
WCG Sun $ 771 $ 200 $ 25,353
WCG DEC Alphas $ 5,165 $ 200 $ 185,300
WCG HP K460 $ 8,541 $ 200 $ 167,702
WCG HP D270 $ 1,411 $ 200 $ 22,043
WCG IBM 43 Comlink $ 622 $ 200 $ 11,792
WCG HP D270 $ 1,411 $ 200 $ 22,043
WCG HP K410 $ 2,842 $ 200 $ 40,651
WCG HP 979KS $ 9,320 $ 200 $ 576,300
Total Leased Equipment Commitments $ 74,309 $ 3,200 $ 2,166,876
</TABLE>
<PAGE> 1
EXHIBIT 10.41
TAX SHARING AGREEMENT
Agreement entered into as of [____], 1999 by and between The Williams
Companies, Inc., a Delaware corporation ("Williams"), and Williams
Communications Group, Inc., a Delaware corporation ("Communications").
Recitals
Williams and Communications are includible corporations in an
affiliated group of corporations of which Williams is the common parent, all
within the meaning of Section 1504 of the Internal Revenue Code of 1986, as
amended (the "Code").
Williams intends to file consolidated Federal income tax returns on
behalf of itself, Communications and the other members of the "Group" (as
hereinafter defined).
Williams and Communications wish to allocate and settle among
themselves the consolidated Federal income tax liabilities of the Group, the
unitary, combined, consolidated or similar state income tax liabilities of the
parties and, if and as determined by Williams, certain other tax liabilities.
Agreements
Accordingly, the parties agree as follows:
ARTICLE I
Certain Definitions
The defined terms used in this Agreement shall, except as otherwise
expressly provided or unless the context otherwise requires, have the meanings
specified in this Article I. The singular shall include the plural and the
masculine gender shall include the feminine, the neuter and vice versa, as the
context requires.
"Estimated Tax Payments" means, for any Taxable Period, the aggregate
payments for such Taxable Period provided in Section 2.04.
"Final Determination" means a closing agreement or an accepted offer in
<PAGE> 2
compromise with the Internal Revenue Service, a claim for refund that has been
allowed, a deficiency notice with respect to which the period for filing a
petition with the Tax Court has expired, or a decision of any court of competent
jurisdiction that is not subject to appeal or the time for appeal of which has
expired.
"Group" means Williams and all other corporations (whether now existing
or hereafter formed or acquired) that at the time would be entitled or required
to join with Williams in filing a consolidated Federal income tax return.
"IPO Date" means the date of the initial public offering of stock of
Communications.
"Subsidiary Separate Tax" means, with respect to any Taxable Period and
subject to the rules set forth below in this definition and Section 2.05, a
hypothetical Federal income tax liability that WCG would have for such Taxable
Period determined as if WCG had filed its own separate Federal income tax return
for such Taxable Period (or for any Taxable Period prior thereto) and calculated
by (x) imposing a tax on the taxable income or alternative minimum taxable
income, as the case may be, of WCG at a rate equal to the highest marginal rate
of corporate tax specified under the Code and applicable to that Taxable Period
and (y) employing the methods and principles of accounting, elections and
conventions that are used by the Group. For purposes of determining Subsidiary
Separate Tax with respect to any Taxable Period, the following special rules
shall apply:
(i) Subsidiary Separate Tax shall include the combined results of
WCG.
(ii) Any loss or credit carryover or other similar attribute of
WCG existing on the date preceding the IPO Date shall be deemed to be an
attribute of Williams for all purposes of this Agreement. For this purpose,
Williams shall allocate any loss, credit or other similar attribute realized by
WCG in the taxable year that includes the IPO Date between the period beginning
on January 1, 1999 and ending on the date preceding the IPO Date, on the one
hand, and the period beginning on the IPO Date and ending on December 31, 1999,
on the other hand, on a pro rata basis or any other reasonable method as
determined by Williams in its sole and absolute discretion with due regard to
clauses (iv) and (v) of this definition of Subsidiary Separate Tax.
(iii) Any loss or credit carryover or other similar attribute of
WCG not in existence on the IPO Date (as determined by Williams pursuant to
clause (ii) above) and arising thereafter shall, unless otherwise provided by
this Agreement, be deemed to be an attribute of WCG solely for purposes of
future determinations of Subsidiary Separate Tax.
<PAGE> 3
(iv) Any limitations or special rules relating to the recognition,
allowance or other treatment of any item of income, gain, loss, deduction,
expense or basis (including, for example, foreign tax credits, research credits,
capital losses, Section 1231 gains or losses and charitable contribution
deductions) may be determined based on a hypothetical separate Federal income
tax return of WCG or, notwithstanding such hypothetical separate Federal income
tax principles, with due regard to consolidated Federal income tax principles or
based on any hybrid approach, all as determined by Williams in its sole and
absolute discretion.
(v) Williams may from time to time establish any other special
rules that Williams reasonably determines to be necessary or appropriate to
carry out the principles reflected above in the definition of Subsidiary
Separate Tax.
"Taxable Period" means, with respect to any period for which a
consolidated Federal income tax return is filed on behalf of the Group that
includes Communications, (i) the period beginning on the IPO Date and ending on
December 31, 1999 and (ii) thereafter, each annual period ending on December 31
of each year.
"WCG" means the group of corporations consisting of Communications and
all members of the Group owned, directly or indirectly and in whole or in part,
by Communications.
ARTICLE II
Payments
Section 2.01 Payments by Communications to Williams. For every Taxable
Period in which the Subsidiary Separate Tax exceeds the Estimated Tax Payments,
or the Subsidiary Separate Tax as recomputed according to Section 2.05 exceeds
the Subsidiary Separate Tax, Communications shall pay to Williams an amount
equal to such excess.
Section 2.02 Payments by Williams to Communications. For every Taxable
Period in which the Estimated Tax Payments exceed the Subsidiary Separate Tax,
or the Subsidiary Separate Tax exceeds the Subsidiary Separate Tax as recomputed
according to Section 2.05, Williams shall pay to Communications an amount equal
to such excess.
Section 2.03 Time of Payment. Payment pursuant to Sections 2.01 and
2.02 (other than resulting from a recomputation of Subsidiary Separate Tax under
Section 2.05) shall be made no later than seven (7) days prior to the due date
of the Group's consolidated Federal income tax return for the Taxable Period in
question, not including extensions. If the due date for such return is extended,
such payment shall be made on an estimated basis and shall be recalculated no
later than seven (7) days prior to the extended due date for such return, and
any
<PAGE> 4
difference between such recalculated payments and such estimated payments shall
be paid to the party entitled thereto at the time of such recalculation. The
time that any payment is required to be made pursuant to Sections 2.01 and 2.02
by reason of a recomputation of Subsidiary Separate Tax under Section 2.05 is
set forth in Section 2.05.
Section 2.04 Estimated Tax Payments. For every Taxable Period,
Communications shall pay to Williams no later than seven (7) days prior to the
fifteenth day of the fourth, sixth, ninth and twelfth months of such Taxable
Period 25%, 50%, 75% and 100%, respectively, of the current annual estimated
Federal income taxes that WCG would be required to pay for such Taxable Period,
less any prior payments for such Taxable Period. Such estimated Federal income
tax liability shall be determined in a manner consistent with the definition of
Subsidiary Separate Tax and subject to approval by Williams.
Section 2.05 Adjustments.
(a) Carryovers of Post-IPO Date Losses or Credits. In the event
that WCG realizes a loss, credit or other similar attribute in any Taxable
Period that would be permitted under applicable Federal income tax law to be
carried over to one or more Taxable Periods that precede or follow such Taxable
Period if WCG had filed a separate Federal income tax return for all such
Taxable Periods, the Subsidiary Separate Tax shall be recomputed for such
preceding or subsequent Taxable Periods to take into account such carryover and
the payments pursuant to Sections 2.01 and 2.02 shall be appropriately adjusted.
Any payment from Williams to Communications required by reason of such
adjustment shall be made within 30 days following the earlier of (i) Williams's
receipt of the related actual refund, if any, from the Internal Revenue Service,
(ii) in the case of a carryback, the date of the filing by Williams of the tax
return for the Taxable Period in which such loss, credit or attribute arises or
(iii) in the case of a carryforward, the date of the filing by Williams of the
tax return for the Taxable Period to which such loss, credit or attribute is
carried.
(b) Redeterminations of Post-IPO Date Tax Liability. In the event
of any redetermination of the consolidated Federal income tax liability of the
Group for any Taxable Period as a result of an audit by the Internal Revenue
Service, the allowance of a claim for refund, court determination or otherwise,
the Subsidiary Separate Tax shall be recomputed for such Taxable Period to take
into account such redetermination in a manner consistent with such revised
treatment and the payments pursuant to Sections 2.01 and 2.02 shall be
appropriately adjusted, which payments shall also include, if and to the extent
applicable, any interest received from the Internal Revenue Service and any
interest, penalties and additions to tax paid to the Internal Revenue Service.
Any payment required to be made by a party hereto by reason of such adjustment
shall be made within 30 days of the date of a Final Determination with respect
to such redetermination or as soon as such adjustment can practicably be
calculated (if later).
(c) Inadvertent Deconsolidation. In the event that Communications
is determined not to have been properly treated as an includible corporation in
the Group with
<PAGE> 5
respect to any Taxable Period, the amount of any payments made under Sections
2.01, 2.02 and 2.04 with respect to such Taxable Period (taking into account any
adjustments pursuant to Section 2.05(a) and (b)) shall be refunded to the party
entitled to such net amount within 30 days of the date of a Final Determination
of such deconsolidation or as soon as the amount to be refunded can practicably
be determined (if later).
(d) Ceasing to Be a Member of the Group. In the event
Communications or any other member of WCG ceases to be a member of the Group,
(x) Williams shall allocate the income, gain, loss, deduction and expense of WCG
for the Taxable Period in which such deconsolidation occurs between the
pre-deconsolidation period of such Taxable Period and the post-deconsolidation
period of such Taxable Period in accordance with any permitted method under the
consolidation return provisions of the Code and Treasury Regulations thereunder
and (y) the Group consolidated loss or credit carryovers or other similar
attributes attributable to Communications or such other member of WCG, if any
(as determined by Williams in accordance with any permitted method under the
consolidated return provisions of the Code and Treasury Regulations thereunder),
shall constitute attributes of Communications or such other member of WCG. With
respect to any such attribute so attributable to Communications or any other
member of WCG, Communications shall pay to Williams, within 30 days of the date
of filing by Williams of the first tax return thereafter, an amount equal to the
sum of the following: (1) the amount of any Group consolidated tax credit
carryover so attributable to WCG to the extent that such credit is treated as an
attribute of Williams under clause (ii) of the definition of Subsidiary Separate
Tax; (2) the product of (A) the highest marginal Federal corporate income tax
rate and (B) the amount of the Group consolidated loss carryover or other
similar attribute (other than credit carryovers) so attributable to WCG to the
extent that such attribute is treated as an attribute of Williams under clause
(ii) of the definition of Subsidiary Separate Tax; (3) the amount of any Group
consolidated tax credit carryover so attributable to WCG to the extent that such
attribute (i) relates to periods beginning on or after the IPO Date and (ii)
reduced the amount of Subsidiary Separate Tax; and (4) the product of (A) the
highest marginal Federal corporate income tax rate and (B) the amount of the
Group consolidated loss carryover or other similar attribute (other than credit
carryovers) so attributable to WCG to the extent that such attribute (i) relates
to periods beginning on or after the IPO Date and (ii) reduced the amount of
Subsidiary Separate Tax. No adjustment to Sections 2.01 and 2.02 shall be made
in the event that Communications ceases to be a member of the Group and
thereafter realizes in any taxable year a loss, credit or other attribute that
would be permitted under applicable Federal income tax law to be carried back to
one or more Taxable Periods that precede such taxable year.
Section 2.06 Payments in Respect of Redeterminations of Pre-IPO Date
Tax Liability. In the event of any Final Determination for a period prior to the
IPO Date and pursuant to which there is a reduction of any loss or credit
carryover or other similar attribute of WCG existing on the date preceding the
IPO Date as determined under clause (ii) of the definition of
<PAGE> 6
Subsidiary Separate Tax, Communications shall pay to Williams, within 30 days of
the date of the Final Determination, an amount equal to the sum of (A) the
amount of any consolidated Federal income taxes, interest, penalties and
additions to such taxes payable to the Internal Revenue Service resulting from
such reduction of any such loss or credit carryover or other similar attribute
of WCG, (B) the amount of the reduction of any such credit carryover of WCG to
the extent not covered by the preceding clause (A), and (C) the product of (i)
the highest marginal Federal corporate income tax rate and (ii) the amount of
the reduction of any such loss carryover or other similar attribute (other than
credit carryovers) of WCG to the extent not covered by the preceding clause (A).
In the event of any Final Determination for a period prior to the IPO Date and
pursuant to which there is an increase to any loss or credit carryover or other
similar attribute of WCG existing on the date preceding the IPO Date as
determined under clause (ii) of the definition of Subsidiary Separate Tax,
Williams shall pay to Communications an amount equal to the sum of (1) any
refund of consolidated Federal income taxes, including interest, received from
the Internal Revenue Service within 30 days following Williams' receipt of the
related actual refund from the Internal Revenue Service resulting from such
increase to any loss or credit carryover or other similar attribute of WCG, (2)
the amount of the increase to any such credit carryover of WCG to the extent not
covered by the preceding clause (1) within 30 days of the date of the Final
Determination, and (3) the product of (i) the highest marginal Federal corporate
income tax rate and (ii) the amount of the increase to any such loss carryover
or other similar attribute (other than credit carryovers) of WCG to the extent
not covered by the preceding clause (1) within 30 days of the date of the Final
Determination.
Section 2.07 Form of Payment. Any payment required to be made by a
party pursuant to this Article II shall be made by wire transfer of immediately
available funds or by appropriate adjustment to intercompany indebtedness (as
determined by Williams).
Section 2.08 General. Unless applicable law changes, the parties agree
to treat any payment provided for under this Agreement as a distribution by
Communications to Williams or a capital contribution by Williams to
Communications, as the case may be.
ARTICLE III
Tax Matters; Cooperation; Indemnification
Section 3.01 Williams As Agent. Communications hereby irrevocably
appoints Williams as its agent, and Communications hereby agrees that Williams
shall have sole and absolute authority, for the purposes of (i) preparing and
filing consolidated Federal income tax returns for the Group (including, without
limitation, preparing and filing estimated tax returns, amended tax returns and
claims for refund, determining tax return positions, selecting methods of
accounting and making elections), (ii) representing any member of WCG that is a
member of the Group with respect to any consolidated Federal income tax audit or
consolidated Federal income tax controversy (including, without limitation, any
proceeding with the Internal Revenue Service
<PAGE> 7
and any judicial proceedings, whether any such proceedings relate to a claim for
additional taxes or a claim for refund of taxes) and settling or compromising
any claim for additional, or any claim for refund of, Federal income taxes of
any member of WCG that is a member of the Group, (iii) engaging outside counsel,
accountants and other experts with respect to Federal income tax matters
relating to any member of WCG that is a member of the Group and (iv) taking any
other action in connection with Federal income tax matters relating to any
member of WCG that is a member of the Group (or relating to any other member of
the Group) as Williams, in its sole and absolute discretion, determines to be
necessary or appropriate.
Section 3.02 Cooperation. Communications shall cooperate (and shall
cause all members of WCG to cooperate) with Williams regarding the application
of all aspects of this Agreement (including, without limitation, the proper and
timely preparation and filing of any tax return to which this Agreement applies,
the calculation or basis of determination of any payment provided for under this
Agreement and the conduct of any tax audit or tax controversy to which this
Agreement applies) (i) by maintaining (or causing all members of WCG to
maintain) such books and records, (ii) by providing (or causing all members of
WCG to provide) such information, (iii) by executing (or causing all members of
WCG to execute) such documents and (iv) by taking (or causing all members of WCG
to take) any such other action (including, without limitation, making any
officers, directors, employees and agents available to Williams), in each such
case as Williams may request from time to time. Communications shall secure (or
shall cause any relevant member of WCG to secure) the covenant of any acquirer
of any member of WCG to comply with this Section 3.02 for the benefit of
Williams and Williams' successors and assigns.
Section 3.03 Indemnification. Communications hereby indemnifies and
holds harmless Williams and the other non-WCG members of the Group against any
interest, penalties, additions to tax, expenses, losses, claims, damages or
liabilities for any failure to file, properly or timely, any tax return to which
this Agreement applies to the extent that such failure is attributable to the
failure of Communications to make the payments required under this Agreement or
the failure of any member of WCG to comply with Section 3.02 (which shall
include, without limitation, the failure of any member of WCG to provide
accurate or complete information or to take proper tax reporting positions).
Upon the proper and timely payment by Communications to Williams of an amount
pursuant to Section 2.01 for any Taxable Period, Williams will indemnify
Communications and the other members of WCG for the Federal income tax
liabilities of the Group for such Taxable Period with the exception of any
adjustment to tax liabilities that are attributable to WCG, as determined by
Sections 2.05(b) and 2.06.
ARTICLE IV
State, Local, Foreign and Other Federal Taxes
The underlying concepts of this Agreement (including, without
limitation, Article II (e.g., treating any loss or credit carryover or other
similar attribute for state income tax
<PAGE> 8
purposes existing on the date preceding the IPO Date as an attribute of Williams
for all purposes) and Article III) shall apply in the same general manner with
respect to state income taxes (and, in the sole and absolute discretion of
Williams, with respect to any foreign, local, other state and other Federal
taxes) where unitary, combined, consolidated or similar returns that include one
or more members of WCG and one or more non-WCG members of the Group are filed.
The parties recognize that, among other things, the utilization of the
definition of Subsidiary Separate Tax may not be appropriate for unitary,
combined, consolidated or similar state income and other tax purposes, and
Williams is thus authorized to apply, in good faith, such principles as would be
reasonably expected to result in an allocation of liabilities for such tax
purposes in a manner designed to reflect such taxes payable on income of members
of the Group arising in whole or in part by reason of other Group member nexus
with, or other Group member activity in, a particular state or other relevant
tax jurisdiction. All matters relating to any Federal, state, local and foreign
taxes to which this Agreement does not apply (including, without limitation,
preparing and filing such tax returns, paying such taxes and handling such tax
audits or tax controversies) shall be the responsibility of the party that is
the relevant taxpayer.
ARTICLE V
Termination
This Agreement shall cease to be effective with respect to consolidated
Federal income tax or any unitary, combined, consolidated or similar state
income tax at such time as Communications ceases to be a member of,
respectively, the Group or the relevant unitary, combined, consolidated or
similar state income tax group. This Agreement shall cease to be effective with
respect to any foreign, local, other state and other Federal tax to which this
Agreement applies (as determined by Williams pursuant to Article IV) under
analogous concepts or any other concept as Williams, in its sole and absolute
discretion, determines to be necessary or appropriate for such tax purposes.
Notwithstanding all of the foregoing of this Article V, all provisions of this
Agreement (including, without limitation, payment obligations, adjustments to
payment obligations, cooperation and indemnification) with respect to any
Taxable Period, taxable year or other period (as the case may be) commencing on
or before the termination of this Agreement shall survive such termination.
ARTICLE VI
Miscellaneous
Section 6.01 Interpretations and Determinations. The application of
this Agreement and any dispute or ambiguity concerning the subject matter of
this Agreement shall be determined by Williams in its sole and absolute
discretion. Such determination by Williams
<PAGE> 9
shall be final and binding upon Communications.
Section 6.02 Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by either party
without the prior written consent of the other party.
Section 6.03 Expenses. Any direct and indirect cost and expense (such
as fees or expenses for legal, accounting or other services and overhead items)
incurred by Williams in connection with the application of this Agreement
(including, without limitation, the preparation and filing of any tax return to
which this Agreement applies and the conduct of any tax audit or tax controversy
to which this Agreement applies) shall be allocated in accordance with the
Administrative Services Agreement by and between the parties dated ___________,
1999.
Section 6.04 Effect of Agreement. This Agreement shall determine the
rights and liabilities of the parties as to the matters provided for in this
Agreement, whether or not such determination is effective for financial
reporting or other purposes.
Section 6.05 Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties in respect of the subject matter
contained in this Agreement and supersedes all prior or contemporaneous
agreements, promises, covenants, arrangements, communications, representations
or warranties, whether oral or written, by any party or by any officer, employee
or representative of any party.
Section 6.06 Amendments and Waivers. This Agreement shall not be
modified, supplemented or terminated except by a writing duly signed by each of
the parties hereto, and no waiver of any provision of this Agreement shall be
effective unless in a writing duly signed by the party sought to be bound.
Section 6.07 Code References. Any references to Sections of the Code
shall be deemed to refer to any corresponding provisions of succeeding law as in
effect from time to time.
Section 6.08 Notices. Any payment, notice, communication or approval
required or permitted to be given under this Agreement shall be deemed to have
been duly given if delivered by hand or deposited in the United States mail,
postage prepaid and sent by certified or registered mail, if addressed to
Williams, at:
The Williams Companies, Inc.
One Williams Center
Tulsa, Oklahoma 74172
Attention: [________]
<PAGE> 10
if addressed to Communications, at:
Williams Communications Group, Inc.
One Williams Center
Tulsa, Oklahoma 74172
Attention: [_________]
Section 6.09 Third Parties. Nothing expressed or implied in this
Agreement is intended or shall be construed to confer upon or give to any person
other than the parties hereto any rights or remedies under or by reason of this
Agreement.
Section 6.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without regard to
principles of conflicts of law.
Section 6.11 Severability. If any provision of this Agreement or the
application of this Agreement in any circumstance is held invalid or
unenforceable, the remainder of this Agreement and the application of this
Agreement in any other circumstance shall not be affected thereby, the
provisions of this Agreement being severable in any such instance.
Section 6.12 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
The parties hereto have caused this Agreement to be duly executed as of
the date first written above.
THE WILLIAMS COMPANIES, INC.
By:
Its:
WILLIAMS COMMUNICATION GROUP, INC.
By:
Its:
<PAGE> 1
EXHIBIT 10.42
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (this "Agreement") is made and entered
into this _____ day of _____________, 1999, by and between The Williams
Companies, Inc., a Delaware corporation ("Williams"), and Williams
Communications Group, Inc., a Delaware corporation ("Communications"),
WITNESSETH:
WHEREAS, Communications plans to sell shares of its Class A Common
Stock, par value $.01 per share ("Common Stock"), to the public in an
underwritten Initial Public Offering ("Initial Public Offering") and to SBC
Communications Inc., pursuant to a Securities Purchase Agreement dated as of
February 8, 1999, and
WHEREAS, Communications plans to sell $[ ] in aggregate principal
amount of [ ]% senior notes due [ ], 2009 (the "Notes") to the public in an
underwritten offering (the "Notes Offering," and together with the Initial
Public Offerings, the "Offerings"), and
WHEREAS, Williams will continue to hold all of the issued and
outstanding Class B Common Stock of Communications, par value $.01 per share,
after the closing of the Initial Public Offering, and
WHEREAS, in connection with each of the Notes Offering and the Initial
Public Offering, Communications has filed a Registration Statement with the
Securities and Exchange Commission ("SEC") under the Securities Act of 1933, as
amended ("1933 Act") and
WHEREAS, each of Williams and Communications desires to indemnify the
other, and to be indemnified by the other, against certain liabilities relating
to, arising out of or resulting from their respective businesses, operations and
assets and the above-mentioned Registration Statement, on the terms set forth in
the Agreement,
NOW, THEREFORE, the parties hereto agree, intending to be legally
bound, as follows:
Indemnification Agreement, 4-05 revision
Page 1 of 15
<PAGE> 2
ARTICLE I
DEFINITIONS
Section 1.01 DEFINITIONS. As used in this Agreement, in addition to the
terms defined in the Preamble and Recitals hereof, the following terms shall
have the following meanings, applicable to both the singular and plural forms of
the terms described:
"ACTION" means any action, claim (whether or not filed), suit,
arbitration, inquiry, demand proceeding or investigation.
"BUSINESS DAY" means any calendar day which is not a Saturday, Sunday
or public holiday under the laws of the State of New York.
"CLOSING" means the consummation of the purchase and sale of shares of
the Common Stock pursuant to the Initial Public Offering and the consummation of
the purchase and sale of the Notes pursuant to the Notes Offering.
"CLOSING DATE" means the date on which the Closing occurs.
"COMMUNICATIONS EMPLOYEES" means all employees or former employees of
the Communications Group other than any person who as of the Closing is an
employee of any member of the Williams Group.
"COMMUNICATIONS GROUP" shall mean Communications and its direct and
indirect subsidiaries.
"COMMUNICATIONS LIABILITIES" means all Liabilities (other than
Liabilities for Taxes that are allocated pursuant to the Tax Sharing Agreement)
to the extent relating to, resulting from or arising out of the businesses or
operations conducted or formerly conducted or assets owned or formerly owned by
any member of the Communications Group.
"COMMUNICATIONS SECURITIES LIABILITIES" means any Liability under the
1933 Act, the 1934 Act, or any other federal or state securities law or
regulation resulting from or arising out of the Notes Offering or the Initial
Public Offering, including, without limitation, any such Liability arising out
of or based upon: (i) any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement or in any Prospectus; or
(ii) the omission or alleged omission to state in a Registration Statement or
Prospectus a material fact required to be stated therein or necessary to make
the statements made therein not misleading; but only to the extent that such
Liability arises out of or is based upon any such untrue statement or
Indemnification Agreement, 4-05 revision
Page 2 of 15
<PAGE> 3
alleged untrue statement or any such omission or alleged omission concerning the
businesses and operations of any member of the Communications Group.
"ENVIRONMENTAL LAW" means ay statute, law, regulation and rule in
effect before, on or after the date of this Agreement that has as its principal
purpose the protection of the environment.
"INDEMNIFIABLE LOSSES" shall have the meaning ascribed to it in Section
2.01.
"INDEMNIFYING PARTY" shall have the meaning ascribed to it in Section
4.01(a).
"INDEMNITEE" shall have the meaning ascribed to it in Section 4.01(a).
"INDEMNITY PAYMENT" shall have the meaning ascribed to it in Section
4.01(a).
"INSURANCE PROCEEDS" means those monies: (a) received by an insured
from an insurance carrier, or (b) paid by an insurance carrier on behalf of the
insured,; in the case of (a) or (b), net of any applicable premium adjustments
(including reserves and retrospectively rated premium adjustments) and net of
any costs or expenses (including allocated costs of in-house counsel and other
personnel) incurred in collection thereof.
"LIABILITIES" means all liabilities and obligations of a party, actual
or contingent, liquidated or unliquidated, accrued or unaccrued, known or
unknown, whenever and however arising, including all costs and expenses
(including reasonable fees and disbursements of counsel) relating thereto, and
including, without limitation, liabilities and obligations arising in connection
with any actual or threatened claim, action, suit or proceeding by or before any
court or regulatory or administrative agency or commission or any arbitration
panel.
"PROSPECTUS" means any prospectus relating to the Notes Offering or the
Initial Public Offering or any amendment or supplement thereto.
"REGISTRATION RIGHTS AGREEMENT" means that certain Registration Rights
Agreement by and between Williams and Communications dated as of the date
hereof.
"REGISTRATION STATEMENT" means any Registration Statement filed with
the SEC in connection with the Notes Offering or the Initial Public Offering and
any amendment or supplement thereto.
"TAX ASSESSMENT" shall have the meaning ascribed to it in Section
12.01(a).
Indemnification Agreement, 4-05 revision
Page 3 of 15
<PAGE> 4
"TAX SHARING AGREEMENT" means that certain Tax Sharing Agreement
between Williams and Communications dated as of the date hereof.
"TAXES" means any and all taxes (including interest, penalties and
additions to tax), fees and charges (including sales, use, excise, value added,
personal property and other taxes) imposed by any federal, state or local or
government tax authority in the United States of America or by any foreign
government or taxing authority.
"THIRD-PARTY CLAIM" shall have the meaning ascribed to it in Section
5.01(a).
"UNDERWRITING AGREEMENTS" means, collectively: (i) that certain
underwriting agreement with respect to the Initial Public Offering by and among
Lehman Brothers Inc., Salomon Smith Barney Inc., Merrill Lynch, Pierce, Fenner &
Smith Incorporated, CIBC Oppenheimer, Credit Suisse First Boston, Donaldson,
Lufkin & Jenrette Securities Corporation and NationsBanc Montgomery Securities
LLC (as representatives of the U.S. underwriters for the Initial Public
Offering) as well as Lehman Brothers International (Europe), Salomon Brothers
International Limited, Merrill Lynch International, CIBC Oppenheimer, Credit
Suisse First Boston (Europe) Limited, Donaldson, Lufkin & Jenrette Securities
Corporation and NationsBanc Montgomery Securities LLC (as representatives of the
international underwriters for the Initial Public Offering), dated [ ], 1999;
and (ii) that certain underwriting agreement with respect to the Notes Offering
by and among Merrill Lynch, Pierce, Fenner & Smith Incorporated, Lehman Brothers
Inc., Salomon Smith Barney Inc., CIBC Oppenheimer, Credit Suisse First Boston,
Donaldson, Lufkin & Jenrette Securities Corporation and NationsBanc Montgomery
Securities LLC (as representatives of the underwriters for the Notes Offering),
dated [ ], 1999.
WILLIAMS EMPLOYEES" means all employees or former employees of any of
the Williams Companies other than the current or former Communications Employees
and Communications' direct and indirect subsidiaries.
"WILLIAMS GROUP" means Williams and each of its direct and indirect
subsidiaries other than members of the Communications Group.
"WILLIAMS GUARANTEE" means any guarantee, surety or performance bond,
letter of credit or other contractual arrangement in effect as of the Closing
pursuant to which any member of the Williams Group has guaranteed or secured, or
caused a third party to guarantee or secure, any liability or obligation of
Communications and its direct and indirect subsidiaries.
Indemnification Agreement, 4-05 revision
Page 4 of 15
<PAGE> 5
"WILLIAMS LIABILITIES" means all Liabilities (other than any
Liabilities for Taxes which are allocated pursuant to the Tax Sharing Agreement)
to the extent relating to, resulting from or arising out of the business or
operations conducted or formerly conducted or assets now or previously owned or
operated by any member of the Williams Group or any predecessor, in whole or in
part, of any such entity.
"WILLIAMS SECURITIES LIABILITIES" means any Liability under the 1933
Act, the 1934 Act or any other federal or state securities law or regulation
resulting from or arising out of either the Notes Offering or the Initial Public
Offering, including, without limitation, any such Liability arising out of or
based upon: (i) any untrue statement or alleged untrue statement of a material
fact contained in a Registration Statement or in any Prospectus; or (ii) the
omission or alleged omission to state in a Registration Statement or Prospectus
a material fact required to be stated therein or necessary to make the
statements made therein not misleading; but only to the extent that such
Liability arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission concerning the business and
operations of any member of the Williams Group.
Section 1.02 INTERNAL REFERENCES. Unless the context indicates
otherwise, references to Articles, Sections and Paragraphs shall refer to the
corresponding Articles, Sections and Paragraphs in this Agreement, and
references to the parties shall mean the parties to this Agreement.
ARTICLE II
INDEMNIFICATION BY COMMUNICATIONS
Section 2.01 INDEMNIFICATION BY COMMUNICATIONS. (a) Communications
shall indemnify, defend and hold harmless the Williams Group and the respective
past, present and future directors, officers, partners, employees, agents and
representatives thereof (regardless in each case of whether any such person
serves in one or more similar capacities for Communications) from and against
any and all losses, claims, damages, liabilities, demands, suits and actions,
including all reasonable attorneys' fees and disbursements and other costs and
expenses incurred in connection therewith (collectively, "Indemnifiable
Losses"), relating to, resulting from or arising out of: (i) any Communications
Liabilities; (ii) any Communications Securities Liabilities; or (iii) any
misrepresentation or breach by any member of the Communications Group of any
covenant of any member of the Communications Group or any failure by any member
of the Communications Group to satisfy any condition required to be satisfied by
any member of the Communications Group or any liability of any member of the
Communications Group for taxes arising prior to the Closing Date determined, in
a manner consistent with the principles of tax liability allocation set forth in
the Tax Sharing Agreement, to be owing by any member of the Communications Group
for which any member of the Williams Group may have a
Indemnification Agreement, 4-05 revision
Page 5 of 15
<PAGE> 6
secondary liability, in each case contained in this Agreement, the Underwriting
Agreements or any other agreement executed by any member of the Communications
Group in connection with the Notes Offering or the Initial Public Offering,
including, without limitation, the Registration Rights Agreement and the Tax
Sharing Agreement, and in addition to and notwithstanding any other
indemnification between the parties hereto as provided in any such agreement,
except to the extent that such misrepresentation, breach or failure was caused
by or resulted from any statement, act or omission within the exclusive
knowledge or control of any member of the Williams Group.
(b) Except as specifically set forth in this Agreement, Williams Group
waives any rights and claims Williams Group may have against any member of
Communications Group, whether in law or in equity, relating to the business of
Williams Group or the transactions contemplated hereby. The rights and claims
waived by Williams Group include, without limitation, claims for contribution or
other rights of recovery arising out of or relating to any Environmental Law,
claims for breach of contract, breach of representation or warranty, negligent
misrepresentation and all other claims for breach of duty. This Agreement will
provide the exclusive remedy for any misrepresentation, breach of warranty,
covenant or other agreement or other claim arising out of this Agreement or the
transactions contemplated hereby.
ARTICLE III
INDEMNIFICATION BY WILLIAMS
Section 3.01 INDEMNIFICATION BY WILLIAMS. (a) Williams shall indemnify,
defend and hold harmless the Communications Group and the respective past,
present and future directors, officers, employees, partners, agents and
representatives thereof (regardless in each case of whether any such person
serves in one or more similar capacities for any member of the Williams Group)
from and against any and all Indemnifiable Losses relating to, resulting from or
arising out of: (i) any Williams Liabilities; (ii) any Williams Securities
Liabilities; or (iii) any misrepresentation or breach by any member of the
Williams Group of any covenant of any member of the Williams Group or any
failure of any member of the Williams Group to satisfy any condition required to
be satisfied by any member of the Williams Group or any liability of any member
of the Williams Group for taxes arising prior to the Closing Date determined, in
a manner consistent with the principles of tax liability allocation set forth in
the Tax Sharing Agreement, to be owing by any member of the Williams Group for
which any member of the Communications Group may have a secondary liability,
contained in this Agreement, the Underwriting Agreements, or any other agreement
executed by any member of the Williams Group in connection with the Notes
Offering or the Initial Public Offering, including, without limitation, the
Registration Rights Agreement and the Tax Sharing Agreement, and in addition to
and
Indemnification Agreement, 4-05 revision
Page 6 of 15
<PAGE> 7
notwithstanding any other indemnification between the parties hereto as
provided in any such agreement, except to the extent that such
misrepresentation, breach or failure was caused by or resulted from any
statement, act or omission within the exclusive knowledge or control of any
member of the Communications Group.
(b) Except as specifically set forth in this Agreement, Communications
Group waives any rights and claims Communications Group may have against any
member of Williams Group, whether in law or in equity, relating to the business
of the Communications Group or the transactions contemplated hereby. The rights
and claims waived by Communications Group include, without limitation, claims
for contribution or other rights of recovery arising out of or relating to any
Environmental Law, claims for breach of contract, breach of representation or
warranty, negligent misrepresentation and all other claims for breach of duty.
This Agreement will provide the exclusive remedy for any misrepresentation,
breach of warranty, covenant or other agreement or other claim arising out of
this Agreement or the transactions contemplated hereby.
ARTICLE IV
INDEMNIFICATION OBLIGATIONS NET OF INSURANCE PROCEEDS AND OTHER AMOUNTS
Section 4.01 INDEMNIFICATION OBLIGATIONS NET OF INSURANCE PROCEEDS AND
OTHER AMOUNTS. (a) The parties intend that any Liabilities subject to
indemnification or reimbursement pursuant to Article II or Article III of this
Agreement will be net of Insurance Proceeds that actually reduce the amount of
the Liabilities. Accordingly, the amount which any party (an "Indemnifying
Party") is required to pay to any person entitled to indemnification hereunder
(an "Indemnitee") will be reduced by any Insurance Proceeds theretofore actually
recovered by or on behalf of the Indemnitee in reduction of the related
Liability. If an Indemnitee receives a payment (an "Indemnity Payment") required
by this Agreement from an Indemnifying Party in respect of any Liability and
subsequently receives Insurance Proceeds, then the Indemnitee will pay to the
Indemnifying Party an amount equal to the excess of the Indemnity Payment
received over the amount of the Indemnity Payment that would have been due if
the Insurance Proceeds recovery had been received, realized or recovered before
the Indemnity Payment was made.
(b) An insurer who would otherwise be obligated to pay any claim shall
not be relieved of the responsibility with respect thereto or, solely by virtue
of the indemnification provisions hereof, or have any subrogation rights with
respect thereto, it being expressly understood and agreed that no insurer or any
other third party shall be entitled to a "windfall" (i.e., a benefit they would
not be entitled to receive in the absence of the indemnification provisions) by
virtue of the indemnification provisions hereof. Notwithstanding the foregoing,
each member of the Williams Group
Indemnification Agreement, 4-05 revision
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<PAGE> 8
and Communications Group shall be required to use commercially reasonable
efforts to collect or recover any available Insurance Proceeds.
ARTICLE V
GUARANTEE
Section 5.01 GUARANTEE. Communications shall indemnify, defend and hold
harmless each member of the Williams Group, and their respective directors,
officers, employees, agents and representatives, from and against any
Indemnifiable Losses relating to, resulting from, or arising out of any Williams
Guarantee. Each member of the Williams Group shall not terminate unilaterally or
withdraw any Williams Guarantee and shall abide by the terms of any such
Williams Guarantee. Communications shall reimburse each member of the Williams
Group for any direct fees (such as letter of credit maintenance fee) incurred by
such member in connection with maintaining any Williams Guarantee.
ARTICLE VI
THIRD-PARTY CLAIMS
Section 6.01 THIRD-PARTY CLAIMS. (a) If any Indemnitee receives notice
of the assertion of any claim or of the commencement of any action or proceeding
by any person that is not a party to this Agreement or a subsidiary of any such
party against such Indemnitee (a "Third-Party Claim"), the Indemnitee shall
promptly provide written notice thereof (including a description of the
Third-Party Claim and an estimate of any Indemnifiable Losses, which estimate
shall not be conclusive as to the final amount of such Indemnifiable Losses) to
the Indemnifying Party within twenty (20) Business Days after the Indemnitee's
receipt of notice of such Third-Party Claim. Any delay by the Indemnitee in
providing such written notice shall not relieve the Indemnifying Party of any
liability for indemnification hereunder except to the extent that the rights of
the Indemnifying Party are materially prejudiced by such delay.
(b) The Indemnifying Party shall have the right to participate in or,
by giving written notice to the Indemnitee, to assume the defense of any
Third-Party Claim at such Indemnifying Party's expense and by such Indemnifying
Party's own counsel (which shall be reasonably satisfactory to the Indemnitee),
and the Indemnitee will cooperate in good faith in such defense. The
Indemnifying Party shall not be liable for any legal expenses incurred by the
Indemnitee after the Indemnitee has received notice of the Indemnifying Party's
intent to assume the defense of a Third-Party Claim; provided, however, that if,
under applicable standards of professional conduct a conflict on any significant
issue between the Indemnifying Party and any Indemnified Party exists in respect
of such Third-Party Claim, then the Indemnifying Party shall reimburse the
Indemnified Party for the reasonable fees and expenses of one additional
Indemnification Agreement, 4-05 revision
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<PAGE> 9
counsel (who shall be reasonably acceptable to the Indemnifying Party);
provided, further, that if the Indemnifying Party fails to take steps reasonably
necessary to diligently pursue the defense of such Third-Party Claim within
twenty (20) Business Days of receipt of notice from the Indemnitee that such
steps are not being taken, the Indemnitee may assume its own defense and the
Indemnifying Party shall be liable for the reasonable costs thereof.
(c) The Indemnifying Party may settle any Third-Party Claim which it
has elected to defend so long as the written consent of the Indemnitee to such
settlement is first obtained (which consent shall not be unreasonably withheld).
The Indemnitee shall not settle any Third-Party Claim without the written
consent of the Indemnifying Party (which consent shall not be unreasonably
withheld).
(d) In the event that a Third-Party Claim involves a proceeding as to
which both Williams and Communications may be Indemnifying Parties, the parties
hereto agree to cooperate in good faith in a joint defense of such Third-Party
Claim.
(e) In the event of payment by or on behalf of any Indemnifying Party
to any Indemnitee in connection with any Third-Party Claim, such Indemnifying
Party shall be subrogated to and shall stand in the place of such Indemnitee as
to any events or circumstances in respect of which such Indemnitee may have any
right, defense or claim relating to such Third-Party Claim against any claimant
or plaintiff asserting such Third-Party Claim or against any other person. Such
Indemnitee shall cooperate with such Indemnifying Party in a reasonable manner,
and at the cost and expense (including allocated costs of in-house counsel and
other personnel) of such Indemnifying Party, in prosecuting any subrogated
right, defense or claim.
Section 6.02 NON THIRD-PARTY CLAIMS. In the event that an Indemnified
Party should have a claim against the Indemnifying Party hereunder that does not
involve a claim or demand being asserted against or sought to be collected from
it by a third party, the Indemnified Party shall send a notice with respect to
such claim to the Indemnifying Party. The Indemnifying Party shall have sixty
(60) days from the date such notice is delivered during which to notify the
Indemnified Party in writing of any good faith objections it has to the
Indemnified Party's notice or claims for indemnification, setting forth in
reasonable detail each of the Indemnifying Party's objections thereto. If the
Indemnifying Party does not deliver such written notice of objection within such
sixty-day period, the Indemnifying Party shall be deemed to not have any
objections to such claim. If the Indemnifying Party does deliver such written
notice of objection within such sixty (60) day period, the Indemnifying Party
and the Indemnified Party shall attempt in good faith to resolve any such
dispute within sixty (60) days of the delivery by the Indemnifying Party of such
written notice of objection. If the Indemnifying Party and the Indemnified Party
are unable to resolve any such dispute within such sixty (60) day period, such
dispute shall be submitted to the
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<PAGE> 10
Separation Committee in accordance with the procedures set forth in Section [xx]
of the Separation Agreement.
ARTICLE VII
CONTRIBUTION
Section 7.01 CONTRIBUTION. If the Indemnification provided for in this
Agreement with respect to Communications Securities Liabilities or Williams
Securities Liabilities is for any reason held by a court or other tribunal to be
unavailable on policy grounds or otherwise, Williams and Communications shall
contribute to any Indemnifiable Losses relating to, resulting from or arising
out of the Communications Securities Liabilities or the Williams Securities
Liabilities in such proportion as to reflect each party's relative fault in
connection with such Indemnifiable Losses. The relative fault of the parties
shall be determined by reference to, among other things, whether the conduct or
information giving rise to the Indemnifiable Losses is attributable to Williams
or Communications and each party's relative intent, knowledge, access to
information and opportunity to prevent or correct the Indemnifiable Losses. 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 is
not guilty of fraudulent misrepresentation.
ARTICLE VIII
COOPERATION
Section 8.01. COOPERATION. So long as any books, records and files
retained after the Closing Date by any member of the Williams Group, on the one
hand, or any member of the Communications Group on the other hand, relating to
the businesses, operations or assets of the other party and its subsidiaries
(including any books, records and files retained by any member of the
Communications Group relating to the conduct of its businesses or operations or
the ownership of its assets prior to the Closing Date) remain in existence and
are available, such other party shall have the right upon prior written notice
to inspect and copy the same at any time during business hours for any proper
purpose; provided that such right will not extend to any books, records or files
the disclosure of which in accordance herewith would result in a waiver of the
attorney-client, work-product or other privileges which permit non-disclosure of
otherwise relevant material in litigation or other proceedings, or which are
subject on the date hereof and at the time inspection is requested to a
non-disclosure agreement with a third party and a waiver cannot reasonably be
obtained. Williams and Communications agree that neither they nor any member of
the Williams Group or the Communications Group, as the case may be, shall
destroy such books, records or files without reasonable notice to the other
party or if such party receives within ten (10) Business Days of such notice any
reasonable objection from the other party to such
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<PAGE> 11
destruction. Except in the case of dispute between the parties hereto, each
member of the Williams Group and each member of the Communications Group shall
cooperate with one another in a timely manner in any administrative or judicial
proceeding involving any matter affecting the actual or potential liability of
either party hereunder. Such cooperation shall include, without limitation,
making available to the other party during normal business hours all books,
records and information, and officers and employees (without substantial
disruption of operations or employment) necessary or useful in connection with
any inquiry, audit, investigation or dispute, any litigation or any other matter
requiring any such books, records, information, officers or employees for any
reasonable business purpose. The party requesting or otherwise entitled to any
books, records, information, officers or employees pursuant to this Article VIII
shall bear all reasonable out-of-pocket costs and expenses (except for salaries,
employee benefits and general overhead) incurred in connection with providing
such books, records, information, officers or employees.
ARTICLE IX
EFFECTIVENESS
Section 9.01 EFFECTIVENESS. This Agreement shall become effective at
Closing.
ARTICLE X
SUCCESSORS AND ASSIGNS
Section 10.01 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon the parties hereto and their respective successors and permitted assigns
and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns. This Agreement may not be assigned by either
party hereto to any other person without the prior written consent of the other
party hereto.
ARTICLE XI
NO THIRD-PARTY BENEFICIARIES
Section 11.01 NO THIRD-PARTY BENEFICIARIES. Except for the persons
entitled to indemnification pursuant to Article II or Article III hereof, each
of whom is an intended third-party beneficiary hereunder, nothing expressed or
implied in this Agreement shall be construed to give any person or entity other
than the parties hereto any legal or equitable rights hereunder.
Indemnification Agreement, 4-05 revision
Page 11 of 15
<PAGE> 12
ARTICLE XII
TAXATION OF PAYMENTS
Section 12.01 TAXATION OF PAYMENTS. (a) All sums payable by the
Indemnifying Party to the Indemnified Party under this Agreement shall be paid
free and clear of all deductions, withholdings, set-offs or counterclaims
whatsoever save only as may be required by law. If any deductions or
withholdings are required by law, the Indemnifying Party shall be obliged to pay
to the Indemnified Party such sum as will, after such deduction or withholding
has been made, leave the Indemnified Party with the same amount as it would have
been entitled to receive in the absence of any such requirement to make a
deduction or withholding. If any authority imposes any Taxes on any sum paid to
the Indemnified Party under this Agreement (a "Tax Assessment"), then the amount
so payable shall be grossed up by such amount as will ensure that after payment
of the Tax Assessment there shall be left a sum equal to the amount that would
otherwise be payable under this Agreement.
(b) The Indemnified Party shall take any action and institute any
proceedings, and give any information and assistance, as the Indemnifying Party
may reasonably request, to dispute, resist, appeal, compromise, defend, remedy
or mitigate any Tax Assessment, in each case on the basis that the Indemnifying
Party shall indemnify the Indemnified Party for all reasonable costs incurred as
a result of a request by the Indemnifying Party.
(c) The Indemnified Party shall not admit liability in respect of, or
compromise or settle, a Tax Assessment without the prior written consent of the
Indemnifying party (such consent not to be unreasonably withheld or delayed).
ARTICLE XIII
ADDITIONAL MATTERS
Section 13.01 SURVIVAL OF INDEMNITIES. The rights and obligations of
each of Communications and Williams and their respective Indemnitees under
Article II and Article III, respectively, of this Agreement shall survive the
sale or other transfer by any party of any assets or businesses or the
assignment by it of any Liabilities.
Section 13.02 REMEDIES CUMULATIVE. The remedies provided in this
Agreement shall be cumulative and shall not, subject to the provisions of
Section 13.04 below, preclude assertion by any Indemnitee of any other rights or
the seeking of any and all other remedies against any Indemnifying Party.
Section 13.03 LIMITATION ON LIABILITY. No Indemnifying Party shall be
liable to an Indemnified Party under this Agreement in respect of consequential,
exemplary, special or punitive damages, or lost profits, except to the extent
such
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<PAGE> 13
consequential, exemplary, special or punitive damages, or lost profits are
actually paid to a third party.
Section 13.04 TAX MATTERS. Except as set forth in the Tax Sharing
Agreement and in Sections 2.01(a) and 3.01(a), all indemnification relating to
Taxes shall be governed by the Tax Sharing Agreement
ARTICLE XIV
ENTIRE AGREEMENT
Section 14.01 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter hereof.
ARTICLE XV
AMENDMENT
Section 15.01 AMENDMENT. This Agreement may not be amended except by an
instrument signed by the parties hereto.
ARTICLE XVI
REMEDIES AND WAIVERS
Section 16.01 REMEDIES AND WAIVERS. No waiver of any term shall be
construed as a subsequent waiver of the same term, or a waiver of any other
term, of this Agreement. The failure of any party to assert any of its rights
hereunder will not constitute a waiver of any such rights. The single or partial
exercise of any right, power or remedy provided by law or under this Agreement
shall not preclude any other or further exercise thereof or the exercise of any
right, power or remedy. Except as provided in this Agreement, the rights, powers
and remedies provided in this Agreement are cumulative and not exclusive of any
rights, powers and remedies provided by law.
ARTICLE XVII
SEVERABILITY
Section 17.01 SEVERABILITY. If any provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, such provision shall be deemed severable and all other provisions of
this Agreement shall nevertheless remain in full force and effect.
Indemnification Agreement, 4-05 revision
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<PAGE> 14
ARTICLE XVIII
HEADINGS
Section 18.01 HEADINGS. Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
ARTICLE XIX
NOTICES
Section 19.01 NOTICES. All notices given in connection with this
Agreement shall be in writing. Service of such notices shall be deemed complete:
(i) if hand delivered, on the date of delivery; (ii) if by mail, on the fourth
Business Day following the day of deposit in the United States mail, by
certified or registered mail, first-class postage prepaid; (iii) if sent by
Federal Express or equivalent courier service, on the next Business Day; or (iv)
if by telecopier, upon receipt by sender of confirmation of successful
transmission. Such notices shall be addressed to the parties at the following
address or at such other address for a party as shall be specified by like
notice (except that notices of change of address shall be effective upon
receipt):
If to Williams:
The Williams Companies, Inc.
One Williams Center
Tulsa, Oklahoma 74172
Attention: William G. von Glahn
Fax No. 918/573-5942
If to Communications:
Williams Communications Group, Inc.
One Williams Center
Tulsa, Oklahoma 74172
Attention: David P. Batow
Fax No.: 918/573-3005
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<PAGE> 15
ARTICLE XX
GOVERNING LAW
Section 20.01 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with, the laws of the State of Oklahoma, without giving
effect to the principles of conflict of laws of such state or any other
jurisdiction.
ARTICLE XXI
COUNTERPARTS
Section 21.01 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be an original, but all of which together
shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
THE WILLIAMS COMPANIES, INC.
By
-----------------------------------
Name:
Title:
WILLIAMS COMMUNICATIONS GROUP, INC.
By
-----------------------------------
Name:
Title:
Indemnification Agreement, 4-05 revision
Page 15 of 15
<PAGE> 1
EXHIBIT 10.43
- --------------------------------------------------------------------------------
WILLIAMS COMMUNICATIONS GROUP, INC.
and
[RIGHTS AGENT],
Rights Agent
--------------------
Rights Agreement
Dated as of , 1999
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
1. Certain Definitions ................................................... 3
2. Appointment of Rights Agent ........................................... 14
3. Issuance of Rights Certificates ....................................... 15
4. Form of Rights Certificates ........................................... 19
5. Countersignature and Registration ..................................... 21
6. Transfer, Split Up, Combination and Exchange of
Rights Certificates; Mutilated, Destroyed, Lost
or Stolen Rights Certificates ......................................... 23
7. Exercise of Rights; Purchase Price; Expiration
Date of Rights ........................................................ 25
8. Cancellation and Destruction of Rights
Certificates .......................................................... 31
9. Reservation and Availability of Capital Stock ......................... 32
10. Preferred Stock Record Date ........................................... 36
11. Adjustment of Purchase Price, Number and Kind
of Shares or Number of Rights ......................................... 37
12. Certificate of Adjusted Purchase Price or Number of Shares ............ 61
13. Consolidation, Merger or Sale or Transfer of
Assets, Cash Flow or Earning Power .................................... 61
14. Fractional Rights and Fractional Shares ............................... 68
15. Rights of Action ...................................................... 72
16. Agreement of Rights Holders ........................................... 73
17. Rights Certificate Holder Not Deemed a Stock
holder ................................................................ 75
18. Concerning the Rights Agent ........................................... 75
19. Merger or Consolidation or Change of Name of
Rights Agent .......................................................... 77
20. Duties of Rights Agent ................................................ 78
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
21. Change of Rights Agent ................................................ 83
22. Issuance of New Rights Certificates ................................... 86
23. Redemption and Termination ............................................ 87
24. Exchange .............................................................. 91
25. Notice of Certain Events .............................................. 94
26. Notices ............................................................... 97
27. Supplements and Amendments ............................................ 98
28. Successors ............................................................ 100
29. Determinations and Action by the Board, etc ........................... 101
30. Benefits of this Agreement ............................................ 102
31. Severability .......................................................... 103
32. Governing Law ......................................................... 104
33. Counterparts .......................................................... 104
34. Descriptive Headings .................................................. 105
</TABLE>
EXHIBITS
Exhibit A -- Form of Certificate of Designation, Preferences and Rights
Exhibit B -- Form of Rights Certificates
Exhibit C -- Form of Summary of Rights
ii
<PAGE> 4
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of ____________, 1999 (the "Agreement"),
between Williams Communications Group, Inc., a Delaware corporation (the
"Company"), and __________________, a ___________ banking corporation (the
"Rights Agent").
W I T N E S S E T H
WHEREAS, on ______________, 1999, the Board of Directors of the Company
authorized the issuance and distribution of one Right (as hereinafter defined)
for each share of Class A common stock, par value $0.01 per share, and Class B
common stock, par value $0.01 per share, of the Company (the "Common Stock")
outstanding at the close of business on the date of this Agreement (the "Record
Date"), and has authorized the issuance of one Right (as such number may
hereinafter be adjusted pursuant to the provisions of Section 11(p) hereof) for
each share of Common Stock of the Company issued between the Record Date
(whether originally issued or delivered from the Company's treasury) and the
Distribution Date (as hereinafter defined) each Right initially representing the
right to purchase one one-hundredth of a share of Series A Junior Participating
Preferred Stock of the
2
<PAGE> 5
Company (the "Preferred Stock") having the rights, powers and preferences set
forth in the form of Certificate of Designation, Preferences and Rights attached
hereto as Exhibit A, upon the terms and subject to the conditions hereinafter
set forth (the "Rights");
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the par ties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 15% or more of the shares of Common Stock then out standing,
but shall not include (i)TWC, (ii) the Company, (iii) any Subsidiary of the
Company, (iv) any employee benefit plan of the Company, or of any Subsidiary of
the Company, or any Person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such plan, or (v) any Person who
becomes the Beneficial Owner of fifteen percent (15%) or more of the shares of
Common Stock then outstanding as a result of a reduction in the number of shares
of Common Stock out-
3
<PAGE> 6
standing due to the repurchase of shares of Common Stock by the Company unless
and until such Person, after becoming aware that such Person has become the
Beneficial Owner of fifteen percent (15%) or more of the then out standing
shares of Common Stock, acquires beneficial ownership of additional shares of
Common Stock representing one percent (1%) or more of the shares of Common
Stock then outstanding, or (vi) any such Person who has reported or is required
to report such ownership (but less than 20%) on Schedule 13G under the
Securities and Exchange Act of 1934, as amended and in effect on the date of the
Agreement (the "Exchange Act") (or any comparable or successor report) or on
Schedule 13D under the Exchange Act (or any comparable or successor report)
which Schedule 13D does not state any intention to or reserve the right to
control or influence the management or policies of the Company or engage in any
of the actions specified in Item 4 of such schedule (other than the disposition
of the Common Stock) and, within 10 Business Days of being requested by the
Company to advise it regarding the same, certifies to the Company that such
Person acquired shares of Common Stock in excess of 14.9% inadvertently or
without knowledge of the terms of the Rights and who, together with all
Affiliates and Associates,
4
<PAGE> 7
thereafter does not acquire additional shares of Common Stock while the
Beneficial Owner of 15% or more of the shares of Common Stock then outstanding;
provided, however, that if the Person requested to so certify fails to do so
within 10 Business Days, then such Person shall become an Acquiring Person
immediately after such 10-Business-Day period.
(b) "Act" shall mean the Securities Act of 1933.
(c) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act.
(d) A Person shall be deemed the "Beneficial Owner" of, and
shall be deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire
(whether such right is exercisable immediately or only after the
passage of time) pursuant to any agreement, arrangement or
understanding (whether or not in writing) or upon the exercise
of conversion rights, exchange rights,
5
<PAGE> 8
rights, warrants or options, or otherwise; provided, however,
that a Person shall not be deemed the "Beneficial Owner" of, or
to "beneficially own," (A) securities tendered pursuant to a
tender or exchange offer made by such Person or any of such
Person's Affiliates or Associates until such tendered securities
are accepted for purchase or exchange, (B) securities issuable
upon exercise of Rights at any time prior to the occurrence of a
Triggering Event (as hereinafter defined), or (C) securities
issuable upon exercise of Rights from and after the occurrence of
a Triggering Event which Rights were acquired by such Person or
any of such Person's Affiliates or Associates prior to the
Distribution Date (as hereinafter defined) or pursuant to Section
3(a) or Section 22 hereof (the "Original Rights") or pursuant to
Section 11(i) hereof in connection with an adjustment made with
respect to any Original Rights;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote
6
<PAGE> 9
or dispose of or has "beneficial ownership" of (as determined
pursuant to Rule 13d-3 of the General Rules and Regulations under
the Ex change Act), including pursuant to any agreement,
arrangement or understanding, whether or not in writing;
provided, however, that a Per son shall not be deemed the
"Beneficial Owner" of, or to "beneficially own," any security
under this subparagraph (ii) as a result of an agreement,
arrangement or understanding to vote such security if such
agreement, arrangement or understanding: (A) arises solely from a
revocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the
applicable provisions of the General Rules and Regulations under
the Exchange Act, and (B) is not reportable by such Person on
Schedule 13D under the Exchange Act (or any comparable or
successor report); or
(iii) which are beneficially owned, directly or indirectly,
by any other Person (or any Affiliate or Associate thereof) with
which such Person (or any of such Person's Affiliates or
Associates) has any agreement,
7
<PAGE> 10
arrangement or understanding (whether or not in writing), for the
purpose of acquiring, holding, voting (except pursuant to a
revocable proxy as described in the proviso to subparagraph (ii)
of this paragraph (d)) or disposing of any voting securities of
the Company; provided, however, that nothing in this paragraph
(d) shall cause a Person engaged in business as an underwriter of
securities to be the "Beneficial Owner" of, or to "beneficially
own," any securities acquired through such Person's participation
in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition, and
then only if such securities continue to be owned by such Person
at such expiration of forty days.
(e) "Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
(f) "Close of business" on any given date shall mean 5:00
P.M., Tulsa, Oklahoma time, on such date; provided, however, that if such date
is not a Business
8
<PAGE> 11
Day, it shall mean 5:00 P.M., Tulsa, Oklahoma time, on the next succeeding
Business Day.
(g) "Common Stock" shall mean, collectively, the Class A
Common Stock, par value $0.01 per share, and the Class B Common Stock, par value
$0.01 per share, of the Company, except that "Common Stock" when used with
reference to any Person other than the Company shall mean the capital stock of
such Person with the greatest voting power, or the equity securities or other
equity interest having power to control or direct the management, of such
Person.
(h) "Common Stock Equivalents" shall have the meaning set
forth in Section 11(a)(iii) hereof.
(i) "Current Market Price" shall have the meaning set forth in
Section 11(d)(i) hereof.
(j) "Current Value" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(k) "Distribution Date" shall have the meaning set forth in
Section 3(a) hereof.
(l) "Equivalent Preferred Stock" shall have the meaning set
forth in Section 11(b) hereof.
(m) "Exchange Act" shall mean the Securities and Exchange Act
of 1934.
9
<PAGE> 12
(n) "Exchange Ratio" shall have the meaning set forth in
Section 24 hereof.
(o) "Expiration Date" shall have the meaning set forth in
Section 7(a) hereof.
(p) "Final Expiration Date" shall have the meaning set forth
in Section 7(a) hereof.
(q) "Person" shall mean any individual, firm, corporation,
partnership or other entity.
(r) "Preferred Stock" shall mean shares of Series A Junior
Participating Preferred Stock, par value $0.01 per share, of the Company, and,
to the extent that there are not a sufficient number of shares of Series A
Junior Participating Preferred Stock authorized to permit the full exercise of
the Rights, any other series of preferred stock of the Company designated for
such purpose containing terms substantially similar to the terms of the Series A
Junior Participating Preferred Stock.
(s) "Principal Party" shall have the meaning set forth in
Section 13(b) hereof.
(t) "Purchase Price" shall have the meaning set forth in
Section 4(a)(ii) hereof.
(u) "Qualified Offer" shall have the meaning set forth in
Section 11(a)(ii) hereof.
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<PAGE> 13
(v) "Record Date" shall have the meaning set forth in the
WHEREAS clause at the beginning of this Agreement.
(w) "Rights" shall have the meaning set forth in the WHEREAS
clause at the beginning of this Agreement.
(x) "Rights Agent" shall have the meaning set forth in the
parties clause at the beginning of this Agreement.
(y) "Rights Certificate" shall have the meaning set forth in
Section 3(a) hereof.
(aa) "Rights Dividend Declaration Date" shall have the meaning
set forth in the WHEREAS clause at the beginning of this Agreement.
(bb) "Section 11(a)(ii) Event" shall mean any event described
in Section 11(a)(ii) hereof.
(cc) "Section 13 Event" shall mean any event described in
clauses (x), (y) or (z) of Section 13(a) hereof.
(dd) "Spread" shall have the meaning set forth in Section
11(a)(iii) hereof.
(ee) "Stock Acquisition Date" shall mean the first date of
public announcement (which, for purposes of this definition, shall include,
without limitation,
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<PAGE> 14
a report filed or amended pursuant to Section 13(d) under the Exchange Act) by
the Company or an Acquiring Person that an Acquiring Person has become such
other than pursuant to a Qualified Offer.
(ff) "Subsidiary" shall mean, with reference to any Person,
any corporation of which an amount of voting securities sufficient to elect at
least a majority of the directors of such corporation is beneficially owned,
directly or indirectly, by such Person, or other wise controlled by such Person.
(gg) "Substitution Period" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(hh) "Summary of Rights" shall have the meaning set forth in
Section 3(b) hereof.
(ii) "Trading Day" shall have the meaning set forth in Section
11(d)(i) hereof.
(jj) "Triggering Event" shall mean any Section 11(a)(ii) Event
or any Section 13 Event.
(kk) "TWC" shall mean The Williams Companies, Inc. or any
Affiliate or Associate thereof.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall prior to the
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<PAGE> 15
Distribution Date also be the holders of the Common Stock) in accordance with
the terms and conditions here of, and the Rights Agent hereby accepts such
appointment. The Company may from time to time appoint such co-rights agents as
it may deem necessary or desirable.
Section 3. Issuance of Rights Certificates.
(a) Until the earlier of (i) the close of business on the
tenth Business Day after the Stock Acquisition Date, or (ii) the close of
business on the tenth Business Day (or such later date as the Board shall
determine) after the date that a tender or exchange offer by any Person (other
than the Company, any Subsidiary of the Company, any employee benefit plan of
the Company or of any Subsidiary of the Company, or any Person or entity
organized, appointed or established by the Company for or pursuant to the terms
of any such plan) is first published or sent or given within the meaning of
Rule 14d- 2(a) of the General Rules and Regulations under the Exchange Act, if
upon consummation thereof, such Person would become an Acquiring Person ,in
either instance other than pursuant to a Qualified Offer (the earlier of (i) and
(ii) being herein referred to as the "Distribution Date"), (x) the Rights will
be evidenced (subject to the provisions of paragraph (b) of this Section 3) by
the
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<PAGE> 16
certificates for the Common Stock registered in the names of the holders of the
Common Stock (which certificates for Common Stock shall be deemed also to be
certificates for Rights) and not by separate certificates, and (y) the Rights
will be transferable only in connection with the transfer of the underlying
shares of Common Stock (including a transfer to the Company). As soon as
practicable after the Distribution Date, the Rights Agent will send by
first-class, insured, postage-prepaid mail, to each record holder of the Common
Stock as of the close of business on the Distribution Date, at the address of
such holder shown on the records of the Company, one or more right certificates,
in substantially the form of Exhibit B hereto (the "Rights Certificates"),
evidencing one Right for each share of Common Stock so held, subject to
adjustment as provided herein. In the event that an adjustment in the number of
Rights per share of Common Stock has been made pursuant to Section 11(p) hereof,
at the time of distribution of the Rights Certificates, the Company shall make
the necessary and appropriate rounding adjustments (in accordance with Section
14(a) hereof) so that Rights Certificates representing only whole numbers of
Rights are distributed and cash is paid in lieu of any fractional Rights. As of
and after the Distribution
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<PAGE> 17
Date, the Rights will be evidenced solely by such Rights Certificates.
(b) The Company will make available, as promptly as
practicable following the Record Date, a copy of a Summary of Rights, in
substantially the form attached hereto as Exhibit C (the "Summary of Rights")
to any holder Rights who may so request from time to time prior to the
Expiration Date. With respect to certificates for the Common Stock outstanding
as of the Record Date, until the Distribution Date, the Rights will be evidenced
by such certificates for the Common Stock and the registered holders of the
Common Stock shall also be the registered holders of the associated Rights.
Until the earlier of the Distribution Date or the Expiration Date (as such term
is defined in Section 7(a) hereof), the transfer of any certificates
representing shares of Common Stock in respect of which Rights have been issued
shall also constitute the transfer of the Rights associated with such shares of
Common Stock.
(c) Rights shall be issued in respect of all shares of Common
Stock which are issued (whether originally issued or from the Company's
treasury) on or after the Record Date but prior to the earlier of the
Distribution Date or the Expiration Date. Certificates
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<PAGE> 18
representing such shares of Common Stock shall also be deemed to be certificates
for Rights, and shall bear the following legend:
This certificate also evidences and entitles the holder hereof
to certain Rights as set forth in the Rights Agreement between Williams
Communications Group, Inc. (the "Company") and the Rights Agent
thereunder (the "Rights Agreement"), the terms of which are hereby
incorporated herein by reference and a copy of which is on file at the
principal offices of the Company. Under certain circumstances, as set
forth in the Rights Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this certificate. The
Company will mail to the holder of this certificate a copy of the Rights
Agreement, as in effect on the date of mailing, without charge, promptly
after receipt of a written request therefor. Under certain circumstances
set forth in the Rights Agreement, Rights issued to, or held by, any
Person who is, was or becomes an Acquiring Person or any Affiliate or
Associate thereof (as such terms are defined in the Rights Agreement),
whether currently held by or on behalf of such Person or by any
subsequent holder, may become null and void.
With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the transfer
of any of such certificates shall also constitute the
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<PAGE> 19
transfer of the Rights associated with the Common Stock represented by such
certificates.
Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the forms of election to
purchase and of assignment to be printed on the reverse thereof) shall each be
substantially in the form set forth in Exhibit B hereto and may have such marks
of identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which the Rights may from time to
time be listed, or to conform to usage. Subject to the provisions of Section 11
and Section 22 hereof, the Rights Certificates, whenever distributed, shall be
dated as of the Record Date and on their face shall entitle the holders thereof
to purchase such number of one one-hundredths of a share of Preferred Stock as
shall be set forth therein at the price set forth therein (such exercise price
per one one-hundredth of a share, the "Purchase Price"), but the amount and type
of securities purchasable upon the exercise of each Right and the
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<PAGE> 20
Purchase Price thereof shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a),
Section 11(i) or Section 22 hereof that represents Rights beneficially owned by:
(i) an Acquiring Person or any Associate or Affiliate of an Acquiring Person,
(ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate)
who be comes a transferee after the Acquiring Person becomes such, or (iii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person becoming
such and receives such Rights pursuant to either (A) a transfer (whether or
not for consideration) from the Acquiring Person to holders of equity interests
in such Acquiring Person or to any Person with whom such Acquiring Person has
any continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect avoidance of Section 7(e) hereof, and any Rights
Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer,
exchange, replacement or adjustment of any other Rights
18
<PAGE> 21
Certificate referred to in this sentence, shall contain (to the extent feasible)
the following legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring
Person or an Affiliate or Associate of an Acquiring Person (as
such terms are defined in the Rights Agreement). Accordingly,
this Rights Certificate and the Rights represented hereby may
become null and void in the circumstances specified in Section
7(e) of the Rights Agreement.
Section 5. Countersignature and Registration.
(a) The Rights Certificates shall be executed on behalf of
the Company by its Chairman of the Board, its President or any Vice President,
either manually or by facsimile signature, and shall have affixed thereto the
Company's seal or a facsimile thereof which shall be attested by the Secretary
or an Assistant Secretary of the Company, either manually or by facsimile
signature. The Rights Certificates shall be counter signed by the Rights Agent,
either manually or by facsimile signature, and shall not be valid for any
purpose unless so countersigned. In case any officer of the Company who shall
have signed any of the Rights Certificates shall cease to be such officer of
the Company before countersignature by the Rights Agent and issuance and
delivery by the Company, such Rights Certificates, nevertheless, may be
countersigned by the Rights Agent
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<PAGE> 22
and issued and delivered by the Company with the same force and effect as though
the person who signed such Rights Certificates had not ceased to be such officer
of the Company; and any Rights Certificates may be signed on behalf of the
Company by any person who, at the actual date of the execution of such Rights
Certificate, shall be a proper officer of the Company to sign such Rights
Certificate, although at the date of the execution of this Rights Agreement any
such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will
keep, or cause to be kept, at its principal office or offices designated as the
appropriate place for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights Certificates issued
hereunder. Such books shall show the names and addresses of the respective
holders of the Rights Certificates, the number of Rights evidenced on its face
by each of the Rights Certificates and the date of each of the Rights
Certificates.
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Section 6. Transfer, Split-Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
(a) Subject to the provisions of Section 4(b), Section 7(e)
and Section 14 hereof, at any time after the close of business on the
Distribution Date, and at or prior to the close of business on the Expiration
Date, any Rights Certificate or Certificates (other than Rights Certificates
representing Rights that may have been exchanged pursuant to Section 24 hereof)
may be transferred, split up, combined or exchanged for another Rights
Certificate or Certificates, entitling the registered holder to purchase a like
number of one one-hundredths of a share of Preferred Stock (or, following a
Triggering Event, Common Stock, other securities, cash or other assets, as the
case may be) as the Rights Certificate or Certificates surrendered then
entitles such holder (or former holder in the case of a transfer) to purchase.
Any registered holder desiring to transfer, split up, combine or exchange any
Rights Certificate or Certificates shall make such request in writing delivered
to the Rights Agent, and shall surrender the Rights Certificate or Certificates
to be transferred, split up, combined or exchanged at the principal office or
offices of the Rights Agent designated for such purpose. Neither the Rights
Agent nor the Company shall be obligated to take any action whatsoever with
respect to the transfer
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<PAGE> 24
of any such surrendered Rights Certificate until the registered holder shall
have completed and signed the certificate contained in the form of assignment on
the reverse side of such Rights Certificate and shall have provided such
additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or Affiliates or Associates thereof as the Company shall
reason ably request. Thereupon the Rights Agent shall, subject to Section 4(b),
Section 7(e), Section 14 hereof and Section 24 hereof, countersign and deliver
to the Person entitled thereto a Rights Certificate or Rights Certificates, as
the case may be, as so requested. The Company may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer, split up, combination or exchange of Rights
Certificates.
(b) Upon receipt by the Company and the Rights Agent of
evidence reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Rights Certificate, and, in case of loss, theft or destruction,
of indemnity or security reasonably satisfactory to them, and reimbursement to
the Company and the Rights Agent of all reasonable expenses incidental thereto,
and upon surrender to the Rights Agent and cancellation of the
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<PAGE> 25
Rights Certificate if mutilated, the Company will execute and deliver a new
Rights Certificate of like tenor to the Rights Agent for countersignature and
delivery to the registered owner in lieu of the Rights Certificate so lost,
stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights.
(a) Subject to Section 7(e) hereof, at any time after the
Distribution Date the registered holder of any Rights Certificate may exercise
the Rights evidenced thereby (except as otherwise provided herein including,
without limitation, the restrictions on exercisability set forth in Section
9(c), Section 11(a)(iii) and Section 23(a) hereof) in whole or in part upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the re verse side thereof duly executed, to the Rights Agent
at the principal office or offices of the Rights Agent designated for such
purpose, together with payment of the aggregate Purchase Price with respect to
the total number of one one-hundredths of a share (or other securities, cash or
other assets, as the case may be) as to which such surrendered Rights are then
exercisable, at or prior to the earlier of (i) 5:00 P.M., Tulsa, Oklahoma time,
on
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<PAGE> 26
June 30, 2009, [or such later date as may be established by the Board of
Directors prior to the expiration of the Rights (such date, as it may be
extended by the Board,] the ("Final Expiration Date"), or (ii) the time at which
the Rights are redeemed or exchanged as provided in Section 23 and Section 24
hereof (the earlier of (i) and (ii) being herein referred to as the "Expiration
Date").
(b) The Purchase Price for each one one-hundredth of a share
of Preferred Stock pursuant to the exercise of a Right shall initially be
$_____, and shall be subject to adjustment from time to time as provided in
Section 11 and Section 13(a) hereof and shall be payable in accordance with
paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing
exercisable Rights, with the form of election to purchase and the certificate
duly executed, accompanied by payment, with respect to each Right so exercised,
of the Purchase Price per one one-hundredth of a share of Preferred Stock (or
other shares, securities, cash or other assets, as the case may be) to be
purchased as set forth below and an amount equal to any applicable transfer tax,
the Rights Agent shall, subject to Section 20(k) hereof, thereupon promptly (i)
(A) requisition from any transfer agent of the shares of Preferred Stock (or
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<PAGE> 27
make available, if the Rights Agent is the transfer agent for such shares)
certificates for the total number of one one-hundredths of a share of Preferred
Stock to be purchased and the Company hereby irrevocably authorizes its
transfer agent to comply with all such requests, or (B) if the Company shall
have elected to deposit the total number of shares of Preferred Stock issuable
upon exercise of the Rights hereunder with a depositary agent, requisition from
the depositary agent depositary receipts representing such number of one
one-hundredths of a share of Preferred Stock as are to be purchased (in which
case certificates for the shares of Preferred Stock represented by such
receipts shall be deposited by the transfer agent with the depositary agent) and
the Company will direct the depositary agent to comply with such request, (ii)
requisition from the Company the amount of cash, if any, to be paid in lieu of
fractional shares in accordance with Section 14 hereof, (iii) after receipt of
such certificates or depositary receipts, cause the same to be delivered to or,
upon the order of the registered holder of such Rights Certificate, registered
in such name or names as may be designated by such holder, and (iv) after
receipt thereof, deliver such cash, if any, to or upon the order of the
registered holder of such Rights Certificate.
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The payment of the Purchase Price (as such amount may be reduced pursuant to
Section 11(a)(iii) hereof) shall be made in cash or by certified bank check or
bank draft payable to the order of the Company. In the event that the Company is
obligated to issue other securities (including Common Stock) of the Company, pay
cash and/or distribute other property pursuant to Section 11(a) hereof, the
Company will make all arrangements necessary so that such other securities, cash
and/or other property are available for distribution by the Rights Agent, if and
when appropriate. The Company reserves the right to require prior to the
occurrence of a Triggering Event that, upon any exercise of Rights, a number of
Rights be exercised so that only whole shares of Preferred Stock would be
issued.
(d) In case the registered holder of any Rights Certificate
shall exercise less than all the Rights evidenced thereby, a new Rights
Certificate evidencing Rights equivalent to the Rights remaining unexercised
shall be issued by the Rights Agent and delivered to, or upon the order of, the
registered holder of such Rights Certificate, registered in such name or names
as may be designated by such holder, subject to the provisions of Section 14
hereof.
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(e) Notwithstanding anything in this Agreement to the
contrary, from and after the first occurrence of a Section 11(a)(ii) Event, any
Rights beneficially owned by (i) an Acquiring Person or an Associate or
Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) who becomes a transferee after the
Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) who becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such Acquiring Person or to
any Person with whom the Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
which the Board of Directors of the Company has determined is part of a plan,
arrangement or understanding which has as a primary purpose or effect the
avoidance of this Section 7(e), shall become null and void without any further
action and no holder of such Rights shall have any rights whatsoever with
respect to such Rights, whether under any provision of this Agreement or
otherwise. The Company shall use
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<PAGE> 30
all reasonable efforts to insure that the provisions of this Section 7(e) and
Section 4(b) hereof are complied with, but shall have no liability to any holder
of Rights Certificates or any other Person as a result of its failure to make
any determinations with respect to an Acquiring Person or its Affiliates,
Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder upon the occurrence of
any purported exercise as set forth in this Section 7 unless such registered
holder shall have (i) completed and signed the certificate contained in the form
of election to purchase set forth on the reverse side of the Rights Certificate
surrendered for such exercise, and (ii) provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates. All
Rights Certificates surrendered for the purpose of exercise, transfer, split-up,
combination or exchange shall, if surrendered to the Company or
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<PAGE> 31
any of its agents, be delivered to the Rights Agent for cancellation or in
cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by
it, and no Rights Certificates shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Agreement. The Company
shall deliver to the Rights Agent for cancellation and retirement, and the
Rights Agent shall so cancel and retire, any other Rights Certificate purchased
or acquired by the Company otherwise than upon the exercise thereof. The Rights
Agent shall deliver all cancelled Rights Certificates to the Company, or shall,
at the written request of the Company, destroy such cancelled Rights
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.
Section 9. Reservation and Availability of Capital Stock.
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued shares of
Preferred Stock (and, following the occurrence of a Triggering Event, out of its
authorized and unissued shares of Common Stock and/or other securities or out of
its authorized and issued shares held in its treasury), the number of shares
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<PAGE> 32
of Preferred Stock (and, following the occurrence of a Triggering Event, Common
Stock and/or other securities) that, as provided in this Agreement including
Section 11(a)(iii) hereof, will be sufficient to permit the exercise in full of
all outstanding Rights.
(b) So long as the shares of Preferred Stock (and, following
the occurrence of a Triggering Event, Common Stock and/or other securities)
issuable and deliverable upon the exercise of the Rights may be listed on any
national securities exchange, the Company shall use its best efforts to cause,
from and after such time as the Rights become exercisable, all shares reserved
for such issuance to be listed on such exchange upon official notice of issuance
upon such exercise.
(c) The Company shall use its best efforts to (i) file, as
soon as practicable following the earliest date after the first occurrence of a
Section 11(a)(ii) Event on which the consideration to be delivered by the
Company upon exercise of the Rights has been determined in accordance with
Section 11(a)(iii) hereof, a registration statement under the Act, with respect
to the securities purchasable upon exercise of the Rights on an appropriate
form, (ii) cause such registration statement to become effective as soon as
practicable after
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such filing, and (iii) cause such registration statement to remain effective
(with a prospectus at all times meeting the requirements of the Act) until the
earlier of (A) the date as of which the Rights are no longer exercisable for
such securities, and (B) the date of the expiration of the Rights. The Company
will also take such action as may be appropriate under, or to ensure compliance
with, the securities or "blue sky" laws of the various states in connection with
the exercisability of the Rights. The Company may temporarily suspend, for a
period of time not to exceed ninety (90) days after the date set forth in clause
(i) of the first sentence of this Section 9(c), the exercisability of the Rights
in order to prepare and file such registration statement and permit it to become
effective. Upon any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the suspension has
been rescinded. In addition, if the Company shall determine that a registration
statement is required following the Distribution Date, the Company may
temporarily suspend the exercisability of the Rights until such time as a
registration statement has been declared effective. Notwithstanding any
provision
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of this Agreement to the contrary, the Rights shall not be exercisable in any
jurisdiction if the requisite qualification in such jurisdiction shall not have
been obtained, the exercise thereof shall not be permitted under applicable law,
or a registration statement shall not have been declared effective.
(d) The Company covenants and agrees that it will take all
such action as may be necessary to ensure that all one one-hundredths of a share
of Preferred Stock (and, following the occurrence of a Triggering Event,
Common Stock and/or other securities) delivered upon exercise of Rights shall,
at the time of delivery of the certificates for such shares (subject to payment
of the Purchase Price), be duly and validly authorized and issued and fully paid
and nonassessable.
(e) The Company further covenants and agrees that it will pay
when due and payable any and all federal and state transfer taxes and charges
which may be payable in respect of the issuance or delivery of the Rights
Certificates and of any certificates for a number of one one-hundredths of a
share of Preferred Stock (or Common Stock and/or other securities, as the case
may be) upon the exercise of Rights. The Company shall not, however, be required
to pay any transfer tax which may be
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payable in respect of any transfer or delivery of Rights Certificates to a
Person other than, or the issuance or delivery of a number of one one-hundredths
of a share of Preferred Stock (or Common Stock and/or other securities, as the
case may be) in respect of a name other than that of the registered holder of
the Rights Certificates evidencing Rights surrendered for exercise or to issue
or deliver any certificates for a number of one one-hundredths of a share of
Preferred Stock (or Common Stock and/or other securities, as the case may be) in
a name other than that of the registered holder upon the exercise of any Rights
until such tax shall have been paid (any such tax being payable by the holder of
such Rights Certificate at the time of surrender) or until it has been
established to the Company's satisfaction that no such tax is due.
Section 10. Preferred Stock Record Date. Each person in whose
name any certificate for a number of one one-hundredths of a share of Preferred
Stock (or Common Stock and/or other securities, as the case may be) is issued
upon the exercise of Rights shall for all purposes be deemed to have become the
holder of record of such fractional shares of Preferred Stock (or Common Stock
and/or other securities, as the case may be) represented
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thereby on, and such certificate shall be dated, the date upon which the Rights
Certificate evidencing such Rights was duly surrendered and payment of the
Purchase Price (and all applicable transfer taxes) was made; provided, however,
that if the date of such surrender and payment is a date upon which the
Preferred Stock (or Common Stock and/or other securities, as the case may be)
transfer books of the Company are closed, such Person shall be deemed to have
become the record holder of such shares (fractional or otherwise) on, and such
certificate shall be dated, the next succeeding Business Day on which the
Preferred Stock (or Common Stock and/or other securities, as the case may be)
transfer books of the Company are open. Prior to the exercise of the Rights
evidenced thereby, the holder of a Rights Certificate shall not be entitled to
any rights of a stockholder of the Company with respect to shares for which the
Rights shall be exercisable, including, without limitation, the right to vote,
to receive dividends or other distributions or to exercise any preemptive
rights, and shall not be entitled to receive any notice of any proceedings of
the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of
Shares or Number of Rights. The
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Purchase Price, the number and kind of shares covered by each Right and the
number of Rights outstanding are subject to adjustment from time to time as
provided in this Section 11.
(a)(i) In the event the Company shall at any time after the date
of this Agreement (A) declare a dividend on the Preferred Stock
payable in shares of Preferred Stock, (B) subdivide the outstanding
Preferred Stock, (C) combine the outstanding Preferred Stock into a
smaller number of shares, or (D) issue any shares of its capital stock
in a reclassification of the Preferred Stock (including any such
reclassification in connection with a consolidation or merger in
which the Company is the continuing or surviving corporation), except
as otherwise provided in this Section 11(a) and Section 7(e) hereof,
the Purchase Price in effect at the time of the record date for such
dividend or of the effective date of such sub division, combination or
reclassification, and the number and kind of shares of Preferred Stock
or capital stock, as the case may be, issuable on such date, shall be
proportionately
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adjusted so that the holder of any Right exercised after such time
shall be entitled to receive, upon payment of the Purchase Price then
in effect, the aggregate number and kind of shares of Preferred Stock
or capital stock, as the case may be, which, if such Right had been
exercised immediately prior to such date and at a time when the
Preferred Stock transfer books of the Company were open, such holder
would have owned upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, combination or reclassification.
If an event occurs which would require an adjustment under both this
Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment provided
for in this Section 11(a)(i) shall be in addition to, and shall
be made prior to, any adjustment required pursuant to Section
11(a)(ii) hereof.
(ii) In the event any Person shall, at any time after the Rights
Dividend Declaration Date, become an Acquiring Person, unless the
event causing such Person to become an Acquiring Person is a
transaction set forth
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in Section 13(a) hereof, or is an acquisition of shares of Common
Stock pursuant to a tender offer or an exchange offer for all
outstanding shares of Common Stock at a price and on terms determined
by at least a majority of the members of the Board of Directors who
are not officers of the Company and who are not representatives,
nominees, Affiliates or Associates of an Acquiring Person, after
receiving advice from one or more investment banking firms, to be (a)
at a price which is fair to stockholders and not inadequate (taking
into account all factors which such members of the Board deem
relevant, including, without limitation, prices which could reasonably
be achieved if the Company or its assets were sold on an orderly
basis designed to realize maximum value) and (b) otherwise in the best
interests of the Company and its stockholders (a "Qualified Offer")
then, promptly following the occurrence of such event, proper provision shall be
made so that each holder of a Right (except as provided below and in Section
7(e) hereof) shall thereafter have the right to receive, upon
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<PAGE> 40
exercise thereof at the then current Purchase Price in accordance with the terms
of this Agreement, in lieu of a number of one one-hundredths of a share of
Preferred Stock, such number of shares of Common Stock of the Company as shall
equal the result obtained by (x) multiplying the then current Purchase Price by
the then number of one one-hundredths of a share of Preferred Stock for which a
Right was exercisable immediately prior to the first occurrence of a Section
11(a)(ii) Event, and (y) dividing that product (which, following such first
occurrence, shall thereafter be referred to as the "Purchase Price" for each
Right and for all purposes of this Agreement) by 50% of the Current Market
Price (determined pursuant to Section 11(d) hereof) per share of Common Stock on
the date of such first occurrence (such number of shares, the "Adjustment
Shares").
(iii) In the event that the number of shares of Common Stock
which are authorized by the Company's Amended and Restated Certificate
of Incorporation, but which are not outstanding or reserved for
issuance for purposes other than upon exercise of the Rights, are not
sufficient to permit the exercise in full of the Rights in accordance
with
38
<PAGE> 41
the foregoing subparagraph (ii) of this Section 11(a), the Company
shall (A) determine the value of the Adjustment Shares issuable upon
the exercise of a Right (the "Current Value"), and (B) with respect to
each Right (subject to Section 7(e) hereof), make adequate provision
to substitute for the Adjustment Shares, upon the exercise of a Right
and payment of the applicable Purchase Price, (1) cash, (2) a
reduction in the Purchase Price, (3) Common Stock or other equity
securities of the Company (including, without limitation, shares, or
units of shares, of preferred stock, such as the Preferred Stock,
which the Board has deemed to have essentially the same value or
economic rights as shares of Common Stock (such shares of preferred
stock being referred to as "Common Stock Equivalents")), (4) debt
securities of the Company, (5) other assets, or (6) any combination of
the foregoing, having an aggregate value equal to the Current Value
(less the amount of any reduction in the Purchase Price), where such
aggregate value has been determined by the Board based upon the advice
of a nationally
39
<PAGE> 42
recognized investment banking firm selected by the Board; provided,
however, that if the Company shall not have made adequate provision to
deliver value pursuant to clause (B) above within thirty (30) days
following the later of (x) the first occurrence of a Section 11(a)(ii)
Event and (y) the date on which the Company's right of redemption
pursuant to Section 23(a) expires (the later of (x) and (y) being
referred to herein as the "Section 11(a)(ii) Trigger Date"), then the
Company shall be obligated to deliver, upon the surrender for exercise
of a Right and without requiring payment of the Purchase Price, shares
of Common Stock (to the extent available) and then, if necessary,
cash, which shares and/or cash have an aggregate value equal to the
Spread. For purposes of the preceding sentence, the term "Spread"
shall mean the excess of (i) the Current Value over (ii) the Purchase
Price. If the Board determines in good faith that it is likely that
sufficient additional shares of Common Stock could be authorized for
issuance upon exercise in full of the Rights, the thirty
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<PAGE> 43
(30) day period set forth above may be extended to the extent
necessary, but not more than ninety (90) days after the Section
11(a)(ii) Trigger Date, in order that the Company may seek shareholder
approval for the authorization of such additional shares (such thirty
(30) day period, as it may be extended, is herein called the
"Substitution Period"). To the extent that action is to be taken
pursuant to the first and/or third sentences of this Section
11(a)(iii), the Company (1) shall provide, subject to Section 7(e)
hereof, that such action shall apply uniformly to all outstanding
Rights, and (2) may suspend the exercisability of the Rights until the
expiration of the Substitution Period in order to seek such share
holder approval for such authorization of additional shares and/or to
decide the appropriate form of distribution to be made pursuant to
such first sentence and to determine the value thereof. In the event
of any such suspension, the Company shall issue a public announcement
stating that the exercisability of the Rights has been temporarily
suspended, as well as a
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<PAGE> 44
public announcement at such time as the suspension is no longer in
effect. For purposes of this Section 11(a)(iii), the value of each
Adjustment Share shall be the Current Market Price per share of the
Common Stock on the Section 11(a)(ii) Trigger Date and the per share
or per unit value of any Common Stock Equivalent shall be deemed to
equal the Current Market Price per share of the Common Stock on such
date.
(b) In case the Company shall fix a record date for the
issuance of rights, options or war rants to all holders of Preferred Stock
entitling them to subscribe for or purchase (for a period expiring within
forty-five (45) calendar days after such record date) Preferred Stock (or shares
having the same rights, privileges and preferences as the shares of Preferred
Stock ("Equivalent Preferred Stock")) or securities convertible into Preferred
Stock or Equivalent Preferred Stock at a price per share of Preferred Stock or
per share of Equivalent Preferred Stock (or having a conversion price per
share, if a security convertible into Preferred Stock or Equivalent Preferred
Stock) less than the Current Market Price (as determined pursuant to Section
11(d) hereof)
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<PAGE> 45
per share of Preferred Stock on such record date, the Purchase Price to be in
effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the number of shares of Preferred Stock outstanding
on such record date, plus the number of shares of Preferred Stock which the
aggregate offering price of the total number of shares of Preferred Stock and/or
Equivalent Preferred Stock so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such Current Market Price, and the denominator of which shall be the number
of shares of Preferred Stock outstanding on such record date, plus the number of
additional shares of Preferred Stock and/or Equivalent Preferred Stock to be
offered for subscription or purchase (or into which the convertible securities
so to be offered are initially convertible). In case such subscription price may
be paid by delivery of consideration, part or all of which may be in a form
other than cash, the value of such consideration shall be as deter mined in good
faith by the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent and shall be binding
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<PAGE> 46
on the Rights Agent and the holders of the Rights. Shares of Preferred Stock
owned by or held for the account of the Company shall not be deemed outstanding
for the purpose of any such computation. Such adjustment shall be made
successively whenever such a record date is fixed, and in the event that such
rights or warrants are not so issued, the Purchase Price shall be adjusted to be
the Purchase Price which would then be in effect if such record date had not
been fixed.
(c) In case the Company shall fix a record date for a
distribution to all holders of Preferred Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness, cash (other than a regular
quarterly cash dividend out of the earnings or retained earnings of the
Company), assets (other than a dividend payable in Preferred Stock, but
including any dividend payable in stock other than Preferred Stock) or evidences
of indebtedness, or of subscription rights or warrants (excluding those referred
to in Section 11(b) hereof), the Purchase Price to be in effect after such
record date shall be deter mined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator
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<PAGE> 47
of which shall be the Current Market Price (as determined pursuant to Section
11(d) hereof) per share of Preferred Stock on such record date, less the fair
market value (as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a statement filed with the
Rights Agent) of the portion of the cash, assets or evidences of indebtedness
so to be distributed or of such subscription rights or warrants applicable to a
share of Preferred Stock, and the denominator of which shall be such Current
Market Price (as determined pursuant to Section 11(d) hereof) per share of
Preferred Stock. Such adjustments shall be made successively whenever such a
record date is fixed, and in the event that such distribution is not so made,
the Purchase Price shall be adjusted to be the Purchase Price which would have
been in effect if such record date had not been fixed.
(d)(i) For the purpose of any computation hereunder, other
than computations made pursuant to Section 11(a)(iii) hereof, the Current Market
Price per share of Common Stock on any date shall be deemed to be the average of
the daily closing prices per share of such Common Stock for the thirty (30)
consecutive Trading Days immediately prior to such date, and for purposes of
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<PAGE> 48
computations made pursuant to Section 11(a)(iii) hereof, the Current Market
Price per share of Common Stock on any date shall be deemed to be the average of
the daily closing prices per share of such Common Stock for the ten (10)
consecutive Trading Days immediately following such date; provided, however,
that in the event that the Current Market Price per share of the Common Stock is
determined during a period following the announcement by the issuer of such
Common Stock of (A) a dividend or distribution on such Common Stock payable in
shares of such Common Stock or securities convertible into shares of such Common
Stock (other than the Rights), or (B) any subdivision, combination or
reclassification of such Common Stock, and the ex-dividend date for such
dividend or distribution, or the record date for such subdivision, combination
or reclassification shall not have occurred prior to the commencement of the
requisite thirty (30) Trading Day or ten (10) Trading Day period, as set forth
above, then, and in each such case, the Current Market Price shall be properly
adjusted to take into account ex-dividend trading. The closing price for each
day shall be the last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular way,
in either case as
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<PAGE> 49
reported in the principal consolidated transaction re porting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the shares of Common Stock are not listed or admitted to trading
on the New York Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the shares of Common Stock are listed or
admitted to trading or, if the shares of Common Stock are not listed or admitted
to trading on any national securities exchange, the last quoted price or, if not
so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers Auto mated Quotation System ("NASDAQ") or such other system then in use,
or, if on any such date the shares of Common Stock are not quoted by any such
organization, the aver age of the closing bid and asked prices as furnished by a
professional market maker making a market in the Common Stock selected by the
Board. If on any such date no market maker is making a market in the Common
Stock, the fair value of such shares on such date as determined in good faith by
the Board shall be used. The term "Trading Day" shall mean a day on which the
principal national
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<PAGE> 50
securities exchange on which the shares of Common Stock are listed or admitted
to trading is open for the trans action of business or, if the shares of Common
Stock are not listed or admitted to trading on any national securities exchange,
a Business Day. If the Common Stock is not publicly held or not so listed or
traded, Current Market Price per share shall mean the fair value per share as
determined in good faith by the Board, whose determination shall be described in
a statement filed with the Rights Agent and shall be conclusive for all
purposes.
(ii) For the purpose of any computation hereunder, the
Current Market Price per share of Preferred Stock shall be deter
mined in the same manner as set forth above for the Common Stock
in clause (i) of this Section 11(d) (other than the last sentence
thereof). If the Current Market Price per share of Preferred
Stock cannot be determined in the manner provided above or if the
Preferred Stock is not publicly held or listed or traded in a
manner described in clause (i) of this Section 11(d), the Current
Market Price per share of Preferred Stock shall be conclusively
deemed to be an
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<PAGE> 51
amount equal to 100 (as such number may be appropriately adjusted
for such events as stock splits, stock dividends and
recapitalizations with respect to the Common Stock occurring
after the date of this Agreement) multiplied by the Current
Market Price per share of the Common Stock. If neither the
Common Stock nor the Preferred Stock is publicly held or so
listed or traded, Current Market Price per share of the Preferred
Stock shall mean the fair value per share as determined in good
faith by the Board, whose determination shall be described in a
statement filed with the Rights Agent and shall be conclusive for
all purposes. For all purposes of this Agreement, the Current
Market Price of a Unit shall be equal to the Current Market Price
of one share of Preferred Stock divided by 100.
(e) Anything herein to the contrary notwithstanding, no
adjustment in the Purchase Price shall be required unless such adjustment would
require an increase or decrease of at least one percent (1%) in the Purchase
Price; provided, however, that any adjustments which by reason of this Section
11(e) are not required to
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<PAGE> 52
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the nearest
cent or to the nearest ten-thousandth of a share of Common Stock or other share
or one-millionth of a share of Preferred Stock, as the case may be.
Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i)
three (3) years from the date of the transaction which mandates such
adjustment, or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section
11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter exercised
shall become entitled to receive any shares of capital stock other than
Preferred Stock, thereafter the number of such other shares so receivable upon
exercise of any Right and the Purchase Price thereof shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred Stock contained in
Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and (m), and the
provisions of Sections 7, 9, 10, 13 and 14 hereof with respect
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<PAGE> 53
to the Preferred Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to
any adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredths of a
share of Preferred Stock purchasable from time to time hereunder upon exercise
of the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
one one-hundredths of a share of Preferred Stock (calculated to the nearest
one-millionth) obtained by (i) multiplying (x) the number of one one-hundredths
of a share covered by a Right immediately prior to this adjustment, by (y) the
Purchase Price in effect immediately prior to such adjustment of the Purchase
Price, and (ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
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(i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in lieu of any
adjustment in the number of one one-hundredths of a share of Preferred Stock
purchasable upon the exercise of a Right. Each of the Rights outstanding after
the adjustment in the number of Rights shall be exercisable for the number of
one one-hundredths of a share of Preferred Stock for which a Right was
exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest one-ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to adjust
the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record date may
be the date on which the Purchase Price is adjusted or any day thereafter, but,
if the Rights Certificates have been issued, shall be at least ten (10) days
later than the date of the public announcement. If Rights Certificates have been
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<PAGE> 55
issued, upon each adjustment of the number of Rights pursuant to this Section
11(i), the Company shall, as promptly as practicable, cause to be distributed to
holders of record of Rights Certificates on such record date Rights Certificates
evidencing, subject to Section 14 hereof, the additional Rights to which such
holders shall be entitled as a result of such adjustment, or, at the option of
the Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Rights Certificates evidencing all the Rights to which such
holders shall be entitled after such adjustment. Rights Certificates so to be
distributed shall be issued, executed and countersigned in the manner provided
for herein (and may bear, at the option of the Company, the adjusted Purchase
Price) and shall be registered in the names of the holders of record of Rights
Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase
Price or the number of one one-hundredths of a share of Preferred Stock issuable
upon the exercise of the Rights, the Rights Certificates
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<PAGE> 56
theretofore and thereafter issued may continue to express the Purchase Price per
one one-hundredth of a share and the number of one one-hundredth of a share
which were expressed in the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then stated value, if any, of the number
of one one-hundredths of a share of Preferred Stock issuable upon exercise of
the Rights, the Company shall take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Company may validly and
legally issue fully paid and nonassessable such number of one one-hundredths of
a share of Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the number of one one-hundredths of a share of Preferred Stock and other
capital stock or securities of the Company, if any, issuable upon such exercise
over and above the number of one one-hundredths
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<PAGE> 57
of a share of Preferred Stock and other capital stock or securities of the
Company, if any, issuable upon such exercise on the basis of the Purchase Price
in effect prior to such adjustment; provided, however, that the Company shall
deliver to such holder a due bill or other appropriate instrument evidencing
such holder's right to receive such additional shares (fractional or otherwise)
or securities upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that in its good faith judgment the Board of
Directors of the Company shall determine to be advisable in order that any (i)
consolidation or subdivision of the Preferred Stock, (ii) issuance wholly for
cash of any shares of Preferred Stock at less than the Current Market Price,
(iii) issuance wholly for cash of shares of Preferred Stock or securities which
by their terms are convertible into or exchangeable for shares of Preferred
Stock, (iv) stock dividends or (v) issuance of rights, options or warrants
referred to in this Section 11, hereafter made by the Company to holders
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<PAGE> 58
of its Preferred Stock shall not be taxable to such stockholders.
(n) The Company covenants and agrees that it shall not, at any
time after the Distribution Date, (i) consolidate with any other Person (other
than a Subsidiary of the Company in a transaction which complies with Section
11(o) hereof), (ii) merge with or into any other Person (other than a Subsidiary
of the Company in a transaction which complies with Section 11(o) hereof), or
(iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets, cash flow or earning
power aggregating more than 50% of the assets, cash flow or earning power of the
Company and its Subsidiaries (taken as a whole) to any other Person or Persons
(other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o) hereof), if (x) at the
time of or immediately after such consolidation, merger or sale there are any
rights, warrants or other instruments or securities outstanding or agreements in
effect which would substantially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights or (y) prior to, simultaneously with or
immediately after such consolidation, merger or
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sale, the shareholders of the Person who constitutes, or would constitute, the
"Principal Party" for purposes of Section 13(a) hereof shall have received a
distribution of Rights previously owned by such Person or any of its Affiliates
and Associates.
(o) The Company covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Section 23 or Section 26
hereof, take (or permit any Subsidiary to take) any action if at the time such
action is taken it is reasonably foreseeable that such action will diminish
substantially or otherwise eliminate the benefits intended to be afforded by the
Rights.
(p) Anything in this Agreement to the contrary
notwithstanding, in the event that the Company shall at any time after the
Rights Dividend Declaration Date and prior to the Distribution Date (i) declare
a dividend on the outstanding shares of Common Stock pay able in shares of
Common Stock, (ii) subdivide the out standing shares of Common Stock, or (iii)
combine the outstanding shares of Common Stock into a smaller number of shares,
the number of Rights associated with each share of Common Stock then
outstanding, or issued or delivered thereafter but prior to the Distribution
Date,
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shall be proportionately adjusted so that the number of Rights thereafter
associated with each share of Common Stock following any such event shall equal
the result obtained by multiplying the number of Rights associated with each
share of Common Stock immediately prior to such event by a fraction the
numerator which shall be the total number of shares of Common Stock outstanding
immediately prior to the occurrence of the event and the denominator of which
shall be the total number of shares of Common Stock outstanding immediately
following the occurrence of such event.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Section 11 and Section 13 hereof,
the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Preferred Stock and the Common Stock, a copy of such certificate, and (c) if a
Distribution Date has occurred, mail a brief summary thereof to each holder of a
Rights Certificate in accordance with Section 27 hereof (or, if prior to the
Distribution Date, to each holder of a certificate representing shares of Common
Stock). The
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Rights Agent shall be fully protected in relying on any such certificate and on
any adjustment therein contained.
Section 13. Consolidation, Merger or Sale or Transfer of Assets, Cash
Flow or Earning Power.
(a) In the event that, following the Stock Acquisition Date,
directly or indirectly, (x) the Company shall consolidate with, or merge with
and into, any other Person (other than (i) TWC or a (ii) Subsidiary of the
Company in a transaction which complies with Section 11(o) hereof), and the
Company shall not be the continuing or surviving corporation of such
consolidation or merger, (y) any Person (other than (i) TWC or (ii) a Subsidiary
of the Company in a transaction which complies with Section 11(o) hereof) shall
consolidate with, or merge with or into, the Company, and the Company shall be
the continuing or surviving corporation of such consolidation or merger and, in
connection with such consolidation or merger, all or part of the outstanding
shares of Common Stock shall be changed into or exchanged for stock or other
securities of any other Person or cash or any other property, or (z) the Company
shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell
or otherwise transfer), in one transaction or a series of related transactions,
assets, cash flow or
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earning power aggregating more than 50% of the assets, cash flow or earning
power of the Company and its Subsidiaries (taken as a whole) to any Person or
Persons (other than (i) TWC or the Company or (ii) any Subsidiary of the Company
in one or more transactions each of which complies with Section 11(o) hereof),
then, and in each such case (except as may be contemplated by Section 13(d)
hereof), proper provision shall be made so that: (i) each holder of a Right,
except as provided in Section 7(e) hereof, shall thereafter have the right to
receive, upon the exercise thereof at the then current Purchase Price in
accordance with the terms of this Agreement, such number of validly authorized
and issued, fully paid, non-assessable and freely tradeable shares of Common
Stock of the Principal Party (as such term is hereinafter defined), not subject
to any liens, encumbrances, rights of first refusal or other adverse claims, as
shall be equal to the result obtained by (1) multiplying the then current
Purchase Price by the number of one one-hundredths
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of a share of Preferred Stock for which a Right is exercisable immediately prior
to the first occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event
has occurred prior to the first occurrence of a Section 13 Event, multiplying
the number of such one one-hundredths of a share for which a Right was
exercisable immediately prior to the first occurrence of a Section 11(a)(ii)
Event by the Purchase Price in effect immediately prior to such first
occurrence), and dividing that product (which, following the first occurrence of
a Section 13 Event, shall be referred to as the "Purchase Price" for each Right
and for all purposes of this Agreement) by (2) 50% of the Current Market Price
(determined pursuant to Section 11(d)(i) hereof) per share of the Common Stock
of such Principal Party on the date of consummation of such Section 13 Event;
(ii) such Principal Party shall thereafter be liable for, and shall assume, by
virtue of such Section 13 Event, all the obligations and duties of the Company
pursuant to this Agreement; (iii) the term "Company" shall thereafter be deemed
to refer to such Principal Party, it being specifically intended that the
provisions of Section 11 hereof shall apply only to such Principal Party
following the first occurrence of a Section 13 Event; (iv) such Principal Party
shall take such steps (including, but not limited to, the reservation of a
sufficient number of shares of its Common Stock) in connection with the
consummation of any such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as
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reasonably may be, in relation to its shares of Common Stock thereafter
deliverable upon the exercise of the Rights; and (v) the provisions of Section
11(a)(ii) hereof shall be of no effect following the first occurrence of any
Section 13 Event.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in clause (x)
or (y) of the first sentence of Section 13(a), the Person that is
the issuer of any securities into which shares of Common Stock of
the Company are converted in such merger or consolidation, and
if no securities are so issued, the Person that is the other
party to such merger or consolidation; and
(ii) in the case of any trans action described in clause (z)
of the first sentence of Section 13(a), the Person that is the
party receiving the greatest portion of the assets, cash flow or
earning power transferred pursuant to such transaction or
transactions;
provided, however, that in any such case, (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding twelve (12)
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month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the Common Stock of which is
and has been so registered, "Principal Party" shall refer to such other Person;
and (2) in case such Person is a Subsidiary, directly or indirectly, of more
than one Person, the Common Stocks of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value.
(c) The Company shall not consummate any such consolidation,
merger, sale or transfer unless the Principal Party shall have a sufficient
number of authorized shares of its Common Stock which have not been issued or
reserved for issuance to permit the exercise in full of the Rights in accordance
with this Section 13 and unless prior thereto the Company and such Principal
Party shall have executed and delivered to the Rights Agent a supplemental
agreement providing for the terms set forth in paragraphs (a) and (b) of this
Section 13 and further providing that, as soon as practicable after the date of
any consolidation, merger or sale of assets mentioned in paragraph (a) of this
Section 13, the Principal Party will
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(i) prepare and file a registration statement under the
Act, with respect to the Rights and the securities purchasable
upon exercise of the Rights on an appropriate form, and will use
its best efforts to cause such registration statement to (A)
become effective as soon as practicable after such filing and
(B) remain effective (with a prospectus at all times meeting the
requirements of the Act) until the Expiration Date; and
(ii) take such all such other action as may be necessary to
enable the Principal Party to issue the securities purchasable
upon exercise of the Rights, including but not limited to the
registration or qualification of such securities under all
requisite securities laws of jurisdictions of the various states
and the listing of such securities on such exchanges and trading
markets as may be necessary or appropriate; and
(iii) will deliver to holders of the Rights historical
financial statements for the Principal Party and each of its
Affiliates which comply in all respects with the
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requirements for registration on Form 10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13 Event
shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the
Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).
(d) Notwithstanding anything in this Agreement to the
contrary, Section 13 shall not be applicable to a transaction described in
subparagraphs (x) and (y) of Section 13(a) if (i) such transaction is
consummated with a Person or Persons who acquired shares of Common Stock
pursuant to a tender offer or exchange offer for all outstanding shares of
Common Stock which is a Qualified Offer as such term is defined in Section
11(a)(ii) hereof (or a wholly owned subsidiary of any such Person or Persons),
(ii) the price per share of Common Stock offered in such transaction is not less
than the price per share of Common Stock paid to all holders of shares of Common
Stock whose shares were purchased pursuant to such tender offer or exchange
offer and (iii) the form of consideration being offered to the remaining
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holders of shares of Common Stock pursuant to such trans action is the same as
the form of consideration paid pursuant to such tender offer or exchange offer.
Upon consummation of any such transaction contemplated by this Section 13(d),
all Rights hereunder shall expire.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of
Rights, except prior to the Distribution Date as provided in Section 11(p)
hereof, or to distribute Rights Certificates which evidence fractional Rights.
In lieu of such fractional Rights, the Company shall pay to the registered
holders of the Rights Certificates with regard to which such fractional Rights
would otherwise be issuable, an amount in cash equal to the same fraction of the
current market value of a whole Right. For purposes of this Section 14(a), the
current market value of a whole Right shall be the closing price of the Rights
for the Trading Day immediately prior to the date on which such fractional
Rights would have been otherwise issuable. The closing price of the Rights for
any day shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either
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case as reported in the principal consolidated transaction reporting system
with respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the Rights are not listed or admitted to trading on the New York
Stock Exchange, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national securities
exchange on which the Rights are listed or admitted to trading, or if the Rights
are not listed or admitted to trading on any national securities exchange, the
last quoted price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights, selected by the Board
of Directors of the Company. If on any such date no such market maker is making
a market in the Rights, the fair value of the Rights on such date as determined
in good faith by the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of
shares of Preferred Stock (other than
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fractions which are integral multiples of one one-hundredth of a share of
Preferred Stock) upon exercise of the Rights or to distribute certificates which
evidence fractional shares of Preferred Stock (other than fractions which are
integral multiples of one one-hundredth of a share of Preferred Stock). In lieu
of fractional shares of Preferred Stock that are not integral multiples of one
one-hundredth of a share of Preferred Stock, the Company may pay to the
registered holders of Rights Certificates at the time such Rights are exercised
as herein provided an amount in cash equal to the same fraction of the current
market value of one one-hundredth of a share of Preferred Stock. For purposes of
this Section 14(b), the current market value of one one-hundredth of a share of
Preferred Stock shall be one one-hundredth of the closing price of a share of
Preferred Stock (as determined pursuant to Section 11(d)(ii) here of) for the
Trading Day immediately prior to the date of such exercise.
(c) Following the occurrence of a Triggering Event, the
Company shall not be required to issue fractions of shares of Common Stock upon
exercise of the Rights or to distribute certificates which evidence fractional
shares of Common Stock. In lieu of fractional
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shares of Common Stock, the Company may pay to the registered holders of Rights
Certificates at the time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of the current market value of one (1) share
of Common Stock. For purposes of this Section 14(c), the current market value of
one share of Common Stock shall be the closing price of one share of Common
Stock (as determined pursuant to Section 11(d)(i) hereof) for the Trading Day
immediately prior to the date of such exercise.
(d) The holder of a Right by the acceptance of the Rights
expressly waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right, except as permitted by this Section 14.
Section 15. Rights of Action. All rights of action in respect of this
Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common
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Stock), may, in his own behalf and for his own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company to
enforce, or other wise act in respect of, his right to exercise the Rights
evidenced by such Rights Certificate in the manner provided in such Rights
Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and shall be entitled to specific performance of the
obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.
Section 16. Agreement of Rights Holders. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal
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office or offices of the Rights Agent designated for such purposes, duly
endorsed or accompanied by a proper instrument of transfer and with the
appropriate forms and certificates fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the
Company and the Rights Agent may deem and treat the person in whose name a
Rights Certificate (or, prior to the Distribution Date, the associated Common
Stock certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Stock certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent, subject to the last sentence of
Section 7(e) hereof, shall be required to be affected by any notice to the
contrary; and
(d) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any liability to
any holder of a Right or other Person as a result of its inability to perform
any of its obligations under this Agreement by reason of any preliminary or
permanent injunction or other order, decree or ruling issued by a court of
competent
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jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or other wise restraining
performance of such obligation; provided, however, the Company must use its
best efforts to have any such order, decree or ruling lifted or otherwise
overturned as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a
Stockholder. No holder, as such, of any Rights Certificate shall be entitled to
vote, receive dividends or be deemed for any purpose the holder of the number of
one one-hundredths of a share of Preferred Stock or any other securities of the
Company which may at any time be issuable on the exercise of the Rights
represented there by, nor shall anything contained herein or in any Rights
Certificate be construed to confer upon the holder of any Rights Certificate, as
such, any of the rights of a stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or with hold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in Section 25 hereof), or to
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receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Rights Certificate shall have been exercised in
accordance with the provisions hereof.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises.
(b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance
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upon any Rights Certificate or certificate for Common Stock or for other
securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper Person or Persons.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
(a) Any corporation into which the Rights Agent or any
successor Rights Agent may be merged or with which it may be consolidated, or
any corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the corporate trust, stock transfer or other shareholder services
business of the Rights Agent or any successor Rights Agent, shall be the
successor to the Rights Agent under this Agreement with out the execution or
filing of any paper or any further act on the part of any of the parties hereto;
but only if such corporation would be eligible for appointment as a successor
Rights Agent under the provisions of Section 21 hereof. In case at the time such
successor Rights Agent
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shall succeed to the agency created by this Agreement, any of the Rights
Certificates shall have been counter signed but not delivered, any such
successor Rights Agent may adopt the countersignature of a predecessor Rights
Agent and deliver such Rights Certificates so counter signed; and in case at
that time any of the Rights Certificates shall not have been countersigned, any
successor Rights Agent may countersign such Rights Certificates either in the
name of the predecessor or in the name of the successor Rights Agent; and in all
such cases such Rights Certificates shall have the full force provided in the
Rights Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Rights Certificates so countersigned; and in
case at that time any of the Rights Certificates shall not have been
countersigned, the Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
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Section 20. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may
be legal counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter (including, without limitation, the identity of any Acquiring Person
and the determination of Current Market Price) be proved or established by the
Company prior to taking or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof be herein specifically prescribed) may
be deemed to be conclusively proved and established by a certificate signed by
the Chairman of the Board, the President, any Vice President, the Treasurer, any
Assistant Treasurer, the Secretary or
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any Assistant Secretary of the Company and delivered to the Rights Agent; and
such certificate shall be full authorization to the Rights Agent for any action
taken or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its
own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of
any of the statements of fact or recitals contained in this Agreement or in the
Rights Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Rights Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Rights Certificate;
nor shall it be responsible for
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any adjustment required under the provisions of Section 11, Section 13 or
Section 24 hereof or responsible for the manner, method or amount of any such
adjustment or the ascertaining of the existence of facts that would require any
such adjustment (except with respect to the exercise of Rights evidenced by
Rights Certificates after actual notice of any such adjustment); nor shall it by
any act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of Common Stock or Preferred Stock to
be issued pursuant to this Agreement or any Rights Certificate or as to whether
any shares of Common Stock or Preferred Stock will, when so issued, be validly
authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will per form, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing
by the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder from
the Chairman of
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the Board, the President, any Vice President, the Secretary, any Assistant
Secretary, the Treasurer or any Assistant Treasurer of the Company, and to apply
to such officers for advice or instructions in connection with its duties, and
it shall not be liable for any action taken or suffered to be taken by it in
good faith in accordance with instructions of any such officer.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction
in which the Company may be interested, or contract with or lend money to the
Company or other wise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from
acting in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either itself
or by or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Company resulting from any
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such act, default, neglect or misconduct; provided, however, reasonable care was
exercised in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights
Agent 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 its
rights if there shall be reasonable grounds for believing that repayment of such
funds or adequate indemnification against such risk or liability is not reason
ably assured to it.
(k) If, with respect to any Rights Certificate surrendered to
the Rights Agent for exercise or transfer, the certificate attached to the form
of assignment or form of election to purchase, as the case may be, has either
not been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise of transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Company,
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and to each transfer agent of the Common Stock and Preferred Stock, by
registered or certified mail, and, if such resignation occurs after the
Distribution Date, to the registered holders of the Rights Certificates by
first-class mail. The Company may remove the Rights Agent or any successor
Rights Agent upon thirty (30) days' notice in writing, mailed to the Rights
Agent or successor Rights Agent, as the case may be, and to each transfer agent
of the Common Stock and Preferred Stock, by registered or certified mail, and,
if such removal occurs after the Distribution Date, to the holders of the Rights
Certificates by first-class mail. If the Rights Agent shall resign or be removed
or shall otherwise become incapable of acting, the Company shall appoint a
successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Rights Certificate (who shall, with such notice, submit his Rights Certificate
for inspection by the Company), then any registered holder of any Rights
Certificate may apply to any court of competent jurisdiction for the appointment
of a new Rights Agent. Any
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successor Rights Agent, whether appointed by the Company or by such a court,
shall be a legal business entity organized and doing business under the laws of
the United States or of the State of New York or of any other state of the
United States, in good standing, having an office in the State of New York,
which is authorized under such laws to exercise corporate trust or stock
transfer or shareholder services powers and which has at the time of its
appointment as Rights Agent a combined capital and surplus of at least
$50,000,000 or (b) an affiliate of a legal business entity described in clause
(a) of this sentence. After appointment, the successor Rights Agent shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Stock and the Preferred Stock, and, if such appointment occurs after
the Distribution Date, mail a
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notice thereof in writing to the registered holders of the Rights Certificates.
Failure to give any notice provided for in this Section 21, however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent,
as the case may be.
Section 22. Issuance of New Rights Certificates. Notwithstanding any
of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Rights Certificates evidencing Rights in
such form as may be approved by the Board of Directors to reflect any adjustment
or change in the Purchase Price and the number or kind or class of shares or
other securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of shares of Common Stock following the Distribution
Date and prior to the redemption or expiration of the Rights, the Company (a)
shall, with respect to shares of Common Stock so issued or sold pursuant to the
exercise of stock options or under any employee plan or arrangement, granted or
awarded as of the Distribution Date, or upon the exercise, conversion
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or exchange of securities hereinafter issued by the Company, and (b) may, in any
other case, if deemed necessary or appropriate by the Board of Directors of the
Company, issue Rights Certificates representing the appropriate number of Rights
in connection with such issuance or sale; provided, however, that (i) no such
Rights Certificate shall be issued if, and to the extent that, the Company shall
be advised by counsel that such issuance would create a significant risk of
material adverse tax consequences to the Company or the Person to whom such
Rights Certificate would be issued, and (ii) no such Rights Certificate shall be
issued if, and to the extent that, appropriate adjustment shall otherwise have
been made in lieu of the issuance thereof.
Section 23. Redemption and Termination.
(a) The Board of Directors of the Company may, at its option,
at any time prior to the earlier of (i) the close of business on the tenth
Business Day following the Stock Acquisition Date, or (ii) the Final Expiration
Date, redeem all but not less than all of the then outstanding Rights at a
redemption price of $.01 per Right, as such amount may be appropriately adjusted
to reflect any stock split, stock dividend or similar trans action occurring
after the date hereof (such redemption
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price being hereinafter referred to as the "Redemption Price"). Notwithstanding
anything contained in this Agreement to the contrary, the Rights shall not be
exercisable after the first occurrence of a Section 11(a)(ii) Event until such
time as the Company's right of redemption hereunder has expired. The Company
may, at its option, pay the Redemption Price in cash, shares of Common Stock
(based on the Current Market Price, as defined in Section 11(d)(i) hereof, of
the Common Stock at the time of redemption) or any other form of consideration
deemed appropriate by the Board of Directors.
(b) Immediately upon the action of the Board of Directors of
the Company ordering the redemption of the Rights, evidence of which shall have
been filed with the Rights Agent and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price for
each Right so held. Promptly after the action of the Board of Directors ordering
the redemption of the Rights, the Company shall give notice of such redemption
to the Rights Agent and the holders of the then outstanding Rights by mailing
such notice to all such holders at each holder's last address as it appears upon
the registry
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books of the Rights Agent or, prior to the Distribution Date, on the registry
books of the transfer agent for the Common Stock. Any notice which is mailed in
the manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of redemption will state the method by
which the payment of the Redemption Price will be made.
Section 24. Exchange.
(a) The Board of Directors of the Company may, at its option,
at any time after any Person becomes an Acquiring Person, exchange all or part
of the then outstanding and exercisable Rights (which shall not include Rights
that have become void pursuant to the provisions of Section 7(e) hereof) for
Common Stock at an exchange ratio of one share of Common Stock per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing,
the Board of Directors of the Company shall not be empowered to effect such
exchange at any time after any Person (other than the Company, any Subsidiary of
the Company, any employee benefit plan of the Company or any such Subsidiary, or
any entity holding Common Stock for or
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pursuant to the terms of any such plan), together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner of 50% or more of the
Common Stock then outstanding.
(b) Immediately upon the action of the Board of Directors of
the Company ordering the exchange of any Rights pursuant to subsection (a) of
this Section 24 and without any further action and without any notice, the right
to exercise such Rights shall terminate and the only right thereafter of a
holder of such Rights shall be to receive that number of shares of Common Stock
equal to the number of such Rights held by such holder multiplied by the
Exchange Ratio. The Company shall promptly give public notice of any such
exchange; provided, however, that the failure to give, or any defect in, such
notice shall not affect the validity of such exchange. The Company promptly
shall mail a notice of any such exchange to all of the holders of such Rights at
their last ad dresses as they appear upon the registry books of the Rights
Agent. Any notice which is mailed in the manner herein provided shall be deemed
given, whether or not the holder receives the notice. Each such notice of
exchange will state the method by which the exchange of the Common Stock for
Rights will be effected and, in the event of
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any partial exchange, the number of Rights which will be exchanged. Any partial
exchange shall be effected pro rata based on the number of Rights (other than
Rights which have become void pursuant to the provisions of Section 7(e) hereof)
held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company,
at its option, may substitute Preferred Stock (or Equivalent Preferred Stock, as
such term is defined in paragraph (b) of Section 11 hereof) for Common Stock
exchangeable for Rights, at the initial rate of one one-hundredth of a share of
Preferred Stock (or Equivalent Preferred Stock) for each share of Common Stock,
as appropriately adjusted to reflect stock splits, stock dividends and other
similar transactions after the date hereof.
(d) In the event that there shall not be sufficient shares of
Common Stock issued but not out standing or authorized but unissued to permit
any ex change of Rights as contemplated in accordance with this Section 24, the
Company shall take all such action as may be necessary to authorize additional
shares of Common Stock for issuance upon exchange of the Rights.
(e) The Company shall not be required to issue fractions of
shares of Common Stock or to distribute
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certificates which evidence fractional shares of Common Stock. In lieu of such
fractional shares of Common Stock, there shall be paid to the registered holders
of the Rights Certificates with regard to which such fractional shares of Common
Stock would otherwise be issuable, an amount in cash equal to the same fraction
of the current market value of a whole share of Common Stock. For the purposes
of this subsection (e), the current market value of a whole share of Common
Stock shall be the closing price of a share of Common Stock (as determined
pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day
immediately prior to the date of exchange pursuant to this Section 24.
Section 25. Notice of Certain Events.
(a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class to the
holders of Preferred Stock or to make any other distribution to the holders of
Preferred Stock (other than a regular quarterly cash dividend out of earnings or
retained earnings of the Company), or (ii) to offer to the holders of Preferred
Stock rights or warrants to subscribe for or to purchase any additional shares
of Preferred Stock or shares of stock of any class or any other securities,
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rights or options, or (iii) to effect any reclassification of its Preferred
Stock (other than a reclassification involving only the subdivision of
outstanding shares of Preferred Stock), or (iv) to effect any consolidation or
merger into or with any other Person (other than a Subsidiary of the Company in
a transaction which complies with Section 11(o) hereof), or to effect any sale
or other transfer (or to permit one or more of its Subsidiaries to effect any
sale or other transfer), in one transaction or a series of related transactions,
of more than 50% of the assets, cash flow or earning power of the Company and
its Subsidiaries (taken as a whole) to any other Person or Persons (other than
the Company and/or any of its Subsidiaries in one or more transactions each of
which complies with Section 11(o) hereof), or (v) to effect the liquidation,
dissolution or winding up of the Company, then, in each such case, the Company
shall give to each holder of a Rights Certificate, to the extent feasible and in
accordance with Section 26 hereof, a notice of such proposed action, which shall
specify the record date for the purposes of such stock dividend, distribution of
rights or warrants, or the date on which such reclassification, consolidation,
merger, sale, transfer, liquidation, dissolution, or winding up is to
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take place and the date of participation therein by the holders of the shares of
Preferred Stock, if any such date is to be fixed, and such notice shall be so
given in the case of any action covered by clause (i) or (ii) above at least
twenty (20) days prior to the record date for determining holders of the shares
of Preferred Stock for purposes of such action, and in the case of any such
other action, at least twenty (20) days prior to the date of the taking of such
proposed action or the date of participation therein by the holders of the
shares of Preferred Stock whichever shall be the earlier.
(b) In case any of the events set forth in Section 11(a)(ii)
hereof shall occur, then, in any such case, (i) the Company shall as soon as
practicable thereafter give to each holder of a Rights Certificate, to the
extent feasible and in accordance with Section 26 hereof, a notice of the
occurrence of such event, which shall specify the event and the consequences of
the event to holders of Rights under Section 11(a)(ii) hereof, and (ii) all
references in the preceding paragraph to Preferred Stock shall be deemed
thereafter to refer to Common Stock and/or, if appropriate, other securities.
Section 26. Notices. Notices or demands authorized by this Agreement to
be given or made by the
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Rights Agent or by the holder of any Rights Certificate to or on the Company
shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed (until another address is filed in writing with the Rights
Agent with the Company) as follows:
Williams Communications Group, Inc.
-----------------------------------
-----------------------------------
Attention: Corporate Secretary
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, ad dressed (until another address is
filed in writing by the Rights Agent with the Company) as follows:
-----------------------------------
-----------------------------------
-----------------------------------
Attention: Corporate Trust Department
[Stock Transfer Administration]
Notices or demands authorized by this Agreement to be given or
made by the Company or the Rights Agent to the holder of any Rights Certificate
(or, if prior to the Distribution Date, to the holder of certificates
representing
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<PAGE> 95
shares of Common Stock) shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Company.
Section 27. Supplements and Amendments. Prior to the Distribution Date,
the Company and the Rights Agent shall, if the Company so directs, supplement or
amend any provision of this Agreement without the approval of any holders of
certificates representing shares of Common Stock. From and after the
Distribution Date, the Company and the Rights Agent shall, if the Company so
directs, supplement or amend this Agreement without the approval of any holders
of Rights Certificates in order (i) to cure any ambiguity, (ii) to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provisions herein, (iii) to shorten or lengthen any time period
hereunder, or (iv) to change or supplement the provisions hereunder in any
manner which the Company may deem necessary or desirable and which shall not
adversely affect the interests of the holders of Rights Certificates (other than
an Acquiring Person or an Affiliate or Associate of an Acquiring Person);
provided, this Agreement may not be supplemented or amended to lengthen any time
period hereunder, pursuant
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<PAGE> 96
to clause (iii) of this sentence, (A) a time period relating to when the Rights
may be redeemed at such time as the Rights are not then redeemable, or (B) any
other time period unless such lengthening is for the purpose of protecting,
enhancing or clarifying the rights of, and/or the benefits to, the holders of
Rights. Upon the delivery of a certificate from an appropriate officer of the
Company which states that the proposed supplement or amendment is in compliance
with the terms of this Section 27, the Rights Agent shall execute such
supplement or amendment. Prior to the Distribution Date, the interests of the
holders of Rights shall be deemed coincident with the interests of the holders
of Common Stock. Notwithstanding anything herein to the contrary, this Agreement
may not be amended at a time when the Rights are not redeemable.
Section 28. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns here under.
Section 29. Determinations and Actions by the Board of Directors, etc.
For all purposes of this Agreement, any calculation of the number of shares of
Common
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<PAGE> 97
Stock outstanding at any particular time, including for purposes of determining
the particular percentage of such outstanding shares of Common Stock of which
any Person is the Beneficial Owner, shall be made in accordance with the last
sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the
Exchange Act. The Board of Directors of the Company shall have the exclusive
power and authority to administer this Agreement and to exercise all rights and
powers specifically granted to the Board or to the Company, or as may be
necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determinations deemed necessary or advisable for
the administration of this Agreement (including a determination to redeem or not
redeem the Rights or to amend the Agreement). All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y)
below, all omissions with respect to the foregoing) which are done or made by
the Board in good faith, shall (x) be final, conclusive and binding on the
Company, the Rights Agent, the holders of the Rights and all other parties, and
(y) not subject the Board, or any of the directors on the Board to any liability
to the holders of the Rights.
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<PAGE> 98
Section 30. Benefits of this Agreement. Nothing in this Agreement
shall be construed to give to any Person other than the Company, the Rights
Agent and the registered holders of the Rights Certificates (and, prior to the
Distribution Date, registered holders of the Common Stock) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock).
Section 31. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors
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<PAGE> 99
of the Company determines in its good faith judgment that severing the invalid
language from this Agreement would adversely affect the purpose or effect of
this Agreement, the right of redemption set forth in Section 23 hereof shall be
reinstated and shall not expire until the close of business on the tenth
Business Day following the date of such determination by the Board of Directors.
Without limiting the foregoing, if any provision requiring a specific group of
Directors of the Company to act is held to by any court of competent
jurisdiction or other authority to be invalid, void or unenforceable, such
determination shall then be made by the Board of Directors of the Company in
accordance with applicable law and the Company's Amended and Restated
Certificate of Incorporation and By-laws.
Section 32. Governing Law. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts made
and to be per formed entirely within such State
Section 33. Counterparts. This Agreement may be executed in any number
of counterparts and each of
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<PAGE> 100
such counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute but one and the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the several
sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
Attest: Williams Communications
Group, Inc.
By By
------------------------- --------------------------
Name: Name:
Title: Title:
Attest: [THE RIGHTS AGENT]
By By
------------------------- --------------------------
Name: Name:
Title: Title:
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<PAGE> 101
Exhibit A
FORM OF
CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
WILLIAMS COMMUNICATIONS GROUP, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
We,[__________ , Chairman of the Board, and _________ , Secretary, of
__________ ,] [the undersigned officers of] Williams Communications Group, Inc.,
a corporation organized and existing under the General Corporation Law of the
State of Delaware, in accordance with the provisions of Section 103 thereof, DO
HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
the Amended and Restated Certificate of Incorporation of the said Corporation,
the said Board of Directors on ____________, 199_, adopted the following
resolution creating a series of __________ shares of Preferred Stock designated
as Series A Junior Participating Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of its Amended
and Restated Certificate of Incorporation, a series of Preferred Stock of the
Corporation be and it hereby is created, and that the designation and amount
thereof and the voting powers, preferences and relative, participating, optional
and other special rights of the shares of such series, and the qualifications,
limitations or restrictions thereof are as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" and the number of
shares constituting such series shall be ___________.
<PAGE> 102
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Series A Junior Participating Preferred Stock with respect to dividends, the
holders of shares of Series A Junior Participating Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds legally available for the purpose, quarterly dividends payable in cash on
the ________ day of ________, ________, _________ and _________ in each year
(each such date being referred to herein as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series A Junior Participating
Preferred Stock, in an amount per share (rounded to the nearest cent) equal to
the greater of (a) $____ or (b) subject to the provision for adjustment
hereinafter set forth, 100 times the aggregate per share amount of all cash
dividends, and 100 times the aggregate per share amount (payable in kind) of all
non-cash dividends or other distributions other than a dividend payable in
shares of Common Stock or a sub division of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Class A Common Stock,
par value $0.01 per share or Class B Common Stock, par value $0.01 per share, of
the Corporation (the "Common Stock"), since the immediately preceding Quarterly
Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of any share or fraction of a share of Series A
Junior Participating Preferred Stock. In the event the Corporation shall at any
time after __________, 1999 (the "Rights Declaration Date") (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the amount to which holders of
shares of Series A Junior Participating Preferred Stock were entitled
immediately prior to such event under clause (b) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
2
<PAGE> 103
(B) The Corporation shall declare a dividend or distribution on the
Series A Junior Participating Preferred Stock as provided in Paragraph (A) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in the
event no dividend or distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $____ per share on the
Series A Junior Participating Preferred Stock shall nevertheless be payable on
such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Junior Participating Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares of Series
A Junior Participating Preferred Stock, unless the date of issue of such shares
is prior to the record date for the first Quarterly Dividend Payment Date, in
which case dividends on such shares shall begin to accrue from the date of issue
of such shares, or unless the date of issue is a Quarterly Dividend Payment Date
or is a date after the record date for the determination of holders of shares of
Series A Junior Participating Preferred Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment Date, in either of which
events such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Series A Junior Participating
Preferred Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Series A Junior Participating Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be no more
than 30 days prior to the date fixed for the payment thereof.
3
<PAGE> 104
Section 3. Voting Rights. The holders of shares of Series A Junior
Participating Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Junior Participating Preferred Stock shall entitle the holder
thereof to 100 votes on all matters submitted to a vote of the stockholders of
the Corporation. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such
case the number of votes per share to which holders of shares of Series A Junior
Participating Preferred Stock were entitled immediately prior to such event
shall be adjusted by multiplying such number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of
shares of Series A Junior Participating Preferred Stock and the holders of
shares of Common Stock shall vote together as one class on all matters submitted
to a vote of stockholders of the Corporation.
(C) (i) If at any time dividends on any Series A Junior
Participating Preferred Stock shall be in arrears in an amount equal to
six (6) quarterly dividends thereon, the occurrence of such
contingency shall mark the beginning of a period (herein called a
"default period") which shall extend until such time when all accrued
and unpaid dividends for all previous quarterly dividend periods and
for the current quarterly dividend period on all shares of Series A
Junior Participating Preferred Stock then outstanding shall have been
declared and paid or set apart for payment. During each default period,
all holders of Preferred Stock (including holders of the Series A
Junior Participating Preferred Stock) with dividends in arrears in an
amount equal to six (6) quarterly
4
<PAGE> 105
dividends thereon, voting as a class, irrespective of series, shall
have the right to elect two (2) directors.
(ii) During any default period, such voting right of
the holders of Series A Junior Participating Preferred Stock may be
exercised initially at a special meeting called pursuant to
subparagraph (iii) of this Section 3(C) or at any annual meeting of
stockholders, and thereafter at annual meetings of stockholders,
provided that neither such voting right nor the right of the holders of
any other series of Preferred Stock, if any, to increase, in certain
cases, the authorized number of directors shall be exercised unless the
holders of ten percent (10%) in number of shares of Preferred Stock
outstanding shall be present in person or by proxy. The absence of a
quorum of the holders of Common Stock shall not affect the exercise by
the holders of Preferred Stock of such voting right. At any meeting at
which the holders of Preferred Stock shall exercise such voting right
initially during an existing default period, they shall have the right,
voting as a class, to elect directors to fill such vacancies, if any,
in the Board of Directors as may then exist up to two (2) directors
or, if such right is exercised at an annual meeting, to elect two (2)
directors. If the number which may be so elected at any special meeting
does not amount to the required number, the holders of the Preferred
Stock shall have the right to make such increase in the number of
directors as shall be necessary to permit the election by them of the
required number. After the holders of the Preferred Stock shall have
exercised their right to elect directors in any default period and
during the continuance of such period, the number of directors shall
not be increased or decreased except by vote of the holders of
Preferred Stock as herein provided or pursuant to the rights of any
equity securities ranking senior to or pari passu with the Series A
Junior Participating Preferred Stock.
(iii) Unless the holders of Preferred Stock shall,
during an existing default period, have previously exercised their
right to elect directors, the Board of Directors may
5
<PAGE> 106
order, or any stockholder or stock holders owning in the aggregate not
less than ten percent (10%) of the total number of shares of Preferred
Stock outstanding, irrespective of series, may request, the calling of
a special meeting of the holders of Preferred Stock, which meeting
shall thereupon be called by the President, a Vice-President or the
Secretary of the Corporation. Notice of such meeting and of any annual
meeting at which holders of Preferred Stock are entitled to vote
pursuant to this Paragraph (C)(iii) shall be given to each holder of
record of Preferred Stock by mailing a copy of such notice to him at
his last address as the same appears on the books of the Corporation.
Such meeting shall be called for a time not earlier than 20 days and
not later than 60 days after such order or request or in default of the
calling of such meeting within 60 days after such order or re quest,
such meeting may be called on similar notice by any stockholder or
stockholders owning in the aggregate not less than ten percent (10%) of
the total number of shares of Preferred Stock outstanding.
Notwithstanding the provisions of this Paragraph (C)(iii), no such
special meeting shall be called during the period within 60 days
immediately preceding the date fixed for the next annual meeting of the
stockholders.
(iv) In any default period, the holders of Common
Stock, and other classes of stock of the Corporation if applicable,
shall continue to be entitled to elect the whole number of directors
until the holders of Preferred Stock shall have exercised their right
to elect two (2) directors voting as a class, after the exercise of
which right (x) the directors so elected by the holders of Preferred
Stock shall continue in office until their successors shall have been
elected by such holders or until the expiration of the default period,
and (y) any vacancy in the Board of Directors may (except as provided
in Paragraph (C)(ii) of this Section 3) be filled by vote of a majority
of the remaining directors thereto fore elected by the holders of the
class of stock which elected the director whose office shall have
become vacant. References in this
6
<PAGE> 107
Paragraph (C) to directors elected by the holders of a particular
class of stock shall include directors elected by such directors to
fill vacancies as provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default
period, (x) the right of the holders of Preferred Stock as a class to
elect directors shall cease, (y) the term of any directors elected by
the holders of Preferred Stock as a class shall terminate, and (z) the
number of directors shall be such number as may be provided for in the
amended and restated certificate of incorporation or by-laws
irrespective of any increase made pursuant to the provisions of
Paragraph (C)(ii) of this Section 3 (such number being subject,
however, to change thereafter in any manner provided by law or in the
amended and restated certificate of incorporation or by-laws). Any
vacancies in the Board of Directors effected by the provisions of
clauses (y) and (z) in the preceding sentence may be filled by a
majority of the remaining directors.
(D) Except as set forth herein, holders of Series A Junior
Participating Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for
taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Junior Participating Preferred Stock as
provided in Section 2 are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not declared, on shares of Series
A Junior Participating Preferred Stock outstanding shall have been paid in full,
the Corporation shall not
(i) declare or pay dividends on, make any
other distributions on, or redeem or purchase or otherwise acquire for
consideration any shares of stock ranking junior (either
7
<PAGE> 108
as to dividends or upon liquidation, dissolution or winding up) to the
Series A Junior Participating Preferred Stock;
(ii) declare or pay dividends on or make any
other distributions on any shares of stock ranking on a parity (either
as to dividends or upon liquidation, dissolution or winding up) with
the Series A Junior Participating Preferred Stock, except dividends
paid ratably on the Series A Junior Participating Preferred Stock and
all such parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such shares
are then entitled;
(iii) redeem or purchase or otherwise
acquire for consideration shares of any stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up)
with the Series A Junior Participating Preferred Stock, provided that
the Corporation may at any time redeem, purchase or otherwise acquire
shares of any such parity stock in exchange for shares of any stock of
the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Junior
Participating Preferred Stock; or
(iv) purchase or otherwise acquire for
consideration any shares of Series A Junior Participating Preferred
Stock, [or any shares of stock ranking on a parity with the Series A
Junior Participating Preferred Stock,] except in accordance with a
purchase offer made in writing or by publication (as determined by the
Board of Directors) to all holders of such shares upon such terms as
the Board of Direc tors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective series or
classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the
8
<PAGE> 109
Corporation unless the Corporation could, under Paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Junior
Participating Preferred Stock purchased or otherwise acquired by the Corporation
in any manner whatsoever shall be retired and cancelled promptly after the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as part of
a new series of Preferred Stock to be created by resolution or resolutions of
the Board of Directors, subject to the conditions and restrictions on issuance
set forth herein.
Section 6. Liquidation, Dissolution or Winding Up. (A) Upon
any liquidation (voluntary or otherwise), dissolution or winding up of the
Corporation, no distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Participating Preferred Stock unless, prior
thereto, the holders of shares of Series A Junior Participating Preferred Stock
shall have received an amount equal to $100 per share of Series A Participating
Preferred Stock, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment (the
"Series A Liquidation Preference"). Following the payment of the full amount of
the Series A Liquidation Preference, no additional distributions shall be made
to the holders of shares of Series A Junior Participating Preferred Stock
unless, prior thereto, the holders of shares of Common Stock shall have received
an amount per share (the "Common Adjustment") equal to the quotient obtained by
dividing (i) the Series A Liquidation Preference by (ii) 100 (as appropriately
adjusted as set forth in subparagraph (C) below to reflect such events as stock
splits, stock dividends and recapitalizations with respect to the Common Stock)
(such number in clause (ii), the "Adjustment Number"). Following the payment of
the full amount of the Series A Liquidation Preference and the Common Adjustment
in respect of all outstanding shares of Series A Junior Participating Preferred
Stock and Common Stock, respectively, holders of Series A
Junior Participating Preferred Stock and holders of shares of Common Stock shall
receive their ratable and proportionate share of the remaining assets to be
distributed in the ratio of the Adjustment Number to 1 with respect to such
Preferred Stock and Common Stock, on a per share basis, respectively.
9
<PAGE> 110
(B) In the event, however, that there are not sufficient
assets available to permit payment in full of the Series A Liquidation
Preference and the liquidation preferences of all other series of preferred
stock, if any, which rank on a parity with the Series A Junior Participating
Preferred Stock, then such remaining assets shall be distributed ratably to the
holders of such parity shares in proportion to their respective liquidation
preferences. In the event, however, that there are not sufficient assets
available to permit payment in full of the Common Adjustment, then such
remaining assets shall be distributed ratably to the holders of Common Stock.
(C) In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the Adjustment Number in effect immediately prior to such event
shall be adjusted by multiplying such Adjustment Number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation
shall enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any such case the shares
of Series A Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 100 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the case
may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in
10
<PAGE> 111
each such case the amount set forth in the preceding sentence with respect to
the exchange or change of shares of Series A Junior Participating Preferred
Stock shall be adjusted by multiplying such amount by a fraction the numerator
of which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Junior
Participating Preferred Stock shall not be redeemable.
Section 9. Ranking. The Series A Junior Participating
Preferred Stock shall rank junior to all other series of the Corporation's
Preferred Stock as to the payment of dividends and the distribution of assets,
unless the terms of any such series shall provide other wise.
Section 10. Amendment. At any time when any shares of Series A
Junior Participating Preferred Stock are outstanding, neither the Amended and
Restated Certificate of Incorporation of the Corporation nor this Certificate
of Designation shall be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A Junior
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of [a majority] or more of the outstanding
shares of Series A Junior Participating Preferred Stock, voting separately as a
class.
Section 11. Fractional Shares. Series A Junior Participating
Preferred Stock may be issued in fractions of a share which shall entitle the
holder, in proportion to such holder's fractional shares, to exercise voting
rights, receive dividends, participate in distributions and to have the benefit
of all other rights of holders of Series A Junior Participating Preferred Stock.
IN WITNESS WHEREOF, we have executed and subscribed this
Certificate and do affirm the foregoing as true under the penalties of perjury
this _____day of ________, 1999.
Chairman of the Board
Attest:
- -------------------------
Secretary
11
<PAGE> 112
Exhibit B
[Form of Rights Certificate]
Certificate No. R- ________ Rights
NOT EXERCISABLE AFTER June 30, 2009 [UNLESS EXTENDED PRIOR THERETO BY THE BOARD
OF DIRECTORS] OR EARLIER IF REDEEMED BY THE COMPANY. THE RIGHTS ARE SUBJECT TO
REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.01 PER RIGHT ON THE TERMS SET
FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY
OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT)
AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS
REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A
PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PER SON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT).
ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY
BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH
AGREEMENT.]*
Rights Certificate
WILLIAMS COMMUNICATIONS GROUP, INC.
This certifies that , or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the
- --------------------
* The portion of the legend in brackets shall be inserted only if
applicable and shall replace the preceding sentence.
<PAGE> 113
owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of __________, 199_ (the "Rights Agreement"), between
Williams Communications Group, Inc., a Delaware corporation (the "Company"), and
___________________________________, [a _______________ banking corporation]
(the "Rights Agent"), to purchase from the Company at any time prior to 5:00
P.M. (Tulsa, Oklahoma time) on June 30, 2009 [(unless such date is extended
prior thereto by the Board of Directors)] at the office or offices of the Rights
Agent designated for such purpose, or its successors as Rights Agent, one
one-hundredth of a fully paid, non-assessable share of Series A Junior
Participating Preferred Stock (the "Preferred Stock") of the Company, at a
purchase price of $_____ per one one-hundredth of a share (the "Purchase
Price"), upon presentation and surrender of this Rights Certificate with the
Form of Election to Purchase and related Certificate duly executed. The number
of Rights evidenced by this Rights Certificate (and the number of shares which
may be purchased upon exercise thereof) set forth above, and the Purchase Price
per share set forth above, are the number and Purchase Price as of ___________,
1999, based on the Preferred Stock as constituted at such date. The Company
reserves the right to require prior to the occurrence of a Triggering
2
<PAGE> 114
Event (as such term is defined in the Rights Agreement) that a number of Rights
be exercised so that only whole shares of Preferred Stock will be issued.
Upon the occurrence of a Section 11(a)(ii) Event (as such term
is defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are defined in the Rights
Agreement), (ii) a transferee of any such Acquiring Person, Associate or
Affiliate, or (iii) under certain circumstances specified in the Rights
Agreement, a transferee of a person who, after such transfer, became an
Acquiring Person, or an Affiliate or Associate of an Acquiring Person, such
Rights shall become null and void and no holder hereof shall have any right with
respect to such Rights from and after the occurrence of such Section 11(a)(ii)
Event.
As provided in the Rights Agreement, the Purchase Price and
the number and kind of shares of Preferred Stock or other securities, which may
be purchased upon the exercise of the Rights evidenced by this Rights
Certificate are subject to modification and adjustment upon the happening of
certain events, including Triggering Events.
3
<PAGE> 115
This Rights Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part hereof
and to which Rights Agreement reference is hereby made for a full description of
the rights, limitations of rights, obligations, duties and immunities hereunder
of the Rights Agent, the Company and the holders of the Rights Certificates,
which limitations of rights include the temporary suspension of the
exercisability of such Rights under the specific circumstances set forth in the
Rights Agreement. Copies of the Rights Agreement are on file at the
above-mentioned office of the Rights Agent and are also available upon written
request to the Company.
This Rights Certificate, with or without other Rights
Certificates, upon surrender at the principal office or offices of the Rights
Agent designated for such purpose, may be exchanged for another Rights
Certificate or Rights Certificates of like tenor and date evidencing Rights
entitling the holder to purchase a like aggregate number of one one-hundredths
of a share of Preferred Stock as the Rights evidenced by the Rights Certificate
or Rights Certificates surrendered shall have entitled such holder to purchase.
If this Rights Certificate
4
<PAGE> 116
shall be exercised in part, the holder shall be entitled to receive upon
surrender hereof another Rights Certificate or Rights Certificates for the
number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company at its option at a
redemption price of $.01 per Right at any time prior to the earlier of the close
of business on (i) the tenth Business Day following the Stock Acquisition Date
(as such time period may be extended pursuant to the Rights Agreement), and (ii)
the Final Expiration Date. In addition, under certain circumstances following
the Stock Acquisition Date, the Rights may be exchanged, in whole or in part,
for shares of the Common Stock, or shares of preferred stock of the Company
having essentially the same value or economic rights as such shares. Immediately
upon the action of the Board of Directors of the Company authorizing any such
exchange, and without any further action or any notice, the Rights (other than
Rights which are not subject to such exchange) will terminate and the Rights
will only enable holders to receive the shares issuable upon such exchange.
No fractional shares of Preferred Stock will be issued upon
the exercise of any Right or Rights evidenced
5
<PAGE> 117
hereby (other than fractions which are integral multiples of one one-hundredth
of a share of Preferred Stock, which may, at the election of the Company, be
evidenced by depositary receipts), but in lieu thereof a cash payment will be
made, as provided in the Rights Agreement. The Company, at its election, may
require that a number of Rights be exercised so that only whole shares of
Preferred Stock would be issued.
No holder of this Rights Certificate shall be entitled to vote
or receive dividends or be deemed for any purpose the holder of shares of
Preferred Stock or of any other securities of the Company which may at any time
be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give consent to or withhold consent from any corporate
action, or, to receive notice of meetings or other actions affecting
stockholders (except as provided in the Rights Agreement), or to receive
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by this Rights Certificate shall have been exercised as provided in
the Rights Agreement.
6
<PAGE> 118
This Rights Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Rights Agent.
7
<PAGE> 119
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal.
Dated as of ___________, ____
ATTEST: WILLIAMS COMMUNICATIONS
GROUP, INC.
By
- ---------------------------- -------------------------------
Secretary Title:
Countersigned:
[NAME OF RIGHTS AGENT]
By
--------------------------
Authorized Signature
8
<PAGE> 120
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED __________________________ hereby
sells, assigns and transfers unto ___________________________________
_________________________
(Please print name and address of transferee)
_______________________________________________________________________________
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________________ Attorney,
to transfer the within Rights Certificate on the books of the within named
Company, with full power of substitution. Dated: __________________, _____
___________________________
Signature
Signature Guaranteed:
Certificate
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold,
assigned and transferred by or on behalf of a
<PAGE> 121
Person who is or was an Acquiring Person or an Affiliate or Associate of any
such Acquiring Person (as such terms are defined pursuant to the Rights
Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or subsequently became an Acquiring
Person or an Affiliate or Associate of an Acquiring Person.
Dated: _______________, _____ __________________________
Signature
Signature Guaranteed:
<PAGE> 122
NOTICE
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
<PAGE> 123
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise Rights
represented by the Rights Certificate.)
To: WILLIAMS COMMUNICATIONS GROUP, INC.
The undersigned hereby irrevocably elects to exercise
__________ Rights represented by this Rights Certificate to purchase the shares
of Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Company or of any other person which may be issuable upon the
exercise of the Rights) and requests that certificates for such shares be
issued in the name of and delivered to:
Please insert social security
or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced
by this Rights Certificate, a new Rights Certificate for the balance of such
Rights shall be registered in the name of and delivered to:
<PAGE> 124
Please insert social security
or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
________________________________________________________________________________
Dated: _______________, _____
___________________________________
Signature
Signature Guaranteed:
Certificate
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [
] are not being exercised by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Acquiring Person (as such terms
are defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the
<PAGE> 125
Rights evidenced by this Rights Certificate from any Person who is, was or
became an Acquiring Person or an Affiliate or Associate of an Acquiring Person.
Dated: ______________, _____
____________________________
Signature
Signature Guaranteed:
<PAGE> 126
NOTICE
The signature to the foregoing Election to Purchase and
Certificate must correspond to the name as written upon the face of this Rights
Certificate in every particular, without alteration or enlargement or any change
whatsoever.
<PAGE> 127
Exhibit C
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
On ______, 1999, the Board of Directors of Williams
Communications Group, Inc. (the "Company") declared a dividend distribution of
one Right for each outstanding share of Company Common Stock to stockholders of
record at the close of business on ________, 1999 (the "Record Date"). Each
Right entitles the registered holder to purchase from the Company a unit
consisting of one one-hundredth of a share (a "Unit") of Series A Junior
Participating Preferred Stock, par value $0.01 per share (the "Series A
Preferred Stock") at a Purchase Price of $___ per Unit, subject to adjustment.
The description and terms of the Rights are set forth in a Rights Agreement (the
"Rights Agreement") between the Company and ________________, as Rights Agent.
Initially, the Rights will be attached to all Common Stock
certificates representing shares then outstanding, and no separate Rights
Certificates will be distributed. Subject to certain exceptions specified in
<PAGE> 128
the Rights Agreement, the Rights will separate from the Common Stock and a
Distribution Date will occur upon the earlier of (i) 10 business days following
a public announcement that a person or group of affiliated or associated persons
(an "Acquiring Person") has acquired beneficial ownership of 15% or more of the
outstanding shares of Common Stock (the "Stock Acquisition Date"), other than as
a result of repurchases of stock by the Company or certain inadvertent actions
by institutional or certain other stockholders or (ii) 10 business days (or such
later date as the Board shall determine) following the commencement of a tender
offer or exchange offer that would result in a person or group becoming an
Acquiring Person. Until the Distribution Date, (i) the Rights will be evidenced
by the Common Stock certificates and will be transferred with and only with such
Common Stock certificates, (ii) new Common Stock certificates issued after the
Record Date will contain a notation incorporating the Rights Agreement by
reference and (iii) the surrender for transfer of any certificates for Common
Stock outstanding will also constitute the transfer of the Rights associated
with the Common Stock represented by such certificate. Pursuant to the Rights
Agreement, the Company reserves the right to require prior to the occurrence of
a Triggering Event (as defined below) that, upon any exercise of Rights, a
number of Rights be exercised so that only whole shares of Preferred Stock will
be issued.
2
<PAGE> 129
The Rights are not exercisable until the Distribution Date and
will expire at 5:00 P.M. (Tulsa, Oklahoma time) on June 30, 2009, [unless such
date is extended] or the Rights are earlier redeemed or exchanged by the Company
as described below.
As soon as practicable after the Distribution Date, Rights
Certificates will be mailed to holders of record of the Common Stock as of the
close of business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except as otherwise determined by
the Board of Directors, only shares of Common Stock issued prior to the
Distribution Date will be issued with Rights.
In the event that a Person becomes an Acquiring Person, except
pursuant to an offer for all outstanding shares of Common Stock which the
independent directors determine to be fair and not inadequate to and to other
wise be in the best interests of the Company and its stockholders, after
receiving advice from one or more investment banking firms (a "Qualified
Offer"), each holder of a Right will thereafter have the right to receive, upon
exercise, Common Stock (or, in certain circumstances, cash, property or other
securities of the Company) having a value equal to two times the exercise
3
<PAGE> 130
price of the Right. Notwithstanding any of the foregoing, following the
occurrence of the event set forth in this paragraph, all Rights that are, or
(under certain circumstances specified in the Rights Agreement) were,
beneficially owned by any Acquiring Person will be null and void. However,
Rights are not exercisable following the occurrence of the event set forth above
until such time as the Rights are no longer redeemable by the Company as set
forth below.
For example, at an exercise price of $[A] per Right, each
Right not owned by an Acquiring Person (or by certain related parties) following
an event set forth in the preceding paragraph would entitle its holder to
purchase $[2A] worth of Common Stock (or other consideration, as noted above)
for $[A]. Assuming that the Common Stock had a per share value of $[current
market] at such time, the holder of each valid Right would be entitled to
purchase _____ shares of Common Stock for $[A].
In the event that, at any time following the Stock Acquisition
Date, (i) the Company engages in a merger or other business combination
transaction in which the Company is not the surviving corporation (other than
with an entity which acquired the shares pursuant to a Qualified Offer), (ii)
the Company engages in a merger or other business combination transaction in
which the Company is the surviving corporation and the Common Stock
4
<PAGE> 131
of the Company is changed or exchanged, or (iii) 50% or more of the Company's
assets, cash flow or earning power is sold or transferred, each holder of a
Right (except Rights which have previously been voided as set forth above) shall
thereafter have the right to receive, upon exercise, common stock of the
acquiring company having a value equal to two times the exercise price of the
Right. The events set forth in this paragraph and in the second preceding
paragraph are referred to as the "Triggering Events."
At any time after a person becomes an Acquiring Person and
prior to the acquisition by such person or group of fifty percent (50%) or more
of the outstanding Common Stock, the Board may exchange the Rights (other than
Rights owned by such person or group which have become void), in whole or in
part, at an exchange ratio of one share of Common Stock, or one one-hundredth of
a share of Preferred Stock (or of a share of a class or series of the Company's
preferred stock having equivalent rights, preferences and privileges), per Right
(subject to adjustment).
At any time until ten business days following the Stock
Acquisition Date, the Company may redeem the Rights in whole, but not in part,
at a price of $.01 per Right (payable in cash, Common Stock or other
consideration deemed appropriate by the Board of Directors). Immediately upon
the action of the Board of Directors
5
<PAGE> 132
ordering redemption of the Rights, the Rights will terminate and the only right
of the holders of Rights will be to receive the $.01 redemption price.
Until a Right is exercised, the holder thereof, as such, will
have no rights as a stockholder of the Company, including, without limitation,
the right to vote or to receive dividends. While the distribution of the Rights
will not be taxable to stockholders or to the Company, stockholders may,
depending upon the circumstances, recognize taxable income in the event that
the Rights become exercisable for Common Stock (or other consideration) of the
Company or for common stock of the acquiring company or in the event of the
redemption of the Rights as set forth above.
Any of the provisions of the Rights Agreement may be amended
by the Board of Directors of the Company prior to the Distribution Date. After
the Distribution Date, the provisions of the Rights Agreement may be amended by
the Board in order to cure any ambiguity, to make changes which do not adversely
affect the interests of holders of Rights, or to shorten or lengthen any time
period under the Rights Agreement. The foregoing notwithstanding, no amendment
may be made at such time as the Rights are not redeemable.
A copy of the Rights Agreement has been filed [is being filed]
with the Securities and Exchange Commission
6
<PAGE> 133
as an Exhibit to a Registration Statement on Form 8-A/Current Report on Form 8-K
dated _________, 1999.
A copy of the Rights Agreement is available free of charge from the
Rights Agent. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
which is incorporated herein by reference.
7
<PAGE> 1
EXHIBIT 10.44
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into as of __________, 1999, by and between The Williams Companies, a
Delaware corporation ("Williams") and Williams Communications Group, Inc., a
Delaware corporation (the "Company").
This Agreement is made in light of the recapitalization of the Company
providing two series of Common Stock of the Company in preparation of an Initial
Public Offering of Series A Common Stock of the Company. In connection with the
recapitalization, Williams received all of the issued and outstanding shares of
Series B Common Stock of the Company. Pursuant to its Certificate of
Incorporation, upon the sale or other transfer of any Series B Common Stock to
any person which is not a Williams Affiliate, such transferred shares will
automatically be converted into an equal number of Class A Common Stock of the
Company.
The parties hereby agree as follows:
1. DEFINITIONS
1.01 "AFFILIATE" means, with respect to a specified Person, any Person
controlling , controlled by or under common control with such Person.
1.02 "COMMISSION" means the Securities and Exchange Commission.
1.03 "COMMON STOCK" means all the common stock, $.01 par value per
share, of the Company including both Series A and Series B.
1.04 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
1.05 "HOLDER" means a holder of Registrable securities. A person is
deemed to be a Holder of Registrable Securities whenever such person owns
Registrable Securities; provided, however, that unless the Company is otherwise
notified by the Holder of a Registrable Security, the Holder of a Registrable
Security shall be deemed to be that person set forth on the books and record of
the Company or the registrar for such Registrable Securities.
1.06 "INSPECTORS" means collectively any Holder, any underwriter
participating in any disposition pursuant to a Registration Statement and any
attorney, accountant or other professional retained by any such Holder or
underwriter.
1.07 "IPO" means the initial public offering of Common Stock by the
Company that is registered under the Securities Act with the Commission.
Page 1 of 13
<PAGE> 2
1.08 "MAJORITY HOLDERS" means the holder or holders of a majority of
the Registrable Securities to be registered under a Registration Statement.
1.09 "OTHER SELLING HOLDERS" means all persons and entities other than
Williams who have been granted registration rights by the Company.
1.10 "PERSON" means an individual, a partnership, a corporation, a
limited liability company, a limited liability partnership, an association, a
joint stock company, a trust, a joint venture, an unincorporated organization
and a governmental entity or any department, agency or political subdivision
thereof.
1.11 "RECORDS" means all financial and other records, pertinent
corporate documents and properties of Williams.
1.12 "REGISTRABLE SECURITIES" means all shares of Common Stock held at
the relevant time by Williams or any affiliated transferee or assignee of Common
Stock previously held by Williams (provided that pursuant to such transfer or
assignment Williams has specifically assigned certain of its rights hereunder),
and any other issued or issuable shares of Common Stock held by Williams at the
relevant time, either at the time of initial issuance or subsequently, by way of
a stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. As to any
particular Registrable Securities, such securities will cease to be Registrable
Securities (i) when they have been transferred in a public offering registered
under the Securities Act or in a sale made through a broker, dealer or
market-maker pursuant to Rule 144 under the Securities Act or (ii) when any
Holder requests in writing that such Registrable Securities not be registered
pursuant to the terms of this Agreement.
1.13 "REGISTRATION EXPENSES" means (i) registration and filing fees,
(ii) fees and expenses of compliance with securities or blue sky laws (including
reasonable fees and disbursements of counsel in connection with blue sky
qualifications of the Registrable Securities), (iii) printing, mailing and
delivery expenses, (iv) internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), (v) the fees and expenses incurred in connection with the
listing of the Registrable Securities, (vi) reasonable fees and disbursements of
counsel for the Company and customary fees and expenses for independent
certified public accountants of a comfort letter or comfort letters), (vii) the
reasonable fees and disbursements of one counsel retained by or for the benefit
of all of the holders of Registrable Securities (determined by the Selling
Holders of such securities in any manner in which they collectively choose),
(viii) the reasonable fees and expenses of any special experts retained by the
Company in connection with such registration and (ix) the reasonable fees and
expenses of any transfer agents and registrars of the Registrable Securities, as
selected by the Company; provided,
Page 2 of 13
<PAGE> 3
however, the Company shall not have any obligation to pay any underwriting fees,
discounts or commissions attributable to the sale of Registrable Securities, or,
except as provided by clause (ii) above, any out-of-pocket expenses of the
Holders (or the agents who manage their accounts) or the fees and disbursements
of counsel for any underwriter.
1.14 "REGISTRATION STATEMENT" means a registration statement on Form
S-1 or another appropriate form filed by the Company during the period that this
agreement is in effect.
1.15 "RULE 144" means Rule 144 issued under the Securities Act or other
comparable provision that may be adopted by the Commission.
1.16 "SECURITIES ACT" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
1.17 "SELLING HOLDER" means, with respect to any Registration
Statement, any Holder whose securities are included therein.
2. REGISTRATION RIGHTS
2.01 DEMAND REGISTRATION RIGHTS. Upon the written request of a Holder,
the Company shall file with the Commission a Registration Statement (a "Demand
Registration") under the Securities Act covering all or part of then outstanding
Registrable Securities, and shall use its reasonable efforts to cause the
Registration Statement to become effective as soon as practicable; provided,
however, that the number of registrable Securities for which such registration
is sought must exceed 1,000,000 shares of the Company's Common Stock.
(a) NUMBER OF DEMAND REGISTRATIONS. The Company shall be required to
effect, pursuant to this Section 2.01, registrations with respect to
Registrable Securities requested by Williams, so long as Williams
beneficially owns in the aggregate at least three percent of the issued
and outstanding shares of the Company's Class B Common Stock
Registrable Securities, Williams shall have the right to require the
Company to effect Required Registrations provided that the Registrable
Securities included therein have an aggregate Market Value of at least
$50 million.
(b) PRIORITY ON DEMAND REGISTRATIONS. In the event that a Demand
Registration is an underwritten offering, and the managing underwriters
advise Williams in writing that in their opinion the number of
Registrable Securities, the Company's securities, and any other
securities requested to be included exceeds the number that can be sold
in such offering without adversely affecting such underwriters' ability
to effect an orderly distribution of such securities
Page 3 of 13
<PAGE> 4
(including the price thereof), the Company will include in such
registration: (i) first, the number of Registrable Securities requested
to be included by Williams; (ii) second, the number of Registrable
Securities requested to be included by any other Holder; (iii) third,
if all the Registrable Securities requested to be included are included
in such registration, the number of the Company's securities requested
to be included that, in the opinion of such underwriters, can be sold;
and (iv) fourth, if all Registrable Securities and the Company's
securities requested to be included are included in such registration,
any other securities requested to be included in such registration
that, in the opinion of such underwriters, can be sold. [NOTE TO
READER: SWBell could "piggyback" but would have a fourth priority]
2.02 PIGGYBACK REGISTRATIONS.
(a) RIGHT TO PIGGYBACK. Whenever the Company proposes to register any
of its Common Stock (whether for its own account or the account of
others) under the Securities Act (other than pursuant to a Demand
Registration) an offering and the registration form to be used is
suitable for the registration of Registrable Securities (a "Piggyback
registration"), the Company will give prompt written notice of the
proposed registration to each Holder and, subject to the priority
provisions of Section 2.02(b), will include in such registration all
Registrable Securities with respect to which the Company has received
written requests for inclusion therein within 30 days after receipt of
such notice, provided, however, that (i) the Company will not be
required to effect a Piggyback Registration if it is registering
securities in connection with an employee stock option plan, a merger,
exchange offer or another transaction of the type specified in Rule 145
and (ii) the Company may withdraw any proposed Registration Statement
or offering of securities under this Section at any time without
liability to any Holder, in which case the Company will not be required
to effect a registration, unless such Holder converts its request into
a Demand Registration.
(b) PRIORITY ON PRIMARY REGISTRATIONS. In the event that a Piggyback
Registration is in connection with an underwritten primary offering of
the Company's securities and the managing underwriters advise the
Company in writing that in their opinion the number of securities
requested to be included in such registration exceeds the number that
can be sold in such offering without adversely affecting such
underwriters' ability to effect an orderly distribution of such
securities, will include in such registration: (i) first, the Company's
securities proposed to be sold by the Company; (ii) second, the number
of Registrable Securities requested to be included that, in the opinion
of such underwriters, can be sold, pro rata among the Holders of such
securities on the basis of the amount of Registrable securities then
owned by each such Holder; and (iii) third, if all Registrable
Securities requested to be included are included
Page 4 of 13
<PAGE> 5
in such registration, any other securities requested to be included in
such registration that, in the opinion of such underwriters, can be
sold.
(c) PRIORITY ON OTHER REGISTRATIONS. In the event that a Piggyback
Registration is in connection with an underwritten offering of the
Company's securities pursuant to the exercise of registration rights by
a stockholder of the Company who is not a Holder hereunder and the
managing underwriters advise the Company in writing that in their
opinion the number of securities requested to be included in such
registration exceeds the number that can be sold in such offering
without adversely affecting such underwriters' ability to effect an
orderly distribution of such securities, the Company will include in
such registration: (i) first, the shares of the Company's Common Stock
requested to be registered by such Company stockholder pursuant to the
exercise of its registration rights, (ii) second, any of the Company's
securities proposed to be sold by the Company in such offering; (iii)
third, the number of Registrable Securities requested to be included
that, in the opinion of such underwriters, can be sold pro rata among
the Holders of such securities on the basis of the amount of
Registrable Securities then owned by each such Holder; and (iv) fourth,
if all Registrable Securities requested to be included are included in
such registration, any other securities requested to be included in
such registration that, in the opinion of such underwriters, can be
sold.
(d) CONDITION TO PIGGYBACK REGISTRATIONS. Registrable Securities and
any other securities registered in a Piggyback Registration shall be
offered to the public at no less than the price at which other
equivalent securities of the company then registered are offered to the
public.
3. HOLDBACK AGREEMENT. To the extent not inconsistent with applicable law,
each Holder agrees not to effect any sale or distribution of any securities of
the issue being registered or any securities similar to those being registered,
or any securities convertible into or exchangeable or exercisable for such
securities, including a sale pursuant to Rule 144, during the ten (10) business
days prior to, and during the 120-day period beginning on, the effective date of
such registration statement (except as part of such registration), if and to the
extent timely notified in writing by the managing underwriter or underwriters in
the case of an underwritten public offering.
4. SELECTION OF UNDERWRITERS. At the option of the Majority Holders, the
offering of Registrable Securities pursuant to Section 2.01 may be in the form
of an underwritten offering; PROVIDED, that the Majority Holders shall be
entitled to select the book-running managing underwriter subject to the approval
of the Company, which approval will not be unreasonably withheld.
Page 5 of 13
<PAGE> 6
5. REGISTRATION.
5.01 REGISTRATION PROCEDURES. In connection with the offering the
Registrable Securities pursuant to Section 2, the Company shall:
(a) prepare and file the Registration Statement with the Commission on
any form for which the Company then qualifies or which counsel for the
Company shall deem appropriate and which form shall be available for
the sale of the Registrable Securities thereunder in accordance with
the intended method of distribution thereof, and use its reasonable
[best] efforts (subject to Section 2.01(c)) to cause such filed
Registration Statement to become effective as soon as practicable; and
after the filing of the Registration Statement, the Company will
promptly notify each Holder of Registrable Securities covered by the
Registration Statement of any stop order issued or threatened by the
Commission and take all reasonable actions required to prevent the
entry of such stop order or to remove it if entered;
(b) in the event of a Demand Registration, prepare and file with the
Commission such amendments and supplements to the Registration
Statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for a period of
not less than 270 days or such shorter period which will terminate when
all Registrable Securities covered by such registration statement have
been sold and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by the
Registration Statement during such period in accordance with the
intended methods of disposition by the holders thereof set forth in the
Registration Statement;
(c) furnish to each Holder whose Registrable Securities are to be
included in the Registration Statement, prior to filing the
Registration Statement, if requested, copies of the Registration
Statement as proposed to be filed, and thereafter furnish to such
Holder such number of copies of the Registration Statement, each
amendment and supplement thereto (in each case including all exhibits
thereto), the prospectus included in the Registration Statement
(including each preliminary prospectus) and such other documents as
such Holder may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such Holder;
(d) use its reasonable efforts to register or qualify such Registrable
Securities under such other securities or state blue sky laws of such
jurisdictions as any Holder or managing underwriter reasonably (in
light of the intended plan of distribution) requests and do any and all
other acts and things which may be reasonably necessary or advisable to
enable such Holder or managing underwriter to consummate the
disposition in such jurisdictions of the Registrable Securities owned
by such Holder; provided, however, that Williams will not be required
to (i) qualify generally to do business in any jurisdiction
Page 6 of 13
<PAGE> 7
where it would not otherwise be required to qualify but for this
Section 5.01(d), (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any such
jurisdiction;
(e) use its reasonable efforts to cause such Registrable Securities to
be registered with or approved by such other governmental agencies or
authorities as may be necessary by virtue of the business and
operations of Williams to enable the Holder or Holders thereof to
consummate the disposition of such Registrable Securities;
(f) notify each Holder of such Registrable Securities, at any time when
a prospectus relating thereto is required to be delivered under the
Securities Act, of the occurrence of an event requiring the preparation
of a supplement or amendment to such prospectus so that, as thereafter
delivered to the Holders of such Registrable Securities, such
prospectus will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and promptly
making available to each Holder any such supplement or amendment
(g) enter into customary agreements (including an underwriting
agreement in customary form) and take such other actions as are
reasonably required in order to expedite or facilitate the disposition
of such Registrable securities;
(h) make available for inspection by Inspectors all Records as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such
Inspectors in connection with the Registration Statement. Records which
the Company determines, in good faith, to be confidential and which it
notifies the Inspectors are confidential shall not be disclosed by the
Inspectors unless (i) the disclosure of such Records is necessary to
avoid or correct a misstatement or omission in the Registration
Statement or (ii) release of such Records is ordered pursuant to a
subpoena or other order from a court of competent jurisdiction. Each
Holder of such Registrable Securities agrees that information obtained
by it as a result of such inspections shall be deemed confidential and
shall not be used by it as the basis for any market transactions in the
securities of the Company or its affiliates unless and until such is
made generally available to the public. Each Holder of such Registrable
Securities further agrees that it will, upon learning that disclosure
of such Records is sought in a court of competent jurisdiction, give
notice to the Company and allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of the Records
deemed confidential;
(i) use its reasonable efforts to obtain a comfort letter or comfort
letters from the Company's independent public accounts in customary
form and covering
Page 7 of 13
<PAGE> 8
such matters of the type customarily covered by comfort letters;
(j) otherwise use its reasonable efforts to comply with all applicable
rules and regulations of the Commission, and make available to its
security holders, as soon as reasonable, practicable, an earnings
statement covering a period of twelve months, beginning within three
months after the effective date of the registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder;
(k) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company
are then listed and, if not so listed, to be listed on the NASDAQ
Nation Market ("NASDAQ") and, if listed on the NASDAQ system, use its
reasonable best efforts to secure designation of all such Registrable
Securities covered by such registration statement as a NASDAQ "national
market system security" within the meaning of Rule 11Aa2-1 of the
Commission or, failing that, to secure NASDAQ authorization for such
Registrable Securities and, without limiting the generality of the
foregoing, to arrange for at least two market makers to register as
such with respect to such Registrable securities with the National
Association of Securities Dealers, Inc.; and
(1) provide a transfer agent and registrar for all such Registrable
Securities (if the Company does not already have such an agent) not
later than the effective date of such registration statement.
The Company may require each Holder of Registrable Securities to
promptly furnish in writing to the Company such information regarding the
distribution of the Registrable Securities as it may from time to time
reasonably request and such other information as may be legally required in
connection with such registration.
Each Holder agrees that, upon receipt of any notice from the Company of
the happening of any event of any kind described in Section 5.01(f) hereof, such
Holder will forthwith discontinue disposition of Registrable Securities pursuant
to the Registration Statement covering such Registrable securities until such
Holder's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 5.01(f) hereof. In the event the Company shall give such
notice, the Company shall extend the period during which the Registration
Statement shall be maintained effective (including the period referred to in
Section 5.01(f) hereof) by the number of days during the period from and
including the date of the giving of notice pursuant to Section 5.01(f) hereof to
the date when the Company shall make available to the Holders of Registrable
Securities covered by the registration Statement a prospectus supplemented or
amended to conform with the requirements of Section 5.01(f) hereof.
Page 8 of 13
<PAGE> 9
5.02. REGISTRATION EXPENSES. Williams will pay or cause to be paid all
Registration Expenses, including all fees and expenses (including all Blue Sky,
New York Stock Exchange and National Association of Securities Dealers, Inc.,
filing and registration fees, accounting fees and disbursements, printing costs,
attorneys' fees and disbursements), arising out of the preparation, filing,
amending and supplementing of a Registration Statement pursuant to Section 2.01
hereof and to the amount of such fees and expenses that are reasonably allocable
to the Selling Stockholder for a Registration Statement used under Section 2.02
based on the number of shares offered by Holders relative to the number of other
shares offered by the Company or on behalf of any of its other holders. [NOTE TO
READER: Conforms to SWBell Agreement]
6. RULE 144. With a view to making available the benefits of Rule 144
under the Securities Act (or similar rule then in effect) available to each
Holder, the Company shall:
(a) make and keep available adequate current public information with
respect to the Company within the meaning of Rule 144(c) under the
Securities Act (or similar rule then in effect);
(b) furnish to each Holder forthwith upon request (i) a written
statement by the Company as to its compliance with the informational
requirements of Rule 144(c) (or similar rule then in effect or (ii) a
copy of the most recent annual or quarterly report of the Company; and
(c) comply with all other necessary filing and other requirements so as
to enable each Holder to sell Registrable Securities under Rule 144
under the Securities Act (or similar rule then in effect).
7. GRANTING OF REGISTRATION RIGHTS. Without Williams' prior written
consent, the Company shall not in the future grant any rights to any other
person to register any shares of capital stock or other securities of the
Company; provided, however, Williams' consent will no longer be required if and
when Williams' direct or beneficial ownership of the Company's voting securities
is less than 50% of the total outstanding voting securities.
8. INDEMNIFICATION AND CONTRIBUTION.
8.01 INDEMNIFICATION OF HOLDERS: The Company agrees to indemnify and
hold harmless each Holder and each Person, if any, who controls (within the
meaning of Section 15 of the 33 Act and Section 20 of the 34 Act) such Holder (a
"Control Person") against any losses, claims, damages or liabilities, joint or
several, to which such Holder or any such Control Person may become subject,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact
Page 9 of 13
<PAGE> 10
contained in any preliminary or final registration Statement or prospectus with
respect thereto, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading; and the Company will reimburse each Holder and each Control Person
for any legal or other expenses reasonably incurred by such Holder or such
Control Person in connection with investigating or defending any such loss,
claim, damage liability or action; provided, however, that the Company will not
be liable in any case to the extent that any such loss claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission from any of such documents in reliance
upon and in conformity with written information furnished by or on behalf of
such Holder or any such Control Person specifically for use in the preparation
thereof.
8.02 INDEMNIFICATION BY HOLDER OR REGISTRABLE SECURITIES. Each Holder
will, severally and not jointly, indemnify and hold harmless the Company and
each of its directors, officers and each Person, if any, who controls (within
the meaning of Section 15 of the 33 Act and Section 20 of the 34 Act) the
Company (a "Company Control Person") to the same extent as set forth in the
foregoing indemnity from the Company to each Holder but only with reference to
written information included in any preliminary or final Registration Statement
or prospectus with respect thereto, or amendment or supplement thereto,
furnished by or on behalf of such Holder specifically for use in the preparation
of such documents; and will reimburse the Company or any such Company Control
Person for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any loss, claim, damage, liability or action for
which such Holder is obligated to indemnify the Company or any Company Control
Person.
8.03 CONDUCT OF INDEMNIFICATION PROCEEDINGS. Promptly after receipt by
an indemnified party under this Article VIII of notice of any claim or the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to e made against an indemnifying party under Section 8.01 or 8.02
above, notify the indemnifying party of any claim or the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than under
Section 8.01 or 8.02 above. In case any such action is brought against any
indemnified party and it notifies an indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party (who shall not, except with the consent of the
indemnified party, be counsel to the indemnifying party), and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. No
Page 10 of 13
<PAGE> 11
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened action 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 any claims that are the subject matter of such action.
8.04 CONTRIBUTION. If the indemnification provided for in Section 8.01
or 8.02 is unavailable or insufficient in accordance with its terms in respect
of any losses, claims, damages or liabilities (or actions in respect thereof)
referred to therein, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative benefits as well as the relative fault of
the Company on the one hand and the Holder on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable consideration. The relative benefits received by the Company on the
one hand and each Holder on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (net of underwriting
discounts and commissions but before deducting expenses) received by the Company
on the one hand bears to the total net proceeds received by the Holder from the
offering. The relative fault 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 fat relates to information
supplied by the Company on the one hand or the Holder on the other and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
8.05 OBLIGATIONS. The obligations of the Company under this Section
shall be in addition to any liability which the Company may otherwise have and
shall extend, upon the same terms and conditions, to each director of any Holder
and to each person, if any, who controls any Holder or any underwriter within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act. The obligations of each Holder under this Section shall be in
addition to any liability which the respective Holder may otherwise have and
shall extend, upon the same terms and conditions, to each director of the
Company, to each officer of the Company who has signed any registration
statement and to each person, if any, who controls the Company or any
underwriter (within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act.
9. MISCELLANEOUS.
9.01 NOTICES. All notices and other communications provided for or
permitted hereunder shall be made by hand-delivery or registered first-class
mail:
Page 11 of 13
<PAGE> 12
(i) HOLDER. If to a Holder of Registrable Securities, at the
most current address, and with a copy to be sent to each additional address
given by such Holder.
(ii) if to the Company:
David Batow
Williams Communications
One Williams Center
Tulsa OK 74172
All such notices and communications shall be deemed to have
been duly given when delivered by hand, if personally delivered, or two business
days after being deposited in the mail, postage prepared, if mailed.
9.02 TRANSFER OR REGISTRATION RIGHTS; SUCCESSORS AND ASSIGNS. Williams
may transfer or assign its rights hereunder, in whole or in part, without the
prior approval of the Company. This Agreement and its benefits shall inure to
the benefit of and be binding upon the successors and assigns of each of the
parties hereto.
9.03 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 without the written consent of the Company and the Majority
Holders.
9.04 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.
9.05 HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning thereof.
9.06 GOVERNING LAW This Agreement shall be governed by and construed in
accordance with the laws of the State of Oklahoma without regard to principles
of conflicts of law.
9.07 SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in very other respect and of
the remaining provisions contained herein shall not be in any way impaired
thereby, it being intended that all of the rights
Page 12 of 13
<PAGE> 13
and privileges of each Holder shall be enforceable to the fullest extent
permitted by law.
9.08 SPECIFIC PERFORMANCE. The parties hereto acknowledge that there
would be no adequate remedy at law if any party fails to perform any of its
obligations hereunder, and accordingly agree that each party, in addition to any
other remedy to which it may be entitled at law or in equity, shall be entitled
to compel specific performance of the obligations of any other party under this
Agreement in accordance with the terms and conditions of this Agreement in any
court of the United States or any State thereof having jurisdiction.
9.09 ENTIRE AGREEMENT. This Agreement, together with the Merger
Agreement, is intended by the parties as a final expression of their agreement
and intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein and therein. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and therein. This
Agreement and the Merger Agreement (including the exhibits thereto) supersede
all prior agreements and understandings between the parties with respect to
subject matter.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
the day and year first written above.
WILLIAMS COMMUNICATIONS GROUP, INC.
By:
---------------------------------------------
Name:
Title:
THE WILLIAMS COMPANIES, INC.
By:
---------------------------------------------
Name:
Title:
Page 13 of 13
<PAGE> 1
EXHIBIT 10.46
CALL OPTION AGREEMENT
This CALL OPTION AGREEMENT ("Agreement") dated as of the 27th day of
May, 1999, is entered into by and among Williams Holdings of Delaware, Inc., a
Delaware corporation ("WHD"), Williams International Company, a Delaware
corporation ("WIC"), Williams International Telecom Limited, a Delaware
corporation ("WITL") and Williams Communications Group, Inc., a Delaware
corporation ("WCG").
WHEREAS, WHD, a wholly-owned subsidiary of The Williams Companies, Inc.
("TWC"), owns all of the issued and outstanding stock of WCG; and
WHEREAS, WHD owns all of the issued and outstanding stock of WIC, which
in turn owns all of the issued and outstanding stock of WITL, which is the owner
and holder of debt and equity in Lightel S.A. Tecnologia Da
Informacao, a Brazilian company ("Lightel"); and
WHEREAS, in connection with TWC's initial public offering of shares of
WCG stock, WHD, WIC and WITL have determined to grant an exclusive option to WCG
to acquire either (1) the stock of WITL (the "WITL stock") or (2) the debt and
equity interests of WITL in Lightel (the "Lightel Assets" ) in exchange for
shares of WCG stock after the Initial Public Offering.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein and intending to be legally bound
hereby, the parties hereto agree as follows:
ARTICLE 1
CALL OPTION RIGHT
WHD, WIC and WITL hereby grant to WCG an exclusive option to acquire
the WITL stock or the Lightel Assets (the "Call Option") in a transaction
intended to qualify as tax-free pursuant to Sections 368 (a) and 351 of the
Internal Revenue Code of 1986, as amended. The Call Option shall provide that
the WITL stock or the Lightel Assets are to be transferred by WIC and WITL to
WHD and subsequently contributed by WHD to WCG in exchange for shares of Class B
common stock of WCG equal in value to the net book value of the Lightel Assets.
The value and number of WCG Class B common shares to be transferred by WCG to
WHD shall be computed by using such shares' average closing price per share over
the twenty day trading-period prior to the transfer date in an amount which is
equal to the net book value of the Lightel Assets at the date of the transfer.
The Call Option shall be exercisable by WCG from January 1, 2000 through January
1, 2001, and shall be exercised in accordance with the Notice Provision below.
1
<PAGE> 2
Prior to the transfer of the WITL stock or Lightel Assets, and as a
condition thereto, WCG shall agree to be bound by all of the terms and
conditions of the following agreements:
(1) Subscription and Shareholder's Agreement dated January 27, 1997 by
and among Lightel S.A. Tecnologia Da Informacao ("Lightel"), Algar S.A.
Empreendimentos e Participacoes ("Algar") and Williams International Telecom
Limited ("WITL") as amended.
(2) Stock Purchase Agreement dated as of January 21, 1997 among ABC
Industria e Comercio S.A. - ABC INCO, Lightel, Algar and WITL.
(3) Loan Agreement dated as of March 30, 1998 among Lightel, Algar and
WITL.
and shall indemnify and hold harmless WHD, WIC and WITL from any and all
damages, liabilities, claims and expenses associated with such agreements. WCG
shall also agree to obtain from third parties and execute any amendments,
assignments, consents or other documentation necessary to transfer the WITL
stock or Lightel Assets from WIC and WITL to WHD and from WHD to WCG and shall
be required to assume any capital or other commitments WHD, WIC or WITL may have
to Lightel from the time of the transfer.
ARTICLE II
NOTICE OF EXERCISE OF CALL OPTION
In order to exercise the Call Option, WCG shall provide written notice
to WHD, WIC and WITL at the following address:
Mr. William G. Von Glahn
Sr. Vice-President, General Counsel
Williams Holdings of Delaware, Inc.
Suite 4900
Tulsa, Oklahoma 74172
Facsimile (918) 573-5942
The notice shall include an estimate of the number of WCG shares to be
transferred, the date of the transfer and any other pertinent details. WHD, WIC
and WITL shall make the determination of whether to transfer the WITL stock or
the Lightel Assets and shall then proceed to transfer in accordance with WCG's
notice.
2
<PAGE> 3
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EACH PARTY
Each of the parties represents and warrants to each other party that:
(a) Such party has been duly organized, and is validly
existing and in good standing, under the laws of the jurisdiction of its
incorporation, has all requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby,
and has taken all necessary corporate action to authorize the execution,
delivery and performance of this Agreement;
(b) This Agreement has been duly executed and delivered by
such party and, assuming due and valid authorization, upon execution and
delivery by the other parties hereto, this Agreement constitutes a legal, valid
and binding obligation of such party, enforceable against such party in
accordance with its terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and other similar
laws of general application affecting enforcement of creditors' rights generally
and (ii) the availability of the remedy of specific performance or injunctive or
other forms of equitable relief being subject to equitable defenses and being
subject to the discretion of the court before which any proceeding therefor may
be brought;
(c) The execution and delivery of this Agreement by such party
will not result in a violation of, or a default under, or conflict with, or
require any consent, approval or notice under, any contract, trust, commitment,
agreement, obligation, understanding, arrangement or restriction of any kind to
which such party is a party or by which such party is bound.
ARTICLE IV
AMENDMENT AND WAIVER
No modification or amendment of this Agreement shall be effective
unless such modification or amendment is approved in writing by all of the
parties hereto. The failure of any party to enforce any of the provisions of
this Agreement shall in no way be construed as a waiver of such provisions and
shall not affect the right of such party thereafter to enforce each and every
provision of the Agreement in accordance with its terms.
3
<PAGE> 4
ARTICLE V
ARBITRATION
In the event of a dispute between any two or more parties with regard
to this Agreement, the matter will be submitted to arbitration for final and
binding resolution in accordance with the International Chamber of Commerce
Arbitration Rules. The arbitration will be held in Tulsa, Oklahoma in the United
States of America. The arbitrators shall be requested to render their decision
as promptly as reasonably practicable. An action to enforce judgment on the
award or decision of the arbitrators may be brought in any court of competent
jurisdiction.
ARTICLE VI
SEVERABILITY
Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law. If
any provision of this Agreement is held to be invalid, illegal or unenforceable
in any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
or any other jurisdiction, but this Agreement shall be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision had never been contained herein.
ARTICLE VII
GOVERNING LAW
This Agreement shall be governed by, enforced and construed in
accordance with the laws of the State of Oklahoma without regard to conflicts of
law rules which may refer the construction of the Agreement to any other
jurisdiction.
ARTICLE VIII
ASSIGNMENT
This Agreement and the rights, duties, benefits and obligations
hereunder shall be freely assignable by WHD, WIC and WITL but shall only be
assignable by WCG with the express written consent of the other parties hereto.
The rights, duties, benefits and obligations hereunder shall enure to the
benefit of and be binding upon the successors and permitted assigns of the
parties.
4
<PAGE> 5
ARTICLE IX
DESCRIPTIVE HEADINGS
The descriptive headings are for convenience only and do not constitute
a part of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Call Option
Agreement on the date first above written.
WILLIAMS HOLDINGS OF DELAWARE, INC.
By:
------------------------------------------------
Name: Mark W. Husband
----------------------------------------------
Title: Assistant Treasurer
---------------------------------------------
WILLIAMS COMMUNICATIONS GROUP INC.
By:
------------------------------------------------
Name: S. Miller Williams
----------------------------------------------
Title: Senior Vice President
---------------------------------------------
WILLIAMS INTERNATIONAL COMPANY
By:
------------------------------------------------
Name: John C. Bumgarner, Jr.
----------------------------------------------
Title: President
---------------------------------------------
WILLIAMS INTERNATIONAL TELECOM, LIMITED
By:
------------------------------------------------
Name: Jack D. McCarthy
----------------------------------------------
Title: Vice-President & Chief Financial Officer
---------------------------------------------
5
<PAGE> 1
EXHIBIT 10.47
CROSS-LICENSE AGREEMENT
This Cross-License Agreement ("Agreement") is made effective as of the ______
day of ______________, 1999 (the "Effective Date") between WILLIAMS INFORMATION
SERVICES CORPORATION ("WISC"), THE WILLIAMS COMPANIES, INC. ("TWC"), WILLIAMS
COMMUNICATIONS GROUP, INC. ("WCG"), and WCG's affiliates in which it owns at
least a controlling interest ("WCG Affiliates") (as used herein, the term "WCG
Group" refers, according to context, either individually to WCG or collectively
to WCG and the WCG Affiliates). WISC, TWC and the WCG Group are each a "Party"
and together are the "Parties" to this Agreement.
WHEREAS, the WCG Group has developed and owns a body of intellectual property
including, without limitation, trademarks, software and technical writings some
of which may be protected by, or sought to be protected by, copyright, patents,
and trademark registrations (the "WCG IP"); and
WHEREAS, WISC has developed and owns a body of intellectual property including,
without limitation, trademarks, software and technical writings some of which
may be protected by copyright, patents and trademark registrations (the "WISC
IP"); and
WHEREAS, TWC has developed and owns a body of intellectual property including,
without limitation, trademarks, software and technical writings some of which
may be protected by copyright, patents and trademark registrations (the "TWC
IP"); and
WHEREAS, WISC and TWC desire to obtain, and the WCG Group desires to grant to
WISC and TWC, certain rights to the WCG IP; and
WHEREAS, the WCG Group desires to obtain, and WISC and TWC desire to grant to
the WCG Group, certain rights to the WISC IP and the TWC IP;
NOW, THEREFORE, in consideration of the covenants and representations set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, WISC, TWC and the WCG Group agree to the
following:
ARTICLE 1
DEFINITIONS
1.01 "TWC Affiliates" shall mean all direct and indirect subsidiaries,
divisions, companies, and affiliates in which TWC or one of its direct
or indirect subsidiaries owns at least a controlling interest, but
shall not include WCG or the WCG Group.
1.02 "Internal Use" shall mean internal use by each Party's employees for
the benefit of the Party, its affiliates and other TWC Affiliates,
specifically excluding use for the benefit of or for providing services
to or disclosure thereof to any third parties including without
limitation any customer of the Party, or customer of any other TWC
Affiliate, if such customer is not a TWC Affiliate.
1.03 "Software" shall mean source code, object code, all instructions
relevant to assembling or compiling the source code, and all other
documentation and instructions relevant to the use thereof, developed
by each
<PAGE> 2
Party as of the Effective Date, plus any enhancements, upgrades,
modifications and new versions of such developed software, including
but not limited to the software listed on the respective Exhibits
attached hereto, as amended from time to time, and any software related
to the Inventions, defined herein, as they exist as of the Effective
Date.
1.04 "Inventions" shall mean each Party's inventions, including but not
limited to the inventions listed on the Exhibits attached hereto, as
amended from time to time, and any inventions or discoveries arising
from or inextricably related to each Party's Software, whether or not
such inventions or discoveries (i) have been disclosed or are otherwise
known to the Party/Licensee, (ii) have been described in patent
applications, (iii) are disclosed in issued patents, or (iv) are
protected by trade secret, and specifically including any inventions or
discoveries disclosed in patents or patent applications assigned to the
Party/Licensee, if any, all of the foregoing as they exist as of the
Effective Date.
1.05 "Marks" shall mean all trademarks, tradenames, logos and/or service
marks, if any, including those trademarks, tradenames, service marks
and logos associated with each Party's Software, Inventions, or with
the subject matter of other licenses granted hereunder.
1.06 "Person" shall mean any natural person, firm, partnership, association,
corporation, company, trust, business trust, Governmental Authority or
other entity.
ARTICLE 2
LICENSE FROM TWC AND WISC TO THE WCG GROUP
2.01 WISC and TWC hereby grant to each member of the WCG Group, and each
member of the WCG Group hereby accepts, a non-exclusive, world-wide,
non-transferable, royalty-free, perpetual license on an "AS IS, WHERE
IS" basis to use (subject to the rights of third parties) the
particular WISC and TWC Software, Marks, and Inventions which exist as
of the Effective Date including without limitation the WISC and TWC
Software, Marks, and Inventions listed on the attached Exhibit I,
solely for the WCG Group's Internal Use.
2.02 Notwithstanding anything to the contrary contained herein, WISC and TWC
do not grant to the WCG Group hereunder, nor shall the WCG Group claim
any right pursuant hereunder, to any intellectual property belonging to
WISC and TWC, other than the WISC and TWC Software, Marks and
Inventions which exist as of the Effective Date of this Agreement.
Further, nothing in this Agreement shall be deemed to transfer title to
any of the Software, Inventions or Marks to any other Party.
ARTICLE 3
LICENSE FROM THE WCG GROUP TO WISC AND TWC
3.01 The WCG Group hereby grants both to WISC and to TWC, and WISC and TWC
each hereby accept, a non-exclusive, world-wide, non-transferable,
royalty-free, perpetual license on an "AS IS, WHERE IS" basis to use
(subject to the rights of third parties) the particular WCG Software,
Marks, and Inventions which exist as of the Effective Date including
without limitation the WCG Software, Marks, and Inventions listed on
the attached Exhibit II, solely for WISC's and TWC's Internal Use.
<PAGE> 3
3.02 Notwithstanding anything to the contrary contained herein, the WCG
Group does not grant to WISC and TWC hereunder, nor shall WISC and TWC
claim any right pursuant hereunder, to any intellectual property
belonging to the WCG Group, other than the WCG Software, Marks and
Inventions which exist as of the Effective Date of this Agreement.
Further, nothing in this Agreement shall be deemed to transfer title to
any of the Software, Inventions or Marks to any other party.
ARTICLE 4
QUALITY CONTROL REGARDING USE OF MARKS
Each Party shall abide by commercially reasonable guidelines regarding use of
the other Party's Marks, provided, however, that each Party acknowledges and
agrees that the quality standards maintained by the other Party as of the
Effective Date are and will be acceptable. Further, neither Party will take any
action that, it knew or reasonably should be known, would jeopardize the other
Party's rights to its Marks.
ARTICLE 5
CONFIDENTIALITY
Each Party shall maintain all Software and Inventions licensed hereunder (the
"Licensed Subject Matter") in strict confidence by limiting disclosure of the
Licensed Subject Matter to those of its employees, contractors or agents having
a need to access the Licensed Subject Matter for the purpose of exercising
rights granted hereunder. Each Party shall exercise at least the same degree of
care as it utilizes to protect its own proprietary information of a similar
nature to prevent unauthorized disclosures of the Licensed Subject Matter, but
in no event less than a reasonable degree of care.
ARTICLE 6
ASSIGNABILITY
6.01 This Agreement and any of the licenses granted herein to WISC and TWC
hereunder are assignable by WISC and TWC, in whole or in part, to TWC
Affiliates, provided that the assignee agrees in writing to abide by
the relevant terms and conditions of this Agreement. Otherwise no
license granted herein to WISC or TWC is assignable without the prior
written consent of the entity within the WCG Group holding title or
licensing rights or its successors in interest, which consent shall not
be unreasonably withheld; provided, however, that consent shall not be
withheld for any assignment made as the result of (i) a corporate
merger, (ii) a sale of all or substantially all of the corporate assets
of such entity, (iii) a sale of a controlling interest in such
entities' corporate stock, (iv) a corporate restructuring, or (v) as a
result of a corporate name change.
6.02 This Agreement and any of the licenses granted herein to the WCG Group
are fully assignable by the WCG Group, in whole or in part, to TWC
Affiliates, provided that the assignee agrees in writing to abide by
the relevant terms and conditions of this Agreement. Otherwise, no
license granted herein to the WCG Group is assignable without the prior
written consent of WISC or TWC, as applicable, or its successor in
interest, which consent shall not be unreasonably withheld, provided,
however, that consent shall not be withheld for any assignment made as
the result of (i) a corporate merger, (ii) a sale of all or
substantially
<PAGE> 4
all of the corporate assets of such entity, (iii) a sale of a
controlling interest in such entities' corporate stock, (iv) a
corporate restructuring, or (v) as a result of a corporate name change.
6.03 Any attempt to assign, or purported assignment of, this Agreement or
any of the licenses granted hereunder in violation of the provisions of
this Article 6 shall be null and void and of no effect.
ARTICLE 7
WARRANTIES; DISCLAIMERS
7.01 Each Party represents and warrants that it owns and has the right to
license the software, marks, and inventions licensed under this
Agreement.
7.02 EXCEPT FOR THE WARRANTIES, REPRESENTATIONS, COVENANTS, OBLIGATIONS, AND
AGREEMENTS DESCRIBED IN SECTION 7.01, EACH PARTY DISCLAIMS ANY AND ALL
WARRANTIES, CONDITIONS, OR REPRESENTATIONS (EXPRESS OR IMPLIED, ORAL OR
WRITTEN) WITH RESPECT TO THE SUBJECT MATTER HEREOF, OR ANY PART
THEREOF, INCLUDING ANY AND ALL IMPLIED WARRANTIES OF NON-INFRINGEMENT,
MERCHANTABILITY, OR FITNESS OR SUITABILITY FOR ANY PURPOSE (WHETHER THE
PARTY KNOWS, HAS REASON TO KNOW, HAS BEEN ADVISED, OR IS OTHERWISE IN
FACT AWARE OF ANY SUCH PURPOSE) WHETHER ALLEGED TO ARISE BY LAW, BY
REASON OF CUSTOM OR USAGE IN THE TRADE, OR BY COURSE OF DEALING.
ARTICLE 8
LIMITATIONS OF LIABILITY / ALLOCATION OF RISK
NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, NEITHER PARTY SHALL BE
LIABLE TO THE OTHER PARTY (NOR TO ANY PERSON CLAIMING RIGHTS DERIVED FROM THE
OTHER PARTY'S RIGHTS, INCLUDING ANY SUBLICENSEE) FOR INCIDENTAL, CONSEQUENTIAL,
SPECIAL, PUNITIVE, OR EXEMPLARY DAMAGES OF ANY KIND, INCLUDING, BUT NOT LIMITED
TO, LOSS OF DATA, LOST PROFITS, LOSS OF BUSINESS, OR OTHER ECONOMIC DAMAGE, AND
FURTHER INCLUDING INJURY TO PROPERTY, AS A RESULT OF BREACH OF ANY TERM OF THIS
AGREEMENT, REGARDLESS OF WHETHER THE PARTY LIABLE OR ALLEGEDLY LIABLE WAS
ADVISED, HAD OTHER REASON TO KNOW, OR IN FACT KNEW OF THE POSSIBILITY THEREOF.
ARTICLE 9
BREACH
Breach of any provision hereof shall not automatically terminate any license
granted hereunder nor give the non-breaching Party the right to terminate any
license granted hereunder; however, the non-breaching Party shall be entitled to
seek any remedy available to it under law or equity due to such breach. Further,
the Party in breach shall immediately take actions to remedy the breach. The
Parties hereby agree that damages resulting from breach of any material
provision hereof may be difficult if not impossible to ascertain, and therefore
agree that the non-breaching Party shall be entitled to injunctive relief to
prevent or stop any threatened or actual breach of any material provision
hereof, including without limitation provisions dealing with confidentiality and
license rights.
<PAGE> 5
ARTICLE 10
GENERAL INDEMNITY
10.01 Each member of the WCG Group shall jointly and severally, and to the
fullest extent permitted by applicable law, defend, indemnify and hold
harmless WISC, TWC, and the TWC Affiliates and their respective
successors and assigns authorized hereunder and any of their respective
officers, directors, employees, agents and representatives
(collectively the "WISC and TWC Indemnitees") from and against any and
all claims, demands, damages, losses, liabilities, costs and expenses
(including but not limited to reasonable attorneys' fees and expenses)
("Costs") incurred or suffered by any WISC and TWC Indemnitees to the
extent that such Costs arise out of claims, actions or proceeding
brought as a result of the negligent or willful misconduct of any
member of the WCG Group regarding this Agreement.
10.02 WISC, TWC and the TWC Affiliates shall jointly and severally, and to
the fullest extent permitted by applicable law, defend, indemnify and
hold harmless any member of the WCG Group and their respective
successors and assigns authorized hereunder and any of their respective
officers, directors, employees, agents and representatives
(collectively the "WCG Group Indemnitees") from and against any and all
claims, demands, damages, losses, liabilities, costs and expenses
(including but not limited to reasonable attorneys' fees and expenses)
("Costs") incurred or suffered by any WCG Group Indemnitee to the
extent that such Costs arise out of claims, actions or proceeding
brought as a result of the negligent or willful misconduct of any
member of WISC, TWC or the TWC Affiliates regarding this Agreement.
ARTICLE 11
DISPUTE RESOLUTION
11.01 Negotiations. Except as otherwise provided herein, WISC, TWC and each
member of the WCG Group shall attempt in good faith to resolve any
dispute arising out of or relating to this Agreement (a "Dispute") by
negotiations between senior executives of the ultimate parent
corporation of such Parties. Such negotiations may be commenced by any
such Party by written notice to the other Party (the "Negotiation
Request"). In the event that such Dispute has not been resolved by such
negotiations within thirty (30) days of the delivery of the Negotiation
Request, and one Party hereto requests non-binding mediation by written
notice to the other Party given prior to the end of such 30-day period,
such member of WISC and/or TWC and such member of the WCG Group shall
attempt in good faith to resolve such Dispute by non-binding mediation
before a mediator mutually agreeable to such member of WISC and/or TWC
and such member of the WCG Group. Neither Party shall be required to
continue with such negotiations or with such non-binding mediation for
more than ninety (90) days after the delivery of the Negotiation
Request. All such negotiations and mediation proceedings shall be
confidential, and shall be treated as compromise and settlement
negotiations for all evidentiary purposes, including but not limited to
for purposes of the Federal Rules of Evidence and any state rules of
evidence.
11.02 Other Remedies. Except as otherwise provided herein, the Parties hereto
shall not initiate litigation with respect to the Dispute unless the
Dispute has not been resolved within ninety (90) days of the delivery
of the Negotiation Request, and shall not initiate litigation with
respect to such Dispute except upon five (5) days' prior written notice
to the other Party; provided that (i) if one such Party has delivered a
Negotiation Request or has so requested non-binding mediation and the
other such Party has not responded to any such request within ten (10)
days of its receipt or is failing to participate in good faith in the
procedures specified In Section 11.01, the requesting Party may
initiate litigation prior to the expiration of such
<PAGE> 6
ninety-day (90-day) period and without giving the five (5) day notice,
and (ii) either such Party may at any time with or without notice file
a complaint or seek an injunction or provisional judicial relief, if in
such Party's sole judgment such action is necessary to avoid
irreparable damage or to preserve the status quo (including but not
limited to statute of limitations reasons or to preserve any defense
based upon the passage of time). Despite such action, such member of
WISC and/or TWC and such member of the WCG Group will continue to
participate in the procedures specified in this Article 11 for so long
and to the extent so specified.
ARTICLE 12
NOTICES
All notices, consents, requests, demands, and other communications required or
permitted under this Agreement shall be in writing and shall be deemed to have
been duly given (a) on the date received when delivered in person, (b) on the
first day after being sent if sent by a generally recognized overnight delivery
company, or (c) on the third day after being mailed by registered or certified
mail, return receipt requested, with postage prepaid to the addresses set forth
below the signature blocks of this Agreement (or to such additional or other
persons, at such other address or addresses as may be designated by notice of
the appropriate Party).
ARTICLE 13
TERMINATION
13.01 In the event that, at any time, TWC or a TWC Affiliate no longer
controls the WCG Group this Agreement shall terminate 90 days from the
date control was lost. For the purposes of this provision the term
"control" means ownership of 50% or more of the issued and outstanding
shares of the WCG Group stock.
13.02 In the event of termination of this Agreement, for whatever reason,
either Party's right to utilize and/or possess Marks, Software,
Inventions, or any other intellectual property of another Party
licensed under this Agreement shall cease. Within fifteen (15) days
after any termination of this Agreement, each Party shall (i) return to
the appropriate Party or destroy the original and all copies, in any
form, of all Software and Inventions, or parts thereof, for which it
has received a license hereunder; and (ii) provide a certified
affidavit executed by an officer of the Party to the effect that this
has been done.
ARTICLE 14
GENERAL PROVISIONS
14.01 No modification or amendment to this Agreement or any Exhibit to this
Agreement, nor any waiver of any provision contained in this Agreement,
shall be valid or binding unless reduced to writing and executed by an
authorized representative of the Party against whom enforcement of the
same is sought.
14.02 The Article headings used herein are for reference purposes only and
shall not in any way control the meaning or interpretation of this
Agreement.
14.03 This Agreement shall be construed in accordance with the laws of the
State of Oklahoma without giving effect to its internal conflicts of
law principles.
14.04 If any term of this Agreement is determined to be invalid or
unenforceable, such term shall be deemed to
<PAGE> 7
be deleted from this Agreement and, if reasonable to do so, the Parties
shall negotiate in good faith a replacement therefore, and the
remainder of this Agreement shall remain in full force and effect.
14.05 This Agreement, constitute(s) the entire understanding and agreement
among the Parties hereto regarding the subject matter hereof and
supersedes any prior or contemporaneous agreement or understanding
between the Parties regarding same.
14.06 Each person signing this Agreement on behalf of one of the Parties has
full authority to do so.
14.07 Each Party shall be deemed independent contractors with respect to each
other, and nothing herein shall create any association, partnership,
joint venture or agency relationship between any of them.
14.08 This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original and all of which taken together shall
constitute one and the same instrument.
WILLIAMS INFORMATION SERVICES CORPORATION
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Notice Address:
Williams Informational Services Corporation
One Williams Center
P.O. Box 2400
Tulsa, Oklahoma 74172
Attn: Senior Vice President
WILLIAMS COMMUNICATION GROUP, INC.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Notice Address:
Vice President, Applications-Network
Williams Communications Group, Inc.
One Williams Center
Tulsa, OK 74172
<PAGE> 8
THE WILLIAMS COMPANIES, INC.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Notice Address:
<PAGE> 1
EXHIBIT 10.48
DISCUSSION DRAFT 4-5-99
TECHNICAL, MANAGEMENT AND ADMINISTRATIVE SERVICES AGREEMENT
THIS TECHNICAL, MANAGEMENT AND ADMINISTRATIVE SERVICES AGREEMENT (the
"Agreement") is made and effective as of ______________, 1999 between WILLIAMS
INTERNATIONAL COMPANY, a corporation organized under the laws of Delaware
("WIC") and _______________, a corporation organized under the laws of
________________ (" ").
WHEREAS, WIC or an affiliate of WIC was the owner of interests in the
projects and project agreements described in Exhibit "A" attached hereto and
made a part hereof ("Projects"); and
WHEREAS, at the direction of Boards of Directors or other Managing
Boards or Committees having authority, WIC assigned to ______________ Company
its rights and obligations in, to and under the Projects and Project Agreements
described in Exhibit A by means of a(n) Assignment Agreement ["Assignment
Agreement"]; and
WHEREAS, prior to the execution of the Assignment Agreement, WIC
provided certain technical, management, administrative, and other services
("Services") with respect to the Projects as described in the Project
Agreements; and
WHEREAS, _______________ desires that WIC from and after the date
hereof continue to provide such Services with respect to the Projects and WIC
desires to do so.
NOW, THEREFORE, in consideration of the promises and respective
representations, warranties, covenants, and agreements herein contained, the
parties hereby agree as follows:
1. EXTENT OF SERVICES. _______________ hereby requests, and WIC hereby
agrees, that various employees of WIC shall from time to time provide, to and
for the benefit of ___________________ the following services: (i) advising and
making recommendations to __________________ regarding the design, engineering
and management of the Projects, (ii) assistance to and coordination and
oversight of consultants, contractors, subcontractors, agents and employees of
__________________ and (iii) such other technical, management, administrative
and oversight services with respect to the Projects as are required by the
Project Agreements and as the parties may from time to time agree.
2. COMPENSATION. As consideration for the Services, Project Company
shall compensate WIC monthly for all costs and expenses incurred by WIC in
performing the Services, which compensation shall in no event include a profit
margin.
<PAGE> 2
3. INVOICING. WIC shall invoice ________________ for all charges
hereunder on or before the 15th of each month for Services performed in the
preceding month. Payment shall be due within 15 days of receipt of WIC's
invoice.
4. QUALITY. WIC, in performing the Services hereunder, shall use all
commercially reasonable efforts to assure that such Services are provided with
no less than that degree of quality and care as WIC applies in its own affairs.
5. CONFIDENTIALITY. WIC undertakes on behalf of itself and its
affiliates that it shall keep confidential and shall not, without prior written
consent of the party to whom the information relates, disclose to any person
other than its respective employees requiring such information for purposes of
the performance of this Agreement, any confidential, proprietary or trade
secret information obtained in connection with or as a result of the
performance of this Agreement. In performing its obligations under this Section
5, WIC shall apply such standards of confidentiality as it applies generally in
relation to its own confidential information. WIC shall use all reasonable
efforts to ensure that its employees and agents and those of its affiliates
observe such confidentiality.
6. INTELLECTUAL PROPERTY RIGHTS. Unless otherwise specifically
described in writing, any intellectual property acquired by ______________
through the Services shall be used by _________________ for purposes of
providing ________________ Services. Furthermore, _________________ shall use
its best efforts to protect any of WIC's intellectual property provided or
licensed to ___________________ pursuant to this Agreement.
7. RECORDS. WIC shall maintain at its principal offices such records
and accounts supporting the costs and expenses incurred in performing the
Services as are consistent with recognized business practice, which records and
accounts shall be available for inspection by representatives of ______________
and its auditors at all reasonable times upon reasonable notice.
8. INDEPENDENT CONTRACTOR. WIC is and shall remain an independent
contractor in its performance of this Agreement. Neither party to this
Agreement, nor any person engaged in any work or services at the request of
such party, shall be deemed a partner, employee, or agent of the other party.
Neither party to this Agreement shall have any right or authority, and shall
not attempt, to enter into any contract, commitment or agreement to incur any
debt or liability, of any nature, in the name of the other party.
9. WIC EMPLOYEES. The Services to be provided hereunder are provided
by WIC to, and at the request and for the benefit of, ___________________, and
the various employees of WIC engaged from time to time in performing the
Services shall under no circumstances be, or be deemed to be, at any time
performing such Services as employees of _________________ or under the control
or supervision of _________________. WIC shall have full and exclusive
liability for the payment of such employees'
2
<PAGE> 3
compensation and for the payment of all taxes, termination, retirement, or
other benefits, pensions, and other obligations or liabilities of any nature
now or hereafter imposed upon employers by the U.S. government in respect of
such employees, and WIC shall make such payments and shall make and file all
reports and returns and do all other things necessary to comply with the law
imposing such taxes, contributions, withholdings or other payments.
10. FORCE MAJEURE. Except for the payment of money when due, should
WIC be unable, in whole or in part, to perform its obligation under this
Agreement by reason of force majeure, WIC shall be excused from performance to
the extent it is affected by such force majeure. If WIC is affected by force
majeure, WIC shall use its best efforts to remedy the impediment to its
performance. The term "force majeure" shall mean any cause which is not within
the control of WIC or which by the exercise of due diligence, WIC is unable to
prevent or overcome.
11. ARBITRATION. In case a dispute arises from the interpretation or
performance of this Agreement, the parties shall use their best efforts in
order to resolve such dispute in an amicable manner. If, such efforts are not
sufficient, any disputes arising out of or relating to this Agreement shall be
resolved exclusively and finally by Arbitration. The Arbitration shall be
conducted and heard by three (3) arbitrators in accordance with the Rules of
the American Arbitration Association with the laws of the State of Oklahoma
applied as the substantive law governing the Agreement. Any decision or award
of the arbitral tribunal shall be final and binding upon the parties. Judgment
for execution of any award rendered by the arbitral tribunal may be entered by
any court of competent jurisdiction. To the extent permitted by applicable Law,
any rights to appeal from or to cause a review of any such award by any court
or tribunal are hereby waived by the parties.
12. INDEMNIFICATION. WIC shall indemnify and hold harmless
________________, its parent, subsidiary, and affiliated companies and the
directors, officers, shareholders, employees and agents thereof from and
against liability, loss and expense, including attorneys' fees and costs,
arising from injury or death to persons or damage to property or violations of
any laws or regulations related to performance of the Services, except to the
extent such loss, injury, death or damage or violations of any laws or
regulations related to the performance of the Services is attributable to the
gross negligence or acts and omissions of ____________________ in the
performance of such Services.
13. INSURANCE. WIC shall carry, at the expense of _________________,
the following insurance:
(a) Workers' Compensation insurance
(b) Comprehensive General Liability insurance
(c) Comprehensive Automobile Liability insurance
(d) Excess or Umbrella Liability coverage
3
<PAGE> 4
14. TERM AND TERMINATION. This Agreement shall become effective as of
the date hereof and shall continue in effect until terminated by the agreement
of the parties or by notice in writing by either party to the other party;
provided, however should ______________ give notice to terminate within five
(5) years from the date of this Agreement, _______________ shall pay a
termination fee equal to five million dollars ($5,000,000) to WIC.
15. MISCELLANEOUS.
15.1. NOTICES.
(a) All notices, requests and other communications under this
Agreement shall be in writing and delivered in person, sent by certified or
registered mail, postage prepaid, or sent by facsimile or express courier to
the respective addresses set forth below or such other address as either party
may notify the other party in writing.
IF TO WIC:
ADDRESS:
ATTN:
FACSIMILE:
IF TO:
ADDRESS:
ATTN:
FACSIMILE:
15.2. ENTIRE AGREEMENT; AMENDMENT. This Agreement contains the entire
agreement between the parties with respect to the services contemplated hereby,
and supersedes all written or oral negotiations, representations, warranties,
commitments, offers and other understandings prior to the date hereof. This
Agreement may be amended or varied only by a written instrument executed by the
parties hereto.
4
<PAGE> 5
15.3. SEVERABILITY. If any provision hereof shall be held invalid or
unenforceable by any court of competent jurisdiction or as a result of future
legislative action, such holding or action shall be strictly construed and
shall not affect the validity or effect of any other provision hereof.
15.4. ASSIGNABILITY. This Agreement shall be binding upon and inure to
the benefit of the successors and permitted assigns of the parties hereto;
provided, however, that except as otherwise provided herein, neither this
Agreement nor any right or obligation hereunder shall be assignable by either
party without the prior written consent of the other party.
15.5. CAPTIONS. The captions of the various Articles and Sections of
this Agreement have been inserted only for convenience of reference, and shall
not be deemed to modify, explain, enlarge or restrict any provision of this
Agreement or affect the construction hereof.
15.6. REMEDIES CUMULATIVE. Except as otherwise expressly limited
herein, the rights, powers and remedies given to any party by this Agreement
shall be in addition to all rights, powers and remedies given to that party by
any statute or rule of law. Any forbearance or failure or delay in exercising
any right, power or remedy hereunder shall not be deemed to be a waiver of such
right, power or remedy, and any single or partial exercise of any right power
or remedy shall not preclude the further exercise thereof or be deemed to be a
waiver of any other right, power or remedy.
15.7 CONSEQUENTIAL DAMAGES. In no event shall WIC be liable to _______
whether by way of indemnity or in contract or in tort (including negligence) for
any indirect, special, or consequential loss or damages or loss of profit, loss
of use, loss of production or loss of contract or for any financial or economic
loss whatever and howsoever caused.
15.8. GOVERNING LAW. The validity, interpretation and effect of this
Agreement shall be governed exclusively by the laws of Oklahoma, without giving
effect to the conflict of law provisions thereof. The parties shall comply with
all applicable laws and regulations, including, but not limited to, the Foreign
Corrupt Practices Act.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
WILLIAMS INTERNATIONAL COMPANY [ ]
By: By:
------------------------------- --------------------------------
Its: Its:
------------------------------ -------------------------------
5
<PAGE> 1
EXHIBIT 10.49
THE WILLIAMS COMPANIES, INC.
1996 STOCK PLAN
SECTION 1
PURPOSES
1.01 The purposes of The Williams Companies, Inc. 1996 Stock Plan (the
"Plan"), are to enable The Williams Companies, Inc. (together with any successor
thereto, the "Company") and its subsidiaries to attract and retain key
employees, reward such employees for superior performance and encourage such
employees to increase their proprietary interest in the Company in order to
provide them with additional motivation to continue in the Company's employ and
to further its profitable growth.
SECTION 2
DEFINITIONS; CONSTRUCTION
2.01 Definitions. In addition to the terms defined elsewhere in the Plan,
the following terms as used in the Plan shall have the following meanings when
used with initial capital letters:
2.01.1 "Affiliate" means any entity other than the Company in which
the Company owns, directly or indirectly, at least 20 percent of the
combined voting power of all classes of stock of such entity or at least 20
percent of the ownership interests in such entity.
2.01.2 "Award" means any Option, Stock Appreciation Right, Restricted
Stock, Deferred Stock, Performance Award, Dividend Equivalent or Other
Stock-Based Award, or any other right or interest relating to Shares or
cash granted under the Plan.
2.01.3 "Award Agreement" means any written agreement, contract, notice
to a Participant or other instrument or document evidencing an Award.
2.01.4 "Board" means the Company's Board of Directors.
2.01.5 "Code" means the Internal Revenue Code of 1986, as amended from
time to time. References to any provision of the Code include regulations
hereunder and successor provisions and regulations thereto.
2.01.6 "Committee" means the Compensation Committee or such other
Committee of the Board as may be designated by the Board to administer the
Plan, as referred to in Section 3.01 hereof; provided, however, that the
Committee will consist of not less than two directors, each of whom shall
be a "disinterested person" within the meaning of Rule 16b-3 if then
required in order that grants will be exempt under that Rule.
2.01.7 "Deferred Stock" means a right, granted under Section 6.05
hereof, to receive Shares at the end of a specified deferral period.
2.01.8 "Disability" means disability as determined under procedures
established by the Committee for purposes of the Plan.
2.01.9 "Dividend Equivalent" means a right, granted under Section 6.07
hereof, to receive payments equal to dividends paid on a specified number
of Shares.
2.01.10 "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time. References to any provision of the Exchange Act
include rules thereunder and successor provisions and rules thereto.
2.01.11 "Fair Market Value" of a Share means, as of any given date,
the closing sales price of a Share reported in the table entitled "New York
Stock Exchange Composite Transactions" contained in
A-1
<PAGE> 2
The Wall Street Journal (or an equivalent successor table) for such date
or, if no such closing sales price was reported for such date, for the most
recent trading day prior to such date for which a closing sales price was
reported.
2.01.12 "Incentive Stock Option" means an Option that is intended to
meet the requirements of Section 422 of the Code.
2.01.13 "Non-Qualified Stock Option" means an Option that is not
intended to be an Incentive Stock Option.
2.01.14 "Option" means a right, granted under Section 6.02 hereof, to
purchase Shares or other Awards at a specified price during specified time
periods. An Option may be either an Incentive Stock Option or a
Non-Qualified Stock Option.
2.01.15 "Other Stock-Based Awards" means a right, granted under
Section 6.08 hereof, that relates to or is valued by reference to Shares or
other Awards relating to Shares.
2.01.16 "Participant" means an officer of the Company or any employee
of the Company or an Affiliate granted an Award which remains outstanding
under the Plan.
2.01.17 "Performance Award" means a right to receive Awards based upon
performance criteria specified by the Committee.
2.01.18 "Person" has the meaning assigned in the Exchange Act.
2.01.19 "Restricted Stock" means Shares, granted under Section 6.04
hereof, that are subject to certain restrictions and to a risk of
forfeiture.
2.01.20 "Rule 16b-3" means Rule 16b-3, as amended from time to time,
or any successor to such Rule promulgated by the Securities and Exchange
Commission under Section 16 of the Exchange Act.
2.01.21 "Shares" means shares of the Common Stock of the Company,
$1.00 par value, and such other securities of the Company as may be
substituted or resubstituted for Shares pursuant to Section 8.01 hereof.
2.01.22 "Stock Appreciation Right" means a right, granted under
Section 6.03 hereof, to be paid an amount measured by the appreciation in
the Fair Market Value of Shares from the date of grant of the Award, except
as provided in Section 7.01, to the date of exercise of the Award, except
as provided in Section 6.03, with payment to be made in cash, Shares or
other Awards as specified in the Award.
Definitions of the terms "Change of Control," "Potential Change of
Control," "Change of Control Price," "Related Party" and "Voting Securities" are
set forth in Section 9.03 hereof.
2.02 Construction. For purposes of the Plan, the following rules of
construction will apply:
2.02.1 The word "or" is disjunctive but not necessarily exclusive.
2.02.2 Words in the singular include the plural; words in the plural
include the singular; and words in the neuter gender include the masculine
and feminine genders and words in the masculine or feminine gender include
the other and neuter genders.
SECTION 3
ADMINISTRATION
3.01 The Plan shall be administered by the Committee. The Committee shall
have full and final authority to take the following actions, in each case
subject to and consistent with the provisions of the Plan:
(i) to designate Participants;
(ii) to determine the type or types of Awards to be granted to each
Participant;
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(iii) to determine the number of Awards to be granted, the number of
Shares or amount of cash or other property to which an Award will relate,
the terms and conditions of any Award (including, but not limited to, any
exercise price, grant price or purchase price, any limitation or
restriction, any schedule for or performance conditions relating to the
lapse of limitations, forfeiture restrictions or restrictions on
exercisability or transferability, and accelerations or waivers thereof,
based in each case on such considerations as the Committee shall
determine), and all other matters to be determined in connection with an
Award;
(iv) to determine whether, to what extent and under what circumstances
an Award may be settled in, or the exercise price of an Award may be paid
in, cash, Shares, other Awards or other property, or an Award may be
accelerated, vested, canceled, forfeited or surrendered;
(v) to determine whether, to what extent and under what circumstances
cash, Shares, other Awards, other property and other amounts payable with
respect to an Award will be deferred either automatically, at the election
of the Committee or at the election of the Participant;
(vi) to prescribe the form of each Award Agreement, which need not be
identical for each Participant;
(vii) to adopt, amend, suspend, waive and rescind such rules and
regulations and appoint such agents as the Committee may deem necessary or
advisable to administer the Plan;
(viii) to correct any defect or supply any omission or reconcile any
inconsistency, and to construe and interpret the Plan, the rules and
regulations, any Award Agreement or any other instrument entered into, or
relating, to an Award under the Plan; and
(ix) to make all other decisions and determinations as may be required
under the terms of the Plan or as the Committee may deem necessary or
advisable for the administration of the Plan.
Any action of the Committee with respect to the Plan shall be final,
conclusive and binding on all Persons, including the Company, Affiliates,
Participants, any Person claiming any rights under the Plan from or through any
Participant and stockholders, except to the extent the Committee may
subsequently modify, or take further action not consistent with, its prior
action. If not specified in the Plan, the time at which the Committee must or
may make any determination shall be determined by the Committee, and any such
determination may thereafter be modified by the Committee (subject to Section
10.01). The express grant of any specific power to the Committee, and the taking
of any action by the Committee, shall not be construed as limiting any power or
authority of the Committee. The Committee may delegate to officers or managers
of the Company or of any Affiliate the authority, subject to such terms as the
Committee shall determine, to perform specified functions under the Plan;
provided, however, that any function relating to a Participant then subject to
Section 16 of the Exchange Act shall be performed solely by the Committee if
necessary to ensure compliance with applicable requirements of Rule 16b-3 or
Rule 16a-1(c)(3). Each member of the Committee or Person acting on behalf of the
Committee shall be entitled to, in good faith, rely or act upon any report or
other information furnished to him by any officer, manager or other employee of
the Company or any Affiliate, the Company's independent certified public
accountants or any executive compensation consultant or other professional
retained by the Company to assist in the administration of the Plan. Any and all
powers, authorizations and discretions granted by the Plan to the Committee
shall likewise be exercisable at any time by the Board, except to the extent
such exercise relating to a Participant then subject to Section 16 of the
Exchange Act would fail to comply with applicable requirements of Rule 16b3 or
Rule 16a-1(c)(3).
SECTION 4
SHARES SUBJECT TO THE PLAN
4.01 Shares Reserved and Available. Subject to adjustment as provided in
Section 8.01 hereof, the total number of Shares reserved and available for
distribution under the Plan shall be two million (2,000,000) Shares; provided,
however, that such number shall be increased by the number of Shares currently
available under The Williams Companies, Inc. 1990 Stock Plan and not covered by
Awards granted thereunder or
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otherwise are not issued or issuable out of the Shares reserved thereunder;
provided further, that the number of Shares issued as Awards other than Options
and Stock Appreciation Rights shall not exceed twenty-five percent (25%) of the
total number of Shares issuable under the Plan.
For purposes of this Section 4.01, the number of Shares to which an Award
relates shall be counted against the number of Shares reserved and available
under the Plan at the time of grant of the Award, unless such number of Shares
cannot be determined at that time, in which case the number of Shares actually
distributed pursuant to the Award shall be counted against the number of Shares
reserved and available under the Plan at the time of distribution; provided,
however, that Awards related to or retroactively added to, or granted in tandem
with, substituted for or converted into, other Awards shall be counted or not
counted against the number of Shares reserved and available under the Plan in
accordance with procedures adopted by the Committee so as to ensure appropriate
counting but avoid double counting; and, provided further, that the number of
Shares deemed to be issued under the Plan upon exercise or settlement of any
Award shall be reduced by the number of Shares surrendered by the Participant or
withheld by the Company in payment of the exercise or purchase price of the
Award and withholding taxes relating to the Award.
If any Shares to which an Award relates are forfeited, or payment is made
to the Participant in the form of cash, cash equivalents or other property other
than Shares, or the Award otherwise terminates without payment being made to the
Participant in the form of Shares, any Shares counted against the number of
Shares reserved and available under the Plan with respect to such Award shall,
to the extent of any such forfeiture, alternative payment or termination, again
be available for Awards under the Plan. Any Shares distributed pursuant to an
Award may consist, in whole or in part, of authorized and unissued Shares or of
treasury Shares, including Shares repurchased by the Company for purposes of the
Plan.
4.02 Annual Individual Limitations. During any calendar year, no
Participant may be granted Awards under the Plan with respect to more than one
hundred fifty thousand (150,000) Shares, subject to adjustment as provided in
Section 8.01. For purposes of this Section 4.02, unless more restrictive
counting is required in order for Awards to comply with the requirements of Code
Section 162(m), this provision will limit the maximum number of Shares that
potentially can be issued to a Participant under Awards (taking into
consideration the terms of the Awards, including tandem exercise or settlement
provisions).
SECTION 5
ELIGIBILITY
5.01 Awards may be granted only to officers of the Company or to employees
of the Company or any Affiliate (including employees who also are directors or
officers) who are, or are believed by the Committee likely to be, subject to
Section 16 of the Exchange Act with respect to the Company (including employees
who also are directors or officers) of the Company or any Affiliate; provided,
however, that no Award shall be granted to any member of the Committee.
SECTION 6
SPECIFIC TERMS OF AWARDS
6.01 General. Awards may be granted on the terms and conditions set forth
in this Section 6. In addition, the Committee may impose on any Award or the
exercise or settlement thereof, at the date of grant or thereafter (subject to
the terms of Section 10.01), such additional terms and conditions, not
inconsistent with the provisions of the Plan, as the Committee shall determine,
including terms requiring forfeiture of Awards in the event of termination of
employment by the Participant. Except as may be required under the Delaware
General Corporation Law or as provided in Section 6.09 or 7.01, Awards shall be
granted for no consideration other than prior and future services.
6.02 Options. The Committee is authorized to grant Options on the following
terms and conditions:
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(i) Exercise Price. The exercise price per Share purchasable under an
Option shall be determined by the Committee; provided, however, that,
except as provided in Section 7.01, such exercise price shall not be
less than the Fair Market Value of a Share on the date of grant of
such Option and in no event shall be less than the par value of a
Share.
(ii) Option Term. Subject to the terms of the Plan and any applicable
Award Agreement, the term of each Option shall be determined by the
Committee.
(iii) Methods of Exercise. Subject to the terms of the Plan, the Committee
shall determine the time or times at which an Option may be exercised
in whole or in part, the methods by which such exercise price may be
paid or deemed to be paid, and the form of such payment, including,
without limitation, cash, Shares, other outstanding Awards or other
property (including notes or other contractual obligations of
Participants to make payment on a deferred basis, to the extent
permitted by law).
(iv) Incentive Stock Options. The terms of any Incentive Stock Option
granted under the Plan shall comply in all material respects with the
provisions of Section 422 of the Code or any successor provision
thereto.
6.03 Stock Appreciation Rights. The Committee is authorized to grant Stock
Appreciation Rights on the following terms and conditions:
(i) Right to Payment. Subject to the terms of the Plan and any applicable
Award Agreement, a Stock Appreciation Right shall confer on the
Participant to whom it is granted a right to receive, upon exercise
thereof, the excess of (i) the Fair Market Value of a Share on the
date of exercise or, if the Committee shall so determine in the case
of any such right other than one related to any Incentive Stock
Option, and so specify in the Award Agreement, at any time during a
specified period before or after the date of exercise, over (ii) the
grant price of the Stock Appreciation Right as determined by the
Committee as of the date of grant of the Stock Appreciation Right,
which, except as provided in Section 7.01, shall not be less than the
Fair Market Value of a Share on the date of grant.
(ii) Other Terms. Subject to the terms of the Plan and any applicable
Award Agreement, the Committee shall determine the term, methods of
exercise, methods of settlement and any other terms and conditions of
any Stock Appreciation Right.
6.04 Restricted Stock. The Committee is authorized to grant Restricted
Stock on the following terms and conditions:
(i) Issuance and Restrictions. Restricted Stock shall be subject to such
restrictions on transferability and other restrictions as the
Committee may impose (including, without limitation, limitations on
the right to vote a Share of Restricted Stock or the right to receive
dividends thereon), which restrictions may lapse separately or in
combination at such times, in such installments or otherwise, as the
Committee shall determine; provided, however, that Restricted Stock
shall be subject to a restriction on transferability and a risk of
forfeiture for a period of not less than one year after the date of
grant if the grant was conditioned upon achievement of one or more
performance objectives and three years after the date of grant in
other cases, except that such restrictions may lapse, if so
determined by the Committee, in the event of the Participant's
termination of employment due to death, disability, normal or
approved early retirement, or involuntary termination by the
Company or an Affiliate without "cause."
(ii) Forfeiture. Except as otherwise determined by the Committee, upon
termination of employment (as determined under criteria established
by the Committee) during the applicable restriction period,
Restricted Stock that is at that time subject to a risk of forfeiture
shall be forfeited and reacquired by the Company; provided, however,
that the Committee may provide, by rule or regulation or in any Award
Agreement, that restrictions on Restricted Stock will be waived in
whole or in part in the
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event of terminations resulting from specified causes, and the
Committee may in other cases waive in whole or in part restrictions
on Restricted Stock, except as provided in Section 6.04(i).
(iii) Certificates for Shares. Restricted Stock granted under the Plan may
be evidenced in such manner as the Committee shall determine,
including, without limitation, issuance of certificates representing
Shares. Certificates representing Shares of Restricted Stock shall be
registered in the name of the Participant and may bear an appropriate
legend referring to the terms, conditions and restrictions applicable
to such Restricted Stock.
6.05 Deferred Stock. The Committee is authorized to grant Deferred Stock
on the following terms and conditions:
(i) Issuance and Limitations. Delivery of Shares will occur upon
expiration of the deferral period specified for the Award of Deferred
Stock by the Committee. In addition, an Award of Deferred Stock shall
be subject to such limitations as the Committee may impose, which
limitations may lapse at the expiration of the deferral period or at
other specified times, separately or in combination, in installments
or otherwise, as the Committee shall determine at the time of grant
or thereafter. A Participant awarded Deferred Stock will have no
voting rights and will have no rights to receive dividends in
respect of Deferred Stock, unless and only to the extent that the
Committee shall award Dividend Equivalents in respect of such
Deferred Stock.
(ii) Forfeiture. Except as otherwise determined by the Committee, upon
termination of employment (as determined under criteria established
by the Committee) during the applicable deferral period, Deferred
Stock that is at that time subject to deferral (other than a deferral
at the election of the Participant) shall be forfeited; provided,
however, that the Committee may provide, by rule or regulation or in
any Award Agreement, that forfeiture of Deferred Stock will be waived
in whole or in part in the event of terminations resulting from
specified causes, and the Committee may in other cases waive in whole
or in part the forfeiture of Deferred Stock.
6.07 Dividend Equivalents. The Committee is authorized to grant Awards of
Dividend Equivalents. Dividend Equivalents shall confer upon the Participant
rights to receive payments equal to interest or dividends, when and if paid,
with respect to a number of Shares determined by the Committee. The Committee
may provide that Dividend Equivalents shall be paid or distributed when accrued
or shall be deemed to have been reinvested in additional Shares or additional
Awards or otherwise reinvested.
6.08 Other Stock-Based Awards. The Committee is authorized, subject to
limitations under applicable law, to grant such other Awards that are
denominated or payable in, valued in whole or in part by reference to, or
otherwise based on, or related to, Shares, as deemed by the Committee to be
consistent with the purposes of the Plan including, without limitation, Shares
awarded which are not subject to any restrictions or conditions, convertible or
exchangeable debt securities or other rights convertible or exchangeable into
Shares, Awards valued by reference to the value of securities of or the
performance of specified Affiliates, and Awards payable in securities of
Affiliates. Subject to the terms of the Plan, the Committee shall determine the
terms and conditions of such Awards. Except as provided in Section 6.09 or 7.01,
Shares delivered pursuant to a purchase right granted under this Section 6.08
shall be purchased for such consideration, paid for by such methods and in such
forms, including, without limitation, cash, Shares, outstanding Awards or other
property, as the Committee shall determine, the value of which consideration
shall not be less per share than the Fair Market Value of a Share on the date of
grant of such purchase right and in no event shall be less per share than the
par value of a Share.
6.09 Exchange Provisions. The Committee may at any time offer to exchange
or buy out any previously granted Award for a payment in cash, Shares or another
Award, based on such terms and conditions as the Committee shall determine and
communicate to the Participant at the time that such offer is made.
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SECTION 7
GENERAL TERMS OF AWARDS
7.01 Stand-Alone, Tandem and Substitute Awards. Awards granted under the
Plan may, in the discretion of the Committee, be granted either alone or in
addition to, in tandem with, or in substitution for, any other Award granted
under the Plan or any award granted under the 1990 Stock Plan or any other plan
of the Company or any Affiliate (subject to the terms of Sections 10.01 and
11.09). If an Award is granted in substitution for another Award or award, the
Committee shall require the surrender of such other Award or award in
consideration for the grant of the new Award. Awards granted in addition to or
in tandem with other Awards or awards may be granted either at the same time as
or at a different time from the grant of such other Awards or awards. The
exercise price of any Option, the grant price of any Stock Appreciation Right or
the purchase price of any other Award conferring a right to purchase Shares:
(i) granted in substitution for an outstanding Award or award shall
either be not less than the Fair Market Value of Shares at the date
such substitute Award is granted or not less than such Fair Market
Value at that date reduced to reflect the Fair Market Value of the
Award or award required to be surrendered by the Participant as a
condition to receipt of a substitute Award; or
(ii) retroactively granted in tandem with an outstanding Award or award
shall be either not less than the Fair Market Value of Shares at the
date of grant of the later Award or the Fair Market Value of Shares
at the date of grant of the earlier Award or award.
7.02 Compliance with Rule 16b-3.
7.02.1 Six-Month Holding Period. Unless a Participant could otherwise
dispose of or exercise a derivative security or dispose of Shares issued
under the Plan without incurring liability under Section 16(b) of the
Exchange Act, (i) at least six months shall elapse from the date of
acquisition of a derivative security under the Plan to the date of
disposition of the derivative security (other than upon exercise or
conversion) or its underlying equity security, and (ii) Shares granted or
awarded under the Plan other than upon exercise or conversion of a
derivative security, shall be held for at least six months from the date of
grant or Award.
7.02.2 Reformation To Comply with Exchange Act Rules. It is the intent
of the Company that this Plan comply in all respects with applicable
provisions of Rule 16b-3 or Rule 16a-1(c)(3) under the Exchange Act in
connection with any grant of Awards to or other transaction by a
Participant who is subject to Section 16 of the Exchange Act (except for
transactions exempted under alternative Exchange Act rules such
Participant). Accordingly, if any provision of this Plan or any Award
Agreement relating to a given Award does not comply with the requirements
of Rule 16b-3 or Rule 16a-1(c)(3) as then applicable to any such
transaction, such provision will be construed or deemed amended to the
extent necessary to conform to the then-applicable requirements of Rule
16b-3 or Rule 16a-1(c)(3) to the extent necessary so that such Participant
shall avoid liability under Section 16(b). In addition, the exercise price
of any Award carrying a right to exercise granted to a Participant subject
to Section 16 of the Exchange Act shall be not less than 50% of the Fair
Market Value of Stock as of the date such Award is granted if such pricing
limitation is required under Rule 16b-3 at the time of such grant.
7.03 Term of Awards. The term of each Award shall be for such period
as may be determined by the Committee; provided, however, that in no event
shall the term of any Incentive Stock Option or a Stock Appreciation Right
granted in tandem therewith exceed a period of ten years from the date of its
grant.
7.04 Form of Payment of Awards. Subject to the terms of the Plan and any
applicable Award Agreement, payments or substitutions to be made by the Company
or an Affiliate upon the grant or exercise of an Award may be made in such forms
as the Committee shall determine, including, without limitation, cash, deferred
cash, Shares, other Awards or other property, and may be made in a single
payment or substitution, in installments or on a deferred basis, in each case in
accordance with rules and procedures established by the Committee. Such rules
and procedures may include, without limitation, provisions for the payment or
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crediting of reasonable interest on installment or deferred payments or the
grant or crediting of Dividend Equivalents in respect of installment or deferred
payments denominated in Shares.
7.05 Limitations on Transferability. Awards and other rights under the
Plan, including any Award or right which constitutes a derivative security as
generally defined in Rule 16a-1(c) under the Exchange Act, will not be
transferable by a Participant except by will or the laws of descent and
distribution (or, in the event of the Participant's death, to a designated
beneficiary), and, if exercisable, shall be exercisable during the lifetime of a
Participant only by such Participant or his guardian or legal representative;
provided, however, that such Awards and other rights (other than Incentive Stock
Options and Stock Appreciation Rights in tandem therewith) may be transferred to
one or more Persons during the lifetime of the Participant in connection with
the Participant's estate planning, and may be exercised by such transferees in
accordance with the terms of such Award, but only if and to the extent then
permitted under Rule 16b-3, consistent with the registration of the offer and
sale of Shares on Form S-8 or Form S-3 or such other registration form of the
Securities and Exchange Commission as may then be filed and effective with
respect to the Plan, and permitted by the Committee. Awards and other rights
under the Plan may not be pledged, mortgaged, hypothecated, or otherwise
encumbered to or in favor of any Person other than the Company or an Affiliate,
and shall not be subject to any lien, obligation or liability of a Participant
or transferee to any Person other than the Company or any Affiliate. If so
determined by the Committee, a Participant may, in the manner established by the
Committee, designate a beneficiary or beneficiaries to exercise the rights of
the Participant, and to receive any distribution with respect to any Award upon
the death of the Participant. A transferee, beneficiary, guardian, legal
representative or other Person claiming any rights under the Plan from or
through any Participant shall be subject to all the terms and conditions of the
Plan and any Award Agreement applicable to such Participant, except to the
extent the Plan and Award Agreement otherwise provide with respect to such
Persons, and to any additional restrictions or limitations deemed necessary or
appropriate by the Committee.
7.06 Registration and Listing Compliance. The Company shall not be
obligated to issue or deliver Shares in connection with any Award or take any
other action under the Plan in a transaction subject to the registration
requirements of the Securities Act of 1933, as amended, or any other federal or
state securities law, any requirement under any listing agreement between the
Company and any national securities exchange or automated quotation system, or
any other law, regulation, or contractual obligation of the Company, until the
Company is satisfied that such laws, regulations, and other obligations of the
Company have been complied with in full.
7.07 Share Certificates. All certificates for Shares delivered under the
terms of the Plan shall be subject to such stop-transfer orders and other
restrictions as the Committee may deem advisable under federal or state
securities laws, rules and regulations thereunder, and the rules of any national
securities exchange or automated quotation system on which Shares are listed or
quoted. The Committee may cause a legend or legends to be placed on any such
certificates to make appropriate reference to such restrictions or any other
restrictions or limitations that may be applicable to Shares. In addition,
during any period in which Awards or Shares are subject to restrictions or
limitations under the terms of the Plan or any Award Agreement, or during any
period during which delivery or receipt of an Award or Shares has been deferred
by the Committee or a Participant, the Committee may require any Participant to
enter into an agreement providing that certificates representing Shares issuable
or issued pursuant to an Award shall remain in the physical custody of the
Company or such other Person as the Committee may designate.
7.08 Performance-Based Awards. The Committee may, in its discretion,
designate any Award that is subject to the achievement of performance conditions
as a performance-based Award subject to this Section 7.08, in order to qualify
such Award as "qualified performance-based compensation" within the meaning of
Code Section 162(m). The performance objectives for an Award subject to this
Section 7.08 shall consist of one or more business criteria and a targeted level
or levels of performance with respect to such criteria, as specified by the
Committee but subject to this Section 7.08. Such performance objectives shall be
objective and shall otherwise meet the requirements of Section 162(m)(4)(C) of
the Code. Business criteria
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used by the Committee in establishing such performance objectives shall be
selected exclusively from among the following:
(1) Annual net income to common stock;
(2) Operating profit;
(3) Annual return on capital or equity;
(4) Annual earnings per share;
(5) Annual cash flow provided by operations;
(6) Changes in annual revenues; and/or
(7) Strategic business criteria, consisting of one or more objectives based
on meeting specified revenue, market penetration, geographic business
expansion goals, cost targets, and goals relating to acquisitions or
divestitures.
The levels of performance required with respect to such business criteria may be
expressed in absolute or relative levels. Achievement of performance objectives
with respect to such Awards shall be measured over a period of not less than one
year nor more than five years, as the Committee may specify. Performance
objectives may differ for such Awards to different Participants. The Committee
shall specify the weighting to be given to each performance objective for
purposes of determining the final amount payable with respect to any such Award.
The Committee may, in its discretion, reduce the amount of a payout otherwise to
be made in connection with an Award subject to this Section 7.08, but may not
exercise discretion to increase such amount, and the Committee may consider
other performance criteria in exercising such discretion. All determinations by
the Committee as to the achievement of performance objectives shall be in
writing. The Committee may not delegate any responsibility with respect to an
Award subject to this Section 7.08.
SECTION 8
ADJUSTMENT PROVISIONS
8.01 In the event that the Committee shall determine that any dividend or
other distribution (whether in the form of cash, Shares, other securities or
other property), recapitalization, forward or reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, exchange of Shares or other securities of the Company, or other
similar corporate transaction or event affects the Shares such that an
adjustment is determined by the Committee to be appropriate in order to prevent
dilution or enlargement of Participants' rights under the Plan, then the
Committee shall, in such manner as it may deem equitable, adjust any or all of:
(i) the number and kind of Shares which may thereafter be issued in connection
with Awards; (ii) the number and kind of Shares issued or issuable in respect of
outstanding Awards; (iii) the number and kind of Shares of outstanding
Restricted Stock or relating to any other outstanding Award in connection with
which Shares have been issued; (iv) the number of Shares with respect to which
Awards may be granted to a Participant in any calendar year, as set forth in
Section 4.02; and (v) the exercise price, grant price or purchase price relating
to any Award or, if deemed appropriate, make provision for a cash payment with
respect to any outstanding Award; provided, however, in each case, that with
respect to Incentive Stock Options, no such adjustment shall be authorized,
unless previously requested by the Participant, to the extent that such
authority would cause the Plan to violate Section 422(b)(1) of the Code or any
successor provision thereto. In addition, the Committee is authorized to make
adjustments in the terms and conditions of, and the criteria in, Awards in
recognition of unusual or nonrecurring events (including, without limitation,
events described in the preceding sentence) affecting the Company or any
Affiliate or the financial statements of the Company or any Affiliate, or in
response to changes in applicable laws, regulations or accounting principles.
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SECTION 9
CHANGE OF CONTROL PROVISIONS
9.01 Acceleration of Exercisability and Lapse of Restrictions. In the event
of a Change of Control, as defined in Section 9.03.1, the following acceleration
provisions shall apply:
(i) All outstanding Awards pursuant to which the Participant may have
rights the exercise of which is restricted or limited shall become
fully exercisable, except to the extent otherwise provided in Section
7.02.1; unless the right to lapse restrictions or limitations is
waived or deferred by a Participant prior to such lapse, all
restrictions or limitations (including risks of forfeiture) on
outstanding Awards subject to restrictions or limitations under the
Plan shall lapse; and all performance criteria and other conditions to
payment of Awards under which payments of cash, Shares or other
property are subject to conditions shall be deemed to be achieved or
fulfilled and shall be waived by the Company, except to the extent
otherwise provided in Section 7.02.1, and;
(ii) In the event that any Award is subject to limitations under Section
7.02.1 at the time of a Change of Control, then, solely for the
purpose of determining the rights of the Participant with respect to
such Award, a Change of Control will be deemed to occur at the close
of business on the first business day following the date on which the
limitations on such Award under Section 7.02.1 have expired.
9.02 Creation and Funding of Trust. Upon the earlier of a Potential Change
of Control as defined in Section 9.03.2, unless the Board or the Committee
adopts a resolution within ten business days following the date the Potential
Change of Control arises to the effect that such action is not necessary to
secure any payments hereunder, or a Change of Control as defined in Section
9.03.1, the Company will deposit with the trustee of a trust for the benefit of
Participants monies or other property having a Fair Market Value at least equal
to the net present value of cash, Shares and other property potentially payable
or distributable in connection with Awards outstanding at that date. The trust
shall be an irrevocable grantor trust which shall preserve the "unfunded" status
of Awards under the Plan, and shall contain other terms and conditions
substantially as specified for trusts authorized under the Company's employment
agreements with executives.
9.03 Definitions of Certain Terms. For purposes of this Section 9, the
following definitions, in addition to those set forth in Section 2.01, shall
apply:
9.03.1 "Change of Control" means and will be deemed to have occurred
if: (i) any Person, other than the Company or a Related Party, is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing 15
percent or more of the total voting power of all the then outstanding
Voting Securities; or (ii) a Person, other than the Company or a Related
Party, purchases or otherwise acquires, under a tender offer, securities
representing 15 percent or more of the total voting power of all the then
outstanding Voting Securities; or
(iii) the individuals (a) who as of the effective date of the Plan
constitute the Board or (b) who thereafter are elected to the Board and
whose election, or nomination for election, to the Board was approved by a
vote of at least two-thirds ( 2/3) of the directors then still in office
who either were directors as of the effective date of the Plan or whose
election or nomination for election was previously so approved, cease for
any reason to constitute a majority thereof; or (iv) the stockholders of
the Company approve a merger, consolidation, recapitalization or
reorganization of the Company or an acquisition by the Company, or
consummation of any such transaction if stockholder approval is not
obtained, other than any such transaction which would result in the Voting
Securities outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least 80 percent of the total voting
power represented by the Voting Securities of such surviving entity
outstanding immediately after such transaction if the voting rights of each
Voting Security relative to the other Voting Securities were not altered in
such transaction; or (v) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's
assets other than any such transaction which would result in a Related
Party owning or acquiring more than 50 percent of the assets owned by the
Company immediately prior to the transaction; or (vi) the Board
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<PAGE> 11
adopts a resolution to the effect that a Change of Control has occurred or
adopts a resolution to the effect that a Potential Change of Control has
arisen and the transaction giving rise to such resolution has been
thereafter approved by the stockholders of the Company or been consummated
if such approval is not sought.
9.03.2 "Potential Change of Control" means and will be deemed to have
arisen if: (i) the Company enters into an agreement, the consummation of
which would result in the occurrence of a Change of Control; or (ii) any
Person (including the Company) publicly announces an intention to take or
to consider taking actions which if consummated would constitute a Change
of Control; or (iii) any Person, other than a Related Party, files with the
Securities and Exchange Commission a Schedule 13D pursuant to Rule 13d-1
under the Exchange Act with respect to Voting Securities; or (iv) any
Person, other than the Company or a Related Party, files with the Federal
Trade Commission a notification and report form pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 with respect to any
Voting Securities or a major portion of the assets of the Company; or (v)
the Board adopts a resolution to the effect that, for purposes of the Plan,
a Potential Change of Control has arisen. A Potential Change of Control
will be deemed to continue (i) with respect to an agreement within the
purview of clause "(i)" of the preceding sentence, until the agreement is
canceled or terminated; or (ii) with respect to an announcement within the
purview of clause "(ii)" of the preceding sentence, until the Person making
the announcement publicly abandons the stated intention or fails to act on
such intention for a period of twelve (12) calendar months; or (iii) with
respect to either the filing of a Schedule 13D within the purview of clause
"(iii)" of the preceding sentence or the filing of a notification and
report form within the purview of clause "(iv)" of the preceding sentence
with respect to Voting Securities, until the Person involved publicly
announces that its ownership or acquisition of the Voting Securities is for
investment purposes only and not for the purpose of seeking a Change of
Control or such Person disposes of the Voting Securities; or (iv) with
respect to any Potential Change of Control, until a Change of Control has
occurred or the Board, on reasonable belief after due investigation, adopts
a resolution that the Potential Change of Control has ceased to exist.
9.03.3 "Related Party" means: (i) a majority-owned subsidiary of the
Company; or (ii) an employee or group of employees of the Company or any
majority-owned subsidiary of the Company; or (iii) a trustee or other
fiduciary holding securities under an employee benefit plan of the Company
or any majority-owned subsidiary of the Company; or (iv) a corporation
owned directly or indirectly by the stockholders of the Company in
substantially the same proportion as their ownership of Voting Securities.
9.03.4 "Voting Securities" means any securities of the Company which
carry the right to vote generally in the election of directors.
SECTION 10
AMENDMENTS TO AND TERMINATION OF THE PLAN
10.01 The Board may amend, alter, suspend, discontinue or terminate the
Plan without the consent of stockholders or Participants, except that any
amendment or alteration shall be subject to the approval of the Company's
stockholders at or before the next annual meeting of stockholders for which the
record date is after the date of such Board action if such stockholder approval
is required by any federal or state law or regulation or the rules of any stock
exchange or automated quotation system on which the Stock may then be listed or
quoted, and the Board may otherwise, in its discretion, determine to submit
other such amendments or alterations to stockholders for approval; provided,
however, that, without the consent of a Participant, no amendment, alteration,
suspension, discontinuation or termination of the Plan may materially and
adversely affect the rights of such Participant under any Award theretofore
granted to him. The Committee may waive any conditions or rights under, or
amend, alter, suspend, discontinue or terminate any Award theretofore granted,
prospectively or retrospectively; provided, however, that, without the consent
of a Participant, no amendment, alteration, suspension, discontinuation or
termination of any Award may materially and adversely affect the rights of such
Participant under any Award theretofore granted to him.
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<PAGE> 12
Unless earlier terminated by the Board, the Plan will terminate when no
Shares remain reserved and available for issuance and the Company has no further
obligation with respect to any Award granted under the Plan.
SECTION 11
GENERAL PROVISIONS
11.01 No Rights to Awards. Nothing contained in the Plan shall give any
Participant or employee any claim to be granted any Award under the Plan, nor
give rise to any obligation for uniformity of treatment of Participants and
employees.
11.02 Withholding. The Company or any Affiliate is authorized to withhold
from any Award granted or any payment due under the Plan, including from a
distribution of Shares, amounts of withholding taxes due with respect to an
Award, its exercise or any payment thereunder, and to take such other action as
the Committee may deem necessary or advisable to enable the Company and
Participants to satisfy obligations for the payment of such taxes. This
authority shall include authority to withhold or receive Shares, Awards or other
property and to make cash payments in respect thereof in satisfaction of such
tax obligations.
11.03 No Right to Employment. Nothing contained in the Plan shall confer,
and no grant of an Award shall be construed as conferring, upon any Participant
any right to continue in the employ of the Company or any Affiliate or to
interfere in any way with the right of the Company or any Affiliate to terminate
his employment at any time or increase or decrease his compensation from the
rate in existence at the time of granting of an Award.
11.04 Unfunded Status of Awards; Creation of Trusts. The Plan is intended
to constitute an "unfunded" plan for incentive and deferred compensation. With
respect to any payments not yet made to a Participant pursuant to an Award,
nothing contained in the Plan or any Award shall give any such Participant any
rights that are greater than those of a general creditor of the Company;
provided, however, that, this provision shall not limit the requirements of
Section 9.02, and in addition, the Committee may authorize the creation of
trusts or make other arrangements to meet the Company's obligations under the
Plan to deliver cash, Shares or other property pursuant to any Award, which
trusts or other arrangements shall be consistent with the "unfunded" status of
the Plan unless the Committee otherwise determines.
11.05 No Limit on Other Compensatory Arrangements. Nothing contained in
this Plan shall prevent the Company or any Affiliate from adopting other or
additional compensation arrangements (which may include, without limitation,
employment agreements with executives and arrangements which relate to Awards
under the Plan), and such arrangements may be either generally applicable or
applicable only in specific cases.
11.06 No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award. The Committee shall determine
whether cash, other Awards or other property shall be issued or paid in lieu of
fractional Shares or whether such fractional Shares or any rights thereto shall
be forfeited or otherwise eliminated.
11.07 Governing Law. The validity, interpretation, construction and effect
of the Plan and any rules and regulations relating to the Plan shall be governed
by the laws of the State of Delaware (without regard to the conflicts of laws
thereof), and applicable federal law.
11.08 Severability. If any provision of the Plan is or becomes or is deemed
invalid, illegal or unenforceable in any jurisdiction, or would disqualify the
Plan or any Award under any law deemed applicable by the Committee, such
provision shall be construed or deemed amended to conform to applicable laws or
if it cannot be construed or deemed amended without, in the determination of the
Committee, materially altering the intent of the Plan, it shall be stricken and
the remainder of the Plan shall remain in full force and effect.
11.09 Compliance with Code Section 162(m). It is the intent of the Company
that Awards subject to Section 7.08 shall constitute "qualified
performance-based compensation" within the meaning of Code Section 162(m).
Accordingly, if any provision of the Plan or any Award Agreement relating to
such an Award
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<PAGE> 13
does not comply or is inconsistent with the requirements of Code Section 162(m)
or regulations thereunder, such provision shall be construed or deemed amended
to the extent necessary to conform to such requirements, and no provision shall
be deemed to confer upon the Committee or any other Person discretion to
increase the amount of compensation otherwise payable in connection with any
such Award upon attainment of the applicable performance objectives.
SECTION 12
EFFECTIVE DATE
12.01 The Plan shall become effective at such time as approved by the
affirmative vote of holders of a majority of Shares present in person or
represented by proxy at the Company's 1996 Annual Meeting of Stockholders, or
any adjournment thereof.
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<PAGE> 14
THE WILLIAMS COMPANIES, INC.
1996 STOCK PLAN
Instrument of Amendment
WHEREAS, The Williams Companies, Inc. (the "Company") maintains The
Williams Companies, Inc. 1996 Stock Plan (the "Plan"); and
WHEREAS, Subsection 9.02 of the Plan provides for the funding of a
trust upon a Potential Change of Control or a Change of Control (as such terms
are defined in the Plan); and
WHEREAS, the Board has determined that, due to the nature of the
transaction with MAPCO, Inc., the lack of funding will not materially and
adversely affect the rights of any participate under any award heretofore
granted under the Plan; and
WHEREAS, the Board desires to amend the Plan to prevent the change in
control provisions from becoming effective where voting securities of the
Company outstanding prior to any transaction continue to represent at least
sixty-five percent (65%) of the total voting power of the voting securities
outstanding immediately after such transaction; and
WHEREAS, Subsection 10.01 of the Plan permits the Board to adopt an
amendment to the Plan where such amendment does not materially and adversely
affect the rights of a participant under any award theretofore granted under
the Plan;
NOW THEREFORE, the Plan is hereby amended as follows:
1. The first sentence of Subsection 9.02 of the Plan is hereby amended
and restated effective November 22, 1997, to provide as follows:
"Upon the earlier of a Potential Change of Control as defined
in Section 9.03.2 which does not involve MAPCO, Inc., unless
the Board or the Committee adopts a resolution within ten
business days following the date the Potential Change of
Control arises to the effect that such action is not
necessary to secure any payment hereunder, or a Change of
Control as defined in Section 9.03.1 which does not involve
MAPCO, Inc., the Company will deposit with the trustee of a
trust for the benefit of Participants monies or other
property having a Fair Market Value at least equal to the net
present value of cash, Shares, and other property potentially
payable or distributable in connection with Awards
outstanding at that date."
2. Clause (iv) of Paragraph 9.03.1 is hereby amended and restated with
respect to awards granted after November 23, 1997, to provide as follows:
<PAGE> 15
"(iv) the stockholders of the Company approve a merger,
consolidation, recapitalization or reorganization of the
Company or an acquisition by the Company, or consummation of
any such transaction if stockholder approval is not obtained,
other than any such transaction which would result in the
Voting Securities outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or
by being converted into voting securities of the surviving
entity) at least sixty-five percent (65%) of the total voting
power represented by the Voting Securities of such surviving
entity outstanding immediately after such transaction if the
voting rights of each Voting Security relative to the other
Voting Securities were not altered in such transaction; or"
3. Except as modified herein, the Plan shall remain in full force and
effect.
IN WITNESS WHEREOF, the Company has caused this Instrument of
Amendment to be executed in _________ counterpart originals effective as of
November 22, 1997.
THE WILLIAMS COMPANIES, INC.
ATTEST
- --------------------------- By:
Secretary -------------------------------
John C. Fischer
Vice President, Human Resources
2
<PAGE> 16
THE WILLIAMS COMPANIES, INC.
1996 STOCK PLAN
Instrument of Second Amendment
WHEREAS, The Williams Companies, Inc. (the "Company") maintains The
Williams Companies, Inc. 1996 Stock Plan (the "Plan"); and
WHEREAS, Subsection 10.01 of the Plan permits the Board to adopt an
amendment to the Plan where such amendment does not materially and adversely
affect the rights of a participant under any award theretofore granted under the
Plan;
NOW THEREFORE, the Plan is hereby amended as follows:
1. The last sentence of Subsection 2.01 of the Plan is hereby amended and
restated, to provide as follows:
"Definitions of the terms "Cause," "Change of Control," "Good Reason,"
"Related Party," "Retirement," and "Voting Securities" are set forth in
Subsection 9.03 hereof."
2. Section 9 of the Plan is hereby amended and restated to provide as follows:
"SECTION 9
Change of Control Provisions
9.01 Acceleration of Exercisability and Lapse of Restrictions. If,
within two (2) years following a Change of Control, a Participant's
employment with the Company and its Affiliates is terminated (excluding
any transfer to the Company or its Affiliates) voluntarily for Good
Reason, or involuntarily (other than due to Cause, death, Disability,
or Retirement) the following acceleration provisions shall apply:
All outstanding Awards pursuant to which the Participant may have
rights the exercise of which is restricted or limited shall become
fully exercisable, except to the extent otherwise provided in Section
7.02.1; unless the right to lapse restrictions or limitations is waived
or deferred by a Participant prior to such lapse, all restrictions or
limitations (including risks of forfeiture) on outstanding Awards
subject to restrictions or limitations under the Plan shall lapse; and
all performance criteria and other conditions to payment of Awards
under which payments of cash, Shares or other property are subject to
conditions shall be deemed to be achieved or fulfilled and shall be
waived by the Company, except to the extent otherwise provided in
Section 7.02.1, and;
In the event that any Award is subject to limitations under Section
7.02.1 at the time of a Change of Control, then, solely for the purpose
of determining the rights of the Participant with respect to such
Award, a Change of Control will be deemed to occur at
<PAGE> 17
the close of business on the first business day following the date on
which the limitations on such Award under Section 7.02.1 have expired.
In addition, notwithstanding any other provision of the Plan or any
outstanding Award Agreement, Awards in the form of nonqualified stock
options which are accelerated under this Subsection 9.01 shall be
exercisable after a Participant's termination of employment for a
period equal to the lesser of: (i) the remaining term of each
nonqualified option; or (ii) eighteen (18) months.
9.02. Definitions of Certain Terms. For purposes of this Section 9, the
following definitions, in addition to those set forth in Section 2.01,
shall apply:
9.02.1 "Cause" means (i) willful failure by the Participant to
substantially perform his duties (as they existed immediately
prior to a Change of Control), other than any such failure
resulting from a Disability, or (ii) gross negligence or
willful misconduct of the Participant which results in a
significantly adverse effect upon the Company or an Affiliate,
or (iii) willful violation or disregard of the code of
business conduct or other published policy of the Company by
the Participant.
9.02.2 "Change of Control" means and will be deemed to have
occurred if: (i) any Person, other than the Company or a
Related Party, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing fifteen
percent (15%) or more of the total voting power of all the
then outstanding Voting Securities; or (ii) a Person, other
than the Company or a Related Party, purchases or otherwise
acquires, under a tender offer, securities representing
fifteen percent (15%) or more of the total voting power of all
the then outstanding Voting Securities; or (iii) the
individuals (a) who as of the effective date of the Plan
constitute the Board or (b) who thereafter are elected to the
Board and whose election, or nomination for election, to the
Board was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors
as of the effective date of the Plan or whose election or
nomination for election was previously so approved, cease for
any reason to constitute a majority thereof; or (iv) the
stockholders of the Company approve a merger, consolidation,
recapitalization or reorganization of the Company or an
acquisition by the Company, or consummation of any such
transaction if stockholder approval is not obtained, other
than any such transaction which would result in the Voting
Securities outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at
least sixty-five percent (65%) of the total voting power
represented by the Voting Securities of such surviving entity
outstanding immediately after such transaction if the voting
rights of each Voting Security relative to the other Voting
Securities were not altered in such transaction; or (v) the
stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the
Company's assets other than any such transaction which
2
<PAGE> 18
would result in a Related Party owning or acquiring more than
fifty percent (50%) of the assets owned by the Company
immediately prior to the transaction; or (vi) the Board adopts
a resolution to the effect that a Change of Control has
occurred.
9.02.3 "Good Reason" means the occurrence, within two (2)
years following a Change of Control, of any of the following
events, unless the Participant has consented thereto: (i) a
material change in the Participant's duties from those
assigned to the Participant immediately prior to a Change of
Control, unless associated with a bona fide promotion of the
Participant and a commensurate increase in the Participant's
compensation, in which case the Participant shall be deemed to
consent, or (ii) a significant reduction in the authority and
responsibility assigned to the Participant, or (iii) the
removal of the Participant from, or failure to reelect the
Participant to, any corporate office of the Company or an
Affiliate to which the Participant may have been elected and
was occupying immediately prior to a Change of Control, unless
associated with a bona fide promotion of the Participant and a
commensurate increase in the Participant's compensation or in
connection with the election of the Participant to a
corresponding or higher office of a Subsidiary, in each which
case the Participant shall be deemed to consent, or (iv)
reduction of a Participant's Base Salary, or (v) termination
of any of the incentive compensation plans in which the
Participant shall be participating at the time of a Change of
Control, unless such plan is replaced by a successor plan
providing incentive opportunities and awards at least as
favorable to the Participant as those provided in the plan
being terminated, or (vi) amendment of any of the incentive
compensation plans in which the Participant shall be
participating at the time of a Change of Control so as to
provide for incentive opportunities and awards less favorable
to the Participant than those provided in the plan being
amended, or (vii) failure by the Company or an Affiliate to
continue the Participant as a participant in any of the
incentive compensation plans in which the Participant is
participating immediately prior to a Change of Control on a
basis comparable to the basis on which other similarly
situated employees participate in such plan, or (viii) except
in relation to a wage freeze applicable to all employees of
the Company or an Affiliate, modification of the
administration of any of the incentive compensation plans so
as to adversely affect the level of incentive opportunities or
awards actually received by the Participant, or (ix) a
requirement by the Company or an Affiliate that the
Participant's principal duties be performed at a location more
than fifty (50) miles from the location where the Participant
was employed immediately preceding the Change of Control,
except for travel reasonably required in the performance of
the Participant's duties.
9.02.4 "Related Party" means: (i) a majority-owned subsidiary
of the Company; or (ii) an employee or group of employees of
the Company or any majority-owned subsidiary of the Company;
or (iii) a trustee or other fiduciary holding securities under
an employee benefit plan of the Company or any majority-owned
subsidiary of the Company; or (iv) a corporation owned
directly or indirectly by
3
<PAGE> 19
the stockholders of the Company in substantially the same
proportion as their ownership of Voting Securities.
9.02.5 "Retirement" shall have the meaning ascribed to such
term in the Company's governing tax-qualified retirement plan
applicable, or if no such plan is applicable to the
Participant, at the discretion of the Board.
9.02.6 "Voting Securities" means any securities of the Company
which carry the right to vote generally in the election of
directors."
3. Subsection 11.04 of the Plan is hereby amended and restated, to provide as
follows:
"Unfunded Status of Awards; Creation of Trusts. The Plan is intended to
constitute an "unfunded" plan for incentive and deferred compensation.
With respect to any payments not yet made to a Participant pursuant to
an Award, nothing contained in the Plan or any Award shall give any
such Participant any rights that are greater than those of a general
creditor of the Company; provided, however, that the Committee may
authorize the creation of trusts or make other arrangements to meet the
Company's obligations under the Plan to deliver cash, Shares or other
property pursuant to any. Award; which trusts or other arrangements
shall be consistent with the "unfunded" status of the Plan unless the
Committee otherwise determines."
4. Except as modified herein, the Plan shall remain in full force and effect.
IN WITNESS WHEREOF, the Company has caused this Instrument of Amendment
to be executed effective as of June 1, 1999.
THE WILLIAMS COMPANIES, INC.
By:
-----------------------------------
Michael P. Johnson
Senior Vice President, Human Resources
4
<PAGE> 1
EXHIBIT 10.50
THE WILLIAMS COMPANIES, INC.
STOCK PLAN FOR NONOFFICER EMPLOYEES
SECTION 1. Purposes.
1.01 The purposes of The Williams Companies, Inc. Stock Plan for
Nonofficer Employees (the "Plan"), are to enable The Williams Companies, Inc.
(together with any successor thereto, the "Company"), and its Affiliates to
attract and retain key employees, reward such employees for superior
performance and encourage such employees to increase their proprietary interest
in the Company in order to provide them with additional motivation to continue
in the Company's employ and to further its profitable growth.
SECTION 2. Definitions; Construction.
2.01 Definitions. In addition to the terms defined elsewhere in
the Plan, the following terms as used in the Plan shall have the following
meanings when used with initial capital letters:
2.01.1 "Affiliate" means any entity other than the Company
in which the Company owns, directly or indirectly, at least 20 percent
of the combined voting power of all classes of stock of such entity or
at least 20 percent of the ownership interests in such entity.
2.01.2 "Award" means any Option, Stock Appreciation Right,
Restricted Stock, Deferred Stock, Performance Award, Dividend
Equivalent, or Other Stock-Based Award, or any other right or interest
relating to Shares or cash granted under the Plan.
2.01.3 "Award Agreement" means any written agreement,
contract or other instrument or document evidencing an Award.
2.01.4 "Board" means the Company's Board of Directors.
2.01.5 "CEO" means the Chief Executive Officer of the
Company as designated by the Board.
2.01.6 "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
2.01.7 "Deferred Stock" means shares granted under Section
6.05 hereof, receipt of which is deferred for a specified deferral
period.
2.01.8 "Disability" means total and permanent disability
as defined under the Company's consolidated pension plan.
<PAGE> 2
2.01.9 "Dividend Equivalent" means a right, granted under
Section 6.07 hereof, to receive interest or dividends, or interest or
dividend equivalents.
2.01.10 "Exchange Act" means the Securities Exchange Act of
1934, as amended.
2.01.11 "Fair Market Value" means, as of any date, with
respect to Shares at any time that Shares are listed on the New York
Stock Exchange, the mean between the highest and lowest selling prices
in the consolidated transaction reporting system as of that date or
nearest preceding date on which a sale was reported; provided,
however, if in a given case the Fair Market Value of Shares is not an
even multiple of one dollar, such Fair Market Value may be rounded up
or down to a whole number if specified by the CEO; and, with respect
to Shares at any time that Shares are not listed on the New York Stock
Exchange, or property other than Shares, the Fair Market Value of such
Shares or other property determined by such methods or procedures as
shall be established from time to time by the CEO.
2.01.12 "Option" means a right, granted under Section 6.02
hereof, to purchase Shares or other Awards at a specified price during
specified time periods.
2.01.13 "Other Stock-Based Awards" means a right, granted
under Section 6.08 hereof, that relates to or is valued by reference
to Shares or other Awards relating to Shares.
2.01.14 "Participant" means a key employee of the Company
or any Affiliate granted an Award under the Plan.
2.01.15 "Performance Award" means a right, granted under
Section 6.06 hereof, to receive Awards based upon performance criteria
specified by the CEO.
2.01.16 "Person" shall have the meaning assigned in the
Exchange Act.
2.01.17 "Restricted Stock" means Shares, granted under
Section 6.04 hereof, that are subject to certain restrictions.
2.01.18 "Rule 16b-3" means Rule 16b-3, as amended from time
to time, or any successor to such Rule promulgated by the Securities
and Exchange Commission under Section 16 of the Exchange Act.
2.01.19 "Shares" means the Common Stock of the Company,
$1.00 par value, and such other securities of the Company as may be
substituted for Shares pursuant to Section 8.01 hereof.
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<PAGE> 3
2.01.20 "Stock Appreciation Right" means a right, granted
under Section 6.03 hereof, to be paid an amount measured by the
appreciation in the Fair Market Value of Shares from the date of grant
to the date of exercise.
Definitions of the terms "Change of Control," "Change of Control
Price," "Potential Change of Control," "Related Party" and "Voting Securities"
are set forth in Section 9.03 hereof.
2.02 Construction. For purposes of the Plan, the following rules
of construction shall apply:
2.02.1 The word "or" is disjunctive but not necessarily
exclusive.
2.02.2 Words in the singular include the plural; words in
the plural include the singular; and words in the neuter gender
include the masculine and feminine genders and words in the masculine
or feminine gender include the other and neuter genders.
SECTION 3. Administration.
3.01 The Plan shall be administered by the CEO. The CEO shall
have full and final authority to take the following actions, in each case
subject to and consistent with the provisions of the Plan:
(i) to designate Participants;
(ii) to determine the type or types of Awards to be granted to
each Participant;
(iii) to determine the number of Awards to be granted, the number
of Shares or amount of cash or other property to which an
Award will relate, the terms and conditions of any Award
(including, but not limited to, any exercise price, grant
price or purchase price, any limitation or restriction, any
schedule for lapse of limitations, forfeiture restrictions
or restrictions on exercisability or transferability, and
accelerations or waivers thereof, based in each case on such
considerations as the CEO shall determine), and all other
matters to be determined in connection with an Award;
(iv) to determine whether, to what extent and under what
circumstances an Award may be settled in, or the exercise
price of an Award may be paid in, cash, Shares, other Awards
or other property, or an Award may be accelerated, vested,
canceled, forfeited, exchanged or surrendered;
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<PAGE> 4
(v) to determine whether, to what extent and under what
circumstances cash, Shares, other Awards, other property and
other amounts payable with respect to an Award shall be
deferred either at the election of the CEO or at the
election of the Participant;
(vi) to prescribe the form of each Award Agreement, which need
not be identical for each Participant;
(vii) to adopt, amend, suspend, waive and rescind such rules and
regulations and appoint such agents as the CEO may deem
necessary or advisable to administer the Plan;
(viii) to correct any defect or supply any omission or reconcile
any inconsistency, and to construe and interpret the Plan,
the rules and regulations, any Award Agreement or other
instrument entered into or relating to an Award made under
the Plan; and
(ix) to make all other decisions and determinations as may be
required under the terms of the Plan or as the CEO may deem
necessary or advisable for the administration of the Plan.
Any action of the CEO with respect to the Plan shall be final,
conclusive and binding on all Persons, including the Company, Affiliates,
Participants, any Person claiming any rights under the Plan from or through any
Participant, and stockholders. The express grant of any specific power to the
CEO, and the taking of any action by the CEO, shall not be construed as
limiting any power or authority of the CEO. The CEO may delegate to officers
or managers of the Company or of any Affiliate the authority, subject to such
terms as the CEO shall determine, to take such actions and perform such
functions under the Plan as the CEO may specify, including, but not limited to,
administrative functions. The CEO shall be entitled to, in good faith, rely or
act upon any report or other information furnished to him by any officer,
manager or other employee of the Company or any Affiliate, the Company's
independent certified public accountants, or any executive compensation
consultant or other professional retained by the Company to assist in the
administration of the Plan. Any and all powers, authorizations and discretions
granted by the Plan to the CEO shall likewise be exercisable at any time by the
Board.
SECTION 4. Shares Subject to the Plan.
Subject to.adjustment as provided in Section 8.01 hereof, the total number of
Shares reserved and available for distribution under the Plan shall be four
million (4,000,000) Shares.
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For purposes of this Section 4.01, the number of Shares to which an
Award relates shall be counted against the number of Shares reserved and
available under the Plan at the time of grant of the Award, unless such number
of Shares cannot be determined at that time, in which case the number of Shares
actually distributed pursuant to the Award shall be counted against the number
of Shares reserved and available under the Plan at the time of distribution;
provided, however, that Awards related to or retroactively added to, or granted
in tandem with, substituted for or converted into, other Awards shall be
counted or not counted against the number of Shares reserved and available
under the Plan in accordance with procedures adopted by the CEO so as to ensure
appropriate counting but avoid double counting; and, provided further, that the
number of Shares deemed to be issued under the Plan upon exercise of an Option
or an Other Stock-Based Award in the nature of a stock purchase right shall be
reduced by the number of Shares surrendered by the Participant in payment of
the exercise or purchase price of the Award.
If any Shares to which an Award relates are forfeited, or payment is
made to the Participant in the form of cash, cash equivalents or other property
other than Shares, or the Award otherwise terminates without payment being made
to the Participant in the form of Shares, any Shares counted against the number
of Shares reserved and available under the Plan with respect to such Award
shall, to the extent of any such forfeiture, alternative payment or
termination, again be available for Awards under the Plan. Any Shares
distributed pursuant to an Award may consist, in whole or in part, of
authorized and unissued Shares or of treasury Shares, including Shares
repurchased by the Company for purposes of the Plan; provided, however, that
if, at the time Shares are to be distributed under the Plan to a Participant
(including upon exercise of an Option), the Shares are listed on the New York
Stock Exchange and such Participant is a "director" or "officer" of the Company
within the meaning of Sections 312.03 and 703.09 of the Listed Company Manual
of the New York Stock Exchange, such that the Participant's acquisition of
Stock originally issued by the Company would be subject to the requirement of
stockholder approval under applicable Exchange rules, the Shares to be
distributed to such Participant shall consist only of treasury Shares then held
by the Company. The Company shall use its best efforts to obtain and have
available, at any time that the such treasury Shares are required to be
distributed in connection with an Award, a sufficient number of treasury
Shares, not reserved for other uses, to be able to make prompt delivery in
connection with any such Award.
SECTION 5. Eligibility.
5.01 Awards may be granted only to individuals who are key
employees of the Company or any Affiliate, excluding employees who are
directors or officers of the Company. However, the Plan has not been approved
by the stockholders of the Company. Accordingly,
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participation in the Plan is limited to key employees who may participate
consistent with the stockholder approval requirements of the New York Stock
Exchange or any other exchange on which the Shares may be listed. No Awards
shall be paid and no Shares shall be distributed with respect to any Award, nor
shall any other action be taken under the terms of the Plan that would be in
violation of any applicable stockholder approval requirement and any actions
taken contrary thereto shall be deemed null and void and of no effect.
SECTION 6. Specific Terms of Awards.
6.01 General. Subject to the terms of the Plan and any
applicable Award Agreement, awards may be issued as set forth in this Section
6. In addition, the CEO may impose on any Award or the exercise thereof, at
the date of grant or thereafter (subject to the terms of Section 10.01), such
additional terms and conditions, not inconsistent with the provisions of the
Plan, as the CEO shall determine, including terms requiring forfeiture of
Awards in the event of termination of employment by the Participant. Except as
provided in Section 7.01, Awards shall be granted for no consideration other
than prior and future services.
6.02 Options. The CEO is authorized to grant Options to
Participants on the following terms and conditions:
(i) Exercise Price. The exercise price per Share of an Option
shall be determined by the CEO; provided, however, that,
except as provided in Section 7.01, such exercise price
shall not be less than the Fair Market Value of a Share on
the date of grant of such Option and in no event shall be
less than the par value of a Share.
(ii) Option Term. The term of each Option shall be determined by
the CEO.
(iii) Methods of Exercise. The CEO shall determine the time or
times at which an Option may be exercised in whole or in
part, the methods by which such exercise price may be paid
or deemed to be paid, and the form of such payment,
including, without limitation, cash, Shares, other
outstanding Awards or other property (including notes or
other contractual obligations of Participants to make
payment on a deferred basis, to the extent permitted by
law).
6.03 Stock Appreciation Rights. The CEO is authorized to grant
Stock Appreciation Rights to Participants on the following terms and
conditions:
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(i) Right to Payment. A Stock Appreciation Right shall confer
on the Participant to whom it is granted a right to receive,
upon exercise thereof, the excess of (i) the Fair Market
Value of a Share on the date of exercise or, if the CEO
shall so determine in the case of any such right, at any
time during a specified period before or after the date of
exercise, over (ii) the grant price of the Stock
Appreciation Right as determined by the CEO as of the date
of grant of the Stock Appreciation Right, which, except as
provided in Section 7.01, shall not be less than the Fair
Market Value of a Share on the date of grant.
(ii) Other Terms. The term, methods of exercise, methods of
settlement and any other terms and conditions of any Stock
Appreciation Right shall be determined by the CEO at grant
or thereafter.
6.04 Restricted Stock. The CEO is authorized to grant Restricted
Stock to Participants on the following terms and conditions:
(i) Issuance and Restrictions. Restricted Stock shall be
subject to such restrictions on transferability and other
restrictions as the CEO may impose (including, without
limitation, limitations on the right to vote Restricted
Stock or the right to receive dividends thereon), which
restrictions may lapse separately or in combination at such
times, in such installments or otherwise, as the CEO shall
determine at the time of grant or thereafter.
(ii) Forfeiture. Except as otherwise determined by the CEO at
the time of grant or thereafter, upon termination of
employment (as determined under criteria established by the
CEO) during the applicable restriction period, Restricted
Stock that is at that time subject to restrictions shall be
forfeited and reacquired by the Company; provided, however,
that the CEO may provide, by rule or regulation or in any
Award Agreement, that restrictions on Restricted Stock shall
be waived in whole or in part in the event of terminations
resulting from specified causes, and the CEO may in other
cases waive in whole or in part restrictions on Restricted
Stock.
(iii) Certificates for Shares. Restricted Stock granted under the
Plan may be evidenced in such manner as the CEO shall
determine, including, without limitation, issuance of
certificates representing Shares. Certificates representing
Shares of Restricted Stock shall be registered in the name
of the Participant and
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shall bear an appropriate legend referring to the terms,
conditions and restrictions applicable to such Restricted
Stock.
6.05 Deferred Stock. The CEO is authorized to grant Deferred
Stock to Participants on the following terms and conditions:
(i) Issuance and Limitations. Delivery of Shares shall occur
upon expiration of the deferral period specified for the
Award of Deferred Stock by the CEO. In addition, an Award
of Deferred Stock shall be subject to such limitations as
the CEO may impose, which limitations may lapse at the
expiration of the deferral period or at other specified
times, separately or in combination, in installments or
otherwise, as the CEO shall determine at the time of grant
or thereafter. A Participant awarded Deferred Stock shall
have no voting rights and shall have no rights to receive
dividends in respect of Deferred Stock, unless and only to
the extent that the CEO shall award Dividend Equivalents in
respect of such Deferred Stock.
(ii) Forfeiture. Except as otherwise determined by the CEO at
the time of grant or thereafter, upon termination of
employment (as determined under criteria established by the
CEO) during the applicable deferral period, Deferred Stock
that is at that time subject to deferral (other than a
deferral at the election of the Participant) shall be
forfeited; provided, however, that the CEO may provide, by
rule or regulation or in any Award Agreement, that
forfeiture of Deferred Stock shall be waived in whole or in
part in the event of terminations resulting from specified
causes, and the CEO may in other cases waive in whole or in
part the forfeiture of Deferred Stock.
6.06 Performance Awards. The CEO is authorized to grant
Performance Awards to Participants on the following terms and conditions:
(i) Right to Payment. A Performance Award shall confer upon
Participant rights, valued as determined by the CEO, and
payable to, or exercisable by, the Participant to whom the
Performance Award is granted, in whole or in part, as the
CEO shall establish at grant or thereafter. The performance
criteria and all other terms and conditions of the
Performance Award shall be determined by the CEO upon the
grant of each Performance Award or thereafter.
(ii) Other Terms. A Performance Award may be denominated or
payable in cash, deferred cash, Shares, other Awards or
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other property, and other terms of Performance Awards shall
be, as determined by the CEO.
6.07 Dividend Equivalents. The CEO is authorized to grant
Dividend Equivalents to Participants. Dividend Equivalents shall confer upon
the Participant's rights to receive, currently or on a deferred basis, interest
or dividends, or interest or dividend equivalents, with respect to a number of
Shares or otherwise as determined by the CEO. The CEO may provide that
Dividend Equivalents shall be paid or distributed when accrued or shall be
deemed to have been reinvested in additional Shares or additional Awards or
otherwise reinvested.
6.08 Other Stock-Based Awards. The CEO is authorized, subject to
limitations under applicable law, to grant to Participants such other Awards
that are denominated or payable in, valued in whole or in part by reference to,
or otherwise based on, or related to, Shares, as deemed by the CEO to be
consistent with the purposes of the Plan including, without limitation,
purchase rights, Shares awarded which are not subject to any restrictions or
conditions, convertible debentures, convertible preferred stock, exchangeable
securities or other rights convertible or exchangeable into Shares, Awards
valued by reference to the value of securities of or the performance of
specified Affiliates, and Awards payable in securities of Affiliates. The CEO
shall determine the terms and conditions of such Awards. Except as provided in
Section 7.01, Shares or securities delivered pursuant to a purchase right
granted under this Section 6.08 shall be purchased for such consideration, paid
for by such methods and in such forms, including, without limitation, cash,
Shares, outstanding Awards or other property, as the CEO shall determine, the
value of which consideration shall not be less than the Fair Market Value of a
Share on the date of grant of such purchase right and in no event shall be less
than the par value of a Share.
6.09 Exchange Provisions. The CEO may at any time offer to
exchange or buy out any previously granted Award for a payment in cash, Shares,
another Award or other property, based on such terms and conditions as the CEO
shall determine and communicate to the Participant at the time that such offer
is made.
SECTION 7. General Terms of Awards.
7.01 Stand-Alone, Tandem and Substitute Awards. Awards granted
under the Plan may, in the discretion of the CEO, be granted either alone or in
addition to, in tandem with or in substitution for, any other Award granted
under the Plan or any award granted under The Williams Companies, Inc. 1990
Stock Plan, or any other plan of the Company or any Affiliate (subject to the
terms of Section 10.01). If an Award is granted in substitution for another
Award or award, the CEO shall require the surrender of such other Award or
award in consideration for the grant of the new
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Award. Awards granted in addition to or in tandem with other Awards or awards
may be granted either at the same time as or at a different time from the grant
of such other Awards or awards. The exercise price of any Option, the grant
price of any Stock Appreciation Right or the purchase price of any other Award
conferring a right to purchase Shares:
(i) granted in substitution for an outstanding Award or award
shall either be not less than the Fair Market Value of
Shares at the date such substitute Award is granted or not
less than such Fair Market Value at that date reduced to
reflect the Fair Market Value of the Award or award required
to be surrendered by the Participant as a condition to
receipt of a substitute Award; or
(ii) retroactively granted in tandem with an outstanding Award or
award shall be either not less than the Fair Market Value of
Shares at the date of grant of the later Award or the Fair
Market Value of Shares at the date of grant of the earlier
Award or award.
7.02 Term of Awards. The term of each Award shall be for such
period as may be determined by the CEO.
7.03 Form of Payment of Awards. Subject to the terms of the Plan
and any applicable Award Agreement, payments or substitutions to be made by the
Company or an Affiliate upon the grant or exercise of an Award may be made in
such forms as the CEO shall determine at the time of grant or thereafter
(subject to the terms of Section 10.01), including, without limitation, cash,
Shares, other Awards or other property, and may be made in a single payment or
substitution, in installments or on a deferred basis, in each case in
accordance with rules and procedures established by the CEO. Such rules and
procedures may include, without limitation, provisions for the payment or
crediting of reasonable interest on installment or deferred payments or the
grant or crediting of Dividend Equivalents in respect of installment or
deferred payments.
7.04 Limits on Transfer of Awards; Beneficiaries. No right or
interest of a Participant in, or relating to, any Award shall be pledged,
encumbered or hypothecated to or in favor of any Person other than the Company
or an Affiliate, or shall be subject to any lien, obligation or liability of
such Participant to any Person other than the Company or an Affiliate. Unless
otherwise determined by the CEO (consistent with the requirements for
registration of offers and sales of Shares under the Plan with the Securities
and Exchange Commission on a registration statement on Form S-8, as then in
effect, or such other such registration form as may then be available), no
Award subject to any restriction or limitation, including any right relating
thereto, shall be
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assignable or transferable by a Participant otherwise than by will or the laws
of descent and distribution except to the Company or any Affiliate under the
terms of the Plan; provided, however, that, if so determined by the CEO, a
Participant may, in the manner established by the CEO, designate a beneficiary
or beneficiaries to exercise the rights of the Participant, and to receive any
distribution with respect to any Award, upon the death of the Participant. A
beneficiary, guardian, legal representative or other Person claiming any rights
under the Plan from or through any Participant shall be subject to all the
terms and conditions of the Plan and any Award Agreement applicable to such
Participant as well as any additional restrictions or limitations deemed
necessary or appropriate by the CEO.
7.05 Registration and Listing Compliance. The Company shall have
no obligation to make any payment or distribute Shares with respect to any
Award in a transaction subject to the registration requirements of the
Securities Act of 1933, as amended, or any state securities laws or subject to
a listing requirement under any listing agreement between the Company and any
national securities exchange, and no Award shall confer upon any Participant's
rights to such delivery or distribution, until such laws and contractual
obligations of the Company have been complied within all material respects.
7.06 Stock Certificates. All certificates for Shares delivered
under the terms of the Plan shall be subject to such stop-transfer orders and
other restrictions as the CEO may deem advisable under federal or state
securities laws, rules and regulations thereunder, and the rules of any
national securities exchange or automated quotation system on which Shares are
listed or quoted. The CEO may cause a legend or legends to be placed on any
such certificates to make appropriate reference to such restrictions or any
other restrictions or limitations that may be applicable to Shares. In
addition, during any period in which Awards or Shares are subject to
restrictions or limitations under the terms of the Plan or any Award Agreement,
or during any period during which delivery or receipt of an Award or Shares has
been deferred by the CEO or a Participant, the CEO may require any Participant
to enter into an agreement providing that certificates representing Shares
issuable or issued pursuant to an Award shall remain in the physical custody of
the Company or such other Person as the CEO may designate.
SECTION 8. Adjustment Provisions.
8.01 In the event that the CEO shall determine that any dividend
or other distribution (whether in the form of cash, Shares, other securities or
other property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, exchange of Shares or other securities of the Company, or other
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similar corporate transaction or event affects the Shares such that an
adjustment is determined by the CEO to be appropriate in order to prevent
dilution or enlargement of Participants' rights under the Plan, then the CEO
shall, in such manner as it may deem equitable, adjust any or all of (i) the
number and kind of Shares which may thereafter be issued in connection with
Awards; (ii) the number and kind of Shares issued or issuable in respect of
outstanding Awards; and (iii) the exercise price, grant price or purchase price
relating to any Award or, if deemed appropriate, make provision for a cash
payment with respect to any outstanding Award. In addition, the CEO is
authorized to make adjustments in the terms and conditions of, and the criteria
in, Awards in recognition of unusual or nonrecurring events (including, without
limitation, events described in the preceding sentence) affecting the Company
or any Affiliate or the financial statements of the Company or any Affiliate,
or in response to changes in applicable laws, regulations or accounting
principles.
SECTION 9. Change of Control Provisions.
9.01 Acceleration of Exercisability and Lapse of Restrictions.
In the event of a Change of Control, the following acceleration provisions
shall apply, except that prior to a Change of Control occurring or a Potential
Change of Control arising or after such has arisen but is no longer continuing,
the Board may, without the consent of Participants, waive the application of
this Section 9 with respect to any transaction that would otherwise constitute
a Change of Control or a Potential Change of Control hereunder. All
outstanding Awards pursuant to which the Participant may have rights the
exercise of which is restricted or limited, shall become fully exercisable,
unless the right to lapse of restrictions or limitations is waived or deferred
by a Participant prior to such lapse, all restrictions or limitations
(including risks of forfeiture) on outstanding Awards subject to restrictions
or limitations under the Plan shall lapse; and all performance criteria and
other conditions to payment of Awards under which payments of cash, Shares or
other property are subject to conditions shall be deemed to be achieved or
fulfilled and shall be waived by the Company.
9.02 Creation and Funding of Trust. Upon the earlier of the
occurrence of a Potential Change of Control unless the Board or a committee
thereof adopts a resolution within ten business days following the date the
Potential Change of Control arises to the effect that such action is not
necessary to secure any payments hereunder, or a Change of Control, the Company
shall deposit with the trustee of a trust for the benefit of Participants
monies or other property having a Fair Market Value at least equal to the value
of cash, Shares and other property to be paid or distributed in connection with
Awards outstanding at that date. The trust shall be a grantor trust which
shall preserve the "unfunded" status of Awards under the Plan, and shall
contain other terms and
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conditions substantially as specified for trusts authorized under the Company's
employment agreements with executives. Subsequent to a Potential Change of
Control which is no longer continuing and prior to a Change of Control and
termination of the trust, upon the request of the Company, the trustee shall
deliver the monies or other property held in the trust to the Company.
9.03 Definition of Certain Terms. For purposes of this Section
9, the following definitions, in addition to those set forth in Section 2.01,
shall apply:
9.03.1 "Change of Control" means and shall be deemed to
have occurred if (i) any Person, other than the Company or a Related Party, is
or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of Voting Securities representing 20 percent or
more of the total voting power of all the then outstanding Voting Securities;
or (ii) a Person, other than the Company or a Related Party, purchases or
otherwise acquires, under a tender offer, Voting Securities representing, when
combined with other Voting Securities owned by such Person, 20 percent or more
of the total voting power of all the then outstanding Voting Securities; or
(iii) the individuals (a) who as of the effective date of the Plan constitute
the Board or (b) who thereafter are elected to the Board and whose election, or
nomination for election, to the Board was approved by a vote of at least
two-thirds of the directors then still in office who either were directors as
of the effective date of the Plan 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, or (iv) the stockholders of the Company approve a
merger, consolidation, recapitalization or reorganization of the Company or an
acquisition of securities or assets by the Company, or consummation of any such
transaction if stockholder approval is not obtained (other than any such
transaction which would result in the Voting Securities outstanding immediately
prior thereto continuing to represent either by remaining outstanding or by
being converted into voting securities of the surviving entity, at least 80
percent of the total voting power represented by the voting securities of such
surviving entity outstanding immediately after such transaction and in or as a
result of which the voting rights of each Voting Security relative to the
voting rights of all other Voting Securities are not altered); or (v) the
stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets other than any such transaction which
would result in a Related Party owning or acquiring more than 50 percent of the
assets owned by the Company immediately prior to the transaction; or (vi) the
Board or a committee thereof adopts a resolution to the effect that a Change of
Control has occurred or adopts a resolution to the effect that a Potential
Change of Control has arisen and the transaction giving rise to such resolution
has been thereafter approved by the
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stockholders of the Company or been consummated if such approval is not sought.
9.03.2 "Potential Change of Control" means and shall be
deemed to have arisen if (i) the Company enters into an agreement, the
consummation of which would result in the occurrence of a Change of Control; or
(ii) any Person (including the Company) publicly announces an intention to take
or to consider taking actions which if consummated would constitute a Change of
Control; or (iii) any Person, other than a Related Party, files with the
Securities and Exchange Commission a Schedule 13D pursuant to Rule 13d-1 under
the Exchange Act with respect to Voting Securities; or (iv) any Person, other
than the Company or a Related Party, files with the Federal Trade Commission a
notification and report form pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 with respect to any Voting Securities or a major
portion of the assets of the Company; or (v) the Board or a committee thereof
adopts a resolution to the effect that, for purposes of the Plan, a Potential
Change of Control has arisen. A Potential Change of Control will be deemed to
continue (i) with respect to an agreement within the purview of clause (i) of
the preceding sentence, until the agreement is canceled or terminated; or (ii)
with respect to an announcement within the purview of clause (ii) of the
preceding sentence, until the Person making the announcement publicly abandons
the stated intention or fails to act on such intention for a period of 12
calendar months; or (iii) with respect to either the filing of a Schedule 13D
within the purview of clause (iii) of the preceding sentence or the filing of a
notification and report form within the purview of clause (iv) of the preceding
sentence with respect to Voting Securities, until the Person involved publicly
announces that its ownership or acquisition of the Voting Securities is for
investment purposes only and not for the purpose of seeking a Change of Control
or such Person disposes of the Voting Securities or assets; or (iv) with
respect to any Potential Change of Control, until a Change of Control has
occurred or the Board or a committee thereof, on reasonable belief after due
investigation, adopts a resolution that the Potential Change of Control has
ceased to exist.
9.03.3 "Related Party" means (i) a majority-owned
subsidiary of the Company; or (ii) an employee or group of employees of the
Company or any majority-owned subsidiary of the Company; or (iii) a trustee or
other fiduciary holding securities under an employee benefit plan of the
Company or any majority-owned subsidiary of the Company; or (iv) a corporation
owned directly or indirectly by the stockholders of the Company in
substantially the same proportion as their ownership of Voting Securities.
9.03.4 "Voting Securities or Security" means any
securities of the Company which carry the right to vote generally in the
election of directors.
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SECTION 10. Amendments to and Termination of the Plan.
10.01 The Board may amend, alter, suspend, discontinue or
terminate the Plan without the consent of stockholders or Participants;
provided, however, that, without the consent of a Participant, no amendment,
alteration, suspension, discontinuation or termination of the Plan may
materially and adversely affect the rights of such Participant under any Award
theretofore granted to him. The CEO may waive any conditions or rights under,
amend any terms of, or amend, alter, suspend, discontinue or terminate any
Award theretofore granted, prospectively or retrospectively; provided, however,
that, without the consent of a Participant, no amendment, alteration,
suspension, discontinuation or termination of any Award may materially and
adversely affect the rights of such Participant under any Award theretofore
granted to him.
Unless earlier terminated by the Board, the Plan shall terminate when
no Shares remain reserved and available for issuance and the Company has no
further obligation with respect to any Award granted under the Plan.
SECTION 11. General Provisions.
11.01 No Rights to Awards; No Stockholder Rights. No Participant
or employee shall have any claim to be granted any Award under the Plan, and
there is no obligation for uniformity of treatment of Participants and
employees, except as provided in any other compensation arrangement. No Award
shall confer on any Participant any of the rights of a stockholder of the
Company unless and until Shares are in fact issued to such Participant in
connection with such Award.
11.02 Withholding. The Company or any Affiliate is authorized to
withhold from any Award granted or any payment due under the Plan, including
from a distribution of Shares, amounts of withholding taxes due with respect to
an Award, its exercise or any payment thereunder, and to take such other action
as the CEO may deem necessary or advisable to enable the Company and
Participants to satisfy obligations for the payment of such taxes. This
authority shall include authority to withhold or receive Shares, Awards or
other property and to make cash payments in respect thereof in satisfaction of
such tax obligations.
11.03 No Right to Employment. Nothing contained in the Plan or
any Award Agreement shall confer, and no grant of an Award shall be construed
as conferring, upon any Participant any right to continue in the employ of the
Company or any Affiliate or to interfere in any way with the right of the
Company or any Affiliate to terminate his employment at any time or increase or
decrease his compensation from the rate in existence at the time of granting of
an Award, except as provided in any other compensation arrangement.
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11.04 Unfunded Status of Awards; Creation of Trusts. The Plan is
intended to constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any payments not yet made to a Participant
pursuant to an Award, nothing contained in the Plan or any Award shall give any
such Participant any rights that are greater than those of a general creditor
of the Company; provided, however, that, in addition to the requirements of
Section 9.02, the CEO may authorize the creation of trusts or make other
arrangements to meet the Company's obligations under the Plan to deliver cash,
Shares or other property pursuant to any Award, which trusts or other
arrangements shall be consistent with the "unfunded" status of the Plan unless
the CEO otherwise determines.
11.05 No Limit on Other Compensatory Arrangements. Nothing
contained in the Plan shall prevent the Company or any Affiliate from adopting
other or additional compensation arrangements (which may include, without
limitation, employment agreements with executives and arrangements which relate
to Awards under the Plan), and such arrangements may be either generally
applicable or applicable only in specific cases. Notwithstanding anything in
the Plan to the contrary, the terms of each Award shall be construed so as to
be consistent with such other arrangements in effect at the time of the Award.
11.06 No Fractional Shares. No fractional Shares shall be issued
or delivered pursuant to the Plan or any Award. The CEO shall determine
whether cash, other Awards or other property shall be issued or paid in lieu of
fractional Shares or whether such fractional Shares or any rights thereto shall
be forfeited or otherwise eliminated.
11.07 Governing Law. The validity, interpretation, construction
and effect of the Plan and any rules and regulations relating to the Plan shall
be governed by the laws of the State of Delaware (without regard to the
conflicts of laws thereof), and applicable federal law.
11.08 Severability. If any provision of the Plan is or becomes or
is deemed invalid, illegal or unenforceable in any jurisdiction, or would
disqualify the Plan or any Award under any law deemed applicable by the CEO,
such provision shall be construed or deemed amended to conform to applicable
laws or if it cannot be construed or deemed amended without, in the
determination of the CEO, materially altering the intent of the Plan, it shall
be deleted and the remainder of the Plan shall remain in full force and effect;
provided, however, that, unless otherwise determined by the CEO, the provision
shall not be construed or deemed amended or deleted with respect to any
Participant whose rights and obligations under the Plan are not subject to the
law of such jurisdiction or the law deemed applicable by the CEO.
-16-
<PAGE> 17
SECTION 12. Effective Date.
12.01 The Plan shall become effective as of January 19, 1995.
THE WILLIAMS COMPANIES, INC.
By /s/ John C. Fischer
-----------------------------
John C. Fischer
Vice President
-17-
<PAGE> 18
THE WILLIAMS COMPANIES, INC.
STOCK PLAN FOR NONOFFICER EMPLOYEES
Instrument of Amendment
WHEREAS, The Williams Companies, Inc. (the "Company") maintains The
Williams Companies, Inc. Stock Plan for Nonofficer Employees (the "Plan"); and
WHEREAS, Section 9 of the Plan provides for accelerated vesting and
certain other features upon a Potential Change of Control or a Change of
Control (as such terms are defined in the Plan); and
WHEREAS, the Board desires to amend the Plan to prevent the change in
control provisions from becoming effective where voting securities of the
Company outstanding prior to any transaction continue to represent at least
sixty-five percent (65%) of the total voting power of the voting securities
outstanding immediately after such transaction; and
WHEREAS, Subsection 10.01 of the Plan permits the Board to adopt an
amendment to the Plan where such amendment does not materially and adversely
affect the rights of a participant under any award theretofore granted under
the Plan;
NOW THEREFORE, the Plan is hereby amended as follows:
1. Clause (iv) of Paragraph 9.03.1 is hereby deleted and the following
clause (iv) is substituted in lieu thereof:
"(iv) the stockholders of the Company approve a merger,
consolidation, recapitalization or reorganization of the
Company or an acquisition of securities or assets by the
Company, or consummation of any such transaction if
stockholder approval is not obtained (other than any such
transaction which would result in the Voting Securities
outstanding immediately prior thereto continuing to represent
either by remaining outstanding or by being converted into
voting securities of the surviving entity, at least
sixty-five percent (65%) of the total voting power
represented by the voting securities of such surviving entity
outstanding immediately after such transaction and in or as a
result of which the voting rights of each Voting Security
relative to the voting rights of all other Voting Securities
are not altered); or"
2. Except as modified herein, the Plan shall remain in full force and
effect.
IN WITNESS WHEREOF, the Company has caused this Instrument of
Amendment to be executed in _________ counterpart originals effective as of
November 22, 1997.
THE WILLIAMS COMPANIES, INC.
ATTEST
- --------------------------- By:
Secretary ------------------------------
John C. Fischer
Vice President, Human Resources
<PAGE> 19
THE WILLIAMS COMPANIES, INC.
STOCK PLAN FOR NONOFFICER EMPLOYEES
Instrument of Second Amendment
WHEREAS, The Williams Companies, Inc. (the "Company") maintains The
Williams Companies, Inc. Stock Plan for Nonofficer Employees (the "Plan"); and
WHEREAS, Subsection 10.01 of the Plan permits the Board to adopt an
amendment to the Plan where such amendment does not materially and adversely
affect the rights of a participant under any award theretofore granted under the
Plan;
NOW THEREFORE, the Plan is hereby amended as follows:
1. Subsection 2.01.14 of the Plan is hereby amended and restated, to provide as
follows:
"2.01.14 "Participant" means an employee of the Company or any
affiliate granted an Award under the Plan."
2. The last sentence of Subsection 2.01 of the Plan is hereby amended and
restated, to provide as follows:
"Definitions of the terms "Cause," "Change of Control," "Good Reason,"
"Related Party," "Retirement," and "Voting Securities" are set forth in
Subsection 9.03 hereof."
3. Section 9 of the Plan is hereby amended and restated to provide as follows:
"SECTION 9
Change of Control Provisions
9.01 Acceleration of Exercisability and Lapse of Restrictions. If,
within two (2) years following a Change of Control, a Participant's
employment with the Company and its Affiliates is terminated (excluding
any transfer to the Company or its Affiliates) voluntarily for Good
Reason, or involuntarily (other than due to Cause, death, Disability,
or Retirement) the following acceleration provisions shall apply,
except that prior to a Change of Control occurring, the Board may,
without the consent of Participants, waive the application of this
Section 9 with respect to any transaction that would otherwise
constitute a Change of Control. All outstanding Awards pursuant to
which the Participant may have rights the exercise of which is
restricted or limited shall become fully exercisable, unless the right
to lapse restrictions or limitations is waived or deferred by a
Participant prior to such lapse, all restrictions or limitations
(including risks of forfeiture) on outstanding Awards subject to
restrictions or limitations under the Plan shall lapse; and all
performance criteria and other conditions to payment of Awards under
which payments of cash, Shares or other property are subject to
conditions shall be
<PAGE> 20
deemed to be achieved or fulfilled and shall be waived by the Company.
In addition, notwithstanding any other provision of the Plan or any
outstanding Award Agreement, Awards in the form of nonqualified stock
options which are accelerated under this Subsection 9.01 shall be
exercisable after a Participant's termination of employment for a
period equal to the lesser of: (i) the remaining term of each
nonqualified option; or (ii) eighteen (18) months.
9.02. Definitions of Certain Terms. For purposes of this Section 9, the
following definitions, in addition to those set forth in Section 2.01,
shall apply:
9.02.1 "Cause" means (i) willful failure by the Participant to
substantially perform his duties (as they existed immediately
prior to a Change of Control), other than any such failure
resulting from a Disability, or (ii) gross negligence or
willful misconduct of the Participant which results in a
significantly adverse effect upon the Company or an Affiliate,
or (iii) willful violation or disregard of the code of
business conduct or other published policy of the Company by
the Participant.
9.02.2 "Change of Control" means and will be deemed to have
occurred if: (i) any Person, other than the Company or a
Related Party, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing fifteen
percent (15%) or more of the total voting power of all the
then outstanding Voting Securities; or (ii) a Person, other
than the Company or a Related Party, purchases or otherwise
acquires, under a tender offer, securities representing
fifteen percent (15%) or more of the total voting power of all
the then outstanding Voting Securities; or (iii) the
individuals (a) who as of the effective date of the Plan
constitute the Board or (b) who thereafter are elected to the
Board and whose election, or nomination for election, to the
Board was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors
as of the effective date of the Plan or whose election or
nomination for election was previously so approved, cease for
any reason to constitute a majority thereof; or (iv) the
stockholders of the Company approve a merger, consolidation,
recapitalization or reorganization of the Company or an
acquisition by the Company, or consummation of any such
transaction if stockholder approval is not obtained, other
than any such transaction which would result in the Voting
Securities outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at
least sixty-five percent (65%) of the total voting power
represented by the Voting Securities of such surviving entity
outstanding immediately after such transaction if the voting
rights of each Voting Security relative to the other Voting
Securities were not altered in such transaction; or (v) the
stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the
Company's assets other than any such transaction which would
result in a Related Party owning or acquiring more than fifty
percent (50%)
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<PAGE> 21
of the assets owned by the Company immediately prior to the
transaction; or (vi) the Board adopts a resolution to the
effect that a Change of Control has occurred.
9.02.3 "Good Reason" means the occurrence, within two (2)
years following a Change of Control, of any of the following
events, unless the Participant has consented thereto: (i) a
material change in the Participant's duties from those
assigned to the Participant immediately prior to a Change of
Control, unless associated with a bona fide promotion of the
Participant and a commensurate increase in the Participant's
compensation, in which case the Participant shall be deemed to
consent, or (ii) a significant reduction in the authority and
responsibility assigned to the Participant, or (iii) the
removal of the Participant from, or failure to reelect the
Participant to, any corporate office of the Company or an
Affiliate to which the Participant may have been elected and
was occupying immediately prior to a Change of Control, unless
associated with a bona fide promotion of the Participant and a
commensurate increase in the Participant's compensation or in
connection with the election of the Participant to a
corresponding or higher office of a Subsidiary, in each which
case the Participant shall be deemed to consent, or (iv)
reduction of a Participant's Base Salary, or (v) termination
of any of the incentive compensation plans in which the
Participant shall be participating at the time of a Change of
Control, unless such plan is replaced by a successor plan
providing incentive opportunities and awards at least as
favorable to the Participant as those provided in the plan
being terminated, or (vi) amendment of any of the incentive
compensation plans in which the Participant shall be
participating at the time of a Change of Control so as to
provide for incentive opportunities and awards less favorable
to the Participant than those provided in the plan being
amended, or (vii) failure by the Company or an Affiliate to
continue the Participant as a participant in any of the
incentive compensation plans in which the Participant is
participating immediately prior to a Change of Control on a
basis comparable to the basis on which other similarly
situated employees participate in such plan, or (viii) except
in relation to a wage freeze applicable to all employees of
the Company or an Affiliate, modification of the
administration of any of the incentive compensation plans so
as to adversely affect the level of incentive opportunities or
awards actually received by the Participant, or (ix) a
requirement by the Company or an Affiliate that the
Participant's principal duties be performed at a location more
than fifty (50) miles from the location where the Participant
was employed immediately preceding the Change of Control,
except for travel reasonably required in the performance of
the Participant's duties.
9.02.4 "Related Party" means: (i) a majority-owned subsidiary
of the Company; or (ii) an employee or group of employees of
the Company or any majority-owned subsidiary of the Company;
or (iii) a trustee or other fiduciary holding securities under
an employee benefit plan of the Company or any majority-owned
subsidiary of the Company; or (iv) a corporation owned
directly or indirectly by the stockholders of the Company in
substantially the same proportion as their ownership of Voting
Securities.
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<PAGE> 22
9.02.5 "Retirement" shall have the meaning ascribed to such
term in the Company's governing tax-qualified retirement plan
applicable to the Participant, or if no such plan is
applicable to the Participant, at the discretion of the Board.
9.02.6 "Voting Securities" means any securities of the Company
which carry the right to vote generally in the election of
directors."
4. Subsection 11.04 of the Plan is hereby amended and restated, to provide as
follows:
"Unfunded Status of Awards; Creation of Trusts. The Plan is intended to
constitute an "unfunded" plan for incentive and deferred compensation.
With respect to any payments not yet made to a Participant pursuant to
an Award, nothing contained in the Plan or any Award shall give any
such Participant any rights that are greater than those of a general
creditor of the Company; provided, however, that the Committee may
authorize the creation of trusts or make other arrangements to meet the
Company's obligations under the Plan to deliver cash, Shares or other
property pursuant to any. Award; which trusts or other arrangements
shall be consistent with the "unfunded" status of the Plan unless the
Committee otherwise determines."
5. Except as modified herein, the Plan shall remain in full force and effect.
IN WITNESS WHEREOF, the Company has caused this Instrument of Amendment
to be executed effective as of June 1, 1999.
THE WILLIAMS COMPANIES, INC.
By:
------------------------------------
Michael P. Johnson
Senior Vice President, Human Resources
4
<PAGE> 1
EXHIBIT 10.51
THE WILLIAMS COMMUNICATIONS
STOCK PLAN
SECTION 1
PURPOSES AND EFFECTIVE DATE
1.01 Purposes. The objectives of the THE WILLIAMS COMMUNICATIONS STOCK
PLAN (the "Plan") are to promote the long-term financial success of WILLIAMS
COMMUNICATIONS GROUP, INC. (the "Company") by providing a compensation program
to enable the Company to (i) retain employees who are critical to the Company's
success; (ii) recognize and reward employee performance; (iii) keep key
employees focused on common measurements and goals; and (iv) provide incentives
for key employees that are consistent with The Williams Companies, Inc.
("Williams") stockholder interests and values.
1.02 Effective Date. The Plan shall become effective upon its approval
by the Board of Directors of the Company.
SECTION 2
DEFINITIONS
2.01 Definitions. In addition to the terms defined elsewhere in the
Plan, the following terms as used in the Plan shall have the following meanings
when used with initial capital letters:
2.01.1 "Affiliate" means any entity, other than the Company,
in which Williams owns, directly or indirectly, at least 20 percent of the
combined voting power of all classes of stock of such entity or at least 20
percent of the ownership interest in such entity.
2.01.2 "Award" means any Option, Deferred Stock, Dividend
Equivalent or any other right or interest relating to Shares or cash granted
under the Plan.
2.01.3 "Award Agreement" means any written agreement,
contract, notice to a Participant or other instrument or document between the
Company and the Participant evidencing an Award.
2.01.4 "Board" means the Board of Directors of Williams.
2.01.5 "CEO" means the Chief Executive Officer of Williams.
2.01.6 "Code" means the Internal Revenue Code of 1986, as
amended from time to time. References to any provision of the Code include
regulations thereunder and successor provisions and regulations thereto.
<PAGE> 2
2.01.7 "Deferred Stock" means a right, granted under the terms
of the Plan, to receive Shares at the end of a specified deferral period.
2.01.8 "Disability" means disability as defined under the
terms of the Williams Consolidated Pension Plan or any successor plan.
2.01.9 "Dividend Equivalent" means a right, granted under the
terms of the Plan, to receive payments equal to dividends paid on Shares.
2.01.10 "Fair Market Value" of a Share means, as of any given
date, the closing price of a Share reported in the table entitled "New York
Stock Exchange Composition Transactions" contained in The Wall Street Journal
(or an equivalent successor table ) for such date or, if no such closing sales
price was reported for such date, for the most recent trading day prior to such
date for which a closing sales price was reported.
2.01.11 "Option" means a right, granted under the terms of the
Plan, to purchase Shares at a specific price during specified time periods.
2.01.12 "Participant" means any employee of the Company or an
Affiliate granted an Award which remains outstanding under the Plan.
2.01.13 "Person" is as defined in the Securities Exchange Act
of 1934, as amended.
2.01.14 "Shares" means shares of the Common Stock of Williams,
$1.00 par value, and such other securities of Williams or the Company as may be
substituted or resubstituted for Shares under the terms of the Plan.
Definitions of the terms "Change of Control", "Potential Change of
Control", "Change of Control Price", "Related Party" and "Voting Securities" are
set forth in Section 9 hereof.
SECTION 3
ADMINISTRATION
3.01 The Plan shall be administered by the CEO. The CEO shall have full
and final authority to take the following actions, in each case subject to, and
consistent with, the provisions of the Plan:
(i) to designate Participants;
(ii) to determine the type or types of Awards to be granted to
each Participant;
(iii) to determine the number of Awards to be granted, the
number of Shares or amount of cash to which an Award will relate, the terms and
conditions of any Award (including,
2
<PAGE> 3
but not limited to, any exercise price, grant price or purchase price, any
limitations or restrictions, any schedule for or performance conditions relating
to the lapse of limitations, forfeiture restrictions or restrictions on
exercisability or transferability, and accelerations or waivers thereof, based
in each case on such considerations as the CEO shall determine), and all other
matters to be determined in connection with an Award;
(iv) to determine whether, to what extent and under what
circumstances an Award may be settled in, or the exercise price of an Award may
be paid in, cash, Shares, other Awards or other property, or an Award may be
accelerated, vested, canceled, forfeited or surrendered;
(v) to determine whether, to what extent and under what
circumstances cash, Shares, other Awards, other property and other amounts
payable with respect to an Award shall be deferred either automatically, at the
election of the CEO or at the election of the Participant;
(vi) to prescribe the form of each Award Agreement, which need
not be identical for each Participant;
(vii) to adopt, amend, suspend, waive and rescind such rules
and regulations and approve such agents as may be deemed necessary or advisable
to administer the Plan;
(viii) to correct any defect or supply any omission or
reconsider any inconsistency, and to construe and interpret the Plan, the rules
and regulations, any Award Agreement or any other instrument entered into, or
relating to, an Award under the Plan; and
(ix) to make all other decisions and determinations as may be
required under the terms of the Plan or as may be deemed necessary or advisable
for the administration of the Plan.
Any action of the CEO with respect to the Plan shall be final,
conclusive and binding on all persons, including the Company, Williams,
Affiliates, Participants, any person claiming rights under the Plan from or
through any Participant, except to the extent the CEO may subsequently modify,
or take further action not inconsistent with, prior action. The express grant of
any specific power to the CEO, and the taking of any action by the CEO, shall
not be construed as limiting the power or authority of the CEO. The CEO may
delegate to officers or managers of the Company or of any Affiliate the
authority to perform specific functions under the Plan. Any and all powers,
authorizations or discretions granted by the Plan to the CEO shall likewise be
exercisable at any time by the Board of Directors of the Company or the Board of
Directors of Williams.
3
<PAGE> 4
SECTION 4
SHARES SUBJECT TO THE PLAN
4.01 Shares Reserved and Available. Subject to adjustment as provided
in Section 8.01 hereof, the total number of Shares reserved and available for
distribution under the Plan shall be two million (2,000,000) Shares.
For purposes of this Section 4.01, the number of Shares to which an
Award relates shall be counted against the number of Shares reserved and
available under the Plan at the time of grant of the Award, unless such number
of Shares cannot be determined at that time in which case the number of Shares
actually distributed pursuant to the Award shall be counted against the number
of Shares reserved and available under the Plan at the time of distribution;
provided, however, that Awards related to or retroactively added to, or granted
in tandem with, substituted for or converted into, other Awards shall be counted
or not counted against the number of Shares reserved and available under the
Plan in accordance with procedures adopted by the CEO so as to ensure
appropriate counting but to avoid double counting; and, provided further, that
the number of Shares deemed to be issued under the Plan upon exercise or
settlement of an Award shall be reduced by the number of Shares surrendered by
the Participant or withheld by the Company in payment of the exercise price of
the Award and withholding taxes relating to the Award.
If any Shares to which an Award relates are forfeited, or payment is
made to the Participant in the form of cash or other property other than Shares,
or the Award otherwise terminates without payment being made to the Participant
in the form of Shares, any Shares counted against the number of Shares reserved
and available under the Plan with respect to such Award shall, to the extent of
any such forfeiture, alternative payment or termination, again be available for
Awards under the Plan. Any Shares distributed pursuant to an Award may consist,
in whole or in part, of authorized and unissued Shares, or of treasury Shares,
including Shares repurchased by the Company or Williams for purposes of the
Plan.
SECTION 5
ELIGIBILITY
5.01 Awards may be granted only to full time executive, management and
professional employees of the Company or Affiliates as may be selected from time
to time in the sole and exclusive discretion of the CEO.
4
<PAGE> 5
SECTION 6
SPECIFIC TERMS OF AWARDS
6.01 General. Awards may be granted on the terms and conditions set
forth in this Section 6. In addition, the CEO may impose on any Award or the
exercise or settlement thereof, at the date of grant or thereafter (subject to
the terms of Section 10.01), such additional terms and conditions, not
inconsistent with the provisions of the Plan, as the CEO shall determine,
including terms requiring forfeiture of Awards in the event of termination of
employment by the Participant. Except as may be required under the Delaware
General Corporation Law or as provided in Sections 6.06 or 7.01, Awards shall be
granted for no consideration other than prior and future services.
6.02 Options. The CEO is authorized to grant Options on the following
terms and conditions:
(i) Exercise Price. The exercise price per Share purchasable
under an Option shall be determined by the CEO; provided, however, that such
exercise price shall not be less than the Fair Market Value of a Share on the
date of grant of such Option and in no event shall be less than the par value of
a Share;
(ii) Option Term. Subject to the terms of the Plan and any
applicable Award Agreement, the term of each Option shall be determined by the
CEO;
(iii) Methods of Exercise. Subject to the terms of the Plan,
the CEO shall determine the time or times at which an Option may be exercised in
whole or in part, the methods by which such exercise price shall be paid or
deemed paid, and the form of such payment, including, without limitation, cash,
Shares, other outstanding Awards or other property (including notes or other
contractual obligations of Participants to make payment on a deferred basis, to
the extent permitted by law).
6.03 Deferred Stock. The CEO is authorized to grant Deferred Stock on
the following terms and conditions:
(i) Issuance and Limitations. Delivery of Shares shall occur
upon expiration of the deferred period specific for the Award by the CEO. In
addition, an Award of Deferred Stock shall be subject to such limitations as the
CEO may impose, which limitations may lapse at the expiration of the deferral
period or at other specified times, separately or in combination, in
installments or otherwise, as the CEO shall determine at the time of grant or
thereafter. A Participant awarded Deferred Stock shall have no voting rights and
will have no rights to receive dividends in respect of such Deferred Stock;
(ii) Forfeiture. Except as otherwise determined by the CEO,
upon termination of employment (as determined under criteria established by the
CEO) during the applicable deferral period, Deferred Stock that is at the time
subject to deferral (other than a deferral at the election of
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<PAGE> 6
the Participant) shall be forfeited; provided, however, that the CEO may
provide, by rule or regulation or in any Award Agreement, that forfeiture of
Deferred Stock may be waived in whole or in part in the event of termination
resulting from specified causes, and the CEO may in other cases waive in whole
or in part the forfeiture of Deferred Stock.
6.04 Dividend Equivalents. The CEO is authorized to grant Awards of
Dividend Equivalents. Dividend Equivalents shall confer upon the Participant
rights to receive payments equal to interest or dividends, when and if paid,
with respect to a number of Shares determined by the CEO. The CEO may provide
that Dividend Equivalents shall be paid or distributed when accrued or shall be
deemed to have been reinvested in additional Shares or additional Awards or
otherwise reinvested.
6.05 Other Stock-Based Awards. The CEO is authorized, subject to
limitations under applicable law, to grant such other Awards that are
denominated or payable in, valued in whole or in part by reference to, or
otherwise based on, or related to, Shares, as deemed by the CEO to be consistent
with the purposes of the Plan including, without limitation, Shares awarded
which are not subject to any restrictions or conditions, convertible or
exchangeable debt securities or other rights convertible or exchangeable into
Shares, Awards valued by reference to the value of securities of or the
performance of the Company or specified Affiliates, and Awards payable in the
securities of the Company or Affiliates. Except as may be provided elsewhere
herein, Shares granted under this Section 6.05 shall be purchased for such
consideration, paid for by such methods and in such forms, including, without
limitation, cash, Shares, outstanding Awards or other property, as the CEO shall
determine, provided, however, that the value of such consideration shall not be
less per share than the Fair Market Value of a Share on the date of grant of
such purchase right and in no event shall be less per share than the par value
of a Share.
6.06 Exchange Provisions. The CEO may at any time offer to exchange or
buy out any previously granted Award for a payment in cash, Shares or another
Award, based on such terms and conditions as the CEO shall determine and
communicate to the Participant at the time that such offer is made.
SECTION 7
GENERAL TERMS OF AWARDS
7.01 Stand-Alone, Tandem and Substitute Awards. Awards granted under
the Plan may, in the discretion of the CEO, be granted either alone or in
addition to, in tandem with, or in substitution for, any other Award granted
under the Plan or any other plan of Williams, the Company or any Affiliate,
subject to the terms of the Plan. If an Award is granted in substitution for
another Award or award, the CEO shall require the surrender of such other Award
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<PAGE> 7
or award in consideration for the grant of the new Award. Awards granted in
addition to or in tandem with other Awards or awards may be granted either at
the same time as or at a different time from the grant of such other Award or
awards. The exercise price of any Option or the purchase price of any other
Award conferring a right to purchase Shares:
(i) granted in substitution for an outstanding Award or award
shall either be not less than the Fair Market Value of Shares at the date such
substitute Award is granted or not less than such Fair Market Value at that date
reduced to reflect the Fair Market Value of the Award or award required to be
surrendered by the Participant as a condition to receipt of a substitute Award;
or
(ii) retroactively granted in tandem with an outstanding Award
or award shall be either not less than the Fair Market Value of Shares at the
date of grant of the later Award or the Fair Market Value at the date of grant
of the earlier Award or award.
7.02 Term of Awards. The term of each Award shall be for such period as
may be determined by the CEO.
7.03 Form of Payment of Awards. Subject to the terms of the Plan and
any applicable Award Agreement, payments or substitutions for payments upon the
grant or exercise of any Award may be made in such forms as the CEO shall
determine, including, without limitation, cash, Deferred Stock, Shares, other
Awards of other property, and may be made in a single payment or substitution in
installments or on a deferred basis, in each case in accordance with rules and
procedures established by the CEO. Such rules and procedures may include,
without limitation, provisions for the payment or crediting of reasonable
interest on installment or deferred payments on the grant or crediting of
Dividend Equivalents in respect of installment or deferred payments denominated
in Shares. The CEO may also permit or require the deferral of any award payment,
subject to rules and procedures as may be established, which may include
provisions for the payment or crediting of interest, or dividend equivalents,
including converting such credits into deferred Share equivalents.
7.04 Limitations on Transferability. Awards and other rights under the
Plan shall not be transferable by a Participant except by will or the laws of
descent and distribution (or, in the event of the Participant's death, to a
designated beneficiary), and, if exercisable, shall be exercisable during the
lifetime of a Participant only by such Participant or such Participant's
guardian or legal representative; provided, however, that except as otherwise
provided by the CEO, Awards and other rights may be transferred to one or more
Persons during the lifetime of the Participant in connection with the
Participant's estate planning, and may be exercised by such transferees in
accordance with the terms of such Award consistent with the registration of the
offer and sale of Shares on Form S-8 or Form S-3 or such other registration form
of the Securities and Exchange Commission as may then be filed and effective
with respect to the Plan, and permitted by the CEO. Awards and other rights
under the Plan may not be pledged, mortgaged, hypothecated, or otherwise
encumbered to or in favor of any Person other than Williams, the Company or an
Affiliate, and shall not be subject to any lien, obligation or liability of a
Participant or transferee to any Person other than Williams, the Company or any
Affiliate. If so determined by the CEO, a Participant may, in the manner
established by the CEO, designate a beneficiary or beneficiaries to exercise the
rights of the Participant, and to receive any distribution with respect to any
Award upon the death of the
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<PAGE> 8
Participant. A transferee, beneficiary, guardian, legal representative or other
Person claiming any rights under the Plan from or through any Participant shall
be subject to all the terms and conditions of the Plan and any Award Agreement
applicable to such Participant, except to the extent the Plan and Award
Agreement otherwise provide with respect to such Persons, and to any additional
restrictions or limitations deemed necessary or appropriate by the CEO.
7.05 Registration and Listing Compliance. Neither Williams nor the
Company shall be obligated to issue or deliver Shares in connection with any
Award or take any other action under the Plan in a transaction subject to the
registration requirements of the Securities Act of 1933, as amended, or any
other federal or state securities law, any requirement under any listing
agreement between Williams and any national securities exchange or automated
quotation system, or any other law, regulation, or contractual obligation of
Williams or the Company, until Williams and the Company are satisfied that such
laws, regulations and any other obligations have been satisfied.
7.06 Share Certificates. All certificates for Shares delivered under
the terms of the Plan shall be subject to such stop-transfer orders and other
restrictions as the CEO may deem advisable under federal or state securities
laws, rules and regulations thereunder, and the rules of any national securities
exchange or automated quotation system on which the Shares are listed or quoted.
The CEO may cause a legend to be placed on any such certificates to make
appropriate reference to such restrictions or limitations that may be applicable
to the Shares. In addition, during any period in which Awards or Shares are
subject to restrictions or limitations under the Plan or any Award Agreement, or
during any period during which delivery or receipt of an Award or Shares has
been deferred by the CEO or a Participant, the CEO may require the Participant
to enter into an agreement providing that certificates representing Shares
issuable or issued pursuant to an Award shall remain in the physical custody of
the Company or such person as the CEO may designate.
7.07 Performance-Based Awards. The CEO may designate any Award as
subject to specified performance conditions. The performance objectives for an
Award shall consist of one or more business criteria and a targeted level or
levels of performance with respect to such criteria, as specified by the CEO.
The levels of performance required with respect to such business criteria may
be expressed in absolute or relative levels. Achievement of performance
objectives with respect to such Awards shall be measured over a period of not
less than one year nor more than five years, as the CEO may specify.
Performance objectives may differ for such Awards to different Participants.
The CEO shall specify the weighting to be given to each performance objective
for purposes of determining the final amount payable with respect to any such
Award. The CEO may, in the CEO's discretion, reduce the amount of a payout
otherwise to be made in connection with an Award subject to this Section 7.07,
but may not exercise discretion to increase such amount, and the CEO may
consider other performance criteria in exercising such discretion. All
determinations by the CEO as to the achievement of performance objectives shall
be in writing. The CEO may not delegate any responsibility with respect to an
Award subject to this Section 7.07. The CEO also has the discretion to adjust
performance objectives to reflect the impact of acquisitions or dispositions of
assets or other events that impact targeted levels of performance that were not
contemplated at the time the Award was made.
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SECTION 8
ADJUSTMENT PROVISIONS
8.01 In the event that the CEO shall determine that any dividend or
other distribution (whether in the form of cash, Shares, other securities, or
property), recapitalization, forward or reverse stock split, reorganization,
merger, consolidation, split-up, spin-off, combination, repurchase, exchange of
Shares or other securities of Williams, or other similar corporate transactions
or event affects the Shares such that an adjustment is determined by the CEO to
be appropriate in order to prevent dilution or enlargement of Participant's
rights under the Plan, then the CEO shall, in such manner as deemed equitable,
adjust any and all of : (i) the number and kind of Shares which may thereafter
be issued in connection with Awards; (ii) the number and kind of Shares issued
or issuable with respect to outstanding Awards; (iii) the exercise price, grant
price or purchase price relating to any Award or, if deemed appropriate, make
provision for a cash payment with respect to any outstanding Award. In addition,
the CEO is authorized to make adjustments in the terms and conditions of , and
the criteria in, Awards in recognition of unusual or nonrecurring events
(including, without limitation, events described in this Section) affecting
Williams, the Company or any Affiliate or the financial statements of Williams,
the Company or any Affiliate, or in response to changes in applicable laws,
regulations or accounting principles.
SECTION 9
CHANGE OF CONTROL PROVISIONS
9.01 Creation and Funding of a Trust. Upon the earlier of a Potential
Change of Control as defined in Section 9.02.2, unless the Board adopts a
resolution within ten business days following the date the Potential Change of
Control arises to the effect that such action is not necessary to secure any
payments hereunder, or a Change of Control as defined in Section 9.02.1, the
Company shall deposit with the trustee of a trust for the benefit of
Participants monies or other property having a Fair Market Value at least equal
to the net present value of cash, Shares and other property potentially payable
or distributable in connection with Awards outstanding at that date. The trust
shall be an irrevocable grantor trust which shall preserve the "unfunded" status
of Awards under the Plan, and shall contain other terms and conditions
substantially as specified for trusts authorized under Williams' employment
agreements with executives.
9.02 Definitions of Certain Terms. For purposes of this Section 9, the
following definitions, in addition to those set forth in Section 2.01, shall
apply:
9.02.1 "Change of Control" means and will be deemed to have
occurred if: (i) any Person, other than Williams or a Related Party, is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended), directly or indirectly, of securities of
Williams representing 15 percent or more of the total voting power of all the
then outstanding Voting Securities; or (ii) a Person, other than Williams or a
Related Party, purchases
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or otherwise acquires, under a tender offer, securities representing 15 percent
or more of the total voting power of all the then outstanding Voting Securities;
or (iii) the individuals (a) who as of the effective date of the Plan constitute
the Board or (b) who thereafter are elected to the Board and whose election, or
nomination for election, to the Board was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were directors
as of the effective date of the Plan or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority thereof; or (iv) the stockholders of Williams approve a merger,
consolidation, recapitalization or reorganization of Williams or an acquisition
by Williams, or consummation of any such transaction if stockholder approval is
not obtained, other than any such transaction which would result in the Voting
Securities outstanding immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting securities of the
surviving entity) at least 65 percent of the total voting power represented by
the Voting Securities of such surviving entity outstanding immediately after
such transaction if the voting rights of each Voting Security relative to the
other Voting Securities were not altered in such transaction; or (v) the
stockholders of Williams approve a plan of complete liquidation of Williams or
an agreement for the sale or disposition by Williams of all or substantially all
of Williams' assets other than any such transaction which would result in a
Related Party owning or acquiring more than 50 percent of the assets owned by
Williams immediately prior to the transaction; or (vi) the Board adopts a
resolution to the effect that a Change of Control has occurred or adopts a
resolution to the effect that a Potential Change of Control has arisen and the
transaction giving rise to such resolution has been thereafter approved by the
stockholders of Williams or been consummated if such approval is not sought.
9.02.2 "Potential Change of Control" means and will be deemed to have
arisen if: (i) Williams enters into an agreement, the consummation of which
would result in the occurrence of a Change of Control; or (ii) any Person
(including Williams) publicly announces an intention to take or to consider
taking actions which if consummated would constitute a Change of Control; or
(iii) any Person, other than a Related Party, files with the Securities and
Exchange Commission a Schedule 13D pursuant to Rule 13d-1 under the Securities
Exchange Act of 1934 with respect to Voting Securities; or (iv) any Person,
other than Williams or a Related Party, files with the Federal Trade Commission
a notification and report form pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 with respect to any Voting Securities or a major
portion of the assets of Williams; or (v) the Board adopts a resolution to the
effect that, for purposes of the Plan, a Potential Change of Control has arisen.
A Potential Change of Control will be deemed to continue (i) with respect to an
agreement within the purview of clause "(i)" of the preceding sentence, until
the agreement is canceled or terminated; or (ii) with respect to an announcement
within the purview of clause "(ii)" of the preceding sentence, until the Person
making the announcement publicly abandons the stated intention or fails to act
on such intention for a period of twelve (12) calendar months; or (iii) with
respect to either the filing of a Schedule 13D within the purview of clause
"(iii)" of the preceding sentence or the filing of a notification and report
form within the purview of clause "(iv)" of the preceding sentence with respect
to Voting Securities, until the Person involved publicly announces that its
ownership or acquisition of the Voting Securities is for investment purposes
only and not for the purpose of seeking a Change of Control or such Person
disposes of the Voting Securities; or (iv) with respect to any Potential Change
of Control until a Change of Control has
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occurred or the Board, on reasonable belief after due investigation, adopts a
resolution that the Potential Change of Control has ceased to exist.
9.02.3 "Related Party" means: (i) a majority-owned subsidiary of
Williams; or (ii) an employee or group of employees of Williams or any
majority-owned subsidiary of Williams; or (iii) a trustee or other fiduciary
holding securities under an employee benefit plan of Williams or any
majority-owned subsidiary of Williams; or (iv) a corporation owned directly or
indirectly by the stockholders of Williams in substantially the same proportion
as their ownership of Voting Securities.
9.02.4 "Voting Securities" means any securities of Williams which carry
the right to vote generally in the election of directors.
SECTION 10
AMENDMENTS TO AND TERMINATION OF THE PLAN
10.01 The Board or the Company may amend, alter, suspend, discontinue
or terminate the Plan without the consent of Participants; provided, however,
that, without the consent of a Participant, no amendment, alteration,
suspension, discontinuation or termination of the Plan may materially and
adversely affect the rights of such Participant under any Award theretofore
granted to such Participant. The CEO may waive any conditions or rights under,
or amend, alter, suspend, discontinue or terminate any Award theretofore
granted, prospectively or retrospectively; provided, however, that, without the
consent of a Participant, no amendment, alteration, suspension, discontinuation
or termination of any Award may materially and adversely affect the rights of
such Participant under any Award theretofore granted to such Participant.
SECTION 11
GENERAL PROVISIONS
11.01 No Rights to Awards. Nothing contained in the Plan shall give any
Participant or employee any claim to be granted any Award under the Plan, nor
give rise to any obligation for uniformity of treatment of Participants and
employees.
11.02 Withholding. Williams, the Company or any Affiliate is authorized
to withhold from any Award granted or any payment due under the Plan, including
from a distribution of Shares, amounts of withholding taxes due with respect to
an Award, its exercise or any payment thereunder, and to take such actions as
the CEO may deem necessary or advisable to enable Williams, the Company or any
Affiliate to satisfy obligations for the payment of such taxes. This authority
shall include authority to withhold or receive Shares, Awards or other property,
and to make cash payments in respect thereof in satisfaction of such tax
obligations.
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11.03 No Right of Employment. Nothing contained in the Plan shall
confer, and no grant of an Award shall be construed as conferring, upon any
Participant any right to continue in the employ of the Company or any Affiliate
or to interfere in any way with the right of the Company or any Affiliate to
terminate a Participant's employment at any time or increase or decrease a
Participant's compensation from the rate in existence at the time of granting of
an Award.
11.04 Unfunded Status of Awards. The Plan is intended to constitute an
"unfunded " plan for incentive and deferred compensation. With respect to any
payments not yet made to a Participant pursuant to an Award, nothing contained
in the Plan or any Award shall give any such Participant any rights that are
greater than those of a general creditor of the Company.
11.05 No Limit on Other Compensatory Arrangements. Nothing contained in
this Plan shall prevent Williams, the Company or an Affiliate from adopting
other or additional compensation arrangements (which may include, without
limitation, employment agreements and arrangements which relate to Awards under
the Plan), and such arrangements may be either generally applicable or
applicable only in specific cases.
11.06 No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award. The CEO shall determine whether
cash, other Awards or other property shall be issued or paid in lieu of
fractional Shares or whether such fractional Shares or any rights thereto shall
be forfeited or otherwise eliminated.
11.07 Governing Law. The validity, interpretation, construction and
effect of the Plan and any rules and regulations relating to the Plan shall be
governed by the laws of the State of Delaware and applicable federal laws.
11.08 Severability. If any provision of the Plan is or becomes or is
deemed invalid, illegal or unenforceable in any jurisdiction, or would
disqualify the Plan or any Award under any law deemed applicable by the CEO,
such provision shall be construed or deemed amended to conform to applicable
laws or if it cannot be construed or deemed amended without, in the
determination of the CEO, materially altering the intent of the Plan, it shall
be stricken and the remainder of the Plan shall remain in full force and effect.
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EXHIBIT 10.52
WILLIAMS COMMUNICATIONS GROUP, INC.
1999 STOCK PLAN
<PAGE> 2
CONTENTS
<TABLE>
- -----------------------------------------------------------------------------------
<S> <C>
Article 1. Establishment and Objectives 1
Article 2. Definitions 1
Article 3. Administration 5
Article 4. Shares Subject to the Plan and Maximum Awards 6
Article 5. Eligibility and Participation 7
Article 6. Stock Options 7
Article 7. Stock Appreciation Rights 8
Article 8. Deferred Stock 9
Article 9. Dividend Equivalents 10
Article 10. Restricted Stock 11
Article 11. Performance Units, Performance Shares, and Stock-based Cash Awards 12
Article 12. Other Stock-Based Awards 13
Article 13. Form of Payment of Awards 13
Article 14. Performance Measures 14
Article 15. Limitations on Transferability 14
Article 16. Beneficiary Designation 15
Article 17. Deferrals 15
Article 18. Registration and Listing Compliance 15
Article 19. Share Certificates 15
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Article 20. Rights of Employees/Directors 16
Article 21. Change in Control 16
Article 22. Amendment, Modification, and Termination 17
Article 23. Withholding 17
Article 24. Successors 18
Article 25. General Provisions and Legal Construction 18
</TABLE>
<PAGE> 4
WILLIAMS COMMUNICATIONS GROUP, INC. 1999 STOCK PLAN
ARTICLE 1. ESTABLISHMENT AND OBJECTIVES
1.1. ESTABLISHMENT OF THE PLAN. Williams Communications Group, Inc., a
Delaware corporation (the "Company"), hereby establishes an incentive
compensation plan to be known as the "Williams Communications Group, Inc. 1999
Stock Plan" (the "Plan"), as set forth in this document. The Plan permits the
grant of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation
Rights, Restricted Stock, Deferred Stock, Performance Shares, Performance Units,
Dividend Equivalents, and Stock-based Cash Awards.
Subject to approval by the Company's stockholders, the Plan shall become
effective as of _______________, 1999 (the "Effective Date").
1.2. OBJECTIVES OF THE PLAN. The objectives of the Plan are to optimize
the profitability and growth of the Company through annual and long-term
incentives which are consistent with the Company's goals and which link the
personal interests of Participants to those of the Company's stockholders; to
provide Participants with an incentive for excellence in individual performance;
and to promote teamwork among Participants.
The Plan is further intended to provide flexibility to the Company in its
ability to motivate, attract, and retain the services of Participants who make
significant contributions to the Company's success and to allow Participants to
share in the success of the Company.
ARTICLE 2. DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings set
forth below, and when the meaning is intended, the initial letter of the word
shall be capitalized:
2.1. "AFFILIATE" shall have the meaning ascribed to such term in Rule
12b-2 of the General Rules and Regulations of the Exchange Act.
2.2. "AWARD" means, individually or collectively, a grant under this
Plan of Nonqualified Stock Options, Incentive Stock Options, Stock
Appreciation Rights, Restricted Stock, Deferred Stock, Performance
Shares, Performance Units, Dividend Equivalents, Stock-based Cash
Awards, or any other right or interest relating to Shares or cash
granted under the Plan.
2.3. "AWARD AGREEMENT" means any written agreement, contract, notice to
a Participant or other instrument or document between the Company
and the Participant evidencing an Award.
2.4. "BENEFICIAL OWNER" or "BENEFICIAL OWNERSHIP" shall have the
meaning ascribed to such term in Rule 13d-3 of the General Rules
and Regulations under the Exchange Act.
2.5. "BOARD" or "BOARD OF DIRECTORS" means the Board of Directors of
the Company.
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2.6. "CAUSE" means (i) willful failure by the Employee to substantially
perform his duties (as they existed immediately prior to a Change
in Control), other than any such failure resulting from a
Disability, or (ii) gross negligence or willful misconduct of the
Employee which results in a significantly adverse effect upon the
Company or a Subsidiary, or (iii) willful violation or disregard
of the Code of Business Conduct or other published policy of the
Company by the Employee.
2.7. "CHANGE IN CONTROL" of the Company shall be deemed to have
occurred as of the first day that any one or more of the following
conditions shall have been satisfied:
(a) Any Person, other than the Company or a Related Party, is
or becomes the Beneficial Owner, directly or indirectly, of
securities of the Company representing fifty percent (50%)
or more of the combined voting power of the Company's then
outstanding securities; or
(b) Any Person, other than the Company or a Related Party,
purchases or otherwise acquires, under a tender offer,
securities representing fifty percent (50%) or more of the
combined voting power of the Company's then outstanding
securities; or
(c) During any period of two (2) consecutive years (not
including any period prior to the Effective Date),
individuals who at the beginning of such period constitute
the Board (and any new Director, whose election by the
Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the Directors then still in office who
either were Directors at the beginning of the period or
whose election or nomination for election was so approved),
cease for any reason to constitute a majority thereof;
(d) The stockholders of the Company approve a merger,
consolidation, recapitalization or reorganization of the
Company or an acquisition by the Company, or consummation
of any such transaction if stockholder approval is not
obtained, other than any such transaction which would
result in the Voting Securities outstanding immediately
prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving entity) at least fifty percent (50%) of the
total voting power represented by the Voting Securities of
such surviving entity outstanding immediately after such
transaction if the voting rights of each Voting Security
relative to the other Voting Securities were not altered in
such transaction;
(e) The stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of
the Company's assets other than any such transaction which
would result in a Related Party owning or acquiring more
than fifty percent (50%) of the assets owned by the Company
immediately prior to the transaction;
(f) The Board adopts a resolution to the effect that a Change
of Control has occurred; or
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(g) A change of control of The Williams Companies, Inc. occurs,
as determined under The Williams Companies, Inc. 1996 Stock
Plan; provided that as of the date immediately preceding
the effective date of the change of control of The Williams
Companies, Inc., securities of the Company representing
fifty percent (50%) or more of the combined voting power of
the Company's then outstanding securities are owned by The
Williams Companies, Inc.
2.8. "CODE" means the Internal Revenue Code of 1986, as amended from
time to time.
2.9. "COMMITTEE" means any committee appointed by the Board to
administer Awards to Employees, as specified in Article 3 herein.
Any such committee shall be comprised entirely of Directors.
2.10. "COVERED EMPLOYEE" means a Participant who, as of the date of
vesting and/or payout of an Award, as applicable, is one of the
group of "covered employees," as defined in the regulations
promulgated under Code Section 162(m), or any successor statute.
2.11. "DEFERRED STOCK" means a right, granted under Article 8 herein, to
receive Shares at the end of a specified deferral period.
2.12. "DIRECTOR" means any individual who is a member of the Board of
Directors of the Company; provided, however, that any Director who
is employed by the Company or any Subsidiary or Affiliate shall be
considered an Employee under the Plan.
2.13. "DISABILITY" shall have the meaning ascribed to such term in the
Company's governing long-term disability plan, or if no such plan
is applicable to the Participant, at the discretion of the Board.
2.14. "DIVIDEND EQUIVALENT" means a right granted under Article 9
herein, to receive payments equal to dividends paid on a specified
number of Shares.
2.15. "EMPLOYEE" means any employee of the Company or its Subsidiaries
or Affiliates.
2.16. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor act thereto.
2.17. "FAIR MARKET VALUE" of a Share means, as of any given date, the
closing sales price of a Share reported in the table entitled "New
York Stock Exchange Composite Transactions" contained in The Wall
Street Journal (or an equivalent successor table) for such date
or, if no such closing sales price was reported for such date, for
the most recent trading day prior to such date for which a closing
sales price was reported.
2.18. "FREESTANDING SAR" means an SAR that is granted independently of
any Options, as described in Article 7 herein.
2.19. "GOOD REASON" means the occurrence, within two (2) years following
a Change in Control, of any of the following events, unless the
Participant has consented thereto: (i) a
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material change in the Participant's duties from those assigned
to the Participant immediately prior to a Change in Control,
unless associated with a bona fide promotion of the Participant
and a commensurate increase in the Participant's compensation, in
which case the Participant shall be deemed to consent, or (ii) a
significant reduction in the authority and responsibility
assigned to the Participant, or (iii) the removal of the
Participant from, or failure to reelect the Participant to, any
corporate office of the Company or an Affiliate to which the
Participant may have been elected and was occupying immediately
prior to a Change in Control, unless associated with a bona fide
promotion of the Participant and a commensurate increase in the
Participant's compensation or in connection with the election of
the Participant to a corresponding or higher office of the
Company or an Affiliate, in each which case the Participant shall
be deemed to consent, or (iv) reduction of a Participant's Base
Salary, or (v) termination of any of the incentive compensation
plans in which the Participant shall be participating at the time
of a Change in Control, unless such plan is replaced by a
successor plan providing incentive opportunities and awards at
least as favorable to the Participant as those provided in the
plan being terminated, or (vi) amendment of any of the incentive
compensation plans in which the Participant shall be
participating at the time of a Change in Control so as to provide
for incentive opportunities and awards less favorable to the
Participant than those provided in the plan being amended, or
(vii) failure by the Company or an Affiliate to continue the
Participant as a participant in any of the incentive compensation
plans in which the Participant is participating immediately prior
to a Change in Control on a basis comparable to the basis on
which other similarly situated employees participate in such
plan, or (viii) except in relation to a wage freeze applicable to
all employees of the Company or an Affiliate, modification of the
administration of any of the incentive compensation plans so as
to adversely affect the level of incentive opportunities or
awards actually received by the Participant, or (ix) a
requirement by the Company or an Affiliate that the Participant's
principal duties be performed at a location more than fifty (50)
miles from the location where the Participant was employed
immediately preceding the Change in Control, except for travel
reasonably required in the performance of the Participant's
duties.
2.20. "INCENTIVE STOCK OPTION" or "ISO" means an option to purchase
Shares granted under Article 6 herein and which is designated as
an Incentive Stock Option and which is intended to meet the
requirements of Code Section 422.
2.21. "INSIDER" shall mean an individual who is, on the relevant date,
an officer, director or a beneficial owner of more than ten
percent (10%) of any class of the Company's equity securities that
is registered pursuant to Section 12 of the Exchange Act, all as
defined under Section 16 of the Exchange Act.
2.22. "NONQUALIFIED STOCK OPTION" or "NQSO" means an option to purchase
Shares granted under Article 6 herein and which is not intended to
meet the requirements of Code Section 422.
2.23. "OPTION" means an Incentive Stock Option or a Nonqualified Stock
Option, as described in Article 6 herein.
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2.24. "OPTION PRICE" means the price at which a Share may be purchased
by a Participant pursuant to an Option.
2.25. "PARTICIPANT" means an Employee or Director who has been selected
to receive an Award or who has outstanding an Award granted under
the Plan.
2.26. "PERFORMANCE-BASED EXCEPTION" means the performance-based
exception from the tax deductibility limitations of Code Section
162(m).
2.27. "PERFORMANCE SHARE" means an Award granted to a Participant, as
described in Article 11 herein.
2.28. "PERFORMANCE UNIT" means an Award granted to a Participant, as
described in Article 11 herein.
2.29. "PERIOD OF RESTRICTION" means the period during which (i) the
transfer of Shares of Restricted Stock is limited in some way
(based on the passage of time, the achievement of performance
goals, or upon the occurrence of other events as determined by the
Board, at its discretion), and (ii) the Shares are subject to a
substantial risk of forfeiture, as provided in Article 10 herein.
2.30. "PERSON" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d)
thereof, including a "group" as defined in Section 13(d) thereof.
2.31. "RELATED PARTY" means: (i) a majority-owned subsidiary of the
Company; (ii) an employee or group of employees of the Company or
any majority-owned subsidiary of the Company; or (iii) a trustee
or other fiduciary holding securities under an employee benefit
plan of the Company or any majority-owned subsidiary of the
Company; or (iv) a corporation owned directly or indirectly by the
stockholders of the Company in substantially the same proportion
as their ownership of securities of the Company which carry the
right to vote generally in the election of Directors.
2.32. "RESTRICTED STOCK" means an Award granted to a Participant
pursuant to Article 10 herein.
2.33. "RETIREMENT" shall have the meaning ascribed to such term in the
Company's governing tax-qualified retirement plan applicable to
the Participant, or if no such plan is applicable to the
Participant, at the discretion of the Board.
2.34. "SHARES" means the shares of common stock of the Company.
2.35. "STOCK APPRECIATION RIGHT" or "SAR" means an Award, granted alone
or in connection with a related Option, designated as an SAR,
pursuant to the terms of Article 7 herein.
2.36. "STOCK-BASED CASH AWARD" means an Award granted to a Participant,
as described in Article 11 herein.
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2.37. "SUBSIDIARY" means any corporation, partnership, joint venture, or
other entity in which the Company has a majority voting interest.
2.38. "TANDEM SAR" means an SAR that is granted in connection with a
related Option pursuant to Article 7 herein, the exercise of which
shall require forfeiture of the right to purchase a Share under
the related Option (and when a Share is purchased under the
Option, the Tandem SAR shall similarly be canceled).
ARTICLE 3. ADMINISTRATION
3.1. GENERAL. The Plan shall be administered by the Board, or (subject to
the following) by any Committee appointed by the Board. The members of the
Committee shall be appointed from time to time by, and shall serve at the
discretion of, the Board of Directors. The Board may delegate to the Committee
any or all of the administration of the Plan; provided, however, that the
administration of the Plan with respect to Awards granted to Directors may not
be so delegated. To the extent that the Board has delegated to the Committee any
authority and responsibility under the Plan, all applicable references to the
Board in the Plan shall be to the Committee. The Committee shall have the
authority to delegate administrative duties to officers or Directors of the
Company.
3.2. AUTHORITY OF THE BOARD. Except as limited by law or by the
Certificate of Incorporation or Bylaws of the Company, and subject to the
provisions herein, the Board shall have full power to select Employees and
Directors who shall participate in the Plan; determine the sizes and types of
Awards; determine the terms and conditions of Awards in a manner consistent with
the Plan; construe and interpret the Plan and any agreement or instrument
entered into under the Plan; establish, amend, or waive rules and regulations
for the Plan's administration; and (subject to the provisions of Article 22
herein) amend the terms and conditions of any outstanding Award as provided in
the Plan. Further, the Board shall make all other determinations which may be
necessary or advisable for the administration of the Plan. As permitted by law
(and subject to Section 3.1 herein), the Board may delegate its authority as
identified herein.
3.3. DECISIONS BINDING. All determinations and decisions made by the Board
pursuant to the provisions of the Plan and all related orders and resolutions of
the Board shall be final, conclusive and binding on all persons, including the
Company, its stockholders, Directors, Employees, Participants, and their estates
and beneficiaries.
ARTICLE 4. SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS
4.1. NUMBER OF SHARES AVAILABLE FOR GRANTS. Subject to adjustment as
provided in Section 4.2 herein, the number of Shares hereby reserved for
issuance to Participants under the Plan shall be __________________
(____________), no more than _________________ (_____________) of which may be
granted in the form of Restricted Shares. For purposes of this Section 4.1, the
number of Shares to which an Award relates shall be counted against the number
of Shares reserved and available under the Plan at the time of grant of the
Award, unless such number of Shares cannot be determined at that time in which
case the number of Shares actually distributed pursuant to the Award shall be
counted against the number of Shares reserved and available under the Plan at
the time of distribution; provided, however, that Awards related to or
retroactively added to, or granted in tandem with, substituted for or converted
into, other Awards shall be counted or not counted against the number of Shares
reserved and available under the Plan in accordance with
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procedures adopted by the Board so as to ensure appropriate counting but to
avoid double counting; and, provided further, that the number of Shares deemed
to be issued under the Plan upon exercise or settlement of an Award shall be
reduced by the number of Shares surrendered by the Participant or withheld by
the Company in payment of the exercise price of the Award and withholding taxes
relating to the Award.
If any Shares to which an Award relates are forfeited, or payment is made
to the Participant in the form of cash or other property other than Shares, or
the Award otherwise terminates without payment being made to the Participant in
the form of Shares, any Shares counted against the number of Shares reserved and
available under the Plan with respect to such Award shall, to the extent of any
such forfeiture, alternative payment or termination, again be available for
Awards under the Plan. Any Shares distributed pursuant to an Award may consist,
in whole or in part, of authorized and unissued Shares, or of treasury Shares,
including Shares repurchased by the Company for purposes of the Plan.
Unless and until the Board determines that an Award to a Covered Employee
shall not be designed to comply with the Performance-Based Exception, the
following rules shall apply to grants of such Awards under the Plan:
(a) STOCK OPTIONS: The maximum aggregate number of Shares that
may be granted in the form of Stock Options, pursuant to
any Award granted in any one fiscal year to any one single
Participant shall be five hundred thousand (500,000).
(b) SARS: The maximum aggregate number of Shares that may be
granted in the form of Stock Appreciation Rights, pursuant
to any Award granted in any one fiscal year to any one
single Participant shall be _________________
(_____________).
(c) PERFORMANCE SHARES/PERFORMANCE UNITS AND STOCK-BASED CASH
AWARDS: The maximum aggregate payout (determined as of the
end of the applicable performance period) with respect to
Stock-based Cash Awards or Awards of Performance Shares or
Performance Units granted in any one fiscal year to any one
Participant shall be equal to the value of
__________________ (_______________) Shares.
4.2. ADJUSTMENTS IN AUTHORIZED SHARES. In the event of any change in
corporate capitalization, such as a stock split, or a corporate transaction,
such as any merger, consolidation, separation, including a spin-off, or other
distribution of stock or property of the Company, any reorganization (whether or
not such reorganization comes within the definition of such term in Code Section
368) or any partial or complete liquidation of the Company, such adjustment
shall be made in the number and class of Shares which may be delivered under
Section 4.1, in the number and class of and/or price of Shares subject to
outstanding Awards granted under the Plan, and in the Award limits set forth in
subsections 4.1(a), 4.1(b), and 4.1(c), as may be determined to be appropriate
and equitable by the Board, in its sole discretion, to prevent dilution or
enlargement of rights; provided, however, that the number of Shares subject to
any Award shall always be a whole number.
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ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1. ELIGIBILITY. Persons eligible to participate in this Plan include all
Employees and Directors.
5.2. ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the
Board may, from time to time, select from all eligible Employees and Directors,
those to whom Awards shall be granted and shall determine the nature and amount
of each Award.
ARTICLE 6. STOCK OPTIONS
6.1. GRANT OF OPTIONS. Subject to the terms and provisions of the Plan,
Options may be granted to Participants in such number, and upon such terms, and
at any time and from time to time as shall be determined by the Board.
6.2. AWARD AGREEMENT. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the duration of the Option, the
number of Shares to which the Option pertains, and such other provisions as the
Board shall determine. The Award Agreement also shall specify whether the Option
is intended to be an ISO within the meaning of Code Section 422, or an NQSO
whose grant is intended not to fall under the provisions of Code Section 422.
6.3. OPTION PRICE. The Option Price for each grant of an Option under this
Plan shall be at least equal to one hundred percent (100%) of the Fair Market
Value of a Share on the date the Option is granted.
6.4. DURATION OF OPTIONS. Each Option granted to a Participant shall
expire at such time as the Board shall determine at the time of grant; provided,
however, that no Option shall be exercisable later than the tenth (10th)
anniversary date of its grant.
6.5. EXERCISE OF OPTIONS. Options granted under this Article 6 shall be
exercisable at such times and be subject to such restrictions and conditions as
the Board shall in each instance approve, which need not be the same for each
grant or for each Participant.
6.6. TERMINATION OF EMPLOYMENT/DIRECTORSHIP. Each Participant's Option
Award Agreement shall set forth the extent to which the Participant shall have
the right to exercise the Option following termination of the Participant's
employment or directorship with the Company. Such provisions shall be determined
in the sole discretion of the Board, shall be included in the Award Agreement
entered into with each Participant, need not be uniform among all Options issued
pursuant to this Article 6, and may reflect distinctions based on the reasons
for termination.
ARTICLE 7. STOCK APPRECIATION RIGHTS
7.1. GRANT OF SARS. Subject to the terms and conditions of the Plan, SARs
may be granted to Participants at any time and from time to time as shall be
determined by the Board. The Board may grant Freestanding SARs, Tandem SARs, or
any combination of these forms of SARs.
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The Board shall have complete discretion in determining the number of SARs
granted to each Participant (subject to Article 4 herein) and, consistent with
the provisions of the Plan, in determining the terms and conditions pertaining
to such SARs.
The grant price of a Freestanding SAR shall equal the Fair Market Value of
a Share on the date of grant of the SAR. The grant price of Tandem SARs shall
equal the Option Price of the related Option.
7.2. EXERCISE OF TANDEM SARS. Tandem SARs may be exercised for all or part
of the Shares subject to the related Option upon the surrender of the right to
exercise the equivalent portion of the related Option. A Tandem SAR may be
exercised only with respect to the Shares for which its related Option is then
exercisable.
Notwithstanding any other provision of this Plan to the contrary, with
respect to a Tandem SAR granted in connection with an ISO: (i) the Tandem SAR
will expire no later than the expiration of the underlying ISO; (ii) the value
of the payout with respect to the Tandem SAR may be for no more than one hundred
percent (100%) of the difference between the Option Price of the underlying ISO
and the Fair Market Value of the Shares subject to the underlying ISO at the
time the Tandem SAR is exercised; and (iii) the Tandem SAR may be exercised only
when the Fair Market Value of the Shares subject to the ISO exceeds the Option
Price of the ISO.
7.3. EXERCISE OF FREESTANDING SARS. Freestanding SARs may be exercised
upon whatever terms and conditions the Board, in its sole discretion, imposes
upon them.
7.4. SAR AGREEMENT. Each SAR grant shall be evidenced by an Award
Agreement that shall specify the grant price, the term of the SAR, and such
other provisions as the Board shall determine.
7.5. TERM OF SARS. The term of an SAR granted under the Plan shall be
determined by the Board, in its sole discretion; provided, however, that such
term shall not exceed ten (10) years.
7.6. PAYMENT OF SAR AMOUNT. Upon exercise of an SAR, a Participant shall
be entitled to receive payment from the Company in an amount determined by
multiplying:
(a) The difference between the Fair Market Value of a Share on
the date of exercise and the grant price; by
(b) The number of Shares with respect to which the SAR is
exercised.
At the discretion of the Board, the payment upon SAR exercise may be in
cash, in Shares of equivalent value, or in some combination thereof. The Board's
determination regarding the form of SAR payout shall be set forth in the Award
Agreement pertaining to the grant of the SAR.
7.7. TERMINATION OF EMPLOYMENT/DIRECTORSHIP. Each SAR Award Agreement
shall set forth the extent to which the Participant shall have the right to
exercise the SAR following termination of the Participant's employment or
directorship with the Company. Such provisions shall be determined in the sole
discretion of the Board, shall be included in the Award Agreement entered into
with
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Participants, need not be uniform among all SARs issued pursuant to the Plan,
and may reflect distinctions based on the reasons for termination.
ARTICLE 8. DEFERRED STOCK
8.1. GRANT OF DEFERRED STOCK. Subject to the terms and provisions of the
Plan, the Board, at any time and from time to time, may grant Shares of Deferred
Stock to Participants in such amounts as the Board shall determine.
8.2. DEFERRED STOCK AGREEMENT. Each Deferred Stock grant shall be
evidenced by a Deferred Stock Award Agreement that shall specify the Period(s)
of Deferral, the number of Shares of Deferred Stock granted, and such other
provisions as the Board shall determine.
8.3. OTHER RESTRICTIONS. The Board shall impose such other conditions
and/or restrictions on any Shares of Deferred Stock granted pursuant to the Plan
as it may deem advisable including, without limitation, a requirement that
Participants pay a stipulated purchase price for each Share of Deferred Stock,
restrictions based upon the achievement of specific performance goals
(Company-wide, divisional, and/or individual), time-based restrictions on
vesting following the attainment of the performance goals, and/or restrictions
under applicable federal or state securities laws.
Except as otherwise provided in this Article 8, Shares of Deferred Stock
covered by each Deferred Stock grant made under the Plan shall become freely
transferable by the Participant after the last day of the applicable Period of
Deferral.
8.4. VOTING RIGHTS. Participants holding Shares of Deferred Stock granted
hereunder shall have no voting rights with respect to those Shares during the
Period of Deferral.
8.5. DIVIDENDS AND OTHER DISTRIBUTIONS. During the Period of Deferral,
Participants holding Shares of Deferred Stock granted hereunder shall have no
rights to receive regular cash dividends paid with respect to the underlying
Shares, unless and only to the extent that the Board shall award Dividend
Equivalents with respect to such Deferred Stock. If the grant or vesting of
Deferred Stock granted to a Covered Employee is designed to comply with the
requirements of the Performance-Based Exception, the Board may apply any
restrictions it deems appropriate to the payment of Dividend Equivalents with
respect to such Deferred Stock, such that the Dividend Equivalents and/or the
Deferred Stock maintain eligibility for the Performance-Based Exception.
8.6. TERMINATION OF EMPLOYMENT/DIRECTORSHIP. Each Deferred Stock Award
Agreement shall set forth the extent to which the Participant shall have the
right to receive Deferred Stock following termination of the Participant's
employment or directorship with the Company. Such provisions shall be determined
in the sole discretion of the Board, shall be included in the Award Agreement
entered into with each Participant, need not be uniform among all Shares of
Deferred Stock issued pursuant to the Plan, and may reflect distinctions based
on the reasons for termination.
ARTICLE 9. DIVIDEND EQUIVALENTS
Subject to the terms and provisions of the Plan, the Board, at any time
and from time to time, may grant Dividend Equivalents to Participants in such
amounts as the Board shall determine. Dividend Equivalents shall confer upon the
Participant rights to receive payments equal to interest or
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<PAGE> 14
dividends, when and if paid, with respect to a number of Shares determined by
the Board. The Board may provide that Dividend Equivalents shall be paid or
distributed when accrued or shall be deemed to have been reinvested in
additional Shares or additional Awards or otherwise reinvested.
ARTICLE 10. RESTRICTED STOCK
10.1. GRANT OF RESTRICTED STOCK. Subject to the terms and provisions of
the Plan, the Board, at any time and from time to time, may grant Shares of
Restricted Stock to Participants in such amounts as the Board shall determine.
10.2. RESTRICTED STOCK AGREEMENT. Each Restricted Stock grant shall be
evidenced by a Restricted Stock Award Agreement that shall specify the Period(s)
of Restriction, the number of Shares of Restricted Stock granted, and such other
provisions as the Board shall determine.
10.3. OTHER RESTRICTIONS. The Board shall impose such other conditions
and/or restrictions on any Shares of Restricted Stock granted pursuant to the
Plan as it may deem advisable including, without limitation, a requirement that
Participants pay a stipulated purchase price for each Share of Restricted Stock,
restrictions based upon the achievement of specific performance goals
(Company-wide, divisional, and/or individual), time-based restrictions on
vesting following the attainment of the performance goals, and/or restrictions
under applicable federal or state securities laws.
The Company may retain the certificates representing Shares of Restricted
Stock in the Company's possession until such time as all conditions and/or
restrictions applicable to such Shares have been satisfied.
Except as otherwise provided in this Article 10, Shares of Restricted
Stock covered by each Restricted Stock grant made under the Plan shall become
freely transferable by the Participant after the last day of the applicable
Period of Restriction.
10.4. VOTING RIGHTS. Participants holding Shares of Restricted Stock
granted hereunder may be granted the right to exercise full voting rights with
respect to those Shares during the Period of Restriction.
10.5. DIVIDENDS AND OTHER DISTRIBUTIONS. During the Period of Restriction,
Participants holding Shares of Restricted Stock granted hereunder may be
credited with regular cash dividends paid with respect to the underlying Shares
while they are so held. The Board may apply any restrictions to the dividends
that the Board deems appropriate. Without limiting the generality of the
preceding sentence, if the grant or vesting of Restricted Shares granted to a
Covered Employee is designed to comply with the requirements of the
Performance-Based Exception, the Board may apply any restrictions it deems
appropriate to the payment of dividends declared with respect to such Restricted
Shares, such that the dividends and/or the Restricted Shares maintain
eligibility for the Performance-Based Exception.
10.6. TERMINATION OF EMPLOYMENT/DIRECTORSHIP. Each Restricted Stock Award
Agreement shall set forth the extent to which the Participant shall have the
right to receive Restricted Shares following termination of the Participant's
employment or directorship with the Company. Such provisions shall be determined
in the sole discretion of the Board, shall be included in the Award
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Agreement entered into with each Participant, need not be uniform among all
Shares of Restricted Stock issued pursuant to the Plan, and may reflect
distinctions based on the reasons for termination.
ARTICLE 11. PERFORMANCE UNITS, PERFORMANCE SHARES, AND STOCK-BASED CASH AWARDS
11.1. GRANT OF PERFORMANCE UNITS/SHARES AND STOCK-BASED CASH AWARDS.
Subject to the terms of the Plan, Performance Units, Performance Shares, and/or
Stock-based Cash Awards may be granted to Participants in such amounts and upon
such terms, and at any time and from time to time, as shall be determined by the
Board.
11.2. VALUE OF PERFORMANCE UNITS/SHARES AND STOCK-BASED CASH AWARDS. Each
Performance Unit shall have an initial value that is established by the Board at
the time of grant. Each Performance Share shall have an initial value equal to
the Fair Market Value of a Share on the date of grant. Each Stock-based Cash
Award shall have a value as may be determined by the Board. The Board shall set
performance goals in its discretion which, depending on the extent to which they
are met, will determine the number and/or value of Performance Units/Shares and
Stock-based Cash Awards that will be paid out to the Participant. For purposes
of this Article 11, the time period during which the performance goals must be
met shall be called a "Performance Period."
11.3. EARNING OF PERFORMANCE UNITS/SHARES AND STOCK-BASED CASH AWARDS.
Subject to the terms of this Plan, after the applicable Performance Period has
ended, the holder of Performance Units/Shares and Stock-based Cash Awards shall
be entitled to receive payout on the number and value of Performance
Units/Shares and Stock-based Cash Awards earned by the Participant over the
Performance Period, to be determined as a function of the extent to which the
corresponding performance goals have been achieved.
11.4. FORM AND TIMING OF PAYMENT OF PERFORMANCE UNITS/SHARES AND
STOCK-BASED CASH AWARDS. Payment of earned Performance Units/Shares and
Stock-based Cash Awards shall be made following the close of the applicable
Performance Period. Subject to the terms of this Plan, the Board, in its sole
discretion, may pay earned Performance Units/Shares and Stock-based Cash Awards
in the form of cash or in Shares (or in a combination thereof) which have an
aggregate Fair Market Value equal to the value of the earned Performance
Units/Shares and Stock-based Cash Awards at the close of the applicable
Performance Period. Such Shares may be granted subject to any restrictions
deemed appropriate by the Board. The determination of the Board with respect to
the form of payout of such Awards shall be set forth in the Award Agreement
pertaining to the grant of the Award.
11.5. TERMINATION OF EMPLOYMENT/DIRECTORSHIP DUE TO DEATH, DISABILITY, OR
RETIREMENT. Unless determined otherwise by the Board and set forth in the
Participant's Award Agreement, in the event the employment or directorship of a
Participant is terminated by reason of death, Disability, or Retirement during a
Performance Period, the Participant shall receive a payout of the Performance
Units/Shares or Stock-based Cash Awards which is prorated, as specified by the
Board in its discretion.
Payment of earned Performance Units/Shares or Stock-based Cash Awards
shall be made at a time specified by the Board in its sole discretion and set
forth in the Participant's Award Agreement.
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11.6. TERMINATION OF EMPLOYMENT/DIRECTORSHIP FOR OTHER REASONS. In the
event that a Participant's employment or directorship terminates for any reason
other than those reasons set forth in Section 11.5 herein, all Performance
Units/Shares and Stock-based Cash Awards shall be forfeited by the Participant
to the Company unless determined otherwise by the Board, as set forth in the
Participant's Award Agreement.
ARTICLE 12. OTHER STOCK-BASED CASH AWARDS
The Board is authorized, subject to limitations under applicable law, to
grant such other Awards that are denominated or payable in, valued in whole or
in part by reference to, or otherwise based on, or related to, Shares, as deemed
by the Board to be consistent with the purposes of the Plan including, without
limitation, Shares awarded which are not subject to any restrictions or
conditions, convertible or exchangeable debt securities or other rights
convertible or exchangeable into Shares, Awards valued by reference to the value
of securities of or the performance of the Company or specified Affiliates, and
Awards payable in the securities of the Company or Affiliates. Except as may be
provided elsewhere herein, Shares granted under this Article 12 shall be
purchased for such consideration, paid for by such methods and in such forms,
including, without limitation, cash, Shares, outstanding Awards or other
property, as the Board shall determine, provided, however, that the value of
such consideration shall not be less per share than the Fair Market Value of a
Share on the date of grant of such purchase right and in no event shall be less
per share than the par value of a Share.
ARTICLE 13. FORM OF PAYMENT OF AWARDS
Subject to the terms of the Plan and any applicable Award Agreement,
payments or substitutions for payments upon the grant or exercise of any Award
may be made in such forms as the Board shall determine, including, without
limitation, cash, Deferred Stock, Shares, other Awards of other property, and
may be made in a single payment or substitution in installments or on a deferred
basis, in each case in accordance with rules and procedures established by the
Board. Such rules and procedures may include, without limitation, provisions for
the payment or crediting of reasonable interest on installment or deferred
payments on the grant or crediting of Dividend Equivalents in respect of
installment or deferred payments denominated in Shares. The Board may also
permit or require the deferral of any award payment, subject to rules and
procedures as may be established, which may include provisions for the payment
or crediting of interest, or Dividend Equivalents, including converting such
credits into deferred Share equivalents.
ARTICLE 14. PERFORMANCE MEASURES
Unless and until the Committee proposes for shareholder vote and
shareholders approve a change in the general performance measures set forth in
this Article 14, the attainment of which may determine the degree of payout
and/or vesting with respect to Awards to Covered Employees which are designed to
qualify for the Performance-Based Exception, the performance measure(s) to be
used for purposes of such grants shall be chosen from among the following:
(a) Annual net income to common stock;
(b) Operating profit;
(c) Annual return on capital or equity;
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(d) Annual earnings per share;
(e) Annual cash flow provided by operations;
(f) Changes in annual revenues; and/or
(g) Strategic business criteria, consisting of one or more objectives
based on meeting specified revenue, market penetration, geographic
business expansion goals, cost targets, and goals relating to
acquisitions or divestitures.
The Board shall have the discretion to adjust the determinations of the
degree of attainment of the preestablished performance goals; provided, however,
that Awards which are designed to qualify for the Performance-Based Exception,
and which are held by a Covered Employee, may not be adjusted upward (the Board
shall retain the discretion to adjust such Awards downward).
In the event that applicable tax and/or securities laws change to permit
Board discretion to alter the governing performance measures without obtaining
shareholder approval of such changes, the Board shall have sole discretion to
make such changes without obtaining shareholder approval. In addition, in the
event that the Board determines that it is advisable to grant Awards which shall
not qualify for the Performance-Based Exception, the Board may make such grants
without satisfying the requirements of Code Section 162(m).
ARTICLE 15. LIMITATIONS ON TRANSFERABILITY
Awards and other rights under the Plan shall not be transferable by a
Participant except by will or the laws of descent and distribution (or, in the
event of the Participant's death, to a designated beneficiary), and, if
exercisable, shall be exercisable during the lifetime of a Participant only by
such Participant or such Participant's guardian or legal representative;
provided, however, that except as otherwise provided by the Board, Awards and
other rights may be transferred to one or more Persons during the lifetime of
the Participant in connection with the Participant's estate planning, and may be
exercised by such transferees in accordance with the terms of such Award
consistent with the registration of the offer and sale of Shares on Form S-8 or
Form S-3 or such other registration form of the Securities and Exchange
Commission as may then be filed and effective with respect to the Plan, and
permitted by the Board. Awards and other rights under the Plan may not be
pledged, mortgaged, hypothecated, or otherwise encumbered to or in favor of any
Person other than the Company or an Affiliate, and shall not be subject to any
lien, obligation or liability of a Participant or transferee to any Person other
than the Company or any Affiliate.
ARTICLE 16. BENEFICIARY DESIGNATION
If so determined by the Board, a Participant may, in the manner
established by the Board, designate a beneficiary or beneficiaries to exercise
the rights of the Participant, and to receive any distribution with respect to
any Award upon the death of the Participant. Each designation shall revoke all
prior designations by the same Participant, shall be in a form prescribed by the
Company, and will be effective only when filed by the Participant in writing
with the Company during the Participant's lifetime. In the absence of any such
designation, benefits remaining unpaid at the Participant's death shall be paid
to the Participant's estate. A transferee, beneficiary, guardian, legal
representative or other Person claiming any rights under the Plan from or
through any
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Participant shall be subject to all the terms and conditions of the Plan and any
Award Agreement applicable to such Participant, except to the extent the Plan
and Award Agreement otherwise provide with respect to such Persons, and to any
additional restrictions or limitations deemed necessary or appropriate by the
Board.
ARTICLE 17. DEFERRALS
The Board may permit or require a Participant to defer such Participant's
receipt of the payment of cash or the delivery of Shares that would otherwise be
due to such Participant by virtue of the exercise of an Option or SAR, the lapse
or waiver of restrictions with respect to Restricted Stock, or the satisfaction
of any requirements or goals with respect to Performance Units/Shares. If any
such deferral election is required or permitted, the Board shall, in its sole
discretion, establish rules and procedures for such payment deferrals.
ARTICLE 18. REGISTRATION AND LISTING COMPLIANCE
The Company shall not be obligated to issue or deliver Shares in
connection with any Award or take any other action under the Plan in a
transaction subject to the registration requirements of the Securities Act of
1933, as amended, or any other federal or state securities law, any requirement
under any listing agreement between the Company and any national securities
exchange or automated quotation system, or any other law, regulation, or
contractual obligation of the Company, until the Company is satisfied that such
laws, regulations and any other obligations have been satisfied.
ARTICLE 19. SHARE CERTIFICATES
All certificates for Shares delivered under the terms of the Plan shall
be subject to such stop-transfer orders and other restrictions as the Board may
deem advisable under federal or state securities laws, rules and regulations
thereunder, and the rules of any national securities exchange or automated
quotation system on which the Shares are listed or quoted. The Board may cause a
legend to be placed on any such certificates to make appropriate reference to
such restrictions or limitations that may be applicable to the Shares. In
addition, during any period in which Awards or Shares are subject to
restrictions or limitations under the Plan or any Award Agreement, or during any
period during which delivery or receipt of an Award or Shares has been deferred
by the Board or a Participant, the Board may require the Participant to enter
into an agreement providing that certificates representing Shares issuable or
issued pursuant to an Award shall remain in the physical custody of the Company
or such person as the Board may designate.
ARTICLE 20. RIGHTS OF EMPLOYEES/DIRECTORS
20.1. NO RIGHT TO EMPLOYMENT. Nothing contained in the Plan shall confer,
and no grant of an Award shall be construed as conferring, upon any Participant
any right to continue in the employ of the Company or any Affiliate or to
interfere in any way with the right of the Company or any Affiliate to terminate
a Participant's employment at any time or increase or decrease a Participant's
compensation from the rate in existence at the time of granting of an Award.
20.2. PARTICIPATION. No Employee or Director shall have the right to be
selected to receive an Award under this Plan, or, having been so selected, to be
selected to receive a future Award.
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ARTICLE 21. CHANGE IN CONTROL
21.1. TREATMENT OF OUTSTANDING AWARDS. If, within two (2) years following
a Change in Control, a Participant's employment with the Company and its
Affiliates is terminated voluntarily for Good Reason (excluding any transfer to
the Company or its Affiliates), or involuntarily (other than due to Cause,
death, Disability or Retirement):
(a) Any and all Options and SARs granted hereunder shall become
immediately vested and exercisable;
(b) Any restriction periods and restrictions imposed on
Restricted Shares which are not performance-based shall
lapse; and
(c) The target payout opportunities attainable under all
outstanding Awards of performance-based Restricted Stock,
Deferred Stock, Performance Units, Performance Shares, and
Stock-based Cash Awards shall be deemed to have been fully
earned for the entire Performance Period(s) as of the
effective date of termination. The vesting of all Awards
denominated in Shares shall be accelerated as of the
effective date of termination, and there shall be paid out
to Participants within thirty (30) days following the
effective date of termination a pro rata number of shares
based upon an assumed achievement of all relevant targeted
performance goals and upon the length of time within the
Performance Period which has elapsed prior to termination.
Awards denominated in cash shall be paid pro rata to
participants in cash within thirty (30) days following the
effective date of termination, with the proration
determined as a function of the length of time within the
Performance Period which has elapsed prior to termination,
and based on an assumed achievement of all relevant
targeted performance goals.
21.2. TERMINATION, AMENDMENT, AND MODIFICATIONS OF CHANGE IN CONTROL
PROVISIONS. Notwithstanding any other provision of this Plan (but subject to the
limitations of Section 22.3 hereof) or any Award Agreement provision, the
provisions of this Article 21 may not be terminated, amended, or modified on or
after the date of a Change in Control to affect adversely any Award theretofore
granted under the Plan without the prior written consent of the Participant with
respect to said Participant's outstanding Awards; provided, however, the Board
may terminate, amend, or modify this Article 21 at any time and from time to
time prior to the date of a Change in Control.
21.3. POOLING OF INTERESTS ACCOUNTING. Notwithstanding any other provision
of the Plan to the contrary, in the event that the consummation of a Change in
Control is contingent on using pooling of interests accounting methodology, the
Board may take any action necessary to preserve the use of pooling of interests
accounting.
ARTICLE 22. AMENDMENT, MODIFICATION, AND TERMINATION
22.1. AMENDMENT, MODIFICATION, AND TERMINATION. The Board may amend,
alter, suspend, discontinue or terminate the Plan without the consent of
stockholders or Participants, except that any amendment or alteration shall be
subject to the approval of the Company's stockholders at or before the next
annual meeting of stockholders for which the record date is after the date of
such Board action if such stockholder approval is required by any federal or
state law or regulation or the rules of
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any stock exchange or automated quotation system on which the Stock may be
listed or quoted, and the Board may otherwise, in its discretion, determine to
submit other such amendments or alterations to stockholders for approval;
provided, however, that, without the consent of a Participant, no amendment,
alteration, suspension, discontinuation or termination of the Plan may
materially and adversely affect the rights of such Participant under any Award
previously granted to him.
Unless earlier terminated by the Board, the Plan will terminate when no
Shares remain reserved and available for issuance and the Company has no further
obligation with respect to any Award granted under the Plan.
22.2. ADJUSTMENT OF AWARDS UPON THE OCCURRENCE OF CERTAIN UNUSUAL OR
NONRECURRING EVENTS. The Board may make adjustments in the terms and conditions
of, and the criteria included in, Awards in recognition of unusual or
nonrecurring events (including, without limitation, the events described in
Section 4.2 hereof) affecting the Company or the financial statements of the
Company or of changes in applicable laws, regulations, or accounting principles,
whenever the Board determines that such adjustments are appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan; provided that, unless the Board determines
otherwise at the time such adjustment is considered, no such adjustment shall be
authorized to the extent that such authority would be inconsistent with the
Plan's meeting the requirements of Section 162(m) of the Code, as from time to
time amended.
22.3. AWARDS PREVIOUSLY GRANTED. Notwithstanding any other provision of
the Plan to the contrary (but subject to Section 21.3 hereof), no termination,
amendment, or modification of the Plan shall adversely affect in any material
way any Award previously granted under the Plan, without the written consent of
the Participant holding such Award.
22.4. COMPLIANCE WITH CODE SECTION 162(M). At all times when Code Section
162(m) is applicable, all Awards granted under this Plan shall comply with the
requirements of Code Section 162(m); provided, however, that in the event the
Board determines that such compliance is not desired with respect to any Award
or Awards available for grant under the Plan, then compliance with Code Section
162(m) will not be required. In addition, in the event that changes are made to
Code Section 162(m) to permit greater flexibility with respect to any Award or
Awards available under the Plan, the Board may, subject to this Article 22, make
any adjustments it deems appropriate.
ARTICLE 23. WITHHOLDING
23.1. TAX WITHHOLDING. The Company and its affiliates shall have the power
and the right to deduct or withhold, or require a Participant to remit to the
Company, an amount sufficient to satisfy federal, state, and local taxes,
domestic or foreign, required by law or regulation to be withheld with respect
to any taxable event arising as a result of this Plan.
23.2. SHARE WITHHOLDING. With respect to withholding required upon the
exercise of Options or SARs, upon the lapse of restrictions on Restricted Stock,
or upon any other taxable event arising as a result of Awards granted hereunder,
Participants may elect, subject to the approval of the Board, to satisfy the
withholding requirement, in whole or in part, by having the Company withhold
Shares having a Fair Market Value on the date the tax is to be determined equal
to the minimum statutory total tax which could be imposed on the transaction.
All such elections shall be irrevocable, made in
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writing, signed by the Participant, and shall be subject to any restrictions or
limitations that the Board, in its sole discretion, deems appropriate.
ARTICLE 24. SUCCESSORS
All obligations of the Company and its affiliates under the Plan with
respect to Awards granted hereunder shall be binding on any successor to the
Company, whether the existence of such successor is the result of a direct or
indirect purchase, merger, consolidation, or otherwise, of all or substantially
all of the business and/or assets of the Company.
ARTICLE 25. GENERAL PROVISIONS AND LEGAL CONSTRUCTION
25.1. UNFUNDED STATUS OF AWARDS. The Plan is intended to constitute an
"unfunded " plan for incentive and deferred compensation. With respect to any
payments not yet made to a Participant pursuant to an Award, nothing contained
in the Plan or any Award shall give any such Participant any rights that are
greater than those of a general creditor of the Company.
25.2. NO FRACTIONAL SHARES. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award. The Board shall determine whether
cash, other Awards or other property shall be issued or paid in lieu of
fractional Shares or whether such fractional Shares or any rights thereto shall
be forfeited or otherwise eliminated.
25.3. GENDER AND NUMBER. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
25.4. SEVERABILITY. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
25.5. REQUIREMENTS OF LAW. The granting of Awards and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
25.6. SECURITIES LAW COMPLIANCE. With respect to Insiders, transactions
under this Plan are intended to comply with all applicable conditions of Rule
16b-3 or its successors under the 1934 Act. To the extent any provision of the
plan or action by the Board fails to so comply, it shall be deemed null and
void, to the extent permitted by law and deemed advisable by the Board.
25.7. GOVERNING LAW. To the extent not preempted by federal law, the Plan,
and all agreements hereunder, shall be construed in accordance with and governed
by the laws of the state of Delaware.
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EXHIBIT 10.53
WILLIAMS PENSION PLAN
(AS EFFECTIVE APRIL 1, 1998)
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WILLIAMS PENSION PLAN
(As Effective April 1, 1998)
TABLE OF CONTENTS
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ARTICLE I Purpose; Effective Date; Merger
1.1 Purpose..................................................................... 1
1.2 Effective Date.............................................................. 1
1.3 Merger of Certain Plans..................................................... 1
ARTICLE II Definitions
2.1 Accrued Benefit............................................................. 2
2.2 Actuarial Equivalent........................................................ 3
2.3 Actuary..................................................................... 4
2.4 Administrative Committee.................................................... 4
2.5 Affiliate................................................................... 4
2.6 Alternate Payee............................................................. 4
2.7 Annuity Starting Date....................................................... 5
2.8 Appendix.................................................................... 5
2.9 Applicable Election Period.................................................. 5
2.10 Authorized Leave of Absence................................................. 5
2.11 Average Monthly Compensation................................................ 5
2.11A Basic Benefit............................................................... 5
2.12 Beneficiary................................................................. 5
2.13 Benefits Committee.......................................................... 5
2.14 Benefit Service............................................................. 5
2.15 Board of Directors.......................................................... 6
2.16 Code........................................................................ 6
2.17 Code Section 415 Compensation............................................... 6
2.18 Company..................................................................... 6
2.19 Compensation................................................................ 6
2.19A Compensation Credit......................................................... 6
2.20 Computation Period.......................................................... 7
2.21 Contribution Accumulation................................................... 7
2.22 Covered Compensation........................................................ 8
2.22A Credit Date................................................................. 8
2.23 Death Benefit............................................................... 8
2.24 Deferred Vested Pension..................................................... 8
2.25 Disability.................................................................. 8
2.26 Disability Pension.......................................................... 9
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2.27 Early Pension............................................................... 9
2.28 Early Retirement Incentive Program.......................................... 9
2.29 Effective Date.............................................................. 9
2.30 Eligibility Service......................................................... 9
2.31 Eligible Employee........................................................... 10
2.32 Employee.................................................................... 10
2.33 Employer.................................................................... 10
2.34 Employer Contributions...................................................... 10
2.35 Employment Date............................................................. 10
2.36 ERISA....................................................................... 10
2.37 Hour of Service............................................................. 10
2.37A Interest Credit............................................................. 12
2.37B Initial Credit.............................................................. 12
2.38 Key Employee................................................................ 12
2.39 Leased Employee............................................................. 12
2.40 Lump Sum.................................................................... 13
2.41 Mandatory Contribution Benefit.............................................. 13
2.41A Nonservice Participant...................................................... 13
2.42 Normal Pension.............................................................. 13
2.43 Normal Retirement Date...................................................... 13
2.44 One Year Break-In-Service................................................... 13
2.45 Participant................................................................. 13
2.45A Past Service................................................................ 13
2.46 Pension..................................................................... 13
2.46A Pension Account............................................................. 13
2.47 Plan........................................................................ 14
2.48 Plan Administrator.......................................................... 14
2.48A Plan Interest Rate.......................................................... 14
2.49 Plan Year................................................................... 14
2.50 Pre-ERISA Former Employee................................................... 14
2.51 Pre-REA Former Employee..................................................... 14
2.52 Prior Employee.............................................................. 15
2.53 Prior Service............................................................... 15
2.54 Prior Williams Plan......................................................... 15
2.55 Procedure................................................................... 15
2.56 Qualified Joint and Survivor Pension........................................ 15
2.57 Qualified Domestic Relations Order.......................................... 15
2.58 Related Plan................................................................ 15
2.59 Retirement.................................................................. 16
2.60 Separation Benefit.......................................................... 16
2.60A Service Participant......................................................... 16
2.61 Single Life Annuity......................................................... 16
2.62 Social Security Retirement Age.............................................. 16
2.63 Special Participant......................................................... 16
2.64 Spouse...................................................................... 16
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2.65 Spouse's Consent............................................................ 16
2.66 Surviving Spouse............................................................ 17
2.67 Survivor Pension............................................................ 17
2.68 Superseded Plan............................................................. 17
2.68A Table 1..................................................................... 17
2.68B Table 2..................................................................... 17
2.69 Termination of Employment................................................... 18
2.69A Transitional Participant................................................... 18
2.70 Trust....................................................................... 18
2.71 Trust Agreement............................................................. 18
2.72 Trustee..................................................................... 19
2.73 Trust Fund.................................................................. 19
2.74 Vesting Service............................................................. 19
2.75 Vested Participant.......................................................... 19
2.76 Year of Service............................................................. 19
ARTICLE III Participation
3.1 Participation............................................................... 21
3.2 Reemployment................................................................ 21
ARTICLE IV Contributions
4.1 Participant Contributions................................................... 22
4.2 Company Contributions....................................................... 22
4.3 Rollover Contributions...................................................... 22
ARTICLE V Retirement Benefits
5.1 Normal and Late Retirement.................................................. 23
5.2 Early Retirement............................................................ 23
5.3 Disability Retirement....................................................... 23
5.4 Deferred Vested Retirement.................................................. 25
5.5 Special Participant Retirement.............................................. 25
5.6 Transferred Employee Retirement............................................. 25
5.7 Early Retirement Incentive Program.......................................... 25
5.8 Annuity Starting Date....................................................... 26
5.9 Distribution Requirements................................................... 27
5.10 Required Information........................................................ 27
5.11 Direct Rollovers............................................................ 27
ARTICLE VI Amount of Pension
6.1 Normal and Late Pension..................................................... 29
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6.2 Early Pension............................................................... 29
6.3 Disability Pension.......................................................... 31
6.4 Deferred Vested Pension..................................................... 31
6.5 Maximum Pensions............................................................ 33
6.6 Minimum Benefit............................................................. 36
6.7 Special Participant Retirement Benefits..................................... 36
6.8 Transferred Employee Retirement Benefits.................................... 36
ARTICLE VII Separation and Death Benefits
7.1 Separation Benefit.......................................................... 37
7.2 Post-Disability Death Benefit............................................... 37
7.3 Special Participants Severance and Death Benefits........................... 37
7.4 Designation of Beneficiary.................................................. 37
7.5 Additional Death Benefit.................................................... 38
7.6 Death Benefit for Certain Employees Who Retired
in 1985 or 1986........................................................... 38
7.7 Loss of Eligibility to Receive Death Benefit................................ 39
7.8 Waiver of Survivor Pension Coverage for Spouse.............................. 39
ARTICLE VIII Normal and Optional Forms of Payment
8.1 Normal Form of Pension...................................................... 40
8.2 Optional Forms of Pension................................................... 40
8.3 Other Benefits Cancelled by Option.......................................... 44
8.4 Return of Contribution Accumulation......................................... 44
8.5 Special Restrictions on Payment............................................. 44
8.6 Domestic Relations Orders................................................... 45
8.7 Unclaimed Benefits.......................................................... 45
8.8 Facility of Payment......................................................... 45
8.9 Loss of Eligibility to Receive Continuation Benefit......................... 45
ARTICLE IX Employment Transfers
9.1 Transfers Between Employers................................................. 47
9.2 Transfers to Non-Employer Affiliates........................................ 47
ARTICLE X Administration
10.1 Fiduciaries................................................................. 48
10.2 Allocation of Responsibilities Among Named Fiduciaries...................... 48
10.3 Provisions Concerning the Benefits Committee................................ 49
10.4 Provisions Concerning the Administrative Committee.......................... 50
10.5 Provisions Concerning Investment Committee.................................. 51
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10.6 Delegation of Responsibilities; Bonding..................................... 51
10.7 No Joint Fiduciary Responsibilities......................................... 52
10.8 Information to be Supplied by Employer...................................... 52
10.9 Records..................................................................... 52
10.10 Fiduciary Capacity.......................................................... 52
ARTICLE XI Trustee
11.1 Appointment of Trustee...................................................... 53
11.2 Responsibility of Trustee and Investment Manager(s)......................... 53
11.3 Funding and Investment Policy............................................... 53
11.4 Bonding..................................................................... 53
11.5 Standard of Conduct of Trustee.............................................. 53
11.6 Payment of Expenses......................................................... 53
ARTICLE XII Limitations
12.1 Reemployment of Retired Employees........................................... 54
12.2 Governmental Restrictions................................................... 54
ARTICLE XIII Amendments
13.1 Right to Amend.............................................................. 56
13.2 Plan Merger or Consolidation................................................ 56
ARTICLE XIV Adoption and Withdrawal
14.1 Procedure for Adoption...................................................... 57
14.2 Withdrawal.................................................................. 57
14.3 Adoption By Affiliate Contingent Upon Qualification......................... 57
ARTICLE XV Termination
15.1 Right to Terminate.......................................................... 58
15.2 Employer Consolidation or Merger............................................ 58
15.3 Allocation and Liquidation of Trust Fund.................................... 58
15.4 Manner of Distribution...................................................... 59
15.5 Amounts Returnable to an Employer........................................... 59
ARTICLE XVI Top-Heavy Provisions
16.1 Definitions................................................................. 61
16.2 Application of Top-Heavy Provisions......................................... 62
16.3 Top-Heavy Determination..................................................... 63
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16.4 Vesting Requirements........................................................ 63
16.5 Minimum Benefit............................................................. 64
16.6 Adjustment in Maximum Limitation on Annual Benefits......................... 64
ARTICLE XVII Miscellaneous
17.1 Nonguarantee of Employment.................................................. 66
17.2 Rights to Trust Assets...................................................... 66
17.3 Nonalienation of Benefits................................................... 66
ARTICLE XVIII Procedure for Identification and Processing of
Qualified Domestic Relations Orders
18.1 Definitions................................................................. 67
18.2 Status of Order............................................................. 67
18.3 Procedural Requirements..................................................... 68
18.4 Segregation of Assets and Payments.......................................... 69
18.5 Modification of Procedure................................................... 69
ARTICLE XIX Medical Benefits for Certain Eligible Retirees
19.1 Definitions and Construction................................................ 70
19.2 Eligibility for Payment of Medical Benefits................................. 70
19.3 Funding of Medical Benefits................................................. 71
19.4 Separate Account-Recordkeeping.............................................. 71
19.5 Expenses.................................................................... 71
19.6 Non-Diversion of Separate Account Assets.................................... 71
19.7 Forfeiture.................................................................. 72
ARTICLE XX Claims Procedure
20.1 Initial Claim for Benefits.................................................. 73
20.2 Review of Claim Denial...................................................... 73
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Appendix I Special Provisions Applicable to Class No. 1 (Pilots and co-pilots of
Employer aircraft)
Appendix II Special Provisions Applicable to Class No. 2 (Certain Employees of The
Williams Companies, Louisiana Resources Company, Paraffine-Williams
Company, Williams Exploration Company, Williams Realty Corp., Williams
Realty Developments, Inc. and Williams Center Forum, Inc.)
Appendix III Special Provisions Applicable to Class No. 3 (Certain Employees of Agrico
Chemical Company, Agrico Chemical Company (Florida), Agrico Overseas
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Company, S.A., Agrico Overseas Investment Corporation, and North
Carolina Phosphate Corporation)
Appendix IV Special Provisions Applicable to Class No. 4 (Certain Employees formerly
employed by Kerr-McGee Chemical Corporation)
Appendix V Special Provisions Applicable to Class No. 5 (Certain Employees formerly
employed by Kennecott Copper Corporation)
Appendix VI Special Provisions Applicable to Class No. 6 (Certain Employees of identified
miscellaneous companies)
Appendix VII Special Provisions Applicable to Class No. 7
(Certain Employees entitled to receive monthly pension
payments provided under public retirement programs of
foreign countries)
Appendix VIII Special Provisions Applicable to Class No. 8 (Hourly Employees of Williams
Pipe Line Company)
Appendix IX Special Provisions Applicable to Class No. 9 (Certain Union Employees of
Agrico Chemical Company)
Appendix X Special Provisions Applicable to Class No. 10 (Certain former Salaried
Employees of Edgcomb Metals Company)
Appendix XI Special Provisions Applicable to Class No. 11 (Certain former Production
and Maintenance Employees of Edgcomb Metals Company)
Appendix XII Special Provisions Applicable to Class No. 12 (Certain former Employees of
Agrico Chemical Company)
Appendix XIII Special Provisions Applicable to Class No. 13 (Certain Employees of
Williams Pipe Line Company)
Appendix XIV Special Provisions Applicable to Class No. 14 (Certain Employees of
Williams Pipe Line Company)
Appendix XV Special Provisions Applicable to Class No. 15 (Certain Union Employees of
Edgcomb Metals Company)
Appendix XVI Special Provisions Applicable to Class No. 16 (Certain Participants in the
Northwest Plan)
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Appendix XVII Special Provisions Applicable to Class No. 17 (Certain Retired Participants
Receiving Pensions)
Appendix XVIII Special Provisions Applicable to Class No. 18 (Certain Employees of
Williams Natural Gas Company)
Appendix XIX Special Provisions Applicable to Class No. 19 (Certain Employees of
Williams Telecommunications Group, Inc. and subsidiaries)
Appendix XX Special Provisions Applicable to Class No. 20 (Certain Participants in the
Transco Plan)
Appendix XXI Special Provisions Applicable to Class No. 21 (Certain Participants in the
Texas Gas Plan)
Appendix XXII Special Provisions Applicable to Class No. 22 (Certain Participants in the
Pekin Plan)
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WILLIAMS PENSION PLAN
ARTICLE I
Purpose; Effective Date; Merger
1.1 Purpose. The purpose of this restated and amended Plan is to
provide retirement and incidental benefits for all Eligible Employees who
complete a period of service and otherwise become eligible hereunder. The
benefits provided by this Plan will be paid from a Trust Fund established by the
Company and will be in addition to the benefits Employees are entitled to
receive under the federal Social Security Act.
1.2 Effective Date. The terms and provisions of this amended and
restated Plan shall be effective on and after April 1, 1998, and shall apply
only to Eligible Employees who are credited with an Hour of Service for services
rendered on or after such date, unless this Plan expressly provides for an
earlier effective date. An Employee who participated in a Prior Williams Plan or
this Plan on or before March 31, 1998, and was not credited with an Hour of
Service for services rendered on or after April 1, 1998, shall remain subject to
the terms and provisions of the plan under which he participated, as in effect
when he ceased to be an Employee, unless such Prior Williams Plan or this Plan
expressly provide otherwise. In this regard, it is expressly provided that the
provisions of Section 2.76(c) with respect to crediting equivalent Hours of
Service shall apply to the determination of all benefits which become payable on
or after December 31, 1986, without regard to the date of a Participant's
Termination of Employment; provided, however, that in no event shall the Benefit
Service of any Participant taken into account be reduced thereby. See also
Sections 7.5 and 7.6.
1.3 Merger of Certain Plans. This Plan is a continuation of The
Williams Companies, Inc. Consolidated Pension Plan, as in effect on March 31,
1998, and is the successor to the Northwest Energy Company Employees Retirement
Income Plan, The Williams Companies Consolidated Pension Plan, as adopted by
Agrico Chemical Company for Salaried and Hourly Employees, The Williams
Companies Consolidated Pension Plan, as adopted by Williams Pipe Line Company,
the Retirement Plan for Salaried Employees of the Milford Division of Edgcomb
Steel Company, the Retirement Plan for Production and Maintenance Employees of
the Milford Division of Edgcomb Steel Company, the Pekin Energy Company
Non-Contributory Retirement Income Plan for Salaried Employees and the MAPCO
Inc. and Subsidiaries Pension Plan.
Benefits payable under this Plan are payable to all Participants in
accordance with the terms of this Plan, unless a Participant is a member of a
class of Eligible Employees for which a different schedule of benefits has been
provided, as described in an Appendix to this Plan.
1
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ARTICLE II
Definitions
The following terms, whenever used in the following capitalized forms,
shall have the meanings set forth below, unless modified by an Appendix attached
hereto:
2.1 "Accrued Benefit" means, with respect to a Service Participant and
a Transitional Participant, subject to the limitations of Section 6.5 and
Article XVI and to the proviso below, a monthly amount payable commencing as of
the first day of the month coincident with or next following his Normal
Retirement Date or as of his later Annuity Starting Date, which amount when
expressed as a Single Life Annuity, is equal to the amount determined below
accrued as of March 31, 1998, under The Williams Companies, Inc. Consolidated
Pension Plan by a Service Participant and as of his Termination of Employment by
a Transitional Participant, reduced for the distribution of a Participant's
Contribution Accumulation, if any, made in accordance with Section 7.1 and for
any reductions, if any, pursuant to an applicable Appendix, where:
such amount is equal to the sum of (a), (b) and (c), where:
(a) is equal to one and four-tenths percent (1.4%) of
the Participant's Average Monthly Compensation multiplied by
his Benefit Service;
(b) is equal to forty-five one-hundredths percent
(0.45%) of the amount, if any, by which such Participant's
Average Monthly Compensation exceeds his Covered Compensation
multiplied by the lesser of (i) his total Benefit Service, or
(ii) thirty-five (35), and
(c) is equal to two tenths percent (0.2%) of the
Participant's Average Monthly Compensation multiplied by the
number, if any, of his full and fractional years of Benefit
Service in excess of thirty-five (35),
with his Average Monthly Compensation, Benefit Service and Covered
Compensation determined as of his Termination of Employment (or, if no
Termination of Employment is involved, as of the date of determination)
in the determination of such amount and the component parts thereof.
Provided, however, in no event, except for reductions, if any, pursuant to an
applicable Appendix, shall a Participant's Accrued Benefit be less than his
accrued benefit determined in accordance with the terms and provisions of the
Plan and any applicable Appendix in effect as of March 31, 1998; and provided
further, that the Accrued Benefit of any Participant whose Compensation is
affected by the provisions of Code Section 401(a)(17) shall in no event exceed
the greater of (A) the sum of (i) his accrued benefit determined in accordance
with the terms and provisions of the Plan and any applicable Appendix in effect
as of December 31, 1993, as if he incurred a Termination of Employment as of
such date and without regard to any amendment to the Plan after such date, plus
(ii) his Accrued Benefit determined based only on his Benefit Service credited
after
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1993 with application of the limitations of Code Section 401(a)(17) to only such
Benefit Service, or (B) his Accrued Benefit determined based on his total
Benefit Service with application of the limitations of Code Section 401(a)(17)
to all such Benefit Service, with the foregoing limitations administered in
accordance with the applicable regulations promulgated under Code Section
401(a)(17) so as to provide a "frozen accrued benefit with extended wear-away"
under such regulations, which regulations are incorporated herein by this
reference.
2.2 "Actuarial Equivalent" means, for purposes of computing optional
forms of benefits and for purposes of computing any adjustments called for under
the terms of this Plan for benefits commencing other than upon the Normal
Retirement Date of a Participant, the following factors and assumptions, unless
a provision of this Plan or of an Appendix expressly provides for other
assumptions or factors:
(a) With respect to the present value of the Pension based
upon his Accrued Benefit of a Participant who has satisfied the
requirements of Section 5.1 or 5.2 and the Survivor Pension based upon
such Pension of such Participant, such present value shall be
determined as the greater of the following:
(1) Solely with respect to benefits payable during
Plan Years for which a Plan Interest Rate is determinable, the
amount determined by application of the Plan Interest Rate and
the Applicable Mortality Table; or
(2) The amount determined by application of the
Applicable Interest Rate applicable for the month of December
1995 for distributions in January, February, March and April,
1996, and thereafter the Applicable Interest Rate for the
month of March, June, September or December nearest preceding
the date of distribution by at least two (2) months and the
Applicable Mortality Table.
(b) With respect to the present value of the Pension based
upon his Accrued Benefit of a Participant who is not described in
subsection (a) and the Survivor Pension based upon such Pension of such
Participant, such present value shall be the amount determined by
application of the Applicable Interest Rate applicable for the month of
September immediately preceding the Plan Year containing the date of
distribution and the Applicable Mortality Table.
(c) With respect to the value of the Pension of a Participant
based upon his Basic Benefit and the Survivor Pension based upon such
Pension, such present value shall be the amount determined by
application of the Applicable Interest Rate applicable for the month of
September immediately preceding the Plan Year containing the date of
distribution and the Applicable Mortality Table.
(d) For purposes of this Section 2.2, the following terms,
whenever used in the capitalized form, shall have the meanings set
forth below:
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(1) "Applicable Interest Rate" means the applicable
interest rate prescribed by the Commissioner of Internal
Revenue in revenue rulings, notices or other guidance
published in the Internal Revenue Bulletin applicable for the
particular month as required in the context of this Section
2.2.
(2) "Applicable Mortality Table" means the applicable
mortality table prescribed by the Commissioner of Internal
Revenue in revenue rulings, notices and other guidance
published in the Internal Revenue Bulletin, as in effect on
the date as of which present value is being determined.
(3) "Plan Interest Rate" means an interest rate equal
to the PBGC Interest Rate established for the month of
December, March, June or September nearest preceding the date
of distribution by at least two (2) months, compounded
annually from the date of determination. Provided, however, in
the event the PBGC Interest Rate ceases to be determined by
the Pension Benefit Guaranty Corporation in the manner such
rate is determined as of January 1, 1996, the Plan Interest
Rate shall cease to exist as of the end of the final Plan Year
for which the Plan Interest Rate is determined pursuant to
this subparagraph (3).
(4) "PBGC Interest Rate" means the interest rate or
rates, as applicable, which would be used, as of the first day
of any month, by the Pension Benefit Guaranty Corporation for
purposes of determining the present value of a lump sum
distribution of Accrued Benefits under the Plan, if the Plan
had terminated on such date with insufficient assets to
provide benefits guaranteed by the Pension Benefit Guaranty
Corporation on such date.
2.3 "Actuary" means the individual actuary or firm of actuaries
selected by the Company to provide actuarial services in connection with the
administration of this Plan.
2.4 "Administrative Committee" means the committee described in Section
10.4.
2.5 "Affiliate" means (1) a corporation, trade or business, if it and
an Employer are members of a controlled group of corporations as defined in Code
Section 414 (b) or under common control as defined under Code Section 414(c);
(2) an organization, if it and an Employer are members of an affiliated service
group, as defined in Code Section 414(m); and (3) solely for the purposes set
forth in Code Section 414(o), any other entity, if it and an Employer are
required to be aggregated pursuant to regulations under Code Section 414(o).
Solely for the purposes of applying the limitations set forth in this Plan on
maximum benefits, the standard of control under Code Sections 414(b) and 414(c)
shall be deemed to be "more than 50%" rather than " at least 80% ".
2.6 "Alternate Payee" means an alternate payee described in the
Procedure.
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2.7 "Annuity Starting Date" means the first day for which an amount
which is required to be paid under this Plan as an annuity or otherwise is
actually paid, whether by reason of Retirement, death or Disability, as
determined in accordance with Section 5.8 hereof.
2.8 "Appendix" means one of the appendices attached hereto and made a
part of this Plan.
2.9 "Applicable Election Period" means:
(a) In the case of an election to waive a Qualified Joint and
Survivor Pension or to revoke such waiver, the ninety-day period ending
on the Annuity Starting Date; and
(b) In the case of any Spouse's Consent required under Section
8.5 before the distribution of the Accrued Benefit of a Participant can
begin, the ninety-day period ending on the Annuity Starting Date.
2.10 "Authorized Leave of Absence" means any absence authorized by the
Employer under the Employer's personnel practices granted in a uniform and
nondiscriminatory manner.
2.11 "Average Monthly Compensation" means the sum of a person's
Compensation earned during his highest paid, four (4) Plan Years of employment
(excluding his first and last partial years of employment) within the ten (10)
Plan Years prior to his Normal Retirement Date, or if earlier, prior to his
Termination of Employment (or if appropriate, the date of determination),
divided by forty-eight (48). If a person has less than four (4) Plan Years of
employment, Average Monthly Compensation shall mean the sum of the person's
Compensation earned for all full Plan Years (excluding his first and last
partial years) of employment, divided by the number of months during this period
for which he received such Compensation.
2.11A "Basic Benefit" means the monthly amount payable to a Vested
Participant commencing as of his Normal Retirement Date in the form of a Single
Life Annuity which can be provided by the amount credited to his Pension Account
pursuant to the applicable provisions of Table 1.
2.12 "Beneficiary" means any person or entity designated under Section
7.6 to receive a Death Benefit.
2.13 "Benefits Committee" means the committee described in Section
10.3.
2.14 "Benefit Service" means the sum of the full and fractional Years
of Service credited to a Participant after the Effective Date under the
provisions of this Plan, plus, for an Eligible Employee who was a Participant in
a Prior Williams Plan before the Effective Date, his Benefit Service (or
comparable service) determined under such Prior Williams Plan as of March 31,
1998; provided, however, that Benefit Service (or comparable service)
attributable to a period of Eligibility Service which is disregarded under
Section 2.30 shall be excluded.
5
<PAGE> 15
2.15 "Board of Directors" means the board of directors of the Company.
2.16 "Code" means the Internal Revenue Code of 1986, as amended, and
any subsequent Internal Revenue Code. If there is a subsequent Internal Revenue
Code, any references herein to Internal Revenue Code sections shall be deemed to
refer to comparable sections of any subsequent Internal Revenue Code.
2.17 "Code Section 415 Compensation" means a Participant's taxable
income as reported or reportable on Form W-2 for federal income tax purposes,
increased by salary reduction amounts contributed to The Williams Companies,
Inc. Investment Plus Plan or similar plan designated by the Administrative
Committee and salary reduction amounts contributed to any cafeteria plan or
flexible benefits plan established by the Company in accordance with Code
Section 125 and related sections of the Code.
2.18 "Company" means The Williams Companies, Inc. a corporation formed
under the laws of the State of Delaware.
2.19 "Compensation" means the first one hundred and fifty thousand
dollars ($150,000) (or such other amount as may be permitted under Code Section
401(a)(17)) of the total wages or salary paid to a Participant each Plan Year by
an Employer or an Affiliate, including base pay, sick pay paid by an Employer,
overriding royalties, amounts paid under a phantom override plan, bonuses
(unless specifically excluded under a written bonus arrangement such as The
Williams Companies, Inc. Executive Incentive Compensation Plan), if any, when
paid, salary reduction amounts contributed to The Williams Companies, Inc.
Investment Plus Plan or a similar plan designated by the Administrative
Committee, salary reduction amounts contributed to any cafeteria plan or
flexible benefits plan established by the Company in accordance with Code
Section 125 and related sections of the Code, but excluding severance pay, cost
of living pay, housing pay, pay for unused vacation, relocation pay (including
mortgage interest differential) and all such other taxable and non-taxable
fringe benefits and extraordinary compensation as determined by the
Administrative Committee in its sole and absolute discretion. For purposes of
determining an Accrued Benefit, if an Employee is credited with less than two
thousand eighty (2,080) Hours of Service for determining Benefit Service during
a Plan Year, his Compensation for that Plan Year shall be the product of his
actual Compensation for such Plan Year as described above multiplied by a
fraction the numerator of which is two thousand eighty (2,080) and the
denominator of which is the number of Hours of Service with which he is credited
for such Plan Year.
2.19A "Compensation Credit" means the amount deemed credited to a
Participant's Pension Account based upon his Compensation for a Plan Year (or
any part of a Plan Year and for a disabled Participant accruing Compensation
Credit pursuant to Section 5.3(b), at the annual rate of his Compensation as of
the Plan Year his Disability commenced), with such amount deemed to be credited
as of the Credit Date for such Plan Year and determined in accordance with the
following:
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<PAGE> 16
(a) Service Participant.
<TABLE>
<CAPTION>
CREDIT RATE ON CREDIT RATE FOR
CREDIT RATE ON COMPENSATION ABOVE PAST SERVICE*** ON
AGE* ON CREDIT DATE ALL COMPENSATION WAGE BASE** ALL COMPENSATION
- ------------------- ---------------- ------------------ ----------------
<S> <C> <C> <C>
Prior to 30 4.50% + 1.00% + 0.30% x Past Service
30 through 39 6.00% + 2.00% + 0.30% x Past Service
40 through 49 8.00% + 3.00% + 0.30% x Past Service
50 and older 10.00% + 5.00% + 0.30% x Past Service
</TABLE>
(b) Nonservice Participant.
<TABLE>
<CAPTION>
CREDIT RATE
CREDIT RATE ON ON COMPENSATION
AGE* ON CREDIT DATE ALL COMPENSATION ABOVE WAGE BASE**
- ------------------- ---------------- -----------------
<S> <C> <C>
Prior to 30 4.50% + 1.00%
30 through 39 6.00% + 2.00%
40 through 49 8.00% + 3.00%
50 and older 10.00% + 5.00%
</TABLE>
* Age means actual age measured in years attained as of the applicable
Credit Date.
** Wage Base means the taxable wage base under the Federal Insurance
Contributions Act applicable for the Plan Year of the applicable Credit
Date (Plan Year of Disability for a disabled Participant accruing
Compensation Credit pursuant to Section 5.3).
*** Past Service means Benefit Service credited as of March 31, 1998.
2.20 "Computation Period" means, with respect to each type of service
to be measured, the following periods of time:
(a) With respect to Eligibility Service, the
twelve-consecutive month period following the first Employment Date of
an Employee (or, if such Eligibility Service can be disregarded under
the break-in-service provisions of this Plan or a Prior Williams Plan,
his first Employment Date thereafter) and anniversaries thereof;
(b) With respect to Vesting Service, a Plan Year; and
(c) With respect to Benefit Service, a Plan Year.
2.21 "Contribution Accumulation" means an amount equal to the sum of:
(a) the value of a Participant's accumulated employee
contributions, if any, and applicable interest credited thereon under
the Prior Williams Plans, determined as of December 31, 1986; plus
(b) interest on the amount determined under subsection (a),
compounded annually from December 31, 1986 to the earliest of (i)
December 31, 1987, (ii) the
7
<PAGE> 17
Participant's Normal Retirement Date, or (iii) date of distribution, at
the rate of five percent (5%) per annum; plus
(c) interest on the amounts determined under subsections (a)
and (b), compounded annually from January 1, 1988 to the earlier of (i)
the Participant's Normal Retirement Date, or (ii) the date of
determination, at such rate or rates as required under Code Section
411(c)(2)(C) for each Plan Year; plus
(d) If the date of determination is prior to such
Participant's Normal Retirement Date, interest at such rate as required
by Section 2.2, compounded annually, from the date of determination to
the earlier of (i) such Participant's Normal Retirement Date, or (ii)
the date such Participant's Contribution Accumulation is distributed in
accordance with Article V or Article VII.
2.22 "Covered Compensation" means, for any Plan Year (except as
provided in Section 5.3 concerning determination of a Disability Pension) and
with respect to each Participant, the average (without indexing) of the social
security taxable wage bases in effect for each calendar year during the
thirty-five-calendar-year-period ending with the calendar year such Participant
attains (or will attain) his Social Security Retirement Age. Such
thirty-five-calendar-year-period shall be used for each Participant regardless
of the year of birth of such Participant. In determining any Participant's
Covered Compensation for any Plan Year, the social security taxable wage base
for such Plan Year (and each subsequent Plan Year) shall be assumed to be the
same as the social security taxable wage base in effect as of the first day of
such Plan Year. A Participant's Covered Compensation for any Plan Year after
such thirty-five-calendar-year-period is such Participant's Covered Compensation
for the Plan Year in which such Participant attained his Social Security
Retirement Age. A Participant's Covered Compensation for any Plan Year prior to
such thirty-five-calendar-year-period is the social security taxable wage base
in effect as of the first day of such Plan Year. Each Participant's Covered
Compensation shall be automatically adjusted for each Plan Year, to the extent
his Covered Compensation is then subject to adjustment under this Section 2.22.
2.22A "Credit Date" means (i) with respect to Compensation Credits, the
last day of the applicable Plan Year referenced in the context in which such
term is used, and (ii) with respect to Interest Credits, the last day of each
quarter of each Plan Year.
2.23 "Death Benefit" means the benefit provided under Article VII of
this Plan to the Surviving Spouse or other Beneficiary of a Participant.
2.24 "Deferred Vested Pension" means the type of Pension described in
Section 5.4.
2.25 "Disability" means a physical or mental condition which (a)
satisfies the initial requirements for disability payments under the Employer
maintained long-term disability plan, or (b) if no long-term disability plan is
maintained by an Employer for such Participant, the presence of a condition
that, as of a date designated by the Administrative Committee, totally and
permanently prevents the Participant, in the judgment of the Administrative
Committee, from
8
<PAGE> 18
engaging in any substantial gainful employment with his Employer, and which (1)
did not arise while the Participant was engaged in or as a result of having
engaged in a criminal act, (2) did not result from addiction to narcotics or
other drugs, or a self-inflicted injury while sane or insane, and (3) did not
result from voluntary or involuntary service in the armed forces of the United
States or any foreign country, which prevents a return to employment with an
Employer and for which the person receives a veteran's disability pension. A
determination of Disability shall be based on competent medical evidence
satisfactory to the Administrative Committee. Disability shall be considered to
have ended if, prior to the Normal Retirement Date of a Participant, (a) he
engages in any substantial gainful activity, except for such employment as is
found by the Administrative Committee to be for the primary purpose of
rehabilitation or not incompatible with a finding of total and permanent
disability, or (b) he has sufficiently recovered, in the opinion of the
Administrative Committee based on a medical examination by a doctor or clinic
appointed by the Administrative Committee, to be able to engage in regular
employment with an Employer, or (c) he refuses to undergo any medical
examination requested by the Administrative Committee, provided that a medical
examination shall not be required more frequently than twice in any calendar
year, or (d) the Participant irrevocably elects not to be treated as suffering
from a Disability.
2.26 "Disability Pension" means the type of Pension described in
Section 5.3.
2.27 "Early Pension" means the type of Pension described in Section
5.2.
2.28 "Early Retirement Incentive Program" means the type of program
described in Section 5.7.
2.29 "Effective Date" means April 1, 1998, the general effective date
of this amendment and restatement.
2.30 "Eligibility Service" means all of the full and partial Years of
Service of an Employee with an Employer or Affiliate and, effective as of
January 1, 1984, any other service with the Company or an Affiliate as a Leased
Employee, if such service would have constituted a Year of Service under the
applicable provisions of this Plan, if the Leased Employee had been a common law
employee of the Company. Eligibility Service shall not include:
(a) Years of Service before April 1, 1998, if under the
break-in-service provisions of this Plan or an applicable Prior
Williams Plan in effect on March 31, 1998, such service was not taken
into account in determining such Employee's Eligibility Service; and
(b) Years of Service credited before a One Year
Break-in-Service, if an Employee has no vested interest in his Accrued
Benefit derived from Employer Con tributions at such time and the
number of consecutive One Year Breaks-in-Service equals or exceeds the
greater of (i) five (5) or (ii) the Years of Service earned by the
Employee before the first One Year Break-in-Service.
9
<PAGE> 19
Years of Service that are not taken into account by reason of the exclusions set
forth above shall not be taken into account in applying the provisions of this
Section 2.30 to a subsequent One Year Break-in-Service.
2.31 "Eligible Employee" means any Employee of an Employer, but does
not include:
(a) A Leased Employee;
(b) an Employee who is a member of a group of Employees
represented by a collective bargaining representative, unless a
currently effective collective bargaining agreement between his
Employer and the collective bargaining representative of the group of
Employees of which he is a member expressly provides for coverage by
this Plan or the Prior Williams Plan that was merged into this Plan;
(c) an Employee who, after the Effective Date, is then
accruing a benefit under the terms of any employee pension benefit plan
maintained outside of this Plan at such time, sponsored by an Employer
and intended to meet the requirements of Code Section 401(a);
(d) an Employee who is rehired after his Annuity Starting
Date;
(e) an Employee who is not a resident of the United States and
not a citizen of the United States;
(f) a nonresident alien;
(g) a weekly-paid employee employed at a retail petroleum
convenience store in any capacity other than a Store Manager;
(h) a seasonal employee, a temporary employee, a term
employee, or an employee not employed on a regularly scheduled basis;
(i) a person who has a written employment contract or other
contract for services, unless such contract expressly provides that
such person is an employee;
(j) a person who is paid through the payroll of a temporary
agency or similar organization;
(k) a person who has a written contract with an Employer which
states either that such person is not an employee or that such person
is not entitled to receive employee benefits from a Participating
Company for services under such contract; or;
(l) a person excluded by the document of adoption of an
Employer.
10
<PAGE> 20
2.32 "Employee" means any common law employee of an Employer or
Affiliate, and any person granted such status in accordance with an Employer's
uniform and nondiscriminatory policies regarding an Authorized Leave of Absence.
2.33 "Employer" means the Company and any Affiliate which, pursuant to
the provisions of Article XIV, has adopted this Plan.
2.34 "Employer Contributions" mean the contributions by Employers to
the Trust for this Plan and the similar contributions made by Employers to the
Prior Williams Plans.
2.35 "Employment Date" means the day an Employee first earns an Hour of
Service, or in the case of an Employee whose Eligibility Service and Vesting
Service can be disregarded under the break-in-service provisions of this Plan or
a Prior Williams Plan, the first day following his last One Year
Break-in-Service in which the Employee earns an Hour of Service.
2.36 "ERISA" means the Employee Retirement Income Security Act of 1974,
as from time to time amended.
2.37 "Hour of Service" means a unit of service used by the Plan to
determine an Employee's Years of Service credited as follows:
(a) each hour for which the Employee is paid, or entitled to
payment, directly or indirectly, for the performance of duties from an
Employer or an Affiliate;
(b) each hour for which backpay, irrespective of mitigation of
damages, is awarded to the Employee or agreed to by the Employer or an
Affiliate;
(c) each hour an Employee is paid or entitled to payment by an
Employer or an Affiliate on account of a period of time during which no
duties are performed due to vacation, holiday, illness, incapacity
(including disability), lay-off, jury duty, military duty or leave of
absence. An Hour of Service for which an Employee is directly or
indirectly paid or entitled to payment on account of a period during
which the Employee performed no duties shall not be credited to the
Employee, if such payment is made or due under a plan maintained solely
for the purpose of complying with any applicable worker's compensation,
disability insurance, or unemployment compensation law. Hours of
Service also shall not be credited for a payment which solely
reimburses the Employee for medical or medically related expenses
incurred by the Employee. Not more than five hundred one (501) Hours of
Service shall be credited under this subsection (c) to the Employee on
account of any single continuous period during which the Employee
performs no duties (whether or not such period occurs in a single
Computation Period). For purposes of this subsection (c), a payment
shall be deemed to be made by or due from an Employer regardless of
whether such payment is made by or due from an Employer directly, or
indirectly through, among others, a trust fund, insurer or other entity
to which an Employer contributes or pays premiums and regardless of
whether contributions made or
11
<PAGE> 21
due to the trust fund, insurer or other entity are for the benefit of
particular employees or are on behalf of a group of employees in the
aggregate;
(d) Solely for purposes of determining whether an Employee has
incurred a One Year Break-in-Service, an Employee who is not otherwise
credited with an Hour of Service under subsection (a), (b) or (c),
above, shall be credited with an Hour of Service for each additional
hour which is part of an Employee's customary work week with an
Employer or Affiliate during which the Employee is on an unpaid
Authorized Leave of Absence, provided the Employee resumes employment
with an Employer or Affiliate upon the expiration of such Authorized
Leave of Absence. For purposes of this subsection (d), an Employee's
customary work week will consist of five (5), eight-hour days;
(e) Solely for purposes of determining whether a One Year
Break-in-Service has occurred for purposes of determining Eligibility
Service, Vesting Service and Years of Participation (but not for
purposes of Benefit Service), an Employee who is absent from work
beginning on or after January 1, 1985 for maternity or paternity
reasons and who is not otherwise credited with an Hour of Service under
subsections (a), (b), (c) or (d) above, shall receive credit for the
Hours of Service for which he would have been regularly scheduled had
the Employee performed duties during such absence for an Employer or
Affiliate, or in the absence of a regularly scheduled number of hours,
forty (40) hours per week (or eight (8) hours per day). For purposes of
such determination, an absence from work for maternity or paternity
reasons means an absence (i) by reason of the pregnancy of the
Employee, (ii) by reason of the birth of a child of such Employee,
(iii) by reason of the placement of a child with the Employee in
connection with the adoption of such child by the Employee, or (iv) for
purposes of caring for such child for a period beginning immediately
following such birth or placement. Hours of Service credited for
purposes of such determination shall be credited in the Computation
Period in which such absence begins, if necessary to prevent a One Year
Break-in-Service in such period, or, in all other cases, in the next
following Computation Period. In no event will more than five hundred
one (501) Hours of Service be credited for any single continuous period
of time during which the person did not or would not have performed
duties. The Committee may, in its discretion, require an Employee who
is absent from work for maternity or paternity reasons to furnish
information to the Committee to establish that the Employee's absence
from work is for maternity or paternity reasons and the number of days
of such absence. The Company reserves the right to terminate the
employment of any Employee who is absent from work without
authorization, without regard to whether such Employee is entitled to
be credited for Hours of Service pursuant to this subsection (e);
(f) The same Hours of Service shall not be credited more than
once under the foregoing subsections. The determination of Hours of
Service for reasons other than the performance of duties shall be made
in accordance with the provisions of Labor Department Regulations,
C.F.R. Section 2530.200b-2(b) (1976); and Hours of Service shall be
credited to Computation Periods in accordance with the provisions of
Labor Department Regulations, C.F.R. Section 2530.200b-2(c) (1976).
12
<PAGE> 22
2.37A "Interest Credit" means the amount deemed credited to a
Participant's Pension Account based upon the balance in his Pension Account on
each Credit Date in a Plan Year (prior to the inclusion of the Compensation
Credit, if any, for such Plan Year) multiplied by the Plan Interest Rate
applicable for such Plan Year.
2.37B "Initial Credit" means the amount credited to a Service
Participant's Pension Account as of April 1, 1998 (or his date of rehire, if
applicable), determined in accordance with the provisions of Table 2 and any
Appendix or Appendices applicable to such Participant.
2.38 "Key Employee" means each Employee and former Employee described
in Section 16.1(d).
2.39 "Leased Employee" means an individual who is not in the employ of
an Employer or an Affiliate and who, pursuant to an agreement between an
Employer or an Affiliate and any other person ('leasing organization'), provides
services to such Employer or Affiliate and has provided services to an Employer
or an Affiliate on a substantially full-time basis for a period of at least one
year, with such services being (i) prior to January 1, 1997, of the type
historically performed by employees in the business field of such Employer or
Affiliate, or (ii) after December 31, 1996, performed under the primary
direction or control of such Employer or Affiliate. Provided, however, if such
individuals constitute less than twenty percent of the non-highly compensated
workforce (within the meaning of Code Section 414(n)(5)(C)(ii)) of such Employer
or Affiliate and the Affiliates of each of them, such an individual shall not be
included in such meaning if such leasing organization covers such an individual
in a money purchase pension plan which provides immediate participation, full
and immediate vesting and a non-integrated contribution formula equal to at
least ten percent of such individual's annual compensation (as defined in Code
section 415(c)(3)); and provided further, if such individual shall be deemed to
be, or treated as, an Employee of an Employer or an Affiliate, any contributions
or benefits provided by such leasing organization which are attributable to
services of such individual performed for an Employer or an Affiliate shall be
treated as provided by such Employer or Affiliate.
2.40 "Lump Sum" means the optional form of payment described in Section
8.2(d).
2.41 "Mandatory Contribution Benefit" means a monthly benefit provided
by mandatory contributions made by certain Participants to certain Prior
Williams Plans during such period as such contributions were required. Such
benefit, when expressed as a Single Life Annuity, shall be a monthly amount
payable commencing on the applicable Annuity Starting Date equal to the value of
his Contribution Accumulation converted to an annuity in such form using the
interest rate required by Section 2.2 as of the determination date, adjusted in
accordance with Section 8.2 if paid in an optional form of payment.
2.41A "Nonservice Participant" means an active Participant who is not a
Service Participant.
2.42 "Normal Pension" means the type of Pension described in Section
5.1.
13
<PAGE> 23
2.43 "Normal Retirement Date" means the date on which a Participant
attains (or would have attained if he had lived) age sixty-five (65). The
Accrued Benefit and Basic Benefit of a Participant who is an Employee on the
date he attains age sixty-five (65) shall become nonforfeitable on and after
such date.
2.44 "One Year Break-In-Service" means a Computation Period within
which an Employee is credited with not more than five hundred (500) Hours of
Service.
2.45 "Participant" means each person who is participating in this Plan
pursuant to the provisions of Article III, including a Nonservice Participant
and a Service Participant.
2.45A "Past Service" means, with respect to a Service Participant, his
Benefit Service credited for periods ending prior to April 1, 1998 under a Prior
Williams Plan.
2.46 "Pension" means a series of monthly amounts which are payable to a
person who is entitled to receive benefits pursuant to this Plan.
2.46A "Pension Account" means a hypothetical account maintained for
recordkeeping purposes only on behalf of each Participant to record each
Participant's Initial Credit, if any, and the amount which would have
accumulated (i) if contributions had been made for each Plan Year of such
Participant's active participation equal to his Compensation Credit, and (ii) if
such Compensation Credits, an Initial Credit, if any, and Interest Credits had
accumulated with interest at the applicable Plan Interest Rate until his Annuity
Starting Date. An Eligible Employee whose Employment Date is on or after April
1, 1998 (or, if before such date, he is not credited with one-year of
Eligibility Service as of such date) shall have a hypothetical account
maintained for crediting Compensation Credit and Interest Credit, if any, with
respect to the period commencing with his Employment Date and ending with the
first day of the month coincident with or immediately following the first
anniversary of his Employment Date; provided, however, in the event such
Eligible Employee does become a Participant on such anniversary date, the amount
in such account shall be forfeited.
2.47 "Plan" means the Williams Pension Plan, as herein amended and
restated, and as hereafter from time to time amended.
2.48 "Plan Administrator" means the person, persons or group appointed
to act as Plan Administrator under Article X.
2.48A "Plan Interest Rate" means the rate determined as the Applicable
Interest Rate pursuant to Section 2.2(c).
2.49 "Plan Year" means the twelve (12) consecutive month period
beginning on January 1 and ending December 31.
2.50 "Pre-ERISA Former Employee" means each former Employee with a
nonforfeitable right to an Accrued Benefit under a Prior Williams Plan who:
14
<PAGE> 24
(a) was credited with at least one (1) Hour of Service
thereunder on or after September 2, 1974, but who was not credited with
any service under a Prior Williams Plan after December 31, 1975;
(b) who was alive on August 23, 1984; and
(c) who had not yet begun to receive his benefits under or a
Prior Williams Plan as of August 23, 1984.
2.51 "Pre-REA Former Employee" means each former Employee with a
nonforfeitable right to an Accrued Benefit derived from Employer Contributions
to this Plan or a Prior Williams Plan who:
(a) was credited with at least one (1) Hour of Service
thereunder after December 31, 1975, but who was not credited with any
service under Prior Williams Plan on or after August 23, 1984;
(b) who had been credited with at least ten (10) Years of
Service when he incurred a Termination of Employment;
(c) who was alive on August 23, 1984; and
(d) who had not yet begun to receive his benefits under a
Prior Williams Plan as of August 23, 1984.
2.52 "Prior Employee" means any Participant, other than a person whose
Employment Date is with Edgcomb Metals Company or its predecessor, whose
Employment Date is prior to July 1, 1978.
2.53 "Prior Service" means the number of Years of Service recognized as
Years of Vesting Service under a Prior Williams Plan as of March 31, 1998, for
purposes of determining the nonforfeitable right of a Participant to his Accrued
Benefit derived from Employer Contributions as of any relevant date prior to
April 1, 1998.
2.54 "Prior Williams Plan" means (a) The Williams Companies
Consolidated Pension Plan, the Northwest Energy Company Employees Retirement
Income Plan, The Williams Companies Consolidated Pension Plan, as adopted by
Agrico Chemical Company for Salaried and Hourly Employees, The Williams
Companies Consolidated Pension Plan, as adopted by Williams Pipe Line Company,
including the separate plan provisions for hourly Employees, the Retirement Plan
for Salaried Employees of the Milford Division of Edgcomb Steel Company, the
Retirement Plan for Production and Maintenance Employees of the Milford Division
of Edgcomb Steel Company, as each such plan existed on and prior to December 31,
1986; (b) the Pekin Energy Company Non-Contributory Retirement Income Plan for
Salaried Employees as such Plan existed on April 30, 1996; (c) The Williams
Companies, Inc. Consolidated Pension Plan and the MAPCO
15
<PAGE> 25
Inc. and Subsidiaries Pension Plan, as each such plan existed on and prior to
March 31, 1998; and (d) the Superseded Plan.
2.55 "Procedure" means the Procedure for Identification and Processing
of Qualified Domestic Relations Orders, which is described in Article XVIII.
2.56 "Qualified Joint and Survivor Pension" means a monthly payment for
the life of the Participant and, if the Participant is married on the date the
payment of such Pension begins, a monthly payment to such Spouse after his death
for life in an amount equal to one hundred percent (100%) in the case of a
Pension based upon his Basic Benefit and fifty percent (50%) in the case of a
Pension based upon his Accrued Benefit, of the monthly Pension payable during
the joint lives of the Participant and his Spouse. A Qualified Joint and
Survivor Pension shall be the actuarial equivalent of the Basic Benefit or
Accrued Benefit, as applicable, of a Participant, reduced to reflect the
separate distribution of his Contribution Accumulation, if any. The monthly
amount of such payments shall be determined under "Option 1" or Option 2, as
applicable, of Section 8.2.
2.57 "Qualified Domestic Relations Order" means the type of court order
or decree described in the Procedure.
2.58 "Related Plan" means any other defined contribution plan (as
defined in Code Section 414(i)) or a defined benefit plan (as defined in Code
Section 414(j)) maintained by an Employer or an Affiliate, respectively called a
"Related Defined Contribution Plan" and a "Related Defined Benefit Plan."
2.59 "Retirement" means Termination of Employment after an Employee has
fulfilled all requirements for a Pension other than any attained age
requirement. Retirement shall be considered as commencing on the day
immediately following an Employee's last day of employment or Authorized Leave
of Absence, if later.
2.60 "Separation Benefit" means a special benefit determined in
accordance with Section 7.1.
2.60A "Service Participant" means a Participant who was a Participant
and an active Eligible Employee or a disabled Participant accruing Benefit
Service or Compensation Credits pursuant to Section 5.3 on March 31, 1998 and on
April 1, 1998 and, solely for purposes of determining Compensation Credits, a
Participant who had incurred a Termination of Employment at any time and is
rehired as an Eligible Employee on or after April 1, 1998 and prior to his
Annuity Starting Date, and, at his date of rehire, he retains credited Benefit
Service.
2.61 "Single Life Annuity" means the optional form of Pension described
in Section 8.2(e).
2.62 "Social Security Retirement Age" means, with respect to each
Participant, the social security retirement age of such Participant as
determined under Code Section 415(b)(8) and the regulations thereunder.
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<PAGE> 26
2.63 "Special Participant" means each Participant who is included in a
special class of Participants described in an Appendix to this Plan.
2.64 "Spouse" means the person to whom a Participant is married and/or
any former spouse to the extent provided in a Qualified Domestic Relations Order
and allowed under Code Section 414(p).
2.65 "Spouse's Consent" means the written, irrevocable consent of the
Spouse of a Participant to a specific election of a form of distribution other
than a Qualified Joint and Survivor Pension or Survivor Pension coverage for
such Spouse and, if applicable, the specific designation of any Beneficiary or
contingent pensioner other than such Spouse, which consent acknowledges the
effect thereof on the rights of such Spouse concerning the Participant's Accrued
Benefit, with such consent being acknowledged before a Plan representative or
notary public. Such election of a form and, if applicable, a Beneficiary or
contingent annuitant cannot be changed by the Participant to a form other than a
Qualified Joint and Survivor Pension with such Spouse as the contingent
pensioner without being accompanied by a new Spouse's Consent of such Spouse,
unless the preceding Spousal Consent (i) expressly permits the Participant to
change an elected form of distribution and designation of contingent pensioner
or Beneficiary without a new Spouse's Consent of such Spouse, and such preceding
Spouse's Consent acknowledges that the Spouse has the right to limit consent to
the specifically elected form of distribution and, if applicable, the specific
contingent annuitant or Beneficiary; provided, however, if the designated
Beneficiary is a trust, a Spouse's Consent shall be required, and applicable to,
the Participant's designation of such trust and shall not be required, nor
applicable to, the designation of trust beneficiaries or any changes in trust
beneficiaries. A Spouse's Consent is binding only with respect to the consenting
Spouse. A Spouse's Consent shall not be required if it is established to the
satisfaction of the Administrative Committee that the Participant is not
married, the Participant's Spouse cannot be located or on account of other
circumstances as the Secretary of the Treasury may prescribe by regulation. No
Spouse's Consent shall be valid or effective unless and until filed with the
Administrative Committee.
2.66 "Surviving Spouse" means the person to whom a Participant is
married on the date of his death and/or any former spouse to the extent provided
in a Qualified Domestic Relations Order and allowed under Code Section 414(p);
provided, however,
(a) a Spouse shall not be a Surviving Spouse for purposes of
eligibility for the survivor portion of any Pension paid to a
Participant hereunder, unless such Spouse was married to the
Participant on his Annuity Starting Date; and
(b) a Spouse shall not be a Surviving Spouse for purposes of
eligibility for a Survivor Pension payable under Section 7.3(b), unless
such Spouse was continuously married to the Vested Participant on whose
behalf such Survivor Pension is payable for the thirty (30) day period
immediately prior to such Vested Participant's death.
2.67 "Survivor Pension" means a monthly amount payable for life to the
Surviving Spouse or Beneficiary of a Vested Participant who died prior to the
Annuity Starting Date of his
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<PAGE> 27
benefits under this Plan. Unless otherwise provided in this Plan, the amount of
such monthly payments shall be equal to the amount payable to the Surviving
Spouse or Beneficiary as a Single Life Annuity as if such Surviving Spouse or
Beneficiary was a Participant (or the Actuarial Equivalent thereof); provided,
however, payment to a Beneficiary which is not a living person shall be made
solely as a single-sum of all or a portion of the Participant's Pension Account
balance as designated by the Participant pursuant to Section 7.4.
2.68 "Superseded Plan" means the pension plan amended, restated,
merged, replaced, continued and retitled "Williams Brothers Pension Plan (As
Restated Effective January 1, 1966)", as amended and in force December 31, 1971.
2.68A "Table 1" means the table of factors and assumptions prepared by
the Actuary for each Plan Year for determining the amount payable as a Single
Life Annuity.
2.68B "Table 2" means the table of formulas, factors and assumptions
prepared by the Actuary for determining the Initial Credit amount credited to
each Service Participant's Pension Account.
2.69 "Termination of Employment" means a separation from service that
occurs when:
(a) an Employee ceases to be employed by an Employer or an
Affiliate, or
(b) a person fails to report for work with an Employer or an
Affiliate, at the termination of an Authorized Leave of Absence.
A transfer of employment from one Employer or Affiliate to another Employer or
Affiliate shall not constitute a Termination of Employment for purposes of the
Plan. A person shall not be considered to have incurred a Termination of
Employment due to his having entered the Armed Forces or Merchant Marine of the
United States unless it is determined by the Committee that he has no
reemployment rights under the law. Upon the sale of all of the stock or
substantially all of the assets used in a trade or business of any subsidiary of
the Company which has adopted the Plan as an Employer prior to such sale, a
Termination of Employment shall occur on the date of such sale with respect to
any Employee who continues in employment with the purchaser of such assets or
with such subsidiary, as the case may be, provided the following conditions (as
recognized in General Counsel Memorandum 39824, August 15, 1990) are met:
(1) the Company continues to maintain the Plan after such sale;
(2) the subsidiary withdraws as an Employer under the Plan prior
to such sale;
(3) the purchaser of such subsidiary's stock or assets
("Purchaser") does not adopt the Plan;
(4) the Purchaser is not an Affiliate;
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<PAGE> 28
(5) no assets or liabilities of the Plan are transferred to a
defined benefit plan maintained by the Purchaser, the
subsidiary or any affiliate of either within the meaning of
Code Sections 414(b), (c) or (m).
After incurring a Termination of Employment, a terminated person shall not be
eligible for or credited with Hours of Service or Years of Service for any
purpose under the Plan with respect to any period after such Termination of
Employment.
2.69A "Transitional Participant" a Participant who (i) was a
Participant and an Eligible Employee or a disabled Participant accruing Benefit
Service pursuant to Section 5.3 on March 31, 1998 and April 1, 1998, and (ii)
had attained at least age fifty (50) as of April 1, 1998, or (iii) was a
"Transitional Participant" under the terms of the Transco Energy Company
Retirement Plan or the Texas Gas Retirement Plan, as defined under either such
plan on the date his employment was directly transferred to an Employer.
2.70 "Trust" means the legal entity resulting from the Trust Agreement.
2.71 "Trust Agreement" means the agreement between the Company and the
Trustee establishing the Trust, and any amendments thereto.
2.72 "Trustee" means the entity which is serving as Trustee under the
Trust Agreement.
2.73 "Trust Fund" means any property, real or personal, received by the
Trustee, plus all income and gains and minus losses, expenses and distributions
chargeable thereto.
2.74 "Vesting Service" means the sum of:
(a) The Employee's Prior Service determined as of March 31,
1998, under the provisions of a Prior Williams Plan then in effect;
plus
(b) all Years of Service earned after the Effective Date; and
(c) all other service with an Employer or an Affiliate as a
Leased Employee, if such service would have constituted a Year of
Service under the applicable provisions of this Plan, if the Leased
Employee had been a common law employee of such Employer or Affiliate;
but, excluding (1) any Years of Service before April 1, 1998, if under the
break-in-service provisions of this Plan or the Prior Williams Plan in effect
for such periods, such service was not taken into account, and (2) any Years of
Service earned prior to a One Year Break-in-Service, if the Employee did not
have a nonforfeitable interest in his Accrued Benefit derived from Employer
Contributions before the One Year Break-in-Service began and if the number of
consecutive One Year Breaks-in-Service equals or exceeds the greater of (i) five
(5) or (ii) the Employee's Vesting Service earned before the One Year
Break-in-Service. Service not required to be taken into
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<PAGE> 29
account by reason of the exclusions set forth above shall not be taken into
account in applying this Section 2.74 to a subsequent One Year Break-in-Service.
2.75 "Vested Participant" means any Participant who has a
nonforfeitable right to any portion of his Accrued Benefit or Basic Benefit, as
applicable.
2.76 "Year of Service" means:
(a) with respect to Eligibility Service, each Computation
Period during which the person earns at least one thousand (1,000)
Hours of Service;
(b) with respect to Vesting Service, the sum of the Prior
Service of the Participant plus each Computation Period ending after
March 31, 1998, during which the person earns at least one thousand
(1,000) Hours of Service;
(c) with respect to Benefit Service, the sum of (i) the
Benefit Service earned by a person before the Effective Date under the
Prior Williams Plans and (ii) each Computation Period beginning on or
after April 1, 1998, during which an Eligible Employee earns at least
two thousand eighty (2,080) Hours of service with an Employer, with
each Eligible Employee receiving one hundred ninety (190) Hours of
service credit for each month, or portion thereof, worked during the
Computation Period. If an Eligible Employee earns less than two
thousand eighty (2,080) Hours of Service during any such Computation
Period, a fraction of a year of Benefit Service shall be earned by the
Eligible Employee, the numerator of which shall be the Eligible
Employee's actual Hours of Service earned with an Employer during such
Computation Period and the denominator of which shall be two thousand
eighty (2,080); and
(d) with respect to Eligibility Service, Vesting Service and
Benefit Service, such service as may be granted by the Administrative
Committee, Benefits Committee or Board of Directors, where appropriate,
in accordance with an Employer's uniform and nondiscriminatory policies
regarding an Authorized Leave of Absence or an Early Retirement
Incentive Program.
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ARTICLE III
Participation
3.1 Participation. Each Eligible Employee who was, as of March 31,
1998, a Participant in a Prior Williams Plan shall continue after such date as a
Participant in this Plan. Each other Eligible Employee shall become a
Participant in this Plan on the first day of the calendar month coincident with
or next following the date he is credited with one year of Eligibility Service.
A Participant shall continue participating in this Plan until the earlier of his
death or the distribution or forfeiture of his entire Accrued Benefit or Basic
Benefit, as applicable, in accordance with the terms and conditions of this
Plan.
3.2 Reemployment. Each Participant who incurs a Termination of
Employment and is reemployed as an Eligible Employee at a time when he retains
credited Eligibility Service shall resume participation in the Plan as of the
date he is credited with an Hour of Service after becoming so reemployed.
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ARTICLE IV
Contributions
4.1 Participant Contributions. No contributions to this Plan shall be
made by Participants. Any reference in the Plan to a Participant's contributions
shall apply to contributions made by a Participant under a Prior Williams Plan
during such period as such contributions were required under any such plan.
4.2 Company Contributions. The Employers, acting under the advice of
the Actuary for the Plan, shall make contributions to the Trust in such amounts
and at such times as are required to comply with Code Section 412. Such
contributions shall be applied to provide benefits under this Plan and to pay
the expenses of this Plan. Forfeitures shall be applied to reduce future
Employer Contributions.
4.3 Rollover Contributions. No rollover contributions of any nature or
description, whether direct or indirect, shall be made to this Plan by any
Employee or Participant or any other person.
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ARTICLE V
Retirement Benefits
5.1 Normal and Late Retirement. A Participant shall be eligible for a
Normal Pension under this Plan, if his Termination of Employment occurs on or
after his Normal Retirement Date. Payment of a Normal Pension to the Participant
shall begin as of the Annuity Starting Date and shall continue in accordance
with the terms of the form of payment applicable to such Participant. The amount
of such Normal Pension shall be determined under Section 6.1. The form of such
Normal Pension shall be determined under Article VIII.
5.2 Early Retirement. A Participant shall be eligible for an Early
Pension under this Plan, if his Termination of Employment is on or after his
fifty-fifth (55th) birthday and before his Normal Retirement Date and he has
completed five (5) or more years of Vesting Service. Payment of an Early Pension
to the Participant shall begin as of his Annuity Starting Date and shall
continue in accordance with the terms of the form of payment applicable to such
Participant. The amount of such Early Pension shall be determined under Section
6.2. The form of such Early Pension shall be determined under Article VIII.
5.3 Disability Retirement. A Participant shall be eligible for a
Disability Pension under this Plan, if his Termination of Employment is on
account of Disability and occurs after he has completed five (5) or more years
of Vesting Service, but prior to his Normal Retirement Date. Payment of a
Disability Pension to the Participant shall begin on the Annuity Starting Date
and shall continue in accordance with the terms of the form of payment
applicable to such Participant. The form of such Disability Pension shall be
determined under Article VIII. The amount of such Disability Pension shall be
determined as follows:
(a) if based upon the Participant's Accrued Benefit:
(1) If a Disability continues to the Participant's
Normal Retirement Date, such Participant shall be entitled to
a Disability Pension based on his Compensation (subject to
applicable limitations), Covered Compensation and Benefit
Service to the date of Disability and Benefit Service credit
for the period of Disability;
(2) If a Disability ceases prior to the Participant's
Normal Retirement Date and the Participant is reemployed by an
Employer as an Eligible Employee, upon his subsequent
Termination of Employment such Participant shall be entitled
to receive a Normal Pension, Early Pension or Deferred Vested
Pension, as applicable, determined by his attained age on the
date of such Termination of Employment. Such Normal Pension,
Early Pension or Deferred Vested Pension shall be based on his
Compensation (subject to applicable limitations), Covered
Compensation and Benefit Service to the date of Disability,
Benefit Service credit for the period of Disability, and his
Benefit Service, Covered Compensation and Compensation during
the period of reemployment, reduced, if applicable, in
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<PAGE> 33
accordance with Section 6.2 or 6.4, based on the number of
years by which the Annuity Starting Date of the Early Pension
or Deferred Vested Pension precedes the Participant's Normal
Retirement Date; and
(3) If a Disability ceases prior to the Participant's
Normal Retirement Date and he is not reemployed by an Employer
as an Employee (or is reemployed as an Employee but not an
Eligible Employee), he shall be entitled to receive,
commencing on the first day of the month coinciding with or
next following the latest of (i) his fifty-fifth (55th)
birthday, (ii) the cessation of such Disability, or (iii) the
date of his subsequent Termination of Employment, an Early
Pension or Deferred Vested Pension, as applicable, to which he
would have been entitled as of the date of such cessation of
such Disability. Such Early Pension or Deferred Vested Pension
shall be based on his Compensation (subject to applicable
limitations), Covered Compensation and Benefit Service to the
date of Disability and Benefit Service to the date of
cessation of such Disability (or, if applicable, date of
Termination of Employment), but in neither case beyond his
Normal Retirement Date, reduced, if applicable, in accordance
with Sections 6.2 and 6.4, based on the number of years by
which the Annuity Starting Date of the Early Pension or
Deferred Vested Pension precedes the Participant's Normal
Retirement Date.
(b) if based upon the Participant's Basic Benefit:
(1) If a Disability continues to the Participant's
Normal Retirement Date, such Participant shall be entitled to
a Disability Pension based on the balance of his Pension
Account to the date of Disability increased by Compensation
Credit and Interest Credit during the period of Disability;
(2) If a Disability ceases prior to the Participant's
Normal Retirement Date and the Participant is reemployed by an
Employer as an Eligible Employee, upon his subsequent
Termination of Employment such Participant shall be entitled
to receive a Normal Pension, Early Pension or Deferred Vested
Pension, as applicable, determined by his attained age on the
date of such Termination of Employment. Such Normal Pension,
Early Pension or Deferred Vested Pension shall be based on the
balance of his Pension Account to the date of Disability,
increased by Compensation Credit and Interest Credit for the
period of Disability and during the period of reemployment,
and Interest Credit until payment of his Basic Benefit
commences; and
(3) If a Disability ceases prior to the Participant's
Normal Retirement Date and he is not reemployed by an Employer
as an Employee (or is reemployed as an Employee but not an
Eligible Employee), he shall be entitled to receive,
commencing on the first day of the month coinciding with or
next following the latest of (i) his fifty-fifth (55th)
birthday, (ii) the cessation of such Disability, or (iii) the
date of his subsequent Termination of Employment, and Early
Pension or
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<PAGE> 34
Deferred Vested Pension, as applicable, to which he would have
been entitled as of the date of such cessation of such
Disability. Such Early Pension or Deferred Vested Pension
shall be based on the balance of his Pension Account to the
date of Disability increased by Compensation Credit and
Interest Credit to the date of cessation of such Disability
(or, if applicable, date of Termination of Employment) and
Interest Credit until payment of his Basic Benefit commences,
but in neither case beyond his Normal Retirement Date.
5.4 Deferred Vested Retirement. A Participant who is not eligible for a
Pension under Sections 5.1, 5.2 or 5.3 shall be eligible for a Deferred Vested
Pension, if his Termination of Employment is on or after the completion of five
(5) or more years of Vesting Service. Payment of a Deferred Vested Pension to
the Participant shall begin on the Annuity Starting Date and shall continue in
accordance with the form of payment applicable to such Participant. The amount
of such Deferred Vested Pension shall be determined under Section 6.4. The form
of such Deferred Vested Pension shall be determined in accordance with Article
VIII.
5.5 Special Participant Retirement. A Special Participant upon
incurring a Termination of Employment for any reason shall be entitled to such
rights, credits and benefits, if any, under this Plan as may be determined in
accordance with the provisions of the Appendix (or Appendices) to this Plan that
relates to his class (or classes) of Special Participants, if he qualifies as a
Special Participant as of his Termination of Employment. If a Special
Participant is reclassified as a Participant or a Participant is reclassified as
a Special Participant, the value of his Accrued Benefit and Basic Benefit, as
applicable, and his nonforfeitable right to a Pension, determined as of the date
of reclassification, shall not be decreased.
5.6 Transferred Employee Retirement. Requirements for Pension benefits
or other benefits, if any, payable under this Plan in cases of transfers of
employment by Employees between Employers or between an Employer and an
Affiliate, shall be determined in accordance with the provisions of Article IX.
5.7 Early Retirement Incentive Program. The Board of Directors, in its
sole discretion, may establish Early Retirement Incentive Programs under which
Participants who have attained at least age fifty (50) (or such greater age as
may be selected by the Board of Directors) and who have been credited with at
least one year of Benefit Service may retire and receive one or more early
retirement benefits described in such program. Each Early Retirement Incentive
Program shall contain an offering period of at least thirty (30) days during
which a Participant who is included in such program may decide whether or not to
retire and receive the additional benefits offered under such program. A
Participant may elect to retire by filing a written notice with the
Administrative Committee during the offering period and he shall then retire on
the date or during the period specified by the Early Retirement Incentive
Program. In order to receive the additional benefits provided by an Early
Retirement Incentive Program, a Participant must comply with all conditions set
forth in such program. In addition, if a Participant is rehired after retiring
pursuant to an Early Retirement Incentive Program, he shall not be entitled to
the additional benefits previously granted to him, unless otherwise required by
ERISA.
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<PAGE> 35
5.8 Annuity Starting Date. Subject to the provisions of Sections 5.9
and 5.10, Pensions and other benefits payable under this Plan shall commence and
be payable in accordance with the following:
(a) In the case of a Normal Pension payable under Section 5.1,
the Annuity Starting Date shall be the earlier of (i) the first day of
the month next following a Participant's Termination of Employment, or
(ii) April 1 of the calendar year following the calendar year in which
such Participant attains age seventy and one-half (70 1/2);
(b) In the case of a Pension payable under Section 5.2, 5.3,
5.4, 5.5, 5.6 or 5.7 and a Separation Benefit payable to a Participant
under Section 7.1, the Annuity Starting Date shall be the first day of
the month coincident with or next following the Participant's Normal
Retirement Date, or if earlier, the date established by the
Administrative Committee in response to the Participant's written
request for early payment, but in no event earlier than the first day
of the month coincident with or next following the date the Participant
attains age fifty-five (55) (or such age as may be established pursuant
to Section 5.7) in the case of such a Pension. Early commencement of a
Pension is subject to the restrictions imposed by Section 8.5;
(c) In the case of a Pension or Separation Benefit described
in subsections (a) or (b) above, the Annuity Starting Date shall in all
events be not later than sixty (60) days after the last day of the Plan
Year in which occurs the latest of the following events:
(1) The Participant's Normal Retirement Date;
(2) The tenth anniversary of the date on which the
Participant commenced participation in the Plan; or
(3) The Participant's Termination of Employment;
(d) In the case of a Survivor Pension, the Annuity Starting
Date shall be the first day of the month:
(1) next following the Participant's date of death,
if the Participant had then attained age sixty-five (65); or
(2) in which the Participant would have attained age
sixty-five (65), if the Participant dies prior to attaining
such age.
A Surviving Spouse may irrevocably elect, on a form provided for such
purpose by the Administrative Committee, to accelerate the Annuity
Starting Date of a Survivor Pension to the first day of the month next
following the date of the Participant's death or the first day of any
month thereafter, but no later than the first day of the month in which
the Participant would have attained age sixty-five (65); and
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<PAGE> 36
(e) If payment of a Survivor Pension based upon a
Participant's Accrued Benefit commences to the Surviving Spouse of a
Participant who was either (i) an Employee, or (ii) eligible for an
Early Pension before the first day of the month in which such
Participant would have attained age sixty-two (62), such Survivor
Pension shall be reduced in accordance with the provisions of Section
6.2(b) based upon the age the Participant would have attained as of the
Annuity Starting Date; provided, however, no reduction shall be made
for any period prior to the date such Participant would have attained
age fifty-five (55). If payment of a Survivor Pension commences to the
Surviving Spouse of a Participant who was eligible for a Deferred
Vested Pension before the first day of the month in which such
Participant would have attained age sixty-five (65), such Survivor
Pension shall be reduced in accordance with the provisions of Section
6.4(b) based on the age such Participant would have attained as of the
Annuity Starting Date.
5.9 Distribution Requirements. In addition to the requirements of
Section 5.8 and subject to the provisions of Section 5.10, distributions to a
Beneficiary in the event of the death of a Participant shall be made in
accordance with the following:
(a) In the event distribution of a Participant's Pension has
commenced before the Participant's death, the remaining interest
thereof, if any, shall be distributed at least as rapidly as under the
method of distribution being used as of the Participant's date of
death; and
(b) In the event distribution of a Participant's Pension has
not commenced before the Participant's death, distribution of any
distributable portion thereof shall be made in accordance with the
following:
(1) Any portion of such Participant's interest which
is not payable to a Beneficiary designated by such Participant
shall be distributed within five (5) years of such
Participant's date of death; and
(2) Any portion of such Participant's interest which
is payable to a Beneficiary designated by such Participant
shall be distributed over the life of such Beneficiary or a
period not exceeding the life expectancy of such Beneficiary,
commencing not later than (i) if such Beneficiary is other
than such Participant's Surviving Spouse, one (1) year after
the Participant's date of death, or (ii) if such Beneficiary
is such Participant's Surviving Spouse, (A) the date on which
such Participant would have attained age seventy and one-half
(70 1/2), if such Participant dies before attaining such age,
or (B) one (1) year after such Participant's date of death, if
such Participant dies after attaining age seventy and one-half
(70 1/2).
5.10 Required Information. Any Participant and any Beneficiary eligible
to receive benefits under the Plan shall furnish to the Committee any
information or proof requested by the Committee and reasonably necessary for
proper administration of the Plan. Failure by such Participant or such
Beneficiary to comply with any such request within a reasonable period of time
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<PAGE> 37
and in good faith shall be sufficient grounds for delay in payment of benefits
under the Plan until sixty (60) days after such information or proof is received
by the Committee.
5.11 Direct Rollovers.
(a) Distributee's Election: Notwithstanding any provision of
the Plan to the contrary that would otherwise limit a Distributee's
election hereunder, a Distributee may elect, at the time and in the
manner prescribed by the Administrator, to have any portion of an
Eligible Rollover Distribution paid directly to an Eligible Retirement
Plan specified by the Distributee in a Direct Rollover.
(b) Definitions: For purposes of this Section 5.11, the
following words and phrases shall have the meanings set forth below
when used in the capitalized form, unless a different meaning is
clearly warranted by the context:
(1) "Direct Rollover" shall mean a payment by the
Plan to the Eligible Retirement Plan specified by the
Distributee.
(2) "Distributee" shall mean a person who is (i) an
Employee or former Employee, (ii) the surviving spouse of an
Employee or former Employee, or (iii) the spouse or former
spouse of an Employee or former Employee who is the Alternate
Payee under a 'qualified domestic relations order', as defined
in Section 414(p) of the Code.
(3) "Eligible Retirement Plan" shall mean an
individual retirement account described in Section 408(a) of
the Code, an individual retirement annuity described in
Section 408(b) of the Code, an annuity plan described in
Section 403(a) of the Code, or a qualified trust described in
Section 401(a) of the Code, that accepts the Distributee's
Eligible Rollover Distribution. However, in the case of an
Eligible Rollover Distribution to the surviving spouse, an
Eligible Retirement Plan is an individual retirement account
or individual retirement annuity.
(4) "Eligible Rollover Distribution" shall mean any
distribution of all or any portion of the balance to the
credit of the Distributee, except that an Eligible Rollover
Distribution does not include: any distribution which is one
of a series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life
expectancy) of the distributee or the joint lives (or joint
life expectancies) of the distributee and the distributee's
designated beneficiary, or for a specified period of ten years
or more; any distribution to the extent such distribution is
required
28
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under Section 401(a)(9) of the Code; and the portion of any
distribution that is not includable in gross income
(determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
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ARTICLE VI
Amount of Pension
6.1 Normal and Late Pension. Subject to Section 6.5 and Article XVI, a
Participant, other than a Service Participant or a Transitional Participant, who
meets the requirements in Section 5.1 for a Normal Pension and retires on or
after his Normal Retirement Date shall receive his Basic Benefit.
(a) Service Participant. Subject to Section 6.5 and Article
XVI, a Service Participant who meets the requirements in Section 5.1
for a Normal Pension and retires on or after his Normal Retirement Date
shall receive a Pension equal to the greater of his Basic Benefit, or
his Accrued Benefit determined as of March 31, 1998; provided, however,
in the event a Service Participant timely elects the Lump Sum payment
option pursuant to Section 8.2, he shall receive a payment equal to the
greater of the Lump Sum amount determined under Section 8.2(d), or the
lump sum value of his Accrued Benefit as of March 31, 1998 determined
by application of the actuarial equivalency factors and assumptions of
the applicable Prior Williams Plan.
(b) Transitional Participant. Subject to Section 6.5 and
Article XVI, a Transitional Participant who meets the requirements of
Section 5.1 for a Normal Pension and retires on or after his Normal
Retirement Date shall receive a Pension equal to the greater of his
Basic Benefit, or his Accrued Benefit determined as of his Termination
of Employment; provided, however, in the event a Transitional
Participant timely elects the Lump Sum payment option pursuant to
Section 8.2 he shall receive a payment equal to the greater of the Lump
Sum amount determined under Section 8.2(d), or the lump sum value of
his Accrued Benefit determined as of his Termination of Employment
determined by application of the actuarial equivalency factors and
assumptions of the applicable Prior Williams Plan.
6.2 Early Pension.
(a) Basic Formula. Subject to Section 6.5 and Article XVI, a
Participant, other than a Service Participant or a Transitional
Participant, who meets the requirements in Section 5.2 for an Early
Pension shall receive the Actuarial Equivalent of his Basic Benefit.
(1) Service Participant. Subject to the provisions of
subsection (b), Section 6.5 and Article XVI, a Service
Participant who meets the requirements in Section 5.2 for an
Early Pension and retires shall receive a Pension equal to the
greater of the Actuarial Equivalent of his Basic Benefit, or
his Accrued Benefit determined as of March 31, 1998, payable
as of his Annuity Starting Date; provided, however, in the
event a Service Participant timely elects the Lump Sum payment
option pursuant to Section 8.2, he shall receive a payment
equal to the greater of the Lump Sum amount determined under
Section 8.2(d), or the lump sum
30
<PAGE> 40
value of his Accrued Benefit as of March 31, 1998 determined
by application of the actuarial equivalency factors and
assumptions of the applicable Prior Williams Plan.
(2) Transitional Participant. Subject to the
provisions of subsection (b), Section 6.5 and Article XVI, a
Transitional Participant who meets the requirements of Section
5.2 for a Normal Pension and retires shall receive a Pension
equal to the greater of the Actuarial Equivalent of his Basic
Benefit, or his Accrued Benefit determined as of his
Termination of Employment, payable as of his Annuity Starting
Date; provided, however, in the event a Transitional
Participant timely elects the Lump Sum payment option pursuant
to Section 8.2 he shall receive a payment equal to the greater
of the Lump Sum amount determined under Section 8.2(d), or the
lump sum value of his Accrued Benefit determined as of his
Termination of Employment determined by application of the
actuarial equivalency factors and assumptions of the
applicable Prior Williams Plan.
(b) Reduction for Early Commencement. If payment of an Early
Pension based on a Participant's Accrued Benefit commences before a
Participant's Normal Retirement Date, such Early Pension shall be
reduced for each full and fractional year by which his Annuity Starting
Date precedes the first day of the month coincident with or immediately
following his Normal Retirement Date in accordance with the following
provisions; provided, however, in no event shall the monthly amount
payable as of the Annuity Starting Date of his Early Pension be less
than the monthly amount payable as of such Annuity Starting Date under
the applicable provisions of the Plan as of March 31, 1998, if any,
based upon his Accrued Benefit as of such date. The monthly amount
payable as determined in accordance with this subsection (b) as of a
Participant's Annuity Starting Date shall remain in effect for as long
as such Early Pension is payable thereafter. Such Early Pension shall
be reduced for early commencement to a percentage thereof determined in
accordance with the following schedule:
<TABLE>
<CAPTION>
Number of Years of Early Percentage of
Commencement of Early Pension Early Pension Payable
- ----------------------------- ---------------------
<S> <C>
1 100
2 100
3 100
4 96
5 92
6 88
7 84
8 80
9 76
10 72
</TABLE>
31
<PAGE> 41
The percentage payable with respect to any fractional year
shall be determined by straight-line interpolation between
applicable percentages in the foregoing schedule.
6.3 Disability Pension. Subject to Section 6.5 and Article XVI, a
Participant who meets the requirements in Section 5.3 for a Disability Pension
shall receive his Disability Pension determined in accordance with Section 5.3.
6.4 Deferred Vested Pension.
(a) Basic Formula. Subject to Section 6.5 and Article XVI, a
Participant, other than a Service Participant or a Transitional
Participant, who meets the requirements in Section 5.4 for a Deferred
Vested Pension shall receive the Actuarial Equivalent of his Basic
Benefit.
(1) Service Participant. Subject to the provisions of
subsection (b), Section 6.5 and Article XVI, a Service
Participant who meets the requirements in Section 5.4 for a
Deferred Vested Pension and retires shall receive a Pension
equal to the greater of the Actuarial Equivalent of his Basic
Benefit, or his Accrued Benefit determined as of March 31,
1998, payable as of his Annuity Starting Date; provided,
however, in the event a Service Participant timely elects the
Lump Sum payment option pursuant to Section 8.2, he shall
receive a payment equal to the greater of the Lump Sum amount
determined under Section 8.2(d), or the lump sum value of his
Accrued Benefit as of March 31, 1998 determined by application
of the actuarial equivalency factors and assumptions of the
applicable Prior Williams Plan.
(2) Transitional Participant. Subject to the
provisions of subsection (b), Section 6.5 and Article XVI, a
Transitional Participant who meets the requirements of Section
5.4 for a Normal Pension and retires shall receive a Pension
equal to the greater of the Actuarial Equivalent of his Basic
Benefit, or his Accrued Benefit determined as of his
Termination of Employment, payable as of his Annuity Starting
Date; provided, however, in the event a Transitional
Participant timely elects the Lump Sum payment option pursuant
to Section 8.2 he shall receive a payment equal to the greater
of the Lump Sum amount determined under Section 8.2(d), or the
lump sum value of his Accrued Benefit determined as of his
Termination of Employment determined by application of the
actuarial equivalency factors and assumptions of the
applicable Prior Williams Plan.
(b) Reduction for Early Commencement. If payment of a Deferred
Vested Pension based on a Participant's Accrued Benefit commences
before the Participant's Normal Retirement Date, such Deferred Vested
Pension shall be reduced for each full and fractional year by which his
Annuity Starting Date precedes the first day of the month coincident
with or next following his Normal Retirement Date in accordance with
the
32
<PAGE> 42
following provisions. The monthly amount payable as determined in
accordance with this subsection (b) as of a Participant's Annuity
Starting Date shall remain in effect for as long as his Deferred Vested
Pension is payable thereafter.
A Participant's Deferred Vested Pension based on his Accrued
Benefit shall be reduced for early commencement to a percentage thereof
determined in accordance with the following schedule:
<TABLE>
<CAPTION>
Number of Years of Early Commencement of Percentage of Deferred Vested
Deferred Vested Pension Pension Payable
- ---------------------------------------- -----------------------------
<S> <C>
1 90
2 81
3 74
4 67
5 61
6 55
7 51
8 46
9 43
10 39
11 36
12 33
13 31
14 28
15 26
16 24
17 23
18 21
19 20
20 18
21 17
22 16
23 15
24 14
25 13
</TABLE>
33
<PAGE> 43
<TABLE>
<S> <C>
26 12
27 11
28 10
29 10
30 9
31 9
32 8
33 8
34 or greater 7
</TABLE>
The percentage payable with respect to any fractional year shall be
determined by straight-line interpolation between applicable
percentages in the foregoing schedule.
6.5 Maximum Pensions. Any Pension in excess of the Mandatory
Contribution Benefit to which a Participant of this Plan or any Prior Williams
Plan is entitled at any time during any Plan Year, when expressed as a pension
payable on a Plan Year basis (which is the "Limitation Year" for this Plan),
shall not exceed the person's "Maximum Annual Benefit". For purposes of this
Section 6.5, "Maximum Annual Benefit" shall mean an annual benefit payable
during a Plan Year in an amount equal to the lesser of Ninety Thousand Dollars
($90,000) multiplied by the Adjustment Factor ("Dollar Limitation"), or one
hundred percent (100%) of the person's average annual Code Section 415
Compensation from an Employer or Affiliate for the person's highest three (3)
consecutive, twelve-month periods consistently used by the Committee (or the
actual number of consecutive twelve-month periods for persons who are employed
less than three consecutive years) ("Compensation Limitation"), reduced by the
annual pension, if any, payable to the person under any Related Defined Benefit
Plan ever maintained by the Employer (or any Affiliate) to the extent
attributable to contributions by the Employer (or any Affiliate), subject to the
following, effective on and after January 1, 1995:
(a) If the form of Pension payable to a Participant is other
than a Single Life Annuity, the Participant's annual Pension in excess
of his Mandatory Contribution Benefit shall not exceed the actuarial
equivalent of the Participant's annual pension determined as the
greater of the amount applying the (1) mortality and interest rate
provisions of Section 2.2, or (2) Applicable Mortality Table and (i) in
the case of payment as a Pension, a 5% interest rate, or (ii) in the
case of payment as a Lump Sum, the Applicable Interest Rate.
(b) If the Participant has less than 10 Years of
Participation, the Dollar Limitation is reduced by one-tenth for each
year of participation (or part thereof) less than ten. If the
Participant has less than ten Years of Service, the Compensation
Limitation is reduced by one-tenth for each Year of Service (or part
thereof) less than ten. The adjustments of this Section 6.5(b) shall be
applied in the denominator of the defined benefit fraction described in
Section 6.5(g) hereof based upon Years of Service. Years of Service
shall include future years occurring before the Participant's Normal
Retirement Date.
34
<PAGE> 44
Such future years shall include the year which contains the date the
Participant reaches his Normal Retirement Date, only if it can be
reasonably anticipated that the Participant will receive a Year of
Service for such year.
(c) If the annual benefit of the Participant commences before
the Participant's Social Security Retirement Age, but on or after age
sixty-two (62), the Dollar Limitation as reduced in Section 6.5(b)
above, if necessary, shall be determined as follows:
(1) If a Participant's Social Security Retirement Age
is sixty-five (65), the Dollar Limitation for benefits
commencing on or after age sixty-two (62) is determined by
reducing the Dollar Limitation by 5/9 of one percent for each
month by which benefits commence before the month in which the
Participant attains age 65; or
(2) If a Participant's Social Security Retirement Age
is greater than 65, the Dollar Limitation for benefits
commencing on or after age 62 is determined by reducing the
Dollar Limitation by 5/9 of one percent for each of the first
36 months and 5/12 of one percent for each of the additional
months (up to 24 months) by which benefit commences before the
month of the Participant's Social Security Retirement Age.
(d) If the annual benefit of a Participant commences prior to
age 62, the Dollar Limitation shall be the actuarial equivalent of an
annual benefit beginning at age 62, as determined above, reduced for
each month by which benefits commence before the month in which the
Participant attains age 62. This reduced Dollar Limitation shall be the
lesser of the equivalent amount computed using the (1) factors of
Section 6.2(b), or (2) Applicable Mortality Table and (i) in the case
of payment as a Pension, a 5% interest rate, or (ii) in the case of
payment as a Lump Sum, the Applicable Interest Rate. Any decrease in
the Dollar Limitation determined in accordance with this Section 6.5(d)
shall not reflect the mortality decrement to the extent that benefits
will not be forfeited upon the death of the Participant.
(e) If the annual benefit of a Participant commences after the
Participant's Social Security Retirement Age, the Dollar Limitation as
reduced in Section 6.5(b) above, if necessary, shall be adjusted so
that it is the actuarial equivalent of an annual benefit of such Dollar
Limitation beginning at the Participant's Social Security Retirement
Age. This increased Dollar Limitation shall be the lesser of the
equivalent amount computed using (1) the factors required by Section
2.2, or (2) Applicable Mortality Table and (i) in the case of payment
as a Pension, a 5% interest rate, or (ii) in the case of payment as a
Lump Sum, the Applicable Interest Rate.
(f) If the Current Accrued Benefit of an individual who was a
Participant as of December 31, 1986, exceeds his Maximum Annual
Benefit, then, for all purposes under this Section 6.5, such
Participant's Dollar Limitation shall be equal to such Current Accrued
Benefit.
35
<PAGE> 45
(g) If a person is (or was) also a participant in any Related
Defined Contribution Plan, and if the sum of such person's defined
benefit plan fraction and his defined contribution plan fraction (both
as defined in Code Section 415(e)) exceeds 1.0, the person's Maximum
Annual Benefit shall be reduced to the extent necessary to reduce such
sum to 1.0. The defined contribution plan fraction for any such person
shall be determined by application of (1) the special transition rules
for the defined contribution plan fraction under Code Section
415(e)(4), (2) the special limitation for employee stock ownership
plans under Code Section 415(c)(6), (3) the special transition rules
for the defined contribution plan fraction under Section 1106(i)(A) of
the Tax Reform Act of 1986 and, (4) if elected by the Plan
Administrator, the special transition rule for the defined contribution
plan fraction for Plan Years ending after December 31, 1982 under Code
Section 415(e)(6).
(h) Notwithstanding any other provision to the contrary, the
maximum pension payable to a Participant shall not exceed the maximum
limitations of Code Section 415, which by this reference are
specifically incorporated in full into the Plan.
(i) Definitions. For purposes of this Section 6.5, the
following terms, whenever used in the capitalized form, shall have the
meanings set forth below:
(1) "Social Security Retirement Age" means age 65 in
the case of a Participant attaining age 62 before January 1,
2000 (i.e., born before January 1, 1938), age 66 for a
Participant attaining age 62 after December 31, 1999, and
before January 1, 2017 (i.e., born after December 31, 1937,
but before January 1, 1955), and age 67 for a Participant
attaining age 62 after December 31, 2016 (i.e., born after
December 31, 1954).
(2) "Adjustment Factor" means the cost of living
adjustment factor prescribed by the Secretary of the Treasury
under Code Section 415(d) for years beginning after December
31, 1987, applied to such items and in such manner as so
prescribed.
(3) "Current Accrued Benefit" means, when expressed
as an annual benefit within the meaning of Code Section
415(b)(2):
(A) for periods prior to January 1, 1995, a
Participant's Accrued Benefit under the Plan,
determined as if the Participant had separated from
service as of December 31, 1986; and
(B) for periods after December 31, 1994, a
Participant's Accrued Benefit under the Plan,
determined as if the Participant had separated from
service as of December 31, 1994.
36
<PAGE> 46
In determining the amount of a Participant's Current Accrued
Benefit, the following shall be disregarded: (i) any change in
the terms and conditions of the Plan after May 5, 1986 or
December 31, 1994, as applicable; and (ii) any cost of living
adjustment occurring after May 5, 1986, or December 31, 1994,
as applicable.
(4) "Applicable Interest Rate" means the applicable
interest rate prescribed by the Commissioner of Internal
Revenue in revenue rulings, notices or other guidance
published in the Internal Revenue Bulletin for the month of
September immediately preceding the Plan Year in which such
distribution is made.
(5) "Applicable Mortality Table" means the applicable
mortality table prescribed by the Commissioner of Internal
Revenue in revenue rulings, notices or other guidance
published in the Internal Revenue Bulletin, as in effect on
the date as of which a benefit is being determined.
6.6 Minimum Benefit. In no event shall the benefits payable to a
Participant be less than his Mandatory Contribution Benefit, provided it has not
already been distributed under Section 7.1.
6.7 Special Participant Retirement Benefits. Notwithstanding other
provisions hereof to the contrary, a Special Participant (or his Beneficiary in
case of his death), upon Termination of Employment for any reason, shall be
entitled to such rights, credits and benefits, if any, under this Plan as may be
determined in accordance with the provisions of that Appendix (or Appendices) to
this Plan which relates to his Special Participant class (or classes). In the
event a Special Participant is reclassified as a Participant or a Participant is
reclassified as a Special Participant, the value of his Accrued Benefit and his
nonforfeitable right to a Pension, determined as of the date of
reclassification, shall not be decreased.
6.8 Transferred Employee Retirement Benefits. Notwithstanding other
provisions hereof to the contrary, Pensions and other benefits, if any, payable
under this Plan in cases of transfers of employment by Employees between
Employers or Affiliates, or by transfers of Employees between this Plan and a
plan maintained outside of this Plan by Affiliates, shall be determined in
accordance with the provisions of Article IX.
37
<PAGE> 47
ARTICLE VII
Separation and Death Benefits
7.1 Separation Benefit. A Participant who incurs a Termination of
Employment may elect at any time before his Annuity Starting Date to receive a
distribution of his Contribution Accumulation, subject to the Annuity Starting
Date requirements of Section 5.8 and the Spousal Consent and other applicable
provisions of Article VIII. Such distribution of his Contribution Accumulation
shall be made in the form of a Qualified Joint and Survivor Pension to a
Participant who is married on his Annuity Starting Date or Single Life Annuity
for a Participant who is not married on his Annuity Starting Date, unless such
Participant elects (with his Spouse's Consent, if he is married) to receive such
distribution as a Lump Sum. Such election shall be made by completing and
delivering to the Plan Administrator a form furnished for such purpose by the
Plan Administrator. In the event such Participant receives such a distribution
of his Contribution Accumulation, his Basic Benefit and Accrued Benefit shall be
reduced by his Mandatory Contribution Benefit. If such Participant does not
receive such a distribution of his Contribution Accumulation, it shall remain in
the Trust Fund and be payable in accordance with the provisions of Articles V or
VII, as applicable.
7.2 Death Benefits. The Surviving Spouse of a deceased, Vested
Participant shall receive a Survivor Pension with payments commencing on the
Annuity Starting Date, unless Survivor Pension coverage for his surviving Spouse
has been waived in accordance with Section 7.8. The Beneficiary of a deceased,
Vested Participant who left no Surviving Spouse or who had waived Survivor
Pension coverage for his Surviving Spouse pursuant to Section 7.8 shall receive
a Survivor Pension with payments commencing on the Annuity Starting Date. If
such Surviving Spouse or Beneficiary, as applicable, dies before receiving
Survivor Pension payments equal to a Lump Sum payment of the deceased
Participant's Contribution Accumulation, determined as of the date of his death,
the excess of (1) such Lump Sum value over (2) such payments received shall be
paid in a Lump Sum, within sixty (60) days after receipt by the Administrative
Committee of proof of death, to the estate of the Surviving Spouse or
Beneficiary, as applicable.
7.3 Special Participants Severance and Death Benefits. Notwithstanding
other provisions hereof to the contrary, a Special Participant, his
Beneficiaries or estate shall, upon Termination of Employment by death or for
any other reason, be entitled to such rights, credits and benefits, if any,
under this Plan as may be determined in accordance with the provisions of the
Appendix (or Appendices) applicable to such Special Participant.
7.4 Designation of Beneficiary. Each active or retired Participant may
designate a primary Beneficiary or Beneficiaries and a contingent Beneficiary or
Beneficiaries to receive any benefit that may become payable under this Plan by
reason of his death. If such Participant is married, no Beneficiary other than
the Participant's current Spouse may be designated as a Beneficiary without a
Spouse's Consent. Any designation or change in designation by a married
Participant of a Beneficiary other than his Spouse shall be invalid under this
Plan, if such designation or change in designation is not accompanied by a
Spouse's Consent. Upon the entry of a decree of divorce respecting a married
Participant and his or her former spouse, any
38
<PAGE> 48
designation of such spouse as Beneficiary of such Participant shall be revoked
automatically and become ineffective on and after the date the decree is
entered, unless otherwise provided in a Qualified Domestic Relations Order. The
automatic revocation of such Beneficiary designation shall be treated under the
provisions of the Plan as if such former spouse had predeceased the Participant.
However, a Participant may designate a former spouse as a Beneficiary under the
Plan, provided a properly completed Beneficiary designation form is filed with
the Administrative Committee subsequent to entry of a decree of divorce
respecting the Participant and such former spouse. If a Participant dies without
executing a valid Beneficiary designation form, any benefits payable on account
of such death shall be paid to such Participant's Surviving Spouse, if any, or
if the Participant had no Surviving Spouse, to his estate, and such Surviving
Spouse or estate, as applicable, shall be such Participant's Beneficiary. Such
designations shall be made upon the forms furnished by the Administrative
Committee, and may at any time and from time to time be changed or revoked
without notice to any Beneficiary, and shall not be effective unless and until
filed with the Administrative Committee. Neither the Employers nor the Trustee
(in its capacity as Trustee) shall be named as a Beneficiary. For purposes of
this Plan, a certified copy of the death certificate, marriage certificate,
final divorce decree, or a Qualified Domestic Relations Order shall be
sufficient evidence of the event or circumstance to which the document attests,
and the Administrative Committee may rely thereon. In the absence of such proof,
the Administrative Committee may rely upon such other evidence as it deems
necessary or advisable.
7.5 Additional Death Benefit. Subject to any applicable Appendix, the
Beneficiary of a Participant who incurred a Termination of Employment on or
after January 1, 1987 and prior to January 1, 1996, and who is eligible to
receive a Pension pursuant to Sections 5.1, 5.2 or 5.3 of a Prior Williams Plan
(and with respect to whom no death benefit shall be paid or payable under the
Company's group insurance contract, if any, in effect as of the date of such
Participant's death), shall be entitled to payment of a Death Benefit in an
amount equal to the lesser of (i) fifty percent (50%) of the annual rate of such
Participant's Compensation, as in effect in the month immediately preceding the
month in which his Termination of Employment occurred with the resultant amount,
if not evenly divisible by one thousand dollars ($1,000), increased to the next
higher amount which is so evenly divisible, or (ii) fifty thousand dollars
($50,000); provided, however, in no event shall the amount of such Death Benefit
be less than two thousand dollars ($2,000). The Administrative Committee, in its
sole discretion may make payments of such Death Benefit in a single-sum payment
or equal or unequal installments over a period not to exceed one hundred twenty
(120) months, commencing with the month immediately following the month in which
the Participant's death occurred. Payment of such Death Benefit shall be made,
if in a lump sum, or commence, if in installments, as soon as practicable after
the Administrative Committee receives official notice of the death of such
Participant. In no event shall this Section 7.5 apply to a Participant who was
entitled to or receiving payment of a Pension under the Plan pursuant to the
operation of Section 5.4.
7.6 Death Benefit for Certain Employees Who Retired in 1985 or 1986. In
addition to any other death benefit payable under The Williams Companies
Consolidated Pension Plan, as such plan existed prior to January 1, 1987 ("Prior
Plan"), the beneficiary of a participant in the Prior Plan (other than
individuals participating in the Prior Plan pursuant to a collective bargaining
agreement) who (i) incurred a Termination of Employment after December 31, 1984
and prior to
39
<PAGE> 49
January 1, 1987, and (ii) was eligible to receive a pension pursuant to Sections
5.1, 5.2 or 5.3 of the Prior Plan (and with respect to whom no death benefit
shall be paid or payable under the Company's group insurance contract, if any,
as in effect as of the date of such participant's death) shall be entitled to
payment of a death benefit of five thousand dollars ($5,000); provided, however,
that the death benefit payable under this Section 7.8 with respect to a
participant subject to the terms of section 4 of appendix III of the Prior Plan
shall be limited to two thousand dollars ($2,000). In no event shall this
Section 7.8 apply to a participant who was entitled to or receiving payment of a
pension pursuant to section 5.4 of the Prior Plan.
7.7 Loss of Eligibility to Receive Death Benefit. Notwithstanding any
other provision of this Plan or an Appendix, in the event a Beneficiary, Spouse
or Surviving Spouse is determined by a court of competent jurisdiction to have
intentionally caused the death of a deceased Participant, such person shall be
ineligible to receive any Death Benefit from the Plan and such person shall be
deemed to have predeceased the deceased Participant. In the event a Beneficiary,
Spouse or Surviving Spouse is deemed to have predeceased a deceased Participant
pursuant to this Section 7.7, the Death Benefit, if any, then payable shall be
paid in accordance with Section 7.4.
7.8 Waiver of Survivor Pension Coverage for Spouse. A Participant who
is credited with at least one Hour of Service on or after April 1, 1998, may
waive Survivor Pension coverage with respect to his vested Basic Benefit for his
Spouse with his Spouse's Consent at any time during the Applicable Waiver
Period, and revoke such waiver at any time during the Applicable Waiver Period,
by properly completing and filing with the Administrative Committee the
appropriate form for such purposes furnished by the Administrative Committee.
Such a Participant may waive and revoke a waiver without limitations on timing
or frequency during the Applicable Waiver Period. Any such waiver of Survivor
Pension coverage shall be invalid unless accompanied by a properly completed
Beneficiary designation form meeting all of the applicable requirements of
Section 7.4. Nor shall any such waiver be valid unless the Participant and his
Spouse have received, and acknowledged receipt of, a written explanation of
Survivor Pension coverage for a Spouse in such terms as are comparable to the
explanation required by Section 8.1. Such written explanation shall be furnished
to each such Participant within the 12-month period beginning with the date he
becomes a Participant and shall be furnished in any event with each waiver form
provided by the Administrative Committee. For purposes of this Section 7.8,
"Applicable Waiver Period" means the period beginning twelve (12) months prior
to the date such a Participant will become a Vested Participant (assuming
continued Vesting Service credit) and ending with the date of death of such
Participant; provided, however, any waiver by a Participant prior to the Plan
Year in which he attains age thirty-five (35) shall become void and of no
further effect as of the first day of such Plan Year, which first day shall be
deemed to be the first day of a new Applicable Waiver Period.
40
<PAGE> 50
ARTICLE VIII
Normal and Optional Forms of Payment
8.1 Normal Form of Pension. The normal form of Pension under this Plan
for any Participant with at least one Hour of Service on or after the Effective
Date shall be determined in accordance with the following:
(a) Married Participant.
(1) Qualified Joint and Survivor Pension. A
Participant who is married on his Annuity Starting Date shall
receive a Qualified Joint and Survivor Pension, unless during
the Applicable Election Period the Participant shall have
elected with his Spouse's Consent to have his Accrued Benefit
paid in an optional form described in Section 8.2, and the
Participant shall have delivered a properly completed election
form to the Administrative Committee at any time before the
Annuity Starting Date, which has not been revoked before such
Annuity Starting Date.
(2) Explanation. The Administrative Committee shall
provide each Vested Participant with a written explanation of
the optional forms of payment in the manner set forth below.
Such written explanation shall be provided to such Participant
by personal delivery or first class mail no less than 30 days
and no more than 90 days prior to his Annuity Starting Date,
unless the Participant elects to waive such minimum 30-day
period, in which case payment may commence as soon as 8 days
after the date such explanation is provided. Such written
explanation shall contain a general explanation: (i) of the
terms and conditions of a Qualified Joint and Survivor
Pension; (ii) the circumstances under which it will be
provided; (iii) the Participant's right during the Applicable
Election Period to make, and the effect of, an election to
waive the Qualified Joint and Survivor Pension; (iv) the
rights of the Participant's Spouse; (v) the Participant's
right during the Applicable Election Period to make, and the
effect of, a revocation of a previous election to waive the
Qualified Joint and Survivor Pension; and (vi) the relative
values of the various optional forms of payment under the
Plan.
(b) Single Participant. A Participant who is not married on
his Annuity Starting Date or a married Participant who has elected not
to receive his Pension in the form of a Qualified Joint and Survivor
Pension shall receive his Pension in the form of a Single Life Annuity,
unless the Administrative Committee has approved such Participant's
selection of an optional form of payment described in Section 8.2.
8.2 Optional Forms of Pension. By filing a timely election in writing
with the Committee, a Participant may designate any person who is a "dependent,"
as defined in Code Section 152 (without regard to the furnishing of support
requirement therein) on the date of the designation, as his contingent pensioner
or Beneficiary and elect to receive a Pension that is
41
<PAGE> 51
actuarially equivalent and is payable in accordance with one of the following
options, in lieu of the Pension to which he may otherwise become entitled upon
Retirement. If the Participant is married on his Annuity Starting Date, the
Participant must designate his Spouse as his contingent pensioner or
Beneficiary, as applicable, unless his designation of another dependent is
accompanied by a Spouse's Consent.
(a) Option 1. The retired Participant shall receive a reduced
Pension payable for life, and payments in the same reduced amount
shall, after the retired Participant's death, be continued to the
contingent pensioner during the contingent pensioner's lifetime. Such
reduced Pension payable to the Participant shall be eighty-two percent
(82%) plus or minus sixty-five hundredths of one percent (0.65%) for
each year to the nearest year that the contingent pensioner is older or
younger respectively than the Participant multiplied by the Pension
payable to the Participant in the form of a Single Life Annuity. Option
A, as described in subsection (j) below, may be elected in connection
with this optional form.
(b) Option 2. The retired Participant shall receive a reduced
Pension payable for life, and payments in the amount of fifty percent
(50%) of such reduced Pension shall, after the retired Participant's
death, be continued to the contingent pensioner during the contingent
pensioner's lifetime. Such reduced Pension payable to the Participant
shall be ninety-two percent (92%) minus twenty-five hundredths of one
percent (0.25%) for each year to the nearest year that the contingent
pensioner is younger than the Participant, or plus four-tenths of one
percent (0.40%) for each year to the nearest year that the contingent
pensioner is older than the Participant, multiplied by the Pension
payable to the Participant in the form of a Single Life Annuity. Option
A, as described in subsection (j) below, may be elected in connection
with this optional form.
(c) Option 3. The retired Participant shall receive a reduced
Pension payable for life, and payments in the amount of seventy-five
percent (75%) of such reduced Pension shall, after the retired
Participant's death, be continued to the contingent pensioner during
the contingent pensioner's lifetime. Such reduced Pension payable to
the Participant shall be eighty-seven percent (87%) minus four-tenths
of one percent (0.40%) for each year to the nearest year that the
contingent pensioner is older or younger than the Participant, or plus
fifty-five hundredths of one percent (0.55%) for each year to the
nearest year that the contingent pensioner is older than the
Participant, multiplied by the Pension payable to the Participant in
the form of a Single Life Annuity.
(d) Option 4. A lump sum cash payment to the Participant
determined as of the end of the month immediately preceding payment,
provided the Participant's Employer, where necessary, files a notice
with the Pension Benefit Guaranty Corporation ("PBGC") (at the time and
in the manner prescribed by the PBGC) notifying the PBGC of such
payment or distribution and the PBGC has approved such payment or
distribution or, within ninety (90) days after the date on which such
notice was filed, has failed to disapprove such payment or
distribution. Such lump sum cash payment shall be in an amount equal to
the greatest of: (1) the then existing balance of the Participant's
Pension
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Account; (2) the Actuarial Equivalent of the Participant's Basic
Benefit; or (3) the Actuarial Equivalent of the Participant's Accrued
Benefit.
(e) Option 5. The retired Participant shall receive a Pension
determined under Article VI payable for his life.
(f) Option 6. The retired Participant shall receive a reduced
Pension payable for life and, in the event such Participant dies prior
to receiving sixty (60) monthly payments pursuant to this optional
form, the balance of such payments shall be payable to a Beneficiary
designated by him ("designee") and, if such designee should fail to
survive, the remaining balance of such payments to any successor
Beneficiary designated by the Participant. Such reduced Pension payable
to the Participant shall be ninety-eight percent (98%) plus one-tenth
of one percent (0.10%) for each year up to a maximum of ten that
Participant is younger than age 65, or minus one-tenth of one percent
(0.10%) for each year that Participant is older than age 65, multiplied
by the Pension payable to the Participant in the form of a Single Life
Annuity.
(g) Option 7. The retired Participant shall receive a reduced
Pension payable for life and, in the event such Participant dies prior
to receiving one hundred twenty (120) monthly payments pursuant to this
optional form, the balance of such payments shall be payable to a
Beneficiary designated by him ("designee") and, if such designee should
fail to survive, the remaining balance of such payments to any
successor Beneficiary designated by the Participant. Such reduced
Pension payable to the Participant shall be ninety-two percent (92%)
plus three-tenths of one percent (0.30%) for each year up to a maximum
of ten that Participant is younger than age 65, or minus one percent
(1.00%) for each year that Participant is older than age 65, multiplied
by the Pension payable to the Participant in the form of a Single Life
Annuity.
(h) Option 8. The retired Participant shall receive a reduced
Pension payable for life and, in the event such Participant dies prior
to receiving one hundred eighty (180) monthly payments pursuant to this
optional form, the balance of such payments shall be payable to a
Beneficiary designated by him ("designee") and, if such designee should
fail to survive, the remaining balance of such payments to any
successor Beneficiary designated by the Participant. Such reduced
Pension payable to the Participant shall be ninety percent (90%) plus
five-tenths of one percent (0.50%) for each year up to a maximum of ten
that Participant is younger than age 65, or minus one and five-tenths
percent (1.50%) for each year that Participant is older than age 65
multiplied by the Pension payable to the Participant in the form of a
Single Life Annuity.
(i) Option 9. The retired Participant shall receive a reduced
Pension payable for life and, in the event such Participant dies prior
to receiving two hundred forty (240) monthly payments pursuant to this
optional form, the balance of such payments shall be payable to a
Beneficiary designated by him ("designee") and, if such designee should
fail to survive, the remaining balance of such payments to any
successor Beneficiary designated by the Participant. Such reduced
Pension payable to the Participant shall be eighty-five
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percent (85%) plus five-tenths of one percent (0.50%) for each year up
to a maximum of ten that Participant is younger than age 65, or minus
two percent (2.00%) for each year that Participant is older than age 65
multiplied by the Pension payable to the Participant in the form of a
Single Life Annuity.
(j) Option A. A retired Participant who has not become
eligible for Federal Social Security benefits and has elected, with his
Spouse's Consent, if applicable, for payment of his Pension in the form
of a Single Life Annuity, Qualified Joint and Survivor Pension or
Pension under Option 1 or Option 2 (as described in subsections (a) and
(b) above, respectively) may elect a Social Security Adjustment Option
in connection with such form of Pension. A Social Security Adjustment
Option shall provide an actuarially determined greater monthly payment
amount to the retired Participant for periods before he attains age 62
and an actuarially determined lesser monthly payment amount after he
attains age 62, than the monthly payment amount otherwise payable under
the elected form of Pension. Such adjusted payment amounts shall take
into account the monthly amount of the old age benefit the Participant
is expected to become entitled to receive at age 62 under the Federal
Social Security Act as in effect on the date of such election (assuming
proper application therefor and without regard to any disqualification
for or loss or reduction in such old age benefit) so as to provide
monthly Pension payment amounts to the retired Participant before and
after age 62 which are as reasonably as practicable nearly equal to the
aggregate of (i) monthly Pension payment amounts, and (ii) such old age
benefits available to the Participant after age 62. The reduced amount
of Pension payments under the Social Security Adjustment Option
commencing at the Participant's age 62 shall become effective and
payable without regard to whether or not an old age benefit in any
amount is actually paid to the Participant under the Federal Social
Security Act.
Subject to the restrictions of Section 7.6, a Participant may elect,
change, or revoke an election only if such election, change or revocation is
filed with the Administrative Committee on a form provided for such purpose
during the Applicable Election Period.
If the Pension payable to the retired Participant is in the form of a
joint and survivor annuity under Option 1, Option 2 (including a Qualified Joint
and Survivor Pension) or Option 3, then, in the event such Participant's
contingent pensioner dies after payment of such Pension has commenced and prior
to such Participant's death, the monthly amount of the Pension payable to such
Participant shall be increased commencing with the first monthly payment to be
made immediately following the date of death of such contingent pensioner. In
such event, the increased monthly amount of Pension payable to such Participant
shall be equal to the monthly amount which would have been payable to the
Participant as of his or her Annuity Starting Date if such Participant's Pension
had been payable in the form of a Single Life Annuity pursuant to Option 5. Such
increased monthly amount shall be payable for the remaining life of such
Participant during which payment of his or her Pension continues after his or
her Spouse's death.
If a Participant who makes an election during the Applicable Election
Period pursuant to the requirements of this Section 8.2 continues in an
Employer's employ after his election, no Pension payments shall be made during
the period of continued employment until his Annuity
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Starting Date. If the Participant continues in such employment after such
Annuity Starting Date, the election shall become inoperative, but a new election
may be made during a subsequent Applicable Election Period.
An election made pursuant to this Section 8.2 shall become inoperative
in the event (a) the Participant's death occurs prior to the Annuity Starting
Date established by his election during the Applicable Election Period, or (b),
if applicable, no contingent pensioner is surviving on the Participant's Annuity
Starting Date. In the event an election becomes inoperative, the normal form of
payment provided by Section 8.1 shall become operative.
8.3 Other Benefits Cancelled by Option. Any Pension, Death Benefit, or
other benefit that would otherwise have become payable under this Plan, shall be
cancelled and superseded by an option elected under this Article VIII as of the
date such option or other form of payment becomes operative.
8.4 Return of Contribution Accumulation. In the event the aggregate
amount received by a Participant and his contingent pensioner is less than a
Lump Sum payment of his Contribution Accumulation determined as of the date
payment to the Participant commences, the difference shall be paid to the estate
of last to die.
8.5 Special Restrictions on Payment.
(a) Subject to the following provisions, if the Lump Sum value
(including for this purpose a value of zero) of a Pension, Survivor
Pension or Separation Benefit or Contribution Accumulation payable to a
Participant or Surviving Spouse is not greater than Five Thousand
Dollars ($5,000), the Administrative Committee shall direct that such
benefit be paid in a Lump Sum no later than the end of the second plan
year following the Plan Year of his Termination of Employment.
(b) Written consent of the Participant during the Applicable
Election Period is required before any part of his Accrued Benefit or a
Separation Benefit is distributed to him, if the present value of the
nonforfeitable portion of his Accrued Benefit is greater than Five
Thousand Dollars ($5,000) and the Participant has not attained age
sixty-five (65). Written consent of the Spouse of a married Participant
during the Applicable Election Period also is required under such
circumstances, unless the Participant has elected to retire and receive
an immediate Qualified Joint and Survivor Pension.
(c) For purposes of this Section 8.5, the present value of the
nonforfeitable portion of an Accrued Benefit, a Survivor Pension or a
Separation Benefit or Contribution Accumulation payable to a
Participant or his Surviving Spouse shall be treated as greater than
Five Thousand Dollars ($5,000) at all times, if the distribution
thereof without the consent of the Participant and/or his Surviving
Spouse, as applicable, was prohibited by this Section 8.5 immediately
before such distribution began. No such consent is required before the
commencement of such distribution, if the present value thereof is not
more then
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Five Thousand Dollars ($5,000), or if the Participant has attained age
sixty-five (65) or would have attained such age as of the Annuity
Starting Date, if he had lived.
(d) In all events, all Pensions and other benefits payable
under the Plan shall be payable only in accordance with the
requirements of Code Section 401(a)(9) and applicable regulations
promulgated thereunder.
8.6 Domestic Relations Orders. The Accrued Benefit of a Participant
shall be paid in accordance with the terms of any Qualified Domestic Relations
Order.
8.7 Unclaimed Benefits. During the time when a benefit hereunder is
payable to any Participant or Beneficiary, the Administrative Committee, upon
request by the Trustee, or at its own instance shall mail by registered or
certified mail to such person, at his last known address, a written demand for
his address, or for satisfactory evidence of his continued life, or both. If
such information is not furnished to the Administrative Committee within three
months from the mailing of such demand, then the Administrative Committee may,
in its sole discretion, determine that such Participant or Beneficiary is
deceased and may declare such benefit, or any unpaid portion thereof, terminated
as if the death of the distributee (with nonsurviving beneficiary) had occurred
on the later of the date of the last payment made thereon or the date such
person first became entitled to receive benefit payments. Any such declaration
by the Administrative Committee shall later be revoked, upon a receipt of the
requested information by the Administrative Committee.
8.8 Facility of Payment. In the event any person entitled to receive
any Pension, Death Benefit or other benefit payment of any nature under the Plan
is determined by the Administrative Committee to be legally, physically or
mentally incapable of personally receiving and receipting for payment thereof,
the Administrative Committee, in its sole discretion, may direct the Trustee to
make payment thereof to such person, persons, institution or institutions then
maintaining or having custody of such incapacitated person, as determined by the
Administrative Committee. The determination of the Administrative Committee as
to the identity of the proper payee of any Pension, Death Benefit or other
benefit of any nature under the Plan and the amount properly payable with
respect thereto shall be final and conclusive with respect to all persons for
purposes.
8.9 Loss of Eligibility to Receive Continuation Benefits.
Notwithstanding any other provision of this Plan or an Appendix, in the event a
contingent annuitant, Surviving Spouse or Beneficiary is determined by a court
of competent jurisdiction to have intentionally caused the death of a deceased
Participant who was receiving Pension payments prior to his death, such person
shall be ineligible to receive any continuation payments from the Plan with
respect to such Pension and such person shall be deemed to have predeceased the
deceased Participant. In the event a contingent annuitant, Beneficiary or
Surviving Spouse is deemed to have predeceased a deceased Participant pursuant
to this Section 8.9, any continuation benefits, if any, shall be payable only as
determined by the form in which the Pension of such deceased Participant was
being paid. In this regard, if such Pension was being paid in the form of joint
and survivor annuity (including a Qualified Joint and Survivor Pension) and the
contingent pensioner (including a Surviving Spouse) is deemed to have
predeceased the deceased Participant, no continuation
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payments shall be payable to any person or entity with respect to such Pension,
unless such Pension was payable for a period certain; in which case payments for
the remainder, if any, of such period certain shall be continued to the deceased
Participant's Beneficiary determined in accordance with Section 7.6.
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ARTICLE IX
Employment Transfers
9.1 Transfers Between Employers. If an Eligible Employee has a transfer
of employment between Employers, his Basic Benefit and Accrued Benefit and Years
of Service earned and credited up to the date of such transfer shall not be
reduced and he shall continue to be credited with Vesting Service (but not
Benefit Service) with respect to his Accrued Benefit accrued to such date for
each Hour of Service during his employment as an Employee with such transferee
Employer. Such transferred Employee shall participate in the Plan after such
transfer of employment in accordance with the terms of the Plan and any Appendix
applicable to his status as an Employee of such transferee Employer and his
Basic Benefit and Accrued Benefit as of any date on or after the date of such
transfer shall be determined in accordance with the applicable terms of the Plan
(including any applicable Appendix) as such terms exist as of the date of such
transfer and as such terms may be amended thereafter.
9.2 Transfers to Non-Employer Affiliates. If an Eligible Employee has a
transfer of employment to an Affiliate which is not an Employer, his Basic
Benefit and Accrued Benefit and Years of Service earned and credited up to the
date of such transfer shall not be reduced and he shall continue to be credited
with Vesting Service (but not Benefit Service) with respect to his Accrued
Benefit accrued to such date for each Hour of Service during his employment as
an Employee with such transferee Affiliate.
9.3 Transfers to Other Plan Employers. If an Eligible Employee has a
transfer of employment to an Affiliate which is a participating employer under
either (i) the Transco Energy Company Retirement Plan or (ii) the Texas Gas
Retirement Plan, his Basic Benefit and Accrued Benefit and Years of Service
earned and credited up to the date of such transfer shall not be reduced and he
shall continue to be credited with Compensation and Vesting Service (but not
Benefit Service) with respect to his Accrued Benefit accrued to such date for
each Hour of Service during his employment as an Employee with such transferee
Affiliate.
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ARTICLE X
Administration
10.1 Fiduciaries. Under certain circumstances, the Trustee, the Board
of Directors, the Benefits Committee, the Investment Committee, the Investment
Managers, or the Administrative Committee may be determined by a court of law to
be a fiduciary with respect to a particular action under the Plan or the Trust
Agreement. As authorized by ERISA, to prevent any two parties to the Plan from
being deemed co-fiduciaries with respect to a particular function, both the Plan
and Trust Agreement are intended, and should be construed, to allocate to each
party to the Plan only those specific powers, duties, responsibilities, and
obligations as are specifically granted to it under the Plan or Trust.
10.2 Allocation of Responsibilities Among Named Fiduciaries.
(a) Trustee. The Trustee shall have the authority and
responsibility to manage and control the Trust Fund and for the
investment and safekeeping of the assets of the Plan, except to the
extent such authority and responsibility is delegated to one or more
Investment Managers. The Trustee shall also have those responsibilities
set forth in the Trust Agreement and the provisions of this Plan.
(b) Board of Directors. The Board of Directors shall have
exclusive authority and responsibility for:
(1) The termination of the Plan;
(2) The adoption of an amendment to this Plan or an
Appendix which would materially increase or decrease the level
of Accrued Benefits provided for in this Plan or an Appendix;
(3) The appointment and removal of members of the
Benefits Committee. The Board of Directors shall designate one
member of the Benefits Committee as the Chairman of the
Benefits Committee;
(4) The approval of the adoption of this Plan by an
Affiliate and the withdrawal from this Plan by an adopting
Employer; and
(5) The delegation to the Benefits Committee of any
authority and responsibility reserved herein to the Board of
Directors.
(c) Benefits Committee. The Benefits Committee shall have
exclusive authority and responsibility for those functions set forth in
Section 10.3 of this Plan and in other provisions of this Plan.
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(d) Administrative Committee. The Administrative Committee
shall serve as plan administrator and shall have exclusive authority
and responsibility for those functions set forth in Section 10.4 and in
other provisions of this Plan.
(e) Investment Committee. The Investment Committee shall have
exclusive authority and responsibility for those functions set forth in
Section 10.5 and in other provisions of this Plan.
(f) Investment Managers. The Investment Managers, if and to
the extent appointed by the Benefits Committee, shall have the
authority and responsibility for the investment of all or any part of
the assets of the Plan, as delegated to the Investment Managers by the
Benefits Committee. In investing any of the assets of the Plan, the
Investment Managers shall follow any investment objectives or
guidelines established by the Benefits Committee and communicated to
the Investment Managers.
10.3 Provisions Concerning the Benefits Committee.
(a) Membership and Voting. The members of the Benefits
Committee shall be appointed and removed by the Board of Directors
pursuant to Section 10.2(b)(3). The Benefits Committee shall consist of
not less than three (3) members. The Board of Directors may remove any
member of the Benefits Committee at any time, with or without cause, by
written notice to such member and to the other members of the Benefits
Committee. Any member may resign by delivering a written resignation to
the Board of Directors. Vacancies in the Benefits Committee arising by
death, resignation or removal shall be filled by the Board of
Directors. The Benefits Committee shall act by a majority of its
members at the time in office, and such action may be taken by a vote
at a meeting, in writing without a meeting, or by telephonic
communications. Attendance at a meeting shall constitute waiver of
notice thereof. A member of the Benefits Committee who is a Participant
of the Plan shall not vote on any question relating specifically to
such Participant. Any such action shall be voted or decided by a
majority vote of the remaining members of the Benefits Committee. The
Benefits Committee shall appoint a Secretary who may, but need not, be
a member thereof. The Benefits Committee may appoint from its members
such subcommittees with such powers as the Benefits Committee shall
determine.
(b) Powers and Duties of Benefits Committee. The Benefits
Committee shall have the authority and responsibility for:
(1) All amendments to this Plan, except to the extent
such authority is reserved to the Board of Directors;
(2) The approval of any merger or spinoff of any part
of this Plan;
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(3) The appointment, removal, with or without cause,
or the replacement of the Trustee, Investment Managers, any
member of the Administrative Committee or any member of the
Investment Committee; and
(4) The delegation of responsibilities to the
Trustee, the Administrative Committee, Investment Committee or
any other person or entity.
The Benefits Committee may appoint such accountants, counsel,
specialists, and other persons as it deems necessary or desirable in
connection with the administration of this Plan. Such accountants and
counsel may, but need not, be accountants and counsel for the Company
or an Affiliate. The Benefits Committee also shall have such other
duties, authority and responsibility as may be delegated by the Board
of Directors.
10.4 Provisions Concerning the Administrative Committee.
(a) Membership and Voting. The Benefits Committee shall
appoint an Administrative Committee, which shall be in charge of the
operation and administration of this Plan. The Administrative Committee
shall consist of not less than three (3) members. The Benefits
Committee may remove any member of the Committee at any time, with or
without cause, by written notice to such member and to the other
members of the Administrative Committee. Any member may resign by
delivering a written resignation to the Benefits Committee. Vacancies
in the Administrative Committee arising by death, resignation or
removal shall be filled by the Benefits Committee. The Administrative
Committee shall act by a majority of its members at the time in office,
and such action may be taken by a vote at a meeting, in writing without
a meeting, or by telephonic communications. A member of the
Administrative Committee who is a Participant of the Plan shall not
vote on any question relating specifically to such Participant. Any
such action shall be voted or decided by a majority vote of the
remaining members of the Administrative Committee. The Administrative
Committee shall designate one of its members as the Chairman and shall
appoint a Secretary who may, but need not, be a member thereof. The
Administrative Committee may appoint from its members such
subcommittees with such powers as the Administrative Committee shall
determine.
(b) Duties of Administrative Committee. The Administrative
Committee shall administer the Plan in accordance with its terms and
shall have all the powers necessary to carry out such terms. The
Administrative Committee shall execute any certificate, instrument or
other written direction on behalf of the Plan and may make any payment
on behalf of the Plan. All interpretations of this Plan, and questions
concerning its administration and application, shall be determined by
the Administrative Committee in its sole discretion and such
determination shall be binding on all persons for all purposes. The
Administrative Committee may appoint such accountants, counsel,
specialists, and other persons as it deems necessary or desirable in
connection with the administration of this Plan. Such accountants and
counsel may, but need not, be accountants and counsel for the Company
or an Affiliate. The Administrative Committee also shall have such
other duties, authority and responsibility as may be delegated by the
Benefits Committee.
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10.5 Provisions Concerning the Investment Committee.
(a) Membership and Voting. The Benefits Committee shall
appoint an Investment Committee. The Investment Committee shall consist
of not less than three (3) members. The Benefits Committee may remove
any member of the Investment Committee at any time, with or without
cause, by written notice to such member and to the other members of the
Investment Committee. Any member may resign by delivering a written
resignation to the Benefits Committee. Vacancies in the Investment
Committee arising by death, resignation or removal shall be filled by
the Benefits Committee. The Investment Committee shall act by a
majority of its members at the time in office, and such action may be
taken by a vote at a meeting, in writing without a meeting, or by
telephonic communications. Attendance at a meeting shall constitute
waiver of notice thereof. A member of the Investment Committee who is a
Participant of the Plan shall not vote on any question relating
specifically to such Participant. Any such action shall be voted or
decided by a majority vote of the remaining members of the Investment
Committee. The Investment Committee shall designate one of its members
as the Chairman and shall appoint a Secretary who may, but need not, be
a member thereof. The Investment Committee may appoint from its members
such subcommittees with such powers as the Investment Committee shall
determine.
(b) Duties of Investment Committee. The Investment Committee
shall recommend to the Benefits Committee investments and Investment
Managers and monitor the performance of such investments and Investment
Managers. The Investment Committee shall also implement any investment
objectives or guidelines which may be established by the Benefits
Committee. The Investment Committee may appoint such accountants,
counsel, specialists, and other persons as it deems necessary or
desirable in connection with its duties under this Plan. Such
accountants and counsel may, but need not, be accountants and counsel
for the Company or an Affiliate. The Investment Committee also shall
have such other duties, authority and responsibility as may be
delegated by the Benefits Committee.
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10.6 Delegation of Responsibilities; Bonding.
(a) Delegation and Allocation. The Board of Directors, the
Benefits Committee, the Investment Committee and the Administrative
Committee, respectively, shall have the authority to delegate and
allocate, from time to time, by a written instrument, all or any part
of its responsibilities under this Plan to such person or persons as
each may deem advisable, and in the same manner to revoke any such
delegation or allocation of responsibility. Any action of such person
in the exercise of such delegated or allocated responsibilities shall
have the same force and effect for all purposes hereunder as if such
action had been taken by the Board of Directors, the Benefits
Committee, the Investment Committee or the Administrative Committee. An
Employer, the Board of Directors, the Benefits Committee, the
Investment Committee or the Administrative Committee shall not be
liable for any acts or omissions of any such person, who shall
periodically report to the Board of Directors, the Benefits Committee,
the Investment Committee or the Administrative Committee, as
applicable, concerning the discharge of the delegated or allocated
responsibilities.
(b) Bonding. The members of the Benefits Committee, the
Investment Committee and the Administrative Committee shall serve
without bond (except as expressly required by federal law) and without
compensation for their services as such.
10.7 No Joint Fiduciary Responsibilities. The Plan is intended to
allocate to each named fiduciary the individual responsibility for the prudent
execution of the functions assigned to it, and none of such responsibilities or
any other responsibility shall be shared by two or more of such named
fiduciaries unless such sharing is provided for by a specific provision of the
Plan. Whenever one named fiduciary is required herein to follow the directions
of another named fiduciary, the two named fiduciaries shall not be deemed to
have been assigned a shared responsibility, but the responsibility of a named
fiduciary receiving such directions shall be to follow them insofar as such
instructions are on their face proper under applicable law.
10.8 Information to be Supplied by Employer. Each Employer shall supply
to the Administrative Committee, within a reasonable time after the end of each
month and in such form as the Administrative Committee shall require, the names
of all Participants who incurred a Termination of Employment or layoff during
the month and the date of termination of each and the amount of Compensation
paid to each Participant for the Plan Year of such Termination of Employment.
The Administrative Committee may rely conclusively on the information certified
to it by an Employer. Each Employer shall provide to the Administrative
Committee or its delegate such other information as it shall from time to time
need in the discharge of its duties.
10.9 Records. The regularly kept records of the Administrative
Committee and of any Employer shall be conclusive evidence of the Accrued
Benefit, Vesting Service and Eligibility Service of a Participant, his
Compensation, his age, marital status, his status as an Eligible Employee and
all other matters contained therein applicable to this Plan; provided that a
Participant may request a correction in the record of his age at any time prior
to his Annuity Starting Date, and such correction shall be made if within ninety
(90) days after such request he furnishes in support thereof a birth
certificate, baptismal certificate, or other documentary proof of age
satisfactory to the Administrative Committee.
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10.10 Fiduciary Capacity. Any person or group of persons may serve in
more than one fiduciary capacity with respect to the Plan.
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ARTICLE XI
Trustee
11.1 Appointment of Trustee. A Trustee (or Trustees) shall be the
entity designated as Trustee under the Trust Agreement or such other entity
appointed by the Benefits Committee. The Trustee shall serve at the pleasure of
the Benefits Committee, and shall have such rights, powers and duties as are
provided to a Named Fiduciary under ERISA for the administration of the Trust
Fund and as are provided in the Trust Agreement.
11.2 Responsibility of Trustee and Investment Manager(s). All
contributions under this Plan shall be paid to and held separately by the
Trustee. The Trustee shall have no responsibility relating to the investment and
reinvestment of the Trust Fund except with respect to the management of those
assets specifically delegated to it in writing. The Investment Manager(s) shall
have exclusive management and control of the investments and/or reinvestments of
the assets of the Trust Fund assigned to them except as specified above. All
property and funds of the Trust Fund shall be retained for the exclusive benefit
of Participants, as provided in the Plan, and shall be used to pay benefits to
Participants or their beneficiaries or to pay expenses of administration of the
Plan and Trust Fund to the extent not paid by the Employers.
11.3 Funding and Investment Policy. The Plan Administrator shall
periodically obtain cash flow projections from the Actuary and shall supply them
to the Benefits Committee, so that an appropriate funding and investment policy
may be maintained by such Benefits Committee in accordance with the requirements
of ERISA.
11.4 Bonding. Neither the Investment Manager(s) nor Trustee shall be
required to furnish any bond or security for the performance of their powers and
duties hereunder unless applicable law makes the furnishing of such bond or
security mandatory.
11.5 Standard of Conduct of Trustee. The Trustee shall perform all of
its functions solely in the interests of the Participants of the Plan and their
Beneficiaries and with the care, skill, prudence, and diligence under the
circumstances then prevailing that a prudent man acting in a like capacity and
familiar with such matters would use in the conduct of an enterprise of a like
character and with like aims, and shall not be liable for any conduct on its
part which conforms to that standard.
11.6 Payment of Expenses. All expenses incident to the administration,
termination or protection of the Plan and Trust, including but not limited to,
actuarial, legal, accounting, investment management, Trustee's fees and premiums
to the Pension Benefit Guaranty Corporation, shall be paid by the Company, which
may require reimbursement from the other Employers for their proportionate
shares, or if not paid by the Company, shall be paid by the Trustee from the
Trust Fund and, until paid, shall constitute a first and prior claim and lien
against the Trust Fund.
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ARTICLE XII
Limitations
12.1 Reemployment of Retired Employees.
(a) Prior to Normal Retirement Date. If a retired Participant
is reemployed as an Eligible Employee prior to his Normal Retirement
Date, no Pension payments shall be made during the period of such
reemployment. Upon subsequent Termination of Employment by such
Participant, the Participant shall be entitled to receive a Pension
based on his Basic Benefit as of the end of his period of reemployment
or his Benefit Service and Average Monthly Compensation prior to the
date of his previous Retirement as well as Benefit Service and Average
Monthly Compensation during the period of his reemployment, and in the
case of a disabled Participant, his Benefit Service while disabled. In
the case of reemployment of a retired Participant who received any
Pension payments prior to his reemployment, the Pension payable upon
his subsequent Retirement shall be reduced by the Actuarial Equivalent
of any Pension payments he received during his previous period of
Retirement.
(b) On or After Normal Retirement Date.
(1) Suspension of Pension. If a retired Participant
is reemployed as an Eligible Employee on or after his Normal
Retirement Date, his Pension shall be suspended for any
calendar month during which he earns at least forty (40) Hours
of Service under this Plan; provided, however, in no event
shall the amount so suspended be greater than the amount of
Pension which would have been payable to the Participant if he
had been receiving monthly Pension payments under the Plan
since his Retirement based on a Single Life Annuity commencing
at his age at Retirement.
(2) Status Determination. Any retired Participant who
is reemployed by any Employer or Affiliate on or after his
Normal Retirement Date may request the Committee to render a
determination of whether specific contemplated reemployment
will result in a permanent suspension of his Pension under
Section 12.2(b)(1). Such requests shall be considered in
accordance with this Plan's claims procedure, and shall be
rendered in a reasonable amount of time.
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12.2 Governmental Restrictions.
(a) Limitation on Benefits of Highly Compensated Employees.
This Section 12.2 sets forth the limitations required by the Internal
Revenue Service on the Employer Contributions which may be used for the
benefit of certain Participants. In the event of Plan termination, the
benefit of any highly compensated active or former employee is limited
to a benefit that is nondiscriminatory under Code Section 401(a)(4). In
this regard, benefits distributed to any of the 25 most highly
compensated active and highly compensated former employees with the
greatest compensation in the current or any prior year are restricted
such that the annual payments are no greater than an amount equal to
the payment that would be made on behalf of the Participant under a
straight life annuity that is the Actuarial Equivalent of the sum of
the Participant's Accrued Benefit, the Participant's other benefits (if
any) under the Plan (other than a social security supplement, within
the meaning of Section 1.411(a)-7(c)(4)(ii) of the Income Tax
Regulations), and the amount the Participant is entitled to receive
under a social security supplement.
The foregoing restrictions shall not apply if:
(1) after payment of the benefit to a Participant described in
the preceding paragraph, the value of plan assets equals or exceeds
110% of the value of current liabilities, as defined in Code Section
412(l)(7);
(2) the value of the benefits for a Participant described
above is less than 1% of the value of current liabilities before
distribution; or
(3) the value of the benefits payable under the Plan to a
Participant described above does not exceed $3,500.
For purposes of this Section 12.3, benefit includes loans in excess of the
amount set forth in Code Section 72(p)(2)(A), any periodic income, any
withdrawal values payable to a living Participant, and any death benefits not
provided for by insurance on the Participant's life.
(b) Permissible Distributions. A Participant's otherwise
restricted benefit may be distributed in full to the affected
Participant if prior to receipt of the restricted amount, the
Participant enters into a written agreement with the Administrative
Committee to secure repayment to the Plan of the restricted amount. The
restricted amount is the excess of the amounts distributed to the
Participant (accumulated with reasonable interest) over the amounts
that could have been distributed to the Participant under a Single Life
Annuity (accumulated with reasonable interest). The Participant may
secure repayment of the restricted amount upon distribution by:
(1) entering into an agreement for promptly
depositing in escrow with an acceptable depositary, property
having a fair market value equal to at least 125 percent of
the restricted amount;
(2) providing a bank letter of credit in an amount
equal to at least 100 percent of the restricted amount; or
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(3) posting a bond equal to at least 100 percent of
the restricted amount. If the Participant elects to post bond,
the bond will be furnished by an insurance company, bonding
company or other surety for federal bonds.
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ARTICLE XIII
Amendments
13.1 Right to Amend. As provided in Article X, the Benefits Committee
or the Board of Directors, as appropriate, reserves the right to make, from time
to time, any amendment to this Plan which does not permit any prohibited
reversion of any part of the Trust Fund to the Employers, and which does not
cause any part of the Trust Fund to be used for, or diverted to, any purpose
other than the exclusive benefit of Participants included in this Plan.
Retroactive amendments may not decrease the Accrued Benefit of any Participant
or Beneficiary thereof determined as of the first Plan Year to which the
amendment applies, or as of the time the amendment was adopted, except as
permitted by law.
13.2 Plan Merger or Consolidation. In the event of any merger or
consolidation with, or transfer of assets or liabilities to any other plan, each
Participant in this Plan, upon termination, shall have as a minimum benefit,
under the successor plan, the amount he would have received if the Plan had
terminated at the time of such merger, consolidation or transfer.
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ARTICLE XIV
Adoption and Withdrawal
14.1 Procedure for Adoption. Any Affiliate now in existence or
hereafter formed or acquired, which is not already an Employer under this Plan
and which is otherwise legally eligible, may by formal resolution or decision of
its own board of governing authority, adopt this Plan and the related Trust, for
all or any classification of persons in its employment, and thereby, from and
after the specified effective date shall become an Employer under this Plan.
Such adoption shall be effectuated by such formal resolution or decision of the
adopting organization as shall be appropriate. The adoption resolution or
decision may contain such specific changes and variations in the terms and
provisions of this Plan and Trust applicable to such adopting Employer and its
Employees, as may be acceptable to the Benefits Committee and attached hereto as
an Appendix. However, the sole, exclusive right of any other amendment of
whatever kind or extent, to the Plan or Trust are reserved by the Company. The
Appendix so added shall become, as to such adopting organization and its
Employees, a part of this Plan as then amended or thereafter amended and the
related Trust. It shall not be necessary for the adopting organization to sign
or execute the original or the amended Plan and Trust documents. The effective
date of this Plan for any such adopting organization shall be stated in this
restated and amended Plan or in the Appendix, and from and after such effective
date such adopting organization shall assume all the rights, obligations and
liabilities of an individual Employer entity hereunder and under the Trust. The
administrative powers and control of the Company, as provided in the Plan and
Trust, including the right of amendment, and of appointment and removal of the
Benefits Committee, shall not be diminished by reason of the participation of
any such adopting organization in this Plan and Trust.
14.2 Withdrawal. An Employer, by action of its board of directors or
other governing authority, may withdraw from this Plan and Trust at any time,
without affecting other Employers not withdrawing. The Company may, in its
absolute discretion, terminate an adopting Employer's participation at any time
when in its judgment such adopting Employer fails or refuses to discharge its
obligations under this Plan.
14.3 Adoption By Affiliate Contingent Upon Qualification. The adoption
and any related amendment of the Plan and its related Trust by an Affiliate is
hereby made contingent and subject to the condition precedent that the Plan and
its related Trust following such adoption, meets all the statutory requirements
for qualified plans, including, but not limited to, Section 401(a) of the Code.
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ARTICLE XV
Termination
15.1 Right to Terminate. The Company may at any time terminate the Plan
with respect to all or any part of the Participants employed by all or any one
of the Employers, and may direct and require the Trustee to liquidate the share
of the Trust Fund allocable to such Participants or their Beneficiaries. If the
Plan is terminated with respect to less than all Employers maintaining the Plan,
the Plan shall continue in effect for Participants of the remaining Employers.
In the event that an Employer shall cease to exist, the Plan shall be terminated
with respect to the Participants of such Employer, unless a successor
organization adopts and continues the Plan. Upon complete or partial termination
of the Plan, the rights of all affected Employees to the benefits accrued under
the Plan to the date of such termination shall be nonforfeitable to the extent
then funded.
15.2 Employer Consolidation or Merger. Upon an Employer's liquidation,
bankruptcy, insolvency, sale, consolidation or merger to or with another
organization which is not an Employer hereunder, in which the Employer is not
the surviving company, or upon an adjudication or other official determination
of a court of competent jurisdiction or other public authority pursuant to which
a conservator, receiver or other legal custodian is appointed for the purpose of
operation or liquidation of an Employer, the Trust Fund assets attributable to
the Participants of such Employer shall be held or distributed as herein
provided, unless the successor to such Employer assumes the duties and
responsibilities of such Employer by adopting the Plan and Trust, or by the
establishment of a separate plan and trust to which the Trust Fund assets of the
Trust held on behalf of such Employer may be transferred with the consent and
agreement of such Employer and the Company. Upon the consolidation or merger of
two or more of the Employers under the Plan with each other, the surviving
Employer or organization shall succeed to all the rights and duties under the
Plan and Trust of the Employers involved.
15.3 Allocation and Liquidation of Trust Fund. Upon complete or partial
termination of the Plan the proportionate interests of the affected Participants
of each Employer, and their Beneficiaries, respectively, shall be determined by
the Administrative Committee in accordance with Section 4044 of ERISA and other
applicable laws and regulations. If any assets of the Plan remain following
complete termination of the Plan, they shall revert to the Company as provided
in Section 15.5. Notwithstanding the foregoing, in the event the Plan
terminates, or there is a spinoff of part of the Plan (in excess of the three
percent (3%) of the Plan assets permitted under Treasury Regulation Section
1.414(1)-1(n)(2)), within five (5) years following the date of any merger of any
other plan into this Plan after September 2, 1974, and if the sum of the assets
in this Plan after any such merger was less than the sum of the present values
of the accrued benefits (whether or not vested) of both this Plan and such other
plan on a termination basis on the merger date, then a special schedule of
benefits shall be created from the necessary (as identified by an enrolled
actuary) data maintained by the Employer or the Plan Administrator and shall be
inserted in and modify the allocation priorities set forth above in this Section
15.3 at the time of such termination or spinoff, in accordance with Treasury
Regulation Sections 1.414(1)-1(e)-(j) and 2608.13.
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15.4 Manner of Distribution. Any distribution after termination or
partial termination of this Plan may be made at any time, and from time to time,
in whole or in part, to the extent that no discrimination in value results, in
cash or in securities or other assets in kind (at fair market value at the time
of distribution). In making such distribution, any and all determinations,
divisions, appraisals, apportionments and allotments shall be made by the
Administrative Committee acting with the information supplied by the Actuary and
such actions shall be final, binding and conclusive on all persons for all
purposes. Provided that no discrimination in value results, the Administrative
Committee may direct that any or all of the nonforfeitable benefits to be
distributed may be paid in a Lump Sum, subject to the consent requirements of
Section 8.5.
15.5 Amounts Returnable to an Employer. In no event shall an Employer
receive any amounts from the Trust, except such amounts, if any, as set forth
below:
(a) Upon termination of the Plan and notwithstanding any other
provisions of the Plan, the Company shall receive such amounts, if any,
as may remain after the satisfaction of all liabilities of the Plan to
affected Participants and Beneficiaries, and aris ing out of any
variations between actual requirements and expected actuarial
requirements;
(b) In the event of a contribution made by an Employer by a
mistake of fact, such contribution may be returned to such Employer
within one year after payment thereof, subject to the provisions of
subsection (d), below;
(c) Each contribution hereunder is conditioned upon the
deductibility of such contribution under Code Section 404 for the Plan
Year for which such contribution is made and shall be returned to an
Employer within one (1) year of disallowance, if such deduction is
disallowed (to the extent of the disallowance), subject to the
provisions of subsection (d), below; and
(d) The return of an Employer Contribution to an Employer
under subsections (b) or (c), above, must comply with each of the
following requirements:
(1) The amount of such Employer Contribution which
may be so returned shall not be greater than the excess of (i)
the amount contributed over (ii) the amount that would have
been contributed had there been no mistake in determining the
deduction or had there been no mistake of fact, as the case
may be; and
(2) The amount of such Employer Contribution which
may be so returned shall not be increased by earnings
attributable to the investment or reinvestment of such
Employer Contribution in the Trust, but shall be reduced by
losses attributable to the investment or reinvestment of such
Employer Contribution in the Trust.
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ARTICLE XVI
Top-Heavy Provisions
16.1 Definitions. For purposes of this Article XVI, the following words
and phrases shall have the meanings set forth below when used in the capitalized
form, unless a different meaning is clearly warranted by the context:
(a) "Aggregation Group" shall mean a Required Aggregation
Group or a Permissive Aggregation Group, as appropriate.
(1) "Required Aggregation Group" shall mean that
group of plans comprised of each defined contribution and each
defined benefit plan sponsored by the Company or any Affiliate
in which at least one (1) Key Employee participates, and any
other defined contribution or defined benefit plan sponsored
by the Company or by any Affiliate which enables a plan in
which a Key Employee participates to satisfy the minimum
participation and non-discrimination requirements of Code
Sections 401(a)(4) or 410.
(2) "Permissive Aggregation Group" shall mean all
plans included in the Required Aggregation Group and any other
plan or plans sponsored by the Company or by an Affiliate but
only if such group of plans would satisfy, in the aggregate,
the minimum participation and non-discrimination requirements
of Code Sections 410 and 401(a)(4) and contributions or
benefits in such other plans are comparable to contributions
or benefits in the plans of the Required Aggregation Group.
The Committee shall determine which plan or plans shall be
taken into account in determining the Permissive Aggregation
Group.
(b) "Annual Compensation" means compensation within the
meaning of Code Section 415(c)(3).
(c) "Determination Date" shall mean, with respect to a Plan
Year, the last day of the immediately preceding Plan Year.
(d) "Key Employee" shall mean any Employee or former Employee
(and any beneficiaries of a former employee) who, for the Plan Year
containing the Determination Date or any of the four preceding Plan
Years, is:
(1) An officer of an Employer (or of an Affiliate)
whose Annual Compensation during the Plan Year containing the
Determination Date is greater than 50 percent of the dollar
limitation on annual benefits for such Plan Year with respect
to defined benefit plans under Code Section 415(b)(1)(A);
provided however, excluding Employees described in Code
Section 414(q)(8), no more than the lesser of:
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(A) fifty (50) Employees; or
(B) the greater of three (3) Employees or
ten percent (10%) of all Employees
shall be treated as officers, and such officers shall be
selected from those with the highest Annual Compensation
during the Plan Year containing the Determination Date;
(2) One (1) of the ten (10) Employees owning, or
considered as owning within the meaning of Code Section 318
(applying subparagraph (a)(2)(C) thereof by substituting "5%"
for "50%" therein), the largest interest in an Employer,
provided such Employee's Annual Compensation from an Employer
during the Plan Year containing the Determination Date is in
excess of the dollar limitation on annual additions for such
Plan Year with respect to defined contribution plans under
Code Section 415(c)(1)(A); and provided further that if two or
more Employees so own equal interests in the Employer, the
Employee having the greater Annual Compensation from the
Employer shall be treated as so owning a larger interest;
(3) A five percent (5%) or greater owner of an
Employer, as defined in Code Section 416(i)(B)(i); or
(4) A one percent (1%) or greater owner of an
Employer (as defined in Code Section 416(i)(B)(ii)) whose
Annual Compensation from an Employer is greater than One
Hundred Fifty Thousand Dollars ($150,000).
(e) "Non-Key Employee" shall mean an Employee who is not a Key
Employee, including an Employee who is a former Key Employee.
(f) "Valuation Date" shall mean (i) with respect to this Plan,
the last valuation date of a Plan Year containing the Determination
Date, which is the valuation date as of which the Actuary determines
the funding requirements for the Trust Fund in accordance with ERISA
and as provided in Section 11.3; (ii) with respect to any other defined
benefit plan included in the Aggregation Group, the valuation date
within the twelve (12) month period ending on the Determination Date as
of which the minimum funding standards are determined for such plan;
and (iii) with respect to a defined contribution plan included in the
Aggregation Group, the valuation date within the twelve (12) month
period ending on the Determination Date as of which the account
balances under such plan are determined.
16.2 Application of Top-Heavy Provisions. The provisions of this
Article XVI shall be applied as follows:
(a) Single Plan Determination. Unless this Plan is included in
an Aggregation Group, it will be considered top-heavy and the
provisions of this Article XVI shall be
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applicable, if, as of a Determination Date, the cumulative Accrued
Benefits of Key Employees under the Plan exceeds sixty percent (60%) of
the cumulative Accrued Benefits of all Employees under the Plan.
(b) Aggregation Group Determination. If the Plan is included
in an Aggregation Group, it will be considered top-heavy and the
provisions of this Article XVI shall be applicable, if as of a
Determination Date, the sum of account balances of Key Employees under
all defined contribution plans in the group and the cumulative accrued
benefits of Key Employees under all defined benefit plans in such group
exceed sixty percent (60%) of the same amounts determined for all
employees under all plans included in the Aggregation Group.
(c) Top-Heavy Test. For purposes of subsection (a) and (b)
above, accrued benefits and account balances shall be adjusted for any
distribution made in the five-year period ending on the Determination
Date, for any contribution due but unpaid as of the Determination Date
and for any contributions made after the most recent Valuation Date.
The value of cumulative accrued benefits and the value of account
balances shall be determined as of the most recent Valuation Date which
is within the twelve-month period ending on the Determination Date and
the accrued benefit of a current Employee shall be determined as if he
had incurred a Termination of Employment as of such Valuation Date. The
present value of accrued benefits shall be determined using the
actuarial assumptions set forth in Section 2.2, without regard to
whether such benefit is accrued under this Plan or any other defined
benefit plan included in the Aggregation Group. The accrued benefit and
account balance of a Participant who either (i) is not a Key Employee
in the determination year but was a Key Employee in a prior year, or
(ii) has not performed services for an Employer or an Affiliate during
the five-year period ending on the Determination Date, shall be
disregarded. The determination of top-heavy status, including the
extent to which contributions, distributions, rollovers and transfers
are taken into account shall be made in accordance with Code Section
416 and the Treasury Regulations issued thereunder. Solely for the
purpose of determining if this Plan, or any other plan included in a
required Aggregation Group of which this Plan is a part, is top-heavy
(within the meaning of Code Section 416(g)) the Accrued Benefit of a
Non-Key Employee shall be determined under (a) the method, if any, that
uniformly applies for accrual purposes under all plans maintained by
Affiliates, or (b) if there is no such method, as if such benefit
accrued not more rapidly than the slowest accrual rate permitted under
the fractional accrual rate of Code Section 411(b)(1)(C).
16.3 Top-Heavy Determination. The Administrative Committee shall
determine whether the Plan is a top-heavy plan with respect to each Plan Year.
The Administrative Committee's determination shall be final and binding on all
Participants.
16.4 Vesting Requirements. If the Plan is determined to be a top-heavy
plan with respect to a Plan Year, then a Participant's interest in his Accrued
Benefit shall vest in accordance with the following schedule:
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<TABLE>
<CAPTION>
Years of Vesting Service Vesting Percentage
- ------------------------ ------------------
<S> <C>
Less than 2 0%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
</TABLE>
If in a subsequent Plan Year, the Plan is no longer top-heavy, the
vesting provisions that were in effect prior to the time the Plan became
top-heavy shall be reinstated; provided, however, that any portion of a
Participant's Accrued Benefit which was vested prior to the time the Plan was no
longer top-heavy shall remain vested; and provided further that a Participant
who has at least three years of Vesting Service at the start of such Plan Year
shall have the option of remaining under the vesting schedule in effect while
the Plan was top-heavy. Notwithstanding the foregoing, this Article XVI does not
apply to the Accrued Benefit of any Participant who does not have an Hour of
Service after the Plan has initially become top-heavy.
16.5 Minimum Benefit.
(a) Minimum Accrual Formula. Subject to the provisions of
subsection (b) below, if the Plan is determined to be top-heavy with
respect to a Plan Year, then each Non-Key Employee who is a Participant
and who completed at least one thousand (1,000) Hours of Service during
such Plan Year shall accrue a benefit (expressed as a Single Life
Annuity commencing at age sixty-five (65)) which is not less than the
product of (1) and (2) below ("Minimum Accrual Amount"), where:
(1) is the number of Years of Service performed while
the Plan is a top- heavy plan; and
(2) is two percent (2%) of such Participant's average
annual Code Section 415 Compensation for the period of the
five (5) consecutive Plan Years during which the Plan is
top-heavy for which such Participant has the highest aggregate
of such compensation;
provided such product shall not exceed twenty percent (20%) of such
average Code Section 415 Compensation, and the Minimum Accrual Amount
shall be determined without regard to Social Security integration.
(b) Participation in Other Plans. If a Non-Key Employee who is
entitled to a Minimum Accrual Amount is a participant in both a defined
contribution plan and this Plan
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in a Plan Year in which this Plan is top-heavy, such Non-Key Employee
shall receive an allocation under such defined contribution plan equal
to five percent (5%) of his Code Section 415 Compensation for such Plan
Year; provided, however, if such Non-Key Employee is a participant in
more than one defined contribution plan, such minimum contribution
allocation shall be provided under only one such defined contribution
plan as determined in accordance with the top-heavy coordination
provisions of such plans.
16.6 Adjustment in Maximum Limitation on Annual Benefits. For any Plan
Year with respect to which the Plan is top-heavy, the denominators of defined
benefit plan fraction and the defined contribution plan fraction described in
Section 6.5(g) shall be determined under Code Section 415(e) by multiplying the
dollar limitation then in effect by 1.0 instead of 1.25.
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ARTICLE XVII
Miscellaneous
17.1 Nonguarantee of Employment. Nothing contained in this Plan shall
be construed as a contract of employment between an Employer and any Employee,
or as a right of any Employee to be continued in the employment of an Employer,
or as a limitation of the right of an Employer to discharge any of its
Employees, with or without cause.
17.2 Rights to Trust Assets. No Participant shall have any right to, or
interest in, any assets of the Trust Fund upon his Termination of Employment or
otherwise, except as provided from time to time under this Plan, and then only
to the extent of the benefits payable to such Participant out of the assets of
the Trust Fund. Neither the Employers, the Trustee nor any member of the
Committee shall be liable to any Participant or beneficiary for benefits from
this Plan, except for those payable from the Trust Fund in accordance with the
terms of the Plan and the Trust.
17.3 Nonalienation of Benefits. Except as expressly provided for by
this Plan or otherwise permitted by law, benefits payable under this Plan shall
not be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, charge, garnishment, execution or levy of any
kind, either voluntary or involuntary, including any liability for alimony or
other payments for property settlement or support of a spouse, former spouse or
for any other relative of the Participant, but excluding devolution by death or
mental incompetency, prior to being received by the person entitled to the
benefit under the terms of the Plan; and any attempt to anticipate, alienate,
sell, transfer, assign, pledge, encumber, charge or otherwise dispose of any
right to benefits payable hereunder shall be void. The Trust Fund shall not in
any manner be liable for, or subject to, the debts, contracts, liabilities,
engagements or torts of any person entitled to benefits hereunder. None of the
unpaid Plan benefits or Trust assets shall be considered an asset of the
Participant in the event of his insolvency or bankruptcy. This Section 17.3
shall not bar any voluntary and revocable assignment to an Employer (or other
designated person) by a Participant which is permitted under Treasury Regulation
Section 1.401(a)-13, including any such assignment of a portion of any payment
that such Participant otherwise is entitled to receive under this Plan for the
purpose of paying part or all of the costs allocable to the Participant under a
retiree medical expense plan.
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ARTICLE XVIII
Procedure for Identification and Processing
of Qualified Domestic Relations Orders
18.1 Definitions. The capitalized terms used in this Procedure, unless
otherwise specifically defined below, shall have the same meaning as provided in
this Plan as amended from time to time.
(a) "Alternate Payee" shall mean any spouse, former spouse,
child or other dependent of a Participant who is recognized by a
Domestic Relations Order as having the right to receive all or any
portion of the benefits payable under the Plan with respect to such
Participant.
(b) "Domestic Relations Order" or "Order", used
interchangeably, shall mean any judgment, decree or order of a court of
competent jurisdiction, including approval of a property settlement
agreement, (i) that relates to the provision of child support, alimony
payments or marital property rights to a spouse, former spouse, child
or other dependent of a Participant, and (ii) that is made pursuant to
the domestic relations law of a state, including a community property
law.
(c) "Qualified Domestic Relations Order" shall mean a Domestic
Relations Order that meets all of the requirements specified in this
Procedure, and that creates or recognizes the existence of the right of
an Alternate Payee to receive, or assigns to an Alternate Payee the
right to receive, all or a portion of the benefits payable with respect
to a Participant under the Plan. The determination of the status of a
Domestic Relations Order shall at all times be made in accordance with
the provisions of any applicable regulations issued by the Secretary of
Labor or the Secretary of the Treasury. The Committee's determination
of the status of a Domestic Relations Order shall be final and binding
on all persons.
18.2 Status of Order.
(a) Grandfathered Orders. If an Order was entered prior to
January 1, 1985, the Administrative Committee shall treat the Order as
a Qualified Domestic Relations Order, if any benefits are being paid
from the Plan pursuant to such Order on January 1, 1985.
(b) New Orders. If an Order is entered after December 31,
1984, the Administrative Committee shall recognize the Order as a
Qualified Domestic Relations Order if the Order satisfies all of the
following requirements:
(1) The Order discloses the name and last known
mailing address, if available, of the Participant and each
Alternate Payee covered by the Order; provided, however, that
an Order shall not fail to be a Qualified Domestic
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Relations Order merely because the Order does not specify the
address of the Participant or an Alternate Payee, if the
Committee is otherwise aware of the address of such
Participant or Alternate Payee.
(2) The Order specifies the amount or the percentage
of the Participant's benefits to be paid to each Alternate
Payee.
(3) The Order identifies the number of payments or
periods to which such Order applies.
(4) The Order contains information sufficient to
assure that the Order relates to the Plan.
(5) The Order does not require any type or form of
payment of benefits or any option that is not otherwise
provided under the Plan (nor require payment in the form of a
joint and survivor annuity with respect to the Alternate Payee
and any joint annuitant); provided, however, in the case of
any payment before distribution of a Participant's Basic
Benefit or Accrued Benefit, as applicable, has commenced, an
Order shall not be treated as failing to meet this requirement
solely because such Order requires the payment of benefits to
an Alternate Payee in a single-sum payment of the entire
benefit of such Alternate Payee.
(6) The Order does not affect any portion of the
Participant's Basic Benefit or Accrued Benefit, as applicable,
which is not fully-vested nor any death benefit which has not
been awarded at the date of the Order.
(7) The Order does not require the Plan to provide
increased benefits, as determined on the basis of actuarial
value.
(8) The Order provides that any income tax basis, if
any, attributable to a Participant's Basic Benefit or Accrued
Benefit, as applicable, shall be proportioned to the benefit
awarded to the Alternate Payee in the same percentage as such
awarded benefit bears to such Basic Benefit or Accrued
Benefit, as applicable, as of the date such Accrued Benefit is
divided.
(9) The Order does not require the payment of
benefits to an Alternate Payee that are required to be paid to
another Alternate Payee under another Order previously
determined by the Administrative Committee to be a Qualified
Domestic Relations order.
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18.3 Procedural Requirements.
(a) Copy of Order. Upon receipt by the Company of a certified
copy of a Domestic Relations Order, the Committee promptly shall notify
the Participant and any Alternate Payee that the Committee has received
such Order and the Committee shall provide the Participant and each
Alternative Payee with a copy of this Procedure.
(b) Notification. Within a reasonable time after receipt by
the Committee of a Domestic Relations Order, or within such time period
as shall be established under any applicable regulations issued by the
Secretary of Labor or the Secretary of the Treasury, the Committee
shall determine whether the Order is a Qualified Domestic Relations
Order and shall notify the Participant and each Alternate Payee of such
determination. If the Committee determines that an Order is not a
Qualified Domestic Relations Order, such notice shall advise the
Alternate Payee that he or she may have a right to petition the issuing
court to amend the Order. Notifications shall be sent to the addresses
specified in the Domestic Relations Order, or if the Domestic Relations
Order does not specify addresses, to the last known address of the
Participant and the Alternate Payee.
18.4 Segregation of Assets and Payments. During the eighteen (18) month
period commencing thirty (30) days after a Domestic Relations Order has been
received by the Administrative Committee and before its status has been
determined, any amounts that would have been payable under the Plan to the
Alternate Payee pursuant to the Order during such period shall be segregated
under the Plan. If, within such eighteen-month period, the Order is determined
to be a Qualified Domestic Relations Order by the Administrative Committee, a
court of competent jurisdiction, or otherwise, the Administrative Committee
shall pay the segregated amounts to the persons entitled to receive them. If it
is determined that the Order is not a Qualified Domestic Relations Order or if
the issue cannot be resolved within such eighteen-month period, the
Administrative Committee shall cause the segregated amounts to be paid to the
person or persons who would have been entitled to receive such amounts in the
absence of such Order. The payment of any benefits from the Plan to a
Participant or Alternate Payee pursuant to a Qualified Domestic Relations Order
shall be suspended during any period during which the enforcement of such Order
shall have been stayed by court of competent jurisdiction, if written notice of
such stay is delivered to the Administrative Committee by a Participant or
Alternate Payee.
18.5 Modification of Procedure. This Procedure may be modified from
time to time by the Administrative Committee in its discretion to conform with
applicable rules or regulations promulgated by the Secretary of Labor or
Secretary of the Treasury.
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ARTICLE XIX
Medical Benefits for Certain Eligible Retirees
This Article XIX, sets forth the terms and conditions under which
Eligible Retirees and Eligible Dependents may be entitled to receive Medical
Benefits hereunder. Unless the context indicates to the contrary, or the
provisions of this Article XIX provide otherwise, all provisions and definitions
contained in the Plan shall apply under this Article XIX.
19.1 Definitions and Construction. For purposes of this Article XIX,
the following terms shall have the meaning set forth below when used in the
capitalized form and shall supersede any similar or inconsistent terms or
provisions which appear in the body of the Plan.
(a) "Contributing Employer" means an Employer which has
contributed amounts pursuant to this Article XIX for the providing of
Medical Benefits for Eligible Retirees and Eligible Dependents.
(b) "Eligible Dependent" means an "Eligible Dependent" under
the Medical Plan of an Eligible Retiree under this Plan.
(c) "Eligible Retiree" means any Participant, other than a Key
Employee, who (i) is in the employ of a Contributing Employer on the
date he or she incurs a Termination of Employment on or after January
1, 1987, (ii) is entitled to commence the receipt of a Pension pursuant
to Section 5.1, 5.2, or 5.3, and (iii) meets all eligibility
requirements set forth, from time to time, in the Medical Plan.
(d) "Key Employee" means any Participant in the Plan who was a
Key Employee (within the meaning of section 416(i) of the Code), of an
Employer during any Plan Year for which contributions under this
Article XIX were made on his behalf.
(e) "Medical Benefits" means any expense for medical care
considered an "Eligible Medical Expense" under the terms of the Medical
Plan applicable to an Eligible Retiree or Eligible Dependent.
(f) "Medical Plan" means The Williams Companies, Inc. Health
Plus Plan for Full-time Employees or The Williams Companies, Inc.
Health Plus Plan for Part-time Employees, as applicable, and as such
plans may be amended from time to time.
19.2 Eligibility for Payment of Medical Benefits. Eligible Retirees and
Eligible Dependents are eligible to receive payment on or after January 1, 1989
of Medical Benefits hereunder solely to the extent they are eligible for such
payment under the Medical Plan. In this regard, the amount of all payments to or
on behalf of an Eligible Retiree or Eligible Dependent shall be subject to all
terms and conditions of the Medical Plan and different levels of benefits may be
payable to various classes of Eligible Retirees and Eligible Dependents under
such Medical Plan. If the Medical Plan is amended to increase or decrease the
benefits of any Eligible Retirees
72
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or Eligible Dependents, then such increase or decrease shall automatically be
incorporated herein. In this regard, and notwithstanding any other provision of
the Plan, the Company, in its sole and absolute discretion, may amend or
terminate the Medical Plan at any time.
19.3 Funding of Medical Benefits. Subject to the right reserved to the
Company to amend or terminate this Article XIX (which may result in medical
benefit obligations hereunder again becoming obligations under the Medical
Plan), the Contributing Employers in their discretion, may make actuarially
determined contributions to fund the Medical Benefits provided hereunder. The
Medical Benefits shall be subordinate to the retirement benefits provided by the
Plan. In this regard, contributions by the Contributing Employers shall be
deemed subordinate if the aggregate contributions credited to the separate
account described in Section 19.4 below, when added to any amounts contributed
with respect to any death benefits provided under the Plan, do not at any time
exceed the lesser of (i) thirty-three percent (33%) of the aggregate normal cost
of the Plan (as computed in accordance with section 404(a)(1)(A)(iii) of the
Code in determining the amount of deductible contributions to the Plan) for Plan
Years during which this Article XIX is in effect, or (ii) the amount necessary
to fund fully the Medical Benefits. The Administrative Committee is expressly
authorized to cause to be allocated, to such separate account, a portion of the
Employer Contributions for each Plan Year commencing on or after January 1, 1987
not to exceed the amount determined by the Actuary to be necessary to fund fully
the Medical Benefits.
19.4 Separate Account-Recordkeeping. All contributions for Medical
Benefits shall be credited to a separate account which shall be maintained under
the Trust Fund solely for recordkeeping purposes. At the time a Contributing
Employer makes any contribution to the Plan, the Benefits Committee shall
designate the portion of such contribution allocable to the funding of Medical
Benefits. In addition, the separate account shall be charged with any payment of
Medical Benefits under the terms of this Article XIX. However, all funds
accounted for in the separate account may, but need not be, invested together
with all other assets of the Trust Fund held by the Trustee.
19.5 Expenses. All reasonable expenses of administering the separate
account, including but not limited to reasonable expenses and compensation of
the Trustee, the Actuary, attorneys, auditors, investment advisors, investment
managers and other consultants, shall be paid out of the Trust Fund at the
direction of the Benefits Committee, unless the amount of such expenses and
compensation shall be paid by the Company.
19.6 Non-Diversion of Separate Account Assets. Plan assets allocated to
the separate account for payment of Medical Benefits may not be used for, or
diverted to, any other purpose (including payment of pension benefits) prior to
the satisfaction of all liabilities under this Article XIX to provide for the
payment of Medical Benefits. In this regard, if (i) the Plan is terminated, (ii)
the requirement that Medical Benefits be provided under this Article XIX is
eliminated by amendment, or (iii) the Medical Plan is terminated, Medical
Benefits incurred prior to such termination or amendment shall be payable under
this Article XIX to the extent then funded. Any amounts remaining in the
separate account after the satisfaction of all liabilities for such Medical
Benefits shall be returned to the Contributing Employers in such amounts and
such proportions as determined by the Benefits Committee in its sole and
absolute discretion.
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19.7 Forfeiture. In the event an individual's interest in the separate
account established pursuant to this Article XIX is forfeited prior to
termination of the Plan, an amount equal to the amount of such forfeiture shall
be applied as soon as practicable thereafter to reduce Employer Contributions by
Contributing Employers to fund such Medical Benefits.
74
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ARTICLE XX
Claims Procedure
20.1 Initial Claim for Benefits. Each Participant or Beneficiary must
submit his claim for benefits to the Administrative Committee (or to such other
person as may be designated by the Administrative Committee) in writing in such
form as is permitted by the Administrative Committee. A Participant shall have
no right to seek review of a denial of benefits, or to bring any action in any
court to enforce a claim for benefits, prior to his filing a claim for benefits
and exhausting his rights to review under Sections 20.1 and 20.2. When a claim
for benefits has been filed properly, such claim for benefits shall be evaluated
and the claimant shall be notified of the approval or the denial within ninety
(90) days after the receipt of such claim unless special circumstances require
an extension of time for processing the claim. If such an extension of time for
processing is required, written notice of the extension shall be furnished to
the claimant prior to the termination of the initial ninety (90) day period
which shall specify the special circumstances requiring an extension and the
date by which a final decision will be reached (which date shall not be later
than one hundred eighty (180) days after the date on which the claim was filed).
A claimant shall be given a written notice in which the claimant shall be
advised as to whether the claim is granted or denied, in whole or in part. If a
claim is denied, in whole or in part, the claimant shall be given written notice
which shall contain (1) the specific reasons for the denial, (2) references to
pertinent plan provisions upon which the denial is based, (3) a description of
any additional material or information necessary to perfect the claim and an
explanation of why such material or information is necessary, and (4) the
claimant's rights to seek review of the denial.
20.2 Review of Claim Denial. If a claim is denied, in whole or in part,
the claimant shall have the right to request that the Administrative Committee
review the denial, provided that the claimant files a written request for review
with the Administrative Committee within sixty (60) days after the date on which
the claimant received written notification of the denial. A claimant (or his
duly authorized representative) may review pertinent documents and submit issues
and comments in writing to the Administrative Committee. Within sixty (60) days
after a request for review is received, the review shall be made and the
claimant shall be advised in writing of the decision on review, unless special
circumstances require an extension of time for processing the review, in which
case the claimant shall be given a written notification within such initial
sixty (60) day period specifying the reasons for the extension and when such
review shall be completed (provided that such review shall be completed within
one hundred twenty (120) days after the date on which the request for review was
filed). The decision on review shall be forwarded to the claimant in writing and
shall include specific reasons for the decision and references to plan
provisions upon which the decision was based. A decision on review shall be made
by the Administrative Committee in its sole discretion and shall be final and
binding on all persons for all purposes. If a claimant shall fail to file a
request for review in accordance with the procedures herein outlined, such
claimant shall have no rights to review and shall have no right to bring action
in any court and the denial of the claim shall become final and binding on all
persons for all purposes.
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IN WITNESS WHEREOF, and as conclusive evidence of the adoption of the
foregoing instrument comprising the Williams Pension Plan, as effective April 1,
1998, The Williams Companies, Inc., as the Company, has caused its corporate
seal to be affixed hereto and these presents to be duly executed in ________
counterpart originals in its name and behalf by its proper officers thereunto
authorized as of the _____ day of ________, 1998.
THE WILLIAMS COMPANIES, INC.
ATTEST:
By:
----------------------------------
Secretary John C. Fischer,
Vice President, Human Resources
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<PAGE> 1
EXHIBIT 10.54
WILTEL COMMUNICATIONS, LLC PENSION PLAN
(EFFECTIVE AUGUST 1, 1997)
<PAGE> 2
WILTEL COMMUNICATION, LLC
PENSION PLAN
(effective August 1, 1997)
TABLE OF CONTENTS
<TABLE>
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ARTICLE I Purpose; Effective Date; Plan Benefits
1.1 Purpose..................................................................... 1
1.2 Effective Date.............................................................. 1
1.3 Plan Benefits............................................................... 1
ARTICLE II Definitions
2.1 Accrued Benefit............................................................. 2
2.2 Actuarial Equivalent........................................................ 2
2.3 Actuary..................................................................... 3
2.4 Administrative Committee.................................................... 3
2.5 Affiliate................................................................... 4
2.6 Alternate Payee............................................................. 4
2.7 Annuity Starting Date....................................................... 4
2.8 Appendix.................................................................... 4
2.9 Applicable Election Period.................................................. 4
2.10 Authorized Leave of Absence................................................. 4
2.11 Average Monthly Compensation................................................ 4
2.12 Beneficiary................................................................. 4
2.13 Benefits Committee.......................................................... 4
2.14 Benefit Service............................................................. 4
2.15 Board of Directors.......................................................... 5
2.16 Code........................................................................ 5
2.17 Code Section 415 Compensation............................................... 5
2.18 Company..................................................................... 5
2.19 Compensation................................................................ 5
2.20 Computation Period.......................................................... 5
2.21 Covered Compensation........................................................ 6
2.22 Death Benefit............................................................... 6
2.23 Deferred Vested Pension..................................................... 6
2.24 Disability.................................................................. 6
2.25 Disability Pension.......................................................... 7
2.26 Early Pension............................................................... 7
2.27 Early Retirement Incentive Program.......................................... 7
2.28 Effective Date.............................................................. 7
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2.29 Eligibility Service......................................................... 7
2.30 Eligible Employee........................................................... 7
2.31 Employee.................................................................... 8
2.32 Employer.................................................................... 8
2.33 Employer Contributions...................................................... 8
2.34 Employment Date............................................................. 8
2.35 ERISA....................................................................... 8
2.36 Hour of Service............................................................. 8
2.37 Key Employee................................................................ 10
2.38 Leased Employee............................................................. 10
2.39 Normal Pension.............................................................. 10
2.40 Normal Retirement Date...................................................... 10
2.41 One Year Break-In-Service................................................... 10
2.42 Parent...................................................................... 10
2.43 Participant................................................................. 10
2.44 Pension..................................................................... 10
2.45 Plan........................................................................ 10
2.46 Plan Administrator.......................................................... 10
2.47 Plan Year................................................................... 10
2.48 Prior Service............................................................... 10
2.49 Prior Plan.................................................................. 10
2.50 Procedure................................................................... 10
2.51 Qualified Joint and Survivor Pension........................................ 11
2.52 Qualified Domestic Relations Order.......................................... 11
2.53 Related Plan................................................................ 11
2.54 Retirement.................................................................. 11
2.55 Single Life Annuity......................................................... 11
2.56 Social Security Retirement Age.............................................. 11
2.57 Special Participant......................................................... 11
2.58 Spouse...................................................................... 11
2.59 Spouse's Consent............................................................ 11
2.60 Surviving Spouse............................................................ 11
2.61 Survivor Pension............................................................ 12
2.62 Termination of Employment................................................... 12
2.63 Trust....................................................................... 13
2.64 Trust Agreement............................................................. 13
2.65 Trustee..................................................................... 13
2.66 Trust Fund.................................................................. 13
2.67 Vesting Service............................................................. 13
2.68 Vested Participant.......................................................... 14
2.69 Year of Service............................................................. 14
ARTICLE III Participation
3.1 Participation............................................................... 15
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3.2 Reemployment................................................................ 15
ARTICLE IV Contributions
4.1 Participant Contributions................................................... 16
4.2 Company Contributions....................................................... 16
4.3 Rollover Contributions...................................................... 16
ARTICLE V Retirement Benefits
5.1 Normal and Late Retirement.................................................. 17
5.2 Early Retirement............................................................ 17
5.3 Disability Retirement....................................................... 17
5.4 Deferred Vested Retirement.................................................. 18
5.5 Special Participant Retirement.............................................. 18
5.6 Transferred Employee Retirement............................................. 18
5.7 Early Retirement Incentive Program.......................................... 18
5.8 Annuity Starting Date....................................................... 19
5.9 Distribution Requirements................................................... 20
5.10 Required Information........................................................ 20
5.11 Direct Rollovers............................................................ 20
ARTICLE VI Amount of Pension
6.1 Normal and Late Pension..................................................... 22
6.2 Early Pension............................................................... 22
6.3 Disability Pension.......................................................... 23
6.4 Deferred Vested Pension..................................................... 23
6.5 Maximum Pensions............................................................ 24
6.6 Special Participant Retirement Benefits..................................... 27
6.7 Transferred Employee Retirement Benefits.................................... 27
ARTICLE VII Death Benefits
7.1 In-Service Survivor Pension................................................. 28
7.2 Out-of-Service Survivor Pension............................................. 28
7.3 Post-Disability Survivor Pension............................................ 29
7.4 Special Participants Severance and Death Benefits........................... 29
7.5 Designation of Beneficiary.................................................. 29
7.6 Loss of Eligibility to Receive Death Benefit................................ 30
ARTICLE VIII Normal and Optional Forms of Payment
8.1 Normal Form of Pension...................................................... 31
8.2 Optional Forms of Pension................................................... 31
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8.3 Other Benefits Cancelled by Option.......................................... 34
8.4 Special Restrictions on Payment............................................. 35
8.5 Domestic Relations Orders................................................... 35
8.6 Unclaimed Benefits.......................................................... 35
8.7 Facility of Payment......................................................... 36
8.8 Loss of Eligibility to Receive Continuation Benefit......................... 36
ARTICLE IX Employment Transfers
9.1 Transfers Between Employers................................................. 37
9.2 Transfers to Non-Employer Affiliates........................................ 37
ARTICLE X Administration
10.1 Fiduciaries................................................................. 38
10.2 Allocation of Responsibilities Among Named Fiduciaries...................... 38
10.3 Provisions Concerning the Benefits Committee................................ 39
10.4 Provisions Concerning the Administrative Committee.......................... 40
10.5 Provisions Concerning Investment Committee.................................. 40
10.6 Delegation of Responsibilities; Bonding..................................... 41
10.7 No Joint Fiduciary Responsibilities......................................... 41
10.8 Information to be Supplied by Employer...................................... 42
10.9 Records..................................................................... 42
10.10 Fiduciary Capacity.......................................................... 42
ARTICLE XI Trustee
11.1 Appointment of Trustee...................................................... 43
11.2 Responsibility of Trustee and Investment Manager(s)......................... 43
11.3 Funding and Investment Policy............................................... 43
11.4 Bonding..................................................................... 43
11.5 Standard of Conduct of Trustee.............................................. 43
11.6 Payment of Expenses......................................................... 43
ARTICLE XII Limitations
12.1 Reemployment of Retired Employees........................................... 44
12.2 Governmental Restrictions................................................... 44
ARTICLE XIII Amendments
13.1 Right to Amend.............................................................. 46
13.2 Plan Merger or Consolidation................................................ 46
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ARTICLE XIV Adoption and Withdrawal
14.1 Procedure for Adoption...................................................... 47
14.2 Withdrawal.................................................................. 47
14.3 Adoption Contingent Upon Initial and Continued
Qualification............................................................. 47
ARTICLE XV Termination
15.1 Right to Terminate.......................................................... 48
15.2 Employer Consolidation or Merger............................................ 48
15.3 Allocation and Liquidation of Trust Fund.................................... 48
15.4 Manner of Distribution...................................................... 49
15.5 Amounts Returnable to an Employer........................................... 49
ARTICLE XVI Top-Heavy Provisions
16.1 Definitions................................................................. 50
16.2 Application of Top-Heavy Provisions......................................... 51
16.3 Top-Heavy Determination..................................................... 52
16.4 Vesting Requirements........................................................ 52
16.5 Minimum Benefit............................................................. 53
16.6 Adjustment in Maximum Limitation on Annual Benefits......................... 54
ARTICLE XVII Miscellaneous
17.1 Non-guarantee of Employment................................................. 55
17.2 Rights to Trust Assets...................................................... 55
17.3 Nonalienation of Benefits................................................... 55
ARTICLE XVIII Procedure for Identification and Processing of
Qualified Domestic Relations Orders
18.1 Definitions................................................................. 56
18.2 Status of Order............................................................. 56
18.3 Procedural Requirements..................................................... 57
18.4 Segregation of Assets and Payments.......................................... 58
18.5 Modification of Procedure................................................... 58
ARTICLE XIX Claims Procedure
19.1 Initial Claim for Benefits.................................................. 59
19.2 Review of Claim Denial...................................................... 59
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APPENDIX I Adoption of Plan by Certain Affiliates
Provisions Applicable to Special Participant Class I..................... I-1
APPENDIX II Adoption of Plan by Certain Affiliates
Provisions Applicable to Special Participant Class II..................... II-1
APPENDIX III Adoption of Plan by Certain Affiliates
Provisions Applicable to Special Participant Class III.................... III-1
</TABLE>
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WILTEL COMMUNICATIONS, LLC
PENSION PLAN
ARTICLE I
Purpose; Effective Date; Plan Benefits
1.1 Purpose. The purpose of this Plan is to provide retirement and
incidental benefits for all Eligible Employees who complete a period of service
and otherwise become eligible hereunder. The benefits provided by this Plan will
be paid from a Trust Fund established by the Company and will be in addition to
any benefits Employees are entitled to receive under the federal Social Security
Act.
1.2 Effective Date. The terms and provisions of this Plan shall be
effective on and after August 1, 1997, and shall apply only to Eligible
Employees who are credited with an Hour of Service for services rendered on or
after such date, unless this Plan expressly provides for an earlier effective
date.
1.3 Plan Benefits. Benefits payable under this Plan are payable to all
Participants in accordance with the terms of this Plan, unless a Participant is
a member of a class of Eligible Employees for which a different schedule of
benefits has been provided, as described in an Appendix to this Plan.
<PAGE> 9
ARTICLE II
Definitions
The following terms, whenever used in the following capitalized forms,
shall have the meanings set forth below, unless modified by an Appendix attached
hereto:
2.1 "Accrued Benefit" means, with respect to a Participant credited
with at least one Hour of Service on or after August 1, 1997, subject to the
limitations of Section 6.5 and Article XVI, a monthly amount payable to a
Participant commencing as of the first day of the month coincident with or next
following his Normal Retirement Date or as of his later Annuity Starting Date,
which amount when expressed as a Single Life Annuity, is equal to the amount
determined below, reduced for any reductions, if any, pursuant to an applicable
Appendix, where:
such amount is equal to the sum of (a) and (b), where:
(a) is equal to seven-tenths percent (.7%) of the
Participant's Average Monthly Compensation multiplied by his
Benefit Service earned on or after August 1, 1997; and
(b) is equal to forty one-hundredths percent (0.40%)
of the amount, if any, by which such Participant's Average
Monthly Compensation exceeds his Covered Compensation
multiplied by the lesser of (i) his total Benefit Service
earned on or after August 1, 1997, or (ii) thirty-five (35).
with his Average Monthly Compensation, Benefit Service and Covered
Compensation determined as of his Termination of Employment (or, if no
Termination of Employment is involved, as of the date of determination)
in the determination of such amount and the component parts thereof.
2.2 "Actuarial Equivalent" means, for purposes of computing optional
forms of benefits and for purposes of computing any adjustments called for under
the terms of this Plan for benefits commencing other than upon the Normal
Retirement Date of a Participant, the factors and assumptions set forth in a
provision of this Plan or of an applicable Appendix; provided, that the
following factors and assumptions shall be used for the lump sum payments under
Sections 8.4 or 18.2(e), or any applicable Appendix
(a) With respect to the present value of the Pension of a
Participant who has satisfied the requirements of Section 5.1 or 5.2
and the Survivor Pension based upon the Pension of such Participant,
such present value shall be determined as the greater of the following:
(1) Solely with respect to benefits payable during
Plan Years for which a Plan Interest Rate is determinable, the
amount determined by application of the Plan Interest Rate and
the Applicable Mortality Table; or
2
<PAGE> 10
(2) The amount determined by application of the
Applicable Interest Rate applicable for the month of December,
March, June or September immediately preceding the date of
distribution by at least two (2) full months and the
Applicable Mortality Table.
(b) With respect to the present value of the Pension of a
Participant who is not described in subsection (a) and the Survivor
Pension based upon the Pension of such Participant, such present value
shall be the amount determined by application of the Applicable
Interest Rate applicable for the month of September immediately
preceding the Plan Year containing the date of distribution and the
Applicable Mortality Table.
(c) For purposes of this Section 2.2, the following terms,
whenever used in the capitalized form, shall have the meanings set
forth below:
(1) "Applicable Interest Rate" means the applicable
interest rate prescribed by the Commissioner of Internal
Revenue in revenue rulings, notices or other guidance
published in the Internal Revenue Bulletin applicable for the
particular month as required in the context of this Section
2.2.
(2) "Applicable Mortality Table" means the applicable
mortality table prescribed by the Commissioner of Internal
Revenue in revenue rulings, notices and other guidance
published in the Internal Revenue Bulletin, as in effect on
the date as of which present value is being determined.
(3) "Plan Interest Rate" means an interest rate equal
to the PBGC Interest Rate established for the month of
December, March, June or September nearest preceding the date
of distribution by at least two (2) full months, compounded
annually from the date of determination.
Provided, however, in the event the PBGC Interest Rate ceases
to be determined by the Pension Benefit Guaranty Corporation
in the manner such rate is determined as of August 1, 1997,
the Plan Interest Rate shall cease to exist as of the end of
the final Plan Year for which the Plan Interest Rate is
determined pursuant to this subparagraph (3).
(4) "PBGC Interest Rate" means the interest rate or
rates, as applicable, which would be used, as of the first day
of any month, by the Pension Benefit Guaranty Corporation for
purposes of determining the present value of a lump sum
distribution of Accrued Benefits under the Plan, if the Plan
had terminated on such date with insufficient assets to
provide benefits guaranteed by the Pension Benefit Guaranty
Corporation on such date.
2.3 "Actuary" means the individual actuary or firm of actuaries
selected by the Company to provide actuarial services in connection with the
administration of this Plan.
3
<PAGE> 11
2.4 "Administrative Committee" means the committee described in
Section 10.4.
2.5 "Affiliate" means (1) a corporation, trade or business, if it and
an Employer are members of a controlled group of corporations as defined in Code
Section 414 (b) or under common control as defined under Code Section 414(c);
(2) an organization, if it and an Employer are members of an affiliated service
group, as defined in Code Section 414(m); and (3) solely for the purposes set
forth in Code Section 414(o), any other entity, if it and an Employer are
required to be aggregated pursuant to regulations under Code Section 414(o).
Solely for the purposes of applying the limitations set forth in this Plan on
maximum benefits, the standard of control under Code Sections 414(b) and 414(c)
shall be deemed to be "more than 50%" rather than " at least 80% ".
2.6 "Alternate Payee" means an alternate payee described in the
Procedure.
2.7 "Annuity Starting Date" means the first day for which an amount
which is required to be paid under this Plan as an annuity or otherwise is
actually paid, whether by reason of Retirement, death or Disability, as
determined in accordance with Section 5.8 hereof.
2.8 "Appendix" means one of the appendices attached hereto and made a
part of this Plan.
2.9 "Applicable Election Period" means:
(a) In the case of an election to waive a Qualified Joint and
Survivor Pension or to revoke such waiver, the ninety-day period ending
on the Annuity Starting Date; and
(b) In the case of any Spouse's Consent required under Section
8.4 before the distribution of the Accrued Benefit of a Participant can
begin, the ninety-day period ending on the Annuity Starting Date.
2.10 "Authorized Leave of Absence" means any absence authorized by the
Employer under the Employer's personnel practices granted in a uniform and
nondiscriminatory manner.
2.11 "Average Monthly Compensation" means the sum of a person's
Compensation earned during his highest paid, four (4) Plan Years of employment
(excluding his first and last partial years of employment) within the ten (10)
Plan Years prior to his Normal Retirement Date, or if earlier, prior to his
Termination of Employment (or if appropriate, the date of determination),
divided by forty-eight (48). If a person has less than four (4) Plan Years of
employment, Average Monthly Compensation shall mean the sum of the person's
Compensation earned for all full Plan Years (excluding his first and last
partial years) of employment, divided by the number of months during this period
for which he received such Compensation.
2.12 "Beneficiary" means any person or entity designated under Section
7.5 to receive a Death Benefit.
2.13 "Benefits Committee" means the committee described in Section
10.3.
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<PAGE> 12
2.14 "Benefit Service" means the sum of the full and fractional Years
of Service credited to a Participant on or after the Effective Date under the
provisions of this Plan; provided, however, that Benefit Service (or comparable
service) attributable to a period of Eligibility Service which is disregarded
under Section 2.29 shall be excluded.
2.15 "Board of Directors" means the board of directors of the Parent.
2.16 "Code" means the Internal Revenue Code of 1986, as amended, and
any subsequent Internal Revenue Code. If there is a subsequent Internal Revenue
Code, any references herein to Internal Revenue Code sections shall be deemed to
refer to comparable sections of any subsequent Internal Revenue Code.
2.17 "Code Section 415 Compensation" means a Participant's taxable
income as reported or reportable on Form W-2 for services rendered to an
Employer or an Affiliate for federal income tax purposes, increased by salary
reduction amounts contributed to Wiltel Communications, LLC Investment Plan or
similar plan designated by the Administrative Committee and salary reduction
amounts contributed to any cafeteria plan or flexible benefits plan established
by an Employer in accordance with Code Section 125 and related sections of the
Code.
2.18 "Company" means Wiltel Communications, LLC, a limited liability
Company formed under the laws of the State of Delaware.
2.19 "Compensation" means, with respect to each Plan Year, the first
one hundred and fifty thousand dollars ($150,000) (or such other amount as may
be permitted under Code Section 401(a)(17)) of the total wages or salary paid to
a Participant each Plan Year by an Employer or an Affiliate, including base pay,
sick pay paid by an Employer, overriding royalties, amounts paid under a phantom
override plan, bonuses (unless specifically excluded under a written bonus
arrangement) if any, when paid, salary reduction amounts contributed to the
Wiltel Communications, LLC Investment Plan or a similar plan designated by the
Administrative Committee, salary reduction amounts contributed to any cafeteria
plan or flexible benefits plan established by an Employer in accordance with
Code Section 125 and related sections of the Code, but excluding severance pay,
cost of living pay, housing pay, pay for unused vacation, relocation pay
(including mortgage interest differential) and all such other taxable and
non-taxable fringe benefits and extraordinary compensation as determined by the
Administrative Committee in its sole and absolute discretion. If an Eligible
Employee is credited with less than two thousand eighty (2,080) Hours of Service
for determining Benefit Service during a Plan Year, his Compensation for that
Plan Year shall be the product of his actual Compensation for such Plan Year as
described above multiplied by a fraction the numerator of which is two thousand
eighty (2,080) and the denominator of which is the number of Hours of Service
with which he is credited for such Plan Year.
2.20 "Computation Period" means, with respect to each type of service
to be measured, the following periods of time:
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<PAGE> 13
(a) With respect to Eligibility Service, the
twelve-consecutive month period following the first Employment Date of
an Employee (or, if such Eligibility Service can be disregarded under
the break-in-service provisions of this Plan, his first Employment Date
thereafter) and anniversaries thereof;
(b) With respect to Vesting Service, a Plan Year; and
(c) With respect to Benefit Service, a Plan Year.
2.21 "Covered Compensation" means, for any Plan Year (except as
provided in Section 5.3 concerning determination of a Disability Pension) and
with respect to each Participant, the average (without indexing) of the social
security taxable wage bases in effect for each calendar year during the
thirty-five-calendar-year-period ending with the calendar year such Participant
attains (or will attain) his Social Security Retirement Age. Such
thirty-five-calendar-year-period shall be used for each Participant regardless
of the year of birth of such Participant. In determining any Participant's
Covered Compensation for any Plan Year, the social security taxable wage base
for such Plan Year (and each subsequent Plan Year) shall be assumed to be the
same as the social security taxable wage base in effect as of the first day of
such Plan Year. A Participant's Covered Compensation for any Plan Year after
such thirty-five-calendar-year-period is such Participant's Covered Compensation
for the Plan Year in which such Participant attained his Social Security
Retirement Age. A Participant's Covered Compensation for any Plan Year prior to
such thirty-five-calendar-year-period is the social security taxable wage base
in effect as of the first day of such Plan Year. Each Participant's Covered
Compensation shall be automatically adjusted for each Plan Year, to the extent
his Covered Compensation is then subject to adjustment under this Section 2.21.
2.22 "Death Benefit" means the benefit provided under Article VII of
this Plan to the Surviving Spouse of a Participant.
2.23 "Deferred Vested Pension" means the type of Pension described in
Section 5.4.
2.24 "Disability" means a physical or mental condition which (a)
satisfies the initial requirements for disability payments under the Employer
maintained long-term disability plan, or (b) if no long-term disability plan is
maintained by an Employer for such Participant, the presence of a condition
that, as of a date designated by the Administrative Committee, totally and
permanently prevents the Participant, in the judgment of the Administrative
Committee, from engaging in any substantial gainful employment with his
Employer, and which (1) did not arise while the Participant was engaged in or as
a result of having engaged in a criminal act, (2) did not result from addiction
to narcotics or other drugs, or a self-inflicted injury while sane or insane,
and (3) did not result from voluntary or involuntary service in the armed forces
of the United States or any foreign country, which prevents a return to
employment with an Employer and for which the person receives a veteran's
disability pension. A determination of Disability shall be based on competent
medical evidence satisfactory to the Administrative Committee. Disability shall
be considered to have ended if, prior to the Normal Retirement Date of a
Participant, (a) he engages in any substantial gainful activity, except for such
employment as is found by the Administrative Committee to be for the primary
purpose of rehabilitation or not incompatible with a finding of total and
permanent
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<PAGE> 14
disability, or (b) he has sufficiently recovered, in the opinion of the
Administrative Committee based on a medical examination by a doctor or clinic
appointed by the Administrative Committee, to be able to engage in regular
employment with an Employer, or (c) he refuses to undergo any medical
examination requested by the Administrative Committee, provided that a medical
examination shall not be required more frequently than twice in any calendar
year, or (d) the Participant irrevocably elects not to be treated as suffering
from a Disability.
2.25 "Disability Pension" means the type of Pension described in
Section 5.3.
2.26 "Early Pension" means the type of Pension described in Section
5.2.
2.27 "Early Retirement Incentive Program" means the type of program
described in Section 5.7.
2.28 "Effective Date" means August 1, 1997, the general effective date
of this Plan.
2.29 "Eligibility Service" means all of the full and partial Years of
Service of an Employee with an Employer or Affiliate and any other service with
an Employer or an Affiliate as a Leased Employee, if such service would have
constituted a Year of Service under the applicable provisions of this Plan, if
the Leased Employee had been a common law employee of an Employer. Eligibility
Service shall not include:
(a) Years of Service before August 1, 1997; and
(b) Years of Service credited before a One Year
Break-in-Service, if an Employee has no vested interest in his Accrued
Benefit derived from Employer Contributions at such time and the number
of consecutive One Year Breaks-in-Service equals or exceeds the greater
of (i) five (5) or (ii) the Years of Service earned by the Employee
before the first One Year Break-in-Service.
Years of Service that are not taken into account by reason of the exclusions set
forth above shall not be taken into account in applying the provisions of this
Section 2.29 to a subsequent One Year Break-in-Service.
2.30 "Eligible Employee" means any Employee of an Employer, but
does not include:
(a) A Leased Employee;
(b) an Employee who is a member of a group of Employees
represented by a collective bargaining representative, unless a
currently effective collective bargaining agreement between his
Employer and the collective bargaining representative of the group of
Employees of which he is a member expressly provides for coverage by
this Plan;
(c) an Employee who, after the Effective Date, is then
accruing a benefit under the terms of any other employee pension
benefit plan maintained outside of this Plan at such
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<PAGE> 15
time, sponsored by an Employer and intended to meet the requirements
of Code Section 401(a);
(d) an Employee who is reemployed on a part-time basis
following his Annuity Starting Date;
(e) an Employee who is not a resident of the United States
and not a citizen of the United States; and
(f) an individual who is designated, compensated or otherwise
treated as an independent contractor by an Employer.
2.31 "Employee" means any common law employee of an Employer or
Affiliate, and any person granted such status in accordance with an Employer's
uniform and nondiscriminatory policies regarding an Authorized Leave of Absence.
2.32 "Employer" means the Company and any Affiliate which, pursuant to
the provisions of Article XIV, has adopted this Plan.
2.33 "Employer Contributions" mean the contributions by Employers to
the Trust for this Plan.
2.34 "Employment Date" means the day an Employee first earns an Hour of
Service, or in the case of an Employee whose Eligibility Service and Vesting
Service can be disregarded under the break-in-service provisions of this Plan,
the first day following his last One Year Break-in-Service in which the Employee
earns an Hour of Service.
2.35 "ERISA" means the Employee Retirement Income Security Act of 1974,
as from time to time amended.
2.36 "Hour of Service" means a unit of service used by the Plan to
determine an Employee's Years of Service credited as follows:
(a) each hour for which the Employee is paid, or entitled to
payment, directly or indirectly, for the performance of duties from an
Employer or an Affiliate;
(b) each hour for which backpay, irrespective of mitigation of
damages, is awarded to the Employee or agreed to by the Employer or an
Affiliate;
(c) each hour an Employee is paid or entitled to payment by an
Employer or an Affiliate on account of a period of time during which no
duties are performed due to vacation, holiday, illness, incapacity
(including disability), lay-off, jury duty, military duty or leave of
absence. An Hour of Service for which an Employee is directly or
indirectly paid or entitled to payment on account of a period during
which the Employee performed no duties shall not be credited to the
Employee, if such payment is made or due under a plan maintained solely
for the purpose of complying with any applicable worker's compensation,
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<PAGE> 16
disability insurance, or unemployment compensation law. Hours of
Service also shall not be credited for a payment which solely
reimburses the Employee for medical or medically related expenses
incurred by the Employee. Not more than five hundred one (501) Hours of
Service shall be credited under this subsection (c) to the Employee on
account of any single continuous period during which the Employee
performs no duties (whether or not such period occurs in a single
Computation Period). For purposes of this subsection (c), a payment
shall be deemed to be made by or due from an Employer regardless of
whether such payment is made by or due from an Employer directly, or
indirectly through, among others, a trust fund, insurer or other entity
to which an Employer contributes or pays premiums and regardless of
whether contributions made or due to the trust fund, insurer or other
entity are for the benefit of particular employees or are on behalf of
a group of employees in the aggregate;
(d) Solely for purposes of determining whether an Employee has
incurred a One Year Break-in-Service, an Employee who is not otherwise
credited with an Hour of Service under subsection (a), (b) or (c),
above, shall be credited with an Hour of Service for each additional
hour which is part of an Employee's customary work week with an
Employer or Affiliate during which the Employee is on an unpaid
Authorized Leave of Absence, provided the Employee resumes employment
with an Employer or Affiliate upon the expiration of such Authorized
Leave of Absence. For purposes of this subsection (d), an Employee's
customary work week will consist of five (5), eight-hour days;
(e) Solely for purposes of determining whether a One Year
Break-in-Service has occurred for purposes of determining Eligibility
Service, Vesting Service and Years of Participation (but not for
purposes of Benefit Service), an Employee who is absent from work for
maternity or paternity reasons and who is not otherwise credited with
an Hour of Service under subsections (a), (b), (c) or (d) above, shall
receive credit for the Hours of Service for which he would have been
regularly scheduled had the Employee performed duties during such
absence for an Employer or Affiliate, or in the absence of a regularly
scheduled number of hours, forty (40) hours per week (or eight (8)
hours per day). For purposes of such determination, an absence from
work for maternity or paternity reasons means an absence (i) by reason
of the pregnancy of the Employee, (ii) by reason of the birth of a
child of such Employee, (iii) by reason of the placement of a child
with the Employee in connection with the adoption of such child by the
Employee, or (iv) for purposes of caring for such child for a period
beginning immediately following such birth or placement. Hours of
Service credited for purposes of such determination shall be credited
in the Computation Period in which such absence begins, if necessary to
prevent a One Year Break-in-Service in such period, or, in all other
cases, in the next following Computation Period. In no event will more
than five hundred one (501) Hours of Service be credited for any single
continuous period of time during which the person did not or would not
have performed duties. The Administrative Committee may, in its
discretion, require an Employee who is absent from work for maternity
or paternity reasons to furnish information to the Administrative
Committee to establish that the Employee's absence from work is for
maternity or paternity reasons and the number of days of such absence.
The Company reserves the right to terminate the employment of any
Employee who is absent from work without authorization,
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<PAGE> 17
without regard to whether such Employee is entitled to be credited for
Hours of Service pursuant to this subsection (e);
(f) The same Hours of Service shall not be credited more than
once under the foregoing subsections. The determination of Hours of
Service for reasons other than the performance of duties shall be made
in accordance with the provisions of Labor Department Regulations,
C.F.R. Section 2530.200b-2(b) (1976); and Hours of Service shall be
credited to Computation Periods in accordance with the provisions of
Labor Department Regulations, C.F.R. Section 2530.200b-2(c) (1976).
2.37 "Key Employee" means each Employee and former Employee described
in Section 16.1(d).
2.38 "Leased Employee" means any "leased employee," within the meaning
of Code Section 414(n), who is not described within the safe harbor exception of
Code Section 414(n)(5).
2.39 "Normal Pension" means the type of Pension described in Section
5.1.
2.40 "Normal Retirement Date" means the day on which a Participant
attains (or would have attained if he had lived) age sixty-five (65).
2.41 "One Year Break-In-Service" means a Computation Period within
which an Employee is credited with not more than five hundred (500) Hours of
Service.
2.42 "Parent" means the Williams Companies, Inc.
2.43 "Participant" means each person who is participating in this Plan
pursuant to the provisions of Article III.
2.44 "Pension" means a series of monthly amounts which are payable to a
person who is entitled to receive benefits pursuant to this Plan.
2.45 "Plan" means the Wiltel Communications, LLC Pension Plan, as
herein amended and restated, and as hereafter from time to time amended.
2.46 "Plan Administrator" means the person, persons or group appointed
to act as Plan Administrator under Article X.
2.47 "Plan Year" means the twelve (12) consecutive month period
beginning on January 1 and ending December 31.
2.48 "Prior Service" means the number of Years of Service recognized as
Years of Vesting Service under the Prior Plan covering the Participant as of
July 31, 1997, for purposes of determining the nonforfeitable right of such
Participant to his accrued benefit under the Prior Plan.
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<PAGE> 18
2.49 "Prior Plan" means either The Williams Companies, Inc.
Consolidated Pension Plan (amended and restated effective January 1, 1996), or
the Northern Telecom, Inc. Retirement Plan for Employees (as amended and
restated effective January 1, 1996), as each such plan existed on and prior to
July 31, 1997.
2.50 "Procedure" means the Procedure for Identification and Processing
of Qualified Domestic Relations Orders, which is described in Article XVIII.
2.51 "Qualified Joint and Survivor Pension" means a monthly payment for
the life of the Participant and, if the Participant is married on the date the
payment of such Pension begins, a monthly payment to such Spouse after his death
for life in an amount equal to fifty percent (50%) of the monthly Pension
payable during the joint lives of the Participant and his Spouse. A Qualified
Joint and Survivor Pension shall be the actuarial equivalent of the Accrued
Benefit of a Participant expressed as a Single Life Annuity. The monthly amount
of such payments shall be determined under "Option 2" of Section 8.2.
2.52 "Qualified Domestic Relations Order" means the type of court order
or decree described in the Procedure.
2.53 "Related Plan" means any other defined contribution plan (as
defined in Code Section 414(i)) or a defined benefit plan (as defined in Code
Section 414(j)) maintained by an Employer or an Affiliate, respectively called a
"Related Defined Contribution Plan" and a "Related Defined Benefit Plan."
2.54 "Retirement" means Termination of Employment after an Employee has
fulfilled all requirements for a Pension other than any attained age
requirement. Retirement shall be considered as commencing on the day immediately
following an Employee's last day of employment or Authorized Leave of Absence,
if later.
2.55 "Single Life Annuity" means the optional form of Pension described
in Section 8.2(d).
2.56 "Social Security Retirement Age" means, with respect to each
Participant, the social security retirement age of such Participant as
determined under Code Section 415(b)(8) and the regulations thereunder.
2.57 "Special Participant" means each Participant who is included in a
special class of Participants described in an Appendix to this Plan.
2.58 "Spouse" means the person to whom a Participant is married and/or
any former spouse to the extent provided in a Qualified Domestic Relations Order
and allowed under Code Section 414(p).
2.59 "Spouse's Consent" means the written, irrevocable consent of the
Spouse of a Participant that acknowledges the effect of the consent and is
witnessed by a representative of this
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<PAGE> 19
Plan or a notary public. A Spouse's Consent is binding only with respect to the
consenting Spouse. A Spouse's Consent shall not be required by this Plan, if it
is established to the satisfaction of a representative of this Plan that a
Participant is not married, that the Participant's Spouse cannot be located, or
because of other circumstances recognized in regulations promulgated by the
Treasury Department.
2.60 "Surviving Spouse" means the person to whom a Participant is
married on the date of his death and/or any former spouse to the extent provided
in a Qualified Domestic Relations Order and allowed under Code Section 414(p);
provided, however,
(a) a Spouse shall not be a Surviving Spouse for purposes of
eligibility for the survivor portion of any Pension paid to a
Participant hereunder, unless such Spouse was married to the
Participant on his Annuity Starting Date; and
(b) a Spouse shall not be a Surviving Spouse for purposes of
eligibility for a Survivor Pension payable under Section 7.3(b), unless
such Spouse was continuously married to the Vested Participant on whose
behalf such Survivor Pension is payable for the thirty (30) day period
immediately prior to such Vested Participant's death.
2.61 "Survivor Pension" means a monthly amount payable for life to the
Surviving Spouse of a Vested Participant who died prior to the Annuity Starting
Date of his benefits under this Plan. Unless otherwise provided in this Plan,
the amount of such monthly payments shall be equal to the amount that would have
been payable to the Surviving Spouse under a Qualified Joint and Survivor
Pension (or the Actuarial Equivalent thereof), if:
(a) in the case of a Vested Participant who dies after
attaining the earliest retirement age under this Plan, such Participant
had retired with an immediate Qualified Joint and Survivor Pension on
the day before his death; or
(b) in the case of a Vested Participant who dies on or before
the date the Participant would have attained the earliest retirement
age under this Plan, such Participant had:
(1) separated from service on the earlier of his
date of death or his actual date of Termination of Employment;
(2) survived to the earliest retirement age under
this Plan;
(3) retired with an immediate Qualified Joint and
Survivor Pension at such earliest retirement age; and
(4) died on the day after the day on which he would
have attained such earliest retirement age.
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2.62 "Termination of Employment" means a separation from service that
occurs when:
(a) an Employee ceases to be employed by an Employer or
an Affiliate, or
(b) a person fails to report for work with an Employer or an
Affiliate, at the termination of an Authorized Leave of Absence.
A transfer of employment from one Employer or Affiliate to another Employer or
Affiliate shall not constitute a Termination of Employment for purposes of the
Plan. A person shall not be considered to have incurred a Termination of
Employment due to his having entered the Armed Forces or Merchant Marine of the
United States unless it is determined by the Administrative Committee that he
has no reemployment rights under the law. Upon the sale of all of the stock or
substantially all of the assets used in a trade or business of any subsidiary of
the Company which has adopted the Plan as an Employer prior to such sale, a
Termination of Employment shall occur on the date of such sale with respect to
any Employee who continues in employment with the purchaser of such assets or
with such subsidiary, as the case may be, provided the following conditions (as
recognized in General Counsel Memorandum 39824, August 15, 1990) are met:
(1) the Company continues to maintain the Plan after such sale;
(2) the subsidiary withdraws as an Employer under the Plan prior
to such sale;
(3) the purchaser of such subsidiary's stock or assets
("Purchaser") does not adopt the Plan;
(4) the Purchaser is not an Affiliate;
(5) no assets or liabilities of the Plan are transferred to a
defined benefit plan maintained by the Purchaser, the
subsidiary or any affiliate of either within the meaning of
Code Sections 414(b), (c) or (m).
After incurring a Termination of Employment, a terminated person shall not be
eligible for or credited with Hours of Service or Years of Service for any
purpose under the Plan with respect to any period after such Termination of
Employment.
2.63 "Trust" means the legal entity resulting from the Trust Agreement.
2.64 "Trust Agreement" means the agreement between the Company and the
Trustee establishing the Trust, and any amendments thereto.
2.65 "Trustee" means the entity which is serving as Trustee under the
Trust Agreement.
2.66 "Trust Fund" means any property, real or personal, received by the
Trustee, plus all income and gains and minus losses, expenses and distributions
chargeable thereto.
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2.67 "Vesting Service" means the sum of:
(a) The Employee's Prior Service, if any, determined as of
July 31, 1997, under the provisions of the Prior Plan then in effect;
plus
(b) all Years of Service earned after the Effective Date,
provided a Participant should only be permitted to earn one year of
Vesting Service for the calendar year 1997; and
(c) all other service with an Employer or an Affiliate as a
Leased Employee, if such service would have constituted a Year of
Service under the applicable provisions of this Plan, if the Leased
Employee had been a common law employee of such Employer or Affiliate;
but, excluding (1) any Years of Service before August 1, 1997, if under the
break-in-service provisions of this Plan or the Prior Plan in effect for such
periods, such service was not taken into account, and (2) any Years of Service
earned prior to a One Year Break-in-Service, if the Employee did not have a
nonforfeitable interest in his Accrued Benefit derived from Employer
Contributions before the One Year Break-in-Service began and if the number of
consecutive One Year Breaks-in-Service equals or exceeds the greater of (i) five
(5) or (ii) the Employee's Vesting Service earned before the One Year
Break-in-Service. Service not required to be taken into account by reason of the
exclusions set forth above shall not be taken into account in applying this
Section 2.67 to a subsequent One Year Break-in-Service.
2.68 "Vested Participant" means any Participant who has a
nonforfeitable right to any portion of his Accrued Benefit.
2.69 "Year of Service" means:
(a) with respect to Eligibility Service, each Computation
Period ending after July 31, 1997 during which the person earns at
least one thousand (1,000) Hours of Service, provided a Participant
shall only be permitted to earn one year of Eligibility Service for the
calendar year 1997;
(b) with respect to Vesting Service, the sum of the Prior
Service of the Participant plus each Computation Period ending after
July 31, 1997, during which the person earns at least one thousand
(1,000) Hours of Service, provided a Participant shall only be
permitted to earn one year of Vesting Service for the calendar year
1997;
(c) with respect to Benefit Service, each computation period
beginning on or after August 1, 1997, during which an Eligible Employee
earns at least two thousand eighty (2,080) Hours of service with an
Employer, with each Eligible Employee receiving one hundred ninety
(190) Hours of service credit for each month, or portion thereof,
worked during the Computation Period. If an Eligible Employee earns
less than two thousand eighty (2,080) Hours of Service during any such
Computation Period, a fraction of a year of Benefit Service shall be
earned by the Eligible Employee, the numerator of which shall be the
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<PAGE> 22
Eligible Employee's actual Hours of Service earned with an Employer
during such Computation Period and the denominator of which shall be
two thousand eighty (2,080); and
(d) with respect to Eligibility Service, Vesting Service and
Benefit Service, such service as may be granted by the Administrative
Committee, Benefits Committee or Board of Directors, where appropriate,
in accordance with an Employer's uniform and nondiscriminatory policies
regarding an Authorized Leave of Absence or an Early Retirement
Incentive Program.
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ARTICLE III
Participation
3.1 Participation. Each Eligible Employee shall become a Participant in
this Plan on the first day of the calendar month coincident with or next
following the date he is credited with one year of Eligibility Service. A
Participant shall continue participating in this Plan until the earlier of his
death or the distribution or forfeiture of his entire Accrued Benefit in
accordance with the terms and conditions of this Plan.
3.2 Reemployment. Each Participant who incurs a Termination of
Employment and is reemployed as an Eligible Employee at a time when he retains
credited Eligibility Service shall resume participation in the Plan as of the
date he is credited with an Hour of Service after becoming so reemployed.
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ARTICLE IV
Contributions
4.1 Participant Contributions. No contributions to this Plan shall be
made by Participants.
4.2 Company Contributions. The Employers, acting under the advice of
the Actuary for the Plan, shall make contributions to the Trust in such amounts
and at such times as are required to comply with Code Section 412. Such
contributions shall be applied to provide benefits under this Plan and to pay
the expenses of this Plan. Forfeitures shall be applied to reduce future
Employer Contributions.
4.3 Rollover Contributions. No rollover contributions of any nature or
description, whether direct or indirect, shall be made to this Plan by any
Employee or Participant or any other person.
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ARTICLE V
Retirement Benefits
5.1 Normal and Late Retirement. A Participant shall be eligible for a
Normal Pension under this Plan, if his Termination of Employment occurs on or
after his Normal Retirement Date. Payment of a Normal Pension to the Participant
shall begin as of the Annuity Starting Date and shall continue in accordance
with the terms of the form of payment applicable to such Participant. The amount
of such Normal Pension shall be determined under Section 6.1. The form of such
Normal Pension shall be determined under Article VIII.
5.2 Early Retirement. A Participant shall be eligible for an Early
Pension under this Plan, if his Termination of Employment is on or after his
fifty-fifth (55th) birthday and before his Normal Retirement Date and he has
completed five (5) or more years of Vesting Service. Payment of an Early Pension
to the Participant shall begin as of his Annuity Starting Date and shall
continue in accordance with the terms of the form of payment applicable to such
Participant. The amount of such Early Pension shall be determined under Section
6.2. The form of such Early Pension shall be determined under Article VIII.
5.3 Disability Retirement. A Participant shall be eligible for a
Disability Pension under this Plan, if his Termination of Employment is on
account of Disability and occurs after he has completed five (5) or more years
of Vesting Service, but prior to his Normal Retirement Date. Payment of a
Disability Pension to the Participant shall begin on the Annuity Starting Date
and shall continue in accordance with the terms of the form of payment
applicable to such Participant. The form of such Disability Pension shall be
determined under Article VIII. The amount of such Disability Pension shall be
determined as follows:
(a) If a Disability continues to the Participant's Normal
Retirement Date, such Participant shall be entitled to a Disability
Pension based on his Compensation (subject to applicable limitations),
Covered Compensation and Benefit Service to the date of Disability and
Benefit Service credit for the period of Disability;
(b) If a Disability ceases prior to the Participant's Normal
Retirement Date and the Participant is reemployed by an Employer as an
Eligible Employee, upon his subsequent Termination of Employment such
Participant shall be entitled to receive a Normal Pension, Early
Pension or Deferred Vested Pension, as applicable, determined by his
attained age on the date of such Termination of Employment. Such Normal
Pension, Early Pension or Deferred Vested Pension shall be based on his
Compensation (subject to applicable limitations), Covered Compensation
and Benefit Service to the date of Disability, Benefit Service credit
for the period of Disability, and his Benefit Service, Covered
Compensation and Compensation during the period of reemployment,
reduced, if applicable, in accordance with Section 6.2 or 6.4, based on
the number of years by which the Annuity Starting Date of the Early
Pension or Deferred Vested Pension precedes the Participant's Normal
Retirement Date; and
18
<PAGE> 26
(c) If a Disability ceases prior to the Participant's Normal
Retirement Date and he is not reemployed by an Employer as an Employee
(or is reemployed as an Employee but not an Eligible Employee), he
shall be entitled to receive, commencing on the first day of the month
coinciding with or next following the latest of (i) his fifty-fifth
(55th) birthday, (ii) the cessation of such Disability, or (iii) the
date of his subsequent Termination of Employment, an Early Pension or
Deferred Vested Pension, as applicable, to which he would have been
entitled as of the date of such cessation of such Disability. Such
Early Pension or Deferred Vested Pension shall be based on his
Compensation (subject to applicable limitations), Covered Compensation
and Benefit Service to the date of Disability and Benefit Service to
the date of cessation of such Disability (or, if applicable, date of
Termination of Employment), but in neither case beyond his Normal
Retirement Date, reduced, if applicable, in accordance with Sections
6.2 and 6.4, based on the number of years by which the Annuity Starting
Date of the Early Pension or Deferred Vested Pension precedes the
Participant's Normal Retirement Date.
5.4 Deferred Vested Retirement. A Participant who is not eligible for a
Pension under Sections 5.1, 5.2 or 5.3 shall be eligible for a Deferred Vested
Pension, if his Termination of Employment is on or after the completion of five
(5) or more years of Vesting Service. Payment of a Deferred Vested Pension to
the Participant shall begin on the Annuity Starting Date and shall continue in
accordance with the form of payment applicable to such Participant. The amount
of such Deferred Vested Pension shall be determined under Section 6.4. The form
of such Deferred Vested Pension shall be determined in accordance with Article
VIII.
5.5 Special Participant Retirement. A Special Participant upon
incurring a Termination of Employment for any reason shall be entitled to such
rights, credits and benefits, if any, under this Plan as may be determined in
accordance with the provisions of the Appendix (or Appendices) to this Plan that
relates to his class (or classes) of Special Participants, if he qualifies as a
Special Participant as of his Termination of Employment. If a Special
Participant is reclassified as a Participant or a Participant is reclassified as
a Special Participant, the value of his Accrued Benefit and his nonforfeitable
right to a Pension, determined as of the date of reclassification, shall not be
decreased.
5.6 Transferred Employee Retirement. Requirements for Pension benefits
or other benefits, if any, payable under this Plan in cases of transfers of
employment by Employees between Employers or between an Employer and an
Affiliate, shall be determined in accordance with the provisions of Article IX.
5.7 Early Retirement Incentive Program. The Board of Directors, in its
sole discretion, may establish Early Retirement Incentive Programs under which
Participants who have attained at least age fifty (50) (or such greater age as
may be selected by the Board of Directors) and who have been credited with at
least one year of Benefit Service may retire and receive one or more early
retirement benefits described in such program. Each Early Retirement Incentive
Program shall contain an offering period of at least thirty (30) days during
which a Participant who is included in such program may decide whether or not to
retire and receive the additional benefits offered under such program. A
Participant may elect to retire by filing a written notice with the
Administrative
19
<PAGE> 27
Committee during the offering period and he shall then retire on the date or
during the period specified by the Early Retirement Incentive Program. In order
to receive the additional benefits provided by an Early Retirement Incentive
Program, a Participant must comply with all conditions set forth in such
program. In addition, if a Participant is rehired after retiring pursuant to an
Early Retirement Incentive Program, he shall not be entitled to the additional
benefits previously granted to him, unless otherwise required by ERISA.
5.8 Annuity Starting Date. Subject to the provisions of Sections 5.9
and 5.10, Pensions and other benefits payable under this Plan shall commence and
be payable in accordance with the following:
(a) In the case of a Normal Pension payable under Section 5.1,
the Annuity Starting Date shall be the earlier of (i) the first day of
the month next following a Participant's Termination of Employment, or
(ii) April 1 of the calendar year following the calendar year in which
such Participant attains age seventy and one-half (70?);
(b) In the case of a Pension payable under Section 5.2, 5.3,
5.4, 5.5, 5.6 or 5.7, the Annuity Starting Date shall be the first day
of the month coincident with or next following the Participant's Normal
Retirement Date, or if earlier, the date established by the
Administrative Committee in response to the Participant's written
request for early payment, but in no event earlier than the first day
of the month coincident with or next following the date the Participant
attains age fifty-five (55) (or such age as may be established pursuant
to Section 5.7). Early commencement of a Pension is subject to the
restrictions imposed by Section 8.4;
(c) In the case of a Pension described in subsections (a) or
(b) above, the Annuity Starting Date shall in all events be not later
than sixty (60) days after the last day of the Plan Year in which
occurs the latest of the following events:
(1) The Participant's Normal Retirement Date;
(2) The tenth anniversary of the date on which the
Participant commenced participation in the Plan; or
(3) The Participant's Termination of Employment; and
(d) In the case of a Survivor Pension, the Annuity Starting
Date shall be the first day of the month:
(1) next following the Participant's date of death,
if the Participant had then attained age sixty-five (65); or
(2) in which the Participant would have attained age
sixty-five (65), if the Participant dies prior to attaining
such age.
20
<PAGE> 28
A Surviving Spouse may irrevocably elect, on a form provided for such
purpose by the Administrative Committee, to accelerate the Annuity
Starting Date of a Survivor Pension to the first day of the month next
following the date of the Participant's death or the first day of any
month thereafter, but no later than the first day of the month in which
the Participant would have attained age sixty-five (65).
(e) If payment of a Survivor Pension commences to the
Surviving Spouse of a Participant who was either (i) an Employee, or
(ii) eligible for an Early Pension before the first day of the month in
which such Participant would have attained age sixty-two (62), such
Survivor Pension shall be reduced in accordance with the provisions of
Section 6.2(b) based upon the age that Participant would have attained
as of the Annuity Starting Date; provided, however, no reduction shall
be made for any period prior to the date such Participant would have
attained age fifty-five (55). If payment of a Survivor Pension
commences to the Surviving Spouse of a Participant who was eligible for
a Deferred Vested Pension before the first day of the month in which
such Participant would have attained age sixty-five (65), such Survivor
Pension shall be reduced in accordance with the provisions of Section
6.4(b) based on the age such Participant would have attained as of the
Annuity Starting Date.
5.9 Distribution Requirements. In addition to the requirements of
Section 5.8 and subject to the provisions of Section 5.10, distributions to a
Beneficiary in the event of the death of a Participant shall be made in
accordance with the following:
(a) In the event distribution of a Participant's Pension has
commenced before the Participant's death, the remaining interest
thereof, if any, shall be distributed at least as rapidly as under the
method of distribution being used as of the Participant's date of
death; and
(b) In the event distribution of a Participant's Pension has
not commenced before the Participant's death, no benefits shall be
payable, except for the Survivor Pension, if any, payable to a
Surviving Spouse which shall be distributed in accordance with Section
5.8(d).
5.10 Required Information. Any Participant and any Beneficiary eligible
to receive benefits under the Plan shall furnish to the Committee any
information or proof requested by the Committee and reasonably necessary for
proper administration of the Plan. Failure by such Participant or such
Beneficiary to comply with any such request within a reasonable period of time
and in good faith shall be sufficient grounds for delay in payment of benefits
under the Plan until sixty (60) days after such information or proof is received
by the Administrative Committee.
5.11 Direct Rollovers.
(a) Distributee's Election: Notwithstanding any provision of
the Plan to the contrary that would otherwise limit a Distributee's
election hereunder, a Distributee may elect, at the time and in the
manner prescribed by the Administrative Committee, to have any portion
of an Eligible Rollover Distribution paid directly to an Eligible
Retirement Plan specified by the Distributee in a Direct Rollover.
21
<PAGE> 29
(b) Definitions: For purposes of this Section 5.11, the
following words and phrases shall have the meanings set forth below
when used in the capitalized form, unless a different meaning is
clearly warranted by the context:
(1) "Direct Rollover" shall mean a payment by the
Plan to the Eligible Retirement Plan specified by the
Distributee.
(2) "Distributee" shall mean a person who is (i) an
Employee or former Employee, (ii) the surviving spouse of an
Employee or former Employee, or (iii) the spouse or former
spouse of an Employee or former Employee who is the Alternate
Payee under a 'qualified domestic relations order', as defined
in Section 414(p) of the Code.
(3) "Eligible Retirement Plan" shall mean an
individual retirement account described in Section 408(a) of
the Code, an individual retirement annuity described in
Section 408(b) of the Code, an annuity plan described in
Section 403(a) of the Code, or a qualified trust described in
Section 401(a) of the Code, that accepts the Distributee's
Eligible Rollover Distribution. However, in the case of an
Eligible Rollover Distribution to the surviving spouse, an
Eligible Retirement Plan is an individual retirement account
or individual retirement annuity.
(4) "Eligible Rollover Distribution" shall mean any
distribution of all or any portion of the balance to the
credit of the Distributee, except that an Eligible Rollover
Distribution does not include: any distribution which is one
of a series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life
expectancy) of the distributee or the joint lives (or joint
life expectancies) of the distributee and the distributee's
designated beneficiary, or for a specified period of ten years
or more; any distribution to the extent such distribution is
required under Section 401(a)(9) of the Code; and the portion
of any distribution that is not includable in gross income
(determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
22
<PAGE> 30
ARTICLE VI
Amount of Pension
6.1 Normal and Late Pension. Subject to Section 6.5, a Participant who
meets the requirements in Section 5.1 for a Normal Pension and who retires on or
after his Normal Retirement Date shall receive his Accrued Benefit. A
Participant who meets the requirements for a Normal Pension and retires after
his Normal Retirement Date shall receive his Accrued Benefit computed as for
normal Retirement considering his Benefit Service and Compensation to his
Termination of Employment.
6.2 Early Pension.
(a) Basic Formula. Subject to the provisions of subsection (b)
and Section 6.5, a Participant who meets the requirements in Section
5.2 for an Early Pension shall receive his Accrued Benefit.
(b) Reduction for Early Commencement. If payment of an Early
Pension commences before a Participant's Normal Retirement Date, his
Early Pension shall be reduced for each full and fractional year by
which his Annuity Starting Date precedes the first day of the month
coincident with or immediately following his Normal Retirement Date in
accordance with the following provisions. The monthly amount payable as
determined in accordance with this subsection (b) as of a Participant's
Annuity Starting Date shall remain in effect for as long as his Early
Pension is payable thereafter. Such Early Pension shall be reduced for
early commencement to a percentage thereof determined in accordance
with the following schedule:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Number of Years of Early Percentage of
Commencement of Early Pension Early Pension Payable
- --------------------------------------------------------------------------------
<S> <C>
1 100
- --------------------------------------------------------------------------------
2 100
- --------------------------------------------------------------------------------
3 100
- --------------------------------------------------------------------------------
4 96
- --------------------------------------------------------------------------------
5 92
- --------------------------------------------------------------------------------
6 88
- --------------------------------------------------------------------------------
7 84
- --------------------------------------------------------------------------------
8 80
- --------------------------------------------------------------------------------
9 76
- --------------------------------------------------------------------------------
10 72
- --------------------------------------------------------------------------------
</TABLE>
23
<PAGE> 31
The percentage payable with respect to any fractional year
shall be determined by straight-line interpolation between
applicable percentages in the foregoing schedule.
6.3 Disability Pension. Subject to Section 6.5, a Participant who meets
the requirements in Section 5.3 for a Disability Pension shall receive his
Disability Pension determined in accordance with Section 5.3.
6.4 Deferred Vested Pension.
(a) Basic Formula. Subject to the provisions of subsection (b)
and Section 6.5, a Participant who meets the requirements in Section
5.4 for a Deferred Vested Pension shall receive his Accrued Benefit.
(b) Reduction for Early Commencement. If payment of a Deferred
Vested Pension commences before the Participant's Normal Retirement
Date, his Deferred Vested Pension shall be reduced for each full and
fractional year by which his Annuity Starting Date precedes the first
day of the month coincident with or next following his Normal
Retirement Date in accordance with the following provisions. The
monthly amount payable as determined in accordance with this subsection
(b) as of a Participant's Annuity Starting Date shall remain in effect
for as long as his Deferred Vested Pension is payable thereafter.
A Participant's Deferred Vested Pension shall be reduced for
early commencement to a percentage thereof determined in accordance
with the following schedule:
<TABLE>
<CAPTION>
========================================================================================
Number of Years of Early Commencement of Deferred Percentage of Deferred Vested
Vested Pension Pension Payable
- ----------------------------------------------------------------------------------------
<S> <C>
1 90
- ----------------------------------------------------------------------------------------
2 81
- ----------------------------------------------------------------------------------------
3 74
- ----------------------------------------------------------------------------------------
4 67
- ----------------------------------------------------------------------------------------
5 61
- ----------------------------------------------------------------------------------------
6 55
- ----------------------------------------------------------------------------------------
7 51
- ----------------------------------------------------------------------------------------
8 46
- ----------------------------------------------------------------------------------------
9 43
- ----------------------------------------------------------------------------------------
10 39
- ----------------------------------------------------------------------------------------
11 36
- ----------------------------------------------------------------------------------------
</TABLE>
24
<PAGE> 32
<TABLE>
<CAPTION>
========================================================================================
Number of Years of Early Commencement of Deferred Percentage of Deferred Vested
Vested Pension Pension Payable
- ----------------------------------------------------------------------------------------
<S> <C>
12 33
- ----------------------------------------------------------------------------------------
13 31
- ----------------------------------------------------------------------------------------
14 28
- ----------------------------------------------------------------------------------------
15 26
- ----------------------------------------------------------------------------------------
16 24
- ----------------------------------------------------------------------------------------
17 23
- ----------------------------------------------------------------------------------------
18 21
- ----------------------------------------------------------------------------------------
19 20
- ----------------------------------------------------------------------------------------
20 18
- ----------------------------------------------------------------------------------------
21 17
- ----------------------------------------------------------------------------------------
22 16
- ----------------------------------------------------------------------------------------
23 15
- ----------------------------------------------------------------------------------------
24 14
- ----------------------------------------------------------------------------------------
25 13
- ----------------------------------------------------------------------------------------
26 12
- ----------------------------------------------------------------------------------------
27 11
- ----------------------------------------------------------------------------------------
28 10
- ----------------------------------------------------------------------------------------
29 10
- ----------------------------------------------------------------------------------------
30 9
- ----------------------------------------------------------------------------------------
31 9
- ----------------------------------------------------------------------------------------
32 8
- ----------------------------------------------------------------------------------------
33 8
- ----------------------------------------------------------------------------------------
34 or greater 7
- ----------------------------------------------------------------------------------------
</TABLE>
The percentage payable with respect to any fractional year shall be
determined by straight-line interpolation between applicable
percentages in the foregoing schedule.
6.5 Maximum Pensions. Any Pension, when expressed as a pension payable
on a Plan Year basis (which is the "Limitation Year" for this Plan), shall not
exceed the person's "Maximum Annual Benefit". For purposes of this Section 6.5,
"Maximum Annual Benefit" shall mean an annual benefit payable during a Plan Year
in an amount equal to the lesser of Ninety Thousand Dollars ($90,000) multiplied
by the Adjustment Factor ("Dollar Limitation"), or one hundred percent (100%) of
the person's average annual Code Section 415 Compensation from an Employer or
Affiliate for the person's highest three (3) consecutive, twelve-month periods
consistently used by the Committee (or the actual number of consecutive
twelve-month periods for persons who are
25
<PAGE> 33
employed less than three consecutive years) ("Compensation Limitation"), reduced
by the annual pension, if any, payable to the person under any Related Defined
Benefit Plan ever maintained by the Employer (or any Affiliate) to the extent
attributable to contributions by the Employer (or any Affiliate), subject to the
following, effective on and after January 1, 1995:
(a) If the form of Pension payable to a Participant is other
than a Single Life Annuity, the Participant's annual Pension shall not
exceed the actuarial equivalent of the Participant's annual pension
determined as the greater of the amount applying the (1) mortality and
interest rate provisions of Section 2.2, or (2) Applicable Mortality
Table and (i) in the case of payment as a Pension, a 5% interest rate,
or (ii) in the case of payment as a lump sum, the Applicable Interest
Rate.
(b) If the Participant has less than 10 Years of Vesting
Service, the Dollar Limitation and the Compensation Limitation is
reduced by one-tenth for each Year of Vesting Service (or part thereof)
less than ten. The adjustments of this Section 6.5(b) shall be applied
in the denominator of the defined benefit fraction described in Section
6.5(g) hereof based upon Years of Vesting Service. Years of Vesting
Service shall include future years occurring before the Participant's
Normal Retirement Date. Such future years shall include the year which
contains the date the Participant reaches his Normal Retirement Date,
only if it can be reasonably anticipated that the Participant will
receive a Year of Vesting Service for such year.
(c) If the annual benefit of the Participant commences before
the Participant's Social Security Retirement Age, but on or after age
sixty-two (62), the Dollar Limitation as reduced in Section 6.5(b)
above, if necessary, shall be determined as follows:
(1) If a Participant's Social Security Retirement Age
is sixty-five (65), the Dollar Limitation for benefits
commencing on or after age sixty-two (62) is determined by
reducing the Dollar Limitation by 5/9 of one percent for each
month by which benefits commence before the month in which the
Participant attains age 65; or
(2) If a Participant's Social Security Retirement Age
is greater than 65, the Dollar Limitation for benefits
commencing on or after age 62 is determined by reducing the
Dollar Limitation by 5/9 of one percent for each of the first
36 months and 5/12 of one percent for each of the additional
months (up to 24 months) by which benefit commences before the
month of the Participant's Social Security Retirement Age.
(d) If the annual benefit of a Participant commences prior to
age 62, the Dollar Limitation shall be the actuarial equivalent of an
annual benefit beginning at age 62, as determined above, reduced for
each month by which benefits commence before the month in which the
Participant attains age 62. This reduced Dollar Limitation shall be the
lesser of the equivalent amount computed using the (1) factors of
Section 6.2(b), or (2) Applicable Mortality Table and (i) in the case
of payment as a Pension, a 5% interest rate, or (ii) in the
26
<PAGE> 34
case of payment as a lump sum, the Applicable Interest Rate. Any
decrease in the Dollar Limitation determined in accordance with this
Section 6.5(d) shall not reflect the mortality decrement to the extent
that benefits will not be forfeited upon the death of the Participant.
(e) If the annual benefit of a Participant commences after the
Participant's Social Security Retirement Age, the Dollar Limitation as
reduced in Section 6.5(b) above, if necessary, shall be adjusted so
that it is the actuarial equivalent of an annual benefit of such Dollar
Limitation beginning at the Participant's Social Security Retirement
Age. This increased Dollar Limitation shall be the lesser of the
equivalent amount computed using (1) the factors required by Section
2.2, or (2) Applicable Mortality Table and (i) in the case of payment
as a Pension, a 5% interest rate, or (ii) in the case of payment as a
lump sum, the Applicable Interest Rate.
(f) If the Current Accrued Benefit of an individual who was a
Participant as of December 31, 1986, exceeds his Maximum Annual
Benefit, then, for all purposes under this Section 6.5, such
Participant's Dollar Limitation shall be equal to such Current Accrued
Benefit.
(g) If a person is (or was) also a participant in any Related
Defined Contribution Plan, and if the sum of such person's defined
benefit plan fraction and his defined contribution plan fraction (both
as defined in Code Section 415(e)) exceeds 1.0, the person's Maximum
Annual Benefit shall be reduced to the extent necessary to reduce such
sum to 1.0. The defined contribution plan fraction for any such person
shall be determined by application of (1) the special transition rules
for the defined contribution plan fraction under Code Section
415(e)(4), (2) the special limitation for employee stock ownership
plans under Code Section 415(c)(6), (3) the special transition rules
for the defined contribution plan fraction under Section 1106(i)(A) of
the Tax Reform Act of 1986 and, (4) if elected by the Plan
Administrator, the special transition rule for the defined contribution
plan fraction for Plan Years ending after December 31, 1982 under Code
Section 415(e)(6).
(h) Notwithstanding any other provision to the contrary, the
maximum pension payable to a Participant shall not exceed the maximum
limitations of Code Section 415, which by this reference are
specifically incorporated in full into the Plan.
(i) Definitions. For purposes of this Section 6.5, the
following terms, whenever used in the capitalized form, shall have the
meanings set forth below:
(1) "Social Security Retirement Age" means age 65 in
the case of a Participant attaining age 62 before January 1,
2000 (i.e., born before January 1, 1938), age 66 for a
Participant attaining age 62 after December 31, 1999, and
before January 1, 2017 (i.e., born after December 31, 1937,
but before January 1, 1955), and age 67 for a Participant
attaining age 62 after December 31, 2016 (i.e., born after
December 31, 1954).
27
<PAGE> 35
(2) "Adjustment Factor" means the cost of living
adjustment factor prescribed by the Secretary of the Treasury
under Code Section 415(d) for years beginning after December
31, 1987, applied to such items and in such manner as so
prescribed.
(3) "Current Accrued Benefit" means, when expressed
as an annual benefit within the meaning of Code Section
415(b)(2):
(A) for periods prior to January 1, 1995, a
Participant's Accrued Benefit under the Plan,
determined as if the Participant had separated from
service as of December 31, 1986; and
(B) for periods after December 31, 1994, a
Participant's Accrued Benefit under the Plan,
determined as if the Participant had separated from
service as of December 31, 1994.
In determining the amount of a Participant's Current Accrued
Benefit, the following shall be disregarded: (i) any change in
the terms and conditions of the Plan after May 5, 1986 or
December 31, 1994, as applicable; and (ii) any cost of living
adjustment occurring after May 5, 1986, or December 31, 1994,
as applicable.
(4) "Applicable Interest Rate" means the applicable
interest rate prescribed by the Commissioner of Internal
Revenue in revenue rulings, notices or other guidance
published in the Internal Revenue Bulletin for the month of
September immediately preceding the Plan Year in which such
distribution is made.
(5) "Applicable Mortality Table" means the applicable
mortality table prescribed by the Commissioner of Internal
Revenue in revenue rulings, notices or other guidance
published in the Internal Revenue Bulletin, as in effect on
the date as of which a benefit is being determined.
6.6 Special Participant Retirement Benefits. Notwithstanding other
provisions hereof to the contrary, a Special Participant (or his Beneficiary in
case of his death), upon Termination of Employment for any reason, shall be
entitled to such rights, credits and benefits, if any, under this Plan as may be
determined in accordance with the provisions of that Appendix (or Appendices) to
this Plan which relates to his Special Participant class (or classes). In the
event a Special Participant is reclassified as a Participant or a Participant is
reclassified as a Special Participant, the value of his Accrued Benefit and his
nonforfeitable right to a Pension, determined as of the date of
reclassification, shall not be decreased.
6.7 Transferred Employee Retirement Benefits. Notwithstanding other
provisions hereof to the contrary, Pensions and other benefits, if any, payable
under this Plan in cases of transfers of employment by Employees between
Employers or Affiliates, or by transfers of Employees between this Plan and a
plan maintained outside of this Plan by Affiliates, shall be determined in
accordance with the provisions of Article IX.
28
<PAGE> 36
ARTICLE VII
Death Benefits
7.1 In-Service Survivor Pension.
The Surviving Spouse of a deceased, Vested Participant who was
an Eligible Employee or employed by an Affiliate which is not an
Employer on his date of death shall receive a Survivor Pension with
payments commencing on the Annuity Starting Date. No reduction in the
Accrued Benefit of a Vested Participant shall be made for the Survivor
Pension coverage provided by this Section 7.1. The Survivor Pension
coverage provided by this Section 7.1 cannot be waived.
7.2 Out-of-Service Survivor Pension.
(a) Early Retirement Survivor Pension. The Surviving
Spouse of a deceased, Vested Participant:
(1) who was not an Eligible Employee when he died;
(2) who had incurred a Termination of Employment on
or after the date he first satisfied Section 5.2;
(3) who died before the Annuity Starting Date of his
benefits under this Plan (or the date his benefits
recommenced, if suspended under Section 12.2); and
(4) whose Surviving Spouse is not entitled to the
Survivor Pension provided by Section 7.1 or Section 7.3,
shall receive a Survivor Pension commencing on the Annuity Starting
Date. No reduction in the Accrued Benefit of a Participant shall be
made for the Survivor Pension coverage provided by this subsection (a),
which cannot be waived.
(b) Deferred Vested Survivor Pension. The Surviving Spouse
(who was continuously married for at least thirty (30) days to the
Participant immediately prior to his death) of a deceased, Vested
Participant:
(1) who is credited with at least one Hour of Service
after August 22, 1984;
(2) who dies after incurring a Termination of
Employment, but before the Annuity Starting Date of his
benefits under this Plan; and
(3) whose Surviving Spouse is not entitled to the
Survivor Pension under Section 7.1, 7.2(a) or 7.3,
29
<PAGE> 37
shall receive a Survivor Pension commencing on the Annuity Starting
Date. No reduction in the Accrued Benefit of a Participant shall be
made for the Survivor Pension provided by this subsection (b), which
cannot be waived.
7.3 Post-Disability Survivor Pension.
The Surviving Spouse of a deceased, Vested Participant who was
entitled to receive a Deferred Disability Pension on the date of his
death shall receive a Survivor Pension with payments commencing on the
Annuity Starting Date. No reduction in the Accrued Benefit of a Vested
Participant shall be made for the Survivor Pension coverage provided by
this Section 7.3, which cannot be waived.
7.4 Special Participants Severance and Death Benefits. Notwithstanding
other provisions hereof to the contrary, a Special Participant, his
Beneficiaries or estate shall, upon Termination of Employment by death or for
any other reason, be entitled to such rights, credits and benefits, if any,
under this Plan as may be determined in accordance with the provisions of the
Appendix (or Appendices) applicable to such Special Participant.
7.5 Designation of Beneficiary. Each active or retired Participant may
designate a primary Beneficiary or Beneficiaries and a contingent Beneficiary or
Beneficiaries to receive any benefit that may become payable under Section 8.2
of this Plan by reason of his death. If such Participant is married, no
Beneficiary other than the Participant's current Spouse may be designated as a
Beneficiary without a Spouse's Consent. Any designation or change in designation
by a married Participant of a Beneficiary other than his Spouse shall be invalid
under this Plan, if such designation or change in designation is not accompanied
by a Spouse's Consent. Upon the entry of a decree of divorce respecting a
married Participant and his or her former spouse, any designation of such spouse
as Beneficiary of such Participant shall be revoked automatically and become
ineffective on and after the date the decree is entered, unless otherwise
provided in a Qualified Domestic Relations Order. The automatic revocation of
such Beneficiary designation shall be treated under the provisions of the Plan
as if such former spouse had predeceased the Participant. However, a Participant
may designate a former spouse as a Beneficiary under the Plan, provided a
properly completed Beneficiary designation form is filed with the Administrative
Committee subsequent to entry of a decree of divorce respecting the Participant
and such former spouse. If a Participant dies without executing a valid
Beneficiary designation form, any benefits payable on account of such death
under Section 8.2 shall be paid to such Participant's Surviving Spouse, if any,
or if the Participant had no Surviving Spouse, to his estate, and such Surviving
Spouse or estate, as applicable, shall be such Participant's Beneficiary. Such
designations shall be made upon the forms furnished by the Administrative
Committee, and may, to the extent consistent with Section 8.2, at any time and
from time to time be changed or revoked without notice to any Beneficiary, and
shall not be effective unless and until filed with the Administrative Committee.
Neither the Employers nor the Trustee (in its capacity as Trustee) shall be
named as a Beneficiary. For purposes of this Plan, a certified copy of the death
certificate, marriage certificate, final divorce decree, or a Qualified Domestic
Relations Order shall be sufficient evidence of the event or circumstance to
which the document attests, and the Administrative Committee may rely thereon.
In the absence of such proof, the Administrative Committee may rely upon such
other evidence as it deems necessary or advisable.
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7.6 Loss of Eligibility to Receive Death Benefit. Notwithstanding any
other provision of this Plan or an Appendix, in the event a Beneficiary, Spouse
or Surviving Spouse is determined by a court of competent jurisdiction to have
intentionally caused the death of a deceased Participant, such person shall be
ineligible to receive any benefit whatsoever from the Plan and such person shall
be deemed to have predeceased the deceased Participant. If a deceased
Participant is not survived by a Surviving Spouse (whether by operation of this
Section 7.6 or otherwise), no Survivor Pension shall be payable to any person or
entity with respect to the Accrued Benefit of such deceased Participant.
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ARTICLE VIII
Normal and Optional Forms of Payment
8.1 Normal Form of Pension. The normal form of Pension under this Plan
for any Participant, shall be determined in accordance with the following:
(a) Married Participant.
(1) Qualified Joint and Survivor Pension. A
Participant who is married on his Annuity Starting Date shall
receive a Qualified Joint and Survivor Pension, unless during
the Applicable Election Period the Participant shall have
elected with his Spouse's Consent to have his Accrued Benefit
paid in an optional form described in Section 8.2, and the
Participant shall have delivered a properly completed election
form to the Administrative Committee at any time before the
Annuity Starting Date, which has not been revoked before such
Annuity Starting Date.
(2) Explanation. The Administrative Committee shall
provide each vested Participant with a written explanation of
the optional forms of payment in the manner set forth below.
Such written explanation shall be provided to such Participant
by personal delivery or first class mail no less than 30 days
and no more than 90 days prior to his Annuity Starting Date,
unless the Participant elects to waive such minimum 30-day
period, in which case payment may commence as soon as 8 days
after the date such explanation is provided. Such written
explanation shall contain a general explanation: (i) of the
terms and conditions of a Qualified Joint and Survivor
Pension; (ii) the circumstances under which it will be
provided; (iii) the Participant's right during the Applicable
Election Period to make, and the effect of, an election to
waive the Qualified Joint and Survivor Pension; (iv) the
rights of the Participant's Spouse; (v) the Participant's
right during the Applicable Election Period to make, and the
effect of, a revocation of a previous election to waive the
Qualified Joint and Survivor Pension; and (vi) the relative
values of the various optional forms of payment under the
Plan.
(b) Single Participant. A Participant who is not married on
his Annuity Starting Date or a married Participant who has elected not
to receive his Pension in the form of a Qualified Joint and Survivor
Pension shall receive his Pension in the form of a Single Life Annuity,
unless the Administrative Committee has approved such Participant's
selection of an optional form of payment described in Section 8.2.
8.2 Optional Forms of Pension. By filing a timely election in writing
with the Committee, a Participant may designate any person who is a "dependent,"
as defined in Code Section 152 (without regard to the furnishing of support
requirement therein) on the date of the designation, as his contingent pensioner
or Beneficiary and elect to receive a Pension that is actuarially equivalent and
is payable in accordance with one of the following options, in lieu of the
Pension to which he may otherwise become entitled upon Retirement. If the
Participant is married on his
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Annuity Starting Date, the Participant must designate his Spouse as his
contingent pensioner or Beneficiary, as applicable, unless his designation of
another dependent is accompanied by a Spouse's Consent.
(a) Option 1. The retired Participant shall receive a reduced
Pension payable for life, and payments in the same reduced amount
shall, after the retired Participant's death, be continued to the
contingent pensioner during the contingent pensioner's lifetime. Such
reduced Pension payable to the Participant shall be eighty-two percent
(82%) plus or minus sixty-five hundredths of one percent (0.65%) for
each year to the nearest year that the contingent pensioner is older or
younger respectively than the Participant multiplied by the Pension
payable to the Participant in the form of a Single Life Annuity. Option
A, as described in subsection (i) below, may be elected in connection
with this optional form.
(b) Option 2. The retired Participant shall receive a reduced
Pension payable for life, and payments in the amount of fifty percent
(50%) of such reduced Pension shall, after the retired Participant's
death, be continued to the contingent pensioner during the contingent
pensioner's lifetime. Such reduced Pension payable to the Participant
shall be ninety-two percent (92%) minus twenty-five hundredths of one
percent (0.25%) for each year to the nearest year that the contingent
pensioner is younger than the Participant, or plus four-tenths of one
percent (0.40%) for each year to the nearest year that the contingent
pensioner is older than the Participant, multiplied by the Pension
payable to the Participant in the form of a Single Life Annuity. Option
A, as described in subsection (i) below, may be elected in connection
with this optional form.
(c) Option 3. The retired Participant shall receive a reduced
Pension payable for life, and payments in the amount of seventy-five
percent (75%) of such reduced Pension shall, after the retired
Participant's death, be continued to the contingent pensioner during
the contingent pensioner's lifetime. Such reduced Pension payable to
the Participant shall be eighty-seven percent (87%) minus four-tenths
of one percent (0.40%) for each year to the nearest year that the
contingent pensioner is older or younger than the Participant, or plus
fifty-five hundredths of one percent (0.55%) for each year to the
nearest year that the contingent pensioner is older than the
Participant, multiplied by the Pension payable to the Participant in
the form of a Single Life Annuity.
(d) Option 4. The retired Participant shall receive a Pension
determined under Article VI payable for his life.
(e) Option 5. The retired Participant shall receive a reduced
Pension payable for life and, in the event such Participant dies prior
to receiving sixty (60) monthly payments pursuant to this optional
form, the balance of such payments shall be payable to a Beneficiary
designated by him ("designee") and, if such designee should fail to
survive, the remaining balance of such payments to any successor
Beneficiary designated by the Participant. Such reduced Pension payable
to the Participant shall be ninety-eight percent (98%) plus one-tenth
of one percent (0.10%) for each year up to a maximum of ten that
Participant is younger than age 65, or minus one-tenth of one percent
(0.10%) for each year
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that Participant is older than age 65, multiplied by the Pension
payable to the Participant in the form of a Single Life Annuity.
(f) Option 6. The retired Participant shall receive a reduced
Pension payable for life and, in the event such Participant dies prior
to receiving one hundred twenty (120) monthly payments pursuant to this
optional form, the balance of such payments shall be payable to a
Beneficiary designated by him ("designee") and, if such designee should
fail to survive, the remaining balance of such payments to any
successor Beneficiary designated by the Participant. Such reduced
Pension payable to the Participant shall be ninety-five percent (95%)
plus three-tenths of one percent (0.30%) for each year up to a maximum
of ten that Participant is younger than age 65, or minus one percent
(1.00%) for each year that Participant is older than age 65, multiplied
by the Pension payable to the Participant in the form of a Single Life
Annuity.
(g) Option 7. The retired Participant shall receive a reduced
Pension payable for life and, in the event such Participant dies prior
to receiving one hundred eighty (180) monthly payments pursuant to this
optional form, the balance of such payments shall be payable to a
Beneficiary designated by him ("designee") and, if such designee should
fail to survive, the remaining balance of such payments to any
successor Beneficiary designated by the Participant. Such reduced
Pension payable to the Participant shall be ninety percent (90%) plus
five-tenths of one percent (0.50%) for each year up to a maximum of ten
that Participant is younger than age 65, or minus one and five-tenths
percent (1.50%) for each year that Participant is older than age 65
multiplied by the Pension payable to the Participant in the form of a
Single Life Annuity.
(h) Option 8. The retired Participant shall receive a reduced
Pension payable for life and, in the event such Participant dies prior
to receiving two hundred forty (240) monthly payments pursuant to this
optional form, the balance of such payments shall be payable to a
Beneficiary designated by him ("designee") and, if such designee should
fail to survive, the remaining balance of such payments to any
successor Beneficiary designated by the Participant. Such reduced
Pension payable to the Participant shall be eighty-five percent (85%)
plus five-tenths of one percent (0.50%) for each year up to a maximum
of ten that Participant is younger than age 65, or minus two percent
(2.00%) for each year that Participant is older than age 65 multiplied
by the Pension payable to the Participant in the form of a Single Life
Annuity.
(i) Option A. A retired Participant who has not become
eligible for Federal Social Security benefits and has elected, with his
Spouse's Consent, if applicable, for payment of his Pension in the form
of a Single Life Annuity, Qualified Joint and Survivor Pension or
Pension under Option 1 or Option 2 (as described in subsections (a) and
(b) above, respectively) may elect a Social Security Adjustment Option
in connection with such form of Pension. A Social Security Adjustment
Option shall provide an actuarially determined greater monthly payment
amount to the retired Participant for periods before he attains age 62
and an actuarially determined lesser monthly payment amount after he
attains age 62, than the monthly payment amount otherwise payable under
the elected form of
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Pension. Such adjusted payment amounts shall take into account the
monthly amount of the old age benefit the Participant is expected to
become entitled to receive at age 62 under the Federal Social Security
Act as in effect on the date of such election (assuming proper
application therefor and without regard to any disqualification for or
loss or reduction in such old age benefit) so as to provide monthly
Pension payment amounts to the retired Participant before and after age
62 which are as reasonably as practicable nearly equal to the aggregate
of (i) monthly Pension payment amounts, and (ii) such old age benefits
available to the Participant after age 62. The reduced amount of
Pension payments under the Social Security Adjustment Option commencing
at the Participant's age 62 shall become effective and payable without
regard to whether or not an old age benefit in any amount is actually
paid to the Participant under the Federal Social Security Act.
Subject to the restrictions of Section 7.6, a Participant may elect,
change, or revoke an election only if such election, change or revocation is
filed with the Administrative Committee on a form provided for such purpose
during the Applicable Election Period.
If the Pension payable to the retired Participant is in the form of a
joint and survivor annuity under Option 1, Option 2 (including a Qualified Joint
and Survivor Pension) or Option 3 with such Participant's Spouse as the
contingent pensioner, then, in the event such Participant's Spouse dies after
payment of such Pension has commenced and prior to such Participant's death, the
monthly amount of the Pension payable to such Participant shall be increased
commencing with the first monthly payment to be made immediately following the
date of death of such Spouse. In such event, the increased monthly amount of
Pension payable to such Participant shall be equal to the monthly amount which
would have been payable to the Participant as of his or her Annuity Starting
Date if such Participant's Pension had been payable in the form of a Single Life
Annuity pursuant to Option 5. Such increased monthly amount shall be payable for
the remaining life of such Participant during which payment of his or her
Pension continues after his or her Spouse's death.
If a Participant who makes an election during the Applicable Election
Period pursuant to the requirements of this Section 8.2 continues in an
Employer's employ after his election, no Pension payments shall be made during
the period of continued employment until his Annuity Starting Date. If the
Participant continues in such employment after such Annuity Starting Date, the
election shall become inoperative, but a new election may be made during a
subsequent Applicable Election Period.
An election made pursuant to this Section 8.2 shall become inoperative
in the event (a) the Participant's death occurs prior to the Annuity Starting
Date established by his election during the Applicable Election Period, or (b),
if applicable, no contingent pensioner is surviving on the Participant's Annuity
Starting Date. In the event an election becomes inoperative, the normal form of
payment provided by Section 8.1 shall become operative.
8.3 Other Benefits Cancelled by Option. Any Pension, Death Benefit, or
other benefit that would otherwise have become payable under this Plan, shall be
cancelled and superseded by an option elected under this Article VIII as of the
date such option or other form of payment becomes operative.
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8.4 Special Restrictions on Payment.
(a) Subject to the following provisions, if the Actuarial
Equivalent present value (including for this purpose a value of zero)
of a Pension or Survivor Pension payable to a Participant or Surviving
Spouse in the form of a lump sum is not greater than Three Thousand
Five Hundred Dollars ($3,500) for distributions before January 1, 1998
or Five Thousand Dollars ($5,000) for distributions on or after January
1, 1998, the Administrative Committee shall direct that such benefit be
paid in a lump sum no later than the end of the second plan year
following the Plan Year of his Termination of Employment.
(b) Written consent of the Participant during the Applicable
Election Period is required before any part of his Accrued Benefit is
distributed to him, if the Actuarial Equivalent present value of the
nonforfeitable portion of his Accrued Benefit is greater than Three
Thousand Five Hundred Dollars ($3,500) for distributions before January
1, 1998 or Five Thousand Dollars ($5,000) for distributions on or after
January 1, 1998, and the Participant has not attained age sixty-five
(65). Written consent of the Spouse of a married Participant during the
Applicable Election Period also is required under such circumstances,
unless the Participant has elected to retire and receive an immediate
Qualified Joint and Survivor Pension.
(c) For purposes of this Section 8.5, the present value of the
nonforfeitable portion of an Accrued Benefit, or a Survivor Pension
payable to a Participant or his Surviving Spouse shall be treated as
greater than Three Thousand Five Hundred Dollars ($3,500) for
distributions before January 1, 1998 or Five Thousand Dollars ($5,000)
for distributions on or after January 1, 1998 at all times, if the
distribution thereof without the consent of the Participant and/or his
Surviving Spouse, as applicable, was prohibited by this Section 8.5
immediately before such distribution began. No such consent is required
before the commencement of such distribution, if the present value
thereof is not more then Three Thousand Five Hundred Dollars ($3,500)
for distributions before January 1, 1998 or Five Thousand Dollars
($5,000) for distributions on or after January 1, 1998, or if the
Participant has attained age sixty-five (65) or would have attained
such age as of the Annuity Starting Date, if he had lived.
8.5 Domestic Relations Orders. The Accrued Benefit of a Participant
shall be paid in accordance with the terms of any Qualified Domestic Relations
Order.
8.6 Unclaimed Benefits. During the time when a benefit hereunder is
payable to any Participant or Beneficiary, the Administrative Committee, upon
request by the Trustee, or at its own instance shall mail by registered or
certified mail to such person, at his last known address, a written demand for
his address, or for satisfactory evidence of his continued life, or both. If
such information is not furnished to the Administrative Committee within three
months from the mailing of such demand, then the Administrative Committee may,
in its sole discretion, determine that such Participant or Beneficiary is
deceased and may declare such benefit, or any unpaid portion thereof,
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terminated as if the death of the distributee (with nonsurviving beneficiary)
had occurred on the later of the date of the last payment made thereon or the
date such person first became entitled to receive benefit payments. Any such
declaration by the Administrative Committee shall later be revoked, upon a
receipt of the requested information by the Administrative Committee.
8.7 Facility of Payment. In the event any person entitled to receive
any Pension, Death Benefit or other benefit payment of any nature under the Plan
is determined by the Administrative Committee to be legally, physically or
mentally incapable of personally receiving and receipting for payment thereof,
the Administrative Committee, in its sole discretion, may direct the Trustee to
make payment thereof to such person, persons, institution or institutions then
maintaining or having custody of such incapacitated person, as determined by the
Administrative Committee. The determination of the Administrative Committee as
to the identity of the proper payee of any Pension, Death Benefit or other
benefit of any nature under the Plan and the amount properly payable with
respect thereto shall be final and conclusive with respect to all persons for
purposes.
8.8 Loss of Eligibility to Receive Continuation Benefits.
Notwithstanding any other provision of this Plan or an Appendix, in the event a
contingent annuitant, Surviving Spouse or Beneficiary is determined by a court
of competent jurisdiction to have intentionally caused the death of a deceased
Participant who was receiving Pension payments prior to his death, such person
shall be ineligible to receive any continuation payments from the Plan with
respect to such Pension and such person shall be deemed to have predeceased the
deceased Participant. In the event a contingent annuitant, Beneficiary or
Surviving Spouse is deemed to have predeceased a deceased Participant pursuant
to this Section 8.8, any continuation benefits, if any, shall be payable only as
determined by the form in which the Pension of such deceased Participant was
being paid. In this regard, if such Pension was being paid in the form of joint
and survivor annuity (including a Qualified Joint and Survivor Pension) and the
contingent pensioner (including a Surviving Spouse) is deemed to have
predeceased the deceased Participant, no continuation payments shall be payable
to any person or entity with respect to such Pension, unless such Pension was
payable for a period certain; in which case payments for the remainder, if any,
of such period certain shall be continued to the deceased Participant's
Beneficiary determined in accordance with Section 7.5.
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ARTICLE IX
Employment Transfers
9.1 Transfers Between Employers. If an Eligible Employee has a transfer
of employment between Employers, his Accrued Benefit and Years of Service earned
and credited up to the date of such transfer shall not be reduced and he shall
continue to be credited with Vesting Service (but not Benefit Service) with
respect to his Accrued Benefit accrued to such date for each Hour of Service
during his employment as an Employee with such transferee Employer. Such
transferred Employee shall participate in the Plan after such transfer of
employment in accordance with the terms of the Plan and any Appendix applicable
to his status as an Employee of such transferee Employer and his Accrued Benefit
as of any date on or after the date of such transfer shall be determined in
accordance with the applicable terms of the Plan (including any applicable
Appendix) as such terms exist as of the date of such transfer and as such terms
may be amended thereafter.
9.2 Transfers to Non-Employer Affiliates. If an Eligible Employee has a
transfer of employment to an Affiliate which is not an Employer, his Accrued
Benefit and Years of Service earned and credited up to the date of such transfer
shall not be reduced and he shall continue to be credited with Vesting Service
(but not Benefit Service) with respect to his Accrued Benefit accrued to such
date for each Hour of Service during his employment as an Employee with such
transferee Affiliate.
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ARTICLE X
Administration
10.1 Fiduciaries. Under certain circumstances, the Trustee, the Board
of Directors, the Benefits Committee, the Investment Committee, the Investment
Managers, or the Administrative Committee may be determined by a court of law to
be a fiduciary with respect to a particular action under the Plan or the Trust
Agreement. As authorized by ERISA, to prevent any two parties to the Plan from
being deemed co-fiduciaries with respect to a particular function, both the Plan
and Trust Agreement are intended, and should be construed, to allocate to each
party to the Plan only those specific powers, duties, responsibilities, and
obligations as are specifically granted to it under the Plan or Trust.
10.2 Allocation of Responsibilities Among Named Fiduciaries.
(a) Trustee. The Trustee shall have the authority and
responsibility to manage and control the Trust Fund and for the
investment and safekeeping of the assets of the Plan, except to the
extent such authority and responsibility is delegated to one or more
Investment Managers. The Trustee shall also have those responsibilities
set forth in the Trust Agreement and the provisions of this Plan.
(b) Board of Directors. The Board of Directors shall have
exclusive authority and responsibility for:
(1) The termination of the Plan;
(2) The adoption of an amendment to this Plan or an
Appendix which would materially increase or decrease the level
of Accrued Benefits provided for in this Plan or an Appendix;
(3) The appointment and removal of members of the
Benefits Committee. The Board of Directors shall designate one
member of the Benefits Committee as the Chairman of the
Benefits Committee;
(4) The approval of the adoption of this Plan by an
Affiliate and the withdrawal from this Plan by an adopting
Employer; and
(5) The delegation to the Benefits Committee of any
authority and responsibility reserved herein to the Board of
Directors.
(c) Benefits Committee. The Benefits Committee shall have
exclusive authority and responsibility for those functions set forth in
Section 10.3 of this Plan and in other provisions of this Plan.
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(d) Administrative Committee. The Administrative Committee
shall serve as plan administrator and shall have exclusive authority
and responsibility for those functions set forth in Section 10.4 and in
other provisions of this Plan.
(e) Investment Committee. The Investment Committee shall have
exclusive authority and responsibility for those functions set forth in
Section 10.5 and in other provisions of this Plan.
(f) Investment Managers. The Investment Managers, if and to
the extent appointed by the Benefits Committee, shall have the
authority and responsibility for the investment of all or any part of
the assets of the Plan, as delegated to the Investment Managers by the
Benefits Committee. In investing any of the assets of the Plan, the
Investment Managers shall follow any investment objectives or
guidelines established by the Benefits Committee and communicated to
the Investment Managers.
10.3 Provisions Concerning the Benefits Committee.
(a) Membership and Voting. The members of the Benefits
Committee shall be appointed and removed by the Board of Directors
pursuant to Section 10.2(b)(3). The Benefits Committee shall consist of
not less than three (3) members. The Board of Directors may remove any
member of the Benefits Committee at any time, with or without cause, by
written notice to such member and to the other members of the Benefits
Committee. Any member may resign by delivering a written resignation to
the Board of Directors. Vacancies in the Benefits Committee arising by
death, resignation or removal shall be filled by the Board of
Directors. The Benefits Committee shall act by a majority of its
members at the time in office, and such action may be taken by a vote
at a meeting, in writing without a meeting, or by telephonic
communications. Attendance at a meeting shall constitute waiver of
notice thereof. A member of the Benefits Committee who is a Participant
of the Plan shall not vote on any question relating specifically to
such Participant. Any such action shall be voted or decided by a
majority vote of the remaining members of the Benefits Committee. The
Benefits Committee shall appoint a Secretary who may, but need not, be
a member thereof. The Benefits Committee may appoint from its members
such subcommittees with such powers as the Benefits Committee shall
determine.
(b) Powers and Duties of Benefits Committee. The Benefits
Committee shall have the authority and responsibility for:
(1) All amendments to this Plan, except to the extent
such authority is reserved to the Board of Directors;
(2) The approval of any merger or spinoff of any part
of this Plan;
(3) The appointment, removal, with or without cause,
or the replacement of the Trustee, Investment Managers, any
member of the Administrative Committee or any member of the
Investment Committee; and
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(4) The delegation of responsibilities to the
Trustee, the Administrative Committee, Investment Committee or
any other person or entity.
The Benefits Committee may appoint such accountants, counsel,
specialists, and other persons as it deems necessary or desirable in
connection with the administration of this Plan. Such accountants and
counsel may, but need not, be accountants and counsel for the Company
or an Affiliate. The Benefits Committee also shall have such other
duties, authority and responsibility as may be delegated by the Board
of Directors.
10.4 Provisions Concerning the Administrative Committee.
(a) Membership and Voting. The Benefits Committee shall
appoint an Administrative Committee, which shall be in charge of the
operation and administration of this Plan. The Administrative Committee
shall consist of not less than three (3) members. The Benefits
Committee may remove any member of the Committee at any time, with or
without cause, by written notice to such member and to the other
members of the Administrative Committee. Any member may resign by
delivering a written resignation to the Benefits Committee. Vacancies
in the Administrative Committee arising by death, resignation or
removal shall be filled by the Benefits Committee. The Administrative
Committee shall act by a majority of its members at the time in office,
and such action may be taken by a vote at a meeting, in writing without
a meeting, or by telephonic communications. A member of the
Administrative Committee who is a Participant of the Plan shall not
vote on any question relating specifically to such Participant. Any
such action shall be voted or decided by a majority vote of the
remaining members of the Administrative Committee. The Administrative
Committee shall designate one of its members as the Chairman and shall
appoint a Secretary who may, but need not, be a member thereof. The
Administrative Committee may appoint from its members such
subcommittees with such powers as the Administrative Committee shall
determine.
(b) Duties of Administrative Committee. The Administrative
Committee shall administer the Plan in accordance with its terms and
shall have all the powers necessary to carry out such terms. The
Administrative Committee shall execute any certificate, instrument or
other written direction on behalf of the Plan and may make any payment
on behalf of the Plan. All interpretations of this Plan, and questions
concerning its administration and application, shall be determined by
the Administrative Committee in its sole discretion and such
determination shall be binding on all persons for all purposes. The
Administrative Committee may appoint such accountants, counsel,
specialists, and other persons as it deems necessary or desirable in
connection with the administration of this Plan. Such accountants and
counsel may, but need not, be accountants and counsel for the Company
or an Affiliate. The Administrative Committee also shall have such
other duties, authority and responsibility as may be delegated by the
Benefits Committee.
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10.5 Provisions Concerning the Investment Committee.
(a) Membership and Voting. The Benefits Committee shall
appoint an Investment Committee. The Investment Committee shall consist
of not less than three (3) members. The Benefits Committee may remove
any member of the Investment Committee at any time, with or without
cause, by written notice to such member and to the other members of the
Investment Committee. Any member may resign by delivering a written
resignation to the Benefits Committee. Vacancies in the Investment
Committee arising by death, resignation or removal shall be filled by
the Benefits Committee. The Investment Committee shall act by a
majority of its members at the time in office, and such action may be
taken by a vote at a meeting, in writing without a meeting, or by
telephonic communications. Attendance at a meeting shall constitute
waiver of notice thereof. A member of the Investment Committee who is a
Participant of the Plan shall not vote on any question relating
specifically to such Participant. Any such action shall be voted or
decided by a majority vote of the remaining members of the Investment
Committee. The Investment Committee shall designate one of its members
as the Chairman and shall appoint a Secretary who may, but need not, be
a member thereof. The Investment Committee may appoint from its members
such subcommittees with such powers as the Investment Committee shall
determine.
(b) Duties of Investment Committee. The Investment Committee
shall recommend to the Benefits Committee investments and Investment
Managers and monitor the performance of such investments and Investment
Managers. The Investment Committee shall also implement any investment
objectives or guidelines which may be established by the Benefits
Committee. The Investment Committee may appoint such accountants,
counsel, specialists, and other persons as it deems necessary or
desirable in connection with its duties under this Plan. Such
accountants and counsel may, but need not, be accountants and counsel
for the Company or an Affiliate. The Investment Committee also shall
have such other duties, authority and responsibility as may be
delegated by the Benefits Committee.
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10.6 Delegation of Responsibilities; Bonding.
(a) Delegation and Allocation. The Board of Directors, the
Benefits Committee, the Investment Committee and the Administrative
Committee, respectively, shall have the authority to delegate and
allocate, from time to time, by a written instrument, all or any part
of its responsibilities under this Plan to such person or persons as
each may deem advisable, and in the same manner to revoke any such
delegation or allocation of responsibility. Any action of such person
in the exercise of such delegated or allocated responsibilities shall
have the same force and effect for all purposes hereunder as if such
action had been taken by the Board of Directors, the Benefits
Committee, the Investment Committee or the Administrative Committee. An
Employer, the Board of Directors, the Benefits Committee, the
Investment Committee or the Administrative Committee shall not be
liable for any acts or omissions of any such person, who shall
periodically report to the Board of Directors, the Benefits Committee,
the Investment Committee or the Administrative Committee, as
applicable, concerning the discharge of the delegated or allocated
responsibilities.
(b) Bonding. The members of the Benefits Committee, the
Investment Committee and the Administrative Committee shall serve
without bond (except as expressly required by federal law) and without
compensation for their services as such.
10.7 No Joint Fiduciary Responsibilities. The Plan is intended to
allocate to each named fiduciary the individual responsibility for the prudent
execution of the functions assigned to it, and none of such responsibilities or
any other responsibility shall be shared by two or more of such named
fiduciaries unless such sharing is provided for by a specific provision of the
Plan. Whenever one named fiduciary is required herein to follow the directions
of another named fiduciary, the two named fiduciaries shall not be deemed to
have been assigned a shared responsibility, but the responsibility of a named
fiduciary receiving such directions shall be to follow them insofar as such
instructions are on their face proper under applicable law.
10.8 Information to be Supplied by Employer. Each Employer shall supply
to the Administrative Committee, within a reasonable time after the end of each
month and in such form as the Administrative Committee shall require, the names
of all Participants who incurred a Termination of Employment or layoff during
the month and the date of termination of each and the amount of Compensation
paid to each Participant for the Plan Year of such Termination of Employment.
The Administrative Committee may rely conclusively on the information certified
to it by an Employer. Each Employer shall provide to the Administrative
Committee or its delegate such other information as it shall from time to time
need in the discharge of its duties.
10.9 Records. The regularly kept records of the Administrative
Committee and of any Employer shall be conclusive evidence of the Accrued
Benefit, Vesting Service and Eligibility Service of a Participant, his
Compensation, his age, marital status, his status as an Eligible Employee and
all other matters contained therein applicable to this Plan; provided that a
Participant may request a correction in the record of his age at any time prior
to his Annuity Starting Date, and such correction shall be made if within ninety
(90) days after such request he furnishes in support thereof a birth
certificate, baptismal certificate, or other documentary proof of age
satisfactory to the Administrative Committee.
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10.10 Fiduciary Capacity. Any person or group of persons may serve in
more than one fiduciary capacity with respect to the Plan.
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ARTICLE XI
Trustee
11.1 Appointment of Trustee. A Trustee (or Trustees) shall be the
entity designated as Trustee under the Trust Agreement or such other entity
appointed by the Benefits Committee. The Trustee shall serve at the pleasure of
the Benefits Committee, and shall have such rights, powers and duties as are
provided to a Named Fiduciary under ERISA for the administration of the Trust
Fund and as are provided in the Trust Agreement.
11.2 Responsibility of Trustee and Investment Manager(s). All
contributions under this Plan shall be paid to and held separately by the
Trustee. The Trustee shall have no responsibility relating to the investment and
reinvestment of the Trust Fund except with respect to the management of those
assets specifically delegated to it in writing. The Investment Manager(s) shall
have exclusive management and control of the investments and/or reinvestments of
the assets of the Trust Fund assigned to them except as specified above. All
property and funds of the Trust Fund shall be retained for the exclusive benefit
of Participants, as provided in the Plan, and shall be used to pay benefits to
Participants or their beneficiaries or to pay expenses of administration of the
Plan and Trust Fund to the extent not paid by the Employers.
11.3 Funding and Investment Policy. The Plan Administrator shall
periodically obtain cash flow projections from the Actuary and shall supply them
to the Benefits Committee, so that an appropriate funding and investment policy
may be maintained by such Benefits Committee in accordance with the requirements
of ERISA.
11.4 Bonding. Neither the Investment Manager(s) nor Trustee shall be
required to furnish any bond or security for the performance of their powers and
duties hereunder unless applicable law makes the furnishing of such bond or
security mandatory.
11.5 Standard of Conduct of Trustee. The Trustee shall perform all of
its functions solely in the interests of the Participants of the Plan and their
Beneficiaries and with the care, skill, prudence, and diligence under the
circumstances then prevailing that a prudent man acting in a like capacity and
familiar with such matters would use in the conduct of an enterprise of a like
character and with like aims, and shall not be liable for any conduct on its
part which conforms to that standard.
11.6 Payment of Expenses. All expenses incident to the administration,
termination or protection of the Plan and Trust, including but not limited to,
actuarial, legal, accounting, investment management, Trustee's fees and premiums
to the Pension Benefit Guaranty Corporation, shall be paid by the Company, which
may require reimbursement from the other Employers for their proportionate
shares, or if not paid by the Company, shall be paid by the Trustee from the
Trust Fund and, until paid, shall constitute a first and prior claim and lien
against the Trust Fund.
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ARTICLE XII
Limitations
12.1 Reemployment of Retired Employees.
(a) Prior to Normal Retirement Date. If a retired Participant
is reemployed as an Eligible Employee prior to his Normal Retirement
Date, no Pension payments shall be made during the period of such
reemployment. Upon subsequent Termination of Employment by such
Participant, the Participant shall be entitled to receive a Pension
based on his Benefit Service and Average Monthly Compensation prior to
the date of his previous Retirement as well as Benefit Service and
Average Monthly Compensation during the period of his reemployment, and
in the case of a disabled Participant, his Vesting Service and Benefit
Service while disabled. In the case of reemployment of a retired
Participant who received any Pension payments prior to his
reemployment, the Pension payable upon his subsequent Retirement shall
be reduced by the actuarial equivalent of any Pension payments he
received during his previous period of Retirement.
(b) On or After Normal Retirement Date.
(1) Suspension of Pension. If a retired Participant
is reemployed as an Eligible Employee on or after his Normal
Retirement Date, his Pension shall be suspended for any
calendar month during which he earns at least forty (40) Hours
of Service under this Plan; provided, however, in no event
shall the amount so suspended be greater than the amount of
Pension which would have been payable to the Participant if he
had been receiving monthly Pension payments under the Plan
since his Retirement based on a Single Life Annuity commencing
at his age at Retirement.
(2) Status Determination. Any retired Participant who
is reemployed by any Employer or Affiliate on or after his
Normal Retirement Date may request the Committee to render a
determination of whether specific contemplated reemployment
will result in a permanent suspension of his Pension under
Section 12.2(b)(1). Such requests shall be considered in
accordance with this Plan's claims procedure, and shall be
rendered in a reasonable amount of time.
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<PAGE> 54
12.2 Governmental Restrictions.
(a) Limitation on Benefits of Highly Compensated Employees.
This Section 12.2 sets forth the limitations required by the Internal
Revenue Service on the Employer Contributions which may be used for the
benefit of certain Participants. In the event of Plan termination, the
benefit of any highly compensated active or former employee is limited
to a benefit that is nondiscriminatory under Code Section 401(a)(4). In
this regard, benefits distributed to any of the 25 most highly
compensated active and highly compensated former employees with the
greatest compensation in the current or any prior year are restricted
such that the annual payments are no greater than an amount equal to
the payment that would be made on behalf of the Participant under a
straight life annuity that is the Actuarial Equivalent of the sum of
the Participant's Accrued Benefit, the Participant's other benefits (if
any) under the Plan (other than a social security supplement, within
the meaning of Section 1.411(a)-7(c)(4)(ii) of the Income Tax
Regulations), and the amount the Participant is entitled to receive
under a social security supplement.
The foregoing restrictions shall not apply if:
(1) after payment of the benefit to a Participant described in
the preceding paragraph, the value of plan assets equals or exceeds
110% of the value of current liabilities, as defined in Code Section
412(l)(7);
(2) the value of the benefits for a Participant described
above is less than 1% of the value of current liabilities before
distribution; or
(3) the value of the benefits payable under the Plan to a
Participant described above does not exceed $3,500 for distributions
prior to January 1, 1998 and Five Thousand Dollars ($5,000) for
distributions on or after January 1, 1998.
For purposes of this Section 12.3, benefit includes loans in excess of the
amount set forth in Code Section 72(p)(2)(A), any periodic income, any
withdrawal values payable to a living Participant, and any death benefits not
provided for by insurance on the Participant's life.
(b) Permissible Distributions. A Participant's otherwise
restricted benefit may be distributed in full to the affected
Participant if prior to receipt of the restricted amount, the
Participant enters into a written agreement with the Administrative
Committee to secure repayment to the Plan of the restricted amount. The
restricted amount is the excess of the amounts distributed to the
Participant (accumulated with reasonable interest) over the amounts
that could have been distributed to the Participant under a Single Life
Annuity (accumulated with reasonable interest). The Participant may
secure repayment of the restricted amount upon distribution by:
(1) entering into an agreement for promptly
depositing in escrow with an acceptable depositary, property
having a fair market value equal to at least 125 percent of
the restricted amount;
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(2) providing a bank letter of credit in an amount
equal to at least 100 percent of the restricted amount; or
(3) posting a bond equal to at least 100 percent of
the restricted amount. If the Participant elects to post bond,
the bond will be furnished by an insurance company, bonding
company or other surety for federal bonds.
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ARTICLE XIII
Amendments
13.1 Right to Amend. As provided in Article X, the Benefits Committee
or the Board of Directors, as appropriate, reserves the right to make, from time
to time, any amendment to this Plan which does not permit any prohibited
reversion of any part of the Trust Fund to the Employers, and which does not
cause any part of the Trust Fund to be used for, or diverted to, any purpose
other than the exclusive benefit of Participants included in this Plan.
Retroactive amendments may not decrease the Accrued Benefit of any Participant
or Beneficiary thereof determined as of the first Plan Year to which the
amendment applies, or as of the time the amendment was adopted, except as
permitted by law.
13.2 Plan Merger or Consolidation. In the event of any merger or
consolidation with, or transfer of assets or liabilities to any other plan, each
Participant in this Plan, upon termination, shall have as a minimum benefit,
under the successor plan, the amount he would have received if the Plan had
terminated at the time of such merger, consolidation or transfer.
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ARTICLE XIV
Adoption and Withdrawal
14.1 Procedure for Adoption. Any Affiliate now in existence or
hereafter formed or acquired, which is not already an Employer under this Plan
and which is otherwise legally eligible, may by formal resolution or decision of
its own board of governing authority, adopt this Plan and the related Trust, for
all or any classification of persons in its employment, and thereby, from and
after the specified effective date shall become an Employer under this Plan.
Such adoption shall be effectuated by such formal resolution or decision of the
adopting organization as shall be appropriate. The adoption resolution or
decision may contain such specific changes and variations in the terms and
provisions of this Plan and Trust applicable to such adopting Employer and its
Employees, as may be acceptable to the Benefits Committee and attached hereto as
an Appendix. However, the sole, exclusive right of any other amendment of
whatever kind or extent, to the Plan or Trust are reserved to the Board of
Directors. The Appendix so added shall become, as to such adopting organization
and its Employees, a part of this Plan as then amended or thereafter amended and
the related Trust. It shall not be necessary for the adopting organization to
sign or execute the original or the amended Plan and Trust documents. The
effective date of this Plan for any such adopting organization shall be stated
in this restated and amended Plan or in the Appendix, and from and after such
effective date such adopting organization shall assume all the rights,
obligations and liabilities of an individual Employer entity hereunder and under
the Trust. The administrative powers and control of the Board of Directors, as
provided in the Plan and Trust, including the right of amendment, and of
appointment and removal of the Benefits Committee, shall not be diminished by
reason of the participation of any such adopting organization in this Plan and
Trust.
14.2 Withdrawal. An Employer, by action of its board of directors or
other governing authority, may withdraw from this Plan and Trust at any time,
without affecting other Employers not withdrawing. The Board of Directors may,
in its absolute discretion, terminate an adopting Employer's participation at
any time when in its judgment such adopting Employer fails or refuses to
discharge its obligations under this Plan.
14.3 Adoption Contingent upon Initial and Continued Qualification. The
adoption and amendment of this Plan and its related Trust is hereby made
contingent and subject to the condition precedent that this Plan, following such
adoption, meets all the statutory requirements for qualified plans, including,
but not limited to, Section 401(a) and 501(a) of the Code.
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ARTICLE XV
Termination
15.1 Right to Terminate. The Board of Directors may at any time
terminate this Plan with respect to all or any part of the Participants employed
by all or any one of the Employers, and may direct and require the Trustee to
liquidate the share of the Trust Fund allocable to such Participants or their
Beneficiaries. If the Plan is terminated with respect to less than all Employers
maintaining the Plan, the Plan shall continue in effect for Participants of the
remaining Employers. In the event that an Employer shall cease to exist, the
Plan shall be terminated with respect to the Participants of such Employer,
unless a successor organization adopts and continues the Plan. Upon complete or
partial termination of the Plan, the rights of affected Participants employed on
the date of the occurrence of such event to the benefits accrued under the Plan
to the date of such termination shall be nonforfeitable to the extent then
funded.
15.2 Employer Consolidation or Merger. Upon an Employer's liquidation,
bankruptcy, insolvency, sale, consolidation or merger to or with another
organization which is not an Employer hereunder, in which the Employer is not
the surviving company, or upon an adjudication or other official determination
of a court of competent jurisdiction or other public authority pursuant to which
a conservator, receiver or other legal custodian is appointed for the purpose of
operation or liquidation of an Employer, the Trust Fund assets attributable to
the Participants of such Employer shall be held or distributed as herein
provided, unless the successor to such Employer assumes the duties and
responsibilities of such Employer by adopting the Plan and Trust, or by the
establishment of a separate plan and trust to which the Trust Fund assets of the
Trust held on behalf of such Employer may be transferred with the consent and
agreement of such Employer and the Company. Upon the consolidation or merger of
two or more of the Employers under the Plan with each other, the surviving
Employer or organization shall succeed to all the rights and duties under the
Plan and Trust of the Employers involved.
15.3 Allocation and Liquidation of Trust Fund. Upon complete or partial
termination of the Plan the proportionate interests of the affected Participants
of each Employer, and their Beneficiaries, respectively, shall be determined by
the Administrative Committee in accordance with Section 4044 of ERISA and other
applicable laws and regulations. If any assets of the Plan remain following
complete termination of the Plan, they shall revert to the Company as provided
in Section 15.5. Notwithstanding the foregoing, in the event the Plan
terminates, or there is a spinoff of part of the Plan (in excess of the three
percent (3%) of the Plan assets permitted under Treasury Regulation Section
1.414(1)-1(n)(2)), within five (5) years following the date of any merger of any
other plan into this Plan after September 2, 1974, and if the sum of the assets
in this Plan after any such merger was less than the sum of the present values
of the accrued benefits (whether or not vested) of both this Plan and such other
plan on a termination basis on the merger date, then a special schedule of
benefits shall be created from the necessary (as identified by an enrolled
actuary) data maintained by the Employer or the Plan Administrator and shall be
inserted in and modify the allocation priorities set forth above in this Section
15.3 at the time of such termination or spinoff, in accordance with Treasury
Regulation Sections 1.414(1)-1(e)-(j) and 2608.13.
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15.4 Manner of Distribution. Any distribution after termination or
partial termination of this Plan may be made at any time, and from time to time,
in whole or in part, to the extent that no discrimination in value results, in
cash or in securities or other assets in kind (at fair market value at the time
of distribution). In making such distribution, any and all determinations,
divisions, appraisals, apportionments and allotments shall be made by the
Administrative Committee acting with the information supplied by the Actuary and
such actions shall be final, binding and conclusive on all persons for all
purposes. Distribution may be implemented through the continuance of the Trust
Fund, the creation of a new trust fund for that purpose or purchase of
nontransferable annuity contracts, or by a combination thereof, as the
Administrative Committee, in its discretion, shall determine.
15.5 Amounts Returnable to an Employer. In no event shall an Employer
receive any amounts from the Trust, except such amounts, if any, as set forth
below:
(a) Upon termination of the Plan and notwithstanding any other
provisions of the Plan, the Company shall receive such amounts, if any,
as may remain after the satisfaction of all liabilities of the Plan to
affected Participants and Beneficiaries;
(b) In the event of a contribution made by an Employer by a
mistake of fact, such contribution may be returned to such Employer
within one year after payment thereof, subject to the provisions of
subsection (e), below;
(c) Each contribution hereunder is conditioned on the
qualification under Code Section 401 of the Plan and the contributing
Employer shall be entitled at its option to withdraw, within one year
after the date of denial of such qualification, all contributions made
to this Plan, subject to the provisions of subsection (e), below;
(d) Each contribution hereunder is conditioned upon the
deductibility of such contribution under Code Section 404 for the Plan
Year for which such contribution is made and shall be returned to an
Employer within one (1) year of disallowance, if such deduction is
disallowed (to the extent of the disallowance), subject to the
provisions of subsection (e), below; and
(e) The return of an Employer Contribution to an Employer
under subsections (b), (c) or (d), above, must comply with each of the
following requirements:
(1) The amount of such Employer Contribution which
may be so returned shall not be greater than the excess of (i)
the amount contributed over (ii) the amount that would have
been contributed had there been no mistake in determining the
deduction or had there been no mistake of fact, as the case
may be; and
(2) The amount of such Employer Contribution which
may be so returned shall not be increased by earnings
attributable to the investment or reinvestment of such
Employer Contribution in the Trust, but shall be reduced by
losses attributable to the investment or reinvestment of such
Employer Contribution in the Trust.
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ARTICLE XVI
Top-Heavy Provisions
16.1 Definitions. For purposes of this Article XVI, the following words
and phrases shall have the meanings set forth below when used in the capitalized
form, unless a different meaning is clearly warranted by the context:
(a) "Aggregation Group" shall mean a Required Aggregation
Group or a Permissive Aggregation Group, as appropriate.
(1) "Required Aggregation Group" shall mean that
group of plans comprised of each defined contribution and each
defined benefit plan sponsored by the Company or any Affiliate
in which at least one (1) Key Employee participates, and any
other defined contribution or defined benefit plan sponsored
by the Company or by any Affiliate which enables a plan in
which a Key Employee participates to satisfy the minimum
participation and non-discrimination requirements of Code
Sections 410 and 401(a)(4).
(2) "Permissive Aggregation Group" shall mean all
plans included in the Required Aggregation Group and any other
plan or plans sponsored by the Company or by an Affiliate but
only if such group of plans would satisfy, in the aggregate,
the minimum participation and non-discrimination requirements
of Code Sections 410 and 401(a)(4) and contributions or
benefits in such other plans are comparable to contributions
or benefits in the plans of the Required Aggregation Group.
The Administrative Committee shall determine which plan or
plans shall be taken into account in determining the
Permissive Aggregation Group.
(b) "Annual Compensation" means compensation within the
meaning of Code Section 415(c)(3), subject to the exclusions described
in Code Section 414(q)(7).
(c) "Determination Date" shall mean, with respect to a Plan
Year, the last day of the immediately preceding Plan Year.
(d) "Key Employee" shall mean any Employee or former Employee
(and any beneficiaries of a former employee) who, for the Plan Year
containing the Determination Date or any of the four preceding Plan
Years, is:
(1) An officer of an Employer (or of an Affiliate)
whose Annual Compensation during the Plan Year containing the
Determination Date is greater than 50 percent of the dollar
limitation on annual benefits for such Plan Year with respect
to defined benefit plans under Code Section 415(b)(1)(A);
provided however, excluding Employees described in Code
Section 414(q)(8), no more than the lesser of:
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(A) fifty (50) Employees; or
(B) the greater of three (3) Employees or
ten percent (10%) of all Employees
shall be treated as officers, and such officers shall be
selected from those with the highest Annual Compensation
during the Plan Year containing the Determination Date;
(2) One (1) of the ten (10) Employees owning, or
considered as owning within the meaning of Code Section 318
(applying subparagraph (a)(2)(C) thereof by substituting "5%"
for "50%" therein), the largest interest in an Employer,
provided such Employee's Annual Compensation from an Employer
during the Plan Year containing the Determination Date is in
excess of the dollar limitation on annual additions for such
Plan Year with respect to defined contribution plans under
Code Section 415(c)(1)(A); and provided further that if two or
more Employees so own equal interests in the Employer, the
Employee having the greater Annual Compensation from the
Employer shall be treated as so owning a larger interest;
(3) A five percent (5%) or greater owner of an
Employer, as defined in Code Section 416(i)(B)(i); or
(4) A one percent (1%) or greater owner of an
Employer (as defined in Code Section 416(i)(B)(ii)) whose
Annual Compensation from an Employer is greater than One
Hundred Fifty Thousand Dollars ($150,000).
(e) "Non-Key Employee" shall mean an Employee who is not a Key
Employee, including an Employee who is a former Key Employee.
(f) "Valuation Date" shall mean (i) with respect to this Plan,
the last valuation date of a Plan Year containing the Determination
Date, which is the valuation date as of which the Actuary determines
the funding requirements for the Trust Fund in accordance with ERISA
and as provided in Section 11.3; (ii) with respect to any other defined
benefit plan included in the Aggregation Group, the valuation date
within the twelve (12) month period ending on the Determination Date as
of which the minimum funding standards are determined for such plan;
and (iii) with respect to a defined contribution plan included in the
Aggregation Group, the valuation date within the twelve (12) month
period ending on the Determination Date as of which the account
balances under such plan are determined.
16.2 Application of Top-Heavy Provisions. The provisions of this
Article XVI shall be applied as follows:
(a) Single Plan Determination. Unless this Plan is included in
an Aggregation Group, it will be considered top-heavy and the
provisions of this Article XVI shall be applicable, if, as of a
Determination Date, the cumulative Accrued Benefits of Key
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Employees under the Plan exceeds sixty percent (60%) of the cumulative
Accrued Benefits of all Employees under the Plan.
(b) Aggregation Group Determination. If the Plan is included
in an Aggregation Group, it will be considered top-heavy and the
provisions of this Article XVI shall be applicable, if as of a
Determination Date, the sum of account balances of Key Employees under
all defined contribution plans in the group and the cumulative accrued
benefits of Key Employees under all defined benefit plans in such group
exceed sixty percent (60%) of the same amounts determined for all
employees under all plans included in the Aggregation Group.
(c) Top-Heavy Test. For purposes of subsection (a) and (b)
above, accrued benefits and account balances shall be adjusted for any
distribution made in the five-year period ending on the Determination
Date, for any contribution due but unpaid as of the Determination Date
and for any contributions made after the most recent Valuation Date.
The value of cumulative accrued benefits and the value of account
balances shall be determined as of the most recent Valuation Date which
is within the twelve-month period ending on the Determination Date and
the accrued benefit of a current Employee shall be determined as if he
had incurred a Termination of Employment as of such Valuation Date. The
present value of accrued benefits shall be determined using the
actuarial assumptions set forth in Section 2.2, without regard to
whether such benefit is accrued under this Plan or any other defined
benefit plan included in the Aggregation Group. The accrued benefit and
account balance of a Participant who either (i) is not a Key Employee
in the determination year but was a Key Employee in a prior year, or
(ii) has not performed services for an Employer or an Affiliate during
the five-year period ending on the Determination Date, shall be
disregarded. The determination of top-heavy status, including the
extent to which contributions, distributions, rollovers and transfers
are taken into account shall be made in accordance with Code Section
416 and the Treasury Regulations issued thereunder. Solely for the
purpose of determining if this Plan, or any other plan included in a
required Aggregation Group of which this Plan is a part, is top-heavy
(within the meaning of Code Section 416(g)) the Accrued Benefit of a
Non-Key Employee shall be determined under (a) the method, if any, that
uniformly applies for accrual purposes under all plans maintained by
Affiliates, or (b) if there is no such method, as if such benefit
accrued not more rapidly than the slowest accrual rate permitted under
the fractional accrual rate of Code Section 411(b)(1)(C).
16.3 Top-Heavy Determination. The Administrative Committee shall
determine whether the Plan is a top-heavy plan with respect to each Plan Year.
The Administrative Committee's determination shall be final and binding on all
Participants.
16.4 Vesting Requirements. If the Plan is determined to be a top-heavy
plan with respect to a Plan Year, then a Participant's interest in his Accrued
Benefit shall vest in accordance with the following schedule:
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<TABLE>
<CAPTION>
Years of Vesting Service Vesting Percentage
------------------------ ------------------
<S> <C>
Less than 2 0%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
</TABLE>
If in a subsequent Plan Year, the Plan is no longer top-heavy, the
vesting provisions that were in effect prior to the time the Plan became
top-heavy shall be reinstated; provided, however, that any portion of a
Participant's Accrued Benefit which was vested prior to the time the Plan was no
longer top-heavy shall remain vested; and provided further that a Participant
who has at least three years of Vesting Service at the start of such Plan Year
shall have the option of remaining under the vesting schedule in effect while
the Plan was top-heavy. Notwithstanding the foregoing, this Article XVI does not
apply to the Accrued Benefit of any Participant who does not have an Hour of
Service after the Plan has initially become top-heavy.
16.5 Minimum Benefit.
(a) Minimum Accrual Formula. Subject to the provisions of
subsection (b) below, if the Plan is determined to be top-heavy with
respect to a Plan Year, then each Non-Key Employee who is a Participant
and who completed at least one thousand (1,000) Hours of Service during
such Plan Year shall accrue a benefit (expressed as a Single Life
Annuity commencing at age sixty-five (65)) which is not less than the
product of (1) and (2) below ("Minimum Accrual Amount"), where:
(1) is the number of Years of Service performed while
the Plan is a top-heavy plan; and
(2) is two percent (2%) of such Participant's average
annual Code Section 415 Compensation for the period of the
five (5) consecutive Plan Years during which the Plan is
top-heavy for which such Participant has the highest aggregate
of such compensation;
provided such product shall not exceed twenty percent (20%) of such
average Code Section 415 Compensation, and the Minimum Accrual Amount
shall be determined without regard to Social Security integration.
(b) Participation in Other Plans. If a Non-Key Employee who is
entitled to a Minimum Accrual Amount is a participant in both a defined
contribution plan and this Plan in a Plan Year in which this Plan is
top-heavy, such Non-Key Employee shall receive an allocation under such
defined contribution plan equal to five percent (5%) of his Code
Section 415 Compensation for such Plan Year; provided, however, if such
Non-Key Employee is a participant in more than one defined contribution
plan, such minimum
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<PAGE> 64
contribution allocation shall be provided under only one such defined
contribution plan as determined in accordance with the top-heavy
coordination provisions of such plans.
16.6 Adjustment in Maximum Limitation on Annual Benefits. For any Plan
Year with respect to which the Plan is top-heavy, the denominators of defined
benefit plan fraction and the defined contribution plan fraction described in
Section 6.5(g) shall be determined under Code Section 415(e) by multiplying the
dollar limitation then in effect by 1.0 instead of 1.25.
57
<PAGE> 65
ARTICLE XVII
Miscellaneous
17.1 Nonguarantee of Employment. Nothing contained in this Plan shall
be construed as a contract of employment between an Employer and any Employee,
or as a right of any Employee to be continued in the employment of an Employer,
or as a limitation of the right of an Employer to discharge any of its
Employees, with or without cause.
17.2 Rights to Trust Assets. No Participant shall have any right to, or
interest in, any assets of the Trust Fund upon his Termination of Employment or
otherwise, except as provided from time to time under this Plan, and then only
to the extent of the benefits payable to such Participant out of the assets of
the Trust Fund. Neither the Employers, the Trustee nor any member of any
Committee shall be liable to any Participant or beneficiary for benefits from
this Plan, except for those payable from the Trust Fund in accordance with the
terms of the Plan and the Trust.
17.3 Nonalienation of Benefits. Except as expressly provided for by
this Plan or otherwise permitted by law, benefits payable under this Plan shall
not be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, charge, garnishment, execution or levy of any
kind, either voluntary or involuntary, including any liability for alimony or
other payments for property settlement or support of a spouse, former spouse or
for any other relative of the Participant, but excluding devolution by death or
mental incompetency, prior to being received by the person entitled to the
benefit under the terms of the Plan; and any attempt to anticipate, alienate,
sell, transfer, assign, pledge, encumber, charge or otherwise dispose of any
right to benefits payable hereunder shall be void. The Trust Fund shall not in
any manner be liable for, or subject to, the debts, contracts, liabilities,
engagements or torts of any person entitled to benefits hereunder. None of the
unpaid Plan benefits or Trust assets shall be considered an asset of the
Participant in the event of his insolvency or bankruptcy. This Section 17.3
shall not bar any voluntary and revocable assignment to an Employer (or other
designated person) by a Participant which is permitted under Treasury Regulation
Section 1.401(a)-13, including any such assignment of a portion of any payment
that such Participant otherwise is entitled to receive under this Plan for the
purpose of paying part or all of the costs allocable to the Participant under a
retiree medical expense plan.
58
<PAGE> 66
ARTICLE XVIII
Procedure for Identification and Processing
of Qualified Domestic Relations Orders
18.1 Definitions. The capitalized terms used in this Procedure, unless
otherwise specifically defined below, shall have the same meaning as provided in
this Plan as amended from time to time.
(a) "Alternate Payee" shall mean any spouse, former spouse,
child or other dependent of a Participant who is recognized by a
Domestic Relations Order as having the right to receive all or any
portion of the benefits payable under the Plan with respect to such
Participant.
(b) "Domestic Relations Order" or "Order", used
interchangeably, shall mean any judgment, decree or order of a court of
competent jurisdiction, including approval of a property settlement
agreement, (i) that relates to the provision of child support, alimony
payments or marital property rights to a spouse, former spouse, child
or other dependent of a Participant, and (ii) that is made pursuant to
the domestic relations law of a state, including a community property
law.
(c) "Qualified Domestic Relations Order" shall mean a Domestic
Relations Order that meets all of the requirements specified in this
Procedure, and that creates or recognizes the existence of the right of
an Alternate Payee to receive, or assigns to an Alternate Payee the
right to receive, all or a portion of the benefits payable with respect
to a Participant under the Plan. The determination of the status of a
Domestic Relations Order shall at all times be made in accordance with
the provisions of any applicable regulations issued by the Secretary of
Labor or the Secretary of the Treasury. The Administrative Committee's
determination of the status of a Domestic Relations Order shall be
final and binding on all persons.
18.2 Status of Order.
The Administrative Committee shall recognize the Order as a
Qualified Domestic Relations Order if the Order satisfies all of the
following requirements:
(a) The Order discloses the name and last known
mailing address, if available, of the Participant and each
Alternate Payee covered by the Order; provided, however, that
an Order shall not fail to be a Qualified Domestic Relations
Order merely because the Order does not specify the address of
the Participant or an Alternate Payee, if the Administrative
Committee is otherwise aware of the address of such
Participant or Alternate Payee.
(b) The Order specifies the amount or the percentage
of the Participant's benefits to be paid to each Alternate
Payee.
59
<PAGE> 67
(c) The Order identifies the number of payments or
periods to which such Order applies.
(d) The Order contains information sufficient to
assure that the Order relates to the Plan.
(e) The Order does not require any type or form of
payment of benefits or any option that is not otherwise
provided under the Plan (nor require payment in the form of a
joint and survivor annuity with respect to the Alternate Payee
and any joint annuitant); provided, however, in the case of
any payment before distribution of a Participant's Accrued
Benefit has commenced, an Order shall not be treated as
failing to meet this requirement solely because such Order
requires the payment of benefits to an Alternate Payee in a
single-sum payment of the entire benefit of such Alternate
Payee.
(f) The Order does not affect any portion of the
Participant's Accrued Benefit which is not fully-vested nor
any death benefit which has not been awarded at the date of
the Order.
(g) The Order does not require the Plan to provide
increased benefits, as determined on the basis of actuarial
value.
(h) The Order provides that any income tax basis, if
any, attributable to a Participant's Accrued Benefit shall be
proportioned to the benefit awarded to the Alternate Payee in
the same percentage as such awarded benefit bears to such
Accrued Benefit as of the date such Accrued Benefit is
divided.
(i) The Order does not require the payment of
benefits to an Alternate Payee that are required to be paid to
another Alternate Payee under another Order previously
determined by the Administrative Committee to be a Qualified
Domestic Relations order.
18.3 Procedural Requirements.
(a) Copy of Order. Upon receipt by the Company of a certified
copy of a Domestic Relations Order, the Administrative Committee
promptly shall notify the Participant and any Alternate Payee that the
Administrative Committee has received such Order and the Administrative
Committee shall provide the Participant and each Alternative Payee with
a copy of this Procedure.
(b) Notification. Within a reasonable time after receipt by
the Administrative Committee of a Domestic Relations Order, or within
such time period as shall be established under any applicable
regulations issued by the Secretary of Labor or the Secretary of the
Treasury, the Administrative Committee shall determine whether the
Order is a Qualified Domestic Relations Order and shall notify the
Participant and each Alternate Payee of such
60
<PAGE> 68
determination. If the Administrative Committee determines that an Order
is not a Qualified Domestic Relations Order, such notice shall advise
the Alternate Payee that he or she may have a right to petition the
issuing court to amend the Order. Notifications shall be sent to the
addresses specified in the Domestic Relations Order, or if the Domestic
Relations Order does not specify addresses, to the last known address
of the Participant and the Alternate Payee.
18.4 Segregation of Assets and Payments. During the eighteen (18) month
period commencing thirty (30) days after a Domestic Relations Order has been
received by the Administrative Committee and before its status has been
determined, any amounts that would have been payable under the Plan to the
Alternate Payee pursuant to the Order during such period shall be segregated
under the Plan. If, within such eighteen-month period, the Order is determined
to be a Qualified Domestic Relations Order by the Administrative Committee, a
court of competent jurisdiction, or otherwise, the Administrative Committee
shall pay the segregated amounts to the persons entitled to receive them. If it
is determined that the Order is not a Qualified Domestic Relations Order or if
the issue cannot be resolved within such eighteen-month period, the
Administrative Committee shall cause the segregated to be paid to the person or
persons who would have been entitled to receive such amounts in the absence of
such Order. After a date as may be selected by the Administrative Committee,
amounts under this Plan payable to a Participant and/or Alternate Payee in
accordance with a Qualified Domestic Relations Order shall be reduced by any
out-of-pocket costs incurred by the Plan in connection with such segregation of
amounts distributable under the Plan and shall be further reduced by any
out-of-pocket costs incurred by the Plan to determine the status of an Order,
including court costs, reasonable attorneys fees and similar expenses. The
payment of any benefits from the Plan to a Participant or Alternate Payee
pursuant to a Qualified Domestic Relations Order shall be suspended during any
period during which the enforcement of such Order shall have been stayed by
court of competent jurisdiction, if written notice of such stay is delivered to
the Administrative Committee by a Participant or Alternate Payee.
18.5 Modification of Procedure. This Procedure may be modified from
time to time by the Administrative Committee in its discretion to conform with
applicable rules or regulations promulgated by the Secretary of Labor or
Secretary of the Treasury.
61
<PAGE> 69
ARTICLE XIX
Claims Procedure
19.1 Initial Claim for Benefits. Each Participant or Beneficiary must
submit his claim for benefits to the Administrative Committee (or to such other
person as may be designated by the Administrative Committee) in writing in such
form as is permitted by the Administrative Committee. A Participant shall have
no right to seek review of a denial of benefits, or to bring any action in any
court to enforce a claim for benefits, prior to his filing a claim for benefits
and exhausting his rights to review under Sections 19.1 and 19.2. When a claim
for benefits has been filed properly, such claim for benefits shall be evaluated
and the claimant shall be notified of the approval or the denial within ninety
(90) days after the receipt of such claim unless special circumstances require
an extension of time for processing the claim. If such an extension of time for
processing is required, written notice of the extension shall be furnished to
the claimant prior to the termination of the initial ninety (90) day period
which shall specify the special circumstances requiring an extension and the
date by which a final decision will be reached (which date shall not be later
than one hundred eighty (180) days after the date on which the claim was filed).
A claimant shall be given a written notice in which the claimant shall be
advised as to whether the claim is granted or denied, in whole or in part. If a
claim is denied, in whole or in part, the claimant shall be given written notice
which shall contain (1) the specific reasons for the denial, (2) references to
pertinent plan provisions upon which the denial is based, (3) a description of
any additional material or information necessary to perfect the claim and an
explanation of why such material or information is necessary, and (4) the
claimant's rights to seek review of the denial.
19.2 Review of Claim Denial. If a claim is denied, in whole or in part,
the claimant shall have the right to request that the Administrative Committee
review the denial, provided that the claimant files a written request for review
with the Administrative Committee within sixty (60) days after the date on which
the claimant received written notification of the denial. A claimant (or his
duly authorized representative) may review pertinent documents and submit issues
and comments in writing to the Administrative Committee. Within sixty (60) days
after a request for review is received, the review shall be made and the
claimant shall be advised in writing of the decision on review, unless special
circumstances require an extension of time for processing the review, in which
case the claimant shall be given a written notification within such initial
sixty (60) day period specifying the reasons for the extension and when such
review shall be completed (provided that such review shall be completed within
one hundred twenty (120) days after the date on which the request for review was
filed). The decision on review shall be forwarded to the claimant in writing and
shall include specific reasons for the decision and references to plan
provisions upon which the decision was based. A decision on review shall be made
by the Administrative Committee in its sole discretion and shall be final and
binding on all persons for all purposes. If a claimant shall fail to file a
request for review in accordance with the procedures herein outlined, such
claimant shall have no rights to review and shall have no right to bring action
in any court and the denial of the claim shall become final and binding on all
persons for all purposes.
62
<PAGE> 70
IN WITNESS WHEREOF, and as conclusive evidence of the adoption of the
foregoing instrument comprising the Wiltel Communications, LLC Pension Plan,
effective August 1, 1997, Wiltel Communications, LLC, as the Company, has caused
its corporate seal to be affixed hereto and these presents to be duly executed
in ______ counterpart originals in its name and behalf by its proper officers
thereunto authorized this ___ day of __________________ , 1997.
WILTEL COMMUNICATIONS, LLC
ATTEST:
By:
- ---------------------------------- ------------------------------------
Secretary
63
<PAGE> 1
EXHIBIT 12.1
WILLIAMS COMMUNICATIONS GROUP, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS EXCEPT RATIOS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, (UNAUDITED) YEAR ENDED DECEMBER 31,
--------------------- --------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
--------- --------- --------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Income (loss)
before income
taxes........... $(56,693) $(27,264) $(190,088) $(33,805) $(3,146) $ 6,763 $(9,829)
Add:
Interest
expenses-
net.......... 6,401 -- 3,075 933 17,367 13,999 7,405
Rental expense
representative
of interest
factor....... 16,900 7,382 44,590 28,120 18,786 1,784 1,230
Minority
interest
income of
consolidated
subsidiaries... (5,836) 1,460 (15,645) 13,506 -- -- --
Equity losses... 10,159 1,479 16,363 2,383 1,601 93 --
-------- -------- --------- -------- ------- ------- -------
Total
earnings
(loss)
as
adjusted
plus
fixed
charges... $(29,069) $(16,943) $(141,705) $ 11,137 $34,608 $22,639 $(1,194)
======== ======== ========= ======== ======= ======= =======
Combined fixed
charges:
Interest expense-
net............. 6,401 -- $ 3,075 $ 933 $17,367 $13,999 $ 7,405
Capitalized
interest........ 4,135 1,739 15,575 7,781 -- -- --
Rental expense
representative
of interest
factor.......... 16,900 7,382 44,590 28,120 18,786 1,784 1,230
-------- -------- --------- -------- ------- ------- -------
Total
fixed
charges... $ 27,436 $ 9,121 $ 63,240 $ 36,834 $36,153 $15,783 $ 8,635
======== ======== ========= ======== ======= ======= =======
Ratio of earnings to
fixed charges...... (a) (a) (a) (a) (a) 1.43 (a)
======== ======== ========= ======== ======= ======= =======
</TABLE>
- ---------------
(a) Earnings were inadequate to cover fixed charges by $56,505,000,
$26,064,000, $204,945,000, $25,697,000, $1,545,000 and $9,829,000 for the
three months ended March 31, 1999 and 1998 (unaudited) and the years ended
1998, 1997, 1996 and 1994, respectively.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Experts" and
"Selected Consolidated Financial and Operating Data" and to the use of our
report on the financial statements dated April 7, 1999, except for the matters
described in the third paragraph of Note 10 and Note 17, as to which the date is
May 27, 1999 and our report on the financial statement schedule dated May 27,
1999, in Amendment No. 1 to the Registration Statement on Form S-1 and related
prospectus of Williams Communications Group, Inc. for the registration of its
common stock.
ERNST & YOUNG LLP
Tulsa, Oklahoma
May 27, 1999
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report on the financial statements of ATL -- ALGAR TELECOM LESTE S.A. as of
December 31, 1998 and for the period from inception (March 26, 1998) through
December 31, 1998 (and to all references to our Firm) included in or made a part
of the amendment to the registration statement on Form S-1 of Williams
Communications Group, Inc.
/s/ ARTHUR ANDERSEN S/C
----------------------------------------
ARTHUR ANDERSEN S/C
Belo Horizonte, Brazil
May 26, 1999
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated March 26, 1999, in Amendment No. 1 to the
Registration Statement Form S-1 and related Prospectus of Williams
Communications Group, Inc. for the registration of its common stock.
/s/ DELOITTE & TOUCHE LLP
----------------------------------------
DELOITTE & TOUCHE LLP
Toronto, Ontario
May 26, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 96,847
<SECURITIES> 0
<RECEIVABLES> 546,226
<ALLOWANCES> 33,241
<INVENTORY> 73,609
<CURRENT-ASSETS> 959,499
<PP&E> 991,752
<DEPRECIATION> 210,428
<TOTAL-ASSETS> 2,868,859
<CURRENT-LIABILITIES> 458,052
<BONDS> 1,143,434
0
0
<COMMON> 1
<OTHER-SE> 1,030,011
<TOTAL-LIABILITY-AND-EQUITY> 2,868,859
<SALES> 0
<TOTAL-REVENUES> 492,002
<CGS> 0
<TOTAL-COSTS> 540,544
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 8,437
<INTEREST-EXPENSE> 10,536
<INCOME-PRETAX> (56,693)
<INCOME-TAX> 17,448
<INCOME-CONTINUING> (74,141)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (74,141)
<EPS-BASIC> (74,141.00)
<EPS-DILUTED> (74,141.00)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 386,293
<CGS> 0
<TOTAL-COSTS> 410,879
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,483
<INTEREST-EXPENSE> 1,739
<INCOME-PRETAX> (27,264)
<INCOME-TAX> (766)
<INCOME-CONTINUING> (26,498)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (26,498)
<EPS-BASIC> (26,498.00)
<EPS-DILUTED> (26,498.00)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 42,004
<SECURITIES> 0
<RECEIVABLES> 515,447
<ALLOWANCES> 23,576
<INVENTORY> 67,699
<CURRENT-ASSETS> 887,579
<PP&E> 875,694
<DEPRECIATION> 179,969
<TOTAL-ASSETS> 2,333,484
<CURRENT-LIABILITIES> 557,046
<BONDS> 623,730
0
0
<COMMON> 1
<OTHER-SE> 1,002,619
<TOTAL-LIABILITY-AND-EQUITY> 2,333,484
<SALES> 0
<TOTAL-REVENUES> 1,717,106
<CGS> 0
<TOTAL-COSTS> 1,900,282
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 21,591
<INTEREST-EXPENSE> 18,650
<INCOME-PRETAX> (190,088)
<INCOME-TAX> (5,097)
<INCOME-CONTINUING> (184,991)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (184,991)
<EPS-BASIC> (184,991.00)
<EPS-DILUTED> (184,991.00)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 11,290
<SECURITIES> 0
<RECEIVABLES> 303,887
<ALLOWANCES> 12,787
<INVENTORY> 63,484
<CURRENT-ASSETS> 560,179
<PP&E> 534,055
<DEPRECIATION> 126,403
<TOTAL-ASSETS> 1,506,034
<CURRENT-LIABILITIES> 409,214
<BONDS> 125,746
0
0
<COMMON> 1
<OTHER-SE> 862,701
<TOTAL-LIABILITY-AND-EQUITY> 1,506,034
<SALES> 0
<TOTAL-REVENUES> 1,426,130
<CGS> 0
<TOTAL-COSTS> 1,483,377
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 7,837
<INTEREST-EXPENSE> 8,714
<INCOME-PRETAX> (33,805)
<INCOME-TAX> 2,038
<INCOME-CONTINUING> (35,843)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (35,843)
<EPS-BASIC> (35,843.00)
<EPS-DILUTED> (35,843.00)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 703,586
<CGS> 0
<TOTAL-COSTS> 702,584
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,694
<INTEREST-EXPENSE> 17,367
<INCOME-PRETAX> (3,146)
<INCOME-TAX> 368
<INCOME-CONTINUING> (3,514)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,514)
<EPS-BASIC> (3,514.00)
<EPS-DILUTED> (3,514.00)
</TABLE>
