<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 2, 1999
REGISTRATION NO. 333-76007
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
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
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common stock, par value $0.01 per share..................... $750,000,000 $208,500(2)
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
EXPLANATORY NOTE
This Amendment No. 2 to the Registration Statement on Form S-1 (File No.
333-76007) of Williams Communications Group, Inc. (the "Registration
Statement"), initially filed with the Securities and Exchange Commission on
April 9, 1999, is being filed solely to include exhibits, portions of which have
been redacted pursuant to a request for confidential treatment.
<PAGE> 3
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.................................................. $4,000,000
==========
</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> 4
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> 5
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.(1)
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.(1)
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.(1)
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, and Side Letter dated March 30,
1999.(1)
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.(1)
10.11 Transport Services Agreement dated February 8, 1999, between
Southwestern Bell Communication Services, Inc. and Williams
Communications, Inc.(1)
10.12 Securities Purchase Agreement dated February 8, 1999,
between SBC Communications Inc. and Williams Communications
Group, Inc.+
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.+
</TABLE>
II-3
<PAGE> 6
<TABLE>
<C> <S>
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).(1)
10.19 UtiliCom Networks, Inc. Note and Warrant Purchase Agreement
dated December 15, 1998.*
10.20 Consolidated IRU Agreement by and among IXC Carrier, Inc.,
Vyvx, Inc. and The WilTech Group, dated December 9, 1998 and
Amendment No. 4, dated December 22, 1998.(1)
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.(1)
10.22 Preferred Stock Purchase by and among UniDial Holdings, Inc.
and Williams Communications, Inc., dated October 2, 1998.(1)
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.(1)
10.25 Capacity Purchase Agreement between Williams Communications,
Inc. and Intermedia Communications, Inc., dated January 5,
1998 and Amendment No. 1 dated August 5, 1998.(1)
10.26 Settlement and Release Agreement by and between WorldCom
Network Services, Inc. and Williams Communications, Inc.,
dated July 1, 1998.(1)
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 and Amendment
No. 1, dated June 14, 1999.(1)
10.29 Distributorship Agreement by and between Northern Telecom
Limited and WilTel Communications, L.L.C., dated January 1,
1998.(1)
</TABLE>
II-4
<PAGE> 7
<TABLE>
<C> <S>
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.(1)
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.(1)
10.34 Formation Agreement by and between Northern Telecom, Inc.
and Williams Communications Group, Inc., dated April 1,
1997.(1)
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. and
Vyvx, Inc. effective as of January 1, 1994.(1)
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.+
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 Communications 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.+
</TABLE>
II-5
<PAGE> 8
<TABLE>
<C> <S>
23.4 Consent of William G. von Glahn, Esq. (contained in opinion filed as Exhibit 5.1).*
23.5 Consent of Roy A. Wilkens.*
24 Power of Attorney.+
24.1 Power of Attorney of Michael P. Johnson, Sr. and Scott E. Schubert.
</TABLE>
- -------------------------
+ Previously filed.
* To be filed by amendment.
(1) Portions of this exhibit have been redacted pursuant to a request for
confidential treatment which is currently being reviewed by the Securities
and Exchange Commission.
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-6
<PAGE> 9
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 2 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Tulsa, Oklahoma on the 2nd day of July, 1999.
WILLIAMS COMMUNICATIONS GROUP, INC.
By: /s/ SHAWNA L. GEHRES
-------------------------------------
Shawna L. Gehres
Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the 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 July 2, 1999
------------------------------------------------ President (Principal Executive
Howard E. Janzen Officer)
/s/ * Chief Financial Officer (Principal July 2, 1999
------------------------------------------------ Accounting and Financial Officer)
Scott E. Schubert
/s/ * Director July 2, 1999
------------------------------------------------
Keith E. Bailey
/s/ * Director July 2, 1999
------------------------------------------------
John C. Bumgarner, Jr.
/s/ * Director July 2, 1999
------------------------------------------------
Brian E. O'Neill
/s/ * Director July 2, 1999
------------------------------------------------
James R. Herbster
/s/ * Director July 2, 1999
------------------------------------------------
Michael P. Johnson, Sr.
/s/ * Director July 2, 1999
------------------------------------------------
Steven J. Malcolm
/s/ * Director July 2, 1999
------------------------------------------------
Jack D. McCarthy
</TABLE>
* Pursuant to a power of attorney.
II-7
<PAGE> 10
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.(1)
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.(1)
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.(1)
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, and Side Letter dated March 30,
1999.(1)
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.(1)
10.11 Transport Services Agreement dated February 8, 1999, between
Southwestern Bell Communication Services, Inc. and Williams
Communications, Inc.(1)
10.12 Securities Purchase Agreement dated February 8, 1999,
between SBC Communications Inc. and Williams Communications
Group, Inc.+
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.+
</TABLE>
<PAGE> 11
<TABLE>
<C> <S>
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).(1)
10.19 UtiliCom Networks, Inc. Note and Warrant Purchase Agreement
dated December 15, 1998.*
10.20 Consolidated IRU Agreement by and among IXC Carrier, Inc.,
Vyvx, Inc. and The WilTech Group, dated December 9, 1998 and
Amendment No. 4, dated December 22, 1998.(1)
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.(1)
10.22 Preferred Stock Purchase by and among UniDial Holdings, Inc.
and Williams Communications, Inc., dated October 2, 1998.(1)
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.(1)
10.25 Capacity Purchase Agreement between Williams Communications,
Inc. and Intermedia Communications, Inc., dated January 5,
1998 and Amendment No. 1 dated August 5, 1998.(1)
10.26 Settlement and Release Agreement by and between WorldCom
Network Services, Inc. and Williams Communications, Inc.,
dated July 1, 1998.(1)
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 and Amendment
No. 1, dated June 14, 1999.(1)
10.29 Distributorship Agreement by and between Northern Telecom
Limited and WilTel Communications, L.L.C., dated January 1,
1998.(1)
</TABLE>
<PAGE> 12
<TABLE>
<C> <S>
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.(1)
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.(1)
10.34 Formation Agreement by and between Northern Telecom, Inc.
and Williams Communications Group, Inc., dated April 1,
1997.(1)
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. and
Vyvx, Inc. effective as of January 1, 1994.(1)
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.+
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 Communications 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.+
</TABLE>
<PAGE> 13
<TABLE>
<C> <S>
23.4 Consent of William G. von Glahn, Esq. (contained in opinion filed as Exhibit 5.1).*
23.5 Consent of Roy A. Wilkens.*
24 Power of Attorney.+
24.1 Power of Attorney of Michael P. Johnson, Sr. and Scott E. Schubert.
</TABLE>
- -------------------------
+ Previously filed.
* To be filed by amendment.
(1) Portions of this exhibit have been redacted pursuant to a request for
confidential treatment which is currently being reviewed by the Securities
and Exchange Commission.
<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 10.4
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;
-1-
<PAGE> 2
Proprietary and Confidential
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.
-2-
<PAGE> 3
Proprietary and Confidential
1.2. Strategic Supplier Relationship
Intel and Williams will make **** to find joint solutions for IDS'
telecommunications needs for US-based backbone, Internet connectivity
and International-based backbone. To facilitate the provision of
Williams' products and services and to further Williams understanding
of IDS data transport needs, Intel will ****. Additional teams or
committees will be formed as appropriate pursuant to the process set
forth in Section 10. Intel will assign an IDS Executive Sponsor to
Williams to assist Williams in its supplier relationship with IDS.
Intel would encourage Williams to put POPs into IDS data centers, where
possible and mutually agreeable.
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 "MFC
Pricing" with respect to any procurement under the Alliance Agreements.
"MFC Pricing" shall mean that the Procuring Party shall receive pricing
from the Supplying Party which is **** that price provided by the
Supplying Party to any third party for the service or product provided
**** Notwithstanding the foregoing, MFC Pricing shall not include any
pricing provided by the Supplying Party to ****. With regard to pricing
provided to ****, the Procuring Party shall receive pricing which is
**** that provided to **** as measured by the extent of the ****. In
either instance, the obligation to offer MFC Pricing
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
-3-
<PAGE> 4
Proprietary and Confidential
shall not apply to (i) any transaction where a substantial portion of the
consideration received by either Party for the offered product or service is in
the form of equity, products or services from a third party, (ii) rates
provided by Supplying Party to Affiliates of the Supplying Party or
intraWilliams or intraIntel transfer rates (except for such rates for services
that are resold to third parties),; or (iii) rates provided by the Supplying
Party to any department, branch or agency of a federal, state or local
government within the United States. For MFC Pricing exclusions regarding rates
provided by the Supplying Party to any foreign (i.e. Non-U.S.) government
entity, the Parties shall mutually agree on such exclusions on a case by case
basis.
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 the lowest price for which the Supplied
Party can acquire the product or service from third parties
with similar terms, conditions and product quality and/or
quality of service. The Procuring Party will discuss with the
Supplying Party any issues pertaining to the pricing of
products and services to be provided to the Procuring Party
compared to the market price for comparable products and
services, or third party offers otherwise available to the
Procuring Party 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 Williams shall no longer be bound to offer MFC Pricing
to IDS with respect to such resold SA Capacity. 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 shall no longer be bound to
offer MFC Pricing to Williams with respect to such SA Hosting
Service.
-4-
<PAGE> 5
Proprietary and Confidential
1.4. 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, each Party will develop a mechanism to ****
to the other the benefits of increased efficiencies (e.g., due to
technology development or regulatory evolution).
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, with a rolling
renewal provision for additional one (1) year terms, to be exercised
within thirty (30) days of the Effective Date anniversary each year
commencing with the completion of the first year of the initial term
and subject to good faith negotiations between the Parties.
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.
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
-5-
<PAGE> 6
Proprietary and Confidential
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.
-6-
<PAGE> 7
Proprietary and Confidential
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
-7-
<PAGE> 8
Proprietary and Confidential
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
-8-
<PAGE> 9
Proprietary and Confidential
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. No Solicitation
During the term of the Alliance 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, actively
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. Nothing
contained herein shall prevent an employee of one of the Parties from
independently seeking and obtaining employment from the other Party so
long as such employee does not do so in violation of his employment
agreement with the other Party.
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.
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
-9-
<PAGE> 10
Proprietary and Confidential
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.
-10-
<PAGE> 11
Proprietary and Confidential
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
-11-
<PAGE> 12
Proprietary and Confidential
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. SPECIAL COVENANT NOT TO SUE
11.1. Definitions
"Assert" means to bring an action of any nature before any legal, judicial,
arbitration, administrative, executive or other type of body or tribunal that
has or claims to have authority to adjudicate such action in whole or in part.
Examples of such body or tribunal include, without limitation, United States
State and Federal Courts, the United States International Trade Commission and
any foreign counterparts of any of the foregoing.
****
- -----------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
-12-
<PAGE> 13
Proprietary and Confidential
****
11.2. Covenant Not To Sue
Covenant Not to Sue. Williams agrees that for so long as Intel **** as defined
and specified in the Securities Purchase Agreement, Williams shall not Assert
any **** against Intel, its subsidiaries or affiliates, or their customers
(direct or indirect), distributors (direct or indirect), agents (direct or
indirect) and contractors (direct or indirect) for **** Intel does not Assert
**** against Williams, its subsidiaries or affiliates, or their customers
(direct or indirect), distributors (direct or indirect), agents (direct or
indirect) and contractors (direct or indirect) for ****. This covenant not to
sue shall survive any termination or expiration of this Agreement and shall
remain in full force and effect until mutually agreed otherwise by the Parties.
11.3. Assignment.
If Williams assigns or attempts to **** to a third party not bound by this
covenant not to sue (whether directly or by operation of law), then effective
immediately prior to such assignment or attempted assignment, Williams agrees
that Intel shall have ****. This **** shall survive any termination or
expiration of this Agreement and shall remain in full force and effect until
mutually agreed otherwise by the Parties.
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
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
-13-
<PAGE> 14
Proprietary and Confidential
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
-14-
<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 86,612 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 **** per rack space per
month, provided that the Definitive Agreement will provide for credits to
Williams that Williams may apply against the monthly charges for such
collocation services (the "Collocation Credits"). Each Collocation Credit may
be used to pay for one rack space and associated collocation services for one
month. MFN shall provide Williams a number of Collocation Credits equal to the
number of Collocation Credits provided by Williams to MFN in the Draft
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.
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.
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
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 86,612 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 **** per rack space per month, provided that the Definitive
Agreement will provide for credits to MFN that MFN may apply against the monthly
charges for such collocation services (the "Collocation Credits"). Each
Collocation Credit may be used to pay for one rack space and associated
collocation services for one month. Prior to execution of the Definitive
Agreement, MFN shall determine the number of racks it will need at each site
identified in Exhibit J. Williams shall provide MFN a number of Collocation
Credits sufficient to provide credits for all such racks from the Scheduled
Acceptance Date for each segment set forth in Exhibit D through **** MFN
shall be required to pay for such number of racks at each site identified in
Exhibit J (by means of Collocation Credits or otherwise) 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.
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
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
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
<PAGE> 2
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
<PAGE> 3
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
-2-
<PAGE> 4
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.
-3-
<PAGE> 5
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.
-4-
<PAGE> 6
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.
-5-
<PAGE> 7
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
-6-
<PAGE> 8
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.
-7-
<PAGE> 9
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.
-8-
<PAGE> 10
(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).
-9-
<PAGE> 11
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.
-10-
<PAGE> 12
(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
-11-
<PAGE> 13
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
-12-
<PAGE> 14
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.
-13-
<PAGE> 15
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.
-14-
<PAGE> 16
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
-15-
<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.
-16-
<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).
-17-
<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.
-18-
<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
-19-
<PAGE> 21
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.
-20-
<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
-21-
<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
-22-
<PAGE> 24
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:
-23-
<PAGE> 25
(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.
-24-
<PAGE> 26
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
-25-
<PAGE> 27
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
-26-
<PAGE> 28
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
-27-
<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
-28-
<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.
-29-
<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.
-30-
<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.
-31-
<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
****
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
33
<PAGE> 35
WILLIAMS INTERNATIONAL (CHILE) LIMITED
March 30, 1999
Metrogas S.A.
Avda. El Bosque Norte 0177, piso 15
Las Condes, Santiago
Chile
Attn: Mr. Juan Claro
Dear Juan:
Reference is made to the Shareholders' Agreement (the "Shareholders' Agreement")
dated the date hereof among Metrogas S.A. ("Metrogas"), Williams International
Telecom (Chile) Limited ("Williams") and Metrocom S.A. ("Metrocom") and to the
Warrant Agreement (the "Warrant Agreement") dated the date hereof among
Metrogas, Williams and Metrocom. Unless otherwise specified, terms defined in
the Shareholders' Agreement are used herein as therein defined.
Williams hereby waives certain influence and control-related rights granted by
the Shareholders', as set forth below, until such time as Williams elects to
subscribe to the Warrant Shares (as defined in the Warrant Agreement)(the
"Waiver Period").
Williams agrees to waive the following rights in the Shareholders' Agreement
during the Waiver Period:
(1) Section 4.1 (b) rights of Williams under Clauses (i), (ii), (iv), (v),
(vi), (vii), (viii), (x), (xiii) and (xiv).
(2) Section 4.2 (a) rights of Williams to (i) nominate and to instruct Metrogas
to nominate one director; and (ii) be deemed to have nominated two directors
for the purposes of Section 4.2(d).
(3) Section 4.2 (b) rights of Williams to nominate the Chairman of the Board of
Directors of Metrocom.
(4) Section 4.3 (b) rights of Williams to nominate senior officers and managers
of Metrocom.
<PAGE> 36
The waiver set forth above shall be effective during the Waiver Period, but
shall not be made by Williams to any other party during or after the Waiver
Period, in accordance with the terms of the Shareholders' Agreement.
The Shareholders' Agreement, Subscription Agreement, Technical Services
Agreement, CIPA and the Warrant Agreement or any other agreement or instrument
signed and entered into by the parties thereto are and shall continue in full
force and effect and are hereby in all respects ratified and confirmed. Except
as expressly set forth above with respect to the Shareholders' Agreement, this
letter shall not act as a waiver of any right, power or remedy of Williams
under the Shareholders' Agreement, the Warrant Agreement, Subscription
Agreement, Technical Services Agreement, CIPA, any other agreement or
instrument signed and entered into by the parties thereto or any other document
related thereto.
This letter of waiver shall be governed by and construed in accordance with the
laws of Chile. Any disputes arising hereunder or in connection herewith shall
be resolved in accordance with Section 15.12 of the Shareholders' Agreement.
Sincerely,
WILLIAMS INTERNATIONAL (CHILE) LIMITED
BY: /s/ CRAIG S. JONES
-----------------------
NAME: Craig S. Jones
Acknowledge and Accepted:
METROGAS S.A. METROCOM S.A.
BY: /s/ JUAN CLARO GONZALEZ BY: /s/ JORGE ROSENBLUT RATINOFF
--------------------------- -------------------------------
NAME: Juan Claro Gonzalez NAME: Jorge Rosenblut Ratinoff
<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>
-5-
<PAGE> 6
Proprietary and Confidential
<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>
-6-
<PAGE> 7
Proprietary and Confidential
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
-7-
<PAGE> 8
Proprietary and Confidential
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>
-8-
<PAGE> 9
Proprietary and Confidential
<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
-9-
<PAGE> 10
Proprietary and Confidential
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
-10-
<PAGE> 11
Proprietary and Confidential
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.
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
-11-
<PAGE> 12
Proprietary and Confidential
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
In no case shall Alliance Prices offered by the Supplying
Party be higher than the lowest rates the Supplying Party ****
a third party. 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
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
-12-
<PAGE> 13
Proprietary and Confidential
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.
-13-
<PAGE> 14
Proprietary and Confidential
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.
-14-
<PAGE> 15
Proprietary and Confidential
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.
-15-
<PAGE> 16
Proprietary and Confidential
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
-16-
<PAGE> 17
Proprietary and Confidential
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
-17-
<PAGE> 18
Proprietary and Confidential
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.
-18-
<PAGE> 19
Proprietary and Confidential
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.
-19-
<PAGE> 20
Proprietary and Confidential
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.
-20-
<PAGE> 21
Proprietary and Confidential
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, or (2) in the event that (i) the
Mandatory Project requires **** (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;
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
-21-
<PAGE> 22
Proprietary and Confidential
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
-22-
<PAGE> 23
Proprietary and Confidential
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.
-23-
<PAGE> 24
Proprietary and Confidential
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.
-24-
<PAGE> 25
Proprietary and Confidential
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
-25-
<PAGE> 26
Proprietary and Confidential
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.
-26-
<PAGE> 27
Proprietary and Confidential
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
-27-
<PAGE> 28
Proprietary and Confidential
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
-28-
<PAGE> 29
Proprietary and Confidential
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,
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
-29-
<PAGE> 30
Proprietary and Confidential
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:
-30-
<PAGE> 31
Proprietary and Confidential
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
-31-
<PAGE> 32
Proprietary and Confidential
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 at net book value
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.
-32-
<PAGE> 33
Proprietary and Confidential
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
-33-
<PAGE> 34
Proprietary and Confidential
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.
-36-
<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
-38-
<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.
-39-
<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/ /s/ KEITH E. BAILEY
- -------------------------------------- --------------------------------------
Signature of Authorized Representative Signature of Authorized Representative
KEITH E. BAILEY
- -------------------------------------- --------------------------------------
Printed Name Printed Name
- -------------------------------------- --------------------------------------
Title Title
-40-
<PAGE> 41
EXHIBIT A
[FLOWCHART DEPICTING TRANSPORT AND MIGRATION]
<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 Pricing Period using the
lowest of the Price Cap, **** or MFN Pricing Based upon actual data from the
Pricing Period.
"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
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
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.
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
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.
"Pass Through Basis" - means reimbursement of ****.
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
7
<PAGE> 8
"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 within 15 (fifteen) days of 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.
8
<PAGE> 9
"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.
9
<PAGE> 10
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
10
<PAGE> 11
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. Notwithstanding the
foregoing, SBCS 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 SBCS pursuant to this Agreement will be
materially adversely affected by Williams' decisions,
provided that SBCS's decision does not have a material
adverse effect on Williams, in accordance with the provision
of Section 3.8 of the Master Alliance Agreement.
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
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
11
<PAGE> 12
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 **** 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.
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
12
<PAGE> 13
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. Except as provided in Schedule F, the 1+ Switched
Voice Services will be available on a State by State basis in
States other than SBC's In-region States by no later than ****
and in SBC's In-region States when SBC's In-Region ILECs
receive 271 Approval in that State (but not before ****.
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 Remote Access to Switches. With respect to any On-Net
Transport Service which requires equipment not available in a
particular Williams POP (the "First POP"), Williams will provide
backhaul via On-Net Transport Service from the First POP to the nearest
Williams POP containing the needed equipment (the "Equipped POP"), at
**** Service beyond the Equipped POP is subject to the **** set forth
herein.
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
13
<PAGE> 14
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 Price Caps 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 Price Cap 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 Price Cap 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 Price Cap 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 Third
Parties or SCBS LEC Affiliates ****
3.2 Rate Adjustment. The Price Caps 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 six months 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
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
14
<PAGE> 15
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. No true-up shall apply for
the first six months following the Effective Date
of the Agreement.
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
and the Price Cap, 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, or the
Price Cap, whichever is lower, times the number of
units billed to SBCS during the month when such
difference exists. No true-up shall apply for the
first six months following the Effective Date of the
Agreement.
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 ****
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
15
<PAGE> 16
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.
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
16
<PAGE> 17
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
Payphone Charges, operator pass through, PIC, Universal Service,
database queries, local number portability, any other charges ancillary
to call set up completion or billing, or any other charges imposed or
hereafter established pursuant to the laws, policies or rules of any
governmental body.
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
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
17
<PAGE> 18
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 IRUs and other transport services 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 order to assure that SCBS
is in a position to provide such prompt and responsive service,
Williams hereby covenants and agrees that it will make available to
SCBS Service Intervals for On-Net Transport Services that are at least
equal, if not superior, to industry standards. 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
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
18
<PAGE> 19
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").
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
19
<PAGE> 20
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 fifteen (15) business days
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. These procedures shall continue to apply until SCBS
determines that the On-Net Service is not materially
non-compliant with the Technical Specifications. If SCBS fails
to give notice within such fifteen business day period that
the Service is materially non-compliant with the Technical
Specifications, SCBS shall be deemed to have accepted such
On-Net Service and Williams shall begin billing for the On-Net
Service as of the Actual Start Date.
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 five (5) business days 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
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
20
<PAGE> 21
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 Neither SBCS nor the affected SBCS End User
shall be required to pay recurring charges for such On-Net
Transport Service until the Actual Start Date.
5.9.2 SBCS shall receive a credit, if and to the
extent that the recurring charges for such On-Net Transport
Service were pre-paid, for failure to activate On-Net
Transport Service within a Service Interval established by
this Agreement, without prejudice to the remedy set forth
below.
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
21
<PAGE> 22
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.
****
<TABLE>
<S> <C>
****
</TABLE>
****
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
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
22
<PAGE> 23
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
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
23
<PAGE> 24
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 [sic] 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 ****.
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
24
<PAGE> 25
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
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
25
<PAGE> 26
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,
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
26
<PAGE> 27
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.
13. Application of Tariffs: Interstate Adjustment.
Intrastate Service will be provided pursuant to tariff where required.
In such event, an interstate adjustment may be applied based on intrastate
usage, which shall be subject to further definition in accordance with
Section 23. The interstate adjustment for a given month shall not exceed
interstate billing for such month.
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
27
<PAGE> 28
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,
28
<PAGE> 29
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.
29
<PAGE> 30
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
30
<PAGE> 31
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
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
31
<PAGE> 32
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)
32
<PAGE> 33
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 3.6 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.
****
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
33
<PAGE> 34
****
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:
China Cable POP Dates:
San Francisco POP - Ready for Testing - **** (200 Paul Street)
San Luis Obispo POP - Ready for Testing - ****
Seattle POP - Ready for Testing - ****
Los Angeles POP - Ready for Testing - ****
Boston POP - Ready for Testing - ****
Miami POP - Ready for Testing - ****
New York City POP - Ready for Testing - ****
Washington DC POP - Ready for Testing - ****
Bandon, Oregon POP - Ready for Testing - ****
For the purposes of this section, "Ready for Testing" means that (1)
all related power and environmentals required under this Agreement are
functional, (2)
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
34
<PAGE> 35
entrance facilities are in place and functional, and (3) connectivity
to the Williams Network is established.
Switch Service Dates:
Kansas City Switch - Ready for Call-Through Testing - ****
Houston Switch - Ready for Call-Through Testing - ****
San Francisco Switch - Ready for Call-Through Testing - ****
Anaheim Switch - Ready for Call-Through Testing - ****
27.2.2 If Williams fails to meet the China POP Dates, and the
shortening of the testing interval causes On-Net Service to fall below
the performance Technical Specifications of this Agreement for that
On-Net Service when the China Cable is ready for service for its
customers (the "In-Service Date"), now scheduled for ****, or if
Williams does not meet the Switch Service Dates, Executive Management
will be provided a briefing on the situation. If, **** after these
dates, Williams still does not have the specified switches Ready for
Testing or POPs ready for Call-Through Testing, SBCS will, from that
day forward, be provided a remedy of **** per day per POP or switch.
**** Furthermore, in the event Williams does not meet SBCS's in-service
date of **** for switched voice service, Williams will provide Service
via another carrier at the rates for On-Net Transport Service stated in
this Agreement.
27.2.3 If the SBCS In-Service date of the China Cable is delayed,
Williams obligation to meet the China Cable POP Dates will also be
adjusted by adding the corresponding number of days to the due date of
the China Cable POP Dates. If Williams fails to meet the Switch Service
Dates, and SBCS does not receive 271 Approval by ****, SBCS will
reimburse the remedies it received for the delays in meeting the
Call-Through-Testing Dates.
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.
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
35
<PAGE> 36
****
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
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
36
<PAGE> 37
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
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
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.
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
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)
<TABLE>
<CAPTION>
DS-1 DS-3 OC-3 OC-12 OC-48
- --------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
**** Billion Minutes/
Or up to **** VGE miles **** **** **** **** ****
- --------------------------------------------------------------------
****
Or **** VGE miles **** **** **** **** ****
- --------------------------------------------------------------------
****
Or **** VGE miles **** **** **** **** ****
- --------------------------------------------------------------------
**** +/
Or **** VGE miles + **** **** **** **** ****
- --------------------------------------------------------------------
</TABLE>
****
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
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 Recurring Non-Recurring
<S> <C> <C>
DS-1 **** ****
DS-3 **** ****
OC-3 **** ****
OC-12 **** ****
OC-48 **** ****
</TABLE>
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
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
<TABLE>
<S> <C> <C> <C>
VGE VGH Miles (Millions/Mo) **** **** ****
Voice Minutes (Billions/Mo) **** **** ****
% Discount kbps **** **** ****
64 **** **** ****
128 **** **** ****
192 **** **** ****
256 **** **** ****
320 **** **** ****
384 **** **** ****
448 **** **** ****
512 **** **** ****
576 **** **** ****
690 **** **** ****
704 **** **** ****
768 **** **** ****
1024 **** **** ****
1536 **** **** ****
D53 **** **** ****
</TABLE>
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
4
<PAGE> 46
PVC Charges (Simplex)-MRC
SBC Frame Relay Price Caps
<TABLE>
<S> <C> <C> <C>
VGE VGH Miles (Millions/Mo) **** **** ****
Voice Minutes (Billions/Mo) **** **** ****
% Discount **** **** ****
CIR for Simplex PVC in kbps Price per simplex PVC
4 **** **** ****
8 **** **** ****
16 **** **** ****
32 **** **** ****
48 **** **** ****
64 **** **** ****
128 **** **** ****
192 **** **** ****
256 **** **** ****
320 **** **** ****
384 **** **** ****
448 **** **** ****
512 **** **** ****
576 **** **** ****
640 **** **** ****
704 **** **** ****
768 **** **** ****
832 **** **** ****
896 **** **** ****
960 **** **** ****
1024 **** **** ****
2 Mbps & (price per meg) **** **** ****
</TABLE>
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
5
<PAGE> 47
SBC FRAME RELAY
UNI (RESELLER) PRICE CAPS
II. Port Charges - MRC
SEC FRAME RELAY PRICE CAPS
<TABLE>
<S> <C> <C> <C> <C>
VGE VGH Miles (Millions/Mo) **** **** **** ****
Voice Minutes (Billions/Mo) **** **** **** ****
% Discount **** **** **** ****
64 **** **** **** ****
128 **** **** **** ****
192 **** **** **** ****
256 **** **** **** ****
320 **** **** **** ****
384 **** **** **** ****
448 **** **** **** ****
512 **** **** **** ****
576 **** **** **** ****
690 **** **** **** ****
704 **** **** **** ****
768 **** **** **** ****
1024 **** **** **** ****
1536 **** **** **** ****
</TABLE>
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
6
<PAGE> 48
PVC Charges (Simplex) - MRC
SBC Frame Relay Price Caps
<TABLE>
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
VGE VGW Miles (Millions/Mo) **** **** **** ****
- --------------------------------------------------------------------------------
Voice Minutes (Billions/Mo) **** **** **** ****
- --------------------------------------------------------------------------------
% Discount **** **** **** ****
- --------------------------------------------------------------------------------
CIR for Simplex PVC in kbps Price per simplex PVC
- --------------------------------------------------------------------------------
4 **** **** **** ****
- --------------------------------------------------------------------------------
8 **** **** **** ****
- --------------------------------------------------------------------------------
16 **** **** **** ****
- --------------------------------------------------------------------------------
32 **** **** **** ****
- --------------------------------------------------------------------------------
64 **** **** **** ****
- --------------------------------------------------------------------------------
128 **** **** **** ****
- --------------------------------------------------------------------------------
192 **** **** **** ****
- --------------------------------------------------------------------------------
256 **** **** **** ****
- --------------------------------------------------------------------------------
320 **** **** **** ****
- --------------------------------------------------------------------------------
384 **** **** **** ****
- --------------------------------------------------------------------------------
448 **** **** **** ****
- --------------------------------------------------------------------------------
512 **** **** **** ****
- --------------------------------------------------------------------------------
576 **** **** **** ****
- --------------------------------------------------------------------------------
640 **** **** **** ****
- --------------------------------------------------------------------------------
704 **** **** **** ****
- --------------------------------------------------------------------------------
768 **** **** **** ****
- --------------------------------------------------------------------------------
832 **** **** **** ****
- --------------------------------------------------------------------------------
896 **** **** **** ****
- --------------------------------------------------------------------------------
960 **** **** **** ****
- --------------------------------------------------------------------------------
1024 **** **** **** ****
- --------------------------------------------------------------------------------
</TABLE>
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
7
<PAGE> 49
TSA Schedules 02-04-99 A, B, C, D, E, G, H, I, J, L, M
<TABLE>
<CAPTION>
---------------------------------------------------
FRAME RELAY NRC AND ANCILLARY CHARGES CAP
---------------------------------------------------
<S> <C>
Configuration Changes ****
---------------------------------------------------
Cancellation ****
---------------------------------------------------
Per PVC Order Change ****
---------------------------------------------------
Per Port Order Change ****
---------------------------------------------------
Per Port Install ****
---------------------------------------------------
Per PVC Install ****
---------------------------------------------------
Per Order Expedite ****
---------------------------------------------------
</TABLE>
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.
<TABLE>
<CAPTION>
---------------------------------------------------
TIME-OF-DAY/DAY-OF-WEEK FLEX-CIR
PVC CHARGES
---------------------------------------------------
DESCRIPTION NRC (per PVC) MRC (per PVC)
<S> <C> <C>
---------------------------------------------------
Basic PVC Charge
(Based on weighted
average of CIRs) **** ****
---------------------------------------------------
TOD Configuration
Charge (2 CIR
adjustments per day) **** ****
---------------------------------------------------
DOW Configuration
Charge (2 CIR
adjustments per wk.) **** ****
---------------------------------------------------
Each additional CIR
adjustment per period
(Per day or per week) **** ****
---------------------------------------------------
</TABLE>
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
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
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.
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
9
<PAGE> 51
TSA Schedules 02-04-99 A, B, C, D, E, G, H, I, J, L, M
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.
<TABLE>
<CAPTION>
- -------------------------------------------------------
MONTHLY RECURRING CHARGES
- -------------------------------------------------------
UNI PORT CIR CoS PRICE PER
(Mbps) MEG PER
PVC
- -------------------------------------------------------
<S> <C> <C> <C>
DS-3 1-9 VBRnrt ****
- -------------------------------------------------------
DS-3 10-19 VBRnrt ****
- -------------------------------------------------------
DS-3 20-29 VBRnrt ****
- -------------------------------------------------------
DS-3 30-40 VBRnrt ****
- -------------------------------------------------------
- -------------------------------------------------------
OC3 5-20 VBRnrt ****
- -------------------------------------------------------
OC3 25-35 VBRnrt ****
- -------------------------------------------------------
OC3 40-55 VBRnrt ****
- -------------------------------------------------------
OC3 60-75 VBRnrt ****
- -------------------------------------------------------
OC3 80-95 VBRnrt ****
- -------------------------------------------------------
OC3 100-120 VBRnrt ****
- -------------------------------------------------------
OC3 125-150 VBRnrt ****
- -------------------------------------------------------
- -------------------------------------------------------
OC12 25-75 VBRnrt ****
- -------------------------------------------------------
OC12 100-175 VBRnrt ****
- -------------------------------------------------------
OC12 200-275 VBRnrt ****
- -------------------------------------------------------
OC12 300-350 VBRnrt ****
- -------------------------------------------------------
</TABLE>
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
10
<PAGE> 52
TSA Schedules 02-04-99 A, B, C, D, E, G, H, I, J, L, M
<TABLE>
- -----------------------------------------------------------------
<S> <C> <C> <C>
OC12 375-475 VBRnrt ****
- -----------------------------------------------------------------
OC12 500-600 VBRnrt ****
- -----------------------------------------------------------------
- -----------------------------------------------------------------
DS-3 1-9 CBR ****
- -----------------------------------------------------------------
DS-3 10-19 CBR ****
- -----------------------------------------------------------------
DS-3 20-29 CBR ****
- -----------------------------------------------------------------
DS-3 30-40 CBR ****
- -----------------------------------------------------------------
OC3 5-20 CBR ****
- -----------------------------------------------------------------
OC3 25-35 CBR ****
- -----------------------------------------------------------------
OC3 40-55 CBR ****
- -----------------------------------------------------------------
OC3 60-75 CBR ****
- -----------------------------------------------------------------
OC3 80-95 CBR ****
- -----------------------------------------------------------------
OC3 100-120 CBR ****
- -----------------------------------------------------------------
OC3 125-150 CBR ****
- -----------------------------------------------------------------
- -----------------------------------------------------------------
OC12 25-75 CBR ****
- -----------------------------------------------------------------
OC12 100-175 CBR ****
- -----------------------------------------------------------------
OC12 200-275 CBR ****
- -----------------------------------------------------------------
OC12 300-350 CBR ****
- -----------------------------------------------------------------
OC12 375-475 CBR ****
- -----------------------------------------------------------------
OC12 500-600 CBR ****
- -----------------------------------------------------------------
- -----------------------------------------------------------------
UNI/NNI PORT UNI/NNI
PORT
PRICE
- -----------------------------------------------------------------
DS3 ****
- -----------------------------------------------------------------
OC3 ****
- -----------------------------------------------------------------
OC12 ****
- -----------------------------------------------------------------
</TABLE>
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
11
<PAGE> 53
TSA Schedules 02-04-99 A, B, C, D, E, G, H, I, J, L, M
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.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
MONTHLY RECURRING CHARGES
- ------------------------------------------------------------------------------
PRICE PER
CIR MEG PER
UNI PORT (MBPS) CoS PVC
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
DS-3 1-9 VBRnrt $ ****
- ------------------------------------------------------------------------------
DS-3 10-19 VBRnrt $ ****
- ------------------------------------------------------------------------------
DS-3 20-29 VBRnrt $ ****
- ------------------------------------------------------------------------------
DS-3 30-40 VBRnrt $ ****
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
OC3 5-20 VBRnrt $ ****
- ------------------------------------------------------------------------------
OC3 25-35 VBRnrt $ ****
- ------------------------------------------------------------------------------
OC3 40-55 VBRnrt $ ****
- ------------------------------------------------------------------------------
OC3 60-75 VBRnrt $ ****
- ------------------------------------------------------------------------------
OC3 80-95 VBRnrt $ ****
- ------------------------------------------------------------------------------
OC3 100-120 VBRnrt $ ****
- ------------------------------------------------------------------------------
OC3 125-150 VBRnrt $ ****
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
OC12 20-75 VBRnrt $ ****
- ------------------------------------------------------------------------------
OC12 100-175 VBRnrt $ ****
- ------------------------------------------------------------------------------
OC12 200-275 VBRnrt $ ****
- ------------------------------------------------------------------------------
OC12 300-350 VBRnrt $ ****
- ------------------------------------------------------------------------------
OC12 375-475 VBRnrt $ ****
- ------------------------------------------------------------------------------
OC12 500-600 VBRnrt $ ****
- ------------------------------------------------------------------------------
</TABLE>
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
12
<PAGE> 54
TSA Schedules 02-04-99 A, B, C, D, E, G, H, I, J, L, M
<TABLE>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
DS-3 1-9 CBR $ ****
- ------------------------------------------------------------------------------
DS-3 10-19 CBR $ ****
- ------------------------------------------------------------------------------
DS-3 20-29 CBR $ ****
- ------------------------------------------------------------------------------
DS-3 30-40 CBR $ ****
- ------------------------------------------------------------------------------
OC3 5-20 CBR $ ****
- ------------------------------------------------------------------------------
OC3 25-35 CBR $ ****
- ------------------------------------------------------------------------------
OC3 40-55 CBR $ ****
- ------------------------------------------------------------------------------
OC3 60-75 CBR $ ****
- ------------------------------------------------------------------------------
OC3 80-95 CBR $ ****
- ------------------------------------------------------------------------------
OC3 100-120 CBR $ ****
- ------------------------------------------------------------------------------
OC3 125-150 CBR $ ****
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
OC12 25-75 CBR $ ****
- ------------------------------------------------------------------------------
OC12 100-175 CBR $ ****
- ------------------------------------------------------------------------------
OC12 200-275 CBR $ ****
- ------------------------------------------------------------------------------
OC12 300-350 CBR $ ****
- ------------------------------------------------------------------------------
OC12 375-475 CBR $ ****
- ------------------------------------------------------------------------------
OC12 500-600 CBR $ ****
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
UNI/NNI UNI/NNI
PORT PORT PRICE
- ------------------------------------------------------------------------------
DS3 $ ****
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
OC3 $ ****
- ------------------------------------------------------------------------------
OC12 $ ****
- ------------------------------------------------------------------------------
</TABLE>
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
13
<PAGE> 55
TSA Schedules 02-04-99 A, B, C, D, E, G, H, I, J, L, M
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
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
MONTHLY RECURRING CHARGES
- ------------------------------------------------------------------------------
PRICE PER
MEG PER
UNI PORT CIR (MBPS) CoS PVC
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
DS-3 1-9 VBRnrt $ ****
- ------------------------------------------------------------------------------
DS-3 10-19 VBRnrt $ ****
- ------------------------------------------------------------------------------
DS-3 20-29 VBRnrt $ ****
- ------------------------------------------------------------------------------
DS-3 30-40 VBRnrt $ ****
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
OC3 5-20 VBRnrt $ ****
- ------------------------------------------------------------------------------
OC3 25-35 VBRnrt $ ****
- ------------------------------------------------------------------------------
OC3 40-55 VBRnrt $ ****
- ------------------------------------------------------------------------------
OC3 60-75 VBRnrt $ ****
- ------------------------------------------------------------------------------
OC3 80-95 VBRnrt $ ****
- ------------------------------------------------------------------------------
OC3 100-120 VBRnrt $ ****
- ------------------------------------------------------------------------------
OC3 125-150 VBRnrt $ ****
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
OC12 20-75 VBRnrt $ ****
- ------------------------------------------------------------------------------
OC12 100-175 VBRnrt $ ****
- ------------------------------------------------------------------------------
OC12 200-275 VBRnrt $ ****
- ------------------------------------------------------------------------------
OC12 300-350 VBRnrt $ ****
- ------------------------------------------------------------------------------
OC12 375-475 VBRnrt $ ****
- ------------------------------------------------------------------------------
OC12 500-600 VBRnrt $ ****
- ------------------------------------------------------------------------------
</TABLE>
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
14
<PAGE> 56
<TABLE>
<S> <C> <C> <C>
----------------------------------------------
DS-3 1-9 CBR ****
----------------------------------------------
DS-3 10-19 CBR ****
----------------------------------------------
DS-3 20-29 CBR ****
----------------------------------------------
DS-3 30-40 CBR ****
----------------------------------------------
OC3 5-20 CBR ****
----------------------------------------------
OC3 25-35 CBR ****
----------------------------------------------
OC3 40-55 CBR ****
----------------------------------------------
OC3 60-75 CBR ****
----------------------------------------------
OC3 80-95 CBR ****
----------------------------------------------
OC3 100-120 CBR ****
----------------------------------------------
OC3 125-150 CBR ****
----------------------------------------------
----------------------------------------------
OC12 25-75 CBR ****
----------------------------------------------
OC12 100-175 CBR ****
----------------------------------------------
OC12 200-275 CBR ****
----------------------------------------------
OC12 300-350 CBR ****
----------------------------------------------
OC12 375-475 CBR ****
----------------------------------------------
OC12 500-600 CBR ****
----------------------------------------------
----------------------------------------------
UNI/NNI Port UNI/NNI Port
Price
----------------------------------------------
DS3 ****
----------------------------------------------
OC3 ****
----------------------------------------------
OC12 ****
----------------------------------------------
</TABLE>
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
15
<PAGE> 57
TSA Schedules 02-04-99 A, B, C, D, E, G, H, I, J, L, M
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.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
MONTHLY RECURRING CHARGES
- ------------------------------------------------------------------------------
UNI PORT CIR (MBPS) CoS PRICE PER MEG
PER PVC
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
DS-3 1-9 VBRnrt ****
- ------------------------------------------------------------------------------
DS-3 10-19 VBRnrt ****
- ------------------------------------------------------------------------------
DS-3 20-29 VBRnrt ****
- ------------------------------------------------------------------------------
DS-3 30-40 VBRnrt ****
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
OC3 5-20 VBRnrt ****
- ------------------------------------------------------------------------------
OC3 25-35 VBRnrt ****
- ------------------------------------------------------------------------------
OC3 40-55 VBRnrt ****
- ------------------------------------------------------------------------------
OC3 60-75 VBRnrt ****
- ------------------------------------------------------------------------------
OC3 80-95 VBRnrt ****
- ------------------------------------------------------------------------------
OC3 100-120 VBRnrt ****
- ------------------------------------------------------------------------------
OC3 125-150 VBRnrt ****
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
OC12 20-75 VBRnrt ****
- ------------------------------------------------------------------------------
OC12 100-175 VBRnrt ****
- ------------------------------------------------------------------------------
OC12 200-275 VBRnrt ****
- ------------------------------------------------------------------------------
OC12 300-350 VBRnrt ****
- ------------------------------------------------------------------------------
OC12 375-475 VBRnrt ****
- ------------------------------------------------------------------------------
OC12 500-600 VBRnrt ****
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
DS-3 1-9 CBR ****
- ------------------------------------------------------------------------------
DS-3 10-19 CBR ****
- ------------------------------------------------------------------------------
DS-3 20-29 CBR ****
- ------------------------------------------------------------------------------
</TABLE>
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
16
<PAGE> 58
TSA Schedules 02-04-99 A, B, C, D, E, G, H, I, J, L, M
<TABLE>
- --------------------------------------------------------------
<S> <C> <C> <C>
DS-3 30-40 CBR ****
- --------------------------------------------------------------
OC3 5-20 CBR ****
- --------------------------------------------------------------
OC3 25-35 CBR ****
- --------------------------------------------------------------
OC3 40-55 CBR ****
- --------------------------------------------------------------
OC3 60-75 CBR ****
- --------------------------------------------------------------
OC3 80-95 CBR ****
- --------------------------------------------------------------
OC3 100-120 CBR ****
- --------------------------------------------------------------
OC3 125-150 CBR ****
- --------------------------------------------------------------
- --------------------------------------------------------------
OC12 25-75 CBR ****
- --------------------------------------------------------------
OC12 100-175 CBR ****
- --------------------------------------------------------------
OC12 200-275 CBR ****
- --------------------------------------------------------------
OC12 300-350 CBR ****
- --------------------------------------------------------------
OC12 375-475 CBR ****
- --------------------------------------------------------------
OC12 500-600 CBR ****
- --------------------------------------------------------------
- --------------------------------------------------------------
UNI/NNI PORT UNI/NNI
PORT PRICE
- --------------------------------------------------------------
DS3 ****
- --------------------------------------------------------------
OC3 ****
- --------------------------------------------------------------
OC12 ****
- --------------------------------------------------------------
</TABLE>
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
17
<PAGE> 59
TSA Schedules 02-04-99 A, B, C, D, E, F, G, H, I, J, L, M
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.
<TABLE>
<CAPTION>
- ------------------------------------------------------
NON RECURRING ON-NET ANCILLARY PRICE
- -------------------------------------------------------
DESCRIPTION OF CHARGE CHARGES
- -------------------------------------------------------
<S> <C>
Installation
- -------------------------------------------------------
45Mb Port ****
- -------------------------------------------------------
155Mb Port ****
- -------------------------------------------------------
622Mb Port ****
- -------------------------------------------------------
per VCC and VPC ****
- -------------------------------------------------------
- -------------------------------------------------------
ANCILLARY
- -------------------------------------------------------
Configuration Changes ****
- -------------------------------------------------------
Cancellation ****
- -------------------------------------------------------
PVC Order Change ****
- -------------------------------------------------------
Port Order Change ****
- -------------------------------------------------------
- -------------------------------------------------------
Per order expedite ****
- -------------------------------------------------------
</TABLE>
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.
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
18
<PAGE> 60
TSA Schedules 02-04-99 A, B, C, D, E, G, H, I, J, L, M
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
COLLOCATION PRICING SCHEDULE
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Service Fee
(MRC)
- -----------------------------------------------------------------------------------------------
PRICE
CALCULATION
- -----------------------------------------------------------------------------------------------
<S> <C>
Rack ****
- -----------------------------------------------------------------------------------------------
Real Estate Lease per sq ft ****
- -----------------------------------------------------------------------------------------------
Maintenance per sq ft ****
- -----------------------------------------------------------------------------------------------
Price per DC Amp ****
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Assumes typical rack requires 15 sq ft and 60 amps plus maintenance
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Installation Fee
(NRC)
- -----------------------------------------------------------------------------------------------
PRICE
- -----------------------------------------------------------------------------------------------
Substructure per sq ft ****
- -----------------------------------------------------------------------------------------------
Infrastructure per sq ft ****
- -----------------------------------------------------------------------------------------------
DC Power per Amp ****
- -----------------------------------------------------------------------------------------------
</TABLE>
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
19
<PAGE> 61
TSA SCHEDULES 02-04-99 A, B, C, D, E, G, H, I, J, L, M
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
CURRENT
COLLOCATION PRICE ESTIMATES BY LOCATION FOR SPACE
- ------------------------------------------------------------------------------
Location Square Feet In Service date Rental $/sq.ft
<S> <C> <C> <C>
Albany, NY 3000 ****
Atlanta 10000 ****
Baltimore 10000 3/1/99 ****
Birmingham 3408 ****
Boston 2469 4/1/99 ****
Buffalo 5000 1/30/99 ****
Chicago 5000 ****
Cincinnati 10000 7/1/99 ****
Cleveland 2862 ****
Dallas 5153 ****
Denver 4805 ****
Detroit 20000 5/1/99 ****
Greensboro 5394 ****
Hartford ? ****
Houston 5000 ****
Kansas City 7693 ****
Las Vegas 2525 ****
Lexington ? ****
Los Angeles 5000 ****
Memphis ? ****
Miami 10000 3/15/99 ****
Minneapolis 10000 1/31/99 ****
Nashville ? ****
New Orleans 5000 ****
New York 5823 ****
Norfork ? ****
Orlando 10000 3/15/99 ****
Philadelphia 3800 ****
Phoenix 10000 3/15/99 ****
Pittsburg ? ****
Portland 5000 ****
Providence ? ****
Rochester 5000 2/2/99 ****
Salt Lake City 10000 5/15/99 ****
San Diego 3861 1/15/99 ****
San Francisco 10000 9/1/99 ****
- ------------------------------------------------------------------------------
</TABLE>
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
20
<PAGE> 62
TSA Schedules 02-04-99 A, B, C, D, E, G, H, I, J, L, M
<TABLE>
- -----------------------------------------------------------------
<S> <C> <C> <C>
Seattle 10000 4/1/99 ****
Tampa 10000 4/20/99 ****
Washington, DC 5279
- -----------------------------------------------------------------
</TABLE>
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.
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
21
<PAGE> 63
Fixed Voice Transport Price Caps
<TABLE>
<CAPTION>
MONTHLY MINUTES (BILLION) RATE PER MINUTE
- ------------------------- ---------------
<S> <C>
Start
**** ****
</TABLE>
Billings in minimum one second increments.
SBCS shall pay **** any PIC processing fees charged by Local Exchange carriers.
****
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
22
<PAGE> 64
TSA Schedules 02-04-99 A, B, C, D, E, G, H, I, J, L, M
SCHEDULE A-2
WILLIAMS NETWORK VOICE SERVICES FEATURES
1+ Voice Services Additional Features
1.1. CIP will be used for the following functions:
1.1.1. Assignment of usage to SBCS
1.1.2. ****
1.1.3. Routing of call for least cost termination
1.1.4. Blocking of SBCS Casual Calls (non-SBCS PIC'd customers) and other
selected calls based on CIC and dialed number
1.2. For usage processing, Williams will collect all necessary Call Detail
Records (CDRs) from its DMS250s via a billing server arrangement, and make
Operational Measure (OM) available near real-time, and that Williams will
assign all appropriate CDRs to SBCS and send them at pre-negotiated
intervals. SBCS may require both billable as well as un-billable (e.g.,
call attempts) CDRs to be sent separately.
1.3. For assignment of usage, Williams will adhere to the following approach:
1.3.1. When CIP is passed to Williams on the call set-up, Williams will use
the CIC to assign the call to SBCS.
1.3.2. When CIP is not available, Williams will associate the originating
ANI on the call with an ANI that SBCS has previously sent to
Williams.
1.4. For branding purposes, Williams will adhere to the following approach:
1.4.1. Williams will send all available CIP information to the OS, Card, DA,
and Toll Free platforms to facilitate branding
1.4.2. ****
1.5. SBCS requires Williams to provide PIC Verification service branded with the
appropriate SBCS brand (e.g., Pacfici Bell, Southwestern Bell Telephone or
Nevada Bell). When two brands are supported by one CIC, branding to be
provided by combination of CIC and ANI.
****
1.7. Williams will be responsible for engineering, provisioning and maintaining
all access trunking facilities
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
23
<PAGE> 65
TSA Schedules 02-04-99 A, B, C, D, E, G, H, I, J, L, M
1.8. Split PIC - Williams will support PIC1 and PIC2 customers. Where the
customer is not PICd to the same company for PIC1 and PIC2 and both
companies resell through Williams, Williams will provide separate
usage based on the appropriate CIC and send the usage in standard
Bellcore EMI format to SBCS specified billing Interface. For End
Offices and Tandems that do not support CIP, special requirements the
Parties will adopt mutually agreed-upon in accordance with the
procedures of Section 23 of the Agreement to ensure that special
branding and feature functionality (e.g., account codes, pin digits,
blocking, etc.) so that proper billing can be supported.
1.9 In addition to the above switch features, Williams will provide the
following within the DMS-250 switch network:
1.9.1. Multiple IEC Dialing Plans
1.9.2. Reset/Reorgination
1.9.3. IEC Trunking (FG C, D, DAL, IMT) If SBCS uses FGC, it will
fully reimburse Williams for all LEC charges at the price
charges by the LEC. SBCS will provide Williams with the
exchanges in which Feature Group C is required and the volumes
required.
1.9.4. MF, DTMF, DP, ISDN Signaling
1.9.5. Call Screening/Validation
1.9.6. Routing by ANI, IntraLATA, Intrastate, and time of day
1.9.7. Authcode, Account code, and PIN
1.9.8. Class of Service (based upon ANI, Authcode or trunk group)
1.9.9. Alternate Routing
1.9.10. Call Detail Record Search off of billing records
1.9.11. X.25 and/or Ethernet file transfer
1.9.12. IDDD
1.9.13. ISDN Primary Rate Interface (PRI)
1.9.14. CCS7 Trunking (FGD, IMT)
1.9.15. Switched 56 Kbps
1.9.16. Full 10-digit routing
1.9.17. Release Link Trunking (CCS7)
1.9.18. Local Number Portability
1.9.19. Dialable Wideband Service
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
99.999% availability, with a 10-year mean-time-between-failure rate and a
10-13-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
TSA Schedules 02-04-99 A,B,C,D,E,G,H,I,J,L,M
EXHIBIT A
TARGET MARKET CITIES
<TABLE>
<CAPTION>
<S> <C>
****
</TABLE>
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
27
<PAGE> 69
WIRELESS LOCAL ACCESS
PRICING
T-1 CHARGES - MRC
<TABLE>
<CAPTION>
SBCS Wireless Local Access Price--Current Pass Through Rate
<S> <C> <C> <C> <C>
VGE V&H Miles (Millions/mo) **** **** **** ****
------ ------ ------ ------
Voice Minutes (Billions/mo) **** **** **** ****
------ ------ ------ ------
Speed T-1 $ **** $ **** $ **** $ ****
------ ------ ------ ------
</TABLE>
ANCILLARY - NRC
NON RECURRING CHARGES:
NRC applies to intracity circuits only.
Refer to ancillary charges associated with transport
products for intercity circuits.
Non-recurring charges include installation, configuration
changes, cancellation, and order changes that may be
incurred for the circuit.
<TABLE>
<S> <C>
Installation $ ****
Configuration Changes $ ****
Cancellation (pre eng.) $ ****
Cancellation (post eng.) $ ****
Order Change $ ****
ASR (new or dis.) $ ****
ASR Supplement $ ****
Order Expedite $ ****
</TABLE>
OTHER CHARGES
CROSS-CONNECT CHARGES
<TABLE>
<S> <C> <C>
DS-1 $ **** $ ****
</TABLE>
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
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.
31
<PAGE> 73
2. 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.).
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
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.
<TABLE>
<S> <C>
</TABLE>
****
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
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.
<TABLE>
<S><C>
</TABLE>
****
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
35
<PAGE> 77
<TABLE>
<S><C>
</TABLE>
36
<PAGE> 78
5. SWITCHED SERVICE METRICS
Service Assurance - Switched
****
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
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.
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
38
<PAGE> 80
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.
39
<PAGE> 81
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
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
40
<PAGE> 82
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
41
<PAGE> 83
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,
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
42
<PAGE> 84
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>
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
43
<PAGE> 85
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.
44
<PAGE> 86
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
45
<PAGE> 87
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 7,000 to 8,000 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 August 31, 1999.
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.
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
46
<PAGE> 88
EXHIBIT B
TELEHOUSING REQUIREMENTS
****
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
47
<PAGE> 89
****
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
48
<PAGE> 90
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.
49
<PAGE> 91
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.
50
<PAGE> 92
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.
51
<PAGE> 93
SCHEDULE D
****
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
52
<PAGE> 94
****
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
53
<PAGE> 95
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. ****
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
54
<PAGE> 96
SCHEDULE F
EARLY ENTRY SUPPORT SCHEDULE
****
(2 pages)
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
<PAGE> 97
****
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
<PAGE> 98
****
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
<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. For key components going live on ****, SBCS and Williams agree to ****
pre-launch testing. Both parties agree that this date is critical to the
success of the Network, and will commit to complete a joint testing
schedule by ****. The joint testing schedule shall include associated
liquidated damages for failing to meet the joint testing schedule.
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.
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
<PAGE> 100
SCHEDULE H
SCHEDULE OF OUT-OF-REGION SERVICES
1.1 **** Neither this list nor any such notice obligates Williams to provide
such proposed service. The following list contains **** and Williams' current
availability or projected availability:
1.1.1. POTS FLAT
1.1.2. Vertical Services (e.g., CCS Features)
Need clarification
1.1.3. ISDN BRI
TBD
1.1.4. ISDN PRI
TBD
1.1.5. Internet Access (Dial Access)
(1999/date to be determined)
1.1.6. Internet Access (Dedicated Access)
(1999/date to be determined)
1.1.7. DSL 384/128
(1999/date to be determined)
1.1.8. DSL 384
(1999/date to be determined)
1.1.9. DSL T1 and Above
(1999/date to be determined)
1.1.10. Frame Relay 56
(Available Today)
1.1.11. Frame Relay 128
(Available Today)
1.1.12. Frame Relay 384
(Available Today)
1.1.13. Frame Relay DS1
(Available Today) and Above (Available by Sept. 1, 1999)
1.1.14. ATM DS1
Currently projected to developed in the fourth quarter of 1999
1.1.15. ATM DS3 and Above
DS3, OC3, and OC12 UNI ports available today
1.1.16. IP VPN (Includes Dial Access)
(1999/date to be determined)
1.1.17. Network Office
Need clarification
1.1.18. DS1
(Available Today)
1.1.19. DS3
(Available Today)
1.1.20. PBX Trunks
1.1.21. Digital Trunks (Supertrunk)
1.1.22. Outbound Local Usage
NO
1.1.23. Outbound IntraLATA Usage
YES
1.1.24. Outbound LD Domestic Usage
YES
1.1.25. Outbound LD International Usage
YES
1.1.26. Toll Free
YES
1.1.27. Calling Card
YES
1.1.28. Voice - VPN
YES; but not at launch or to 1999.
1.1.29. Operator Assisted
YES
1.1.30. Directory Assistance
YES
1.1.31. Network Integration
Williams Network does not provide Network Integration to a retail environment
(Network does have a wholesale-managed service offering). Williams offering
integration services to retail markets through its Communication Solutions unit.
1.1.31.1. CPE
Williams Network does not provide Network Integration to a retail
environment (Network does have a wholesale-managed service
offering). Williams offering integration services to retail
markets through its Communication Solutions unit.
1.1.31.2. Design
Williams Network does not provide Network Integration to a retail
environment (Network does have a wholesale-managed service
offering). Williams offering integration services to retail
markets through its Communication Solutions unit.
1.1.31.3 Outsourcing
Williams Network does not provide Network Integration to a retail
environment (Network does have a wholesale-managed service
offering). Williams offering integration services to retail
markets through its Communication Solutions unit.
1.1.31.4 Managed Services
Williams Network does not provide Network Integration to a retail
environment (Network does have a wholesale-managed service
offering). Williams offering integration services to retail
markets through its Communication Solutions unit.
1.1.32. Centrex
1.1.33. Voice Mail
Only as it relates to Enhanced Calling Card services
1.1.34. DID Number Blocks
1.1.35. Sonet
1.1.36. OCN
(Available Today)
1.1.37. Integrated Access
1.1.38. Inside Wire
1.1.39. POTs Measured
1.1.40. IVR & ACD
1.1.41. Wireless/Paging
1.1.42. CPE
NO
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
56
<PAGE> 101
57
<PAGE> 102
58
<PAGE> 103
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 1Q99.
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 6/99.
1.1.3.2. Bulk CDR information will be provided 6/99.
1.1.3.3. Remaining Voice features will be developed for 9/99, 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 1Q99 (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 1Q99: 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 Web page that provides user login, icons to specific CNMS features and an
information section that highlights CNMS changes, new features or
updates, and important Williams Network announcements. Links provided
to Customer Care's Customer Handbook, Williams web site, etc.
Customer Contact & The customer has ability to identify, locate and contact vital Customer Care.
Account Information Network Operations, and Billing resources and information.
Web Site Security The customers network information is secure both across the Internet and
Reference 1.2.1.3 from other CNMS users. Information is customer partitioned and secure.
Network Access & Security/access screens prompt users for their Individual User ID and
Customer Administration assigned password. New users within a company are determined by an
assigned "primary administrator" within the client company.
On-Line Help Fully integrated help documentation and tools for the user.
Application Environment CNMS is designed for 24X7 level of service with 99.995% uptimes, date
assurance, and systems support
</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 1Q99.
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 with 99.995%
uptimes annually. 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 1Q99
(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 (1Q99) Williams CNMS features to
support Williams data products include:
FEATURES CUSTOMER BENEFIT
Network Monitoring A partitioned view for the customer into the
(Views & Alarms) Williams network that provides a logical map of
the specific customer's network, alarm views by
circuit, and views of specific alarms affecting
the customer's circuits.
(re: 7.1.4 Fault
Management)
Action Tickets Williams customers are able to monitor and create
(re: 7.1.4 Fault Action Tickets (Trouble Tickets) for their
Management) Customer Care, Billing, and Operations issues.
Customer can monitor the status, activities, and
projected resolution of their network issue.
Service Order Entry The customer is able to enter orders for network
(re: 7.1.1 products and services directly into the Williams
Configuration systems. The customer can monitor a log of current
Management) orders and filled orders.
Customer Billing & Customers can view and print formatted summary
Account Review invoice information from their most recent
invoice. The customer can download detail invoice
information in ASCII format to their local PC over
the web through CNMS.
Service Level Customers can access a collection of network
Statistics statistics to allow verification and monitoring of
Product Specific Service Level Agreements (SLA's)
and evaluate network usage and performance
(re: 7.1.2
Performance
Management)
Flex-CIRsm Interface CNMS allows Williams Frame Relay Flex-CIR(SM)
(Frame Relay) customers to manage and adjust their Committed
(2Q/99) Information Rate (CIR) on a time-of-day and
day-of-week basis.
Published API's Application program interfaces (API's) which give
system interface information to the customer that
allows them to utilize their own existing customer
applications to exchange information with Williams
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 1Q99.
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 within
10 minutes. 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 2Q99), 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 1Q99 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
9/99
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
1Q99 release of the CNMS:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
SERVICE STATISTIC OR SLA MEASUREMENT PERIOD
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ATM Throughput Sum of cells in and out Daily, weekly, monthly, and yearly
- ----------------------------------------------------------------------------------------------------------------------------
Frame Relay Transfer Delay by PVC Edge to edge Average Monthly
- ----------------------------------------------------------------------------------------------------------------------------
Frame Delivery Ratio by Within CIR, above CIR and 15 minute, hourly, daily, weekly,
PVC overall delivery and monthly increments
- ----------------------------------------------------------------------------------------------------------------------------
Data delivery ratio by Within CIR, above CIR and 15 minute, hourly, daily, weekly,
PVC overall delivery and monthly increments
- ----------------------------------------------------------------------------------------------------------------------------
</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 9/99.
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 1Q99 release (see above).
1.2.2.5.5. By 9/99 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. The Parties shall jointly develop voice monitoring
capabilities in CNMS prior to September 1, 1999.
1.2.2.6. Flex-CIR Interface
CNMS will provide (2Q99) 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 1Q99
Network Monitoring (Views & Alarms) 1Q99
Action Tickets 1Q99
Service Order Entry 1Q99
Customer Billing & Account Review 1Q99
Service Level Statistics 1Q99
User Administration 1Q99
</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.
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
68
<PAGE> 113
TSA Schedules 02-04-99 A, B, C, D, E, G, H, I, J, L, M
SCHEDULE J
Williams On-Net City List
The following chart sets forth the Williams' On-Net cities and the date upon
which such city becomes part of the Williams' Network. Williams shall send SBCS
an updated listing of On-Net cities each month.
<TABLE>
<CAPTION>
IN- IN-
CITY LOCATIONS SERVICE CITY LOCATIONS SERVICE
-------------- -------- -------------- --------
<S> <C> <C> <C>
Akron 08/01/99 Detroit 12/31/99
Albany 03/15/99 El Paso 04/01/00
Albuquerque 12/01/00 Fresno 10/01/99
Anaheim 06/01/99 Ft. Meyers 08/01/99
Atlanta In- Ft. Lauderdale 04/15/99
Service Greensboro In-
Austin 04/01/00 Service
Bakersfield 12/15/99 Harrisburg 12/31/00
Baltimore 05/01/99 Hartford 07/01/00
Baton Rouge In- Herndon, VA 04/01/99
Service (Washington, D.C.)
Birmingham In- Houston In-
Service Service
Boise 05/16/99 Indianapolis In-
Boston 12/01/99 Service
Buffalo 01/15/99 Jackson, MS 01/31/99
Charlotte In- Jacksonville 02/19/99
Service Johnson City 12/01/00
Chattanooga 07/01/00 Kansas City In-
Chicago In- Service
Service Knoxville 12/01/00
Cincinnati 06/01/99 Lansing 10/01/99
Cleveland In- Las Vegas In-
Service Service
Colorado Springs In- Little Rock 12/01/00
Service Los Angeles In-
Columbus 04/15/99 Service
Dallas In- Louisville 07/01/00
Service Macon 01/31/99
Dayton 04/15/99 Madison 10/01/99
Daytona Beach 02/15/99 Melbourne 03/15/99
Denver In- Memphis 12/01/00
Service Miami 07/15/99
Des Moines 06/15/99
</TABLE>
<TABLE>
<CAPTION>
IN- IN-
CITY LOCATIONS SERVICE CITY LOCATIONS SERVICE
-------------- -------- -------------- --------
<S> <C> <C> <C>
Milwaukee 10/01/99 Santa Fe 12/01/00
Minneapolis 02/19/99 Seattle 05/01/99
Mobile 10/15/99 South Bend 10/01/99
Modesto 10/01/99 Spartanburg In-
Nashville 12/01/00 Service
New Haven 07/01/00 Springfield, IL 07/01/00
New Orleans In- Springfield, MA 03/01/00
Service St. Louis In-
New York In- Service
Service Stamford 07/01/00
Newark 04/01/99 Syracuse 02/01/99
Norfolk 12/31/00 Tacoma, WA 03/01/00
Oakland 11/01/99 Tallahassee 11/01/99
Oklahoma City In- Tampa 04/30/99
Service Toledo 10/01/99
Orlando 04/30/99 Topeka 04/15/99
Pensicola 10/15/99 Tucson 04/15/99
Peoria, IL 07/01/00 Tulsa In-
Philadelphia In- Service
Service Washington, DC In-
Phoenix 04/30/99 Service
Pittsburgh 12/31/00 West Palm Beach 03/27/99
Portland In- Wichita, KS 12/31/00
Service Worcester 03/01/00
Providence 07/01/00 Youngstown 12/31/00
Raleigh In-
Service
Reno 11/15/99
Richmond In-
Service
Riverside, CA 03/01/00
Rochester 01/20/99
Sacramento In-
Service
Salt Lake City 04/15/99
San Antonio 04/01/00
San Diego In-
Service
San Francisco 08/01/99
Santa Clara 09/01/99
</TABLE>
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>
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
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
<TABLE>
<CAPTION>
CITY GX 550 CBX 500 B- LITTON PNY SENTIE M 13
STDX9000 (GX250) NT
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Akron 4th Qtr 4th Qtr
- ------------------------------------------------------------------------------------------------------
Albany 1st Qtr 1st Qtr 2nd Qtr 2nd Qtr
- ------------------------------------------------------------------------------------------------------
Albuquerque 4th Qtr 4th Qtr 4th Qtr
- ------------------------------------------------------------------------------------------------------
Anaheim 3rd Qtr 3rd Qtr 3rd Qtr
- ------------------------------------------------------------------------------------------------------
Atlanta 3rd Qtr 3rd Qtr 3rd Qtr 1st Qtr
- ------------------------------------------------------------------------------------------------------
Austin 4th Qtr 4th Qtr 4th Qtr
- ------------------------------------------------------------------------------------------------------
Bakersfield 4th Qtr 4th Qtr 4th Qtr
- ------------------------------------------------------------------------------------------------------
Baltimore 4th Qtr 2nd Qtr 4th Qtr 2nd Qtr 2nd Qtr
- ------------------------------------------------------------------------------------------------------
Baton Rouge 1st Qtr 1st Qtr 1st Qtr
- ------------------------------------------------------------------------------------------------------
Birmingham 1st Qtr 1st Qtr 1st Qtr
- ------------------------------------------------------------------------------------------------------
Boise 2nd Qtr 2nd Qtr 2nd Qtr
- ------------------------------------------------------------------------------------------------------
Boston 4th Qtr 4th Qtr 4th Qtr 4th Qtr 4th Qtr
- ------------------------------------------------------------------------------------------------------
Bridgeport 1st Qtr 00 1st Qtr 00 1st Qtr 00
- ------------------------------------------------------------------------------------------------------
Buffalo 1st Qtr 1st Qtr 1st Qtr 2nd Qtr 2nd Qtr
- ------------------------------------------------------------------------------------------------------
Charlotte 1st Qtr 1st Qtr 1st Qtr
- ------------------------------------------------------------------------------------------------------
Chattanooga 2nd Qtr 00 2nd Qtr 00 2nd Qtr 00
- ------------------------------------------------------------------------------------------------------
Chicago 3rd Qtr 3rd Qtr 1st Qtr
- ------------------------------------------------------------------------------------------------------
Cincinnati 3rd Qtr 3rd Qtr
- ------------------------------------------------------------------------------------------------------
Cleveland 4th Qtr 1st Qtr 4th Qtr 1st Qtr
- ------------------------------------------------------------------------------------------------------
Colorado 1st Qtr 1st Qtr 1st Qtr 1st Qtr
Springs
- ------------------------------------------------------------------------------------------------------
Columbus 2nd Qtr 2nd Qtr 2nd Qtr
- ------------------------------------------------------------------------------------------------------
Dallas 3rd Qtr 3rd Qtr 1st Qtr 3rd Qtr 1st Qtr
- ------------------------------------------------------------------------------------------------------
Dayton 3rd Qtr 3rd Qtr 2nd Qtr 2nd Qtr
- ------------------------------------------------------------------------------------------------------
Daytona Beach 2nd Qtr 2nd Qtr 2nd Qtr 2nd Qtr 2nd Qtr
- ------------------------------------------------------------------------------------------------------
Denver 3rd Qtr 3rd Qtr 1st Qtr
- ------------------------------------------------------------------------------------------------------
Des Moines 2nd Qtr 2nd Qtr 2nd Qtr 3rd Qtr 3rd Qtr
- ------------------------------------------------------------------------------------------------------
Detroit 2nd Qtr 2nd Qtr 2nd Qtr 3rd Qtr 3rd Qtr
- ------------------------------------------------------------------------------------------------------
El Paso 4th Qtr 4th Qtr 4th Qtr
- ------------------------------------------------------------------------------------------------------
Fresno 4th Qtr 4th Qtr 4th Qtr
- ------------------------------------------------------------------------------------------------------
Ft. Lauderdale 2nd Qtr 2nd Qtr 2nd Qtr 2nd Qtr 2nd Qtr
- ------------------------------------------------------------------------------------------------------
Ft. Myer 4th Qtr 4th Qtr 4th Qtr
- ------------------------------------------------------------------------------------------------------
Greensboro 1st Qtr 1st Qtr 1st Qtr
- ------------------------------------------------------------------------------------------------------
Hartford 1st Qtr 00 1st Qtr 00 1st Qtr 00
- ------------------------------------------------------------------------------------------------------
Houston 3rd Qtr 3rd Qtr 1st Qtr
- ------------------------------------------------------------------------------------------------------
Indianapolis 3rd Qtr 1st Qtr 3rd Qtr 1st Qtr
- ------------------------------------------------------------------------------------------------------
Jackson 1st Qtr 1st Qtr 1st Qtr 1st Qtr
- ------------------------------------------------------------------------------------------------------
Jacksonville 2nd Qtr 2nd Qtr 2nd Qtr 2nd Qtr
- ------------------------------------------------------------------------------------------------------
Kansas City 3rd Qtr 1st Qtr 3rd Qtr 1st Qtr
- ------------------------------------------------------------------------------------------------------
Lansing 4th Qtr 4th Qtr 4th Qtr
- ------------------------------------------------------------------------------------------------------
Las Vegas 4th Qtr 1st Qtr 4th Qtr 1st Qtr 1st Qtr
- ------------------------------------------------------------------------------------------------------
Los Angeles 3rd Qtr 3rd Qtr 3rd Qtr 1st Qtr
- ------------------------------------------------------------------------------------------------------
Louisville 2nd Qtr 00 2nd Qtr 00 2nd Qtr 00
- ------------------------------------------------------------------------------------------------------
Macon 1st Qtr 1st Qtr 1st Qtr 1st Qtr 1st Qtr
- ------------------------------------------------------------------------------------------------------
Madison 4th Qtr 4th Qtr 4th Qtr
- ------------------------------------------------------------------------------------------------------
Melbourne 2nd Qtr 2nd Qtr 2nd Qtr 2nd Qtr
- ------------------------------------------------------------------------------------------------------
Miami 4th Qtr 1st Qtr 4th Qtr 3rd Qtr 3rd Qtr
- ------------------------------------------------------------------------------------------------------
Milwaukee 4th Qtr 4th Qtr 4th Qtr
- ------------------------------------------------------------------------------------------------------
Minneapolis 1st Qtr 1st Qtr 2nd Qtr 2nd Qtr
- ------------------------------------------------------------------------------------------------------
Mobile 4th Qtr 4th Qtr 4th Qtr
- ------------------------------------------------------------------------------------------------------
Modesto 4th Qtr 4th Qtr 4th Qtr
- ------------------------------------------------------------------------------------------------------
Nashville 2nd Qtr 00 2nd Qtr 00 2nd Qtr 00
- ------------------------------------------------------------------------------------------------------
New Orleans 4th Qtr 1st Qtr 4th Qtr 1st Qtr
- ------------------------------------------------------------------------------------------------------
New York 1st Qtr 1st Qtr 1st Qtr 1st Qtr
- ------------------------------------------------------------------------------------------------------
Newark 3rd Qtr 3rd Qtr 3rd Qtr 2nd Qtr 2nd Qtr
- ------------------------------------------------------------------------------------------------------
Oakland 4th Qtr 4th Qtr 4th Qtr
- ------------------------------------------------------------------------------------------------------
Oklahoma City 4th Qtr 1st Qtr 4th Qtr 1st Qtr
- ------------------------------------------------------------------------------------------------------
Orlando 2nd Qtr 3rd Qtr 3rd Qtr
- ------------------------------------------------------------------------------------------------------
Pensicola 4th Qtr 4th Qtr 4th Qtr
- ------------------------------------------------------------------------------------------------------
Philadelphia 4th Qtr 2nd Qtr 4th Qtr 2nd Qtr
- ------------------------------------------------------------------------------------------------------
Phoenix 4th Qtr 2nd Qtr 4th Qtr 2nd Qtr 2nd Qtr
- ------------------------------------------------------------------------------------------------------
Portland 2nd Qtr 2nd Qtr 2nd Qtr 2nd Qtr 2nd Qtr
- ------------------------------------------------------------------------------------------------------
Providence 4th Qtr 4th Qtr 4th Qtr
- ------------------------------------------------------------------------------------------------------
Raleigh 4th Qtr 4th Qtr 4th Qtr 1st Qtr
- ------------------------------------------------------------------------------------------------------
Reno 4th Qtr 4th Qtr 4th Qtr
- ------------------------------------------------------------------------------------------------------
Richmond 1st Qtr 4th Qtr 1st Qtr
- ------------------------------------------------------------------------------------------------------
Rochester 1st Qtr 1st Qtr 2nd Qtr 2nd Qtr
- ------------------------------------------------------------------------------------------------------
Sacramento 3rd Qtr 3rd Qtr 3rd Qtr 3rd Qtr
- ------------------------------------------------------------------------------------------------------
Salt Lake City 3rd Qtr 2nd Qtr 3rd Qtr
- ------------------------------------------------------------------------------------------------------
San Antonio 4th Qtr 4th Qtr 4th Qtr
- ------------------------------------------------------------------------------------------------------
San Diego 2nd Qtr 2nd Qtr 2nd Qtr 2nd Qtr 2nd Qtr
- ------------------------------------------------------------------------------------------------------
San Francisco 4th Qtr 4th Qtr 4th Qtr
- ------------------------------------------------------------------------------------------------------
Santa Clara 3rd Qtr 3rd Qtr 3rd Qtr
- ------------------------------------------------------------------------------------------------------
Seattle 3rd Qtr 3rd Qtr 3rd Qtr 3rd Qtr 3rd Qtr
- ------------------------------------------------------------------------------------------------------
South Bend 4th Qtr 4th Qtr 4th Qtr
- ------------------------------------------------------------------------------------------------------
Spartanburg 2nd Qtr 2nd Qtr 2nd Qtr
- ------------------------------------------------------------------------------------------------------
Springfield 4th Qtr 4th Qtr 4th Qtr
- ------------------------------------------------------------------------------------------------------
St. Louis, MO 1st Qtr 1st Qtr 1st Qtr 1st Qtr
- ------------------------------------------------------------------------------------------------------
Syracuse 2nd Qtr 2nd Qtr 2nd Qtr 2nd Qtr
- ------------------------------------------------------------------------------------------------------
Tallahassee 4th Qtr 4th Qtr 4th Qtr
- ------------------------------------------------------------------------------------------------------
Tampa 2nd Qtr 2nd Qtr 3rd Qtr 3rd Qtr
- ------------------------------------------------------------------------------------------------------
Topeka 2nd Qtr 2nd Qtr 2nd Qtr
- ------------------------------------------------------------------------------------------------------
Tucson 2nd Qtr 2nd Qtr 2nd Qtr 2nd Qtr
- ------------------------------------------------------------------------------------------------------
Tulsa 4th Qtr 1st Qtr
- ------------------------------------------------------------------------------------------------------
Washington, D.C. 3rd Qtr 3rd Qtr 3rd Qtr 1st Qtr
- ------------------------------------------------------------------------------------------------------
West Palm Beach 2nd Qtr 2nd Qtr 2nd Qtr 2nd Qtr
- ------------------------------------------------------------------------------------------------------
Worcester 4th Qtr 4th Qtr 4th Qtr
- ------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 116
TSA Schedules 02-04-99 A, B, C, D, E, G, H, I, J, L, M
Schedule J - Part 4
Service Availability by Quarter
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
GX CBX B- LITTO PHY SENTIE M 13
CITY 550 500 STDX9000 N (GX250) NT
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1ST QUARTER
- -------------------------------------------------------------------------------------------------------------------
Albany 1 1
- -------------------------------------------------------------------------------------------------------------------
Atlanta 2
- -------------------------------------------------------------------------------------------------------------------
Baton Rouge 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Birmingham 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Buffalo 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Charlotte 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Chicago 2
- -------------------------------------------------------------------------------------------------------------------
Cleveland 1 1
- -------------------------------------------------------------------------------------------------------------------
Colorado
Springs 1 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Dallas 1 2
- -------------------------------------------------------------------------------------------------------------------
Denver 1
- -------------------------------------------------------------------------------------------------------------------
Greensboro 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Houston 1
- -------------------------------------------------------------------------------------------------------------------
Indianapolis 1 1
- -------------------------------------------------------------------------------------------------------------------
Jackson 1 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Kansas City 1 2
- -------------------------------------------------------------------------------------------------------------------
Las Vegas 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Los Angeles 2
- -------------------------------------------------------------------------------------------------------------------
Macon 1 1 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Miami 1
- -------------------------------------------------------------------------------------------------------------------
Minneapolis 1 1
- -------------------------------------------------------------------------------------------------------------------
New Orleans 1 1
- -------------------------------------------------------------------------------------------------------------------
New York 1 1 2 2
- -------------------------------------------------------------------------------------------------------------------
Oklahoma City 1 1
- -------------------------------------------------------------------------------------------------------------------
Raleigh 1
- -------------------------------------------------------------------------------------------------------------------
Richmond 1 1
- -------------------------------------------------------------------------------------------------------------------
Rochester 1 1
- -------------------------------------------------------------------------------------------------------------------
St. Louis 1 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Tulsa 1
- -------------------------------------------------------------------------------------------------------------------
Washington D.C. 1
- -------------------------------------------------------------------------------------------------------------------
TOTAL 4 21 1 1 14 31 3
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
2ND QUARTER
- -------------------------------------------------------------------------------------------------------------------
Albany 1 1
- -------------------------------------------------------------------------------------------------------------------
Baltimore 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Boise 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Buffalo 1 1
- -------------------------------------------------------------------------------------------------------------------
Columbus 1 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Dayton 1 1
- -------------------------------------------------------------------------------------------------------------------
Daytona Beach 1 1 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Des Moines 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Detroit 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Ft. Lauderdale 1 1 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Jacksonville 1 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Melbourne 1 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Minneapolis 1 1
- -------------------------------------------------------------------------------------------------------------------
Newark 1 1
- -------------------------------------------------------------------------------------------------------------------
Orlando 1
- -------------------------------------------------------------------------------------------------------------------
Philadelphia 1 1
- -------------------------------------------------------------------------------------------------------------------
Phoenix 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Portland 1 1 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Rochester 1 1
- -------------------------------------------------------------------------------------------------------------------
Salt Lake City 1
- -------------------------------------------------------------------------------------------------------------------
San Diego 1 1 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Spartanburg 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Syracuse 1 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Tampa 1 1
- -------------------------------------------------------------------------------------------------------------------
Topeka 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Tucson 1 1 1 1
- -------------------------------------------------------------------------------------------------------------------
West Palm
Beach 1 1 1 1
- -------------------------------------------------------------------------------------------------------------------
TOTAL 8 20 0 0 17 19 18
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
3RD QUARTER
- -------------------------------------------------------------------------------------------------------------------
Anaheim 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Atlanta 1 1 2
- -------------------------------------------------------------------------------------------------------------------
Chicago 1 1
- -------------------------------------------------------------------------------------------------------------------
Cincinnati, OH 1 1
- -------------------------------------------------------------------------------------------------------------------
Dallas 1 1 2
- -------------------------------------------------------------------------------------------------------------------
Dayton 1 1
- -------------------------------------------------------------------------------------------------------------------
Denver 1 2
- -------------------------------------------------------------------------------------------------------------------
Des Moines 1 1
- -------------------------------------------------------------------------------------------------------------------
Detroit 1 1
- -------------------------------------------------------------------------------------------------------------------
Houston 1 2
- -------------------------------------------------------------------------------------------------------------------
Indianapolis 1 1
- -------------------------------------------------------------------------------------------------------------------
Kansas City 1 1
- -------------------------------------------------------------------------------------------------------------------
Los Angeles 1 1 2
- -------------------------------------------------------------------------------------------------------------------
Miami 1 1
- -------------------------------------------------------------------------------------------------------------------
Newark 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Orlando 1 1
- -------------------------------------------------------------------------------------------------------------------
Sacramento 1 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Salt Lake City 1 1
- -------------------------------------------------------------------------------------------------------------------
Santa Clara 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Seattle 1 1 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Tampa 1 1
- -------------------------------------------------------------------------------------------------------------------
Washington, D.C. 1 1 2
- -------------------------------------------------------------------------------------------------------------------
TOTAL 15 11 0 0 23 7 6
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
4TH QUARTER
- -------------------------------------------------------------------------------------------------------------------
Akron 1 1
- -------------------------------------------------------------------------------------------------------------------
Albuquerque 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Austin 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Baltimore 1 1
- -------------------------------------------------------------------------------------------------------------------
Bakersfield 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Boston 1 1 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Cleveland 1 2
- -------------------------------------------------------------------------------------------------------------------
El Paso 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Fresno 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Ft. Myers 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Lansing 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Las Vegas 1 1
- -------------------------------------------------------------------------------------------------------------------
Madison 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Miami 1 1
- -------------------------------------------------------------------------------------------------------------------
Milwaukee 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Mobile 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Modesto 1 1 1
- -------------------------------------------------------------------------------------------------------------------
New Orleans 1 1
- -------------------------------------------------------------------------------------------------------------------
Oakland 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Oklahoma City 1 1
- -------------------------------------------------------------------------------------------------------------------
Pensacola 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Philadelphia 1 1
- -------------------------------------------------------------------------------------------------------------------
Phoenix 1 1
- -------------------------------------------------------------------------------------------------------------------
Providence 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Raleigh 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Reno 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Richmond 1
- -------------------------------------------------------------------------------------------------------------------
San Antonio 1 1 1
- -------------------------------------------------------------------------------------------------------------------
San Francisco 1 1 2
- -------------------------------------------------------------------------------------------------------------------
South Bend 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Springfield 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Tallahassee 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Tulsa 1
- -------------------------------------------------------------------------------------------------------------------
Worcester 1 1 1
- -------------------------------------------------------------------------------------------------------------------
TOTAL 32 23 0 0 36 1 1
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
1ST QUARTER
2000
- -------------------------------------------------------------------------------------------------------------------
Bridgeport 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Hartford 1 1 1
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
2ND QUARTER
2000
- -------------------------------------------------------------------------------------------------------------------
Chattanooga 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Louisville 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Nashville 1 1 1
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 117
Schedule J - Part 5
Existing Switches
<TABLE>
<CAPTION>
Existing Switches
City GX 550 CBX 500 B-STDX9000 Litton
<S> <C> <C> <C> <C>
Albany, NY 1
Atlanta, GA 2 1 1
Buffalo, NY 1
Billingsly, AL 1
East Feliciana, LA 1
Charlotte, NC 1
Chicago, IL 2 1 1
Dallas, TX 3 1 1
Denver, CO 1 1 1 1
Kernersville, NC 1
Greenwood, IN 1
Hudson, OK 1
Houston, TX 1 1 1
Indianapolis 1
Covington, MS 1
Joplin, MO 1
Los Angeles, CA 2 1 1 1
New Orleans, LA 1
New York, NY 2 1 1 1
Oklahoma City, OK 1
Orlando, FL 1 1
Pevely, MO 1
Scottville, VA 1
Rochester, NY 1
San Francisco, CA 1 1 1
Spartanburg, SC 1
Syracuse, NY 1
Tucson, AZ 1
Terry Ranch, WY 1 1
Tulsa, OK 1 1 2 1
Washington, DC 2 1 1 1
Total 37 12 10 7
</TABLE>
80
<PAGE> 118
SCHEDULE K (i) --
Cost Centers and Account Classification
Schedule K(i)
****
<TABLE>
<S> <C>
</TABLE>
Depreciable Lives
Schedule K(ii)(a)
****
<TABLE>
<S> <C>
</TABLE>
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)
****
<TABLE>
<S> <C>
</TABLE>
SCHEDULE L - TRANSITION
1.1 GENERAL. Should any of the circumstances outlined in Section 12.1 of
the Master Alliance Agreement occur, the Parties will consider and negotiate
terms consistent with Section 12.1 of the Master Alliance Agreement and Section
4.2 of this Agreement under which they will initiate the transition of SBCS
from Williams' Network and Williams' from SBCS' Platforms.
1.2 TRANSITION TEAM. The transition will be supervised by a team
consisting of three representatives designated by each party (the "Transition
Team"). The Transition Team will meet within thirty (30) days after the event
triggering Transition. The Transition Team will (a) develop and administer a
transition plan and schedule, (b) identify, document and value the assets to be
transferred, and (c) determine the amount of any SBCS Transition Costs and
Williams Transition Costs in each case in accordance with Section 12 of the
Alliance Agreement. **** The party that owns the asset (the "Transferring
Party") shall cooperate fully with the **** in connection with the
determination of current net book value. ****
1.3 LICENSE OF SPACE. Upon the transition, Williams will continue to
license Space to SBCS to accommodate any existing assets transferred to SBCS
under the terms and conditions of the Schedule C of this Agreement. Williams
will provide reasonably sufficient room for full expansion of the network
elements that are transferred, but will not be obligated to provide room for new
or additional network elements. The license of any new space will be upon
mutually agreeable terms and conditions based substantially on the terms and
conditions of Schedule C. To the extent of Williams' rights, Williams will pass
on any non-disturbance covenants applicable to the Space.
1.4 ****
<TABLE>
<S> <C>
****
</TABLE>
SCHEDULE L - ATTACHMENT A
PRINCIPLES GOVERNING IRU ACQUISITION
****
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
<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)
****
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
<PAGE> 121
Exhibit A
Williams Unbundled Pricing Proposal for
SBC Long Distance
****
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
<PAGE> 122
EXHIBIT B
Examples of Direct End Office Trunking (DEOT) Mou Cap
****
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
<PAGE> 123
EXHIBIT C
****
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
<PAGE> 124
EXHIBIT D
****
[FLOW CHART DEPICTING ACCESS TO WILLIAMS POP]
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
<PAGE> 125
EXHIBIT E
****
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
<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 10.18
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
<PAGE> 4
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.
2
<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.
3
<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.
4
<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.
6
<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.
9
<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.
10
<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.
11
<PAGE> 13
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.
12
<PAGE> 14
(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.
13
<PAGE> 15
(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).
14
<PAGE> 16
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.
15
<PAGE> 17
(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).
16
<PAGE> 18
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.
17
<PAGE> 19
(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.
18
<PAGE> 20
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.
19
<PAGE> 21
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).
20
<PAGE> 22
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.
21
<PAGE> 23
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.
22
<PAGE> 24
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.
23
<PAGE> 25
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.
24
<PAGE> 26
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.
25
<PAGE> 27
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.
26
<PAGE> 28
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.
27
<PAGE> 29
(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.
28
<PAGE> 30
(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.
29
<PAGE> 31
(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.
30
<PAGE> 32
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
31
<PAGE> 33
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.
32
<PAGE> 34
(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;
33
<PAGE> 35
(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).
34
<PAGE> 36
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.
35
<PAGE> 37
(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.
36
<PAGE> 38
(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.
37
<PAGE> 39
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).
38
<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
39
<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.
40
<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
41
<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.
42
<PAGE> 44
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
43
<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.
44
<PAGE> 46
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.
45
<PAGE> 47
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>
46
<PAGE> 48
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 WinStar's Minimum
commitment set forth in the Agreement of which ****. 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 fifth 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
fifth anniversary of the Agreement and in fact have placed Service
Orders for the entire Minimum Commitment as of the Effective Date.
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 with the Assignments and the Assumed Backbone Agreements 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 any
Assumed Backbone Agreements which one being assigned in whole or in part, to
Williams pursuant to one of the Assignments.
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 the Assignments and the Assumed Backbone
Agreements 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 any Assumed Backbone Agreements which are being assigned, in
whole or in part, to Williams pursuant to one of the Assignments.
4. Any switch circuits provided by Williams pursuant to the IRU Agreement
shall be provided to WinStar on a pass-through basis and shall be governed by
the terms and conditions of the Assumed Backbone Agreement or Renegotiated
Backbone Agreement as the case may be, pursuant to which Williams obtains such
switched circuits (if any).
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 10.20
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.
2
<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. Beginning at the Both Party Completion Date, (i) each Party shall
lease the IRU's described below to the other during the Permanent Lease Term (as
defined below); (ii) Vyvx shall pay IXC a usage fee (the "Permanent Lease Fee")
during the Permanent Lease Term in the monthly sum of **** payable at the end of
each month for a lease of the IRU rights in **** fibers on the IXC System (the
"Vyvx Leased Fibers"); (iii) IXC shall pay Vyvx a Permanent Lease Fee during the
Permanent Lease Term in the monthly sum of **** payable at the end of each month
for a lease of the IRU rights in **** fibers on the Vyvx System (the "IXC IRU
Fibers").
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
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. Vyvx grants IXC a power to convey an IRU in the IXC IRU Fibers and IXC
grants Vyvx a power to convey an IRU in the Vyvx Leased Fibers. The lease term
conveyed pursuant to either such power shall be no longer than the lesser of (i)
**** years from the Both Party Completion Date, or (ii) the remainder of the
Term of the IRU Agreement (excluding any unexercised Renewal Term). An IRU shall
not be conveyed pursuant to such power before the expiration of the **** month
period beginning on the Both Party Completion Date. Payment received in exchange
for such a conveyance shall be **** of the IRU agreement and, upon expiration of
the Permanent Lease Term without any renewal, shall be paid for the remaining
term of any such IRU to the Constructing Party. 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).
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
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) upon execution of a **** year note ("Note
Option") for such fair market value amount. The **** note shall be at an
interest rate equal to the higher of eight percent (8%) annual interest or the
minimum long-term applicable federal rate of interest (pursuant to Section 1274
of the Internal Revenue Code of 1986) and be payable annually, interest only,
with the entire balance due and payable upon expiration of the twenty-year lease
term. The note shall have no terms or conditions except as set forth in this
paragraph or as are necessary to make the note valid and enforceable.
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 or the Note 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 or the Note
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 or by the tendering of an executed note 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 and the Note Option
with respect to other fibers. A Party need not exercise either the Cash Option
or the Note Option.
D. If the non-Electing Party does not elect to exercise the Cash Option
or the Note 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 or by the tendering of an executed note 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) pro-rated so that
IXC's payment is reduced for each fiber mile of Additional Fiber that has been
Sold. For example, if the total **** and eighty percent (80%) of such fiber
miles have been Sold, IXC's Additional Fiber Option exercise price would be
****. 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). As consideration for such termination of IXC's
rights, IXC shall be entitled to receive a portion of the Additional Fiber
Revenue (as defined below) as set forth in the Article entitled Additional
Fiber Revenue.
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
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. In the event one party completes its System (the "Completing
Party") prior to the other party, the Late Party shall pay, whether or not it
uses any fiber in the Completing Party's System, to the Completing Party late
fee payments (each, a "Late Fee Payment") in the Completing Party's System. The
Late Fee Payments shall be payable from the date (the "Payment Start Date")
thirty (30) days after the Completing Party's Completion Date (i.e., the date
the Late Party accepts its fibers in the Completing Party's System as set forth
below) until the Late Party's Completion Date (i.e., the date the Completing
Party accepts its fibers in the Late Party's System, as set forth below);
provided however, that if the Completing Party's Completion Date is on or before
July 1, 1998, the Payment Start Date shall be July 1, 1998. The Late Fee Payment
shall be as set forth in Exhibit C-7 less, in the case of Vyvx, the monthly
amount of any Temporary Lease payments made pursuant to Article III. During the
period between the Payment Start Date and the Late Party's Completion Date, the
Completing Party shall have the option, at its sole discretion, to lease its IRU
rights on a temporary basis in any completed portions of the Late Party's
System. The Completing Party's temporary right to use the Late Party's fibers
shall be in effect until the Both Party Completion Date and shall be subject to
the terms of this Agreement. The Late Party shall use its best reasonable
efforts to make such portions of its System available to the Completing Party.
In exchange for the Completing Party's right to use the Late Party's System, the
Late Party's Late Fee Payment shall be reduced by a fraction whose numerator is
the number of route miles in the portion of the Late Party's System to be used
by the Completing Party under such temporary right to use and whose denominator
is the total number of route miles to be in the Late Party's System, or if Vyvx
is the Late Party, the total number of route miles to be in the uncompleted
segment(s) of the Vyvx System.
8
<PAGE> 9
D. In the event the Late Party does not have its Completion Date on or
before December 31, 1998 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 October 31,
1999, 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 paragraphs C
and D of this Article. The dollar amount in paragraph C is agreed upon as
liquidated damages and not as a penalty. The parties hereto have computed,
estimated and agreed upon the amount as an attempt to make a reasonable forecast
of actual loss because of the difficulty in measuring actual damages.
9
<PAGE> 10
F. For purposes of Paragraphs B, C, D, and E of this Article,
"System" or "Vyvx System" shall not include the New Orleans Lateral, and
the Vyvx System will be deemed completed upon completion of the portions
other than the New Orleans Lateral. The scheduled completion date for
completion of all construction, installation and Fiber Acceptance Testing
of the New Orleans Lateral, shall be July 1, 1998. Vyvx shall use
commercially reasonable best efforts to complete all construction and
testing obligations by such date.
G. In the event Vyvx completes the New Orleans Lateral after
December 31, 1998 and more than twenty-nine (29) days after IXC completes
its System, Vyvx shall pay to IXC late fee payments (each, an "NOL Late Fee
Payment"). The NOL Late Fee payment shall be payable from (1) the later of
January 1, 1999 or thirty (30) days after the IXC Completion Date until (2)
the New Orleans Lateral Completion Date (as defined below). The NOL Late
Fee Payment shall be **** per month (prorated, as applicable, for partial
months) and shall be made monthly on the first day of the month following
each month for which it applies. During the period between the later of
January 1, 1999 or thirty (30) days after the IXC Completion Date and the
New Orleans Lateral Completion Date, IXC shall have the option, at its sole
discretion, to lease its IRU rights on a temporary basis in any completed
portions of the New Orleans Lateral. IXC's temporary right to use the New
Orleans Lateral fibers shall be in effect until the New Orleans Lateral
Completion Date and shall be subject to the terms of this Agreement. Vyvx
shall use its best reasonable efforts to make such portions of the New
Orleans Lateral available to IXC. In exchange for IXC's right to use the
New Orleans Lateral, Vyvx's NOL Late Fee Payment shall be reduced by a
fraction whose numerator is the number of route miles in the New Orleans
Lateral used and whose denominator is the total number of route miles to be
in the New Orleans Lateral. If the New Orleans Lateral Completion Date
occurs after April 30, 2000, then after such date IXC shall have the right
to lease its IRU rights in any completed portions of the New Orleans
Lateral at no charge during the Term of this Agreement until the New
Orleans Lateral Completion Date.
H. In the event Vyvx does not complete the New Orleans Lateral, on
or before April 30, 2000, IXC shall have the option, at its sole
discretion, to take over the design, engineering,
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
10
<PAGE> 11
installation and construction (including all the activities referred to in
the Article entitled Construction) of the New Orleans Lateral. 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 New Orleans Lateral 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 New Orleans Lateral. 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 New Orleans Lateral by
April 30, 2000, IXC's sole and exclusive remedy against Vyvx for failure
to meet the July 1, 1998 scheduled completion date for the New Orleans
Lateral shall be as set forth in paragraphs F and G of this Article. The
NOL Late Fee Payment in paragraph G is agreed upon as liquidated damages
and not as a penalty. The parties have computed, estimated and agreed upon
the amount as an attempt to make a reasonable forecast of actual loss
because of the difficulty in measuring actual damages.
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
11
<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
12
<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."
13
<PAGE> 14
ARTICLE IX. SYSTEM DOCUMENTATION
After the Both Party Completion Date (or, with respect to the
New Orleans Lateral after the New Orleans Lateral 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
In order to encourage timely restoral of service, the
Constructing Party shall owe the Non-Constructing Party a payment (an "Outage
Damage Payment") for every fiber hour (prorated for a portion of a fiber hour)
whenever the Constructing Party's System experiences a Service Interruption (as
defined below) on lighted fiber affecting IXC's use of the IXC IRU Fibers or
Vyvx's use of the Vyvx IRU Fibers, as the case may be, unless such Service
Interruption is due to: the negligence or willful misconduct of the
Non-Constructing Party, the failure of the Non-Constructing Party's electronic
equipment which it is required to maintain under Exhibit E, Section 1g or a
Natural Disaster (as defined below) but, with respect to a Natural Disaster,
only as long as the Constructing Party uses its commercially reasonable best
efforts to rectify the Service Interruption. The Outage Damage Payment for any
one Service Interruption incident (i.e., a specific accident or disaster) shall
be ****. Each party shall record Service Interruptions experienced on its System
and the other party's System. On each anniversary date of the Effective Date,
the parties shall reconcile their Service Interruption records and determine (i)
which Constructing Party had the greatest aggregate Outage Damage Payments on
its System (the "Outage Payor") and (ii) how much more Outage Damage Payments
that Constructing Party owes than the other party (the amount of the excess owed
is referred to as the "Outage Damage Payment Excess"). Such Outage Payor shall
pay the other party the amount of the Outage Damage Payment Excess within
forty-five (45) days of each anniversary of the Effective Date. As the Outage
Damage Payment Excess reflects the net difference in Outage Damage Payments,
such other party will not be required to pay its Outage Damage Payment to the
Outage Payor. An example of this calculation is set forth in Exhibit C-8. The
payment for the Outage Damage Payment is the Non-Constructing Party's sole and
exclusive remedy for Service Interruptions and is agreed upon as liquidated
damages and not as a penalty. The parties hereto have computed, estimated and
agreed upon the amount as an attempt to make a reasonable forecast of actual
loss because of the difficulty on measuring actual damages. "Natural Disaster"
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
14
<PAGE> 15
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. Vyvx shall exercise commercially reasonable
efforts to market IRU's in the Additional Fibers to third parties, but in
performing such obligation Vyvx shall act on its own behalf and not as agent of
IXC and shall have no authority to sell any IRU's on behalf of IXC. (The revenue
generated from Vyvx's marketing of IRU's in the Additional Fibers shall
hereinafter be referred to as the "Additional Fiber Revenue.") It is the
intention of each Party that each such transaction ("Additional Fiber
Transaction") shall be characterized **** so that the consideration for such
transaction **** shall be paid ****. 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 sell, grant IRU's in, lease,
trade or in any way make available for a third party's use, any dark fibers
contained in the Vyvx System (other than Additional Fiber Transactions in the
Additional Fibers, as set forth herein) or any other fibers along any portion of
the route of the Vyvx System that such Party owns or has an IRU interest. 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. Notwithstanding anything herein to the
contrary, in the event Vyvx or any affiliate of Vyvx installs, owns or has
rights in additional fiber optic cable not in the initial fiber bundle along any
portion of the route of the Vyvx System ("Additional Vyvx Cable"), such
Additional Vyvx Cable shall not be used in any way by Vyvx, any affiliate of
Vyvx or any person prior to the Sale of IRU's in all the Additional Fibers.
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
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
15
<PAGE> 16
Additional Fiber Transaction. Vyvx shall compensate IXC for termination of such
option by paying amounts as set forth in this Paragraph. After reimbursing Vyvx
for its Related Transaction Expenses (as defined below), Vyvx shall retain or
shall pay to IXC amounts equal to the **** in the following amounts and in the
following order of priority:
1. Vyvx shall pay IXC an amount equal to all **** up to ****.
2. After paying IXC **** of the **** Vyvx shall be entitled to retain
all **** up to the amount equal to the sum of **** plus the amount (the "****")
equal to the sum of (a) **** and (b) one half of the ****. The **** shall
include only ****. Such **** shall be the ****. The **** shall not include any
****.
3. After Vyvx receives the **** in the amount of **** plus the ****,
Vyvx shall pay IXC an amount equal to all **** up to ****.
4. After paying IXC **** Vyvx shall be entitled to retain all **** up to
****.
5. After the above Sales and distributions, Vyvx shall pay to IXC an
amount equal to ****.
By way of example, if the **** equal **** and the **** equal ****, Vyvx would
retain **** pursuant to Step 2, **** pursuant to Step 4, and **** pursuant to
Step 5) and Vyvx would pay IXC **** pursuant to Step 1, **** pursuant to Step 3,
and **** pursuant to Step 5).
D. Five (5) years after the Effective Date, the Parties will agree upon
the market value of the IRU's in any remaining Additional Fibers in which no IRU
has been Sold (the "Remaining Fibers"). Any dispute as to fair market value
shall be determined by arbitration as set forth below. 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
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
16
<PAGE> 17
Remaining Fibers will then be distributed in accordance with the following steps
and in the following order of priority:
Step 1. IXC shall be entitled to sole ownership in IRU's in the
Remaining Fibers such that the market value of the IRU's received is equal to
the difference between **** and the amount actually received by IXC under
paragraph C 1 above.
Step 2. To the extent any Remaining Fibers remain after Step 1, then
Vyvx shall be entitled to unencumbered ownership of the Remaining Fibers such
that the market value of IRU's in the Remaining Fibers received is equal to the
difference between the sum of **** plus the Incremental Costs and the amount
actually received by Vyvx under paragraph C 2 above.
Step 3. To the extent any Remaining Fibers remain after Step 2, then
IXC shall be entitled to sole ownership in IRU's in the Remaining Fibers such
that the market value of the IRU's received is equal to the difference between
**** and the amount actually received by IXC under paragraph C 3 above.
Step 4. To the extent any Remaining Fibers remain after Step 3, then
Vyvx shall be entitled to unencumbered ownership in the Remaining Fibers such
that the market value of IRU's in the Remaining Fibers received is equal to the
difference between **** and the amount actually received by Vyvx under
paragraph C 4 above.
Step 5. To the extent any Remaining Fibers remain after Step 4, then
IXC shall be entitled to sole ownership in IRU's in **** the Remaining Fibers
and Vyvx will have unencumbered ownership in **** of any Remaining Fibers.
Step 6. After completion of the foregoing five steps, all such
Remaining Fibers shall be deemed to be Sold and IXC shall no longer have the
Additional Fiber Option with respect to the Remaining Fibers.
E. During the period when Additional Fibers remaining are available for
IRU Sale either IXC or Vyvx may, in its sole discretion, choose to acquire sole
ownership (collectively "Purchase") in the IRU in any number of such Additional
Fibers at **** subject to comparable terms as third parties have obtained in
similar Sales of IRU's in the Additional Fibers. IXC and Vyvx shall mutually
agree upon the terms and conditions of such Sales. The non-purchasing Party may
not unreasonably withhold its approval to any such Sale. Any dispute as to ****
or other terms and conditions of such Sale shall be determined by arbitration
as set forth below. Any **** generated from the Sale of an IRU in the Additional
Fibers to IXC or Vyvx ****. The IRU in the Additional Fibers Purchased by
either IXC or Vyvx under this paragraph E shall be subject to the restriction
set forth in paragraph B of this Article as to any further transfer, sale or
exchange. Notwithstanding the foregoing, if either IXC or Vyvx presents to the
other Party an IRU exchange or a long-term leased capacity exchange with a
third party which such other Party does not
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
17
<PAGE> 18
elect to participate, then IXC or Vyvx, as the case may be, may Purchase
Additional Fibers **** and exchange those Purchased IRU's with such third party
transaction substantially similar to that presented to the other Party.
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. Within five (5) business days of receipt of any **** and
within thirty (30) business days of receipt of any **** the Selling Party
shall (i) pay any amounts to be paid to the Reviewing Party pursuant to
Paragraph C accompanied by evidence of the date of receipt of any amounts
by the Selling Party and (ii) deliver to the Reviewing Party a written
statement setting forth its computation of the amounts to be retained or
paid pursuant to Paragraph C. The Reviewing Party shall promptly notify the
Selling Party in writing: (x) of any reasons known to it that would make
such computation inaccurate or (y) that the computation is accurate. The
provisions of this Paragraph shall not prejudice the rights of either party
in the event the computation, or the review of the computation, are in
error.
H. Payments made in accordance with Paragraph G herein, shall
accrue interest according to Paragraph XXXVII. Late Payments the same as
any other payments, and this provision is equally applicable to **** paid
to date and not paid in accordance with this Agreement, unless otherwise
agreed in writing by the parties.
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
18
<PAGE> 19
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 **** 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. The temporary Lease Term shall begin on the date Vyvx elects
to lease under Article III and shall terminate upon the Both Party Completion
Date.
D. The Permanent Lease Term shall commence on the Both Party
Completion Date and terminate for any lease upon the earlier of (i) the
effective date of the exercise by the lessee of the Cash Option or the Notes
Option with respect to the IXC IRU Fibers or the Vyvx Leased Fibers, or (ii) the
**** anniversary of the Both Party Completion Date. Either or both of the
Parties may renew the Permanent Lease Term for an additional **** year term,
under the same terms and conditions as provided herein and under the same
payment terms, at fair market value to be determined at that time.
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
19
<PAGE> 20
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 4
hours, maintenance and repair services may be performed by Vyvx, subject to the
20
<PAGE> 21
provisions of applicable R of W Agreements. In such event, Vyvx may access any
part of the IXC System to perform such service. In the event Vyvx requires IXC
personnel to unlock any IXC facility, IXC shall cooperate fully with Vyvx to
allow Vyvx access. In those parts of the IXC System that Vyvx does not require
IXC personnel to enter IXC facilities, Vyvx shall provide IXC with oral
notification of those parts of the IXC System that were entered as soon as
possible. Vyvx shall only use the preceding rights to enter the IXC System to
the extent necessary for the emergency situation. IXC shall reimburse Vyvx its
direct costs and out-of-pocket expenses of providing such maintenance services.
Vyvx shall provide supporting documentation for such costs.
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 the negligence or wilful misconduct of IXC. 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) ****, for performance of the maintenance and repair services (excluding
the cost of repairing IXC Damage or Deterioration) set forth in this Article.
"Maintenance Charges" means any and all recurring fees, charges or monies of any
kind collected from third parties owning IRU's in the Additional Fibers in
consideration of Vyvx R of W Agreements or of Vyvx's maintenance to the
Additional Fibers. Maintenance Charges do not include any fees, charges or
monies of any kind collected from third parties owning or leasing IRU's in the
Additional Fibers which arise from specific occurrences (as opposed to being
recurring such as maintenance charges) such as those in consideration of
repairing damage resulting from a specific accident or disaster to, or
deterioration of the Vyvx System requiring replacement of fibers. The Parties
estimate that the amounts IXC will receive pursuant to Subparagraph H(2) will be
approximately equal to the difference between **** and the value of IXC's
maintenance and repair services, which are valued at **** per route mile
multiplied by four thousand, one hundred ninety eight (4,198), the number of
route miles on the IXC System.
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
21
<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
22
<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 4 hours,
maintenance and repair services may be performed by IXC subject to the
provisions of applicable R of W Agreements. In such event, IXC may access any
part of the Vyvx System to perform such services. In the event IXC requires Vyvx
personnel to unlock any Vyvx facility, Vyvx shall cooperate fully with IXC to
allow IXC access. In those parts of the Vyvx System that IXC does not require
Vyvx personnel to enter Vyvx facilities, IXC shall provide Vyvx with oral
notification of those parts of the Vyvx System that were entered as soon as
possible. IXC shall only use the preceding rights to enter the Vyvx System to
the extent necessary for the emergency situation. Vyvx shall reimburse IXC its
direct costs and out-of-pocket expenses of providing such maintenance services.
IXC shall provide supporting documentation for such costs.
23
<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 negligence or wilful misconduct of Vyvx. 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 route mile multiplied by one
thousand, seven hundred sixty four (1764), (the number of route miles on the
Vyvx System) 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.
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
<PAGE> 25
ARTICLE XV. PERMITS; PHYSICAL PLANT AND REQUIRED RIGHTS
A. As of the Both Party Completion Date 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 the Both Party Completion Date (or with respect to the New
Orleans Lateral, as of the New Orleans Lateral Completion Date), 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.
25
<PAGE> 26
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.
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
26
<PAGE> 27
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 **** but as a minimum (i) Vyvx shall be
assigned at least **** at optical amplifier sites, **** at regenerator sites and
**** at junction sites on the IXC System; and (ii) IXC shall be assigned at
least **** optical amplifier sites, **** at regenerator sites and **** at
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.
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
27
<PAGE> 28
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
28
<PAGE> 29
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.
29
<PAGE> 30
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.
30
<PAGE> 31
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
31
<PAGE> 32
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
32
<PAGE> 33
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
33
<PAGE> 34
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
34
<PAGE> 35
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
35
<PAGE> 36
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.
36
<PAGE> 37
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
37
<PAGE> 38
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,
38
<PAGE> 39
(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.
39
<PAGE> 40
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.
40
<PAGE> 41
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
41
<PAGE> 42
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.
42
<PAGE> 43
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.
43
<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. "Both Party Completion Date" means the later to occur of the IXC
IRU Acceptance Date or the Vyvx IRU Acceptance Date. The Both Party Completion
Date may occur before the New Orleans Lateral Completion Date.
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. "Late Fee Payment" shall have the definition set forth in the Article
entitled Completion of The Systems.
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.
47
<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. "Additional Lateral Cost" means Vyvx's actual incremental cost of
constructing the Additional Laterals (excluding the Additional Fiber Cost
attributable to the Additional Laterals). The Additional Lateral Cost shall
include only the increased costs incurred by Vyvx in constructing the Vyvx
System with the Additional Laterals over the costs it would have incurred had it
constructed the Vyvx System without the Additional Laterals, adjusted to
eliminate double counting of the Additional Fiber Cost when computing
Incremental Costs. For example, if Vyvx incurred incremental costs of $1 million
in constructing the Vyvx System with the Additional Fibers and $5 million in
constructing the Vyvx System with the Additional Laterals and if such $5 million
included $200,000 of the $1 million Additional Fiber Cost, the Incremental Costs
would be $1 million in Additional Fiber Cost plus $2.4 million in Additional
Lateral Cost ($5 million minus $200,000 with the difference divided by two). To
the extent Vyvx incurs costs that must be allocated between Additional Lateral
Costs and other costs, it shall allocate such costs, where practical (and where
the costs cannot be allocated directly) on the basis of the ratio of the number
of miles in the Additional Laterals to the number of miles in the Vyvx System,
with all mileage based on actual as-built route miles. For example, if Vyvx
purchased 1000 miles of fiber optic cable (with each spool containing cable of
the same type and with the same type and number of fibers) under one purchase
order and used 50 miles of the cable in the Additional Laterals and the
remainder elsewhere on its System, 1/20 of the cost of the fiber optic cable
(assuming the delivery costs were the same for all spools) would be allocated to
the Additional Lateral Cost (subject to the above-described adjustment to
eliminate double counting when computing Incremental Costs).
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. "NOL Late Fee Payments" shall have the definition set forth in
the Article entitled Completion of the Systems.
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. "Note Option" shall have the definition set forth in the Article
entitled Option to Acquire IRU's and Consideration.
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. IXC and Williams wish to terminate, for the consideration set forth below,
IXC's Additional Fiber Option with respect to six (6) Additional Fibers
(the "Supplemental Fibers") so that Williams will, subject to the
provisions of the IRU Agreement (other than those set forth in Article
XI), have the right to use and resell IRU rights in the Supplemental
Fibers.
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 be six (6) SMF-LS Additional Fibers selected by
Williams, with IXC's approval, which shall not be unreasonably withheld, on the
portion of the Vyvx System between Atlanta and Washington, D.C. (including
spurs).
1
<PAGE> 53
EXECUTION COPY
B. PAYMENT FOR TERMINATION. Williams shall, no later than January 31,
1999, pay IXC the amount of six million, three hundred fifty-five thousand,
eight hundred dollars ($6,355,800) which is product of:
1. 963, the estimated number of route miles along the Vyvx System
between Atlanta and Washington, D.C. (including spurs);
2. multiplied by six, the number of Supplemental Fibers;
3. multiplied by $2200, the parties' agreed valuation of the IRU
rights on such fibers;
4. multiplied by fifty percent, to account for IXC's Additional
Fiber Option to purchase a fifty percent IRU interest in the fibers.
At the time Williams provides IXC with as-built drawings pursuant to the
IRU Agreement, it shall also provide IXC with a written statement of the actual
route miles along the Vyvx System between Atlanta and Washington, D.C.
(including spurs) and any amount to be paid by Williams to IXC or by IXC to
Williams to reflect any difference between the amounts paid by Williams for the
Supplemental Fibers and the amounts that would have been paid if the actual
route miles had been used to compute such payment. The party owing such amount
shall pay such difference within thirty (30) days of delivery of such statement.
C. EFFECT OF TERMINATION. Except for purposes of calculating the
Incremental Costs, as of December 31, 1998, the Supplemental Fibers shall no
longer be deemed Additional Fibers or Remaining Fibers for purposes of the IRU
Agreement. Neither the money paid to IXC or by IXC pursuant to Paragraph B,
above, nor the value of the Supplemental Fibers paid for or retained by
Williams shall be deemed Additional Fiber Revenues.
II. REMOVAL OF RESTRICTIONS ON IRU SALES
A. On or after December 31, 1998, Williams may, notwithstanding the
restrictions set forth in Article XI of the IRU Agreement, sell IRU rights in
six (6) fibers, other than the Additional Fibers or the IXC IRU Fibers, on the
portion of the Vyvx System between Atlanta and Houston (including spurs). Such
sales shall not require IXC's approval and the resulting revenues shall not be
deemed Additional Fiber Revenues.
B. On or after December 31, 1998, IXC may, notwithstanding the
restrictions set forth in Article XI of the IRU Agreement, sell IRU rights in
two (2) of the IXC IRU Fibers on the Vyvx System (i.e., between Washington and
Houston, including spurs). Such sales shall not require Williams' approval and
the resulting revenues shall not be deemed Additional Fiber Revenues.
2
<PAGE> 54
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
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 10.21
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
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
1
<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
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
2
<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
4
<PAGE> 9
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.
5
<PAGE> 10
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
6
<PAGE> 11
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.
7
<PAGE> 12
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
8
<PAGE> 13
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.
9
<PAGE> 14
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
10
<PAGE> 15
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
11
<PAGE> 16
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
12
<PAGE> 17
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
13
<PAGE> 18
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.
14
<PAGE> 19
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
15
<PAGE> 20
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.
16
<PAGE> 21
(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.
17
<PAGE> 22
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
18
<PAGE> 23
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
19
<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:
20
<PAGE> 25
(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
21
<PAGE> 26
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
22
<PAGE> 27
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
23
<PAGE> 28
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
24
<PAGE> 29
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
25
<PAGE> 30
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):
26
<PAGE> 31
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
27
<PAGE> 32
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
28
<PAGE> 33
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.
29
<PAGE> 34
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).
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
<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.
2
<PAGE> 3
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:
3
<PAGE> 4
(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
4
<PAGE> 5
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
5
<PAGE> 6
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.
6
<PAGE> 7
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
7
<PAGE> 8
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,
8
<PAGE> 9
(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:
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
9
<PAGE> 10
(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
10
<PAGE> 11
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
11
<PAGE> 12
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
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
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"). The Purchaser
shall then have the right, but not the obligation, within fifteen (15) days of
receipt of the letter, ****. If Purchaser does not elect to exercise such
right, then the Company may proceed with the IPO but only at a price per share
equal to or greater than the IPO Price and only for the amount of IPO Shares not
less than eighty percent (80%) nor more than one hundred fifteen percent (115%)
of the amount offered to Purchaser; provided, (as defined in the ****
represented by the number of IPO Shares offered to the Purchaser has not
declined since the date of the letter from the nationally recognized investment
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
13
<PAGE> 14
banking firm. 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 10.24
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. Extension of APA Purchase Commitments..........................................8
SECTION 1.07. Cash Secured Advance...........................................................9
SECTION 1.08. Release of Funds from Collateral Purchase Accounts............................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>
ii
<PAGE> 4
<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. EITF 97-10....................................................................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
iii
<PAGE> 5
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
2
<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).
3
<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
5
<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. Extension of APA Purchase Commitments. (a) The initial
term of the APA Purchaser's Purchase Commitment (as defined in the APA) shall
expire on the Stated Purchase Termination Date (as defined in the APA), which
shall be the date 364 days after the Initial Funding Date. No earlier than the
60th day and no later than the 30th day before the expiration of the Stated
Purchase Termination Date, as the same may be extended from time to time, and
provided that the SPV is then the Note Holder of the Interim A-Notes and the
Interim B-Notes, or the A-Notes and the B-Notes, as the case may be, at the
written direction of the Company, the SPV shall, by written notice to each APA
Purchaser, request each APA Purchaser to renew its Purchase Commitment for at
least the 364 days immediately following the then Stated Purchase Termination
Date.
(b) If on or before the 15th Business Day prior to any then Stated Purchase
Termination Date occurring prior to the first to occur of (x) the Commitment
Termination Date and (y) the Interim Note Maturity Date, any APA Purchaser
declines to extend its Purchase Commitment for at least the 364 days immediately
following such Stated Purchase Termination Date, unless on or before the tenth
Business Day prior to such Stated Purchase Termination Date any other APA
Purchaser or APA Purchasers (including any Person who may thereby become an APA
Purchaser) shall have assumed or otherwise become obligated for the Purchase
Commitment of such declining APA Purchaser for a term of at least 364 days
immediately following such Stated Purchase Termination Date, the SPV shall, at
the direction of the Company and upon at least three Business Days' written
notice to the Trustee, the Agent, the Certificate Holders and the APA Agent,
simultaneously reduce (x) the Facility Amount (as defined in the Finance
Facility) and (y) the Maximum Purchase (as defined in the APA) amount pursuant
to Section 15(e) of the APA by (in each case) an amount equal to such declining
APA Purchaser's Purchase Commitment. Notwithstanding the foregoing, no such
reductions shall be permitted unless:
(i) on or before the effective date of such reduction **** shall
have received payment in full in cash of (A) the amount by which the
aggregate principal amount of all **** Advances owing by the SPV under the
Finance Facility would exceed the Facility Amount (as defined therein)
immediately after giving effect to such reduction plus (B) the aggregate
unpaid interest payable on the amount of such excess **** Advances through
the maturity dates thereof; and
(ii) if the effective date of such reduction occurs (A) prior to the
Commitment Termination Date, either (1) the Company shall have caused the
Interim A-Note Commitment and the Interim B-Note Commitment to be reduced
by the amount of such Purchase Commitment and the Certificate Commitment is
reduced pro rata provided,
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
8
<PAGE> 13
however, that 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, and, to
the extent the amount of such Purchase Commitment exceeds the Interim
A-Note Commitment and the Interim B-Note Commitment, the Lessee shall
have effected a Partial Termination in accordance with the provisions
of Section 5.02 of the Lease, or (2) the Lessee shall have effected a
Partial Termination in accordance with the provisions of Section 5.02
of the Lease with respect to such Property that has aggregate
Termination Value of an amount equal to or greater than such Purchase
Commitment, or (B) on or after the Commitment Termination Date, the
Lessee shall have effected a Partial Termination in accordance with the
provisions of Section 5.02 of the Lease with respect to such Property
that has aggregate Termination Value of an amount equal to or greater
than such Purchase Commitment; and
(iii) the Facility Amount immediately after giving effect to
such reduction is at least $100,000,000.
(c) If any APA Purchaser does not agree to renew its Purchase
Commitment on or before the 15th Business Day prior to its Stated Purchase
Termination Date, such APA Purchaser will be deemed to have declined to renew
its Purchase Commitment.
(d) The Company and the Trustee acknowledge that if (i) any APA
Purchaser declines or is deemed to have declined to renew its Purchase
Commitment as set forth above in this Section 1.06, (ii) no other APA Purchaser
or APA Purchasers (including any Person who may thereby become an APA Purchaser)
shall have assumed or otherwise become obligated for such Purchase Commitment in
accordance with Section 1.06(b), and (iii) the Company has not caused
the Facility Amount and the Maximum Purchase to be reduced by an amount equal to
such Purchase Commitment in accordance with Section 1.06(b), then, subject to
Section 1.07(a), the APA Purchasers (including each APA Purchaser that does not
extend its Purchase Commitment) will be required to purchase Percentage
Interests to the full extent of their respective Purchase Commitments on the
Business Day immediately preceding the then Stated Purchase Termination Date in
accordance with the terms and provisions of the APA.
SECTION 1.07. Cash Secured Advance. (a) If (i) any APA Purchaser
declines or is deemed to have declined to renew its Purchase Commitment as set
forth above in Section 1.06 prior to the first to occur of (x) the Commitment
Termination Date and (y) the Interim Note Maturity Date (ii) no other APA
Purchaser or APA Purchasers (including any Person who may thereby become an APA
Purchaser) shall have assumed or otherwise become obligated for such Purchase
Commitment in accordance with Section 1.06 (b), and (iii) the Company has not
caused the Facility Amount and the
9
<PAGE> 14
Maximum Purchase to be reduced by an amount equal to such Purchase Commitment in
accordance with Section 1.06(b), then on or before the fifth Business Day before
such Stated Purchase Termination Date the SPV shall, if and only if instructed
by the Agent or the Company, deliver to each APA Purchaser (including each APA
Purchaser which does not extend its Purchase Commitment) a notice containing a
request that such APA Purchaser purchase on the Business Day immediately
preceding such Stated Purchase Termination Date (such Business Day being the
"Cash Secured Advance Date") undivided interests in (i) all outstanding advances
under the Finance Facility and all interest payable on such advances through the
maturity dates thereof and all outstanding Notes and (ii) any Cash Secured
Advances being made on the Cash Secured Advance Date pursuant to Section 1.01(d)
for an aggregate purchase price (the "APA Purchaser's Price") for such APA
Purchaser equal to the sum of (A) the amounts payable under Sections 2 and 4 of
the APA as if it were obligated under such Sections to acquire on the Cash
Secured Advance Date its maximum share of interests described therein plus (B)
the lesser of (1) the excess of its Percentage (as defined in the APA) of the
full amount of such APA Purchaser's unused Purchase Commitment (as defined in
the APA) in effect on the Cash Secured Advance Date minus all principal amounts
of **** Advances included in clause (A) of this sentence, or (2) or such lesser
amount as may be specified in such request for Cash Secured Advances.
(b) Each APA Purchaser agrees that, upon receipt of a request pursuant to
Section 1.07(a) and so long as the Purchase Termination Date (as defined in the
APA) shall not have occurred before the Cash Secured Advance Date, such APA
Purchaser shall, by 11:00 a.m. (New York City time) on the Cash Secured Advance
Date, establish its account (a "Collateral Purchase Account") and make available
the full purchase price payable by it under Section 1.07(a) by:
(i) paying to the Agent in the same day funds the amount payable by
such APA Purchaser as described in clause (A) of Section 1.07(a) in
consideration of its purchase of the interests contemplated by Sections 2
and 4 of the APA; and
(ii) depositing the balance of the APA Purchaser's Price in same day
funds in such APA Purchaser's Collateral Purchase Account.
Each such deposit by an APA Purchaser under clause (ii) of this Section 1.07(b)
shall constitute (A) a payment to the SPV by such APA Purchaser of the purchase
price payable by it under Section 1.07(a) in respect of its undivided interest
in Cash Secured Advances, (B) an advance by the SPV to the Trustee of a Cash
Secured Advance in the amount of such deposit pursuant to Section 1.06(d) and
(C) a pledge and deposit by the Trustee of cash in
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
10
<PAGE> 15
the amount of such deposit to secure the obligations of the Trustee to repay
such Cash Secured Advance. Each APA Purchaser in its discretion may invest the
credit balance in such APA Purchaser's Collateral Purchase Account, and the
proceeds and earnings thereof, for the account of the Trustee in Permitted
Investments and even if not then a Permitted Investment interest bearing
deposit accounts of such APA Purchaser (which may be represented by short-term
certificates of deposit, time deposit, open account agreements or other short
term deposit instruments), provided, however, that such APA Purchaser shall
bear the full risk of loss with respect to any such investment of the credit
balance.
(c) Upon receipt by the Agent from any APA Purchaser of the funds
referred to in Section 1.07(b)(i), the Agent will cause such funds to be
immediately applied in accordance with the applicable provisions of the APA.
Upon receipt by **** of payment in full from each APA Purchaser of the payments
called for pursuant to Section 2 of the APA (whether as a result of purchase of
interests contemplated by Section 2 or Section 4 of the APA), **** shall
thereafter cease to make any further advances to the SPV under the Finance
Facility.
SECTION 1.08. Release of Funds from Collateral Purchase Accounts: (a)
Each APA Purchaser agrees, on the terms and conditions set forth in the
Operative Documents and so long as the Commitment Termination Date shall not
have occurred, to release from its Collateral Purchase Account on each Funding
Date during the period from the Cash Secured Advance Date until the Interim
Note Maturity Date (such period being the "Collateral Purchase Account
Period"), an amount (its "Release Amount") equal to the lesser of its
Percentage (as defined in the APA) of any Advance to be made by the SPV on such
Funding Date or the remaining credit balance in its Collateral Purchase Account
by depositing its Release Amount in an account designated by the Agent at
Citibank, N.A., 399 Park Avenue, New York, New York 10043. The paries hereto
agree that each such deposit by an APA Purchaser under this Section 1.08 shall
constitute (A) a prepayment by the Trustee to the extent of such deposit on
account of the interest owned by such APA Purchaser in a Cash Secured Advance
and (B) the making by the SPV and the receipt by the Trustee, to the extent of
such deposit, of an Advance by the SPV (or portion thereof) pursuant to Section
1.03 on such Funding Date.
(b) Unless the Agent shall have received notice from an APA Purchaser
prior to the date of any scheduled release of funds from the Collateral Purchase
Accounts that such APA Purchaser will not make available the amount required to
be released by such APA Purchaser, the Agent may assume that such APA Purchaser
has made the deposit in accordance with Section 1.08(a) on the date on which
such deposit is to be made, and the Agent may, in reliance upon such
assumption, make available to
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
11
<PAGE> 16
the Trustee on such date a corresponding amount. If and to the extent that an
APA Purchaser shall not have so made the required deposit, such APA Purchaser
agrees to repay to the Agent forthwith on demand the principal amount of such
required deposit together with interest thereon, for each day from the date such
amount is made available to the Trustee until the date such amount is repaid to
the Agent at the Federal Funds Rate. If such APA Purchaser shall repay to the
Agent such corresponding amount, such amount so repaid shall constitute the
release by the APA Purchaser of the amount required to be released by it for
purposes of this Agreement. So long as such APA Purchaser fails to repay to the
Agent such corresponding amount, the Agent shall have all rights of the APA
Purchaser to receive payments otherwise due to the APA Purchaser under the
Operative Documents and the Securitization Documents until the Agent shall have
received payment in full of such corresponding amount.
(c) The failure of any APA Purchaser to release any amount required to
be released from its Collateral Purchase Account shall not relieve any other APA
Purchaser of its obligation, if any, hereunder to release an amount from its
Collateral Purchase Account in accordance with this Agreement, but no APA
Purchaser shall be responsible for the failure of any other APA Purchaser to
release any amount from a Collateral Purchase Account of such other APA
Purchaser.
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.
12
<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.
13
<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,
14
<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;
15
<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
16
<PAGE> 21
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
17
<PAGE> 22
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
18
<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
19
<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
20
<PAGE> 25
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
21
<PAGE> 26
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
22
<PAGE> 27
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
23
<PAGE> 28
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.
24
<PAGE> 29
(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
25
<PAGE> 30
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
26
<PAGE> 31
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
27
<PAGE> 32
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.
28
<PAGE> 33
(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.
29
<PAGE> 34
(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
30
<PAGE> 35
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
31
<PAGE> 36
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
32
<PAGE> 37
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.
33
<PAGE> 38
(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.
34
<PAGE> 39
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;
35
<PAGE> 40
(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
36
<PAGE> 41
(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"
37
<PAGE> 42
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
38
<PAGE> 43
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:
39
<PAGE> 44
(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
40
<PAGE> 45
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
41
<PAGE> 46
(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
42
<PAGE> 47
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
43
<PAGE> 48
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
44
<PAGE> 49
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
45
<PAGE> 50
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
46
<PAGE> 51
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
47
<PAGE> 52
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
48
<PAGE> 53
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
49
<PAGE> 54
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
50
<PAGE> 55
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.
51
<PAGE> 56
(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
52
<PAGE> 57
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.
53
<PAGE> 58
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
54
<PAGE> 59
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
55
<PAGE> 60
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
56
<PAGE> 61
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
57
<PAGE> 62
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
58
<PAGE> 63
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
59
<PAGE> 64
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
60
<PAGE> 65
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;
61
<PAGE> 66
(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
62
<PAGE> 67
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
63
<PAGE> 68
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
64
<PAGE> 69
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
65
<PAGE> 70
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
66
<PAGE> 71
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
67
<PAGE> 72
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
68
<PAGE> 73
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
69
<PAGE> 74
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
70
<PAGE> 75
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
71
<PAGE> 76
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.
72
<PAGE> 77
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
73
<PAGE> 78
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;
74
<PAGE> 79
(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
75
<PAGE> 80
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
76
<PAGE> 81
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,
77
<PAGE> 82
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
78
<PAGE> 83
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
79
<PAGE> 84
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
80
<PAGE> 85
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
81
<PAGE> 86
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
82
<PAGE> 87
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
83
<PAGE> 88
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
84
<PAGE> 89
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
85
<PAGE> 90
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. EITF 97-10. (a) The Operative Documents have been
negotiated by the parties thereto with a view to assuring that the Company, as
Lessee, is not considered the owner of a project, for accounting purposes, in
respect of any Project prior to the Completion Date, and, accordingly, include
certain limitations on indemnities and guarantees by the Company which the
Company and the Company's Independent Accountants (as defined below) have
advised are or may be required by EITF 97-10.
(b) If there is an Adverse Accounting Determination (as defined
below), however, the parties hereto agree to negotiate in good faith changes in
the Operative Documents that both (i) cure the Adverse Accounting Determination
and (ii) preserve and maintain the respective economic interests, rights,
remedies, liabilities and obligations of the parties under the Operative
Documents, including the credit, payment, return and security terms thereof,
subject in each case to the provisions in paragraphs (c) and (d) of this
Section; provided, however, that within a reasonable time period prior to
commencement of such negotiations, the Company shall give all of the parties
hereto written notice of the Adverse Accounting Determination, which notice
shall specify in reasonable detail the basis for such Adverse Accounting
Determination and the changes in the Operative Documents which the Company and
the Company's Independent Accountants consider are required to cure such Adverse
Accounting Determination. If requested by the Majority Holders, the Purchasers'
Accountants may review such Adverse Accounting Determination, the basis therefor
and the changes in the
89
<PAGE> 94
Operative Documents which the Company and the Company's Independent Accountants
consider are required to cure such Adverse Accounting Determination.
(c) The Company will be responsible for all costs and expenses
incurred in connection with any changes requested by the Company pursuant to
this Section including reasonable fees and expenses of counsel for the Trustee,
the Agent, the Collateral Agent, the Note Holders and the Certificate Holders,
reasonable fees and expenses of the Purchaser's Accountants, and all fees and
expenses of the Company's Independent Accountants.
(d) This Section does not, and should not be construed as, creating
any binding obligation or commitment on the part of any party hereto to agree to
any amendment, modification or supplement of any kind in or to any of the
Operative Documents. Without limiting the generality of the foregoing, any party
hereto may determine not to agree to a proposed change in the Operative
Documents notwithstanding that such change is the only cure for an Adverse
Accounting Determination, provided that (i) such party shall have negotiated in
good faith as provided in paragraph (b) of this Section and (ii) this sentence
shall not give any party any greater (or lesser) rights in respect of required
approvals or consents or otherwise change the requirements for amendments,
modifications or waivers of the Operative Documents set forth in Section 8.04 of
this Agreement or any other Operative Document.
(e) For purposes of this Section, the following terms shall have the
meanings set forth below:
The term "Adverse Accounting Determination" means a determination by
the Company or the Company's Independent Accountants that, based on
interpretations or amendments of EITF 97-10 as proscribed by GAAP for companies
reporting to the Securities and Exchange Commission after the date hereof, the
Company should be considered the owner of a project for accounting purposes, in
respect of any Project prior to the Completion Date as a direct result of the
failure of the Operative Documents to comply with EITF 97-10.
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
<PAGE> 118
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
2
<PAGE> 119
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.
3
<PAGE> 120
"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.
4
<PAGE> 121
"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
5
<PAGE> 122
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.
6
<PAGE> 123
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.
7
<PAGE> 124
"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
8
<PAGE> 125
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.
9
<PAGE> 126
"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,
10
<PAGE> 127
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.
11
<PAGE> 128
"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.
12
<PAGE> 129
"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
13
<PAGE> 130
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.
14
<PAGE> 131
"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
15
<PAGE> 132
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
16
<PAGE> 133
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
17
<PAGE> 134
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.
10
<PAGE> 135
"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.
19
<PAGE> 136
"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,
20
<PAGE> 137
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;
21
<PAGE> 138
(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
22
<PAGE> 139
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.
23
<PAGE> 140
"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.
24
<PAGE> 141
"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,
25
<PAGE> 142
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
26
<PAGE> 143
"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.
27
<PAGE> 144
"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
28
<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.
29
<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
30
<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.
31
<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
32
<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.
33
<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:
34
<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.
35
<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.
36
<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
37
<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.
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
38
<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.
39
<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
40
<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
41
<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
<PAGE> 161
"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) wars, (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).
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
<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.
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
<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.
2.2 GRANTOR SHORTFALL IN CAPACITY. (a) In the event that the Grantor
gives notice (which such notice must be received by the Purchaser within ten
(10) Business Days of the relevant Service Order) to the Purchaser that it
cannot provide any portion of the Required Capacity (including Designated
Off-Net Capacity) either On-Net or Off-Net after exercising reasonable
commercial efforts to provision such Capacity (a "Required Capacity
Shortfall"), the Purchaser shall be entitled to attempt to locate a carrier
able to provision the Required Capacity Shortfall. In the event that (i) the
Purchaser is able to locate a carrier willing to provision the Required
Capacity Shortfall at commercially reasonable rates (the "Shortfall Carrier"),
the Purchaser shall notify the Grantor of the identity of such carrier and the
Grantor shall then be required to issue orders with respect of the Required
Capacity Shortfall at the Rates (or, in the case of Designated Off-Net
Capacity, at the Off-Net Rate), within two (2) days of the Purchaser's notice
to the Grantor; however, if, after notice from the Purchaser, the Grantor then
continues to fail to provision the Required Capacity Shortfall, the Purchaser
shall be entitled to provision the Required Capacity Shortfall with the
Shortfall Carrier **** or (ii) the Purchaser is unable to locate a carrier
willing to provision the Required Capacity Shortfall at commercially reasonable
rates, the Grantor shall not be obligated to provision the Required Capacity
Shortfall and the Purchaser shall not have any remedy for the Grantor's
failure to provision the Required Capacity Shortfall: provided that the Grantor
shall be obligated to continue to use commercially reasonable efforts to
provision the Required Capacity Shortfall (either On-Net or Off-Net) at the
earliest reasonable date that Capacity (either On-Net or Off-Net) becomes
available.
(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.
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
<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
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
<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 ****
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
<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
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
<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
<PAGE> 16
16
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 herein 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
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
<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.
<PAGE> 18
18
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.
<PAGE> 20
20
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
<PAGE> 21
21
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
<PAGE> 22
22
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]
<PAGE> 23
23
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
<PAGE> 27
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
<PAGE> 31
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
<PAGE> 32
32
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
<PAGE> 33
33
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.
<PAGE> 34
34
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/
------------------------------
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 Line Pricing ($/VGE V&H mi) unless otherwise specified
- --------------------------------------------------------------------------------------------------------
New Commitment DS3 OC3 OC12 OC48 OC192*
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
**** **** **** **** **** **** ****
**** **** **** **** **** **** ****
**** **** **** **** **** **** ****
**** **** **** **** **** **** ****
**** **** **** **** **** **** ****
- --------------------------------------------------------------------------------------------------------
</TABLE>
*OC192 pricing is $/VGE route mile
<TABLE>
<CAPTION>
OS-3 Non-Recurring/Ancillary
- --------------------------------------------------------------------------------------------------------
IXC Cross-Connect Local Loop Admin
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Installation $ 2,000.00 N/C $ 100.00
- --------------------------------------------------------------------------------------------------------
Chng of Req. Svc Date-Initial N/C N/C $ 100.00
- --------------------------------------------------------------------------------------------------------
Chng of Req. Svc Date-Subsequent $ 500.00 $ 250.00 $ 100.00
- --------------------------------------------------------------------------------------------------------
Chng of Order - Administration N/C N/C $ 100.00
- --------------------------------------------------------------------------------------------------------
Chng of Order - Pre-Engineering $ 500.00 $ 250.00 $ 100.00
- --------------------------------------------------------------------------------------------------------
Chng of Order - Post-Engineering $ 2,000.00 $ 500.00 $ 100.00
- --------------------------------------------------------------------------------------------------------
Order Cancellation - Pre-Engineering $ 500.00 $ 250.00 $ 100.00
- --------------------------------------------------------------------------------------------------------
Order Cancellation - Post-Engineering $ 2,000.00 $ 500.00 $ 100.00
- --------------------------------------------------------------------------------------------------------
Change of Service - Admin N/C N/C $ 100.00
- --------------------------------------------------------------------------------------------------------
Change of Service - Re-Engineering $ 2,000.00 $ 500.00 $ 100.00
- --------------------------------------------------------------------------------------------------------
Off-Net Ancillary - Recurring Passthrough
- --------------------------------------------------------------------------------------------------------
Off-Net Ancillary - Non-Recurring Passthrough
- --------------------------------------------------------------------------------------------------------
Contract Termination 100% of remain contract life
- --------------------------------------------------------------------------------------------------------
Additional Install/Maint/Eng/Tech Chngs $100.00/Hr, $125.00/Hr After hours
- --------------------------------------------------------------------------------------------------------
Local Loop Billing Admin $ 150.00
- --------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
OC-3 Non-Recurring/Ancillary
- --------------------------------------------------------------------------------------------------------
IXC Cross-Connect Local Loop Admin
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Installation $ 5,000.00 N/C $ 300.00
- --------------------------------------------------------------------------------------------------------
Chng of Req. Svc Date-Initial N/C N/C $ 300.00
- --------------------------------------------------------------------------------------------------------
Chng of Req. Svc Date-Subsequent $ 1,250.00 $ 500.00 $ 300.00
- --------------------------------------------------------------------------------------------------------
Chng of Order - Administration N/C N/C $ 300.00
- --------------------------------------------------------------------------------------------------------
Chng of Order - Pre-Engineering $ 1,250.00 $ 500.00 $ 300.00
- --------------------------------------------------------------------------------------------------------
Chng of Order - Post-Engineering $ 5,000.00 $ 1,250.00 $ 300.00
- --------------------------------------------------------------------------------------------------------
Order Cancellation - Pre-Engineering $ 1,250.00 $ 500.00 $ 300.00
- --------------------------------------------------------------------------------------------------------
Order Cancellation - Post-Engineering $ 5,000.00 $ 1,250.00 $ 300.00
- --------------------------------------------------------------------------------------------------------
Change of Service - Admin N/C N/C $ 300.00
- --------------------------------------------------------------------------------------------------------
Change of Service - Re-Engineering $ 5,000.00 $ 1,250.00 $ 300.00
- --------------------------------------------------------------------------------------------------------
Off-Net Ancillary - Recurring Passthrough
- --------------------------------------------------------------------------------------------------------
Off-Net Ancillary - Non-Recurring Passthrough
- --------------------------------------------------------------------------------------------------------
Contract Termination 100% of remain contract life
- --------------------------------------------------------------------------------------------------------
Additional Install/Maint/Eng/Tech Chngs $100.00/Hr, $125.00/Hr After hours
- --------------------------------------------------------------------------------------------------------
Local Loop Billing Admin $ 150.00
- --------------------------------------------------------------------------------------------------------
</TABLE>
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
<PAGE> 44
Rates
<TABLE>
<CAPTION>
OC-12 Non-recurring/Ancillary
- --------------------------------------------------------------------------------------------------------
IXC CROSS-CONNECT LOCAL LONG ADMIN
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Installation $ 18,000.00 N/C $ 1,000.00
- --------------------------------------------------------------------------------------------------------
Chng of Req. Svc Date - Initial N/C N/C $ 1,000.00
- --------------------------------------------------------------------------------------------------------
Chng of Req. Svc Date - Subsequent $ 3,500.00 $ 1,500.00 $ 1,000.00
- --------------------------------------------------------------------------------------------------------
Chng of Order - Administration N/C N/C $ 1,000.00
- --------------------------------------------------------------------------------------------------------
Chng of Order - Pre-Engineering $ 3,500.00 $ 1,500.00 $ 1,000.00
- --------------------------------------------------------------------------------------------------------
Chng of Order - Post-Engineering $ 18,000.00 $ 3,500.00 $ 1,000.00
- --------------------------------------------------------------------------------------------------------
Order Cancellation - Pre-Engineering $ 3,500.00 $ 1,500.00 $ 1,000.00
- --------------------------------------------------------------------------------------------------------
Order Cancellation - Post-Engineering $ 18,000.00 $ 3,500.00 $ 1,000.00
- --------------------------------------------------------------------------------------------------------
Change of Service - Admin N/C N/C $ 1,000.00
- --------------------------------------------------------------------------------------------------------
Change of Service - Re-Engineering $ 18,000.00 $ 3,500.00 $ 1,000.00
- --------------------------------------------------------------------------------------------------------
Off-Net Ancillary - Recurring Passthrough
- --------------------------------------------------------------------------------------------------------
Off-Net Ancillary - Non-Recurring Passthrough
- --------------------------------------------------------------------------------------------------------
Contract Termination 100% of remain contract life
- --------------------------------------------------------------------------------------------------------
Additional Install/Maint/Eng/Tech Chgs $100.00/Hr, $125.00/Hr After hours
- --------------------------------------------------------------------------------------------------------
Local Loop Billing Admin $ 150.00
- --------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
OC-42 Non-recurring/Ancillary
- --------------------------------------------------------------------------------------------------------
IXC CROSS-CONNECT LOCAL LONG ADMIN
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Installation $ 48,000.00 N/C $ 3,500.00
- --------------------------------------------------------------------------------------------------------
Chng of Req. Svc Date - Initial N/C N/C $ 3,500.00
- --------------------------------------------------------------------------------------------------------
Chng of Req. Svc Date - Subsequent $ 12,000.00 $ 5,000.00 $ 3,500.00
- --------------------------------------------------------------------------------------------------------
Chng of Order - Administration N/C N/C $ 3,500.00
- --------------------------------------------------------------------------------------------------------
Chng of Order - Pre-Engineering $ 12,000.00 $ 5,000.00 $ 3,500.00
- --------------------------------------------------------------------------------------------------------
Chng of Order - Post-Engineering $ 48,000.00 $ 12,000.00 $ 3,500.00
- --------------------------------------------------------------------------------------------------------
Order Cancellation - Pre-Engineering $ 12,000.00 $ 5,000.00 $ 3,500.00
- --------------------------------------------------------------------------------------------------------
Order Cancellation - Post-Engineering $ 48,000.00 $ 12,000.00 $ 3,500.00
- --------------------------------------------------------------------------------------------------------
Change of Service - Admin N/C N/C $ 3,500.00
- --------------------------------------------------------------------------------------------------------
Change of Service - Re-Engineering $ 48,000.00 $ 12,000.00 $ 3,500.00
- --------------------------------------------------------------------------------------------------------
Off-Net Ancillary - Recurring Passthrough
- --------------------------------------------------------------------------------------------------------
Off-Net Ancillary - Non-Recurring Passthrough
- --------------------------------------------------------------------------------------------------------
Contract Termination 100% of remain contract life
- --------------------------------------------------------------------------------------------------------
Additional Install/Maint/Eng/Tech Chgs $100.00/Hr, $125.00/Hr After hours
- --------------------------------------------------------------------------------------------------------
Local Loop Billing Admin $ 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
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
<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
Schedule 5
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MONTHLY
EQUIVALENT
POSITION SALARY RANGE MIDPOINT RATE MULTIPLIER YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
PJT MGR/SR. NET PLANNER **** **** **** 1.7 **** **** **** **** ****
SR. NETWORK PLANNER **** **** **** 1.7 **** **** **** **** ****
NETWORK CIRCUIT DESIGNE **** **** **** 1.7 **** **** **** **** ****
NETWORK PROVIS **** **** **** 1.7 **** **** **** **** ****
SYSTEM ENGINEER **** **** **** 1.7 **** **** **** **** ****
ACCOUNTING MANAGER **** **** **** 1.7 **** **** **** **** ****
ACCOUNTING CLERK **** **** **** 1.7 **** **** **** **** ****
ACCOUNTING CLERK **** **** **** 1.7 **** **** **** **** ****
ACCOUNTING CLERK **** **** **** 1.7 **** **** **** **** ****
AVERAGE MULTIPLIER RATE 1.7 $58,817 $52,708 $58,548 $50,270 $50,118
</TABLE>
Note 1 Table reflects budgetary model only. Resources will be billed at
Actual Salary rate multiplied by multiplier rate.
Note 2 Multiplier rate includes benefits, payroll taxes, administrative costs
and profit margin.
Note 3 Resources listed represent minimum staffing levels and may be adjusted
upward upon consent of Grantor and purchaser.
Note 4 Relocation Costs will be invoiced as ACTUAL plus a 10 percent
administrative fee and will be capped at 25% of the leaded annual
employee cost.
Note 5 Relocation expenses will fall in accordance with Williams
Communication, INC. employee relocation policy.
Note 6 Expenses (travel & capital) will invoiced as ACTUAL.
Note 7 In years 2 through 5 merit increases are calculated at a rate equal
to 5%.
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
<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.
7. ****
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
<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 effective retroactively
to January 1, 1999. The Off-Net Rate Tables are effective April 1, 1999. 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.
11. The On-Net Rate Tables have rates that are determined by the monthly volume
of on-net capacity used by Intermedia, as measured in DS-0 equivalent miles.
Intermedia's rates for on-net capacity each year will be "**** DSO Equivalent
On-net Mileage per month" rates. ****
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
<PAGE> 55
Letter Amendment
Page 4
****
12. The rates set forth in Annexes 1 and 2 are fixed for the calendar years
1999, 2000 and 2001, and will only be revisited during those years if Intermedia
has a good faith basis to assert that the overall market price for
telecommunications capacity in the United States has fallen by more than ****
below these rates. The parties will attempt to resolve any disagreement
regarding the overall market price and any adjustments to be made to the rates.
If the parties are unable to resolve any disagreement, determination of such a
change in the overall market prices will be initiated by Intermedia using an
independent, third-party consultant (the "Appraiser") reasonably acceptable to
both parties. Once the Appraiser is accepted by both parties, the Appraiser
shall determine whether overall market prices have declined by **** or more. If
the Appraiser determines that such a reduction has not occurred, the rates will
remain unchanged, and Intermedia shall bear the entire cost of the Appraiser. If
the Appraiser determines that such a reduction has occurred, the rates will
decreased in a percentage equal to the percentage amount of the reduction,
effective on a prospective basis, but in no event more than three (3) months
from the date Intermedia initiated retention of the Appraiser, and Williams
shall bear the entire cost of the appraiser. This process of using an Appraiser
shall be used no more than once in any calendar year. For purposes of this
paragraph 12, "overall market price" shall be determined with reference to
pricing that is available on a nationwide basis, disregarding segment-specific
pricing and promotional pricing.
13. Further reductions of the rates set forth in Annexes 1 and 2 for calendar
year 2002 and subsequent years under the CPA will be established by mutual
agreement during the 3rd Quarter of calendar year 2001. The objective of any
reduction in rates will be to ensure that Intermedia continues to receive
favorable pricing relative to the prevailing market. If no agreement can be
reached to reduce the rates, Intermedia shall have the right to either accept
the then-current rates or initiate the retention of an Appraiser, reasonably
acceptable to both parties, to resolve the parties' differences. Once the
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
<PAGE> 56
Letter Amendment
Page 5
Appraiser is accepted by both parties, the Appraiser shall determine whether
overall market prices have declined below the current rates being charged to
Intermedia. If the Appraiser determines that such a reduction has not occurred,
the rates will remain unchanged, and Intermedia shall bear the entire cost of
the Appraiser. If the Appraiser determines that such a reduction has occurred,
the rates will be decreased in a percentage equal to the percentage amount of
the reduction, effective from the first day of the applicable calendar year, and
Williams shall bear the entire cost of the Appraiser. This process of using an
Appraiser shall be used no more than once in any calendar year. For purposes of
this paragraph 13, "overall market price" and "prevailing market" shall be
determined with reference to pricing that is available on a nationwide basis,
disregarding segment-specific pricing and promotional pricing.
14. Intermedia agrees to maintain minimum revenue commitments (the "Minimum
Commitments") to Williams on a calendar year basis as follows: **** from January
1, 1999 to December 31, 1999; **** from January 1, 2000 to December 31, 2000;
**** from January 1, 2001 to December 31, 2001; **** from January 1, 2002 to
December 31, 2002; **** for each of the succeeding five (5) calendar years
beginning January 1, 2003 and ending December 31, 2007; **** for each of the
next succeeding five (5) calendar years beginning January 1, 2008 and ending
December 31, 2012; **** for each of the next succeeding five (5) calendar years
beginning January 1, 2013 and ending December 31, 2017. Payments by Intermedia
to Williams for the period January 1, 2018 to March 31, 2018, shall be applied
to the Minimum Commitment for the 2017 calendar year. **** If Intermedia fails
to achieve the Minimum Commitment in any calendar year, upon the later of
forty-five (45) days after the due date for any re-rate payment under paragraph
11, above, if applicable, or forty-five (45) days after the end of the calendar
year, Intermedia shall pay to Williams an amount equal to the difference between
the Minimum Commitment and the payments made by Intermedia for that year (the
"Shortfall Payment"). **** The Minimum Commitments shall supersede the Purchased
Capacity requirements set forth in the CPA,
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
<PAGE> 57
Letter Amendment
Page 6
and the right of Intermedia to apply the Excess to immediately succeeding
calendar years and Intermedia's Shortfall Payment obligations shall supersede
the Purchased Capacity Shortfall provisions set forth in the CPA.
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:
****
Portability
16. Any on-net circuit purchased by Intermedia from Williams under the CPA may
be terminated and/or replaced by Intermedia with other circuits after six (6)
months with no termination charges. Termination or replacement of on-net
circuits within six (6) months of provision will be addressed on an individual
case basis. Any new off-net circuit of DS-3 level or lesser capacity purchased
by Intermedia as of March 1, 1999 shall have a minimum term commitment of one
(1) year unless otherwise ordered by Intermedia or agreed to by the parties on
an individual case basis. Termination of any such DS-3 level or lesser capacity
off-net circuit after one (1) year shall not result in any termination charges.
Any Local Access circuit purchased by Intermedia from Williams under the CPA may
be terminated and/or replaced by Intermedia with other circuits with no
termination charges provided that Williams would not be subject to termination
charges as set forth in Annex 6 (Portability) which is attached hereto and
hereby made a part hereof.
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
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
<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.
**** Intermedia will assume the cost of interim local loops used in lieu of
completed interconnects on a cost pass-through basis. Where an interconnect is
delayed for any reason beyond the applicable schedule set forth in Annex 4,
Williams shall pay for **** of the associated local access costs commencing on
the first day of the fifth month following the scheduled date until such time as
the permanent interconnect is available for use. However, if Intermedia cancels
an interconnect build in progress, Intermedia shall thereafter pay **** of the
associated local access costs. 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.
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
<PAGE> 59
Letter Amendment
Page 8
22. ****
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
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
<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 ANNEX 1
ON-NET RATE TABLES
TABLE 1 - 1999 On-net Capacity Price Table
<TABLE>
<CAPTION>
DS0 Equivalent On-net Mileage
per month at December 31 DS3 OC3 OC12 OC48 OC192
<S> <C> <C> <C> <C> <C>
<100,000,000 **** **** **** **** ****
100,000,001 - 200,000,000 **** **** **** **** ****
200,000,001 - 300,000,000 **** **** **** **** ****
> 300,000,000 **** **** **** **** ****
</TABLE>
TABLE 2 - 2000 On-net Capacity Price Table
<TABLE>
<CAPTION>
DS0 Equivalent On-net Mileage
per month at December 31 DS3 OC3 OC12 OC48 OC192
<S> <C> <C> <C> <C> <C>
<100,000,000 **** **** **** **** ****
100,000,001 - 200,000,000 **** **** **** **** ****
200,000,001 - 300,000,000 **** **** **** **** ****
> 300,000,000 **** **** **** **** ****
</TABLE>
TABLE 3 - 2001 On-net Capacity Price Table
<TABLE>
<CAPTION>
DS0 Equivalent On-net Mileage
per month at December 31 DS3 OC3 OC12 OC48 OC192
<S> <C> <C> <C> <C> <C>
<100,000,000 **** **** **** **** ****
100,000,001 - 200,000,000 **** **** **** **** ****
200,000,001 - 300,000,000 **** **** **** **** ****
> 300,000,000 **** **** **** **** ****
</TABLE>
Further Rate reductions for year 2002 and beyond will be established as
described in Paragraph 13 of the Amendment.
Notes
1. Mileage is determined by V&H coordinates, except for OC192 capacity which is
based on route miles.
2. DS0 equivalent miles are calculated using the following table multiplied by
the mileage:
<TABLE>
<CAPTION>
Circuit Type DSO Equivalents
<S> <C>
DS0 1
DS1 24
DS3 672
OC3 2016
OC12 8064
OC48 32256
OC192 129024
</TABLE>
3. On-net is defined as any circuit that is physically provisioned on the
Williams network (Tier A cities).
4. The following circuits qualify as on-net mileage:
a) on-net circuits as defined in note 3 above;
b) circuits in Annex 2 Note 7
c) dark or dim fiber purchases
5. The 1999 rate table will be applied to all circuits for the whole of 1999
6. For all years, the **** DS0 Equivalent mileage row will be assumed
from the beginning of the year
7. Ancillary Charges and Monthly Minimums of $50 DS-O, $250 DS-1, $1,340 DS-3,
$3,830 OC-3, $13,789 OC-12, $49,029 OC-48 apply to all circuits
8. If Intermedia orders a circuit with a request that it be diverse from an
existing circuit, the diverse circuit provisioned on-net for that order will
be charged by ROUTE miles multiplied by the applicable contract rate.
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
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
<TABLE>
<CAPTION>
From 4/1/1999 2000 2001
<S> <C> <C> <C>
DS0 **** **** ****
DS1 **** **** ****
DS3 **** **** ****
OC3 **** **** ****
</TABLE>
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
<TABLE>
<CAPTION>
All Years
<S> <C>
Circuits ordered and provisioned by Williams **** billed as routed
Circuits ordered and provisioned by Intermedia Cost (passed through), billed as routed
</TABLE>
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
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
4/23/99 Page 3
<PAGE> 66
SERVICE ORDERING AND PROVISIONING METRICS AND REMEDIES
ANNEX 3 TO LETTER AMENDMENT
The schedule of Service Ordering and Provisioning Metrics and Remedies is
included in Annex 3. Any applicable credits will be calculated on a quarterly
basis as part of the quarterly planning reviews addressed by Paragraph 19 of
the Letter Amendment. This document is intended to explain how the metrics and
remedies set forth in Annex 3 will be applied by the parties.
PROVISIONING CATEGORY NO. 1: ON-NET WITH INTERCONNECT CAPACITY AVAILABLE ON
BOTH ENDS
This category of provisioning metrics and remedies applies to new circuit orders
from Intermedia in each calendar quarter, when the circuit should be On-net,
and there is capacity available on an established interconnect between Williams
and Intermedia POPs at both ends of the requested circuit.
The first metric is whether an individual circuit ordered by Intermedia is
provisioned within **** days from Receipt and Acceptance of a valid order. For
purposes of Annex 3, "provisioned" shall mean Intermedia has been notified by
Williams that the circuit is ready to be tested. If Williams fails to provision
a circuit within **** days of Receipt and Acceptance of a valid order, then
Intermedia will receive a remedy in the form of a credit as follows: (i) If the
circuit is provisioned within **** days after Receipt and Acceptance of a valid
order, then the credit Intermedia will receive shall be ****. (ii) If the
circuit is provisioned within **** days after Receipt and Acceptance, then
Intermedia will receive a credit of ****. (iii) If the circuit is provisioned
more than **** days after Receipt and Acceptance, then Intermedia will receive
a credit of ****. These remedies are issued on a quarterly basis for individual
circuits. The Remedy for each Circuit can not exceed a maximum cap of ****.
The second metric within this category is whether on a calendar quarter basis
Williams has met the goal of provisioning the circuit within **** days of
Receipt and Acceptance of valid order at least **** percent of the time. This
standard is calculated using all orders provisioned within the given calendar
quarter falling within this category, placed by Intermedia.
Example: Assume Williams provisioned only **** percent of the circuits,
within **** days of Receipt and Acceptance of a valid order from January 1
to March 31 of a given year, which Intermedia ordered. Intermedia would
receive a credit in an amount equal to ****
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
04/23/99 Page 1
<PAGE> 67
****This credit amount cannot exceed the cap of ****.
If Williams misses the goal of **** percent of circuits provisioned within
**** days of Receipt and Acceptance of a valid order for a second consecutive
calendar quarter, then for all provisioned circuits ordered by Intermedia that
fall within this category for that second quarter, Intermedia would receive a
credit of ****.
Example: Assume Williams provisioned only **** percent of the circuits,
within **** days of Receipt and Acceptance of a valid order from January 1
to March 31 of a given year, which Intermedia ordered. Intermedia would
receive a credit in an amount equal to ****. Additionally, assume Williams
provisioned only **** percent of the circuits, within **** days of Receipt
and Acceptance of a valid order from April 1 to June 30 of that same year,
which Intermedia ordered. Intermedia would receive a credit in an amount
equal to ****. This credit amount cannot exceed the cap of ****.
The third metric within this category is whether on a calendar quarter basis
Williams has met the goal of issuing the FOC **** after Receipt and Acceptance
of a valid order from Intermedia at least **** percent of the time. Again,
this standard is calculated using all provisioned orders, placed by Intermedia
falling within this category within the given calendar quarter.
Example: Assume Williams met this goal on only **** percent of provisioned
circuits from January 1 to March 31 of a given year ordered by Intermedia.
Intermedia would receive a credit in an amount equal to ****. This amount
cannot exceed the cap of ****.
The "second consecutive" and "third consecutive" quarters for this performance
metric are handled as described above in the example for the second metric.
PROVISIONING CATEGORY NO. 2: ON-NET WITH LEC PROVIDING INTERCONNECT
The provisioning metrics are stated differently for the second category of
On-Net capacity, when one or both ends of the circuit rely on a Local Exchange
Carrier (LEC) or other third party for interconnection or local access. In this
circumstance, Williams' provisioning is dependent upon the actions of the LEC,
and the metrics and remedies reflect that.
The first metric is whether an individual circuit ordered by Intermedia is
provisioned within **** days from the FOC due date issued by the LEC. If
Williams fails to provision a circuit falling within this category within ****
days of the LEC's FOC due date, then
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
Page 2
<PAGE> 68
Intermedia will receive a credit in the amount of ****. If the circuit is
provisioned within **** after the LEC's FOC due date, then Intermedia will
receive a credit of ****. If the circuit is provisioned more than **** days
after the LEC's FOC due date, then Intermedia will receive a credit of ****.
These remedies are issued on a quarterly basis for individual circuits. The
Remedy for each circuit cannot exceed a maximum cap of ****.
The second metric within this category is whether on a calendar quarter basis
Williams has met the goal of provisioning the circuit within **** days of the
LEC's FOC due date at least **** percent of the time. Again, this standard is
calculated using all provisioned orders falling within this category within the
given calendar quarter placed by Intermedia.
Example: Assume Williams provisioned only **** percent of the circuits
falling within this category from January 1 to March 31 of a given year,
within **** days of the LEC's FOC due date, which Intermedia ordered.
Intermedia would receive a credit in an amount equal to ****. This amount
cannot exceed the cap of ****.
If Williams misses the goal of **** percent of circuits provisioned within
**** days of the LEC's FOC due date for a second consecutive calendar quarter,
for all provisioned circuits that fall within this category for that second
quarter, then, Intermedia would receive a credit of ****.
Example: Assume Williams provisioned only **** percent of the circuits
falling within this category from January 1 to March 31 of a given year
within **** days of the LEC's FOC due date that Intermedia ordered.
Intermedia would receive a credit in an amount equal to ****. Additionally,
assume Williams provisioned only **** percent of the circuits falling
within this category within **** days of the LEC's FOC due date from April
1 to June 30 of that same year which Intermedia ordered. Intermedia would
receive a credit ****. This amount cannot exceed the cap of ****.
The third metric within this category is whether on a calendar quarter basis
Williams has met the goal of issuing the FOC within **** days after Williams
has received the LEC's FOC at least **** percent of the time. Again, this
standard is calculated using all orders falling within this category within the
given calendar quarter, placed by Intermedia.
Example: Assume Williams met this goal on only **** percent of circuits
falling within this category from January 1 to March 31 of a given year
ordered by
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
4/23/99 Page 3
<PAGE> 69
Intermedia. Intermedia would receive a credit in an amount equal to ****.
This amount cannot exceed the cap of ****.
The "second consecutive" and "third consecutive" quarters for this performance
metric are handled as described above in the example for the second metric.
PROVISIONING CATEGORY NO. 3: OFF-NET SERVICES
This category of provisioning metrics and remedies applies to new circuits
provisioned in each calendar quarter, when the circuit is Off-Net. The metrics
and remedies are applied in the same way as for Category No. 1 and No. 2.
GENERAL NOTES FOR ALL PROVISIONING METRICS AND REMEDIES
All metrics and remedies will be calculated using the calendar quarter in which
Williams provisions the circuits. A valid circuit order must contain all
necessary information for Williams to provision the requested circuit. Williams
may not accept the order and will notify Intermedia via email, or similar
communication within a timely manner which shall not exceed such order
confirmation interval listed within the Operation Guideline Manual. In that
event, the performance metrics and remedies shall not apply. Remedies do not
apply in the event that Williams' non-compliance with the metrics is caused by a
force majeure event, regulatory event, acts or failure to act by Intermedia, or
by Intermedia's equipment or facilities. Remedies do not apply in cases where
Intermedia makes any material change to a circuit order.
OUTAGE CREDITS FOR ON-NET SERVICES
Outage Credits for On-Net Services are calculated based on the **** chart in
Annex 3. ****.
Example: Assume a circuit is out of service a total of **** hours. Credits
would accumulate as follows:
****
****
****
****
The total credits for a circuit out of service for **** hours would be
****.
Outage credits do not apply in the event that the outage is directly or
indirectly caused by a force majeure event, regulatory event, acts or failure
to act by Intermedia, or by Intermedia's equipment or facilities.
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
4/23/99 Page 4
<PAGE> 70
SERVICE ORDERING AND PROVISIONING METRICS AND REMEDIES
ANNEX 3
<TABLE>
<CAPTION>
ON-NET WITH INTERCONNECT CAPACITY AVAILABLE ON BOTH ENDS REMEDY
- -------------------------------------------------------- ------
<S> <C>
Provisioned Greater than **** Calendar Days from Receipt & Acceptance of Valid Order ****
Provisioned Greater than **** Calendar Days from Receipt & Acceptance of Valid Order ****
Provisioned Greater than **** Calendar Days from Receipt & Acceptance of Valid Order ****
****% measured on Quarterly Basis(1)
Less than ****% First Quarter ****
Less than ****% Second Consecutive Quarter ****
Less than ****% Third Consecutive Quarter ****
Firm Order Commitment issued within **** after confirmed order receipt(3)
Compliance of ****% Measured on Quarterly Basis(1)
Less than ****% First Quarter ****
Less than ****% Second Consecutive Quarter ****
Less than ****% Third Consecutive Quarter ****
ON-NET SERVICES WITH LEC PROVIDING INTERCONNECT(2)
- --------------------------------------------------
Provisioned Greater than **** Calendar Days from LEC FOC Due Date after Receipt & Acceptance of Valid Order ****
Provisioned Greater than **** Calendar Days from LEC FOC Due Date after Receipt & Acceptance of Valid Order ****
Provisioned Greater than **** Calendar Days from LEC FOC Due Date after Receipt & Acceptance of Valid Order ****
Compliance of ****% Measured on Quarterly Basis(1)
Less than ****% First Quarter ****
Less than ****% Second Consecutive Quarter ****
Less than ****% Third Consecutive Quarter ****
Firm Order Commitment issued within **** days after FOC is received from LEC
Compliance of ****% Measured on Quarterly Basis(1)
Less than ****% First Quarter ****
Less than ****% Second Consecutive Quarter ****
Less than ****% Third Consecutive Quarter ****
OFF-NET SERVICES(2)
- -------------------
Provisioned Greater than **** Calendar Days from Receipt & Acceptance of Valid Order ****
Provisioned Greater than **** Calendar Days from Receipt & Acceptance of Valid Order ****
Provisioned Greater than **** Calendar Days from Receipt & Acceptance of Valid Order ****
</TABLE>
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
4/23/99 Page 5
<PAGE> 71
<TABLE>
<S> <C>
Compliance Of ****% Measured On Quarterly Basis (1)
Less than ****% First Quarter ****
Less than ****% Second Consecutive Quarter ****
Less than ****% Third Consecutive Quarter ****
Firm Order Commitment issued within **** days after FOC is received from Off-net Provider
Compliance of ****% Measured on Quarterly Basis (1)
Less than ****% First Quarter ****
Less than ****% Second Consecutive Quarter ****
Less than ****% Third Consecutive Quarter ****
</TABLE>
Notes:
(1) Percentage of Circuits Provisioned in the Time Period Specified within the
Calendar Quarter
(2) DS-n Service Only, Oc-n Service is Individual Case Basis. As the industry
establishes standard intervals for Ocn services, Williams and Intermedia
will review the applicable service interval.
(3) Firm Order Commitment issued **** after confirmed order receipt.
All Remedies Apply to orders placed within the applicable quarter
Exclusions are:
Occurrence of Force Majeure Event or Regulatory Event
Orders Incomplete
ICIX Requests Changes in Order
Delays due to Intermedia personnel, equipment or facilities
<TABLE>
<CAPTION>
CIRCUIT PERFORMANCE OUTAGE CREDITS FOR ON-NET SERVICE CREDITS ALLOWED EACH HOUR
<S> <C>
**** ****
**** ****
**** ****
**** ****
</TABLE>
Credit = 1/720 of the monthly recurring IXC charge
Credits are Cumulative
****
After an outage exceeding 24 continuous hours, Circuit may be cancelled without
penalty
Exclusions are:
Occurrence of Force Majeure Event or Regulatory Event
Delays due to Intermedia personnel, equipment, or facilities
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
<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
<TABLE>
<CAPTION>
DS-3 RECURRING/NON-RECURRING/ANCILLARY CHARGES SCHEDULE
- --------------------------------------------------------------------------------------------------------------------------------
LONG HAUL (IXC) CROSS CONNECTS L/L ADMIN (PER LOOP) ENTRANCE FACILITY CHARGES*1
--------------- -------------- -------------------- -----------------------------
RECURRING NRC RECURRING NRC RECURRING NRC RECURRING NRC
--------------- -------------- -------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Installation $ 0 $2,000 $ 0 $ 750 $ 0 $ 100 $ 0 *1
Chng of Req. Svc Date--Initial $ 0 $ 0 $ 0 $ 0 $ 0 $ 100 $ 0 *1
Chng of Req. Svc Date--Subsequent $ 0 $ 500 $ 0 $ 250 $ 0 $ 100 $ 0 *1
Chng of Order--Administration $ 0 $ 0 $ 0 $ 0 $ 0 $ 100 $ 0 *1
Chng of Order--Pre-Engineering $ 0 $ 500 $ 0 $ 250 $ 0 $ 100 $ 0 *1
Chng of Order--Post-Engineering $ 0 $2,000 $ 0 $ 250 $ 0 $ 100 $ 0 *1
Order Cancellation--Pre-Engineering $ 0 $ 500 $ 0 $ 250 $ 0 $ 100 $ 0 *1
Order Cancellation--Post-Engineering $ 0 $2,000 $ 0 $ 250 $ 0 $ 100 $ 0 *1
Billing Administration $ 0 $ 0 $ 0 $ 0 $ 100 $ 150 *1 *1
Minimum Recurring Charge $2,000 $ 0 $ 250 $ 0 Pass-thru Pass-thru *1 $ 0
Expedite Charges $ 0 $ 300 $ 0 $ 250 Pass-thru Pass-thru $ 0 *1
Off-Net Ancillary Pass-Through Pass-Through Pass-Through Pass-Through
Contract Termination 100% of Remaining Contract Life
Additional Install/Maint/Eng/Tech Chgs $100/Hour, $125/Hour After Hours
</TABLE>
*1 -- Entrance Facility Charges are based on pass-through DS-3 applicable
Tariff Rates
Note: All third party charges are passed on to the customer.
04/23/99 Page 1
<PAGE> 74
<TABLE>
<CAPTION>
OC-48 RECURRING/NON-RECURRING/ANCILLARY CHARGES SCHEDULE
- --------------------------------------------------------------------------------------------------------------------------------
LONG HAUL (IXC) CROSS CONNECTS L/L ADMIN (PER LOOP) ENTRANCE FACILITY CHARGES *1
--------------- -------------- -------------------- -----------------------------
RECURRING NRC RECURRING NRC RECURRING NRC RECURRING NRC
--------------- -------------- -------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Installation $ 0 $5,000 $ 0 $1,000 $ 0 $ 300 $ 0 *1
Chng of Req. Svc Date--Initial $ 0 $ 0 $ 0 $ 0 $ 0 $ 300 $ 0 *1
Chng of Req. Svc Date--Subsequent $ 0 $1,250 $ 0 $ 600 $ 0 $ 300 $ 0 *1
Chng of Order--Administration $ 0 $ 0 $ 0 $ 0 $ 0 $ 300 $ 0 *1
Chng of Order--Pre-Engineering $ 0 $1,250 $ 0 $ 600 $ 0 $ 300 $ 0 *1
Chng of Order--Post-Engineering $ 0 $5,000 $ 0 $1,000 $ 0 $ 300 $ 0 *1
Order Cancellation--Pre-Engineering $ 0 $1,250 $ 0 $ 600 $ 0 $ 300 $ 0 *1
Order Cancellation--Post-Engineering $ 0 $5,000 $ 0 $1,000 $ 0 $ 300 $ 0 *1
Billing Administration $ 0 $ 0 $ 0 $ 0 $ 100 $ 150 *1 *1
Minimum Recurring Charge $3,830 $ 0 $ 600 $ 0 Pass-thru Pass-thru *1 $ 0
Expedite Charges $ 0 $ 900 $ 0 $ 600 Pass-thru Pass-thru $ 0 *1
Off-Net Ancillary Pass-Through Pass-Through Pass-Through Pass-Through
Contract Termination 100% of Remaining Contract Life
Additional Install/Maint/Eng/Tech Chgs $100/Hour, $125/Hour After Hours
</TABLE>
*1 -- Entrance Facility Charges are based on pass-through OC-48 applicable
Tariff Rates
Note: All third party charges are passed on to the customer.
Services not described above will be considered exceptions and handled on an
individual case basis.
<TABLE>
<CAPTION>
OC-12 RECURRING/NON-RECURRING/ANCILLARY CHARGES SCHEDULE
- --------------------------------------------------------------------------------------------------------------------------------
LONG HAUL (IXC) CROSS CONNECTS L/L ADMIN (PER LOOP) ENTRANCE FACILITY CHARGES *1
---------------- -------------- -------------------- -----------------------------
RECURRING NRC RECURRING NRC RECURRING NRC RECURRING NRC
---------------- -------------- -------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Installation $ 0 $18,000 $ 0 $1,500 $ 0 $1,000 $ 0 *1
Chng of Req. Svc Date--Initial $ 0 $ 0 $ 0 $ 0 $ 0 $1,000 $ 0 *1
Chng of Req. Svc Date--Subsequent $ 0 $ 3,500 $ 0 $1,200 $ 0 $1,000 $ 0 *1
Chng of Order--Administration $ 0 $ 0 $ 0 $ 0 $ 0 $1,000 $ 0 *1
Chng of Order--Pre-Engineering $ 0 $ 3,500 $ 0 $1,200 $ 0 $1,000 $ 0 *1
Chng of Order--Post-Engineering $ 0 $18,000 $ 0 $1,500 $ 0 $1,000 $ 0 *1
Order Cancellation--Pre-Engineering $ 0 $ 3,500 $ 0 $1,200 $ 0 $1,000 $ 0 *1
Order Cancellation--Post-Engineering $ 0 $18,000 $ 0 $1,500 $ 0 $1,000 $ 0 *1
Billing Administration $ 0 $ 0 $ 0 $ 0 $ 100 $ 150 *1 *1
Minimum Recurring Charge $13,790 $ 0 $1,200 $ 0 Pass-thru Pass-thru *1 $ 0
Expedite Charges $ 0 $ 1,200 $ 0 $1,200 Pass-thru Pass-thru $ 0 *1
Off-Net Ancillary Pass-Through Pass-Through Pass-Through Pass-Through
Contract Termination 100% of Remaining Contract Life
Additional Install/Maint/Eng/Tech Chgs $100/Hour, $125/Hour After Hours
</TABLE>
*1 -- Entrance Facility Charges are based on pass-through OC-12 applicable
Tariff Rates
Note: All third party charges are passed on to the customer.
<PAGE> 75
<TABLE>
<CAPTION>
OC-48 RECURRING/NON-RECURRING/ANCILLARY CHARGES SCHEDULE
- --------------------------------------------------------------------------------------------------------------------------------
LONG HAUL (IXC) CROSS CONNECTS L/L ADMIN (PER LOOP) ENTRANCE FACILITY CHARGES *1
---------------- -------------- -------------------- -----------------------------
RECURRING NRC RECURRING NRC RECURRING NRC RECURRING NRC
---------------- -------------- -------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Installation $ 0 $48,000 $ 0 $3,000 $ 0 $3,500 $ 0 *1
Chng of Req. Svc Date--Initial $ 0 $ 0 $ 0 $ 0 $ 0 $3,500 $ 0 *1
Chng of Req. Svc Date--Subsequent $ 0 $12,000 $ 0 $3,500 $ 0 $3,500 $ 0 *1
Chng of Order--Administration $ 0 $ 0 $ 0 $ 0 $ 0 $3,500 $ 0 *1
Chng of Order--Pre-Engineering $ 0 $12,000 $ 0 $3,000 $ 0 $3,500 $ 0 *1
Chng of Order--Post-Engineering $ 0 $48,000 $ 0 $3,500 $ 0 $3,500 $ 0 *1
Order Cancellation--Pre-Engineering $ 0 $12,000 $ 0 $3,000 $ 0 $3,500 $ 0 *1
Order Cancellation--Post-Engineering $ 0 $48,000 $ 0 $3,500 $ 0 $3,500 $ 0 *1
Billing Administration $ 0 $ 0 $ 0 $ 0 $ 100 $ 150 *1 *1
Minimum Recurring Charge ICB $ 0 $3,500 $ 0 Pass-thru Pass-thru *1 $ 0
Expedite Charges $ 0 $ 4,800 $ 0 $3,000 Pass-thru Pass-thru $ 0 *1
Off-Net Ancillary Pass-Through Pass-Through Pass-Through Pass-Through
Contract Termination 100% of Remaining Contract Life
Additional Install/Maint/Eng/Tech Chgs $100/Hour, $125/Hour After Hours
</TABLE>
*1 -- Entrance Facility Charges are based on pass-through OC-3 applicable
Tariff Rates
Note: All third party charges are passed on to the customer.
Services not described above will be considered exceptions and handled on an
individual basis.
04/23/99 Page 3
<PAGE> 76
ANNEX 6
PORTABILITY
[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.
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
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) With respect to **** that paid by Williams to WorldCom in
accordance with Section 2, reasonable cost substantiation of the
**** shall be provided to the party required to pay for the fiber or
the IRU. In calculating the ****, each party agrees to use generally
accepted accounting principles which have been consistently applied.
Attached as Attachment 4 is a list of cost categories that have been
and will be used to gather the costs comprising the net book value.
Pursuant to this Section and Section 2, if either party disputes the
**** proposed by the party offering fiber, the disputing party shall
notify the party offering fiber within thirty (30) days following
receipt of the final Williams Fiber Charge or the WorldCom Fiber
Charge, whichever is applicable. Upon receipt of the dispute notice,
the party offering fiber shall within fifteen (15) business days
allow a mutually acceptable nationally recognized independent
accounting firm to review its calculation of the **** including
third party and internal cost information supporting the calculation
of ****. Based on its review of the cost information, the
independent accounting firm shall calculate the **** which
calculation shall be final and binding on the parties. The party
challenging the **** shall pay for the cost of the independent
accounting firm. The disputing party shall have sixty (60) days
after the independent accounting firm distributes its calculation of
the **** to the parties in which to elect to purchase a fiber. The
failure to make an election within the sixty (60) day period will be
deemed to be a waiver of the disputing party's right to purchase
fiber on such segment(s).
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
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 ****
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
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.
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
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
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.
<TABLE>
<CAPTION>
Minimum Yearly Purchase
of Services
Year ("Minimum Obligation")
- ---------------------- -----------------------
<S> <C>
1 ****
(7/1/98 - 6/30/99)
2 ****
(7/1/99 - 6/30/2000)
3 ****
(7/1/2000 - 6/30/2001)
4 ****
(7/1/2001 - 6/30/2002)
5 ****
(7/1/2002 - 6/30/2003)
</TABLE>
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
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
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, ****
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
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
7
<PAGE> 8
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
8
<PAGE> 9
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.
9
<PAGE> 10
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
10
<PAGE> 11
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
11
<PAGE> 12
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:
--------------------------------
12
<PAGE> 13
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.
13
<PAGE> 14
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
14
<PAGE> 15
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:
------------------------------ ------------------------------
15
<PAGE> 16
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.
16
<PAGE> 17
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
17
<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
18
<PAGE> 19
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
19
<PAGE> 20
EXHIBIT I TO SCHEDULE A
PRICING EXHIBIT
COMMITMENT AND PRICING MATRIX (ON NETWORK)
<TABLE>
<CAPTION>
- ----------------------------------------------------------
Yearly
Commitment DS1E* DS3 OC3 OC12 OC48
- ----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
**** **** **** **** **** ****
- ----------------------------------------------------------
**** **** **** **** **** ****
- ----------------------------------------------------------
**** **** **** **** **** ****
- ----------------------------------------------------------
**** **** **** **** **** ****
- ----------------------------------------------------------
**** **** **** **** **** ****
- ----------------------------------------------------------
</TABLE>
per V & H VGE
* DS1E represents a DS3 facility, with DS1 transmission capability. After year
two, it is anticipated that the DS1Es will be repriced as DS3s
ON NETWORK BANDWIDTH PRICING FOR NON-RECURRING CHARGES
DS-3 Non-Recurring/Ancillary
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
IXC Cross - Connect Local Loop Admin.
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Installation **** **** ****
- -------------------------------------------------------------------------------------------------------
Chng of Reg. Svc Date - Initial **** **** ****
- -------------------------------------------------------------------------------------------------------
Chng of Reg. Svc Date - Subsequent **** **** ****
- -------------------------------------------------------------------------------------------------------
Chng of Order - Admin **** **** ****
- -------------------------------------------------------------------------------------------------------
Chng of Order - Pre-Engineering **** **** ****
- -------------------------------------------------------------------------------------------------------
Chng of Order - Post-Engineering **** **** ****
- -------------------------------------------------------------------------------------------------------
Order Cancellation - Pre-Engineering **** **** ****
- -------------------------------------------------------------------------------------------------------
Order Cancellation - Post-Engineering **** **** ****
- -------------------------------------------------------------------------------------------------------
Chng of Service - Admin **** **** ****
- -------------------------------------------------------------------------------------------------------
Chng of Service - Re-Engineering **** **** ****
- -------------------------------------------------------------------------------------------------------
Offnet Ancillary - Recurring Passthrough
- -------------------------------------------------------------------------------------------------------
Offnet Ancillary - Non-recurring Passthrough
- -------------------------------------------------------------------------------------------------------
Contract Termination ****
- -------------------------------------------------------------------------------------------------------
Additional Install/Maint/Eng ****
- -------------------------------------------------------------------------------------------------------
Local Loop Billing Admin ****
- -------------------------------------------------------------------------------------------------------
</TABLE>
OC-3 Non-Recurring/Ancillary
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
IXC Cross - Connect Local Loop Admin.
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Installation **** **** ****
- -------------------------------------------------------------------------------------------------------
Chng of Reg. Svc Date - Initial **** **** ****
- -------------------------------------------------------------------------------------------------------
Chng of Reg. Svc Date - Subsequent **** **** ****
- -------------------------------------------------------------------------------------------------------
Chng of Order - Admin **** **** ****
- -------------------------------------------------------------------------------------------------------
Chng of Order - Pre-Engineering **** **** ****
- -------------------------------------------------------------------------------------------------------
Chng of Order - Post-Engineering **** **** ****
- -------------------------------------------------------------------------------------------------------
Order Cancellation - Pre-Engineering **** **** ****
- -------------------------------------------------------------------------------------------------------
Order Cancellation - Post-Engineering **** **** ****
- -------------------------------------------------------------------------------------------------------
Chng of Service - Admin **** **** ****
- -------------------------------------------------------------------------------------------------------
Chng of Service - Re-Engineering **** **** ****
- -------------------------------------------------------------------------------------------------------
Offnet Ancillary - Recurring Passthrough
- -------------------------------------------------------------------------------------------------------
Offnet Ancillary - Non-recurring Passthrough
- -------------------------------------------------------------------------------------------------------
Contract Termination ****
- -------------------------------------------------------------------------------------------------------
Additional Install/Maint/Eng ****
- -------------------------------------------------------------------------------------------------------
Local Loop Billing Admin ****
- -------------------------------------------------------------------------------------------------------
</TABLE>
OC-12 Non-Recurring/Ancillary
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
IXC Cross - Connect Local Loop Admin.
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Installation **** **** ****
- -------------------------------------------------------------------------------------------------------
Chng of Reg. Svc Date - Initial **** **** ****
- -------------------------------------------------------------------------------------------------------
Chng of Reg. Svc Date - Subsequent **** **** ****
- -------------------------------------------------------------------------------------------------------
Chng of Order - Admin **** **** ****
- -------------------------------------------------------------------------------------------------------
Chng of Order - Pre-Engineering **** **** ****
- -------------------------------------------------------------------------------------------------------
Chng of Order - Post-Engineering **** **** ****
- -------------------------------------------------------------------------------------------------------
Order Cancellation - Pre-Engineering **** **** ****
- -------------------------------------------------------------------------------------------------------
Order Cancellation - Post-Engineering **** **** ****
- -------------------------------------------------------------------------------------------------------
Chng of Service - Admin **** **** ****
- -------------------------------------------------------------------------------------------------------
Chng of Service - Re-Engineering **** **** ****
- -------------------------------------------------------------------------------------------------------
Offnet Ancillary - Recurring Passthrough
- -------------------------------------------------------------------------------------------------------
Offnet Ancillary - Non-recurring Passthrough
- -------------------------------------------------------------------------------------------------------
Contract Termination ****
- -------------------------------------------------------------------------------------------------------
Additional Install/Maint/Eng ****
- -------------------------------------------------------------------------------------------------------
Local Loop Billing Admin ****
- -------------------------------------------------------------------------------------------------------
</TABLE>
OC-48 Non-Recurring/Ancillary
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
IXC Cross - Connect Local Loop Admin.
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Installation **** **** ****
- -------------------------------------------------------------------------------------------------------
Chng of Reg. Svc Date - Initial **** **** ****
- -------------------------------------------------------------------------------------------------------
Chng of Reg. Svc Date - Subsequent **** **** ****
- -------------------------------------------------------------------------------------------------------
Chng of Order - Admin **** **** ****
- -------------------------------------------------------------------------------------------------------
Chng of Order - Pre-Engineering **** **** ****
- -------------------------------------------------------------------------------------------------------
Chng of Order - Post-Engineering **** **** ****
- -------------------------------------------------------------------------------------------------------
Order Cancellation - Pre-Engineering **** **** ****
- -------------------------------------------------------------------------------------------------------
Order Cancellation - Post-Engineering **** **** ****
- -------------------------------------------------------------------------------------------------------
Chng of Service - Admin **** **** ****
- -------------------------------------------------------------------------------------------------------
Chng of Service - Re-Engineering **** **** ****
- -------------------------------------------------------------------------------------------------------
Offnet Ancillary - Recurring Passthrough
- -------------------------------------------------------------------------------------------------------
Offnet Ancillary - Non-recurring Passthrough
- -------------------------------------------------------------------------------------------------------
Contract Termination ****
- -------------------------------------------------------------------------------------------------------
Additional Install/Maint/Eng ****
- -------------------------------------------------------------------------------------------------------
Local Loop Billing Admin ****
- -------------------------------------------------------------------------------------------------------
</TABLE>
Collocate:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Rack Price (Per Power Installation Rack Installation
USW Tier City Month)* Charge (One-Time 25 AMPs) Charge (One-time)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Price Per Rack **** **** ****
- -------------------------------------------------------------------------------------------------------
</TABLE>
These Prices are only applicable with a 5 year term commitment.
20
<PAGE> 21
AMENDMENT NO. 1
TO CARRIER SERVICES AGREEMENT
This Amendment No. 1 is made to that certain Carrier Service Agreement (the
"Agreement") by and between Williams, Inc. d/b/a Williams Network, ("Williams")
and U S WEST Communications, Inc. ("USWC"), dated January 5, 1998.
The Purpose of this Amendment is to revise the following sections of the
Agreement to read:
1. Amend Section 1.0 to add the following:
Schedule C - Intentionally Omitted
Schedule D - Collocation Services
2. Replace Section 3.2 in its entirety with the following:
The duration of this Agreement shall continue for a term expiring on
January 5, 2003 (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 (ii) negotiated pricing based upon the existing market
prices.
2. Replace Section 3.3 in its entirety with the following:
Prices for Services shall be set in accordance with Exhibit 1 to
schedule A, hereto, "Pricing Exhibit," or other express provisions 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. Pricing in
the Pricing Exhibit does not include payments to be made 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 cost all of which shall be billed to USWC at cost or as
otherwise set forth herein. Furthermore, all current Services purchased
under this Agreement shall be re-priced based on this Amendment as of
the date of execution of this Amendment, with such repricing to apply
prospectively only. Such repricing shall not affect or re-start the
term or minimum term of any Services currently being provided under the
Agreement.
<PAGE> 22
3. Replace Section 3.4 in its entirety with the following:
USWC may terminate this Agreement by providing Williams thirty (30)
days written notice provided that USWC meets its Yearly Commitment as
defined in the Pricing Exhibit. Notwithstanding such termination, all
existing service(s) shall continue to be provided and paid through the
end of the current service(s) term.
4. Replace Section 3.5 in its entirety with the following:
From the Effective Date until December 31, 2000, all Services shall be
priced on a "most favored customer" basis ("MFC Pricing"). MFC Pricing
is the most competitive rate given by Williams to a customer for
comparable services on similar terms and conditions, taking into
account all relevant factors such as volume and length of commitment.
This provision shall not apply with respect to any lower charges by
Williams to: (i) ****; or (ii) ****; or (iii) ****; or (iv)****.
"Affiliate" means any entity which directly or indirectly through one
or more intermediaries, controls, or is controlled by, or is under
common control with, Williams. For purposes of this paragraph "control"
means (i) in the case of corporate entities, direct or indirect
ownership of twenty percent (20%) or more of the stock or share
entitled to vote for the election of the board of directors or other
governing body of the entity; and (ii) in the case of non-corporate
entities, direct or indirect ownership of twenty percent (20%) or
greater of the equity interest.
5. Delete Section 4.1 in Schedule A in its entirety, except that with
respect to any change of service date, USWC will reimburse Williams for
any reasonable charges incurred by Williams from third party providers
as a result of the request for a change of service date.
6. Delete Sections 5 - 5.4 in Schedule A in their entirety
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
<PAGE> 23
7. Replace Pricing Exhibit in its entirety with Pricing Exhibit attached
hereto and incorporated herein by this reference.
8. Replace Technical Specifications for Private Line Service in its
entirety with the Technical Specifications for Private Line Service
attached hereto and incorporated herein by this reference.
9. (a) For purposes of this Agreement, "On-Net Services" shall be defined
as those interexchange telecommunications transmission services between
two locations traversing Williams' owned and operated network both end
points of which originate or terminate at a Williams' point of
presence.
(b) For purposes of this Agreement, "Extended On-Net Services" shall be
defined as those interexchange telecommunications transmission services
where one end-point is On-Net to Williams and the other end-point will
be On-Net to Williams within twelve (12) months of Williams acceptance
of a Service Order. Whether or not a circuit will be On-Net within
twelve (12) months shall be determined in accordance with Williams
"On-Net and On-Net Extended POP List" which shall be updated by
Williams from time to time and provided by Williams to U S WEST at the
time of update.
10. The parties agree to substitute for U S WEST Communications, Inc., U S
WEST, Inc. prospectively. USWEST, Inc. agrees to assume all rights and
obligations under the Agreement.
This Amendment and the Agreement shall be read so as to complement each other.
However, in the event of an irreconcilable conflict in the terms thereof, the
provisions of this Amendment shall have precedence over the terms of the
Agreement.
Except as amended herein, all of the terms and conditions of the Agreement
remain unchanged and shall continue in full force and effect.
The parties have caused their duly authorized representatives to sign this
Amendment as of the dates stated below.
WILLIAMS COMMUNICATIONS, INC U S WEST COMMUNICATIONS, INC.
/s/ GORDON C. MARTIN /s/ ALLAN R. SPIES
- ------------------------------- ---------------------------------------
Signature Signature
Gordon C. Martin Allan R. Spies
- ------------------------------- ---------------------------------------
Printed Name Printed Name
Senior Vice President,
Network Services Vice President and CFO
- ------------------------------- ---------------------------------------
Title Title
6/14/99 6/10/99
- ------------------------------- ---------------------------------------
Date Date
<PAGE> 24
U S WEST, INC.
/s/ ALLAN R. SPIES
- -------------------------------
Signature
Allan R. Spies
- -------------------------------
Printed Name
Executive Vice President & CFO
- -------------------------------
Title
6/10/99
- -------------------------------
Date
<PAGE> 25
TECHNICAL SPECIFICATIONS FOR PRIVATE LINE SERVICE
1.0 Unchanged
2.0 Unchanged
2.1 Unchanged
2.2 Unchanged
2.3 Unchanged
3.0 Scheduled Maintenance and Outages:
3.1 Customer acknowledges that Williams may perform scheduled network
maintenance ("Scheduled Maintenance") from time to time, and that such
Scheduled Maintenance may result in a continuous and/or interrupted
period of time when an On-Net Service or On-Net Services are
"Unavailable" (as defined in the Specifications).
Williams will make reasonable efforts:
(a) to perform Scheduled Maintenance between the hours of 12:00am
and 6:00am in the time zone where the affected On-Net Services
are located (the "Maintenance Window")
(b) to ensure that Scheduled Maintenance performed on On-Net
Services that cross multiple time zones does not extend
outside the Maintenance Window for any such time zone
(c) to provide options of rerouting traffic when Williams
anticipates Unavailability of an On-Net Service during
Scheduled Maintenance.
3.2 Williams will make reasonable efforts to notify Customer of any
Scheduled Maintenance that Williams determines will materially affect
Customer's On-Net Services according to the following guidelines:
(a) "Regular Scheduled Maintenance" shall mean Scheduled
Maintenance performed where Williams shall use reasonable
efforts to provide at least 72 hours advance notice to
Customer's Service Management Center via e-mail with a
follow-up telephone call.
(b) "Demand Scheduled Maintenance" shall mean Scheduled
Maintenance performed where Williams may provide less than 72
hours advance notice to Customer's Service Management Center
via e-mail with a follow-up telephone call. Williams shall use
reasonable efforts to perform Maintenance during the
Maintenance Window.
(c) "Emergency Scheduled Maintenance" shall mean Scheduled
Maintenance performed where Williams may provide less than 72
hours advance notice to Customer's Service Management Center
via e-mail with a follow-up telephone call. Maintenance may be
performed outside the Maintenance Window due to exigent
circumstances
If Williams determines that the Regular Scheduled Maintenance or Demand
Scheduled Maintenance originally anticipated to be completed within the
Maintenance Window will extend beyond the Maintenance Window, Williams
will make reasonable efforts to give advance notice by telephone to
Customer's Service Management Center of such extension. If any such
maintenance extending beyond the Maintenance Window results in a
continuous and/or interrupted period of time when the affected On-Net
Service or On-Net Services are Unavailable, Customer shall be entitled
to an outage credit pursuant to Section 5.1 for the period that such
Unavailability extends beyond the Maintenance Window.
<PAGE> 26
3.3 Repair efforts will be undertaken by Williams upon notification of
trouble by internal network surveillance and network surveillance or by
notification of trouble and release of all or part of the Service by
the Customer for testing.
4.0 Remove from contract
5.0 Outage Notification and Credits:
5.1 Williams will make reasonable efforts to notify Customer's Service
Management Center of all Outages and all problems which materially
impact Customer's On-Net Services (including hazardous conditions)
promptly upon discovery of such problems by Williams. Any such
notification shall include, when available, the following information:
o Time of Outage
o Scope of Outage or problem (which customers can be impacted)
o Cause of Outage or problem
o Estimated Time to Resolution (ETR)
o Action taken to fix Outage or problem
o Circuit ID, Trunk ID or other unique identifiers
Williams shall provide notification to the Customer Service Management
Center within 30 minutes of the outage via an e-mail and phone call.
5.2 In the event of an Outage, Customer shall be entitled to a credit (the
"Outage Credit") determined according to the following formula:
Outage Credit = Hours of Outage - 2 hours x Total Monthly Charge of
Affected On-Net circuit(s)
720 hours
5.3 The Outage Credit shall apply to the charges for the total mileage of
any On-Net circuit affected by an Outage; provided, however, that if
any portion of the affected On-Net circuit remains beneficially used or
useable by Customer between any intermediate terminals (where Customer
has installed drop and insert capability) or end terminals, the Outage
Credit shall not apply to that pro-rata portion of the mileage. The
length of each Outage shall be calculated in hours and shall include
fractional portions thereof. An Outage shall be deemed to have
commenced upon verifiable notification thereof by Customer or Williams,
or, when indicated by network control information actually known to
Williams personnel, whichever is earlier. Each Outage shall be deemed
to terminate upon restoration of the affected On-Net circuit as
evidenced by appropriate network test by Williams. Williams shall give
notice to Customer of any scheduled outage as early as is practicable,
and, except as specified in Section 3.1 of the Technical Specifications
for Private Line Service, a scheduled outage shall under no
circumstance be viewed as an Outage hereunder.
5.4 Outage Credits shall not be granted if the malfunction of any On-Net
circuit is due to: i) an Outage or other Defect occurring in Customer's
Interconnection Facilities; ii) the negligence or willful misconduct of
USW or others authorized by USW to use the services under this
Agreement; iii) due to the failure of power, facilities, equipment,
systems or connections not provided by Williams; iv) caused by the
failure of access to Williams' On-Net Service, except for Williams'
giving pass-through credits from the access provider as available; v)
due to a Force Majeure event as defined in Section 8.5 of the CSA.
5.5 All Outage Credits shall be credited on the next monthly invoice for
the affected On-Net circuit after receipt of Customer's request for
credit. The total of all Outage Credits applicable to or
<PAGE> 27
accruing in any given month shall not exceed the amount payable by
Customer to Williams for that same month for such On-Net circuit.
5.6 The Outage Credit described in this Section 5 shall be the sole and
exclusive remedy of Customer in the event of any Outage, and under no
circumstance shall an outage be deemed a Default under the agreement.
5.7 In the event any On-Net circuit provided on the Williams On-Net network
experiences more than two (2) outages, each of which has a duration of
at least two (2) hours and such Outages occur during any consecutive
one hundred-eighty (180) day period, Customer may terminate the
portion, or portions, of the applicable Service Order(s) pertaining to
the affected On-Net circuit(s) without penalty; except as set forth
below, provided, however, that Customer delivers written notice 10 days
prior to such termination to Williams.
6.0 Performance Objectives
The following performance objectives will apply:
o Mean Time to Repair (MTTR) for SONET equipment - ****
o MTTR for fiber optic cable - ****
o Cable cut rate - ****
Williams will endeavor to meet the above performance objectives, but in
no event will Williams' failure to meet such objectives constitute a
default or breach under the Agreement.
7.0 Service Intervals
The following Service Intervals shall apply:
o DS3 POP to POP ****
o DS1 POP to POP ****
o Any Service for which Williams is
Ordering Local Access ****
o Any Service which Williams is
Providing Off-Net ****
Williams will, in good faith, make their best reasonable efforts to
meet the Service Intervals listed above. In the event that the
applicable Service Interval is not met, the Customer may cancel the
Service Order, eliminating the Order Cancellation Pre-Engineering Fee
included in Exhibit 1 to Schedule A, unless the failure of Williams to
meet the applicable Service Interval is caused by delays on the part of
U S WEST, Inc. or any of its subsidiaries or affiliates. Such
cancellation shall be USW's sole and exclusive remedy and Williams'
failure to meet the Service Intervals listed above shall in no event
constitute a default or breach under the Agreement.
8.0 Provisioning Milestones
The following Service Intervals shall apply:
o FOC - after order issued to Williams ****
o (Williams Circuit ID, Order #, Due ****
Date) Williams' receipt of Order
o CFA/LOA - after order issued to ****
Williams
o This information is contained on
Williams' FOC
Williams will, in good faith, make their best reasonable efforts to
meet the Provisioning Milestones listed in Section 8.0. In no event
shall Williams' failure to meet such Provisioning Milestones constitute
a default or breach of the Agreement.
- ----------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
<PAGE> 28
9.0 Williams and Customer will review on a Quarterly basis the Performance
Measurements of Williams as applicable in Sections 2.2 and 2.3, the
Performance Objectives as applicable in Section 6.0, the Service
Intervals as applicable in Section 7.0, and the Provisioning Milestones
as applicable in Section 8.0.
<PAGE> 29
EXHIBIT 1 TO SCHEDULE A - AMENDED
PRICING EXHIBIT
COMMITMENT AND PRICING MATRIX (ON-NET SERVICES ONLY)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
YEARLY COMMITMENT DS3 OC3 OC12 OC48
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ **** $ **** $ **** $ **** $ ****
$ **** $ **** $ **** $ **** $ ****
$ **** $ **** $ **** $ **** $ ****
$ **** $ **** $ **** $ **** $ ****
- ------------------------------------------------------------------------------------------------
</TABLE>
per V & H VGE
PRICING - EXTENDED ON-NET SERVICES
Extended On-Net Service is defined as a circuit where one end-point of the
circuit is On-Net to Williams and the other end-point will be On-Net for
Williams within twelve (12) months of Williams' acceptance of a Service Order.
Whether or not a circuit will be On-Net within twelve (12) months shall be
determined in accordance with Williams "On-Net and On-Net Extended POP List"
which shall be updated by Williams from time to time and provided by Williams to
USW at the time of update.
Extended On-Net Service will be priced at a rate of $ ****
- -------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
<PAGE> 30
ON NETWORK BANDWIDTH PRICING FOR NON-RECURRING CHARGES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
DS-3 & OC-N NON-RECURRING/ANCILLARY IXC CROSS-CONNECT
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Installation $**** $****
Change of Service Order $**** $****
Change of Service - Re-Engineering $**** $****
Order Cancellation - Pre-Engineering $**** $****
Order Cancellation - Post-Engineering $**** $****
Expedited Order Charges $**** $****
Offnet Ancillary - Recurring ****
Offnet Ancillary - Non-recurring ****
Contract Termination See Note 1
Additional Install/Maint/Eng ****/Hr After hours
Local Loop Billing Admin $****
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Note 1: U S WEST may terminate facilities provided on the Williams network
without termination charges, provided that:
a) the termination date applicable to such Facility is at least **** from the
Start of Service Date
b) U S WEST replaces such terminated Facility by submitting a Service Order,
which is accepted by Williams, for a new On-Net Facility or Facilities with
monthly billing equal to or greater than that of the terminated Facility
c) any new facility must be installed on a term that shall in no case be less
than the total number of months remaining on the term of such terminated
Facility
- ----------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
<PAGE> 31
COLLOCATE:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
POWER INSTALLATION
RACK PRICE CHARGE (ONE-TIME (RACK INSTALLATION
USW TIER CITY (PER MONTH) 25 AMPs) CHARGE (ONE-TIME)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Price Per Rack $ **** $ **** $ ****
- --------------------------------------------------------------------------------------------------
</TABLE>
- -------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
<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
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE ONE
ESTABLISHMENT OF DISTRIBUTORSHIP
<S> <C>
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
</TABLE>
<PAGE> 3
ARTICLE THREE
OBLIGATIONS OF NORTEL
<TABLE>
<S> <C>
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
</TABLE>
<PAGE> 4
<TABLE>
ARTICLE FIVE
PROPRIETARY INFORMATION
<S> <C>
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
</TABLE>
<PAGE> 5
ARTICLE NINE
MISCELLANEOUS
<TABLE>
<S> <C>
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
</TABLE>
<PAGE> 6
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,
Page 1
<PAGE> 7
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.
Page 2
<PAGE> 8
"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.
Page 3
<PAGE> 9
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.
Page 4
<PAGE> 10
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.
Page 5
<PAGE> 11
(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.
Page 6
<PAGE> 12
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.
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
Page 7
<PAGE> 13
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.
Page 8
<PAGE> 14
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.
Page 9
<PAGE> 15
(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.
Page 10
<PAGE> 16
(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 effect 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.
Page 11
<PAGE> 17
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
Page 12
<PAGE> 18
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
If Nortel shall determine that a need exists to make either Class A
Corrective Retrofits or Class B Corrective Retrofits, then Nortel shall
so notify Distributor within thirty (30) days of the date of such
determination by means of appropriate documentation. Nortel shall use
all commercially reasonable efforts to develop required Corrective
Retrofits and, when and if such Corrective Retrofits are developed,
shall provide to Distributor without charge, one Corrective Retrofit
kit for each affected item of Product delivered to Distributor pursuant
to this Agreement. Nortel will install all Class A Corrective Retrofit
kits with its own personnel, or such personnel as it may contract and
at its own expense, provided Distributor first: (1) obtains permission
from the affected End User for Nortel personnel to work on the End
User's affected Product during normal business working hours and at
such time as is reasonably convenient to both Nortel and the End User;
and (2) when necessary, obtains the affected End User's permission to
take the affected Product out of service during the time necessary to
install the Class A Corrective Retrofit kit; and (3) has obtained from
the End User a written Agreement protecting Nortel against liability
for any incidental, special and/or consequential damages to such End
User as a result of performance by Nortel. Installation of Class B
Corrective Retrofit kits at affected End User sites shall be the
responsibility and obligation of Distributor, at Distributor's
expense, unless Nortel is providing post-warranty maintenance to the
affected Product under contract to the affected End User, in which case
Nortel will install the Class B Corrective Retrofit kit at Nortel's
expense. If Nortel shall determine that a need exists to make
Regulatory Retrofits, then Nortel shall notify Distributor by means of
appropriate documentation. When a Regulatory Retrofit kit is developed,
Nortel shall offer, at such price as it may announce, and on its then
standard terms and conditions, to provide such Regulatory Retrofit kit
for all affected Products delivered to Distributor pursuant to this
Agreement.
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.
Page 13
<PAGE> 19
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) The Net Distributor Price for any order of Products shall be
calculated as follows: (1) the Commercial List Price in effect
on the date Nortel accepts the order less the applicable
Distributor Discount equals the Gross Distributor Price; (2)
The Gross Distributor Price less any Other Discounts equals
Net Distributor Price. All discounts will be stated in
percentage terms. The Net Distributor Price does not include
any applicable handling charges, interest charges, freight
charges, insurance charges, cancellation charges, or
rescheduling charges, or any applicable sales, use, and/or
privilege taxes, all of which will be invoiced to Distributor
in addition to the Net Distributor Price.
(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).
Page 14
<PAGE> 20
(c) Nortel reserves the right to change the Commercial List Price,
and/or change or eliminate discounts.
Section 4.2.4 PAYMENT TERMS
(a) Except as otherwise stated in the Product Reference Guide or
Product Catalog, Nortel will invoice Distributor as of the
date that a full or partial shipment is made, or for services
upon completion thereof but no less often than monthly if
services continue from month to month. Any invoiced amount
shall be due and payable thirty days after the date of the
invoice. If an invoice contains one or more amounts which are
disputed, as well as one or more amounts which are not,
Distributor agrees it will not withhold any amount(s) which
are not disputed. All amounts past due shall accrue interest
from the thirty-first day following the date of the invoice at
the rate of one percent (1%) per month (or such lesser rate as
may be the maximum permissible rate under applicable law).
Nortel reserves the right to refuse to grant credit to
Distributor at any time and for any reason and to insist upon
cash on delivery or cash-in advance transactions.
(b) Notwithstanding the above, Nortel will invoice Distributor the
purchase price for any Meridian SL-100 system as follows:
10% upon execution of the "Meridian SL-100 Installation
Subcontract" and acceptance of Distributor's order by
Nortel; and
80% upon shipment of the central processor unit of the
system; and
10% upon in-service date or 60 days from the completion of
testing, whichever occurs first.
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.
Page 15
<PAGE> 21
(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;
Page 16
<PAGE> 22
(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
Nortel expressly reserves the following rights with respect to the
offer of Products to Distributor: (1) to cease manufacturing,
distributing, supporting, except as provided in the "Life Cycle
Support" provision in the Product Reference Guide, any Products not
constituting an entire line of Products, upon **** written notice to
Distributor; and (2) to cease manufacturing, distributing, supporting,
except as provided in the "Life Cycle Support" provisions in the
Product Reference Guide, an entire line of Products upon **** written
notice to Distributor; (3) except as provided in Section 4.1.4,
"Changes in Design or Manufacture", to alter the design specifications,
configuration, construction, material, or manufacturing methods
applicable to any Product, without notice, provided that such
alteration does not materially and adversely affect the performance of
the Product; and (4) to allocate limited supplies of Product among all
Nortel Distributors as reasonably seems most equitable to Nortel in
light of all information then available to it; and (5) to release new
Products and Product improvements only pursuant to a controlled release
program, and under such program to allocate such Products to and among
such Nortel Distributors as Nortel, in its sole discretion, may
determine.
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
Page 17
<PAGE> 23
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,
Page 18
<PAGE> 24
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
Page 19
<PAGE> 25
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
Page 20
<PAGE> 26
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) The Receiving Party shall indemnify the Disclosing Party against
measurable economic loss proximately caused by the breach of the
provisions of Article Five of this Agreement by the Receiving Party.
Section 8.3 INTELLECTUAL PROPERTY INFRINGEMENT
(a) The following terms shall have the definitions indicated herein for the
purposes of this Section 8.3 only:
"Software" shall mean any set of one or more Nortel proprietary
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, severally owned by Nortel. The term Software shall
also include any corrections, patches, updates or revisions to Software
originally Distributed.
"Hardware" shall mean only Nortel proprietary physical portions of
Nortel Product, including memory circuits and media upon which Software
and/or Licensed Software may be delivered, but excluding Software and
Licensed Software.
Page 21
<PAGE> 27
"Licensed Software" shall mean any set of one or more third party-owned computer
programs which are 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. The term
Licensed Software shall also include any corrections, patches, updates or
revisions to Licensed Software originally Distributed.
"Third Party Hardware" shall mean only third party owned physical portions of a
Product, including memory circuits and media upon which Software and/or
Licensed Software may be delivered, but excluding Software and Licensed
Software in which Nortel has Distribution rights.
(b) Nortel will indemnify and/or defend, as the case may be, claims of
infringement of intellectual property rights of third parties for only
those Products and Product components specifically identified as being so
covered in the Product Catalog. If a Product or Product component is
identified in the Product Catalog as being covered by a duty to indemnify
and/or defend, the following shall apply:
(1) For Software and Hardware: ****
(2) For Licensed Software and Third Party Hardware: ****
(c) The conditions precedent to the duties set forth herein shall be that: (1)
Distributor, in the applicable instance, shall have complied with the
requirements of this Agreement with respect to retention of, transfer of,
and/or license of the right to use Software and/or Licensed Software; (2)
Distributor shall have given Nortel Formal Notice of such claim promptly on
receipt of same; (3) such claim does not arise from modifications to
Hardware, Software, Licensed Software or Third Party Hardware not
authorized in writing by Nortel; (4) such claim does not arise from use or
combinations of Hardware, Software, Licensed Software or Third Party
Hardware with other products not provided by Nortel wherein the
infringement arises from such combination and such use or combination is
not authorized in writing by Nortel; (5) such claim does not arise from
Hardware, Software, Licensed Software or Third Party Hardware supplied in
accordance with any design or special instructions provided by Distributor
on its behalf or on behalf of an End User; and (6) should Hardware,
Software, Licensed Software or Third Party Hardware become, or in Nortel's
sole opinion, be likely to become, the subject of such claim of
infringement, Distributor shall permit Nortel, at Nortel's option and
expense, either to (i) procure the right to continue using such Hardware,
Software, Licensed Software or Third Party Hardware; (ii) replace or modify
(at Nortel's option) such Hardware, Software, Licensed Software or Third
Party Hardware while maintaining the functionality of such Hardware,
Software, Licensed Software or Third Party Hardware; or (iii) refund to
Distributor the purchase price or fee paid less a reasonable amount for
use, damage and obsolescence, whereupon Distributor shall return to Nortel
all Hardware, Software, Licensed Software or Third Party Hardware for which
such amount is paid by Nortel.
(d) ****
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.
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
Page 22
<PAGE> 28
(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.
Page 23
<PAGE> 29
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.
Page 24
<PAGE> 30
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
----------------------------------- ------------------------------
Page 25
<PAGE> 31
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
Page 1
<PAGE> 32
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
AFFILIATES OF DISTRIBUTOR
Name of Distributor: WilTel Communications, L.L.C.
LIST OF AUTHORIZED AFFILIATES:
None.
This Annex is effective as of __________________.
<TABLE>
<CAPTION>
NORTHERN TELECOM INC. DISTRIBUTOR
<S> <C>
By: By:
--------------------- -----------------------
Name: Name:
--------------------- -----------------------
Title: Title:
--------------------- -----------------------
Date: Date:
--------------------- -----------------------
</TABLE>
<PAGE> 35
ANNEX D
TO DISTRIBUTION AGREEMENT 4.01
SOFTWARE LICENSE
NORTHERN TELECOM INC. ("NORTEL") TELECOMMUNICATIONS PRODUCTS
- --------------------------------------------------------------------------------
THIS LEGAL DOCUMENT IS A LICENSE AGREEMENT ("License") BETWEEN YOU, THE END-USER
("CUSTOMER"), AND NORTEL. BY ACQUIRING A SYSTEM, AN UPGRADE TO AN EXISTING
SYSTEM OR SOFTWARE PRODUCTS FROM NORTEL OR A NORTEL DISTRIBUTOR, YOU, THE
CUSTOMER, AGREE TO BE BOUND BY THE TERMS OF THIS LICENSE.
- --------------------------------------------------------------------------------
Subject to the terms hereinafter set forth, NORTEL grants to CUSTOMER and/or its
representatives, with a "need to know", a personal, non-exclusive license (1) to
use the licensed software, proprietary to NORTEL or its suppliers and (2) to use
the associated documentation. CUSTOMER is granted no title or ownership rights,
in or to the licensed software, in whole or in part, and CUSTOMER acknowledges
that title to and all copyrights, patents, trade secrets and/or any other
intellectual property rights to and in all such licensed software and associated
documentation are and shall remain the property of NORTEL and/or NORTEL's
suppliers. The right to use licensed software may be restricted by a measure of
usage of applications based upon number of lines, number of ports , number of
terminal numbers assigned, number of users, or some similar measure. Expansion
beyond the specified usage level may require payment of an incremental charge or
another license fee.
NORTEL considers the licensed software to contain "trade secrets" of NORTEL
and/or its suppliers. Such "trade secrets" include, without limitation thereto,
the specific design, structure and logic of individual licensed software
programs, their interactions with other portions of licensed software, both
internal and external, and the programming techniques employed therein. In order
to maintain the "trade secret" status of the information contained within the
licensed software, the licensed software is being delivered to CUSTOMER in
object code form only.
NORTEL or any of its suppliers holding any intellectual property rights in any
licensed software, and/or any third party owning any intellectual property
rights in software from which the licensed software was derived, are intended
third party beneficiaries of this License. All grants of rights to use
intellectual property intended to be accomplished by this License are explicitly
stated. No other grants of such rights shall be inferred or shall arise by
implication.
CUSTOMER warrants to NORTEL that CUSTOMER is not purchasing the rights granted
by this License in anticipation of reselling those rights.
CUSTOMER shall:
o Hold the licensed software in confidence for the benefit of NORTEL and/or
NORTEL's suppliers using no less a degree of care than it uses to protect
its own most confidential and valuable information; and
o Keep a current record of the location of each copy of licensed software
made by it; and
o Install and use each copy of licensed software only on a single CPU at a
time (for this purpose, single CPU shall include systems with single
processing units); and
o Affix to each copy of licensed software made by it, in the same form and
location, a reproduction of the copyright notices, trademarks and all other
proprietary legends and/or logos of NORTEL and/or NORTEL's suppliers,
appearing on the original copy of such licensed software delivered to
CUSTOMER; and retain the same without alteration on all original copies;
and
o Issue instructions to each of its authorized employees, agents and/or
representatives to whom licensed software is disclosed, advising them of
the confidential nature of such licensed software and to provide them with
a summary of the requirements of this License: and
o Return the licensed software and all copies through an Authorized
Distributor to NORTEL at such time as CUSTOMER chooses to permanently cease
using it.
CUSTOMER shall not:
o Use licensed software (i) for any purpose other than CUSTOMER's own
internal business purposes and (ii) other than as provided by this License;
or
o Allow anyone other than CUSTOMER's employees, agents and/or representatives
with a "need to know" to have physical access to licensed software; or
o Make any copies of licensed software except such limited number of object
code copies in machine readable form only, as may be reasonably necessary
for execution or archival purposes only; or
o Make any modifications, enhancements, adaptations, or translations to or of
licensed software, except as may result from those CUSTOMER interactions
with the licensed software associated with normal use and explained in the
associated documentation; or
o Attempt to reverse engineer, dissemble, reverse translate, decompile, or in
any other manner decode licensed softwares in order to derive the source
code form or for any other reason; or
o Make full or partial copies of any documentation or other similar printed
or machine-readable matter provided with licensed software unless the same
has been supplied in a form by NORTEL intended for periodic reproduction of
partial copies; or
o Export or re-export licensed software an/or associated documentation from
the fifty states of the United States and the District of Columbia.
o NOTE: Notwithstanding the above restrictions, if CUSTOMER has licensed the
licensed software under a "site license" option as set forth in CUSTOMER's
purchase agreement, CUSTOMER is authorized to make a limited number of
copies of the licensed software and documentation to support additional
users as specified in CUSTOMER's purchase agreement.
CUSTOMER may assign collectively its rights under this License to any subsequent
owner of the associated hardware, but not otherwise, subject to the payment of
the then current license fee for new users, if any. No such assignment shall be
valid until CUSTOMER has delegated all of its obligations under this License to
the assignee; and (2) has obtained from the assignee an unconditional written
assumption of all such obligations; and (3) has provided Nortel a copy of such
assignment, delegation and assumption; and (4) has transferred physical
possession of all licensed software and all associated documentation to the
assignee and destroyed all archival copies. Except as provided, neither this
License nor any rights acquired by CUSTOMER through this License are assignable.
Any attempted assignment of rights and/or transfer
Annex D - Page 1
<PAGE> 36
of licensed software not specifically allowed shall be void and conclusively
presumed a material breach of this License.
If NORTEL (i) claims a material breach of this License, and (ii) provides
written notice of such claimed material breach to CUSTOMER and (iii) observes
that such claimed material breach remains uncorrected and/or unmitigated more
than thirty (30) days following CUSTOMER's receipt of written notice specifying
in reasonable detail the nature of the claimed material breach, then CUSTOMER
acknowledges that this License may be immediately terminated by NORTEL and
CUSTOMER further acknowledges that any such termination shall be without
prejudice to any other rights and remedies that NORTEL may have at law or in
equity.
EXPRESS LIMITED WARRANTIES FOR ANY ITEM OF LICENSED SOFTWARE, IF ANY, WILL BE
SOLELY THOSE GRANTED DIRECTLY TO CUSTOMER BY DISTRIBUTOR. OTHER THAN AS SET
FORTH THEREIN, THIS LICENSE DOES NOT CONFER ANY WARRANTY TO CUSTOMER FROM OR BY
NORTEL.
THE LICENSED SOFTWARE IS PROVIDED BY NORTEL "AS IS" AND WITHOUT WARRANTY OF ANY
KIND OR NATURE, WRITTEN OR ORAL, EXPRESS OR IMPLIED, INCLUDING (WITHOUT
LIMITATION) THE IMPLIED WARRANTIES OF MERCHANTABILITY AND OF FITNESS FOR A
PARTICULAR PURPOSE.
THIS LIMITATION OF WARRANTIES WAS A MATERIAL FACTOR IN THE ESTABLISHMENT OF THE
LICENSE FEE CHARGED FOR EACH SPECIFIC ITEM OF SOFTWARE LICENSED.
IN NO EVENT WILL NORTEL AND/OR NORTEL'S SUPPLIERS AND THEIR DIRECTORS, OFFICERS,
EMPLOYEES OR AGENTS BE LIABLE TO OR THROUGH CUSTOMER FOR INCIDENTAL, INDIRECT,
SPECIAL, CONSEQUENTIAL, PUNITIVE, OR EXEMPLARY DAMAGES OF ANY KIND, INCLUDING
LOST PROFITS, LOSS OF BUSINESS OR BUSINESS INFORMATION, BUSINESS INTERRUPTION,
OR OTHER ECONOMIC DAMAGE, AND FURTHER INCLUDING INJURY TO PROPERTY, AS A RESULT
OF USE OR INABILITY TO USE THE LICENSED SOFTWARE OR BREACH OF ANY WARRANTY OR
OTHER TERM OF THIS LICENSE, REGARDLESS OF WHETHER NORTEL AND/OR NORTEL'S
SUPPLIERS WERE ADVISED, HAD OTHER REASON TO KNOW, OR IN FACT KNEW OF THE
POSSIBILITY THEREOF.
THE RIGHTS AND OBLIGATIONS ARISING UNDER THIS LICENSE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF TEXAS.
- -------------------------------------------------------------------------------
CUSTOMER HEREBY AGREES TO ADHERE TO THE TERMS AND
CONDITIONS OF THIS SOFTWARE LICENSE AGREEMENT:
CUSTOMER SIGNATURE:
------------------------------------------------------------
PRINTED NAME: DATE:
-------------------------------------- --------------------
COMPANY NAME: TELEPHONE NUMBER:
------------------------------ ------------------
DISTRIBUTOR NAME:
--------------------------------------------------------------
- -------------------------------------------------------------------------------
RADFORD L. KELLY
AVP, CONTRACTS AND MARKET CHANNEL MANAGEMENT
NORTHERN TELECOM INC.
Annex D - Page 2
<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>
-i-
<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
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C>
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
</TABLE>
-iv-
<PAGE> 6
<TABLE>
<S> <C>
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
</TABLE>
-v-
<PAGE> 7
<TABLE>
<S> <C>
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
</TABLE>
-vi-
<PAGE> 8
<TABLE>
<S> <C>
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)
</TABLE>
-vii-
<PAGE> 9
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
1
<PAGE> 10
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)
2
<PAGE> 11
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
3
<PAGE> 12
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
4
<PAGE> 13
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
5
<PAGE> 14
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.
6
<PAGE> 15
"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
7
<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),
8
<PAGE> 17
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.
9
<PAGE> 18
"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.
10
<PAGE> 19
"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.
11
<PAGE> 20
"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.
12
<PAGE> 21
"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.
13
<PAGE> 22
" 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.
14
<PAGE> 23
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.
15
<PAGE> 24
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).
16
<PAGE> 25
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.
17
<PAGE> 26
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:
R = (P x V + M) / (V + T)
where:
R = such Member's revised Percentage Interest
P = such Member's Percentage Interest as of the last day of the preceding fiscal
quarter
M = the Agreed Value of the Capital Contributions made by such Member since the
last day of the preceding fiscal quarter
18
<PAGE> 27
T = the Agreed Value of the Capital Contributions made by all Members
since the last day of the preceding fiscal quarter
V = (0.615 A + 8.53 B + 11.1 C) / 3 - D
where:
A = Total Revenue for the Company for the preceding four (4) fiscal
quarters
B = EBITDA for the preceding four (4) fiscal quarters
C = EBIT for the preceding four (4) fiscal quarters
D = The Debt of the Company as of the last day of the preceding fiscal
quarter.
(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
19
<PAGE> 28
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
20
<PAGE> 29
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
21
<PAGE> 30
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
22
<PAGE> 31
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)
23
<PAGE> 32
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
24
<PAGE> 33
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
25
<PAGE> 34
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
26
<PAGE> 35
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
27
<PAGE> 36
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
28
<PAGE> 37
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
29
<PAGE> 38
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.
30
<PAGE> 39
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;
31
<PAGE> 40
(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
32
<PAGE> 41
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
33
<PAGE> 42
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:
34
<PAGE> 43
(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
35
<PAGE> 44
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.
36
<PAGE> 45
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.
37
<PAGE> 46
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
38
<PAGE> 47
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
39
<PAGE> 48
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
40
<PAGE> 49
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
41
<PAGE> 50
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.
42
<PAGE> 51
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.
43
<PAGE> 52
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
44
<PAGE> 53
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
45
<PAGE> 54
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
46
<PAGE> 55
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
47
<PAGE> 56
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
48
<PAGE> 57
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
49
<PAGE> 58
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
50
<PAGE> 59
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.
51
<PAGE> 60
(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
52
<PAGE> 61
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
53
<PAGE> 62
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.
54
<PAGE> 63
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
55
<PAGE> 64
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
56
<PAGE> 65
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
57
<PAGE> 66
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, that the Company shall not be deemed to be
at a disadvantage to any other Distributor solely by reason of differences in
treatment between Distributors (including the Company) arising out of the terms
and conditions of the CPE Agreement and the policies implemented pursuant
thereto so long as such agreement and policies are uniformly applied and made
available to all Distributors (including the Company) and so long as any and all
products that are made available to other Distributors have been offered to the
Company on a basis at least as favorable as offered to such other Distributors,
and the Territory provided for therein shall be the United States of America;
and provided further, that the Company shall not be deemed to be at a
disadvantage and shall derive no rights as a result of or in connection with the
****. The parties hereto acknowledge that the provisions of this Article XX are
not intended to be part of or an amendment or supplement to the CPE Agreement,
but are intended to be separate and distinct agreements between the parties.
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
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
58
<PAGE> 67
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, that the Company
shall not be deemed to be at a disadvantage to any other Distributor solely by
reason of differences in treatment between Distributors (including the Company)
arising out of the terms and conditions of the CPE Agreement and the policies
implemented pursuant thereto so long as such agreement and policies are
uniformly applied and made available to all Distributors (including the Company)
and so long as any and all products that are made available to other
Distributors have been offered to the Company on a basis at least as favorable
as offered to such other Distributors, and the Territory provided for therein
shall be the United States and Canada; 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. For so long as both Parties are Members of the
Company, the Company, as a technology partner of NTI, will participate in the
technology (alpha) trials and field (beta) trials of any Emerging Products,
and will act as a reseller of such Emerging Products prior to Distribution
thereof upon such terms and conditions as NTI and the Company mutually agree,
the Parties having an obligation to negotiate in good faith toward commercially
reasonable terms and conditions.
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.
59
<PAGE> 68
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
60
<PAGE> 69
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.
61
<PAGE> 70
(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;
62
<PAGE> 71
(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,
63
<PAGE> 72
(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
64
<PAGE> 73
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
65
<PAGE> 74
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.
66
<PAGE> 75
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
67
<PAGE> 76
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/ S. MILLER WILLIAMS
---------------------------------
Its: Senior Vice President
---------------------------------
NORTHERN TELECOM INC.
By: /s/
---------------------------------
Its: Vice President Distributor Sales
--------------------------------
68
<PAGE> 77
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;
1
<PAGE> 3
"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;
2
<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 Ten Million Dollars ($10,000,000) 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 Four Million Dollars
($4,000,000) 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
5
<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 **** by wire
transfer and **** by promissory note payable ninety (90) days after Closing
substantially in the form attached to the Formation Agreement as Exhibit G
thereto (the "TTS Accounts Receivable Note").
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
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"):
(i) any liability, Claim or obligation (whether actual,
contingent, known or unknown) of TTS arising out of any Claim in
connection with facts, events or circumstances occurring on or
before the Effective Date or relating to periods ending on or
before such date (a "Litigation Claim") to the extent the Losses
(after deducting any specific liability amounts reflected on the
NCS Adjusted Effective Date Balance Sheet, as it pertains to TTS)
in the aggregate resulting therefrom exceed the amount of the
Litigation Deductible excluding, for the avoidance of all doubt,
TTS' performance obligations from and after the Effective Date
under TTS Contracts disclosed under Article III of this Agreement
or not required to be disclosed under express terms of Article III
of this Agreement;
(ii) any liability, Claim or obligation (whether actual,
contingent, known or unknown), arising out of or relating to the
NTL Retained Assets; and
(iii) any liability, Claim or obligation (whether actual,
contingent, known or unknown) arising out of any occurrence or
incident happening on or before the Closing Date and arising from
any: (x) bodily injury, including death therefrom, personal injury,
or property damage (other than claims covered by warranty or
maintenance provisions of TTS Contracts with customers), including
loss of use thereof, to third parties; and (y) any injuries,
including death therefrom, to any current or prior employees of
TTS.
9
<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
10
<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,
11
<PAGE> 13
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").
12
<PAGE> 14
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.
13
<PAGE> 15
(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.
14
<PAGE> 16
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.
15
<PAGE> 17
(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.
16
<PAGE> 18
(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.
17
<PAGE> 19
(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.
18
<PAGE> 20
(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.
19
<PAGE> 21
(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.
20
<PAGE> 22
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;
21
<PAGE> 23
(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.
22
<PAGE> 24
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
23
<PAGE> 25
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.
24
<PAGE> 26
(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
25
<PAGE> 27
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.
26
<PAGE> 28
(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.
27
<PAGE> 29
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
28
<PAGE> 30
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
29
<PAGE> 31
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
30
<PAGE> 32
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.
31
<PAGE> 33
(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:
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
32
<PAGE> 34
(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").
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
33
<PAGE> 35
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
34
<PAGE> 36
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
eighteen months (18) following the Closing. The representation and warranties,
covenants, agreements and undertakings of NTL (i) contained in Section 3.4
hereof (the "Title Representations") shall survive the Closing until the fourth
(4th) anniversary thereof and will thereupon expire together with any right of
indemnification with respect to breaches of the Title Representations, (ii)
contained in Section 3.10 hereof (the "Environmental Representations") shall
survive the Closing until the Second (2nd) anniversary thereof and will
thereupon expire together with any right of indemnification with respect to
breaches of the Environmental Representations, (iii) contained in Sections 3.7
and 3.12 and Article IX hereof (the "Employment and Tax Representations and
Covenants") shall survive the Closing for a period ending ninety (90) days
after the expiration of the applicable statute of limitation, as the same may
be extended from time to time, and thereupon expire together with any right of
indemnification with respect to Employment and Tax Representations and
Covenants, and (iv) contained
35
<PAGE> 37
in Sections 2.4 and 10.6 shall survive the Closing until the third (3rd)
anniversary thereof and will thereupon expire together with any right of
indemnification with respect thereto; provided that, if a Claim or oral demand
for indemnification (including, without limitation, any notice of any Litigation
Claim) has been made or given within the applicable survival period and has not
been resolved as of the expiration of such period, such Claim (and, if the Claim
results from a breach of a representation, warranty, covenant, agreement or
undertaking, such representation, warranty, covenant, agreement or undertaking)
shall survive until the final resolution of such Claim.
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 Ten
Million Dollars ($10,000,000) 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 Four Million Dollars ($4,000,000) 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" 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;
5
<PAGE> 15
"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;
6
<PAGE> 16
"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;
7
<PAGE> 17
"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
8
<PAGE> 18
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;
9
<PAGE> 19
"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;
10
<PAGE> 20
"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
11
<PAGE> 21
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: (i) the Accounts Receivable Note and the proceeds from the
transfer of inventory and fixed assets pursuant to Section 2.7(b), (ii) any
rights in, to and under the trademarks, servicemarks and tradenames Nortel,
Nortel and Design(TM) or any other trademark, servicemark or tradenames, whether
registered or otherwise, of NTL or NTI or their Affiliates, (iii) any
intercompany notes payable to, or to the order of, NCS listed on Schedule
2.4(a)(iii) hereto, (iv) any prepaid Taxes or deferred Tax benefits relating to
the NCS Business for any periods ending on or prior to the Closing Date, and (v)
rights in and to the items listed on Schedule 2.4(a)(v) (collectively, the "NTI
Retained Assets").
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
12
<PAGE> 22
(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: (i) any tangible or intangible asset to the extent, but
only to the extent, it relates to or is used in connection with the development,
marketing, licensing, sale or use of internet services, (ii) any capital stock
or note of Intersys, (iii) any intercompany note or account receivable of WilTel
or any WilTel Subsidiary from any of their respective Affiliates that may be
receivable on the Effective Date in the accounts set forth on Schedule
2.4(b)(iii) hereto, (but excluding any amounts receivable for goods and services
rendered in the ordinary course of the WilTel Business), (iv) any prepaid Taxes
or deferred Tax benefits relating to the WilTel Business for any periods ending
on or prior to the Closing Date, 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"):
(i) any liability, Claim or obligation (whether actual,
contingent, known or unknown) for any Taxes relating to the
NCS Business for any periods ending on or prior to the Closing
Date;
(ii) any liability or obligation (whether actual,
contingent, known or unknown) of NCS arising out of any Claim
or oral demand which a third party has expressly indicated its
intention to pursue in connection with facts, events or
circumstances occurring on or before the Effective Date or
relating to periods ending on or before such date (a
"Litigation Claim") to the extent the Losses (after deducting
any specific liability amounts reflected on the NCS Adjusted
Effective Date Balance Sheet) in the aggregate resulting
therefrom exceed the amount of the Litigation Deductible,
excluding, for the avoidance of all doubt, the performance
obligations from and after the Effective Date under NCS
Contracts disclosed under Article III of this Agreement or not
required to be disclosed under the express terms of Article
III of this Agreement;
(iii) any liability, Claim or obligation (whether actual,
contingent, known or unknown), arising out of or relating to
the NTI Retained Assets; and
(iv) any liability, Claim, or obligation (whether actual,
contingent, known or unknown) arising out of any occurrence or
incident happening
13
<PAGE> 23
on or before the Closing Date and arising from any: (x) bodily
injury, including death therefrom, personal injury, or
property damage (other than Claims covered by warranty or
maintenance provisions of NCS Contracts with customers),
including loss of use thereof, to third parties; and (y) any
injuries, including death therefrom to any current or prior
employee of NCS.
(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"):
(i) any liability, Claim or obligation (whether
actual, contingent, known or unknown) for any Taxes relating
to the WilTel Business for any periods ending on or prior to
the Closing Date;
(ii) any liability or obligation (whether actual,
contingent, known or unknown) of WilTel arising out of any
Claim or oral demand which a third party has expressly
indicated its intention to pursue in connection with facts,
events or circumstances occurring on or before the Effective
Date or relating to periods ending on or before such date (a
"Litigation Claim") to the extent the Losses (after deducting
any specific liability amounts reflected on the WilTel
Adjusted Effective Date Balance Sheet) in the aggregate
resulting therefrom exceed the amount of the Litigation
Deductible, excluding, for the avoidance of all doubt, the
performance obligations from and after the Effective Date
under WilTel Contracts disclosed under Article IV of this
Agreement or not required to be disclosed under the express
terms of Article IV of this Agreement;
(iii) any liability, Claim or obligation, (whether
actual, contingent, known or unknown) arising out of or
relating to the WCG Retained Assets; and
(iv) any liability, Claim or obligation (whether
actual, contingent, known or unknown) arising out of any
occurrence or incident happening on or before the Closing Date
and arising from any: (x) bodily injury, including death
therefrom, personal injury, or property damage (other than
Claims covered by warranty or maintenance provisions of WilTel
Contracts with customers), including loss of use thereof, to
third parties; any (y) any injuries, including death therefrom
to any current or prior employee of WilTel.
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
14
<PAGE> 24
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
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
15
<PAGE> 25
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. 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 a worksheet calculating
the sum of (x) the sum of the Assets minus the Liabilities as contained in the
NCS Adjusted Effective Date Balance Sheet minus (y) ****, (such amount shall be
referred to as the "NCS Adjustment").
(b) Calculation of WilTel Adjustment. 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 a worksheet calculating
the (x) the sum of the Assets minus the Liabilities as contained in the WilTel
Adjusted Effective Date Balance Sheet minus (y) ****, (such amount shall be
referred to as the "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
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
16
<PAGE> 26
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;
17
<PAGE> 27
(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,
18
<PAGE> 28
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
19
<PAGE> 29
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
20
<PAGE> 30
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
21
<PAGE> 31
(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
22
<PAGE> 32
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
23
<PAGE> 33
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
24
<PAGE> 34
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.
25
<PAGE> 35
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
26
<PAGE> 36
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
27
<PAGE> 37
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
28
<PAGE> 38
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;
29
<PAGE> 39
(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.
30
<PAGE> 40
(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;
31
<PAGE> 41
(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.
32
<PAGE> 42
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
33
<PAGE> 43
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.
34
<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
35
<PAGE> 45
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,
36
<PAGE> 46
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.
37
<PAGE> 47
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.
S. 6901 et seq., the Clean Air Act, 42 U.S.C. S. 7401 et seq. and the Federal
Water Pollution Control Act, 33 U.S.C. S. 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
38
<PAGE> 48
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.
39
<PAGE> 49
(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
40
<PAGE> 50
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
41
<PAGE> 51
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
42
<PAGE> 52
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.
43
<PAGE> 53
(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
44
<PAGE> 54
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
45
<PAGE> 55
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:
46
<PAGE> 56
(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
47
<PAGE> 57
(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;
48
<PAGE> 58
(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;
49
<PAGE> 59
(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,
50
<PAGE> 60
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.
51
<PAGE> 61
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.
52
<PAGE> 62
(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
53
<PAGE> 63
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
54
<PAGE> 64
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.
55
<PAGE> 65
(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.
56
<PAGE> 66
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
57
<PAGE> 67
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
58
<PAGE> 68
(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.
59
<PAGE> 69
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
60
<PAGE> 70
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.
(c) Leaves of Absence. Employees on short-term
disability, long-term disability or any other leave of absence
status, who are able to return to work after the Employee
Transfer Date, will have their reemployment rights determined
by Newco. Any person who qualifies for long-term disability
benefits on or before the Employee Transfer Date under either
the employee benefit plans of NTI or WCG shall not be
transferred to Newco and shall be entitled to receive the
disability and other benefits, if any, provided by the
employee benefit plans covering such person prior to the
Employee Transfer Date. All employees of
61
<PAGE> 71
Nortel Communications Personnel Services Inc., and all
employees of WilTel Services, Inc. who are on short-term
disability or other leave of absence status (other than
long-term disability) shall be transferred to Newco on the
Employee Transfer Date and Nortel Communications Personnel
Services Inc., and WilTel Services, Inc. shall cease providing
benefits to all such employees on the Employee Transfer Date.
If Newco decides to provide any benefits to employees on
short-term disability or other leave of absence status (other
than long-term disability) after the Employee Transfer Date,
such benefits shall be the responsibility and liability of
Newco.
(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.
(f) NCS Negotiated Plans. Effective as of the
Employee Transfer Date, Newco shall have the option to assume
all liability for the Pension Plan for Bargaining Employees of
Northern Telecom Inc. and/or to assume all liability for The
Savings Plan for Bargaining Unit Employees of Northern Telecom
Inc. on such terms as are agreed to by Newco and NTI. If Newco
assumes either plan, it shall continue such plan with respect
to individuals covered thereby on the Employee Transfer Date
as the sponsoring employer pursuant to the terms of such plans
and the collective bargaining agreements pursuant to which
they were established.
(g) WilTel Negotiated Plans. Effective as of the
Employee Transfer Date, Newco shall have the option to assume
all liability for the WilTel Union 401(k) savings plans listed
on Schedule 9.8(g) on such terms as are agreed to by Newco and
WCG. If Newco assumes a plan listed on Schedule 9.8(g), Newco
shall continue such plan with respect to individuals covered
thereby on the Employee Transfer Date as the sponsoring
employer pursuant to the terms of such plans and the
collective bargaining agreements pursuant to which they were
established. Effective as of the Employee Transfer Date, Newco
shall assume all liability for the WilTel multi-employer Plans
which are listed on Schedule 4.12(g) (except for any
withdrawal liabilities that were incurred prior to the
Closing), and Newco shall continue such plans in accordance
with applicable collective bargaining agreements.
62
<PAGE> 72
(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
63
<PAGE> 73
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
64
<PAGE> 74
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.
65
<PAGE> 75
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
66
<PAGE> 76
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
67
<PAGE> 77
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.
68
<PAGE> 78
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
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
69
<PAGE> 79
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
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
70
<PAGE> 80
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
71
<PAGE> 81
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
eighteen (18) months following the Closing. The representation and warranties,
convenants, agreements and undertakings of NTI and WCG: (i) contained in
Sections 3.4 and 4.4 hereof (the "Title Representations") shall survive the
Closing until the fourth (4th) anniversary thereof and will thereupon expire
together with any right of indemnification with respect to breaches of the Title
Representations, (ii) contained in Sections 3.10 and 4.10 hereof (the
"Environmental Representations") shall survive the Closing until the Second
(2nd) anniversary thereof and will thereupon expire together with any right of
indemnification with respect to breaches of the Environmental Representations,
(iii) contained in Sections 3.7, 3.12, 4.7, 4.12, the last paragraph of 8.2, and
Article IX hereof (the "Employment and Tax Representations and Covenants") shall
survive the Closing for a period ending ninety (90) days after the expiration of
the applicable statute of limitation, as the same may be extended from time to
time, and thereupon expire together with any right of indemnification with
respect to Employment and Tax Representations and Covenants; and (iv) contained
in Sections 2.5 and 10.11 shall survive the Closing until the third (3rd)
anniversary thereof and will thereupon expire together with any right of
indemnification with respect thereto; provided that, if a Claim or oral demand
for indemnification (including, without limitation, any notice of any Litigation
Claim) has been made or given within the applicable survival period and has not
been resolved as of the expiration of such period, such Claim (and, if the claim
results from a breach of a representation, warranty, covenant, agreement or
undertaking, such representation, warranty, covenant, agreement or undertaking)
shall survive until the final resolution of such Claim.
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.
72
<PAGE> 82
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.
73
<PAGE> 83
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
74
<PAGE> 84
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.
75
<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.
76
<PAGE> 86
IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of
the date first set forth above.
NORTHERN TELECOM INC.
By: /s/
---------------------------------------
Its: Vice President
--------------------------------------
WILLIAMS COMMUNICATIONS GROUP, INC.
By: /s/ [S. MILLER WILLIAMS]
---------------------------------------
Its: Senior Vice President
--------------------------------------
77
<PAGE> 87
CERTIFICATE OF FORMATION
OF
WILTEL COMMUNICATIONS, LLC
This Certificate of Formation of WilTel Communications, LLC (the
"LLC"), dated April 1, 1997, is being duly executed and filed by Howard E.
Janzen, as an authorized person, to form a limited liability company under the
Delaware Limited Liability Company Act (6 Del. C. 18-101, et seq.).
FIRST. The name of the limited liability company formed hereby is
WilTel Communications, LLC.
SECOND. The address of the registered office of the LLC in the State of
Delaware is c/o The Corporation Trust Company, Corporation Trust Center, 1209
Orange Street, Wilmington, New Castle County, Delaware 19801.
THIRD. The name and address of the registered agent for service of
process on the LLC in the State of Delaware is The Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County,
Delaware 19801.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Formation as of the date first above written.
/s/ HOWARD E. JANZEN
------------------------------
Howard E. Janzen
Authorized Person
1
<PAGE> 88
EXHIBIT UPDATES TO FORMATION AGREEMENT
EXHIBIT B
CERTIFICATE OF MERGER OF WILTEL
This Exhibit has been updated pursuant to the Amendment Agreement to Formation
Agreement.
2
<PAGE> 89
CERTIFICATE OF MERGER
OF
WILLIAMS TELECOMMUNICATIONS SYSTEMS, INC.
INTO
WILTEL COMMUNICATIONS, LLC
Pursuant to Title 8, Section 264(c) of the General Corporation Law of
the State of Delaware (the "General Corporation Law") and Title 6, Section
18-209 of the Delaware Limited Liability Company Act (the "Act"), the
undersigned limited liability company does hereby certify:
FIRST: The name of the jurisdiction of formation or organization and
domicile of each of the constituent entities which is to merge are as follows:
WilTel Communications, LLC, a Delaware limited liability company, and Williams
Tele communications Systems, Inc., a Delaware corporation.
SECOND: An Agreement of Merger has been approved, adopted, certified,
executed and acknowledged in accordance with Section 264(c) of the General
Corporation Law and in accordance with Section 18-209 of the Act by: (i)
Williams Telecommunications Systems, Inc. and (ii) WilTel Communications, LLC.
THIRD: The name of the surviving limited liability company is WilTel
Communications, LLC.
FOURTH: The merger of Williams Telecommunications Systems, Inc. into
WilTel Communications, LLC shall be effective upon the filing of this
Certificate of Merger with the Secretary of State of the State of Delaware.
FIFTH: The executed Agreement of Merger is on file at the principal
place of business and an office of the surviving limited liability company. The
address of the principal place of business and an office of the surviving
limited liability company is One Williams Center, Tulsa, OK 74172.
SIXTH: A copy of the Agreement of Merger will be furnished by the
surviving limited liability company, on request and without cost, to any member
of WilTel Communications, LLC and to any person holding an interest in Williams
Telecommunications Systems, Inc.
IN WITNESS WHEREOF, said Limited Liability Company has caused this certificate
to be signed by an authorized person, the 30th day of April, 1997.
WILTEL COMMUNICATIONS, LLC
BY: /s/ S. MILLER WILLIAMS
-------------------------------
as Authorized Person
3
<PAGE> 90
CERTIFICATE OF MERGER
OF
NORTEL COMMUNICATIONS SYSTEMS INC.
INTO
WILTEL COMMUNICATIONS, LLC
------------------------------------------------------
Pursuant to Section 18-209(c) of the
Limited Liability Company Act of the State of Delaware
and Section 264(c) of the
General Corporation Law of the State of Delaware
------------------------------------------------------
WilTel Communications, LLC, a limited liability company
organized under the Delaware Limited Liability Company Act with its principal
office at One Williams Center, Tulsa, Oklahoma 74172, does hereby certify as
follows:
FIRST: The name and jurisdiction of organization of each of
the constituent entities to the merger are as follows:
<TABLE>
Name State of Organization
---- ---------------------
<S> <C>
NORTEL Communications Systems Inc. Delaware
WilTel Communications, LLC Delaware
</TABLE>
SECOND: An Agreement of Merger between the constituent
entities to the merger (the "Agreement of Merger") has been approved and
executed by each
4
<PAGE> 91
of the constituent entities in accordance with Section 18-209(b) of the Limited
Liability Company Act of the State of Delaware and Section 264(c) of the
Delaware General Corporation Law, as applicable.
THIRD: The name of the surviving domestic limited liability company in
the merger is WilTel Communications, LLC (the "Surviving Limited Liability
Company").
FOURTH: The Agreement of Merger is on file at the principal place of
business of the Surviving Limited Liability Company. The address of the
principal place of business of the Surviving Limited Liability Company is One
Williams Center, Tulsa, Oklahoma 74172.
FIFTH: A copy of the Agreement of Merger will be furnished by the
Surviving Limited Liability Company, on request and without cost, to any stock
holder of NORTEL Communications Systems Inc. and any member of WilTel
Communications, LLC.
SIXTH: The merger of the constituent entities shall become effective
upon the filing hereof.
5
<PAGE> 92
IN WITNESS WHEREOF, this Certificate of Merger has been duly executed
as of the 30th day of April 1997, and is being filed in accordance with Section
18-209(c) of the Limited Liability Company Act of the State of Delaware and
Section 264(c) of the General Corporation Law of the State of Delaware.
WilTel Communications, LLC
By: /s/ S. MILLER WILLIAMS
-----------------------------------
Name: S. Miller Williams
Title: Senior Vice President
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 10.38
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>
i
<PAGE> 3
<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>
ii
<PAGE> 4
<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>
iii
<PAGE> 5
LIST OF EXHIBITS
EXHIBIT A WILTEL NETWORK
EXHIBIT B VYVX EQUIPMENT
EXHIBIT C VYVX FIBER
EXHIBIT D SYSTEM SEGMENTS
EXHIBIT E SYSTEM SERVICE STATEMENT
iv
<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.
Page 1 of 37
<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
Page 2 of 37
<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.
Page 3 of 37
<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.
Page 5 of 37
<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
Page 6 of 37
<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).
Page 7 of 37
<PAGE> 13
(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;
Page 8 of 37
<PAGE> 14
(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.
Page 9 of 37
<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 2.03. Additional Purchase Price. On certain segments of the
WilTel Network which have been identified on Exhibit D, Vyvx will be required to
pay an additional price in order to install equipment with a capacity greater
than the initial Vyvx Equipment. In such event, Vyvx and WilTel agree to
negotiate in good faith to establish the purchase price (the "Additional
Purchase Price") for the right to install such additional capacity on the
effected segments. The Additional Purchase Price may not exceed ****. Vyvx may
pay the Additional Purchase Price either, at Vyvx's option in whole or in part,
in cash or through issuing credits (the "Additional Purchase Price Credits") for
future services. The Additional Purchase Price Credits are [sic] be applied
until used in full against ****, as adjusted by the Inflation Adjustment, for
either, at WilTel's option in whole or in part, (a) **** or (b) ****. WilTel may
only utilize the Additional Purchase Price Credits as provided in the preceding
sentence and will have no right to a refund thereof.
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
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
Page 10 of 37
<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
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
Page 11 of 37
<PAGE> 17
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.
Page 12 of 37
<PAGE> 18
(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.
Page 13 of 37
<PAGE> 19
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") at the amount (the "Vyvx Share")
equal to the Vyvx Percentage multiplied by the net book value to WilTel, plus,
but only in the case of a WilTel Expansion, ten percent (10%) of the Vyvx Share,
or in the case of a merger or acquisition the net book value reflected on the
books of the acquired entity as adjusted by any election allowed under Section
338(h)10 of the Internal Revenue Code, of such Network Replacement or WilTel
Expansion.
(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
Page 14 of 37
<PAGE> 20
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
Page 15 of 37
<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: $75/hour for 5:00 p.m. to 8:00 a.m., local
time, Monday - Friday and $100/hour 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
Page 16 of 37
<PAGE> 22
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
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
Page 17 of 37
<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
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
Page 18 of 37
<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 One Hundred Thousand Dollars ($100,000)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
Page 19 of 37
<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
- ------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
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
Page 21 of 37
<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
Page 22 of 37
<PAGE> 28
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.
Page 23 of 37
<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
Page 24 of 37
<PAGE> 30
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
Page 25 of 37
<PAGE> 31
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
Page 26 of 37
<PAGE> 32
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
Page 27 of 37
<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.
Page 28 of 37
<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
Page 30 of 37
<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.
Page 31 of 37
<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.
Page 32 of 37
<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.
Page 33 of 37
<PAGE> 39
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
Page 34 of 37
<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.
Page 35 of 37
<PAGE> 41
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.
Page 36 of 37
<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/ BY: /s/ LAWRENCE C. LITTLEFIELD JR.
- ----------------------------- --------------------------------
Vice President
ATTEST: VYVX, INC.
/s/ BY: /s/ DEL BOTHOF
- ----------------------------- --------------------------------
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.
Page 1 of 5
<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.
Page 2 of 5
<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
Page 3 of 5
<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 24.1
WILLIAMS COMMUNICATIONS GROUP, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each of the undersigned
individuals, in their capacity as a director or officer, or both, as hereinafter
set forth below their signature, of WILLIAMS COMMUNICATIONS GROUP, INC., a
Delaware corporation ("WCG"), does hereby constitute and appoint each of WILLIAM
G. von GLAHN, REBECCA H. HILBORNE, and SHAWNA L. GEHRES their true and lawful
attorney-in-fact and each of them (with full power to act without the others)
their true and lawful attorney-in-fact for them and in their name and in their
capacity as a director or officer, or both, of WCG, as hereinafter set forth
below their signature, to sign any and all amendments (including post-effective
amendments) to the registration statement on Form S-1 for the registration of
Class A common stock of WCG (file number 333-76007) and any and all additional
registration statements pursuant to Rule 462(b) relating to said registration
statement on Form S-1, and to file the same, with all exhibits thereto, and any
and all other instruments necessary or incidental in connection therewith, with
the Securities and Exchange Commission; and
THAT the undersigned WCG does hereby constitute and appoint
WILLIAM G. von GLAHN, REBECCA H. HILBORNE, and SHAWNA L. GEHRES its true and
lawful attorney-in-fact and each of them (with full power to act without the
others) its true and lawful attorney-in-fact for it and in its name and on its
behalf to sign said registration statement and any and all amendments thereto
and any additional registration statements pursuant to Rule 462(b) relating to
said registration statement on Form S-1, and to file the same, with all exhibits
thereto, and all instruments necessary or incidental in connection therewith.
Each of said attorney-in-fact shall have full power of
substitution and resubstitution, and said attorney-in-fact or any of them or any
substitute appointed by any of them hereunder shall have full power and
authority to do and perform in the name and on behalf of each of the
undersigned, in any and all capacities, every act whatsoever requisite or
necessary to be done in the premises, as fully to all intents and purposes as
each of the undersigned might or could do in person, the undersigned hereby
ratifying and approving the acts of said attorney-in-fact or any of them or of
any such substitute pursuant hereto.
IN WITNESS WHEREOF, the undersigned have executed this
instrument, all as of the 31st day of May, 1999.
/s/ MICHAEL P. JOHNSON /s/ SCOTT E. SCHUBERT
- -------------------------------------- ------------------------------------
Michael P. Johnson Scott E. Schubert
Director Senior Vice President and
Chief Financial Officer
(Principal Financial Officer &
Principal Accounting Officer)
WILLIAMS COMMUNICATIONS GROUP, INC.
By /s/ WILLIAM G. VON GLAHN
----------------------------------
William G. von Glahn
ATTEST: Senior Vice President
/s/ SHAWNA L. GEHRES
- --------------------------------------
Shawna L. Gehres
Secretary
