<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 18, 1998
REGISTRATION NO. 333-62797
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BIRCH TELECOM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 4813 43-1766929
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) NO.)
</TABLE>
1004 BALTIMORE AVE., SUITE 900
KANSAS CITY, MISSOURI 64105
(816) 842-7560
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
GREGORY C. LAWHON
SENIOR VICE PRESIDENT OF
PUBLIC POLICY AND GENERAL COUNSEL
BIRCH TELECOM, INC.
1004 BALTIMORE AVE., SUITE 900
KANSAS CITY, MISSOURI 64105
(816) 842-7560
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
Copy to:
KIRK A. DAVENPORT, ESQ.
LATHAM & WATKINS
885 THIRD AVENUE.
NEW YORK, NEW YORK 10022
(212) 906-1267
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE BEING OFFERED IN
CONNECTION WITH THE FORMATION OF A HOLDING COMPANY AND THERE IS COMPLIANCE WITH
GENERAL INSTRUCTION G, CHECK THE FOLLOWING BOX. [ ]
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(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. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
TITLE OF EACH PROPOSED PROPOSED AMOUNT OF
CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER NOTES(1) OFFERING PRICE(1) FEE(2)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
14% Senior Notes due 2008..... $115,000,000 100% $115,000,000 $33,925
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457.
(2) Paid with the initial filing of the Registration Statement.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware
("DGCL") provides that a corporation has the power to indemnify any director or
officer, or former director or officer, who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the corporation) against the expenses (including
attorney's fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with the defense of any action by
reason of being or having been directors or officers, if such person shall have
acted in good faith and in a manner reasonably believed to be in or not opposed
to the best interests of the corporation, and, with respect to any criminal
action or proceeding, provided that such person had no reasonable cause to
believe his conduct was unlawful, except that, if such action shall be in the
right of the corporation, no such indemnification shall be provided as to any
claim, issue or matter as to which such person shall have been judged to have
been liable to the corporation unless and only to the extent that the Court of
Chancery of the State of Delaware (the "Court of Chancery"), or any court in
such suit or action was brought, shall determine upon application that, despite
the liability judgment, but in view of all of the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses as
the Court of Chancery or such other court shall deem proper.
Accordingly, the Certificate of Incorporation and the amendments thereto
dated February 10, 1998 and June 23, 1998 of the Company (filed herewith as
Exhibit 3.1) provide that subject to certain exceptions, the Company shall
indemnify each director or officer against any and all expenses (including
attorneys' fees), judgments, fines, excise taxes assessed with respect to any
employee benefit plan, or penalties and amounts paid in settlement actually and
reasonably incurred by such director or officer in connection with any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (including an action by or in the
right of the Company), to which such director or officer is, was or at any time
becomes a party, or is threatened to be made a party, by reason of the fact that
such director or officer is, was or at any time becomes a director or officer of
the Company, or is, or was serving, or at any time serves at the request of the
Company as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise. The Certificate of Incorporation and the
amendments thereto also provide that the Company shall advance expenses
(including attorneys' fees) actually and reasonably incurred by a director or
officer in defending any proceeding and any judgments, fines or amounts to be
paid in settlement thereof. The Certificate of Incorporation and the amendments
thereto provide, however, that the foregoing provisions shall not require the
Company to pay any indemnity (i) for which payment is actually made to such
director or officer under a valid and collectible insurance policy, except in
respect of any excess beyond the amount of payment under such insurance; (ii)
for which such director or officer is indemnified by the Company pursuant to
applicable law or otherwise than pursuant to the Certificate of Incorporation of
the Company; (iii) for an accounting of profits made from the purchase or sale
by such director or officer of securities of the Company within the meaning of
Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or
similar provisions of any state statutory law or common law; (iv) on account of
such director's or officer's conduct which is finally adjudged by a court to
have been knowingly fraudulent, deliberately dishonest or willful misconduct; or
(v) if a final decision by a court having jurisdiction in the matter shall
determine that such indemnity is not lawful. Such indemnification shall not be
deemed exclusive of any other rights to which a director or officer seeking
indemnification may be entitled under any statute, the Bylaws, other provisions
of the Certificate of Incorporation of the Company, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in such
director's or officer's official capacity and as to action in any other capacity
while holding such office.
Furthermore, a director of the Company shall not be liable to the Company
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (a) for any breach of the director's duty of
loyalty to the Company or its stockholders, (b) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (c) for the unlawful payment of a
II-1
<PAGE> 3
dividend, unlawful stock purchase or unlawful redemption, (d) for any
transaction from which the director derived an improper personal benefit, or
such exemption from liability or limitation thereof is not permitted under the
DGCL as currently in effect or as the same may hereafter be amended.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <C> <S>
2.1 -- Agreement and Plan of Merger among Birch Telecom, Inc.,
Valu-Line Companies, Inc., Stephen L. Sauder, Paula K.
Sauder, Richard L. Tidwell, Sarah J. Tidwell, Stormy Supiran
and Carla S. Supiran.
3.1 -- Amended and Restated Certificate of Incorporation of Birch
Telecom, Inc.
3.2 -- Restated Bylaws of Birch Telecom, Inc.
4.1 -- Indenture, dated as of June 23, 1998, between Birch Telecom,
Inc. and Norwest Bank Minnesota, National Association, as
trustee, relating to $115,000,000 aggregate principal amount
of 14% Senior Notes due 2008.
4.2 -- Specimen Certificate of 14% Senior Notes due 2008 (the
"Private Notes") (included in Exhibit 4.1 hereto).
4.3 -- Specimen Certificate of 14% Senior Notes due 2008 (the
"Exchange Notes") (included in Exhibit 4.1 hereto).
4.4 -- Registration Rights Agreement, dated as of June 23, 1998,
between Birch Telecom, Inc. and Lehman Brothers Inc. and BT
Alex. Brown Incorporated.
4.5 -- Collateral Pledge and Security Agreement, dated as of June
23, 1998 from Birch Telecom, Inc., Pledgor, to Norwest Bank
Minnesota, National Association, Trustee.
5.1 -- Opinion of Latham & Watkins regarding the validity of the
Exchange Notes.
10.1 -- Birch Telecom, Inc. Securities Purchase Agreement.
10.2 -- Birch Telecom, Inc. Purchasers Rights Agreement.
10.3 -- Employment Agreement dated as of February 10, 1998 between
Birch Telecom, Inc. and David E. Scott.
10.4 -- Employment Agreement dated as of February 10, 1998 between
Birch Telecom, Inc. and Gregory C. Lawhon.
10.5 -- Employment Agreement dated as of February 10, 1998 between
Birch Telecom, Inc. and Gary L. Chesser.
10.6 -- Employment Agreement dated as of February 10, 1998 between
Birch Telecom, Inc. and David W. Vranicar.
10.7 -- Employment Agreement dated as of February 10, 1998 between
Birch Telecom, Inc. and Stephen L. Sauder.
10.8 -- Stock Purchase Agreement, dated as of May 21, 1998, among
Birch Telecom, Inc., Dunn & Associates, Inc. and Patricia A.
Dunn.
10.9 -- Stock Purchase Agreement, dated as of May 28, 1998, among
Birch Telecom, Inc., Telesource Communications Inc., Michael
W. Hicks and Marjorie G. Hicks.
10.10 -- Resale Agreement between Southwestern Bell Telephone Company
and Birch Telecom of Missouri, Inc.
10.11 -- Resale Agreement between Southwestern Bell Telephone Company
and Valu-Line of Kansas, Inc.
+*10.12 -- General Agreement between Birch Telecom, Inc. and Lucent
Technologies Inc.
10.13 -- Interconnection Agreement under Sections 251 and 252 of the
Telecommunications Act of 1996 by and between Southwestern
Bell Telephone Company and Birch Telecom of Missouri, Inc.
+*10.14 -- Software License Agreement between Birch Telecom, Inc. and
Saville Systems Inc.
**12.1 -- Statement of Computation of Ratio of Earnings to Fixed
Charges.
21.1 -- Subsidiaries of Birch Telecom, Inc.
23.1 -- Consent of Latham & Watkins (included in their opinion filed
as Exhibit 5.1 hereto).
</TABLE>
II-2
<PAGE> 4
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <C> <S>
**23.2 -- Consent of Ernst & Young LLP.
24.1 -- Power of Attorney of Birch Telecom, Inc. (included on
signature page to this Registration Statement on Form S-4).
25.1 -- Statement of Eligibility and Qualification (Form T-1) under
the Trust Indenture Act of 1939 of Norwest Bank Minnesota,
National Association.
*27.1 -- Financial Data Schedule.
99.1 -- Form of Letter of Transmittal and related documents to be
used in conjunction with the Exchange Offer.
</TABLE>
- ---------------
* To be filed by amendment.
+ Indicates that portions of the exhibit have been omitted pursuant to a
request for confidential treatment and such portions have been filed with the
Commission separately.
** Previously filed
(b) Financial Statement Schedules:
** Schedule II. Valuation of Qualifying Accounts.
II-3
<PAGE> 5
SCHEDULES OMITTED
Schedules not listed above are omitted because of the absence of the
conditions under which they are required or because the information required by
such omitted schedules is set forth in the financial statements or the notes
thereto.
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes that 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 described under Item 20 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim of 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 paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted against the
Registrant 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 of whether such indemnification
by it is against public policy as expressed in the Securities Act of 1933 and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes (i) to respond to requests for
information that is incorporated by reference into this Prospectus pursuant to
Items 4, 10(b), 11, or 13 of Form S-4, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This undertaking also includes documents filed
subsequent to the effective date of the Registration Statement through the date
of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
The undersigned Registrant hereby undertakes to file, during any period in
which offers or sales are being made, a post-effective amendment to this
registration statement: (i) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933; (ii) to reflect in the prospectus any
facts or events arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set forth in
the registration statement (notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more
than 20 percent change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement); and (iii) to include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
The undersigned Registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
undersigned undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the application form.
The undersigned Registrant hereby undertakes that every prospectus: (i)
that is filed pursuant to the immediately preceding paragraph or (ii) that
purports to meet the requirements of Section l0(a)(3) of the Securities Act of
1933 and is used in connection with an offering of securities subject to Rule
415, will be filed
II-4
<PAGE> 6
as a part of an amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to remove from registration by
means of a post-effective amendment any of the securities being registered which
remain unsold at the termination of the Exchange Offer.
II-5
<PAGE> 7
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Kansas
City, State of Missouri, on September 18, 1998.
BIRCH TELECOM, INC.
By: /s/ GREGORY C. LAWHON
------------------------------------
Gregory C. Lawhon
Senior Vice President of
Public Policy and General Counsel
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned officers and
directors of Birch Telecom, Inc., a Delaware corporation (the "Company"), for
himself and not for one another, does hereby constitute and appoint David E.
Scott and Gregory C. Lawhon and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments to this Registration Statement with respect to the proposed
issuance, sale and delivery by the Company of 14% Senior Notes due 2008, or any
registration statement for this offering that is to be effective upon the filing
pursuant to rule 462(b) under the Securities Act of 1933, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that each of said attorneys-in-fact or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and as of the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* President and Chief Executive Officer September 18, 1998
- ------------------------------------ (Principal Executive Officer)
David E. Scott
* Chief Financial Officer (Principal September 18, 1998
- ------------------------------------ Financial and Accounting Officer)
Bradley A. Moline
* Director September 18, 1998
- ------------------------------------
Henry H. Bradley
* Director September 18, 1998
- ------------------------------------
Stephen L. Sauder
* Director September 18, 1998
- ------------------------------------
Ian R. N. Bund
* Director September 18, 1998
- ------------------------------------
David W. Bergmann
*By: /s/ GREGORY C. LAWHON
- ------------------------------------
Gregory C. Lawhon
Attorney-in-fact
</TABLE>
II-6
<PAGE> 8
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S> <C>
2.1 -- Agreement and Plan of Merger among Birch Telecom, Inc.,
Valu-Line Companies, Inc., Stephen L. Sauder, Paula K.
Sauder, Richard L. Tidwell, Sarah J. Tidwell, Stormy Supiran
and Carla S. Supiran.
3.1 -- Amended and Restated Certificate of Incorporation of Birch
Telecom, Inc.
3.2 -- Restated Bylaws of Birch Telecom, Inc.
4.1 -- Indenture, dated as of June 23, 1998, between Birch Telecom,
Inc. and Norwest Bank Minnesota, National Association, as
trustee, relating to $115,000,000 aggregate principal amount
of 14% Senior Notes due 2008.
4.2 -- Specimen Certificate of 14% Senior Notes due 2008 (the
"Private Notes") (included in Exhibit 4.1 hereto).
4.3 -- Specimen Certificate of 14% Senior Notes due 2008 (the
"Exchange Notes") (included in Exhibit 4.1 hereto).
4.4 -- Registration Rights Agreement, dated as of June 23, 1998,
between Birch Telecom, Inc. and Lehman Brothers Inc. and BT
Alex. Brown Incorporated.
4.5 -- Collateral Pledge and Security Agreement, dated as of June
23, 1998 from Birch Telecom, Inc., Pledgor, to Norwest Bank
Minnesota, National Association, Trustee.
5.1 -- Opinion of Latham & Watkins regarding the validity of the
Exchange Notes.
10.1 -- Birch Telecom, Inc. Securities Purchase Agreement.
10.2 -- Birch Telecom, Inc. Purchasers Rights Agreement.
10.3 -- Employment Agreement dated as of February 10, 1998 between
Birch Telecom, Inc. and David E. Scott.
10.4 -- Employment Agreement dated as of February 10, 1998 between
Birch Telecom, Inc. and Gregory C. Lawhon.
10.5 -- Employment Agreement dated as of February 10, 1998 between
Birch Telecom, Inc. and Gary L. Chesser.
10.6 -- Employment Agreement dated as of February 10, 1998 between
Birch Telecom, Inc. and David W. Vranicar.
10.7 -- Employment Agreement dated as of February 10, 1998 between
Birch Telecom, Inc. and Stephen L. Sauder.
10.8 -- Stock Purchase Agreement, dated as of May 21, 1998, among
Birch Telecom, Inc., Dunn & Associates, Inc. and Patricia A.
Dunn.
10.9 -- Stock Purchase Agreement, dated as of May 28, 1998, among
Birch Telecom, Inc., Telesource Communications Inc., Michael
W. Hicks and Marjorie G. Hicks.
10.10 -- Resale Agreement between Southwestern Bell Telephone Company
and Birch Telecom of Missouri, Inc.
10.11 -- Resale Agreement between Southwestern Bell Telephone Company
and Valu-Line of Kansas, Inc.
+*10.12 -- General Agreement between Birch Telecom, Inc. and Lucent
Technologies Inc.
10.13 -- Interconnection Agreement under Sections 251 and 252 of the
Telecommunications Act of 1996 by and between Southwestern
Bell Telephone Company and Birch Telecom of Missouri, Inc.
+*10.14 -- Software License Agreement between Birch Telecom, Inc. and
Saville Systems Inc.
**12.1 -- Statement of Computation of Ratio of Earnings to Fixed
Charges.
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S> <C>
21.1 -- Subsidiaries of Birch Telecom, Inc.
23.1 -- Consent of Latham & Watkins (included in their opinion filed
as Exhibit 5.1 hereto).
**23.2 -- Consent of Ernst & Young LLP.
24.1 -- Power of Attorney of Birch Telecom, Inc. (included on
signature page to this Registration Statement on Form S-4).
25.1 -- Statement of Eligibility and Qualification (Form T-1) under
the Trust Indenture Act of 1939 of Norwest Bank Minnesota,
National Association.
*27.1 -- Financial Data Schedule.
99.1 -- Form of Letter of Transmittal and related documents to be
used in conjunction with the Exchange Offer.
</TABLE>
- ---------------
* To be filed by amendment.
+ Indicates that portions of the exhibit have been omitted pursuant to a
request for confidential treatment and such portions have been filed with the
Commission separately.
** Previously filed
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
among
BIRCH TELECOM, INC.,
VALU-LINE COMPANIES, INC.,
STEPHEN L. SAUDER,
PAULA K. SAUDER,
RICHARD L. TIDWELL,
SARAH J. TIDWELL,
STORMY SUPIRAN,
and
CARLA S. SUPIRAN
January 15, 1998
<PAGE> 2
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") is entered into as of
January 15, 1998, by and among BIRCH TELECOM, INC., a Delaware corporation
("Birch"), VALU-LINE COMPANIES, INC., a Kansas corporation ("Valu-Line"),
STEPHEN L. SAUDER, the principal stockholder of Valu-Line, and PAULA K. SAUDER,
his spouse (collectively, "Sauder"), RICHARD L. TIDWELL, a stockholder of
Valu-Line, and SARAH J. TIDWELL, his spouse (collectively, "Tidwell"), and
STORMY SUPIRAN, a stockholder of Valu-Line, and CARLA S. SUPIRAN, his spouse
(collectively, "Supiran"). Sauder, Tidwell, and Supiran are individually
referred to as a "Stockholder" and collectively referred to as the
"Stockholders."
The parties desire to adopt a plan of reorganization pursuant to
Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the
"Code"), pursuant to which Valu-Line will be merged with and into Birch in
accordance with the applicable provisions the Delaware General Corporation Law,
the Kansas General Corporation Law, and the terms of this Agreement.
Now, therefore, the parties agree as follows:
1. THE MERGER.
1.1 THE MERGER. On and subject to the terms and conditions of this
Agreement, and in accordance with the Delaware General Corporation Law (the
"DGCL") and the Kansas General Corporation Law (the "KGCL"), as applicable,
Valu-Line shall merge with and into Birch (the "Merger") at the Effective Time
(as defined below). At the Effective Time, the separate existence of Valu-Line
shall cease, and Birch shall continue as the surviving corporation (the
"Surviving Corporation").
1.2 THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Spencer Fane Britt
& Browne, LLP, 1000 Walnut Street, Suite 1400, Kansas City, Missouri 64106,
commencing at 10:00 a.m. local time on the second business day following the
satisfaction or waiver of all conditions to the obligations of the parties to
consummate the transactions contemplated by this Agreement (other than
conditions with respect to actions the respective parties will take at the
Closing itself) or such other date as the parties may mutually determine (the
"Closing Date").
1.3 ACTIONS AT THE CLOSING. At the Closing, (i) Valu-Line and the
Stockholders will deliver to Birch the various certificates, instruments, and
documents referred to in Section 4.6, (ii) Birch will deliver to Valu-Line or
the Stockholders the various certificates, instruments, and documents referred
to in Section 5.4, (iii) Birch and Valu-Line will file with the Secretary of
State of the States of Delaware and Kansas a Certificate of Merger in the form
attached hereto as EXHIBIT 1.3 (the "Certificate of Merger"), and (iv) Birch
will deliver to the stockholders of
<PAGE> 3
Valu-Line the consideration for the outstanding shares of Valu-Line capital
stock as set forth in Section 1.9.
1.4 EFFECTIVE TIME. The Merger shall become effective at the time (the
"Effective Time") Birch and Valu-Line file the Certificate of Merger with the
Secretary of State of the States of Delaware and Kansas. The Merger shall have
the effect set forth in the DGCL and KGCL. The Surviving Corporation may, at any
time after the Effective Time, take any action (including executing and
delivering any document) in the name and on behalf of either Birch or Valu-Line
in order to carry out and effectuate the transactions contemplated by this
Agreement.
1.5 CERTIFICATE OF INCORPORATION. The Amended and Restated Certificate
of Incorporation of Birch, in the form attached as EXHIBIT 1.5, shall be the
Certificate of Incorporation of the Surviving Corporation.
1.6 BYLAWS. The Bylaws of Birch in effect at and as of the Effective
Time will remain the Bylaws of the Surviving Corporation without any
modification or amendment in the Merger.
1.7 DIRECTORS. The directors of the Surviving Corporation from and
after the Effective Time will be the directors of Birch immediately prior to the
Effective Time and Stephen L. Sauder. They shall serve until the earlier of
their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be.
1.8 OFFICERS. The officers of the Surviving Corporation from and after
the Effective Time will be the officers of Birch immediately prior to the
Effective Time, and Stephen L. Sauder, who shall become the Vice Chairman of the
Surviving Corporation. They shall serve until the earlier of their resignation
or removal or until their respective successors are duly elected and qualified,
as the case may be.
1.9 CONVERSION OF SHARES OF COMMON STOCK OF VALU-LINE. At the Effective
Time, each share of Valu-Line's common stock issued and outstanding immediately
prior to the Effective Time (the "Valu-Line Stock") shall, by virtue of the
Merger and without any action on the part of Valu-Line, Birch or any holder
thereof, be canceled and converted into the right to receive from the Surviving
Corporation a share of the Purchase Price, as set forth on SCHEDULE 1.9.
"Purchase Price" means (i) 2,968,750 shares of the Series A Preferred Stock of
Birch (the "Series A Preferred"); (ii) 6,250,000 shares of the Series C
Preferred Stock of Birch (the "Series C Preferred"), and (iii) $4,750,000,
payable in immediately available funds at the Closing.
2. REPRESENTATIONS AND WARRANTIES OF VALU-LINE AND THE STOCKHOLDERS. Valu-Line
and the Stockholders jointly and severally represent and warrant to Birch as
follows:
2.1. ORGANIZATION, QUALIFICATION, CORPORATE POWER AND AUTHORITY; EFFECT
OF
<PAGE> 4
AGREEMENT.
(a) Each of Valu-Line and its Subsidiaries (as defined below)
is a corporation duly organized, validly existing and in good standing
under the laws of the state of Kansas and each has all requisite
corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted. Each is duly
qualified or licensed as a foreign corporation to do business, and is
in good standing, in each jurisdiction in which the character of its
properties owned or leased or the nature of its activities makes such
qualification necessary. Copies of the Articles of Incorporation and
Bylaws of Valu-Line and its Subsidiaries are set forth in SCHEDULE 2.1,
and such copies are accurate and complete as of the date hereof. Also
set forth on SCHEDULE 2.1 is a list of each Subsidiary of Valu-Line,
together with the state of incorporation or organization of each
Subsidiary and the states where each of Valu-Line and the Subsidiaries
are qualified to do business. For purposes of this Agreement,
"Subsidiary" means, with respect to any corporation or entity
("Person"), any other corporation or other business entity in which
such Person owns, directly or indirectly, through one or more
subsidiaries, 50% or more of the voting or equity interests, or has the
power or authority to control such corporation or other business
entity; provided, however, that for the purposes of Valu-Line's
representations, warranties and covenants in this Agreement, the term
"Subsidiary" shall not include Valu-Broadcasting, Inc., a Kansas
corporation ("Valu-Broadcasting") or SS Property Management
Corporation, a Kansas corporation ("SS Property Management").
(b) Valu-Line has the requisite corporate power and authority
to enter into this Agreement and to consummate the transactions
contemplated by this Agreement. The execution, delivery and performance
by Valu-Line of this Agreement and the consummation by Valu-Line of the
transactions contemplated hereby have been duly authorized by all
necessary corporation action on the part of Valu-Line. This Agreement
has been duly and validly executed and delivered by Valu-Line and the
Stockholders and, assuming due execution and delivery by the other
parties thereto, constitutes the legal, valid and binding obligation of
Valu-Line and Stockholders, enforceable against them in accordance with
its terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws relating
to creditors' rights generally and subject to general principles of
equity (regardless of whether enforcement is sought in a proceeding at
law or in equity). The execution, delivery and performance by Valu-Line
of this Agreement and the consummation by Valu-Line of the transactions
contemplated hereby will not, with or without the giving of notice or
the lapse of time, or both, (i) violate in any material respect any
provision of law, rule or regulation to which Valu-Line or any of its
Subsidiaries is subject, (ii) conflict with or violate in any material
respect (A) an order, judgment, injunction, award or decree applicable
to Valu-Line or any of its Subsidiaries, or (B) the Articles of
Incorporation, Bylaws or other similar governing documents of Valu-Line
or any of its Subsidiaries, (iii) except as set forth in Section 2.11,
conflict with, result in a breach or termination of, or constitute a
default (or constitute an event which with notice, lapse of time, or
both, would constitute a default,
<PAGE> 5
or give rise to any right of termination, cancellation or acceleration)
under, any written or oral contract, agreement, arrangement, permit,
license, qualification, franchise or commitment of any kind to which
Valu-Line or any of its Subsidiaries is a party, by which any of them
may be bound or under which any of them are entitled to any rights or
benefits, or (iv) result in the creation of any lien, charge or
encumbrance upon any of the assets or properties of any of Valu-Line or
any of its Subsidiaries.
2.2. CAPITALIZATION OF VALU-LINE AND SUBSIDIARIES. The authorized and
issued capital stock of Valu-Line and each of its Subsidiaries is set forth in
SCHEDULE 2.2. The Stockholders own, of record and beneficially all of the issued
shares of capital stock of Valu-Line in the amounts set forth on SCHEDULE 2.2.
Each of the outstanding shares of Valu-Line and each of its Subsidiaries is
validly issued, fully paid and non-assessable, and has not been issued and is
not owned or held in violation of any preemptive right of stockholders. All of
the capital stock of each Subsidiary of Valu-Line is owned by Valu-Line. All of
the shares of the Subsidiaries owned by Valu-Line are held free and clear of all
liens, pledges, encumbrances, charges, assessments or claims of any kind
whatsoever. No bonds, debentures, notes or other indebtedness of Valu-Line or
any of its Subsidiaries are issued or outstanding which are convertible into, or
exchangeable for, securities having the right to vote on any matters on which
the Stockholders of Valu-Line are entitled to vote. There are no commitments,
plans or arrangements to issue, and no options, warrants or other rights calling
for the issuance of, shares of capital stock of Valu-Line or any of its
Subsidiaries or for the sale or disposition by Valu-Line or any of its
Subsidiaries of any shares of capital stock of Valu-Line or any of its
Subsidiaries.
2.3. ABSENCE OF CERTAIN EVENTS. Except as set forth in SCHEDULE 2.3,
since November 30, 1997, up to and including the date of this Agreement,
Valu-Line has caused its business and the businesses of its Subsidiaries to be
operated in the ordinary course of business. Neither Valu-Line nor any of its
Subsidiaries has, except in the ordinary course of business, sold, transferred,
mortgaged, pledged or subjected to any lien, charge or encumbrance or any of the
Valu-Line Stock or any other material assets or properties of Valu-Line or its
Subsidiaries. In addition, except as set forth in SCHEDULE 2.3 or as reflected
in the Valu-Line Financial Statements (as defined in Section 2.4), there has not
been:
(a) any change or any development which is likely to result in
a material adverse change in the business, properties, assets,
financial condition, prospects or results of operations of Valu-Line
and its Subsidiaries;
(b) any change in accounting methods, principles or practices
by Valu-Line or its Subsidiaries affecting its or their assets,
liabilities or business;
(c) any writing off or determination to write off as
uncollectible any material amounts of notes or accounts receivable;
(d) any damage, destruction or loss by Valu-Line or its
Subsidiaries, whether
<PAGE> 6
covered by insurance or not, the replacement cost of which would
materially adversely affect the properties, business or financial
condition of Valu-Line or its Subsidiaries;
(e) any declaration, setting aside or payment of dividends or
distributions in respect of the Valu-Line Stock;
(f) any redemption of any of the capital stock of Valu-Line;
(g) any cancellation or waiver of a right materially related
to the operation of the business of Valu-Line or its Subsidiaries or
any modification or amendment of any commitment or the incurrence of
any material debt or obligation other than in the ordinary course of
business;
(h) any split, combination or reclassification of outstanding
Valu-Line Stock or any issuance or the authorization of any issuance of
any other securities in respect of, in lieu of or in substitution for
shares of outstanding Valu-Line Stock;
(i) any issuance by Valu-Line or any of its Subsidiaries of or
commitment of Valu- Line or any of its Subsidiaries to issue, any
shares of its capital stock or securities convertible into or
exchangeable for shares of its capital stock;
(j) any increase in salaries, bonuses or other benefits
payable, including the increase of, or an entry into, severance or
termination arrangements by Valu-Line or any of its Subsidiaries, other
than in the ordinary course of business consistent with past practice;
(k) any guarantee of any material debt or obligation of others
by Valu-Line or any of its Subsidiaries;
(l) any transaction, commitment, dispute or other event or
condition of any character (whether or not in the ordinary course of
business) individually or in the aggregate having or which in the
future is likely to have a material adverse effect on Valu-Line; or
(m) any agreement (other than the transactions contemplated by
this Agreement) to do any of the foregoing.
2.4. FINANCIAL STATEMENTS. SCHEDULE 2.4 contains copies of the
unaudited balance sheets of Valu-Line and its Subsidiaries for the fiscal years
ended December 31, 1996, 1995, and 1994 and related statements of income and
retained earnings and cash flows for each of the years in the three-year period
ended December 31, 1996, prepared by Valu-Line's independent public accountants.
Also included in SCHEDULE 2.4 are copies of the unaudited balance sheets of
Valu-Line and its Subsidiaries as of November 30, 1997 and the related
statements of income for the eleven-month period then ended (such financial
statements, and those as agreed to be
<PAGE> 7
delivered to Birch pursuant to Section 4.4, being collectively referred to as
the "Valu-Line Financial Statements"). The Valu-Line Financial Statements have
been prepared on the income tax basis of accounting applied in a consistent
manner with Valu-Line's past practices, except as otherwise stated therein, and
present fairly the financial position of Valu-Line and its Subsidiaries as of
their dates and the results of its operations as of and for the periods
then-ended. The Valu-Line Financial Statements do not contain any extraordinary
or nonrecurring items other than as specifically noted thereon.
2.5. TAX MATTERS.
(a) For purposes of this Agreement, the following terms shall
have the meanings set forth below:
(i) "Tax" means any federal, state, local, or foreign
income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Code Section 59A),
customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on
minimum, estimated or other tax of any kind whatsoever, in
effect on or at any time prior to the date hereof, including
any interest, penalty, or addition thereto, whether disputed
or not, other than taxes arising or imposed as a result of or
in respect of the transactions contemplated by this Agreement;
provided, however, that the term Tax shall not include any
required contributions by telecommunications companies to the
Kansas Universal Service Fund.
(ii) "Tax Returns" means any return, declaration,
report, claim for refund, information return or other
statement or filing related to or required in connection with
Taxes, including any schedule or attachment thereto and any
amendment thereof.
(b) Valu-Line and each of its Subsidiaries have timely filed
all Tax Returns required to be filed by them. All such Tax Returns are
true, correct and complete and present fairly and accurately the
information required to be shown therein. Valu-Line and each of its
Subsidiaries have timely paid all taxes payable by them (whether or not
shown on any Tax Return). There are no liens, claims, or encumbrances
on or against any of the assets or property of Valu-Line or any of its
Subsidiaries that arose in connection with or by reason of any failure
or alleged failure of Valu-Line or any of its Subsidiaries to pay any
Tax.
(c) Valu-Line and each of its Subsidiaries have withheld and
paid all Taxes required to have been withheld and paid in connection
with amounts paid or owing to any employee, independent contractor,
creditor, stockholder, or other third party.
<PAGE> 8
(d) No officer (or employee responsible for Tax matters) of
Valu-Line or any of its Subsidiaries expects any authority to assess or
assert any additional Taxes for any period for which Tax Returns have
been filed by Valu-Line or its Subsidiaries. There is no dispute or
claim concerning any Taxes of Valu-Line or any of its Subsidiaries
either (i) claimed or raised by any taxing or other authority or (ii)
as to which any of the officers (or employees responsible for Tax
matters) of Valu-Line or any of its Subsidiaries has knowledge.
(e) Neither Valu-Line nor any of its Subsidiaries has waived
any statute of limitations in respect of Taxes or Tax Returns or agreed
to any extension of time with respect to an assessment or deficiency of
Taxes.
(f) The consummation of the transactions contemplated by this
Agreement shall not cause Valu-Line or any of its Subsidiaries to
recognize income by reason of any deferred gains or excess loss
accounts within the control group consisting of Valu-Line and its
Subsidiaries.
(g) Attached as SCHEDULE 2.5 are true and correct copies of
the 1996 federal and Kansas corporate income tax returns for Valu-Line
and its Subsidiaries, as amended as of the date of this Agreement.
2.6. CONSENTS AND APPROVALS. To Valu-Line's knowledge, the execution,
delivery and performance by Valu-Line of this Agreement and the consummation of
the Merger and the resulting change in control of Valu-Line require no action by
or in respect of, or filing with, any governmental body, agency or official
other than (a) any required filings under the DGCL and the KGCL, and (b) filing
notice of the pending Merger with (but not requiring the approval of) the Kansas
Corporation Commission ("KCC") and Missouri Public Service Commission ("MPSC").
2.7. LITIGATION. Except as set forth on SCHEDULE 2.7, there are no
claims, actions, suits, proceedings or governmental investigations
(collectively, "Actions") pending or, to Valu-Line's knowledge, threatened
against Valu-Line or any of its Subsidiaries, nor is there to Valu-Line's
knowledge any basis for such an Action. Neither Valu-Line and its Subsidiaries
nor any of their properties or assets is subject to any order, judgment, writ,
injunction or decree.
2.8. COMPLIANCE WITH LAW. For purposes of this Agreement, the term
"Law" shall mean any federal, state or local law, statute, ordinance, legal
requirement, rule, regulation, order, writ, injunction or decree. To Valu-Line's
knowledge, the businesses of Valu-Line and its Subsidiaries are operated in
compliance with all applicable Laws, except for such breaches or violations of
Laws which individually or in the aggregate would not have a material adverse
effect on the business, operations, or financial condition of Valu-Line or any
of its Subsidiaries. All material licenses, approvals, authorizations,
certificates and permits necessary for the legal
<PAGE> 9
conduct of the business of Valu-Line or any of its Subsidiaries have been
secured, are valid and in full force and effect, and no suspension or
cancellation of any of them is threatened. All reports, documents or notices
required to be filed, maintained or furnished with or to all governmental and
regulatory authorities by Valu- Line or any of its Subsidiaries has received any
written notice from any governmental or regulatory authority as to any
infringement of, or non-compliance with, any Laws. As of the date of this
Agreement, to the knowledge of Valu-Line, no investigations by any governmental
entity with respect to Valu-Line or any of its Subsidiaries is pending or
threatened.
2.9. EMPLOYEE BENEFIT PLANS. SCHEDULE 2.9 contains a true and complete
list of each employee benefit plan, program, arrangement or contract, including
pension, profit sharing, stock bonus, deferred compensation, incentive
compensation, stock option, stock purchase, supplemental retirement, severance
or termination pay, salary continuation, supplemental unemployment benefits,
hospitalization, medical, dental, disability, life insurance, vacation and other
plans, programs, arrangements, or contracts, maintained, contributed to, or
required to be contributed to, by Valu-Line or it Subsidiaries ("Valu-Line
Benefit Plans"). None of the Valu-Line Benefit Plans is a "multi-employer plan"
within the meaning of Section 3(37) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"). Neither Valu-Line nor any of its Subsidiaries
(i) has contributed to a multi-employer pension plan; and (ii) has incurred any
liability under Title IV of ERISA to the Pension Benefit Guaranty Corporation or
to a multi-employer pension plan. All Valu-Line Benefit Plans have been operated
substantially in compliance with ERISA and all other applicable laws, and all
material reports have been filed with respect to the Valu-Line Benefit Plans in
accordance with ERISA, the Code, and other applicable laws.
2.10. DEBTS AND LIABILITIES. Except as set forth in SCHEDULE 2.10,
neither Valu-Line nor any of its Subsidiaries has any material liability,
whether absolute, contingent, by guarantee or otherwise, and whether due or to
become due, nor does there exist any situation or facts which could involve
potential material liability of Valu-Line or its Subsidiaries, except as
reflected or reserved against in the Valu-Line Financial Statements or incurred
in the ordinary course of business since November 30, 1997.
2.11. CONTRACTS.
(a) SCHEDULE 2.11 contains a listing of every (i) contract,
agreement or other legally binding oral or written commitment of
Valu-Line and its Subsidiaries in existence on the date hereof that
requires aggregate payments to or from Valu-Line or any of its
Subsidiaries of $50,000 or more, (ii) employment contract, contract for
personal services provided to Value-Line or its Subsidiaries, or
contract with an independent contractor; and (iii) promissory note,
loan or credit contract, or instrument or document related to security
for debt, including any security agreement, mortgage or pledge.
(b) All items listed on SCHEDULE 2.11 are in full force with
no material default
<PAGE> 10
thereunder by Valu-Line or any of its Subsidiaries, and no facts or conditions
exist which, if continued, would result in a material default thereunder by
either Valu-Line or its Subsidiaries or, to Valu-Line's knowledge, the other
party or parties. Except as otherwise described on SCHEDULE 2.11, no item listed
on that Schedule terminates, is terminable or may be accelerated upon the
Merger, the Merger will not make Valu-Line or any of its Subsidiaries liable for
any payments to another person, and the contracts and other items listed on
SCHEDULE 2.11 continue in effect after the Closing Date without the consent,
approval or act of any third party.
2.12. COMPUTER PROGRAMS, DATABASES AND SOFTWARE. Valu-Line or its
Subsidiaries have computer programs, databases and software that in the
aggregate are sufficient and adequate to operate the business of Valu-Line and
its Subsidiaries in the manner presently conducted.
2.13. TRADEMARKS. SCHEDULE 2.13 contains a list of (i) all material
trademarks, trade names and service marks (and registrations and applications
for such trademarks, trade names and service marks), owned, licensed or used by
Valu-Line or any of its Subsidiaries (the "Valu-Line Trademarks"). Valu-Line and
each of its Subsidiaries owns or holds adequate licenses or other express or
implied rights to use all Valu-Line Trademarks and, to the best knowledge of
Valu-Line, such use does not conflict with, infringe on, or otherwise violate
any rights of others. Neither Valu- Line nor any of its Subsidiaries has
received written notice of any conflict, infringement or violation relating to
any Valu-Line Trademarks.
2.14. REAL ESTATE.
(a) All parcels of real property owned directly or indirectly
by Valu-Line or any of its Subsidiaries, including all buildings,
improvements and structures located thereon and all appurtenances
belonging thereto are referred to herein as the "Valu-Line Fee
Properties," and all leaseholds of real property of Valu-Line or any of
its Subsidiaries, including any prepaid rent, security deposits and
options to renew or purchase in connection therewith shall hereinafter
be referred to as the "Valu-Line Leases." Collectively the Valu-Line
Leases and the Valu-Line Fee Properties are referred to herein as the
"Valu-Line Real Estate."
(b) SCHEDULE 2.14 sets forth a list of all Valu-Line Fee
Properties and all Valu- Line Leases, in each case specifying the
interest of Valu-Line or any of its Subsidiaries therein, whether fee,
leasehold or otherwise.
(c) Neither Valu-Line nor any of its Subsidiaries has received
any written notice of any (i) intended or proposed federal, state or
local statute, ordinance, order, requirement, law or regulation
(including zoning changes), or (ii) existing, proposed or contemplated
public improvement plan to modify or realign any street or highway or
initiate an eminent domain proceeding or a taking in lieu of
condemnation, which would impose a lien upon, result in the taking of
all or any material part of, or adversely affect the current use of,
any of the Valu- Line Real Estate.
<PAGE> 11
(d) Except set forth on SCHEDULE 2.14, none of the Valu-Line
Real Estate is subject to any leases or subleases.
(e) There are no claims, suits or judgments relating to
Valu-Line or any of its Subsidiaries that will, with the passage of
time, result in the imposition of a material mechanic's, serviceman's
or materialman's lien against any of the Valu-Line Real Estate.
(f) Each of the Valu-Line Leases is in full force and effect,
and is valid, binding and enforceable in accordance with its terms.
There is no existing breach, default, event of default or event under
any Valu-Line Lease which, with or without notice or lapse of time or
both, would constitute a breach, default or an event of default by
Valu-Line or any of its Subsidiaries, or by any other party to such
lease. All Valu-Line Leases will continue in effect after the Closing
Date and the consummation of the Merger without the consent, approval
or act of any other party.
(g) Neither Valu-Line or any of its Subsidiaries owns or
holds, or is obligated under or a party to, any option, right of first
refusal or other contractual right to purchase, acquire, sell, assign
or dispose of the Valu-Line Real Estate or any portion thereof or any
interest therein.
2.15. TITLE TO ASSETS. Valu-Line or its Subsidiaries have good and
marketable title to all assets or interests in assets which are owned by
Valu-Line or its Subsidiaries, free and clear of mortgages, security interests
and other encumbrances, except for those disclosed in the Valu-Line Financial
Statements and any liens for current Taxes not yet due and payable. Valu-Line or
its Subsidiaries own or lease all assets necessary to conduct their businesses
as now conducted. All such assets are in good operating condition and repair.
2.16. LABOR MATTERS.
(a) Neither Valu-Line nor any of its Subsidiaries is a party
to any collective bargaining agreement and there are no collective
bargaining agreements which pertain to employees of the Valu-Line or
any of its Subsidiaries.
(b) To the best knowledge of Valu-Line: (i) no employees of
Valu-Line or any of its Subsidiaries are represented by any labor
organization, and (ii) no labor organizations or group of employees of
Valu-Line or any of its Subsidiaries has made a pending demand for
recognition. There are no representation proceedings or petitions
seeking a representation proceeding presently pending or, to the best
knowledge of Valu-Line, threatened to be brought or filed, with the
National Labor Relations Board or other labor relations tribunal. There
has never been any organizing activity involving Valu-Line or any of
its Subsidiaries pending or threatened by any labor organization or
group of employees of Valu-Line or any of its Subsidiaries.
<PAGE> 12
(c) There have never been any strikes, work stoppages,
slowdowns, lockouts, arbitrations, grievances or other labor disputes
pending or threatened against or involving Valu-Line or any of its
Subsidiaries.
(d) Except as set forth on SCHEDULE 2.16, neither Valu-Line
nor any of its Subsidiaries is a contractor or subcontractor with the
government of the United States or any state such that it has an
obligation to maintain any affirmative action plans.
2.17. ENVIRONMENTAL MATTERS. Except as set forth on SCHEDULE 2.17,
neither Valu-Line nor any of its Subsidiaries has handled or disposed of any
hazardous or toxic substances, materials, or wastes as defined by any Law
("Hazardous Materials"). To Valu-Line's knowledge, none of the Valu-Line Real
Estate, and none of any properties formerly owned, leased or used by Valu-Line
or any of its Subsidiaries (including soils and surface, ground waters, and
buildings) is contaminated with any Hazardous Materials. There are no past,
pending or, to Valu-Line's knowledge, threatened environmental claims or
circumstances that could reasonably be anticipated to form the basis thereof
against Valu-Line or any of its Subsidiaries. Valu-Line has delivered to Birch
true and correct copies and results of any reports, studies, analyses, tests, or
monitoring possessed or initiated by Valu-Line or any of its Subsidiaries
pertaining to any environmental Laws or Hazardous Materials in, on, or under any
of the Valu-Line Real Estate and any properties formerly owned, leased or used
by Valu- Line or any of its Subsidiaries. To Valu-Line's knowledge, there are
not now and never have been any underground storage tanks located on the
Valu-Line Real Estate or any properties formerly owned or leased by Valu-Line or
any of its Subsidiaries.
2.18. INTEREST IN SUPPLIERS AND COMPETITORS. Except as set forth in
SCHEDULE 2.18, none of Valu-Line, any of its Subsidiaries, or any officer or
director of Valu-Line or any of its Subsidiaries, or any spouse or child of any
of them, has any direct or indirect material interest in any competitor of
Valu-Line or its Subsidiaries or in any person from whom or to whom Valu-Line or
its Subsidiaries leases any real or personal property, or in any person with
whom Valu-Line and its Subsidiaries is currently doing any material amount of
business.
2.19. INSURANCE. Each of the material insurance policies of Valu-Line
and its Subsidiaries is listed in SCHEDULE 2.19, is in full force and effect and
is in a commercially reasonable amount, and will continue in effect after the
consummation of the Merger without the consent, approval or act of any third
party. Except as set forth in the SCHEDULE 2.19, neither Valu-Line nor any of
its subsidiaries has received written notice since November 30, 1997 of any
increase in premiums or reduction in coverage from any insurer.
2.20. RESTRICTIVE COVENANTS. Neither Valu-Line nor any of its
Subsidiaries is a party to any contract containing non-competition provisions
that would limit the Surviving Corporation's ability after the Closing to engage
in business in any area or to compete against any person or entity.
<PAGE> 13
2.21. BROKER'S FEES. None of Valu-Line and its Subsidiaries has any
liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement.
2.22. DISCLOSURE. None of: (a) the representations or warranties made
by Valu-Line contained in this Agreement, (b) Valu-Line's Schedules to this
Agreement, (c) the Valu-Line Financial Statements, or (d) any other certificate,
affidavit, document or instrument required to be furnished by Valu-Line, its
Subsidiaries, or any of their respective directors, officers or employees in
connection with this Agreement, contains or will contain, as of the respective
dates thereof, any untrue statement of a material fact or omits or will omit to
state any material fact required to be stated herein or therein in order to make
the statements made herein or therein, in light of the circumstances under which
they were made, not misleading.
3. REPRESENTATIONS AND WARRANTIES OF BIRCH. Birch represents and warrants to
Valu-Line and the Stockholders as follows:
3.1. ORGANIZATION, QUALIFICATION, CORPORATE POWER AND AUTHORITY; EFFECT
OF AGREEMENT.
(a) Each of Birch and its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of organization and each has all requisite corporate power
and authority to own, lease and operate its properties and to carry on
its business as now being conducted. Each is duly qualified or licensed
as a foreign corporation to do business, and is in good standing, in
each jurisdiction in which the character of its properties owned or
leased or the nature of its activities makes such qualification
necessary. Copies of the Articles of Incorporation and Bylaws of Birch
are set forth in SCHEDULE 3.1 and such copies are accurate and complete
as of the date hereof. Also set forth on SCHEDULE 3.1 is a list of the
Subsidiaries of Birch, together with the state of incorporation or
organization of each such entity. SCHEDULE 3.1 also lists the states
where each of Birch and its Subsidiaries are qualified to do business.
(b) Birch has the requisite corporate power and authority to
enter into this Agreement and to consummate the transactions
contemplated by this Agreement. The execution, delivery and performance
by Birch of this Agreement and the consummation by Birch of the
transactions contemplated hereby have been duly authorized by all
necessary corporation action on the part of Birch. This Agreement has
been duly and validly executed and delivered by Birch and, assuming due
execution and delivery by the other parties thereto, constitutes the
legal, valid and binding obligation of Birch, enforceable against it in
accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other
similar laws relating to creditors' rights generally and subject to
general principles of equity
<PAGE> 14
(regardless of whether enforcement is sought in a proceeding at law
or in equity). The execution, delivery and performance by Birch
of this Agreement and the consummation by Birch of the transactions
contemplated hereby will not, with or without the giving of notice or
the lapse of time, or both, (i) violate in any material respect any
provision of law, rule or regulation to which Birch or any of its
Subsidiaries is subject, (ii) conflict with or violate in any material
respect (A) any order, judgment, injunction, award or decree applicable
to Birch or any of its Subsidiaries or (B) the Articles of
Incorporation, Bylaws or other similar governing documents of Birch or
any of its Subsidiaries, (iii) conflict with, result in a breach or
termination of, or constitute a default (or constitute an event which
with notice, lapse of time, or both, would constitute a default, or
give rise to any right of termination, cancellation or acceleration)
under, any written or oral contract, agreement, arrangement, permit,
license, qualification, franchise or commitment of any kind to which
Birch or any of its Subsidiaries is a party, by which any of them may
be bound or under which any of them are entitled to any rights or
benefits, or (iv) result in the creation of any lien, charge or
encumbrance upon any of the assets or properties of any of Birch or any
of its Subsidiaries.
3.2. CAPITALIZATION OF BIRCH AND ITS SUBSIDIARIES. The authorized and
issued capital stock of Birch is set forth in SCHEDULE 3.2. Each of the
outstanding shares of Birch and each of its Subsidiaries is validly issued,
fully paid and non-assessable, and has not been issued and is not owned or held
in violation of any preemptive right of stockholders. All of the capital stock
of each Subsidiary is owned either by Birch or one of its Subsidiaries. All of
the shares of the Subsidiaries owned by Birch or by any of its Subsidiaries are
held free and clear of all liens, pledges, encumbrances, charges, assessments or
claims of any kind whatsoever. No bonds, debentures, notes or other indebtedness
of Birch or any of its Subsidiaries are issued or outstanding. Except as set
forth on SCHEDULE 3.2, there are no commitments, plans or arrangements to issue,
and no options, warrants or other rights calling for the issuance of, shares of
capital stock of Birch or any of its Subsidiaries or for the sale or disposition
by Birch or any of its Subsidiaries of any shares of capital stock of Birch or
any of its Subsidiaries.
3.3. BUSINESS OF BIRCH. Birch is a holding company that was formed on
December 23, 1996, and conducts no business activities except through its
Subsidiaries.
3.4. FINANCIAL STATEMENTS. SCHEDULE 3.4 contains copies of the
unaudited consolidated balance sheet of Birch as of December 31, 1997, and the
related statement of income for the year then ended (such financial statements
being collectively referred to as the "Birch Financial Statements"). Except as
noted thereon, such unaudited consolidated financial statements have been
prepared from the corporate books and records of Birch in accordance with
generally accepted accounting principles and fairly present the financial
position of Birch and the results of its operations as of December 31, 1997, and
for the year then ended (subject to the absence of notes and recurring annual
audit adjustments that are normal in nature and amount).
3.5. TAX MATTERS OF BIRCH.
<PAGE> 15
(a) Birch and each of its Subsidiaries have timely filed all
Tax Returns required to be filed by them. All such Tax Returns are
true, correct and complete and present fairly and accurately the
information required to be shown therein. Birch and each of its
Subsidiaries has timely paid all taxes payable by it (whether or not
shown on any Tax Return). Since Birch's inception no claim has been
made by any taxing or other authority in any jurisdiction where Birch
or any of its Subsidiaries do not file Tax Returns that Birch or any of
its Subsidiaries is, or has been, or may be, subject to taxation by
that jurisdiction. There are no liens, claims, or encumbrances on or
against any of the assets or property of Birch or any of its
Subsidiaries that arose in connection with or by reason of any failure
or alleged failure to Birch or any of its Subsidiaries to pay any Tax.
(b) Birch and each of its Subsidiaries have withheld and paid
all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor,
creditor, stockholder, or other third party.
(c) No officer (or employee responsible for Tax matters) of
Birch or any of its Subsidiaries expects any authority to assess or
assert any additional Taxes for any period for which Tax Returns have
been filed by Birch or its Subsidiaries. There is no dispute or claim
concerning any Taxes of Birch or any of its Subsidiaries either (i)
claimed or raised by any taxing or other authority or (ii) as to which
any of the officers (or employees responsible for Tax matters) of Birch
or any of its Subsidiaries has knowledge.
(d) Neither Birch nor any of its Subsidiaries has waived any
statute of limitations in respect of Taxes or Tax Returns or agreed to
any extension of time with respect to an assessment or deficiency of
Taxes.
3.6. CONSENTS AND APPROVALS. The execution, delivery and performance by
Birch of this Agreement and the consummation of the Merger require no action by
or in respect of, or filing with, any governmental body, agency or official
other than (a) any required filings under the DGCL and the KGCL, and (b) filing
notice of the pending Merger with (but not requiring the approval of) the KCC
and MPSC.
3.7. LITIGATION. Except as set forth on SCHEDULE 3.7, there are no
Actions pending or threatened against Birch or its Subsidiaries, nor is there,
to Birch's knowledge, any basis for such an action. Neither Birch and its
Subsidiaries nor any of their properties or assets is subject to any order,
judgment, writ, injunction or decree.
3.8. COMPLIANCE WITH LAW. The businesses of Birch and its Subsidiaries
are operated in compliance with all applicable Laws, except for such breaches or
violations of Laws which individually or in the aggregate would not have a
material adverse effect on the business, operations, or financial condition of
Birch or any of its Subsidiaries. All material licenses, approvals,
authorizations, certificates and permits necessary for the legal conduct of the
business
<PAGE> 16
of Birch or any of its Subsidiaries have been secured, are valid and in
full force and effect, and no suspension or cancellation of any of them is
threatened. All reports, documents or notices required to be filed, maintained
or furnished with or to all governmental and regulatory authorities by Birch or
any of its Subsidiaries has received any written notice from any governmental or
regulatory authority as to any infringement of, or non-compliance with, any
Laws. As of the date of this Agreement, to the knowledge of Birch, no
investigations by any governmental entity with respect to Birch or any of its
Subsidiaries is pending or threatened.
3.9. EMPLOYEE BENEFIT PLANS. SCHEDULE 3.9 contains a true and complete
list of each employee benefit plan, program, arrangement or contract, including
pension, profit sharing, stock bonus, deferred compensation, incentive
compensation, stock option, stock purchase, supplemental retirement, severance
or termination pay, salary continuation, supplemental unemployment benefits,
hospitalization, medical, dental, disability, life insurance, vacation and other
plans, programs, arrangements, or contracts, maintained, contributed to, or
required to be contributed to, by Birch or it Subsidiaries ("Birch Benefit
Plans"). None of the Birch Benefit Plans is a "multi-employer plan" within the
meaning of Section 3(37) of ERISA. Neither Birch nor any of its Subsidiaries (i)
has contributed to a multi-employer pension plan; and (ii) has incurred any
liability under Title IV of ERISA to the Pension Benefit Guaranty Corporation or
to a multi-employer pension plan. All Birch Benefit Plans have been operated
substantially in compliance with ERISA and all other applicable laws, and all
material reports have been filed with respect to the Birch Benefit Plans in
accordance with ERISA, the Code, and other applicable laws.
3.10. DEBTS AND LIABILITIES. Except as set forth in SCHEDULE 3.10,
neither Birch nor any of its Subsidiaries has any material liability, whether
absolute, contingent, by guarantee or otherwise, and whether due or to become
due, nor does there exist any situation or facts which could involve potential
material liability of Birch or its Subsidiaries, except as reflected or reserved
against in the Birch Financial Statements or incurred in the ordinary course of
business.
3.11. REAL ESTATE.
(a) Neither Birch nor any of its Subsidiaries owns any real
property directly or indirectly.
(b) All leaseholds of real property of Birch or any of its
Subsidiaries, including any prepaid rent, security deposits and options
to renew or purchase in connection therewith shall hereinafter be
referred to as the "Birch Leases." SCHEDULE 3.11 sets forth a list of
all Birch Leases.
(c) Each of the Birch Leases is in full force and effect, and
is valid, binding and enforceable in accordance with its terms. There
is not under any such Birch Lease any existing breach, default, event
or default or event which, with or without notice or lapse of time or
both, would constitute a breach, default or an event of default by
Birch or
<PAGE> 17
any of its Subsidiaries, or by any other party to such lease. All Birch
Leases will continue in effect after the Closing Date and the
consummation of the Merger without the consent, approval or act of any
other party.
3.12. BROKER'S FEES. Birch does not have any liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
3.13. DISCLOSURE. No representation or warranty made by Birch contained
in this Agreement, and none of the Schedules to this Agreement, the Birch
Financial Statements, or any other certificate, affidavit, document or
instrument required to be furnished by Birch or its Subsidiaries, or any of
their respective directors, officers, or employees in connection with this
Agreement, contains or will contain, as of the respective dates thereof, any
untrue statement of material fact or omits or will omit to state any material
fact required to be stated herein or therein in order to make the statements
made herein or therein, in light of the circumstances under which they were
made, not misleading.
4. COVENANTS OF VALU-LINE AND THE STOCKHOLDERS. Valu-Line and the
Stockholders covenant and agree as follows (for purposes of this Section 4, all
references to Valu- Line shall be deemed to include its Subsidiaries and any
provision that requires Valu-Line to take action, or prohibits Valu-Line from
taking action, shall be deemed to require Valu-Line to cause its Subsidiaries to
comply with such provisions):
4.1. CONDUCT OF THE BUSINESS OF VALU-LINE; VALU-LINE STOCK. During the
period from the date of this Agreement to the Effective Time:
(a) Valu-Line and its Subsidiaries shall conduct their
businesses in the ordinary course consistent with past practices;
(b) Valu-Line and its Subsidiaries will not take any actions
that could at the time taken reasonably be expected to have a material
adverse effect on Valu-Line or any of its Subsidiaries;
(c) Valu-Line and its Subsidiaries shall use their best
efforts to preserve intact their corporate structures and business
organizations, to keep available the services of their key managerial
employees, to maintain satisfactory relationships with those having
business relationships with them, and to preserve their goodwill;
(d) Valu-Line and its Subsidiaries shall use their best
efforts to continue in effect all existing insurance arrangements or
shall use their best efforts to obtain comparable insurance;
(e) Value-Line and its Subsidiaries shall comply in all
material respects with
<PAGE> 18
all applicable Laws;
(f) the Stockholders shall not sell, pledge, dispose of or
encumber (or authorize or allow any of the foregoing with respect to)
their Valu-Line Stock.
Without limiting the generality of the foregoing, and except as otherwise
expressly provided in this Agreement prior to the Effective Time, neither
Valu-Line nor any of its Subsidiaries (as the case may be) will without the
prior written consent of Birch: (i) issue, sell, pledge, dispose of or encumber
(or authorize or allow any of the foregoing with respect to) (A) additional
shares of capital stock of any class, or securities convertible into or
exchangeable for capital stock, or any rights, warrants or options to acquire
capital stock or other convertible securities, or (B) any bonds or other
securities or debt instruments in respect of, in lieu of or in substitution for
capital stock outstanding on the date hereof, (ii) purchase or otherwise
acquire, or propose to purchase or otherwise to acquire, any
outstanding shares of Valu-Line Stock, (iii) split, combine or reclassify the
outstanding Valu-Line Stock, (iv) declare, set aside or pay any dividend or
distribution on the outstanding Valu-Line Stock, (v) sell, pledge, dispose of or
encumber any of its assets, (vi) terminate any existing agreements or waive any
material right or incur any indebtedness or obligation (other than indebtedness
and obligations in the ordinary course of business and consistent with past
practices), or issue or sell any debt securities, or assume, guarantee, endorse,
or otherwise as an accommodation become responsible for the obligations of any
other individual or entity, or make any loans or advances, (vii) except as
otherwise required by law or by any existing Benefit Plan, adopt or amend any
plan for the benefit of employees, enter into or amend any consulting or other
employment agreement, increase salaries or declare bonuses (other than increases
or bonuses in the ordinary course of business consistent with past practices),
(viii) adopt any amendments to Articles of Incorporation or Bylaws, (ix) make
any contract or commitment or incur any material obligations for capital
expenditures, (x) lend or agree to lend any funds, or (xi) discharge or satisfy
any lien or encumbrance or pay any obligation or liability (absolute or
contingent), other than current liabilities or those incurred in the ordinary
course of business consistent with past practice. None of the Stockholders shall
object to the Merger or otherwise take any action to require the Surviving
Corporation to pay any of the Stockholders the value of the Stockholder's stock
pursuant to the provisions of the KGCL. Notwithstanding the foregoing, nothing
in this Agreement shall be construed to prohibit Valu-Line from distributing the
stock of Valu-Broadcasting or SS Property Management to the Valu-Line
Stockholders.
4.2. ACCESS TO INFORMATION; CONFIDENTIAL TREATMENT OF INFORMATION. From
the date hereof to the Effective Time, Birch and its representatives shall have,
during all reasonable hours, access to Valu-Line's premises, and to all
facilities, properties, books, accounts, records, contracts and documents of or
relating to Valu-Line and any of its Subsidiaries (collectively, the "Valu-Line
Records"). Valu-Line shall furnish to Birch and its representatives such
financial and operating data, regulatory filings, and tax returns, and permit
Birch and its representatives to have access to data processing systems, related
documentation, and such other information with respect to the business and
properties of Valu-Line and its Subsidiaries as Birch shall, from time to time,
reasonably request. Valu-Line shall cause its agents to provide the officers,
employees
<PAGE> 19
and agents of Birch with such information concerning Valu-Line as may be
necessary for Birch to verify the performance of and compliance with Valu-Line's
representations, warranties, covenants and conditions in this Agreement.
4.3. CONFIDENTIAL TREATMENT OF INFORMATION. Subject to the requirements
of law, Valu- Line shall hold in confidence, and shall use its best efforts to
cause its officers, directors, employees affiliates, and agents to hold in
confidence, all confidential, proprietary, and other non-public information
received from Birch until such time as such information is otherwise publicly
available, and Valu-Line and its affiliates shall reveal such information only
to those officers, employees and agents who are informed by Valu-Line of the
confidential nature of such information and who agree to be bound by and to act
only in accordance with the terms of this Section 4.3. If this Agreement is
terminated, Valu-Line will, and will use its best efforts to cause its officers,
directors, employees and agents to, deliver to Birch all documents, work papers
and other material (including copies, extracts and summaries thereof) obtained
by or on behalf of any of them, directly or indirectly from
Birch, as a result of this Agreement or in connection herewith, whether so
obtained before or after the execution hereof. If Valu-Line or any of its
officers, employees, affiliates, or agents is requested or required in a legal
proceeding or pursuant to legal process to disclose any non-public information
supplied in the course of their dealings with Birch, Valu-Line promptly will
notify Birch so that it may seek any appropriate protective order and/or take
any mutually agreed action. If in the absence of a protective order or the
receipt of a waiver hereunder, such person is nonetheless, in the judgment of
its counsel, compelled to disclose such information, Valu-Line shall use all
reasonable efforts to inform Birch of such fact prior to such disclosure, shall
furnish only that portion of such information that Valu-Line is advised by
counsel is legally required and shall exercise its best efforts to obtain
reasonable assurance that confidential treatment will be accorded such
information.
4.4 SUPPLEMENTAL DISCLOSURE.
(a) Between the date of this Agreement and the Closing Date,
Valu-Line and the Stockholders will promptly notify Birch in writing if
it or he becomes aware of (i) any fact or condition that causes or
constitutes a breach of any of the representations and warranties of
Valu-Line or the Stockholders as of the date of this Agreement, or (ii)
the occurrence after the date of this Agreement of any fact or
condition that would cause or constitute a breach of any such
representation or warranty had such representation or warranty been
made as of the time of occurrence or discovery of such fact or
condition. Should any such fact or condition require any change in the
schedules to this Agreement or the representations or warranties of
Valu-Line or the Stockholders if this Agreement were dated the date of
the occurrence or discovery of any such fact or condition, Valu-Line or
the Stockholders will promptly deliver to Birch a supplement to this
Agreement specifying such change. During the same period, Valu-Line and
the Stockholders will promptly notify Birch of the occurrence of any
breach of any covenant of Valu-Line or the Stockholders or of the
occurrence of any event that may make the satisfaction of the
conditions in Section 7 impossible or unlikely.
<PAGE> 20
(b) At least two business days prior to Closing, Valu-Line
shall deliver to Birch unaudited financial statements for Valu-Line and
its Subsidiaries for the period from December 31, 1996, through the
most recent practicable month ended prior to Closing; provided,
however, in no event shall the end of such period be a date more than
45 days prior to the Closing Date.
4.5 NO SOLICITATION. Neither Valu-Line nor any of its Subsidiaries will
permit any of their respective officers, directors, employees, affiliates,
representatives or agents (including any investment banker, stockbroking firm,
attorney or accountant retained by Valu-Line or any of its Subsidiaries) to,
directly or indirectly, (a) solicit, initiate, facilitate, encourage, propose or
any way seek proposals or offers with respect to a merger, acquisition, tender
offer, consolidation, business combination, transfer or disposition of all or
any part of the assets or any or all of the stock of Valu- Line or any of its
Subsidiaries or similar transactions involving Valu-Line or any of its
Subsidiaries (collectively, an "Acquisition Transaction"), (b) provide any
information to any corporation, partnership, person or other entity or group
(other than Birch and it representatives), with respect to
Valu-Line or any of its Subsidiaries in contemplation of an Acquisition
Transaction, or (c) engage in discussions or negotiations with respect to an
Acquisition Transaction.
4.6 DELIVERIES OF VALU-LINE AND THE STOCKHOLDERS. At the Closing,
Valu-Line and/or the Stockholders will deliver to Birch:
(a) certificates representing the Valu-Line Stock, duly
endorsed (or accompanied by duly executed stock powers), for transfer
to Buyer;
(b) releases in the form of EXHIBIT 4.6(b), executed by each
of the Stockholders (collectively, the "Stockholders' Releases");
(c) employment agreements substantially in the form of EXHIBIT
4.6(c), executed by each of the persons set forth on SCHEDULE 4.6(c)
(collectively, the "Employment Agreements");
(d) stock option agreements, executed by each of the persons
and with respect to the number of shares of Birch's common stock and
with the vesting schedule and other terms set forth on SCHEDULE 4.6(d)
(the "Option Agreements");
(e) a stockholders agreement, executed by each of the
Stockholders containing, among other terms, the provisions set forth on
SCHEDULE 4.6(e) (the "Stockholders Agreement");
(f) a certificate executed by a duly authorized officer of
Valu-Line and each of the Stockholders representing and warranting to
Birch that each of the representations and warranties of Valu-Line and
the Stockholders in this Agreement was accurate in all
<PAGE> 21
respects as of the date of this Agreement and is accurate in all
respects as of the Closing Date as if made on the Closing Date (giving
full effect to any supplements delivered by Valu-Line or the
Stockholders to Birch prior to the Closing Date in accordance with
Section 4.4(a); and
(g) certified copies of resolutions, duly adopted by the Board
of Directors and stockholders of Valu-Line, which shall be in full
force and effect at the time of closing, authorizing the execution,
delivery, and performance by Valu-Line of this Agreement and the
consummation o the transactions contemplated hereby.
5. COVENANTS OF BIRCH. Birch covenants and agrees as follows:
5.1 ACCESS TO INFORMATION; CONFIDENTIAL TREATMENT OF INFORMATION. From
the date hereof to the Effective Time, Valu-Line and its representatives shall
have, during all reasonable hours, access to Birch's premises, and to all
facilities, properties, books, accounts, records, contracts and documents of or
relating to Birch (collectively, the "Birch Records"). Birch shall furnish to
Valu-Line and its representatives such financial and operating data, regulatory
filings and tax returns, and permit Valu-Line such other information with
respect to the business and properties of Birch, as Valu-Line shall, from time
to time, reasonably request. Birch shall cause its agents to provide the
officers, employees and agents of Valu-Line with such information concerning
Birch as may be necessary for Valu-Line to verify the performance of and
compliance with their representations, warranties, covenants and conditions
contained in this Agreement.
5.2 CONFIDENTIAL TREATMENT OF INFORMATION. Subject to the requirements
of law, Birch shall hold in confidence, and shall use its best efforts to cause
its officers, directors, employees affiliates, and agents to hold in confidence,
all confidential, proprietary, and other non-public information received from
Valu-Line until such time as such information is otherwise publicly available,
and Birch and its affiliates shall reveal such information only to those
officers, employees and agents who are informed by Birch of the confidential
nature of such information and who agree to be bound by and to act only in
accordance with the terms of this Section 5.2. If this Agreement is terminated,
Birch will, and will use its best efforts to cause its officers, directors,
employees and agents to, deliver to Valu-Line all documents, work papers and
other material (including copies, extracts and summaries thereof) obtained by or
on behalf of any of them, directly or indirectly from Birch , as a result of
this Agreement or in connection herewith, whether so obtained before or after
the execution hereof. If Birch or any of its officers, employees, affiliates, or
agents is requested or required in a legal proceeding or pursuant to legal
process to disclose any non-public information supplied in the course of their
dealings with Valu-Line, Birch promptly will notify Valu-Line so that it may
seek any appropriate protective order and/or take any mutually agreed action. If
in the absence of a protective order or the receipt of a waiver hereunder, such
person is nonetheless, in the judgment of its counsel, compelled to disclose
such information, Birch shall use all reasonable efforts to inform Valu-Line of
such fact prior to such disclosure, shall furnish only that portion of such
<PAGE> 22
information that Birch is advised by counsel is legally required and shall
exercise its best efforts to obtain reasonable assurance that confidential
treatment will be accorded such information.
5.3 SUPPLEMENTAL DISCLOSURE. Between the date of this Agreement and the
Closing Date, Birch will promptly notify Valu-Line in writing if it becomes
aware of (i) any fact or condition that causes or constitutes a breach of any of
Birch's representations and warranties as of the date of this Agreement, or (ii)
the occurrence after the date of this Agreement of any fact or condition that
would cause or constitute a breach of any such representation or warranty had
such representation or warranty been made as of the time of occurrence or
discovery of such fact or condition. Should any such fact or condition require
any change in the schedules to this Agreement or the representation or
warranties of Birch if this Agreement were dated the date of the occurrence or
discovery of any such fact or condition, Birch will promptly deliver to
Valu-Line a supplement to this Agreement specifying such change. During the same
period, Valu-Line and the Stockholders will promptly notify Birch of the
occurrence of any breach of any covenant of Valu-Line or the Stockholders or of
the occurrence of any event that may make the satisfaction of the conditions in
Section 8 impossible or unlikely.
5.4 DELIVERIES OF BIRCH. At the Closing, Birch will deliver to
Valu-Line and/or the Stockholders:
(a) the Purchase Price as set forth in Section 1.9;
(b) the Employment Agreements, executed by Birch;
(c) the Option Agreements, executed by Birch;
(d) the Stockholders Agreement, executed by Birch;
(e) a certificate executed by a duly authorized officer of
Birch representing and warranting to the Stockholders that each of
Birch's representations and warranties in this Agreement was accurate
in all respects as of the date of this Agreement and is accurate in all
respects as of the Closing Date as if made on the Closing Date (giving
full effect to any supplements delivered by Birch to Valu-Line prior to
the Closing Date in accordance with Section 5.3); and
(f) certified copies of resolutions, duly adopted by the Board
of Directors and stockholders of Birch, which shall be in full force
and effect a the time of Closing, authorizing the execution, delivery,
and performance by Birch of this Agreement and the consummation of the
transactions contemplated hereby.
6. ADDITIONAL COVENANTS. The parties covenant and agree as follows:
6.1 FEES AND EXPENSES. All costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby by Birch shall be
paid by Birch, and all
<PAGE> 23
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby by Valu-Line shall be paid by Valu-Line prior
to the Closing Date.
6.2 ADDITIONAL AGREEMENTS. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all actions to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement and to cooperate
with each other in connection with the foregoing, including using all reasonable
efforts (a) to obtain any necessary waivers, consents and approvals from other
parties to material loan agreements, leases and other contracts, (b) to obtain
all necessary consents, approvals and authorizations as are required to be
obtained under any federal, state or foreign law or regulation, (c) to lift or
rescind any injunction or restraining order or other order adversely affecting
the ability of the parties to consummate the transactions contemplated hereby,
(d) to effect all necessary registrations and filings, including filings and
submissions of information required by governmental authorities, and (e) to
fulfill all conditions to this Agreement.
7. CONDITIONS TO BIRCH'S OBLIGATION TO CLOSE. Birch's obligation to effect the
Merger and to perform its obligations under this Agreement shall be subject to
the satisfaction (or waiver by Birch) on or prior to the Closing Date of all of
the following conditions:
7.1 NO PROHIBITION. No statute, rule, regulation, order, decree or
preliminary or permanent injunction of any court or administrative agency shall
be enacted, promulgated, entered or otherwise in effect which would prohibit
consummation of the Merger.
7.2 REPRESENTATIONS AND WARRANTIES. All representations and warranties
made by Valu- Line or the Stockholders in this Agreement shall be true in all
material respects (without giving effect to any supplement delivered pursuant to
Section 4.4(a)) on the Closing Date as if made on such date.
7.3 PERFORMANCE OF OBLIGATIONS. All covenants, agreements, obligations
and conditions required by this Agreement to be performed by Valu-Line and the
Stockholders shall have been performed.
7.4 NO MATERIAL CHANGE. There shall have occurred no material adverse
change in the business, properties, assets, financial condition, prospects or
results of operations of Valu-Line.
7.5 FINANCING. Birch shall have arranged financing in an amount not
less than $7,000,000 substantially on the terms and conditions set forth on
SCHEDULE 7.5.
7.6 DELIVERIES. Valu-Line and the Stockholders shall have complied with
each and every one of its or their obligations set forth in Section 4.6.
<PAGE> 24
7.7 PHASE I. Birch shall have received a Phase I Environmental Survey
in form and content reasonably acceptable to Birch (the "Environmental Survey")
with respect to the Valu-Line Real Property.
7.8 OPINION OF COUNSEL. There shall have been delivered to Birch an
opinion of counsel for Valu-Line and the Stockholders, dated as of the Closing
Date, in substantially the form set forth in EXHIBIT 7.8 attached hereto.
8. CONDITIONS TO VALU-LINE'S AND STOCKHOLDERS' OBLIGATION TO CLOSE.
Valu-Line's and its Stockholders obligations to effect the Merger and to perform
its obligations under this Agreement shall be subject to satisfaction (or waiver
by Valu-Line) on or prior to the Closing Date of all of the following
conditions:
8.1 NO PROHIBITION. No statute, rule, regulation, order, decree or
preliminary or permanent injunction of any court or administrative agency shall
be enacted, promulgated, entered or otherwise in effect which would prohibit
consummation of the Merger.
8.2 REPRESENTATIONS AND WARRANTIES. All representations and warranties
of Birch shall be true in all material respects (without giving effect to any
supplement delivered pursuant to Section 5.3) on the Closing Date as if made on
such date.
8.3 PERFORMANCE OF OBLIGATIONS. All covenants, agreements, obligations
and conditions required by this Agreement to be performed by Birch shall have
been performed.
8.4 DELIVERIES. Birch shall have complied with each and every one of
its obligations set forth in Section 5.4.
8.5 OPINION OF COUNSEL. There shall have been delivered to Valu-Line an
opinion of counsel for Birch, dated as of the Closing Date, in substantially the
form set forth in EXHIBIT 8.5 attached hereto.
8.6 STOCKHOLDERS AGREEMENT. The holders of at least 90% of the
outstanding common stock of Birch and of at least 90% of the shares of capital
stock of Birch issued in connection with the financing described in Section 7.5
shall have executed the Stockholders Agreement.
9. TERMINATION.
9.1 TERMINATION OF AGREEMENT. Either of Birch of Valu-Line may
terminate this Agreement with the prior authorization of its board of directors
(whether before or after stockholder approval) as provided below:
<PAGE> 25
(a) Birch and Valu-Line may terminate this Agreement by mutual
written consent at any time prior to the Effective Time;
(b) Birch may terminate this Agreement by giving written
notice to Valu-Line at any time prior to the Effective Time if the
Closing shall not have occurred on or before May 1, 1998, by reason of
the failure of any condition precedent under Section 7 (unless the
failure results primarily from Birch breaching any representation,
warranty, or covenant contained in this Agreement); and
(c) Valu-Line may terminate this Agreement by giving written
notice to Birch at any time prior to the Effective Time if the Closing
shall not have occurred on or before May 1, 1998, by reason of the
failure of any condition precedent under Section 8 (unless the failure
results primarily from Valu-Line or the Stockholders breaching any
representation, warranty, or covenant contained in this Agreement).
9.2 EFFECT OF TERMINATION. If Birch or Valu-Line terminates this
Agreement pursuant to Section 9.1, all rights and obligations of the parties
hereunder shall terminate without any liability of any party to any other party
(except for any liability of any party then in breach); provided, however, that
the confidentiality provisions contained in Sections 4.3 and 5.2 shall survive
any such termination.
10. INDEMNIFICATION; REMEDIES.
10.1 SURVIVAL. All representations, warranties, covenants, and
obligations in this Agreement and any certificate or document delivered pursuant
to this Agreement will survive the Closing.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY THE STOCKHOLDERS. The
Stockholders, jointly and severally, will indemnify and hold harmless Birch, its
Subsidiaries, and their respective directors, officers, employees, agents,
consultants, advisors, and other representatives, including legal counsel,
accountants, and financial advisors, stockholders, controlling persons, and
affiliates (collectively, the "Indemnified Persons") for, and will pay to the
Indemnified Persons the amount of, any loss, liability, claim, damage (including
incidental and consequential damages), expense (including costs of investigation
and defense and reasonable attorneys' fees), whether or not involving a
third-party claim (collectively, "Damages"), arising, directly or indirectly,
from or in connection with:
(a) any breach of any representation or warranty made by
Valu-Line or the Stockholders in this Agreement or in any certificate
or document delivered by Valu-Line or the Stockholders pursuant to this
Agreement as if such representation or warranty were made on and as of
the Closing Date, other than any such breach that (i) is disclosed in a
supplement delivered pursuant to Section 4.4(a), and (ii) is expressly
identified in the certificate delivered pursuant to Section 4.6(d) as
having caused the condition specified in
<PAGE> 26
Section 7.2 or 7.3 not to be satisfied; or
(b) any breach by Valu-Line or the Stockholders of any
covenant or obligation of Valu-Line or a Stockholder in this Agreement.
The remedies provided in this Section 10.2 will not be exclusive of or limit any
other remedies that may be available to Birch or the other Indemnified Persons.
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BIRCH. Birch will
indemnify and hold harmless the Stockholders, and will pay to the Stockholders
the amount of Damages arising, directly or indirectly, from or in connection
with:
(a) any breach of any representation or warranty made by Birch
in this Agreement or in any certificate or document delivered by Birch
pursuant to this Agreement as if such representation or warranty were
made on and as of the Closing Date, other than any such breach that (i)
is disclosed in a supplement delivered pursuant to Section 5.3, and
(ii) is expressly identified in the certificate delivered pursuant to
Section 5.4(d) as having caused the condition specified in Section 8.2
or 8.3 not to be satisfied; or
(b) any breach by Birch of any covenant or obligation of Birch
in this Agreement.
The remedies provided in this Section 10.3 will not be exclusive of or limit any
other remedies that may be available to Birch or the other Indemnified Persons.
10.4 TIME LIMITATIONS. If the Closing occurs, the Stockholders will
have no liability (for indemnification or otherwise) with respect to (a) any
representation or warranty, or covenant or obligation to be performed and
complied with prior to the Closing Date, other than those in Sections 2.2, 2.5,
2.9, and 2.17, unless on or before the second anniversary of the Closing Date,
Birch notifies the Stockholders of a claim specifying the factual
<PAGE> 27
basis of that claim in reasonable detail to the extent then known by Birch; (b)
any representation or warranty in Section 2.5, unless on or before the
expiration of the statute of limitation applicable to the Tax or Tax Return in
question, Birch notifies the Stockholders of a claim specifying the factual
basis of that claim in reasonable detail to the extent then known by Birch; and
(c) any representation or warranty in Sections 2.9 and 2.17, unless on or before
the sixth anniversary of the Closing Date, Birch notifies the Stockholders of a
claim specifying the factual basis of that claim in reasonable detail to the
extent then known by Birch. A claim with respect to Section 2.2 or a claim for
indemnification or reimbursement not based upon any representation or warranty
or any covenant or obligation to be performed and complied with prior to the
Closing Date, may be made at any time. If the Closing occurs, Birch will have no
liability (for indemnification or otherwise) with respect to any representation
or warranty, or covenant or obligation to be performed and complied with prior
to the Closing Date, unless on or before the second anniversary of the Closing
Date, the Stockholders notify Birch of a claim specifying the factual basis of
that claim in reasonable detail to the extent then known by the Stockholders.
10.5 LIMITATIONS ON AMOUNT--THE STOCKHOLDERS. The Stockholders will
have no liability (for indemnification or otherwise) with respect to the matters
described Section 10.2 until the total of all Damages with respect to such
matters exceeds $100,000, and then only for the amount by which such Damages
exceed $100,000. The Stockholders aggregate liability with respect to matters
described in Section 10.2 shall be as follows: (a) Sauder's aggregate liability
shall not exceed $18,822,394; (b) Tidwell's aggregate liability shall not exceed
$338,803; and (c) Supiran's aggregate liability shall not exceed $338,803.
However, this Section 10.5 will not apply to any Stockholder having actual
knowledge, at any time prior to the date on which a representation and warranty
of Valu-Line or any Stockholder is made, of a breach of such representation and
warranty or to any Stockholder causing an intentional breach of any covenant or
obligation, and that Stockholder will be liable for all Damages with respect to
such breaches. A Stockholder may satisfy an indemnification obligation (i)
entirely in cash or (ii) in a combination of cash, Series A Preferred, and
Series C Preferred in a proportion equal to the proportion of cash, Series A
Preferred and Series C Preferred received by that Stockholder in the Merger. For
purposes of this Section 10.5, each share of Series A Preferred and Series C
Preferred shall be valued at $1.60.
10.6 LIMITATIONS ON AMOUNT--BIRCH. Birch will have no liability (for
indemnification or otherwise) with respect to the matters described in Section
10.3 until the total of all Damages with respect to such matters exceeds
$100,000, and then only for the amount by which such Damages exceed $ 100,000.
Birch's aggregate liability with respect to matters described in Section 10.3
shall not exceed $19,500,000. However, this Section 10.6 will not apply to any
breach of any of Birch's representations and warranties of which the President
or any Vice President of Birch had actual knowledge at any time prior to the
date on which such representation and warranty is made or any intentional breach
by Birch of any covenant or obligation, and Birch will be liable for all Damages
with respect to such breaches.
10.7 RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE. The right to
indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations will not be affected by
any investigation conducted with respect to, or any knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the Closing Date, with respect to the accuracy
or inaccuracy of or compliance with, any such representation, warranty,
covenant, or obligation, except as set forth in Sections 10.2(a) and 10.3(a).
The waiver of any condition based on the accuracy of any representation or
warranty, or on the performance of or compliance with any covenant or
obligation, will not affect the right to indemnification, payment of Damages, or
other remedy based on such representations, warranties, covenants, and
obligations.
11. MISCELLANEOUS.
11.1 EXPENSES. Except as otherwise expressly provided in this
Agreement, each party
<PAGE> 28
to this Agreement will bear its respective expenses incurred in connection with
the preparation, execution, and performance of this Agreement and the Merger,
including all fees and expenses of agents, representatives, counsel, and
accountants; provided, however, that Birch shall bear the cost of the
Environmental Survey. The Stockholders will cause Valu-Line and its Subsidiaries
not to incur any out-of-pocket expenses in connection with this Agreement,
except for professional fees not in excess of $25,000. In the event of
termination of this Agreement, the obligation of each party to pay its own
expenses will be subject to any rights of such party arising from a breach of
this Agreement by another party.
11.2 PUBLIC ANNOUNCEMENTS. Any public announcement or similar publicity
with respect to this Agreement or the Merger will be issued, if at all, at such
time and in such manner as Birch and Valu-Line determine. Unless consented to by
the other party in advance or required by law, prior to the Closing, neither
Valu-Line nor Birch may make any disclosure about this Agreement to any person.
Valu-Line and Birch will consult with each other concerning the means by which
Valu-Line's employees, customers, and suppliers and others having dealings with
it will be informed of the Merger.
11.3 NOTICES. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when delivered by hand (with written confirmation of receipt), sent by
telecopier (with written confirmation of receipt), provided that a copy is
mailed by registered mail, return receipt requested, or when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
Valu-Line or the Stockholders: Birch:
Valu-Line Companies, Inc. Birch Telecom, Inc.
1420 C of E Drive Suite 1220, 1000 Walnut Street
Emporia, KS Kansas City, MO 64106
Attention: Stephen L. Sauder Attention: President
Fax: 316-343-9160 Fax: 816-842-7507
with a copy to: with a copy to:
Woodard, Blaylock, Hernandez, Roth & Day Spencer Fane Britt & Browne, LLP
Riverfront Place Suite 1400, 1000 Walnut Street
833 North Waco Kansas City, MO 64106
Wichita, KS 67201 Attention: Michael L. McCann, Esq.
Attention: James R. Roth, Esq. Fax: 816-474-3216
Fax: 316-263-0125
<PAGE> 29
11.4 FURTHER ASSURANCES. The parties agree to furnish upon request to
each other such further information, to execute and deliver to each other such
other documents, and to do such other acts and things, all as the other party
may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
11.5 WAIVER. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by any
party in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; no waiver that may be given
by a party will be applicable except in the specific instance for which it is
given; and no notice to or demand on one party will be deemed to be a waiver of
any obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
11.6 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter and
constitutes (along with the schedules to this Agreement and documents referred
to in this Agreement) a complete and exclusive statement of the terms of the
agreement between the parties with respect to its subject matter. This Agreement
may not be amended except by a written agreement executed by the party to be
charged with the amendment.
11.7 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. Neither party
may assign any of its rights under this Agreement without the prior consent of
the other parties. Subject to the preceding sentence, this Agreement will apply
to, be binding in all respects upon, and inure to the benefit of the successors
and permitted assigns of the parties. Nothing expressed or referred to in this
Agreement will be construed to give any person other than the parties to this
Agreement any legal or equitable right, remedy, or claim under or with respect
to this Agreement or any provision of this Agreement. This Agreement and all of
its provisions and conditions are for the sole and exclusive benefit of the
parties to this Agreement and their successors and assigns.
11.8 SEVERABILITY. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
11.9 SECTION HEADINGS, CONSTRUCTION. The headings of sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references
<PAGE> 30
to "Section" or "Sections" refer to the corresponding Section or Sections of
this Agreement. All words used in this Agreement will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or terms.
11.10 GOVERNING LAW. This Agreement will be governed by the laws of the
State of Missouri without regard to conflicts of laws principles.
11.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
*****
<PAGE> 31
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
BIRCH TELECOM, INC.
/s/ David E. Scott
By: __________________________
David E. Scott, President
VALU-LINE COMPANIES, INC.
/s/ Stephen L. Sauder
By: __________________________
Stephen L. Sauder, President
/s/ Stephen L. Sauder
_____________________________
Stephen L. Sauder
/s/ Paula K. Sauder
_____________________________
Paula K. Sauder
/s/ Richard L. Tidwell
_____________________________
Richard L. Tidwell
/s/ Sarah J. Tidwell
_____________________________
Sarah J. Tidwell
/s/ Stormy Supiran
_____________________________
Stormy Supiran
/s/ Carla S. Supiran
_____________________________
Carla S. Supiran
<PAGE> 32
INDEX OF DEFINED TERMS
Acquisition Transaction................................................... 18
Actions ........................................................ 7
Agreement ........................................................ 1
Birch ........................................................ 1
Birch Benefit Plans....................................................... 15
Birch Financial Statements................................................ 13
Birch Leases ........................................................ 15
Birch Records ........................................................ 19
Certificate of Merger..................................................... 1
Closing ........................................................ 1
Closing Date ........................................................ 1
Code ........................................................ 1
Damages ........................................................ 24
DGCL ........................................................ 1
Effective Time ........................................................ 2
Employment Agreements..................................................... 19
Environmental Survey...................................................... 22
Hazardous Materials....................................................... 11
Indemnified Persons....................................................... 24
KCC ........................................................ 7
KGCL ........................................................ 1
Law ........................................................ 7
Merger ........................................................ 1
MPSC ........................................................ 7
Option Agreements ........................................................ 19
Person ........................................................ 3
Purchase Price ........................................................ 2
Sauder ........................................................ 1
Section ........................................................ 28
Series A Preferred........................................................ 2
Series C Preferred........................................................ 2
Stockholder ........................................................ 1
Stockholders Agreement.................................................... 19
Stockholders' Releases.................................................... 19
Subsidiaries ........................................................ 3
Supiran ........................................................ 1
Tax ........................................................ 6
Tax Returns ........................................................ 6
Tidwell ........................................................ 1
Valu-Broadcasting ........................................................ 3
Valu-Line ........................................................ 1
<PAGE> 33
Valu-Line Benefit Plans.................................................. 8
Valu-Line Fee Properties................................................. 9
Valu-Line Financial Statements........................................... 5
Valu-Line Leases ....................................................... 9
Valu-Line Real Estate.................................................... 9
Valu-Line Records ....................................................... 17
Valu-Line Stock ....................................................... 2
Valu-Line Trademarks..................................................... 9
<PAGE> 34
SCHEDULES AND EXHIBITS
Schedule 1.9 Purchase Price
Schedule 2.1 Articles of Incorporation and Bylaws of Valu-Line and
Subsidiaries; Subsidiaries
Schedule 2.2 Capitalization
Schedule 2.3 Absence of Certain Events
Schedule 2.4 Financial Statements
Schedule 2.5 Tax Returns
Schedule 2.7 Litigation
Schedule 2.9 Employee Benefit Plans
Schedule 2.10 Debts and Liabilities
Schedule 2.11 Contracts
Schedule 2.13 Trademarks
Schedule 2.14 Real Estate
Schedule 2.16 Labor Matters
Schedule 2.17 Environmental Matters
Schedule 2.18 Interest in Suppliers and Competitors
Schedule 2.19 Insurance
Schedule 3.1 Articles of Incorporation and Bylaws of Birch and
Subsidiaries; Subsidiaries
Schedule 3.2 Capitalization
Schedule 3.4 Financial Statements
Schedule 3.7 Litigation
Schedule 3.9 Employee Benefit Plans
Schedule 3.10 Debts and Liabilities
Schedule 3.11 Real Estate
Schedule 4.6(c) Persons Executing Employment Agreements
Schedule 4.6(d) Stock Options
Schedule 4.6(e) Stockholders Agreement
Schedule 7.5 Financing
Exhibit 1.3 Certificate of Merger
Exhibit 1.5 Amended and Restated Certificate of Incorporation
Exhibit 4.6(b) Stockholders' Releases
Exhibit 4.6(c) Employment Agreements
Exhibit 7.8 Valu-Line Legal Opinion
Exhibit 8.5 Birch Legal Opinion
<PAGE> 1
Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
BIRCH TELECOM, INC.
BIRCH TELECOM, INC., a corporation organized and existing under the
laws of the State of Delaware, certifies as follows:
1. The original Certificate of Incorporation of Birch Telecom, Inc. was
filed with the Delaware Secretary of State on December 23, 1996.
2. This Amended and Restated Certificate of Incorporation amends and
restates the provisions of the Certificate of Incorporation of this Corporation,
and was duly adopted in accordance with Sections 245 and 228 of the General
Corporation Law of the State of Delaware by the directors and stockholders of
the Corporation.
3. The text of the Certificate of Incorporation is amended and restated
to read in its entirety as set forth below:
FIRST: The name of the Corporation is Birch Telecom, Inc. (the
"Corporation").
SECOND: The address of the Corporation's initial registered office in
the State of Delaware is 1209 Orange Street, in the City of Wilmington, County
of New Castle, and the name of its initial registered agent at such address is
The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the Delaware General
Corporation Law.
FOURTH:
A. The aggregate number of shares which the Corporation shall have authority to
issue shall be 52,000,000 shares, divided into 27,000,000 shares of common stock
("Common Stock"), and 25,000,000 shares of preferred stock ("Preferred Stock").
The Preferred Stock shall have a par value of one-tenth of one cent ($.001)
each, and the Common Stock shall have a par value of one-tenth of one cent
($.001) each.
-1-
<PAGE> 2
B. The Preferred Stock may be issued from time to time in one or more series.
The Board of Directors is hereby authorized, within the limitations and
restrictions stated in this Amended and Restated Certificate of Incorporation,
to fix or alter the dividend rights, dividend rate, conversion rate, voting
rights, rights and terms of redemption (including sinking fund provisions), the
redemption price or prices, the liquidation preferences of any wholly unissued
series of Preferred Stock, and the number of shares constituting any such series
and the designation thereof, or any of them; and to increase or decrease the
number of shares of any series subsequent to the issue of shares of that series,
but not below the number of shares of such series then outstanding. In case the
number of shares of any series shall be so decreased, the shares constituting
such decrease shall resume the status which they had prior to the adoption of
the resolution originally fixing the number of shares of such series.
Of the authorized shares of Preferred Stock, 2,968,750 shares are
hereby designated "Series A Preferred Stock"; 8,125,000 shares are hereby
designated "Series B Preferred Stock"; and 8,050,000 shares are hereby
designated "Series C Preferred Stock."
C. The powers, preferences, rights, restrictions, and other matters relating to
the Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred
Stock are as follows:
(1) DIVIDENDS.
(a) SERIES A PREFERRED STOCK. The holders of Series A
Preferred Stock shall be entitled to receive dividends in cash at the
rate of ten percent (10%) of the Series A Liquidation Preference per
annum on each outstanding share of Series A Preferred Stock (as
adjusted for any stock dividends, combinations, splits and the like
with respect to such shares), payable on March 31, June 30, September
30 and December 31 of each year, when and as declared by the Board of
Directors out of funds legally available for that purpose. Such
dividends shall be cumulative from the date of issuance of the Series A
Preferred Stock, whether or not earned, whether or not funds of the
Corporation are legally available for the payment of dividends and
whether or not declared by the Board, but such dividends shall be
payable only when, as, and if declared by the Board. So long as any
shares of Series A Preferred Stock shall be outstanding, no dividend,
whether in cash or property, shall be paid or declared, nor shall any
other distribution be made, on any shares of Series B Preferred Stock
or Series C Preferred Stock or Common Stock, nor shall any shares of
Series B Preferred Stock or Series C Preferred Stock or Common Stock be
purchased, redeemed or otherwise acquired for value by the Corporation
(except for acquisitions of Common Stock by the Corporation pursuant to
agreements which permit the Corporation to repurchase such shares upon
termination of services to the Corporation or in exercise of the
Corporation's right of first refusal upon a proposed transfer) until
all dividends set forth in this Section (1)(a) on the Series A
Preferred Stock
-2-
<PAGE> 3
shall have been paid or declared and set apart.
(b) SERIES B PREFERRED STOCK. The holders of Series B
Preferred Stock shall be entitled to receive dividends in cash at the
rate of fifteen percent (15%) per annum on an amount equal to $1.60
plus all unpaid dividends accrued on such shares of Series B Preferred
Stock, on each outstanding share of Series B Preferred Stock (as
adjusted for any stock dividends, combinations, splits and the like
with respect to such shares), when and as declared by the Board of
Directors out of funds legally available for that purpose. Such
dividends shall be cumulative from the date of issuance of the Series B
Preferred Stock, whether or not earned, whether or not funds of the
Corporation are legally available for the payment of dividends and
whether or not declared by the Board, but such dividends shall be
payable only when, as, and if declared by the Board. So long as any
shares of Series B Preferred Stock shall be outstanding, no dividend,
whether in cash or property, shall be paid or declared, nor shall any
other distribution be made, on any shares of Series C Preferred Stock
or Common Stock, nor shall any shares of Series C Preferred Stock or
Common Stock be purchased, redeemed or otherwise acquired for value by
the Corporation (except for acquisitions of Common Stock by the
Corporation pursuant to agreements which permit the Corporation to
repurchase such shares upon termination of services to the Corporation
or in exercise of the Corporation's right of first refusal upon a
proposed transfer) until all dividends set forth in this Section (1)(b)
on the Series B Preferred Stock shall have been paid or declared and
set apart.
(c) SERIES C PREFERRED STOCK. The holders of Series C
Preferred Stock shall be entitled to receive dividends in cash at the
rate of ten percent (10%) per annum on an amount equal to $1.60 on each
outstanding share of Series C Preferred Stock (as adjusted for any
stock dividends, combinations, splits and the like with respect to such
shares), when and as declared by the Board of Directors out of funds
legally available for that purpose. Notwithstanding anything to the
contrary herein, such dividends shall be payable only when, as and if
declared by the Board of Directors and shall not be cumulative. So long
as any shares of Series C Preferred Stock shall be outstanding, no
dividend, whether in cash or property, shall be paid or declared, nor
shall any other distribution be made, on any shares of Common Stock,
nor shall any shares of Common Stock be purchased, redeemed or
otherwise acquired for value by the Corporation (except for
acquisitions of Common Stock by the Corporation pursuant to agreements
which permit the Corporation to repurchase such shares upon termination
of services to the Corporation or in exercise of the Corporation's
right of first refusal upon a proposed transfer) until all dividends
set forth in this Section (1)(c) on the Series C Preferred Stock shall
have been paid or declared and set apart.
(2) LIQUIDATION RIGHTS.
-3-
<PAGE> 4
(a) Upon any liquidation, dissolution, or winding up of the
Corporation, and before any distribution or payment shall be made to
the holders of Series B Preferred Stock and Series C Preferred Stock
and Common Stock, the holders of Series A Preferred Stock shall be
entitled to be paid out of the assets of the Corporation an amount
equal to the sum of (i) $1.60 per share of Series A Preferred Stock (as
adjusted for any stock dividends, combinations, splits and the like
with respect to such shares) plus (ii) an amount equal to all unpaid
dividends accrued on such shares of Series A Preferred Stock to the
date of payment of such preference, whether or not earned, whether or
not funds of the Corporation are legally available for the payment of
dividends and whether or not such dividends have been declared by the
Board (the "Series A Liquidation Preference"), for each share of Series
A Preferred Stock held by them. If the assets of the Corporation shall
be insufficient to make payment in full to all holders of Series A
Preferred Stock of the liquidation preference set forth in this Section
(2)(a), then such assets shall be distributed among the holders of
Series A Preferred Stock at the time outstanding ratably in proportion
to the full amounts to which they would otherwise be respectively
entitled.
(b) Upon any liquidation, dissolution, or winding up of the
Corporation, and after the payment of the full liquidation preference
of the Series A Preferred Stock as set forth in Section (2)(a) above,
and before any distribution or payment shall be made to the holders of
Series C Preferred Stock and Common Stock, the holders of Series B
Preferred Stock shall be entitled to be paid out of the assets of the
Corporation an amount equal to the greater of (i) the sum of $1.60 for
each share of Series B Preferred Stock held by them (as adjusted for
any stock dividends, combinations, splits and the like with respect to
such shares) plus all unpaid dividends accrued on such shares of Series
B Preferred Stock to the date of payment of such preference, whether or
not earned, whether or not funds of the Corporation are legally
available for the payment of dividends and whether or not such
dividends have been declared by the Board; or (ii) (x) $1.60 for each
share of Series B Preferred Stock held by them (as adjusted for any
stock dividends, combinations, splits and the like with respect to such
shares) less the per share amount of any dividends previously declared
and paid on such shares plus (y) the Participation Amount (the "Series
B Liquidation Preference"), for each share of Series B Preferred Stock
held by them. If the assets of the Corporation shall be insufficient to
make payment in full to all holders of Series B Preferred Stock of the
liquidation preference set forth in this Section (2)(b), then such
assets shall be distributed among the holders of Series B Preferred
Stock at the time outstanding ratably in proportion to the full amounts
to which they would otherwise be respectively entitled.
(c) Upon any liquidation, dissolution, or winding up of the
Corporation, and after the payment of the full liquidation preference
of the Series A Preferred Stock as set forth
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in Section (2)(a) above and the Series B Preferred Stock as set forth
in Section (2)(b) above, and before any distribution or payment shall
be made to the holders of Common Stock, the holders of Series C
Preferred Stock shall be entitled to be paid out of the assets of the
Corporation an amount equal to the greater of: (i) the sum of $1.60 per
share of Series C Preferred Stock (as adjusted for any stock dividends,
combinations, splits and the like with respect to such shares), plus an
amount equal to all declared and unpaid dividends for each share of
Series C Preferred Stock held by them; or (ii) (x) $1.60 for each share
of Series C Preferred Stock held by them (as adjusted for any stock
dividends, combinations, splits and the like with respect to such
shares) less the per share amount of any dividends previously paid on
such shares plus (y) the Participation Amount (the "Series C
Liquidation Preference"). If the assets of the Corporation shall be
insufficient to make payment in full to all holders of Series C
Preferred Stock of the liquidation preference set forth in this Section
(2)(c), then such assets shall be distributed among the holders of
Series C Preferred Stock at the time outstanding ratably in proportion
to the full amounts to which they would otherwise be respectively
entitled.
(d) "Participation Amount" shall mean: (i) with respect to the
Series B Preferred Stock, (x) the Residual Amount multiplied by a
fraction the numerator of which is the number of shares of Series B
Preferred Stock issued and outstanding and the denominator of which is
the number of shares of Series B Preferred Stock, Series C Preferred
Stock and Common Stock issued and outstanding (including all shares
reserved for issuance under the Company's Stock Option Plan), on an
as-converted basis, divided by (y) the number of shares of Series B
Preferred Stock issued and outstanding; (ii) with respect to the Series
C Preferred Stock, (x) the Residual Amount multiplied by a fraction the
numerator of which is the number of shares of Series C Preferred Stock
issued and outstanding and the denominator of which is the number of
shares of Series B Preferred Stock, Series C Preferred Stock and Common
Stock issued and outstanding (including all shares reserved for
issuance under the Company's Stock Option Plan), on an as-converted
basis, divided by (y) the number of shares of Series C Preferred Stock
issued and outstanding; and (iii) with respect to the Common Stock, (x)
the Residual Amount multiplied by a fraction the numerator of which is
the number of shares of Common Stock issued and outstanding (including
all shares reserved for issuance under the Company's Stock Option Plan)
and the denominator of which is the number of shares of Series B
Preferred Stock, Series C Preferred Stock and Common Stock issued and
outstanding, on an as-converted basis, divided by (y) the number of
shares of Common Stock issued and outstanding (including all shares
reserved for issuance under the Company's Stock Option Plan).
(e) "Residual Amount" shall be the assets of the Company
remaining after the payment of: (i) the Series A Liquidation Preference
multiplied by all the outstanding
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shares of Series A Preferred Stock; (ii) $1.60 (as adjusted for any
stock dividend, combination, splits and the like with respect to such
shares) less the per share amount of any dividends previously declared
and paid on such shares multiplied by all outstanding shares of Series
B Preferred Stock; and (iii) $1.60 (as adjusted for any stock dividend,
combination, splits and the like with respect to such shares) less the
per share amount of any dividends previously declared and paid on such
shares multiplied by all outstanding shares of Series C Preferred
Stock.
(f) Upon any liquidation, dissolution, or winding up of the
Corporation, and after the payment in full of the Series A Liquidation
Preference, the Series B Liquidation Preference, and the Series C
Liquidation Preference, the Participation Amount shall be distributed
to the holders of the Common Stock.
(g) DEEMED LIQUIDATIONS. The following events will be deemed a
liquidation under this section: (i) consolidation or merger of the
Corporation into or with any corporation or other entity, person, or
any other corporate reorganization in which the stockholders of the
Corporation immediately prior to such consolidation, merger or
reorganization own less than 50% of the Corporation's voting power
immediately after such consolidation, merger or reorganization, or any
transaction or series of related transactions in which in excess of 50%
of the Corporation's voting power is transferred (an "Acquisition");
and (ii) the sale, lease, transfer or other disposition of all or
substantially all of the assets of the Corporation (an "Asset
Transfer").
(h) PAYMENTS IN PROPERTY. Whenever the distribution provided
for in this Section (2) shall be payable in securities or other
property other than cash, the value of that distribution shall be the
fair market value of those securities or other property as determined
in good faith by the Board of Directors.
(3) VOTING RIGHTS.
(a) SERIES A PREFERRED STOCK. Except as otherwise required by
applicable law, the holders of Series A Preferred Stock shall have no
voting rights with respect to the Series A Preferred Stock held by
them.
(b) SERIES B AND C PREFERRED STOCK. Except as set forth in
Sections (3)(c) and (d), the holders of Series B Preferred Stock shall
be entitled to cast one vote for each share of Series B Preferred Stock
held by them on an as-converted basis, and the holders of Series C
Preferred Stock shall be entitled to cast one vote for each share of
Series C Preferred Stock held by them on an as-converted basis. Such
votes shall be cast together with those cast by the holders of Common
Stock and not as a separate class, except as
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otherwise provided herein or required by applicable law. The Series B
Preferred Stock and the Series C Preferred Stock shall not have
cumulative voting rights.
(c) RESTRICTIONS AND LIMITATIONS.
(i) So long as the outstanding shares of Series B
Preferred Stock, including as outstanding Series B Preferred
Stock issuable upon conversion of all convertible securities
of the Corporation, represents at least five percent (5%) or
more of the outstanding shares of Common Stock of the
Corporation (on an as-converted to Common Stock basis), the
approval by the vote or written consent of the holders of at
least a majority of the then outstanding shares of Series B
Preferred Stock shall be necessary for effecting or validating
the following actions:
(A) Any action that results in the payment
or declaration of a dividend on any shares of Common
Stock; or
(B) The purchase or other acquisition (or
payment into or set aside for a sinking fund for such
purpose) of any Series A Preferred Stock or Series C
Preferred Stock or Common Stock; provided, however,
that this restriction shall not apply to: (x) the
repurchase of shares of Common Stock by the
Corporation pursuant to agreements which permit the
Corporation to repurchase such shares upon
termination of services to the Corporation; (y) the
exercise of the Corporation's right of first refusal
with the approval of the Board of Directors upon a
proposed transfer; or (z) the redemption of the
Series A Preferred Stock pursuant to the terms set
forth in Section (5)(a);or
(C) Any agreement by the Corporation or its
stockholders regarding an Acquisition or an Asset
Transfer (as defined in Section (2)(g)).
(ii) So long as the outstanding shares of Series B
Preferred Stock, including as outstanding Series B Preferred
Stock issuable upon conversion of all convertible securities
of the Corporation, represents at least five percent (5%) or
more of the outstanding shares of Common Stock of the
Corporation (on an as-converted to Common Stock basis), the
approval by the vote or written consent of the holders of at
least seventy-five percent (75%) of the then outstanding
shares of Series B Preferred Stock shall be necessary for
effecting or validating the following actions:
(A) Any amendment, alteration, or repeal of any
provision of the
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<PAGE> 8
Certificate of Incorporation or Bylaws of the Corporation (including the filing
of a Certificate of Designation), that adversely affects the voting powers,
preferences or other special rights or privileges, qualifications, limitations,
or restrictions of the Series B Preferred Stock; or
(B) Any amendment, alteration, or repeal of this
Section (3)(c).
(d) ELECTION OF BOARD OF DIRECTORS.
(i) Subject to Section (5)(d)(iii) below, for so long
as at least 4,062,500 shares of Series B Preferred Stock
remain outstanding, including as outstanding Series B
Preferred Stock issuable upon conversion of all convertible
securities of the Corporation (subject to adjustment for any
stock split, reverse stock split or the like), and the
authorized size of the Corporation's Board of Directors is
five (5) or more, the holders of Series B Preferred Stock,
voting as a separate class, shall be entitled to elect three
(3) members of the Corporation's Board of Directors at each
meeting or pursuant to each consent of the Corporation's
shareholders for the election of directors, and to remove from
office such directors and to fill any vacancy caused by the
resignation, death or removal of such directors.
(ii) Subject to Section (5)(d)(iii) below, for so
long as at least 4,025,000 shares of Series C Preferred Stock
remain outstanding (subject to adjustment for any stock split,
reverse stock split and the like) and the authorized size of
the Corporation's Board of Directors is five (5) or more, the
holders of Series C Preferred Stock, voting as a separate
class, shall be entitled to elect one (1) member of the
Corporation's Board of Directors at each meeting or pursuant
to each consent of the Corporation's shareholders for the
election of directors, and to remove from office such director
and to fill any vacancy caused by the resignation, death or
removal of such director.
(iii) Subject to Section (5)(d)(iii) below, for so
long as the conditions set forth in 3(d)(i) and (ii) are
satisfied the holders of Common Stock, voting as a separate
class, shall be entitled to elect one (1) member of the Board
of Directors at each meeting or pursuant to each consent of
the Corporation's shareholders for the election of directors,
and to remove from office such director and to fill any
vacancy caused by the resignation, death or removal of such
director; and
(iv) Except as provided in 3(d)(i), (ii) and (iii)
above, the holders of Common Stock and Preferred Stock, voting
together as a single class, shall be entitled to elect all
members of the Board of Directors.
(4) CONVERSION RIGHTS. The holders of the Series B Preferred Stock
and
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<PAGE> 9
Series C Preferred Stock shall have the following rights with respect to the
conversion of the Series B Preferred Stock and Series C Preferred Stock into
shares of Common Stock (the "Conversion Rights"):
(a) OPTIONAL CONVERSION. Subject to and in compliance with the
provisions of this Section (4), any shares of Series B Preferred Stock and
Series C Preferred Stock may, at the option of the holder, be converted at any
time into fully paid and nonassessable shares of Common Stock. The number of
shares of Common Stock to which a holder of Series B Preferred Stock or Series C
Preferred Stock shall be entitled upon conversion shall be the product obtained
by multiplying the applicable Preferred Stock Rate then in effect (determined as
provided in Section (4)(c)) by the number of shares of Series B Preferred Stock
or Series C Preferred Stock being converted.
(b) AUTOMATIC CONVERSION. Subject to and in compliance with
the provisions of this Section (4), all outstanding shares of Series C Preferred
Stock shall be automatically converted into shares of Common Stock immediately
prior to the closing of a firmly underwritten public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended,
covering the offer and sale of Common Stock for the account of the Company in
which the gross proceeds to the Company (before underwriting discounts,
commissions and fees) are at least $30,000,000. The number of shares of Common
Stock to which a holder of Series C Preferred Stock shall be entitled upon
conversion shall be the product obtained by multiplying the applicable Preferred
Stock Rate then in effect by the number of shares of Series C Preferred Stock
being converted.
(c) PREFERRED STOCK. The conversion rate of the applicable
series of Preferred Stock in effect at any time for conversion of the Series B
Preferred Stock or Series C Preferred Stock (the "Preferred Stock Rate") shall
be the quotient obtained by dividing the Original Issue Price of the applicable
series of Preferred Stock by the applicable Preferred Stock Price, calculated as
provided in Section (4)(d). The "Original Issue Price" for each series of
Preferred Stock shall initially equal $1.60 per share.
(d) CONVERSION PRICE. The conversion price for the applicable
series of Preferred Stock shall initially be the Original Issue Price of the
applicable series of Preferred Stock (the "Preferred Stock Price"). Such initial
Preferred Stock Price shall be adjusted from time to time in accordance with
this Section (4). All references to the Preferred Stock Price herein shall mean
the Preferred Stock Price as applicable and as so adjusted.
(e) MECHANICS OF CONVERSION. Each holder of Series B Preferred
Stock or Series C Preferred Stock who desires to convert the same into shares of
Common Stock pursuant to this Section (4) shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or any
transfer agent for the Series B Preferred
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<PAGE> 10
Stock or Series C Preferred Stock, and shall give written notice to the
Corporation at such office that such holder elects to convert the same. Such
notice shall state the number of shares of Series B Preferred Stock or Series C
Preferred Stock being converted. Thereupon, the Corporation shall promptly issue
and deliver at such office to such holder a certificate or certificates for the
number of shares of Common Stock to which such holder is entitled. Such
conversion shall be deemed to have been made at the close of business on the
date of such surrender of the certificates representing the shares of Series B
Preferred Stock or Series C Preferred Stock to be converted, and the person
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder of such shares of Common
Stock on such date.
(f) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the
Corporation shall at any time or from time to time after the date that the first
share of Series B Preferred Stock and Series C Preferred Stock is issued (the
"Original Issue Date") effect a subdivision of the outstanding Common Stock
without a corresponding subdivision of the Series B Preferred Stock or Series C
Preferred Stock, the Preferred Stock Price for each series of Preferred Stock in
effect immediately before that subdivision shall be proportionately decreased.
Conversely, if the Corporation shall at any time or from time to time after the
Original Issue Date combine the outstanding shares of Common Stock into a
smaller number of shares without a corresponding combination of the Series B
Preferred Stock or Series C Preferred Stock, the Preferred Stock Price for each
series of Preferred Stock in effect immediately before the combination shall be
proportionately increased. Any adjustment under this Section (4)(f) shall become
effective at the close of business on the date the subdivision or combination
becomes effective.
(g) ADJUSTMENT FOR COMMON STOCK DIVIDENDS AND DISTRIBUTIONS.
If the Corporation at any time or from time to time after the Original Issue
Date makes, or fixes a record date for the determination of holders of Common
Stock entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, in each such event the Preferred Stock Price
of each applicable series of Preferred Stock that is then in effect shall be
decreased as of the time of such issuance or, in the event such record date is
fixed, as of the close of business on such record date, by multiplying the
Preferred Stock Price for each applicable series of Preferred Stock then in
effect by a fraction (i) the numerator of which is the total number of shares of
Common Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date, and (ii) the denominator
of which is the total number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of business on such
record date plus the number of shares of Common Stock issuable in payment of
such dividend or distribution; provided, however, that if such record date is
fixed and such dividend is not fully paid or if such distribution is not fully
made on the date fixed therefor, the applicable Preferred Stock Price shall be
recomputed accordingly as of the close of business on such record date and
thereafter the applicable
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<PAGE> 11
Preferred Stock Price shall be adjusted pursuant to this Section (4)(g) to
reflect the actual payment of such dividend or distribution.
(h) ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. If the
Corporation at any time or from time to time after the Original Issue Date
makes, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in securities of
the Corporation other than shares of Common Stock, in each such event provision
shall be made so that the holders of the Series B Preferred Stock and Series C
Preferred Stock shall receive upon conversion thereof, in addition to the number
of shares of Common Stock receivable thereupon, the amount of other securities
of the Corporation which they would have received had their Series B Preferred
Stock or Series C Preferred Stock been converted into Common Stock on the date
of such event and had they thereafter, during the period from the date of such
event to and including the conversion date, retained such securities receivable
by them as aforesaid during such period, subject to all other adjustments called
for during such period under this Section (4) with respect to the rights of the
holders of the Preferred Stock or with respect to such other securities by their
terms.
(i) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND
SUBSTITUTION. If at any time or from time to time after the Original Issue Date,
the Common Stock issuable upon the conversion of the Series B Preferred Stock
and Series C Preferred Stock is changed into the same or a different number of
shares of any class or classes of stock, whether by recapitalization,
reclassification or otherwise (other than an Acquisition or Asset Transfer as
defined in Section (2)(g) or a subdivision or combination of shares or stock
dividend or a reorganization, merger, consolidation or sale of assets provided
for elsewhere in this Section (4), in any such event each holder of Series B
Preferred Stock and Series C Preferred Stock shall have the right thereafter to
convert such stock into the kind and amount of stock and other securities and
property receivable upon such recapitalization, reclassification or other change
by holders of the maximum number of shares of Common Stock into which such
shares of Series B Preferred Stock or Series C Preferred Stock could have been
converted immediately prior to such recapitalization, reclassification or
change, all subject to further adjustment as provided herein or with respect to
such other securities or property by the terms thereof.
(j) REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF
ASSETS. If at any time or from time to time after the Original Issue Date, there
is a capital reorganization of the Common Stock (other than an Acquisition or
Asset Transfer as defined in Section (2)(g) or a recapitalization, subdivision,
combination, reclassification, exchange or substitution of shares provided for
elsewhere in this Section (4), as a part of such capital reorganization,
provision shall be made so that the holders of the Series B Preferred Stock and
Series C Preferred Stock shall thereafter be entitled to receive upon conversion
of the
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<PAGE> 12
Series B Preferred Stock and Series C Preferred Stock the number of shares of
stock or other securities or property of the Corporation to which a holder of
the number of shares of Common Stock deliverable upon conversion would have been
entitled on such capital reorganization, subject to adjustment in respect of
such stock or securities by the terms thereof. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Section
(4) with respect to the rights of the holders of Series B Preferred Stock and
Series C Preferred Stock after the capital reorganization to the end that the
provisions of this Section (4) (including adjustment of the Preferred Stock
Price then in effect and the number of shares issuable upon conversion of the
Series B Preferred Stock and Series C Preferred Stock) shall be applicable after
that event and be as nearly equivalent as practicable.
(k) SALE OF SHARES BELOW PREFERRED STOCK PRICE.
(i) If at any time or from time to time after the
Original Issue Date, the Corporation issues or sells, or is
deemed by the express provisions of this Section (4)(k) to
have issued or sold, Additional Shares of Common Stock (as
defined in Section (4)(k)(iv) below), other than as a dividend
or other distribution on any class of stock as provided in
Section (4)(g) above, and other than a subdivision or
combination of shares of Common Stock as provided in Section
(4)(f) above, for an Effective Price (as defined in Section
(4)( k)(iv) below) less than the then effective Preferred
Stock Price, then and in each such case the then existing
Preferred Stock Price shall be reduced, as of the opening of
business on the date of such issue or sale, to a price
determined by multiplying the Preferred Stock Price by a
fraction (i) the numerator of which shall be (A) the number of
shares of Common Stock deemed outstanding (as defined below)
immediately prior to such issue or sale, plus (B) the number
of shares of Common Stock which the aggregate consideration
received (as defined in Section (4)(k)(ii) by the Corporation
for the total number of Additional Shares of Common Stock so
issued would purchase at such Preferred Stock Price, and (ii)
the denominator of which shall be the number of shares of
Common Stock deemed outstanding (as defined below) immediately
prior to such issue or sale plus the total number of
Additional Shares of Common Stock so issued. For the purposes
of the preceding sentence, the number of shares of Common
Stock deemed to be outstanding as of a given date shall be the
sum of (A) the number of shares of Common Stock actually
outstanding, (B) the number of shares of Common Stock into
which the then outstanding shares of Series B Preferred Stock
and Series C Preferred Stock could be converted if fully
converted on the day immediately preceding the given date, and
(C) the number of shares of Common Stock which could be
obtained through the exercise or conversion of all other
rights, options and convertible securities on the day
immediately preceding the given date.
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(ii) For the purpose of making any adjustment
required under this Section (4)(k), the consideration received
by the Corporation for any issue or sale of securities shall
(A) to the extent it consists of cash, be computed at the net
amount of cash received by the Corporation after deduction of
any underwriting or similar commissions, compensation or
concessions paid or allowed by the Corporation in connection
with such issue or sale but without deduction of any expenses
payable by the Corporation, (B) to the extent it consists of
property other than cash, be computed at the fair value of
that property as determined in good faith by the Board of
Directors, and (C) if Additional Shares of Common Stock,
Convertible Securities (as defined in Section (4)(k)(iii)) or
rights or options to purchase either Additional Shares of
Common Stock or Convertible Securities are issued or sold
together with other stock or securities or other assets of the
Corporation for a consideration which covers both, be computed
as the portion of the consideration so received that may be
reasonably determined in good faith by the Board of Directors
to be allocable to such Additional Shares of Common Stock,
Convertible Securities or rights or options.
(iii) For the purpose of the adjustment required
under this Section (4)(k), if the Corporation issues or sells
any rights or options for the purchase of, or stock or other
securities convertible into, Additional Shares of Common Stock
(such convertible stock or securities being herein referred to
as "Convertible Securities") and if the Effective Price of
such Additional Shares of Common Stock is less than the
Preferred Stock Price, in each case the Corporation shall be
deemed to have issued at the time of the issuance of such
rights or options or Convertible Securities the maximum number
of Additional Shares of Common Stock issuable upon exercise or
conversion thereof and to have received as consideration for
the issuance of such shares an amount equal to the total
amount of the consideration, if any, received by the
Corporation for the issuance of such rights or options or
Convertible Securities, plus, in the case of such rights or
options, the minimum amounts of consideration, if any, payable
to the Corporation upon the exercise of such rights or
options, plus, in the case of Convertible Securities, the
minimum amounts of consideration, if any, payable to the
Corporation (other than by cancellation of liabilities or
obligations evidenced by such Convertible Securities) upon the
conversion thereof; provided that if in the case of
Convertible Securities the minimum amounts of such
consideration cannot be ascertained, but are a function of
antidilution or similar protective clauses, the Corporation
shall be deemed to have received the minimum amounts of
consideration without reference to such clauses; provided
further that if the minimum amount of consideration payable to
the Corporation upon the exercise or conversion of rights,
options or Convertible Securities is reduced over time or on
the occurrence or non-occurrence of specified events other
than by reason of
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antidilution adjustments, the Effective Price shall be
recalculated using the figure to which such minimum amount of
consideration is reduced; provided further that if the minimum
amount of consideration payable to the Corporation upon the
exercise or conversion of such rights, options or Convertible
Securities is subsequently increased, the Effective Price
shall be again recalculated using the increased minimum amount
of consideration payable to the Corporation upon the exercise
or conversion of such rights, options or Convertible
Securities. No further adjustment of the Preferred Stock
Price, as adjusted upon the issuance of such rights, options
or Convertible Securities, shall be made as a result of the
actual issuance of Additional Shares of Common Stock on the
exercise of any such rights or options or the conversion of
any such Convertible Securities. If any such rights or options
or the conversion privilege represented by any such
Convertible Securities shall expire without having been
exercised, the Preferred Stock Price as adjusted upon the
issuance of such rights, options or Convertible Securities
shall be readjusted to the Preferred Stock Price which would
have been in effect had an adjustment been made on the basis
that the only Additional Shares of Common Stock so issued were
the Additional Shares of Common Stock, if any, actually issued
or sold on the exercise of such rights or options or rights of
conversion of such Convertible Securities, and such Additional
Shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Corporation upon such
exercise, plus the consideration, if any, actually received by
the Corporation for the granting of all such rights or
options, whether or not exercised, plus the consideration
received for issuing or selling the Convertible Securities
actually converted, plus the consideration, if any, actually
received by the Corporation (other than by cancellation of
liabilities or obligations evidenced by such Convertible
Securities) on the conversion of such Convertible Securities,
provided that such readjustment shall not apply to prior
conversions of Series B Preferred Stock or Series C Preferred
Stock.
(iv) "Additional Shares of Common Stock" shall mean
all shares of Common Stock issued by the Corporation or deemed
to be issued pursuant to this Section (4)(k), whether or not
subsequently reacquired or retired by the Corporation other
than (A) shares of Common Stock issued upon conversion of the
Series B Preferred Stock or Series C Preferred Stock; (B)
Common Stock and/or options, warrants or other Common Stock
purchase rights, and the Common Stock issued pursuant to such
options, warrants or other rights to employees, officers or
directors of, or consultants or advisors to the Corporation or
any subsidiary pursuant to stock purchase or stock option
plans or other arrangements that are approved by the Board;
and (C) shares of Common Stock issued pursuant to the exercise
of options, warrants or convertible securities outstanding as
of the Original Issue Date. The "Effective Price" of
Additional
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Shares of Common Stock shall mean the quotient determined by
dividing the total number of Additional Shares of Common Stock
issued or sold, or deemed to have been issued or sold by the
Corporation under this Section (4)(k), into the aggregate
consideration received, or deemed to have been received by the
Corporation for such issue under this Section (4)(k), for such
Additional Shares of Common Stock.
(l) CERTIFICATE OF ADJUSTMENT. In each case of an adjustment
or readjustment of the applicable Preferred Stock Price for the number of shares
of Common Stock or other securities issuable upon conversion of the Series B
Preferred Stock or Series C Preferred Stock, if the Series B Preferred Stock or
Series C Preferred Stock is then convertible pursuant to this Section (4), the
Corporation, at its expense, shall compute such adjustment or readjustment in
accordance with the provisions hereof and prepare a certificate showing such
adjustment or readjustment, and shall mail such certificate, by first class
mail, postage prepaid, to each registered holder of Series B Preferred Stock or
Series C Preferred Stock at the holder's address as shown in the Corporation's
books. The certificate shall set forth such adjustment or readjustment, showing
in detail the facts upon which such adjustment or readjustment is based,
including a statement of (i) the consideration received or deemed to be received
by the Corporation for any Additional Shares of Common Stock issued or sold or
deemed to have been issued or sold, (ii) the Preferred Stock Price at the time
in effect, (iii) the number of Additional Shares of Common Stock and (iv) the
type and amount, if any, of other property which at the time would be received
upon conversion of the Series B Preferred Stock or Series C Preferred Stock.
(m) NOTICES OF RECORD DATE. Upon (i) any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, or (ii) any Acquisition (as defined in Section
(2)(g)) or other capital reorganization of the Corporation, any reclassification
or recapitalization of the capital stock of the Corporation, any merger or
consolidation of the Corporation with or into any other corporation, or any
Asset Transfer (as defined in Section (2)(g)), or any voluntary or involuntary
dissolution, liquidation or winding up of the Corporation, the Corporation shall
mail to each holder of Preferred Stock at least twenty (20) calendar days prior
to the record date specified therein a notice specifying (A) the date on which
any such record is to be taken for the purpose of such dividend or distribution
and a description of such dividend or distribution, (B) the date on which any
such Acquisition, reorganization, reclassification, transfer, consolidation,
merger, Asset Transfer, dissolution, liquidation or winding up is expected to
become effective, and (C) the date, if any, that is to be fixed as to when the
holders of record of Common Stock (or other securities) shall be entitled to
exchange their shares of Common
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Stock (or other securities) for securities or other property deliverable upon
such Acquisition, reorganization, reclassification, transfer, consolidation,
merger, Asset Transfer, dissolution, liquidation or winding up.
(n) FRACTIONAL SHARES. No fractional shares of Common Stock
shall be issued upon conversion of Series B Preferred Stock or Series C
Preferred Stock. All shares of Common Stock (including fractions thereof)
issuable upon conversion of more than one share of Series B Preferred Stock or
Series C Preferred Stock by a holder thereof shall be aggregated for purposes of
determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion would
result in the issuance of any fractional share, the Corporation shall, in lieu
of issuing any fractional share, pay cash equal to the product of such fraction
multiplied by the Common Stock's fair market value (as determined by the Board
of Directors) on the date of conversion.
(o) RESERVATION OF STOCK. The Corporation shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of Series B
Preferred Stock and Series C Preferred Stock and the exercise of all outstanding
options and warrants of the Corporation. If at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient to effect the
conversion of all then outstanding shares of the Series B Preferred Stock and
Series C Preferred Stock or the exercise of all outstanding options and
warrants, the Corporation will take such corporate action as may, in the opinion
of its counsel, be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purposes.
(p) NOTICES. Any notice required by the provisions of this
Section (4) shall be in writing and shall be deemed effectively given: (i) upon
personal delivery to the party to be notified, (ii) when sent by confirmed telex
or facsimile if sent during normal business hours of the recipient; if not, then
on the next business day, (iii) five (5) business days after having been sent by
registered or certified mail, return receipt requested, postage prepaid, or (iv)
one (1) business day after deposit with a nationally recognized overnight
courier, specifying next day delivery, with written verification of receipt. All
notices shall be addressed to each holder of record at the address of such
holder appearing on the books of the Corporation.
(q) PAYMENT OF TAXES. The Corporation will pay all taxes
(other than taxes based upon income) and other governmental charges that may be
imposed with respect to the issue or delivery of shares of Common Stock upon
conversion of shares of Series B Preferred Stock or Series C Preferred Stock,
excluding any tax or other charge imposed in connection with any transfer
involved in the issue and delivery of shares of Common Stock in a name other
than that in which the shares of Series B Preferred Stock or Series
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<PAGE> 17
C Preferred Stock so converted were registered.
(5) REDEMPTION.
(a) SERIES A PREFERRED STOCK. The Corporation shall redeem,
from any source of funds legally available therefor, all of the Series
A Preferred Stock upon the earlier of: (i) the twentieth (20th)
anniversary of the date of issuance of the Series A Preferred Stock; or
(ii) the 180th calendar day following the date the Corporation first
has knowledge of the death, disability or mental incompetency of
Stephen Lockwood Sauder, the initial holder of the Series A Preferred
Stock (the "Series A Notice Date"); provided however, that in the event
that the Series A Notice Date occurs prior to the third anniversary of
the date of issuance of the Series A Preferred Stock, then the
Corporation shall redeem, from any source of funds legally available
therefor, all of the Series A Preferred Stock in no more than three
annual installments beginning on the first anniversary of the Series A
Notice Date and continuing on the second and third anniversaries of
such Series A Notice Date (each a "Series A Redemption Date"). The
Corporation shall effect such redemption on the Series A Redemption
Date by paying in cash in exchange for the shares of Series A Preferred
Stock a sum equal to $1.60 per share of Series A Preferred Stock (as
adjusted for any stock dividends, combinations, splits, or the like
with respect to such shares) plus all declared or accumulated but
unpaid dividends on such shares (the "Series A Redemption Price").
(b) SERIES B PREFERRED STOCK.
(i) A holder of Series B Preferred Stock may require
the Corporation, to the extent it may lawfully do so, to
redeem all of such holder's Series B Preferred Stock, or the
holders of at least seventy-five percent (75%) of the then
outstanding shares of Series B Preferred Stock, voting as a
separate class, may require the Corporation, to the extent it
may lawfully do so, to redeem, all of the outstanding shares
of Series B Preferred Stock, upon notice given pursuant to
Section (5)(c)(i) (the "Holder Redemption Notice"). Once the
Holder Redemption Notice has been given to the Corporation,
the Corporation shall redeem one-third of the aggregate number
of shares of Series B Preferred Stock requested to be redeemed
in the Holder Redemption Notice on February 28, 2003, 2004 and
2005, respectively (each a "Series B Redemption Date"). The
Corporation shall effect such redemption or redemptions on the
applicable Series B Redemption Dates by paying in cash in
exchange for the shares of Series B Preferred Stock to be
redeemed a sum equal to the greater of: (x) $1.60 per share of
Series B Preferred Stock (as adjusted for any stock dividends,
combinations, splits or the like with respect to such shares)
plus the fair market value of such number of shares of Common
Stock that would be issuable upon conversion of one share of
Series B
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<PAGE> 18
Preferred Stock as of the applicable Series B Redemption Date;
or (y) $1.60 per share of Series B Preferred Stock (as
adjusted for any stock dividends, combinations, splits or the
like with respect to such shares) plus all declared or
accumulated but unpaid dividends on such shares (the "Series B
Redemption Price").
(ii) For purposes of this Section (5)(b), "fair
market value" of the Common Stock will be the fair market
value of the Common Stock of the Corporation as of a date
within 30 days of the applicable Series B Redemption Date as
determined by one mutually agreed upon independent appraiser
who is a regionally or nationally recognized investment
banking firm, or an independent appraiser who is a member of a
recognized professional organization. Such "fair market value"
will be determined as though the Common Stock were being
traded in the public securities markets, with no discount in
such valuation due to lack of liquidity of the Corporation's
shares, or due to the fact that the shares being valued
constituted a minority interest in the Corporation. The cost
of the appraisal shall be borne equally by the Corporation and
the holder or holders of Series B Preferred Stock who
originally elected to exercise their redemption rights.
(iii) Notwithstanding the foregoing Section
(5)(b)(i), the Corporation shall redeem, from any source of
funds legally available therefor, all of the Series B
Preferred Stock concurrent with the closing of a firmly
underwritten public offering of the capital stock of the
Corporation pursuant to an effective registration statement
under the Securities Act of 1933, as amended, with gross cash
proceeds to the Corporation (before underwriting discounts,
commissions and fees) of not less than $30,000,000 (the
"Series B IPO Redemption Date"). The Corporation shall effect
such redemption on the Series B IPO Redemption Date: (x) by
paying in cash in exchange for the shares of Series B
Preferred Stock to be redeemed a sum equal to $1.60 per share
of Series B Preferred Stock (as adjusted for any stock
dividends, combinations, splits or the like with respect to
such shares) and (y) by issuing such number of shares of
Common Stock that would be issuable upon conversion of such
shares of Series B Preferred Stock as of the Series B IPO
Redemption Date.
(c) PROCEDURE.
(i) In order to exercise the right of redemption, a
holder or holders of Series B Preferred Stock shall provide
written notice of such holder's request to redeem its shares
of Series B Preferred Stock to the Corporation at least sixty
(60) calendar days prior to February 28, 2003. Such notice to
the Corporation shall be
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<PAGE> 19
deemed an irrevocable request by such holder to require the
Corporation to redeem all of such holder's shares of Series B
Preferred Stock.
(ii) At least 15 but no more than 30 days prior to
each Series B Redemption Date, the Series B IPO Redemption
Date, or a Series A Redemption Date (each a "Redemption
Date"), as applicable, written notice shall be mailed, first
class postage prepaid, to each holder of record (at the close
of business on the business day next preceding the day on
which notice is given) of the Series A Preferred Stock or
Series B Preferred Stock to be redeemed, at the address last
shown on the records of the Corporation for such holder,
notifying such holder of the redemption to be effected,
specifying the number of shares to be redeemed from such
holder, the applicable Redemption Date, the Series A
Redemption Price or Series B Redemption Price (each a
"Redemption Price"), as applicable, the place at which payment
may be obtained and calling upon such holder to surrender to
the Corporation, in the manner and at the place designated,
his certificate or certificates representing the shares to be
redeemed (the "Company Redemption Notice"). Except as provided
in Section (5)(d), on or after the Redemption Dates, each
holder of Series A Preferred Stock or Series B Preferred
Stock, as applicable, to be redeemed shall surrender to the
Corporation the certificate or certificates representing such
shares, in the manner and at the place designated in the
Redemption Notice, and thereupon the applicable Redemption
Price of such shares shall be payable to the order of the
person whose name appears on such certificate or certificates
as the owner thereof and each surrendered certificate shall be
canceled. In the event less than all the shares represented by
any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares.
(d) RIGHTS OF REDEEMED STOCK; DEFAULT.
(i) From and after the applicable Redemption Date,
unless there shall have been a default in payment of the
applicable Redemption Price, all rights of the holders of
shares of Series A Preferred Stock or Series B Preferred Stock
designated for redemption in the Company Redemption Notice as
holders of Series A Preferred Stock or Series B Preferred
Stock (except the right to receive the applicable Redemption
Price without interest upon surrender of their certificate or
certificates) shall cease with respect to such shares, and
such shares shall not thereafter be transferred on the books
of the Corporation or be deemed to be outstanding for any
purpose whatsoever.
(ii) If the Corporation fails to redeem for any
reason, including, but not
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<PAGE> 20
limited to, the insufficiency of funds legally available for
the redemption of shares, the total number of shares of Series
A Preferred Stock or Series B Preferred Stock to be redeemed
on such Redemption Date, those funds which are legally
available will be used to redeem the maximum possible number
of such shares ratably among the holders of such shares to be
redeemed based upon their holdings of Series A Preferred Stock
or Series B Preferred Stock. The shares of Series A Preferred
Stock or Series B Preferred Stock not redeemed shall remain
outstanding and entitled to all the rights and preferences
provided herein. At any time thereafter when additional funds
of the Corporation are legally available for the redemption of
shares of Series A Preferred Stock or Series B Preferred Stock
such funds will immediately be used to redeem the balance of
the shares which the Corporation has become obliged to redeem
on any applicable Redemption Date, but which it has not
redeemed.
(iii) If the Corporation fails to redeem for any
reason, including, but not limited to, the insufficiency of
funds legally available for the redemption of shares, the
total number of shares of Series B Preferred Stock to be
redeemed on the applicable Redemption Date, the holders of
Series B Preferred Stock at the time outstanding, voting
separately as a class, shall be entitled to elect the smallest
number of directors of the Corporation that shall constitute a
majority of the Board of Directors of the Corporation (and, if
there are not a sufficient number of resignations by the
members of the Board of Directors at the time of such default,
the Board of Directors shall be expanded by such number of
directors as is necessary to give effect to the foregoing
right). Such right to vote separately as a class to elect
directors shall, when vested, remove any limitations to vote
only as a separate class for directors as provided in Section
(3)(d) above and shall permit the voting for the election of
all directors, and shall continue until the Series B Preferred
Stock shall have been redeemed and, when so redeemed, such
right to elect all directors separately as a class pursuant to
this Section (5)(d)(iii) shall cease and the right to vote
separately as a class and elect directors as provided in
Section (3)(d) above shall resume; subject, always, to the
same provisions for the vesting of such right to elect
directors separately as a class in the case of future defaults
as provided above. At any time when such right to elect
directors separately as a class pursuant to this Section (5)
(d)(iii) shall have so vested, the Corporation may, and upon
written request of the holders of record of not less than 20%
of the total number of shares of Series B Preferred Stock then
outstanding shall, call a special meeting of shareholders for
the election of directors. In the event of such a written
request, such special meeting shall be held within 15 business
days after the delivery of such request and, in either case,
at the place and upon the notice required by law and the
Bylaws of the
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<PAGE> 21
Corporation; provided, that the Corporation shall not be
required to call such a special meeting if such request is
received less than 60 calendar days before the date fixed for
the next ensuing annual meeting of shareholders of the
Corporation. Directors elected as aforesaid shall serve until
the next annual meeting of shareholders of the Corporation or
until their respective successors shall be elected and
qualify.
(e) DEPOSIT OF REDEMPTION PRICE. On or prior to each
Redemption Date, the Corporation shall deposit the applicable Redemption Price
of all shares of Series A Preferred Stock or B Preferred Stock designated for
redemption in the Redemption Notice and not yet redeemed with a bank or trust
corporation as a trust fund for the benefit of the respective holder or holders
of the shares designated for redemption and not yet redeemed, with irrevocable
instructions and authority to the bank or trust corporation to pay the
applicable Redemption Price for such shares to their respective holder or
holders on or after the applicable Redemption Date upon receipt of notification
from the Corporation that such holder has surrendered his share certificate to
the Corporation pursuant to Section (5)(c). As of the applicable Redemption
Date, the deposit shall constitute full payment of the shares to the holder or
holders, and from and after the applicable Redemption Date the shares so called
for redemption shall be redeemed and shall be deemed to be no longer
outstanding, and the holder or holders thereof shall cease to be stockholders
with respect to such shares and shall have no rights with respect thereto except
the rights to receive from the bank or trust corporation payment of the
applicable Redemption Price of the shares, without interest, upon surrender of
their certificates therefor. The balance of any moneys deposited by the
Corporation pursuant to this Section (5)(e) remaining unclaimed at the
expiration of two years following the applicable Redemption Date shall
thereafter be returned to the Corporation upon its request expressed in a
resolution of its Board of Directors.
(6) INCREASING COMMON STOCK. The number of authorized shares
of Common Stock may be increased or decreased (but not below the number of
shares of Common Stock then outstanding, issuable upon the conversion of the
Series B Preferred Stock, Series C Preferred Stock and any other convertible
securities of the Corporation, and issuable upon the exercise of all outstanding
options and warrants), by the affirmative vote of the holders of a majority of
the Common Stock and Preferred Stock, voting together as a single class.
(7) NO REISSUANCE OF SERIES A PREFERRED STOCK, SERIES B
PREFERRED STOCK OR SERIES C PREFERRED STOCK. No share or shares of Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock acquired
by the Corporation by reason of redemption, purchase, or otherwise shall be
reissued, and all such shares
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<PAGE> 22
shall be canceled, retired and eliminated from the shares which the
Corporation shall be authorized to issue.
FIFTH: The number of directors which shall constitute the whole Board
of Directors of the Corporation shall be five (5).
SIXTH: The Board of Directors shall have power to make, and from time
to time alter, amend, or repeal the Bylaws of the Corporation; provided,
however, that (a) the stockholders shall have the paramount power to alter,
amend and repeal the Bylaws or adopt new Bylaws, exercisable by a majority vote
of the stockholders present in person or by proxy at any annual or special
meeting of stockholders, and (b) if and to the extent the stockholders exercise
such power, the Board of Directors shall not thereafter suspend, alter, amend or
repeal the Bylaws, or portions thereof, adopted by the stockholders, unless, in
adopting such Bylaws, or portions thereof, the stockholders otherwise provide.
SEVENTH: A director of the Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (a) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (b) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (c) under the provisions of Section 174 of the
Delaware General Corporation Law and amendments thereto, or (d) for any
transaction from which the director derived an improper personal benefit. If the
Delaware General Corporation Law is amended to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation Law, as so amended.
No amendment, repeal or adoption of any provision of this Certificate of
Incorporation inconsistent with this Article Seventh shall apply or have any
effect on the liability of any director of the Corporation for or with respect
to any acts or omissions of such director occurring prior to such amendment,
repeal, or adoption of any inconsistent provision.
EIGHTH: The directors of the Corporation need not be elected by written
ballot.
NINTH:
(a) Subject only to the exclusions set forth in paragraph (c) of this
Article Ninth, the Corporation shall hold harmless and indemnify each director
or officer of the Corporation (each, an "Indemnitee") against any and all
expenses (including attorneys' fees), judgments, fines, excise taxes assessed
with respect to any employee benefit plan, or penalties and amounts paid in
settlement actually and reasonably incurred by Indemnitee in connection with any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or
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<PAGE> 23
investigative (including an action by or in the right of the Corporation), to
which Indemnitee is, was or at any time becomes a party, or is threatened to be
made a party, by reason of the fact that Indemnitee is, was or at any time
becomes a director or officer of the Corporation, or is, or was serving, or at
any time serves at the request of the Corporation as a director or officer of
another corporation, partnership, joint venture, trust or other enterprise.
(b) The expenses (including attorneys' fees) actually and reasonably
incurred by Indemnitee in defending any proceeding and any judgments, fines or
amounts to be paid in settlement shall be advanced by the Corporation at the
request of the Indemnitee and upon delivery to the Corporation of an undertaking
by such Indemnitee to repay all amounts so advanced if it shall ultimately be
determined that Indemnitee was not entitled to be indemnified or was not to be
fully indemnified.
(c) No indemnity pursuant to this Article Ninth shall be paid by the
Corporation (i) for which payment is actually made to Indemnitee under a valid
and collectible insurance policy, except in respect of any excess beyond the
amount of payment under such insurance; (ii) for which Indemnitee is indemnified
by the Corporation pursuant to applicable law or otherwise than pursuant to this
Article Ninth; (iii) for an accounting of profits made from the purchase or sale
by Indemnitee of securities of the Corporation within the meaning of Section
16(b) of the Securities Exchange Act of 1934 and amendments thereto or similar
provisions of any state statutory law or common law; (iv) on account of
Indemnitee's conduct which is finally adjudged by a court to have been knowingly
fraudulent, deliberately dishonest or willful misconduct; or (v) if a final
decision by a court having jurisdiction in the matter shall determine that such
indemnity is not lawful.
(d) All obligations of the Corporation contained herein shall continue
during the period Indemnitee is a director or officer of the Corporation (or is,
or was serving at the request of the Corporation as a director or officer of
another corporation, partnership, joint venture, trust or other enterprise) and
shall continue thereafter so long as Indemnitee shall be subject to any possible
claim or threatened, pending or completed action, suit or proceeding, whether
civil, criminal or investigative, by reason of the fact that Indemnitee was a
director or officer of the Corporation or serving in any other capacity referred
to herein.
(e) Promptly after receipt by Indemnitee of notice of the commencement
of any action, suit or proceeding, Indemnitee will, if a claim in respect
thereof is to be made against the Corporation under this Article Ninth, notify
the Corporation of the commencement thereof; but the omission so to notify the
Corporation will not relieve it from any liability which it may have to
Indemnitee otherwise than under this Article Ninth. With respect to any such
action, suit or proceeding as to which Indemnitee notifies the Corporation of
the commencement thereof, the Corporation will be entitled to participate
therein at its own expense.
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<PAGE> 24
(f) Except as otherwise provided below, to the extent that it may wish,
the Corporation jointly with any other indemnifying party similarly notified
will be entitled to assume the defense thereof. After notice from the
Corporation to Indemnitee of its election so to assume the defense thereof, the
Corporation will not be liable to Indemnitee under this Article Ninth for any
legal or other expenses subsequently incurred by Indemnitee in connection with
the defense thereof other than reasonable costs of investigation or as otherwise
provided below. Indemnitee shall have the right to employ its counsel in such
action, suit or proceeding, but the fees and expenses of such counsel, incurred
after notice from the Corporation of its assumption of the defense thereof,
shall be at the expense of Indemnitee unless (i) the employment of counsel by
Indemnitee has been authorized by the Corporation, (ii) Indemnitee shall have
reasonably concluded that there may be a conflict of interest between the
Corporation and Indemnitee in the conduct of the defense of such, subject to the
approval of the Corporation, which approval shall not be unreasonably withheld,
or (iii) the Corporation shall not in fact have employed counsel to assume the
defense of such action, in each of which cases the fees and expenses of counsel
shall be at the expense of the Corporation. The Corporation shall not be
entitled to assume the defense of any action, suit or proceeding brought by or
on behalf of the Corporation or as to which Indemnitee shall have made the
conclusion provided for in (ii) above.
(g) The Corporation shall not be liable to indemnify Indemnitee under
this Article Ninth for any amounts paid in settlement of any action or claim
effected without its written consent. The Corporation shall not settle any
action or claim in any manner which would impose any penalty or limitation on
Indemnitee without Indemnitee's written consent. Neither the Corporation nor
Indemnitee will unreasonably withhold their consent to any proposed settlement.
(h) In the event Indemnitee is required to bring any action to enforce
rights or to collect moneys due under this Article Ninth and is successful in
such action, the Corporation shall reimburse Indemnitee for all of Indemnitee's
reasonable fees and expenses in bringing and pursuing such action.
(i) The provisions of this Article Ninth shall inure to the benefit of
and be enforceable by the Indemnitee's personal or legal representatives,
executors, administrators, heirs, devises and legatees.
(j) The Corporation shall have power to purchase and maintain
insurance, at its expense, on behalf of any person who is or was an officer,
director, employee or agent of the Corporation or a subsidiary thereof, or is or
was serving at the request of the Corporation as an officer, director, partner,
member, employee, trustee or agent of another corporation, partnership, joint
venture, trust or other enterprise, including any employee benefit plan, against
any expense, liability or loss asserted against such person and incurred by such
person in any such capacity, or
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arising out of such person's status as such, whether or not the Corporation
would have the power to indemnify such person against such expense, liability or
loss under the Bylaws, the provisions of this Article Ninth or the Delaware
General Corporation Law.
(k) The indemnification provided by this Article Ninth shall not be
deemed exclusive of any other rights to which a person seeking indemnification
may be entitled under any statute, the Bylaws, other provisions of this
Certificate of Incorporation, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in such person's official capacity and
as to action in any other capacity while holding such office, and shall continue
as to a person who has ceased to be an officer or director of the Corporation or
a subsidiary thereof or an officer, director, partner, member, employee, trustee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, including any employee benefit plan, and shall inure to the benefit
of the heirs, executors and administrators of such person.
(l) This Article Ninth may be hereafter amended or repealed; provided,
however, that no amendment or repeal shall reduce, terminate, or otherwise
adversely affect the right of a person entitled to obtain indemnification
hereunder with respect to acts or omissions of such person occurring prior to
the effective date of such amendment or repeal.
IN WITNESS WHEREOF, this Amended and Restated Certificate of
Incorporation has been executed on behalf of the Corporation this 10th day of
February, 1998.
BIRCH TELECOM, INC.
By: /s/ David E. Scott
_____________________________
David E. Scott, President
Attest:
/s/ Gregory C. Lawhon
_______________________________
Gregory C. Lawhon, Secretary
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<PAGE> 26
Exhibit 3.2
RESTATED BYLAWS
OF
BIRCH TELECOM, INC.
ARTICLE I
MEETINGS OF STOCKHOLDERS
SECTION 1. PLACE. All meetings of the stockholders shall be held at
such place within or without the State of Delaware as may be designated from
time to time by the Board of Directors, but if the Board of Directors fails to
designate a place for such meeting, then the meeting shall be held at the
principal office of the Corporation.
SECTION 2. ANNUAL MEETING. Annual meetings of the stockholders shall be
held on the second Thursday in April if not a legal holiday, and if a legal
holiday, then on the next business day following, at 10:00 a.m., or at such
other date and time as shall be designated by the Board of Directors or
President and stated in the notice of the meeting, at which they shall elect by
a plurality vote (except as otherwise provided in the Certificate of
Incorporation) the Board of Directors, and transact such other business as may
properly be brought before the meeting.
SECTION 3. SPECIAL MEETINGS. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called by the Chairman of the Board, the
President or the Secretary and shall be called by the President or Secretary at
the request in writing of a majority of the Board of Directors. Such request
shall state the purpose or purposes of the proposed meeting. Business transacted
at any special meeting of stockholders shall be limited to the purposes stated
in the notice.
SECTION 4. NOTICE OF STOCKHOLDERS MEETINGS, ANNUAL OR SPECIAL. Written
notice of each meeting of the stockholders stating the place, date and hour of
such meeting, and, in the case of a special meeting, the purpose or purposes of
such meeting, shall be given either personally or by mail to each stockholder of
record entitled to vote at such meeting, not less than ten (10) nor more than
sixty (60) days before the date of the meeting. If mailed, notice is given when
deposited in the Unites States mail, postage prepaid, directed to the
stockholder at his or her address as it appears on the records of the
Corporation. When a meeting is adjourned to another time or place, notice need
not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. If the adjournment
is for more than thirty days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
<PAGE> 27
SECTION 5. QUORUM. The holders of a majority of the stock issued and
outstanding and entitled to vote at any meeting, present in person or
represented by proxy, shall constitute a quorum at a meeting of the stockholders
for the transaction of business except as otherwise provided by statute or by
the Certificate of Incorporation. If, however, such quorum shall not be present
or represented at any meeting of the stockholders, the stockholders entitled to
vote at any meeting, present in person or represented by proxy, shall have power
to adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum shall be present or represented. At such
adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. If the adjournment is for more than thirty days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
SECTION 6. REQUIRED VOTE. When a quorum is present at any meeting, the
vote of the holders of a majority of the stock having voting power present in
person or represented by proxy shall decide any question brought before such
meeting other than the election of directors, unless the question is one upon
which by express provision of the statutes or of the Certificate of
Incorporation, a different vote is required in which case such express provision
shall govern and control the decision of such question.
SECTION 7. VOTING RIGHTS. Except as otherwise provided by statute or by
the Certificate of Incorporation, each stockholder shall at every meeting of the
stockholders be entitled to one (1) vote in person or by proxy for each share of
the capital stock having voting power held by such stockholder, but no proxy
shall be voted on after three (3) years from its date, unless the proxy provides
for a longer period.
ARTICLE II
VOTING PROCEDURES
SECTION 1. LIST OF VOTERS. The officer who has charge of the stock
ledger of the Corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
<PAGE> 28
SECTION 2. RECORD DATE.
(a) In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, the Board of Directors may fix
a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the Board of
Directors, and which record date shall not be more than sixty (60) nor
less than ten (10) days before the date of such meeting. If no record
date is fixed by the Board of Directors, the record date for
determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the
meeting is held. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting except that the Board of Directors may fix a
new record date for the adjourned meeting.
(b) In order that the Corporation may determine the
stockholders entitled to consent to corporate action in writing without
a meeting, the Board of Directors may fix a record date which record
date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors, and which date shall
not be more than ten (10) days after the date upon which the resolution
fixing the record date is adopted by the Board of Directors. If no
record date has been fixed by the Board of Directors, the record date
for determining stockholders entitled to consent to corporate action in
writing without a meeting, when no prior action by the Board of
Directors is required by statute, shall be the first date on which a
signed written consent setting forth the action taken or proposed to be
taken is delivered to the Corporation by delivery to its registered
office, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings
of stockholders are recorded. Delivery made to the Corporation's
registered office shall be by hand or by certified or registered mail,
return receipt requested. If no record date has been fixed by the Board
of Directors and prior action by the Board of Directors is required by
law, the record date for determining stockholders entitled to consent
to corporate action in writing without a meeting shall be at the close
of business on the day on which the Board of Directors adopts the
resolution taking such prior action.
(c) In order that the Corporation may determine the
stockholders entitled to receive payment of any dividend or other
distribution or allotment of any rights or the stockholders entitled to
exercise any rights in respect of any change, conversion or exchange of
stock, or for the purpose of any other lawful action, the Board of
Directors may fix a record date, which record date shall not precede
the date upon which the resolution fixing the record date is adopted,
and which record date shall be not more than sixty (60) days prior to
such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of
business on the day
<PAGE> 29
on which the Board of Directors adopts the resolution relating thereto.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. MANAGEMENT AND NUMBER. The property, business and affairs of
the Corporation shall be controlled and managed by or under the direction of a
Board of Directors. The number of directors to constitute the Board of Directors
shall be as set forth in the Certificate of Incorporation.
SECTION 2. ELECTION. At each annual meeting of the stockholders, the
stockholders entitled to vote at the meeting shall elect the directors in
accordance with the Certificate of Incorporation to hold office until the next
annual meeting of stockholders, or until their successors are elected and
qualified, or until their earlier resignation or removal.
SECTION 3. VACANCIES. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director, and the directors so chosen shall hold office until
the next annual election and until their successors are duly elected and shall
qualify, unless sooner displaced. If there are no directors in office, then an
election of directors may be held in the manner provided by the Certificate of
Incorporation. If, at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole Board (as constituted immediately prior to any such increase), the
Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office.
SECTION 4. FIRST MEETING OF THE BOARD OF DIRECTORS. The first meeting
of each newly elected Board of Directors shall be held at such time and place as
shall be fixed by the vote of the stockholders at the annual meeting and no
notice of such meeting shall be necessary to the newly elected directors in
order legally to constitute the meeting, provided a quorum shall be present. In
the event of the failure of the stockholders to fix the time or place of such
first meeting of the newly elected Board of Directors, or in the event such
meeting is not held at the time and place so fixed by the stockholders, the
meeting may be held at such time and place as shall be specified in a notice
given as hereinafter provided for special meetings of the Board of Directors, or
as shall be specified in a written waiver signed by all of the directors.
SECTION 5. REGULAR MEETINGS. Regular meetings of the Board of Directors
may be held without notice at such time and at such place as shall from time to
time be determined by the Board of Directors, but shall be held not less than
quarterly.
<PAGE> 30
SECTION 6. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by the President on two (2) days' notice to each director, either
personally or by mail or by telegram, setting forth the time, place and purpose
of the meeting; special meetings shall be called by the President or Secretary
in like manner and on like notice on the written request of two directors.
SECTION 7. QUORUM. At all meetings of the Board of Directors, a
majority of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the Board of Directors, except as may otherwise
be specifically provided by statute or by the Certificate of Incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present at the meeting may adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present.
SECTION 8. ACTION BY CONSENT. Unless otherwise restricted by the
Certificate of Incorporation, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the Board of Directors or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board of Directors or committee.
SECTION 9. MEETING BY CONFERENCE CALL. Unless otherwise restricted by
the Certificate of Incorporation, members of the Board of Directors or of any
committee thereof, may participate in a meeting of the Board of Directors or
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting by use of such equipment shall constitute
presence in person at such meeting.
SECTION 10. COMMITTEES OF DIRECTORS. The Board of Directors may, by
resolution passed by a majority of the whole Board of Directors, designate one
or more committees, each committee to consist of one or more of the directors of
the Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of a
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors,
shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the Corporation, and
may authorize the seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to amending the Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets, recommending
to the stockholders a dissolution of the Corporation or a revocation of
<PAGE> 31
a dissolution, or amending the Bylaws of the Corporation; and, unless a
resolution of the Board of Directors or the Certificate of Incorporation
expressly so provide, no such committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock or to adopt a
certificate of ownership and merger pursuant to Section 253 of the Delaware
General Corporation Law. Such committee or committees shall have such name or
names as may be determined from time to time by resolution adopted by the Board
of Directors.
SECTION 11. MINUTES OF COMMITTEE MEETINGS. Each committee shall keep
regular minutes of its meetings and report the same to the Board of Directors
when required.
SECTION 12. COMPENSATION OF DIRECTORS. Unless otherwise restricted by
the Certificate of Incorporation, the Board of Directors shall have the
authority to fix the compensation of directors. The directors shall be paid
their reasonable expenses (including traveling expenses), if any, of attendance
at each meeting of the Board of Directors and may be paid a fixed sum for
attendance at each meeting of the Board of Directors and a stated salary as
director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
ARTICLE IV
NOTICES
SECTION 1. NOTICE. Whenever, under the provisions of any statute or of
the Certificate of Incorporation or of these Bylaws, notice is required to be
given to any director or stockholder, such notice may be given in writing, by
mail, addressed to such director or stockholder at his address as it appears on
the records of the Corporation, with postage thereon prepaid, and such notice
shall be deemed to be given at the time when the same shall be deposited in the
United States mail. Notice to directors may also be given by telegram.
SECTION 2. WAIVER OF NOTICE. Whenever any notice is required to be
given under the provisions of any statute or of the Certificate of Incorporation
or of these Bylaws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
ARTICLE V
OFFICERS
SECTION 1. OFFICERS. The officers of the Corporation shall be elected
by the Board of Directors and shall be a President and a Secretary and such
other officers as the Board of Directors may from time to time elect. If the
Board of Directors elects more than one Vice President, the Board of Directors,
in its discretion, may designate seniority levels among some or
<PAGE> 32
all of the Vice Presidents. Any number of offices may be held by the same
person, unless the Certificate of Incorporation otherwise provides.
SECTION 2. ELECTION AND TERM. The officers of the Corporation shall be
elected at the annual meeting of the Board of Directors and shall hold office
until their successors are elected and qualify. Any officer elected or appointed
by the Board of Directors may be removed at any time by the affirmative vote of
a majority of the Board of Directors. Any vacancy occurring in any office of the
Corporation shall be filled by the Board of Directors.
SECTION 3. COMPENSATION OF OFFICERS. The salaries of all officers and
agents of the Corporation shall be fixed by the Board of Directors. If the
Corporation makes any payments to an officer for compensation, interest, rent,
expense reimbursements or any similar purpose, and if such payments are
disallowed as deductible expenses of the Corporation for Federal income tax
purposes or are treated as dividends or constructive dividends, then such
officer shall reimburse to the Corporation to the full extent of such
disallowance or treatment and the Board of Directors shall enforce such
reimbursement.
ARTICLE VI
DUTIES OF OFFICERS
SECTION 1. CHAIRMAN OF THE BOARD. The Chairman of the Board (if one
shall be elected by the Board of Directors) shall preside at all meetings of the
stockholders and at all meetings of the Board of Directors. He shall perform all
the duties incident to the office of Chairman of the Board and such other duties
as the Board of Directors may from time to time determine or as may be
prescribed by these Bylaws, provided, however, that such duties shall not
supersede the duties of the President.
SECTION 2. PRESIDENT. The President shall be the chief executive and
administrative officer of the Corporation, shall have general supervision of the
business and finances of the Corporation, shall see that all orders and
resolutions of the Board of Directors are carried into effect and shall, in the
absence of the Chairman of the Board, preside at all meetings of the
stockholders and directors subject, however, to the right of the directors to
delegate any specific powers to any other officer or officers of the Corporation
except such as may be by statute exclusively conferred upon the President. The
President may execute all bonds, deeds, mortgages, conveyances, contracts and
other instruments, except in cases where the signing and execution thereof shall
be expressly delegated by the Board of Directors or by these Bylaws to some
other officer or agent of the Corporation, or shall be required by law otherwise
to be signed or executed. He shall have the power to appoint, determine the
duties and fix the compensation of such agents and employees as in his judgment
may be necessary or proper for the transaction of the business of the
Corporation, except that (i) the President shall not exercise such powers of and
to the extent they are limited or restricted by, or are exercised by, the Board
of Directors, and (ii) the Board of Directors shall have exclusive power to
elect and remove the officers of the
<PAGE> 33
Corporation. In general, he shall perform all duties incident to the office of
President and such other duties as may from time to time be assigned to him by
the Board of Directors.
SECTION 3. VICE PRESIDENTS. The Vice Presidents (if any are elected by
the Board of Directors) shall perform such duties as shall be assigned to them
and shall exercise such powers as may be granted to them by the Board of
Directors or by the President of the Corporation. In the absence of the
President and the Chairman of the Board, the Vice President (or, if the Board of
Directors has designated seniority levels among some or all of the Vice
Presidents, the available Vice President with the highest level of seniority)
may perform the duties and exercise the powers of the President with the same
force and effect as if performed or exercised by the President. Any Vice
President may sign and execute in the name of the Corporation deeds, mortgages,
bonds, contracts or other instruments authorized by the Board of Directors or by
any duly authorized committee of directors, except in cases where the signing
and execution thereof shall be expressly delegated by the Board of Directors or
by any duly authorized committee of directors or by these Bylaws to some other
officer or agent of the Corporation, or shall be required by law otherwise to be
signed or executed.
SECTION 4. SECRETARY. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the stockholders and record all the
proceedings of the meetings of the Corporation and of the Board of Directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the Board of
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors or President, under whose supervision he shall be. He shall have
custody of the corporate seal of the Corporation and he, or an Assistant
Secretary, shall have authority to affix the same to any instrument requiring it
and when so affixed, it may be attested by his signature or by the signature of
such Assistant Secretary. The Board of Directors may give general authority to
any other officer to affix the seal of the Corporation and to attest the
affixing by his signature.
SECTION 5. TREASURER. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the Corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and shall
render to the President and the Board of Directors, at its regular meetings, or
when the Board of Directors so requires, an account of all his transactions as
Treasurer and of the financial condition of the Corporation. If required by the
Board of Directors, he shall give the Corporation a bond (which shall be renewed
every six years) in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the Corporation.
<PAGE> 34
SECTION 6. OTHER OFFICERS. Any other officers elected by the Board of
Directors shall perform such duties, exercise such powers, and have such
authority as the Board of Directors may prescribe.
ARTICLE VII
CERTIFICATES OF STOCK
SECTION 1. STOCK CERTIFICATES. The shares of the Corporation may (but
need not) be represented by certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate, signed by, or in the name
of the Corporation by the Chairman of the Board of Directors, or the President
or a Vice President and the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary of the Corporation, certifying the number of
shares owned by him in the Corporation. Any or all of the signatures on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
SECTION 2. LOST CERTIFICATES. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to give the Corporation a bond in
such sum as it may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
SECTION 3. TRANSFERS OF STOCK; CONVERSIONS. Upon surrender to the
Corporation or the transfer agent of the Corporation of a certificate for shares
duly endorsed or accompanied by proper evidence of succession, assignment, or
authority to transfer, (a) the transfer will be effective at the close of
business on the date of surrender of such certificate, (b) the transferee shall
be the record holder of shares at such time, and (c) it shall be the duty of the
Corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books as of such date.
Upon surrender to the Corporation of a certificate, note, instrument, or other
evidence of a convertible security, together with a written notice that the
holder of the convertible security elects to convert the same into shares of the
Corporation's capital stock and the total amount of consideration then payable
to the Corporation upon the exercise of the right to convert, (i) the conversion
will be effective at the close of business on the date of such surrender, (ii)
such holder shall be the record holder of the shares issued upon such
conversion, and (iii) it shall be the duty of the Corporation to issue a new
certificate to such holder, cancel the old certificate, note, instrument, or
other evidence of a convertible security, as
<PAGE> 35
the case may be, and record the transaction upon its books as of such date.
SECTION 4. REGISTERED STOCKHOLDERS. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the laws of Delaware or the Certificate of Incorporation or the Bylaws of the
Corporation.
<PAGE> 36
ARTICLE VIII
GENERAL PROVISIONS
SECTION 1. DIVIDENDS. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the Corporation's capital stock, subject to the provisions of the
Certificate of Incorporation.
SECTION 2. RESERVES. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the directors shall think conducive to the interest of
the Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
SECTION 3. ANNUAL STATEMENT. The Board of Directors shall present at
each annual meeting, and at any special meeting of the stockholders when called
for by vote of the stockholders, a full and clear statement of the business and
condition of the Corporation.
SECTION 4. CHECKS AND DEPOSITS. All checks or demands for money and
notes of the Corporation shall be signed by such officer or officers or such
other person or persons as the Board of Directors may from time to time
designate. All funds of the Corporation not otherwise employed may be deposited
to the credit of the Corporation in such banks, trust companies or other
depositories as the Board of Directors may from time to time select.
SECTION 5. FISCAL YEAR. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
SECTION 6. SEAL. The corporate seal shall have inscribed thereon the
name of the Corporation and the words "Corporate Seal, Delaware." The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
/s/ Gregory C. Lawhon
Dated: February 9, 1998 ___________________________________
Gregory C. Lawhon, Secretary
<PAGE> 1
Exhibit 3.2
RESTATED BYLAWS
OF
BIRCH TELECOM, INC.
ARTICLE I
MEETINGS OF STOCKHOLDERS
SECTION 1. PLACE. All meetings of the stockholders shall be held at
such place within or without the State of Delaware as may be designated from
time to time by the Board of Directors, but if the Board of Directors fails to
designate a place for such meeting, then the meeting shall be held at the
principal office of the Corporation.
SECTION 2. ANNUAL MEETING. Annual meetings of the stockholders shall be
held on the second Thursday in April if not a legal holiday, and if a legal
holiday, then on the next business day following, at 10:00 a.m., or at such
other date and time as shall be designated by the Board of Directors or
President and stated in the notice of the meeting, at which they shall elect by
a plurality vote (except as otherwise provided in the Certificate of
Incorporation) the Board of Directors, and transact such other business as may
properly be brought before the meeting.
SECTION 3. SPECIAL MEETINGS. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called by the Chairman of the Board, the
President or the Secretary and shall be called by the President or Secretary at
the request in writing of a majority of the Board of Directors. Such request
shall state the purpose or purposes of the proposed meeting. Business transacted
at any special meeting of stockholders shall be limited to the purposes stated
in the notice.
SECTION 4. NOTICE OF STOCKHOLDERS MEETINGS, ANNUAL OR SPECIAL. Written
notice of each meeting of the stockholders stating the place, date and hour of
such meeting, and, in the case of a special meeting, the purpose or purposes of
such meeting, shall be given either personally or by mail to each stockholder of
record entitled to vote at such meeting, not less than ten (10) nor more than
sixty (60) days before the date of the meeting. If mailed, notice is given when
deposited in the Unites States mail, postage prepaid, directed to the
stockholder at his or her address as it appears on the records of the
Corporation. When a meeting is adjourned to another time or place, notice need
not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. If the adjournment
is for more than thirty days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
1
<PAGE> 2
SECTION 5. QUORUM. The holders of a majority of the stock issued and
outstanding and entitled to vote at any meeting, present in person or
represented by proxy, shall constitute a quorum at a meeting of the stockholders
for the transaction of business except as otherwise provided by statute or by
the Certificate of Incorporation. If, however, such quorum shall not be present
or represented at any meeting of the stockholders, the stockholders entitled to
vote at any meeting, present in person or represented by proxy, shall have power
to adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum shall be present or represented. At such
adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. If the adjournment is for more than thirty days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
SECTION 6. REQUIRED VOTE. When a quorum is present at any meeting, the
vote of the holders of a majority of the stock having voting power present in
person or represented by proxy shall decide any question brought before such
meeting other than the election of directors, unless the question is one upon
which by express provision of the statutes or of the Certificate of
Incorporation, a different vote is required in which case such express provision
shall govern and control the decision of such question.
SECTION 7. VOTING RIGHTS. Except as otherwise provided by statute or by
the Certificate of Incorporation, each stockholder shall at every meeting of the
stockholders be entitled to one (1) vote in person or by proxy for each share of
the capital stock having voting power held by such stockholder, but no proxy
shall be voted on after three (3) years from its date, unless the proxy provides
for a longer period.
ARTICLE II
VOTING PROCEDURES
SECTION 1. LIST OF VOTERS. The officer who has charge of the stock
ledger of the Corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
2
<PAGE> 3
SECTION 2. RECORD DATE.
(a) In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, the Board of Directors may fix
a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the Board of
Directors, and which record date shall not be more than sixty (60) nor
less than ten (10) days before the date of such meeting. If no record
date is fixed by the Board of Directors, the record date for
determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the
meeting is held. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting except that the Board of Directors may fix a
new record date for the adjourned meeting.
(b) In order that the Corporation may determine the
stockholders entitled to consent to corporate action in writing without
a meeting, the Board of Directors may fix a record date which record
date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors, and which date shall
not be more than ten (10) days after the date upon which the resolution
fixing the record date is adopted by the Board of Directors. If no
record date has been fixed by the Board of Directors, the record date
for determining stockholders entitled to consent to corporate action in
writing without a meeting, when no prior action by the Board of
Directors is required by statute, shall be the first date on which a
signed written consent setting forth the action taken or proposed to be
taken is delivered to the Corporation by delivery to its registered
office, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings
of stockholders are recorded. Delivery made to the Corporation's
registered office shall be by hand or by certified or registered mail,
return receipt requested. If no record date has been fixed by the Board
of Directors and prior action by the Board of Directors is required by
law, the record date for determining stockholders entitled to consent
to corporate action in writing without a meeting shall be at the close
of business on the day on which the Board of Directors adopts the
resolution taking such prior action.
(c) In order that the Corporation may determine the
stockholders entitled to receive payment of any dividend or other
distribution or allotment of any rights or the stockholders entitled to
exercise any rights in respect of any change, conversion or exchange of
stock, or for the purpose of any other lawful action, the Board of
Directors may fix a record date, which record date shall not precede
the date upon which the resolution fixing the record date is adopted,
and which record date shall be not more than sixty (60) days prior to
such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of
business on the day on which the Board of Directors adopts the
resolution relating thereto.
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ARTICLE III
BOARD OF DIRECTORS
SECTION 1. MANAGEMENT AND NUMBER. The property, business and affairs of
the Corporation shall be controlled and managed by or under the direction of a
Board of Directors. The number of directors to constitute the Board of Directors
shall be as set forth in the Certificate of Incorporation.
SECTION 2. ELECTION. At each annual meeting of the stockholders, the
stockholders entitled to vote at the meeting shall elect the directors in
accordance with the Certificate of Incorporation to hold office until the next
annual meeting of stockholders, or until their successors are elected and
qualified, or until their earlier resignation or removal.
SECTION 3. VACANCIES. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director, and the directors so chosen shall hold office until
the next annual election and until their successors are duly elected and shall
qualify, unless sooner displaced. If there are no directors in office, then an
election of directors may be held in the manner provided by the Certificate of
Incorporation. If, at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole Board (as constituted immediately prior to any such increase), the
Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office.
SECTION 4. FIRST MEETING OF THE BOARD OF DIRECTORS. The first meeting
of each newly elected Board of Directors shall be held at such time and place as
shall be fixed by the vote of the stockholders at the annual meeting and no
notice of such meeting shall be necessary to the newly elected directors in
order legally to constitute the meeting, provided a quorum shall be present. In
the event of the failure of the stockholders to fix the time or place of such
first meeting of the newly elected Board of Directors, or in the event such
meeting is not held at the time and place so fixed by the stockholders, the
meeting may be held at such time and place as shall be specified in a notice
given as hereinafter provided for special meetings of the Board of Directors, or
as shall be specified in a written waiver signed by all of the directors.
SECTION 5. REGULAR MEETINGS. Regular meetings of the Board of Directors
may be held without notice at such time and at such place as shall from time to
time be determined by the Board of Directors, but shall be held not less than
quarterly.
SECTION 6. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by the President on two (2) days' notice to each director, either
personally or by mail or by telegram,
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<PAGE> 5
setting forth the time, place and purpose of the meeting; special meetings shall
be called by the President or Secretary in like manner and on like notice on the
written request of two directors.
SECTION 7. QUORUM. At all meetings of the Board of Directors, a
majority of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the Board of Directors, except as may otherwise
be specifically provided by statute or by the Certificate of Incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present at the meeting may adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present.
SECTION 8. ACTION BY CONSENT. Unless otherwise restricted by the
Certificate of Incorporation, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the Board of Directors or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board of Directors or committee.
SECTION 9. MEETING BY CONFERENCE CALL. Unless otherwise restricted by
the Certificate of Incorporation, members of the Board of Directors or of any
committee thereof, may participate in a meeting of the Board of Directors or
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting by use of such equipment shall constitute
presence in person at such meeting.
SECTION 10. COMMITTEES OF DIRECTORS. The Board of Directors may, by
resolution passed by a majority of the whole Board of Directors, designate one
or more committees, each committee to consist of one or more of the directors of
the Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of a
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors,
shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the Corporation, and
may authorize the seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to amending the Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets, recommending
to the stockholders a dissolution of the Corporation or a revocation of a
dissolution, or amending the Bylaws of the Corporation; and, unless a resolution
of the Board of Directors or the Certificate of Incorporation expressly so
provide, no such committee shall have the power or authority to declare a
dividend or to authorize the issuance of stock or to adopt a certificate of
ownership and merger pursuant to
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<PAGE> 6
Section 253 of the Delaware General Corporation Law. Such committee or
committees shall have such name or names as may be determined from time to time
by resolution adopted by the Board of Directors.
SECTION 11. MINUTES OF COMMITTEE MEETINGS. Each committee shall keep
regular minutes of its meetings and report the same to the Board of Directors
when required.
SECTION 12. COMPENSATION OF DIRECTORS. Unless otherwise restricted by
the Certificate of Incorporation, the Board of Directors shall have the
authority to fix the compensation of directors. The directors shall be paid
their reasonable expenses (including traveling expenses), if any, of attendance
at each meeting of the Board of Directors and may be paid a fixed sum for
attendance at each meeting of the Board of Directors and a stated salary as
director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
ARTICLE IV
NOTICES
SECTION 1. NOTICE. Whenever, under the provisions of any statute or of
the Certificate of Incorporation or of these Bylaws, notice is required to be
given to any director or stockholder, such notice may be given in writing, by
mail, addressed to such director or stockholder at his address as it appears on
the records of the Corporation, with postage thereon prepaid, and such notice
shall be deemed to be given at the time when the same shall be deposited in the
United States mail. Notice to directors may also be given by telegram.
SECTION 2. WAIVER OF NOTICE. Whenever any notice is required to be
given under the provisions of any statute or of the Certificate of Incorporation
or of these Bylaws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
ARTICLE V
OFFICERS
SECTION 1. OFFICERS. The officers of the Corporation shall be elected
by the Board of Directors and shall be a President and a Secretary and such
other officers as the Board of Directors may from time to time elect. If the
Board of Directors elects more than one Vice President, the Board of Directors,
in its discretion, may designate seniority levels among some or all of the Vice
Presidents. Any number of offices may be held by the same person, unless the
Certificate of Incorporation otherwise provides.
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SECTION 2. ELECTION AND TERM. The officers of the Corporation shall be
elected at the annual meeting of the Board of Directors and shall hold office
until their successors are elected and qualify. Any officer elected or appointed
by the Board of Directors may be removed at any time by the affirmative vote of
a majority of the Board of Directors. Any vacancy occurring in any office of the
Corporation shall be filled by the Board of Directors.
SECTION 3. COMPENSATION OF OFFICERS. The salaries of all officers and
agents of the Corporation shall be fixed by the Board of Directors. If the
Corporation makes any payments to an officer for compensation, interest, rent,
expense reimbursements or any similar purpose, and if such payments are
disallowed as deductible expenses of the Corporation for Federal income tax
purposes or are treated as dividends or constructive dividends, then such
officer shall reimburse to the Corporation to the full extent of such
disallowance or treatment and the Board of Directors shall enforce such
reimbursement.
ARTICLE VI
DUTIES OF OFFICERS
SECTION 1. CHAIRMAN OF THE BOARD. The Chairman of the Board (if one
shall be elected by the Board of Directors) shall preside at all meetings of the
stockholders and at all meetings of the Board of Directors. He shall perform all
the duties incident to the office of Chairman of the Board and such other duties
as the Board of Directors may from time to time determine or as may be
prescribed by these Bylaws, provided, however, that such duties shall not
supersede the duties of the President.
SECTION 2. PRESIDENT. The President shall be the chief executive and
administrative officer of the Corporation, shall have general supervision of the
business and finances of the Corporation, shall see that all orders and
resolutions of the Board of Directors are carried into effect and shall, in the
absence of the Chairman of the Board, preside at all meetings of the
stockholders and directors subject, however, to the right of the directors to
delegate any specific powers to any other officer or officers of the Corporation
except such as may be by statute exclusively conferred upon the President. The
President may execute all bonds, deeds, mortgages, conveyances, contracts and
other instruments, except in cases where the signing and execution thereof shall
be expressly delegated by the Board of Directors or by these Bylaws to some
other officer or agent of the Corporation, or shall be required by law otherwise
to be signed or executed. He shall have the power to appoint, determine the
duties and fix the compensation of such agents and employees as in his judgment
may be necessary or proper for the transaction of the business of the
Corporation, except that (i) the President shall not exercise such powers of and
to the extent they are limited or restricted by, or are exercised by, the Board
of Directors, and (ii) the Board of Directors shall have exclusive power to
elect and remove the officers of the Corporation. In general, he shall perform
all duties incident to the office of President and such other duties as may from
time to time be assigned to him by the Board of Directors.
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<PAGE> 8
SECTION 3. VICE PRESIDENTS. The Vice Presidents (if any are elected by
the Board of Directors) shall perform such duties as shall be assigned to them
and shall exercise such powers as may be granted to them by the Board of
Directors or by the President of the Corporation. In the absence of the
President and the Chairman of the Board, the Vice President (or, if the Board of
Directors has designated seniority levels among some or all of the Vice
Presidents, the available Vice President with the highest level of seniority)
may perform the duties and exercise the powers of the President with the same
force and effect as if performed or exercised by the President. Any Vice
President may sign and execute in the name of the Corporation deeds, mortgages,
bonds, contracts or other instruments authorized by the Board of Directors or by
any duly authorized committee of directors, except in cases where the signing
and execution thereof shall be expressly delegated by the Board of Directors or
by any duly authorized committee of directors or by these Bylaws to some other
officer or agent of the Corporation, or shall be required by law otherwise to be
signed or executed.
SECTION 4. SECRETARY. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the stockholders and record all the
proceedings of the meetings of the Corporation and of the Board of Directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the Board of
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors or President, under whose supervision he shall be. He shall have
custody of the corporate seal of the Corporation and he, or an Assistant
Secretary, shall have authority to affix the same to any instrument requiring it
and when so affixed, it may be attested by his signature or by the signature of
such Assistant Secretary. The Board of Directors may give general authority to
any other officer to affix the seal of the Corporation and to attest the
affixing by his signature.
SECTION 5. TREASURER. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the Corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and shall
render to the President and the Board of Directors, at its regular meetings, or
when the Board of Directors so requires, an account of all his transactions as
Treasurer and of the financial condition of the Corporation. If required by the
Board of Directors, he shall give the Corporation a bond (which shall be renewed
every six years) in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the Corporation.
SECTION 6. OTHER OFFICERS. Any other officers elected by the Board of
Directors shall perform such duties, exercise such powers, and have such
authority as the Board of Directors may prescribe.
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ARTICLE VII
CERTIFICATES OF STOCK
SECTION 1. STOCK CERTIFICATES. The shares of the Corporation may (but
need not) be represented by certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate, signed by, or in the name
of the Corporation by the Chairman of the Board of Directors, or the President
or a Vice President and the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary of the Corporation, certifying the number of
shares owned by him in the Corporation. Any or all of the signatures on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
SECTION 2. LOST CERTIFICATES. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to give the Corporation a bond in
such sum as it may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
SECTION 3. TRANSFERS OF STOCK; CONVERSIONS. Upon surrender to the
Corporation or the transfer agent of the Corporation of a certificate for shares
duly endorsed or accompanied by proper evidence of succession, assignment, or
authority to transfer, (a) the transfer will be effective at the close of
business on the date of surrender of such certificate, (b) the transferee shall
be the record holder of shares at such time, and (c) it shall be the duty of the
Corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books as of such date.
Upon surrender to the Corporation of a certificate, note, instrument, or other
evidence of a convertible security, together with a written notice that the
holder of the convertible security elects to convert the same into shares of the
Corporation's capital stock and the total amount of consideration then payable
to the Corporation upon the exercise of the right to convert, (i) the conversion
will be effective at the close of business on the date of such surrender, (ii)
such holder shall be the record holder of the shares issued upon such
conversion, and (iii) it shall be the duty of the Corporation to issue a new
certificate to such holder, cancel the old certificate, note, instrument, or
other evidence of a convertible security, as the case may be, and record the
transaction upon its books as of such date.
SECTION 4. REGISTERED STOCKHOLDERS. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and
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to vote as such owner, and to hold liable for calls and assessments a person
registered on its books as the owner of shares, and shall not be bound to
recognize any equitable or other claim to or interest in such share or shares on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of Delaware or the
Certificate of Incorporation or the Bylaws of the Corporation.
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ARTICLE VIII
GENERAL PROVISIONS
SECTION 1. DIVIDENDS. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the Corporation's capital stock, subject to the provisions of the
Certificate of Incorporation.
SECTION 2. RESERVES. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the directors shall think conducive to the interest of
the Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
SECTION 3. ANNUAL STATEMENT. The Board of Directors shall present at
each annual meeting, and at any special meeting of the stockholders when called
for by vote of the stockholders, a full and clear statement of the business and
condition of the Corporation.
SECTION 4. CHECKS AND DEPOSITS. All checks or demands for money and
notes of the Corporation shall be signed by such officer or officers or such
other person or persons as the Board of Directors may from time to time
designate. All funds of the Corporation not otherwise employed may be deposited
to the credit of the Corporation in such banks, trust companies or other
depositories as the Board of Directors may from time to time select.
SECTION 5. FISCAL YEAR. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
SECTION 6. SEAL. The corporate seal shall have inscribed thereon the
name of the Corporation and the words "Corporate Seal, Delaware." The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
/s/ Gregory C. Lawhon
Dated: February 9, 1998 _______________________________
Gregory C. Lawhon, Secretary
11
<PAGE> 1
EXHIBIT 4.1
EXECUTION COPY
BIRCH TELECOM, INC.
As Issuer
$115,000,000
14% SENIOR NOTES DUE 2008
INDENTURE
Dated as of June 23, 1998
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
As Trustee
<PAGE> 2
EXECUTION COPY
CROSS-REFERENCE TABLE*
Trust Indenture
Act Section Indenture Section
310 (a)(1) 7.10
(a)(2) 7.10
(a)(3) N.A.
(a)(4) N.A.
(a)(5) 7.10
(b) 7.10
(c) N.A.
311 (a) 7.11
(b) 7.11
(c) N.A.
312 (a) 2.05
(b) 11.03
(c) 11.03
313 (a) 7.06
(b)(1) N.A.
(b)(2) 7.07
(c) 7.06; 11.02
(d) 7.06
314 (a) 4.03; 11.02
(b) 11.04
(c)(1) 11.04
(c)(2) 11.04
(c)(3) N.A.
(d) 10.01
(e) 11.05
(f) NA
315 (a) 7.01
(b) 7.05, 11.02
(c) 7.01
(d) 7.01
(e) 6.11
316 (a)(last sentence) 2.09
(a)(1)(A) 6.05
(a)(1)(B) 6.04
(a)(2) N.A.
(b) 6.07
(c) 2.12
317 (a)(1) 6.08
(a)(2) 6.09
(b) 2.04
318 (a) 11.01
(b) N.A.
(c) 11.01
<PAGE> 3
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE> 4
EXECUTION COPY
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE 1
Section 1.01. Definitions 1
Section 1.02. Other Definitions 16
Section 1.03. Incorporation by Reference of TIA 17
Section 1.04. Rules of Construction 17
ARTICLE 2. THE NOTES 17
Section 2.01. Form and Dating 17
Section 2.02. Execution and Authentication 19
Section 2.03. Registrar and Paying Agent 19
Section 2.04. Paying Agent to Hold Money in Trust 19
Section 2.05. Holder Lists 20
Section 2.06. Transfer and Exchange 20
Section 2.07. Replacement Notes 32
Section 2.08. Outstanding Notes 33
Section 2.09. Treasury Notes 33
Section 2.10. Temporary Notes 33
Section 2.11. Cancellation 33
Section 2.12. Defaulted Interest 34
ARTICLE 3. REDEMPTION AND PREPAYMENT 34
Section 3.01. Notices to Trustee 34
Section 3.02. Selection of Notes to Be Redeemed 34
Section 3.03. Notice of Redemption 34
Section 3.04. Effect of Notice of Redemption 35
Section 3.05. Deposit of Redemption Price 35
Section 3.06. Notes Redeemed in Part 36
Section 3.07. Optional Redemption 36
Section 3.08. Mandatory Redemption 36
Section 3.09. Offer to Purchase by Application of Excess Proceeds 37
ARTICLE 4. COVENANTS 38
Section 4.01. Payment of Notes 38
Section 4.02. Maintenance of Office or Agency 39
Section 4.03. Reports 39
Section 4.04. Compliance Certificate 40
Section 4.05. Taxes 40
Section 4.06. Stay, Extension and Usury Laws 40
Section 4.07. Restricted Payments 41
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries 42
Section 4.09. Incurrence of Indebtedness and Issuance of Disqualified Stock 43
Section 4.10. Asset Sales 45
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
Section 4.11. Transactions with Affiliates 46
Section 4.12. Liens 47
Section 4.13. Business Activities 47
Section 4.14. Corporate Existence 47
Section 4.15. Offer to Repurchase Upon Change of Control 47
Section 4.16. Limitation on Sale and Leaseback Transactions 48
Section 4.17. Limitation on Issuances and Sales of Equity Interests of Restricted Subsidiaries 49
Section 4.18. Limitation on Issuances of Guarantees of Indebtedness 49
ARTICLE 5. SUCCESSORS 49
Section 5.01. Merger, Consolidation or Sale of Assets 49
Section 5.02. Successor Corporation Substituted 50
ARTICLE 6. DEFAULTS AND REMEDIES 50
Section 6.01. Events of Default 50
Section 6.02. Acceleration 52
Section 6.03. Other Remedies 52
Section 6.04. Waiver of Past Defaults 52
Section 6.05. Control by Majority 53
Section 6.06. Limitation on Suits 53
Section 6.07. Rights of Holders of Notes to Receive Payment 53
Section 6.08. Collection Suit by Trustee 53
Section 6.09. Trustee May File Proofs of Claim 54
Section 6.10. Priorities 54
Section 6.11. Undertaking for Costs 54
ARTICLE 7. TRUSTEE 55
Section 7.01. Duties of Trustee 55
Section 7.02. Rights of Trustee 56
Section 7.03. Individual Rights of Trustee 56
Section 7.04. Trustee's Disclaimer 56
Section 7.05. Notice of Defaults 56
Section 7.06. Reports by Trustee to Holders of the Notes 57
Section 7.07. Compensation and Indemnity 57
Section 7.08. Replacement of Trustee 58
Section 7.09. Successor Trustee by Merger, etc 59
Section 7.10. Eligibility; Disqualification 59
Section 7.11. Preferential Collection of Claims Against Company 59
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE 59
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance 59
Section 8.02. Legal Defeasance and Discharge 59
Section 8.03. Covenant Defeasance 60
Section 8.04. Conditions to Legal or Covenant Defeasance 60
Section 8.05. Deposited Money and U.S. Government Obligations to be Held in Trust; Other
Miscellaneous Provisions 61
Section 8.06. Repayment to Company 62
</TABLE>
<PAGE> 6
<TABLE>
<S> <C>
Section 8.07. Reinstatement 62
ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER 62
Section 9.01. Without Consent of Holders of Notes 62
Section 9.02. With Consent of Holders of Notes 63
Section 9.03. Compliance with Trust Indenture Act 65
Section 9.04. Revocation and Effect of Consents 65
Section 9.05. Notation on or Exchange of Notes 65
Section 9.06. Trustee to Sign Amendments, etc 65
ARTICLE 10. SECURITY 65
SECTION 10.01. SECURITY 65
ARTICLE 11. MISCELLANEOUS 66
Section 11.01. Trust Indenture Act Controls 66
Section 11.02. Notices 67
Section 11.03. Communication by Holders of Notes with Other Holders of Notes 68
Section 11.04. Certificate and Opinion as to Conditions Precedent 68
Section 11.05. Statements Required in Certificate or Opinion 68
Section 11.06. Rules by Trustee and Agents 68
Section 11.07. No Personal Liability of Directors, Officers, Employees and Stockholders 69
Section 11.08. Governing Law 69
Section 11.09. No Adverse Interpretation of Other Agreements 69
Section 11.10. Successors 69
Section 11.11. Severability 69
Section 11.12. Counterpart Originals 69
Section 11.13. Table of Contents, Headings, etc 69
</TABLE>
EXHIBITS
Exhibit A-1 FORM OF NOTE
Exhibit A-2 FORM OF REGULATION S GLOBAL NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM OF INSTITUTIONAL ACCREDITED INVESTOR REPRESENTATION
LETTER
Exhibit E FORM OF NOTATION OF GUARANTEE
Exhibit F FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED
BY SUBSEQUENT GUARANTORS
<PAGE> 7
EXECUTION COPY
INDENTURE dated as of June 23, 1998 between Birch Telecom,
Inc., a Delaware corporation (the "Company"), and Norwest Bank Minnesota,
National Association, as trustee (the "Trustee").
The Company and the Trustee agree as follows for the benefit
of each other and for the equal and ratable benefit of the Holders of the 14%
Senior Notes due 2008 (the "Notes"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"144A Global Note" means a global note in the form of Exhibit
A-1 hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of, and registered in the name of, the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold in reliance on Rule 144A.
"Acquired Debt" means, with respect to any specified Person,
(i) Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, other than
Indebtedness incurred in connection with, or in contemplation of, such other
Person merging with or into or becoming a Subsidiary of such specified Person,
and (ii) Indebtedness secured by a Lien encumbering any asset acquired by such
specified Person.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise;
provided that beneficial ownership of 10% or more of the Voting Stock of a
Person shall be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary, Euroclear and Cedel that apply to such transfer or
exchange.
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition of any assets or rights (including, without limitation, by way of a
sale and leaseback) provided that the sale, lease, conveyance or other
disposition of all or substantially all of the assets of the Company and its
Subsidiaries taken as a whole will be governed by the provisions of Section 4.15
and/or the provisions described in Section 5.01 hereof and not by the provisions
of the Asset Sale covenant in Section 4.10 hereof, and (ii) the issue or sale by
the Company or any of its Restricted Subsidiaries of Equity Interests of any of
the Company's Subsidiaries (other than directors' qualifying shares or shares
required by applicable law to be held by a Person other than the Company or a
Restricted Subsidiary), in the case of either clause (i) or (ii), whether in a
single transaction or a series of related transactions (a) that have a Fair
Market Value in excess of $1,000,000 or (b) for net proceeds in excess of
$1,000,000.
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Notwithstanding the foregoing, the following items shall not be deemed to be
Asset Sales: (i) a transfer of assets by the Company to a Restricted Subsidiary
or by a Restricted Subsidiary to the Company or to another Restricted
Subsidiary, (ii) an issuance of Equity Interests by a Subsidiary to the Company
or to another Restricted Subsidiary, (iii) a Restricted Payment or Permitted
Investment that is permitted by Section 4.07 hereof, (iv) the sale or other
disposition of real or personal property or equipment that has become worn out,
obsolete or damaged or otherwise unsuitable or not required for use in
connection with the business of the Company or any Restricted Subsidiary, as the
case may be, (v) disposals of Cash Equivalents and (vi) sales or other
dispositions of assets for consideration, received substantially concurrently
with such sale or disposition, at least equal to the Fair Market Value of the
assets sold or disposed of, to the extent that the consideration received would
constitute property or assets of the kind described in clauses (c), (d), or (e)
of the second paragraph of Section 4.10 hereof, provided that such consideration
may also include a cash equalization payment, in which case such cash payment,
if received by the Company or any of its Restricted Subsidiaries, will be deemed
to be proceeds received from an Asset Sale which will be applied in accordance
with the provisions of Section 4.10 hereof.
"Attributable Debt" in respect of a sale and leaseback
transaction means, at the time of determination, the present value (discounted
at the rate of interest implicit in such transaction, determined in accordance
with GAAP) of the obligation of the lessee for net rental payments during the
remaining term of the lease included in such sale and leaseback transaction
(including any period for which such lease has been extended or may, at the
option of the lessor, be extended).
"Bankruptcy Law" means Title 11, U.S. Code or any similar
federal or state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the
Company, or any authorized committee of the Board of Directors.
"Broker-Dealer" means any broker or dealer registered under
the Exchange Act.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any
determination thereof is to be made, the amount of the liability in respect of a
capital lease that would at such time be required to be capitalized on a balance
sheet in accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation,
corporate stock, (ii) in the case of an association or business entity, any and
all shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii)
securities issued or directly and fully guaranteed or insured by the United
States government 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 one year from the date of acquisition, (iii)
certificates of deposit and eurodollar time deposits with maturities of one year
or less from the date of acquisition, bankers' acceptances with maturities not
exceeding one year and overnight bank deposits, in each case with any
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<PAGE> 9
domestic commercial bank having capital and surplus in excess of $500,000,000
and a Thompson Bank Watch Rating of "B" or better, (iv) repurchase obligations
with a term of not more than 30 days for underlying securities of the types
described in clauses (ii) and (iii) above entered into with any financial
institution meeting the qualifications specified in clause (iii) above, (v)
commercial paper or other indebtedness issued by domestic corporations having
the highest rating obtainable from either Moody's Investors Service, Inc. or
Standard & Poor's Ratings Group and, in each case maturing within one year after
the date of acquisition and (vi) money market funds at least 95% of the assets
of which constitute Cash Equivalents of the kinds described in clauses (i)
through (v) of this definition.
"Cedel" means Cedel Bank, societe anonyme.
"Change of Control" means the occurrence of any of the
following: (i) the sale, lease, transfer, conveyance or other disposition (other
than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Company and its
Restricted Subsidiaries, taken as a whole to any "person" (as such term is used
in Section 13(d)(3) of the Exchange Act), other than any of the Principals and
their Related Parties; (ii) the adoption of a plan relating to the liquidation
or dissolution of the Company; (iii) the consummation of any transaction
(including, without limitation, any merger or consolidation) the result of which
is that any "person" (as defined above), other than the Principals, their
Related Parties or (prior to the establishment of a Public Market) a Permitted
Group, becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that a person shall be deemed to have
"beneficial ownership" of all securities that such person has the right to
acquire, whether such right is currently exercisable or is exercisable only upon
the occurrence of a subsequent condition), directly or indirectly, of (A) more
than 40% of the Voting Stock of the Company and (B) more of the Voting Stock of
the Company than is at the time "beneficially owned" (as defined above) by the
Principals and their Related Parties in the aggregate (Voting Stock, in each
case, measured by voting power rather than number of shares); (iv) the first day
on which a majority of the members of the Board of Directors are not Continuing
Directors; or (v) the Company consolidates with, or merges with or into, any
Person, or any Person consolidates with, or merges with or into, the Company, in
any such event pursuant to a transaction in which any of the outstanding Voting
Stock of the Company is converted into or exchanged for cash, securities or
other property, other than any such transaction where the Voting Stock of the
Company outstanding immediately prior to such transaction is converted into or
exchanged for Voting Stock (other than Disqualified Stock) of the surviving or
transferee Person constituting a majority of the outstanding shares of such
Voting Stock of such surviving or transferee Person (immediately after giving
effect to such issuance).
"Common Stock" of any Person means Capital Stock of such
Person that does not rank prior, as to the payment of dividends or as to the
distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of such Person, to shares of Capital Stock of any
other class of such Person.
"Company" means Birch Telecom, Inc., and any and all
successors thereto.
"Consolidated Assets" means, with respect to the Company, the
total consolidated assets of the Company and its Restricted Subsidiaries, as
shown on the most recent internal consolidated balance sheet of the Company and
such Restricted Subsidiaries calculated on a consolidated basis in accordance
with GAAP.
"Consolidated Cash Flow" means, with respect to any Person for
any period, the
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Consolidated Net Income of such Person for such period plus (i) provision for
taxes based on income or profits of such Person and its Restricted Subsidiaries
for such period, to the extent that such provision for taxes was included in
computing such Consolidated Net Income, plus (ii) consolidated interest expense
of such Person and its Restricted Subsidiaries for such period, whether paid or
accrued and whether or not capitalized (including, without limitation,
amortization of debt issuance costs and original issue discount, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, imputed interest with respect to Attributable Debt, commissions,
discounts and other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), to the extent that any such expense was deducted in computing such
Consolidated Net Income, plus (iii) depreciation, amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) and other non-cash
expenses (excluding any such non-cash expense to the extent that it represents
an accrual of or reserve for cash expenses in any future period or amortization
of a prepaid cash expense that was paid in a prior period) of such Person and
its Restricted Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income, minus (iv) non-cash items increasing
such Consolidated Net Income for such period (excluding any items that were
accrued in the ordinary course of business), in each case on a consolidated
basis and determined in accordance with GAAP.
"Consolidated Indebtedness" means, with respect to any Person
as of any date of determination, the sum, without duplication, of (i) the total
amount of Indebtedness of such Person and its Restricted Subsidiaries, plus (ii)
the total amount of Indebtedness of any other Person, to the extent that such
Indebtedness has been Guaranteed by the referent Person or one or more of its
Restricted Subsidiaries, plus (iii) the aggregate liquidation value of all
Disqualified Stock of such Person and all preferred stock of Restricted
Subsidiaries of such Person, in each case, determined on a consolidated basis in
accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person
for any period, the aggregate of the Net Income of such Person and its
Restricted Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP; provided that (i) the Net Income (but not loss) of any
Person other than the Company that is not a Restricted Subsidiary or that is
accounted for by the equity method of accounting shall be included only to the
extent of the amount of dividends or distributions paid in cash to the referent
Person or a Restricted Subsidiary thereof, (ii) the Net Income of any Person
acquired in a pooling of interests transaction for any period prior to the date
of such acquisition shall be excluded, (iii) the cumulative effect of a change
in accounting principles shall be excluded and (iv) the Net Income (but not
loss) of any Unrestricted Subsidiary shall be excluded whether or not
distributed to the Company or one of its Restricted Subsidiaries.
"Consolidated Net Worth" means, with respect to any Person as
of any date of determination, stockholders' equity as set forth on the most
recently available quarterly or annual consolidated balance sheet of such Person
(which shall be as of a date not more than 90 days prior to the date of such
computation, and which shall not take into account Unrestricted Subsidiaries),
less any amounts attributable to Disqualified Stock or any equity security
convertible into or exchangeable for Indebtedness, the cost of treasury stock
and the principal amount of any promissory notes receivable from the sale of the
Capital Stock of such Person, in each case determined on a consolidated basis in
accordance with GAAP.
"Continuing Directors" means, as of any date of determination,
any member of the
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Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of this Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"Corporate Trust Office of the Trustee" shall be at the
address of the Trustee specified in Section 10.02 hereof or such other address
as to which the Trustee may give notice to the Company.
"Credit Facilities" means one or more debt facilities or
commercial paper facilities with banks or other institutional lenders providing
for revolving credit loans, term loans, receivables financing (including through
the sale of receivables to such lenders or to special purpose entities formed to
borrow from such lenders against such receivables) or letters of credit, in each
case, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part from time to time.
"Debt to Consolidated Cash Flow Ratio" means, as of any date
of determination (the "Calculation Date"), the ratio of (a) the Consolidated
Indebtedness of the Company as of such date to (b) the Consolidated Cash Flow of
the Company for the four most recent full fiscal quarters ending immediately
prior to the Calculation Date for which internal financial statements are
available, in each case determined on a pro forma basis after giving effect to
all acquisitions or dispositions of assets made by the Company and its
Subsidiaries from the beginning of such four-quarter period through and
including the Calculation Date as if such acquisitions and dispositions had
occurred at the beginning of such four-quarter period. For purposes of making
the computation referred to above, (i) acquisitions that have been made by the
Company or any of its Restricted Subsidiaries, including through mergers or
consolidations, during the reference period or subsequent to such reference
period and on or prior to the Calculation Date shall be deemed to have occurred
on the first day of the reference period and Consolidated Cash Flow for such
reference period shall be calculated without giving effect to clause (ii) of the
proviso set forth in definition of Consolidated Net Income, and (ii) the
Consolidated Cash Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded.
"Default" means any event that is, or with the passage of time
or the giving of notice or both would be, an Event of Default.
"Definitive Note" means a certificated Note registered in the
name of the Holder thereof and issued in accordance with Section 2.06 hereof, in
the form of Exhibit A-1 hereto except that such Note shall not bear the Global
Note Legend and shall not have the "Schedule of Exchanges of Interests in the
Global Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or
issued in whole or in part in global form, the Person specified in Section 2.03
hereof as the Depositary with respect to the Notes, and any and all successors
thereto appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"Disqualified Stock" means any Capital Stock that, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable, in each case, at the option of the holder thereof), or upon
the happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the Holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the Notes mature (other than with the proceeds of an IPO
Redemption in the case of the Series B Preferred Stock); provided, however, that
any
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Capital Stock that would constitute Disqualified Stock solely because the
holders thereof have the right to require the Company to repurchase such Capital
Stock upon the occurrence of a Change of Control or an Asset Sale shall not
constitute Disqualified Stock if the terms of such Capital Stock provide that
the Company may not repurchase or redeem any such Capital Stock pursuant to such
provisions unless such repurchase or redemption complies with Section 4.07
hereof.
"Distribution Compliance Period" means the 40-day distribution
compliance period as defined in Regulation S.
"Eligible Indebtedness" means any Indebtedness other than (i)
Indebtedness in the form of, or represented by, bonds or other securities or any
guarantee thereof and (ii) Indebtedness that is, or may be, quoted, listed or
purchased and sold on any stock exchange, automated trading system or
over-the-counter or other securities market (including, without prejudice to the
generality of the foregoing, the market for securities eligible for resale
pursuant to Rule 144A under the Securities Act).
"Eligible Receivables" means the accounts receivable (net of
any reserves and allowances for doubtful accounts in accordance with GAAP) of
the Company and its Restricted Subsidiaries that are not more than 60 days past
their due date and that were entered into in the ordinary course of business on
normal payment terms as shown on the most recent internal consolidated balance
sheet of the Company and such Restricted Subsidiaries, all calculated on a
consolidated basis in accordance with GAAP.
"Equity Interests" means Capital Stock and all warrants,
options or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means a public or private offering of Common
Stock of the Company pursuant to an effective registration statement under the
Securities Act or otherwise of which the net cash proceeds to the Company are
equal to or greater than $25,000,000.
"Exchange Offer" means the exchange and issuance by the
Company of a principal amount of New Notes (which shall be registered pursuant
to the Exchange Offer Registration Statement) equal to the outstanding principal
amount of Notes that are tendered by such Holders in connection with such
exchange and issuance.
"Exchange Offer Registration Statement" means the Registration
Statement relating to the Exchange Offer, including the related Prospectus.
"Existing Indebtedness" means Indebtedness of the Company and
its Subsidiaries in existence on the date of this Indenture, until such amounts
are repaid.
"Fair Market Value" means the price that would be paid in an
arm's-length transaction between an informed and willing seller under no
compulsion to sell and an informed and willing buyer under no compulsion to buy,
as determined in good faith by the Board of Directors, whose determination shall
be evidenced by a resolution thereof set forth in an Officers' Certificate
delivered to the Trustee; provided that for purposes of clause (ix) of Section
4.09 hereof, and only for purposes of such clause: (x) the Fair Market Value of
any security registered under the Exchange Act shall be the average of the
closing prices, regular way, of such security for the 20 consecutive trading
days immediately preceding the sale of Capital Stock and (y) in the event the
aggregate Fair Market Value of any other property
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(other than cash or Cash Equivalents) received by the Company exceeds
$10,000,000, the Fair Market Value of such property shall be determined by a
nationally recognized investment banking firm (or, if no such investment banking
firm is qualified to issue such an opinion, by a nationally recognized appraisal
firm or public accounting firm) and set forth in the written opinion of such
firm which shall be delivered to the Trustee.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession, which are in effect from time to time.
"Global Note Legend" means the legend set forth in Section
2.06(g)(ii) hereof, which is required to be placed on all Global Notes issued
under this Indenture.
"Global Notes" means, individually and collectively, each of
the Restricted Global Note and the Unrestricted Global Note, in the form of
Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(iv),
2.06(d)(ii) or 2.06(f) hereof.
"Guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, by way of a
pledge of assets or through letters of credit or reimbursement agreements in
respect thereof), of all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates or currency exchange rates.
"Holder" means a Person in whose name a Note is registered.
"Indebtedness" means, with respect to any Person, any
indebtedness of such Person, whether or not contingent, in respect of borrowed
money or evidenced by bonds, notes, debentures or similar instruments or letters
of credit (or reimbursement agreements in respect thereof) or banker's
acceptances or representing Capital Lease Obligations or the balance deferred
and unpaid of the purchase price of any property or representing any Hedging
Obligations, except any such balance that constitutes an accrued expense or
trade payable, if and to the extent any of the foregoing indebtedness (other
than letters of credit and Hedging Obligations) would appear as a liability upon
a balance sheet of such Person prepared in accordance with GAAP, as well as all
Indebtedness of others secured by a Lien on any asset of such Person whether or
not such Indebtedness is assumed by such Person (the amount of such Indebtedness
as of any date being deemed to be the lesser of the value of such property or
assets as of such date or the principal amount of such Indebtedness of such
other Person so secured) and, to the extent not otherwise included, the
Guarantee by such Person of any Indebtedness of any other Person. The amount of
any Indebtedness outstanding as of any date shall be (i) the accreted value
thereof, in the case of any Indebtedness issued with original issue discount,
and (ii) the principal amount thereof in the case of any other Indebtedness.
"Indenture" means this Indenture, as amended or supplemented
from time to time.
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"Indirect Participant" means a Person who holds a beneficial
interest in a Global Note through a Participant.
"Initial Purchasers" means Lehman Brothers Inc. and BT Alex.
Brown Incorporated.
"Institutional Accredited Investor" means an institution that
is an "accredited investor" as defined in Rule 501(a)(1),(2),(3) or (7) under
the Securities Act.
"Investments" means, with respect to any Person, all
investments by such Person in other Persons (including Affiliates) in the form
of direct or indirect loans (including guarantees of Indebtedness or other
obligations), advances or capital contributions (excluding commission, travel
and similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities, together with all items that are or would
be classified as investments on a balance sheet prepared in accordance with
GAAP. If the Company or any Restricted Subsidiary of the Company sells or
otherwise disposes of any Equity Interests of any direct or indirect Subsidiary
of the Company or a Restricted Subsidiary of the Company issues any of its
Equity Interests such that, in each case, after giving effect to any such sale
or disposition, such Person is no longer a Restricted Subsidiary of the Company,
the Company shall be deemed to have made an Investment on the date of any such
sale or disposition equal to the Fair Market Value of the Equity Interests of
such Subsidiary not sold or disposed of in an amount determined as provided in
the final paragraph of Section 4.07 hereof.
"IPO Redemption" means a redemption, from any source of funds
legally available therefor, of all of the Series B Preferred Stock in the event
of and concurrently with the closing of a firmly underwritten public offering of
the Company's Common Stock pursuant to an effective registration statement under
the Securities Act, with gross cash proceeds to the Company (before underwriting
discounts, commissions and fees) of not less than $30,000,000.
"Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions in the City of New York or at a place of payment are
authorized by law, regulation or executive order to remain closed. If a payment
date is a Legal Holiday at a place of payment, payment may be made at that place
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue on such payment for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be
prepared by the Company and sent to all Holders of the Notes for use by such
Holders in connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law (including any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Liquidated Damages" means the amount payable by the Company
to each Holder under the circumstances set forth in and pursuant to Section 5 of
the Registration Rights Agreement.
"Net Income" means, with respect to any Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends,
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excluding, however, (i) any gain or loss, together with any related provision
for taxes on such gain or loss, realized in connection with (a) any Asset Sale
(including, without limitation, dispositions pursuant to sale and leaseback
transactions) or (b) the disposition of any securities by such Person or any of
its Restricted Subsidiaries or the extinguishment of any Indebtedness of such
Person or any of its Restricted Subsidiaries and (ii) any extraordinary gain or
loss, together with any related provision for taxes on such extraordinary gain
or loss.
"Net Proceeds" means the aggregate cash proceeds received by
the Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
(i) the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, (ii) taxes paid or payable as
a result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), (iii) amounts required to be
applied to the repayment of Indebtedness (other than Indebtedness under a Credit
Facility) secured by a Lien on the asset or assets that were the subject of such
Asset Sale, (iv) all distributions and other payments required to be made to
minority interest holders in Restricted Subsidiaries as a result of such Asset
Sale, (v) the deduction of appropriate amounts provided by the seller as a
reserve in accordance with GAAP against any liabilities associated with the
assets disposed of in such Asset Sale and retained by the Company or any
Restricted Subsidiary after such Asset Sale and (vi) without duplication, any
reserves that the Company's Board of Directors determines in good faith should
be made in respect of the sale price of such asset or assets for post closing
adjustments; provided that in the case of any reversal of any reserve referred
to in clause (v) or (vi) above, the amount so reserved shall be deemed to be Net
Proceeds from an Asset Sale as of the date of such reversal.
"New Notes" means the Company's 14% Senior Notes due 2008,
Series B, to be issued pursuant to this Indenture: (i) in the Exchange Offer or
(ii) as contemplated by Section 4 of the Registration Rights Agreement.
"Non-Recourse Debt" means Indebtedness (i) as to which neither
the Company nor any of its Restricted Subsidiaries (a) provides credit support
of any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor
or otherwise), or (c) constitutes the lender and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; and (iii) as to which the lenders have been notified in
writing that they will not have any recourse to the stock or assets of the
Company or any of its Restricted Subsidiaries.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Notes" has the meaning assigned to it in the preamble to this
Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offering of the Notes by the Company.
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"Officer" means, with respect to any Person, the Chairman of
the Board, the Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer,
the Controller, the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf
of the Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Section 11.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who
is reasonably acceptable to the Trustee, that meets the requirements of Section
10.05 hereof. The counsel may be an employee of or counsel to the Company, any
Subsidiary of the Company or the Trustee.
"Participant" means, with respect to the Depositary, Euroclear
or Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to The Depository Trust Company, shall include
Euroclear and Cedel).
"Participating Broker-Dealer" has the meaning set forth in the
Registration Rights Agreement.
"Permitted Group" means any group of investors that is deemed
to be a "person" (as such term is used in Section 13(d)(3) of the Exchange Act)
by virtue of the Purchasers Rights Agreement, as the same may be amended,
modified or supplemented from time to time, provided that no single Person
(together with its Affiliates), other than the Principals and their Related
Parties, is the "beneficial owner" (as such term is defined in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that a person shall be deemed to have
"beneficial ownership" of all securities that such person has the right to
acquire, whether such right is currently exercisable or is exercisable only upon
the occurrence of a subsequent condition, and beneficial ownership shall be
determined without regard to the Purchasers Rights Agreement, as the same may be
amended, modified or supplemented from time to time), directly or indirectly, of
(A) more than 40% of the Voting Stock of the Company that is "beneficially
owned" (as defined above) by such group of investors and (B) more of the Voting
Stock of the Company than is at the time "beneficially owned" (as defined above)
by the Principals and their Related Parties in the aggregate (Voting Stock, in
each case, measured by voting power rather than number of shares).
"Permitted Investments" means (a) any Investment in the
Company or in a Restricted Subsidiary of the Company; (b) any Investment in Cash
Equivalents or Pledged Securities; (c) any Investment by the Company or any
Restricted Subsidiary of the Company in a Person, if as a result of such
Investment (i) such Person becomes a Restricted Subsidiary of the Company or
(ii) such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated into,
the Company or a Restricted Subsidiary of the Company; (d) any Restricted
Investment made as a result of the receipt of non-cash consideration from an
Asset Sale that was made pursuant to and in compliance with Section 4.10 hereof;
(e) any acquisition of assets to the extent that the consideration therefor
consists of Equity Interests (other than Disqualified Stock) of the Company; (f)
receivables created in the ordinary course of business; (g) loans or advances to
employees made in the ordinary course of business not to exceed $500,000 at any
one time outstanding; (h) securities and other assets received in settlement of
trade debts or other claims arising in the ordinary course of business; (i)
Guarantees permitted by Section 4.09 hereof; (j) Investments in prepaid
expenses, negotiable instruments held for collection and lease, utility and
workers' compensation, performance and other similar deposits; (k) Investments
in Permitted Joint Ventures in an amount not to exceed
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$10,000,000 at any one time outstanding; and (1) other Investments not to exceed
5% of the Company's Consolidated Assets at any one time outstanding (each such
Investment being measured as of the date made without giving effect to
subsequent changes in value).
"Permitted Joint Venture" means any corporation, partnership
or other entity engaged in one or more Telecommunications Businesses (i) of
which the Company owns, directly or indirectly, at least 45% of the outstanding
Capital Stock and (ii) that is managed and operated by the Company or any of its
Subsidiaries.
"Permitted Liens" means (i) Liens securing Indebtedness of the
Company under one or more Credit Facilities that was permitted by the terms of
this Indenture to be incurred; (ii) Liens on the property or assets of one or
more Restricted Subsidiaries of the Company securing Indebtedness of one or more
Restricted Subsidiaries of the Company that was permitted by the terms of this
Indenture to be incurred; (iii) Liens in favor of the Company; (iv) Liens
existing on the date of this Indenture; (v) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently concluded, provided that any reserve or other appropriate provision
as shall be required in conformity with GAAP shall have been made therefor; (vi)
Liens securing Indebtedness permitted to be incurred under clause (iv) of the
second paragraph of Section 4.09 hereof provided that (A) any such Lien is
created solely for the purpose of securing Indebtedness (1) to finance the cost
(including the cost of design, development, acquisition, construction,
installation, improvement, transportation or integration) of the item of
property or assets subject thereto and such Lien is created prior to, at the
time of or within six months after the later of the acquisition, the completion
of construction or the commencement of full operation of such property or (2) to
refinance any Indebtedness previously so secured, (B) the principal amount of
the Indebtedness secured by such Lien does not exceed 100% of such cost and (C)
such Lien does not extend to or cover any property or assets other than such
item of property or assets and any improvements on such item; (vii) Liens on
property of a Person existing at the time such Person is merged into or
consolidated with the Company or any Subsidiary; provided that such Liens were
in existence prior to the contemplation of such merger or consolidation and do
not extend to any assets other than those of the Person merged into or
consolidated with the Company or such Subsidiary; (viii) Liens on property
existing at the time of acquisition thereof by the Company or any Subsidiary,
provided that such Liens were in existence prior to the contemplation of such
acquisition; (ix) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business; (x) Liens securing the Notes, the
New Notes and this Indenture or any guarantee thereof; (xi) Liens granted in
favor of the Holders of the Notes; and (xii) Liens incurred in the ordinary
course of business of the Company or any Restricted Subsidiary of the Company
with respect to obligations that do not exceed $10,000,000 at any one time
outstanding.
"Permitted Refinancing Indebtedness" means any Indebtedness of
the Company or any of its Restricted Subsidiaries issued in exchange for, or the
net proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that: (i) the principal amount
(or initial accreted value, if applicable) of such Permitted Refinancing
Indebtedness does not exceed the principal amount of (or accreted value, if
applicable), plus accrued interest on, the Indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded (plus the amount of expenses and
prepayment premiums incurred in connection therewith); (ii) such Permitted
Refinancing Indebtedness has a final maturity date later than the final maturity
date of, and has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed,
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replaced, defeased or refunded; (iii) if the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded is subordinated in right of
payment to the Notes, such Permitted Refinancing Indebtedness is subordinated in
right of payment to the Notes on terms at least as favorable to the Holders of
Notes as those contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such
Indebtedness is incurred either by the Company or by the Restricted Subsidiary
who is the obligor on the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or agency or political subdivision thereof (including any subdivision
or ongoing business of any such entity or substantially all of the assets of any
such entity, subdivision or business).
"Pledge Account" means an account established with the Trustee
pursuant to the terms of the Pledge Agreement for the deposit of the Pledged
Securities purchased by the Company with a portion of the net proceeds from the
Offering.
"Pledge Agreement" means the Collateral Pledge and Security
Agreement, dated as of the date of this Indenture, from the Company to the
Trustee, governing the Pledge Account and the disbursement of funds therefrom.
"Pledged Securities" means the securities purchased by the
Company with a portion of the net proceeds from the Offering, which shall
consist of U.S. Government Obligations, to be deposited in the Pledge Account.
The Pledged Securities may be held in book-entry form through Bankers Trust
Company, acting as securities intermediary.
"Principal" means Henry H. Bradley, David E. Scott and Jeffrey
D. Shackelford.
"Private Placement Legend" means the legend set forth in
Section 2.06(g)(i) hereof to be placed on all Notes issued under this Indenture
except where otherwise permitted by the provisions of this Indenture.
"Prospectus" means the prospectus included in a Registration
Statement at the time such Registration Statement is declared effective, as
amended or supplemented by any prospectus supplement and by all other amendments
thereto, including post-effective amendments, and all material incorporated by
reference into such Prospectus.
"Public Equity Offering" means an underwritten primary public
offering of Common Stock of the Company pursuant to an effective registration
statement under the Securities Act.
A "Public Market" shall be deemed to exist if (i) a Public
Equity Offering has been consummated and (ii) at least 35% of the total issued
and outstanding Common Stock of the Company immediately prior to the
consummation of the Public Equity Offering has been distributed by means of an
effective registration statement under the Securities Act.
"Purchasers Rights Agreement" means the Purchasers Rights
Agreement dated February 10, 1998 between the Company and the then current
shareholders of the Company named as parties therein.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
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"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date of this Indenture, by and among the Company and
the Initial Purchasers as such agreement may be amended, modified or
supplemented from time to time.
"Registration Statement" means any registration statement of
the Company relating to (a) an offering of New Notes pursuant to an Exchange
Offer or (b) the registration for resale of Transfer Restricted Securities
pursuant to the Shelf Registration Statement, in each case, (i) that is filed
pursuant to the provisions of the Registration Rights Agreement and (ii)
including the Prospectus included therein, all amendments and supplements
thereto (including post-effective amendments) and all exhibits and material
incorporated by reference therein.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Note" means a Regulation S Temporary
Global Note or Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global
Note in the form of Exhibit A-1 hereto bearing the Global Note Legend and the
Private Placement Legend and deposited with or on behalf of and registered in
the name of the Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the Regulation S Temporary Global Note upon
expiration of the Distribution Compliance Period.
"Regulation S Temporary Global Note" means a temporary global
Note in the form of Exhibit A-2 hereto bearing the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee, issued in a denomination equal to the outstanding principal amount
of the Notes initially sold in reliance on Rule 903 of Regulation S.
"Related Party" with respect to any Principal means (a) (1)
any spouse, sibling, parent or child of such Principal or (2) the estate of any
Principal during any period in which such estate holds Equity Interests of the
Company for the benefit of any person referred to in clause (a)(1), or (b) any
trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially owning an interest of
more than 50% of which consist of such Principal and/or such other Persons
referred to in the immediately preceding clause (a).
"Responsible Officer" when used with respect to the Trustee,
means any officer within the Corporate Trust Administration of the Trustee (or
any successor group of the Trustee) or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing
the Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the
Private Placement Legend.
"Restricted Investment" means an Investment other than a
Permitted Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of
the referent Person that is not an Unrestricted Subsidiary.
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"Rule 144" means Rule 144 promulgated under the Securities
Act.
"Rule 144A" means Rule 144A promulgated under the Securities
Act.
"Rule 903" means Rule 903 of Regulation S promulgated under
the Securities Act.
"Rule 904" means Rule 904 of Regulation S promulgated under
the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Series B Preferred Stock" means the shares of Capital Stock
of the Company designated as "Series B Preferred Stock", par value $0.001 per
share, in the Company's Amended and Restated Certificate of Incorporation as in
effect on the date of this Indenture.
"Shelf Registration Statement" means the Shelf Registration
Statement as defined in the Registration Rights Agreement.
"Significant Subsidiary" means, with respect to any person,
any Restricted Subsidiary of such Person that would be a "significant
subsidiary" of such Person as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date of this Indenture, except that all references to "10 percent" in Rule
1-02(w)(1), (2) and (3) shall mean "5 percent."
"Stated Maturity" means, with respect to any installment of
interest or principal on any series of Indebtedness, the date on which such
payment of interest or principal was scheduled to be paid in the original
documentation governing such Indebtedness, and shall not include any contingent
obligations to repay, redeem or repurchase any such interest or principal prior
to the date originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of such Person (or a
combination thereof) and (ii) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a Subsidiary of such
Person or (b) the only general partners of which are such Person or one or more
Subsidiaries of such Person (or any combination thereof).
"Telecommunications Business" means any business engaged
primarily in the development, ownership or operation of one or more telephone,
telecommunications or information systems or the provision of telephony,
telecommunications or information services (including, without limitation, any
voice, video transmission, data or Internet services) and any related, ancillary
or complementary business; provided that the determination of what constitutes a
Telecommunications Business shall be made in good faith by the Board of
Directors.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) as in effect on the date on which this Indenture is
qualified under the TIA.
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"Transfer Restricted Securities" means each Note, until the
earliest to occur of (a) the date on which such Note is exchanged in the
Exchange Offer and entitled to be resold to the public by the Holder thereof
without complying with the prospectus delivery requirements of the Securities
Act, (b) the date on which such Note has been disposed of in accordance with a
Shelf Registration Statement, (c) the date on which such Note is disposed of by
a Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the
Exchange Offer Registration Statement (including delivery of the Prospectus
contained therein) or (d) the date on which such Note is distributed to the
public pursuant to Rule 144 or is eligible for resale pursuant to Rule 144(k)
under the Securities Act.
"Trustee" means the party named as such above until a
successor replaces it in accordance with the applicable provisions of this
Indenture and thereafter means the successor serving hereunder.
"Unrestricted Definitive Note" means one or more Definitive
Notes that do not bear and are not required to bear the Private Placement
Legend.
"Unrestricted Global Note" means a permanent global Note in
the form of Exhibit A-1 attached hereto that bears the Global Note Legend and
that has the "Schedule of Exchanges of Interests in the Global Note" attached
thereto, and that is deposited with or on behalf of and registered in the name
of the Depositary, representing a series of Notes that do not bear the Private
Placement Legend.
"Unrestricted Subsidiary" means (i) any Subsidiary of the
Company that is designated by the Board of Directors as an Unrestricted
Subsidiary pursuant to a Board Resolution; but only to the extent that such
Subsidiary: (a) has no Indebtedness other than Non-Recourse Debt; (b) is not
party to any agreement, contract, arrangement or understanding with the Company
or any Restricted Subsidiary of the Company unless the terms of any such
agreement, contract, arrangement or understanding are no less favorable to the
Company or such Restricted Subsidiary than those that might be obtained at the
time from Persons who are not Affiliates of the Company; (c) is a Person with
respect to which neither the Company nor any of its Restricted Subsidiaries has
any direct or indirect obligation (x) to subscribe for additional Equity
Interests or (y) to maintain or preserve such Person's financial condition or to
cause such Person to achieve any specified levels of operating results; (d) has
not guaranteed or otherwise directly or indirectly provided credit support for
any Indebtedness of the Company or any of its Restricted Subsidiaries; and (e)
has at least one director on its board of directors that is not a director or
executive officer of the Company or any of its Restricted Subsidiaries and has
at least one executive officer that is not a director or executive officer of
the Company or any of its Restricted Subsidiaries. Any such designation by the
Board of Directors shall be evidenced to the Trustee by filing with the Trustee
a certified copy of the Board Resolution giving effect to such designation and
an Officers' Certificate certifying that such designation complied with the
foregoing conditions and was permitted by Section 4.07 hereof. If, at any time,
any Unrestricted Subsidiary would fail to meet the foregoing requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be Unrestricted Subsidiary
for purposes of this Indenture and any Indebtedness of such Subsidiary shall be
deemed to be incurred by a Restricted Subsidiary of the Company as of such date
(and, if such Indebtedness is not permitted to be incurred as of such date under
Section 4.09 hereof, the Company shall be in default of such Section). The Board
of Directors of the Company may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided that such designation shall
be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the
Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (i) such Indebtedness is permitted under
Section 4.09 hereof, calculated on a pro forma basis as if such designation had
occurred at the beginning of the four-quarter reference period, and (ii) no
Default or Event of Default would occur or be
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in existence following such designation.
"U.S. Government Obligations" means securities that are (x)
direct obligations of the United States of America for the timely payment of
which its full faith and credit is pledged or (y) obligations of a Person
controlled or supervised by and acting as an agency or instrumentality of the
United States of America, the timely payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States of
America, which, in either case, are not callable or redeemable at the option of
the issuer thereof, and shall also include a depository receipt issued by a
"bank" (as defined in Section 3(a)(2) of the Securities Act), as custodian with
respect to any such U.S. Government Obligation or a specific payment of
principal of or interest on any such U.S. Government Obligation held by such
custodian for the account of the holder of such depository receipt, provided
(except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depository receipt from
any amount received by the custodian in respect of the U.S. Government
Obligation or the specific payment of principal of or interest on the U.S.
Government Obligation evidenced by such depository receipt.
"U.S. Person" means a U.S. person as defined in Rule 902(k)
under the Securities Act.
"Voting Stock" of any Person as of any date means the Capital
Stock of such Person that is at the time entitled to vote in the election of the
Board of Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the sum
of the products obtained by multiplying (x) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (y) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (b) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a
Restricted Subsidiary of such Person all of the outstanding Capital Stock or
other ownership interests of which (other than directors' qualifying shares)
shall at the time be owned by such Person or by one or more Wholly Owned
Restricted Subsidiaries of such Person and one or more Wholly Owned Restricted
Subsidiaries of such Person.
SECTION 1.02. OTHER DEFINITIONS.
Defined in
Term Section
"Affiliate Transaction" 4.11
"Asset Sale Offer" 3.09
"Authentication Order" 2.02
"Change of Control Offer" 4.15
"Change of Control Payment" 4.15
"Change of Control Payment Date" 4.15
"Covenant Defeasance" 8.03
"Event of Default" 6.01
"Excess Proceeds" 4.10
"incur" 4.09
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"Legal Defeasance" 8.02
"Offer Amount" 3.09
"Offer Period" 3.09
"Paying Agent" 2.03
"Payment Default" 6.01
"Permitted Debt" 4.09
"Purchase Date" 3.09
"Registrar" 2.03
"Restricted Payments" 4.07
SECTION 1.03. INCORPORATION BY REFERENCE OF TIA.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the
following meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee; and
"obligor" on the Notes means the Company and any successor
obligor upon the Notes.
All other terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule under
the TIA have the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the
plural include the singular;
(5) provisions apply to successive events and
transactions; and
(6) references to sections of or rules under the
Securities Act shall be deemed to include substitute,
replacement or successor sections or rules adopted by the SEC
from time to time.
ARTICLE 2.
THE NOTES
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SECTION 2.01. FORM AND DATING.
(a) General.
The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes shall
be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall
constitute, and are hereby expressly made, a part of this Indenture and the
Company and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby. However,
to the extent any provision of any Note conflicts with the express provisions of
this Indenture, the provisions of this Indenture shall govern and be
controlling.
(b) Global Notes.
Notes issued in global form shall be substantially in the form
of Exhibit A-1 or A-2 attached hereto (including the Global Note Legend thereon
and the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Notes issued in definitive form shall be substantially in the form of
Exhibit A-1 attached hereto (but without the Global Note Legend thereon and
without the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate principal amount of outstanding Notes from time to time endorsed
thereon and that the aggregate principal amount of outstanding Notes represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and redemptions. Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the aggregate principal amount of
outstanding Notes represented thereby shall be made by the Trustee, in
accordance with instructions given by the Holder thereof as required by Section
2.06 hereof.
(c) Temporary Global Notes.
Notes offered and sold in reliance on Regulation S shall be
issued initially in the form of the Regulation S Temporary Global Note, which
shall be deposited on behalf of the purchasers of the Notes represented thereby
with the Trustee, at its New York office, as custodian for the Depositary, and
registered in the name of the Depositary or the nominee of the Depositary for
the accounts of designated agents holding on behalf of Euroclear or Cedel, duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. At any time on or after the later of (x) the Separation Date and (y)
the termination of the Distribution Compliance Period and upon the receipt by
the Trustee of (i) a written certificate from the Depositary, together with
copies of certificates from Euroclear and Cedel certifying that they have
received certification of non-United States beneficial ownership of 100% of the
aggregate principal amount of the Regulation S Temporary Global Note (except to
the extent of any beneficial owners thereof who acquired an interest therein
during the Distribution Compliance Period pursuant to another exemption from
registration under the Securities Act and who will take delivery of a beneficial
ownership interest in a 144A Global Note bearing a Private Placement Legend, all
as contemplated by Section 2.06(a)(ii) hereof), and (ii) an Officers'
Certificate from the Company, beneficial interests in the Regulation S Temporary
Global Note shall be exchanged for beneficial interests in Regulation S
Permanent Global Notes pursuant to the Applicable Procedures. Simultaneously
with the authentication of Regulation S Permanent Global Notes, the Trustee
shall cancel the Regulation S Temporary Global
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Note. The aggregate principal amount of the Regulation S Temporary Global Note
and the Regulation S Permanent Global Notes may from time to time be increased
or decreased by adjustments made on the records of the Trustee and the
Depositary or its nominee, as the case may be, in connection with transfers of
interest as hereinafter provided.
(d) Euroclear and Cedel Procedures Applicable.
The provisions of the "Operating Procedures of the Euroclear
System" and "Terms and Conditions Governing Use of Euroclear" and the "General
Terms and Conditions of Cedel Bank" and "Customer Handbook" of Cedel shall be
applicable to transfers of beneficial interests in the Regulation S Temporary
Global Note and the Regulation S Permanent Global Notes that are held by
Participants through Euroclear or Cedel.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
One Officer shall sign the Notes for the Company by manual or
facsimile signature.
If an Officer whose signature is on a Note no longer holds
that office at the time a Note is authenticated, the Note shall nevertheless be
valid.
A Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Note has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed
by one Officer (an "Authentication Order"), authenticate Notes for original
issue up to the aggregate principal amount stated in paragraph 4 of the Notes.
The aggregate principal amount of Notes outstanding at any time may not exceed
such amount except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to
the Company to authenticate Notes. An authenticating agent may authenticate
Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with Holders or an
Affiliate of the Company.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Notes may
be presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company shall notify
the Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Company or any of
its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company
("DTC") to act as Depositary with respect to the Global Notes.
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The Company initially appoints the Trustee to act as the
Registrar and Paying Agent and to act as custodian with respect to the Global
Notes.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders or the Trustee all money held by the Paying Agent for the
payment of principal, premium or Liquidated Damages, if any, or interest on the
Notes, and will notify the Trustee of any default by the Company in making any
such payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company or a
Subsidiary) shall have no further liability for the money. If the Company or a
Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust
fund for the benefit of the Holders all money held by it as Paying Agent. Upon
any bankruptcy or reorganization proceedings relating to the Company, the
Trustee shall serve as Paying Agent for the Notes.
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of all Holders and shall otherwise comply with TIA Section 312(a). If
the Trustee is not the Registrar, the Company shall furnish to the Trustee at
least seven Business Days before each interest payment date and at such other
times as the Trustee may request in writing, a list in such form and as of such
date as the Trustee may reasonably require of the names and addresses of the
Holders of Notes and the Company shall otherwise comply with TIA Section 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Notes.
A Global Note may not be transferred as a whole except by
the Depositary to a nominee of the Depositary, by a nominee of the Depositary to
the Depositary or to another nominee of the Depositary, or by the Depositary or
any such nominee to a successor Depositary or a nominee of such successor
Depositary. All Global Notes will be exchanged by the Company for Definitive
Notes if (i) the Company delivers to the Trustee notice from the Depositary that
it is unwilling or unable to continue to act as Depositary or that it is no
longer a clearing agency registered under the Exchange Act and, in either case,
a successor Depositary is not appointed by the Company within 120 days after the
date of such notice from the Depositary or (ii) the Company in its sole
discretion determines that the Global Notes (in whole but not in part) should be
exchanged for Definitive Notes and delivers a written notice to such effect to
the Trustee; provided that in no event shall the Regulation S Temporary Global
Note be exchanged by the Company for Definitive Notes prior to (x) the
expiration of the Distribution Compliance Period and (y) the receipt by the
Registrar of any certificates required pursuant to Rule 903(c)(3)(ii)(B) under
the Securities Act. Upon the occurrence of either of the preceding events in (i)
or (ii) above, Definitive Notes shall be issued in such names as the Depositary
shall instruct the Trustee. Global Notes also may be exchanged or replaced, in
whole or in part, as provided in Sections 2.07 and 2.10 hereof. Every Note
authenticated and delivered in exchange for, or in lieu of, a Global Note or any
portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof,
shall be authenticated and delivered in the form of, and shall be, a Global
Note. A Global Note may not be exchanged for another Note other than as provided
in this Section 2.06(a), however, beneficial interests in a Global Note may be
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transferred and exchanged as provided in Section 2.06(b),(c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the
Global Notes.
The transfer and exchange of beneficial interests in the
Global Notes shall be effected through the Depositary, in accordance with the
provisions of this Indenture and the Applicable Procedures. Beneficial interests
in the Restricted Global Notes shall be subject to restrictions on transfer
comparable to those set forth herein to the extent required by the Securities
Act. Transfers of beneficial interests in the Global Notes also shall require
compliance with either subparagraph (i) or (ii) below, as applicable, as well as
one or more of the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be transferred
to Persons who take delivery thereof in the form of a beneficial
interest in the same Restricted Global Note in accordance with the
transfer restrictions set forth in the Private Placement Legend;
provided, however, that prior to the expiration of the Distribution
Compliance Period, transfers of beneficial interests in the Temporary
Regulation S Global Note may not be made to a U.S. Person or for the
account or benefit of a U.S. Person (other than an Initial Purchaser).
Beneficial interests in any Unrestricted Global Note may be transferred
to Persons who take delivery thereof in the form of a beneficial
interest in an Unrestricted Global Note. No written orders or
instructions shall be required to be delivered to the Registrar to
effect the transfers described in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests
in Global Notes. In connection with all transfers and exchanges of
beneficial interests that are not subject to Section 2.06(b)(i) above,
the transferor of such beneficial interest must deliver to the
Registrar either (A) (1) a written order from a Participant or an
Indirect Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to credit or cause to be
credited a beneficial interest in another Global Note in an amount
equal to the beneficial interest to be transferred or exchanged and (2)
instructions given in accordance with the Applicable Procedures
containing information regarding the Participant account to be credited
with such increase or (B) (1) a written order from a Participant or an
Indirect Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to cause to be issued a
Definitive Note in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given by the Depositary
to the Registrar containing information regarding the Person in whose
name such Definitive Note shall be registered to effect the transfer or
exchange referred to in (1) above; provided that in no event shall
Definitive Notes be issued upon the transfer or exchange of beneficial
interests in the Regulation S Temporary Global Note prior to (x) the
expiration of the Distribution Compliance Period and (y) the receipt by
the Registrar of any certificates required pursuant to Rule 903 under
the Securities Act. Upon consummation of an Exchange Offer by the
Company in accordance with Section 2.06(f) hereof, the requirements of
this Section 2.06(b)(ii) shall be deemed to have been satisfied upon
receipt by the Registrar of the instructions contained in the Letter of
Transmittal delivered by the Holder of such beneficial interests in the
Restricted Global Notes. Upon satisfaction of all of the requirements
for transfer or exchange of beneficial interests in Global Notes
contained in this Indenture and the Notes or otherwise applicable under
the Securities Act, the Trustee shall adjust the principal amount of
the relevant Global Note(s) pursuant to Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted
Global Note. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof
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in the form of a beneficial interest in another Restricted Global Note
if the transfer complies with the requirements of Section 2.06(b)(ii)
above and the Registrar receives the following:
(A) if the transferee will take delivery in the form of a
beneficial interest in the 144A Global Note, then the transferor
must deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (1) thereof;
(B) if the transferee will take delivery in the form of a
beneficial interest in the Regulation S Temporary Global Note or
the Regulation S Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item (2) thereof; and
(iv) Transfer and Exchange of Beneficial Interests in a
Restricted Global Note for Beneficial Interests in the Unrestricted
Global Note. A beneficial interest in any Restricted Global Note may be
exchanged by any holder thereof for a beneficial interest in an
Unrestricted Global Note or transferred to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global
Note if the exchange or transfer complies with the requirements of
Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights
Agreement and the holder of the beneficial interest to be
transferred, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a
Person who is an affiliate (as defined in Rule 144) of the
Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a beneficial interest in an Unrestricted Global
Note, a certificate from such holder in the form of Exhibit C
hereto, including the certifications in item (1)(a) thereof;
or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial
interest to a Person who shall take delivery thereof in the
form of a beneficial interest in an Unrestricted Global Note,
a certificate from such holder in the form of Exhibit B
hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require,
an Opinion of Counsel in form reasonably acceptable to the
Registrar to the effect that such exchange or transfer is in
compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are
no longer required in order to maintain compliance with the
Securities Act.
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If any such transfer is effected pursuant to subparagraph (B)
or (D) above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for
Definitive Notes.
(i) Beneficial Interests in Restricted Global Notes to
Restricted Definitive Notes. If any holder of a beneficial interest in
a Restricted Global Note proposes to exchange such beneficial interest
for a Restricted Definitive Note or to transfer such beneficial
interest to a Person who takes delivery thereof in the form of a
Restricted Definitive Note, then, upon receipt by the Registrar of the
following documentation:
(A) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a Restricted Definitive Note, a certificate from
such holder in the form of Exhibit C hereto, including the
certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred
to a QIB in accordance with Rule 144A under the Securities
Act, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (1) thereof;
(C) if such beneficial interest is being transferred
to a Non-U.S. Person in an offshore transaction in accordance
with Rule 903 or Rule 904 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (2) thereof;
(D) if such beneficial interest is being transferred
pursuant to an exemption from the registration requirements of
the Securities Act in accordance with Rule 144 under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(a)
thereof;
(E) if such beneficial interest is being transferred
to an Institutional Accredited Investor in reliance on an
exemption from the registration requirements of the Securities
Act other than those listed in subparagraphs (B) through (D)
above, a certificate to the effect set forth in Exhibit B
hereto, including the certifications, certificates and Opinion
of Counsel required by Item (3) thereof, if applicable, and a
certificate from the transferee to the effect set forth in
Exhibit D hereto;
(F) if such beneficial interest is being transferred
to the Company or any of its Subsidiaries, a certificate to
the effect set forth in Exhibit B hereto, including the
certifications in item (3)(b) thereof; or
(G) if such beneficial interest is being transferred
pursuant to an effective registration statement under the
Securities Act, a certificate to the effect set forth in
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Exhibit B hereto, including the certifications in item (3)(c)
thereof,
the Trustee shall cause the aggregate principal amount of the
applicable Global Note to be reduced accordingly pursuant to Section
2.06(h) hereof, and the Company shall execute and the Trustee shall
authenticate and deliver to the Person designated in the instructions a
Definitive Note in the appropriate principal amount. Any Definitive
Note issued in exchange for a beneficial interest in a Restricted
Global Note pursuant to this Section 2.06(c) shall be registered in
such name or names and in such authorized denomination or denominations
as the holder of such beneficial interest shall instruct the Registrar
through instructions from the Depositary and the Participant or
Indirect Participant. The Trustee shall deliver such Definitive Notes
to the Persons in whose names such Notes are so registered. Any
Definitive Note issued in exchange for a beneficial interest in a
Restricted Global Note pursuant to this Section 2.06(c)(i) shall bear
the Private Placement Legend and shall be subject to all restrictions
on transfer contained therein.
(ii) Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof, a
beneficial interest in the Regulation S Temporary Global Note may not
be exchanged for a Definitive Note or transferred to a Person who takes
delivery thereof in the form of a Definitive Note prior to (x) the
expiration of the Distribution Compliance Period and (y) the receipt by
the Registrar of any certificates required pursuant to Rule
903(b)(3)(ii)(B) under the Securities Act, except in the case of a
transfer pursuant to an exemption from the registration requirements of
the Securities Act other than Rule 903 or Rule 904.
(iii) Beneficial Interests in Restricted Global Notes to
Unrestricted Definitive Notes. A holder of a beneficial interest in a
Restricted Global Note may exchange such beneficial interest for an
Unrestricted Definitive Note or may transfer such beneficial interest
to a Person who takes delivery thereof in the form of an Unrestricted
Definitive Note only if:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights
Agreement and the holder of such beneficial interest, in the
case of an exchange, or the transferee, in the case of a
transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a broker-dealer, (2) a Person participating
in the distribution of the Exchange Notes or (3) a Person who
is an affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration
Rights Agreement;
(C) such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial
interest in a Restricted Global Note proposes to
exchange such beneficial interest for a Definitive
Note that does not bear the Private Placement Legend,
a certificate from such holder in the form of Exhibit
C hereto, including the certifications in item (1)(b)
thereof; or
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(2) if the holder of such beneficial
interest in a Restricted Global Note proposes to
transfer such beneficial interest to a Person who
shall take delivery thereof in the form of a
Definitive Note that does not bear the Private
Placement Legend, a certificate from such holder in
the form of Exhibit B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if
the Registrar so requests or if the Applicable Procedures so
require, an Opinion of Counsel in form reasonably acceptable
to the Registrar to the effect that such exchange or transfer
is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
(iv) Beneficial Interests in Unrestricted Global Notes to
Unrestricted Definitive Notes. If any holder of a beneficial interest
in an Unrestricted Global Note proposes to exchange such beneficial
interest for a Definitive Note or to transfer such beneficial interest
to a Person who takes delivery thereof in the form of a Definitive
Note, then, upon satisfaction of the conditions set forth in Section
2.06(b)(ii) hereof, the Trustee shall cause the aggregate principal
amount of the applicable Global Note to be reduced accordingly pursuant
to Section 2.06(h) hereof, and the Company shall execute and the
Trustee shall authenticate and deliver to the Person designated in the
instructions a Definitive Note in the appropriate principal amount. Any
Definitive Note issued in exchange for a beneficial interest pursuant
to this Section 2.06(c)(iii) shall be registered in such name or names
and in such authorized denomination or denominations as the holder of
such beneficial interest shall instruct the Registrar through
instructions from the Depositary and the Participant or Indirect
Participant. The Trustee shall deliver such Definitive Notes to the
Persons in whose names such Notes are so registered. Any Definitive
Note issued in exchange for a beneficial interest pursuant to this
Section 2.06(c)(iii) shall not bear the Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for
Beneficial Interests.
(i) Restricted Definitive Notes to Beneficial Interests in
Restricted Global Notes. If any Holder of a Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a
Restricted Global Note or to transfer such Restricted Definitive Notes
to a Person who takes delivery thereof in the form of a beneficial
interest in a Restricted Global Note, then, upon receipt by the
Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a
Restricted Global Note, a certificate from such Holder in the
form of Exhibit C hereto, including the certifications in item
(2)(b) thereof;
(B) if such Restricted Definitive Note is being
transferred to a QIB in accordance with Rule 144A under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (1)
thereof;
(C) if such Restricted Definitive Note is being
transferred to a Non-U.S. Person in an offshore transaction in
accordance with Rule 903 or Rule 904 under the Securities Act,
a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (2) thereof;
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(D) if such Restricted Definitive Note is being
transferred pursuant to an exemption from the registration
requirements of the Securities Act in accordance with Rule 144
under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in
item (3)(a) thereof;
(E) if such Restricted Definitive Note is being
transferred to the Company or any of its Subsidiaries, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(b) thereof; or
(F) if such Restricted Definitive Note is being
transferred pursuant to an effective registration statement
under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in
item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or
cause to be increased the aggregate principal amount of, in the case of
clause (A) above, the appropriate Restricted Global Note, in the case
of clause (B) above, the 144A Global Note, in the case of clause (C)
above, the Regulation S Global Note, and in all other cases, the 144A
Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of a Restricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global
Note or transfer such Restricted Definitive Note to a Person who takes
delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note only if:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution
of the Exchange Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration
Rights Agreement;
(C) such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes
proposes to exchange such Notes for a beneficial
interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (1)(c)
thereof; or
(2) if the Holder of such Definitive Notes
proposes to transfer such Notes to a Person who shall
take delivery thereof in the form of a beneficial
interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit B
hereto, including the certifications in item (4)
thereof;
and, in each such case set forth in this subparagraph (D), if
the Registrar so requests or if
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the Applicable Procedures so require, an Opinion of Counsel in
form reasonably acceptable to the Registrar to the effect that
such exchange or transfer is in compliance with the Securities
Act and that the restrictions on transfer contained herein and
in the Private Placement Legend are no longer required in
order to maintain compliance with the Securities Act.
Upon satisfaction of the conditions of any of the
subparagraphs in this Section 2.06(d)(ii), the Trustee shall cancel the
Definitive Notes and increase or cause to be increased the aggregate
principal amount of the Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note
may exchange such Note for a beneficial interest in an Unrestricted
Global Note or transfer such Definitive Notes to a Person who takes
delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note at any time. Upon receipt of a request for
such an exchange or transfer, the Trustee shall cancel the applicable
Unrestricted Definitive Note and increase or cause to be increased the
aggregate principal amount of one of the Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or
(iii) above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for
Definitive Notes.
Upon request by a Holder of Definitive Notes and such
Holder's compliance with the provisions of this Section 2.06(e), the Registrar
shall register the transfer or exchange of Definitive Notes. Prior to such
registration of transfer or exchange, the requesting Holder shall present or
surrender to the Registrar the Definitive Notes duly endorsed or accompanied by
a written instruction of transfer in form satisfactory to the Registrar duly
executed by such Holder or by his attorney, duly authorized in writing. In
addition, the requesting Holder shall provide any additional certifications,
documents and information, as applicable, required pursuant to the following
provisions of this Section 2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive
Notes. Any Restricted Definitive Note may be transferred to and
registered in the name of Persons who take delivery thereof in the form
of a Restricted Definitive Note if the Registrar receives the
following:
(A) if the transfer will be made pursuant to Rule
144A under the Securities Act, then the transferor must
deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (1) thereof;
(B) if the transfer will be made pursuant to Rule 903
or Rule 904, then the transferor must deliver a certificate in
the form of Exhibit B hereto, including the certifications in
item (2) thereof;
(C) if the transfer will be made pursuant to any
other exemption from the registration requirements of the
Securities Act, then the transferor must deliver a certificate
in the form of Exhibit B hereto, including the certifications,
certificates and
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Opinion of Counsel required by item (3) thereof, if
applicable; and
(D) if the transfer will be made to an Institutional
Accredited Investor pursuant to an exemption from the
registration requirements of the Securities Act other than
those listed in subparagraphs (A) and (B) above, then the
transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications, certificates and Opinion
of Counsel required by Item (3) thereof, if applicable, and
the transferee must deliver a certificate in the form of
Exhibit D hereto.
(ii) Restricted Definitive Notes to Unrestricted Definitive
Notes. Any Restricted Definitive Note may be exchanged by the Holder
thereof for an Unrestricted Definitive Note or transferred to a Person
or Persons who take delivery thereof in the form of an Unrestricted
Definitive Note if:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution
of the Exchange Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the
Shelf Registration Statement in accordance with the
Registration Rights Agreement;
(C) any such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted
Definitive Notes proposes to exchange such Notes for
an Unrestricted Definitive Note, a certificate from
such Holder in the form of Exhibit C hereto,
including the certifications in item (1)(d) thereof;
or
(2) if the Holder of such Restricted
Definitive Notes proposes to transfer such Notes to a
Person who shall take delivery thereof in the form of
an Unrestricted Definitive Note, a certificate from
such Holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if
the Registrar so requests, an Opinion of Counsel in form
reasonably acceptable to the Company to the effect that such
exchange or transfer is in compliance with the Securities Act
and that the restrictions on transfer contained herein and in
the Private Placement Legend are no longer required in order
to maintain compliance with the Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive
Notes. A Holder of Unrestricted Definitive Notes may transfer such
Notes to a Person who takes delivery thereof in the form of an
Unrestricted Definitive Note. Upon receipt of a request to register
such a transfer, the Registrar shall register the Unrestricted
Definitive Notes pursuant to the instructions from the
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Holder thereof.
(f) Exchange Offer.
Upon the occurrence of the Exchange Offer in accordance with
the Registration Rights Agreement, the Company shall issue and, upon receipt of
an Authentication Order in accordance with Section 2.02 hereof, the Trustee
shall authenticate (i) one or more Unrestricted Global Notes in an aggregate
principal amount equal to the principal amount of the beneficial interests in
the Restricted Global Notes tendered for acceptance by Persons that certify in
the applicable Letters of Transmittal that (x) they are not broker-dealers, (y)
they are not participating in a distribution of the Exchange Notes and (z) they
are not affiliates (as defined in Rule 144) of the Company, and accepted for
exchange in the Exchange Offer and (ii) Definitive Notes in an aggregate
principal amount equal to the principal amount of the Restricted Definitive
Notes accepted for exchange in the Exchange Offer. Concurrently with the
issuance of such Notes, the Trustee shall cause the aggregate principal amount
of the applicable Restricted Global Notes to be reduced accordingly, and the
Company shall execute and the Trustee shall authenticate and deliver to the
Persons designated by the Holders of Definitive Notes so accepted Definitive
Notes in the appropriate principal amount.
(g) Legends.
The following legends shall appear on the face of all Global
Notes and Definitive Notes issued under this Indenture unless specifically
stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below,
each Global Note and each Definitive Note (and all Notes
issued in exchange therefor or substitution thereof) shall
bear the legend in substantially the following form.
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE OR OTHER SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF
THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A)
IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON
AND IS ACQUIRING ITS NOTE IN AN "OFFSHORE TRANSACTION"
PURSUANT TO REGULATION S UNDER THE SECURITIES ACT, (2) AGREES
THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR
SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k) UNDER
THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER)
AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY
PREDECESSOR OF THIS SECURITY ) OR THE LAST DAY ON WHICH THE
COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS
SECURITY (OR ANY PREDECESSOR
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OF THIS SECURITY) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE
REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION
TERMINATION DATE"), OFFER, SELL OR OTHERWISE TRANSFER THIS
SECURITY EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER
THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES
FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER
IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS
AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED
STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES
ACT OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, (3) IF THIS
SECURITY WAS ACQUIRED IN AN OFFSHORE TRANSACTION PURSUANT TO
REGULATION S, AGREES THAT HEDGING TRANSACTIONS INVOLVING THIS
SECURITY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE
SECURITIES ACT AND (4) AGREES THAT IT WILL GIVE TO EACH PERSON
TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND; PROVIDED THAT THE COMPANY, THE
TRUSTEE AND THE REGISTRAR SHALL HAVE THE RIGHT PRIOR TO ANY
SUCH OFFER, SALE OR TRANSFER, IN EACH OF THE FOREGOING CASES,
TO REQUIRE THAT A CERTIFICATION OF TRANSFER IN THE FORM
PROVIDED IN THE INDENTURE IS COMPLETED AND DELIVERED BY THE
TRANSFEROR TO THE TRUSTEE IN CONNECTION WITH ANY TRANSFER OF
THIS SECURITY WITHIN THE TIME PERIOD REFERRED TO ABOVE. THE
HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE
TRANSFER CERTIFICATE RELATING TO THE MANNER OF SUCH TRANSFER
AND SUBMIT THE CERTIFICATE TO THE TRUSTEE. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE
THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT."
(B) Notwithstanding the foregoing, any Global Note or
Definitive Note issued pursuant to subparagraphs (b)(iv),
(c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f)
to this Section 2.06 (and all Notes issued in exchange
therefor or substitution thereof) shall not bear the Private
Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend
in substantially the following form:
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"UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE COMPANY
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME
OF CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITARY TRUST COMPANY (AND ANY
PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITARY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF
PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS
MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION
2.06 OF THE INDENTURE."
(iii) Regulation S Temporary Global Note Legend. The
Regulation S Temporary Global Note shall bear a legend in substantially
the following form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL
NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE
FOR PERMANENT OR CERTIFICATED NOTES, ARE AS SPECIFIED IN THIS
INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE
SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON."
(iv) Separability Legend. Until the Separation Date, each Note
shall bear the following legend (the "Separability Legend"):
"UNTIL THE SEPARATION DATE (AS DEFINED), THIS NOTE HAS BEEN
ISSUED AS, AND MUST BE TRANSFERRED AS, A UNIT TOGETHER WITH
THE ASSOCIATED WARRANTS TO PURCHASE COMMON STOCK OF THE
COMPANY. EACH UNIT CONSISTS OF $1,000 PRINCIPAL AMOUNT OF
NOTES AND A WARRANT TO PURCHASE 12.25856 SHARES OF COMMON
STOCK OF THE COMPANY, SUBJECT TO ADJUSTMENT UNDER CERTAIN
CIRCUMSTANCES. A COPY OF THE WARRANT AGREEMENT PURSUANT TO
WHICH THE WARRANTS HAVE BEEN ISSUED IS AVAILABLE FROM THE
COMPANY UPON REQUEST."
(h) Cancellation and/or Adjustment of Global Notes.
At such time as all beneficial interests in a particular
Global Note have been exchanged for Definitive Notes or a particular Global Note
has been redeemed, repurchased or canceled in whole
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<PAGE> 38
and not in part, each such Global Note shall be returned to or retained and
canceled by the Trustee in accordance with Section 2.11 hereof. At any time
prior to such cancellation, if any beneficial interest in a Global Note is
exchanged for or transferred to a Person who will take delivery thereof in the
form of a beneficial interest in another Global Note or for Definitive Notes,
the principal amount of Notes represented by such Global Note shall be reduced
accordingly and an endorsement shall be made on such Global Note by the Trustee
or by the Depositary at the direction of the Trustee to reflect such reduction;
and if the beneficial interest is being exchanged for or transferred to a Person
who will take delivery thereof in the form of a beneficial interest in another
Global Note, such other Global Note shall be increased accordingly and an
endorsement shall be made on such Global Note by the Trustee or by the
Depositary at the direction of the Trustee to reflect such increase.
(i) General Provisions Relating to Transfers and
Exchanges.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Global Notes
and Definitive Notes upon the Company's order or at the Registrar's
request.
(ii) No service charge shall be made to a holder of a
beneficial interest in a Global Note or to a Holder of a Definitive
Note for any registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith (other than
any such transfer taxes or similar governmental charge payable upon
exchange or transfer pursuant to Sections 2.10, 3.06, 3.09, 4.10, 4.15
and 9.05 hereof).
(iii) The Registrar shall not be required to register the
transfer of or exchange any Note selected for redemption in whole or in
part, except the unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive
Notes shall be the valid obligations of the Company, evidencing the
same debt, and entitled to the same benefits under this Indenture, as
the Global Notes or Definitive Notes surrendered upon such registration
of transfer or exchange.
(v) The Company shall not be required (A) to issue, to
register the transfer of or to exchange any Notes during a period
beginning at the opening of business 15 days before the day of any
selection of Notes for redemption under Section 3.02 hereof and ending
at the close of business on the day of selection, (B) to register the
transfer of or to exchange any Note so selected for redemption in whole
or in part, except the unredeemed portion of any Note being redeemed in
part or (c) to register the transfer of or to exchange a Note between a
record date and the next succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of a
transfer of any Note, the Trustee, any Agent and the Company may deem
and treat the Person in whose name any Note is registered as the
absolute owner of such Note for the purpose of receiving payment of
principal of and interest on such Notes and for all other purposes, and
none of the Trustee, any Agent or the Company shall be affected by
notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and
Definitive Notes in accordance with the provisions of Section 2.02
hereof.
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(viii) All certifications, certificates and Opinions of
Counsel required to be submitted to the Registrar pursuant to this
Section 2.06 to effect a registration of transfer or exchange may be
submitted by facsimile.
SECTION 2.07. REPLACEMENT NOTES
If any mutilated Note is surrendered to the Trustee or the
Company or the Trustee receives evidence to its satisfaction of the destruction,
loss or theft of any Note, the Company shall issue and the Trustee, upon receipt
of an Authentication Order, shall authenticate a replacement Note if the
Trustee's requirements are met. If required by the Trustee or the Company, an
indemnity bond must be supplied by the Holder that is sufficient in the judgment
of the Trustee and the Company to protect the Company, the Trustee, any Agent
and any authenticating agent from any loss that any of them may suffer if a Note
is replaced. The Company may charge for its expenses in replacing a Note.
Every replacement Note is an additional obligation of the
Company and shall be entitled to all of the benefits of this Indenture equally
and proportionately with all other Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes
authenticated by the Trustee except for those canceled by it, those delivered to
it for cancellation, those reductions in the interest in a Global Note effected
by the Trustee in accordance with the provisions hereof, and those described in
this Section as not outstanding.
If a Note is replaced pursuant to Section 2.07 hereof, it
ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under
Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
If the Paying Agent (other than the Company, a Subsidiary or
an Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal
amount of Notes have concurred in any direction, waiver or consent, Notes owned
by the Company, or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company, shall
be considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes that the Trustee knows are so owned
shall be so disregarded.
SECTION 2.10. TEMPORARY NOTES
Until certificates representing Notes are ready for delivery,
the Company may prepare and the Trustee, upon receipt of an Authentication
Order, shall authenticate temporary Notes. Temporary Notes shall be
substantially in the form of certificated Notes but may have variations that the
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Company considers appropriate for temporary Notes and as shall be reasonably
acceptable to the Trustee. Without unreasonable delay, the Company shall prepare
and the Trustee shall authenticate definitive Notes in exchange for temporary
Notes.
Holders of temporary Notes shall be entitled to all of the
benefits of this Indenture.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
canceled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all canceled Notes shall be delivered
to the Company. The Company may not issue new Notes to replace Notes that it has
paid or that have been delivered to the Trustee for cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes,
it shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee in
writing of the amount of defaulted interest proposed to be paid on each Note and
the date of the proposed payment. The Company shall fix or cause to be fixed
each such special record date and payment date, provided that no such special
record date shall be less than 10 days prior to the related payment date for
such defaulted interest. At least 15 days before the special record date, the
Company (or, upon the written request of the Company, the Trustee in the name
and at the expense of the Company) shall mail or cause to be mailed to Holders a
notice that states the special record date, the related payment date and the
amount of such interest to be paid.
ARTICLE 3.
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 30 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture pursuant to
which the redemption shall occur, (ii) the redemption date, (iii) the principal
amount of Notes to be redeemed and (iv) the redemption price (expressed as a
percentage or principal amount).
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED
If less than all of the Notes are to be redeemed or purchased
in an offer to purchase at any time, the Trustee shall select the Notes to be
redeemed or purchased among the Holders of the Notes in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot
or in accordance with any other method the Trustee shall deem fair and
appropriate; provided that no Notes of $1,000 or less shall be redeemed in part.
In the event of partial redemption by lot, the particular Notes to be redeemed
shall be selected, unless otherwise provided herein, not less than 30 nor more
than 60 days prior to the
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redemption date by the Trustee from the outstanding Notes not previously called
for redemption.
The Trustee shall promptly notify the Company in writing of
the Notes selected for redemption and, in the case of any Note selected for
partial redemption, the principal amount thereof to be redeemed. Notes and
portions of Notes selected shall be in amounts of $1,000 or whole multiples of
$1,000; except that if all of the Notes of a Holder are to be redeemed, the
entire outstanding amount of Notes held by such Holder, even if not a multiple
of $1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION
Subject to the provisions of Section 3.09 hereof, at least 30
days but not more than 60 days before a redemption date, the Company shall mail
or cause to be mailed, by first class mail, a notice of redemption to each
Holder whose Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall
state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of
the principal amount of such Note to be redeemed and that, after the redemption
date upon surrender of such Note, a new Note or Notes in principal amount equal
to the unredeemed portion shall be issued upon cancellation of the original
Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered
to the Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such
redemption payment, interest on Notes called for redemption ceases to accrue on
and after the redemption date;
(g) the paragraph of the Notes and/or Section of this
Indenture pursuant to which the Notes called for redemption are being redeemed;
and
(h) that no representation is made as to the correctness
or accuracy of the CUSIP number, if any, listed in such notice or printed on the
Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION
Once notice of redemption is mailed in accordance with Section
3.03 hereof, Notes
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called for redemption become irrevocably due and payable on the redemption date
at the redemption price. A notice of redemption may not be conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE
One Business Day prior to the redemption date, the Company
shall deposit with the Trustee or with the Paying Agent money sufficient to pay
the redemption price of and accrued interest on all Notes to be redeemed on that
date. The Trustee or the Paying Agent shall promptly return to the Company any
money deposited with the Trustee or the Paying Agent by the Company in excess of
the amounts necessary to pay the redemption price of, and accrued interest on,
all Notes to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption. If a Note is redeemed
on or after an interest record date but on or prior to the related interest
payment date, then any accrued and unpaid interest shall be paid to the Person
in whose name such Note was registered at the close of business on such record
date. If any Note called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest shall be paid on the unpaid principal, from the redemption
date until such principal is paid, and to the extent lawful on any interest not
paid on such unpaid principal, in each case at the rate provided in the Notes
and in Section 4.01 hereof.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company
shall issue and, upon the Company's written request, the Trustee shall
authenticate for the Holder at the expense of the Company a new Note equal in
principal amount to the unredeemed portion of the Note surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
(a) Except as set forth in clause (b) of this Section
3.07, the Company shall not have the option to redeem the Notes pursuant to this
Section 3.07 prior to June 15, 2003. Thereafter, the Company shall have the
option to redeem the Notes, in whole or in part, upon not less than 30 nor more
than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest and
Liquidated Damages thereon, if any, to the applicable redemption date (subject
to the right of Holders of record on the relevant record date to receive
interest and Liquidated Damages due on the relevant interest payment date), if
redeemed during the twelve-month period beginning on June 15 of the years
indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2003...................................................................107.000%
2004...................................................................104.667%
2005...................................................................102.333%
2006 and thereafter....................................................100.000%
</TABLE>
(b) Notwithstanding the provisions of clause (a) of this
Section 3.07, during the first 36 months after the date of original issuance of
the Notes, the Company may on any one or more occasions redeem up to 35% of the
originally issued aggregate principal amount of the Notes at a redemption price
of 114% of the principal amount thereof on the redemption date, plus accrued and
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unpaid interest and Liquidated Damages thereon, if any, to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive Liquidated Damages, if any, due on the relevant interest payment date),
with the net cash proceeds of one or more Equity Offerings; provided that at
least 65% of the originally issued aggregate principal amount of the Notes
remains outstanding immediately after the occurrence of such redemption
(excluding Notes held by the Company or any of its Subsidiaries); and provided,
further, that notice of any such redemption shall be given within 60 days of the
date of the closing of such Equity Offering.
(c) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08 MANDATORY REDEMPTION.
The Company shall not be required to make mandatory redemption
or sinking fund payments with respect to the Notes.
SECTION 3.09 OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
In the event that, pursuant to Section 4.10 hereof, the
Company shall be required to commence an offer to holders of Notes (an "Asset
Sale Offer") to purchase the maximum principal amount of Notes it shall follow
the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20
Business Days following its commencement and no longer, except to the extent
that a longer period is required by applicable law (the "Offer Period"). No
later than five Business Days after the termination of the Offer Period (the
"Purchase Date"), the Company shall purchase the principal amount of Notes
required to be purchased pursuant to Section 4.10 hereof (on a pro rata basis if
Notes tendered are in excess of the Excess Proceeds) (which maximum principal
amount of Notes shall be the "Offer Amount") or, if less than the Offer Amount
has been tendered, all Notes tendered in response to the Asset Sale Offer.
Payment for any Notes so purchased shall be made in the same manner as interest
payments are made.
If the Purchase Date is on or after an interest record date
and on or before the related interest payment date, any accrued and unpaid
interest shall be paid to the Person in whose name a Note is registered at the
close of business on such record date, and no additional interest shall be
payable to Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company
shall send, by first class mail, a notice to the Trustee and each of the
Holders, with a copy to the Trustee. The notice shall contain all instructions
and materials necessary to enable such Holders to tender Notes pursuant to the
Asset Sale Offer. The Asset Sale Offer shall be made to all Holders. The notice,
which shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this
Section 3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer
shall remain open;
(b) the Offer Amount, the purchase price and the Purchase
Date;
(c) that any Note not tendered or accepted for payment shall
continue to accrue interest;
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(d) that, unless the Company defaults in making such payment,
any Note accepted for payment pursuant to the Asset Sale Offer shall cease to
accrue interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to
an Asset Sale Offer may only elect to have all of such Note purchased and may
not elect to have only a portion of such Note purchased;
(f) that Holders electing to have a Note purchased pursuant to
any Asset Sale Offer shall be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, or transfer by book-entry transfer, to the Company, the Depositary,
if appointed by the Company, or a Paying Agent at the address specified in the
notice at least three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election
if the Company, the Depositary or the Paying Agent, as the case may be,
receives, not later than the expiration of the Offer Period, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Note the Holder delivered for purchase and a statement
that such Holder is withdrawing his election to have such Note purchased;
(h) that, if the aggregate principal amount of Notes tendered
by Holders exceeds the Offer Amount, the Company shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall
be issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Company shall, to the
extent lawful, accept for payment, on a pro rata basis to the extent necessary,
the Offer Amount of Notes or portions thereof tendered pursuant to the Asset
Sale Offer, or if less than the Offer Amount has been tendered, all Notes or
portions thereof tendered, and shall deliver to the Trustee an Officers'
Certificate stating that such Notes or portions thereof were accepted for
payment by the Company in accordance with the terms of this Section 3.09. The
Company, the Depositary or the Paying Agent, as the case may be, shall promptly
(but in any case not later than five days after the Purchase Date) mail or
deliver to each tendering Holder an amount equal to the purchase price of the
Notes tendered by such Holder and accepted by the Company for purchase, and the
Company shall promptly issue a new Note, and the Trustee, upon written request
from the Company, shall authenticate and mail or deliver such new Note to such
Holder, in a principal amount equal to any unpurchased portion of the Note
surrendered. Any Note not so accepted shall be promptly mailed or delivered by
the Company to the Holder thereof. The Company shall publicly announce the
results of the Asset Sale Offer on the Purchase Date.
Other than as specifically provided in this Section 3.09, any
purchase pursuant to this Section 3.09 shall be made pursuant to the provisions
of Sections 3.01 through 3.06 hereof.
ARTICLE 4.
COVENANTS
SECTION 4.01 PAYMENT OF NOTES.
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The Company shall pay or cause to be paid the principal of,
premium, if any, and interest and Liquidated Damages, if any, on the Notes on
the dates and in the manner provided in the Notes. Principal, premium, if any,
interest and Liquidated Damages, if any, shall be considered paid on the date
due if the Paying Agent, if other than the Company or a Subsidiary thereof,
holds as of 10:00 a.m. Eastern Time on the due date money deposited by the
Company in immediately available funds and designated for and sufficient to pay
all principal, premium, if any, interest and Liquidated Damages, if any, then
due. The Company shall pay all Liquidated Damages, if any, in the same manner on
the dates and in the amounts set forth in the Registration Rights Agreement.
The Company shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue principal at the
rate equal to 1% per annum in excess of the then applicable interest rate on the
Notes to the extent lawful; it shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue installments of
interest and Liquidated Damages (without regard to any applicable grace period)
at the same rate to the extent lawful.
SECTION 4.02 MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the
City of New York, an office or agency (which may be an office of the Trustee or
an affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
The Company may also from time to time designate one or more
other offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York for such purposes. The Company shall
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of
the Trustee as one such office or agency of the Company in accordance with
Section 2.03 hereof.
SECTION 4.03 REPORTS.
(a) Whether or not required by the rules and regulations of
the SEC, so long as any Notes are outstanding, the Company shall furnish to the
Holders of Notes (i) all quarterly and annual financial information that would
be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if
the Company were required to file such forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" that
describes the financial condition and results of operations of the Company and
its consolidated Subsidiaries (showing in reasonable detail, in the footnotes to
the financial statements and in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" (in each case to the extent not
prohibited by the SEC's rules and regulations), the financial condition and
results of operations of the Company and its Restricted Subsidiaries separate
from the financial condition and results of operations of the Unrestricted
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Subsidiaries of the Company and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants and (ii) all
current reports that would be required to be filed with the SEC on Form 8-K if
the Company were required to file such reports, in each case within the time
periods specified in the SEC's rules and regulations; provided, however, that
with respect to quarterly information relating to the fiscal quarter of the
Company ending on June 30, 1998, the Company shall not be required to furnish
such quarterly information to the Holders of Notes until 60 days after the end
of such quarter. In addition, following consummation of the Exchange Offer
contemplated by the Registration Rights Agreement, whether or not required by
the rules and regulations of the SEC, the Company shall file a copy of all such
information and reports with the SEC for public availability within the time
periods specified in the SEC's rules and regulations (unless the SEC will not
accept such a filing) and make such information available to securities analysts
and prospective investors upon request. The Company shall at times comply with
TIA Section 314(a).
(b) For so long as any Notes remain outstanding, the Company
shall furnish to the Holders and to securities analysts and prospective
investors, upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act.
SECTION 4.04 COMPLIANCE CERTIFICATE.
(a) The Company shall deliver to the Trustee, within 90 days
after the end of each fiscal year, an Officers' Certificate stating that a
review of the activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under this Indenture, and further
stating, as to each such Officer signing such certificate, that to the best of
his or her knowledge the Company has kept, observed, performed and fulfilled
each and every covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions of this
Indenture (or, if a Default or Event of Default shall have occurred, describing
all such Defaults or Events of Default of which he or she may have knowledge and
what action the Company is taking or proposes to take with respect thereto) and
that to the best of his or her knowledge no event has occurred and remains in
existence by reason of which payments on account of the principal of or interest
or Liquidated Damages, if any, on the Notes is prohibited or if such event has
occurred, a description of the event and what action the Company is taking or
proposes to take with respect thereto.
(b) So long as not contrary to the then current
recommendations of the American Institute of Certified Public Accountants, the
year-end financial statements delivered pursuant to Section 4.03(a) above shall
be accompanied by a written statement of the Company's independent public
accountants (who shall be a firm of established national reputation) that in
making the examination necessary for certification of such financial statements,
nothing has come to their attention that would lead them to believe that the
Company has violated any provisions of Article 4 or Article 5 hereof or, if any
such violation has occurred, specifying the nature and period of existence
thereof, it being understood that such accountants shall not be liable directly
or indirectly to any Person for any failure to obtain knowledge of any such
violation.
(c) The Company shall, so long as any of the Notes are
outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware
of any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes to
take with respect thereto.
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SECTION 4.05 TAXES.
The Company shall pay, and shall cause each of its
Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and
governmental levies except such as are contested in good faith and by
appropriate proceedings or where the failure to effect such payment is not
adverse in any material respect to the Holders of the Notes.
SECTION 4.06 STAY, EXTENSION AND USURY LAWS.
The Company covenants (to the extent that it may lawfully do
so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay, extension or
usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Indenture; and the Company (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and covenants that it shall not, by resort to any
such law, hinder, delay or impede the execution of any power herein granted to
the Trustee, but shall suffer and permit the execution of every such power as
though no such law has been enacted.
SECTION 4.07 RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any
dividend or make any other payment or distribution on account of the Company's
or any of its Restricted Subsidiaries' Equity Interests (including, without
limitation, any payment in connection with any merger or consolidation involving
the Company or any of its Restricted Subsidiaries) or to the direct or indirect
holders of the Company's or any of its Restricted Subsidiaries' Equity Interests
in their capacity as such (other than cash to the extent required to pay for
fractional shares of such Equity Interests (other than Disqualified Stock),
dividends or distributions payable in Equity Interests (other than Disqualified
Stock) of the Company or to the Company or a Restricted Subsidiary of the
Company and other than dividends, payments or other distributions on or with
respect to any Equity Interests of any Restricted Subsidiary of the Company to
the holders of its Equity Interests on a pro rata basis); (ii) purchase, redeem
or otherwise acquire or retire for value (including without limitation, in
connection with any merger or consolidation involving the Company) any Equity
Interests of the Company or any direct or indirect parent of the Company (other
than any such Equity Interests owned by the Company or any Restricted Subsidiary
of the Company); (iii) make any payment on or with respect to, or purchase,
redeem, defease or otherwise acquire or retire for value any Indebtedness that
is subordinated to the Notes, except a payment of interest or principal at
Stated Maturity; or (iv) make any Restricted Investment (all such payments and
other actions set forth in clauses (i) through (iv) above being collectively
referred to as "Restricted Payments"), unless, at the time of and after giving
effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would have been permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Debt to Consolidated Cash Flow
Ratio test set forth in Section 4.09 hereof; and
(c) such Restricted Payment, together with the aggregate
amount of all other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of this Indenture (excluding Restricted Payments
permitted by clauses (ii) through (v) of the next succeeding paragraph),
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is less than the sum, without duplication, of (i) 50% of the Consolidated Net
Income of the Company for the period (taken as one accounting period) from the
beginning of the first fiscal quarter commencing after the date of this
Indenture to the end of the Company's most recently ended fiscal quarter for
which internal financial statements are available at the time of such Restricted
Payment (or, if such Consolidated Net Income for such period is a deficit, less
100% of such deficit), plus (ii) 100% of the aggregate net cash proceeds
received by the Company since the date of this Indenture as a contribution to
its common equity capital or from the issue or sale of Equity Interests of the
Company (other than Disqualified Stock and except to the extent such net cash
proceeds are used to incur new Indebtedness outstanding pursuant to clause (ix)
in Section 4.09 hereof) or from the issue or sale of Disqualified Stock or debt
securities of the Company that have been converted into such Equity Interests
(other than Equity Interests (or Disqualified Stock or convertible debt
securities) sold to a Subsidiary of the Company and other than Disqualified
Stock or convertible debt securities that have been converted into Disqualified
Stock), plus (iii) to the extent that any Restricted Investment that was made
after the date of this Indenture is sold for cash or otherwise liquidated or
repaid for cash, the lesser of (A) the cash return of capital with respect to
such Restricted Investment (less the cost of disposition, if any) and (B) the
initial amount of such Restricted Investment, plus (iv) to the extent that any
Unrestricted Subsidiary of the Company is designated as a Restricted Subsidiary
after the date of this Indenture, the lesser of (A) the Fair Market Value of the
Company's Investment in such Subsidiary as of the date of such designation, or
(B) the sum of (x) the Fair Market Value of the Company's Investment in such
Subsidiary as of the date on which such Subsidiary was originally designated as
an Unrestricted Subsidiary and (y) the amount of any Investments made in such
Subsidiary subsequent to such designation (and treated as a Restricted Payment)
by the Company or any Restricted Subsidiary, plus (v) 50% of any dividends
received by the Company or a Restricted Subsidiary after the date of this
Indenture from an Unrestricted Subsidiary of the Company, to the extent that
such dividends were not otherwise included in Consolidated Net Income of the
Company for such period.
The foregoing provisions shall not prohibit (i) the payment of
any dividend within 60 days after the date of declaration thereof, if at said
date of declaration such payment would have complied with the provisions of this
Indenture; (ii) the making of any Investment or the redemption, repurchase,
retirement, defeasance or other acquisition of any subordinated Indebtedness or
Equity Interests of the Company in exchange for, or out of the net cash proceeds
of the substantially concurrent sale (other than to a Subsidiary of the Company)
of, any Equity Interests of the Company (other than any Disqualified Stock;
provided that such net cash proceeds are not used to incur new Indebtedness
pursuant to clause (ix) in Section 4.09 hereof); and provided further that, in
each such case, the amount of any such net cash proceeds that are so utilized
shall be excluded from clause (c) (ii) of the preceding paragraph; (iii) the
defeasance, redemption, repurchase or other acquisition of subordinated
Indebtedness with the net cash proceeds from an incurrence of Permitted
Refinancing Indebtedness; (iv) payments or distributions to dissenting
stockholders, pursuant to applicable law, pursuant to or in connection with a
consolidation, merger or transfer of assets that complies with the provisions of
Article 5 of this Indenture applicable to mergers, consolidations and transfers
of all or substantially all of the property and assets of the Company; and (v)
the repurchase, retirement or other acquisition or retirement for value of
Equity Interests of the Company that is held by any current or former employee,
director or consultant (or their estates or the beneficiaries of such estates)
of the Company or any Subsidiary, not to exceed (A) $1,000,000 in any calendar
year or (B) $5,000,000 in aggregate.
The Board of Directors may designate any Restricted Subsidiary
to be an Unrestricted Subsidiary if such designation would not cause a Default
or Event of Default; provided that in no event shall the businesses operated by
the Company's Restricted Subsidiaries as of the date of this Indenture be
transferred to or held by an Unrestricted Subsidiary. For purposes of making
such determination, all
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outstanding Investments by the Company and its Restricted Subsidiaries (except
to the extent repaid in cash) in the Subsidiary so designated shall be deemed to
be Restricted Payments at the time of such designation and shall reduce the
amount available for Restricted Payments under the first paragraph of this
Section. All such outstanding Investments will be deemed to constitute
Investments in an amount equal to the Fair Market Value of such Investments at
the time of such designation. Such designation will only be permitted if such
Restricted Payment would be permitted at such time and if such Restricted
Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The
Board of Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary if such designation would not cause a Default or Event of Default.
The amount of all Restricted Payments (other than cash) shall
be the Fair Market Value on the date of the Restricted Payment of the asset(s)
or securities proposed to be transferred or issued by the Company or the
applicable Restricted Subsidiary, as the case may be, pursuant to the Restricted
Payment.
SECTION 4.08 DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to (i)(a) pay dividends or make any other
distributions to the Company or any of its Restricted Subsidiaries (1) on its
Capital Stock or (2) with respect to any other interest or participation in, or
measured by, its profits, or (b) pay any indebtedness owed to the Company or any
of its Restricted Subsidiaries, (ii) make loans or advances to the Company or
any of its Restricted Subsidiaries or (iii) transfer any of its properties or
assets to the Company or any of its Restricted Subsidiaries. However, the
foregoing restrictions shall not apply to encumbrances or restrictions existing
under or by reason of (a) Existing Indebtedness as in effect on the date of this
Indenture, and any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof; provided that
such amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are no more restrictive, taken as a
whole, with respect to such dividend and other payment restrictions than those
contained in the applicable series of Existing Indebtedness as in effect on the
date of this Indenture, (b) any Indebtedness or any agreement pursuant to which
such Indebtedness was issued if (A) the encumbrance or restriction either (1)
applies only in the event of a payment default or a default with respect to a
financial covenant contained in such Indebtedness or agreement or (2) is
contained in one or more Credit Facilities, and (B) the encumbrance or
restriction is not materially more disadvantageous to the Holders of the Notes
than is customary in comparable financings (as determined in good faith by the
Company) based on market conditions prevailing at the time such encumbrance or
restriction is created, (c) this Indenture and the Notes, (d) applicable law,
(e) any instrument governing Indebtedness or Capital Stock of a Person acquired
by the Company or any of its Restricted Subsidiaries as in effect at the time of
such acquisition (except to the extent such Indebtedness was incurred in
connection with or in contemplation of such acquisition), which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person, or the property or assets of the Person, so
acquired, provided that, in the case of Indebtedness, such Indebtedness was
permitted by the terms of this Indenture to be incurred, (f) customary
non-assignment provisions in leases or licenses entered into in the ordinary
course of business, (g) purchase money obligations for property acquired in the
ordinary course of business that impose restrictions of the nature described in
clause (iii) above on the property so acquired, (h) any agreement for the sale
of a Restricted Subsidiary that restricts that Restricted Subsidiary pending its
sale, (i) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing Indebtedness
are no more restrictive
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than those contained in the agreements governing the Indebtedness being
refinanced, (j) Liens permitted to be incurred pursuant to the provisions of
Section 4.12 hereof and (k) customary provisions with respect to the disposition
or distribution of assets or property in joint venture agreements and other
similar agreements.
SECTION 4.09 INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF DISQUALIFIED STOCK.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Debt) and the Company shall not issue any
Disqualified Stock and shall not permit any of its Restricted Subsidiaries to
issue any shares of preferred stock; provided, however, that the Company may
incur Indebtedness (including Acquired Debt) or issue shares of Disqualified
Stock and the Company's Restricted Subsidiaries may incur Eligible Indebtedness
if, in each case, (i) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof and (ii) the Debt to
Consolidated Cash Flow Ratio at the time of incurrence of such Indebtedness or
the issuance of such Disqualified Stock, after giving pro forma effect to such
incurrence or issuance as of such date and to the use of proceeds therefrom as
if the same had occurred at the beginning of the most recently ended four full
fiscal quarter period of the Company for which internal financial statements are
available, would have been no greater than 5.5 to 1.
The provisions of the first paragraph of this Section shall
not apply to the incurrence of any of the following items of Indebtedness
(collectively, "Permitted Debt"):
(i) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness under Credit Facilities in an aggregate
principal amount (with letters of credit being deemed to have a
principal amount equal to the maximum potential liability of the
Company and its Restricted Subsidiaries thereunder) at any one time
outstanding not to exceed the greater of (x) $50,000,000 less the
aggregate amount of all Net Proceeds of Asset Sales applied to repay
Indebtedness under a Credit Facility pursuant to Section 4.10 hereof
and (y) 80% of the Eligible Receivables that are outstanding as of such
date of incurrence;
(ii) the incurrence by the Company and its Restricted
Subsidiaries of Existing Indebtedness;
(iii) the incurrence by the Company of Indebtedness
represented by the Notes and the New Notes;
(iv) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness to finance the cost (including the cost of
design, development, acquisition, construction, installation,
improvement, transportation or integration) to acquire equipment,
inventory or network assets (including acquisitions of the Capital
Stock of a Person that is or becomes a Restricted Subsidiary of the
Company to the extent of the Fair Market Value of the equipment,
inventory or network assets so acquired) after the date of this
Indenture;
(v) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or
the net proceeds of which are used to extend, refinance, renew,
replace, defease or refund Indebtedness (other than intercompany
Indebtedness) that was permitted by this Indenture to be incurred under
the first paragraph hereof
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or clauses (ii) through (v) of this paragraph;
(vi) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company
and any of its Restricted Subsidiaries; provided, however, that (i) if
the Company is the obligor on such Indebtedness, such Indebtedness is
expressly subordinated to the prior payment in full in cash of all
Obligations with respect to the Notes and (ii) (A) any subsequent
issuance or transfer of Equity Interests that results in any such
Indebtedness being held by a Person other than the Company or a
Restricted Subsidiary and (B) any sale or other transfer of any such
Indebtedness to a Person that is not either the Company or a Restricted
Subsidiary shall be deemed, in each case, to constitute an incurrence
of such Indebtedness by the Company or such Restricted Subsidiary, as
the case may be, not permitted by this clause (vi) of this paragraph;
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose
of fixing or hedging interest rate risk with respect to any floating
rate Indebtedness that is permitted by the terms of this Section 4.09
to be outstanding or currency exchange risk;
(viii) the guarantee by the Company or any of its Restricted
Subsidiaries of Indebtedness of the Company or a Restricted Subsidiary
of the Company that was permitted to be incurred by another provision
of this Section 4.09;
(ix) the incurrence by the Company of Indebtedness or by a
Restricted Subsidiary of the Company of Acquired Debt not to exceed, at
any one time outstanding the sum of (A) 2.0 times the aggregate net
cash proceeds received by the Company after the date of this Indenture
from the issuance and sale of its Common Stock (other than Disqualified
Stock) to a Person that is not a Subsidiary of the Company, to the
extent such net cash proceeds have not been used pursuant to clause
(c)(ii) of the first paragraph or clause (ii) of the second paragraph
of Section 4.07 hereof to make a Restricted Payment and (B) the Fair
Market Value of assets (other than cash and Cash Equivalents) that are
used or useful in a Telecommunications Business or Capital Stock of a
Person engaged in a Telecommunications Business that is or becomes a
Restricted Subsidiary of the Company, in each case, received by the
Company after the date of this Indenture from the issuance and sale of
its Common Stock (other than Disqualified Stock) to a Person that is
not a Subsidiary of the Company, to the extent such issuance and sale
of Common Stock has not been used pursuant to clause (ii) of the second
paragraph of Section 4.07 hereof to effect a Restricted Payment; and
provided further that such Indebtedness (other than Acquired Debt) does
not mature prior to the Stated Maturity of the Notes and the Weighted
Average Life to Maturity of such Indebtedness is longer than that of
the Notes;
(x) the incurrence by the Company of Indebtedness, to the
extent that the net proceeds thereof are promptly (A) used to
repurchase Notes tendered in a Change of Control Offer or (B) deposited
to defease all of the Notes as described in Article 8 of this
Indenture; and
(xi) the incurrence by the Company or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate principal
amount (or accreted value, as applicable) at any time outstanding, not
to exceed $50,000,000.
The Company shall not (i) incur any Indebtedness that is
contractually subordinated in right of payment to any other Indebtedness of the
Company unless such Indebtedness is also
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contractually subordinated in right of payment to the Notes on substantially
identical terms; provided, however, that no Indebtedness of the Company shall be
deemed to be contractually subordinated in right of payment to any other
Indebtedness of the Company solely by virtue of being unsecured and (ii) the
Company shall not permit any of its Unrestricted Subsidiaries to incur any
Indebtedness other than Non-Recourse Debt.
For purposes of determining compliance with this Section 4.09,
in the event that an item of Indebtedness meets the criteria of more than one of
the categories of Permitted Debt described in clauses (i) through (xi) above or
is entitled to be incurred pursuant to the first paragraph of this Section 4.09,
the Company shall, in its sole discretion, classify such item of Indebtedness in
any manner that complies with this Section 4.09 and may from time to time
reclassify such item of Indebtedness in any manner that would comply with this
Section 4.09 at the time of reclassification. Accrual of interest, accrual of
dividends, accretion or amortization of original issue discount and the payment
of interest in the form of additional Indebtedness, and the payment of dividends
in the form of additional shares of Disqualified Stock shall not be deemed to be
an incurrence of Indebtedness or an issuance of Disqualified Stock, as the case
may be, for purposes of this Section 4.09.
SECTION 4.10 ASSET SALES
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company (or
the Restricted Subsidiary, as the case may be) receives consideration at the
time of such Asset Sale at least equal to the Fair Market Value of the assets or
Equity Interests issued or sold or otherwise disposed of and (ii) at least 75%
of the consideration therefor received by the Company or such Restricted
Subsidiary is in the form of cash or Cash Equivalents; provided that the amount
of (x) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet), of the Company or any Restricted
Subsidiary (other than contingent liabilities and liabilities that are by their
terms subordinated to the Notes or any guarantee thereof) that are assumed by
the transferee of any such assets pursuant to a binding written agreement that
releases the Company or such Restricted Subsidiary from further liability and
(y) any securities, notes or other obligations received by the Company or any
such Restricted Subsidiary from such transferee that are converted by the
Company or such Restricted Subsidiary into cash within 30 days of the applicable
Asset Sale (to the extent of the cash received), shall be deemed to be cash for
purposes of this provision.
Within 365 days after the receipt of any Net Proceeds from an
Asset Sale, the Company or the applicable Restricted Subsidiary may apply such
Net Proceeds to: (a) the reduction of Indebtedness under a Credit Facility; (b)
the reduction of other Indebtedness of any of the Company's Restricted
Subsidiaries; (c) the acquisition of all or substantially all the assets of a
Telecommunications Business; (d) the acquisition of Voting Stock of a Person
engaged in the Telecommunications Business from a Person that is not a
Subsidiary of the Company; provided, that, after giving effect thereto, the
Person whose Voting Stock was so acquired is a Restricted Subsidiary of the
Company; or (e) the making of a capital expenditure or the acquisition of other
long-term assets that are used or useful in a Telecommunications Business.
Pending the final application of any such Net Proceeds, the Company may
temporarily reduce revolving credit borrowings or otherwise invest such Net
Proceeds in any manner that is not prohibited by this Indenture. Any Net
Proceeds from Asset Sales that are not applied or invested as provided in the
first sentence of this paragraph shall be deemed to constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds exceeds $5,000,000, the
Company shall be required to make an offer to all Holders of Notes and all
holders of other senior Indebtedness of the Company containing provisions
similar to those set forth in this Indenture with respect to offers to
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purchase or redeem with the proceeds of sales of assets (an "Asset Sale Offer")
to purchase the maximum principal amount of Notes and such other senior
Indebtedness of the Company that may be purchased out of the Excess Proceeds, at
an offer price in cash in an amount equal to 100% of the principal amount
thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any,
to the date of purchase (subject to the right of Holders of record on the
relevant record date to receive interest and Liquidated Damages, if any, due on
the relevant interest payment date), in accordance with the procedures set forth
in this Indenture and such other senior Indebtedness of the Company. To the
extent that any Excess Proceeds remain after consummation of an Asset Sale
Offer, the Company may use such Excess Proceeds for any purpose not otherwise
prohibited by this Indenture. If the aggregate principal amount of Notes and
such other senior Indebtedness of the Company tendered into such Asset Sale
Offer surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes and such other senior Indebtedness to be
purchased on a pro rata basis. Upon completion of such offer to purchase, the
amount of Excess Proceeds shall be reset at zero.
SECTION 4.11 TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"),
unless (i) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee
(a) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $1,000,000, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $5,000,000, an opinion as to the fairness
to the Holders of such Affiliate Transaction from a financial point of view
issued by a nationally recognized investment banking firm (or, if no such
investment banking firm is qualified to issue such an opinion, by a nationally
recognized appraisal firm or public accounting firm). Notwithstanding the
foregoing, the following items shall not be deemed to be Affiliate Transactions:
(i) any employment arrangements with any executive officer of the Company or a
Restricted Subsidiary that is entered into by the Company or any of its
Restricted Subsidiaries in the ordinary course of business and consistent with
past practice, (ii) transactions between or among the Company and/or its
Restricted Subsidiaries, (iii) payment of directors fees in an aggregate annual
amount not to exceed $25,000 per Person, (iv) Restricted Payments that are
permitted by the provisions of Section 4.07 hereof and (v) the issuance or sale
of Equity Interests (other than Disqualified Stock) of the Company.
SECTION 4.12 LIENS.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
suffer to exist any Lien securing Indebtedness or trade payables on any asset
now owned or hereafter acquired, or any income or profits therefrom or assign or
convey any right to receive income therefrom, except Permitted Liens.
SECTION 4.13 BUSINESS ACTIVITIES.
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The Company shall not, and shall not permit any Restricted
Subsidiary to, engage in any business other than a Telecommunications Business,
except to such extent as would not be material to the Company and its Restricted
Subsidiaries taken as a whole.
SECTION 4.14 CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company shall do or cause to
be done all things necessary to preserve and keep in full force and effect (i)
its corporate existence, and the corporate, partnership or other existence of
each of its Restricted Subsidiaries, in accordance with the respective
organizational documents (as the same may be amended from time to time) of the
Company or any such Restricted Subsidiary and (ii) the rights (charter and
statutory), licenses and franchises of the Company and its Subsidiaries;
provided, however, that the Company shall not be required to preserve any such
right, license or franchise, or the corporate, partnership or other existence of
any of its Restricted Subsidiaries, if the Board of Directors shall determine
that the preservation thereof is no longer desirable in the conduct of the
business of the Company and its Restricted Subsidiaries, taken as a whole, and
that the loss thereof is not adverse in any material respect to the Holders of
the Notes.
SECTION 4.15 OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, each Holder of
Notes shall have the right to require the Company to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of such Holder's Notes
pursuant to the offer described below (the "Change of Control Offer") at an
offer price in cash equal to 101% of the principal amount thereof plus accrued
and unpaid interest and Liquidated Damages thereon, if any (subject to the right
of Holders of record on the relevant record date to receive interest and
Liquidated Damages, if any, due on the relevant interest payment date), to the
date of purchase (the "Change of Control Payment"). Within 60 days following any
Change of Control, the Company shall state: (i) that the Change of Control Offer
is being made pursuant to this Section 4.15 and that all Notes tendered will be
accepted for payment; (ii) the purchase price and the purchase date, which shall
be no earlier than 30 business days and no later than 60 days from the date such
notice is mailed (the "Change of Control Payment Date"); (iii) that any Note not
tendered will continue to accrue interest; (iv) that, unless the Company
defaults in the payment of the Change of Control Payment, all Notes accepted for
payment pursuant to the Change of Control Offer shall cease to accrue interest
after the Change of Control Payment Date; (v) that Holders electing to have any
Notes purchased pursuant to a Change of Control Offer will be required to
surrender the Notes, with the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Notes completed, to the Paying Agent at the address
specified in the notice prior to the close of business on the third Business Day
preceding the Change of Control Payment Date; (vi) that Holders will be entitled
to withdraw their election if the Paying Agent receives, not later than the
close of business on the second Business Day preceding the Change of Control
Payment Date, a telegram, telex, facsimile transmission or letter setting forth
the name of the Holder, the principal amount of Notes delivered for purchase,
and a statement that such Holder is withdrawing his election to have the Notes
purchased; and (vii) that Holders whose Notes are being purchased only in part
will be issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered, which unpurchased portion must be equal to $1,000 in
principal amount or an integral multiple thereof.
(b) On the Change of Control Payment Date, the Company shall,
to the extent lawful, (i) accept for payment all Notes or portions thereof
properly tendered pursuant to the Change of Control Offer, (ii) deposit with the
Paying Agent an amount equal to the Change of Control Payment in
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respect of all Notes or portions thereof so tendered and (iii) deliver or cause
to be delivered to the Trustee the Notes so accepted together with an Officers'
Certificate stating the aggregate principal amount of Notes or portions thereof
being purchased by the Company. The Paying Agent shall promptly mail to each
Holder of Notes so tendered the Change of Control Payment for such Notes, and
the Trustee shall promptly authenticate and mail (or cause to be transferred by
book entry) to each Holder a new Note equal in principal amount to any
unpurchased portion of the Notes surrendered, if any; provided that each such
new Note shall be in a principal amount of $1,000 or an integral multiple
thereof.
(c) The Change of Control provisions described above shall be
applicable whether or not any other provisions of this Indenture are applicable.
The Company shall comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
applicable to any Change of Control Offer. To the extent that the provisions of
any such securities laws or securities regulations conflict with the provisions
of this Section, the Company shall comply with the applicable securities laws
and regulations and shall not be deemed to have breached its obligations under
this Section by virtue thereof.
SECTION 4.16 LIMITATION ON SALE AND LEASEBACK TRANSACTIONS.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, enter into any sale and leaseback transaction;
provided that the Company or any of its Restricted Subsidiaries may enter into a
sale and leaseback transaction if (i) the Company or such Restricted Subsidiary,
as applicable, could have (a) incurred Indebtedness in an amount equal to the
Attributable Debt relating to such sale and leaseback transaction pursuant to
the Debt to Consolidated Cash Flow Ratio test set forth in the first paragraph
of Section 4.09 hereof and (b) incurred a Lien to secure such Indebtedness
pursuant to Section 4.12 hereof, (ii) the gross cash proceeds of such sale and
leaseback transaction are at least equal to the Fair Market Value of the
property that is the subject of such sale and leaseback transaction and (iii)
the transfer of assets in such sale and leaseback transaction is permitted by,
and the Company applies the proceeds of such transaction in compliance with,
Section 4.10 hereof.
SECTION 4.17 LIMITATION ON ISSUANCES AND SALES OF EQUITY INTERESTS OF
RESTRICTED SUBSIDIARIES.
The Company (i) shall not, and shall not permit any Restricted
Subsidiary of the Company to, transfer, convey, sell, lease or otherwise dispose
of any Equity Interests in any Restricted Subsidiary of the Company to any
Person (other than the Company or a Wholly Owned Restricted Subsidiary of the
Company) and (ii) shall not permit any Restricted Subsidiary of the Company to
issue any of its Equity Interests (other than, if necessary, shares of its
Capital Stock constituting directors' qualifying shares) to any Person other
than to the Company or a Wholly Owned Restricted Subsidiary of the Company,
unless, in each such case: (a) as a result of such transfer, conveyance, sale,
lease or other disposition or issuance such Restricted Subsidiary no longer
constitutes a Subsidiary and (b) the Net Proceeds from such transfer,
conveyance, sale, lease or other disposition or issuance are applied in
accordance with Section 4.10 hereof.
SECTION 4.18 LIMITATION ON ISSUANCES OF GUARANTEES OF INDEBTEDNESS.
The Company shall not permit any Restricted Subsidiary,
directly or indirectly, to Guarantee or pledge any assets to secure the payment
of any other Indebtedness of the Company unless such Subsidiary simultaneously
executes and delivers a supplemental indenture to this Indenture (in
substantially the form attached as Exhibit F hereto) providing for the Guarantee
of the payment of the Notes by such Subsidiary, which Guarantee shall be senior
to or pari passu with such Subsidiary's
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Guarantee of or pledge to secure such other Indebtedness. Notwithstanding the
foregoing, any such Guarantee by a Subsidiary of the Notes shall provide by its
terms that it shall be automatically and unconditionally released and discharged
upon any sale, exchange or transfer, to any Person other than a Subsidiary of
the Company, of all of the Company's Equity Interests in, or all or
substantially all the assets of, such Subsidiary, which sale, exchange or
transfer is made in compliance with the applicable provisions of this Indenture.
The form of such Guarantee is attached as Exhibit E hereto.
ARTICLE 5.
SUCCESSORS
SECTION 5.01 MERGER, CONSOLIDATION OR SALE OF ASSETS.
The Company shall not consolidate or merge with or into
(whether or not the Company is the surviving corporation), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia, (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Notes and this Indenture pursuant to a supplemental indenture
in a form reasonably satisfactory to the Trustee, (iii) immediately after such
transaction, no Default or Event of Default exists and (iv) except in the case
of a merger of the Company with or into a Wholly Owned Restricted Subsidiary of
the Company and except in the case of a merger entered into solely for the
purpose of reincorporating the Company in another jurisdiction, the Company or
the entity or Person formed by or surviving any such consolidation or merger (if
other than the Company), or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made (A) shall, immediately
after giving pro forma effect to such transaction, have a Consolidated Net Worth
equal to or greater than the Consolidated Net Worth of the Company immediately
prior to such transaction and (B) shall, at the time of such transaction and
after giving pro forma effect thereto as if such transaction had occurred at the
beginning of the applicable four-quarter period, be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Debt to Consolidated Cash Flow
Ratio test set forth in the first paragraph of Section 4.09 hereof.
SECTION 5.02 SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all of
the assets of the Company in accordance with Section 5.01 hereof, the successor
corporation formed by such consolidation or into or with which the Company is
merged or to which such sale, assignment, transfer, lease, conveyance or other
disposition is made shall succeed to, and be substituted for (so that from and
after the date of such consolidation, merger, sale, lease, conveyance or other
disposition, the provisions of this Indenture referring to the "Company" shall
refer instead to the successor corporation and not to the Company), and may
exercise every right and power of the Company under this Indenture with the same
effect as if such successor Person had been named as the Company herein,
provided, however, that and the predecessor Company shall not be relieved from
the obligation to pay the principal of and interest on the Notes except in the
case of a sale of all of the Company's assets that meets the requirements of
Section 5.01 hereof.
ARTICLE 6.
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DEFAULTS AND REMEDIES
SECTION 6.01 EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(a) the Company defaults in the payment of interest, or
Liquidated Damages, if any, on the Notes when due and payable as to any Interest
Payment Date falling on or prior to June 15, 2001;
(b) the Company defaults in the payment of interest or
Liquidated Damages, if any, on the Notes when due and payable as to any Interest
Payment Date falling after June 15, 2001 and any such failure continues for 30
days;
(c) the Company defaults in the payment of principal of or
premium, if any, on the Notes when the same becomes due and payable at maturity,
upon redemption (including in connection with an offer to purchase) or
otherwise;
(d) the Company or any of its Subsidiaries fails to comply
with any of the provisions of Section 4.10, 4.15 or 5.01 hereof;
(e) the Company or any of its Subsidiaries fails to observe or
perform any other covenant, representation, warranty or other agreement in this
Indenture or the Notes for 30 days after notice to the Company by the Trustee or
the Holders of at least 25% in aggregate principal amount of the Notes then
outstanding voting as a single class;
(f) a default occurs under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of its
Restricted Subsidiaries (or the payment of which is guaranteed by the Company or
any of its Restricted Subsidiaries), whether such Indebtedness or guarantee now
exists, or is created after the date of this Indenture, which default (a) is
caused by a failure to pay principal of or premium, if any, or interest on such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (b) results in
the acceleration of such Indebtedness prior to its express maturity and, in each
case, the principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated, aggregates $5,000,000
more;
(g) a final judgment or final judgments for the payment of
money are entered by a court or courts of competent jurisdiction against the
Company or any of its Restricted Subsidiaries and such judgment or judgments
remain unpaid or undischarged for a period (during which execution shall not be
effectively stayed) of 60 days, provided that the aggregate of all such unpaid
or undischarged judgments exceeds $5,000,000;
(h) the Company asserts in writing that the Pledge Agreement
ceases to be in full force and effect before payment in full of the obligations
thereunder or the Collateral (as defined in the Pledge Agreement) becomes
subject to any Lien other than the Lien under the Pledge Agreement;
(i) the Company or any of its Restricted Subsidiaries pursuant
to or within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
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(ii) consents to the entry of an order for relief against
it in an involuntary case,
(iii) consents to the appointment of a custodian of it or
for all or substantially all of its property,
(iv) makes a general assignment for the benefit of its
creditors, or
(v) generally is not paying its debts as they become due;
(j) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(i) is for relief against the Company or any Restricted
Subsidiary in an involuntary case;
(ii) appoints a custodian of the Company or any Restricted
Subsidiary or for all or substantially all of the property of the
Company or any Restricted Subsidiary; or
(iii) orders the liquidation of the Company or any Restricted
Subsidiary;
and the order or decree remains unstayed and in effect for 60 consecutive days;
or
(k) except as permitted herein, any Guarantee shall be held in
any judicial proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect or any Guarantor, or any Person acting on
behalf of any Guarantor, shall deny or disaffirm its obligations under its
Guarantee (other than by reason of the termination of this Indenture or the
release of any such Guarantee in accordance with this Indenture).
SECTION 6.02 ACCELERATION.
If any Event of Default (other than an Event of Default
specified in clause (i) or (j) of Section 6.01 hereof with respect to the
Company or any Restricted Subsidiary) occurs and is continuing, the Trustee or
the Holders of at least 25% in principal amount of the then outstanding Notes
may declare all the Notes to be due and payable immediately. Upon any such
declaration, the principal of, if any, and accrued and unpaid interest and
Liquidated Damages, if any, shall become due and payable immediately.
Notwithstanding the foregoing, if an Event of Default specified in clause (i) or
(j) of Section 6.01 hereof occurs with respect to the Company or any Restricted
Subsidiary, all outstanding Notes shall be due and payable immediately without
further action or notice. The Holders of a majority in aggregate principal
amount of the then outstanding Notes by written notice to the Trustee may on
behalf of all of the Holders rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree and if all existing
Events of Default (except nonpayment of principal, interest or premium that has
become due solely because of the acceleration) have been cured or waived.
In the case of any Event of Default occurring by reason of any
willful action (or inaction) taken (or not taken) by or on behalf of the Company
with the intention of avoiding payment of the premium that the Company would
have had to pay if the Company then had elected to redeem the Notes pursuant to
the provisions of Section 3.07 hereof, an equivalent premium shall also become
due and payable immediately to the extent permitted by law upon the acceleration
of the Notes. If an Event of Default occurs prior to, June 15, 2003 by reason of
any willful action (or inaction) taken (or not taken)
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by or on behalf of the Company with the intention of avoiding the prohibition on
redemption of the Notes prior to, June 15, 2003, then the premium specified in
Section 3.07 hereof shall also become due and payable immediately to the extent
permitted by law upon the acceleration of the Notes.
SECTION 6.03 OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy to collect the payment of principal, premium, if
any, interest and Liquidated Damages, if any, on the Notes or to enforce the
performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Holder of a Note in exercising any right
or remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
SECTION 6.04 WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate principal
amount of the then outstanding Notes by notice to the Trustee may on behalf of
the Holders of all of the Notes waive any existing Default or Event of Default
and its consequences hereunder, except a continuing Default or Event of Default
in the payment of the principal of, premium and Liquidated Damages, if any, or
interest on, the Notes (including in connection with an offer to purchase)
(provided, however, that the Holders of a majority in aggregate principal amount
of the then outstanding Notes may rescind an acceleration and its consequences,
including any related payment default that resulted from such acceleration).
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.
SECTION 6.05 CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then
outstanding Notes may direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee or exercising any
trust or power conferred on it. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture that the Trustee determines
may be unduly prejudicial to the rights of other Holders of Notes or that may
involve the Trustee in personal liability.
SECTION 6.06 LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this
Indenture or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice
of a continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the
then outstanding Notes make a written request to the Trustee to pursue the
remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the
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Trustee indemnity satisfactory to the Trustee against any loss, liability or
expense;
(d) the Trustee does not comply with the request within 60
days after receipt of the request and the offer and, if requested, the provision
of indemnity; and
(e) during such 60-day period the Holders of a majority in
principal amount of the then outstanding Notes do not give the Trustee a
direction inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the
rights of another Holder of a Note or to obtain a preference or priority over
another Holder of a Note.
SECTION 6.07 RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the
right of any Holder of a Note to receive payment of principal, premium and
Liquidated Damages, if any, and interest on the Note, on or after the respective
due dates expressed in the Note (including in connection with an offer to
purchase), or to bring suit for the enforcement of any such payment on or after
such respective dates, shall not be impaired or affected without the consent of
such Holder.
SECTION 6.08 COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a) or (b)
hereof occurs and is continuing, the Trustee is authorized to recover judgment
in its own name and as trustee of an express trust against the Company for the
whole amount of principal of, premium and Liquidated Damages, if any, and
interest remaining unpaid on the Notes and interest on overdue principal and, to
the extent lawful, interest and such further amount as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
SECTION 6.09 TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and
other papers or documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel) and
the Holders of the Notes allowed in any judicial proceedings relative to the
Company (or any other obligor upon the Notes), its creditors or its property and
shall be entitled and empowered to collect, receive and distribute any money or
other property payable or deliverable on any such claims and any custodian in
any such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee, and in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 7.07 hereof. To the extent that the payment of any such
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07 hereof out
of the estate in any such proceeding, shall be denied for any reason, payment of
the same shall be secured by a Lien on, and shall be paid out of, any and all
distributions, dividends, money, securities and other properties that the
Holders may be entitled to receive in such proceeding whether in liquidation or
under any plan of reorganization or arrangement or otherwise. Nothing herein
contained shall be deemed to authorize the Trustee to authorize or consent to or
accept or adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or
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composition affecting the Notes or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.10 PRIORITIES.
If the Trustee collects any money pursuant to this Article, it
shall pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts
due under Section 7.07 hereof, including payment of all compensation, expense
and liabilities incurred, and all advances made, by the Trustee and the costs
and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the
Notes for principal, premium and Liquidated Damages, if any, and interest,
ratably, without preference or priority of any kind, according to the amounts
due and payable on the Notes for principal, premium and Liquidated Damages, if
any and interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any
payment to Holders of Notes pursuant to this Section 6.10.
SECTION 6.11 UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as a Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section does not apply to a suit by the Trustee, a suit by a
Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more
than 10% in principal amount of the then outstanding Notes.
ARTICLE 7.
TRUSTEE
SECTION 7.01 DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by
the express provisions of this Indenture and the Trustee need perform
only those duties that are specifically set forth in this Indenture and
no others, and no implied covenants or obligations shall be read into
this Indenture against the Trustee; and
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(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements
of this Indenture.
(c) The Trustee may not be relieved from liabilities for its
own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee is subject to
paragraphs (a), (b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or incur any liability. The Trustee shall be
under no obligation to exercise any of its rights and powers under this
Indenture at the request of any Holders, unless such Holder shall have offered
to the Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
SECTION 7.02 RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon any document
believed by it to be genuine and to have been signed or presented by the proper
Person. The Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel or both. The Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may
consult with counsel and the written advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and protection from liability
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any agent appointed
with due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within the
rights or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture,
any demand, request,
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direction or notice from the Company shall be sufficient if signed by an Officer
of the Company.
(f) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders unless such Holders shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities that might be incurred by it in compliance with such request or
direction.
SECTION 7.03 INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with like
rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
SECTION 7.04 TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture or the Notes, it
shall not be accountable for the Company's use of the proceeds from the Notes or
any money paid to the Company or upon the Company's direction under any
provision of this Indenture, it shall not be responsible for the use or
application of any money received by any Paying Agent other than the Trustee,
and it shall not be responsible for any statement or recital herein or any
statement in the Notes or any other document in connection with the sale of the
Notes or pursuant to this Indenture other than its certificate of
authentication.
SECTION 7.05 NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and
if it is known to the Trustee, the Trustee shall mail to Holders of Notes a
notice of the Default or Event of Default within 90 days after it occurs. Except
in the case of a Default or Event of Default in payment of principal of,
premium, if any, or interest on any Note, the Trustee may withhold the notice if
and so long as a committee of its Responsible Officers in good faith determines
that withholding the notice is not opposed to the interests of the Holders of
the Notes.
SECTION 7.06 REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each June 15 beginning with the June 15
following the date of this Indenture, and for so long as any Notes remain
outstanding, the Trustee shall mail to the Holders of the Notes a brief report
dated as of such reporting date that complies with TIA Section 313(a) (but if no
event described in TIA Section 313(a) has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Trustee also
shall comply with TIA Section 313(b)(2). The Trustee shall also transmit by mail
all reports as required by TIA Section 313(c).
A copy of each report at the time of its mailing to the
Holders of Notes shall be mailed to the Company and filed with the SEC and each
stock exchange on which the Notes are listed in accordance with TIA Section
313(d). The Company shall promptly notify the Trustee when the Notes are listed
on any stock exchange.
SECTION 7.07 COMPENSATION AND INDEMNITY.
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The Company shall pay to the Trustee from time to time
reasonable compensation for its acceptance of this Indenture and services
hereunder. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse the
Trustee promptly upon request for all reasonable disbursements, advances and
expenses incurred or made by it in addition to the compensation for its
services. Such expenses shall include the reasonable compensation, disbursements
and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee against any and all
losses, liabilities or expenses incurred by it arising out of or in connection
with the acceptance or administration of its duties under this Indenture,
including the costs and expenses of enforcing this Indenture against the Company
(including this Section 7.07) and defending itself against any claim (whether
asserted by the Company or any Holder or any other person) or liability in
connection with the exercise or performance of any of its powers or duties
hereunder, except to the extent any such loss, liability or expense may be
attributable to its negligence or bad faith. The Trustee shall notify the
Company promptly of any claim for which it may seek indemnity. Failure by the
Trustee to so notify the Company shall not relieve the Company of its
obligations hereunder. The Company shall defend the claim and the Trustee shall
cooperate in the defense. The Trustee may have separate counsel and the Company
shall pay the reasonable fees and expenses of such counsel. The Company need not
pay for any settlement made without its consent, which consent shall not be
unreasonably withheld.
The obligations of the Company under this Section 7.07 shall
survive the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section,
the Trustee shall have a Lien prior to the Notes on all money or property held
or collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(i) or (j) hereof occurs, the expenses
and the compensation for the services (including the fees and expenses of its
agents and counsel) are intended to constitute expenses of administration under
any Bankruptcy Law.
The Trustee shall comply with the provisions of TIA Section
313(b)(2) to the extent applicable.
SECTION 7.08 REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be
discharged from the trust hereby created by so notifying the Company. The
Holders of Notes of a majority in principal amount of the then outstanding Notes
may remove the Trustee by so notifying the Trustee and the Company in writing.
The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an
order for relief is entered with respect to the Trustee under any
Bankruptcy Law;
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(c) a custodian or public officer takes charge of the Trustee
or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office, the
Holders of a majority in principal amount of the then outstanding Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company, or the Holders of Notes of at least 10% in principal amount of the then
outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Note
who has been a Holder of a Note for at least six months, fails to comply with
Section 7.10 hereof, such Holder of a Note may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Notes. The retiring Trustee shall promptly transfer
all property held by it as Trustee to the successor Trustee, provided all sums
owing to the Trustee hereunder have been paid and subject to the Lien provided
for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant
to this Section 7.08, the Company's obligations under Section 7.07 hereof shall
continue for the benefit of the retiring Trustee.
SECTION 7.09 SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a
corporation organized and doing business under the laws of the United States of
America or of any state thereof that is authorized under such laws to exercise
corporate trustee power, that is subject to supervision or examination by
federal or state authorities and that has a combined capital and surplus of at
least $50,000,000 as set forth in its most recent published annual report of
condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to
TIA Section 310(b).
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated
therein.
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ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01 OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
When (i) the Company delivers to the Trustee all outstanding
Notes (other than Notes replaced pursuant to Section 2.07 hereof) for
cancellation or (ii) all outstanding Notes have become due and payable, whether
at maturity or as a result of the mailing of a notice of redemption pursuant to
Article 3 hereof and the Company irrevocably deposits with the Trustee funds
sufficient to pay at maturity or upon redemption all outstanding Notes,
including interest thereon to maturity or such redemption date (other than Notes
replaced pursuant to Section 2.07 hereof), and if in either case the Company
pays all other sums payable hereunder by the Company, then this Indenture shall,
subject to the proviso set forth in Section 8.02 hereof, cease to be of further
effect. The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article Eight.
SECTION 8.02 LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.02, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to
have been discharged from its obligations with respect to all outstanding Notes
on the date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same); provided that the following provisions which shall
survive until otherwise terminated or discharged hereunder: (a) the rights of
Holders of outstanding Notes to receive solely from the trust fund described in
Section 8.04 hereof, and as more fully set forth in such Section, payments in
respect of the principal of, premium, if any, and interest and Liquidated
Damages on such Notes when such payments are due, (b) the Company's obligations
with respect to such Notes under Article 2 and Section 4.02 hereof, (c) the
rights, powers, trusts, duties and immunities of the Trustee hereunder and the
Company's obligations in connection therewith and (d) this Article Eight.
Subject to compliance with this Article Eight, the Company may exercise its
option under this Section 8.02 notwithstanding the prior exercise of its option
under Section 8.03 hereof.
SECTION 8.03 COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.03, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, be released
from its obligations under the covenants contained in Sections 4.03, 4.04, 4.05,
4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17, 4.18 hereof and
Article 5 hereof, with respect to the outstanding Notes on and after the date
the conditions set forth in Section 8.04 hereof are satisfied (hereinafter,
"Covenant Defeasance"), and the Notes shall thereafter be deemed not
"outstanding" for the purposes of any direction, waiver, consent or declaration
or act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "outstanding" for all other purposes
hereunder (it being understood that such Notes shall not be deemed outstanding
for accounting purposes). For this purpose, Covenant Defeasance means that, with
respect to the outstanding Notes, the
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Company may omit to comply with and shall have no liability in respect of any
term, condition or limitation set forth in any such covenant, whether directly
or indirectly, by reason of any reference elsewhere herein to any such covenant
or by reason of any reference in any such covenant to any other provision herein
or in any other document and such omission to comply shall not constitute a
Default or an Event of Default under Section 6.01 hereof, but, except as
specified above, the remainder of this Indenture and such Notes shall be
unaffected thereby. In addition, upon the Company's exercise under Section 8.01
hereof of the option applicable to this Section 8.03 hereof, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, Sections
6.01(d) through 6.01(h) hereof and 6.01(k) hereof shall not constitute Events of
Default.
SECTION 8.04 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of
either Section 8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in
trust, for the benefit of the Holders, cash in United States dollars,
non-callable U.S. Government Obligations, or a combination thereof, in
such amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay the principal
of, premium, if any, and interest and Liquidated Damages on the
outstanding Notes on the stated maturity or on the applicable
redemption date, as the case may be, and the Company must specify
whether the Notes are being defeased to maturity or to a particular
redemption date;
(b) in the case of an election under Section 8.02 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in
the United States reasonably acceptable to the Trustee confirming that
(A) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the date of this
Indenture, there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon such Opinion
of Counsel shall confirm that, the Holders of the outstanding Notes
will not recognize income, gain or loss for federal income tax purposes
as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Legal Defeasance had not
occurred;
(c) in the case of an election under Section 8.03 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in
the United States reasonably acceptable to the Trustee confirming that
the Holders of the outstanding Notes will not recognize income, gain or
loss for federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event
of Default resulting from the incurrence of Indebtedness all or a
portion of the proceeds of which will be used to defease the Notes
pursuant to this Article Eight concurrently with such incurrence) or
insofar as Sections 6.01(i) or 6.01(j) hereof is concerned, at any time
in the period ending on the 91st day after the date of deposit;
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(e) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under, any
material agreement or instrument (other than this Indenture) to which
the Company or any of its Restricted Subsidiaries is a party or by
which the Company or any of its Restricted Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an Opinion
of Counsel (which may be subject to customary exceptions) to the effect
that after the 91st day following the deposit, the trust funds will not
be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally;
(g) the Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders over any other
creditors of the Company or with the intent of defeating, hindering,
delaying or defrauding any other creditors of the Company; and
(h) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for or relating to the Legal Defeasance
or the Covenant Defeasance have been complied with.
SECTION 8.05 DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD IN
TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and U.S. Government
Obligations (including the proceeds thereof) deposited with the Trustee (or
other qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, interest and
Liquidated Damages, if any, but such money need not be segregated from other
funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the cash or U.S.
Government Obligations deposited pursuant to Section 8.04 hereof or the
principal and interest received in respect thereof other than any such tax, fee
or other charge which by law is for the account of the Holders of the
outstanding Notes.
Anything in this Article Eight to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company from time to
time upon the request of the Company any money or U.S. Government Obligations
held by it as provided in Section 8.04 hereof which, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee (which may be the opinion
delivered under Section 8.04(a) hereof), are in excess of the amount thereof
that would then be required to be deposited to effect an equivalent Legal
Defeasance or Covenant Defeasance.
SECTION 8.06 REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of, premium,
if any, or interest on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due
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and payable shall be paid to the Company on its request or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Note shall
thereafter, as a secured creditor, look only to the Company for payment thereof,
and all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in the New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
SECTION 8.07 REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United
States dollars or U.S. Government Obligations in accordance with Section 8.02 or
8.03 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.02 or 8.03
hereof, as the case may be; provided, however, that, if the Company makes any
payment of principal of, premium, if any, Liquidated Damages, if any, or
interest on any Note following the reinstatement of its obligations, the Company
shall be subrogated to the rights of the Holders of such Notes to receive such
payment from the money held by the Trustee or Paying Agent.
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01 WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.02 of this Indenture, the Company
and the Trustee may amend or supplement this Indenture or the Notes without the
consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in
place of certificated Notes or to alter the provisions of Article 2
hereof (including the related definitions) in a manner that does not
materially adversely affect any Holder;
(c) to provide for the assumption of the Company's obligations
to the Holders of the Notes by a successor to the Company pursuant to
Article 5 hereof or to add any Person as a Guarantor hereunder;
(d) to make any change that would provide any additional
rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights hereunder of any Holder of the Note;
and
(e) to comply with requirements of the SEC in order to effect
or maintain the qualification of this Indenture under the TIA.
Upon the request of the Company accompanied by a resolution of
its Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon receipt by the
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Trustee of the documents described in Section 7.02 hereof, the Trustee shall
join with the Company in the execution of any amended or supplemental Indenture
authorized or permitted by the terms of this Indenture and to make any further
appropriate agreements and stipulations that may be therein contained, but the
Trustee shall not be obligated to enter into such amended or supplemental
Indenture that affects its own rights, duties or immunities under this Indenture
or otherwise.
SECTION 9.02 WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.02, the Company and
the Trustee may amend or supplement this Indenture (including Section 3.09, 4.10
and 4.15 hereto) and the Notes may be amended or supplemented with the consent
of the Holders of at least a majority in principal amount of the Notes then
outstanding (including, without limitation, consents obtained in connection with
a tender offer or exchange offer for, or purchase of, the Notes), and, subject
to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default
(other than a Default or Event of Default in the payment of the principal of,
premium, if any, or interest on the Notes, except a payment default resulting
from an acceleration that has been rescinded) or compliance with any provision
of this Indenture or the Notes may be waived with the consent of the Holders of
a majority in principal amount of the then outstanding Notes voting as a single
class (including, without limitation, consents obtained in connection with a
tender offer or exchange offer for, or purchase of, the Notes). Section 2.08
hereof shall determine which Notes are considered to be "outstanding" for
purposes of this Section 9.02.
Upon the request of the Company accompanied by a resolution of
its Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid,
and upon receipt by the Trustee of the documents described in Section 7.02
hereof, the Trustee shall join with the Company in the execution of such amended
or supplemental Indenture unless such amended or supplemental Indenture directly
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of
Notes under this Section 9.02 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section
becomes effective, the Company shall mail to the Holders of Notes affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amended or
supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the
Holders of a majority in aggregate principal amount of the Notes then
outstanding voting as a single class may waive compliance in a particular
instance by the Company with any provision of this Indenture or the Notes.
However, without the consent of each Holder affected, an amendment or waiver
under this Section 9.02 may not (with respect to any Notes held by a
non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of
any Note or alter or waive the provisions with respect to the
redemption of the Notes except as provided above with respect to
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Sections 3.09, 4.10 and 4.15 hereof;
(c) reduce the rate of or change the time for payment of
interest, including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest on the Notes (except a
rescission of acceleration of the Notes by the Holders of at least a
majority in aggregate principal amount of the then outstanding Notes
and a waiver of the payment default that resulted from such
acceleration);
(e) make any Note payable in money other than that stated in
the Notes;
(f) make any change in the provisions of this Indenture
relating to waivers of past Defaults or the rights of Holders of Notes
to receive payments of principal of, premium, if any, or interest on
the Notes;
(g) except as provided under Article 8 hereof or in accordance
with the terms of any Guarantee of the Notes by a Subsidiary of the
Company, release a Guaranteeing Subsidiary from its obligations under
its Guarantee of the Notes or make any change in a Guarantee of the
Notes by a Subsidiary of the Company that would aversely affect the
Holders of the Notes;
(h) modify the provisions of the Pledge Agreement or the
Indenture relating to the Pledged Securities in any manner adverse to
the Holders or release the Pledge Account from the Lien under the
Pledge Agreement or permit any other obligation to be secured by the
Pledge Agreement; or
(i) make any change in Section 6.04 or 6.07 hereof or in the
foregoing amendment and waiver provisions.
SECTION 9.03 COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes
shall be set forth in a amended or supplemental Indenture that complies with the
TIA as then in effect.
SECTION 9.04 REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Note is a continuing consent by the Holder of a
Note and every subsequent Holder of a Note or portion of a Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent
is not made on any Note. However, any such Holder of a Note or subsequent Holder
of a Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
SECTION 9.05 NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an
amendment, supplement or waiver on any Note thereafter authenticated. The
Company in exchange for all Notes may issue and the Trustee shall, upon receipt
of an Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
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Failure to make the appropriate notation or issue a new Note
shall not affect the validity and effect of such amendment, supplement or
waiver.
SECTION 9.06 TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article Nine if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Company may not sign an amendment or supplemental Indenture until the Board
of Directors approves it. In executing any amended or supplemental indenture,
the Trustee shall be entitled to receive and (subject to Section 7.01 hereof)
shall be fully protected in relying upon, in addition to the documents required
by Section 10.04 hereof, an Officers' Certificate and an Opinion of Counsel
stating that the execution of such amended or supplemental indenture is
authorized or permitted by this Indenture.
ARTICLE 10.
SECURITY
SECTION 10.01. SECURITY.
(a) On the date of this Indenture, the Company shall purchase,
and, at all times subject to the Pledge Agreement, shall maintain Pledged
Securities pledged to the Trustee as security for the benefit of the Holders in
such amount as will be sufficient upon receipt of scheduled interest and/or
principal payments of such Pledged Securities, in the opinion of a nationally
recognized firm of independent public accountants selected by the Company, to
provide for payment in full of the first six scheduled interest payments due on
the outstanding Notes. The Pledged Securities shall be pledged by the Company to
the Trustee for the benefit of the Holders and shall be held by the Trustee in
the Pledge Account pending disposition pursuant to the Pledge Agreement.
(b) Each Holder, by its acceptance of a Note, consents and
agrees to the terms of the Pledge Agreement (including, without limitation, the
provisions providing for foreclosure and release of the Pledged Securities) as
the same may be in effect or may be amended from time to time in accordance with
its terms, and authorizes and directs the Trustee to enter into the Pledge
Agreement and to perform its respective obligations and exercise its respective
rights thereunder in accordance therewith. The Company shall do or cause to be
done all such acts and things as may be necessary or proper, or as may be
required by the provisions of the Pledge Agreement, to assure and confirm to the
Trustee the security interest in the Pledged Securities contemplated hereby or
by the Pledge Agreement, or any part thereof as from time to time constituted,
so as to render the same available for the security and benefit of this
Indenture and of the Notes secured hereby, according to the intent and purposes
herein expressed. The Company shall take, or shall cause to be taken, any and
all actions reasonable required (and any action reasonably requested by the
Trustee) to cause the Pledge Agreement to create and maintain, as security for
the obligations of the Company under this Indenture and the Notes, valid and
enforceable first priority liens in and on all the Pledged Securities, in favor
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of the Trustee, superior to and prior to the rights of third Persons and subject
to no other Liens.
(c) The release of any Pledged Securities pursuant to the
Pledge Agreement will not be deemed to impair the security under this Indenture
in contravention of the provisions hereof if and to the extent the Pledged
Securities are released pursuant to this Indenture and the Pledge Agreement. To
the extent applicable, the Company shall cause TIA Section 314(d) relating to
the release of property or securities from the Lien and security interest of the
Pledge Agreement (other than pursuant to Sections 6(c) and 6(e) thereof) and
relating to the substitution therefor of any property or securities to be
subjected to the Lien and security interest of the Pledge Agreement to be
complied with. Any certificate or opinion required by TIA Section 314(d) may be
made by an officer of the Company, except in cases where TIA Section 314(d)
requires that such certificate or opinion be made by an independent Person,
which Person shall be an independent engineer, appraiser or other expert
selected by the Company
(d) The Trustee, in its sole discretion and without the
consent of the Holders, may, and at the request of the Holders of at least 25%
in aggregate principal amount of Notes then outstanding shall, on behalf of the
Holders, take all actions it deems necessary or appropriate in order to (i)
enforce any of the terms of the Pledge Agreement and (ii) collect and receive
any and all amounts payable in respect of the obligations of the Company
thereunder. The Trustee shall have the power to institute and to maintain such
suits and proceedings as the Trustee in its sole discretion may deem expedient
to preserve or protect its interests and the interests of the Holders in the
Pledged Securities (including the power to institute and maintain suits or
proceedings to restrain the enforcement of or compliance with any legislative or
other governmental enactment, rule or order that may be unconstitutional or
otherwise invalid if the enforcement of, or compliance with, such enactment,
rule or order would impair the security interest hereunder or be prejudicial to
the interests of the Holders or of the Trustee).
ARTICLE 11.
MISCELLANEOUS
SECTION 11.01 TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or
conflicts with the duties imposed by TIA Section 318(c), the imposed duties
shall control.
SECTION 11.02 NOTICES.
Any notice or communication by the Company or the Trustee to
the others is duly given if in writing and delivered in Person or mailed by
first class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, to the
others'
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<PAGE> 74
address
If to the Company:
Birch Telecom, Inc.
1004 Baltimore Avenue
Suite 900
Kansas City, MO 64105
Telecopier No.: (816) 842-7507
Attention: Chief Financial Officer
With a copy to:
Latham & Watkins
885 Third Avenue
Suite 1000
New York, NY 10022
Telecopier No.: (212) 751-4864
Attention: Kirk A. Davenport
If to the Trustee:
Norwest Bank Minnesota, National Association
Sixth and Marquette
Minneapolis, MN 55479-0069
Telecopier No.: (612) 667-9825
Attention: Jane Schweiger, Corporate Trust Department
The Company or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to
Holders) shall be deemed to have been duly given: at the time delivered by hand,
if personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by
first class mail, certified or registered, return receipt requested, or by
overnight air courier guaranteeing next day delivery to its address shown on the
register kept by the Registrar. Any notice or communication shall also be so
mailed to any Person described in TIA Section 313(c), to the extent required by
the TIA. Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it
shall mail a copy to the Trustee and each Agent at the same time.
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<PAGE> 75
SECTION 11.03 COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.
Holders may communicate pursuant to TIA Section 312(b) with
other Holders with respect to their rights under this Indenture or the Notes.
The Company, the Trustee, the Registrar and anyone else shall have the
protection of TIA Section 312(c).
SECTION 11.04 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee
to take any action under this Indenture, the Company shall furnish to the
Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set
forth in Section 11.05 hereof) stating that, in the opinion of the
signers, all conditions precedent and covenants, if any, provided for
in this Indenture relating to the proposed action have been satisfied;
and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set
forth in Section 11.05 hereof) stating that, in the opinion of such
counsel, all such conditions precedent and covenants have been
satisfied.
SECTION 11.05 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of
TIA Section 314(e) and shall include:
(a) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she
has made such examination or investigation as is necessary to enable
such Person to express an informed opinion as to whether or not such
covenant or condition has been satisfied; and
(d) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been satisfied.
SECTION 11.06 RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a
meeting of Holders. The Registrar or Paying Agent may make reasonable rules and
set reasonable requirements for its functions.
SECTION 11.07 NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS.
No past, present or future director, officer, employee,
incorporator or stockholder of the Company, as such, shall have any liability
for any obligations of the Company under the Notes, this Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part
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<PAGE> 76
of the consideration for issuance of the Notes.
SECTION 11.08 GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE
USED TO CONSTRUE THIS INDENTURE AND THE NOTES.
SECTION 11.09 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other
indenture, loan or debt agreement of the Company or its Subsidiaries or of any
other Person. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
SECTION 11.10 SUCCESSORS.
All agreements of the Company in this Indenture and the Notes
shall bind its successors. All agreements of the Trustee in this Indenture shall
bind its successors.
SECTION 11.11 SEVERABILITY.
In case any provision in this Indenture or in the Notes shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
SECTION 11.12 COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together represent the
same agreement.
SECTION 11.13 TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of
the Articles and Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part of this Indenture and shall
in no way modify or restrict any of the terms or provisions hereof.
[signature pages follow]
76
<PAGE> 77
EXECUTION COPY
SIGNATURES
DATED AS OF JUNE 23, 1998
BIRCH TELECOM, INC.
BY: /s/ Bradley Moline
---------------------------
Name: Bradley Moline
Title: V.P. Finance - Birch
Attest:
/s/ Gregory C. Lawhon
- -------------------------
Name:
Title:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
BY: /s/ Jane Schweiger
---------------------------
Name: Jane Schweiger
Title: Corporate Trust Officer
<PAGE> 78
EXECUTION COPY
EXHIBIT A-1
(FACE OF NOTE)
BIRCH TELECOM, INC.
14% SENIOR NOTES DUE 2008
CUSIP No. [__________]
No. 1 $[__________]
BIRCH TELECOM, INC., a Delaware corporation, promises to pay
to Cede & Co., or registered assigns, the principal sum of
[____________________] on June 15, 2008.
Interest Payment Dates: June 15 and December 15
Record Dates: June 1 and December 1
Additional provisions of this Note are set forth on the other
side of this Note
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<PAGE> 79
IN WITNESS WHEREOF, the Issuer has caused this Note to be
signed manually or by facsimile by its authorized Officer.
DATED: JUNE 23, 1998
BIRCH TELECOM, INC.
BY:
Name: David E. Scott
Title: Chief Executive Officer
This is one of the Global
Notes referred to in the
within-mentioned Indenture:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee
By:
Authorized Signatory
79
<PAGE> 80
EXECUTION COPY
(Back of Note)
14% Senior Notes due 2008
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY TRUST COMPANY (AND
ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY TRUST COMPANY), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN
PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.06 OF
THE INDENTURE.
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES
LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING ITS NOTE IN AN
"OFFSHORE TRANSACTION" PURSUANT TO REGULATION S UNDER THE SECURITIES ACT, (2)
AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH
SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k) UNDER THE SECURITIES ACT OR
ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY ) OR THE LAST DAY ON WHICH THE
COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF THIS SECURITY) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE
REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER,
SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY, (B) PURSUANT
TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR
OUTSIDE THE UNITED STATES WITHIN THE
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<PAGE> 81
MEANING OF REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
(3) IF THIS SECURITY WAS ACQUIRED IN AN OFFSHORE TRANSACTION PURSUANT TO
REGULATION S, AGREES THAT HEDGING TRANSACTIONS INVOLVING THIS SECURITY MAY NOT
BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT AND (4) AGREES THAT IT
WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE COMPANY, THE
TRUSTEE AND THE REGISTRAR SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER, IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATION OF
TRANSFER IN THE FORM PROVIDED IN THE INDENTURE IS COMPLETED AND DELIVERED BY THE
TRANSFEROR TO THE TRUSTEE IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY
WITHIN THE TIME PERIOD REFERRED TO ABOVE. THE HOLDER MUST CHECK THE APPROPRIATE
BOX SET FORTH ON THE TRANSFER CERTIFICATE RELATING TO THE MANNER OF SUCH
TRANSFER AND SUBMIT THE CERTIFICATE TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED
UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS
USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON"
HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
UNTIL THE SEPARATION DATE (AS DEFINED), THIS NOTE HAS BEEN
ISSUED AS, AND MUST BE TRANSFERRED AS, A UNIT TOGETHER WITH THE ASSOCIATED
WARRANTS TO PURCHASE COMMON STOCK OF THE COMPANY. EACH UNIT CONSISTS OF $1,000
PRINCIPAL AMOUNT OF NOTES AND A WARRANT TO PURCHASE 12.25856 SHARES OF COMMON
STOCK OF THE COMPANY, SUBJECT TO ADJUSTMENT UNDER CERTAIN CIRCUMSTANCES. A COPY
OF THE WARRANT AGREEMENT PURSUANT TO WHICH THE WARRANTS HAVE BEEN ISSUED IS
AVAILABLE FROM THE COMPANY UPON REQUEST.
Capitalized terms used herein shall have the meanings assigned
to them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Birch Telecom, Inc., a Delaware corporation
(the "Company"), promises to pay interest on the principal amount of this Note
at 14% per annum from June 23, 1998 until maturity and shall pay the Liquidated
Damages, if any, payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company will pay interest and Liquidated
Damages, if any, semi-annually on June 15 and December 15 of each year, or if
any such day is not a Business Day, on the next succeeding Business Day (each an
"Interest Payment Date"); provided that the first such interest payment date
shall be December 15, 1998. Interest on the Notes will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from June 23, 1998. The Company shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue principal and
premium, if any, from time to time on demand at a rate that is 1% per annum in
excess of the rate then in effect; it shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest and Liquidated Damages (without regard to any
applicable grace periods) from time to time on demand at the same rate to the
extent lawful. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on
the Notes (except defaulted interest) and Liquidated Damages to the Persons who
are registered Holders of Notes at the
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close of business on the June 1 or December 1 next preceding the Interest
Payment Date, even if such Notes are canceled after such record date and on or
before such Interest Payment Date, except as provided in Section 2.12 of the
Indenture with respect to defaulted interest. The Notes will be payable as to
principal, premium and Liquidated Damages, if any, and interest at the office or
agency of the Company maintained for such purpose within or without the City and
State of New York, or, at the option of the Company, payment of interest and
Liquidated Damages may be made by check mailed to the Holders at their addresses
set forth in the register of Holders, and provided that payment by wire transfer
of immediately available funds will be required with respect to principal of and
interest, premium and Liquidated Damages on, all Global Notes and all other
Notes the Holders of which shall have provided wire transfer instructions to the
Company or the Paying Agent. Such payment shall be in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, Norwest Bank
Minnesota, National Association, the Trustee under the Indenture, will act as
Paying Agent and Registrar. The Company may change any Paying Agent or Registrar
without notice to any Holder. The Company or any of its Subsidiaries may act in
any such capacity.*
4. INDENTURE. The Company issued the Notes under an
Indenture dated as of June 23, 1998 ("Indenture") between the Company and the
Trustee. The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all
such terms, and Holders are referred to the Indenture and such Act for a
statement of such terms. To the extent any provision of this Note conflicts with
the express provisions of the Indenture, the provisions of the Indenture shall
govern and be controlling. The Notes are obligations of the Company limited to
$115,000,000 in aggregate principal amount, plus amounts, if any, issued to pay
Liquidated Damages on outstanding Notes as set forth in Paragraph 2 hereof.
5. OPTIONAL REDEMPTION.
(A) EXCEPT AS SET FORTH IN SUBPARAGRAPH (B) OF THIS
PARAGRAPH 5, THE COMPANY SHALL NOT HAVE THE OPTION TO REDEEM THE NOTES PURSUANT
TO SECTION 3.07 OF THE INDENTURE PRIOR TO JUNE 15, 2003. THEREAFTER, THE COMPANY
SHALL HAVE THE OPTION TO REDEEM THE NOTES, IN WHOLE OR IN PART, UPON NOT LESS
THAN 30 NOR MORE THAN 60 DAYS NOTICE, AT THE REDEMPTION PRICES (EXPRESSED AS
PERCENTAGES OF PRINCIPAL AMOUNT) SET FORTH BELOW PLUS ACCRUED AND UNPAID
INTEREST AND LIQUIDATED DAMAGES THEREON, IF ANY, TO THE APPLICABLE REDEMPTION
DATE (SUBJECT TO THE RIGHT OF HOLDERS OF RECORD ON THE RELEVANT RECORD DATE TO
RECEIVE INTEREST AND LIQUIDATED DAMAGES DUE ON THE RELEVANT INTEREST PAYMENT
DATE), IF REDEEMED DURING THE TWELVE-MONTH PERIOD BEGINNING ON JUNE 15 OF THE
YEARS INDICATED BELOW:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2003 107.000%
2004 104.667%
2005 102.333%
2006 and thereafter 100.00%
</TABLE>
(B) NOTWITHSTANDING THE PROVISIONS OF SUBPARAGRAPH (A) OF THIS
PARAGRAPH 5, DURING THE FIRST 36 MONTHS AFTER THE DATE OF ORIGINAL ISSUANCE OF
THE NOTES, THE COMPANY MAY ON ANY ONE OR MORE OCCASIONS REDEEM UP TO 35% OF THE
ORIGINALLY ISSUED AGGREGATE PRINCIPAL AMOUNT OF THE NOTES AT A
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REDEMPTION PRICE OF 114% OF THE PRINCIPAL AMOUNT THEREOF ON THE REDEMPTION DATE,
PLUS LIQUIDATED DAMAGES THEREON, IF ANY, TO THE REDEMPTION DATE (SUBJECT TO THE
RIGHT OF HOLDERS OF RECORD ON THE RELEVANT RECORD DATE TO RECEIVE LIQUIDATED
DAMAGES, IF ANY, DUE ON THE RELEVANT INTEREST PAYMENT DATE), WITH THE NET CASH
PROCEEDS OF ONE OR MORE EQUITY OFFERINGS; PROVIDED THAT AT LEAST 65% OF THE
ORIGINALLY ISSUED AGGREGATE PRINCIPAL AMOUNT OF THE NOTES REMAINS OUTSTANDING
IMMEDIATELY AFTER THE OCCURRENCE OF SUCH REDEMPTION (EXCLUDING NOTES HELD BY THE
COMPANY OR ANY OF ITS SUBSIDIARIES);AND PROVIDED, FURTHER, THAT NOTICE OF SUCH
REDEMPTION SHALL BE GIVEN WITHIN 60 DAYS OF THE DATE OF THE CLOSING OF SUCH
EQUITY OFFERING.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall
not be required to make mandatory redemption payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) Upon the occurrence of a Change of Control, each Holder of
Notes shall have the right to require the Company to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of such Holder's Notes
pursuant to the offer described below (the "Change of Control Offer") at an
offer price in cash equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any (the "Change
of Control Payment"). Within 60 days following any Change of Control, the
Company shall mail a notice to each Holder setting forth the procedures
governing the Change of Control Offer as required by the Indenture.
(b) If the Company or a Restricted Subsidiary consummates any
Asset Sales, within five days of each date on which the aggregate amount of
Excess Proceeds exceeds $5,000,000, the Company shall commence an offer to all
Holders of Notes (an "Asset Sale Offer") pursuant to Section 3.09 of the
Indenture to purchase the maximum principal amount of Notes and such other
senior Indebtedness of the Company that may be purchased out of the Excess
Proceeds, at an offer price in cash in an amount equal to 100% of the principal
amount thereof plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the date of purchase (subject to the right of Holders of record on
the relevant record date to receive interest and Liquidated Damages, if any, due
on the relevant interest payment date), in accordance with the procedures set
forth in the Indenture and such other senior Indebtedness of the Company. To the
extent that any Excess Proceeds remain after consummation of an Asset Sale
Offer, the Company may use such Excess Proceeds for any purpose not otherwise
prohibited by the Indenture. If the aggregate principal amount of Notes and such
other senior Indebtedness of the Company tendered into such Asset Sale Offer
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes and such other senior Indebtedness to be
purchased on a pro rata basis. Upon completion of such offer to purchase, the
amount of Excess Proceeds shall be reset to zero. Holders of Notes that are the
subject of an offer to purchase will receive an Asset Sale Offer from the
Company prior to any related purchase date and may elect to have such Notes
purchased by completing the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be
mailed at least 30 days but not more than 60 days before the redemption date to
each Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes or
portions thereof called for redemption.
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<PAGE> 84
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Notes may be registered and Notes may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture. The Company need not
exchange or register the transfer of any Note or portion of a Note selected for
redemption, except for the unredeemed portion of any Note being redeemed in
part. Also, the Company need not exchange or register the transfer of any Notes
for a period of 15 days before a selection of Notes to be redeemed or during the
period between a record date and the corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a
Note may be treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain
exceptions, the Indenture or the Notes may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the then
outstanding Notes voting as a single class, and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes voting as a single class. Without the consent of any Holder of
a Note, the Indenture or the Notes may be amended or supplemented to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Notes in
addition to or in place of certificated Notes, to provide for the assumption of
the Company's obligations to Holders of the Notes in case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder, to comply with the requirements
of the SEC in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act.
12. DEFAULTS AND REMEDIES. Events of Default include (i)
a default in the payment of interest on, or Liquidated Damages, if any, on the
Notes when due and payable as to any Interest Payment Date falling on or prior
to June 15, 2001; (ii) a default in the payment of interest or Liquidated
Damages, if any, on the Notes when due and payable as to any Interest Payment
Date falling after June 15, 2001 and any such failure continues for 30 days;
(iii) a default in the payment of principal of or premium, if any, on the Notes
when the same becomes due and payable at maturity, upon redemption (including in
connection with an offer to purchase) or otherwise; (iv) failure by the Company
or any of its Subsidiaries to comply with any of the provisions of Section 4.10,
4.15 or 5.01 of the Indenture; (v) failure by the Company or any of its
Subsidiaries to observe or perform any other covenant, representation, warranty
or other agreement in the Indenture or the Notes for 30 days after notice to the
Company by the Trustee or the Holders of at least 25% in aggregate principal
amount of the Notes then outstanding; (vi) a default under any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Company or any
of its Restricted Subsidiaries (or the payment of which is guaranteed by the
Company or any of its Restricted Subsidiaries), whether such Indebtedness or
guarantee now exists, or is created after the date of the Indenture, which
default (a) is caused by a failure to pay principal of or premium, if any, or
interest on such Indebtedness prior to the expiration of the grace period
provided in such Indebtedness on the date of such default (a "Payment Default")
or (b) results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under which
there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $5,000,000 or more; (vii) a final judgment
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<PAGE> 85
or final judgments for the payment of money are entered by a court or courts of
competent jurisdiction against the Company or any of its Restricted Subsidiaries
and such judgment or judgments remain unpaid or undischarged for a period
(during which execution shall not be effectively stayed) of 60 days, provided
that the aggregate of all such unpaid or undischarged judgments exceeds
$5,000,000; (viii) the Company asserts in writing that the Pledge Agreement
ceases to be in full force and effect before payment in full of the obligations
thereunder or the Collateral (as defined in the Pledge Agreement) becomes
subject to any Lien other than the Lien under the Pledge Agreement; (ix) certain
events of bankruptcy or insolvency with respect to the Company or any of its
Restricted Subsidiaries; or (x) failure of any Guarantee to be in full force and
effect or the denial by any Guarantor, or any Person acting on behalf of any
Guarantor, of its obligations under its Guarantee. If any Event of Default
occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the then outstanding Notes may declare all the Notes to be
due and payable immediately. Notwithstanding the foregoing, in the case of an
Event of Default arising from certain events of bankruptcy or insolvency with
respect to the Company, all outstanding Notes will become due and payable
without further action or notice. Holders may not enforce the Indenture or the
Notes except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest. The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event Default in the payment
of the principal of, premium or Liquidated Damages, if any, or interest on, the
Notes. The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may otherwise deal with
the Company or its Affiliates, as if it were not the Trustee.
14. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
15. AUTHENTICATION. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES
AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders
of Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the Registration Rights
Agreement dated as of June 23, 1998, between the Company and the parties named
A1-85
<PAGE> 86
on the signature pages thereof (the "Registration Rights Agreement").
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No representation
is made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
Birch Telecom, Inc.
1004 Baltimore Avenue, Suite 900
Kansas City, MO 64105
Attention: Chief Financial Officer
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<PAGE> 87
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
(Insert assignee's soc. sec. or tax I.D. no.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint to transfer this Note on the books of the Company. The
agent may substitute another to act for him.
Date:
Your Signature:
(Sign exactly as your name appears on
the face of this Note)
Signature Guarantee.
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<PAGE> 88
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.10 or 4.15 of the Indenture, check the box below:
/ / Section 4.10 / / Section 4.15
If you want to elect to have only part of the Note purchased
by the Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state
the amount you elect to have purchased: $________
Date: Your Signature:
(Sign exactly as your name appears on the Note)
Tax Identification No:
Signature Guarantee.
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<PAGE> 89
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note for an
interest in another Global Note or for a Definitive Note, or exchanges of a part
of another Global Note or Definitive Note for an interest in this Global Note,
have been made:
<TABLE>
<CAPTION>
Principal Amount
Amount of Amount of of
decrease in increase in this Global Note
Principal Amount Principal Amount following such Signature of
of of decrease (or authorized officer
Date of Exchange this Global Note this Global Note increase) of Trustee
<S> <C> <C> <C> <C>
</TABLE>
A1-89
<PAGE> 90
EXECUTION COPY
EXHIBIT A-2
(Face of Regulation S Temporary Global Note)
BIRCH TELECOM, INC.
14% SENIOR NOTES DUE 2008
CUSIP NO.:____________
No. 1 $[__________]
BIRCH TELECOM, INC., a Delaware corporation, promises to pay
to Cede & Co., or registered assigns, the principal sum of
[_________________________] on June 15, 2008.
Interest Payment Dates: June 15 and December 15
Record Dates: June 1 and December 1
Additional provisions of this Note are set forth on the other
side of this Note
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<PAGE> 91
IN WITNESS WHEREOF, the Issuer has caused this Note to be
signed manually or by facsimile by its authorized Officer.
DATED: JUNE 23, 1998
BIRCH TELECOM, INC.
BY:
Name: David E. Scott
Title: Chief Executive Officer
This is one of the Global
Notes referred to in the
within-mentioned Indenture:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee
By:_______________________________________________________
_________Authorized Signatory
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<PAGE> 92
(Back of Note)
14% Senior Notes due 2008
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR PERMANENT OR CERTIFICATED
NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER
NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE
ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY TRUST COMPANY (AND
ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY TRUST COMPANY), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN
PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.06 OF
THE INDENTURE.
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES
LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING ITS NOTE IN AN
"OFFSHORE TRANSACTION" PURSUANT TO REGULATION S UNDER THE SECURITIES ACT, (2)
AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH
SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k) UNDER THE SECURITIES ACT OR
ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DAY ON WHICH THE
COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF THIS SECURITY) AND (Y) SUCH LATER DATE, IT ANY, AS MAY BE
REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER,
SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY, (B) PURSUANT
TO A REGISTRATION STATEMENT WHICH AHS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
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<PAGE> 93
ELIGIBLE UNDER FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S.
PERSONS THAT OCCUR OUTSIDE THE UNTIED STATES WITHIN THE MEANING OF REGULATION S
UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, (3) IF THIS SECURITY WAS
ACQUIRED IN AN OFFSHORE TRANSACTION PURSUANT TO REGULATION S, AGREES THAT
HEDGING TRANSACTIONS INVOLVING THIS SECURITY MAY NOT BE CONDUCTED UNLESS IN
COMPLIANCE WITH THE SECURITIES ACT AND (4) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND; PROVIDED THAT THE COMPANY, THE TRUSTEE AND THE REGISTRAR SHALL
HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER, IN EACH OF THE
FOREGOING CASES, TO REQUIRE THAT A CERTIFICATION OF TRANSFER IN THE FORM
PROVIDED IN THE INDENTURE IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
TRUSTEE IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN THE TIME PERIOD
REFERRED TO ABOVE. THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE
TRANSFER CERTIFICATE RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THE
CERTIFICATE TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE
HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS
GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
UNTIL THE SEPARATION DATE (AS DEFINED), THIS NOTE HAS BEEN
ISSUED AS, AND MUST BE TRANSFERRED AS, A UNIT TOGETHER WITH THE ASSOCIATED
WARRANTS TO PURCHASE COMMON STOCK OF THE COMPANY. EACH UNIT CONSISTS OF $1,000
PRINCIPAL AMOUNT OF NOTES AND A WARRANT TO PURCHASE 12.25856 SHARES OF COMMON
STOCK OF THE COMPANY, SUBJECT TO ADJUSTMENT UNDER CERTAIN CIRCUMSTANCES. A COPY
OF THE WARRANT AGREEMENT PURSUANT TO WHICH THE WARRANTS HAVE BEEN ISSUED IS
AVAILABLE FROM THE COMPANY UPON REQUEST.
Capitalized terms used herein shall have the meanings assigned
to them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Birch Telecom, Inc., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at 14%
per annum from June 23, 1998 until maturity and shall pay the Liquidated
Damages, if any, payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company will pay interest and Liquidated
Damages, if any, semi-annually on June 15 and December 15 of each year, or if
any such day is not a Business Day, on the next succeeding Business Day (each an
"Interest Payment Date"); provided that the first such interest payment date
shall be December 15, 1998. Interest on the Notes will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from June 23, 1998. The Company shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue principal and
premium, if any, from time to time on demand at a rate that is 1% per annum in
excess of the rate then in effect; it shall pay interest (including
post-petition interest in any proceeding under any
A2-93
<PAGE> 94
Bankruptcy Law) on overdue installments of interest and Liquidated Damages
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the
Notes (except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the June 1 or December 1
next preceding the Interest Payment Date, even if such Notes are canceled after
such record date and on or before such Interest Payment Date, except as provided
in Section 2.12 of the Indenture with respect to defaulted interest. The Notes
will be payable as to principal, premium and Liquidated Damages, if any, and
interest at the office or agency of the Company maintained for such purpose
within or without the City and State of New York, or, at the option of the
Company, payment of interest and Liquidated Damages may be made by check mailed
to the Holders at their addresses set forth in the register of Holders, and
provided that payment by wire transfer of immediately available funds will be
required with respect to principal of and interest, premium and Liquidated
Damages on, all Global Notes and all other Notes the Holders of which shall have
provided wire transfer instructions to the Company or the Paying Agent. Such
payment shall be in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, Norwest Bank
Minnesota, National Association, the Trustee under the Indenture, will act as
Paying Agent and Registrar. The Company may change any Paying Agent or Registrar
without notice to any Holder. The Company or any of its Subsidiaries may act in
any such capacity.*
4. INDENTURE. The Company issued the Notes under an Indenture
dated as of June 23, 1998 ("Indenture") between the Company and the Trustee. The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939, as amended (15
U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such terms,
and Holders are referred to the Indenture and such Act for a statement of such
terms. To the extent any provision of this Note conflicts with the express
provisions of the Indenture, the provisions of the Indenture shall govern and be
controlling. The Notes are obligations of the Company limited to $115,000,000 in
aggregate principal amount, plus amounts, if any, issued to pay Liquidated
Damages on outstanding Notes as set forth in Paragraph 2 hereof.
5. OPTIONAL REDEMPTION.
(A) EXCEPT AS SET FORTH IN SUBPARAGRAPH (B) OF THIS PARAGRAPH
5, THE COMPANY SHALL NOT HAVE THE OPTION TO REDEEM THE NOTES PURSUANT TO SECTION
3.07 OF THE INDENTURE PRIOR TO JUNE 15, 2003. THEREAFTER, THE COMPANY SHALL HAVE
THE OPTION TO REDEEM THE NOTES, IN WHOLE OR IN PART, UPON NOT LESS THAN 30 NOR
MORE THAN 60 DAYS NOTICE, AT THE REDEMPTION PRICES (EXPRESSED AS PERCENTAGES OF
PRINCIPAL AMOUNT) SET FORTH BELOW PLUS ACCRUED AND UNPAID INTEREST AND
LIQUIDATED DAMAGES THEREON, IF ANY, TO THE APPLICABLE REDEMPTION DATE (SUBJECT
TO THE RIGHT OF HOLDERS OF RECORD ON THE RELEVANT RECORD DATE TO RECEIVE
INTEREST AND LIQUIDATED DAMAGES DUE ON THE RELEVANT INTEREST PAYMENT DATE), IF
REDEEMED DURING THE TWELVE-MONTH PERIOD BEGINNING ON JUNE 15 OF THE YEARS
INDICATED BELOW:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2003 107.000%
2004 104.667%
</TABLE>
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<PAGE> 95
<TABLE>
<S> <C>
2005 102.333%
2006 and thereafter 100.00%
</TABLE>
(B) NOTWITHSTANDING THE PROVISIONS OF SUBPARAGRAPH (A) OF THIS
PARAGRAPH 5, DURING THE FIRST 36 MONTHS AFTER THE DATE OF ORIGINAL ISSUANCE OF
THE NOTES, THE COMPANY MAY ON ANY ONE OR MORE OCCASIONS REDEEM UP TO 35% OF THE
ORIGINALLY ISSUED AGGREGATE PRINCIPAL AMOUNT OF THE NOTES AT A REDEMPTION PRICE
OF 114% OF THE PRINCIPAL AMOUNT THEREOF ON THE REDEMPTION DATE, PLUS LIQUIDATED
DAMAGES THEREON, IF ANY, TO THE REDEMPTION DATE (SUBJECT TO THE RIGHT OF HOLDERS
OF RECORD ON THE RELEVANT RECORD DATE TO RECEIVE LIQUIDATED DAMAGES, IF ANY, DUE
ON THE RELEVANT INTEREST PAYMENT DATE), WITH THE NET CASH PROCEEDS OF ONE OR
MORE EQUITY OFFERINGS; PROVIDED THAT AT LEAST 65% OF THE ORIGINALLY ISSUED
AGGREGATE PRINCIPAL AMOUNT OF THE NOTES REMAINS OUTSTANDING IMMEDIATELY AFTER
THE OCCURRENCE OF SUCH REDEMPTION (EXCLUDING NOTES HELD BY THE COMPANY OR ANY OF
ITS SUBSIDIARIES);AND PROVIDED, FURTHER, THAT NOTICE OF SUCH REDEMPTION SHALL BE
GIVEN WITHIN 60 DAYS OF THE DATE OF THE CLOSING OF SUCH EQUITY OFFERING.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall
not be required to make mandatory redemption payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) Upon the occurrence of a Change of Control, each Holder of
Notes shall have the right to require the Company to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of such Holder's Notes
pursuant to the offer described below (the "Change of Control Offer") at an
offer price in cash equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any (the "Change
of Control Payment"). Within 60 days following any Change of Control, the
Company shall mail a notice to each Holder setting forth the procedures
governing the Change of Control Offer as required by the Indenture.
(b) If the Company or a Restricted Subsidiary consummates any
Asset Sales, within five days of each date on which the aggregate amount of
Excess Proceeds exceeds $5,000,000, the Company shall commence an offer to all
Holders of Notes (an "Asset Sale Offer") pursuant to Section 3.09 of the
Indenture to purchase the maximum principal amount of Notes and such other
senior Indebtedness of the Company that may be purchased out of the Excess
Proceeds, at an offer price in cash in an amount equal to 100% of the principal
amount thereof plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the date of purchase (subject to the right of Holders of record on
the relevant record date to receive interest and Liquidated Damages, if any, due
on the relevant interest payment date), in accordance with the procedures set
forth in the Indenture and such other senior Indebtedness of the Company. To the
extent that any Excess Proceeds remain after consummation of an Asset Sale
Offer, the Company may use such Excess Proceeds for any purpose not otherwise
prohibited by the Indenture. If the aggregate principal amount of Notes and such
other senior Indebtedness of the Company tendered into such Asset Sale Offer
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes and such other senior Indebtedness to be
purchased on a pro rata basis. Upon completion of such offer to purchase, the
amount of Excess Proceeds shall be reset to zero. Holders of Notes that are the
subject of an offer to purchase will receive an Asset Sale Offer from the
Company prior to any related purchase date and may elect to have such Notes
purchased by completing the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Notes.
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<PAGE> 96
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed
at least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes or
portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Notes may be registered and Notes may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture. The Company need not
exchange or register the transfer of any Note or portion of a Note selected for
redemption, except for the unredeemed portion of any Note being redeemed in
part. Also, the Company need not exchange or register the transfer of any Notes
for a period of 15 days before a selection of Notes to be redeemed or during the
period between a record date and the corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may
be treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain
exceptions, the Indenture or the Notes may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the then
outstanding Notes voting as a single class, and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes voting as a single class. Without the consent of any Holder of
a Note, the Indenture or the Notes may be amended or supplemented to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Notes in
addition to or in place of certificated Notes, to provide for the assumption of
the Company's obligations to Holders of the Notes in case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder, to comply with the requirements
of the SEC in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act.
12. DEFAULTS AND REMEDIES. Events of Default include (i) a
default in the payment of interest on, or Liquidated Damages, if any, on the
Notes when due and payable as to any Interest Payment Date falling on or prior
to June 15, 2001; (ii) a default in the payment of interest or Liquidated
Damages, if any, on the Notes when due and payable as to any Interest Payment
Date falling after June 15, 2001 and any such failure continues for 30 days;
(iii) a default in the payment of principal of or premium, if any, on the Notes
when the same becomes due and payable at maturity, upon redemption (including in
connection with an offer to purchase) or otherwise; (iv) failure by the Company
or any of its Subsidiaries to comply with any of the provisions of Section 4.10,
4.15 or 5.01 of the Indenture; (v) failure by the Company or any of its
Subsidiaries to observe or perform any other covenant, representation, warranty
or other agreement in the Indenture or the Notes for 30 days after notice to the
Company by the Trustee or the Holders of at least 25% in aggregate principal
amount of the Notes then outstanding; (vi) a default under any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Company or any
of its Restricted Subsidiaries (or the payment of which is guaranteed by the
Company or any of its Restricted Subsidiaries), whether such Indebtedness or
guarantee now exists, or is created after the date of the Indenture, which
default (a) is caused by a failure to pay principal of or premium, if any, or
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<PAGE> 97
interest on such Indebtedness prior to the expiration of the grace period
provided in such Indebtedness on the date of such default (a "Payment Default")
or (b) results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under which
there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $5,000,000 or more; (vii) a final judgment or final
judgments for the payment of money are entered by a court or courts of competent
jurisdiction against the Company or any of its Restricted Subsidiaries and such
judgment or judgments remain unpaid or undischarged for a period (during which
execution shall not be effectively stayed) of 60 days, provided that the
aggregate of all such unpaid or undischarged judgments exceeds $5,000,000;
(viii) the Company asserts in writing that the Pledge Agreement ceases to be in
full force and effect before payment in full of the obligations thereunder or
the Collateral (as defined in the Pledge Agreement) becomes subject to any Lien
other than the Lien under the Pledge Agreement; (ix) certain events of
bankruptcy or insolvency with respect to the Company or any of its Restricted
Subsidiaries; or (x) failure of any Guarantee to be in full force and effect or
the denial by any Guarantor, or any Person acting on behalf of any Guarantor, of
its obligations under its Guarantee. If any Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Notes may declare all the Notes to be due and payable
immediately. Notwithstanding the foregoing, in the case of an Event of Default
arising from certain events of bankruptcy or insolvency with respect to the
Company, all outstanding Notes will become due and payable without further
action or notice. Holders may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to certain limitations, Holders of a majority
in principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Notes notice of any continuing Default or Event of Default (except a Default or
Event of Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest. The Holders of a
majority in aggregate principal amount of the Notes then outstanding by notice
to the Trustee may on behalf of the Holders of all of the Notes waive any
existing Default or Event of Default and its consequences under the Indenture
except a continuing Default or Event Default in the payment of the principal of,
premium or Liquidated Damages, if any, or interest on, the Notes. The Company is
required to deliver to the Trustee annually a statement regarding compliance
with the Indenture, and the Company is required upon becoming aware of any
Default or Event of Default, to deliver to the Trustee a statement specifying
such Default or Event of Default.
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may otherwise deal with
the Company or its Affiliates, as if it were not the Trustee.
14. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
15. AUTHENTICATION. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
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<PAGE> 98
17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES
AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders
of Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the Registration Rights
Agreement dated as of June 23, 1998, between the Company and the parties named
on the signature pages thereof (the "Registration Rights Agreement").
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No representation
is made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
Birch Telecom, Inc.
1004 Baltimore Avenue, Suite 900
Kansas City, MO 64105
Attention: Chief Financial Officer
A2-98
<PAGE> 99
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
(Insert assignee's soc. sec. or tax I.D. no.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date: Your Signature:
(Sign exactly as your name appears on the face of this Note)
Signature Guarantee.
A2-99
<PAGE> 100
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.10 or 4.15 of the Indenture, check the appropriate
box below:
/ / Section 4.10 / / Section 4.15
If you want to elect to have only part of the Note purchased
by the Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state
the amount you elect to have purchased: $___________
Date: Your Signature:
(Sign exactly as your name appears on the Note)
Tax Identification No.:
Signature Guarantee.
A2-100
<PAGE> 101
SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE
The following exchanges of a part of this Regulation S
Temporary Global Note for an interest in another Global Note, or of other
Restricted Global Notes for an interest in this Regulation S Temporary Global
Note, have been made:
<TABLE>
<CAPTION>
Principal Amount
Amount of Amount of increase of this
decrease in in Principal Global Note
Principal Amount Amount Following such Signature of
of Of decrease (or authorized officer
Date of Exchange this Global Note this Global Note increase) of Trustee
<S> <C> <C> <C> <C>
</TABLE>
A2-101
<PAGE> 102
EXECUTION COPY
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Birch Telecom, Inc.
1004 Baltimore Avenue, Suite 900
Kansas City, MO 64105
Norwest Bank Minnesota, National Association
Sixth and Marquette
Minneapolis, MN 55479-0069
Attention: Corporate Trust
Re: 14% Senior Notes Due 2008
Reference is hereby made to the Indenture, dated as of June
23, 1998 (the "Indenture"), between Birch Telecom, Inc., as issuer (the
"Company"), and Norwest Bank Minnesota, National Association, as trustee.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
______________, (the "Transferor") owns and proposes to
transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in
the principal amount of $___________ in such Note[s] or interests (the
"Transfer"), to __________ (the "Transferee"), as further specified in Annex A
hereto. In connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. / / CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN
THE 144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is
being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such Transfer is
in compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or Definitive Note
will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the 144A Global Note and/or the Definitive Note and
in the Indenture and the Securities Act.
2. / / CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN
THE TEMPORARY REGULATION S GLOBAL NOTE, THE REGULATION S GLOBAL NOTE OR A
DEFINITIVE NOTE PURSUANT TO REGULATION S. The Transfer is being effected
pursuant to and in accordance with Rule 903 or Rule 904
A2-102
<PAGE> 103
under the Securities Act and, accordingly, the Transferor hereby further
certifies that (i) the Transfer is not being made to a person in the United
States and (x) at the time the buy order was originated, the Transferee was
outside the United States or such Transferor and any Person acting on its behalf
reasonably believed and believes that the Transferee was outside the United
States or (y) the transaction was executed in, on or through the facilities of a
designated offshore securities market and neither such Transferor nor any Person
acting on its behalf knows that the transaction was prearranged with a buyer in
the United States, (ii) no directed selling efforts have been made in
contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S
under the Securities Act, (iii) the transaction is not part of a plan or scheme
to evade the registration requirements of the Securities Act and (iv) if the
proposed transfer is being made prior to the expiration of the Distribution
Compliance Period, the transfer is not being made to a U.S. Person or for the
account or benefit of a U.S. Person (other than an Initial Purchaser). Upon
consummation of the proposed transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will be
subject to the restrictions on Transfer enumerated in the Private Placement
Legend printed on the Regulation S Global Note, the Temporary Regulation S
Global Note and/or the Definitive Note and in the Indenture and the Securities
Act.
3. / / CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN A 144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO ANY PROVISION OF
THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is being
effected in compliance with the transfer restrictions applicable to beneficial
interests in Restricted Global Notes and Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act and any applicable blue
sky securities laws of any state of the United States, and accordingly the
Transferor hereby further certifies that (check one):
(a) / / such Transfer is being effected pursuant to and in
accordance with Rule 144 under the Securities Act;
or
(b) / / such Transfer is being effected to the Company or a
subsidiary thereof;
or
(c) / / such Transfer is being effected pursuant to an
effective registration statement under the Securities Act and in compliance with
the prospectus delivery requirements of the Securities Act;
or
(d) / / such Transfer is being effected to an Institutional
Accredited Investor and pursuant to an available exemption from the registration
requirements of the Securities Act (other than Rule 144A, Rule 144 or Regulation
S), which certification is supported by (1) a certificate executed by the
Transferee in the form of Exhibit D to the Indenture and (2) if such Transfer is
in respect of a principal amount of Notes at the time of transfer of less than
$250,000, an Opinion of Counsel provided by the Transferor or the Transferee (a
copy of which the Transferor has attached to this certification), to the effect
that such transfer is in compliance with the Securities Act. Upon consummation
of the proposed transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will be evidenced by a
Definitive Note and will be subject to the restrictions on transfer enumerated
in the Private Placement Legend printed on the Restricted Definitive Notes and
in the
B-103
<PAGE> 104
Indenture and the Securities Act.
4. / / CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN
UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE.
(a) / / CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The
Transfer is being effected pursuant to and in accordance with Rule 144 under the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes, on Restricted Definitive Notes and in the Indenture.
(b) / / CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and in compliance with the transfer restrictions
contained in the Indenture and any applicable blue sky securities laws of any
state of the United States and (ii) the restrictions on transfer contained in
the Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the proposed
Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Notes, on Restricted Definitive Notes and in the
Indenture.
(c) / / CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i)
The Transfer is being effected pursuant to and in compliance with an exemption
from the registration requirements of the Securities Act other than Rule 144,
Rule 903 or Rule 904 and in compliance with the transfer restrictions contained
in the Indenture and any applicable blue sky securities laws of any State of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will not be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes or Restricted Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company.
[Insert Name of Transferor]
By:
Name:
Title:
Dated: ,
B-104
<PAGE> 105
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) / / a beneficial interest in the:
(i) / / 144A Global Note (CUSIP ), or
(ii) / / Regulation S Global Note (CUSIP ), or
(b) / / a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) / / a beneficial interest in the:
(i) / / 144A Global Note (CUSIP ), or
(ii) / / Regulation S Global Note (CUSIP ), or
(iii) / / Unrestricted Global Note (CUSIP ); or
(b) / / a Restricted Definitive Note; or
(c) / / an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
B-105
<PAGE> 106
EXECUTION COPY
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Birch Telecom, Inc.
1004 Baltimore Avenue, Suite 900
Kansas City, MO 64105
Norwest Bank Minnesota, National Association
Sixth and Marquette
Minneapolis, MN 55479-0069
Attention: Corporate Trust
Re: 14% Senior Notes due 2008
(CUSIP______________)
Reference is hereby made to the Indenture, dated as of June
23, 1998 (the "Indenture"), between Birch Telecom, Inc., as issuer (the
"Company"), and Norwest Bank Minnesota, National Association, as trustee.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
____________, (the "Owner") owns and proposes to exchange the
Note[s] or interest in such Note[s] specified herein, in the principal amount of
$____________ in such Note[s] or interests (the "Exchange"). In connection with
the Exchange, the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A
RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN AN UNRESTRICTED GLOBAL NOTE
(a) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In
connection with the Exchange of the Owner's beneficial interest in a Restricted
Global Note for a beneficial interest in an Unrestricted Global Note in an equal
principal amount, the Owner hereby certifies (i) the beneficial interest is
being acquired for the Owner's own account without transfer, (ii) such Exchange
has been effected in compliance with the transfer restrictions applicable to the
Global Notes and pursuant to and in accordance with the United States Securities
Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
beneficial interest in an Unrestricted Global Note is being acquired in
compliance with any applicable blue sky securities laws of any state of the
United States.
(b) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Note for an
Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes
A2-106
<PAGE> 107
and pursuant to and in accordance with the Securities Act, (iii) the
restrictions on transfer contained in the Indenture and the Private Placement
Legend are not required in order to maintain compliance with the Securities Act
and (iv) the Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
(c) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE
TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an
Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE
TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED
GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN
RESTRICTED GLOBAL NOTES
(a) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Note for a
Restricted Definitive Note with an equal principal amount, the Owner hereby
certifies that the Restricted Definitive Note is being acquired for the Owner's
own account without transfer. Upon consummation of the proposed Exchange in
accordance with the terms of the Indenture, the Restricted Definitive Note
issued will continue to be subject to the restrictions on transfer enumerated in
the Private Placement Legend printed on the Restricted Definitive Note and in
the Indenture and the Securities Act.
(b) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE
TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the
Exchange of the Owner's Restricted Definitive Note for a beneficial interest in
the [CHECK ONE] / / 144A Global Note, / / Regulation S Global Note, with an
equal principal amount, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer and (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance with
the Securities Act, and in compliance with any applicable blue sky securities
laws of any state of the United States. Upon consummation of the proposed
Exchange in accordance with the terms of the Indenture, the beneficial interest
issued will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the relevant Restricted Global Note and in the
Indenture and the Securities Act.
C-107
<PAGE> 108
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company.
[Insert Name of Owner]
By:
Name:
Title:
Dated: ________________, ____
C-108
<PAGE> 109
EXECUTION COPY
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Birch Telecom, Inc.
1004 Baltimore Avenue
Suite 900
Kansas City, MO 64105
Norwest Bank Minnesota, National Association
Sixth and Marquette
Minneapolis, MN 55479-0069
Attention: Corporate Trust
Re: 14% Senior Notes due 2008
Reference is hereby made to the Indenture, dated as of June 23, 1998
(the "Indenture"), between Birch Telecom, Inc., as issuer (the "Company") and
Norwest Bank Minnesota, National Association, as trustee. Capitalized terms used
but not defined herein shall have the meanings given to them in the Indenture.
In connection with our proposed purchase of $______________ aggregate
principal amount of a Definitive Note, we confirm that:
1. we are an "accredited investor" within the meaning of Rule 501(a)(1),
(2), (3) or (7) under the Securities Act of 1933, as amended (the
"Securities Act"), or an entity in which all of the equity owners are
accredited investors within the meaning of Rule (501)(a)(1), (2), (3)
or (7) under the Securities Act (an "institutional accredited
investor");
2. (A) any purchase of the Notes by us will be for our own account or for
the account of one or more other institutional accredited investors or
as fiduciary for the account of one or more trusts, each of which is an
"accredited investor" within the meaning of Rule 501(a)(7) under the
Securities Act and for each of which we exercise sole investment
discretion or (B) we are a "bank," within the meaning of Section
3(a)(2) of the Securities Act, or a "savings and loan association" or
other institution described in Section 3(a)(5)(A) of the Securities Act
that is acquiring Notes as fiduciary for the account of one or more
institutions for which we exercise sole investment discretion;
3. in the event that we purchase any Notes, we will acquire Notes having a
minimum purchase price of not less than $250,000 for our own account
and for each separate account for which we are acting;
4. we have such knowledge and experience in financial and business matters
that we are capable of evaluating the merits and risks of purchasing
Notes;
5. we are not acquiring the Notes with a view to any distribution thereof
in a transaction
A2-109
<PAGE> 110
that would violate the Securities Act or the securities laws of any
state of the United States or any other applicable jurisdictions,
provided that the disposition of our property and the property of any
accounts for which we are acting as fiduciary shall remain at all times
within our control;
6. we acknowledge that we have had access to such financial and other
information, and have been afforded the opportunity to ask such
questions of representatives of the Company and receive answers
thereto, as we deem necessary in connection with our decision to
purchase the Notes;
7. (A) we are not a pension or welfare plan (as defined in Section 3 of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) or plan (as defined in Section 4975 of the Internal Revenue
Code of 1986, as amended (the "Code")) (collectively, a "Plan") and we
are not purchasing (and will not hold) the Notes on behalf of, or with
the assets of, any such plan; or (B) our purchase and holding of the
Notes are completely covered by the full exemptive relief provided by
U.S. Department of Labor Prohibited Transaction Class Exemption 96-23,
95-60, 91-38, 90-1 or 84-14; or are permitted to the extent that the
Plan is a governmental plan (as defined in Section 3 of ERISA) which is
not subject to the provisions of Title I of ERISA or Section 4975 of
the Code; and
8. if we are, or are acting on behalf of, a trust established under a
Plan: we are aware of and have taken into consideration our fiduciary
duties including the diversification requirements of Section
404(a)(1)(c) of ERISA; we have concluded that the proposed investment
in the Notes is a prudent one; the fiduciary trustee or other person
purchasing the Notes on our behalf is independent of the Company; the
investment in the Notes is in accordance with all requirements
applicable to the Plan under its governing instruments and under ERISA;
and we acknowledge and agree that the Company is not a "fiduciary"
(within the meaning of "Section 3(21) of ERISA) with respect to any
assets of the Plan by reason of our investment in the Notes and that we
have not and are not relying on the Company to provide, and it has not
provided, any kind of investment advice with respect to our investment.
We understand that the Notes are being offered in a
transaction not involving any public offering within the United States within
the meaning of the Securities Act and that the Notes have not been registered
under the Securities Act. We agree on our own behalf and on behalf of any
investor account for which we are purchasing the Notes, to offer, sell or
otherwise transfer such Notes prior to (x) the date which is two years (or such
shorter period of time as permitted by Rule 144(k) under the Securities Act or
any successor provision thereunder) after the later of the date of the original
issue of the Notes and the last date on which the Company or any affiliate of
the Company was the owner of such Notes (or any predecessor thereto) or (y) such
later date, if any, as may be required by applicable law only (a) to the
Company, (b) pursuant to a registration statement which has been declared
effective under the Securities Act, (c) for so long as the Notes are eligible
for resale pursuant to Rule 144A, to a person we reasonably believe is a QIB,
that purchases for its own account or for the account of a QIB to whom notice is
given that the transfer is being made in reliance on Rule 144A, (d) pursuant to
offers and sales to non-U.S. persons that occur outside the United States within
the meaning of Regulation S under the Securities Act or (e) pursuant to any
other available exemption from the registration requirements of the Securities
Act, subject in each of the foregoing cases to any
D-110
<PAGE> 111
requirements of law that the disposition of our property or the property of such
investor account or accounts be at all times within our control and in
compliance with any applicable state securities laws. We further agree to
provide any person purchasing any of the Notes other than pursuant to clause (b)
above from us a notice advising such purchaser that resales of such securities
are restricted as stated herein. We understand that the Trustee and the
Registrar for the Notes will not be required to accept for registration of
transfer any Notes, except upon presentation of evidence satisfactory to the
Company that the foregoing restrictions on transfer have been complied with. We
further understand that any Notes will be in the form of definitive physical
certificates and that such certificates will bear a legend reflecting the
substance of this paragraph.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby.
[Insert Name of Accredited Investor]
By:
Name:
Title:
Dated: ,
D-111
<PAGE> 112
EXECUTION COPY
EXHIBIT E
FORM OF NOTATION OF GUARANTEE
For value received, each Guarantor (which term includes any
successor Person under the Indenture) has, jointly and severally,
unconditionally guaranteed, to the extent set forth in the Indenture and subject
to the provisions in the Indenture dated as of June 23, 1998 (the "Indenture")
among BIRCH TELECOM, INC., the Guarantors listed on Schedule I thereto and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as trustee (the "Trustee"), (a)
the due and punctual payment of the principal of, premium, if any, Liquidated
Damages, if any, and interest on the Notes (as defined in the Indenture),
whether at maturity, by acceleration, redemption or otherwise, the due and
punctual payment of interest on overdue principal and premium, and, to the
extent permitted by law, interest, and the due and punctual performance of all
other obligations of the Company to the Holders or the Trustee all in accordance
with the terms of the Indenture and (b) in case of any extension of time of
payment or renewal of any Notes or any of such other obligations, that the same
will be promptly paid in full when due or performed in accordance with the terms
of the extension or renewal, whether at stated maturity, by acceleration or
otherwise. The obligations of the Guarantors to the Holders of Notes and to the
Trustee pursuant to the Note Guarantee and the Indenture are set forth in the
Indenture, as supplemented and amended from time to time, and reference is
hereby made to the Indenture for the terms of the Note Guarantee.
[Name of Guarantor(s)]
By:
Name:
Title:
E-112
<PAGE> 113
EXECUTION COPY
EXHIBIT F
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT GUARANTORS
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated
as of ________________, among __________________ (the "Guaranteeing
Subsidiary"), a subsidiary of BIRCH TELECOM, INC. (or its permitted successor),
a Delaware corporation (the "Company"), the Company, the other Guarantors (as
defined in the Indenture referred to herein) and NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as trustee under the Indenture referred to below (the
"Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to
the Trustee an indenture (as supplemented and amended, the "Indenture"), dated
as of June 23, 1998 providing for the issuance of an aggregate principal amount
of up to $115,000,000 of 14% Senior Notes due 2008 (the "Notes");
WHEREAS, the Indenture provides that under certain
circumstances the Guaranteeing Subsidiary shall execute and deliver to the
Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary
shall unconditionally guarantee all of the Company's Obligations under the Notes
and the Indenture on the terms and conditions set forth herein (the "Note
Guarantee"); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the
Trustee is authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:
1. Capitalized Terms. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.
2. Agreement to Guarantee. The Guaranteeing Subsidiary hereby
agrees as follows:
(a) Along with all Guarantors named in the Indenture, to
jointly and severally Guarantee to each Holder of a
Note authenticated and delivered by the Trustee and
to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of
the Indenture, the Notes or the obligations of the
Company hereunder or thereunder, that:
(i) the principal of, premium, if any,
Liquidated Damages, if any, and interest on
the Notes will be promptly paid in full when
due, whether at maturity, by acceleration,
redemption or otherwise, and interest on the
overdue principal of and interest on the
Notes, if any, if lawful, and all other
obligations of the Company to the Holders or
the Trustee
F-113
<PAGE> 114
hereunder or thereunder will be promptly
paid in full or performed, all in accordance
with the terms hereof and thereof; and
(ii) in case of any extension of time of payment
or renewal of any Notes or any of such other
obligations, that same will be promptly paid
in full when due or performed in accordance
with the terms of the extension or renewal,
whether at stated maturity, by acceleration
or otherwise. Failing payment when due of
any amount so guaranteed or any performance
so guaranteed for whatever reason, the
Guarantors shall be jointly and severally
obligated to pay the same immediately.
(b) The obligations hereunder shall be unconditional,
irrespective of the validity, regularity or
enforceability of the Notes or the Indenture, the
absence of any action to enforce the same, any waiver
or consent by any Holder of the Notes with respect to
any provisions hereof or thereof, the recovery of any
judgment against the Company, any action to enforce
the same or any other circumstance which might
otherwise constitute a legal or equitable discharge
or defense of a guarantor.
(c) The following is hereby waived: diligence,
presentment, demand of payment, filing of claims with
a court in the event of insolvency or bankruptcy of
the Company, any right to require a proceeding first
against the Company, protest, notice and all demands
whatsoever.
(d) This Note Guarantee shall not be discharged except by
complete performance of the obligations contained in
the Notes and the Indenture.
(e) If any Holder or the Trustee is required by any court
or otherwise to return to the Company, the
Guarantors, or any custodian, Trustee, liquidator or
other similar official acting in relation to either
the Company or the Guarantors, any amount paid by
either to the Trustee or such Holder, this Note
Guarantee, to the extent theretofore discharged,
shall be reinstated in full force and effect.
(f) The Guaranteeing Subsidiary shall not be entitled to
any right of subrogation in relation to the Holders
in respect of any obligations guaranteed hereby until
payment in full of all obligations guaranteed hereby.
(g) As between the Guarantors, on the one hand,
and the Holders and the Trustee, on the other hand,
(x) the maturity of the obligations guaranteed hereby
may be accelerated as provided in Article 6 of the
Indenture for the purposes of this Note Guarantee,
notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect
of the obligations guaranteed hereby, and (y) in the
event of any declaration of acceleration of such
obligations as provided in Article 6 of the
Indenture, such obligations (whether or not due and
payable) shall forthwith become due and payable by
the Guarantors for the purpose of this Note
Guarantee.
(h) The Guarantors shall have the right to seek
contribution from any non-paying
F-114
<PAGE> 115
Guarantor so long as the exercise of such right does
not impair the rights of the Holders under the
Guarantee.
(i) For purposes hereof, each Guarantor's liability shall
be limited to the lesser of (i) the aggregate amount
of the Obligations of the Company under the Notes and
the Indenture and (ii) the amount, if any, which
would not have (A) rendered such Guarantor
"insolvent" (as such term is defined under Bankruptcy
Law, including the Debtor and Creditor Law of the
State of New York) or (B) left such Guarantor with
unreasonably small capital at the time its Guarantee
of the Notes was entered into; provided that, it will
be a presumption in any lawsuit or other proceeding
in which a Guarantor is a party that the amount
guaranteed pursuant to the Guarantee is the amount
set forth in clause (i) above unless any creditor, or
representative of creditors of such Guarantor, or
debtor in possession or trustee in bankruptcy of such
Guarantor, or proves in such a lawsuit that the
aggregate liability of the Guarantor is limited to
the amount set forth in clause (ii) above. In making
any determination as to the solvency or sufficiency
of capital of a Guarantor in accordance with the
previous sentence, the right of such Guarantors to
contribution from other Guarantors as set forth in
the Indenture and any other rights such Guarantors
may have, contractual or otherwise, shall be taken
into account.
3 EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary agrees
that the Note Guarantees shall remain in full force and effect notwithstanding
any failure to endorse on each Note a notation of such Note Guarantee.
4. Guaranteeing Subsidiary May Consolidate, Etc. on Certain
Terms.
(a) The Guaranteeing Subsidiary may not consolidate with or merge
with or into (whether or not such Guarantor is the surviving
Person) another corporation, Person or entity whether or not
affiliated with such Guarantor unless:
(i) the Person formed by or surviving any such
consolidation or merger (if other than a Guarantor or
the Company) unconditionally assumes all the
obligations of such Guarantor, pursuant to a
supplemental indenture in form and substance
reasonably satisfactory to the Trustee, under the
Notes, the Indenture and the Note Guarantee on the
terms set forth herein or therein; and
(ii) immediately after giving effect to such transaction,
no Default or Event of Default exists.
(b) In case of any such consolidation, merger, sale or conveyance
and upon the assumption by the successor corporation, by
supplemental indenture, executed and delivered to the Trustee
and satisfactory in form to the Trustee, of the Note Guarantee
endorsed upon the Notes and the due and punctual performance
of all of the covenants and conditions of the Indenture to be
performed by the Guarantor, such successor corporation shall
succeed to and be substituted for the Guarantor with the same
effect as if it had been named herein as a Guarantor. Such
successor corporation thereupon may cause to be signed any or
all of the Note Guarantees to be endorsed upon all of the
Notes issuable hereunder which theretofore shall not have been
signed by the Company and delivered to the Trustee. All
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<PAGE> 116
the Note Guarantees so issued shall in all respects have the
same legal rank and benefit under the Indenture as the Note
Guarantees theretofore and thereafter issued in accordance
with the terms of the Indenture as though all of such Note
Guarantees had been issued at the date of the execution
hereof.
(c) Except as set forth in Articles 4 and 5 of the Indenture, and
notwithstanding clauses (a) and (b) above, nothing contained
in the Indenture or in any of the Notes shall prevent any
consolidation or merger of a Guarantor with or into the
Company or another Guarantor, or shall prevent any sale or
conveyance of the property of a Guarantor as an entirety or
substantially as an entirety to the Company or another
Guarantor.
5. RELEASES.
(a) In the event of a sale or other disposition of all of the
assets of any Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all to the
capital stock of any Guarantor, then such Guarantor (in the
event of a sale or other disposition, by way of merger,
consolidation or otherwise, of all of the capital stock of
such Guarantor) or the corporation acquiring the property (in
the event of a sale or other disposition of all or
substantially all of the assets of such Guarantor) will be
released and relieved of any obligations under its Note
Guarantee; provided that the Net Proceeds of such sale or
other disposition are applied in accordance with the
applicable provisions of the Indenture, including without
limitation Section 4.10 of the Indenture. Upon delivery by the
Company to the Trustee of an Officers' Certificate and an
Opinion of Counsel to the effect that such sale or other
disposition was made by the Company in accordance with the
provisions of the Indenture, including without limitation
Section 4.10 of the Indenture, the Trustee shall execute any
documents reasonably required in order to evidence the release
of any Guarantor from its obligations under its Note
Guarantee.
(b) Any Guarantor not released from its obligations under its Note
Guarantee shall remain liable for the full amount of principal
of and interest on the Notes and for the other obligations of
any Guarantor under the Indenture as provided in Article 10 of
the Indenture.
6. NO RECOURSE AGAINST OTHERS. No past, present or future
director, officer, employee, incorporator, stockholder or agent of the
Guaranteeing Subsidiary, as such, shall have any liability for any obligations
of the Company or any Guaranteeing Subsidiary under the Notes, any Note
Guarantees, the Indenture or this Supplemental Indenture or for any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
Holder of the Notes by accepting a Note waives and releases all such liability.
The waiver and release are part of the consideration for issuance of the Notes.
7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF
NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE AND
THE NOTE GUARANTEES.
8. COUNTERPARTS The parties may sign any number of copies of
this Supplemental Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
9. EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not affect the construction hereof.
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<PAGE> 117
10. THE TRUSTEE. The Trustee shall not be responsible in any
manner whatsoever for or in respect of the validity or sufficiency of this
Supplemental Indenture or for or in respect of the recitals contained herein,
all of which recitals are made solely by the Guaranteeing Subsidiary and the
Company.
F-117
<PAGE> 118
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed and attested, all as of the
date first above written.
Dated: _______________, ____
[Guaranteeing Subsidiary]
By:
Name:
Title:
[COMPANY]
By:
Name:
Title:
[EXISTING GUARANTORS]
By:
Name:
Title:
[TRUSTEE]
as Trustee
By:
Name:
Title:
F-118
<PAGE> 1
Exhibit 4.4
REGISTRATION RIGHTS AGREEMENT
Dated as of June 23, 1998
by and among
BIRCH TELECOM, INC.
and
LEHMAN BROTHERS INC.
and
BT ALEX. BROWN INCORPORATED
<PAGE> 2
This Registration Rights Agreement (this "Agreement") is made and
entered into as of June 23, 1998 by and between Birch Telecom, Inc., a Delaware
corporation (the "Company"), and Lehman Brothers Inc. and BT Alex. Brown
Incorporated (each an "Initial Purchaser," and together, the "Initial
Purchasers"), who have agreed to purchase Units (the "Units"), each consisting
of $1,000 principal amount of the Company's 14% Senior Notes due 2008 (the
"Series A Notes") and a Warrant to purchase 12.25856 shares of its Common Stock,
par value $.001 per share pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated June
18, 1998 (the "Purchase Agreement"), by and among the Company, the Subsidiaries
named therein and the Initial Purchasers. In order to induce the Initial
Purchasers to purchase the Units, the Company has agreed to provide the
registration rights set forth in this Agreement. The execution and delivery of
this Agreement is a condition to the obligations of the Initial Purchasers set
forth in Section 7 of the Purchase Agreement. Capitalized terms used herein and
not otherwise defined shall have the meaning assigned to them the Indenture,
dated as of June 23, 1998, between the Company and Norwest Bank Minnesota,
National Association, as trustee, relating to the Series A Notes and the Series
B Notes (the "Indenture").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
Affiliate: An Affiliate of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise.
Board of Directors: The Board of Directors of the Company, or any
authorized committee of the Board of Directors.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
Business Day: Any day other than a Legal Holiday.
Capital Stock: (a) In the case of a corporation, corporate stock, (b)
in the case of an association or business entity, any and all shares, interests,
participations, rights or other equivalents (however designated) of corporate
stock, (c) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited) and (d) any
other interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distributions of assets of, the issuing
Person.
Closing Date: June 23, 1998.
Commission: The Securities and Exchange Commission.
Consummate: An Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (a) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Series B Notes to be issued in the Exchange Offer, (b) the
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<PAGE> 3
maintenance of such Exchange Offer Registration Statement continuously effective
and the keeping of the Exchange Offer open for a period not less than the period
required pursuant to Section 3(b) hereof and (c) the delivery by the Company to
the Trustee under the Indenture of Series B Notes in the same aggregate
principal amount as the aggregate principal amount of Series A Notes tendered by
Holders thereof pursuant to the Exchange Offer.
Effectiveness Deadline: As defined in Section 3(a) and 4(a) hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Offer: The exchange and issuance by the Company of a principal
amount of Series B Notes (which shall be registered pursuant to the Exchange
Offer Registration Statement) equal to the outstanding principal amount of
Series A Notes that are tendered by such Holders in connection with such
exchange and issuance.
Exchange Offer Registration Statement: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchasers
propose to sell the Series A Notes to certain "qualified institutional buyers,"
as such term is defined in Rule 144A under the Act and pursuant to Regulation S
under the Act.
Filing Deadline: As defined in Sections 3(a) and 4(a) hereof.
Holders: As defined in Section 2 hereof.
Indemnified Holder: As defined in Section 8(a) hereof.
Legal Holiday: A Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue on
such payment for the intervening period.
Notes: Series A Notes and Series B Notes.
Participating Broker-Dealer: Any Broker-Dealer that holds Series B
Notes that were acquired in the Exchange Offer in exchange for Series A Notes
that such Broker-Dealer acquired for its own account as a result of market
making activities or other trading activities (other than Series A Notes
acquired directly from the Company or any of its affiliates).
Person: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or agency or political subdivision thereof (including any subdivision
or ongoing business of any such entity or substantially all of the assets of any
such entity, subdivision or business).
Prospectus: The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
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<PAGE> 4
Recommencement Date: As defined in Section 6(d) hereof.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Company
relating to (a) an offering of Series B Notes pursuant to an Exchange Offer or
(b) the registration for resale of Transfer Restricted Securities pursuant to
the Shelf Registration Statement, in each case, (i) that is filed pursuant to
the provisions of this Agreement and (ii) including the Prospectus included
therein, all amendments and supplements thereto (including post-effective
amendments) and all exhibits and material incorporated by reference therein.
Regulation S: Regulation S promulgated under the Act.
Rule 144: Rule 144 promulgated under the Act.
Securities Act: The Securities Act of 1933, as amended.
Series B Notes: The Company's 14% Series B Senior Notes due 2008 to be
issued pursuant to the Indenture: (i) in the Exchange Offer or (ii) as
contemplated by Section 4 hereof.
Shelf Registration Statement: As defined in Section 4 hereof.
Suspension Notice: As defined in Section 6(d) hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb)
as in effect on the date of the Indenture.
Transfer Restricted Securities: Each Series A Note until the earlier to
occur of (a) the date on which such Series A Note has been exchanged by a person
other than a Broker-Dealer for a Series B Note in the Exchange Offer, (b)
following the exchange by a Broker-Dealer in the Exchange Offer of a Series A
Note for a Series B Note, the date on which such Series B Note is sold to a
purchaser who receives from such Broker-Dealer on or prior to the date of such
sale a copy of the Prospectus, (c) the date on which such Series B Note has been
effectively registered under the Securities Act and disposed of in accordance
with the Shelf Registration Statement or (d) the date on which such Series B
Note is distributed to the public pursuant to Rule 144 under the Securities Act
or is eligible for resale pursuant to Rule 144(k) under the Securities Act.
Voting Stock: The Capital Stock of such Person that is at the time
entitled to vote in the election of the Board of Directors of such Person.
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities
(each, a "Holder") whenever such Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable
federal law (after the procedures set forth in Section 6(a)(i) below have been
complied with), the Company shall (i) cause the
4
<PAGE> 5
Exchange Offer Registration Statement to be filed with the Commission as soon as
practicable after the Closing Date (the "Exchange Offer Filing Date"), but in no
event later than 90 days after the Closing Date (such 90th day being the "Filing
Deadline"), (ii) use all commercially reasonable efforts to cause such Exchange
Offer Registration Statement to become effective at the earliest possible time,
but in no event later than 150 days after the Closing Date (such 150th day being
the "Effectiveness Deadline"), (iii) in connection with the foregoing, (A) file
all pre-effective amendments to such Exchange Offer Registration Statement as
may be necessary in order to cause it to become effective, (B) file, if
applicable, a post-effective amendment to such Exchange Offer Registration
Statement pursuant to Rule 430A under the Act and (C) cause all necessary
filings, if any, in connection with the registration and qualification of the
Series B Notes to be made under the Blue Sky laws of such jurisdictions as are
necessary to permit Consummation of the Exchange Offer and (iv) upon the
effectiveness of such Exchange Offer Registration Statement, commence and
Consummate the Exchange Offer. The Exchange Offer shall be on the appropriate
form permitting registration of the Series B Notes to be offered in exchange for
the Series A Notes that are Transfer Restricted Securities and to permit resales
of Series B Notes by Broker-Dealers that tendered into the Exchange Offer for
Series A Notes that such Broker-Dealer acquired for its own account as a result
of market making activities or other trading activities (other than Series A
Notes acquired directly from the Company or any of its Affiliates) as
contemplated by Section 3(c) below.
(b) The Company shall use its best efforts to cause the Exchange Offer
Registration Statement to be effective continuously, and shall keep the Exchange
Offer open for a period of not less than the minimum period required under
applicable federal and state securities laws to Consummate the Exchange Offer;
provided, however, that in no event shall such period be less than 20 Business
Days. The Company shall cause the Exchange Offer to comply with all applicable
federal and state securities laws. No securities other than the Series B Notes
shall be included in the Exchange Offer Registration Statement. The Company
shall use its best efforts to cause the Exchange Offer to be Consummated on the
earliest practicable date after the Exchange Offer Registration Statement has
become effective, but in no event later than 30 Business Days thereafter.
(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Broker-Dealer that holds Transfer Restricted Securities that
were acquired for the account of such Broker-Dealer as a result of market-making
activities or other trading activities (other than Transfer Restricted
Securities acquired directly from the Company or any Affiliate of the Company),
may exchange such Transfer Restricted Securities pursuant to the Exchange Offer;
however, such Broker-Dealer may be deemed to be an "underwriter" within the
meaning of the Act and must, therefore, deliver a prospectus meeting the
requirements of the Act in connection with its initial sale of any Series B
Notes received by such Broker-Dealer in the Exchange Offer and that the
Prospectus contained in the Exchange Offer Registration Statement may be used to
satisfy such prospectus delivery requirement. Such "Plan of Distribution"
section shall also contain all other information with respect to such sales by
such Broker-Dealers that the Commission may require in order to permit such
sales pursuant thereto, but such "Plan of Distribution" shall not name any such
Broker-Dealer or disclose the amount of Transfer Restricted Securities held by
any such Broker-Dealer, except to the extent required by the Commission as a
result of a change in policy, rules or regulations after the date of this
Agreement.
To the extent necessary to ensure that the Exchange Offer Registration
Statement is available for sales of Series B Notes by Broker-Dealers, the
Company agrees to use its best efforts to keep the Exchange Offer Registration
Statement continuously effective, supplemented and amended as required by the
provisions of Section 6(c) hereof and in conformity with the requirements of
this Agreement, the Act and the policies, rules and regulations of the
Commission as announced from time to time, for a
5
<PAGE> 6
period of 180 days from the date on which the Exchange Offer is Consummated, or
such shorter period as will terminate when all Transfer Restricted Securities
held by such Broker-Dealers covered by such Registration Statement have been
sold pursuant thereto (unless such period is extended pursuant to Section 6(d)
below). The Company shall promptly provide sufficient copies of the latest
version of such Prospectus to such Broker-Dealers promptly upon request, and in
no event later than one day after such request, at any time during such period.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Exchange Offer is not permitted by
applicable law or Commission policy (after the Company has complied with the
procedures set forth in Section 6(a)(i) below) or (ii) if any Holder of Transfer
Restricted Securities shall notify the Company within 20 Business Days following
the Consummation of the Exchange Offer that (A) such Holder was prohibited by
law or Commission policy from participating in the Exchange Offer or (B) such
Holder may not resell the Series B Notes acquired by it in the Exchange Offer to
the public without delivering a prospectus and the Prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for such
resales by such Holder or (C) such Holder is a Broker-Dealer and holds Series A
Notes acquired directly from the Company or any of its Affiliates, then the
Company shall:
(x) cause to be filed, on or prior to 90 days after the earlier of (i)
the date on which the Company determines that the Exchange Offer Registration
Statement cannot be filed as a result of clause (a)(i) above and (ii) the date
on which the Company receives the notice specified in clause (a) (ii) above
(such earlier date, the "Filing Deadline"), a shelf registration statement
pursuant to Rule 415 under the Act (which may be an amendment to the Exchange
Offer Registration Statement (the "Shelf Registration Statement")), relating to
all Transfer Restricted Securities, and
(y) shall use all commercially reasonable efforts to cause such Shelf
Registration Statement to become effective on or prior to 150 days after the
Filing Deadline (such 150th day the "Effectiveness Deadline").
If, after the Company has filed an Exchange Offer Registration
Statement that satisfies the requirements of Section 3(a) above, the Company is
required to file and make effective a Shelf Registration Statement solely
because the Exchange Offer is not permitted under applicable federal law, then
the filing of the Exchange Offer Registration Statement shall be deemed to
satisfy the requirements of clause (x) above; provided that, in such event, the
Company shall remain obligated to meet the Effectiveness Deadline set forth in
clause (y).
The Company shall use its best efforts to keep any Shelf Registration
Statement required by this Section 4(a) continuously effective, supplemented and
amended as required by and subject to the provisions of Sections 6(b) and (c)
hereof to the extent necessary to ensure that it is available for sales of
Transfer Restricted Securities by the Holders thereof entitled to the benefit of
this Section 4(a), and to ensure that it conforms with the requirements of this
Agreement, the Act and the policies, rules and regulations of the Commission as
announced from time to time, for a period of at least two years (as extended
pursuant to Section 6(d)) following the date on which such Shelf Registration
Statement first becomes effective under the Act, or such shorter period as will
terminate when all Transfer Restricted Securities covered by such Registration
Statement (i) have been sold pursuant thereto or (ii) are no longer restricted
Securities (as defined in Rule 144 under the Act).
(b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer Restricted
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<PAGE> 7
Securities may include any of its Transfer Restricted Securities in any Shelf
Registration Statement pursuant to this Agreement unless and until such Holder
furnishes to the Company in writing, within 20 days after receipt of a request
therefor, the information specified in Item 507 or 508 of Regulation S-K, as
applicable, under the Act for use in connection with any Shelf Registration
Statement or Prospectus or preliminary Prospectus included therein. No Holder of
Transfer Restricted Securities shall be entitled to liquidated damages pursuant
to Section 5 hereof unless and until such Holder shall have provided all such
information. Each selling Holder agrees to promptly furnish additional
information required to be disclosed in order to make the information previously
furnished to the Company by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
(a) If (i) any Registration Statement required by this Agreement is not
filed with the Commission on or prior to the applicable Filing Deadline, (ii)
any such Registration Statement has not been declared effective by the
Commission on or prior to the applicable Effectiveness Deadline, (iii) the
Exchange Offer has not been Consummated within 30 Business Days after the
Effectiveness Deadline with respect to the Exchange Offer Registration Statement
or (iv) any Registration Statement required by this Agreement is filed and
declared effective but shall thereafter cease to be effective or fail to be
usable for its intended purpose without being succeeded immediately by a
post-effective amendment to such Registration Statement that cures such failure
and that is itself declared effective immediately (except as permitted in
paragraph (b) of this Section 5; such period of time during which any such
Registration Statement is not effective or any such Registration Statement or
the related Prospectus is not usable being referred to as a "Blackout Period")
(each such event referred to in clauses (i) through (iv), a "Registration
Default"), then the Company hereby agrees to pay to each Holder of Transfer
Restricted Securities affected thereby liquidated damages in an amount equal to
$.05 per week per $1,000 of the principal amount of Transfer Restricted
Securities held by such Holder for each week or portion thereof that the
Registration Default continues for the first 90-day period immediately following
the occurrence of such Registration Default. The amount of the liquidated
damages shall increase by an additional $.05 per week per $1,000 of the
principal amount of Transfer Restricted Securities with respect to each
subsequent 90-day period until all Registration Defaults have been cured, up to
a maximum amount of liquidated damages for all Registration Defaults of $.50 per
week per $1,000 of the principal amount of Transfer Restricted Securities.
Notwithstanding anything to the contrary set forth herein, (1) upon filing of
the Exchange Offer Registration Statement (and/or, if applicable, the Shelf
Registration Statement), in the case of (i) above, (2) upon the effectiveness of
the Exchange Offer Registration Statement (and/or, if applicable, the Shelf
Registration Statement), in the case of (ii) above, (3) upon Consummation of the
Exchange Offer, in the case of (iii) above, or (4) upon the filing of a
post-effective amendment to the Registration Statement or an additional
Registration Statement that causes the Exchange Offer Registration Statement
(and/or, if applicable, the Shelf Registration Statement) to again be declared
effective or made usable in the case of (iv) above, the liquidated damages
payable with respect to the Transfer Restricted Securities as a result of such
clause (i), (ii), (iii) or (iv), as applicable, shall cease.
(b) A Registration Default referred to in Section 5(a)(iv) shall be
deemed not to have occurred and be continuing in relation to a Registration
Statement or the related Prospectus if (i) the Blackout Period has occurred
solely as a result of (x) the filing of a post-effective amendment to such Shelf
Registration Statement to incorporate annual audited financial information with
respect to the Company where such post-effective amendment is not yet effective
and needs to be declared effective to permit Holders to use the related
Prospectus or (y) the occurrence of other material events with respect to the
Company that would need to be described in such Registration Statement or the
related Prospectus and (ii) in the case of clause (y), the Company is proceeding
promptly and in good faith to amend or supplement (including by way of filing
documents under the Exchange Act which are incorporated by reference into the
Registration Statement) such Registration Statement and the related Prospectus
to
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<PAGE> 8
describe such events: provided, however, that in any case if such Blackout
Period occurs for a continuous period in excess of 30 days, a Registration
Default shall be deemed to have occurred on the 31st day of such Blackout Period
and liquidated damages shall be payable in accordance with the above paragraph
from the day such Registration Default occurs until such Registration Default is
cured or until the Company is no longer required pursuant to this Agreement to
keep such Registration Statement effective or such Registration Statement or the
related Prospectus usable; provided further, however, that in no event shall the
total of all Blackout Periods exceed 60 days in the aggregate in any 12-month
period.
All accrued liquidated damages shall be paid to the Holders entitled
thereto, in the manner provided for the payment of interest in the Indenture, on
each Interest Payment Date, as more fully set forth in the Indenture and the
Notes. All obligations of the Company set forth in the preceding paragraph that
are outstanding with respect to any Transfer Restricted Security at the time
such security ceases to be a Transfer Restricted Security shall survive until
such time as all such obligations with respect to such Security shall have been
satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Company shall comply with all applicable provisions of
Section 6(c) below, shall use its best efforts to effect such exchange and to
permit the resale of Series B Notes by Broker-Dealers that tendered in the
Exchange Offer Series A Notes that such Broker-Dealer acquired for its own
account as a result of its market making activities or other trading activities
(other than Series A Notes acquired directly from the Company or any of its
Affiliates) being sold in accordance with the intended method or methods of
distribution thereof, and shall comply with all of the following provisions:
(i) If, following the date hereof there has been announced a
change in Commission policy with respect to exchange offers such as the
Exchange Offer, that in the reasonable opinion of counsel to the
Company raises a substantial question as to whether the Exchange Offer
is permitted by applicable federal law, the Company hereby agrees to
seek a no-action letter or other favorable decision from the Commission
allowing the Company to Consummate an Exchange Offer for such Transfer
Restricted Securities. The Company hereby agrees to pursue the issuance
of such a decision to the Commission staff level. In connection with
the foregoing, the Company hereby agrees to take all such other actions
as may be requested by the Commission or otherwise required in
connection with the issuance of such decision, including without
limitation (A) participating in telephonic conferences with the
Commission, (B) delivering to the Commission staff an analysis prepared
by counsel to the Company setting forth the legal bases, if any, upon
which such counsel has concluded that such an Exchange Offer should be
permitted and (C) diligently pursuing a resolution (which need not be
favorable) by the Commission staff of such submission.
(ii) As a condition to its participation in the Exchange
Offer, each Holder of Transfer Restricted Securities (including,
without limitation, any Holder who is a Broker Dealer) shall furnish,
upon the request of the Company, prior to the Consummation of the
Exchange Offer, a written representation to the Company (which may be
contained in the letter of transmittal contemplated by the Exchange
Offer Registration Statement) to the effect that (A) it is not an
Affiliate of the Company, (B) it is not engaged in, and does not intend
to engage in, and has no arrangement or understanding with any person
to participate in, a distribution of the Series B Notes to be issued in
the Exchange Offer and (C) it is acquiring the Series B Notes in its
ordinary course of business. Each Holder using the Exchange Offer to
participate in a distribution of the Series B Notes hereby acknowledges
and agrees that, if the resales are of
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<PAGE> 9
Series B Notes obtained by such Holder in exchange for Series A Notes
acquired directly from the Company or an Affiliate thereof, it (1)
could not, under Commission policy as in effect on the date of this
Agreement, rely on the position of the Commission enunciated in Morgan
Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital
Holdings Corporation (available May 13, 1988), as interpreted in the
Commission's letter to Shearman & Sterling (available July 2, 1993),
and similar no-action letters (including, if applicable, any no-action
letter obtained pursuant to clause (i) above), and (2) must comply with
the registration and prospectus delivery requirements of the Act in
connection with a secondary resale transaction and that such a
secondary resale transaction must be covered by an effective
registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation
S-K.
(iii) Prior to effectiveness of the Exchange Offer
Registration Statement, the Company shall provide a supplemental letter
to the Commission (A) stating that the Company is registering the
Exchange Offer in reliance on the position of the Commission enunciated
in Exxon Capital Holdings Corporation (available May 13, 1988), Morgan
Stanley and Co., Inc. (available June 5, 1991) as interpreted in the
Commission's letter to Shearman & Sterling (available July 2, 1993),
and, if applicable, any no-action letter obtained pursuant to clause
(i) above, (B) including a representation that the Company has not
entered into any arrangement or understanding with any Person to
distribute the Series B Notes to be received in the Exchange Offer and
that, to the best of the Company's information and belief, each Holder
participating in the Exchange Offer is acquiring the Series B Notes in
its ordinary course of business and has no arrangement or understanding
with any Person to participate in the distribution of the Series B
Notes received in the Exchange Offer and (C) any other undertaking or
representation required by the Commission as set forth in any no-action
letter obtained pursuant to clause (i) above, if applicable.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company shall comply with all the provisions of
Section 6(c) below and shall use its best efforts to effect such registration to
permit the sale of the Transfer Restricted Securities being sold in accordance
with the intended method or methods of distribution thereof (as indicated in the
information furnished to the Company pursuant to Section 4(b) hereof), and
pursuant thereto the Company will prepare and file with the Commission a
Registration Statement relating to the registration on any appropriate form
under the Act, which form shall be available for the sale of the Transfer
Restricted Securities in accordance with the intended method or methods of
distribution thereof within the time periods and otherwise in accordance with
the provisions hereof.
(c) General Provisions. In connection with any Registration Statement
and any related Prospectus required by this Agreement, the Company shall:
(i) use its best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements
for the period specified in Section 3 or 4 of this Agreement, as
applicable; upon the occurrence of any event that would cause any such
Registration Statement or the Prospectus contained therein (A) to
contain a material misstatement or omission or (B) not to be effective
and usable for resale of Transfer Restricted Securities during the
period required by this Agreement, the Company shall file promptly an
appropriate amendment to such Registration Statement curing such
defect, and, if Commission review is required, use its best efforts to
cause such amendment to be declared effective as soon as practicable;
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<PAGE> 10
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the applicable Registration Statement as
may be necessary to keep such Registration Statement effective for the
applicable period set forth in Section 3 or 4 hereof, as the case may
be; cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424
under the Act, and to comply fully with Rules 424, 430A and 462, as
applicable, under the Act in a timely manner; and comply with the
provisions of the Act with respect to the disposition of all securities
covered by such Registration Statement during the applicable period in
accordance with the intended method or methods of distribution by the
sellers thereof set forth in such Registration Statement or supplement
to the Prospectus;
(iii) advise the selling Holders promptly and, if requested by
such Persons, confirm such advice in writing, (A) when the Prospectus
or any Prospectus supplement or post-effective amendment has been
filed, and, with respect to any applicable Registration Statement or
any post-effective amendment thereto, when the same has become
effective, (B) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus
or for additional information relating thereto, (C) of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement under the Act or of the suspension by any state
securities commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or the initiation
of any proceeding for any of the preceding purposes, (D) of the
existence of any fact or the happening of any event that makes any
statement of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement thereto or any document
incorporated by reference therein untrue, or that requires the making
of any additions to or changes in the Registration Statement in order
to make the statements therein not misleading, or that requires the
making of any additions to or changes in the Prospectus in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading. If at any time the Commission
shall issue any stop order suspending the effectiveness of the
Registration Statement, or any state securities commission or other
regulatory authority shall issue an order suspending the qualification
or exemption from qualification of the Transfer Restricted Securities
under state securities or Blue Sky laws, the Company shall use its best
efforts to obtain the withdrawal or lifting of such order at the
earliest possible time;
(iv) subject to Section 6(c)(i), if any fact or event
contemplated by Section 6(c)(iii)(D) above shall exist or have
occurred, prepare a supplement or post-effective amendment to the
Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(v) furnish to the Initial Purchasers and, if requested by any
selling Holder, to such Holder, named in any Registration Statement or
Prospectus in connection with such sale, if any, before filing with the
Commission, copies of any Registration Statement or any Prospectus
included therein or any amendments or supplements to any such
Registration Statement or Prospectus (including all documents
incorporated by reference after the initial filing of such Registration
Statement), which documents will be subject to the review and comment
of such Holders in connection with such sale, if any, for a period of
at least five Business Days, and the Company will not file any such
Registration Statement or Prospectus or any amendment or supplement to
any such Registration Statement or Prospectus (including all such
documents
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<PAGE> 11
incorporated by reference) to which the selling Holders of the Transfer
Restricted Securities covered by such Registration Statement in
connection with such sale, if any, shall reasonably object within five
Business Days after the receipt thereof. A selling Holder shall be
deemed to have reasonably objected to such filing if such Registration
Statement, amendment, Prospectus or supplement, as applicable, as
proposed to be filed, contains a material misstatement or omission or
fails to comply with the applicable requirements of the Act;
(vi) upon the reasonable request of any selling Holder,
promptly prior to the filing of any document that is to be incorporated
by reference into a Registration Statement or Prospectus, provide
copies of such document to the selling Holders in connection with such
sale, if any, make the Company's representatives available for
discussion of such document and other customary due diligence matters,
and include such information in such document prior to the filing
thereof as any selling Holder may reasonably request;
(vii) in the case of any Shelf Registration, make available at
reasonable times for inspection by the selling Holders participating in
any disposition pursuant to such Registration Statement and any
attorney or accountant retained by such selling Holders, all financial
and other records, pertinent corporate documents of the Company and
cause the Company's officers, directors and employees to supply all
information reasonably requested by any such selling Holder, attorney
or accountant in connection with such Registration Statement or any
post-effective amendment thereto subsequent to the filing thereof and
prior to its effectiveness, in each case as shall reasonably be
necessary to enable such persons to conduct a reasonable investigation
within the meaning of Section 11 of the Act; provided, however, that
the foregoing inspection and information gathering shall be coordinated
on behalf of the Initial Purchasers and such selling Holders by you and
on behalf of the other parties, by one counsel designated by and on
behalf of such other parties as described in Section 7 hereof,
provided, further, that any records, documents, properties or
information that are designated by the Company as confidential at the
time of delivery of such records, documents, properties or information
shall be kept confidential by such persons, unless (i) such records,
documents, properties or information are in the public domain or
otherwise publicly available, (ii) disclosure of such records,
documents, properties or information is required by court or
administrative order or (iii) disclosure of such records, documents,
properties or information, in the written opinion of counsel to such
person, is otherwise required by law (including, without limitation,
pursuant to the requirements of the Act);
(viii) subject to Section 4(b) hereof, if reasonably requested
by selling Holders of a majority of the principal amount of Transfer
Restricted Securities being sold in connection with such offering, if
any, promptly include in any Registration Statement or Prospectus,
pursuant to a supplement or post-effective amendment if necessary, such
information as such selling Holders may reasonably request to have
included therein, including, without limitation, information relating
to the "Plan of Distribution" of the Transfer Restricted Securities;
and make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after the Company is
notified of the matters to be included in such Prospectus supplement or
post-effective amendment; provided, however, that the Company shall not
be required to take any action pursuant to this Section 6(c)(viii) that
would, in the opinion of counsel for the Company reasonably
satisfactory to the Initial Purchasers, violate applicable law;
(ix) furnish to each selling Holder in connection with such
sale, if any, without charge, at least one copy of the Registration
Statement, as first filed with the Commission, and of each
post-effective amendment thereto, including financial statements and
schedules, and, if the
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<PAGE> 12
Holder so requests in writing, all documents incorporated by reference
therein and all exhibits (including exhibits incorporated therein by
reference);
(x) deliver to each selling Holder, without charge, as many
copies of the Prospectus (including each preliminary prospectus) and
any amendment or supplement thereto as such selling Holder reasonably
may request; the Company hereby consents to the use (in accordance with
law and subject to the provisions of this Agreement) of the Prospectus
and any amendment or supplement thereto by each of the selling Holders
in connection with the offering and the sale of the Transfer Restricted
Securities covered by the Prospectus or any amendment or supplement
thereto;
(xi) upon the request of any selling Holder, enter into such
agreements (including underwriting agreements) and make such
representations and warranties and take all such other actions in
connection therewith in order to expedite or facilitate the disposition
of the Transfer Restricted Securities pursuant to any applicable
Registration Statement contemplated by this Agreement as may be
reasonably requested by any Holder of Transfer Restricted Securities in
connection with any sale or resale pursuant to any applicable
Registration Statement, and in such connection, the Company shall:
(A) Upon the request of any selling Holder, furnish (or in the
case of paragraphs (2) and (3), use its best efforts to cause to
be furnished) to each selling Holder, upon the effectiveness of
the Shelf Registration Statement or upon Consummation of the
Exchange Offer, as the case may be:
(1) a certificate, dated such date, signed on behalf
of the Company by (x) the Chief Executive Officer or President
and (y) the Chief Financial Officer or Treasurer of the
Company, as set forth in Section 7(j) of the Purchase
Agreement and such other similar matters as are customary and
as the selling Holders may reasonably request;
(2) an opinion, dated the date of Consummation of the
Exchange Offer, or the date of effectiveness of the Shelf
Registration Statement, as the case may be, of counsel for the
Company covering matters similar to those set forth in of
Section 7(d) of the Purchase Agreement and such other matters
as the selling Holders may reasonably request, and in any
event including a statement to the effect that such counsel
has participated in conferences with officers of the Company
and with the independent public accountants for the Company
concerning the preparation of the Exchange Offer Registration
Statement or the Shelf Registration Statement, as the case may
be, and although such counsel has made certain inquiries and
investigations in connection with such preparation, it is not
passing upon and does not assume any responsibility for the
accuracy or completeness of the statements contained in such
Registration Statements, except insofar as such statements
relate to such counsel, and on the basis of the foregoing,
such counsel's work in connection with this matter did not
disclose any information that gave such counsel reason to
believe that the applicable Registration Statement, at the
time such Registration Statement or any post-effective
amendment thereto became effective, or the Prospectus
contained in such Registration Statement as of its date, and,
in the case of the Exchange Offer Registration Statement, as
of the date of Consummation of the Exchange Offer, contained
an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading; and
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<PAGE> 13
(3) a customary comfort letter, dated the date of
Consummation of the Exchange Offer, or as of the date of
effectiveness of the Shelf Registration Statement, as the case
may be, from the Company's independent accountants, in the
customary form and covering matters of the type customarily
covered in comfort letters to underwriters in connection with
underwritten offerings, and meeting the requirements set forth
in the comfort letters delivered pursuant to Section 7(i) of
the Purchase Agreement;
(B) Set forth in full or incorporate by reference in the
underwriting agreement, if any, the indemnification provisions and
procedures of Section 8 hereof with respect to all parties to be
indemnified pursuant to said Section; and
(C) Deliver such other customary documents and certificates as
may be reasonably requested by the selling Holders to evidence
compliance with clause (A) above and with any customary conditions
contained in any agreement entered into by the Company pursuant to
this clause (xi).
If at any time the representations and warranties of the Company set
forth in the certificate contemplated in clause (A)(1) above cease to be true
and correct, the Company shall so advise the Initial Purchasers and the
underwriter(s), if any, and each selling Holder promptly and, if requested by
such Persons, shall confirm such advice in writing;
(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders and their counsel in
connection with the registration and qualification of the Transfer
Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders may request and do any and all
other acts or things necessary or advisable to enable the disposition
in such jurisdictions of the Transfer Restricted Securities covered by
the applicable Registration Statement; provided, however, that the
Company shall not be required to register or qualify as a foreign
corporation where it is not now so qualified or to take any action that
would subject it to the service of process in suits, other than as to
matters and transactions relating to the Registration Statement, in any
jurisdiction where it is not now so subject;
(xiii) issue, upon the request of any Holder of Series A Notes
covered by any Shelf Registration Statement contemplated by this
Agreement, Series B Notes having a principal amount equal to the
principal amount of Series A Notes surrendered to the Company by such
Holder in exchange therefor or being sold by such Holder; such Series B
Notes to be registered in the name of such Holder or in the name of the
purchaser(s) of such Series B Notes, as the case may be; in return, the
Series A Notes held by such Holder shall be surrendered to the Company
for cancellation;
(xiv) in connection with any sale of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with the selling Holders to facilitate
the timely preparation and delivery of certificates representing
Transfer Restricted Securities to be sold and not bearing any
restrictive legends; and to register such Transfer Restricted
Securities in such denominations and such names as the selling Holders
may request at least two Business Days prior to such sale of Transfer
Restricted Securities pursuant to such Registration Statements;
(xv) use its best efforts to cause the disposition of the
Transfer Restricted Securities covered by the Registration Statement to
be registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers thereof
to
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<PAGE> 14
consummate the disposition of such Transfer Restricted Securities,
subject to the proviso contained in clause (xii) above;
(xvi) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of a Registration
Statement covering such Transfer Restricted Securities and provide the
Trustee under the Indenture with printed certificates for the Transfer
Restricted Securities which are in a form eligible for deposit with The
Depository Trust Company;
(xvii) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders with regard to any applicable
Registration Statement, as soon as practicable, a consolidated earnings
statement meeting the requirements of Rule 158 (which need not be
audited) covering a twelve-month period beginning after the effective
date of the Registration Statement (as such term is defined in
paragraph (c) of Rule 158 under the Act);
(xviii) (A) if the Notes have been rated prior to the initial
sale of such Notes, use its best efforts to confirm that such ratings
will apply to the Transfer Restricted Securities covered by a
Registration Statement, or (B) if the Notes were not previously rated,
use commercially reasonable efforts to cause the Transfer Restricted
Securities covered by the Registration Statement to be rated with the
appropriate rating agencies, if so requested by the Holders of a
majority of the principal amount of Notes covered thereby or the
managing underwriter(s), if any;
(xix) cause the Indenture to be qualified under the TIA not
later than the effective date of the first Registration Statement
required by this Agreement and, in connection therewith, cooperate with
the Trustee and the Holders to effect such changes to the Indenture as
may be required for such Indenture to be so qualified in accordance
with the terms of the TIA; and execute and use its best efforts to
cause the Trustee to execute, all documents that may be required to
effect such changes and all other forms and documents required to be
filed with the Commission to enable such Indenture to be so qualified
in a timely manner; and
(xx) provide promptly to each Holder upon request each
document filed with the Commission pursuant to the requirements of
Section 13 or Section 15(d) of the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(i) or any notice from the Company of the existence of any fact of
the kind described in Section 6(c)(iii)(D) hereof (in each case, a "Suspension
Notice"), such Holder will forthwith discontinue disposition of Transfer
Restricted Securities pursuant to the applicable Registration Statement until
(i) such Holder has received copies of the supplemented or amended Prospectus
contemplated by Section 6(c)(iv) hereof, or (ii) such Holder is advised in
writing by the Company that the use of the Prospectus may be resumed, and has
received copies of any additional or supplemental filings that are incorporated
by reference in the Prospectus (in each case, the "Recommencement Date"). Each
Holder receiving a Suspension Notice hereby agrees that it will either (i)
destroy any Prospectuses, other than permanent file copies, then in such
Holder's possession which have been replaced by the Company with more recently
dated Prospectuses or (ii) deliver to the Company (at the Company's expense) all
copies, other than permanent file copies, then in such Holder's possession of
the Prospectus covering such Transfer Restricted Securities that was current at
the time of receipt of the Suspension Notice. The time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4 hereof,
as applicable, shall be extended by a number of days equal to
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<PAGE> 15
the number of days in the period from and including the date of delivery of the
Suspension Notice to the date of delivery of the Recommencement Date.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or compliance
with this Agreement will be borne by the Company, regardless of whether a
Registration Statement becomes effective, including without limitation: (i) all
registration and filing fees and expenses; (ii) all fees and expenses of
compliance with federal securities and state Blue Sky or securities laws; (iii)
all expenses of printing (including printing of Prospectuses), messenger and
delivery services and telephone; (iv) all reasonable fees and disbursements of
counsel for the Company and one firm of counsel designated by the Holders of a
majority of the principal amount of Transfer Restricted Securities to act as
counsel for the Holders in connection therewith; (v) all application and filing
fees in connection with listing the Series B Notes on a national securities
exchange or automated quotation system pursuant to the requirements hereof; and
(vi) all fees and disbursements of independent certified public accountants of
the Company (including the expenses of any special audit and comfort letters
required by or incident to such performance).
The Company will, in any event, bear its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expenses of any annual audit and the
fees and expenses of any Person, including special experts, retained by the
Company.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company will reimburse the
Initial Purchasers and the Holders of Transfer Restricted Securities being
tendered in the Exchange Offer and/or resold pursuant to the "Plan of
Distribution" contained in the Exchange Offer Registration Statement or
registered pursuant to the Shelf Registration Statement, as applicable, for the
reasonable fees and disbursements of not more than one counsel, who shall be
Milbank, Tweed, Hadley & McCloy, New York, New York, unless another firm shall
be chosen by the Holders of a majority of the principal amount of Transfer
Restricted Securities for whose benefit such Registration Statement is being
prepared.
(c) Each Holder of Transfer Restricted Securities will pay all
underwriting discounts, if any, and commissions and transfer taxes, if any,
relating to the sale or disposition of such Holder's Transfer Restricted
Securities.
SECTION 8. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless each Holder of
Transfer Restricted Securities, its officers and employees and each person, if
any, who controls any such Holder within the meaning of Section 15 of the
Securities Act, from and against any loss, claim, damage or liability, joint or
several, or any action in respect thereof (including, but not limited to, any
loss, claim, damage, liability or action relating to purchases and sales of
Transfer Restricted Securities), to which that Holder, officer, employee or
controlling person may become subject, under the Securities Act or otherwise,
insofar as such loss, claim, damage, liability or action arises out of, or is
based upon, (i) any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement, preliminary prospectus or
Prospectus (in each case as amended or supplemented) or (ii) the omission or
alleged omission to state in any Registration Statement, preliminary prospectus
or Prospectus (in each case as amended or supplemented) any material fact
required to be stated therein or necessary to make
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<PAGE> 16
the statements therein not misleading; and shall reimburse each such Holder and
each such officer, employee or controlling person promptly upon demand for any
legal or other expenses reasonably incurred by that Holder, officer, employee or
controlling person in connection with investigating or defending or preparing to
defend against any such loss, claim, damage, liability or action as such
expenses are incurred; provided, however, that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage, liability or
action arises out of, or is based upon, any untrue statement or alleged untrue
statement or omission or alleged omission made in any Registration Statement,
preliminary prospectus or Prospectus (in each case as amended or supplemented)
in reliance upon and in conformity with written information concerning such
Holder furnished to the Company by or on behalf of such Holder specifically for
inclusion therein and provided further, however, that the Company shall not be
liable to any Holder under the indemnity agreement in this subsection (a) with
respect to any preliminary prospectus to the extent that any such loss, claim,
damage or liability of such Holder results from the fact that such Holder sold
Transfer Restricted Securities to a person as to whom there was not sent or
given, at or prior to written confirmation of such sale, a copy of the
Prospectus or of the Prospectus as then amended or supplemented if the Company
had previously furnished copies thereof in the quantity requested and in a
timely manner in accordance with Section 6(c)(x) hereof to such Holder and the
loss, claim, damage or liability of such Holder results from an untrue statement
or omission of a material fact contained in the preliminary prospectus and
corrected in the Prospectus or the Prospectus as amended or supplemented. The
foregoing indemnity agreement is in addition to any liability which the Company
may otherwise have to any Holder or to any officer, employee or controlling
person of that Holder.
(b) Each Holder of Transfer Restricted Securities, severally and not
jointly, shall indemnify and hold harmless the Company, its officers and
employees, each of its directors, and each person, if any, who controls the
Company within the meaning of the Securities Act, from and against any loss,
claim, damage or liability, joint or several, or any action in respect thereof,
to which the Company or any such director, officer or controlling person may
become subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon, (i) any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement, preliminary prospectus or Prospectus (in each case as
amended or supplemented) or (ii) the omission or alleged omission to state in
any Registration Statement, preliminary prospectus or Prospectus (in each case
as amended or supplemented) any material fact required to be stated therein or
necessary to make the statements therein not misleading, but in each case only
to the extent that the untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with written
information concerning such Holder furnished to the Company by or on behalf of
that Holder specifically for inclusion therein, and shall reimburse the Company
and any such director, officer or controlling person for any legal or other
expenses reasonably incurred by the Company or any such director, officer or
controlling person in connection with investigating or defending or preparing to
defend against any such loss, claim, damage, liability or action as such
expenses are incurred. The foregoing indemnity agreement is in addition to any
liability which any Holder may otherwise have to the Company or any such
director, officer, employee or controlling person.
(c) Promptly after receipt by an indemnified party under this Section 8
of notice of any claim or the commencement of any action, the indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under this Section 8, notify the indemnifying party in writing of the
claim or the commencement of that action; provided, however, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have under this Section 8 except to the extent it has been materially
prejudiced by such failure and, provided further, that the failure to notify the
indemnifying party shall not relieve it from any liability which it may have to
an indemnified party otherwise than under this Section 8. If any such claim or
action shall be brought against an indemnified
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<PAGE> 17
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to assume
the defense thereof with counsel reasonably satisfactory to the indemnified
party. After notice from the indemnifying party to the indemnified party of its
election to assume the defense of such claim or action, the indemnifying party
shall not be liable to the indemnified party under this Section 8 for any legal
or other expenses subsequently incurred by the indemnified party in connection
with the defense thereof other than reasonable costs of investigation. Any
Holder shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of the indemnified party unless (i) the employment of
such counsel shall have been specifically authorized in writing by the
indemnifying party, (ii) the indemnifying party shall have failed to assume the
defense of such action or employ counsel reasonably satisfactory to the
indemnified party or (iii) the named parties to any such action (including any
impleaded parties) include both the Company and the Holder, and the Holder shall
have been advised by such counsel that there may be one or more legal defenses
available to it which are different from or additional to those available to the
Company (in which case the Company shall not have the right to assume the
defense of such action on behalf of the indemnified party). Such counsel shall
be designated in writing by the Holders of a majority in principal amount of
Transfer Restricted Securities which are subject to such claim. No indemnifying
party shall (i) without the prior written consent of the indemnified parties
(which consent shall not be unreasonably withheld), settle or compromise or
consent to the entry of any judgment with respect to any pending or threatened
claim, action, suit or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified parties are
actual or potential parties to such claim or action) unless such settlement,
compromise or consent includes an unconditional release of each indemnified
party from all liability arising out of such claim, action, suit or proceeding,
or (ii) be liable for any settlement of any such action effected without its
written consent (which consent shall not be unreasonably withheld), but if
settled with the consent of the indemnifying party or if there be a final
judgment of the plaintiff in any such action, the indemnifying party agrees to
indemnify and hold harmless any indemnified party from and against any loss or
liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 8 shall for any
reason be unavailable to or insufficient to hold harmless an indemnified party
under Section 8(a) or 8(b) in respect of any loss, claim, damage or liability,
or any action in respect thereof, referred to therein, then each indemnifying
party shall, in lieu of indemnifying such indemnified party, contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability, or action in respect thereof, (i) in such proportion
as shall be appropriate to reflect the relative benefits received by the Company
from the offering and sale of the Notes, on the one hand, and the Holders from
their sale of Transfer Restricted Securities, on the other, or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and the Holders on the other with respect to the statements or
omissions which resulted in such loss, claim, damage or liability, or action in
respect thereof, as well as any other relevant equitable considerations.
Notwithstanding the provisions of this Section 8, no Holder shall be required to
contribute, in the aggregate, any amount in excess of the amount by which the
total received by such Holder with respect to the sale of its Transfer
Restricted Securities pursuant to a Registration Statement exceeds the amount of
any damages which such Holder has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. The
relative fault shall be determined by reference to whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company or the Holders, the
intent of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
the Holders agree that it would not be just and
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<PAGE> 18
equitable if contributions pursuant to this Section 8(d) were to be determined
by pro rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, damage or liability, or
action in respect thereof, referred to above in this Section shall be deemed to
include, for purposes of this Section 8(d), any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Holders' obligations to contribute as provided
in this Section 8(d) are several in proportion to the respective principal
amount of the Transfer Restricted Securities held by each of the Holders
hereunder and not joint.
SECTION 9. RULE 144A
The Company hereby agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding and during any period in which the
Company is not subject to Section 13 or 15(d) of the Exchange Act, to make
available, upon request of any Holder of Transfer Restricted Securities, to any
Holder or beneficial owner of Transfer Restricted Securities in connection with
any sale thereof and any prospective purchaser of such Transfer Restricted
Securities designated by such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Act in order to permit resales of such
Transfer Restricted Securities pursuant to Rule 144A.
SECTION 10. MISCELLANEOUS
(a) Remedies. The Company acknowledges and agrees that any failure by
the Company to comply with its obligations under Sections 3 and 4 hereof may
result in material irreparable injury to the Initial Purchasers or the Holders
for which there is no adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of any such
failure, the Initial Purchasers or any Holder may obtain such relief as may be
required to specifically enforce the Company's obligations under Sections 3 and
4 hereof. The Company further agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company will not, on or after the
date of this Agreement, enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. The Company has not previously
entered into any agreement granting any registration rights with respect to its
securities to any Person. The rights granted to the Holders hereunder do not in
any way conflict with and are not inconsistent with the rights granted to the
holders of the Company's securities under any agreement in effect on the date
hereof.
(c) Adjustments Affecting the Notes. The Company will not take any
action, or permit any change to occur, with respect to the Notes that would
materially and adversely affect the ability of the Holders to Consummate any
Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 10(d)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities (excluding Transfer Restricted Securities
18
<PAGE> 19
held by the Company or its Affiliates). Notwithstanding the foregoing, a waiver
or consent to departure from the provisions hereof that relates exclusively to
the rights of Holders whose securities are being tendered pursuant to the
Exchange Offer and that does not affect directly or indirectly the rights of
other Holders whose securities are not being tendered pursuant to such Exchange
Offer may be given by the Holders of a majority of the outstanding principal
amount of Transfer Restricted Securities subject to such Exchange Offer.
(e) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company, on the one
hand, and the Initial Purchasers, on the other hand, and shall have the right to
enforce such agreements directly to the extent they may deem such enforcement
necessary or advisable to protect its rights or the rights of Holders hereunder.
(f) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of
the Registrar under the Indenture, with a copy to the Registrar under
the Indenture; and
(ii) if to the Company:
Birch Telecom, Inc.
1004 Baltimore Avenue, Suite 900
Kansas City, Missouri 64105
Telecopier No.: (816) 842-7507
Attention: Chief Financial Officer
With a copy to:
Latham & Watkins
885 Third Avenue, Suite 1000
New York, New York 10022
Telecopier No.: (212) 751-4864
Attention: Kirk A. Davenport, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next Business Day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
Upon the date of filing of the Exchange Offer or a Shelf Registration
Statement, as the case may be, notice shall be delivered to Lehman Brothers Inc.
on behalf of the Initial Purchasers (in the form attached hereto as Exhibit A)
and shall be addressed to: Attention: Compliance Department, 3 World Financial
Center, New York, New York 10285.
19
<PAGE> 20
(g) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders of Transfer Restricted Securities; provided, that nothing
herein shall be deemed to permit any assignment, transfer or other disposition
of Transfer Restricted Securities in violation of the terms hereof or of the
Purchase Agreement or the Indenture. If any transferee of any Holder shall
acquire Transfer Restricted Securities in any manner, whether by operation of
law or otherwise, such Transfer Restricted Securities shall be held subject to
all of the terms of this Agreement, and by taking and holding such Transfer
Restricted Securities such Person shall be conclusively deemed to have agreed to
be bound by and to perform all of the terms and provisions of this Agreement,
including the restrictions on resale set forth in this Agreement and, if
applicable, the Purchase Agreement, and such Person shall be entitled to receive
the benefits hereof.
(h) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(i) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(j) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(k) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(l) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
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<PAGE> 21
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
BIRCH TELECOM, INC.
By: /s/ Bradley Moline
___________________
Name: Bradley Moline
Title: V.P. Finance Birch Telecom, Inc.
<PAGE> 22
LEHMAN BROTHERS INC.
By: /s/ Paul Zoidis
______________________________
Name: Paul Zoidis
Title: Managing Director
BT ALEX. BROWN INCORPORATED
By: /s/ Gerry McConnell
______________________________
Name: Gerry McConnell
Title: Principal
<PAGE> 23
EXHIBIT A
NOTICE OF FILING OF
A/B EXCHANGE OFFER REGISTRATION STATEMENT
To: Compliance Department
3 World Financial Center
New York, NY 10285
From: Birch Telecom, Inc.
1004 Baltimore Avenue, Suite 900
Kansas City, Missouri 64105
Re: 14% Senior Notes due 2008
Date ______________________, 199_____
For your information only (NO ACTION REQUIRED):
Today, ______, 199_, we filed [an A/B Exchange Registration Statement/a Shelf
Registration Statement] with the Securities and Exchange Commission. We
currently expect this registration statement to be declared effective within
______ business days of the date hereof.
<PAGE> 1
EXHIBIT 4.5
EXECUTION COPY
COLLATERAL PLEDGE AND
SECURITY AGREEMENT
Dated as of June 23, 1998
from
BIRCH TELECOM, INC.,
Pledgor
to
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Trustee
<PAGE> 2
TABLE OF CONTENTS
Section Page
SECTION 1. Definitions; Appointment; Deposit and Investment. .............. 2
1.1 Definitions.................................................... 2
1.2 Appointment of the Trustee..................................... 6
1.3 Pledge and Grant of Security Interest.......................... 6
SECTION 2. Delivery of Collateral; Establishment of Pledge Account......... 6
SECTION 3. Delivery of the Pledged Securities.............................. 7
SECTION 4. Delivery of Collateral Other than U.S. Government Obligations .. 9
SECTION 5. Investing of Amounts in the Pledge Account........ ............. 9
SECTION 6. Disbursements................................................... 9
SECTION 7. Representations and Warranties.................................. 11
SECTION 8. Further Assurances.............................................. 12
SECTION 9. Covenants....................................................... 13
SECTION l0. Power of Attorney............................................... 13
SECTION 11. No Assumption of Duties; Reasonable Care........................ 14
SECTION 12. Indemnity....................................................... 14
SECTION 13. Remedies upon Event of Default.................................. 14
SECTION 14. Expenses........................................................ 15
SECTION 15. Security Interest Absolute...................................... 15
SECTION 16. New York Securities Intermediary's Representations, Warranties
and Covenants................................................... 16
SECTION 17. Miscellaneous Provisions........................................ 17
17.1 Notices ........................................................ 17
17.2 Severability ................................................... 18
17.3 Headings ....................................................... 18
17.4 Counterpart Originals .......................................... 18
i
<PAGE> 3
17.5 Benefits of Pledge Agreement ................................... 18
17.6 Amendments, Waivers and Consents ............................... 18
17.7 Interpretation of Agreement .................................... 18
17.9 Survival Provisions ............................................ 19
17.10 Waivers ........................................................ 19
17.11 Authority of the Trustee ....................................... 19
17.12 Final Expression ............................................... 20
17.13 Rights of Holders of the Notes ................................. 20
17.14 GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF
DAMAGES......................................................... 20
17.15 Effectiveness .................................................. 22
SCHEDULE I PLEDGED SECURITIES 1
EXHIBIT A NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
OFFICER'S CERTIFICATE 1
EXHIBIT B [Attach Report from Ernst & Young LLP] 1
This Collateral Pledge and Security Agreement (this "Pledge Agreement")
is made and entered into as of June 23, 1998 by Birch Telecom, Inc., a Delaware
corporation (the "Pledgor"), having its principal offices at 1004 Baltimore
Ave., Suite 900, Kansas City, MO 64105, in favor of Norwest Bank Minnesota,
National Association, as Trustee (in such capacity, the "Trustee") having its
principal corporate trust office at Sixth and Marquette, Minneapolis, MN
55479-0069, Attention: Corporate Trust Department, as trustee for the holders
(the "Holders") of the Notes (as defined herein) issued by the Pledgor under the
Indenture referred to below.
W I T N E S S E T H:
WHEREAS, the Pledgor, its subsidiaries and the Initial Purchasers (as
defined in the Purchase Agreement) are parties to a Purchase Agreement, dated
June 18, 1998 (the "Purchase Agreement"), pursuant to which the Pledgor will
issue and sell to the Initial Purchasers 115,000 units (the "Units") each
consisting of $1,000 principal amount of the Pledgor's 14% Senior Notes due 2008
(the "Notes") and a warrant to purchase 12.25856 shares of the Company's common
stock, par value $.001 per share;
WHEREAS, the Pledgor and the Trustee have entered into that certain
indenture, dated as of the date hereof (as amended, restated, supplemented or
otherwise modified from time to time, the "Indenture"), pursuant to which the
Pledgor is issuing the Notes on the date hereof;
WHEREAS, pursuant to the Indenture, the Pledgor is required, on the
Closing Date (as defined in the Purchase Agreement), to purchase, or cause the
purchase of, and pledge to the Trustee for the benefit of the Holders of the
Notes U.S. Government Obligations (as defined
2
<PAGE> 4
below) in an amount that will be sufficient upon receipt of scheduled interest
and principal payments of such securities, in the opinion of a
nationally-recognized firm of independent public accountants selected by the
Pledgor (the "Accounting Firm") to provide for payment in full of the first six
scheduled interest payments due on the Notes to secure the Pledgor's obligation
(such obligation, together with the obligation to repay the principal, premium,
Liquidated Damages (as defined in the Registration Rights Agreement, dated as of
the Closing Date, between the Pledgor and the Initial Purchasers), if any, and
interest on the Notes in the event that the Notes become due and payable prior
to such time as the first six scheduled interest payments thereon shall have
been paid in full, being collectively referred to herein as the "Obligations");
WHEREAS, the Trustee has opened a securities account (the "Pledge
Account") with Bankers Trust Company, as Securities Intermediary (in such
capacity, the "New York Securities Intermediary"), at its office at 16 Wall St.,
MS 4039, New York, New York 10005 (designated "Pledge Account pledged by Birch
Telecom, Inc. to Norwest Bank Minnesota, National Association as Trustee and
Sole Entitlement Holder"), in the name of and under the sole dominion and
control of the Trustee and subject to the terms of this Pledge Agreement;
WHEREAS, pursuant to the Purchase Agreement it is a condition precedent
to the purchase of the Units by the Initial Purchasers that the Pledgor apply
certain of the proceeds of the offering of the Units to purchase the Pledged
Securities (as defined below) and to deposit such Pledged Securities into the
Pledge Account to be held therein under the sole dominion and control of the
Trustee and subject to the terms of this Pledge Agreement;
WHEREAS, to secure the Obligations of the Pledgor, the Pledgor has
agreed to execute and deliver this Pledge Agreement and pledge to the Trustee,
for its benefit and the ratable benefit of the Holders of the Notes, the Pledged
Securities and the related Collateral (as defined below) in order to secure the
payment by the Pledgor of all the Obligations.
All capitalized terms used herein but not defined herein shall have the
meanings assigned to such terms in the Indenture.
NOW, THEREFORE, in consideration of the premises herein contained, and
in order to induce the Holders of the Notes to purchase the Notes (as a part of
the purchase of the Units), the Pledgor and the Trustee hereby agree, for the
benefit of the Trustee and for the ratable benefit of the Holders of the Notes,
as follows:
SECTION 1. Definitions; Appointment; Deposit and Investment.
1.1 Definitions.
(a) Unless otherwise defined in this Pledge Agreement, terms defined or
referenced in the Indenture are used in this Pledge Agreement as such terms are
defined or referenced therein.
(b) Unless otherwise defined in the Indenture or in this Pledge
Agreement, terms defined in Article 8 or 9 of the Uniform Commercial Code in
effect in the State of New York
2
<PAGE> 5
from time to time and/or in Section 357.2 of the Treasury Regulations (as
defined in Section 1.l(c)) are used in this Pledge Agreement as such terms are
defined in such Article 8 or 9 and/or such Section 357.2. Such terms shall
include, but not be limited to, "book-entry security", "certificated security",
"entitlement holder", "CUBES", "entitlement order", "financial asset",
"instrument", "participant's securities account", "proceeds", "securities
account", "securities intermediary", "security", "security entitlement" and
"STRIPS".
(c) In this Pledge Agreement the following terms have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"Adverse Claim" has the meaning specified in Section 8-102(a)(1) of the
UCC.
"Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government 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 one year from the date of acquisition, (iii)
certificates of deposit and eurodollar time deposits with maturities of one year
or less from the date of acquisition, bankers' acceptances with maturities not
exceeding one year and overnight bank deposits, in each case with any domestic
commercial bank having capital and surplus in excess of $500.0 million and a
Thompson Bank Watch Rating of "B" or better, (iv) repurchase obligations with a
term of not more than 30 days for underlying securities of the types described
in clauses (ii) and (iii) above entered into with any financial institution
meeting the qualifications specified in clause (iii) above, (v) commercial paper
or other indebtedness issued by domestic corporations having the highest rating
obtainable from either Moody's Investors Service, Inc. or Standard & Poor's
Ratings Group and, in each case maturing within one year after the date of
acquisition and (vi) money market funds at least 95% of the assets of which
constitute Cash Equivalents of the kinds described in clauses (i) through (v) of
this definition.
"Certificated Security" has the meaning specified in Section
8-102(a)(4) of the UCC.
"CFR" means the U.S. Code of Federal Regulations.
"Collateral" has the meaning specified in Section 1.3.
"Deposit Account" has the meaning specified in Section 9-105(e) of the
UCC.
"Entitlement Holder" has the meaning specified in Section 8-102(a)(7)
of the UCC.
"Entitlement Order" has the meaning specified in Section 8-102(a)(8) of
the UCC.
"Financial Asset" has the meaning specified in Section 8-102(a)(9) of
the UCC.
"FRB" means Federal Reserve Bank of New York.
3
<PAGE> 6
"FRB Account" means the participant's securities account maintained in
the name of the New York Securities Intermediary by the FRB.
"FRB Member" means any Person that is eligible to maintain (and that
maintains) with the FRB one or more FRB Member Securities Accounts in such
Person's name.
"FRB Member Securities Account" means in respect of any Person, an
account in the name of such Person at the FRB, to which account U.S. Government
Obligations held for such Person are or may be credited.
"General Intangibles" has the meaning specified in Section 9-106 of the
UCC.
"Instruments" has the meaning specified in Section 9-105(i) of the UCC.
"Investment Property" has the meaning specified in Section 9-115(1)(f)
of the UCC.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Money" has the meaning specified in Section 1-201(24) of the UCC.
"New York Securities Intermediary" has the meaning specified in the
recitals hereto.
"Pledgor" has the meaning specified in the recitals of the parties
hereto.
"Proceeds" means all "proceeds" as such term is defined in Section
9-306(1) of the UCC and, in any event, shall include without limitation, all
interest, dividends or other earnings, income or distributions from or in
respect of, or from or in respect of investments or reinvestments of, the cash
and Cash Equivalents and Investment Property from time to time on deposit in the
Pledge Account, all collections and distributions with respect to the U.S.
Government Obligation and all other proceeds of Collateral.
"Securities Account" has the meaning specified in Section 8-501(a) of
the UCC.
"Securities Control" shall mean "control" as defined in Section
9-115(1)(e) of the UCC.
"Securities Intermediary" means a Person that is a "securities
intermediary" (as defined in Section 8-102(a)(14) of the UCC) and, in respect of
any book-entry security, a "securities intermediary" (as defined in 31 CFR
Section 357.2 or, as applicable to such book-entry security, the corresponding
Federal book-entry regulations).
4
<PAGE> 7
"Security" has the meaning specified in Section 8-102(a)(15) of the
UCC.
"Security Certificate" has the meaning specified in Section
8-102(a)(16) of the UCC.
"Security Entitlement" as defined in Section 8-102(a)(17) of the UCC
or, in respect of any book-entry security, as defined in 31 CFR Section 357.2
(or, as applicable to such book-entry security, the corresponding Federal
book-entry regulations).
"Settlement Date" means, as to any U.S. Government Obligations, the
date on which the purchase of such U.S. Government Obligations shall have been
settled.
"Termination Date" means the earlier of (a) the date of the payment in
full in cash of each of the first six scheduled interest payments due on the
Notes under the terms of the Indenture and (b) the date of the payment in full
of all obligations due and owing under this Pledge Agreement, the Indenture and
the Notes, in the event such obligations become due and payable prior to the
payment of the first six scheduled interest payments on the Notes.
"Treasury Regulations" means (a) the regulations contained in 31 CFR
Part 357 (including, without limitation, Section 357.2, Section 357.10 through
Section 357.14 and Section 357.41 through Section 357.44 of 31 CFR) and (b) to
the extent substantially identical to the regulations referred to in clause (a)
above (as in effect from time to time) the regulations governing other U.S.
Government Obligations.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Pledge Agreement or any successor thereto appointed in
accordance with the provisions of the TIA.
"UCC" means, unless otherwise specified herein, the Uniform Commercial
Code as in effect in New York State.
"Uncertificated Security" has the meaning specified in Section
8-102(a)(18) of the UCC.
"U.S. Government Obligations" means securities that are (x) direct
obligations of the United States of America for the timely payment of which its
full faith and credit is pledged or (y) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America, which, in either
case, are not callable or redeemable at the option of the issuer thereof, and
shall also include a depository receipt issued by a "bank" (as defined in
Section 3(a)(2) of the Securities Act), as custodian with respect to any such
U.S. Government Obligation or a specific payment of principal of or interest on
any such U.S. Government Obligation held by such custodian for the account of
the holder of such depository receipt, provided (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S. Government
5
<PAGE> 8
Obligation or the specific payment of principal of or interest on the U.S.
Government Obligation evidenced by such depository receipt.
1.2 Appointment of the Trustee. The Pledgor hereby appoints the Trustee
as Trustee in accordance with the terms and conditions set forth herein and the
Trustee hereby accepts such appointment.
1.3 Pledge and Grant of Security Interest. As security for the prompt
and complete payment and performance when due (whether at the stated maturity,
by acceleration or otherwise) of the Obligations, the Pledgor hereby grants to
the Trustee for its benefit and for the ratable benefit of the Holders of the
Notes, a lien on and security interest in all of the Pledgor's right, title and
interest in, to and under the following property (whether characterized as
Certificate Securities or Uncertificated Securities, Financial Assets, Security
Entitlements, Deposit Accounts, bank accounts, Securities Accounts, Money,
Proceeds, Investment Property, General Intangibles or otherwise): (a) the U.S.
Government Obligations identified by CUSIP No. in Schedule I to this Pledge
Agreement (the "Pledged Securities"), the scheduled payments of principal and
interest of which will be sufficient to provide for payment in full of the first
six scheduled interest payments due on the Notes, (b) any and all applicable
Security Entitlements to the Pledged Securities, (c) the Pledge Account, all
funds held therein and all certificates and instruments, if any, from time to
time representing or evidencing the Pledge Account, (d) all Collateral
Investments (as defined below) and all certificates and instruments, if any,
representing or evidencing the Collateral Investments, and any and all Security
Entitlements to the Collateral Investments, and any and all related Securities
Accounts in which any Security Entitlement to the Collateral Investments is
carried, (e) all notes, certificates of deposit, Deposit Accounts, checks and
other instruments, if any, from time to time hereafter delivered to or otherwise
possessed by the Trustee for or on behalf of the Pledgor in substitution for or
in addition to any or all of the then existing Collateral, (f) all interest,
dividends, cash, instruments and other property, if any, from time to time
received by the Trustee, receivable or otherwise distributed in respect of or in
exchange for any or all of the then existing Collateral and (g) except as
otherwise provided herein, all proceeds of any and all of the foregoing
Collateral (including, without limitation, proceeds that constitute property of
the types described in clauses (a) - (f) of this Section 1.3) (such property
being collectively referred to herein as the "Collateral").
SECTION 2. Delivery of Collateral; Establishment of Pledge Account. (a)
The Trustee has established with the New York Securities Intermediary, and at
all times until the Termination Date, the Pledgor shall maintain with the New
York Securities Intermediary, the Pledge Account. The Pledge Account shall be a
Securities Account. The following provisions shall apply to the establishment
and maintenance of the Pledge Account:
(i) The Trustee shall cause the Pledge Account to be, and the Pledge
Account shall be, separate from all other accounts maintained by the
Trustee.
(ii) The Trustee shall, in accordance with all applicable laws, have
sole dominion and control (including, without limitation, Securities
Control) over the Pledge Account,
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and it shall be a term and condition of the Pledge Account and the
Pledgor irrevocably instructs the Trustee, notwithstanding any other
term or condition to the contrary in any other agreement, that no
Collateral shall be released to or for the account of, or withdrawn by
or for the account of, the Pledgor or any other Person except as
expressly provided in this Pledge Agreement.
(iii) The Trustee shall, in accordance with and subject to all
applicable laws, be the sole Entitlement Holder of, and have the power to
originate Entitlement Orders with respect to, the Pledge Account and all
U.S. Government Obligations, Securities, Security Entitlements and other
Financial Assets held therein, and it shall be a term and condition of the
Pledge Account that the Trustee shall have the right to issue such
Entitlement Orders with respect to the Pledge Account and such Securities,
Security Entitlements and other Financial Assets without further consent
of the Pledgor, and that no Collateral shall be released to or for the
account of, or withdrawn by or for the account of, the Pledgor or any
other Person except as expressly provided in this Pledge Agreement.
(b) On the Closing Date, the Pledgor shall transfer, or cause to be
transferred, to the Trustee an amount equal to $44,246,583.50 by depositing (i)
cash in such amount or (ii) U.S. Government Obligations (in the name of the
Trustee) listed in Schedule I hereto purchased for such amount into the Pledge
Account.
(c) As soon as possible after receipt of the amount referred to in
Section 2(b)(i), (i) the Trustee shall apply such amount to purchase the U.S.
Government Obligations (in the name of the Trustee) listed on Schedule I hereto
in such principal amount. The Trustee shall ensure that, on the Settlement Date,
the FRB credits in the FRB Account those U.S. Government Obligations being
settled on such date which the Trustee has either received under Section
2(b)(ii) or purchased under this ---------- Section 2(c). The Trustee shall
cause the New York Securities Intermediary to credit any such U.S. Government
Obligations received or purchased by it to the Pledge Account as Collateral
hereunder.
(d) The Trustee will, from time to time, reinvest the proceeds of
Collateral that may mature or be sold in such Collateral Investments (in the
name of the Trustee) as it may be directed in writing by the Pledgor, and cause
such Collateral Investments to be credited to the Pledge Account as Collateral
hereunder. Such proceeds that are not so reinvested in Collateral Investments
shall be deposited and held in the Pledge Account.
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SECTION 3. Delivery of the Pledged Securities. (a) The Pledged
Securities shall be pledged and delivered to the Pledge Account in the name of
the Trustee and the Trustee shall become the Entitlement Holder of a Security
Entitlement to the Pledged Securities through action by the New York Securities
Intermediary, as confirmed (in writing or electronically or otherwise in
accordance with standard industry practice) to the Trustee by the New York
Securities Intermediary (i) indicating by book-entry that the Pledged Securities
and all Security Entitlements thereto have been credited to the Pledge Account,
or (ii) acquiring the Pledged Securities and all Security Entitlements thereto
for the Trustee and accepting the same for credit to the Pledge Account.
(b) Prior to or concurrently with the execution and delivery hereof and
prior to the transfer to the Trustee of the Pledged Securities (or acquisition
by the Trustee of any Security Entitlement thereto), as provided in subsection
(a) of this Section 3, the Trustee and the New York Securities Intermediary
shall establish the Pledge Account on the books of the New York Securities
Intermediary as a Securities Account segregated from all other custodial or
collateral accounts, such account to be maintained either (i) directly at its
offices located at 16 Wall St., MS 4039, New York, New York 10005 or (ii)
through a "Securities Account" maintained by the New York Securities
Intermediary at the FRB, as Securities Intermediary. Upon transfer of the
Pledged Securities to the Trustee (or the Trustee's acquisition of a Security
Entitlement thereto), as confirmed to the New York Securities Intermediary by
FRB or another Securities Intermediary, the New York Securities Intermediary
shall make appropriate book entries indicating that the Pledged Securities
and/or such Security Entitlement have been credited to and are held in the
Pledge Account. Subject to the other terms and conditions of this Pledge
Agreement, all funds or other property held by the Trustee pursuant to this
Pledge Agreement shall be held in the Pledge Account subject (except as
expressly provided in Section 6) to the exclusive dominion and control
(including, without limitation, Securities Control) of the Trustee and
exclusively for the benefit of the Trustee and for the ratable benefit of the
Holders of the Notes and segregated from all other funds or other property
otherwise held by the Trustee.
(c) All Collateral shall be retained in the Pledge Account pending
disbursement pursuant to the terms hereof.
(d) Concurrently with the execution and delivery of this Pledge
Agreement, the Trustee is delivering to the Pledgor and the Initial Purchasers a
duly executed certificate, in the form of Exhibit A hereto, of an officer of the
Trustee, confirming the Trustee's establishment and maintenance of the Pledge
Account with the New York Securities Intermediary and its receipt and holding of
the Pledged Securities or a Security Entitlement thereto and the crediting of
the Pledged Securities or such Security Entitlement to the Pledge Account, all
in accordance with this Pledge Agreement.
(e) Concurrently with the execution and delivery of this Pledge
Agreement, the Pledgor is delivering to the Trustee an opinion of the Accounting
Firm substantially in the form of Exhibit B hereto.
(f) Concurrently with the execution and delivery of this Pledge
Agreement, the
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Pledgor is delivering to the Trustee financing statements in form acceptable for
filing under the UCC of the State of New York, covering the Collateral described
in this Pledge Agreement.
SECTION 4. Delivery of Collateral Other than U.S. Government
Obligations. (a) Collateral consisting of cash will be deemed to be delivered to
the Trustee (such that the Trustee will have an enforceable lien and security
interest thereon and therein), when it has been (and for so long as it shall
remain) deposited in or credited to the Pledge Account.
(b) Collateral consisting of Cash Equivalents (other than U.S.
Government Obligations) will be deemed to be delivered to the Trustee (such that
the Trustee will have an enforceable lien and security interest thereon and
therein), when they have been (and for so long as they shall remain) deposited
in or credited to the Pledge Account.
(c) Collateral consisting of Securities (other than U.S. Government
Obligations) will be deemed delivered to the Trustee when the New York
Securities Intermediary (A) shall indicate by book entry that such Securities
have been credited to the Pledge Account or (B) shall receive such Security (or
a Financial Asset based on such Security) for the Trustee, from or at the
direction of the Pledgor, and shall accept such Security (or such Financial
Asset) for credit to the Pledge Account;
(d) Collateral consisting of Securities and represented or evidenced by
certificates or instruments will be deemed delivered to the Trustee when all
such certificates or instruments representing or evidencing the Collateral,
including, without limitation, amounts invested as provided in Section 5, shall
be delivered to the New York Securities Intermediary and held by or on behalf of
the Trustee pursuant hereto and shall be in registered form and specially
indorsed to the Trustee by an effective indorsement, all in form and substance
sufficient to convey a valid security interest in such Collateral to the Trustee
or shall be credited to the Pledge Account.
SECTION 5. Investing of Amounts in the Pledge Account. If at any time,
any amounts shall exist in the Pledge Account uninvested, and if directed in
writing by the Pledgor, the Trustee will, subject to the provisions of Section 6
and Section 13, (a) invest such amounts on deposit in the Pledge Account in such
Cash Equivalents in the name of the Trustee as the Pledgor may select and (b)
invest interest paid on the Cash Equivalents referred to in clause (a) above,
and reinvest other proceeds of any such Cash Equivalents that may mature or be
sold, in each case in such Cash Equivalents in the name of the Trustee, as the
Pledgor may select and the Trustee may approve (the Cash Equivalents referred to
in clauses (a) and (b) above, together with the Pledged Securities, being
collectively referred to herein as "Collateral Investments"); provided, however,
that the amount in cash and Pledged Securities on deposit in the Pledge Account,
collectively, at any time during the term of this Pledge Agreement, must be
sufficient to provide for the payment in full of the remaining interest payments
at such time on the Notes up to and including the sixth scheduled interest
payment. Except as otherwise provided in Sections 11 and 12, the Trustee shall
not be liable for any loss in the investment or reinvestment of amounts held in
the Pledge Account.
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SECTION 6. Disbursements. The Trustee shall hold the Collateral in the
Pledge Account and release the same, or a portion thereof, only as follows:
(a) At least three Business Day prior to the due date of any of the
first six scheduled interest payments on the Notes, the Pledgor may, pursuant to
written instructions executed by the Pledgor (an "Issuer Order"), direct the
Trustee to release from the Pledge Account and pay to the Holders of the Notes
proceeds sufficient to provide for payment in full of such interest then due on
the Notes; provided, however, that in the event Collateral is required to be
liquidated, the Pledgor will give the Trustee at least five Business Days'
notice as to whether payment of interest will be made pursuant to this Section
6(a) or pursuant to Section 6(b). If no such notice is given and no such Issuer
Order is provided, the Trustee will act pursuant to this Section 6(a) as if it
had received an Issuer Order pursuant hereto for the payment in full of the
interest then due. Upon receipt of an Issuer Order or upon the Pledgor's failure
to give either such notice or such Issuer Order in a timely manner, the Trustee
will take any action necessary to provide for the payment of the interest on the
Notes to the Holders of the Notes in accordance with the payment provisions of
the Indenture from (and to the extent of) proceeds of the Collateral in the
Pledge Account. Nothing in this Section 6 shall affect the Trustee's rights to
apply the Collateral to the payments of amounts due on the Notes upon
acceleration thereof.
(b) If the Pledgor makes any interest payment or portion of an interest
payment for which the Collateral is security from a source of funds other than
the Pledge Account ("Pledgor Funds"), the Pledgor may, after payment in full of
such interest payment, direct the Trustee by Issuer Order to release to the
Pledgor or to another party at the direction of the Pledgor (the "Pledgor's
Designee") proceeds from the Pledge Account in an amount less than or equal to
the amount of Pledgor Funds applied to such interest payment. Upon receipt of
such Issuer Order by the Trustee, the Trustee shall pay over to the Pledgor or
the Pledgor's Designee, as the case may be, the requested amount from proceeds
in the Pledge Account. Concurrently with any release of funds to the Pledgor
pursuant to this Section 6(b), the Pledgor shall deliver to the Trustee a
certificate signed by an officer of the Pledgor stating that the Pledgor has
made the interest payment from a source of funds other than the Pledge Account,
and that such release has been duly authorized by the Pledgor and will not
violate any provision of applicable law or the Certificate of Incorporation or
the By-laws of the Pledgor or any material agreement or instrument binding upon
the Pledgor or any of its subsidiaries or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Pledgor or any
of its subsidiaries or result in the creation or imposition of any Lien on any
assets of the Pledgor, except for the security interest granted under this
Pledge Agreement.
(c) Upon the Termination Date, the security interest in the Collateral
evidenced by this Pledge Agreement will automatically terminate and be of no
further force and effect, and the Collateral, upon receipt by the Trustee of an
Issuer Order, shall promptly be paid over and transferred to the Pledgor.
(d) In the event that the Collateral held in the Pledge Account exceeds
100% of the amount sufficient, in the written opinion of the Accounting Firm, to
provide for payment in full of the first six scheduled interest payments due on
the Notes (or, in the event an interest
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payment or payments have been made, an amount sufficient to provide for payment
in full of all interest payments remaining, up to and including the sixth
scheduled interest payment), the Trustee shall release to the Pledgor, at the
Pledgor's written request, accompanied by a written opinion of the Accounting
Firm, any such excess Collateral.
(e) Upon the release of any Collateral from the Pledge Account in
accordance with the terms of this Pledge Agreement, the security interest
evidenced by this Pledge Agreement in such released Collateral will
automatically terminate and be of no further force and effect.
(f) Nothing contained in Section 1, this Section 6, Section 13, or any
other provision of this Pledge Agreement shall (i) afford the Pledgor any right
to issue Entitlement Orders with respect to any Security Entitlement to the
Pledged Securities or Collateral Investments or any Securities Account in which
any such Security Entitlement may be carried, or otherwise afford the Pledgor
control of any such Security Entitlement or (ii) otherwise give rise to any
rights of the Pledgor with respect to the Collateral Investments, any Security
Entitlement thereto or any Securities Account in which any such Security
Entitlement may be carried, other than the Pledgor's rights under this Pledge
Agreement as the beneficial owner of Collateral pledged to and subject to the
exclusive dominion and control (including, without limitation, Securities
Control) (except as expressly provided in this Section 6) of the Trustee in its
capacity as such (and not as a Securities Intermediary). The Pledgor
acknowledges, confirms and agrees that the Trustee holds a Security Entitlement
to the Collateral Investments solely as trustee for the Holders of the Notes and
not as a Securities Intermediary for the Pledgor.
SECTION 7. Representations and Warranties. The Pledgor hereby
represents and warrants, as of the date hereof, that:
(a) The execution and delivery by the Pledgor of, and the performance
by the Pledgor of its obligations under, this Pledge Agreement will not violate
any provision of applicable law or the Articles of Incorporation or By-laws of
the Pledgor or any material agreement or instrument binding upon the Pledgor or
any of its subsidiaries or any judgment, order or decree of any governmental
body, agency or court having jurisdiction over the Pledgor or any of its
subsidiaries, or result in the creation or imposition of any Lien on any assets
of the Pledgor, except for the security interests granted under this Pledge
Agreement. No consent, approval, authorization or order of, or qualification
with, any governmental body or agency is required (i) for the performance by the
Pledgor of its obligations under this Pledge Agreement, (ii) for the pledge by
the Pledgor of the Collateral pursuant to this Pledge Agreement or (iii) except
for any such consents, approvals, authorizations or orders required to be
obtained by the Trustee (or the Holders) for reasons other than the consummation
of this transaction, for the exercise by the Trustee of the rights provided for
in this Pledge Agreement or the remedies in respect of the Collateral pursuant
to this Pledge Agreement.
(b) The Pledgor is the beneficial owner of the Collateral, free and
clear of any Lien or claims of any person or entity (except for the security
interests granted under this Pledge Agreement). No financing statement covering
the Pledgor's interest in the Collateral is on file in
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any public office other than the financing statements, if any, filed pursuant to
this Pledge Agreement.
(c) This Pledge Agreement has been duly and validly authorized,
executed and delivered by the Pledgor and (assuming the due authorization,
execution and delivery of this Pledge Agreement by the Trustee and
enforceability of the Pledge Agreement against the Trustee in accordance with
its terms and the provisions of the TIA) constitutes a valid and binding
agreement of the Pledgor, enforceable against the Pledgor in accordance with its
terms (subject to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and other similar laws affecting creditors' rights generally
from time to time in effect and to general principles of equity, including,
without limitation, concepts of materiality, reasonableness, good faith and fair
dealing, regardless of whether considered in a proceeding in equity or at law).
(d) Upon the delivery to the Trustee of the Collateral in accordance
with the procedures described in Section 3 and Section 4, the pledge of and
grant of a security interest in the Collateral securing the payment of the
Obligations for the benefit of the Trustee and the Holders of the Notes will
constitute a valid, first priority, perfected security interest in such
Collateral (except, with respect to Proceeds, only to the extent permitted by
Section 9-306 of the UCC), enforceable as such against all creditors of the
Pledgor and any persons purporting to purchase any of the Collateral from the
Pledgor, except in each case as enforcement may be subject to general principles
of equity (whether considered in a proceeding in equity or at law) and other
than as permitted by the Indenture.
(e) There are no legal or governmental proceedings pending or, to the
Pledgor's knowledge, threatened, against the Pledgor or any of its subsidiaries
or to which any of their respective properties is subject that would materially
adversely affect the power or ability of the Pledgor to perform its obligations
under this Pledge Agreement or to consummate the transactions contemplated
hereby.
(f) The pledge of the Collateral pursuant to this Pledge Agreement is
not prohibited by law or governmental regulation (including, without limitation,
Regulations T, U and X of the Board of Governors of the Federal Reserve System)
applicable to the Pledgor.
(g) No Event of Default (as defined herein) exists.
SECTION 8. Further Assurances. The Pledgor will, promptly upon the
request by the Trustee (which request the Trustee may submit at the direction of
the Holders of a majority in aggregate principal amount of the Notes then
outstanding), execute and deliver or cause to be executed and delivered, or use
its reasonable best efforts to procure, all assignments, instruments and other
documents, all in form and substance reasonably satisfactory to the Trustee,
deliver any instruments to the Trustee and take any other actions that are
necessary or desirable to perfect, continue the perfection of, or protect the
first priority of the Trustee's security interest in and to the Collateral, to
protect the Collateral against the rights, claims or interests of third persons
(other than any such rights, claims or interests created by or arising through
the Trustee) or to effect the purposes of this Pledge Agreement. The Pledgor
also hereby authorizes the Trustee to file any financing or continuation
statements in the United States with
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respect to the Collateral without the signature of the Pledgor (to the extent
permitted by applicable law). The Pledgor will promptly pay all reasonable costs
incurred in connection with any of the foregoing within 60 days of receipt of an
invoice therefor. The Pledgor also agrees, whether or not requested by the
Trustee, to use its reasonable best efforts to perfect or continue the
perfection of, or to protect the first priority of, the Trustee's security
interest i and to the Collateral, and to protect the Collateral against the
rights, claims or interests of third persons (other than any such rights, claims
or interests created by or arising through the Trustee).
SECTION 9. Covenants. The Pledgor covenants and agrees with the Trustee
and the Holders of the Notes that from and after the date of this Pledge
Agreement until the Termination Date:
(a) that it will not (i) (and will not purport to) sell or otherwise
dispose of, or grant any option or warrant with respect to, any of the
Collateral nor (ii) create or permit to exist any Lien upon or with
respect to any of the Collateral (except for the security interests
granted under this Pledge Agreement and any Lien created by or arising
through the Trustee) and at all times will be the sole beneficial owner of
the Collateral; and
(b) that it will not (i) enter into any agreement or understanding that
restricts or inhibits or purports to restrict or inhibit the Trustee's
rights or remedies hereunder, including, without limitation, the Trustee's
right to sell or otherwise dispose of the Collateral or (ii) fail to pay
or discharge any tax, assessment or levy of any nature with respect to the
Collateral not later than five Business Days prior to the date of any
proposed sale under any judgment, writ or warrant of attachment with
respect to the Collateral.
SECTION l0. Power of Attorney. In addition to all of the powers granted
to the Trustee pursuant to the Indenture, subject to the terms of this Pledge
Agreement, the Pledgor hereby appoints and constitutes the Trustee as the
Pledgor's attorney-in-fact (with full power of substitution) to exercise to the
fullest extent permitted by law all of the following powers upon and at any time
after the occurrence and during the continuance of an Event of Default: (a)
collection of proceeds of an Collateral; (b) conveyance of any item of
Collateral to any purchaser thereof; (c) giving of any notices or recording of
any Liens under Section 3; and (d) paying or discharging taxes or Liens levied
or placed upon the Collateral, the legality or validity thereof and the amounts
necessary to discharge the same to be determined by the Trustee in its
reasonable discretion, and such payments made by the Trustee to become part of
the Obligations of the Pledgor to the Trustee, due and payable immediately upon
demand. The Trustee's authority under this Section l0 shall include, without
limitation, the authority to endorse and negotiate any checks or instruments
representing proceeds of Collateral in the name of the Pledgor, execute and give
receipt for any certificate of ownership or any document constituting
Collateral, transfer title to any item of Collateral, sign the Pledgor's name on
all financing statements (to the extent permitted by applicable law) or any
other documents deemed necessary or appropriate by the Trustee in its reasonable
discretion to preserve, protect or perfect the security interest in the
Collateral and to file the same, prepare, file and sign the Pledgor's name on
any notice of Lien, and to take any other actions arising from or incident to
the powers
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granted to the Trustee in this Pledge Agreement. This power of attorney is
coupled with an interest and is irrevocable by the Pledgor but shall remain in
effect only during the continuance of an Event of Default.
SECTION 11. No Assumption of Duties; Reasonable Care. The rights and
powers granted to the Trustee hereunder are being granted in order to preserve
and protect the security interest of the Trustee and the Holders of the Notes in
and to the Collateral granted hereby and shall not be interpreted to, and shall
not impose any duties on, the Trustee in connection therewith other than those
expressly provided herein or imposed under applicable law. Except as provided by
applicable law or by the Indenture, the Trustee shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral in
its possession if the Collateral is accorded treatment substantially equal to
that which the Trustee accords similar property held by the Trustee for similar
accounts, it being understood that the Trustee in its capacity as such shall not
have any responsibility for (a) ascertaining or taking action with respect to
calls, conversions, exchanges, maturities or other matters relative to any
Collateral, whether or not the Trustee has or is deemed to have knowledge of
such matters, (b) taking any necessary steps to preserve rights against any
parties with respect to any Collateral or (c) investing or reinvesting any of
the Collateral, provided, however, that nothing contained in this Pledge
Agreement shall relieve the Trustee of any responsibilities as a Securities
Intermediary under applicable law.
SECTION 12. Indemnity. The Pledgor shall indemnify the Trustee against
any and all losses, liabilities or expenses incurred by it arising out of or in
connection with the acceptance or administration of its duties under this Pledge
Agreement, including the costs and expenses of enforcing this Pledge Agreement
against the Pledgor and defending itself against any claim (whether asserted by
the Pledgor or any Holder or any other person) or liability in connection with
the exercise or performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be attributable to its
negligence or bad faith. The Trustee shall notify the Pledgor promptly of any
claim for which it may seek indemnity. Failure by the Trustee to so notify the
Pledgor shall not relieve the Pledgor of its obligations hereunder. The Pledgor
shall defend the claim and the Trustee shall cooperate in the defense. The
Trustee may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel. The Pledgor need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld. The
provisions of this Section 12 shall survive termination of this Pledge Agreement
and the resignation and removal of the Trustee for a period of three (3) years
after the Termination Date.
SECTION 13. Remedies upon Event of Default. If any Event of Default
under the Indenture or breach of the terms hereof (any such Event of Default or
breach being referred to in this Pledge Agreement as an "Event of Default")
shall have occurred and be continuing:
(a) The Trustee and the Holders of the Notes shall have, in addition to
all other rights given by law or by this Pledge Agreement or the
Indenture, all of the rights and remedies with respect to the Collateral
of a secured party under the UCC then in effect in the State of New York.
Any sale of the Collateral conducted in conformity with
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reasonable commercial practices of banks, insurance companies, commercial
finance companies, or other financial institutions disposing of property
similar to the Collateral shall be deemed to be commercially reasonable.
Any requirements of reasonable notice shall be met if such notice is
mailed to the Pledgor as provided in Section 17.1 at least ten (10) days
before the time of the sale or disposition. The Trustee or any Holder of
Notes may, in its own name or in the name of a designee or nominee, buy
any of the Collateral at any public sale and, if permitted by applicable
law, at any private sale. All expenses (including court costs and
reasonable attorneys' fees, expenses and disbursements) of, or incident
to, the enforcement of any of the provisions hereof shall be recoverable
from the proceeds of the sale or other disposition of the Collateral.
(b) The Pledgor further agrees to use its reasonable best efforts to do
or cause to be done all such other acts as may be necessary to make such
sale or sales of all or any portion of the Collateral pursuant to this
Section 13 valid and binding and in compliance with any and all other
applicable requirements of law. The Pledgor further agrees that a breach
of any of the covenants contained in this Section 13 will cause
irreparable injury to the Trustee and the Holders of the Notes, that the
Trustee and the Holders of the Notes have no adequate remedy at law in
respect of such breach and, as a consequence, that each and every covenant
contained in this Section 13 shall be specifically enforceable against the
Pledgor, and the Pledgor hereby waives and agrees not to assert any
defenses against an action for specific performance of such covenants
except for a defense that no Event of Default has occurred.
SECTION 14. Expenses. The Pledgor will, upon demand, pay to the Trustee
the amount of any and all reasonable expenses, including, without limitation,
the reasonable fees, expenses and disbursements of its counsel, experts and
agents retained by the Trustee, that the Trustee may incur in connection with
(a) the review, negotiation and administration of this Pledge Agreement, (b) the
custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (c) the exercise or enforcement of any
of the rights of the Trustee and the Holders of the Notes hereunder or (d) the
failure by the Pledgor to perform or observe any of the provisions hereof.
SECTION 15. Security Interest Absolute. All rights of the Trustee and
the Holders of the Notes and security interests hereunder, and all obligations
of the Pledgor hereunder, shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Indenture or any
other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or
waiver of or any consent to any departure from the Indenture;
(c) any exchange, surrender, release or non-perfection of any Liens on
any other collateral for all or any of the Obligations; or
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(d) to the extent permitted by applicable law, any other circumstance
which might otherwise constitute a defense available to, or a discharge
of, the Pledgor in respect of the Obligations or of this Pledge Agreement.
SECTION 16. New York Securities Intermediary's Representations,
Warranties and Covenants. For the purposes of this Section 16 only, the New York
Securities Intermediary represents and warrants that it is as of the date
hereof, and it agrees that for so long as it maintains the Pledge Account and
acts as the Securities Intermediary pursuant to this Pledge Agreement it shall
be a Securities Intermediary and a FRB Member. In furtherance of the foregoing
the New York Securities Intermediary hereby:
(a) represents and warrants that it is a corporation that in the
ordinary course of its business maintains securities accounts
for others and is acting in that capacity hereunder and with
respect to the Pledge Account;
(b) represents and warrants that it maintains a FRB Member
Securities Account with the FRB;
(c) agrees that the Pledge Account shall be an account to which
Financial Assets may be credited, and the New York Securities
Intermediary undertakes to treat the Trustee as entitled to
exercise rights that comprise (and entitled to the benefits
of) such Financial Assets, and entitled to exercise the rights
of an Entitlement Holder in the manner contemplated by the
UCC;
(d) hereby represents that it has not granted, and covenants that
so long as it acts as a Securities Intermediary hereunder it
shall not grant, control (including without limitation,
Securities Control) over or with respect to any Collateral
credited to the Pledge Account from time to time to any other
Person other than the Trustee;
(e) covenants that in its capacity as New York Securities
Intermediary hereunder and with respect to the Pledge Account,
it shall not take any action inconsistent with, and represents
and covenants that it is not and so long as this Pledge
Agreement remains in effect will not become party to any
agreement the terms of which are inconsistent with the
provisions of this Pledge Agreement;
(f) agrees, with the other parties to this Pledge Agreement, that
any item of property credited to the Pledge Account shall be
treated as a Financial Asset;
(g) agrees that any item of Collateral credited to the Pledge
Account shall not be subject to any security interest, Lien or
right of setoff in favor of the New York Securities
Intermediary, except as may be expressly permitted under the
Indenture (and the New York Securities Intermediary shall take
such actions as shall be necessary and appropriate to cause
such
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Collateral to remain free of any Lien or security interest of
any underlying Securities Intermediary through which the New
York Securities Intermediary holds such Collateral or any
Security Entitlement thereto);
(h) agrees, so long as it serves as New York Securities
Intermediary pursuant to this Pledge Agreement, to maintain
the Pledge Account and maintain appropriate books and records
in respect thereof in accordance with its usual procedures;
and
(i) agrees, with the other parties to this Pledge Agreement, that
the New York Securities Intermediary's jurisdiction, for
purposes of Section 8-110(e) of the UCC as it pertains to this
Pledge Agreement, the Pledge Account and the Security
Entitlements relating thereto, shall be the State of New York.
SECTION 17. Miscellaneous Provisions.
17.1 Notices. Any notice, approval, consent or other communication
shall be sufficiently given if in writing and delivered in person or mailed by
first class mail, commercial courier service or telecopier communication,
addressed as follows:
if to the Pledgor:
Birch Telecom, Inc.
1004 Baltimore Ave., Suite 900
Kansas City, MO 64105
Attention: Chief Financial Officer
Telecopier No.: (816) 842-7507
with a copy to:
Latham & Watkins
885 Third Avenue
Suite 1000
New York, NY 10022
Attention: Kirk A. Davenport
Telecopier No.: (212) 751-4864
if to the Trustee:
Norwest Bank Minnesota, National Association
Sixth and Marquette
Minneapolis, MN 55479-0069
Attention: Jane Schwieger, Corporate Trust Department
Telecopier No.: (612) 667-9825
17
<PAGE> 20
Severability. The provisions of this Pledge Agreement are severable,
and if any clause or provision shall be held invalid, illegal or unenforceable
in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Pledge Agreement in any jurisdiction.
17.3 Headings. The headings in this Pledge Agreement have been inserted
for convenience of reference only, are not to be considered a part hereof and
shall in no way modify or restrict any of the terms or provisions hereof.
17.4 Counterpart Originals. This Pledge Agreement may be signed in two
or more counterparts, each of which shall be deemed an original, but all of
which shall together constitute one and the same agreement. Delivery of an
executed counterpart of a signature page to this Pledge Agreement by facsimile
shall be effective as delivery of a manually executed counterpart of this Pledge
Agreement.
Benefits of Pledge Agreement. Nothing in this Pledge Agreement, express
or implied, shall give to any person, other than the parties hereto and their
successors hereunder, and the Holders of the Notes, any benefit or any legal or
equitable right, remedy or claim under this Pledge Agreement.
Amendments, Waivers and Consents. Any amendment or waiver of any
provision of this Pledge Agreement and any consent to any departure by the
Pledgor from any provision of this Pledge Agreement shall be effective only if
made or duly given in compliance with all of the terms and provisions of the
Indenture, and neither the Trustee nor any Holder of Notes shall be deemed, by
any act, delay, indulgence, omission or otherwise, to have waived any right or
remedy hereunder or to have acquiesced in any Default or Event of Default or in
any breach of any of the terms and conditions hereof. Failure of the Trustee or
any Holder of Notes to exercise, or delay in exercising, any right, power or
privilege hereunder shall not preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. A waiver by the Trustee or
any Holder of Notes of any right or remedy hereunder on any one occasion shall
not be construed as a bar to any right or remedy that the Trustee or such Holder
of Notes would otherwise have on any future occasion. The rights and remedies
herein provided are cumulative, may be exercised singly or concurrently and are
not exclusive of any rights or remedies provided by law.
Interpretation of Agreement. All terms not defined herein or in the
Indenture shall have the meaning set forth in the UCC, except where the context
otherwise requires. To the extent a term or provision of this Pledge Agreement
conflicts with the Indenture, the Indenture shall control with respect to the
subject matter of such term or provision. Acceptance of or acquiescence in a
course of performance rendered under this Pledge Agreement shall not be relevant
to determine the meaning of this Pledge Agreement even though the accepting or
acquiescing party had knowledge of the nature of the performance and opportunity
for objection.
18
<PAGE> 21
Continuing Security Interest; Termination. (a) This Pledge Agreement
shall create a continuing security interest in and to the Collateral and shall,
unless otherwise provided in the Indenture or in this Pledge Agreement, remain
in full force and effect until the payment in full in cash of the Obligations.
This Pledge Agreement shall be binding upon the Pledgor, its transferees,
successors and assigns, and shall inure, together with the rights and remedies
of the Trustee hereunder, to the benefit of the Trustee, the Holders of the
Notes and their respective successors, transferees and assigns.
(b) In addition to the provisions of Section 6(e) and subject to the
provisions of Section 17.9, this Pledge Agreement shall terminate upon the
payment in full in cash of the Obligations. At such time, and subject to Section
12, the Trustee shall, pursuant to an Issuer Order, reassign and redeliver to
the Pledgor all of the Collateral hereunder that has not been sold, disposed of,
retained or applied by the Trustee in accordance with the terms of this Pledge
Agreement and the Indenture. Such reassignment and redelivery shall be without
warranty by or recourse to the Trustee in its capacity as such, except as to the
absence of any Liens on the Collateral created by or arising through the
Trustee, and shall be at the reasonable expense of the Pledgor.
Survival Provisions. All representations, warranties and covenants of
the Pledgor contained herein shall survive the execution and delivery of this
Pledge Agreement, and shall terminate only upon the termination of this Pledge
Agreement. The obligations of the Pledgor under Section 14 shall survive the
termination of this Pledge Agreement.
Waivers. The Pledgor waives presentment and demand for payment of any
of the Obligations, protest and notice of dishonor or default with respect to
any of the Obligations, and all other notices to which the Pledgor might
otherwise be entitled, except as otherwise expressly provided herein or in the
Indenture.
Authority of the Trustee. (a) The Trustee shall have and be entitled to
exercise all powers hereunder that are specifically granted to the Trustee by
the terms hereof, together with such powers as are reasonably incident thereto.
The Trustee may perform any of its duties hereunder or in connection with the
Collateral by or through agents or employees and shall be entitled to retain
counsel and to act in reliance upon the advice of counsel concerning all such
matters. Except as otherwise expressly provided in this Pledge Agreement or the
Indenture, neither the Trustee nor any director, officer, employee, attorney or
agent of the Trustee shall be liable to the Pledgor for any action taken or
omitted to be taken by the Trustee, in its capacity as Trustee, hereunder,
except for its own bad faith or negligence, and the Trustee shall not be
responsible for the validity, effectiveness or sufficiency hereof or of any
document or security furnished pursuant hereto. The Trustee and its directors,
officers, employees, attorneys and agents shall be entitled to rely on any
communication, instrument or document reasonably believed by it or them to be
genuine and correct and to have been signed or sent by the proper person or
persons. The Trustee shall have no duty to cause any financing statement or
continuation statement to be filed in respect of the Collateral.
19
<PAGE> 22
(b) The Pledgor acknowledges that the rights and responsibilities of
the Trustee under this Pledge Agreement with respect to any action taken by the
Trustee or the exercise or non-exercise by the Trustee of any option, right,
request, judgment or other right or remedy provided for herein or resulting or
arising out of this Pledge Agreement shall, as between the Trustee and the
Holders of the Notes, be governed by the Indenture and by such other agreements
with respect thereto as may exist from time to time among them, but, as between
the Trustee and the Pledgor, the Trustee shall be conclusively presumed to be
acting as agent for the Holders of the Notes with full and valid authority so to
act or refrain from acting, and the Pledgor shall not be obligated or entitled
to make any inquiry respecting such authority.
Final Expression. This Pledge Agreement, together with the Indenture
and any other agreement executed in connection herewith, is intended by the
parties as a final expression of this Pledge Agreement and is intended as a
complete and exclusive statement of the terms and conditions thereof.
Rights of Holders of the Notes. No Holder of Notes shall have any
independent rights hereunder other than those rights granted to individual
Holders of the Notes pursuant to Section 6.07 of the Indenture; provided that
nothing in this subsection shall limit any rights granted to the Trustee under
the Notes or the Indenture.
GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF DAMAGES. (a) BOTH
THIS PLEDGE AGREEMENT AND THE PLEDGE ACCOUNT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND ANY DISPUTE ARISING
OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED BETWEEN THE PLEDGOR, THE TRUSTEE AND THE HOLDERS OF THE NOTES IN
CONNECTION WITH THIS PLEDGE AGREEMENT, AND WHETHER ARISING IN CONTRACT, TORT,
EQUITY OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK. NOTWITHSTANDING THE FOREGOING, THE MATTERS IDENTIFIED IN 31 CFR
SECTIONS 357.10 AND 357.11 (AS IN EFFECT ON THE DATE OF THIS PLEDGE AGREEMENT)
SHALL BE GOVERNED SOLELY BY THE LAWS SPECIFIED THEREIN. REGARDLESS OF ANY
PROVISION IN ANY OTHER AGREEMENT, FOR PURPOSES OF THE UCC, NEW YORK SHALL BE
DEEMED TO BE THE SECURITIES INTERMEDIARY'S JURISDICTION AS DEFINED IN SECTIONS
9-103(6)(d) AND 8-110(e) OF THE UCC AND THE PLEDGE ACCOUNT (AS WELL A ANY
SECURITIES ENTITLEMENTS RELATED THERETO) SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK.
(b) THE PLEDGOR HEREBY APPOINTS LATHAM & WATKINS, 885 THIRD AVENUE,
SUITE 1000, NEW YORK, NEW YORK 10022 AS ITS AGENT FOR SERVICE OF PROCESS IN ANY
SUIT, ACTION OR PROCEEDING WITH RESPECT TO THIS PLEDGE AGREEMENT AND FOR ACTIONS
BROUGHT UNDER THE U.S. FEDERAL OR STATE SECURITIES LAWS BROUGHT IN ANY FEDERAL
OR STATE COURT LOCATED IN THE CITY OF NEW YORK (EACH A "NEW YORK
20
<PAGE> 23
COURT"). EACH OF THE PARTIES HERETO SUBMITS TO THE JURISDICTION OF ANY NEW YORK
COURT AND TO THE COURTS OF ITS CORPORATE DOMICILE WITH RESPECT TO ANY ACTIONS
BROUGHT AGAINST IT AS DEFENDANT IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT
OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
BETWEEN THE PLEDGOR, THE TRUSTEE AND THE HOLDERS OF THE NOTES IN CONNECTION WITH
THIS PLEDGE AGREEMENT, AND EACH OF THE PARTIES HERETO WAIVES ANY OBJECTION THAT
IT MAY HAVE TO THE LAYING OF VENUE, INCLUDING ANY PLEADING OF FORUM NON
CONVENIENS, WITH RESPECT TO ANY SUCH ACTION AND WAIVES ANY RIGHT TO WHICH IT MAY
BE ENTITLED ON ACCOUNT OF PLACE OF RESIDENCE OR DOMICILE.
(c) THE PLEDGOR AGREES THAT THE TRUSTEE SHALL, IN ITS CAPACITY AS
TRUSTEE OR IN THE NAME AND ON BEHALF OF ANY HOLDER OF NOTES, HAVE THE RIGHT, TO
THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE PLEDGOR OR THE
COLLATERAL IN A COURT IN ANY LOCATION REASONABLY SELECTED IN GOOD FAITH (AND
HAVING PERSONAL OR IN REM JURISDICTION OVER THE PLEDGOR OR THE COLLATERAL, AS
THE CASE MAY BE) TO ENABLE THE TRUSTEE TO REALIZE ON SUCH COLLATERAL, OR TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE TRUSTEE. THE
PLEDGOR AGREES THAT IT WILL NOT ASSERT ANY COUNTERCLAIMS, SETOFFS OR CROSSCLAIMS
IN ANY PROCEEDING BROUGHT BY THE TRUSTEE TO REALIZE ON SUCH PROPERTY OR TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE TRUSTEE, EXCEPT FOR SUCH
COUNTERCLAIMS, SETOFFS OR CROSSCLAIMS WHICH, IF NOT ASSERTED IN ANY SUCH
PROCEEDING, COULD NOT OTHERWISE BE BROUGHT OR ASSERTED.
(d) THE PLEDGOR AGREES THAT NEITHER ANY HOLDER OF NOTES NOR (EXCEPT AS
OTHERWISE PROVIDED IN THIS PLEDGE AGREEMENT OR THE INDENTURE) THE TRUSTEE IN ITS
CAPACITY AS TRUSTEE SHALL HAVE ANY LIABILITY TO THE PLEDGOR (WHETHER ARISING IN
TORT, CONTRACT OR OTHERWISE) FOR LOSSES SUFFERED BY THE PLEDGOR IN CONNECTION
WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO, THE TRANSACTIONS CONTEMPLATED
AND THE RELATIONSHIP ESTABLISHED BY THIS PLEDGE AGREEMENT, OR ANY ACT, OMISSION
OR EVENT OCCURRING IN CONNECTION THEREWITH, UNLESS IT IS DETERMINED BY A FINAL
AND NON-APPEALABLE JUDGMENT OF A COURT THAT IS BINDING ON THE TRUSTEE OR SUCH
HOLDER OF NOTES, AS THE CASE MAY BE, THAT SUCH LOSSES WERE THE RESULT OF ACTS OR
OMISSIONS ON THE PART OF THE TRUSTEE OR SUCH HOLDERS OF NOTES, AS THE CASE MAY
BE, CONSTITUTING BAD FAITH OR NEGLIGENCE.
(e) TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PLEDGOR WAIVES THE
POSTING OF ANY BOND OTHERWISE REQUIRED OF THE TRUSTEE OR ANY HOLDER OF NOTES IN
CONNECTION WITH ANY JUDICIAL PROCESS OR PROCEEDING TO ENFORCE ANY JUDGMENT OR
OTHER COURT
21
<PAGE> 24
ORDER PERTAINING TO THIS PLEDGE AGREEMENT OR ANY RELATED AGREEMENT OR DOCUMENT
ENTERED IN FAVOR OF THE TRUSTEE OR ANY HOLDER OF NOTES, OR TO ENFORCE BY
SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER OR PRELIMINARY OR PERMANENT
INJUNCTION, THIS PLEDGE AGREEMENT OR ANY RELATED AGREEMENT OR DOCUMENT BETWEEN
THE PLEDGOR, ON THE ONE HAND, AND THE TRUSTEE AND/OR THE HOLDERS OF THE NOTES,
ON THE OTHER HAND.
Effectiveness. This Pledge Agreement shall become effective upon the
effectiveness of the Indenture.
[signature pages follow]
22
<PAGE> 25
IN WITNESS WHEREOF, the Pledgor and the Trustee have each caused this
Pledge Agreement to be duly executed and delivered as of the date first above
written.
Pledgor:
BIRCH TELECOM, INC.
By: /s/ Bradley Moline
-------------------------
Name: Bradley Moline
Title: V.P. Finance
<PAGE> 26
Trustee:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Trustee
/s/ Jane Schweiger
By: ___________________________________
Name: Jane Schweiger
Title: Corporate Trust Officer
BANKERS TRUST COMPANY,
as Securities Intermediary, for
purposes of Section 16 only
/s/ Richard M. Quintal
By: ___________________________________
Name: Richard M. Quintal
Title: Managing Director
<PAGE> 27
SCHEDULE I
PLEDGED SECURITIES
Original
Description CUSIP Final Principal Cost at
of Security No(s). Maturity Amount Closing Date
----------- ----- -------- ------ ------------
----------- ----- -------- ------ ------------
----------- ----- -------- ------ ------------
----------- ----- -------- ------ ------------
----------- ----- -------- ------ ------------
----------- ----- -------- ------ ------------
<PAGE> 28
EXHIBIT A
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
OFFICER'S CERTIFICATE
Pursuant to Section 3(d) of the Collateral Pledge and Security
Agreement (the "Pledge Agreement") dated as of June 23, 1998 between Birch
Telecom, Inc., a Delaware corporation (the "Pledgor"), and Norwest Bank
Minnesota, National Association, trustee (in such capacity, the "Trustee") for
the holders of the Pledgor's 14% Senior Notes due 2008, the undersigned officer
of the Trustee, on behalf of the Trustee, makes the following certifications to
the Pledgor and the Initial Purchasers. Capitalized terms used and not defined
in this Officer's Certificate have the meanings set forth or referred to in the
Pledge Agreement.
1. Substantially contemporaneously with the execution and delivery of
this Officer's Certificate, the Trustee has established the Pledge Account with
the New York Securities Intermediary. The Trustee is the entitlement holder with
respect to the financial assets on deposit in the Pledge Account and has
acquired a security entitlement with respect to such financial assets. The
Trustee will be the entitlement holder with respect to the Pledged Securities
and will acquire a security entitlement with respect to the Pledged Securities
when the New York Securities Intermediary indicates by book entry that the
Pledged Securities have been credited to the Pledge Account. Without limiting
the generality of the foregoing, the Pledge Account, the Pledged Securities and
the other Collateral are not, and the Trustee's security entitlement with
respect to the financial assets on deposit in the Pledge Account is not, to the
actual knowledge of the corporate trust officer having responsibility for the
administration of this Indenture on behalf of the Trustee, subject to any Lien
granted by or to or arising through or in favor of any Securities Intermediary
(including, without limitation, the New York Securities Intermediary, or the
Federal Reserve Bank of New York).
2. The Trustee has not caused or permitted the Pledge Account or its
Security Entitlement with respect to the financial assets on deposit in the
Pledge Account to become subject to any Lien created by or arising through the
Trustee.
A-1
<PAGE> 29
IN WITNESS WHEREOF, the undersigned officer has executed this Officer's
Certificate on behalf of Norwest Bank Minnesota, National Association, Trustee
this 23rd day of June, 1998.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
Trustee
By: __________________________
Name:
Title:
A-2
<PAGE> 30
EXHIBIT B
[Attach Report from Ernst & Young, LLP]
B-1
<PAGE> 1
Exhibit 5.1
[LETTERHEAD OF LATHAM & WATKINS]
September 18, 1998
Birch Telecom, Inc.
1004 Baltimore Ave., Suite 900
Kansas City, Missouri 64105
Re: Registration Statement on Form S-4
Birch Telecom, Inc.
File No. 333-62797
Ladies and Gentlemen:
In connection with the registration of $115,000,000 in aggregate
principal amount of its 14% Senior Notes due 2008 (the "New Notes") by Birch
Telecom, Inc., a company incorporated under the laws of the State of Delaware
(the "Company"), pursuant to a registration statement on Form S-4 (the
"Registration Statement") filed with the Securities and Exchange Commission (the
"Commission") on September 3, 1998 (File No. 333-62797), you have requested our
opinion with respect to the matters set forth below. The New Notes will be
issued pursuant to an indenture (the "Indenture"), dated as of June 23, 1998,
among the Company and Norwest Bank Minnesota, National Association, as trustee
(the "Trustee"). The New Notes will be issued in exchange for the Company's
outstanding 14% Senior Notes due 2008 (the "Old Notes") on the terms set forth
in the prospectus contained in the Registration Statement and the Letter of
Transmittal filed as an exhibit thereto (the "Exchange Offer").
In our capacity as your special counsel, we have made such legal and factual
examinations and inquiries as we have deemed necessary or appropriate for
purposes of this opinion.
In our examination, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals and the
conformity to authentic original documents of all documents submitted to us as
copies. As to facts material to the opinions, statements and assumptions
expressed herein, we
<PAGE> 2
LATHAM & WATKINS
September 18, 1998
Page 2
have, with your consent, relied upon oral or written statements and
representations of officers and other representatives of the Company and others.
We are opining herein as to the effect on the subject transaction only
of the federal laws of the United States, the internal laws of the State of New
York and we express no opinion with respect to the applicability thereto, or the
effect thereon, of the laws of any other jurisdiction or as to any matters of
municipal law or the laws of any other local agencies within any state.
Subject to the foregoing and the other matters set forth herein, it is
our opinion that, as of the date hereof:
When the New Notes to be exchanged for the Old Notes pursuant to the
Exchange Offer have been duly executed, issued and authenticated in accordance
with the terms of the Exchange Offer and the Indenture, the New Notes will be
legally valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms.
The opinion rendered in the forgoing paragraph relating to the
enforceability of the New Notes is subject to the following exceptions,
limitations and qualifications: (i) the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting the rights and remedies of creditors; (ii) the effect
of general principles of equity, whether enforcement is considered in a
proceeding in equity or at law, and the discretion of the court before which any
proceeding therefor may be brought; (iii) we express no opinion concerning the
enforceability of the waiver of rights or defenses contained in Section 4.06 of
the Indenture; and (iv) we express no opinion with respect to whether
acceleration of the New Notes may affect the collectibility of that portion of
the stated principal amount thereof which might be determined to constitute
unearned interest thereon.
To the extent that the obligations of the Company under the Indenture
and the New Notes may be dependent upon such matters, we have assumed for
purposes of this opinion that (i) each of the Company and the Trustee (a) is
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization; (b) has the requisite organizational and legal
power and authority to perform its obligations under the Indenture; (c) is duly
qualified to engage in the activities contemplated by the Indenture; and (d) has
duly authorized, executed and delivered the Indenture; (ii) the Indenture is the
legally valid and binding agreement of the Trustee, enforceable against the
Trustee in accordance with its terms; and (iii) that the Trustee is in
compliance, generally and with respect to acting as Trustee under the Indenture,
with all applicable laws and regulations. We have also assumed, with your
consent, that the choice of law provisions in the Indenture would be enforced by
any court in which enforcement thereof might be sought.
We have not been requested to express and, with your knowledge and
consent, do not render any opinion as to the applicability to the obligations of
the Company under the Indenture and the New Notes of Sections 547 and 548 of the
Bankruptcy Code or applicable state law (including, without limitation, Article
10 of the New York Debtor & Creditor Law) relating to preferences and fraudulent
transfers and obligations.
We consent to your filing this opinion as an exhibit to the
Registration Statement and to the reference to our firm contained under the
heading "Legal Matters."
Very truly yours,
/s/ Latham & Watkins
<PAGE> 1
EXHIBIT 10.1
BIRCH TELECOM, INC.
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (the "Agreement") is entered into as
of February 10, 1998, by and among BIRCH TELECOM, INC., a Delaware corporation
(the "Company"), each of those persons and entities, severally and not jointly,
whose names are set forth on Schedule I (each a "Common Stock Purchaser" and,
collectively, the "Common Stock Purchasers"), each of those persons and
entities, severally and not jointly, whose names are set on Schedule II (each a
"Series B Purchaser" and, collectively, the "Series B Purchasers"), each of
those persons and entities, severally and not jointly, whose names are set forth
on Schedule III (each a "Series C Purchaser" and, collectively, the "Series C
Purchasers"), each of those persons and entities, severally and not jointly,
whose names are set forth in Schedule IV (each a "Subordinated Note Purchaser"
and collectively, the "Subordinated Note Purchasers") and White Pines
Management, L.L.C., a Michigan limited liability company, as agent for the
Subordinated Note Purchasers (the "Agent"). Each Common Stock Purchaser, Series
B Purchaser, Series C Purchaser and Subordinated Note Purchaser are hereinafter
sometimes individually referred to as a "Purchaser" and, collectively, as the
"Purchasers".
RECITALS
WHEREAS, pursuant to the Company's 1998 Employee Stock Purchase Plan
(the "Stock Purchase Plan"), the Common Stock Purchasers wish to purchase,
shares of Common Stock, par value $0.001 per share, of the Company (the "Common
Stock"), on the terms and conditions set forth herein;
WHEREAS, the Company wishes to issue and sell, and the Series B
Purchasers wish to purchase, shares of Series B Preferred Stock, par value
$0.001 per share, of the Company (the "Series B Preferred Stock"), which Series
B Preferred Stock shall have the relative rights, preferences and privileges set
forth in the form of the Company's Amended and Restated Certificate of
Incorporation, in substantially the form of Exhibit A attached hereto (the
"Restated Certificate"), on the terms and conditions set forth herein;
WHEREAS, the Company has adopted a plan of recapitalization (the "Plan
of Recapitalization") whereby it will issue shares of Series C Preferred Stock,
par value $0.001 per share, of the Company (the "Series C Preferred Stock"),
which Series C Preferred Stock shall have the relative rights, preferences and
privileges set forth in the Restated Certificate, in exchange for all of the
outstanding shares of Common Stock, and the Series C Purchasers wish to exchange
such shares of Common Stock for Series C Preferred Stock, on the terms and
conditions set forth herein;
WHEREAS, the Company wishes to issue and sell, and the Subordinated
Note Purchasers wish to purchase, convertible subordinated notes, on the terms
and conditions set forth herein.
1.
<PAGE> 2
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE.
1.1 SALE AND PURCHASE OF COMMON SHARES. Subject to the terms and
conditions set forth herein, and pursuant to the Stock Purchase Plan, at the
Closing, the Company shall issue and sell to the Common Stock Purchasers, and
the Common Stock Purchasers shall purchase from the Company, 450,000 shares of
Common Stock (the "Common Shares") for an aggregate consideration of $450.00,
with each Common Stock Purchaser purchasing the number of Common Shares
allocated under the Stock Purchase Plan as set forth opposite their names on
Schedule I hereto at a price of $0.001 per share.
1.2 SALE AND PURCHASE OF SERIES B PREFERRED SHARES. Subject to the
terms and conditions set forth herein, at the Closing, the Company shall issue
and sell to the Series B Purchasers, and the Series B Purchasers shall purchase
from the Company, 4,031,250 shares of Series B Preferred Stock (the "Series B
Preferred Shares") for an aggregate purchase price of $6,450,000, with each
Series B Purchaser purchasing the number of Series B Preferred Shares set forth
opposite such Series B Purchaser's name on the Schedule II hereto at the total
price per Series B Purchaser set forth thereon. In addition to the Series B
Preferred Shares issued and sold pursuant to this Section 1.2, the Company may
issue and sell up to 1,906,250 shares of Series B Preferred Stock pursuant to
Section 2.3 hereof.
1.3 EXCHANGE OF COMMON STOCK FOR SERIES C PREFERRED SHARES. Subject to
the terms and conditions set forth herein, and pursuant to the Plan of
Recapitalization, at the Closing, the Company shall issue to the Series C
Purchasers, and the Series C Purchasers shall acquire from the Company, in
exchange for all of the outstanding shares of Common Stock (the "Existing Common
Shares") and all of the outstanding warrants to purchase Common Stock (the
"Existing Warrants") held by the Series C Purchasers, 1,800,000 shares of Series
C Preferred Stock (the "Series C Preferred Shares"), with each Series C
Purchaser receiving the number of Series C Preferred Shares set forth opposite
such Series C Purchaser's name on Schedule III hereto.
1.4 SALE AND PURCHASE OF SUBORDINATED NOTES. Subject to the terms and
conditions set forth herein, at the Closing, the Company shall sell to the
Subordinated Note Purchasers, and the Subordinated Note Purchasers shall
purchase from the Company, its subordinated notes in substantially the form of
Exhibit B attached hereto (herein, together with any such subordinated notes
which may be issued pursuant to any provisions of this Agreement, and any such
subordinated notes which may be issued hereunder in substitution or exchange
therefor, collectively called the "Subordinated Notes" and individually called a
"Subordinated Note") in the aggregate principal amount of $3,500,000 for an
aggregate purchase price of 100% of the principal amount thereof, with each
Subordinated Note Purchaser purchasing the aggregate principal amount of
Subordinated Notes set forth opposite such Subordinated Note Purchaser's name on
Schedule IV hereto.
2.
<PAGE> 3
1.5 CERTAIN DEFINITIONS. The Series B Preferred Shares and Subordinated
Notes are sometimes individually referred to as a "New Security" and,
collectively, as the "New Securities." The Common Shares, Series C Preferred
Shares and New Securities are sometimes individually referred to as a "Security"
and, collectively, as the "Securities." The shares of Common Stock issuable upon
conversion of the Securities are sometimes individually referred to as an
"Underlying Security" and, collectively, as the "Underlying Securities." Any
shares of Series B Preferred Stock issued upon conversion of any Subordinated
Note shall be deemed "Series B Preferred Shares" for all purposes under this
Agreement and any Subordinated Note Purchaser issued shares of Series B
Preferred Stock upon such conversion shall be deemed a "Series B Purchaser" for
all purposes under this Agreement. Any shares of Common Stock issued upon
conversion of any Series B Preferred Stock shall be deemed "Common Shares" for
all purposes under this Agreement and any Series B Purchaser issued shares of
Common Stock upon such conversion shall be deemed a "Common Stock Purchaser" for
all purposes under this Agreement. Any shares of Common Stock issued upon
conversion of any Series C Preferred Stock shall be deemed "Common Shares" for
all purposes under this Agreement and any Series C Purchaser issued shares of
Common Stock upon such conversion shall be deemed a "Common Stock Purchaser" for
all purposes under this Agreement.
2. CLOSING, DELIVERY AND PAYMENT.
2.1 FIRST CLOSING. The initial closing of the sale of the Securities to
the Purchasers (the "First Closing") shall take place at the offices of the
Company at 1000 Walnut Street, Suite 1220, Kansas City, Missouri 64106 at 10:00
a.m. (Central Standard Time) on February 10, 1998 or at such other time as the
Purchasers and the Company shall agree (the "First Closing Date").
2.2 DELIVERIES AT THE FIRST CLOSING.
(a) At the First Closing, the Company shall deliver to the
Common Stock Purchasers the Common Shares and each Common Stock Purchaser shall
deliver to the Company a check or wire transfer of funds in the amount of such
Common Stock Purchaser's total purchase price as indicated on Schedule I.
(b) At the First Closing, the Company shall deliver to the
Series B Purchasers the Series B Preferred Shares and each Series B Purchaser
shall deliver to the Company a check or wire transfer of funds in the amount of
such Series B Purchaser's total purchase price as indicated on Schedule II;
provided, however, that delivery of the total purchase price due by Advantage
Capital Missouri Partners I, L.P. ("Advantage") shall occur upon the release of
$2,000,000.00 held in the name of the Company in a special account (account #
017-338-758/107 with A.G. Edwards & Sons, Inc.) opened on December 30, 1997 with
funds wire transferred by Advantage on that date.
(c) At the First Closing, the Company shall deliver to the
Series C Purchasers the Series C Preferred Shares upon surrender by each Series
C Purchaser of and in exchange for all of the Existing Common Shares of and all
of the Existing Warrants held by such Series C Purchaser. The Company will
cancel the Existing Common Shares and Existing
3.
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Warrants.
(d) At the First Closing, the Company shall deliver to the
Subordinated Note Purchasers the Subordinated Notes and each Subordinated Note
Purchaser shall deliver to the Company a check or wire transfer of funds in the
amount of such Subordinated Note Purchaser's total purchase price as indicated
on Schedule IV.
(e) At the First Closing, the Company shall deliver to each of
the Subordinated Note Purchasers a check or wire transfer of funds in an amount
equal to two percent (2%) of the principal amount loaned by such Subordinated
Note Purchaser as a closing fee. At the First Closing, the Company shall deliver
to each of the Series B Preferred Purchasers identified with an asterisk on
Schedule II to this Agreement a check or wire transfer of funds in an amount
equal to two percent (2%) of the purchase price paid by such Series B Preferred
Purchaser for its Series B Preferred Stock as a closing fee.
2.3 SUBSEQUENT CLOSING; DELIVERIES AT SECOND CLOSING.
2.3 At any time on or before thirty (30) days following the First
Closing, the Company may sell up to 1,906,250 shares of Series B Preferred Stock
to such persons as may be approved by the Board of Directors with a closing of
such purchase (the "Second Closing") to be on such date as the Company and the
subsequent purchasers shall mutually agree ("Second Closing Date"). All such
sales shall be made on the terms and conditions (including price per Share) set
forth in this Agreement, including, without limitation, the representations and
warranties by such subsequent purchasers as set forth in Section 4. Any shares
of Series B Preferred Stock sold pursuant to this Section 2.3 shall be deemed
"Series B Preferred Shares" for all purposes under this Agreement. Any
subsequent purchasers thereof shall be deemed to be "Series B Purchasers" for
all purposes under this Agreement. The term "Closing" as used in this Agreement
shall refer to each of the First Closing and the Second Closing, as applicable,
and the term "Closing Date" as used in this Agreement shall refer to each of the
First Closing Date and the Second Closing Date, as applicable.
(a) At the Second Closing, the Company shall deliver to the
Series B Purchasers the Series B Preferred Shares to be issued and sold at the
Second Closing and each Series B Purchaser shall deliver to the Company a check
or wire transfer of funds in the amount of such Series B Purchaser's total
purchase price which price shall be the $1.60 multiplied by the number of Series
B Preferred Shares purchased by such Series B Purchaser.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth on a Schedule of Exceptions delivered by the
Company to the Series B Purchasers and Subordinated Note Purchasers at the First
Closing, the Company hereby represents and warrants to each Series B Purchaser
and Subordinated Note Purchaser as of the date of this Agreement as follows:
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. Each of the Company
and its Subsidiaries is a corporation duly organized, validly existing and in
good standing under the
4.
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laws of the State of Delaware and has all requisite corporate power and
authority to own and operate its properties and assets and to carry on its
business as currently conducted and as currently proposed to be conducted. The
Company has all requisite corporate power and authority to execute and deliver
this Agreement, the Purchasers Rights Agreement in substantially the form of
Exhibit C attached hereto (the "Purchasers Rights Agreement"), the Subordinated
Notes, the Security Agreement in substantially the form of Exhibit D attached
hereto (the "Security Agreement" and together with this Agreement, the
Purchasers Rights Agreement and the Subordinated Notes, the "Related
Agreements"), to issue and sell the Securities and to carry out the provisions
of this Agreement and the Related Agreements. Each of the Company and its
Subsidiaries is duly qualified and is authorized to do business and is in good
standing as a foreign corporation in all jurisdictions in which the nature of
its activities and of its properties (both owned and leased) makes such
qualification necessary, except for those jurisdictions in which failure to do
so would not have a material adverse effect on the business, operations or
financial condition of the Company and its Subsidiaries, taken as a whole.
3.2 SUBSIDIARIES. Except for Birch Telecom of Missouri, Inc., Birch
Telecom of Kansas, Inc., Birch Telecom of Nebraska, Inc. and Birch Telecom of
Arizona, Inc. (each a "Subsidiary" and collectively, the "Subsidiaries"), the
Company owns no equity securities of any other corporation, limited partnership
or similar entity. All the outstanding shares of stock of the Subsidiaries have
been validly issued and are fully paid and non-assessable and all such
outstanding shares are owned directly by the Company free of any lien or claim.
Neither the Company nor any of its Subsidiaries is a participant in any joint
venture, partnership or similar arrangement.
3.3 CAPITALIZATION; VOTING RIGHTS. The authorized capital stock of the
Company, immediately prior to the Closing, will consist of 52,000,000 shares, of
which 27,000,000 shares of Common Stock, par value $.001 per share, 1,800,000
shares of which are issued and outstanding and 3,687,500 shares of which are
reserved for future issuance to employees pursuant to the Stock Option Plan (as
hereinafter defined) and 25,000,000 shares of Preferred Stock, par value $.001
per share, 2,968,750 of which are designated Series A Preferred Stock, none of
which are issued and outstanding; 8,125,000 of which are designated Series B
Preferred Stock, none of which are issued and outstanding; 8,050,000 shares of
which are designated Series C Preferred Stock, none of which are issued and
outstanding. All issued and outstanding shares of the Company's capital stock
(a) have been duly authorized and validly issued, (b) are fully paid and
nonassessable, (c) were issued in compliance with all applicable state and
federal laws concerning the issuance of securities. The rights, preferences,
privileges and restrictions of the Preferred Stock are as stated in the Restated
Certificate. A copy of the Company's Stock Option Plan is attached hereto as
Exhibit E (the "Stock Option Plan"). Other than the 3,687,500 shares reserved
for issuance under the Stock Option Plan and the Existing Warrants, and except
as may be granted pursuant to this Agreement and the Related Agreements, there
are no outstanding options, warrants, rights (including conversion or preemptive
rights and rights of first refusal), proxy or shareholder agreements, or
agreements of any kind for the purchase or acquisition from the Company of any
of its securities. When issued in compliance with the provisions of this
Agreement and the Restated Certificate, the Series B Preferred Shares, the
Series C Preferred Shares, and Common Shares will be validly issued, fully paid
and
5.
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nonassessable; provided, however, that such shares may be subject to
restrictions on transfer under state and/or federal securities laws as set forth
herein or in the Purchasers Rights Agreement or as otherwise required by such
laws at the time a transfer is proposed. After giving effect to the transactions
contemplated by the Merger Agreement (as hereinafter defined) and this
Agreement, the capitalization of the Company as of the First Closing and as of
the Second Closing (assuming all 1,906,250 shares of Series B Preferred Stock
are issued and sold) would be as set forth on Schedules V and VI, respectively.
3.4 AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on the
part of the Company, its officers, directors and shareholders necessary for the
authorization of this Agreement and the Related Agreements, the performance of
all obligations of the Company hereunder and thereunder as of a Closing and the
authorization, sale, issuance and delivery of the Securities has been taken or
will be taken prior to such Closing. The Agreement and the Related Agreements,
when executed and delivered, will be valid and binding obligations of the
Company enforceable in accordance with their terms, except (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application affecting enforcement of creditors' rights; (b) general
principles of equity that restrict the availability of equitable remedies; and
(c) to the extent that the enforceability of the indemnification provisions in
Section 2.5 of the Purchasers Rights Agreement may be limited by applicable
laws. Other than pursuant to the Related Agreements, the sale of the Series B
Preferred 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.
3.5 FINANCIAL STATEMENTS. The Company has delivered to each Purchaser
an unaudited balance sheet of the Company and its subsidiaries as at December
31, 1997 (the "Statement Date") and unaudited statement of income and cash flows
of the Company and its subsidiaries for the twelve months ending on the
Statement Date (the "Financial Statements"). The Financial Statements, together
with the notes thereto, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated, except as disclosed therein, and present fairly the financial
condition and position of the Company and its Subsidiaries as of the Statement
Date; provided, however, that the unaudited financial statements are subject to
normal recurring year-end audit adjustments (which are not expected to be
material), and do not contain all footnotes required under generally accepted
accounting principles.
3.6 LIABILITIES. Neither the Company nor any Subsidiary has material
liabilities and neither the Company nor any Subsidiary knows of any material
contingent liabilities not disclosed in the Financial Statements, except current
liabilities incurred in the ordinary course of business subsequent to the
Statement Date which would not have, either individually or in the aggregate, a
material adverse effect on the business, operations or financial condition of
the Company and its Subsidiaries, taken as a whole.
3.7 AGREEMENTS; ACTION.
(a) Except for agreements explicitly contemplated hereby and
agreements
6.
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between the Company or any Subsidiary and its employees with respect to the sale
of Common Stock, there are no agreements, understandings or proposed
transactions between the Company or any Subsidiary and any of its officers,
directors, affiliates or any affiliate thereof.
(b) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company or any Subsidiary is a party or to its knowledge by which it is
bound which may involve (i) obligations (contingent or otherwise) of, or
payments to, the Company or any Subsidiary in excess of $10,000 (other than
obligations of, or payments to, the Company or any Subsidiary arising from
purchase or sale agreements entered into in the ordinary course of business), or
(ii) the license of any patent, copyright, trade secret or other proprietary
right to or from the Company or any Subsidiary (other than licenses arising from
the purchase of "off the shelf" or other standard products), or (iii)
indemnification by the Company or any Subsidiary with respect to infringements
of proprietary rights (other than indemnification obligations arising from
purchase or sale agreements entered into in the ordinary course of business).
(c) Neither the Company nor any Subsidiary has (i) declared or
paid any dividends, or authorized or made any distribution upon or with respect
to any class or series of its capital stock, (ii) incurred any indebtedness for
money borrowed or any other liabilities individually in excess of $10,000 or, in
the case of indebtedness and/or liabilities individually less than $10,000, in
excess of $25,000 in the aggregate, (iii) made any loans or advances to any
person, other than ordinary advances for travel expenses, or (iv) sold,
exchanged or otherwise disposed of any of its assets or rights, other than the
sale of its inventory in the ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company or any Subsidiary has reason to believe are affiliated
therewith) shall be aggregated for the purpose of meeting the individual minimum
dollar amounts of such subsections.
3.8 OBLIGATIONS TO RELATED PARTIES. There are no obligations of the
Company or any Subsidiary to their respective officers, directors, shareholders,
or employees other than (a) for payment of salary for services rendered, (b)
reimbursement for reasonable expenses incurred on behalf of the Company or
Subsidiary and (c) for other standard employee benefits made generally available
to all employees (including stock option agreements outstanding under any stock
option plan approved by the Board of Directors of the Company or Subsidiary).
Except as may be disclosed in the Financial Statements, neither the Company nor
any Subsidiary is a guarantor or indemnitor of any indebtedness of any other
person, firm or corporation.
3.9 CHANGES. Since the Statement Date, there has not been:
(a) Any change in the assets, liabilities, financial condition
or operations of the Company and its Subsidiaries from that reflected in the
Financial Statements, other than changes in the ordinary course of business,
none of which individually or in the aggregate has
7.
<PAGE> 8
had or is expected to have a material adverse effect on the business, operations
or financial condition of the Company and its Subsidiaries, taken as a whole;
(b) Any resignation or termination of any key officers of the
Company and its Subsidiaries; and the Company does not know of the impending
resignation or termination of employment of any such officer;
(c) Any material change, except in the ordinary course of
business, in the contingent obligations of the Company and its Subsidiaries by
way of guaranty, endorsement, indemnity, warranty or otherwise;
(d) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, business or
prospects or financial condition of the Company and its Subsidiaries;
(e) Any waiver by the Company or any Subsidiary of a valuable
right or of a material debt owed to it;
(f) Any direct or indirect loans made by the Company or any
Subsidiary to any shareholder, employee, officer or director of the Company or
any Subsidiary, other than advances made in the ordinary course of business;
(g) Any material change in any compensation arrangement or
agreement with any employee, officer, director or shareholder;
(h) Any declaration or payment of any dividend or other
distribution of the assets of the Company or any Subsidiary;
(i) Any labor organization activity;
(j) Any debt, obligation or liability incurred, assumed or
guaranteed by the Company or any Subsidiary, except those for immaterial amounts
and for current liabilities incurred in the ordinary course of business;
(k) Any sale, assignment or transfer of any patents,
trademarks, copyrights, trade secrets or other intangible assets;
(l) Any change in any material agreement to which the Company
or any Subsidiary is a party or by which it is bound which materially and
adversely affects the business, operations or financial condition of the Company
and its Subsidiaries, taken as a whole; or
(m) Any other event or condition of any character that, either
individually or cumulatively, has materially and adversely affected the
business, operations or financial condition of the Company and its Subsidiaries,
taken as a whole.
3.10 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company
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and each of its Subsidiaries has good and marketable title to its respective
properties and assets, including the properties and assets reflected in the most
recent balance sheet included in the Financial Statements, and good title to its
respective leasehold estates, in each case subject to no mortgage, pledge, lien,
lease, encumbrance or charge. The Company and each of its Subsidiaries is in
compliance with all material terms of each lease to which it is a party or is
otherwise bound.
3.11 PATENTS AND TRADEMARKS. The Company and each of its Subsidiaries
owns or possesses sufficient legal rights to all patents, trademarks, service
marks, trade names, copyrights, trade secrets, licenses, information and other
proprietary rights and processes necessary for its respective business as now
conducted and as currently proposed to be conducted, without any known
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 or any
of its Subsidiaries 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 and other proprietary rights
and processes of any other person or entity other than such licenses or
agreements arising from the purchase of "off the shelf" or standard products.
Neither the Company nor any of its Subsidiaries has received any communications
alleging that it has violated or, by conducting its business as presently
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. Neither the Company nor any of its Subsidiaries is 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 their duties to the Company or any of its Subsidiaries or that
would conflict with the Company's or any of its Subsidiaries' business as
presently proposed to be conducted. Neither the execution nor delivery of this
Agreement, nor the carrying on of the Company's or any of its Subsidiaries'
business by the employees of the Company or its Subsidiaries, nor the conduct of
the Company's or any of its Subsidiaries' business as currently proposed, will
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 employee is now obligated. Neither the Company or any of its Subsidiaries
believes it is or will be necessary to utilize any inventions, trade secrets or
proprietary information of any of its employees made prior to their employment
by the Company or any of its Subsidiaries, except for inventions, trade secrets
or proprietary information that have been assigned to the Company or any of its
Subsidiaries.
3.12 COMPLIANCE WITH OTHER INSTRUMENTS. Neither the Company nor any of
its Subsidiaries is in violation or default of any term of its Restated
Certificate or Bylaws, or of any provision of any mortgage, indenture, contract,
agreement, instrument or contract to which it is party or by which it is bound
or of any judgment, decree, order, writ or, to its knowledge, any statute, rule
or regulation applicable to the Company or any Subsidiary which would materially
and adversely affect the business, assets, liabilities, financial condition, or
operations of the Company or any Subsidiary. The execution, delivery, and
performance of and compliance with this Agreement, and the Related Agreements,
and the issuance and sale of the Securities pursuant hereto, will not, with or
without the passage of time or giving of notice, result in any such material
violation, or be in conflict with or constitute a
9.
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default under any such term, or result in the creation of any mortgage, pledge,
lien, encumbrance or charge upon any of the properties or assets of the Company
and its Subsidiaries or the suspension, revocation, impairment, forfeiture or
nonrenewal of any permit license, authorization or approval applicable to the
Company, its business or operations or any of its assets or properties.
3.13 LITIGATION. There is no action, suit, proceeding or investigation
pending or to the Company's knowledge currently threatened against the Company
or any Subsidiary that questions the validity of this Agreement, or the Related
Agreements or the right of the Company to enter into any of such agreements, or
to consummate the transactions contemplated hereby or thereby, or which might
result, either individually or in the aggregate, in any material adverse change
in the assets, condition, affairs or operations of the Company and its
Subsidiaries, 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. 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 or any Subsidiary's employees, their use in
connection with the Company's or any Subsidiary's business of any information or
techniques allegedly proprietary to any of their former employers, or their
obligations under any agreements with prior employers. Neither the Company nor
any Subsidiary is 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 or any Subsidiary currently pending or which the Company or any
Subsidiary intends to initiate.
3.14 TAX RETURNS AND PAYMENTS. The Company and each of its Subsidiaries
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 and each of its Subsidiaries
on or before the Closing have been paid or will be paid prior to the time they
become delinquent. Neither the Company nor any Subsidiary has knowledge of any
liability of any tax to be imposed upon its properties or assets as of the date
of this Agreement that is not adequately provided for.
3.15 EMPLOYEES. Neither the Company nor any of its Subsidiaries has any
collective bargaining agreements with any of its employees. There is no labor
union organizing activity pending or, to the knowledge of the Company or any of
its Subsidiaries, threatened with respect to the Company or any of its
Subsidiaries. Neither the Company nor any of its Subsidiaries is aware that any
officer or key employee, or that any group of key employees, intends to
terminate their employment with the Company or any of its Subsidiaries, nor does
the Company or any of its Subsidiaries have a present intention to terminate the
employment of any officer, key employee or group of key employees.
3.16 REGISTRATION RIGHTS. Except as required pursuant to the Purchasers
Rights Agreement, neither the Company nor any of its Subsidiaries is currently
under any obligation, and has not granted any rights, to register (as defined in
the Purchasers Rights Agreement) any of the Company's or any Subsidiary's
currently outstanding securities or any of
10.
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its securities that may hereafter be issued.
3.17 COMPLIANCE WITH LAWS; PERMITS. Neither the Company nor any of its
Subsidiaries is in violation of any applicable statute, rule, regulation, order
or restriction of any domestic or foreign government or any instrumentality or
agency thereof in respect of the conduct of its business or the ownership of its
properties which violation would materially and adversely affect the business,
assets, liabilities, financial condition, operations or prospects of the Company
or any of its Subsidiaries. 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 and the issuance of the Securities, except such as
has been duly and validly obtained or filed, or with respect to any filings that
must be made after the Closing, as will be filed in a timely manner. The Company
and each of its Subsidiaries has all franchises, permits, licenses and any
similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, operations or financial condition of the Company and its Subsidiaries,
taken as a whole, and believes it can obtain, without undue burden or expense,
any similar authority for the conduct of its business as planned to be
conducted.
3.18 ENVIRONMENTAL AND SAFETY LAWS. Neither the Company nor any of its
Subsidiaries is in violation of any applicable statute, law or regulation
relating to the environment or occupational health and safety, and to its
knowledge, no material expenditures are or will be required in order to comply
with any such existing statute, law or regulation.
3.19 OFFERING VALID. Assuming the accuracy of the representations and
warranties of the Purchasers contained in Section 3 hereof, the offer, sale and
issuance of the Securities 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. 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 Securities to any person or persons so as
to bring the sale of such Securities by the Company within the registration
provisions of the Securities Act or any state securities laws.
3.20 SMALL BUSINESS CONCERN. The Company together with its "affiliates"
(as that term is defined in Section 121.103 of Title 13 of the Code of Federal
Regulations (the "Federal Regulations")), is a "small business concern" or a
"smaller business" within the meaning of the Small Business Investment Act of
1958, as amended (the "Small Business Act"), and the regulations thereunder,
including Section 121.301 of Title 13 of the Federal Regulations (a "Small
Business Concern") or including Section 107.710 of Title 13 of the Federal
Regulations (a "Smaller Business"). The information delivered to each Purchaser
that is a licensed Small Business Investment Company (an "SBIC Purchaser") on
SBA Forms 480, 652 and 1031 delivered in connection herewith is true and
correct. The Company is not ineligible for financing by any SBIC Purchaser
pursuant to Section 107.720 of Title 13 of the
11.
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Federal Regulations. The Company acknowledges that each SBIC Purchaser is a
Federal licensee under the Small Business Investment Act of 1958, as amended.
3.21 MERGER AGREEMENT. The Company has previously delivered to the
Series B Purchasers and the Subordinated Note Purchasers a true and accurate
copy of the Agreement and Plan of Merger, dated January 16, 1998, among the
Company, Valu-Line Companies, Inc. ("Valu-Line") and the shareholders of
Valu-Line (the "Merger Agreement") relating to the merger (the "Merger") of
Valu-Line with and into the Company. All representations and warranties
contained in Article 3 of the Merger Agreement are incorporated herein by
reference as representations and warranties of the Company under the terms and
provisions of this Agreement.
3.22 EMPLOYEE BENEFIT PLANS. Neither the Company nor any of its
Subsidiaries has any employee benefit plan as defined in the Employment
Retirement Income Security Act of 1974, as amended ("ERISA"). The Company and
each of its Subsidiaries is in compliance in all material respects with ERISA,
and has fulfilled its obligations under the minimum funding standards of ERISA
and the Internal Revenue Code of 1986, as amended (the "Code"), with respect to
each of its federally insured pension plans and is in compliance in all material
respects with the currently applicable provisions of ERISA and the Code. No
"Reportable Event" (as defined in ERISA) which could result in a material
accumulated deficiency under ERISA or material liability to the Pension Benefit
Guaranty Corporation ("PBGC") has occurred or is continuing, and there exists no
condition or set of circumstances which could result in a "Reportable Event."
The value of all accrued benefits is fully funded by the assets of such plans.
All contributions have been made or accrued for each of the plans, including
contributions that are payable for the preceding and current plan year. Neither
the Company nor any of its Subsidiaries participates in any "multi-employer
plan" as defined in ERISA. Neither the Company nor any of its Subsidiaries has
any liability under ERISA on account of the prior termination of any employee
welfare or benefit plan.
3.23 INSURANCE. Each property of the Company and its Subsidiaries is
insured for the benefit of the Company or respective Subsidiary in amounts
reasonably deemed adequate by the Company's or Subsidiary's management against
risks usually insured against by persons operating businesses similar to those
of the Company or Subsidiary in the localities where such properties are
located.
3.24 BOOKS AND RECORDS. The books of account, stock records, minute
books and other records of the Company and each of its Subsidiaries are
accurate, up-to-date and complete in all material respects, and have been
maintained in accordance with prudent business practices.
3.25 BUSINESS PLAN. Attached hereto as Exhibit F is a copy of the
Company's Business Plan, dated January 29, 1998.
3.26 NO BROKER. Except as set forth in Section 2.2(e), neither the
Company nor any of its Subsidiaries has employed any broker or finder, or
incurred any
12.
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liability for any brokerage or finders' fees or any similar fees or commissions
in connection with the transactions contemplated by this Agreement.
3.27 DISCLOSURE. No representation or warranty contained in this
Agreement or any statement or information contained in any schedule, exhibit,
certificate, written statement, document or instrument, or other information
attached to, delivered or required to be delivered pursuant to this Agreement
contains any untrue statement of material fact or omits to state a material fact
necessary in order to make the statements contained herein not misleading or
necessary in order to fully and fairly provide the information required to be
provided in any such document.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
Each Purchaser hereby represents and warrants to the Company only as to
itself as follows (such representations and warranties do not lessen or obviate
the representations and warranties of the Company set forth in this Agreement):
4.1 REQUISITE POWER AND AUTHORITY. Purchaser has all necessary power
and authority under all applicable provisions of law to execute and deliver this
Agreement and the Related 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 Related Agreements have been or will be effectively taken
prior to the Closing. Upon their execution and delivery, this Agreement and the
Related Agreements will be valid and binding obligations of Purchaser,
enforceable in accordance with their terms, except (a) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application affecting enforcement of creditors' rights, (b) general principles
of equity that restrict the availability of equitable remedies, and (c) to the
extent that the enforceability of the indemnification provisions of Section 2.5
of the Purchasers Rights Agreement may be limited by applicable laws.
4.2 INVESTMENT REPRESENTATIONS. Purchaser understands that none of the
Securities or the Underlying Securities have been registered under the
Securities Act. Purchaser also understands that the Securities 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 this Agreement.
Purchaser hereby represents and warrants as follows:
(a) PURCHASER BEARS ECONOMIC RISK. Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. Purchaser must bear the economic risk of
this investment indefinitely unless the Securities 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
Securities or any Underlying Securities. Purchaser also understands that there
is no assurance that any exemption from registration under the Securities Act
will be available and that, even if available, such exemption may not allow
Purchaser to transfer all or any portion of the Securities under the
circumstances, in the amounts
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<PAGE> 14
or at the times Purchaser might propose.
(b) ACQUISITION FOR OWN ACCOUNT. Purchaser is acquiring the
Securities for Purchaser's own account for investment only, and not with a view
towards their distribution.
(c) PURCHASER CAN PROTECT ITS INTEREST. Purchaser represents
that by reason of its, or of its management's, business or financial experience,
Purchaser has the capacity to protect its own interests in connection with the
transactions contemplated in this Agreement, and the Related Agreements.
Further, Purchaser is aware of no publication of any advertisement in connection
with the transactions contemplated in the Agreement.
(d) ACCREDITED INVESTOR. Purchaser represents that it is an
accredited investor within the meaning of Regulation D under the Securities Act.
(e) COMPANY INFORMATION. Purchaser has received and read the
Financial Statements and has had an opportunity to discuss the Company's
business, management and financial affairs with directors, officers and
management of the Company and has had the opportunity to review the Company's
operations and facilities. Purchaser has also had the opportunity to ask
questions of and receive answers from, the Company and its management regarding
the terms and conditions of this investment.
(f) RULE 144. Purchaser acknowledges and agrees that the
Securities must be held indefinitely unless they are subsequently registered
under the Securities Act or an exemption from such registration is available.
Purchaser has been advised or is aware of the provisions of Rule 144 promulgated
under the Securities Act as in effect from time to time, which permits limited
resale of shares purchased in a private placement subject to the satisfaction of
certain conditions, including, among other things: the availability of certain
current public information about the Company, the resale occurring following the
required holding period under Rule 144 and the number of shares being sold
during any three-month period not exceeding specified limitations.
(g) RESIDENCE. If the Purchaser is an individual, then the
Purchaser resides in the state or province identified in the address of the
Purchaser set forth on the Schedule of Purchasers; if the Purchaser is a
partnership, corporation, limited liability company or other entity, then the
office or offices of the Purchaser in which its investment decision was made is
located at the address or addresses of the Purchaser set forth on Schedules I,
II, III or IV, as applicable.
4.3 TRANSFER RESTRICTIONS. Each Purchaser acknowledges and agrees that
the Securities and Underlying Securities are subject to restrictions on transfer
as set forth in the Purchasers Rights Agreement.
5. COVENANTS OF THE COMPANY.
5.1 BASIC FINANCIAL INFORMATION. The Company will furnish the following
reports to each Purchaser (except for the reports described in subsections (c)
and (d), which only
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<PAGE> 15
will be provided to Significant Purchasers (as defined below)):
(a) As soon as practicable after the end of each fiscal year
of the Company, and in any event within ninety (90) days thereafter, a
consolidated balance sheet of the Company and its subsidiaries, if any, as at
the end of such fiscal year, and consolidated statements of income and cash
flows of the Company and its subsidiaries, if any, for such year, prepared in
accordance with generally accepted accounting principles consistently applied
and setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail and certified by independent public
accountants of recognized national standing selected by the Company, and a
Company-prepared comparison to the Company's operating plan for such year.
(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 consolidated balance
sheet of the Company and its subsidiaries, if any, as of the end of each such
quarterly period, and consolidated statements of income and cash flows of the
Company and its subsidiaries, if any, for such period and for the current fiscal
year to date, prepared in accordance with generally accepted accounting
principles consistently applied and setting forth in comparative form the
figures for the corresponding periods of the previous fiscal year and to the
Company's operating plan then in effect and approved by its Board of Directors,
subject to changes resulting from normal year-end audit adjustments, all in
reasonable detail and certified by the principal financial or accounting officer
of the Company, except that such financial statements need not contain the notes
required by generally accepted accounting principles.
(c) As soon as practical after the end of each month and in
any event within twenty (20) days thereafter (within thirty (30) days thereafter
for the first three months following the First Closing), the Company will
deliver to each Significant Purchaser (as defined below) a consolidated balance
sheet of the Company and its subsidiaries, if any, as at the end of such month
and consolidated statements of income and cash flows of the Company and its
subsidiaries, for each month and for the current fiscal year of the Company to
date, all subject to normal year-end audit adjustments, prepared in accordance
with generally accepted accounting principles consistently applied and certified
by the principal financial or accounting officer of the Company, together with a
comparison of such statements to the corresponding periods of the prior fiscal
year and to the Company's operating plan then in effect and approved by its
Board of Directors.
(d) The Company will deliver to each Significant Purchaser (as
defined below) an annual financial plan for the Company for the next fiscal
year, no later than forty-five (45) days before the start of the Company's next
fiscal year, in such manner and form as approved by the Board of Directors of
the Company, which financial plan shall include at least a projection of income
and a projected cash flow statement for each fiscal quarter in such fiscal year
and a projected balance sheet as of the end of each fiscal quarter in such
fiscal year. Any material changes in such business plan shall be delivered to
each requesting Purchaser as promptly as practicable after such changes have
been approved by the Board of Directors of the
15.
<PAGE> 16
Company.
(e) From the date the Company becomes subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended, (which shall
include any successor federal statute), and in lieu of the financial information
required pursuant to this Section 5.1, the Company may deliver copies of its
annual reports on Form 10-K and its quarterly reports on Form 10-Q,
respectively.
5.2 ADDITIONAL INFORMATION AND RIGHTS.
(a) The Company shall permit a Purchaser who holds at least
625,000 Series B Preferred Shares (as adjusted for any stock combinations,
splits and the like with respect to such shares) or $1,000,000 aggregate
principal amount of Subordinated Notes (each a "Significant Purchaser") to visit
and inspect any of the properties of the Company, including its books of account
and other records (and make copies thereof and take extracts therefrom), and to
discuss its affairs, finances and accounts with the Company's officers and its
independent public accountants, at such reasonable times and as often as such
Significant Purchaser may reasonably request.
(b) As soon as practicable after the end of each fiscal year
and in any event within ninety (90) days thereafter, the Company shall provide a
report to each Purchaser reporting on compliance with the terms and conditions
of this Agreement.
(c) Anything in Section 5 to the contrary notwithstanding, no
Purchaser or Significant Purchaser by reason of this Agreement shall have access
to any trade secrets or classified information of the Company. Each Significant
Purchaser hereby agrees to hold in confidence and trust and not to misuse or
disclose any confidential information provided pursuant to Sections 5.1 and 5.2.
The Company shall not be required to comply with Section 5.2(a) in respect of
any Purchaser whom the Company reasonably determines to be a competitor or an
officer, employee, director or greater than ten percent (10%) stockholder of a
competitor.
5.3 KEY PERSON LIFE INSURANCE. The Company has as of the date
hereof or shall within ninety (90) days of the date hereof use reasonable
efforts to obtain from financially sound and reputable insurers term life
insurance on the life of David E. Scott in the amount of $5,000,000. The Company
will cause to be maintained the term life insurance required by this Section 5.3
hereof. Such policies shall name the Series B Purchasers and Subordinated Note
Purchasers as loss payee and shall not be cancelable by the Company.
5.4 INDEPENDENT ACCOUNTS. The Company will retain independent
public accountants of recognized national standing who shall certify the
Company's financial statements at the end of each fiscal year. In the event the
services of the independent public accountants so selected, or any firm of
independent public accountants hereafter employed by the Company, are
terminated, the Company will promptly thereafter notify the Purchasers and will
request the firm of independent public accountants whose
16.
<PAGE> 17
services are terminated to deliver to the Purchasers a letter from such firm
setting forth the reasons for the termination of their services. In the event of
such termination, the Company will promptly thereafter engage another firm of
independent public accountants of recognized national standing. In its notice to
the Purchasers the Company shall state whether the change of accountants was
recommended or approved by the Board of Directors of the Company or any
committee thereof.
5.5 TRANSACTIONS WITH AFFILIATES. The Company shall not, without the
approval of the disinterested members of the Company's Board of Directors,
engage in any loans, leases, contracts or other transactions with any director,
officer or key employee of the Company, or any member of any such person's
immediate family, including the parents, spouse, children and other relatives of
any such person, on terms less favorable than the Company would obtain in a
transaction with an unrelated party, as determined in good faith by the Board of
Directors.
5.6 USE OF PROCEEDS.
(a) The Company shall use the proceeds from the sale of the
Securities to consummate the Merger, for the purchase of certain capital
equipment and for working capital and general corporate purposes.
(b) The proceeds received by the Company from Advantage must
be deployed in the State of Missouri in compliance with the Missouri Certified
Capital Company Law.
(c) Notwithstanding anything herein to the contrary, no
portion of the proceeds from the sale of securities acquired by the Purchasers
who are licensed under the Small Business Investment Act of 1958, as amended
(together with the rules and regulations thereunder) will be used (i) for
relending or reinvesting, if the Company's primary purpose involves, directly or
indirectly, providing funds to others, (ii) for the purchase of debt
obligations, factoring, or the long-term leasing of equipment with no provision
for maintenance or repair, (iii) to, directly or indirectly, provide capital or
financing to a company, (iv) to acquire, or to pay obligations relating to the
prior acquisition of, land or improved real estate to be held, without prompt
and substantial improvement, for resale or leasing to others, (v) outside the
United States (except that all or any portion of such proceeds may be used by
the Company in the domestic production of products for distribution abroad or to
acquire abroad materials used in such production, provided the major portion of
the assets and activities of the Company after such proceeds are so employed
remains within the territorial jurisdiction of the United States), (vi) for any
purpose contrary to the public interest (including but not limited to activities
which are in violation of law or inconsistent with free competitive enterprise),
(vii) to purchase good or services from a supplier that is an "associate" (as
defined in Section 107.50 of Title 13 of the Code of Federal Regulations (the
"CFR")) of Purchaser if 50% or more of such proceeds will be used to purchase
goods or services from any such supplier (provided, however, that (A) in no
event may such proceeds be used to purchase capital goods from an associate
supplier, and (B) such goods and services shall be at a price no greater than
that charged other customers of the associate supplier), or (viii) to acquire
"farm land" (as that term is defined in Section 107.720 of Title 13 of the CFR).
17.
<PAGE> 18
(d) The Company shall give the Significant Purchasers access
to its records to confirm that the Company has used the proceeds from the sale
of the Securities solely for the foregoing purposes. Without limiting the
generality of the foregoing, the Company shall permit the Significant Purchasers
to conduct a post-closing review within 90 days after the date hereof to assure
that the proceeds from the sale of the Securities were used for the foregoing
purposes.
5.7 GRANT OF STOCK OPTIONS. On or before the First Closing Date, the
Company shall have granted options to purchase shares of Common Stock to the
individuals set forth on Schedule VII attached hereto exercisable into the
number of shares of Common Stock set forth on Schedule VII attached hereto,
pursuant to Nonstatutory Stock Option Agreements in the form of Exhibit G
attached hereto.
5.8 TERMINATION OF COVENANTS. The covenants set forth in this Section
5 shall terminate and be of no further force and effect after the closing of a
firm commitment underwritten public offering pursuant to an effective
registration statement declared effective under the Securities Act of 1933, as
amended, covering the offer and sale of Common Stock for the account of the
Company in which the gross proceeds to the Company (before underwriting
discounts, commissions and fees, are at least $30,000,000 (a "Qualifying Public
Offering").
6. ADDITIONAL COVENANTS
6.1 APPROVAL REQUIRED FOR CERTAIN ACTIONS.
(a) For so long as the approval by the vote or written consent
of the holders of at least a majority of the then outstanding shares of Series B
Preferred Stock shall be necessary under the provisions of Article Fourth,
Section C(3)(c)(i) of the Company's Amended and Restated Certificate of
Incorporation for effecting or validating the following actions:
(i) the purchase or other acquisition (or payment
into or set aside for a sinking fund for such purpose) of any Series A
or Series C Preferred Stock or Common Stock; provided, however, that
this restriction shall not apply to: (x) the repurchase of shares of
Common Stock by the Company pursuant to agreements which permit the
Company to repurchase such shares upon termination of services to the
Company; (y) the exercise of the Company's right of first refusal with
approval of the Board of Directors upon a proposed transfer; or (z) the
redemption of the Series A Preferred Stock pursuant to the terms set
forth in Article Fourth, Section C(5)(a) of the Company's Amended and
Restated Certificate of Incorporation;
(ii) any action that results in the payment or
declaration of a dividend on any shares of Common Stock; or
(iii) any agreement by the Company or its
stockholders regarding an Acquisition or an Asset Transfer (as defined
in Article Fourth, Section C(2)(g) of the Company's Amended and
Restated Certificate of Incorporation),
18.
<PAGE> 19
the Series B Preferred Stock shall not give any such approval without the
affirmative vote or written consent of the holders of at least a majority of the
then outstanding shares of Series B Preferred Stock and the Subordinated Notes
as converted into Series B Preferred Stock, voting together as a single class.
(b) For so long as the approval by the vote or written consent
of the holders of at least seventy-five percent (75%) of the then outstanding
shares of Series B Preferred Stock shall be necessary under the provisions of
Article Fourth, Section C(3)(c)(ii) of the Company's Amended and Restated
Certificate of Incorporation for effecting or validating the following actions:
(i) any amendment, alteration, or repeal of any
provision of the Certificate of Incorporation or Bylaws of the Company
(including the filing of a Certificate of Designation), that affects
adversely the voting powers, preferences or other special rights or
privileges, qualifications, limitations, or restrictions of the Series
B Preferred Stock or Subordinated Notes; or
(ii) any amendment to Article Fourth, Section C(3)(c)
of the Company's Amended and Restated Certificate of Incorporation, the
Series B Preferred Stock shall not give any such approval without the
affirmative vote or written consent of the holders of at least
seventy-five percent (75%) of the then outstanding shares of Series B
Preferred Stock and the Subordinated Notes as converted into Series B
Preferred Stock, voting together as a single class
6.2 SUBORDINATED NOTE INTEREST. All interest due on the Subordinated
Notes (including deferred interest) shall be paid in full before any
distribution may be made on any of the Company's equity securities, except for
dividends on Series A Preferred Stock. Dividends shall be paid on the Series A
Preferred Stock before any interest may be paid on the Subordinated Notes.
6.3 NEGATIVE PLEDGE. Until payment in full of the Subordinated Notes,
the Company shall not, except with the prior written consent of a majority of
the holders of the Series B Preferred Stock and the Subordinated Notes as
converted into Series B Preferred Stock, voting together as a single class,
pledge the stock of any of its Subsidiaries other than to holders of Senior
Indebtedness (as defined in the Subordinated Note).
6.4 CURRENT DIVIDEND PAYMENTS. The Subordinated Notes shall not be
prepaid prior to March 1, 1999. Thereafter, upon thirty (30) days prior written
notice, the Company may prepay the Subordinated Notes in accordance with their
terms provided all accumulated but unpaid dividends on the Series B Preferred
Stock shall have been paid prior to such time as the Company shall give notice
of its intent to prepay the Subordinated Notes. If prior to such prepayment the
Holder converts the principal amount to be prepaid into Series B Preferred Stock
in accordance with the terms of the Subordinated Note, the Company shall
thereafter declare and pay in cash quarterly dividends, on the last day of
February, May, August, and November,
19.
<PAGE> 20
commencing with the first such date occurring after the conversion of the Series
B Preferred Stock in accordance with the Company's Amended and Restated
Certificate of Incorporation.
7. CONDITIONS TO CLOSING.
7.1 CONDITIONS TO PURCHASERS' OBLIGATIONS.
(a) AT EACH CLOSING. Purchasers' obligations to purchase the
Securities at each Closing are subject to the satisfaction, at or prior to the
applicable Closing Date, of the following conditions:
(i) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE
OF OBLIGATIONS. The representations and warranties made by the Company
in Section 3 hereof shall be true and correct in all material respects
as of such Closing Date with the same force and effect as if they had
been made as of such Closing Date, and the Company shall have performed
all obligations and conditions herein required to be performed or
observed by it on or prior to such Closing Date.
(ii) LEGAL INVESTMENT. On such Closing Date, the sale
and issuance of the Securities shall be legally permitted by all laws
and regulations to which Purchasers and the Company are subject.
(iii) CONSENTS, PERMITS, AND WAIVERS. The Company
shall have obtained any and all consents, permits and waivers necessary
or appropriate for consummation of the transactions contemplated by the
Agreement and the Related Agreements (except for such as may be
properly obtained subsequent to such Closing Date).
(iv) CORPORATE DOCUMENTS. The Company shall have
delivered to Purchasers or their counsel, copies of all corporate
documents of the Company as Purchasers shall reasonably request.
(v) COMPLIANCE CERTIFICATE; SECRETARY'S CERTIFICATE;
GOOD STANDING CERTIFICATE. The Company shall have delivered to the
Purchasers a Compliance Certificate, executed by the President of the
Company, dated such Closing Date, to the effect that the conditions
specified in Section 7.1(a)(i) have been satisfied. The Company shall
have delivered to the Purchasers a certificate executed by the
Secretary of the Company, dated such Closing Date, certifying as to (i)
the resolutions of the Board of Directors of the Company evidencing
approval of the transactions contemplated by and from this Agreement
and the Related Agreements and the authorization of the named officer
or officers to execute and deliver this Agreement and the Related
Agreements and (ii) certain of the officers of the Company, their
titles and examples of their signatures. The Company shall have
delivered to the Purchasers certificates of the Secretary of State of
the State of Delaware, dated a recent date, that the Company is in good
standing.
(vi) LEGAL OPINION. The Purchasers shall have
received from legal counsel to the Company an opinion addressed to
them, dated as of such Closing Date, in
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substantially the form attached hereto as Exhibit H.
(vii) PROPRIETARY INFORMATION AND INVENTIONS
AGREEMENT. The individuals set forth on Schedule VIII shall have
executed a Proprietary Information and Inventions Agreement in
substantially the form of Exhibit I attached hereto.
(viii) 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 Purchasers and their special counsel, and the Purchasers and their
special counsel shall have received all such counterpart originals or
certified or other copies of such documents as they may reasonably
request.
(ix) SBA MATTERS. The Company shall have executed and
delivered to each SBIC Purchaser a Size Status Declaration on SBA Form
480 and an Assurance of Compliance on SBA Form 652, and shall have
provided to each such Purchaser information necessary for the
preparation of a Portfolio Financing Report on SBA Form 1031.
(b) AT THE FIRST CLOSING. Purchaser's obligations to purchase
the Securities at each Closing are subject to satisfaction, at or prior to the
First Closing Date, of the following conditions:
(i) SIZE OF FIRST CLOSING. The First Closing shall
consist of the purchase and sale of at least 4,031,250 Series B
Preferred Shares at an aggregate purchase price of at least $6,450,000.
(ii) FILING AND CERTIFICATION OF RESTATED
CERTIFICATE. The Restated Certificate shall have been filed with and
certified by the Secretary of State of the State of Delaware.
(iii) PURCHASERS RIGHTS AGREEMENT. The Purchasers
Rights Agreement shall have been executed and delivered by the parties
thereto.
(iv) BOARD OF DIRECTORS. Upon the First Closing, the
authorized size of the Board of Directors of the Company shall be five
(5) members and the Board shall consist of David E. Scott, Stephen L.
Sauder, Henry H. Bradley, Ian R.N. Bund, and David W. Bergmann.
(v) EMPLOYMENT AGREEMENTS. The Company shall have
entered into employment agreements with David E. Scott, Jeffrey D.
Shackelford, Gary L. Chesser, David W. Vranicar, Bradley A. Moline,
Gregory C. Lawhon, Stephen L. Sauder, Richard L. Tidwell, Stormy C.
Supiran and Bobbie L. Agler in substantially the form attached hereto
as Exhibit J-1 ("Management Employment Agreement"), with the base
salaries for each such employee at the level set forth opposite such
employee's name on Exhibit J-2.
(vi) VALU-LINE MERGER. All conditions to the
obligation of the parties to the Merger Agreement to consummate the
Merger shall have been satisfied or waived,
21.
<PAGE> 22
except for the conditions that are contingent upon the consummation of
the transactions contemplated by this Agreement; and, assuming the
consummation of the transactions contemplated by this Agreement, each
of the parties to the Merger Agreement shall be legally obligated to
consummate the Merger. The condition set forth in this Section
7.1(b)(vi) shall not apply to the purchase of Securities by Advantage.
7.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY.
(a) AT EACH CLOSING. The Company's obligation to issue and
sell the Securities at each Closing is subject to the satisfaction, on or prior
to such Closing, of the following conditions:
(i) REPRESENTATIONS AND WARRANTIES TRUE. The
representations and warranties made by those Purchasers acquiring
Securities in Section 4 hereof shall be true and correct in all
material respects at the date of such Closing Date with the same force
and effect as if they had been made on and as of such Closing Date.
(ii) PERFORMANCE OF OBLIGATIONS. Such Purchasers
shall have performed and complied with all agreements and conditions
herein required to be performed or complied with by such Purchasers on
or before such Closing Date.
(iii) CONSENTS, PERMITS, AND WAIVERS. The Company
shall have obtained any and all consents, permits and waivers necessary
or appropriate for consummation of the transactions contemplated by the
Agreement and the Related Agreements (except for such as may be
properly obtained subsequent to such Closing Date).
(b) AT THE FIRST CLOSING. The Company's obligation to issue
and sell the Securities at each Closing is subject to satisfaction, at or prior
to the First Closing Date, of the following conditions:
(i) FILING AND CERTIFICATION OF RESTATED CERTIFICATE.
The Restated Certificate shall have been filed with and certified by
the Secretary of State of the State of Delaware.
(ii) PURCHASERS RIGHTS AGREEMENT. The Purchasers
Rights Agreement shall have been executed and delivered by the
Purchasers.
(iii) VALU-LINE MERGER. All conditions to the
obligation of the parties to the Merger Agreement to consummate the
Merger shall have been satisfied or waived, except for the conditions
that are contingent upon the consummation of the transactions
contemplated by this Agreement; and, assuming the consummation of the
transactions contemplated by this Agreement, each of the parties to the
Merger Agreement shall be legally obligated to consummate the Merger.
8. MISCELLANEOUS.
22.
<PAGE> 23
8.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of Missouri as such laws are applied to agreements between
Missouri residents entered into and performed entirely in Missouri.
(a) SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by any 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.
8.2 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 Securities from time to time.
8.3 APPOINTMENT OF AGENT
(a) Each Subordinated Note Purchaser hereby appoints White
Pines Management, L.L.C., as agent to exercise all of such Subordinated Note
Purchaser's rights under this Agreement, the Purchasers Rights Agreement, the
Security Agreement, and the Subordinated Notes, the Series B Preferred Shares
issued upon conversion of the Subordinated Notes and the Common Shares issued
upon conversion of the Series B Preferred Shares issued to such Subordinated
Note Purchaser (collectively the "Subordinated Note Purchase Documents"). In
order to accomplish the foregoing, each Subordinated Note Purchaser hereby
irrevocably constitutes and appoints the Agent, with full power of substitution,
as such Subordinated Note Purchaser's true and lawful attorney-in-fact, to take
the following actions in such Subordinated Note Purchaser's name, place and
stead, in such manner and upon such terms as the Agent may determine to be
appropriate:
(i) Exercise all rights granted to the Subordinated
Note Purchaser pursuant to the Subordinated Note Purchase Documents;
(ii) Make decisions concerning the exercise of
remedies available to the Subordinated Note Purchaser under the
Subordinated Note Purchase Documents;
(iii) Negotiate with the Company any amendment or
modification of the Subordinated Note Purchase Documents;
(iv) Act as proxy to execute written consents of
shareholders and to attend all meetings of the shareholders of the
Company with full power to vote and act for Subordinated Note Purchaser
in the same manner and extent that Subordinated Note Purchaser might if
personally present at such meeting, such rights being acknowledged and
agreed by Subordinated Note Purchaser as being coupled with an
interest;
23.
<PAGE> 24
(v) Make all decisions concerning administration of
the investment in the Subordinated Note, Series B Preferred Shares or
Common Stock; and
(vi) Employ counsel to assist the Agent in carrying
out its obligations hereunder.
(b) Each Subordinated Note Purchaser hereby grants to such
attorney-in-fact full power and authority to do and perform each and every thing
whatsoever necessary or desirable to be done in connection with the Subordinated
Note Purchase Documents, to the same extent as could be done if Subordinated
Note Purchaser were personally present, and each Subordinated Note Purchaser
hereby ratifies and confirms all that said attorney-in-fact shall do or cause to
be done by virtue of these provisions. Each Subordinated Note Purchaser will
cooperate fully with the Agent in accomplishing the actions set forth above.
Neither the Agent nor any employee or agent thereof, shall be liable, in damages
or otherwise, to any Subordinated Note Purchaser (or its insurer by right of
subrogation) for any action taken or omitted to be taken by the Agent pursuant
to the authority granted by this Agreement, except if such act or omission
results from the gross negligence or willful misconduct of the Agent or any of
its employees or agents. Each Subordinated Note Purchaser shall indemnify the
Agent, pro rata, from and against any and all claims, liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by, or asserted against the Agent in any way relating to or arising out of this
Agreement or any action taken or omitted to be taken in good faith by the Agent
hereunder, provided that no Subordinated Note Purchaser shall be liable for any
portion of the foregoing items resulting from the gross negligence or willful
misconduct of the Agent or any of its employees or agents. The Subordinated Note
Purchaser shall reimburse the Agent for all expenses incurred by the Agent in
connection with performing its obligations hereunder, pro rata.
8.4 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 Securities from time to time.
8.5 ENTIRE AGREEMENT; SUPERCEDES PRIOR AGREEMENT. This Agreement, the
Exhibits and Schedules hereto, the Related 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 and
therein. By executing this Agreement, David E. Scott, Jeffrey D. Shackelford and
News-Press & Gazette Company agree that the Purchase Agreement, dated December
24, 1996, by and among David E. Scott, Jeffrey D. Shackelford and News-Press &
Gazette Company shall be terminated and be of no further force and effect.
24.
<PAGE> 25
8.6 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.
8.7 AMENDMENT AND WAIVER.
(a) This Agreement may be amended or modified only upon the
written consent of the Company and holders of: (i) at least fifty percent (50%)
of the Common Shares, voting together as a single class; (ii) at least fifty
percent (50%) of the Series B Preferred Shares and Subordinated Notes (on an
as-converted basis), voting together as a single class; and (iii) at least fifty
percent (50%) of the Series C Preferred Shares (on an as-converted basis),
voting as a single class.
(b) The obligations of the Company and the rights of the
holders of the Securities under this Agreement may be waived only with the
written consent of the holders of (i) at least fifty percent (50%) of the Common
Shares, voting together as a single class; (ii) at least fifty percent (50%) of
the Series B Preferred Shares and the Subordinated Notes (on an as-converted
basis), voting together as a single class; and (iii) at least fifty percent
(50%) of the Series C Preferred Shares (on an as-converted basis), voting
together as a single class.
8.8 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement or the Related
Agreements, 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 any Purchaser's part of any breach, default
or noncompliance under this Agreement or the Related Agreements or any waiver on
such party's part of any provisions or conditions of the Agreement or the
Related Agreements, must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, or the Related Agreements, by law, or otherwise afforded to any
party, shall be cumulative and not alternative.
8.9 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified; (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day; (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid; or (d) one (1) business day after
deposit with a nationally recognized overnight courier, specifying next day
delivery, with written verification of receipt. All communications shall be sent
to the Company at the address as set forth on the signature page hereof and to
Purchaser at the address set forth on the Schedule of Purchasers attached hereto
or at such other address as the Company or Purchaser may designate by ten (10)
days advance written notice to the other parties hereto.
8.10 EXPENSES. The Company shall pay all costs and expenses
25.
<PAGE> 26
that it incurs with respect to the negotiation, execution, delivery and
performance of this Agreement and the Related Agreements. The Company shall, at
the Closing, reimburse the reasonable fees of and expenses of special counsel
for the Purchasers, not to exceed $45,000, and shall reimburse such special
counsel for reasonable expenses incurred in connection with the negotiation,
execution, and delivery of this Agreement and the Related Agreements.
8.11 ATTORNEYS' FEES. In the event that any dispute among the parties
to this Agreement should result in litigation, the prevailing party in such
dispute shall be entitled to recover from the losing party all fees, costs and
expenses of enforcing any right of such prevailing party under or with respect
to this Agreement, including without limitation, such reasonable fees and
expenses of attorneys and accountants, which shall include, without limitation,
all fees, costs and expenses of appeals.
8.12 TITLES AND SUBTITLES. The titles of the sections and subsections
of the Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
8.13 COUNTERPARTS; EXECUTION BY FACSIMILE SIGNATURE. 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. This Agreement may be
executed by facsimile signature(s).
8.14 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, except as set forth in Section 2.2(e).
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 8.14 being untrue.
8.15 EXCULPATION AMONG PURCHASERS. Each Purchaser acknowledges that it
is not relying upon any person, firm, or corporation, other than the Company and
its officers and directors, in making its investment or decision to invest in
the Company. Each Purchaser agrees that no Purchaser nor the respective
controlling persons, officers, directors, partners, agents, or employees of any
Purchaser shall be liable for any action heretofore or hereafter taken or
omitted to be taken by any of them in connection with the Securities.
8.16 PRONOUNS. All pronouns contained herein, and any variations
thereof, shall be deemed to refer to the masculine, feminine or neutral,
singular or plural, as to the identity of the parties hereto may require.
26.
<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have executed the SECURITIES
PURCHASE AGREEMENT as of the date set forth in the first paragraph hereof.
COMPANY: PURCHASER:
BIRCH TELECOM, INC.
NAME OF PURCHASER
WHITE PINES LIMITED PARTNERSHIP I
By: /s/ David E. Scott By: /s/ Ian R.N. Bund
----------------------------- ------------------------------
David E. Scott, President Title: President
Suite 1220
1000 Walnut Street
Kansas City, MO 64106 AGENT:
(816) 842-7507 (Fax)
WHITE PINE MANAGEMENT, L.L.C.
By: /s/ Ian R.N. Bund
------------------------------
Title: President
SIGNATURE PAGE
<PAGE> 28
BIRCH TELECOM, INC.
SECURITIES PURCHASE AGREEMENT
<PAGE> 29
TABLE OF CONTENTS
PAGE
1. AGREEMENT TO SELL AND PURCHASE.......................................2
1.1 Sale and Purchase of Common Shares..........................2
1.2 Sale and Purchase of Series B Preferred Shares..............2
1.3 Exchange of Common Stock for Series C Preferred Shares......2
1.4 Sale and Purchase of Subordinated Notes.....................2
1.5 Certain Definitions.........................................3
2. CLOSING, DELIVERY AND PAYMENT........................................3
2.1 First Closing...............................................3
2.2 Deliveries at the First Closing.............................3
2.3 Subsequent Closing; Deliveries at Second Closing............4
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................4
3.1 Organization, Good Standing and Qualification...............4
3.2 Subsidiaries................................................5
3.3 Capitalization; Voting Rights...............................5
3.4 Authorization; Binding Obligations..........................6
3.5 Financial Statements........................................6
3.6 Liabilities.................................................6
3.7 Agreements; Action..........................................6
3.8 Obligations to Related Parties..............................7
3.9 Changes.....................................................7
3.10 Title to Properties and Assets; Liens, etc..................8
3.11 Patents and Trademarks......................................8
3.12 Compliance with Other Instruments...........................9
3.13 Litigation..................................................9
3.14 Tax Returns and Payments...................................10
3.15 Employees..................................................10
3.16 Registration Rights........................................10
3.17 Compliance with Laws; Permits..............................10
3.18 Environmental and Safety Laws..............................11
3.19 Offering Valid.............................................11
3.20 Small Business Concern.....................................11
29.
<PAGE> 30
TABLE OF CONTENTS
(CONTINUED)
PAGE
3.21 Merger Agreement...........................................11
3.22 Employee Benefit Plans.....................................11
3.23 Insurance..................................................12
3.24 Books and Records..........................................12
3.25 Business Plan..............................................12
3.26 No Broker..................................................12
3.27 Disclosure.................................................12
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS....................12
4.1 Requisite Power and Authority..............................12
4.2 Investment Representations.................................13
4.3 Transfer Restrictions......................................14
5. COVENANTS OF THE COMPANY............................................14
5.1 Basic Financial Information................................14
5.2 Additional Information and Rights..........................15
5.3 Key Person Life Insurance..................................16
5.4 Independent Accountants....................................16
5.5 Transactions with Affiliates...............................16
5.6 Use of Proceeds............................................16
5.7 Grant of Stock Options.....................................17
5.8 Termination of Covenants..................................17
6. ADDITIONAL COVENANTS................................................17
6.1 Approval Required for Certain Actions......................17
6.2 Subordinated Note Interest.................................18
6.3 Negative Pledge............................................19
6.4 Current Dividend Payments..................................19
7. CONDITIONS TO CLOSING...............................................19
7.1 Conditions to Purchasers' Obligations......................19
7.2 Conditions to Obligations of the Company...................21
8. MISCELLANEOUS.......................................................22
8.1 Governing Law..............................................22
(a) Survival..........................................22
30.
<PAGE> 31
TABLE OF CONTENTS
(CONTINUED)
PAGE
8.2 Successors and Assigns.....................................22
8.3 Appointment of Agent.......................................22
8.4 Successors and Assigns.....................................24
8.5 Entire Agreement; Supercedes Prior Agreement...............24
8.6 Severability...............................................24
8.7 Amendment and Waiver.......................................24
8.8 Delays or Omissions........................................24
8.9 Notices....................................................25
8.10 Expenses...................................................25
8.11 Attorneys' Fees............................................25
8.12 Titles and Subtitles.......................................25
8.13 Counterparts; Execution by Facsimile Signature.............25
8.14 Broker's Fees..............................................25
8.15 Exculpation Among Purchasers...............................25
8.16 Pronouns...................................................26
<PAGE> 32
TABLE OF CONTENTS
PAGE
SCHEDULES
Schedule of Common Stock Purchasers Schedule I
Schedule of Series B Purchasers Schedule II
Schedule of Series C Purchasers Schedule III
Schedule of Subordinated Note Purchasers Schedule IV
Capitalization After First Closing Schedule V
Capitalization After Second Closing Schedule VI
Schedule of Option Grants Schedule VII
Schedule of Proprietary Information Schedule VIII
and Invention Agreements
Schedule of Exceptions
EXHIBITS
Form of Restated Certificate Exhibit A
Form of Convertible Subordinated Note Exhibit B
Form of Purchasers Rights Agreement Exhibit C
Form of Security Agreement Exhibit D
Stock Option Plan Exhibit E
Business Plan Exhibit F
Nonstatutory Stock Option Agreement Exhibit G
Form of Legal Opinion Exhibit H
Proprietary Information and Exhibit I
Inventions Agreement
Management Employment Agreement Exhibit J-1
Key Management Salaries Exhibit J-2
<PAGE> 1
EXHIBIT 10.2
BIRCH TELECOM, INC.
THIS PURCHASERS RIGHTS AGREEMENT (this "Agreement") is made and entered
into as of February 10, 1998, by and among BIRCH TELECOM, INC., a Delaware
corporation (the "Company"), and the persons identified on Exhibit A attached
hereto (the "Purchasers").
RECITALS
WHEREAS, the Purchasers are parties to the Securities Purchase
Agreement, of even date herewith, between the Company and the Purchasers (the
"Securities Purchase Agreement");
WHEREAS, certain of the Company's and such Purchasers' obligations
under the Securities Purchase Agreement are conditioned upon the execution and
delivery by such Purchasers and the Company of this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties hereto further agree as follows:
1. CERTAIN DEFINITIONS.
Capitalized terms used herein and not otherwise defined shall have the
meaning ascribed thereto in the Securities Purchase Agreement. As used in this
Agreement, the following terms shall have the meanings set forth below:
(A) "Commission" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
(B) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
or any similar successor federal statute and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
(C) "Holder" shall mean any Purchaser who holds Registrable Securities and any
holder of Registrable Securities to whom the registration rights conferred by
this Agreement have been transferred in compliance with Section 2.9 and Section
3 hereof.
(D) "Initiating Holders" shall mean any Holder or Holders who in the aggregate
hold at least fifty percent (50%)
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<PAGE> 2
of the outstanding Registrable Securities.
(E) "Key Management" shall mean David E. Scott, Jeffrey D. Shackelford, Gary
L. Chesser, David W. Vranicar, Bradley A. Moline, Gregory C. Lawhon, Stephen L.
Sauder, Richard L. Tidwell, Stormy C. Supiran and Bobbie L. Agler and any other
employee of the Company designated by the Board of Directors, so long as such
individual remains an employee of the Company.
(F) "Management Group" shall mean David E. Scott, Jeffrey D. Shackelford, Gary
L. Chesser, David W. Vranicar, Bradley A. Moline and Gregory C. Lawhon so long
as such individual remains an employee of the Company.
(G) "Option Shares" shall mean the shares of Common Stock issued upon the
exercise of those stock options granted pursuant to Section 5.7 of the
Securities Purchase Agreement as increased pursuant to Section 8 of this
Agreement.
(H) "Other Purchasers" shall mean persons other than Holders who, by virtue of
agreements with the Company, are entitled to include their securities in certain
registrations hereunder.
(I) "Qualifying Public Offering" shall mean the closing of a firmly underwritten
public offering pursuant to an effective registration statement under the
Securities Act covering the offer and sale of Common Stock for the account of
the Company in which the gross proceeds to the Company (before underwriting
discounts, commissions and fees) are at least $30,000,000.
(J) "Registrable Securities" shall mean (i) the Common Shares; (ii) the shares
of Common Stock issuable upon the conversion of the Series B Preferred Stock and
Series C Preferred Stock, (iii) the shares of Common Stock issuable upon the
redemption of the Series B Preferred Stock; and (iv) the shares of Common Stock
issuable upon the conversion or redemption of the Series B Preferred Stock
issuable upon conversion of the Subordinated Notes; provided, however, that
Registrable Securities shall not include any shares of Common Stock which have
previously been registered or which have been sold to the public either pursuant
to a registration statement or Rule 144, or which have been sold in a private
transaction in which the transferor's rights under this Agreement are not
assigned.
(K) The terms "register," "register" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
(L) "Registration Expenses" shall mean all expenses incurred in effecting any
registration pursuant to this Agreement, including, without limitation, all
registration, qualification, and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company, blue sky fees and expenses,
and expenses of any regular or special audits incident to or required by any
such registration, but shall not include Selling Expenses, fees and
disbursements of counsel for the Holders and the compensation of regular
employees of the Company, which shall be paid in any event by the Company.
(M) "Restricted Securities" shall mean any Registrable Securities required to
bear the legend set forth in
2
<PAGE> 3
Section 3.4 hereof.
(N) "Rule 144" shall mean Rule 144 as promulgated by the Commission under the
Securities Act, as such Rule may be amended from time to time, or any similar
successor rule that may be promulgated by the Commission.
(O) "Rule 145" shall mean Rule 145 as promulgated by the Commission under the
Securities Act, as such Rule may be amended from time to time, or any similar
successor rule that may be promulgated by the Commission.
(P) "Securities Act" shall mean the Securities Act of 1933, as amended, or any
similar successor federal statute and the rules and regulations thereunder, all
as the same shall be in effect from time to time.
(Q) "Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the sale of Registrable
Securities and fees and disbursements of one special counsel for the Holders
(other than the fees and disbursements of counsel included in Registration
Expenses).
2. REGISTRATION RIGHTS.
2.1 REQUESTED REGISTRATION
(A) REQUEST FOR REGISTRATION. If the Company shall receive from Initiating
Holders at any time after the earlier of (I) six years after the date of this
Agreement or (II) one year after the effective date of the first registration
statement filed by the Company pursuant to the Securities Act covering an
underwritten offering of any of its securities to the general public, a written
request that the Company effect any registration with respect to all or a part
of the Registrable Securities, the Company will:
(I) promptly give written notice of the proposed registration to all other
Holders; and
(II) as soon as practicable, use its best efforts to effect such registration
(including, without limitation, filing post-effective amendments, appropriate
qualifications under applicable blue sky or other state securities laws, and
appropriate compliance with the Securities Act) and as would permit or
facilitate the sale and distribution of all or such portion of such Registrable
Securities as are specified in such request, together with all or such portion
of the Registrable Securities of any Holder or Holders joining in such request
as are specified in a written request received by the Company within twenty (20)
calendar days after such written notice from the Company is mailed or delivered.
The Company shall not be obligated to effect, or to take any action to
effect, any such registration pursuant to this Section 2.1:
A. In any particular jurisdiction in which the Company would be required to
execute a general consent to service of process in effecting such registration,
qualification, or compliance, unless the Company is already subject to service
in such jurisdiction and except as may be required by
3
<PAGE> 4
the Securities Act;
B. After the Company has initiated one such registration pursuant to this
Section 2.1(a) (counting for these purposes only registrations which have been
declared or ordered effective and pursuant to which securities have been sold
and registrations which have been withdrawn by the Holders as to which the
Holders have not elected to bear the Registration Expenses pursuant to Section
2.3 hereof and would, absent such election, have been required to bear such
expenses);
C. During the period starting with the date sixty (60) days prior to the
Company's good faith estimate of the date of filing of, and ending on a date one
hundred eighty (180) days after the effective date of, a Company-initiated
registration; provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective;
(B) Subject to the foregoing clauses (A) through (C), the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practicable after receipt of the request or requests of
the Initiating Holders; provided, however, that if (I) in the good faith
judgment of the Board of Directors of the Company, such registration would be
seriously detrimental to the Company and the Board of Directors of the Company
concludes, as a result, that it is essential to defer the filing of such
registration statement at such time, and (II) the Company shall furnish to such
Holders a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company for such registration statement to be filed
in the near future and that it is, therefore, essential to defer the filing of
such registration statement, then the Company shall have the right to defer such
filing (except as provided in clause (C) above) for a period of not more than
one hundred eighty (180) days after receipt of the request of the Initiating
Holders, and, provided further, that the Company shall not defer its obligation
in this manner more than once in any twelve-month period.
The registration statement filed pursuant to the request of the
Initiating Holders may, subject to the provisions of Sections 2.1(d), include
other securities of the Company, with respect to which registration rights have
been granted, and may include securities of the Company being sold for the
account of the Company.
(C) UNDERWRITING. If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Company as part of their request made pursuant to Section 2.1 and the
Company shall include such information in the written notice referred to in
section 2.1(a)(i). In such event, the right of any Holder to registration
pursuant to Section 2.1 shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of such Holder's Registrable Securities in
the underwriting (unless otherwise mutually agreed by a majority in interest of
the Initiating Holders and such Holder with respect to such participation and
inclusion) to the extent provided herein. A Holder may elect to include in such
underwriting all or a part of the Registrable Securities such Holder holds.
(D) PROCEDURES. If the Company shall request inclusion in any registration
pursuant to Section 2.1 of securities being sold for its own account, or if
other persons shall request inclusion in any
4
<PAGE> 5
registration pursuant to Section 2.1, the Initiating Holders shall, on behalf of
all Holders, offer to include such securities in the underwriting and may
condition such offer on their acceptance of the further applicable provisions of
this Section 2. The Company shall (together with all Holders and other persons
proposing to distribute their securities through such underwriting) enter into
an underwriting agreement in customary form with the representative of the
underwriter or underwriters selected for such underwriting by a majority in
interest of the Initiating Holders, which underwriters are reasonably acceptable
to the Company. Notwithstanding any other provision of this Section 2.1, if the
representative of the underwriters advises the Initiating Holders in writing
that marketing factors require a limitation on the number of shares to be
underwritten, the number of shares to be included in the underwriting or
registration shall be allocated: first, to the Holders of Registrable Securities
pro rata based on the number of shares of Registrable Securities for which
registration was requested; and second, to the Company for securities being sold
for its own account; and finally, to the holders of other securities of the
Company with registration rights pro rata based on the number of shares for
which registration was requested. The Company shall not limit the number of
Registrable Securities to be included in a registration statement pursuant to
this Section 2.1 in order to include shares held by Purchasers with no
registration rights or any other shares of stock issued to employees, officers,
directors or consultants pursuant to the Stock Option Plan, in order to include
in such registration securities registered for the Company's own account. If a
person who has requested inclusion in such registration as provided above does
not agree to the terms of any such underwriting, such person shall be excluded
therefrom by written notice from the Company, the underwriter or the Initiating
Holders, and the securities so excluded shall also be withdrawn from
registration. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall also be withdrawn from such registration.
If shares are so withdrawn from the registration and if the number of shares to
be included in such registration was previously reduced as a result of marketing
factors pursuant to this Section 2.1(d), then the Company shall offer to all
holders who have retained rights to include securities in the registration the
right to include additional securities in the registration in an aggregate
amount equal to the number of shares so withdrawn, with such shares to be
allocated among such Holders requesting additional inclusion in accordance with
this Section 2.1(d).
2.2 COMPANY REGISTRATION
(A) If the Company shall determine to register any of its securities either for
its own account or the account of a security holder or holders exercising their
respective demand registration rights (other than pursuant to Section 2.1
hereof), other than a registration relating solely to employee benefit plans, or
a registration relating to a corporate reorganization or other transaction under
Rule 145, or a registration on any registration form that does not permit
secondary sales, the Company will:
(I) promptly give to each Holder written notice thereof; and
(II) use its best efforts to include in such registration (and any related
qualification under blue sky laws or other compliance), except as set forth in
Section 2.2(b) below, and in any underwriting involved therein, all the
Registrable Securities specified in a written request or requests, made by any
5
<PAGE> 6
Holder and received by the Company within ten (10) calendar days after the
written notice from the Company described in clause (i) above is mailed or
delivered by the Company. Such written request may specify all or a part of a
Holder's Registrable Securities.
(B) UNDERWRITING. If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
advise the Holders as a part of the written notice given pursuant to Section
2.2(a)(i). In such event, the right of any Holder to registration pursuant to
this Section 2.2 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected by the Company.
(C) Notwithstanding any other provision of this Section 2.2, if the
representative of the underwriters advises the Company in writing that marketing
factors require a limitation on the number of shares to be underwritten, the
representative may (subject to the limitations set forth below) exclude all
Registrable Securities from, or limit the number of Registrable Securities to be
included in, the registration and underwriting. The Company shall so advise all
holders of securities requesting registration, and the number of shares of
securities that are entitled to be included in the registration and underwriting
shall be allocated: first, to the Company for securities being sold for its own
account; second, to the Holders of Registrable Securities pro rata based on the
number of shares of Registrable Securities for which registration was requested;
and finally, to the holders of other securities of the Company with registration
rights pro rata based on the number of Other Shares for which registration was
requested. The Company shall not limit the number of Registrable Securities to
be included in a registration pursuant to this Agreement in order to include
shares held by Purchasers with no registration rights or any other shares of
stock issued to employees, officers, directors, or consultants pursuant to the
Stock Option Plan, in order to include in such registration securities
registered for the Company's own account. If any person does not agree to the
terms of any such underwriting, he shall be excluded therefrom by written notice
from the Company or the underwriter. Any Registrable Securities or other
securities excluded or withdrawn from such underwriting shall be withdrawn from
such registration.
If shares are so withdrawn from the registration or if the number of
shares of Registrable Securities to be included in such registration was
previously reduced as a result of marketing factors, the Company shall then
offer to all persons who have retained the right to include securities in the
registration the right to include additional securities in the registration in
an aggregate amount equal to the number of shares so withdrawn, with such shares
to be allocated among the persons requesting additional inclusion as set forth
above.
2.3 EXPENSES OF REGISTRATION. All Registration Expenses incurred in connection
with any registration, qualification or compliance pursuant to Sections 2.1 and
2.2 hereof and reasonable fees of one counsel for the selling Holders shall be
borne by the Company; provided, however, that if the Holders bear the
Registration Expenses for any registration proceeding begun pursuant to Section
2.1 and subsequently withdrawn by the Holders registering shares therein, such
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registration proceeding shall not be counted as a requested registration
pursuant to Section 2.1 hereof. Furthermore, in the event that a withdrawal by
the Holders is based upon material adverse information relating to the Company
that is different from the information known or available (upon request from the
Company or otherwise) to the Holders requesting registration at the time of
their request for registration under Section 2.1, such registration shall not be
treated as a counted registration for purposes of Section 2.1 hereof, even
though the Holders do not bear the Registration Expenses for such registration.
All Selling Expenses relating to securities so registered shall be borne by the
holders of such securities pro rata on the basis of the number of shares of
securities so registered on their behalf, as shall any other expenses in
connection with the registration required to be borne by the holders of such
securities.
2.4 REGISTRATION PROCEDURES. In the case of each registration effected by the
Company pursuant to Section 2, the Company will keep each Holder advised in
writing as to the initiation of each registration and as to the completion
thereof. At its expense, the Company will use reasonable efforts to:
(A) Keep such registration effective for a period of one hundred twenty (120)
days or until the Holder or Holders have completed the distribution described in
the registration statement relating thereto, whichever first occurs; provided,
however, that such 120-day period shall be extended for a period of time equal
to the period the Holder refrains from selling any securities included in such
registration at the request of an underwriter of Common Stock (or other
securities) of the Company;
(B) Prepare and file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement;
(C) Furnish such number of prospectuses and other documents incident thereto,
including any amendment of or supplement to the prospectus, as a Holder from
time to time may reasonably request;
(D) Notify each seller of Registrable Securities covered by such registration
statement at any time when a prospectus relating thereto is required to be
delivered under the Securities Act of the happening of any event as a result of
which the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading or incomplete in the light of the circumstances then existing,
and at the request of any such seller, prepare and furnish to such seller a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such shares, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or incomplete
in the light of the circumstances then existing;
(E) Cause all such Registrable Securities registered pursuant hereunder to be
listed on each securities exchange on which similar securities issued by the
Company are then listed;
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(F) Provide a transfer agent and registrar for all Registrable Securities
registered pursuant to such registration statement and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration;
(G) Otherwise use its best efforts to comply with all applicable rules and
regulations of the Commission, and make available to its security holders, as
soon as reasonably practicable, an earnings statement covering the period of at
least twelve months, but not more than eighteen months, beginning with the first
month after the effective date of the Registration Statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities Act;
and
(H) In connection with any underwritten offering pursuant to a registration
statement filed pursuant to Section 2.1 hereof, the Company will enter into an
underwriting agreement in form reasonably necessary to effect the offer and sale
of Common Stock, provided such underwriting agreement contains customary
underwriting provisions and provided further that if the underwriter so requests
the underwriting agreement will contain customary contribution provisions.
2.5 INDEMNIFICATION
(A) The Company will indemnify each Holder, each of its officers, directors and
partners, legal counsel, and accountants and each person controlling such Holder
within the meaning of Section 15 of the Securities Act, with respect to which
registration, qualification, or compliance has been effected pursuant to this
Section 2, and each underwriter, if any, and each person who controls within the
meaning of Section 15 of the Securities Act any underwriter, against all
expenses, claims, losses, damages, and liabilities (or actions, proceedings, or
settlements in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any prospectus,
offering circular, or other document (including any related registration
statement, notification, or the like) incident to any such registration,
qualification, or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of the
Securities Act or any rule or regulation thereunder applicable to the Company
and relating to action or inaction required of the Company in connection with
any such registration, qualification, or compliance, and will reimburse each
such Holder, each of its officers, directors, partners, legal counsel, and
accountants and each person controlling such Holder, each such underwriter, and
each person who controls any such underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating and defending or
settling any such claim, loss, damage, liability, or action, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability, or expense arises out of or is based on any untrue
statement or omission based upon written information furnished to the Company by
such Holder or underwriter and stated to be specifically for use therein. It is
agreed that the indemnity agreement contained in this Section 2.5(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability,
or action if such settlement is effected without the consent of the Company
(which consent has not been unreasonably withheld).
(B) Each Holder will, if Registrable Securities held by such Holder are included
in the securities as
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to which such registration, qualification, or compliance is being effected,
indemnify the Company, each of its directors, officers, partners, legal counsel,
and accountants and each underwriter, if any, of the Company's securities
covered by such a registration statement, each person who controls the Company
or such underwriter within the meaning of Section 15 of the Securities Act, each
other such Holder and Other Purchaser, and each of their officers, directors,
and partners, and each person controlling such Holder or Other Purchaser,
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement,
prospectus, offering circular, or other document, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Company and such Holders, Other Purchasers, directors, officers, partners, legal
counsel, and accountants, persons, underwriters, or control persons for any
legal or any other expenses reasonably incurred in connection with investigating
or defending any such claim, loss, damage, liability, or action, in each case to
the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular, or other document in reliance upon and
in conformity with written information furnished to the Company by such Holder
and stated to be specifically for use therein provided, however, that the
obligations of such Holder hereunder shall not apply to amounts paid in
settlement of any such claims, losses, damages, or liabilities (or actions in
respect thereof if such settlement is effected without the consent of such
Holder (which consent shall not be unreasonably withheld); and provided that in
no event shall any indemnity under this Section 2.5 exceed the gross proceeds
from the offering received by such Holder.
(C) Each party entitled to indemnification under this Section 2.5 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 2, to the extent such
failure is not prejudicial. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability in respect to such
claim or litigation. Each Indemnified Party shall furnish such information
regarding itself or the claim in question as an Indemnifying Party may
reasonably request in writing and as shall be reasonably required in connection
with the defense of such claim and litigation resulting therefrom.
(D) If the indemnification provided for in this Section 2.5 is held by a court
of competent jurisdiction to be unavailable to an Indemnified Party with respect
to any loss, liability, claim, damage, or expense referred to therein, then the
Indemnifying Party, in lieu of indemnifying such Indemnified Party
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hereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage, or expense in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the statements or omissions that resulted in such loss, liability, claim,
damage, or expense as well as any other relevant equitable considerations. The
relative fault of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the Indemnified
Party and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.
(E) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement entered
into in connection with the underwritten public offering are in conflict with
the foregoing provisions, the provisions in the underwriting agreement shall
control.
2.6 INFORMATION BY HOLDER. Each Holder of Registrable Securities shall furnish
to the Company such information regarding such Holder and the distribution
proposed by such Holder as the Company may reasonably request in writing and as
shall be reasonably required in connection with any registration, qualification,
or compliance referred to in this Section 2.
2.7 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. From and until four years
after the date of this Agreement, if the Company enters into any agreement with
any holder or prospective holder of any securities of the Company giving such
holder or prospective holder any registration rights the terms of which are more
favorable than the registration rights granted to the Holders hereunder, then
the Company shall give equivalent registration rights to the Holders.
2.8 RULE 144 REPORTING. With a view to making available the benefits of certain
rules and regulations of the Commission that may permit the sale of the
Restricted Securities to the public without registration, the Company agrees to
use reasonable efforts to:
(A) Make and keep public information regarding the Company available as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times from and after ninety (90) days following the effective date of the first
registration under the Securities Act filed by the Company for an offering of
its securities to the general public;
(B) File with the Commission in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act at any
time after it has become subject to such reporting requirements;
(C) So long as a Holder owns any Restricted Securities, furnish to the Holder
forthwith upon written request a written statement by the Company as to its
compliance with the reporting requirements of Rule 144 (at any time from and
after ninety (90) days following the effective date of the first registration
statement filed by the Company for an offering of its securities to the general
public), and of the Securities Act and the Exchange Act (at any time after it
has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company,
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and such other reports and documents so filed as a Holder may reasonably request
in availing itself of any rule or regulation of the Commission allowing a Holder
to sell any such securities without registration.
2.9 TRANSFER OR ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register securities granted to a Holder by the Company under this
Section 2 may be transferred or assigned by a Holder only to a transferee or
assignee of not less than 200,000 shares of Registrable Securities (as currently
constituted and subject to subsequent adjustments for stock splits, stock
dividends, reverse stock splits, and the like), provided that the Company is
given written notice prior to said transfer or assignment, stating the name and
address of the transferee or assignee and identifying the securities with
respect to which such registration rights are being transferred or assigned,
and, provided further, that the transferee or assignee of such rights assumes in
writing the obligations of such Holder under this Agreement.
2.10 "MARKET STAND-OFF" AGREEMENT. If requested by the Company and an
underwriter of securities of the Company, a Purchaser shall not sell or
otherwise transfer or dispose of any securities of the Company held by such
Purchaser (other than those included in the registration) during the one hundred
eighty (180) day period following the effective date of a registration statement
of the Company filed under the Securities Act, provided that:
(A) such agreement shall only apply to the first such registration statement of
the Company, including securities to be sold on its behalf to the public in an
underwritten offering; and
(B) all officers and directors of the Company are bound by and have entered into
similar agreements.
The obligations described in this Section 2.10 shall not apply to a
registration relating solely to employee benefit plans on Form S-1 or Form S-8
or similar forms that may be promulgated in the future, or a registration
relating solely to a Commission Rule 145 transaction on Form S-4 or similar
forms that may be promulgated in the future. The Company may impose
stop-transfer instructions with respect to the shares of Common Stock (or other
securities) subject to the foregoing restriction until the end of said one
hundred eighty (180) day period.
2.11 DELAY OF REGISTRATION. No Holder shall have any right to take any action to
restrain, enjoin, or otherwise delay any registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Section 2.
3. RESTRICTIONS ON TRANSFER
3.1 TRANSFER. No Purchaser will, voluntarily or involuntarily, directly or
indirectly, sell, transfer, assign, donate, pledge or otherwise encumber or
dispose of any interest in all or any portion of the Securities or Option Shares
(a "Transfer") except pursuant to an Exempt Transfer.
3.2 EXEMPT TRANSFER. The restrictions contained in this Section 3 will not apply
to any Transfer which is one of the following "Exempt Transfers":
(A) the Transfer by a partnership to its partners or retired partners in
accordance with partnership
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interests;
(B) the Transfer by a corporation to its shareholders in accordance with their
interest in the corporation;
(C) the Transfer by a limited liability company to its members in accordance
with their interest in the limited liability company;
(D) the Transfer by a Purchaser to such Purchaser's spouse, lineal descendant,
father, mother, brother or sister ("Immediate Family");
(E) the Transfer by a Purchaser to a custodian or trustee for the account of
such Purchaser or such Purchaser's Immediate Family;
(F) a bona fide pledge or mortgage with a commercial lending institution that
creates a mere security interest; or
(G) pursuant to Sections 5, 6 or 7 of this Agreement.
3.3 SECURITIES LAWS. In addition to any other restriction on Transfer herein,
such Purchaser will not effect any Transfer until the transferee has agreed in
writing for the benefit of the Company to be bound by this Section 3, and:
(A) There is then in effect a registration statement under the Securities Act
covering such proposed disposition and such disposition is made in accordance
with such registration statement; or
(B) Such Purchaser shall have notified the Company of the proposed disposition
and shall have furnished the Company with a detailed statement of the
circumstances surrounding the proposed disposition, and if reasonably requested
by the Company, such Purchaser shall have furnished the Company with an opinion
of counsel, reasonably satisfactory to the Company, that such disposition will
not require registration of such shares under the Securities Act; provided
however, that it is agreed that the Company will not require opinions of counsel
for transactions made pursuant to Rule 144 except in unusual circumstances.
3.4 LEGEND.
(A) Each certificate representing Securities shall (unless otherwise permitted
by the provisions of this Agreement) be stamped or otherwise imprinted with
legends substantially similar to the following (in addition to any legend
required under applicable state securities laws):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAW OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED TO EFFECTUATE
SUCH TRANSACTION.
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THE SALE, TRANSFER OR PLEDGE OF THIS CERTIFICATE [OR THE SECURITIES ISSUED UPON
CONVERSION OF THIS CERTIFICATE] ARE SUBJECT TO THE TERMS AND CONDITIONS OF A
CERTAIN PURCHASER RIGHTS AGREEMENT BETWEEN THE COMPANY AND CERTAIN HOLDERS OF
ITS SECURITIES, AS THE SAME MAY BE AMENDED AND IN EFFECT FROM TIME TO TIME.
COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY
OF THE COMPANY.
(B) The Company shall be obligated to reissue promptly unlegended certificates
at the request of any Purchaser if the Purchaser shall have obtained an opinion
of counsel at such Purchaser's expense (which counsel may be counsel to the
Company) reasonably acceptable to the Company to the effect that the securities
proposed to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
3.5 IMPROPER TRANSFER. Any attempt to Transfer any Securities or Option Shares
which is not in accordance with this Agreement shall be null and void, and the
Company shall not give any effect to such attempted Transfer in the records of
the Company.
3.6 TERMINATION. The restrictions on the transfer of shares set forth in this
Section 3 shall terminate with respect to each security on the closing of a
Qualifying Public Offering.
4. PRE-EMPTIVE RIGHT
4.1 PRE-EMPTIVE RIGHT. The Company hereby grants to each Purchaser who owns
Series B Preferred Shares, Subordinated Notes or Series C Preferred Shares (such
Purchasers referred to as the "Pre-Emptive Purchasers") the right to purchase a
pro rata portion of New Securities (as defined in Section 4.2) which the Company
may, from time to time, propose to sell and issue (the "Pre-Emptive Right").
Such Pre-Emptive Purchaser's pro rata share for purposes of this Pre-Emptive
Right is the ratio of the number of shares of Common Stock owned by such
Pre-Emptive Purchaser (on an as-converted, as-exercised basis) immediately prior
to the issuance of New Securities, to the total number of shares of Common Stock
outstanding immediately prior to the issuance of New Securities, assuming full
conversion of all securities and full exercise of all outstanding rights,
options and warrants to acquire Common Stock of the Company. Each Pre-Emptive
Purchaser exercising their portion of the Pre-Emptive Right in full (an
"Exercising Pre-Emptive Purchaser") shall have a right of over-allotment such
that if any other Pre-Emptive Purchaser fails to exercise its right hereunder to
purchase its pro rata share of New Securities (a "Non-Purchasing Pre-Emptive
Purchaser"), such Exercising Pre-Emptive Purchaser may purchase such portion, on
a pro rata basis, by giving written notice to the Company within ten (10)
calendar days from the date that the Company provides written notice of the
amount of New Securities such Non-Purchasing Pre-Emptive Purchaser have failed
to exercise its Right hereunder. This Pre-Emptive Right shall be subject to the
following provisions of this Section 4.
4.2 NEW SECURITIES. "New Securities" shall mean any capital stock (including
Common Stock and/or Preferred Stock) of the Company whether now authorized or
not, and rights, options or warrants to purchase such capital stock, and
securities of any type whatsoever that are, or may become, convertible into
capital stock; provided that the term "New Securities" does not include
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(i) securities purchased under the Securities Purchase Agreement or issued
pursuant to the Merger; (ii) securities issuable upon conversion or exercise of
the securities purchased under the Securities Purchase Agreement or issued
pursuant to the Merger; (iii) securities issued pursuant to the acquisition of
another business entity or business segment of any such entity by the Company by
merger, purchase of substantially all the assets or other reorganization whereby
the Company will own more than fifty percent (50%) of the voting power of such
business entity or business segment of any such entity; (iv) any borrowings,
direct or indirect, from financial institutions or other persons by the Company,
whether or not currently authorized, including any type of loan or payment
evidenced by any type of debt instrument, provided such borrowings do not have
any equity features including warrants, options or other rights to purchase
capital stock and are not convertible into capital stock of the Company; (v)
securities issued to employees, consultants, officers or directors of the
Company pursuant to the Stock Option Plan, or any stock option, stock purchase
or stock bonus plan, agreement or arrangement approved by the Board of
Directors; (vi) securities issued to vendors or customers or to other persons in
similar commercial situations with the Company if such issuance is approved by
the Board of Directors; (vii) securities issued in connection with obtaining
lease financing, whether issued to a lessor, guarantor or other person; (viii)
securities issued in a public offering pursuant to a registration under the
Securities Act; (ix) securities issued in connection with any stock split, stock
dividend or recapitalization of the Company; (x) any right, option or warrant to
acquire any security convertible into the securities excluded from the
definition of New Securities pursuant to subsections (i) through (ix) above.
4.3 NOTICE. In the event the Company proposes to undertake an issuance of New
Securities, it shall give each Pre-Emptive Purchaser written notice of its
intention, describing the type of New Securities, and their price and the
general terms upon which the Company proposes to issue the same. Each such
Pre-Emptive Purchaser shall have twenty (20) calendar days after any such notice
is mailed or delivered to agree to purchase such Pre-Emptive Purchaser's pro
rata share of such New Securities for the price and upon the terms specified in
the notice by giving written notice to the Company and stating therein the
quantity of New Securities to be purchased.
4.4 SELLING PERIOD. In the event any Pre-Emptive Purchaser or Exercising
Pre-Emptive Purchaser fails to exercise fully the Pre-Emptive Right within said
twenty (20) day period and after the expiration of the 10-day period for the
exercise of the over-allotment provisions of Section 4.1, the Company shall have
one hundred twenty (120) calendar days thereafter to sell or enter into an
agreement (pursuant to which the sale of New Securities covered thereby shall be
closed, if at all, within one hundred twenty (120) calendar days from the date
of said agreement) to sell the New Securities respecting which any Pre-Emptive
Purchasers' or Exercising Pre-Emptive Purchasers' Pre-Emptive Right option set
forth in this Section 4 was not exercised, at a price and upon terms no more
favorable to the purchasers thereof than specified in the Company's notice to
the Pre-Emptive Purchasers pursuant to Section 4.3. In the event the Company has
not sold within said 120-day period or entered into an agreement to sell the New
Securities in accordance with the foregoing within said 120-day period from the
date of said agreement, the Company shall not thereafter issue or sell any New
Securities, without first again offering such securities to the Pre-Emptive
Purchasers in the manner provided in Section 4.3 above.
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4.5 TERMINATION OF PRE-EMPTIVE RIGHT. The Pre-Emptive Right granted under this
Agreement shall expire upon, and shall not be applicable to, the first sale of
securities of the Company to the public effected pursuant to a registration
statement filed with, and declared effective by, the Commission under the
Securities Act.
4.6 TRANSFER OF PRE-EMPTIVE RIGHT. The Pre-Emptive Right set forth in this
Section 4 may be transferred or assigned by a Pre-Emptive Purchaser only to a
transferee or assignee of not less than 200,000 Series B Preferred Shares or
200,000 Series C Preferred Shares (in each case, as currently constituted and
subject to subsequent adjustments for stock splits, stock dividends, reverse
stock splits, and the like) or $320,000 aggregate principal amount of the
Subordinated Notes, provided that the Company is given written notice prior to
said transfer or assignment, stating the name and address of the transferee or
assignee and identifying the securities with respect to which such registration
rights are being transferred or assigned, and, provided further, that the
transferee or assignee of such rights assumes in writing the obligations of such
Pre-Emptive Purchaser under this Agreement.
5. RIGHT OF FIRST REFUSAL.
5.1 RIGHT OF FIRST REFUSAL. No Purchaser shall sell, assign, pledge, or in any
manner transfer any shares of capital stock of the Company (whether now owned or
hereafter acquired) or any right or interest therein, whether voluntarily or by
operation of law, or by gift or otherwise, except as set forth herein:
(A) If Purchaser desires to sell or otherwise transfer any shares of capital
stock, then such Purchaser (the "Section 5 Selling Purchaser") shall give at
least thirty (30) calendar days written notice thereof to the Company and the
other Purchasers. The notice shall name the proposed transferee and state the
number of shares of capital stock to be transferred, the proposed consideration,
and all other terms and conditions of the proposed transfer.
(B) For twenty (20) calendar days following receipt of such notice, the Company
shall have the option but not the obligation to purchase all (but not less than
all) of the shares of capital stock specified in the notice at the price and
upon the terms set forth in such notice; provided, however, that, with the
consent of the Section 5 Selling Purchaser, the Company shall have the option to
purchase a lesser portion of the shares of capital stock specified in said
notice at the price and upon the terms set forth therein. In the event of a
gift, property settlement or other transfer in which the proposed transferee is
not paying the full price for the shares of capital stock, and that is not
otherwise exempted from the provisions of this Section 5.1, the price shall be
deemed to be the fair market value of the capital stock at such time as
determined in good faith by the Board of Directors. In the event the Company
elects to purchase all of the shares of capital stock or, with consent of the
Section 5 Selling Purchaser, a lesser portion of the shares of capital stock, it
shall give written notice to the Section 5 Selling Purchaser of its election and
settlement for said shares of capital stock shall be made as provided below in
paragraph (d).
(C) If the Company does not elect to purchase the shares specified in the
notice, then the Company shall promptly provide written notice to the Purchasers
of such election (which in no event will be later than 20 calendar days
following receipt of the notice referred to in Section 5.1(a)) and
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the Purchasers may elect to purchase all (but not less than all) of the shares
by delivering written notice to the Company and the Section 5 Selling Purchaser
within ten (10) calendar days after the expiration of the period specified in
Section 5.1(b) above.
(D) In the event the Company and/or any other Purchaser elect to acquire any of
the shares of capital stock of the Section 5 Selling Purchaser as specified in
said Section 5 Selling Purchaser's notice, the Secretary of the Company shall so
notify the Section 5 Selling Purchaser and settlement thereof shall be made in
cash within forty (40) days after the Secretary of the Company receives said
Section 5 Selling Purchaser's notice; provided that if the terms of payment set
forth in said Section 5 Selling Purchaser's notice were other than cash against
delivery, the Company and/or the other Purchaser shall pay for said shares on
the same terms and conditions set forth in said Section 5 Selling Purchaser's
notice.
(E) In the event the Company and/or the other Purchasers do not elect to acquire
all of the shares of capital stock specified in the Section 5 Selling
Purchaser's notice, said Section 5 Selling Purchaser may, within the sixty-day
period following the expiration of the rights granted to the Company and/or the
other Purchaser's herein, transfer the shares of capital stock specified in said
Section 5 Selling Purchaser's notice which were not acquired by the Company
and/or the other Purchasers as specified in said Section 5 Selling Purchaser's
notice.
5.2 TRANSFER EXEMPT FROM RIGHT OF FIRST REFUSAL. Anything to the contrary
contained herein notwithstanding, the following transactions shall be exempt
from the provisions of this section:
(A) A Purchaser's transfer to such Purchaser's Immediate Family.
(B) A transfer any custodian or trustee for the account of such Purchaser or
such Purchaser's Immediate Family.
(C) A Purchaser's bona fide pledge or mortgage with a commercial lending
institution creating a mere security interest.
(D) A corporate Purchaser's transfer of any or all of its shares of capital
stock to its stockholders in accordance with their interest in the corporation.
(E) A transfer by a Purchaser which is a partnership to any or all of its
partners or retired partners in accordance with partnership interests.
(F) A transfer by a Purchaser which is a limited liability company to its
members in accordance with their interest in the limited liability company.
In any such case, the transferee, assignee, or other recipient shall
receive and hold such stock subject to the provisions of this section, and there
shall be no further transfer of such stock except in accord with this section.
5.3 TERMINATION. The foregoing right of first refusal shall terminate on the
closing of a Qualifying Public Offering.
6. CO-SALE RIGHT.
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6.1 NOTICE. If a Purchaser of Series C Preferred Stock or Common Stock proposes
to sell or transfer any shares of Series C Preferred Stock or Common Stock
("Co-Sale Stock") then such Purchaser (a "Section 6 Selling Purchaser") shall
promptly give written notice (the "Notice") simultaneously to the Company and to
each of the Purchasers of Series B Preferred Shares and Subordinated Notes at
least thirty (30) calendar days prior to the closing of such sale or transfer.
The Notice shall describe in reasonable detail the proposed sale or transfer
including, without limitation, the number of shares of Co-Sale Stock to be sold
or transferred, the nature of such sale or transfer, the total consideration to
be paid to the Section 6 Selling Purchaser (including any consideration for the
securities that is paid or to be paid under other arrangements with the Section
6 Selling Purchaser, including but not limited to, compensation for employment
or services in excess of the reasonable value of the Section 6 Selling
Purchaser's services), and the name and address of each prospective purchaser or
transferee.
6.2 NOTICE OF PARTICIPATION. Each Purchaser of Series B Preferred Shares and
Subordinated Notes shall have the right, exercisable upon written notice to the
Company within fifteen (15) calendar days after the Notice, to participate in
such sale of Co-Sale Stock on the same terms and conditions. If the Co-Sale
Stock is Common Stock, then each such Purchaser may sell all or any part of that
number of Common Stock equal to the product obtained by multiplying (a) the
aggregate number of shares of Co-Sale Stock by (b) a fraction the numerator of
which is the number of shares of Common Stock owned by such Purchaser at the
time of the sale or transfer (on an as-converted to Common Stock basis) and the
denominator of which is the total number of shares of Common Stock owned by such
Purchasers at the time of such sale or transfer (on an as-converted to Common
Stock basis). If the Co-Sale Stock is Series C Preferred Stock, then each
Purchaser may sell all or any part of that number of Series B Preferred Shares
or Subordinated Notes equal to the product obtained by multiplying (x) the
aggregate number of shares of Co-Sale Stock by (y) a fraction the numerator of
which is the number of Series B Preferred Shares, including the Subordinated
Notes on an as-converted basis, owned by such Purchaser at the time of the sale
or transfer and the denominator of which is the total number of Series B
Preferred Shares, including the Subordinated Notes on an as-converted basis,
owned by such Purchasers at the time of such sale or transfer. Such notice shall
indicate the number of Series B Preferred Shares, Subordinated Notes, or Common
Shares such Purchaser wishes to sell under his or her right to participate. To
the extent one or more Purchasers exercises such right of participation in
accordance with the terms and conditions set forth in this Section 6, the number
of shares of Co-Sale Stock that may be sold in the transaction shall be
correspondingly reduced.
6.3 TRANSFER. Each Purchaser who elects to participate in the sale pursuant to
this Section 6 (a "Participant") shall effect its participation in the sale by
promptly delivering to the Company for transfer to the prospective purchaser one
or more certificates, properly endorsed for transfer the type and number of
shares of Series B Preferred Stock, Subordinated Notes or Common Stock which
such Participant elects to sell.
6.4 ADDITIONAL TRANSFER PROVISIONS. The stock certificate or certificates or
Subordinated Notes that the Participant delivers to the Company pursuant to
Section 6.3 shall be transferred to the prospective purchaser in consummation of
the sale of the Series C Preferred Stock or Common Stock pursuant to the terms
and conditions specified in the Notice, and the Section 6 Selling
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Purchaser(s) shall concurrently therewith remit to such Participant that portion
of the sale proceeds to which such Participant is entitled by reason of its
participation in such sale. To the extent that any prospective purchaser or
purchasers prohibits such assignment or otherwise refuses to purchase shares or
other securities from a Participant exercising its rights of co-sale hereunder,
such Section 6 Selling Purchaser(s) shall not sell to such prospective purchaser
or purchasers any Co-Sale Stock unless and until, simultaneously with such sale,
such Section 6 Selling Purchaser(s) shall purchase such shares or other
securities from such Participant on the same terms and conditions specified in
the Notice.
6.5 NO ELECTION TO PARTICIPATE. If none of the Purchasers of Series B Preferred
Stock or Subordinated Notes elects to participate in the sale of the Co-Sale
Stock subject to the Notice, such Section 6 Selling Purchaser(s) may, not later
than sixty (60) calendar days following delivery to the Company of the Notice,
enter into an agreement providing for the closing of the transfer of the Co-Sale
Stock covered by the Notice within thirty (30) days of such agreement on terms
and conditions not more favorable to the transferor than those described in the
Notice. Any proposed transfer on terms and conditions more favorable than those
described in the Notice, as well as any subsequent proposed transfer of any of
the Co-Sale Stock by a Section 6 Selling Purchaser(s), shall again be subject to
the co-sale rights of the Purchaser and shall require compliance by such Section
6 Selling Purchaser(s) with the procedures described in this Section 6.
6.6 TRANSFERS EXEMPT FROM CO-SALE RIGHT
(A) Notwithstanding the foregoing, the co-sale rights of the Purchaser shall not
apply to (i) any transfer or transfers by a Section 6 Selling Purchaser(s) which
in the aggregate, over the term of this Agreement, amount to no more than 10,000
shares of Co-Sale Stock held by such holder, (ii) any bona fide pledge or
mortgage of Co-Sale Stock with a commercial lending institution that creates a
mere security interest, (iii) any transfer to the Immediate Family of the
holders of Co-Sale Stock, (iv) any transfer to a custodian or trustee for the
account of the holder of Co-Sale Stock or such holder's Immediate Family, (v)
any transfer or transfers by a holder of Co-Sale Stock to another holder of
Co-Sale Stock (the "Transferee-Holder") so long as the Transferee-Holder is, at
the time of the transfer, employed by, or acting as a consultant or director of,
the Company, or (vi) any bona fide gift; provided that in the event of any
transfer made pursuant to one of the exemptions provided by clauses (ii), (iii),
(iv), (v) and (vi), (A) the holder of Co-Sale Stock shall inform the Purchasers
of such pledge, transfer or gift prior to effecting it and (B) the pledgee,
transferee or donee shall furnish the Purchasers with a written agreement to be
bound by and comply with all provisions of Sections 6 of this Agreement. Such
transferred Co-Sale Stock shall remain "Restricted Stock" hereunder.
(B) The co-sale rights of the Purchasers are subject to, and shall in no manner
limit the right which the Company may have to repurchase securities from the
holder of Co-Sale Stock pursuant to (i) a stock restriction agreement or other
agreement between the Company and the holder of Co-Sale Stock and (ii) the
Pre-Emptive Right set forth in Section 5 hereto.
6.7 TERMINATION OF CO-SALE RIGHTS. The provisions of Section 6 of this Agreement
shall expire
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upon and shall not apply to a Qualifying Public Offering.
7. DRAG ALONG RIGHTS.
7.1 DRAG ALONG RIGHT. If Purchasers holding at least sixty-six and two-thirds
percent (66 2/3%) of the outstanding shares of Common Stock (assuming conversion
or exercise of all convertible securities, options or warrants) ("Initiating
Securityholders") agree to sell or transfer all of their securities of the
Company or agree to the sale of all or substantially all of the assets of the
Company to a third party, then all Purchasers ("Selling Securityholders") will
be required to sell all of their securities of the Company held by them or
acquiesce to the sale of the assets of the Company.
7.2 CONSIDERATION. The consideration to be received by the Selling
Securityholders shall be the same consideration per share to be received by the
Initiating Securityholders for the corresponding class or series of stock, or
type of security, and the terms and conditions of such sale shall be the same as
those upon which the Initiating Securityholders sell their securities; provided
however, that any general indemnity given by the Selling Securityholders,
applicable to liabilities not specific to a particular Selling Securityholder,
to the purchaser in connection with such sale shall be apportioned among the
Selling Securityholders according to the consideration received by each Selling
Securityholder.
7.3 NOTICE. The Initiating Securityholders shall provide written notice to the
other Selling Securityholders setting forth the consideration to be paid by the
purchaser for the Securities and the material terms of the sale within ten (10)
business days after such Initiating Securityholders exercise the Drag Along
Rights pursuant to Section 7.1 ("Drag Along Notice").
7.4 DELIVERY OF SECURITIES. Within ten (10) business days after the date of the
Drag Along Notice, each Selling Securityholder shall deliver to the Company, the
duly endorsed certificate or certificates representing the securities held by
such Selling Securityholder to be sold, and a limited power-of-attorney
authorizing the Company to take all actions necessary to sell or otherwise
dispose of such Securities. In the event that a Selling Securityholder should
fail to deliver the Securities, the Company shall cause the books and records of
the Company to show that such Securities are bound by the provisions of this
Section 7 and that such Securities may only be transferred to the purchaser in
such sale.
7.5 REMITTANCE OF CONSIDERATION. Promptly after the consummation of the sale,
the Purchaser shall remit directly to the Selling Securityholders the total
sales price of the Securities sold pursuant thereto.
7.6 TERMINATION OF COVENANTS. This Section 7 shall terminate and be of no
further force and effect after a Qualifying Public Offering.
8. BOARD OF DIRECTORS.
8.1 NOMINATION AND ELECTION OF DIRECTORS.
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(A) Each Purchaser holding Series B Preferred Shares agrees to cast all votes to
which they are entitled (whether at an annual or special meeting of shareholders
or by written consent in lieu of a meeting or otherwise) in such a manner as to
cause the election of: one (1) designee of News-Press & Gazette Company ("NPG
Director"); one (1) designee of Advantage Capital Missouri Partners 1, L.P
("Advantage Director"); one (1) designee of White Pines Management L.L.C.
("White Pines Director").
(B) In the event that the NPG Director dies, resigns or is removed, then
News-Press & Gazette Company shall be entitled to appoint a successor director
to the Board of Directors to fill the vacancy created by such death, resignation
or removal. In the event that the Advantage Director dies, resigns or is
removed, then Advantage Capital Missouri Partners 1, L.P. shall be entitled to
appoint a successor director to the Board of Directors to fill the vacancy
created by such death, resignation or removal. In the event that the White Pines
Director dies, resigns or is removed, then White Pines Management L.L.C. shall
be entitled to appoint a successor director to the Board of Directors to fill
the vacancy created by such death, resignation or removal.
8.2 BOARD COMMITTEES.
(A) The Purchasers agree to take all actions necessary to cause the Board of
Directors to appoint one of either the NPG Director, Advantage Director or White
Pines Director to any committees of the Board of Directors as requested by the
Purchasers holding a majority of the votes of the Series B Preferred Stock and
Subordinated Notes (on an as-converted to Series B Preferred Stock basis).
(B) The Company shall create an Audit Committee of the Board of Directors
consisting of three members, two members of which shall not be members of the
Management Group or employees of the Company.
(C) The Company shall create a Compensation Committee of the Board of Directors
consisting of three members. Two members of such Compensation Committee shall
not be members of the Management Group or employees of the Company and one
member shall be a member of the Management Group.
8.3 SIZE OF THE BOARD. So long as ten percent (10%) or more of the outstanding
shares of Series B Preferred Stock are held by the Purchasers or at least
$350,000 aggregate principal amount is outstanding under the Subordinated Notes,
the approval by the vote or written consent of the holders of at least a
majority of the then outstanding shares of Series B Preferred Stock and the
Subordinated Notes (on an as-converted to Series B Preferred Stock basis) shall
be necessary to change the size of the Board of Directors.
8.4 ATTENDANCE AT BOARD MEETINGS. Each Purchaser who owns at least 625,000
Series B Preferred Shares or $1,000,000 aggregate principal amount of
Subordinated Notes or any combination thereof (as currently constituted and
subject to adjustment for stock splits, stock dividends, recapitalizations and
the like) (a "Significant Holder") shall have the right to attend, or to appoint
a representative to attend, all meetings of the Board of Directors in a
nonvoting observer capacity, to receive notice of such meetings and to receive
the information provided by the Company to the Board of Directors; provided,
however, that the Company may require as a
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condition precedent to any such Significant Holder's rights under this Section
8.4 that each person proposing to attend any meeting of the Board of Directors
and each person to have access to any of the information provided by the Company
to the Board of Directors shall agree to hold in confidence and trust and to act
in a fiduciary manner with respect to all information so received during such
meetings or otherwise; and, provided further, that the Company reserves the
right not to provide information and to exclude such Significant Holder (or its
representative) from any meeting or portion thereof if delivery of such
information or attendance at such meeting by such Significant Holder (or its
representative) would result in disclosure of trade secrets to such holder or
its representative or would adversely affect the attorney-client privilege
between the Company and its counsel or if such Significant Holder or its
representative is a direct competitor of the Company.
8.5 TERMINATION. Except for the confidentiality provisions of Section 8.4, this
Section 8 shall terminate and be of no further force and effect after a
Qualifying Public Offering.
9. STOCK OPTION PLAN
9.1 OPTION PLAN INCREASE AND GRANTS.
(A) If a Second Closing (as that term is defined in the Securities Purchase
Agreement) takes place pursuant to the Securities Purchase Agreement, the
Purchasers agree to vote all the voting securities of the Company held by them
in favor of an increase in the number of shares of Common Stock authorized for
issuance pursuant to the Stock Option Plan by an amount such that the total
number of shares of Common Stock authorized equals twenty percent (20%) of all
of the outstanding equity securities of the Company, including as outstanding
equity securities issuable upon conversion of all convertible securities of the
Company, but excluding the Series A Preferred Stock (the "Option Plan
Increase").
(B) Such Purchasers shall also cause their representative director on the Board
of Directors of the Company to approve: (i) such Option Plan Increase; (ii) the
grant of options to purchase up to 69.25% of the Option Plan Increase to the
employees to the Company just prior to the closing of the Valu-Line Merger in
proportion to the number of options held as of the First Closing; and (iii) the
grant of options to purchase up to 18.75% of the Option Plan Increase to the
employees of Valu-Line hired by the Company as of the Closing of the Valu-Line
Merger, in proportion to the number of options held as of the First Closing.
9.2 TERMINATION. This Section 9 shall terminate and be of no further force and
effect after a Qualifying Public Offering.
10. PROVISIONS FOR SHARING.
10.1 APPLICABILITY OF PROVISIONS. The provisions of Section 10.2 shall have no
force or effect except upon any liquidation, dissolution or winding up of the
Company (including an "Acquisition" or "Asset Transfer" as such terms are
defined in Section Fourth(C)(2)(g) of the Certificate of Incorporation of the
Company, as amended) in which liquidation, dissolution or winding up of the
Company, the holders of the Series A Preferred Stock or the holders of the
Series B Preferred
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Stock shall receive less than the full amount to which such holders are entitled
pursuant to the terms and provisions of Section Fourth(C)(2)(a) and
Fourth(C)(2)(b), respectively, of the Certificate of Incorporation of the
Company, as amended
10.2 TERMS OF SHARING. Upon any liquidation, dissolution or winding up of the
Company pursuant to which the holders of the Series A Preferred Stock or the
holders of the Series B Preferred Stock shall receive less than the full amount
to which such holders are entitled pursuant to the terms and provisions of
Section Fourth(C)(2)(a) and Fourth(C)(2)(b), respectively, of the Certificate of
Incorporation of the Company, as amended, the holders of the Subordinated Notes
and the holders of Series B Preferred Stock issued upon conversion of the
Subordinated Notes (the "Sub Debt Series B") shall assign and transfer to the
holders of the Series A Preferred Stock and/or to the holders of the Series B
Preferred Stock, other than the holders of Sub Debt Series B, without
consideration, all or such portion of such assets of the Company as the holders
of the Subordinated Notes and Sub Debt Series B shall have received pursuant to
such liquidation, dissolution or winding up of the Company as shall be necessary
to achieve the following adjusted distribution of all assets of the Company
received by the holders of the Subordinated Notes, the holders of the Series A
Preferred Stock, and the holders of the Series B Preferred Stock, in such
liquidation, dissolution or winding up of the Company prior to giving effect to
the foregoing provisions:
(A) First, the holders of Series A Preferred Stock shall be entitled to receive
an amount equal to the sum of (i) $1.60 per share of Series A Preferred Stock
(the "Series A Liquidation Preference"), plus (ii) an amount equal to all unpaid
dividends accrued on such shares of Series A Preferred Stock to the date of
payment of such preference, whether or not earned, whether or not funds of the
Corporation are legally available for the payment of dividends and whether or
not such dividends have been declared by the Board, for each share of Series A
Preferred Stock held by them. If the assets subject to this Section 10.2 shall
be insufficient to make payment in full to all holders of Series A Preferred
Stock of the liquidation preference set forth in this Section 10.2(a), then such
assets shall be distributed among the holders of Series A Preferred Stock at the
time outstanding ratably in proportion to the full amounts to which they would
otherwise be respectively entitled.
(B) Next, the holders of Series B Preferred Stock, other than the holders of the
Sub Debt Series B, shall be entitled to receive an amount equal to all unpaid
dividends accrued on such shares of Series B Preferred Stock to the date of
payment of such preference, whether or not earned, whether or not funds of the
Corporation are legally available for the payment of dividends and whether or
not such dividends have been declared by the Board, up to an amount equal to the
actual interest paid to the holders of Subordinated Notes as of the date of
payment of such preference. If the assets subject to this Section 10.2 shall be
insufficient to make payment in full to such holders of Series B Preferred Stock
of the liquidation preference set forth in this Section 10.2(b), then such
assets shall be distributed among such holders of Series B Preferred Stock at
the time outstanding ratably in proportion to the full amounts to which they
would otherwise be respectively entitled.
(C) Next, (i) the holders of Series B Preferred Stock, other than the holders of
the Sub Debt Series B,
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shall be entitled to receive an amount equal to the difference between (x) all
unpaid dividends accrued on such shares of Series B Preferred Stock to the date
of payment of such preference, whether or not earned, whether or not funds of
the Corporation are legally unavailable for the payment of dividends and whether
or not such dividends have been declared by the Board, and (y) the actual
interest paid to the holders of Subordinated Notes as of the date of payment of
such preference; (ii) the holders of Subordinated Notes shall be entitled to
receive an amount equal to any accrued and deferred interest on the Subordinated
Notes not yet paid as of the date of payment of such preference; and (iii) the
holders of the Sub Debt Series B shall be entitled to receive all unpaid
dividends accrued on the Sub Debt Series B to the date of payment of such
preference, whether or not earned, whether or not funds of the Corporation are
legally available for the payment of dividends, and whether or not such
dividends have been declared by the Board.. If the assets subject to this
Section 10.2 shall be insufficient to make payment in full to all holders of
Series B Preferred Stock and the Subordinated Notes of the liquidation
preference set forth in this Section 10.2(c) then such assets shall be
distributed among the holders of Series B Preferred Stock and the Subordinated
Notes at the time outstanding ratably in proportion to the full amounts to which
they would otherwise be respectively entitled.
(D) Next, (i) the holders of Series B Preferred Stock shall be entitled to be
paid out of the assets of the Corporation an amount equal to $1.60 for each
share of Series B Preferred Stock held by them (the "Series B Liquidation
Preference"); and (ii) the holders of Subordinated Notes shall be entitled to be
paid out of the assets of the Corporation an amount equal to any remaining
unpaid principal amount on such Subordinated Notes. If the assets subject to
this Section 10.2 shall be insufficient to make payment in full to all holders
of Series B Preferred Stock and the Subordinated Notes of the liquidation
preference set forth in this Section 10.2(d), then such assets shall be
distributed among the holders of Series B Preferred Stock and the Subordinated
Notes at the time outstanding ratably in proportion to the full amounts to which
they would otherwise be respectively entitled.
10.3 DEFAULT UNDER THE SUBORDINATED NOTES. In the event of a default under the
Subordinated Notes and if, and to the extent, there is a repayment (or a right
or remedy is exercised in pursuit of a repayment) of principal through an
acceleration of the Subordinated Notes or foreclosure action under the Security
Agreement:
(A) If such action occurs prior to February 28, 2003, the holders of the
Subordinated Notes shall assign and transfer to the holders of the Series A
Preferred Stock and/or to the holders of the Series B Preferred Stock, other
than the holders of the Sub Debt Series B, all or such portion of such assets of
the Company as the holders of the Subordinated Notes shall have received as such
repayment as shall be necessary to achieve the distribution of such assets of
the Company as specified in Section 10.2 above, as if such assets had been
received upon the liquidation, dissolution or winding up of the Company.
(B) If such action occurs on or subsequent to February 28, 2003, the holders of
the Subordinated Notes shall assign and transfer to the holders of the Series A
Preferred Stock and/or those holders of Series B Preferred Stock, other than the
holders of the Sub Debt Series B, who elected to require the Company to redeem
their shares of Series B Preferred Stock all or such portion of such assets of
the Company as the holders of the Subordinated Notes shall have received as such
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repayment, as shall be necessary to achieve the distribution of such assets of
the Company to the holders of the Series A Preferred Stock and to such holders
of the Series B Preferred Stock as specified in Section 10.2 above, as if such
assets had been received upon the liquidation, dissolution or winding up of the
Company.
The holders of the Series A Preferred Stock and/or the holders of the Series B
Preferred Stock who receive any distribution of assets of the Company pursuant
to the provisions of this Section 10.3 shall assign and transfer to the holders
of the Subordinated Notes such portion of their shares of Series A Preferred
Stock and/or Series B Preferred Stock for which the liquidation preference as of
the date of such transfer shall be equal to the amount of assets distributed to
such holders.
10.4 NO THIRD PARTY RIGHTS. The provisions of this Section 10 are intended to
define the rights and obligations of the holders of the Subordinated Notes, the
holders of the Series A Preferred Stock and the holders of the Series B
Preferred Stock and are not intended that any third party shall acquire any
rights or benefits as a result. If the effect of any provision would be to give
any third person a priority status to which they would not otherwise be
entitled, or to subordinate the holders of the Subordinated Notes to a status to
which they would not otherwise be subject, then that provision shall, to the
extent necessary to avoid such priority or subordination, as the case may be, be
given no force and effect, and the rights and priorities of the holders of the
Subordinated Notes, the holders of the Series A Preferred Stock and the holders
of the Series B Preferred Stock shall be determined in accordance with the law.
11. MISCELLANEOUS.
11.1 GOVERNING LAW. This Agreement shall be governed in all respects by the laws
of the State of Missouri, as applied to agreements among Missouri residents
entered into and to be performed entirely within Missouri.
11.2 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.
11.3 ENTIRE AGREEMENT; AMENDMENT; WAIVER
(A) This Agreement (including the Exhibits hereto) constitutes the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof.
(B) This Agreement may be amended or modified only upon the written consent of
the Company and holders of: (i) at least fifty percent (50%) of the Common
Shares, voting together as a single class; (ii) at least fifty percent (50%) of
the Series B Preferred Shares and Subordinated Notes (on an as-converted basis),
voting together as a single class; and (iii) at least fifty percent (50%) of the
Series C Preferred Shares, voting together as a single class.
(C) The obligations of the Company and the rights of the holders of the
Securities under this Agreement may be waived only with the written consent of
the holders of: (i) at least fifty percent (50%) of
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the Common Shares, voting together as a single class; (ii) at least fifty
percent (50%) of the Series B Preferred Shares and Subordinated Notes (on an
as-converted basis), voting together as a single class; and (iii) at least fifty
percent (50%) of the Series C Preferred Shares, voting together as a single
class.
11.4 NOTICES, ETC. All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by United States first-class
mail, postage prepaid, sent by facsimile or delivered personally by hand or
nationally recognized courier addressed (a) if to a Holder, as indicated on the
list of Holders attached hereto as Exhibit A, or at such other address as such
holder or permitted assignee shall have furnished to the Company in writing, or
(b) if to the Company, at such address or facsimile number as the Company shall
have furnished to each Holder in writing. All such notices and other written
communications shall be effective on the date of mailing, facsimile transfer or
delivery.
11.5 DELAYS OR OMISSIONS. No delay or omission to exercise any right, power or
remedy accruing to any Holder, upon any breach or default of the Company under
this Agreement shall impair any such right, power or remedy of such Holder nor
shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default therefore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
Holder of any breach or default under this Agreement or any waiver on the part
of any Holder of any provisions or conditions of this Agreement must be made in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or otherwise
afforded to any Holder, shall be cumulative and not alternative.
11.6 RIGHTS; SEPERABILITY. Unless otherwise expressly provided herein, a
Holder's rights hereunder are several rights, not rights jointly held with any
of the other Holders. 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.
11.7 INFORMATION CONFIDENTIAL. Each Holder acknowledges that the information
received by them pursuant hereto may be confidential and for its use only, and
it will not use such confidential information in violation of the Exchange Act
or reproduce, disclose or disseminate such information to any other person
(other than its employees or agents having a need to know the contents of such
information, and its attorneys), except in connection with the exercise of
rights under this Agreement, unless the Company has made such information
available to the public generally or such Holder is required to disclose such
information by a governmental body.
11.8 TITLES AND SUBTITLES. The titles of the paragraphs and subparagraphs of
this Agreement are for convenience of reference only and are not to be
considered in construing or interpreting this Agreement.
11.9 COUNTERPARTS; EXECUTION BY FACSIMILE SIGNATURE. 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. This Agreement may be
executed by facsimile signature(s).
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IN WITNESS WHEREOF, the parties hereto have executed this Purchasers
Rights Agreement effective as of the day and year first above written.
BIRCH TELECOM, INC. PURCHASER:
By: /s/ David Scott By: /s/ David R. Bradley Jr.
David Scott, President
Name: David R. Bradley Jr.
Title: President
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EXHIBIT A
PURCHASERS
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TABLE OF CONTENTS
PAGE
1. CERTAIN DEFINITIONS 1
2. REGISTRATION RIGHTS 3
2.1 Requested Registration 3
2.2 Company Registration 5
2.3 Expenses of Registration 6
2.4 Registration Procedures 7
2.5 Indemnification 8
2.6 Information by Holder 10
2.7 Limitations on Subsequent Registration Rights 10
2.8 Rule 144 Reporting 10
2.9 Transfer or Assignment of Registration Rights 10
2.10 "Market Stand-Off" Agreement 11
2.11 Delay of Registration 11
3. RESTRICTIONS ON TRANSFER 11
3.1 Transfer 11
3.2 Exempt Transfer 11
3.3 Securities Laws 12
3.4 Legend 12
3.5 Improper Transfer 13
3.6 Termination 13
4. PRE-EMPTIVE RIGHT 13
4.1 Pre-Emptive Right 13
4.2 New Securities 13
4.3 Notice 14
4.4 Selling Period 14
4.5 Termination of Pre-Emptive Right 14
4.6 Transfer of Pre-Emptive Right 15
5. RIGHT OF FIRST REFUSAL 15
5.1 Right of First Refusal 15
5.2 Transfer Exempt from Right of First Refusal 16
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TABLE OF CONTENTS
(CONTINUED)
PAGE
5.3 Termination 16
6. CO-SALE RIGHT 16
6.1 Notice 16
6.2 Notice of Participation 17
6.3 Transfer 17
6.4 Additional Transfer Provisions 17
6.5 No Election to Participate 18
6.6 Transfers Exempt from Co-Sale Right 18
6.7 Termination of Co-Sale Rights 18
7. DRAG ALONG RIGHTS 18
7.1 Drag Along Right 18
7.2 Consideration 19
7.3 Notice 19
7.4 Delivery of Securities 19
7.5 Remittance of Consideration 19
7.6 Termination of Covenants 19
8. BOARD OF DIRECTORS 19
8.1 Nomination and Election of Directors 19
8.2 Board Committees 20
8.4 Attendance at Board Meetings 20
8.5 Termination 21
9. STOCK OPTION PLAN 21
9.1 Option Plan Increase and Grants 21
9.2 Termination 21
10. PROVISIONS FOR SHARING 21
10.1 Applicability of Provisions 21
10.3 Default Under the Subordinated Notes 23
10.4 No Third Party Rights 24
11. MISCELLANEOUS 24
11.1 Governing Law 24
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TABLE OF CONTENTS
(CONTINUED)
PAGE
11.2 Successors and Assigns 24
11.3 Entire Agreement; Amendment; Waiver 24
11.4 Notices, etc. 24
11.5 Delays or Omissions 25
11.6 Rights; Separability 25
11.7 Information Confidential 25
11.8 Titles and Subtitles 25
11.9 Counterparts; Execution by Facsimile Signature 25
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TABLE OF CONTENTS
PAGE
BIRCH TELECOM, INC.
PURCHASERS RIGHTS AGREEMENT
<PAGE> 32
AMENDMENT TO THE PURCHASERS RIGHTS AGREEMENT
The following amendment to the Purchasers Rights Agreement was duly
adopted and approved by the Board of Directors of Birch Telecom, Inc. and shall
become effective upon the approval of the holders of (i) at least fifty percent
(50%) of the Common Shares, voting together as a single class; (ii) at least
fifty percent (50%) of the Series B Preferred Shares and Subordinated Notes (on
an as-converted basis), voting together as a single class; and (iii) at least
fifty percent (50%) of the Series C Preferred Shares, voting together as a
single class.
Section 3.3 of the Purchasers Rights Agreement shall be deleted in its
entirety and the following shall be substituted in its place:
3.3 SECURITIES LAWS. In addition to any other restriction on
Transfer herein, such Purchaser will not effect any Transfer until the
transferee has agreed in writing for the benefit of the Company to be
bound by this Section 3 and by Sections 7 and 8, and:
(A) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition
is made in accordance with such registration statement; or
(B) Such Purchaser shall have notified the Company of the
proposed disposition and shall have furnished the Company with a
detailed statement of the circumstances surrounding the proposed
disposition, and if reasonably requested by the Company, such Purchaser
shall have furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not require
registration of such shares under the Securities Act; provided however,
that it is agreed that the Company will not require opinions of counsel
for transactions made pursuant to Rule 144 except in unusual
circumstances.
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Exhibit 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made as of February 10,
1998 by BIRCH TELECOM, INC., a Delaware corporation (the "Company"), and DAVID
E. SCOTT, an individual (the "Employee").
The Company and the Employee desire for the Employee to be employed by
the Company upon the terms and conditions set forth in this Agreement.
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For the purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1.
1.1 "AGREEMENT" shall mean this Employment Agreement, as amended from
time to time.
1.2 "AFFILIATE" shall mean:
(a) any partnership, limited liability company, corporation or
other entity if the Company owns more than 25% of the equity securities
or interests of such entity; or
(b) any such entity which owns more than 25% of the equity
securities of the Company (and, for the purpose of this Section 1.2,
any options to acquire equity securities shall be treated as having
been fully exercised, and any securities convertible into equity
securities shall be treated as having been fully converted).
1.3 "BENEFITS" shall mean as defined in Section 3.1(b).
1.4 "BOARD OF DIRECTORS" shall mean the board of directors of the
Company.
1.5 "COMPETITIVE BUSINESS" shall mean any business which directly or
indirectly provides any local exchange telecommunications service that is the
same as or substantially similar to any local exchange telecommunications
service provided by the Company.
1.6 "CAUSE" shall mean as defined in Section 6.3.
1.7 "CHANGE IN CONTROL" means any of the following: (i) the sale of all
or substantially all of the Company's (or its Affiliates') assets that results
in the liquidation of the Company and the payment of liquidating distributions
to the stockholders of the Company; (ii) the acquisition of the Company by
another entity by means of a merger or consolidation resulting in the exchange
of the outstanding shares of the Company's capital stock for securities or
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consideration issued or paid or caused to be issued or paid by the acquiring
entity or its subsidiary; or (iii) the acquisition from one or more of the
stockholders of the Company of more than 50% of the voting stock of the Company
by a single person or group of persons acting together.
1.8 "CONFIDENTIAL INFORMATION" shall mean any and all:
(a) trade secrets concerning the business and affairs of the
Company, the Company's product and service specifications, data,
formulae, compositions, processes, designs, sketches, photographs,
maps, engineering studies, graphs, drawings, samples, inventions and
ideas, past, current, and planned research and development, current and
planned methods and processes, customer and supplier lists, current and
anticipated customer requirements, price lists, bid information, market
studies, business plans, computer software and programs (including
object code and source code), computer software and database
technologies, systems, structures, and architectures (and related
formulae, compositions, processes, improvements, devices, inventions,
discoveries, concepts, ideas, designs, methods and information), and
any other information, however documented, that is a trade secret
within the meaning of the Missouri Uniform Trade Secrets Act; and
(b) information concerning the business and affairs of the
Company (which includes without limitation, historical financial
statements, financial projections and budgets, historical and projected
sales, capital spending budgets and plans, the names and backgrounds of
key personnel and personnel training techniques and materials), however
documented; and
(c) notes, analysis, compilations, studies, summaries, and
other material prepared by or for the Company containing or based, in
whole or in part, on any information included in the foregoing.
1.9 "DISABILITY" shall mean as defined in Section 6.2.
1.10 "EMPLOYEE INVENTION" shall mean any idea, invention, technique,
modification, process, or improvement (whether patentable or not), any
industrial design (whether registerable or not), any mask work, however fixed or
encoded, that is suitable to be fixed, embedded or programmed in a semiconductor
product (whether recordable or not), and any work of authorship (whether or not
copyright protection may be obtained for it) created, conceived, or developed by
the Employee, either solely or in conjunction with others, during the Employment
Period, or a period that includes a portion of the Employment Period, that
relates in any way to, or is useful in any manner in, the business then being
conducted or proposed to be conducted by the Company, and any such item created
by the Employee, either solely or in conjunction with others, following
termination of the Employee's employment with the Company, that is based upon or
uses Confidential Information, but shall not include any of the foregoing with
respect to the Internet-based information services business of DNS Publishing,
Inc., in which the Employee
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holds a substantial equity interest.
1.11 "EMPLOYMENT PERIOD" shall mean the term of the Employee's
employment under this Agreement.
1.12 "GOOD REASON" shall mean as defined in Section 6.4.
1.13 "PERSON" shall mean any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, or
governmental body.
1.14 "POST-EMPLOYMENT PERIOD" shall mean the two-year period beginning
on the date of termination of the Employee's employment with the Company.
1.15 "PROPRIETARY ITEMS" shall mean as defined in Section 7.2(a)(iv).
1.16 "SALARY" shall mean as defined in Section 3.1(a).
1.17 "TERRITORY" shall mean
(a) the states of Missouri and Kansas; and
(b) any metropolitan areas outside of Missouri and Kansas, if
at the time the Employee ceases to be employed by the Company (i) the
Company or any Affiliate is providing a local exchange
telecommunications service within the metropolitan area, or (ii) a
detailed business development plan has been prepared, or is in the
process of being prepared, by or on behalf of the Company, in order to
evaluate whether the Company should provide local exchange
telecommunications services within the metropolitan area within twelve
months after the date Employee ceases to be employed by the Company,
and the Board of Directors has not formally resolved against providing
such services in such metropolitan area.
2. EMPLOYMENT TERMS AND DUTIES
2.1 EMPLOYMENT. The Company hereby employs the Employee, and the
Employee hereby accepts employment by the Company, upon the terms and conditions
set forth in this Agreement.
2.2 TERM. Subject to the provisions of Section 6, the term of this
Agreement shall be three (3) years. Thereafter, this Agreement shall be renewed
automatically from year to year unless either party shall have given written
notice of termination to the other party at least ninety (90) days prior to the
end of the current term of this Agreement.
2.3 DUTIES. The Employee will have such duties as are assigned or
delegated to the
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Employee by the Board of Directors and will serve as the President of the
Company. The Employee will devote substantially all his business time and
attention to the business of the Company, will act in good faith to promote the
success of the Company's business, and will cooperate fully with the Board of
Directors in the advancement of the best interests of the Company. Nothing in
this Section 2.3, however, will prevent the Employee from engaging in additional
activities in connection with personal investments and community affairs that
are not inconsistent with the Employee's duties under this Agreement (which
community affairs shall be disclosed to and approved by the Chairman of the
Board). If the Employee serves as a director of the Company or as a director or
officer of any of its Affiliates, the Employee will fulfill his duties as such
director or officer without additional compensation.
3. COMPENSATION
3.1 BASIC COMPENSATION.
(a) SALARY. The Employee will be paid an annual salary of not
less than $175,000 (the "Salary"), which will be payable in equal
periodic installments according to the Company's customary payroll
practices, but no less frequently than monthly. The Employee's annual
salary shall be reviewed by the Compensation Committee of the Board of
Directors annually.
(b) BENEFITS. The Employee will, during the Employment Period,
be permitted to participate in such pension, profit sharing, bonus,
life insurance, disability insurance, hospitalization, major medical,
and other employee benefit plans of the Company that may be in effect
from time to time, to the extent the Employee is eligible under the
terms of such plans (collectively, the "Benefits").
3.2 INCENTIVE COMPENSATION. The Employee shall be entitled to
participate in an incentive bonus program established by the Board of Directors
to measure and reward management for the financial performance of the Company.
4. FACILITIES AND EXPENSES
The Company will furnish the Employee office space, equipment, supplies, and
such other facilities and personnel as the Company deems necessary or
appropriate for the performance of the Employee's duties under this Agreement.
The Company will pay the Employee's dues in such professional societies and
organizations as the Chairman of the Board deems appropriate, and will pay on
behalf of the Employee (or reimburse the Employee for) reasonable expenses
incurred by the Employee at the request of, or on behalf of, the Company in the
performance of the Employee's duties pursuant to this Agreement, and in
accordance with the Company's employment policies, including reasonable expenses
incurred by the Employee in attending conventions, seminars, and other business
meetings, in appropriate business entertainment activities, and for promotional
expenses.
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5. VACATIONS AND HOLIDAYS
The Employee will be entitled to paid vacation in accordance with the vacation
policies of the Company in effect for its employee officers from time to time.
Vacation must be taken by the Employee at such time or times as approved by the
Chairman of the Board. The Employee will also be entitled to the paid holidays
set forth in the Company's policies.
6. TERMINATION
6.1 EVENTS OF TERMINATION. The Employment Period, the Employee's
Salary, Benefits, and Incentive Compensation, and any and all other rights of
the Employee under this Agreement will terminate (except as otherwise provided
in this Section 6):
(a) upon the death of the Employee;
(b) upon the Disability of the Employee (as defined in Section
6.2) immediately upon notice from either party to the other;
(c) for Cause (as defined in Section 6.3), immediately upon
notice from the Company to the Employee, or at such later time as such
notice may specify;
(d) for Good Reason (as defined in Section 6.4) upon not less
than thirty days' prior notice from the Employee to the Company; or
(e) without Cause upon not less than thirty days' notice from
the Company to the Employee.
6.2 DEFINITION OF "DISABILITY." For purposes of Section 6.1, the
Employee will be deemed to have a "Disability" if, for physical or mental
reasons, the Employee is unable to perform the Employee's duties under this
Agreement for 120 consecutive days, or 180 days during any twelve month period,
as determined in accordance with this Section 6.2. The Disability of the
Employee will be determined by a medical doctor selected by written agreement of
the Company and the Employee upon the request of either party by notice to the
other. If the Company and the Employee cannot agree on the selection of a
medical doctor, each of them will select a medical doctor and the two medical
doctors will select a third medical doctor who will determine whether the
Employee has a Disability. The determination of the medical doctor selected
under this Section 6.2 will be binding on both parties. The Employee must submit
to a reasonable number of examinations by the medical doctor making the
determination of Disability under this Section 6.2, and to other specialists
designated by such medical doctor, and the Employee hereby authorizes the
disclosure and release to the Company of such determination and all supporting
medical records. If the Employee is not legally competent, the Employee's legal
guardian or duly authorized attorney-in-fact will act in the Employee's stead
under this Section 6.2 for the purposes of submitting the Employee to the
examinations, and providing the authorization of disclosure, required under this
Section 6.2.
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6.3 DEFINITION OF "CAUSE." For purposes of Section 6.1, the term
"Cause" means: (a) the Employee's breach of a material obligation under this
Agreement; (b) the Employee's failure to adhere in any material respect to any
written Company policy if such policy is material to the effective performance
by the Employee of his duties under this Agreement, and if the Employee has been
given a reasonable opportunity to cure his failure to comply within the
thirty-day period preceding termination of this Agreement, provided that if the
Employee cures his failure to comply with such a policy and then fails again to
comply with the same policy, no further opportunity to cure that failure shall
be required; (c) the appropriation (or attempted appropriation) of a material
business opportunity of the Company, including attempting to secure or securing
any personal profit in connection with any transaction entered into on behalf of
the Company (other than through stock options, bonuses and other incentives
provided by the Company to the Employee); (d) the misappropriation (or attempted
misappropriation) of any of the Company's funds or property; or (e) the
conviction of, or the entering of a guilty plea or plea of no contest with
respect to, a felony, or a crime involving moral turpitude, dishonesty, or
fraud.
6.4 DEFINITION OF "GOOD REASON." For purposes of Section 6.1, the term
"Good Reason" means any of the following: (a) the Company's breach of a material
obligation under this Agreement; (b) the assignment of the Employee without his
consent to a position, responsibilities, or duties of a materially lesser status
or degree of responsibility than his position, responsibilities, or duties at
the Effective Date; or (c) following a Change in Control, the mandatory
relocation of the Employee outside the greater Kansas City metropolitan area
without the consent of the Employee.
6.5 TERMINATION PAY. Effective upon the expiration or termination of
this Agreement, the Company will be obligated to pay the Employee (or, in the
event of his death, his designated beneficiary as defined below) only such
compensation as is provided in this Section 6.5. For purposes of this Section
6.5 the Employee's designated beneficiary will be such individual beneficiary or
trust, located at such address, as the Employee may designate by notice to the
Company from time to time or, if the Employee fails to give notice to the
Company of such a beneficiary, the Employee's estate. Notwithstanding the
preceding sentence, the Company will have no duty, in any circumstances, to
attempt to open an estate on behalf of the Employee, to determine whether any
beneficiary designated by the Employee is alive or to ascertain the address of
any such beneficiary, to determine the existence of any trust, to determine
whether any Person purporting to act as the Employee's personal representative
(or the trustee of a trust established by the Employee) is duly authorized to
act in that capacity, or to locate or attempt to locate any beneficiary,
personal representative, or trustee.
(a) TERMINATION BY THE EMPLOYEE FOR GOOD REASON OR BY THE
COMPANY WITHOUT CAUSE. If the Employee terminates this Agreement for
Good Reason, or if the Company terminates this Agreement other than for
Cause (but not because of the Disability or death of the Employee), or
if the Company notifies the Employee in accordance with Section 2.2
that this Agreement will not be renewed as of an applicable expiration
date, the Company will pay the Employee the Employee's Salary for the
remainder, if any, of the
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calendar month in which such termination is effective and for
twenty-four (24) consecutive calendar months thereafter.
Notwithstanding the preceding sentence, if the Employee obtains other
employment prior to the end of the twenty-four (24) months following
the month in which the termination or expiration is effective, he must
promptly give notice thereof to the Company, and the Salary payments
under this Agreement for any period after the Employee obtains other
employment will be reduced by the amount of the cash compensation
received and to be received by the Employee from the Employee's other
employment for services performed during such period.
(b) TERMINATION BY THE COMPANY FOR CAUSE. If the Company
terminates this Agreement for Cause, the Employee will be entitled to
receive his Salary only through the date such termination is effective.
(c) TERMINATION UPON DISABILITY. If this Agreement is
terminated by either party as a result of the Employee's Disability, as
determined under Section 6.2, the Company will pay the Employee his
Salary through the remainder of the calendar month during which such
termination is effective and for the lesser of (i) six consecutive
months thereafter, or (ii) the period until disability insurance
benefits commence under any disability insurance coverage furnished by
the Company to the Employee.
(d) TERMINATION UPON DEATH. If this Agreement is terminated
because of the Employee's death, the Employee will be entitled to
receive his Salary through the end of the calendar month in which his
death occurs.
(e) BENEFITS. Except as otherwise required by law, the
Employee's accrual of, or participation in plans providing for, the
Benefits will cease at the effective date of the termination of this
Agreement, and the Employee will be entitled to accrued Benefits
pursuant to such plans only as provided in such plans.
7. NON-DISCLOSURE COVENANT; EMPLOYEE INVENTIONS
7.1 ACKNOWLEDGMENTS BY THE EMPLOYEE. The Employee acknowledges that (a)
during the Employment Period and as a part of his employment, the Employee will
be afforded access to Confidential Information; (b) public disclosure of such
Confidential Information could have an adverse effect on the Company and its
business; (c) because the Employee possesses substantial technical expertise and
skill with respect to the Company's business, the Company desires to obtain
exclusive ownership of each Employee Invention, and the Company will be at a
substantial competitive disadvantage if it fails to acquire exclusive ownership
of each Employee Invention; and (d) the provisions of this Section 7 are
reasonable and necessary to prevent the improper use or disclosure of
Confidential Information and to provide the Company with exclusive ownership of
all Employee Inventions.
7.2 AGREEMENTS OF THE EMPLOYEE. In consideration of the compensation
and benefits to be paid or provided to the Employee by the Company under this
Agreement, the Employee
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covenants as follows:
(a) CONFIDENTIALITY.
(i) During and following the Employment Period, the
Employee will hold in confidence the Confidential Information
and will not disclose it to any Person except with the
specific prior written consent of the Company or except as
otherwise expressly permitted by the terms of this Agreement.
(ii) Any trade secrets of the Company will be
entitled to all of the protections and benefits under the
Missouri Uniform Trade Secrets Act and any other applicable
law. If any information that the Company deems to be a trade
secret is found by a court of competent jurisdiction not to be
a trade secret for purposes of this Agreement, such
information will, nevertheless, be considered Confidential
Information for purposes of this Agreement. The Employee
hereby waives any requirement that the Company submit proof of
the economic value of any trade secret or post a bond or other
security.
(iii) None of the foregoing obligations and
restrictions applies to any part of the Confidential
Information that the Employee demonstrates was or became
generally available to the public other than as a result of a
disclosure by the Employee or by any other Person bound by a
confidentiality obligation to the Company in respect of such
Confidential Information.
(iv) The Employee will not remove from the Company's
premises (except to the extent such removal is for purposes of
the performance of the Employee's duties at home or while
traveling, or except as otherwise specifically authorized by
the Company) any Company document, record, notebook, plan,
model, component, device, or computer software or code,
whether embodied in a disk or in any other form (collectively,
the "Proprietary Items"). The Employee recognizes that, as
between the Company and the Employee, all of the Proprietary
Items, whether or not developed by the Employee, are the
exclusive property of the Company. Upon termination of this
Agreement by either party, or upon the request of the Company
during the Employment Period, the Employee will return to the
Company all of the Proprietary Items in the Employee's
possession or subject to the Employee's control, and the
Employee shall not retain any copies, abstracts, sketches, or
other physical embodiment of any of the Proprietary Items.
(b) EMPLOYEE INVENTIONS. Each Employee Invention will belong
exclusively to the Company. The Employee acknowledges that all Employee
Inventions are works made for hire and are the property of the Company,
including any copyrights, patents, or other intellectual property
rights pertaining thereto. If it is determined that any such works are
not works made for hire, the Employee hereby assigns to the Company all
of the Employee's right, title, and interest, including all rights of
copyright, patent, and other
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intellectual property rights, to or in such Employee Inventions. The
Employee will promptly:
(i) disclose to the Company in writing any Employee
Invention;
(ii) assign to the Company or to a party designated
by the Company, at the Company's request and without
additional compensation, all of the Employee's right to the
Employee Invention for the United States and all foreign
jurisdictions;
(iii) execute and deliver to the Company such
applications, assignments, and other documents as the Company
may request in order to apply for and obtain patents or other
registrations with respect to any Employee Invention in the
United States and any foreign jurisdictions;
(iv) sign all other papers necessary to carry out the
above obligations; and
(v) give testimony and render any other assistance in
support of the Company's rights to any Employee Invention.
Notwithstanding anything to the contrary herein, provisions otherwise
requiring the Employee to assign to the Company any invention conceived
by the Employee shall not apply to an invention for which no equipment,
supplies, facilities or trade secret information of the Company was
used and which was developed entirely on the Employee's own time,
unless the invention relates to the business of the Company or to the
Company's actual or demonstrably anticipated research or development,
or the invention results from any work performed by the Employee for
the Company.
7.3 DISPUTES OR CONTROVERSIES. The Employee recognizes that should a
dispute or controversy arising from or relating to this Agreement be submitted
for adjudication to any court, arbitration panel, or other third party, the
preservation of the secrecy of Confidential Information may be jeopardized. All
pleadings, documents, testimony, and records relating to any such adjudication
will be maintained in secrecy and will be available for inspection by the
Company, the Employee, and their respective attorneys and experts, who will
agree, in advance and in writing, to receive and maintain all such information
in secrecy, except as may be limited by them in writing.
8. NON-COMPETITION AND NON-INTERFERENCE
8.1 ACKNOWLEDGMENTS BY THE EMPLOYEE. The Employee acknowledges that:
(a) the services to be performed by him under this Agreement are of a special,
unique, unusual, extraordinary, and intellectual character; (b) the Company
competes with other businesses that are or could be located in any part of the
Territory; and (c) the provisions of this Section 8 are reasonable and necessary
to protect the Company's business.
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8.2 COVENANTS OF THE EMPLOYEE. In consideration of the acknowledgments
by the Employee, and in consideration of the compensation and benefits to be
paid or provided to the Employee by the Company, the Employee covenants that he
will not, directly or indirectly:
(a) during the Employment Period, except in the course of his
employment hereunder, and during the Post-Employment Period, engage or
invest in, own, manage, operate, finance, control, or participate in
the ownership, management, operation, financing, or control of, be
employed by, associated with, or in any manner connected with, lend the
Employee's name or any similar name to, lend Employee's credit to or
render services or advice to, any Competitive Business within the
Territory; provided, however, that the Employee may purchase or
otherwise acquire up to (but not more than) one percent of any class of
securities of any enterprise (but without otherwise participating in
the activities of such enterprise) if such securities are listed on any
national or regional securities exchange or have been registered under
Section 12(g) of the Securities Exchange Act of 1934;
(b) whether for the Employee's own account or for the account
of any other Person, at any time during the Employment Period and the
Post-Employment Period, solicit business of the same or similar type
being carried on by the Company, from any Person known by the Employee
to be a customer of the Company, whether or not the Employee had
personal contact with such Person during and by reason of the
Employee's employment with the Company;
(c) whether for the Employee's own account or the account of
any other Person at any time during the Employment Period and the
Post-Employment Period, solicit, employ, or otherwise engage as an
employee, independent contractor, or otherwise, any person who is or
was an employee of the Company at any time during the Employment Period
or in any manner induce or attempt to induce any employee of the
Company to terminate his or her employment with the Company; or at any
time during the Employment Period and the Post-Employment Period,
interfere with the Company's relationship with any person, including
any person who at any time during the Employment Period was an
employee, contractor, supplier, or customer of the Company;
(d) at any time during the Employment Period and the
Post-Employment Period, disparage the Company or any of its
shareholders, directors, officers, employees, or agents.
8.3 DIVISIBLE COVENANTS. If any covenant in Section 8.2 is held to be
unreasonable, arbitrary, or against public policy, such covenant will be
considered to be divisible with respect to scope, time, and geographic area, and
such lesser scope, time, or geographic area, or all of them, as a court of
competent jurisdiction may determine to be reasonable, not arbitrary, and not
against public policy, will be effective, binding, and enforceable against the
Employee.
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8.4 EXTENSION OF COVENANTS. The period of time applicable to any
covenant in Section 8.2 will be extended by the duration of any violation by the
Employee of such covenant.
8.5 NOTICES. The Employee will, while the covenants under Section 8.2
are in effect, give notice to the Company, within ten days after accepting any
other employment, of the identity of the Employee's new employer. The Company
may notify such new employer that the Employee is bound by this Agreement and,
at the Company's election, furnish such new employer with a copy of this
Agreement or relevant portions thereof.
9. GENERAL PROVISIONS
9.1 INJUNCTIVE RELIEF AND ADDITIONAL REMEDY. The Employee acknowledges
that the injury that would be suffered by the Company as a result of a breach of
the provisions of this Agreement (including any provision of Sections 7 and 8)
would be irreparable and that an award of monetary damages to the Company for
such a breach would be an inadequate remedy. Consequently, the Company will have
the right, in addition to any other rights it may have, to obtain injunctive
relief to restrain any breach or threatened breach or otherwise to specifically
enforce any provision of this Agreement, and the Company will not be obligated
to post bond or other security in seeking such relief. Without limiting the
Company's rights under this Section 9 or any other remedies of the Company, if
the Employee breaches any of the provisions of Section 7 or 8, the Company will
have the right to cease making any payments otherwise due to the Employee under
this Agreement.
9.2 COVENANTS OF SECTIONS 7 AND 8 ARE ESSENTIAL AND INDEPENDENT
COVENANTS. The covenants by the Employee in Sections 7 and 8 are essential
elements of this Agreement, and without the Employee's agreement to comply with
such covenants, the Company would not have entered into this Agreement or
employed the Employee. The Company and the Employee have independently consulted
their respective counsel and have been advised in all respects concerning the
reasonableness and propriety of such covenants, with specific regard to the
nature of the business conducted by the Company. The Employee's covenants in
Sections 7 and 8 are independent covenants and the existence of any claim by the
Employee against the Company, under this Agreement or otherwise, will not excuse
the Employee's breach of any covenant in Section 7 or 8. If the Employee's
employment hereunder expires or is terminated, this Agreement will continue in
full force and effect as is necessary or appropriate to enforce the covenants
and agreements of the Employee in Sections 7 and 8.
9.3 REPRESENTATIONS AND WARRANTIES BY THE EMPLOYEE. The Employee
represents and warrants to the Company that the execution and delivery by the
Employee of this Agreement do not, and the performance by the Employee of the
Employee's obligations hereunder will not, with or without the giving of notice
or the passage of time, or both: (a) violate any judgment, writ, injunction, or
order of any court, arbitrator, or governmental agency applicable to the
Employee; or (b) conflict with, result in the breach of any provisions of or the
termination of, or constitute a default under, any agreement to which the
Employee is a party or by which the Employee is or may be bound.
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9.4 OBLIGATIONS CONTINGENT ON PERFORMANCE. The obligations of the
Company hereunder, including its obligation to pay the compensation provided for
herein, are contingent upon the Employee's performance of the Employee's
obligations hereunder.
9.5 WAIVER. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by either
party in exercising any right, power, or privilege under this Agreement will
operate as a waiver of such right, power, or privilege, and no single or partial
exercise of any such right, power, or privilege will preclude any other or
further exercise of such right, power, or privilege or the exercise of any other
right, power, or privilege. To the maximum extent permitted by applicable law,
(a) no claim or right arising out of this Agreement can be discharged by one
party, in whole or in part, by a waiver or renunciation of the claim or right
unless in writing signed by the other party; (b) no waiver that may be given by
a party will be applicable except in the specific instance for which it is
given; and (c) no notice to or demand on one party will be deemed to be a waiver
of any obligation of such party or of the right of the party giving such notice
or demand to take further action without notice or demand as provided in this
Agreement.
9.6 BINDING EFFECT; DELEGATION OF DUTIES PROHIBITED. This Agreement
shall inure to the benefit of, and shall be binding upon, the parties hereto and
their respective successors, assigns, heirs, and legal representatives,
including any entity with which the Company may merge or consolidate or to which
all or substantially all of its assets may be transferred. The duties and
covenants of the Employee under this Agreement, being personal, may not be
delegated.
9.7 NOTICES. All notices and other communications under this Agreement
must be in writing and will be deemed to have been duly given when (a) delivered
by hand (with written confirmation of receipt), (b) sent by facsimile (with
written confirmation of receipt), provided that a copy is mailed by registered
mail, return receipt requested, or (c) when received by the addressee, if sent
by a nationally recognized overnight delivery service (receipt requested), in
the case of the Company to the attention of the Chairman of the Board with
respect to David E. Scott's Agreement at the Company's principal business office
and in the case of the Employee to the address or facsimile number set forth
below (or to such other address or facsimile number as the Employee may
designate by notice to the Company):
73 Janssen Place
Kansas City, MO 64109
9.8 ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the entire
agreement between the parties with respect to its subject matter and supersedes
all prior agreements and understandings, oral or written, between the parties
with respect to its subject matter. This Agreement may not be amended orally,
but only by an agreement in writing signed by each of the parties to this
Agreement.
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9.9 GOVERNING LAW. This Agreement will be governed by the laws of the
State of Missouri without regard to conflicts of laws principles.
9.10 JURISDICTION. Any action or proceeding seeking to enforce any
provision of, or based on any right arising out of, this Agreement may be
brought against either of the parties in the courts of the State of Missouri,
County of Jackson, or, if it has or can acquire jurisdiction, in the United
States District Court for the Western District of Missouri, and each of the
parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on either party anywhere in the world.
9.11 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement unless otherwise specified.
All words used in this Agreement will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
word "including" does not limit the preceding words or terms.
9.12 SEVERABILITY. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
9.13 COUNTERPARTS; EXECUTION BY FACSIMILE SIGNATURES. This Agreement
may be executed in one or more counterparts, each of which will be deemed to be
an original copy of this Agreement and all of which, when taken together, will
be deemed to constitute one and the same agreement. This Agreement may be
executed by facsimile signatures.
9.14 WAIVER OF JURY TRIAL. THE PARTIES HERETO HEREBY WAIVE A JURY TRIAL
IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date above first written above.
BIRCH TELECOM, INC.
By: /s/ Henry H. Bradley
________________________________________
Henry H. Bradley, Chairman of the Board
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/s/ David E. Scott
__________________________________
David E. Scott
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Exhibit 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made as of February 10,
1998 by BIRCH TELECOM, INC., a Delaware corporation (the "Company"), and GREGORY
C. LAWHON, an individual (the "Employee").
The Company and the Employee desire for the Employee to be employed by
the Company upon the terms and conditions set forth in this Agreement.
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For the purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1.
1.1 "AGREEMENT" shall mean this Employment Agreement, as amended from
time to time.
1.2 "AFFILIATE" shall mean:
(a) any partnership, limited liability company, corporation or
other entity if the Company owns more than 25% of the equity securities
or interests of such entity; or
(b) any such entity which owns more than 25% of the equity
securities of the Company (and, for the purpose of this Section 1.2,
any options to acquire equity securities shall be treated as having
been fully exercised, and any securities convertible into equity
securities shall be treated as having been fully converted).
1.3 "BENEFITS" shall mean as defined in Section 3.1(b).
1.4 "BOARD OF DIRECTORS" shall mean the board of directors of the
Company.
1.5 "COMPETITIVE BUSINESS" shall mean any business which directly or
indirectly provides any local exchange telecommunications service that is the
same as or substantially similar to any local exchange telecommunications
service provided by the Company.
1.6 "CAUSE" shall mean as defined in Section 6.3.
1.7 "CHANGE IN CONTROL" means any of the following: (i) the sale of all
or substantially all of the Company's (or its Affiliates') assets that results
in the liquidation of the Company and the payment of liquidating distributions
to the stockholders of the Company; (ii)
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the acquisition of the Company by another entity by means of a merger or
consolidation resulting in the exchange of the outstanding shares of the
Company's capital stock for securities or consideration issued or paid or caused
to be issued or paid by the acquiring entity or its subsidiary; or (iii) the
acquisition from one or more of the stockholders of the Company of more than 50%
of the voting stock of the Company by a single person or group of persons acting
together.
1.8 "CONFIDENTIAL INFORMATION" shall mean any and all:
(a) trade secrets concerning the business and affairs of the
Company, the Company's product and service specifications, data,
formulae, compositions, processes, designs, sketches, photographs,
maps, engineering studies, graphs, drawings, samples, inventions and
ideas, past, current, and planned research and development, current and
planned methods and processes, customer and supplier lists, current and
anticipated customer requirements, price lists, bid information, market
studies, business plans, computer software and programs (including
object code and source code), computer software and database
technologies, systems, structures, and architectures (and related
formulae, compositions, processes, improvements, devices, inventions,
discoveries, concepts, ideas, designs, methods and information), and
any other information, however documented, that is a trade secret
within the meaning of the Missouri Uniform Trade Secrets Act; and
(b) information concerning the business and affairs of the
Company (which includes without limitation, historical financial
statements, financial projections and budgets, historical and projected
sales, capital spending budgets and plans, the names and backgrounds of
key personnel and personnel training techniques and materials), however
documented; and
(c) notes, analysis, compilations, studies, summaries, and
other material prepared by or for the Company containing or based, in
whole or in part, on any information included in the foregoing.
1.9 "DISABILITY" shall mean as defined in Section 6.2.
1.10 "EMPLOYEE INVENTION" shall mean any idea, invention, technique,
modification, process, or improvement (whether patentable or not), any
industrial design (whether registerable or not), any mask work, however fixed or
encoded, that is suitable to be fixed, embedded or programmed in a semiconductor
product (whether recordable or not), and any work of authorship (whether or not
copyright protection may be obtained for it) created, conceived, or developed by
the Employee, either solely or in conjunction with others, during the Employment
Period, or a period that includes a portion of the Employment Period, that
relates in any way to, or is useful in any manner in, the business then being
conducted or proposed to be conducted by the Company, and any such item created
by the Employee, either solely or in conjunction with others, following
termination of the Employee's employment with the Company, that is based
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upon or uses Confidential Information.
1.11 "EMPLOYMENT PERIOD" shall mean the term of the Employee's
employment under this Agreement.
1.12 "GOOD REASON" shall mean as defined in Section 6.4.
1.13 "PERSON" shall mean any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, or
governmental body.
1.14 "POST-EMPLOYMENT PERIOD" shall mean the one-year period beginning
on the date of termination of the Employee's employment with the Company.
1.15 "PROPRIETARY ITEMS" shall mean as defined in Section 7.2(a)(iv).
1.16 "SALARY" shall mean as defined in Section 3.1(a).
1.17 "TERRITORY" shall mean
(a) the states of Missouri and Kansas; and
(b) any metropolitan areas outside of Missouri and Kansas, if
at the time the Employee ceases to be employed by the Company (i) the
Company or any Affiliate is providing a local exchange
telecommunications service within the metropolitan area, or (ii) a
detailed business development plan has been prepared, or is in the
process of being prepared, by or on behalf of the Company, in order to
evaluate whether the Company should provide local exchange
telecommunications services within the metropolitan area within twelve
months after the date Employee ceases to be employed by the Company,
and the Board of Directors has not formally resolved against providing
such services in such metropolitan area.
2. EMPLOYMENT TERMS AND DUTIES
2.1 EMPLOYMENT. The Company hereby employs the Employee, and the
Employee hereby accepts employment by the Company, upon the terms and conditions
set forth in this Agreement.
2.2 TERM. Subject to the provisions of Section 6, the term of this
Agreement shall be one year. Thereafter, this Agreement shall be renewed
automatically from year to year unless either party shall have given written
notice of termination to the other party at least ninety (90) days prior to the
end of the current term of this Agreement.
2.3 DUTIES. The Employee will have such duties as are assigned or
delegated to the
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Employee by the Board of Directors and President and will serve as the Senior
Vice President of Public Policy and General Counsel of the Company. The Employee
will devote substantially all his business time and attention to the business of
the Company, will act in good faith to promote the success of the Company's
business, and will cooperate fully with the Board of Directors and President in
the advancement of the best interests of the Company. Nothing in this Section
2.3, however, will prevent the Employee from engaging in additional activities
in connection with personal investments and community affairs that are not
inconsistent with the Employee's duties under this Agreement (which community
affairs shall be disclosed to and approved by the President). If the Employee
serves as a director of the Company or as a director or officer of any of its
Affiliates, the Employee will fulfill his duties as such director or officer
without additional compensation.
3. COMPENSATION
3.1 BASIC COMPENSATION.
(a) SALARY. The Employee will be paid an annual salary of
$175,000 (the "Salary"), which will be payable in equal periodic
installments according to the Company's customary payroll practices,
but no less frequently than monthly.
(b) BENEFITS. The Employee will, during the Employment Period,
be permitted to participate in such pension, profit sharing, bonus,
life insurance, disability insurance, hospitalization, major medical,
and other employee benefit plans of the Company that may be in effect
from time to time, to the extent the Employee is eligible under the
terms of such plans (collectively, the "Benefits").
3.2 INCENTIVE COMPENSATION. The Employee shall be entitled to
participate in an incentive bonus program established by the Board of Directors
to measure and reward management for the financial performance of the Company.
4. FACILITIES AND EXPENSES
The Company will furnish the Employee office space, equipment, supplies, and
such other facilities and personnel as the Company deems necessary or
appropriate for the performance of the Employee's duties under this Agreement.
The Company will pay the Employee's dues in such professional societies and
organizations as the President deems appropriate, and will pay on behalf of the
Employee (or reimburse the Employee for) reasonable expenses incurred by the
Employee at the request of, or on behalf of, the Company in the performance of
the Employee's duties pursuant to this Agreement, and in accordance with the
Company's employment policies, including reasonable expenses incurred by the
Employee in attending conventions, seminars, and other business meetings, in
appropriate business entertainment activities, and for promotional expenses.
5. VACATIONS AND HOLIDAYS
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The Employee will be entitled to paid vacation in accordance with the vacation
policies of the Company in effect for its employee officers from time to time.
Vacation must be taken by the Employee at such time or times as approved by the
President. The Employee will also be entitled to the paid holidays set forth in
the Company's policies.
6. TERMINATION
6.1 EVENTS OF TERMINATION. The Employment Period, the Employee's
Salary, Benefits, and Incentive Compensation, and any and all other rights of
the Employee under this Agreement will terminate (except as otherwise provided
in this Section 6):
(a) upon the death of the Employee;
(b) upon the Disability of the Employee (as defined in Section
6.2) immediately upon notice from either party to the other;
(c) for Cause (as defined in Section 6.3), immediately upon
notice from the Company to the Employee, or at such later time as such
notice may specify;
(d) for Good Reason (as defined in Section 6.4) upon not less
than thirty days' prior notice from the Employee to the Company; or
(e) without Cause upon not less than thirty days' notice from
the Company to the Employee.
6.2 DEFINITION OF "DISABILITY." For purposes of Section 6.1, the
Employee will be deemed to have a "Disability" if, for physical or mental
reasons, the Employee is unable to perform the Employee's duties under this
Agreement for 120 consecutive days, or 180 days during any twelve month period,
as determined in accordance with this Section 6.2. The Disability of the
Employee will be determined by a medical doctor selected by written agreement of
the Company and the Employee upon the request of either party by notice to the
other. If the Company and the Employee cannot agree on the selection of a
medical doctor, each of them will select a medical doctor and the two medical
doctors will select a third medical doctor who will determine whether the
Employee has a Disability. The determination of the medical doctor selected
under this Section 6.2 will be binding on both parties. The Employee must submit
to a reasonable number of examinations by the medical doctor making the
determination of Disability under this Section 6.2, and to other specialists
designated by such medical doctor, and the Employee hereby authorizes the
disclosure and release to the Company of such determination and all supporting
medical records. If the Employee is not legally competent, the Employee's legal
guardian or duly authorized attorney-in-fact will act in the Employee's stead
under this Section 6.2 for the purposes of submitting the Employee to the
examinations, and providing the
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authorization of disclosure, required under this Section 6.2.
6.3 DEFINITION OF "CAUSE." For purposes of Section 6.1, the term
"Cause" means: (a) the Employee's breach of a material obligation under this
Agreement; (b) the Employee's failure to adhere in any material respect to any
written Company policy if such policy is material to the effective performance
by the Employee of his duties under this Agreement, and if the Employee has been
given a reasonable opportunity to cure his failure to comply within the
thirty-day period preceding termination of this Agreement, provided that if the
Employee cures his failure to comply with such a policy and then fails again to
comply with the same policy, no further opportunity to cure that failure shall
be required; (c) the appropriation (or attempted appropriation) of a material
business opportunity of the Company, including attempting to secure or securing
any personal profit in connection with any transaction entered into on behalf of
the Company (other than through stock options, bonuses and other incentives
provided by the Company to the Employee); (d) the misappropriation (or attempted
misappropriation) of any of the Company's funds or property; or (e) the
conviction of, or the entering of a guilty plea or plea of no contest with
respect to, a felony, or a crime involving moral turpitude, dishonesty, or
fraud.
6.4 DEFINITION OF "GOOD REASON." For purposes of Section 6.1, the term
"Good Reason" means any of the following: (a) the Company's breach of a material
obligation under this Agreement; (b) the assignment of the Employee without his
consent to a position, responsibilities, or duties of a materially lesser status
or degree of responsibility than his position, responsibilities, or duties at
the Effective Date; or (c) following a Change in Control, the mandatory
relocation of the Employee outside the greater Kansas City metropolitan area
without the consent of the Employee.
6.5 TERMINATION PAY. Effective upon the expiration or termination of
this Agreement, the Company will be obligated to pay the Employee (or, in the
event of his death, his designated beneficiary as defined below) only such
compensation as is provided in this Section 6.5. For purposes of this Section
6.5 the Employee's designated beneficiary will be such individual beneficiary or
trust, located at such address, as the Employee may designate by notice to the
Company from time to time or, if the Employee fails to give notice to the
Company of such a beneficiary, the Employee's estate. Notwithstanding the
preceding sentence, the Company will have no duty, in any circumstances, to
attempt to open an estate on behalf of the Employee, to determine whether any
beneficiary designated by the Employee is alive or to ascertain the address of
any such beneficiary, to determine the existence of any trust, to determine
whether any Person purporting to act as the Employee's personal representative
(or the trustee of a trust established by the Employee) is duly authorized to
act in that capacity, or to locate or attempt to locate any beneficiary,
personal representative, or trustee.
(a) TERMINATION BY THE EMPLOYEE FOR GOOD REASON OR BY THE
COMPANY WITHOUT CAUSE. If the Employee terminates this Agreement for
Good Reason, or if the Company terminates this Agreement other than for
Cause (but not because of the Disability or death of the Employee), or
if the Company notifies the Employee in accordance with Section 2.2
that this Agreement will not be renewed as of an applicable expiration
date, the
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Company will pay the Employee the Employee's Salary for the remainder,
if any, of the calendar month in which such termination is effective
and for twelve consecutive calendar months thereafter. Notwithstanding
the preceding sentence, if the Employee obtains other employment prior
to the end of the twelve months following the month in which the
termination or expiration is effective, he must promptly give notice
thereof to the Company, and the Salary payments under this Agreement
for any period after the Employee obtains other employment will be
reduced by the amount of the cash compensation received and to be
received by the Employee from the Employee's other employment for
services performed during such period.
(b) TERMINATION BY THE COMPANY FOR CAUSE. If the Company
terminates this Agreement for Cause, the Employee will be entitled to
receive his Salary only through the date such termination is effective.
(c) TERMINATION UPON DISABILITY. If this Agreement is
terminated by either party as a result of the Employee's Disability, as
determined under Section 6.2, the Company will pay the Employee his
Salary through the remainder of the calendar month during which such
termination is effective and for the lesser of (i) six consecutive
months thereafter, or (ii) the period until disability insurance
benefits commence under any disability insurance coverage furnished by
the Company to the Employee.
(d) TERMINATION UPON DEATH. If this Agreement is terminated
because of the Employee's death, the Employee will be entitled to
receive his Salary through the end of the calendar month in which his
death occurs.
(e) BENEFITS. Except as otherwise required by law, the
Employee's accrual of, or participation in plans providing for, the
Benefits will cease at the effective date of the termination of this
Agreement, and the Employee will be entitled to accrued Benefits
pursuant to such plans only as provided in such plans.
7. NON-DISCLOSURE COVENANT; EMPLOYEE INVENTIONS
7.1 ACKNOWLEDGMENTS BY THE EMPLOYEE. The Employee acknowledges that (a)
during the Employment Period and as a part of his employment, the Employee will
be afforded access to Confidential Information; (b) public disclosure of such
Confidential Information could have an adverse effect on the Company and its
business; (c) because the Employee possesses substantial technical expertise and
skill with respect to the Company's business, the Company desires to obtain
exclusive ownership of each Employee Invention, and the Company will be at a
substantial competitive disadvantage if it fails to acquire exclusive ownership
of each Employee Invention; and (d) the provisions of this Section 7 are
reasonable and necessary to prevent the improper use or disclosure of
Confidential Information and to provide the Company with exclusive ownership of
all Employee Inventions.
7.2 AGREEMENTS OF THE EMPLOYEE. In consideration of the compensation
and benefits
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to be paid or provided to the Employee by the Company under this Agreement, the
Employee covenants as follows:
(a) CONFIDENTIALITY.
(i) During and following the Employment Period, the
Employee will hold in confidence the Confidential Information
and will not disclose it to any Person except with the
specific prior written consent of the Company or except as
otherwise expressly permitted by the terms of this Agreement.
(ii) Any trade secrets of the Company will be
entitled to all of the protections and benefits under the
Missouri Uniform Trade Secrets Act and any other applicable
law. If any information that the Company deems to be a trade
secret is found by a court of competent jurisdiction not to be
a trade secret for purposes of this Agreement, such
information will, nevertheless, be considered Confidential
Information for purposes of this Agreement. The Employee
hereby waives any requirement that the Company submit proof of
the economic value of any trade secret or post a bond or other
security.
(iii) None of the foregoing obligations and
restrictions applies to any part of the Confidential
Information that the Employee demonstrates was or became
generally available to the public other than as a result of a
disclosure by the Employee or by any other Person bound by a
confidentiality obligation to the Company in respect of such
Confidential Information.
(iv) The Employee will not remove from the Company's
premises (except to the extent such removal is for purposes of
the performance of the Employee's duties at home or while
traveling, or except as otherwise specifically authorized by
the Company) any Company document, record, notebook, plan,
model, component, device, or computer software or code,
whether embodied in a disk or in any other form (collectively,
the "Proprietary Items"). The Employee recognizes that, as
between the Company and the Employee, all of the Proprietary
Items, whether or not developed by the Employee, are the
exclusive property of the Company. Upon termination of this
Agreement by either party, or upon the request of the Company
during the Employment Period, the Employee will return to the
Company all of the Proprietary Items in the Employee's
possession or subject to the Employee's control, and the
Employee shall not retain any copies, abstracts, sketches, or
other physical embodiment of any of the Proprietary Items.
(b) EMPLOYEE INVENTIONS. Each Employee Invention will belong
exclusively to the Company. The Employee acknowledges that all Employee
Inventions are works made for hire and are the property of the Company,
including any copyrights, patents, or other intellectual property
rights pertaining thereto. If it is determined that any such works are
not works made for hire, the Employee hereby assigns to the Company all
of
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the Employee's right, title, and interest, including all rights of
copyright, patent, and other intellectual property rights, to or in
such Employee Inventions. The Employee will promptly:
(i) disclose to the Company in writing any Employee
Invention;
(ii) assign to the Company or to a party designated
by the Company, at the Company's request and without
additional compensation, all of the Employee's right to the
Employee Invention for the United States and all foreign
jurisdictions;
(iii) execute and deliver to the Company such
applications, assignments, and other documents as the Company
may request in order to apply for and obtain patents or other
registrations with respect to any Employee Invention in the
United States and any foreign jurisdictions;
(iv) sign all other papers necessary to carry out the
above obligations; and
(v) give testimony and render any other assistance in
support of the Company's rights to any Employee Invention.
Notwithstanding anything to the contrary herein, provisions otherwise
requiring the Employee to assign to the Company any invention conceived
by the Employee shall not apply to an invention for which no equipment,
supplies, facilities or trade secret information of the Company was
used and which was developed entirely on the Employee's own time,
unless the invention relates to the business of the Company or to the
Company's actual or demonstrably anticipated research or development,
or the invention results from any work performed by the Employee for
the Company.
7.3 DISPUTES OR CONTROVERSIES. The Employee recognizes that should a
dispute or controversy arising from or relating to this Agreement be submitted
for adjudication to any court, arbitration panel, or other third party, the
preservation of the secrecy of Confidential Information may be jeopardized. All
pleadings, documents, testimony, and records relating to any such adjudication
will be maintained in secrecy and will be available for inspection by the
Company, the Employee, and their respective attorneys and experts, who will
agree, in advance and in writing, to receive and maintain all such information
in secrecy, except as may be limited by them in writing.
8. NON-COMPETITION AND NON-INTERFERENCE
8.1 ACKNOWLEDGMENTS BY THE EMPLOYEE. The Employee acknowledges that:
(a) the services to be performed by him under this Agreement are of a special,
unique, unusual, extraordinary, and intellectual character; (b) the Company
competes with other businesses that are or could be located in any part of the
Territory; and (c) the provisions of this Section 8 are
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reasonable and necessary to protect the Company's business.
8.2 COVENANTS OF THE EMPLOYEE. In consideration of the acknowledgments
by the Employee, and in consideration of the compensation and benefits to be
paid or provided to the Employee by the Company, the Employee covenants that he
will not, directly or indirectly:
(a) during the Employment Period, except in the course of his
employment hereunder, and during the Post-Employment Period, engage or
invest in, own, manage, operate, finance, control, or participate in
the ownership, management, operation, financing, or control of, be
employed by, associated with, or in any manner connected with, lend the
Employee's name or any similar name to, lend Employee's credit to or
render services or advice to, any Competitive Business within the
Territory; provided, however, that (i) the Employee may purchase or
otherwise acquire up to (but not more than) one percent of any class of
securities of any enterprise (but without otherwise participating in
the activities of such enterprise) if such securities are listed on any
national or regional securities exchange or have been registered under
Section 12(g) of the Securities Exchange Act of 1934, and (ii) no
restriction in this Agreement shall apply to the extent that it would
violate or cause the Employee to violate any provision of the rules of
professional conduct applicable to attorneys of any state where the
Employee is licensed to practice law;
(b) whether for the Employee's own account or for the account
of any other Person, at any time during the Employment Period and the
Post-Employment Period, solicit business of the same or similar type
being carried on by the Company, from any Person known by the Employee
to be a customer of the Company, whether or not the Employee had
personal contact with such Person during and by reason of the
Employee's employment with the Company;
(c) whether for the Employee's own account or the account of
any other Person at any time during the Employment Period and the
Post-Employment Period, solicit, employ, or otherwise engage as an
employee, independent contractor, or otherwise, any person who is or
was an employee of the Company at any time during the Employment Period
or in any manner induce or attempt to induce any employee of the
Company to terminate his or her employment with the Company; or at any
time during the Employment Period and the Post-Employment Period,
interfere with the Company's relationship with any person, including
any person who at any time during the Employment Period was an
employee, contractor, supplier, or customer of the Company;
(d) at any time during the Employment Period and the
Post-Employment Period, disparage the Company or any of its
shareholders, directors, officers, employees, or agents.
8.3 DIVISIBLE COVENANTS. If any covenant in Section 8.2 is held to be
unreasonable, arbitrary, or against public policy, such covenant will be
considered to be divisible with respect
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to scope, time, and geographic area, and such lesser scope, time, or geographic
area, or all of them, as a court of competent jurisdiction may determine to be
reasonable, not arbitrary, and not against public policy, will be effective,
binding, and enforceable against the Employee.
8.4 EXTENSION OF COVENANTS. The period of time applicable to any
covenant in Section 8.2 will be extended by the duration of any violation by the
Employee of such covenant.
8.5 NOTICES. The Employee will, while the covenants under Section 8.2
are in effect, give notice to the Company, within ten days after accepting any
other employment, of the identity of the Employee's new employer. The Company
may notify such new employer that the Employee is bound by this Agreement and,
at the Company's election, furnish such new employer with a copy of this
Agreement or relevant portions thereof.
9. GENERAL PROVISIONS
9.1 INJUNCTIVE RELIEF AND ADDITIONAL REMEDY. The Employee acknowledges
that the injury that would be suffered by the Company as a result of a breach of
the provisions of this Agreement (including any provision of Sections 7 and 8)
would be irreparable and that an award of monetary damages to the Company for
such a breach would be an inadequate remedy. Consequently, the Company will have
the right, in addition to any other rights it may have, to obtain injunctive
relief to restrain any breach or threatened breach or otherwise to specifically
enforce any provision of this Agreement, and the Company will not be obligated
to post bond or other security in seeking such relief. Without limiting the
Company's rights under this Section 9 or any other remedies of the Company, if
the Employee breaches any of the provisions of Section 7 or 8, the Company will
have the right to cease making any payments otherwise due to the Employee under
this Agreement.
9.2 COVENANTS OF SECTIONS 7 AND 8 ARE ESSENTIAL AND INDEPENDENT
COVENANTS. The covenants by the Employee in Sections 7 and 8 are essential
elements of this Agreement, and without the Employee's agreement to comply with
such covenants, the Company would not have entered into this Agreement or
employed the Employee. The Company and the Employee have independently consulted
their respective counsel and have been advised in all respects concerning the
reasonableness and propriety of such covenants, with specific regard to the
nature of the business conducted by the Company. The Employee's covenants in
Sections 7 and 8 are independent covenants and the existence of any claim by the
Employee against the Company, under this Agreement or otherwise, will not excuse
the Employee's breach of any covenant in Section 7 or 8. If the Employee's
employment hereunder expires or is terminated, this Agreement will continue in
full force and effect as is necessary or appropriate to enforce the covenants
and agreements of the Employee in Sections 7 and 8.
9.3 REPRESENTATIONS AND WARRANTIES BY THE EMPLOYEE. The Employee
represents and warrants to the Company that the execution and delivery by the
Employee of this Agreement do not, and the performance by the Employee of the
Employee's obligations hereunder will not, with or without the giving of notice
or the passage of time, or both: (a) violate any judgment,
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writ, injunction, or order of any court, arbitrator, or governmental agency
applicable to the Employee; or (b) conflict with, result in the breach of any
provisions of or the termination of, or constitute a default under, any
agreement to which the Employee is a party or by which the Employee is or may be
bound.
9.4 OBLIGATIONS CONTINGENT ON PERFORMANCE. The obligations of the
Company hereunder, including its obligation to pay the compensation provided for
herein, are contingent upon the Employee's performance of the Employee's
obligations hereunder.
9.5 WAIVER. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by either
party in exercising any right, power, or privilege under this Agreement will
operate as a waiver of such right, power, or privilege, and no single or partial
exercise of any such right, power, or privilege will preclude any other or
further exercise of such right, power, or privilege or the exercise of any other
right, power, or privilege. To the maximum extent permitted by applicable law,
(a) no claim or right arising out of this Agreement can be discharged by one
party, in whole or in part, by a waiver or renunciation of the claim or right
unless in writing signed by the other party; (b) no waiver that may be given by
a party will be applicable except in the specific instance for which it is
given; and (c) no notice to or demand on one party will be deemed to be a waiver
of any obligation of such party or of the right of the party giving such notice
or demand to take further action without notice or demand as provided in this
Agreement.
9.6 BINDING EFFECT; DELEGATION OF DUTIES PROHIBITED. This Agreement
shall inure to the benefit of, and shall be binding upon, the parties hereto and
their respective successors, assigns, heirs, and legal representatives,
including any entity with which the Company may merge or consolidate or to which
all or substantially all of its assets may be transferred. The duties and
covenants of the Employee under this Agreement, being personal, may not be
delegated.
9.7 NOTICES. All notices and other communications under this Agreement
must be in writing and will be deemed to have been duly given when (a) delivered
by hand (with written confirmation of receipt), (b) sent by facsimile (with
written confirmation of receipt), provided that a copy is mailed by registered
mail, return receipt requested, or (c) when received by the addressee, if sent
by a nationally recognized overnight delivery service (receipt requested), in
the case of the Company to the attention of the President at the Company's
principal business office and in the case of the Employee to the address or
facsimile number set forth below (or to such other address or facsimile number
as the Employee may designate by notice to the Company):
1215 West 70th Street
Kansas City, MO 64113
9.8 ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the entire
agreement between the parties with respect to its subject matter and supersedes
all prior agreements and understandings, oral or written, between the parties
with respect to its subject matter. This
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Agreement may not be amended orally, but only by an agreement in writing signed
by each of the parties to this Agreement.
9.9 GOVERNING LAW. This Agreement will be governed by the laws of the
State of Missouri without regard to conflicts of laws principles.
9.10 JURISDICTION. Any action or proceeding seeking to enforce any
provision of, or based on any right arising out of, this Agreement may be
brought against either of the parties in the courts of the State of Missouri,
County of Jackson, or, if it has or can acquire jurisdiction, in the United
States District Court for the Western District of Missouri, and each of the
parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on either party anywhere in the world.
9.11 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement unless otherwise specified.
All words used in this Agreement will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
word "including" does not limit the preceding words or terms.
9.12 SEVERABILITY. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
9.13 COUNTERPARTS; EXECUTION BY FACSIMILE SIGNATURES. This Agreement
may be executed in one or more counterparts, each of which will be deemed to be
an original copy of this Agreement and all of which, when taken together, will
be deemed to constitute one and the same agreement. This Agreement may be
executed by facsimile signatures.
9.14 WAIVER OF JURY TRIAL. THE PARTIES HERETO HEREBY WAIVE A JURY TRIAL
IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date above first written above.
BIRCH TELECOM, INC.
By: /s/ David E. Scott
_____________________________________
David E. Scott, President
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/s/ Gregory C. Lawhon
____________________________
Gregory C. Lawhon
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EXHIBIT 10.5
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made as of February 10,
1998 by BIRCH TELECOM, INC., a Delaware corporation (the "Company"), and GARY L.
CHESSER, an individual (the "Employee").
The Company and the Employee desire for the Employee to be employed by
the Company upon the terms and conditions set forth in this Agreement.
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For the purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1.
1.1 "AGREEMENT" shall mean this Employment Agreement, as amended from
time to time.
1.2 "AFFILIATE" shall mean:
(a) any partnership, limited liability company, corporation or
other entity if the Company owns more than 25% of the equity securities
or interests of such entity; or
(b) any such entity which owns more than 25% of the equity
securities of the Company (and, for the purpose of this Section 1.2,
any options to acquire equity securities shall be treated as having
been fully exercised, and any securities convertible into equity
securities shall be treated as having been fully converted).
1.3 "BENEFITS" shall mean as defined in Section 3.1(b).
1.4 "BOARD OF DIRECTORS" shall mean the board of directors of the
Company.
1.5 "COMPETITIVE BUSINESS" shall mean any business which directly or
indirectly provides any local exchange telecommunications service that is the
same as or substantially similar to any local exchange telecommunications
service provided by the Company.
1.6 "CAUSE" shall mean as defined in Section 6.3.
1.7 "CHANGE IN CONTROL" means any of the following: (i) the sale of all
or substantially all of the Company's (or its Affiliates') assets that results
in the liquidation of the Company and the payment of liquidating distributions
to the stockholders of the Company; (ii)
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the acquisition of the Company by another entity by means of a merger or
consolidation resulting in the exchange of the outstanding shares of the
Company's capital stock for securities or consideration issued or paid or caused
to be issued or paid by the acquiring entity or its subsidiary; or (iii) the
acquisition from one or more of the stockholders of the Company of more than 50%
of the voting stock of the Company by a single person or group of persons acting
together.
1.8 "CONFIDENTIAL INFORMATION" shall mean any and all:
(a) trade secrets concerning the business and affairs of the
Company, the Company's product and service specifications, data,
formulae, compositions, processes, designs, sketches, photographs,
maps, engineering studies, graphs, drawings, samples, inventions and
ideas, past, current, and planned research and development, current and
planned methods and processes, customer and supplier lists, current and
anticipated customer requirements, price lists, bid information, market
studies, business plans, computer software and programs (including
object code and source code), computer software and database
technologies, systems, structures, and architectures (and related
formulae, compositions, processes, improvements, devices, inventions,
discoveries, concepts, ideas, designs, methods and information), and
any other information, however documented, that is a trade secret
within the meaning of the Missouri Uniform Trade Secrets Act; and
(b) information concerning the business and affairs of the Company
(which includes without limitation, historical financial statements,
financial projections and budgets, historical and projected sales,
capital spending budgets and plans, the names and backgrounds of key
personnel and personnel training techniques and materials), however
documented; and
(c) notes, analysis, compilations, studies, summaries, and other
material prepared by or for the Company containing or based, in whole
or in part, on any information included in the foregoing.
1.9 "DISABILITY" shall mean as defined in Section 6.2.
1.10 "EMPLOYEE INVENTION" shall mean any idea, invention, technique,
modification, process, or improvement (whether patentable or not), any
industrial design (whether registerable or not), any mask work, however fixed or
encoded, that is suitable to be fixed, embedded or programmed in a semiconductor
product (whether recordable or not), and any work of authorship (whether or not
copyright protection may be obtained for it) created, conceived, or developed by
the Employee, either solely or in conjunction with others, during the Employment
Period, or a period that includes a portion of the Employment Period, that
relates in any way to, or is useful in any manner in, the business then being
conducted or proposed to be conducted by the Company, and any such item created
by the Employee, either solely or in conjunction with others, following
termination of the Employee's employment with the Company, that is based
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upon or uses Confidential Information.
1.11 "EMPLOYMENT PERIOD" shall mean the term of the Employee's
employment under this Agreement.
1.12 "GOOD REASON" shall mean as defined in Section 6.4.
1.13 "PERSON" shall mean any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, or
governmental body.
1.14 "POST-EMPLOYMENT PERIOD" shall mean the one-year period beginning
on the date of termination of the Employee's employment with the Company.
1.15 "PROPRIETARY ITEMS" shall mean as defined in Section 7.2(a)(iv).
1.16 "SALARY" shall mean as defined in Section 3.1(a).
1.17 "TERRITORY" shall mean
(a) the states of Missouri and Kansas; and
(b) any metropolitan areas outside of Missouri and Kansas, if at
the time the Employee ceases to be employed by the Company (i) the
Company or any Affiliate is providing a local exchange
telecommunications service within the metropolitan area, or (ii) a
detailed business development plan has been prepared, or is in the
process of being prepared, by or on behalf of the Company, in order to
evaluate whether the Company should provide local exchange
telecommunications services within the metropolitan area within twelve
months after the date Employee ceases to be employed by the Company,
and the Board of Directors has not formally resolved against providing
such services in such metropolitan area.
2. EMPLOYMENT TERMS AND DUTIES
2.1 EMPLOYMENT. The Company hereby employs the Employee, and the
Employee hereby accepts employment by the Company, upon the terms and conditions
set forth in this Agreement.
2.2 TERM. Subject to the provisions of Section 6, the term of this
Agreement shall be one year. Thereafter, this Agreement shall be renewed
automatically from year to year unless either party shall have given written
notice of termination to the other party at least ninety (90) days prior to the
end of the current term of this Agreement.
2.3 DUTIES. The Employee will have such duties as are assigned or
delegated to the
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Employee by the Board of Directors and President and will serve as the Senior
Vice President of Engineering and Operations of the Company. The Employee will
devote substantially all his business time and attention to the business of the
Company, will act in good faith to promote the success of the Company's
business, and will cooperate fully with the Board of Directors and President in
the advancement of the best interests of the Company. Nothing in this Section
2.3, however, will prevent the Employee from engaging in additional activities
in connection with personal investments and community affairs that are not
inconsistent with the Employee's duties under this Agreement (which community
affairs shall be disclosed to and approved by the President). If the Employee
serves as a director of the Company or as a director or officer of any of its
Affiliates, the Employee will fulfill his duties as such director or officer
without additional compensation.
3. COMPENSATION
3.1 BASIC COMPENSATION.
(a) SALARY. The Employee will be paid an annual salary of $150,000
(the "Salary"), which will be payable in equal periodic installments
according to the Company's customary payroll practices, but no less
frequently than monthly.
(b) BENEFITS. The Employee will, during the Employment Period, be
permitted to participate in such pension, profit sharing, bonus, life
insurance, disability insurance, hospitalization, major medical, and
other employee benefit plans of the Company that may be in effect from
time to time, to the extent the Employee is eligible under the terms of
such plans (collectively, the "Benefits").
3.2 INCENTIVE COMPENSATION. The Employee shall be entitled to
participate in an incentive bonus program established by the Board of Directors
to measure and reward management for the financial performance of the Company.
4. FACILITIES AND EXPENSES
The Company will furnish the Employee office space, equipment, supplies, and
such other facilities and personnel as the Company deems necessary or
appropriate for the performance of the Employee's duties under this Agreement.
The Company will pay the Employee's dues in such professional societies and
organizations as the President deems appropriate, and will pay on behalf of the
Employee (or reimburse the Employee for) reasonable expenses incurred by the
Employee at the request of, or on behalf of, the Company in the performance of
the Employee's duties pursuant to this Agreement, and in accordance with the
Company's employment policies, including reasonable expenses incurred by the
Employee in attending conventions, seminars, and other business meetings, in
appropriate business entertainment activities, and for promotional expenses.
5. VACATIONS AND HOLIDAYS
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The Employee will be entitled to paid vacation in accordance with the vacation
policies of the Company in effect for its employee officers from time to time.
Vacation must be taken by the Employee at such time or times as approved by the
President. The Employee will also be entitled to the paid holidays set forth in
the Company's policies.
6. TERMINATION
6.1 EVENTS OF TERMINATION. The Employment Period, the Employee's
Salary, Benefits, and Incentive Compensation, and any and all other rights of
the Employee under this Agreement will terminate (except as otherwise provided
in this Section 6):
(a) upon the death of the Employee;
(b) upon the Disability of the Employee (as defined in Section
6.2) immediately upon notice from either party to the other;
(c) for Cause (as defined in Section 6.3), immediately upon notice
from the Company to the Employee, or at such later time as such notice
may specify;
(d) for Good Reason (as defined in Section 6.4) upon not less than
thirty days' prior notice from the Employee to the Company; or
(e) without Cause upon not less than thirty days' notice from the
Company to the Employee.
6.2 DEFINITION OF "DISABILITY." For purposes of Section 6.1, the
Employee will be deemed to have a "Disability" if, for physical or mental
reasons, the Employee is unable to perform the Employee's duties under this
Agreement for 120 consecutive days, or 180 days during any twelve month period,
as determined in accordance with this Section 6.2. The Disability of the
Employee will be determined by a medical doctor selected by written agreement of
the Company and the Employee upon the request of either party by notice to the
other. If the Company and the Employee cannot agree on the selection of a
medical doctor, each of them will select a medical doctor and the two medical
doctors will select a third medical doctor who will determine whether the
Employee has a Disability. The determination of the medical doctor selected
under this Section 6.2 will be binding on both parties. The Employee must submit
to a reasonable number of examinations by the medical doctor making the
determination of Disability under this Section 6.2, and to other specialists
designated by such medical doctor, and the Employee hereby authorizes the
disclosure and release to the Company of such determination and all supporting
medical records. If the Employee is not legally competent, the Employee's legal
guardian or duly authorized attorney-in-fact will act in the Employee's stead
under this Section 6.2 for the purposes of submitting the Employee to the
examinations, and providing the
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authorization of disclosure, required under this Section 6.2.
6.3 DEFINITION OF "CAUSE." For purposes of Section 6.1, the term
"Cause" means: (a) the Employee's breach of a material obligation under this
Agreement; (b) the Employee's failure to adhere in any material respect to any
written Company policy if such policy is material to the effective performance
by the Employee of his duties under this Agreement, and if the Employee has been
given a reasonable opportunity to cure his failure to comply within the
thirty-day period preceding termination of this Agreement, provided that if the
Employee cures his failure to comply with such a policy and then fails again to
comply with the same policy, no further opportunity to cure that failure shall
be required; (c) the appropriation (or attempted appropriation) of a material
business opportunity of the Company, including attempting to secure or securing
any personal profit in connection with any transaction entered into on behalf of
the Company (other than through stock options, bonuses and other incentives
provided by the Company to the Employee); (d) the misappropriation (or attempted
misappropriation) of any of the Company's funds or property; or (e) the
conviction of, or the entering of a guilty plea or plea of no contest with
respect to, a felony, or a crime involving moral turpitude, dishonesty, or
fraud.
6.4 DEFINITION OF "GOOD REASON." For purposes of Section 6.1, the term
"Good Reason" means any of the following: (a) the Company's breach of a material
obligation under this Agreement; (b) the assignment of the Employee without his
consent to a position, responsibilities, or duties of a materially lesser status
or degree of responsibility than his position, responsibilities, or duties at
the Effective Date; or (c) following a Change in Control, the mandatory
relocation of the Employee outside the greater Kansas City metropolitan area
without the consent of the Employee.
6.5 TERMINATION PAY. Effective upon the expiration or termination of
this Agreement, the Company will be obligated to pay the Employee (or, in the
event of his death, his designated beneficiary as defined below) only such
compensation as is provided in this Section 6.5. For purposes of this Section
6.5 the Employee's designated beneficiary will be such individual beneficiary or
trust, located at such address, as the Employee may designate by notice to the
Company from time to time or, if the Employee fails to give notice to the
Company of such a beneficiary, the Employee's estate. Notwithstanding the
preceding sentence, the Company will have no duty, in any circumstances, to
attempt to open an estate on behalf of the Employee, to determine whether any
beneficiary designated by the Employee is alive or to ascertain the address of
any such beneficiary, to determine the existence of any trust, to determine
whether any Person purporting to act as the Employee's personal representative
(or the trustee of a trust established by the Employee) is duly authorized to
act in that capacity, or to locate or attempt to locate any beneficiary,
personal representative, or trustee.
(a) TERMINATION BY THE EMPLOYEE FOR GOOD REASON OR BY THE COMPANY
WITHOUT CAUSE. If the Employee terminates this Agreement for Good
Reason, or if the Company terminates this Agreement other than for
Cause (but not because of the Disability or death of the Employee), or
if the Company notifies the Employee in accordance with Section 2.2
that this Agreement will not be renewed as of an applicable expiration
date, the
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Company will pay the Employee the Employee's Salary for the remainder,
if any, of the calendar month in which such termination is effective
and for twelve consecutive calendar months thereafter. Notwithstanding
the preceding sentence, if the Employee obtains other employment prior
to the end of the twelve months following the month in which the
termination or expiration is effective, he must promptly give notice
thereof to the Company, and the Salary payments under this Agreement
for any period after the Employee obtains other employment will be
reduced by the amount of the cash compensation received and to be
received by the Employee from the Employee's other employment for
services performed during such period.
(b) TERMINATION BY THE COMPANY FOR CAUSE. If the Company
terminates this Agreement for Cause, the Employee will be entitled to
receive his Salary only through the date such termination is effective.
(c) TERMINATION UPON DISABILITY. If this Agreement is terminated
by either party as a result of the Employee's Disability, as determined
under Section 6.2, the Company will pay the Employee his Salary through
the remainder of the calendar month during which such termination is
effective and for the lesser of (i) six consecutive months thereafter,
or (ii) the period until disability insurance benefits commence under
any disability insurance coverage furnished by the Company to the
Employee.
(d) TERMINATION UPON DEATH. If this Agreement is terminated
because of the Employee's death, the Employee will be entitled to
receive his Salary through the end of the calendar month in which his
death occurs.
(e) BENEFITS. Except as otherwise required by law, the Employee's
accrual of, or participation in plans providing for, the Benefits will
cease at the effective date of the termination of this Agreement, and
the Employee will be entitled to accrued Benefits pursuant to such
plans only as provided in such plans.
7. NON-DISCLOSURE COVENANT; EMPLOYEE INVENTIONS
7.1 ACKNOWLEDGMENTS BY THE EMPLOYEE. The Employee acknowledges that (a)
during the Employment Period and as a part of his employment, the Employee will
be afforded access to Confidential Information; (b) public disclosure of such
Confidential Information could have an adverse effect on the Company and its
business; (c) because the Employee possesses substantial technical expertise and
skill with respect to the Company's business, the Company desires to obtain
exclusive ownership of each Employee Invention, and the Company will be at a
substantial competitive disadvantage if it fails to acquire exclusive ownership
of each Employee Invention; and (d) the provisions of this Section 7 are
reasonable and necessary to prevent the improper use or disclosure of
Confidential Information and to provide the Company with exclusive ownership of
all Employee Inventions.
7.2 AGREEMENTS OF THE EMPLOYEE. In consideration of the compensation
and benefits
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to be paid or provided to the Employee by the Company under this
Agreement, the Employee covenants as follows:
(a) CONFIDENTIALITY.
(i) During and following the Employment Period, the
Employee will hold in confidence the Confidential Information
and will not disclose it to any Person except with the
specific prior written consent of the Company or except as
otherwise expressly permitted by the terms of this Agreement.
(ii) Any trade secrets of the Company will be
entitled to all of the protections and benefits under the
Missouri Uniform Trade Secrets Act and any other applicable
law. If any information that the Company deems to be a trade
secret is found by a court of competent jurisdiction not to be
a trade secret for purposes of this Agreement, such
information will, nevertheless, be considered Confidential
Information for purposes of this Agreement. The Employee
hereby waives any requirement that the Company submit proof of
the economic value of any trade secret or post a bond or other
security.
(iii) None of the foregoing obligations and
restrictions applies to any part of the Confidential
Information that the Employee demonstrates was or became
generally available to the public other than as a result of a
disclosure by the Employee or by any other Person bound by a
confidentiality obligation to the Company in respect of such
Confidential Information.
(iv) The Employee will not remove from the Company's
premises (except to the extent such removal is for purposes of
the performance of the Employee's duties at home or while
traveling, or except as otherwise specifically authorized by
the Company) any Company document, record, notebook, plan,
model, component, device, or computer software or code,
whether embodied in a disk or in any other form (collectively,
the "Proprietary Items"). The Employee recognizes that, as
between the Company and the Employee, all of the Proprietary
Items, whether or not developed by the Employee, are the
exclusive property of the Company. Upon termination of this
Agreement by either party, or upon the request of the Company
during the Employment Period, the Employee will return to the
Company all of the Proprietary Items in the Employee's
possession or subject to the Employee's control, and the
Employee shall not retain any copies, abstracts, sketches, or
other physical embodiment of any of the Proprietary Items.
(b) EMPLOYEE INVENTIONS. Each Employee Invention will belong
exclusively to the Company. The Employee acknowledges that all Employee
Inventions are works made for hire and are the property of the Company,
including any copyrights, patents, or other intellectual property
rights pertaining thereto. If it is determined that any such works are
not works made for hire, the Employee hereby assigns to the Company all
of
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the Employee's right, title, and interest, including all rights of
copyright, patent, and other intellectual property rights, to or in
such Employee Inventions. The Employee will promptly:
(i) disclose to the Company in writing any Employee
Invention;
(ii) assign to the Company or to a party designated
by the Company, at the Company's request and without
additional compensation, all of the Employee's right to the
Employee Invention for the United States and all foreign
jurisdictions;
(iii) execute and deliver to the Company such
applications, assignments, and other documents as the Company
may request in order to apply for and obtain patents or other
registrations with respect to any Employee Invention in the
United States and any foreign jurisdictions;
(iv) sign all other papers necessary to carry out the
above obligations; and
(v) give testimony and render any other assistance in
support of the Company's rights to any Employee Invention.
Notwithstanding anything to the contrary herein, provisions otherwise
requiring the Employee to assign to the Company any invention conceived
by the Employee shall not apply to an invention for which no equipment,
supplies, facilities or trade secret information of the Company was
used and which was developed entirely on the Employee's own time,
unless the invention relates to the business of the Company or to the
Company's actual or demonstrably anticipated research or development,
or the invention results from any work performed by the Employee for
the Company.
7.3 DISPUTES OR CONTROVERSIES. The Employee recognizes that should a
dispute or controversy arising from or relating to this Agreement be submitted
for adjudication to any court, arbitration panel, or other third party, the
preservation of the secrecy of Confidential Information may be jeopardized. All
pleadings, documents, testimony, and records relating to any such adjudication
will be maintained in secrecy and will be available for inspection by the
Company, the Employee, and their respective attorneys and experts, who will
agree, in advance and in writing, to receive and maintain all such information
in secrecy, except as may be limited by them in writing.
8. NON-COMPETITION AND NON-INTERFERENCE
8.1 ACKNOWLEDGMENTS BY THE EMPLOYEE. The Employee acknowledges that:
(a) the services to be performed by him under this Agreement are of a special,
unique, unusual, extraordinary, and intellectual character; (b) the Company
competes with other businesses that are or could be located in any part of the
Territory; and (c) the provisions of this Section 8 are
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reasonable and necessary to protect the Company's business.
8.2 COVENANTS OF THE EMPLOYEE. In consideration of the acknowledgments
by the Employee, and in consideration of the compensation and benefits to be
paid or provided to the Employee by the Company, the Employee covenants that he
will not, directly or indirectly:
(a) during the Employment Period, except in the course of his
employment hereunder, and during the Post-Employment Period, engage or
invest in, own, manage, operate, finance, control, or participate in
the ownership, management, operation, financing, or control of, be
employed by, associated with, or in any manner connected with, lend the
Employee's name or any similar name to, lend Employee's credit to or
render services or advice to, any Competitive Business within the
Territory; provided, however, that the Employee may purchase or
otherwise acquire up to (but not more than) one percent of any class of
securities of any enterprise (but without otherwise participating in
the activities of such enterprise) if such securities are listed on any
national or regional securities exchange or have been registered under
Section 12(g) of the Securities Exchange Act of 1934;
(b) whether for the Employee's own account or for the account of
any other Person, at any time during the Employment Period and the
Post-Employment Period, solicit business of the same or similar type
being carried on by the Company, from any Person known by the Employee
to be a customer of the Company, whether or not the Employee had
personal contact with such Person during and by reason of the
Employee's employment with the Company;
(c) whether for the Employee's own account or the account of any
other Person at any time during the Employment Period and the
Post-Employment Period, solicit, employ, or otherwise engage as an
employee, independent contractor, or otherwise, any person who is or
was an employee of the Company at any time during the Employment Period
or in any manner induce or attempt to induce any employee of the
Company to terminate his or her employment with the Company; or at any
time during the Employment Period and the Post-Employment Period,
interfere with the Company's relationship with any person, including
any person who at any time during the Employment Period was an
employee, contractor, supplier, or customer of the Company;
(d) at any time during the Employment Period and the
Post-Employment Period, disparage the Company or any of its
shareholders, directors, officers, employees, or agents.
8.3 DIVISIBLE COVENANTS. If any covenant in Section 8.2 is held to be
unreasonable, arbitrary, or against public policy, such covenant will be
considered to be divisible with respect to scope, time, and geographic area, and
such lesser scope, time, or geographic area, or all of them, as a court of
competent jurisdiction may determine to be reasonable, not arbitrary, and not
against public policy, will be effective, binding, and enforceable against the
Employee.
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8.4 EXTENSION OF COVENANTS. The period of time applicable to any
covenant in Section 8.2 will be extended by the duration of any violation by the
Employee of such covenant.
8.5 NOTICES. The Employee will, while the covenants under Section 8.2
are in effect, give notice to the Company, within ten days after accepting any
other employment, of the identity of the Employee's new employer. The Company
may notify such new employer that the Employee is bound by this Agreement and,
at the Company's election, furnish such new employer with a copy of this
Agreement or relevant portions thereof.
9. GENERAL PROVISIONS
9.1 INJUNCTIVE RELIEF AND ADDITIONAL REMEDY. The Employee acknowledges
that the injury that would be suffered by the Company as a result of a breach of
the provisions of this Agreement (including any provision of Sections 7 and 8)
would be irreparable and that an award of monetary damages to the Company for
such a breach would be an inadequate remedy. Consequently, the Company will have
the right, in addition to any other rights it may have, to obtain injunctive
relief to restrain any breach or threatened breach or otherwise to specifically
enforce any provision of this Agreement, and the Company will not be obligated
to post bond or other security in seeking such relief. Without limiting the
Company's rights under this Section 9 or any other remedies of the Company, if
the Employee breaches any of the provisions of Section 7 or 8, the Company will
have the right to cease making any payments otherwise due to the Employee under
this Agreement.
9.2 COVENANTS OF SECTIONS 7 AND 8 ARE ESSENTIAL AND INDEPENDENT
COVENANTS. The covenants by the Employee in Sections 7 and 8 are essential
elements of this Agreement, and without the Employee's agreement to comply with
such covenants, the Company would not have entered into this Agreement or
employed the Employee. The Company and the Employee have independently consulted
their respective counsel and have been advised in all respects concerning the
reasonableness and propriety of such covenants, with specific regard to the
nature of the business conducted by the Company. The Employee's covenants in
Sections 7 and 8 are independent covenants and the existence of any claim by the
Employee against the Company, under this Agreement or otherwise, will not excuse
the Employee's breach of any covenant in Section 7 or 8. If the Employee's
employment hereunder expires or is terminated, this Agreement will continue in
full force and effect as is necessary or appropriate to enforce the covenants
and agreements of the Employee in Sections 7 and 8.
9.3 REPRESENTATIONS AND WARRANTIES BY THE EMPLOYEE. The Employee
represents and warrants to the Company that the execution and delivery by the
Employee of this Agreement do not, and the performance by the Employee of the
Employee's obligations hereunder will not, with or without the giving of notice
or the passage of time, or both: (a) violate any judgment, writ, injunction, or
order of any court, arbitrator, or governmental agency applicable to the
Employee; or (b) conflict with, result in the breach of any provisions of or the
termination of, or constitute a default under, any agreement to which the
Employee is a party or by which the
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Employee is or may be bound.
9.4 OBLIGATIONS CONTINGENT ON PERFORMANCE. The obligations of the
Company hereunder, including its obligation to pay the compensation provided for
herein, are contingent upon the Employee's performance of the Employee's
obligations hereunder.
9.5 WAIVER. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by either
party in exercising any right, power, or privilege under this Agreement will
operate as a waiver of such right, power, or privilege, and no single or partial
exercise of any such right, power, or privilege will preclude any other or
further exercise of such right, power, or privilege or the exercise of any other
right, power, or privilege. To the maximum extent permitted by applicable law,
(a) no claim or right arising out of this Agreement can be discharged by one
party, in whole or in part, by a waiver or renunciation of the claim or right
unless in writing signed by the other party; (b) no waiver that may be given by
a party will be applicable except in the specific instance for which it is
given; and (c) no notice to or demand on one party will be deemed to be a waiver
of any obligation of such party or of the right of the party giving such notice
or demand to take further action without notice or demand as provided in this
Agreement.
9.6 BINDING EFFECT; DELEGATION OF DUTIES PROHIBITED. This Agreement
shall inure to the benefit of, and shall be binding upon, the parties hereto and
their respective successors, assigns, heirs, and legal representatives,
including any entity with which the Company may merge or consolidate or to which
all or substantially all of its assets may be transferred. The duties and
covenants of the Employee under this Agreement, being personal, may not be
delegated.
9.7 NOTICES. All notices and other communications under this Agreement
must be in writing and will be deemed to have been duly given when (a) delivered
by hand (with written confirmation of receipt), (b) sent by facsimile (with
written confirmation of receipt), provided that a copy is mailed by registered
mail, return receipt requested, or (c) when received by the addressee, if sent
by a nationally recognized overnight delivery service (receipt requested), in
the case of the Company to the attention of the President at the Company's
principal business office and in the case of the Employee to the address or
facsimile number set forth below (or to such other address or facsimile number
as the Employee may designate by notice to the Company):
2020 North Leonard Road
St. Joseph, MO 64506
9.8 ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the entire
agreement between the parties with respect to its subject matter and supersedes
all prior agreements and understandings, oral or written, between the parties
with respect to its subject matter. This Agreement may not be amended orally,
but only by an agreement in writing signed by each of the parties to this
Agreement.
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9.9 GOVERNING LAW. This Agreement will be governed by the laws of the
State of Missouri without regard to conflicts of laws principles.
9.10 JURISDICTION. Any action or proceeding seeking to enforce any
provision of, or based on any right arising out of, this Agreement may be
brought against either of the parties in the courts of the State of Missouri,
County of Jackson, or, if it has or can acquire jurisdiction, in the United
States District Court for the Western District of Missouri, and each of the
parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on either party anywhere in the world.
9.11 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement unless otherwise specified.
All words used in this Agreement will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
word "including" does not limit the preceding words or terms.
9.12 SEVERABILITY. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
9.13 COUNTERPARTS; EXECUTION BY FACSIMILE SIGNATURES. This Agreement
may be executed in one or more counterparts, each of which will be deemed to be
an original copy of this Agreement and all of which, when taken together, will
be deemed to constitute one and the same agreement. This Agreement may be
executed by facsimile signatures.
9.14 WAIVER OF JURY TRIAL. THE PARTIES HERETO HEREBY WAIVE A JURY TRIAL
IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date above first written above.
BIRCH TELECOM, INC.
By: /s/ David E. Scott
_____________________________________
David E. Scott, President
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/s/ Gary L. Chesser
________________________________________
Gary L. Chesser
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EXHIBIT 10.6
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made as of February
10, 1998 by BIRCH TELECOM, INC., a Delaware corporation (the "Company"), and
DAVID W. VRANICAR, an individual (the "Employee").
The Company and the Employee desire for the Employee to be employed by
the Company upon the terms and conditions set forth in this Agreement.
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For the purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1.
1.1 "AGREEMENT" shall mean this Employment Agreement, as amended
from time to time.
1.2 "AFFILIATE" shall mean:
(a) any partnership, limited liability company, corporation or
other entity if the Company owns more than 25% of the equity securities
or interests of such entity; or
(b) any such entity which owns more than 25% of the equity
securities of the Company (and, for the purpose of this Section 1.2,
any options to acquire equity securities shall be treated as having
been fully exercised, and any securities convertible into equity
securities shall be treated as having been fully converted).
1.3 "BENEFITS" shall mean as defined in Section 3.1(b).
1.4 "BOARD OF DIRECTORS" shall mean the board of directors of the
Company.
1.5 "COMPETITIVE BUSINESS" shall mean any business which directly
or indirectly provides any local exchange telecommunications service that is the
same as or substantially similar to any local exchange telecommunications
service provided by the Company.
1.6 "CAUSE" shall mean as defined in Section 6.3.
1.7 "CHANGE IN CONTROL" means any of the following: (i) the sale
of all or substantially all of the Company's (or its Affiliates') assets that
results in the liquidation of the Company and the payment of liquidating
distributions to the stockholders of the Company; (ii)
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the acquisition of the Company by another entity by means of a merger or
consolidation resulting in the exchange of the outstanding shares of the
Company's capital stock for securities or consideration issued or paid or caused
to be issued or paid by the acquiring entity or its subsidiary; or (iii) the
acquisition from one or more of the stockholders of the Company of more than 50%
of the voting stock of the Company by a single person or group of persons acting
together.
1.8 "CONFIDENTIAL INFORMATION" shall mean any and all:
(a) trade secrets concerning the business and affairs of the
Company, the Company's product and service specifications, data,
formulae, compositions, processes, designs, sketches, photographs,
maps, engineering studies, graphs, drawings, samples, inventions and
ideas, past, current, and planned research and development, current and
planned methods and processes, customer and supplier lists, current and
anticipated customer requirements, price lists, bid information, market
studies, business plans, computer software and programs (including
object code and source code), computer software and database
technologies, systems, structures, and architectures (and related
formulae, compositions, processes, improvements, devices, inventions,
discoveries, concepts, ideas, designs, methods and information), and
any other information, however documented, that is a trade secret
within the meaning of the Missouri Uniform Trade Secrets Act; and
(b) information concerning the business and affairs of the
Company (which includes without limitation, historical financial
statements, financial projections and budgets, historical and projected
sales, capital spending budgets and plans, the names and backgrounds of
key personnel and personnel training techniques and materials), however
documented; and
(c) notes, analysis, compilations, studies, summaries, and
other material prepared by or for the Company containing or based, in
whole or in part, on any information included in the foregoing.
1.9 "DISABILITY" shall mean as defined in Section 6.2.
1.10 "EMPLOYEE INVENTION" shall mean any idea, invention,
technique, modification, process, or improvement (whether patentable or not),
any industrial design (whether registerable or not), any mask work, however
fixed or encoded, that is suitable to be fixed, embedded or programmed in a
semiconductor product (whether recordable or not), and any work of authorship
(whether or not copyright protection may be obtained for it) created, conceived,
or developed by the Employee, either solely or in conjunction with others,
during the Employment Period, or a period that includes a portion of the
Employment Period, that relates in any way to, or is useful in any manner in,
the business then being conducted or proposed to be conducted by the Company,
and any such item created by the Employee, either solely or in conjunction with
others, following termination of the Employee's employment with the Company,
that is based
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upon or uses Confidential Information.
1.11 "EMPLOYMENT PERIOD" shall mean the term of the Employee's
employment under this Agreement.
1.12 "GOOD REASON" shall mean as defined in Section 6.4.
1.13 "PERSON" shall mean any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, or
governmental body.
1.14 "POST-EMPLOYMENT PERIOD" shall mean the one-year period beginning
on the date of termination of the Employee's employment with the Company.
1.15 "PROPRIETARY ITEMS" shall mean as defined in Section 7.2(a)(iv).
1.16 "SALARY" shall mean as defined in Section 3.1(a).
1.17 "TERRITORY" shall mean
(a) the states of Missouri and Kansas; and
(b) any metropolitan areas outside of Missouri and Kansas, if at
the time the Employee ceases to be employed by the Company (i) the
Company or any Affiliate is providing a local exchange
telecommunications service within the metropolitan area, or (ii) a
detailed business development plan has been prepared, or is in the
process of being prepared, by or on behalf of the Company, in order to
evaluate whether the Company should provide local exchange
telecommunications services within the metropolitan area within twelve
months after the date Employee ceases to be employed by the Company,
and the Board of Directors has not formally resolved against providing
such services in such metropolitan area.
2. EMPLOYMENT TERMS AND DUTIES
2.1 EMPLOYMENT. The Company hereby employs the Employee, and the
Employee hereby accepts employment by the Company, upon the terms and conditions
set forth in this Agreement.
2.2 TERM. Subject to the provisions of Section 6, the term of this
Agreement shall be one year. Thereafter, this Agreement shall be renewed
automatically from year to year unless either party shall have given written
notice of termination to the other party at least ninety (90) days prior to the
end of the current term of this Agreement.
2.3 DUTIES. The Employee will have such duties as are assigned or
delegated to the
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Employee by the Board of Directors and President and will serve as the Senior
Vice President of Business Development of the Company. The Employee will devote
substantially all his business time and attention to the business of the
Company, will act in good faith to promote the success of the Company's
business, and will cooperate fully with the Board of Directors and President in
the advancement of the best interests of the Company. Nothing in this Section
2.3, however, will prevent the Employee from engaging in additional activities
in connection with personal investments and community affairs that are not
inconsistent with the Employee's duties under this Agreement (which community
affairs shall be disclosed to and approved by the President). If the Employee
serves as a director of the Company or as a director or officer of any of its
Affiliates, the Employee will fulfill his duties as such director or officer
without additional compensation.
3. COMPENSATION
3.1 BASIC COMPENSATION.
(a) SALARY. The Employee will be paid an annual salary of $150,000
(the "Salary"), which will be payable in equal periodic installments
according to the Company's customary payroll practices, but no less
frequently than monthly.
(b) BENEFITS. The Employee will, during the Employment Period, be
permitted to participate in such pension, profit sharing, bonus, life
insurance, disability insurance, hospitalization, major medical, and
other employee benefit plans of the Company that may be in effect from
time to time, to the extent the Employee is eligible under the terms of
such plans (collectively, the "Benefits").
3.2 INCENTIVE COMPENSATION. The Employee shall be entitled to
participate in an incentive bonus program established by the Board of Directors
to measure and reward management for the financial performance of the Company.
4. FACILITIES AND EXPENSES
The Company will furnish the Employee office space, equipment, supplies, and
such other facilities and personnel as the Company deems necessary or
appropriate for the performance of the Employee's duties under this Agreement.
The Company will pay the Employee's dues in such professional societies and
organizations as the President deems appropriate, and will pay on behalf of the
Employee (or reimburse the Employee for) reasonable expenses incurred by the
Employee at the request of, or on behalf of, the Company in the performance of
the Employee's duties pursuant to this Agreement, and in accordance with the
Company's employment policies, including reasonable expenses incurred by the
Employee in attending conventions, seminars, and other business meetings, in
appropriate business entertainment activities, and for promotional expenses.
5. VACATIONS AND HOLIDAYS
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The Employee will be entitled to paid vacation in accordance with the vacation
policies of the Company in effect for its employee officers from time to time.
Vacation must be taken by the Employee at such time or times as approved by the
President. The Employee will also be entitled to the paid holidays set forth in
the Company's policies.
6. TERMINATION
6.1 EVENTS OF TERMINATION. The Employment Period, the Employee's
Salary, Benefits, and Incentive Compensation, and any and all other rights of
the Employee under this Agreement will terminate (except as otherwise provided
in this Section 6):
(a) upon the death of the Employee;
(b) upon the Disability of the Employee (as defined in Section
6.2) immediately upon notice from either party to the other;
(c) for Cause (as defined in Section 6.3), immediately upon notice
from the Company to the Employee, or at such later time as such notice
may specify;
(d) for Good Reason (as defined in Section 6.4) upon not less than
thirty days' prior notice from the Employee to the Company; or
(e) without Cause upon not less than thirty days' notice from the
Company to the Employee.
6.2 DEFINITION OF "DISABILITY." For purposes of Section 6.1, the
Employee will be deemed to have a "Disability" if, for physical or mental
reasons, the Employee is unable to perform the Employee's duties under this
Agreement for 120 consecutive days, or 180 days during any twelve month period,
as determined in accordance with this Section 6.2. The Disability of the
Employee will be determined by a medical doctor selected by written agreement of
the Company and the Employee upon the request of either party by notice to the
other. If the Company and the Employee cannot agree on the selection of a
medical doctor, each of them will select a medical doctor and the two medical
doctors will select a third medical doctor who will determine whether the
Employee has a Disability. The determination of the medical doctor selected
under this Section 6.2 will be binding on both parties. The Employee must submit
to a reasonable number of examinations by the medical doctor making the
determination of Disability under this Section 6.2, and to other specialists
designated by such medical doctor, and the Employee hereby authorizes the
disclosure and release to the Company of such determination and all supporting
medical records. If the Employee is not legally competent, the Employee's legal
guardian or duly authorized attorney-in-fact will act in the Employee's stead
under this Section 6.2 for the purposes of submitting the Employee to the
examinations, and providing the
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authorization of disclosure, required under this Section 6.2.
6.3 DEFINITION OF "CAUSE." For purposes of Section 6.1, the term
"Cause" means: (a) the Employee's breach of a material obligation under this
Agreement; (b) the Employee's failure to adhere in any material respect to any
written Company policy if such policy is material to the effective performance
by the Employee of his duties under this Agreement, and if the Employee has been
given a reasonable opportunity to cure his failure to comply within the
thirty-day period preceding termination of this Agreement, provided that if the
Employee cures his failure to comply with such a policy and then fails again to
comply with the same policy, no further opportunity to cure that failure shall
be required; (c) the appropriation (or attempted appropriation) of a material
business opportunity of the Company, including attempting to secure or securing
any personal profit in connection with any transaction entered into on behalf of
the Company (other than through stock options, bonuses and other incentives
provided by the Company to the Employee); (d) the misappropriation (or attempted
misappropriation) of any of the Company's funds or property; or (e) the
conviction of, or the entering of a guilty plea or plea of no contest with
respect to, a felony, or a crime involving moral turpitude, dishonesty, or
fraud.
6.4 DEFINITION OF "GOOD REASON." For purposes of Section 6.1, the term
"Good Reason" means any of the following: (a) the Company's breach of a material
obligation under this Agreement; (b) the assignment of the Employee without his
consent to a position, responsibilities, or duties of a materially lesser status
or degree of responsibility than his position, responsibilities, or duties at
the Effective Date; or (c) following a Change in Control, the mandatory
relocation of the Employee outside the greater Kansas City metropolitan area
without the consent of the Employee.
6.5 TERMINATION PAY. Effective upon the expiration or termination of
this Agreement, the Company will be obligated to pay the Employee (or, in the
event of his death, his designated beneficiary as defined below) only such
compensation as is provided in this Section 6.5. For purposes of this Section
6.5 the Employee's designated beneficiary will be such individual beneficiary or
trust, located at such address, as the Employee may designate by notice to the
Company from time to time or, if the Employee fails to give notice to the
Company of such a beneficiary, the Employee's estate. Notwithstanding the
preceding sentence, the Company will have no duty, in any circumstances, to
attempt to open an estate on behalf of the Employee, to determine whether any
beneficiary designated by the Employee is alive or to ascertain the address of
any such beneficiary, to determine the existence of any trust, to determine
whether any Person purporting to act as the Employee's personal representative
(or the trustee of a trust established by the Employee) is duly authorized to
act in that capacity, or to locate or attempt to locate any beneficiary,
personal representative, or trustee.
(a) TERMINATION BY THE EMPLOYEE FOR GOOD REASON OR BY THE COMPANY
WITHOUT CAUSE. If the Employee terminates this Agreement for Good
Reason, or if the Company terminates this Agreement other than for
Cause (but not because of the Disability or death of the Employee), or
if the Company notifies the Employee in accordance with Section 2.2
that this Agreement will not be renewed as of an applicable expiration
date, the
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Company will pay the Employee the Employee's Salary for the remainder,
if any, of the calendar month in which such termination is effective
and for twelve consecutive calendar months thereafter. Notwithstanding
the preceding sentence, if the Employee obtains other employment prior
to the end of the twelve months following the month in which the
termination or expiration is effective, he must promptly give notice
thereof to the Company, and the Salary payments under this Agreement
for any period after the Employee obtains other employment will be
reduced by the amount of the cash compensation received and to be
received by the Employee from the Employee's other employment for
services performed during such period.
(b) TERMINATION BY THE COMPANY FOR CAUSE. If the Company
terminates this Agreement for Cause, the Employee will be entitled to
receive his Salary only through the date such termination is effective.
(c) TERMINATION UPON DISABILITY. If this Agreement is terminated
by either party as a result of the Employee's Disability, as determined
under Section 6.2, the Company will pay the Employee his Salary through
the remainder of the calendar month during which such termination is
effective and for the lesser of (i) six consecutive months thereafter,
or (ii) the period until disability insurance benefits commence under
any disability insurance coverage furnished by the Company to the
Employee.
(d) TERMINATION UPON DEATH. If this Agreement is terminated
because of the Employee's death, the Employee will be entitled to
receive his Salary through the end of the calendar month in which his
death occurs.
(e) BENEFITS. Except as otherwise required by law, the Employee's
accrual of, or participation in plans providing for, the Benefits will
cease at the effective date of the termination of this Agreement, and
the Employee will be entitled to accrued Benefits pursuant to such
plans only as provided in such plans.
7. NON-DISCLOSURE COVENANT; EMPLOYEE INVENTIONS
7.1 ACKNOWLEDGMENTS BY THE EMPLOYEE. The Employee acknowledges that
(a) during the Employment Period and as a part of his employment, the Employee
will be afforded access to Confidential Information; (b) public disclosure of
such Confidential Information could have an adverse effect on the Company and
its business; (c) because the Employee possesses substantial technical expertise
and skill with respect to the Company's business, the Company desires to obtain
exclusive ownership of each Employee Invention, and the Company will be at a
substantial competitive disadvantage if it fails to acquire exclusive ownership
of each Employee Invention; and (d) the provisions of this Section 7 are
reasonable and necessary to prevent the improper use or disclosure of
Confidential Information and to provide the Company with exclusive ownership of
all Employee Inventions.
7.2 AGREEMENTS OF THE EMPLOYEE. In consideration of the compensation
and benefits
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to be paid or provided to the Employee by the Company under this Agreement, the
Employee covenants as follows:
(a) CONFIDENTIALITY.
(i) During and following the Employment Period, the
Employee will hold in confidence the Confidential Information
and will not disclose it to any Person except with the
specific prior written consent of the Company or except as
otherwise expressly permitted by the terms of this Agreement.
(ii) Any trade secrets of the Company will be
entitled to all of the protections and benefits under the
Missouri Uniform Trade Secrets Act and any other applicable
law. If any information that the Company deems to be a trade
secret is found by a court of competent jurisdiction not to be
a trade secret for purposes of this Agreement, such
information will, nevertheless, be considered Confidential
Information for purposes of this Agreement. The Employee
hereby waives any requirement that the Company submit proof of
the economic value of any trade secret or post a bond or other
security.
(iii) None of the foregoing obligations and
restrictions applies to any part of the Confidential
Information that the Employee demonstrates was or became
generally available to the public other than as a result of a
disclosure by the Employee or by any other Person bound by a
confidentiality obligation to the Company in respect of such
Confidential Information.
(iv) The Employee will not remove from the Company's
premises (except to the extent such removal is for purposes of
the performance of the Employee's duties at home or while
traveling, or except as otherwise specifically authorized by
the Company) any Company document, record, notebook, plan,
model, component, device, or computer software or code,
whether embodied in a disk or in any other form (collectively,
the "Proprietary Items"). The Employee recognizes that, as
between the Company and the Employee, all of the Proprietary
Items, whether or not developed by the Employee, are the
exclusive property of the Company. Upon termination of this
Agreement by either party, or upon the request of the Company
during the Employment Period, the Employee will return to the
Company all of the Proprietary Items in the Employee's
possession or subject to the Employee's control, and the
Employee shall not retain any copies, abstracts, sketches, or
other physical embodiment of any of the Proprietary Items.
(b) EMPLOYEE INVENTIONS. Each Employee Invention will belong
exclusively to the Company. The Employee acknowledges that all Employee
Inventions are works made for hire and are the property of the Company,
including any copyrights, patents, or other intellectual property
rights pertaining thereto. If it is determined that any such works are
not works made for hire, the Employee hereby assigns to the Company all
of
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the Employee's right, title, and interest, including all rights of
copyright, patent, and other intellectual property rights, to or in
such Employee Inventions. The Employee will promptly:
(i) disclose to the Company in writing any Employee
Invention;
(ii) assign to the Company or to a party designated
by the Company, at the Company's request and without
additional compensation, all of the Employee's right to the
Employee Invention for the United States and all foreign
jurisdictions;
(iii) execute and deliver to the Company such
applications, assignments, and other documents as the Company
may request in order to apply for and obtain patents or other
registrations with respect to any Employee Invention in the
United States and any foreign jurisdictions;
(iv) sign all other papers necessary to carry out the
above obligations; and
(v) give testimony and render any other assistance in
support of the Company's rights to any Employee Invention.
Notwithstanding anything to the contrary herein, provisions otherwise
requiring the Employee to assign to the Company any invention conceived
by the Employee shall not apply to an invention for which no equipment,
supplies, facilities or trade secret information of the Company was
used and which was developed entirely on the Employee's own time,
unless the invention relates to the business of the Company or to the
Company's actual or demonstrably anticipated research or development,
or the invention results from any work performed by the Employee for
the Company.
7.3 DISPUTES OR CONTROVERSIES. The Employee recognizes that should a
dispute or controversy arising from or relating to this Agreement be submitted
for adjudication to any court, arbitration panel, or other third party, the
preservation of the secrecy of Confidential Information may be jeopardized. All
pleadings, documents, testimony, and records relating to any such adjudication
will be maintained in secrecy and will be available for inspection by the
Company, the Employee, and their respective attorneys and experts, who will
agree, in advance and in writing, to receive and maintain all such information
in secrecy, except as may be limited by them in writing.
8. NON-COMPETITION AND NON-INTERFERENCE
8.1 ACKNOWLEDGMENTS BY THE EMPLOYEE. The Employee acknowledges that:
(a) the services to be performed by him under this Agreement are of a special,
unique, unusual, extraordinary, and intellectual character; (b) the Company
competes with other businesses that are or could be located in any part of the
Territory; and (c) the provisions of this Section 8 are
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reasonable and necessary to protect the Company's business.
8.2 COVENANTS OF THE EMPLOYEE. In consideration of the acknowledgments
by the Employee, and in consideration of the compensation and benefits to be
paid or provided to the Employee by the Company, the Employee covenants that he
will not, directly or indirectly:
(a) during the Employment Period, except in the course of his
employment hereunder, and during the Post-Employment Period, engage or
invest in, own, manage, operate, finance, control, or participate in
the ownership, management, operation, financing, or control of, be
employed by, associated with, or in any manner connected with, lend the
Employee's name or any similar name to, lend Employee's credit to or
render services or advice to, any Competitive Business within the
Territory; provided, however, that the Employee may purchase or
otherwise acquire up to (but not more than) one percent of any class of
securities of any enterprise (but without otherwise participating in
the activities of such enterprise) if such securities are listed on any
national or regional securities exchange or have been registered under
Section 12(g) of the Securities Exchange Act of 1934;
(b) whether for the Employee's own account or for the account of
any other Person, at any time during the Employment Period and the
Post-Employment Period, solicit business of the same or similar type
being carried on by the Company, from any Person known by the Employee
to be a customer of the Company, whether or not the Employee had
personal contact with such Person during and by reason of the
Employee's employment with the Company;
(c) whether for the Employee's own account or the account of any
other Person at any time during the Employment Period and the
Post-Employment Period, solicit, employ, or otherwise engage as an
employee, independent contractor, or otherwise, any person who is or
was an employee of the Company at any time during the Employment Period
or in any manner induce or attempt to induce any employee of the
Company to terminate his or her employment with the Company; or at any
time during the Employment Period and the Post-Employment Period,
interfere with the Company's relationship with any person, including
any person who at any time during the Employment Period was an
employee, contractor, supplier, or customer of the Company;
(d) at any time during the Employment Period and the
Post-Employment Period, disparage the Company or any of its
shareholders, directors, officers, employees, or agents.
8.3 DIVISIBLE COVENANTS. If any covenant in Section 8.2 is held to be
unreasonable, arbitrary, or against public policy, such covenant will be
considered to be divisible with respect to scope, time, and geographic area, and
such lesser scope, time, or geographic area, or all of them, as a court of
competent jurisdiction may determine to be reasonable, not arbitrary, and not
against public policy, will be effective, binding, and enforceable against the
Employee.
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8.4 EXTENSION OF COVENANTS. The period of time applicable to any
covenant in Section 8.2 will be extended by the duration of any violation by the
Employee of such covenant.
8.5 NOTICES. The Employee will, while the covenants under Section 8.2
are in effect, give notice to the Company, within ten days after accepting any
other employment, of the identity of the Employee's new employer. The Company
may notify such new employer that the Employee is bound by this Agreement and,
at the Company's election, furnish such new employer with a copy of this
Agreement or relevant portions thereof.
9. GENERAL PROVISIONS
9.1 INJUNCTIVE RELIEF AND ADDITIONAL REMEDY. The Employee acknowledges
that the injury that would be suffered by the Company as a result of a breach of
the provisions of this Agreement (including any provision of Sections 7 and 8)
would be irreparable and that an award of monetary damages to the Company for
such a breach would be an inadequate remedy. Consequently, the Company will have
the right, in addition to any other rights it may have, to obtain injunctive
relief to restrain any breach or threatened breach or otherwise to specifically
enforce any provision of this Agreement, and the Company will not be obligated
to post bond or other security in seeking such relief. Without limiting the
Company's rights under this Section 9 or any other remedies of the Company, if
the Employee breaches any of the provisions of Section 7 or 8, the Company will
have the right to cease making any payments otherwise due to the Employee under
this Agreement.
9.2 COVENANTS OF SECTIONS 7 AND 8 ARE ESSENTIAL AND INDEPENDENT
COVENANTS. The covenants by the Employee in Sections 7 and 8 are essential
elements of this Agreement, and without the Employee's agreement to comply with
such covenants, the Company would not have entered into this Agreement or
employed the Employee. The Company and the Employee have independently consulted
their respective counsel and have been advised in all respects concerning the
reasonableness and propriety of such covenants, with specific regard to the
nature of the business conducted by the Company. The Employee's covenants in
Sections 7 and 8 are independent covenants and the existence of any claim by the
Employee against the Company, under this Agreement or otherwise, will not excuse
the Employee's breach of any covenant in Section 7 or 8. If the Employee's
employment hereunder expires or is terminated, this Agreement will continue in
full force and effect as is necessary or appropriate to enforce the covenants
and agreements of the Employee in Sections 7 and 8.
9.3 REPRESENTATIONS AND WARRANTIES BY THE EMPLOYEE. The Employee
represents and warrants to the Company that the execution and delivery by the
Employee of this Agreement do not, and the performance by the Employee of the
Employee's obligations hereunder will not, with or without the giving of notice
or the passage of time, or both: (a) violate any judgment, writ, injunction, or
order of any court, arbitrator, or governmental agency applicable to the
Employee; or (b) conflict with, result in the breach of any provisions of or the
termination of, or constitute a default under, any agreement to which the
Employee is a party or by which the
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Employee is or may be bound.
9.4 OBLIGATIONS CONTINGENT ON PERFORMANCE. The obligations of the
Company hereunder, including its obligation to pay the compensation provided for
herein, are contingent upon the Employee's performance of the Employee's
obligations hereunder.
9.5 WAIVER. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by either
party in exercising any right, power, or privilege under this Agreement will
operate as a waiver of such right, power, or privilege, and no single or partial
exercise of any such right, power, or privilege will preclude any other or
further exercise of such right, power, or privilege or the exercise of any other
right, power, or privilege. To the maximum extent permitted by applicable law,
(a) no claim or right arising out of this Agreement can be discharged by one
party, in whole or in part, by a waiver or renunciation of the claim or right
unless in writing signed by the other party; (b) no waiver that may be given by
a party will be applicable except in the specific instance for which it is
given; and (c) no notice to or demand on one party will be deemed to be a waiver
of any obligation of such party or of the right of the party giving such notice
or demand to take further action without notice or demand as provided in this
Agreement.
9.6 BINDING EFFECT; DELEGATION OF DUTIES PROHIBITED. This Agreement
shall inure to the benefit of, and shall be binding upon, the parties hereto and
their respective successors, assigns, heirs, and legal representatives,
including any entity with which the Company may merge or consolidate or to which
all or substantially all of its assets may be transferred. The duties and
covenants of the Employee under this Agreement, being personal, may not be
delegated.
9.7 NOTICES. All notices and other communications under this Agreement
must be in writing and will be deemed to have been duly given when (a) delivered
by hand (with written confirmation of receipt), (b) sent by facsimile (with
written confirmation of receipt), provided that a copy is mailed by registered
mail, return receipt requested, or (c) when received by the addressee, if sent
by a nationally recognized overnight delivery service (receipt requested), in
the case of the Company to the attention of the President at the Company's
principal business office and in the case of the Employee to the address or
facsimile number set forth below (or to such other address or facsimile number
as the Employee may designate by notice to the Company):
12116 Westgate
Overland Park, KS 66213
9.8 ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the entire
agreement between the parties with respect to its subject matter and supersedes
all prior agreements and understandings, oral or written, between the parties
with respect to its subject matter. This Agreement may not be amended orally,
but only by an agreement in writing signed by each of the parties to this
Agreement.
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9.9 GOVERNING LAW. This Agreement will be governed by the laws of the
State of Missouri without regard to conflicts of laws principles.
9.10 JURISDICTION. Any action or proceeding seeking to enforce any
provision of, or based on any right arising out of, this Agreement may be
brought against either of the parties in the courts of the State of Missouri,
County of Jackson, or, if it has or can acquire jurisdiction, in the United
States District Court for the Western District of Missouri, and each of the
parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on either party anywhere in the world.
9.11 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement unless otherwise specified.
All words used in this Agreement will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
word "including" does not limit the preceding words or terms.
9.12 SEVERABILITY. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
9.13 COUNTERPARTS; EXECUTION BY FACSIMILE SIGNATURES. This Agreement
may be executed in one or more counterparts, each of which will be deemed to be
an original copy of this Agreement and all of which, when taken together, will
be deemed to constitute one and the same agreement. This Agreement may be
executed by facsimile signatures.
9.14 WAIVER OF JURY TRIAL. THE PARTIES HERETO HEREBY WAIVE A JURY TRIAL
IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date above first written above.
BIRCH TELECOM, INC.
/s/ David E. Scott
By:_____________________________________
David E. Scott, President
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/s/ David W. Vranicar
_____________________________________
David W. Vranicar
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EXHIBIT 10.7
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made as of February
10, 1998 by BIRCH TELECOM, INC., a Delaware corporation (the "Company"), and
STEPHEN L. SAUDER, an individual (the "Employee").
The Company and the Employee desire for the Employee to be employed by
the Company upon the terms and conditions set forth in this Agreement.
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For the purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1.
1.1 "AGREEMENT" shall mean this Employment Agreement, as amended from
time to time.
1.2 "AFFILIATE" shall mean:
(a) any partnership, limited liability company, corporation or
other entity if the Company owns more than 25% of the equity securities
or interests of such entity; or
(b) any such entity which owns more than 25% of the equity
securities of the Company (and, for the purpose of this Section 1.2,
any options to acquire equity securities shall be treated as having
been fully exercised, and any securities convertible into equity
securities shall be treated as having been fully converted).
1.3 "BENEFITS" shall mean as defined in Section 3.1(b).
1.4 "BOARD OF DIRECTORS" shall mean the board of directors of the
Company.
1.5 "COMPETITIVE BUSINESS" shall mean any business which directly or
indirectly provides any local exchange telecommunications service that is the
same as or substantially similar to any local exchange telecommunications
service provided by the Company.
1.6 "CAUSE" shall mean as defined in Section 6.3.
1.7 "CHANGE IN CONTROL" means any of the following: (i) the sale of all
or substantially all of the Company's (or its Affiliates') assets that results
in the liquidation of the Company and the payment of liquidating distributions
to the stockholders of the Company; (ii)
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the acquisition of the Company by another entity by means of a merger or
consolidation resulting in the exchange of the outstanding shares of the
Company's capital stock for securities or consideration issued or paid or caused
to be issued or paid by the acquiring entity or its subsidiary; or (iii) the
acquisition from one or more of the stockholders of the Company of more than 50%
of the voting stock of the Company by a single person or group of persons acting
together.
1.8 "CONFIDENTIAL INFORMATION" shall mean any and all:
(a) trade secrets concerning the business and affairs of the
Company, the Company's product and service specifications, data,
formulae, compositions, processes, designs, sketches, photographs,
maps, engineering studies, graphs, drawings, samples, inventions and
ideas, past, current, and planned research and development, current and
planned methods and processes, customer and supplier lists, current and
anticipated customer requirements, price lists, bid information, market
studies, business plans, computer software and programs (including
object code and source code), computer software and database
technologies, systems, structures, and architectures (and related
formulae, compositions, processes, improvements, devices, inventions,
discoveries, concepts, ideas, designs, methods and information), and
any other information, however documented, that is a trade secret
within the meaning of the Kansas Uniform Trade Secrets Act; and
(b) information concerning the business and affairs of the Company
(which includes without limitation, historical financial statements,
financial projections and budgets, historical and projected sales,
capital spending budgets and plans, the names and backgrounds of key
personnel and personnel training techniques and materials), however
documented; and
(c) notes, analysis, compilations, studies, summaries, and other
material prepared by or for the Company containing or based, in whole
or in part, on any information included in the foregoing.
1.9 "DISABILITY" shall mean as defined in Section 6.2.
1.10 "EMPLOYEE INVENTION" shall mean any idea, invention, technique,
modification, process, or improvement (whether patentable or not), any
industrial design (whether registerable or not), any mask work, however fixed or
encoded, that is suitable to be fixed, embedded or programmed in a semiconductor
product (whether recordable or not), and any work of authorship (whether or not
copyright protection may be obtained for it) created, conceived, or developed by
the Employee, either solely or in conjunction with others, during the Employment
Period, or a period that includes a portion of the Employment Period, that
relates in any way to, or is useful in any manner in, the business then being
conducted or proposed to be conducted by the Company, and any such item created
by the Employee, either solely or in conjunction with others, following
termination of the Employee's employment with the Company, that is based
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upon or uses Confidential Information.
1.11 "EMPLOYMENT PERIOD" shall mean the term of the Employee's
employment under this Agreement.
1.12 "GOOD REASON" shall mean as defined in Section 6.4.
1.13 "PERSON" shall mean any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, or
governmental body.
1.14 "POST-EMPLOYMENT PERIOD" shall mean the three-year period
beginning on the date of termination of the Employee's employment with the
Company.
1.15 "PROPRIETARY ITEMS" shall mean as defined in Section 7.2(a)(iv).
1.16 "SALARY" shall mean as defined in Section 3.1(a).
1.17 "TERRITORY" shall mean
(a) the states of Missouri and Kansas; and
(b) any metropolitan areas outside of Missouri and Kansas, if at
the time the Employee ceases to be employed by the Company (i) the
Company or any Affiliate is providing a local exchange
telecommunications service within the metropolitan area, or (ii) a
detailed business development plan has been prepared, or is in the
process of being prepared, by or on behalf of the Company, in order to
evaluate whether the Company should provide local exchange
telecommunications services within the metropolitan area within twelve
months after the date Employee ceases to be employed by the Company,
and the Board of Directors has not formally resolved against providing
such services in such metropolitan area.
2. EMPLOYMENT TERMS AND DUTIES
2.1 EMPLOYMENT. The Company hereby employs the Employee, and the
Employee hereby accepts employment by the Company, upon the terms and conditions
set forth in this Agreement.
2.2 TERM. Subject to the provisions of Section 6, the term of this
Agreement shall be one year. Thereafter, this Agreement shall be renewed
automatically from year to year unless either party shall have given written
notice of termination to the other party at least ninety (90) days prior to the
end of the current term of this Agreement.
2.3 DUTIES. The Employee will have such duties as are assigned or
delegated to the
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Employee by the Board of Directors and President and will serve as the Vice
President of the Company. The Employee will devote substantially all his
business time and attention to the business of the Company, will act in good
faith to promote the success of the Company's business, and will cooperate fully
with the Board of Directors and President in the advancement of the best
interests of the Company. Nothing in this Section 2.3, however, will prevent the
Employee from engaging in additional activities in connection with personal
investments and community affairs that are not inconsistent with the Employee's
duties under this Agreement (which community affairs shall be disclosed to and
approved by the President). If the Employee serves as a director of the Company
or as a director or officer of any of its Affiliates, the Employee will fulfill
his duties as such director or officer without additional compensation.
3. COMPENSATION
3.1 BASIC COMPENSATION.
(a) SALARY. The Employee will be paid an annual salary of $213,000
(the "Salary"), which will be payable in equal periodic installments
according to the Company's customary payroll practices, but no less
frequently than monthly.
(b) BENEFITS. The Employee will, during the Employment Period, be
permitted to participate in such pension, profit sharing, bonus, life
insurance, disability insurance, hospitalization, major medical, and
other employee benefit plans of the Company that may be in effect from
time to time, to the extent the Employee is eligible under the terms of
such plans (collectively, the "Benefits").
3.2 INCENTIVE COMPENSATION. The Employee shall be entitled to
participate in an incentive bonus program established by the Board of Directors
to measure and reward management for the financial performance of the Company.
4. FACILITIES AND EXPENSES
The Company will furnish the Employee office space, equipment, supplies, and
such other facilities and personnel as the Company deems necessary or
appropriate for the performance of the Employee's duties under this Agreement.
The Company will pay the Employee's dues in such professional societies and
organizations as the President deems appropriate, and will pay on behalf of the
Employee (or reimburse the Employee for) reasonable expenses incurred by the
Employee at the request of, or on behalf of, the Company in the performance of
the Employee's duties pursuant to this Agreement, and in accordance with the
Company's employment policies, including reasonable expenses incurred by the
Employee in attending conventions, seminars, and other business meetings, in
appropriate business entertainment activities, and for promotional expenses.
5. VACATIONS AND HOLIDAYS
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The Employee will be entitled to paid vacation in accordance with the vacation
policies of the Company in effect for its employee officers from time to time.
Vacation must be taken by the Employee at such time or times as approved by the
President. The Employee will also be entitled to the paid holidays set forth in
the Company's policies.
6. TERMINATION
6.1 EVENTS OF TERMINATION. The Employment Period, the Employee's
Salary, Benefits, and Incentive Compensation, and any and all other rights of
the Employee under this Agreement will terminate (except as otherwise provided
in this Section 6):
(a) upon the death of the Employee;
(b) upon the Disability of the Employee (as defined in Section
6.2) immediately upon notice from either party to the other;
(c) for Cause (as defined in Section 6.3), immediately upon notice
from the Company to the Employee, or at such later time as such notice
may specify;
(d) for Good Reason (as defined in Section 6.4) upon not less than
thirty days' prior notice from the Employee to the Company; or
(e) without Cause upon not less than thirty days' notice from the
Company to the Employee.
6.2 DEFINITION OF "DISABILITY." For purposes of Section 6.1, the
Employee will be deemed to have a "Disability" if, for physical or mental
reasons, the Employee is unable to perform the Employee's duties under this
Agreement for 120 consecutive days, or 180 days during any twelve month period,
as determined in accordance with this Section 6.2. The Disability of the
Employee will be determined by a medical doctor selected by written agreement of
the Company and the Employee upon the request of either party by notice to the
other. If the Company and the Employee cannot agree on the selection of a
medical doctor, each of them will select a medical doctor and the two medical
doctors will select a third medical doctor who will determine whether the
Employee has a Disability. The determination of the medical doctor selected
under this Section 6.2 will be binding on both parties. The Employee must submit
to a reasonable number of examinations by the medical doctor making the
determination of Disability under this Section 6.2, and to other specialists
designated by such medical doctor, and the Employee hereby authorizes the
disclosure and release to the Company of such determination and all supporting
medical records. If the Employee is not legally competent, the Employee's legal
guardian or duly authorized attorney-in-fact will act in the Employee's stead
under this Section 6.2 for the purposes of submitting the Employee to the
examinations, and providing the authorization of disclosure, required under this
Section 6.2.
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6.3 DEFINITION OF "CAUSE." For purposes of Section 6.1, the term
"Cause" means: (a) the Employee's breach of a material obligation under this
Agreement; (b) the Employee's failure to adhere in any material respect to any
written Company policy if such policy is material to the effective performance
by the Employee of his duties under this Agreement, and if the Employee has been
given a reasonable opportunity to cure his failure to comply within the
thirty-day period preceding termination of this Agreement, provided that if the
Employee cures his failure to comply with such a policy and then fails again to
comply with the same policy, no further opportunity to cure that failure shall
be required; (c) the appropriation (or attempted appropriation) of a material
business opportunity of the Company, including attempting to secure or securing
any personal profit in connection with any transaction entered into on behalf of
the Company (other than through stock options, bonuses and other incentives
provided by the Company to the Employee); (d) the misappropriation (or attempted
misappropriation) of any of the Company's funds or property; or (e) the
conviction of, or the entering of a guilty plea or plea of no contest with
respect to, a felony, or a crime involving moral turpitude, dishonesty, or
fraud.
6.4 DEFINITION OF "GOOD REASON." For purposes of Section 6.1, the term
"Good Reason" means any of the following: (a) the Company's breach of a material
obligation under this Agreement; (b) the assignment of the Employee without his
consent to a position, responsibilities, or duties of a materially lesser status
or degree of responsibility than his position, responsibilities, or duties at
the Effective Date; or (c) the mandatory relocation of the Employee outside the
Emporia, Kansas area without the consent of the Employee.
6.5 TERMINATION PAY. Effective upon the expiration or termination of
this Agreement, the Company will be obligated to pay the Employee (or, in the
event of his death, his designated beneficiary as defined below) only such
compensation as is provided in this Section 6.5. For purposes of this Section
6.5 the Employee's designated beneficiary will be such individual beneficiary or
trust, located at such address, as the Employee may designate by notice to the
Company from time to time or, if the Employee fails to give notice to the
Company of such a beneficiary, the Employee's estate. Notwithstanding the
preceding sentence, the Company will have no duty, in any circumstances, to
attempt to open an estate on behalf of the Employee, to determine whether any
beneficiary designated by the Employee is alive or to ascertain the address of
any such beneficiary, to determine the existence of any trust, to determine
whether any Person purporting to act as the Employee's personal representative
(or the trustee of a trust established by the Employee) is duly authorized to
act in that capacity, or to locate or attempt to locate any beneficiary,
personal representative, or trustee.
(a) TERMINATION BY THE EMPLOYEE FOR GOOD REASON OR BY THE COMPANY
WITHOUT CAUSE. If the Employee terminates this Agreement for Good
Reason, or if the Company terminates this Agreement other than for
Cause (but not because of the Disability or death of the Employee), or
if the Company notifies the Employee in accordance with Section 2.2
that this Agreement will not be renewed as of an applicable expiration
date, the Company will pay the Employee the Employee's Salary for the
remainder, if any, of the calendar month in which such termination is
effective and for twelve consecutive
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calendar months thereafter. Notwithstanding the preceding sentence, if
the Employee obtains other employment prior to the end of the twelve
months following the month in which the termination or expiration is
effective, he must promptly give notice thereof to the Company, and the
Salary payments under this Agreement for any period after the Employee
obtains other employment will be reduced by the amount of the cash
compensation received and to be received by the Employee from the
Employee's other employment for services performed during such period.
(b) TERMINATION BY THE COMPANY FOR CAUSE. If the Company
terminates this Agreement for Cause, the Employee will be entitled to
receive his Salary only through the date such termination is effective.
(c) TERMINATION UPON DISABILITY. If this Agreement is terminated
by either party as a result of the Employee's Disability, as determined
under Section 6.2, the Company will pay the Employee his Salary through
the remainder of the calendar month during which such termination is
effective and for the lesser of (i) six consecutive months thereafter,
or (ii) the period until disability insurance benefits commence under
any disability insurance coverage furnished by the Company to the
Employee.
(d) TERMINATION UPON DEATH. If this Agreement is terminated
because of the Employee's death, the Employee will be entitled to
receive his Salary through the end of the calendar month in which his
death occurs.
(e) BENEFITS. Except as otherwise required by law, the Employee's
accrual of, or participation in plans providing for, the Benefits will
cease at the effective date of the termination of this Agreement, and
the Employee will be entitled to accrued Benefits pursuant to such
plans only as provided in such plans.
7. NON-DISCLOSURE COVENANT; EMPLOYEE INVENTIONS
7.1 ACKNOWLEDGMENTS BY THE EMPLOYEE. The Employee acknowledges that (a)
during the Employment Period and as a part of his employment, the Employee will
be afforded access to Confidential Information; (b) public disclosure of such
Confidential Information could have an adverse effect on the Company and its
business; (c) because the Employee possesses substantial technical expertise and
skill with respect to the Company's business, the Company desires to obtain
exclusive ownership of each Employee Invention, and the Company will be at a
substantial competitive disadvantage if it fails to acquire exclusive ownership
of each Employee Invention; and (d) the provisions of this Section 7 are
reasonable and necessary to prevent the improper use or disclosure of
Confidential Information and to provide the Company with exclusive ownership of
all Employee Inventions.
7.2 AGREEMENTS OF THE EMPLOYEE. In consideration of the compensation
and benefits to be paid or provided to the Employee by the Company under this
Agreement, the Employee covenants as follows:
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(a) CONFIDENTIALITY.
(i) During and following the Employment Period, the
Employee will hold in confidence the Confidential Information
and will not disclose it to any Person except with the
specific prior written consent of the Company or except as
otherwise expressly permitted by the terms of this Agreement.
(ii) Any trade secrets of the Company will be
entitled to all of the protections and benefits under the
Kansas Uniform Trade Secrets Act and any other applicable law.
If any information that the Company deems to be a trade secret
is found by a court of competent jurisdiction not to be a
trade secret for purposes of this Agreement, such information
will, nevertheless, be considered Confidential Information for
purposes of this Agreement. The Employee hereby waives any
requirement that the Company submit proof of the economic
value of any trade secret or post a bond or other security.
(iii) None of the foregoing obligations and
restrictions applies to any part of the Confidential
Information that the Employee demonstrates was or became
generally available to the public other than as a result of a
disclosure by the Employee or by any other Person bound by a
confidentiality obligation to the Company in respect of such
Confidential Information.
(iv) The Employee will not remove from the Company's
premises (except to the extent such removal is for purposes of
the performance of the Employee's duties at home or while
traveling, or except as otherwise specifically authorized by
the Company) any Company document, record, notebook, plan,
model, component, device, or computer software or code,
whether embodied in a disk or in any other form (collectively,
the "Proprietary Items"). The Employee recognizes that, as
between the Company and the Employee, all of the Proprietary
Items, whether or not developed by the Employee, are the
exclusive property of the Company. Upon termination of this
Agreement by either party, or upon the request of the Company
during the Employment Period, the Employee will return to the
Company all of the Proprietary Items in the Employee's
possession or subject to the Employee's control, and the
Employee shall not retain any copies, abstracts, sketches, or
other physical embodiment of any of the Proprietary Items.
(b) EMPLOYEE INVENTIONS. Each Employee Invention will belong
exclusively to the Company. The Employee acknowledges that all Employee
Inventions are works made for hire and are the property of the Company,
including any copyrights, patents, or other intellectual property
rights pertaining thereto. If it is determined that any such works are
not works made for hire, the Employee hereby assigns to the Company all
of the Employee's right, title, and interest, including all rights of
copyright, patent, and other intellectual property rights, to or in
such Employee Inventions. The Employee will
8
<PAGE> 9
promptly:
(i) disclose to the Company in writing any Employee
Invention;
(ii) assign to the Company or to a party designated
by the Company, at the Company's request and without
additional compensation, all of the Employee's right to the
Employee Invention for the United States and all foreign
jurisdictions;
(iii) execute and deliver to the Company such
applications, assignments, and other documents as the Company
may request in order to apply for and obtain patents or other
registrations with respect to any Employee Invention in the
United States and any foreign jurisdictions;
(iv) sign all other papers necessary to carry out the
above obligations; and
(v) give testimony and render any other assistance in
support of the Company's rights to any Employee Invention.
Notwithstanding anything to the contrary herein, provisions otherwise
requiring the Employee to assign to the Company any invention conceived
by the Employee shall not apply to an invention for which no equipment,
supplies, facilities or trade secret information of the Company was
used and which was developed entirely on the Employee's own time,
unless the invention relates to the business of the Company or to the
Company's actual or demonstrably anticipated research or development,
or the invention results from any work performed by the Employee for
the Company.
The Employee's attention is specifically directed to the immediately
preceding paragraph, which constitutes the notice required by K.S.A.
Section 44-130.
7.3 DISPUTES OR CONTROVERSIES. The Employee recognizes that should a
dispute or controversy arising from or relating to this Agreement be submitted
for adjudication to any court, arbitration panel, or other third party, the
preservation of the secrecy of Confidential Information may be jeopardized. All
pleadings, documents, testimony, and records relating to any such adjudication
will be maintained in secrecy and will be available for inspection by the
Company, the Employee, and their respective attorneys and experts, who will
agree, in advance and in writing, to receive and maintain all such information
in secrecy, except as may be limited by them in writing.
8. NON-COMPETITION AND NON-INTERFERENCE
8.1 ACKNOWLEDGMENTS BY THE EMPLOYEE. The Employee acknowledges that:
(a) the services to be performed by him under this Agreement are of a special,
unique, unusual, extraordinary, and intellectual character; (b) the Company
competes with other businesses that
9
<PAGE> 10
are or could be located in any part of the Territory; and (c) the provisions of
this Section 8 are reasonable and necessary to protect the Company's business.
8.2 COVENANTS OF THE EMPLOYEE. In consideration of the acknowledgments
by the Employee, and in consideration of the compensation and benefits to be
paid or provided to the Employee by the Company, the Employee covenants that he
will not, directly or indirectly:
(a) during the Employment Period, except in the course of his
employment hereunder, and during the Post-Employment Period, engage or
invest in, own, manage, operate, finance, control, or participate in
the ownership, management, operation, financing, or control of, be
employed by, associated with, or in any manner connected with, lend the
Employee's name or any similar name to, lend Employee's credit to or
render services or advice to, any Competitive Business within the
Territory; provided, however, that the Employee may purchase or
otherwise acquire up to (but not more than) one percent of any class of
securities of any enterprise (but without otherwise participating in
the activities of such enterprise) if such securities are listed on any
national or regional securities exchange or have been registered under
Section 12(g) of the Securities Exchange Act of 1934;
(b) whether for the Employee's own account or for the account of
any other Person, at any time during the Employment Period and the
Post-Employment Period, solicit business of the same or similar type
being carried on by the Company, from any Person known by the Employee
to be a customer of the Company, whether or not the Employee had
personal contact with such Person during and by reason of the
Employee's employment with the Company;
(c) whether for the Employee's own account or the account of any
other Person at any time during the Employment Period and the
Post-Employment Period, solicit, employ, or otherwise engage as an
employee, independent contractor, or otherwise, any person who is or
was an employee of the Company at any time during the Employment Period
or in any manner induce or attempt to induce any employee of the
Company to terminate his or her employment with the Company; or at any
time during the Employment Period and the Post-Employment Period,
interfere with the Company's relationship with any person, including
any person who at any time during the Employment Period was an
employee, contractor, supplier, or customer of the Company;
(d) at any time during the Employment Period and the
Post-Employment Period, disparage the Company or any of its
shareholders, directors, officers, employees, or agents.
8.3 DIVISIBLE COVENANTS. If any covenant in Section 8.2 is held to be
unreasonable, arbitrary, or against public policy, such covenant will be
considered to be divisible with respect to scope, time, and geographic area, and
such lesser scope, time, or geographic area, or all of them, as a court of
competent jurisdiction may determine to be reasonable, not arbitrary, and not
10
<PAGE> 11
against public policy, will be effective, binding, and enforceable against the
Employee.
8.4 EXTENSION OF COVENANTS. The period of time applicable to any
covenant in Section 8.2 will be extended by the duration of any violation by the
Employee of such covenant.
8.5 NOTICES. The Employee will, while the covenants under Section 8.2
are in effect, give notice to the Company, within ten days after accepting any
other employment, of the identity of the Employee's new employer. The Company
may notify such new employer that the Employee is bound by this Agreement and,
at the Company's election, furnish such new employer with a copy of this
Agreement or relevant portions thereof.
9. GENERAL PROVISIONS
9.1 INJUNCTIVE RELIEF AND ADDITIONAL REMEDY. The Employee acknowledges
that the injury that would be suffered by the Company as a result of a breach of
the provisions of this Agreement (including any provision of Sections 7 and 8)
would be irreparable and that an award of monetary damages to the Company for
such a breach would be an inadequate remedy. Consequently, the Company will have
the right, in addition to any other rights it may have, to obtain injunctive
relief to restrain any breach or threatened breach or otherwise to specifically
enforce any provision of this Agreement, and the Company will not be obligated
to post bond or other security in seeking such relief. Without limiting the
Company's rights under this Section 9 or any other remedies of the Company, if
the Employee breaches any of the provisions of Section 7 or 8, the Company will
have the right to cease making any payments otherwise due to the Employee under
this Agreement.
9.2 COVENANTS OF SECTIONS 7 AND 8 ARE ESSENTIAL AND INDEPENDENT
COVENANTS. The covenants by the Employee in Sections 7 and 8 are essential
elements of this Agreement, and without the Employee's agreement to comply with
such covenants, the Company would not have entered into this Agreement or
employed the Employee. The Company and the Employee have independently consulted
their respective counsel and have been advised in all respects concerning the
reasonableness and propriety of such covenants, with specific regard to the
nature of the business conducted by the Company. The Employee's covenants in
Sections 7 and 8 are independent covenants and the existence of any claim by the
Employee against the Company, under this Agreement or otherwise, will not excuse
the Employee's breach of any covenant in Section 7 or 8. If the Employee's
employment hereunder expires or is terminated, this Agreement will continue in
full force and effect as is necessary or appropriate to enforce the covenants
and agreements of the Employee in Sections 7 and 8.
9.3 REPRESENTATIONS AND WARRANTIES BY THE EMPLOYEE. The Employee
represents and warrants to the Company that the execution and delivery by the
Employee of this Agreement do not, and the performance by the Employee of the
Employee's obligations hereunder will not, with or without the giving of notice
or the passage of time, or both: (a) violate any judgment, writ, injunction, or
order of any court, arbitrator, or governmental agency applicable to the
Employee; or (b) conflict with, result in the breach of any provisions of or the
termination of, or
11
<PAGE> 12
constitute a default under, any agreement to which the Employee is a party or by
which the Employee is or may be bound.
9.4 OBLIGATIONS CONTINGENT ON PERFORMANCE. The obligations of the
Company hereunder, including its obligation to pay the compensation provided for
herein, are contingent upon the Employee's performance of the Employee's
obligations hereunder.
9.5 WAIVER. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by either
party in exercising any right, power, or privilege under this Agreement will
operate as a waiver of such right, power, or privilege, and no single or partial
exercise of any such right, power, or privilege will preclude any other or
further exercise of such right, power, or privilege or the exercise of any other
right, power, or privilege. To the maximum extent permitted by applicable law,
(a) no claim or right arising out of this Agreement can be discharged by one
party, in whole or in part, by a waiver or renunciation of the claim or right
unless in writing signed by the other party; (b) no waiver that may be given by
a party will be applicable except in the specific instance for which it is
given; and (c) no notice to or demand on one party will be deemed to be a waiver
of any obligation of such party or of the right of the party giving such notice
or demand to take further action without notice or demand as provided in this
Agreement.
9.6 BINDING EFFECT; DELEGATION OF DUTIES PROHIBITED. This Agreement
shall inure to the benefit of, and shall be binding upon, the parties hereto and
their respective successors, assigns, heirs, and legal representatives,
including any entity with which the Company may merge or consolidate or to which
all or substantially all of its assets may be transferred. The duties and
covenants of the Employee under this Agreement, being personal, may not be
delegated.
9.7 NOTICES. All notices and other communications under this Agreement
must be in writing and will be deemed to have been duly given when (a) delivered
by hand (with written confirmation of receipt), (b) sent by facsimile (with
written confirmation of receipt), provided that a copy is mailed by registered
mail, return receipt requested, or (c) when received by the addressee, if sent
by a nationally recognized overnight delivery service (receipt requested), in
the case of the Company to the attention of the President at the Company's
principal business office and in the case of the Employee to the address or
facsimile number set forth below (or to such other address or facsimile number
as the Employee may designate by notice to the Company):
2541 West View Drive
Emporia, KS 66801
9.8 ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the entire
agreement between the parties with respect to its subject matter and supersedes
all prior agreements and understandings, oral or written, between the parties
with respect to its subject matter. This Agreement may not be amended orally,
but only by an agreement in writing signed by each of the parties to this
Agreement.
12
<PAGE> 13
9.9 GOVERNING LAW. This Agreement will be governed by the laws of the
State of Missouri without regard to conflicts of laws principles.
9.10 JURISDICTION. Any action or proceeding seeking to enforce any
provision of, or based on any right arising out of, this Agreement may be
brought against either of the parties in the courts of the State of Missouri,
County of Jackson, or, if it has or can acquire jurisdiction, in the United
States District Court for the Western District of Missouri, and each of the
parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on either party anywhere in the world.
9.11 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement unless otherwise specified.
All words used in this Agreement will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
word "including" does not limit the preceding words or terms.
9.12 SEVERABILITY. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
9.13 COUNTERPARTS; EXECUTION BY FACSIMILE SIGNATURES. This Agreement
may be executed in one or more counterparts, each of which will be deemed to be
an original copy of this Agreement and all of which, when taken together, will
be deemed to constitute one and the same agreement. This Agreement may be
executed by facsimile signatures.
9.14 WAIVER OF JURY TRIAL. THE PARTIES HERETO HEREBY WAIVE A JURY TRIAL
IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date above first written above.
BIRCH TELECOM, INC.
By: /s/ David E. Scott
_____________________________________
David E. Scott, President
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<PAGE> 14
/s/ Stephen L. Sauder
________________________________________
Stephen L. Sauder
14
<PAGE> 1
EXHIBIT 10.8
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement is made as of May 21, 1998, among BIRCH
TELECOM, INC., a Delaware corporation ("Buyer"), DUNN & ASSOCIATES, INC., a
Kansas corporation d/b/a Boulevard Phone Co. (the "Company"), and PATRICIA A.
DUNN ("Seller").
Seller owns all of the issued and outstanding shares of capital stock
of the Company (the "Shares"). Seller desires to sell, and Buyer desires to
purchase, the Shares for the consideration and on the terms set forth in this
Agreement.
The parties, intending to be legally bound, agree as follows:
1. SALE AND TRANSFER OF SHARES.
1.1 SHARES. Subject to the terms and conditions of this Agreement,
Seller hereby sells the Shares to Buyer, and Buyer hereby purchases the Shares
from Seller.
1.2 PURCHASE PRICE. The purchase price (the "Purchase Price") for the
Shares shall be $300,000 in good funds payable contemporaneously with the
execution of this Agreement.
1.3 DELIVERIES. Contemporaneously with the execution of this
Agreement:
(iii) Seller shall deliver to Buyer: certificates representing
the Shares, duly endorsed (or accompanied by duly executed stock
powers), for transfer to Buyer; a release in the form of EXHIBIT
1.3(a)(ii) executed by Seller; a noncompetition agreement in the form
of EXHIBIT 1.3(a)(iii), executed by Seller; and (iv) Seller's
resignation as an officer and director of the Company.
(ii) Buyer shall deliver to Seller: the Purchase Price; a
stock option agreement in the form of EXHIBIT 1.3(b)(ii), executed by
Buyer; and (iii) the payment specified in Section 3.6.
2. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and warrants to
Buyer as follows:
2.1 ORGANIZATION AND GOOD STANDING. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Kansas, with full corporate power and authority to conduct its business as it is
now being conducted, to own or use the properties and assets that it purports to
own or use, and to conduct its business and operations as presently conducted by
it. The Company is duly qualified to do business as a foreign corporation and is
in good standing under the laws of each state or other jurisdiction in which
either the ownership or use of the properties owned or used by it, or the nature
of the activities conducted by it, requires such qualification. Seller has
delivered to Buyer copies of the Articles of Incorporation and Bylaws of the
Company, as currently in effect (the "Organizational
<PAGE> 2
Documents").
2.2 AUTHORITY. Seller and the Company have full power and authority
to execute and deliver this Agreement and all other agreements, instruments and
certificates contemplated to be executed and delivered by any of them hereby and
thereby (collectively, the "Seller Related Agreements") and to carry out and
perform all of their obligations under the terms of this Agreement and the
Seller Related Agreements. All corporate action by the Company necessary for the
authorization, execution, delivery and performance by the Company of this
Agreement and the Seller Related Agreements has been taken. This Agreement has
been duly executed and delivered by Seller and the Company and this Agreement
and the Seller Related Agreements constitute or will, when executed and
delivered, constitute the valid and legally binding obligations of Seller and
the Company, enforceable against them in accordance with their respective terms.
2.3 NO CONFLICT. Neither the execution and delivery of this Agreement
and the Seller Related Agreements nor the consummation or performance of any of
the transactions contemplated thereby (the "Contemplated Transactions") will,
directly or indirectly (with or without notice or lapse of time): (i) violate in
any material respect any provision of law, rule or regulation to which the
Company is subject, (ii) conflict with or violate in any material respect the
Organizational Documents or any order, judgment, injunction, award, or decree
applicable to the Company, (iii) conflict with, result in a breach or
termination of, or constitute a default under, any written or oral contract,
agreement, arrangement, permit, license, qualification, franchise, or commitment
of any kind to which the Company is a party, by which it may be bound or under
which it is entitled to any rights or benefits, or (iv) result in the creation
or imposition of any lien, charge, tax, or encumbrance upon the Company or any
of its assets or properties.
2.4 CAPITALIZATION. The authorized securities of the Company consist
solely of 30,000 shares of common stock, par value $0.01 per share, of which
only 1,000 shares are issued and outstanding and constitute the Shares. Seller
is the record and beneficial owner and holder of all of the Shares, free and
clear of all liens, pledges, encumbrances, charges, assessments, or claims of
any kind whatsoever (collectively, "Encumbrances"). No legend or other reference
to any purported Encumbrance appears upon any certificate representing the
Shares. The Shares have been duly authorized and validly issued and are fully
paid and nonassessable. There are no agreements relating to the issuance, sale,
or transfer of any securities of the Company. None of the outstanding securities
of the Company was issued in violation of law. The Company does not own, and is
not obligated to acquire, any direct or indirect ownership interest in any other
business.
2.5 FINANCIAL STATEMENTS. Seller has delivered to Buyer the balance
sheet and income statements of the Company for each of the years in the
three-year period ending December 31, 1997, and the balance sheet and income
statement of the Company for the three months ending March 31, 1998 (the
"Financial Statements"), which fairly present the financial condition and the
results of operations, changes in stockholders' equity, and cash flow of the
Company as at the respective dates of and for the periods referred to, all in
accordance with GAAP. The Financial Statements reflect the consistent
application of such accounting principles
<PAGE> 3
throughout the periods involved.
2.6 TITLE TO PROPERTIES; ENCUMBRANCES. SCHEDULE 2.6 contains a
complete and accurate list of all leaseholds or other interests in real estate
owned or utilized by the Company. The Company owns all of the properties and
assets (whether real, personal, or mixed and whether tangible or intangible)
that it purports to own, including all of the properties and assets reflected in
the Financial Statements, free and clear of all Encumbrances, except for those
disclosed in the Financial Statements and any liens for current Taxes not yet
due and payable. The Company owns or leases all assets necessary to conduct its
business as now conducted.
2.7 ACCOUNTS RECEIVABLE. All accounts receivable of the Company that
are reflected on the Financial Statements or on the accounting records of the
Company as of the date hereof (collectively, the "Accounts Receivable")
represent valid obligations arising from sales actually made or services
actually performed in the ordinary course of business. There is no contest,
claim, or right of set-off with any obligor of an Accounts Receivable relating
to the amount or validity of such Accounts Receivable. SCHEDULE 2.7 contains a
complete and accurate list of all Accounts Receivable as of May 19, 1998, which
list sets forth the aging of such Accounts Receivable.
2.8 NO UNDISCLOSED LIABILITIES. The Company has no liabilities or
obligations of any nature (whether known or unknown and whether absolute,
accrued, contingent, or otherwise) except for liabilities or obligations
reflected or reserved against in the Financial Statements and current
liabilities incurred in the ordinary course of business since the date thereof.
2.9 TAXES.
(a) For purposes of this Agreement, the term " Tax" means
any federal, state, local, or foreign income, gross receipts, license,
payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property,
personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated or other tax of any kind
whatsoever, in effect on or at any time prior to the date hereof,
including any interest, penalty, or addition thereto, whether disputed
or not, other than taxes arising or imposed as a result of or in
respect of the transactions contemplated by this Agreement; and the
term " Tax Returns" means any return, declaration, report, claim for
refund, information return or other statement or filing related to or
required in connection with Taxes, including any schedule or attachment
thereto and any amendment thereof.
(b) The Company has timely filed all Tax Returns required to
be filed by it. All such Tax Returns are true, correct and complete and
present fairly and accurately the information required to be shown
therein. The Company has timely paid all taxes payable by it (whether
or not shown on any Tax Return). There are no liens, claims, or
<PAGE> 4
encumbrances on or against any of the assets or property of the Company
that arose in connection with or by reason of any failure or alleged
failure of the Company to pay any Tax. The Company has withheld and
paid all Taxes required to have been withheld and paid in connection
with amounts paid or owing to any employee, independent contractor,
creditor, stockholder, or other third party. No officer (or employee
responsible for Tax matters) of the Company expects any authority to
assess or assert any additional Taxes for any period for which Tax
Returns have been filed by the Company. There is no dispute or claim
concerning any Taxes of the Company either (i) claimed or raised by any
taxing or other authority or (ii) as to which any of the officers (or
employees responsible for Tax matters) of the Company has knowledge.
The Company has not waived any statute of limitations in respect of
Taxes or Tax Returns or agreed to any extension of time with respect to
an assessment or deficiency of Taxes. The consummation of the
transactions contemplated by this Agreement shall not cause the Company
to recognize income by reason of any deferred gains or excess loss
accounts. The Company has provided Buyer with true and correct copies
of the 1997 federal and Kansas corporate income tax returns for the
Company, as amended as of the date of this Agreement. As of December
31, 1997, the Company is entitled to tax refunds of at least $5,269.
2.10 NO MATERIAL ADVERSE CHANGE. Since January 1, 1998, up to and
including the date of this Agreement, the Company has caused its business to be
operated in the ordinary course of business. The Company has not, except in the
ordinary course of business, sold, transferred, mortgaged, pledged or subjected
to any lien, charge or encumbrance or any of the other material assets or
properties of the Company. In addition, except as reflected in the Financial
Statements, there has not been:
(a) any change or any development which has or is likely to
result in a material adverse change in the business, properties,
assets, financial condition, prospects or results of operations of the
Company;
(b) any change in accounting methods, principles or practices
by the Company affecting its assets, liabilities or business;
(c) any writing off or determination to write off as
uncollectible any material amounts of notes or accounts receivable;
(d) any material damage, destruction or loss by the Company,
whether covered by insurance or not;
(e) any declaration, setting aside or payment of dividends or
distributions in respect of the Shares or any redemption of any of the
securities of the Company;
(f) any cancellation or waiver of a right materially related
to the operation of the business of the Company or any modification or
amendment of any commitment or the incurrence of any material debt or
obligation other than in the ordinary course of
<PAGE> 5
business;
(g) any issuance by the Company of, or commitment of the
Company to issue, any shares of its capital stock or securities
convertible into or exchangeable for shares of its capital stock;
(h) any increase in salaries, bonuses or other benefits
payable to employees or independent contractors, including the increase
of, or an entry into, severance or termination arrangements by the
Company;
(i) any guarantee of any material debt or obligation of others
by the Company;
(j) any transaction, commitment, dispute or other event or
condition of any character (whether or not in the ordinary course of
business) individually or in the aggregate having or which in the
future is likely to have a material adverse effect on the Company; or
(k) any agreement (other than the transactions contemplated by
this Agreement) to do any of the foregoing.
2.11 EMPLOYEE BENEFITS. SCHEDULE 2.11 contains a true and complete
list of each employee benefit plan, program, arrangement or contract, including
pension, profit sharing, stock bonus, deferred compensation, incentive
compensation, stock option, stock purchase, supplemental retirement, severance
or termination pay, salary continuation, supplemental unemployment benefits,
hospitalization, medical, dental, disability, life insurance, vacation and other
plans, programs, arrangements, or contracts, maintained, contributed to, or
required to be contributed to, by the Company ("Benefit Plans"). None of the
Benefit Plans is a "multi-employer plan" within the meaning of Section 3(37) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). The
Company has not (i) contributed to a multi-employer pension plan; or (ii)
incurred any liability under Title IV of ERISA to the Pension Benefit Guaranty
Corporation or to a multi-employer pension plan. All Benefit Plans have been
operated substantially in compliance with ERISA and all other applicable laws,
and all material reports have been filed with respect to the Benefit Plans in
accordance with ERISA, the Code, and other applicable laws.
2.12 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS.
For purposes of this Agreement, the term " Law" shall mean any federal, state or
local law, statute, ordinance, legal requirement, rule, regulation, order, writ,
injunction or decree. To the Company's knowledge, the business of the Company is
operated in compliance with all applicable Laws, except for such breaches or
violations of Laws which individually or in the aggregate would not have a
material adverse effect on the business, operations, or financial condition of
the Company. All material licenses, approvals, authorizations, certificates and
<PAGE> 6
permits necessary for the legal conduct of the business of the Company have been
secured, are valid and in full force and effect, and no suspension or
cancellation of any of them is threatened. All reports, documents or notices
required to be filed, maintained or furnished with or to all governmental and
regulatory authorities by the Company have been so filed, maintained or
furnished, and the Company has not received any written notice from any
governmental or regulatory authority as to any infringement of, or
non-compliance with, any Laws. As of the date of this Agreement, to the
knowledge of the Company, no investigations by any governmental entity with
respect to the Company is pending or threatened.
2.13 LITIGATION. There are no claims, actions, suits, proceedings or
governmental investigations (collectively, " Actions") pending or, to the
Company's knowledge, threatened against the Company, nor is there to the
Company's knowledge any basis for such an Action. Neither Company nor any of its
properties or assets is subject to any order, judgment, writ, injunction or
decree.
2.14 CONTRACTS; NO DEFAULTS. SCHEDULE 2.14 contains a listing of every
(i) contract, agreement or other legally binding oral or written commitment of
the Company in existence on the date hereof that requires aggregate payments to
or from the Company of $20,000 or more, (ii) employment contract, contract for
personal services, or contract with an independent contractor; and (iii)
promissory note, loan or credit contract, or instrument or document related to
security for debt, including any security agreement, mortgage or pledge. All
items listed on SCHEDULE 2.14 are in full force with no material default
thereunder by the Company, and no facts or conditions exist which, if continued,
would result in a material default thereunder by the Company or, to the
Company's knowledge, the other party or parties. Except as otherwise described
on SCHEDULE 2.14, no item listed on that Schedule terminates, is terminable or
may be accelerated as a result of the Contemplated Transactions, the
Contemplated Transactions will not make the Company liable for any payments to
another person, and the contracts and other items listed on SCHEDULE 2.14
continue in effect after the date of this Agreement without the consent,
approval or act of any third party. Neither Seller nor the Company is a party to
any agreement containing non-competition provisions that would limit the
Seller's or the Company's ability after the date of this Agreement to engage in
business in any area or to compete against any person or entity.
2.15 INSURANCE. Each of the material insurance policies of the
Company is in full force and effect and is in a commercially reasonable amount,
and will continue in effect after the consummation of the Contemplated
Transactions without the consent, approval or act of any third party. The
Company has not received written notice since January 1, 1998, of any increase
in premiums or reduction in coverage from any insurer.
2.16 ENVIRONMENTAL MATTERS. The Company has not handled or disposed
of any hazardous or toxic substances, materials, or wastes as defined by any Law
("Hazardous Materials"). To the Company's knowledge, none of the properties
currently or formerly owned, leased or used by the Company (including soils and
surface, ground waters, and buildings) is contaminated with any Hazardous
Materials. There are no past, pending or, to the Company's
<PAGE> 7
knowledge, threatened environmental claims or circumstances that could
reasonably be anticipated to form the basis thereof against the Company. The
Company has delivered to Buyer true and correct copies and results of any
reports, studies, analyses, tests, or monitoring possessed or initiated by the
Company pertaining to any environmental Laws or Hazardous Materials in, on, or
under any of the properties currently or formerly owned, leased or used by the
Company. To the Company's knowledge, there are not now and never have been any
underground storage tanks located on any properties currently or formerly owned
or leased by the Company.
2.17 LABOR RELATIONS The Company is not a party to any collective
bargaining agreement and there are no collective bargaining agreements which
pertain to employees of the Company. The Company is not a contractor or
subcontractor with the government of the United States or any state such that it
has an obligation to maintain any affirmative action plans.
2.18 INTEREST IN SUPPLIERS AND COMPETITORS. Neither the Company nor
any officer or director of the Company, or any spouse or child of any of them,
has any direct or indirect material interest in any competitor of the Company or
in any person from whom or to whom the Company leases any real or personal
property, or in any person with whom the Company is currently doing any material
amount of business.
2.19 DISCLOSURE. No representation or warranty of Seller in this
Agreement omits to state a material fact necessary to make the statements
herein, in light of the circumstances in which they were made, not misleading.
There is no fact known to Seller that has specific application to either Seller
or the Company (other than general economic or industry conditions) and that
materially adversely affects the assets, business, prospects, financial
condition, or results of operations of the Company that has not been set forth
in this Agreement or otherwise disclosed to Buyer.
2.20 EMPLOYEE STATUS. Contemporaneously with the execution of this
Agreement, Buyer is employing Seller as provided in Section 3.7. Seller
acknowledges that she will be an employee at will and that this Agreement shall
not entitle her to any specified term of employment.
2.21 BROKERS OR FINDERS. Seller, her agents, and the Company have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
this Agreement.
3. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF BUYER. Buyer represents and
warrants to Seller and covenants, as applicable, as follows:
3.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware.
3.2 AUTHORITY. Buyer has full power and authority to execute and
deliver this Agreement and all other agreements, instruments and certificates
contemplated to be executed
<PAGE> 8
and delivered by it hereby and thereby (collectively, the "Buyer Related
Agreements") and to carry out and perform all of their obligations under the
terms of this Agreement and the Buyer Related Agreements. All corporate action
by Buyer necessary for the authorization, execution, delivery and performance by
Buyer of this Agreement and the Buyer Related Agreements has been taken. This
Agreement has been duly executed and delivered by Buyer and this Agreement and
the Buyer Related Agreements constitute or will, when executed and delivered,
constitute the valid and legally binding obligations of Buyer, enforceable
against it in accordance with their respective terms.
3.3 NO CONFLICT. Neither the execution and delivery of this Agreement
and the Buyer Related Agreements nor the consummation or performance of the
Contemplated Transactions will, directly or indirectly (with or without notice
or lapse of time), give any person the right to prevent, delay, or otherwise
interfere with any of the Contemplated Transactions pursuant to: (i) any
provision of law, rule or regulation to which Buyer is subject, (ii) the
Articles of Incorporation or Bylaws of Buyer or any order, judgment, injunction,
award, or decree applicable to Buyer, or (iii) any written or oral contract,
agreement, arrangement, permit, license, qualification, franchise, or commitment
of any kind to which Buyer is a party, by which it may be bound or under which
it is entitled to any rights or benefits.
3.4 BROKERS OR FINDERS. Buyer and its officers and agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
this Agreement.
3.5 COMPANY EQUIPMENT. Buyer acknowledges that all equipment owned or
leased by the Company may need to be repaired or replaced, and that Buyer takes
such equipment "as is, where is, and with all faults."
3.6 REPAYMENT OF DEBT. Buyer acknowledges that the Company is
indebted to Seller pursuant to certain promissory notes in the aggregate amount
of $34,501, which amount will be repaid by the Company contemporaneously with
the execution of this Agreement.
3.7 EMPLOYMENT OF SELLER. Contemporaneously with the execution of
this Agreement, Buyer will hire Seller as Vice President of Shared Tenant
Services. Seller's base salary during the first twelve months of employment will
be $51,768, and thereafter would be $81,000 per year. In addition, (a) Seller
will be eligible to earn a discretionary bonus not to exceed $25,000 per year as
determined by the President of Buyer, and (b) Seller will be entitled to
participate in standard employee benefit plans provided to other similarly
situated employees of Buyer.
4. INDEMNIFICATION; REMEDIES.
4.1 SURVIVAL. All representations, warranties, covenants, and
obligations in this Agreement and any other certificate or document delivered
pursuant to this Agreement will
<PAGE> 9
survive the execution and delivery of this Agreement and the consummation of the
Contemplated Transactions, without regard to any investigation conducted with
respect to, or any knowledge acquired (or capable of being acquired) at any
time, with respect to the accuracy or inaccuracy thereof or compliance
therewith.
4.2 INDEMNIFICATION BY SELLER. Seller will indemnify and hold
harmless Buyer, the Company, and their respective representatives, stockholders,
controlling persons, and affiliates (collectively, the "Indemnified Persons")
for, and will pay to the Indemnified Persons the amount of, any loss, liability,
claim, damage (including incidental and consequential damages), expense
(including costs of investigation and defense and reasonable attorneys' fees) or
diminution of value, whether or not involving a third-party claim (collectively,
"Damages"), arising, directly or indirectly, from or in connection with: (a) any
breach of any representation or warranty made by Seller in this Agreement or any
other certificate or document delivered by Seller pursuant to this Agreement;
and (b) any breach by Seller of any covenant or obligation of Seller in this
Agreement. The remedies provided in this Section will not be exclusive of or
limit any other remedies that may be available to Buyer or the other Indemnified
Persons.
4.3 INDEMNIFICATION BY BUYER. Buyer will indemnify and hold harmless
Seller, and will pay to Seller the amount of any Damages arising, directly or
indirectly, from or in connection with any breach of any representation or
warranty made by Buyer in this Agreement, any breach by Buyer of any covenant or
obligation of Buyer in this Agreement. The remedies provided in this Section
will not be exclusive of or limit any other remedies that may be available to
Seller.
5. GENERAL PROVISIONS.
5.1 EXPENSES. Except as otherwise expressly provided in this
Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the Contemplated Transactions, including all fees and expenses of
agents, representatives, counsel, and accountants in connection with this
Agreement and the Contemplated Transactions. Seller will cause the Company not
to incur any out-of-pocket expenses in connection with this Agreement.
5.2 PUBLIC ANNOUNCEMENTS. Any public announcement or similar
publicity with respect to this Agreement or the Contemplated Transactions will
be issued, if at all, at such time and in such manner as Buyer determines.
5.3 FURTHER ASSURANCES. The parties agree to furnish upon request to
each other such further information, to execute and deliver to each other such
other documents, and to do such other acts and things, all as the other party
may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
5.4 WAIVER. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by any
party in exercising any right, power,
<PAGE> 10
or privilege under this Agreement or the documents referred to in this Agreement
will operate as a waiver of such right, power, or privilege, and no single or
partial exercise of any such right, power, or privilege will preclude any other
or further exercise of such right, power, or privilege or the exercise of any
other right, power, or privilege. To the maximum extent permitted by applicable
law, no claim or right arising out of this Agreement or the documents referred
to in this Agreement can be discharged by one party, in whole or in part, by a
waiver or renunciation of the claim or right unless in writing signed by the
other party.
5.5 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter
(including the Letter of Intent between Buyer and Seller) and constitutes (along
with the documents referred to in this Agreement) a complete and exclusive
statement of the terms of the agreement between the parties with respect to its
subject matter. This Agreement may not be amended except by a written agreement
executed by the party to be charged with the amendment.
5.6 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. Neither party
may assign any of its rights under this Agreement without the prior consent of
the other parties, except that Buyer may assign any of its rights under this
Agreement to any subsidiary of Buyer. Subject to the preceding sentence, this
Agreement will apply to, be binding in all respects upon, and inure to the
benefit of the successors and permitted assigns of the parties. Nothing
expressed or referred to in this Agreement will be construed to give any person
other than the parties to this Agreement any legal or equitable right, remedy,
or claim under or with respect to this Agreement or any provision of this
Agreement.
5.7 SEVERABILITY. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
5.8 SECTION HEADINGS, CONSTRUCTION. The headings of sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding section or sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
5.9 GOVERNING LAW. This Agreement will be governed by the laws of the
State of Kansas without regard to conflicts of laws principles.
5.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as
<PAGE> 11
of the date first written above.
BIRCH TELECOM, INC.
By: /s/Gregory C. Lawhon
Gregory C. Lawhon, Senior Vice President
DUNN & ASSOCIATES, INC.
By: /s/Patricia A. Dunn
Patricia A. Dunn, an individual Patricia A. Dunn, President
<PAGE> 12
SCHEDULE 2.6
PROPERTIES
Lease between the Company and F.P. Office, Inc. for the Company's office space,
providing for monthly rent of $1,400 and expiring on September 30, 1998.
SCHEDULE 2.7
ACCOUNTS RECEIVABLE
See Attached List of Accounts Receivable.
SCHEDULE 2.11
EMPLOYEE BENEFIT PLANS
None.
SCHEDULE 2.14
CONTRACTS
1. See Lease described on Schedule 2.6.
2. Bulk Service Agreement between the Company and Frontier Communications,
providing for a gross retail obligation of $6,000 per month and expiring on
December 31, 1998.
<PAGE> 13
EXHIBIT 1.3(a)(ii)
RELEASE
This Release is being executed and delivered in accordance with Section
1.3(a)(ii) of the Stock Purchase Agreement dated May 21, 1998 (the "Agreement"),
among Birch Telecom, Inc., a Delaware corporation ("Buyer"), Dunn & Associates,
Inc., a Kansas corporation (the "Company"), and Patricia A. Dunn ("Seller").
Capitalized terms used in this Release without definition have the respective
meanings given to them in the Agreement.
Seller acknowledges that execution and delivery of this Release is a
condition to Buyer's obligation to purchase the Shares pursuant to the Agreement
and that Buyer is relying on this Release in consummating such purchase.
Seller, for good and valuable consideration the receipt and sufficiency
of which is hereby acknowledged and intending to be legally bound, in order to
induce Buyer to purchase the Shares pursuant to the Agreement, hereby agrees as
follows:
Seller hereby releases and forever discharges Buyer, the Company and
each of their respective individual, joint, or mutual, past, present, and future
directors, officers, employees, agents, affiliates, stockholders, controlling
persons, subsidiaries, successors, and assigns (individually, a "Releasee" and
collectively, "Releasees") from any and all claims, demands, proceedings, causes
of action, orders, obligations, contracts, agreements, debts, and liabilities
whatsoever, whether known or unknown, suspected or unsuspected, both at law and
in equity, which Seller now has, have ever had, or may hereafter have against
the respective Releasees arising contemporaneously with or prior to the date
hereof or on account of or arising out of any matter, cause, or event occurring
contemporaneously with or prior to the date hereof, including, but not limited
to, any rights to indemnification or reimbursement from the Company, whether
pursuant to their respective Organizational Documents, contract, or otherwise
and whether or not relating to claims pending on, or asserted after, the date
hereof; provided, however, that nothing contained herein shall operate to
release any obligations of Buyer arising under the Agreement.
Seller hereby irrevocably covenants to refrain from, directly or
indirectly, asserting any claim or demand, or commencing, instituting, or
causing to be commenced, any proceeding of any kind against any Releasee, based
upon any matter purported to be released hereby.
Without in any way limiting any of the rights and remedies otherwise
available to any Releasee, Seller shall indemnify and hold harmless each
Releasee from and against all loss, liability, claim, damage (including
incidental and consequential damages), or expense (including costs of
investigation and defense and reasonable attorney's fees) whether or not
involving third party claims, arising directly or indirectly from or in
connection with (i) the assertion by or on behalf of Seller of any claim or
other matter purported to be released pursuant to this Release and
<PAGE> 14
EXHIBIT 1.3(a)(ii)
(ii) the assertion by any third party of any claim or demand against any
Releasee which claim or demand arises directly or indirectly from, or in
connection with, any assertion by or on behalf of Seller against such third
party of any claims or other matters purported to be released pursuant to this
Release.
If any provision of this Release is held invalid or unenforceable by
any court of competent jurisdiction, the other provisions of this Release will
remain in full force and effect. Any provision of this Release held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
This Release may not be changed except in a writing signed by the
person(s) against whose interest such change shall operate. This Release shall
be governed by and construed under the laws of the State of Kansas without
regard to principles of conflicts of law.
IN WITNESS WHEREOF, each of the undersigned have executed and delivered
this Release as of this ___ day of May, 1998.
Patricia A. Dunn
<PAGE> 1
Exhibit 10.9
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement is made as of May 28, 1998, among BIRCH
TELECOM, INC., a Delaware corporation ("Buyer"), TELESOURCE COMMUNICATIONS,
INC., a Kansas corporation (the "Company"), and MICHAEL W. HICKS AND MARJORIE G.
HICKS (individually, "Seller" and collectively, "Sellers").
Sellers own all of the issued and outstanding shares of capital stock
of the Company (the "Shares"). Sellers desire to sell, and Buyer desires to
purchase, the Shares for the consideration and on the terms set forth in this
Agreement.
The parties, intending to be legally bound, agree as follows:
1. SALE AND TRANSFER OF SHARES.
1.1 SHARES. Subject to the terms and conditions of this Agreement,
Sellers hereby sells the Shares to Buyer, and Buyer hereby purchases the Shares
from Sellers.
1.2 PURCHASE PRICE. The purchase price (the "Purchase Price") for the
Shares shall be $478,323.42 in good funds payable contemporaneously with the
execution of this Agreement.
1.3 DELIVERIES. Contemporaneously with the execution of this Agreement:
(a) Sellers shall deliver to Buyer: (i) certificates
representing the Shares, duly endorsed (or accompanied by duly executed
stock powers), for transfer to Buyer; (ii) a release in the form of
EXHIBIT 1.3(a)(ii) executed by Sellers; and (iii) a noncompetition
agreement in the form of EXHIBIT 1.3(a)(iii), executed by Sellers; and
(iv) Sellers' resignation as officers and directors of the Company.
(b) Buyer shall deliver to Sellers: (i) the Purchase Price;
and (ii) a stock option agreement in the form of EXHIBIT 1.3(b)(ii),
executed by Buyer.
1.4 COVENANTS.
(a) Contemporaneously with the execution of this Agreement,
Sellers will repay all amounts owed by them to the Company, which
Sellers represent to be equal to $153,323.42.
(b) As soon as practicable after the date of this Agreement,
Birch and the Company shall use their commercial reasonable best
efforts to have Sellers released from all of their guaranties of
obligations of the Company.
(c) Contemporaneously with the execution of this Agreement,
Buyer will hire Seller with a base salary of $85,000 per year. In
addition, Seller will be entitled to
<PAGE> 2
participate in standard employee benefit plans provided to other
similarly situated employees of Buyer.
2. REPRESENTATIONS AND WARRANTIES OF SELLERS. Sellers, jointly and severally,
represent and warrant to Buyer as follows:
2.1 ORGANIZATION AND GOOD STANDING. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Kansas, with full corporate power and authority to conduct its business as it is
now being conducted, to own or use the properties and assets that it purports to
own or use, and to conduct its business and operations as presently conducted by
it. Except as disclosed on SCHEDULE 2.1, the Company is duly qualified to do
business as a foreign corporation and is in good standing under the laws of each
state or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities conducted by it,
requires such qualification. Sellers have delivered to Buyer copies of the
Articles of Incorporation and Bylaws of the Company, as currently in effect (the
"Organizational Documents").
2.2 AUTHORITY. Sellers and the Company have full power and authority to
execute and deliver this Agreement and all other agreements, instruments and
certificates contemplated to be executed and delivered by any of them hereby and
thereby (collectively, the "Seller Related Agreements") and to carry out and
perform all of their obligations under the terms of this Agreement and the
Seller Related Agreements. All corporate action by the Company necessary for the
authorization, execution, delivery and performance by the Company of this
Agreement and the Seller Related Agreements has been taken. This Agreement has
been duly executed and delivered by Sellers and the Company and this Agreement
and the Seller Related Agreements constitute or will, when executed and
delivered, constitute the valid and legally binding obligations of Sellers and
the Company, enforceable against them in accordance with their respective terms.
2.3 NO CONFLICT. Neither the execution and delivery of this Agreement
and the Seller Related Agreements nor the consummation or performance of any of
the transactions contemplated thereby (the "Contemplated Transactions") will,
directly or indirectly (with or without notice or lapse of time): (i) violate in
any material respect any provision of law, rule or regulation to which the
Company is subject, (ii) conflict with or violate in any material respect the
Organizational Documents or any order, judgment, injunction, award, or decree
applicable to the Company, (iii) conflict with, result in a breach or
termination of, or constitute a default under, any written or oral contract,
agreement, arrangement, permit, license, qualification, franchise, or commitment
of any kind to which the Company is a party, by which it may be bound or under
which it is entitled to any rights or benefits (except that the consent of
Northern Telecom is required pursuant to the Company's Distributorship Agreement
with Northern Telecom, which consent has been obtained), or (iv) result in the
creation or imposition of any lien, charge, tax, or encumbrance upon the Company
or any of its assets or properties.
2.4 CAPITALIZATION. The authorized securities of the Company consist
solely of 10,000 shares of common stock, no par value, of which only 1,000
shares are issued and outstanding and constitute the Shares. Sellers are the
record and beneficial owner and holder of all of the Shares, free
-2-
<PAGE> 3
and clear of all liens, pledges, encumbrances, charges, assessments, or claims
of any kind whatsoever (collectively, "Encumbrances"). No legend or other
reference to any purported Encumbrance appears upon any certificate representing
the Shares. The Shares have been duly authorized and validly issued and are
fully paid and nonassessable. There are no agreements relating to the issuance,
sale, or transfer of any securities of the Company. None of the outstanding
securities of the Company was issued in violation of law. The Company does not
own, and is not obligated to acquire, any direct or indirect ownership interest
in any other business.
2.5 FINANCIAL STATEMENTS. Sellers have delivered to Buyer the balance
sheet of the Company as of March 31, 1998 and the income statement of the
Company for the period then ended (collectively, the "Financial Statements"),
which fairly present the financial condition and the results of operations,
changes in stockholders' equity, and cash flow of the Company as at the
respective dates of and for the periods referred to, all in accordance with
GAAP. The Financial Statements reflect the consistent application of such
accounting principles throughout the periods involved.
2.6 TITLE TO PROPERTIES; ENCUMBRANCES. SCHEDULE 2.6 contains a complete
and accurate list of all leaseholds or other interests in real estate owned or
utilized by the Company. The Company owns all of the properties and assets
(whether real, personal, or mixed and whether tangible or intangible) that it
purports to own, including all of the properties and assets reflected in the
Financial Statements, free and clear of all Encumbrances, except for those
disclosed in the Financial Statements and any liens for current Taxes not yet
due and payable. The Company owns or leases all assets necessary to conduct its
business as now conducted, and such assets are in good operating condition and
repair.
2.7 ACCOUNTS RECEIVABLE. All accounts receivable of the Company that
are reflected on the Financial Statements or on the accounting records of the
Company as of the date hereof (collectively, the "Accounts Receivable")
represent valid obligations arising from sales actually made or services
actually performed in the ordinary course of business. There is no contest,
claim, or right of set-off with any obligor of an Accounts Receivable relating
to the amount or validity of such Accounts Receivable. SCHEDULE 2.7 contains a
complete and accurate list of all Accounts Receivable as of May 28, 1998, which
list sets forth the aging of such Accounts Receivable.
2.8 NO UNDISCLOSED LIABILITIES. The Company has no liabilities or
obligations of any nature (whether known or unknown and whether absolute,
accrued, contingent, or otherwise) except for liabilities or obligations
reflected or reserved against in the Financial Statements and current
liabilities incurred in the ordinary course of business since the date thereof.
2.9 TAXES.
(a) For purposes of this Agreement, (i) the term "Tax" means
any federal, state, local, or foreign income, gross receipts, license,
payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property,
personal property, sales, use, transfer,
-3-
<PAGE> 4
registration, value added, alternative or add-on minimum, estimated or
other tax of any kind whatsoever, in effect on or at any time prior to
the date hereof, including any interest, penalty, or addition thereto,
whether disputed or not, other than taxes arising or imposed as a
result of or in respect of the transactions contemplated by this
Agreement; and (ii) the term "Tax Returns" means any return,
declaration, report, claim for refund, information return or other
statement or filing related to or required in connection with Taxes,
including any schedule or attachment thereto and any amendment thereof.
(b) Except as set forth on SCHEDULE 2.9: (i) the Company has
timely filed all Tax Returns required to be filed by it; (ii) all such
Tax Returns are true, correct and complete and present fairly and
accurately the information required to be shown therein; (iii) the
Company has timely paid all taxes payable by it (whether or not shown
on any Tax Return). There are no liens, claims, or encumbrances on or
against any of the assets or property of the Company that arose in
connection with or by reason of any failure or alleged failure of the
Company to pay any Tax. The Company has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid
or owing to any employee, independent contractor, creditor,
stockholder, or other third party. No officer (or employee responsible
for Tax matters) of the Company expects any authority to assess or
assert any additional Taxes for any period for which Tax Returns have
been filed by the Company. There is no dispute or claim concerning any
Taxes of the Company either (i) claimed or raised by any taxing or
other authority or (ii) as to which any of the officers (or employees
responsible for Tax matters) of the Company has knowledge. The Company
has not waived any statute of limitations in respect of Taxes or Tax
Returns or agreed to any extension of time with respect to an
assessment or deficiency of Taxes. The consummation of the transactions
contemplated by this Agreement shall not cause the Company to recognize
income by reason of any deferred gains or excess loss accounts. The
Company has provided Buyer with true and correct copies of the 1997
federal and Kansas corporate income tax returns for the Company, as
amended as of the date of this Agreement.
2.10 NO MATERIAL ADVERSE CHANGE. Except as set forth in SCHEDULE 2.10,
since January 1, 1998, up to and including the date of this Agreement, the
Company has caused its business to be operated in the ordinary course of
business. The Company has not, except in the ordinary course of business, sold,
transferred, mortgaged, pledged or subjected to any lien, charge or encumbrance
or any of the other material assets or properties of the Company. In addition,
except with respect to the distribution to Michael W. Hicks of the Company's
1994 Nissan truck or as reflected in the Financial Statements, there has not
been:
(a) any change or any development which has or is likely to
result in a material adverse change in the business, properties,
assets, financial condition, prospects or results of operations of the
Company;
(b) any change in accounting methods, principles or practices
by the Company affecting its assets, liabilities or business;
-4-
<PAGE> 5
(c) any writing off or determination to write off as
uncollectible any material amounts of notes or accounts receivable;
(d) any material damage, destruction or loss by the Company,
whether covered by insurance or not;
(e) any declaration, setting aside or payment of dividends or
distributions in respect of the Shares or any redemption of any of the
securities of the Company;
(f) any cancellation or waiver of a right materially related
to the operation of the business of the Company or any modification or
amendment of any commitment or the incurrence of any material debt or
obligation other than in the ordinary course of business;
(g) any issuance by the Company of, or commitment of the
Company to issue, any shares of its capital stock or securities
convertible into or exchangeable for shares of its capital stock;
(h) any increase in salaries, bonuses or other benefits
payable to employees or independent contractors, including the increase
of, or an entry into, severance or termination arrangements by the
Company;
(i) any guarantee of any material debt or obligation of others
by the Company;
(j) any transaction, commitment, dispute or other event or
condition of any character (whether or not in the ordinary course of
business) individually or in the aggregate having or which in the
future is likely to have a material adverse effect on the Company; or
(k) any agreement (other than the transactions contemplated by
this Agreement) to do any of the foregoing.
2.11 EMPLOYEE BENEFITS. SCHEDULE 2.11 contains a true and complete list
of each employee benefit plan, program, arrangement or contract, including
pension, profit sharing, stock bonus, deferred compensation, incentive
compensation, stock option, stock purchase, supplemental retirement, severance
or termination pay, salary continuation, supplemental unemployment benefits,
hospitalization, medical, dental, disability, life insurance, vacation and other
plans, programs, arrangements, or contracts, maintained, contributed to, or
required to be contributed to, by the Company ("Benefit Plans"). None of the
Benefit Plans is a "multi-employer plan" within the meaning of Section 3(37) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). The
Company has not (i) contributed to a multi-employer pension plan; or (ii)
incurred any liability under Title IV of ERISA to the Pension Benefit Guaranty
Corporation or to a multi-employer pension plan. All Benefit Plans have been
operated substantially in compliance with ERISA and all other applicable laws,
and all material reports have been filed with respect to the Benefit Plans in
accordance with ERISA, the Code, and other applicable laws.
-5-
<PAGE> 6
2.12 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS.
For purposes of this Agreement, the term "Law" shall mean any federal, state or
local law, statute, ordinance, legal requirement, rule, regulation, order, writ,
injunction or decree. To the Company's knowledge, the business of the Company is
operated in compliance with all applicable Laws, except for such breaches or
violations of Laws which individually or in the aggregate would not have a
material adverse effect on the business, operations, or financial condition of
the Company. All material licenses, approvals, authorizations, certificates and
permits necessary for the legal conduct of the business of the Company have been
secured, are valid and in full force and effect, and no suspension or
cancellation of any of them is threatened. All reports, documents or notices
required to be filed, maintained or furnished with or to all governmental and
regulatory authorities by the Company have been so filed, maintained or
furnished, and the Company has not received any written notice from any
governmental or regulatory authority as to any infringement of, or
non-compliance with, any Laws. As of the date of this Agreement, to the
knowledge of the Company, no investigations by any governmental entity with
respect to the Company is pending or threatened.
2.13 LITIGATION. There are no claims, actions, suits, proceedings or
governmental investigations (collectively, "Actions") pending or, to the
Company's knowledge, threatened against the Company, nor is there to the
Company's knowledge any basis for such an Action. Neither Company nor any of its
properties or assets is subject to any order, judgment, writ, injunction or
decree.
2.14 CONTRACTS; NO DEFAULTS. SCHEDULE 2.14 contains a listing of every
(i) contract, agreement or other legally binding oral or written commitment of
the Company in existence on the date hereof that requires aggregate payments to
or from the Company of $10,000 or more, (ii) employment contract, contract for
personal services, or contract with an independent contractor; and (iii)
promissory note, loan or credit contract, or instrument or document related to
security for debt, including any security agreement, mortgage or pledge. All
items listed on SCHEDULE 2.14 are in full force with no material default
thereunder by the Company, and no facts or conditions exist which, if continued,
would result in a material default thereunder by the Company or, to the
Company's knowledge, the other party or parties. Except as otherwise described
on SCHEDULE 2.14, no item listed on that Schedule terminates, is terminable or
may be accelerated as a result of the Contemplated Transactions, the
Contemplated Transactions will not make the Company liable for any payments to
another person, and the contracts and other items listed on SCHEDULE 2.14
continue in effect after the date of this Agreement without the consent,
approval or act of any third party. Neither of the Sellers nor the Company is a
party to any agreement containing non-competition provisions that would limit
either of the Seller's or the Company's ability after the date of this Agreement
to engage in business in any area or to compete against any person or entity.
2.15 INSURANCE. Each of the material insurance policies of the Company
is in full force and effect and is in a commercially reasonable amount, and will
continue in effect after the consummation of the Contemplated Transactions
without the consent, approval or act of any third party. The Company has not
received written notice since January 1, 1998, of any increase in premiums or
reduction in coverage from any insurer.
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<PAGE> 7
2.16 ENVIRONMENTAL MATTERS. The Company has not handled or disposed of
any hazardous or toxic substances, materials, or wastes as defined by any Law
("Hazardous Materials"). To the Company's knowledge, none of the properties
currently or formerly owned, leased or used by the Company (including soils and
surface, ground waters, and buildings) is contaminated with any Hazardous
Materials. There are no past, pending or, to the Company's knowledge, threatened
environmental claims or circumstances that could reasonably be anticipated to
form the basis thereof against the Company. The Company has delivered to Buyer
true and correct copies and results of any reports, studies, analyses, tests, or
monitoring possessed or initiated by the Company pertaining to any environmental
Laws or Hazardous Materials in, on, or under any of the properties currently or
formerly owned, leased or used by the Company. To the Company's knowledge, there
are not now and never have been any underground storage tanks located on any
properties currently or formerly owned or leased by the Company.
2.17 LABOR RELATIONS. The Company is not a party to any collective
bargaining agreement and there are no collective bargaining agreements which
pertain to employees of the Company. The Company is not a contractor or
subcontractor with the government of the United States or any state such that it
has an obligation to maintain any affirmative action plans.
2.18 INTEREST IN SUPPLIERS AND COMPETITORS. Except as disclosed on
SCHEDULE 2.18, neither the Company nor any officer or director of the Company,
or any spouse or child of any of them, has any direct or indirect material
interest in any competitor of the Company or in any person from whom or to whom
the Company leases any real or personal property, or in any person with whom the
Company is currently doing any material amount of business.
2.19 INVENTORY. All inventory of the Company consists of a quality and
quantity usable and salable in the ordinary course of business, except for
obsolete items and items of below-standard quality, all of which have been
written off or written down to net realizable value in the Financial Statements.
All inventories not written off have been valued on the Financial Statements at
the lower of cost or net realizable value on a first in, first out basis.
2.20 EMPLOYEE STATUS. Contemporaneously with the execution of this
Agreement, Buyer is employing Michael W. Hicks as provided in Section 1.4(d).
Mr. Hicks acknowledges that he will be an employee at will and that this
Agreement shall not entitle him to any specified term of employment.
2.21 DISCLOSURE. No representation or warranty of Sellers in this
Agreement omits to state a material fact necessary to make the statements
herein, in light of the circumstances in which they were made, not misleading.
There is no fact known to Sellers that has specific application to either of the
Sellers or the Company (other than general economic or industry conditions) and
that materially adversely affects the assets, business, prospects, financial
condition, or results of operations of the Company that has not been set forth
in this Agreement or otherwise disclosed to Buyer.
-7-
<PAGE> 8
2.22 BROKERS OR FINDERS. Sellers, their agents, and the Company have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants to
Seller as follows:
3.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware.
3.2 AUTHORITY. Buyer has full power and authority to execute and
deliver this Agreement and all other agreements, instruments and certificates
contemplated to be executed and delivered by it hereby and thereby
(collectively, the "Buyer Related Agreements") and to carry out and perform all
of their obligations under the terms of this Agreement and the Buyer Related
Agreements. All corporate action by Buyer necessary for the authorization,
execution, delivery and performance by Buyer of this Agreement and the Buyer
Related Agreements has been taken. This Agreement has been duly executed and
delivered by Buyer and this Agreement and the Buyer Related Agreements
constitute or will, when executed and delivered, constitute the valid and
legally binding obligations of Buyer, enforceable against it in accordance with
their respective terms.
3.3 NO CONFLICT. Neither the execution and delivery of this Agreement
and the Buyer Related Agreements nor the consummation or performance of the
Contemplated Transactions will, directly or indirectly (with or without notice
or lapse of time), give any person the right to prevent, delay, or otherwise
interfere with any of the Contemplated Transactions pursuant to: (i) any
provision of law, rule or regulation to which Buyer is subject, (ii) the
Articles of Incorporation or Bylaws of Buyer or any order, judgment, injunction,
award, or decree applicable to Buyer, or (iii) any written or oral contract,
agreement, arrangement, permit, license, qualification, franchise, or commitment
of any kind to which Buyer is a party, by which it may be bound or under which
it is entitled to any rights or benefits.
3.4 BROKERS OR FINDERS. Buyer and its officers and agents have incurred
no obligation or liability, contingent or otherwise, for brokerage or finders'
fees or agents' commissions or other similar payment in connection with this
Agreement.
4. INDEMNIFICATION; REMEDIES.
4.1 SURVIVAL. All representations, warranties, covenants, and
obligations in this Agreement and any other certificate or document delivered
pursuant to this Agreement will survive the execution and delivery of this
Agreement and the consummation of the Contemplated Transactions, without regard
to any investigation conducted with respect to, or any knowledge acquired (or
capable of being acquired) at any time, with respect to the accuracy or
inaccuracy thereof or compliance therewith; provided, however, all of such
representations, warranties, covenants, and obligations shall terminate eighteen
months from the date of this Agreement (with the exception of the
representations and warranties contained in Sections 2.4 and 2.9 and the
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<PAGE> 9
covenants and obligations contained in 5.1 and 5.4, which shall survive without
any time limitation, and any representations, warranties, covenants, and
obligations relating to any written claim for Damages which is made prior to a
relevant survival expiration date, which shall survive until the existence of
such Damages has been finally established and the claim resolved).
4.2 INDEMNIFICATION BY SELLERS. Sellers will, jointly and severally,
indemnify and hold harmless Buyer, the Company, and their respective
representatives, stockholders, controlling persons, and affiliates
(collectively, the "Indemnified Persons") for, and will pay to the Indemnified
Persons the amount of, any loss, liability, claim, damage (including incidental
and consequential damages), expense (including costs of investigation and
defense and reasonable attorneys' fees) or diminution of value, whether or not
involving a third-party claim (collectively, "Damages"), arising, directly or
indirectly, from or in connection with: (a) any breach of any representation or
warranty made by either of the Sellers in this Agreement or any other
certificate or document delivered by either of the Sellers pursuant to this
Agreement; or (b) any breach by either of the Sellers of any covenant or
obligation of Sellers in this Agreement. The remedies provided in this Section
4.2 will not be exclusive of or limit any other remedies that may be available
to Buyer or the other Indemnified Persons.
4.3 INDEMNIFICATION BY BUYER. Buyer will indemnify and hold harmless
Sellers, and will pay to Sellers the amount of any Damages arising, directly or
indirectly, from or in connection with (a) any breach of any representation or
warranty made by Buyer in this Agreement, (b) any breach by Buyer of any
covenant or obligation of Buyer in this Agreement. The remedies provided in this
Section 4.3 will not be exclusive of or limit any other remedies that may be
available to Sellers.
4.4 LIMITATIONS ON AMOUNT. Neither Sellers nor Buyer will have any
liability with respect to Section 4.2 or 4.3 until the total of all Damages for
which such party(ies) are liable exceeds $10,000, but once such Damages exceed
$10,000 such party(ies) shall be liable for all such Damages.
5. GENERAL PROVISIONS.
5.1 EXPENSES. Except as otherwise expressly provided in this Agreement,
each party to this Agreement will bear its respective expenses incurred in
connection with the preparation, execution, and performance of this Agreement
and the Contemplated Transactions, including all fees and expenses of agents,
representatives, counsel, and accountants in connection with this Agreement and
the Contemplated Transactions. Sellers will cause the Company not to incur any
out-of-pocket expenses in connection with this Agreement.
5.2 PUBLIC ANNOUNCEMENTS. Any public announcement or similar publicity
with respect to this Agreement or the Contemplated Transactions will be issued,
if at all, at such time and in such manner as Buyer determines.
5.3 KNOWLEDGE OF BREACH. Neither Buyer nor Sellers have actual
knowledge that any of the representations and warranties made by the other party
are untrue.
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<PAGE> 10
5.4 FURTHER ASSURANCES. The parties agree to furnish upon request to
each other such further information, to execute and deliver to each other such
other documents, and to do such other acts and things, all as the other party
may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
5.5 WAIVER. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by any
party in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party.
5.6 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter
(including the Letter of Intent with respect to the Contemplated Transactions)
and constitutes (along with the documents referred to in this Agreement) a
complete and exclusive statement of the terms of the agreement between the
parties with respect to its subject matter. This Agreement may not be amended
except by a written agreement executed by the party to be charged with the
amendment.
5.7 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. Neither party
may assign any of its rights under this Agreement without the prior consent of
the other parties, except that Buyer may assign any of its rights under this
Agreement to any subsidiary of Buyer. Subject to the preceding sentence, this
Agreement will apply to, be binding in all respects upon, and inure to the
benefit of the successors and permitted assigns of the parties. Nothing
expressed or referred to in this Agreement will be construed to give any person
other than the parties to this Agreement any legal or equitable right, remedy,
or claim under or with respect to this Agreement or any provision of this
Agreement.
5.8 SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
5.9 SECTION HEADINGS, CONSTRUCTION. The headings of sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding section or sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
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<PAGE> 11
5.10 GOVERNING LAW. This Agreement will be governed by the laws of the
State of Kansas without regard to conflicts of laws principles.
5.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
BIRCH TELECOM, INC. TELESOURCE COMMUNICATIONS, INC.
By: /s/ Gregory C. Lawhon By: /s/ Marjorie G. Hicks
------------------------------------- ---------------------------------
Gregory C. Lawhon, Senior Vice President Marjorie G. Hicks, President
/s/ Michael W. Hicks /s/ Marjorie G. Hicks
- ---------------------------------------- ------------------------------------
Michael W. Hicks, an individual Marjorie G. Hicks, an individual
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<PAGE> 12
SCHEDULE 2.1
GOOD STANDING
The Company is not in good standing as a foreign corporation in the State of
Missouri.
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<PAGE> 13
SCHEDULE 2.6
PROPERTIES
1. The Company leases retail space located at 7956 Lee Boulevard, Leawood,
Kansas.
2. The Company's personal property is subject to a blanket security interest in
favor of Johnson County Bank, securing the Company's note to that bank.
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<PAGE> 14
SCHEDULE 2.7
ACCOUNTS RECEIVABLE
See attached Accounts Receivable list.
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<PAGE> 15
SCHEDULE 2.9
TAXES
See attached list of taxes payable.
-15-
<PAGE> 16
SCHEDULE 2.10
NO MATERIAL ADVERSE CHANGE
None.
-16-
<PAGE> 17
SCHEDULE 2.11
EMPLOYEE BENEFITS
1. The Company has contributed to IRA/SEPs for its employees in past years.
2. The Company's vacation policy is 1 week during each of the first 5 years of
employment, and 2 weeks thereafter.
3. The Company's employees are entitled to drive Company trucks home from and to
work (and, therefore, use the trucks for commuting).
4. The Company pays for health insurance individual coverage for its employees.
A copy of the summary plan description is attached.
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<PAGE> 18
SCHEDULE 2.14
CONTRACTS
1. Distributorship Agreement between the Company and Northern Telecom dated
February 13, 1997.
2. Commercial Lease Agreement dated November 17, 1994 between the George W.
Hawley Irrevocable Trust and the Company covering rental space located at 7956
Lee Boulevard, Leawood, Kansas, containing approximately 2,375 square feet. In
September of 1997 the lease was renewed for a 2 year period ending December 31,
1999.
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<PAGE> 19
SCHEDULE 2.18
INTEREST IN SUPPLIERS AND COMPETITORS
Sellers own StarSource, an unincorporated business which was formed to buy and
sell new and used Northern Telecom equipment. StarSource purchases from a number
of sources and sell to distributors nationwide. It has in the past sold
equipment to and purchased equipment from the Company.
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<PAGE> 20
EXHIBIT 1.3(a)(ii)
RELEASE
This Release is being executed and delivered in accordance with Section
1.3(a)(ii) of the Stock Purchase Agreement dated May 28, 1998 (the "Agreement"),
among Birch Telecom, Inc., a Delaware corporation ("Buyer"), Telesource
Communications, Inc., a Kansas corporation (the "Company"), and Michael W. Hicks
and Marjorie G. Hicks (collectively, "Sellers"). Capitalized terms used in this
Release without definition have the respective meanings given to them in the
Agreement.
Sellers acknowledge that execution and delivery of this Release is a
condition to Buyer's obligation to purchase the Shares pursuant to the Agreement
and that Buyer is relying on this Release in consummating such purchase.
Sellers, for good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged and intending to be legally bound,
in order to induce Buyer to purchase the Shares pursuant to the Agreement,
hereby agree as follows:
Sellers hereby release and forever discharge Buyer, the Company and
each of their respective individual, joint, or mutual, past, present, and future
directors, officers, employees, agents, affiliates, stockholders, controlling
persons, subsidiaries, successors, and assigns (individually, a "Releasee" and
collectively, "Releasees") from any and all claims, demands, proceedings, causes
of action, orders, obligations, contracts, agreements, debts, and liabilities
whatsoever, whether known or unknown, suspected or unsuspected, both at law and
in equity, which Sellers, or either of them, now have, have ever had, or may
hereafter have against the respective Releasees arising contemporaneously with
or prior to the date hereof or on account of or arising out of any matter,
cause, or event occurring contemporaneously with or prior to the date hereof,
including, but not limited to, any rights to indemnification or reimbursement
from the Company, whether pursuant to their respective Organizational Documents,
contract, or otherwise and whether or not relating to claims pending on, or
asserted after, the date hereof; provided, however, that nothing contained
herein shall operate to release any obligations of Buyer arising under the
Agreement.
Sellers hereby irrevocably covenant to refrain from, directly or
indirectly, asserting any claim or demand, or commencing, instituting, or
causing to be commenced, any proceeding of any kind against any Releasee, based
upon any matter purported to be released hereby.
Without in any way limiting any of the rights and remedies otherwise
available to any Releasee, Sellers shall, jointly and severally, indemnify and
hold harmless each Releasee from and against all loss, liability, claim, damage
(including incidental and consequential damages), or expense (including costs of
investigation and defense and reasonable attorney's fees) whether or not
involving third party claims, arising directly or indirectly from or in
connection with (i) the assertion by or on behalf of Sellers, or either of them,
of any claim or other matter purported to be released
<PAGE> 21
EXHIBIT 1.3(a)(ii)
pursuant to this Release and (ii) the assertion by any third party of any claim
or demand against any Releasee which claim or demand arises directly or
indirectly from, or in connection with, any assertion by or on behalf of
Sellers, or either of them, against such third party of any claims or other
matters purported to be released pursuant to this Release.
If any provision of this Release is held invalid or unenforceable by
any court of competent jurisdiction, the other provisions of this Release will
remain in full force and effect. Any provision of this Release held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
This Release may not be changed except in a writing signed by the
person(s) against whose interest such change shall operate. This Release shall
be governed by and construed under the laws of the State of Kansas without
regard to principles of conflicts of law.
IN WITNESS WHEREOF, each of the undersigned have executed and delivered
this Release as of this 28th day of May, 1998.
--------------------------------------------
Michael W. Hicks
--------------------------------------------
Marjorie G. Hicks
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<PAGE> 1
EXHIBIT 10.10
PAGE 1 OF 33
RESALE AGREEMENT BETWEEN
SOUTHWESTERN BELL TELEPHONE COMPANY
AND BIRCH TELECOM OF MISSOURI, INC.
This Agreement is between Southwestern Bell Telephone Company ("SWBT"),
a Missouri corporation, and Birch Telecom of Missouri, Inc. ("LSP")
(collectively, "the Parties" and singly, "Party") entered into this 21st day
of August, 1997.
WHEREAS, pursuant to the Telecommunications Act of 1996 (the "Act"),
the Parties wish to establish terms for the purchase by LSP of certain SWBT
retail telecommunications services and certain other services for resale by LSP
to its local exchange end users in the State of Missouri. Therefore, the Parties
hereby agree as follows:
I. DESCRIPTION AND CHARGES FOR SERVICES
A. Attached hereto as Exhibit A is a list of Telecommunications
Services currently available for resale at the wholesale
discount rate of thirteen and two-tenthS percent (13.2%) off
the retail rate for each service. Except as otherwise
expressed herein and consistent with SWBT's obligation
under Section 251(c)(4)(A) of the Act, LSP may resell other
Telecommunications Services offered by SWBT and not listed in
Exhibit A at the same discount. Exhibit B contains a list of
other services available for resale at the discount included
in the exhibit. In addition to the services listed in Exhibit
A and Exhibit B, LSP may resell custom service arrangements
(CSAs) /Individual Case Basis (ICB) offerings without discount
to the extent such service is a telecommunications service as
defined by the Act.
B. SWBT will make available to LSP for resale SWBT's Bill Plus
and Consolidated Billing service at a discount of five percent
(5%) off of SWBT's tariffed rate for each service (or in the
event either of these services is not tariffed, at the lowest
rate charged to any other local service provider or SWBT
subscriber.
C. SWBT shall make available for resale by LSP the following SWBT
services at SWBT's tariffed rate for each service (or in the
event a service is not tariffed, at the rate SWBT charges its
subscribers, except as otherwise provided herein):
- Construction Charges
- Distance Learning
- Connections with Terminal Equipment and Communication
Systems
- Maintenance of Service Charges
<PAGE> 2
PAGE 2 OF 33
- Suspension Services
- Telecommunications Service Priority Systems
- Access Services
- Cellular Mobile Telephone Interconnection Services
- Exchange Connection Services
- Shared Tenant Service
D. Suspension of Service discounts apply to the discounted rate
for the underlying service. When LSP resells Shared Tenant
Service, LSP will receive the discount associated with the
underlying service used in the shared tenant arrangement.
E. SWBT shall be under no obligation to offer the following for
resale:
- BDS/LAN
- Customer Provided Equipment
- Customized Billing Reports
- InLine(R) Products
- Inside Wiring
- Semi-Public Telephone Booths and Enclosures
- 911 Universal Emergency Number Equipment
F. Educational and Lifeline/Linkup services will be wholesale
priced at zero discount.
G. Grandfathered services are also available for resale at the
applicable wholesale discount to the same customers at the
same location to which SWBT offers the service.
H. Telecommunications Services will be resold to LSP on terms and
conditions that are reasonable and nondiscriminatory.
I. Unless otherwise provided in this Agreement, SWBT will perform
all of its obligations hereunder throughout the entire service
area where SWBT is the incumbent local exchange carrier. SWBT
will provide the services covered by this Attachment subject
to the availability of facilities in this state on a
nondiscriminatory basis with its other customers.
J. LSP may offer to resell Customer Initiated Suspension and
Restoral Service to their end users as outlined in the
corresponding retail tariff. SWBT will offer to LSP Company
Initiated Suspension Service for their own purposes at the
SWBT retail tariffed rate. Should LSP choose to suspend their
end user through Company Initiated Suspension Service, this
suspension period shall not exceed fifteen (15) calendar days.
If LSP
<PAGE> 3
PAGE 3 OF 33
issues a disconnect on their end user account within the
fifteen (15) day period, appropriate services will not be
billed for the suspension period. However, should LSP issue a
disconnect after the fifteen (15) day suspension period, LSP
will be responsible for all appropriate charges on the account
back to the suspension date. Should LSP restore their end
user, restoral charges at the SWBT retail tariffed rate will
apply and LSP will be billed for the appropriate service from
the time of suspension.
II. TERMS AND CONDITIONS FOR RESALE OF SERVICES
The following terms and conditions are applicable to all
services purchased under this Agreement.
A. Permitted Use of Resold Services by LSP and Its End Users
1. For services included in this Agreement, which are
offered through tariffs by SWBT to its end users, the
rules and regulations associated with the applicable
State General Exchange Tariff, Local Exchange Service
Tariff, and the other tariffs for the resold service
(such tariffs collectively referred to herein as
"corresponding tariffs") apply except as otherwise
provided herein.
2. LSP shall only sell Plexar(R) services to a single
end user.
3. Except where otherwise explicitly provided in the
corresponding tariffs or where SWBT permits sharing
or aggregation by its customers, LSP shall not permit
the sharing of a service or services by multiple end
users or the aggregation of traffic from multiple end
users onto a single service.
4. LSP shall only resell services purchased under this
Agreement to the same class of end users to whom SWBT
sells such services (e.g., residence service shall
not be resold to business end users). LSP may only
resell Lifeline Assistance, Link-Up, and other like
services to similarly situated customers who are
eligible for such services. Further, to the extent
LSP resells services that require certification on
the part of the buyer, LSP will ensure that the buyer
has received proper certification and complies with
all rules and regulations as established by the
Commission.
5. SWBT promotions of ninety (90) days or less shall not
be available to LSP for resale. For purposes of this
section, the duration of the promotion is the length
of the offering period during which the promotion may
be offered to the public, and the realization period
<PAGE> 4
PAGE 4 OF 33
during which any and all benefits from the promotion
must be realized or captured by the subscriber; the
subscriber must begin receiving the benefit during
the offering period.
a) When SWBT offers a promotion on a
Telecommunications Service available for
resale for longer than ninety (90) days,
SWBT shall provide LSP with notice of the
promotion, pursuant to Article XXIII. The
applicable discount rate for such
Telecommunications Service shall be applied
to the promotional rate.
b) Nothing in this Agreement shall require SWBT
to provide to LSP promotional service
elements that are not Telecommunications
Services such as CPE and Inside Wire
Maintenance Plans.
6. LSP shall not use a resold service to avoid the
rates, terms, and conditions of SWBT's corresponding
tariffs.
7. LSP shall not use resold local exchange telephone
service to provide access or interconnection services
to itself, interexchange carriers (IXCs), wireless
carriers, competitive access providers (CAPs), or
other telecommunications providers. Provided,
however, that LSP may permit its end users to use
resold local exchange telephone service to access
IXCs, wireless carriers, CAPs, or other retail
telecommunications providers.
8. If LSP is in violation of a provision of this
Agreement, SWBT shall notify LSP of the violation in
writing of the specific provision being violated. At
such time, LSP shall have thirty (30) days to correct
the violation and notify SWBT in writing that the
violation has been corrected. SWBT shall then bill
LSP for the charges which should have been collected
by SWBT, except that where the violation (i) results
from LSP's failure to exercise reasonable diligence
in overseeing the use of the resold services by its
customers; or (ii) was discoverable by the exercise
of reasonable diligence by LSP; or (iii) is a result
of intentional conduct by LSP, SWBT may at its option
collect from LSP the actual revenues collected by LSP
from its end users for the stated violation. If LSP
disputes the violation, it shall notify SWBT in
writing within fourteen (14) days of receipt of
notice from SWBT. Disputes shall be resolved as
outlined in the Dispute Resolution section of the
Agreement.
<PAGE> 5
PAGE 5 OF 33
9. SWBT will apply any Commission mandated end-user
charges including an End User Common Line (EUCL)
charge to each local exchange line resold under this
agreement. All federal rules and regulations
associated with EUCL charges, as found in Tariff FCC
73, also apply to such EUCL charges.
10. To the extent allowable by law, LSP shall be
responsible for Primary Interexchange Carrier (PIC)
change charges associated with such local exchange
line. LSP shall pay for PIC changes at the tariffed
rate.
11. SWBT is not required to make services available for
resale at wholesale rates to LSP for its own use.
SWBT, however, shall allow LSP to purchase SWBT's
Telecommunications Services and other services
available for resale as outlined in the exhibits to
this Agreement, as long as said services are not
resold exclusively or predominately to LSP, its
subsidiaries, or affiliates for their internal or
administrative use.
B. Use of SWBT Trademarks
Except where otherwise required by law, LSP shall not, without
SWBT's written authorization, offer the services covered by
this Agreement using the trademarks, service marks, trade
names, brand names, logos, insignia, symbols, or decorative
designs of SWBT or its affiliates. Nor shall LSP state or
imply that there is any joint business association or similar
arrangement with SWBT in the provision of telecommunications
services to LSP's own end users. LSP may brand services
included in this Agreement with its own brand name, but SWBT
shall not be responsible for providing such branding, except
as specifically provided in this Agreement or as LSP may
purchase branding service(s) pursuant to this Agreement or
otherwise.
C. Network and Service Order Conditions
1. SWBT shall provide the services covered by this
Agreement subject to availability of existing
facilities and on a nondiscriminatory basis with its
other customers. LSP shall resell the services
provided herein only in those service areas in which
such resale services or any feature or capability
thereof are offered at retail by SWBT as the
incumbent local exchange carrier to its end users.
2. When LSP converts an end user currently receiving
noncomplex
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service from the SWBT network, without any changes to
SWBT's network, LSP will be charged a per order
(i.e., per billable telephone number) conversion
charge of twenty-five dollars ($25.00) in Missouri.
Conversion orders processed and completed
electronically will be charged five dollars ($5.00)
per order until a final rate is established by the
Commission, at which time the rate established by the
Commission shall be the rate. Complex orders will be
charged at a rate of one hundred twenty-five dollars
($125.00). Complex services generally are those
services which have order specific or service
specific engineering requirements, or new services
that use a different platform than current
technology. Custom Services conversions (e.g., Plexar
Custom) will be handled on a Customer Specific
Proposal basis.
A request for conversion shall be handled
simultaneously by SWBT as a "disconnect" from SWBT or
another resale local service provider and an
"initiate" service for LSP. The charge set forth
herein shall apply.
When LSP converts an end user and adds or changes are
made to the network, the respective conversion charge
will apply, as well as any normal service order
charges associated with said changes. All
nonrecurring service connection charges, excluding
the conversion charge mentioned above, will be
charged at a discount for those services listed in
Exhibits A and B.
3. Except as provided in Sections (c)(1), (2) above, for
the purposes of ordering new service under this
Agreement, each request for service shall be handled
as a separate and initial request for service per
billable telephone number. The additional line rate
for Service Order Charges shall apply only to those
requests for additional residential service at the
end user's same location where a residential line is
currently provided on SWBT's network, regardless of
the nonfacilities based local service provider of
record.
4. Except as provided in section A of Article IV, for
purposes of this section, service orders for LSPs
shall be handled in the same fashion as SWBT requires
for its end users.
5. SWBT will make available such customer proprietary
network information ("CPNI") and all other SWBT
customer information as is currently available in the
2733 Report except for retail rates associated with
the customer's services.
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III. ADDITIONAL SERVICES
A. 911/E911
1. Access to the 911 or E911 service, available to SWBT
end users in the area(s) served by LSP, shall be made
available to LSP's end users. Where no 911 is
available, LSP end users will receive the same
emergency dialing services available to SWBT end
users.
2. LSP shall be responsible for collecting and remitting
all applicable 911 surcharges on a per line basis to
the Public Safety Answering Point (PSAP).
3. When requested by SWBT, LSP shall timely provide
accurate and complete information on each of LSP's
end users as needed for the provisioning of 911
service to LSPs end users. Such information shall be
in a format determined by SWBT.
B. Dialing Parity
1. Local Dialing Parity
SWBT agrees that local dialing parity shall be
available to LSP. For all call types associated with
the Resale services provided to LSP by SWBT under
this Agreement: (i) an LSP Customer will not be
required to dial any greater number of digits than a
similarly situated SWBT customer; (ii) the post-dial
delay (time elapsed between the last digit dialed and
the first network response), call completion rate and
transmission quality received by an LSP Customer will
be at least equal in quality to that received by a
similarly situated SWBT customers; and (iii) the LSP
Customer may retain its local telephone number if the
customer remains within the same wire center;
provided that (a) the customer is a retail customer
of SWBT, or (b) served by a SWBT resold line, or (c)
if the customer was previously served by another
facilities based carrier, provided that SWBT has the
right to have the number ported from the facilities
based carrier and LSP agrees to pay any charges
associated with porting such number, and (d) the
customer is neither under suspension for non-pay nor
disconnected prior to the conversion by LSP. End
users of SWBT and end users of LSP shall have the
same exchange boundaries; and such end users shall be
able to dial the same number of digits when making a
"local" call, and activating feature functionality.
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2. IntraLATA Toll Dialing Parity
SWBT agrees to make intraLATA toll dialing parity
available in accordance with Section 251(b)(3) of the
Telecommunications Act of 1996.
C. White Page Directories: Listings, Distribution and Information
Page
1. At LSP's request, SWBT shall provide
nondiscriminatory access to White Pages directory
listing and distribution services under the terms and
conditions described herein:
a) SWBT shall provide, at no additional charge,
a straight line listing in the appropriate
SWBT white pages for each of LSP's local
exchange service end users. Subscriber
listings are to be interfiled (interspersed)
with SWBT's and other LSP's subscriber
listings in the White Pages directory with
no discernible differentiation in the
listings to indicate to the reader that the
listings are served by another LSP.
Subscriber listing information shall,
however, remain the property of SWBT but
nothing herein contained shall in any manner
restrict or limit LSP's authority and right
to exercise complete dominion over its
subscriber lists and subscriber information
in its own databases. SWBT will provide
subscriber list information that includes
LSP customers to third parties on the same
terms and conditions and at the same rates
that SWBT provides its own subscriber list
information to third parties. Provision of
subscriber list information to third parties
will be solely at SWBT's discretion.
b) Additional Listing Services (e.g., foreign
and signature listings) can be purchased by
LSP for its end users on a per listing
basis. LSP shall pay SWBT for all such
listings provided to LSP's end users. The
discounts applicable to Listing Services are
contained in Exhibits A and B to this
Agreement.
c) LSP end users shall be entitled to one
directory per basic residential or business
line provided by SWBT pursuant to this
Agreement.
d) SWBT, or its agents shall deliver a White
Pages Directory
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to LSP end user's premises at the same time
that such directories are delivered to SWBT
end users. If an LSP's end user already has
a current SWBT directory, SWBT shall not be
required to deliver a new directory to that
end user until the new directories are
published for that end user's location.
e) LSP hereby releases SWBT from any and all
liability for damages due to errors or
omissions in LSP's subscriber listing
information as it appears in the White Pages
directory, including, but not limited to,
special, indirect, consequential, punitive,
or incidental damages except where SWBT has
engaged in willful misconduct or gross
negligence. To the extent LSP reimburses its
end user subscriber any listing charge due
to errors or omissions caused directly by
SWBT, SWBT shall reimburse LSP any
associated wholesale rate.
f) LSP shall indemnify, protect, save harmless
and defend SWBT (or SWBT's officers,
employees, agents, assigns, and
representatives) from and against any and
all losses, liability, damages, and expense
arising out of any demand, claim, suit, or
judgment by a third party in any way related
to any error or omission in LSP's subscriber
listing information as it appears in the
White Pages directory, including any error
or omission related to nonpublished or
nonlisted subscriber listing information;
provided, however, LSP shall not be required
to indemnify SWBT where SWBT has engaged in
gross negligence or willful misconduct. LSP
shall so indemnify regardless of whether the
demand, claim, or suit by the third party is
brought jointly against LSP and SWBT, and/or
against SWBT alone.
2. Information Page
a) At LSP's request, SWBT shall include in the
"Informational Page" section of SWBT's White
Pages directory, for those geographical
areas in which LSP provides local exchange
services, LSP's customer contact information
regarding emergency services, billing and
service information, repair services and
other pertinent information similar to that
provided by SWBT in its "Informational
Pages." Such information shall be included
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on the same page with other LSP information.
b) At LSP's option, LSP shall be provided a
single "Informational Page" (one side of one
page) in the informational section of the
White Pages directory covering a geographic
area where an LSP provides local exchange
service. This page shall be no different in
style, size, color and format than SWBT
"Informational Pages." Sixty (60) days prior
to the directory close date, LSP shall
provide to SWBT the "Informational Page" in
the form of camera-ready copy. The charges
associated with this service vary from
geographic market to market, and are charged
outside this Agreement. LSP may purchase
additional pages at the prevailing rates.
D. Directory Assistance (DA)
SWBT shall provide access to DA to LSP's end users. LSP shall
pay the charges associated with the use of such services by
LSP's end users. The discounts applicable to such services are
contained in Exhibits A and B, which is attached hereto and
made a part hereof.
E. Operator Services (OS)
1. SWBT shall provide access to Operator Services to
LSP's end users. LSP shall pay the charges associated
with the use of such services by LSP's end users. The
discounts applicable to such services are contained
in Exhibits A and B, which is attached hereto and
incorporated by reference.
2. SWBT shall provide Line Status Verification and Busy
Line Interrupt on calls made on SWBT's network to LSP
end users. LSP shall pay SWBT associated charges when
its end users request such services, with discounts
to apply as listed in Exhibits A and B.
IV. RESPONSIBILITIES OF SWBT
A. SWBT shall allow LSP to place service orders and receive phone
number assignments (for new lines). These activities shall be
accomplished by telephone call or facsimile until electronic
interface capability has been established. SWBT, with input
from LSP, shall provide interface specifications for
electronic access for these functions to LSP once such
electronic interfaces become technically feasible and are in
place.
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However, LSP shall be responsible for modifying and connecting
any of its systems with SWBT provided interfaces when such
interfaces become available, as outlined in Appendix OSS, if
and when LSP elects to use such interfaces.
B. SWBT shall implement LSP service orders within the same time
intervals SWBT uses to implement service orders for similar
services for its own end users.
C. LSP will have the ability to report trouble for its end users
to appropriate SWBT trouble reporting centers twenty-four (24)
hours a day, seven (7) days a week. LSP will be assigned a
customer contact center when initial service agreements are
made. LSP end users calling SWBT may be referred to LSP at the
number provided by LSP. In the case of such misdirected calls,
the provisions of Article IX, section A(2) shall apply.
Methods and procedures for ordering and trouble reporting are
outlined in the Handbook for Non-Switched Based Providers
dated 11/15/95, as amended by SWBT from time to time, except
that no such amendment may change any procedure set forth in
this Agreement without the written consent of LSP. Both
parties agree to abide by the procedures contained therein.
D. SWBT will respond to LSP's trouble reports and repair troubles
with processes and in time frames in which SWBT performs such
activities for its own end user customers. Subject to Article
XXII, upon LSP's request, SWBT will extend to LSP any
performance guarantees or specialized trouble handling on
repair procedures extended to any other local service provider
reseller to the extent such procedures are more favorable than
those provided to LSP under this Agreement on the same terms
and conditions that any of those services is offered to such
other local service provider.
E. On no less than sixty (60) days advance written notice, LSP
may request SWBT to make available to LSP on a daily basis in
a standard electronic format usage sensitive records SWBT will
bill to LSP arising out of the use of resold lines so that LSP
can bill its customers in a timely manner in order to maximize
LSP's collection. LSP agrees to pay SWBT three tenths of a
cent ($.003) per message for this service, plus other charges
outlined in Appendix OSS.
V. ADDITIONAL RESPONSIBILITIES OF THE PARTIES
Cooperation on Fraud
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SWBT shall not be liable to LSP for any fraudulent usage on LSP's end
users' accounts except where LSP has ordered toll or 900 blocking and
SWBT has failed to properly install or maintain the service. SWBT shall
not be considered to have properly installed or maintained the service
if notwithstanding the toll or 900 block, an end user successfully
completes toll or 900 calls designed to be blocked by the service,
provided however, where SWBT has failed to install or maintain toll or
900 blocking and fraudulent usage occurs, LSP shall make all reasonable
efforts to collect from its end user for such usage. SWBT shall not be
responsible to the extent of LSP's successful collection efforts.
The Parties agree to cooperate with one another to investigate,
minimize and take corrective action in cases of fraud. The Parties'
fraud minimization procedures are to be cost effective and implemented
so as not to unduly burden or harm one Party as compared to the other.
At a minimum, such cooperation shall include providing to the other
Party, upon request, information concerning end users who terminate
services to that Party without paying all outstanding charges, when
such end user seeks service from the other Party, except that neither
party shall be required to divulge any information that would result in
additional reporting, compliance, or any other legal obligations for
that Party. The Party seeking such information is responsible for
securing the end user's permission to obtain such information.
VI. CHANGES IN SUBSCRIBER CARRIER SELECTIONS
A. Prior to submitting an order under this Agreement, LSP shall
obtain end user authorization as required by applicable state
or federal laws and regulations, and assumes responsibility
for applicable charges as specified in Section 258(b) of the
Telecommunications Act of 1996. SWBT shall abide by the same
applicable laws and regulations.
B. Only an end user can initiate a challenge to a change in its
local exchange service provider. If an end user notifies SWBT
or LSP that the end user requests local exchange service, the
Party receiving such request shall be free to immediately
provide service to such end user. SWBT shall be free to
connect the end user to any local service provider based upon
the local service provider's request and local service
provider's assurance that proper end user authorization has
been obtained. LSP shall make authorization available to SWBT
upon request and at no charge.
C. When an end user changes or withdraws authorization, each
Party shall release customer-specific facilities in accordance
with the end user customer's direction or the direction of the
end user's authorized agent.
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Further, when an end user abandons the premise, SWBT is free
to reclaim the facilities for use by another customer and is
free to issue service orders required to reclaim such
facilities.
D. Neither Party shall be obligated by this Agreement to
investigate any allegations of unauthorized changes in local
exchange service (slamming) on behalf of the other Party or a
third party. If either Party, on behalf of the other, agrees
to investigate an alleged incidence of slamming, the
investigating Party shall charge the other Party a fifty
dollar ($50) investigation fee.
E. When SWBT receives an order from LSP for services under this
Agreement and SWBT is currently providing the same services to
another local service provider for the same end user, SWBT
shall notify the end user's local service provider of record
of such order coincident with processing the order. It shall
then be the responsibility of the local service provider of
record and LSP to resolve any issues related to the end user.
This paragraph shall not apply to new additional lines and
services purchased by an end user from multiple LSPs or from
SWBT.
F. On no less than sixty (60) days notice, LSP may request the
Local Disconnect Report. SWBT agrees to furnish to LSP the
Billing Telephone Number (BTN), Working Telephone Number
(WTN), and terminal number of all end users who have
disconnected LSP's service. LSP understands and agrees that
the CARE interface will be used to provide such information
and such information will only be available via the CARE
electronic data transmission. Information will be provided on
a per-WTN basis to be priced on a per-WTN basis. SWBT will
provide LSP no less than thirty (30) days notice prior to any
change of the per-WTN charge. SWBT grants to LSP a
non-exclusive right to use the information provided by SWBT.
LSP will not permit anyone but its duly authorized employees
or agents to inspect or use this information. LSP agrees to
pay SWBT ten cents ($0.10) per-WTN and any applicable
transmission charges for the Local Disconnect Report.
G. The LSP agrees to hold harmless and indemnify SWBT against any
and all liability and claims, including reasonable attorney's
fees, that may result from SWBT acting under this Article,
except where SWBT has engaged in willful misconduct or gross
negligence.
H. Nothing herein shall be interpreted to apply to conversion of
LSP end users pursuant to Article XII. (Termination of Service
to LSP).
VII. ADDITIONAL RESPONSIBILITIES OF LSP
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A. Payment of Rates and Charges
1. LSP is solely responsible for the payment of charges
for all services furnished under this Agreement
including, but not limited to, calls originated or
accepted at LSP's location and its end users' service
locations, except (x) charges for any retail services
provided directly by SWBT to the end user which SWBT
shall be responsible for billing; and (y) toll or 900
charges where LSP has ordered toll or 900 blocking
service designed to prevent such calls being
completed by the end user and SWBT has failed to
properly install or maintain the toll or 900 blocking
service. SWBT shall not be considered to have
properly installed or maintained the toll or 900
blocking service if notwithstanding the toll or 900
blocking service, an end user successfully completes
toll calls designed to be blocked by the service,
provided however, where SWBT has failed to install or
maintain toll or 900 blocking service and fraudulent
usage occurs, LSP shall make all reasonable efforts
to collect from its end user for such usage. LSP
shall be responsible to pay SWBT the appropriate
charges to the extent of LSP's successful collection
efforts.
Interexchange carried traffic (e.g., sent-paid,
information services and alternate operator services
messages) received by SWBT for billing to resold
end-user accounts will be returned as unbillable and
will not be passed on to LSP for billing. An
unbillable code returned with those messages to the
carrier will indicate that the messages originated
from a resold account, will not be billed by SWBT,
and give LSP's OCN, if any.
2. SWBT shall not be responsible for the manner in which
the use of resold service, or the associated charges
are allocated to others by LSP. All applicable rates
and charges for such services will be billed to and
shall be the responsibility of LSP, with the
exception of retail services provided directly to the
end user by SWBT as described in paragraph 1 above.
3. Compensation for all services shall be paid by LSP
regardless of LSP's ability or inability to collect
charges from its end user for such service. SWBT will
provide LSP with timely and accurate bills.
4. If LSP does not wish to be responsible for collect,
third number billed, toll, and information services
(e.g., 900) calls, it must order
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the appropriate blocking for the affected resold
line(s) under this Agreement and pay any applicable
charges. LSP acknowledges that blocking is not
available for certain types of calls, including 800
numbers.
B. Interfaces with SWBT
To the extent LSP elects to use them, LSP shall be responsible
for modifying and connecting any of its systems with
SWBT-provided interfaces as described in this Agreement.
C. Repair Contact Arrangements
LSP shall be responsible for providing to its end users and to
SWBT a telephone number or numbers that LSP's end users can
use to contact LSP in the event of service or repair requests.
In the event that LSP's end users contact SWBT with regard to
such requests, SWBT shall inform the end user that they should
call LSP and may provide LSP contact number. The provisions of
Article IX, section A(2) shall apply in the case of such
misdirected calls.
D. LSP Operating Company Number (OCN)
For the purposes of establishing service and providing
efficient and consolidated billing to the LSP, the LSP is
required to provide SWBT its authorized and nationally
recognized OCN.
E. Special Service Arrangements
For special service arrangements for LSP not covered under
this Agreement, special charges shall apply as provided in the
applicable corresponding tariffs.
F. Development of Branding and Customized Routing for Directory
Assistance and Operator Services
1. If LSP uses SWBT operator and/or directory assistance
service(s), LSP will:
a) provide its brand at the beginning of each
telephone call and before the consumer
incurs any charge for the call; and
b) disclose immediately to the consumer, upon
request a quote of its rates or charges for
the call.
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c) Where SWBT provides LSPs OS and DA services
via the same trunk, both the OS and DA calls
will be branded with the same brand. Since
SWBT's DA and OS utilize the same trunk
group, LSP will receive the same brand for
both DA/OS. Such branding will be provided
pursuant to section 2 below.
2. If LSP uses SWBT operator and/or directory assistance
service(s), SWBT will brand DA/OS in LSP's name based
upon the criteria outlined below:
a) LSP will provide SWBT with written
specification of its company name to be used
in creating LSP specific branding messages
for its DA/OS calls.
b) An initial nonrecurring charge applies per
load for the establishment of Call Branding
as well as a charge per subsequent load to
change the brand. In addition, a per call
charge applies for every DA/OS call handled
by SWBT on behalf of LSP when such services
are provided in conjunction with resale
services. Prices for Call Branding are as
outlined in Exhibit C, attached hereto and
incorporated herein.
3. RATES/REFERENCE INFORMATION - SWBT will provide LSP
DA/OS Rates/Reference Information based upon the
criteria outlined below:
a) LSP will furnish DA/OS Rates/ Reference
Information in a mutually agreed to format
or media thirty (30) days in advance of the
date when the DA/OS services are to be
undertaken.
b) LSP will inform SWBT, in writing, of any
changes to be made to such Rates/Reference
Information ten (10) working days prior to
the effective Rates/Reference change date.
LSP acknowledges that it is responsible to
provide SWBT updated Rates/Reference
Information in advance of when the
Rates/Reference Information is to become
effective.
c) In all cases when a SWBT operator receives a
rate request from a LSP end user, SWBT will
quote the applicable DA/OS rates as provided
by LSP.
d) An initial nonrecurring charge will apply
for loading of LSP's DA/OS Rates/Reference
Information as well as a charge for each
subsequent change to either the LSP's DA/OS
services Rates/ Reference Information as
outlined in Exhibit C, attached hereto and
incorporated herein.
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4. CUSTOMIZED ROUTING - SWBT shall also offer LSP the
opportunity to customize route DA/OS where
technically feasible. LSP agrees to pay SWBT
appropriate charges associated with customized
routing on an ICB basis.
VIII. NONEXCLUSIVITY
This Agreement is nonexclusive. LSP acknowledges that SWBT will be
providing the same or similar services to other local services
providers in accordance with negotiated agreements which will be filed
with the Commission. LSP also acknowledges that SWBT may, upon end user
request, provide any and all of the services provided to LSP under this
Agreement directly to the end users. SWBT acknowledges that LSP may
obtain the same or similar services from other local exchange
companies.
IX. SUPPORT SYSTEMS SERVICES
A. Support Systems Services
1. Transfer of Service Announcements (Intercept)
The Party formerly providing service to an end user shall
provide a Basic Referral announcement, reciprocally and free
of charge on the abandoned telephone number. The announcement
states that the called number has been disconnected or changed
and provides the end user's new telephone number to the extent
that it is listed. SWBT shall provide an intercept referral on
behalf of LSP to their end user as indicated on the
appropriate service order.
Basic Intercept Referral Announcements are to be provided on
residential numbers for a minimum of thirty (30) days where
facilities exist and the threat of telephone number exhaustion
is not imminent. LSP may order Special Intercept Referral
Service if a longer period is desired for the intercept.
Basic Intercept Referral Announcements for a single line
business end users and the primary listed telephone number for
Direct Inward Dial (DID) and "Centrex-type" end users, shall
be available for a minimum of thirty (30) days or the life of
the white pages directory, whichever is greater. LSP may order
Special Intercept Referral Service if a longer period is
desired for the intercept. If the threat of telephone number
exhaustion becomes imminent for a particular central office,
the service provider may reissue a disconnected number prior
to the expiration of the directory, but no
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earlier than thirty (30) days after the disconnection of the
business telephone number.
2. Coordinated Repair Calls
SWBT shall be responsible for repairing its own network.
However, LSP shall maintain telephone numbers where its end
user may call to report instances of trouble.
The Parties shall employ the following procedures for handling
misdirected repair calls:
a. The Parties shall inform their respective end users
of the correct telephone numbers to call to access
their respective repair bureaus.
b. To the extent the correct provider can be determined,
each Party shall refer misdirected repair calls to
the proper provider of local exchange service, at no
charge, and shall provide the end user the contact
telephone number provided by the other Party.
In responding to repair calls, neither Party shall
make disparaging remarks about each other, nor shall
they use these repair calls as the basis for internal
referrals or to solicit customers or to market
services. Either Party may respond with accurate
information in answering customer questions.
c. The Parties shall provide each other their respective
repair contact numbers.
B. Network Management Controls
Each Party shall provide a 24-hour contact number for Network
Traffic Management issues to the other. A FAX number must also
be provided to facilitate event notifications for planned mass
calling events. Additionally, both Parties agree that they
shall work cooperatively to attempt to conduct all such events
in such a manner as to avoid degradation or loss of service to
other end users.
C. Law Enforcement and Civil Process
SWBT and LSP shall handle law enforcement requests as follows:
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1) INTERCEPT DEVICES Local and federal law enforcement
agencies periodically request information or
assistance from local telephone service providers.
When either Party receives a request associated with
an end user of the other Party, it shall refer such
request to the appropriate Party, unless the request
directs the receiving Party to attach a pen register,
trap and trace or form of intercept on that Party's
own facilities, in which case that Party shall comply
with any valid request.
2) SUBPOENAS If a Party receives a subpoena for
information concerning an end user the Party knows to
be an end user of the other Party, it shall refer the
subpoena to the requesting entity with an indication
that the other Party is the responsible company.
Provided, however, if the subpoena requests records
for a period of time during which the receiving Party
was the end user's service provider, the receiving
Party will respond to any valid request.
3) EMERGENCIES If a Party receives a request from a law
enforcement agency for a temporary number change,
temporary disconnect or one way denial of outbound
calls for an end user of the other Party, the
receiving Party will comply so long as it is a valid
emergency request. If time and circumstances permit,
SWBT will make reasonable efforts, considering the
circumstances of the request, to consult with the LSP
prior to initiating any service change in response to
such request except when responding to a court order
requiring nondisclosure. If not bound by
nondisclosure, SWBT shall as promptly as circumstance
permit notify LSP of any change of service. In the
case of the LSP, LSP shall refer such request to SWBT
and SWBT shall honor such request in accordance with
this paragraph. However, neither Party shall be held
liable for any claims or damages arising from
compliance with such requests, and the Party serving
the end user agrees to indemnify and hold the other
Party harmless against any and all such claims.
D. Usage Data
On no less than sixty (60) days advance written notice, LSP
may request SWBT to make certain usage information available
to LSP on a daily basis via a mechanized feed. The information
will consist of usage sensitive charges SWBT will bill to LSP
arising out of the use of resold lines. LSP agrees to pay SWBT
three tenths of a cent ($.003) per message for this service.
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X. CALL TRACE
LSP end user's activation of Call Trace shall be handled by the SWBT
Call Trace Center (CTC) or its Annoying and Anonymous Call Bureau. SWBT
shall notify LSP of requests by its end users to provide the call
records to the proper authorities. Subsequent communication and
resolution of the case with LSP's end user (whether that end user is
the victim or the suspect) will be coordinated through the LSP.
LSP understands that for services where reports are provided to law
enforcement agencies (e.g., Call Trace) only billing number and address
information shall be provided. It shall be the LSP's responsibility to
determine whether to provide additional information necessary for any
police investigation to the extent that such information is in LSP's
possession. LSP shall indemnify SWBT against any claims that LSP's
efforts to produce or the actual production of information in LSP's
possession were insufficient and led to inadequate prosecution.
XI. TAXES
LSP shall be responsible for all federal, state or local, sales, use,
excise or gross receipts taxes or fees imposed on or with respect to
the services provided under this Agreement including those taxes and
fees imposed on SWBT. LSP shall reimburse SWBT for the amount of any
such taxes or fees which SWBT is required to pay or collect for
services provided to LSP hereunder.
XII. TERMINATION OF SERVICE TO LSP
A. All undisputed charges are payable to SWBT prior to the start
of the next bill cycle. If LSP fails to pay when due, any and
all undisputed charges billed to LSP under this Agreement,
including any late payment charges (Unpaid Charges), and any
portion of such charges remain unpaid more than fifteen (15)
days after the due date of such Unpaid Charges, SWBT shall
notify LSP in writing that in order to avoid having service
disconnected, LSP must remit all Unpaid Charges to SWBT within
fourteen (14) days.
B. If LSP disputes the billed charges, it shall inform SWBT in
writing as specified in Section XVIII(A) which portion of the
charges it disputes, including the specific details and
reasons for its dispute; pay SWBT all undisputed charges in
accordance with Section XII(A); and pay all disputed charges
into an interest bearing escrow account with a third party
escrow agent mutually agreed upon by the Parties prior to the
start of the next bill cycle. Any disputed charges for which
payment is not deposited
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into the escrow account prior to the start of the bill cycle
when payment of such charges would otherwise be due shall be
treated as Unpaid Charges in accordance with Section XII(A).
Late payment charges shall apply to any disputed charges for
which payment is not timely deposited into the escrow account,
and shall also be treated as Unpaid Charges in accordance with
Section XII(A) if not timely paid.
C. Disputes hereunder shall be resolved in accordance with the
procedures identified in Article XVIII (Dispute Resolution).
Failure of LSP to pay charges deemed owed to SWBT as a result
of the ruling in the arbitration shall be grounds for
termination under this Article.
D. If any LSP charges remain unpaid or undisputed at the end of
the fourteen (14) day period provided for in section A above,
SWBT shall notify LSP, and if required or requested by the
Commission, the Commission in writing, that unless all charges
are paid within sixteen (16) days, LSP's service shall be
disconnected and its end users shall be switched to SWBT local
service. SWBT will also suspend order acceptance at this time.
E. If any LSP charges remain unpaid or undisputed at the end of
the sixteen (16) day period provided for in section D above,
LSP shall, at its sole expense, notify its end users and if
required or requested by the Commission, the Commission, that
service may be disconnected and that each end user must
affirmatively select a new local service provider within five
(5) days. The notice shall also advise the end users that SWBT
will assume the end user's account at the end of the five (5)
day period should the end user fail to select a new local
service provider.
F. If any LSP charges remain unpaid or undisputed five (5) days
after the sixteen (16) day period provided for in section E
above, SWBT shall disconnect LSP and transfer all LSP's end
users who have not selected another local service provider
directly to SWBT's service. These end users shall receive the
same services provided through LSP at the time of transfer.
SWBT shall inform the Commission and the end user's IXC(s) of
Record of the names of all end users transferred through this
process. Applicable service establishment charges for
switching end users from LSP to SWBT shall be assessed to LSP.
G. Within five (5) days of the transfer, SWBT shall notify all
affected end users that because of LSP's failure to pay, their
service is now being provided by SWBT. SWBT shall also notify
the end users that they have thirty (30) days to select a
local service provider.
H. SWBT may discontinue service to LSP upon failure to pay
undisputed
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charges as provided in this Article, and shall have no
liability to LSP or LSP end users in the event of such
disconnection.
I. If any end user fails to select a local service provider
within thirty (30) days of the change of providers (80 days
past LSP's due date), SWBT shall terminate the end user's
service. SWBT shall notify the Commission and the end user's
IXC(s) of Record of the names of all end users whose service
has been terminated. The end user shall be responsible for any
and all charges incurred during the selection period.
J. Nothing herein shall be interpreted to obligate SWBT to
continue to provide service to any such end users. Nothing
herein shall be interpreted to limit any and all disconnection
rights SWBT may have with regard to such end users.
K. After disconnect procedures have begun, SWBT shall not accept
service orders from LSP until all unpaid charges are paid.
SWBT shall have the right to require a deposit equal to one
month's charges (based on the highest previous month of
service from SWBT) prior to resuming service to LSP after
disconnect for nonpayment.
XIII. FORCE MAJEURE
Neither Party shall be responsible for delays or failures in
performance resulting from acts or occurrences beyond the reasonable
control of such Party, regardless of whether such delays or failures in
performance were foreseen or foreseeable as of the date of this
Agreement, including, without limitation: fire, explosion, power
failure, cable cuts, acts of God, war, revolution, civil commotion, or
acts of public enemies; any law, order, regulation, ordinance, or
requirement of any government or legal body; or labor unrest,
including, without limitation, strikes, slowdowns, picketing, or
boycotts; or delays caused by the other Party or by other service or
equipment vendors; or any other circumstances beyond the Party's
reasonable control. In such event, the Party affected shall, upon
giving prompt notice to the other Party, be excused from such
performance on a day-to-day basis to the extent of such interference
(and the other Party shall likewise be excused from performance of its
obligations on a day-for-day basis to the extent such Party's
obligations relate to the performance so interfered with). The affected
Party shall use its best efforts to avoid or remove the cause of
nonperformance and both Parties shall proceed to perform with dispatch
once the causes are removed or cease.
XIV. LIMITATION OF LIABILITY
SWBT's liability, if any, for its gross negligence or willful
misconduct is not
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limited by its corresponding tariffs. With respect to any other claim
or suit, by a LSP or any others, for damages arising out of mistakes,
omissions, interruptions, delays or efforts, or defects in transmission
occurring in the course of furnishing service hereunder, SWBT's
liability, if any, shall not exceed an amount equivalent to the
proportionate charge to the LSP for the period of service during which
such mistake, omission, interruption, delay, error, or defect in
transmission or service occurs and continues. In no event shall SWBT be
responsible for any special, indirect, consequential, or exemplary
damages. This liability shall be in addition to any amounts that may
otherwise be due to the LSP under corresponding tariffs as an allowance
for interruptions. However, any such mistakes, omissions,
interruptions, delays, errors, or defects in transmission or service
which are caused or contributed to by the negligence or willful act of
the LSP or which arise from the use of LSP-provided facilities or
equipment shall not result in the imposition of any liability
whatsoever upon SWBT.
SWBT shall be indemnified and held harmless by the LSP against claims
and damages arising from provision of the LSP's services or equipment
except those directly associated with the provision of local service to
the LSP which is governed by corresponding tariffs.
SWBT shall be indemnified and held harmless from all claims and damages
arising from the discontinuance of service for nonpayment to SWBT by
the LSP as provided for herein. Notice of discontinuance shall be as
specified in this Agreement.
SWBT shall have no liability to the end users of the LSP for claims
arising from the provision of the LSP's service to its end users
including, but not limited to, claims for interruption of service,
quality of service, or billing disputes.
When the lines or services of other companies and carriers are used in
establishing connections to and/or from points not reached by SWBT's
lines, SWBT is not liable for any act or omission of the other
companies or carriers.
Nothing contained in this Article shall limit SWBT's liability or
impose a duty of indemnity on LSP where SWBT has engaged in willful
misconduct or gross negligence with respect to conduct involved in the
claim against SWBT.
XV. NONDISCLOSURE
The Parties to this Agreement anticipate and recognize that they will
exchange or come into possession of data about each other's end users
and each other's business as a result of this Agreement which will be
designated as confidential by that Party. Each Party agrees (1) to
treat all such data as strictly confidential and (2) to use such data
only for purposes of performance under this Agreement. Each
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Party agrees not to disclose data on the other Party's end users or
business which has been designated as confidential to any person
without first securing the written consent of the other Party. The
foregoing shall not apply to information which is in the public domain.
If a court or governmental agency orders or a third party requests a
Party to disclose or to provide any data or information covered by this
Article, that Party will immediately inform the other Party of the
order or request both by telephone and overnighted mail before
disclosing the data or information. Notification and consent
requirements described above are not applicable in cases where a court
order requires the production of toll billing records of an individual
residence or business end user customer.
This Article will not preclude the disclosure by the Parties of
information or material described in this Article to consultants,
agents, or attorneys representing the respective Parties or the Office
of the Public Counsel for the State of Missouri, and the Commission or
its staff, or FCC staff, provided that these third parties are bound by
the same or comparable confidentiality requirements as the Parties to
this Agreement. The provisions of this Article will remain in effect
notwithstanding the termination of this Agreement, unless agreed to in
writing by both Parties.
Party agrees to indemnify the other for a breach of Section 222 by the
indemnifying Party.
XVI. PUBLICITY
The Parties agree not to use in any advertising or sales promotion,
press releases or other publicity matters any endorsements, direct or
indirect quotes, or pictures implying endorsement by the other Party or
any of its employees without such Party's prior written approval. The
Parties will submit to each other for written approval, prior to
publication, all publicity matters that mention or display one
another's name and/or marks or contain language from which a connection
to said name and/or marks may be inferred or implied.
XVII. ASSIGNMENT
Neither Party may assign, subcontract, or otherwise transfer its rights
or obligations under this Agreement except under such terms and
conditions as are mutually acceptable to the other Party (e.g., a
conversion charge will apply per billable telephone number) and with
such Party's prior written consent, which consent shall not be
unreasonably withheld provided that each Party may assign this
Agreement to a corporate affiliate (as defined in the Communications
Act) or an entity under common control or an entity acquiring all or
substantially all of its
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assets or equity by providing prior written notice to the other Party.
Assignment without consent shall be grounds for immediate termination
of this Agreement.
XVIII. DISPUTE RESOLUTION
A. Finality of Disputes
No claims shall be brought for disputes arising from this
Agreement more than twenty-four (24) months from the date of
occurrence which gives rise to the dispute. If any portion of
an amount due to SWBT under this Agreement is subject to a
bona fide dispute between the Parties, LSP shall within
fourteen (14) days of its receipt of the invoice containing
such disputed amount give notice to SWBT of the amounts it
disputes and include in such notice the specific details and
reasons for disputing each item. Nothing herein shall prevent
LSP from disputing amounts paid to SWBT for services provided
by SWBT within twenty-four (24) months of the bill date. LSP
shall pay when due (i) all undisputed amounts to SWBT and (ii)
all Disputed Amounts into an interest bearing escrow account
with a third party escrow agent mutually agreed upon by the
Parties. In the event LSP disputes an amount paid to SWBT, and
it is determined the amount was erroneously paid or billed,
SWBT shall return the amount along with interest from the date
of LSP's payment.
B. Alternative to Litigation
The Parties desire to resolve disputes arising out of this
Agreement without litigation. Accordingly, except for action
seeking a temporary restraining order or an injunction related
to the purposes of this Agreement, or suit to compel
compliance with this dispute resolution process, the Parties
agree to use the following alternative dispute resolution
procedure as their sole remedy with respect to any controversy
or claim of twenty-five thousand dollars ($25,000) or less,
arising out of or relating to this Agreement or its breach.
The procedures hereunder may be used with disputes for
twenty-five thousand dollars ($25,000) or more, if mutually
agreeable to the Parties.
1. Resolution of Disputes Between Parties to the
Agreement
At the written request of a Party, each Party will
appoint a knowledgeable, responsible representative
with authority to settle the matter to meet and
negotiate in good faith to resolve any dispute
arising under this Agreement. The location, form,
frequency, duration, and conclusion of these
discussions shall be left to the discretion of the
representatives. Upon agreement, the
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representatives may utilize other alternative dispute
resolution procedures such as mediation to assist in
the negotiations. Discussions and correspondence
among the representatives for purposes of settlement
are exempt from discovery and production and shall
not be admissible in the arbitration described below
or in any lawsuit without the concurrence of all
Parties. Documents identified in or provided with
such communications, which are not prepared for
purposes of the negotiations, are not so exempted
and, if otherwise admissible, may be admitted in
evidence in the arbitration or lawsuit.
2. Arbitration
If the negotiations do not resolve the dispute within
thirty (30) days of the initial written request, the
dispute shall be submitted to binding arbitration by
a single arbitrator pursuant to the Commercial
Arbitration Rules of the American Arbitration
Association. A Party may demand such arbitration in
accordance with the procedures set out in those
rules. Discovery shall be controlled by the
arbitrator and shall be permitted to the extent set
out in this section. Each Party may submit in writing
to a Party, and that Party shall so respond, to a
maximum of any combination of thirty-five (35) (none
of which may have subparts) of the following:
(a) Interrogatories
(b) Demands to produce documents
(c) Requests for admission
Additional discovery may be permitted upon mutual
agreement of the Parties or upon good cause found by
the arbitrator. The arbitration hearing shall be
commenced within thirty (30) days of the demand for
arbitration. The arbitration shall be held in the
city where this Agreement was executed by SWBT. The
arbitrator shall control the scheduling so as to
process the matter expeditiously. The Parties shall
submit written briefs five (5) days before the
hearing. The arbitrator shall rule on the dispute by
issuing a written opinion within twenty (20) days
after the close of hearings. The opinion shall
contain findings of fact and conclusions of law based
on the evidence. The arbitrator has no authority to
order punitive or consequential damages. The times
specified in this section may be extended upon mutual
agreement of the Parties or by the arbitrator upon a
showing of good cause. Judgment upon the award
rendered by the arbitrator may be
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entered in any court having jurisdiction.
3. Costs
Each Party shall bear its own costs of these
procedures. A Party seeking discovery shall reimburse
the responding Party the reasonable costs of
production of documents (including search time and
reproduction costs). The Parties shall equally split
the fees of the arbitration and the arbitrator.
XIX. VERIFICATION REVIEWS
Each Party to this Agreement will be responsible for the accuracy and
quality of its data as submitted to the respective Party involved. Upon
reasonable written notice, each Party or its authorized representative
(providing such authorized representative does not have a conflict of
interest related to other matters before one of the Parties) shall have
the right to conduct a review and verification of the other Party to
give assurances of compliance with the provisions of this Agreement.
This includes on-site verification reviews at the other Party's or the
Party's vendor locations.
After the initial year of this Agreement verification reviews will
normally be conducted on an annual basis with provision for staged
reviews, as mutually agreed, so that all subject matters are not
required to be reviewed at the same time. Follow-up reviews will be
permitted between annual reviews where significant deviations are
found. During the initial year of the Agreement more frequent reviews
may occur but no more than quarterly.
The review will consist of an examination and verification of data
involving records, systems, procedures, and other information related
to the services performed by either Party as related to settlement
charges or payments made in connection with this Agreement as
determined by either Party to be reasonably required. Each Party,
whether or not in connection with an on-site verification review, shall
maintain reasonable records for a period of time no less than
twenty-four (24) months from the date such records are created and
provide the other Party with reasonable access to such information as
is necessary to determine amounts receivable or payable under this
Agreement.
Each Party's right to access information for verification review
purposes is limited to data not in excess of twenty-four (24) months in
age. Once specific data has been reviewed and verified, it is
unavailable for future reviews. Any items not reconciled at the end of
a review will, however, be subject to a follow-up review effort. Any
retroactive adjustments required subsequent to previously reviewed and
verified data will also be subject to follow-up review. Information
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of either Party involved with a verification review shall be subject to
the nondisclosure terms of this Agreement.
The Party requesting a verification review shall fully bear its costs
associated with conducting the review. The Party being reviewed will
provide access to required information, as outlined in this Article, at
no charge to the reviewing Party. Should the reviewing Party request
information or assistance beyond that reasonably required to conduct
such a review, the Party being reviewed may, at its option, decline to
comply with such request or may bill actual costs incurred in complying
subject to the concurrence of reviewing Party.
XX. COMPLIANCE WITH LAWS
The Parties believe in good faith that the Services to be provided
under this Agreement satisfy the requirements of the Act. In the event
a court or regulatory agency of competent jurisdiction should determine
that modifications of this Agreement are required to bring the Services
being provided hereunder into compliance with the Act, the affected
Party shall promptly give the other Party written notice of the
modifications deemed required. Upon delivery of such notice, the
Parties shall expend diligent efforts to arrive at an agreement
respecting such modifications required. If the Parties are unable to
arrive at such agreement, effective on the day either Party concludes
and gives notice that the Parties will not be able to arrive at any
agreement respecting such modifications, either Party may present the
matter to the Commission for arbitration. Either Party may request that
the Commission also arbitrate any other provision(s) of the Agreement
the Party believes may be affected by the ruling. The Parties agree to
submit themselves to the jurisdiction of the Commission for the
purposes of the arbitration, preserving all rights under law.
This Agreement is an integrated package that reflects a balancing of
interests critical to the Parties. It will be submitted to the
Commission and the FCC as a compliance filing, and the Parties will
specifically request that the Commission and the FCC refrain from
taking any action to change, suspend or otherwise delay implementation
of the Agreement. In the event the Commission or the FCC rejects any
portion or provision of this Agreement or subsequently issues a ruling
or order that results in a provision being contrary to law, or is
invalid for any reason, the Parties shall continue to be bound by the
terms of this Agreement, insofar as possible, except for the portion
rejected or subsequently determined to be unlawful, invalid, or
unenforceable. In such event, the Parties shall negotiate in good faith
to replace the rejected, unlawful, invalid, or unenforceable provision
and shall not discontinue service to the other Party during such period
if to do so would disrupt existing service being provided to an end
user. So long as the Agreement remains in effect, the Parties shall not
advocate before any legislative, regulatory, or other public forum that
any terms of this specific Agreement be
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modified or eliminated. Notwithstanding this mutual commitment,
however, the Parties enter into this Agreement without prejudice to any
positions they have taken previously, or may take in the future in any
legislative, regulatory, or other public forum addressing any matters,
including matters related to the types of arrangements prescribed by
this Agreement. In the event the Parties are unable to agree on a
replacement provision, the procedures in the previous paragraph shall
apply.
XXI. CERTIFICATION REQUIREMENTS
LSP warrants that it has obtained all certifications required in those
jurisdictions in which LSP has ordered services pursuant to this
Agreement. Subject to restrictions in Article II, section A. (Permitted
Use of Resold Service by LSP and Its End Users), LSP covenants that any
originating service provider utilizing the resold services under this
Agreement has obtained all required certification. Upon request by any
governmental entity, the LSP is required to provide proof of
certification.
XXII. EFFECT OF OTHER AGREEMENTS
The Parties agree that pursuant to the requirements of the
Telecommunications Act of 1996, a Party shall treat the other Party no
less favorably than it treats similarly situated local service
providers with whom such Party has an operational interconnection or
resale agreement which has been approved by the Commission. If either
Party enters into an agreement (the "Other Agreement") approved by the
Commission pursuant to Section 252 of the Act which provides for the
provision of arrangements covered in this Agreement to another
requesting Telecommunications Carrier, such Party shall make available
to the other Party such arrangements upon the same rates, terms and
conditions as those provided in the Other Agreement.
XXIII. NOTIFICATION
SWBT shall make telecommunications services that SWBT provides at
retail to subscribers who are not telecommunications carriers available
for resale consistent with its obligation under Section 251(c)(4)(A) of
the Telecommunications Act. SWBT will provide LSP notice of new
services or of price changes to existing services. The notice shall
advise LSP of the category in which such new service shall be placed
and the same discount already applicable to LSP in that category shall
apply to the new service.
SWBT currently uses the Accessible Letter process to notify LSP of such
changes to the services available for resale. Any change to the process
of notification to the LSP will provide no less notice than the current
Accessible Letter process.
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XXIV. NOTICES
In the event any notices are required to be sent under the terms of
this Agreement, they shall be sent by registered mail, return receipt
requested to:
To SWBT: To LSP:
Patrick Halbach Gregory Lawhon
Southwestern Bell Telephone Senior Vice President and
One Bell Plaza General Counsel
208 S. Akard Birch Telecom, Inc.
Room 0523.13 1000 Walnut Street
Dallas, TX 75202 Suite 1220
Kansas City, MO 64106
XXV. BENEFICIARIES
This Agreement shall not provide any nonparty with any remedy, claim,
cause of action or other right.
XXVI. TERM
A. SWBT and LSP agree that the initial term of this Agreement
shall be for 90 days, and thereafter the Agreement shall
continue in force and effect unless and until terminated as
provided herein or superseded by a new Agreement between the
Parties. Either Party may terminate this Agreement by
providing written notice of termination to the other Party, at
least sixty (60) days in advance of the date of termination.
At the conclusion of the first term, this Agreement shall
continue without interruption unless terminated by either
Party. By mutual agreement, SWBT and LSP may amend this
Agreement to modify the term of this Agreement.
B. In the event the Agreement would otherwise terminate (other
than by being superceded by a new Agreement between the
Parties), LSP may elect to continue to operate under the terms
and conditions of the Agreement (or upon such other terms and
conditions as the Parties may agree) during a holdover period
as herein described ("Holdover Period") provided LSP complies
with the steps detailed herein. Within 10 days of receiving
notice of termination from SWBT, LSP shall send a request for
negotiations for a new resale agreement under Sections 251 and
252 of the Communications Act (to the extent resale is not
already part of a negotiation between the Parties). LSP may
then operate under the terms of this Agreement until the
Parties reach agreement or have completed the
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processes provided for in Section 252 of the Communication Act
provided that if the Parties have not reached agreement, LSP
must seek arbitration at the earliest time permitted under
Section 252. In any event, SWBT may not terminate this
Agreement while any Agreement between the Parties that would
supercede this Agreement is pending approval at the
Commission.
C. Where this Agreement would terminate without being superceded
by a new agreement between the Parties, or there is no
Holdover Period in effect, and LSP has not made arrangements
to provide service over its own facilities to its end users,
the notification and transfer of end user procedures outlined
in Article XII, sections D to F (Termination of Service to
LSP) shall apply.
XXVII. EFFECTIVE DATE
The effective date of this Agreement shall be ten (10) days after the
date that the Commission approves this Agreement.
XXVIII. WAIVER
The failure of either Party to enforce or insist that the other Party
comply with any of the terms or conditions of this Agreement, or the
waiver by either Party in a particular instance of any of the terms and
conditions of this Agreement, shall not be construed as a general
waiver or relinquishment of the terms and conditions, but the Agreement
shall be and remain at all times in full force and effect.
XXIX. DISCLAIMER OF WARRANTIES
SWBT MAKES NO REPRESENTATION OR WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING BUT NOT LIMITED TO ANY WARRANTY AS TO MERCHANTABILITY OR
FITNESS FOR INTENDED OR PARTICULAR PURPOSE WITH RESPECT TO SERVICES
PROVIDED HEREUNDER. ADDITIONALLY, SWBT ASSUMES NO RESPONSIBILITY WITH
REGARD TO THE CORRECTNESS OF DATA OR INFORMATION SUPPLIED BY LSP WHEN
THIS DATA OR INFORMATION IS ACCESSED AND USED BY A THIRD PARTY.
XXX. RELATIONSHIP OF THE PARTIES
This Agreement shall not establish, be interpreted as establishing, or
be used by either Party to establish or to represent their relationship
as any form of agency, partnership or joint venture. Neither Party
shall have any authority to bind the other or to act as an agent for
the other unless written authority, separate from this
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Agreement, is provided. Nothing in the Agreement shall be construed as
providing for the sharing of profits or losses arising out of the
efforts of either or both of the Parties. Nothing herein shall be
construed as making either Party responsible or liable for the
obligations and undertakings of the other Party.
XXXI. COMPLETE TERMS
This Agreement, together with its Attachments constitutes the entire
agreement between the Parties and supersedes all prior discussions,
representations or oral understandings reached between the Parties.
The corresponding tariffs and this Agreement (including the
Attachments) contain all of the applicable rates and charges to be paid
by the LSP to SWBT in connection with SWBT's provision of
telecommunications service to LSP for resale to its end user customers.
Neither Party shall be bound by any amendment, modification or
additional terms unless it is reduced to writing signed by an
authorized representative of the Party sought to be bound.
By their signatures in the space provided below, LSP and SWBT indicate
their acceptance of this Agreement. This agreement shall not bind LSP
and SWBT until executed by both Parties. This Agreement will be
governed by and interpreted in accordance with the laws of the State of
Missouri.
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THIS AGREEMENT CONTAINS A BINDING ARBITRATION AGREEMENT.
BIRCH TELECOM OF MISSOURI, INC. SOUTHWESTERN BELL TELEPHONE
AECN/OCN: __________ COMPANY
/s/Gregory C. Lawhon /s/Larry B. Cooper
- --------------------------------- ----------------------------------
Signature Signature
Gregory C. Lawhon Larry B. Cooper
- --------------------------------- ----------------------------------
Printed Name Printed Name
Senior Vice President and General Manager-
General Counsel Competitive Provider Account Team
- --------------------------------- ----------------------------------
Position/Title Position/Title
August 18, 1997 August 21, 1997
- --------------------------------- ----------------------------------
Date Date
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RESALE AGREEMENT BETWEEN
SOUTHWESTERN BELL TELEPHONE COMPANY
AND BIRCH TELECOM OF MISSOURI, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
I. DESCRIPTION AND CHARGES FOR SERVICES.......................................................... 1
II. TERMS AND CONDITIONS FOR RESALE OF SERVICES................................................... 3
A. Permitted Use of Resold Services by LSP and Its End Users............................ 3
B. Use of SWBT Trademarks............................................................... 5
C. Network and Service Order Conditions................................................. 5
III. ADDITIONAL SERVICES........................................................................... 7
A. 911/E911............................................................................. 7
B. Dialing Parity....................................................................... 7
C. White Page Directories: Listings, Distribution and Information Page................. 8
D. Directory Assistance (DA)............................................................ 10
E. Operator Services (OS)............................................................... 10
IV. RESPONSIBILITIES OF SWBT...................................................................... 10
V. ADDITIONAL RESPONSIBILITIES OF THE PARTIES.................................................... 12
VI. CHANGES IN SUBSCRIBER CARRIER SELECTIONS...................................................... 12
VII. ADDITIONAL RESPONSIBILITIES OF LSP............................................................ 14
A. Payment of Rates and Charges......................................................... 14
B. Interfaces with SWBT................................................................. 15
C. Repair Contact Arrangements.......................................................... 15
D. LSP Operating Company Number (OCN)................................................... 15
E. Special Service Arrangements......................................................... 15
F. Development of Branding and Customized Routing for Directory
Assistance and Operator Services................................................... 15
VIII. NONEXCLUSIVITY................................................................................ 17
IX. SUPPORT SYSTEMS SERVICES...................................................................... 17
A. Support Systems Services............................................................. 17
B. Network Management Controls.......................................................... 19
C. Law Enforcement and Civil Process .................................................. 19
D. Usage Data........................................................................... 20
X. CALL TRACE.................................................................................... 20
</TABLE>
<PAGE> 35
<TABLE>
<S> <C>
XI. TAXES........................................................................................ 20
XII. TERMINATION OF SERVICE TO LSP................................................................ 20
XIII. FORCE MAJEURE................................................................................ 22
XIV. LIMITATION OF LIABILITY...................................................................... 23
XV. NONDISCLOSURE................................................................................ 24
XVI. PUBLICITY.................................................................................... 24
XVII. ASSIGNMENT................................................................................... 25
XVIII. DISPUTE RESOLUTION........................................................................... 25
A. Finality of Disputes................................................................ 25
B. Alternative to Litigation........................................................... 25
XIX. VERIFICATION REVIEWS......................................................................... 27
XX. COMPLIANCE WITH LAWS ....................................................................... 28
XXI. CERTIFICATION REQUIREMENTS................................................................... 29
XXII. EFFECT OF OTHER AGREEMENTS................................................................... 29
XXIII. NEW SERVICES................................................................................. 30
XXIV. NOTICES...................................................................................... 30
XXV. BENEFICIARIES................................................................................ 30
XXVI. TERM......................................................................................... 30
XXVII. EFFECTIVE DATE............................................................................... 31
XXVIII. WAIVER ...................................................................................... 31
XXIX. DISCLAIMER OF WARRANTIES..................................................................... 32
XXX. RELATIONSHIP OF THE PARTIES.................................................................. 32
XXXI. COMPLETE TERMS............................................................................... 32
</TABLE>
<PAGE> 36
EXHIBIT A - TELECOMMUNICATIONS SERVICES LIST
EXHIBIT B - OTHER SERVICES LIST
EXHIBIT C - OS/DA PRICING - BRANDING, RATE & REFERENCE
<PAGE> 37
EXHIBIT A
PAGE 1 OF 5
SOUTHWESTERN BELL'S RESALE TELECOMMUNICATIONS SERVICES* LIST - BUSINESS
MISSOURI
<TABLE>
<CAPTION>
RESALE DISCOUNTS
RECURRING NON-RECURRING
--------- -------------
<S> <C> <C>
LOCAL EXCHANGE SERVICE
Business 1 Party 13.2% 13.2%
Business - Multi-Line Hunting 13.2% 13.2%
Business Measured 13.2% 13.2%
Business Measured (HTG Class of Service) 13.2% 13.2%
EXPANDED LOCAL CALLING
Mandatory EAS 13.2% 13.2%
Optional Metropolitan Calling Area 13.2% 13.2%
VERTICAL SERVICES
Auto Redial 13.2% 13.2%
Call Blocker 13.2% 13.2%
Call Forwarding 13.2% 13.2%
Call Forwarding - Busy Line 13.2% 13.2%
Call Forwarding - Busy Line/Don't Answer 13.2% 13.2%
Call Forwarding - Don't Answer 13.2% 13.2%
Call Return 13.2% 13.2%
Call Trace 13.2% 13.2%
Call Waiting 13.2% 13.2%
Calling Name 13.2% 13.2%
Calling Number 13.2% 13.2%
ComCall(R) 13.2% 13.2%
Personalized Ring (1 dependent number) 13.2% 13.2%
Personalized Ring (2 dependent numbers - 1st number) 13.2% 13.2%
Personalized Ring (2 dependent numbers - 2nd number) 13.2% 13.2%
Priority Call 13.2% 13.2%
Remote Access to Call Forwarding 13.2% 13.2%
Selective Call Forwarding 13.2% 13.2%
Simultaneous Call Forwarding 13.2% 13.2%
Speed Calling 8 13.2% 13.2%
Speed Calling 30 13.2% 13.2%
Three Way Calling 13.2% 13.2%
</TABLE>
*Some Services not available in all Areas.
Resale products available subject to state and federal rules, regulations and
tariffs.
<PAGE> 38
EXHIBIT A
PAGE 2 OF 5
<TABLE>
<CAPTION>
RESALE DISCOUNTS
RECURRING NON-RECURRING
--------- -------------
<S> <C> <C>
DID
DID (First Block of 100 - Category 1) 13.2% 13.2%
DID (First Block of 10 - Category 1) 13.2% 13.2%
DID (Ea. adl. block of 10 after first 10 - Category 1) 13.2% 13.2%
DID (Ea. adl. block of 100 after first 100 - Category 2) 13.2% 13.2%
DID (Ea. adl. block of 10 assigned over 1st 100 - Category 2) 13.2% 13.2%
DID (with Multifrequency) 13.2% 13.2%
DID (with Dual-Tone Multifrequency) 13.2% 13.2%
DID (1st 10 Trunks or access lines) 13.2% 13.2%
DID (11th thru 50th trunk or network access line) 13.2% 13.2%
DID (51st trunk or network access line) 13.2% 13.2%
TRUNKS
Analog Trunks 13.2% 13.2%
Digital Trunks 13.2% 13.2%
AIN
Area Wide Networking 13.2% 13.2%
Disaster Routing Service 13.2% 13.2%
Intelligent Redirect(sm) 13.2% 13.2%
Intellinumber 13.2% 13.2%
Positive ID 13.2% 13.2%
OTHER
Bundled Telecommunications Services (e.g., the Works) 13.2% 13.2%
Customer Alerting Enablement 13.2% 13.2%
Grandfathered Services 13.2% 13.2%
Hot Line 13.2% 13.2%
Hunting 13.2% 13.2%
Local Operator Assistance Service 13.2% 13.2%
Night Number associated with Telephone Number 13.2% 13.2%
Night Number associated with a Terminal 13.2% 13.2%
Promotions (Greater than 90 days) 13.2% 13.2%
Telebranch(R) 13.2% 13.2%
Toll Restriction 13.2% 13.2%
TouchTone 13.2% 13.2%
Voice Dial 13.2% 13.2%
Warm Line 13.2% 13.2%
</TABLE>
*Some Services not available in all Areas.
Resale products available subject to state and federal rules, regulations and
tariffs.
<PAGE> 39
EXHIBIT A
PAGE 3 OF 5
<TABLE>
<CAPTION>
RESALE DISCOUNTS
RECURRING NON-RECURRING
--------- -------------
<S> <C> <C>
ISDN
Digiline 13.2% 13.2%
Select Video Plus(R) 13.2% 13.2%
Smart Trunk(sm) 13.2% 13.2%
DIRECTORY ASSISTANCE SERVICES 13.2% 13.2%
TOLL
900 Call Restriction 13.2% 13.2%
IntraLATA MTS 13.2% 13.2%
MaxiMizer 800(R) 13.2% 13.2%
OutWATS 13.2% 13.2%
Toll Billing Exception (Billed Number Screen) 13.2% 13.2%
800 Service 13.2% 13.2%
OPTIONAL TOLL CALLING PLANS
1+ SAVER(sm) 13.2% 13.2%
1+ SAVER Direct(sm) 13.2% 13.2%
Community Optional Saver 13.2% 13.2%
Outstate Calling Area Service 13.2% 13.2%
PLEXAR(R)
Plexar I(R) 13.2% 13.2%
Plexar II(R) 13.2% 13.2%
Plexar Custom(R) 0.0% 0.0%
PRIVATE LINE
Analog Private Lines 13.2% 13.2%
Business Video Service 13.2% 13.2%
Digital Loop Service 13.2% 13.2%
DOVLink 13.2% 13.2%
Foreign Exchange Service 13.2% 13.2%
Foreign Serving Office 13.2% 13.2%
Frame Relay 13.2% 13.2%
Group Alerting Services 13.2% 13.2%
MegaLink II(R) 13.2% 13.2%
MegaLink III(R) 13.2% 13.2%
MicroLink I(R) 13.2% 13.2%
MicroLink II(R) 13.2% 13.2%
MultiPoint Video 13.2% 13.2%
Service Loop Facility Modification Service 13.2% 13.2%
</TABLE>
*Some Services not available in all Areas.
Resale products available subject to state and federal rules, regulations and
tariffs.
<PAGE> 40
EXHIBIT A
PAGE 4 OF 5
SOUTHWESTERN BELL'S RESALE TELECOMMUNICATIONS SERVICES* LIST - RESIDENCE
MISSOURI
<TABLE>
<CAPTION>
RESALE DISCOUNTS
RECURRING NON-RECURRING
--------- -------------
<S> <C> <C>
LOCAL EXCHANGE SERVICE
Life Line and Link Up America Services 13.2% 13.2%
Residence 1 Party 13.2% 13.2%
Residence Measured 13.2% 13.2%
EXPANDED LOCAL CALLING
Mandatory EAS 13.2% 13.2%
Optional Metropolitan Calling Area 13.2% 13.2%
VERTICAL SERVICES
Auto Redial 13.2% 13.2%
Call Blocker 13.2% 13.2%
Call Forwarding 13.2% 13.2%
Call Forwarding - Busy Line 13.2% 13.2%
Call Forwarding - Busy Line/Don't Answer 13.2% 13.2%
Call Forwarding - Don't Answer 13.2% 13.2%
Call Return 13.2% 13.2%
Call Trace 13.2% 13.2%
Call Waiting 13.2% 13.2%
Calling Name 13.2% 13.2%
Calling Number 13.2% 13.2%
ComCall(R) 13.2% 13.2%
Personalized Ring (1 dependent number) 13.2% 13.2%
Personalized Ring (2 dependent numbers - 1st number) 13.2% 13.2%
Personalized Ring (2 dependent numbers - 2nd number) 13.2% 13.2%
Priority Call 13.2% 13.2%
Remote Access to Call Forwarding 13.2% 13.2%
Selective Call Forwarding 13.2% 13.2%
Simultaneous Call Forwarding 13.2% 13.2%
Speed Calling 8 13.2% 13.2%
Three Way Calling 13.2% 13.2%
DIRECTORY ASSISTANCE SERVICES 13.2% 13.2%
</TABLE>
<PAGE> 41
EXHIBIT A
PAGE 5 OF 5
<TABLE>
<CAPTION>
RESALE DISCOUNTS
RECURRING NON-RECURRING
--------- -------------
<S> <C> <C>
ISDN
Digiline 13.2% 13.2%
OTHER
Bundled Telecommunications Services (e.g., the Works) 13.2% 13.2%
Customer Alerting Enablement 13.2% 13.2%
Grandfathered Services 13.2% 13.2%
Hot Line 13.2% 13.2%
Local Operator Assistance Service 13.2% 13.2%
Promotions (Greater than 90 days) 13.2% 13.2%
Preferred Number Service 13.2% 13.2%
Toll Restriction 13.2% 13.2%
TouchTone 13.2% 13.2%
Voice Dial 13.2% 13.2%
Warm Line 13.2% 13.2%
TOLL
900 Call Restriction 13.2% 13.2%
Home 800(sm) 13.2% 13.2%
IntraLATA MTS 13.2% 13.2%
Toll Billing Exception (Billed Number Screen) 13.2% 13.2%
OPTIONAL TOLL CALLING PLANS
1+ SAVER(sm) 13.2% 13.2%
1+ SAVER Direct(sm) 13.2% 13.2%
Community Optional Saver 13.2% 13.2%
Outstate Area Calling Service 13.2% 13.2%
</TABLE>
*Some Services not available in all Areas.
Resale products available subject to state and federal rules, regulations and
tariffs.
<PAGE> 42
EXHIBIT B
PAGE 1 OF 1
SOUTHWESTERN BELL'S RESALE OTHER SERVICES* LIST
MISSOURI
<TABLE>
<CAPTION>
RESALE DISCOUNTS
RECURRING NON-RECURRING
--------- -------------
<S> <C> <C>
Additional Directory Listings 13.2% 13.2%
Prepaid Calling Cards 13.2% 13.2%
Bill Plus 5% 5%
Consolidated Billing 5% 5%
Access Services 0% 0%
Wireless Carrier Interconnection Services 0% 0%
Company Initiated Suspension Service 0% 0%
Construction Charges 0% 0%
Customer Initiated Suspension Service 0% 0%
Exchange Interconnection Service 0% 0%
Connections with Terminal Equipment and Communications 0% 0%
Equipment
Maintenance of Service Charges 0% 0%
Telecommunications Service Priority Systems 0% 0%
</TABLE>
*Some Services not available in all Areas.
Resale products available subject to state and federal rules, regulations and
tariffs.
<PAGE> 43
EXHIBIT C
PAGE 1 OF 1
APPENDIX RESALE
MISSOURI
OS/DA PRICING - BRANDING, RATE & REFERENCE
The following rates will apply for each service element:
<TABLE>
<S> <C>
A. CALL BRANDING
An initial non-recurring charge applies per TOPS switch, per
brand for the establishment of LSP specific Call Branding. A Per
Call charge also applies. When there are subsequent changes to
the branding announcement, an additional non-recurring charge
will also apply per TOPS, per brand, for each change.
Rate per initial load group $2,325.00
Rate per load for Brand change $2,325.00
Per Call $0.02
B. DIRECTORY ASSISTANCE RATE/REFERENCE
INFORMATION
An initial non-recurring charge applies per TOPS switch, per rate
schedule for the initial load of LSP's DA Services Rate/Reference
Information. An additional non-recurring charge applies per TOPS
switch, per rate schedule for each subsequent change to
Rate/Reference Information.
Rate per initial load $3,850.00
Rate per subsequent rate change $2,850.00
Rate per subsequent reference change $2,850.00
C. OPERATOR SERVICES RATE/REFERENCE
INFORMATION
An initial non-recurring charge applies per TOPS switch, per rate
schedule for the initial load of LSP's Operator Services
Rate/Reference Information. An additional non-recurring charge
applies per TOPS switch, per rate schedule for each subsequent
change to Rate/Reference Information.
Rate per initial load $3,850.00
Rate per subsequent rate change $2,850.00
Rate per subsequent reference change $2,850.00
</TABLE>
Proprietary: Not for Use or Disclosure Outside the
Southwestern Bell Corporation
Family of Companies Except Under Written Agreement
<PAGE> 44
APPENDIX OSS-RESALE
<PAGE> 45
PAGE 2 OF 8
APPENDIX OSS
ACCESS TO OPERATIONS SUPPORT SYSTEMS FUNCTIONS
1. GENERAL CONDITIONS
1.1 This Appendix sets forth the terms and conditions under which SWBT
provides nondiscriminatory access to SWBT's operations support systems
"functions" to LSP for pre-ordering, ordering, provisioning, maintenance /
repair, and billing. Such functions will be made available as described herein
for Resold Services, as provided in this Interconnection Agreement.
1.2 The functions, for Resale, will be accessible via electronic
interface, as described herein, where such functions are available. Manual
access will be available to all pre-ordering, ordering, provisioning, and
billing functions via the Local Service Provider Service Center (LSPSC). LSP may
continue to use manual processes through SWBT to access OSS functions even after
the electronic interfaces are available. The provisions governing use of
electronic interfaces will apply at such time as LSP begins to utilize the
electronic interface. LSP may utilize this manual process for some OSS functions
and electronic access for other OSS functions. Repair and maintenance functions
are available via manual handling by the Local Service Provider Center (LSPC).
1.3 LSP agrees to utilize SWBT electronic interfaces, as SWBT defines
in its requirements, only for the functions described herein for the purposes of
establishing and maintaining Resale services. LSP agrees that such use will
comply with the summary of SWBT's Operating Practice No. 113, Protection of
Electronic Information, titled Local Service Provider Security Policies and
Guidelines.
1.4 LSP's access to OSS functions will only be utilized to view an end
user's Customer Proprietary Network Information (CPNI) under the conditions set
forth and agreed to in Exhibit A and elsewhere in this Appendix. Once the
conditions set forth in Appendix A are satisfied, LSP may access the end user's
CPNI pursuant to this section 1.4.
1.5 By utilizing electronic interfaces to access OSS functions, LSP
acknowledges and agrees to perform accurate and correct billing functions that
occur during ordering per the terms of this Agreement. Further, LSP recognizes
that such billing functions for conversion orders require viewing CPNI as
described in section 1.4 above. All exception handling must be requested
manually from LSPSC.
1.6 In areas where Resale service order transactions cannot be provided
via an electronic interface for the pre-order, ordering and provisioning
processes, SWBT and LSP will utilize manual processes until such time as the
transactions can be electronically transmitted, subject to section 1.2.
1.7 SWBT will provide a help desk function for electronic system
interfaces.
<PAGE> 46
PAGE 3 OF 8
1.8 SWBT and LSP will jointly establish interface contingency and
disaster recovery plans for the pre-order, ordering and provisioning of Resale
services.
1.9 SWBT reserves the right to modify or discontinue the use of any
system or interface as it deems appropriate.
1.10 If LSP elects to utilize industry standardized electronic
interfaces for Resale, SWBT and LSP agree to work together to implement the
guidelines issued by the Order and Billing Forum (OBF) and the
Telecommunications Industry Forum (TCIF) and conform to uniform industry
standards for electronic interfaces for pre-order, ordering, and provisioning.
Neither Party waives its rights in such forums in the implementation of the
standards. To achieve industry standard system functionality as quickly as
possible, the Parties acknowledge that SWBT may deploy these interfaces with
requirements developed in advance of industry standards. Thus, subsequent
modifications may be necessary to comply with emerging standards. LSP and SWBT
are individually responsible for evaluating the risk of developing their
respective systems in advance of standards and agree to support their own system
modifications to comply with new requirements.
1.11 If LSP determines that additional or different information and/or
functionality is required or desirable with respect to any of the OSS functions,
whether covered by this Agreement or otherwise, LSP shall request such
information or functionality from SWBT.
1.12 To the extent LSP feels that outages affecting its access to OSS
are excessive, the Parties agree that this matter may be raised as a dispute to
be handled per the Dispute Resolution Process of Article XVIII of the Resale
Agreement without prejudice to the other rights of either party.
2. PRE-ORDER
2.1 SWBT will provide access to pre-order functions to support LSP
ordering of Resale services via several electronic interfaces. The Parties
acknowledge that ordering requirements necessitate the use of current, real time
pre-order information to accurately build service orders. The following lists
represent pre-order information that will be available to LSP so that LSP order
requests may be created to comply with SWBT ordering requirements.
2.2 PRE-ORDERING FUNCTIONS FOR RESALE SERVICES WILL INCLUDE:
2.2.1 customer name, billing address and residence or business
address, billed telephone numbers and features and services available in the end
office where the customer is provisioned;
2.2.2 features and services to which the customer subscribes
(LSP agrees that LSP's representatives will not access the information specified
in this Subsection until after the
<PAGE> 47
PAGE 4 OF 8
customer requests that the customer's local exchange service provider be changed
to LSP and such request complies with the conditions of Exhibit A of this
Appendix.)
2.2.3 a telephone number (if the customer does not have one
assigned) with the customer on-line.
2.2.4 if a service call is needed to install the line or
service;
2.2.5 information regarding the dispatch / installation
schedule, if applicable;
2.2.6 PIC options for intraLATA toll (when available) and
interLATA toll;
2.2.7 address verification.
2.3. Electronic Access to Pre-Order Functions: Upon request by LSP for
electronic access to pre-ordering functions, SWBT will provide LSP access to one
or more of the following systems:
2.3.1 Residential Easy Access Sales Environment (R-EASE):
R-EASE is an ordering entry system through which SWBT will provide LSP access
for the functions of pre-ordering SWBT's Resale services so long as EASE is
utilized to order SWBT Residential Resale Services.
2.3.2 Business Easy Access Sales Environment (EASE): B-EASE is
an ordering entry system through which SWBT will provide LSP access for the
functions of pre-ordering SWBT's Resale services so long as such access is
utilized to order SWBT's Business Resale Services.
2.3.3 DataGate: DataGate is transaction-based data query
system through which SWBT will provide LSP access for the functions of gathering
pre-ordering information to support industry standardized ordering processes for
Residential and Business Resale services. When ordering Resale services, LSP's
representatives will have access to a pre-order electronic gateway provided by
SWBT for both consumer and business customers that provides real-time access to
SWBT's operations systems. This gateway shall be a Transmission Control
Protocol/Internet Protocol (TCP/IP) gateway and will allow the LSP
representatives to perform the pre-order functions for Resale services, as
described above. SWBT and LSP agree to work together to develop and implement an
electronic communication interface that will replace this initial pre-order
electronic interface consistent with industry standards developed by the OBF and
the TCIF.
2.3.4 VERIGATE is an Access Service Pre-order system that will
also provide access to the pre-ordering functions for Resale Services. VERIGATE
may be used in connection with electronic or manual ordering. VERIGATE preorder
functionality "features and services to which the customer currently subscribes"
will be made available by third quarter 1997.
<PAGE> 48
PAGE 5 OF 8
2.4 OTHER PRE-ORDER FUNCTION AVAILABILITY:
2.4.1 Where due dates are not available electronically, SWBT
will provide LSP with due date interval for inclusion in the service order
request.
2.4.2 In addition to electronic interface access to pre-order
information, upon request, SWBT will provide LSP pre-order information in batch
transmission for the purposes of back-up data for periods of system
unavailability. The parties recognize such information must be used to construct
order requests only in exception handling.
2.5 The provisions of section 1.2 shall apply with respect to the
functions addressed in this Section 2.
3. ORDERING/PROVISIONING
3.1 SWBT will provide access to ordering functions to support LSP
provisioning of Resale services via one or more electronic interfaces. Upon
request for electronic access to ordering functions, SWBT will provide LSP
access to one or more of the following systems or interfaces:
3.1.1 R-EASE is available for the generation of Residential
Resale services orders. Ordering Flows will be available via these systems for
the following ordering functions: Conversion ("as is" or "with changes"); Change
(Features, Listings, Long Distance); New Connect; Disconnect; From and To
(change of premises with same service).
3.1.2 B-EASE is available for the generation of Business
Resale services orders. Ordering Flows will be available via these systems for
the following ordering functions: Conversion ("as is" or "with changes"); Change
(Features, Listings, Long Distance); New Connect; Disconnect; From and To
(change of premises with same service).
3.1.3 SWBT will provide LSP with an Electronic Data
Interexchange (EDI) Interface for transmission of industry-standardized Resale
service order requests in formats as defined by the Ordering and Billing Forum
(OBF) and EDI mapping as defined by TCIF. EDI ordering functionality will be
made available as negotiated and implemented in timeframes mutually acceptable
to SWBT and LSP.
3.2 SWBT will provision Resale Services as prescribed in LSP order
requests. Access to status on such orders of Resale services will be provided
via the following electronic interfaces:
3.2.1 Order Status will allow LSP to check service order status.
3.2.2 In cases of industry-standardized EDI ordering, SWBT will provide
to LSP an
<PAGE> 49
PAGE 6 OF 8
EDI electronic interface for transferring and receiving orders, Firm Order
Confirmation (FOC), service completion, and, as available, other provisioning
data and information. SWBT will provide LSP with a FOC for each Resale order.
The FOC includes but is not necessarily limited to: purchase order number,
telephone number, Local Service Request number, due date, Service Order number,
and completion date. Upon work completion, SWBT will provide LSP with an 855 EDI
transaction based Order Completion that states when that order was completed.
When available, SWBT will provide LSP an 865 EDI transaction-based Order
Completion.
3.2.3 A file transmission may be provided to confirm order completions
for R-EASE or B-EASE order processing. This file will provide service order
information of all distributed and completed orders for LSP, regardless of order
entry mechanism.
3.3 The provisions of section 1.2 shall apply with respect to access to
the functions described in this Section 3.
4. MAINTENANCE/REPAIR
4.1 Two electronic interfaces are accessible to place, and check the
status of, trouble reports for Resale. Upon request, LSP may access these
functions via the following methods:
4.1.1 Trouble Administration (TA) system access provides LSP
with SWBT software that allows LSP to submit trouble reports and subsequently
check status on trouble reports for LSP end-users. TA will provide ability to
review the maintenance history of a converted Resale LSP account.
4.1.2 Electronic Bonding Interface (EBI) is an
industry-standardized interface that is available for trouble report submission
and status updates. This EBI will conform to ANSI standards T1:227:1995 and
T1.228:1995, Electronic Communications Implementation Committee (ECIC) Trouble
Report Format Definition (TFRD) Number 1 as defined in ECIC document
ECIC/TRA/95-003, and all standards referenced within those documents, as
mutually agreed upon by LSP and SWBT. Functions currently implemented will
include Enter Trouble, Request Trouble Report Status, Add Trouble Information,
Modify Trouble Report Attributes, Trouble Report Attribute Value Change
Notification, and Cancel Trouble Report, as explained in 6 and 9 of ANSI
T1.228:1995. LSP. SWBT will exchange requests over a mutually agreeable
X.25-based network.
4.2 The provisions of section 1.2 shall apply with respect to access to
the functions described in this Section 4.
5. BILLING
5.1 SWBT shall bill LSP for resold services. SWBT shall send associated
billing information to LSP as necessary to allow LSP to perform billing
functions. At minimum SWBT will provide LSP billing information in a paper
format or via magnetic tape, as agreed to between
<PAGE> 50
PAGE 7 OF 8
LSP and SWBT.
5.2 Upon request, electronic access to billing information for Resale
Services will also be available via the following interfaces:
5.2.1 LSP may receive Bill Plus(TM), an electronic version of
their electronic bill as described in and in accordance with SWBT's Local
Exchange Tariff.
5.2.2 LSP may receive a mechanized bill format via the
industry standards EDI.
5.2.3 LSP may also view billing information through the CNA -
Billing Inquiry interface.
5.2.4 SWBT shall provide the Usage Billable Records for Resale
Services via EMR industry standard format with a daily feed.
5.2.5 LSP may receive Local Disconnect Report records (via
CARE records) electronically that indicate when LSP's customers change their
local service provider.
5.3 The provisions of section 1.2 shall apply with respect to access to
the functions described in this Section 5.
6. REMOTE ACCESS FACILITY
6.1 LSP must access the following of SWBT's OSS interfaces via a LSP
Remote Access Facility (LRAF) located in Dallas, Texas: R-EASE, B-EASE, Trouble
Administration, DATAGATE and VERIGATE. Connection to the LRAF will be
established via a "port" either through dial-up or direct connection as
described in Section 6.2. LSP may utilize a port to access these interfaces to
perform the supported functions in any SWBT state where LSP has executed an
Appendix OSS and purchases System Access in that state.
6.2 LSP may use three types of access: Switched, Private Line, and
Frame Relay. For Private Line and Frame Relay connections, LSP shall provide its
own router, circuit, and two Channel Service Units/Data Service Units (CSU/DSU).
The demarcation point shall be the router interface at the LRAF. Switched Access
connections require LSP to provide its own modems and connection to the SWBT
LRAF. LSP shall pay the cost of the call if Switched Access is used.
6.3 LSP must use TCP/IP to access SWBT OSS via the LRAF. In addition,
each LSP shall have a valid Internet Protocol (IP) network address. A user-id
/password unique to each individual accessing an OSS shall be maintained to
access any SWBT OSS. Prior to establishing connectivity and as needed
thereafter, LSP must provide estimates regarding its volume of transactions,
number of concurrent users, desired number of private line or dial-up (switched)
connections, and length of a typical session.
<PAGE> 51
PAGE 8 OF 8
6.4 LSP shall attend and participate in implementation meetings to
discuss LSP LRAF access plans in detail and schedule testing of such
connections. SWBT shall make a Help Desk function available to assist LSP on an
ongoing basis in accessing SWBT OSS's over the LRAF.
7. OPERATIONAL READINESS TEST (ORT) FOR ORDERING/PROVISIONING AND REPAIR/
MAINTENANCE INTERFACES
7.1 If and when LSP uses electronic interfaces, LSP must participate
with SWBT in Operational Readiness Testing (ORT), which will allow for the
testing of the systems, interfaces, and processes for the ordering and
provisioning of Resale services. ORT will be completed in conformance with
agreed upon implementation dates. LSP and SWBT will also engage in such testing
as may be necessary for successful implementation of the manual processes
contemplated by Section 1.2.
7.2 Prior to live system usage, LSP must complete user training
sessions for SWBT-provided interfaces that affect SWBT network. Currently,
training is available and required for R-EASE, B-EASE, and Trouble
Administration. Training is also available for Order Status and Verigate.
Charges apply to training delivery.
8. RATES
8.1 LSP requesting access to one or more of the SWBT OSS functions
(i.e., preordering, ordering / provisioning, maintenance / repair, billing)
agrees to pay the following rate:
System Access $3,345.00 / month
8.2 LSP requesting functions via interfaces that require connection to
the Remote Access Facility, as described in section 6, agrees to pay the
following rate(s) depending upon on method of access utilized:
Remote Access Facility Access Methods
Direct Connection Per Port $1,580.00 / month
Dial Up Per Port $ 316.00 / month
8.3 LSP requesting the Bill Plus(TM), as described in 5.2.1, agrees to
pay applicable tariffed rate, less Resale discount.
8.4 LSP requesting the billing function for Usage Billable Records, as
described in 5.2.4, agrees to pay $.003 per message transmitted.
8.5 LSP requesting the Local Disconnect Report, as described in 5.2.5,
agrees to pay $0.10 per record transmitted.
<PAGE> 52
PAGE 9 OF 8
8.6 Should unforeseen modifications and costs to provision OSS
functions become required by SWBT or industry standards, SWBT reserves the right
to modify its rate structure. In addition, should LSP request custom development
of an exclusive interface to support OSS functions, such development will be
considered by SWBT on an Individual Case Basis (ICB) and priced as such.
9. EFFECTIVE DATE, TERM
9.1 The Term of this Appendix OSS will be coincident with the term of
the underlying Resale Agreement between the Parties and will be effective upon
approval by the Commission when it approves it as a part of the Resale
Agreement.
<PAGE> 53
EXHIBIT A
PAGE 1 OF 2
BLANKET CERTIFICATION FOR END-USER AUTHORIZATION FOR RELEASE OF
CUSTOMER PROPRIETARY NETWORK INFORMATION (CPNI)
The undersigned hereby agrees:
Before it may obtain CPNI of an end-user, whether via an independent request or
in the course of ordering SWBT's Resale services via manual and/or mechanized
interfaces, the undersigned must, at least, certify that "yes" (Y) it has
obtained Authorization for Release of CPNI and provide the name of the
individual authorizing the release of CPNI. By these indications, the
undersigned affirms that a current Authorization for the Release of CPNI has
been obtained from an end-user and that it includes the expressed content of the
language, "Minimum Scope." SWBT may then provide the CPNI referenced herein.
Minimum Scope: Authorization for the release of CPNI
1) An affirmative written request that substantially reflects the
following: "This document serves as instruction to all holders
of my local exchange telecommunications Customer Proprietary
Network Information (CPNI) to provide such information to the
undersigned. I understand that this CPNI includes the
following information: billing name, service address, billing
address, service and feature subscription, directory listing
information long distance carrier identity, and all pending
service order activity This Authorization remains in effect
until such time that I revoke it directly or appoint another
individual/company with such capacity or undersigned receives
notice to disconnect my local exchange service or notice that
a service disconnect has been performed. At and from such
time, this Authorization is null and void."
or
2) Authorization for change in local exchange service and release
of CPNI with documentation that adheres to all requirements of
state and federal law, as applicable.
------------------------------------------
Signed
------------------------------------------
Name (Typed/Printed)
------------------------------------------
Title
------------------------------------------
Company
------------------------------------------
Date
Proprietary: Not for Use or Disclosure Outside the Southwestern Bell Corporation
Family of Companies Except Under Written Agreement
<PAGE> 54
SOUTHWESTERN BELL TELEPHONE COMPANY BIRCH TELECOM OF MISSOURI, INC.
By:________________________________ By:____________________________________
(name printed or typed)
Signature:_________________________ Signature:_____________________________
Title:_____________________________ Title:_________________________________
(printed or typed) (printed or typed)
Date:______________________________ Date:__________________________________
Proprietary: Not for Use or Disclosure Outside the Southwestern Bell Corporation
Family of Companies Except Under Written Agreement
<PAGE> 1
Exhibit 10.11
RESALE AGREEMENT (MO, KS & AR)
PAGE 1 OF 2
SWBT/LSP
F307
RESALE AGREEMENT BETWEEN
SOUTHWESTERN BELL TELEPHONE COMPANY
AND VALU-LINE OF KANSAS
TABLE OF CONTENTS
I. DESCRIPTION AND CHARGES FOR SERVICES ........................... 1
II. TERMS AND CONDITIONS FOR RESALE OF SERVICES .................... 1
A. Permitted Use of Resold Services by LSP and
Its End Users ............................................ 2
B. Use of SWBT Trademarks ................................... 3
C. Network and Service Order Conditions ..................... 3
III. ADDITIONAL SERVICES ............................................ 4
A. 911/E911 ................................................. 4
B. Dialing Parity ........................................... 5
C. White Pane Directories: Listings, Distribution
and Information Page ..................................... 5
D. Directory Assistance (DA) ................................ 6
E. Operator Services (OS) ................................... 7
IV. RESPONSIBILITIES OF SWBT ....................................... 7
V. ADDITIONAL RESPONSIBILITIES OF THE PARTIES ..................... 8
VI. CHANGES IN SUBSCRIBER CARRIER SELECTIONS ....................... 9
VII. ADDITIONAL RESPONSIBILITIES OF LSP ............................. 10
A. Payment of Rates and Charges ............................. 10
B. Interfaces with SWBT ..................................... 11
C. Repair Contact Arrangements .............................. 11
D. LSP Operating Company Number (OCN) ....................... 11
E. Special Service Arrangements ............................. 11
F. DA/OS Branding ........................................... 11
VIII. NONEXCLUSIVITY ................................................. 12
IX. SUPPORT SYSTEMS SERVICES ....................................... 12
A. Support Systems Services ................................. 12
B. Network Management Controls .............................. 14
C. Law Enforcement and Civil Process ........................ 14
D. Usage Data ............................................... 15
X. CALL TRACE ..................................................... 15
<PAGE> 2
RESALE AGREEMENT (MO, KS & AR)
PAGE 2 OF 2
SWBT/LSP
F307
XI. TAXES .......................................................... 15
XII. TERMINATION OF SERVICE TO LSP .................................. 15
XIII. FORCE MAJEURE .................................................. 17
XIV. LIMITATION OF LIABILITY ........................................ 17
XV. NONDISCLOSURE .................................................. 18
XVI. PUBLICITY ...................................................... 19
XVII. ASSIGNMENT ..................................................... 19
XVIII. DISPUTE RESOLUTION ............................................. 19
A. Finality of Disputes ..................................... 19
B. Alternative to Litigation ................................ 20
XIX. VERIFICATION REVIEWS ........................................... 21
XIX. COMPLIANCE WITH LAWS ........................................... 22
XXI. CERTIFICATION REQUIREMENTS ..................................... 23
XXII. EFFECT OF OTHER AGREEMENTS ..................................... 24
XXIII. NOTIFICATION ................................................... 24
XXIV. NOTICES ........................................................ 24
XXV. BENEFICIARIES .................................................. 24
XXVI. TERM ........................................................... 25
XXVII. EFFECTIVE DATE ................................................. 25
XXVIII. WAIVER ......................................................... 25
XXIX. DISCLAIMER OF WARRANTIES ....................................... 25
XXIX. RELATIONSHIP OF THE PARTIES .................................... 25
XXXI. COMPLETE TERMS ................................................. 26
<PAGE> 3
RESALE AGREEMENT (MO, KS & AR)
PAGE 1 OF 27
SWBT/LSP
F313
RESALE AGREEMENT BETWEEN
SOUTHWESTERN BELL TELEPHONE COMPANY
AND VALU-LINE OF KANSAS, INC.
This Agreement is between Southwestern Bell Telephone Company ("SWBT"), a
Missouri corporation, and Valu-Line of Kansas, Inc. ("LSP") (collectively, "the
Parties") entered into this ________ day of ________, 1997.
WHEREAS, pursuant to the Telecommunications Act of 1996 (the "Act"), the
Parties wish to establish terms for the purchase by LSP of certain SWBT retail
telecommunications services and certain other services for resale by LSP to its
local exchange end users in the State of Kansas. Therefore, the Parties hereby
agree as follows:
I. DESCRIPTION AND CHARGES FOR SERVICES
The services available to LSP for resale and the discounts for such
services are identified in Attachments A and B. Furthermore, to the extent
that a federal or state regulatory agency adopts a final order
establishing wholesale discounts under 252(d)(3) of the Telecommunications
Act, which is not stayed and which directs SWBT to apply state-specific
wholesale discount percentages which are different from those incorporated
within this Agreement, either Party shall have the option of converting to
that discount level upon ten (10) days' written notice to the other Party.
LSP may offer to resell Customer Initiated Suspension and Restoral Service
to their end users as outlined in the corresponding retail tariff. SWBT
will offer to LSP Company Initiated Suspension Service for their own
purposes at the SWBT retail tariffed rate. Should LSP choose to suspend
their end user through Company Initiated Suspension Service, this
suspension period shall not exceed fifteen (15) calendar days. If LSP
issues a disconnect on their end user account within the fifteen (15) day
period, appropriate services will not be billed for the suspension period.
However, should LSP issue a disconnect after the fifteen (15) day
suspension period, LSP will be responsible for all appropriate charges on
the account back to the suspension date. Should LSP restore their end
user, restoral charges at the SWBT retail tariffed rate will apply and LSP
will be billed for the appropriate service from the time of suspension.
II. TERMS AND CONDITIONS FOR RESALE OF SERVICES
The following terms and conditions are applicable to all services
purchased under this Agreement.
<PAGE> 4
RESALE AGREEMENT (MO, KS & AR)
PAGE 2 OF 27
SWBT/LSP
F313
A. Permitted Use of Resold Services by LSP and Its End Users
1. For services included in this Agreement, which are offered
through tariffs by SWBT to its end users, the rules and
regulations associated with the applicable State General
Exchange Tariff; Local Exchange Service Tariff, and the other
tariffs for the resold service (such tariffs collectively
referred to herein as "corresponding tariffs"), apply except
as otherwise provided herein.
2. LSP shall only sell Plexar(R) services to a single end user.
3. Except where otherwise explicitly provided in the
corresponding tariffs, LSP shall not permit the sharing of a
service or services by multiple end users or the aggregation
of traffic from multiple end users onto a single service.
4. LSP shall only resell services purchased under this Agreement
to the same class of end users to whom SWBT sells such
services (e.g. residence service shall not be resold to
business end users). LSP may only resell Lifeline Assistance,
Link-Up, and other like services to similarly situated
customers who are eligible for such services. Further, to the
extent LSP resells services that require certification on the
part of the buyer, LSP will ensure that the buyer has received
proper certification and complies with all rules and
regulations as established by the Commission.
5. SWBT promotions of ninety (90) days or less shall not be
available to LSP for resale.
6. LSP shall not use a resold service to avoid the rates, terms
and conditions of SWBT's corresponding tariffs.
7. LSP shall not use resold local exchange telephone service to
provide access or interconnection services to itself,
interexchange carriers (IXCs), wireless carriers, competitive
access providers (CAPs), or other telecommunications
providers. Provided however, that LSP may permit its end users
to use resold local exchange telephone service to access IXCs,
wireless carriers, CAPs, or other retail telecommunications
providers.
8. If LSP is in violation of a provision of this Agreement, SWBT
shall notify LSP of the violation in writing of the specific
provision being violated. At such time LSP shall have (30)
days to correct
<PAGE> 5
RESALE AGREEMENT (MO, KS & AR)
PAGE 3 OF 27
SWBT/LSP
F313
the violation and notify SWBT in writing that the violation
has been corrected. SWBT shall then bill LSP for the charges
which should have been collected by SWBT or the actual
revenues collected by LSP from its end users for the stated
violation, whichever is greater. If LSP disputes the
violation, it shall notify SWBT in writing within fourteen
(14) days of receipt of notice from SWBT. Disputes shall be
resolved as outlined in the Dispute Resolution section of the
Agreement.
9. An End User Common Line (EUCL) charge will continue to apply
for each local exchange line resold under this Agreement. All
federal rules and regulations associated with EUCL charges, as
found in Tariff FCC 73, also apply.
10. To the extent allowable by law, LSP shall be responsible for
Primary Interexchange Carrier (PIC) change charges associated
with such local exchange line. LSP shall pay for PIC changes
at the tariffed rate.
11. SWBT is not required to make services available for resale at
wholesale rates to LSP for its own use. SWBT, however, shall
at its option agree to allow LSP to purchase SWBT's
Telecommunications Services and other services available for
resale as outlined in the exhibits to this Agreement, as long
as said services are not resold exclusively or predominately
to LSP, its subsidiaries, or affiliates.
B. Use of SWBT Trademarks
Except where otherwise required by law, LSP shall not, without
SWBT's written authorization, offer the services covered by this
Agreement using the trademarks, service marks, trade names, brand
names, logos, insignia, symbols or decorative designs of SWBT or its
affiliates. Nor shall LSP state or imply that there is any joint
business association or similar arrangement with SWBT in the
provision of telecommunications services to LSP's own end users. LSP
may brand services included in this Agreement with its own brand
name, but SWBT shall not be responsible for providing such branding.
C. Network and Service Order Conditions
1. SWBT shall provide the services covered by this Agreement
subject to availability of existing facilities and on a
nondiscriminatory basis with its other customers. LSP shall
resell the services provided
<PAGE> 6
RESALE AGREEMENT (MO, KS & AR)
PAGE 4 OF 27
SWBT/LSP
F313
herein only in those service areas in which such resale
services or any feature or capability thereof are offered at
retail by SWBT as the incumbent local exchange carrier to its
end users.
2. When LSP converts an end user currently receiving noncomplex
service from the SWBT network, without any changes to SWBT's
network, LSP will be charged a per order (i.e., per billable
telephone number) conversion charge of twenty-five dollars
($25.00) in Kansas. Conversion orders processed and completed
electronically will be charged five dollars ($5.00) per order
on an interim basis. Complex orders will be charged at a rate
of one hundred twenty-five dollars ($125.00). Custom Services
conversions (e.g. Plexar Custom) will be handled on a Customer
Specific Proposal basis.
When LSP converts an end user and adds or changes are made to
the network, the respective conversion charge will apply, as
well as any normal service order charges associated with said
changes. All nonrecurring service connection charges,
excluding the conversion charge mentioned above, will be
charged at a discount for those services listed in Exhibits A
and B.
3. For the purposes of ordering new service under this Agreement,
each request for service shall be handled as a separate and
initial request for service per billable telephone number. The
additional line rate for Service Order Charges shall apply
only to those requests for additional residential service at
the end user's same location where a residential line is
currently provided on SWBT's network, regardless of the
nonfacilities based local service provider of record.
4. For purposes of this section, service orders for LSPs shall be
handled in the same fashion as SWBT requires for its end
users.
III. ADDITIONAL SERVICES
A. 911/E911
1. Access to the 911 or E911 service, available to SWBT end users
in the area(s) served by LSP, shall be made available to LSP's
end users.
<PAGE> 7
RESALE AGREEMENT (MO, KS & AR)
PAGE 5 OF 27
SWBT/LSP
F313
2. LSP shall be responsible for collecting and remitting all
applicable 911 surcharges on a per line basis to the Public
Safety Answering Point (PSAP).
3. When requested by SWBT, LSP shall timely provide accurate and
complete information on each of LSP's end users as needed for
the provisioning of 911 service to LSPs end users. Such
information shall be in a format determined by SWBT.
B. Dialing Parity
1. Local Dialing Parity
SWBT agrees that local dialing parity shall be available to
LSP. That is, end users of SWBT and end users of LSP shall
have the same exchange boundaries, such end users shall be
able to dial the same number of digits when making a "local"
call.
2. IntraLATA Toll Dialing Parity.
SWBT agrees to make intraLATA toll dialing parity available in
accordance with Section 251(b)(3) of the Telecommunications
Act of 1996.
C. White Page Directories: Listings, Distribution and Information Page
1. At LSP's request, SWBT shall provide nondiscriminatory access
to White Pages directory listing and distribution services
under the terms and conditions described herein:
a) SWBT shall provide, at no additional charge, a straight
line listing in the appropriate SWBT white pages for
each of LSP's local exchange service end users.
Subscriber listing information shall, however, remain
the property of SWBT.
b) Additional Listing Services (e.g., foreign and signature
listings) can be purchased by LSP for its end users on a
per listing basis. LSP shall pay SWBT for all such
listings provided to LSP's end users. The discounts
applicable to Listing Services are contained in Exhibits
A and B to this Agreement.
<PAGE> 8
RESALE AGREEMENT (MO, KS & AR)
PAGE 6 OF 27
SWBT/LSP
F313
c) LSP end users shall be entitled to one directory per
basic residential or business line provided by SWBT
pursuant to this Agreement.
d) SWBT, or its agents shall deliver a White Pages
Directory to LSP end user's premises at the same time
that such directories are delivered to SWBT end users.
If an LSP's end user already has a current SWBT
directory, SWBT shall not be required to deliver a new
directory to that end user until the new directories are
published for that end user's location.
e) LSP hereby releases SWBT from any and all liability for
damages due to errors or omissions in LSP's subscriber
listing information as it appears in the White Pages
directory, including, but not limited to, special,
indirect, consequential, punitive or incidental damages.
To the extent LSP reimburses its end user subscriber any
listing charge due to errors or omissions caused
directly by SWBT, SWBT shall reimburse LSP any
associated wholesale rate.
f) LSP shall indemnify, protect, save harmless and defend
SWBT (or SWBT's officers, employees, agents, assigns,
and representatives) from and against any and all
losses, liability, damages and expense arising out of
any demand, claim, suit, or judgment by a third party in
any way related to any error or omission in LSP's
subscriber listing information as it appears in the
White Pages directory, including any error or omission
related to nonpublished or nonlisted subscriber listing
information; provided, however, LSP shall not be
required to indemnify SWBT for gross negligence or
willful misconduct. LSP shall so indemnify regardless of
whether the demand, claim, or suit by the third party is
brought jointly against LSP and SWBT, and/or against
SWBT alone.
2. Information Page
a) At LSP's request, SWBT shall include in the
"Informational Page" section of SWBT's White Pages
directory, for those geographical areas in which LSP
provides local exchange services, LSP's customer contact
information regarding emergency services, billing and
service information, repair services and other pertinent
information similar to that
<PAGE> 9
RESALE AGREEMENT (MO, KS & AR)
PAGE 7 OF 27
SWBT/LSP
F313
provided by SWBT in its "Informational Pages." Such
information shall be included on the same page with
other LSP information.
b) At LSP's option, LSP shall be provided a single
"Informational Page" (one side of one page) in the
informational section of the White Pages directory
covering a geographic area where an LSP provides local
exchange service. This page shall be no different in
style, size, color and format than SWBT Informational
Pages." Sixty (60) days prior to the directory close
date, LSP shall provide to SWBT the "Informational Page"
in the form of camera-ready copy. The charges associated
with this service vary from geographic market to market,
and are charged outside this Agreement.
D. Directory Assistance (DA)
SWBT shall provide access to DA to LSP's end users. LSP shall pay
the charges associated with the use of such services by LSP's end
users. The discounts applicable to such services are contained in
Exhibits A and B, which is attached hereto and made a part hereof.
E. Operator Services (OS)
1. SWBT shall provide access to Operator Services to LSP's end
users. LSP shall pay the charges associated with the use of
such services by LSP's end users. The discounts applicable to
such services are contained in Exhibits A and B, which is
attached hereto and incorporated by reference.
2. SWBT shall provide Line Status Verification and Busy Line
Interrupt on calls made on SWBT's network to LSP end users.
LSP shall pay SWBT associated charges when its end users
request such services, with discounts to apply as listed in
Exhibits A and B.
IV. RESPONSIBILITIES OF SWBT
A. SWBT shall allow LSP to place service orders and receive phone
number assignments (for new lines). These activities shall be
accomplished by telephone call or facsimile until electronic
interface capability has been established. SWBT, with input from
LSP, shall provide interface specifications for electronic access
for these functions to LSP once such electronic interfaces become
technically feasible and are in place.
<PAGE> 10
RESALE AGREEMENT (MO, KS & AR)
PAGE 8 OF 27
SWBT/LSP
F313
However, LSP shall be responsible for modifying and connecting any
of its systems with SWBT provided interfaces when such interfaces
become available, as outlined in Appendix OSS.
B. SWBT shall implement LSP service orders within the same time
intervals SWBT uses to implement service orders for similar services
for its own end users.
C. LSP will have the ability to report trouble for its end users to
appropriate SWBT trouble reporting centers 24 hours a day, 7 days a
week. LSP will be assigned a customer contact center when initial
service agreements are made. LSP end users calling SWBT may be
referred to LSP at the number provided by LSP.
Methods and procedures for ordering and trouble reporting are
outlined in the Handbook for Non-Switched Based Providers dated
11/15/95, as amended by SWBT from time to time. Both parties agree
to abide by the procedures contained therein.
D. On no less than sixty (60) days advance written notice, LSP may
request SWBT to make certain usage information available to LSP on a
daily basis in a standard electronic format. The information will
consist of usage sensitive charges SWBT will bill to LSP arising out
of the use of resold lines. LSP agrees to pay SWBT three tenths of a
cent ($.003) per message for this service, plus other charges
outlined in Appendix OSS
V. ADDITIONAL RESPONSIBILITIES OF THE PARTIES
Cooperation on Fraud
SWBT shall not be liable to LSP for any fraudulent usage on LSP's end
users' accounts.
The Parties agree to cooperate with one another to investigate, minimize
and take corrective action in cases of fraud. The Parties' fraud
minimization procedures are to be cost effective and implemented so as not
to unduly burden or harm one Party as compared to the other.
At a minimum, such cooperation shall include providing to the other Party,
upon request, information concerning end users who terminate services to
that Party without paying all outstanding charges, when such end user
seeks service from the other Party. The Party seeking such information is
responsible for securing the end user's permission to obtain such
information.
<PAGE> 11
RESALE AGREEMENT (MO, KS & AR)
PAGE 9 OF 27
SWBT/LSP
F313
VI. CHANGES IN SUBSCRIBER CARRIER SELECTIONS
A. Prior to submitting an order under this Agreement, LSP shall obtain
end user authorization as required by applicable state or federal
laws and regulations, and assumes responsibility for applicable
charges as specified in Section 258(b) of the Telecommunications Act
of 1996. SWBT shall abide by the same applicable laws and
regulations.
B. Only an end user can initiate a challenge to a change in its local
exchange service provider. If an end user notifies SWBT or LSP that
the end user requests local exchange service, the Party receiving
such request shall be free to immediately provide service to such
end user. SWBT shall be free to connect the end user to any local
service provider based upon the local service provider's request and
local service provider's assurance that proper end user
authorization has been obtained. LSP shall make authorization
available to SWBT upon request and at no charge.
C. When an end user changes or withdraws authorization, each Party
shall release customer-specific facilities in accordance with the
end user customer's direction or the direction of the end user's
authorized agent. Further, when an end user abandons the premise,
SWBT is free to reclaim the facilities for use by another customer
and is free to issue service orders required to reclaim such
facilities.
D. Neither Party shall be obligated by this Agreement to investigate
any allegations of unauthorized changes in local exchange service
(slamming) on behalf of the other Party or a third party. If SWBT,
on behalf of LSP, agrees to investigate an alleged incidence of
slamming, SWBT shall charge LSP a fifty dollar ($50) investigation
fee.
E. When SWBT receives an order from LSP for services under this
Agreement and SWBT is currently providing the same services to
another local service provider for the same end user, SWBT shall
notify the end user's local service provider of record of such order
coincident with processing the order. It shall then be the
responsibility of the local service provider of record and LSP to
resolve any issues related to the end user. This paragraph shall not
apply to new additional lines and services purchased by an end user
from multiple LSPs or from SWBT.
F. On no less than sixty (60) days notice, LSP may request the Local
Disconnect Report. SWBT agrees to furnish to LSP the Billing
Telephone Number (BTN), Working Telephone Number (WTN), and terminal
number of all end users who have disconnected LSP's service. LSP
understands and agrees that the CARE interface will be used to
provide such
<PAGE> 12
RESALE AGREEMENT (MO, KS & AR)
PAGE 10 OF 27
SWBT/LSP
F313
information and such information will only be available via the CARE
electronic data transmission. Information will be provided on a
per-WTN basis to be priced on a per-WTN basis. SWBT will provide LSP
no less than thirty (30) days notice prior to any change of the
per-WTN charge. SWBT grants to LSP a non-exclusive right to use the
information provided by SWBT. LSP will not permit anyone but its
duly authorized employees or agents to inspect or use this
information. LSP agrees to pay SWBT ten cents ($0.10) per WTN and
any applicable transmission charges for the Local Disconnect Report.
G. The LSP agrees to hold harmless and indemnify SWBT against any and
all liability and claims, including reasonable attorney's fees, that
may result from SWBT acting under this Article.
H. Nothing herein shall be interpreted to apply to conversion of LSP
end users pursuant to Article XII. (Termination of Service to LSP).
VII. ADDITIONAL RESPONSIBILITIES OF LSP
A. Payment of Rates and Charges
1. LSP is solely responsible for the payment of charges for all
services furnished under this Agreement including, but not
limited to, calls originated or accepted at LSP's location and
its end users' service locations, with the exception of any
retail services provided directly by SWBT to the end user
which SWBT shall be responsible for billing.
Interexchange carried traffic (e.g., sent-paid, information
services and alternate operator services messages) received by
SWBT for billing to resold end-user accounts will be returned
as unbillable and will not be passed on to LSP for billing. An
unbillable code returned with those messages to the carrier
will indicate that the messages originated from a resold
account and will not be billed by SWBT.
2. SWBT shall not be responsible for the manner in which the use
of resold service, or the associated charges are allocated to
others by LSP. All applicable rates and charges for such
services will be billed to and shall be the responsibility of
LSP, with the exception of retail services provided directly
to the end user by SWBT as described in paragraph 1 above.
<PAGE> 13
RESALE AGREEMENT (MO, KS & AR)
PAGE 11 OF 27
SWBT/LSP
F313
3. Compensation for all services shall be paid by LSP regardless
of LSP's ability or inability to collect charges from its end
user for such service.
4. If LSP does not wish to be responsible for collect, third
number billed, toll, and information services (e.g., 900)
calls, it must order the appropriate blocking for resold lines
under this Agreement and pay any applicable charges. LSP
acknowledges that blocking is not available for certain types
of calls, including 800 numbers.
B. Interfaces with SWBT
LSP shall be responsible for modifying and connecting any of its
systems with SWBT-provided interfaces as described in this
Agreement.
C. Repair Contact Arrangements
LSP shall be responsible for providing to its end users and to SWBT
a telephone number or numbers that LSP's end users can use to
contact LSP in the event of service or repair requests. In the event
that LSP's end users contact SWBT with regard to such requests, SWBT
shall inform the end user that they should call LSP and may provide
LSP contact number.
D. LSP Operating Company Number (OCN)
For the purposes of establishing service and providing efficient and
consolidated billing to the LSP, the LSP is required to provide SWBT
its authorized and nationally recognized OCN.
E. Special Service Arrangements
For special service arrangements for LSP not covered under this
Agreement, special charges shall apply as provided in the applicable
corresponding tariffs.
F. Development of Branding and Customized Routing for Directory
Assistance and Operator Services
1. Requirements - Pursuant to ss. 226 (b) of The
Telecommunications Act of 1996, each provider of Operator
Services is required to:
a) provide its brand at the beginning of each telephone
call and before the consumer incurs any charge for the
call; and
<PAGE> 14
RESALE AGREEMENT (MO, KS & AR)
PAGE 12 OF 27
SWBT/LSP
F313
b) disclose immediately to the consumer, upon request a
quote of its rates or charges for the call.
c) Where SWBT provides LSPs OS and DA services via the same
trunk, both the OS and DA calls will be branded with the
same brand. Since SWBT's DA and OS utilize the same
trunk group, LSP will receive the same brand for both
DA/OS. Such branding will be provided pursuant to
Section 2. below.
2. Call Branding - In compliance with F.l. above, SWBT will brand
DA/OS in LSP's name based upon the criteria outlined below:
a) LSP will provide SWBT with written specification of its
company name to be used in creating LSP specific
branding messages for its DA/OS calls.
b) An initial non-recurring charge applies per load for the
establishment of Call Branding as well as a charge per
subsequent load to change the brand. In addition, a per
call charge applies for every DA/OS call handled by SWBT
on behalf of LSP when such services are provided in
conjunction with resale services. Prices for Call
Branding are as outlined in Exhibit C, attached hereto
and incorporated herein.
3. Rate/Reference Information - SWBT will provide LSP DA/OS
Rate/Reference Information based upon the criteria outlined
below:
a) LSP will furnish DA/OS Rate and Reference Information in
a mutually agreed to format or media thirty (30) days in
advance of the date when the DA/OS Services are to be
undertaken.
b) LSP will inform SWBT, in writing, of any changes to be
made to such Rate/Reference Information ten (10) working
days prior to the effective Rate/Reference change date.
LSP acknowledges that it is responsible to provide SWBT
updated Rate/Reference Information in advance of when
the Rates/Reference Information are to become effective.
c) In all cases when a SWBT Operator receives a rate
request from a LSP end user, SWBT will quote the
applicable DA/OS rates as provided by LSP.
d) An initial non-recurring charge will apply for loading
of LSP's DA/OS Rate/Reference Information as well as a
charge for each
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subsequent change to either the LSP's DA/OS Services
Rate or Reference Information as outlined in Exhibit C,
attached hereto and incorporated herein.
4. Customized Routine - SWBT shall also offer LSP the opportunity
to customize route DA/OS where technically feasible. LSP
agrees to pay SWBT appropriate charges associated with
customized routing on an ICB basis.
VIII. NONEXCLUSIVITY
This Agreement is nonexclusive. LSP acknowledges that SWBT will be
providing the same or similar services to other local services providers
in accordance with negotiated agreements which will be filed with the
appropriate state commission(s). LSP also acknowledges that SWBT may, upon
end user request, provide any and all of the services provided to LSP
under this Agreement directly to the end users. SWBT acknowledges that LSP
may obtain the same or similar services from other local exchange
companies.
IX. SUPPORT SYSTEMS SERVICES
A. Support Systems Services
1. Transfer of Service Announcements (Intercept)
The Party formerly providing service to an end user shall
provide a Basic Referral announcement, reciprocally and free
of charge on the abandoned telephone number. The announcement
states that the called number has been disconnected or changed
and provides the end user's new telephone number to the extent
that it is listed. SWBT shall provide an intercept referral on
behalf of LSP to their end user as indicated on the
appropriate service order.
Basic Intercept Referral Announcements are to be provided on
residential numbers for a minimum of thirty (30) days where
facilities exist and the threat of telephone number exhaustion
is not imminent.
Basic Intercept Referral Announcements for a single line
business end users and the primary listed telephone number for
Direct Inward Dial (DID) and "Centrex-type" end users, shall
be available for a minimum of thirty (30) days or the life of
the white pages directory, whichever is greater. If the threat
of telephone number exhaustion becomes imminent for a
particular central office, the
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service provider may reissue a disconnected number prior to
the expiration of the directory, but no earlier than thirty
(30) days after the disconnection of the business telephone
number.
2. Coordinated Repair Calls
SWBT shall be responsible for repairing its own network.
However, LSP shall maintain telephone numbers where its end
user may call to report instances of trouble.
The Parties shall employ the following procedures for handling
misdirected repair calls:
a. The Parties shall inform their respective end users of
the correct telephone numbers to call to access their
respective repair bureaus.
b. To the extent the correct provider can be determined,
each Party shall refer misdirected repair calls to the
proper provider of local exchange service, at no charge,
and shall provide the end user the contact telephone
number provided by the other party.
In responding to repair calls, neither Party shall make
disparaging remarks about each other, nor shall they use
these repair calls as the basis for internal referrals
or to solicit customers or to market services. Either
Party may respond with accurate information in answering
customer questions.
c. The Parties shall provide each other their respective
repair contact numbers.
B. Network Management Controls
Each Party shall provide a 24-hour contact number for Network
Traffic Management issues to the other. A FAX number must also be
provided to facilitate event notifications for planned mass calling
events. Additionally, both Parties agree that they shall work
cooperatively that all such events shall attempt to be conducted in
such a manner as to avoid degradation or loss of service to other
end users.
C. Law Enforcement and Civil Process
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SWBT and LSP shall handle law enforcement requests as follows:
1) INTERCEPT DEVICES Local and federal law enforcement agencies
periodically request information or assistance from local
telephone service providers. When either Party receives a
request associated with an end user of the other Party, it
shall refer such request to the appropriate Party, unless the
request directs the receiving Party to attach a pen register,
trap and trace or form of intercept on that Party's own
facilities, in which case that Party shall comply with any
valid request.
2) SUBPOENAS If a Party receives a subpoena for information
concerning an end user the Party knows to be an end user of
the other Party, it shall refer the subpoena to the requesting
entity with an indication that the other Party is the
responsible company. Provided, however, if the subpoena
requests records for a period of time during which the
receiving Party was the end user's service provider, the
receiving Party will respond to any valid request.
3) EMERGENCIES If a Party receives a request from a law
enforcement agency for a temporary number change, temporary
disconnect or one way denial of outbound calls for an end user
of the other party, the receiving Party will comply so long as
it is a valid emergency request. In the case of the LSP, the
LSP shall refer such request to SWBT and SWBT shall honor such
request in accordance with this paragraph. However, neither
Party shall be held liable for any claims or damages arising
from compliance with such requests, and the Party serving the
end user agrees to indemnify and hold the other Party harmless
against any and all such claims.
D. Usage Data
On no less than 60 days advance written notice, LSP may request SWBT
to make certain usage information available to LSP on a daily basis
via a mechanized feed. The information will consist of usage
sensitive charges SWBT will bill to LSP arising out of the use of
resold lines. LSP agrees to pay SWBT $.003 per message for this
service.
X. CALL TRACE
LSP end user's activation of Call Trace shall be handled by the SWBT Call
Trace Center (CTC) or its Annoying and Anonymous Call Bureau. SWBT shall
notify LSP of requests by its end users to provide the call records to the
proper
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authorities. Subsequent communication and resolution of the case with
LSP's end user (whether that end user is the victim or the suspect) will
be coordinated through the LSP.
LSP understands that for services where reports are provided to law
enforcement agencies (e.g., Call Trace) only billing number and address
information shall be provided. It shall be the LSP's responsibility to
provide additional information necessary for any police investigation. LSP
shall indemnify SWBT against any claims that insufficient information led
to inadequate prosecution.
XI. TAXES
LSP shall be responsible for all federal, state or local, sales, use,
excise or gross receipts taxes or fees imposed on or with respect to the
services provided under this Agreement including those taxes and fees
imposed on SWBT. LSP shall reimburse SWBT for the amount of any such taxes
or fees which SWBT is required to pay or collect for services provided to
LSP hereunder.
XII. TERMINATION OF SERVICE TO LSP
A. If LSP fails to pay when due, any and all charges billed to them
under this Agreement, including any late payment charges (Unpaid
Charges), and any portion of such charges remain unpaid more than
fifteen (15) days after the due date of such Unpaid Charges, SWBT
shall notify LSP in writing that in order to avoid having service
disconnected, LSP must remit all Unpaid Charges to SWBT within
fourteen (14) business days.
B. If LSP disputes the billed charges, it shall, within the fourteen
(14) day period provided for above, inform SWBT in writing which
portion of the charges it disputes, including the specific details
and reasons for its dispute; immediately pay to SWBT all undisputed
charges; and pay all disputed charges into an interest bearing
escrow account with a third party escrow agent mutually agreed upon
by the Parties.
C. Disputes hereunder shall be resolved in accordance with the
procedures identified in Article XVIII (Dispute Resolution). Failure
of LSP to pay charges deemed owed to SWBT after conclusion of the
Arbitration shall be grounds for termination under this Article.
D. If any LSP charges remain unpaid or undisputed twenty-nine (29) days
past the due date, SWBT shall notify LSP, the Commission and the end
user's IXC(s) of Record in writing, that unless all charges are paid
within sixteen (16) days, LSP's service shall be disconnected and
its end users shall be
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switched to SWBT local service. SWBT will also suspend order
acceptance at this time.
E. If any LSP charges remain unpaid or undisputed forty (40) days past
the due date, LSP shall, at its sole expense, notify its end users,
the Commission and the end user's of Record that their service may
be disconnected for LSP failure to pay Unpaid Charges, and that its
end users must select a new local service provider within five (5)
days. The notice shall also advise the end user that SWBT will
assume the end user's account at the end of the five (5) day period
should the end user fail to select a new local service provider.
F. If any LSP charges remain unpaid or undisputed forty-five (45) days
past the due date, SWBT shall disconnect LSP and transfer all LSP's
end users who have not selected another local service provider
directly to SWBT's service. These end users shall receive the same
services provided through LSP at the time of transfer. SWBT shall
inform the Commission and the end user's IXC(s) of Record of the
names of all end users transferred through this process. Applicable
service establishment charges for switching end users from LSP to
SWBT shall be assessed to LSP.
G. Within five (5) days of the transfer (50 days past LSP's due date),
SWBT shall notify all affected end users that because of an LSP's
failure to pay, their service is now being provided by SWBT. SWBT
shall also notify the end user that they have thirty (30) days to
select a local service provider.
H. SWBT may discontinue service to LSP upon failure to pay undisputed
charges as provided in this section, and shall have no liability to
LSP or LSP end users in the event of such disconnection.
I. If any end user fails to select a local service provider within
thirty (30) days of the change of providers (80 days past LSP's due
date), SWBT shall terminate the end user's service. SWBT shall
notify the Commission and the end user's IXC of Record of the names
of all end users whose service has been terminated. The end user
shall be responsible for any and all charges incurred during the
selection period.
J. Nothing herein shall be interpreted to obligate SWBT to continue to
provide service to any such end users. Nothing herein shall be
interpreted to limit any and all disconnection rights SWBT may have
with regard to such end users.
K. After disconnect procedures have begun, SWBT shall not accept
service orders from LSP until all unpaid charges are paid. SWBT
shall have the
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right to require a deposit equal to one month's charges (based on
the highest previous month of service from SWBT) prior to resuming
service to LSP after disconnect for nonpayment.
XIII. FORCE MAJEURE
Neither party shall be responsible for delays or failures in performance
resulting from acts or occurrences beyond the reasonable control of such
Party, regardless of whether such delays or failures in performance were
foreseen or foreseeable as of the date of this Agreement, including,
without limitation: fire, explosion, power failure, cable cuts, acts of
God, war, revolution, civil commotion, or acts of public enemies; any law,
order, regulation, ordinance or requirement of any government or legal
body; or labor unrest, including, without limitation, strikes, slowdowns,
picketing or boycotts; or delays caused by the other party or by other
service or equipment vendors; or any other circumstances beyond the
Party's reasonable control. In such event, the Party affected shall, upon
giving prompt notice to the other Party, be excused from such performance
on a day-to-day basis to the extent of such interference (and the other
Party shall likewise be excused from performance of its obligations on a
day-for-day basis to the extent such Party's obligations relate to the
performance so interfered with). The affected party shall use its best
efforts to avoid or remove the cause of nonperformance and both parties
shall proceed to perform with dispatch once the causes are removed or
cease.
XIV. LIMITATION OF LIABILITY
SWBT's liability, if any, for its gross negligence or willful misconduct
is not limited by its corresponding tariffs. With respect to any other
claim or suit, by a LSP or any others, for damages arising out of
mistakes, omissions, interruptions, delays or efforts, or defects in
transmission occurring in the course of furnishing service hereunder,
SWBT's liability, if any, shall not exceed an amount equivalent to the
proportionate charge to the LSP for the period of service during which
such mistake, omission, interruption, delay, error, or defect in
transmission or service occurs and continues. In no event shall SWBT be
responsible for any special, indirect, consequential or exemplary damages.
This liability shall be in addition to any amounts that may otherwise be
due to the LSP under corresponding tariffs as an allowance for
interruptions. However, any such mistakes, omissions, interruptions,
delays, errors, or defects in transmission or service which are caused or
contributed to by the negligence or willful act of the LSP or which arise
from the use of LSP-provided facilities or equipment shall not result in
the imposition of any liability whatsoever upon SWBT.
SWBT shall be indemnified and held harmless by the LSP against claims and
damages arising from provision of the LSP's services or equipment except
those
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directly associated with the provision of local service to the LSP which
is governed by corresponding tariffs.
SWBT shall be indemnified and held harmless from all claims and damages
arising from the discontinuance of service for nonpayment to SWBT by the
LSP. Notice of discontinuance shall be as specified in the Substantive
Rules of the State Commission.
SWBT shall have no liability to the end users of the LSP for claims
arising from the provision of the LSP's service to its end users
including, but not limited to, claims for interruption of service, quality
of service or billing disputes.
When the lines or services of other companies and carriers are used in
establishing connections to and/or from points not reached by SWBT's
lines, SWBT is not liable for any act or omission of the other companies
or carriers.
XV. NONDISCLOSURE
The Parties to this Agreement anticipate and recognize that they will
exchange or come into possession of data about each other's end users and
each other's business as a result of this Agreement which will be
designated as confidential by that Party. Each Party agrees (1) to treat
all such data as strictly confidential and (2) to use such data only for
purposes of performance under this Agreement. Each Party agrees not to
disclose data on the other Party's end users or business which has been
designated as confidential to any person without first securing the
written consent of the other Party. The foregoing shall not apply to
information which is in the public domain.
If a court or governmental agency orders or a third party requests a Party
to disclose or to provide any data or information covered by this Section,
that Party will immediately inform the other Party of the order or request
both by telephone and overnighted mail before disclosing the data or
information. Notification and consent requirements described above are not
applicable in cases where a court order requires the production of toll
billing records of an individual residence or business end user customer.
This section will not preclude the disclosure by the Parties of
information or material described in this Section to consultants, agents,
or attorneys representing the respective Parties or the Office of the
Public Counsel for the states of Arkansas, Kansas, and/or Missouri, and
state regulatory commissions or staffs, or FCC Staff, provided that these
third parties are bound by the same or comparable confidentiality
requirements as the Parties to this Agreement. The provisions of this
Section will remain in effect notwithstanding the termination of this
Agreement, unless agreed to in writing by both Parties.
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Pursuant to Section 222 of the Act, both Parties agree to limit their use
of proprietary information received from the other to the permitted
purposes identified in the Act.
XVI. PUBLICITY
The Parties agree not to use in any advertising or sales promotion, press
releases or other publicity matters any endorsements, direct or indirect
quotes, or pictures implying endorsement by the other Party or any of its
employees without such Party's prior written approval. The Parties will
submit to each other for written approval, prior to publication, all
publicity matters that mention or display one another's name and/or marks
or contain language from which a connection to said name and/or marks may
be inferred or implied.
XVII. ASSIGNMENT
Neither Party may assign, subcontract, or otherwise transfer its rights or
obligations under this Agreement except under such terms and conditions as
are mutually acceptable to the other Party (e.g., a conversion charge will
apply per billable telephone number) and with such Party's prior written
consent, which consent shall not be unreasonably withheld. Assignment
without consent shall be grounds for immediate termination of this
Agreement.
XVIII. DISPUTE RESOLUTION
A. Finality of Disputes
No claims shall be brought for disputes arising from this Agreement
more than 24 months from the date of occurrence which gives rise to
the dispute. If any portion of an amount due to SWBT under such
agreement is subject to a bona fide dispute between the Parties, LSP
shall within fourteen (14) days of its receipt of the invoice
containing such disputed amount give notice to SWBT of the amounts
it disputes and include in such notice the specific details and
reasons for disputing each item. LSP shall pay when due (i) all
undisputed amounts to SWBT and (ii) all Disputed Amounts into an
interest bearing escrow account with a third party escrow agent
mutually agreed upon by the Parties.
B. Alternative to Litigation
The Parties desire to resolve disputes arising out of this Agreement
without litigation. Accordingly, except for action seeking a
temporary restraining order or an injunction related to the purposes
of this Agreement, or suit to
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compel compliance with this dispute resolution process, the Parties
agree to use the following alternative dispute resolution procedure
as their sole remedy with respect to any controversy or claim of
$25,000 or less, arising out of or relating to this Agreement or its
breach. The procedures hereunder may be used with disputes for
$25,000 or more, if mutually agreeable to the Parties.
1. Resolution of Disputes Between Parties to the Agreement
At the written request of a Party, each Party will appoint a
knowledgeable, responsible representative to meet and
negotiate in good faith to resolve any dispute arising under
this Agreement. The location, form, frequency, duration and
conclusion of these discussions shall be left to the
discretion of the representatives. Upon agreement, the
representatives may utilize other alternative dispute
resolution procedures such as mediation to assist in the
negotiations. Discussions and correspondence among the
representatives for purposes of settlement are exempt from
discovery and production and shall not be admissible in the
arbitration described below or in any lawsuit without the
concurrence of all Parties. Documents identified in or
provided with such communications, which are not prepared for
purposes of the negotiations, are not so exempted and, if
otherwise admissible, may be admitted in evidence in the
arbitration or lawsuit.
2. Arbitration
If the negotiations do not resolve the dispute within thirty
(30) days of the initial written request, the dispute shall be
submitted to binding arbitration by a single arbitrator
pursuant to the Commercial Arbitration Rules of the American
Arbitration Association. A Party may demand such arbitration
in accordance with the procedures set out in those rules.
Discovery shall be controlled by the arbitrator and shall be
permitted to the extent set out in this section. Each Party
may submit in writing to a Party, and that Party shall so
respond, to a maximum of any combination of thirty-five (35)
(none of which may have subparts) of the following:
(a) Interrogatories
(b) Demands to produce documents
(c) Requests for admission
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Additional discovery may be permitted upon mutual agreement of
the Parties. The arbitration hearing shall be commenced within
thirty (30) days of the demand for arbitration. The
arbitration shall be held in the city where this Agreement was
executed by SWBT. The arbitrator shall control the scheduling
so as to process the matter expeditiously. The Parties shall
submit written briefs five days before the hearing. The
arbitrator shall rule on the dispute by issuing a written
opinion within twenty (20) days after the close of hearings.
The arbitrator has no authority to order punitive or
consequential damages. The times specified in this section may
be extended upon mutual agreement of the Parties or by the
arbitrator upon a showing of good cause. Judgment upon the
award rendered by the arbitrator may be entered in any court
having jurisdiction.
3. Costs
Each Party shall bear its own costs of these procedures. A
Party seeking discovery shall reimburse the responding Party
the costs of production of documents (including search time
and reproduction costs). The Parties shall equally split the
fees of the arbitration and the arbitrator.
XIX. VERIFICATION REVIEWS
Each Party to this Agreement will be responsible for the accuracy and
quality of its data as submitted to the respective Parties involved. Upon
reasonable written notice, each Party or its authorized representative
(providing such authorized representative does not have a conflict of
interest related to other matters before one of the Parties) shall have
the right to conduct a review and verification of the other Party to give
assurances of compliance with the provisions of this Agreement. This
includes on-site verification reviews at the other Party's or the Party's
vendor locations.
After the initial year of this Agreement verification reviews will
normally be conducted on an annual basis with provision for staged
reviews, as mutually agreed, so that all subject matters are not required
to be reviewed at the same time. Follow up reviews will be permitted
between annual reviews where significant deviations are found. During the
initial year of the Agreement more frequent reviews may occur.
The review will consist of an examination and verification of data
involving records, systems, procedures and other information related to
the services performed by either Party as related to settlement charges or
payments made in connection with this Agreement as determined by either
Party to be reasonably
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required. Each Party, whether or not in connection with an on-site
verification review, shall maintain reasonable records for a period of
time no less than twenty-four (24) months from the date such records are
created and provide the other Party with reasonable access to such
information as is necessary to determine amounts receivable or payable
under this Agreement.
Each Party's right to access information for verification review purposes
is limited to data not in excess of 24 months in age. Once specific data
has been reviewed and verified, it is unavailable for future reviews. Any
items not reconciled at the end of a review will, however, be subject to a
follow-up review effort. Any retroactive adjustments required subsequent
to previously reviewed and verified data will also be subject to follow-up
review. Information of either Party involved with a verification review
shall be subject to the nondisclosure terms of this Agreement.
The Party requesting a verification review shall fully bear its costs
associated with conducting the review. The Party being reviewed will
provide access to required information, as outlined in this Section, at no
charge to the reviewing Party. Should the reviewing Party request
information or assistance beyond that reasonably required to conduct such
a review, the Party being reviewed may, as its option, decline to comply
with such request or may bill actual costs incurred in complying
subsequent to the concurrence of reviewing Party.
XX. COMPLIANCE WITH LAWS
The Parties believe in good faith that the Services to be provided under
this Agreement satisfy the requirements of the Act. In the event a court
or regulatory agency of competent jurisdiction should determine that
modifications of this Agreement are required to bring the Services being
provided hereunder into compliance with the Act, the affected Party shall
promptly give the other Party written notice of the modifications deemed
required. Upon delivery of such notice, the Parties shall expend diligent
efforts to arrive at an agreement respecting such modifications required,
and if the Parties are unable to arrive at such agreement, either Party
may terminate this Agreement, without penalty, effective the day the
affected Party is ordered to implement the modifications deemed required,
or effective on the day either Party concludes and gives notice that the
Parties will not be able to arrive at any agreement respecting such
modifications, whichever date shall occur earlier.
This Agreement is an integrated package that reflects a balancing of
interests critical to the Parties. It will be submitted to the applicable
state regulatory Commission and the FCC as a compliance filing, and the
Parties will specifically request that the applicable state regulatory
Commission and the FCC refrain from taking any action to change, suspend
or otherwise delay implementation of the
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Agreement. In the event the Commission or the FCC rejects any portion or
provision of this Agreement or subsequently issues a ruling or order that
results in a provision being contrary to law, or is invalid for any
reason, the parties shall continue to be bound by the terms of this
Agreement, insofar as possible, except for the portion rejected or
subsequently determined to be unlawful, invalid, or unenforceable. In such
event, the Parties shall negotiate in good faith to replace the rejected,
unlawful, invalid, or unenforceable provision and shall not discontinue
service to the other Party during such period if to do so would disrupt
existing service being provided to an end user. So long as the Agreement
remains in effect, the Parties shall not advocate before any legislative,
regulatory, or other public forum that any terms of this specific
Agreement be modified or eliminated. Notwithstanding this mutual
commitment, however, the Parties enter into this Agreement without
prejudice to any positions they have taken previously, or may take in the
future in any legislative, regulatory, or other public forum addressing
any matters, including matters related to the types of arrangements
prescribed by this Agreement.
XXI. CERTIFICATION REQUIREMENTS
LSP warrants that it has obtained all certifications required in those
jurisdictions in which LSP has ordered services pursuant to this
Agreement. Subject to restrictions in Article II.A. (Permitted Use of
Resold Service by LSP and Its End Users), LSP covenants that any
originating service provider utilizing the resold services under this
Agreement has obtained all required certification. Upon request by any
governmental entity, the LSP is required to provide proof of
certification.
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XXII. EFFECT OF OTHER AGREEMENTS
The Parties agree that pursuant to the requirements of the
Telecommunications Act of 1996, a Party shall treat the other Party no
less favorably than it treats similarly situated local service providers
with whom such Party has an operational interconnection or resale
agreement which has been approved by the State PUC or PSC. If either Party
enters into an agreement (the "Other Agreement") approved by the
Commission pursuant to Section 252 of the Act which provides for the
provision of arrangements covered in this Agreement to another requesting
Telecommunications Carrier, such Party shall make available to the other
Party such arrangements upon the same rates, terms and conditions as those
provided in the Other Agreement.
XXIII. NOTIFICATION
SWBT shall make telecommunications services that SWBT provides at retail
to subscribers who are not telecommunications carriers available for
resale consistent with its obligation under Section 25 I(c)(4)(A) of the
Telecommunications Act. The notification shall advise LSP of the category
in which such new service shall be placed and the same discount already
applicable to LSP in that category shall apply to the new service.
SWBT currently uses the Accessible Letter process to notify LSP of such
changes to the services available for resale. Any change to the process of
notification to the LSP will provide no less notice than the current
Accessible Letter process.
XXIV. NOTICES
In the event any notices are required to be sent under the terms of this
Agreement, they shall be sent by registered mail, return receipt requested
to:
To LSP: To SWBT:
Mary Bush Debbie Watson
Valu-Line of Kansas, Inc. SWBT
1420 C. of E. Drive One Bell Plaza, Room 522
Emporia, KS 66801 Dallas, TX 75202
XXV. BENEFICIARIES
This Agreement shall not provide any nonparty with any remedy, claim,
cause of action or other right.
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XXVI. TERM
SWBT and LSP agree that the initial term of this Agreement shall be for 90
days, and thereafter the Agreement shall continue in force and effect
unless and until terminated as provided herein. Either Party may terminate
this Agreement by providing written notice of termination to the other
Party, at least 60 days in advance of the date of termination. At the
conclusion of the first term, this Agreement shall continue without
interruption unless terminated by either Party or superseded by a new
Agreement between the Parties. By mutual agreement, SWBT and LSP may amend
this Agreement to modify the term of this Agreement. Where LSP has not
made arrangements to provide service over its own facilities to its end
users, the notification and transfer of end user procedures outlined in
Article XJII.D. -F. (Termination of service to LSP) shall apply.
XXVII. EFFECTIVE DATE
The effective date of this Agreement shall be ten (10) days after the date
that the appropriate state regulatory Commission approves this Agreement.
XXVIII. WAIVER
The failure of either Party to enforce or insist that the other party
comply with any of the terms or conditions of this Agreement, or the
waiver by either Party in a particular instance of any of the terms and
conditions of this Agreement, shall not be construed as a general waiver
or relinquishment of the terms and conditions, but the Agreement shall be
and remain at all times in full force and effect.
XXIX. DISCLAIMER OF WARRANTIES
SWBT MAKES NO REPRESENTATION OR WARRANTIES, EXPRESS OR IMPLIED, INCLUDING
BUT NOT LIMITED TO ANY WARRANTY AS TO MERCHANTABILITY OR FITNESS FOR
INTENDED OR PARTICULAR PURPOSE WITH RESPECT TO SERVICES PROVIDED
HEREUNDER. ADDITIONALLY, SWBT ASSUMES NO RESPONSIBILITY WITH REGARD TO THE
CORRECTNESS OF DATA OR INFORMATION SUPPLIED BY LSP WHEN THIS DATA OR
INFORMATION IS ACCESSED AND USED BY A THIRD PARTY.
XXX. RELATIONSHIP OF THE PARTIES
This Agreement shall not establish, be interpreted as establishing, or be
used by either Party to establish or to represent their relationship as
any form of agency, partnership or joint venture. Neither Party shall have
any authority to bind the other or to act as an agent for the other unless
written authority, separate from this
<PAGE> 29
RESALE AGREEMENT (MO, KS & AR)
PAGE 27 OF 27
SWBT/LSP
F313
Agreement, is provided. Nothing in the Agreement shall be construed as
providing for the sharing of profits or losses arising out of the efforts
of either or both of the Parties. Nothing herein shall be construed as
making either Party responsible or liable for the obligations and
undertakings of the other Party.
XXXI. COMPLETE TERMS
This Agreement, together with its Attachments constitutes the entire
agreement between the Parties and supersedes all prior discussions,
representations or oral understandings reached between the Parties.
The corresponding tariffs and this Agreement (including the Attachments)
contain all of the applicable rates and charges to be paid by the LSP to
SWBT in connection with SWBT's provision of telecommunications service to
LSP for Resale to its end user customers.
Neither Party shall be bound by any amendment, modification or additional
terms unless it is reduced to writing signed by an authorized
representative of the Party sought to be bound.
By their signatures in the space provided below, LSP and SWBT indicate
their acceptance of this Agreement. This agreement shall not bind LSP and
SWBT until executed by both Parties. This Agreement will be governed by
and interpreted in accordance with the laws of the State of Kansas.
<PAGE> 30
RESALE AGREEMENT (MO, KS & AR)
PAGE 28 OF 27
SWBT/LSP
F313
THIS AGREEMENT CONTAINS A BINDING ARBITRATION AGREEMENT.
VALU-LINE OF KANSAS, INC. SOUTHWESTERN BELL TELEPHONE COMPANY
AECN/OCN: 7611
/s/ Rick Tidwell /s/ Ricardo Zamora
- ----------------------------------- -----------------------------------
Signature Signature
Rick Tidwell Ricardo Zamora
- ----------------------------------- -----------------------------------
Printed Name Printed Name
President VP-Local Interconnection
- ----------------------------------- -----------------------------------
Position/Title Position/Title
March 31, 1997 April , 1997
- ----------------------------------- -----------------------------------
Date Date
<PAGE> 31
RESALE AGREEMENT (MO, KS & AR)
PAGE 28 OF 27
SWBT/LSP
F313
THIS AGREEMENT CONTAINS A BINDING ARBITRATION AGREEMENT.
VALU-LINE OF KANSAS, INC. SOUTHWESTERN BELL TELEPHONE COMPANY
AECN/OCN: 7611
/s/ Rick Tidwell /s/ Ricardo Zamora
- ----------------------------------- -----------------------------------
Signature Signature
Rick Tidwell Ricardo Zamora
- ----------------------------------- -----------------------------------
Printed Name Printed Name
President VP-Local Interconnection
- ----------------------------------- -----------------------------------
Position/Title Position/Title
March 31, 1997 April , 1997
- ----------------------------------- -----------------------------------
Date Date
<PAGE> 32
RESALE AGREEMENT (MO, KS & AR)
PAGE 28 OF 27
SWBT/LSP
F313
THIS AGREEMENT CONTAINS A BINDING ARBITRATION AGREEMENT.
VALU-LINE OF KANSAS, INC. SOUTHWESTERN BELL TELEPHONE COMPANY
AECN/OCN: 7611
/s/ Rick Tidwell /s/ Ricardo Zamora
- ----------------------------------- -----------------------------------
Signature Signature
Rick Tidwell Ricardo Zamora
- ----------------------------------- -----------------------------------
Printed Name Printed Name
President VP-Local Interconnection
- ----------------------------------- -----------------------------------
Position/Title Position/Title
March 31, 1997 April , 1997
- ----------------------------------- -----------------------------------
Date Date
<PAGE> 33
RESALE AGREEMENT (MO, KS, AR) - EXHIBIT A
PAGE 1 0F 2
SWBT/LSP
M307
Southwestern Bell's Resale Product* List - Residence
Kansas
<TABLE>
<CAPTION>
AVOIDED COST DISCOUNTS
RECURRING NON-RECURRING
--------- -------------
<S> <C> <C>
LOCAL EXCHANGE SERVICE
Link Up America Service 14.9% 14.9%
Residence 1 Party 14.9% 14.9%
Res Flat Rate Trunks 14.9% 14.9%
EXPANDED LOCAL CALLING
Expanded Local Calling (Mandatory) 14.9% 14.9%
MetroPlus 14.9% 14.9%
CALL MANAGEMENT SERVICES
Auto Redial 14.9% 14.9%
Auto Redial - Usage Sensitive 14.9% 14.9%
Call Blocker 14.9% 14.9%
Call Forwarding 14.9% 14.9%
Call Forwarding - Busy Line 14.9% 14.9%
Call Forwarding - Busy Line/Don't Answer 14.9% 14.9%
Call Forwarding - Don't Answer 14.9% 14.9%
Call Return 14.9% 14.9%
Call Return - Usage Sensitive 14.9% 14.9%
Call Trace 14.9% 14.9%
Call Waiting 14.9% 14.9%
Calling Name 14.9% 14.9%
Calling Number 14.9% 14.9%
Personalized Ring (1 dependent number) 14.9% 14.9%
Personalized Ring (2 dependent numbers - 1st number) 14.9% 14.9%
Personalized Ring (2 dependent numbers - 2nd number) 14.9% 14.9%
Preferred Number Service 14.9% 14.9%
Priority Call 14.9% 14.9%
Remote Access to Call Forwarding 14.9% 14.9%
Selective Call Forwarding 14.9% 14.9%
Simultaneous Call Forwarding 14.9% 14.9%
Speed Calling 8 14.9% 14.9%
Three Way Calling 14.9% 14.9%
AIN
Selective Call Acceptance 14.9% 14.9%
</TABLE>
Some products not available in all areas.
Resale products available subject to state and federal rules, regulations, and
tariffs.
<PAGE> 34
RESALE AGREEMENT (MO, KS, AR) - EXHIBIT A
PAGE 2 OF 2
SWBT/LSP
M307
Southwestern Bell's Resale Product* List - Residence
Kansas
<TABLE>
<CAPTION>
AVOIDED COST DISCOUNTS
RECURRING NON-RECURRING
--------- -------------
<S> <C> <C>
DIRECTORY ASSISTANCE SERVICES 14.9% 14.9%
ISDN
Digiline(SM) 14.9% 14.9%
OTHER
Customer Alerting Enablement 14.9% 14.9%
Grandfathered Services 14.9% 14.9%
Hot Line 14.9% 14.9%
Hunting 14.9% 14.9%
Improved Data Transmission Service 14.9% 14.9%
Local Operator Assistance Service 14.9% 14.9%
Packages 14.9% 14.9%
Promotions (greater than 90 days) 14.9% 14.9%
Preferred Number Service 14.9% 14.9%
Second Line Control 14.9% 14.9%
Toll Restriction 14.9% 14.9%
TouchTone 14.9% 14.9%
Voice Dial 14.9% 14.9%
Warm Line 14.9% 14.9%
TOLL
900 Call Restriction 14.9% 14.9%
Home 800(SM) 14.9% 14.9%
IntraLATA MTS 14.9% 14.9%
Toll Billing Exception 14.9% 14.9%
NON-TELECOMMUNICATION SERVICES
Bill Plus(SM) 14.9% 14.9%
Consolidated Billing 14.9% 14.9%
Company Initiated Suspension and Restoral Service 0.0% 0.0%
Customer Initiated Suspension and Restoral Service 0.0% 0.0%
Enhanced Directory Listings 14.9% 14.9%
</TABLE>
* Some products not available in all areas.
Resale products available subject to state and federal rules, regulations,
and tariffs.
<PAGE> 35
RESALE AGREEMENT (MO, KS, AR) - EXHIBIT B
PAGE 1 OF 3
SWBT/LSP
M307
Southwestern Bell's Resale Product* List - Business
Kansas
<TABLE>
<CAPTION>
AVOIDED COST DISCOUNTS
RECURRING NON-RECURRING
--------- -------------
<S> <C> <C>
LOCAL EXCHANGE SERVICE
Business 1 Party 14.9% 14.9%
Business - Multi-Line 14.9% 14.9%
Business - Message Rate 1 Party 14.9% 14.9%
Semi Public Coin Telephone Service 14.9% 14.9%
Semi Public Coinless Telephone Service 14.9% 14.9%
Semi Public Coinless - Outward only 14.9% 14.9%
Semi Public Outgoing Only/1 Way Originating only 14.9% 14.9%
TRUNKS
Analog Trunk 14.9% 14.9%
DID 14.9% 14.9%
Digital Trunk 14.9% 14.9%
Hotel/Motel Message Trunks 14.9% 14.9%
EXPANDED LOCAL CALLING
Expanded Local Calling (Mandatory) 14.9% 14.9%
MetroPlus 14.9% 14.9%
CALL MANAGEMENT SERVICES
Auto Redial 14.9% 14.9%
Auto Redial - Usage Sensitive 14.9% 14.9%
Call Blocker 14.9% 14.9%
Call Forwarding 14.9% 14.9%
Call Forwarding - Busy Line 14.9% 14.9%
Call Forwarding - Busy Line/Don't Answer 14.9% 14.9%
Call Forwarding - Don't Answer 14.9% 14.9%
Call Return 14.9% 14.9%
Call Return - Usage Sensitive 14.9% 14.9%
Call Trace 14.9% 14.9%
Call Waiting 14.9% 14.9%
Calling Name 14.9% 14.9%
Calling Number 14.9% 14.9%
Personalized Ring (1 dependent number) 14.9% 14.9%
Personalized Ring (2 dependent numbers - 1st number) 14.9% 14.9%
Personalized Ring (2 dependent numbers - 2nd number) 14.9% 14.9%
Priority Call 14.9% 14.9%
Remote Access to Call Forwarding 14.9% 14.9%
Selective Call Forwarding 14.9% 14.9%
Simultaneous Call Forwarding 14.9% 14.9%
Speed Calling 30 14.9% 14.9%
Three Way Calling 14.9% 14.9%
</TABLE>
Some products not available in all areas.
Resale products available subject to state and federal rules, regulations and
tariffs.
<PAGE> 36
RESALE AGREEMENT (MO, KS, AR) - EXHIBIT B
PAGE 2 OF 3
SWBT/LSP
M307
Southwestern Bell's Resale Product* List - Business
Kansas
<TABLE>
<CAPTION>
AVOIDED COST DISCOUNTS
RECURRING NON-RECURRING
--------- -------------
<S> <C> <C>
DID
DID (First Block of 100) 14.9% 14.9%
DID (First Block of 10) 14.9% 14.9%
DID (Ea. adl. block of 10 after first 10) 14.9% 14.9%
DID (Ea. adl. block of 100 after first 100) 14.9% 14.9%
DID (with dial pulse) 14.9% 14.9%
DID (with Mutlifrequency) 14.9% 14.9%
DID (with Dual-Tone Multifrequency) 14.9% 14.9%
AIN
Area Wide Networking 14.9% 14.9%
Caller Intellidata (R) 14.9% 14.9%
Disaster Routing Service 14.9% 14.9%
Intelligent Redirect(SM) 14.9% 14.9%
IntelliNumber(SM) 14.9% 14.9%
Positive ID 14.9% 14.9%
Selective Call Acceptance 14.9% 14.9%
OTHER
Busy Out Arrangement 14.9% 14.9%
Customer Alerting Enablement 14.9% 14.9%
Grandfathered Services 14.9% 14.9%
Foreign Exchange 14.9% 14.9%
Foreign Serving Office 14.9% 14.9%
Frame Relay 14.9% 14.9%
Hot Line 14.9% 14.9%
Hunting 14.9% 14.9%
Improved Data Transmission Service 14.9% 14.9%
Local Operator Assistance Service 14.9% 14.9%
MicroLink 1 (R) 14.9% 14.9%
Multi Pt. Video 14.9% 14.9%
Network Reconfiguration Service 14.9% 14.9%
Night Number associated with a Terminal 14.9% 14.9%
Night Number associated with Telephone Number 14.9% 14.9%
Packages 14.9% 14.9%
Promotions (greater than 90 days) 14.9% 14.9%
Telebranch (R) 14.9% 14.9%
Telephone Answering Secretarial 14.9% 14.9%
Toll Restriction 14.9% 14.9%
TouchTone (Business) 14.9% 14.9%
TouchTone (Trunk) 14.9% 14.9%
Voice Dial 14.9% 14.9%
Warm Line 14.9% 14.9%
</TABLE>
* Some products not available in all areas.
Resale products available subject to state and federal rules, regulations
and tariffs.
<PAGE> 37
RESALE AGREEMENT (MO, KS, AR) - EXHIBIT B
PAGE 3 OF 3
SWBT/LSP
M307
Southwestern Bell's Resale Product* List - Business
Kansas
<TABLE>
<CAPTION>
AVOIDED COST DISCOUNTS
RECURRING NON-RECURRING
--------- -------------
<S> <C> <C>
ISDN
Digiline(SM) 14.9% 14.9%
Select Video Plus(R) 14.9% 14.9%
Smart Trunk(SM) 14.9% 14.9%
DIRECTORY ASSISTANCE SERVICES 14.9% 14.9%
TOLL
900 Call Restriction 14.9% 14.9%
IntraLATA MTS 14.9% 14.9%
MaxiMizer 800(R) 14.9% 14.9%
OutWATS 14.9% 14.9%
Toll Billing Exception 14.9% 14.9%
PLEXAR(R)
Plexar 1(R) 14.9% 14.9%
Plexar 11(R) 14.9% 14.9%
NON-TELECOMMUNICATION SERVICES
Bill Plus(SM) 14.9% 14.9%
Consolidated Billing 14.9% 14.9%
Company Initiated Suspension and Restoral Service 0.0% 0.0%
Customer Initiated Suspension and Restoral Service 0.0% 0.0%
Enhanced Directory Listings 14.9% 14.9%
</TABLE>
* Some products not available in all areas.
Resale products available subject to state and federal rules, regulations
and tariffs.
<PAGE> 38
RESALE AGREEMENT (MO, KS & AR) - EXHIBIT C
PAGE 1 OF 1
SWBT/LSP
M304
APPENDIX RESALE
KANSAS
OS/DA PRICING - BRANDING, RATE & REFERENCE
The following rates will apply for each service element:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
A. CALL BRANDING
<S> <C>
An initial non-recurring charge applies per trunk group for the establishment of
LSP specific Call Branding. A Per Call charge also applies. When there are
subsequent changes to the branding announcement, an additional non-recurring
charge will also apply per change.
Rate per initial load group $2100.00
Rate per load for Brand change $2100.00
Per Call $0.02
- ----------------------------------------------------------------------------------------------
B. DIRECTORY ASSISTANCE RATE/REFERENCE INFORMATION
An initial non-recurring charge applies for the initial load of LSP's DA
Services Rate/Reference Information. An additional non-recurring charge applies
for each subsequent change to Rate/Reference Information.
Rate per initial load $3375.00
Rate per subsequent rate change $2375.00
Rate per subsequent reference change $2375.00
- ----------------------------------------------------------------------------------------------
C. OPERATOR SERVICES RATE/REFERENCE INFORMATION
An initial non-recurring charge applies for the initial load of LSP's Operator
Services Rate/Reference Information. An additional non-recurring charge applies
for each subsequent change to Rate/Reference Information.
Rate per initial load $3375.00
Rate per subsequent rate change $2375.00
Rate per subsequent reference change $2375.00
- ----------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 39
[LETTERHEAD OF SOUTHWESTERN BELL]
March 25, 1997
Mr. Rick Tidwell
Valu-Line of Kansas
1420 C of E Drive
Emporia, KS 66801
Dear Mr. Tidwell:
Please find enclosed one copy of the Wirework Agreement for your file. Also
enclosed is one copy of the Remote Access Facility LSP Service Activation
Procedures for your review. Please call me if I can be of further assistance.
Sincerely,
/s/ Deborah R Watson
Deborah R Watson
Enclosure
<PAGE> 40
TABLE of CONTENTS
WireWorx(SM) (RESALE) AGREEMENT
Between
SOUTHWESTERN BELL TELEPHONE COMPANY
and
VALU-LINE OF KANSAS, INC.
PAGE
I. DEFINITIONS 3
II. LSP COMPANY OBLIGATIONS 4
III. SWBT OBLIGATIONS 4
IV. OPERATIONAL PROCEDURES 5
A. Repair Referrals to SWBT
B. Pre-Referral Repair Screening
C SWBT Repair Report Handling
D. Jacks/Inside Wire Requests Received Direct from End Users
E. Jacks/Inside Wire Requests via Service Order
F. Coordinated Repair Calls
V. ADDITIONAL RESPONSIBILITIES OF THE PARTIES 7
A. Notice of Network Changes
B. Billing and Payment of Rates and Charges
C. Notice of Price Changes
D. Termination of Service for Nonpayment
VI. FORCE MAJEURE 9
VII. LIMITATION OF LIABILITY 9
VIII. NONDISCLOSURE 9
IX. PUBLICITY 10
X. ASSIGNMENT 10
XI. NOTICES 11
XII. THIRD PARTY BENEFICIARIES 11
1
<PAGE> 41
XIII. TAXES 11
XIV. TERM 11
XV. WAIVER 11
XVI. DISCLAIMER OF WARRANTIES 12
XVII. EFFECTIVE DATE 12
XVIII. RELATIONSHIP OF THE PARTIES 12
XIX. COMPLETE TERMS 13
APPENDIX I - WireWorx(SM) Inside Wire Repair Charges 14
APPENDIX II - Maintenance of Service Charges 15
APPENDIX III - Time Sensitive Jacks/Inside Wire
Installation/Repair Charges 16
2
<PAGE> 42
WireWorx(SM) AGREEMENT
This Agreement is between Valu-Line of Kansas (hereinafter referred to as
"LSP") and Southwestern Bell Telephone Company ("SWBT") (collectively, "the
Parties") entered into this 3rd day of March, 1997.
WHEREAS, SWBT offers a service known as WireWorx(SM) for the installation
and repair of simple inside wire and/or jacks to Local Service Providers; and
LSP desires to obtain WireWorx(SM) from SWBT;
It is therefore agreed in consideration of the mutual promises contained
herein that:
I. DEFINITIONS
As used in this Agreement, the following definitions shall apply:
Customer Premises Equipment (CPE)- Equipment owned by an end user, such as
a telephone set, that can be connected to the telephone network.
Demarcation Point/Network Interface (NI)- The point of demarcation and/or
interconnection between "telephone company communications facilities" and
"wiring at subscriber premises." The terms demarcation point and network
interface (NI) are used interchangeably and mean the same thing.
Inside Wire (1W)- End user premises wiring beyond the established
demarcation point or network interface.
Inside Wire Repair Charge - The recurring monthly price listed in Appendix
I of this Agreement that SWBT will charge LSP for the WireWorx(SM) Option
chosen.
Maintenance of Service Charge (MSC)- The price for dispatching a SWBT
technician to an end users premises for the purpose of isolating trouble
reported by LSP. It is charged to LSP on each dispatch wherein trouble is
isolated to the end user side of the demarcation point/NI and the affected line
is NOT designated as covered by WireWorx(SM) or the trouble is isolated to end
user's CPE (See Appendix II).
Multi-line Service- An end user resold-line account wherein there are two
(2) or more non-designed lines terminating in key equipment. This Agreement
covers repairs of inside wire and jacks from the last common termination point
up to and including the jack.
Off-Premises Extension- An extension of the basic line to a premises
separated from the primary service location by any public roadway or
thoroughfare.
3
<PAGE> 43
Resold Line- A telephone line purchased by LSP from SWBT at wholesale
rates and resold to LSP's end users.
Riser Cable- Copper conductors, typically within a cable sheath, that are
placed exclusively within or between multi-unit buildings from the an entrance
location of a building (typically in the basement or lower floor equipment
closet) to designated equipment space or terminal space within such building.
Time Sensitive Installation Charge- The time sensitive price SWBT charges
for each service order for jack/inside wire installation completed by a SWBT
technician on a resold line, either residence, business or multi-line (See
Appendix III).
Time Sensitive Repair Charge- The time sensitive price SWBT charges for
each repair trip completed by a SWBT technician on a resold line, either
residence, business or multi-line, that is NOT designated as covered by
WireWorx(SM) (See Appendix III).
II. LSP COMPANY OBLIGATIONS
LSP agrees to purchase WireWorx(SM) for residence and single-line business
resold lines at the monthly WireWorx(SM) price listed in Appendix I attached
hereto for the Option chosen by LSP. LSP further agrees to purchase WireWorx(SM)
for multi-line business resold lines and jacks at the monthly price listed in
Appendix I for the Option chosen by LSP.
III. SWBT OBLIGATIONS
A. SWBT agrees to diagnose, isolate trouble and repair the inside wiring
and jacks of LSP's end user at no charge to said end user. WireWorx(SM)
however, does NOT cover:
1. Charges for wire repair due to natural disasters such as flood
and earthquake, riots, acts of war, gross negligence, willful
damage and/or vandalism.
2. Repairs to wire that does not meet SWBT's installation
practices or technical standards as provided under separate
cover.
3. Repair to wire provided and maintained by military personnel.
(Texas Only)
4. Repair and/or replacement of CPE. NOTE: If the trouble is
determined to be in the end user's CPE and NOT in the
facilities up to and including the jacks, a Maintenance of
Service Charge (MSC) equal to the retail rate in the
appropriate state, will be billed to LSP.
5. Repairs to house or riser cable, or cable between buildings.
4
<PAGE> 44
6. Repairs to designated designed services:
a. Trunks
b. Access services
c. Foreign Exchange service
d. WATS
e. Private Line services, Analog & Digital
f. Foreign Serving Office service
g. Off-Premises Extensions
B. SWBT shall not be obligated by this Agreement to provide technicians,
either individual or crews, exclusively dedicated to the performance of
services for LSP.
C. SWBT shall not be obligated by this Agreement to provide LSP with
branding of any kind including but not limited to, technician apparel,
vehicles, forms; nor shall the SWBT technician carry and provide to LSP's
end users, LSP-branded business cards or other printed materials.
IV. OPERATIONAL PROCEDURES
A. Repair Referrals to SWBT
LSP shall be responsible for calling its assigned SWBT trouble reporting
center with each repair referral. The referral shall include:
1. The end users telephone number;
2. A detailed description of the trouble reported by the end
user;
3. A contact name and telephone number (if different from 1.
above) for the end user.
4. LSP representative name and telephone number.
SWBT shall give the next available repair commitment to LSP based upon
whether the trouble is an out-of-service or service-affecting trouble
condition.
B. Pre-Referral Repair Screening
Prior to referring a trouble report to SWBT, LSP shall have its end user
perform the tests described in the SWET printed materials provided under
separate cover, to determine if the trouble is with the end user's CPE.
<PAGE> 45
C. SWBT Repair Report Handling
When SWBT is informed by LSP of trouble on one of its end users lines, a
SWBT technician will be dispatched to repair the end users trouble. If the
cause of trouble is isolated on the SWBT side of the demarcation point/NI,
SWBT will repair its own facilities or equipment. If the trouble is
isolated to the end user side of the demarcation point/NI and the line has
the appropriate 'Every Account' Option designation, the SWBT technician
shall:
1. Advise the end user that SWBT is under Agreement to repair or
restore service and will request the end users consent to enter the
premises; and
2. Where consent is obtained, the SWBT technician shall repair the
trouble (if possible) and follow existing procedures for closing out a
trouble report.
If the trouble is isolated to the end user side of the demarcation
point/NI and the line does NOT have the appropriate WireWorx(SM)
designation per the 'Selected Account' Option, the SWBT technician shall:
1. Advise the end user that the trouble is on their side of the
demarcation point and prepare a Maintenance of Service Charge (MSC) for
billing to LSP, per Appendix II attached hereto; and
2. Then, repair the trouble (if possible) at Time Sensitive Repair
charges, billed to LSP, per Appendix III attached hereto.
Whenever a SWBT technician is dispatched to a LSP end user's premises to
perform work via a repair referral or a service order (See E. below) from
LSP, and if the end user is not present or refuses permission to enter its
premises, a No Access condition shall be deemed to exist.
For No Access conditions, the SWBT technician shall complete an agreed
upon No Access form and leave it at the end users premises. The form shall
advise the end user to contact their local service provider to reschedule
an appointment.
D. Jacks/Inside Wire Installation Requests Received Direct from End
Users
When a LSP end user requests jack/wiring installation directly from a SWBT
technician while the technician is at the end user's premises performing
repair functions, the end user will be referred to LSP to place an order
for the requested services. The service order will be passed from LSP to
SWBT using established service order procedures. Due dates will be
negotiated using established intervals and charges will be billed to LSP
per the rate schedule in Appendix III attached hereto.
<PAGE> 46
E. Jacks/Inside Wire Installation Requests via Service Order
LSP shall forward their end users' requests for installation of jacks
and/or inside wire to SWBT via established service order procedures. Due
dates will be determined using established intervals and time sensitive
charges will be billed to LSP per the rate schedule in Appendix III
attached hereto.
F. Coordinated Repair Calls
The Parties shall employ the following procedures for handling misdirected
repair calls received from the other Party's end users:
1. The Parties shall inform their respective end users of the
correct telephone numbers to call to access their respective
repair bureaus.
2. To the extent the correct provider can be determined,
misdirected repair calls shall be referred to the appropriate
Party in a courteous manner, at no charge. The Party receiving
a misdirected repair call shall provide the end user with the
correct contact telephone number. In responding to repair
calls, neither Party shall make disparaging remarks about the
other Party, nor shall repair calls be used as the basis for
internal referrals, to solicit end users or to market
services. Either Party may respond with accurate information
in answering end user questions.
3. The Parties shall provide their respective repair contact
numbers to one another.
V. ADDITIONAL RESPONSIBILITIES OF THE PARTIES
A. Notice of Network Changes
The Parties agree to provide each other with reasonable notice of
changes in information necessary for the execution of services
listed in this Agreement.
B. Billing and Payment of Rates and Charges
SWBT shall include all maintenance of service charges,
time-sensitive installation and/or repair charges and monthly
flat-rate repair rates per the Option selected, on the monthly
consolidated bill rendered to LSP (hereinafter "invoice"). NOTE: For
multiline accounts, repair rates are charged per line as well as per
jack on those lines designated by LSP to be covered by the "Selected
Account' Option as purchased by LSP for resale,
<PAGE> 47
and detailed on Appendix I. Such rates shall not be subject to
adjustment for trouble isolated to and repaired in SWBT's
facilities.
LSP shall pay all such charges due and owing within 30 days of
invoice.
LSP billing inquiries and/or claims of overbilling by SWBT shall be
referred to SWBT for investigation within six (6) months of the
charge(s) appearance on the invoice to LSP. After six (6) months of
such appearance on the invoice, all billed charges shall be deemed
to be correct.
If the Parties determine that LSP was billed incorrectly for
services rendered pursuant to this Agreement, a billing adjustment
shall be calculated. If a refund is due, an adjustment shall be made
for the overcharges. If an overcharge is adjusted within three
billing cycles of the bill in error, interest will not be
applicable. If the overcharge is not adjusted within three billing
cycles, interest on the amount will be credited at the applicable
rate from SWBT's General Exchange Tariff.
C. Notice of Price Changes
Charges listed on Appendix I shall remain in effect throughout the
initial term of this Agreement as defined in Section XIV. Term. SWBT
may increase such WireWorx(SM) Inside Wire Repair charges by
providing written notice of the increase to LSP at least 120 days
prior to the Agreement expiration date, also defined in Section XIV.
Term. LSP shall provide written response to SWBT at least 60 days
prior to said expiration date of either: a.) acceptance of the
increase(s) and continuation of the Agreement, or b.) refusal of the
increase(s) and the intent to renegotiate or terminate the Agreement
as defined in Section XIV. Term.
D. Termination of Service for Nonpayment
Upon nonpayment of any inside wire installation/repair sum due, or
upon violation of any conditions governing the furnishing of these
services, SWBT may give notice, without incurring any liability,
that SWBT will discontinue furnishing service under this Agreement
("termination"). Proper notice shall consist of notice sent by
certified mail, return receipt requested, at least 30 days prior to
the stated date of termination; notice is complete upon mailing. At
its option, SWBT may net amounts owed by LSP against funds which
otherwise might be due LSP.
Termination hereunder shall not relieve LSP of its obligation to pay
for any services performed by SWBT up to and including the date of
termination.
<PAGE> 48
VI. FORCE MAJEURE
SWBT shall not be responsible for delays or failures in performance
resulting from acts or occurrences beyond SWBT's reasonable control,
regardless of whether such delays or failures in performance were foreseen
or foreseeable as of the date of this Agreement, including, without
limitation: fire, explosion, power failure, acts of God, war, revolution,
civil commotion, or acts of public enemies; any law, order, regulation,
ordinance or requirement of any government or legal body; or labor unrest,
including, without limitation, strikes, slowdowns, picketing or boycotts;
or delays caused by LSP or by other service or equipment vendors; or any
other circumstances beyond SWBT's reasonable control. In such event, SWBT
shall, upon giving prompt notice to LSP, be excused from such performance
on a day-to-day basis to the extent of such interference (and LSP shall
likewise be excused from performance of its obligations on a day-for-day
basis to the extent its obligations relate to the performance so
interfered with). SWBT shall use its best efforts to avoid or remove the
cause of non-performance and both Parties shall proceed to perform with
dispatch once the causes are removed or cease.
VII. LIMITATION OF LIABILITY
With respect to any claim or suit for damages arising out of mistakes,
omissions, defects in furnishing service under this Agreement, the
liability of SWBT, if any, shall not exceed an amount equivalent to the
proportionate monthly price listed in Appendix I for the period of that
particular service under this Agreement during which such mistake,
omission, defect in transmission, interruption, failures, delay or error
occurs and continues.
Neither Party shall be responsible to the other for any indirect, special,
consequential or punitive damages, whether sounding in Agreement or tort.
SWBT shall have no liability to the end users of LSP for claims arising
from the provision of WireWorx(sm) to LSP's end users, including but not
limited to claims related to the marketing or sales of its services
provided hereunder, delayed restoral or nonrestoral of service, quality of
service or any resulting billing or any other type of dispute between LSP
and its end user. LSP agrees to indemnify, defend, and hold SWBT harmless
from and against any and all claims, demands, costs, damages, liabilities,
and expenses (including reasonable attorney fees) arising from any claim
or action initiated by LSP's end user against SWBT for services rendered
under this Agreement.
VIII. NONDISCLOSURE
LSP and SWBT anticipate and recognize that they will come into possession
of, technical or business information or data about the Parties' or their
end users as a result of this Agreement which will be considered
confidential by SWBT. The
<PAGE> 49
Parties agree (1) to treat all such information as strictly confidential
and (2) to use such information only for purposes of performance under
this Agreement. The Parties agree not to disclose confidential information
of the other Party or its end users to any person without first securing
the written consent of such Party. The foregoing shall not apply to
information which is in the public domain.
If a court or governmental agency orders or a third-party requests a Party
to disclose or to provide any data or information covered by this Section,
that Party will immediately inform the other Party of the order or request
before such data is provided and will inform the other Party both by
telephone and certified mail. Notification and consent requirements
described above are not applicable in cases where a court order requires
the production of toll billing records of an individual residence or
business end user customer.
This section will not preclude the disclosure by the Parties of
information or data described in this Section to consultants, agents, or
attorneys representing the respective Parties, or the Office of the Public
Counsel for the State, or appropriate State Commissions or staffs, or FCC
Staff provided that these third-parties are bound by the same or
comparable confidentiality requirements as the Parties to this Agreement.
The provisions of this Section will remain in effect notwithstanding the
termination of this Agreement, unless agreed to in writing by both
Parties.
IX. PUBLICITY
The Parties agree not to use in any advertising or sales promotion, press
releases or other publicity matters any endorsements, direct or indirect
quotes, or pictures implying endorsement by the other Party or any of its
employees without such Party's prior written approval. The Parties will
submit to each other for written approval, prior to publication, all
publicity matters that mention or display one another's name and/or marks
or contain language from which a connection to said name and/or marks may
be inferred or implied.
X. ASSIGNMENT
LSP may not assign, subcontract, or otherwise transfer its rights or
obligations under this Agreement except under such terms and conditions as
are mutually acceptable to SWBT and with SWBT's prior written consent,
which consent shall not be unreasonably withheld.
<PAGE> 50
XI. NOTICES
In an event any notices are required to be sent under the terms of this
Agreement, they shall be sent by registered mail, return receipt requested
to:
To SWBT: To LSP:
SWBT Valu-Line of Kansas, Inc.
Attn: Debbie Watson Attn: Rick Tidwell
One Bell Plaza, Rm 523.08 1420 C of E Drive
Dallas, TX 75202 Emporia, KS 66801
XII. THIRD PARTY BENEFICIARIES
This Agreement shall not provide any non-party with any remedy, claim,
cause of action or other right.
XIII. TAXES
LSP shall be responsible for all federal, state or local, sales, use,
excise or gross receipts taxes or fees imposed on or with respect to the
inside wire installation/repair services provided under this Agreement
including those taxes and fees, the incidence of which is imposed on SWBT.
LSP shall reimburse SWBT for the amount of any such taxes or fees which
SWBT is required to pay or collect.
XIV. TERM
SWBT and LSP agree to the terms and conditions defined in this Agreement
for a term of one (1) year, and thereafter the Agreement shall continue in
force and effect unless and until terminated as provided herein. Either
Party may, at any time, terminate this Agreement by providing written
notice of termination to the other Party, such written notice to be
provided at least 60 days in advance of the date of termination. In the
event of such termination as described herein, this Agreement shall
continue without interruption until the end of the 60 day period or a new
Agreement becomes effective between the parties. By mutual agreement, SWBT
and LSP may amend this Agreement to modify its term.
XV. WAIVER
The failure of either Party to enforce or insist that the other Party
comply with the terms or conditions of this Agreement, or the waiver by
either Party in a particular instance of any of the terms or conditions of
this Agreement, shall not be construed as a general waiver or
relinquishment of the terms and conditions, but this Agreement shall be
and remain at all times, in full force and effect, unless terminated or
amended as provided for herein.
<PAGE> 51
XVI. DISCLAIMER OF WARRANTIES
SWBT MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, INCLUDING
BUT NOT LIMITED TO ANY WARRANTY AS TO MERCHANTABILITY OR FITNESS FOR
INTENDED OR PARTICULAR PURPOSE WITH RESPECT TO SERVICES PROVIDED
HEREUNDER. ADDITIONALLY, SWBT ASSUMES NO RESPONSIBILITY WITH REGARD TO THE
CORRECTNESS OF DATA OR INFORMATION SUPPLIED BY LSP WHEN THIS DATA OR
INFORMATION IS ACCESSED AND USED BY A THIRD PARTY.
XVII. EFFECTIVE DATE
The Parties shall effectuate all the terms and conditions of this
Agreement ten (10) business days after both Parties' final authorizing
signatures have been affixed.
XVIII. RELATIONSHIP OF THE PARTIES
This Agreement shall not establish, be interpreted as establishing, or be
used by either Party to establish or to represent their relationship as
any form of agency, partnership or joint venture. Neither Party shall have
any authority to bind the other or to act as an agent for the other unless
written authority, separate from this Agreement, is provided. Nothing in
the Agreement shall be construed as providing for the sharing of profits
or losses arising out of the efforts of either or both of the Parties.
Nothing herein shall be construed as making either Party responsible or
liable for the obligations and undertakings of the other Party.
<PAGE> 52
XIX. COMPLETE TERMS
LSP hereby chooses the WireWorx(sm) Option defined as: 'Every
Account'/'Selected Account' (circle one) with the appropriate rates as
detailed in Appendix I attached hereto. This Agreement together with its
Appendices constitutes the entire Agreement for inside wire installation
and repair services between the Parties and supersedes all prior
discussions, representations or oral understandings pursuant exclusively
to such services, reached between the Parties.
Neither Party shall be bound by any amendment, modification or additional
terms unless it is reduced to writing signed by an authorized
representative of the Party sought to be bound.
If this Agreement is acceptable to LSP and SWBT, both Parties will sign in
the space provided below. This Agreement shall not bind LSP and SWBT until
executed by both parties.
/s/ Rick Tidwell /s/ ILLEGIBLE
- ---------------------------------- ----------------------------------
(Name Typed) Rick Tidwell (Name Typed) Stephen M. Carter
(Title) President (Title) Vice President-General Manager
(Title) President (Special Markets)
Valu-Line of Kansas Inc. Southwestern Bell Telephone Company
3-3-97 3-12-97
- ------------------ ------------------
DATE DATE
<PAGE> 53
APPENDIX I
WireWorx(sm) INSIDE WIRE REPAIR CHARGES
OPTION: EVERY ACCOUNT
Billed Monthly per Basic Resold Line
<TABLE>
<S> <C>
RESIDENCE
WMW $ 2.75
BUSINESS
WMW $ 3.00
MULTILINE
Billed Monthly per Multi-Resold Line and per Station Jack
(CPE Termination)
LINE - WMDLX $ 2.50
STATION - WMDJX $ .50
</TABLE>
OPTION: SELECTED ACCOUNT
Billed Monthly per Basic Resold Line Designated
NOTE: All lines for each specific end user account selected must be so
designated.
<TABLE>
<S> <C>
RESIDENCE
WMWLS $ 3.15
BUSINESS
WMWLS $ 3.50
MULTILINE
Billed Monthly per Multi-Resold Line and per Station Jack
(CPE Termination)
LINE - WMDJS $ 3.00
STATION - WMTDJS $ .60
</TABLE>
<PAGE> 54
APPENDIX II
MAINTENANCE OF SERVICE CHARGES
<TABLE>
<S> <C>
Arkansas 100% of retail
Kansas 100% of retail
Missouri 100% of retail
Oklahoma 100% of retail
Texas 100% of retail
</TABLE>
<PAGE> 55
APPENDIX III
TIME SENSITIVE JACKS/INSIDE WIRE
INSTALLATION/REPAIR CHARGES
<TABLE>
<CAPTION>
RESIDENCE First 1/2 hr. Ea. adl. 1/4 hr.
- --------- ------------- ----------------
<S> <C> <C>
State-by-State 100% of retail 100% of retail
<CAPTION>
BUSINESS First 1/2 hr. Ea. adl. 1/4 hr.
- -------- ------------- ----------------
<S> <C> <C>
State-by-State 100% of retail 100% of retail
</TABLE>
NOTE: Installation charges shall be billed at 100% of retail rates as structured
state-by-state. Any changes to rates and/or rate structure shall flow through to
LSP effective with the change to SWBT's retail customers.
16
<PAGE> 56
XIII. TAXES 11
XIV. TERM 11
XV. WAIVER 11
XVI. DISCLAIMER OF WARRANTIES 12
XVII. EFFECTIVE DATE 12
XVIII. RELATIONSHIP OF THE PARTIES 12
XIX. COMPLETE TERMS 13
APPENDIX I - WireWorx(sm) Inside Wire Repair Charges 14
APPENDIX II - Maintenance of Service Charges 15
APPENDIX III - Time Sensitive Jacks/Inside Wire
Installation/Repair Charges 16
2
<PAGE> 57
WireWorx(sm) AGREEMENT
This Agreement is between Valu-Line of Kansas (hereinafter referred to as
"LSP") and Southwestern Bell Telephone Company ("SWBT") (collectively, "the
Parties") entered into this ______ day of __________, 1997
WHEREAS, SWBT offers a service known as WireWorx(sm) for the installation
and repair of simple inside wire and /or jacks to Local Service Providers; and
LSP desires to obtain WireWorx(sm) from SWBT;
It is therefore agreed in consideration of the mutual promises contained
herein that:
I. DEFINITIONS
As used in this Agreement, the following definitions shall apply:
Customer Premises Equipment (CPE) - Equipment owned by an end user, such
as a telephone set, that can be connected to the telephone network.
Demarcation Point/Network Interface (NI) - The point of demarcation and/or
interconnection between "telephone company communications facilities" and
"wiring at subscriber premises." The terms demarcation point and network
interface (NI) are used interchangeably and mean the same thing.
Inside Wire (IW) - End user premises wiring beyond the established
demarcation point or network interface.
Inside Wire Repair Charge - The recurring monthly price listed in Appendix
I of this Agreement that SWBT will charge LSP for the WireWorx(sm) Option
chosen.
Maintenance of Service Charge (MSC) - The price for dispatching a SWBT
technician to an end user's premises for the purpose of isolating trouble
reported by LSP. It is charged to LSP on each dispatch wherein trouble is
isolated to the end user side of the demarcation point/NI and the affected line
is NOT designated as covered by WireWorx(sm) or the trouble is isolated to end
user's CPE (See Appendix II).
Multi-line Service - An end user resold-line account wherein there are two
(2) or more non-designed lines terminating in key equipment. This Agreement
covers repairs of inside wire and jacks from the last common termination point
up to and including the jack.
Off-Premises Extension - An extension of the basic line to a premises
separated from the primary service location by any public roadway or
thoroughfare.
3
<PAGE> 58
Resold Line - A telephone line purchased by LSP from SWBT at wholesale
rates and resold to LSPs end users.
Riser Cable - Copper conductors, typically within a cable sheath, that are
placed exclusively within or between multi-unit buildings from the an entrance
location of a building (typically in the basement or lower floor equipment
closet) to designated equipment space or terminal space within such building.
Time Sensitive Installation Charge - The time sensitive price SWBT charges
for each service order for jack/inside wire installation completed by a SWBT
technician on a resold line, either residence, business or multi-line (See
Appendix III).
Time Sensitive Repair Charge - The time sensitive price SWBT charges for
each repair trip completed by a SWBT technician on a resold line, either
residence, business or multi-line, that is NOT designated as covered by
WireWorx(sm) (See Appendix III).
II. LSP COMPANY OBLIGATIONS
LSP agrees to purchase WireWorx(sm) for residence and single-line
business resold lines at the monthly WireWorx(sm) price listed in Appendix I
attached hereto for the Option chosen by LSP. LSP further agrees to purchase
WireWorx(sm) for multi-line business resold lines and jacks at the monthly price
listed in Appendix I for the Option chosen by LSP.
III. SWBT OBLIGATIONS
A. SWBT agrees to diagnose, isolate trouble and repair the inside wiring
and jacks of LSP's end user at no charge to said end user. WireWorx(sm)
however, does NOT cover:
1. Charges for wire repair due to natural disasters such as flood
and earthquake, riots, acts of war, gross negligence, willful
damage and/or vandalism.
2. Repairs to wire that does not meet SWB's installation
practices or technical standards as provided under separate
cover.
3 Repair to wire provided and maintained by military personnel.
(Texas Only)
4. Repair and/or replacement of CPE. NOTE: If the trouble is
determined to be in the end user's CPE and NOT in the
facilities up to and including the jacks, a Maintenance of
Service Charge (MSC) equal to the retail rate in the
appropriate state, will be billed to LSP.
5 Repairs to house or riser cable, or cable between buildings.
4
<PAGE> 59
6. Repairs to designated designed services:
a. Trunks
b. Access services
c. Foreign Exchange service
d. WATS
e. Private Line services, Analog & Digital
f. Foreign Serving Office service
g. Off-Premises Extensions
B. SWBT shall not be obligated by this Agreement to provide technicians,
either individual or crews, exclusively dedicated to the performance of
services for LSP.
C. SWBT shall not be obligated by this Agreement to provide LSP with
branding of any kind including but not limited so, technician apparel,
vehicles, forms; nor shall the SWBT technician carry and provide to LSP's
end users, LSP-branded business cards or other printed materials.
IV. OPERATIONAL PROCEDURES
A. Repair Referrals to SWBT
LSP shall be responsible for calling its assigned SWBT trouble reporting
center with each repair referral. The referral shall include:
1. The end user's telephone number;
2. A detailed description of the trouble reported by the end
user;
3. A contact name and telephone number (if different from 1.
above) for the end user.
4. LSP representative name and telephone number.
SWBT shall give the next available repair commitment to LSP based upon
whether the trouble is an out-of-service or service-affecting trouble
condition.
B. Pro-Referral Repair Screening
Prior to referring a trouble report to SWBT, LSP shall have its end user
perform the tests described in the SWBT printed materials provided under
separate cover, to determine if the trouble is with the end user's CPE.
5
<PAGE> 60
C. SWBT Repair Report Handling
When SWBT is informed by LSP of trouble on one of its end user's lines, a
SWBT technician will be dispatched to repair the end user's trouble. If
the cause of trouble is isolated on the SWBT side of the demarcation
point/NI, SWBT will repair its own facilities or equipment. If the trouble
is isolated to the end user side of the demarcation point/NI and the line
has the appropriate 'Every Account' Option designation, the SWBT
technician shall:
1. Advise the end user that SWBT is under Agreement to repair or
restore service and will request the end user's consent to enter the
premises; and
2. Where consent is obtained, the SWBT technician shall repair the
trouble (if possible) and follow existing procedures for closing out a
trouble report.
If the trouble is isolated to the end user side of the demarcation
point/NI and the line does NOT have the appropriate WireWorx(sm)
designation per the 'Selected Account' Option, the SWBT technician shall:
1. Advise the end user that the trouble is on their side of the
demarcation point and prepare a Maintenance of Service Charge (MSC) for
billing to LSP, per Appendix II attached hereto; and
2. Then, repair the trouble (if possible) at Time Sensitive Repair
charges, billed to LSP, per Appendix III attached hereto.
Whenever a SWBT technician is dispatched to a LSP end user's premises to
perform work via a repair referral or a service order (See E. below) from
LSP, and if the end user is not present or refuses permission to enter its
premises, a No Access condition shall be deemed to exist.
For No Access conditions, the SWBT technician shall complete an agreed
upon No Access form and leave it at the end user's premises. The form
shall advise the end user to contact their local service provider to
reschedule an appointment.
D. Jacks/Inside Wire Installation Requests Received Direct from End Users
When a LSP end user requests jack/wiring installation directly from a SWBT
technician while the technician is at the end user's premises performing
repair functions, the end user will be referred to LSP to place an order
for the requested services. The service order will be passed from LSP to
SWBT using established service order procedures. Due dates will be
negotiated using established intervals and charges will be billed to LSP
per the rate schedule in Appendix III attached hereto.
6
<PAGE> 61
E. Jacks/Inside Wire Installation Requests via Service Order
LSP shall forward their end users' requests for installation of jacks
and/or inside wire to SWBT via established service order procedures. Due
dates will be determined using established intervals and time sensitive
charges will be billed to LSP per the rate schedule in Appendix III
attached hereto.
F. Coordinated Repair Calls
The Parties shall employ the following procedures for handling misdirected
repair calls received from the other Party's end users:
1. The Parties shall inform their respective end users of the
correct telephone numbers to call to access their respective
repair bureaus.
2. To the extent the correct provider can be determined,
misdirected repair calls shall be referred to the appropriate
Party in a courteous manner, at no charge. The Party receiving
a misdirected repair call shall provide the end user with the
correct contact telephone number. In responding to repair
calls, neither Party shall make disparaging remarks about the
other Party, nor shall repair calls be used as the basis for
internal referrals, to solicit end users or to market
services. Either Party may respond with accurate information
in answering end user questions.
3. The Parties shall provide their respective repair contact
numbers to one another.
V. ADDITIONAL RESPONSIBILITIES OF THE PARTIES
A. Notice of Network Changes
The Parties agree to provide each other with reasonable notice of
changes in information necessary for the execution of services
listed in this Agreement.
B. Billing and Payment of Rates and Charges
SWBT shall include all maintenance of service charges,
time-sensitive installation and/or repair charges and monthly
flat-rate repair rates per the Option selected, on the monthly
consolidated bill rendered to LSP (hereinafter "invoice"). NOTE: For
multiline accounts, repair rates are charged per line as well as per
jack on those lines designated by LSP to be covered by the 'Selected
Account' Option as purchased by LSP for resale,
7
<PAGE> 62
and detailed on Appendix I. Such rates shall not be subject to
adjustment for trouble isolated to and repaired in SWBT's
facilities.
LSP shall pay all such charges due and owing within 30 days of
invoice.
LSP billing inquiries and/or claims of overbilling by SWBT shall be
referred to SWBT for investigation within six (6) months of the
charge(s) appearance on the invoice to LSP. After six (6) months of
such appearance on the invoice, all billed charges shall be deemed
to be correct.
If the Parties determine that LSP was billed incorrectly for
services rendered pursuant to this Agreement, a billing adjustment
shall be calculated. If a refund is due, an adjustment shall be made
for the overcharges. If an overcharge is adjusted within three
billing cycles of the bill in error, interest will not be
applicable. If the overcharge is not adjusted within three billing
cycles, interest on the amount will be credited at the applicable
rate from SWBT's General Exchange Tariff.
C. Notice of Price Changes
Charges listed on Appendix I shall remain in effect throughout the
initial term of this Agreement as defined in Section XIV. Term. SWBT
may increase such WireWorx(sm) Inside Wire Repair charges by
providing written notice of the increase to LSP at least 120 days
prior to the Agreement expiration date, also defined in Section XIV.
Term. LSP shall provide written response to SWBT at least 60 days
prior to said expiration daze of either a.) acceptance of the
increase(s) and continuation of the Agreement, or b.) refusal of the
increase(s) and the intent to renegotiate or terminate the Agreement
as defined in Section XIV. Term.
D. Termination of Service for Nonpayment
Upon nonpayment of any inside wire installation/repair sum due, or
upon violation of any conditions governing the furnishing of these
services, SWBT may give notice, without incurring any liability,
that SWBT will discontinue furnishing service under this Agreement
("termination"). Proper notice shall consist of notice sent by
certified mail, return receipt requested, at least 30 days prior to
the stated date of termination; notice is complete upon mailing. At
its option, SWBT may net amounts owed by LSP against funds which
otherwise might be due LSP.
Termination hereunder shall not relieve LSP of its obligation to pay
for any services performed by SWBT up to and including the date of
termination.
8
<PAGE> 63
VI. FORCE MAJEURE
SWBT shall not be responsible for delays or failures in performance
resulting from acts or occurrences beyond SWBT's reasonable control,
regardless of whether such delays or failures in performance were foreseen
or foreseeable as of the date of this Agreement, including, without
limitation: fire, explosion, power failure, acts of God, war, revolution,
civil commotion, or acts of public enemies; any law, order, regulation,
ordinance or requirement of any government or legal body; or labor unrest,
including, without limitation, strikes, slowdowns, picketing or boycotts;
or delays caused by LSP or by other service or equipment vendors; or any
other circumstances beyond SWBT's reasonable control. In such event, SWBT
shall, upon giving prompt notice to LSP, be excused from such performance
on a day-to-day basis to the extent of such interference (and LSP shall
likewise be excused from performance of its obligations on a day-for-day
basis to the extent its obligations relate to the performance so
interfered with). SWBT shall use its best efforts to avoid or remove the
cause of non-performance and both Parties shall proceed to perform with
dispatch once the causes are removed or cease.
VII. LIMITATION OF LIABILITY
With respect to any claim or suit for damages arising out of mistakes,
omissions, defects in finishing service under this Agreement, the
liability of SWBT, if any, shall not exceed an amount equivalent to the
proportionate monthly price listed in Appendix I for the period of that
particular service under this Agreement during which such mistake,
omission, defect in transmission, interruption, failures, delay or error
occurs and continues.
Neither Party shall be responsible to the other for any indirect, special,
consequential or punitive damages, whether sounding in Agreement or tort.
SWBT shall have no liability to the end users of LSP for claims arising
from the provision of WireWorx(sm) to LSP's end users, including but not
limited to claims related to the marketing or sales of its services
provided hereunder, delayed restoral or nonrestoral of service, quality of
service or any resulting billing or any other type of dispute between LSP
and its end user. LSP agrees to indemnify, defend, and hold SWBT harmless
from and against any and all claims, demands, costs, damages, liabilities,
and expenses (including reasonable attorney fees) arising from any claim
or action initiated by LSP's end user against SWBT for services rendered
under this Agreement.
VIII. NONDISCLOSURE
LSP and SWBT anticipate and recognize that they will come into possession
of, technical or business information or data about the Parties' or their
end users as a result of this Agreement which will be considered
confidential by SWBT. The
9
<PAGE> 64
Parties agree (1) to treat all such information as strictly confidential
and (2) to use such information only for purposes of performance under
this Agreement. The Parties agree not to disclose confidential information
of the other Party or its end users to any person without first securing
the written consent of such Party. The foregoing shall not apply to
information which is in the public domain.
If a court or governmental agency orders or a third-party requests a Party
to disclose or to provide any data or information covered by this Section,
that Party will immediately inform the other Party of the order or request
before such data is provided and will inform the other Party both by
telephone and certified mail. Notification and consent requirements
described above are not applicable in cases where a court order requires
the production of toll billing records of an individual residence or
business end user customer.
This section will not preclude the disclosure by the Parties of
information or data described in this Section to consultants, agents, or
attorneys representing the respective Parties, or the Office of the Public
Counsel for the State, or appropriate State Commissions or staffs, or FCC
Staff, provided that these third-parties are bound by the same or
comparable confidentiality requirements as the Parties to this Agreement.
The provisions of this Section will remain in effect notwithstanding the
termination of this Agreement, unless agreed to in writing by both
Parties.
IX. PUBLICITY
The Parties agree not to use in any advertising or sales promotion, press
releases or other publicity matters any endorsements, direct or indirect
quotes, or pictures implying endorsement by the other Party or any of its
employees without such Party's prior written approval. The Parties will
submit to each other for written approval, prior to publication, all
publicity matters that mention or display one another's name and/or marks
or contain language from which a connection to said name and/or marks may
be inferred or implied.
X. ASSIGNMENT
LSP may not assign, subcontract, or otherwise transfer its rights or
obligations under this Agreement except under such terms and conditions as
are mutually acceptable to SWBT and with SWBT's prior written consent,
which consent shall not be unreasonably withheld.
10
<PAGE> 65
XI. NOTICES
In an event any notices are required to be sent under the terms of this
Agreement, they shall be sent by registered mail, return receipt requested
to:
To SWBT: To LSP:
SWBT Valu-Line of Kansas, Inc.
Attn: Debbie Watson Attn: Rick Tidwell
One Bell Plaza, Rm 523.08 1420 C of E Drive
Dallas, TX 75202 Emporia, KS 66801
XII. THIRD PARTY BENEFICIARIES
This Agreement shall not provide any non-party with any remedy, claim,
cause of action or other right.
XIII. TAXES
LSP shall be responsible for all federal, state or local, sales, use
excise or gross receipts taxes or fees imposed on or with respect to the
inside wire installation/repair services provided under this Agreement
including those taxes and fees, the incidence of which is imposed on SWBT.
LSP shall reimburse SWBT for the amount of any such taxes or fees which
SWBT is required to pay or collect.
XIV. TERM
SWBT and LSP agree to the terms and conditions defined in this Agreement
for a term of one (1) year, and thereafter the Agreement shall continue in
force and effect unless and until terminated as provided herein. Either
Party may, at any time, terminate this Agreement by providing written
notice of termination to the other Party, such written notice to be
provided at least 60 days in advance of the date of termination. In the
event of such termination as described herein, this Agreement shall
continue without interruption until the end of the 60 day period or a new
Agreement becomes effective between the parties. By mutual agreement, SWBT
and LSP may amend this Agreement to modify its term.
XV. WAIVER
The failure of either Party to enforce or insist that the other Party
comply with the terms or conditions of this Agreement, or the waiver by
either Party in a particular instance of any of the terms or conditions of
this Agreement, shall not be construed as a general waiver or
relinquishment of the terms and conditions, but this Agreement shall be
and remain at all times, in full force and effect, unless terminated or
amended as provided for herein.
11
<PAGE> 66
XVI. DISCLAIMER OF WARRANTIES
SWBT MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING BUT NOT LIMITED TO ANY WARRANTY AS TO MERCHANTABILITY OR
FITNESS FOR INTENDED OR PARTICULAR PURPOSE WITH RESPECT TO SERVICES
PROVIDED HEREUNDER. ADDITIONALLY, SWBT ASSUMES NO RESPONSIBILITY WITH
REGARD TO THE CORRECTNESS OF DATA OR INFORMATION SUPPLIED BY LSP WHEN
THIS DATA OR INFORMATION IS ACCESSED AND USED BY A THIRD PARTY.
XVII. EFFECTIVE DATE
The Parties shall effectuate all the terms and conditions of this
Agreement ten (10) business days after both Parties' final authorizing
signatures have been affixed.
XVIII. RELATIONSHIP OF THE PARTIES
This Agreement shall not establish, be interpreted as establishing, or be
used by either Party to establish or to represent their relationship as
any form of agency, partnership or joint venture. Neither Party shall
have any authority to bind the other or to act as an agent for the other
unless written authority, separate from this Agreement, is provided.
Nothing in the Agreement shall be construed as providing for the sharing
of profits or losses arising out of the efforts of either or both of the
Parties. Nothing herein shall be construed as making either Party
responsible or liable for the obligations and undertakings of the other
Party.
12
<PAGE> 67
XIX. COMPLETE TERMS
LSP hereby chooses the WireWorx(sm) Option defined as: 'Every
Account'/'Selected Account' (circle one) with the appropriate rates as
detailed in Appendix I attached hereto. This Agreement together with its
Appendices constitutes the entire Agreement for inside wire installation
and repair services between the Parties and supersedes all prior
discussions, representations or oral understandings pursuant exclusively
to such services, reached between the Parties.
Neither Party shall be bound by any amendment, modification or additional
terms unless it is reduced to writing signed by an authorized
representative of the Party sought to be bound.
If this Agreement is acceptable to LSP and SWBT, both Parties will sign in
the space provided below. This Agreement shall not bind LSP and SWBT until
executed by both parties.
- ---------------------------------- ----------------------------------
(Name Typed) (Name Typed) Stephen M. Carter
---------------------- (Title) Vice President-General Manager
(Title) (Special Markets)
--------------------------- Southwestern Bell Telephone Company
- ----------------------------------
- ------------------ ------------------
DATE DATE
13
<PAGE> 68
APPENDIX I
WireWorx(sm) INSIDE WIRE REPAIR CHARGES
OPTION: EVERY ACCOUNT
Billed Monthly per Basic Resold Line
<TABLE>
<S> <C>
RESIDENCE
WMW $ 2.75
BUSINESS
WMW $ 3.00
MULTILINE
Billed Monthly per Multi-Resold Line and per Station Jack
(CPE Termination)
LINE - WMDLX $ 2.50
STATION - WMDJX $ .50
</TABLE>
OPTION: SELECTED ACCOUNT
Billed Monthly per Basic Resold Line Designated
NOTE: All lines for each specific end user account selected must be so
designated.
<TABLE>
<S> <C>
RESIDENCE
WMWLS $ 3.15
BUSINESS
WMWLS $ 3.50
MULTILINE
Billed Monthly per Multi-Resold Line and per Station Jack
(CPE Termination)
LINE - WMDJS $ 3.00
STATION - WMTDJS $ .60
</TABLE>
14
<PAGE> 69
APPENDIX II
MAINTENANCE OF SERVICE CHARGES
<TABLE>
<S> <C>
Arkansas 100% of retail
Kansas 100% of retail
Missouri 100% of retail
Oklahoma 100% of retail
Texas 100% of retail
</TABLE>
15
<PAGE> 70
APPENDIX III
TIME SENSITIVE JACKS/INSIDE WIRE
INSTALLATION/REPAIR CHARGES
<TABLE>
<CAPTION>
RESIDENCE First 1/2 hr. Ea. adl. 1/4 hr.
- --------- ------------- ----------------
<S> <C> <C>
State-by-State 100% of retail 100% of retail
<CAPTION>
BUSINESS First 1/2 hr. Ea. adl. 1/4 hr.
- -------- ------------- ----------------
<S> <C> <C>
State-by-State 100% of retail 100% of retail
</TABLE>
NOTE: Installation charges shall be billed at 100% of retail rates as structured
state-by-state. Any changes to rates and/or rate structure shall flow through to
LSP effective with the change to SWBT's retail customers.
16
<PAGE> 71
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Birch Telecom, Inc.
We have audited the consolidated financial statements of Birch Telecom,
Inc. (the Company) as of December 31, 1997 and the year then ended and have
issued our report thereon dated April 24, 1998. Our audits also included the
financial statement schedule included in Item 16(b) of this Registration
Statement. This schedule is the responsibility of the management of the Company.
Our responsibility is to express an opinion based on our audit.
In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as whole,
presents fairly in all material respects the information set forth therein.
Ernst & Young LLP
Kansas City, Missouri
April 24, 1998
BIRCH TELECOM, INC.
SCHEDULE II - CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
Additions
Balance Charged Balance
beginning Charged to other Other end of
of year to income accounts deductions year
1997
<S> <C> <C> <C> <C> <C>
Valuation allowance-deferred income tax assets $ - $ 681 $ - $ - $ 681
</TABLE>
<PAGE> 72
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Valu-Line Companies, Inc.
We have audited the consolidated financial statements of Valu-Line
Companies, Inc (the Predecessor) as of December 31, 1997 and 1996 and three
years ended December 31, 1997 and have issued our reports thereon dated May 15,
1998. Our audits also included the financial statement schedule included in Item
16(b) of this Registration Statement. This schedule is the responsibility of
the management of the Predecessor. Our responsibility is to express an opinion
based on our audits.
In our opinion, the financial statement cchedule referred to above,
when considered in relation to the basic financial statements taken as whole,
presents fairly in all material respects the information set forth therein.
Ernst & Young LLP
Kansas City, Missouri
May 15, 1998
VALU-LINE COMPANIES, INC.
SCHEDULE II - CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
Additions
Balance Charged Balance
beginning Charged to other Other end of
of year to income accounts deductions year
(1)
<S> <C> <C> <C> <C> <C>
1997
Allowance for doubtful accounts $ 70 $ 20 $ - $ 10 $ 80
1996
Allowance for doubtful accounts $ 105 $ 45 $ - $ 80 $ 70
1995
Allowance for doubtful accounts $ 35 $ 109 $ - $ 39 $ 105
</TABLE>
(1) Accounts written off, net of recoveries.
<PAGE> 1
EXHIBIT 10.13
INDEX
Main Agreement ..................................................... 1
Appendix UNE & Price List .......................................... 2
Appendix OSS-UNE ................................................... 3
Appendix 911 ....................................................... 4
Appendix BCR ....................................................... 5
Appendix CH ........................................................ 6
Appendix DCO ....................................................... 7
Appendix FGA ....................................................... 8
Appendix Host ...................................................... 9
Appendix ITR ....................................................... 10
Appendix MAP ....................................................... 11
Appendix NIM ....................................................... 12
Appendix Port ...................................................... 13
Appendix Recording ................................................. 14
Appendix TP ........................................................ 15
Appendix Wireless .................................................. 16
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1.0 DEFINITIONS ............................................................................................. 2
2.0 INTERPRETATION AND CONSTRUCTION ......................................................................... 6
3.0 IMPLEMENTATION SCHEDULE AND INTERCONNECTION ACTIVATION DATES ............................................ 6
4.0 INTERCONNECTION PURSUANT TO SECTION 251(c)(2) ........................................................... 7
4.1 Scope .......................................................................................... 7
4.2 Interconnection Coverage ....................................................................... 7
4.3 Methods for Interconnection .................................................................... 8
4.4 Physical Architecture .......................................................................... 9
4.5 Technical Specifications ....................................................................... 10
4.6 Interconnection in Additional Metropolitan Exchange Areas ...................................... 10
5.0 TRANSMISSION AND ROUTING OF TELEPHONE EXCHANGE SERVICE TRAFFIC PURSUANT TO SECTION 251(c)(2) ........... 11
5.1 Scope of Traffic ............................................................................... 11
5.2 Responsibilities of the Parties ................................................................ 12
5.3 Reciprocal Compensation for Termination of Local Traffic ....................................... 12
5.4 Reciprocal Compensation for Transit Traffic .................................................... 13
5.5 Reciprocal Compensation for Termination of IntraLATA Interexchange Traffic ..................... 14
5.6 Compensation for Origination and Termination of Switched Access Service Traffic
to or From an IXC (Meet-Point Billing (MPB) Arrangements) ...................................... 15
5.7 Billing Arrangements for Compensation for Termination of IntraLATA, Local, Transit,
and Optional Calling Area Traffic .............................................................. 17
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
5.8 Compensation for "Porting" Optional Calling Area Numbers ....................................... 18
6.0 TRANSMISSION AND ROUTING OF EXCHANGE ACCESS TRAFFIC PURSUANT
TO 251(c)(2) ............................................................................................ 18
6.1 Scope of Traffic ............................................................................... 18
6.2 Trunk Group Architecture Traffic Routing ....................................................... 18
7.0 TRANSPORT AND TERMINATION OF OTHER TYPES OF TRAFFIC ..................................................... 18
7.1 Information Services Traffic ................................................................... 18
7.2 Line Status Verification (LSV)/Busy Line Interrupt (BLI) Traffic ............................... 19
7.3 Wireless Traffic ............................................................................... 19
8.0 SIGNALING ............................................................................................... 19
9.0 NUMBERING ............................................................................................... 20
10.0 RESALE -- SECTIONS 251(B)1); 251(c)(4); 252(d)(3); and 271(c)(2)(B)(xiv) ................................ 21
11.0 UNBUNDLED NETWORK ELEMENTS - SECTIONS 251(c)(3), 271(c)(2)(B) (ii),(iv),(v),(vi),(x) .................... 21
12.0 NOTICE OF CHANGES -- SECTION 251(c)(5) .................................................................. 22
13.0 COLLOCATION -- SECTION 251(c)(6) ........................................................................ 22
14.0 NUMBER PORTABILITY -- SECTIONS 251(b)(2) and 271(c)(2)(B)(xi)...... ..................................... 22
15.0 DIALING PARITY -- SECTION 251(b)(3); 271(c)(2)(B)(xii); and 271(e)(2) ................................... 23
16.0 ACCESS TO RIGHTS-OF-WAY -- SECTION 251(b)(4) and 271(c)(2)(B)(iii) ...................................... 23
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
17.0 DATABASE ACCESS -- SECTION 271(c)(2)(B)(x) ............................................................. 23
18.0 INTERCEPT REFERRAL ANNOUNCEMENTS ........................................................................ 23
19.0 COORDINATED REPAIR CALLS ................................................................................ 24
20.0 OTHER SERVICES 271(c)(B)(2)(vii) and 271(c)(2)(B)(viii) ................................................. 24
20.1 White Pages .................................................................................... 24
20.2 Calling Name Information ....................................................................... 24
20.3 Billing/Collecting/Remitting ................................................................... 25
20.4 911/E911 Service ............................................................................... 25
20.5 Directory Assistance (DA) ...................................................................... 25
20.6 Direct Access (DIRECT) ......................................................................... 25
20.7 Operator Services .............................................................................. 25
20.8 Clearinghouse Services ......................................................................... 25
20.9 Hosting ........................................................................................ 25
20.10 Signaling System 7 Interconnection ............................................................. 25
21.0 GENERAL RESPONSIBILITIES OF THE PARTIES ................................................................. 25
22.0 EFFECTIVE DATE, TERM, AND TERMINATION ................................................................... 27
23.0 DISCLAIMER OF REPRESENTATIONS AND WARRANTIES ............................................................ 28
24.0 CHANGES IN END USER LOCAL EXCHANGE SERVICE PROVIDER SELECTION ........................................... 28
25.0 SEVERABILITY ............................................................................................ 29
26.0 INTELLECTUAL PROPERTY ................................................................................... 29
27.0 INDEMNIFICATION ......................................................................................... 29
28.0 LIMITATION OF LIABILITY ................................................................................. 32
</TABLE>
<PAGE> 5
<TABLE>
<S> <C> <C>
29.0 LIQUIDATED DAMAGES FOR SPECIFIED ACTIVITIES ............................................................. 32
29.1 Certain Definitions ............................................................................ 32
29.2 Specified Performance Breach ................................................................... 33
29.3 Liquidated Damages ............................................................................. 33
29.4 Limitations .................................................................................... 34
29.5 Sole Remedy .................................................................................... 34
29.6 Records ........................................................................................ 34
30.0 REGULATORY APPROVAL ..................................................................................... 34
31.0 MISCELLANEOUS ........................................................................................... 35
31.1 Authorization .................................................................................. 35
31.2 Compliance and Certification ................................................................... 35
31.3 Law Enforcement ................................................................................ 35
31.4 Independent Contractor ......................................................................... 36
31.5 Force Majeure .................................................................................. 36
31.6 Confidentiality ................................................................................ 37
31.7 Governing Law .................................................................................. 38
31.8 Taxes .......................................................................................... 39
31.9 Non-Assignment ................................................................................. 41
31.10 Non-Waiver ..................................................................................... 41
31.11 Audits ......................................................................................... 41
31.12 Disputed Amounts ............................................................................... 42
</TABLE>
<PAGE> 6
<TABLE>
<S> <C> <C>
31.13 Disputed Resolutions ........................................................................... 43
31.14 Notices ........................................................................................ 43
31.15 Publicity and Use of Trademarks or Service Marks ............................................... 43
31.16 Section 252(i) Obligations ..................................................................... 44
31.17 Joint Work Product ............................................................................. 44
31.18 Intervening Law ................................................................................ 45
31.19 No Third Party Beneficiaries; Disclaimer of Agency ............................................. 45
31.20 No License ..................................................................................... 45
31.21 Survival ....................................................................................... 45
31.23 Scope of Agreement ............................................................................. 45
31.24 Entire Agreement ............................................................................... 46
</TABLE>
<PAGE> 7
GENERAL TERMS AND CONDITIONS
PAGE 6 OF 48
SWBT/Birch
INTERCONNECTION AGREEMENT UNDER SECTIONS 251 AND 252 OF THE TELECOMMUNICATIONS
ACT OF 1996
BY AND BETWEEN
SOUTHWESTERN BELL TELEPHONE COMPANY
AND
BIRCH TELECOM OF MISSOURI, INC.
<PAGE> 8
GENERAL TERMS AND CONDITIONS
PAGE 7 OF 48
SWBT/Birch
INTERCONNECTION AGREEMENT UNDER SECTIONS 251 AND 252 OF THE TELECOMMUNICATIONS
ACT OF 1996
This Interconnection Agreement under Sections 251 and 252 of the
Telecommunications Act of 1996 ("Agreement"), is by and between Southwestern
Bell Telephone Company, a Missouri Corporation ("SWBT"), and Birch Telecom of
Missouri, Inc. ("Birch"), a Delaware Corporation.
WHEREAS, the Parties want to interconnect their networks at mutually
agreed upon points of interconnection to provide, directly or indirectly,
Telephone Exchange Services and Exchange Access to residential and business end
users predominantly over their respective telephone exchange service facilities
in Missouri; and
WHEREAS, the Parties are entering into this Agreement to set forth the
respective obligations of the Parties and the terms and conditions under which
the Parties will interconnect their networks and provide other services as
required by the Telecommunications Act of 1996 ("the Act") and additional
services as set forth herein; and
WHEREAS, for purposes of this Agreement, the Parties intend to operate
where SWBT is the incumbent local exchange carrier and Birch, a competitive
local exchange carrier, is certified by the Missouri Public Service Commission,
as required.
NOW, THEREFORE, Birch and SWBT hereby agree as follows:
1.0 DEFINITIONS
1.1 "Act" means the Communications Act of 1934 [47 U.S.C. 151 et seq.],
as amended by the Telecommunications Act of 1996.
1.2 "Affiliate" is as defined in the Act.
1.3 "Automatic Number Identification" or "ANI" is a switching system
feature that forwards the telephone number of the calling party and is used for
screening, routing and billing purposes.
1.4 "Busy Line Interrupt" or "BLI" is performed when one Party's
operator bureau interrupts a telephone number in progress after Line Status
Verification has occurred. The operator bureau will interrupt the busy line and
inform the called party that there is a call waiting.
1.5 "Calling Party Number" or "CPN" is a feature of signaling system 7
(SS7) protocol whereby the ten (10) digit number of the calling party is
forwarded from the end office.
1.6 "Central Office Switch" means a single switching system within the
public
<PAGE> 9
GENERAL TERMS AND CONDITIONS
PAGE 8 OF 48
SWBT/Birch
switched telecommunications network, including the following:
(i) "End Office Switches" which are Class 5
switches where end user Exchange Services
are directly connected and offered; and
(ii) "Tandem Office Switches" or "Tandems" which
are Class 4 switches used to connect and
switch trunk circuits between Central Office
Switches.
Central Office Switches may be employed as combination End Office/Tandem Office
switches (combination Class 5/Class 4).
1.7 "CLASS Features" mean certain CCS-based features available to end
users including, but not limited to: Automatic Call Back; Call Trace; Caller
Identification and related blocking features; Distinctive Ringing/Call Waiting;
Selective Call Forward; and Selective Call Rejection.
1.8 "Collocation" means an arrangement whereby one Party's (the
"Collocating Party") facilities are terminated in its equipment necessary for
Interconnection or for access to Network Elements on an unbundled basis which
has been installed and maintained at the premises of a second Party (the
"Housing Party"). Collocation may be "physical" or "virtual." In "Physical
Collocation," the Collocating Party installs and maintains its own equipment in
the Housing Party's premises. In "Virtual Collocation," the Housing Party
installs and maintains the collocated equipment in the Housing Party's premises.
Collocation includes, but is not limited to, collocation of 38 GHz basic
transmission equipment, provided it complies with the guidelines in SWBT's
current Physical Collocation Technical Publication as of the date of this
Agreement provided to Birch.
1.9 "Commission" means the Missouri Public Service Commission.
1.10 "Common Channel Signaling" or "CCS" is a special network, fully
separate from the transmission path of the public switched network, that
digitally transmits call set-up and network control data. Unless otherwise
agreed by the Parties, the CCS used by the Parties shall be SS7.
1.11 "Cross Connect" means the unbundled network element cross connect
rate element which is used to designate connection between: i) the SWBT
distribution frame and an unbundled network element component, or ii) two
unbundled network element components, or iii) the SWBT distribution frame and
the tie cable termination point for a Birch collocation.
1.12 "Dialing Parity" is as defined in the Act. As used in this
Agreement, Dialing Parity refers to both Local Dialing Parity and Toll Dialing
Parity.
<PAGE> 10
GENERAL TERMS AND CONDITIONS
PAGE 9 OF 48
SWBT/Birch
1.13 "Digital Signal Level" means one of several transmission rates in
the time-division multiplex hierarchy.
1.14 "Digital Signal Level 0" or "DS0" means the 64 Kbps zero-level
signal in the time-division multiplex hierarchy.
1.15 "Digital Signal Level 1" or "DS1" means the 1.544 Mbps first-level
signal in the time-division multiplex hierarchy. In the time-division
multiplexing hierarchy of the telephone network, DS1 is the initial level of
multiplexing.
1.16 "Digital Signal Level 3" or "DS3" means the 44.736 Mbps
third-level signal in the time-division multiplex hierarchy. In the
time-division multiplexing hierarchy of the telephone network, DS3 is defined as
the third level of multiplexing.
1.17 "End User" means a third-party residence or business, that
subscribes to Telecommunications Services provided by either of the Parties, or
by another telecommunications service provider.
1.18 "Exchange Access" is as defined in the Act.
1.19 "Exchange Message Record" or "EMR" means the standard used for
exchange of Telecommunications message information among Telecommunications
Carriers for billable, non-billable, sample, settlement and study data. EMR
format is contained in Bellcore Practice BR-010-200-010 CRIS Exchange Message
Record.
1.20 "Fiber-Meet" means an Interconnection architecture method whereby
the Parties physically interconnect their networks via an optical fiber
interface (as opposed to an electrical interface) at a mutually agreed upon
location.
1.21 "Interconnection" is as described in the Act and refers to the
connection of separate pieces of equipment, facilities, or platforms between or
within networks for the purpose of transmission and routing of Telephone
Exchange Service traffic and Exchange Access traffic.
1.22 "Interconnection Activation Date" is the date that the
construction of the joint facility Interconnection arrangement has been
completed, trunk groups have been established, and joint trunk testing is
completed.
1.23 "Interexchange Carrier" or "IXC" means a carrier that provides,
directly or indirectly, interLATA or intraLATA Telephone Toll Services. For
purposes of Section 6.0 of this Agreement, the term "IXC" includes any entity
which purchases FGB or FGD Switched Exchange Access Service in order to
originate or terminate traffic to/from Birch's end users.
1.24 "IntraLATA Toll Traffic" means those intraLATA station calls that
are not defined as Local Traffic in this Agreement.
<PAGE> 11
GENERAL TERMS AND CONDITIONS
PAGE 10 OF 48
SWBT/Birch
1.25 "Line Status Verification" or "LSV" or "Busy Line Verify" or "BLV"
is performed when one Party's end user requests assistance from the operator
bureau to determine if the called line of the other Party is in use.
1.26 "Local Traffic," for purposes of intercompany compensation, is if
(i) the call originates and terminates in the same SWBT exchange area; or (ii)
originates and terminates within different SWBT Exchanges that share a common
mandatory local calling area, e.g., mandatory Extended Area Service (EAS),
mandatory Extended Local Calling Service (ELCS), or other like types of
mandatory expanded local calling scopes.
1.27 "Losses" means any and all losses, costs (including court costs),
claims, damages (including fines, penalties, and criminal or civil judgments and
settlements), injuries, liabilities and expenses (including attorneys' fees).
1.28 "MECAB" refers to the Multiple Exchange Carrier Access Billing
(MECAB) document prepared by the Billing Committee of the Ordering and Billing
Forum (OBF), which functions under the auspices of the Carrier Liaison Committee
(CLC) of the Alliance for Telecommunications Industry Solutions (ATIS). The
MECAB document, published by Bellcore as Special Report SR-BDS-000983, contains
the recommended guidelines for the billing of access services provided to an IXC
by two or more LECs, or by one LEC in two or more states within a single LATA.
The latest release is issue No. 5, dated June 1994.
1.29 "MECOD" refers to the Multiple Exchange Carriers Ordering and
Design (MECOD) Guidelines for Access Services - Industry Support Interface, a
document developed by the Ordering/Provisioning Committee of the Ordering and
Billing Forum (OBF), which functions under the auspices of the Carrier Liaison
Committee (CLC) of the Alliance for Telecommunications Industry Solutions
(ATIS). The MECOD document, published by Bellcore as Special Report SR
STS-002643, establishes methods for processing orders for access service which
is to be provided to an IXC by two or more telecommunications providers. The
latest release is issue No. 3, dated February 1996.
1.30 "Meet-Point Billing" or "MPB" refers to a billing arrangement
whereby two or more Telecommunications Carriers jointly provide for switched
access service to an IXC, with each LEC receiving an appropriate share of its
switched access revenues as defined by its effective access tariffs.
1.31 "Metropolitan Exchange Area" means a geographical area defined in
SWBT current tariffs effective as a metropolitan exchange local calling area.
For example, Dallas, Ft. Worth, Houston, Little Rock, Oklahoma City, St. Louis
and Austin would be examples of Metropolitan Exchange Areas.
1.32 "Bona Fide Request" means the process described in Appendix UNE
that is attached hereto and incorporated herein and that is described in Section
4.36 that prescribes the
<PAGE> 12
GENERAL TERMS AND CONDITIONS
PAGE 11 OF 48
SWBT/Birch
terms and conditions relating to a Party's request that the other Party provide
a Network Element or a form of interconnection not otherwise provided for in
this Agreement.
1.33 "Switched Exchange Access Service" means the offering of
transmission or switching services to Telecommunications Carriers for the
purpose of the origination or termination of Telephone Toll Service. Switched
Exchange Access Services include, but are not necessarily limited to: Feature
Group A, Feature Group B, Feature Group D, 800/888 access, and 900 access and
their successors or similar Switched Exchange Access services.
1.34 "Synchronous Optical Network" or "SONET" means an optical
interface standard that allows inter-networking of transmission products from
multiple vendors. The base rate is 51.84 Mbps (OC-1/STS-1) and higher rates are
direct multiples of the base rate, up to 13.22 Gpbs.
1.35 "Telephone Exchange Service" is as defined in the Act.
1.36 "Wire Center" means an occupied structure or portion thereof in
which a Party has the exclusive right of occupancy and which serves as a Routing
Point for Switched Exchange Access Service.
2.0 INTERPRETATION AND CONSTRUCTION
All references to Sections, Exhibits, Schedules, and Appendices shall
be deemed to be references to Sections of, and Exhibits, Schedules, and
Appendices to, this Agreement unless the context shall otherwise require. The
headings of the Sections are inserted for convenience of reference only and are
not intended to be a part of or to affect the meaning or interpretation of this
Agreement. Unless the context shall otherwise require, any reference to any
agreement, other instrument (including SWBT or other third party offerings,
guides or practices), statute, regulation, rule or tariff is to such agreement,
instrument, statute, regulation, rule or tariff as amended and supplemented from
time to time (and, in the case of a statute, regulation, rule or tariff, to any
successor provision). In the event of a conflict or discrepancy between the
provisions of this Agreement or the definitions contained herein and the Act, as
from time to time interpreted in the rules, as effective, the provisions and
definitions of the Act or such rules and regulations shall govern.
3.0 IMPLEMENTATION SCHEDULE AND INTERCONNECTION ACTIVATION DATES
Subject to the terms and conditions of this Agreement, Interconnection
of the Parties' facilities and equipment pursuant to Sections 4.0, 5.0 and 6.0
for the transmission and routing of Telephone Exchange Service traffic and
Exchange Access traffic shall be established on or before the corresponding
"Interconnection Activation Date" shown for each such Metropolitan Exchange Area
on Appendix DCO attached hereto and incorporated by reference. Appendix DCO may
be revised and supplemented from time to time upon the mutual agreement of the
<PAGE> 13
GENERAL TERMS AND CONDITIONS
PAGE 12 OF 48
SWBT/Birch
Parties to reflect the Interconnection of additional Metropolitan Exchange Areas
pursuant to Section 4.6 by modifying or updating Appendix DCO.
4.0 INTERCONNECTION PURSUANT TO SECTION 251(C)(2)(A),(B),(C); 47
CFR SECTION 51.305(a)(1)
4.1 SCOPE
This Section 4.0 describes the physical architecture for
Interconnection of the Parties' facilities and equipment for the transmission
and routing of Telephone Exchange Service traffic and Exchange Access traffic
pursuant to Section 251(c)(2) of the Act. Such Interconnections shall be equal
in quality to that provided by the Parties to themselves or to any subsidiary,
affiliate or Third Party, provided however, that nothing contained in this
Section shall be construed as limiting the duties otherwise imposed by Section
29. Appendix ITR attached hereto and incorporated by reference prescribes the
specific trunk groups (and traffic routing parameters) which will be configured
over the physical connections described in this Section 4.0 to provide the
facilities for the transmission and routing of Telephone Exchange Service
traffic (as described in Section 5.0), Exchange Access traffic (as described in
Section 6.0), LSV/BLI traffic (as described in sub-section 7.2).
4.2 INTERCONNECTION COVERAGE SECTION 251(c)(2)(B) AND (C), 47
CFR SECTION51.305(A)(2)
The Parties shall provide for interoperation of their networks that is
at least equal in quality to that provided by SWBT to itself or to any
subsidiary, affiliate, or any other party to which SWBT provides interconnection
and shall interconnect at any technically feasible point in their network as
stated below:
4.2.1. Birch shall interconnect with SWBT's facilities as follows:
a. In each SWBT exchange area in which Birch chooses to
offer local exchange service, Birch, at a minimum,
will interconnect its network facilities to: (a) a
SWBT access tandem(s), and (b) to either each SWBT
local tandem(s) or each SWBT end office(s) ("EO")
subtending that local tandem(s); or as the Parties
may otherwise agree. SWBT EOs and tandems through
which Birch will terminate its traffic will be called
SWBT Interconnection Wire Centers and are identified
in Appendix DCO. As Birch initiates Exchange Service
operations in additional SWBT exchange areas, SWBT
and Birch shall agree upon additional SWBT
Interconnection Wire Centers in each new exchange
area. Birch agrees that if SWBT establishes
additional tandems in an exchange area within which
Birch offers local exchange service, Birch will
interconnect to the additional tandems.
b. Interconnection to a SWBT local tandem(s) will
provide Birch local
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SWBT/Birch
access to the SWBT end offices and NXXs which subtend
that tandem(s), and to other Local Exchange Carriers
("LECs") (subject to sub-section 5.4) which are
connected to that tandem(s). Interconnection to SWBT
EO(s) will provide Birch access only to the NXXs
served by that individual EO(s) to which Birch
interconnects.
c. Interconnection to a SWBT access tandem will provide
Birch interexchange access to SWBT, IXCs, LECs and
CRMS providers (subject to sub-section 7.3) which are
connected to that tandem. Where an access tandem also
provides local tandem functions, interconnection to a
SWBT access tandem serving that exchange will also
provide Birch access to SWBT's EOs with the same
functionality described in (b) above.
d. Where Birch requires ancillary services (e.g.,
Directory Assistance, Operator Assistance, E911/911)
additional interconnection to SWBT's Interconnection
Wire Center(s) or special trunking will be required for
interconnection to such ancillary services.
4.2.2. SWBT shall interconnect with Birch's facilities under terms and
conditions no less favorable than those identified in sub-section 4.2.1, above.
4.3 METHODS FOR INTERCONNECTION
Where the Parties interconnect, for the purpose of exchanging traffic
between networks, the Parties may use the following interconnection methods for
each Tandem and End Office identified in Appendix DCO making use of facilities
they own or lease from a third party or SWBT.
4.3.1 Physical Collocation Interconnection ("PCI") - Where
Birch provides fiber cable and connects to its equipment located in the SWBT
Wire Center. Birch owns and maintains Birch's equipment.
4.3.2 Virtual Collocation Interconnection ("VCI") - Where
Birch provides fiber cable to SWBT for connection to Birch-designated basic
transmission equipment dedicated solely for Birch's use, located in the SWBT
Interconnection Wire Center. SWBT owns and maintains the basic transmission
equipment at the SWBT Interconnection Wire Center. This option shall be
consistent with the terms of SWBT's virtual collocation tariff.
4.3.3 SONET-Based Interconnection ("SBI") - Where Birch
provides fiber cable to SWBT for connection to SWBT-designated basic
transmission equipment located at the SWBT Interconnection Wire Center and
dedicated solely for Birch's use. SWBT owns and maintains the basic transmission
equipment. This option shall be consistent with SWBT's SBI tariff.
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SWBT/Birch
4.3.4 Leased Facility Interconnection ("LFI") - Where
facilities exist, either Party may lease facilities from the other Party.
4.3.5 Mid-span Fiber Interconnection ("NIM") - Where the
Parties agree to interconnect through SONET technology, using a Fujitsu
originating line terminating multiplexer fiber optic terminal ("FOT") details of
this architecture are addressed in Appendix NIM attached hereto and incorporated
by reference. This interconnection arrangement is limited to interconnecting
trunks.
4.3.6 Other interconnection methods, as negotiated by the
parties, which interconnect Birch's and SWBT's networks (1) for the transmission
and routing of telephone exchange traffic, exchange access traffic, or both; (2)
at any technically feasible point within SWBT's network including: (i) the
line-side of a local switch; (ii) the trunk-side of a local switch, (iii) the
trunk interconnection points for a tandem switch; (iv) central office
cross-connect points; (v) out-of-band signaling transfer points necessary to
exchange traffic at these points and access call related databases, and (vi) the
points of access to unbundled network elements; (3) that is a level of quality
that is equal to that which SWBT provides itself, a subsidiary, an affiliate, or
any other party. If Birch requests, and to the extent technically feasible, SWBT
shall negotiate interconnection that is superior or lesser in quality to that
provided by SWBT to itself or any subsidiary, affiliate, or any other party to
which the incumbent LEC provides interconnection. Birch may also request
additional interconnection methods through the Bona Fide Request process as
described in Appendix UNE.
4.4 PHYSICAL ARCHITECTURE. Using one or more of the Interconnection
Methods described in Section 4.3 above, the Parties will agree on a physical
architecture plan. This plan will be documented within Appendix DCO. The Parties
agree to deploy one physical architecture plan per Metropolitan Serving Area.
The two architecture arrangements, End Point Meet and Mid-Point Meet, are
discussed below. Additional physical architectures, as yet undefined, may evolve
during the term of this Agreement. These future as yet undefined architectures
can be deployed if mutually agreed upon or secured through the Bona Fide Request
process.
4.4.1 End Point Meet. Using the "End Point Meet" architecture,
the Parties will establish transport facilities from their own Central Office(s)
to the other party's Central Office(s) utilizing any method of interconnection
described in Section 4.3 above. Unless otherwise mutually agreed upon, each
Party will use its own transport facilities to provide its trunking as set forth
in Appendix ITR. Each Party will be responsible for the appropriate sizing,
operation, and maintenance of its own transport facilities. If initially
deployed as an End Point Architecture, the deployment architecture may be
migrated or groomed, upon mutual agreement, to a Mid-Point Meet architecture.
4.4.2 Mid-Point Meet. Using the Mid-Point Meet architecture,
the Parties will agree upon a Point of Interconnection (POI). The POI functions
as a demarcation point for each Party. Each Party is responsible to transport
all trunking to its side of the POI utilizing any
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GENERAL TERMS AND CONDITIONS
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SWBT/Birch
method of interconnection described in Section 4.3 above. Each Party is
responsible for the appropriate sizing, operation, and maintenance of the
transport facility and trunking to the POI.
4.4.2.1 A second POI can be established to eliminate
a "single point of failure" when mutually agreed upon. The establishment of the
second POI should not require additional or increased trunking or facilities of
either Party. Trunking from the initial POI will be groomed or augmented to the
second POI upon mutual agreement.
4.4.2.2 When required, based on guidelines
established pursuant to Appendix ITR, either Party may trunk directly to the
other Party's EO. If the Party is virtually or physically collocated to the EO,
then that collocation will be designated a POI. This collocation will be used
for the transport of direct EO trunking, in addition to other uses. The
collocated Party is responsible for the appropriate sizing, operation, and
maintenance of the transport facility. In the instance where the Party is not
collocated, the EO trunk group will be handed off at the original POI and both
Parties will be responsible for the transport facility on their side of that
POI.
4.4.2.3 Unless otherwise mutually agreed upon, when
Mid-Point Meet architecture has been deployed, it will remain as the
architecture of choice during the term of this Agreement.
4.5 TECHNICAL SPECIFICATIONS
4.5.1 Birch and SWBT shall work cooperatively to install and
maintain a reliable network. Birch and SWBT shall exchange appropriate
information (e.g., maintenance contact numbers, network information, information
required to comply with law enforcement and other security agencies of the
Government and such other information as the Parties shall mutually agree) to
achieve this desired reliability.
4.5.2 Birch and SWBT shall work cooperatively to apply sound
network management principles by invoking network management controls to
alleviate or to prevent congestion.
4.5.3 Technical Publications describe the practices,
procedures, specifications and interfaces generally utilized by SWBT, are listed
in Appendix TP attached hereto and incorporated by reference. Appendix TP will
herein assist the Parties in meeting their respective Interconnection
responsibilities. Copies of the publications listed in Appendix TP have been or
shall be provided to Birch by SWBT.
4.6 INTERCONNECTION IN ADDITIONAL METROPOLITAN EXCHANGE AREAS
4.6.1 If Birch decides to offer Telephone Exchange Services in
any Metropolitan Exchange and Areas in which SWBT also offers Telephone Exchange
Services, Birch shall provide written notice to SWBT of the need to establish
Interconnection in such
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SWBT/Birch
Metropolitan Exchange Areas pursuant to this Agreement.
4.6.2 The notice provided in Section 4.6.1 shall include: (i)
the initial Routing Point Birch has designated in the Metropolitan Exchange
Area; (ii) Birch's requested Interconnection Activation Date; and (iii) a
non-binding forecast of Birch's trunking requirements.
4.6.3 Unless otherwise agreed by the Parties, the Parties
shall designate the Wire Center that Birch has identified as its initial Routing
Point in the Metropolitan Exchange Area as Birch Interconnection Wire Center
(IWC) in that Metropolitan Exchange Area and shall designate the SWBT Tandem
Office Wire Center within the Metropolitan Exchange Area nearest to the IWC (as
measured in airline miles utilizing the V&H coordinates method) as the SWBT
Interconnection Wire Center (SIWC) in that Metropolitan Exchange Area.
4.6.4 Unless otherwise agreed by the Parties, the
Interconnection Activation Date in each new Metropolitan Exchange Area shall be
the one-hundred and fiftieth (150th) day following the date on which Birch
delivered notice to SWBT of the need to establish Interconnection pursuant to
Section 4.6.1 above. Within ten (10) business days of SWBT's receipt of Birch's
notice, SWBT and Birch shall confirm their respective Wire Centers to be
Interconnected and the Interconnection Activation Date for the new Metropolitan
Exchange Area by attaching a supplementary schedule to Appendix DCO.
5.0 TRANSMISSION AND ROUTING OF TELEPHONE EXCHANGE SERVICE TRAFFIC PURSUANT
TO SECTION 251(c)(2)(D); 252(d)(1) AND (2); 47 CFR SECTION 51.305(a)(5)
5.1 SCOPE OF TRAFFIC
This Section 5.0 prescribes parameters for Traffic Exchange trunk
groups the Parties shall establish over the Interconnections specified in
Section 4.0. The Parties shall allow for the Traffic Exchange trunk groups
specified in this Section 5.0 and in Appendix ITR for the transmission and
routing of all Local and IntraLATA Toll Traffic between the Parties' respective
Telephone Exchange Service end users.
5.1.1 For purposes of compensation under this Agreement, the
telecommunications traffic traded between Birch and SWBT will be classified as
either Local Traffic, Transit Traffic, Optional Calling Area Traffic), IntraLATA
Interexchange Traffic, InterLATA Interexchange Traffic, or FGA Traffic. The
compensation arrangement for the joint provision of Feature Group A (FGA)
Services is covered in Appendix FGA, attached hereto and incorporated herein by
reference. The Parties agree that, notwithstanding the classification of traffic
under this Agreement, either Party is free to define its own "local" calling
area(s) for purposes of its provision of Telecommunications Services to its end
users.
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SWBT/Birch
5.1.2 Calls originated by one Party's end user and terminated
to the other Party's end user will be classified as "Local Traffic" under this
Agreement if the call: (i) originates and terminates in the same SWBT exchange
area; or (ii) originates and terminates within different SWBT Exchanges that
share a common mandatory local calling area, e.g., mandatory Extended Area
Service (EAS), mandatory Extended Local Calling Service (ELCS), or other like
types of mandatory expanded local calling scopes.
THE PARTIES DISAGREE AS TO WHETHER RECIPROCAL COMPENSATION SHOULD APPLY TO ISP
TRAFFIC AND WHAT LANGUAGE, IF ANY, SHOULD ADDRESS THAT ISSUE.
5.2 RESPONSIBILITIES OF THE PARTIES
5.2.1 Each Party to this Agreement will be responsible for the
accuracy and quality of its data as submitted to the respective Parties
involved.
5.2.2 Each Party will include in the information transmitted
to the other for each call being terminated on the other's network (where
available), the originating Calling Party Number (CPN).
5.2.3 If the percentage of calls passed with CPN is greater
than ninety percent (90%), all calls exchanged without CPN information will be
billed as either Local Traffic or IntraLATA Toll Traffic in direct proportion to
the minutes of use (MOU) of calls exchanged with CPN information. If the
percentage of calls passed with CPN is less than ninety percent (90%), the
Parties shall meet to ascertain the source of the problem and correct it. The
Parties shall work together to rate correctly all calls passed without CPN.
Where CPN is not passed and no valid technical reason exists for the failure to
pass CPN, the Parties will bill switched access.
5.2.4 The type of originating calling number transmitted
depends on the protocol of the trunk signaling used for interconnection.
Traditional toll protocol will be used with Multi-Frequency (MF) signaling, and
ANI will be sent from the originating Party's end office switch to the
terminating Party's tandem or end office switch.
5.2.5 Where one Party is passing CPN but the other party is
not properly receiving information, the Parties will cooperate to rate the
traffic correctly.
5.3 RECIPROCAL COMPENSATION FOR TERMINATION OF LOCAL TRAFFIC
5.3.1 The Compensation set forth below will apply to all Local
Traffic as defined in sub-section 5.1.2 of this Agreement.
5.3.2 Applicability of Rates
i) The rates, terms, conditions in this Section
5.3 apply only to the termination of Local
Traffic, except as explicitly noted.
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SWBT/Birch
ii) The Parties agree to compensate each other
for the termination of Local Traffic on a
minute of use (MOU) basis.
5.3.3 Rate Elements
5.3.3.1 A Tandem Served rate element is applicable to
Tandem Routed Local Traffic on a terminating local MOU basis and includes
compensation for the following sub-elements:
i) Tandem Switching - compensation for the
use of tandem switching functions.
ii) Tandem Transport - compensation for
the transmission facilities between the
local tandem and the end offices
subtending that tandem.
iii) End Office Switching - compensation
for the local EO office switching and line
termination functions necessary to
complete the transmission.
5.3.3.2 An End Office Served rate element applies to
direct-routed Local Traffic on a terminating local MOU basis and includes
compensation for End Office Switching. This includes direct-routed Local Traffic
that terminates to offices that have combined tandem and End Office functions.
5.3.4 Local Traffic Interconnection Rates
Serving Method Prices Per MOU
-------------- --------------
Tandem Served $.00975
End Office Served $.00720
5.4 RECIPROCAL COMPENSATION FOR TRANSIT TRAFFIC
5.4.1 Transit Traffic allows one Party to send traffic to a
third party network through the other Party's tandem. A Transit Traffic rate
element applies to all MOUs between a Party and third party networks that
transit the other Party's tandem switch. The originating Party is responsible
for the appropriate rates unless otherwise specified. The Transit Traffic rate
element is only applicable when calls do not originate with (or terminate to)
the transit Party's end user. The two categories of Transit Traffic are: i)
Local, and ii) Optional Area. The following details when each element applies:
i) The Local Transit Traffic rate element
applies when both the
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SWBT/Birch
originating and terminating end users are
within SWBT local and mandatory exchanges.
ii) The Optional Area Transit Traffic rate
element applies when one end user is in a
SWBT optional exchange which is listed in
Appendix Map and the other end user is within
the SWBT local or mandatory exchanges. The
Parties agree also to apply the Optional Area
Transit rate to traffic terminating to third
party incumbent LECs that share a common
mandatory local calling area with all SWBT
exchanges included in a specific metropolitan
exchange area. ILEC mandatory exchanges are
listed in Appendix Map.
5.4.1.1 The Parties acknowledge that traffic
originated in third party incumbent LEC mandatory exchange areas as
listed in Appendix Map, which is attached hereto and incorporated by
reference, may traverse the SWBT tandem and terminate in other third
party LEC exchange areas. Although direct connections could be used for
this traffic, SWBT agrees to transit this traffic for the rate of
$0.006 per MOU if the other LEC exchanges share a common mandatory
local calling area with all SWBT exchanges included in a specific
exchange area.
Type of Transit Traffic Prices Per MOU
----------------------- --------------
Local Transit $0.003
Optional Area Transit $0.004
5.4.2 All other traffic which transits a tandem shall be
treated as Meet-Point Billing Traffic as described in Section 5.6 below or as
intraLATA interexchange traffic as described in Section 5.5.3 below, unless
otherwise agreed.
5.4.3 If transit traffic is passed by Birch without authority
from a third party, SWBT shall transit such traffic and Birch shall be
responsible for reimbursing SWBT for any terminating compensation SWBT may be
required to pay as a result of transiting such traffic. Birch shall indemnify
SWBT for such terminating compensation. Traffic originated by a third party and
transiting SWBT's network shall be terminated to Birch and Birch shall be
responsible for obtaining compensation from such third party, at its discretion.
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SWBT/Birch
5.5 RECIPROCAL COMPENSATION FOR TERMINATION OF INTRALATA
INTEREXCHANGE TRAFFIC
5.5.1 Optional Calling Area Compensation (OCA) - For the SWBT
optional calling areas listed in Appendix Map, the compensation for termination
of intercompany traffic will be at a rate of $0.0160 per MOU. This terminating
compensation rate applies to all traffic to and from the exchange(s) listed in
Appendix Map, and the associated metropolitan area. This rate is independent of
any retail service arrangement established by either Party.
5.5.2 The Parties also agree to apply the OCA compensation
rate $0.0160 per MOU for traffic terminating to Birch end users in other
incumbent LEC exchange that share a common mandatory local calling area with all
SWBT exchanges that are included in the metropolitan exchange area. Appendix Map
lists the shared mandatory local calling areas. This rate is independent of any
retail service arrangement established by either Party to their respective end
users.
5.5.3 For intrastate intraLATA interexchange service traffic,
compensation for termination of intercompany traffic will be at terminating
access rates for Message Telephone Service (MTS) and originating access rates
for 800 Service, including the Carrier Common Line (CCL) charge, as set forth in
each Party's Intrastate Access Service Tariff. For interstate intraLATA
intercompany service traffic, compensation for termination of intercompany
traffic will be at terminating access rates for MTS and originating access rates
for 800 Service including the CCL charge, as set forth in each Party's
interstate Access Service Tariff.
5.6 COMPENSATION FOR ORIGINATION AND TERMINATION OF SWITCHED
ACCESS SERVICE TRAFFIC TO OR FROM AN IXC (MEET-POINT BILLING
(MPB) ARRANGEMENTS)
5.6.1 For interLATA traffic and for intraLATA traffic (e.g.
dial around) to or from an IXC, compensation will be at access rates as set
forth in each Party's own applicable access tariffs.
5.6.2 The Parties will establish MPB arrangements in order to
provide Switched Access Services to IXCs via SWBT's access tandem switch in
accordance with the MPB guidelines adopted by and contained in the Ordering and
Billing Forum's MECOD and MECAB documents. Birch's Meet Points with SWBT shall
be those identified in Appendix DCO and any supplements thereto.
5.6.3 Billing to IXCs for the Switched Exchange Access
Services jointly provided by the Parties via Meet-Point Billing arrangement
shall be according to the multiple bill/single tariff method. As described in
the MECAB document, each Party will render a bill in accordance with its own
tariff for that portion of the service it provides. For the purpose of this
Agreement, Birch is the Initial Billing Company (IBC) and SWBT is the Subsequent
Billing Company (SBC). The assignment of revenues, by rate element, and the
Meet-Point Billing percentages applicable to this Agreement are set forth in
Appendix DCO. The actual rate values
<PAGE> 22
GENERAL TERMS AND CONDITIONS
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SWBT/Birch
for each element shall be the rates contained in that Party's own applicable
access tariffs.
5.6.4 The Parties will maintain provisions in their respective
federal and state access tariffs, or provisions within the National Exchange
Carrier Association (NECA) Tariff No. 4, or any successor tariff, sufficient to
reflect this MPB arrangement, including MPB percentages.
5.6.5 As detailed in the MECAB document, the Parties will, in
accordance with accepted time intervals, exchange all information necessary to
accurately, reliably and promptly bill third Parties for Switched Access
Services traffic jointly handled by the Parties via the Meet Point Arrangement.
Each Party reserves the right to charge the other Party for the
recording/processing functions it performs pursuant to the terms and conditions
of Appendix Recording attached hereto and incorporated by reference. Information
shall be exchanged in Exchange Message Record (EMR) format, on magnetic tape or
via a mutually acceptable electronic file transfer protocol.
5.6.6 Initially, billing to IXCs for the Switched Access
Services jointly provided by the parties via the MPB arrangement will be
according to the multiple bill single tariff method, as described in the MECAB
document. Each Party will render a bill to the IXC in accordance with its own
tariff for that portion of the service it provides. Each Party will bill its own
network access service rates to the IXC. The residual interconnection charge
(RIC), if any, will be billed by the Party providing the End Office function.
5.6.7 Meet-Point Billing shall also apply to all jointly
provided MOU traffic bearing the 900, 800, and 888 NPAs or any other
non-geographic NPAs which may likewise be designated for such traffic in the
future where the responsible party is an IXC. When SWBT performs 800 database
queries, SWBT will charge the provider of the Signaling Service Point for the
database query in accordance with standard industry practices.
5.6.8 Each Party shall coordinate and exchange the billing
account reference ("BAR") and billing account cross reference ("BACR") numbers
for the Meet Point Billing service. Each Party shall notify the other if the
level of billing or other BAR/BACR elements change, resulting in a new BAR/BACR
number.
5.6.9 Each Party will provide the other with the Exchange
Access detailed usage data within thirty (30) days of the end of the billing
period. SWBT will perform assembly and editing, messages processing and
provision of Access Usage Records in accordance with Appendix Recording,
attached hereto and incorporated by reference. Each Party will provide to the
other the Exchange Access summary usage data within ten (10) working days after
the date that a bill is rendered to the IXC by the initial Party. To the extent
Birch provides SWBT with Access Usage Records, SWBT will compensate Birch on the
same terms as Birch compensates SWBT per Appendix Recording. SWBT acknowledges
that currently there is no charge for Summary Usage Data Records but that such a
charge may be appropriate. At Birch's request, SWBT will negotiate a mutual and
reciprocal charge for provision of Summary Usage Data
<PAGE> 23
GENERAL TERMS AND CONDITIONS
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SWBT/Birch
Records.
5.6.10 Errors may be discovered by Birch, the IXC or SWBT.
Both SWBT and Birch agree to provide the other Party with notification of any
discovered errors within two (2) business days of the discovery.
5.6.11 In the event of a loss of data, both Parties shall
cooperate to reconstruct the lost data within sixty (60) days of notification
and if such reconstruction is not possible, shall accept a reasonable estimate
of the lost data, based upon no more than three (3) to twelve (12) months of
prior usage data, if available.
5.7 BILLING ARRANGEMENTS FOR COMPENSATION FOR TERMINATION OF
INTRALATA, LOCAL, TRANSIT, AND OPTIONAL CALLING AREA TRAFFIC
5.7.1 Other than for traffic described in sub-section 5.6
above, each Party shall deliver monthly settlement statements for terminating
the other Party's traffic based on the following:
5.7.1.1 Each Party shall, unless otherwise agreed,
adhere to the detailed technical descriptions and requirements for the
recording, record exchange, and billing of traffic using the guidelines as set
forth in the Technical Exhibit Settlement Procedures (TESP), previously provided
by SWBT to Birch. Reference to this technical publication is included in
Appendix TP.
(a) Where Birch has direct/high usage trunks to
a SWBT end office with overflow trunking
through a SWBT tandem, billing for the
Tandem Traffic will be calculated as
follows:
Total Originating MOUs Recorded By Birch
Less Direct End Office Terminating MOUs
Recorded By SWBT Equals Total MOUs To Be
Compensated As Tandem Traffic.
(b) Where Birch has direct/high usage trunks to
a third party with overflow trunking
through a SWBT tandem, Birch must
differentiate the originating MOU records
for the Parties to ascertain how many MOUs
should be compensated as Transit Traffic.
If Birch is unable to so differentiate the
originating MOU records, the Parties shall
mutually agree upon a surrogate method for
calculating Transit Traffic charges owed to
SWBT.
5.7.1.2 On a monthly basis, each Party will record
its originating MOU including identification of the originating and terminating
NXX for all intercompany calls.
5.7.1.3 Each Party will transmit the summarized
originating MOU
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GENERAL TERMS AND CONDITIONS
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SWBT/Birch
from Section 5.7.1.1 above to the transiting and/or terminating Party for
subsequent monthly intercompany settlement billing.
5.7.1.4 Bills rendered by either Party will be paid
within thirty (30) days of receipt subject to subsequent audit verification.
5.7.1.5 MOUs for the rates contained herein will be
measured in seconds by call type, and accumulated each billing period into one
(1) minute increments for billing purposes in accordance with industry rounding
standards.
5.7.1.6 Each Party will multiply the tandem routed
and end office routed terminating MOUs by the appropriate rate contained in this
Section to determine the total monthly billing to each Party.
5.8 COMPENSATION FOR "PORTING" OPTIONAL CALLING AREA NUMBERS
In those instances where an Optional Calling Area telephone number is
ported, Birch will compensate SWBT $12.40 monthly, per ported number.
5.9 COMPENSATION FOR PORTED TRAFFIC
The Parties agree that under INP, the net terminating compensation on
calls to INP numbers will be received by each end user's chosen local service
provider as if each call to the end user had been originally addressed by the
caller to a telephone number bearing an NPA-NXX directly assigned to the end
user's chosen local service provider. In order to accomplish this objective
where INP is employed, the Parties shall utilize the process set forth below (or
other mutually developed and agreed to arrangement) whereby the net terminating
compensation on calls subject to INP will be passed from the Party (the
"Performing Party") which performs the INP to the other Party (the "Receiving
Party") for whose end user the INP is provided.
5.9.1 The Parties will treat all ported calls as two separate
call segments in the interLATA and intraLATA access billing and local
interconnection settlement billing systems.
5.9.2 The Performing Party will quantify the total monthly
terminating ported minutes of use to the Receiving Party by each Performing
Party's end office.
5.9.3 The Performing Party will quantify the total monthly
interstate, intrastate, and local minutes of use in those Performing Party's end
offices in accordance with Section 5.9.2 above in order to determine the
jurisdictional percentages. The Receiving party shall have the right to audit
those percentages, not to exceed once per quarter. The Performing Party shall
provide the Receiving Party with detailed summary reporting on a total calling
area basis each month.
5.9.4 Each month, using the percentages developed pursuant to
Section 5.9.3
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SWBT/Birch
above, the Performing Party will calculate by end office the interstate and
intrastate access adjustment amounts from the initial billing amounts under
Section 5.9.1 for subsequent payment to the Receiving party. This adjustment
will be based on the Performing Party's interstate and intrastate access rates
utilizing the applicable rate elements, i.e., carrier common line (CCL),
residual interconnection charge (RIC), local switching (LS), local transport
termination (LTT), and local transport facility (LTF).
5.9.5 Each month the Performing Party will calculate a local
interconnection settlement billing credit related to the interstate and
intrastate (non-local) ported calls from the initial billing amounts under
Section 5.9.1. The billing credit for these non-local calls will be included
with the calculation under Section 5.9.4 for subsequent reimbursement to the
Performing Party on a net payment basis by the Receiving Party.
5.9.6 Each month, the Performing Party will calculate an
Optional EAS settlement additive payable to the Receiving Party applicable to
the nontoll ported volumes remaining after the computations under Sections
5.9.3, 5.9.4, and 5.9.5. This will be based on the monthly relationship of Local
and Optional EAS volumes of nonported Traffic that the Performing Party
originates to the Receiving Party. The EAS settlement additive will be included
with the calculations under 5.9.4 for subsequent reimbursement to the Receiving
Party by the Performing Party.
5.9.7 The net terminating compensation will be reflective of
the following:
(Local Traffic times the Reciprocal Compensation
Rate) plus (Optional EAS traffic times the Optional
EAS compensation rate) plus (Intrastate Access
Traffic times SWBT's applicable intrastate access
rates) plus (Interstate Access Traffic times SWBT's
applicable interstate access rates).
6.0 TRANSMISSION AND ROUTING OF EXCHANGE ACCESS TRAFFIC PURSUANT TO
251(c)(2)
6.1 SCOPE OF TRAFFIC
Section 6.0 prescribes parameters for certain trunk groups ("Access
Toll Connecting Trunks") to be established over the Interconnections specified
in Section 4.0 above, for the transmission and routing of Exchange Access
traffic between Birch Telephone Exchange Service end users and IXCs via a SWBT
access tandem.
6.2 TRUNK GROUP ARCHITECTURE AND TRAFFIC ROUTING
6.2.1 The Parties shall jointly establish Access Toll
Connecting Trunks as described in Appendix ITR, by which will jointly provide
tandem-transported Switched
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SWBT/Birch
Exchange Access Services to IXCs to enable Birch's end users to originate and
terminate traffic to/from such IXCs.
6.2.2 Access Toll Connecting Trunks shall be used solely for
the transmission and routing of Switched Exchange Access to allow Birch end
users to originate and terminate traffic to/from any IXCs which is connected to
a SWBT Access Tandem. In addition, the trunks shall be used to allow Birch's end
users to connect to, or be connected to, the 800 Services of any
Telecommunications Carrier connected to the SWBT Access Tandem.
7.0 TRANSPORT AND TERMINATION OF OTHER TYPES OF TRAFFIC
7.1 INFORMATION SERVICES TRAFFIC
7.1.1 At such time as the Parties agree to route intraLATA
Information Services Traffic to one another, they shall agree to exchange rating
and billing information to effectively allow the Parties to bill their end users
and to charge reciprocal rates.
7.2 LINE STATUS VERIFICATION (LSV)/BUSY LINE INTERRUPT (BLI)
TRAFFIC
7.2.1 Each Party's operator bureau shall accept LSV and BLI
inquiries from the operator bureau of the other Party in order to allow
transparent provision of LSV/BLI Traffic between the Parties' networks. Only one
LSV attempt will be made per end user operator bureau call, and the applicable
charge shall apply whether or not the line is busy at the time of verification
or if the called party agrees to release the line. Only one BLI attempt will be
made per end user operator telephone call, and the applicable charge shall apply
whether or not the line is in use at the to time of interrupt or the called
party releases the line.
7.2.2 Each Party shall route LSV/BLI Traffic inquiries between
the Parties' respective operator bureaus over trunks described in Appendix ITR.
7.3 WIRELESS TRAFFIC
7.3.1 Appendix Wireless, attached hereto and incorporated by
reference sets forth the terms and conditions under which the Parties will
distribute revenue from their joint provision of Wireless Interconnection
Service for mobile to landline traffic terminating through the Parties'
respective wireline switching networks within a LATA. Appendix Wireless shall be
applicable to such traffic until one Party enters into an interconnection
agreement with a CMRS provider at which time Appendix Wireless shall no longer
be applicable between the Parties with respect to such CMRS providers. Once
SWBT's currently pending wireless interconnection tariff amendment becomes
effective Appendix Wireless shall no longer apply for any CMRS providers,
regardless of whether a Party has entered into an interconnection agreement with
any such provider. At such time, intraMTA Wireless Interconnection Service
traffic from mobile to landline destined for a third party shall be treated as
transit traffic; interMTA traffic shall be treated as toll.
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SWBT/Birch
7.3.2 Traffic from landline to mobile where either Party
transits such traffic for the party on whose network the traffic originated
shall be treated as transit traffic under Section 5.4. The originating Party
agrees to indemnify the transiting Party for any claims of compensation that may
be made by the CMRS provider against the transiting Party regarding compensation
for such traffic.
7.3.3 When traffic is originated by either Party to a CMRS
Provider, and the traffic cannot be specifically identified as wireless traffic
for purposes of compensation between SWBT and Birch, the traffic will be rated
either as Local, Optional or Access and the appropriate compensation rate shall
be paid by the originating Party to the transiting Party.
8.0 SIGNALING
8.1 The SWBT signaling publications that describe the practices,
procedures and specifications generally utilized by SWBT for signaling purposes
are listed in Appendix TP which is attached hereto and incorporated herein. A
copy of these publications has been provided to Birch.
8.2 The Parties will cooperate on the exchange of Transactional
Capabilities Application Part (TCAP) messages to facilitate interoperability of
CCS-based features between their respective networks, including all CLASS
features and functions, to the extent each Party offers such features and
functions to its end users. All CCS signaling parameters will be provided
including, without limitation, calling party number (CPN), originating line
information (OLI), calling party category and charge number.
9.0 NUMBERING
9.1 Nothing in this Agreement shall be construed to limit or otherwise
adversely impact in any manner either Party's right to employ or to request and
be assigned any North American Numbering Plan (NANP) number resources including,
but not limited to, central office (NXX) codes pursuant to the Central Office
Code Assignment Guidelines(1), or to establish, by tariff or otherwise,
Exchanges and Rating Points corresponding to such NXX codes. Each Party is
responsible for administering the NXX codes it is assigned.
9.2 At a minimum, in those Metropolitan Exchange Areas where Birch
intends to provide local exchange service, Birch shall obtain a separate NXX
code for each SWBT exchange or group of exchanges that share a common mandatory
calling scope as defined in SWBT tariffs. This will enable Birch and SWBT to
identify the jurisdictional nature of traffic
- --------
1 Last published by the Industry Numbering Committee ("INC") as INC 95-0407-008,
Revision 4/7/95, formerly ICCF 93-0729-010.
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SWBT/Birch
for intercompany compensation until such time as both Parties have implemented
billing and routing capabilities to determine traffic jurisdiction on a basis
other than NXX codes.
9.3 Each Party agrees to make available to the other, up-to-date
listings of its own assigned NPA-NXX codes, along with associated Rating Points
and Exchanges.
9.4 To the extent SWBT serves as Central Office Code Administrator for
a given region, SWBT commits to treat Birch requests for assignment of central
office code(s) in a neutral and nondiscriminatory manner, consistent with
regulatory requirements, and (NXX) Central Office Code Assignment Guidelines.
9.5 Each Party is responsible to program and update its own switches
and network systems to recognize and route traffic to the other Party's assigned
NXX codes at all times. Neither Party shall impose fees or charges on the other
Party for such required programming and updating activities.
9.6 Each Party is responsible to input required data into the Routing
Data Base Systems (RDBS) and into the Bellcore Rating Administrative Data
Systems (BRADS) or other appropriate system(s) necessary to update the Local
Exchange Routing Guide (LERG), unless negotiated otherwise.
9.7 Upon the request of Birch, SWBT shall perform LERG input for Birch.
Birch agrees to pay SWBT the sum of $110 per NXX in exchange for SWBT's input of
required data necessary to update the Local Exchange Routing Guide (LERG) on
Birch's behalf. SWBT shall not be liable for any losses or damages arising out
of errors, defects, or failures associated with the input of Birch's data into
the LERG, except for gross negligence or willful misconduct.
9.8 Neither Party is responsible for notifying the other Parties' end
users of any changes in dialing arrangements, including those due to NPA
exhaust, unless otherwise ordered by the Commission, the FCC, or a court.
9.9 NXX Migration. Where either Party has activated an entire NXX for a
single end user, or activated more than half of an NXX for a single end user
with the remaining numbers in that NXX either reserved for future use or
otherwise unused, if such end user chooses to receive service from the other
Party, the first Party shall cooperate with the second Party to have the entire
NXX reassigned in the LERG (and associated industry databases, routing tables,
etc.) to an End Office operated by the second Party. Such transfer will require
development of a transition process to minimize impact on the Network and on the
end user(s)' service and will be subject to appropriate industry lead times
(currently forty-five (45) days) for movements of NXXs from one switch to
another. The Party to whom the NXX is migrated will pay NXX migration charges of
$10,000 per NXX to the Party formerly assigned the NXX.
10.0 RESALE -- SECTIONS 251(b)(1); 251(c)(4); AND 252(d)(3)
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SWBT/Birch
10.1 AVAILABILITY OF SWBT RETAIL TELECOMMUNICATIONS SERVICES FOR RESALE
Unless and until the Parties shall enter into a resale agreement that
will be an Appendix to this Agreement, SWBT shall offer to Birch for resale at
wholesale rates its Telecommunications Services, as described in Section
251(c)(4) of the Act, pursuant to the terms and conditions of a separate resale
agreement entered into between the Parties and filed with the Commission.
10.2 AVAILABILITY OF BIRCH RETAIL TELECOMMUNICATION SERVICES FOR RESALE
Birch shall make available its Telecommunications Services for resale
at wholesale rates to SWBT in accordance with Section 251(b)(1) of the Act.
11.0 UNBUNDLED NETWORK ELEMENTS -- SECTIONS 251(c)(3)
11.1 Pursuant to Appendix UNE, which is offered to Birch pursuant to
Section 252(i) of the Act and which is based upon the SWBT/ACSI Interconnection
Agreement, and is attached hereto and made a part hereof, SWBT will provide the
Birch access to unbundled network elements for the provision of a
telecommunication service as required by Sections 251 and 252 of the Act and in
compliance with those portions of the FCC's First Report and Order in CC Docket
No. 96-98 that are in effect, subject to any modifications on reconsideration,
stay or appeal, under the terms and conditions described herein and in the
attachments hereto. Birch agrees to provide access to network elements to SWBT
under the same terms, conditions and prices contained herein. Appendix UNE is
expressly subject to Section 31.18, in light of the July 17, 1997 opinion of the
Eighth Circuit Court of Appeals in Case No. 96-3321.
12.0 NOTICE OF CHANGES -- SECTION 251(c)(5)
Nothing in this Agreement shall limit either Party's ability to upgrade
its network through the incorporation of new equipment, new software or
otherwise. If a Party makes a change in its network which it believes will
materially affect the interoperability of its network with the other Party, the
Party making the change shall provide at least ninety (90) days advance written
notice of such change to the other Party. The Party upgrading its network shall
be solely responsible for the cost and effort of accommodating such changes in
its own network. Notwithstanding the foregoing, if either Party establishes
additional tandems in an exchange area in which the other Party offers local
exchange service, that Party will provide the other Party with not less than
one-hundred eighty (180) days' advance notification of same, and with greater
notification when practicable. Both Parties agree to coordinate interconnection
matters consistent with the requirements of the Americans with Disabilities Act
(42 U.S.C. 12101) and with Sections 255 and 256 of the Act. In addition, the
Parties will comply with the Network Disclosure rules adopted by the FCC in CC
Docket No. 96-98, Second Report and Order, as may be amended from time to time.
13.0 COLLOCATION -- SECTION 251(c)(6)
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SWBT/Birch
13.1 SWBT shall provide to Birch Physical Collocation space necessary
for Interconnection (pursuant to Section 4.0 of this Agreement) or access to
Network Elements on an unbundled basis except that SWBT may provide for Virtual
Collocation if SWBT demonstrates that Physical Collocation is not practical for
technical reasons or because of space limitations, as provided in Section
251(c)(6) of the Act. SWBT shall provide such Collocation for the purpose of
Interconnection or access to Network Elements on an unbundled basis, except as
otherwise mutually agreed to in writing by the Parties or as required by the FCC
or the appropriate Commission, subject to applicable federal and state tariffs.
13.2 Except as otherwise ordered by the Commission or the FCC, or as
mutually agreed to by Birch and SWBT, Physical Collocation shall be available at
a Central Office Switch location classified as an end office location, a serving
wire center, a tandem office location, or a remote node that serves as a rating
point for special access or switched access transport.
14.0 NUMBER PORTABILITY -- SECTIONS 251(b)(2)
14.1 The Parties shall provide to each other Interim Number Portability
(INP) on a reciprocal basis. Pursuant to the provisions in the Act, and in
accordance with the terms and conditions outlined in Appendix PORT, which is
attached hereto and incorporated herein, SWBT will provide Birch Interim Number
Portability through Remote Call Forwarding and Direct Inward Dialing technology
until Permanent Number Portability is implemented.
14.2 Once Permanent Number Portability is implemented, either Party may
withdraw, at any time and at its sole discretion, its INP offerings, subject to
thirty (30) day's advance notice to the other Party to allow the seamless and
transparent conversion of INP end user numbers to Permanent Number Portability.
15.0 DIALING PARITY -- SECTION 251(b)(3)
15.1 The Parties shall provide Dialing Parity to each other as required
under Section 251(b)(3) of the Act.
16.0 ACCESS TO RIGHTS-OF-WAY -- SECTION 251(b)(4)
Each Party shall provide the other Party access to its poles, ducts,
rights-of-way and conduits it owns or controls in accordance with Section 224 of
the Act on terms, conditions and prices comparable to those offered to any other
entity pursuant to each Party's applicable tariffs and/or standard agreements.
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SWBT/Birch
17.0 DATABASE ACCESS
SWBT shall provide Birch with nondiscriminatory access to databases and
associated signaling necessary for call routing and completion. When requesting
access to databases not otherwise provided for in this Agreement, or appropriate
interfaces, regardless of whether they constitute Unbundled Network Elements,
Birch will use the Network Element Bona Fide Request process. This process is
defined in Appendix UNE, which is attached hereto and incorporated herein by
reference.
18.0 INTERCEPT REFERRAL ANNOUNCEMENTS
The Party formerly providing service to an end user shall provide a
Basic Referral announcement, reciprocally and free of charge on the abandoned
telephone number. The announcement states that the called number has been
disconnected or changed and provides the end user's new telephone number to the
extent that it is listed.
(a) Basic Intercept Referral Announcements are to be provided on
residential numbers for a minimum of thirty (30) days where
facilities exist and the threat of telephone number exhaustion
is not imminent.
(b) Basic Intercept Referral Announcements for a single line
business end user and the primary listed telephone number for
DID and "Centrex-type" end users, shall be available for a
minimum of thirty (30) days or the life of the White Pages
directory, whichever is greater. If the threat of telephone
number exhaustion becomes imminent for a particular Central
Office, the service provider may reissue a disconnected number
prior to the expiration of the directory, but no earlier than
thirty (30) days after the disconnection of the business
telephone number.
19.0 COORDINATED REPAIR CALLS
To avoid and minimize the potential for end user confusion, each Party
shall inform their respective end users of their respective repair bureau
telephone number(s) to access such bureaus. In the event that either Party
receives a misdirected repair call, the Parties agree to employ the following
procedures for handling such calls:
(a) To the extent the correct provider can be determined,
misdirected repair calls will be referred to the proper
provider of local exchange service in a courteous manner, at
no charge, and the end user will be provided the correct
contact telephone number.
(b) In responding to repair calls, neither Party shall make
disparaging remarks about each other, nor shall they use these
repair calls as the basis for internal referrals or to solicit
customers or to market services, nor shall they initiate
extraneous
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GENERAL TERMS AND CONDITIONS
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SWBT/Birch
communications beyond the direct referral to the correct repair
telephone number.
20.0 OTHER SERVICES
20.1 WHITE PAGES. SWBT will make nondiscriminatory access to White
Pages service available under nondiscriminatory terms and conditions.
20.2 CALLING NAME INFORMATION. The Parties shall provide, on mutually
agreeable and reciprocal terms, each other with access to Calling Name
information of their respective end users whenever one Party initiates a query
from a Signaling System Point for such information associated with a call
terminating to an end user who subscribes to a calling name service. SWBT will
provide Calling Name Information on nondiscriminatory terms and conditions.
20.3 BILLING/COLLECTING/REMITTING. The Parties will jointly agree to
terms and conditions for Billing, Collecting and Remitting for alternated billed
local message as described in Appendix BCR, attached hereto and incorporated by
reference.
20.4 911 AND E911 SERVICES. SWBT will make nondiscriminatory access to
911 and E911 services available under the terms and conditions of Appendix 911,
attached hereto and incorporated by reference.
20.5 DIRECTORY ASSISTANCE (DA). SWBT will provide nondiscriminatory
access to DA services under nondiscriminatory terms and conditions.
20.6 DIRECT ACCESS (DIRECT). SWBT will provide nondiscriminatory access
to subscriber listing information contained in SWBT's Directory Assistance
database on nondiscriminatory terms and conditions..
20.7 OPERATOR SERVICES. SWBT shall provide nondiscriminatory access to
Operator Services on nondiscriminatory terms and conditions.
20.8 CLEARINGHOUSE SERVICES. To the extent requested by Birch, SWBT
shall provide for the tracking of message revenues from certain messages to
facilitate the transfer of revenues between the billing company the earning
company through the Clearinghouse Services provided by SWBT pursuant to the
terms and conditions in Appendix CH, attached hereto and incorporated by
reference.
20.9 HOSTING. At Birch's request, SWBT shall perform hosting
responsibilities for the provision of billable message data and/or access usage
data received from Birch for distribution to the appropriate billing and/or
processing location or for delivery to Birch of such data via SWBT's internal
network or the nationwide CMDS network pursuant to Appendix HOST, attached
hereto and incorporated by reference.
20.10 SIGNALING SYSTEM 7 INTERCONNECTION. At Birch's request, SWBT
shall perform
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SWBT/Birch
SS7 interconnection services for Birch pursuant to Appendix SS7, attached hereto
and incorporated by reference.
21.0 GENERAL RESPONSIBILITIES OF THE PARTIES
21.1 IMPLEMENTATION SCHEDULE. Upon approval by the Commission, the
Parties shall convene an Implementation Team and meet to develop an
Implementation Plan whose purpose is to take all steps necessary to allow the
Parties to exchange traffic as soon as possible consistent with the Parties'
business plans.
21.2 SWBT and Birch shall each use their best efforts to meet the
Interconnection Activation Dates.
21.3 Each Party is individually responsible to provide facilities
within its network that are necessary for routing, transporting, measuring, and
billing traffic from the other Party's network and for delivering such traffic
to the other Party's network in the standard format compatible with SWBT's
network as referenced in Bellcore's BOC Notes on LEC Networks Practice No.
SR-TSV-002275, and to terminate the traffic it receives in that standard format
to the proper address on its network. The Parties are each solely responsible
for participation in and compliance with national network plans, including the
National Network Security Plan and the Emergency Preparedness Plan.
21.4 Neither Party shall use any service related to or use any of the
services or elements provided in this Agreement in any manner that interferes
with other persons in the use of their service, prevents other persons from
using their service, or otherwise impairs the quality of service to other
carriers or to either Party's end users, and either Party may discontinue or
refuse service, but only for so long as the other Party is violating this
provision. Upon such violation, either Party shall provide the other Party
notice of the violation at the earliest practicable time. The Party receiving
notice of such violation may invoke the Dispute Resolution procedures of this
Agreement and such shall not be interrupted until the Dispute Resolution
procedures are completed, provided however, that in the event the Party giving
notice of the violation reasonably believes the alleged violation of this
provision is causing imminent network harm or significantly interfering with the
Party's ability to serve its customers, the Party may discontinue or refuse to
provide service as provided for in this provision but either Party may
thereafter invoke the Dispute Resolution procedures.
21.5 Each Party is solely responsible for the services it provides to
its end users and to other Telecommunications Carriers.
21.6 The Parties shall work cooperatively to minimize fraud associated
with third-number billed calls, calling card calls, and any other services
related to this Agreement.
21.7 At all times during the term of this Agreement, each Party shall
keep and maintain in force at each Party's expense all insurance required by law
(e.g. workers' compensation
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SWBT/Birch
insurance) as well as general liability insurance for personal injury or death
to any one person, property damage resulting from any one incident, automobile
liability with coverage for bodily injury for property damage. Upon request from
the other Party, each Party shall provide to the other Party evidence of such
insurance (which may be provided through a program of self insurance).
21.8 Unless otherwise stated, each Party will render a monthly bill to
the other for service(s) provided hereunder. Remittance in full will be due
within thirty (30) days of that billing date. Interest shall apply on overdue
amounts (other than disputed amounts which are subject to Section 31.12) at the
rate specified in Section 31.12, unless otherwise specified in an applicable
tariff. Each Party reserves the right to net delinquent amounts against amounts
otherwise due the other. In the event a Party disputes an amount paid to the
other Party, and it is determined that the amount was erroneously paid or
billed, the Party receiving such payment shall return the amount along with
interest from the original date of payment.
21.9 SWBT is participating with the industry to develop standardized
methods through the OBF and shall implement ordering and billing
formats/processes consistent with industry guidelines as capabilities are
deployed. Where such guidelines are not available or SWBT decides not to fully
utilize industry guidelines, SWBT will provide Birch with information on its
ordering and billing format/process and requirements during the development of
the Implementation Plan provided for in Section 21.1 or as soon as SWBT is aware
it will not be using industry standard guidelines or such guidelines are not
available.
22.0 EFFECTIVE DATE, TERM, AND TERMINATION
22.1 This Agreement shall be effective ten (10) days after approval by
the Commission when it has determined that the Agreement complies with Sections
251 and 252 of the Act ("Effective Date").
22.2 The initial term of this Agreement shall be one (1) year (the
"Term") which shall commence on the Date of Execution. Absent the receipt by one
Party of written notice from the other Party at least sixty (60) days prior to
the expiration of the Term to the effect that such Party does not intend to
extend the Term of this Agreement, this Agreement shall automatically renew and
remain in full force and effect on and after the expiration of the Term until
terminated by either Party pursuant to Section 22.4, below.
22.3 Either Party may terminate this Agreement in the event that the
other Party fails to perform a material obligation that disrupts the operation
of either Party's network and/or end user service and fails to cure such
material nonperformance within forty-five (45) days after written notice
thereof. The Party receiving notice of such violation may invoke the Dispute
Resolution procedures of this Agreement and such forty-five (45) day period
shall not begin to run until the Dispute Resolution procedures are completed,
provided however, that in the event the Party giving notice of the violation
reasonably believes the alleged violation of the Agreement is causing imminent
network harm or significantly interfering with the Party's ability
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SWBT/Birch
to serve its customers, the Party may discontinue or refuse to provide service
as provided for in Section 21.4 but either Party may thereafter invoke the
Dispute Resolution procedures.
22.4 If pursuant to Section 22.2, above, this Agreement continues in
full force and effect after the expiration of the Term, either Party may
terminate this Agreement ninety (90) days after delivering written notice to the
other Party of its intention to terminate this Agreement, subject to Section
22.6, below. Neither Party shall have any liability to the other Party for
termination of this Agreement pursuant to this Section 22.4 other than its
obligations under Section 22.5, below.
22.5 Upon termination or expiration of this Agreement in accordance
with this Section 22.0:
(a) each Party shall comply immediately with its
obligations set forth in Section 31.6, below; and
(b) each Party shall promptly pay all amounts (including
any late payment charges) owed under this Agreement;
and
(c) each Party 's indemnification obligations shall
survive.
22.6 In the event the Agreement would otherwise terminate (other than
by being superseded by a new agreement between the Parties), Birch may elect to
continue to operate under the terms and conditions of the Agreement (or upon
such other terms and conditions as the Parties may agree) during a holdover
period as herein described ("Holdover Period") provided Birch complies with the
steps detailed herein. Within ten (10) days of receiving notice of termination
from SWBT, Birch shall send a request for negotiations for a new agreement under
Sections 251 and 252 of the Communications Act. Birch may then operate under the
terms of this Agreement until the Parties reach agreement or have completed the
processes provided for in Section 252 of the Communications Act provided that if
the Parties have not reached agreement, Birch must seek arbitration at the
earliest time permitted under Section 252. In any event, SWBT may not terminate
this Agreement while any agreement between the Parties that would supersede this
Agreement is pending approval at the Commission.
22.7 Except as set forth in Section 29.5, below, no remedy set forth in
this Agreement is intended to be exclusive and each and every remedy shall be
cumulative and in addition to any other rights or remedies now or hereafter
existing under applicable law or otherwise.
23.0 DISCLAIMER OF REPRESENTATIONS AND WARRANTIES
EXCEPT AS EXPRESSLY PROVIDED UNDER THIS AGREEMENT, NO PARTY MAKES OR
RECEIVES ANY WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE SERVICES,
FUNCTIONS AND PRODUCTS IT PROVIDES UNDER OR CONTEMPLATED BY THIS AGREEMENT AND
THE PARTIES DISCLAIM THE
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SWBT/Birch
IMPLIED WARRANTIES OF MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE.
ADDITIONALLY, NEITHER SWBT NOR BIRCH ASSUMES RESPONSIBILITY WITH REGARD TO THE
CORRECTNESS OF DATA OR INFORMATION SUPPLIED BY THE OTHER WHEN THIS DATA OR
INFORMATION IS ACCESSED AND USED BY A THIRD PARTY.
24.0 CHANGES IN END USER LOCAL EXCHANGE SERVICE PROVIDER SELECTION
Each Party will abide by applicable state or federal laws and
regulations in obtaining end user authorization prior to changing end user's
local service provider to itself and in assuming responsibility for any
applicable charges as specified in Section 258 (b) of the Telecommunications Act
of 1996. Birch shall make authorization available to SWBT upon request and at no
charge. Only an end user can initiate a challenge to a change in its local
exchange service provider. If an end user notifies SWBT or Birch that the end
user requests local exchange service, the Party receiving such request shall be
free to immediately provide service to such end user. When an end user changes
or withdraws authorization, each Party shall release customer-specific
facilities in accordance with the end user's direction or the end user's
authorized agent. Further, when an end user abandons the premise, SWBT is free
to reclaim the unbundled network element facilities for use by another customer
and is free to issue service orders required to reclaim such facilities.
25.0 SEVERABILITY
25.1 The Parties negotiated the services, arrangements,
Interconnection, terms and conditions of this Agreement by the Parties as a
total arrangement and are intended to be nonseverable, subject only to Section
31.16 of this Agreement.
25.2 In the event the Commission, the FCC, or a court rejects any
portion or determines that any provision of this Agreement is contrary to law,
or is invalid or unenforceable for any reason, the Parties shall continue to be
bound by the terms of this Agreement, insofar as possible, except for the
portion rejected or determined to be unlawful, invalid, or unenforceable. In
such event, the Parties shall negotiate in good faith to replace the rejected,
unlawful, invalid, or unenforceable provision and shall not discontinue service
to the other party during such period if to do so would disrupt existing service
being provided to an end user. Nothing in this Agreement shall be construed as
requiring or permitting either Party to contravene any mandatory requirement of
federal or state law, or any regulations or orders adopted pursuant to such law.
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SWBT/Birch
26.0 INTELLECTUAL PROPERTY
Birch is responsible for obtaining any license or right to use
agreement associated with a Unbundled Network Element purchased from SWBT. SWBT
will provide a list of all known and necessary licenses or right to use
agreements applicable to the subject Network Element(s) within seven days of a
request for such a list by Birch. SWBT agrees to use its best efforts to
facilitate the obtaining of any necessary license or right to use agreement.
SWBT makes no warranties, express or implied, concerning Birch's (or any third
party's) rights with respect to intellectual property (including with
limitation, patent, copyright, and trade secret rights) or contract rights
associated with Birch's rights to interconnect with SWBT's network and to
Unbundled Network Elements.
27.0 INDEMNIFICATION
27.1 Except as otherwise provided herein or in specific appendices,
each Party shall be responsible only for service(s) and facility(ies) which are
provided by that Party, its authorized agents, subcontractors, or others
retained by such parties, and neither Party shall bear any responsibility for
the service(s) and facility(ies) provided by the other Party, its agents,
subcontractors, or others retained by such parties.
27.2 Except as otherwise provided herein or in specific appendices, and
to the extent not prohibited by law and not otherwise controlled by tariff, each
Party (the "Indemnifying Party") shall defend and indemnify the other Party (the
"Indemnified Party") and hold such Indemnified Party harmless against any Loss
to a third party arising out of the negligence or willful misconduct by such
Indemnifying Party, its agents, its end user, contractors, or others retained by
such parties, in connection with the provision of services or functions under
this Agreement.
27.3 In the case of any Loss alleged or made by an end user of either
Party, the Party whose end user alleged or made such Loss (Indemnifying Party)
shall defend and indemnify the other Party (Indemnified Party) against any and
all such claims or Loss by its end users regardless of whether the underlying
service was provided or unbundled element was provisioned by the Indemnified
Party, unless the Loss was caused by the gross negligence or intentional
misconduct of the other (Indemnified) Party.
27.4 Birch agrees to indemnify, defend and hold harmless SWBT from any
Loss arising out of SWBT's provision of 911 services or out of Birch's end
users' use of the 911 service, whether suffered, made, instituted, or asserted
by Birch or its end users, including for any personal injury or death of any
person or persons, except for Loss which is the direct result of SWBT's own
negligence or willful misconduct.
27.5 SWBT shall not be liable for damages to an end user's premises
resulting from the furnishing of unbundled elements, including the installation
and removal of equipment and associated wiring, unless the damage is caused by
SWBT's negligence or willful misconduct.
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SWBT does not guarantee or make any warranty with respect to unbundled elements
when used in an explosive atmosphere.
27.6 Each Party shall be indemnified, defended and held harmless by the
other Party against any Loss arising from a Party's use of services or elements
provided under this Agreement involving: tort claims, including claims for
libel, slander, invasion of privacy, or infringement of copyright arising from a
Party's own communications. This includes, but is not limited to, suits arising
from disclosure of any customer-specific information associated with either the
originating or terminating numbers used to provision unbundled elements provided
hereunder or all other claims arising out of any act or omission in the course
of using services or functions provided pursuant to this Agreement.
27.7 The Indemnifying Party agrees to defend any suit brought against
the Indemnified Party for any Loss identified in this Section or specific
appendices. The Indemnified Party agrees to notify the Indemnifying Party
promptly in writing of any written claims, lawsuits or demands for which the
Indemnifying Party may be responsible under this Agreement. The Indemnified
Party shall cooperate in every reasonable way to facilitate defense or
settlement. The Indemnifying Party shall have the right to control and conduct
the defense and settlement of any action or claim subject to the consultation of
the Indemnified Party. The Indemnifying Party shall not be responsible for any
settlement unless the Indemnifying Party approved such settlement in advance and
agrees to be bound by the settlement agreement.
27.8 Birch acknowledges that its right under this contract to
interconnect with SWBT's network and to unbundle and/or combine SWBT's network
elements (including combining with Birch's network elements) may be subject to
or limited by intellectual property (including, without limitation, patent,
copyright, and trade secret rights) and contract rights of third parties. It is
the sole obligation of Birch to obtain any consents, authorizations, or licenses
under intellectual property or proprietary rights held by third parties that may
be necessary for its use of SWBT network facilities under this Agreement. SWBT
hereby conveys no licenses to use such intellectual property rights and makes no
warranties, express or implied, concerning Birch's (or any third party's) rights
with respect to such intellectual property and contract rights, including,
without limitation, whether such rights will be violated by such interconnection
or unbundling and/or combining or elements (including combining with Birch's
network elements) in SWBT's network. SWBT does not and shall not indemnify or
defend, nor be responsible for indemnifying or defending, Birch for any
liability losses, claims, costs, damages, demand, penalties, or other expenses
arising out of, caused by, or relating to Birch's interconnection with SWBT's
network and unbundling and/or combining SWBT's network elements (including
combining with Birch's network elements).
27.9 Birch agrees to indemnify and hold SWBT harmless from and against
all liability, losses, claims, costs, damages, demand, penalties, or other
expenses, including but not limited to costs of litigation and reasonable
attorneys fees, arising out of, caused by, or relating to any real or potential
claim, demand, or action that Birch's interconnection with SWBT's network, or
Birch's use of services or functions offered hereunder, or unbundling and/or
combining of
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SWBT's network elements (including combining with Birch's network elements)
violates or infringes upon any intellectual property rights of any third party
or constitutes a breach of contract. Birch shall notify SWBT in writing within
ten (10) days after Birch receives notification of any claim or suit subject to
this provision. Birch shall undertake and control the defense and settlement of
any such claim or suit and SWBT shall cooperate fully with Birch in connection
therewith. In no event shall SWBT be liable for any consequential damages or
loss of profits which Birch may suffer arising out of same.
27.10 Birch shall reimburse SWBT for damages to SWBT facilities
utilized to provide unbundled elements hereunder caused by the negligence or
willful act of Birch or resulting from Birch's unauthorized or negligent use of
SWBT facilities, or due to malfunction of any facilities or equipment provided
by other than SWBT. Nothing in the foregoing provision shall be interpreted to
hold Birch liable for another local service provider or end user's actions. Upon
reimbursement for damages, SWBT will cooperate with Birch in prosecuting a claim
against the person causing such damage. Birch shall be subrogated to the right
of recovery by SWBT for the damages to the extent of such payment.
28.0 LIMITATION OF LIABILITY
28.1 Except for indemnity obligations under this Agreement, grossly
negligent or willful misconduct, or except as otherwise provided in specific
appendices, each Party's liability to the other Party for any Loss relating to
or arising out of any negligent act or omission in its performance under this
Agreement, whether in contract or tort, shall not exceed in total the amount
SWBT or Birch has or would have charged the other Party for the affected
service(s) or function(s) which were not performed or were otherwise improperly
performed.
28.2 Except for Losses alleged or made by an end user of either Party,
or except as otherwise provided in specific appendices, in the case of any Loss
alleged or made by a third party arising under the negligence or willful
misconduct of both Parties, each Party shall bear, and its obligation under this
Section shall be limited to, that portion (as mutually agreed to by the Parties)
of the resulting expense caused by its own negligence or willful misconduct or
that of its agents, servants, contractors, or others acting in aid or concert
with it.
28.3 In no event shall either Party have any liability whatsoever to
the other Party for any indirect, special, consequential, incidental, or
punitive damages, including but not limited to, loss of anticipated profits or
revenue or other economic loss in connection with or arising from anything said,
omitted, or done hereunder (collectively, "Consequential Damages"), even if the
Party has been advised of the possibility of such damages; provided that the
foregoing shall not limit a Party's obligation under this Agreement to
indemnify, defend, and hold the other Party harmless against any amounts payable
to a third party, including any losses, costs, fines, penalties, criminal or
civil judgments or settlements, expenses (including attorney's fees) and
Consequential Damages of such third party unless the other Party has engaged in
gross negligence or willful misconduct.
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29.0 LIQUIDATED DAMAGES FOR SPECIFIED ACTIVITIES
29.1 CERTAIN DEFINITONS. When used in this Section 29.0, the following
terms shall have the meanings indicated:
29.1.1 "SPECIFIED PERFORMANCE BREACH" means the failure by
SWBT to meet the Performance Criteria for any Specified Activity for a period of
three (3) consecutive calendar months.
29.1.2 "Specified Activity" means any of the following
activities:
(i) the installation by SWBT of unbundled loops
associated with Birch end user Lines;
(ii) SWBT's provision of Interim Number
Portability; or
(iii) the repair of out of service problems for
Birch ("Out of Service Repairs").
29.1.3 "Performance Criteria" means, with respect to each
calendar month during the term of this Agreement, the performance by SWBT during
such month of each Specified Activity shown below within the time interval shown
in at least eighty percent (80%) of the covered instances:
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SPECIFIED ACTIVITY PERFORMANCE INTERVAL DATE
(i) Birch End User Lines
1-10 Lines per Service Order Five (5) business days from SWBT's Receipt
of valid Service Order
11-20 Lines per Service Order Ten (10) business days from SWBT's Receipt
of valid Service Order
21+ Lines per Service Order To Be Negotiated
(ii) Interim Number Portability
1-10 Numbers per Service Order Five (5) business days from SWBT's Receipt
of valid Service Order
11-20 Numbers per Service Order Ten (10) business days from SWBT's Receipt
of valid Service Order
21+ Numbers per Service Order To be Negotiated
(iii) Out-of-Service Repairs Less than twenty-four (24) hours from SWBT's
Receipt of Notification of Out-of-Service
Condition
29.2 SPECIFIED PERFORMANCE BREACH. In recognition of the: (1) loss of
end user opportunities, revenues and goodwill which Birch might sustain in the
event of a Specified Performance Breach; (2) the uncertainty, in the event of
such a Specified Performance Breach, of Birch having available to it customer
opportunities similar to those opportunities currently available to Birch; and
(3) the difficulty of accurately ascertaining the amount of damages Birch would
sustain in the event of such a Specified Performance Breach, SWBT agrees to pay
Birch, subject to Section 29.4 below, damages as set forth in Section 29.3 below
in the event of the occurrence of a Specified Performance Breach.
29.3 LIQUIDATED DAMAGES. The damages payable by SWBT to Birch as a
result of a Specified Performance Breach shall be $75,000 for each Specified
Performance Breach (collectively, the "Liquidated Damages"). Birch and SWBT
agree and acknowledge that: (a) the Liquidated Damages are not a penalty and
have been determined based upon the facts and circumstances of Birch and SWBT at
the time of the negotiation and entering into of this Agreement, with due regard
given to the performance expectations of each Party; (b) the Liquidated Damages
constitute a reasonable approximation of the damages Birch would sustain if its
damages were readily ascertainable; and (c) Birch shall not be required to
provide any proof of the Liquidated Damages.
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29.4 LIMITATIONS. In no event shall SWBT be liable to pay the
Liquidated Damages if SWBT's failure to meet or exceed any of the Performance
Criteria is caused, directly or indirectly, by a Delaying Event. A "Delaying
Event" means: (a) a failure by Birch to perform any of its obligations set forth
in this Agreement (including, without limitation, the Implementation Schedule
and the Joint Implementation Process); (b) any delay, act or failure to act by
an end user, agent or subcontractor of Birch; (c) any Force Majeure Event; or
(d) for INP, where memory limitations in the switch in the SWBT serving office
cannot accommodate the request. If a Delaying Event: (i) prevents SWBT from
performing a Specified Activity, then such Specified Activity shall be excluded
from the calculation of SWBT's compliance with the Performance Criteria; or (ii)
only suspends SWBT's ability to timely perform the Specified Activity, the
applicable time frame in which SWBT's compliance with the Performance Criteria
is measured shall be extended on an hour-for-hour or day-for-day basis, as
applicable, equal to the duration of the Delaying Event.
29.5 SOLE REMEDY. The Liquidated Damages shall be the sole and
exclusive remedy of Birch for SWBT's breach of the Performance Criteria or a
Specified Performance Breach as described in this Section 29.0 and shall be in
lieu of any other damages or credit Birch might otherwise seek for such breach
of the Performance Criteria or a Specified Performance Breach through any claim
or suit brought under any contract or tariff.
29.6 RECORDS. SWBT shall maintain complete and accurate records, on a
monthly basis, of its performance under this Agreement of each Specified
Activity and its compliance with the Performance Criteria. SWBT shall provide to
Birch such records in a self-reporting format on a monthly basis.
Notwithstanding Section 31.6.1, below, the Parties agree that such records shall
be deemed "Proprietary Information" under Section 31.6, below.
30.0 REGULATORY APPROVAL
30.1 The Parties understand and agree that this Agreement will be filed
with the Commission and may thereafter be filed with the FCC. The Parties
believe in good faith and agree that the services to be provided under this
Agreement satisfy the specifically mentioned sections of the Act and are in the
public interest. Each Party covenants and agrees to fully support approval of
this Agreement by the Commission or the FCC under Section 252 of the Act without
modification.
31.0 MISCELLANEOUS
31.1 AUTHORIZATION
(a) SWBT is a corporation duly organized, validly
existing and in good standing under the laws of the
State of Missouri and has full power and authority
to execute and deliver this Agreement and to perform
the obligations hereunder.
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SWBT/Birch
(b) Birch is a corporation duly organized, validly
existing and in good standing under the laws of the
State of Delaware and has full power and authority
to execute and deliver this Agreement and to perform
its obligations hereunder.
31.2 COMPLIANCE AND CERTIFICATION
31.2.1 Each Party is responsible for its own compliance with
all federal, state, and local laws, rules, and regulations applicable to its
performance under this Agreement.
31.2.2 Each Party warrants that it has obtained all necessary
state certification required in those states in which it has ordered services
from the other Party pursuant to this Agreement. Upon request by any state
governmental entity, each Party shall provide proof of certification.
31.2.3 Each Party represents and warrants that any equipment,
facilities or services provided to the other Party under this Agreement comply
with the Communications Law Enforcement Act ("CALEA"). Each Party shall
indemnify and hold the other Party harmless from any and all penalties imposed
upon the other Party for such noncompliance and shall at the non-compliant
Party's sole cost and expense, modify or replace any equipment, facilities or
services provided to the other Party under this Agreement to ensure that such
equipment, facilities and services fully comply with CALEA.
31.3 LAW ENFORCEMENT
31.3.1 SWBT and Birch shall handle law enforcement requests as
follows:
(a) Intercept Devices: Local and federal law
enforcement agencies periodically request
information or assistance from local telephone
service providers. When either Party receives a
request associated with an end user of the
other Party, it shall refer such request to the
Party that serves such end user, unless the
request directs the receiving Party to attach a
pen register, trap-and-trace or form of
intercept on the Party's facilities, in which
case that Party shall comply with any valid
request.
(b) Subpoenas: If a Party receives a subpoena for
information concerning an end user the Party
knows to be an end user of the other Party, it
shall refer the subpoena to the requesting
party with an indication that the other Party
is the responsible company, unless the subpoena
requests records for a period of time during
which the Party was the end user's service
provider, in which case the Party will respond
to any valid request.
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SWBT/Birch
(c) Emergencies: If a Party receives a request
from a law enforcement agency for temporary
number change, temporary disconnect, or
one-way denial of outbound calls for an end
user of the other Party by the receiving
Party's switch, that Party will comply with
an valid emergency request. However, neither
Party shall be held liable for any claims or
damages arising from compliance with such
requests on behalf of the other Party's end
user and the Party serving such end user
agrees to indemnify and hold the other Party
harmless against any and all such claims.
31.4 INDEPENDENT CONTRACTOR. Each Party and each Party's contractor
shall be solely responsible for the withholding or payment of all applicable
federal, state and local income taxes, social security taxes and other payroll
taxes with respect to its employees, as well as any taxes, contributions or
other obligations imposed by applicable state unemployment or workers'
compensation acts. Each Party has sole authority and responsibility to hire,
fire and otherwise control its employees.
31.5 FORCE MAJEURE. Neither Party shall be liable for any delay or
failure in performance of any part of this Agreement from any cause beyond its
control and without its fault or negligence including, without limitation, acts
of nature, acts of civil or military authority, government regulations,
embargoes, epidemics, terrorist acts, riots, insurrections, fires, explosions,
earthquakes, nuclear accidents, floods, work stoppages, equipment failure, cable
cuts, power blackouts, volcanic action, other major environmental disturbances,
unusually severe weather conditions, inability to secure products or services of
other persons or transportation facilities or acts or omissions of
transportation carriers In such event, the Party affected shall, upon giving
prompt notice to the other Party, be excused from such performance on a
day-to-day basis to the extent of such interference (and the other Party shall
likewise be excused from performance of its obligations on a day-for-day basis
to the extent such Party's obligations related to the performance so interfered
with). The affected Party shall use its best efforts to avoid or remove the
cause of nonperformance and both Parties shall proceed to perform with dispatch
once the causes are removed or cease.
31.6 CONFIDENTIALITY
31.6.1 All information, including but not limited to specifications, microfilm,
photocopies, magnetic disks, magnetic tapes, drawings, sketches, models,
samples, tools, technical information, data, employee records, maps, financial
reports, and market data; (i) furnished by one Party (the "Disclosing Party") to
the other Party (the "Receiving Party") dealing with customer-specific,
facility-specific, or usage-specific information, other than customer
information communicated for the purpose of publication or directory database
inclusion, 911, call processing, billing or settlement or as otherwise mutually
agreed upon; or (ii) in written, graphic, electromagnetic, or other tangible
form and marked at the time of delivery as "Confidential" or "Proprietary;" or
(iii) communicated orally and declared to the Receiving Party as confidential or
proprietary prior to disclosure of the actual Proprietary Information to enable
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SWBT/Birch
the Receiving Party to determine whether it will accept such Proprietary
Information and, if accepted, confirmed by written notice given to the Receiving
Party within ten (10) days after declaration to be "Confidential" or
"Proprietary" (collectively referred to as "Proprietary Information"), shall
remain the property of the Disclosing Party.
31.6.2 (a) If a Receiving Party desires to disclose or provide
to the Commission or the FCC any Proprietary Information of the Disclosing
Party, such Receiving Party shall, prior to and as a condition of such
disclosure, (i) provide the Disclosing Party with written notice and the form of
such proposed disclosure as soon as possible but in any event early enough to
allow the Disclosing Party to protect its interests in the Proprietary
Information to be disclosed and (ii) attempt to obtain in accordance with the
applicable procedures of the intended recipient of such Proprietary Information
an order, appropriate protective relief or other reliable assurance that
confidential treatment shall be accorded to such Proprietary Information.
(b) If a Receiving Party is required by any
governmental authority or by applicable law to disclose any Proprietary
Information, then such Receiving Party shall provide the Disclosing Party with
written notice of such requirement as soon as possible and prior to such
disclosure. The Disclosing Party may then either seek appropriate protective
relief from all or part of such requirement or, if it fails to successfully do
so, it shall be deemed to have waived the Receiving Party's compliance with this
Section 31.6 with respect to all or part of such requirement. The Receiving
Party shall use all commercially reasonable efforts to cooperate with the
Disclosing Party in attempting to obtain any protective relief which such
Disclosing Party chooses to obtain.
31.6.3 Upon request by the Disclosing Party, the Receiving
Party shall return all tangible copies of Proprietary Information, whether
written, graphic, or otherwise. In the event of the expiration or termination of
this Agreement for any reason whatsoever, each Party shall return to the other
Party or destroy all Proprietary Information and other documents, work papers
and other material (including all copies thereof) obtained from the other Party
in connection with this Agreement.
31.6.4 Each Party shall keep all the other Party's Proprietary
Information confidential in the same manner in which it keeps its own
Proprietary Information confidential, and shall use the other Party's
Proprietary Information only for performing the covenants contained in the
Agreement and shall disclose such Proprietary Information only to those
employees, contractors, agents or Affiliates who have a need to know. Neither
Party shall use the other Party's Proprietary Information for any other purpose
except upon such terms and conditions as may be agreed upon between the Parties
in writing.
31.6.5 Unless otherwise agreed, the obligations of
confidentiality and nonuse set forth in the Agreement do not apply to such
Proprietary Information that:
(a) was at the time of receipt, already known to the
Receiving Party, free of
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any obligation to keep confidential and evidenced by
written records prepared prior to delivery by the
Disclosing Party;
(b) is, or becomes publicly known through no wrongful act
of the receiving Party;
(c) is rightfully received from a third person having no
direct or indirect secrecy or confidentiality
obligation to the Disclosing Party with respect to
such information;
(d) is independently developed by an employee, agent, or
contractor of the Receiving Party which individual is
not involved in any manner with the provision of
services pursuant to the Agreement and does not have
any direct or indirect access to the Proprietary
Information;
(e) is disclosed to a third person by the Disclosing
Party without similar restrictions on such third
person's rights;
(f) is approved for release by written authorization of
the Disclosing Party;
(g) is required to be made public by the Receiving Party
pursuant to applicable law or regulation provided
that the Receiving party shall provide the Disclosing
Party with written notice of such requirement as soon
as possible and prior to such disclosure. The
Disclosing Party may then either seek appropriate
protective relief from all or part of such
requirement or, if it fails to successfully do so, it
shall be deemed to have waived the Receiving Party's
compliance with Section 31.6 with respect to all or
part of such requirement. The Receiving Party shall
use all commercially reasonable efforts to cooperate
with the Disclosing Party in attempting to obtain any
protective relief which such Disclosing Party chooses
to obtain. Notwithstanding the foregoing, SWBT shall
be entitled to disclose confidential information on a
confidential basis to regulatory agencies upon
request for information as to SWBT's activities under
the Act.
31.6.6 Notwithstanding any other provision of this Agreement,
the Proprietary Information provisions of this Agreement shall apply to all
information furnished by either Party to the other in furtherance of the purpose
of this Agreement, even if furnished before the date of this Agreement.
31.6.7 Pursuant to Section 222(b) of the Act, both parties
agree to limit their use of Proprietary Information received from the other to
the permitted purposed identified in the Act.
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31.7 GOVERNING LAW. For all claims under this Agreement that are based
upon issues within the jurisdiction (primary or otherwise) of the FCC, the
exclusive jurisdiction and remedy for all such claims shall be as provided for
by the FCC and the Act. For all claims under this Agreement that are based upon
issues within the jurisdiction (primary or otherwise) of the Commission, the
exclusive jurisdiction for all such claims shall be with such Commission, and
the exclusive remedy for such claims shall be as provided for by such
Commission. In all other respects, this Agreement shall be governed by the
domestic laws of the State of Missouri without reference to conflict of law
provisions.
31.8 TAXES
31.8.1 Each Party purchasing services hereunder shall pay or
otherwise be responsible for all federal, state, or local sales, use, excise,
gross receipts, transaction or similar taxes, fees, or surcharges (hereinafter
"Tax") imposed on or with respect to the services provided by or to such Party,
except for any Tax on either party's corporate existence, status, or income.
Whenever possible, these amounts shall be billed as a separate item on the
invoice. To the extent a sale is claimed to be for resale tax exemption, the
purchasing party shall furnish the providing party a proper resale tax exemption
certificate as authorized or required by statute or regulation by the
jurisdiction providing said resale tax exemption. Failure to timely provide said
resale tax exemption certificate will result in no exemption being available to
the purchasing Party until such time as the purchasing Party presents a valid
certification. Failure to timely provide said resale tax exemption certificate
will result in no exemption being available to the purchasing Party until such
time as the purchasing Party presents a valid certificate.
31.8.2 With respect to any purchase of services, facilities or
other arrangements, if any Tax is required or permitted by applicable law to be
collected from the purchasing party by the providing party, then: (i) the
providing party shall bill the purchasing party for such Tax; (ii) the
purchasing party shall remit such Tax to the providing party; and (iii) the
providing party shall remit such collected Tax to the applicable taxing
authority.
31.8.3 With respect to any purchase hereunder of services,
facilities or arrangements that are resold to a third party, if any Tax is
imposed by applicable law on the end user in connection with any such purchase,
then: (i) the purchasing party shall be required to impose and/or collect such
Tax from the end user; and (ii) the purchasing party shall remit such Tax to the
applicable taxing authority. The purchasing party agrees to indemnify and hold
harmless the providing party on an after-tax basis for any costs incurred by the
providing party as a result of actions taken by the applicable taxing authority
to collect the Tax from the providing party due to the failure of the purchasing
party to pay or collect and remit such tax to such authority.
31.8.4 If the providing party fails to collect any Tax as
required herein, then, as between the providing party and the purchasing party:
(i) the purchasing party shall remain liable for such uncollected Tax; and (ii)
the providing party shall be liable for any penalty and
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interest assessed with respect to such uncollected Tax by such authority.
However, if the purchasing party fails to pay any taxes properly billed, then,
as between the providing party and the purchasing party, the purchasing party
will be solely responsible for payment of the taxes, penalty and interest.
31.8.5 If the purchasing party fails to impose and/or collect
any Tax from end users as required herein, then, as between the providing party
and the purchasing party, the purchasing party shall remain liable for such
uncollected Tax and any interest and penalty assessed thereon with respect to
the uncollected Tax by the applicable taxing authority. With respect to any Tax
that the purchasing party has agreed to pay or impose on and/or collect from end
users, the purchasing party agrees to indemnify and hold harmless the providing
party on an after-tax basis for any costs incurred by the providing party as a
result of actions taken by the applicable taxing authority to collect the Tax
from the providing Party due to the failure of the purchasing party to pay or
collect and remit such Tax to such authority.
31.9 NON-ASSIGNMENT. Each Party covenants that, if it sells or
otherwise transfers to a third party its Telephone Exchange and Exchange Access
network facilities within any territory within which SWBT is an Incumbent Local
Exchange Carrier as of the date of this Agreement (the SWBT Territory), or any
portion thereof, to a third party, it will require as a condition of such
transfer that the transferee agree to be bound by this Agreement with respect to
services provided over the transferred facilities. Except as provided in this
paragraph, neither Party may assign or transfer (whether by operation of law or
otherwise) this Agreement (or any rights or obligations hereunder) to a third
party without the prior written consent of the other Party; provided that each
Party may assign this Agreement to a corporate Affiliate or an entity under its
common control or an entity acquiring all or substantially all of its assets or
equity by providing prompt written notice to the other Party of such assignment
or transfer. Any attempted assignment or transfer that is not permitted is void
ab initio. Without limiting the generality of the foregoing, this Agreement
shall be binding upon and shall inure to the benefit of the Parties' respective
successors and assigns.
31.10 NON-WAIVER. Failure of either Party to insist on performance of
any term or condition of this Agreement or to exercise any right or privilege
hereunder shall not be construed as a continuing or future waiver of such term,
condition, right or privilege.
31.11 AUDITS. Each Party to this Agreement will be responsible for the
accuracy and quality of its data as submitted to the respective Parties
involved.
31.11.1 Upon reasonable written notice and at its own expense,
each Party or its authorized representative (providing such authorized
representative does not have a conflict of interest related to other matters
before one of the Parties) shall have the right to conduct an audit of the other
Party to give assurances of compliance with the provisions of this Agreement;
provided, that neither Party may request more than two (2) such audits within
any twelve (12) month period. This includes on-site audits at the other Party's
or the Party's vendor locations. Each Party, whether or not in connection with
an audit, shall maintain reasonable records for a
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minimum of twenty-four (24) months and provide the other Party with reasonable
access to such information as is necessary to determine amounts receivable or
payable under this Agreement. Each Party's right to access information for audit
purposes is limited to data not in excess of twenty-four (24) months in age.
31.12 DISPUTED AMOUNTS
31.12.1 No claims, under this Agreement or its Appendices,
shall be brought for disputed amounts more than twenty-four (24) months from the
date of occurrence which gives rise to the dispute. Under this Section 30.12, if
any portion of an amount due to a Party (the "Billing Party") under this
Agreement is subject to a bona fide dispute between the Parties, the Party
billed (the "Non-Paying Party") shall within sixty (60) days of its receipt of
the invoice containing such disputed amount give notice to the Billing Party of
the amounts it disputes ("Disputed Amounts") and include in such notice the
specific details and reasons for disputing each item. The Non-Paying Party shall
pay when due: (i) all undisputed amounts to the Billing Party; and (ii) all
Disputed Amounts to Billing Party.
31.12.2 If the Parties are unable to resolve the issues
related to the Disputed Amounts in the normal course of business within sixty
(60) days after delivery to the Billing Party of notice of the Disputed Amounts,
each of the Parties shall appoint a designated representative who has authority
to settle the dispute and who is at a higher level of management than the
persons with direct responsibility for administration of this Agreement. The
designated representatives shall meet as often as they reasonably deem necessary
in order to discuss the dispute and negotiate in good faith in an effort to
resolve such dispute.
31.12.3 If the Parties are unable to resolve issues related to
the Disputed Amounts within forty-five (45) days after the Parties' appointment
of designated representatives pursuant to Section 31.12.2, above, then either
Party may file a complaint with the Commission to resolve such issues or proceed
with any other remedy pursuant to law or equity.
31.12.4 The Parties agree that all negotiations pursuant to
this Section 31.12 shall remain confidential and shall be treated as compromise
and settlement negotiations for purposes of the Federal Rules of Evidence and
state rules of evidence.
31.12.5 Any undisputed amounts not paid when due shall accrue
interest from the date such amounts were due at the lesser of: (i) one and
one-half percent (1-1/2%) per month; or (ii) the highest rate of interest that
may be charged under applicable law.
31.13 DISPUTE RESOLUTION
31.13.1 No claims shall be brought for disputes arising under
this Agreement or its Appendices more than twenty-four (24) months from the date
of occurrence which gives rise to the dispute.
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31.13.2 For disputes other than disputed amounts under this
Agreement or its Appendices, each Party shall appoint a designated
representative as set forth in Section 31.12.2, above, and if unable to resolve
the dispute, proceed as set forth in Section 31.12.3, above.
31.14 NOTICES. Any notice to a Party required or permitted under this
Agreement shall be in writing and shall be deemed to have been received on the
date of service if served personally; on the date receipt is acknowledged in
writing by the recipient if delivered by regular mail; or on the date stated on
the receipt if delivered by certified or registered mail or by a courier service
that obtains a written receipt. Notice may also be provided by facsimile, which
shall be effective on the next Business Day following the date of transmission
as reflected in the facsimile confirmation sheet. "Business Day" shall mean
Monday through Friday, SWBT/Birch holidays excepted. Any notice shall be
delivered using one of the alternatives mentioned in this Section and shall be
directed to the applicable address indicated below or such address as the Party
to be notified has designated by giving notice in compliance with this Section,
except that notices to a Party's twenty-four (24) hour contact number shall be
by telephone and/or facsimile and shall be deemed to have been received on the
date transmitted.
<TABLE>
<CAPTION>
NOTICE CONTACT Birch CONTACT SWBT CONTACT
- ------------------------------------------- ---------------------------- -------------------------------------
<S> <C> <C>
NAME/TITLE Greg Lawhon/ Senior Vice General Manager-CPAT
President
- ------------------------------------------- ---------------------------- -------------------------------------
STREET ADDRESS 1000 Walnut, One Bell Plaza, Room 525
Suite 1220
- ------------------------------------------- ---------------------------- -------------------------------------
CITY, STATE, ZIP CODE Kansas City, MO 64106 Dallas, TX 75202
- ------------------------------------------- ---------------------------- -------------------------------------
TELEPHONE NUMBER 1-888-842-7590 1-214-464-8145
- ------------------------------------------- ---------------------------- -------------------------------------
FAX NUMBER 1-888-842-7595 1-214-464-1486
- ------------------------------------------- ---------------------------- -------------------------------------
- ------------------------------------------- ----------------------------- -------------------------------------
24-HOUR NETWORK MGMT CONTACT Birch CONTACT SWBT CONTACT
- ------------------------------------------- ----------------------------- -------------------------------------
NAME/TITLE Michael Griess/Vice NSMC Control
President Engineering
- ------------------------------------------- ----------------------------- -------------------------------------
TELEPHONE NUMBER 1-888-842-7590 1-800-792-2662
- ------------------------------------------- ----------------------------- -------------------------------------
FAX NUMBER 1-888-842-7595
- ------------------------------------------- ----------------------------- -------------------------------------
</TABLE>
31.15 PUBLICITY AND USE OF TRADEMARKS OR SERVICE MARKS.
31.15.1 The Parties agree not to use in any advertising or
sales promotion, press releases, or other publicity matters any endorsements,
direct or indirect quotes, or pictures implying endorsement by the other Party
or any of its employees without such Party's prior written approval. The Parties
will submit to each other for written approval, prior to publication,
all publicity matters that mention or display one another's name and/or
marks or contain
<PAGE> 51
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SWBT/Birch
language from which a connection to said name and/or marks may be inferred or
implied; the Party to whom a request is directed shall respond promptly. Nothing
herein, however, shall be construed as preventing either Party from publicly
stating the fact that it has executed this Agreement with the other Party.
31.15.2 Nothing in this Agreement shall grant, suggest, or
imply any authority for one Party to use the name, trademarks, service marks, or
trade names of the other for commercial purposes without prior written approval.
31.16 SECTION 252(i) OBLIGATIONS. If either Party enters into an
agreement (the "Other Agreement") approved by the Commission or FCC pursuant to
Section 252 of the Act (regardless of whether the approved agreement was
negotiated or arbitrated) which provides for the provision of arrangements
covered in this Agreement to another requesting Telecommunications Carrier,
including an Affiliate, such Party shall make available to the other Party such
arrangements upon the same rates, terms and conditions as those provided in the
Other Agreement. At its sole option, the other Party may avail itself of either:
(i) the Other Agreement in its entirety; or (ii) the prices, terms and
conditions of the Other Agreement that directly relate to any of the following
duties as a whole:
(a) Interconnection (including compensation for delivery of
traffic and intellectual property rights)
(b) Exchange Access
(c) Unbundled Network Elements (including intellectual property
rights)
(d) Resale
(e) Collocation
(f) Number Portability
(g) Database Access
(h) Access to Rights of Way
(i) Operator Services
(j) Directory Assistance
31.17 JOINT WORK PRODUCT. This Agreement is the joint work product of
the Parties and has been negotiated by the Parties and their respective counsel
and shall be fairly interpreted in accordance with its terms and, in the event
of any ambiguities, no inferences shall be drawn against either Party.
<PAGE> 52
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31.18 INTERVENING LAW. This Agreement is entered into as a result of
both private negotiation between the Parties and the incorporation of some of
the results of arbitration by the Commission. If the actions of Missouri or
federal legislative bodies, courts, or regulatory agencies of competent
jurisdiction invalidate, modify, or stay the enforcement of laws or regulations
that were the basis for a provision of the contract, the affected provision
shall be invalidated, modified, or stayed, consistent with the action of the
legislative body, court, or regulatory agency. In such event, the Parties shall
expend diligent efforts to arrive at an agreement respecting the modifications
to the Agreement. If negotiations fail, disputes between the Parties concerning
the interpretation of the actions required or provisions affected by such
governmental actions shall be resolved pursuant to the dispute resolution
process provided for in this Agreement.
31.19 NO THIRD PARTY BENEFICIARIES; DISCLAIMER OF AGENCY. This
Agreement is for the sole benefit of the Parties and their permitted assigns,
and nothing herein express or implied shall create or be construed to create any
third-party beneficiary rights hereunder. Except for provisions herein expressly
authorizing a Party to act for another, nothing in this Agreement shall
constitute a Party as a legal representative or agent of the other Party, nor
shall a Party have the right or authority to assume, create or incur any
liability or any obligation of any kind, express or implied, against or in the
name or on behalf of the other Party unless otherwise expressly permitted by
such other Party. Except as otherwise expressly provided in this Agreement, no
Party undertakes to perform any obligation of the other Party, whether
regulatory or contractual, or to assume any responsibility for the management of
the other Party's business.
31.20 NO LICENSE. No license under patents, copyrights or any other
intellectual property right (other than the limited license to use consistent
with the terms, conditions and restrictions of this Agreement) is granted by
either Party or shall be implied or arise by estoppel with respect to any
transactions contemplated under this Agreement.
31.21 SURVIVAL. The Parties' obligations under this Agreement which by
their nature are intended to continue beyond the termination or expiration of
this Agreement shall survive the termination or expiration of this Agreement.
31.23 SCOPE OF AGREEMENT. This Agreement is intended to describe and
enable specific Interconnection and compensation arrangements between the
Parties. This Agreement does not obligate either Party to provide arrangements
not specifically provided herein.
31.24 ENTIRE AGREEMENT. The terms contained in this Agreement and any
Schedules, Exhibits, Appendices, tariffs and other documents or instruments
referred to herein, which are incorporated into this Agreement by this
reference, constitute the entire agreement between the Parties with respect to
the subject matter hereof, superseding all prior understandings, proposals and
other communications, oral or written. Neither Party shall be bound by any
preprinted terms additional to or different from those in this Agreement that
may appear subsequently in the other Party's form documents, purchase orders,
quotations, acknowledgments, invoices or other
<PAGE> 53
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SWBT/Birch
communications. This Agreement may only be modified by a writing signed by an
officer of each Party.
<PAGE> 54
GENERAL TERMS AND CONDITIONS
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
as of this 21st day of May, 1998.
BIRCH TELECOM OF MISSOURI, INC. SOUTHWESTERN BELL TELEPHONE COMPANY*
Signature:/s/Gregory C. Lawhon Signature:/s/Sandy Kinney
_____________________________________ ______________________________________
Name: Gregory C. Lawhon Name: Sandy Kinney
_____________________________________ ______________________________________
(Print or Type) (Print or Type)
Title: Senior Vice President Title: VP-GM Industry Markets.
_____________________________________ ______________________________________
(Print or Type) (Print or Type)
*SWBT is entering into this agreement in compliance with the Commission's
Arbitration Order of April 23, 1997. SWBT's execution of this agreement is
expressly subject to its Application For Rehearing and right of appeal.
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APPENDIX UNE
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APPENDIX: UNBUNDLED NETWORK ELEMENTS (UNE)
I. Introduction
A. This Appendix Unbundled Network Elements to the
Agreement sets forth the unbundled Network Elements
that SWBT agrees to offer to LSP. The specific terms
and conditions that apply to the unbundled Network
Elements are described below. The prices for Network
Elements are set forth in UNE Attachment 1.
II. General Terms and Conditions
A. SWBT and LSP may agree to connect LSP's facilities
with SWBT's network at any technically feasible point
for access to unbundled Network Elements for the
provision by LSP of a Telecommunications Service.
Unbundled Network Elements may not be connected to or
combined with SWBT access services or other SWBT
tariffed service offerings with the exception of
tariffed collocation services.
B. SWBT will provide LSP access to the unbundled Network
Elements to permit LSP to combine such Network
Elements with other Network Elements obtained from
SWBT or with network components provided by itself to
provide Telecommunications Services to its customers,
provided that such combination is technically
feasible and would not impair the ability of other
carriers to obtain access to other unbundled network
elements or to interconnect with SWBT's network. When
LSP recombines unbundled elements to create services
identical to SWBT's retail offerings, the prices
charged to LSP for the rebundled services will be
computed as SWBT's retail prices less the wholesale
discount and offered under the same terms and
conditions, including the application of access
charges. In this situation, "identical" means that
LSP is not using its own switching or other
functionality or capability together with the
unbundled elements in order to produce its service.
Any request by LSP for SWBT to provide a type of
connection between Network Elements that is not
currently being utilized in the SWBT network and is
not otherwise provided for under this Agreement will
be made in accordance with the Bona Fide Request
process described in Section III.
C. When LSP orders unbundled network elements, SWBT will
perform the functions necessary to combine unbundled
network elements in any manner required by law, even
if those elements are not ordinarily combined in
SWBT's network, provided that such combination is a)
technically feasible; and b) would not impair the
ability of other carriers to obtain access to
unbundled network elements or to interconnect with
SWBT's network as provided in F.C.C. Rule 51.315 (c).
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D. LSP is responsible to designate each network element
being ordered from SWBT and how those network
elements are to be combined. Where multiple SWBT
network elements are to be combined, LSP must
designate the order in which the elements are to be
connected. Where SWBT network elements are to be
connected to another carrier's network element(s),
LSP will designate how SWBT network element(s) are to
be connected (i.e., cross connected) to the network
element(s) of the other telecommunications carrier.
E. Various subsections below list the Network Elements
that LSP and SWBT have identified as of the Effective
Date of this Agreement. SWBT will upon request of LSP
and to the extent technically feasible provide LSP
additional Network Elements or modifications to
previously identified Network Elements for the
provision by LSP of a Telecommunications Service.
Such requests will be processed in accordance with
the Bona Fide Request process.
F. Unbundled Network Elements are provided under this
Agreement over such routes, technologies, and
facilities as SWBT may elect at its own discretion.
If LSP requests special facilities, equipment or
routing of unbundled network elements such requests
will be handled under the Bona Fide Request process.
G. Subject to the terms herein, SWBT is responsible only
for the installation, operation and maintenance of
the Network Elements it provides. SWBT is not
otherwise responsible for the Telecommunications
Services provided by LSP through the use of those
elements.
H. Where unbundled elements provided to LSP are
dedicated to a single end user, if such elements are
for any reason disconnected they will be made
available to SWBT for future provisioning needs.
Provided that the replacement end user does not
subscribe to LSP's local services, LSP agrees to
relinquish control of any such unbundled element
concurrent with the disconnection of a LSPs end
user's service.
I. LSP will, upon request of SWBT, and to the extent
technically feasible, provide SWBT access to Network
Elements for the provision of SWBT's
telecommunications services in accordance with the
Act. Such request by SWBT will be processed in
accordance with the Bona Fide Request process.
J. Each Party is solely responsible for the services it
provides to its end users and to other
Telecommunications Carriers.
K. Network elements provided to LSP under the provisions
of this Appendix will remain the property of SWBT.
L. SWBT will provide network elements where technically
feasible. Where facilities
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and equipment are not available, LSP may request and,
to the extent required by law and as SWBT may
otherwise agree, SWBT may provide Network Elements
through the Bona Fide Request process.
M. The elements provided pursuant to this Agreement will
be available to SWBT at times mutually agreed upon in
order to permit SWBT to make tests and adjustments
appropriate for maintaining the services in
satisfactory operating condition. No credit will be
allowed for any interruptions involved during such
tests and adjustments.
N. LSP's use of any SWBT network element, or of its own
equipment or facilities in conjunction with any SWBT
network element, will not materially interfere with
or impair service over any facilities of SWBT, its
affiliated companies or its connecting and concurring
carriers involved in its services, cause damage to
their plant, impair the privacy of any communications
carried over their facilities or create hazards to
the employees of any of them or the public. Upon
reasonable written notice and opportunity to cure,
SWBT may discontinue or refuse service if LSP
violates this provision.
O. When converting a SWBT account to an LSP account or
between LSP and another provider, the conversion will
be handled as a disconnect of the current account and
a new connect of the unbundled network elements
account.
P. Performance of Network Elements
1. Each Network Element provided by SWBT to LSP
will meet applicable regulatory performance
standards and be at least equal in quality
and performance as that which SWBT provides
to itself. Each Network Element will be
provided in accordance with SWBT Technical
Publications or other written descriptions,
if any, as changed from time to time by SWBT
at its sole discretion. LSP may request, and
SWBT will provide, to the extent technically
feasible, Network Elements that are superior
or lesser in quality than SWBT provides to
itself and such service will be requested
pursuant to the Bona Fide Request process.
2. Nothing in this Agreement will limit either
Party's ability to modify its network
through the incorporation of new equipment,
new software or otherwise. Each Party will
provide the other Party written notice of
any such upgrades in its network which will
materially impact the other Party's service
consistent with the timelines established by
the FCC in the Second Report and Order, CC
Docket 96-98. LSP will be solely
responsible, at its own expense, for the
overall design of its telecommunications
services and for any redesigning or
rearrangement of its telecommunications
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services which may be required because of
changes in facilities, operations or
procedure of SWBT, minimum network
protection criteria, or operating or
maintenance characteristics of the
facilities.
Q. LSP will connect equipment and facilities that are
compatible with the SWBT Network Elements and will
use Network Elements in accordance with the
applicable regulatory standards and requirements
referenced in paragraph II, Q.
III. Bona Fide Request
A. Sections IV - XI below identify specific unbundled
Network Elements and provide the terms and conditions
on which SWBT will offer them to LSP. Any request by
LSP for an additional unbundled Network Element, or
modifications to previously identified Network
Elements, both to the extent technically feasible,
will be considered under this Bona Fide Request
process. Where facilities and equipment are not
available, LSP may request and SWBT may agree to
provide, Network Elements through the Bona Fide
Request process.
B. Each Party will promptly consider and analyze access
to new unbundled Network Element with the submission
of a Network Element Bona Fide Request hereunder. The
Network Element Bona Fide Request process set forth
herein does not apply to those services requested
pursuant to Report & Order and Notice of Proposed
Rulemaking 91-141 (rel. Oct. 19, 1992) paragraph 259
and n. 603 and subsequent rulings.
C. A Network Element Bona Fide Request will be submitted
in writing and will include a technical description
of each requested Network Element, the date when
interconnection is requested and the projected
quantity of interconnection points ordered with a
demand forecast.
D. The requesting Party may cancel a Network Element
Bona Fide Request at any time, but will pay the other
Party's reasonable and demonstrable costs of
processing and/or implementing the Network Element
Bona Fide Request up to the date of cancellation.
E. Within ten (10) business days of its receipt, the
receiving Party will acknowledge receipt of the
Network Element Bona Fide Request.
F. Except under extraordinary circumstances, within
thirty (30) days of its receipt of a Network Element
Bona Fide Request, the receiving Party will provide
to the requesting Party a preliminary analysis of
such Network Element Bona Fide Request. The
preliminary analysis will confirm that the receiving
Party will offer access to the Network Element or
will provide a detailed explanation that access to
the Network Element is not technically feasible
and/or that the request does not qualify as a Network
Element that is required to be provided under the
Act.
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G. If the receiving Party determines that the Network
Element Bona Fide Request is technically feasible and
otherwise qualifies under the Act, it will promptly
proceed with developing the Network Element Bona Fide
Request upon receipt of written authorization from
the requesting Party. When it receives such
authorization, the receiving Party shall promptly
develop the requested services, determine their
availability, calculate the applicable prices and
establish installation intervals.
H. Unless the Parties otherwise agree, the Network
Element Bona Fide Request must be priced in
accordance with Section 252(d)(1) of the Act.
I. As soon as feasible, but not more than ninety (90)
days after its receipt of authorization to proceed
with developing the Network Element Bona Fide
Request, the receiving Party shall provide to the
requesting Party a Network Element Bona Fide Request
quote which will include, at a minimum, a description
of each Network Element, the availability, the
applicable rates and the installation intervals.
J. Within thirty (30) days of its receipt of the Network
Element Bona Fide Request quote, the requesting Party
must either confirm its order for the Network Element
Bona Fide Request pursuant to the Network Element
Bona Fide Request quote or seek arbitration by the
Commission pursuant to Section 252 of the Act.
K. If a Party to a Network Element Bona Fide Request
believes that the other Party is not requesting,
negotiating or processing the Network Element Bona
Fide Request in good faith, or disputes a
determination, or price or cost quote, such Party may
seek mediation or arbitration by the Commission
pursuant to Section 252 of the Act.
IV. Network Interface Device
A. The Network Interface Device (NID) element is a
cross-connect used to connect LSP provided loop
facilities to inside wiring. The fundamental function
of the NID is to establish the official network
demarcation point between a carrier and its end-user
customer. The NID contains the appropriate and
accessible connection points or posts to which the
service provider and the end-user customer each make
its connections.
B. LSP may connect to the customer's inside wire at the
SWBT NID, as is, at no charge. Any repairs, upgrade
and rearrangements required by LSP will be performed
by SWBT based on time and material charges.
C. LSP will provide its own NID and will interface to
the customer's premises wiring through connections in
the customer chamber of the SWBT NID.
D. With respect to multiple dwelling units or
multiple-unit business premises, LSP will provide its
own NID, will connect directly with the customer's
inside wire and will not require any connection to
the SWBT NID, unless such
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premises are served by "single subscriber" type NIDs.
E. The SWBT NIDs that LSP uses under this Appendix will
be those installed by SWBT to serve its customers.
F. LSP will not attach to or disconnect SWBT's ground.
LSP will not cut or disconnect SWBT's loop from its
protector. LSP will not cut any other leads in the
NID. LSP will protect all disconnected leads with
plastic sleeves and will store them within the NID
enclosure. LSP will tighten all screws or lugs
loosened by LSP in the NID's enclosure and replace
all protective covers.
V. Local Loop
A. A "loop" is a dedicated transmission facility
(including use of SWBT NID) between a distribution
frame (or its equivalent) in a SWBT central office
and an end user customer premises.
B. SWBT will provide at the rates, terms, and conditions
set out in UNE Attachment 1 the following:
1. The 2-Wire analog loop supports analog voice
frequency, voice band services with loop
start signaling within the frequency
spectrum of approximately 300 Hz and 3000
Hz.
2. SWBT will offer 5 dB conditioning on a
2-wire analog loop as the standard
conditioning option available.
3. The 4-Wire analog loop provides a
non-signaling voice band frequency spectrum
of approximately 300 Hz to 3000 Hz. The
4-Wire analog loop provides separate
transmit and receive paths.
4. The 2-Wire digital loop 160 Kbps supports
Basic Rate ISDN (BRI) digital exchange
services. The 2-Wire digital loop 160 Kbps
supports usable bandwidth up to 160 Kbps.
5. The 4-Wire digital loop 1.544 Mbps will
support DS1 service including Primary Rate
ISDN (PRI). The 4-wire digital loop 1.544
Mbps supports usable bandwidth up to 1.544
Mbps.
C. If LSP requests one or more unbundled Loops serviced by
Integrated Digital Loop Carrier (IDLC) or Remote Switching
technology, SWBT will, where available, move the requested
unbundled Loop(s) to a spare, existing physical or a universal
digital loop carrier unbundled Loop at no additional charge to
LSP. If, however, no spare unbundled Loop is available, SWBT
will within two business days, excluding weekends and
holidays, of LSP's request notify LSP of the lack of available
facilities. LSP may request alternative arrangements through
the Bona Fide Request process.
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D. In addition to any liability provisions in this agreement,
SWBT does not guarantee or make any warranty with respect to
unbundled loops when used in an explosive atmosphere. LSP will
indemnify, defend and hold SWBT harmless from any and all
claims by any person relating to LSP's or LSP end user's use
of unbundled loops in an explosive atmosphere.
VI. Local Switching
A. The local switching element encompasses line-side and trunk
side facilities plus the features, functions and capabilities
of the switch. The line side facilities include the connection
between a loop termination at, for example, a main
distribution frame (MDF), and a switch line card. Trunk-side
facilities include the connection between, for example, trunk
termination at a trunk-side cross-connect panel and a trunk
card. The local switching element includes all features,
functions, and capabilities of the local switch, including but
not limited to the basic switching function of connecting
lines to lines, lines to trunks, trunks to lines and trunks to
trunks. It also includes the same basic capabilities that are
available to SWBT customers, such as a telephone number, dial
tone, signaling and access to 911, operator services,
directory assistance, and features and functions necessary to
provide services required by law. In addition, the local
switching element includes all vertical features that the
switch is capable of providing, including custom calling,
CLASS features, and centrex-like capabilities.
B. SWBT will route InterLATA calls as defined by the exchange
dialing plan via the existing PIC process when LSP uses Local
Switching elements. Until such time that the commission
mandates intraLATA presubscription, SWBT will route IntraLATA
Toll calls as defined by the exchange dialing plan when LSP
uses Local Switching elements and will provide intraLATA toll
to LSP without other usage sensitive charges. When the
commission mandates intraLATA presubscription, SWBT will route
IntraLATA Toll calls to the presubscribed carrier.
C. When LSP requests Unbundled Common Transport, SWBT's Local
Switching element will route local calls on SWBT's common
network to the appropriate trunk or lines for call origination
or termination.
D. SWBT will provide the Local Switching element only with
standard central office treatments (e.g., busy tones, vacant
codes, fast busy, etc.), supervision and announcements.
E. SWBT will control congestion points such as those caused by
radio station call-ins, and network routing abnormalities,
using capabilities such as Automatic Call Gapping, Automatic
Code Gapping, Automatic Congestion Control, and Network
Routing Overflow. LSP agrees to respond to SWBT's
notifications regarding network congestion.
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F. SWBT will provide switch interfaces to adjuncts in the same
manner it provides them to itself. LSP requests for use of
SWBT adjuncts will be handled through the Bona Fide Request
process.
G. SWBT will allow LSP to designate the features and functions
that are activated on a particular unbundled switch port to
the extent such features and functions are available or as may
be requested by the Bona Fide Request process.
H. Switch Ports
1. Analog Line Port: A line side switch connection
available in either a loop or ground start signaling
configuration used primarily for Switched voice
communications.
2. Analog (DID) Trunk Port: A trunk side switch
connection used for voice communications via customer
premises equipment primarily provided by a Private
Branch Exchange (PBX) switch.
3. ISDN Basic Rate Interface (BRI) Port: A line side
switch connection which provides ISDN Basic Rate
Interface (BRI) based capabilities.
4. ISDN Primary Rate Interface (PRI) Trunk Side Port:
trunk side switch connection which provides Primary
Rate Interface (PRI) ISDN Exchange Service
capabilities.
VII. Tandem Switching
A. Tandem Switching is defined as: (1) trunk-connect facilities,
including but not limited to the connection between trunk
termination at a cross-connect panel and a switch trunk card,
(2) the basic switching function of connecting trunks to
trunks; and (3) all technically feasible functions that are
centralized in tandem switches (as distinguished from separate
end-office switches), including but not limited to call
recording, the routing of calls to operator services, and
signaling conversion features.
B. Tandem Switching will provide trunk to trunk connections for
local calls between two end offices.
C. To the extent all signaling is SS7, Tandem Switching will
preserve CLASS/LASS features and Caller ID as traffic is
processed. Additional signaling information and requirements
are provided in Section IX.
VIII. Interoffice Transport
A. The Interoffice Transport network element is defined as SWBT
interoffice transmission facilities dedicated to a particular
customer or carrier, or shared by more than one customer or
carrier, that provide telecommunications between wire centers
owned by SWBT or LSP, or between switches owned by SWBT or
LSP. Interoffice Transport includes
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Common Transport and Dedicated Transport.
B. SWBT will be responsible for the engineering, provisioning,
and maintenance of the underlying equipment and facilities
that are used to provide Interoffice Transport.
C. Common Transport - Common Transport is a shared interoffice
transmission path between SWBT switches. Common Transport will
permit LSP to connect its Unbundled Local Switching element
purchased from SWBT with Common Transport to transport the
local call dialed by the Unbundled Local Switching element to
its destination through the use of SWBT's common transport
network. Common Transport will also permit LSP to utilize
SWBT's common network between a SWBT tandem and a SWBT end
office.
D. Dedicated Transport
1. Dedicated Transport is an interoffice transmission
path dedicated to a particular customer or carrier
that provides telecommunications between wire centers
owned by SWBT or LSP, or between switches owned by
SWBT or LSP.
2. SWBT will offer Dedicated Transport as a circuit
(e.g., DS1, DS3) dedicated to LSP.
3. SWBT will provide Dedicated Transport at the
following speeds: DS1 (1.544 Mbps), DS3 (45 Mbps),
OC3 (155.520 Mbps) and OC12 (622.080 Mbps). In
addition, SWBT offers OC48 (2488.320 Mbps) bandwidth
as an option for interoffice capacity.
4. In addition to any liability provisions in this
agreement, SWBT does not guarantee or make any
warranty with respect to entrance facilities when
used in an explosive atmosphere. LSP will indemnify,
defend and hold SWBT harmless from any and all claims
by any person relating to LSP's or LSP end user's use
of unbundled loops in an explosive atmosphere.
E. Digital Cross-Connect System (DCS) - SWBT will offer Digital
Cross-Connect System (DCS) in conjunction with the unbundled
dedicated transport element with the same functionality that
is offered to interexchange carriers.
IX. Signaling Networks and Call-Related Databases - Signaling Networks and
Call-Related Databases are Network Elements that include Signaling Link
Transport, Signaling Transfer Points, and Service Control Points and
Call-Related Databases. Access to SWBT's signaling network and call
related databases will be provided as described in the following
Appendices: SS7, LIDB Validation, LIDB, CNAM, 800, and AIN.
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X. Operations Support Systems Functions
A. Operations Support Systems Functions consist of pre-ordering,
ordering, provisioning, maintenance and repair, and billing
functions supported by SWBT's databases and information.
B. SWBT will provide LSP access to its Operations Support Systems
Functions as outlined in Appendix OSS.
XI. Cross Connects
A. The cross connect is the media between the SWBT distribution
frame and an LSP designated collocation or to other SWBT
unbundled network elements purchased by LSP.
B. SWBT offers a choice of four types of cross connects with each
unbundled loop type. The applicable cross connects are as
follows:
1. Cross connect to DCS
2. Cross connect to MUX
3. Cross connect to Collocation
4. Cross connect to Switch Port
C. Cross connects must also be ordered with Unbundled Dedicated
Transport (UDT).
1. The LSP must specify when placing an UDT order, in
what order the unbundled network components are to be
connected.
2. The Cross Connect being requested must have a
compatible interface to each of the elements which
the Cross Connect is joining together.
3. The following cross connects are available with UDT:
a) Voice Grade 2-Wire
b) Voice Grade 4-Wire
c) DS0 - DCS to Collocation
d) DS1
e) DS3
f) OC3
g) OC12
h) OC48
XII. Pricing
A. Attached hereto as UNE Attachment 1 is a schedule which
reflects the prices at which SWBT agrees to furnish Unbundled
Network Elements to LSP. LSP agrees to compensate SWBT for
unbundled Network elements at the rates contained in this
Appendix. Unbundled Network Elements are available from SWBT
on a per unbundled Network Element basis at prices as
contained in UNE Attachment 1.
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B. For any rate element and/or charge contained in or referenced
to in this Appendix that are not listed in the attached UNE
Attachment 1, including Bona Fide Requests, SWBT and LSP will
negotiate prices.
C. Unless otherwise stated, SWBT will render a monthly bill for
Network Elements provided hereunder. Remittance in full will
be due within thirty (30) days of receipt of invoice. Interest
will apply on overdue amounts.
D. SWBT will recover the costs of modifying its outside plant
facilities for LSP space requirements. These costs will be
recovered via the Bona Fide Request process described herein.
E. Recurring Charges
1. Unless otherwise listed below, where Rates are shown
as monthly, a month will be defined as a calendar
month. The minimum term for each monthly rated
element will be one (1) month. After the initial
month, billing will be on the basis of whole or
fractional months used. The minimum service period
for elements provided under the Bona Fide Request
process may be longer.
2. When an unbundled network element with a minimum
period greater than one month is discontinued prior
to the expiration of the minimum period, the
applicable charge will be the total monthly charges,
for the remainder of the minimum period.
3. The minimum service period for unbundled dedicated
transport element at the DS3 level and above is 12
months.
4. Where rates will be based on minutes of use, usage
will be accumulated at the end office or other
measurement point without any per call rounding and
total minutes by end office are rounded to the next
higher minute. LSP will pay for all usage on such
calls including those that are not completed due to
busy or don't answer conditions.
5. Where rates are based on miles, the mileage will be
calculated on the airline distance involved between
the locations. To determine the rate to be billed,
SWBT will first compute the mileage using the V&H
coordinates method, as set forth in the National
Exchange Carrier Association, Inc. Tariff F.C.C. No
4. When the calculation results in a fraction of a
mile, SWBT will round up to the next whole mile
before determining the mileage and applying rates.
F. Non-Recurring Charges
1. There are non-recurring charges for the first
connection on an LSP order as well as separate
non-recurring charges for each additional connection
associated with the same LSP order at the same LSP
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specified premises. When converting the SWBT account
to LSP or between LSP and another local service
provider, the conversion will be handled as a
disconnect of the current account and a new connect
of the unbundled network element account.
2. LSP will pay a non-recurring charge when an LSP adds
or removes a signaling point code. The rates and
charges for Signaling Point Code(s) are identified in
the Pricing Schedule. This charge also applies to
point code information provided by LSP allowing other
telecommunications providers to use LSP's SS7
signaling network.
3. A service order processing (Service Order) charge
will apply for each service order issued by SWBT to
process a request for installation, disconnection,
rearrangement, changes to or record orders for
unbundled elements.
G. Maintenance of Elements
1. The network elements provided by SWBT pursuant to
this Appendix will be maintained by SWBT. LSP or
others may not rearrange, move, disconnect, remove or
attempt to repair any facilities provided by SWBT,
other than by connection or disconnection to any
interface means used, except with the written consent
of SWBT.
2. If trouble occurs with unbundled network elements
provided by SWBT, LSP will first determine whether
the trouble is in LSP's own equipment and/or
facilities or those of the end user. If LSP
determines the trouble is in SWBT's equipment and/or
facilities, LSP will issue a trouble report to SWBT.
3. LSP will pay Time and Material charges when LSP
reports a suspected failure of a network element and
SWBT dispatches personnel to the end user's premises
or a SWBT central office and trouble was not caused
by SWBT's facilities or equipment. Time and Material
charges will include all technicians dispatched,
including technicians dispatched to other locations
for purposes of testing.
4. LSP will pay Time and Material charges when SWBT
dispatches personnel and the trouble is in equipment
or communications systems provided an entity by other
than SWBT or in detariffed CPE provided by SWBT,
unless covered under a separate maintenance
agreement.
5. If LSP issues a trouble report allowing SWBT access
to the end user's premises and SWBT personnel are
dispatched but denied access to the premises, then
Time and Material charges will apply for the period
of time that SWBT personnel are dispatched.
Subsequently, if SWBT personnel are allowed access to
the premises, the charges
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discussed herein will still apply.
6. Time and Material charges apply on a first and
additional basis for each half hour or fraction
thereof. If more than one technician is dispatched in
conjunction with the same trouble report, the total
time for all technicians dispatched will be
aggregated prior to the distribution of time between
the "First Half Hour or Fraction Thereof" and "Each
Additional Half Hour or Fraction Thereof" rate
categories. Basic Time is work related efforts of
SWBT performed during normally scheduled working
hours on a normally scheduled work day. Overtime is
work related efforts of SWBT performed on a normally
scheduled work day, but outside of normally scheduled
working hours. Premium Time is work related efforts
of SWBT performed other than on a normally scheduled
work day.
7. If LSP requests or approves a SWBT technician to
perform services in excess of or not otherwise
contemplated by the nonrecurring charges herein, LSP
will pay for any additional work to perform such
services, including requests for installation or
conversion outside of normally scheduled working
hours.
H. Other Pricing Terms and Conditions for Unbundled Local
Switching (ULS)
1. When LSP purchases Unbundled Local Switching, SWBT
will provide LSP the vertical features that the
switch is equipped to provide, as part of the usage
charges associated with ULS. LSP will pay
non-recurring charges to activate such features in
association with a particular ULS Port type. There
are two levels of non-recurring charges. The first
will apply when the features are activated at the
same time the port is established. A different
non-recurring charge applies when the feature is
activated subsequent to initial installation of the
port.
2. When the NXX of the telephone number provided to LSP
is one associated with an optional EAS arrangement,
LSP will pay a flat-rated monthly port additive for
the optional EAS toll package(s) inherent in the
telephone number.
3. LSP will pay the Toll Free Database query rate for
each query received and processed by SWBT's database.
When applicable, the charge for the additional
features (Designated 10-Digit Translation, Call
Validation and Call Handling and Destination) are per
query and in addition to the Toll Free Database query
charge, and will also be paid by LSP.
4. Use of SWBT's SS7 signaling network will be provided
for unbundled local switching as set forth in
Appendix SS7. LSP does not
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separately order SS7 under this method. LSP will be
charged for the use of the SWBT SS7 network on a per
call basis when the SS7 network is used in
conjunction with unbundled local switching.
5. With Unbundled Local Switching, SWBT will make
available features that require resources outside the
switch, but LSP will pay additional charges (e.g.,
TCAP messages, SS7 Signaling, database queries, etc.)
for such features.
6. Associated with Unbundled Local Switching, LSP will
pay a non-recurring and a monthly recurring charge
for the establishment of common block for a
particular end user served by LSP. LSP will also pay
a non-recurring charge for activation of features
associated with individual ports and for subsequent
changes to features associated with individual ports.
These non-recurring charges are separate from the
service charges for service order processing.
I. Temporary Rate Structure for Unbundled Local Switching (ULS)
1. LSP will be charged a per minute rate for each local
call generated by an unbundled local ULS port, when
both the originating and terminating telephone number
are in the same 11 digit CLLI end office. When LSP
uses a ULS port to initiate a call to a terminating
number associated with a different 11 digit CLLI, LSP
will pay a rate per minute for ULS plus a rate per
minute for UCT transport. The parties agree to assume
that SWBT's common transport network is used in this
latter case.
J. Standard Interim Structure for ULS
1. Intra Switch Calls - On calls originating and
terminating in the same switch:
a) LSP will pay ULS-O for a call originating
from an ULS line or trunk port that
terminates to a SWBT end user service line
or any other unbundled line or trunk port
which is connected to the same end office
switch.
b) LSP will pay ULS-O for a centrex-like ULS
intercom call in which the LSP's user dials
from one centrex-like station to another
centrex-like station in the same common
block defined system.
c) SWBT will not bill ULS-T for calls
originating from a bundled line port (a line
port associated with the provision of resold
local service by SWBT, or associated with
local service to SWBT end user) and
terminating to a ULS Port.
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d) SWBT will not bill ULS-T for Intraswitch
calls originated by an unbundled ULS port
even when the line to which the call is
terminated is another ULS Port.
2. Inter Switch Calls - On calls not originating and
terminating in the same switch:
a) When a call originates from an ULS Port and
is routed to SWBT's public network via a
connection to UCT, ULS-O will apply. Charges
for UCT as outlined below will also apply.
b) When an InterLATA toll call is initiated
from an ULS port it will be routed to the
end user PIC choice. ULS-O usage charges
will apply to LSP in such event.
c) Until IntraLATA Dialing Parity, all
intraLATA toll calls initiated by ULS Port
will be routed to SWBT. The LSP will pay
IntraLATA toll rates for such calls. No ULS
usage charges will apply to LSP in such
event.
d) After IntraLATA Dialing Parity, IntraLATA
toll calls from ULS Ports will be routed to
the end user PIC choice. ULS-O charges will
apply.
e) When LSP uses ULS Ports to initiate an
800/888 call, SWBT will perform the
appropriate database query and route the
call to the indicated IXC. No ULS-O charges
will apply to the ULS Port.
f) When a call that has been routed through
SWBT's public network terminates to an ULS
Port, from another of the same LSP's ports
or another LSP's ULS Port, ULS-T charges
will apply.
g) When a call that has been routed through
SWBT's public network terminates to an ULS
Port, from the bundled local exchange
service of SWBT, ULS-T charges will apply.
h) When a call terminates to an ULS Port via
terminating access services provided by SWBT
(e.g., FGA, FGB, FGD, WATS etc.) SWBT will
assess ULS-T charges.
i) When a call which has been routed from
another network terminates to an ULS line
port, ULS-T charges will apply.
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APPENDIX OSS-UNE
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APPENDIX OSS
ACCESS TO OPERATIONS SUPPORT SYSTEMS FUNCTIONS
1. GENERAL CONDITIONS
1.1 This Appendix sets forth the terms and conditions under which SWBT
provides nondiscriminatory access to SWBT's operations support systems (OSS)
"functions" to LSP for pre-ordering, ordering, provisioning, maintenance /
repair, and billing. Such functions will be made available for Unbundled Network
Elements ("UNE") in a non-discriminatory manner under the terms of the governing
Interconnection Agreement and appendices.
1.2 The functions, for UNE, will be accessible via electronic
interface, as described herein, where such functions are available. Manual
access will be available to all pre-ordering, ordering, provisioning, and
billing functions via the Local Service Provider Service Center (LSPSC). LSP may
continue to use manual processes through SWBT to access OSS functions even after
the electronic interfaces are available. The provisions governing use of
electronic interfaces will apply at such time as LSP begins to utilize the
electronic interface. LSP may utilize this manual process for some OSS functions
and electronic access for other OSS functions. Repair and maintenance functions
are available via manual handling by the Local Service Provider Center (LSPC).
1.3 LSP agrees to utilize SWBT electronic interfaces, as SWBT defines
in its requirements, only for the functions described herein for the purposes of
establishing and maintaining UNE. In addition, LSP agrees that such use will
comply with the summary of SWBT's Operating Practice No. 113, Protection of
Electronic Information, titled Competitive Local Exchange Carrier Security
Policies and Guidelines.
1.4 LSP's access to OSS functions will only be utilized to view an end
user's Customer Proprietary Network Information (CPNI) under the conditions set
forth and agreed to in Exhibit A and elsewhere in this Appendix. Once the
conditions set forth in Appendix A are satisfied, LSP may access the end user's
CPNI pursuant to this Section 1.4.
1.5 By utilizing electronic interfaces to access OSS functions, LSP
acknowledges and agrees to perform accurate and correct ordering as it relates
to SWBT billing functions per the terms of this Agreement. Further, LSP
recognizes that such billing functions for conversion orders require viewing
CPNI as described in Section 1.4 above. All exception handling must be requested
manually from the LSC.
1.6 In areas where UNE order functions are not available via an
electronic interface for the pre-order, ordering and provisioning processes,
SWBT and LSP will utilize manual processes until such time as the transactions
can be electronically transmitted, subject to Section 1.2.
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1.7 SWBT will provide a help desk function for electronic system
interfaces.
1.8 SWBT and LSP will jointly establish interface contingency and
disaster recovery plans for the pre-order, ordering and provisioning of UNE.
1.9 SWBT reserves the right to modify or discontinue the use of any
system or interface as it deems appropriate.
1.10 If LSP elects to utilize electronic interfaces based upon industry
guidelines for UNE, SWBT and LSP agree to work together to implement the
guidelines issued by the Order and Billing Forum (OBF) and the
Telecommunications Industry Forum (TCIF) and conform to uniform industry
guidelines for electronic interfaces for pre-order, ordering, and provisioning.
Neither Party waives its rights in such forums in the implementation of the
standards. To achieve industry standard system functionality as quickly as
possible, the Parties acknowledge that SWBT may deploy these interfaces with
requirements developed in advance of industry guidelines. Thus, subsequent
modifications may be necessary to comply with emerging standards. LSP and SWBT
are individually responsible for evaluating the risk of developing their
respective systems in advance of standards and agree to support their own system
modifications to comply with new requirements.
1.11 If LSP determines that additional or different information and/or
functionality is required or desirable with respect to any of the OSS functions,
whether covered by this Agreement or otherwise, LSP shall request such
information or functionality from SWBT.
1.12 To the extent LSP feels that outages affecting its access to OSS
are excessive, the Parties agree that this matter may be raised as a dispute to
be handled per the Dispute Resolution Process of the Interconnection Agreement
without prejudice to the other rights of either party.
2. PRE-ORDER
2.1 SWBT will provide real time access to pre-order functions to
support LSP ordering of UNE via several electronic interfaces. The Parties
acknowledge that ordering requirements necessitate the use of current, real time
pre-order information to accurately build service orders. The following lists
represent pre-order functions that are available to LSP so that LSP order
requests may be created to comply with SWBT ordering requirements.
2.2 PRE-ORDERING FUNCTIONS FOR UNE INCLUDE:
2.2.1 customer name, billing address and residence or business
address, billed telephone numbers and features and services available in the end
office where the customer is provisioned;
2.2.2 features and services to which the customer subscribes
(LSP agrees that LSP's representatives will not access the information specified
in this Subsection until after the
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customer requests that the customer's local exchange service provider be changed
to LSP, and such request complies with conditions of Exhibit A of this
Appendix.)
2.2.3 telephone number (if the customer does not have one
assigned) with the customer on-line;
2.2.4 PIC options for intraLATA toll (when available) and
interLATA toll;
2.2.5 address verification;
2.2.6 channel facility assignment (CFA), network channel (NC),
and network channel interface (NCI) data;
2.3. ELECTRONIC ACCESS TO PRE-ORDER FUNCTIONS: Upon request by
LSP for electronic access to pre-ordering functions, SWBT will provide LSP
access to one or more of the following systems:
2.3.1 UNE PRE-ORDER SYSTEM AVAILABILITY:
2.3.1.1 DataGate is a transaction-based data query system
through which SWBT will provide LSP access for the functions of gathering
pre-ordering information to support industry standardized ordering processes for
Residential and Business Resale services. When ordering UNE services, LSP's
representatives will have access to a pre-order electronic gateway provided by
SWBT for both consumer and business customers that provides real-time access to
SWBT's operations systems. This gateway shall be a Transmission Control
Protocol/Internet Protocol (TCP/IP) gateway and will allow the LSP
representatives to perform the pre-order functions for Resale services, as
described above. SWBT and LSP agree to work together to develop and implement an
electronic communication interface that will replace this initial pre-order
electronic interface consistent with industry guidelines developed by the OBF
and the TCIF.
2.3.1.2 VERIGATE is an Access Service Pre-order system that
will also provide access to the pre-ordering functions for UNE Services.
VERIGATE may be used in connection with electronic or manual ordering. VERIGATE
preorder functionality "features and services to which the customer currently
subscribes" will be made available by third quarter 1997.
2.4 OTHER PRE-ORDER FUNCTION AVAILABILITY:
2.4.1 Where due dates are not available electronically, SWBT
will provide LSP with due date interval for inclusion in the service order
request.
2.4.2 In addition to electronic interface access to pre-order
information, upon request, SWBT will provide LSP pre-order information in batch
transmission for the purposes of
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back-up data for periods of system unavailability. The parties recognize such
information must be used to construct order requests only in exception handling
situations.
2.5 The provisions of Section 1.2 shall apply with respect to the
functions addressed in this Section 2.
3. ORDERING/PROVISIONING
3.1 SWBT will provide access to ordering functions to support LSP
provisioning of UNE services via one or more electronic interfaces. Upon request
for electronic access to ordering functions, SWBT will provide LSP access to one
or more of the following systems or interfaces:
3.2 UNE SERVICE ORDER REQUEST ORDERING SYSTEM AVAILABILITY:
3.2.1 In ordering and provisioning UNE, LSP and SWBT will
utilize mutually agreeable standard industry order formats and data elements
developed by OBF and TCIF EDI. Where industry standards do not currently exist
for the ordering and provisioning of UNE, LSP and SWBT agree to jointly develop
a form for ordering Common-Use UNE. Common-Use UNE, including, without
limitation, tandem switching, signaling and call-related databases, Operator
Services and DA, and Operations Support Systems, shall be ordered in a manner
that is consistent with OBF Access Service Request Process; in addition
customized routing will be ordered in the same manner. Customer Specific UNE,
including, Local Loop (which includes NID), and unbundled Local Switching, and
Interim Number Portability will be ordered consistent with the OBF Local Service
Request (LSR) process.
3.3 SWBT will provision UNE as prescribed in LSP order requests. Access
to status on such orders of UNE will be provided via the following electronic
interfaces:
3.3.1 Order Status will allow LSP to check service order
status.
3.3.2 In cases of EDI ordering, SWBT will provide to LSP an
EDI electronic interface for transferring and receiving orders, Firm Order
Confirmation (FOC), service completion, and, as available, other provisioning
data and information. SWBT provides LSP with a FOC for each Resale and UNE
service request. The FOC includes but is not necessarily limited to: purchase
order number, telephone number, Local Service Request number, due date, Service
Order number, and completion date. Upon work completion, SWBT will provide LSP
with an 855 EDI transaction-based Order Completion that states when that order
was completed. LSP may submit supplement requests via the 860 EDI transaction,
and, where available, SWBT will provide LSP an 865 EDI transaction-based
Completion notice.
3.4 The provisions of Section 1.2 shall apply with respect to access to
the functions described in this Section 3.
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4. MAINTENANCE/REPAIR
4.1 Two real time electronic interfaces are accessible to place, and
check the status of, trouble reports for UNE. Upon request, LSP may access these
functions via the following methods:
4.1.1 Trouble Administration (TA) system access provides LSP
with SWBT software that allows LSP to submit trouble reports and subsequently
check status on trouble reports for LSP end-users. TA will provide the ability
to review the maintenance history of a converted Resale LSP account.
4.1.2 Electronic Bonding Interface (EBI) is an interface that
is available for trouble report submission and status updates. This EBI will
conform to ANSI guidelines T1:227:1995 and T1.228:1995, Electronic
Communications Implementation Committee (ECIC) Trouble Report Format Definition
(TFRD) Number 1 as defined in ECIC document ECIC/TRA/95-003, and all guidelines
referenced within those documents, as mutually agreed upon by LSP and SWBT.
Functions currently implemented will include Enter Trouble, Request Trouble
Report Status, Add Trouble Information, Modify Trouble Report Attributes,
Trouble Report Attribute Value Change Notification, and Cancel Trouble Report,
as explained in 6 and 9 of ANSI T1.228:1995. LSP. SWBT will exchange requests
over a mutually agreeable X.25-based network.
4.2 The provisions of Section 1.2 shall apply with respect to access to
the functions described in this Section 4.
5. BILLING
5.1 SWBT shall bill LSP for UNE. SWBT shall send associated billing
information to LSP as necessary to allow LSP to perform billing functions. At
minimum SWBT will provide LSP billing information in a paper format or via
magnetic tape, as agreed to between LSP and SWBT.
5.2 ELECTRONIC ACCESS TO BILLING INFORMATION FOR UNE WILL ALSO BE
AVAILABLE VIA THE FOLLOWING INTERFACES:
5.2.1 SWBT makes available to LSPs a local Bill Data Tape to
receive data in an electronic format from its CABS database, the same
information that would appear on its paper bill.
5.2.2 LSP may also view billing information through the Bill
Information interface. Bill Information will be accessible via SWBT Toolbar.
5.2.3 SWBT shall provide LSPs a Usage Extract Feed
electronically, on a daily basis, with information on the usage billed to its
accounts for UNE in the industry standardized
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Exchange Message Record (EMR) format.
5.2.4 LSP may receive Local Disconnect Report records (via
CARE records) electronically that indicate when LSP's customers, utilizing SWBT
ports, change their Competitive Local Exchange Carrier.
5.3 The provisions of Section 1.2 shall apply with respect to access to
the functions described in this Section 5.
6. REMOTE ACCESS FACILITY
6.1 LSP must access the following SWBT OSS interfaces via a LSP Remote
Access Facility (LRAF) located in Dallas, Texas: R-EASE; B-EASE; Trouble
Administration; DataGate; and VERIGATE. Connection to the LRAF will be
established via a "port" either through dial-up or direct connection as
described in Section 6.2. LSP may utilize a port to access these interfaces to
perform the supported functions in any SWBT state where LSP has executed an
Appendix OSS and purchases System Access in that state.
6.2 LSP may use three types of access: Switched, Private Line, and
Frame Relay. For Private Line and Frame Relay connections, LSP shall provide its
own router, circuit, and two Channel Service Units/Data Service Units (CSU/DSU).
The demarcation point shall be the router interface at the LRAF. Switched Access
connections require LSP to provide its own modems and connection to the SWBT
LRAF. LSP shall pay the cost of the call if Switched Access is used.
6.3 LSP must use TCP/IP to access SWBT OSS via the LRAF. In addition,
each LSP shall have one valid Internet Protocol (IP) network address. A user-id
/password unique to each individual accessing an OSS shall be maintained to
access SWBT OSS. Prior to establishing connectivity, and as needed thereafter,
LSP must provide estimates regarding its volume of transactions, number of
concurrent users, desired number of private line or dial-up (switched)
connections, and length of a typical session.
6.4 LSP shall attend and participate in implementation meetings to
discuss LSP LRAF access plans in detail and schedule testing of such
connections. SWBT shall make a Help Desk function available to assist LSP on an
ongoing basis in accessing SWBT OSS's over the LRAF.
7. OPERATIONAL READINESS TEST (ORT) FOR ORDERING/PROVISIONING AND REPAIR/
MAINTENANCE INTERFACES
7.1 If and when LSP uses electronic interfaces, LSP must participate
with SWBT in Operational Readiness Testing (ORT), which will allow for the
testing of the systems, interfaces, and processes for the ordering and
provisioning of Resale services. ORT will be completed in conformance with
agreed upon implementation dates. LSP and SWBT will also engage in such
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testing as may be necessary for successful implementation of the manual
processes contemplated by Section 1.2.
7.2 Prior to live system usage, LSP must complete user training
sessions for SWBT-provided interfaces that affect SWBT network. Currently,
training is available and required for R-EASE, B-EASE, LEX, and Trouble
Administration. Training is also available for Order Status and VERIGATE.
Charges apply to training delivery.
8. RATES
8.1 LSP requesting access to one or more of the SWBT OSS functions
(i.e., preordering, ordering / provisioning, maintenance / repair, billing)
agrees to pay the following rate:
<TABLE>
<S> <C>
System Access $ 3,345.00 / month
</TABLE>
8.2 LSP requesting functions via interfaces that require connection to
the Remote Access Facility, as described in Section 6, agrees to pay the
following rate(s) depending upon on method of access utilized:
<TABLE>
<S> <C>
Remote Access Facility Access Methods
Direct Connection Per Port $ 1,580.00 / month
Dial Up Per Port $ 316.00 / month
</TABLE>
8.3 The rates specified in Sections 8.1 and 8.2 shall not be charged if
LSP is already paying them under a separate OSS agreement.
8.4 LSP requesting the billing function for Usage Billable Records, as
described in 5.2.4 and 5.3.3, agrees to pay $.003 per message transmitted.
8.5 LSP requesting the Local Disconnect Report, as described in 5.2.5
and 5.3.4, agrees to pay $0.10 per record transmitted.
8.6 Should unforeseen modifications and costs to provision OSS
functions become required by SWBT or industry guidelines, or by regulatory
rulings, SWBT reserves the right to modify its rate structure. In addition,
should LSP request custom development of an exclusive interface to support OSS
functions, such development will be considered by SWBT on an Individual Case
Basis (ICB) and priced as such.
9. EFFECTIVE DATE, TERM
9.1 The Term of this Appendix OSS will be coincident with the term of
the underlying Interconnection Agreement between the Parties and will be
effective upon approval by the Commission when it approves it as a part of the
Interconnection Agreement.
<PAGE> 79
APPENDIX 911-MOKA
PAGE 1 OF 4
APPENDIX 911 - MISSOURI
<PAGE> 80
APPENDIX 911-MOKA
PAGE 2 OF 4
APPENDIX 911 - MISSOURI
TERMS AND CONDITIONS FOR PROVIDING CONNECTION
TO E911 UNIVERSAL EMERGENCY NUMBER SERVICE
This appendix between SWBT and LSP sets forth the terms and conditions upon
which SWBT will provide LSP's connection to E911 Universal Emergency Number
Service.
I. DEFINITIONS
A. The definition of IEC in the Missouri General Exchange Tariff
referenced below is modified as follows:
1. Independent Exchange Company (IEC): A local exchange
telephone company, including Local Service Providers
(LSPs) who are certified by the state commission,
other than Southwestern Bell Telephone Company.
II. TERMS AND CONDITIONS
A. The following are in addition to those terms and conditions in
the Missouri General Exchange Tariff referenced below:
1. SWBT shall provide LSP with a file containing the
Master Street Address Guide (MSAG) for the exchanges
or communities specified in Exhibit I, in accordance
with the methods and procedures described in the
document "Universal Emergency Number Service - Local
Service Providers". SWBT shall provide LSP additional
files with the entire MSAG, including subsequent
additions or updates to the MSAG in accordance with
the intervals specified in Exhibit I. In addition,
SWBT shall provide LSP with a statistical report in a
timely fashion and in accordance with the methods and
procedures described in the above mentioned document,
for each file downloaded by LSP to SWBT's DBMS, so
that LSP may ensure the accuracy of the end user
records. LSP will attest it has been provided a copy
of the document referenced above.
2. At a reasonable time prior to the establishment of
E911 Service, LSP shall download and maintain
thereafter all information required to establish
records necessary for furnishing connection to E911
Service and shall promptly notify SWBT in writing of
any changes to be made to such records. LSP shall
adopt and comply with operating methods applicable to
downloading and maintaining LSP's end user records in
SWBT's DBMS, as set forth in the document referenced
in the paragraph above.
<PAGE> 81
APPENDIX 911-MOKA
PAGE 3 OF 4
3. LSP acknowledges that its end users in a single local
calling scope may be served by different PSAPs, and
LSP shall be responsible for providing facilities to
route calls from its end users to the proper E911
Control Office(s).
4. LSP shall connect its switches to the E911 Control
Office by one-way outgoing CAMA trunks dedicated for
originating 911 emergency service calls.
5. The parties agree that the E911 service is provided
for the use of the E911 Customer, and recognizes the
authority of the E911 Customer to establish service
specifications and grant final approval (or denial)
of service configurations offered by SWBT and the
LSP. The terms and conditions of this appendix
represent a plan for providing E911 service, for
which LSP must obtain documentation of approval from
the appropriate E911 Customer(s) which have
jurisdiction in the area(s) in which LSP's customers
are located. LSP shall provide such documentation to
SWBT prior to the use of LSP's E911 connection for
actual emergency calls.
6. Both parties agree to designate a representative who
shall have the authority to execute additional
exhibits to this Appendix when necessary to
accommodate expansion of the geographic area of LSP
into the jurisdiction of additional PSAPs or to
increase the number of CAMA trunks. The designated
representative for SWBT is Pat Halbach and for LSP is
Michael Griess.
7. The terms and conditions of this Appendix are subject
to renegotiation in the event that the E911 Customer
orders changes to the E911 service that necessitate
revision of this Appendix.
III. RATES, TERMS AND CONDITIONS
E911 Universal Emergency Number Service will be provided utilizing the
rates, terms and conditions set forth in the following state tariffs,
in addition to those terms and conditions described previously in this
Appendix:
Missouri: SWBT's General Exchange Tariff (Mo. P.S.C. No. 35) Section 28
- Universal Emergency Number Service (9-1-1)
<PAGE> 82
APPENDIX BCR
PAGE 1 OF 5
APPENDIX BCR
<PAGE> 83
APPENDIX BCR
PAGE 2 OF 5
APPENDIX BCR
BILLING, COLLECTING AND REMITTING
This Appendix sets forth the terms and conditions that apply to those
telecommunications services for which charges are billed and collected by one
Local Exchange Carrier (LEC) or LSP but earned by another LEC; and to establish
procedures for the billing, collecting and remitting of such charges and for
compensation for the services performed in connection with the billing,
collecting and remitting of such charges.
I. DEFINITIONS
A. BellCore Client Company Calling Card and Third Number
Settlement (BCC CATS) System - Nationwide system used to
produce information reports that are used in the settlement of
LEC revenues recorded by one BCC (or LEC) and billed to an end
user of another BCC (or LEC) as described in accordance with
the BellCore Practice BR 981-200-110.
B. Charges - the amount approved or allowed by the appropriate
regulatory authority to be billed to an end user for any of
the services described in Section II., rendered by a LEC to an
end user.
C. Compensation - the amount to be paid by one Party to the other
Party for billing, collecting and remitting of charges as set
forth in Section IV.
D. IntraLATA - within a Local Access Transport Area (LATA) -
IntraLATA messages are those messages, either intrastate or
interstate, which originate and terminate within a LATA. The
term "IntraLATA messages," as used herein, shall only include
those that qualify for the BellCore Client Company BCC CATS
process.
E. InterLATA - between Local Access and Transport Areas (LATAs)
as defined in the FCC's CC Docket No. 78-72. InterLATA
messages are those messages which originate in one LATA and
terminate in a different LATA. The term "InterLATA messages"
as used herein, shall only include those that qualify for the
BellCore Client Company BCC CATS process.
F. Local Exchange Carrier (LEC) - as used in this Appendix shall
mean those Local Exchange Carriers or Local Service Providers
using BCC CATS as a message tracking system.
<PAGE> 84
APPENDIX BCR
PAGE 3 OF 5
G. Local Message - Local messages are those messages which
originate and terminate within the area defined as the local
service area of the station from which the message originates.
H. Revenues - the sum of all or part of the charges as defined
above.
II. SCOPE OF APPENDIX
This Appendix shall apply to procedures for the billing, collecting and
remitting of revenues (and compensation to either Party for billing,
collecting and remitting of such revenues) derived from the following
services:
A. LEC-carried (traffic transported by facilities belonging to a
LEC) local messages of the following types:
1. Local Message Service Charges Billed to a Calling
Card or to a Third Number.
2. Directory Assistance Calls Charged to a Calling Card
or to a Third Number.
3. Public Land Mobile Radiotelephone Transient-Unit
Local Message Service (Mobile Channel Usage Link
Charge).
4. Maritime Mobile Radiotelephone Service and Aviation
Radiotelephone Service (Marine, Aircraft, High Speed
Train Radio Link Charges).
B. LEC-carried Interstate IntraLATA and Interstate InterLATA
telecommunications services that qualify for and flow through
the BCC CATS process as addressed in the BellCore Practice BR
981-200-110, of the following types:
1. Interstate IntraLATA Toll Service carried by an LEC
and charged to a Calling Card or a Third Number.
2. Interstate InterLATA Toll Service carried by an LEC
and charged to a Calling Card or a Third Number.
3. Radio Link Charges where service is provided by one
LEC and billed by another LEC.
<PAGE> 85
APPENDIX BCR
PAGE 4 OF 5
III. RESPONSIBILITIES OF THE PARTIES
A. LSP agrees to bill, collect and remit to SWBT the charges for
the services described in Section II which charges are earned
by any LEC (including SWBT), but which are to be billed to end
users of LSP.
B. In those cases in which the charges for the services listed in
Section II above are due any LEC other than SWBT, SWBT will
arrange to transfer these charges to the appropriate company
in accordance with accepted industry standards.
C. Charges for the services listed in Section II above to be
billed, and collected by LSP for SWBT's benefit, shall be
remitted by LSP to SWBT within thirty (30) days of the date of
SWBT's bill to LSP for such services.
D. SWBT agrees to bill and collect (or to have another LEC bill
and collect, where appropriate), and to remit to LSP, the
charges for the services described in Section II above, which
charges are earned by LSP, but which are to be billed by
another LEC (including SWBT) to the end users of that LEC.
E. Charges for the services listed in Section II above to be
billed, collected and remitted by SWBT or another LEC for
LSP's benefit, shall be remitted by SWBT to LSP within thirty
(30) days of the date of LSP's bill to SWBT for such services.
F. The full amount of the charges transmitted to either Party for
billing, collecting and remitting shall be remitted by the
other Party, without setoff, abatement or reduction for any
purpose, other than to deduct the compensation, as described
in Section IV below, due the Party for performing the end user
billing function. The Party billing the end user shall be
responsible for all uncollectible amounts related to the
services described remitted in Section II above.
Notwithstanding this paragraph, SWBT may net amounts due to
LSP under this Appendix against amounts owed to SWBT when SWBT
renders a bill to LSP hereunder.
G. Each Party will furnish to the other such information as may
be required for monthly billing and remitting purposes.
IV. COMPENSATION
A Party performing the services described in Section II.A. above will
compensate the other Party in the amount of $.08 for each charge billed
for any service described in Section II.A. above and subsequently
remitted pursuant to this Appendix by such other Party to the Party
performing the services described in Section II.A above. A Party
performing the services described in Section II.B. above will
compensate the other Party in the amount of $.05 for each charge billed
for any service described in Section II.B.
<PAGE> 86
APPENDIX BCR
PAGE 5 OF 5
above and subsequently remitted pursuant to this Appendix by such other
Party to the Party performing the services described in Section II.B.
above. Such compensation shall be paid (unless a Party has collected
such compensation as described in Section III.F. above) within thirty
(30) days of the date of a bill for such compensation by the Party
performing (or which has another LEC perform for it), the billing,
collecting and remitting functions described in Section III.
V. DISCLAIMER OF REPRESENTATIONS AND WARRANTIES
SWBT MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING BUT NOT LIMITED TO ANY WARRANTY AS TO MERCHANTABILITY OR
FITNESS FOR INTENDED OR PARTICULAR PURPOSE WITH RESPECT TO SERVICES
PROVIDED HEREUNDER. ADDITIONALLY, SWBT ASSUMES NO RESPONSIBILITY WITH
REGARD TO THE CORRECTNESS OF THE DATA SUPPLIED BY LSP WHEN THIS DATA IS
ACCESSED AND USED BY A THIRD PARTY.
<PAGE> 87
APPENDIX CH
PAGE 1 OF 4
APPENDIX CH
<PAGE> 88
APPENDIX CH
PAGE 2 OF 4
APPENDIX CLEARINGHOUSE (CH)
WHEREAS, SWBT operates a Clearinghouse (CH), as described below, for its own
behalf and that of participating LECs and LSPs, including LSP; and
WHEREAS, LSP wants to participate in the CH on the terms set forth herein;
The Parties agree to the following:
I. CLEARINGHOUSE DESCRIPTION
SWBT operates a CH for the purpose of facilitating the
exchange of certain alternatively billed intrastate intraLATA message
toll call records and the reporting of settlement revenues owed by and
among participating LECs and LSPs, including SWBT and LSP.
II. QUALIFYING MESSAGE CRITERIA
The only toll call messages that qualify for submission to
SWBT for CH processing are: (a) intrastate intraLATA sent collect
(including calling card, collect and third number) messages which are
originated in one LEC or LSP exchange, exclusively carried by a LEC or
LSP over LEC or LSP facilities and billed to a customer located in a
second LEC's or LSP exchange within the same state; or (b) intrastate
intraLATA sent collect (but limited to calling card and third number)
messages originated in one of SWBT's operating areas (located in parts
of Texas, Arkansas, Kansas, Missouri or Oklahoma), exclusively carried
by a LEC or LSP over LEC or LSP facilities, and billed to a customer
located in a second LEC's or LSP exchange and not in the originating
State.
III. RESPONSIBILITIES OF THE PARTIES
A. LSP agrees that it will provide SWBT with billing records for
CH processing that are in an industry standard format
acceptable to SWBT and at a minimum will display the telephone
number of the end user to whom the call is to be billed, and
data about the call sufficient for a carrier to comply with
all applicable state regulatory requirements. For purposes of
this Appendix, these records ("CH Records") will detail
intraLATA toll calls which were originated by use of the
single digit access code (i.e., 0+ and 0-) in one LEC or LSP
exchange but are to be billed to an end user in a second LEC's
or LSP exchange. Such records are referred to as category
ninety-two (92) records for CH processing purposes. The term
"CH Record" will mean the call detail attributed to a single
completed toll message.
LSP agrees that all CH Records it generates will display
indicators denoting
<PAGE> 89
APPENDIX CH
PAGE 3 OF 4
whether category ninety-two (92) Records should be forwarded
to SWBT's CH. LSP will retain its originating records for
ninety (90) days such that the category ninety-two (92)
Records can be retransmitted to SWBT for CH processing, if
needed.
B. SWBT will provide and maintain such systems as it believes are
required to furnish the CH service described herein. SWBT, in
its capacity as operator of the CH, agrees to retain all CH
Records processed through the CH for two (2) years.
C. LSP will timely furnish to SWBT all CH Records required by
SWBT to provide the CH service in accordance with the
Technical Exhibit Settlement Procedures (TESP) dated
DD/MM/YEAR, or as otherwise mutually agreed upon by the
Parties. SWBT will provide the CH service in accordance with
the TESP, and such modifications as are subsequently agreed
upon.
D. Presently, in operating the CH, SWBT relies upon NXX codes to
identify messages for transmission to participating billing
companies. To the extent any subprocesses are required to
settle CH messages due to the use of ported numbers, such
subprocessing will be the responsibility of the porting
entity.
IV. PROCESSING CHARGE
LSP agrees to pay SWBT a processing charge in consideration of
SWBT's performance of CH services. This charge is two cents ($.02) per
originated CH Record processed on behalf of LSP.
V. BILLING CHARGE
LSP agrees to pay a five cents ($.05) per message charge to
the LEC or LSP responsible for billing the message, including SWBT,
when SWBT bills the message.
VI. SETTLEMENT REPORT
SWBT will issue monthly reports containing the results of the
processing of CH Records to each participating LEC and LSP. These
reports list the: (a) amounts owed by LSP for billing messages
originated by others; (b) amounts due to LSP for LSP originated
messages billed by others; (c) applicable billing charges; and (d)
processing charges.
VII. RETROACTIVE AND LOST MESSAGES
The Parties agree that processing of retroactive messages
through the CH is acceptable, if such messages utilize the industry
standard format for call records, pursuant to Section III of this
Appendix. The Parties agree that lost messages are the complete
responsibility of the originating LEC or LSP. If messages are lost by
any Party, and
<PAGE> 90
APPENDIX CH
PAGE 4 OF 4
cannot be recreated or retransmitted, the originating LEC or LSP will
estimate messages, minutes, and associated revenues based on the best
available data. No estimate will be made for messages which are more
than two years old at the time the estimate is made. The estimates will
be off-line calculations (i.e., not part of the routine CH processing)
and will be included as a supplement to the monthly settlement report.
VIII. LIMITATION OF LIABILITY
A. By agreeing to operate the CH, SWBT assumes no liability for
any LEC's or LSP's receipt of appropriate revenues due to it
from any other entity. LSP agrees that SWBT will not be liable
to it for damages (including, but not limited to, lost profits
and exemplary damages) which may be owed to it as a result of
any inaccurate or insufficient information resulting from any
entity's actions, omissions, mistakes, or negligence and upon
which SWBT may have relied in preparing settlement reports or
performing any other act under this Appendix.
B. LSP agrees to indemnify and hold SWBT harmless against and
with respect to any and all third party claims, demands,
liabilities or court actions arising from any of its actions,
omissions, mistakes or negligence occurring during the course
of SWBT's performance of CH processing pursuant to this
Appendix.
C. SWBT will not be liable for any losses or damages arising out
of errors, interruptions, defects, failures, or malfunction of
the CH services provided pursuant to this Appendix, including
those arising from associated equipment and data processing
systems, except such losses or damages caused by the sole
negligence of SWBT. Any losses or damage for which SWBT is
held liable under this Appendix will in no event exceed the
amount of processing charges incurred by LSP for the CH
services provided hereunder during the period beginning at the
time SWBT receives notice of the error, interruption, defect,
failure or malfunction, to the time service is restored.
IX. DISCLAIMER OF WARRANTIES
SWBT MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING BUT NOT LIMITED TO ANY WARRANTY AS TO
MERCHANTABILITY OR FITNESS FOR INTENDED OR PARTICULAR PURPOSE WITH
RESPECT TO SERVICES PROVIDED HEREUNDER. ADDITIONALLY, SWBT ASSUMES NO
RESPONSIBILITY WITH REGARD TO THE CORRECTNESS OF THE DATA SUPPLIED BY
LSP WHEN THIS DATA IS ACCESSED AND USED BY A THIRD PARTY.
<PAGE> 91
APPENDIX DCO
INTERCONNECTION SCHEDULE
<TABLE>
<CAPTION>
LSP SWBT
Interconnection Interconnection
Metropolitan Wire Center Wire Center Interconnection
Exchange Area Direction(1) (IIWC)(2) (SIWC)(3) POI(4) Activation Date
- ------------- ------------ --------------- --------------- ------ ---------------
<S> <C> <C> <C> <C> <C>
St. Joseph LSP TO SWBT STJSMO?? STJSMODN03T STJSMODN03T
INTRALATA, (St. Joe DMS100)
INTERLATA, INTRALATA
800
CHOKE
LOCAL
LSP TO SWBT STJSMO?? STJSMODN03T STJSMODN03T
TOPS (St. Joe DMS100)
LSP TO SWBT STJSMO?? KSCYKSJO07T6 STJSMODN03T
911
SWBT TO LSP STJSMO?? STJSMODN03T STJSMODN03T
INTRALATA, INTERLATA, (St. Joe DMS100)
LOCAL
</TABLE>
(1) This column will be completed by indicating the direction of the
terminating traffic (e.g., either LSP to SWBT or SWBT to LSP).
(2) LSP INTERCONNECTION WIRE CENTER (IIWC) - The address of the LSP
location that will house the interconnection equipment and through which SWBT
will terminate traffic on LSP's network.
(3) SWBT INTERCONNECTION WIRE CENTER (SIWC) - The address of the SWBT
end office or tandem through which LSP will terminate traffic on SWBT's network.
(4) POINT OF INTERCONNECTION (POI) - The POI is the location where SWBT
and LSP facilities connect. The POI will be identified by address and V&H
Coordinates. The POI for traffic going from LSP to SWBT and going from SWBT to
LSP could be different. Where the physical interface occurs at a SWBT end office
or tandem, the POI shall be located at the SIWC. Where the physical interface
occurs at the LSP location, the POI for that interconnection shall be located at
the LSP location.
(5) For the purposes of IntraLata Meet Point Billing, the billing
percentages will be 50% for SWBT and 50% for LSP. For InterLata Meet Point
Billing, the percentages be 100% for LSP, except in Houston, which will be 50%
for SWBT and 50% for LSP. As LSP enters additional markets, the Meet Point
Billing Percentages will be negotiated based on ownership of facilities.
(6) SWBT agrees to carry 911 traffic to Kansas City 911 tandem from St.
Joe in exchange for Birch providing facilities from collocation cage in St. Joe
central office to Birch's switch for SWBT's trunk groups. The parties agree that
the trunking and compensation agreed upon herein is based upon the forecasted
facilities projected by SWBT and Birch. The parties agree that this arrangement
shall be used in St. Joe for other ancillary services or in future metropolitan
areas for ancillary services traffic unless the serving arrangements in such
other metropolitan areas necessitate another arrangement.
<PAGE> 92
APPENDIX FGA
PAGE 1 OF 5
APPENDIX FGA
<PAGE> 93
APPENDIX FGA
PAGE 2 OF 5
APPENDIX FGA
This Appendix sets forth the terms and conditions under which the Parties will
distribute revenue from the joint provision of Feature Group A (FGA) Switched
Access Services.
These services will be provided within a Local Access and Transport Area (LATA)
and/or an Extended Area Service (EAS) arrangement. The Primary Company will
compensate the Secondary Company only to the extent that it has not already been
compensated under its interstate or intrastate access service tariffs or other
settlement/contract arrangements. This Appendix is subject to applicable
tariffs.
I. DEFINITIONS
A. Local Access and Transport Area (LATA) means a pre-established
geographic area encompassing one or more local exchange areas
within which a Party may provide telecommunications services.
B. The term Extended Area Service (EAS) as used in this Appendix
means the provision of message telephone exchange service
between two or more local exchange service areas without a
toll charge.
C. Subscriber Access Lines will mean a communication facility
provided under a general and/or exchange service tariff
extended from a customer premise to a central office switch
which may be used to make and receive exchange service calls,
intrastate toll service or interstate toll service calls.
D. Feature Group A Switched Access Service includes all
facilities and services rendered in furnishing FGA access
service, both in EAS and non-EAS (i.e., LATA wide
terminations) areas, in accordance with the schedule or
charges, regulations, terms and conditions stated in the
interstate or intrastate access service tariffs of the
Parties.
E. The Primary Company denotes the Party with the Primary
office(s).
F. The Primary Office is an office which: (1) directly or jointly
connects to an interexchange carrier and /or end user; and (2)
provides joint FGA switched access service to that
interexchange carrier and/or end user with other end offices.
G. The Secondary Company denotes the Party with the secondary
office(s).
H. The Secondary Office is any office involved in providing joint
FGA switched access to an Interexchange carrier and /or end
user through the switching facilities of the Primary office.
<PAGE> 94
APPENDIX FGA
PAGE 3 OF 5
I. Revenues under this Appendix are those FGA Switched Access
amounts due the Primary and Secondary Companies under their
applicable tariffs, less uncollectible revenues. Revenues for
any other services are not included. Uncollectible revenues
are those revenues the Primary Company is unable to collect,
using its regular established collection procedures. The
Primary Company may offset uncollectibles against current
revenue distribution.
J. Access Minutes or Minutes of Use (MOUs) are those minutes of
use as described in Part 69 of the Federal Communications
Commissions Rules, and are limited to those FGA MOUs which
originate and /or terminate in the Secondary Office(s) covered
by this Appendix.
K. Currently Effective Tariff Rate means the approved tariff rate
effective on the first day of the month for which compensation
is being calculated.
II. UNDERTAKING OF THE PARTIES
A. The Secondary Company will notify the Primary Company of all
tariff rate revisions, affecting this Appendix which the FCC
or other appropriate regulatory authority allows to take
effect, at least thirty (30) days in advance of their
effective date. Revenue distribution will be based on the
revised rates forty-five (45) days after the effective date of
the tariff revisions. However, if the secondary Company fails
to notify the Primary Company of a new rate within thirty (30)
days of its effective date, the Primary company may delay
implementation of the new rate until the next month's revenue
distribution cycle, and will not be required to adjust the
previous bills retroactive.
B. Each party will furnish to the other such information as may
reasonably be required for the administration, computation and
distribution of revenue, or otherwise to execute the
provisions of this Appendix.
III. ADMINISTRATION OF REVENUE DISTRIBUTION
The Primary Company will be responsible for the administration,
computation and distribution of the FGA access service revenues
collected on behalf of the Secondary Company.
IV. MINUTES OF USE (MOU'S) DEVELOPMENT
A. The Parties will calculate the amount of FGA revenues due each
Party, by determining the amount of FGA MOUs attributable to
each Party as described below. The Primary Company will then
multiply the MOUs by the rates in the Secondary Company's
applicable tariff to determine the amounts tentatively due to
the Secondary Company.
<PAGE> 95
APPENDIX FGA
PAGE 4 OF 5
V. TERMINATING MOU'S DEVELOPMENT
A. Actual monthly premium (charged at equal access end office)
and non-premium (charged at non-equal access end offices)
terminating FGA access MOUs for each office in the LATA or a
FGA access EAS area will be measured by the Primary Company.
B. Where the Primary Company cannot measure or identify the
terminating FGA MOUs by end office, terminating MOUs will be
total unmeasured MOUs allocated to the LATA. In this event,
those MOUs will be distributed based upon the ratio of each
Party's subscriber access lines, as identified in Exhibit B,
which is attached hereto and made a part hereof, to the total
subscriber access lines in the FGA access area as determined
by the Primary Company.
VI. ORIGINATING MOU'S DEVELOPMENT
A. The Primary Company will derive and distribute monthly
originating FGA access MOUs, billed by the Primary Company, to
each Secondary Company's end office in the EAS calling area,
as identified in Exhibit A, which is attached hereto and made
a part hereof, based upon a ratio of each Party's subscriber
access lines to the total subscriber access lines in the
appropriate EAS area as determined by the Primary Company.
B. The Parties recognize that since originating non-EAS calls to
the FGA service area are rated and billed as intraLATA toll,
such usage is assumed to be minimal. Therefore, originating
FGA access MOUs will not be distributed to end offices outside
an EAS calling area.
VII. CALCULATION OF REVENUE DISTRIBUTION
A. The amount of premium or non-premium revenues due each party
each month will be equal to the sum of Originating and
Terminating premium or non-premium revenue for each end
office. These revenues will be calculated by the Primary
Company by multiplying each of the Secondary Company's
effective interstate and/or intrastate FGA switched access
tariff rate elements (except the Local Transport element
described below) by the appropriate MOU calculation under
Sections 4.2.A. and B. above.
B. Local Transport (or its equivalent under the Secondary
Company's tariff and called Transport in this Appendix)
compensation will be determined for each company by
multiplying each of the Secondary Company's Transport rates by
the appropriate MOUs (as calculated under Sections 4.2.A. and
B. above) by the Secondary Company's percentage ownership of
facilities agreed on by the Parties and set out in Exhibit B,
which is attached hereto and made a part hereof.
<PAGE> 96
APPENDIX FGA
PAGE 5 OF 5
VIII. REVENUE DISTRIBUTION AMOUNTS, MONTHLY STATEMENTS AND PAYMENTS
A. The Primary Company each month will calculate and prepare a
monthly compensation statement reflecting the revenue
distribution amounts for FGA, both EAS and non-EAS, access
service due the Secondary Company.
B. The monthly compensation statement will show, for each
Secondary Office, separately:
1. The total number of non-premium or premium
terminating MOUs and revenue.
2. The total number of non-premium or premium
originating MOUs and revenues.
3. The total compensation due the Secondary Company, by
rate element.
4. The number of terminating MOUs recorded by the
Primary Company.
5. The number of originating MOUs estimated by the
Primary Company pursuant to Section 4.3 contained
herein.
6. The number of access lines used to prorate
originating usage pursuant to Section 4.3 contained
herein.
7. The percent ownership factor, if any, used to prorate
Local Transport revenues.
8. Adjustments for uncollectibles.
C. Within sixty (60) Calendar days after the end of each billing
period, the Primary Company will remit the compensation amount
due the Secondary Company. Where more than one compensation
amount is due, they may be combined into a single payment.
IX. MISCELLANEOUS PROVISIONS
A. This Appendix will remain in effect until terminated by thirty
(30) calendar days' notice by either Party to the other.
<PAGE> 97
APPENDIX FGA - EXHIBIT A
PAGE 1 OF 1
EXHIBIT A
EAS Locations for Originating and Terminating
Feature Group A Access Service
Primary Office Company Secondary Office Company
CLLI CODE NPA-NXX CLLI CODE NPA-NXX ACCESS LINE
<PAGE> 98
APPENDIX FGA - EXHIBIT B
PAGE 1 OF 1
EXHIBIT B
Location for LATA Wide Termination
of Feature Group A Access Service in
Non-EAS Calling Areas
SECONDARY OFFICE COMPANY
% Ownership of
CLLI CODE NPA-NXX Access Line Transport Facilities LATA
<PAGE> 99
APPENDIX HOST
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APPENDIX HOST
<PAGE> 100
APPENDIX HOST
PAGE 2 OF 5
APPENDIX HOST
This Appendix sets forth the terms and conditions under which SWBT will perform
hosting responsibilities for LSP for: (1) the provision of billable message data
and/or access usage data received from such LSP for distribution to the
appropriate billing and/or processing location via SWBT's in-region network or
via the nationwide Centralized Message Distribution System (CMDS); or (2)
billable message data and/or access usage data received from other Local
Exchange Carriers (LECs) or LSPs or from CMDS to be distributed to such LSP.
This Appendix covers hosting in region (i.e., Missouri, Arkansas, Kansas,
Oklahoma and Texas) and hosting out of region. Hosting out of region is only
available to an LSP that is a Full Status Revenue Accounting Office (RAO)
company.
I. DEFINITIONS
A. Access Usage Record (AUR) - a message record which contains
the usage measurement reflecting the service feature group,
duration and time of day for a message which is subsequently
used by a LEC to bill access to an Interexchange Carrier
(IXC).
B. Bellcore Client Company Calling Card and Third Number
Settlement (BCC CATS) System - nationwide system used to
produce information reports that are used in the settlement of
LEC or LSP revenues recorded by one BCC (or LEC or LSP within
the territory of that BCC) and billed to a customer of another
BCC (or LEC or LSP within the territory of that BCC) as
described in accordance with the Bellcore Practice BR
981-200-110.
C. Billable Message Record - a message record containing details
of a completed call which has been carried by a LEC over its
facilities or by LSP over its facilities and such record is to
be used to bill an end user.
D. Centralized Message Distribution System (CMDS) - the national
network of private line facilities used to exchange Exchange
Message Record (EMR) formatted billing data between a company
originating a message and the company billing for a message.
E. Exchange Message Record (EMR) - industry standard message
format as described in accordance with the Bellcore Practice
BR 010-200-010 which was developed to facilitate the exchange
of telecommunications message information.
F. Full Status Revenue Accounting Office (RAO) - an LSP or LEC
that is responsible for formatting EMR records, and for
editing and packing of such detail records into files for
distribution.
G. In-Region Hosting - includes the transport, using Hosting
Company network, of
<PAGE> 101
APPENDIX HOST
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(1) billable message record data for LEC or LSP transported
messages and/or access usage record data that originate in a
region and are delivered by the LSP to SWBT at a mutually
agreed upon location within the territory of SWBT to be sent
to another LEC or LSP for billing; and (2) billable message
record data and/or access usage data received from CMDS or
another LEC or LSP to be delivered to the LSP for billing to
its end user located within the five state territory of SWBT.
H. Out-of-Region Hosting - includes the transport, using the
national CMDS network, of (1) billable message record data for
LEC or LSP transported messages and/or access usage record
data that originate out of region and are delivered by the LSP
to SWBT and are to be sent to another LEC or LSP for billing;
and (2) billable message record data and/or access usage data
received from CMDS or another LEC or LSP to be delivered to
the LSP for billing to its end user located outside SWBT's
five state territory.
I. Non-Full Status Revenue Accounting Office (RAO) - An LSP or
LEC that has assigned responsibility to SWBT for editing,
sorting and placing billing message record detail and/or
access usage record detail into packs for distribution.
II. RESPONSIBILITIES OF THE PARTIES
A. All data forwarded from LSP must be in the industry standard
EMR format in accordance with Bellcore Practice BR
010-200-010. The LSP is responsible to ensure all appropriate
settlement plan indicators are included in the message detail,
i.e., the Bellcore Client Company Calling Card and Third
Number Settlement (BCC CATS) System. The LSP acknowledges that
the only message records subject to this Hosting Appendix are
those that arise from LEC or LSP transported billable messages
and/or access usage records to be used by a LEC or LSP for the
purpose of billing access to an IXC.
B. When LSP delivers billable message data and/or access usage
data to SWBT which must be forwarded to another location for
billing purposes, SWBT will accept data from the LSP, perform
edits to make message detail and access usage records
consistent with CMDS specifications, and use its in region
data network to forward this data to the appropriate billing
company or to access the national CMDS network in order to
deliver this data to the appropriate billing and/or processing
company.
If LSP is not a Full Status RAO Company, SWBT will also sort
billable message detail and access usage record detail by
Revenue Accounting Office, Operating Company Number or Service
Bureau and split data into packs for invoicing prior to using
its in region network to forward this data to the appropriate
billing company or to access the national CMDS network in
order to deliver such data to the appropriate billing company.
<PAGE> 102
APPENDIX HOST
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C. For billable message data and/or access usage data received by
SWBT for delivery to an LSP location, SWBT will use its in
region data network to receive this data from other LECs or
LSPs or from CMDS in order to deliver such billable message
data and/or access usage data to the agreed upon billing LSP
location.
III. BASIS OF COMPENSATION
A. LSP agrees to pay SWBT a per record charge for billable
message records and/or access usage records that are received
from LSP and destined for delivery to another location for
billing, at the rates listed below:
<TABLE>
<S> <C>
Per Record Charge
Full Status RAO Company
Hosting Company Network $.002
National CMDS Network $.005
Non-Full Status RAO Company
Hosting Company Network $.007
National CMDS Network $.010
</TABLE>
B. As part of this per record charge, SWBT will provide
Confirmation and/or Error Reports and any Intercompany
Settlement (ICS) Reports, such as the Bellcore Client Company
Calling Card and Third Number Settlement System (BCC CATS), as
needed.
C. LSP agrees to pay SWBT a per record charge for billable
message records and/or access usage records which are entered
on a magnetic tape or data file for delivery to the LSP, at
the rate listed below:
<TABLE>
<S> <C>
Per Record Charge $.003
</TABLE>
IV. LIABILITY
A. Any failure to populate accurate information in accordance
with Section II.A. above, will be the responsibility of the
LSP.
B. SWBT will not be liable for any costs incurred by the LSP when
the LSP is transmitting data files via data lines and a
transmission failure results in the non-receipt of data by
SWBT.
C. SWBT SHALL NOT BE LIABLE IN ANY EVENT FOR ANY SPECIAL,
INDIRECT, INCIDENTAL, CONSEQUENTIAL, OR EXEMPLARY DAMAGES
RESULTING FROM, OR ARISING OUT OF, OR IN CONNECTION WITH, THIS
APPENDIX.
D. SWBT shall not be liable for any losses or damages arising out
of errors,
<PAGE> 103
APPENDIX HOST
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interruptions, defects, failures, or malfunction of the
services provided hereunder, including any and all associated
equipment and data processing systems, except such losses or
damages caused by the sole negligence of SWBT. Any losses or
damage for which SWBT is held liable under this Appendix shall
in no event exceed the amount of charges made for the services
provided hereunder during the period beginning at the time
SWBT receives notice of the error, interruption, defect,
failure or malfunction to the time service is restored.
E. The LSP agrees to release, defend, indemnify, and hold
harmless SWBT from any and all losses, damages, or other
liability, including attorney fees, that it may incur as a
result of claims, demands, or other suits brought by any party
that arise out of the use of this service by the LSP. The LSP
shall defend SWBT against all end user claims just as if LSP
had provided such service to its end users with its own
employees.
F. The LSP also agrees to release, defend, indemnify and hold
harmless SWBT from any claim, demand or suit that asserts any
infringement or invasion of privacy or confidentiality of any
person(s), caused or claimed to be caused, directly or
indirectly, by SWBT employees and equipment associated with
provision of this service. This includes, but is not limited
to suits arising from disclosure of any customer specific
information associated with either the originating or
terminating numbers used to provision this service.
VI. DISCLAIMER OF WARRANTIES
SWBT MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING BUT NOT LIMITED TO ANY WARRANTY AS TO MERCHANTABILITY OR
FITNESS FOR INTENDED OR PARTICULAR PURPOSE WITH RESPECT TO SERVICES
PROVIDED HEREUNDER. ADDITIONALLY, SWBT ASSUMES NO RESPONSIBILITY WITH
REGARD TO THE CORRECTNESS OF THE DATA SUPPLIED BY LSP WHEN THIS DATA IS
ACCESSED AND USED BY A THIRD PARTY.
<PAGE> 104
APPENDIX ITR
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APPENDIX ITR
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APPENDIX ITR
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APPENDIX ITR
(TRUNKING REQUIREMENTS)
This Appendix provides descriptions of the trunking requirements for the LSP and
SWBT interconnection. The attached scenarios depict the recommended trunk groups
for local, intraLATA toll, interLATA "meet point", mass calling, E911 and
Operator Services interconnection. All references to incoming and outgoing trunk
groups are from the perspective of the LSP.
I. LOCAL TRAFFIC AND INTRALATA TOLL TRAFFIC
A. LSP Originating (LSP to SWBT)
When SWBT has a combined local and access tandem in an
exchange, IntraLATA Toll Traffic may be combined with the
Local Traffic on the same trunk group. When SWBT has more than
one combined local and access tandem in an exchange, the LSP
shall provide a separate trunk group to each SWBT tandem. When
there are separate SWBT access and local tandems in an
exchange, a separate local trunk group shall be provided to
the local tandem and a separate IntraLATA toll trunk group
shall be provided to the access tandem. This trunk group(s)
shall be one-way or two-way directionalized outgoing only and
will utilize Signaling System 7 (SS7) or multifrequency (MF)
protocol signaling.
B. LSP Terminating (SWBT to LSP)
When SWBT has a combined local and access tandem, SWBT shall
normally combine the Local and IntraLATA Toll Traffic over a
single trunk group to the LSP. When SWBT has a separate access
and local tandem in an exchange, a trunk group shall be
established from each tandem to the LSP. This trunk group(s)
shall be one-way or two-way directionalized incoming only and
will utilize SS7 or MF protocol signaling.
C. Direct End Office Trunking
The Parties shall establish direct end office primary high
usage trunk groups for Local Traffic and/or IntraLATA Toll
Traffic when end office traffic requires twelve or more trunks
on a shared facility or 24 trunks on a dedicated facility. If
LSP has established collocation to the end office, the trunks
shall be provisioned over the LSP collocation facility. If the
LSP has no collocation facilities, SWBT shall provision the
trunks from the POI to the end office. IntraLATA Toll Traffic
shall be provided over a separate trunk group to the SWBT
access tandem.
D. Two Way Trunking
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APPENDIX ITR
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Directionalized trunking specified in paragraphs I.A through
I.C above may be converted to two way trunking after an
initial period of traffic assessment no less than 6 months nor
more than 12 months unless otherwise mutually agreed upon.
Conversion to two way trunking is also conditional on both
parties agreeing to exchange traffic data and having
implemented such an exchange using the Data Interexchange
Carrier (DIXC) process via a Network Data Mover (NDM) or FTP
computer to computer file transfer interface. The traffic data
to be exchanged will be the Peg Count, Usage (measured in
one-hundred call seconds), Overflow and Maintenance Usage from
each end of the two way trunk group on a 7 day per week, 24
hour per day, 52 weeks per year basis. Two way trunking will
be jointly provisioned and maintained. Both Parties will agree
on who will have administrative control for the purpose of
issuing ASRs.
II. ACCESS TOLL CONNECTING TRUNKS
InterLATA traffic shall be transported between the LSP Central Office
and the SWBT access tandem over a "meet point" trunk group separate
from local and intraLATA toll traffic. The access toll connecting trunk
group will be established for the transmission and routing of Exchange
Access traffic between the LSP's end users and interexchange carriers
via a SWBT access tandem. When SWBT has more than one access tandem
within an exchange, the LSP shall utilize a single access toll
connecting trunk group to one SWBT tandem within the exchange. This
trunk group may be set up as one-way or two-way (two-way is preferred)
and will utilize SS7 or MF protocol signaling. The traffic use code and
modifier for this trunk group should be MDJ (see Scenario 1, 2, 3, or
4).
III. 800 (888) TRAFFIC
A. If the LSP chooses SWBT to handle 800 (888) database queries
from its central office switches, all the LSP originating 800
(888) service queries will be routed over the InterLATA
Interexchange Carrier (MDJ) trunk group. This traffic will
include a combination of both Interexchange Carrier 800 (888)
service and LEC 800 (888) service that will be identified and
segregated by carrier through the database query handled
through the SWBT tandem switch.
B. A separate trunk group from each Party to the other will be
required for IntraLATA 800 service if either Party chooses to
handle the 800 database queries from its switch location. The
purpose of the separate trunk group is to provide for the
segregation of originating 800 IntraLATA call volumes to
ensure the proper billing of intercompany settlement
compensation.
C. The trunk group shall be set up as one-way outgoing only and
will utilize SS7 protocol signaling. The traffic use code and
modifier for this trunk group should be DD800J (see Scenario
1, 2, 3, or 4).
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APPENDIX ITR
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IV. E911
A segregated trunk group will be required to each appropriate E911
tandem within the exchange in which the LSP offers the Exchange
Service. This trunk group shall be set up as a one-way outgoing only
and shall utilize MF CAMA signaling. The traffic use code and modifier
for this trunk group shall be ESJ (see Scenario 1, 2, 3, or 4).
V. MASS CALLING (PUBLIC RESPONSE CHOKE NETWORK)
A. A segregated trunk group shall be required to the designated
Public Response Choke Network tandem in each serving area.
This trunk group shall be one-way outgoing only and shall
utilize MF signaling. It is recommended that this group be
sized as follows:
<15001 access lines (AC) 2 trunks (min)
15001 to 25000 AC 3 trunks
25001 to 50000 AC 4 trunks
50001 to 75000 AC 5 trunks
>75000 AC 6 trunks (max)
B. The traffic use code and modifier for this trunk group shall
be TOCRJ (see Scenario 1, 2, 3, or 4).
VI. OPERATOR SERVICES
A. No Operator Contract:
Inward Operator Assistance (Toll Center (TC) Code plus 121) -
LSP may choose from two interconnection options for Inward
Operator Assistance as follows:
1. Option 1 - Interexchange Carrier (IXC) Carrier
LSP may utilize the Interexchange Carrier Network
(see Scenario 6). LSP operator will route its calls
requiring inward operator assistance through its
designated IXC POP to SWBT's TOPS tandem. SWBT shall
route its calls requiring inward operator assistance
to the LSP's Designated Operator Switch (TTC) through
the designated IXC POP.
2. Option 2 - LSP Operator Switch
LSP reports its switch as the designated serving
operator switch (TTC) for its NPA-NXXs and requests
SWBT to route its calls requiring inward operator
assistance to the LSP. This option requires a
segregated two-way (with MF signaling) trunk group
from SWBT's Access Tandem to the LSP switch. The
traffic use code and modifier for this trunk group
should
<PAGE> 108
APPENDIX ITR
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be OAJ (see Scenario 7). LSP's operator will route
its calls requiring inward operator assistance to
SWBT's operator over an IXC network.
B. Operator Contract with SWBT:
1. Directory Assistance (DA):
LSP may contract for DA services only. A segregated
trunk group for these services would be required to
SWBT's TOPS tandem. This trunk group is set up as
one-way outgoing only and utilizes MF and Operator
Services signaling. The traffic use code and modifier
for this trunk group should be DAJ (see Scenario 5).
2. Directory Assistance Call Completion (DACC):
LSP contracting for DA services may also contract for
DACC. This requires a segregated one-way trunk group
to SWBT's TOPS tandem. This trunk group is set up as
one-way outgoing only and utilizes MF signaling. The
traffic use code and modifier for this trunk group
should be DACCJ (see Scenario 5).
3. Busy Line Verification:
When SWBT's operator is under contract to verify the
LSP's end user loop, SWBT will utilize a segregated
one-way with MF signaling trunk group from SWBT's
Access Tandem to the LSP switch. The traffic use
code and modifier for this trunk group should be VRJ
(see Scenario 5).
4. Operator Assistance (0+, 0-):
This service requires a one-way trunk group from
the LSP switch to SWBT's TOPS tandem. Two types of
trunk groups may be utilized. If the trunk group
transports DA/DACC, the trunk group will be
designated as ETCMFJ (0-, 0+, DA, DACC) (see Scenario
5). If DA is not required or is transported on a
segregated trunk group, then the group will be
designated as ETCM2J (see Scenario 5). MF and
Operator Services signaling will be required on the
trunk group.
VII. TRUNK DESIGN BLOCKING CRITERIA
Trunk forecasting and servicing for the Local and IntraLATA Toll trunk
groups shall be based on the industry standard objective of two percent
(2%) overall time consistent average busy season busy hour loads (one
percent (1%) from the End Office to the Tandem and one percent (1%)
from the Tandem to the End Office based on Neil Wilkinson B.01M [Medium
Day-to-Day Variation] until traffic data is available). Listed
<PAGE> 109
APPENDIX ITR
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below are the trunk group types and their objectives:
Trunk Group Type Blocking Objective (Neil Wilkinson M)
---------------- -------------------------------------
Local Tandem 1%
Local Direct 2%
IntraLATA Interexchange 1%
911 1%
Operator Services (DA/DACC) 1%
Operator Services (0+, 0-) 0.5%
InterLATA Tandem 0.5%
VIII. FORECASTING/SERVICING RESPONSIBILITIES
A. Both Parties agree to provide an initial forecast for
establishing the initial interconnection facilities.
Subsequent forecasts will be provided no less than on a
semi-annual basis (concurrent with the publication of the SWBT
General Trunk Forecast including yearly forecasted trunk
quantities for all trunk groups described in this Appendix for
a minimum of three years and the use of Common Language
Location Identifier (CLLI-MSG) which is described in Bellcore
documents BR795-100-100 and BR795-400-100) or as mutually
agreed between the Parties. Trunk analyses will be performed
on a monthly basis at a minimum.
B. SWBT shall be responsible for forecasting and servicing the
trunk groups terminating to the LSP. LSP shall be responsible
for forecasting and servicing the trunk groups terminating to
SWBT end users and/or to be used for tandem transit to other
provider's networks, operator services and DA service, and
interLATA toll service. Standard trunk traffic engineering
methods will be used as described in Bell Communications
Research, Inc. (Bellcore) document SR-TAP-000191, Trunk
Traffic Engineering Concepts and Applications.
IX. TRUNK SERVICING
A. Orders between the Parties to establish, add, change or
disconnect trunks shall be processed by use of an Access
Service Request ("ASR").
B. All Parties shall jointly manage the capacity of local
Interconnection Trunk Groups. Either Party may send the other
Party an ASR to initiate changes to the Local Interconnection
Trunk Groups that the ordering Party desires based on the
ordering Party's capacity assessment. The receiving Party will
issue a Firm Order Confirmation ("FOC") and a Design Layout
Record ("DLR") to the ordering Party within five (5) business
days after receipt of the ASR.
C. Orders that comprise a major project (i.e., 5 DS1s or more)
shall be submitted in a timely fashion, and their
implementation shall be jointly planned and coordinated.
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APPENDIX ITR
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D. SWBT will process trunk service requests submitted via a
properly completed ASR within twenty (20) business days of
receipt of such ASR. Facilities must also be in place before
trunk orders can be completed.
E. In the event that a Party requires trunk servicing within
shorter time intervals than those provided for in this Article
IX due to a bona fide end user demand, such Party may
designate its ASR as an "Expedite" and the other Party shall
use best efforts to issue its FOC and DLR and install service
within the requested interval.
F. Each Party shall be responsible for engineering their networks
on their side of the POI.
X. SERVICING OBJECTIVE/DATA EXCHANGE
Each Party agrees to service trunk groups to the foregoing blocking
criteria in a timely manner when trunk groups exceed measured blocking
thresholds on an average time consistent busy hour for a 20 business
day study period. Upon request, each Party will make available to the
other, trunk group measurement reports for trunk groups terminating in
the requesting Party's network. These reports will contain offered
load, measured in CCS (100 call seconds), that has been adjusted to
consider the effects of overflow, retrials and day-to-day variation.
They will also contain overflow CCS associated with the offered load,
day-to-day variation, peakedness factor, the date of the last week in
the four week study period and the number of valid days of measurement.
These reports shall be made available at a minimum on a semi-annual
basis upon request.
XI. SPECIFICATIONS
All DS-1 and DS-3 facilities utilized for trunking established or
employed by the Parties for purposes of this Appendix shall meet the
specifications set forth in SWBT's TP-76625 dated June, 1990 and
TP-76839 dated January, 1996.
XII. TRUNK FACILITY UNDER UTILIZATION
A. At least once a year the Parties shall exchange trunk group
measurement reports as detailed above for trunk groups
terminating to the other Party's network. Each Party will
determine the required trunks for each of the other Party's
trunk groups for the previous twelve (12) months. Required
trunks will be based on the Blocking Objectives under "Trunk
Design Blocking Criteria" above and time consistent average
busy hour usage measurements from the highest four (4)
consecutive week (twenty (20) business day) study. Trunk
groups with excess capacity will be identified to the other
Party as eligible for downsizing. Excess capacity exists when
a trunk group, on a modular trunk group design basis, has
forty-eight (48) trunks (two (2) modular digroups) or ten
percent (10%), whichever is larger, over the required number
of trunks.
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APPENDIX ITR
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B. The party with excess trunking capacity will assess the trunk
capacity based on forecasted requirements and agrees to
disconnect trunks in excess of forecasted requirements for the
next twelve (12) months. If after twelve (12) months the trunk
group continues to have excess capacity the Party agrees to
take timely steps to disconnect all excess capacity.
C. Where available and upon the request of the other Party, each
Party shall cooperate to ensure that its trunk groups are
configured utilizing the B8ZS ESF protocol for 64 kbps clear
channel transmission to allow for ISDN interoperability
between the Parties' respective networks.
D. Installation, Maintenance, Testing and Repair. SWBT's standard
intervals for Feature Group D Switched Exchange Access
Services will be used for Interconnection trunks as specified
in the most current SWBT Accessible Letter, currently
SWA96-036, dated April 15, 1996. LSP shall meet the same
intervals for comparable installations, maintenance, joint
testing, and repair of its facilities and services associated
with or used in conjunction with Interconnection or shall
notify SWBT of its inability to do so and will negotiate such
intervals in good faith.
<PAGE> 112
APPENDIX ITR-SCENARIOS
PAGE 1 OF 7
SWBT/BIRCH
SCENARIO 1
SINGLE RATE AREA - COMBINED SWBT LOCAL/ACCESS TANDEM
WITHOUT DIRECT END OFFICE, ILEC OR IXC TRUNKING
[FLOW CHART]
TRAFFIC USE/MODIFIER DESCRIPTION
- -------------------- -----------
1. DDJ INTRALATA AND LOCAL (SS7 SIGNALING)
2. TCJ INTRALATA AND LOCAL (SS7 SIGNALING)
3. TOCRJ MASS CALLING (MF SIGNALING)
4. DD800J INTRALATA 800 (MAXIMIZER 800)(SS7 SIGNALING)#
5. MDJ INTERLATA ONLY (MF SIGNALING)@
6. MDJ INTERLATA ONLY (SS7 SIGNALING)
7. ESJ EMERGENCY SERVICE (MF SIGNALING)
@ Required at the Dallas 4 ESS switch only for 10XXXX # cut through and Feature
Group B over D
# Required if SWBT does not perform database query for the LSP
<PAGE> 113
APPENDIX ITR-SCENARIOS
PAGE 2 OF 7
SWBT/BIRCH
SCENARIO 2
SINGLE RATE AREA - COMBINED SWBT LOCAL/ACCESS TANDEM
WITH SOME DIRECT END OFFICE, ILEC AND IXC TRUNKING
[FLOW CHART]
TRAFFIC USE/MODIFIER DESCRIPTION
- -------------------- -----------
1. IEJ LOCAL ONLY (SS7 SIGNALING)
2. IEJ LOCAL ONLY (SS7 SIGNALING)
3. DDJ INTRALATA AND LOCAL (SS7 SIGNALING)
4. TCJ INTRALATA AND LOCAL (SS7 SIGNALING)
5. TOCRJ MASS CALLING (MF SIGNALING)
6. DD800J INTRALATA 800 (MAXIMIZER 800) (SS7 SIGNALING)#
7. MDJ INTERLATA ONLY (MF SIGNALING)@
8. MDJ INTERLATA ONLY (SS7 SIGNALING)
9. ESJ EMERGENCY SERVICE (MF SIGNALING)
@ Required at the Dallas 4 ESS switch only for 10XXXX# cut through and Feature
Group B over D
# Required if SWBT does not perform the database query for the LSP
<PAGE> 114
APPENDIX ITR - SCENARIOS
PAGE 3 OF 7
SWBT/BIRCH
SCENARIO 3
SINGLE RATE AREA - SEPARATE SWBT LOCAL AND ACCESS
TANDEMS WITHOUT DIRECT END OFFICE, ILEC OR IXC TRUNKING
[FLOW CHART]
TRAFFIC USE/MODIFIER DESCRIPTION
- -------------------- ---------------------------------------------
1. TOJ LOCAL ONLY (SS7 SIGNALING)
2. TGJ LOCAL ONLY (SS7 SIGNALING)
3. TOCRJ MASS CALLING (MF SIGNALING)
4. DD800J INTRALATA 800 (MAXIMIZER 800) (SS7 SIGNALING)#
5. DDJ INTRALATA ONLY (SS7 SIGNALING)
6. TCJ INTRALATA ONLY (SS7 SIGNALING)
7. MDJ INTERLATA ONLY (SS7 SIGNALING)
8. ESJ EMERGENCY SERVICE (MF SIGNALING)
# Required if SWBT does not perform the database query for the LSP.
<PAGE> 115
APPENDIX ITR-SCENARIOS
PAGE 4 OF 7
SWBT/BIRCH
SCENARIO 4
SINGLE RATE AREA - SEPARATE SWBT LOCAL AND ACCESS
TANDEMS WITH SOME DIRECT END OFFICE, ILEC AND IXC TRUNKING
[FLOW CHART]
TRAFFIC USE/MODIFIER DESCRIPTION
1. IEJ LOCAL ONLY (SS7 SIGNALING)
2. IEJ LOCAL ONLY (SS7 SIGNALING)
3. TOJ LOCAL ONLY (SS7 SIGNALING)
4. TGJ LOCAL ONLY (SS7 SIGNALING)
5. TOCRJ MASS CALLING (MF SIGNALING)
6. DD800J INTRALATA 800 (MAXIMIZER 800) (SS7 SIGNALING)#
7. DDJ INTRALATA ONLY (SS7 SIGNALING)
8. TCJ INTRALATA ONLY (SS7 SIGNALING)
9. MDJ INTERLATA ONLY (SS7 SIGNALING)
10. ESJ EMERGENCY SERVICE (MF SIGNALING)
# Required if SWBT does not perform database query for the LSP
<PAGE> 116
APPENDIX ITR -- SCENARIOS
PAGE 5 OF 7
SWBT/BIRCH
SCENARIO 5
SINGLE RATE AREA - COMBINED SWBT LOCAL/ACCESS TANDEM
WHERE SWBT IS THE OPERATOR SERVICES PROVIDER FOR THE LSP
[FLOW CHART]
TRAFFIC USE/MODIFIER DESCRIPTION
- -------------------- -----------------------------------------------------
1. VRJ BUSY LINE VERIFICATION (MF SIGNALING)#
2. DAJ or DACCJ DIRECTORY ASSISTANCE or DIRECTORY ASSISTANCE CALL
COMPLETION (MF SIGNALING, OPERATOR SERVICES SIGNALING)
3. ETCM2J 0-, 0+ COMBINED COIN AND NONCOIN
(MF SIGNALING, OPERATOR SERVICES SIGNALING)
4. ETCMFJ 0-, 0+ DA, DACC COMBINED COIN AND NONCOIN
(MF SIGNALING, OPERATOR SERVICES SIGNALING)
# Busy Line Verification is sometimes trunked out from the TOPS Tandem rather
than the Access Tandem.
Revised 1/7/97
LSP5.AF3
<PAGE> 117
APPENDIX ITR - SCENARIOS
PAGE 6 OF 7
SWBT/BIRCH
SCENARIO 6
SINGLE RATE AREA - COMBINED SWBT LOCAL/ACCESS TANDEM
WHERE SWBT IS NOT THE OPERATOR SERVICES PROVIDER FOR THE LSP
121 INWARD OPERATOR ASSISTANCE
[Flow Chart]
NOTE: THIS SCENARIO WOULD USE EXISTING INTEREXCHANGE CARRIER NETWORK.
<PAGE> 118
APPENDIX ITR - SCENARIOS
PAGE 7 OF 7
SWBT/BIRCH
SCENARIO 7
SINGLE RATE AREA - COMBINED SWBT LOCAL/ACCESS TANDEM
WHERE SWBT IS NOT THE OPERATOR SERVICES PROVIDE
FOR THE LSP AND THE LSP'S SWITCH IS THE DESIGNATED
OPERATOR SWITCH (TTC) FOR 121 INWARD ASSISTANCE
[FLOW CHART]
TRAFFIC USE/MODIFIER DESCRIPTION
- -------------------- ----------------------------------------------
1. OAJ ACCESS TO INWARD OPERATOR (121) (MF SIGNALING)
<PAGE> 119
APPENDIX MAP
KANSAS CITY, MISSOURI
SWBT OPTIONAL CALLING AREAS
- - FARLEY
- - SMITHVILLE
EXCELSIOR SPRINGS
RICHMOND
GRAIN VALLEY
GREENWOOD
ARCHIE
ILEC MANDATORY AREAS
- - FERRELVIEW
<PAGE> 120
APPENDIX MAP
ST. LOUIS, MISSOURI
SWBT OPTIONAL CALLING AREAS
- - PORTAGE DES SIOUX
ST. CHARLES
CHESTERFIELD
MANCHESTER
VALLEY PARK
FENTON
MAXVILLE
IMPERIAL
- - HARVESTER
POND
EUREKA
HIGH RIDGE
ANTONIA
HERCULANEUM
GRAY SUMMIT
PACIFIC
CEDAR HILL
WARE
HILLSBORO
FESTUS
DESOTO
<PAGE> 121
APPENDIX NIM
PAGE 1 OF 6
APPENDIX NIM
<PAGE> 122
APPENDIX NIM
PAGE 2 OF 6
APPENDIX NETWORK INTERCONNECTION METHODS (NIM)
This Appendix NIM designates Network Interconnection Methods (NIMs) to
be used by the Parties. These include, but are not limited to: MidSpan Fiber
Interconnection (MSFI); Virtual Collocation Interconnection; SONET Based
Interconnection; Physical Collocation Interconnection; leasing of SWBT
facilities; and other methods as mutually agreed to by the Parties.
I. MID-SPAN FIBER INTERCONNECTION (MSFI)
Mid-Span Fiber Interconnection (MSFI) between Southwestern Bell
Telephone (SWBT) and LSP can occur at any mutually agreeable,
economically and technically feasible point between LSP's premises and
a SWBT tandem or end office. This interconnection will be on a
point-to-point SONET system over single mode fiber optic cable.
MSFI may be used to provide interconnection trunking as defined in
Appendix ITR.
A. There are two basic mid-span interconnection designs:
1. Design One: LSP's fiber cable and SWBT's fiber cable
are connected at an economically and technically
feasible point between the LSP location and the last
entrance manhole at the SWBT central office.
The Parties may agree to a location with access to an
existing SWBT fiber termination panel. In these
cases, the network interconnection point (POI) shall
be designated outside of the SWBT building, even
though the LSP fiber may be physically terminated on
a fiber termination panel inside of a SWBT building.
In this instance, LSP will not incur fiber
termination charges and SWBT will be responsible for
connecting the cable to the SWBT facility.
The Parties may agree to a location with access to an
existing LSP fiber termination panel. In these cases,
the network interconnection point (POI) shall be
designated outside of the LSP building, even though
the SWBT fiber may be physically terminated on a
fiber termination panel inside of an LSP building. In
this instance, SWBT will not incur fiber termination
charges and LSP will be responsible for connecting
the cable to the LSP facility.
If a suitable location with an existing fiber
termination panel cannot be agreed upon, LSP and SWBT
shall mutually determine provision of a fiber
termination panel housed in an outside, above ground,
cabinet placed at the physical POI. Ownership and the
cost of provisioning the panel will be negotiated
between the two parties.
<PAGE> 123
APPENDIX NIM
PAGE 3 OF 6
2. Design Two: LSP will provide fiber cable to the last
entrance manhole at the SWBT tandem or end office
switch with which LSP wishes to interconnect. LSP
will provide a sufficient length of fiber optic cable
for SWBT to pull the fiber cable to the SWBT cable
vault for termination on the SWBT fiber distribution
frame (FDF). In this case the POI shall be at the
manhole location.
Each Party is responsible for designing,
provisioning, ownership and maintenance of all
equipment and facilities on its side of the POI. Each
Party is free to select the manufacturer of its Fiber
Optic Terminal (FOT). Neither Party will be allowed
to access the Data Communication Channel (DCC) of the
other Party's FOT. The Parties will work
cooperatively to achieve equipment compatibility.
B. The Parties will mutually agree upon the precise terms of each
mid-span interconnection facility. These terms will cover the
technical details of the interconnection as well as other
network interconnection, provisioning and maintenance issues.
C. The LSP location includes FOTs, multiplexing and fiber
required to take the optical signal handoff from SWBT for
interconnection trunking as outlined in Appendix ITR.
D. The fiber connection point may occur at several locations:
1. a location with an existing SWBT fiber termination
panel. In this situation, the POI shall be outside
the SWBT building which houses the fiber termination
panel;
2. a location with access to an existing LSP fiber
termination panel. In these cases, the network
interconnection point (POI) shall be designated
outside of the LSP building, even though the SWBT
fiber may be physically terminated on a fiber
termination panel inside a LSP building;
3. a location with no existing SWBT fiber termination
panel. In this situation, SWBT and LSP will negotiate
provisioning, maintenance and ownership of a fiber
termination panel and above ground outside cabinet as
a POI and for connection of the fiber cables;
4. a manhole outside of the SWBT central office. In this
situation, LSP will provide sufficient fiber optic
cable for SWBT to pull the cable into the SWBT cable
vault for termination on the SWBT FDF. The POI will
be at the manhole and SWBT will assume maintenance
responsibility for the
<PAGE> 124
APPENDIX NIM
PAGE 4 OF 6
fiber cabling from the manhole to the FDF.
E. The SWBT tandem or end office switch includes all SWBT FOT,
multiplexing and fiber required to take the optical signal
hand-off provided from LSP for interconnection trunking as
outlined in Appendix ITR. This location is SWBT's
responsibility to provision and maintain.
F. In both designs, LSP and SWBT will mutually agree on the
capacity of the FOT(s) to be utilized. The capacity will be
based on equivalent DS1s that contain trunks and interLATA
traffic. Each Party will also agree upon the optical frequency
and wavelength necessary to implement the interconnection. The
Parties will develop and agree upon methods for the capacity
planning and management for these facilities, terms and
conditions for over provisioning facilities, and the necessary
processes to implement facilities as indicated below. These
methods will meet quality standards as mutually agreed to by
LSP and SWBT.
II. AVOIDANCE OF OVER PROVISIONING
Underutilization is the inefficient deployment and use of the network
due to forecasting a need for more capacity than actual usage requires,
and results in unnecessary costs for SONET systems. To avoid over
provisioning, the Parties will agree to joint facility growth planning
as detailed below.
III. JOINT FACILITY GROWTH PLANNING
The initial fiber optic system deployed for each interconnection shall
be the smallest standard available, unless otherwise agreed. For SONET
this is an OC-3 system. The following list the criteria and processes
needed to satisfy additional capacity requirements beyond the initial
system.
A. Criteria:
1. Investment is to be minimized;
2. Facilities are to be deployed in a "just in time"
fashion.
B. Processes
1. discussions to provide relief to existing facilities
will be triggered when either Party recognizes that
the overall system facility (DS1s) is at 90%
capacity;
2. both Parties will perform a joint validation to
ensure current trunks have
<PAGE> 125
APPENDIX NIM
PAGE 5 OF 6
not been over-provisioned. If any trunk groups are
over-provisioned, trunks will be turned down as
appropriate. If any trunk resizing lowers the fill
level of the system below 90%, the growth planning
process will be suspended and will not be reinitiated
until a 90% fill level is achieved. Trunk design
blocking criteria described in Appendix ITR will be
used in determining trunk group sizing requirements
and forecasts;
3. if based on the forecasted equivalent DS1 growth, the
existing fiber optic system is not projected to
exhaust within one year, the Parties will suspend
further relief planning on this interconnection until
a date one year prior to the projected exhaust date.
If growth patterns change during the suspension
period, either Party may re-initiate the joint
planning process;
4. if the placement of a minimum size FOT will not
provide adequate augmentation capacity for the joint
forecast over a two year period, and the forecast
appears reasonable based upon history, the next
larger system may be deployed. In the case of a SONET
system, the OC-3 system could be upgraded to an
OC-12. If the forecast does not justify a move to the
next larger system, another minimal size system (such
as on OC-3) could be placed. This criteria assumes
both Parties have adequate fibers for either
scenario. If adequate fibers do not exist, both
Parties would negotiate placement of additional
fibers;
5. both Parties will negotiate a project service date
and corresponding work schedule to construct relief
facilities in an effort to achieve "just in time"
deployment;
6. the joint planning process/negotiations should be
completed within two months of identification of 90%
fill.
IV. VIRTUAL COLLOCATION INTERCONNECTION
The description of Virtual Collocation Interconnection is contained in
SWBT's Virtual Collocation tariffs (i.e., SWBT's Tariff F.C.C. No. 73).
V. SONET-BASED INTERCONNECTION
The description of SONET-Based Interconnection is contained in SWBT's
Sonet-Based Interconnection tariffs (i.e., SWBT's Tariff F.C.C. No.
73).
<PAGE> 126
APPENDIX NIM
PAGE 6 OF 6
VI. PHYSICAL COLLOCATION INTERCONNECTION
SWBT will provide Physical Collocation Interconnection on
nondiscriminatory terms and conditions at the time LSP requests such
interconnection.
VII. LEASING OF SWBT'S FACILITIES
LSP's leasing of SWBT's facilities for purposes of network
interconnection will be subject to the agreement of the Parties.
<PAGE> 127
APPENDIX PORT
PAGE 1 OF 5
APPENDIX PORT
<PAGE> 128
APPENDIX PORT
PAGE 2 OF 5
APPENDIX PORT
I. GENERAL
SWBT and LSP will provide Interim Number Portability (INP) in
accordance with requirements of the Act. INP will be provided by each
Party to the other upon request. INP will be provided with minimum
impairment of functionality, quality, reliability and convenience to
subscribers of LSP or SWBT. The Parties will provide Permanent Number
Portability (PNP) as soon as it is technically feasible, in conformance
with FCC rules and the Act, and will participate in development of PNP
in the state, in accordance with the FCC's First Report and Order in
Docket No. 95-116 (hereinafter called the Number Portability Order). As
described herein, INP is a service arrangement whereby an end user, who
switches subscription of exchange service from one provider to another
is permitted to retain, for its use, the existing assigned number
provided that the end user remains in the same serving wire center.
II. TERMS, CONDITIONS UNDER WHICH SWBT SHALL PROVIDE INP
A. Service Provided
1. SWBT shall only provide INP, as described herein, to
LSP.
2. SWBT shall only provide INP services and facilities
where technically feasible, subject to the
availability of facilities, and only from properly
equipped central offices. SWBT does not offer INP
services and facilities for NXX codes 555, 976, 950.
3. SWBT shall not provide INP services for end user
accounts where the end user's payments are thirty
(30) days or more in arrears, or where contract
termination liabilities would be assessed by SWBT to
the end user, unless full payment is made, or an
agreement is reached where LSP agrees to make full
payment on the end user's behalf, including any
termination amounts due or the Parties otherwise
agree.
4. When the exchange service offerings associated with
INP service are provisioned using remote switching
arrangements, SWBT shall make INP service available
from, or to the host central offices.
B. Obligations Of SWBT
SWBT's sole responsibility is to comply with the service
requests it receives from LSP and to provide INP in accordance
with this Appendix.
<PAGE> 129
APPENDIX PORT
PAGE 3 OF 5
C. Obligations Of LSP
1. LSP shall coordinate the provision of service with
SWBT to assure that LSP's switch is capable of
accepting INP ported traffic.
2. LSP is solely responsible to provide equipment and
facilities that are compatible with SWBT's service
parameters, interfaces, equipment and facilities. LSP
shall provide sufficient terminating facilities and
services at the terminating end of an INP call to
adequately handle all traffic to that location and
shall ensure that its facilities, equipment and
services do not interfere with or impair any
facility, equipment or service of SWBT or any of its
end users. In the event that SWBT determines in its
sole judgment that LSP will likely impair or is
impairing, or interfering with any equipment,
facility or service of SWBT or any of its end users,
SWBT may either refuse to provide INP service or
terminate it in accordance with other provisions of
this Agreement or SWBT's tariffs.
3. LSP shall provide an appropriate intercept
announcement service for any telephone numbers
subscribed to INP service for which LSP is not
presently providing exchange service or terminating
to an end user, to the extent LSP desires such an
announcement.
4. Where LSP chooses to disconnect or terminate any INP
service, LSP shall designate which standard SWBT
intercept announcement SWBT shall provide for
disconnected number.
5. LSP shall designate to SWBT at the time of its
initial service request for INP service one of the
following options for handling and processing of
Calling Card, Collect, Third Party, and other
operator handled non-sent paid calls from or to LSP
assigned telephone numbers:
a. LSP may elect to block the completion of
third number and calling card calls through
the use of LIDB to select ported numbers.
b. For non-sent paid calls billed to INP
assigned numbers, a separate
sub-clearinghouse billing arrangement must
be established which will provide for the
transmission of the EMR 01-01-01 billing
records, and settlement of toll revenues.
D. Limitations Of Service
1. SWBT is not responsible for adverse effects on any
service, facility or equipment from the use of INP
service.
2. End-to-end transmission characteristics may vary
depending on the
<PAGE> 130
APPENDIX PORT
PAGE 4 OF 5
distance and routing necessary to complete calls over
INP facilities and the fact that another carrier is
involved in the provisioning of service. Therefore,
end-to-end transmission characteristics cannot be
specified by SWBT for such calls.
E. Service Descriptions
1. INP-REMOTE. INP-Remote is a service whereby a call
dialed to an INP-Remote equipped telephone number,
assigned to SWBT, is automatically forwarded to an
LSP-assigned, 7 or 10 digit telephone number. The
forwarded-to number is specified by LSP at the same
location.
a. INP-Remote provides an initial call path and
two additional paths for the forwarding of
no more than three (3) simultaneous calls to
LSP's specified forwarded-to number.
Additional call paths are available on a per
path basis.
b. The LSP-assigned forwarded-to number shall
be treated as two separate calls with
respect to interconnection compensation, end
user toll billing and intercompany
settlement and access billing, i.e., an
incoming call to the SWBT ported number
shall be handled like any other SWBT call
being terminated to that end office and the
ported call to LSP assigned telephone number
in LSP switch shall be handled as any local
calls between SWBT and LSP.
c. Where facilities exist, SWBT will provide
identification of the originating telephone
number, via SS7 signaling, to LSP.
2. INP-DIRECT. INP-Direct is a service which provides
for the delivery of the called (dialed) number to
LSP's switching (central office or premises)
equipment for identification and subsequent routing
and call completion.
a. INP-Direct is available either on a per
voice grade channel basis or a per DS1 (24
equivalent voice grade channels) basis.
(1) Where the location of LSP's
switching equipment to which SWBT is
providing voice grade or DS1
INP-Direct service resides outside
the exchange or central office
serving area from which the
INP-Direct service is purchased, LSP
shall pay applicable interoffice
mileage charges as specified in the
applicable state Special Access
Tariff.
b. INP-Direct service must be established with
a minimum configuration of two (2) voice
grade channels and one unassigned telephone
number per SWBT switch. Transport facilities
arranged
<PAGE> 131
APPENDIX PORT
PAGE 5 OF 5
for INP-Direct may not be mixed with any
other type of trunk group. Outgoing calls
may not be placed over facilities arranged
for INP-Direct service.
c. SS7 Signaling is not available on the
INP-Direct facilities.
F. Pricing
1. The Parties will comply with all effective FCC,
Commission and/or court Orders governing INP cost
recovery and compensation. The Parties acknowledge
that the Telephone Number Portability Order is
subject to pending Petitions for Reconsideration and
may be subject to appeal. As such, the Number
Portability Order may be reconsidered, revised and
remanded, or vacated, subject to further proceedings
before the FCC. As such, until a final decision is
rendered on INP cost recovery, the Parties agree to
track the costs associated with the implementation
and provision of INP and to "true-up" INP-related
accruals to reflect the final terms of any such
order.
2. Neither Party waives its rights to advocate its views
on INP cost recovery, or to present before any
appropriate regulatory agency or court its views on
FCC or Commission actions pertaining to INP cost
recovery.
<PAGE> 132
<TABLE>
<CAPTION>
LSP SERVING AREA DESCRIPTION AND E9-1-1 INTERCONNECTION DETAILS
LSP NAME & CONTACTS LSP "OCN" LSP Switch Name & Addr. Switch Type LSP NPA/NXX(s) included
<S> <C> <C> <C> <C>
CLLI Code # 9-1-1 Trunks Requested
E9-1-1 Manager LSP Telco ID
"Connect Signal" Digits (4) "Default" PSAP
1 - 1
Database Administrator Estimated # of EAAs ETST Code
LSP Service Area Definition:
Switch Site Contact
</TABLE>
<TABLE>
<CAPTION>
SWBT E9-1-1 SYSTEM CONFIGURATION ASSOCIATED WITH DESIGNATED E9-1-1 CONTROL OFFICE
E9-1-1 CONTROL OFFICE: PSAPs INCLUDED IN COMMUNITY E9-1-1 CUSTOMER and
CLLI Code: 9-1-1 SERVICE PLAN for MSAG PULL (3) AGENCY TYPE (see legend below)
<S> <C> <C> <C> <C>
E9-1-1 Features Required:
# of 9-1-1 Trunks from LSP:
MSAG Update Interval: Monthly
<FN>
FOOTNOTES: (1)
(2)
(3) MSAG will only include addresses within SWBT exchanges, unless specifically stated
otherwise.
(4) Refer to network interface specifications in Exhibit III.
</FN>
</TABLE>
<TABLE>
<S> <C>
"TYPE of AGENCY" LEGEND:
HRC = Home Rule City
ECD = Emergency Communications District
COG = Council of Governments or Regional Planning Commission
GLC = General Law City
Cnty = County with special provisions (only applies to Dallas County)
Date Prepared
</TABLE>
<PAGE> 133
APPENDIX TP
PAGE 1 OF 2
APPENDIX TP
<PAGE> 134
APPENDIX TP
PAGE 2 OF 2
ELECTRICAL/OPTICAL INTERFACES:
- - SWBT Technical Publication TP-76839 - SONET Transmission Requirements
Performance and Interface Specifications, Issue 1, January 1996, or the most
current version.
- - SWBT Technical Publication TP-76625 - High Capacity Digital Service
1.544 Mbs and 44.736 Mbs Requirements and Transmission Limits, Issue 1, June
1990, or the most current version.
INTERCONNECTION RESPONSIBILITIES RELATED TO SIGNALING:
- - SWBT Technical Publication, TP-76638 - Common Channel Signaling Network
Interface Specifications
- - GR-000246-CORE, Bell Communications Research Specifications of
Signaling System 7
- - GR-000317-CORE, Switching System Requirements for Call Control Using
the Integrated Services Digital Network User Part
- - GR-000394-CORE, Switching System Requirements for Interexchange Carrier
Interconnection Using the Integrated Services Digital Network User Part
- - GR-000606-CORE, LATA Switching Systems Generic Requirements-Common
Channel Signaling-Section 6.5
- - GR-000905-CORE, Common Channel Signaling Network Interface
Specification Supporting Network Interconnection Message Transfer Part (MTP) and
Integrated Digital Services Network User Part (ISDNUP)
COLLOCATION
- - SWBT's Technical Publication for Physical Collocation (sixth revision
dated 2-18-97)
TECHNICAL EXHIBIT SETTLEMENT PROCEDURES
- - TESP
<PAGE> 135
APPENDIX RECORDING
PAGE 1 OF 7
APPENDIX RECORDING
<PAGE> 136
APPENDIX RECORDING
PAGE 2 OF 7
APPENDIX RECORDING
RECORDING, MESSAGE PROCESSING AND
PROVISION OF INTEREXCHANGE CARRIER TRANSPORTED
MESSAGE DETAIL APPENDIX
This Appendix sets forth the terms and conditions under which SWBT will provide
recording, message processing and message detail services as described in total
in Exhibit I, SERVICES AND ASSOCIATED CHARGES, and those services specifically
selected by LSP as described in Exhibit II, SELECTED SERVICE OPTIONS AND METHOD
OF PROVISION, at the rates set forth in Exhibit III, BASIS OF COMPENSATION.
Exhibits I, II and III are attached hereto and made a part of this Appendix by
reference.
I. DEFINITIONS
As used herein and for the purposes of this Appendix, the following
terms shall have the meanings set forth below:
A. Access Usage Record (AUR) - a message record which contains
the usage measurement reflecting the service feature group,
duration and time of day for a message and is subsequently
used to bill access to Interexchange Carriers (IXCs).
B. Assembly and Editing - the aggregation of recorded customer
message details to create individual message records and the
verification that all necessary information required to ensure
all individual message records meet industry specifications is
present.
C. Billing Company - the company that bills end users for the
charges incurred in originating and terminating IXC
transported calls.
D. Centralized Message Distribution System (CMDS) - the national
network of private line facilities used to exchange Exchange
Message Records (EMR) formatted billing data between SWBT and
the Billing Company.
E. Data Transmission - the forwarding by SWBT of IXC transported
toll message detail and/or access usage record detail in EMR
format over data lines or on magnetic tapes to the appropriate
Billing Company.
F. Exchange Message Record (EMR) - Industry standard message
format as described in accordance with the Bellcore Practice
BR010-200-010 developed for the interexchange of
telecommunications message information.
G. Interexchange Carrier (IXC) - A third party transmission
provider that carries long distance voice and non-voice
traffic between user locations for a related recurring
<PAGE> 137
APPENDIX RECORDING
PAGE 3 OF 7
fee. IXCs provide service interstate and intrastate. In some
states IXCs are permitted to operate within a LATA.
H. Interexchange Carrier Transported - telecommunications
services provided by an IXC or traffic transported by
facilities belonging to an IXC.
I. Message Processing - the creation of individual EMR formatted
billable message detail records from individual recordings
that reflect specific billing detail for use in billing the
end user and/or access usage records from individual
recordings that reflect the service feature group, duration
and time of day for a message, Carrier Identification Code,
among other fields, for use in billing access to the
Interexchange Carriers. Message Processing includes performing
CMDS online edits required to ensure message detail and access
usage records are consistent with CMDS specifications.
J. Originating Local Exchange Carrier Company - the company whose
local exchange telephone network is used to originate calls
thereby providing originating exchange access to IXCs.
K. Provision of Message Detail - the sorting of all billable
message detail and access usage record detail by Revenue
Accounting Office, Operating Company Number or Service Bureau,
splitting of data into packs for invoicing, and loading of
data into files for data transmission to LSP for those records
created internally or received from other Local Exchange
Carrier Companies or Interexchange Carriers through SWBT's
internal network or national CMDS.
L. Record - a logical grouping of information as described in the
programs that process information and create the magnetic
tapes or data files.
M. Recording - the creation and storage on magnetic tape or other
medium of the basic billing details of a message in Automatic
Message Accounting (AMA) format.
N. Service Switching Point (SSP) - a signaling point that can
launch queries to databases and receive/interpret responses
used to provide specific customer services.
O. Switching Control Point (SCP) - the real time database system
that contains routing instructions for 800 calls. In addition
to basic routing instructions, the SCP may also provide
vertical feature translations, i.e., time of day, day of week
routing, out of area screening and/or translation of the
dialed 800 number to its assigned working telephone number.
P. 800 SCP Carrier Access Usage Summary Record (SCP Record) - a
summary record which contains information concerning the
quantity and types of queries
<PAGE> 138
APPENDIX RECORDING
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launched to a SWBT SCP. In those situations where charges are
applicable for the production and delivery of SCP records,
such charges will be those specified in Exhibit III-A
pertaining to the production and forwarding of AUR data.
Q. Terminating Local Exchange Carrier Company - the company whose
local exchange telephone network is used to terminate calls
thereby providing terminating exchange access to IXCs.
II. RESPONSIBILITIES OF THE PARTIES
A. SWBT will record all IXC transported messages for LSP carried
over all Feature Group Switched Access Services that are
available to SWBT-provided recording equipment or operators.
Unavailable messages (i.e., certain operator messages which
are not accessible by SWBT-provided equipment or operators)
will not be recorded. The recording equipment will be provided
at locations selected by SWBT.
B. SWBT will perform assembly and editing, message processing and
provision of applicable access usage record detail for IXC
transported messages if the messages are recorded by SWBT.
C. SWBT will provide access usage records that are generated by
SWBT.
D. Assembly and editing will be performed on all IXC transported
messages recorded by SWBT, during the billing period
established by SWBT and selected by LSP from Exhibit III-B.
E. Standard EMR record formats for the provision of billable
message detail and access usage record detail will be
established by SWBT and provided to LSP.
F. Recorded access usage record detail will not be sorted to
furnish detail by specific end users, by specific groups of
end users, by office, by feature group or by location.
G. SWBT will provide message detail to LSP either on magnetic
tapes or in data files, depending on the option contracted for
by LSP in Exhibit III. Only ONE method may be selected by LSP.
1. Magnetic Tapes
a. SWBT will supply the magnetic tapes, which
will be provided without the return of
previously supplied tapes.
b. LSP will specify one of the following
options for provision of tapes:
<PAGE> 139
APPENDIX RECORDING
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1) SWBT may send the tapes to LSP via
first class U.S. Mail Service or an
equivalent service of SWBT's
choice, or
2) LSP may pick up the magnetic tapes
at a location designated by SWBT.
3) If, at the request of LSP,
overnight delivery other than those
provided in 1 & 2 above is
requested, the cost of this
delivery will be at the expense of
LSP.
2. Data Files
The message detail may be transmitted to LSP in data
files via data lines using software and hardware
acceptable to both parties.
H. In Exhibit III, LSP will identify separately the location
where the tapes and any data transmissions should be sent (as
applicable) and the number of times each month the information
should be provided. SWBT reserves the right to limit the
frequency of transmission to existing SWBT processing and work
schedules, holidays, etc.
I. SWBT will determine the number of magnetic tapes or data files
required to provide the access usage record detail to LSP.
J. Recorded access usage record detail previously provided LSP
and lost or destroyed through no fault of SWBT will not be
recovered and made available to LSP except on an individual
case basis at a cost determined by SWBT.
K. When SWBT receives rated billable messages from an IXC or
another Local Exchange Carrier (LEC) that are to be billed by
LSP, SWBT will forward those messages to LSP.
L. When SWBT has rated billable message detail originating from
LSP's end users requiring billing by another LEC or LSP, SWBT
will forward such messages to the appropriate Billing Company.
M. SWBT will record the applicable detail necessary to generate
access usage records and forward them to LSP for its use in
billing access to the IXC.
III. BASIS OF COMPENSATION
A. Compensation for recording, assembly and editing, rating,
message processing and provision of messages provided
hereunder by SWBT for LSP shall be based upon the rates and
charges set forth in Exhibit III, BASIS OF COMPENSATION.
B. When message detail is entered on a magnetic tape or data file
for provision of
<PAGE> 140
APPENDIX RECORDING
PAGE 6 OF 7
message detail to LSP, a per record charge will apply for each
record processed. SWBT will determine the charges based on its
count of the records processed.
IV. LIABILITY
A. Except as otherwise provided herein, neither party shall be
liable to the other for any special, indirect, or
consequential damage of any kind whatsoever. A party shall not
be liable for its inability to meet the terms of this Appendix
where such inability is caused by failure of the first party
to comply with the obligations stated herein. Each party is
obliged to use its best efforts to mitigate damages.
B. When SWBT is notified that, due to error or omission,
incomplete data has been provided to LSP, SWBT will make
reasonable efforts to locate and/or recover the data and
provide it to LSP at no additional charge. Such requests to
recover the data must be made within 30 days from the date the
details initially were made available to LSP. If written
notification is not received within 30 days, SWBT shall have
no further obligation to recover the data and shall have no
further liability to LSP.
C. If, despite timely notification by LSP, message detail is lost
and unrecoverable as a direct result of SWBT having lost or
damaged tapes or incurred system outages while performing
recording, assembly and editing, rating, message processing,
and/or transmission of message detail, SWBT will estimate the
volume of lost messages and associated revenue based on
information available to it concerning the average revenue per
minute for the average interstate and/or intrastate call. In
such events, SWBT's liability to LSP shall be limited to the
granting of a credit adjusting amounts otherwise due from it
equal to the estimated net lost revenue associated with the
lost message detail.
D. SWBT will not be liable for any costs incurred by LSP when LSP
is transmitting data files via data lines and a transmission
failure results in the non-receipt of data by SWBT.
E. LSP agrees to defend, indemnify, and hold harmless SWBT from
any and all losses, damages, or other liability, including
attorney fees, that it may incur as a result of claims,
demands, or other suits brought by any party that arise out of
the use of this service by LSP, its customers or end users.
LSP shall defend against all end users' claims just as if LSP
had provided such service to its end users with its own
employees.
F. LSP also agrees to release, defend, indemnify and hold
harmless SWBT from any claim, demand or suit that asserts any
infringement or invasion of privacy or confidentiality of any
person(s), caused or claimed to be caused, directly or
indirectly, by SWBT employees and equipment associated with
provision of this service. This includes, but is not limited
to suits arising from disclosure of any
<PAGE> 141
APPENDIX RECORDING
PAGE 7 OF 7
customer specific information associated with either the
originating or terminating numbers used to provision this
service.
SWBT MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT
NOT LIMITED TO ANY WARRANTY AS TO MERCHANTABILITY OR FITNESS FOR INTENDED OR
PARTICULAR PURPOSE WITH RESPECT TO SERVICES PROVIDED HEREUNDER. ADDITIONALLY,
SWBT ASSUMES NO RESPONSIBILITY WITH REGARD TO THE CORRECTNESS OF THE DATA
SUPPLIED BY LSP WHEN THIS DATA IS ACCESSED AND USED BY A THIRD PARTY.
<PAGE> 142
APPENDIX RECORDING - EXHIBIT I
PAGE 1 OF 3
EXHIBIT I
EXPLANATION OF SERVICE OPTIONS
The attached pages of this Exhibit I show the service options that are offered
under this Appendix and the charges that are associated with each option.
Alphabetical and numerical references in the CHARGES columns are to rates and
charges set forth in Exhibit III, BASIS OF COMPENSATION.
ORIGINATING 1+ DDD RECORDINGS - IXC TRANSPORTED MESSAGE DETAIL AND ACCESS USAGE
RECORDS
OPTION #1: SWBT performs recording, assembly and editing, rating of
billable message detail and creates an Access Usage Record
(AUR) for all 1+ Interexchange Carrier (IXC) transported
messages originating from LSP end office telephone network and
forwards both billable message detail records and AUR records
to LSP.
OPTION #2: SWBT performs recording, assembly and editing of the billable
message detail and extracts that detail to the IXC for all 1+
IXC transported messages originating from LSP end office. SWBT
creates Access Usage Records for this traffic and forwards
those AUR records to LSP.
OPTION #3: The IXCs do their own billable message recording for their 1+
IXC transported messages originating from LSP end office. SWBT
performs recording for Access purposes only, assembles and
edits this data, creates AURs and forwards the AUR records to
LSP.
ORIGINATING OPERATOR RECORDINGS - IXC TRANSPORTED MESSAGE DETAIL AND ACCESS
USAGE RECORDS
OPTION #4: LSP Non-Equal Access End Office - The IXCs do their own
billable message recording. SWBT performs local and intraLATA
operator services for LSP. SWBT performs recording at the
operator switch for all 0+, 0-, Coin Sent Paid, CAMA and
International IXC transported messages. SWBT assembles and
edits this data, creates AURs and forwards the AUR records to
LSP.
OPTION #5: LSP Equal Access End Office - The IXCs do their own billable
message recording. SWBT performs local and intraLATA operator
services for LSP. SWBT performs recording at the operator
switch for 0- only IXC transported messages. SWBT assembles
and edits this data, creates AURs and forwards the AUR records
to LSP.
OPTION #6: LSP Equal or Non-Equal Access End Office - The IXCs do their
own billable message recording. LSP chooses to have SWBT
purchase source information
<PAGE> 143
APPENDIX RECORDING - EXHIBIT I
PAGE 2 OF 3
from IXC in order to have information required to create
Access Usage Records. SWBT assembles and edits this data,
creates AURs and forwards the AUR records to LSP.
OPTION #7: The IXCs do their own billable message recording and forward
to SWBT the billable message detail for assembly and editing
and rating of these operator service IXC transported messages.
SWBT forwards the rated billable message detail to the
appropriate billing company, creates an AUR and forwards the
AUR records to LSP. This situation occurs when LSP has not
signed a rating takeback waiver with the IXC.
800 RECORDINGS - IXC TRANSPORTED MESSAGE DETAIL
OPTION #8: SWBT performs SSP function for LSP end office and bills query
charge to the appropriate IXC. SWBT performs recording for
Access purposes only, assembles and edits this data, creates
AURs and forwards AUR records to LSP.
OPTION #9: SWBT performs SSP function for LSP end office. LSP performs
billing of query charge to the appropriate IXC. SWBT performs
recording at the SSP for Access purposes only, assembles and
edits this data, creates AURs and forwards AUR records to LSP.
SWBT performs recording at the SCP for query billing purposes
only, assembles and edits this data, creates SCP records and
forwards SCP records to LSP.
OPTION 10: SWBT performs SCP function for LSP. SWBT performs recording at
the SCP, assembles and edits this data, creates SCP records
and forwards SCP records to LSP.
TERMINATING RECORDINGS - IXC TRANSPORTED ACCESS USAGE RECORDS
OPTION 11: SWBT provides tandem function for LSP. LSP requests SWBT to
provide all Feature Group B, Feature Group C and Feature Group
D terminating usage recordings including Feature Group B over
D and Feature Group C over D. SWBT creates terminating AURs
for this data and forwards AUR records to LSP.
OPTION 12: SWBT provides tandem function for LSP. LSP requests SWBT to
provide all Feature Group B terminating usage recordings
excluding B over D. SWBT creates terminating AURs for this
data and forwards AUR records to LSP.
OPTION 13: SWBT provides tandem function for LSP. LSP requests SWBT to
provide all Feature Group B terminating usage recordings
including Feature Group B over D. SWBT creates terminating
AURs for this data and forwards AUR records to LSP.
OPTION 14: SWBT provides tandem function for LSP. LSP requests SWBT to
provide all Feature Group D terminating usage recordings
including B over D and C over D.
<PAGE> 144
APPENDIX RECORDING - EXHIBIT I
PAGE 3 OF 3
SWBT creates terminating AURs for this data and forwards AUR
records to LSP.
OPTION 15: SWBT provides tandem function for LSP. LSP requests SWBT to
provide all Feature Group D terminating usage recordings
including B over D. SWBT creates terminating AURs for this
data and forwards AUR records to LSP.
MESSAGE PROVISIONING:
OPTION 16: SWBT will forward all IXC transported message detail records
or access usage records to LSP generated internally within
SWBT system or received via CMDS from an IXC or another Local
Exchange Carrier or LSP. LSP forwards rated IXC transported
message detail or access usage detail to SWBT for distribution
to the appropriate billing company through SWBT's internal
network or using the CMDS network.
There is no charge for this option under this
Appendix if LSP has also executed, as part of an
agreement executed pursuant to this Statement, an
Appendix for SWBT to provide "Hosting" services to
LSP, of if LSP has executed a separate agreement with
SWBT for "Hosting" services to be provided from SWBT
to LSP.
<PAGE> 145
APPENDIX RECORDING - EXHIBIT II
PAGE 4 OF 2
DRAFT APPENDIX RECORDING
EXHIBIT II
PAGE 1 OF 2
4/09/97
SELECTED SERVICE OPTIONS
AND
METHOD OF PROVISION
The service options and method of provision selected by LSP under this Appendix
are as indicated on page two, attached, of this Exhibit II. Numerical references
are to service options shown in Exhibit I.
<PAGE> 146
APPENDIX RECORDING - EXHIBIT II
PAGE 5 OF 2
APPENDIX RECORDING
EXHIBIT II
PAGE 2 OF 2
SELECTED SERVICE OPTIONS
AND METHOD OF PROVISION
EFFECTIVE DATE:
<TABLE>
<CAPTION>
MESSAGE
1+DDD OPERATOR HANDLED 800 SERVICE TERMINATING AUR PROVISIONING
OPTIONS OPTIONS OPTIONS OPTIONS OPTIONS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NPA/NXX 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Numerical references are to specific service options listed in Exhibit I.
<PAGE> 147
APPENDIX RECORDING - EXHIBIT III-A
PAGE 6 OF 1
DRAFT APPENDIX RECORDING
EXHIBIT III-A
PAGE 1 OF 1
4/09/97
BASIS OF COMPENSATION [RATES TO BE CONSISTENT WITH ORDER.]
EFFECTIVE: _____________________
LSP shall pay SWBT the following amounts for services provided under the
Recording, Message Processing and Provision of Message Detail Appendix.
<TABLE>
<CAPTION>
TYPE OF ACTIVITY RATE
<S> <C>
A. Recording
Per AUR $.0100
B. Assembly and Editing
Per Message and/or AUR $.0050
C. Rating
Per Message $.0050
D. Message Processing
Per Message and/or AUR $.0050
E. Provision of Message Detail
Per Record $.0030
</TABLE>
<PAGE> 148
APPENDIX RECORDING - EXHIBIT III-B
PAGE 7 OF 2
DRAFT APPENDIX RECORDING
EXHIBIT III-B
PAGE 1 OF 2
4/09/97
INVOICE DESIGNATION
COMPANY NAME: _______________________________________________________
EXCHANGE COMPANY I.D. NUMBER (OCN): _____ _____ _____ _____
BILLABLE INVOICE INTERVAL:
Check One:
Daily (Full Status RAO Companies will receive
billable messages daily.)
Bill period (A maximum of five dates may be chosen.)
A file is created five workdays from each bill period
date, and three additional days should be allowed for
distribution. Circle a maximum of five bill period
dates:
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29
TAPE MAILING ADDRESS: (Full RAO Companies will receive AURs at the same address
as billable message toll.)
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
<PAGE> 149
APPENDIX RECORDING - EXHIBIT III-B
PAGE 8 OF 2
DRAFT APPENDIX RECORDING
EXHIBIT III-B
PAGE 2 OF 2
4/09/97
AUR INVOICE INTERVAL:
Check One:
Daily (Full Status RAO Companies will receive AURs
daily.)
Bill period (A maximum of five dates may be chosen.)
A file is created five workdays from each bill period
date, and three additional days should be allowed for
distribution. Circle a maximum of five bill period
dates:
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29
TAPE MAILING ADDRESS: (Full RAO Companies will receive AURs at the same address
as billable message toll.)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
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<PAGE> 150
APPENDIX WIRELESS
PAGE OF 5
APPENDIX WIRELESS
<PAGE> 151
APPENDIX WIRELESS
PAGE OF 5
APPENDIX WIRELESS
This Appendix sets forth the terms and conditions under which the
Parties will distribute revenue from their joint provision of Wireless
Interconnection Service for traffic originated on a Commercial Mobile Radio
Service (CMRS) Provider's network and terminating through the Parties'
respective wireline switching networks within a Local Access and Transport Area
(LATA). The Parties will be compensated under this Appendix only to the extent
that they are not compensated for Wireless Interconnection Service under other
tariffs, settlement agreements, contracts or other mechanism. This Appendix is
subject to the terms and conditions of applicable tariffs.
I. DEFINITIONS
A. Wireless Interconnection Service - The interchange of traffic
originated from a Commercial Mobile Radio Service (CMRS) Provider's
Mobile Telephone Switching Office (MTSO) through SWBT's or LSP's
point of switching for termination on the relevant Party's wireline
switching network.
B. Commercial Mobile Radio Service (CMRS) Provider - A radio common
carrier provider of domestic public cellular telecommunication
service, as defined in Part 22, Part 24, or Part 90 of the FCC
Rules and Regulations.
C. End Office - SWBT or LSP switching system where exchange service
customer station loops are terminated for the purpose of
interconnection to each other and to the network.
D. Local Access and Transport Area ("LATA") - A geographic area
marking the boundaries beyond which a Bell Operating Company
formerly could not carry telephone calls pursuant to the terms of
the Modification of Final Judgment (MFJ), U.S. vs. American Tel. &
Tel. Co., 552 F. Supp. 131 (D.D.C. 1983), affirmed sub nom.
Maryland v. United States, 460 U.S. 1001 (1983).
E. Local Calling Area or Local Calling Scope - That area in which the
message telephone exchange service between two or more end offices,
without a toll charge, is provided.
F. Minutes of Use (MOU) - For the purposes of this Appendix, MOU means
the Terminating Traffic as recorded by the Primary Company or MOU
provided by the CMRS Provider to the Primary Company where the
Primary Company is unable to measure the actual terminating usage.
G. Mobile Telephone Switching Office ("MTSO") - A CMRS Provider's
switching equipment or terminal used to provide CMRS Provider's
switching services or,
<PAGE> 152
APPENDIX WIRELESS
PAGE OF 5
alternatively, any other point of termination designated by the CMRS
Provider. The MTSO directly connects the CMRS Provider's customers
within its licensed serving area to the Primary Company's facilities.
H. Primary Company - The Party that provides the End Office or Tandem
Office where the CMRS Provider chooses to connect terminating traffic.
The Primary Company also bills the CMRS Provider for Wireless
Interconnection Service.
I. Revenues - Those monies the Primary Company bills and collects from
the CMRS Provider for jointly provided Wireless Interconnection
Service.
J. Secondary Company - The Party that receives Terminating Traffic from
the Primary Company.
K. Tandem Office - a Party's switching system that provides an
intermediate switching point for traffic between end offices or the
network.
L. Terminating Traffic - That traffic which is delivered by a CMRS
Provider to the Primary Company for termination at a point on the
intraLATA wireline switching network.
II. ADMINISTRATION OF REVENUE DISTRIBUTION
A. The Primary Company will compute, bill, collect and distribute the
revenue for jointly provided Wireless Interconnection Service for
calls terminating within a LATA. On jointly provided Wireless
Interconnection Service, the Primary Company will distribute a portion
of the Local Transport (LT) Revenues as described below with the
Secondary Company for its part in terminating traffic from the CMRS
Provider. The Primary Company will distribute applicable Local
Switching (LS) and Carrier Common Line (CCL) charges which are
collected from the CMRS Provider to the Secondary Company, as
described below.
B. Distribution of revenues will be computed using the rate elements as
defined in SWBT's applicable Wireless Interconnection Tariff.
C. For terminating traffic, actual monthly wireless MOU will be measured
by the Primary Company for each office in the LATA or provided to the
Primary Company by the CMRS Provider in those cases where the Primary
Company is unable to measure the actual terminating usage.
D. Each month, the amount of CCL and LS revenue (based on the rates in
the Primary Company's applicable tariffs) due the Secondary Company
from the Primary Company will be determined by totaling the actual
terminating MOU associated with each of the Secondary Company's end
offices and multiplying those MOU by the appropriate rates as set out
above. The LT revenues due to the
<PAGE> 153
APPENDIX WIRELESS
PAGE OF 5
Secondary Company will be determined for each Secondary Company end
office by multiplying the billed MOU by the appropriate LT rate
multiplied by the applicable end office percentage ownership of
facilities listed in Exhibit A to this Appendix.
E. The Primary Company will prepare a revenue and usage statement on a
monthly basis. Within 90 calendar days after the end of each billing
period, except in cases of disputes, the Primary Company will remit
the compensation amount due the Secondary Company. When more than one
compensation amount is due, they may be combined into a single
payment. No distribution will be made for the revenue the Primary
Company is unable to collect.
F. The revenue and usage statement will contain the following
information:
1. The number of MOU for each of the Secondary Company's end
offices, the corresponding rate elements to be applied to the MOU
for each end office, and the resulting revenues;
2. The total of the MOU and revenues for the Secondary Company;
3. The percent ownership factor used to calculate the distribution
of Local Transport revenues; and,
4. Adjustments for uncollectibles.
G. The Parties agree that revenue distribution under this Appendix will
apply as of the effective date of this Agreement. The Primary Company
will start revenue distribution on usage within 60 calendar days from
the date this Appendix is effective.
III. TERMINATION PROVISIONS
A. This Appendix shall remain in effect until terminated by either Party
upon a minimum of 30 calendar days' written notice by such Party to
the designated representative of the other.
B. This Appendix may be terminated by an order of an appropriate
regulatory commission or a court of competent jurisdiction.
IV. MISCELLANEOUS PROVISIONS
A. Exhibit A to this Appendix is attached and incorporated into this
Appendix by reference. From time to time, by written agreement of both
parties, new Exhibits may be substituted for the attached Exhibit A,
superseding and canceling the Exhibit A previously in effect.
<PAGE> 154
APPENDIX WIRELESS
PAGE OF 5
B. Each party will promptly upon request, furnish to the other such
information as may be required to perform under this Appendix.
V. NOTICE
In the event any notices are required under the terms of this Appendix,
they shall be sent by registered mail, return receipt requested to:
if to SWBT _____________________________________
if to LSP _____________________________________
<PAGE> 155
APPENDIX WIRELESS
PAGE 1 OF 1
EXHIBIT A TO APPENDIX WIRELESS
END OFFICE PERCENT OWNERSHIP OF LOCAL TRANSPORT FACILITIES
CLLI CODE NPA-NXX % OWNERSHIP OF TRANSPORT FACILITIES
<PAGE> 1
Exhibit 21.1
SUBSIDIARIES OF BIRCH TELECOM INC.
1. Birch Telecom Inc. (Delaware) owns 100% of the following entities:
1. Birch Telecom of Arizona, Inc. (Delaware)
2. Birch Telecom of Arkansas, Inc. (Delaware)
3. Birch Telecom of Kansas, Inc. (Delaware)
4. Birch Telecom of Missouri, Inc. (Delaware)
5. Birch Telecom of Nebraska, Inc. (Delaware)
6. Birch Telecom of Oklahoma, Inc. (Delaware)
7. Birch Texas Holdings, Inc. (Delaware)
8. Dunn & Associates, Inc. (Kansas)
9. Telesource Communications, Inc. (Kansas)
10. Valu-Line of Kansas, Inc. (Kansas)
11. Valu-Line Management Corporation, (Kansas)
12. I.S. Advertising, Inc. (Kansas)
13. Birch Telecom of Texas Ltd., a Texas limited partnership.
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
-----------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE
PURSUANT TO SECTION 305(b) (2)
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
A U.S. NATIONAL BANKING ASSOCIATION 41-1592157
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national Identification No.)
bank)
SIXTH STREET AND MARQUETTE AVENUE
Minneapolis, Minnesota 55479
(Address of principal executive offices) (Zip code)
Stanley S. Stroup, General Counsel
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
(612) 667-1234
(Agent for Service)
-----------------------------
BIRCH TELECOM, INC.
(Exact name of obligor as specified in its charter)
DELAWARE 43-1766929
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1004 BALTIMORE AVE., SUITE 900
KANSAS CITY, MISSOURI 64105
(Address of principal executive offices) (Zip code)
-----------------------------
14% SENIOR NOTES DUE 2008
(Title of the indenture securities)
<PAGE> 2
Item 1. General Information. Furnish the following information as to the
trustee:
(a) Name and address of each examining or supervising
authority to which it is subject.
Comptroller of the Currency
Treasury Department
Washington, D.C.
Federal Deposit Insurance Corporation
Washington, D.C.
The Board of Governors of the Federal Reserve System
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust
powers.
The trustee is authorized to exercise corporate trust
powers.
Item 2. Affiliations with Obligor. If the obligor is an affiliate of the
trustee, describe each such affiliation.
None with respect to the trustee.
No responses are included for Items 3-14 of this Form T-1 because the obligor is
not in default as provided under Item 13.
Item 15. Foreign Trustee. Not applicable.
Item 16. List of Exhibits. List below all exhibits filed as a part of this
Statement of Eligibility. Norwest Bank incorporates by reference into this Form
T-1 the exhibits attached hereto.
Exhibit 1. a. A copy of the Articles of Association of the trustee now in
effect.*
Exhibit 2. a. A copy of the certificate of authority of the trustee to commence
business issued June 28, 1872, by the Comptroller of the Currency to The
Northwestern National Bank of Minneapolis.*
b. A copy of the certificate of the Comptroller of the Currency dated
January 2, 1934, approving the consolidation of The Northwestern National Bank
of Minneapolis and The Minnesota Loan and Trust Company of Minneapolis, with the
surviving entity being titled Northwestern National Bank and Trust Company of
Minneapolis.*
c. A copy of the certificate of the Acting Comptroller of the Currency
dated January 12, 1943, as to change of corporate title of Northwestern National
Bank and Trust Company of Minneapolis to Northwestern National Bank of
Minneapolis.*
d. A copy of the letter dated May 12, 1983 from the Regional Counsel,
Comptroller of the Currency, acknowledging receipt of notice of name change
effective May 1, 1983 from Northwestern National Bank of Minneapolis to Norwest
Bank Minneapolis, National Association.*
e. A copy of the letter dated January 4, 1988 from the Administrator of
National Banks for the Comptroller of the Currency certifying approval of
consolidation and merger effective January 1, 1988 of Norwest Bank Minneapolis,
National Association with various other banks under the title of "Norwest Bank
Minnesota, National Association."*
Exhibit 3. A copy of the authorization of the trustee to exercise corporate
trust powers issued January 2, 1934, by the Federal Reserve Board.*
Exhibit 4. Copy of By-laws of the trustee as now in effect.*
Exhibit 5. Not applicable.
Exhibit 6. The consent of the trustee required by Section 321(b) of the Act.
Exhibit 7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining authority.**
Exhibit 8. Not applicable.
Exhibit 9. Not applicable.
* Incorporated by reference to exhibit number 25 filed with
registration statement number 33-66026.
** Incorporated by reference to exhibit number 25 filed with
registration statement number 333-62999.
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the
trustee, Norwest Bank Minnesota, National Association, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Minneapolis and State of Minnesota on the 17th day of September 1998.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Jane Y. Schweiger
------------------------
Jane Y. Schweiger
Corporate Trust Officer
<PAGE> 4
EXHIBIT 6
September 17, 1998
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In accordance with Section 321(b) of the Trust Indenture Act of 1939, as
amended, the undersigned hereby consents that reports of examination of the
undersigned made by Federal, State, Territorial, or District authorities
authorized to make such examination may be furnished by such authorities to the
Securities and Exchange Commission upon its request therefor.
Very truly yours,
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Jane Y. Schweiger
------------------------
Jane Y. Schweiger
Corporate Trust Officer
<PAGE> 1
Exhibit 99.1
LETTER OF TRANSMITTAL
BIRCH TELECOM, INC.
OFFER TO EXCHANGE
$115,000,000 PRINCIPAL AMOUNT OF 14% SENIOR NOTES DUE 2008
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
FOR ANY AND ALL OUTSTANDING
$115,000,000 PRINCIPAL AMOUNT OF 14% SENIOR NOTES DUE 2008
PURSUANT TO THE PROSPECTUS, DATED _______, 1998
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON ___________, 1998 (AS SUCH DATE AND TIME MAY BE EXTENDED BY THE COMPANY
IN ITS SOLE DISCRETION, THE "EXPIRATION DATE").
PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS
If you desire to accept the Exchange Offer, this Letter of
Transmittal should be completed, signed, and submitted to:
<TABLE>
<S> <C>
By Registered or Certified Mail: In Person:
Norwest Bank Minnesota, Northstar East Bldg.
National Association 608 2nd Avenue S., 12th Floor
Corporate Trust Operations Corporate Trust Services
P.O. Box 1517 Minneapolis, MN 55479-0113
Minneapolis, MN 55480-1517
By Hand or Overnight Carrier: By Facsimile (for Eligible Institutions only):
Norwest Bank Minnesota, (612) 667-4927
National Association
Corporate Trust Operations
Norwest Center Confirm Receipt of Notice of
Sixth and Marquette Guaranteed Delivery by Telephone:
Minneapolis, MN 55479-0113 (612) 667-9764
</TABLE>
Delivery of this Letter of Transmittal to an address other
than as set forth above or transmission of instructions via a facsimile number
other than that set forth above will not constitute a valid delivery.
The undersigned hereby acknowledges receipt of the Prospectus
dated _______, 1998 (the "Prospectus") of Birch Telecom, Inc., a company
incorporated under the laws of the state of Delaware (the "Company"), and this
Letter of Transmittal (the "Letter of Transmittal"), that together constitute
the Company's offer (the "Exchange Offer") to exchange $1,000 principal amount
(or fraction thereof) of a new series of 14% Senior Notes due 2008 (the "New
Notes") for each $1,000 principal amount (or fraction thereof) of its
outstanding 14% Senior Notes due 2008 (the "Old Notes"). The New Notes and the
Old Notes are collectively referred to as the "Notes." Capitalized terms used
but not defined herein have the meanings ascribed to them in the Prospectus.
THE REGISTRATION STATEMENT ON FORM S-4 (FILE NO. 333-62797) OF
WHICH THE PROSPECTUS IS A PART WAS DECLARED EFFECTIVE BY THE SECURITIES AND
EXCHANGE COMMISSION ON _______, 1998.
<PAGE> 2
Either this Letter of Transmittal or an Agent's Message (as
defined) is to be completed by a holder of Old Notes (which term, for purposes
of the Exchange Offer, includes any participant in the DTC system whose name
appears on a security position listing as the holder of such Old Notes) in order
to tender Old Notes. All deliveries of Old Notes must be made either by (i)
endorsement and delivery of Definitive Registered Notes or (ii) by book-entry
transfer of Book-Entry Interests to the account maintained by the Exchange Agent
at DTC pursuant to the procedures set forth in the Prospectus under "The
Exchange Offer--Procedures For Tendering Book." Holders of Old Notes who are
unable to deliver (i) endorsed Definitive Registered Notes, (ii) confirmation of
the book-entry tender of their Old Notes into the Exchange Agent's account at
DTC (a "Book-Entry Confirmation") or (iii) in either case all other documents
required by this Letter of Transmittal to the Exchange Agent on or prior to the
Expiration Date must tender their Old Notes according to the guaranteed delivery
procedures set forth in the Prospectus under "The Exchange Offer--Guaranteed
Delivery Procedures." See Instruction 1. Delivery of documents to DTC does not
constitute delivery to the Exchange Agent.
The undersigned has completed the appropriate boxes below and
signed this Letter to indicate the action the undersigned desires to take with
respect to the Exchange Offer.
List below the Old Notes to which this Letter relates. If the
space provided is inadequate, the principal amount of Old Notes should be listed
on a separate signed schedule affixed hereto.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
BOX 1
DESCRIPTION OF OLD NOTES TENDERED
- -----------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF
HOLDER(S) OF OLD NOTES, AGGREGATE PRINCIPAL AMOUNT OF PRINCIPAL AMOUNT OF OLD NOTES
(PLEASE FILL IN, IF BLANK) OLD NOTES TENDERED*
--------------------------------------------------------------
<S> <C> <C>
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
TOTAL
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
* Unless otherwise indicated in this column, ALL of the Old Notes
indicated in the preceding column of this Box 1 or delivered to the
Exchange Agent herewith shall be deemed tendered. See Instruction 4.
[ ] CHECK HERE IF DEFINITIVE REGISTERED NOTES ARE BEING DELIVERED WITH THIS
LETTER OF TRANSMITTAL AND COMPLETE THE FOLLOWING:
Name(s) of Holder(s)
--------------------------------------------
Certificate Number(s)
--------------------------------------------
<PAGE> 3
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC
AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
-----------------------------------
The Depository Trust Company Account Number ____ Transaction
Code Number ____
<PAGE> 4
By crediting the Old Notes to the Exchange Agent's account at
DTC in accordance with DTC's Automated Tender Offer Program ("ATOP") and by
complying with applicable ATOP procedures with respect to the Exchange Offer,
including transmitting a computer-generated message (an "Agent's Message") to
the Exchange Agent in which the holder of the Old Notes acknowledges and agrees
to be bound by the terms of this Letter of Transmittal, the DTC participant
confirms on behalf of itself and the beneficial owners of such Old Notes all
provisions of this Letter of Transmittal applicable to it and such beneficial
owners as fully as if it had completed the information required herein and
executed and transmitted this Letter of Transmittal to the Exchange Agent.
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Holder(s)
--------------------------------------------
Name of Institution that guaranteed delivery
--------------------
If Definitive Registered Notes are being tendered:
Name of Holder(s)
--------------------------------------------
Certificate number
-------------------------------------------
If Book-Entry Interests are being tendered:
The Depository Trust Company: Account Number
-----------------
Transaction Code Number
------
<PAGE> 5
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO:
Name
-----------------------------------------------------------
Address
---------------------------------------------------------
You are entitled to as many copies as you may reasonably
request and if you need more than 10 copies, please so indicate by a notation
below.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
<PAGE> 6
Birch Telecom, Inc.
1004 Baltimore Ave., Suite 900
Kansas City, Missouri 64105
Attention: Gregory C. Lawhon, Esq.
Norwest Bank Minnesota, National Association
Corporate Trust Operations
P.O. Box 1517
Minneapolis, MN 55480-1517
Re: Tender of Old Notes for New Notes
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange
Offer described in the Prospectus and this Letter of Transmittal, the
undersigned hereby tenders to Birch Telecom, Inc. the principal amount of Old
Notes indicated in Box 1 above (the "Tendered Notes"). Subject to, and effective
upon, the acceptance for exchange of the Tendered Notes, the undersigned hereby
exchanges, assigns, and transfers to, or upon the order of, Birch Telecom, Inc.,
all right, title, and interest in, to and under the Tendered Notes. Each DTC
participant transmitting by means of DTC a computer-generated message forming
part of a Book-Entry Confirmation, on behalf of itself and the beneficial owner
of the Old Notes tendered thereby, acknowledges receipt of the Prospectus and
this Letter of Transmittal and agrees to be bound by the terms and conditions of
the Exchange Offer as set forth in the Prospectus and this Letter of
Transmittal.
The undersigned hereby represents and warrants that the
undersigned has full power and authority to tender, exchange, assign, and
transfer the Tendered Notes and that the Company will acquire good and
unencumbered title thereto, free and clear of all liens, restrictions, charges,
encumbrances, and adverse claims when the Tendered Notes are acquired by the
Company as contemplated herein. The undersigned and each beneficial owner of Old
Notes tendered by the undersigned will, upon request, execute and deliver any
additional documents reasonably requested by the Company as necessary or
desirable to complete and give effect to the transactions contemplated hereby.
The undersigned hereby irrevocably constitutes and appoints the
Exchange Agent as the true and lawful agent and attorney in fact of the
undersigned with respect to the Tendered Notes, with full power of substitution
(such power of attorney being deemed to be an irrevocable power coupled with an
interest), to (i) deliver the Tendered Notes to the Company or cause ownership
of the Tendered Notes to be transferred to, or upon the order of, the Company,
and deliver all accompanying evidences of transfer and authenticity to, or upon
the order of, the Company upon receipt by the Exchange Agent, as the
undersigned's agent, of the New Notes to which the undersigned is entitled upon
the acceptance by the Company of the Tendered Notes pursuant to the Exchange
Offer, and (ii) receive all benefits and otherwise exercise all rights of
beneficial ownership of the Tendered Notes, all in accordance with the terms of
the Exchange Offer.
The undersigned also acknowledges that this Exchange Offer is
being made by the Company in reliance on an interpretation by the staff of the
Securities and Exchange Commission (the "Commission"), as set forth in certain
no-action letters to third parties, that the New Notes issued in exchange for
the Old Notes pursuant to the Exchange Offer may be offered for resale, resold
and otherwise transferred by holders thereof (other than a broker-dealer, as set
forth below, or any such holder that is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act of 1933, as amended (the
"Securities Act"), without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such New Notes are
acquired in the ordinary course of such holder's business and such holders have
no arrangement with any person to participate in the distribution (within the
meaning of the Securities Act) of such New Notes. By tendering, each holder of
Old Notes represents to the Company that (i) the New Notes or Book-Entry
Interests therein to be acquired by such
<PAGE> 7
holder and any beneficial owner(s) of such Old Notes or interests therein
("Beneficial Owner(s)") in connection with the Exchange Offer are being acquired
by such holder and any Beneficial Owner(s) in the ordinary course of business of
the holder and any Beneficial Owner(s), (ii) the holder and each Beneficial
Owner are not participating, do not intend to participate, and have no
arrangement or understanding with any person to participate, in the distribution
of the New Notes, (iii) if the holder is a resident of the State of California,
it falls under the self-executing institutional investor exemption set forth
under Section 25102(i) of the Corporate Securities Law of 1968 and Rules
260.102.10 and 260.105.14 of the California Blue Sky Regulations, (iv) if the
undersigned is a resident of the Commonwealth of Pennsylvania, it falls under
the self-executing institutional investor exemption set forth under Sections
203(c), 102(d) and (k) of the Pennsylvania Securities Act of 1972, Section
102.111 of the Pennsylvania Blue Sky Regulations and an interpretive opinion
dated November 16, 1985, (v) the holder and each Beneficial Owner acknowledge
and agree that any person who is a broker-dealer registered under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or is participating in
the Exchange Offer for the purpose of distributing the New Notes must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with a secondary resale transaction of the New Notes or interests
therein acquired by such person and cannot rely on the position of the staff of
the Commission set forth in certain no-action letters, (vi) the holder and each
Beneficial Owner understands that a secondary resale transaction described in
clause (v) above and any resales of New Notes or interests therein obtained by
such holder in exchange for Old Notes or interests therein originally acquired
by such holder directly from the Company should be covered by an effective
registration statement containing the selling security holder information
required by Item 507 or Item 508, as applicable, of Regulation S-K of the
Commission and (vii) neither the holder nor any Beneficial Owner(s) is an
"affiliate," as defined in Rule 405 under the Securities Act, of the Company.
Upon a request by the Company, a holder or beneficial owner will deliver to the
Company a legal opinion confirming its representation made in clause (vii)
above. By tendering, each holder of Old Notes that is a broker-dealer (whether
or not it is also an "affiliate") that will receive New Notes for its own
account pursuant to the Exchange Offer, represents that the Old Notes to be
exchanged for the New Notes were acquired by it as a result of market-making
activities or other trading activities, and acknowledges that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such New Notes; however, by so acknowledging and by delivering a
prospectus, the holder will not be deemed to admit that it is an "underwriter"
within the meaning of the Securities Act.
The undersigned understands that tenders of Old Notes pursuant to
the procedures described under the captions "The Exchange Offer--Procedures for
Tendering" in the Prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer, subject only to withdrawal of
such tenders on the terms set forth in the Prospectus under the caption "The
Exchange Offer--Withdrawal of Tenders." All authority herein conferred or agreed
to be conferred shall survive the death or incapacity of the undersigned and any
Beneficial Owner(s), and every obligation of the undersigned or any Beneficial
Owners hereunder shall be binding upon the heirs, representatives, successors,
and assigns of the undersigned and such Beneficial Owner(s).
The undersigned acknowledges and understands that New Notes will
be issued in exchange for Tendered Notes (i) as Definitive Registered Notes
registered in the name(s) of the undersigned and sent to the address(es) shown
above in Box 1 or, if applicable, Box 2 if Definitive Registered Notes were
tendered or (ii) as Book-Entry Interests delivered by book-entry transfer to the
account of the undersigned shown above under Box 1 or, if applicable, Box 2 if
Book-Entry Interests were tendered.
<PAGE> 8
Unless otherwise indicated in Box 2 below, please deliver New
Notes as specified in Box 1.
The undersigned, by completing Box 1 above and signing this
letter, will be deemed to have tendered the Old Notes as set forth in such Box
above.
BOX 2
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7)
To be completed ONLY if the New Notes exchanged for Old Notes and/or if
untendered Old Notes or Old Notes that are not accepted for exchange are to be
delivered to someone other than the undersigned, or to the undersigned at an
address or an account maintained at DTC other than that shown above under Box 1.
Please issue New Notes and/or any unexchanged or unaccepted Old Notes to:
Names(s):
- --------------------------------------------------------------------------------
(please type or print)
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(include Zip Code)
Tax Identification or
Social Security No.:
[ ] Credit Book-Entry Interests in New Notes and/or unexchanged or
unaccepted Old Notes to the DTC account set forth below:
-----------------------------------------------------------------------
<PAGE> 9
BOX 3
USE OF GUARANTEED DELIVERY
[ ] CHECK HERE ONLY IF OLD NOTES ARE BEING TENDERED BY MEANS OF A NOTICE OF
GUARANTEED DELIVERY. See Instruction 2. If this box is checked, please
provide the following information:
Name(s) of Holder(s):
-----------------------------------------------------------
- --------------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
----------------------------
Name of Institution which Guaranteed Delivery:
---------------------------------
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF OR AN AGENT'S
MESSAGE (TOGETHER WITH A BOOK-ENTRY CONFIRMATION AND ANY OTHER REQUIRED
DOCUMENTS OR THE NOTICE OF GUARANTEED DELIVERY, AS APPLICABLE) MUST BE RECEIVED
BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON OR PRIOR TO THE
EXPIRATION DATE.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX ABOVE.
<PAGE> 10
BOX 4
TENDERING HOLDER SIGNATURE
(SEE INSTRUCTIONS 1 AND 5)
X
------------------------------------------------------------------------------
X
------------------------------------------------------------------------------
(Signature of Owner)
The above lines must be signed by the person in whose name such Old Notes are
(i) registered in the case of Definitive Registered Notes being tendered or (ii)
registered on the security position listing maintained by DTC or, in each case,
by any person(s) authorized to become holder(s) by documents transmitted
herewith. If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer, or other person acting in a fiduciary or
representative capacity, such person must set forth his or her full title below.
See Instruction 5.
Name(s):
------------------------------------------------------------------------
------------------------------------------------------------------------
Capacity:
----------------------------------------------------------------------
Street Address:
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
(include Zip Code)
Area Code and Telephone Number:
------------------------------------------------
Tax Identification or Social Security Number:
----------------------------------
Signature Guarantee
(If required by Instruction 5)
Authorized Signature
X
------------------------------------------------------------------------------
Name:
--------------------------------------------------------------------------
(please print)
Title:
-------------------------------------------------------------------------
Name of Firm:
------------------------------------------------------------------
(Must be an Eligible Institution as defined in Instruction 2)
Address:
-----------------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
(include Zip Code)
Area Code and Telephone Number:
------------------------------------------------
Date:
--------------------------------------------------------------------------
<PAGE> 11
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. Delivery of the Old Notes and this Letter of Transmittal.
(A) If the holder is tendering Definitive Registered Notes,
such holder must deliver (i) the certificate(s) representing the Old Notes
tendered, (ii) a properly completed and duly executed copy of this Letter of
Transmittal and (iii) any other documents required by this Letter of
Transmittal, all of which must be received by the Exchange Agent at its address
set forth herein prior to the Expiration Date.
(B) If the holder is tendering Book-Entry Interests, such
holder must (i) utilize DTC's ATOP system to tender such holder's Book-Entry
Interests to an account established at DTC by the Exchange Agent, (ii) make the
Agent's Message and cause a Book-Entry Confirmation to be issued to the Exchange
Agent or deliver a properly completed and duly executed copy of this Letter of
Transmittal and (iii) deliver any other documents required by this Letter of
Transmittal, all of which must be received by the Exchange Agent at its DTC
account or address set forth herein prior to the Expiration Date.
The method of delivery of certificates for Old Notes and all
other required documents is at the election and risk of the tendering holder and
delivery will be deemed made only when actually received by the Exchange Agent.
If delivery is by mail, registered mail with return receipt requested, properly
insured, is recommended. Instead of delivery by mail it is recommended that the
holder use an overnight or hand delivery service. In all cases, sufficient time
should be allowed to assure timely delivery. In no event should any Old Notes or
documentation be sent to the Company. Neither the Company nor the registrar is
under any obligation to notify any tendering holder of the Company's acceptance
of Tendered Notes prior to the Expiration Date.
2. Guaranteed Delivery Procedures. Holders, who wish to tender
their Old Notes but who cannot deliver their Old Notes, Letter of Transmittal or
any other documents required by the Letter of Transmittal to the Exchange Agent
prior to the Expiration Date must tender their Old Notes according to the
guaranteed delivery procedures set forth below, including completion of Box 3
(if this Letter of Transmittal is being delivered). Pursuant to such procedures:
(i) such tender must be made by or through a firm which is a member of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., or is a commercial bank or trust company having an
office or correspondent in the United States, or is otherwise an "eligible
guarantor institution" within the meaning of Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended (an "Eligible Institution"), and the Notice of
Guaranteed Delivery must be signed by the holder; (ii) prior to the Expiration
Date, the Exchange Agent must have received from the holder and the Eligible
Institution a properly completed and duly executed Notice of Guaranteed Delivery
(by facsimile transmission, mail or hand delivery) setting forth the name and
address of the holder, in the case of Definitive Registered Notes, the
certificate number or numbers of the Tendered Notes, and, in each case, the
principal amount of Tendered Notes, stating that the tender is being made
thereby and guaranteeing that, within five New York Stock Exchange ("NYSE")
trading days after the Expiration Date, either a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof) or a properly
transmitted Agent's Message, together with the Tendered Notes and any other
required documents will be deposited by the Eligible Institution with the
Exchange Agent; and (iii) such Agent's Message or Letter of Transmittal, such
properly completed and executed documents required by this Letter of Transmittal
and such Tendered Notes in proper form for transfer must be received by the
Exchange Agent within five NYSE trading days after the Expiration Date. Failure
to complete the guaranteed delivery procedures outlined above will not, of
itself, affect the validity or effect a revocation of any Letter of Transmittal
form properly completed and executed by an Eligible Holder who attempted to use
the guaranteed delivery process.
<PAGE> 12
3. Beneficial Owner Instructions to Registered Holders. Only a
holder in whose name Definitive Registered Notes are registered on the books of
the registrar (or the legal representative or attorney-in-fact of such
registered holder) or who is a DTC participant who owns a Book-Entry Interest in
the Old Notes through a security position maintained by DTC may execute and
deliver this Letter of Transmittal. Any Beneficial Owner of Old Notes who is not
the registered holder or who is not a DTC participant who has a security
position in the Old Notes maintained by DTC in its name must arrange promptly
with the registered holder or a DTC participant, as the case may be, to execute
and deliver this Letter of Transmittal or an Agent's Message on his or her
behalf through the execution and delivery to the registered holder or DTC
participant of the "Instructions to Registered Holder or DTC Participant from
Beneficial Owner" form accompanying this Letter of Transmittal.
4. Partial Tenders. If less than the entire number of Old Notes
are tendered, the tendering holder should fill in the number of Old Notes
tendered in the column labeled "Principal Amount of Old Notes Tendered" of Box 1
above. The entire number of Old Notes delivered to the Exchange Agent will be
deemed to have been tendered unless otherwise indicated. If the entire number of
all Old Notes indicated in Box 1 above is not tendered, Old Notes in a principal
amount equal to Old Notes not tendered as well as New Notes exchanged for any
Old Notes tendered will be delivered to the address or account, as applicable,
indicated in Box 1, unless a different address or account, as applicable, is
provided in Box 2 of this Letter of Transmittal.
5. Signatures on the Letter of Transmittal; Endorsements;
Guarantee Of Signatures. If this Letter of Transmittal is signed by the
registered holder(s) of the Tendered Notes (in the case of Definitive Registered
Notes), the signature must correspond with the name(s) as written on the face of
the Tendered Notes without alteration, enlargement, or any change whatsoever. If
this Letter of Transmittal is signed by the DTC participant whose name appears
on a security position maintained by DTC (in the case of Book-Entry Interests),
the signature must correspond exactly with such participant's name as it appears
on a security position maintained by DTC listing such participant as the owner
of the Old Notes, without any change whatsoever.
If any of the Tendered Notes are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal. If any
Tendered Notes are held in different names on several Old Notes, it will be
necessary to complete, sign, and submit as many separate copies of the Letter of
Transmittal documents as there are names in which Tendered Notes are held.
When this Letter of Transmittal is signed by the holders of
the Old Notes specified herein and tendered hereby, no separate bond powers are
required. If, however, the New Notes are to be issued, or any untendered or
unaccepted Old Notes are to be reissued, to a person other than the holder, then
separate bond powers are required. Signatures on such bond powers must be
guaranteed by an Eligible Institution.
If this Letter of Transmittal or any Old Notes are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations, or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and, unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with this Letter of Transmittal.
Signatures on bond powers required by this Instruction 5 must
be guaranteed by an Eligible Institution. Signatures on this Letter of
Transmittal need not be guaranteed by an Eligible Institution if: (i) this
Letter of Transmittal is signed by the registered holder of Definitive
Registered Notes tendered hereby, (ii) this Letter of Transmittal is signed by
any participant in DTC whose name appears on a security position listing
maintained by DTC as the owner of the Old Notes tendered and such person has not
completed Box 2 of this Letter of Transmittal or (iii) the Old Notes are
tendered for the account of an Eligible Institution.
<PAGE> 13
6. Special Delivery Instructions. Tendering holders of Old Notes
should indicate in Box 2 (i) the name and address to which Definitive Registered
Notes representing New Notes and/or substitute Definitive Registered Notes
representing Old Notes in a principal amount equal to the Old Notes not tendered
or not accepted for exchange are to be sent or (ii) the DTC account to which
Book-Entry Interests in the New Notes issued pursuant to the Exchange Offer
and/or substitute Book-Entry Interests in the Old Notes not tendered or not
accepted for exchange are to be issued, in each case only if the recipient of
such New Notes or substitute Old Notes is different from the person signing this
Letter of Transmittal. The employer identification number or social security
number of the person named must also be indicated. If no such instructions are
given, such New Notes and/or Old Notes not tendered or not accepted for exchange
will be credited to the registered holder or DTC account of the person signing
this Letter of Transmittal.
7. Transfer Taxes. The Company will pay all transfer taxes, if
any, applicable to the sale and transfer of Old Notes to it or its order
pursuant to the Exchange Offer. If, however, a transfer tax is imposed for any
reason other than the transfer and sale of Old Notes to the Company or its order
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or on any other person) will be
payable by the tendering holder. If satisfactory evidence of payment of such
taxes or exemption from taxes therefrom is not submitted with this Letter of
Transmittal, the amount of transfer taxes will be billed directly to such
tendering holder.
8. Validity of Tenders. All questions as to the validity, form,
eligibility (including time of receipt), and acceptance of Tendered Notes will
be determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the right to reject any and all Old
Notes not validly tendered or any Old Notes the Company's acceptance of which
would, in the opinion of the Company or its counsel, be unlawful. The Company
also reserves the right to waive any conditions of the Exchange Offer or defects
or irregularities in tenders of Old Notes as to any ineligibility of any holder
who seeks to tender Old Notes in the Exchange Offer. The interpretation of the
terms and conditions of the Exchange Offer (including this Letter of Transmittal
and the instructions hereto) by the Company shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Old Notes must be cured within such time as the Company shall determine. The
Company will use reasonable efforts to give notification of defects or
irregularities with respect to tenders of Old Notes, but shall not incur any
liability for failure to give such notification.
9. Waiver of Conditions. The Company reserves the absolute right
to amend, waive, or modify specified conditions of the Exchange Offer as
enumerated in the Prospectus in the case of any Tendered Notes.
10. No Conditional Tender. No alternative, conditional, irregular,
or contingent tender of Old Notes or transmittal of this Letter of Transmittal
will be accepted.
11. Mutilated, Lost, Stolen or Destroyed Old Notes. Any tendering
holder whose Old Notes have been mutilated, lost, stolen, or destroyed should
contact the Exchange Agent at the address indicated above for further
instruction.
12. Requests for Assistance or Additional Copies. Questions and
requests for assistance and requests for additional copies of the Prospectus may
be directed to the Exchange Agent at the address specified in the Prospectus.
Holders may also contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Exchange Offer.
13. Acceptance of Tendered Notes and Issuance of New Notes; Return
Old Notes. Subject to the terms and conditions of the Exchange Offer, the
Company will accept for exchange all validly tendered Old Notes as soon
<PAGE> 14
as practicable after the Expiration Date and will issue New Notes therefor as
soon as practicable thereafter. For purposes of the Exchange Offer, the Company
shall be deemed to have accepted tendered Old Notes when, as and if the Company
has given written or oral notice thereof (such oral notice being promptly
confirmed in writing) to the Exchange Agent. If any Tendered Notes are not
exchanged pursuant to the Exchange Offer for any reason, such unexchanged Old
Notes will be returned, without expense, to the undersigned at the address or
DTC account shown above or at a different address or DTC account as may be
indicated herein under Box 2.
14. Withdrawal. Tenders may be withdrawn only pursuant to the
limited withdrawal rights set forth in the Prospectus under the caption "The
Exchange Offer--Withdrawal of Tenders."
15. Incorporation of Letter of Transmittal. This Letter of
Transmittal shall be deemed to be incorporated in and acknowledged and accepted
by any tender through DTC's ATOP procedures by any DTC participant on behalf of
itself and the beneficial owners of any Book-Entry Interests representing Old
Notes so tendered.
<PAGE> 15
NOTICE OF GUARANTEED DELIVERY
FOR
14% SENIOR NOTES DUE 2008
OF
BIRCH TELECOM, INC.
As set forth in the Prospectus dated _______________, 1998 (the
"Prospectus") of Birch Telecom, Inc. (the "Company") and in the accompanying
Letter of Transmittal and instructions thereto (the "Letter of Transmittal"),
this form or one substantially equivalent hereto must be used to accept the
Company's Exchange Offer (the "Exchange Offer") to exchange new 14% Senior Notes
due 2008 (the "New Notes") that have been registered under the Securities Act of
1933, as amended (the "Securities Act"), for all of its outstanding 14% Senior
Notes due 2008 (the "Old Notes") IF the Letter of Transmittal or any other
documents required thereby cannot be delivered to the Exchange Agent, or
Definitive Registered Notes cannot be delivered or the procedure for book-entry
transfer cannot be completed, prior to 5:00 p.m., New York City Time, on the
Expiration Date (as defined in the Prospectus). This form may be delivered by an
Eligible Institution by hand or transmitted by facsimile transmission, overnight
courier or mail to the Exchange Agent as set forth below. Capitalized terms not
defined herein have the meanings ascribed to them in the Prospectus or the
Letter of Transmittal.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON _______________, 1998 (AS SUCH DATE AND TIME MAY BE EXTENDED BY THE
COMPANY IN ITS SOLE DISCRETION, THE "EXPIRATION DATE").
PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS
To: Norwest Bank Minnesota, National Association, as Exchange Agent
<TABLE>
<S> <C>
By Registered or Certified Mail: In Person:
Norwest Bank Minnesota, Northstar East Bldg.
National Association 608 2nd Avenue S., 12th Floor
Corporate Trust Operations Corporate Trust Services
P.O. Box 1517 Minneapolis, MN 55479-0113
Minneapolis, MN 55480-1517
By Hand or Overnight Carrier: By Facsimile (for Eligible Institutions only):
Norwest Bank Minnesota, (612) 667-4927
National Association
Corporate Trust Operations
Norwest Center Confirm Receipt of Notice of
Sixth and Marquette Guaranteed Delivery by Telephone:
Minneapolis, MN 55479-0113 (612) 667-9764
</TABLE>
Delivery of this Notice of Guaranteed Delivery to an address other than
as set forth above or transmission of instructions via a facsimile number other
than that set forth above will not constitute a valid delivery.
This form is not to be used to guarantee signatures. If a signature on
the Letter of Transmittal to be used to tender Old Notes is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the Letter
of Transmittal.
<PAGE> 16
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and
subject to the conditions set forth in the Prospectus and the related Letter of
Transmittal (which together constitute the "Exchange Offer"), receipt of which
is hereby acknowledged, the principal amount of Old Notes specified below
pursuant to the guaranteed delivery procedures set forth in the Prospectus and
in Instruction 2 of the Letter of Transmittal.
The undersigned understands that tenders of Old Notes pursuant to the
Exchange Offer may not be withdrawn after 5:00 p.m., New York City time, on the
Expiration Date. Tenders of Old Notes may also be withdrawn if the Exchange
Offer is terminated without any such Old Notes being purchased thereunder or as
otherwise provided in the Prospectus.
All authority thereto conferred or agreed to be conferred by this
Notice of Guaranteed Delivery shall survive the death, incapacity or dissolution
of the undersigned and every obligation of the undersigned under this Notice of
Guaranteed Delivery shall be binding upon the heirs, personal representatives,
executors, administrators, successors, assigns, trustees in bankruptcy and other
legal representatives of the undersigned.
The undersigned hereby tenders the Old Notes listed below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Aggregate Principal Amount of Old Notes Principal Amount of Old Notes Tendered
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: SIGNATURES MUST BE PROVIDED WHERE INDICATED BELOW
SIGN HERE
Name(s) of Holder(s):
------------------------------------------------
Address(es):
------------------------------------------------
------------------------------------------------
------------------------------------------------
Telephone Number:
------------------------------------------------
Signature(s):
------------------------------------------------
------------------------------------------------
Date:
------------------------------------------------
DTC Account Number (if applicable):
---------------------------------------------
This Notice of Guaranteed Delivery must be signed by (i) the Holder(s)
of Old Notes exactly as its/their name(s) appear on Definitive Registered Notes,
(ii) the Holder(s) of Old Notes exactly as its/their name(s) appear on a
security position listing maintained by DTC as the owner of Old Notes or (iii)
by person(s) authorized to become Holder(s) by documents transmitted with this
Notice of Guaranteed Delivery. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer or other person acting in a
fiduciary or representative capacity, such person must provide the following
information:
<PAGE> 17
Please print name(s) and address(es) of person signing above
Name(s):
-------------------------------------------------------------
-------------------------------------------------------------
Capacity:
-------------------------------------------------------------
Address(es):
-------------------------------------------------------------
-------------------------------------------------------------
-------------------------------------------------------------
<PAGE> 18
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or is a commercial bank or trust company having an office or correspondent in
the United States, or is otherwise an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), hereby (a) represents that the above named
person(s) "own(s)" the Old Notes tendered hereby within the meaning of Rule
14e-4 under the Exchange Act, (b) represents that such tender of Old Notes
complies with Rule 14e-4 under the Exchange Act and (c) guarantees that delivery
to the Exchange Agent of the Letter of Transmittal (or facsimile thereof),
either Definitive Registered Notes in proper form for transfer or a confirmation
of the book-entry transfer of Book-Entry Interests representing such Old Notes
into the Exchange Agent's account at DTC, pursuant to the procedures for
book-entry transfer set forth in the Prospectus, and delivery of either a
properly completed and duly executed Letter of Transmittal (or manually signed
facsimile thereof) with any required signatures and any other documents required
by the Letter of Transmittal or an Agent's Message, will be received by the
Exchange Agent by 5:00 p.m., New York City time, on the fifth New York Stock
Exchange trading day after the Expiration Date.
THE UNDERSIGNED ACKNOWLEDGES THAT IT MUST DELIVER THE LETTER OF
TRANSMITTAL OR AGENT'S MESSAGE AND OLD NOTES TENDERED HEREBY TO THE EXCHANGE
AGENT WITHIN THE TIME PERIOD SET FORTH THEREIN AND THAT FAILURE TO DO SO COULD
RESULT IN FINANCIAL LOSS TO THE UNDERSIGNED.
SIGN HERE
Name of firm:
-------------------------------
Authorized Signature:
-------------------------------
Name (please print):
-------------------------------
Address:
-------------------------------
-------------------------------
-------------------------------
Telephone Number:
-------------------------------
Date:
-------------------------------
DO NOT SEND ANY DEFINITIVE REGISTERED NOTES WITH THIS FORM. ACTUAL SURRENDER OF
DEFINITIVE REGISTERED NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN
EXECUTED LETTER OF TRANSMITTAL.
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly
completed and duly executed copy of this Notice of Guaranteed Delivery and any
other documents required by this Notice of Guaranteed Delivery must be received
by the Exchange Agent at its address set forth herein prior to the Expiration
Date. The method of delivery of this Notice of Guaranteed Delivery and any other
required documents to the Exchange Agent is at the election and risk of the
holder, and the delivery will be deemed made only when actually received by the
Exchange Agent. If delivery is by mail, registered mail with return receipt
requested, properly insured, is recommended. Instead of delivery by mail, it is
recommended that the holder use an overnight or hand delivery service. In all
cases sufficient time should be allowed to assure timely delivery. For a
description of the guaranteed delivery procedure, see Instruction 2 of the
Letter of Transmittal.
<PAGE> 19
2. Signatures on this Notice of Guaranteed Delivery. If this
Notice of Guaranteed Delivery is signed by the registered holder(s) of the Old
Notes to be tendered (in the case of Definitive Registered Notes), the signature
must correspond with the name(s) as written on the face of such Old Notes
without alteration, enlargement, or any change whatsoever. If this Notice of
Guaranteed Delivery is signed by the DTC participant whose name appears on a
security position maintained by DTC (in the case of Book-Entry Interests), the
signature must correspond exactly with such participant's name as it appears on
a security position maintained by DTC listing such participant as the owner of
the Old Notes, without any change whatsoever.
If any of the Old Notes to be tendered are owned of record by two or
more joint owners, all such owners must sign this Notice of Guaranteed Delivery.
If any Old Notes to be tendered are held in different names on several Old
Notes, it will be necessary to complete, sign, and submit as many separate
copies of the Notice of Guaranteed Delivery documents as there are names in
which Old Notes to be tendered are held.
If this Notice of Guaranteed Delivery or any Old Notes are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations, or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and, unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with this Notice of Guaranteed Delivery.
3. Requests for Assistance of Additional Copies. Questions and
requests for assistance and requests for additional copies of the prospectus may
be directed to the Exchange Agent at the address specified in the Prospectus.
Holders also may contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Exchange Offer.
<PAGE> 20
LETTER TO REGISTERED HOLDERS AND DTC PARTICIPANTS
REGARDING THE OFFER TO EXCHANGE
$115,000,000 PRINCIPAL AMOUNT OF 14% SENIOR NOTES DUE 2008
FOR ANY AND ALL OUTSTANDING
$115,000,000 PRINCIPAL AMOUNT OF 14% SENIOR NOTES DUE 2008
OF
BIRCH TELECOM, INC.
To Registered Holders and The Depository Trust Company Participants:
We are enclosing herewith the materials listed below relating
to the offer by Birch Telecom, Inc. (the "Company") to exchange its new 14%
Senior Notes due 2008 (the "New Notes"), pursuant to an offering registered
under the Securities Act of 1933, as amended (the "Securities Act"), for a like
principal amount of its issued and outstanding 14% Senior Notes due 2008 (the
"Old Notes") upon the terms and subject to the conditions set forth in the
Company's Prospectus, dated _______________, 1998, and the related Letter of
Transmittal (which together constitute the "Exchange Offer").
Enclosed herewith are copies of the following documents:
1. Prospectus dated _______________, 1998;
2. Letter of Transmittal;
3. Notice of Guaranteed Delivery;
4. Instruction to Registered Holder or DTC Participant from
Beneficial Owner; and
5. Letter which may be sent to your clients for whose account you
hold Definitive Registered Notes or Book-Entry Interests representing Old Notes
in your name or in the name of your nominee, to accompany the instruction form
referred to above, for obtaining such client's instruction with regard to the
Exchange Offer.
WE URGE YOU TO CONTACT YOUR CLIENTS PROMPTLY. PLEASE NOTE THAT
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
_______________, 1998, UNLESS EXTENDED.
The Exchange Offer is not conditioned upon any minimum number
of Old Notes being tendered.
To participate in the Exchange Offer, a beneficial holder must
either (i) cause to be delivered to State Street Bank and Trust Company (the
"Exchange Agent") at the address set forth in the Letter of Transmittal
Definitive Registered Notes in proper form for transfer together with a properly
executed Letter of Transmittal or (ii) cause a DTC Participant to tender such
holder's Old Notes to the Exchange Agent's account maintained at the Depository
Trust Company ("DTC") for the benefit of the Exchange Agent through DTC's
Automated Tender Offer Program ("ATOP"), including transmission of a
computer-generated message that acknowledges and agrees to be bound by the terms
of the Letter of Transmittal. By complying with DTC's ATOP procedures with
respect to the Exchange Offer, the DTC Participant confirms on behalf of itself
and the beneficial owners of tendered Old Notes all provisions of the Letter of
Transmittal applicable to it and such beneficial owners as fully as if it
completed, executed and returned the Letter of Transmittal to the Exchange
Agent.
<PAGE> 21
Pursuant to the Letter of Transmittal, each holder of Old
Notes will represent to the Company that: (i) the New Notes or Book-Entry
Interests therein to be acquired by such holder and any beneficial owner(s) of
such Old Notes or interests therein ("Beneficial Owner(s)") in connection with
the Exchange Offer are being acquired by such holder and any Beneficial Owner(s)
in the ordinary course of business of the holder and any Beneficial Owner(s),
(ii) the holder and each Beneficial Owner are not participating, do not intend
to participate, and have no arrangement or understanding with any person to
participate, in the distribution of the New Notes, (iii) if the holder or
Beneficial Owner is a resident of the State of California, it falls under the
self-executing institutional investor exemption set forth under Section 25102(i)
of the Corporate Securities Law of 1968 and Rules 260.102.10 and 260.105.14 of
the California Blue Sky Regulations, (iv) if the holder or Beneficial Owner is a
resident of the Commonwealth of Pennsylvania, it falls under the self-executing
institutional investor exemption set forth under Sections 203(c), 102(d) and (k)
of the Pennsylvania Securities Act of 1972, Section 102.111 of the Pennsylvania
Blue Sky Regulations and an interpretive opinion dated November 16, 1985, (v)
the holder and each Beneficial Owner acknowledge and agree that any person who
is a broker-dealer registered under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") or is participating in the Exchange Offer for the
purpose of distributing the New Notes must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction of the New Notes or interests therein acquired by
such person and cannot rely on the position of the staff of the Commission set
forth in certain no-action letters, (vi) the holder and each Beneficial Owner
understand that a secondary resale transaction described in clause (v) above and
any resales of New Notes or interests therein obtained by such holder in
exchange for Old Notes or interests therein originally acquired by such holder
directly from the Company should be covered by an effective registration
statement containing the selling security holder information required by Item
507 or Item 508, as applicable, of Regulation S-K of the Commission and (vii)
neither the holder nor any Beneficial Owner(s) is an "affiliate," as defined in
Rule 405 under the Securities Act, of the Company. Upon a request by the
Company, a holder or beneficial owner will deliver to the Company a legal
opinion confirming its representation made in clause (vii) above. If the
tendering holder of Old Notes is a broker-dealer (whether or not it is also an
"affiliate") or any Beneficial Owner(s) that will receive New Notes for its own
or their account pursuant to the Exchange Offer, the tendering holder will
represent on behalf of itself and the Beneficial Owner(s) that the Old Notes to
be exchanged for the New Notes were acquired as a result of market-making
activities or other trading activities, and acknowledge on its own behalf and on
the behalf of such Beneficial Owner(s) that it or they will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such New Notes; however, by so acknowledging and by delivering a prospectus,
such tendering holder will not be deemed to admit that it or any Beneficial
Owner is an "underwriter" within the meaning of the Securities Act.
The enclosed "Instruction to Registered Holder or DTC
Participant from Beneficial Owner" form contains an authorization by the
beneficial owners of Old Notes for you to make the foregoing representations.
The Company will not pay any fee or commission to any broker
or dealer or to any other persons (other than the Exchange Agent) in connection
with the solicitation of tenders of Old Notes pursuant to the Exchange Offer.
The Company will pay or cause to be paid any transfer taxes payable on the
transfer of Old Notes to it, except as otherwise provided in Instruction 7 of
the enclosed Letter of Transmittal.
Additional copies of the enclosed material may be obtained
from Norwest Bank Minnesota, National Association.
Very truly yours,
BIRCH TELECOM, INC.
<PAGE> 22
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU THE
AGENT OF BIRCH TELECOM, INC. OR NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION OR
AUTHORIZE YOU TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON THEIR BEHALF IN
CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH
AND THE STATEMENTS CONTAINED THEREIN.
<PAGE> 23
INSTRUCTION TO REGISTERED HOLDER OR DTC PARTICIPANT
FROM BENEFICIAL OWNER
FOR
14% SENIOR NOTES DUE 2008
OF
BIRCH TELECOM, INC.
The undersigned hereby acknowledges receipt of the Prospectus
dated _______________, 1998 (the "Prospectus"), of Birch Telecom, Inc., a
company incorporated under the laws of Delaware (the "Company"), and the
accompanying Letter of Transmittal (the "Letter of Transmittal") that together
constitute the Company's offer (the "Exchange Offer"). Capitalized terms used
but not defined herein have the meanings assigned to them in the Prospectus and
the Letter of Transmittal.
This will instruct you as to the action to be taken by you
relating to the Exchange Offer with respect to the 14% Senior Notes due 2008
(the "Old Notes") held by you for the account of the undersigned.
The principal amount of the Old Notes held by you for the
account of the undersigned is (fill in amount): $_____________ principal amount
of Old Notes.
With respect to the Exchange Offer, the undersigned hereby
instructs you (check appropriate box):
[ ] To TENDER the following principal amount of Old Notes held by
you for the account of the undersigned (insert amount of Old Notes to be
tendered, if any):
$_____________ principal amount of Old Notes.
[ ] NOT to TENDER any Old Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Old Notes held
by you for the account of the undersigned, it is understood that you are
authorized:
(a) to make, on behalf of the undersigned (and the
undersigned, by its signature below, hereby makes to you), the
representations and warranties contained in the Letter of Transmittal
that are to be made with respect to the undersigned as a beneficial
owner, including but not limited to the representations that (i) the
New Notes or Book-Entry Interests therein to be acquired by the
undersigned (the "Beneficial Owner(s)") in connection with the Exchange
Offer are being acquired by the undersigned in the ordinary course of
business of the undersigned, (ii) the undersigned is not participating,
does not intend to participate, and has no arrangement or understanding
with any person to participate, in the distribution of the New Notes,
(iii) if the undersigned is a resident of the State of California, it
falls under the self-executing institutional investor exemption set
forth under Section 25102(i) of the Corporate Securities Law of 1968
and Rules 260.102.10 and 260.105.14 of the California Blue Sky
Regulations, (iv) if the undersigned is a resident of the Commonwealth
of Pennsylvania, it falls under the self-executing institutional
investor exemption set forth under Sections 203(c), 102(d) and (k) of
the Pennsylvania Securities Act of 1972, Section 102.111 of the
Pennsylvania Blue Sky Regulations and an interpretive opinion dated
November 16, 1985, (v) the undersigned acknowledges and agrees that any
person who is a broker-dealer registered under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), or is participating in
the Exchange Offer for the purpose of distributing the New Notes must
comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale transaction of
the New
<PAGE> 24
Notes or interests therein acquired by such person and cannot rely on
the position of the staff of the Commission set forth in certain
no-action letters, (vi) the undersigned understands that a secondary
resale transaction described in clause (v) above and any resales of New
Notes or interests therein obtained by such holder in exchange for Old
Notes or interests therein originally acquired by such holder directly
from the Company should be covered by an effective registration
statement containing the selling security holder information required
by Item 507 or Item 508, as applicable, of Regulation S-K of the
Commission and (vii) the undersigned is not an "affiliate," as defined
in Rule 405 under the Securities Act, of the Company. Upon a request by
the Company, a holder or beneficial owner will deliver to the Company a
legal opinion confirming its representation made in clause (vii) above.
If the undersigned is a broker-dealer (whether or not it is also an
"affiliate") that will receive New Notes for its own account pursuant
to the Exchange Offer, the undersigned represents that the Old Notes to
be exchanged for the New Notes were acquired by it as a result of
market-making activities or other trading activities, and acknowledges
that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Notes;
however, by so acknowledging and by delivering a prospectus, the
undersigned does not and will not be deemed to admit that is and
"underwriter" within the meaning of the Securities Act;
(b) to agree, on behalf of the undersigned, as set forth
in the Letter of Transmittal; and
(c) to take such other action as necessary under the
Prospectus or the Letter of Transmittal to effect the valid tender of
such Old Notes.
SIGN HERE
Name of Beneficial Owner(s):
--------------------------------------------------
Signature(s):
--------------------------------------------------
Name(s) (please print):
--------------------------------------------------
Address:
--------------------------------------------------
--------------------------------------------------
Telephone Number:
--------------------------------------------------
Taxpayer Identification or Social Security Number:
-----------------------------
Date:
--------------------------------------------------
<PAGE> 25
LETTER TO CLIENTS
REGARDING THE OFFER TO EXCHANGE
$115,000,000 PRINCIPAL AMOUNT OF 14% SENIOR NOTES DUE 2008
FOR ANY AND ALL OUTSTANDING
$115,000,000 PRINCIPAL AMOUNT OF 14% SENIOR NOTES DUE 2008
OF
BIRCH TELECOM, INC.
To Our Clients:
We are enclosing herewith a Prospectus, dated _______________,
1998, of Birch Telecom, Inc. (the "Company") and a related Letter of Transmittal
(which together constitute the "Exchange Offer") relating to the offer by the
Company to exchange its new 14% Senior Notes due 2008 (the "New Notes"),
pursuant to an offering registered under the Securities Act of 1933, as amended
(the "Securities Act"), for a like principal amount of its issued and
outstanding 14% Senior Notes due 2008 (the "Old Notes") upon the terms and
subject to the conditions set forth in the Prospectus and the Letter of
Transmittal.
PLEASE NOTE THAT THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON ________, 1998, UNLESS EXTENDED.
The Exchange Offer is not conditioned upon any minimum number
of Old Notes being tendered.
We are the Registered Holder or DTC participant through which
you hold an interest in the Old Notes. A tender of such Old Notes can be made
only by us pursuant to your instructions. The Letter of Transmittal is furnished
to you for your information only and cannot be used by you to tender your
beneficial ownership of Old Notes held by us for your account.
We request instructions as to whether you wish to tender any
or all of your Old Notes held by us for your account pursuant to the terms and
subject to the conditions of the Exchange Offer. We also request that you
confirm that we may on your behalf make the representations contained in the
Letter of Transmittal that are to be made with respect to you as beneficial
owner.
Pursuant to the Letter of Transmittal, each holder of Old
Notes must make certain representations and warranties that are set forth in the
Letter of Transmittal and in the attached form that we have provided to you for
your instructions regarding what action we should take in the Exchange Offer
with respect to your interest in the Old Notes.
