<PAGE>
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 6, 1999
REGISTRATION NO. 333-49439
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 6
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
TIME WARNER TELECOM INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 4813 84-1452416
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
5700 S. QUEBEC STREET
GREENWOOD VILLAGE, CO 80111
(303) 566-1000
(ADDRESS, INCLUDING EACH ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
DAVID J. RAYNER
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
TIME WARNER TELECOM INC.
5700 S. QUEBEC STREET
GREENWOOD VILLAGE, CO 80111
(303) 566-1000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
<TABLE>
<CAPTION>
COPIES TO:
<S> <C> <C>
WILLIAM P. ROGERS, JR. PETER R. HAJE FAITH D. GROSSNICKLE
CRAVATH, SWAINE & MOORE EXECUTIVE VICE PRESIDENT, SHEARMAN & STERLING
WORLDWIDE PLAZA SECRETARY AND GENERAL COUNSEL 599 LEXINGTON AVENUE
825 EIGHTH AVENUE TIME WARNER INC. NEW YORK, NY 10022-6069
NEW YORK, NY 10019-7415 75 ROCKEFELLER PLAZA (212) 848-4000
(212) 474-1270 NEW YORK, NY 10019
(212) 484-8000
</TABLE>
------------------------
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 to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
================================================================================
<PAGE>
<PAGE>
EXPLANATORY NOTE
THIS REGISTRATION STATEMENT CONTAINS TWO FORMS OF PROSPECTUS: ONE TO BE
USED IN CONNECTION WITH AN OFFERING OF THE COMPANY'S CLASS A COMMON STOCK IN THE
UNITED STATES AND CANADA, AND ONE TO BE USED IN A CONCURRENT OFFERING OF THE
COMPANY'S CLASS A COMMON STOCK OUTSIDE THE UNITED STATES AND CANADA. THE
PROSPECTUSES ARE IDENTICAL EXCEPT FOR THE FRONT COVER PAGE. THE U.S. PROSPECTUS
IS INCLUDED IN THIS REGISTRATION STATEMENT AND IS FOLLOWED BY THE ALTERNATE
FRONT COVER PAGE TO BE USED IN THE INTERNATIONAL PROSPECTUS. THE ALTERNATE PAGE
FOR THE INTERNATIONAL PROSPECTUS INCLUDED IN THIS REGISTRATION STATEMENT IS
LABELED 'ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS.' FINAL FORMS OF EACH
PROSPECTUS WILL BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER RULE
424(b) OF THE GENERAL RULES AND REGULATIONS UNDER THE SECURITIES ACT OF 1933, AS
AMENDED.
<PAGE>
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS (SUBJECT TO COMPLETION)
ISSUED MAY 6, 1999
18,000,000 SHARES
[LOGO]
TIME WARNER TELECOM INC.
CLASS A COMMON STOCK
------------------------
TIME WARNER TELECOM INC. IS OFFERING 18,000,000 SHARES OF ITS CLASS A COMMON
STOCK. INITIALLY, THE U.S. UNDERWRITERS ARE OFFERING 14,400,000 SHARES OF OUR
CLASS A COMMON STOCK IN THE UNITED STATES AND CANADA, AND THE INTERNATIONAL
UNDERWRITERS ARE OFFERING 3,600,000 SHARES OF OUR CLASS A COMMON STOCK
OUTSIDE THE UNITED STATES AND CANADA. THIS IS OUR INITIAL PUBLIC
OFFERING AND NO PUBLIC MARKET CURRENTLY EXISTS FOR OUR SHARES.
WE ANTICIPATE THAT THE INITIAL PUBLIC OFFERING PRICE WILL
BE BETWEEN $9 AND $11 PER SHARE.
IMMEDIATELY AFTER THE OFFERING, THE FOUNDING STOCKHOLDERS OF TIME WARNER TELECOM
INC. WILL OWN 100% OF THE CLASS B COMMON STOCK, WHICH WILL REPRESENT 97.8% OF
THE COMBINED VOTING POWER OF BOTH CLASSES OF OUTSTANDING COMMON STOCK.
------------------------
WE EXPECT THE CLASS A COMMON STOCK TO BE APPROVED FOR QUOTATION ON THE NASDAQ
NATIONAL MARKET OF THE NASDAQ STOCK MARKET UNDER THE SYMBOL 'TWTC.'
------------------------
INVESTING IN OUR CLASS A COMMON STOCK INVOLVES RISKS.
SEE 'RISK FACTORS' BEGINNING ON PAGE 14.
------------------------
PRICE $ A SHARE
------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS COMPANY
--------------------- ------------------------ ------------------------
<S> <C> <C> <C>
Per Share............................... $ $ $
Total................................... $ $ $
</TABLE>
------------------------
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
Time Warner Telecom Inc. has granted the U.S. Underwriters the right to purchase
up to an additional 2,700,000 shares of Class A Common Stock to cover
over-allotments. Morgan Stanley & Co. Incorporated expects to deliver the shares
of Class A Common Stock to purchasers on , 1999.
------------------------
JOINT BOOK - RUNNING MANAGERS
MORGAN STANLEY DEAN WITTER LEHMAN BROTHERS
BEAR, STEARNS & CO. INC.
, 1999
<PAGE>
<PAGE>
[TIME WARNER TELECOM NETWORK MAP]
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary............................... 5
Risk Factors..................................... 14
Use of Proceeds.................................. 23
Dividend Policy.................................. 23
The Reconstitution............................... 24
Capitalization................................... 25
Dilution......................................... 26
Selected Combined Financial and Other Operating
Data........................................... 27
Management's Discussion and Analysis of Financial
Condition and Results of Operations............ 29
Qualitative and Quantitative Disclosures about
Market Risk.................................... 38
Business......................................... 39
Management....................................... 57
Certain Relationships and Related Transactions... 69
Principal Stockholders........................... 73
Description of Certain Indebtedness.............. 74
Description of Capital Stock..................... 76
Certain United States Federal Tax Consequences to
Non-United States Holders of Common Stock...... 79
Shares Eligible for Future Sale.................. 82
Underwriters..................................... 83
Legal Matters.................................... 86
Experts.......................................... 86
Where You Can Find More Information.............. 86
Glossary......................................... 88
Index to Combined Financial Statements........... F-1
</TABLE>
------------------------
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell shares of Class A Common
Stock and seeking offers to buy shares of Class A Common Stock only in
jurisdictions where offers and sales are permitted. The information contained in
this prospectus is accurate only as of the date of this prospectus, regardless
of the time of delivery of this prospectus or any sale of the Class A Common
Stock.
Until , 1999 all dealers that buy, sell or trade shares of
Class A Common Stock, whether or not participating in this Offering, may be
required to deliver a prospectus. This is in addition to the dealers' obligation
to deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
This prospectus contains forward-looking statements, including statements
regarding, among other items, our business and operating strategy, operations,
economic performance and financial condition. These forward-looking statements
are subject to risks, uncertainties and assumptions, some of which are beyond
our control. Actual results may differ materially from those expressed or
implied by such forward-looking statements. Factors that could cause such
differences include, but are not limited to, those discussed under 'Risk
Factors.' We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. In light of these risks, uncertainties and assumptions, the
forward-looking events and circumstances discussed in this prospectus might not
occur.
3
<PAGE>
<PAGE>
4
<PAGE>
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding the Company, the Class A Common Stock being sold in this
Offering and our financial statements and the notes to these financial
statements appearing elsewhere in this prospectus.
We have summarized the complex history and structure of our company under
'Background of the Company and Reconstitution.' For simplicity, we use the terms
'we' and the 'Company' throughout this prospectus to refer to the business that
is owned and conducted by the corporation that became Time Warner Telecom Inc.
shortly prior to the Offering of the Class A Common Stock, and that was owned
and conducted by its predecessors prior to that time.
Other important terms are defined in 'Background of the Company and
Reconstitution.' In addition, to assist you in understanding certain terms
relating to the telephony business that we explain and use in the body of this
prospectus, we have also included a glossary at the back of this prospectus.
THE COMPANY
The Company is a leading fiber facilities-based competitive local exchange
carrier in selected metropolitan areas across the United States. It offers a
wide range of business telephony services, primarily to medium- and large-sized
telecommunications-intensive business end-users, long distance carriers,
internet service providers, wireless communications companies and governmental
entities. These business telephony services include dedicated transmission,
local switched, long distance, data and video transmission services and
high-speed dedicated internet access. The Company had deployed digital telephony
switches in 16 of its 19 service areas as of December 31, 1998. As of that date,
the Company operated networks in 19 metropolitan areas that spanned 6,968 route
miles, contained 272,390 fiber glass miles and offered service to 4,321
buildings.
The Company believes that the Telecommunications Act of 1996 (the '1996
Act') and certain state regulatory initiatives provide increased opportunities
in the telecommunications marketplace by opening all local service areas to
competition and requiring existing local telephone companies, which are often
referred to as incumbent local exchange carriers, to provide increased direct
interconnection.
BUSINESS STRATEGY
The key elements of the Company's business strategy are discussed in detail
under 'Business -- Business Strategy,' which we urge you to read carefully
because we believe it is important to understanding our business. The following
is a summary of the Company's business strategy.
LEVERAGE EXISTING FIBER OPTIC NETWORK. The Company has a substantial
in-place fiber optic network that it plans to emphasize in seeking to expand its
business with existing and new customers. Its ownership of these facilities
should provide competitive advantages over providers that must resell and/or
bundle services provided on other companies' networks.
EXPAND SWITCHED SERVICES. The Company is rapidly expanding the switched
services portion of its business, which represented approximately one-third of
revenues in 1998. To meet the anticipated increase in demand, the Company is
rapidly installing switches and expects to be able to offer switched services in
all current service areas by early 2000.
EXPAND DATA SERVICES CAPACITY. To enhance the Company's capacity to offer
high quality, long-haul data products, the Company is completing a fully
managed, high speed nationwide fiber optic infrastructure, which is expected to
be completed during the second quarter of 1999.
TARGET MEDIUM- AND LARGE-SIZED BUSINESS CUSTOMERS. The Company targets
medium- and large-sized business customers because these companies are often
high volume users of telecommunications services who require the high quality
networks that we operate. The Company can also achieve economies of scale in
sales, marketing and operations by focusing on these customers.
INTERCONNECT COMPANY SERVICE AREAS. The Company is interconnecting its 19
existing service areas with owned or leased fiber optic and conventional
facilities. This will allow the Company to increase revenue by offering regional
long distance services over facilities it controls.
LEVERAGE STRATEGIC RELATIONSHIP WITH TIME WARNER INC. The Company has
agreements with Time Warner Inc. and its subsidiaries that allow the Company to
use the 'Time Warner' brand name in its business and derive economies of scale
by licensing and sharing the cost of developing and building existing and new
fiber optic
5
<PAGE>
<PAGE>
transmission facilities. The Company may also benefit from certain of Time
Warner's existing regulatory approvals and licenses. Time Warner Inc. is the
largest multiple system cable operator in the United States.
ENTER NEW GEOGRAPHIC AREAS. The Company plans to commence construction or
operations in three additional metropolitan areas by December 31, 1999,
including Jersey City, New Jersey and Dallas, Texas.
CONTINUE DISCIPLINED EXPENDITURE PROGRAM. The Company increases operating
efficiencies by pursuing a capital expenditure program that focuses on projects
that meet stringent financial criteria. The Company also considers acquisitions
and strategic alliances with other telecommunications providers to share the
costs and risks of new projects. On May 4, 1999, the Company announced that it
has an agreement to acquire the 50% interest in MetroComm AxS, LP ('MetroComm'),
which serves Columbus, Ohio, that it does not currently own for 2,190,308 shares
of Class A Common Stock. See 'Business -- Business Strategy.'
FINANCING PLAN
On July 21, 1998, the Company completed the public offering of $400.0
million principal amount of its 9 3/4% Senior Notes due 2008 (the 'Notes'). See
'Description of Certain Indebtedness -- The Notes.'
We expect that the net proceeds of the offering after repayment of
subordinated indebtedness to affiliates of the Existing Stockholders, together
with proceeds received from the sale of the Notes and internally generated
funds, will provide sufficient funds to expand the Company's business as
currently planned, pay interest on the Notes and fund its currently expected
losses through the second quarter of 2000. After that, the Company expects to
require additional financing. See 'Use of Proceeds.'
RECENT FINANCIAL RESULTS
On April 19, 1999, the Company announced its financial results for the
quarter ended March 31, 1999. The following table sets forth certain combined
statement of operations data of the Company for each of the periods presented.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1998 1999
-------- --------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
(UNAUDITED)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Dedicated transport services..................................................... $ 16,733 $ 29,664
Switched services................................................................ 5,315 17,925
-------- --------
Total revenues............................................................... 22,048 47,589
Costs and expenses:
Operating........................................................................ 13,519 23,995
Selling, general and administrative.............................................. 16,316 24,136
Depreciation and amortization.................................................... 11,932 14,994
-------- --------
Operating loss................................................................... (19,719) (15,536)
Equity in income (losses) of unconsolidated affiliates............................... (58) 188
Interest expense, net................................................................ (2,011) (9,294)
-------- --------
Net loss............................................................................. $(21,788) $(24,642)
-------- --------
-------- --------
Basic and diluted loss per common share.............................................. $ (.27) $ (.30)
-------- --------
-------- --------
Average common shares................................................................ 81,250 81,250
-------- --------
-------- --------
OTHER FINANCIAL DATA:
EBITDA (1)........................................................................... $ (7,787) $ (542)
Cash used in operations.............................................................. (15,103) (29,290)
Cash provided by (used in) investing activities...................................... (24,961) 415
Cash provided by financing activities................................................ 40,064 --
</TABLE>
(table continued on next page)
6
<PAGE>
<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
--------------------
<S> <C>
SELECTED OPERATING DATA (2):
Operating Networks.................................................................... 19
Route miles........................................................................... 7,069
Fiber miles........................................................................... 276,692
Buildings -- on net................................................................... 1,975
Voice grade equivalent circuits (approximate)......................................... 3,344,000
Digital telephone switches............................................................ 16
Employees............................................................................. 987
Access lines.......................................................................... 101,365
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
--------------------
(IN THOUSANDS)
(UNAUDITED)
<S> <C>
SELECTED BALANCE SHEET DATA:
Cash and marketable securities........................................................ $283,445
Property, plant and equipment, gross.................................................. 655,295
Long-term debt........................................................................ 578,329
Total stockholders' equity............................................................ 183,009
</TABLE>
- ------------
(1) 'EBITDA' is defined as operating income (loss) before depreciation and
amortization expense. It does not include charges for interest expense or
provision for income taxes. Accordingly, EBITDA is not intended to replace
operating income, net income, cash flow and other measures of financial
performance and liquidity reported in accordance with generally accepted
accounting principles. Rather, EBITDA is a measure of operating performance
and liquidity that you may consider in addition to those measures.
Management believes that EBITDA is a standard measure of operating
performance and liquidity that is commonly reported and widely used by
analysts, investors and other interested parties in the telecommunications
industry because it eliminates many differences in financial,
capitalization, and tax structures, as well as non-operating and one-time
charges to earnings. EBITDA is used internally by the Company's management
to assess ongoing operations and is a component of a covenant of the Notes
that limits the Company's ability to incur certain additional future
indebtedness. However, EBITDA as used in this prospectus may not be
comparable to similarly titled measures reported by other companies due to
differences in accounting policies.
(2) Includes all managed properties, including unconsolidated affiliates. The
unconsolidated affiliate consists of MetroComm in Columbus, Ohio. The
Company has an agreement to acquire the 50% interest in MetroComm that it
does not currently own. See 'Business -- Business Strategy.'
Revenues. Revenues increased $25.5 million, or 116%, to $47.6 million for
the three months ended March 31, 1999, from $22.0 million for the same period in
1998. First quarter revenues from dedicated transport services increased 77% as
compared to the first quarter of 1998, reflecting growth in existing markets.
First quarter revenues from switched services increased 237%, from $5.3 million
for the first quarter of 1998 to $17.9 million for the first quarter of 1999,
primarily from growth in previously served markets and introduction of new
products. Switched services represent 38% of first quarter revenues in 1999 from
24% of first quarter revenues in 1998.
Operating Expenses. Operating expenses increased $10.5 million, or 78%, to
$24.0 million for the first quarter of 1999, from $13.5 million for the first
quarter of 1998. This increase was primarily due to an increase in costs
directly associated with an increase in customer base including local exchange
carrier expenses, back office support and the Company's overall expansion of its
business. As a percentage of revenues, operating costs decreased to 50% for the
first quarter of 1999 from 61% for the first quarter of 1998.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $7.8 million, or 48%, to $24.1 million for the
first quarter of 1999 from $16.3 million for the first quarter of 1998,
primarily resulting from higher direct sales and sales support cost, and data
processing costs associated with
7
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<PAGE>
increased revenues. As a percentage of revenues, selling, general and
administrative expenses decreased to 51% for the first quarter of 1999,
compared to 74% for the same period of 1998.
Operating Loss. Operating Loss for the first quarter of 1999 decreased
$4.2 million or 21.2% to $15.5 million, compared to $19.7 million for the first
quarter of 1998.
Depreciation and Amortization Expense. Depreciation and amortization
expense increased $3.1 million, or 25.7%, to $15.0 million for the first three
months of 1999, from $11.9 million for the same period in 1998.
Interest Expense, Net. Effective July 1, 1997 to July 14, 1998, all of the
Company's financing requirements were funded with loans from affiliates of the
Existing Stockholders. On July 21, 1998, the Company issued $400.0 million in
Notes. Interest expense, net relating to these loans and Notes totaled $9.3
million for the first quarter of 1999, compared to $2.0 million for the same
period a year ago.
Net Loss. Net loss increased $2.8 million, or 13.1%, to a loss of $24.6
million for the first quarter of 1999, from a loss of $21.8 million for the
first quarter of 1998.
Capital Expenditures. Capital expenditures were $43.3 million for the first
quarter of 1999 primarily associated with central office expansions, the
purchase of switches and switch upgrades, fiber construction for intercity
networks, and transport equipment to support the growth of the business.
8
<PAGE>
<PAGE>
BACKGROUND OF THE COMPANY AND RECONSTITUTION
The structure and history of the Company is complicated and is summarized
as follows:
(1) Prior to July 14, 1998, our business was operated by Time Warner
Cable, which refers to the cable systems owned by Time Warner Entertainment
Company, L.P. ('TWE'), Time Warner Entertainment-Advance/Newhouse
Partnership ('TWE-A/N') and Time Warner Inc. ('Time Warner'). TWE and TWE-
A/N are owned as follows:
(a) TWE is a partnership of subsidiaries of Time Warner and
MediaOne Group, Inc. ('MediaOne'); and
(b) TWE-A/N is a partnership of TWE and Advance/Newhouse
Partnership ('Newhouse').
(2) On July 14, 1998, Time Warner Telecom LLC ('TWT LLC') succeeded to
the ownership of our business. TWT LLC and a subsidiary corporation that,
prior to the Reconstitution, was named Time Warner Telecom Inc. ('TWT
Inc.') were formed by Time Warner, MediaOne and Newhouse to conduct the
Notes offering that closed on July 21, 1998, and to acquire the assets and
liabilities of our business from TWE, TWE-A/N and Time Warner. This
transaction resulted in Time Warner, MediaOne and Newhouse (either directly
or through subsidiaries) becoming the owners of all of the limited
liability company interests in TWT LLC. We refer to Time Warner, MediaOne
and Newhouse collectively as the 'Existing Stockholders.' On May 6, 1999,
MediaOne and AT&T Corp. ('AT&T') entered into a merger agreement providing
for MediaOne to be acquired by AT&T. If the merger between AT&T and Media
One is consummated, AT&T will succeed to all of MediaOne's rights and
obligations as an Existing Stockholder.
(3) Shortly prior to the date of this prospectus, a newly formed
corporation that we call 'New Time Warner Telecom' merged with and became
the successor to TWT LLC and TWT Inc., and changed its name to Time Warner
Telecom Inc. As part of that merger, the Existing Stockholders exchanged
their interests in TWT LLC for Class B Common Stock of New Time Warner
Telecom. We refer to this reconstitution of the Company from a limited
liability company to a corporation as the 'Reconstitution.'
As a result of the Reconstitution, the ownership of the Class B Common
Stock is as follows:
<TABLE>
<S> <C>
Time Warner................................................... 61.98%
MediaOne...................................................... 18.85%
Newhouse...................................................... 19.17%
</TABLE>
See 'The Reconstitution' for additional information.
Throughout this prospectus we use the terms defined in this section. In
addition, as described above, we use the term the 'Company' throughout this
prospectus to refer to our business:
(a) as it was owned and conducted by Time Warner Cable prior to
July 14, 1998;
(b) that, prior to the Reconstitution, was owned and conducted by
TWT LLC; and
(c) that since the Reconstitution is owned and conducted by New
Time Warner Telecom.
The Company's principal executive offices are located at 5700 S. Quebec
Street, Greenwood Village, CO 80111, and its telephone number is (303) 566-1000.
9
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<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Class A Common Stock offered........... 18,000,000 shares
Class A Common Stock offered in:
U.S. Offering..................... 14,400,000 shares
International Offering............ 3,600,000 shares
----------
Total........................ 18,000,000 shares
==========
Common Stock outstanding after the
Offering:
Class A Common Stock.............. 18,000,000 shares(1)
Class B Common Stock.............. 81,250,000 shares
----------
Total........................ 99,250,000 shares(1)
==========
Over-allotment option.................. 2,700,000 shares
The Offering........................... The sale of the Class A Common Stock is referred to in this prospectus
as the 'Offering.' We also completed a Notes offering in July 1998.
Use of Proceeds........................ The Company will use the net proceeds from the Offering primarily to
repay outstanding subordinated indebtedness plus accrued interest owed
to affiliates of the Existing Stockholders. Any remaining proceeds will
be used for general corporate and working capital purposes, which may
include payment of interest on the Notes and acquisitions of and joint
ventures with other telecommunications service providers. See 'Use of
Proceeds.'
Voting Rights.......................... After the Offering:
the Company will have outstanding two classes of common stock: the
Class A Common Stock and the Class B Common Stock (which are together
called the 'Common Stock'); and
the Existing Stockholders will have approximately 97.8% of the
combined voting power of the outstanding Common Stock. As a result,
they generally will have the collective ability to control all matters
requiring stockholder approval, including the election of directors.
Holders of Class A Common Stock have one vote per share.
Holders of Class B Common Stock have ten votes per share.
Holders of the Class A Common Stock and Class B Common Stock generally
vote together as a single class. However, some matters require the
approval of 100% of the holders of the Class B Common Stock voting
separately as a class, and some matters require the approval of a
majority of the holders of the Class A Common Stock, voting separately
as a class.
See 'Principal Stockholders,' 'Description of Capital Stock' and
'Certain Relationships and Related Transactions -- Stockholders
Agreement.'
Conversion............................. Each share of Class B Common Stock is convertible into one share of
Class A Common Stock.
Proposed Nasdaq National Market
Symbol............................... 'TWTC'
</TABLE>
- ------------
(1) The number excludes approximately 6,186,667 shares of Class A Common Stock
issuable upon the exercise of employee stock options that will not
immediately be exercisable. See 'Management -- Stock Option Plan.' Depending
upon the final initial public offering price, the Company may in connection
with the Offering grant additional options to employees having an exercise
price equal to the initial public offering price. The number excludes
307,550 shares of Class A Common Stock issued to the former owners of
Internet Connect, Inc. as a result of the Company's acquisition of Internet
Connect, Inc. See 'Business -- Services -- Internet Services.' The number
also excludes 2,190,308 shares of Class A Common Stock issuable upon the
closing of the acquisition of the 50% interest in MetroComm that the Company
does not currently own, if such acquisition is consummated. See
'Business -- Business Strategy.'
RISK FACTORS
You should consider all of the information contained in this prospectus
before making an investment in the Class A Common Stock. In particular, you
should consider the factors described under 'Risk Factors,' beginning on page
14.
10
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<PAGE>
SUMMARY COMBINED FINANCIAL AND OTHER OPERATING DATA
The summary statement of operations data for the years ended December 31,
1996, 1997 and 1998 are derived from the audited financial statements of the
Company, including the notes, appearing elsewhere in this prospectus. The
summary statement of operations data for the years ended December 31, 1994 and
1995 have been derived from audited financial statements of the Company not
included in this prospectus. The pro forma other operating data have been
derived from the accounting records of the Company and have not been audited.
The financial statements of the Company for all periods prior to the
reorganization of the Company that occurred on July 14, 1998 reflect the 'carved
out' historical financial position, results of operations, cash flows and
changes in stockholders' equity of the commercial telecommunications operations
of the predecessors of the Company, as if they had been operating as a separate
company. The summary financial and other operating data set forth below should
be read together with the information contained in 'Management's Discussion and
Analysis of Financial Condition and Results of Operations' and the Company's
financial statements, including the notes, appearing elsewhere in this
prospectus.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------
1994 1995 1996 1997 1998
-------- --------- --------- --------- ---------
(THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Dedicated transport services....................... $ 2,169 $ 6,505 $ 20,362 $ 44,529 $ 84,024
Switched services.................................. -- 350 3,555 10,872 37,848
-------- --------- --------- --------- ---------
Total revenues................................. 2,169 6,855 23,917 55,401 121,872
-------- --------- --------- --------- ---------
Costs and expenses:
Operating (1)...................................... 10,454 15,106 25,715 40,349 67,153
Selling, general and administrative (1)............ 26,066 34,222 60,366 54,640 77,401
Depreciation and amortization (1).................. 1,213 7,216 22,353 38,466 50,717
-------- --------- --------- --------- ---------
Total costs and expenses....................... 37,733 56,544 108,434 133,455 195,271
-------- --------- --------- --------- ---------
Operating loss......................................... (35,564) (49,689) (84,517) (78,054) (73,399)
Gain on disposition of investments (2)................. -- -- -- 11,018 --
Equity in income (losses) of unconsolidated
affiliates........................................... (1,611) (1,391) (1,547) (2,082) 127
Interest income........................................ -- -- -- -- 9,731
Interest and other, net (1)............................ (3) (25) (52) (1,538) (29,198)
-------- --------- --------- --------- ---------
Net loss............................................... $(37,178) $ (51,105) $ (86,116) $ (70,656) $ (92,739)
-------- --------- --------- --------- ---------
-------- --------- --------- --------- ---------
Basic and diluted loss per common share................ $ (.46) $ (.63) $ (1.06) $ (.87) $ (1.14)
-------- --------- --------- --------- ---------
-------- --------- --------- --------- ---------
Average common shares outstanding...................... 81,250 81,250 81,250 81,250 81,250
-------- --------- --------- --------- ---------
-------- --------- --------- --------- ---------
OTHER OPERATING DATA:
EBITDA (3)............................................. $(34,351) $ (42,473) $ (62,164) $ (39,588) $ (22,682)
EBITDA Margin (4)...................................... (1,583.7)% (619.6)% (259.9)% (71.5)% (18.6)%
Capital expenditures................................... 50,293 141,479 144,815 127,315 126,023
Cash provided (used) by operations..................... (14,873) (35,605) (52,274) (29,419) (343)
Cash used in investing activities...................... (52,632) (145,293) (149,190) (120,621) (378,083)
Cash provided by financing activities.................. 67,505 180,898 201,464 150,040 483,566
Pro forma interest expense, net (5)(6)................. (38,611)
Pro forma net loss (5)................................. (102,152)
Pro forma basic and diluted loss per common share
(5).................................................. (1.03)
Pro forma average common shares outstanding (5)........ 99,250
</TABLE>
(footnotes on next page)
11
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<PAGE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------------------------------------------
1994 1995 1996 1997 1998
------- -------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C>
OPERATING DATA (7):
Operating Networks........................................... 8 15 18 19 19
Route miles.................................................. 880 3,207 5,010 5,913 6,968
Fiber miles.................................................. 24,995 116,286 198,490 233,488 272,390
Voice grade equivalent circuits.............................. 39,002 158,572 687,001 1,702,431 2,953,454
Digital telephone switches................................... -- 1 2 14 16
Employees.................................................... 239 508 673 714 919
Access lines................................................. -- 493 2,793 16,078 78,036
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
---------------------------
(THOUSANDS)
AS ADJUSTED
FOR THE
RECONSTITUTION
AND THE
ACTUAL OFFERING (8)
-------- ---------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................................................. $105,140 $ 105,140
Marketable securities..................................................................... 250,857 250,857
Property, plant and equipment, net........................................................ 494,158 494,158
Total assets.............................................................................. 904,344 904,344
Long-term debt (9)........................................................................ 574,940 408,940
Total stockholders' equity................................................................ 207,651 334,251
</TABLE>
- ------------
(1) Includes expenses resulting from transactions with affiliates of $1.9
million in 1994, $6.5 million in 1995, $12.4 million in 1996, $17.1 million
in 1997 and $27.7 million in 1998. See note 7 to the Company's financial
statements appearing elsewhere in this prospectus for an explanation of
these expenses.
(2) In September 1997, the Company completed a series of transactions related to
its interests in the Hyperion Partnerships, a group of unconsolidated
telecommunication partnerships serving the New York area. In these
transactions, the Company sold its interests in the partnerships serving the
Buffalo and Syracuse markets in exchange for $7.0 million of cash and all of
the minority interests in the partnerships serving the Albany and Binghamton
markets that were not already owned by the Company. In connection with these
transactions, the Company recognized a gain of approximately $11.0 million.
(3) 'EBITDA' is defined as operating income (loss) before depreciation and
amortization expense. It does not include charges for interest expense or
provision for income taxes. Accordingly, EBITDA is not intended to replace
operating income, net income, cash flow and other measures of financial
performance and liquidity reported in accordance with generally accepted
accounting principles. Rather, EBITDA is a measure of operating performance
and liquidity that you may consider in addition to those measures.
Management believes that EBITDA is a standard measure of operating
performance and liquidity that is commonly reported and widely used by
analysts, investors and other interested parties in the telecommunications
industry because it eliminates many differences in financial,
capitalization, and tax structures, as well as non-operating and one-time
charges to earnings. EBITDA is used internally by the Company's management
to assess ongoing operations and is a component of a covenant of the Notes
that limits the Company's ability to incur certain additional future
indebtedness. However, EBITDA as used in this prospectus may not be
comparable to similarly titled measures reported by other companies due to
differences in accounting policies.
(4) EBITDA Margin represents EBITDA as a percentage of revenues.
(5) The pro forma statement of operations data for the year ended December 31,
1998 gives effect to the Reconstitution, the Offering and the sale of the
Notes as if they had occurred at the beginning of 1998. The pro forma
amounts are presented for informational purposes only and do not necessarily
indicate the actual amounts that would have been reported if the
transactions had been consummated at that date, nor do they necessarily
indicate future results. The pro forma data excludes a one-time $39.4
million charge to earnings, recognized by the Company on the Reconstitution
date, to record a net deferred tax liability associated with the change from
a limited liability company to a corporation.
(footnotes continued on next page)
12
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(footnotes continued from previous page)
(6) Pro forma interest expense gives effect to:
the issuance of $400.0 million principal amount of the Notes at an
interest rate of 9.75% at the beginning of 1998 and
the use of $166.0 million of the net proceeds from the Offering to
repay subordinated indebtedness to affiliates of the Existing
Stockholders,
in each case as if the transactions had occurred at the beginning of 1998
assuming approximately 4.0% of the interest on the Notes would have been
capitalized under FASB Statement No. 34, 'Capitalization of Interest Costs.'
In addition, pro forma interest expense includes $1.25 million for the year
ended December 31, 1998 relating to the amortization of approximately $12.5
million of debt issuance costs over a ten-year period.
(7) Includes all managed properties, including unconsolidated affiliates. The
unconsolidated affiliates consist of MetroComm in Columbus, Ohio and the
Albany and Binghamton, New York networks. Albany and Binghamton were wholly
owned at December 31, 1997. The Company has an agreement to acquire the 50%
interest in MetroComm that it does not currently own. See 'Business --
Business Strategy.'
(8) Adjusted to give effect to:
the issuance by the Company and distribution to the Existing
Stockholders of shares of Class B Common Stock pursuant to the
Reconstitution,
the issuance and sale by the Company of 18,000,000 shares of Class A
Common Stock in the Offering at an assumed initial public offering
price per share of $10, the midpoint of the range set forth on the
cover page of this prospectus,
the application of the net proceeds to the Company from the Offering
to repay $166.0 million of subordinated indebtedness to affiliates of
the Existing Stockholders and
a reduction in stockholders' equity that reflects a one-time $39.4
million charge to earnings (as of December 31, 1998), recognized by
the Company on the Reconstitution date, to record a net deferred tax
liability associated with the change from a limited liability company
to a corporation. The Company estimates that the charge to earnings
will be approximately $42.0 million as of May 1999. See 'Use of
Proceeds' and 'Capitalization.'
(9) As of March 31, 1999, long-term debt consisted of (a) $400.0 million
principal amount of Notes and (b) $178.3 million principal amount of
subordinated loans payable to affiliates of the Existing Stockholders.
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RISK FACTORS
Prior to investing in the Class A Common Stock, you should carefully
consider the following risks.
OUR LIMITED OPERATING HISTORY MAY NOT BE A RELIABLE BASIS FOR EVALUATING OUR
PROSPECTS.
Time Warner Cable began the Company's business in 1993. Since the beginning
of 1997, our business has changed substantially as it has rapidly expanded into
switched services. As a result, prospective purchasers have limited historical
financial information available to evaluate our likely future performance. When
making a decision to invest in the Class A Common Stock, prospective purchasers
should consider the risks, expenses and difficulties frequently encountered by
companies that are in the development stage.
WE HAVE A HISTORY OF OPERATING LOSSES AND NEGATIVE CASH FLOW.
The Company has incurred operating losses and negative cash flow since
inception. For the years ended December 31, 1997 and 1998, the Company had
combined operating losses of $78.1 million and $73.4 million. The Company had
negative EBITDA for the year ended December 31, 1997 of $39.6 million, and for
the year ended December 31, 1998 of $22.7 million.
EBITDA has the meaning described in footnote 3 under 'Summary Combined
Financial and Other Operating Data.'
WE EXPECT TO EXPERIENCE NEGATIVE CASH FLOW AND OPERATING LOSSES FOR THE
FORESEEABLE FUTURE.
The Company expects to continue to incur operating losses and negative cash
flow as the Company builds its networks and expands its customer base. This will
reduce our ability to meet working capital needs and increase our need for
external financing.
The development of our business requires substantial capital expenditures.
A substantial part of these expenditures are incurred before any related
revenues are realized. Capital expenditures and other operating expenditures
will result in negative cash flow and operating losses until and unless we
develop an adequate customer base and revenue stream. We expect that each
network will produce negative cash flow for at least two and a half years after
it begins operations in that network. Moreover, the Company may never develop an
adequate customer base, sustain profitability, or generate sufficient cash flow.
WE WILL REQUIRE SUBSTANTIAL CAPITAL TO EXPAND OUR OPERATIONS.
The development and expansion of the Company's networks requires
substantial capital. If this capital is not available when needed, our business
will be adversely affected. We expect our principal capital requirements in the
next two years to be:
$345.0 million to purchase and install switches, electronics, fiber and
other technologies in existing and future networks; and
$50.0 million for capital expenditures on the Company's management
information system infrastructure.
WE EXPECT TO REQUIRE ADDITIONAL THIRD PARTY FINANCING BEGINNING IN 2000.
We expect to require additional financing beginning in 2000, or possibly
sooner, as explained below. When we seek additional financing, the terms offered
may place significant limits on our financial and operating flexibility, or may
not be acceptable to us. The failure to raise sufficient funds when needed and
on reasonable terms may require us to modify or significantly curtail our
business expansion plans. This could have a material adverse impact on the
Company's growth, ability to compete, and ability to service its existing debt.
The Company expects the proceeds of the Offering, after repayment of
subordinated indebtedness to affiliates of the Existing Stockholders, the
proceeds of the Notes offering, and internally generated funds to provide
sufficient capital to fund its current business plans through the middle of
2000. We expect to require additional financing after that date and may seek a
revolving bank credit facility and vendor financing prior to that time. The
Company may also be required to seek additional financing sooner than 2000 if:
the Company's business plans and cost estimates prove to be inaccurate;
14
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<PAGE>
the Company decides to accelerate the expansion of its business and
existing networks;
the Company consummates acquisitions or joint ventures that require
capital; or
the Company is not able to lease additional capacity from Time Warner
Cable at acceptable rates.
Although the Existing Stockholders financed the Company's business prior to
the offering of the Notes, they are not required to provide any future
financing.
OUR SIGNIFICANT INDEBTEDNESS MAY IMPAIR OUR FINANCIAL AND OPERATING FLEXIBILITY.
The Company has a significant amount of debt outstanding. This substantial
indebtedness may have an adverse impact on the Company. For example:
the Company's ability to obtain additional financing may be limited;
a substantial portion of its cash flow will be dedicated to pay interest
and principal on its debt;
the Company's ability to satisfy its debt obligations may be diminished;
the Company may be more vulnerable to economic downturns; and
the Company's ability to withstand competitive pressure may be more
limited.
As of December 31, 1998, after giving pro forma effect to the
Reconstitution, the Offering, the sale of the Notes, and the repayment of $166.0
million of indebtedness, the Company would have $408.9 million of consolidated
total debt. This includes $8.9 million of subordinated debt to affiliates of the
Existing Stockholders.
THE INDENTURE FOR THE NOTES CONTAINS RESTRICTIVE COVENANTS THAT MAY LIMIT OUR
FLEXIBILITY.
The indenture limits, and in some circumstances prohibits, the ability of
the Company to:
incur additional debt;
pay dividends;
make investments or other restricted payments;
engage in transactions with stockholders and affiliates;
create liens;
sell assets;
issue or sell capital stock of subsidiaries; and
engage in mergers and consolidations.
These covenants may limit our financial and operating flexibility. In
addition, if the Company does not comply with these covenants, the holders of
the Notes may accelerate the Company's debt under the Notes and the holders of
other indebtedness of the Company may also have the right to accelerate their
debt.
THE MARKET VALUE OF YOUR INVESTMENT MAY BE ADVERSELY AFFECTED IF WE DO NOT
SUCCESSFULLY MANAGE THE EXPANSION OF THE SWITCHED SERVICES BUSINESS AND OUR
EXPANSION INTO NEW MARKETS AND SERVICES.
Since 1997, the Company has been implementing switched services at a rapid
rate. We expect switched services, which provided one-third of revenues in 1998,
to be the predominant source of future growth and revenues. In addition, the
Company plans to offer new telecommunications services, expand service in its
existing markets, interconnect its existing markets and enter new markets. If we
are not successful in implementing these changes, our results of operations and
stock price will likely be adversely affected.
Our ability to manage this expansion depends on many factors, including the
ability to:
attract new customers and sell new services to existing customers;
design, acquire and install transmission and switching facilities;
obtain any required governmental permits and rights-of-way;
implement interconnection with local exchange carriers;
expand, train and manage its employee base;
15
<PAGE>
<PAGE>
improve its financial, operating and information systems to effectively
manage its growth; and
accurately predict and manage the cost and timing of its capital
expenditure programs.
Even if the Company is successful in completing the infrastructure to
support its expanded business, that business may not be profitable and may not
generate positive cash flow for the Company.
WE MAY NEED TO OBTAIN ADDITIONAL FIBER OPTIC CAPACITY BEYOND WHAT TIME WARNER
CABLE PROVIDES US.
The Company licenses much of its fiber optic capacity on Time Warner
Cable's networks. However, Time Warner Cable is not obligated to provide
additional capacity to the Company and may or may not choose to do so. If we
cannot obtain additional capacity from Time Warner Cable at acceptable rates,
the increased costs may adversely affect our business in some locations. Also,
if Time Warner Cable fails to maintain the necessary permits, rights-of-way and
governmental authorization, or if the Company cannot rely on Time Warner Cable's
licenses and permits, the Company's business may be adversely affected in some
locations.
OUR BUSINESS MAY BE LIMITED IF THE CAPACITY LICENSE WITH TIME WARNER CABLE
EXPIRES OR IS TERMINATED.
If the capacity license is not renewed on expiration in 2028 or is
terminated prior to that time, the Company may need to build, lease, or
otherwise obtain fiber optic capacity. The terms of those arrangements may be
materially less favorable to the Company than the terms of its existing capacity
license. See 'Certain Relationships and Related Transactions -- Certain
Operating Agreements.'
At expiration of the capacity license, Time Warner Cable is obligated to
negotiate a renewal in good faith, but the Company may be unable to reach
agreement with Time Warner Cable on acceptable terms. In addition, Time Warner
Cable may terminate the capacity license before expiration upon:
a material impairment of Time Warner Cable's ability to provide the
license by law;
a material breach of the capacity license by the Company; or
the institution of any proceedings to impose any public utility or common
carrier status or obligations on Time Warner Cable, or any other
proceedings challenging Time Warner Cable's operating authority as a
result of the services provided to the Company under the capacity license.
The capacity license prohibits the Company from offering residential
services or content services with the capacity licensed from Time Warner Cable.
WE MAY LOSE THE RIGHT TO USE THE 'TIME WARNER' NAME.
The Company believes the 'Time Warner' brand name is valuable and its loss
could have an adverse effect on the Company. Under a license agreement with Time
Warner, the Company is required to discontinue use of the 'Time Warner' name in
the following circumstances:
the license agreement expires after an initial term of four years or any
permitted renewal;
Time Warner no longer owns at least 30% of the Common Stock;
Time Warner no longer has the right to nominate at least three members of
the Company's board of directors;
the Company violates covenants in the capacity license with Time Warner
Cable relating to residential services and content services; or
an Existing Stockholder transfers its Class B Common Stock and its rights
to designate nominees to the board of directors to a third party.
Under these circumstances, the Company may change its name to TW Telecom
Inc.
THE COMPANY DEPENDS ON INTERCONNECTION WITH INCUMBENT LOCAL EXCHANGE CARRIERS.
The Company's services may be less attractive if it cannot obtain high
quality, reliable and reasonably priced interconnection from incumbent local
exchange carriers. The 1996 Act requires incumbent local
16
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exchange carriers to allow the Company to connect to their networks, thereby
connecting to end users not on the Company's networks ('interconnection').
However, negotiating interconnection agreements with the incumbent local
exchange carriers takes considerable time, effort and expense. The agreements
are also subject to state and local regulation. The Company may be unable to
obtain interconnection at rates that are both competitive and profitable.
WE MAY NOT BE ABLE TO OFFER LONG DISTANCE SERVICES ON A PROFITABLE BASIS.
The Company has begun to offer long distance services. The long distance
market is extremely competitive. The risks associated with this market for the
Company include the following:
we may need to engage in significant price competition and discounting to
attract and retain customers;
we may experience high average customer turnover or 'churn' rates;
we will rely on other carriers for a portion of our transmission and
termination services; and
we may have difficulty in estimating future supply and demand.
Among other things, we may be obligated to pay underutilization charges to other
carriers if we overestimate our needs for transmission services. We may also
face higher prices if we underestimate our transmission needs.
THE LOCAL SERVICES MARKET IS HIGHLY COMPETITIVE, AND MANY OF OUR COMPETITORS
HAVE SIGNIFICANT ADVANTAGES THAT MAY ADVERSELY AFFECT OUR ABILITY TO COMPETE
WITH THEM.
The Company operates in an increasingly competitive environment and some
companies may have competitive advantages over the Company. Most incumbent local
exchange carriers offer substantially the same services as those offered by the
Company. Incumbent local exchange carriers benefit from:
longstanding relationships with their customers;
greater financial and technical resources;
the ability to subsidize local services from revenues in unrelated
businesses; and
recent regulations that relax price restrictions and decrease regulatory
oversight of incumbent local exchange carriers.
The Company also faces competition from new entrants into the local
services business, who may also be better established and have greater financial
resources. These advantages may impair the Company's ability to compete in price
and service offerings or require the Company to sustain prolonged periods of
operating losses in order to retain customers. The current trend of
consolidation of telecommunications companies and strategic alliances within the
industry could give rise to significant new or stronger competitors for the
Company. Some long distance carriers who are customers of the Company are
pursuing alternative ways to obtain local telecommunications services, including
by acquiring local exchange carriers or constructing their own facilities.
COMPETITION IN LOCAL SERVICES HAS ALSO INCREASED AS A RESULT OF CHANGING
GOVERNMENT REGULATIONS.
The 1996 Act has increased competition in the local telecommunications
business. The 1996 Act:
requires incumbent local exchange carriers to interconnect their networks
with those of requesting telecommunications carriers and to allow
requesting carriers to collocate equipment at the premises of the
incumbent local exchange carriers;
requires all local exchange providers to offer their services for resale;
allows long distance carriers to resell local services;
requires incumbent local exchange carriers to offer to requesting
telecommunications carriers network elements on an unbundled basis; and
requires incumbent local exchange carriers to offer to requesting
telecommunications carriers the services they provide to end-users to
other carriers at wholesale rates.
Competition may also increase as a result of a recent World Trade
Organization agreement on telecommunications services. As a result of the
agreement, the FCC has made it easier for foreign companies to enter the U.S.
telecommunications market.
17
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SEVERAL CUSTOMERS ACCOUNT FOR A SIGNIFICANT AMOUNT OF OUR REVENUES.
The Company has substantial business relationships with a few large
customers. For the year ended December 31, 1998, the Company's top 10 customers
accounted for 37.8% of the Company's total revenues. The Company's two largest
customers for the year ended December 31, 1998, AT&T and MCI-Worldcom,
represented 13.4% and 10.3% of the Company's total revenues. However, a
substantial portion of that revenue results from traffic that is directed to the
Company by customers that have selected those long distance carriers
(approximately 27.3% of the 1998 AT&T revenue and 34.0% of the 1998 MCI-Worldcom
revenue). No other customer, including customers who direct their business
through long distance carriers, accounted for 10% or more of revenues.
WE ARE SUBJECT TO SIGNIFICANT FEDERAL AND STATE REGULATION THAT CAN
SIGNIFICANTLY AFFECT PRICING AND PROFITABILITY.
Existing Federal and state regulations, or new regulations, could have a
material impact on the prices and revenues of the Company. Certain rates charged
by the Company to its customers must be filed with the FCC and/or state
regulators, which provides price transparency to customers and competitors.
In addition, when the Company provides local exchange services in a market,
the Communications Act of 1934 ('Communications Act') and FCC rules require it
to:
not unreasonably limit the resale of its services;
provide telephone number portability if technically feasible;
provide dialing parity to competing providers;
provide access to poles, ducts and conduits owned by it; and
establish reciprocal compensation arrangements for the transport and
termination of telecommunications.
WE MAY RECEIVE LESS REVENUE IF INCUMBENT LOCAL EXCHANGE CARRIERS SUCCESSFULLY
CHALLENGE RECIPROCAL COMPENSATION.
The Company currently receives compensation from incumbent local exchange
carriers for terminating local calls at the premises of internet service
providers. Some companies have challenged the right of the Company and others to
receive this compensation. Determinations by the FCC or by state utility
commissions that such traffic should not be subject to termination compensation
could be adverse to the Company. See 'Business -- Government Regulation.'
WE DEPEND ON GOVERNMENTAL AND OTHER AUTHORIZATIONS.
The development, expansion and maintenance of the Company's networks will
depend on, among other things, its ability to obtain rights-of-way and other
required governmental authorizations and permits. Any increase in the difficulty
or cost of obtaining these authorizations and permits could adversely affect the
Company, particularly where it must compete with companies that already have the
necessary permits. In order to compete effectively, the Company must obtain
these authorizations in a timely manner, at reasonable costs and on satisfactory
terms and conditions. In certain of the cities or municipalities where the
Company provides network services, it pays license or franchise fees. The 1996
Act permits municipalities to charge these fees only if they are competitively
neutral and nondiscriminatory, but certain municipalities may not conform their
practices to the requirements of the 1996 Act in a timely manner or without
legal challenge. The Company also faces the risks that other cities may start
imposing fees, fees will be raised or franchises will not be renewed. Some of
the Company's franchise agreements also provide for increases or renegotiation
of fees at certain intervals. Any increases in these fees may have a negative
impact on the Company's financial condition.
WE ARE DEPENDENT ON TIME WARNER CABLE'S PERMITS, LICENSES AND RIGHTS-OF-WAY.
The Company currently licenses a significant portion of its capacity from
Time Warner Cable. Municipalities that regulate Time Warner Cable may or may not
seek to impose additional franchise fees or otherwise charge Time Warner Cable.
The Company must reimburse Time Warner Cable for any new fees or increases. Time
Warner Cable or the Company may not be able to obtain all necessary permits,
licenses or agreements from governmental authorities or private rights-of-way
providers necessary to effect future license transactions. This would hinder the
Company's ability to expand its existing networks or develop new networks
successfully in locations served by Time Warner Cable.
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WE MAY FACE RISKS ASSOCIATED WITH POTENTIAL ACQUISITIONS.
The Company may acquire other businesses that will complement its existing
business. These acquisitions will likely involve some or all of the following
risks:
the difficulty of assimilating the acquired operations and personnel;
the potential disruption of the Company's ongoing business;
diversion of resources;
the possible inability of management to maintain uniform standards,
controls, procedures and policies;
the possible difficulty of managing its growth and information systems;
the risks of entering markets in which the Company has little experience;
and
the potential impairment of relationships with employees or customers.
WE EXPECT THAT OUR QUARTERLY OPERATING RESULTS WILL FLUCTUATE.
As a result of the limited revenues and significant expenses associated
with the expansion and development of its networks and services, the Company
anticipates that its operating results could vary significantly from quarter to
quarter. Changes in the usage or payment patterns of significant customers may
also cause operating results to vary.
SOME OF OUR ASSETS MAY FLUCTUATE IN VALUE.
After the Offering, the Company will hold a significant part of the
proceeds of the Notes offering in marketable securities, including investment
grade corporate debt securities. The value of these securities will likely be
affected by changes in interest rates and general market conditions. Periodic
fluctuations in the value of these assets will affect our quarterly results.
WE EXPECT TO DEPEND ON THIRD PARTY VENDORS FOR INFORMATION SYSTEMS.
The Company has entered into agreements with vendors that provide for the
development and operation of back office systems, such as ordering, provisioning
and billing systems. The failure of those vendors to perform their services in a
timely and effective manner at acceptable costs could have a material adverse
effect on the Company's growth and its ability to monitor costs, bill customers,
provision customer orders and achieve operating efficiencies. See 'Management's
Discussion and Analysis of Financial Condition and Results of Operations -- Year
2000.'
AFTER THE OFFERING, THE EXISTING STOCKHOLDERS WILL CONTINUE TO CONTROL THE
COMPANY.
After the Offering, the Existing Stockholders will hold all the outstanding
shares of Class B Common Stock. The Existing Stockholders generally will have
the collective ability to control all matters requiring stockholder approval,
including the nomination and election of directors. The Class B Common Stock is
not subject to any mandatory conversion provisions other than pursuant to
certain transfer restrictions. The disproportionate voting rights of the Class B
Common Stock relative to the Class A Common Stock may delay or prevent a change
in control of the Company, and may make the Company a less attractive takeover
target. See 'Principal Stockholders' and 'Description of Capital Stock.'
THE HOLDERS OF CLASS B COMMON STOCK CAN SELL CONTROL OF THE COMPANY AT A TIME
WHEN THEY DO NOT HAVE A MAJORITY ECONOMIC INTEREST IN THE COMPANY, AND EXCLUDE
THE HOLDERS OF CLASS A COMMON STOCK FROM PARTICIPATING IN THE SALE.
The stockholders agreement provides that, subject to the rights of first
refusal of the other holders of Class B Common Stock, the Existing Stockholders
may transfer their Class B Common Stock. If a holder sells all, but not less
than all, of its Class B Common Stock as shares of Class B Common Stock, such
holder may transfer its right to nominate Class B nominees for election to the
board of directors. In addition, all of the holders of Class B Common Stock have
the right to participate in certain sales by Time Warner of its Class B Common
Stock. Accordingly, majority control of the Company could be transferred by one
or more holders of Class B Common Stock at a time when such holder or holders of
Class B Common Stock do not have a majority of the economic interest in the
Company and with no assurance that the holders of Class A Common Stock would be
given the opportunity to participate in the transaction or, if they were
permitted to participate in the transaction, to receive the same amount and type
of consideration for their stock in the Company as the holders of Class B Common
Stock.
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In addition, the Company has elected not to be subject to Section 203 of
the Delaware General Corporation Law, which would otherwise provide certain
restrictions on 'business combinations' between the Company and any person
acquiring a significant (15% or greater) interest in the Company other than in a
transaction approved by the board of directors and in certain cases by
stockholders of the Company.
THE EXISTING STOCKHOLDERS MAY COMPETE WITH THE COMPANY.
The Existing Stockholders are in the cable television business. There is no
restriction on the Existing Stockholders' ability to compete with the Company.
They may, now or in the future, provide the same or similar services to those
provided by the Company. Time Warner and AT&T have also announced their
intention to form a joint venture to offer any distance telephone services to
residential and small business customers in Time Warner Cable's service areas,
utilizing its cable facilities. Although the Company primarily targets large-
and medium-size business customers in the same services areas, the proposed
joint venture could compete directly with the Company with respect to small
business customers.
LIMITATIONS ON THE COMPANY'S BUSINESS ACTIVITIES.
The Company's restated certificate of incorporation restricts the Company's
business activities. These restrictions limit our ability to expand our business
and could deprive the Company of valuable future opportunities. Under the
restated certificate of incorporation, the Company may not, directly or through
a subsidiary or affiliate:
provide residential services, or
produce or otherwise provide entertainment, information, or any other
content services, with certain limited exceptions.
The Company may engage in these activities with the affirmative vote of all
the holders of the Class B Common Stock or on the earlier of:
five years from the date of the restated certificate of incorporation, or
the date the Class B Common Stock represents less than 50% of the voting
power of the Company.
See 'Description of Capital Stock.'
The Company is subject to the same restrictions under the capacity license
with Time Warner Cable, except that those restrictions apply only to the
Company's use of the leased capacity but last until the capacity license expires
in 2028 or is terminated. The Company believes these restrictions will not
materially affect its ability to operate its business as currently planned.
SOME OF OUR DIRECTORS MAY HAVE CONFLICTS OF INTEREST.
Some directors of the Company are also directors, officers or employees of
the Existing Stockholders or their affiliates. Although these directors have
fiduciary obligations to the Company under Delaware law, they may face conflicts
of interest. For example, conflicts of interest may arise with respect to
certain business opportunities available to, and certain transactions involving,
the Company. The Existing Stockholders have not adopted any special voting
procedures to deal with such conflicts of interest. The resolution of these
conflicts may be unfavorable to the Company. The Company's restated certificate
of incorporation provides for the allocation of corporate opportunities between
the Company and the Existing Stockholders. See 'Description of Capital Stock'
and 'Certain Relationships and Related Transactions.'
IF WE DO NOT ADAPT TO RAPID CHANGES IN THE TELECOMMUNICATIONS INDUSTRY, WE COULD
LOSE CUSTOMERS OR MARKET SHARE.
The telecommunications industry will continue to experience rapid changes
in technology. The Company's future success may depend on its ability to adapt
to any changes in the industry. A failure by the Company to adopt new
technology, or the Company's choice of one technological innovation over
another, may have an adverse impact on the Company's ability to compete or meet
customer demands.
20
<PAGE>
<PAGE>
FUTURE SALES OF SHARES OF CLASS A COMMON STOCK COULD DEPRESS THE PRICE OF THE
CLASS A COMMON STOCK.
The market price of the Class A Common Stock could drop as a result of
sales in the market after the Offering. The perception that such sales could
occur may also affect its trading price. These factors could also make it more
difficult for the Company to raise funds through future offerings of Common
Stock.
In connection with the Offering, the officers, directors and Existing
Stockholders have agreed that, with certain exceptions, they will not sell
shares of Common Stock for 180 days after the date of this prospectus without
the consent of Morgan Stanley & Co. Incorporated. After the 180 day period, the
officers, directors and Existing Stockholders may decide to dispose of their
shares of Class A Common Stock. Sales of shares at that time may have an adverse
effect on the price of the Class A Common Stock.
There will be 18,000,000 shares of Class A Common Stock and 81,250,000
shares of Class B Common Stock outstanding after the Offering. There will also
be 307,550 shares of Class A Common Stock outstanding held by the former owners
of Internet Connect, Inc. and, if the MetroComm transaction is consummated,
2,190,308 shares of Class A Common Stock held by the former owners of the 50%
interest in MetroComm that the Company does not currently own. In addition, if
the underwriters exercise the over-allotment option, there will be an additional
2,700,000 shares of Class A Common Stock outstanding. The Class B Common Stock
is convertible into Class A Common Stock on a one-to-one ratio. The shares of
Class A Common Stock sold in the Offering will be freely transferrable without
further registration, except for any shares purchased by 'affiliates,' as that
term is defined in Rule 144 under the Securities Act. The remaining shares of
Class A Common Stock and any shares of Class A Common Stock converted from
Class B Common Stock are 'restricted securities' within the meaning of the
Securities Act. These shares may only be sold under a registration statement or
an exemption under the Securities Act. The Existing Stockholders have rights to
require the Company to register sales of shares of Class A Common Stock and
shares of Class B Common Stock.
The Company has also initially reserved 9,027,000 shares of Class A Common
Stock for the exercise of employee stock options. The amount of this reservation
may be increased depending upon the size of the Offering. Approximately
6,186,667 stock options are outstanding as of April 1999. See 'Underwriters.'
THE CLASS A COMMON STOCK HAS NOT BEEN PUBLICLY TRADED BEFORE THIS OFFERING AND
THE STOCK PRICE MAY BE VOLATILE.
The Class A Common Stock has not been publicly traded prior to the
Offering. The Company expects the Class A Common Stock to be approved for
quotation on the Nasdaq National Market. However, an active trading market may
not develop or be sustained. The Company and the underwriters will determine the
initial public offering price. The initial public offering price may not be
indicative of the trading prices after the Offering. The price after the
Offering may be volatile, and may fluctuate due to factors such as:
actual or anticipated fluctuations in quarterly and annual results;
announcements of technological innovations;
introduction of new services;
mergers and strategic alliances in the telecommunications industry; and
changes in government regulation.
In recent years, the market for stock in technology, telecommunications, and
computer companies has been highly volatile. This is particularly true for
companies with relatively small capitalizations, such as the Company.
WE DO NOT EXPECT TO PAY DIVIDENDS FOR THE FORESEEABLE FUTURE.
The Company is effectively prohibited from paying dividends on its Common
Stock for the foreseeable future under the terms of the indenture for the Notes.
Moreover, we plan to retain all earnings for investment in our business, and do
not plan to pay dividends at any time in the foreseeable future. See 'Dividend
Policy.'
PURCHASERS WILL HAVE SUBSTANTIAL AND IMMEDIATE DILUTION.
Purchasers of the Class A Common Stock will incur immediate and substantial
dilution of $6.83 in the pro forma net tangible book value per share (assuming
an offering price of $10 per share). See 'Dilution.'
21
<PAGE>
<PAGE>
IF WE FAIL TO TIMELY RESOLVE POTENTIAL YEAR 2000 PROBLEMS, WE COULD EXPERIENCE
MAJOR SYSTEM FAILURES.
If the Company or its significant vendors or suppliers experience Year 2000
problems, those problems could have a negative impact on the Company's networks,
customer order processing and provisioning systems, customer billing and data
interfaces to and from these systems. See 'Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Year 2000.' The Company has
implemented comprehensive efforts to assess and remediate its computer systems
and related software and equipment to ensure that those systems, software and
equipment recognize, process and store information in the Year 2000 and later
years. The Company is also verifying the Year 2000 readiness of its significant
suppliers and vendors. Our management believes that it has established a program
to resolve significant Year 2000 issues in a timely manner. However, the process
for addressing these issues is not yet complete.
22
<PAGE>
<PAGE>
USE OF PROCEEDS
The Company estimates the net proceeds from the sale of 18,000,000 shares
of Class A Common Stock in the Offering to be approximately $166.0 million (or
approximately $191.2 million if the U.S. underwriters exercise their
over-allotment option). This is based on the assumption that the initial public
offering price is $10 per share, the midpoint of the range set forth on the
cover page of this prospectus, after deducting estimated underwriting discounts
and commissions and other expenses.
The Company intends to use the net proceeds of the Offering primarily to
repay outstanding subordinated indebtedness, plus accrued interest, owed to
affiliates of the Existing Stockholders. At March 31, 1999, this indebtedness
equaled $178.3 million. Any remaining proceeds will be used for general
corporate and working capital purposes, which may include acquisitions and joint
ventures. Pending these uses, the net proceeds of the Offering will be invested
in short-term, money market instruments. This subordinated indebtedness that
will be repaid bears interest payable in kind at an annual rate equal to The
Chase Manhattan Bank's prime lending rate as in effect from time to time, and
matures on August 15, 2008.
The Company, from time to time, evaluates potential acquisitions of, and
joint ventures relating to, networks currently owned and operated by other
companies, including affiliates of the Existing Stockholders, and expects to
continue to do so. If the Company enters into a definitive agreement with
respect to any acquisition or joint venture, it may require additional financing
or it may elect to use a portion of the proceeds of the Offering or the proceeds
from the sale of the Notes not previously expended for other purposes.
The Company expects that any net proceeds of the Offering that remain after
repayment of subordinated indebtedness to affiliates of the Existing
Stockholders, together with the net proceeds received from the sale of the Notes
and internally generated funds, will provide sufficient funds for the Company
to:
expand its business as currently planned,
pay interest on the Notes and
fund its currently expected losses,
in each case through the middle of 2000. After that, the Company expects to
require additional financing. However, if the Company's plans or assumptions
change or prove to be inaccurate, or the foregoing sources of funds prove to be
insufficient to fund the Company's growth and operations, or if the Company
consummates acquisitions or joint ventures, the Company may be required to seek
additional capital sooner than currently anticipated.
The Company's revenues and costs are dependent upon factors that the
Company cannot control, such as regulatory changes, changes in technology and
increased competition. Due to the uncertainty of these and other factors, actual
revenues and costs may vary from expected amounts, possibly to a material
degree, and such variations are likely to affect the Company's future capital
requirements. Sources of financing may include public or private debt or equity
financing by the Company or its subsidiaries, vendor financing or other
financing arrangements. At a future date, the Company may negotiate a bank
credit facility to provide it with working capital and enhance its financial
flexibility. This financing may not be available on terms acceptable to the
Company or at all. The Company's issuance of additional equity securities could
cause substantial dilution of your interest in the Company.
DIVIDEND POLICY
The Company intends to retain any future earnings to finance its growth
strategy and the development and expansion of its networks and operations. We do
not anticipate paying any dividends in the foreseeable future. The decision
whether to pay dividends will be made by the Company's board of directors in
light of conditions then existing, including the Company's results of
operations, financial condition and requirements, business conditions, covenants
under loan agreements and other contractual arrangements, and other factors. In
addition, the indenture for the Notes contains covenants that effectively
prevent the Company from paying dividends on the Common Stock for the forseeable
future.
23
<PAGE>
<PAGE>
THE RECONSTITUTION
Shortly prior to the date of this prospectus, New Time Warner Telecom was
formed to conduct the Offering and merged with and became the successor to both
of TWT LLC and TWT Inc. TWT LLC was formed to acquire the telephony business
formerly operated by Time Warner Cable and to conduct the Notes offering. TWT
Inc. was formed solely for the purpose of serving as co-obligor of the Notes. In
connection with the reorganization of the Company that occurred on July 14,
1998, the Existing Stockholders received all the limited liability company
interests of TWT LLC. These interests were exchanged in connection with the
Reconstitution for all the outstanding Class B Common Stock of New Time Warner
Telecom.
The Company's authorized capital includes two classes of Common Stock,
Class A Common Stock and Class B Common Stock, are identical in all respects
except that
(a) holders of Class A Common Stock are entitled to one vote per share
and holders of Class B Common Stock are entitled to 10 votes per share on
all matters submitted to a vote of stockholders;
(b) certain matters require the approval of 100% of the outstanding
Class B Common Stock, voting separately as a class; and
(c) certain other matters require the approval of a majority of the
outstanding Class A Common Stock, voting separately as a class. Each share
of Class B Common Stock is convertible into one share of Class A Common
Stock.
See 'Description of Capital Stock' and 'Principal Stockholders.'
The following diagram is the organizational structure of the Company
immediately following the Offering. This diagram assumes that shares of Class A
Common Stock are issued in the Offering and excludes (a) 2.7 million shares of
Class A Common Stock issuable upon exercise of the U.S. underwriters'
over-allotment option, (b) approximately 6,186,667 shares of Class A Common
Stock issuable upon the exercise of employee stock options that will not
immediately be exercisable, (c) 307,550 shares of Class A Common Stock issued in
the Reconstitution to the former owners of Internet Connect, Inc., and (d)
2,190,308 shares of Class A Common Stock that will be issued to the former
owners of the 50% of MetroComm that the Company does not currently own, if that
transaction is consummated. See 'Management -- Stock Option Plan.' The interests
of Time Warner, MediaOne and Newhouse consist of Class B Common Stock. Assuming
18,000,000 shares of Class A Common Stock are issued in the Offering, Time
Warner, MediaOne (or, if the merger between MediaOne and AT&T is consummated,
AT&T) and Newhouse would hold Class B Common Stock representing 60.64%, 18.44%
and 18.75% of the voting power, respectively.
[CHART]
24
<PAGE>
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1998, as adjusted to reflect:
the issuance and sale of the 18,000,000 shares of Class A Common Stock
offered in the Offering and the application of the net proceeds from the
Offering to repay $166.0 million of subordinated indebtedness to
affiliates of the Existing Stockholders and
the Reconstitution, including a reduction in stockholders' equity
resulting from a one-time $39.4 million charge to earnings (as of
December 31, 1998), recognized by the Company upon the Reconstitution
date, to record a net deferred tax liability associated with the change
from a limited liability company to a corporation. The Company estimates
that the charge to earnings will be approximately $42.0 million as of May
1999.
See 'Use of Proceeds' and 'The Reconstitution.'
The assumed public offering price is $10 per share, the midpoint of the
range set forth on the cover of this prospectus. The table further assumes that
the U.S. underwriters do not exercise their over-allotment option and excludes
approximately 6,186,667 shares of Class A Common Stock issuable upon the
exercise of employee stock options that are not immediately exercisable. See
'Management -- Stock Option Plan.' This table should be read together with
'Selected Combined Financial and Other Operating Data,' 'Management's Discussion
and Analysis of Financial Condition and Results of Operations,' and the
Company's financial statements, including the notes, appearing elsewhere in this
prospectus.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
-----------------------------------
(THOUSANDS)
AS ADJUSTED
FOR THE RECONSTITUTION
ACTUAL AND THE OFFERING
--------- ----------------------
<S> <C> <C>
Cash and cash equivalents...................................................... $ 105,140 $ 105,140
--------- ------------
--------- ------------
Marketable securities.......................................................... $ 250,857 $ 250,857
--------- ------------
--------- ------------
Long-term debt:
Notes..................................................................... $ 400,000 $ 400,000
Subordinated loans payable to affiliates of the Existing
Stockholders(1)......................................................... 174,940 8,940
--------- ------------
Total long-term debt................................................. 574,940 408,940
Stockholder's equity (deficit):
Preferred stock, $0.01 par value, 20,000,000 shares authorized, no shares
outstanding............................................................. -- --
Class A Common Stock, $0.01 par value; 277,300,000 shares authorized, 0
and 18,000,000 shares issued and outstanding on an actual and a pro
forma basis, respectively(2)............................................ -- 180
Class B Common Stock, $0.01 par value; 162,500,000 shares authorized,
81,250,000 shares issued and outstanding on an actual and a pro forma
basis................................................................... 813 813
Additional paid-in capital:
Contributed capital in excess of par value.............................. 554,994 720,814
Accumulated deficit prior to Reorganization............................. (299,340) (299,340)
--------- ------------
Total additional paid-in capital..................................... 255,654 421,474
Accumulated Deficit....................................................... (48,816) (88,216)
--------- ------------
Total stockholders' equity..................................................... 207,651 334,251
--------- ------------
Total capitalization................................................. $ 782,591 $ 743,191
--------- ------------
--------- ------------
</TABLE>
- ------------
(1) As of March 31, 1999, the Company had outstanding approximately $178.3
million of indebtedness to affiliates of the Existing Stockholders, all of
which is subordinated in right of payment to the Notes. The indenture for
the Notes provides that subordinated indebtedness may be repaid prior to
maturity with the net proceeds of any offering of common stock or equivalent
interests of the Company, including the Offering.
(2) Excludes 307,550 shares of Class A Common Stock that were issued in the
Reconstitution to the former owners of Internet Connect, Inc. See
'Business -- Services -- Internet Services.' Also excludes 2,190,308 shares
of Class A Common Stock issuable upon the closing of the acquisition of the
50% interest in MetroComm that the Company does not currently own.
25
<PAGE>
<PAGE>
DILUTION
The net tangible book value of the Company as of December 31, 1998 was
$188.0 million, or $2.31 per share of Class B Common Stock. Pro forma net
tangible book value per share is determined by dividing the tangible net worth
of the Company (total assets less intangible assets and total liabilities) by
the aggregate number of shares of Class A Common Stock and Class B Common Stock
outstanding, assuming the Reconstitution and the Offering had taken place on
December 31, 1998. After giving effect to the sale of the 18,000,000 shares of
Class A Common Stock offered in the Offering at an assumed initial public
offering price of $10 per share, the midpoint of the range set forth on the
cover page of this prospectus, and the receipt and application of the net
proceeds from the Offering, pro forma net tangible book value of the Company as
of December 31, 1998, would have been approximately $314.6 million, or $3.17 per
share. This represents an immediate increase in pro forma net tangible book
value of $0.86 per share to the Existing Stockholders of the Company and an
immediate dilution in pro forma net tangible book value of $6.83 per share to
purchasers of Class A Common Stock in the Offering. The following table
illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Initial public offering price per share............................................... $10.00
Net tangible book value per share at December 31, 1998................................ $2.31
Increase in pro forma net tangible book value per share attributable to purchasers in
the Offering........................................................................ 0.86
-----
Pro forma net tangible book value per share after the Offering........................ 3.17
------
Dilution in pro forma net tangible book value per share to purchasers of Class A
Common Stock in the Offering(1)..................................................... $ 6.83
------
------
</TABLE>
- ------------
(1) Dilution is determined by subtracting pro forma net tangible book value per
share after the Offering from the initial public offering price per share.
------------------------
The following table summarizes, on a pro forma basis, as of December 31,
1998, the numbers of shares purchased, the total consideration paid or to be
paid and the average price per share paid or to be paid by the Existing
Stockholders and the purchasers of Class A Common Stock in the Offering, at the
initial public offering price of $10 per share, the midpoint of the range set
forth on the cover page of this prospectus, before deducting estimated Offering
expenses of $14.0 million including underwriting discounts and commissions. The
calculations in the table exclude an aggregate of: (a) 2,700,000 shares of Class
A Common Stock issuable pursuant to the U.S. underwriters' over-allotment
option, (b) approximately 6,186,667 shares of Class A Common Stock issuable upon
the exercise of employee stock options that are not immediately exercisable and
(c) 3,111,833 additional shares of Class A Common Stock reserved for awards
under the Company's stock option plan, (d) 307,550 shares of Class A Common
Stock issued in the Reconstitution to the former owners of Internet Connect,
Inc. and (e) 2,190,308 shares of Class A Common Stock issuable upon the closing
of the Company's acquisition of the 50% interest in MetroComm that it does not
currently own, if such acquisition is consummated. See 'Management -- Stock
Option Plan.'
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- ----------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing Stockholders...................... 81,250,000 81.9% $256,467,000 58.8% $ 3.16
Purchasers of Class A Common Stock in the
Offering................................. 18,000,000 18.1 180,000,000 41.2 10.00
---------- ------- ------------ ------- ---------
Total................................. 99,250,000 100.0% $436,467,000 100.0% $ 4.40
---------- ------- ------------ ------- ---------
---------- ------- ------------ ------- ---------
</TABLE>
26
<PAGE>
<PAGE>
SELECTED COMBINED FINANCIAL AND OTHER OPERATING DATA
The selected statement of operations data for the years ended December 31,
1996, 1997 and 1998, and the selected balance sheet data as of December 31, 1997
and 1998, are derived from, and are qualified by reference to, the financial
statements of the Company, including the notes, audited by Ernst & Young LLP,
independent auditors, appearing elsewhere in this prospectus. The selected
statement of operations data for the year ended December 31, 1994 and 1995 and
the selected balance sheet data as of December 31, 1994, 1995 and 1996 have been
derived from audited financial statements of the Company not included in this
prospectus. The pro forma other operating data have been derived from the
accounting records of the Company and have not been audited. The financial
statements of the Company for all periods prior to the reorganization of the
Company that occurred on July 14, 1998 reflect the 'carved out' historical
financial position, results of operations, cash flows and changes in
stockholders' equity of the commercial telecommunications operations of
predecessors of the Company, as if they had been operating as a separate
company. The selected financial and other operating data set forth below should
be read together with 'Management's Discussion and Analysis of Financial
Condition and Results of Operations' and the Company's financial statements,
including the notes, appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------
1994 1995 1996 1997 1998
-------- --------- ----------- --------- ---------
(THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Dedicated transport
services................ $ 2,169 $ 6,505 $ 20,362 $ 44,529 $ 84,024
Switched services......... -- 350 3,555 10,872 37,848
-------- --------- ----------- --------- ---------
Total revenues........ 2,169 6,855 23,917 55,401 121,872
-------- --------- ----------- --------- ---------
Costs and expenses:
Operating (1)............. 10,454 15,106 25,715 40,349 67,153
Selling, general and
administrative (1)...... 26,066 34,222 60,366 54,640 77,401
Depreciation and
amortization (1)........ 1,213 7,216 22,353 38,466 50,717
-------- --------- ----------- --------- ---------
Total costs and
expenses............ 37,733 56,544 108,434 133,455 195,271
-------- --------- ----------- --------- ---------
Operating loss................ (35,564) (49,689) (84,517) (78,054) (73,399)
Gain on disposition of
investments (2)............. -- -- -- 11,018 --
Equity in income (losses) of
unconsolidated affiliates... (1,611) (1,391) (1,547) (2,082) 127
Interest income............... -- -- -- -- 9,731
Interest and other, net (1)... (3) (25) (52) (1,538) (29,198)
-------- --------- ----------- --------- ---------
Net loss...................... $(37,178) $ (51,105) $ (86,116) $ (70,656) $ (92,739)
-------- --------- ----------- --------- ---------
-------- --------- ----------- --------- ---------
Basic and diluted loss per
common share................ $ (.46) $ (.63) $ (1.06) $ (.87) $ (1.14)
-------- --------- ----------- --------- ---------
-------- --------- ----------- --------- ---------
Average common shares
outstanding................. 81,250 81,250 81,250 81,250 81,250
-------- --------- ----------- --------- ---------
-------- --------- ----------- --------- ---------
OTHER OPERATING DATA:
EBITDA (3).................... $(34,351) $ (42,473) $ (62,164) $ (39,588) $ (22,682)
EBITDA Margin (4)............. (1,583.7)% (619.6)% (259.9)% (71.5)% (18.6)%
Capital expenditures.......... 50,293 141,479 144,815 127,315 126,023
Cash provided (used) by
operations.................. (14,873) (35,605) (52,274) (29,419) (343)
Cash used in investing
activities.................. (52,632) (145,293) (149,190) (120,621) (378,083)
Cash provided by financing
activities.................. 67,505 180,898 201,464 150,040 483,566
Pro forma interest expense,
net (5)(6).................. (38,611)
Pro forma net loss (5)........ (102,152)
Pro forma basic and diluted
loss per common share (5)... (1.03)
Pro forma average common
shares outstanding (5)...... 99,250
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------------------------------------------
1994 1995 1996 1997 1998
------- -------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
OPERATING DATA (7):
Operating Networks............ 8 15 18 19 19
Route miles................... 880 3,207 5,010 5,913 6,968
Fiber miles................... 24,995 116,286 198,490 233,488 272,390
Voice grade equivalent
circuits.................... 39,002 158,572 687,001 1,702,431 2,953,454
Digital telephone switches.... -- 1 2 14 16
Employees..................... 239 508 673 714 919
Access lines.................. -- 493 2,793 16,078 78,036
</TABLE>
(table continued on next page)
27
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------------------------------------------
1994 1995 1996 1997 1998
------- -------- --------- ---------- ----------
(THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents..... $ -- $ -- $ -- $ -- $ 105,140
Marketable securities......... -- -- -- -- 250,857
Property, plant and equipment,
net......................... 53,139 199,005 323,161 415,158 494,158
Total assets.................. 60,604 214,963 341,480 438,077 904,344
Long-term debt (8)............ -- -- -- 75,475 574,940
Total stockholders' equity.... 33,749 179,589 294,937 300,390 207,651
</TABLE>
- ------------
(1) Includes expenses resulting from transactions with affiliates of $1.9
million in 1994, $6.5 million in 1995, $12.4 million in 1996, $17.1 million
in 1997 and $27.7 million in 1998. See note 7 to the Company's financial
statements appearing elsewhere in this prospectus for an explanation of
these expenses.
(2) In September 1997, the Company completed a series of transactions related to
its interests in the Hyperion Partnerships, a group of unconsolidated
telecommunication partnerships serving the New York area. In these
transactions, the Company sold its interests in the partnerships serving the
Buffalo and Syracuse markets in exchange for $7.0 million of cash and all of
the minority interests in the partnerships serving the Albany and Binghamton
markets that were not already owned by the Company. In connection with these
transactions, the Company recognized a gain of approximately $11.0 million.
(3) 'EBITDA' is defined as operating income (loss) before depreciation and
amortization expense. It does not include charges for interest expense or
provision for income taxes. Accordingly, EBITDA is not intended to replace
operating income, net income, cash flow and other measures of financial
performance and liquidity reported in accordance with generally accepted
accounting principles. Rather, EBITDA is a measure of operating performance
and liquidity that you may consider in addition to those measures.
Management believes that EBITDA is a standard measure of operating
performance and liquidity that is commonly reported and widely used by
analysts, investors and other interested parties in the telecommunications
industry because it eliminates many differences in financial,
capitalization, and tax structures, as well as non-operating and one-time
charges to earnings. EBITDA is used internally by the Company's management
to assess ongoing operations and is a component of a covenant of the Notes
that limits the Company's ability to incur certain additional future
indebtedness. However, EBITDA as used in this prospectus may not be
comparable to similarly titled measures reported by other companies due to
differences in accounting policies.
(4) EBITDA Margin represents EBITDA as a percentage of revenues.
(5) The pro forma statement of operations data for the year ended December 31,
1998 gives effect to the Reconstitution, the Offering and the sale of the
Notes as if they had occurred at the beginning of 1998. The pro forma
amounts are presented for informational purposes only and do not necessarily
indicate the actual amounts that would have been reported if the
transactions had been consummated at that date, nor do they necessarily
indicate future results. The pro forma data excludes a one-time $39.4
million charge to earnings (as of December 31, 1998), recognized by the
Company on the Reconstitution date, to record a net deferred tax liability
associated with the change from a limited liability company to a
corporation. The Company estimates the charge to earnings will be
approximately $42.0 million as of May 1999.
(6) Pro forma interest expense gives effect to:
the issuance of $400.0 million principal amount of the Notes at an
interest rate of 9.75% at the beginning of 1998 and
the use of $166.0 million of the net proceeds from the Offering to
repay subordinated indebtedness to affiliates of the Existing
Stockholders,
in each case as if the transactions had occurred at the beginning of 1998
assuming approximately 4.0% of the interest on the Notes would have been
capitalized under FASB Statement No. 34, 'Capitalization of Interest Costs.'
In addition, pro forma interest expense includes $1.25 million for the year
ended December 31, 1998 relating to the amortization of approximately $12.5
million of debt issuance costs over a ten-year period.
(7) Includes all managed properties including unconsolidated affiliates. The
unconsolidated affiliates consist of MetroComm in Columbus, Ohio and the
Albany and Binghamton, New York networks. Albany and Binghamton were wholly
owned at December 31, 1997. The Company has an agreement to acquire the 50%
interest in MetroComm that it does not currently own. See 'Business --
Business Strategy.'
(8) As of December 31, 1998, long-term debt consisted of (a) $400.0 million
principal amount of Notes and (b) $174.9 million principal amount of
subordinated loans payable to affiliates of the Existing Stockholders.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis together with the
Company's financial statements, including the notes, appearing elsewhere in this
prospectus. Certain information contained in the discussion and analysis set
forth below and elsewhere in this prospectus, including information with respect
to the Company's plans and strategy for its business and related financing,
includes forward-looking statements that involve risk and uncertainties. See
'Risk Factors' for a discussion of important factors that could cause actual
results to differ materially from the results described in or implied by the
forward-looking statements contained in this prospectus.
OVERVIEW
The Company is a leading fiber facilities-based competitive local exchange
carrier in selected metropolitan markets across the United States. We offer a
wide range of business telephony services, primarily to medium-and large-sized
business customers. The business of the Company was commenced in 1993 by Time
Warner Cable and reflects the combined commercial telecommunications operations
under the ownership or management control of Time Warner Cable. These operations
consist of the commercial telecommunication operations of Time Warner and
TWE-A/N that were each acquired or formed in 1995, as well as the pre-existing
commercial telecommunication operations of TWE. All intercompany accounts and
transactions between the combined entities have been eliminated.
In connection with the reorganization of the Company that occurred on July
14, 1998, the assets and liabilities of the Company's business were contributed
to TWT LLC by affiliates of the Existing Stockholders and the Existing
Stockholders received all of the limited liability company interests of TWT LLC.
These interests were exchanged in connection with the Reconstitution for all of
the outstanding Class B Common Stock of New Time Warner Telecom. The Company
accounted for the reorganization and the Reconstitution at each of the Existing
Stockholders' historical cost basis of accounting and, except as noted below,
the reorganization and the Reconstitution had no effect on the Company's total
stockholders' equity, which has been presented on a consistent basis.
The primary change to the Company's operating structure since the
Reconstitution is that the management of the Company became directly accountable
to the board of directors, instead of to the management committee of TWT LLC. In
addition, all future net operating loss carryforwards can be utilized against
future earnings of the Company, concurrent with the change in the Company's
operating and legal structure from a limited liability company to a corporation.
Prior to the Reconstitution, all net operating loss carryforwards were allocated
to and utilized primarily by Time Warner and its affiliates. The Company has
not, and will not, be compensated for such losses. Also, in connection with the
Reconstitution, the Company recognized a one-time charge to earnings of
approximately $39.4 million (as of December 31, 1998), to record a net deferred
tax liability associated with the change from a limited liability company to a
corporation. The Company estimates that the charge to earnings will be
approximately $42.0 million as of May 1999.
The majority of the Company's revenues have been derived from the provision
of 'private line' and 'direct access' telecommunications services. Because the
Company has deployed switches in 16 of its 19 service areas as of December 31,
1998, management expects that a growing portion of its revenues will be derived
from providing switched services. The Company's customers are principally
telecommunications-intensive business end-users, long distance carriers,
internet service providers, wireless communications companies and governmental
entities. Such customers are offered a wide range of integrated
telecommunications products and services, including dedicated transmission,
local switched, data and video transmission services and internet services. In
addition, the Company benefits from its strategic relationship with Time Warner
Cable both through network facilities access and cost-sharing. The Company's
networks have been constructed primarily through the use of fiber capacity
licensed from Time Warner Cable. As of December 31, 1998, the Company operated
networks in 19 metropolitan areas that spanned 6,968 route miles, contained
272,390 fiber glass miles and offered service to 4,321 buildings. The Company's
19 service areas include 18 networks that are wholly owned and one that is owned
through a 50% joint venture and is not combined with the Company's financial
results. The Company's combined revenues were $55.4 million and $121.9 million
for the years ended December 31, 1997 and 1998, respectively. As of December 31,
1998, affiliates of the Existing Stockholders had contributed $555.8 million in
capital and $174.9 million in debt in the Company.
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The Company's revenues have been derived primarily from business telephony
services, including dedicated transmission, local switched, long distance, data
and video transmission services and certain high-speed dedicated internet access
services. Since its inception in 1993, the Company has experienced significant
growth in revenues and in the geographic scope of its operations. Management
believes an increasing portion of the Company's future growth will come from the
provision of local switched services as a result of the 16 switches deployed as
of December 31, 1998. The Company believes that switched services provide the
opportunity for higher incremental rate of return on capital investment than
those expected from transport services. The shift of the revenue growth to
switched services may cause the Company's revenues to become less predictable
since a portion of such services are billed to customers on a usage basis.
Dedicated transport customers are typically billed a flat monthly rate which
produces a less variable stream of revenues for the Company. Furthermore, it is
expected that the growth in the switched service offerings will expand the
Company's customer base by making more services available to customers that are
generally smaller than those who purchase dedicated transport services. These
smaller customers are also expected to be the principal users of the Company's
long distance services (which were launched in the third quarter of 1998) and
high-speed dedicated internet access services. The Company expects to experience
a higher churn rate for these customers than it has traditionally experienced
with transport services. The Company intends to minimize this churn for long
distance and internet services to smaller customers by offering such service
under minimum one-year contracts.
The Company plans to expand its revenue base by fully utilizing available
network capacity in its existing markets and by continuing to develop and
selectively tailor new services in competitively-priced packages to meet the
needs of its medium- and large-sized business customers. The Company plans on
selectively entering new markets and intends to have networks under construction
or operational in three additional cities by the end of 1999. The Company has
signed a combination of long-term dark fiber and conduit leases in Dallas, Texas
and Jersey City, New Jersey and plans to commence offering fiber based telephone
services in these metropolitan areas during the third quarter of 1999. The third
city has not yet been selected.
Operating expenses consist of costs directly related to the operation and
maintenance of the networks and the provision of the Company's services. This
includes the salaries and related expenses of operations and engineering
personnel as well as costs from the incumbent local exchange carriers and other
competitors for facility leases and interconnection. These costs have increased
over time as the Company has increased its operations and revenues. It is
expected that these costs (including the costs described below for which the
Company reimburses affiliates of Existing Stockholders) will continue to
increase, but generally at a slower rate than revenue growth.
Selling, general and administrative expenses consist of salaries and
related costs for employees other than those involved in operations and
engineering. Such expenses also include costs related to non-technical
facilities, sales and marketing, regulatory and legal costs. These costs have
increased over time as the Company has increased its operations and revenues.
The Company expects these costs to continue to increase as the Company's revenue
growth continues, but at a slower rate than revenue growth.
In the normal course of conducting its businesses, the Company engages in
various transactions with the Existing Stockholders and their affiliates,
generally on terms resulting from negotiation between the affected units that,
in management's view, result in reasonable allocations. In connection with the
reorganization that occurred on July 14, 1998, the Company entered into several
contracts with the Existing Stockholders or their affiliates in respect of
certain of these transactions. See 'Certain Relationships and Related
Transactions -- Certain Operating Agreements.' The Company's selling, general
and administrative expenses include charges allocated from the Existing
Stockholders or their affiliates for certain general and administrative
expenses, primarily including office rent and overhead charges for various
administrative functions performed by Time Warner Cable. These charges are
required to reflect all costs of doing business and are based on various
methods, which management believes result in reasonable allocations of such
costs that are necessary to present the Company's operations as if they are
operated on a stand alone basis. In addition, the Company licenses the right to
use the majority of its fiber optic cable capacity from Time Warner Cable and
reimburses it for facility maintenance and pole rental costs. These costs are
included in the Company's operating expense. Finally, effective July 1, 1997
through July 14, 1998, all of the Company's financing requirements were funded
with loans from affiliates of the Existing Stockholders. These loans are
subordinated in right of payment to the Notes, bear interest (payable in kind)
at an annual rate equal to The Chase Manhattan Bank's prime lending rate as in
effect from time-to-time and mature on August 15, 2008. The Company believes
that this rate is comparable to
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rates that could have been obtained from unrelated third parties. The Existing
Stockholders and their affiliates are not obligated to make additional equity
investments in or loans to the Company.
The Company expects that any net proceeds of the Offering remaining after
repayment of up to $166.0 million of subordinated indebtedness to affiliates of
the Existing Stockholders, together with the net proceeds received from the sale
on July 21, 1998, of $400.0 million principal amount of the Notes and internally
generated funds, will provide sufficient funds for the Company to expand its
business as currently planned, pay interest on the Notes and to fund its
currently expected working capital needs through the second quarter of 2000.
After that, the Company expects to require additional financing. However, in the
event that the Company's plans or assumptions change or prove to be inaccurate,
or if the Company consummates acquisitions or joint ventures, the Company may be
required to seek additional capital sooner than currently anticipated.
The Company has not historically, and does not currently, generate positive
operating cash flow. However, for the year ended December 31, 1998, 16 of the
Company's 19 service areas generated positive operating cash flow before
corporate allocations and the Company, as a whole, expects to begin generating
positive EBITDA during the second quarter of 1999. The following comparative
discussion of the results of financial condition and results of operations of
the Company includes an analysis of changes in revenues and EBITDA.
The Company has had and will continue to have significant capital
expenditures. These expenditures pertain to the historical construction and
expansion of the networks and to the future expansion of the existing networks
as well as the construction of new networks.
RESULTS OF OPERATIONS
The following table sets forth certain combined statement of operations
data of the Company, in thousands of dollars and expressed as a percentage of
revenues, for each of the periods presented. This table should be read together
with the Company's financial statements, including the notes, appearing
elsewhere in this prospectus:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------
1996 1997 1998
-------------------- -------------------- -----------------
(THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Dedicated transport services..................... $ 20,362 85.1% $ 44,529 80.4% $ 84,024 68.9%
Switched services................................ 3,555 14.9 10,872 19.6 37,848 31.1
-------- -------- -------- -------- -------- -----
Total revenues............................... 23,917 100.0 55,401 100.0 121,872 100.0
Costs and expenses:
Operating (1).................................... 25,715 107.5 40,349 72.8 67,153 55.1
Selling, general and administrative (1).......... 60,366 252.4 54,640 98.6 77,401 63.5
Depreciation and amortization (1)................ 22,353 93.5 38,466 69.4 50,717 41.6
-------- -------- -------- -------- -------- -----
Total costs and
expenses................................... 108,434 453.4 133,455 240.8 195,271 160.2
Operating loss....................................... (84,517) (353.4) (78,054) (140.8) (73,399) (60.2)
Gain on disposition of
investments (2).................................... -- -- 11,018 19.9 -- --
Equity in income (losses) of unconsolidated
affiliates......................................... (1,547) (6.5) (2,082) (3.8) 127 .1
Interest income...................................... -- -- -- -- 9,731 8.0
Interest and other, net (1).......................... (52) (.2) (1,538) (2.8) (29,198) (24.0)
-------- -------- -------- -------- -------- -----
Net loss............................................. $(86,116) (360.1)% $(70,656) (127.5)% $(92,739) (76.1)%
-------- -------- -------- -------- -------- -----
-------- -------- -------- -------- -------- -----
Basic and diluted loss per common share.............. $ (1.06) $ (.87) $ (1.14)
Average common shares outstanding.................... 81,250 81,250 81,250
EBITDA (3)........................................... $(62,164) (259.9)% $(39,588) (71.5)% $(22,682) (18.6%)
Cash provided (used) by operations................... (52,274) -- (29,419) -- (343) --
Cash used in investing activities.................... (149,190) -- (120,621) -- (378,083) --
Cash provided by financing activities................ 201,464 -- 150,040 -- 483,566 --
</TABLE>
- ------------
(1) Includes expenses resulting from transactions with affiliates of $12.4
million in 1996, $17.1 million in 1997 and $27.7 million in 1998.
(2) In September 1997, the Company completed a series of transactions related to
its interests in the Hyperion Partnerships, a group of unconsolidated
telecommunication partnerships serving the New York area. In these
transactions, the Company sold its interests in the partnerships serving the
Buffalo and Syracuse markets in exchange for $7.0 million of cash and all of
the minority interests in the partnerships serving the Albany and Binghamton
markets that were not already owned by the Company. In connection with these
transactions, the Company recognized a gain of approximately $11.0 million.
(footnotes continued on next page)
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(footnotes from previous page)
(3) 'EBITDA' is defined as operating income (loss) before depreciation and
amortization expense. It does not include charges for interest expense or
provision for income taxes. Accordingly, EBITDA is not intended to replace
operating income, net income, cash flow and other measures of financial
performance and liquidity reported in accordance with generally accepted
accounting principles. Rather, EBITDA is a measure of operating performance
and liquidity that you may consider in addition to those measures.
Management believes that EBITDA is a standard measure of operating
performance and liquidity that is commonly reported and widely used by
analysts, investors and other interested parties in the telecommunications
industry because it eliminates many differences in financial,
capitalization, and tax structures, as well as non-operating and one-time
charges to earnings. EBITDA is used internally by the Company's management
to assess ongoing operations and is a component of a covenant of the Notes
that limits the Company's ability to incur certain additional future
indebtedness. However, EBITDA as used in this prospectus may not be
comparable to similarly titled measures reported by other companies due to
differences in accounting policies.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Revenues. Revenues increased $66.5 million, or 120.0%, to $121.9 million
for the year ended December 31, 1998, from $55.4 million in 1997. Revenues from
the provision of dedicated transport services increased $39.5 million, or 88.7%,
to $84.0 million for the year ended December 31, 1998, from $44.5 million in
1997. Switched service revenue increased $27.0 million, or 248.1%, to $37.8
million for the year ended December 31, 1998, from $10.9 million in 1997. The
increase in revenues from dedicated transport services primarily reflects growth
of services and new products offered in existing markets. The increase in
switched services resulted from the offering of services in new markets and the
growth of services in existing markets, including reciprocal compensation.
Reciprocal compensation represented 8.3% and 8.6% of total revenues for the
years ended December 31, 1998 and 1997 respectively. At December 31, 1998, the
Company offered dedicated transport services in 18 consolidated metropolitan
areas, 16 of which also offered switched services, as compared to offering
dedicated transport services in 18 consolidated metropolitan areas, 14 of
which also offered switched services at December 31, 1997. The consolidated
metropolitan areas do not include MetroComm AxS, L.P., a 50% owned entity of
the Company.
Operating Expenses. Operating expenses increased $26.8 million, or 66.4%,
to $67.2 million for the year ended December 31, 1998, from $40.3 million in
1997. The increase in operating expenses was primarily attributable to the
Company's expansion of its business, principally switched services, and the
ongoing development of existing markets resulting in higher local exchange
carrier charges for circuit leases and interconnection and higher technical
personnel costs. As a percentage of revenues, operating expenses decreased to
55.1% in 1998 from 72.8% in 1997.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $22.8 million, or 41.7%, to $77.4 million for
the year ended December 31, 1998, from $54.6 million in 1997. The increase in
selling, general and administrative expenses was primarily attributable to
higher direct sales costs associated with the increase in revenues, higher
property taxes, an increase in consulting expenses relating to local regulatory
matters, the implementation of new billing and system software, higher data
processing costs and an increase in the provision for doubtful accounts related
to the increase in revenue. As a percentage of revenues, selling, general and
administrative expenses decreased to 63.5% in 1998 from 98.6% in 1997.
Depreciation and Amortization Expense. Depreciation and amortization
expense increased $12.2 million, or 31.8%, to $50.7 million for the year ended
December 31, 1998, from $38.5 million in 1997. The increase in depreciation and
amortization expense was primarily attributable to higher capital expenditures
related to the ongoing construction and expansion of the Company's
telecommunications networks in both 1997 and 1998. As a percentage of revenues,
depreciation and amortization expenses decreased to 41.6% in 1998, from 69.4% in
1997.
EBITDA. The EBITDA loss for the year ended December 31, 1998 decreased
$16.9 million, or 42.7%, to a loss of $22.7 million in 1998, from a loss of
$39.6 million in 1997. This improvement was primarily the result of increased
revenues due to the Company's expansion of local telecommunications networks in
new and
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existing markets and growth of the Company's customer base, partially offset by
higher operating expenses in support of the larger customer base, and higher
selling, general and administrative expenses required to support the expansion.
Interest Expense. Effective July 1, 1997 through July 14, 1998, all of the
Company's financing requirements were funded with loans from affiliates of the
Existing Stockholders. On July 21, 1998, the Company issued $400.0 million in
Notes. Interest expense relating to these loans and Notes totaled $29.2 million
for the year ended December 31, 1998, an increase of $27.7 million compared to
1997.
Income Taxes. On a pro forma basis, had the Company been operating as a
corporation on a stand-alone basis, for the year ended December 31, 1998, net
income tax benefits would have increased $16.4 million, or 57.7%, to $44.8
million, from $28.4 million for the same period in 1997. The net income tax
benefits would have been fully offset by corresponding increases in the
valuation allowance due to the uncertainty of realizing the benefit for tax
losses on a separate return basis. On a pro forma basis, had the Company been
operating as a corporation on a stand alone basis, the Company would have had
net operating loss carryforwards. However, the Company, which operated as a
partnership for tax purposes during the periods presented in this prospectus,
has no net operating loss carryforwards for tax purposes because those losses
were primarily allocated to and utilized by Time Warner and its affiliates. The
Company has not, and will not, be compensated for such losses.
Net Loss. Net loss increased $22.1 million, or 31.3%, to $92.7 million for
the year ended December 31, 1998, from a net loss of $70.7 million in 1997. This
increase resulted from higher depreciation and amortization expenses relating to
the Company's expansion of telecommunications networks in new and existing
markets, as well as interest expense relating to the subordinated loans payable
to affiliates of the Existing Stockholders and the Notes.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Revenues. Revenues increased $31.5 million, or 131.6%, to $55.4 million in
1997, from $23.9 million in 1996. Revenues from the provision of dedicated
transport services increased $24.1 million, or 118.7%, to $44.5 million in 1997,
from $20.4 million in 1996. Revenues from dedicated transport service increased
115.9% in those markets in which dedicated transport services were offered as of
December 31, 1996. Switched service revenues increased $7.3 million, or 205.8%,
to $10.9 million in 1997, from $3.6 million in 1996. Switched services revenues
increased 183.9% in those markets in which switched services were offered as of
December 31, 1996. The increase in revenues from dedicated transport services
primarily reflected growth of services offered in existing markets. The increase
in switched services resulted from the offering of services in new markets and
the growth of services in existing markets, including reciprocal compensation.
Reciprocal compensation represented 8.6% and 7.4% of total revenues for the
years ended December 31, 1997 and 1996, respectively. At December 31, 1997, the
Company offered dedicated transport services in 18 consolidated metropolitan
areas, 14 of which also offered switched services, as compared to offering
dedicated transport services in 15 consolidated metropolitan areas, 2 of which
also offered switched services at December 31, 1996.
Operating Expenses. Operating expenses increased $14.6 million, or 56.9%,
to $40.3 million in 1997, from $25.7 million in 1996. The increase in operating
expenses was primarily attributable to the Company's expansion of its business,
principally switched services, and the ongoing development of existing markets
resulting in higher technical personnel costs, higher local exchange carrier
charges for circuit leases and interconnection and higher data processing costs.
As a percentage of revenues, operating expenses decreased to 72.8% in 1997 from
107.5% in 1996.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased $5.8 million, or 9.5%, to $54.6 million in
1997, from $60.4 million in 1996. The decrease in selling, general and
administrative expenses was primarily attributable to the absence of a $5.5
million charge recorded in 1996 to terminate certain employees as a result of
the Company's reorganization at the end of 1996 as well as the on-going cost
reduction due to lower employee headcount, partially offset by higher direct
sales costs associated with the increase in revenues. As a percentage of
revenues, selling, general and administrative expenses decreased to 98.6% in
1997 from 252.4% in 1996.
Depreciation and Amortization Expense. Depreciation and amortization
expense increased $16.1 million, or 72.1%, to $38.5 million in 1997, from $22.4
million in 1996. The increase in depreciation and amortization expense was
primarily attributable to higher capital expenditures related to the ongoing
construction and
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expansion of the Company's telecommunications networks in both 1997 and 1996. As
a percentage of revenues, depreciation and amortization expenses decreased to
69.4% for 1997 from 93.5% for the same period in 1996.
Gain on Disposition of Investments. In September 1997, the Company
completed the Hyperion Transactions. In connection with these transactions, the
Company recognized a gain of approximately $11.0 million.
EBITDA. The EBITDA loss in 1997 decreased $22.6 million, or 36.3%, to $39.6
million, from a loss of $62.2 million in 1996. This improvement was primarily
the result of increased revenues due to the Company's expansion of local
telecommunications networks in new and existing markets and growth of the
Company's customer base, partially offset by higher operating expenses in
support of the larger customer base.
Interest and Other, Net. Effective July 1, 1997 all of the Company's
financing requirements were funded with loans from affiliates of the Existing
Stockholders. Interest expense relating to these loans totaled approximately
$1.5 million in 1997.
Income Taxes. On a pro forma basis, had the Company been operating as a
corporation on a stand-alone basis, net income tax benefits would have decreased
by $6.2 million, or 17.9%, to $28.4 million in 1997, from $34.6 million in 1996.
These net income tax benefits would have been fully offset by corresponding
increases in the valuation allowance due to the uncertainty of realizing the
benefit for tax losses on a separate return basis.
Net loss. Net loss decreased $15.4 million, or 18.0%, to $70.7 million in
1997, from a net loss of $86.1 million in 1996. This improvement principally
resulted from the one-time $11.0 million gain resulting from the Hyperion
Transactions and from increased revenues generated by the Company's expanded
networks, partially offset by increased operating and depreciation and
amortization expenses relating to the Company's expansion of telecommunications
networks in new and existing markets.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows. For the year ended December 31, 1998, the Company's cash used
in operations was $343,000 as compared to $29.4 million for the year ended
December 31, 1997. This decrease in cash used in operations of $29.1 million
principally resulted from lower EBITDA losses and working capital requirements
in 1998. The Company expects to continue to have operating cash flow
deficiencies for the near future as it develops and expands its business.
For the year ended December 31, 1997, the Company's cash used in operations
decreased to $29.4 million from $52.3 million for the year ended December 31,
1996. This decrease in cash used in operations of $22.9 million principally
resulted from lower EBITDA losses during 1997.
Cash used in investing activities increased $257.5 million to $378.1
million in 1998, as compared to $120.6 million in 1997. The increase was
primarily due to higher purchases of marketable securities of $286.4 million.
The Company did not receive any proceeds from the sale of investments in 1998.
Cash used in investing activities decreased $28.6 million to $120.6 million
in 1997, as compared to $149.2 million in 1996. This decrease resulted
principally from lower capital expenditures due to a slower rate of expansion
and $7.0 million of cash proceeds received in 1997 relating to the Hyperion
Transactions. As discussed more fully above, the Company has made substantial
capital expenditures in order to develop and expand its business.
Cash provided by financing activities in 1998 reflected the receipt of
interest bearing subordinated loans from affiliates of the Existing Stockholders
amounting to $96.1 million and net proceeds from the sale of the Notes of $387.5
million. Prior to July 1, 1997, the Company's cash flow deficiencies were
entirely funded by non-interest bearing capital contributions from affiliates of
the Existing Stockholders. In 1997, cash provided by financing activities
reflected the receipt of interest bearing loans from affiliates of the Existing
Stockholders of $73.9 million, and net capital contributions from affiliates of
the Existing Stockholders of $76.1 million. The total increase in cash provided
by financing activities of $333.5 million was primarily due to the proceeds from
the sale of the Notes.
Cash provided by financing activities reflected the receipt of non-interest
bearing capital contributions from affiliates of the Existing Stockholders to
fund the Company's cash flow deficiencies through June 30, 1997. Effective July
1, 1997 through July 14, 1998, all of the Company's financing requirements were
funded with interest-bearing loans from affiliates of the Existing Stockholders.
The loans from affiliates of the Existing
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Stockholders are subordinated in right of payment to the Notes, bear interest
(payable in kind) at an annual rate equal to The Chase Manhattan Bank's prime
lending rate as in effect from time-to-time and mature on August 15, 2008, one
month after the maturity of the Notes. The aggregate of net capital
contributions and loans from affiliates of the Existing Stockholders decreased
$51.5 million to $150.0 million in 1997 as compared to $201.5 million in 1996.
This decrease was primarily due to lower cash funding requirements principally
due to operating cash flow associated with the Company's expansion of its
customer base and services in new and existing markets and lower capital
expenditure requirements.
Financing. Historically, the Company did not maintain cash balances since
all the Company's funding requirements were provided by affiliates of the
Existing Stockholders. The proceeds from the Offering after repayment of
subordinated indebtedness to affiliates of the Existing Stockholders, together
with the net proceeds from the sale of the Notes and cash flow from operations,
are expected to fund the Company's future cash requirements through the second
quarter of 2000. The Existing Stockholders and their affiliates are not under
any obligation to make any additional equity investments in or loans to the
Company. At a future date, the Company may negotiate a bank credit facility to
provide it with working capital and enhance its financial flexibility. There can
be no assurance that such financing will be available on terms acceptable to the
Company or at all.
The development of the Company's business and the installation and
expansion of the Company's communications networks, combined with the
development and operation of the Company's network operations center, have
resulted in substantial capital expenditures. These capital expenditures, as
well as the Company's historical operating losses, have resulted in substantial
negative cash flow for the Company since inception in 1993. Funding of this
historical cash flow deficiency has been primarily accomplished through the
receipt of capital contributions from affiliates of the Existing Stockholders
through June 30, 1997. From July 1, 1997 through July 14, 1998, the deficiency
has been funded through interest bearing loans from affiliates of the Existing
Stockholders. Thereafter, the Company expects cash flow deficiencies to be
funded with the proceeds of the Offering, the proceeds of the Notes and future
financings as described above. In addition, the Notes provide that the proceeds
of an equity offering such as the Offering may be used to repay subordinated
indebtedness to affiliates of the Existing Stockholders. The amounts due to
affiliates of the Existing Stockholders, including interest accrued on those
amounts, under this funding arrangement was $174.9 million and $75.5 million as
of December 31, 1998 and 1997, respectively.
On July 21, 1998, the Company issued $400.0 million principal amount in
Notes. Interest on the Notes is payable semiannually on January 15 and July 15.
The net proceeds from the sale of the Notes were immediately invested in short
term investments.
The Company estimates that net proceeds from the sale of 18,000,000 shares
of Class A Common Stock in the Offering are approximately $166.0 million,
approximately $191.2 million if the U.S. underwriters exercise their
over-allotment option, assuming an initial public offering price of $10 per
share, the midpoint of the range set forth on the cover page of this prospectus,
after deducting underwriting discounts and estimated expenses of the Offering.
The Company intends to use the net proceeds of the Offering primarily to
repay outstanding subordinated indebtedness to affiliates of the Existing
Stockholders, which was $174.9 million at December 31, 1998 and $178.3 million
at March 31, 1999. Any remaining proceeds will be used for general corporate and
working capital purposes, which may include acquisitions and joint ventures.
Pending these uses, the net proceeds of the Offering will be invested in short
term, money market instruments. While the primary use of such remaining
proceeds, together with the proceeds from the sale of the Notes, will be to fund
ongoing business operations of the Company's subsidiaries which own and operate
its networks, the Company intends to continue to evaluate potential acquisitions
and joint ventures. The Company has no definitive agreement with respect to any
material acquisition or joint venture, although from time to time it may discuss
and assess opportunities with other companies, including affiliates of the
Existing Stockholders, on an ongoing basis.
The Company expects that its future cash requirements will principally be
for working capital, capital expenditures and to fund its operating losses. The
Company expects that the net proceeds of the Offering after the repayment of
subordinated loans to affiliates of the Existing Stockholders, together with the
net proceeds of $387.5 million received from the sale of the Notes and
internally generated funds, will provide sufficient funds for the Company to
meet the Company's expected capital and liquidity needs to expand its business
as currently planned, pay interest on the Notes and to fund its currently
expected losses through the middle of 2000. After
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that, the Company expects to require additional financing. However, in the event
that the Company's plans or assumptions change or prove to be inaccurate, or the
foregoing sources of funds prove to be insufficient to fund the Company's growth
and operations, or if the Company consummates acquisitions or joint ventures,
the Company may be required to seek additional capital sooner than currently
anticipated. The Company's revenues and costs are dependent upon factors that
are not within the Company's control, such as regulatory changes, changes in
technology and increased competition. Due to the uncertainty of these and other
factors, actual revenues and costs may vary from expected amounts, possibly to a
material degree, and such variations are likely to affect the level of the
Company's future capital expenditures and expansion plans. Sources of financing
may include public or private debt or equity financing by the Company or its
subsidiaries or other financing arrangements.
Capital Expenditures. The facilities-based telecommunications service
business is a capital intensive business. The Company's operations have required
and will continue to require substantial capital investment for:
the purchase and installation of switches, electronics, fiber and other
technologies in existing networks and in additional networks to be
constructed in new service areas; and
the acquisition and expansion of networks currently owned and operated by
other companies.
The Company's expected capital expenditures for general corporate and
working capital purposes include:
expenditures with respect to the Company's management information system
and corporate service support infrastructure and
operating and administrative expenses with respect to new networks and
debt service.
The Company plans to make substantial capital investments in connection
with the deployment of switches in all of its existing networks, and plans to
construct and develop new networks. Expansion of the Company's networks will
include the geographic expansion of the Company's existing operations and will
consider the development of new markets. In addition, the Company may acquire
existing networks in the future.
During the year ended December 31, 1998, capital expenditures were $126.0
million, a decrease of $1.3 million from the year ended December 31, 1997. The
largest commitment of capital was related to the installation of transport and
switch related electronics to support the increase in sales activity and the
addition of 1,055 route miles of fiber. During the year ended December 31, 1997,
capital expenditures were $127.3 million, a decrease of $17.5 million from
$144.8 million in 1996. The decrease was principally due to a slower rate of
expansion into new markets in 1997. Based on historic capital requirements for
network construction in relation to sales volumes and network expansion plans,
the Company anticipates it will commit approximately $395.0 million over the
next two years to fund its capital expenditures. See 'Certain Relationships and
Related Transactions -- Certain Operating Agreements.'
YEAR 2000
The Company is currently working to resolve the potential impact of the
Year 2000 on the processing of time-sensitive information by its computerized
information systems. Year 2000 issues may arise if computer programs have been
written using two digits (rather than four) to define the applicable year. In
such case, programs that have time-sensitive logic may recognize a date using
'00' as the year 1900 rather than the year 2000, which could result in
miscalculations or system failures. The Company utilizes a number of computer
programs across its entire operation. Year 2000 issues could impact the
Company's information systems as well as computer hardware and equipment that is
part of its telephony network such as switches, termination devices and SONET
rings that may contain embedded software or 'firmware.'
The Company's exposure to potential Year 2000 problems exists in two
general areas: technological operations in the sole control of the Company, and
technological operations dependent in some way on one or more third parties. The
majority of the Company's exposure to potential Year 2000 problems is in the
latter area where the situation is much less within the Company's ability to
predict or control. The Company's business is heavily dependent on technology.
For example, like all other telecommunications providers, the Company must
interconnect its networks with other carriers and service providers in order to
provide end-to-end service to customers. The Company cannot control the Year
2000 readiness of those parties but to the extent practicable the Company plans
to assess its interfaces with them and to work with those parties to resolve any
difficulties. In some cases, the Company's third party dependence is on vendors
of technology who are themselves working
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towards solutions to Year 2000 problems, such as suppliers of software systems
for billing, ordering and other key business operations. See 'Risk Factors -- We
expect to depend on third party vendors for information systems.'
The Company has developed a Year 2000 action plan to address identification
and assessment of potential Year 2000 issues, remediation, testing and
implementation of any corrected software or firmware. The Company has completed
the first phase of such action plan which involved making the Company's internal
organizations aware of Year 2000 issues and assigning responsibility internally
for the Year 2000 readiness program. The Company has also completed the
assessment phase of its plan which involves an inventory and review of software
and equipment used in the Company's operations in order to determine the Year
2000 readiness of that software and equipment and the identification of
remediation measures that could be taken on a timely basis to alter, validate or
replace time-sensitive and date-sensitive software and equipment.
In the course of the assessment process the Company determined that all of
the equipment comprising its telephony networks depends on software or firmware
that is already represented by its vendor to be Year 2000 ready. The Company
conducted its own validation testing of that equipment, including its switches,
to verify the vendor's representations. On the basis of the test results, the
Company believes that such equipment will continue to accurately recognize and
process date information on and after January 1, 2000. The Company has developed
test and verification plans for the remainder of its equipment, applications and
systems.
The Company has already begun implementing certain remedial measures and
intends to complete its remediation efforts with respect to technological
operations within its sole control prior to any anticipated material impact on
its computerized information systems. The Company's early Year 2000 planning
took into account the Company's plans to replace, in the normal course of
business in 1999, many of the computer programs used by key business operations
and its financial systems. The specifications for these new systems are all Year
2000 compliant but would require validation testing by the Company to verify the
Year 2000 readiness of those systems. The Company anticipates that
implementation of some back office systems for ordering, workflow management,
service design and trouble management may be delayed in implementation so that
it may not be possible to test these systems before the fourth quarter of 1999.
The Company's Year 2000 action plan currently includes a moratorium on the
installation of new hardware or software systems during the last 60 to 90 days
of 1999 in order to avoid the possible creation of new Year 2000 issues during
that period and to allow the Company's information technologies personnel to
focus on contingency planning. Therefore, the implementation of these new
systems may not occur until the first quarter of 2000. As a result, the Company
is in the process of testing and remediating the back office systems that would
have been replaced by the new systems and plans to complete validation testing
of the remediated systems during the third quarter of 1999.
Costs of addressing potential Year 2000 problems have not been material to
date and, based on preliminary information gathered to date from the Company,
its customers and vendors, are not currently expected to have a material adverse
impact on the Company's financial position, results of operations or cash flows
in future periods.
Total 1998 costs incurred with respect to Year 2000 issues were
approximately $115,000. Based on the Company's current Year 2000 action plan,
the Company expects that 1999 costs will be approximately $2.0 million. The
majority of the estimated 1999 costs represent the costs of personnel who will
conduct verification testing of equipment and software, costs of out-sourcing
the testing of some existing software systems, test equipment and costs for
replacement of certain personal computers. These costs do not include the cost
of replacing systems, the replacement of which is not being accelerated due to
Year 2000 issues, or the costs of software maintenance contracts that the
Company would have entered into in the normal course of business. In some cases,
Year 2000 compliant upgrades to third party software systems licensed to the
Company are being supplied under these maintenance agreements. However, the
Company's Year 2000 costs could exceed these estimates if third party equipment
or software do not perform as represented, additional unanticipated Year 2000
issues arise or planned remediation efforts are unsuccessful.
The Company is in the process of developing specific contingency plans in
the event that unanticipated problems arise from Year 2000 issues, including
plans for extra staffing and surveillance of operations at year end,
prioritization of systems for restoral and manual work-arounds for automated
processes. As part of this process, the Company is examining its existing
emergency procedures to determine how those procedures could meet the demand of
failures resulting from Year 2000-related problems. The Company also plans to
conduct
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tests of its contingency plans by simulating interruptions in a test laboratory
which reproduces the Company's switch and transport environments.
Management believes that it has established a sound program to resolve
significant Year 2000 issues within its sole control in a timely manner and that
the Company has made satisfactory progress in addressing issues dependent on
third parties. However, the Company's Year 2000 program is not yet complete. The
Company's failure to correctly identify and remediate all Year 2000 issues
within its control or the failure of suppliers or other third parties with which
the Company interconnects to address their Year 2000 issues could pose various
risks to the Company. Those risks may include the possibility of interruptions
to the Company's basic services and difficulties in passing traffic to or
receiving traffic from other carriers, detecting and resolving trouble in the
networks, provisioning new service to customers, billing customers and other
carriers and collecting revenues. These impacts as well as disruptions
experienced by other parties could result in material adverse consequences to
the Company, including loss of revenue and substantial unanticipated costs, the
amounts of which cannot reasonably be estimated at this time.
EFFECTS OF INFLATION
Historically, inflation has not had a material effect on the Company.
QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's interest income and expense are sensitive to changes in the
general level of interest rates. In this regard, changes in interest rates can
affect the interest earned on the Company's cash equivalents and marketable
securities as well as interest paid on its borrowings. To mitigate the impact of
fluctuations in interest rates, the Company generally enters into fixed rate
investing and borrowing arrangements.
The following table provides information at December 31, 1998 about the
Company's financial instruments that are sensitive to changes in interest rates.
For investment securities and debt obligations, the table presents principal
cash flows and related weighted-average interest rates expected by the maturity
dates. The Company also has financial instruments included in the liabilities
portion of its balance sheet. These liabilities are comprised of the Notes,
which are fixed rate debt at 9 3/4% and mature in 2008, and the subordinated
loans payable to affiliates of the Existing Stockholders, which are variable
rate debt based on the Chase Manhattan prime rate, which was 7 3/4% at December
31, 1998. The weighted-average variable rate on the Company's long term debt is
based on the Chase Manhattan Bank's prime rate. The carrying amounts for the
following financial instruments approximate fair market value at December 31,
1998, except for the Notes for which the fair market value is estimated to be
$422 million based on market prices.
<TABLE>
<CAPTION>
1999 2000 TOTAL
-------- ------- --------
(THOUSANDS, UNLESS OTHERWISE NOTED)
---------------------------------
<S> <C> <C> <C>
Assets:
Marketable securities:
Shares of money market mutual funds...................................... $ 3,338 -- $ 3,338
Average interest rate.................................................. 4.62% --
Certificates of deposit with banks....................................... $ 62,014 -- $ 62,014
Average interest rate.................................................. 5.65% --
Corporate debt securities................................................ $262,479 $19,750 $282,229
Average interest rate.................................................. 5.59% 5.69%
Foreign government debt securities....................................... $ 5,008 -- $ 5,008
Average interest rate.................................................. 5.99% --
</TABLE>
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BUSINESS
OVERVIEW
The Company is a leading fiber facilities-based competitive local exchange
carrier in selected metropolitan areas across the United States, offering a wide
range of business telephony services, primarily to medium- and large-sized
business customers and other carriers. The Company's customers are principally
telecommunications-intensive business end-users, long distance carriers,
internet service providers, wireless communications companies and governmental
entities. Such customers are offered a wide range of integrated
telecommunications services, including dedicated transmission, local switched,
long distance, data and video transmission services and certain Internet
services. The Company has deployed switches in 16 of its 19 service areas as of
December 31, 1998, and management expects that a growing portion of the
Company's revenues will be derived from providing switched services. In
addition, the Company benefits from its strategic relationship with Time Warner
Cable both through network facilities access and cost-sharing. As a result, the
Company's networks have been constructed primarily through licensing the use of
fiber capacity from Time Warner Cable. As of December 31, 1998, the Company
operated networks in 19 metropolitan areas that spanned 6,968 route miles,
contained 272,390 fiber glass miles and offered service to 4,321 buildings.
Combined revenues for the Company, which have historically been primarily
derived from private line services, grew by 120.0% for the year ended December
31, 1998 as compared to 1997.
The business of the Company was commenced in 1993 by Time Warner Cable,
originally to provide certain telephony services together with cable television.
In January 1997, the Company put in place a new management team that is
implementing a business strategy focused exclusively on serving business
customers, rapidly providing switched services in all the Company's service
areas and expanding the range of business telephony services offered by the
Company.
The Company believes that the 1996 Act and certain state regulatory
initiatives provide increased opportunities in the telecommunications
marketplace by opening all local service areas to competition and requiring
incumbent local exchange carriers to provide increased direct interconnection.
According to the FCC, in 1997 the total revenues for the telecommunications
industry amounted to approximately $230.0 billion, of which approximately $130.0
billion was local service and approximately $100.0 billion was long distance. To
capitalize on these significant opportunities, the Company has accelerated its
deployment of high capacity digital switches in its service areas and is
aggressively marketing switched services to medium- and large-sized businesses.
BUSINESS STRATEGY
The Company's primary objective is to be a leading competitive local
exchange carrier in its existing and future service areas offering medium- and
large-sized businesses superior telecommunications services through advanced
networks. The key elements of the Company's business strategy include the
following:
Leverage Existing Fiber Optic Networks. The Company has designed and built
its networks to serve geographic locations where management believes there are
large numbers of potential customers. As of December 31, 1998, the Company
operated networks that spanned over 6,968 route miles and contained over 272,390
fiber glass miles. The Company's highly concentrated networks have yet to be
fully exploited and provide the capacity to serve a substantially larger base of
customers.
Management believes that the Company's extensive fiber network capacity
allows it to:
increase orders substantially from new and existing customers while
incurring significantly lower capital expenditures and operating expenses
than non-fiber facilities based carriers;
emphasize its fiber facilities-based services rather than resales of
network capacity of other providers; and
provide better customer service because the Company can exert greater
control over its services than its competitors that depend on off-net
facilities.
Expand Switched Services. The Company provided a broad range of switched
services in 16 of its 19 service areas as of December 31, 1998, and plans to
provide switched services in Albany and Greensboro by the end of the third
quarter of 1999, and in Binghamton in 2000. For the year ended December 31,
1998, combined
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revenues from switched service grew by 248.1% as compared to the same period in
1997. Because the demand for switched services is greater than for dedicated
transport services and the Company has been rapidly installing switches in its
markets, management expects the Company to derive a growing portion of its
revenues from switched services. The Company utilizes high capacity digital
5-ESS switches manufactured by Lucent.
Expand Data Services Capacity. Data services are becoming increasingly
important to the Company's target customers. In particular, the Company believes
that the demand for high speed, high quality local area network and wide area
network connectivity, virtual private networks, website hosting, electronic
commerce, intranet and internet access and transport services is growing
rapidly. During the second quarter of 1999, the Company will have deployed a
fully managed, fiber-based nationwide infrastructure to ensure that its
long-haul data products provide the capacity and high quality level of service
increasingly demanded by its customers.
Target Medium- and Large-Sized Business Customers. The Company operates
networks in metropolitan areas that have high concentrations of medium- and
large-sized businesses. Such businesses tend to be telecommunications-intensive
and are more likely to seek the greater reliability provided by an advanced
network such as the Company's. Thus, management believes that significant
economies of scale may be achieved by focusing and intensifying its sales and
marketing efforts on such businesses as they are potentially high volume users
of the Company's services. To drive revenue growth in these markets, the Company
is aggressively expanding its direct sales force to focus on such business
customers.
Interconnect Service Areas. The Company groups the 19 service areas in
which the Company currently operates into six geographic clusters across the
United States. See ' -- Telecommunications Networks and
Facilities -- Telecommunications Networks.' The Company plans to interconnect
each service area within a cluster with its own broadband, fiber optic
facilities or with facilities licensed from Time Warner Cable and/or third
parties. This is expected to increase its revenue potential by addressing
customers' regional long distance voice, data and video requirements. The
Company began interconnecting its service areas in 1998.
Utilize Strategic Relationships with Time Warner Cable. The Company has
benefited from and continues to leverage its relationships with Time Warner
Cable, the largest multiple system cable operator in the U.S., by licensing and
sharing the cost of digital fiber optic facilities. This licensing arrangement
allows the Company to benefit from Time Warner Cable's access to rights-of-way,
easements, poles, ducts and conduits. See 'Certain Relationships and Related
Transactions -- Certain Operating Agreements.' By leveraging its existing
relationship with Time Warner Cable, the Company believes that it can increase
revenues, benefit from existing regulatory approvals and licenses, derive
economies of scale in network costs and extend its existing networks in a rapid,
efficient and cost-effective manner. Furthermore, management believes that the
strong awareness and positive recognition of the 'Time Warner' brand name
significantly contributes to its marketing programs and sales efforts by
distinguishing it from its competitors.
Enter New Geographic Areas. The Company's strategy is to target
metropolitan areas possessing demographic, economic and telecommunications
demand profiles that it believes provide it with the potential to generate an
attractive economic return. Currently, the Company operates networks in a total
of 19 metropolitan areas and has announced plans to enter Dallas, Texas and
Jersey City, New Jersey by the third quarter of 1999, which will bring the total
to 21. Management plans to have networks in operation or under construction in
one additional service area by the end of 1999. See 'Certain Relationships and
Related Transactions -- Certain Operating Agreements.'
Continue Disciplined Expenditure Program. The Company increases operational
efficiencies by pursuing a disciplined approach to capital expenditures. This
capital expenditure program requires that prior to making any expenditure on a
project, the project must be expected to meet stringent financial criteria such
as minimum recurring revenue, cash flow margins and rate of return. In addition,
to control capital expenditures and share the risks of developing costly new
networks, management is considering establishing strategic alliances with other
telecommunications providers in the form of joint ventures and possible
co-branding marketing programs.
On May 4, 1999 the Company announced that it signed an agreement to acquire
the remaining 50% interest in MetroComm that it does not currently own. In
connection with the transaction, the Company will issue 2,190,308 shares of
Class A Common Stock to the former partners of MetroComm, representing
approximately 2% of the combined Class A Common Stock and Class B Common Stock
of the Company. The closing of the acquisition is subject to receipt of
antitrust clearance and completion of the Offering, as well as other closing
conditions.
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MARKET OPPORTUNITY
The Company believes that the 1996 Act and certain state regulatory
initiatives provide increased opportunities in the telecommunications
marketplace by opening all local markets to competition and requiring incumbent
local exchange carriers to provide increased direct interconnection. According
to the FCC, in 1997 the total revenues for the telecommunications industry
amounted to approximately $230.0 billion, of which approximately $130.0 billion
was local service and approximately $100.0 billion was long distance. To
capitalize on these significant opportunities, the Company accelerated its
deployment of high capacity digital switches in its markets and is aggressively
marketing switched services to its customers.
A number of important trends are reshaping the U.S. communications
industry, creating substantial opportunities for competitive local exchange
carriers beyond capturing market share from incumbent local exchange carriers in
local exchange services. These trends include:
increasing customer demand for high speed, broadband services, such as
internet access and transport and personal computer- and internet
protocol-based applications,
the emergence of electronic commerce as a new paradigm for business
transactions and
continued consolidation among service providers to broaden their service
offerings and technical capabilities.
By leveraging customer relationships and bundling service offerings,
competitive local exchange carriers have begun to exploit a variety of
opportunities, including high speed internet access and transport, digital
subscriber lines, local area network and wide area network connectivity, managed
network services, virtual private networks, remote access, and electronic
commerce services. The Company believes that new entrants have an excellent
opportunity to establish themselves as leading providers of such value-added
services.
High-speed connectivity has become important to business due to the
dramatic increase in internet usage and the proliferation of personal computer-
and internet protocol-based applications. According to International Data
Corporation, an independent telecommunications and technology research company,
the number of internet users worldwide reached approximately 69 million in 1997
and is forecasted to grow to approximately 320 million by 2002. The popularity
of the internet with consumers has also driven the rapid growth in exploiting
the internet as a commercial medium, as businesses establish websites, corporate
intranets and extranets and implement electronic commerce applications to expand
their customer reach and improve their communications efficiency. International
Data Corporation estimates that the value of goods and services sold worldwide
through the internet will increase from $12 billion in 1997 to over $400 billion
in 2002. The Company believes that these applications are becoming increasingly
important to businesses of all sizes, making the availability of broadband
capacity, network quality, a value-added services portfolio and technical
capability an important competitive distinction among service providers.
SERVICES
The Company provides its customers with a wide range of telecommunications
services, including dedicated transmission, local switched, long distance, data
and video transmission services and high-speed dedicated internet access
services. The Company's dedicated services, which include private line and
special access services, use high-capacity digital circuits to carry voice, data
and video transmissions from point-to-point in multiple configurations. Switched
voice services offered by the Company use high-capacity digital switches to
route voice transmissions anywhere on the public switched telephone network. In
offering its dedicated transmission and switched services, the Company also
provides private network management and systems integration services for
businesses that require combinations of various dedicated and switched
telecommunications services. Data services provided by the Company allow
customers to create their own internal computer networks and access external
computer networks and the internet. The Company can provide its customers,
including companies in the media industry, with advanced video transport
services such as point-to-point, broadcast-quality video to major television
networks as well as to advertising agencies and other customers. Internet
services provided by the Company include dedicated internet access, website
hosting, transport and electronic commerce services for business customers and
local internet service providers.
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DEDICATED TRANSPORT SERVICES
The Company currently provides a complete range of dedicated transport
services with transmission speeds from 2.4 kilobits per second to 2.488 gigabits
per second to its long distance carriers and end-user customers. All products
and services can be used for voice, data, image and video transmission.
The Company offers the following dedicated transport links:
POP-TO-POP SPECIAL ACCESS. Telecommunications lines linking the points of
presence (POPs) of one long distance carrier or the points of presence of
different long distance carriers in a market, allowing the points of
presence to exchange transmissions for transport to their final
destinations.
END-USER/INTEREXCHANGE CARRIER SPECIAL ACCESS. Telecommunications lines
between an end-user, such as a large business, and the local points of
presence of its selected long distance carrier.
PRIVATE LINE. Telecommunications lines connecting various locations of a
customer's operations, suitable for transmitting voice and data traffic
internally.
TRANSPORT ARRANGEMENT SERVICE. Provides dedicated transport between local
exchange carrier central offices and customer designated points of
presence of a long distance carrier for transport of local exchange
carrier provided switched access or local exchange carrier provided
special access. This point-to-point service is available at DS1 or DS3
interfaces at both ends. DS1 and DS3 interfaces are standard North
American telecommunications industry digital signal formats that are
distinguishable by the number of binary digits transmitted per second, or
bit rate. DS1 has a bit rate of 1.544 megabits per second and DS3 has a
bit rate of 44.736 megabits per second.
The Company provides the following services that use high-capacity digital
circuits to carry voice, data and video transmissions from point to point in
flexible configurations involving different standardized transmission speeds and
circuit capacities:
broadcast video TV-1, which is the dedicated transport of broadcast
quality video signals;
STS-1, which is the full duplex, synchronous optical transmission of
digital data on synchronous optical network, or SONET, standards, which
eliminates the need to maintain and pay for multiple dedicated lines; and
private network transport service, which is a private, dedicated premium
quality service over fully redundant, diverse routed, SONET rings with
bandwidth that is dedicated and always available.
The transmission speeds and circuit capacities used for these services
include DS0, DS1, DS3 and SONET OC-N. DS0 is a standard North American
telecommunications industry digital signal format that has a bit rate of 64
kilobits per second.
SWITCHED SERVICES
The Company's switched services provide business customers with local
calling capabilities and connections to their long distance carriers. The
Company owns, houses, manages and maintains the switch used to provide the
services. The Company's switched services include the following:
BUSINESS ACCESS LINE SERVICE. This service provides voice and data
customers quality analog voice grade telephone lines for use at any time.
Business access line service provides customers with flexibility in
network configurations because lines can be added, deleted and moved as
needed.
TIME WARNER ACCESS TRUNKS. Time Warner access trunks provide communication
lines between two switching systems. These trunks are utilized by private
branch exchange, or PBX, customers which are customers that own and
operate a switch on their own premises. PBX customers use these trunks to
provide access to the local, regional and long distance telephone
networks. PBX customers may use either the Company's telephone numbers or
their incumbent local exchange carrier assigned telephone numbers.
Customer access to the Company's local exchange services is accomplished
by a DS1 digital connection or DS0 analog trunks between the customer's
PBX port and the Company's switching centers.
TIME WARNER LOCAL TOLL SERVICE. This service provides customers with a
competitive alternative to incumbent local exchange carrier service for
intraLATA toll calls. LATA refers to a geographic area
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identified by the FCC that was originally designated by a unique area
code. The Company's local toll service is a customized, high-quality local
calling plan available to business access line and Time Warner access
trunk customers. The Company works with customers to devise cost-saving
programs based on actual usage and calling patterns.
LOCAL TELEPHONE SERVICE. Local telephone service is basic local exchange
service which can be tailored to a customer's particular calling
requirements. Local telephone service includes operator and directory
assistance services, as well as an optional intraLATA toll plan.
SWITCHED ACCESS SERVICE. The connection between a long distance carrier's
POP and an end user's premises that is provided through the switching
facilities of a local exchange carrier are referred to as switched access
services. These services provide long distance carriers with a switched
connection to their customers for the origination and termination of long
distance telephone calls.
OTHER SERVICES. Other services offered by the Company include telephone
numbers, listings, customized calling features, voice messaging, hunting,
blocking services and two-way, simultaneous voice and data transmission in
digital formats over the same transmission line, which is an international
standard referred to as integrated services digital network or ISDN.
DATA TRANSMISSION SERVICES
The Company offers its customers a broad array of data transmission
services that enable customers to create their own internal computer networks
and access external computer networks and the internet. In 1996, the Company
introduced its native speed local area network inter-networking data service
which is used to connect workstations and personal computer users on one or more
local area networks. Native speed services avoid the bottleneck problems that
are frequently encountered with customary DS1 connections by providing the
customer with a circuit that matches the transmission speeds of its local area
network. The Company's local area network service provides dedicated circuits,
guaranteed transmission capacity and guaranteed bandwidth for virtually all
local area network applications. Users can share files and databases as if they
were all working on the same computer, or within the same local area network.
As companies and communications become more sophisticated, there is an
increased need for customer access to superior traffic management of sensitive
data, video and voice transmission within a single metropolitan area, or between
various company operations. The Company's switched data services offer
sophisticated switching technology and provide high standards in reliability and
flexibility while enabling users to reduce the costs associated with
interconnecting architecturally diverse information systems. The Company's data
service offerings support evolving high-speed applications, such as multimedia,
desktop video conferencing and medical imaging. The Company offers native speed
connections to both end-users as well as interexchange data carriers. The
Company's services allow users to interconnect both high speed and low speed
local area network environments and to benefit from flexible billing, as well as
detailed usage reports.
VIDEO TRANSMISSION SERVICES
The Company provides broadcast quality digital and analog video link
services to its video services customers, including media industry customers,
such as television networks, and advertising agencies. The Company's video
services include offering broadcast quality, digital channel transmissions that
can be provided on a point-to-point or point-to-multipoint basis.
INTERNET SERVICES
Late in 1998, the Company contracted with Internet Connect, Inc., a
regional internet service provider, to deploy a national fiber-based internet
protocol network connecting the Company's hub cities. By the end of the second
quarter of 1999, the network is expected to be operational in the 19 markets
that the Company currently serves. In April 1999, the Company acquired Internet
Connect, Inc. which became a wholly-owned subsidiary of the Company. Through
this subsidiary, the Company will manage its data network and new internet
products, including its Digital Subscriber Line or DSL, services. As part of the
consideration, the former owners of Internet Connect, Inc. received, in
connection with the Reconstitution, approximately 307,550 shares of Class A
Common Stock of the Company which will be released from escrow over a three year
period.
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LONG DISTANCE SERVICES
The Company began to offer basic long distance services in 1998 and intends
to offer additional services, such as toll free, calling card and international
gateways to Europe and the Pacific, targeting medium- and small-size business
customers. Generally, large businesses tend to obtain their long distance needs
directly from the major long distance carriers. The Company believes medium- and
small-size businesses are more likely to obtain their long distance services
from competitive local exchange carriers rather than the major long distance
carriers. As a result, management believes that such medium- and small-sized
end-users represent a potential customer base for developing a market for the
Company's long distance services. The Company purchases long distance capacity
under agreements with major long distance carriers that provide the Company
capacity at competitive rates for resale and all support and billing services.
The Company has negotiated a non-exclusive resale agreement with a long distance
carrier and may negotiate additional resale agreements with other long distance
carriers. Management believes that the offering of long distance services will
contribute to revenue growth with profitable margins and will also add strategic
sales and marketing value as a bundled product.
TELECOMMUNICATIONS NETWORKS AND FACILITIES
Overview. The Company uses the latest technologies and network
architectures to develop a highly reliable infrastructure for delivering
high-speed, quality digital transmissions of voice, data and video
telecommunications. The Company's basic transmission platform consists primarily
of optical fiber equipped with high capacity SONET equipment deployed in fully
redundant, self-healing rings. These SONET rings give the Company the capability
of routing customer traffic in both directions around the ring, thereby
eliminating loss of service in the event of a cable cut. The Company's networks
are designed for remote automated provisioning, which allows the Company to meet
customers' real time service needs. The Company extends SONET rings or point to
point links from rings to each customer's premises over its own fiber optic
cable and unbundled facilities obtained from incumbent local exchange carriers.
The Company also installs diverse building entry points where a customer's
security needs require such redundancy. The Company then places necessary
customer-dedicated or shared electronic equipment at a location near or in the
customer's premises to terminate the link.
The Company serves its customers from one or more central offices or hubs
strategically positioned throughout its networks. The central offices house the
transmission and switching equipment needed to interconnect customers with each
other, the long distance carriers and other local exchange networks. Redundant
electronics, with automatic switching to the backup equipment in the event of
failure, protects against signal deterioration or outages. The Company
continuously monitors system components from its network operations center and
proactively focuses on avoiding problems rather than merely reacting upon
failure.
The Company adds switched, dedicated and data services to its basic fiber
optic transmission platform by installing sophisticated digital electronics at
its central offices and nodes and at customer locations. The Company's advanced
Lucent 5-ESS digital telephone switches are connected to multiple incumbent
local exchange carriers and long distance carrier switches to provide the
Company's customers access to telephones in the local market as well as the
public switched telephone network. Similarly, in certain markets, the Company
provides asynchronous transfer mode, or ATM, switched and local area network
multiplexers at its customers' premises and in its central offices to provide
high speed local area network interconnection services.
The Company's strategy for adding customers is designed to maximize the
speed and impact of its marketing efforts while maintaining attractive rates of
return on capital invested to connect customers directly to its networks. To
initially serve a new customer, the Company may use various transitional links,
such as reselling a portion of an incumbent local exchange carrier's network.
Once the new customer's communications volume and product needs are identified,
the Company may build its own fiber optic connection between the customer's
premises and the Company's network to accommodate: (1) the customer's needs; and
(2) the Company's efforts to maximize return on network investment.
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Telecommunications Networks. The following chart sets forth information
regarding each of the Company's telecommunications networks as of December 31,
1998:
<TABLE>
<CAPTION>
Network Switch Commercial
Commercially Commercially Fiber Route Buildings MSA Business
Metropolitan Area Available Available(1) Miles(2) On-Net Lines(3)
- ------------------------------------ ------------- ------------------ ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
NEW YORK REGION
Albany, New York.................... Jul. 95 Sep. 99(4) 42 16 302,130
Binghamton, New York................ Jan. 95 TBD 81 27 78,868
Manhattan, New York................. Feb. 96 Feb. 96 157 53 2,473,048
Rochester, New York................. Dec. 94 Feb. 95 366 91 368,522
Jersey City, New Jersey............. July 99(4) July 99(4) na na 203,312
SOUTHWEST REGION
Austin, Texas....................... Sep. 94 Apr. 97 284 89 374,200
Dallas, Texas....................... Sept. 99(4) Sept. 99(4) na na 1,095,916
Houston, Texas...................... Jan. 96 Sep. 97 471 153 1,262,601
San Antonio, Texas.................. May 93(5) Nov. 97 524 151 431,989
SOUTHEAST REGION
Charlotte, N. Carolina.............. Sep. 94 Dec. 97 634 192 494,477
Greensboro, N. Carolina............. Jan. 96 Sep. 99(4) 142 20 317,637
Memphis, Tennessee.................. May 95 May 97 503 112 267,339
Raleigh, N. Carolina................ Oct. 94 Sep. 97 523 131 277,378
MIDWEST REGION
Cincinnati, Ohio.................... Jul. 95 Nov. 97 299 86 524,937
Columbus, Ohio(6)................... Mar. 91(5) Jul. 97 371 105 433,323
Indianapolis, Indiana............... Sep. 87(5) Dec. 97 281 137 452,874
Milwaukee, Wisconsin................ Feb. 96 Sep. 97 422 96 524,155
SOUTH REGION
Tampa, Florida...................... Dec. 97 Jan. 98 423 10 978,203
Orlando, Florida.................... Jul. 95 Jul. 97 912 152 833,765
WESTERN REGION
Honolulu, Hawaii.................... Jun. 94 Jan. 98 296 195 223,224
San Diego, California............... Jun. 95 Jul. 97 237 103 1,125,674
----- ----- ----------
Total............................... 6,968 1,919 13,043,572
----- ----- ----------
----- ----- ----------
</TABLE>
- ------------
(1) Date of switch commercially available is the first date on which switched
services were provided to a customer of the Company.
(2) Licensed and owned fiber optic route miles.
(3) Metropolitan statistical areas business lines data are from Statistics of
Communications Common Carrier 1997 Business Data.
(4) Estimated.
(5) The networks in Columbus, Ohio, San Antonio, Texas and Indianapolis, Indiana
were built by certain predecessor companies prior to the commencement of the
Company's business.
(6) The Columbus market is operated by MetroComm, a partnership which is
50%-owned by the Company. However, the switch is owned by the Company. The
Company has an agreement to acquire the 50% interest in MetroComm that it
does not currently own. See ' -- Business Strategy.'
Information Systems Infrastructure. The Company uses advanced technology in
its information systems infrastructure. The Company also uses an integrated,
nationwide client server platform and coherent relational databases to increase
employee productivity, link itself electronically to some of its customers and
develop real time data and information. The architecture also enables the
Company to rapidly re-engineer its processes and procedures to lower its costs
and to respond rapidly to changing industry conditions. The Company's
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information systems deliver data at the network, regional or corporate level,
and also by customer and vendor. The Company's information systems assist in the
delivery of superior customer service and real time support of network
operations. The systems, which were partially developed by an outside vendor but
are operated internally, utilize open system standards and architecture. As a
result, the Company is positioned to either purchase from third parties or
develop in-house supplementary information support systems as its needs arise.
The Company has contracted with an outside vendor to install certain new back
office systems to enhance the Company's capabilities and accommodate the planned
scale of its business. See 'Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Year 2000.'
Network Monitoring and Management. The Company provides a single point of
contact for all of its customers and consolidates all of its systems support,
expertise and technical training at its network operations center in Greenwood
Village, Colorado. With over 400 technicians, customer service representatives
and administrative support staff dedicated to providing superior customer
service, the Company is able to quickly correct, and often anticipate, any
problems that may arise in its networks. The Company provides 24 hour-a-day, 7
days-a-week surveillance and monitoring of networks to achieve the Company's
99.98% network reliability and performance. Network analysts monitor real-time
alarm, status and performance information for network circuits, which allows
them to react swiftly to repair network failures.
Network Development and Application Laboratory. The Company's network
development and application laboratory is a comprehensive telecommunications
technology, applications and services development laboratory, equipped with
advanced systems and equipment, including those used by the Company in the
operation of its local digital networks.
The center is designed to provide a self-contained testing and integration
environment, fully compatible with the Company's digital networks, for the
purposes of:
verifying the technical and operational integrity of new equipment prior
to installation in the networks;
developing new services and applications;
providing a realistic training environment for technicians, engineers and
others; and
providing a network simulation environment to assist in fault isolation
and recovery.
Technologies currently under evaluation in the lab include dense wave
division multiplexing, or DWDM, optical bandwidth management and internet
protocol telephony, and related data applications.
Billing Systems. The Company contracts with outside vendors for customer
billing. The Company has licensed a system for switched services billing that it
operates on its own equipment and has a service bureau arrangement with another
vendor for dedicated transport service and interconnection billing. See 'Risk
Factors -- We expect to depend on third party vendors for information systems'
and 'Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Year 2000.'
Agreements with Time Warner Cable. The Company has entered into several
agreements with Time Warner Cable for the license of fiber optic networks and
certain facilities, administrative and operating services, residential telephony
support services. See 'Risk Factors -- We may need to obtain additional fiber
optic capacity beyond what Time Warner Cable provides us,' 'Risk Factors -- Our
business may be limited if the capacity license with Time Warner Cable expires
or is terminated' and 'Certain Relationships and Related Transactions -- Certain
Operating Agreements.'
NETWORK DESIGN AND CONSTRUCTION
In order to leverage its relationship with Time Warner Cable, the Company
has constructed its existing networks in selected metropolitan areas served by
Time Warner Cable's fiber optic infrastructure. This has allowed the Company to
develop, in a cost-efficient way, an extensive network in each of its service
areas. As of December 31, 1998, the Company's networks spanned 6,968 route
miles, contained 272,390 fiber glass miles and offered service to 4,321
buildings with 2,953,454 voice grade equivalent circuits and 78,036 access lines
in service.
The Company anticipates that it will construct new networks in certain
cities, using its relationship with Time Warner Cable or other fiber providers,
or by developing the networks in house, whichever is most effective and
economical. Before deciding to construct or acquire a network in a particular
city, the Company's corporate
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development staff reviews the demographic, economic, competitive and
telecommunications demand characteristics of the city, including its location,
the concentration of potential business, government and institutional end-user
customers, the economic prospects for the area, available data regarding long
distance carrier and end-user special access and switched access transport
demand and actual and potential competitive access provider/competitive local
exchange carrier competitors. Market demand is estimated on the basis of market
research performed by Company personnel and others, utilizing a variety of data
including estimates of the number of interstate access and intrastate private
lines in the city based primarily on FCC reports and commercial databases. This
process has enabled the Company to reduce its start-up costs and expedite lead
times.
If a particular city targeted for development is found to have sufficiently
attractive demographic, economic, competitive and telecommunications demand
characteristics, the Company's network planning and design personnel design a
network targeted to provide access to the major long distance carrier, points of
presence and the incumbent local exchange carrier's principal central office(s)
in the city. Consistent with the Company's disciplined capital expenditure
program, distribution rings are designed to cover strategic or highly
concentrated business parks and downtown metropolitan areas, and build-out to
100% of the identified end-users is generally not considered to be
cost-effective since a portion of the end-users are located in low density
areas.
Based on the data obtained through the foregoing process, in connection
with either the construction or an acquisition of a network, the Company
develops detailed financial estimates based on the anticipated demand for the
Company's current services. If the financial estimates meet or exceed the
Company's minimum rate of return thresholds using a discounted cash flow
analysis, the Company's corporate planning personnel prepare a detailed business
and financial plan for the proposed network.
Prior to commencing construction, the Company's local staff, working
together with Time Warner Cable, where applicable, obtains any needed city
franchises, permits, or other municipal requirements to initiate construction
and operate the network. In some cities, a construction permit is all that is
required. In other cities, a right-of-way agreement or franchise may also be
required. Such agreements and franchises are generally for a term of limited
duration. In addition, the 1996 Act requires that local governmental authorities
treat all telecommunications carriers in a competitively neutral,
non-discriminatory manner. The Company's current right-of-way agreements and
franchises expire in years ranging from 1999 to 2015. City franchises often
require payment of franchise fees which in some cases can be directly passed
through on customers' invoices. The Company's local staff also finalizes
arrangements for other needed rights-of-way. Rights-of-way are typically
licensed from Time Warner Cable under multi-year agreements with renewal options
and are generally non-exclusive. See 'Certain Relationships and Related
Transactions -- Certain Operating Agreements.' The Company leases underground
conduit and pole space and other rights-of-way from entities such as local
exchange carriers and other utilities, railroads, long distance providers, state
highway authorities, local governments and transit authorities. The 1996 Act
requires most utilities, including most local exchange carriers and electric
companies, to afford competitive access providers/competitive local exchange
carriers access to their poles, conduits and rights-of-way at reasonable rates
on non-discriminatory terms and conditions.
The Company's networks are constructed to cost-effectively access areas of
significant commercial end-user telecommunications traffic, as well as the
points of presence of most long distance carriers and cellular companies and the
principal local exchange carrier central offices in a city. The Company
establishes general requirements for network design, and internally engineers
the contemplated network and the required deployment. Construction and
installation services are provided by independent contractors, including Time
Warner Cable, selected through a competitive bidding process. Company personnel
provide project management services, including contract negotiation and
supervision of the construction, testing and certification of all facilities.
The construction period for a new network varies depending upon the number of
route miles to be installed, the initial number of buildings targeted for
connection to the network, the general deployment of the network and other field
conditions. Networks that the Company has installed to date generally have
become operational within six to nine months after the beginning of
construction.
EQUIPMENT SUPPLY
The Company acquires Lucent 5-ESS digital switches pursuant to an exclusive
vendor agreement, which provides for discounted pricing. The Lucent agreement
expires in June of 2002 and is renewable for up to four additional years upon
the parties' mutual agreement. The Lucent agreement provides that if the Company
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purchases digital switches from a vendor other than Lucent during the term of
the agreement, Lucent, among other things, may discontinue the agreed upon
discounted pricing on all future orders, renegotiate higher prices for digital
switches and may not be liable for failures to meet certain delivery and
installation schedules on future orders.
CUSTOMERS AND SALES AND MARKETING
The Company's customers are principally telecommunications-intensive medium
and large-sized businesses, internet service providers, wireless communications
companies and various governmental entities. Historically, the Company's
customers were primarily long distance carriers. While the Company's long
distance carrier business has grown by approximately 67.0% in 1998 over 1997, it
has declined as a proportion of total revenues by 24.0%, to approximately 26.0%
of the Company's total revenues. Of this long distance carrier revenue,
approximately 60% is influenced by the end-user customer rather than the long
distance carrier since an end-user may switch long distance carriers while
retaining the Company as its local exchange carrier.
The Company's two largest customers for the year ended December 31, 1998,
AT&T and MCI-Worldcom, represented 13.4% and 10.3%, respectively, of the
Company's total revenues. However, a substantial portion of that revenue results
from traffic that is directed to the Company by customers that have selected
those long distance carriers (approximately 27.3% of the 1998 AT&T revenue and
34.0% of the 1998 MCI-Worldcom revenue). The Company's primary contracts with
AT&T and MCI-Worldcom are summarized below. The Company does not believe that
the termination of either of the contracts would have a material adverse effect
on its business.
The agreement between the Company and AT&T specifies the terms under which
AT&T will purchase certain switched and dedicated services in selected service
areas of the Company. The agreement (but not the individual services purchased
under such agreement) has a 13 year term ending in September 2008, but may be
terminated, in whole or in part, under specified circumstances prior to that
time. Interexchange company affiliates of AT&T and AT&T Wireless Services, Inc.
are also eligible to purchase services under the agreement.
The Master Capacity Agreement between the Company and a subsidiary of
MCI-Worldcom ('MCImetro') provides for MCImetro and its affiliates to purchase
dedicated services from the Company. Most of these services connect MCImetro end
users to MCImetro's points of presence, but may also provide transport between a
MCImetro point of presence and a local exchange carrier central office or
another interexchange carrier. The Master Capacity Agreement is effective until
September 12, 1999. The Company is currently in negotiations with MCImetro for
renewal of the Master Capacity Agreement. The Master Capacity Agreement also
permits the Company to co-locate its equipment in MCImetro locations approved by
MCImetro for purposes of performing the Company's obligations under the Master
Capacity Agreement.
No other customer, including customers who direct their business through
long distance carriers, accounted for 10% or more of revenues. For the year
ended December 31, 1998, the Company's top 10 customers accounted for 37.8% of
the Company's total revenues.
The Company provides incentives for its sales force to negotiate service
contracts that have a minimum term of 1 year, and provides enhanced commissions
for executing agreements with terms of 3 years or greater. Currently, more than
50% of service agreements have a duration of 3 years or greater. See 'Risk
Factors -- Several customers account for a significant amount of our revenues.'
The Company's marketing emphasizes its:
reliable, facilities-based networks;
flexibly priced, bundled products and services;
responsive customer service orientation; and
integrated operations, customer support and network monitoring and
management systems.
The Company's centrally managed customer support operations are designed to
facilitate the processing of orders for changes and upgrades in customer
services. To reduce the inherent risk in bringing new and untested
telecommunications products and services to a dynamically changing market, the
Company introduces its products and services once market demand develops and
offers them in diversified, competitively-priced
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bundles, thereby increasing usage among its existing customers and attracting
new customers. The services offered by the Company are typically priced at a
discount to the prices of the incumbent local exchange carriers.
With a direct sales force in each of its service areas along with regional
and national sales support, the Company targets medium- and large-sized
telecommunications-intensive businesses in the areas served by its networks.
Compensation for the Company's sales representatives is based primarily on
commissions that are tied to sales generated. The Company's customers include
financial services firms, health care, media, telecommunications services and
high tech companies and various governmental institutions. In addition, the
Company markets its services through sales agents, landlords, advertisements,
trade journals, media relations, direct mail and participation in trade
conferences.
The Company also targets long distance carriers, internet service
providers, large, strategic business accounts and wireless telephone companies
through its national sales organization. The Company also has master services
agreements (which generally set forth technical standards, ordering processes,
pricing methodologies and service grade requirements, but do not guarantee any
specified level of business for the Company) with Sprint Corporation, and
Qwest-LCI, Inc. By providing long distance carriers with a local connection to
their customers, the Company enables them to avoid complete dependence on the
incumbent local exchange carriers for access to customers and to obtain a high
quality and reliable local connection. The Company provides a variety of
transport services and arrangements that allow long distance carriers to connect
their own switches in both local areas, or intra-city, and in wide areas, or
inter-city. Additionally, long distance carriers may purchase the Company's
transport services that allow them to connect their switch to an incumbent local
exchange carrier switch and to end-user locations directly. The Company's
advanced networks allow it to offer high volume business customers and long
distance carriers uniformity of services, pricing, quality standards and
customer service.
CUSTOMER SERVICE
With over 400 expert technicians, customer service representatives and
administrative support staff, the Company provides its customers with continuous
support and superior service. To serve its customers, account representatives
are assigned to the Company's customers to act as effective liaisons with the
Company. Technicians and other support personnel are available in each of the
Company's service areas to react to any network failures or problems. In
addition, the network operations center provides 24 hour-a-day, 7 days-a-week
surveillance and monitoring of networks to maintain the Company's network
reliability and performance. See ' -- Telecommunications Networks and
Facilities -- Network Monitoring and Management.'
COMPETITION
The Company believes that the principal competitive factors affecting its
business are, and will continue to be
(a) pricing,
(b) the availability of proven support systems for the Company's back
office systems, including provisioning and billing,
(c) competition for skilled, experienced personnel, and
(d) regulatory decisions and policies that promote competition.
The Company believes that it competes favorably with other companies in the
industry or is impacted favorably with respect to each of these factors. The
technologies and systems which provide back office support for the competitive
local exchange carrier industry are nascent and may not keep pace with the
growth of order volume, integration with other systems, and production of
required information for systems managers. The best personnel in all areas of
the Company's operations are in demand by the numerous participants in the
highly specialized competitive local exchange carrier industry. While the
Company's employee base is very stable, it is anticipated that others in the
industry will continue to demand high quality personnel and will thus drive
pressure to maintain extremely competitive compensation and benefits packages in
addition to an attractive work environment. Regulatory environments at both the
state and Federal level differ widely and have considerable influence on the
Company's market and economic opportunities and resulting investment decisions.
The
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Company believes it must continue monitoring regulatory developments and remain
active in its participation in regulatory issues.
Services substantially similar to those offered by the Company are also
offered by the incumbent local exchange carriers, which include Ameritech
Corporation, Bell Atlantic Corporation, BellSouth Corporation, SBC and GTE
Corporation. The Company believes that many incumbent local exchange carriers
may have competitive advantages over the Company. Incumbent local exchange
carriers generally benefit from their long-standing relationships with customers
and greater technical and financial resources. The incumbent local exchange
carriers have the potential to subsidize services of the type offered by the
Company from service revenues in unrelated businesses and currently benefit from
recent regulations that relax price restrictions and decrease regulatory
oversight of incumbent local exchange carriers. In addition, in most of the
metropolitan areas in which the Company currently operates, at least one, and
sometimes several, other competitive access providers or competitive local
exchange carriers offer substantially similar services at substantially similar
prices to those of the Company.
The Company also faces competition from new entrants in the local services
business who may also be better established and have greater financial
resources. Other competitive local exchange carriers, competitive access
providers, cable television companies, electric utilities, long distance
carriers, microwave carriers, wireless telephone system operators and private
networks built by large end users currently do, and may in the future, offer
services similar to those offered by the Company.
In addition, the current trend of business combinations and alliances in
the telecommunications industry, including mergers between subsidiaries of
regional Bell operating companies, between Bell operating companies and other
incumbent local exchange carriers, and between major long distance carriers and
competitive local exchange carriers, may create significant new competitors for
the Company. For example, Bell Atlantic has acquired the local exchange carriers
owned by NYNEX and SBC, corporate parent of Southwestern Bell Telephone Company,
has acquired Southern New England Telephone and Pacific Telesis. In addition,
SBC and Ameritech have agreed to merge, as have Bell Atlantic and GTE
Corporation. The latter two mergers have not yet been consummated pending
regulatory approval. On July 23, 1998, AT&T announced that it had completed its
acquisition of TCG, a competitor of the Company. On March 8, 1999, AT&T
completed its acquisition of TCI, a major cable operator, following FCC approval
of the transfer of TCI's licenses to AT&T. AT&T and Time Warner have also
announced their intention to form a joint venture to offer any distance
telephone service to residential and small business customers over Time Warner's
cable facilities.
The Company believes that the 1996 Act will provide increased business
opportunities by opening all local markets to competition. The 1996 Act:
requires all local exchange providers to offer their services for resale;
requires incumbent local exchange carriers to provide increased direct
interconnection;
requires incumbent local exchange carriers to offer network elements on an
unbundled basis; and
requires incumbent local exchange carriers to offer the services they
provide to end-users to other carriers at wholesale rates.
However, under the 1996 Act, the FCC and some state regulatory authorities
may provide incumbent local exchange carriers with increased flexibility to
reprice their services as competition develops and as incumbent local exchange
carriers allow competitors to interconnect to their networks. In addition, some
new entrants in the local market may price certain services to particular
customers or for particular routes below the prices charged by the Company for
services to those customers or for those routes, just as the Company may itself
underprice those new entrants for other services, customers or routes. If the
incumbent local exchange carriers and other competitors lower their rates and
can sustain significantly lower prices over time, this may adversely affect
revenues of the Company if it is required by market pressure to price at or
below the incumbent local exchange carriers' prices. If regulatory decisions
permit the incumbent local exchange carriers to charge competitive access
providers/competitive local exchange carriers substantial fees for
interconnection to the incumbent local exchange carriers' networks or afford
incumbent local exchange carriers other regulatory relief, such decisions could
also have a material adverse effect on the Company.
However, the Company believes that the negative effects of the 1996 Act may
be more than offset by
the increased revenues available as a result of being able to address the
entire local exchange market,
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mutual reciprocal compensation with the incumbent local exchange carriers
that results in the Company terminating its local exchange traffic on the
incumbent local exchange carrier's network at little or no net cost to the
Company,
obtaining access to off-network customers through more reasonably priced
expanded interconnection with incumbent local exchange carrier networks,
and
a shift by long distance carriers to purchase access services from
competitive access providers/competitive local exchange carriers instead
of incumbent local exchange carriers.
There can be no assurance, however, that these anticipated results will
offset completely the effects of increased competition as a result of the 1996
Act.
Historically, the Company has been able to build new networks and expand
existing networks in a timely and economical manner through strategic
arrangements such as leasing fiber optic cable from Time Warner Cable, which
already possesses rights-of-way and has facilities in place. The Company intends
to use its experience and presence in the telecommunications industry to fully
exploit its available capacity, further develop and expand its existing
telecommunications infrastructure and offer a diversified range of products and
services in competitively priced bundles.
GOVERNMENT REGULATION
Historically, interstate and foreign communication services were subject to
the regulatory jurisdiction of the FCC, and intrastate and local
telecommunications services were subject to regulation by state public service
commissions. With the enactment of the 1996 Act, competition in all
telecommunications market segments, including interstate and intrastate, local
and long distance, became matters of national policy. As described below, the
respective roles of Federal and state regulators to establish rules and pricing
requirements to implement that policy remain the subject of litigation.
Nonetheless, the Company believes that the national policy fostered by the 1996
Act should contribute to an increase in the market opportunities for the
Company. Because these developments require numerous actions to be implemented
by individual Federal and state regulatory commissions, and are subject to
particular legal, political and economic conditions, it is not possible to
predict the pace at which regulatory liberalization will occur.
Telecommunications Act of 1996. In early 1996, President Clinton signed the
1996 Act, the most comprehensive reform of the nation's telecommunications laws
since the Communications Act. The 1996 Act prohibits state and local governments
from enforcing any law, rule or legal requirement that prohibits or has the
effect of prohibiting any entity from providing any interstate or intrastate
telecommunications service. This provision of the 1996 Act should enable the
Company to provide a full range of local telecommunications services in any
state. States retain jurisdiction under the 1996 Act to adopt competitively
neutral regulations necessary to preserve universal service, protect public
safety and welfare, ensure the continued quality of telecommunications services
and safeguard the rights of consumers. States are also responsible for mediating
and arbitrating competitive local exchange carrier-incumbent local exchange
carrier interconnection arrangements if voluntary agreements are not reached.
Therefore, the degree of state regulation of local telecommunications services
may be substantial.
The 1996 Act imposes a number of access and interconnection requirements on
all local exchange carriers, including competitive local exchange carriers, with
additional requirements imposed on incumbent local exchange carriers. The 1996
Act requires competitive local exchange carriers and incumbent local exchange
carriers to attempt to resolve interconnection issues through negotiations for
at least 135 days. During these negotiations, the parties may submit disputes to
state regulators for mediation and, after the negotiation period has expired,
the parties may submit outstanding disputes to state regulators for arbitration.
As of December 1, 1998, the Company has executed 36 definitive interconnection
agreements with incumbent local exchange carriers, covering 18 of its markets.
The Company has executed interconnection agreements with the incumbent local
exchange carriers in each of its markets in which it offers switched services
and has negotiated, or is negotiating, secondary interconnection arrangements
with carriers whose territories are adjacent to the Company's for intrastate
intraLATA toll traffic and extended area services.
Under the 1996 Act, the FCC was required to establish rules and regulations
to implement the local competition provisions of the 1996 Act within six months
of enactment. In August 1996, the FCC issued two reports and orders. In the
First Report and Order, the FCC promulgated rules to govern interconnection,
resale,
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unbundled network elements, and the pricing of those facilities and services, as
well as the negotiation and arbitration procedures to be utilized by states to
implement those requirements. In the Second Report and Order, the FCC adopted
rules to govern the dialing parity requirements of the 1996 Act.
In July 1997, the Eighth Circuit Court of Appeals issued a decision in
which it affirmed certain portions of the FCC's rules and vacated others. It
vacated the FCC rules governing the pricing of interconnection, resale, and
unbundled network elements on the basis that the FCC lacks jurisdiction to
establish pricing rules for intrastate service. It also vacated rules allowing
requesting carriers to select from among various provisions of individual
interconnection agreements between incumbent local exchange carriers and other
carriers, and rules permitting the combining of network elements. In a
subsequent decision, the court vacated the FCC's dialing parity rules with
respect to intraLATA service. In October 1997, the Eighth Circuit Court of
Appeals issued an order on rehearing in which it vacated one additional FCC
rule. The vacated rule prohibited incumbent local exchange carriers from
separating network elements that they currently combine, except upon request.
Although the FCC's rules governing the pricing of interconnection, unbundled
network elements and resale have been vacated by the Eighth Circuit Court of
Appeals, interconnection and arbitration proceedings at the state level have
continued with the states implementing their own pricing standards.
Several entities, including the United States government, submitted
petitions for certiorari asking the U.S. Supreme Court to review the orders of
the Eighth Circuit Court of Appeals. Those petitions asked the Supreme Court to
review the Court of Appeals' ruling that the FCC lacks jurisdiction to establish
pricing rules for intrastate services and facilities as well as to establish
dialing parity requirements for intrastate (including most intraLATA) service.
In addition, the petitions asked the Supreme Court to review the Court of
Appeals' decision to vacate the so-called 'pick and choose' rule established by
the FCC. That rule required local exchange carriers to make available to
requesting carriers (including the Company) any provision from any
interconnection, unbundled network element or resale agreement between an
incumbent local exchange carrier and any requesting carrier approved by a state
commission. Finally, several of the petitions (including that of the U.S.
government) also asked the Supreme Court to review the October 1996 rehearing
order vacating the FCC rule which required incumbent local exchange carriers to
make available combined packages of network elements. In January 1998, the
Supreme Court granted those petitions for certiorari and agreed to review the
Eighth Circuit decisions.
On January 25, 1999, the Supreme Court issued its opinion in the case
involving review of the Eighth Circuit Court of Appeals decision. The Court held
that the FCC has authority under the Communications Act to establish rules,
including pricing rules, to implement the local competition provisions of the
1996 Act, even with respect to intrastate services. The Supreme Court did not
address the merits of the pricing rules which the FCC promulgated in 1996. In
addition, the Supreme Court affirmed several of the other rules which had been
promulgated by the FCC but which had been found unlawful by the Eighth Circuit
Court of Appeals. These included a rule allowing requesting carriers to select
provisions from among different interconnection agreements approved by state
commissions (the so-called 'pick-and-choose' rule) and a rule allowing
requesting carriers to obtain from incumbent local exchange carriers assembled
combinations of unbundled network elements. However, the Court vacated a FCC
rule identifying specific network elements which incumbent local exchange
carriers were required to make available on the basis that the FCC had failed to
consider (1) whether such network elements were necessary and (2) whether the
failure to make network elements available would impair the ability of
requesting carriers to provide the services they seek to offer. The FCC has
indicated that it will conduct further proceedings to comply with the Supreme
Court opinion regarding the availability of network elements. Whether incumbent
local exchange carriers will be required to make available to requesting
telecommunications carriers combined platforms of network elements will depend
on how the FCC implements the 'necessary' and 'impair' standards governing
network elements availability in light of the Supreme Court opinion. The Company
believes that the availability of combined platforms of network elements at
prices based on the FCC's Total Element Long Run Incremental Cost standard could
create economic opportunities for new competitors to enter local markets through
acquisition of incumbent local exchange carrier network element platforms rather
than by investing in their own network facilities as the Company does.
The 1996 Act provides a detailed list of items that are subject to these
interconnection negotiations, as well as a detailed set of duties for all
affected carriers.
All local exchange carriers, including competitive local exchange carriers
like the Company, have a duty to
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not unreasonably limit the resale of their services,
provide number portability if technically feasible,
provide dialing parity to competing providers,
provide access to poles, ducts and conduits, and
establish reciprocal compensation arrangements for the transport and
termination of telecommunications.
Under the 1996 Act and rules established by the FCC in 1996 (and modified
on reconsideration in 1997), local exchange carriers, including the Company, are
required to make available number portability. Number portability refers to the
ability of users of telecommunications services to retain, at the same location,
existing telecommunications numbers without impairment of quality, reliability,
or convenience when switching from one telecommunications carrier to another.
Under the schedule for number portability implementation established by the FCC,
local exchange carriers are required to implement number portability in the 100
largest MSAs over a five-phase period that began on October 1, 1997 and
concluded on December 31, 1998. After that, in areas outside the 100 largest
MSAs, local exchange carriers are required to make available number portability
within six months of receipt of a specific request from another
telecommunications carrier.
The 1996 Act and the FCC's rules also require local exchange carriers to
implement dialing parity. Dialing parity refers to the ability of a person that
is not an affiliate of a local exchange carrier to be able to provide
telecommunications services in such a manner that customers have the ability to
route automatically without the use of any access code, their telecommunications
to the telecommunications service provider of the customer's designation from
among two or more telecommunications service providers (including such local
exchange carrier). Under rules promulgated by the FCC in 1996, all local
exchange carriers, including the Company, are required to provide intraLATA and
interLATA dialing parity not later than February 8, 1999. However, if a local
exchange carrier also provides interLATA service as the Company does, that local
exchange carrier was required to provide dialing parity by August 8, 1997. Local
exchange carriers unable to comply with that August 8, 1997 deadline were
required to have notified the FCC by May 8, 1997. As a result of the Eighth
Circuit Court of Appeals' vacating of the FCC's intraLATA dialing parity rules,
the February 8, 1999 dialing parity date was to apply to intraLATA dialing
parity only. However, in March 1999, following the Supreme Court's January 1999
opinion reinstating the FCC's intraLATA dialing parity rules, the FCC issued an
order establishing a schedule for implementation of intraLATA dialing parity.
The Company does not restrict the resale of its services, engages in
reciprocal compensation arrangements, provides dialing parity, and provides full
number portability, satisfying four of the five requirements. The Company
generally licenses poles, ducts and conduits, and therefore owns few such
rights-of-way subject to the requirement to make them available to other
carriers.
In addition to those general duties of all local exchange carriers,
incumbent local exchange carriers have additional duties to
interconnect at any technically feasible point and provide service equal
in quality to that provided to their customers or the incumbent local
exchange carrier itself,
provide unbundled access to network elements at any technically feasible
point,
offer retail services at wholesale prices for the use of competitors,
provide reasonable public notice of changes in the network or the
information necessary to use the network, and
provide for physical collocation.
The 1996 Act further imposes various pricing guidelines for the provision
of certain of these services. Both the incumbent local exchange carriers and the
requesting carriers have a statutory duty to negotiate in good faith regarding
these arrangements. The regional Bell operating companies, in particular, must
successfully achieve agreements, leading to the development of facilities-based
competition for business and residential users, in order to enter the long
distance markets within their regions. The Company has successfully concluded
agreements governing interconnection arrangements in all of the states in which
it holds competitive local exchange carrier authority. Several of these
agreements are expiring in 1999 and the Company anticipates that the incumbent
local exchange carriers will want to renegotiate the terms and conditions,
including reciprocal compensation. The Company cannot predict the outcome of the
negotiations, especially in light of the Supreme Court's recent decision
regarding the interconnection rules, and the FCC's recent determination that
local traffic which terminates at Internet service providers' premises is mostly
jurisdictionally interstate.
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The 1996 Act establishes procedures under which Bell operating companies
may apply to the FCC for authority to provide interLATA service from states
within their operating regions. A Bell operating company seeking in-region
interLATA authority must demonstrate that it is subject to competition from a
competitor in the state with whom it has entered into an interconnection
agreement and which is providing service to business and residential customers
within the state exclusively or predominantly over its own facilities.
Alternatively, the Bell operating company may seek in-region interLATA authority
if no provider has requested access and interconnection, and the Bell operating
company has in place a state commission-approved statement of generally
available terms and conditions for access and interconnection which is available
to competitors. Further, access and interconnection agreements must comply with
each point of a 14 point competitive checklist. To date, five applications have
been filed by Bell operating companies with the FCC for authority pursuant to
Section 271 of the Communications Act to provide interLATA long distance service
in states within their operating territories. All five of those applications
have been denied by the FCC. An application by SBC for FCC authority to provide
long distance service in Oklahoma was denied in June 1997. SBC's appeal of that
decision was denied by the U.S. Court of Appeals for the District of Columbia
Circuit in March 1998. In August 1997, the FCC also denied an application by
Ameritech to provide long distance service in Michigan. BellSouth applications
for FCC approval to provide long distance service in South Carolina and
Louisiana also were denied by the FCC in December 1997 and February 1998,
respectively. In July 1998, BellSouth again applied to the FCC to provide long
distance service in Louisiana. That application was denied by the FCC in October
1998. In addition to those FCC applications, SBC Corporation brought a lawsuit
in the U.S. District Court for the Northern District of Texas in which it
challenged on constitutional grounds the Bell operating company long distance
entry provisions of the Communications Act. In December 1997, the District Court
ruled in favor of SBC finding those provisions to be unconstitutional. Shortly
thereafter, the District Court stayed its decision pending review by the U.S.
Court of Appeals for the Fifth Circuit. On September 4, 1998, the U.S. Court of
Appeals for the Fifth Circuit reversed that decision of the District Court
concluding that the provisions of Section 271 governing the Bell operating
companies interLATA service entry is not an unconstitutional bill of attainder.
Several parties, including SBC, have filed petitions for certiorari with the
U.S. Supreme Court asking that it review the decision of the Fifth Circuit. On
January 19, 1999, the Supreme Court declined to review that decision. The
Company anticipates that eventually the Bell operating companies will be found
to comply with the requirements of the Communications Act governing in-region
long distance entry and their applications for authority to provide interLATA
service will be approved and they will be permitted to offer interLATA services
within their operating territories.
The Company, like other competitive local exchange carriers, receives
reciprocal compensation from incumbent local exchange carriers for local calls
which it terminates at the premises of Internet service providers. Incumbent
local exchange carriers have attempted to persuade state commissions and the FCC
that such traffic is interstate traffic rather than local traffic and that such
traffic should not be subject to reciprocal compensation. To date, every state
commission which has considered the issue has concluded that local traffic
terminated at Internet service provider locations is local traffic and is
subject to reciprocal compensation under state-approved interconnection
agreements. However, on February 26, 1999, the FCC released a declaratory ruling
in which it held that local traffic that terminates at Internet service
providers is largely interstate traffic. The FCC did not determine whether or
not such traffic may be subject to reciprocal compensation on a prospective
basis, but commenced a FCC rulemaking on that subject. Pending completion of
that rulemaking, determinations of whether reciprocal compensation should be
paid on traffic terminated at internet service provider locations will be made
by state commissions and under the terms of approved agreements. It is expected
that incumbent local exchange carriers will attempt to persuade the FCC and
state commissions that local traffic delivered to Internet service providers
should not be subject to reciprocal compensation. Exclusion of such traffic from
reciprocal compensation requirements could reduce the revenues received by the
Company for terminating traffic originated by incumbent local exchange carriers.
If the Bell operating companies become authorized to provide in-region
interLATA service, they will be able to offer customers a full range of local
and long distance services. Bell operating company entry into the interLATA
services markets may reduce the market shares held by major long distance
carriers, which are among the Company's largest customers. However, the Company
believes that the entry of Bell operating companies into the interLATA market
will encourage long distance carriers to increase their use of exchange access
services offered by the Company and by other competitive local exchange carriers
rather than the exchange access services of the Bell operating companies. When
Bell operating companies provide long
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distance services outside their local telephone service areas, they will be
potential customers of the Company's services as well as services of other
competitive local exchange carriers and competitive access providers.
Federal Regulation. The 1996 Act obligates the FCC to establish mechanisms
for ensuring that consumers, including low income consumers and those located in
rural, insular and high cost areas, have access to telecommunications and
information services at rates reasonably comparable to those charged for similar
services in urban areas. The 1996 Act also requires the FCC to establish funding
mechanisms to make available access to telecommunications services, including
advanced services, to schools, libraries and rural health care centers. These
requirements are generally referred to as the 'universal service requirements'
of the 1996 Act. In May 1997, the FCC adopted rules to implement the universal
service requirements. Under those rules, all telecommunications carriers,
including the Company, are required to contribute to support universal service.
If the Company offers to provide local exchange service to all customers within
certain geographic areas, it may be deemed to be an 'Eligible Carrier' and
therefore entitled to subsidy funds under the program established by the FCC.
Certain aspects of universal service, including the formulas to be used to
quantify local service costs remain under study by the FCC. In addition, several
parties appealed the FCC's May 1997 universal service order. Those appeals were
consolidated in the U.S. Court of Appeals for the Fifth Circuit and are pending.
On December 23, 1998, the FCC established rules to govern the manner in
which telecommmunications carriers effectuate and verify selection by consumers
of preferred providers of local exchange and interexchange services. The Company
will be subject to those rules and will be required to comply with the specific
verification requirements established by the FCC. Violation of those rules could
subject the Company to sanctions imposed by the FCC.
Following a June 1997 decision of the FCC, the Company has been permitted
to provide its interstate access services without having tariffs on file with
the FCC. Following that decision, the Company withdrew its interstate access
services tariff and now provides such services pursuant to contracts entered
into with customers. This will improve the Company's ability to rapidly change
its access service pricing in response to competition and will reduce the
Company's regulatory compliance costs. The Company is still required to file
with the FCC tariffs for its other interstate telecommunications services,
including long distance service.
The FCC's action does not, however, impact the Company's state public
utility commission tariff requirements. Whether or not the Company is subject to
a tariff filing requirement, the Company must offer its interstate services on a
nondiscriminatory basis, at just and reasonable rates, and it is subject to the
complaint provisions of the Communications Act. For its current offering of
interstate services as a nondominant carrier, the Company is not subject to rate
of return or price cap regulation by the FCC and may install and operate digital
facilities for the transmission of interstate communications without prior FCC
authorization. Pursuant to the 1996 Act, the Company is subject to additional
Federal regulatory obligations when it provides local exchange service in a
market, such as the access and interconnection requirements that are imposed
on all local exchange carriers. See ' -- Government Regulation --
Telecommunications Act of 1996.'
The Communications Assistance for Law Enforcement Act, enacted in 1994,
requires telecommunications carriers, including the Company, to make their
equipment and facilities capable of assisting authorized law enforcement
agencies to conduct electronic surveillance. By September 8, 1998, subject
carriers were required to notify the Attorney General of systems which do not
have the capacity to meet surveillance requirements specified by the Attorney
General. By October 25, 1998, telecommunications carriers, including the
Company, were required to meet the surveillance standards set by the Attorney
General. The FCC has extended the date for compliance with these requirements
until June 30, 2000.
State Regulation. The Company has acquired all state government authority
needed to conduct its business as currently contemplated. Most state public
service commissions require carriers that wish to provide local and other
jurisdictionally intrastate common carrier services to be authorized to provide
such services. The Company's operating subsidiaries and affiliates are
authorized as common carriers in ten states. These certifications cover the
provision of switched services including local basic exchange service, point to
point private line, competitive access services, and in five states long
distance services.
Local Government Authorizations. The Company may be required to obtain from
municipal authorities street opening and construction permits and other rights
and other rights-of-way to install and expand its networks in certain cities. In
some cities, the Company's affiliates or subcontractors may already possess the
requisite authorizations to construct or expand the Company's networks. Any
increase in the difficulty or cost of
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obtaining these authorizations and permits could adversely affect the Company,
particularly where it must compete with companies that already have the
necessary permits.
In some of the metropolitan areas where the Company provides network
services, the Company pays license or franchise fees based on a percent of gross
revenues. There can be no assurance that municipalities that do not currently
impose fees will not seek to impose fees in the future, nor is there any
assurance that, following the expiration of existing franchises, fees will
remain at their current levels. Under the 1996 Act, municipalities are required
to impose such fees on a competitively neutral and nondiscriminatory basis.
However, municipalities that currently favor the incumbent local exchange
carriers may or may not conform their practices in a timely manner or without
legal challenges by the Company or another competitive access provider or
competitive local exchange carrier. Moreover, there can be no assurance that
incumbent local exchange carriers with whom the Company competes will not be
excluded from such local franchise fee requirements by previously-enacted
legislation allowing them to utilize rights-of-way throughout their states
without being required to pay franchise fees to local governments.
If any of the Company's existing franchise or license agreements for a
particular metropolitan area were terminated prior to its expiration date and
the Company were forced to remove its fiber optic cables from the streets or
abandon its network in place, even with compensation, such termination could
have a material adverse effect on the Company's operation in that metropolitan
area and could have a material adverse effect on the Company.
The Company is party to various regulatory and administrative proceedings,
however, subject to the discussion above, the Company does not believe that any
such proceedings will have a material adverse effect on its business.
COMPANY NAME
The use of the 'Time Warner' name by the Company is subject to a license
agreement with Time Warner. See 'Risk Factors -- We may lose the right to use
the `Time Warner' name' and 'Certain Relationships and Related Transactions --
Certain Operating Agreements.'
EMPLOYEES
As of December 31, 1998, the Company employed 898 full-time employees. The
Company believes that its relations with its employees are good. By succession,
the New York City operating entity is a party to a collective bargaining
agreement. In connection with the construction and maintenance of its networks
and the conduct of its other business operations, the Company uses third party
contractors, some of whose employees may be represented by unions or collective
bargaining agreements. The Company believes that its success will depend in part
on its ability to attract and retain highly qualified employees and maintain
good working relations with its current employees.
PROPERTIES
The Company leases network hub sites and other facility locations and sales
and administrative offices, substantially all of which are leased from Time
Warner Cable, in each of the cities in which it operates networks. During 1996,
1997 and 1998, rental expense for the Company's facilities and offices totaled
approximately $3.9 million, $4.7 million and $4.8 million, respectively. The
Company owns no material real estate. Management believes that its properties,
taken as a whole, are in good operating condition and are suitable and adequate
for the Company's business operations. The Company currently leases
approximately 130,000 square feet of space in Greenwood Village, Colorado, where
its corporate headquarters are located.
LEGAL PROCEEDINGS
The Company is a party to various claims and legal and regulatory
proceedings arising in the ordinary course of business. The Company does not
believe that such claims or proceedings, individually or in the aggregate, will
have a material adverse effect on the Company's business, financial condition or
results of operations.
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MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The following table sets forth certain information (as of April 1999) with
respect to the persons who are members of the board of directors, executive
officers or key employees of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------ --- ----------------------------------------------------------------------
<S> <C> <C>
Larissa L. Herda.................... 40 President and Chief Executive Officer and Director
Paul B. Jones....................... 52 Senior Vice President, General Counsel and Regulatory Policy
A. Graham Powers.................... 52 Senior Vice President, Chief Information Officer
David J. Rayner..................... 42 Senior Vice President and Chief Financial Officer
John T. Blount...................... 40 Senior Vice President, Sales
Raymond H. Whinery.................. 44 Senior Vice President, Engineering, Technologies and Operations
Julie A. Rich....................... 45 Senior Vice President, Human Resources and Business Administration
Mark A. Peters...................... 38 Vice President, Treasurer
Jill Stuart......................... 44 Vice President, Accounting and Finance and Chief Accounting Officer
Richard J. Bressler................. 41 Director
Glenn A. Britt...................... 50 Director
Richard J. Davies................... 51 Director
Douglas Holmes...................... 38 Director
Stephen A. McPhie................... 45 Director
Robert J. Miron..................... 61 Director
Audley M. Webster, Jr............... 46 Director
</TABLE>
Ms. Herda has served as President and Chief Executive Officer of the
Company since June 22, 1998. From March 1997 to June 21, 1998, Ms. Herda served
as Senior Vice President, Sales of the Company. From 1989 to 1997, Ms. Herda was
employed by MFS Telecom Inc., a competitive local exchange carrier, most
recently as Southeast Regional Vice President and General Manager. Ms. Herda has
served as a director of the Company since June 22, 1998.
Mr. Jones has served as Senior Vice President, General Counsel and
Regulatory Policy of the Company since August 1998. Prior to August 1998, Mr.
Jones served as Senior Vice President, Legal and Regulatory Policy of the
Company from October 1993. From 1992 to 1993, Mr. Jones served as Senior Vice
President, Corporate Development of Time Warner Cable Ventures. Mr. Jones was
Senior Vice President and General Counsel of Warner Cable from 1987 to 1992 and
Vice President, Strategy and Development of CBS Publishing Group from 1985 to
1986. From 1977 to 1979, Mr. Jones was the Assistant General Counsel for the
FCC.
Mr. Powers has served as Senior Vice President, Chief Information Officer
since April 1999. Prior to April 1999, Mr. Powers served as Senior Vice
President, Engineering and Technology of the Company since June 1996. From
August 1993 to May 1996, Mr. Powers served as Senior Vice President, Operations
Development and Business Implementation. Prior to joining the Company, Mr.
Powers was the President of Telecommunications Strategy Inc., a technology
consulting service, from May 1992 to July 1993 and previously held various
management positions at American Television and Communications Corporation, a
subsidiary of Time Warner Inc.
Mr. Rayner has served as Senior Vice President and Chief Financial Officer
of the Company since June, 1998. From February 1997 to May 1998, Mr. Rayner
served as Vice President, Finance. From May 1994 to February 1997, Mr. Rayner
served as Controller. From 1982 to 1994, Mr. Rayner held various financial and
operational management positions in Time Warner Cable.
Mr. Blount has served as Senior Vice President, Sales of the Company since
June 24, 1998. Prior to that, Mr. Blount served as the Company's Regional Vice
President for the Midwest and Southwest regions from January 1997 and
Milwaukee's Vice President and General Manager from January 1996 to January
1997, having served as its General Manager from February 1995. Prior to joining
the Company, Mr. Blount held various sales positions at US WEST, Inc., the
predecessor of MediaOne, starting in 1988, including Director of Sales for US
WEST !nterprise in Minneapolis from May 1994 to February 1995 and Sales and
Service Manager for South Dakota from January 1992 to May 1994.
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Mr. Whinery has served as Senior Vice President, Engineering, Technologies
and Operations since April 1999. Prior to that, Mr. Whinery served as Senior
Vice President, Technical Operations of the Company since January 1997. From May
1994 to January 1997, Mr. Whinery served as the Senior Director of Engineering
and Planning. Prior to May 1994, Mr. Whinery was employed by U S WEST, Inc., the
predecessor of MediaOne, from 1978 and served as General Manager for Idaho,
Montana, North Dakota and South Dakota from 1992 to 1994.
Ms. Rich has served as Senior Vice President, Human Resources and Business
Administration since April 1999. Prior to April 1999, Ms. Rich served as Vice
President, Human Resources and Business Administration of the Company since
March 1998. From June 1996 to February 1998, she owned an independent human
resources consulting practice. From 1984 to 1996 she was a founder of XEL
Communications, Inc., a telecommunications manufacturer, and held positions of
Director and Vice President of Human Resources.
Mr. Peters has served as Vice President, Treasurer of the Company since
July 15, 1998. From March 1996 to July 1998, Mr. Peters participated in
entrepreneurial start-up ventures. From January 1990 to February 1996, Mr.
Peters was an executive officer with Nextel Communications, Inc. and predecessor
OneComm where he most recently held the position of Vice President of Finance
and Treasurer.
Ms. Stuart has served as Vice President, Accounting and Finance and Chief
Accounting Officer since July 1998. Prior to that, she served as Director,
Finance and Business Planning from September 1994 to July 1998.
Mr. Bressler has served as a director of the Company since February 1998,
as a director of TWT Inc. since July 1998 and as Executive Vice President and
Chief Financial Officer of Time Warner Inc. since January 1998. Prior to that,
he served as Time Warner Inc.'s Senior Vice President and Chief Financial
Officer from March 1995; as Senior Vice President, Finance from January 1995;
and as a Vice President prior to that. Mr. Bressler is also a member of the
Board of Representatives of TWE.
Mr. Britt has served as a director of the Company since July 1998, as Vice
President of the Company since July 1998, as Chief Executive Officer and
President of Time Warner Cable Ventures, a division of Time Warner Cable, for
more than the past five years and as President of Time Warner Cable since
January 1999.
Mr. Davies has served as a director of the Company since October 1998, and
as Senior Vice President, Corporate Development, of Time Warner Cable since
September 1998. Prior to that, he served as Senior Vice President of TW Ventures
from June 1996 and as Chief Financial Officer of the Company from March 1993 to
June 1996.
Mr. Holmes has served as a director of the Company since April 1999, and as
Executive Vice President -- Strategy and Business Development for MediaOne since
May 1998. From January 1997 to May 1998, Mr. Holmes served as Executive Vice
President -- Finance, Strategy and Business Development for MediaOne's domestic
cable business. Prior to that, he served as the chief financial officer for U S
WEST Media Group and held a variety of strategy and marketing positions with U S
WEST, Inc. since 1990.
Mr. McPhie has served as a director of the Company since July 1998, and as
Executive Vice President of MediaOne International, a division of MediaOne,
since August 1998. From January 1997 to June 1998, Mr. McPhie served as
President and Chief Executive Officer of the Company. Prior to that, Mr. McPhie
was Vice President of Business Development at U S WEST, Inc., the predecessor of
MediaOne, from November 1995. From 1993 to 1995, Mr. McPhie served as Senior
Vice President of MFS Network Technologies, a competitive local exchange
carrier.
Mr. Miron has served as a director of the Company since July 1998, and as
President of Advance/Newhouse Communications since April 1995, having served as
President of Newhouse Broadcasting Corporation from October 1986.
Mr. Webster has served as a director of the Company since July 1998, and as
Vice President -- Shared Corporate Resources of MediaOne since December 1997.
Prior to December 1997, he was Vice President -- Corporate Strategy of MediaOne
from December 1996. Prior to that, Mr. Webster served as Executive Director of U
S WEST, Inc. since February 1993.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company or of any of the holders of
Class B Common Stock or their affiliates will receive no compensation for their
services as directors. It is currently anticipated that each director who is not
affiliated with the Company or of any of the holders of Class B Common Stock
will be entitled to
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receive an annual retainer of $25,000 (to be paid 50% in cash and 50% in Class A
Common Stock) and an additional $1,000 plus reasonable expenses for attending
each meeting of the board of directors of the Company. A director is also
entitled to be paid $1,000 annually for each committee of the board of directors
for which that director serves as chairman.
BOARD COMPOSITION
Directors are elected annually. The stockholders agreement among the
Existing Stockholders provides that the board of directors of the Company will
consist of up to 10 directors and that at each annual meeting of the Company's
stockholders at which directors are elected, the holders of the Class B Common
Stock (all of which is currently held by the Existing Stockholders) will vote
their shares in favor of the following nominees: (1) up to seven nominees
selected by the holders of Class B Common Stock, (2) the chief executive officer
of the Company and (3) two nominees who are neither employed by nor affiliated
with the Company or any holder of Class B Common Stock and who are selected by a
committee comprised of the members of the board of directors, other than the
chief executive officer and the independent directors. The independent directors
are expected to be nominated within 90 days of the Offering. See 'Certain
Relationships and Related Transactions -- Stockholders Agreement.' The holders
of the Class A Common Stock will not have the right, as a class, under the
Company's restated certificate of incorporation or the stockholders agreement to
nominate any individuals for election to the board of directors.
COMMITTEES OF BOARD OF DIRECTORS
The board of directors will have two committees: an audit committee and a
compensation committee.
The audit committee will be comprised of a majority of independent
directors. The audit committee reviews and recommends to the board of directors,
as it deems necessary, the internal accounting and financial controls for the
Company and the accounting principles and auditing practices and procedures to
be employed in preparation and review of financial statements of the Company.
The audit committee makes recommendations to the board of directors concerning
the engagement of independent public accountants and the scope of the audit to
be undertaken by such accountants. Ernst & Young LLP presently serves as the
independent auditors of the Company.
The compensation committee will be comprised solely of independent
directors. The compensation committee reviews and, as it deems appropriate,
recommends to the board of directors policies, practices and procedures relating
to the compensation of the officers and other managerial employees and the
establishment and administration of employee benefit plans. The compensation
committee will exercise all authority under the 1998 Option Plan of the Company
(unless the board of directors appoints any other committee to exercise such
authority), and advises and consults with the officers of the Company as may be
requested regarding managerial personnel policies. The compensation committee
will have such additional powers and be granted additional authority as may be
conferred upon it from time to time by the board of directors.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning total compensation
paid to the Company's chief executive officer and each of its four remaining
most highly compensated current executive officers, which are collectively
referred to as the 'named executive officers', for services rendered to the
Company during 1998 in their capacities as executive officers.
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------------------
AWARDS
---------------------------
TIME WARNER CLASS A
COMMON STOCK COMMON STOCK PAYOUTS
ANNUAL COMPENSATION UNDERLYING UNDERLYING ----------
----------------------- OPTIONS OPTIONS LTIP ALL OTHER
NAME & PRINCIPAL POSITION SALARY(1) BONUS AWARDED(2) AWARDED(3) PAYOUTS(4) COMPENSATION(5)
- --------------------------------------- ------------ -------- ------------ ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Larissa L. Herda(6) ................... $300,000 $169,381 7,600 375,000 $ -- $ 3,116
President and Chief Executive Officer
Paul B. Jones ......................... $259,000 $171,748 16,700 166,000 $ 134,400 $ --
General Counsel and
Regulatory Policy
A. Graham Powers ...................... $175,497 $118,448 7,600 100,000 $ 60,480 $ 4,800
Senior Vice President,
Engineering & Technology
David J. Rayner ....................... $171,000 $ 94,792 7,600 125,000 $ -- $ 4,610
Senior Vice President and Chief
Financial Officer
John T. Blount ........................ $170,500 $ 65,963 -- 100,000 $ -- $49,581
Senior Vice President, Sales
Stephen A. McPhie(6) .................. $234,000 -- -- -- $ -- $ --
Former President and Chief Executive
Officer
</TABLE>
- ------------
(1) The information provided under the heading 'Salary' is the annual salary of
the named executive officers as of December 31, 1998 pursuant to their
employment agreements with the Company (except for Mr. McPhie for whom the
information provided represents his annual salary received prior to June 22,
1998. See note 6). Actual salaries received by Ms. Herda and Messrs Jones,
Powers, Rayner, Blount and McPhie were $242,129, $259,242, $175,479,
$153,654, $145,625 and $140,400, respectively. See 'Employment Agreements.'
In accordance with rules of the SEC, amounts of personal benefits totaling
less than 10% of the total annual salary and bonus reported in the Table
have been omitted. Compensation of the Company's executive officers for 1998
was determined by the Existing Stockholders and approved by the Management
Committee of TWT LLC, as reflected in the employment agreements.
(2) All of these options are exercisable for the common stock of Time Warner
Inc. and have been adjusted to reflect a two-for-one stock split of Time
Warner common stock that took place on December 15, 1998. None of these
options was awarded with tandem stock appreciation rights. Mr. McPhie holds
12,450 restricted shares of common stock of MediaOne awarded in February
1997 by U S WEST, Inc. all of which are vested. No dividends were paid on
these restricted shares of MediaOne common stock. The value of these
restricted shares based on the closing price of MediaOne common stock on the
New York Stock Exchange Composite Listing on December 31, 1998 was $585,150.
None of the other named executive officers was awarded restricted stock of
MediaOne, Time Warner Inc. or the Company during 1998 or holds any such
shares.
(3) These options were originally awarded by TWT LLC with respect to equity
interests therein and were assumed by the Company in connection with the
Reconstitution and are exercisable for Class A Common Stock. See ' -- Stock
Option Plan.'
(4) These payouts were made in 1999 to participants in the Time Warner Cable
Long-Term Cash-Flow Incentive Plan for the 1995 to 1998 four-year cycle.
(5) The amounts shown in this column include the following:
(a) Pursuant to the TWC Savings Plan, a defined contribution plan
available generally to employees of the Company, each executive named above,
if eligible, may defer a portion of his or her annual compensation and the
Company contributes an additional two-thirds of that contribution so
deferred by the executive up to $4,800. These Company contributions were
invested under the savings plan. The amount contributed for 1998 on behalf
of Mr. Blount was $4,800 and for each other named executive officer is
disclosed under the heading 'All Other Compensation.'
(footnotes continued on next page)
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(footnotes continued from previous page)
(b) The Company maintains a program of life and disability insurance
generally available to all salaried employees on the same basis. For 1998,
prior to the reorganization that occurred on July 14, 1998, group term life
insurance was reduced to $50,000 for Mr. Jones, who was given an annual cash
payment equal to the cost of replacing coverage amounting to three times
base salary and annual bonus less $50,000.
(c) Mr. Blount received $44,781 in commissions during 1998 in his
capacity as Regional Vice President.
The amounts of this column exclude amounts of approximately $65,157 and
$30,182 paid to Mr. Blount and Mr. Jones, respectively, for certain
relocation expenses.
(6) Ms. Herda became President and Chief Executive Officer of the Company on
June 22, 1998 upon the resignation of Mr. McPhie who, effective August 1,
1998, became an Executive Vice President of MediaOne International, a
division of MediaOne. Prior to June 22, 1998, Ms. Herda served as the Senior
Vice President, Sales. Information for Mr. McPhie covers only the period
during which he was employed by the Company.
STOCK OPTION PLAN
GENERAL
In connection with the Reconstitution, New Time Warner Telecom assumed the
obligations under the TWT LLC 1998 Option Plan, amended such plan and renamed it
the Time Warner Telecom Inc. 1998 Stock Option Plan which is referred to as the
'1998 Option Plan'. The 1998 Option Plan provides for the granting of stock
options to purchase shares of Class A Common Stock to directors and current or
prospective employees of, and consultants or other individuals providing
services to, the Company and its subsidiaries. The Company believes that the
stock options to be granted under the 1998 Option Plan are an important part of
the compensation of the Company's key employees.
STOCK SUBJECT TO THE PLAN
The 1998 Option Plan provides for the granting of options to purchase a
maximum of 9,027,000 shares (approximately 33.0% of the Class A Common Stock
expected to be outstanding) of the Company's Class A Common Stock. The shares of
Class A Common Stock issued under the 1998 Option Plan may be either authorized
and unissued shares or issued shares held in treasury, or both. The Company will
reserve the number of shares necessary to satisfy the maximum number of shares
that may be issued under the 1998 Option Plan. The Class A Common Stock
underlying any option that expires, terminates or is canceled for any reason
without being exercised will again become available for awards under the 1998
Option Plan. Cash payments received by the Company upon the exercise of options
will be used for general corporate purposes. Awards under the 1998 Option Plan
may be made to (a) directors and employees of the Company, (b) prospective
employees of the Company or any of its subsidiaries and (c) any other
individuals providing services to the Company or any of its subsidiaries. As of
December 31, 1998, there were 898 employees and 8 directors eligible to
participate in the 1998 Option Plan.
ADMINISTRATION AND ELIGIBILITY
The board of directors of the Company intends to delegate authority to
administer the 1998 Option Plan to its compensation committee. Members of the
compensation committee will be 'non-employee directors' within the meaning of
SEC Rule 16b-3 and 'outside directors' within the meaning of Section 162(m) of
the Internal Revenue Code of 1986, as amended.
Awards may be made to employees and directors whether or not they
participate or are entitled to participate in any other option, restricted stock
or other compensation plan of the Company. The maximum number of shares that may
be awarded to any one person during one calendar year is 4,513,500. The exercise
of options granted to a prospective employee will be conditioned upon such
person becoming an employee of the Company or one of its subsidiaries.
Except as expressly provided by the 1998 Option Plan, the board of
directors, or to the extent delegated to the compensation committee, the
compensation committee will have the plenary authority in its discretion, to
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grant awards under the 1998 Option Plan and to determine the terms and
conditions, which need not be identical, of such awards, including without
limitation,
(a) the employees and directors to whom, and the time or times at which,
awards will be granted,
(b) the number of awards to be granted,
(c) whether an option will be an incentive stock option, within the meaning
of Section 422A of the Code or a nonqualified stock option,
(d) the exercise price of any such award,
(e) when an option can be exercised and whether in whole or in
installments, and
(f) the form, terms and provisions of any agreement in which awards of
options are made.
However, under the terms of the 1998 Option Plan, the board of directors of
the Company may not delegate to the compensation committee the power to appoint
members to the compensation committee or amend, modify or terminate the 1998
Option Plan.
OPTIONS
Purchase Price. Subject to the limitations set forth below, the purchase
price of the shares of Class A Common Stock covered by each option will be
determined by the board of directors, or to the extent delegated to the
compensation committee, the compensation committee on the date of grant. The
purchase price of the shares of Class A Common Stock covered by each option will
not be less than the fair market value of the Class A Common Stock on the date
of grant of such option. In addition, an incentive stock option may not be
granted to any person who owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company unless the purchase
price is at least 110% of the fair market value of the Class A Common Stock at
the time the incentive stock option is granted and the incentive stock option is
not exercisable after the expiration of five years from the date it is granted.
Term and Exercise. The duration of each option will be for a period of up
to ten years as the board of directors, or to the extent delegated to the
compensation committee, the compensation committee determines at the time of
grant. Each option may be exercised in whole or in part at any time or only
after a period of time or in installments, as determined by the board of
directors or compensation committee at the time of grant, or by the board of
directors' or compensation committee's subsequent acceleration. Under the terms
of the 1998 Option Plan, options become immediately exercisable in full if the
optionee's employment terminates by reason of death or total disability.
The board of directors, or to the extent delegated to the compensation
committee, the compensation committee will establish option exercise procedures.
Payments may be made in cash or, unless otherwise determined by the board of
directors or compensation committee, in shares of Class A Common Stock already
owned by the optionee for at least six months or partly in cash and partly in
such Common Stock.
Options may be exercised after termination of employment only to the extent
provided in the agreement under which the option award was made; provided,
however, that (1) if employment terminates by reason of death or total
disability, options will remain exercisable for a period of at least one year
after such termination, but not later than the scheduled expiration of such
options, and (2) if employment terminates for cause, then all such options will
terminate immediately.
Transferability. To the extent permitted by the agreement under which the
option award was made, options will be transferable by gift to members of a
holder's immediate family. Options will also be transferable to a designated
beneficiary or by will or the laws of descent and distribution upon the death of
the holder.
ACCELERATION OF OPTIONS
Unless otherwise provided in the agreement under which the option award was
made, each award will vest upon the occurrence of any of the following
change-of-control transactions:
(1) the board of directors (or stockholders if required) approves:
(a) a consolidation or merger in which the Company is not the
surviving corporation or pursuant to which the Class A Common
Stock would be converted into cash, securities or other property,
excluding any merger in which the stockholders of the Company
immediately prior to the merger have the same proportionate
ownership of the equity value of the surviving company immediately
after the merger,
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(b) the sale, lease, exchange or other transfer of all or
substantially all of the assets of the Company, or
(c) the adoption of any plan for the liquidation or dissolution of the
Company;
(2) (a) the Existing Stockholders as a group cease to have the ability to
elect a majority of the members of the board of directors, other
than the chief executive officer and independent directors;
provided that independent directors shall be included in
calculating whether the foregoing majority requirement is satisfied
if the directors nominated by the Existing Stockholders do not
constitute a majority of the committee that selects the board of
directors' nominees for independent directors, and
(b) a 'person' or 'group' within the meaning of Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended, other
than the Existing Stockholders, has become the ultimate 'beneficial
owner' as defined in Rule 13d-3 under the Exchange Act of more than
35% of the total voting power of the Company's securities, on a
fully diluted basis, and such ownership represents a greater
percentage of the total voting power of the Company's securities,
on a fully diluted basis, than is held by the Existing Stockholders
as a group on such date.
Under Section 4999 of the Internal Revenue Code, an optionee may be
required to pay an excise tax on certain cash or stock received in connection
with any such change-of-control transaction, and, under Section 280G of the
Internal Revenue Code, the Company may not be entitled to a deduction for
Federal income tax purposes for certain of such cash or stock paid to an
optionee. However, the 1998 Option Plan provides that agreements under which
options are awarded may contain provisions relating to the applicability of the
penalty provisions of Section 4999 of the Internal Revenue Code to any such cash
or stock received by an optionee.
ADDITIONAL PROVISIONS
Change in Capitalization. In the event of stock split, stock dividend,
recapitalization, merger, consolidation or other similar transaction which
affects the character or amount of the outstanding shares of Class A Common
Stock, the board of directors, or to the extent delegated to the compensation
committee, the compensation committee will equitably adjust the purchase price
of each award and the number of shares subject to each award, and the number of
shares for which awards may be granted under the 1998 Option Plan will be
appropriately adjusted.
Other. The obligations of the Company with respect to awards granted under
the 1998 Option Plan are subject to all applicable laws. Unless otherwise
provided by the board of directors, or to the extent delegated to the
compensation committee, the compensation committee, the payment of withholding
taxes due in respect of an award under the 1998 Option Plan may be made with
shares of Class A Common Stock.
AMENDMENT AND TERMINATION
No awards may be granted under the 1998 Option Plan on or after July 14,
2008. The board of directors may terminate, modify or amend the 1998 Option Plan
at any time, provided that the board of directors must comply with all
applicable laws, applicable stock exchange listing requirements and applicable
requirements for the 1998 Option Plan to qualify as 'performance based' under
Section 162(m) of the Internal Revenue Code. Termination or amendment of the
1998 Option Plan or any outstanding award may not adversely affect the rights of
any holder without his or her consent.
AWARDS UNDER THE 1998 OPTION PLAN
In connection with the Reconstitution, New Time Warner Telecom assumed
options awarded by TWT LLC that were exercisable for units of Class A limited
liability company interests in TWT LLC. These options were adjusted in the
Reconstitution such that an option with respect to one TWT LLC unit at an
exercise price of $12 per unit became exercisable for one share of Class A
Common Stock at an exercise price of $12 per share, subject to adjustment based
on the size of the Offering. As a result of the Reconstitution, each of Ms.
Herda and Messrs. Jones, Powers, Rayner and Blount holds nonqualified stock
options with respect to 375,000, 166,000, 100,000, 125,000 and 100,000 shares of
Class A Common stock, respectively, and there are options with respect to an
additional 5,320,667 shares held by other employees, all with an exercise price
of $12 per share, subject to adjustment based on the size of the Offering and
the initial offering price. These options become exercisable in installments of
one-quarter on the first anniversary of the date of grant and one-sixteenth at
the end of each calendar quarter thereafter, subject to acceleration upon the
occurrence of certain events, and will expire ten years from the date of grant.
In March 1999 the Company granted options covering 41,667 shares of Class A
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Common Stock to its former president and chief executive officer in settlement
of certain incentive compensation issues. These options have an exercise price
of $12 per share and vest over a three-year period and expire in 2008.
Depending upon the final initial public offering price, the Company may in
connection with the Offering grant additional options to employees having an
exercise price equal to the initial public offering price.
FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS
The following summary generally describes the principal Federal (and not
state and local) income tax consequences of awards granted under the 1998 Option
Plan. It is general in nature and is not intended to cover all tax consequences
that may apply to a particular officer or to the Company. The provisions of the
Internal Revenue Code and the regulations thereunder relating to these matters
are complicated and their impact in any one case may depend upon the particular
circumstances.
If an option is granted in accordance with the terms of the 1998 Option
Plan, no income will be recognized by the recipient thereof at the time the
option is granted.
On exercise of a nonqualified stock option, the amount by which the fair
market value of the shares of Class A Common Stock on the date of exercise
exceeds the purchase price of such shares will generally be taxable to the
optionee as ordinary income, and will be deductible for tax purposes by the
Company in the year in which the optionee recognized the ordinary income. The
disposition of shares acquired upon exercise of a nonqualified stock option will
ordinarily result in long-term or short-term capital gain or loss, depending on
the applicable holding period, in an amount equal to the difference between the
amount realized on such disposition and the sum of the purchase price and the
amount of ordinary income recognized in connection with the exercise of the
nonqualified stock option.
On exercise of an incentive stock option, an optionee will generally not
recognize any income and the Company will generally not be entitled to a
deduction for tax purposes. However, the difference between the exercise price
and the fair market value of the shares received on the date of exercise will be
treated as a positive adjustment in determining alternative minimum taxable
income, which may subject the optionee to the alternative minimum tax. The
disposition of shares acquired upon exercise of an incentive stock option will
ordinarily result in long-term or short-term capital gain or loss (depending on
the applicable holding period). However, if the optionee disposes of shares
acquired upon exercise of an incentive stock option within two years after the
date of grant or within one year after the date of exercise (a 'disqualifying
disposition'), the optionee will generally recognize ordinary income, and the
Company will generally be entitled to a deduction for tax purposes in the amount
of the excess of the fair market value of the shares of Class A Common Stock on
the date the incentive stock option is so exercised over the purchase price or,
in certain circumstances, the gain on sale, if less. Any excess of the amount
realized by the optionee on the disqualifying disposition over the fair market
value of the shares on the date of exercise of the incentive stock option will
ordinarily constitute capital gain.
If an option is exercised through the use of Class A Common Stock
previously owned by the optionee, such exercise generally will not be considered
a taxable disposition of the previously owned shares and no gain or loss will be
recognized with respect to such shares upon such exercise. However, if the
previously owned shares were acquired on the exercise of an incentive stock
option or other tax-qualified stock option and the holding period requirement
for those shares was not satisfied at the time they were used to exercise an
option intended to qualify as an incentive stock option, such use would
constitute a disqualifying disposition of such previously owned shares resulting
in the recognition of ordinary income, but, under proposed Treasury Regulations,
not any additional capital gain, in the amount described above. If an otherwise
qualifying incentive stock option becomes first exercisable in any one year for
shares having a value in excess of $100,000 on the date it is granted, the
portion of the option in respect of such excess shares will be treated as a
nonqualified stock option.
EMPLOYMENT AGREEMENTS
The Company is a party to employment agreements with the each of the
current named executive officers of the Company. These agreements have been
incorporated by reference as exhibits to the registration statement of which
this prospectus forms a part.
Among other things, the agreements with the Company's named executive
officers provide for:
a three-year term of employment in a specified executive post, commencing
on July 14, 1998;
an annual salary;
an annual bonus in the discretion of the Company, generally targeted at
50% of the named executive officer's salary; and
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a participation in any present or future pension, profit-sharing, employee
equity ownership, vacation, insurance, hospitalization, medical, health,
disability and other employee benefit or welfare plan, program or policy,
to the extent that employees at the officer's executive level are general
eligible under the provisions of the plan, program or policy.
The minimum annual salaries under these agreements are $300,000 for Ms.
Herda; $259,000 for Mr. Jones; $175,497 for Mr. Powers; $171,000 for Mr. Rayner
and $170,500 for Mr. Blount.
Generally, such agreements include a narrow definition of the 'cause' for
which an executive's employment may be terminated and in that event, the
executive will only receive earned and unpaid base salary accrued through such
date of termination.
These agreements typically provide that in the event of the Company's
material breach or termination of the executive's employment during the term of
employment without cause, the executive will be entitled to elect either
to receive a lump-sum payment equal to the present value of the base
salary and annual bonus otherwise payable during the remaining portion of
the executive's term of employment, provided that such amount shall not be
less than the sum of such salary and bonus prorated for an 18-month period
or
to remain an employee of the Company for up to 18 months and, without
performing any services, receive the base salary and annual bonus
otherwise payable, with a lump-sum payment, if necessary for any remaining
payment, at the end of such 18 months.
Executives are not generally required to mitigate damages after such a
termination, other than as necessary to prevent the Company from losing any tax
deductions to which it otherwise would have been entitled for any payments
deemed to be 'contingent on a change' under the Internal Revenue Code.
If an executive becomes disabled during the term of his or her employment
agreement, the executive typically will receive 75% of the executive's then
current salary and his or her applicable target annual bonus amount prorated for
an 18-month period. Any such payments will be reduced by amounts received from
Worker's Compensation, Social Security and disability insurance policies
maintained by the Company.
If an executive dies during the term of an employment agreement, generally
the executive's beneficiaries will receive the executive's earned and unpaid
salary to the date thirty days after the date of death and a pro rata portion of
the executive's bonus for the year of his death.
STOCK OPTIONS AWARDED BY THE COMPANY DURING 1998
The following table sets forth certain information with respect to employee
options to purchase shares of Class A Common Stock assumed by the Company in
connection with the Reconstitution awarded during 1998 with respect to the named
executive officers. All such options were nonqualified stock options and no
stock appreciation rights, alone or in tandem with stock options, were awarded
during 1998. These are the only options with respect to Class A Common Stock
held by such persons.
STOCK OPTION GRANTS DURING 1998 BY THE COMPANY
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS (1)
---------------------------------------------------
POTENTIAL REALIZABLE VALUE
PERCENT OF AT ASSUMED ANNUAL RATES
NUMBER OF TOTAL OF
SECURITIES OPTIONS EXERCISE STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO OR BASE FOR OPTION TERM
OPTIONS EMPLOYEES PRICE EXPIRATION -------------------------
NAME GRANTED IN 1998 ($ /SHARE) DATE 5% ($) 10% ($)
- ------------------ ---------- ---------- --------- ---------- --------- -------------
<S> <C> <C> <C> <C>
Larissa L.
Herda........... 375,000 6.1% $12 8/5/08 $2,830,026 $ 7,171,841
Paul B. Jones..... 166,000 2.7% $12 8/5/08 $1,252,758 $ 3,174,735
A. Graham
Powers.......... 100,000 1.6% $12 8/5/08 $ 754,674 $ 1,912,491
David J. Rayner... 125,000 2.0% $12 8/5/08 $ 943,342 $ 2,390,614
John T. Blount.... 100,000 1.6% $12 8/5/08 $ 754,674 $ 1,912,491
Stephen A.
McPhie.......... -- -- -- -- -- --
</TABLE>
(table continued on next page)
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(table continued from previous page)
<TABLE>
<CAPTION>
TOTAL GRANTS (1)
----------------------------------------------
EXERCISE OR BASE NUMBER OF SECURITIES
PRICE ($/SHARE) UNDERLYING OPTIONS GRANTED
---------------- --------------------------
<S> <C> <C>
All executive officers as a group (7 persons)........................ $ 12 1,040,000
Non-executive director group (7 persons)............................. -- --
All other employees (891 persons).................................... $ 12 4,770,750
</TABLE>
(1) These options were awarded pursuant to the option plan of TWT LLC and were
assumed by the Company and the terms are governed by such plan and the
recipient's option agreement. See ' -- Stock Option Plan -- General.'
As required by SEC rules, the dollar amounts in the last two columns under
'Individual Grants' represent the hypothetical gain or 'option spread' that
would exist for the options based on assumed 5% and 10% annual compounded rates
of Class A Common Stock appreciation over the full ten-year option term,
resulting in 63% and 159% appreciation, respectively. These assumed rates of
appreciation applied to the exercise price would result in a Class A Common
Stock price on August 5, 2008 of $19.55 and $31.12, respectively. These
prescribed rates are not intended to forecast possible future appreciation, if
any, of the Class A Common Stock.
STOCK OPTIONS AWARDED BY THE EXISTING STOCKHOLDERS DURING 1998
The following table sets forth certain information with respect to employee
options to purchase shares of Time Warner common stock awarded by Time Warner
during 1998 to the named executive officers. All such Time Warner options were
nonqualified options and no stock appreciation rights, alone or in tandem with
stock options, were awarded during 1998. No options to purchase MediaOne common
stock were awarded to the named executive officers during 1998.
STOCK OPTION GRANTS DURING 1998 BY THE EXISTING STOCKHOLDERS
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS (1)
---------------------------------------------------
PERCENT OF
TOTAL POTENTIAL REALIZABLE VALUE
NUMBER OF OPTIONS AT ASSUMED ANNUAL RATES OF
SECURITIES GRANTED TO EXERCISE STOCK PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES OR BASE OPTION TERM
OPTIONS IN 1998 PRICE EXPIRATION ------------------------------
NAME GRANTED (2) ($ /SHARE) DATE 5% ($) 10% ($)
- ------------------ ---------- ---------- --------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Larissa L.
Herda........... 7,600 .04% $ 36.03 3/17/08 $ 172,512 $ 435,387
Paul B. Jones..... 16,700 .09% $ 36.03 3/17/08 $ 379,072 $ 956,705
A. Graham
Powers.......... 7,600 .04% $ 36.03 3/17/08 $ 172,512 $ 435,387
David J. Rayner... 7,600 .04% $ 36.03 3/17/08 $ 172,512 $ 435,387
John T. Blount.... -- -- -- -- -- --
Stephen A.
McPhie.......... -- -- -- -- -- --
</TABLE>
- ------------
(1) These Time Warner options were awarded pursuant to stock option plans of
Time Warner and the terms are governed by such plans and the recipient's
option agreement, and, pursuant to these terms, have been adjusted to
reflect the Time Warner stock split that took place on December 15, 1998.
The option exercise price is the fair market value of the Time Warner common
stock on the date of grant. The Time Warner options shown in the table
become exercisable in installments of one-third on the first three
anniversaries of the date of grant. Payment of the exercise price of a Time
Warner option may be made in cash or, in whole or in part, in full shares of
Time Warner common stock already owned by the holder of the Time Warner
option. The payment of withholding taxes due upon exercise of a Time Warner
option may generally be made with shares of Time Warner common stock.
(2) Represents a percentage of all options granted to employees of Time Warner
during 1998.
As required by SEC rules, the dollar amounts in the last two columns
represent the hypothetical gain or 'option spread' that would exist for the
options based on assumed 5% and 10% annual compounded rates of Time Warner
common stock price appreciation over the full ten-year option term, resulting in
63% and 159% appreciation, respectively. These assumed rates of appreciation
applied to the price on the date of the awards would result in a Time Warner
common stock price on March 17, 2008 of $58.69 and $93.45, respectively.
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These prescribed rates are not intended to forecast possible future
appreciation, if any, of the Time Warner common stock.
OPTION EXERCISES AND VALUES IN 1998
None of the options exercisable for Class A Common Stock held by the named
executive officers and listed under the heading 'Stock Options Awarded by the
Company During 1998' have been exercised, are exercisable or are 'in-the-money.'
The following table sets forth as to each of the named executive officers
information with respect to option exercises during 1998 and the status of their
options on December 31, 1998:
the number of shares of Time Warner common stock, or MediaOne common stock
in the case of Messrs. Blount and McPhie, underlying options exercised
during 1998;
the aggregate dollar value realized upon exercise of such options;
the total number of shares of Time Warner common stock, or MediaOne common
stock in the case of Messrs. Blount and McPhie, underlying exercisable and
nonexercisable stock options held on December 31, 1998; and
the aggregate dollar value of in-the-money exercisable and nonexercisable
stock options on December 31, 1998.
None of the named executive officers has been awarded stock appreciation
rights alone or in tandem with stock options. This information has been adjusted
to reflect the Time Warner stock split that took place on December 15, 1998.
AGGREGATE OPTION EXERCISES DURING 1998 AND
OPTION VALUES ON DECEMBER 31, 1998
<TABLE>
<CAPTION>
NUMBER OF
SHARES
UNDERLYING DOLLAR VALUE OF
NUMBER OF UNEXERCISED UNEXERCISED
SHARES DOLLAR OPTIONS IN-THE-MONEY OPTIONS
UNDERLYING VALUE ON DECEMBER 31, 1998 ON DECEMBER 31, 1998*
OPTIONS REALIZED ON ---------------------------- ----------------------------
NAME EXERCISED EXERCISE EXERCISABLE NONEXERCISABLE EXERCISABLE NONEXERCISABLE
- -------------------------------------- ---------- ----------- ----------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Larissa L. Herda...................... -- -- 3,334 14,266 $ 134,302 $ 466,370
Paul B. Jones......................... 4,000 $ 110,280 85,078 33,398 $ 3,656,870 $1,109,996
A. Graham Powers...................... -- -- 29,402 15,198 $ 1,222,919 $ 505,103
David J. Rayner....................... 1,600 $ 44,054 668 8,932 $ 26,909 $ 251,503
John T. Blount........................ -- -- 521 -- $ 17,245 $ 0
Stephen A. McPhie(1).................. -- -- 30,916 7,838 $ 886,526 $ 219,289
</TABLE>
- ------------
* Based on a closing price of $62.0625 per share of Time Warner common stock,
and $47.00 per share of MediaOne common stock with respect to stock options
held by Messrs. Blount and McPhie, on December 31, 1998 as reported on the
New York Stock Exchange Composite Listing.
(1) These options to purchase MediaOne common stock become exercisable in
installments of one-third on the first three anniversaries of the date of
grant and include a reload feature that gives the holder the right to
receive a further option, at the then current market price, for a number of
shares equal to the number of shares of stock surrendered in payment of the
exercise price of the original option.
The option exercise price of all options held by the named executive
officers is the fair market value of the stock on the date of grant. All of the
options held by the named executive officers become immediately exercisable in
full upon the occurrence of certain events, including the death or total
disability of the option holder, certain change-of-control transactions and, in
most cases, the Company's breach of the holder's employment agreement. The Time
Warner options held by the named executive officers generally remain exercisable
for three years after their employment is terminated without cause, for one year
after death or total disability, for five years after retirement and for three
months after termination for any other reason, except that such stock options
awarded before 1996 are exercisable for three months after a termination without
cause and
67
<PAGE>
<PAGE>
after retirement and those awarded after July 1997 are exercisable for three
years after death or disability. All Time Warner options terminate immediately
if the holder's employment is terminated for cause. The terms of the options
shown in the chart are ten years.
PENSION COVERAGE
Although the Company does not currently expect to have its own pension
plan, Messrs. Jones, Powers and Rayner will, upon retirement, be entitled to
receive benefits under the Time Warner Cable pension plan based on service to
the Company and/or Time Warner Cable on or prior to December 31, 1998. Set forth
below is a brief description of the Time Warner Cable pension plan.
A participant accrues benefits under the Time Warner Cable pension plan on
the basis of 1 1/4% of the average annual compensation, which is defined as the
highest average annual compensation for five consecutive full years of
employment in the last ten years, which includes regular salary, overtime and
shift differential payments, and non-deferred bonuses paid according to a
regular program, up to the average Social Security Wage Base plus 1 2/3% in
excess of the average Social Security Wage Base for each year of service up to
35 years and 1/2% for each year of service over 35 years. In addition, there is
a supplemental benefit of $60 per year times years of service up to thirty
years. Compensation for purposes of calculating average annual compensation
under the Time Warner Cable pension plan is limited to $200,000 per year for
1989 through 1993 and $150,000 per year for 1994 and thereafter, each subject to
adjustments provided in the Internal Revenue Code. Eligible employees become
vested in all benefits under the Time Warner Cable pension plan on the earlier
of five years of service or certain other events.
Federal law limits both the amount of compensation that is eligible for the
calculation of benefits and the amount of benefits derived from employer
contributions that may be paid to participants under the Time Warner Cable
pension plan. However, as permitted by the Employee Retirement Income Security
Act of 1974, as amended, Time Warner Cable has adopted the Time Warner Cable
excess benefit pension plan, which provides for payments by Time Warner Cable of
certain amounts which employees of Time Warner Cable would have received under
the Time Warner Cable pension plan if eligible compensation were limited to
$250,000 in 1994, increased 5% per year after 1994, to a maximum of $350,000,
and there were no payment restrictions.
The following table shows the estimated annual pension payable upon
retirement to employees in specified remuneration and years-of-service
classifications. The amount of the estimated annual pension is based upon a
pension formula which applies to all participants in both the Time Warner Cable
pension plan and the excess benefit pension plan. The estimated amounts are
based on the assumption that payments under the Time Warner Cable pension plan
will commence upon normal retirement, which is generally age 65, that the Time
Warner Cable pension plan will continue in force in its present form and that no
joint and survivor annuity will be payable, which would on an actuarial basis
reduce benefits to the employee but provide benefits to a surviving beneficiary.
Amounts calculated under the pension formula which exceed ERISA limits will be
paid under the excess benefit pension Plan from Time Warner Cable's assets and
are included in the amounts shown in the following table.
<TABLE>
<CAPTION>
ESTIMATED ANNUAL PENSION FOR YEARS OF CREDITED SERVICE
HIGHEST CONSECUTIVE -----------------------------------------------------------------
FIVE YEAR AVERAGE COMPENSATION 10 15 20 25 30 35
- -------------------------------------------- ------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$ 50,000.................................... $ 7,036 $10,555 $14,073 $ 17,591 $ 21,109 $ 24,627
$100,000.................................... 15,370 23,055 30,740 38,425 46,110 53,795
$150,000.................................... 23,703 35,555 47,407 59,268 71,110 82,962
$200,000.................................... 32,037 48,055 64,074 80,092 96,111 112,129
$250,000.................................... 40,370 60,556 80,741 100,926 121,111 141,296
$300,000.................................... 48,704 73,056 97,408 121,760 146,112 170,464
$350,000.................................... 57,037 85,556 114,075 142,593 171,112 199,631
</TABLE>
The estimated annual benefits payable under the Time Warner Cable pension
plan and the excess benefit pension plan, as of December 31, 1998, would be
based on average compensation of $261,321 for Mr. Jones, $189,395 for Mr. Powers
and $123,226 for Mr. Rayner with 11.0, 12.0 and 15.5 years of credited service,
respectively.
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<PAGE>
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
STOCKHOLDERS AGREEMENT
In connection with the Reconstitution, the Existing Stockholders entered
into a stockholders agreement. The following summary description of the
stockholders agreement does not purport to be complete and is qualified in its
entirety by reference to the text of such agreement, the form of which is filed
as an exhibit to the registration statement of which this prospectus forms a
part. Additionally, there can be no assurance that the Existing Stockholders
will not cause the stockholders agreement to be amended, modified or terminated
or cause the Company to waive any provision of such agreement.
The stockholders agreement provides that at each annual meeting of the
Company's stockholders at which directors are elected, the holders of the Class
B Common Stock will vote their shares in favor of the following nominees:
(1) up to seven nominees selected by the holders of Class B Common Stock as
described in the next paragraph,
(2) the chief executive officer and
(3) two nominees who are neither employed by nor affiliated with the
Company or any holder of Class B Common Stock and who are selected by a
committee comprised of all the members of the Board of Directors, other
than the chief executive officer and the independent directors;
provided that if the Existing Stockholders do not have the right to nominate a
total of at least three Class B nominees, such nominating committee shall
consist of a total of three directors and shall include such Class B nominees
plus such other director or directors as shall be determined by a majority of
the board of directors. Solely as a result of the agreement of each Existing
Stockholder to vote in favor of the other Existing Stockholders' director
nominees under the stockholders agreement, the Existing Stockholders may be
deemed to share beneficial ownership of the shares beneficially owned by each of
them.
Under the stockholders agreement, the Class B Nominees will be selected as
follows: initially three Class B nominees will be designated by Time Warner,
three by MediaOne and one by Newhouse. Under the stockholders agreement, the
ability of the Existing Stockholders to designate any Class B nominees depends
on the identity of the particular stockholder and the percentage of shares of
Common Stock owned by it. Generally, each Existing Stockholder must own at least
9.44% of the Common Stock to appoint one director. In the case of Time Warner,
so long as it owns at least 18.88% of the Common Stock it will be entitled to
nominate three directors. In the event that Time Warner owns less than 18.88% of
the Common Stock, which event is referred to in this prospectus as a 'Time
Warner step event', the number of directors which Time Warner may nominate will
decrease proportionally with its ownership of the Common Stock until it owns
less than 9.44%, at which point it will not be entitled to nominate any
directors. In the case of MediaOne, so long as a Time Warner step event has not
occurred and it owns at least 9.44% of the Common Stock, MediaOne will be
entitled to nominate three directors. If a Time Warner step event has occurred,
the number of directors that MediaOne is entitled to nominate will decrease
proportionally with its ownership of the Common Stock (in accordance with the
same percentage thresholds as apply to Time Warner) until it owns less than
9.44%, at which point it will not be entitled to nominate any directors. If a
Time Warner step event has not occurred but MediaOne owns less than 9.44% of the
Common Stock, it will not be entitled to nominate any directors. In the case of
Newhouse, so long as it owns at least 9.44% of the Common Stock, Newhouse will
be entitled to nominate one director. The foregoing percentages shall be
adjusted, from time to time, in the event that the Company issues additional
shares of Common Stock or takes actions in respect of Common Stock, such as
stock splits or recapitalizations, to reflect the percentages that would have
been in effect had such action been taken as of the effective date of the
Reconstitution and prior to the computation of such percentages.
The stockholders agreement prohibits any transfer of Class B Common Stock
held by the Existing Stockholders, unless expressly permitted under the terms
thereof. In addition, voting agreements relating to the Class B Common Stock
with any third party are prohibited.
If a selling Class B stockholder proposes to sell all of its shares of
Class B Common Stock pursuant to a bona fide offer from an unaffiliated third
party, such stockholder shall give a refusal notice to all other holders of
Class B Common Stock. The notice must contain the identity of the offeror and an
offer to sell such stock to the holders of Class B Common Stock upon the terms
and subject to the conditions set forth in the offer from the
69
<PAGE>
<PAGE>
third party. The non-selling holders of Class B Common Stock will have the right
of first refusal to purchase pro rata all, but not less than all, of such Class
B Common Stock. If the non-selling holders do not exercise that right for all
the shares, the selling Class B Stockholder shall be free, for a period of 90
days thereafter, to sell such shares of Class B Common Stock, as shares of
Class B Common Stock, to the third party offeror on terms and conditions that
are no less favorable to the selling Class B Common stockholder than those
contained in the refusal notice. If a holder sells all, but not less than all,
of its Class B Common Stock as shares of Class B Common Stock, such holder may
transfer its right to nominate Class B nominees for election to the board of
directors. In addition, if Time Warner proposes to sell all, but not less than
all, of its Class B Common Stock together with shares of its Class A Common
Stock that represent an aggregate of more than one-third of the outstanding
shares of Common Stock, then other holders of Class B Common Stock will have
certain 'tag-along' rights that provide them with the right to sell their shares
of Class A Common Stock and Class B Common Stock on a pro rata basis along with,
and on the same terms and conditions as, Time Warner. However, these 'tag-along'
rights apply to all Class B Common Stock prior to applying to any Class A Common
Stock held by such holders. In connection with such sale, Time Warner and any
other stockholder transferring all of its shares of Class B Common Stock shall
have the right to transfer all of its right, if any, to nominate Class B
nominees for election to the board of directors. In addition, Time Warner and
the other selling stockholders will not be required to convert their shares of
Class B Common Stock to Class A Common Stock prior to such sale.
Except for transfers to affiliates and any other transfer described above,
immediately prior to any direct transfer of Class B Common Stock or certain
indirect transfers of Class B Common Stock, the Class B Common Stock must be
converted to Class A Common Stock. Except for transfers described above, a
stockholder may not transfer its right to nominate Class B nominees. A holder of
Class B Common Stock will not be required to convert its shares into Class A
Common Stock, and such holder's right to nominate Class B nominees will not
terminate, if such holder is acquired by a third party or such holder
distributes to its stockholders a company holding its shares of Class B Common
Stock, as well as other assets.
The Existing Stockholders will have demand registration rights with respect
to shares of Class A Common Stock, including Class A Common Stock issuable or
issued upon the conversion of shares of Class B Common Stock, on the following
terms:
no demand may be made during the first 180 days after the closing date of
the Offering,
the Company shall not be obligated to effect a demand within 180 days from
the effective date of the previous demand registration,
the Company will not be required to effect a demand registration unless
the aggregate number of shares of Class A Common Stock to be registered
is, at any given time, at least 1% of the Class A Common Stock then
outstanding and
the demand registration may be postponed for up to two months if the
Company believes that such registration would have a material adverse
effect on any proposal or plan to engage in any financing, acquisition of
assets or any merger, consolidation, tender offer or other significant
transaction.
In addition, each Existing Stockholder may cause the Company to include its
shares in certain other registered offerings under the Securities Act, subject
to certain conditions. Each Existing Stockholder will pay all underwriting
discounts and commissions and any transfer taxes attributable to the sale of its
shares. The Company will pay all expenses relating to its obligations to file
and maintain the effectiveness of a registration statement, the legal fees of
one counsel to represent the Existing Stockholders and the fees and expenses of
its auditors.
CERTAIN OPERATING AGREEMENTS
Capacity License Agreements. Each of the Company's local operations is
party to a capacity license agreement, which are collectively referred to as the
'capacity license,' with the local cable television operation of Time Warner
Cable, providing the Company with a 30 year exclusive right to utilize all of
the capacity of specified fiber-optic cable owned and maintained by the
respective Time Warner Cable operation. For the Company's existing networks, the
capacity license has been fully paid and does not require additional license
fees (although certain maintenance fees and fees for splicing and similar
services are payable periodically). The Company may request that the Time Warner
Cable construct and provide additional fiber-optic cable capacity to
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meet the Company's future needs. Time Warner Cable is not obligated to provide
such fiber capacity to the Company; however, the capacity license provides for
the sharing of construction costs between the Company and Time Warner Cable to
the extent that such costs are incurred to build additional fiber-optic capacity
which is licensed to the Company. See 'Risk Factors -- We may need to obtain
additional fiber optic capacity beyond what Time Warner Cable provides us.' and
'Risk Factors -- Our business may be limited if the capacity license with Time
Warner Cable expires or is terminated.' If Time Warner Cable provides such
additional capacity, the Company will pay an allocable share of the cost of
construction of the fiber upon which capacity is to be provided, plus a
permitting fee. Such payments are due one-half upon commencement of construction
and the remainder upon initial acceptance of the capacity by the Company. The
Company is responsible for all taxes and franchise or similar fees arising out
of its utilization of the capacity, and a portion of other out-of-pocket
expenses incurred by Time Warner Cable with regard to the cable upon which such
capacity is made available. The Company is permitted to use the capacity for
telecommunications services and any other lawful purpose, except for the
provision of residential services and content services. Violations of the
limitations on business activities of the Company contained in the restated
certificate of incorporation or the capacity license may, subject to the cure
period provided in the capacity license, result in a termination of the capacity
license. The capacity license does not restrict the Company from licensing fiber
optic capacity from parties other than Time Warner Cable. The capacity license
expires in 2028. Although Time Warner Cable has agreed to negotiate renewal or
alternative provisions in good faith at that time, the parties may not agree on
the terms of any renewal or alternative provisions or the terms of any renewal
or alternative provisions agreed upon by the parties may not be favorable to the
Company. If the capacity license is not renewed in 2028, the Company will have
no residual interest in the capacity under the capacity license and may need to
build, lease or otherwise obtain transmission capacity in order to service its
customers in the service areas covered by the capacity license; the terms of
such arrangements could have a material adverse effect on the Company's
business, financial condition and results of operations. The Company has the
right to terminate a capacity license in whole or in part at any time upon 180
days' notice and payment of any outstanding fees regarding the terminated
capacity. Time Warner Cable has the right to terminate a capacity license upon
180 days' notice in the event of, among other things, certain governmental
proceedings or third party challenges to Time Warner Cable's franchises or the
capacity license. The capacity license includes substantial limitations on
liability in the event of service interruptions. See 'Risk Factors -- Our
business may be limited if the capacity license with Time Warner Cable expires
or is terminated.'
Facility Lease Agreements. The Company leases or subleases physical space
located at Time Warner Cable's facilities for various purposes under facility
lease agreements. In the event that at least a majority of the ownership of any
Time Warner Cable system is not owned by one or more affiliates of the Existing
Stockholders or of
Time Warner's owning less than 30% of the Common Stock,
Time Warner having the right to nominate less than 3 nominees to the board
of directors of the Company,
the Company's non-compliance with the restrictions in the restated
certificate of incorporation regarding residential services and content
services and
the transfer by an Existing Stockholder of its Class B Common Stock
together with its rights to designate nominees to the board of directors
under the stockholders agreement, the Company will be required, at its own
expense, to segregate and partition in a reasonable, secure manner its
leased or subleased space.
The lease rates for properties owned by Time Warner Cable and leased to the
Company are based upon comparable rents in the local market, taking into account
other factors such as the term of the lease, type of space, square footage,
location and leasehold improvements funded to date by Time Warner Cable.
Generally, the term of such leases are for 15 years, with two five year options
to renew. With respect to properties leased by Time Warner Cable, the Company is
charged a pro rata portion of the rent and fees payable under the primary lease.
The duration of the Company's subleases are coextensive with Time Warner Cable's
primary lease.
Services Agreement. Time Warner Cable provides certain administrative and
operating services, tax, management information systems, and legal support
services, to the Company pursuant to an administrative services agreement. The
costs for such services are determined by Time Warner Cable based upon the
Company's historical and projected usage, depending on the amount and type of
administrative services to be provided.
71
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Residential Support Agreements. Under residential support agreements, the
Company will provide certain support and interconnection services to Time Warner
Cable for its residential telephony business. Generally, all rates for such
residential support services offered to Time Warner Cable may be adjusted
annually by the Company, but may not be less favorable than the wholesale rates
charged to the Company's other customers.
Time Warner License Agreement. The use of the 'Time Warner' name by the
Company is subject to a license agreement with Time Warner. The Company will no
longer have the right to use of the 'Time Warner' in the following
circumstances:
the license agreement expires after an initial term of four years or any
permitted renewal,
Time Warner no longer owns at least 30% of the Common Stock,
Time Warner no longer has the right to nominate at least 3 nominees to the
board of directors of the Company,
the Company violates covenants regarding residential services and content
services, or
an Existing Stockholder transfers its Class B Common Stock and its rights
to designate nominees to the board of directors to a third party.
Under those circumstances, the Company may change its name to 'TW Telecom
Inc.' The Company believes that the terms and conditions, taken as a whole, of
the transactions described under the headings 'Capacity License Agreements,'
'Facility Lease Agreements,' 'Services Agreement,' 'Residential Support
Agreements' and the 'Time Warner License Agreement' were no less favorable to
the Company than could have been obtained from unaffiliated parties.
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<PAGE>
PRINCIPAL STOCKHOLDERS
Prior to the reorganization of the Company that occurred on July 14, 1998,
the Existing Stockholders and their affiliates beneficially owned all of the
assets and liabilities of the Company's business. In connection with the
reorganization, such assets were contributed to the Company by affiliates of the
Existing Stockholders and the Existing Stockholders received all the limited
liability company interests in TWT LLC. These interests were exchanged in
connection with the Reconstitution for all the outstanding Class B Common Stock
of New Time Warner Telecom.
The following table sets forth certain information regarding the beneficial
ownership of the equity securities of the Company:
(1) immediately following the Reconstitution but immediately prior to the
Offering and
(2) immediately following the Offering by:
(a) each of the directors and the named executive officers;
(b) all directors and executive officers as a group; and
(c) each owner of more than 5% of any class of equity securities of
the Company.
Unless otherwise noted, the address for each executive officer of the
Company is c/o the Company, 5700 S. Quebec Street, Greenwood Village, CO 80111.
<TABLE>
<CAPTION>
CLASS A COMMON STOCK (1) CLASS B COMMON STOCK (1) TOTAL COMMON STOCK
----------------------------------- ---------------------------------- ------------------------------------
PERCENT OF CLASS PERCENT OF CLASS PERCENT OF EQUITY
-------------------------- ---------------------- ------------------------
PRIOR TO FOLLOWING PRIOR TO FOLLOWING PRIOR TO FOLLOWING
NO. OF THE THE NO. OF THE THE NO. OF THE THE
SHARES OFFERING (2) OFFERING (2) SHARES OFFERING OFFERING SHARES OFFERING OFFERING
------- ------------ ------------ ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TW (3)(4)...... -- --% --% 50,358,750 61.98% 61.98% 50,358,750 61.98% 50.74%
MediaOne
(4)(5)....... -- -- -- 15,315,625 18.85 18.85 15,315,625 18.85 15.43
Newhouse
(4)(6)....... -- -- -- 15,575,625 19.17 19.17 15,575,625 19.17 15.69
All Directors
and
executive
officers as
a group (16
persons)
(7)(8)..... * * * -- -- -- * * *
<CAPTION>
% OF
VOTING POWER
FOLLOWING THE
OFFERING
-------------
<S> <C>
TW (3)(4)...... 60.64%
MediaOne
(4)(5)....... 18.44
Newhouse
(4)(6)....... 18.75
All Directors
and
executive
officers as
a group (16
persons)
(7)(8)..... *
</TABLE>
- ------------
* Represents less than one percent.
(1) The Company has two classes of outstanding Common Stock, the Class A Common
Stock and the Class B Common Stock. Beneficial ownership of the Common Stock
has been determined in accordance with the rules of the SEC. See
'Description of Capital Stock.'
(2) Excludes 81,250,000 shares of Class B Common Stock which are convertible
into an equal number of shares of Class A Common Stock. The shares of Class
B Common Stock held by Time Warner, MediaOne and Newhouse represented on a
converted basis 61.98%, 18.85% and 19.17%, respectively, of the Class A
Common Stock prior to the Offering and 50.74%, 15.43% and 15.69%,
respectively, following the Offering.
(3) Owned by Time Warner Companies, Inc., American Television and Communications
Corporation, Warner Communications Inc., TW/TAE, Inc., FibrCOM Holdings,
L.P. and Paragon Communications, each a direct or indirect wholly owned
subsidiary of Time Warner Inc. The business address of Time Warner is 75
Rockefeller Plaza, New York, NY 10019.
(4) Solely as a result of the agreement of the Existing Stockholders to vote in
favor of the others' director nominees under the stockholders agreement, the
Existing Stockholders may be deemed to share beneficial ownership of the
shares beneficially owned by each of them. See 'Certain Relationships and
Related Transactions -- Stockholders Agreement.'
(5) Owned by MediaOne of Colorado, Inc., a Colorado corporation and wholly owned
subsidiary of MediaOne Group, Inc., a Delaware corporation. The business
address of MediaOne is 188 Inverness Drive West, Englewood, CO 80112.
(6) The business address of Newhouse is 5015 Campuswood Drive, East Syracuse, NY
13057.
(7) None of the directors or executive officers of the Company beneficially owns
any shares of Class A Common Stock or Class B Common Stock.
(8) As of December 31, 1998 all directors and executive officers held an
aggregate of 60,204 shares of Time Warner common stock, including 23,744
shares held by trusts under Time Warner-sponsored benefit plans. In
addition, such persons held options which, on December 31, 1998 were
exercisable within 60 days to purchase 1,357,960 shares of Time Warner
common stock.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
THE NOTES
On July 21, 1998, the Company completed the public offering of $400.0
million aggregate principal amount of the Notes. The Notes were issued pursuant
to the indenture. For the purposes of this section only, the term 'obligor':
when used in relation to any period prior to the Reconstitution, refers
collectively to TWT LLC and TWT Inc., as co-oligors of the Notes, and does
not include any other consolidated or unconsolidated subsidiary of TWT LLC
and
when used in relation to any period after the Reconstitution, refers to
New Time Warner Telecom, as successor obligor to the Notes.
The Notes are unsecured unsubordinated obligations of the obligor, ranking
equally in right of payment with all existing and future unsubordinated
indebtedness of the obligor and senior in right of payment to all subordinated
indebtedness of the obligor. Interest on the Notes will accrue at the rate of
9 3/4% per annum from July 21, 1998 or from the most recent interest payment
date to which interest has been paid or provided for, payable semiannually on
January 15 and July 15. The Notes will be subject to redemption at the option of
the obligor, in whole or in part, at any time on or after July 15, 2003,
initially at 104.875% of their principal amount and declining to 100% of their
principal amount at maturity on or after July 15, 2006 plus accrued and unpaid
interest to the applicable redemption date. In addition, at any time prior to
July 15, 2001, in the event of an offering of the Common Stock of the Company
for cash, the obligor may, at its option, within 90 days of an offering, use the
net proceeds of the offering to redeem up to 35% of the aggregate principal
amount at maturity of the Notes at a redemption price of 109.75% of the
principal amount on the redemption date; provided that at least 65% of the
aggregate principal amount at maturity of the Notes originally issued remain
outstanding immediately after each redemption. The Company does not intend to
use any portion of the proceeds of the Offering to redeem the Notes. Upon the
occurrence of a change of control under the indenture, the obligor must
commence, within 30 days of the later of the occurrence of such change of
control and the end of the change of control period required under the
indenture, an offer to purchase the Notes then outstanding at a purchase price
of 101% of their principal amount; provided that the obligor shall not be
required to commence an offer to purchase if, at any time within 30 days of the
later of the occurrence of the change of control and the end of the change of
control period, the Notes shall be rated investment grade under the indenture.
The indenture limits, and in some circumstances prohibits, the ability of
the Company to:
incur additional debt;
pay dividends;
make investments or other restricted payments;
engage in transactions with stockholders and affiliates;
create liens;
sell assets;
issue or sell capital stock of subsidiaries; and
engage in mergers and consolidations.
The indenture also provides for the repayment of subordinated debt,
including the subordinated indebtedness to affiliates of the Existing
Stockholders, prior to maturity with the net proceeds of any offering of common
stock or equivalent interests of the Company, including the Offering.
INTERCOMPANY SUBORDINATED DEBT
As of December 31, 1998, the Company had outstanding approximately $174.9
million of subordinated indebtedness to affiliates of the Existing Stockholders,
all of which is subordinated in right of payment to the Notes. This subordinated
indebtedness is payable in kind, bears interest at an annual rate equal to The
Chase Manhattan Bank's prime lending rate as in effect from time to time and
matures on August 15, 2008, one month after the maturity of the Notes. The Chase
Manhattan Bank's prime lending rate was 8.5% throughout the periods from July 1,
1997 through September 29, 1998, was 8.25% for the period from September 30,
1998
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through October 15, 1998, was 8.0% for the period from October 15, 1998 through
November 17, 1998 and is presently 7.75%. The subordinated indebtedness may be
declared immediately due and payable only if the maturity of the Notes is
similarly accelerated. If any event of default under the subordinated
indebtedness, or event that with notice or the passage of time would be an event
of default, shall have occurred and be continuing or would occur upon any
payment of the subordinated indebtedness, with respect to any senior debt (as
defined in the terms of the subordinated indebtedness), the Company shall not
make any payment with respect to amounts owing under the subordinated
indebtedness. Furthermore, upon any distribution of assets of, or payments by,
the Company of any kind or character to creditors upon any dissolution or
winding-up or total or partial liquidation or reorganization of the Company, all
amounts due or to become due upon all senior debt, including, without
limitation, interest accruing after the filing of a petition under any
bankruptcy law at the rate provided for in the documents governing the senior
debt, whether or not allowable as a claim under such bankruptcy law, shall first
be paid in full in cash, or duly provided for, before any payment or
distribution is made on account of any amount owing under the subordinated
indebtedness and before the Company shall, directly or indirectly, prepay,
repay, redeem, purchase, exchange or acquire the subordinated indebtedness. Upon
any such dissolution, winding-up, liquidation or reorganization, any payment or
distribution of assets of, or payments by, the Company of any kind or character
in respect of such subordinated indebtedness to which an affiliate of an
Existing Stockholder would be entitled except for the provisions of the
subordinated indebtedness, shall be paid pro rata by the Company or by any
receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution, or by an affiliate of an Existing
Stockholder if received by it, directly to the holders of senior debt for
application to the payment of senior debt remaining unpaid until all such senior
debt has been paid in full in cash after giving effect to any concurrent
payment, distribution or provision therefor to or for the holders of the senior
debt. The indenture for the Notes provides that the subordinated indebtedness
may be repaid prior to maturity with the net proceeds of any offering of common
stock or equivalent interests of the Company, including the Offering. The
Company intends to use the net proceeds of the Offering primarily to repay the
subordinated indebtedness to affiliates of the Existing Stockholders.
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DESCRIPTION OF CAPITAL STOCK
The Company's restated certificate of incorporation provides for authorized
capital stock of 459.8 million shares, including 277.3 million shares of Class A
Common Stock, $.01 par value per share, 162.5 million shares of Class B Common
Stock, $.01 par value per share, and 20 million shares of preferred stock, $.01
par value per share. Upon completion of the Offering, no preferred stock will be
outstanding and the Existing Stockholders will own of record all of the
outstanding shares of Class B Common Stock. See 'Principal Stockholders.'
The following summary description relating to the capital stock of the
Company does not purport to be complete. The rights of the holders of the
Company's capital stock will be set forth in the Company's restated certificate
of incorporation, as well as the stockholders agreement, the forms of both of
which are filed as exhibits to the registration statement of which this
prospectus forms a part. The summary set forth below is qualified by reference
to such exhibits and to the applicable provisions of the Delaware General
Corporation Law.
COMMON STOCK
The relative rights of the Class A Common Stock and Class B Common Stock
are substantially identical in all respects, except for voting rights and
conversion rights.
Voting Rights. Each share of Class A Common Stock entitles the holder to
one vote and each share of Class B Common Stock entitles the holder to 10 votes
on each matter to be voted upon by the holders of the Common Stock. The holders
of the shares of Class A Common Stock and Class B Common Stock vote as one class
on all matters to be voted on by stockholders, including, without limitation,
the election of directors and any proposed amendment to the restated certificate
of incorporation of the Company that would increase the authorized number of
shares of Common Stock or any class thereof or any other class or series of
stock or decrease the number of authorized shares of any class or series of
stock (but not below the number then outstanding), except as required by the
Delaware General Corporation Law and except that,
(1) without a unanimous vote of the holders of the Class B Common Stock,
voting as a separate class,
(A) the restated certificate of incorporation may not be amended,
altered or repealed and
(B) the Company may not merge or consolidate with, or sell all or
substantially all of its assets to, any person,
in each case until such time as the outstanding shares of Class B
Common Stock represent less than 50% of the voting power of the
outstanding Common Stock and
(C) the Company cannot issue additional shares of Class B Common Stock
or other capital stock having more than one vote per share and
(2) without a majority vote of the holders of the Class A Common Stock,
certain provisions of the restated certificate of incorporation
relating to the termination of, and vote required to waive, the
limitations on business purposes described in the next sentence may not
be amended, altered or repealed.
Under the restated certificate of incorporation, the Company may not
directly or indirectly, through a subsidiary or affiliate of the Company,
(a) engage in the business of providing, offering, packaging, marketing,
promoting or branding (alone or jointly with or as an agent for other
parties) any wireline telecommunications services or other services,
including data services, to residences (collectively, 'residential
services') or
(b) engage in the business of producing, packaging, distributing,
marketing, hosting, offering, promoting, branding or otherwise
providing entertainment, information or any other content services,
whether fixed or interactive, or any services incidental thereto, but
excluding acting solely as a carrier of video, audio or data of
unaffiliated third parties by providing transport services, so long as
the Company has no other direct or indirect pecuniary interest in the
transmitted information or content (collectively, 'content services'),
in each case until the earlier of (1) the date that is five years after the date
of the filing of the restated certificate of incorporation and (2) the date on
which the holders of Class B Common Stock no longer represent at least 50% of
the voting power of the outstanding Common Stock of the Company.
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Neither the holders of Class A Common Stock nor the holders of Class B
Common Stock have cumulative voting rights. For a discussion of the effects of
the disproportionate voting rights of the Class A Common Stock and Class B
Common Stock, see 'Risk Factors -- After the Offering, the Existing Stockholders
will continue to control the Company.'
Dividends. Each share of Common Stock is entitled to receive dividends from
funds legally available therefor if, as and when declared by the board of
directors of the Company. Class A Common Stock and Class B Common Stock share
equally, on a share-for-share basis, in any dividends declared by the board of
directors. If at any time a distribution of the Class A Common Stock or Class B
Common Stock is to be paid in shares of Class A Common Stock, Class B Common
Stock or any other securities of the Company or any other person, such dividends
may be declared and paid only as follows:
(1) a share distribution consisting of Class A Common Stock to holders of
Class A Common Stock and Class B Common Stock, on an equal per share
basis; or to holders of Class A Common Stock only, but in such event
there shall also be a simultaneous share distribution to holders of
Class B Common Stock consisting of shares of Class B Common Stock on an
equal per share basis;
(2) a share distribution consisting of Class B Common Stock to holders of
Class B Common Stock and Class A Common Stock, on an equal per share
basis; or to holders of Class B Common Stock only, but in such event
there shall also be a simultaneous share distribution to holders of
Class A Common Stock consisting of shares of Class A Common Stock on an
equal per share basis; and
(3) a share distribution of shares of any class of securities of the
Company or any other person other than the Common Stock, either on the
basis of a distribution of identical securities, on an equal per share
basis to the holders of Class A Common Stock and Class B Common Stock,
or on the basis of a distribution of one class of securities to the
holders of Class A Common Stock and another class of securities to
holders of Class B Common Stock, provided that the securities so
distributed do not differ in any respect other than relative voting
rights and related differences in designations, conversion and share
distribution provisions, with the holders of Class B Common Stock
receiving the class having the higher relative voting rights, provided
that if the securities so distributed constitute capital stock of a
subsidiary of the Company, such rights shall not differ to a greater
extent than the corresponding differences in voting rights,
designations, conversion and distribution provisions between Class A
Common Stock and Class B Common Stock.
If the Company shall in any manner subdivide or combine the outstanding
shares of Class A Common Stock or Class B Common Stock, the outstanding shares
of the other class of Common Stock shall be proportionally subdivided or
combined in the same manner and on the same basis as the outstanding shares of
Class A Common Stock or Class B Common Stock, as the case may be, that have been
subdivided or combined.
Conversion. Under the restated certificate of incorporation, each share of
Class B Common Stock is convertible at any time and from time to time at the
option of the holder thereof into one share of Class A Common Stock. The Class A
Common Stock has no conversion rights.
Equivalent Consideration in Certain Transactions. In the event of any
merger, consolidation, acquisition of all or substantially all the assets of the
Company or other reorganization to which the Company is a party, in which any
consideration is to be received by the holders of Class A Common Stock and
Class B Common Stock, those holders must receive the Equivalent Consideration
(as defined below) on a per share basis. Under the restated certificate of
incorporation of the Company, 'Equivalent Consideration' is defined as
consideration of substantially equivalent economic value as determined by the
board of directors of the Company at the time of execution of the definitive
agreement relating to the applicable merger, consolidation, acquisition or
reorganization, provided, that (i) the holders of Class A Common Stock can
receive consideration of a different form from the consideration to be received
by the holders of Class B Common Stock and (ii) if the holders of Class A Common
Stock and Class B Common Stock are to receive securities of any other person,
such securities (and, if applicable, the securities into which the received
securities are convertible, or for which they are exchangeable, or which they
evidence the right to purchase) can differ with respect to their relative voting
rights and related differences in conversion and share distribution provisions,
with the holders of shares of Class B Common Stock receiving the class or series
having the higher relative voting rights, and the differences permitted by this
clause (ii) are not taken into account in the determination of equivalent
economic value.
Other. Stockholders of the Company have no preemptive or other rights to
subscribe for additional shares. All holders of Common Stock, regardless of
class, are entitled to share equally on a share-for-share basis in any
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assets available for distribution to stockholders on liquidation, dissolution or
winding up of the Company. All outstanding shares are, and all shares offered by
this prospectus will be, when sold, validly issued, fully paid and
nonassessable. The Company may not subdivide or combine shares of Common Stock
without at the same time proportionally subdividing or combining shares of the
other classes.
PREFERRED STOCK
The Company's board of directors is authorized to provide for the issuance
of preferred stock in one or more series and to fix the designation,
preferences, powers and relative, participating, optional and other rights,
qualifications, limitations and restrictions thereof, including the dividend
rate, conversion rights, voting rights, redemption price and liquidation
preference and to fix the number of shares to be included in any such series.
Any preferred stock so issued may rank senior to the Common Stock with respect
to the payment of dividends or amounts upon liquidation, dissolution or winding
up, or both. In addition, any such shares of preferred stock may have class or
series voting rights.
CORPORATE OPPORTUNITIES
The restated certificate of incorporation provides that the Existing
Stockholders are not restricted from engaging directly or indirectly in the same
or similar business activities or lines of business as the Company. In the event
that any of the Existing Stockholders acquires knowledge of a potential
transaction or matter that may be a corporate opportunity for any of the
Existing Stockholders and the Company, such corporate opportunity shall be
allocated to the Existing Stockholder if offered to any person who is an
officer, employee or director of the Existing Stockholder and/or the Company,
unless such opportunity is expressly offered to such person primarily in his or
her capacity as an officer, employee or director of the Company. Other than
under these circumstances, the Existing Stockholders shall have no duty to
communicate or present such corporate opportunity to the Company.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
The restated certificate of incorporation of the Company expressly states
that the Company has elected not to be governed by Section 203 of the Delaware
General Corporation Law which prohibits a publicly held Delaware corporation
from engaging in a 'business combination', as defined in clause (c)(3) of that
section, with an 'interested stockholder', as defined in clause (c)(5) of that
section, for a period of three years after the date of the transaction in which
the stockholder became an interested stockholder.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
The restated certificate of incorporation limits the liability of directors
to the fullest extent permitted by the Delaware General Corporation Law. In
addition, the restated certificate of incorporation provides that the Company
shall indemnify directors and officers of the Company to the fullest extent
permitted by that law. The Company anticipates entering into separate
indemnification agreements with its current directors and executive officers
prior to the completion of the Offering which will have the effect of providing
such persons indemnification protection in the event the restated certificate of
incorporation is subsequently amended.
NASDAQ TRADING
The Class A Common Stock is expected to be approved for quotation on the
Nasdaq National Market of the Nasdaq Stock Market under the symbol 'TWTC.'
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Norwest Bank,
Minnesota N.A.
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CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS OF COMMON STOCK
GENERAL
The following is a general discussion of U.S. Federal income and estate tax
consequences of the ownership and disposition of common stock that may be
relevant to you if you are a 'non-U.S. holder'. For purposes of this summary, a
non-U.S. holder is a beneficial owner of common stock that is, for U.S. Federal
income tax purposes, (1) a nonresident alien individual, (2) a foreign
corporation, (3) a nonresident alien fiduciary of a foreign estate or trust or
(4) a foreign partnership one or more of the members of which is, for U.S.
Federal income tax purposes, a nonresident alien individual, a foreign
corporation or a nonresident alien fiduciary of a foreign estate or trust.
This discussion does not address all aspects of U.S. Federal income and
estate taxation that may be relevant to you in light of your particular
circumstances, and does not address any foreign, state or local tax
consequences. Furthermore, this discussion is based on provisions of the
Internal Revenue Code, Treasury regulations and administrative and judicial
interpretations as of the date hereof. All of these are subject to change,
possibly with retroactive effect, or different interpretations. If you are
considering buying common stock you should consult your own tax advisor about
current and possible future tax consequences of holding and disposing of common
stock in your particular situation.
DISTRIBUTIONS
We do not anticipate paying cash dividends on our common stock in the
foreseeable future. See 'Risk Factors -- The indenture for the Notes contains
restrictive covenants that may limit our flexibility.' However, if distributions
are paid on the shares of Common Stock, these distributions generally will
constitute dividends for U.S. Federal income tax purposes to the extent paid
from our current or accumulated earnings and profits, as determined under U.S.
Federal income tax principles. Dividends paid to a non-U.S. holder that are not
effectively connected with a U.S. trade or business of the non-U.S. holder will
be subject to United States withholding tax at a 30% rate or, if a tax treaty
applies, a lower rate specified by the treaty. To receive a reduced treaty rate,
a non-U.S. holder must furnish to us or our paying agent a duly completed Form
1001 or Form W-8BEN (or substitute form) certifying to its qualification for
such rate.
Currently, withholding is generally imposed on the gross amount of a
distribution, regardless of whether we have sufficient earnings and profits to
cause the distribution to be a dividend for U.S. Federal income tax purposes.
However, withholding on distributions made after December 31, 1999 may be on
less than the gross amount of the distribution if the distribution exceeds a
reasonable estimate of our accumulated and current earnings and profits.
Dividends that are effectively connected with the conduct of a trade or
business within the U.S. and, if a tax treaty applies, are attributable to a
U.S. permanent establishment of the non-U.S. holder, are exempt from U.S.
Federal withholding tax, provided that the non-U.S. holder furnishes to us or
our paying agent a duly completed Form 4224 or Form W-8ECI (or substitute form)
certifying the exemption. However, dividends exempt from U.S. withholding
because they are effectively connected or they are attributable to a U.S.
permanent establishment are subject to U.S. Federal income tax on a net income
basis at the regular graduated U.S. Federal income tax rates. Any such
effectively connected dividends received by a foreign corporation may, under
certain circumstances, be subject to an additional 'branch profits tax' at a 30%
rate or a lower rate specified by an applicable income tax treaty.
Under current U.S. Treasury regulations, dividends paid before January 1,
2000 to an address outside the United States are presumed to be paid to a
resident of the country of address for purposes of the withholding discussed
above and for purposes of determining the applicability of a tax treaty rate.
However, U.S. Treasury regulations applicable to dividends paid after December
31, 1999 eliminate this presumption, subject to certain transition rules.
For dividends paid after December 31, 1999, a non-U.S. holder generally
will be subject to U.S. backup withholding tax at a 31% rate under the backup
withholding rules described below, rather than at a 30% rate or a reduced rate
under an income tax treaty, as described above, unless the non-U.S. holder
complies with certain Internal Revenue Service certification procedures or, in
the case of payments made outside the U.S. with respect
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to an offshore account, certain IRS documentary evidence procedures. Further, to
claim the benefit of a reduced rate of withholding under a tax treaty for
dividends paid after December 31, 1999, a non-U.S. holder must comply with
certain modified IRS certification requirements. Special rules also apply to
dividend payments made after December 31, 1999 to foreign intermediaries, U.S.
or foreign wholly owned entities that are disregarded for U.S. Federal income
tax purposes and entities that are treated as fiscally transparent in the U.S.,
the applicable income tax treaty jurisdiction, or both. You should consult your
own tax advisor concerning the effect, if any, of the rules affecting
post-December 31, 1999 dividends on your possible investment in common stock.
A non-U.S. holder may obtain a refund of any excess amounts withheld by
filing an appropriate claim for refund along with the required information with
the IRS.
GAIN ON DISPOSITION OF COMMON STOCK
A non-U.S. holder will generally not be subject to U.S. Federal income tax
with respect to gain recognized on a sale or other disposition of our Common
Stock unless one of the following apply:
If the gain is effectively connected with a trade or business of the
non-U.S. holder in the United States and, if a tax treaty applies, the
gain is attributable to a U.S. permanent establishment maintained by the
non-U.S. holder. The non-U.S. holder will, unless an applicable treaty
provides otherwise, be taxed on its net gain derived from the sale under
regular graduated U.S. Federal income tax rates. If the non-U.S. holder is
a foreign corporation, it may be subject to an additional branch profits
tax equal to 30% of its effectively connected earnings and profits within
the meaning of the Internal Revenue Code for the taxable year, as adjusted
for certain items, unless it qualifies for a lower rate under an
applicable income tax treaty and duly demonstrates such qualification.
If a non-U.S. holder who is an individual and holds our Common Stock as a
capital asset is present in the United States for 183 or more days in the
taxable year of the disposition and certain other conditions are met, the
non-U.S. holder will be subject to a flat 30% tax on the gain derived from
the sale, which may be offset by certain U.S. capital losses.
If we are or have been a 'U.S. real property holding corporation' for U.S.
Federal income tax purposes at any time during the shorter of the
five-year period ending on the date of the disposition or the period
during which the non-U.S. holder held the Common Stock. We believe that we
never have been and are not currently a U.S. real property holding
corporation for U.S. Federal income tax purposes. Although we consider it
unlikely based on our current business plans and operations, we may or may
not become a U.S. real property holding corporation in the future. Even if
we were to become a U.S. real property holding corporation, any gain
recognized by a non-U.S. holder still would not be subject to U.S. tax if
the shares were considered to be 'regularly traded on an established
securities market' and the non-U.S.
holder did not own, actually or constructively, at any time during the
shorter of the periods described above, more than five percent of a class
of Common Stock.
FEDERAL ESTATE TAX
Common Stock held by an individual non-U.S. holder at the time of death
will be included in such holder's gross estate for U.S. Federal estate tax
purposes, unless an applicable estate tax treaty provides otherwise.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
Under U.S. Treasury regulations, we must report annually to the IRS and to
each non-U.S. holder the amount of dividends paid to such holder and the tax
withheld with respect to such dividends. These information reporting
requirements apply even if withholding was not required because the dividends
were effectively connected dividends or withholding was reduced or eliminated by
an applicable income tax treaty. Pursuant to an applicable tax treaty, that
information may also be made available to the tax authorities in the country in
which the non-U.S. holder resides.
United States Federal backup withholding generally is a withholding tax
imposed at the rate of 31% on certain payments to persons that fail to furnish
certain required information. Backup withholding generally will not apply to
dividends paid before January 1, 2000 to non-U.S. holders. See the discussion
under
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'Distributions' above for rules regarding reporting requirements to avoid backup
withholding on dividends paid after December 31, 1999.
As a general matter, information reporting and backup withholding will not
apply to a payment by or through a foreign office of a foreign broker of the
proceeds of a sale of Common Stock effected outside the U.S. However,
information reporting requirements, but not backup withholding, will apply to a
payment by or through a foreign office of a broker of the proceeds of a sale of
Common Stock effected outside the U.S. if that broker:
is a U.S. person,
is a foreign person that derives 50% or more of its gross income for
certain periods from the conduct of a trade or business in the U.S.,
is a 'controlled foreign corporation' as defined in the Internal Revenue
Code, or
is a foreign partnership with certain U.S. connections (for payments made
after December 31, 1999).
Information reporting requirements will not apply in the above cases if the
broker has documentary evidence in its records that the holder is a non-U.S.
holder and certain conditions are met or the holder otherwise establishes an
exemption.
Payment by or through a U.S. office of a broker of the proceeds of a sale
of Common Stock is subject to both backup withholding and information reporting
unless the holder certifies to the payor in the manner required as to its
non-U.S. status under penalties of perjury or otherwise establishes an
exemption.
Amounts withheld under the backup withholding rules do not constitute a
separate U.S. Federal income tax. Rather, any amounts withheld under the backup
withholding rules will be refunded or allowed as a credit against the holder's
U.S. Federal income tax liability, if any, provided the required information or
appropriate claim for refund is filed with the IRS.
THE FOREGOING DISCUSSION IS A SUMMARY OF CERTAIN U.S. FEDERAL INCOME AND
ESTATE TAX CONSEQUENCES OF THE OWNERSHIP, SALE OR OTHER DISPOSITION OF COMMON
STOCK BY NON-U.S. HOLDERS. YOU ARE URGED TO CONSULT YOUR OWN TAX ADVISOR WITH
RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO YOU OF OWNERSHIP AND DISPOSITION
OF COMMON STOCK, INCLUDING THE EFFECT OF ANY STATE, LOCAL, FOREIGN OR OTHER TAX
LAWS.
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SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, there will be 18,000,000 shares of Class A
Common Stock outstanding and 81,250,000 shares of Class B Common Stock
outstanding, all of which are convertible into Class A Common Stock on a share
for share basis. This number excludes 307,550 shares of Class A Common Stock
that were issued in connection with the Reconstitution to the former owners of
Internet Connect, Inc. and 2,190,308 shares of Class A Common Stock issuable
upon the closing of the Company's acquisition of the 50% interest in MetroComm
that the Company does not currently own, if such acquisition is consummated. See
'Business -- Services -- Internet Services and 'Business -- Business Strategy.'
The Company has reserved for issuance 9,027,000 shares, subject to adjustment
based on the size of the Offering, of Class A Common Stock upon the exercise of
stock options. Options to purchase 6,186,667 shares were outstanding as a result
of New Time Warner Telecom's assumption of TWT LLC's outstanding options in
connection with the Reconstitution.
Each of the Company, its directors and executive officers and the Existing
Stockholders has agreed that, subject to certain exceptions, without the prior
written consent of Morgan Stanley & Co. Incorporated and Lehman Brothers Inc.,
it will not, during the period ending 180 days after the date of this
prospectus, offer, pledge, sell, contract to sell or otherwise transfer, lend or
dispose of, directly or indirectly, any shares of Class A Common Stock or any
securities convertible into or exercisable or exchangeable for shares of Class A
Common Stock. See 'Underwriters.' After that, other holders of the Class B
Common Stock may or may not decide, based upon then prevailing market and other
conditions, to convert their Class B Common Stock to Class A Common Stock and to
dispose of all or a portion of such stock pursuant to the provisions of Rule 144
under the Securities Act or pursuant to the demand registration rights contained
in the stockholders agreement among the Existing Stockholders. See 'Certain
Relationships and Related Transactions -- Stockholders Agreement.'
Prior to the Offering, there has been no established market for the Class A
Common Stock, and no predictions can be made about the effect, if any, that
market sales of shares of Class A Common Stock or the availability of such
shares for sale would have on the market price prevailing from time to time.
Nevertheless, sales of substantial amounts of Class A Common Stock in the public
market, or the perception that such sales could occur, may have an adverse
impact on the market price for the shares of Class A Common Stock offered hereby
or on the ability of the Company to raise capital through a public offering of
its equity securities. See 'Risk Factors -- Future sales of shares of Class A
Common Stock could depress the price of the Class A Common Stock.'
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UNDERWRITERS
Under the terms and subject to the conditions contained in the underwriting
agreement dated the date of this prospectus, the U.S. underwriters named below,
for whom Morgan Stanley & Co. Incorporated, Lehman Brothers Inc. and Bear,
Stearns & Co. Inc. are acting as U.S. representatives, and the international
underwriters named below, for whom Morgan Stanley & Co. International Limited,
Lehman Brothers International (Europe) and Bear, Stearns International Limited
are acting as international representatives have severally agreed to purchase,
and the Company has agreed to sell to them, severally, the respective number of
shares of Class A Common Stock set forth opposite the names of such underwriters
below:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
-------- ----------------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated.............................................
Lehman Brothers Inc...........................................................
Bear, Stearns & Co. Inc.......................................................
----------------
Subtotal................................................................. 14,400,000
----------------
International Underwriters:
Morgan Stanley & Co. International Limited....................................
Lehman Brothers International (Europe)........................................
Bear, Stearns International Limited...........................................
----------------
Subtotal................................................................. 3,600,000
----------------
Total.................................................................. 18,000,000
----------------
----------------
</TABLE>
The U.S. underwriters and the international underwriters, and the U.S.
representatives and the international representatives, are collectively referred
to as the 'underwriters' and the 'representatives,' respectively. The
underwriting agreement provides that the obligations of the several underwriters
to pay for and accept delivery of the shares of Class A Common Stock offered are
subject to the approval of certain legal matters by their counsel and to certain
other conditions. The underwriters are obligated to take and pay for all the
shares of Class A Common Stock offered in the Offering other than those covered
by the U.S. underwriters' over-allotment option described below, if any such
shares are taken.
Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. underwriter has represented and agreed that, with certain exceptions:
it is not purchasing any shares for the account of anyone other than a
United States or Canadian person and
it has not offered or sold, and will not offer or sell, directly or
indirectly, any Shares or distribute any prospectus relating to the shares
outside the United States or Canada or to anyone other than a United
States or Canadian person.
Pursuant to the Agreement between U.S. and International Underwriters, each
international underwriter has represented and agreed that, with certain
exceptions:
it is not purchasing any shares for the account of any United States or
Canadian person and
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it has not offered or sold, and will not offer or sell, directly or
indirectly, any shares or distribute any prospectus relating to the shares
in the United States or Canada or to any United States or Canadian person.
With respect to any underwriter that is a U.S. underwriter and an
international underwriter, the foregoing representations and agreements (1) made
by it in its capacity as a U.S. underwriter apply only to it in its capacity as
a U.S. underwriter and (2) made by it in its capacity as an international
underwriter apply only to it in its capacity as an international underwriter.
The foregoing limitations do not apply to stabilization transactions or to
certain other transactions specified in the Agreement between U.S. and
International Underwriters. As used herein, 'United States or Canadian person'
means any national or resident of the United States or Canada, or any
corporation, pension, profit-sharing or other trust or other entity organized
under the laws of the United States or Canada or of any political subdivision
thereof other than a branch located outside the United States and Canada of any
United States or Canadian person, and includes any United States or Canadian
branch of a person who is otherwise not a United States or Canadian person. All
shares of Class A Common Stock to be purchased by the underwriters under the
underwriting agreement are referred to herein as the 'shares.'
Pursuant to the Agreement between U.S. and International Underwriters,
sales may be made between the U.S. underwriters and international underwriters
of any number of shares as may be mutually agreed. The per share price of any
shares sold shall be the public offering price set forth on the cover page of
this prospectus, in United States dollars, less an amount not greater than the
per share amount of the concession to dealers set forth below.
Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. underwriter has represented that it has not offered or sold, and has agreed
not to offer or sell, any shares, directly or indirectly, in any province or
territory of Canada or to, for the benefit of, any resident of any province or
territory of Canada in contravention of the securities laws thereof and has
represented that any offer or sale of shares in Canada will be made only
pursuant to an exemption from the requirement to file a prospectus in the
province or territory of Canada in which such offer or sale is made. Each U.S.
underwriter has further agreed to send to any dealer who purchases from it any
of the shares a notice stating in substance that, by purchasing such shares,
such dealer represents and agrees that it has not offered or sold, and will not
offer or sell, directly or indirectly, any of such shares in any province or
territory of Canada or to, or for the benefit of, any resident of any province
or territory of Canada in contravention of the securities laws thereof and that
any offer or sale of shares in Canada will be made only pursuant to an exemption
from the requirement to file a prospectus in the province or territory of Canada
in which such offer or sale is made, and that such dealer will deliver to any
other dealer to whom it sells any of such shares a notice containing
substantially the same statement as is contained in this sentence.
Pursuant to the Agreement between U.S. and International Underwriters, each
international underwriter has represented and agreed that
it has not offered or sold and, prior to the date six months after the
closing date for the sale of the shares to the international underwriters,
will not offer or sell, any shares to persons in the United Kingdom except
to persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments, either as principal or agent, for
the purposes of their businesses or otherwise in circumstances which have
not resulted and will not result in an offer to the public in the United
Kingdom within the meaning of the Public Offers of Securities Regulations
1995;
it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in
relation to the shares in, from or otherwise involving the United Kingdom;
and
it has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the offering
of the Shares to a person who is of a kind described in Article 11(3) of
the Financial Services Act 1986 (Investment Advertisements) (Exemptions)
Order 1996 or is a person to whom such document may otherwise lawfully be
issued or passed on.
Pursuant to the Agreement between U.S. and International Underwriters, each
international underwriter has further represented that is has not offered or
sold, and has agreed not to offer or sell, directly or indirectly, in Japan or
to or for the account of any resident thereof, any of the shares acquired in
connection with the distribution contemplated hereby, except for offers or sales
to Japanese international underwriters or dealers and except pursuant to any
exemption from the registration requirements of the Securities and Exchange Law
and otherwise in compliance with applicable provisions of Japanese law. Each
international underwriter has further
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agreed to send to any dealer who purchases from it any of the shares a notice
stating in substance that, by purchasing such shares, such dealer represents and
agrees that it has not offered or sold, and will not offer or sell, any of such
shares, directly or indirectly, in Japan or to or for the account of any
resident thereof except for offers or sales to Japanese international
underwriters or dealers and except pursuant to any exemption from the
registration requirements of the Securities and Exchange Law and otherwise in
compliance with applicable provisions of Japanese law, and that such dealer will
send to any other dealer to whom it sells any of such shares a notice containing
substantially the same statement as is contained in this sentence.
The underwriters initially propose to offer part of the shares of Class A
Common Stock directly to the public at the public offering price set forth on
the cover page of this prospectus and part to certain dealers at a price that
represents a concession not in excess of $ a share under the public offering
price. The underwriters may allow, and such dealers may reallow, a concession
not in excess of $ a share to other underwriters or to certain dealers. After
the initial offering of the shares of Class A Common Stock, the offering price
and other selling terms may from time to time be varied by the representatives.
Pursuant to the underwriting agreement, the Company has granted to the U.S.
underwriters an option, exercisable for 30 days from the date of this
prospectus, to purchase up to an aggregate of 2.7 million additional shares of
Class A Common Stock at the public offering price set forth on the cover page of
this prospectus, less underwriting discounts and commissions. The U.S.
underwriters may exercise such option to purchase solely for the purpose of
covering over-allotments, if any, made in connection with the offering of the
shares of Class A Common Stock offered hereby. To the extent such option is
exercised, each U.S. underwriter will become obligated, subject to conditions,
to purchase approximately the same percentage of such additional shares of
Class A Common Stock as the number set forth next to such U.S. underwriter's
name in the preceding table bears to the total number of shares of Class A
Common Stock set forth next to the names of all U.S. underwriters in the
preceding table. If the U.S. underwriters' option is exercised in full, the
total price to the public would be $ , the total underwriters'
discounts and commissions would be $ and total proceeds to the Company
would be $ .
The Class A Common Stock is expected to be approved for quotation, subject
to official notice of issuance, on the Nasdaq National Market under the symbol
'TWTC.'
Each of the Company and the directors, executive officers and certain other
stockholders of the Company has agreed that, without the prior written consent
of each of Morgan Stanley & Co. Incorporated and Lehman Brothers Inc. on behalf
of the underwriters, it will not during the period ending 180 days after the
date of this prospectus:
offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right
or warrant to purchase or otherwise transfer or dispose of, directly or
indirectly, any shares of Class A Common Stock or any securities
convertible into or exercisable or exchangeable for Class A Common Stock;
provided that such shares or securities are either now owned by such party
or are hereafter acquired prior to or in connection with the Offering or
enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the
shares of Class A Common Stock,
in each case whether any such transaction described above is to be settled by
delivery of Class A Common Stock or such other securities, in cash or otherwise.
These restrictions do not apply to (a) the shares of Class A Common Stock to be
sold in the Offering or (b) the issuance by the Company of (1) shares of Class A
Common Stock upon the exercise of an option or warrant or the conversion of a
security outstanding on the date of this prospectus of which the underwriters
have been advised in writing and (2) grants from time to time of stock options
and other incentive compensation pursuant to the 1998 Option Plan, provided that
such options or awards do not vest during the period of 180 days ending after
the date of this prospectus.
The underwriters have informed the Company that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
Class A Common Stock offered by them.
In order to facilitate the Offering of the Class A Common Stock, the
underwriters may engage in transactions that stabilize, maintain or otherwise
affect the price of the Class A Common Stock. Specifically, the underwriters may
over-allot in connection with the Offering, creating a short position in the
Class A Common Stock for their own account. In addition, to cover
over-allotments or to stabilize the price of the Class A Common Stock, the
underwriters may bid for, and purchase, shares of Class A Common Stock in the
open market. Finally, the underwriting syndicate may reclaim selling concessions
allowed to an underwriter or a
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<PAGE>
dealer for distributing the Class A Common Stock in the Offering, if the
syndicate repurchases previously distributed Class A Common Stock in
transactions to cover syndicate short positions, in stabilization transactions
or otherwise. Any of these activities may stabilize or maintain the market price
of the Class A Common Stock above independent market levels. The underwriters
are not required to engage in these activities, and may end any of these
activities at any time.
At the request of the Company, the underwriters have reserved up to 900,000
shares of Class A Common Stock for sale at the initial public offering price to
the Company's employees, officers and directors and to other individuals having
relationships with the Company. The Company will pay all fees and disbursements
of counsel incurred by the underwriters in connection with offering the shares
to such persons. The number of shares available for sale to the general public
will be reduced to the extent such persons purchase such reserved shares. Any
reserved shares which are not so purchased will be offered by the underwriters
to the general public on the same basis as the other shares offered hereby.
Reserved shares purchased by such individuals will, except as restricted by
applicable securities laws, be available for resale following the Offering.
The Company and the underwriters have agreed to indemnify each other
against certain liabilities, including liabilities under the Securities Act.
The Company has agreed to pay the printing, legal, accounting and other
expenses relating to the Offering, which it estimates to be $1.85 million.
From time to time, Morgan Stanley & Co. Incorporated and Lehman Brothers
Inc. provide certain financial advisory services to the Company and the Existing
Stockholders for which they have received customary fees and commissions.
Prior to the Offering, there has been no public market for the shares of
Class A Common Stock of the Company. Consequently, the initial public offering
price for the Class A Common Stock will be determined by negotiation between the
Company and the U.S. and international representatives of the underwriters.
Among the factors to be considered in determining the initial public offering
price will be the Company's record of operations, the Company's current
financial condition and future prospects, the experience of its management, the
economics of its industry in general, the general condition of the equity
securities market and the market prices of similar securities of companies
considered comparable to the Company and other factors deemed relevant. A
regular trading market for the shares of Class A Common Stock may not develop
after the Offering or, if developed, a public trading market may not be
sustained. The prices at which the Class A Common Stock will sell in the public
market after the Offering may not be lower than the price at which it is issued
by the underwriters in the Offering.
LEGAL MATTERS
The legality of the Class A Common Stock offered in the Offering and
certain other legal matters will be passed upon for the Company by Cravath,
Swaine & Moore, New York, New York and for the underwriters by Shearman &
Sterling, New York, New York.
EXPERTS
The combined financial statements of Time Warner Telecom Inc. and its
subsidiaries as of December 31, 1998 and 1997 and for each of the three years in
the period ended December 31, 1998 included in this prospectus and registration
statement have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report appearing elsewhere herein, and are included in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We filed with the SEC a registration statement on Form S-1 under the
Securities Act with respect to the Class A Common Stock being offered in the
Offering. The term 'registration statement' means the original registration
statement and any and all amendments thereto, including the schedules and
exhibits to the original registration statement or any amendment. This
prospectus does not contain all of the information set forth in the registration
statement. We refer you to the registration statement for any information in the
registration statement that is not included in this prospectus. In addition,
each statement made in this prospectus concerning a document filed as an exhibit
to the registration statement is qualified in its entirety by reference to that
exhibit for a complete statement of its provisions.
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<PAGE>
We are currently subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and file periodic reports, and
other information relating to our business, financial statements and other
matters. Our SEC filings are available to the public over the internet at the
SEC's web site at http://www.sec.gov. You may also read and copy any document we
file at the SEC's public reference room located at 450 Fifth Street, N.W.,
Washington, D.C. 20549, as well as at the regional offices of the SEC located at
7 World Trade Center, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Chicago, Illinois 60661. Please call the SEC at 1-800-SEC-0330
for further information on the public reference rooms and their copy charges.
We intend to distribute to all holders of the shares of Class A Common
Stock offered in the Offering annual reports containing audited consolidated
financial statements together with a report by our independent certified public
accountants.
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GLOSSARY
Access Charges. The fees paid by long distance carriers for the local
connections between the long distance carriers' networks and the long distance
carriers' customers.
ATM (asynchronous transfer mode). A recently commercialized switching and
transmission technology that is one of a general class of packet technologies
that relay traffic by way of an address contained within the first five bits of
a standard fifty-three bit-long packet or cell. ATM-based packet transport was
specifically developed to allow switching and transmission of mixed voice, date
and video at varying rates. The ATM format can be used by many different
information systems, including LANs.
Bell Operating Company. A telephone operating subsidiary of an RBOC; an
incumbent local exchange carrier.
Broadcast Video TV-1. This Company service provides dedicated transport of
broadcast quality video signals.
Competitive Access Provider. A company that provides dedicated
telecommunications services (private line, local transport and special access)
as an alternative to the incumbent local exchange carrier.
Central Offices. A telecommunications center where switches and other
telecommunications facilities are housed. CAPs may connect with incumbent local
exchange carrier networks either at this location or through a remote location.
Collocation. The ability of a telecommunications carrier to interconnect
its network to the incumbent local exchange carrier's network by extending its
facilities to the incumbent local exchange carrier's central office. Physical
collocation occurs when the interconnecting carrier places its network equipment
within the incumbent local exchange carrier's central offices. Virtual
collocation is an alternative to physical collocation under which the incumbent
local exchange carrier permits a carrier to interconnect its network to the
ILEC's network in a manner which is technically, operationally and economically
comparable to physical collocation, even though the interconnecting carrier's
network connection equipment is not physically located within the central
offices.
Competitive Local Exchange Carrier. A company that provides local exchange
services, including Dedicated service, in competition with the incumbent local
exchange carrier.
Dedicated. Telecommunications lines dedicated to, or reserved for use by, a
particular customer along predetermined routes (in contrast to links which are
temporarily established).
Dedicated Transmission. The sending of electronic signals carrying
information over a direct transport facility.
Digital. A means of storing, processing and transmitting information by
using distinct electronic or optical pulses that represent the binary digits 0
and 1. Digital transmission and switching technologies use a sequence of these
pulses to represent information as opposed to the continuously variable analog
signal. The precise digital numbers preclude distortion (such as graininess or
snow in the case of video transmission, or static or other background distortion
in the case of audio transmission).
Direct Transport (aka Dedicated Transport). A non-switched point-to-point
telecommunications facility leased from a telecommunications provider by an end
user and used exclusively by that end user.
Diverse Routing. A telecommunications network configuration in which
signals are transmitted simultaneously along two different paths so that if one
path is cut or impaired, traffic can continue in the other direction without
interrupting service. The Company's networks generally provide diverse routing.
DS0, DS1, DS3. Standard North American telecommunications industry digital
signal formats, which are distinguishable by bit rate (the number of binary
digits (0 and 1) transmitted per second). DS0 service has a bit rate of 64
kilobits per second. DS1 service has a bit rate of 1.544 megabits per second and
DS3 service as a bit rate of 44.736 megabits per second. A DS0 can transmit a
single uncompressed voice conversation.
FCC. Federal Communications Commission.
Fiber Glass Miles. The number of route miles of fiber optic cable installed
(excluding pending installations) along a telecommunications path multiplied by
the number of fibers in the cable. See the definition of 'route mile' below.
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Fiber Optics. Fiber optic technology involves sending laser light pulses
across glass strands in order to transmit digital information. Fiber optic cable
is the medium of choice for the telecommunications and cable industries. Fiber
is immune to electrical interference and environmental factors that effect
copper wiring and satellite transmission.
Incumbent Local Exchange Carriers. The local phone companies, either a Bell
Operating Company or an independent (such as GTE) which provides local exchange
services.
Internet. The name used to describe the global open network of computers
that permits a person with access to the Internet to exchange information with
any other computer connected to the network.
Integrated Services Digital Network. ISDN is an internationally agreed
standard which, through special equipment, allows two-way, simultaneous voice
and data transmission in digital formats over the same transmission line. ISDN
permits video conferencing over a single line, for example, and also supports a
multitude of value-added switched service applications such as Incoming Calling
Line Identification. ISDN's combined voice and data networking capabilities
reduce costs for end users and result in more efficient use of available
facilities. ISDN combines standards for highly flexible customer to network
signaling with both voice and data within a common facility.
Interexchange Carrier. A long distance carrier.
Kilobits. One thousand bits of information. The information-carrying
capacity (i.e., bandwidth) of a circuit may be measured in 'thousands of bits
per second.'
Local Area Networks. The interconnection of computers for the purpose of
sharing files, programs and peripheral devices such as printers and high-speed
modems. LANs may include dedicated computers or file servers that provide a
centralized source of shared files and programs. LANs are generally confined to
a single customer's premises and may be extended or interconnected to other
locations through the use of bridges and routers.
LATAS (Local Access and Transport Area). The geographical areas within
which a local telephone company may offer telecommunications services, as
defined in the divestiture order known as the Modified Final Judgment ('MFP')
unless and until refined by the FCC pursuant to the 1996 Act.
Local Exchange. A geographic area defined by the appropriate state
regulatory authority in which telephone calls generally are transmitted without
toll charges to the calling or called party.
Local Exchange Service/Local Exchange Telephone Service. Basic local
telephone service, including the provision of telephone numbers, dial tone and
calling within the local exchange area.
Long Distance Carriers (Interexchange Carriers). Long distance carriers
providing services between LATAs, on an interstate or intrastate basis. A long
distance carrier may be facilities-based or offer service by reselling the
services of a facilities-based carrier.
Local Transport Services. Dedicated lines between the incumbent local
exchange carrier's central offices and long distance carrier POPs used to carry
switched traffic.
Mbps (Megabit). One million bits of information. The information carrying
capacity (i.e., bandwidth) of a circuit may be measured in 'millions of bits per
second.'
PBX (Private Branch Exchange). A customer owned and operated switch on
customer premises, typically used by large businesses with multiple telephone
lines.
PBX Trunk. A transmission facility which connects a PBX to the Company's or
ILEC's central office switching center.
POPs (Points of Presence). Locations where a long distance carrier has
installed transmission equipment in a service area that serves as, or relays
telephone calls to, a network switching center of the same long distance
carrier.
Private Line. A private, dedicated telecommunications link between
different customer locations (excluding long distance carrier POPs).
Private Network Transport Service. This service is a private, dedicated
high capacity premium quality service over fully redundant, diverse routed,
SONET rings with band width that is dedicated and always available.
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Public Switched Network. The switched network available to all users
generally on a shared basis (i.e., not dedicated to a particular user). The
local exchange telephone service networks operated by incumbent local exchange
carriers are the largest and often the only public switched networks in a given
locality.
Regional Bell Operating Company. The holding company which owns a Bell
operating company.
Reciprocal Compensation. An arrangement in which two local exchange
carriers agree to terminate traffic originating on each other's networks in
exchange for a negotiated level of compensation.
Route Mile. The number of miles along which fiber optic cables are
installed.
SONET (Synchronous Optical Network). A set of standards for optical
communications transmission systems that define the optical rates and formats,
signal characteristics, performance, management and maintenance information to
be embedded within the signals and the multiplexing techniques to be employed in
optical communications transmission systems. SONET facilitates the
interoperability of dissimilar vendors equipment. SONET benefits business
customers by minimizing the equipment necessary for various telecommunications
applications and supports networking diagnostic and maintenance features.
Special Access Services. The lease of private, dedicated telecommunications
lines or circuits on an incumbent local exchange carrier's or a competitive
access provider's network which run to or from the long distance carrier's POPs.
Special access services do not require the use of switches. Examples of special
access services are telecommunications circuits running between POPs of a single
long distance carrier, from one long distance carrier's POP to another long
distance carrier's POP or from an end user to its long distance carrier's POP.
STS-1. This dedicated transmission service is carried over high capacity
channels for full duplex, synchronous optical transmission of digital data on
SONET standards. This service eliminates the need to maintain and pay for
multiple dedicated lines.
Switch. A mechanical or electronic device that opens or closes circuits or
selects the paths or circuits to be used for the transmission of information.
Switching is a process of linking different circuits to create a temporary
transmission path between users. Within this document, switches generally refer
to voice grade telecommunications switches unless specifically stated otherwise.
Switched Access Services. The connection between a long distance carrier's
POP and an end user's premises through the switching facilities of a local
exchange carrier.
Switched Services. Telecommunications services that support the connection
of one calling party with another calling party via use of a telephone switch
(i.e., an electronic device that opens or closes circuits, completes or breaks
an electrical path, or selects paths or circuits).
Toll Services. Otherwise known as EAS or intra LATA toll services are those
calls that are beyond the free local calling area but originate and terminate
within the same LATA; such calls are usually priced on a measured basis.
Voice Grade Equivalent ('VGE') Circuit. One DS0. One voice grade equivalent
circuit is equal to 64 kilobits of bandwidth.
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TIME WARNER TELECOM INC.
INDEX TO COMBINED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Audited Financial Statements:
Report of Independent Auditors........................................................................ F-2
Combined Balance Sheets at December 31, 1998 and 1997................................................. F-3
Combined Statement of Operations for the years ended December 31, 1998, 1997
and 1996............................................................................................ F-4
Combined Statement of Cash Flows for the years ended December 31, 1998, 1997
and 1996............................................................................................ F-5
Combined Statement of Changes in Stockholders' Equity for the years ended
December 31, 1998, 1997 and 1996.................................................................... F-6
Notes to Combined Financial Statements................................................................ F-7
</TABLE>
F-1
<PAGE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of TIME WARNER TELECOM INC.
We have audited the accompanying combined balance sheets of Time Warner
Telecom Inc. (the 'Company') as of December 31, 1998 and 1997, and the related
combined statements of operations, cash flows and stockholders' equity for each
of the three years in the period ended December 31, 1998. These combined
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these combined financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the Company
at December 31, 1998 and 1997, and the combined results of its operations and
its cash flows for each of the three years in the period ended December 31,
1998, in conformity with generally accepted accounting principles.
Denver, Colorado
February 5, 1999
except for Notes 1, 2 and 3 as to
which the date is , 1999
The foregoing report is in the form that will be signed upon the effective
date of the Company's registration of Class A Common Stock in a registration
statement on Form S-1 and the concurrent change in the Company's operating and
legal structure from a limited liability company to a corporation.
/s/ ERNST & YOUNG LLP
Denver, Colorado
May 5, 1999
F-2
<PAGE>
<PAGE>
TIME WARNER TELECOM INC.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
(THOUSANDS)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents...................................................... $ 105,140 $ --
Marketable securities.......................................................... 231,107 --
Receivables, less allowances of $2,692 and $776................................ 26,690 8,882
Prepaid expenses............................................................... 2,176 1,192
------------ ------------
Total current assets...................................................... 365,113 10,074
Investments in unconsolidated affiliates............................................ 5,707 4,376
Property, plant and equipment....................................................... 612,119 484,206
Less: accumulated depreciation...................................................... (117,961) (69,048)
------------ ------------
494,158 415,158
Long-term marketable securities..................................................... 19,750 --
Intangible assets, net.............................................................. 19,616 8,469
------------ ------------
Total assets.............................................................. $ 904,344 $ 438,077
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable............................................................... $ 38,888 $ 32,908
Accrued interest............................................................... 17,333 --
Payable to TW Cable............................................................ 16,801 --
Deferred revenue............................................................... 10,524 938
Accrued payroll and benefits................................................... 8,821 6,333
Accrued taxes and fees......................................................... 7,481 5,871
Other current liabilities...................................................... 21,905 16,162
------------ ------------
Total current liabilities................................................. 121,753 62,212
Long term debt...................................................................... 400,000 --
Subordinated loans payable to the Parent Companies (including $3,399 and $1,544 of
accrued interest, respectively)................................................... 174,940 75,475
Stockholders' equity
Preferred stock, $0.01 par value, 20,000,000 shares authorized, no shares
outstanding................................................................... -- --
Class A common stock, $0.01 par value, 277,300,000 shares authorized, no shares
outstanding................................................................... -- --
Class B common stock, $0.01 par value, 162,500,000 shares authorized,
81,250,000 shares outstanding................................................. 813 813
Additional paid in capital..................................................... 255,654 554,994
Accumulated deficit............................................................ (48,816) (255,417)
------------ ------------
Total stockholders' equity................................................ 207,651 300,390
------------ ------------
Total liabilities and stockholders' equity................................ $ 904,344 $ 438,077
------------ ------------
------------ ------------
</TABLE>
See accompanying notes.
F-3
<PAGE>
<PAGE>
TIME WARNER TELECOM INC.
COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1998 1997 1996
-------- -------- --------
(THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Revenues:
Dedicated transport services............................................ $ 84,024 $ 44,529 $ 20,362
Switched services....................................................... 37,848 10,872 3,555
-------- -------- --------
Total revenues..................................................... 121,872 55,401 23,917
-------- -------- --------
Costs and expenses:
Operating(a)............................................................ 67,153 40,349 25,715
Selling, general and administrative(a).................................. 77,401 54,640 60,366
Depreciation and amortization(a)........................................ 50,717 38,466 22,353
-------- -------- --------
Total costs and expenses........................................... 195,271 133,455 108,434
-------- -------- --------
Operating loss............................................................... (73,399) (78,054) (84,517)
Gain on disposition of investments........................................... -- 11,018 --
Equity in income (losses) of unconsolidated affiliates....................... 127 (2,082) (1,547)
Interest income.............................................................. 9,731 -- --
Interest expense(a).......................................................... (29,198) (1,538) (52)
-------- -------- --------
Net loss..................................................................... $(92,739) $(70,656) $(86,116)
-------- -------- --------
-------- -------- --------
Basic and diluted loss per common share...................................... $ (1.14) $ (0.87) $ (1.06)
-------- -------- --------
-------- -------- --------
Average common shares........................................................ 81,250 81,250 81,250
-------- -------- --------
-------- -------- --------
(a) Includes expenses resulting from transactions with affiliates (Note 7):
Operating............................................................. $ 2,041 $ 1,731 $ 1,303
-------- -------- --------
-------- -------- --------
Selling, general and administrative................................... $ 5,063 $ 6,810 $ 6,106
-------- -------- --------
-------- -------- --------
Depreciation and amortization......................................... $ 9,010 $ 7,064 $ 4,961
-------- -------- --------
-------- -------- --------
Interest expense...................................................... $ 11,582 $ 1,544 $ --
-------- -------- --------
-------- -------- --------
</TABLE>
See accompanying notes.
F-4
<PAGE>
<PAGE>
TIME WARNER TELECOM INC.
COMBINED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1998 1997 1996
--------- --------- ---------
(THOUSANDS)
<S> <C> <C> <C>
OPERATIONS
Net loss................................................................... $ (92,739) $ (70,656) $ (86,116)
Adjustments for noncash and nonoperating items:
Gain on disposition of investments.................................... -- (11,018) --
Depreciation and amortization......................................... 50,717 38,466 22,353
Equity in (income) losses of unconsolidated affiliates................ (127) 2,082 1,547
Changes in operating assets and liabilities:
Receivables........................................................... (17,808) (4,019) (2,553)
Accounts payable...................................................... 5,980 7,264 1,333
Accrued interest...................................................... 20,732 1,544 --
Payable to TW Cable................................................... 16,801 -- --
Accrued payroll and benefits.......................................... 2,488 4,093 919
Other current liabilities............................................. 16,939 5,473 8,172
Other balance sheet changes........................................... (3,326) (2,648) 2,071
--------- --------- ---------
Cash used in operations.................................................... (343) (29,419) (52,274)
--------- --------- ---------
INVESTING ACTIVITIES
Capital expenditures....................................................... (126,023) (127,315) (144,815)
Investments and acquisitions............................................... (1,204) (334) (4,375)
Proceeds from sale of investments.......................................... -- 7,028 --
Purchases of marketable securities......................................... (286,356) -- --
Proceeds from maturities of marketable securities.......................... 35,500 -- --
--------- --------- ---------
Cash used in investing activities.......................................... (378,083) (120,621) (149,190)
--------- --------- ---------
FINANCING ACTIVITIES
Proceeds from loans from the Parent Companies.............................. 96,066 73,931 --
Capital contributions from the Parent Companies............................ -- 127,550 222,584
Distributions to the Parent Companies...................................... -- (51,441) (21,120)
Net proceeds from debt offering............................................ 387,500 -- --
--------- --------- ---------
Cash provided by financing activities...................................... 483,566 150,040 201,464
--------- --------- ---------
INCREASE IN CASH AND EQUIVALENTS........................................... 105,140 -- --
CASH AND EQUIVALENTS AT BEGINNING OF YEAR.................................. -- -- --
--------- --------- ---------
CASH AND EQUIVALENTS AT END OF YEAR........................................ $ 105,140 $ -- $ --
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying notes.
F-5
<PAGE>
<PAGE>
TIME WARNER TELECOM INC.
COMBINED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CLASS B
COMMON STOCK ADDITIONAL TOTAL
----------------- PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT EQUITY
------- ------ ---------- ----------- --------------
(THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995....................... 81,250 $813 $ 277,421 $ (98,645) $179,589
Net loss for 1996.................................. -- -- -- (86,116) (86,116)
Net capital contributions from the Parent
Companies........................................ -- -- 201,464 -- 201,464
------- ------ ---------- ----------- --------------
BALANCE AT DECEMBER 31, 1996....................... 81,250 813 478,885 (184,761) 294,937
Net loss for 1997.................................. -- -- -- (70,656) (70,656)
Net capital contributions from the Parent
Companies........................................ -- -- 76,109 -- 76,109
------- ------ ---------- ----------- --------------
BALANCE AT DECEMBER 31, 1997....................... 81,250 813 554,994 (255,417) 300,390
Net loss prior to Reorganization................... -- -- -- (43,923) (43,923)
------- ------ ---------- ----------- --------------
81,250 813 554,994 (299,340) 256,467
Effect of Reorganization........................... -- -- (299,340) 299,340 --
Net loss after Reorganization...................... -- -- -- (48,816) (48,816)
------- ------ ---------- ----------- --------------
BALANCE AT DECEMBER 31, 1998....................... 81,250 $813 $ 255,654 $ (48,816) $207,651
------- ------ ---------- ----------- --------------
------- ------ ---------- ----------- --------------
</TABLE>
See accompanying notes.
F-6
<PAGE>
<PAGE>
TIME WARNER TELECOM INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Time Warner Telecom Inc. (the 'Company') is a facilities-based competitive
local telecommunications services provider in selected metropolitan markets
across the United States, offering a wide range of business telephony services,
primarily to medium- and large-sized business customers. The business of the
Company was commenced in 1993 by Time Warner Cable ('TW Cable'), a division of
Time Warner Entertainment Company, L.P. ('TWE'), and reflects the combined
commercial telecommunication operations under the ownership or management
control of TW Cable. These operations consist of the commercial
telecommunication operations of Time Warner Inc. and certain of its subsidiaries
(collectively, 'Time Warner') and the Time Warner Entertainment-Advance/Newhouse
Partnership ('TWE-A/N') that were acquired or formed in 1995, as well as the
pre-existing commercial telecommunication operations of TWE (collectively, TWE,
TWE-A/N and Time Warner are referred to herein as the 'Parent Companies').
In July 1998, the Company completed a reorganization (the 'Reorganization')
under which the Parent Companies contributed all of the assets and liabilities
of the Company into Time Warner Telecom LLC ('TWT LLC') and in connection
therewith, Time Warner, MediaOne of Colorado, Inc. ('MediaOne') and
Advance/Newhouse Partnership ('A/N') and together with Time Warner and MediaOne,
the ('Existing Stockholders') received all of the limited liability company
interests in TWT LLC. The Reorganization has been reflected as of July 1, 1998
for accounting purposes. On , 1999, TWT LLC was reconstituted as
a corporation through the merger of TWT LLC with and into the Company (the
'Reconstitution'). In connection with the Reconstitution, the Company's
capitalization was authorized to include two classes of common stock, Class A
Common Stock and Class B Common Stock and the Existing Stockholders exchanged
their respective limited liability company interests for all of the outstanding
shares of Class B Common Stock. Following the Reconstitution, Time Warner,
MediaOne and A/N held all of the Company's Class B Common Stock. Accordingly,
the accompanying combined financial statements have been adjusted to
retroactively reflect the authorization of the shares of Class A Common Stock
and the authorization and issuance of shares of Class B Common Stock for all
periods.
To date, the majority of the Company's revenues have been derived from the
provision of 'private line' or 'direct access' telecommunications services.
Because the Company has deployed switches in 16 of its 19 markets, management
expects that a growing portion of the Company's revenues will be derived from
providing switched services. The Company's customers are principally
telecommunications-intensive business end-users, long distance carriers and
internet service providers, wireless communications companies and governmental
entities. Such customers are offered a wide range of integrated
telecommunications products and services, including dedicated transmission,
local switched, data and video transmission services and Internet services. In
addition, the Company benefits from its strategic relationship with TW Cable
both through access rights and cost-sharing. As a result, the Company's networks
have been constructed primarily through the use of fiber capacity licensed from
TW Cable.
BASIS OF PRESENTATION
The combined financial statements of the Company reflect the 'carved out'
historical financial position, results of operations, cash flows and changes in
stockholders' equity of the commercial telecommunications operations of the
Parent Companies as if they had been operating as a separate company. Although
these financial statements are presented as if the Company had operated as a
corporation, the Company operated as a partnership for tax purposes and
continued to operate in a partnership structure through December 31, 1998. The
combined statement of operations has been adjusted to retroactively reflect an
allocation of certain expenses pursuant to the final terms of the related
agreements, primarily relating to office rent, overhead charges for various
administrative functions performed by TW Cable and certain facility maintenance
and pole rental costs. These allocations were required to reflect all costs of
doing business and have been based on various methods (Note 7), which management
believes results in reasonable allocations of such costs.
F-7
<PAGE>
<PAGE>
TIME WARNER TELECOM INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
RECENT PRONOUNCEMENTS
Effective December 31, l998, the Company adopted FASB Statement No. 131,
'Disclosures About Segments of an Enterprise and Related Information' ('FAS
131'). FAS 131 requires disclosure of financial and descriptive information
about an entity's reportable operating segments under the 'Management Approach'
as defined in the statement.
The Company operates in 19 locations and the Company's management makes
decisions on resource allocation and assesses performance based on total
revenues, EBITDA, and capital spending of these operating locations. Each of the
locations offer the same products and services, have similar customers and
networks, are regulated by the same type of authorities, and are managed
directly by the Company's executives, allowing the 19 sites to be aggregated
under the guidelines of FAS 131 resulting in one reportable line of business.
BASIS OF COMBINATION AND CONSOLIDATION AND ACCOUNTING FOR INVESTMENTS
The combined financial statements include 100% of the assets, liabilities,
revenues, expenses, income, loss and cash flows of the Company and all entities
in which the Company has a controlling voting interest ('subsidiaries'), as if
the Company and its subsidiaries were a single entity. Significant intercompany
accounts and transactions between the combined entities have been eliminated.
Significant accounts and transactions with the Parent Companies are disclosed as
related party transactions.
Investments in entities in which the Company has significant influence, but
less than a controlling voting interest, are accounted for using the equity
method. At December 31, 1998 and 1997, the Company's investments in
unconsolidated affiliates consisted solely of a 50% investment in Metrocomm AXS,
L.P., a joint venture providing commercial telecommunications services in the
central Ohio area. Under the equity method, only the Company's investment in and
amounts due to and from the equity investee are included in the combined balance
sheet, and only the Company's share of the investee's earnings is included in
the combined operating results. In addition, only the Company's share of the
cash distributions and cash paid to the investee are included in the combined
cash flows.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
footnotes thereto. Actual results could differ from those estimates.
REVENUES
Revenues for dedicated transport services are generally billed in advance
on a fixed rate basis and recognized over the period the services are provided.
Revenues for switched services and long distance are generally billed on a
transactional basis determined by customer usage with some fixed rate elements.
The transactional elements of switched services are billed in arrears and
estimates are used to recognize revenue in the period earned. The fixed rate
elements are billed in advance and recognized over the period provided.
Reciprocal compensation revenue is an element of switched service revenue, which
represents compensation from local exchange carriers for local exchange traffic
terminated on the Company's facilities originated by other local exchange
carriers. Reciprocal compensation is based on contracts between the Company and
the local exchange carriers. The Company has chosen to defer revenue recognition
on a portion of cash payments associated with reciprocal compensation agreements
that are under dispute. The Company pays reciprocal compensation expense to the
other local exchange carriers for local exchange traffic it terminates on the
local exchange carriers' facilities. These costs are recognized as operating
expenses.
SIGNIFICANT CUSTOMERS
The Company has substantial business relationships with a few large
customers, including the major long distance carriers. For the year ended
December 31, 1998, the Company's top 10 customers accounted for 37.8%
F-8
<PAGE>
<PAGE>
TIME WARNER TELECOM INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
of the Company's consolidated revenues. Two of these customers, AT&T and
MCI-Worldcom, each accounted for more than 10% of the Company's total revenues
in 1998, 1997 and 1996. However, a substantial portion of that revenue results
from traffic that is directed to the Company by customers of the Company that
have selected those long distance carriers. Revenues included sales to AT&T and
MCI-Worldcom (including sales directed to the Company by customers of the
Company) of approximately $28.9 million, $14.7 million and $5.2 million in 1998,
1997 and 1996, respectively.
CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES
The Company did not historically maintain any cash or marketable securities
since all funding of the Company's operating, investing and financing activities
were provided by the Parent Companies or by subordinated loans payable to the
Parent Companies (Note 5). This funding consisted of non-interest bearing
capital contributions through June 30, 1997 and subordinated loans during the
period from July 1, 1997 through July 14, 1998. The non-interest bearing capital
contributions have been included in paid-in capital. The subordinated loans,
including accrued interest, have been reflected as long-term liabilities in the
accompanying balance sheets.
The Company considers all highly liquid debt instruments with an original
maturity of three months or less, when purchased, to be cash equivalents.
The Company records its marketable securities in conformity with the
provisions of Statement of Financial Accounting Standards No. 115, 'Accounting
for Certain Investments in Debt and Equity Securities.' This statement entails
categorizing all debt and equity securities as held-to-maturity securities,
trading securities, or available-for-sale securities, and then measuring the
securities at either fair value or amortized cost.
Management determines the appropriate classification of debt securities at
the time of purchase and reevaluates such designation as of each balance sheet
date. Debt securities are classified as held-to-maturity when the Company has
the positive intent and ability to hold the securities to maturity.
Held-to-maturity securities are stated at amortized cost, adjusted for
amortization of premiums and accretion of discounts to maturity. Such
amortization is included in interest income. Interest on securities classified
as held-to-maturity is included in interest income.
RECEIVABLES
The Company does not require collateral for telecommunication services
provided to customers. However, the Company performs ongoing credit evaluations
of its customers' financial conditions and has provided an allowance for
doubtful accounts based on the expected collectability of all accounts
receivable. The provision for doubtful accounts was $2.0 million, $931,000 and
$207,000 for the years ended December 31, 1998, 1997 and 1996, respectively.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Additions to property,
plant and equipment generally include material, labor, and overhead. The Company
licenses the right to use the majority of its fiber optic cable from TW Cable
divisions, in which they are co-located. The cost of these rights is capitalized
and reflects an allocable share of TW Cable's costs, which generally reflects
the incremental costs incurred by TW Cable to construct the fiber for the
Company. Such amounts do not always reflect TW Cable's total cost of
constructing the distribution plant in cases where TW Cable is also constructing
cable plants at the same time. In these instances, TW Cable's total cost of
construction is allocated between cable plant and the Company. The Company is
then charged for its incremental share of the construction costs related to its
share of the fiber. Depreciation is provided on the straight-line method over
estimated useful lives as follows:
F-9
<PAGE>
<PAGE>
TIME WARNER TELECOM INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<S> <C>
Buildings and improvements............................................. 5-20 years
Communications networks................................................ 5-15 years
Vehicles and other equipment........................................... 3-10 years
Fiber optic use rights................................................. 15 years
</TABLE>
Property, plant and equipment consist of:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1998 1997
--------- ---------
(THOUSANDS)
<S> <C> <C>
Buildings and improvements.......................................... $ 14,453 $ 12,846
Communications networks............................................. 380,150 290,618
Vehicles and other equipment........................................ 58,224 46,086
Fiber optic use rights.............................................. 159,292 134,656
--------- ---------
612,119 484,206
Less accumulated depreciation....................................... (117,961) (69,048)
--------- ---------
Total..................................................... $ 494,158 $ 415,158
--------- ---------
--------- ---------
</TABLE>
INTANGIBLE ASSETS
Intangible assets primarily consist of goodwill, deferred right of way
costs and covenants not to compete, which are amortized over periods up to 20
years using the straight-line method. Amortization expense amounted to $2.3
million, $2.0 million and $271,000 for the years ended December 31, 1998, 1997
and 1996, respectively. Accumulated amortization of intangible assets at
December 31, 1998 and 1997, amounted to $2.2 million and $1.5 million,
respectively.
INCOME TAXES
Had the Company been operating as a corporation on a stand-alone basis,
income tax benefits would not have been provided in the accompanying combined
statement of operations because such benefits would have been fully offset by
corresponding increases in the valuation allowance due to the uncertainty of
realizing the benefit for tax losses on a separate return basis. On a historical
basis, the operating results of the Company have primarily been included in the
consolidated U.S. Federal, state and local income tax returns of Time Warner or
subsidiaries of Time Warner. Time Warner has not, and will not, compensate the
Company for the utilization of the Company's losses.
LOSS PER SHARE
In February 1997, the FASB issued Statement No. 128, 'Earnings per Share'
('FAS 128'), effective for periods ending after December 15, 1997. The new rules
establish simplified standards for computing and presenting earnings per share.
The Company's adoption of FAS 128 did not have a material effect on its
financial statements.
Basic loss per common share is based upon the net loss applicable to common
shares and the weighted average of common shares outstanding during the period.
Diluted loss per common share adjusts for the effect of stock options only in
the periods presented in which such effect would have been dilutive. As all of
the Company's stock options are antidilutive and none of the stock options have
nominal exercise prices, basic and diluted earnings per share are the same for
all periods presented herein.
In connection with the Reconstitution of the Company that occurred in
1999, the Company was authorized to issue two new classes of
common stock, Class A Common Stock and Class B Common Stock. Accordingly, the
accompanying combined financial statements have been adjusted to retroactively
reflect the authorization of the shares of Class A Common Stock and the
authorization and issuance of shares of Class B Common Stock for all periods.
F-10
<PAGE>
<PAGE>
TIME WARNER TELECOM INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the balance sheet for the Company's
financial instruments approximate fair market value, except for the Company's
9 3/4% Senior Notes due 2008 ('Senior Notes'). The fair market value for these
instruments was determined based on quoted market prices. At December 31, 1998,
the fair market value for the $400 million of Senior Notes was determined to be
$422 million, based on the quoted market price.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior year financial
statements to conform with the 1998 presentation.
2. STOCKHOLDERS' EQUITY
Prior to the Reorganization in July 1998, all the assets and liabilities of
the Company were beneficially owned by Time Warner and MediaOne, which, through
certain subsidiaries, are partners in TWE. The assets and liabilities of the
Company were also beneficially owned by A/N through TWE-A/N. Time Warner and
certain of its subsidiaries, MediaOne and certain of its subsidiaries and A/N
are collectively referred to herein as the 'Existing Stockholders'.
In July 1998, the Company completed the Reorganization under which the
Parent Companies contributed all of the assets and liabilities of the Company to
TWT LLC and in connection therewith, the Existing Stockholders received all of
the limited liability company interests in TWT LLC. In 1999, TWT
LLC was reconstituted as a corporation through the Reconstitution. In connection
with the Reconstitution, the Company's capitalization was authorized to include
two classes of common stock, Class A Common Stock and Class B Common Stock and
the Existing Stockholders exchanged their respective limited liability company
interests for all of the outstanding shares of the Class B Common Stock.
Following the Reconstitution, Time Warner, MediaOne and A/N held all of the
Company's Class B Common Stock. Accordingly, the accompanying combined financial
statements have been adjusted to retroactively reflect the authorization of the
shares of Class A Common Stock and the authorization and issuance of shares of
Class B Common Stock for all periods.
Shares of Class A Common Stock and Class B Common Stock are identical in
all respects, except that holders of Class A Common Stock are entitled to one
vote per share and holders of Class B Common Stock are entitled to 10 votes per
share on all matters submitted to a vote of stockholders and except that certain
matters require the approval of 100% of the outstanding Class B Common Stock,
voting separately as a class, and certain other matters require the approval of
a majority of the outstanding Class A Common Stock, voting separately as a
class.
The Company also is authorized to issue shares of Preferred Stock. The
Company's board of directors has the authority to establish the voting powers,
the preferences and special rights for the Preferred Stock. No such voting
powers, preferences or special rights have been established as of December 31,
1998 and no shares of Preferred Stock have been issued at December 31, 1998.
3. STOCK OPTION PLANS
TIME WARNER TELECOM INC. 1998 STOCK OPTION PLAN
In connection with the Reorganization, the Management Committee approved an
option plan that provides for granting options to purchase 9,027,000 shares of
the Company's Class A Common Stock. Such options have been granted to employees
of the Company at estimated fair value at the date of the grant, and
accordingly, no compensation cost has been recognized by the Company relating to
such stock option plan. Generally, the options become exercisable over a
four-year vesting period and expire ten years from the date of the grant. The
Company has reserved the number of shares necessary to satisfy the maximum
number of shares that may be issued under the option plan.
F-11
<PAGE>
<PAGE>
TIME WARNER TELECOM INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
For purposes of applying FASB Statement No. 123, 'Accounting for
Stock-Based Compensation' ('FAS 123'), the fair value of each option grant by
Time Warner Telecom Inc. is estimated on the date of the grant using the minimum
value option-pricing model. With regard to grants of Time Warner Telecom Inc.
stock options to the Company's employees in 1998, weighted average assumptions
consisted of: dividend yield of 0%; risk-free interest rate of 6.5%; and an
expected life of 5 years. The weighted average fair value of a Time Warner
Telecom Inc. stock option granted to the Company's employees was $12 per share
for the year ended December 31, 1998.
A summary of stock option activity with respect to the Time Warner Telecom
Inc. 1998 Stock Option Plan is as follows:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED-AVERAGE
SHARES EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Balance at December 31, 1997............................................. -- $ --
Granted............................................................. 6,115,250 12.00
Exercised........................................................... -- --
Cancelled (a)....................................................... (304,500) $12.00
---------
Balance at December 31, 1998............................................. 5,810,750 $12.00
---------
---------
</TABLE>
- ------------
(a) Includes all options cancelled and forfeited during the year.
There were no exercisable options held by employees at December 31, 1998.
Outstanding options held by employees at December 31, 1998 have a weighted
average exercise price of $12 per share and a weighted average remaining
contractual life of 9.6 years. All options were granted at the same exercise
price during 1998.
TIME WARNER AND MEDIAONE STOCK OPTION PLANS
Time Warner and MediaOne also have stock option plans under which certain
employees of the Company have been granted options to purchase Time Warner or
MediaOne common stock. Such options have been granted to employees of the
Company at fair market value at the date of the grant, and accordingly, no
compensation cost has been recognized by Time Warner and MediaOne, nor charged
to the Company, related to such stock option plans. Generally, the options
become exercisable over a three-year vesting period and expire ten years from
the date of the grant. All options have been retroactively restated for stock
splits.
For purposes of applying FAS 123, the fair value of each option grant by
Time Warner and MediaOne is estimated on the date of the grant using the
Black-Scholes option-pricing model. With regard to grants of Time Warner stock
options to the Company's employees in 1998, 1997 and 1996, weighted average
assumptions consisted of: dividend yields of .5% in 1998 and 1.0% in each of
1997 and 1996; expected volatility of 21.5%, 21.9% and 21.7%, respectively;
risk-free interest rates of 5.5%, 6.6% and 6.1%, respectively; and expected
lives of 5 years in all three periods. The weighted average fair value of Time
Warner stock granted to the Company's employees was $10.50, $6.48 and $6.09 for
the years ended December 31, 1998, 1997 and 1996, respectively. In 1997,
MediaOne granted options to a director and former executive of the Company. The
weighted averaged fair value of a MediaOne stock option was $7.43, based on the
following weighted average assumptions: no dividend yield; expected volatility
of 30%; risk-free interest rate of 6.8%; and an expected life of 5 years.
F-12
<PAGE>
<PAGE>
TIME WARNER TELECOM INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of stock option activity in the Time Warner and MediaOne stock
option plans, with respect to employees of the Company, is as follows:
<TABLE>
<CAPTION>
TIME WARNER MEDIAONE
----------------------------- -----------------------------
NUMBER WEIGHTED-AVERAGE NUMBER WEIGHTED-AVERAGE
OF SHARES EXERCISE PRICE OF SHARES EXERCISE PRICE
--------- ---------------- --------- ----------------
<S> <C> <C> <C> <C>
Balance at December 31, 1995................ 264,350 $18.56 -- $ --
Granted................................ 113,500 21.32 -- --
Exercised.............................. (1,268) 17.69 -- --
Cancelled (a).......................... (13,932) 20.32 -- --
--------- ---------
Balance at December 31, 1996................ 362,650 $19.35 -- $ --
Granted................................ 27,700 21.78 5,566 $18.26
Exercised.............................. (3,500) 18.88 -- --
Transferred (b)........................ (98,100) 22.36 -- --
Cancelled (a).......................... (19,500) 20.49 -- --
--------- ---------
Balance at December 31, 1997................ 269,250 $18.43 5,566 $18.26
Granted................................ 54,900 34.87 -- --
Exercised.............................. (59,164) 19.72 -- --
Cancelled (a).......................... (500) 18.78 -- --
--------- ---------
Balance at December 31, 1998................ 264,486 $21.55 5,566 $18.26
--------- ---------
--------- ---------
</TABLE>
- ------------
(a) Includes all options cancelled and forfeited during the year.
(b) Transfers represent individuals who were employed by the Company; but
transferred to another Time Warner affiliate.
The number of exercisable Time Warner and MediaOne options held by
employees of the Company is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- ------
<S> <C> <C> <C>
Time Warner stock options............................................... 166,730 121,433 70,408
MediaOne stock options.................................................. 1,855 -- --
</TABLE>
PRO FORMA NET LOSS
In accordance with Accounting Principles Board Opinion No. 25, 'Accounting
for Stock Issued to Employees' and related interpretations, no compensation cost
has been recognized by the Company for any of the three stock option plans
detailed above. Had compensation cost for Time Warner Telecom Inc.'s, Time
Warner's, and Media One's stock option plans been determined based on the fair
value at the grant dates for all awards made subsequent to 1994 consistent with
the method set forth under FASB Statement No. 123, 'Accounting for Stock-Based
Compensations' ('FAS 123'), the Company's allocable share of compensation cost
would have increased its net loss to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1998 1997 1996
-------- -------- --------
(THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net loss:
As reported................................................... $(92,739) $(70,656) $(86,116)
-------- -------- --------
-------- -------- --------
Pro forma..................................................... $(95,382) $(71,012) $(86,500)
-------- -------- --------
-------- -------- --------
Net loss per common share
As reported................................................... $ (1.14) $ (0.87) $ (1.06)
-------- -------- --------
-------- -------- --------
Pro forma..................................................... $ (1.17) $ (0.87) $ (1.06)
-------- -------- --------
-------- -------- --------
</TABLE>
F-13
<PAGE>
<PAGE>
TIME WARNER TELECOM INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The Black-Scholes and minimum value method option valuation models were
developed for use in estimating the fair value of options which have no vesting
restrictions and are fully transferable. In addition, option valuation models
require the input of highly subjective assumptions such as expected stock price
volatility. Because the Company's employee stock options and those issued by
Time Warner and MediaOne have characteristics significantly different from those
of traded options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the existing
models do not necessarily provide a reliable single measure of the fair value of
its employee stock options.
4. LONG TERM DEBT
On July 21, 1998, the Company issued $400 million of Senior Notes. The
Senior Notes are unsecured, unsubordinated obligations of the Company and Time
Warner Telecom Inc., a wholly owned subsidiary of the Company, which are jointly
and severally liable, fully and unconditionally, with respect to the Senior
Notes. Interest on the Senior Notes is payable semiannually on January 15 and
July 15, beginning January 15, 1999. The net proceeds of approximately $387.5
million are expected to be used to expand and develop existing and new networks
and for general corporate and working capital purposes through the second
quarter of 2000. The proceeds of the Senior Notes were immediately invested in
cash equivalents and marketable securities. Interest expense relating to the
Senior Notes totaled approximately $17.9 million for the twelve months ended
December 31, 1998.
5. SUBORDINATED LOANS PAYABLE TO THE PARENT COMPANIES
Effective July 1, 1997 through July 14, 1998, all of the Company's
financing requirements were funded with subordinated loans from the Parent
Companies. These loans from the Parent Companies are subordinated in right of
payment to the Senior Notes, except for a provision allowing repayment prior to
maturity with the net proceeds of any offering of common stock or equivalent
interest of the Company. These loans bear interest (payable in kind) at The
Chase Manhattan Bank's prime rate which was 7.75% at December 31, 1998.
Effective with the Reorganization, the maturity of these loans was extended
until 2008. Interest expense relating to these loans totaled approximately $11.6
million in 1998 and $1.5 million in 1997.
6. MARKETABLE SECURITIES
At December 31, 1998, the Company's marketable securities portfolio
consisted of shares of money market mutual funds, corporate debt securities,
certificates of deposit with banks, and foreign government debt securities. At
December 31, 1998, all of the Company's marketable securities were categorized
as 'held-to-maturity' and carried at amortized cost.
Marketable securities at December 31, 1998, were as follows:
<TABLE>
<CAPTION>
AMORTIZED
COST
-----------
(THOUSANDS)
<S> <C>
Cash Equivalents:
Shares of money market mutual funds............................... $ 3,338
Certificates of deposit with banks................................ 5,000
Corporate debt securities......................................... 93,394
-----------
101,732
Current Marketable Securities:
Certificates of deposit with banks................................ 57,014
Corporate debt securities......................................... 169,085
Foreign government debt securities................................ 5,008
-----------
231,107
Long-Term Marketable Securities:
Corporate debt securities......................................... 19,750
-----------
Total Marketable Securities.................................. $ 352,589
-----------
-----------
</TABLE>
F-14
<PAGE>
<PAGE>
TIME WARNER TELECOM INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The estimated fair value of the marketable securities is not materially
different from the amortized cost. The Company does not have any marketable
securities with a maturity of greater than two years.
7. RELATED PARTY TRANSACTIONS
In the normal course of conducting its businesses, the Company has various
transactions with the Parent Companies, generally on terms resulting from
negotiation between the affected units that, in management's view, results in
reasonable allocations.
The Company's operations, which in certain cases are co-located with TW
Cable divisions, are allocated a charge for various overhead expenses for
services provided by TW Cable. These allocations are based on direct labor,
total expenses, or headcount relative to each division. The Company is also
allocated rent based on the square footage of space occupied by the Company at
TW Cable facilities. The aggregate of these charges totaled approximately $2.1
million, $4.4 million and $4.3 million for the years ended December 31, 1998,
1997 and 1996, respectively.
The Company participates in the Time Warner Cable Pension Plan (the
'Pension Plan'), a noncontributory defined benefit pension plan which covers
approximately 75% of all employees. The remaining 25% of employees are
participating in a pension plan under the administration of MediaOne, their
previous employer. The Company also participates in the Time Warner Cable
Employees Savings Plan (the 'Savings Plan'), a defined contribution plan. Both
the Pension Plan and Savings Plan are administered by a committee appointed by
the Board of Representatives of TWE and cover substantially all employees.
Benefits under the Pension Plan are determined based on formulas which
reflect employees' years of service and compensation levels during their
employment period. Total pension cost was $1.9 million, $1.7 million and $1.2
million for the years ended December 31, 1998, 1997 and 1996, respectively.
The Company's contributions to the Savings Plan can represent up to 6.67%
of the employees' compensation during the plan year. TWE's Board of
Representatives has the right in any year to set the maximum amount of the
Company's annual contribution. Defined contribution plan expense was $1.0
million, $710,000 and $606,000 for the years ended December 31, 1998, 1997 and
1996, respectively.
As of January 1, 1999, the Company does not participate in the Time Warner
Cable Pension Plan, the MediaOne Pension Plan or the Time Warner Cable Employee
Savings Plan, because the company has adopted its own benefit plans, including a
401(k) program.
The Company licenses the right to use the majority of its fiber optic cable
from TW Cable. The Company paid TW Cable $23.8 million, $32.5 million, and $41.3
million in the years ended December 31, 1998, 1997 and 1996, respectively, under
this arrangement. Such costs have been capitalized by the Company. The
amortization of these costs and fiber previously capitalized in the amount of
$9.0 million, $7.1 million and $5.0 million for the years ended December 31,
1998, 1997 and 1996, respectively, has been classified as a component of
depreciation and amortization in the accompanying combined statement of
operations. In addition, under this licensing arrangement, the Company
reimburses TW Cable for facility maintenance and pole rental costs, which costs
amounted to $2.0 million, $1.7 million and $1.3 million for the years ended
December 31, 1998, 1997 and 1996, respectively.
Effective July 1, 1997 through July 14, 1998, all of the Company's
financing requirements were funded with loans from the Parent Companies.
Interest expense relating to these loans totaled approximately $11.6 million in
1998 and $1.5 million in 1997 (see Note 5).
F-15
<PAGE>
<PAGE>
TIME WARNER TELECOM INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
8. INCOME TAXES
There are no current income taxes payable based on the Company's operating
losses.
The pro forma deferred tax assets and liabilities calculated on a
separate-company basis consistent with the liability method prescribed by FASB
Statement No. 109, 'Accounting for Income Taxes' are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1998 1997
--------- ---------
(THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts................................ $ 1,082 $ 312
Tax losses utilized by Time Warner............................. 179,192 134,365
--------- ---------
Total gross deferred tax assets................................ 180,274 134,677
Less: valuation allowance...................................... (139,829) (102,679)
--------- ---------
Net deferred tax assets........................................ 40,445 31,998
--------- ---------
Deferred tax liabilities:
Depreciation and amortization.................................. (38,570) (30,583)
Investments.................................................... (1,875) (1,415)
--------- ---------
Total gross deferred tax liabilities........................... (40,445) (31,998)
--------- ---------
Net deferred tax assets........................................ $ -- $ --
--------- ---------
--------- ---------
</TABLE>
In 1998, 1997 and 1996, the net income tax benefits of approximately $44.8
million, $28.4 million and $34.6 million, respectively, have been fully offset
by corresponding increases in the valuation allowance due to the uncertainty of
realizing the benefit for tax losses on a separate return basis.
On a pro forma basis, had the Company been operating on a stand alone
basis, the Company would have generated net operating loss carryforwards for tax
purposes of approximately $333 million during the three years ended December 31,
1998. However, at December 31, 1998, the Company, which operated as a
partnership for tax purposes during the periods presented herein, has no net
operating loss carryforwards for tax purposes because such losses were primarily
allocated to and utilized by Time Warner and its affiliates. The Company has
not, and will not, be compensated for such losses. Consequently, without the tax
benefit for losses utilized by Time Warner, the Company would have a net
deferred tax liability of approximately $39.4 million at December 31, 1998.
9. COMMITMENTS AND CONTINGENCIES
The Company has non-cancelable operating leases for office space and
switching facilities expiring over various terms. Certain of these leases
contain renewal clauses. Rental expense for all operating leases totaled $7.0
million, $5.4 million and $4.2 million for the years ended December 31, 1998,
1997 and 1996, respectively.
The minimum rental commitments under non-cancelable operating leases are:
1999 -- $6.3 million; 2000 -- $6.1 million; 2001 -- $5.8 million; 2002 -- $5.9
million; 2003 -- $5.7 million and after 2003 -- $30.6 million.
Pending legal proceedings are substantially limited to litigation
incidental to the business of the Company. In the opinion of management, the
ultimate resolution of these matters will not have a material adverse effect on
the Company's financial statements.
F-16
<PAGE>
<PAGE>
[Logo]
<PAGE>
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS (SUBJECT TO COMPLETION)
ISSUED MAY 6, 1999
18,000,000 SHARES
[LOGO]
TIME WARNER TELECOM INC.
CLASS A COMMON STOCK
------------------------
TIME WARNER TELECOM INC. IS OFFERING 18,000,000 SHARES OF ITS CLASS A COMMON
STOCK. INITIALLY, THE INTERNATIONAL UNDERWRITERS ARE OFFERING 3,600,000 SHARES
OF OUR CLASS A COMMON STOCK OUTSIDE THE UNITED STATES AND CANADA, AND THE
U.S. UNDERWRITERS ARE OFFERING 14,400,000 SHARES OF OUR CLASS A
COMMON STOCK IN THE UNITED STATES AND CANADA. THIS IS OUR INITIAL
PUBLIC OFFERING AND NO PUBLIC MARKET CURRENTLY EXISTS FOR OUR
SHARES. WE ANTICIPATE THAT THE INITIAL PUBLIC OFFERING PRICE
WILL BE BETWEEN $9 AND $11 PER SHARE.
IMMEDIATELY AFTER THE OFFERING, THE FOUNDING STOCKHOLDERS OF TIME WARNER TELECOM
INC. WILL OWN 100% OF THE CLASS B COMMON STOCK, WHICH WILL REPRESENT 97.8% OF
THE COMBINED VOTING POWER OF BOTH CLASSES OF OUTSTANDING COMMON STOCK.
------------------------------------
WE EXPECT THE CLASS A COMMON STOCK TO BE APPROVED FOR QUOTATION ON THE NASDAQ
NATIONAL MARKET OF THE NASDAQ STOCK MARKET UNDER THE SYMBOL 'TWTC.'
------------------------
INVESTING IN OUR CLASS A COMMON STOCK INVOLVES RISKS.
SEE 'RISK FACTORS' BEGINNING ON PAGE 13.
------------------------
PRICE $ A SHARE
------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS COMPANY
--------------------- ------------------------ ------------------------
<S> <C> <C> <C>
Per Share............................... $ $ $
Total................................... $ $ $
</TABLE>
------------------------
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
Time Warner Telecom Inc. has granted the U.S. Underwriters the right to purchase
up to an additional 2,700,000 shares of Class A Common Stock to cover
over-allotments. Morgan Stanley & Co. Incorporated expects to deliver the shares
of Class A Common Stock to purchasers on , 1999.
------------------------
JOINT BOOK - RUNNING MANAGERS
MORGAN STANLEY DEAN WITTER LEHMAN BROTHERS
BEAR, STEARNS INTERNATIONAL LIMITED
, 1999
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following are the expenses of issuance and distribution of the shares
of Class A Common Stock registered hereunder on Form S-1, other than
underwriting discounts and commissions. All amounts except the Registration Fee
are estimated.
<TABLE>
<S> <C>
Registration Fee.......................................................................... $ 63,301
Nasdaq National Market Listing Fee........................................................ 50,000
NASD Filing Fee........................................................................... 95,000
Printing and Engraving Fees............................................................... 500,000
Blue Sky Fees and Expenses................................................................ 12,000
Legal Fees and Expenses................................................................... 950,000
Accounting Fees and Expenses.............................................................. 200,000
Registrar and Transfer Agent's Fees....................................................... 2,000
Miscellaneous............................................................................. 4,429
----------
Total................................................................................ $1,850,000
----------
----------
</TABLE>
All of the above expenses have been or will be paid by Time Warner Telecom
Inc.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article VI of the Restated Certificate of Incorporation (the 'Restated
Certificate of Incorporation') of Time Warner Telecom Inc. (the 'Company')
provides that to the fullest extent permitted under the General Corporation Law
of the State of Delaware (the 'DGCL'), a director of the Company shall not be
personally liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director.
Section 102(b)(7) of the DGCL, provides that a corporation may eliminate or
limit the personal liability of a director (or certain persons who, pursuant to
the provisions of the certificate of incorporation, exercise or perform duties
conferred or imposed upon directors by the DGCL) to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
provided that such provisions shall not eliminate or limit the liability of a
director:
for any breach of the director's duty of loyalty to the corporation or its
stockholders,
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,
under Section 174 of the DGCL (providing for liability of directors for
unlawful payment of dividends or unlawful stock purchases or redemptions)
or
for any transaction from which the director derived an improper personal
benefit.
Section 145 of the DGCL provides that a corporation may indemnify directors
and officers as well as other employees and individuals against expenses
(including attorneys' fees), judgments, fines, and amounts paid in settlement in
connection with specified actions, suits or proceedings, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation -- a 'derivative action'), if they acted in good faith
and in a manner they reasonably believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal action or
proceedings, had no reasonable cause to believe their conduct was unlawful. A
similar standard is applicable in the case of derivative actions, except that
indemnification only extends to expenses (including attorneys' fees) actually
and reasonably incurred in connection with the defense or settlement of such
action, and the statute requires court approval before there can be any
indemnification where the person seeking indemnification has been found liable
to the corporation. The statute provides that it is not exclusive of other
indemnification that may be granted by a corporation's charter, by-laws,
disinterested director vote, stockholder vote, agreement or otherwise. Article
VIII of the TWT Charter provides that TWT shall indemnify its officers,
directors, employees and agents to the full extent permitted by Delaware law.
II-1
<PAGE>
<PAGE>
The By-laws of Time Warner Inc. ('TWI') require indemnification to the
fullest extent permitted under Delaware law of any person who is or was a
director or officer of TWI who is or was involved or threatened to be made so
involved in any action, suit or proceeding, whether criminal, civil,
administrative or investigative, by reason of the fact that such person is or
was serving at the request of TWI as a director, officer or employee of any
other enterprise. Mr. Bressler would be covered by this provision. The
Directors' and Officers' Liability and Reimbursement Insurance Policy of TWI is
designed to reimburse TWI for any payments made by it pursuant to the foregoing
indemnification. The policy has coverage of $50,000,000.
The Agreement of Limited Partnership of TWE provides that TWE shall
indemnify, defend and hold harmless each officer of TWE from any personal
liability he or she may incur by reason of his or her action on behalf of TWE to
the fullest extent permitted as if TWE were a Delaware corporation. Messrs.
Bressler, Britt, Davies and Rossetti would be covered by this provision.
The By-laws of MediaOne Group, Inc. ('MediaOne') require indemnification to
the fullest extent permitted under Delaware law of any person who is or was a
director, officer or employee of MediaOne, or was otherwise designated as an
indemnified representative (as defined in the MediaOne By-laws) by MediaOne,
against any liability (as defined in the MediaOne By-laws) incurred by such
person in connection with any proceeding (as defined in the MediaOne By-laws) in
which such person is involved by reason of their past, present or future
services for, or at the request of, MediaOne as a director, officer, employee,
agent, fiduciary or trustee of any other entity or enterprise. Messrs. McPhie,
Williams and Webster are covered by this provision.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
During the past three years, except as set forth in the next four
sentences, the Company has not sold any securities without registration under
the Securities Act. Immediately prior to the date of this Registration
Statement, the Company issued 81,250,000 shares of its Class B Common Stock to
the Existing Stockholders, in a private placement under Section 4(2) of the
Securities Act. In April 1999, the Company issued 307,550 shares of Class A
Common Stock in connection with the Company's acquisition of Internet Connect,
Inc. in a private placement under Section 4(2) of the Securities Act. In March
1999, the Company issued options to acquire 41,667 shares of Class A Common
Stock to its former president and CEO, Steven McPhie, in a private placement
under Section 4(2) of the Securities Act. If the Company's proposed acquisition
of the remaining 50% of MetroComm that the Company does not currently own is
consummated, the Company will issue 2,190,308 shares of Class A Common Stock to
the former partners of MetroComm in a private placement under Section 4(2) of
the Securities Act.
II-2
<PAGE>
<PAGE>
ITEM 16. EXHIBITS
(a) Exhibits:
TIME WARNER TELECOM INC.
EXHIBIT LIST
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- -----------------------------------------------------------------------------------------------------------
<S> <C>
1.1 -- Form of Underwriting Agreement***
2.1 -- Reorganization Agreement among Time Warner Companies, Inc., MediaOne Group, Inc., Advance/Newhouse
Partnership, Time Warner Entertainment Company, L.P., and Time Warner Entertainment -- Advance Newhouse
Partnership (filed as Exhibit 2.1 to TWT LLC's Quarterly Report on Form 10-Q for the quarter ended June
30, 1998)**
2.2 -- Merger Agreement among the Company, TWT LLC and TWT Inc.
3.1 -- Restated Certificate of Incorporation of the Company
3.2 -- Restated By-laws of the Company***
4.1 -- Stockholders Agreement, among the Company, Time Warner Companies, Inc., American Television and
Communications Corporation, Warner Communications Inc., TW/TAE Inc., FibrCOM Holdings, L.P., Paragon
Communications, MediaOne Group, Inc., Multimedia Communications, Inc. and Advance/Newhouse Partnership***
4.2 -- Indenture, between TWT LLC, TWT Inc. and The Chase Manhattan Bank, as Trustee (filed as Exhibit 4.1 to
TWT LLC's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998)**
5 -- Opinion of Cravath, Swaine & Moore*
10.1 -- Lease, between Quebec Court Joint Venture No. 2, Landlord, and Intelligent Advanced Systems, Inc.,
Tenant, dated June 3, 1994 (filed as Exhibit 10.1 to TWT LLC's Registration Statement on Form S-1
(Registration No. 333-53553))**
10.2 -- Agreement for Assignment of Lease, dated September 12, 1997, between Ingram Micro Inc. and Time Warner
Communications Holdings Inc. (filed as Exhibit 10.2 to TWT LLC's Registration Statement on Form S-1
(Registration No. 333-53553))**
10.3 -- First Amendment to Lease, dated October 15, 1997, by Carramerica Realty, L.P. and Time Warner
Communications Holdings Inc. (filed as Exhibit 10.3 to TWT LLC's Registration Statement on Form S-1
(Registration No. 333-53553))**
10.4 -- Time Warner Telecom Inc. 1998 Stock Option Plan
10.5 -- Employment Agreement between the Company and Larissa L. Herda (filed as Exhibit 10.6 to TWT LLC's
Registration Statement on Form S-1 (Registration No. 333-53553))**
10.6 -- Employment Agreement between the Company and Paul B. Jones (filed as Exhibit 10.5 to TWT LLC's
Registration Statement on Form S-1 (Registration No. 333-53553))**
10.7 -- Employment Agreement between the Company and A. Graham Powers (filed as Exhibit 10.7 to TWT LLC's
Registration Statement on Form S-1 (Registration No. 333-53553))**
10.8 -- Employment Agreement between the Company and David J. Rayner (filed as Exhibit 10.8 to TWT LLC's
Registration Statement on Form S-1 (Registration No. 333-53553))**
10.9 -- Employment Agreement between the Company and John T. Blount (filed as Exhibit 10.10 to TWT LLC's
Registration Statement on Form S-1 (Registration No. 333-53553))**
10.10 -- Capacity License Agreement (filed as Exhibit 10.3 to TWT LLC's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998)**
10.11 -- Trade Name License Agreement (filed as Exhibit 10.4 to TWT LLC's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998)**
10.12 -- Master Capacity Agreement between MCImetro Access Transmission Services, Inc. and Time Warner
Communications, dated September 9, 1994, as amended on September 9, 1994 and August 28, 1997'D'
10.13 -- Agreement between AT&T Communications, Inc. and Time Warner Communications, dated as of September 15,
1995, as amended on June 1, 1997'D'
</TABLE>
II-3
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- -----------------------------------------------------------------------------------------------------------
<C> <S>
21 -- Subsidiaries of the Company
23.1 -- Consent of Ernst & Young LLP, Independent Auditors
23.2 -- Consent of Cravath, Swaine & Moore (included in Exhibit 5)*
24.1 -- Power of Attorney of the Company's Officers and Directors***
24.2 -- Power of Attorney of the Company's Officers and Directors***
</TABLE>
- ------------
* To be filed by amendment.
** Incorporated by reference.
*** Previously filed as part of this Registration Statement.
'D' 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.
(b) Financial Statement Schedule
The following financial statement schedule is included in Part II of this
Registration Statement and should be read in conjunction with the combined
financial statements and notes thereto included elsewhere herein.
<TABLE>
<S> <C>
Report of Independent Auditors.................................................................... S-1
Schedule II -- Valuation and Qualifying Accounts.................................................. S-2
</TABLE>
All other schedules are omitted, either because they are not applicable or
because the required information is shown in the financial statements or the
notes thereto.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the provisions described under Item 14 above or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or controlling person of the
Company in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the
securities being registered, the Company will, unless in the opinion of their
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The Company hereby undertakes that:
1. For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as a part of this
Registration Statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Company pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed part of this Registration
Statement as of the time it was declared effective.
2. For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at such time shall be
deemed to be the initial bona fide offering thereof.
3. It will provide the underwriters at the closing specified in the
underwriting agreements certificates in such denominations and registered
in such names as required by the underwriters to permit prompt delivery to
each purchaser.
II-4
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Time Warner Telecom Inc. has duly caused Amendment No. 6 to this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on May 5, 1999.
TIME WARNER TELECOM INC.
By /s/ David J. Rayner
....................................
DAVID J. RAYNER
SENIOR VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------------------------- ------------------------------------ --------------------
<S> <C> <C>
(i) Principal Executive Officer
* President and Chief Executive May 5, 1999
.................................................... Officer and Director
LARISSA L. HERDA
(ii) Principal Financial Officer
/s/ David J. Rayner Senior Vice President and May 5, 1999
.................................................... Chief Financial Officer
DAVID J. RAYNER
(iii) Principal Accounting Officer
* Vice President, Accounting May 5, 1999
.................................................... and Finance and
JILL STUART Chief Accounting
Officer
(iv) Directors
* Director May 5, 1999
....................................................
RICHARD J. BRESSLER
* Director May 5, 1999
....................................................
LARISSA L. HERDA
* Director May 5, 1999
....................................................
ROBERT J. MIRON
* Director May 5, 1999
....................................................
DOUGLAS HOLMES
* By: /s/ David J. Rayner
....................................................
ATTORNEY-IN-FACT
</TABLE>
II-5
<PAGE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of Time Warner Telecom Inc.
We have audited the combined financial statements of Time Warner Telecom
Inc. (the 'Company') as of December 31, 1998 and 1997, and for each of the three
years in the period ended December 31, 1998 and have issued our report thereon
dated February 5, 1999, except for Notes 1, 2 and 3, as to which the date is
, 1999. Our audits also included the financial statement schedule
listed in Item 16(b) of this Registration Statement. This schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic combined financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
Denver, Colorado
February 5, 1999
The foregoing report is in the form that will be signed upon the effective
date of the Company's registration of Class A Common Stock in a registration
statement on Form S-1 and the concurrent change in the Company's operating and
legal structure from a limited liability company to a corporation.
/s/ ERNST & YOUNG LLP
Denver, Colorado
May 5, 1999
S-1
<PAGE>
<PAGE>
TIME WARNER TELECOM LLC
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS/
BALANCE AT CHARGES TO BALANCE AT
BEGINNING COSTS AND END OF
OF PERIOD EXPENSES DEDUCTIONS PERIOD
---------- ---------- ---------- ----------
(THOUSANDS)
<S> <C> <C> <C> <C>
For the Year ended December 31, 1998:
Allowance for doubtful accounts receivable................. $776 $2,020 $ (104) $2,692
For the Year ended December 31, 1997:
Allowance for doubtful accounts receivable................. $193 $1,213 $ (630) $ 776
For the Year ended December 31, 1996:
Allowance for doubtful accounts receivable................. $ 21 $ 271 $ (99) $ 193
</TABLE>
S-2
<PAGE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE
- -------- ---------------------------------------------------------------------------------------------------- -----
<S> <C> <C>
1.1 -- Form of Underwriting Agreement***................................................................
2.1 -- Reorganization Agreement among Time Warner Companies, Inc., MediaOne Group, Inc.,
Advance/Newhouse Partnership, Time Warner Entertainment Company, L.P., and Time Warner
Entertainment -- Advance Newhouse Partnership (filed as Exhibit 2.1 to TWT LLC's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1998)**..............................................
2.2 -- Merger Agreement among the Company, TWT LLC and TWT Inc..........................................
3.1 -- Restated Certificate of Incorporation of the Company.............................................
3.2 -- Restated By-laws of the Company***...............................................................
4.1 -- Stockholders Agreement, among the Company, Time Warner Companies, Inc., American Television and
Communications Corporation, Warner Communications Inc., TW/TAE Inc., FibrCOM Holdings, L.P.,
Paragon Communications, MediaOne Group, Inc., Multimedia Communications, Inc. and Advance/Newhouse
Partnership***...................................................................................
4.2 -- Indenture, between TWT LLC, TWT Inc. and The Chase Manhattan Bank, as Trustee (filed as Exhibit
4.1 to TWT LLC's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998)**............
5 -- Opinion of Cravath, Swaine & Moore*..............................................................
10.1 -- Lease, between Quebec Court Joint Venture No. 2, Landlord, and Intelligent Advanced Systems,
Inc., Tenant, dated June 3, 1994 (filed as Exhibit 10.1 to TWT LLC's Registration Statement on
Form S-1 (Registration No. 333-53553))**.........................................................
10.2 -- Agreement for Assignment of Lease, dated September 12, 1997, between Ingram Micro Inc. and Time
Warner Communications Holdings Inc. (filed as Exhibit 10.3 to TWT LLC's Registration Statement on
Form S-1 (Registration No. 333-53553))**.........................................................
10.3 -- First Amendment to Lease, dated October 15, 1997, by Carramerica Realty, L.P. and Time Warner
Communications Holdings Inc. (filed as Exhibit 10.3 to TWT LLC's Registration Statement on Form
S-1 (Registration Statement No. 333-53553))**....................................................
10.4 -- Time Warner Telecom Inc. 1998 Stock Option Plan..................................................
10.5 -- Employment Agreement between the Company and Larissa L. Herda (filed as Exhibit 10.6 to TWT LLC's
Registration Statement on Form S-1 (Registration No. 333-53553))**...............................
10.6 -- Employment Agreement between the Company and Paul B. Jones (filed as Exhibit 10.5 to TWT LLC's
Registration Statement on Form S-1 (Registration No. 333-53553))**...............................
10.7 -- Employment Agreement between the Company and A. Graham Powers (filed as Exhibit 10.7 to TWT LLC's
Registration Statement on Form S-1 (Registration No. 333-53553))**...............................
10.8 -- Employment Agreement between the Company and David J. Rayner (filed as Exhibit 10.8 to TWT LLC's
Registration Statement on Form S-1 (Registration No. 333-53553))**...............................
10.9 -- Employment Agreement between the Company and John T. Blount (filed as Exhibit 10.10 to TWT LLC's
Registration Statement on Form S-1 (Registration No. 333-53553))**...............................
10.10 -- Capacity License Agreement (filed as Exhibit 10.3 to TWT LLC's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1998)**...............................................................
10.11 -- Trade Name License Agreement (filed as Exhibit 10.4 to TWT LLC's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1998)**...........................................................
10.12 -- Master Capacity Agreement between MCImetro Access Transmission Services, Inc. and Time Warner
Communications, dated September 9, 1994, as amended on September 9, 1999 and August 28, 1997'D'..
10.13 -- Agreement between AT&T Communications, Inc. and Time Warner Communications, dated as of
September 15, 1995, as amended on June 1, 1997'D'................................................
21 -- Subsidiaries of the Company......................................................................
23.1 -- Consent of Ernst & Young LLP, Independent Auditors...............................................
23.2 -- Consent of Cravath, Swaine & Moore (included in Exhibit 5)*......................................
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE
- -------- ---------------------------------------------------------------------------------------------------- -----
<S> <C> <C>
24.1 -- Power of Attorney of the Company's Officers and Directors***.....................................
24.2 -- Power of Attorney of the Company's Officers and Directors***.....................................
</TABLE>
- ------------
* To be filed by amendment.
** Incorporated by reference.
*** Previously filed as part of this Registration Statement.
'D' 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.
STATEMENT OF DIFFERENCES
------------------------
The dagger symbol shall be expressed as ................................... 'D'
<PAGE>
<PAGE>
Exhibit 2.2
AGREEMENT AND PLAN OF MERGER, dated as of
__________, 1999 (this "Agreement"), between TW
Telecom Merger Corp., a Delaware corporation ("TW
Telecom"), Time Warner Telecom LLC , a Delaware
limited liability company ("TWT LLC") and Time
Warner Telecom Inc., a Delaware corporation
("TWT Inc.").
W I T N E S S E T H :
WHEREAS TW Telecom desires to acquire the properties and other assets
and to assume all of the liabilities and obligations pursuant to a merger of
each of TWT LLC and TWT Inc. with and into TW Telecom;
WHEREAS Section 18-209 of the Delaware Limited Liability Company Act,
6 Del. C. 'SS' 18-101, et seq. (the "Delaware Act") and Section 264 of the
General Corporation Law of the State of Delaware, 8 Del C. 'SS' 101, et seq.
(the "GCL") authorize the merger of a Delaware limited liability company with
and into a Delaware corporation and Section 251 of the GCL authorizes the merger
of a Delaware corporation with and into another Delaware corporation;
WHEREAS TW Telecom, TWT LLC and TWT Inc. now desire to merge (the
"Merger"), following which TW Telecom shall be the surviving entity;
WHEREAS Time Warner Companies, Inc., a Delaware corporation ("TWX"),
American Television and Communications Corporation, a Delaware corporation
("ATC"), Warner Communications Inc., a Delaware corporation ("WCI"), TW/TAE,
Inc., a Delaware corporation ("TW/TAE"), FibrCOM Holdings, L.P., a Delaware
limited partnership that is owned by TW/Kblcom Inc., a Delaware corporation
("TW/KBLCOM"), Paragon Communications, a Colorado general partnership ("Paragon"
and, together with TWX, ATC, WCI, TWI/TAE and TW/KBLCOM, the "TW Stockholders"),
Media One Group, Inc., a Colorado corporation ("MediaOne"), and Advance/Newhouse
Partnership, a New York general partnership ("A/N"), as the "distributee
members" under the Amended and Restated Limited Liability Company Agreement of
TWT LLC (the "Members") have approved this Agreement and the consummation of the
Merger
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2
and have executed counterparts to this Agreement as evidence of that approval;
WHEREAS TW Telecom's Certificate of Incorporation and By-laws permit,
and resolutions adopted by TW Telecom's Board of Directors authorize, this
Agreement and the consummation of the Merger; and
WHEREAS TWT Inc.'s Certificate of Incorporation and By-laws permit and
resolutions adopted by TWT Inc.'s Board of Directors authorize, this Agreement
and the consummation of the Merger.
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
The Merger
SECTION 1.01. The Merger. (a) After satisfaction or, to the extent
permitted hereunder, waiver of all conditions to the Merger, as TW Telecom, the
Members and TWT Inc. shall determine, TW Telecom, which shall be the surviving
entity, shall merge with each of TWT LLC and TWT Inc. and shall file a
certificate of merger substantially in the form of Exhibit A hereto (the
"Certificate of Merger") with the Secretary of State of the State of Delaware
and make all other filings or recordings required by Delaware law in connection
with the Merger. The Merger shall become effective at such time as is specified
in the Certificate of Merger (the "Effective Time").
(b) At the Effective Time, each of TWT LLC and TWT Inc. shall be
merged with and into TW Telecom, whereupon the separate existence of each of TWT
LLC and TWT Inc. shall cease, and TW Telecom shall be the surviving entity of
the Merger (the "Surviving Corporation") in accordance with Section 18-209 of
the Delaware Act and Sections 251, 259 and 264 of the GCL.
SECTION 1.02. Exchange of Interests. At the Effective Time:
(a) each Class B limited liability company interest in TWT LLC
outstanding immediately prior to the Effective Time, representing a 1%
participation percentage in the Company, shall be exchanged for 815,557.7
shares of Class B Common Stock of TW Telecom provided that TW Telecom shall
not be required to issue fractional shares;
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3
(b) each Class A limited liability company interest in TWT LLC
outstanding immediately prior to the Effective Time representing a 1%
participation percentage in the Company, shall be exchanged for 815,557.7
shares of Class A Common Stock of TW Telecom provided that TW Telecom shall
not be required to issue fractional shares;
(c) each option exercisable for one Unit (as defined in the TWT LLC
1998 Option Plan) outstanding immediately prior to the Effective Date shall
be exchanged for one option exercisable for one share of Class A Common
Stock of TW Telecom;
(d) each share of common stock of TW Telecom that is owned by TWT LLC
shall no longer be outstanding and shall automatically be canceled and
retired and shall cease to exist, and no consideration shall be delivered
in exchange therefor; and
(e) each share of capital stock of TWT Inc. that is owned by TWT LLC
or any subsidiary of TWT LLC shall automatically be canceled and retired
and shall cease to exist, and no consideration shall be delivered in
exchange therefor.
ARTICLE II
The Surviving Corporation
SECTION 2.01. Certificate of Incorporation and By-laws. The
Certificate of Incorporation and By-laws of TW Telecom in effect at the
Effective Time shall be the Certificate of Incorporation and By-laws attached
hereto as Exhibits B and C, respectively unless and until amended in accordance
with its terms and applicable law. In accordance with the Amended and Restated
Certificate of Incorporation, the name of the Surviving Corporation shall be
Time Warner Telecom Inc.
SECTION 2.02. Directors and Officers. From and after the Effective
Time, until successors are duly elected or appointed and qualified in accordance
with the applicable law, (i) the Representatives of the Management Committee of
TWT LLC shall become the directors of TW Telecom and
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4
(ii) the officers of TWT LLC shall become the officers of TW Telecom.
ARTICLE III
Transfer and Conveyance of Assets
and Assumption of Liabilities
SECTION 3.01. Transfer, Conveyance and Assumption. At the Effective
Time, TW Telecom shall continue in existence as the Surviving Corporation, and
without further transfer, succeed to and possess all of the rights, privileges
and powers of each of TWT LLC and TWT Inc., and all of the assets and property
of whatever kind and character of each of TWT LLC and TWT Inc. shall vest in TW
Telecom without further act or deed; thereafter, TW Telecom, as the Surviving
Corporation, shall be liable for all of the liabilities and obligations of each
of TWT LLC and TWT Inc., and any claim or judgment against either TWT LLC or TWT
Inc. may be enforced against TW Telecom, as the Surviving Corporation, in
accordance with Section 18-209 of the Delaware Act and Section 259 of the GCL.
SECTION 3.02. Further Assurances. If at any time TW Telecom shall
consider or be advised that any further assignment, conveyance or assurance is
necessary or advisable to vest, perfect or confirm of record in the Surviving
Corporation the title to any property or right of either TWT LLC or TWT Inc., or
otherwise to carry out the provisions hereof, the proper representatives of each
of TWT LLC and TWT Inc. as of the Effective Time shall execute and deliver any
and all proper deeds, assignments and assurances and do all things necessary or
proper to vest, perfect or convey title to such property or right in the
Surviving Corporation and otherwise to carry out the provisions hereof.
<PAGE>
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5
ARTICLE IV
Termination
SECTION 4.01. Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, whether before
or after approval of this agreement by the members and stockholders of the
constituent entities:
(a) by mutual written consent of the Members, on behalf of TWT LLC,
the Board of Directors of TWT Inc., and the Board of Directors of TW
Telecom;
(b) by either the Members, on behalf of TWT LLC, the Board of
Directors of TWT Inc., or the Board of Directors of TW Telecom, if there
shall be any law or regulation that makes consummation of the Merger
illegal or otherwise prohibited, or if any judgment, injunction, order or
decree enjoining TW Telecom, TWT LLC or TWT Inc. from consummating the
Merger is entered and such judgment, injunction, order or decree shall
become final and nonappealable.
SECTION 4.02. Effect of Termination. If this Agreement is terminated
pursuant to Section 4.01, this Agreement shall become void and of no effect with
no liability on the part of any party hereto.
ARTICLE V
Miscellaneous
SECTION 5.01. Amendments; No Waivers. (a) Any provision of this
Agreement may, subject to applicable law, be amended or waived prior to the
Effective Time if, and only if, such amendment or waiver is in writing and
signed by the Members, on behalf of TWT LLC, by TWT Inc. and by TW Telecom.
(b) No failure or delay by any party hereto in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be
<PAGE>
<PAGE>
6
cumulative and not exclusive of any rights or remedies provided by law.
SECTION 5.02. Integration. All prior or contemporaneous agreements,
contracts, promises, representations and statements, if any, between TW Telecom,
TWT LLC and TWT Inc., or their representatives, are merged into this agreement,
and this Agreement shall constitute the entire understanding between TW
Telecom, TWT LLC and TWT Inc. with respect to the subject matter hereof.
SECTION 5.03. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of the other parties hereto.
SECTION 5.04. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Delaware, without
giving effect to principles of conflicts of law.
SECTION 5.05. Counterparts; Effectiveness. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received the counterpart hereof signed by the other party hereto.
<PAGE>
<PAGE>
7
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized representatives as of the day
and year first above written.
TIME WARNER TELECOM LLC,
by
FIBRCOM HOLDINGS, L.P.,
by FIBRCOM INCORPORATED,
General Partner
by __________________________
Name:
Title:
TIME WARNER COMPANIES, INC.
by __________________________
Name:
Title:
AMERICAN TELEVISION AND
COMMUNICATIONS CORPORATION,
by __________________________
Name:
Title:
WARNER COMMUNICATIONS INC.,
by __________________________
Name:
Title:
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<PAGE>
8
TW/TAE, INC.,
by __________________________
Name:
Title:
PARAGON COMMUNICATIONS,
by KBL COMMUNICATIONS, INC.,
Managing General Partner
by __________________________
Name:
Title:
MEDIAONE GROUP, INC.,
by __________________________
Name:
Title:
ADVANCE/NEWHOUSE PARTNERSHIP,
by ADVANCE COMMUNICATION
CORP., General Partner,
by __________________________
Name:
Title:
TIME WARNER TELECOM INC.
by __________________________
Name:
Title:
TW TELECOM MERGER CORP.
by __________________________
Name:
Title:
<PAGE>
<PAGE>
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
TIME WARNER TELECOM INC.
The undersigned officers of Time Warner Telecom Inc., a
Delaware corporation (the "Corporation"), do hereby certify as follows:
(1) The present name of the Corporation shall be Time Warner
Telecom Inc. The Corporation was originally incorporated under the name TW
Telecom Merger Corp., and its original certificate of incorporation was filed
with the office of the Secretary of State of the State of Delaware on
May 4, 1999.
(2) This Restated Certificate of Incorporation was duly
adopted in accordance with Sections 242 and 245 of the General Corporation Law
of the State of Delaware and by unanimous written consent of stockholders in
accordance with Section 228 of the General Corporation Law of the State of
Delaware.
(3) This Restated Certificate of Incorporation restates and
integrates and further amends the certificate of incorporation of the
Corporation.
(4) The text of the certificate of incorporation of the
Corporation is amended and restated so as to read in its entirety as follows:
ARTICLE I
NAME
The name of this corporation (hereinafter the "Corporation")
is TIME WARNER TELECOM INC.
ARTICLE II
ADDRESS; REGISTERED AGENT
The address of the Corporation's registered office in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington,
Delaware 19801. The name of the Corporation's registered agent at such address
is The Corporation Trust Company.
<PAGE>
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2
ARTICLE III
PURPOSE
The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware (the "DGCL"); provided, however, that
until the earlier of (i) the date that is five years after the date of filing of
this Restated Certificate of Incorporation and (ii) the date on which the
outstanding shares of Class B Stock (as defined herein) no longer represent at
least fifty percent (50%) of the total voting power in the election of directors
of the Corporation ("Voting Power") of all outstanding shares of all classes and
series of capital stock of the Corporation entitled generally to vote in such
election ("Voting Stock") (the earlier of (i) and (ii) being called the
"Termination Date"), the Corporation shall not, directly or indirectly (through
a subsidiary or affiliate of the Corporation), engage in the business of
providing, offering, packaging, marketing, promoting or branding (alone or
jointly with or as an agent for other parties) any Residential Services or
engage in the business of producing, packaging, distributing, marketing,
hosting, offering, promoting, branding or otherwise providing Content Services,
unless such action shall be approved in advance by the affirmative vote of the
holders of one hundred percent (100%) of the Voting Power of the outstanding
shares of Class B Stock, voting separately as a class.
"Residential Services" shall mean wireline telecommunications services
or other services (including, without limitation, data services) of any
nature provided, directly or indirectly, to third party end-users at
address locations other than Business Locations. "Business Locations"
shall mean (i) address locations that are used solely for business
purposes, including, without limitation, public spaces within business
locations and governmental offices and (ii) hotels, hospitals, jails
and the business offices of residential facilities within educational
institutions and within nursing and assisted living complexes.
"Content Services" means entertainment, information or other content
services, whether fixed or interactive, or any services incidental
thereto; provided, however, that Content Services shall not include
acting solely as a carrier of video, audio or data of unaffiliated
third parties by providing transport services, so long as the
Corporation has no other direct or indirect
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3
pecuniary interest in the transmitted information or
content.
ARTICLE IV
CAPITAL STOCK
SECTION 1. Authorized Capital Stock. The total number of
shares of all classes of capital stock that the Corporation shall have authority
to issue is 459,800,000 shares, consisting of (i) 439,800,000 shares of Common
Stock, par value of $0.01 per share ("Common Stock"), and (ii) 20,000,000 shares
of Preferred Stock, par value of $0.01 per share ("Preferred Stock"). The Common
Stock shall be divided into classes as follows: 277,300,000 shares of Class A
Common Stock ("Class A Stock") and 162,500,000 shares of Class B Common Stock
("Class B Stock").
SECTION 2. Common Stock. (a) Except as otherwise provided in
this Restated Certificate of Incorporation, the Class A Stock and the Class B
Stock shall have the same rights and privileges and shall rank equally, share
ratably and be identical in all respects as to all matters.
(b) Subject to provisions of law and the terms of any
outstanding Preferred Stock, the holders of the Class A Stock and the Class B
Stock shall be entitled to receive dividends or other distributions with respect
to such stock, in an equal amount per share, at such times and in such amounts
as may be determined by the Board and declared out of any funds lawfully
available therefor, and shares of Preferred Stock of any series shall not be
entitled to share therein except as otherwise expressly provided in the
resolution or resolutions of the Board providing for the issue of such series.
Dividends and other distributions with respect to the Class A Stock and the
Class B Stock shall be payable only when, as and if declared by the Board.
(c) Subject to the provisions of law and the terms of any
outstanding Preferred Stock, if at any time a dividend or other distribution
with respect to the Class A Stock or Class B Stock is to be paid in shares of
Class A Stock, Class B Stock or any other securities of the Corporation or any
other corporation, partnership, limited liability company, trust or legal entity
("Person") (hereinafter sometimes called a "share distribution"), such share
distribution shall be declared and paid only as follows, and share distributions
declared and paid as follows shall be deemed to be equal distributions for
purposes of the preceding paragraph:
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4
(i) a share distribution (A) consisting of Class A Stock (or
Convertible Securities that are convertible into, exchangeable
for, or evidence the right to purchase, shares of Class A
Stock) to holders of Class A Stock and Class B Stock, on an
equal per share basis; or (B) consisting of shares of Class B
Stock (or Convertible Securities that are convertible into,
exchangeable for or evidence the right to purchase shares of
Class B Stock) to holders of Class A Stock and Class B Stock,
on an equal per share basis; or (C) consisting of shares of
Class A Stock (or Convertible Securities that are convertible
into, exchangeable for or evidence the right to purchase
shares of Class A Stock) to holders of Class A Stock and, on
an equal per share basis, shares of Class B Stock (or
Convertible Securities that are convertible into, exchangeable
for or evidence the right to purchase shares of Class B Stock)
to holders of Class B Stock; and
(ii) a share distribution consisting of shares of any class or
series of securities of the Corporation or any other Person
other than Class A Stock or Class B Stock (and other than
Convertible Securities that are convertible into, exchangeable
for or evidence the right to purchase shares of Class A Stock
or Class B Stock), either on the basis of a distribution of
identical securities, on an equal per share basis, to holders
of Class A Stock and Class B Stock or on the basis of a
distribution of one class or series of securities to holders
of Class A Stock and another class or series of securities to
holders of Class B Stock, provided that the securities so
distributed (and, if applicable, the securities into which the
distributed securities are convertible, or for which they are
exchangeable, or which the distributed securities evidence the
right to purchase) do not differ in any respect other than
their relative voting rights and related differences in
conversion and share distribution provisions, with holders of
shares of Class B Stock receiving the class or series having
the higher relative voting rights (without regard to whether
such rights differ to a greater or lesser extent than the
corresponding differences in voting rights and related
differences in conversion and share distribution provisions
between the Class A Stock and the Class B Stock), provided
that if the securities so distributed
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5
constitute capital stock of a Subsidiary of the Corporation,
such rights shall not differ to a greater extent than the
corresponding differences in voting rights, conversion and
share distribution provisions between the Class A Stock and
Class B Stock, and provided in each case that such
distribution is otherwise made on an equal per share basis.
As used herein, the term "Subsidiary" means, when used with
respect to any Person, (i) a corporation in which such Person and/or one or more
Subsidiaries of such Person, directly or indirectly, owns capital stock having a
majority of the Voting Power of such corporation's Voting Stock; and (ii) any
other Person (other than a corporation) in which such Person and/or one or more
Subsidiaries of such Person, directly or indirectly, has (x) a majority
ownership interest or (y) the power to elect or direct the election of a
majority of the members of the governing body of such first-named Person.
As used herein, the term "Convertible Securities" shall mean
any securities of the Corporation (other than any class of Common Stock) that
are convertible into, exchangeable for, or evidence the right to purchase any
class of Common Stock, whether upon conversion, exercise or exchange, pursuant
to anti-dilution provisions of such securities or otherwise.
(d) If the Corporation shall in any manner reclassify,
subdivide or combine the outstanding shares of Class A Stock or Class B Stock,
the outstanding shares of the other class of Common Stock shall be
proportionally reclassified, subdivided or combined in the same manner and on
the same basis as the outstanding shares of Class A Stock or Class B Stock, as
the case may be, that have been reclassified, subdivided or combined so as to
preserve the relative Voting Power of each class and the relative proportion of
the equity of the Corporation represented by each class immediately prior to the
transaction giving rise to an adjustment pursuant to this paragraph.
(e)
(i) Each share of Class B Stock may at any time be converted
into one fully paid and nonassessable share of Class A Stock. Such
right shall be exercised by the surrender of the certificate
representing such share of Class B Stock to be converted to the
Corporation at any time during normal business hours at the principal
executive offices of the Corporation, or
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6
if an agent for the registration of transfer of shares of Class B Stock
is then duly appointed and acting (said agent being hereinafter called
the "Transfer Agent"), then at the office of the Transfer Agent,
accompanied by a written notice of the election by the holder thereof
to convert and (if so required by the Corporation or the Transfer
Agent) by instruments of transfer, in form satisfactory to the
Corporation and to the Transfer Agent, duly executed by such holder or
such holder's duly authorized attorney, and together with any necessary
transfer tax stamps or funds therefor, if required pursuant to
subparagraph (v) of this subsection (e).
(ii) As promptly as practicable after the surrender for
conversion of a certificate representing shares of Class B Stock in the
manner provided in paragraph (i) of this subsection (e) and the payment
in cash of any amount required by the provisions of paragraphs (i) and
(v) of this subsection (e), the Corporation will deliver or cause to be
delivered at the office of the Transfer Agent to or upon the written
order of the holder of such certificate, a certificate or certificates
representing the number of full shares of Class A Stock issuable upon
such conversion, issued in such name or names as such holder may
direct. Such conversion shall be deemed to have been made immediately
prior to the close of business on the date of the surrender of the
certificates representing shares of Class B Stock, and all rights of
the holder of such shares as such holder shall cease at such time and
the person or persons in whose name or names the certificate or
certificates representing the shares of Class A Stock are to be issued
shall be treated for all purposes as having become the record holder or
holders of such shares of Class A Stock at such time; provided,
however, if any such surrender and payment is made on any date when the
stock transfer books of the Corporation shall be closed, the person or
persons in whose name or names the certificate or certificates
representing shares of Class A Stock are to be issued as the record
holder or holders thereof shall be treated for all purposes as having
become the record holder or holders of such shares immediately prior to
the close of business on the next succeeding day on which such stock
transfer books are open.
(iii) No adjustments in respect of dividends shall be made
upon the conversion of any share of Class B Stock; provided, however,
that if a share shall be converted subsequent to the record date for
the payment
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7
of a dividend or other distribution on shares of Class B Stock but
prior to such payment, the registered holder of such share at the close
of business on such record date shall be entitled to receive the
dividend or other distribution payable on such share upon the date set
for payment of such dividend or other distribution notwithstanding the
conversion thereof or the Corporation's default in payment of the
dividend due on such date.
(iv) The Corporation will at all times reserve and keep
available, solely for the purpose of issuance upon conversion of the
outstanding shares of Class B Stock, such number of shares of Class A
Stock as shall be issuable upon the conversion of all such outstanding
shares; provided, however, that nothing contained herein shall be
construed to preclude the Corporation from satisfying its obligations
in respect of the conversion of the outstanding shares of Class B Stock
by delivery of purchased shares of Class A Stock which are held in the
treasury of the Corporation. If any shares of Class A Stock required to
be reserved for purposes of conversion hereunder require registration
with or approval of any governmental authority under any Federal or
state law before such shares of Class A Stock may be issued upon
conversion, the Corporation will cause such shares to be duly
registered or approved, as the case may be. All shares of Class A Stock
which shall be issued upon conversion of the shares of Class B Stock
will, upon issue, be fully paid and nonassessable and not subject to
any preemptive rights.
(v) The issuance of certificates for shares of Class A Stock
upon conversion of shares of Class B Stock shall be made without charge
for any stamp or other similar tax in respect of such issuance.
However, if any such certificate is to be issued in a name other than
that of the holder of the share or shares of Class B Stock converted,
the person or persons requesting the issuance thereof shall pay to the
Corporation the amount of any tax which may be payable in respect of
any transfer involved in such issuance or shall establish to the
satisfaction of the Corporation that such tax has been paid.
(vi) Any shares of Class B Stock which shall have been
converted into Class A Stock at any time pursuant to the provisions of
this subsection (e) of this Section 2 shall, after such conversion,
have the status of authorized but unissued shares of Class B Stock.
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8
(f) Upon the liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, subject to any preferential or
other amounts to be distributed to the holders of the Preferred Stock and any
other class or series of stock then outstanding, the holders of Class A Stock
and Class B Stock shall be entitled to receive all the assets of the Corporation
available for distribution to its stockholders ratably as a single class in
proportion to the number of shares held by them.
(g) In the event of any merger, consolidation, acquisition of
all or substantially all the assets of the Corporation or other reorganization
to which the Corporation is a party, in which any consideration is to be
received by the holders of Class A Stock and Class B Stock, the holders of each
such class of Common Stock shall receive the Equivalent Consideration (as
defined herein) on a per share basis. "Equivalent Consideration" shall mean
consideration of substantially equivalent economic value as determined by the
Board at the time of execution of the definitive agreement relating to the
applicable merger, consolidation, acquisition or reorganization; provided, that
(i) the consideration to be received by holders of Class A Stock shall be
permitted to be of a different form than the consideration to be received by the
holders of Class B Stock and (ii) in the event that securities of any Person are
to be received by holders of Class A Stock and Class B Stock, such securities
(and, if applicable, the securities into which the received securities are
convertible, or for which they are exchangeable, or which they evidence the
right to purchase) shall be permitted to differ with respect to their relative
voting rights and related differences in conversion and share distribution
provisions, with holders of shares of Class B Stock receiving the class or
series having the higher relative voting rights (without regard to whether such
rights differ to a greater or lesser extent than the corresponding differences
in voting rights and related differences in conversion and share distribution
provisions between the Class A Stock and the Class B Stock), and the differences
permitted by this clause (ii) shall not be taken into account in the
determination of equivalent economic value.
(h) The Class A Stock and the Class B Stock are subject to all
the powers, rights, privileges, preferences and priorities of any series of
Preferred Stock as shall be stated and expressed in any resolution or
resolutions adopted by the Board, pursuant to authority expressly granted to and
vested in it by the provisions of this Article IV.
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SECTION 3. Preferred Stock. The Board is hereby expressly
authorized, by resolution or resolutions, to provide, out of the unissued shares
of Preferred Stock, for series of Preferred Stock and, with respect to each such
series, to fix the number of shares constituting such series and the designation
of such series, the voting powers (if any) of the shares of such series, and the
preferences and relative, participating, optional or other special rights, if
any, and any qualifications, limitations or restrictions thereof, of the shares
of such series. The powers, preferences and relative, participating, optional
and other special rights of each series of Preferred Stock, and the
qualifications, limitations or restrictions thereof, if any, may differ from
those of any and all other series at any time outstanding.
SECTION 4. Redemption of Capital Stock. Notwithstanding any
other provision of this Restated Certificate of Incorporation to the contrary,
but subject to the provisions of any resolution or resolutions of the Board of
Directors adopted pursuant to this Article IV creating any series of Preferred
Stock, outstanding shares of Class A Common Stock, Preferred Stock or any other
class or series of stock of the Corporation, other than Class B Stock, shall
always be subject to redemption by the Corporation, by action of the Board, if
in the judgment of the Board such action should be taken, pursuant to Section
151(b) of the DGCL (or any other applicable provision of law), to the extent
necessary to prevent the loss or secure the reinstatement of any license or
franchise from any governmental agency held by the Corporation or any Subsidiary
to conduct any portion of the business of the Corporation or such Subsidiary,
which license or franchise is conditioned upon some or all of the holders of the
Corporation's stock of any class or series possessing prescribed qualifications.
The terms and conditions of such redemption shall be as follows:
(a) the redemption price of the shares to be redeemed pursuant
to this Section 4 shall be equal to the Fair Market Value of such
shares;
(b) the redemption price of such shares may be paid in cash,
Redemption Securities or any combination thereof;
(c) if less than all the shares held by Disqualified Holders
are to be redeemed, the shares to be redeemed shall be selected in such
manner as shall be determined by the Board, which may include selection
first of the most recently purchased shares thereof,
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10
selection by lot or selection in any other manner determined by
the Board of Directors;
(d) at least 30 days' written notice of the Redemption Date
shall be given to the record holders of the shares selected to be
redeemed (unless waived in writing by such holder), provided that the
Redemption Date may be the date on which written notice shall be given
to record holders if the cash or Redemption Securities necessary to
effect the redemption shall have been deposited in trust for the
benefit of such record holders and subject to immediate withdrawal by
them upon surrender of the stock certificates for their shares to be
redeemed;
(e) from and after the Redemption Date, any and all rights of
whatever nature, which may be held by the owners of shares selected for
redemption (including without limitation any rights to vote or
participate in dividends declared on stock of the same class or series
as such shares), shall cease and terminate and they shall thenceforth
be entitled only to receive the cash or Redemption Securities payable
upon redemption; and
(f) such other terms and conditions as the Board shall
determine.
For purposes of this Section 4:
(i) "Disqualified Holder" shall mean any holder of shares of
stock of the Corporation of any class or series whose holding of such
stock may result in the loss of any license or franchise from any
governmental agency held by the Corporation or any Subsidiary to
conduct any portion of the business of the Corporation or any
Subsidiary.
(ii) "Fair Market Value" of a share of the Corporation's stock
of any class or series shall mean the average (unweighted) Closing
Price for such a share for each of the 45 most recent days on which
shares of stock of such class or series shall have been traded
preceding the day on which notice of redemption shall be given pursuant
to paragraph (d) of this Section 4; provided, however, that if shares
of stock of such class or series are not traded on any securities
exchange or in the over-the-counter market, "Fair Market Value" shall
be determined by the Board of Directors in good faith; and provided
further, however, that "Fair Market Value" as to any stockholder who
purchases his stock within 120 days of a Redemption
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11
Date need not (unless otherwise determined by the Board of Directors)
exceed the purchase price paid by him. "Closing Price" on any day means
the reported last sales price regular way or, in case no such sale
takes place, the average of the reported closing bid and asked prices
regular way on the New York Stock Exchange Composite Tape, or, if stock
of the class or series in question is not quoted on such Composite
Tape, on the New York Stock Exchange, or, if such stock is not listed
on such exchange, on the principal United States registered securities
exchange on which such stock is listed, or, if such stock is not listed
on any such exchange, the highest closing sales price or bid quotation
for such stock on The Nasdaq Stock Market or any system then in use, or
if no such prices or quotations are available, the fair market value on
the day in question as determined by the Board of Directors in good
faith.
(iii) "Redemption Date" shall mean the date fixed by the Board
of Directors for the redemption of any shares of stock of the
Corporation pursuant to this Section 4.
(iv) "Redemption Securities" shall mean any debt or equity
securities of the Corporation, any Subsidiary or any other corporation,
or any combination thereof, having such terms and conditions as shall
be approved by the Board of Directors and which, together with any cash
to be paid as part of the redemption price, in the opinion of any
nationally recognized investment banking firm selected by the Board of
Directors (which may be a firm which provides other investment banking,
brokerage or other services to the Corporation or its affiliates), has
a value, at the time notice of redemption is given pursuant to
paragraph (d) of this Section 4, at least equal to the Fair Market
Value of the shares to be redeemed pursuant to this Section 4
(assuming, in the case of Redemption Securities to be publicly traded,
such Redemption Securities were fully distributed and subject only to
normal trading activity).
SECTION 5. Stockholder Voting. (a) Except as otherwise
provided in this Restated Certificate of Incorporation or required by law, with
respect to all matters upon which stockholders are entitled to vote or to which
stockholders are entitled to give consent, the holders of any outstanding shares
of Class A Stock and the holders of any outstanding shares of Class B Stock
shall vote together without regard to class, and every holder of the outstanding
shares of Class A Stock shall be entitled to
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12
cast thereon one (1) vote in person or by proxy for each share of Class A Stock
standing in such holder's name, and every holder of the outstanding shares of
Class B Stock shall be entitled to cast thereon ten (10) votes in person or by
proxy for each share of Class B Stock standing in such holder's name.
(b) Until such time as the outstanding shares of Class B Stock
no longer represent at least fifty percent (50%) of the Voting Power of the
Voting Stock, in addition to any other vote required hereunder or by applicable
law (and notwithstanding the fact that a lesser percentage may be specified by
law or this Restated Certificate of Incorporation), the affirmative vote of the
holders of one hundred percent (100%) of the Voting Power of all outstanding
shares of Class B Stock, voting separately as a class, shall be required:
(i) to amend, alter or repeal any provision of this Restated
Certificate of Incorporation, other than an amendment to Article II to
change the registered office or registered agent of the Corporation,
and other than an amendment effected pursuant to Section 151(g) of the
DGCL (or any successor provision thereto); or
(ii) for (x) the disposition, directly or indirectly, by the
Corporation (or by one or more direct or indirect subsidiaries thereof)
by sale, merger, new issuances or otherwise, to a Person (other than
the Corporation or a direct or indirect wholly owned subsidiary of the
Corporation), in any transaction or series of related transactions, of
shares of the capital stock of one or more direct or indirect
Subsidiaries of the Corporation which, in the aggregate, hold all or
substantially all of the assets of the Corporation and its Subsidiaries
on a consolidated basis or (y) the disposition, directly or indirectly,
by the Corporation (or by one or more direct or indirect subsidiaries
thereof) by sale, merger or otherwise, (other than to the Corporation
or a direct or indirect wholly owned subsidiary of the Corporation) in
any transaction or series of related transactions outside the ordinary
course of the business of the Corporation, of all or substantially all
of the assets of the Corporation and its Subsidiaries on a consolidated
basis, except, in each case referred to in the foregoing clauses (x)
and (y), for pledges, grants of security interests, security deeds,
mortgages or similar encumbrances securing bona
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13
fide indebtedness, and any foreclosure in respect
thereof.
(c) In addition to any other vote required hereunder or by
applicable law, the affirmative vote of the holders of a majority of the
combined Voting Power of the Voting Stock, voting together as a single class,
shall be required for (x) the disposition, directly or indirectly, by the
Corporation (or by one or more direct or indirect subsidiaries thereof) by sale,
merger, new issuances or otherwise, to a Person (other than the Corporation or a
direct or indirect wholly owned subsidiary of the Corporation), in any
transaction or series of related transactions, of shares of the capital stock of
one or more direct or indirect Subsidiaries of the Corporation which, in the
aggregate, hold all or substantially all of the assets of the Corporation and
its Subsidiaries on a consolidated basis or (y) the disposition, directly or
indirectly, by the Corporation (or by one or more direct or indirect
subsidiaries thereof) by sale, merger or otherwise, (other than to the
Corporation or a direct or indirect wholly owned subsidiary of the Corporation)
in any transaction or series of related transactions outside the ordinary course
of the business of the Corporation, of all or substantially all of the assets of
the Corporation and its Subsidiaries on a consolidated basis, except, in each
case referred to in the foregoing clauses (x) and (y), for pledges, grants of
security interests, security deeds, mortgages or similar encumbrances securing
bona fide indebtedness, and any foreclosure in respect thereof.
(d) Until such time as the outstanding shares of Class B Stock
no longer represent at least fifty (50%) percent of the Voting Power of the
Voting Stock, in addition to any other vote required hereunder or by applicable
law, the affirmative vote of the holders of a majority of the Voting Power of
all outstanding shares of Class A Stock, voting separately as a class, shall be
required to amend the definition of Termination Date as specified in Article III
so as to extend the date specified in clause (i) thereof or to reduce the
percentage specified in clause (ii) thereof.
(e) In addition to any other vote required hereunder or by
applicable law, the affirmative vote of the holders of one hundred percent
(100%) of the Voting Power of all outstanding shares of Class B Stock, voting
separately as a class, shall be required for (i) the issuance by the Corporation
of shares of Class B Stock or the authorization or issuance by the Corporation
of any securities convertible into or exchangeable for shares of Class B Stock,
or options, warrants or other rights to acquire shares of Class
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14
B Stock or any securities convertible into or exchangeable for shares of Class B
Stock or (ii) the authorization or issuance by the Corporation of shares of any
series or class of capital stock (other than Class B Stock) having more than one
vote per share ("High Vote Stock"), or securities convertible into or
exchangeable for shares of High Vote Stock, or options, warrants or other rights
to acquire shares of High Vote Stock or any securities convertible into or
exchangeable for shares of High Vote Stock.
ARTICLE V
DGCL SECTION 203
The Company hereby expressly elects not to be governed by the
provisions of Section 203 of the DGCL, and the restrictions and limitations set
forth therein.
ARTICLE VI
DIRECTORS
SECTION 1. Election of Directors. Directors shall be elected
at the annual meeting of stockholders, and each director elected shall hold
office until such director's successor has been elected and qualified. Directors
need not be stockholders of the Corporation.
SECTION 2. Advance Notice of Nominations; Independent
Directors. (a) Advance notice of nominations for the election of directors
shall be given in the manner and to the extent permitted provided in the By-laws
of the Corporation.
(b) The Board of Directors' nominees for election as
independent directors shall be approved by a committee of the Board comprised of
all of the directors other than the Chief Executive Officer and the independent
directors; provided, that if the holders of Class B Stock of the Corporation
cease to have the right, collectively, to designate at least three nominees to
the Board pursuant to the Stockholders' Agreement referred to in Section 3
below, then such committee of the Board shall be comprised of three members,
including all the directors designated by the holders of the Class B Stock
pursuant to the Stockholders' Agreement, if any, and such other director or
directors as shall be determined by majority vote of the whole Board.
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15
SECTION 3. Number of Directors. Subject to any rights of the
holders of any series of Preferred Stock outstanding at any time to elect
additional directors to the Board, the number of directors that shall constitute
the whole Board of the Corporation shall be determined from time to time
pursuant to the Stockholders' Agreement dated as of [ ], 1999, among Time Warner
Companies, Inc., American Television and Communications Corporation, Warner
Communications Inc., TW/TAE Inc., FibrCOM Holdings L.P., Paragon Communications,
MediaOne Group, Inc., and Advance/Newhouse Partnership (and their successors and
permitted assigns) and the Corporation, as amended from time to time, or, if
such agreement is no longer in effect, as specified in the By-laws of the
Corporation, as the same may be amended from time to time. In the absence of
such a provision in such Stockholders' Agreement or the By-laws of the
Corporation, the number of directors that shall constitute the whole Board of
the Corporation shall be three.
SECTION 4. Limitation on Director Liability. To the fullest
extent that the DGCL or any other law of the State of Delaware as it exists or
as it may hereafter be amended permits the limitation or elimination of the
liability of directors, no director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director. No amendment to or repeal of this Article VI shall apply to
or have any effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal.
SECTION 5. Removal of Directors; Filling of Newly Created
Directorships and Vacancies. (a) Subject to the rights of the holders of any
series of Preferred Stock outstanding at any time, directors may be removed from
office with or without cause, but only upon the affirmative vote of the holders
of a majority of the combined Voting Power of the Voting Stock, voting together
as a single class.
(b) Subject to the rights of holders of any series of
Preferred Stock outstanding at any time, any newly created directorship or
vacancy in the office of a director shall be filled only by (A) during the 20
day period following the date such newly created directorship or vacancy comes
into existence, the affirmative vote of the remaining directors or the sole
remaining director, as the case may be, or (B) if not so filled within such 20
day period, either (i) the affirmative vote of the holders of a
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majority of the combined Voting Power of the Voting Stock, voting together as a
single class, or (ii) the affirmative vote of the remaining directors or the
sole remaining director, as the case may be.
ARTICLE VII
PROVISIONS RELATING TO FOUNDING STOCKHOLDERS
SECTION 1. Founding Stockholders. In anticipation that the
capital stock of Corporation will cease to be owned exclusively, directly or
indirectly, by affiliates of Time Warner Inc. ("TW"), MediaOne Group, Inc. and
Advance/Newhouse Partnership (collectively and as further defined in Section 4
below, the "Founding Stockholders"), but that the Founding Stockholders will
remain, directly or indirectly, stockholders of the Corporation, and in
anticipation that the Corporation and the Founding Stockholders may engage in
the same or similar activities or lines of business and have an interest in the
same areas of corporate opportunities, and in recognition of the benefits to be
derived by the Corporation through its continued contractual, corporate and
business relations with the Founding Stockholders (including service of
officers, directors or employees of the Founding Stockholders as directors of
the Corporation), the provisions of this Article VII are set forth to regulate,
define and guide, to the fullest extent permitted by the DGCL, the conduct of
certain affairs of the Corporation as they may involve the Founding Stockholders
and their respective officers and directors, and the powers, rights and duties
of the Corporation and the Founding Stockholders and their respective officers
and directors in connection therewith.
SECTION 2. Competition and Corporate Opportunities. None of
the Founding Stockholders shall have any duty to refrain from engaging directly
or indirectly in the same or similar business activities or lines of business as
the Corporation. In the event that any of the Founding Stockholders acquires
knowledge of a potential transaction or matter that may be a corporate
opportunity for any of the Founding Stockholders and the Corporation, subject to
Section 3 of this Article VIII, none of the Founding Stockholders shall have any
duty to communicate or offer such corporate opportunity to the Corporation and
any other Founding Stockholders as applicable shall be entitled to pursue or
acquire such corporate opportunity for itself or to direct such corporate
opportunity to another person or entity. In addition, the fact that a Founding
Stockholder shall engage in a particular business activity shall not, of
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17
itself, provide a basis for determining that there has been a violation of
Section 3 of this Article.
SECTION 3. Allocation of Corporate Opportunities. The
following provisions shall be applicable to the maximum extent consistent with,
and permitted by, applicable Delaware law. In the event that a director, officer
or employee of the Corporation who is also a director, officer or employee of
any of the Founding Stockholders acquires knowledge of a potential transaction
or matter that may be a corporate opportunity for both the Corporation and any
of the Founding Stockholders, such director, officer or employee of the
Corporation shall act in good faith in a manner consistent with the following:
(a) a corporate opportunity offered to any person who is an
officer or employee (whether or not a director) of the Corporation and
who is also a director but not an officer or employee of a Founding
Stockholder shall belong to the Corporation, unless such opportunity is
expressly offered to such person primarily in his or her capacity as a
director of a Founding Stockholder, in which case such opportunity
shall belong to the relevant Founding Stockholder;
(b) a corporate opportunity offered to any person who is a
director but not an officer or employee of the Corporation and who is
also an officer or employee (whether or not a director) of a Founding
Stockholder shall belong to the relevant Founding Stockholder, unless
such opportunity is expressly offered to such person in his or her
capacity as a director of the Corporation, in which case such
opportunity shall belong to the Corporation; and
(c) a corporate opportunity:
(i) offered to any other person who is either (A) an
officer or employee of both the Corporation and a Founding
Stockholder or (B) a director of both the Corporation and a
Founding Stockholder (but not an officer or employee of the
Corporation or any Founding Stockholder), and
(ii) that is expressly offered to such person
(A) in his or her capacity as an officer, employee or director of the
Corporation shall belong to the Corporation; and
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18
(B) in his or her capacity as an officer, employee or director of a
Founding Stockholder shall belong to the relevant Founding Stockholder.
SECTION 4. Certain Matters Deemed Not Corporate Opportunities.
(a) In addition to and notwithstanding the foregoing provisions of this Article
VII, a corporate opportunity shall not be deemed to belong to the Corporation if
it is a business opportunity that the Corporation is not permitted to undertake
under the terms of Article II or that the Corporation is not financially able or
contractually permitted or legally able to undertake, or that is, from its
nature, not in the line of the Corporation's business or is of no practical
advantage to it or that is one in which the Corporation has no interest or
reasonable expectancy.
(b) For purposes of this Article VII only, (i) the term
"Corporation" shall mean the Corporation and all corporations, limited liability
companies, partnerships, joint ventures, associations and other entities in
which the Corporation beneficially owns (directly or indirectly) 50% or more of
the outstanding voting stock, voting power or similar voting interests, except
that for purposes of determining those persons who are directors of the
Corporation, such term shall mean the Corporation without regard to any other
entities in which it may hold an interest and (ii) the term "Founding
Stockholder" shall mean a Founding Stockholder and all corporations, limited
liability companies, partnerships, joint ventures, associations and other
entities (other than the Corporation) in which such Founding Stockholder
beneficially owns (directly or indirectly) 50 percent or more of the outstanding
voting stock, voting power or similar interests and, if a Founding Stockholder
is a partnership, shall also include those entities which constitute its
corporate general partners, except that for purposes of determining those
persons who are directors of Founding Stockholders, such term shall mean Time
Warner Inc., U S West Media Group, Inc. and, in the case of Advance/Newhouse
Partnership, Advance Communication Corp. and Newhouse Broadcasting Corporation,
its general partners.
SECTION 5. Expiration of Certain Provisions. Notwithstanding
anything in this Restated Certificate of Incorporation to the contrary, the
provisions of this Article VII shall expire as to any Founding Stockholder on
the date that both (i) such Founding Stockholder ceases to own beneficially
Common Stock representing at least 5% of the number of outstanding shares of
Common Stock of the Corporation and (ii) no person who is a director or officer
of the Corporation is also a director or officer of such
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Founding Stockholder. Neither the alteration, amendment, change or repeal of any
provision of this Article VII nor the adoption of any provision of this Restated
Certificate of Incorporation inconsistent with any provision of this Article VII
shall eliminate or reduce the effect of this Article VII in respect of any
matter occurring, or any cause of action, suit or claim that, but for this
Article VII, would accrue or arise, prior to such alteration, amendment, repeal
or adoption.
SECTION 6. Deemed Notice. Any person or entity purchasing or
otherwise acquiring any interest in any shares of the Corporation shall be
deemed to have notice of and to have consented to the provisions of this Article
VII.
ARTICLE VIII
STOCKHOLDER MEETINGS
SECTION 1. Meetings Generally. Meetings of stockholders may be
held within or without the State of Delaware, as the By-laws of the Corporation
may provide. The books of the Corporation may be kept (subject to any provision
of Delaware law) outside the State of Delaware at such place or places as may be
designated from time to time by the Board or in the By-laws of the Corporation.
Elections of directors need not be by written ballot unless the By-laws of the
Corporation shall so provide.
SECTION 2. Special Meetings. Special meetings of the
stockholders shall be called only (i) upon written request of the holders of not
less than a majority of the total voting power of the outstanding capital stock
of the Corporation entitled to vote at such meeting or (ii) upon request of any
director. Special meetings of the stockholders may be held at such time and
place as may be stated in the notice of meeting.
ARTICLE IX
BY-LAWS
In furtherance and not in limitation of the powers conferred
upon it by law, the Board of Directors is expressly authorized to adopt, repeal,
alter or amend the By-laws of the Corporation by the vote of a majority of the
entire Board of Directors. In addition to any requirements of law and any other
provision of this Restated Certificate of Incorporation or any resolution or
resolutions of the
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Board of Directors adopted pursuant to Article IV of this Restated Certificate
of Incorporation (and notwithstanding the fact that a lesser percentage may be
specified by law, this Restated Certificate of Incorporation or any such
resolution or resolutions), the affirmative vote of the holders of a majority of
the combined Voting Power of the Voting Stock, voting together as a single
class, shall be required for stockholders to adopt, amend, alter or repeal any
provision of the By-laws.
IN WITNESS WHEREOF, the Corporation has caused this Restated
Certificate of Incorporation to be duly executed this day of [ ], 1999.
TIME WARNER TELECOM INC.,
a Delaware corporation,
_______________________________
Name:
Title:
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EXHIBIT 10.4
As amended as of
December 16, 1998
TIME WARNER TELECOM LLC
1998 OPTION PLAN
ARTICLE I
PURPOSE OF THE PLAN
The purpose of the Time Warner Telecom LLC (the 'Company') 1998 Option Plan
(hereinafter the 'Plan') is to provide for the granting of options to
representatives and employees of the Company and its Subsidiaries in recognition
of the valuable services provided, and contemplated to be provided, by such
representatives and employees. The general purpose of the Plan is to promote the
interests of the Company and its members and to reward dedicated representatives
and employees of the Company and its Subsidiaries by providing them additional
incentives to continue and increase their efforts with respect to, and to remain
in the employ of, the Company or its Subsidiaries.
ARTICLE 11
CERTAIN DEFINITIONS
The following terms (whether used in the singular or plural) have the
meanings indicated when used in the Plan:
(a) 'Agreement' means the option agreement specified in Article XI.
(b) 'Approved Transaction' means any transaction in which the Board
(or, if approval of the Board is not required as a matter of law, the
members of the Company) shall approve (i) any consolidation or merger of
the Company in which the Company is not the continuing or surviving company
or pursuant to which Interests would be converted into cash, securities or
other property, other than a merger of the Company in which the equity
holders of the Company immediately prior to the merger have the same
proportionate ownership of the equity value of the surviving company
immediately after the merger or (ii) any sale, lease, exchange, or other
transfer (in one transaction or a series of related transactions) of all,
or substantially all, of the assets of the Company, or (iii) the adoption
of any plan or proposal for the liquidation or dissolution of the Company;
provided that the reconstitution of the Company as a corporation or other
entity or a public offering of the equity of the Company (or its successor)
shall not constitute an Approved Transaction.
(e) 'Award' means grants of Options under this Plan.
(d) 'Board' means the Management Committee of the Company.
(e) 'Board Change' means such time as the Initial Members and their
respective affiliates as a group cease to have the ability to elect a
majority of the members of the Board (other than the chief executive
officer of the Company and independent representatives; provided that
independent representatives shall be included in calculating whether the
foregoing majority requirement is satisfied if the representatives
nominated by the Initial Members and their respective affiliates do not
constitute a majority of the committee that selects the Board's nominees
for independent representatives) and a 'person' or 'group' (within the
meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) (other than the
Initial Members and their respective affiliates) has become the ultimate
'beneficial owner' (as defined in Rule 13d-3 under the Exchange Act) of
more than 35% of the total voting power of the voting interests of the
Company on a fully diluted basis and such ownership represents a greater
percentage of the total voting power of the voting interests of the
Company, on a fully diluted basis, than is held by the Initial Members and
their respective affiliates as a group on such date.
(f) 'Code' means the Internal Revenue Code of 1986, as amended from
time to time, or any successor statute or statutes thereto. Reference to
any specific Code section shall include any successor section.
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(g) 'Committee' means the Committee comprised of members of the Board
appointed pursuant to Article IV.
(h) 'Company' means Time Warner Telecom LLC, a limited liability
company, and any successor thereto.
(i) 'Effective Date' means the date the Plan becomes effective
pursuant to Article XV.
(j) 'Exchange Act' means the Securities Exchange Act of 1934, as
amended from time to time, or any successor statute or statutes thereto.
Reference to any specific Exchange Act section shall include any successor
section.
(k) 'Fair Market Value' of Units shall mean the fair market value of
such Units as determined in good faith by the Board after consultation with
an independent appraiser or other third party deemed appropriate by the
Board. In the event of an Approved Transaction involving the sale of
Interests of the Company, the Fair Market Value of a Unit shall be based
upon the price per Unit paid by the acquiror in connection with such
Approved Transaction, subject to appropriate adjustment to reflect relative
differences among the Units as determined in good faith by the Board.
(l) 'Holder' means a representative or an employee of the Company or
any of its Subsidiaries who has received an Award under this Plan. An
individual shall continue to be considered a Holder for purposes of this
Plan during the period such individual holds Units acquired pursuant to an
exercise of an Option.
(m) 'Initial Members' means Time Warner Inc., MediaOne Group, Inc.,
Advance/Newhouse Partnership and the affiliates of each of the foregoing.
(n) 'Interest' shall mean a Class A Interest in the Company as defined
in the Operating Agreement.
(o) 'Operating Agreement' shall mean the Amended and Restated Limited
Liability Company Agreement of Time Warner Telecom LLC dated July 14, 1998,
as in effect from time to time.
(p) 'Option' means any option granted pursuant to this Plan.
(q) 'Plan' has the meaning ascribed thereto in Article 1.
(r) 'Subsidiary' of a person means any present or future subsidiary of
such person as such term is defined in Section 425 of the Code and any
present or future trade or business, whether or not incorporated,
controlled by or under common control with such person. An entity shall be
deemed a Subsidiary of a person only for such periods as the requisite
ownership or control relationship is maintained.
(s) 'Total Disability' means a permanent and total disability as
defined in Section 22(e)(3) of the Code.
(t) 'Unit' shall mean an Interest in the Company expressed as a unit.
As of the date of the initial grant of Options under the Plan, the Board
shall determine the notional amount of Units considered to be outstanding
and the percentage interest of the equity value of the Company represented
by each Unit, which amounts shall be subject to adjustment as provided in
Section 3.02 and Section 6.06. Any references herein to Units include any
securities exchanged in the conversion of Units.
ARTICLE III
UNITS SUBJECT TO THE PLAN
SECTION 3.01 Number of Units. Subject to the provisions of Section 3.02 and
Section 6.06, the maximum number of Units in respect of which Awards may be
granted under the Plan shall be determined by the Board as of the date of the
initial grant of Awards under the Plan, but shall in no event represent more
than 10% of the equity value of the Company as of that date. The maximum number
of Units in respect of which Awards may be granted during any calendar year to
any one individual under the Plan shall not exceed one-half the number of Units
that may be subject to Awards granted under the Plan under the preceding
sentence. If and to the extent that an Option shall expire, terminate or be
canceled for any reason without having been exercised, the Units subject to such
expired, terminated or canceled portion of the Option shall again become
available for purposes of the Plan.
SECTION 3.02 Adjustments. In addition to the adjustment in the Interests as
described in Section 6.06, in the event that the Board determines that any
dividend or other distribution (whether in the form of cash, Interests,
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securities or other property), recapitalization, reorganization, merger,
consolidation, issuance or exchange of Interests, other ownership interests or
other securities of the Company, issuance of warrants or other rights to
purchase Interests, other ownership interests or other securities of the Company
or other similar corporate transaction or event affects the Interests such that
an adjustment is determined by the Board in its discretion to be appropriate in
order to prevent inappropriate dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the Board
may, in such manner as it may deem equitable, adjust any or all of (a) the
number of Units, other ownership interests or other securities of the Company
(or number and kind of other securities or property) with respect to which
Awards may be granted, (b) the number of Units, other ownership interests or
other securities of the Company (or number and kind of other securities or
property) subject to outstanding Awards or the percentage of Interests, other
ownership interests or other securities of the Company subject to Units and (c)
the exercise price with respect to any Option or, if deemed appropriate, make
provision for a cash payment to the Holder of an outstanding Option in
consideration for the cancellation of such Option. No adjustment shall be made
on account of the issuance of Interests with respect to Options.
ARTICLE IV
ADMINISTRATION
SECTION 4.01 Powers. The Plan shall be administered by the Board. Subject
to the express provisions of the Plan, the Board shall have plenary authority,
in its discretion, to grant Awards under the Plan and to determine the terms and
conditions (which need not be identical) of all Awards so granted, including
without limitation, (a) the individuals to whom, and the time or times at which,
Awards shall be granted or awarded, (b) the number of Units to be subject to
each Award, (c) when an Option can be exercised and whether in whole or in
installments, and (d) the form, terms and provisions of any Agreement (which
terms may be amended, subject to Article XIV).
SECTION 4.02 Factors to Consider. In making determinations hereunder, the
Board may take into account the nature of the services rendered by the
respective representatives and employees, their dedication and past
contributions to the Company and its Subsidiaries, their present and potential
contributions to the success of the Company and its Subsidiaries and such other
factors as the Board in its discretion shall deem relevant.
SECTION 4.03 Interpretation. Subject to the express provisions of the Plan,
the Board shall have plenary authority to interpret the Plan, to prescribe,
attend and rescind the rules and regulations relating to it and to make all
other determinations deemed necessary or advisable for the administration of the
Plan. The determinations of the Board on the matters referred to in this
Article IV shall be conclusive.
SECTION 4.04 Delegation to Committee. Notwithstanding anything to the
contrary contained herein, the Board may at any time, or from time to time,
appoint a Committee and delegate to such Committee the authority of the Board to
administer the Plan, including to the extent provided by the Board, the power to
further delegate such authority. Upon such appointment and delegation, any such
Committee shall have all the powers, privileges and duties of the Board in the
administration of the Plan to the extent provided in such delegation, except for
the power to appoint members of the Committee and to terminate, modify or amend
the Plan. The Board may from time to time appoint members of any such Committee
in substitution for or in addition to members previously appointed, may fill
vacancies in such Committee and may discharge such Committee.
Any such Committee shall hold its meetings at such times and places as it
shall deem advisable. A majority of members shall constitute a quorum and all
determinations shall be made by a majority of such quorum. Any determination
reduced to writing and signed by all of the members shall be fully as effective
as if it had been made by a majority vote at a meeting duly called and held.
ARTICLE V
ELIGIBILITY
Awards may be made only to (a) representative employees including officers
and representatives who are also employees, of, and consultants to, the Company
or any of its Subsidiaries, (b) prospective employees of the Company or any of
its, Subsidiaries and (c) any other individuals providing services to the
Company or any of its Subsidiaries. The exercise of Options granted to a
prospective employee shall be conditioned upon such
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person becoming an employee of the Company or any of its Subsidiaries. For
purposes of the Plan, the term 'prospective employee' shall mean any person who
holds an outstanding offer of employment on specific terms from the Company or
any of its Subsidiaries. Awards may be made to employees who hold or have held
Awards under this Plan or any similar or other awards under any other plan of
the Company or its Subsidiaries.
ARTICLE VI
OPTIONS
SECTION 6.01 Option Price. The purchase price of the Units under each
Option shall be determined by the Board and set forth in the applicable
Agreement, but shall not be less than 100% of the Fair Market Value of the Unit
on the date of grant.
SECTION 6.02 Term of Options. The term of each Option shall be for such
period as the Board shall determine, as set forth in the applicable Agreement,
but not more than 10 years from the date of grant (except as provided in
Section 6.08(b)).
SECTION 6.03 Exercise of Options. An Option granted under the Plan shall
become (and remain) exercisable during the term of the Option to the extent
provided in the applicable Agreement and this Plan and, unless the Agreement
otherwise provides, may be exercised to the extent exercisable, in whole or in
part, at any time and from time to time during such term; provided, however,
that subsequent to the grant of an Option, the Board, at any time before
complete termination of such Option, may accelerate the time or times at which
such Option may be exercised in whole or in part (without reducing the term of
such Option). The Agreement may contain conditions precedent to the
exercisability of Options, including without limitation, the achievement of
minimum performance criteria.
SECTION 6.04 Manner of Exercise. Payment of the Option purchase price shall
be made in cash or in whole Units already owned by the person exercising an
Option or, partly in cash and partly in such Units; provided, however, that such
payment may be made in whole or in part in Units held for six-months and only if
and to the extent permitted by the applicable Agreement. In addition, before the
occurrence of an IPO (as defined below), the Company may, in its sole
discretion, lend, on a full recourse basis, funds sufficient to pay any
applicable exercise price; provided that any such loan shall (i) be made only in
the event of the Holder's death or the Holder's termination of employment by the
Company without cause (as determined by the Board), (ii) be made at commercial
rates and (iii) be payable in full by the borrower on the earliest to occur of
(a) the six month anniversary of the date of exercise, (b) 30 days after an IPO
or (c) the sale of the Unit(s) acquired upon exercise of the Option. Such an
Option shall be exercised by written notice to the Company upon such terms and
conditions as provided in the Agreement. The Company shall effect the transfer
of the Units purchased under the Option as soon as practicable. No Holder or
other person exercising an Option shall have any of the rights of a Unit holder
of the Company with respect to Units subject to an Option granted under the Plan
until due exercise and full payment has been made.
SECTION 6.05 Limited Transferability of Options. Except as set forth in
this Section 6.05 and Article XXI, Options shall not be transferable other than
by will or the laws of descent and distribution, and Options may be exercised
during the lifetime of the Holder thereof only by such Holder (or his or her
court appointed legal representative). The Agreement may provide that Options
are transferable by gift to such persons or entities and upon such terms and
conditions specified in the Agreement.
SECTION 6.06 Adjustment of Percentage of Interests Subject to Units. Upon
the issuance or redemption of Interests in the Company, the number of Units
available under the Plan and the number of Units subject to outstanding Options
shall be equitably adjusted as determined by the Board in its sole discretion to
prevent inappropriate dilution or enlargement of the economic interest
represented by such Units.
SECTION 6.07 Restrictions. As a condition to the exercise of an Option, the
Holder will be required to become a party to the Operating Agreement and the
Stockholders Agreement (as defined in the Operating Agreement) and the Interests
acquired upon exercise of the Option will be held subject in all respects to the
terms and conditions of the Operating Agreement and Stockholders Agreement. In
addition, certificates representing Interests issued upon exercise of Options
shall bear a restrictive legend to the effect that transferability of such
Interests is subject to the restrictions contained in the Plan and the
applicable Agreement.
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SECTION 6.08 Special Exercise Delay/Extension of Options. The provisions of
this Section 6.08 shall apply to an Option unless the applicable Option
Agreement otherwise provides.
(a) An otherwise vested Option shall not be exercisable until the
'Liquidity Date' which shall be the earlier of (i) an initial public
offering of equity securities (an 'IPO') of the Company or a successor
thereto and (ii) the first anniversary of the initial grant of Options
under the Plan; provided that the Liquidity Date may be postponed at the
discretion of the Board, to comply with applicable securities laws or,
prior to an IPO, to avoid the need for the Company to register the
Interests under the securities laws.
(b) If the vested portion of an Option would expire when the Liquidity
Date has not yet occurred, the expiration date of such vested portion shall
be extended until the later of (i) 30 days after the Liquidity Date or
(ii) the regularly scheduled expiration date.
(c) Prior to an IPO, vested Options may be exercised only during the
30-day period starting on each Communication Date.
SECTION 6.09 Section 83(b) Election. Unless the Board determines otherwise,
an individual exercising an Option will be required to make a timely, valid
election under Section 83(b) of the Code.
SECTION 6.10 Tax Treatment of Exercise. Solely for purposes of determining
the appropriate tax treatment of the Members and the Holder, upon exercise of an
Option, a Holder will be treated as if the Company paid him or her an amount
equal to the aggregate difference between the exercise price and the Fair Market
Value of the Units subject to the Option and the Holder then purchased from the
Company for cash the applicable number of Units at the then current Fair Market
Value of such Units.
SECTION 6.11 Value Determinations. Commencing in 1999, the Company shall
determine the Fair Market Value of the Units as of December 31 and June 30 of
each year (each, a 'Valuation Date'). Such Fair Market Value shall be
communicated to Holders as soon as practicable following each Valuation Date
(each such date, a 'Communication Date'). In the event that any Option become
exercisable prior to the initial Valuation Date as a result of an acceleration
under the Plan, the Company will determine the Fair Market Value of the Units as
of a date selected by the Chief Financial Officer no more than six months
earlier than the date of the event triggering the acceleration.
ARTICLE VII
ACCELERATION OF OPTIONS
Notwithstanding any contrary waiting period or installment period in any
Agreement or in the Plan, or unless the applicable Agreement provides otherwise,
if a Holder's employment shall terminate by reason of death or Total Disability,
or in the event of any Approved Transaction or Board Change each outstanding
Option granted under the Plan shall immediately become exercisable in full in
respect of the aggregate number of Units covered thereby.
ARTICLE VIII
TERMINATION OF EMPLOYMENT
SECTION 8.01 General. If a Holder's employment shall terminate prior to the
complete exercise of an Option, then such Option shall thereafter be exercisable
in accordance with the provisions of the applicable Agreement (including the
provisions of any other agreement referred to in the Agreement); provided,
however, that (a) no Option may be exercised after the scheduled expiration date
of such Option; (b) if the Holdees employment terminates by reason of death or
Total Disability, Options shall remain exercisable for a period of at least one
year following such termination (but not later than the scheduled expiration of
such Option); and (c) any termination by the employing company for cause will be
treated in accordance with the provisions of Section 8.02.
SECTION 8.02 Termination for Cause. If a Holder's employment with the
Company or any of its Subsidiaries shall be terminated for cause, by the Company
or such Subsidiary prior to the exercise of any Option, then all Options held by
such Holder and any permitted transferee pursuant to Section 6.05 shall
immediately terminate. For the purposes of this Section 8.02, cause shall have
the meaning ascribed thereto in any employment agreement to which such Holder is
a party. In the absence of an employment agreement, cause
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shall include but not be limited to, insubordination, dishonesty, incompetence,
moral turpitude, other misconduct of any kind and the refusal to perform his
duties and responsibilities for any reason other than illness or incapacity;
provided, however, that if such termination occurs within 12 months after an
Approved Transaction or Board Change, termination for cause in the absence of an
employment agreement shall mean only a felony conviction for fraud,
misappropriation or embezzlement.
SECTION 8.03 Miscellaneous. The Board may determine whether any given leave
of absence constitutes a termination of employment. Awards made under the Plan
shall not be affected by any change of employment so long as the Holder
continues to be an employee of the Company or one of its Subsidiaries.
ARTICLE IX
RIGHT OF COMPANY TO TERMINATE EMPLOYMENT
Nothing contained in the Plan or in any Award shall confer on any Holder
any right to continue in the employ of the Company or any of its Subsidiaries or
interfere in any way with the right of the Company or a Subsidiary to terminate
the employment of the Holder at any time, with or without cause; subject,
however, to the provisions of any employment agreement between the Holder and
the Company or any of its Subsidiaries.
ARTICLE X
NONALIENATION OF BENEFITS
Except as specifically provided in Section 6.05 and Article XXI, no right
or benefit under the Plan shall be subject to anticipation, alienation, sale,
assignment, hypothecation, pledge, exchange, transfer, encumbrance or charge,
and any attempt to anticipate, alienate, sell, assign, hypothecate, pledge,
exchange, transfer, encumber or charge the same shall be void. No right or
benefit hereunder shall in any manner be liable for or subject to the debts,
contracts, liabilities or torts of the person entitled to such benefits.
ARTICLE XI
WRITTEN AGREEMENT
Each grant of an Option shall be evidenced by an Option Agreement in such
form and containing such terms and provisions not inconsistent with the
provisions of the Plan as the Board from time to time shall approve; provided,
however, that such Awards shall be evidenced by a single agreement. The
effective date of the granting of an Award shall be the date on which the Board
approves such grant. Each grantee of an Option shall be notified promptly of
such grant and a written Agreement shall be promptly executed and delivered by
the Company and the grantee; provided that such grant of Options shall terminate
if such written Agreement is not signed by such grantee (or his attorney) and
delivered to the Company within 90 days after the date the Agreement is sent to
such grantee for signature. Any such written Agreement may contain (but shall
not be required to contain) such provisions as the Board deems appropriate to
ensure that the penalty provisions of Section 4999 of the Code will not apply to
any stock or cash received from the Company or any of its Subsidiaries by the
Holder or a transferee of such Holder if the Award, or any part thereof, has
been transferred pursuant to Section 6.05 or Article XXI.
ARTICLE XII
RIGHT OF FIRST REFUSAL
The Agreement may contain such provisions as the Board shall determine to
the effect that if a Holder, or such other person exercising an Option, elects
to sell all or any Units that such Holder or other person acquired upon the
exercise of an Option awarded under the Plan, then such Holder or other person
shall not sell such Units unless such Holder or other person shall have first
offered in writing to sell such Units to the Company at Fair Market Value on a
date specified in such offer (which date shall be at least three business days
and not more than 10 business days following the date of such offer). If the
Company does not accept such offer within 10 days, the Units may be sold on
terms no more favorable than those offered to the Company. If the Units (i) are
not sold within 10 days of the date the Company declined to purchase the Units
or (ii) would be sold on terms more favorable than those offered to the Company,
the holder of the Units must again offer the Units for
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sale to the Company in accordance with this Article XII before any subsequent
sale of such Units. Any transfer of Units that occurs after any violation of
this Article XII shall be null and void.
ARTICLE XIII
PUT RIGHTS AND CALL RIGHTS
SECTION 13.01 Recurring Put Rights.
(a) Prior to any IPO, if a Holder has exercised an Option and held the
Units acquired upon exercise for a period of more than six months, such
Holder shall have the right to sell to the Company all or any portion of
such Units.
(b) The put right may be exercised only during the 30-day period
starting on each Communication Date, at fair market value determined as of
the preceding Valuation Date; provided that, unless otherwise determined by
the Board, with respect to any calendar year the Company shall not be
required to purchase Units issued pursuant to the Plan with an aggregate
value in excess of $20,000,000 (the 'Put Limit'). To the extent Units with
a value in excess of the Put Limit have been put to the Company, the
Company shall purchase a pro rata share of the Units put to the Company by
each individual.
(c) The put right will not be available to any Holder who is
terminated for cause.
(d) Prompt payment in respect of the put right will be due, without
interest.
(e) The determination of fair market value shall be made by the Board
in good faith. Such determination shall be made on a going concern basis
and a minority interest discount shall not be applied in assigning a value
to the Units that are being put back to the Company.
(f) Notwithstanding the foregoing, the Company shall not be obligated
to take any action or make any payment in satisfaction of a Holder's
exercise of a put right (the Company being hereinafter referred to as the
'Put Obligor') (i) if an event of default should then exist and be
continuing under the terms of any agreement for indebtedness for borrowed
money to which the Put Obligor or any of its subsidiaries is a party at
such time or (ii) if such action or payment would constitute a default or
an event of default or result in a mandatory prepayment requirement under
the terms of any agreement for indebtedness for borrowed money to which the
Put Obligor or any of its subsidiaries is a party at such time (each a
'Financing Limitation').
(g) If the Put Obligor is unable to make payments in respect of the
exercise of a put right due to a Financing Limitation, the Put Obligor will
make payment of the Put Date Value at the earliest practicable date
following the date when such payment would no longer contravene a Financing
Limitation, together with interest at the prime rate from the Scheduled
Payment Date to the date of payment by the Put Obligor.
SECTION 13.02 Recurring Call Rights.
(a) Prior to an IPO, if a Holder whose employment has terminated for
any reason holds Units of the Company acquired upon the exercise of an
Option, the Company may, in its discretion, purchase all or any number of
such Units that have been held by the Holder for a period of more than six
months.
(b) The call right may be exercised only during the 30-day period
starting on each Communication Date.
(c) The purchase price for called Units shall be the fair market value
as determined by the Board as of the preceding Valuation Date, as
applicable, and shall be determined under the principles governing the
determination of fair market value for purposes of the put right in
Section 13.01 of this Plan.
ARTICLE XIV
TERMINATION AND AMENDMENT
SECTION 14.01 General. Unless the Plan shall theretofore have been
terminated as hereinafter provided, no Awards may be made under the Plan on or
after the tenth anniversary of the Effective Date. The Board may at any time
prior to the tenth anniversary of the Effective Date terminate the Plan, and the
Board may at any time modify or amend the Plan in such respects as it shall deem
advisable.
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SECTION 14.02 Modification. No termination, modification or amendment of
the Plan may, without the consent of the person to whom any Award shall
theretofore have been granted (or a transferee of such person if the Award, or
any part thereof, has been transferred pursuant to Section 6.05 or Article XXI),
adversely affect the rights of such person with respect to such Award. No
modification, extension, renewal or other change in any Award granted under the
Plan shall be made after the grant of such Award, unless the same is consistent
with the provisions of the Plan. With the consent of the Holder (or a transferee
of such Holder if the Award, or any part thereof, has been transferred pursuant
to Section 6.05 or Article XXI) and subject to the terms and conditions of the
Plan (including Section 14.01), the Board may amend outstanding Agreements with
any Holder (or any such transferee), including, without limitation, any
amendment which would (a) accelerate the time or times at which the Award may be
exercised and/or (b) extend the scheduled expiration date of the Award. Without
limiting the generality of the foregoing, the Board may but solely with the
Holder's consent, agree to cancel any Award under the Plan held by such Holder
and issue a new Award in substitution therefor; provided that the Award so
substituted shall satisfy all of the requirements of the Plan as of the date
such new Award is made.
SECTION 14.03 Initial Public Offering.
(a) Upon the occurrence of an Initial Public Offering ('IPO') of stock
by the Company or a successor, the public corporation shall assume this
Plan and any outstanding Options in such manner as the Board shall
determine to be equitable and consistent with the purposes of the Plan. The
Board shall, in its discretion, determine the period during which the fair
market value of the equity interests subject to the Options are determined
for purposes of this Section 14.03.
(b) The Board shall have the right to require all Holders to
participate in a sale or merger transaction and to sell their Units to a
third party purchaser in connection with such sale or merger. Such right
shall be exercisable by written notice (the 'Buyout Notice') given to each
Holder which shall state (i) that there has been a proposal to effect the
sale of the Interests of every Member of the Company to such third party
purchaser, (ii) the proposed purchase price per Unit to be paid by the
third party purchaser for the Interests of all of the Members, and (iii)
the name of the third party purchaser, and to which shall be attached a
copy of all writings between such selling Member and the other parties to
such transaction necessary to establish the terms of such transaction. Each
such Holder agrees that, upon receipt of a Buyout Notice, each such Holder
shall be obligated to sell his Option Interests upon the terms and
conditions of such transaction (and otherwise take all reasonably necessary
action to cause consummation of the proposed transaction, including voting
any such Option Interest in favor of such transaction). The third party
purchaser shall furnish evidence reasonably satisfactory to the Board to
the effect that it has the financial ability to consummate the proposed
purchase of the Interests of all of the Members. For purposes of this
paragraph, 'Holder' means a person who holds an unexercised Option or who
holds an Interest acquired upon exercise of an Option. The term 'Option
Interest' means either an Option or an Interest acquired pursuant to
exercise of an Option.
SECTION 14.04 Corporate Reconstitution. If the Company's business is
reconstituted in corporate form, outstanding Options shall be assumed by the
successor corporation in accordance with the principles set forth in Section
14.03.
ARTICLE XV
EFFECTIVENESS OF THE PLAN
The Plan shall become effective upon approval by the affirmative vote of a
majority of the Members of the Company entitled to vote thereon.
ARTICLE XVI
GOVERNMENT AND OTHER REGULATIONS
The obligation of the Company with respect to Awards shall be subject to
all applicable laws, rules and regulations and such approvals by any
governmental agencies as may be required, including, without limitation, the
effectiveness of any registration statement required under the Securities Act of
1933, and the rules and regulations of any applicable securities exchange.
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ARTICLE XVII
WITHHOLDING
The Company's obligation to deliver Units in respect of any Award under the
Plan shall be subject to applicable federal, state and local tax withholding
requirements. Federal, state and local withholding taxes paid upon the exercise
of any Option may be paid in Units upon such terms and conditions as the Board
shall determine; provided, however, that the Board in its sole discretion may
disapprove such payment and require that such taxes be paid in cash.
ARTICLE XVIII
SEPARABILITY
If any of the terms or provisions of this Plan conflict with the
requirements of applicable law or applicable rules and regulations thereunder,
including the applicable requirements, if any, of Section 162(m) of the Code or
Rule 16b-3 under the Exchange Act, then such terms or provisions shall be deemed
inoperative to the extent necessary to avoid the conflict with applicable law,
or applicable rules and regulations, without invalidating the remaining
provisions hereof.
ARTICLE XIX
NON-EXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board nor the submission of the
Plan to the Members of the Company for approval shall be construed as creating
any limitations on the power of the Board to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and the awarding of stock and cash otherwise than
under the Plan, and such arrangements may be either generally applicable or
applicable only in specific cases.
ARTICLE XX
EXCLUSION FROM PENSION AND PROFIT-SHARING COMPUTATION
By acceptance of an Award, each Holder shall be deemed to have agreed that
such Award is special incentive compensation that will not be taken into
account, in any manner, as salary, compensation or bonus in determining the
amount of any payment under any pension, retirement or other employee benefit
plan of the Company or any of its Subsidiaries. In addition, each beneficiary of
a deceased Holder shall be deemed to have agreed that such Award will not affect
the amount of any life insurance coverage, if any, provided by the Company or
any of its Subsidiaries on the life of the Holder which is payable to such
beneficiary under any life insurance plan covering employees of the Company or
any of its Subsidiaries.
ARTICLE XXI
BENEFICIARIES
Each Holder may designate any person(s) or legal entity(ies), including his
or her estate, as his or her beneficiary under the Plan. Such designation shall
be made in writing on a form filed with the Secretary of the Company or his or
her designee and may be revoked or changed by such Holder at any time by filing
written notice of such revocation or change with the Secretary of the Company or
his or her designee. If no person shall be designated by a Holder as his or her
beneficiary or if no person designated as a beneficiary survives such Holder,
the Holder's beneficiary shall be his or her estate.
ARTICLE XXII
GOVERNING LAW
The Plan shall be governed by, and construed in accordance with, the laws
of the State of New York.
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EXHIBIT 10.12
MASTER CAPACITY AGREEMENT
BETWEEN
MCI TELECOMMUNICATIONS CORPORATION
AND
TIME WARNER AxS
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TABLE OF CONTENTS
IA. ASSIGNMENT AND ASSUMPTION BY AFFILIATES ....................... - 2 -
IB. DEFINITIONS ................................................... - 3 -
II. TERM AND TERMINATION .......................................... - 5 -
III. CAPACITY AVAILABILITY ......................................... - 6 -
IV. PAYMENT FOR CAPACITY .......................................... - 7 -
V. AUTHORITY, REPRESENTATIONS AND PERFORMANCE OF EQUIPMENT ....... - 10 -
VI. CAPACITY SPECIFICATIONS, MAINTENANCE, REPAIR AND
TESTING ....................................................... - 12 -
VII. COLLOCATION OF EQUIPMENT ...................................... - 12 -
VIII. CAPACITY INTERRUPTION, LIMITATIONS OF WARRANTY AND
DAMAGES ....................................................... - 14 -
IX. INDEMNIFICATION ............................................... - 15 -
X. DEFAULT ....................................................... - 16 -
XI. INFRINGEMENT .................................................. - 17 -
XII. REQUIRED RIGHTS ............................................... - 17 -
XIII. FORCE MAJEURE ................................................. - 18 -
XIV. TAXES ......................................................... - 18 -
XV. NOTICES ....................................................... - 19 -
XVI. CONFIDENTIALITY ............................................... - 20 -
XVII. WAIVER ........................................................ - 20 -
XVIII. GOVERNING LAW ................................................. - 20 -
XIX. ASSIGNMENT .................................................... - 20 -
XX. NON-DISCLOSURE OF COMMUNICATIONS .............................. - 21 -
XXI. NON-EXCLUSIVE ARRANGEMENT ..................................... - 21 -
XXII. INSURANCE AND LIABILITY ....................................... - 21 -
XXIII. AUTHORITY ..................................................... - 22 -
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XXIV. GENERAL PROVISIONS ............................................ - 22 -
XXV. ARBITRATION ................................................... - 23 -
XXVI. ENTIRE AGREEMENT .............................................. - 24 -
EXHIBIT A TECHNICAL SPECIFICATIONS
EXHIBIT B SERVICE AGREEMENT
EXHIBIT C BUILDING LIST
EXHIBIT D REQUIREMENTS FOR AUTOMATED INTERFACE WITH MCI
EXHIBIT E PRICING
EXHIBIT F CONFIDENTIALITY AGREEMENT
EXHIBIT G PERFORMANCE AND MAINTENANCE
EXHIBIT H PROVIDER RESPONSIBILITIES AND SYSTEM CRITERIA
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MASTER CAPACITY AGREEMENT
THIS AGREEMENT is made and entered into as of the 12th day of September
1994, by and between MCI Telecommunications Corporation, a Delaware corporation,
having an office at 1133 Nineteenth Street, N.W., Washington, D.C. 20036
(hereinafter referred to as "MCI"), and Time Warner AxS, a Delaware general
partnership, having an office at 160 Inverness Drive, West, Englewood, CO 80112
(hereinafter referred to as "Provider")
RECITALS
WHEREAS, Provider is affiliated with a series of limited partnerships or
other entities, which own and/or operate communications facilities in various
metropolitan areas and constitute Affiliates (as defined below);
WHEREAS, Provider, through Affiliates, has or will have a communication
network in the metropolitan area(s) identified herein with which Provider has or
will have the capability to furnish special access services to MCI, as MCI, in
its sole discretion, may require for the purpose of fulfilling certain
interconnection requirements for its customers;
WHEREAS, Provider and MCI have entered into this Agreement for the purpose
of setting forth those terms and conditions under which Provider's Affiliates
will furnish MCI with requested interconnection services;
WHEREAS, Provider and MCI also agree that they may enter into separate
capacity agreements (hereinafter referred to collectively or singly as the
"Service Agreement") for each MCI circuit requirement not otherwise available to
MCI under the procedures set forth in this Agreement which Service Agreement
shall incorporate the terms, conditions and covenants of this Agreement and
shall also set forth the terms and provisions unique to each such circuit
requirement; and
WHEREAS, MCI and Provider acknowledge and agree that the services to be
provided hereunder shall be provided by the Affiliates in the respective
territories in which they operate pursuant to an assignment of rights and
delegation of obligations hereunder as described in Article IA hereof.
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NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and in consideration of the covenants and agreements contained
in any Service Agreement, the parties hereto hereby agree as follows:
IA. ASSIGNMENT AND ASSUMPTION BY AFFILIATES
1A.1 Provider shall designate, from time to time, its Affiliates
that own and/or operate telecommunications facilities in various metropolitan
areas to provide Capacity and services under this Agreement. Such designation
shall constitute an assignment and assumption of all of Provider's rights and
responsibilities related to the provision of such specific Capacity (including
without limitation the responsibility to provide and maintain Capacity in
accordance with the specifications set forth in this Agreement, the right to
collocate equipment and the right to receive payment therefor) and no other
rights or responsibilities under this Agreement; provided that Provider shall
invoice for services rendered and may exercise and enforce other rights on
behalf of such Affiliates. Notwithstanding such assignment and assumption,
Provider shall manage the ASR and Service Agreement acceptance process, as set
forth in Article III, on behalf of its Affiliates. Provider and all such
Affiliates shall be deemed to be a single entity for purposes of pricing under
this Agreement (Exhibit E). All references to "Provider" throughout this
Agreement shall be interpreted to apply to "Affiliates" if in context and
consistent with the guidelines set forth in this Article IA.
1A.2 Provider shall only be jointly and severally liable for any
monetary obligations. Provider shall not be liable for any obligations of any
Partly Owned Affiliate, and MCI hereby releases Provider from and agrees to look
only to each Partly Owned Affiliate for payment and performance of any of its
respective obligations under this Agreement (including liability credits under
Article VIII).
1A.3 MCI shall be deemed to have approved without further action
under this Agreement any such assignment to and assumption by a Wholly Owned
Affiliate. Prior to the first such assignment to and assumption by a Partly
Owned Affiliate, Provider shall notify MCI of the identity of such Partly Owned
Affiliate and shall provide MCI, within a reasonable time, with such other
information on the Partly Owned Affiliate, as MCI shall reasonably request. Upon
notification by Provider, MCI may withhold its acceptance of an assignment to a
Partly Owned Affiliate in its sole discretion. If MCI accepts the designation
and assignment to such Partly Owned Affiliate, then Provider shall be entitled
to assign rights and delegate obligations under this Agreement to such Partly
Owned Affiliate for Capacity requested by MCI. Upon MCI's acceptance of the
assignment and delegation, the acceptance shall
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remain in effect for all subsequent assignments and assumptions by such Partly
Owned Affiliates until MCI notifies Provider in writing at least ten (10) days
in advance of its desire to terminate the MCI assignment approval. No change in
the ownership status of an Affiliate shall be effective for purposes of this
Agreement unless and until Provider has provided ten (10) days prior written
notice of such change to MCI (and, if required in this paragraph 1.A.3, obtained
the consent of MCI), or shall affect the liability of Provider for obligations
of an Affiliate incurred prior to the effective date of such change of status.
No withdrawal of designation by Provider, or approval by MCI, of a Partly Owned
Affiliate shall affect any ASR or Service Agreement then in effect that had been
assigned to and assumed by such Partly Owned Affiliate prior to the effective
date of such withdrawal of designation or approval.
1A.4 To the extent set forth in paragraph 1A.2, no Affiliate shall
be jointly and severally liable for any obligation of any other Affiliate or of
Provider under this Agreement. With regard to Articles X, XII and XIII, MCI's
rights to terminate this entire Agreement as specified in Articles X, XII and
XIII shall be deemed to be limited to (i) all ASRs and Service Agreements
assigned to Wholly Owned Affiliates, with respect to any default by a Wholly
Owned Affiliate; and (ii) all ASRs and Service Agreement assigned to a
particular Partly Owned Affiliate, with respect to a default by such Partly
Owned Affiliate.
1A.5 MCI hereby accepts and approves the assignment of this
Agreement to the following Partly Owned Affiliates: Charlotte AxS, L.P., Kansas
City Fiber Network, L.P., and MetroComm AxS, L.P.
IB. DEFINITIONS
1B.1 "Affiliate" shall mean a Wholly Owned Affiliate or a Partly
Owned Affiliate.
1B.2 "Capacity" shall mean dedicated telecommunications Circuits (as
hereinafter defined) Provider furnishes to MCI between Demarcation Points under
the terms of this Agreement.
1B.3 "Circuit" shall mean any individual DS-0, DS-1 or DS-3 or other
data transmission service Provider furnishes to MCI under the terms of this
Agreement.
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1B.4 "Confidential Information" shall mean any materials defined as
confidential or proprietary in any Confidentiality Agreement entered into
between the parties, and: a) all requests for service quotations for Capacity
and the contents thereof, including, but not limited to, the identity and
location of MCI's Customers (as hereinafter defined); b) all responses to
requests for quotations and Capacity, and the contents thereof, which Provider
submits to MCI; and c) all information one party provides to the other, if the
disclosing party clearly identifies such information as being confidential or
proprietary prior to disclosure or which is identified as such to the receiving
party, in writing, within ten (10) days after disclosure.
1B.5 "Customer" shall mean any corporation, company, entity or
person to which MCI furnishes Capacity or service, either under tariff or
contractual arrangement.
1B.6 "Demarcation Point" shall mean the point of interconnection
between the Network (as hereinafter defined) and MCI's telecommunications
equipment, as well as the interface between the Provider's telecommunications
facilities and Customer's telecommunications facilities. Provider shall be
responsible for all equipment required for provision of service between the
Network and a Customer's telecommunications equipment.
1B.7 "Interconnection Facilities" shall mean all local access
facilities if any between a Demarcation Point and Customer's telecommunications
equipment.
1B.8 "LEC" shall mean any company responsible for the provisioning
of local access lines owned and operated by a Regional Bell Operating Company or
an independent telephone company which has historically held the rights to
provide such services in their franchised territory.
1B.9 "MCI" shall mean MCI Telecommunications Corporation, MCI
Communications Corporation, and all subsidiaries, affiliates, successors and
assigns.
1B.10 "Network" shall mean any telecommunications links utilized by
or necessary to Provider in order to furnish the Capacity.
1B.11 "Partly Owned Affiliate" shall mean a partnership, corporation
or other entity that is under partial common control with Provider, that has
agreed to accept and assume the rights and responsibilities of providing
Capacity and related services hereunder in a specific territory and that has
been accepted by MCI as a Partly Owned Affiliate in accordance with Article IA.
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1B.12 "Provider" shall mean Time Warner AxS or its Affiliates as set
forth in Article IA above.
1B.13 "SECABS" shall mean Small Exchange Carrier Access Billing
System as defined by Bellcore Special Publication Number SROPT-001-856.
1B.14 "Wholly Owned Affiliate " shall mean any person or entity for
which Provider is the sole general partner and that is under 100% common control
with Provider.
Unless otherwise expressly defined, all other terms used in this
Agreement shall be accorded their usual and customary meanings.
II. TERM AND TERMINATION
2.1 The term of this Agreement shall commence as of the date hereof
and shall continue either: (a) for a period of five (5) years, or (b) until
final termination of any active Service Agreement or ASR (as hereinafter
defined) entered into in accordance with this Agreement, whichever is later.
2.2 The initial term of each ASR or Service Agreement shall commence
on the date upon which the Capacity described in the ASR or Service Agreement is
available for use. The initial term of the ASR or Service Agreement shall expire
at the end of the period set forth in the ASR or Service Agreement.
2.3 MCI shall have the right, in its sole discretion, to cancel any
ASR or Service Agreement twenty-four (24) hours after written notice to
Provider. Unless the ASR or Service Agreement is cancelled for breach as
provided for elsewhere in the Agreement, MCI shall remain liable for any
termination liabilities associated with the cancelled ASR or Service Agreement.
In the event MCI exercises its right to cancel any ASR or Service Agreement, the
terms and conditions of this Agreement shall nevertheless remain in effect until
termination of the last active ASR or Service Agreement.
2.4 Upon termination of this Agreement, all rights of MCI to the
Capacity shall cease and Provider shall have no further obligations to MCI with
respect to furnishing the Capacity.
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III. CAPACITY AVAILABILITY
3.1 Provider shall make available to MCI, in response to any
electronically transmitted requests from MCI, Capacity as specifically provided
for in any ASR or Service Agreement which may be entered into by the parties,
subject to the terms of this Agreement. A sample form of the Service Agreement
is attached hereto as Exhibit B.
3.2 The metropolitan areas and building locations in which
Provider's Network is currently able to furnish Capacity to MCI are listed in
Exhibit C attached hereto and made a part hereof. Provider shall have the right,
at any time and from time to time during the term of this Agreement, to provide
MCI with a revised list of metropolitan areas and building locations, in a
format acceptable to MCI. Upon receipt by MCI, any such revised list shall be
automatically attached hereto as an amended Exhibit C.
3.3 To order Capacity to be furnished at a building location
included in Exhibit C, MCI shall electronically submit an Access Service Request
(herein referred to as "ASR") to Provider, including the requested date of
service. Within five (5) business days after receipt of the ASR, Provider shall
electronically issue a Firm Order Commitment (hereinafter referred to as "FOC")
to MCI. MCI shall have the right, in its sole discretion, to cancel the ASR,
without incurring any termination liability, at any time prior to receiving the
FOC or in the event the Capacity is not provided by the in-service date set
forth in the FOC, unless the delay in providing the service is directly
attributable to MCI or its Customer for the requested Capacity. In the event the
Capacity is not provided by the in-service date set forth in the FOC, and the
delay in providing the service is not directly attributable to MCI or its
Customer, and MCI chooses not to cancel the ASR, Provider will waive
non-recurring charges associated with the Capacity ordered. Under no
circumstances shall MCI be billed for use of a circuit prior to installation.
The requirements for electronically issuing an ASR and an FOC are further
defined in Exhibit D attached hereto and made a part hereof. For the first
ninety (90) days of the term of this Agreement, the parties may continue to use
Provider's current method for receiving service orders and returning order
commitments. Provider shall use its best efforts to transition its access
service ordering system to conform to the requirements set forth in Exhibit D
within ninety (90) days of the date of this Agreement; provided, however, that
Provider must transition its access service ordering system no later than one
hundred eighty (180) days after the date of this Agreement.
3.4 To order Capacity to be furnished at a location not included in
Exhibit C, MCI shall submit a service request to Provider, including a requested
date of service. Within five (5) business days after receipt of the service
request, if Provider will be able to furnish such Capacity, Provider shall issue
a
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service request confirmation to MCI, along with an estimated date on which the
Capacity can be made available to MCI. Within ten (10) business days after
receipt of the service request confirmation, MCI shall have the right, in its
sole discretion, to either: (a) notify Provider that the availability date is
not acceptable and cancel the service request at no cost to MCI or request
Provider to submit a new service request confirmation, or (b) notify Provider
that the availability date is acceptable. In the event MCI chooses option (a)
and requests Provider to submit a new service request confirmation, the
procedures and the time periods for responses set forth in this paragraph 3.4
shall again be applicable to MCI's request. In the event MCI chooses option (b),
MCI shall submit an ASR to Provider which includes the estimated date from the
service request confirmation. Within five (5) business days after receipt of the
ASR, Provider will issue a FOC to MCI and shall immediately begin making all
arrangements necessary to insure that the Capacity will be available for MCI's
use by the estimated availability date. If the terms or pricing for Capacity
differ from those stated in Exhibit E, the parties shall execute a Service
Agreement for the Capacity within twenty (20) days from the date Provider
notifies MCI of the actual availability date for the Capacity; provided,
however, that MCI shall have the right, in its sole discretion, to cancel the
Service Agreement, without incurring any termination liability, in the event the
Capacity is not furnished within thirty (30) days after the in-service date set
forth in the Service Agreement, provided that neither MCI nor its Customer is
the direct cause of the delay. Notwithstanding the aforementioned, in the event
that a Customer cancels its requirement for Capacity after the in-service date
has passed, but before the Capacity has been furnished by Provider and neither
MCI nor its Customer is the direct cause of the delay, MCI shall have the right,
in its sole discretion, to cancel the accompanying Service Agreement for that
Capacity without incurring any termination liability.
IV. PAYMENT FOR CAPACITY
4.1 The monthly recurring charges for the Capacity shall be at the
rates set forth in Exhibit E, attached hereto and made a part hereof, net of any
discounts provided for in Exhibit E, and shall be payable by MCI by the next
bill date (same day in the following month as the bill date) in immediately
available funds. If such payment due date would cause payment to be due on a
Saturday, Sunday, or Legal Holiday, payment for such bills would be due as
follows: if such payment due date falls on a Sunday or on a Legal Holiday, the
payment due date shall be the first non-Holiday date following such Sunday or
Legal Holiday. If such payment due date falls on a Saturday or on a Legal
Holiday which is observed on Tuesday, Wednesday, Thursday, or Friday, the
payment due date shall be the last non-Holiday day preceding such Saturday or
Legal Holiday. If any portion of the payment is received by the
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Provider after the payment due date as set forth above, or if any portion of the
payment is received by the Provider in funds which are not immediately available
to the Provider, then a late payment charge shall be due the Provider. The late
payment charge will be applied to the portion of the payment not received by the
payment due date. The late payment charge shall be 1% per month (.000329 per
day) or 12% annually. This charge will be applied for the number of days from
the payment due date to and including the date MCI actually makes the payment to
the Provider. However, if for reasons outside the control of MCI (including, but
not limited to, a computer system failure), a payment is delayed but received
within two weeks of the payment due date, late payment charges will be waived.
The charges for Capacity will begin to accrue on the date the Capacity is
available for use. Provider will submit monthly invoices as directed by MCI,
which invoice(s) will include all the Capacity furnished to MCI as of the date
of the invoice(s). The invoice(s) submitted by Provider to MCI shall be prepared
utilizing the SECABS billing guidelines, and must be rendered to MCI within
fifteen (15) days after the close of the billing period. Under no circumstances
shall MCI be liable for any charges which are not billed to MCI within ninety
(90) days after the charges were initially incurred. For the first ninety (90)
days of the term of this Agreement, Provider may continue to use its current
standard billing procedures. Provider must transition its billing system to the
SECABS billing system within ninety (90) days of the date of this Agreement.
4.2 The non-recurring fee set forth in Exhibit E will be included in
the first monthly invoice submitted to MCI after Provider has furnished the
Capacity specified in the applicable FOC.
4.3 MCI shall have the right to dispute any charges for which it is
invoiced by Provider. In the event MCI disputes any such invoice or portion
thereof, MCI shall promptly pay that portion of the invoice which is undisputed.
MCI shall have the right to withhold payment of any disputed amount, provided
that MCI gives Provider notice of the amount and reason for the dispute in
accordance with the provisions of paragraph 25.1 herein. All claims must be
submitted within * of receipt of billing for those services. If a claim
is not submitted as stated above, MCI waives all rights to filing a claim
thereafter. If the dispute is resolved in favor of MCI and MCI has withheld the
disputed amount, no interest credits or charges will apply. If the dispute is
resolved in favor of MCI and MCI has paid the disputed amount, MCI will receive
an interest credit from the Provider for the disputed amount times a late
payment factor as set forth in paragraph 4.1 herein. In the event the Provider
agrees to refund a credit by check or wire transfer, interest will be applied up
to and including the date of issuance for either the check or wire transfer. If
the dispute is resolved in the favor of the Provider and MCI has paid the
disputed amount on or before the payment due
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date, no interest credit or charges will apply. If the dispute is resolved in
the favor of the Provider and MCI has withheld the disputed amount, any payments
withheld pending settlement of the disputed amount will be subject to the late
payment charge as set forth in paragraph 4.1 herein; however, interest charges
shall not apply to any period of time required by Provider to research and
validate invoice disputes. All invoicing disputes that cannot be resolved to the
mutual satisfaction of Provider and MCI shall be resolved in accordance with the
provisions of Article XXV herein. Notwithstanding any provisions contained in
this Agreement to the contrary, MCI's failure to pay any disputed invoice or
portion thereof shall not be considered a breach of the terms and provisions of
this Agreement.
4.4 The rates for furnishing the Capacity to MCI throughout the term
of this Agreement are set forth in Exhibit E. Under no circumstances during the
term of this agreement shall the price MCI pays to Provider for Capacity be more
than 90% of the tariffed prices MCI can obtain from the LEC serving the same
locations as Provider (Provider mileage for individual Circuits shall conform to
the mileage component assigned to the individual Circuit by the LEC) assuming
the LEC is used for all MCI access requirements (MCI LEC Price). In the event of
a LEC tariff change, both parties will work together to establish new pricing.
Provider shall modify the applicable rates in Exhibit E within seventy-five (75)
days of such LEC tariff change. This change will be effective on the date of the
LEC tariff change.
In the event of changes in the rates in Exhibit E resulting from changes in the
factors used by MCI to calculate the MCI LEC Price, the changes to the rates in
Exhibit E will be effective on the date MCI notifies Provider of the change in
calculation of the MCI LEC Price.
Notwithstanding the provisions of the foregoing sentence, however, in the event
Provider issues a revised schedule of rates resulting in a decrease in pricing,
all Capacity furnished to MCI by Provider pursuant to this Agreement shall be
subject to such decreased pricing schedule.
4.5 * In the event Provider * then Provider will * . As used in
the paragraph 4.5, the phrase "prices, terms and conditions" and * shall include
considerations of * and any other contract term which * may not be construed
as violations of this paragraph 4.5.
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If it is determined that Provider has not fully complied with the terms of this
Paragraph 4.5, Provider shall * .
V. AUTHORITY, REPRESENTATIONS AND PERFORMANCE OF EQUIPMENT
5.1 Each Affiliate providing Capacity in any territory warrants and
represents that it is authorized by all applicable federal, state and local
laws, regulations and ordinances to furnish such Capacity and hereby agrees to
indemnify and hold harmless MCI and MCI's Customers from and against any and all
loss, liability, damage and expense (including reasonable attorneys' fees) for
any demand, claim, suit or judgment against MCI and/or MCI's Customers
attributable to such Affiliate not having or losing such authorizations.
5.2 MCI warrants and represents that is authorized by all applicable
federal, state and local laws, regulations and ordinances to enter into this
Agreement and perform its obligations hereunder and hereby agrees to indemnify
and hold harmless Provider from and against any and all loss, liability, damage
and expense (including reasonable attorney's fees) for any demand, claim, suit
or judgment against Provider attributable to MCI not having or losing such
authorizations.
5.3 Each Affiliate providing Capacity in any territory represents
and warrants to MCI that it has authority to do business in the areas in which
such Affiliate furnishes Capacity to MCI as set forth in Exhibit C and the right
to furnish the Capacity to MCI, and that it is an entity, duly organized,
validly existing and in good standing under the laws of the state of its origin,
with all requisite power to enter into and perform its obligations under this
Agreement in accordance with its terms.
5.4 MCI represents and warrants that it is an entity, duly
organized, validly existing and in good standing under the laws of the state of
its origin, with all requisite power to enter into and perform its obligations
under this Agreement in accordance with its terms.
5.5 Each Affiliate represents and warrants to MCI that the Capacity
furnished by it under the terms of this Agreement and any Service Agreement
shall be designed, produced, installed, provided and maintained in conformance
and compliance with applicable federal, state and local laws, administrative and
regulatory requirements and any other authorities having jurisdiction over the
subject matter of this Agreement. Provider
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or its Affiliates shall be responsible for applying for, obtaining and
maintaining all registrations and certifications which may be required by such
authorities.
5.6 Each Affiliate represents and warrants to MCI that it will use
its best efforts to ensure the Capacity it furnishes to MCI shall meet the
specifications contained herein as defined in Exhibit A and H except for
scheduled maintenance (as described in Exhibit G). Outages resulting from
scheduled maintenance shall not exceed one (1) cumulative hour per consecutive
thirty (30) day period with respect to any single Circuit.
5.7 Provider or its Affiliates shall obtain any authorizations and
approvals necessary to furnish the Capacity to MCI. In the event of a conflict
between the terms of this Agreement and/or any Service Agreement and any tariff
which Provider's Affiliates or MCI may file pursuant to any federal or state
law, rule or regulation, the terms of any such tariff shall control unless
otherwise exempted by statue; provided, however, that to the extent lawfully
required, each Affiliate represents and warrants that there are no such
conflicts on the date hereof regarding services to be provided by it, and
covenants it will permit no such conflicts unless the new terms are expressly
agreed to by MCI. Notwithstanding the termination provisions set forth in
paragraph 2.3 herein, if the provisions of any tariff alter the terms and
conditions of this Agreement and/or any Service Agreement materially and
adversely to either party, the affected party may terminate this Agreement
and/or any affected Service Agreement(s) upon thirty (30) days notice to the
other party, without incurring any termination liability, for a period of one
hundred eighty (180) days after written notice of such tariff change.
5.8 Each party agrees that neither its equipment nor the Circuit(s)
associated with the Capacity shall interfere with or impair any other services
or facilities furnished by the other party including, but not limited to, damage
to the other's plant, unlawful impairment of the privacy of any communications
transmitted over the Capacity, or creation of a hazard to any employees or
customers or to the public. If a party determines that any such impairment or
interference exists, such party shall provide written notice to the other. The
aforementioned notice shall state, if known, the nature and cause of the
interference or impairment in sufficient detail to allow the damaging party to
take immediate remedial measures including, but not limited to, blockage of the
other party's network associated with the Capacity as provided for in paragraph
6.5 herein. If additional equipment is required because of the damaging party's
misuse of the Capacity, the damaging party shall bear the cost thereof. The
damaged party shall have the right to inspect any such equipment to determine
its compliance and compatibility with the damaged party's network.
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VI. CAPACITY SPECIFICATIONS, MAINTENANCE, REPAIR AND TESTING
6.1 Provider represents, covenants and warrants to MCI that it
shall, at all times, comply with the provisions of Exhibits G and H attached
hereto and made a part hereof.
6.2 Provider warrants, covenants and represents that the Capacity it
furnishes to MCI shall meet the technical specifications set forth in Exhibit A
(hereinafter referred to as the "Specifications")
6.3 Provider shall be responsible for maintaining and repairing the
Network in accordance with the procedures set forth in Exhibit G. MCI is
prohibited from performing any maintenance and repair on the Network, other than
set forth expressly in Exhibit G, without the express written authorization of
Provider. Upon request from MCI, Provider shall furnish, install, test, maintain
and repair any Interconnection Facilities in a Customer location, at Provider's
sole cost and expense, in accordance with reasonable industry standards,
including, but not limited to, those procedures set forth in paragraph 2.9 of
Exhibit G.
6.4 Provider shall report, investigate and correct any failure,
interruption or impairment of the Capacity in accordance with the procedures set
forth in Exhibit G.
6.5 The parties agree that if either party, in its sole discretion,
determines that any emergency action is necessary to protect its own
telecommunications network, that party may block any signals the other party may
be transmitting over the blocking party's network. In the event MCI blocks
Provider's Circuit(s) and/or Capacity because such Circuit(s) and/or Capacity do
not meet the parameters of the specifications set forth in Exhibit A, MCI shall
be relieved of all obligations to make payments for charges relating to such
Circuit(s) and/or Capacity until such time as the affected Circuit(s) and/or
Capacity meet the Specifications. Each party agrees that it will notify the
other, as soon as practicable, when a blockage occurs and both parties agree to
work diligently towards restoration of the affected Circuits and/or Capacity.
Neither party shall have any obligation to the other party for any claim,
judgment or liability resulting from such blockage, except as otherwise provided
in this paragraph 6.5.
VII. COLLOCATION OF EQUIPMENT
7.1 Subject to MCI's approval, which approval may be withheld in
MCI's sole discretion, Provider shall be permitted to install its equipment at
MCI locations provided that such equipment shall be used solely for the purpose
of providing access facilities
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to interconnect the Capacity and, if applicable, to interconnect the services
acquired by Customer directly from Provider, to MCI's telecommunications
network. Any equipment installed by Provider must be MCI lab-approved. Any
equipment Provider is permitted to install at an MCI location shall be
maintained and repaired by Provider. MCI will allow Provider access to its
equipment for the purpose of maintenance and repair of equipment, and testing
the Circuits and the Capacity, but only in accordance with procedures which MCI,
in its sole discretion, deems to be appropriate, including, but not limited to,
those procedures set forth in paragraph 2.9 of Exhibit G. For each MCI location
in the metropolitan areas set forth in Exhibit C, the parties shall prepare a
detailed scope of work, including a designation of the space at the MCI location
within which Provider will install its equipment and a list of the equipment
Provider intends to install, which scope of work as amended from time to time
shall be attached to this Agreement as a part of Exhibit C. Subject to all
required approvals and the availability of sufficient space, MCI will provide,
at MCI's cost, reasonable space, power and environmental conditions including,
but not limited to, equipment space, battery space and conduit space, air
conditioning and fire protection, as necessary to facilitate said
interconnection.
7.2 The parties agree that if Provider installs equipment at MCI
locations in accordance with paragraph 7.1 herein, Provider will make the
equipment available as a bailment and title to the equipment will remain with
Provider. MCI shall have no right, title or interest therein. MCI will keep
Provider's equipment free and clear of all liens, security interest and
encumbrances. MCI shall have the right to relocate Provider's equipment for
MCI's convenience due to MCI's networking requirements; provided however, MCI
will provide Provider with as much notice as practicable under the circumstances
prior to relocating Provider's equipment. If the schedule and operating
conditions merits it, in MCI's sole discretion, MCI may allow Provider to
coordinate relocation activities with the appropriate MCI representative and
perform the relocation work on its own equipment. If MCI relocates the
Provider's equipment within the space, the relocation will be at MCI's sole cost
and expense; provided, however, if the Provider's equipment is moved by the
Provider or is moved to another location, the relocation will be at the
Provider's sole cost and expense. For purposes of this Paragraph 7.2 and in
order to facilitate coordination, the parties will name appropriate field level
contacts and provide their respective telephone numbers within thirty (30) days
after execution of this Agreement.
7.3 Provider understands and agrees that permission to install its
equipment at an MCI location is not intended to and shall not be deemed to grant
Provider any property rights in the location. In the event, however, that this
arrangement shall be
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construed by the owner of the building in which the location is situated to be
such a grant and if the owner of the building asserts such a grant to be a
violation of the lease under which MCI occupies the location, Provider agrees,
upon request of MCI, to either enter into an agreement approved by said owner or
immediately remove its equipment. MCI agrees to cooperate with Provider in
obtaining the approvals Provider may need to obtain from any building owner.
VIII. CAPACITY INTERRUPTION LIMITATIONS OF WARRANTY AND DAMAGES
8.1 For interruptions of the Capacity * , unless such interruption
is the result of any act or omission of MCI or Customer, or the failure of MCI
or Customer to allow Provider access to premises where repair of interruption
is necessary, or suspension of Capacity by Provider as permitted under the
terms of this Agreement. *
<TABLE>
<CAPTION>
*
------------------------------- ------
<S> <C>
*
*
</TABLE>
Notwithstanding the termination provisions of paragraph 2.3 herein or the
default provisions of Article X herein, if any Circuit included in the Capacity
cannot meet the Specifications * , MCI may *, at MCI's discretion, * for
comparable services.
In addition, if Provider has identified a location listed on Exhibit C, Building
List, as being serviced by a self-healing fiber ring, * to such location in the
event that * . In no event, however, shall * during a particular month at a
location serviced by a self-healing ring * during that particular month.
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Once a location has been identified by Provider as being serviced by a
self-healing ring, that location will be subject to the * listed above for
the term of this Agreement.
8.2 THE FOREGOING SHALL BE * , HOWEVER LONG IT SHALL LAST AND
REGARDLESS OF THE CAUSE, UNLESS SUCH LOSS OR DAMAGE IS DUE TO PROVIDER'S
WILLFUL OR NEGLIGENT ACTS OR OMISSIONS.
8.3 IN NO EVENT SHALL EITHER PARTY TO THIS AGREEMENT BE LIABLE TO
THE OTHER PARTY, TO CUSTOMERS OF A PARTY OR TO ANY THIRD PARTIES FOR ANY
INDIRECT, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES TO THE OTHER PARTY, TO THE
CUSTOMERS OF A PARTY OR TO A THIRD PARTY INCLUDING, WITHOUT LIMITATION, THOSE
BASED ON LOSS OF SERVICE, REVENUES, PROFITS OR BUSINESS OPPORTUNITIES, WHETHER
OR NOT PROVIDER OR MCI HAD OR SHOULD HAVE HAD ANY ACTUAL OR CONSTRUCTIVE
KNOWLEDGE THAT SUCH THAT SUCH DAMAGES MIGHT BE INCURRED BY A PARTY, CUSTOMERS OF
A PARTY, OR ANY THIRD PARTIES.
IX. INDEMNIFICATION
9.1 Provider shall indemnify and hold MCI and its Customers harmless
from and against any and all loss, liability, damage and expense (including
reasonable attorneys' fees) arising out of any demand, claim, suit or judgment,
for damages to any property or bodily injury to or death of any persons,
including, but not limited to, customers, agents and employees of either party
hereto (including payment under any worker's compensation law or under any plan
for employee disability and death benefits) which may arise out of or be caused
by any act or omission of Provider.
9.2 MCI shall indemnify and hold Provider harmless from and against
any and all loss, liability, damage and expense (including reasonable attorneys'
fees) arising out of any demand, claim, suit or judgment, for damages to any
property or bodily injury to or death of any persons, including, but not limited
to, customers, agents and employees of either party hereto (including payment
under any workers' compensation law or under any plan for employee disability
and death benefits) which may arise out of or be caused by any act or omission
of MCI.
9.3 If any claim arises to which the provisions of this Article IX
may be applicable, the party against whom such claim is made shall immediately
upon learning of such claim, notify the other party. Such other party, at its
option, may settle or compromise such claim or retain counsel of its own
choosing and control and prosecute the defense. In no event shall the party
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against whom the claim is asserted have the right to pay, settle or otherwise
compromise such claim without the prior written consent of the party who may be
obligated for such indemnity and the parties hereto agree that they will not
unreasonably withhold their consent to such payment, settlement or compromise.
X. DEFAULT
10.1 Except for Provider's obligations to furnish the Capacity
without interruption and to repair the Network and/or Circuit(s) comprising the
Capacity, the exclusive remedies for breach of which obligations are provided
for in Article VIII herein, neither party shall be in default under this
Agreement or in breach of any provisions hereof unless and until it has been
given written notice of a breach of this Agreement by the other party and shall
have failed to cure such breach within thirty (30) days after receipt of such
notice. When a breach cannot reasonably be cured within such thirty (30) day
period, if the breaching party shall proceed promptly to cure the same and
prosecute such curing with due diligence, the time for curing such breach shall
be extended for such period of time as may be necessary to complete such curing.
Notwithstanding the termination provisions of paragraph 2.3 herein, upon the
failure to cure any such breach as provided above, the party giving notice of
the breach may thereupon immediately terminate this Agreement or any ASR or
Service Agreement upon providing written notice of termination to the breaching
party and without incurring any termination liability. Upon default by either
party, except as expressly limited herein, the non-defaulting party shall have
the right to pursue any or all remedies available at law and/or equity.
10.2 In addition to any breach of a material term of this Agreement,
other events that will, if not cured within the applicable time periods,
constitute a default shall include, but not be limited to, the occurrence of any
one or more of the following events:
a. The filing of bankruptcy or making a general assignment
for the benefit of creditors; and/or
b. The defaulting party's material violation of any
applicable laws, statutes, ordinances, codes or other
legal requirements with respect to the Capacity when the
violation(s) is not remedied within ten (10) business
days after written notice thereof; provided, however,
that each party hereto reserves the right to contest
and/or appeal any such claim of violation, in which
event Termination shall be stayed pending resolution of
the contest and/or appeal.
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XI. INFRINGEMENT
11.1 Provider represents that the equipment and facilities it will
use in furnishing the Capacity to MCI pursuant to this Agreement will not
infringe or violate any copyright, patent, trade secret or any other
intellectual property rights or similar property rights, excluding, however, any
such infringement which may arise due to combining such equipment and facilities
with equipment or facilities furnished by MCI or with equipment or facilities
furnished by any entity other than Provider outside the Demarcation Points.
Provider will indemnify, defend and hold MCI and its Customers harmless from and
against any claims made as a consequence of any such infringement or violation
of any copyright, patent, trade secret or any other intellectual property rights
or similar property rights. Moreover, should the equipment or facilities
furnished by Provider hereunder become, or in Provider's opinion is likely to
become, the subject of a claim of infringement, or should MCI's use of the
equipment and facilities be finally enjoined, Provider shall at its election and
expense do either A or B below:
A. Procure for MCI the right to continue using the equipment or
facilities; or
B. Replace or modify the equipment or facilities to make it
non-infringing.
XII. REQUIRED RIGHTS
12. Each Affiliate providing Capacity in any territory represents
that it currently owns, has obtained or will obtain all licenses,
authorizations, franchises, rights of way and other licenses or permits
necessary for furnishing the Capacity to MCI (hereinafter referred to as
"Required Rights"). Such Affiliate shall utilize its best efforts to cause such
Required Rights to remain in effect throughout the term of this Agreement.
Notwithstanding the termination provisions of paragraph 2.3 of this Agreement,
if such Affiliate does not obtain and maintain such Required Rights, MCI may
terminate this Agreement and/or any affected ASR or Service Agreement
immediately upon notice to Provider, without incurring any termination
liability, in addition to exercising any other rights or remedies under this
Agreement.
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XIII. FORCE MAJEURE
13.1 In no event shall either party have any claim or right against
the other party for any failure of performance by such other party if such
failure of performance is caused by or the result of causes beyond the
reasonable control of such other party, including, but not limited to, act of
God, fire, flood or other natural catastrophe; laws, orders, rules, regulations,
directions or actions of governmental authorities having jurisdiction over the
subject matter of this Agreement or any civil or military authority; national
emergency, insurrection, riot or war; or other similar occurrence.
Notwithstanding the termination provisions of paragraph 2.3 herein, if the
excusable delay exceeds sixty (60) days, either party may terminate this
Agreement and/or any affected ASR or Service Agreement immediately upon written
notice, without incurring any termination liability.
XIV. TAXES
14.1 Any sums MCI is required to pay under this Agreement are
exclusive of any taxes which may be imposed with respect to this Agreement or
any of the services furnished or used hereunder including, but not limited to,
taxes imposed on this Agreement, the Capacity, maintenance and repair or
Provider's provision thereof or MCI's use thereof. MCI shall be responsible for
any such taxes with the exception of municipal franchise taxes levied against
Provider or regarding Providers' provision of the Capacity/services which shall
be Provider's responsibility and obligation. MCI shall pay to or reimburse
Provider for any taxes Provider is required to pay on MCI's behalf upon
presentation of proof thereof.
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XV. NOTICES
15.1 All notices and communications concerning this Agreement shall
be addressed to:
MCI (one copy to each) at:
1. Director
Alternative Access Development
1650 Tysons Blvd.
McLean, Virginia 22102
2. Assistant General Counsel-Real Estate
1133 Nineteenth Street, N.W.
Washington, D.C. 20036
Provider at:
Time Warner AxS
c/o Time Warner Communications Holdings, Inc.
160 Inverness Drive, West
Englewood, CO 80112
Attn: Vice President, Marketing
Time Warner AxS
c/o Time Warner Communications Holdings, Inc.
300 First Stamford Place
Stamford, CT 06902
Attn: General Counsel
or at such other address as may be designated in writing to the other party.
15.2 Notices shall be sent by registered or certified U.S. Mail,
postage prepaid, or by commercial overnight delivery service, or by facsimile,
and shall be deemed delivered to addressee on the date of return receipt
acknowledgment, in the case of notices sent via U.S. Mail; or on the next day
after the date the notice was sent, in the case of notices sent by either
overnight delivery service or by facsimile; provided, however, that upon receipt
of a returned notice marked "unclaimed," the sending party shall make reasonable
effort to contact and notify the other party by telephone. Notwithstanding the
aforementioned, the original of the facsimile notice must be sent by overnight
delivery service in order for the delivery of facsimile notice to be deemed
effected.
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XVI. CONFIDENTIALITY
16.1 All confidential and proprietary information disclosed by
either party hereto to the other in connection with this Agreement or any
Service Agreement and in accordance with the Confidentiality Agreement, attached
hereto as Exhibit F and hereby incorporated herein, shall be treated as required
under the provisions of the Confidentiality Agreement.
16.2 The provisions of this Article XVI shall survive termination of
this Agreement for a period of two (2) years.
XVII. WAIVER
17.1 Except as otherwise stated herein, no waiver of any breach of
this Agreement or of any of the terms hereof shall be effective unless such
waiver is in writing and signed by the party against whom such waiver is
claimed. No waiver of any breach shall be deemed to be a waiver of any other or
subsequent breach.
XVIII. GOVERNING LAW
18.1 This Agreement shall be governed by and construed in accordance
with the laws of the State of New York without giving effect to its principles
of conflicts of laws.
XIX. ASSIGNMENT
19.1 Provider may assign its rights and delegate its obligations
under this Agreement to any Affiliate in accordance with Article IA. Any
assignment or transfer of this Agreement by Provider shall be subject to MCI's
rights under this Agreement and any assignee or transferee shall continue to
perform Provider's obligations to MCI under the terms and conditions of this
Agreement and any Service Agreement. Notwithstanding any assignment or transfer
of this Agreement by Provider but subject to Article IA above, Provider shall
nevertheless remain fully and primarily liable for all of Provider's obligations
under this Agreement and any Service Agreement.
19.2 This Agreement, and each of the parties' respective rights and
obligations hereunder, shall be binding on and inure to the benefit of the
parties and each of their respective successors and assigns.
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XX. NON-DISCLOSURE OF COMMUNICATIONS
20.1 Provider and each Affiliate hereby acknowledges its obligations
under Section 605/705 of the Communications Act of 1934, as amended, and other
applicable federal or state laws not to divulge or publish (except as authorized
by law) the existence, contents, substance, purport, effect or meaning of any
communications which Provider or such Affiliate transmits, receives or assists
in transmitting or receiving in connection with the Capacity provided under this
Agreement.
XXI. NON-EXCLUSIVE ARRANGEMENT
21.1 This Agreement between Provider and MCI is non-exclusive.
Nothing in this Agreement shall prevent Provider or MCI from entering into
similar arrangements with any other entities or otherwise furnishing Capacity to
any entity.
XXII. INSURANCE AND LIABILITY
22.1 Throughout the term of this Agreement, Provider and each
Affiliate and its contractors and/or subcontractors, shall obtain and maintain
the following insurance coverage:
a. Comprehensive or commercial general liability insurance
naming Provider and its affiliates as the named
insureds. MCI shall be included as an additional insured
for purposes of this Agreement. The comprehensive or
commercial general liability insurance policy shall
cover liability for injury to or death of persons or
damage to property including, but not limited to, work
associated with this Agreement, including such liability
as may arise from the use of independent contractors, as
well as any contractual liability assumed under this
Agreement. The policy shall be in the amount of Two
Million Dollars ($2,000,000) combined single limit per
occurrence and aggregate (where applicable) for bodily
injury, personal injury and property damage, and shall
cover (i) explosion liability and damages to underground
utilities and damage caused by collapse if the
appropriate exposure exists (involving blasting,
underpinning, and structural alterations, etc.); (ii)
broad form property damage; and (iii) personal injury
liability.
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b. Business automobile liability insurance including
coverage for owned, hired and non-owned vehicles in the
amount of One Million Dollars ($1,000,000) combined
single limit per occurrence/accident for bodily injury
and property damage. MCI shall be included as an
additional insured for purposes of this Agreement.
c. Worker's compensation in the statutory amount(s) and
with benefits required by the laws of the state in which
the work is performed and the state(s) in which
employees are hired, if the state(s) are other than that
in which the work is performed. Provider shall also
obtain and maintain employers' liability insurance with
a minimum limit of liability of One Million Dollars
($1,000,000) for bodily injury per accident.
22.2 Certificates evidencing such insurance coverage shall be
submitted to MCI prior to Provider or its Affiliates beginning any work
associated with this Agreement. The Certificates shall certify that no
material alteration, or termination of such coverage shall be effective
without at least thirty (30) days' advance notice to MCI.
22.3 Provider and each Affiliate shall require each contractor
and/or subcontractor to obtain and maintain at all times during the term
of this Agreement, insurance equivalent to that which is required of
Provider. Subcontractor's carriers shall waive all right of recovery
against MCI for any injuries to persons or damage to property in the
execution of work performed pursuant to this Agreement.
XXIII. AUTHORITY
23.1 Each party has full power and authority to enter into and
perform this Agreement, and the person signing this Agreement on behalf of each
party has been properly authorized and empowered to enter into this Agreement
and bind its representatives and designated Affiliates to the terms, conditions,
and required performances set forth in the Agreement.
XXIV. GENERAL PROVISIONS
24.1 The relationship of the parties hereunder shall always and only
be that of independent contractors.
24.2 Whenever the singular is used herein, the same shall include
the plural where appropriate, and when the plural is used herein, the same shall
include the singular where appropriate.
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24.3 In the event any of the provisions of this Agreement shall be
held to be invalid, illegal or unenforceable, the unaffected provisions of this
Agreement shall be unimpaired and remain in full force and effect. MCI and
Provider shall negotiate in good faith to substitute for such invalid, illegal
or unenforceable provisions a mutually acceptable provision consistent with the
original intention of the parties hereto.
24.4 The title page, captions or headings in this Agreement are
strictly for convenience and shall not be considered in interpreting it or as
amplifying or limiting any of its content.
24.5 This Agreement is the joint work product of both parties
hereto; accordingly, in the event of ambiguity no presumption shall be imposed
against any party by reason of document preparation.
24.6 Provider represents and warrants that, prior to the first
assignment and delegation to an Affiliate under Article IA such Affiliate shall
have been duly notified of the pending terms and conditions set forth in this
Agreement and shall have agreed to render the performances required in this
Agreement.
XXV. ARBITRATION
25.1 Any dispute or disagreement arising between Provider and MCI in
connection with this Agreement, which is not settled to the mutual satisfaction
of Provider and MCI within thirty (30) days (or such longer period as may be
mutually agreed upon) from the date that either party informs the other in
writing that such dispute or disagreement exists, shall be settled by
arbitration conducted in Washington, D.C., in accordance with the Commercial
Arbitration Rules of the American Arbitration Association then in effect. The
arbitration procedure shall commence within thirty (30) days after either party
files an arbitration request. The parties must select an arbitrator within the
thirty (30) day period in accordance with the arbitrator selection rules of the
American Arbitration Association. Each potential arbitrator shall have a minimum
of five (5) years of telecommunications experience. The decision of the
arbitrator shall be final and binding upon the parties and judgment may be
obtained thereon by either party in a court of competent jurisdiction. Each
party shall bear the cost of preparing and presenting its case. The cost of the
arbitration, including the fees and expenses of the arbitrator, will be shared
equally by the parties unless the award otherwise provides.
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XXVI. ENTIRE AGREEMENT
26.1 This Agreement, including Exhibits A through H which are
attached hereto and hereby incorporated as an integral part of this Agreement,
constitutes the entire Agreement between the parties with respect to the subject
matter and geographic location(s) referred to and supersedes any and all prior
or contemporaneous agreements whether written or oral. Except as otherwise
provided herein with regard to Exhibits, this Agreement cannot be modified
except in writing signed by both parties.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
MCI Telecommunications Attest:
Corporation
By: /s/ DONALD LYNCH By: /s/ EDWARD G. FREITAG
--------------------------- ---------------------------
Name: Donald Lynch Name: EDWARD G. FREITAG
Title: Vice President Title: Assistant Secretary
Date: 9/12/94 Date: 9/16/94
------------------------- -------------------------
(Corporate Seal)
Time Warner AxS Attest:
By: Time Warner Communications
Holdings, Inc., its Managing
General Partner
By: /s/ TOM MORROW By: /s/ MARC APFELBAUM
--------------------------- ---------------------------
Name: Tom Morrow Name: Marc Apfelbaum
Title: President Title: Assistant Secretary
Date: 9/1/94 Date: 9/1/94
------------------------- -------------------------
(Corporate Seal)
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AMENDMENT NUMBER ONE
TO
MASTER CAPACITY AGREEMENT
THIS AMENDMENT is made this 2nd day of December 1994, by and between MCI
Telecommunications Corporation, a Delaware corporation, having an office at 1133
Nineteenth Street, NW Washington, DC 20036 (hereinafter referred to as "MCI"),
and Time Warner Communications, (f/k/a Time Warner AxS), a Delaware general
partnership, having an office at 160 Inverness Drive, West, Englewood, CO 80112
(hereinafter referred to as "Provider")
WITNESSETH
WHEREAS, MCI and Provider executed a Master Capacity Agreement ("Agreement")
effective September 12, 1994; and,
WHEREAS, Provider informed MCI of a change in name under which it will conduct
business; and,
WHEREAS, MCI and Provider each desire to amend the referenced Agreement;
NOW, THEREFORE, in consideration of their mutual agreement and promises, MCI and
Provider do hereby agree that the Agreement be amended as follows:
1. A. The term "Provider" shall now be defined throughout the document
as Time Warner Communications.
B. Article 1B.12 is deleted in its entirety and replaced with the
following:
"Provider shall mean Time Warner Communications or its Affiliates as
set forth in Article IA above."
1
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2. Article 1A.5 is deleted in its entirety and replaced with the following:
"MCI hereby accepts and approves the assignment of this Agreement to the
following Partly Owned Affiliates: Charlotte AxS, L.P., and Metrocomm AxS,
L.P."
3. Upon the execution of this Amendment, the following changes shall be
effective:
A. Article 4.4, paragraph 1 is deleted in its entirety and replaced
with the following:
"4.4 The rates for furnishing the Capacity to MCI throughout the term of
this Agreement are set forth in Exhibit E. Under no circumstances during
the term of this agreement shall the price MCI pays to Provider for
Capacity be more than * of the tariffed prices MCI can obtain from the
LEC serving the same locations as Provider (Provider mileage for
individual Circuits shall conform to the mileage component assigned to the
individual Circuit by the LEC) assuming the LEC is used for all MCI access
requirements (MCI LEC Price). In the event of a LEC tariff change, both
parties will work together to establish new pricing. Provider shall modify
the applicable rates in Exhibit E within seventy-five (75) days of such
LEC tariff change. This change will be effective on the date of the LEC
tariff change."
B. Exhibit E entitled "Pricing" is deleted in its entirety and replaced
with the attached Exhibit E - Revision 1.
Except as provided herein, all terms and conditions of the Agreement shall
remain unchanged and in full force and effect.
2
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IN WITNESS WHEREOF, each of the parties have executed this Amendment by their
duly authorized representatives on the date set forth below.
TIME WARNER COMMUNICATIONS MCI TELECOMMUNICATIONS CORP.
By: Time Warner Communications
Holdings, Inc., its General
Partner
/s/ CHRISTIE L. DOHERTY /s/ DONALD T. LYNCH
- ----------------------------------- -----------------------------------
Signature Signature
Christie L. Doherty Donald T. Lynch
- ----------------------------------- -----------------------------------
Signature Signature
Vice President Vice President
- ----------------------------------- -----------------------------------
Title Title
11-11-94 December 2, 1994
- ----------------------------------- -----------------------------------
Date Date
ATTEST: ATTEST:
/s/ MARY CARROLL HUEY /s/ EDWARD FRIETAG
- ----------------------------------- -----------------------------------
Signature Signature
Mary Carroll Huey Edward Frietag
- ----------------------------------- -----------------------------------
Signature Signature
Assistant Secretary Assistant Secretary
- ----------------------------------- -----------------------------------
Title Title
Corporate Seal Corporate Seal
3
*Indicates that such portions of the contract has been omitted pursuant to a
request for confidential treatment and that such portions have been filed with
the Commission separately.
<PAGE>
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SECOND AMENDMENT TO MASTER CAPACITY AGREEMENT
THIS SECOND AMENDMENT to Master Capacity Agreement ("Second Amendment") is
made this 28 day of August 1997, between MCImetro Access Transmission Services,
Inc. (as assignee of MCI Telecommunications Corporation), a Delaware
corporation, having an office at 8521 Leesburg Pike, Vienna, Virginia 22182
(hereinafter referred to as "MCI"), and Time Warner Communications (f/k/a Time
Warner AxS), a Delaware general partnership, having an office at 160 Inverness
Drive, West Englewood, CO 80112 (hereinafter referred to as "Provider").
WITNESSETH:
WHEREAS, MCI and Provider executed a Master Capacity Agreement effective
September 12, 1994 as amended by the Amendment Number One to Master Capacity
Agreement effective December 2, 1994 (collectively the "Agreement"); and,
WHEREAS, as of the Effective Date defined herein, MCI and Provider each
desire to amend the referenced Agreement to, among other things, bring under the
terms of the Agreement certain Capacity currently leased by MCI pursuant to a
Master Capacity Agreement between MCI and Hyperion Telecommunications, Inc.
dated as of December 10, 1993, as amended (the "Hyperion Agreement").
NOW THEREFORE, in consideration of the premises and the mutual agreements
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Definition of Terms. All capitalized terms used in this Second
Amendment but not defined herein shall have the meanings given to such terms in
the Agreement.
2. Hyperion Agreement. Pursuant to a series of transfers of assets,
Hyperion Telecommunications of New York, Inc. (a wholly-owned subsidiary of
Hyperion Telecommunications, Inc.) and a partner in the partnership between
Hyperion Telecommunications of New York, Inc., Advance/Newhouse Partnership and
Time Warner Entertainment-Advance/Newhouse Partnership (the "Partnership") has
agreed to transfer to Time Warner AxS of Albany, L.P. ("TW Albany"), certain
telecommunications network assets on which Capacity is currently provided to MCI
in the metropolitan areas of Albany and Binghamton, New York pursuant to the
Hyperion Agreement. Provider represents and warrants to MCI that TW Albany is,
and will be as of the Effective Date, a Wholly Owned Affiliate of Provider as
defined in Article 1A of the Agreement. Immediately following the dissolution of
the Partnership and the subsequent transfer of that certain portion of network
assets to TW Albany as described above (the "Effective Date"), Provider shall
deliver to MCI certified copies of all documentation reasonably requested by MCI
to evidence the completion of the required dissolutions and transfers of assets.
Subject to receipt by MCI of the required documentation as set forth in the
preceding sentence, all circuits in the Albany and Binghamton, New York
metropolitan areas currently leased by MCI under the Hyperion Agreement, which
circuits are identified on Appendix 1 attached hereto (the "Hyperion Circuits")
shall be transferred to the Agreement effective as of the Effective Date, and
shall thereafter be governed by all the terms and conditions thereof as though
such Hyperion Circuits had originally been ordered under the Agreement.
Effective as of the Effective Date, the Hyperion Circuits shall be repriced by
Provider in accordance with the Agreement. All future Capacity leased by MCI in
the Albany and Binghamton, New York metropolitan areas shall be leased under the
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Agreement.
3. Metropolitan Areas and Building Locations. Exhibit C of the Agreement
shall be amended to add Albany and Binghamton, New York to the listed
metropolitan areas in which Provider's Network is currently able to furnish
Capacity to MCI. Exhibit C shall further be amended to add the building
locations identified on Appendix 2 attached hereto ("Hyperion Building
Locations").
4. Pricing. Section 1, paragraph B.iv. of Exhibit E to the Agreement shall
be amended to add the following two cities and additional discounts:
<TABLE>
<CAPTION>
Cities Additional Discounts
------ --------------------
<S> <C>
* *
* *
</TABLE>
5. Except as provided herein, all terms and conditions of the Agreement
shall remain unchanged and in full force and effect.
IN WITNESS WHEREOF, each of the parties has executed this Second Amendment
by its duly authorized representatives on the date set forth below.
Time Warner Communications MCImetro Access Transmission Services, Inc.
By: Time Warner Communications
Holding, Inc., its
General Partner
Name: George Bykowski Name: Cari Santor
------------------------- -------------------------
Title: VP National Sales Title: Vice President
------------------------- -------------------------
Date: 8/27/97 Date: 9/26/97
------------------------- -------------------------
Attest: Attest:
Signature: LARISSA HERDA Signature: DANIEL J. PERKA
--------------------- ---------------------
Name: LARISSA HERDA Name: DANIEL J. PERKA
--------------------- ---------------------
Title: Sr. V.P. Sales Title: Assistant Secretary
--------------------- ---------------------
(Corporate Seal) (Corporate Seal)
- -------------
*Indicates that such portions of the contract has been omitted pursuant to a
request for confidential treatment and that such portions have been filed with
the Commission separately.
<PAGE>
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EXHIBIT A
TECHNICAL SPECIFICATIONS
1. INTERCONNECTION SPECIFICATIONS
Any and all Circuits furnished by Provider shall meet Digital Cross Connect
Specifications as stated within the MCI DS-1 and DS-3 Performance Specifications
Alternate Access Vendor Publication No. MCIT 051 450 3500.
1.1 Circuits designed as DS-1 shall be available with either AMI or
B8ZS signaling format. Extended Superframe Framing (ESF) format shall be
available as an option.
1.2 Circuits designed as DS-3 may be used with clear channel
capability.
1.3 All high-speed DS-3/OC-N equipment shall be fully protected in a
1:1 arrangement.
1.4 Provider shall furnish alternate/diverse paths into the MCI
point of presence, i.e., no single point of failure, where feasible.
1.5 All Provider equipment deployed after the commencement of the
Agreement will be SONET compatible unless otherwise mutually agreed to by
the parties.
1.6 Mean time to Restore Electronics and Network Circuit Path: Two
(2) hours
A-1
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EXHIBIT B
SERVICE AGREEMENT
THIS SERVICE AGREEMENT shall be subject to all terms and conditions of the
Capacity Agreement dated as of the ______ day of ______________ 19__, (the
"Capacity Agreement"), between _____________________________________
(hereinafter referred to as "Provider"), and MCI Telecommunications Corporation
(hereinafter referred to as "MCI") which, by this reference, is incorporated
herein.
1. SERVICE DESCRIPTION
______ DS-1 (1.544 Mbps) digital channels; or
______ DS-3 (45 Mbps) digital channel(s)
on the Provider's Network, between the following
Demarcation Points in _____________, ______________:
Demarcation Point #1:
__________________, __________________________________
(Building No.) (Building Name)
______________________________________________________
(Customer's Name)
_________________________, _________________, ________
(Street) (Floor or Level) (Room)
_________________________, ___________________________
(City) (State)
Demarcation Point #2:
__________________, __________________________________
(Building No.) (Building Name)
______________________________________________________
(Customer's Name)
_________________________, _________________, ________
(Street) (Floor or Level) (Room)
_________________________, ___________________________
(City) (State)
The Demarcation Points will be the Provider-furnished DSX-1 (OR) DSX-3 cross
connect panel, whichever is applicable, located within the premises designated
room or other location described above as
B-1
<PAGE>
<PAGE>
Demarcation Points 1 and 2.
2. Requested Availability Date: __________________.
3. Term Commencement Date: __________________.
(commencement date for service and billing)
This Service Agreement shall commence on the date (hereinafter referred to as
the "Commencement Date") upon which the following conditions have been
fulfilled: (i) the Capacity described in this Service Agreement is available for
use; (ii) Provider has completed all testing required by the Capacity Agreement
and Provider has obtained MCI's authorized signature on a completed Service
Acceptance Certificate; and (iii) the seventy-two (72) hour acceptance period
described in Exhibit H of the Capacity Agreement has expired without MCI
notifying Provider that any Circuit has failed to perform within the
Specifications.
4. Fees and Charges for Capacity
The Fees and Charges for the Capacity provided hereunder shall be:
4.1 $____.00 Recurring Charge per month ($_____.00 Recurring Charge
per channel, per month for service provided herein).
4.2 $____.00 Non-Recurring Fee (one time set-up charge).
5. Term
Unless terminated as provided for elsewhere in this Service Agreement or in the
Capacity Agreement, this Agreement shall be for an initial term of ___________
(_____) year(s) (the "Initial Term") commencing on the Commencement Date, and
shall continue thereafter following the expiration of the Initial Term, on a
month-to-month basis at the rates applicable for that term stated herein until
terminated by MCI in accordance with the provisions of the Capacity Agreement.
6. Miscellaneous
All capitalized terms referred to in this Service Agreement shall have the
meanings defined herein or in the Capacity Agreement. This Service Agreement may
not be amended or otherwise altered except by written agreement between the
parties hereto.
This Service Agreement shall not be considered as an exhibit or amendment to the
Capacity Agreement. Any amendments made hereto shall only affect this Service
Agreement and the Capacity described herein.
B-2
<PAGE>
<PAGE>
Time Warner AxS hereby assigns this Service Agreement to _____________________.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement this _____________ date of ____________, 19___.
TIME WARNER AXS MCI TELECOMMUNICATIONS
BY: TIME WARNER COMMUNICATIONS
CORPORATION HOLDINGS, INC., ITS
MANAGING GENERAL PARTNER
By: ________________________________ By: ________________________________
Name: ______________________________ Name: ______________________________
Title: _____________________________ Title: _____________________________
Date: ______________________________ Date: ______________________________
B-3
<PAGE>
<PAGE>
EXHIBIT C
[BUILDING LIST]
[TO BE SUPPLIED BY PROVIDER AT A LATER DATE]
C-1
<PAGE>
<PAGE>
EXHIBIT D
REQUIREMENTS FOR AUTOMATED INTERFACE WITH MCI
Required Codes:
o Provider is required to obtain the four (4) digit Vendor code that uniquely
identifies local exchange providers by state. Codes are assigned by National
Exchange Carrier Association (NECA).
o Provider is required to obtain a valid ICSC code(s) registered by Bellcore.
o Provider must obtain registered CLLI codes assigned by Bellcore for
identifying connection points between MCI POPs and CAP interconnect facilities.
Provisioning Requirements:
o Automated ASR, FOC and DLR processing as specified in the following Bellcore
documents:
- "Access Service Ordering Guidelines"
- "ASR Mechanized Interface Specifications"
- "DLR - Mechanized Interface Specifications"
- "DLR - Industry Support Interface"
o Automated ASR, FOC and DLR transmission per MCI standard transmission method
of Network Data Mover (NDM)
o Automated delivery of building list with all fields as specified in MCI's
Automated Interface Requirements document dated March 4, 1993, as may be
amended.
o Automated delivery of terminal list with all fields as specified in MCI's
Automated Interface Requirements document dated March 4, 1993, as may be
amended.
o Automated delivery of rate file with all fields as specified in MCI's
Automated Interface Requirements document dated March 4, 1993, as may be
amended.
o Automated processing of error files as specified in MCI's Automated Interface
Requirements document dated March 4, 1993, as may be amended.
Billing Requirements:
o Automated delivery of invoicing as specified in Bellcore document "Small
Exchange Carrier Access Billing Guidelines".
D-1
<PAGE>
<PAGE>
EXHIBIT E
PRICING
E-1
<PAGE>
<PAGE>
EXHIBIT E
REVISION 1
EXHIBIT E
REVISION 1
Provider offers two pricing plans to MCI for Capacity purchased during the term
of this Agreement. Any Capacity purchased by MCI through December 31, 1994 will
be purchased in accordance with Provider's Introductory Pricing Plan. Effective
January 1, 1995, Capacity will be purchased in accordance with Provider's
Standard Plus Pricing Plan, unless Provider and MCI have mutually agreed to
another pricing plan.
Effective January 1, 1995, all existing Capacity purchased from Provider. *
However, if the parties agree to another pricing plan effective January 1, 1995,
MCI may, at its option, *
* Indicates that such portions of the contract have been omitted pursuant to a
request for confidential treatment and that such portions have been filed with
the Commission separately.
<PAGE>
<PAGE>
EXHIBIT E
REVISION 1
1. INTRODUCTORY PRICING PLAN:
A. COMMITMENTS:
There are no commitment requirements under this plan.
B. RATES:
i.) MCI's rate shall be * to a 7 year term, regardless of the term
*
ii.) Non-recurring charges ("NRCs") shall * on a service by service
and element by element basis. They will be * in all cities. *
iii.) MCI shall purchase DS3 connectivity at the DS1 or DS0 level
assuming a fill factor of 23 DS1s per DS3 ("Virtual Pricing").
iv.) Provider shall apply additional city specific discounts if
* in seven (7) of the Provider's cities. (See listing below)
<TABLE>
<CAPTION>
CITY ADDITIONAL DISCOUNT
---- -------------------
<S> <C>
* *
* *
* *
* *
* *
</TABLE>
<PAGE>
<PAGE>
EXHIBIT E
REVISION 1
<TABLE>
<S> <C>
* *
* *
* *
* *
* *
* *
* *
* *
* *
* *
* *
* *
* *
* *
</TABLE>
C. NETWORK OPTIMIZATION:
MCI shall be eligible for Provider's * (See Appendix A)
D. *
6
<PAGE>
<PAGE>
EXHIBIT E
PRICING
TIME WARNER - INDIANAPOLIS
AMERITECH - INDIANA
INTRODUCTORY PRICING PLAN
EFFECTIVE 7/1/94
Assumptions:
MCI *
1. * fill factor on DS3s.
2. * fill factor on DS1s.
3. DS3 Entrance Facility - *
4. DS3/DS1/DSO - * Discount Commitment Program (DCP)
CAP mileage calculated on *
SPECIAL ACCESS DSO RATES
<TABLE>
<S> <C>
RECURRING
Base Rate
2 wire *
4 wire *
2.4/4.8/9.6/19.2/56/64.0KB *
Fixed Mileage *
Variable *
NON-RECURRING
2 wire *
4 wire *
2.4/4.8/9.6/19.2/56/64.0KB *
</TABLE>
<PAGE>
<PAGE>
EXHIBIT E
PRICING
TIME WARNER - INDIANAPOLIS
AMERITECH - INDIANA
INTRODUCTORY PRICING PLAN
EFFECTIVE 7/1/94
SPECIAL ACCESS DS1 RATES
<TABLE>
<S> <C>
RECURRING
Base Rate *
Fixed Mileage *
Variable Mileage *
NON-RECURRING *
</TABLE>
SPECIAL ACCESS DS3 RATES
<TABLE>
<S> <C>
RECURRING
Base Rate *
Fixed Mileage *
Variable Mileage *
NON-RECURRING *
</TABLE>
REVISED 10/19/94
<PAGE>
<PAGE>
EXHIBIT E
PRICING
TIME WARNER - COLUMBUS
AMERITECH - OHIO
INTRODUCTORY PRICING PLAN
EFFECTIVE 7/1/94
Assumptions:
MCI *
1. * fill factor on DS3s.
2. * fill factor on DS1s.
3. D53 Entrance Facility - *
4. DS3/DS1/DSO - * Discount Commitment Program (DCP)
CAP mileage calculated on *
SPECIAL ACCESS DSO RATES
<TABLE>
<S> <C>
RECURRING
Base Rate
2 wire *
4 wire *
2.4/4.8/9.6/19.2/56/64.0KB *
Fixed Mileage *
Variable *
NON-RECURRING
2 wire *
4 wire *
2.4/4.8/9.6/19.2/56/64.0KB *
</TABLE>
REVISED 10/19/94
<PAGE>
<PAGE>
EXHIBIT E
PRICING
TIME WARNER - COLUMBUS
AMERITECH - OHIO
INTRODUCTORY PRICING PLAN
EFFECTIVE 7/1/94
SPECIAL ACCESS DS1 RATES
<TABLE>
<S> <C>
RECURRING
Base Rate *
Fixed Mileage *
Variable Mileage *
NON-RECURRING *
</TABLE>
SPECIAL ACCESS DS3 RATES
<TABLE>
<S> <C>
RECURRING
Base Rate *
Fixed Mileage *
Variable Mileage *
NON-RECURRING *
</TABLE>
REVISED 10/19/94
<PAGE>
<PAGE>
EXHIBIT E
PRICING
TIME WARNER - CHARLOTTE, MEMPHIS, RALEIGH
BELL SOUTH
INTRODUCTORY PRICING PLAN
EFFECTIVE 7/1/94
Assumptions:
MCI *
1. * fill factor on DS3s.
2. * fill factor on DS1s.
3. DS3 Entrance Facility - *
4. DS3/DS1/DDS - *, VG - month-month
Mileage calculated on *
SPECIAL ACCESS DSO RATES
<TABLE>
<S> <C>
RECURRING
Base Rate
2 wire *
4 wire *
2.4 - 19.2 KB *
56 - 64 KB *
Fixed Mileage *
Variable *
<CAPTION>
NON-RECURRING First Addt'l
----- ------
<S> <C> <C>
2 wire * *
4 wire * *
2.4/4.8/9.6/19.2/56/64.OKB * *
</TABLE>
REVISED 10/19/94
<PAGE>
<PAGE>
EXHIBIT E
PRICING
TIME WARNER - CHARLOTTE, MEMPHIS, RALEIGH
BELL SOUTH
INTRODUCTORY PRICING PLAN
EFFECTIVE 7/1/94
SPECIAL ACCESS DS1 RATES
<TABLE>
<S> <C>
RECURRING
Base Rate *
Fixed Mileage *
Variable Mileage *
<CAPTION>
NON-RECURRING First Addt'l
----- ------
<S> <C> <C>
0 Miles * *
1+ Miles * *
</TABLE>
SPECIAL ACCESS DS3 RATES
<TABLE>
<S> <C>
RECURRING
Base Rate *
per 1/2 mile Local Channel *
Fixed Mileage *
Variable Mileage *
NON-RECURRING
0 Miles *
1+ Miles *
</TABLE>
REVISED 10/19/94
<PAGE>
<PAGE>
EXHIBIT E
PRICING
TIME WARNER - CINCINNATI
CINCINNATI BELL
INTRODUCTORY PRICING PLAN
EFFECTIVE 7/1/94
Assumptions:
MCI *
1. * fill factor on DS3s.
2. * fill factor on DS1s.
3. DS3 Entrance Facility - *
4. DS3/DS1/DDS - * VG - month-month
Mileage calculated on *
SPECIAL ACCESS DS0 RATES
<TABLE>
<S> <C>
RECURRING
Base Rate
2 wire *
4 wire *
2.4 - 9.6KB *
56 - 64KB *
Fixed Mileage *
Variable *
NON-RECURRING
2 wire *
4 wire *
2.4/4.8/9.6/19.2/56/64.0KB *
</TABLE>
REVISED 10/19/94
<PAGE>
<PAGE>
EXHIBIT E
PRICING
TIME WARNER - CINCINNATI
CINCINNATI BELL
INTRODUCTORY PRICING PLAN
EFFECTIVE 7/1/94
SPECIAL ACCESS DS1 RATES
<TABLE>
<S> <C>
RECURRING
Base Rate *8
Fixed Mileage *
Variable Mileage *
NON-RECURRING
*
</TABLE>
SPECIAL ACCESS DS3 RATES
<TABLE>
<S> <C>
RECURRING
Base Rate *
Fixed Mileage *
Variable Mileage *
NON-RECURRING *
</TABLE>
REVISED 10/19/94
<PAGE>
<PAGE>
EXHIBIT E
PRICING
TIME WARNER - HONOLULU
GTE - HAWAII
INTRODUCTORY PRICING PLAN
EFFECTIVE 7/1/94
Assumptions:
MCI
1. * fill factor on DS3s.
2. * fill factor on DS1s.
3. DS3 Entrance Facility - *
4. DS3/DS1 - * - month-month
Mileage calculated on *
SPECIAL ACCESS DSO RATES
<TABLE>
<S> <C>
RECURRING
Base Rate
2 wire *
4 wire *
2.4 - 19.2KB *
56 - 64KB *
Fixed Mileage *
Variable *
NON-RECURRING
2 wire *
4 wire *
2.4/4.8/9.6/19.2/56/64.0KB *
</TABLE>
REVISED 10/19/94
<PAGE>
<PAGE>
EXHIBIT E
PRICING
TIME WARNER - HONOLULU
GTE - HAWAII
INTRODUCTORY PRICING PLAN
EFFECTIVE 7/1/94
SPECIAL ACCESS DS1 RATES
<TABLE>
<S> <C>
RECURRING
Base Rate *
Fixed Mileage *
Variable Mileage *
<CAPTION>
<S> <C>
NON-RECURRING First
-----
*
</TABLE>
SPECIAL ACCESS DS3 RATES
<TABLE>
<S> <C>
RECURRING
Base Rate *
Fixed Mileage *
Variable Mileage *
NON-RECURRING *
</TABLE>
REVISED 10/19/94
<PAGE>
<PAGE>
EXHIBIT E
PRICING
TIME WARNER - NEW YORK
NEW YORK TEL
INTRODUCTORY PRICING PLAN
EFFECTIVE 7/1/94
Assumptions:
MCI *
1. * fill factor on DS3s.
2. * fill factor on DS1s.
3. DS3 Entrance Facility - *
4. *
Mileage calculated on *
SPECIAL ACCESS DSO RATES
<TABLE>
<S> <C>
RECURRING
Base Rate
2 wire *
4 wire *
DDS II < 56KBps *
DDS II >= 56KBps *
Fixed Mileage *
Variable *
<CAPTION>
NON-RECURRING First Addt'l
----- ------
<S> <C> <C>
2 wire * *
4 wire * *
DDS II * *
</TABLE>
REVISED 10/19/94
<PAGE>
<PAGE>
EXHIBIT E
PRICING
TIME WARNER - NEW YORK
NEW YORK TEL
INTRODUCTORY PRICING PLAN
EFFECTIVE 7/1/94
SPECIAL ACCESS DS1 RATES
<TABLE>
<S> <C>
RECURRING
Base Rate *
Fixed Mileage *
Variable Mileage *
<CAPTION>
NON-RECURRING First Addt'l
----- ------
<S> <C> <C>
* *
</TABLE>
SPECIAL ACCESS DS3 RATES
<TABLE>
<S> <C>
RECURRING
Base Rate
1st DS3 *
2nd+ D53 *
Fixed Mileage *
Variable Mileage *
NON-RECURRING *
</TABLE>
REVISED 10/19/94
<PAGE>
<PAGE>
EXHIBIT E
PRICING
TIME WARNER - ROCHESTER
ROCHESTER TEL
INTRODUCTORY PRICING PLAN
EFFECTIVE 7/1/94
Assumptions:
MCI *
1. *
2. *
3. *
4. *
Mileage calculated on *
SPECIAL ACCESS DSO RATES
<TABLE>
<S> <C>
RECURRING
Base Rate
2 wire *
4 wire *
2.4 - 9.6 KB *
19.2 KB *
56KB *
64 KB *
Fixed Mileage *
Variable *
NON-RECURRING
2 wire *
4 wire *
2.4 - 9.6 KB *
19.2 KB *
56KB *
64 KB *
</TABLE>
REVISED 10/19/94
<PAGE>
<PAGE>
EXHIBIT E
PRICING
TIME WARNER - ROCHESTER
ROCHESTER TEL
INTRODUCTORY PRICING PLAN
EFFECTIVE 7/1/94
SPECIAL ACCESS DS1 RATES
<TABLE>
<S> <C> <C>
RECURRING
Base Rate *
Fixed Mileage *
Variable Mileage *
<CAPTION>
NON-RECURRING First Addt'l
----- ------
<S> <C> <C>
* *
</TABLE>
SPECIAL ACCESS DS3 RATES
<TABLE>
<S> <C>
RECURRING
Base Rate *
Fixed Mileage *
Variable Mileage *
NON-RECURRING *
</TABLE>
<PAGE>
<PAGE>
<PAGE>
EXHIBIT E
PRICING
TIME WARNER - AUSTIN
SOUTHWEST BELL
INTRODUCTORY PRICING PLAN
EFFECTIVE 7/1/94
Assumptions:
MCI *
1. *
2. *fill factor on DS1s.
3. DS3 Entrance Facility - *
4. DS3/DS1 - *
Mileage calculated on *
SPECIAL ACCESS DSO RATES
<TABLE>
<S> <C>
RECURRING
Base Rate
2 wire *
4 wire *
2.4 - 9.6KB *
19.2KB *
56KB *
64.0KB *
Fixed Mileage *
Variable *
<CAPTION>
NON-RECURRING First Addt'l
----- ------
<S> <C> <C>
2 wire * *
4 wire * *
2.4KB * *
4.8KB * *
9.6KB * *
19.2KB * *
56KB * *
64KB * *
</TABLE>
REVISED 10/19/94
<PAGE>
<PAGE>
EXHIBIT E
PRICING
TIME WARNER - AUSTIN
SOUTHWEST BELL
INTRODUCTORY PRICING PLAN
EFFECTIVE 7/1/94
SPECIAL ACCESS DS1 RATES
<TABLE>
<S> <C>
RECURRING
Base Rate *
Fixed Mileage *
Variable Mileage *
<CAPTION>
NON-RECURRING First Addt'l
----- ------
<S> <C> <C>
* *
</TABLE>
SPECIAL ACCESS DS3 RATES
<TABLE>
<S> <C>
RECURRING
Base Rate *
Fixed Mileage *
Variable Mileage *
<CAPTION>
First Addt'l
----- ------
<S> <C> <C>
NON-RECURRING * *
</TABLE>
REVISED 10/19/94
<PAGE>
<PAGE>
EXHIBIT E
REVISION 1
2. STANDARD PLUS PRICING PLAN:
Includes all elements of the Introductory Pricing Plan
EXCEPT:
A. COMMITMENTS:
MCI shall * from the start of Standard Plus Plan or in-service date
of the city, whichever is later, in order to be eligible for *
B. RATES:
i.) The fill factor for Virtual Pricing shall be *.
C. *:
i.) *
ii.) a. Beginning in the thirteenth (13th) month under the Standard
Plus Plan, MCI * if the number of Circuits in any city,
measured in DS1 equivalents, at the end of each billing period
is *
<PAGE>
<PAGE>
EXHIBIT E
REVISION 1
*
b. The * shall apply to that number of circuits that represents
* above.
c. The * shall be applied to that number of circuits, calculated
in paragraph iib above, in reverse chronological order
beginning with the last disconnected circuit from the prior
month. In the event there are multiple circuits disconnected
on the same date, the * shall apply to the *
d. The * shall be calculated for the two options set forth below
and the *.
Option 1 -
The * charge shall be equal to * of the remaining term.
Option 2 -
The * charge will be equal to the *
8
<PAGE>
<PAGE>
EXHIBIT E
REVISION 1
*
(Example: If a circuit was placed on a five year plan and
*
iii.) In the event that MCI does not * within a twelve month, period, the
* described in Section 1, B.iii and as modified in
Section 2, B.i above, will not apply. Provider * that represents *
ordered at optimal configuration less the price of * as described in
Section 2, paragraph B.i. above.
<PAGE>
<PAGE>
EXHIBIT E
PRICING
TIME WARNER - INDIANAPOLIS
AMERITECH - INDIANA
STANDARD PLUS PRICING PLAN
EFFECTIVE 7/1/94
Assumptions:
MCI *
1. * fill factor on DS3s.
2. * fill factor on DS1s.
3. DS3 Entrance Facility - *
4. DS3/DS1/DSO - *
5. Rates do not include Additional City Discount of *
CAP mileage calculated on *
SPECIAL ACCESS DSO RATES
<TABLE>
<S> <C>
RECURRING
Base Rate
2 wire *
4 wire *
2.4/4.8/9.6/19.2/56/64.0KB *
Fixed Mileage *
Variable *
NON-RECURRING
2 wire *
4 wire *
2.4/4.8/9.6/19.2/56/64.0KB *
</TABLE>
<PAGE>
<PAGE>
EXHIBIT E
PRICING
TIME WARNER - INDIANAPOLIS
AMERITECH - INDIANA
STANDARD PLUS PRICING PLAN
EFFECTIVE 7/1/94
SPECIAL ACCESS DS1 RATES
<TABLE>
<S> <C>
RECURRING
Base Rate *
Fixed Mileage *
Variable Mileage *
NON-RECURRING *
</TABLE>
SPECIAL ACCESS DS3 RATES
<TABLE>
<S> <C>
RECURRING
Base Rate *
Fixed Mileage *
Variable Mileage *
NON-RECURRING *
</TABLE>
<PAGE>
<PAGE>
EXHIBIT E
PRICING
TIME WARNER - COLUMBUS
AMERITECH - OHIO
STANDARD PLUS PRICING PLAN
EFFECTIVE 7/1/94
Assumptions:
MCI *
1. * fill factor on DS3s.
2. * fill factor on DS1s.
3. DS3 Entrance Facility -
4. DS3/DS1/DSO - *
5. Rates do not include Additional City Discount of *
CAP mileage calculated on *
SPECIAL ACCESS DSO RATES
<TABLE>
<S> <C>
RECURRING
Base Rate
2 wire *
4 wire *
2.4/4.8/9.6/19.2/56/64.0KB *
Fixed Mileage *
Variable *
NON-RECURRING
2 wire *
4 wire *
2.4/4.8/9.6/19.2/56/64.0KB *
</TABLE>
<PAGE>
<PAGE>
EXHIBIT E
PRICING
TIME WARNER - COLUMBUS
AMERITECH - OHIO
STANDARD PLUS PRICING PLAN
EFFECTIVE 7/1/94
SPECIAL ACCESS DS1 RATES
<TABLE>
<S> <C>
RECURRING
Base Rate *
Fixed Mileage *
Variable Mileage *
NON-RECURRING *
</TABLE>
SPECIAL ACCESS D53 RATES
<TABLE>
<S> <C>
RECURRING
Base Rate *
Fixed Mileage *
Variable Mileage *
NON-RECURRING *
</TABLE>
<PAGE>
<PAGE>
EXHIBIT E
PRICING
TIME WARNER - CHARLOTTE, MEMPHIS, RALE1GH
BELL SOUTH
STANDARD PLUS PRICING PLAN
EFFECTIVE 7/1/94
Assumptions:
MCI *
1. * fill factor on DS3s.
2. * fill factor on DS1s.
3. DS3 Entrance Facility - *
4. DS3/DS1/DDS - * VG - month-month
5. Rates do not include Additional City Discount of *
Mileage calculated on *
SPECIAL ACCESS DS0 RATES
<TABLE>
<S> <C>
RECURRING
Base Rate
2 wire *
4 wire *
2.4 - 19.2KB *
56 - 64KB *
Fixed Mileage *
Variable *
<CAPTION>
NON-RECURRING First Addt'l
----- ------
<S> <C> <C>
2 wire * *
4 wire * *
2.4/4.8/9.6/19.2/56/64.0KB * *
</TABLE>
<PAGE>
<PAGE>
EXHIBIT E
PRICING
TIME WARNER - CHARLOTTE, MEMPHIS, RALEIGH
BELL SOUTH
STANDARD PLUS PRICING PLAN
EFFECTIVE 7/1/94
SPECIAL ACCESS DS1 RATES
<TABLE>
<S> <C>
RECURRING
Base Rate *
Fixed Mileage *
Variable Mileage *
<CAPTION>
NON-RECURRING First Addt'l
----- ------
<S> <C> <C>
0 Miles * *
1+ Miles * *
</TABLE>
SPECIAL ACCESS DS3 RATES
<TABLE>
<S> <C>
RECURRING
Base Rate *
per 1/2 mile Local Channel *
Fixed Mileage *
Variable Mileage *
NON-RECURRING
0 Miles *
1+ Miles *
</TABLE>
<PAGE>
<PAGE>
EXHIBIT E PRICING
TIME WARNER - CINCINNATI
CINCINNATI BELL
STANDARD PLUS PRICING PLAN
EFFECTIVE 7/1/94
Assumptions:
MCI *
1. * fill factor on DS3s.
2. * fill factor on DS1s.
3. DS3 Entrance Facility - *
4. DS3/DS1/DDS - * VG - month-month
5. Rates do not include Additional City Discount of *
Mileage calculated on *
SPECIAL ACCESS DSO RATES
<TABLE>
<S> <C>
RECURRING
Base Rate
2 wire *
4 wire *
2.4 - 9.6KB *
56 - 64KB *
Fixed Mileage *
Variable *
NON-RECURRING
2 wire *
4 wire *
2.4/4.8/9.6/19.2/56/64.0KB *
</TABLE>
<PAGE>
<PAGE>
EXHIBIT E
PRICING
TIME WARNER - CINCINNATI
CINCINNATI BELL
STANDARD PLUS PRICING PLAN
EFFECTIVE 7/1/94
SPECIAL ACCESS DS1 RATES
<TABLE>
<S> <C>
RECURRING
Base Rate *
Fixed Mileage *
Variable Mileage *
NON-RECURRING
*
</TABLE>
SPECIAL ACCESS DS3 RATES
<TABLE>
<S> <C>
RECURRING
Base Rate *
Fixed Mileage *
Variable Mileage *
NON-RECURRING *
</TABLE>
<PAGE>
<PAGE>
EXHIBIT E
PRICING
TIME WARNER - HONOLULU
GTE - HAWAII
STANDARD PLUS PRICING PLAN
EFFECTIVE 7/1/94
Assumptions:
MCI *
1. * fill factor on DS3s.
2. * fill factor on DS1s.
3. DS3 Entrance Facility - *
4. DS3/DS1 - * - month-month
5. Rates do not include Additional City Discount of *
Mileage calculated on *
SPECIAL ACCESS DS0 RATES
<TABLE>
<S> <C>
RECURRING
Base Rate
2 wire *
4 wire *
2.4 - 19.2KB *
56 - 64KB *
Fixed Mileage *
Variable *
NON-RECURRING
2 wire *
4 wire *
2.4/4.8/9.6/19.2/56/64.0KB *
</TABLE>
<PAGE>
<PAGE>
EXHIBIT E
PRICING
TIME WARNER - HONOLULU
GTE - HAWAII
STANDARD PLUS PRICING PLAN
EFFECTIVE 7/1/94
SPECIAL ACCESS DS1 RATES
<TABLE>
<S> <C>
RECURRING
Base Rate *
Fixed Mileage *
Variable Mileage *
<CAPTION>
NON-RECURRING First
-----
<S> <C>
*
</TABLE>
SPECIAL ACCESS DS3 RATES
<TABLE>
<S> <C>
RECURRING
Base Rate *
Fixed Mileage *
Variable Mileage *
NON-RECURRING *
</TABLE>
<PAGE>
<PAGE>
EXHIBIT E
PRICING
TIME WARNER - NEW YORK
NEW YORK TEL
STANDARD PLUS PRICING PLAN
EFFECTIVE 7/1/94
Assumptions:
MCI *
1. * fill factor on DS3s.
2. * fill factor on DSls.
3. DS3 Entrance Facility - *
4. DS3/DS1 - *
5. Rates do not include Additional City Discount of *
Mileage calculated on *
SPECIAL ACCESS DSO RATES
<TABLE>
<S> <C>
RECURRING
Base Rate
2 wire *
4 wire *
DDS II <56KBps *
DDS II >= 56KBps *
Fixed Mileage *
Variable *
<CAPTION>
NON-RECURRING First Addt'l
----- ------
<S> <C> <C>
2 wire * *
4 wire * *
DDS II * *
</TABLE>
<PAGE>
<PAGE>
EXHIBIT E
PRICING
TIME WARNER - NEW YORK
NEW YORK TEL
STANDARD PLUS PRICING PLAN
EFFECTIVE 7/1/94
SPECIAL ACCESS DS1 RATES
<TABLE>
<S> <C>
RECURRING
Base Rate *
Fixed Mileage *
Variable Mileage *
<CAPTION>
NON-RECURRING First Addt'l
----- ------
<S> <C> <C>
* *
</TABLE>
SPECIAL ACCESS DS3 RATES
<TABLE>
<S> <C>
RECURRING
Base Rate
1st DS3 *
2nd+ DS3 *
Fixed Mileage *
Variable Mileage *
NON-RECURRING *
</TABLE>
<PAGE>
<PAGE>
EXHIBIT E
PRICING
TIME WARNER - ROCHESTER
ROCHESTER TEL
STANDARD PLUS PRICING PLAN
EFFECTIVE 7/1/94
Assumptions:
MCI *
1. * fill factor on DS3s.
2. * fill factor on DS1s.
3. DS3 Entrance Facility - *
4. DS3/DS1 - *
5. Rates do not include Additional City Discount of *
Mileage calculated on *
SPECIAL ACCESS DSO RATES
<TABLE>
<S> <C>
RECURRING
Base Rate
2 wire *
4 wire *
2.4 - 9.6 KB *
19.2 KB *
56KB *
64 KB *
Fixed Mileage *
Variable *
NON-RECURRING
2 wire *
4 wire *
2.4 - 9.6 KB *
19.2 KB *
56KB *
64 KB *
</TABLE>
<PAGE>
<PAGE>
EXHIBIT E
PRICING
TIME WARNER - ROCHESTER
ROCHESTER TEL
STANDARD PLUS PRICING PLAN
EFFECTIVE 7/1/94
SPECIAL ACCESS DS1 RATES
<TABLE>
<S> <C>
RECURRING
Base Rate *
Fixed Mileage *
Variable Mileage *
<CAPTION>
NON-RECURRING First Addt'l
----- ------
<S> <C> <C>
* *
</TABLE>
SPECIAL ACCESS DS3 RATES
<TABLE>
<S> <C>
RECURRING
Base Rate *
Fixed Mileage *
Variable Mileage *
NON-RECURRING *
</TABLE>
<PAGE>
<PAGE>
EXHIBIT E
PRICING
TIME WARNER - AUSTIN
SOUTHWEST BELL
STANDARD PLUS PRICING PLAN
EFFECTIVE 7/1/94
Assumptions:
MCI *
1. * fill factor on DS3s.
2. * fill factor on DS1s.
3. DS3 Entrance Facility - *
4. DS3/DS1 - *
5. Rates do not include Additional City Discount of *
Mileage calculated on *
SPECIAL ACCESS DS0 RATES
<TABLE>
<CAPTION>
RECURRING
Base Rate
<S> <C>
2 wire *
4 wire *
2.4 - 9.6KB *
19.2KB *
56KB *
64.0KB *
Fixed Mileage *
Variable *
<CAPTION>
NON-RECURRING First Addt'l
------- -------
<S> <C> <C>
2 wire * *
4 wire * *
2.4KB * *
4.8KB * *
9.6KB * *
19.2KB * *
56KB * *
64KB * *
</TABLE>
REVISED 10/19/94
<PAGE>
<PAGE>
EXHIBIT E
PRICING
TIME WARNER - AUSTIN
SOUTHWEST BELL
STANDARD PLUS PRICING PLAN
EFFECTIVE 7/1/94
SPECIAL ACCESS DS1 RATES
<TABLE>
<CAPTION>
RECURRING
<S> <C>
Base Rate *
Fixed Mileage *
Variable Mileage *
<CAPTION>
NON-RECURRING First Addt'l
------- -------
<S> <C> <C>
* *
</TABLE>
SPECIAL ACCESS DS3 RATES
<TABLE>
<CAPTION>
RECURRING
<S> <C>
Base Rate *
Fixed Mileage *
Variable Mileage *
<CAPTION>
NON-RECURRING First Addt'l
------- -------
<S> <C> <C>
* *
</TABLE>
REVISED 10/19/94
<PAGE>
<PAGE>
EXHIBIT E
REVISION 1
APPENDIX A
TO
EXHIBIT E
OPTIMIZED NETWORK PRICING
Optimized network pricing applies to all Capacity purchased from Provider.
When MCI purchases Capacity as part of a hubbed network which concentrates
bandwidth in one location (e.g., IXC POP) Provider will * . When either Provider
or MCI identifies a change * between types of Capacity * . Provider will * .
Only interoffice mileage and associated multiplexing will be analyzed during
optimization. End link channel terminations cannot be optimized because Provider
will not change the service interface delivered to any MCI customer location
without an ASR from MCI.
<PAGE>
<PAGE>
EXHIBIT F
CONFIDENTIALITY AGREEMENT
F - 1
<PAGE>
<PAGE>
CONFIDENTIALITY AGREEMENT
This CONFIDENTIALITY AGREEMENT is effective as of May 16, 1994 between
Time Warner Communications Holdings Inc. ("Time Warner Communications") and MCI
Telecommunication Corporation ("MCI").
Time Warner Communications and MCI are exploring a possible business
arrangement between Time Warner Communications or one of its affiliates which
controls, is controlled by, or is under common control with Time Warner
Communications (Time Warner Communications and its affiliates are referred to
collectively herein as "TWC"), and MCI (the "Potential Venture"). In connection
with TWC's and MCI's analysis of the Potential Venture, they have requested
certain oral and written information from one another concerning their
respective businesses and the Potential Venture from officers, directors,
employees and/or agents of one another (collectively, the "Evaluation
Material"). The party providing any Evaluation Material to the other party is
sometimes referred to herein as the "Provider".
In consideration of the premises and mutual promises contained in this
Agreement, including TWC's and MCI's furnishing one another with the Evaluation
Material, and intending to be legally bound hereby, TWC and MCI hereby agree as
follows:
1. TWC and MCI will use the Evaluation Material received from the other
party solely for the purpose of evaluating the Potential Venture and such
information will be kept confidential by the receiving party, except that TWC
and MCI may disclose the other party's Evaluation Material or portions thereof
to those of their directors, officers, employees, consultants, and advisors (the
persons to whom such disclosure is permissible being collectively called
"Representatives") who need to know such information for the purpose of
evaluating the Potential Venture (it being understood that, before disclosing
the Evaluation Material or any portion thereof to such Representatives, TWC and
MCI will inform their Representatives of the confidential nature of the
Evaluation Material and their duty to treat such Evaluation Material in
accordance with this Agreement). If the parties or any of their Representatives
become legally compelled (by deposition, interrogatory, request for documents,
subpoena, civil investigative demand or similar process) or shall be advised by
counsel to disclose any of the Evaluation Material, the compelled party shall
undertake reasonable efforts to provide the other party with prompt notice of
such requirement or advice prior to disclosure so that the other party may seek
a protective order or other appropriate remedy and/or waive compliance with the
terms of this Agreement. If such protective order or other remedy is not
obtained, or the other party waives compliance with the provisions hereof, the
compelled party agrees to furnish only that portion of the Evaluation Material
which it is legally required to so furnish and, at the request of the other
party, to use reasonable efforts to obtain assurance that confidential treatment
will be accorded such Evaluation Material, it being understood that such
reasonable efforts shall be at the cost and expense of the party whose
Evaluation Material has been sought.
2. The term "Evaluation Material" does not include any information that
(a) at the time of disclosure or thereafter is generally available to the public
(other than as a result of a wrongful disclosure directly or indirectly by the
receiving party or its Representatives), (b) was or becomes available to the
receiving party (the "Recipient") from a source other than the Provider or its
advisors, or any affiliates or representatives thereof, provided that the
Recipient has no reasonable
<PAGE>
<PAGE>
basis for concluding that such information was made available in violation of a
confidentiality agreement with the Provider, or (c) is independently developed
by the Recipient without violating any of its obligations under this Agreement;
provided, however, that if any Evaluation Material was or is made available to
the Recipient on a confidential basis that is less strict than the terms
contained herein, the terms of the less strict confidentiality agreement shall
govern the use and disclosure of such Evaluation Material. "Evaluation Material"
shall only include information that is conspicuously marked as proprietary or
confidential and, in the case of information provided orally, shall only apply
to such information if it is stated to be proprietary or confidential at the
time of disclosure and a written summary thereof, marked to show its proprietary
nature, is furnished to the Recipient by the Provider within 15 days of the oral
disclosure.
3. If a transaction is not consummated between TWC and MCI within 180
days from the date hereof and the Provider so requests in writing or if the
Provider otherwise so requests in writing, the Recipient will return to the
Provider within 30 business days of the request all copies of Evaluation
Material in tangible form received from the other party in its or its
Representatives' possession or certify within such period that it has destroyed
such information; provided, however, that the Recipient's sole obligation with
respect to the disposition of any internal memoranda or other materials prepared
by it that incorporate any such Evaluation Material shall be to redact or
otherwise expunge all such Evaluation Material from such materials.
4. Whether or not the Potential Venture is consummated, neither party
shall issue a press release or make any statement to the general public
concerning such transaction or the absence thereof without the express prior
written consent of the other.
5. TWC and MCI may each now market or have under development products or
services which are competitive with products or services now offered or which
may be offered by the other, may now be having or have in the future discussions
with others concerning subject matters similar to the Potential Venture and may
receive information from others similar to the Provider's Evaluation Material.
Subject to the express terms and conditions of this Agreement, neither this
Agreement nor discussions and/or communications between TWC and MCI will impair
the right of either party to develop, make, use, procure, and/or market any
products or services, alone or with others, now or in the future, including
those which may be competitive with those offered by the other.
6. Neither this Agreement nor the disclosure by TWC and MCI of the
Evaluation Material or other information to the other shall result in any
obligation on the part of either party to enter into any further agreement with
the other with respect to the subject matter hereof or otherwise, to purchase
any products or services from the other or to require either party to disclose
any particular information to the other. Nothing in this Agreement shall imply
any partnership or joint venture between the parties or be construed as making
either party the agent of the other.
7. In the event of any breach of the provisions of this Agreement, the
non-breaching party shall be entitled to equitable relief, including in the form
of injunctions and orders for specific performance, in addition to all other
remedies available at law or in equity, provided, however, that if the Recipient
uses a degree of care to prevent disclosure of the Provider's Evaluation
Material that is at least as great as the care it normally takes to preserve its
own information of a similar nature, it shall not be liable for nor shall
equitable remedies apply to any disclosure that occurs
2
<PAGE>
<PAGE>
despite the exercise of that degree of care and in no event shall any party be
liable for any indirect, punitive, special, or consequential damages.
8. This Agreement shall apply to information exchanged prior to April 1,
1994; provided, however, that upon 30 days' written notice, either party may
notify the other that it no longer wishes to receive or provide Evaluation
Material. Any information received or provided by either party thereafter shall
not be subject to the protection of this Agreement.
9. The obligations under this Agreement will expire ten years from the
date of this Agreement.
10. This Agreement shall be governed by the internal laws of the State of
New York.
11. This Agreement constitutes the entire understanding between TWC and
MCI as to Evaluation Material provided pursuant to it and merges all prior and
contemporaneous discussions and agreements between them relating thereto.
IN WITNESS WHEREOF, each party has caused this Agreement to be executed on
its behalf by an officer thereunto duly authorized, all as of the date set forth
above.
TIME WARNER COMMUNICATIONS HOLDINGS INC.
By: /s/ Christie Doherty
---------------------------------------
Christie Doherty
Vice President, Marketing
MCI TELECOMMUNICATION CORPORATION
By: /s/ D. T. Lynch
---------------------------------------
Name: D. T. Lynch
Title: Vice President
3
<PAGE>
<PAGE>
EXHIBIT G
PERFORMANCE AND MAINTENANCE
1.0 PERFORMANCE MONITORING AND REPORTING
1.1 Provider shall be responsible for performing surveillance on the
Network. However, MCI may also perform surveillance on Provider' s
Network.
1.2 MCI, at its expense, may provide surveillance equipment to the
terminating equipment Network side of the DSX-1 cross connect frame
connected to Provider's transmission equipment situated in MCI's
locations, which will provide the MCI's Surveillance System Operations
group with the ability to perform surveillance of the Capacity to MCI's
Customer locations.
1.3 Alarms related to the Capacity will be reported immediately to
Provider by the MCI Surveillance System Operations group.
2.0 MAINTENANCE
2.1 Provider shall be responsible for maintaining, repairing and testing
the Capacity and the Network, including Provider-owned equipment in
Customer and MCI locations. MCI shall permit Provider to access its
equipment in MCI locations for the purpose of testing the Capacity in
accordance with procedures which MCI, in its sole discretion, deems
appropriate, including, but not limited to, the provisions of paragraph
2.9 of this Exhibit G.
2.2 Provider shall perform all maintenance functions, except as provided
for in paragraph 2.9 of this Exhibit G and in paragraph 7.1 of this
Agreement, on the Capacity and/or Network between the Demarcation Point(s)
twenty-four (24) hours per day, seven (7) days per week. Provider
scheduled maintenance will be performed between 12:00 A.M. and 6:00 A.M.
unless otherwise agreed between Provider and MCI, with the exception of
scheduled maintenance on DDN services, which are to performed between
12:00 A.M. and 6:00 A.M. on the second or third Sunday of a month, unless
otherwise approved by MCI.
2.3 Specifications. Maintenance of the Capacity and/or Network shall be
performed to meet the manufacturer's specifications and those provided for
in this Agreement. MCI shall have the right to review Provider's
maintenance procedures and maintenance records.
G - 1
<PAGE>
<PAGE>
2.4 Coordination. Any maintenance and/or service function performed by
Provider on the Network which will or could affect the Capacity provided
to MCI shall be coordinated and scheduled through MCI's Surveillance
System Operations group pursuant to Article VI and this Exhibit G.
2.5 Response and Repair Times. In the event of a Capacity failure,
Provider shall begin restoring service to the affected Capacity within the
following time frames:
(i) Electronic Restoration. In the event of an electronics failure,
Provider shall restore Capacity to the affected electronics within
* of notification by MCI's Surveillance System Operations group.
(ii) Cable Restoration. In the event of a cable failure, Provider
shall begin cable restoration * after the faulty cable is
identified. Provider shall reroute all affected MCI Circuits to
an alternate route * after location of such failure has been
determined. The cable shall be restored no later * after failure.
(iii) Emergency Reconfiguration. If the affected Network has the
capability to provide route reconfiguration to maintain Capacity
between the Demarcation Points, Provider shall provide
reconfiguration if other means of restoration will not restore the
Capacity within the time frames provided in subparagraphs (i) and
(ii) above. Reconfiguration will begin * after the need to
re-configure has been determined.
2.6 Trouble reporting. Provider shall maintain a twenty-four (24) hour a
day, seven (7) day a week point-of-contact for MCI to report
Capacity troubles. Provider shall furnish MCI with periodically
updated lists for Network management.
2.6.1 Each party shall furnish the other with a list of its
personnel authorized to issue trouble reports under this
Agreement. Each party shall accept trouble reports
without delay from these personnel whenever, after the
performance of appropriate tests, trouble is located in
the facilities provided by such party under this
Agreement and shall cause further testing and
sectionalization to be done to determine whether the
trouble is located in the provider's facilities,
switching vehicle, equipment or another source. If such
testing is ineffective, each party will work with the
other to assist with
G - 2
<PAGE>
<PAGE>
the localization of the trouble. Such cooperative
testing will normally be limited to continuity testing
under a party's existing practices. If the trouble is
sectionalized to a party's facilities, switching vehicle
or equipment, such party shall take all necessary steps
to clear the trouble and restore the Capacity.
2.6.2 If a party becomes aware of any condition, circumstance
or failure that could adversely affect the Capacity,
such party shall immediately notify the other. A party
may, upon obtaining consent from the other party,
temporarily interrupt the Capacity to perform needed
testing.
2.6.3 When troubles are reported by either party, specific
trouble tracking information will be exchanged with the
other party. To facilitate the exchange of information,
each party will maintain a trouble log of all trouble
reports. The trouble log shall include the following
information:
1. serialization of each trouble report;
2. the nature of the reported trouble;
3. date and time of the trouble report;
4. name and telephone number of the person reporting
trouble;
5. name and telephone number of the person receiving the
trouble report;
6. diagnosis of trouble;
7. date and time of trouble clearance;
8. name and telephone number of the person reporting
trouble clearance; and
9. name and telephone number of the person receiving
trouble clearance.
2.6.4 Each party shall furnish to the other status reports of
each trouble report with thirty (30) minutes of the
initial report and periodically thereafter.
2.6.5 Whenever a party designates a recurring trouble to be
chronic in nature, each party shall immediately perform
an investigation of the recent trouble history and
report the findings to the other.
2.7 Equipment spares. Provider will supply all maintenance spares plus
repair and return service of defective parts.
G - 3
<PAGE>
<PAGE>
Provider will be responsible for furnishing storage space for
maintenance spares.
2.8 Scheduled Maintenance.
2.8.1 Maintenance which may place the Capacity in jeopardy or
require Capacity down time will normally be performed
during the "Maintenance Window" of 12:00 midnight and
6:00 A.M., and shall be mutually agreed to by MCI and
Provider. Provider shall request permission from the MCI
Surveillance System Operations group at least
seventy-two (72) hours prior to commencing any such
scheduled maintenance work.
2.8.2 Provider maintenance personnel shall notify MCI prior to
beginning scheduled maintenance work and must receive
authorization to proceed. Provider personnel shall
notify MCI upon completion of scheduled maintenance work
and must receive verification from MCI that the Capacity
is fully operational.
2.9 Access to Equipment and Facilities.
2.9.1 Each party shall comply with rules, regulations and
restrictions which apply to the premises or facilities
of the other party in which such party has installed its
equipment. Such rules, regulations and restrictions may
include, without limitation, the following:
- Visitors may be denied admission unless they
present satisfactory identification or are
identified on an authorized personnel list,
or both.
- Visitors may be required to be accompanied
by authorized personnel or be subject to
other access restrictions.
G - 4
<PAGE>
<PAGE>
2.9.2 MCI shall have the right to be present during any
equipment testing and during any scheduled and
non-scheduled maintenance activity. Provider shall
notify MCI in advance of any such activity.
G - 5
<PAGE>
<PAGE>
EXHIBIT H
PROVIDER RESPONSIBILITIES AND SYSTEM CRITERIA
1.0 PROVIDER RESPONSIBILITIES
Unless otherwise provided in the applicable Service Agreement, Provider
shall furnish the following:
(i) full-duplex, full time DS-0 and/or DS-1 and/or DS-3 Circuits between
Provider-furnished cross-connect panels at designated Demarcation Points,
provided by a fiber-optic transmission Network. MCI will provide the
connections from the designated Demarcation Points to MCI's equipment.
Provider will supply the connections from the designated Demarcation
Point(s) to Customer's equipment, upon request from MCI.
(ii) at the Demarcation Points, digital signals which meet the Specifications.
Provider shall not use any equipment to furnish the Capacity that will in
any way harm or restrict test access by MCI, including, but not limited to, the
in-band looping codes utilized to test Channel Service Units (CSUs).
2.0 CAPACITY INTERRUPTION
An interruption begins when MCI reports a trouble on any one or more
Circuits to Provider in accordance with Exhibit G. Provider will provide
diagnostics and perform corrective action as necessary to timely restore the
affected Circuit(s) in accordance with the Specifications. Upon correction of
the trouble, Provider will contact MCI and advise of the action taken to correct
the problem. MCI will consult with MCI's Customer regarding acceptability of the
Circuits and upon Customer's confirmation that the Circuits are acceptable,
Provider will be so notified and the trouble will be considered as having been
cleared at the time that Provider last reported clearance of same, immediately
prior to Customer's confirmation.
If, during the testing of the affected Circuit(s), it is determined that
the Circuit(s) is operating normally and within the parameters of the
Specifications and the same is confirmed by Customer through MCI then such
interruption shall not be considered a Capacity Interruption for credit
purposes.
H - 1
<PAGE>
<PAGE>
3.0 SYSTEM ACCEPTANCE CRITERIA
The following acceptance tests will be conducted:
DS-0, DS-1 and/or DS-3: A test for a period of seventy-two (72) hours
where Bit Error Ratio ("BER") , Error Free Seconds ("EFS") and Burst Error
Seconds ("BES") shall meet the parameters of the Specifications.
Protection Switch Operation: The protection switch shall operate within
all manufacturer's specific operating parameters.
Equipment Alarm and Status Indication Functionality: All equipment alarm
functions and status indicators provided by the equipment vendor will function
properly under all simulated (non-destructive) alarm conditions.
4.0 INTERCONNECTION
4.1 Interconnection of Provider's, MCI's or MCI's Customer's telecommunications
equipment to the Demarcation Point will be performed by MCI, Provider or
Customer, at MCI's sole discretion.
4.2 Provider shall supply and connect any special interface equipment or
facilities necessary to achieve compatibility between Provider, MCI and/or MCI's
Customer at the Demarcation Points. If such special interface equipment or
facilities are required because MCI's equipment or MCI's Customer's equipment
deviates from industry standards, then such entity shall be responsible for
supplying and connecting any special interface equipment or facilities necessary
to achieve compatibility.
H - 2
<PAGE>
<PAGE>
EXHIBIT 10.13
Page 1 of 47
Effective Date: September 15, 1995
AGREEMENT
This Agreement ("Agreement") is entered into by and between TIME WARNER
COMMUNICATIONS, a Delaware General Partnership, having an office at 160
Inverness Drive West, Englewood, Colorado 80112 ("TWComm"), and AT&T
COMMUNICATIONS, INC., a Delaware corporation, having an office at 32 Avenue of
the Americas, New York, New York 10013, on behalf of itself, the Interstate
Division of AT&T Corp., a New York corporation, and each of their interexchange
company affiliates (individually and collectively "AT&T").
Whereas, TWComm, acting through its subsidiaries and affiliates, is in the
business of providing special access, switched access, private line, local
calling, and other business telecommunications services in certain Metropolitan
Statistical Areas ("MSAs") within the United States; and
Whereas, TWComm intends to offer these and other business services through
affiliates controlled by, and under common ownership with, TWComm and certain
other entities ("Local Entities") in certain MSAs proposed by TWComm and agreed
to by AT&T ("Selected MSAs"); and
Whereas, in consideration of TWComm's making such business services
available to AT&T in each Selected MSA, AT&T agrees to purchase such business
services ordered from TWComm and the Local Entities in each Selected MSA;
Now, therefore, in consideration of the foregoing premises and the mutual
covenants of this Agreement, TWComm and AT&T agree as follows:
================================================================================
AT&T and TWComm Proprietary: Subject to Nondisclosure Agreement
================================================================================
<PAGE>
<PAGE>
Page 2 of 47
PART I: General
1. Introduction
1.A This Agreement sets forth the terms, conditions, and pricing principles to
govern all offers by TWComm through its Local Entities, and all purchases by
AT&T of certain business telecommunications Services (as defined in Section 6 of
this Agreement) in certain areas within the Selected MSAs. The parties expect
this Agreement to be nationwide in scope and cover multiple MSAs, subject to
AT&T's acceptance of TWComm's proposed MSA Schedules, as discussed further in
Section 4 of this Agreement.
1.B This Agreement also sets forth provisions applicable to certain Services
provided by TWComm at TWComm's option outside Expected Serving Areas, as defined
in Section 5 of this Agreement.
2. Term of Agreement
2.A When executed by authorized representatives of TWComm and AT&T, this
Agreement shall become effective as of the Effective Date stated above, and
shall expire thirteen years from the Effective Date, unless terminated at an
earlier date pursuant to Section 31 of this Agreement. Each MSA Schedule shall
become effective as of the Effective Date set forth therein, upon the execution
and delivery thereof by authorized representatives of AT&T, TWComm and the Local
Entity specified therein, and shall expire upon expiration of this Agreement or
any earlier date upon which such MSA Schedule is terminated pursuant to Section
32 of this Agreement.
3. Defined Terms
3.A For purposes of this Agreement, words and phrases spelled with initial
capital letters (other than proper names) shall have the defined meanings set
forth in the applicable provisions of this Agreement.
3.B For convenience, an index of defined terms is contained in Appendix A.
3.C Unless the context otherwise requires, references hereinafter to "TWComm",
when used in the context of obligations or responsibility related to the offer
and provision of Services, or to the management and operation of the network
(including without limitation the installation, maintenance and removal of
Facilities) over which Services shall be provided, shall be interpreted to refer
only to a Local Entity that has assumed such obligations or responsibilities as
described in Section 4 and Section 26.B.i of this Agreement; all other such
references shall refer only to TWComm as defined in the first paragraph of this
Agreement.
================================================================================
AT&T and TWComm Proprietary: Subject to Nondisclosure Agreement
================================================================================
<PAGE>
<PAGE>
Page 3 of 47
PART II: Areas Served
4. Selected MSAs and MSA Schedules
4.A For purposes of this Agreement, certain parts of the United States are
divided into geographical areas designated as MSAs. TWComm expects to offer
Services to AT&T under the terms, conditions and pricing principles of this
Agreement in certain areas within Selected MSAs. (The parties expect that TWComm
will propose, and AT&T will consider, MSA Schedules for those MSAs listed in
Appendix B.) No MSA will be deemed a Selected MSA until such agreement is
evidenced by execution of a MSA Schedule, at each party's sole discretion, in
substantially the same form set forth in Appendix C on behalf of each party by
an authorized representative. Neither party shall have the right to rely upon
obtaining the other party's agreement to designate any MSA a Selected MSA unless
and until TWComm, AT&T, and the Local Entity have executed a MSA Schedule.
4.B Each MSA Schedule shall incorporate by reference the terms, conditions, and
prices of this Agreement, and each Local Entity, upon execution of a MSA
Schedule, will agree that all offers of Services by such Local Entity to AT&T in
the Selected MSA shall be governed by such terms, conditions, and prices. By
executing each MSA Schedule, AT&T shall be deemed to have consented to the
delegation by TWComm, and the assumption by the Local Entity named therein, of
all obligations and responsibility for the offer and provision of Services in
accordance with the terms set forth, or incorporated by reference, in the MSA
Schedule, subject to the following. TWComm shall be responsible for causing such
Local Entities to comply with the terms, conditions, and prices of the
applicable MSA Schedule and this Agreement and shall be financially liable, for
any money amounts payable to AT&T under this Agreement, for a Local Entity's
failure to comply with such terms, conditions, and prices; provided that TWComm
itself shall not be required to actually provide or resell Services in the
Selected MSA. No Local Entity shall be responsible in any regard for the
performance of any MSA Schedule to which it is not a party.
4.B.i "Local Entity" shall mean any entity which:
4.B.i.(a) is managed by TWComm and the outstanding common equity
interests in which are entirely owned, directly or indirectly, by
any one or more of Time Warner Entertainment Company, L.P., Time
Warner Entertainment-Advance Newhouse Partnership, and Time Warner
Inc.; or
4.B.i.(b) is otherwise designated by mutual agreement of TWComm and
AT&T to be a Local Entity.
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4.C The exact geographic area of each Selected MSA will be set forth in the
applicable MSA Schedule.
5. Serving Areas
5.A Every Selected MSA is composed of defined geographic areas ("Exchange
Areas"), each corresponding to the area served by a local serving office ("LSO")
of the dominant telephone company offering ubiquitous facilities-based local
exchange services ("Local Exchange Company" or "LEC"). The MSA Schedule for each
Selected MSA will identify those Exchange Areas within the Selected MSA in which
TWComm expects to offer Services ("Expected Serving Areas"). Each Exchange Area
comprising the Selected MSA that is not expressly identified as an Expected
Serving Area by the applicable MSA Schedule is deemed to be an Optional Serving
Area. TWComm, at its option, may offer any Service within an Optional Serving
Area under the terms, conditions and pricing principles of this Agreement. Each
Exchange Area in which TWComm is then currently offering the respective Service
under this Agreement shall be referred to as a Current Serving Area.
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PART III: Services and Prices
6. Services
6.A With respect to each Selected MSA, TWComm expects to offer to AT&T certain
wireline business telecommunications services, as defined below ("Services")
subject to the applicable terms, conditions and pricing principles of this
Agreement. Any Services that TWComm expects to offer to AT&T in each Selected
MSA are set forth in the applicable MSA Schedule. The Services that TWComm
expects to offer are defined as follows:
6.A.i "Dedicated Services" means services providing two point digital or
analog channels connecting any location within an Expected Serving Area or
Optional Serving Area to any other location within an Expected Serving
Area or Optional Serving Area in the same Selected MSA. (Such locations
may include, but are not limited to, all AT&T premises, all premises of
AT&T's customers, as well as the premises of any other supplier or user of
telecommunications services). The service characteristics and technical
specifications of Dedicated Services are set forth in Appendix D-1.
6.A.ii "Switched Services" means the following services, individually or
collectively as the context may require:
6.A.ii.(a) "Switched Access Service" means a service which provides
the switched connection and transport of international, interLATA
and intraLATA calls between an AT&T point of presence or other AT&T
network location (an "AT&T Serving Office") to which AT&T orders
Services from TWComm, and the point of call origination or
termination. The service characteristics and technical
specifications of Switched Access Service are set forth in Appendix
D-2.
6.A.ii.(b) "Switched Business Line Service" means dial tone lines
providing the capability to originate and terminate all types of
local exchange, intraLATA, interLATA, and international switched
services calls. The service characteristics and technical
specifications of Switched Business Line Service are set forth in
Appendix D-3.
6.A.ii.(c) "Local Calling Service" means a service which provides
the origination and termination of calls that originate and
terminate within the same Local Calling Area set forth in, or
determined pursuant to, a MSA Schedule. The service characteristics
and
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technical specifications of Local Calling Service are set forth in
Appendix D-4.
6.B AT&T and TWComm agree and acknowledge that this Agreement does not in any
respect provide for or apply to wireless telecommunications services, or
residential services of any nature; provided that mere transport of residential
calls via Dedicated Services shall not be deemed "residential service." TWComm
agrees not to pass any calls originating from a residential unit to an AT&T
Serving Office via Switched Access Service without AT&T's prior written
agreement. The scope of Services hereunder shall be based on the business or
residential usage of each individual unit (e.g., each individual apartment, or
suite of offices or the like, within a larger building).
7. Service Arrangements
7.A TWComm will offer Services in two service arrangements that are
distinguished by the type of location at which the Service is terminated. The
service arrangements (collectively "Service Arrangements") are as follows:
7.A.i "Transport Arrangement" means (1) with respect to Dedicated
Services, a Service Arrangement which originates at an AT&T Serving Office
and terminates at a point of interconnection with the LEC (i.e.,
collocation space in a LEC central office) ("Transport Premises"); and (2)
with respect to Switched Business Line Services, a Service Arrangement
which, regardless of where it originates, terminates at a Transport
Premises, whereby AT&T may interconnect a telecommunications service
provided by another entity (pursuant to an agreement between AT&T and such
entity) or by AT&T to the Transport Arrangement provided by TWComm. Only
Dedicated Services and Switched Business Line Services are offered under a
Transport Arrangement, as set forth in (1) and (2) above, respectively.
7.A.ii "Full Service Arrangement" means a Service Arrangement which
originates and terminates at a Served Premises (as defined in Appendix I)
that is not a Transport Premises (e.g., an AT&T Serving Office or a
Customer Premises). All Services are offered under a Full Service
Arrangement.
8. Service Elements
8.A Each Service is composed of its constituent components ("Service Elements").
The Service Elements composing each Service are described in the applicable
service description (Appendix D-1 through D-4). Unless it is expressly stated
otherwise in this Agreement, the terms, conditions and pricing principles
applicable to a Service shall not vary by Service Element.
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9. Right to Resell
9.A AT&T will have the right to control and monitor, in accordance with the
terms of this Agreement, the technical specifications and quality standards set
forth herein of each TWComm Service, including Services to be marketed under an
AT&T brand name or under such other name or mark as AT&T may elect under Section
9.B below.
9.B AT&T shall have the right to resell or repackage under an AT&T brand name,
or under such other name or mark as AT&T may elect, any Service or Similar
Service provided to AT&T by TWComm that AT&T deems to meet the applicable
standards set forth in Section 9.A above. AT&T shall have the right to control
the graphic specifications, and all other aspects, of all marketing and branding
materials used by it pursuant to the foregoing; provided that such material or
branding shall not infringe upon the rights of any person. The foregoing rights
are not intended to imply, and do not create, any license to AT&T or its
affiliates to use any brand, trademark, trade name or other trade dress of
TWComm or any of its affiliates. Any such license shall arise only when agreed
upon in writing by AT&T and TWComm or its affiliates, as applicable. AT&T will
Indemnify TWComm from and against any Damages arising out of any Actions in
which it is claimed that AT&T marketing or branding of TWComm Services infringes
any United States trademark or copyright (the terms "Indemnify," "Damages," and
"Actions" are defined in Appendix I).
10. Pricing Principles
10.A The pricing principles by which TWComm will establish rates and charges for
the Services offered to AT&T pursuant to this Agreement are set forth in the
following Appendixes:
i. Appendix E-1 General Pricing Principles;
ii. Appendix E-2 Pricing Principles: Dedicated Services;
iii. Appendix E-3 Pricing Principles: Switched Access Services;
iv. Appendix E-4 Pricing Principles: Switches Business Line Services;
v. Appendix E-5 Pricing Principles: Local Calling Services; and
vi. Appendix E-6 Determination of Discounts for Dedicated
Services and Switched Access Services.
10.B. Except as provided for by Section 10.C, to the extent that the pricing
principles of Appendix E-1 through E-6 of this Agreement * for calculating
TWComm's rates, the applicable * will be the lowest tariffed or published
rates available to AT&T within or between the same Exchange Areas.
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10.C. Notwithstanding Section 10.B, * offers services at non-tariffed and
unpublished rates, or at rates that cannot be specifically determined from
a tariff or published price list, the applicable * will be based upon a
proposal by * to AT&T. AT&T will provide TWComm with reasonable evidence
of all material terms and conditions of such offer, unless such disclosure
would violate AT&T's confidentiality obligations *, or unless any laws or
regulations prohibit such disclosure. If AT&T cannot provide such evidence
of * proposal to TWComm, then AT&T and TWComm will mutually agree to the
Price for the applicable Service. If under such a circumstance AT&T and TWComm
are unable to reach mutual agreement, TWComm will continue to use the rates
described in Section 10.B as its reference point, but AT&T may terminate the
applicable MSA Schedule, pursuant to Section 32 of this Agreement, and commence
a Transition Period (as defined in Appendix E-6) in the applicable Selected MSA.
10.D If TWComm offers in any Selected MSA a wireline business telecommunications
service that is not a Similar Service to any of the Services provided for in
this Agreement ("New Service"), then AT&T and TWComm will negotiate in good
faith the prices, terms and conditions under which TWComm would expect to offer,
and AT&T would expect to purchase such New Service in such Selected MSA. The
parties agree that the pricing principles used to determine the price of the
Service that is most closely related to the New Service will be used as a guide
for the negotiations for the Price of the New Service, but will not be binding
upon the parties. New Services shall not include any information or
content-based telecommunications service.
10.E TWComm will not assess AT&T (or AT&T's customer) any rate, charge, fee,
tax, or surcharge in connection with any Service or New Service except those
specifically provided for in this Agreement or otherwise agreed to in writing by
TWComm and AT&T.
11. Embedded Services
11.A AT&T from time to time may issue an inquiry affording TWComm the
opportunity to provide Dedicated Services in place of existing LEC special
access, private line, or switched access local transport services ("Embedded
Services"). AT&T may request that Embedded Services be replaced with a Full
Service Arrangement or a Transport Arrangement provided by TWComm. Such Embedded
Services may terminate in Expected Serving Areas or Optional Serving Areas
within a Selected MSA. In addition to Service Credits provided for pursuant to
Section E-1.6.D of Appendix E-1, in connection with such inquiry, AT&T may
request that TWComm * Embedded Services. AT&T will provide all relevant details
regarding such * in such request. Upon such a
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request, TWComm shall notify AT&T whether TWComm would * that would be
associated with the transition of such Embedded Services to TWComm.
11.B If AT&T elects to transition Embedded Services from the LEC to TWComm
utilizing Full Service Arrangements, then AT&T shall also offer to transfer to
TWComm AT&T's customer of record status for the LEC secondary channel
terminations (commonly referred to as "LEC tails") for such Embedded Services;
provided that the LEC permits such a transfer without having to disconnect and
add each LEC secondary channel termination. if TWComm agrees to accept customer
of record status from AT&T for such secondary channel terminations, then TWComm
shall: (i) * which AT&T had previously elected when it was the customer of
record for the Embedded Service.
11.C Even if TWComm elects not to credit AT&T pursuant to Section 11.A, AT&T
may, at such time or at a later date, order Services to those locations under
the pricing principles of this Agreement.
11.D Regardless of TWComm's election * described under Section 11.A, TWComm
* the transition of Embedded Services to TWComm.
12. Transition of Services To This Agreement
12.A Unless otherwise provided in this Agreement or in a MSA Schedule, all
provisions of this Agreement shall take effect in each Selected MSA immediately
upon the MSA Schedule Effective Date.
12.B In each Selected MSA where AT&T and a Local Entity are parties to one or
more Communications Services Agreements or similar carrier-to-carrier agreements
for access and other telecommunications services ("CSAs"), the following
provisions shall apply:
12.B.i The MSA Schedule shall provide for the immediate termination of
such CSAs;
12.B.ii Pursuant to Appendix E-1, TWComm shall waive or reimburse any
nonrecurring charges applicable to the transition of Services from the
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CSAs (and any tariffs implementing such CSAs) to this Agreement (and any
tariffs implementing this Agreement);
12.B.iii Any Services provided to AT&T by TWComm on the MSA Schedule
Effective Date (whether under a CSA or otherwise) shall continue to be
provided to AT&T within that Selected MSA by TWComm (as specified in the
MSA Schedule), and the offering of such Services within a Selected MSA
shall become subject to this Agreement upon the MSA Schedule Effective
Date;
12.B.iv All nonrecurring or recurring charges incurred (whether or not
billed or collected) for Services through the MSA Schedule Effective Date
shall be governed by the CSA (and any tariff implementing the CSA), and
all nonrecurring or recurring charges incurred after the MSA Schedule
Effective Date (whether or not billed or collected) shall be governed by
the MSA Schedule and this Agreement; and
12.B.v Except to the extent required to implement the billing and
collection of charges for services rendered prior to the MSA Schedule
Effective Date, the other terms and conditions governing the ordering and
provision of Services shall be those in the CSA (and any tariff
implementing the CSA) for all activities prior to the MSA Schedule
Effective Date, and those in the MSA Schedule for all activities after the
MSA Schedule Effective Date, regardless of when an issue as to compliance
with such terms and conditions arises.
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PART IV: Network, Provisioning, Maintenance and Billing
13. Network and Infrastructure Deployment
13.A In each Expected Serving Area, TWComm expects to deploy network facilities
and infrastructure as necessary to provide each of the Services TWComm is
expected to offer pursuant to Part III of this Agreement. TWComm has submitted
to AT&T, and AT&T has accepted, TWComm's technical plan as to how TWComm intends
to satisfy each of the requirements set forth in "AT&T-CAP Infrastructure
Requirements" (described in Section 13.D below) ("Technical Plan"). Within 60
days of the Effective Date of this Agreement TWComm shall submit to AT&T a
nationwide disaster recovery plan acceptable to AT&T describing how TWComm would
respond to a failure to any primary component of its network ("Disaster Recovery
Plan"). Prior to the execution of a MSA Schedule, TWComm shall submit to AT&T a
network design plan for such MSA pursuant to Appendix F, that is reasonably
acceptable to AT&T ("Network Design Plan").
13.B Each MSA Schedule shall set forth the date by which TWComm expects its
network and infrastructure to be capable of offering Dedicated Services and
Switched Services, respectively, in each Expected Serving Area in accordance
with the applicable network requirements, infrastructure requirements, Technical
Plan and Network Design Plan, projected availability of regulatory approvals,
and other relevant factors ("Date of Expected Availability").
13.C Appendix F sets forth the network facilities architecture, technology, and
other technical characteristics applicable to all Current Serving Areas in every
Selected MSA. While nothing herein is to be construed as a commitment by TWComm
to deploy facilities or offer or provide Services at any time in any Exchange
Area, except as provided in Section 33.A of this Agreement, TWComm agrees that
it shall meet the requirements described in Appendix F and the AT&T-CAP
Infrastructure Requirements below in all Current Serving Areas at all times when
it actually provides Services to AT&T therein under a MSA Schedule.
13.D All AT&T infrastructure requirements, including but not limited to Service
provisioning and Service maintenance, applicable to all Current Serving Areas in
each Selected MSA are set forth in the then current version of "AT&T-CAP
Infrastructure Requirements" which is incorporated by reference into this
Agreement, and a copy of which (the then current version) has been provided to
TWComm. Throughout the term of this Agreement, AT&T shall have the right, in its
sole discretion, to modify AT&T-CAP Infrastructure Requirements by giving TWComm
no less than 60 days' prior written notice (provided that AT&T will give
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TWComm as much advance notice as reasonably possible in excess of such 60-day
requirement).
13.E Billing and collection of TWComm's charges for Services provided under this
Agreement shall be in accordance with the specifications and procedures set
forth in Appendix G-1 and Appendix G-2.
13.F Notwithstanding the requirements set forth in Appendix F and the AT&T-CAP
Infrastructure Requirements, TWComm understands that AT&T's continued purchasing
of Services hereunder throughout the term of this Agreement will depend on
TWComm's continuing to implement state-of-the-art technology, equipment,
facilities, processes, and techniques in connection with the delivery of
Services to AT&T.
14. Verification of Performance Capabilities
14.A At the time TWComm is first ready to offer Dedicated Services or Switched
Services in an Expected Serving Area in accordance with the network and
infrastructure requirements set forth in Section 13, TWComm will afford AT&T the
opportunity to evaluate TWComm's network and Service capabilities. Upon a
minimum of 15 days' prior written notice by AT&T (describing the scope and
location of such evaluation), TWComm shall also afford AT&T such evaluation
opportunity at all times during the term of this Agreement. Evaluation of
TWComm's performance capabilities may include, at AT&T's discretion:
14.A.i Physical inspections of TWComm's network ("Network Validation
Tests" and "Switch Validation Tests");
14.A.ii Assessments of TWComm's provisioning, maintenance, and billing
processes and systems ("Operational Readiness Assessments" or "ORAs"); and
14.A.iii Operational Readiness Tests ("ORTs") of TWComm's overall service
delivery capabilities for each Service Product.
14.B Initial deployment of the TWComm network and infrastructure will not be
deemed complete for an Expected Serving Area for purposes of this Agreement
until the initial assessments and tests specified in Section 14.A have been
completed to the mutual satisfaction of TWComm and AT&T. Accordingly, Appendix
E-6 of this Agreement sets forth the criteria for such assessments and tests as
Preconditions for the commencement of the Ramp-Up Period (defined in Appendix
E-6) for each Expected Serving Area. Any determination by AT&T that TWComm has
satisfied such assessments and tests shall be for the limited purpose of
determining whether the applicable Preconditions have been met and shall be
deemed to establish TWComm's compliance only with the network and
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infrastructure requirements of this Agreement tested thereby, and only for the
periods covered by such assessments or tests, and no more. The time frames for
AT&T to complete such assessments and tests shall be governed by the time
periods set forth in Section 14.E. Any evaluation that is not completed within
the prescribed time period shall be deemed to be waived by AT&T for the purpose
of satisfying any applicable Precondition, subject, however, to Section E-6.10.B
and E-6.11.B of Appendix E-6.
14.C For the purpose of determining the applicable time period for AT&T to
perform its evaluations as provided for by this Section 14, assessments and
tests will be classified as either Initial Evaluations or Subsequent
Evaluations.
14.C.i Dedicated Services Initial Evaluations include the tests AT&T
expects to perform following the receipt of TWComm's notice ("Network
Readiness To Serve Package") for Dedicated Services for a Selected MSA.
Dedicated Services Initial Evaluations may include the initial Dedicated
Services ORA, ORT and Network Validation Test for the initial set of
Expected Serving Areas within such Selected MSA.
14.C.ii Switched Services Initial Evaluations include the tests AT&T
expects to perform following the receipt of TWComm's Network Readiness To
Serve Package for Switched Services for a Selected MSA. Switched Services
Initial Evaluations may include the initial Switched Services ORA, ORT and
Switch Validation Test for the initial set of Expected Serving Areas
within such Selected MSA.
14.C.iii Subsequent Evaluations (for both Dedicated Services and Switched
Services) will include all tests that will be performed subsequent to the
Initial Evaluations. Subsequent Evaluations may include those Network
Validation Tests, Switch Validation Tests, ORAs and ORTs that are
performed as follow up tests due to (1) augmentations of TWComm's network
to address additional Expected Serving Areas; (2) implementation of New
Services or processes; or (3) any deficiencies noted during a previous
evaluation.
14.D Unless otherwise agreed to by the parties, TWComm will be limited to
initiating no more than four evaluation requests (either Initial Evaluations or
Subsequent Evaluations) in any one month period for all Selected MSAs. TWComm
may initiate these requests for MSAs listed in Appendix B in advance of
execution of the applicable MSA Schedule, however, AT&T is under no obligation
to commence such evaluations nor is AT&T subject to the time limitations to
perform such evaluations described in Section 14.E below until the applicable
MSA Schedule Effective Date.
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14.E Unless otherwise agreed to by the parties, the length of time AT&T will
have to conduct evaluations will be as follows:
14.E.i With respect to Dedicated Services, until the date that TWComm
successfully completes each of the tests associated with the Dedicated
Service ORTs, AT&T will have 6 months from the date AT&T receives a
reasonably satisfactory Network Readiness to Serve Package to complete its
Dedicated Services Initial Evaluations and report the findings to TWComm.
Once TWComm has successfully completed all of the tests associated with
the Dedicated Services ORTs, AT&T will have 3 months from receipt of a
reasonably satisfactory Network Readiness to Serve Package to complete its
further Dedicated Service Initial Evaluations and report the findings to
TWComm.
14.E.ii With respect to Switched Services, until the date that TWComm
successfully completes each of the tests associated with the Switched
Services ORTs, AT&T will have 6 months from the date AT&T receives a
reasonably satisfactory Network Readiness to Serve Package to complete its
Switched Services Initial Evaluations and report the findings to TWComm.
Once TWComm has successfully completed all of the tests associated with
the Switched Services ORTs, AT&T will have 3 months from receipt of a
reasonably satisfactory Network Readiness to Serve Package to complete its
further Switched Service Initial Evaluations and report the findings to
TWComm.
14.E.iii AT&T will have two months to complete any Subsequent Evaluations
from the date of receipt of TWComm's notice that TWComm is ready to
retest.
15. Provisioning Type
15.A For purposes of this Agreement, the network serving arrangement
("Provisioning Type") of each Service will be referred to by the following
terminology:
15.A.i Type I: Service configuration in which TWComm provides a Service
exclusively by means of network facilities operated and controlled by
TWComm or its affiliates.
15.A.ii Type II: Service configuration in which TWComm provides a Service
using a combination of facilities operated and controlled by the LEC, and
network facilities operated and controlled by TWComm or its affiliates.
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15.B The preferred method of provisioning is Type I. However, TWComm may choose
a different Provisioning Type to provide a Service, except as otherwise provided
for below.
15.B.i Each MSA Schedule will contain a list of locations (by street
address) that will be served by Type I provisioning for Dedicated
Services, and for Subscriber Lines for Switched Business Line Service as
part of TWComm's initial network deployment.
15.B.ii Appendix H sets forth details regarding the expected expansion of
TWComm's network to serve additional buildings via Type I provisioning.
15.C As provided for in this Section 15, a Service may be provisioned as Type
II. However, even in such cases, certain Service Elements must be furnished as
Type I, as specified below, unless otherwise agreed by the parties.
15.C.i The Service Elements of Dedicated Services shall be provisioned as
follows:
15.C.i.(a) Each Primary Channel Termination shall be provisioned as
Type I.
15.C.i.(b) Each Secondary Channel Termination shall be provisioned
as Type I or Type II in accordance with the requirements of Section
15.B and Appendix H.
15.C.i.(c) Each Internodal Connection entirely within one or more
Expected Serving Areas (exclusive of Optional Serving Areas) shall
be provisioned as Type I, in accordance with the requirements of
Section 15.B and Appendix H. Each Internodal Connection between an
LSO Node (as defined in Appendix D-1) and an LSO located in an
Optional Serving Area ("Optional LSO") shall be provisioned as
either Type I or Type II without limitation.
15.C.i.(d) Each Multiplexing function shall be provisioned as Type I
or Type II, in accordance with the requirements of Section 15.B and
Appendix H.
15.C.ii The Service Element of Switched Access Service referred to in
Appendix D-2 as Switched Access Transport shall be provisioned as Type I.
15.C.iii The Service Element of Switched Business Line Service referred to
in Appendix D-3 as Subscriber Line shall be provisioned as follows:
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15.C.iii.(a) Full Service Arrangements shall be provisioned Type I
or Type II in accordance with the requirements of Section 15.B and
Appendix H; and
15.C.iii.(b) Transport Arrangements shall be provisioned as Type I.
15.C.iv Provisioning Types have no application to Local Calling Service.
15.D AT&T may designate on its service request that a Service be provisioned
either Type I or Type II. If TWComm elects not to provide the Provisioning Type
designated by AT&T, AT&T may cancel any such Service requests associated with
such Provisioning Type any time prior to the installation of the Service without
a charge of any type, including a cancellation charge; provided that if TWComm
rejects a Service request specifying Type II provisioning at a location where
TWComm is capable of providing Type I provisioning, such rejection will not
adversely affect TWComm's Service Performance Evaluation pursuant to Appendix K,
or Imputed Volumes pursuant to Appendix E-6.
16. TWComm Activities at LSOs, AT&T Serving Offices, and Customer Premises
16.A TWComm, at its own expense, will be solely responsible for obtaining from
building owners, governmental authorities, LECs, and any other persons or
entities, all rights and privileges (including, but not limited to, space, power
and illumination) which are necessary for TWComm to provide Services under this
Agreement.
16.B The terms and conditions upon which certain rights and privileges related
to TWComm's provision of Services may be obtained from AT&T with regard to AT&T
Serving Offices are set forth in this Section 16 and Appendix I of this
Agreement. In accordance with the provisions of Section 16.C and Appendix I,
AT&T shall provide space (with temperature maintained in conformance with the
environmental requirements set forth in Bellcore Network Equipment Building
Systems (PR-NWT-000063)(Issue 5/Sept. 1993), or any subsequent issue),
electrical power, and illumination for TWComm's Facilities (including space for
storage of spare parts for such Facilities) within the AT&T Serving Office, at
no cost to TWComm. AT&T will expedite the processing of TWComm's requests for
space, power, and illumination in accordance with Section 16.E.
16.C All other agreements that must be entered into between AT&T and TWComm
which are necessary for TWComm to obtain entry into, and are in support of,
TWComm activities at AT&T Serving Offices, will be listed in the applicable MSA
Schedule.
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16.D Where AT&T's Serving Office is part of a condominium or three-dimensional
conveyance arrangement under which contiguous real property is owned by one or
more third parties, or if AT&T's Serving Office is in space leased from a third
party, AT&T will work cooperatively with TWComm to seek from the third party
owner, lessor, or other lessees any appropriate easements, rights of way,
licenses, or other rights of access needed for TWComm's access through such
third party's real property. Where such cooperative efforts are not sufficient
to permit TWComm to obtain such rights or licenses, AT&T, at its sole
discretion, may work with TWComm to establish mutually acceptable alternative
arrangements whereby TWComm can provide Services to such AT&T Serving Offices.
16.E Upon execution of a MSA Schedule, AT&T will expedite the processing of
TWComm's space and power requirements in AT&T's Serving Offices within that MSA
for TWComm's equipment and cable used solely to serve AT&T. However, AT&T shall
not be obligated to expedite such processing in a Selected MSA if:
16.E.i a Special Control Event, as defined in Section 30, affecting such
Selected MSA occurs with respect to TWComm or with respect to the
applicable Local Entity and is not waived by AT&T; or
16.E.ii TWComm does not achieve Satisfactory Performance, as defined in
Appendix K, on a national level.
16.F In each customer premises to which AT&T has ordered Services, AT&T shall
provide at no cost to TWComm space, power and illumination for TWComm equipment
and cable used solely to provide AT&T-designated brand services under Type I
provisioning arrangements, but only to the extent permitted by applicable AT&T
tariffs and AT&T customer contracts.
16.G TWComm's opportunity to enter and use space in the AT&T Serving Offices and
in the premises of AT&T's customers pursuant to Section 16.A and 16.0 is a
nonexclusive license and privilege. This Agreement does not create or vest in
TWComm (or in any other person or entity) any leasehold estate, easement,
ownership interest, or other property right or interest of any nature in any
part of the AT&T Serving Offices or premises of AT&T's customers.
16.H Terms and conditions applicable to TWComm's activities in and around AT&T
Serving Offices and the premises of AT&T's customers and other Secondary
Locations (as specified in such designated field of AT&T's Access Service
Request) including, but not limited to, installation, maintenance, and operation
of TWComm equipment and cable, are set forth in Appendix I.
16.I Notwithstanding the provisions of Section 16.A, unless otherwise directed
by AT&T, TWComm shall refrain from any contact with AT&T's customers with
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respect to Services provided under this Agreement, and shall allow AT&T to serve
as the sole contact with such customers to obtain entry upon customer premises,
release of Service for cutover or maintenance, and for all other similar
purposes under this Agreement. Therefore, TWComm shall not be held responsible
or accountable for failure to meet any of the conditions of this Agreement
caused in whole or significant part by AT&T's actions or failure to act under
this Section 16.I.
16.J If TWComm provides dedicated access services directly to AT&T's customers
under Shared Customer-Provided Access arrangements, such arrangements will
require a separate written contract ("Space License") between AT&T and TWComm
for space, power, and other physical arrangements in the AT&T Serving Office.
(Shared Customer-Provided Access means an arrangement under which TWComm
interconnects with the AT&T network so that TWComm can directly market and
provide special access services to customers of AT&T interexchange services.)
Unless TWComm and AT&T otherwise mutually agree in writing, TWComm shall furnish
these Shared Customer-Provided Access services by means of equipment and cable
which are separate from the equipment and cable used to provide Service to AT&T
under this Agreement, and TWComm shall not use any of its privileges under this
Agreement in the provision of such Services. For purposes of this Section 16.J,
each strand of fiber optic cable is deemed to be an individual "cable."
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PART V: Service Quality
17. Acceptance Testing
17.A Prior to delivery of each Dedicated Service, Switched Access Transport, and
Switched Business Line Service, TWComm shall afford AT&T the opportunity to
perform acceptance testing in accordance with the specifications and procedures
set forth in the then current version of the AT&T-CAP Infrastructure
Requirements.
17.B Following an interruption (as described in Section J.3.B of Appendix J of
this Agreement) of a Dedicated Service, Switched Access Transport, or Switched
Business Line Service, TWComm shall afford AT&T the opportunity to perform
acceptance testing in accordance with the specifications and procedures set
forth in the then current version of the AT&T-CAP Infrastructure Requirements.
18. Direct Measures of Quality.
18.A In providing Services and performing related functions, AT&T expects that
TWComm shall meet or exceed the Direct Measures of Quality ("DMOQs") designated
from time to time by AT&T. (The method which shall be used to evaluate TWComm's
service performance with respect to AT&T's DMOQs is set forth in Appendix K.)
The document that contains the initial set of DMOQs is referred to herein as the
"CAP Performance and Quality Requirements" which is incorporated by reference
into this Agreement, and a copy of which has been provided to TWComm. Throughout
the term of this Agreement AT&T shall have the right, in its sole discretion, to
modify the CAP Performance and Quality Requirements by giving TWComm no less
than 30 days' prior written notice (provided, that AT&T will give TWComm as much
advance notice as possible in excess of such 30 day requirement). A more
detailed description of DMOQs and the administration of such is provided in
Appendix K.
18.B Notwithstanding AT&T's right to discontinue its purchase of Services at its
sole discretion at any time during the term of this Agreement, AT&T's sole
remedy for TWComm's failure to achieve Satisfactory Performance (as set forth in
Appendix K), is the application of Remedies specified in Appendix E-6 of this
Agreement.
19. Quality Initiatives
19.A TWComm has established and will maintain a support organization, the
purpose of which shall be to work towards maintaining and improving the
performance by TWComm under this Agreement and any MSA Schedules.
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19.B TWComm will participate with AT&T in joint quality programs as reasonably
requested by AT&T.
19.C TWComm will implement supplier quality principles to the extent
economically reasonable in support of AT&T's candidacy for a Malcolm Baldrige
National Quality Award, International Standards Organization registration, and
other recognitions of quality.
20. Remedies for Service Deficiencies
20.A TWComm will offer Service Assurance Warranties ("SAWs") as described in
Appendix J for *. Notwithstanding Section 38 of this Agreement, TWComm shall
issue credits to AT&T pursuant to Appendix J of this Agreement *, unless TWComm
can demonstrate *.
20.B As described in further detail in Appendix E-6 of this Agreement, TWComm's
continuing failure to * in a Selected MSA may have the following
consequences:
20.B.i If TWComm's continuing failure (i.e., failure over the time periods
specified in Appendix E-6) * occurs during a time period in which any
Expected Serving Area within such Selected MSA is in a Ramp-Up Period
(as defined in Appendix E-6), then TWComm is subject to * (as these terms
are defined in Appendix E-6) for all such Expected Serving Areas within
the Selected MSA.
20.B.ii If TWComm's continuing failure (i.e., failure over the time
periods specified in Appendix E-6) to meet AT&T's DMOQs occurs during a
time period in which any Expected Serving Area within such Selected MSA is
in a Plateau Period (as defined in Appendix E-6), then TWComm is subject
to *.
20.B.iii TWComm's Service performance deficiencies with respect to
Dedicated Services will affect only the Dedicated Services Ramp-Up
Schedule and/or Volume Targets; TWComm's Service performance deficiencies
with respect to Switched Services will affect only the Switched Services
Ramp-Up Schedule and/or Volume Targets.
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20.C If any AT&T customer experiences Chronic Trouble (as defined in Section
20.C.v below) associated with any Service provided by TWComm:
20.C.i AT&T shall have the right to * within the MSA by TWComm;
20.C.ii TWComm shall * for those Services;
20.C.iii TWComm * and
20.C.iv The disconnected Services will be * this Agreement for a period
of (1) * from the date of disconnection, in the case of Dedicated
Services, or (2) * from the date of disconnection, in the case of Switched
Services.
20.C.v A Service shall be deemed to experience Chronic Trouble * (as
described in Section J.3.B of Appendix J of this Agreement) *.
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PART VI: Regulatory
21. TWComm Regulatory Approvals
21.A TWComm at its own expense, shall be solely responsible for obtaining all
regulatory certifications, authorizations, and permits needed to offer Services
to AT&T in any MSA in accordance with this Agreement and the applicable MSA
Schedule. TWComm shall not be obligated to, and shall not, commence offering any
Service to AT&T in any MSA if TWComm has not obtained all such certifications,
authorizations, and permits therefor. TWComm will be solely responsible for
determining which regulatory approvals are required to satisfy applicable law
and regulation, and the adequacy of such approvals to satisfy the requirements
of this Agreement.
21.B TWComm agrees to promptly notify AT&T of any regulatory applications filed,
and approvals received, by TWComm or any Local Entity relevant to Services under
this Agreement.
22. AT&T Regulatory Approvals
22.B AT&T, at its own expense, will be solely responsible for obtaining all
regulatory certifications, authorizations and permits needed by it to offer
services (including resale of Services) to its customers as contemplated by this
Agreement and any applicable MSA Schedule.
23. Inter-Carrier Contract: Tariffs
23.A The parties acknowledge that this Agreement is an inter-carrier contract,
and, accordingly, to the extent TWComm is offering Services, and AT&T is
purchasing Services under this Agreement, TWComm and AT&T shall be making such
offers and purchases, respectively, as carriers.
23.B Prior to TWComm's offer or provision of any Service, TWComm shall file with
all appropriate regulatory authorities and have in effect any legally required
tariffs (or lawful substitutes therefor) (the "Tariffs") under which AT&T may
purchase such Service consistent with the terms and conditions, including
prices, of this Agreement and the applicable MSA Schedules. TWComm shall not
file any Tariff until AT&T has had the opportunity to review such Tariff and
confirm in writing to TWComm that such Tariff reflects the material terms and
conditions, including prices, of the Agreement and the applicable MSA Schedules.
23.C Subject to Section 23.F, and in accordance with Section 23.D, during the
term of this Agreement, TWComm shall promptly file with the appropriate
regulatory authorities revisions to the Tariffs:
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23.C.i necessary to extend Service to additional Selected MSAs or Optional
Serving Areas where TWComm chooses to offer such Services to AT&T under
this Agreement, to effectuate rate adjustments or credits required under
the terms of this Agreement, to offer New Services, and otherwise to
implement the provisions of this Agreement; or
23.C.ii necessary to incorporate the substance of any untariffed provision
of this Agreement which either party reasonably determines may be
unenforceable unless tariffed; or
23.C.iii as the parties may otherwise agree.
23.D Except where required by applicable law or regulatory authority, TWComm
shall not file any revisions to any of the Tariffs that alter the material terms
and conditions, including prices, of this Agreement and any applicable MSA
Schedule without AT&T's prior written approval of such revisions, which approval
shall not be unreasonably withheld.
23.E TWComm shall take all prudent steps reasonably available to ensure that the
Tariffs, and any revisions to such tariffs filed pursuant to Section 23.0, take
effect as soon after filing as is possible.
23.F Except as otherwise expressly required by Section 23.0 or where required
by applicable law or regulatory authority, TWComm shall not file any
tariff, substitute tariff, or any revision thereto that:
23.F.i modifies or seeks to modify in any material respect a Tariff filed
pursuant to Section 23.B, as it applies to AT&T; or
23.F.ii modifies or seeks to modify any material terms and conditions,
including prices, with respect to any Services offered under this
Agreement to AT&T.
23.G If TWComm is required by applicable law or regulatory authority to file any
revision to its Tariffs which materially adversely affects the terms,
conditions, or prices of this Agreement to AT&T, then AT&T may terminate the
entire Agreement or MSA Schedule as applicable pursuant to Section 31 or 32 of
this Agreement.
23.H TWComm agrees that, in the event of any breach by TWComm of its obligations
under Sections 23.B through 23.D and Section 23.F of this Agreement, TWComm will
file such revisions to the Tariffs, tariff substitutes, and/or contract-based
tariff as needed to cure the breach, and to take all prudent steps reasonably
available to ensure that such revisions take effect.
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23.1 Where AT&T is required to approve or confirm any Tariff filing, such
approval or confirmation shall not be unreasonably withheld or delayed. AT&T
shall use reasonable efforts to respond to any requests for approval or
confirmation within a reasonable time period requested by TWComm. Where AT&T has
not responded in writing to a request of TWComm for such approval or
confirmation within a reasonable period of time following TWComm's request
(which writing shall include a detailed description of AT&T's objections to a
proposed filing, if applicable), TWComm shall be entitled to proceed with its
filing notwithstanding the requirements of Sections 23.B and 23.D of this
Agreement.
23.J TWComm shall provide to AT&T a courtesy copy of every Tariff and revision
thereof filed pursuant to this Agreement not later than the date of filing.
24. Detariffing
24.A In the event that any of the Services are detariffed by regulating
authorities, such detariffed Services shall thereafter be offered and provided
to AT&T pursuant to this Agreement, rather than pursuant to any Tariff, within
the jurisdictions of such regulating authorities.
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PART VII: Assignment, Delegation, and Subcontracting
25. Basis for Selection of TWComm
25.A AT&T has elected to enter into this Agreement on the basis of TWComm's
representations concerning the capabilities and resources of TWComm, and the
expertise and experience of TWComm's management and employees. Accordingly,
TWComm shall not delegate, assign, subcontract, or otherwise transfer any of its
duties, obligations, rights, payments, or privileges in connection with this
Agreement except in conformance with the requirements set forth in this Part
VII.
26. Delegation or Assignment by TWComm
26.A Other than as set forth in this Section 26, TWComm shall not assign or
delegate this Agreement (or any rights, payments, privileges, duties, or
obligations under this Agreement) without the prior written consent of AT&T,
which shall not be unreasonably withheld or delayed. Absent AT&T's written
consent, any such attempted assignment by TWComm shall be null and void.
26.B Notwithstanding the foregoing, TWComm shall be entitled to assign or
delegate the Agreement or any MSA Schedule in accordance with the following:
26.B.i TWComm may delegate its obligations to provision, manage and
operate the Network over which Services will be provided, and to offer and
provide Services, to entities (which shall thereupon become Local
Entities) pursuant to MSA Schedules that have been executed by AT&T, in
accordance with Section 4 of this Agreement.
26.B.ii TWComm or a Local Entity may assign and delegate its rights and
obligations under this Agreement or any MSA Schedule to any entities, the
management of which is vested directly or indirectly in, and the
outstanding equity interests in which are entirely owned, directly or
indirectly, by any one or more of Time Warner Entertainment Company, L.P.,
Time Warner Entertainment-Advance/Newhouse Partnership, and Time Warner
Inc.; and, with respect to the assignment or delegation of the entire
Agreement, provided that the net worth of such successor entity (or a
guarantor of its obligations under this Agreement) is no less than the net
worth of TWComm.
26.B.iii TWComm or a Local Entity may assign and delegate all the rights
and obligations of the Local Entity under an MSA Schedule to a purchaser
or assignee of substantially all of the business and assets of the Local
Entity in an MSA, and such purchaser or assignee shall thereupon become a
Local Entity; provided that TWComm is managing
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the telephony operations of such Local Entity in accordance with a
management agreement to be entered into and provided to AT&T no later than
the date of such assignment and delegation.
26.C If TWComm elects to assign or delegate this Agreement or a MSA Schedule
under this Section 26, TWComm shall notify AT&T no later than one business day
of a public announcement of the transaction which would effect the delegation or
assignment, or one business day following the actual assignment or delegation,
whichever occurs first.
26.D With respect to an assignment or delegation pursuant to Section 26.B.iii,
AT&T may elect to terminate the applicable MSA Schedule and enter a Transition
Period as described in Section 32.C.
27. Subcontracting by TWComm
27.A TWComm shall not subcontract any of its duties and obligations under this
Agreement regarding work to be performed within or around any Served Premises
(including, without limitation, any work associated with network deployment,
service delivery, and quality control) to any entity without obtaining AT&T's
prior written consent to the specific subcontractors, subject to and in
accordance with the following:
27.A.i TWComm shall identify its anticipated subcontractors and the
general types of work that may be performed by them in the applicable MSA
Schedule ("Subcontractor List"). AT&T's execution of the MSA Schedule
shall constitute AT&T's consent to TWComm's use of any subcontractor on
the Subcontractor List for any project of the designated function or type,
whether subcontracted at the MSA Schedule Effective Date or thereafter.
27.A.ii At any time after the execution of a MSA Schedule, TWComm may make
a written request to AT&T to add a subcontractor or replace a
subcontractor identified on the Subcontractor List. AT&T shall have 15
days from the receipt of such a request to provide its consent in writing.
If AT&T fails to respond to such request within 15 days, such
subcontractor shall be deemed approved and shall be added to the
Subcontractor List.
27.A.iii AT&T's consent to a proposed subcontractor shall not be
unreasonably withheld (subject, however, to Section 27.C of this
Agreement). If AT&T rejects a subcontractor proposed by TWComm, AT&T must
specify the grounds for such rejection in writing.
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27.A.iv The requirement for AT&T consent set forth in this Section 27
shall not apply to any subcontractor that is a TW System (as defined in
Appendix E-1 of this Agreement).
27.B In addition to providing the Subcontractor List, within 60 days after an
MSA Schedule's Effective Date and annually afterwards on the anniversary of such
MSA Schedule Effective Date, TWComm shall provide AT&T with a then current
complete list of all primary construction and billing subcontractors under this
Agreement which are not performing work within or around any Served Premises.
TWComm shall also specify the general type of work that such subcontractors are
performing. AT&T's prior consent is not required for TWComm's use of such
subcontractors. However, such subcontractors must comply with Section 27.C to
the extent applicable.
27.C All subcontractors performing work under this Agreement pursuant to
Sections 27.A and 27.B must execute a nondisclosure agreement satisfactory to
AT&T prior to receipt from TWComm of any AT&T "Information" as defined in
Section 41 of this Agreement.
28. Single Point of Contact
28.A Notwithstanding the provision of Services by the Local Entities pursuant to
any MSA Schedules, TWComm will make available a single point of contact
dedicated to AT&T with respect to each major function described herein,
including without limitation contracting, contract administration, price
adjustment, order processing, Service delivery, Service maintenance, quality
control, and billing. TWComm will notify AT&T from time to time of the person or
persons to whom inquiries in such areas should be addressed.
28.B AT&T will utilize TWComm as its single point of contact(s) pursuant to
Section 28.A, provided, with respect to Service delivery issues, AT&T may, in
its discretion, deal directly with the Local Entity.
28.C AT&T will identify a lead manager and supporting resources that will
provide ongoing planning and support for any AT&T purchases from TWComm.
However, AT&T shall not be obligated to identify or provide a lead manager and
supporting resources if:
28.C.i a Special Control Event, as defined in Section 30, occurs with
respect to TWComm and is not waived by AT&T; or
28.C.ii TWComm does not achieve Satisfactory Performance, as defined in
Appendix K, on a national level.
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29. Delegation or Assignment by AT&T
29.A AT&T shall not assign or delegate this Agreement (or any rights, payments,
privileges, duties, or obligations under this Agreement) without the prior
written consent of TWComm, which shall not be unreasonably withheld or delayed.
Absent TWComm's written consent, any attempted assignment by AT&T shall be null
and void; provided, however, that AT&T shall have the right to make such
delegation or assignment to any entity that is majority owned by AT&T and
entirely managed (directly or indirectly) by AT&T without obtaining TWComm's
consent.
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PART VIII: Additional Terms and Conditions
30. Special Control Event
30.A In the event that any "IXC" (as defined in Section 30.B) obtains special
management rights or control, as set forth in this Section 30 (a "Special
Control Event"), of TWComm or a Local Entity, AT&T may elect the options set
forth in Sections 30.E and 30.F, as applicable. It is agreed that neither TWComm
nor the Local Entity shall be considered in breach of this Agreement or the
applicable MSA Schedule by virtue of any Special Control Event, but only that
AT&T shall have the rights specified in this Section 30.
30.B For purposes of this Section 30, "IXC" shall mean any entity that is a
common carrier of wireline interexchange telecommunications services (excluding
"local service," "incidental transactions," and any "content services," (as
these terms are defined below) in a Selected MSA, or the "controlled affiliates"
(as defined in Section 30.I below) of such an entity. In no event shall US WEST
or its affiliates be deemed an IXC under this Section 30.B.
30.C A Special Control Event shall be deemed to have occurred if at any time:
30.C.i an IXC has become the owner of at least 5% of the outstanding
voting equity of TWComm or any Local Entity, or of any controlled
affiliate of Time Warner Inc. that directly or indirectly controls TWComm
or any Local Entity (a "Controlling Entity") that is not a publicly held
entity;
30.C.ii an IXC has become the owner of voting equity representing at least
5% of the outstanding voting equity of Time Warner Inc. or any other
publicly held entity, provided that such other entity is also a
Controlling Entity (a "Public Controlling Entity"), and the management or
governing body of such Public Controlling Entity has granted to such IXC
any rights with respect to the governance or conduct of the business of
such Public Controlling Entity that are not possessed generally by the
owners of such a voting equity interest of the Public Controlling Entity;
30.C.iii an IXO has become the owner of voting equity representing at
least 15% of the outstanding voting equity of a Public Controlling Entity,
and the management or governing board of such Public Controlling Entity
has approved or consented to such IXC ownership; or
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30.C.iv an IXC has become the owner of voting equity representing at least
25% of the outstanding voting equity of a Public Controlling Entity.
30.D Subject to Section 30.G of this Agreement, if any entity that previously
obtained ownership of voting equity as described in Section 30.C.i through
30.C.iv thereafter becomes an IXC, then a Special Control Event shall be deemed
to have occurred.
30.E If a Special Control Event has occurred with regard to TWComm, then AT&T
shall elect (i) to terminate this Agreement and to enter into a Transition
Period with respect to all Selected MSAs pursuant to Section 31 of this
Agreement, (in which event, AT&T shall be relieved of its obligations specified
in Sections 16.E and 28.C with respect to all Selected MSAs); or (ii) to waive
any Special Control Event with regard to such IXC.
30.F If a Special Control Event has occurred only with regard to a Local Entity,
then AT&T shall elect (i) to terminate the MSA Schedule and to enter into a
Transition Period with respect to the applicable Selected MSA, (in which event,
AT&T shall be relieved of its obligation specified in Section 16.E with respect
to such Selected MSA); or (ii) to waive any Special Control Event with regard to
such IXC.
30.G A Special Control Event will only occur (1) as a result of an acquisition
of interest by a third party IXC (i.e., the IXC is not affiliated with Time
Warner Inc. as of the Effective Date of this Agreement) as described above (or a
change in the status of such an acquirer as described in Section 30.D); or (2)
if TWComm, Time Warner Inc., a Local Entity, or a Controlling Entity offers
interLATA telecommunications services (excluding local service, incidental
transactions and any content services, and further excluding any interLATA
service that TWComm or its affiliates are permitted to provide under the MFJ
Waiver (as defined below) as of the Effective Date of this Agreement), as an
IXC, to business telephone service customers in a Selected MSA; provided,
however, that TWComm, Time Warner Inc., a Local Entity, or a Controlling Entity
will not otherwise be deemed IXCs due to any change in regulatory status or
internal development of their respective business after the Effective Date of
this Agreement or applicable MSA Schedule.
30.G.i The "MFJ Waiver" shall mean that certain order filed October 24,
1994, in United States v. Western Electric Company et al., Civil Action
No. 82-192, relating to the activities of Time Warner Entertainment
Company, L.P.
30.H. If a Special Control Event occurs with respect to TWComm or a Local
Entity, TWComm shall provide to AT&T a notice thereof no later than one
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business day following a public announcement of the transaction which would
effect the Special Control Event, or one business day following the actual
Special Control Event, whichever occurs first.
30.I For purposes of this Section 30:
30.I.i "local service" means telecommunications service within a local
calling area for which no long distance toll applies;
30.I.ii "incidental transactions" shall mean any privately negotiated
transactions for the provision of facilities, capacity, transport or
telecommunications services that are not offered to customers in the
ordinary course of the entity's business;
30.I.iii "content services" shall include all information or content-based
services, including without limitation cable television services;
30.I.iv a "controlled affiliate" of a specified party means an entity
controlled, directly or indirectly, by such specified party.
30.I.v "control" means the possession of the power to direct or cause the
direction of the management and policies of a person, whether through the
ownership of voting securities, by contract, or otherwise.
31. Termination of the Agreement
31.A Special Control Event. AT&T may elect to terminate this entire Agreement,
including all MSA Schedules then in effect, if a Special Control Event occurs
with respect to TWComm, provided that AT&T makes such an election within 90
days of AT&T's receipt of TWComm's notice pursuant to Section 30.H.
31.A.i A Transition Period (as described in Appendix E-6) with respect to
each Selected MSA shall begin to run on the date that TWComm receives
notice of AT&T's election to terminate the Agreement pursuant to this
Section 31.A.
31.B AT&T's Failure to Cure Material Breach. TWComm may elect to terminate this
Agreement, and all MSA Schedules then in effect, upon AT&T's failure to cure a
material breach hereunder within 120 days after written notice thereof from
TWComm.
31.B.i AT&T may take up to two years from the date it receives TWComm's
notice of termination under this Section 31.B to continue purchasing
existing Services (while making payments in accordance with Appendix G-1
and G-2), under the terms, conditions, and pricing principles of this
Agreement while it transitions such Services to another
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supplier. Such period, under this Section 31.B, shall not constitute a
Transition Period.
31.C Change in TWComm's Financial Condition. AT&T may elect to terminate this
entire Agreement if the then current "senior debt rating," as published by
Standard & Poor's, for Time Warner Entertainment Company, L.P. is "CCC" or lower
and the then "bond" rating, as published by Moody's Investors Services for Time
Warner Entertainment Company, L.P. is "B2" or lower (provided that if either
such rating service ceases to publish ratings for Time Warner Entertainment
Company, L.P., the parties will mutually select an alternative rating service,
and such alternative rating service's rating most nearly equivalent to the
foregoing ratings shall be substituted herein).
31.C.i A Transition Period with respect to each Selected MSA shall begin
to run on the date that TWComm receives notice of AT&T's election to
terminate this Agreement pursuant to this Section 31.C.
31.D Certain Regulatory Events.
31.D.i AT&T may elect to terminate this entire Agreement, including all
MSA Schedules then in effect, if TWComm is required by applicable law or
regulatory authority to file any revision to its Tariffs that materially
adversely affects the terms, conditions, or prices of this Agreement to
AT&T, provided AT&T must make such an election within 90 days of such
Tariff modification.
31.D.ii TWComm may elect to terminate this entire Agreement, including all
MSA Schedules then in effect, in accordance with Section 48.D of this
Agreement, due to the imposition of certain adverse regulatory
requirements described therein, if all Selected MSAs have been adversely
affected thereby.
31.D.iii A Transition Period (as described in Appendix E-6) with respect
to each Selected MSA shall begin to run on the date that either party
receives notice of the other party's election to terminate this Agreement
pursuant to this Section 31.D.
31.E Termination of all MSA Schedules. Unless AT&T and TWComm otherwise mutually
agree, if all MSA Schedules are terminated as a result of any or all of the
events set forth in Section 32 of this Agreement, this Agreement shall
automatically terminate at the expiration of the Transition Period (if any)
which commenced with respect to the final terminated MSA Schedule. If this
Agreement so terminates while a two-year period described in Section 31.B.i or
32.H.i is in effect, the terms, conditions and pricing principles of this
Agreement
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shall survive to the extent necessary to effect any such provision, until the
end of the last such two-year period.
32. Termination of a MSA Schedule
32.A Special Control Event. AT&T may elect to terminate a MSA Schedule if a
Special Control Event occurs with respect to the applicable Local Entity;
provided that AT&T makes such an election within 90 days of AT&T's receipt of
TWComm's notice pursuant to Section 30.H.
32.A.i A Transition Period with respect to such Selected MSA shall begin
to run on the date that TWComm receives notice of AT&T's election to
terminate such MSA Schedule pursuant to this Section 32.A.
32.A.iii After the expiration of such Transition Period, the applicable
MSA Volume Targets (as defined in Appendix E-6) shall not apply toward the
National Volume Target (as defined in Appendix E-6).
32.6 Change in Ownership of a Local Entity. Either AT&T (unless TWComm has
complied with Section 26.B of this Agreement) or TWComm may elect to terminate a
MSA Schedule if there is a change in ownership of a Local Entity, as defined in
Sections 32.B.i and 32.B.ii below, provided that such election is made (1) no
later than 30 days after the change in ownership, in the case of TWComm, or (2)
within 90 days after AT&T's receipt of notice of the change in ownership that
has occurred or shall occur, in the case of AT&T; also provided that TWComm
shall notify AT&T of such change in ownership no later than one business day
following a public announcement of the transaction which would effect the
ownership change, or one business day following the actual ownership change,
whichever occurs first.
32.B.i If (1) the Local Entity transfers all or substantially all of its
assets to, or merges or consolidates with an entity that is substantially
different in direct or indirect ownership of its equity securities from
the Local Entity itself as of the MSA Schedule Effective Date; or (2)
direct or indirect ownership of the equity securities of the Local Entity
is substantially different than it was on the MSA Schedule Effective Date.
32.B.ii The successor entity, or the original Local Entity following such
a transfer of its securities, as the case may be, shall be deemed
"substantially different" from the Local Entity on the MSA Schedule
Effective Date in accordance with the following:
32.B.ii.(a) If the Local Entity itself on the MSA Schedule Effective
Date was an entity (1) managed by TWComm, and (2) the outstanding
voting equity interests of which are at least 50%
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owned, directly or indirectly, by any one or more of Time Warner
Entertainment Company, L.P., Time Warner Entertainment -
Advance/Newhouse Partnership and Time Warner Inc., then there will
be no substantial difference if the foregoing conditions (1) and (2)
continue to be met, and TWComm is willing to provide to AT&T the
assurance of performance described in Section 4.B.
32.B.ii.(b) In all other cases other than Section 32.B.ii.(a), any
entity that differs in the beneficial ownership of outstanding
equity securities from the Local Entity as of the MSA Schedule
Effective Date by more than 5% shall be deemed substantially
different.
32.B.iii A Transition Period with respect to such Selected MSA shall begin
to run on the date that TWComm or AT&T receives notice of the other
party's election to terminate such MSA Schedule pursuant to this Section
32.B.
32.B.iv After the expiration of such Transition Period, the applicable MSA
Volume Targets shall not apply toward the National Volume Target.
32.C TWComm's Assignment or Delegation to Certain Entities. AT&T may elect to
terminate a MSA Schedule if TWComm or Local Entity has assigned the rights and
obligations of the Local Entity to another entity pursuant to Section 26.B.iii
of this Agreement, provided that AT&T makes such election within 90 days of
AT&T's receipt of a management agreement between TWComm and the purchaser or
assignee, to be entered into no later than the date of such assignment or
delegation, also provided, that TWComm or Local Entity has provided AT&T with
appropriate notice under this Agreement.
32.C.i A Transition Period with respect to such Selected MSA shall begin
to run on the date that TWComm receives notice of AT&T's election to
terminate such MSA Schedule pursuant to this Section 32.C.
32.C.ii After the expiration of such Transition Period, the applicable MSA
Volume Targets shall not apply toward the National Volume Target.
32.D Certain Regulatory Events.
32.D.i AT&T may elect to terminate the applicable MSA Schedule, if TWComm
is required by applicable law or regulatory authority to file any revision
to the applicable Tariffs that materially adversely affects the terms,
conditions, or prices of this Agreement to AT&T, provided that AT&T must
make such election within 90 days of such Tariff modification.
32.D.ii TWComm may elect to terminate the applicable MSA Schedule in
accordance with Section 48.D of this Agreement, due to the imposition of
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certain adverse regulatory requirements described therein that have
materially adversely affected such Selected MSA.
32.D.iii A Transition Period (as described in Appendix E-6) with respect
to such Selected MSA shall begin to run on the date that either party
receives notice of the other party's election to terminate the applicable
MSA Schedule pursuant to this Section 32.D.
32.E Ramp-Up Period for Dedicated Services Has Not Commenced in at Least Half of
the Expected Serving Areas. TWComm may elect to terminate a MSA Schedule if one
year from the later of (1) the date that Dedicated Services are first offered
within such Selected MSA, or (2) the Effective Date of the applicable MSA
Schedule, the Dedicated Ramp-Up Period has not commenced in at least one-half of
the Expected Serving Areas.
32.E.i A Transition Period with respect to such Selected MSA shall begin
to run on the date that AT&T receives notice of TWComm's election to
terminate such MSA Schedule pursuant to this Section 32.E.
32.E.ii After the expiration of such Transition Period, the applicable MSA
Volume Targets shall not apply toward the National Volume Target.
32.F AT&T's Application of Remedies for Over Twelve Consecutive Months. TWComm
may elect to terminate a MSA Schedule if AT&T has invoked Remedies (as defined
in Appendix E-6) with respect to such Selected MSA for at least twelve
consecutive months; provided that TWComm and AT&T have not otherwise mutually
agreed to a date upon which such Remedies shall cease.
32.F.i A Transition Period with respect to such Selected MSA shall begin
to run on the date that AT&T receives notice of TWComm's election to
terminate such MSA Schedule pursuant to this Section 32.F.
32.F.ii After the expiration of such Transition Period, the applicable MSA
Volume Targets shall not apply toward the National Volume Target.
32.G No Price Agreed Upon After the Detariffing of LEC Similar Service. With
regard to the detariffing of a LEC Similar Service, AT&T may elect to terminate
a MSA Schedule if, pursuant to Section 10.C of this Agreement, AT&T and TWComm
do not mutually agree to the Price for the applicable Service within 60 days
after written notice from AT&T to TWComm requesting a price adjustment.
32.G.i A Transition Period with respect to such Selected MSA shall begin
to run on the date that TWComm receives notice of AT&T's election to
terminate such MSA Schedule pursuant to this Section 32.F.
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32.G.ii After the expiration of such Transition Period, the applicable MSA
Volume Targets shall not apply toward the National Volume Target.
32.H AT&T's Failure to Cure Material Breach. TWComm may elect to terminate a MSA
Schedule, upon AT&T's failure to cure a material breach with respect to such MSA
Schedule within 90 days after written notice thereof from TWComm.
32.H.i AT&T may take up to two years from the date it receives TWComm's
notice of termination under this Section 32.H to continue purchasing
existing Services (while making payments in accordance with Appendix G-1
and G-2), under the terms, conditions, and pricing principles of this
Agreement while its transitions such Services to another supplier. Such
period, under this Section 32.H, shall not constitute a Transition Period.
32.H.ii On the date of termination of a MSA Schedule under this Section
32.H, any Expected Serving Area that would be deemed to have met the
applicable Preconditions if not for the termination of the MSA Schedule
shall begin its respective Ramp-Up Period. The Ramp-Up Schedule for all
Expected Serving Areas within a Ramp-Up Period shall continue to progress
until each has reached its Plateau Period. Accordingly, the MSA Volume
Targets for a MSA terminated pursuant to this Section 32.H shall continue
to be applied towards the National Volume Target for the term of this
Agreement.
33. Continuity of Service
33.A TWComm and each Local Entity agree that once specific Services (i.e.,
specific circuits or lines to a customer) are provided to AT&T under this
Agreement, TWComm shall continue to provide all such specific Services to AT&T
until TWComm receives a request from AT&T to disconnect such Services, or until
such time as this Agreement or the applicable MSA Schedule is terminated
pursuant to Sections 31 or 32 of this Agreement.
33.B. TWComm agrees that once a certain Service Product is generally offered to
AT&T throughout an Expected Serving Area and AT&T is purchasing that Service
Product under this Agreement in that Expected Serving Area, the continued
general offering of such Service Product throughout such Expected Serving Area
shall be a Precondition or Ongoing Condition, as the case may be.
33.C. If, for any reason, AT&T elects to transition certain Services to another
supplier, TWComm shall cooperate with AT&T in good faith to effect such a
transition in an orderly manner.
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33.D TWComm will give AT&T written notice prior to discontinuing its general
offering of any Service hereunder for any reason.
34. No Commitment
34.A Notwithstanding the pricing mechanisms of this Agreement in which AT&T's
achievement of Volume Targets determine in part the Price received by AT&T, such
Volume Targets serve only such limited purpose and shall not constitute, or be
construed as, a commitment on the part of AT&T to actually purchase such volumes
of Services. Accordingly, AT&T shall not be liable to TWComm for any penalty,
true-up, credit, lump sum payments, or any other remedies (other than a possible
adjustment in Discounts received, as set forth in Appendix E-6) if AT&T does not
achieve such Volume Targets. Notwithstanding any other provision of this
Agreement, except for (1) the 30-day minimum term of Service specified in
Section E-1.2.C of Appendix E-1,(2) the provisions of Section E-4.3.C of
Appendix E-4, and (3) the provisions of Addendum 1, *
35. No Consequential Damages
35.A NOTWITHSTANDING ANY PROVISION OF THIS AGREEMENT, NEITHER AT&T NOR TWCOMM
NOR ANY LOCAL ENTITY SHALL BE LIABLE FOR ANY INDIRECT, INCIDENTAL,
CONSEQUENTIAL, RELIANCE, PUNITIVE, OR SPECIAL DAMAGES (INCLUDING WITHOUT
LIMITATION ANY DAMAGES FOR HARM TO BUSINESS, LOST REVENUES, LOST SAVINGS,
OR LOST PROFITS (COLLECTIVELY "SPECIAL DAMAGES")), REGARDLESS OF THE FORM OF
ACTION, WHETHER IN CONTRACT, WARRANTY, STRICT LIABILITY, OR TORT, INCLUDING
WITHOUT LIMITATION NEGLIGENCE OF ANY KIND WHETHER ACTIVE OR PASSIVE, AND
REGARDLESS OF WHETHER THE PARTY KNEW OF THE POSSIBILITY THAT SUCH DAMAGES COULD
RESULT. EACH PARTY HEREBY RELEASES THE OTHER PARTY (AND SUCH OTHER PARTY'S
SUBSIDIARIES AND AFFILIATES, AND THEIR RESPECTIVE OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, AND SUPPLIERS) FROM ANY SUCH CLAIM.
35.B THE AMOUNT OF ANY DAMAGES PAID BY AT&T TO A THIRD PARTY THAT ARE EQUAL TO
OR LESS THAN THE LIMITATION ON LIABILITY UNDER SECTION 2.4.1.A OF ITS FEDERAL
COMMUNICATIONS COMMISSION TARIFF NO. 11, AS IN EFFECT ON THE EFFECTIVE DATE OF
THIS AGREEMENT (WHICH SECTION IS QUOTED IN SECTION 35.B.i BELOW), IF AT&T
REASONABLY DETERMINES THAT IT IS REQUIRED TO PAY SUCH DAMAGES UNDER APPLICABLE
LAW OR TARIFF, SHALL NEVERTHELESS BE DEEMED DIRECT DAMAGES AND SHALL NOT BE
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DEEMED SPECIAL DAMAGES OR BE SUBJECT TO THE LIMITATIONS OF SECTION 35.A. ALL
OTHER SPECIAL DAMAGES PAID BY AT&T TO A THIRD PARTY SHALL BE DEEMED SPECIAL
DAMAGES THAT ARE SUBJECT TO THE FOREGOING LIMITATION ON LIABILITY AND SHALL NOT
BE RECOVERABLE FROM TWCOMM.
35.B.i Section 2.4.1.A of AT&T's Federal Communications Commission Tariff
No. 11 as of the Effective Date of this Agreement reads as follows:
2.4.1. Liability
A. ...With respect to any other claim or suit, by a Customer or by any
others, for damages associated with the installation, provision,
termination, maintenance, repair or restoration of a local channel
service, and subject to the provisions of B. through F. following
[exclusions, exceptions and conditions], AT&T's liability, if any, shall
not exceed an amount equal to the proportionate charge provided for under
this tariff for the local channel service for the period during which the
condition(s) giving rise to the claim or suit arose. This liability for
damages shall be in addition to any amounts that may otherwise be due the
Customer under this tariff as a Credit Allowance for Interruptions (see
Credit Allowances for Interruptions, Page 45).
36. Nonexclusive Remedies
36.A Except as otherwise expressly provided in this Agreement, each of the
remedies provided under this Agreement is cumulative and is in addition to any
remedies that may be available at law or in equity.
37. No Third Party Beneficiaries
37.A This Agreement does not provide and is not intended to provide third
parties with any remedy, claim, liability, reimbursement, cause of action, or
other privilege.
38. Force Majeure
38.A Except as otherwise expressly provided in this Agreement, neither party
shall be liable for any delay or failure of performance resulting from any cause
beyond such party's reasonable control and not from its fault or negligence,
including without limitation the elements; unusually severe weather conditions;
lightning; earthquakes; floods; pest damage; power surges, fluctuations, or
failures; nuclear accidents; strikes or labor disputes; water; acts of God;
epidemics; war, terrorist acts, riots, insurrections, and civil disturbances;
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government regulations; acts of civil or military authorities, or the public
enemy; and fuel or energy shortages (collectively "Force Majeure").
39. Alternative Dispute Resolution
39.A Disputes between AT&T and TWComm that arise out of this Agreement shall be
resolved pursuant to the Alternative Dispute Resolution ("ADR") procedures set
forth in Appendix L of this Agreement. Such ADR procedures are designed to
enable the parties to resolve their disputes in an expeditious manner without
resort to courts.
40. Not a Joint Venture
40.A This Agreement is intended to establish a relationship of supplier and
customer between TWComm and AT&T. The undertakings described in this Agreement
shall not be deemed to constitute a joint venture or partnership between TWComm
and AT&T.
41. Confidentiality and Proprietary Information
41.A In connection with this Agreement, either AT&T, on the one hand, or TWComm
and/or a Local Entity, on the other hand, may furnish to the other certain
information that is marked or otherwise specifically identified as proprietary
or confidential ("Information"). This Information may include, among other
things, documentation, data, drawings, specifications, plans, and other
technical or business information. The term "Information" shall not be deemed to
include the existence or contents of this Agreement, which shall nonetheless be
kept confidential in accordance with this Section 41. For purposes of this
Section 41, the party that discloses Information is referred to as the
Disclosing Party, and the party that receives Information is referred to as the
Receiving Party.
41.B When Information is furnished in tangible form, the Disclosing Party shall
mark it as proprietary or confidential. When Information is provided orally, the
Disclosing Party shall, at the time of disclosure or promptly thereafter,
identify the Information as being proprietary or confidential.
41.C With respect to Information disclosed under this Agreement, and except as
otherwise provided for in Paragraph 4 of the Amended and Restated Joint
Non-Disclosure Agreement dated July 20, 1993, between AT&T, Time Warner, Inc.
and US WEST, Inc. (The "Original Nondisclosure Agreement") which shall survive
the execution hereof, the Receiving Party shall:
41.C.i hold the Information in confidence, exercising a degree of care not
less than the care used by the Receiving Party to protect its own
proprietary or confidential information that it does not wish to disclose;
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41.C.ii restrict disclosure of the Information solely to those of its
employees, officers, directors, and attorneys who have a need to know in
connection with the performance or enforcement of this Agreement, and not
disclose the Information to any other person or entity without the prior
written consent of the Disclosing Party;
41.C.iii advise those employees, officers, directors, and attorneys of
their obligations with respect to the Information; and
41.C.iv use the Information only in connection with the performance or
enforcement of this Agreement, except as the Disclosing Party may
otherwise agree in writing.
41.C.v It is understood that TWComm, as a Receiving Party, may make
disclosures of Information to (1) its affiliates that are proposed as
Local Entities, or to a TW System, but only to the extent such entities
have a need to know the Information in order to provide or assist in
providing Services under this Agreement and that such parties agree to
maintain the Information in confidence in accordance with the terms
hereof; (2) to the parties to the Original Nondisclosure Agreement
authorized to receive such Information, but only to the extent such
entities have a need to know the Information in order to approve this
Agreement or any amendment hereto or modification hereof, provided that
such entities have agreed in writing to maintain the Information in
confidence in accordance with the terms of the Original Nondisclosure
Agreement.
41.D Information shall be deemed the property of the Disclosing Party. Upon
request of the Disclosing Party, the Receiving Party shall return all
Information received in tangible form, or shall destroy it and provide written
certification of destruction to the Disclosing Party. If the Receiving Party
loses or makes an unauthorized disclosure of Information, it shall notify the
Disclosing Party and use reasonable efforts to retrieve the Information.
41.E The Receiving Party shall have no obligation to preserve the proprietary
nature of Information which:
41.E.i was previously known to the Receiving Party free of any obligation
to keep it confidential; or
41.E.ii is or becomes publicly available by means other than unauthorized
disclosure; or
41.E.iii is developed by or on behalf of the Receiving Party independently
of any Information furnished under this Agreement; or
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41.E.iv is received from a third party whose disclosure does not violate
any confidentiality obligation.
41.F In the event that the Receiving Party needs, for securities law purposes,
to make disclosures of Information to lawfully proceed with other transactions
or to comply with such applicable law or the rules of a stock exchange or
association on which such Party's securities are listed, the Receiving Party
shall provide the Disclosing Party with prompt written notice prior to making
any such disclosure so that the Disclosing Party can work with the Receiving
Party to limit the disclosure to the greatest extent possible consistent with
legal obligation, including requiring the execution of any non-disclosure
agreements reasonably deemed appropriate by the Disclosing Party, subject,
however, to the provisions of Section 41.G.
41.G All information that may be disclosed to TWComm pertaining to the
identities, locations, and requirements of AT&T's customers, are Information of
AT&T. Notwithstanding Section 41.F, under no circumstances shall TWComm or a
Local Entity or a party described in Section 41.C.v.(1) disclose AT&T's customer
Information to any third party (even if under contract to TWComm), or to any of
their personnel, responsible for publicity or for end user sales or marketing.
However, TWComm's or a Local Entity's personnel dedicated to sales or marketing
of Services to AT&T may receive such customer Information for the sole purpose
of providing such sales or marketing to AT&T.
41.H In the event that the Receiving Party becomes legally compelled (by oral
questions, interrogatories, requests for information or documents, subpoenas,
civil investigative demands or otherwise) to disclose any Information, the
Receiving Party shall provide the Disclosing Party with prompt written notice
prior to the disclosure of such Information so that the Disclosing Party may
seek appropriate confidentiality agreements, a protective order or other
appropriate remedy, or waive compliance with the provisions of this Section 41.
In the event that the Disclosing Party is unable to obtain a protective order or
other appropriate remedy, or if the Disclosing Party so directs, the Receiving
Party shall, and shall cause its employees to, exercise its reasonable best
efforts to obtain a protective order or other appropriate remedy at the
Disclosing Party's reasonable expense. Failing the entry of a protective order
or other appropriate remedy or receipt of a waiver hereunder, the Receiving
Party shall furnish only that portion of the Information which it is advised by
written opinion of its counsel is legally required to be furnished and shall
exercise its reasonable best efforts to obtain reliable assurance that
confidential treatment shall be accorded such Information.
41.I Except for any announcement agreed upon in writing by both parties pursuant
to Section 42.B, or the filing of Tariffs in accordance with Section 23, the
existence and contents of this Agreement and any MSA Schedule shall be
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kept in confidence by both parties in accordance with Section 41.C as though
they were Information; subject, however, to Sections 41.F and 41.H.
41.J Each party agrees that the Disclosing Party would be irreparably injured by
a breach of this Section 41 by the Receiving Party or its representatives and
that the Disclosing Party shall be entitled to equitable relief, including
injunctive relief and specific performance, in the event of any breach of the
provisions of this Section 41. Such remedies shall not be deemed to be the
exclusive remedies for a breach of this Section 41, but shall be in addition to
all other remedies available at law or in equity.
42. Publicity and Advertising
42.A Neither party shall publish or use any advertising, sales promotions, or
other publicity materials that use the other party's logo, trademarks, or
service marks without the prior written approval of the other party.
42.B AT&T and TWComm shall have the right to review and approve any publicity
materials, press releases, or other public statements by the other that refer to
such party and that describe any aspect of this Agreement. Each party agrees not
to issue any such publicity materials, press releases, or public statements
without the prior written approval of the other party.
42.C Nothing in this Agreement establishes a license for either party to use any
of the other party's brands, marks, or logos, and neither party shall do so,
without prior written approval of the other.
43. Governing Law
43.A This Agreement shall be governed by and interpreted in accordance with the
local laws of the State of New York, exclusive of its conflict of law
provisions.
44. No Waiver
44.A Failure of either party to enforce any right or remedy available to it
under this Agreement shall not be construed as a waiver of the right or remedy
with respect to any other breach or failure by the other party.
45. Unenforceable Provisions
45.A No provision of this Agreement shall be interpreted to require any unlawful
action by either party. If any section or clause of this Agreement is held to be
invalid or unenforceable, then the meaning of that section or clause shall be
construed so as to render it valid and enforceable to the extent feasible. If no
feasible interpretation would save the section or clause, it shall be severed
from this Agreement with respect to the matter in question, and the remainder of
the
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Agreement shall remain in full force and effect. However, in the event such
section or clause is an essential element of the Agreement, the parties shall
promptly negotiate a replacement that will achieve the intent of such
unenforceable section or clause to the extent permitted by law.
46. Notices
46.A Wherever this Agreement requires written notice, consent, or other
communication to the other party, such communication shall be given in writing
to the person and address for such notices set forth in Appendix M, or at such
other address as either party may hereafter designate in writing to the other.
Notices shall be effective as described in Appendix M.
47. Titles
47.A Titles to parts, sections, appendixes, tables, schedules, and the like are
used merely for convenience and shall not be taken as an interpretation of the
contents of those provisions or as an attempt to enlarge, limit, or define terms
covered by this Agreement.
48. Amendments
48.A Except as otherwise expressly provided in this Agreement or a MSA Schedule,
this Agreement and any MSA Schedule may be modified or amended only by written
agreement executed by authorized representatives of both TWComm and AT&T.
48.6 To the extent that this Agreement expressly authorizes unilateral
modification of certain Appendix material at the discretion of one party, such
party may effect the modification of the Appendix by giving written notice of
such modification to the other party, and mutual written agreement shall not be
required.
48.C The parties acknowledge that the pricing and terms of this Agreement are
based on many factors, including among others the current pricing and service
offerings of the LECs, which may substantially change over the term of the
Agreement. If either party believes that changes in such factors, outside the
party's control, that affect the underlying assumptions of this Agreement have
materially adversely affected the rights or obligations of such party under the
terms hereof, it may request an amendment to this Agreement consistent with the
original intent hereof. Each party acknowledges its obligation to address the
concerns of the other party and to negotiate in good faith and agree to
reasonable amendments (if appropriate) in such circumstances.
48.D The parties acknowledge that the terms and conditions of the Agreement
reflect the unique commercial requirements of the parties. In the event that
there
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is a regulatory requirement for TWComm to make the Services available via
contract or tariff to third parties which are not similarly situated to AT&T, on
the same, or substantially the same, terms and conditions set forth in the
Agreement, and TWComm is materially adversely affected by such regulatory
requirement (despite TWComm's reasonable best efforts to avoid such requirement)
such that the performance of the Agreement or any MSA Schedule is uneconomic
(based on reasonable standards of economic return) for TWComm, then the parties
will use reasonable commercial efforts to renegotiate the terms and conditions
of Services provided hereunder, to avoid such materially adverse effect while
preserving the original intents of the parties as closely as practicable. If the
parties are unsuccessful in renegotiating such terms and conditions, TWComm may,
pursuant to Section 31.D or 32.D of the Agreement, terminate one or more MSA
Schedules for those Selected MSAs that have been materially adversely affected,
or the Agreement if all Selected MSAs have been materially adversely affected.
If TWComm chooses to offer the prices, terms, and conditions hereunder to third
parties that are not similarly situated to AT&T, without a regulatory
requirement to do so, or if TWComm becomes subject to a regulatory requirement
to offer the prices, terms, and conditions hereunder to a third party willing to
commit to purchase volumes at the target levels provided in all Selected MSAs,
this Section 48.D does not apply. (Nothing herein is intended to, or shall,
preclude TWComm from complying with any regulatory requirement regarding its
offering of Services to a third party.)
48.D.i For purposes of this Section 48.D, a third party will not be
considered similarly situated to AT&T unless such third party's own
service requirements are of comparable size and scope.
49. Joint and Several Liability
49.6 With respect to each Selected MSA, TWComm and the applicable Local Entity
shall be jointly and severally liable for any monetary damages awarded to AT&T
under this Agreement and the respective MSA Schedule.
50. Successors and Assigns
50.A This Agreement shall be binding upon, and shall inure to the benefit of,
the parties and their permitted successors and assigns. No succession or
assignment by TWComm or AT&T shall be permitted (even if by operation of law)
except in accordance with the requirements of Part VII.
51. Survival
51.A The obligations of the parties under Section 41, and all other obligations
which by their nature continue beyond the term of this Agreement, shall survive
the expiration or termination of this Agreement (or any part of it).
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Page 45 of 46
52. Referenced Documents
52.A Whenever any provision of this Agreement refers to a technical reference,
technical publication, AT&T statement of requirements, or any publication of
telecommunications industry administrative, technical standards, or any other
document specifically incorporated into this Agreement, it will be deemed to be
a reference to the most recent version or edition (including any amendments,
supplements, addenda, or successors) of such document that is in general effect,
and will include the most recent version or edition (including any amendments,
supplements, addenda, or successors) of each document incorporated by reference
in such a technical reference, technical publication, AT&T statement of
requirements, or publication of industry standards.
52.B Numerous provisions of this Agreement incorporate by reference documents,
publications, statements of requirements or similar statements that are
permitted to be unilaterally changed by AT&T in the future. These relate,
generally, to Service specifications, infrastructure requirements, Service
quality and similar matters. Notwithstanding any other provisions hereof, the
parties understand that TWComm's failure to comply with any such unilateral
requirements of AT&T ("Unilateral Requirements") shall not constitute a breach
hereunder, however "Remedies" under Appendix E-6 or remedies under Section 20
may apply. In addition, such remedies shall not be available to AT&T for any
failure by TWComm to comply with a Unilateral Requirement that has been changed
by AT&T after the Effective Date of this Agreement (a "Revised Unilateral
Requirement") unless TWComm has approved such Revised Unilateral Requirement in
writing, or:
52.B.i It is technically and economically reasonable for TWComm to comply
with such revised unilateral requirement; and
52.B.ii Such Revised Unilateral Requirement is generally required by AT&T
of its competitive access providers and at least one other access supplier
has successfully implemented the Revised Unilateral Requirement.
53. Incorporated Documents
53.A The annexed Appendixes A through M and Addendum 1 referred to in this
Agreement, listed in the List of Appendixes (behind the Table of Contents of
this Agreement) are hereby incorporated in and made part of this Agreement.
54. Entire Agreement
54.A This Agreement constitutes the entire agreement between TWComm and AT&T
with respect to the subject matter hereof. This Agreement supersedes the
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Page 46 of 46
January 9, 1995 Memorandum executed by TWComm and AT&T, and all other memoranda,
proposals, representations, statements, agreements, or understandings, whether
written or oral, made concerning such subject matter prior to mutual execution
hereof.
In witness whereof, the parties have executed this Agreement through their
authorized representatives.
TIME WARNER COMMUNICATIONS AT&T COMMUNICATIONS, INC.
By: /s/ THOMAS J. MORROW By: /s/ THOMAS J. HERR
----------------------------- -----------------------------
Signature Signature
THOMAS J. MORROW THOMAS J. HERR
- -------------------------------- --------------------------------
Name Name
President, Time Warner
Communications Holdings Inc.,
Managing General Partner of VP-Strategic Business
Time Warner Communications Development & Access Management
- -------------------------------- --------------------------------
Title Title
September 29, 1995 October 4, 1995
- -------------------------------- --------------------------------
Date Date
* Indicates that such portions of the contract has been omitted pursuant to a
request for confidential treatment and that such portions have been filed with
the Commission separately.
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<PAGE>
APPENDIX A
Page 1 of 7
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
Defined Terms Location
- ------------- --------
<S> <C>
2.048 Mbps Service .................................. Appendix D-1.9
Adjustment Factor1 .................................. Appendix E-6.15.B
Adjustment Factor2 .................................. Appendix H.4.C.i
Agreement ........................................... Preamble
Alternative Dispute Resolution (ADR) ................ Section 39.A
American Arbitration Association (AAA) .............. Appendix L.3.A
Analog Business Exchange Line Service ............... Appendix D-3.3.A
Analog Business Exchange Trunk Service .............. Appendix D-3.3.C
Anticipated Volume Target (AVT) ..................... Appendix E-6.7.A
Arbitrator .......................................... Appendix L.6.A
AT&T ................................................ Preamble
AT&T Serving Office ................................. Appendix I.1.B
AT&T's Affiliates and Personnel ..................... Appendix I-18.H
AT&T-CAP Infrastructure Requirements ................ Section 13.D
Base Price .......................................... Appendix E-1.2.D
Base Price Set ...................................... Appendix E-1.4.A
Basic Channel Mileage ............................... Appendix E-2.5.C.iv
Bill Date ........................................... Appendix G-1.4.A
Call Delivery ....................................... Appendix D-2.1.B.ii
CAP Performance and Quality Requirements ............ Section 18.A
CASBR ............................................... Appendix G-1.1.C
Channel Mileage ..................................... Appendix E-2.5.C
Channel Termination ................................. Appendix D-1.2.A.i
Chronic Trouble ..................................... Section 20.C
CLASS Features ...................................... Appendix D-3.7.A
Communications Services Agreement (CSA) ............. Section 12.B
Composite Performance ............................... Appendix K.5.A
</TABLE>
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APPENDIX A
Page 2 of 7
<TABLE>
<CAPTION>
Defined Term Location
- ------------ --------
<S> <C>
Connect Direct ...................................... Appendix G-1.3.B
Controlling Entity .................................. Section 30.C.i
Current Purchase Volume ............................. Appendix E-6.16.B
Current Serving Area ................................ Section 5.A
Custom Calling Features ............................. Appendix D-3.6.A
Customer Premises ................................... Appendix I.1.B
Date of Expected Availability ....................... Section 13.B
Dedicated Local Discount Level ...................... Appendix E-6.16.A
Dedicated MSA Volume Target (D-MVT) ................. Appendix E-6.14.A
Dedicated National Discount Level ................... Appendix E-6.17.A
Dedicated National Volume Target (D-NVT) ............ Appendix E-6.15.A
Dedicated Ramp-Up Period ............................ Appendix E-6.9.A
Dedicated Service ................................... Section 6.A.i
Dedicated Service Anticipated Volume
Target (D-AVT) ...................................... Appendix E-6.7.A
Dedicated Service Expected Serving Area
Volume Target (D-XVT) ............................... Appendix E-6.13.A
Dedicated Services Initial Evaluations .............. Section 14.C.i
Dedicated Services Precondition ..................... Appendix E-6.10.A.
Digital Business Exchange Line ...................... Appendix D-3.3.B
Digital Business Exchange Trunk ..................... Appendix D-3.3.D
Digital Subrate Service ............................. Appendix D-1.7
Direct Measure of Quality (DMOQ) .................... Section 18.A
Disaster Recovery Plan .............................. Section 13.A
Disclosing Party .................................... Section 41.A
Discount ............................................ Appendix E-1.3.A.ii
Discount Level (1,2,3) .............................. Appendix E-6.4.A
DMOQ Standard ....................................... Appendix K.3.B
DS-0 Service ........................................ Appendix D-1.6
DS-1 Equivalent ..................................... Appendix E-6.7.A.i
DS-1 Service ........................................ Appendix D-1.4
</TABLE>
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APPENDIX A
Page 3 of 7
<TABLE>
<CAPTION>
Defined Term Location
- ------------ --------
<S> <C>
DS-1 Switched Access Transport ...................... Appendix D-2.1.B.i
DS-3 Service ........................................ Appendix D-1.3
DS-3 Switched Access Transport ...................... Appendix D-2.1.B.i
Effective Date ...................................... Section 2.A
Embedded Service .................................... Section 11.A
Entrance Facility ................................... Appendix E-1.2.G
Exchange Area ....................................... Section 5.A
Expected Serving Area ............................... Section 5.A
Extended Channel Mileage ............................ Appendix E-2.5.C.iii
Facilities .......................................... Appendix I.2.A.i
Force Majeure ....................................... Section 38.A
Fractional DS-1 Service ............................. Appendix D-1.5
Full Service Arrangement ............................ Section 7.A.ii
Imputed Volumes ..................................... Appendix E-6.23.A
Information ......................................... Section 41.A
Initial Evaluations ................................. Section 14.C
Initial Period ...................................... Appendix E-6.3.A.i
Inter-Company Review Board .......................... Appendix L.3.A
Internodal Connection ............................... Appendix D-1.2.A.ii
Late Factor ......................................... Appendix G-1.5.H
LEC Rate Element .................................... Appendix E-2.3.A.i
Less Than Satisfactory Performance .................. Appendix K.8.A
Lines ............................................... Appendix E-6.16.A.ii
Local Calling Area .................................. Appendix D-4.1.A
Local Calling Service ............................... Section 6.A.ii.(c)
Local Discount ...................................... Appendix E-6.2.A
Local Entities ...................................... Section 4.B.i
Local Exchange Company (LEC) ........................ Section 5.A
Local Serving Office (LSO) .......................... Section 5.A
</TABLE>
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APPENDIX A
Page 4 of 7
<TABLE>
<CAPTION>
Defined Term Location
- ------------ --------
<S> <C>
LSO Node ............................................ Appendix D-1.2.C.ii
Mandatory Type I Building ........................... Appendix H.1.A
Maximum Base Price (MBP) ............................ Appendix E-1.4.A
Metropolitan Statistical Area (MSA) ................. Section 4.A
MSA Schedule ........................................ Section 4.A
MSA Schedule Effective Date ......................... Section 12.A
MSA Volume Target (MVT) ............................. Appendix E-6.7.C
Multiplexing ........................................ Appendix D-1.2.A.iii
National Discount ................................... Appendix E-6.2.A
National DMOQ ....................................... Appendix K.3.D
National Volume Target (NVT) ........................ Appendix E-6.7.D
Network ............................................. Appendix F.1.A
Network Design Plan ................................. Section 13.A
Network Interface ................................... Appendix D-1.1.C.i
Network Readiness to Serve Package .................. Section 14.C.i
Network Validation Test ............................. Section 14.A.i
New Service ......................................... Section 10.D
Nonrecurring Charge (NRC) ........................... Appendix E-1.6.D
Ongoing Condition ................................... Appendix E-6.20.A
Ongoing Condition Deficiency Notice ................. Appendix E-6.20.E
Ongoing Condition Dispute Notice .................... Appendix E-6.20.H.i
Ongoing Condition Remedies Notice ................... Appendix E-6.20.E
Ongoing Condition Satisfaction Notice ............... Appendix E-6.20.H
Operational Readiness Assessment (ORA) .............. Section 14.A.ii
Operational Readiness Test (ORT) .................... Section 14.A.iii
Optional LSO ........................................ Appendix D-1.2.C.iii
Optional Serving Area ............................... Section 5.A
Payment Due Date .................................... Appendix G-1.5.A
Percentage Weight ................................... Appendix K.7.B
</TABLE>
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APPENDIX A
Page 5 of 7
<TABLE>
<CAPTION>
Defined Term Location
- ------------ --------
<S> <C>
Performance Evaluation .............................. Appendix K.10.A
Performance Evaluation Period ....................... Appendix K.9.A
Plateau Period ...................................... Appendix E-6.3.A.iii
POP to POP Services ................................. Appendix G-2.1.A
Precondition ........................................ Appendix E-6.10.A
Preconditions Dispute Notice ........................ Appendix E-6.9.A.i
Preconditions Notice ................................ Appendix E-6.9.A
Price ............................................... Appendix E-1.1.A
Primary Channel Termination ......................... Appendix D-1.2.A.i
Primary Location .................................... Appendix D-1.1.C
Provisioning Type ................................... Section 15.A
Public Controlling Entity ........................... Section 30.C.ii
Purchase Volume ..................................... Appendix E-6.2.B
Ramp-Up Interval .................................... Appendix E-6.8.B
Ramp-Up Percentage .................................. Appendix E-6.8.C
Ramp-Up Period ...................................... Appendix E-6.3.A.ii
Ramp-Up Schedule .................................... Appendix E-6.8.B
Receiving Party ..................................... Section 41.A
Reference Price ..................................... Appendix E-6.6.A
Reference Price Range ............................... Appendix E-6.6.A
Reference Price Threshold ........................... Appendix E-2.7.A.
Remedies ............................................ Appendix E-6.20.A
Revised Unilateral Requirement ...................... Section 52.B
Rules ............................................... Appendix L-3.A
Satisfactory Performance ............................ Appendix K.8.A
SBL Feature ......................................... Appendix D-3.1.A
SECAB ............................................... Appendix G-1.3.A
Secondary Channel Termination ....................... Appendix D-1.2.A.i
Secondary Location .................................. Appendix D-1.1.C
</TABLE>
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APPENDIX A
Page 6 of 7
<TABLE>
<CAPTION>
Defined Term Location
- ------------ --------
<S> <C>
Selected MSA ........................................ Section 4.A
Self-Healing Ring Access Service .................... Appendix D-1.1O
Self-Reported DMOQ .................................. Appendix K-9.B.i
Served Premises ..................................... Appendix I.1.A
Service ............................................. Section 6.A
Service Arrangement ................................. Section 7.A
Service Assurance Warranty (SAW) .................... Appendix J.1
Service Credits ..................................... Addendum 1.A.1
Service Element ..................................... Section 8.A
Service Performance ................................. Appendix K-5.E
Service Product ..................................... Appendix D-1.1.C
Shared Customer-Provided Access ..................... Section 16.J
Similar Feature ..................................... Appendix E-1.5.A.v
Similar Local Call .................................. Appendix E-5.3.A
Similar Service ..................................... Appendix E-1.5.A
Similarly Situated CAP .............................. Appendix E-1.6.B
Space License ....................................... Section 16.J
Special Control Event ............................... Section 30.A
Special Damages ..................................... Section 35.A
Subcontractor List .................................. Section 27.A.i
Subscriber Line ..................................... Appendix D-3.1.A
Subsequent Evaluation ............................... Section 14.C.iii
Supplier Quality Certification (SQC) ................ Appendix G-1.2.C
Switch Validation Test .............................. Section 14.A.i
Switched Access Service ............................. Section 6.A.ii.(a)
Switched Access Transport ........................... Appendix D-2.1.B.i
Switched Business Line (SBL) Service ................ Section 6.A.ii.(b)
Switched Local Discount Level ....................... Appendix E-6.16.A
Switched National Discount Level .................... Appendix E-6.17.C
</TABLE>
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APPENDIX A
Page 7 of 7
<TABLE>
Defined Term Location
- ------------ --------
<S> <C>
Switched National Volume Target (S-NVT) .............. Appendix E-6.15.A
Switched Ramp-Up Period .............................. Appendix E-6.8.B
Switched Service ..................................... Section 6.A.ii
Switched Service Anticipated Volume Target (S-AVT) ... Appendix E-6.7.A
Switched Service Expected Serving Area Volume
Target (S-XVT) ....................................... Appendix E-6.13.B
Switched Services Initial Evaluation ................. Section 14.C.ii
Switched Services Precondition ....................... Section E-6.11.A
Tariffs .............................................. Section 23.C
Technical Plan ....................................... Section 13.A
Third Party Interest ................................. Appendix I-11.A
This Selected MSA .................................... Appendix C, Section 2.A
Threshold Anniversary ................................ Appendix H-4.A
Total Channel Mileage ................................ Appendix E-2.5.C.ii
Transition Period .................................... Appendix E-6.22.A
Transport Arrangement ................................ Section 7.A.i
Transport Premises ................................... Section 7.A.i
TW System ............................................ Appendix E-1.6.A.i(a)
TWC Node ............................................. Appendix D-1.2.C
TWComm ............................................... Preamble
TWComm's Personnel ................................... Appendix I.6.A
TWComm Tariff ........................................ Section 23.C
Type 1 Threshold ..................................... Appendix H.2.E
Type I ............................................... Section 15.A.i
Type II .............................................. Section 15.A.ii
Unilateral Requirement ............................... Section 52.B
Voice Grade Service .................................. Appendix D-1.8.A
Volume Target ........................................ Appendix E-6.3.A.ii
Weight ............................................... Appendix K.3.C
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APPENDIX B
Page 1 of 1
POTENTIAL SELECTED MSAs
B.1 Introduction
B.1.A Pursuant to Section 4 of this Agreement, this Appendix sets forth those
MSAs for which TWComm expects to propose MSA Schedules for AT&T's consideration.
B.2 Potential Selected MSAs
Albany, NY
Austin, TX
Charlotte, NC
Cincinnati, OH
Columbus, OH
Fayetteville, NC
Greensboro, NC
Honolulu, HI
Houston, TX
Indianapolis, IN
Memphis, TN
Milwaukee, WI
New York, NY
Orlando, FL
Raleigh-Durham, NC
Rochester, NY
San Diego, CA
Tampa-St. Petersburg, FL
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APPENDIX C
Page 1 of 17
MODEL
- --------------------------------------------------------------------------------
MSA SCHEDULE
FOR
[MSA NAME] MSA
between
TIME WARNER COMMUNICATIONS
AT&T COMMUNICATIONS, INC.
[LOCAL ENTITY]
Effective Date: MMMM dd, 199X
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APPENDIX C
Page 2 of 17
TABLE OF CONTENTS
Section Page
- ------- ----
1. Incorporation_______________________________________________________4
2. General_____________________________________________________________4
3. Transition to Agreement from Communications Services Agreement______4
4. TWComm to Serve as Local Entity's Agent_____________________________4
5. MSA Schedule Tables_________________________________________________5
6. Delegation of TWComm Obligations Under the Agreement________________5
7. Execution by the Parties____________________________________________7
Table
-----
1 LEC Exchange Areas Comprising This Selected MSA_____________________5
2 Services Offered____________________________________________________9
3 Initial Type I Locations___________________________________________10
4 Expected Serving Areas and Network Deployment Time Table___________11
5 Dedicated Services Anticipated Volume Targets______________________12
6 Switched Services Anticipated Volume Targets_______________________13
7 TWComm Subcontractors______________________________________________14
8 Local Calling Areas Comprising This Selected MSA___________________15
9 Taxes Applicable To This Selected MSA______________________________16
10 Other Agreements in Support of Local Entity's Activities
At AT&T Serving Offices____________________________________________17
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APPENDIX C
Page 3 of 17
- --------------------------------------------------------------------------------
Selected MSA Name:
- --------------------------------------------------------------------------------
MSA Schedule Effective Date:
- --------------------------------------------------------------------------------
Local Entity:
- --------------------------------------------------------------------------------
This MSA Schedule is entered into between TIME WARNER COMMUNICATIONS, a
Delaware General Partnership, having an office at 160 Inverness Drive West,
Englewood, Colorado 80112 ("TWComm"), the Local Entity identified above having
an office at ___________________________, and AT&T COMMUNICATIONS, INC., a
Delaware corporation, having an office at 32 Avenue of the Americas, New York,
New York 10013, on behalf of itself, the Interstate Division of AT&T Corp., a
New York corporation, and each of their interexchange company affiliates
(individually and collectively "AT&T').
Whereas, AT&T and TWComm entered into an agreement effective September 15,
1995 (the "Agreement") under which TWComm intends to offer certain business
telecommunications ("Service") to AT&T through Local Entities in certain MSAs
proposed by TWComm and agreed to by AT&T; and
Whereas, TWComm has proposed, and AT&T has agreed, to include [MSA NAME]
MSA as a Selected MSA under the Agreement (hereinafter referred to as "This
Selected MSA"); and
Whereas, TWComm has delegated, and Local Entity has agreed to assume, all
applicable obligations and responsibilities for offering and providing Services
in This Selected MSA in accordance with the terms and conditions of this MSA
Schedule, including those terms and conditions incorporated by reference from
the Agreement;
Now, therefore, in consideration of the foregoing premises and mutual
covenants of this MSA Schedule, TWComm, AT&T, and Local Entity agree as follows:
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APPENDIX C
Page 4 of 17
1. Incorporation
1.A When executed by authorized representatives of TWComm, AT&T, and Local
Entity, this MSA Schedule will become effective on the Effective Date stated
above, and will incorporate the applicable terms and conditions of the Agreement
executed between TWComm and AT&T on September 15, 1995, pursuant to Section 4 of
the Agreement.
2. General
2.A This MSA Schedule sets forth certain information required by the Agreement
which applies solely to This Selected MSA. The Local Entity's obligations
hereunder shall extend solely to This Selected MSA. Information, terms and
conditions listed herein are intended to supplement, and not replace or
supersede those set forth in the Agreement, unless expressly stated otherwise
within this MSA Schedule.
2.B Words and phrases spelled with initial capital letters (other than proper
names) are defined terms, definitions for which may be contained in this MSA
Schedule or elsewhere in the Agreement.
3. Transition to Agreement from Communications Services Agreement
3.A Upon the MSA Schedule Effective Date, the Communications Services Agreement
("CSA") for [CSA city], dated [CSA effective date], and all subsequent
amendments to the CSA, executed between Local Entity and AT&T, shall terminate
without further liability to either Local Entity or AT&T, and all Services
(tariffed or nontariffed) which were offered or provided to AT&T, and the
prices, terms and conditions governing existing Services under the CSA, shall be
replaced with the prices, terms and conditions herein, all in accordance with
Section 12 of the Agreement.
4. TWComm to Serve as Local Entity's Agent
4.A Local Entity shall appoint TWComm to serve as its agent for the following
functions:
4.A.i Accepting orders from AT&T, and for billing and collection of all
charges to AT&T in connection with all Services provided to AT&T by Local
Entity (all payments made to TWComm by (or on behalf of) AT&T in
connection with such Services shall be deemed received by Local Entity
when the payment is received by TWComm);
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APPENDIX C
Page 5 of 17
4.A.ii Negotiating and entering into any modifications or amendments to
the Agreement, or otherwise providing any consents required under the
Agreement, which affect the terms and conditions of this MSA Schedule;
4.A.iii Preparing Performance Evaluations as specified in Appendix K of
this Agreement;
4.A.iv Acting as the "single point of contact" on behalf of the Local
Entity in accordance with Section 28 of the Agreement;
4.A.v Receiving service of process at the address designated for delivery
of notices in Appendix M of the Agreement on behalf of Local Entity; and
4.A.vi Any other functions to be borne by TWComm on behalf of the Local
Entity in accordance with the Agreement, or as otherwise agreed to in
writing by the parties.
4.B TWComm's authority under this Section 4 as agent for Local Entity shall be
irrevocable for the term of this MSA Schedule unless otherwise agreed to by the
parties in writing.
5. MSA Schedule Tables
5.A Tables 1 through 10 of this MSA Schedule set forth the information, terms
and conditions referenced in Section 2.A of this MSA Schedule that are
applicable solely to This Selected MSA. A list of the Tables can be found in the
Table of Contents on Page 2 of this MSA Schedule.
6. Delegation of TWComm Obligations Under the Agreement
6.A TWComm hereby delegates to Local Entity all applicable obligations and
responsibilities under the Agreement related to the offering and provision of
Services in This Selected MSA, and Local Entity hereby assumes such obligations
and responsibilities. Accordingly, TWComm itself shall not be required to
actually provide Services in This Selected MSA.
6.6 AT&T, by executing this MSA Schedule, consents to TWComm's delegation to
Local Entity of all applicable obligations and responsibilities under the
Agreement related to the offering and provision of Services in This Selected
MSA.
6.C Notwithstanding such delegation, TWComm shall be responsible for causing
Local Entity to comply with the applicable terms, conditions, and prices
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APPENDIX C
Page 6 of 17
of This MSA Schedule and the Agreement, and will be financially liable for Local
Entity's failure to comply with such terms, conditions, and prices.
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APPENDIX C
Page 7 of 17
7. Execution by the Parties
In witness whereof, the parties have executed this MSA Schedule through their
authorized representatives.
TIME WARNER COMMUNICATIONS AT&T COMMUNICATIONS, INC.
By:________________________________ By:_____________________________________
Signature Signature
___________________________________ _____________________________________
Name Name
___________________________________ _____________________________________
Title Title
___________________________________ _____________________________________
Date Date
[LOCAL ENTITY NAME]
By:________________________________
Signature
___________________________________
Name
___________________________________
Title
___________________________________
Date
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APPENDIX C
Page 8 of 17
TABLE 1
EXCHANGE AREAS COMPRISING THIS SELECTED MSA
Pursuant to Section 4 of the Agreement, the geographic area comprising This
Selected MSA will be the aggregate area covered by the Exchange Areas listed
below (by their respective Common Language Location Identifiers).
XOXOXOXO XOXOXOXO
XOXOXOXO XOXOXOXO
XOXOXOXO XOXOXOXO
XOXQXOXO XOXOXOXO
XOXOXOXO XOXOXOXO
XOXOXOXO XOXOXOXO
XOXOXOXO XOXOXOXO
XOXOXOXO XOXOXOXO
XOXOXOXO XOXOXOXO
XOXOXOXO XOXOXOXO
XOXOXOXO XOXOXOXO
XOXOXOXO XOXOXOXO
XOXOXOXO XOXOXOXO
XOXOXOXO
XOXOXOXO
XOXOXOXO
XOXOXOXO
XOXOXOXO
XOXOXOXO
XOXOXOXO
XOXOXOXO
XOXOXOXO
XOXOXOXO
XOXOXOXO
XOXOXOXO
XOXOXOXO
XOXOXOXO
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APPENDIX C
Page 9 of 17
TABLE 2
SERVICES OFFERED
Pursuant to Section 6 of the Agreement, the Services that the Local Entity
expects to offer to AT&T in This Selected MSA are listed below;
All Dedicated Services described in Appendix D-1 of the Agreement.
All Switched Access Services described in Appendix D-2 of the Agreement.
All Switched Business Line Services described in Appendix D-3 of the
Agreement.
All Local Calling Services described in Appendix D-4 of the Agreement.
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APPENDIX C
Page 10 of 17
TABLE 3
INITIAL TYPE I LOCATIONS
Pursuant to Section 15 of the Agreement, those locations which TWComm will serve
by Type I provisioning as part of TWComm's initial network deployment for This
Selected MSA are set forth below:
Customer Building 1
Street number, Street Building
City, State, Zip Code
Serving Area
Customer Building 2
Street number, Street Building
City, State, Zip Code
Serving Area
Customer Building 3
Street number, Street Building
City, State, Zip Code
Serving Area
Customer Building 4
Street number, Street Building
City, State, Zip Code
Serving Area
Customer Building 5
Street number, Street Building
City, State, Zip Code
Serving Area
Customer Building 6
Street number, Street Building
City, State, Zip Code
Serving Area
Customer Building 7
Street number, Street Building
City, State, Zip Code
Serving Area
Customer Building 8
Street number, Street Building
City, State, Zip Code
Serving Area
Customer Building 9
Street number, Street Building
City, State, Zip Code
Serving Area
Customer Building 10
Street number, Street Building
City, State, Zip Code
Serving Area
Customer Building 11
Street number, Street Building
City, State, Zip Code
Serving Area
Customer Building 12
Street number, Street Building
City, State, Zip Code
Serving Area
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APPENDIX C
Page 11 of 17
TABLE 4
EXPECTED SERVING AREAS AND NETWORK DEPLOYMENT TIME TABLE
Pursuant to Section 5 of the Agreement, the Expected Serving Areas for This
Selected MSA are identified by their respective Common Language Location
Identifiers in the column of this Table 4 designated "Expected Serving Area".
The dates which TWComm expects to make Dedicated Services and Switched Services
available to AT&T in each Expected Serving Area are set forth in the columns of
this Table 4 designated "Dedicated Services Date of Expected Availability" and
"Switched Services Date of Expected Availability," respectively.
</TABLE>
<TABLE>
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DEDICATED SERVICES SWITCHED SERVICES
EXPECTED DATE OF EXPECTED DATE OF EXPECTED
SERVING AREA AVAILABILITY AVAILABILITY
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TABLE 5
DEDICATED SERVICES ANTICIPATED VOLUME TARGETS
Pursuant to Section E-6.7 of Appendix E-6 of the Agreement, the Level 1, Level 2
and Level 3 Dedicated Services Anticipated Volume Targets ("AVTs") associated
with each Expected Serving Area for This Selected MSA are set forth in the
respective columns of this Table 5.
<TABLE>
<CAPTION>
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EXPECTED
SERVING AREA LEVEL 1 AVT LEVEL 2 AVT LEVEL 3 AVT
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<S> <C> <C> <C>
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TABLE 6
SWITCHED SERVICES ANTICIPATED VOLUME TARGETS
Pursuant to Section E-6.7 of Appendix E-6 of the Agreement, Level 1, Level 2
and Level 3 Switched Services Anticipated Volume Targets ("AVTs") associated
with each Expected Serving Area for This Selected MSA are set forth in the
respective columns of this Table 6.
<TABLE>
<CAPTION>
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EXPECTED
SERVING AREA LEVEL 1 AVT LEVEL 2 AVT LEVEL 3 AVT
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<S> <C> <C> <C>
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TABLE 7
TWCOMM SUBCONTRACTORS
Pursuant to Section 27.A of the Agreement, the initial Subcontractor List,
including the work that may be performed by each subcontractor in This Selected
MSA, is provided below:
First Subcontractor's Name
First Subcontractor's Address
First Subcontractor's Telephone Number
Work to be performed by First Subcontractor
Second Subcontractor's Name
Second Subcontractor's Address
Second Subcontractor's Telephone Number
Work to be performed by Second Subcontractor
Third Subcontractor's Name
Third Subcontractor's Address
Third Subcontractor's Telephone Number
Work to be performed by Third Subcontractor
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APPENDIX C
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TABLE 8
LOCAL CALLING AREAS COMPRISING THIS SELECTED MSA
Pursuant to Section D-4.1 of Appendix D-4 of the Agreement, the Exchange Areas
comprising each of the Local Callings Areas for This Selected MSA shall be the
then current LEC local calling areas within This Selected MSA, subject to
revision from time to time by mutual agreement of AT&T and TWComm in accordance
with Section D-4.1 of Appendix D-4.
[If the parties elect to describe Local Calling Areas by Exchange Area, Local
Calling Areas will be set forth in the form described below.]
Any call which originates and terminates within or between the Exchange Areas
associated with a Local Calling Area shall be deemed to be a Local Call.
Exchange Areas comprising Local Calling Area 1:
XOXOXOXO XOXOXOXO
XOXOXOXO XOXOXOXO
XOXOXOXO XOXOXOXO
XOXOXOXO XOXOXOXO
Exchange Areas comprising Local Calling Area 2:
XOXOXOXO XOXOXOXO
XOXOXOXO XOXOXOXO
XOXOXOXO XOXOXOXO
XOXOXOXO XOXOXOXO
Exchange Areas comprising Local Calling Area 3:
XOXOXOXO XOXOXOXO
XOXOXOXO XOXOXOXO
XOXOXOXO XOXOXOXO
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APPENDIX C
Page 16 of 17
TABLE 9
TAXES APPLICABLE TO THIS SELECTED MSA
The following taxes may be applicable to the Services provided under this MSA
Schedule as of the MSA Schedule Effective Date. To the extent such taxes are
applicable (whether or not the rates set forth below have subsequently changed),
and unless subject to a tax exempt certificate under Section E-1.8.A of Appendix
E-1 of the Agreement, TWComm will charge AT&T, and AT&T will pay TWComm, for
such taxes.
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APPENDIX C
Page 17 of 17
TABLE 10
OTHER AGREEMENTS IN SUPPORT OF LOCAL ENTITY'S ACTIVITIES AT
AT&T SERVING OFFICES
Pursuant to Section 16.C of the Agreement, other agreements that TWComm and AT&T
have entered into in support of Local Entity's activities at AT&T Serving
Offices in This Selected MSA are listed below:
Occupancy Agreement, effective MMMM dd, 19XX
Synchronization Agreement, effective MMMM dd, 19XX
* Indicates that such portions of the contract has been omitted pursuant to a
request for confidential treatment and that such portions have been filed with
the Commission separately.
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APPENDIX D-1
Page 1 of 21
SERVICE DESCRIPTION: DEDICATED SERVICES
D-1.1 General Description
D-1.1.A Dedicated Services are Services that provide 2-point digital or analog
channels connecting any location within an Expected Serving Area or Optional
Serving Area to any other location within any Expected Serving Area or Optional
Serving Area in the same MSA.
D-1.1.B As of the Effective Date of this Agreement, LEC services under current
LEC tariffs that are Similar to Dedicated Services are offered and priced
exclusively by service element (e.g., channel termination, channel mileage and
multiplexing). Accordingly, LEC customers must purchase and combine various LEC
service elements into the desired arrangement to make a complete and functional
service (e.g., a LEC customer may purchase two DS-1 channel terminations and
channel mileage which comprises a complete LEC DS-1 service). * , at such time
that TWComm offers Dedicated Services to AT&T, * . (Service Elements are defined
in this Agreement in Section D-1.2 only because such Service Elements are
necessary for describing pricing and provisioning concepts contained herein; * .
D-1.1.C Dedicated Services are distinguished by Service Product. Each Service
Product is characterized by its digital bit transmission rate or analog
bandwidth at the Network Interface (as defined below). If the Service connects a
Primary Location and a Secondary Location (as these terms are defined by the
Bellcore Industry Support Interface), the bit rate or bandwidth will be as
measured at the Network Interface at the Secondary Location. If the Service
connects two Primary Locations or two Secondary Locations, the bit rate or
bandwidth will be as measured at the Network Interface having the lower digital
bit transmission rate or analog bandwidth. The Service Categories of Dedicated
Services are: DS-3 Service, DS-1 Service, Fractional DS-1 Service, DS-0 Service
Digital Subrate Service, Voice Grade Service, 2.048 Mbps Service, and
Self-Healing Ring Access Service. The technical specifications and available
features applicable to each Service Product are described in Section D-1.3
through Section D-1.11 of this Appendix D-1.
D-1.1.C.i Depending on the context in which the term "Network Interface"
is used in this Agreement, such term shall mean one or more of the
following: (1) the point of demarcation where the Service originates
and/or terminates; (2) the device (e.g., jack) which permits AT&T or
AT&T's customer to interconnect to such Service; and/or (3) the code
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*Indicates that such portions of the contract have been omitted pursuant to a
request for confidential treatment and that such portions have been filed with
the Commission separately
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APPENDIX D-1
Page 2 of 21
which designates the transmission and signalling characteristics of the
Service at such demarcation point (e.g., the Network Channel Code or
Network Interface Code as these terms are defined by the Bellcore Industry
Support Interface).
D-1.1.D Except as otherwise provided within this Section D-1.1.D, AT&T may
designate the location of the Network Interface within each Served Premises (as
defined in Appendix I of this Agreement).
D-1.1.D.i With regard to Full Service Arrangements, if the LEC's then
current practice is to terminate Service to a minimum point of penetration
in that Exchange Area, then TWComm may elect to terminate the Service at
the minimum point of penetration in that Exchange Area.
D-1.1.D.ii With regard to Transport Arrangements, if the location of the
Network Interface within a Transport Premises designated by AT&T is not
reasonably feasible, AT&T and TWComm will mutually agree to an alternative
location for the Network Interface.
D-1.1.E Dedicated Services shall meet or exceed the requirements set forth in
the technical references identified herein. If another AT&T, Bell Communications
Research, Inc. ("Bellcore"), or generally accepted industry standard (e.g.,
American National Standards Institute ("ANSI")) technical reference sets forth a
different requirement, * . AT&T will notify TWComm from time to time of any such
standards it believes to be applicable. If the parties cannot agree which
requirement * , AT&T may * .
D-1.1.F Dedicated Services provide any feature or service option described in
the technical references identified herein, as designated by AT&T.
D-1.1.G AT&T, at its option, may designate any commercially available Network
Interface device (e.g., a jack or connector) to be installed at a Served
Premises, including without limitation DS-1, DS-3, STS-1, and OC-n (where n
equals 1 to 48) interfaces, and any other interface described in the applicable
technical references.
D-1.1.H Services which AT&T purchases from TWComm for the purpose of replacing
LEC switched local transport restructure trunks are deemed to be Dedicated
Services under this Agreement.
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D-1.2 Service Elements
D-1.2.A Available Service Elements: Dedicated Services are composed of
components referred to as Service Elements. The Service Elements of Dedicated
Services are as follows:
D-1.2.A.i Channel Termination - The Service Element that provides a
dedicated connection between the Network Interface at a Served Premises
and the nearest TWComm Node or Optional LSO (as this term is described In
Section D-1.2.C below). If the Served Premises is an AT&T Serving Office
and the Channel Termination presents a Network Interface operating at a
digital transmission rate of 44.736 Mbps or higher, this Service Element
is referred to as a Primary Channel Termination. Otherwise, this Service
Element is referred to as a Secondary Channel Termination.
D-1.2.A.ii Internodal Connection - The Service Element that, alone or in
combination with one or more other Internodal Connections, provides a
dedicated connection between two Channel Terminations; or with regard to a
Transport Arrangement, between a Channel Termination and a Network
Interface at the Transport Premises. The interconnected Channel
Terminations may be in the same Current Serving Area or in different
Current Serving Areas within the Selected MSA. Internodal Connections are
measured with respect to Channel Mileage as described in Appendix E-2.
D-1.2.A.iii Multiplexing - The Service Element that provides multiplexing
and/or demultiplexing as required. Multiplexing will be a required Service
Element whenever TWComm provides a Dedicated Service having Network
Interfaces that are not at the same bit transmission rate or analog
bandwidth.
D-1.2.B Available Service Configurations: Dedicated Services are provided by
assembling the applicable combination of required Service Elements as described
below. In each case, Multiplexing will also be a required Service Element if the
Network Interfaces of the Channel Terminations are not at the same bit
transmission rate or analog bandwidth.
D-1.2.B.i Two Primary Channel Terminations and one or more Internodal
Connections, if the Service is a DS-3 Dedicated Service between two AT&T
Serving Offices (for Full Service Arrangements only).
D-1.2.B.ii Two Secondary Channel Terminations and one or more Internodal
Connections, if the Service is a Full Service Arrangement (a) between two
Secondary Locations, or (b) between an AT&T Serving
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APPENDIX D-1
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Office and a Secondary Location, and presents a Network Interface
operating at a digital transmission rate below 44.736 Mbps at the AT&T
Serving Office.
D-1.2.B.iii One Primary Channel Termination, one Secondary Channel
Termination, and one or more Internodal Connections, if the Service is a
Full Service Arrangement between an AT&T Serving Office and a Secondary
Location, and presents a Network Interface operating at a digital
transmission rate of 44.736 Mbps or higher at the AT&T Serving Office.
D-1.2.B.iv If the requested Service is a Transport Arrangement, one
Primary Channel Termination and one or more Internodal Connections.
D-1.2.C Required Service Elements: Figures 1 through 10 depict the required
Service Elements for each often basic configurations of Dedicated Services.
Other configurations of Dedicated Services may also be offered by TWComm but are
not illustrated here. Each required Service Element depicted in Figures 1
through 10 is designated in italic type. For purposes of this Appendix D-1, the
following definitions apply:
D-1.2.C.i a TWC Node is any location on the TWComm network that contains
equipment or apparatus owned or controlled by TWComm.
D-1 .2.C.ii a LSO Node is a TWComm Node physically or virtually collocated
within a LEC LSO.
D-1.2.C.iii an Optional LSO is the LEC LSO corresponding to an Optional
Serving Area.
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APPENDIX D-1
Page 5 of 21
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KEY
to Figures 1 through 10
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[GRAPHIC OMITTED]
- ----------
Note 1: Channel Mileage is measured based upon the V & H coordinates of the
corresponding LEC Serving Wire center as described in Appendix E-2.
Note 2: Although not depicted on the following figures, Multiplexing is a
required Service Element when the network interfaces of the Channel Terminations
are not the same bit transmission rate or analog bandwidth.
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APPENDIX D-1
Page 6 of 21
Figure 1
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Required Service Elements for Dedicated Service between
two AT&T Serving Offices
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APPENDIX D-1
Page 7 of 21
Figure 2
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Required Service Elements for Dedicated Service between an
AT&T Serving Office and a Type I Secondary Location
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[GRAPHIC OMITTED]
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APPENDIX D-1
Page 8 of 21
Figure 3
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Required Service Elements for Dedicated Service between an
AT&T Serving Office and a Type II Secondary Location
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Page 9 of 21
Figure 4
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Required Service Elements for Dedicated Transport Service
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APPENDIX D-1
Page 10 of 21
Figure 5
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Required Service Elements for Dedicated Service between an
AT&T Serving Office and a Type II Secondary
Location in a Foreign Exchange Area
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[GRAPHIC OMITTED]
Note 1. Basic channel Mileage is Total Channel Mileage minus Extended Channel
Mileage.
Note 2. Extended Channel Mileage is measured from the Foreign LSO to the nearest
LSO Node irrespective of routing.
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APPENDIX D-1
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Figure 6
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Required Service Elements for Dedicated Service between
two Type I Secondary Locations
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Figure 7
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Required Service Elements for Dedicated Service between a
Type II Secondary Location and a Type II Secondary Location
in a Foreign Exchange Area
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[GRAPHIC OMITTED]
Note 1. Basic Channel Mileage is Total Channel Mileage minus Extended Channel
Mileage.
Note 2. Extended Channel Mileage is measured from the Foreign LSO to the nearest
LSO Node irrespective of routing.
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Figure 8
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Required Service Elements for Dedicated Service between
two Type II Secondary Locations
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Figure 9
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Required Service Elements for Dedicated Service between
two Type II Secondary Location a Type II Secondary Location
in a Foreign Exchange Area
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[GRAPHIC OMITTED]
Note 1. Basic Channel Mileage is Total Channel Mileage minus Extended Channel
Mileage.
Note 2. Extended Channel Mileage is measured from the Foreign LSO to the nearest
LSO Node irrespective of routing.
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Figure 10
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Required Service Elements for Dedicated Service between
two Type II Secondary Locations in Foreign Exchange Areas
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[GRAPHIC OMITTED]
Note 1. This service arrangement requires two separate Type II Intemodal
Connections, each of which have separate Fixed and Per Mile Extended Channel
Mileage. Extended Channel Mileage is measured from the Foreign LSO to the
nearest LSO Node irrespective of routing.
Note 2. Basic Channel Mileage is Total Channel Mileage minus the sum of Extended
Channel Mileage.
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Page 16 of 21
D-1.3 DS-3 Service
D-1.3.A General Description: DS-3 Service means a Dedicated Service that
provides a 2-point digital channel for the 2-way simultaneous transmission of
digital signals at 44.736 Mbps.
D-1.3.B Technical Requirements
D-1.3.B.i General. DS-3 Service shall meet or exceed the DS-3 requirements
set forth in the following technical references:
AT&T Technical Reference TR 62415 "Access Specifications for High
Capacity DS-1/DS-3 Dedicated Digital Services";
AT&T Technical Reference TR 54014 "ACCUNET(R) T45 Service
Description Interface Specification."
D-1.3.B.ii Additional Specifications. DS-3 Service provides digital clear
channels at 44.736 Mbps that are capable of synchronous transmission. The
DS-3 clear channel signal shall be transmitted intact (i.e., neither the
content (including overhead) nor timing of the signal shall be changed in
any way that may affect a user's application).
D-1.4 DS-1 Service
D-1.4.A General Description: DS-1 Service means a Dedicated Service that
provides a 2-point digital channel for the 2-way simultaneous transmission of
digital signals at 1.544 Mbps.
D-1.4.B Technical Requirements
D-1.4.B.i General. DS-1 Service shall meet or exceed the DS-1
requirements set forth in the following technical references: AT&T
Technical Reference TR 62415 "Access Specifications for High Capacity
DS-1/DS-3 Dedicated Digital Services";
AT&T Technical Reference TR 62411 "ACCUNET(R) T1.5 Service
Description & Interface Specifications";
AT&T Technical Reference TR 54016 "Requirements For Interfacing
Digital Terminal Equipment Services Employing Extended Superframe."
D-1.4.B.ii Additional Specifications.
D-1.4.B.ii.(a) DS-1 Service provides digital clear channels at
1.544 Mbps that are capable of asynchronous transmission. The
DS-1 clear
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APPENDIX D-1
Page 17 of 21
channel signal shall be transmitted intact (i.e., neither the
content (including overhead) nor timing of the signal shall be
changed in any way that affects a user's application).
D-1.4.B.ii.(b) DS-1 Service shall not interfere with, or be
impaired by, the use of AT&T Stratum 1 traceable timing by
AT&T or AT&T's customer.
D-1.4.B.ii.(c) DS-1 Service shall utilize Bipolar Eight Zero
Substitution (B8ZS) line code unless otherwise designated by
AT&T. DS-1 Service shall be provided with an unframed format
or extended superframe format when specified by AT&T.
D-1.5 Fractional DS-1 Service
D-1.5.A General Description: Fractional DS-1 Service means a Dedicated Service
that provides a 2-point digital channel for the 2-way simultaneous transmission
of digital signals at one of the following bit transmission rates: 128 Kbps, 256
Kbps, 384 Kbps, 512 Kbps, 640 Kbps, 768 Kbps, 896 Kbps, 1.024 Mbps, 1.152 Mbps,
1.280 Mbps, and 1.408 Mbps.
D-1.5.B Technical Requirements
D-1.5.B.i General. Fractional DS-1 Service shall meet or exceed the DS-1
requirements set forth in the following technical references:
AT&T Technical Reference TR 62415 "Access Specifications for High
Capacity DS-1/DS-3 Dedicated Digital Services";
AT&T Technical Reference TR 62411 "ACCUNET(R) T1.5 Service
Description & Interface Specifications";
AT&T Technical Reference TR 54016 "Requirements For Interfacing
Digital Terminal Equipment Services Employing Extended Superframe."
D-1.5.B.ii Additional Specifications
D-1.5.B.ii.(a) Fractional DS-1 Service provides the bit
transmission rate selected by AT&T to the applicable Network
Interface.
D-1.5.B.ii.(b) Fractional DS-1 Service shall provide digital
clear channels at the selected bit transmission rate that are
capable of asynchronous transmission. The Fractional DS-1
clear channel signal shall be transmitted intact (i.e.,
neither the content (including overhead) nor timing of the
signal shall be changed in any way that affects an AT&T
customer's application.
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D-1.5.B.ii.(c) Fractional DS-1 Service shall not interfere
with, or be impaired by, the use of AT&T Stratum 1 traceable
timing by AT&T or AT&T's customer).
D-1.5.B.ii.(d) Fractional DS-1 Service shall be provided with
an unframed format when specified by AT&T.
D-1.6 DS-0 Service
D-1.6.A General Description: DS-0 Service means a Dedicated Service that
provides a 2-point digital channel for the 2-way simultaneous transmission of
signals at 64 Kbps or 56 Kbps.
D-1.6.B Technical Requirements
D-1.6.B.i General. DS-0 Service shall meet or exceed the DS-0 requirements
set forth in the following AT&T technical references:
AT&T Technical Reference TR 62310 "DS-0 Digital Local Channel
Description and Interface Specification"; and
AT&T Technical Reference TR 62421 "ACCUNET(R) Spectrum of
Digital Services."
D-1.6.B.ii Additional Specifications
D-1.6.B.ii.(a) DS-0 Services provide the bit transmission rate
selected by AT&T to the applicable Network Interface.
D-1.6.B.ii.(b) Within the Secondary Location, and on the
network side of the Network Interface at the Secondary
Location, DS-0 Service includes an Office Channel Unit (OCU)
with latching loopback capability as described in TR-62310 and
ANSI T1.1O7B-1990.
D-1.6.B.ii.(c) DS-0 Service shall not use error correction.
D-1.7 Digital Subrate Service
D-1.7.A General Description: Digital Subrate Service means a Dedicated Service
that provides a 2-point digital channel for the 2-way simultaneous transmission
of signals at 9.6 Kbps.
D-1.7.B Technical Requirements
D-1.7.B.i General. Digital Subrate Service shall meet or exceed the DS-0
requirements set forth in the following AT&T technical references:
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Page 19 of 21
AT&T Technical Reference TR 62310 "DS-0 Digital Local Channel
Description and Interface Specification";
AT&T Technical Reference TR 62421 "ACCUNET(R) Spectrum of Digital
Services."
D-1.7.B.ii Additional Specifications
D-1.7.B.ii.(a) Within the Secondary Location, and on the
network side of the Network Interface at the Secondary
Location, Digital Subrate Service includes an Office Channel
Unit (OCU) with latching loopback capability as described in
TR-62310 and ANSI T1.107B-1990.
D-1.7.B.ii.(b) Digital Subrate Service shall not use error
correction.
D-1.8 Voice Grade Service
D-1.8.A General Description: Voice Grade Service means a Dedicated Service that
provides an analog channel for the 2-way simultaneous transmission of
frequencies between 300 and 3000 Hz, together with applicable signaling states.
Voice Grade Service may be, but is not limited to, data private lines, tie
lines, tie trunks, foreign exchange circuits ("closed end"), and off-premises
stations/extension lines. Voice Grade Service supports the transmission of
2-wire and 4-wire voice, voice-band data, alternate voice/data, telephoto, and
protective relaying applications.
D-1.8.B Technical Requirements
D-1.8.B.i General. Voice Grade Service shall meet or exceed the voice
grade requirements set forth in the following technical references:
AT&T Technical Reference PUB 43202 "AT&T Analog Voice Total &
Coordinated Services";
Bellcore Technical References TR-NPL-000335 and TR-NPL-000336;
AT&T Technical Reference TR 62421 "ACCUNET(R) Spectrum of Digital
Services."
D-l.9 2.048 Mbps Service
D-1.9.A General Description: 2.048 Mbps Service means a Dedicated Service that
provides a 2-point digital channel for the 2-way simultaneous transmission of
signals at 2.048 Mbps. This Service is suitable for the transmission of voice,
data, or other applications consistent with International El Service standards
in support of AT&T's International ACCUNET Digital 2.048 Service.
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D-1.9.B Technical Requirements
D-1.9.B.i General. 2.048 Mbps Service shall meet or exceed the
requirements set forth in the following technical references:
AT&T Bell Laboratories letter entitled "Technical Prospectus and
Service Operation Plan for IADS 2.048 Service Version 2.0" (October
29, 1993);
AT&T Technical Reference TR 54019 "International ACCUNET(R) Digital
Services Description and Network Interface Specification."
D-1.1O Self-Healing Ring Access Service
D-1.1O.A General Description: Self-Healing Ring Access Service means a Dedicated
Service supporting AT&T's ACCU-Ring(sm) Access Service. Self-Healing Ring Access
Service provides AT&T's customers the capability to transport telecommunications
services on a high capacity self-healing access ring where such capacity is
dedicated to such customer. To the extent permitted by Federal and state
regulation, Self-Healing Ring Access Service may be used to transport a variety
of TWComm Services, including but not limited to: other Dedicated Services and
Switched Business Line Services, as well as services provided by the LEC and/or
other common carriers. Self-Healing Ring Access Service is designed and offered
on an individual case basis with respect to each AT&T's customer's unique
service requirements.
D-1.10.B Service Elements: Notwithstanding Section D-1.2 of this Appendix D-1,
Self-Healing Ring Access Service consists of three Service Elements specific to
this Service:
D-1.10.B.i Ring Capacity provides digital bandwidth capacity that is
dedicated to AT&T's customer. Bandwidth capacity may range from 45 Mbps to
622 Mbps in 45 Mbps increments. Ring Capacity shall be capable of dropping
Service at TWComm Nodes specified by AT&T that meet the requirements for
Self-Healing Ring Access Service.
D-1.10.B.ii A Service Channel provides a dedicated channel between two
TWComm Nodes affording two-way simultaneous transmission of digital
signals at 1.544 Mbps, 45 Mbps, 155 Mbps or any other technically feasible
bit transmission rate specified by AT&T. AT&T may specify any technically
feasible Network Interface to serve as an access from the Served Premises
to the TWComm Node. The quantity of Service Channels is unrestricted so
long as sufficient Ring Capacity is available to transport the requested
Service Channel bandwidth. Service Channels are offered between any two
TWComm Nodes so long as no single point of failure exists between such
TWComm Nodes.
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D-1.10.B.iii A Ring Access Channel provides a dedicated channel between a
TWComm Node and the Network Interface associated with a location that is
not directly served by a TWComm Node that meet the requirements for
Self-Healing Ring Access Service. A Ring Access Channel provides two-way
simultaneous transmission of digital signals at either 1.544 Mbps or 45
Mbps. A Ring Access Channel may be interconnected to a Service Channel
for transport of such Service to a distant TWComm Node.
D-1.10.C Technical Requirements
Self-Healing Ring Access Service shall meet or exceed the requirements set forth
in the then current version of AT&T Technical Reference "Self-Healing Ring
Access Service Requirements Specification."
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SERVICE DESCRIPTION: SWITCHED ACCESS SERVICES
D-2.1 General Description
D-2.1.A Switched Access Services are Services which provide the switched
connection and transport of intraLATA (which shall not include local calling
service unless initiated by an end user through the use of a carrier
identification code), interLATA, and international calls between an AT&T Serving
Office and the point of call origination or termination.
D-2.1.A.i Switched Access Services originate calls over either: (a)
Switched Business Line Service; (b) a TWComm-branded business line; or (c)
any other communications path, which has been proposed by TWComm and
approved by AT&T, from the point of call origination.
D-2.1.A.ii Switched Access Services terminate calls over either: (a)
Switched Business Line Service; (b) a TWComm-branded business line; or (c)
any other communications path, which has been proposed by TWComm and
approved by AT&T, to the point of call termination.
D-2.1.B Switched Access Services consist of two Service Elements: Switched
Access Transport and Call Delivery.
D-2.1.B.i Switched Access Transport is the service component for the
dedicated connection between the AT&T Serving Office and the TWComm class
5 switching system. There are two categories of Switched Access Transport,
which are distinguished by transmission digital bit rate: DS-3 Switched
Access Transport and DS-1 Switched Access Transport. Switched Access
Transport shall be provided on a "virtual" basis, as described in Section
D-1.1.B of Appendix D-1 of this Agreement.
D-2.1.B.ii Call Delivery consists of two functions:-- Local Switching,
which provides the switched connection between the Switched Access
Transport component and the Switched Business Line Service or other
AT&T-approved communications path to the point of call origination or
termination; and Common Line, which provides transport over such Switched
Business Line Service or other such communications path.
D-2.1.C Switched Access Services are available to AT&T for non-coin calls
originating at public stations; however, Switched Access Services are not
available to AT&T for coin calls originating from public stations unless TWComm
and AT&T have a separate revenue agreement expressly authorizing TWComm to route
such calls to AT&T.
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D-2.1.D If TWComm elects to offer any TWComm-branded service that is similar to
Switched Business Line Service, TWComm shall make Switched Access Services
available to AT&T for calls originating or terminating over such Similar
Service. TWComm shall afford each customer of such Similar Service the right to
select AT&T as its preferred carrier for each interLATA call, either through
presubscription or by dialing a 1OXXX carrier identification code to the extent
required in accordance with procedures applicable to interexchange carriers
generally, based on then current applicable laws and regulations. Upon AT&T's
request, on behalf of a customer that it has solicited and obtained authority to
represent in accordance with procedures applicable to interexchange carriers
generally, based on then current applicable laws and regulations, TWComm will
* for intraLATA toll calls outside the Local Calling Areas established in
Appendix D-4 of this Agreement.
D-2.2 Technical Requirements for Switched Access Service
The technical requirements for Switched Access Service are those requirements
set forth in the applicable sections of the then current AT&T Technical
Reference draft titled, "Technical Reference - Switched Access Service and
IntraLATA Toll Service Provided by Competitive Access Providers." From the date
that the final version of this document is published by AT&T, the then current
version of such published Technical Reference shall set forth the technical
requirements of Switched Access Services.
D-2.3 Call Delivery Features
TWComm will make available to AT&T all of the following Call Delivery features
in each Selected MSA where TWComm offers Switched Services. TWComm will provide
to AT&T any such feature or set of features designated by AT&T by written
instruction.
D-2.3.A Automatic Number Identification (ANI)/Charge Number Parameter. The ANI
feature is a switching machine software function that is associated on a
call-by-call basis with an individual transmission path in a trunk group routed
directly between the TWComm Switching Node and the AT&T Serving Office. This
feature provides the automatic transmission of information indicators to
identify the calling party's class of service for billing, routing, and special
handling purposes.
Switched Access Services will transmit the 10 digit telephone number to identify
the calling station on all calls except for operator services calls which
require 7 digit ANI. Switched Access Services will forward to AT&T only valid
billable numbers which correctly identify the customer originating the call.
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D-2.3.B Calling Party Number (CPN) Parameter. The CPN feature provides for the
automatic transmission of the 10 digit directory number associated with a
calling station to the AT&T Serving Office for calls originating in the MSA. The
10 digit telephone number consists of the NPA plus the 7 digit telephone number.
When requested by AT&T, Switched Access Services will deliver the CPN to an AT&T
customer. Unless otherwise directed by AT&T, Switched Access Services will send
the Charge Number (CN) when CPN is not available. The CPN will be coded as
presented, or restricted via a "privacy indicator" for delivery to the called
party.
D-2.3.C Cut-Through. The Cut-Through feature allows AT&T's customers to reach
the switch designated by AT&T, by dialing any AT&T carrier identification code
and the # digit (pound sign). Cut-Through provides for connection of the call to
the AT&T Serving Office indicated by the AT&T carrier identification code-upon
receipt of the # digit (pound sign) which indicates end of dialing.
D-2.3.D Flexible Automatic Number Identification (Flex ANI). The Flex ANI
feature provides additional capabilities beyond those available with the ANI
feature described above. TWComm will offer to AT&T all present Originating Line
Indicator (OLI) codes and all new OLI codes as soon as they are assigned in
each TWComm switch. Switched Access Services will meet all requirements for Flex
ANI that are contained in the Bellcore reference "Local Switching System General
Requirements," LSSGR FSD 20-20-0100.
D-2.3.E Carrier Selection Parameter (CSP). The CSP features provides for the
automatic transmission of a signaling indicator which signifies to AT&T whether
or not the call being processed originated from a presubscribed line. If the
line was presubscribed, the indicator shall signify whether or not AT&T's
customer dialed 10XXX.
D-2.3.F Recorded Announcements. The Recorded Announcements feature allows AT&T
to specify the content and quality of recorded announcements, which Switched
Access Services will make available as promptly as possible, but not later than
within 2 hours of AT&T's request.
D-2.3.G Customer Specified Entry Switch Receive Level. The Customer Specified
Entry Switch Receive Level feature allows AT&T to specify the receive
transmission level at the first point of switching. The range of transmission
levels which may be specified is described in the Bellcore technical reference
TR-NWT-000334.
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D-2.3.H Split Unblocking. The Split Unblocking feature prevents specified
1OXXX+1+ and 1OXXX+011+ calls from being completed. These blocked calls will be
routed to an announcement as designated by AT&T.
D-2.3.I Originating Line Screening (OLS). The OLS feature enables calling party
billing restrictions, or other information as designated by AT&T, to be
forwarded to AT&T using the "MFJ Expanded Address Signaling" set forth in the
AT&T technical reference PUB 60120 "TSPS Incoming Interface Technical
Specification For Routing Via An Intermediate Switching Point Or Direct From A
Local Office" (November 1985).
D-2.3.J Billed Number Screening (BNS). The BNS feature provides the capability
to prohibit collect and/or third number billed calls from being charged to
BNS-equipped numbers. TWComm shall ensure that the BNS-equipped numbers have
been entered in the Line Information Data Base (LIDB). BNS numbers will include
all public telephone numbers and other numbers as designated by AT&T.
D-2.4 Measurement of Call Duration
D-2.4.A Switched Access Services will measure the duration of Call Delivery
minutes of use in 100th of a minute increments.
D-2.4.B All Call Delivery minutes of use, or fractions thereof, shall be
accumulated over the billing period for each Selected MSA, and shall then be
rounded to the nearest whole minute.
D-2.4.C Call duration for originating calls shall begin when (a) the SS7 Initial
Address Message is sent from TWComm's Signaling Switching Point (SSP) to AT&T's
Service Transfer Point (STP); or (b) for wink-back supervision, when the TWComm
switch receives the first wink supervisor signal forwarded from the AT&T Serving
Office. Call duration for originating calls shall end when (a) the originating
TWComm switch receives an SS7 Release Message indicating either the originating
or terminating end-user has disconnected; or (b) when a disconnect signal is
received from the AT&T Serving Office.
D-2.4.D Call duration for terminating calls shall begin when the terminating
recording switch receives answer supervision from the terminating end-user. The
TWComm switch shall receive answer supervision and send the indication to AT&T
in the form of an answer message. Call duration for terminating calls shall end
when the TWComm switch receives a release from AT&T, or sends a release message
to AT&T, whichever occurs first.
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SERVICE DESCRIPTION: SWITCHED BUSINESS LINE SERVICES
D-3.1 General Description
D-3.1.A Switched Business Line ("SBL") Services consist of two Service Elements:
(1) a 2-point digital or analog channel connecting any business location within
an Expected Serving Area to a TWComm class 5 switching system which provides
dial tone over that channel, together with screening and routing functions for
call origination ("Subscriber Line"); and (2) call and call-management
characteristics ("SBL Features"). At TWComm's election (subject, however, to
Section E-1.6.A), Subscriber Lines may be offered to all locations or specified
locations within Optional Serving Areas.
D-3.1.B Subscriber Lines are distinguished by Service Product. Each Service
Product is characterized by: (1) digital bit transmission rate or analog
bandwidth; and (2) signaling characteristics. These transmission and signaling
characteristics are measured at the Network Interface. The Subscriber Line
Service Products consist of: Analog Business Exchange Line; Digital Business
Exchange Line; Analog Business Exchange Trunk; and Digital Business Exchange
Trunk. A description of each Service Product is provided in Section D-3.3 of
this Appendix D-3.
D-3.1.C TWComm will assign each Subscriber Line a unique telephone number which
adheres to the North American Numbering Plan (which may be a number retained by
the end user customer under number portability requirements).
D-3.1.D Except as AT&T may otherwise designate, SBL Services will provide for
the origination of any type of switched call.
D-3.1.E Except as AT&T may otherwise designate, SBL Services will provide for
the termination of any type of switched call directed to an assigned telephone
number.
D-3.1.F SBL Services provide for the presubscription of the Service to the
subscriber's preferred interexchange carrier.
D-3.1.G SBL Services provide the standard listings designated by AT&T in the LEC
local white pages directory. TWComm will also permit unlisted and unpublished
listings as designated by AT&T.
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D-3.1.H Switched Business Line Service is offered in either a Full Service
Arrangement or a Transport Arrangement, as these terms are defined in Section 7
of this Agreement.
D-3.1.I Except as otherwise provided within this Section D-3.1.I, AT&T may
designate the location of the Network Interface for Subscriber Lines within each
Served Premises.
D-3.1.I.i With regard to Full Service Arrangements, if the LEC's then
current practice is to terminate service to a minimum point of penetration
defined for that Exchange Area, then TWComm may elect to terminate the
Service at the minimum point of penetration defined for that Exchange
Area.
D-3.1.I.ii With regard to Transport Arrangements, if the location of the
Network Interface within a Transport Premises designated by AT&T is not
reasonably feasible, AT&T and TWComm will mutually agree to an alternative
location for the Network Interface.
D-3.2 Call Screening and Routing
D-3.2.A SBL Services will route all calls as designated by AT&T. AT&T may
provide different routing requirements on the basis of line class code, call
type, or destination.
D-3.2.B SBL Services must provide the capability to originate and terminate
Local Calls. The completion or delivery of such calls is accomplished through
Local Calling Services or Switched Access Services and is not part of SBL
Services.
D-3.2.C SEL Services must provide the capability to originate and terminate
intraLATA calls that are not Local Calls. The completion or delivery of such
calls is accomplished through Switched Access Services and is not part of SBL
Services.
D-3.2.D SBL Services must provide the capability to originate and terminate
interLATA and international calls. The completion or delivery of such calls is
accomplished through Switched Access Services and is not part of SBL Services.
D-3 Service Product Characteristics
D-3.3.A Analog Business Exchange Line
An Analog Business Exchange Line provides either a 2-wire or 4-wire analog
channel, as designated by AT&T, for the simultaneous two-way
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transmission of frequencies between 200 and 3400 Hz. An Analog Business Exchange
Line provides a Network Interface that is intended for use with station-type
customer-premises equipment (e.g., a telephone set) having an analog interface
to the telephone network. The Analog Business Exchange Line Network Interface is
further documented in the Code of Federal Regulations (Title 47, Part 68--
Connection of Terminal Equipment to the Telephone Network). AT&T may designate
the signaling protocol that is applicable to each line.
D-3.3.B Digital Business Exchange Line
A Digital Business Exchange Line provides a digital channel for the simultaneous
two-way transmission of signals at 2.4, 4.8, 9.6, 19.2, 56, 64 or 160 Kbps, as
designated by AT&T. A Digital Business Exchange Line provides a Network
Interface that is intended for use with station-type customer-premises equipment
having a digital interface to the telephone network. The Digital Business
Exchange Line Network Interface is further documented in the Code of Federal
Regulations (Title 47, Part 68 -- Connection of Terminal Equipment to the
Telephone Network). AT&T may designate the signaling protocol that is applicable
to each line.
D-3.3.C Analog Business Exchange Trunk
An Analog Business Exchange Trunk provides either a 2-wire or 4-wire analog
channel, as designated by AT&T, for the simultaneous two-way transmission of
frequencies between 200 and 3400 Hz. An Analog Business Exchange Trunk provides
a Network Interface that is intended for use with trunk-type customer-premises
equipment (e.g., a private branch exchange) having an analog interface to the
telephone network. The Analog Business Exchange Trunk Network Interface is
further documented in the Code of Federal Regulations (Title 47, Part 68
- -- Connection of Terminal Equipment to the Telephone Network). Analog Business
Exchange Trunk Service permits AT&T to designate the signaling protocol that is
applicable to each trunk and to designate whether the call-setup privilege is
in-only, out-only, or two-way.
D-3.3.D Digital Business Exchange Trunk
A Digital Business Exchange Trunk provides a digital channel for the two-way
simultaneous transmission of signals at 56 Kbps, or 64 Kbps, as designated by
AT&T. A Digital Business Exchange Trunk shall provide such channels using either
a DS-0 or DS-1 Network Interface, as designated by AT&T. A Digital Business
Exchange Trunk provides a Network Interface that is intended for use with
trunk-type customer-premises equipment (e.g., a private branch exchange) having
a digital
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interface to the telephone network. The Digital Business Exchange Trunk Network
Interface is further documented in the Code of Federal Regulations (Title 47,
Part 68 -- Connection of Terminal Equipment to the Telephone Network). Digital
Business Exchange Trunk Service permits AT&T to designate the signaling protocol
that is applicable to each trunk and to designate whether the call-setup
privilege is in-only, out-only, or two-way.
D-3.4 Technical Specifications
D-3.4.A Each SBL Service Product will meet or exceed the requirements set forth
in the applicable section of the then current AT&T Technical Reference draft
titled, "Technical Reference - Switched Access Service and IntraLATA Toll
Service Provided by Competitive Access Providers". From the date that the final
version of this document is published by AT&T, the then current version of such
published Technical Reference shall set forth the technical requirements of each
SBL Service Product.
D-3.5 Bundling of Features
D-3.5.A TWComm may make available SBL Features on a bundled or an unbundled
basis in its sole discretion. However, in each Selected MSA that * ,
TWComm will * . If TWComm offers a SBL Feature on an unbundled basis in * ,
then TWComm will * to the extent that TWComm is offering SBL Services.
D-3.6 Custom Calling Features
D-3.6.A Subject to Section D-3.5.A above, TWComm shall make available the
following SBL Custom Calling Features with each SBL Service Product. Custom
Calling Features means:
D-3.6.A.i Abbreviated Access. Abbreviated Access allows a customer to
place a call to a predetermined telephone number by dialing an abbreviated
code. Two arrangements are available: Abbreviated Access, one-digit, or
Abbreviated Access, two-digit. The customer has access to its Abbreviated
Access provider's speed call list through their SBL Services connection to
the TWComm switch and software which controls the shared speed call list.
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D-3.6.A.ii Programmable Forwarding. Programmable Forwarding allows a
customer to have incoming calls forwarded to another number when the
called number is busy. The customer can activate and deactivate the
forwarding feature by dialing a code and can establish or change the
number to which calls will be forwarded.
D-3.6.A.iii Expanded Forwarding. Expanded Forwarding allows a customer to
have incoming calls forwarded to a predetermined number in a different
central office switch (TWComm or LEC) if the called number is busy or if
the customer does not answer after a preset number of ringing cycles.
D-3.6.A.iv External Forwarding. External Forwarding allows a customer to
have incoming calls forwarded to another predetermined number outside the
customer's system but within the same central office switch if the called
number is busy, or to any number within the same central office switch if
the called number does not answer.
D-3.6.A.v Call Forwarding - Variable. Call Forwarding - Variable enables
the customer to forward incoming calls to another number by dialing a
code, plus the number to receive the call. An option is also available
that allows a customer to activate the feature without completing a call
to the forward-to number.
D-3.6.A.vi Multiline Hunting - Regular Hunt Service. The hunt for an idle
access line starts with the called SBL Service in a prearranged hunt group
and ends with the last access line in the hunt group, completing the call
to the first idle access line encountered. Unless the first access line in
the hunt group is called, only the succeeding line(s) in the hunt group is
hunted.
D-3.6.A.vii Multiline Hunting - Circle Hunt Service. Multiline Hunting -
Circle Hunt Service permits a complete hunt over all the access lines in a
prearranged hunt group. If no idle access line is encountered the hunting
will continue until it reaches the access line that was originally called.
D-3.6.A.viii Multiline Hunting - Preferential Hunt Service. Individual
access lines in a hunt group may have an associated preferential hunt
list. This hunt list specifies a hunting sequence over a predetermined
subset or preferential arrangement of up to 18 access lines before
proceeding to hunt through the remainder of the hunt group.
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D-3.6.A.ix Multiline Hunting - Overflow. Multiline Hunting - Overflow
permits a call destined for a particular hunt group to be routed to
another telephone number within the same switching machine, but outside
the hunt group.
D-3.6.A.x Call Transfer. Call Transfer enables a customer to transfer an
incoming call to a third party or add a third party to an existing call,
forming a three party connection, and then to leave the connection without
disconnecting the call.
D-3.6.A.xi Call Waiting. With Call Waiting, a short spurt of tone signals
that a call is waiting when a customer is talking on the telephone. The
tone is heard only by the Call Waiting customer, while the incoming caller
hears a regular ringing signal. Flashing the switchhook holds the first
call while the second is answered. The customer can alternate between
calls by flashing the switchhook.
D-3.6.A.xii Dial Call Waiting. Dial Call Waiting allows a customer to
direct a Call Waiting tone or a Distinctive Alert signal to a line
equipped with Distinctive Alert. This feature is activated by dialing a
preset access code and the telephone number of the line to which the
signal is directed.
D-3.6.A.xiii Directed Call Pick Up. Directed Call Pick Up allows a
customer to answer a call during the ringing cycle that is directed to
another line by dialing a preset access code and the telephone number of
the line to be answered. Both the originating line and the line to be
answered must be equipped with this SBL Feature.
D-3.6.A.xiv Directed Call Pick Up With Barge-In. Directed Call Pick Up
With Barge-In allows a customer to answer a call directed to another line
which has been answered or is ringing by dialing a preset access code and
the telephone number of the line to be answered. Both the originating line
and the line to be answered must be equipped with this feature.
D-3.6.A.xv Distinctive Alert. Distinctive Alert allows a customer to
receive an audible Call Waiting tone or Distinctive Ringing signal from a
line equipped with Dial Call Waiting. If the called line is idle, a
Distinctive Ringing signal will be heard. If the called line is busy, the
called line receives a Call Waiting tone.
D-3.6.A.xvi Hot Line. Hot Line allows a customer to establish a switched
connection to a predetermined number when the
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customer's telephone goes off-hook. No dialing is required and the call is
processed automatically to the predetermined telephone number.
D-3.6.A.xvii Speed Calling. Speed Calling enables the customer to call a
preselected group of telephone numbers by dialing 1 or 2 digits rather
than the actual number. Speed Calling is available with an 8 or 30
telephone number capacity.
D-3.6.A.xviii Three-Way Calling. Three-Way Calling enables a customer to
add a third party on an established local or long distance connection
without operator assistance. The third customer may be called by the
customer initiating the Three-Way Calling on either a local or
interexchange basis.
D-3.7 CLASS Features
D-3.7.A Subject to Section D-3.5.A above, TWComm shall make available the
following SBL CLASS Features with each SBL Service Product. CLASS Features
means:
D-3.7.A.i Call Rejection. Call Rejection enables a customer to reject call
attempts from up to 15 numbers by dialing a code and the telephone numbers
of calls to be rejected. Any call attempts to the customer from these
numbers will be prevented from terminating to the customer and will
instead be connected to an announcement informing the caller that the call
is not presently being accepted by the called party. A customer may also
reject future calls from the directory number of the most recent call
received by dialing a code after completing the call.
D-3.7.A.ii Caller ID. Caller ID allows a customer with a display device to
receive a visual-display of the directory-number of an incoming call.
D-3.7.A.iii Continuous Redial. Continuous Redial allows a customer to dial
a code that causes an automatic redial of the last number the customer
dialed. If the called number is busy, this SBL Feature will redial the
called number for a limited period of time. A tone alerts the customer
when the called number becomes available.
D-3.7.A.iv Last Call Return. Last Call Return allows a customer to dial a
code that causes an automatic redial of the number of the last incoming
call to that line, whether the call was answered or not.
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The customer does not have to know the number of the calling party. If the
calling party's number is blocked by the calling party, this SBL Feature
will not return the call. If the called number is busy, this SBL Feature
will redial the called number for a limited period of time. A tone alerts
the customer when the called line is available.
D-3.7.A.v Priority Call. Priority Call allows a customer to assign a
maximum of 15 telephone numbers to a special list. The customer will hear
a distinctive ring when calls are received from telephone numbers on that
list.
D-3.7.A.vi Selective Call Forwarding. Selective Call Forwarding allows a
customer to specify a special list of a maximum of 15 telephone numbers.
Incoming calls placed to the customer from telephone numbers on that list
will automatically be forwarded to a predefined telephone number. All
other calls will be handled normally.
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SERVICE DESCRIPTION: LOCAL CALLING SERVICE
D-4.1 General Description
D-4.1.A Local Calling Service provides the origination and termination of Local
Calls on Switched Business Line Services. Local Calls are defined as (1) all
intraexchange calls (i.e., calls that originate and terminate within the same
Exchange Area), and (2) all interexchange intraLATA calls that originate and
terminate within Local Calling Areas established pursuant to Section D-4.1.B
below, irrespective of whether such calls are considered local calls or local
exchange services under applicable statutes, regulations, and any other
authorities.
D-4.1.B The Local Calling Areas comprising each Selected MSA shall be
established from time to time as follows:
D-4.1.B.i AT&T may designate the Local Calling Areas to be the then
current LEC local calling areas within such Selected MSA;
D-4.1.B.ii AT&T may designate the Local Calling Areas to be the then
current local calling areas associated with TWComm-branded business line
service within such Selected MSA (a different Base Price may be applicable
to Subscriber Lines under this option as described in Appendix E-4); or
D-4.1.B.iii AT&T and TWC may mutually agree to those Exchange Areas
comprising a Local Calling Area (including without limitation expanded
area service).
D-4.1.C The initial Local Calling Areas within each Selected MSA shall be set
forth in the applicable MSA Schedule.
D-4.1.D Within each Exchange Area that TWComm is then offering Local Calling
Services, TWComm will provide Local Calling Service to AT&T or, at AT&T's
direction if AT&T has been unable to obtain authorization to offer Local
Service, directly to AT&T's business line customer.
D-4.1.D.i If AT&T elects to have Local Calling Service provided to its
customer, the completion of Local Calls shall be a separate service that
TWComm will provide directly to AT&T's customer. The price of a Local Call
provided directly to AT&T's customer is * is defined in Appendix E-1).
AT&T may designate that the billing and
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collection for such calls shall be done by TWComm directly with AT&T's
customer, or by AT&T through a separate billing and collection agreement
between AT&T and TWComm to be negotiated in good faith between AT&T and
TWComm (if such agreement is not executed by the parties, TWComm will bill
and collect directly from its Local Calling Service customers).
D-4.1.D.ii If AT&T elects to have Local Calling Service provided to AT&T,
then TWComm will provide usage data to AT&T for end user billing as
reasonably required by AT&T * . The reasonableness of AT&T's requirement
for such data shall be determined with respect to the data generally
required by the industry to bill for local calls.
D-4.2 Technical Specifications
D-4.2.A Local Calling Service will meet or exceed the requirements set forth in
the sections that are applicable to intraLATA toll service of the then current
AT&T Technical Reference draft titled, "Technical Reference - Switched Access
Service and IntraLATA Toll Service Provided by Competitive Access Providers".
From the date that the final version of this document is published by AT&T, the
then current version of such published Technical Reference shall set forth the
technical requirements of Local Calling Service. If this AT&T Technical
Reference is later modified to provide specifications generally applicable to
similarly situated providers expressly for Local Calling Service, the Local
Calling Service specifications shall apply in lieu of the specifications for
intraLATA toll service.
D-4.3 Measurement of Call Duration
D-4.3.A In those Exchange Areas where TWComm is permitted to charge for Local
Calling on a per-minute basis (as described in Appendix E-5) the duration of
each call shall be measured as follows:
D-4.3.A.i Local Calling Service will measure the duration of Local Call
minutes of use in the same increment (e.g., 6 second increment) in each
Selected MSA as the LEC which measures Local Calls in the smallest
increment in any Selected MSA.
D-4.3.A.ii All Local Calling Service call minutes, or fractions thereof,
for each AT&T customer within each Selected MSA will be accumulated and
rounded in the same increments (e.g., rounding each call to the nearest
whole minute versus the rounding the aggregate minutes of use of all calls
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for the billing period to nearest 1/10th minute) in all Selected MSAs
based upon the LEC in any Selected MSA which accumulates and rounds calls
in the most favorable manner, as designated by AT&T with at least 30 days'
advance notice.
D-4.3.A.iii Call duration for Local Calling Service begins when answer
supervision is received by the TWComm switch.
D-4.3.A.iv Call duration for Local Calling Service ends when either
service point disconnects, thereby releasing the network connection.
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GENERAL PRICING PRINCIPLES
E-1.1 Introduction
E-1.1.A This Appendix sets forth: (a) fundamental pricing principles applicable
to all Services; (b) the basic operations to be used by the parties to determine
the net prices to AT&T ("Prices"); (c) certain conditions under which Prices are
adjusted; (d) the time period within which TWComm will effect rate changes; and
(e) the criteria to be used to determine application of taxes.
E-1.1.B Appendixes E-2 through E-6 supplement this Appendix E-1 and set forth
detailed pricing principles and methods to determine the Price for each
respective Service offered by TWComm. Any limitations on price reductions set
forth in Appendixes E-2 through E-6 will not apply to price reductions made
pursuant to this Appendix E-1.
E-1.1.C In any instance where the application of any two pricing principles
within Appendix E-1 through E-6 are mutually exclusive, the procedure which is
analogous to the procedure used by the LEC to determine its rates, if any, shall
apply. In any instance where the sequence of any two pricing principles within
Appendix E-1 through E-6 is not specified, the sequence which is analogous to
the procedure used by the LEC to determine its rates, if any, shall apply. If
there is no analogous LEC procedure to guide the parties, AT&T and TWC shall
mutually agree to the application of the pricing principles.
E-1.2 Fundamental Pricing Principles
E-1.2.A The pricing principles set forth in Appendixes E-1 through E-6 will
apply throughout the term of this Agreement, irrespective of the quantity of
AT&T's purchases under this Agreement.
E-1.2.8 Except as expressly provided for otherwise within this Agreement,
regardless of any pricing assumptions used to determine the Prices, no term
requirements, revenue requirements, revenue commitments or spending levels shall
be conditions of TWComm's offering the Prices for the Services.
E-1.2.C With regard to all Services that have a monthly recurring charge, the
minimum term of service is 30 days. *
E-1.2.D Except as modified by other pricing operations described in Section
E1.3, TWComms prices to AT&T are *. The price that is
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equal to the price * (as defined in Section E-1.4) * based upon the principles
set forth herein is referred to as the Base Price.
E-1.2.E For interstate Services offered by TWComm, Prices are determined using
*. For intrastate Services offered by TWComm, Prices are
determined using *.
E-1.2.F If in any Exchange Area the *, the Price for the applicable Service
shall be determined with respect to the * a Similar Service anywhere in the
Selected MSA. If a Similar Service is not * the Price of such Service is
determined by *.
E-1.2.G To ensure sufficient network capacity for AT&T's current and forecasted
service requirements between an AT&T Serving Office and one or more Exchange
Areas, AT&T expects to place advance orders for DS-3 facilities connecting a
TWComm Node to the point of interface in the AT&T Serving Office ("Entrance
Facilities"). The purpose of AT&T's orders for Entrance Facilities is to enable
TWComm to install such transmission facilities prior to receipt of firm orders
for Services utilizing those facilities. Each order for Entrance Facilities will
specify the increased or decreased network capacity from current service volume,
in DS-3 increments, required between the AT&T Serving Office and each Exchange
Area or group of Exchange Areas. Entrance Facilities are used exclusively as a
vehicle for advance provisioning of network capacity and will not be considered
a TWComm Service. TWComm agrees that such orders and any Entrance Facilities
furnished by it are at no charge except the charges for any Services that may
ultimately be provided over them.
E-1.3 Basic Pricing Operations
E-1.3.A The pricing principles set forth in Appendixes E-2 through E-6 utilize
three basic pricing operations necessary to determine the Price for each
Service. The three basic pricing operations are performed in the sequence that
follows:
E-1.3.A.i Determine the Base Price: Except where expressly stated
otherwise, the Base Price for each Service is * (as defined in
Section E-1.4 of this Appendix E-1) *, and is based upon the principles
set forth in Appendixes E-2 through E-5. Additionally, Section E-1.4
sets forth principles that provide a Maximum Base Price ("MBP") for each
respective Service which shall not be exceeded
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* that otherwise would be used to determine the Base Price.
E-1.3.A.ii Determine the Applicable Discount Percentage ("Discount"): A
Discount is applied to the Base Price of * as applicable that is eligible
for a Discount. All Services are eligible for a Discount except certain *
which TWComm provides using Type II provisioning and certain Self-Healing
Ring Access Services, as further described in Appendix E-2; and certain
Subscriber Lines described in Appendix E-4. As further described in
Appendixes E-2 through E-6, some Discounts vary dependent upon *
some Discounts vary dependent upon *; and certain Discounts are
definitive and * for any reason.
E-1.3.A.iii Apply any Required Price Adjustments: Once the Base Price and
any applicable Discount has been determined, prices are adjusted to
conform to the principles set forth in Section E-1.5 of this Appendix
E-1.
E-1.3.B The specific procedure used to implement these three basic pricing
operations shall be adopted by mutual agreement of TWComm and AT&T consistent
with Section E-1.1.C. If either AT&T or TWComm believes the procedure used to
determine any Price is inconsistent with the pricing principles of this
Agreement, then it may invoke the alternative dispute resolution process
described in Appendix L of this Agreement to determine whether such procedure is
inconsistent with the pricing principles.
E-1.4 Maximum Base Prices
E-1.4.A Maximum Base Prices ("MBPs") are based upon the principle that as Base
Prices for a Service Category increase across Selected MSAs, there is a
corresponding increase in MBPs; and that as Base Prices for a Service Category
decrease across Selected MSAs there is a corresponding decrease in MBPs.
Accordingly, the MBP for each Service shall be determined with respect to the
then current Base Price for each Service Category in each Selected MSA (pursuant
to the applicable pricing principles used to determine the Base Price) ("Base
Price Set").
E-i.4.A.i Notwithstanding the foregoing, the MBP for Call Delivery is a
* pursuant to Section E-3.5.C of Appendix E-3, and no MBP is applicable
to *.
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E-1.4.B The MBP for Transport Arrangements shall be determined independently
from the MBP for Full Service Arrangements.
E-1.4.C The determination of MBPs shall vary by time period as follows:
E-1.4.A.i From the Effective Date of this Agreement to the first
anniversary of the Effective Date of this Agreement, the MBP shall be
determined pursuant to the following formula:
<TABLE>
<S> <C>
MBP = *
</TABLE>
E-1.4.A.ii From the first anniversary of the Effective Date of this
Agreement to the term of this Agreement the MBP shall be determined
pursuant through the following formula:
MBP = *
E-1.5 Similar Services
E-1.5.A For purposes of Appendixes E-1 through E-6 of this Agreement the term
"Similar Service" means the following:
E-1.5.A.i With regard to Dedicated Services, any service that provides a
dedicated connection between two locations utilizing materially the same
Network Interfaces;
E-1.5.A.ii With regard to Switched Access Transport, any service that
provides a dedicated connection for the transport of switched minutes of
use between an interexchange common carrier's serving office and an access
supplier's switching system utilizing materially the same Network
Interfaces;
E-1.5.A.iii With regard to Switched Access Call Delivery, any service
that provides routing of calls between a telephone station and a Similar
Service to Switched Access Transport;
E-1.5.A.iv With regard to Subscriber Lines, any channel providing dial
tone service for business customers that provides a connection for the
origination or termination of calls utilizing materially the same Network
Interface;
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E-1.5.A.v With regard to SBL Features, any feature offered with a Similar
Service to Subscriber Lines for business customers that provides
materially the same functionality as a SBL Feature ("Similar Feature");
and
E-1.5.A.vi With regard to Local Calling Service, any switched message
telecommunications service for business customers which provides for the
completion of calls originating and terminating within or between
comparable local calling areas.
E-1.5.B Notwithstanding Section E-1.5.A, a service offering will not be deemed a
Similar Service under the following circumstances:
E-1.5.B.i The service offering is only available as part of a bundled
arrangement (e.g., private line transport for emergency 911 services);
E-1.5.B.ii The service is only available on an individual case basis
within the Selected MSA; or
E-1.5.B.iii The service is a service or a feature that is only available
for, or bundled with, Centrex service.
E-1.6 Price Adjustment Principles
E-1.6.A TWComm will offer AT&T * pricing as follows:
E-1.6.A.i Subject to Sections E-6.A.ii, E-1.6.A.iii and E-1.6.A.iv, if
during the term of this Agreement, (1) TWComm makes * in an Exchange
Area or other applicable geographic area, or (2) a "TW System" (as
defined below) makes a * in a Serving Area or other applicable geographic
area in which TWComm is then offering Services and TWComm has all
necessary licenses, certificates and authorizations necessary to fulfill
its obligations under this Section; in either such case under *
E-1.6.A.i.(a) A "TW System" shall mean any cable television system
controlled by a controlling affiliate of TWComm that is not then
generally offering a Similar Service. (U S WEST is not a controlling
affiliate of TWComm for purposes of this subsection.)
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E-1.6.A.ii If during the term of this Agreement, TWComm *, then TWComm
will **, provided that TWComm shall not be obligated hereunder
to provide *
E-1.6.A.iii The "applicable geographic area" referred to in this Section
E-1.6 shall encompass only areas where TWComm (or, in the case of Section
D-1.6.A.i (2), a TW System) is in fact offering to provide Similar
Services within the United States regardless of whether such area is then
covered by a MSA Schedule.
E-1.6.A.iv Notwithstanding the foregoing, TWComm shall not be obligated
to * under the following circumstances:
E-1.6.A.iv.(a) If the other customer is not an end user or a
common carrier engaged in service competition with AT&T in the
applicable Serving Area or other geographic area;
E-1.6.A.iv.(b) If the other customer is affiliated with
TWComm and is purchasing the Similar Services solely for its
use as an end user and not for resale in whole or in part;
E-1.6.A.iv.(c) If TWComm or its affiliates are receiving all
or part of their consideration for such Similar Services
through participation in the revenues or profits of such other
customer;
E-1.6.A.iv.(d) If the Similar Services are provided between
and among TWComm and/or TW System;
E-1.6.A.iv.(e) If the Similar Service is offered to a state or
local government entity or regulatory authority as
consideration for
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obtaining any franchise, right of way, or other official
authorization or concession;
E-1.6.A.iv.(f) If an agreement for Similar Service was entered
into by the Local Entity prior to the Effective Date of this
Agreement, or prior to TWComm's ownership and control of the
Local Entity entering into the Similar Service arrangement
(this exemption shall not apply to any renewals or extensions
of such arrangement by the Local Entity unless such renewal or
extension was required by law or contract);
E-1.6.A.iv.(g) If following a 60 day cure period, AT&T is in
material breach of the respective MSA Schedule (if applicable)
or of this Agreement;
E-1.6.A.iv.(h).1 With regard to Similar Services within a
Selected MSA, if after 60 days following notice from TWComm to
AT&T, AT&T's Current Purchase Volumes in such MSA have not
increased to be equal to or greater than the Level 1 Dedicated
MSA Volume Target (D-MVT 1) for the applicable MSA; or
E-1.6.A.iv.(h).2 With regard to Similar Services outside any
Selected MSA, if after 60 days following notice from TWComm to
AT&T, AT&T's Current Purchase Volumes for all Selected MSAs
have not increased to be equal to or greater than the Level 1
Dedicated National Volume Target (D-NVT 1).
E-1.6.B If a Similarly Situated CAP which offers services within a Selected MSA
offers a Similar Service within a Current Serving Area at a *, then TWComm *
offered by such Similarly Situated CAP in such Current Serving Area. For
purposes of this Agreement any Company that meets each of the following
conditions shall be deemed to be a Similarly Situated CAP:
E-1.6.B.i The company is not the dominant telecommunications carrier in
that Selected MSA and is not affiliated with AT&T, and such company offers
a set of wireline business telecommunications services similar to those
offered by TWComm in that Selected MSA (i.e., such company must offer
comparable Service Products in the Selected MSA);
E-1.6.B.ii The company has deployed a network covering at least the same
approximate number of business customers as TWComm in that Selected MSA,
regardless of the customers' location; and
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E-1.6.B.iii The company has deployed a network having a self-healing loop
ring architecture which may be composed of either synchronous or
non-synchronous facilities.
E-1.6.C With respect to the Services, TWComm * in Current Serving Areas.
TWComm's promotional offering may contain volume, term, and length of
promotional pricing conditions *. However, any credit, waiver of charges or
other rate reduction that is made generally available (i.e., is available
without distinction to both existing and prospective * for an unspecified
period of time will be deemed a *
E-1.6.D TWComm may * for certain Embedded Services (as defined in Section 11
of the Agreement) pursuant to Addendum 1 of this Agreement.
E-i.6.E TWComm's NRCs for Dedicated Services, Switched Access Transport and
Business Line Services shall be adjusted as follows:
E-1.6.E.i NRCs *
E-1.6.E.ii NRCs * under Section 12.B of this Agreement, or under a
tariff supporting another agreement to the applicable tariffs, if any,
supporting this Agreement.
E-1.6.E.iii NRCs *
E-1.6.E.iv NRCs * Service from a Transport
Arrangement to a Full Service Arrangement.
E-1.6.E.v NRCs * Service from a TWComm branded
service to an AT&T-designated branded service.
E-1.6.E.vi NRCs * activity on an existing Service that is
initiated at the request of TWComm.
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E-1.6.E.vii NRCs associated with an "inside move" are no greater than
one-half of the LEC's applicable installation charges for a Similar
Service, less the applicable Discount.
E-1.6.F With respect to Dedicated Services provided by TWComm to replace * to
charge AT&T for intrastate local transport following the transition of such
trunks to TWComm. AT&T and TWComm may mutually agree *, which shall be applied
in lieu of the * for intrastate local transport. Under no circumstance shall *
under this E-1.6.F * for such Service prior to the application of such
adjustment. TWComm may decline any AT&T Service request for Dedicated Services
to replace LEC switched access local transport trunks for which AT&T is entitled
to * described in this Section E-1.6.F without any adverse affect on TWComm's
Service Performance pursuant to Appendix K or to Imputed Volumes pursuant to
Appendix E-6 of this Agreement.
E-1.6.G With regard to Subscriber Lines, TWComm may adjust the Price of such
Services to include an additional charge * used to determine the Base Price
of such Service. If, however, * used to determine the Base Price of such
Service (e.g., as in the case of certain * services used to determine the
Base Price of SBL Transport Arrangements), * .
E-1.7 Effective Date of Rate Changes
E-1.7.A Regardless of when a change in Price is actually implemented, if AT&T so
requests, the net effect to AT&T shall be as if the effective date of any change
in Price were the date set forth in Section E-1.7.B below. If any TWComm price
reductions required by this Agreement are delayed for any reason, AT&T shall
* which, upon request from AT&T, * . TWComm shall immediately notify AT&T
when it determines that a price change is applicable. Any retroactive price
adjustment made pursuant to this Section E-1.7 shall limited to price
differential AT&T would have obtained for the affected Services for the
preceding three billing periods.
E-1.7.B The effective date of any change in the Price of a Service shall be
determined as follows:
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E-1.7.B.i The effective date of any change in the Price of a Service *
shall be the same date as the effective *.
E-1.7.B.ii The effective date of any change in the Price of a Service
resulting from the increase or decrease of the applicable Discount shall
be first day of the billing cycle in which the new Discount becomes
effective.
E-1.7.B.iii The effective date of any change in the Price of a Service
resulting from an application of a required adjustment under this Appendix
E-1 shall be the date that AT&T was entitled to such price adjustment.
E-1.7.C Notwithstanding Section E-1.7.B.i, for 3 years following the Effective
Date of this Agreement, TWComm need only make any change in the Price of a
Service resulting * effective within 30 days of the effective * , excluding
those rate changes *. However, AT&T shall nonetheless be entitled to a credit
for any resulting price differential from such a 30 day grace period pursuant to
Section E-1.7.A, which, upon request from AT&T, TWComm shall apply within the
next billing cycle.
E-1.8 Applicable Taxes
E-1.8.A TWComm shall charge AT&T, as separately identified items on TWComm's
bills, for any state and local taxes and surcharges and federal excise taxes
which are applicable to AT&T's purchase of Services from TWComm under this
Agreement and which are not subject to a tax exemption certificate provided to
TWComm by AT&T. Except as provided by Section E-1.8.B below, TwComm shall not
charge AT&T for any other taxes, fees, or surcharges, however designated, that
arise out of AT&T's purchase of Services from TWComm including, but not limited
to, real or personal property taxes, income taxes, franchise fees, license fees,
permit fees, and occupational fees, unless (1) AT&T agrees in writing that such
other taxes are properly charged against AT&T, or (2) an appropriate judicial or
administrative body issues a non-appealable ruling that such other taxes are
properly charged against AT&T or another similarly situated party.
E-1.8.B Notwithstanding Section E-1.8.A above, AT&T will pay TWComm for any
taxes, fees, or surcharges which (1) TWComm is obligated pursuant to statute or
regulation to charge AT&T; or (2) AT&T would have paid the LEC if the LEC had
provided the same service in the same jurisdiction, provided, however that
TWComm is not expressly forbidden by statute or regulation to charge AT&T for
such taxes, fees, or surcharges; and that the rates charged by TWComm associated
with such taxes, fees, or surcharges would not exceed the applicable
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rates that would have been charged by the LEC. Each item of tax, fee, and
surcharge shall be individually considered for purposes of determining whether
TWComm was expressly forbidden by statute or regulation from collecting the
same regardless of any relationship between such items. It is understood,
however, that TWComm will not charge for any tax or fee to a governmental agency
or authority, or any surcharge that is clearly related to such a tax or fee, to
the extent the LEC is liable for such tax or fee but TWComm is not liable
therefor.
E-1.8.C Except as otherwise mutually agreed by TWComm and AT&T, the taxes
applicable to the Services provided in each Selected MSA as of the Effective
Date thereof, and how responsibility therefor is to be allocated between the
parties, are set forth in the applicable MSA Schedule.
E-1.8.D AT&T will pay, or indemnify TWComm against, any taxes (and interest or
penalty thereon) for which TWComm is held liable by a relevant taxing authority
(1) if any tax exemption certificate presented to TWComm by AT&T relating
thereto is held to be invalid, or (2) that TWComm had not collected, pursuant to
AT&T's written request. AT&T shall also indemnify TWComm for all expenses
incurred by TWComm in connection with any audit or proceeding for the collection
of such amounts by a taxing authority. TWComm shall provide AT&T with prompt
notice of any such audit or proceeding by a taxing authority and shall
reasonably cooperate with AT&T in responding thereto or in AT&T's response
thereto (at AT&T's expense). If AT&T disputes the taxability of any tax imposed
as a result of the existence or operation of this Agreement, AT&T at its own
expense in its own name may protest the imposition of the disputed tax. In the
event that such protest must be made in the name of TWComm, TWComm shall in good
faith and with due diligence at AT&T's sole expense contest the imposition of
such tax.
E-1.8.E AT&T shall be solely responsible for all taxes, fees or surcharges
charged against it with regard to its own sales of telecommunications services,
regardless of whether the same involve a resale of TWComm Services.
* Indicates that such portions of the contract has been omitted pursuant
to a request for confidential treatment and that such portions have been
filed with the Commission separately.
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PRICING PRINCIPLES: DEDICATED SERVICES
E-2.1 Introduction
E-2.1.A This Appendix E-2 sets forth: (a) general pricing principles under which
Base Prices and Discounts for Dedicated Services will be initially determined
and subsequently adjusted; and (b) a pricing methodology intended to implement
the general pricing principles.
E-2.1.B Appendix E-1 supplements this Appendix E-2 and sets forth, among other
things, additional conditions under which the Prices for Dedicated Services may
be further adjusted.
E-2.1.C Appendix E-6 supplements this Appendix E-2 and sets forth the specific
terms, conditions and methods to determine the recurring charges Discount
applicable to Dedicated Services.
E-2.2 Virtual Pricing
E-2.2.A As of the Effective Date of this Agreement, LEC services under current
LEC tariffs that are Similar to Dedicated Services are offered and priced
exclusively by service element (e.g., channel termination, channel mileage and
multiplexing). Accordingly, LEC customers must purchase and combine different
LEC service elements into various arrangements to make a complete and functional
service (e.g., two DS-1 channel terminations and channel mileage may comprise a
complete LEC DS-1 service). As described in Appendix D-1 of this Agreement,
TWComm will offer Dedicated Services on a "virtual" basis, that is, as a
complete, functional Service. Accordingly, the Price for each Dedicated Service
is reflected as a "per-unit" price, where the per-unit price is determined with
respect to the transmission bit rate of the applicable Dedicated Service (e.g.,
DS-3 Service is priced in DS-3 units, DS-1 Service is priced in DS-1 units, DS-0
Service, Digital Subrate Service and Voice Grade Services is priced in DS-0
units).
E-2.2.B Except where expressly provided otherwise, the Base Price of a Service
is determined from the * based upon the principles set forth in Sections E-2.4
and E-2.5 of this Appendix E-2. Accordingly, the Base Price of each Dedicated
Service shall be the sum of the per-unit costs of * which comprise *. The
per-unit cost shall be determined with respect to the transmission bit rate
of the applicable Dedicated Service.
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E-2.3 Pricing Methodology for Dedicated Services
E-2.3.A The method which shall be used to determine the Price of a Dedicated
Service is as follows:
E-2.3.A.i Determine the * that corresponds to each required TWComm
Service Element * pursuant to Appendix D-1 (it being understood that,
while TWComm's Service Elements make reference to TWComm Nodes, *).
E-2.3.A.ii Following the pricing principles set forth in Sections E-2.2,
E-2.4 and E-2.5 of this Appendix E-2, determine the per-unit cost *,
which cost shall be deemed to be the Base Price of the Service Element
to which *.
E-2.3.A.iii Determine the Discount applicable to the Base Price of each
Service Element pursuant to the principles set forth in Section E-2.8 of
this Appendix E-2 and Appendix E-6.
E-2.3.A.iv Sum the Discounted Base Prices of all required Service Elements
as set forth in Appendix D-1.
E-2.3.A.v Determine if an adjustment is applicable to the aggregate
Discounted Base Price pursuant to Appendix E-1.
E-2.3.B Notwithstanding Section E-2.3.A, either AT&T or TWComm may propose a
different method to be used to determine the Base Price of a Dedicated Service
for mutual consideration.
E-2.3.C Notwithstanding Section E-2.3.A above, * on a "virtual" basis, then *
be used to determine the Base Price for a Dedicated Service, but * is the
least costly means to obtain such Similar Service.
E-2.4 Base Price Principles Applicable to All Dedicated Service Elements
E-2.4.A The Base Price for Dedicated Services includes a nonrecurring
installation charge and a monthly recurring charge.
E-2.4.B Except as provided for in Sections E-2.5.E.ii and E-2.5.E.iii, * for
different terms of service, the * such rates are used to determine the Base
Price, so long as such term discount is not based on a term that exceeds
7 years.
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E-2.4.C Except as provided for in Sections E-2.5.E.ii and E-2.5.E.iii, * offers
different rates based on spending levels, or based on revenue or volume
commitments or requirements, the Base Price shall be determined using the
lowest such rates for which AT&T could have qualified if AT&T * to satisfy
all of its access services needs *.
E-2.5 Base Price Principles Applicable to Individual Dedicated Service
Elements
E-2.5.A With respect to Primary Channel Terminations, Channel Mileage and
Multiplexing, * offers different rates depending on various volume purchase
options (e.g., DS-3 multipacks), the Base Price of the Dedicated Service is
determined using the most efficient bundling, routing, and hubbing of all AT&T
access services among all Exchange Areas within the Selected MSA. This
determination shall be based on the utilization * multi-pack arrangement which
could transport all of the respective access services to each corresponding
AT&T Serving Office to which the services are associated. If the volume of
AT&T services exceeds the *, then the Base Price of the Dedicated Service
is based on the *.
E-2.5.A.i Example 1: If the aggregate of all AT&T access services among
all Exchange Areas within the Selected MSA equaled 9 DS-3s of facility
capacity (allowing for the spare capacity described in Section E-2.5.B),
* offers DS-3 multipacks in increments of 3 DS-3s, 6 DS-3s and 12 DS-3s,
then the * which could transport all of the AT&T access services would
be a 12 DS-3 multi-pack arrangement.
E-2.5.A.ii Example 2: If the aggregate of all AT&T access services among
all Exchange Areas within the Selected MSA equaled 13 DS-3s of facility
capacity (allowing for the spare capacity described in Section E-2.5.B),
and the * is a 12-DS-3 multi-pack arrangement, then the 12-DS-3 multi-pack
arrangement alone would be used to determine the Base Price.
E-2.5.B With respect to Primary Channel Terminations, Channel Mileage and
Multiplexing, the per-unit price shall be determined using the following
assumptions regarding utilization of bulk facilities:
E-2.5.B.i The multi-pack arrangements are assumed to be 100% utilized
(e.g., 12 DS-3s on a 12-pack arrangement and 24 DS-3s on a 24-pack
arrangement).
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E-2.5.B.ii DS-3 hubbing facilities are assumed to have 23 of 28 available
channels filled.
E-2.5.B.iii DS-1 hubbing facilities are assumed to have 21 of 24 available
channels filled.
E-2.5.C The Base Price for Channel Mileage shall be based upon the following
principles:
E-2.5.C.i All Channel Mileage determinations are based upon the V&H
(airline mile) coordinates of the applicable * LSOs.
E-2.5.C.ii Total Channel Mileage is the airline mileage between the *
LSOs corresponding to the Exchange Areas of the terminating points of the
Dedicated Service.
E-2.5.C.iii Extended Channel Mileage is the airline mileage between (1)
the * LSO corresponding to the Optional Serving Area of the terminating
point ("Optional LSO") and (2) the nearest LSO corresponding to any
Expected Serving Area, regardless of the actual routing of the Service.
E-2.5.C.iv Basic Channel Mileage is Total Channel Mileage minus Extended
Channel Mileage.
E-2.5.C.v For Dedicated Services having both terminating points located in
the same Exchange Area, the channel mileage is zero and the Base Price for
Channel Mileage is zero.
E-2.5.C.vi The Base Price for Basic Channel Mileage shall be determined
irrespective of Service Product (e.g., DS-3, DS-1, DS-O), and is derived
from * DS-3 channel mileage rate per mile multiplied times the
applicable number of airline miles.
E-2.5.C.vii The Base Price for Extended Channel Mileage shall be based
upon the * mileage charge for the respective Service Product (e.g., the
Base Price for Extended Channel Mileage for DS-1 Service is determined
from the * DS-1 channel mileage rate) multiplied times the applicable
number of airline miles.
E-2.5.D The recurring and nonrecurring Base Price for Multiplexing is determined
from * necessary to multiplex between the transmission bit rate of each network
interface (e.g., DS-3 to DS-1, or DS-3 to DS-O).
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E-2.5.E The Base Price Secondary Channel Terminations shall be determined as
follows:
E-2.5.E.i The Base Price for Secondary Channel Terminations which are
provided by TWComm utilizing Type I provisioning shall be based upon the
LEC (channel termination) * for the respective Service Product (e.g., the
Base Price for a Secondary Channel Termination for DS-1 Service is
determined from the * DS-1 channel termination rate).
E-2.5.E.ii The Base Price for Secondary Channel Terminations which are
provided by TWComm utilizing Type II provisioning as part of an Embedded
Service (as defined in Section 11 of this Agreement) shall be the * Rate
Element of the specific Embedded Service * prior to the time the Embedded
Service was transitioned to TWComm (e.g., if AT&T had obtained the
Embedded Service channel termination *, then the Base Price for such
TWComm Secondary Channel Termination shall be the *).
E-2.5.E.iii The Base Price for all other Secondary Channel Terminations
which are provided by TWComm utilizing Type II provisioning are determined
from (1) * to exceed 5 years (e.g., * discounts that provide a lower cost
for longer term commitments, then the Base Price for a Type II Secondary
Channel Termination shall be based upon *); and (2) the * based upon the
aggregate volume of all AT&T access services *.
E-2.6 Maximum Base Prices
E-2.6.A The MBP for each Dedicated Service Product shall be determined pursuant
to the principles set forth in Section E-1.4 of Appendix E-1 with respect to the
sum of the Base Prices of all required Service Elements.
E-2.7 TWComm's Election Not to Lower Base Prices
E-2.7.A If the Reference Price (as described in Appendix E-6) for a Dedicated
Service Product for the applicable Exchange Areas is determined to be lower than
the Reference Price Threshold set forth in Table 1, on page 9 of this Appendix
E-2, then TWComm will have the option to:
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E-2.7.A.i Charge AT&T a Price for that Service equal to the then current
Base Price for that Service, less the applicable Discount and any
applicable adjustment; or
E-2.7.A.ii Charge AT&T a Price for that Service equal to the Base Price
for that Service that was in effect prior to the LEC rate reduction which
resulted in the Reference Price falling below the designated threshold,
less the applicable Discount and any applicable adjustment.
E-2.7.B If TWComm elects to charge AT&T the higher Price as provided for in
Section E-2.7.A.ii of this Appendix E-2, then the Discount applicable to
Dedicated Services, Switched Access Transport and Call Delivery may be adjusted
as set forth in Section E-6.24 of Appendix E-6.
E-2.8 Determination of Discounts for Service Elements
E-2.8.A The Discount applicable to the recurring charges Base Price for eligible
Service Elements shall be * as determined using the method set forth in Appendix
E-6 of this Agreement.
E-2.8.B The Discount applicable to the nonrecurring charges Base Price for
eligible Service Elements shall be *.
E-2.8.C The eligibility of a Service Element for a Discount is a function of the
Provisioning Type (as described in Section 15 of this Agreement) used by TWComm
to furnish the Service. Table 2, on page 10 of this Appendix E-2, specifies
which Service Element-Provisioning Type combinations are eligible for a Discount
and which are combinations not eligible for a Discount.
E-2.9 Self-Healing Ring Access Service
E-2.9.A The parties will use good faith efforts to set Prices for Self-Healing
Ring Access Service based on principles applicable to other Dedicated Services.
The Base Price for Self-Healing Ring Access Service shall be determined as
follows:
E-2.9.A.i * to Self-Healing Ring Access Service on a * (i.e., available
without distinction to any customer) the Base Price of Self-Healing Ring
Access Service shall be no greater than the price of such Similar Service
based upon principles analogous to those set forth in Sections E-2.4 and
E-2.5 of this Appendix E-2.
E-2.9.A.ii * to Self-Healing Ring Access Service *
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*, the Base Price of Self-Healing Ring Access Service to AT&T for such
AT&T customer shall be *, provided that AT&T is able to provide TWComm
with reasonable evidence of *.
E-2.9.A.iii If neither Section E-2.9.A.i nor Section E-2.9.A.ii is
applicable, the Base Price of Self-Healing Ring Access Service shall be
determined * TWComm.
E-2.9.B Notwithstanding Section E-2.8 of this Appendix E-2, the Discount
applicable to Self-Healing Ring Access Service shall be determined as follows:
E-2.9.B.i If the Base Price is determined pursuant to Section E-2.9.A.i or
E-2.9.A.ii above, then the Discount applicable to Self-Healing Ring
Service shall be no less than the sum of (1) * to other Dedicated Services
in the Selected MSA, and (2) * as determined using the method set forth
in Appendix E-6 of this Agreement.
E-2.9.B.ii If the Base Price is determined pursuant to Section E-2.9.A.iii
above, then the Service * unless the individual case basis agreement on
the Price for such Service *.
E-2.9.C Notwithstanding the foregoing, because there is no Reference Price
Threshold for Self-Healing Ring Access Services, TWComm shall have the right to
refuse to accept * that would otherwise be required in accordance with the
foregoing principles, without any adverse consequences hereunder, provided
that TWComm offers a reasonable individual case basis Price for the Service
based on good faith negotiations with AT&T.
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APPENDIX E-2
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TABLE 1
DEDICATED SERVICES REFERENCE PRICE THRESHOLDS
(for TWComm's election not to lower Base Prices pursuant to
Section E-2.7 of this Appendix E-2)
<TABLE>
<CAPTION>
SERVICE PRODUCT REFERENCE PRICE THRESHOLDS
--------------- --------------------------
<S> <C>
DS-3 Service < *
DS-1 Service < *
Factional DS-1 Service < *
DS-O Service < *
Digital Subrate Service < *
Voice Grade Service < *
2.048 Mbps Service < *
</TABLE>
*Indicates that such portions of the contract has been omitted pursuant to a
request for confidential treatment and that such portions have been filed
with the Commission separately.
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TABLE 2
SERVICE ELEMENTS ELIGIBLE FOR A DISCOUNT
A "(check)" within the cell indicates that the Service Element-Provisioning
Type combination is eligible for a Discount. An "x" within the cell indicates
that the Service Element/Provisioning Type combination will not be eligible
for a Discount.
<TABLE>
<CAPTION>
SERVICE ELEMENT TYPE I TYPE II
--------------- ------ -------
<S> <C> <C>
Primary Channel Termination (check)
Secondary Channel Termination (check) x
Basic Channel Mileage (check)
Extended Channel Mileage x
Multiplexing (check) x
</TABLE>
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APPENDIX E-3
Page 1 of 5
PRICING PRINCIPLES: SWITCHED ACCESS SERVICE
E-3.1 Introduction
E-3.1.A This Appendix E-3 sets forth the pricing principles under which the
Prices for each Switched Access Service will be initially determined and
subsequently adjusted.
E-3.1.B Appendix E-1 supplements this Appendix E-3, and sets forth, among other
things, certain conditions under which Prices for Switched Access Services will
be adjusted.
E-3.2 General Pricing Principles for Switched Access Services
E-3.2.A The Prices for Switched Access Services shall be determined using the
three basic pricing operations described in Section E-1.3: (1) determine the
Base Price, (2) determine any applicable Discount, and (3) apply any required
adjustments, as set forth in Appendix E-1.
E-3.2 B As described in Appendix D-2, Switched Access Service is composed of two
Service Elements, Switched Access Transport and Call Delivery.
E-3.2.B.i The Base Price for Switched Access Transport includes a
nonrecurring installation charge and a monthly recurring charge. The
pricing principles used to determine the Base Price for Switched Access
Transport are set forth in Sections E-3.3 of this Appendix E-3. The method
used to determine the Discount applicable to Switched Access Transport is
referenced in Section E-3.4 of this Appendix E-3 and described more fully
in Appendix E-6.
E-3.2.B.ii The Base Price for Call Delivery is a per minute charge. The
pricing principles used to determine the Base Price for Call Delivery are
set forth in Sections E-3.5 of this Appendix E-3. The method used to
determine the Discount applicable to Call Delivery is referenced in
Sections E-3.6 of this Appendix E-3 and described more fully in Appendix
E-6.
E-3.3 Determination of Base Price for Switched Access Transport
E-3.3.A The recurring and nonrecurring charges Base Price for Switched Access
Transport are determined as follows:
E-3.3.A.i Notwithstanding Section E-1.2.E of Appendix E-1, inasmuch as
the same Switched Access Transport trunks shall be used to transport
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both interstate and intrastate Switched Access minutes of use, the
recurring charges Base Price applicable to Switched Access Transport shall
be determined from the * based on the principles set forth in this
Section E-3.3.
E-3.3.A.ii The nonrecurring installation Base Price for Switched Access
Transport is determined from the nonrecurring installation charge for the
*.
E-3.3.B The Base Price determination for Switched Access Transport shall be
subject to following conditions:
E-3.3.B.i The Base Price for Switched Access Transport is reflected as a
"per unit" price (virtual pricing), where the "per unit" price is
determined with respect to the transmission bit rate of the applicable
Switched Access Transport trunk group (e.g., a DS-3 Switched Access
Transport trunk group is priced in DS-3 units and a DS-1 Switched Access
Transport trunk group is priced in DS-1 units).
E-3.3.B.ii If the * the * are used to determine the Base Price, so long
as such term discount is not based on a term that exceeds 7 years.
E-3.3.B.iii * the Base Price shall be the * for which AT&T could have
qualified if AT&T *.
E-3.3.B.iv If the LEC offers different rates depending on various bulk
purchase volumes (e.g., DS-3 multi-packs), the Base Price of the Switched
Access Transport is determined using the most efficient bundling, routing,
and hubbing of all AT&T access services among all Exchange Areas within
the Selected MSA. This determination shall utilize the * which could
transport all of the respective access services to each corresponding
AT&T Serving Office to which the services are associated. If the volume
of AT&T services exceeds the *, then the Base Price of the Switched Access
Transport is based on *.
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E-3.3.C The MBP for Switched Access Transport shall be determined pursuant to
the principles set forth in Section E-1.4 of Appendix E-1.
E-3.3.D If the Reference Price (as described in Appendix E-6) for a Switched
Access Transport Service Product is determined to be lower than the Reference
Price Thresholds set forth in this Section E-3.3.F, then TWComm will have the
option to:
E-3.3.D.i Charge AT&T a Price for that Service equal to the * for that
Service, less the applicable Discount and any applicable adjustment; or
E-3.3.D.ii Charge AT&T a Price for that Service equal to the Base Price
for that Service that was in effect prior * which resulted in the
Reference Price falling below the threshold, less the applicable Discount
and adjustment.
E-3.3.D.iii The Reference Price Thresholds for Switched Access Transport
are as follows:
E-3.3.D.iii.(a) * for DS-3 Switched Access Transport; and
E-3.3.D.iii.(b) * for DS-1 Switched Access Transport.
E-3.3.E If TWComm elects to charge AT&T the higher Price as provided for in
Section E-3.3.D.ii of this Appendix E-3, then the Discount applicable to
Dedicated Services, Switched Access Transport and Call Delivery will be adjusted
as set forth in Section E-6.24 of Appendix E-6.
E-3.4 Determination of Discounts for Switched Access Transport
E-3.4.A The Discount applicable to the recurring charges for Switched Access
Transport shall be no less than the sum of the Dedicated Local Discount and
Dedicated National Discount as each is determined using the method set forth in
Appendix E-6 of this Agreement.
E-3.4.B The Discount applicable to the nonrecurring charges for Switched Access
Transport shall be *.
E-3.5 Determination of Base Price for Call Delivery
E-3.5.A The Base Price for Call Delivery is determined from *.
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E-3.5.A.i With regard to interstate Call Delivery, the cost per minute of
use of * would be the sum of * for local switching, carrier common line,
and residual interconnection charge.
E-3.5.A.ii With regard to intrastate Call Delivery, the cost per minute of
use of the * would be the sum of * for local switching and carrier common
line. if the state jurisdiction has adopted local transport restructure
and * in the determination of the Base Price for intrastate Call Delivery.
E-3.5.A.iii * may be used to determine the Base Price of Call Delivery
in place of local switching, carrier common line and residual
interconnection charge (1) *; (2) new * as replacements; and
(3) such * represent the identical functionality of one or more of the *.
E-3.5.A.iv With respect only to Transport Arrangements, notwithstanding
Sections E-3.5.A.i and E-3.5.A.ii, the determination of Base Price for
Call Delivery minutes of use that are originated from, or terminated to,
such lines shall exclude carrier common line.
E-3.5.B * based on spending levels or based on revenue or volume commitments
or requirements, the Base Price for Call Delivery shall be the * for which
AT&T would have qualified if AT&T had used the services *.
E-3.5.C The MBP for Call Delivery is * per minute of use, except as
otherwise adjusted as follows:
E-3.5.C.i If the Base Price for Call Delivery has increased more than 10%
since the Effective Date of this Agreement, and the average Base Price for
all categories of Subscriber Lines in the Selected MSA has decreased more
than * since the Effective Date of this Agreement, then
E-3.5.C.ii The MBP for Call Delivery of * will increase by for each
percentage point increase of the Base Price for Call delivery over.
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E-3.5.C.iii The Base Price review required above is not itself *.
E-3.5.D If the Reference Price for Call Delivery in an Exchange Area is
determined to be lower than the threshold set forth in this Section E-3.5.D,
then TWComm will have the option to:
E-3.5.D.i Charge AT&T a Price for that Service equal to the then current
Base Price for that Service, less the applicable Discount and any
applicable adjustment; or
E-3.5.D.ii Charge AT&T a Price for that Service equal to the Base Price
for that Service * which resulted in the Reference Price falling below
the threshold, less the applicable Discount and applicable adjustment.
E-3.5.D.iii The Reference Price threshold for Call Delivery is *
E-3.5.D.iv If TWComm elects to charge AT&T the higher Price as provided
for in Section E-3.5.D.ii of this Appendix E-3, then the Discount
applicable to Dedicated Services, Switched Access Transport and Call
Delivery will be adjusted as set forth in Section E-6.24 of Appendix E-6.
E-3.6 Determination of Discounts for Call Delivery
E-3.6.A The Discount applicable to Call Delivery shall be no less than the sum
of the Switched Local Discount and Switched National Discount as each is
determined using the methods set forth in Appendix E-6.
*Indicates that such portions of the contract has been omitted pursuant to a
request for confidential treatment and that such portions have been filed
with the Commission separately.
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APPENDIX E-4
Page 1 of 7
PRICING PRINCIPLES: SWITCHED BUSINESS LINE SERVICE
E-4.1 Introduction
E-4.1.A This Appendix E-4 sets forth the pricing principles under which the
Prices for each Switched Business Line Service will be initially determined and
subsequently adjusted.
E-4.1.B Appendix E-1 supplements this Appendix E-4, and sets forth, among
other things, certain conditions under which Prices for Switched Business Line
Services will be adjusted.
E-4.2 General Pricing Principles for Switched Business Line Services
E-4.2.A The Prices for Switched Business Line Services shall be determined using
the three basic pricing operations described in Section E-1.3: (1) determine
the Base Price, (2) determine any applicable Discount, and (3) apply any
required adjustments, as set forth in Appendix E-1.
E-4.2.B As described in Appendix D-3, Switched Business Line Services are
composed of two Service Elements: Subscriber Lines and SBL Features. The pricing
principles applicable to Subscriber Lines are set forth in Sections E-4.3 and
E-4.4 of this Appendix E-4. The Pricing principles applicable to SBL Features
are set forth in Sections E-4.5 and E-4.6 of this Appendix E-4.
E-4.2.C The Prices for both Subscriber Lines and Switched Business Line Features
include a nonrecurring installation charge and a monthly recurring charge. No
per minute or per message charges apply to Switched Business Line Service
(Switched Business Line Service is solely a flat rate service). Any per minute
or per message charges to be assessed on calls originated on Subscriber Lines
are assessed to the applicable usage-based Service (i.e., Local Calling Service
or Switched Access Service).
E-4.2.D AT&T and TWComm will mutually agree to the various bundling options that
will be offered to AT&T by TWComm within each Current Serving Area for the
following Services: Switched Business Subscriber Lines; SBL Features; and Local
Calling options, if any (e.g., extended calling area or call measurement).
E-4.3 Determination of Base Prices for Subscriber Lines
E-4.3.A The Base Price for Subscriber Lines shall be determined *, if any, that
provide the * that AT&T would have qualified for it AT&T *
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* (The proportional volume of Similar Services is determined based upon the
number of * for which the end-user customers of such lines elected AT&T as
their Primary Interexchange Carrier ("PIC") *, regardless of LATA or state
boundaries, versus the number of * for which the end-user customers of such
lines elected AT&T as their PIC within the Current Serving Areas with regard
to SBL Services (as they may change from time to time) *.
E-4.3.A.i Example 1: The * offers its services throughout State A which
is composed of 200 Exchange Areas. Within such Exchange Areas, AT&T
reports that 200,000 business lines are PIC'd to AT&T. TWComm offers
SBL Services in one Selected MSA in State A in 20 Current Serving Areas.
Within such Current Serving Areas, AT&T reports that 20,000 business lines
are PIC'd to AT&T. Therefore, the proportional volume of * (20,000 [div]
200,000). If the * requires the purchase of 100,000 lines within State
A to obtain a * on such lines, then AT&T must purchase * within such
Selected MSA from TWComm to receive a corresponding * of the Base Price
from TWComm.
E-4.3.A.ii Example 2: * covering six states offers a territory-wide volume
discount plan. The six-state LEC territory, excluding those Exchange
Areas served by other dominant telephone companies, is composed of 1000
Exchange Areas. Within such Exchange Areas, AT&T reports that 100,000
business lines are PIC'd to AT&T. TWComm offers SBL Services in 50 Current
Serving Areas in two Selected MSAs in such LEC territory. Within such
Current Serving Areas, AT&T reports that 10,000 business lines are PIC'd
to AT&T. Therefore, the proportional volume of *. If the LEC volume
discount plan requires the purchase of 50,000 lines within its territory
to obtain * on such lines, then AT&T must purchase a total of * within
such two * from TWComm to receive a * of the Base Price from TWComm.
E-4.3.B Subject to Section E-4.3.C, the Base Price applicable to each Subscriber
Line Service Product will be as designated from the following by AT&T:
E-4.3.B.i The price for * for which resale by the customer is *, state
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regulation or law, less the applicable Discount, if any, described in
Section E-4.4.
E-4.3.B.ii The price for the * for which resale by the customer is not
prohibited. (This pricing option is not eligible for a Discount.)
E-4.3.B.iii The price for * which is available only to common carriers
for resale. (This pricing option is not eligible for a Discount.)
E-4.3.B.iv In the absence of a designation by AT&T, the pricing option
described in this Section E-4.3.B that provides *.
E-4.3.C If the Base Price for Subscriber Lines is determined *, then, unless
the parties otherwise mutually agree, the Prices for Subscriber Lines shall be
subject to *, including, but not limited to, the purchase of proportional
volumes of Switched Business Line Services from TWComm, as described in Section
E-4.3.A. AT&T may designate the volume and term discount options or optional
pricing plan applicable to a specific Subscriber Line or group of Subscriber
Lines for a specific end-user subject to this Section E-4.3.C. Where the option
described in Section E-4.3.B.i is selected by AT&T, AT&T must represent that all
such Services resold by it under such option will be purchased by a single
end-user that meets the materially relevant terms and conditions *.
E-4.3.D For purposes of this Section E-4.3, the * to a SBL Transport Arrangement
is a similar dial tone switch port or other functionally equivalent offering
(e.g., a voice grade switch port is similar to a voice grade SBL Transport
Arrangement and a 56kbps switch port is similar to a 56kbps SBL Transport
Arrangement). The * to a SBL Full Service Arrangement is a functionally
complete similar business line, whether offered in whole or by
its constituent components (e.g., a dial tone switch port cross-connected
to a subscriber loop constitute a functionally complete service).
E-4.3.E The federal subscriber line charge shall not be included in the
determination of the Base Price regardless * assesses the federal subscriber
line charge with the Similar Service used to determine such Base Price.
However, TWComm may assess a like charge in certain circumstances as an
adjustment pursuant to Section E-1.6.G of Appendix E-1.
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E-4.3.F With respect to the Base Price options described in E-4.3.B above, if
* to Switched Business Line Service as a bundled offering, or interdependent
offering, with intraLATA, interexchange toll services or interLATA,
interexchange toll services, such * are excluded from the determination of the
Base Price for Subscriber Lines.
E-4.3.G The nonrecurring installation charges Base Price applicable to any
Subscriber Line is the installation charge of the * from which the Base Price
for the recurring charge is derived.
E-4.3.H. Notwithstanding Sections E-4.3.A through E-4.3.G above, if AT&T
designates the Local Calling Areas to be the then current expanded local calling
areas associated with TWComm-branded business line service within a Selected MSA
pursuant to Section D-4.1.B.ii of Appendix D-4 of this Agreement, then the Base
* of Subscriber Lines within such MSA is the price of the * Service that
provides local calling throughout such expanded calling area less any
applicable volume and term discounts generally available with such Similar
Service for which AT&T has qualified. *
E-4.3.I The MBP for each Subscriber Lines Service Product shall be determined
pursuant to the principles set forth in Section E-1.4 of Appendix E-1.
E-4.4 Determination of Discounts for Subscriber Lines
E-4.4.A Unless AT&T and TWComm otherwise mutually agree, a Subscriber Line shall
not be eligible for a recurring charges Discount if the Base Price of such
Subscriber Line *. A recurring charges Discount is applicable to each
Subscriber Line for which the Base Price is determined pursuant to
Section E-4.3.B.i of this Appendix E-4, provided that such Base Price is not
determined from a *.
E-4.4.B Unless AT&T and TWComm mutually agree otherwise, the recurring charges
Discount is determined by time period as follows:
E-4.4.B.i From the Effective Date of the Agreement through the fifth
anniversary of the Effective Date of the Agreement, the Discount
applicable to eligible Subscriber Lines in all Selected MSAs *.
E-4.4.B.ii From the commencement of the Switched Services Ramp-Up Period
for the first such Expected Serving Area within an MSA through the second
anniversary of the end of the Switched Services Ramp-Up Period for the
last such Expected Serving Area within such MSA, the Discount
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applicable to eligible Subscriber Lines within such Selected MSA is *.
E-4.4.B.iii Following the fifth anniversary of the Effective Date of the
Agreement or the second anniversary of the end of the Switched Services
Ramp-Up Period for the last such Expected Serving Area within such MSA,
whichever occurs later, the Discount applicable to eligible Subscriber
Lines is *.
E-4.4.B.iv During any period when any two of the conditions described in
this Section E-4.4.A of this Appendix E-4 are both applicable, the higher
Discount shall apply.
E-4.4.C Unless AT&T and TWComm mutually agree otherwise, the nonrecurring
charges Discount applicable to Subscriber Lines shall be *.
E-4.5 Determination of Base Prices for SBL Features
E-4.5.A With respect to each SBL Feature, the recurring charge Base Price is the
* the Base Price for SBL Features shall be determined using the * that provides
the least costly Similar Feature for which AT&T would have qualified if AT&T
purchased the same proportional volume of * that AT&T is then currently
purchasing from TWComm. (The proportional volume of Similar Features is based
upon the number of * includes in its volume discount plan, regardless of
LATA or state boundaries, versus the number of Expected Serving Areas for which
TWComm has satisfied each of the Switched Services Preconditions (as described
in Appendix E-6) *
E-4.5.A.i With respect to the determination of "proportional volume," the
illustrative examples provided in Section E-4.3.A of this Appendix also
apply to this Section E-4.5.A.
E-4.5.B The nonrecurring Base Price applicable to any SBL Feature is the
installation charge of the * from which the Base Price for the recurring
charge is derived.
E-4.5.C Pursuant to Section D-3.5 of Appendix D-3, if TWComm offers a SBL
Feature on an unbundled basis in a Serving Area *, the nonrecurring and
recurring charges Base Price shall be determined through *; the imputed
value derived * shall be the primary factor in
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such negotiation. (For example, if the * offers a business line without any
features for a monthly recurring charge of * and a bundled offering composed
of a business line with call waiting for a monthly recurring charge of *, the
imputed recurring charge Base Price for Call Waiting shall be *.)
E-4.5.D The MBP for each SBL Feature shall be determined pursuant to the
principles set forth in Section E-1.4 of Appendix E-1.
E-4.6 Determination of Discount for Switched Business Line Features
E-4.6.A The Discount applicable to the recurring charges Base Price for a SBL
Feature is based upon (1) where the Base Price of the SBL Feature falls in a
range of Base Prices; (2) the type of SBL Feature; and (3) the service period
(the first year of service for each SBL Feature receives a higher discount than
the subsequent years of service). Unless AT&T and TWComm otherwise mutually
agree, the Discount applicable to the recurring charge Base Price for a SBL
Feature is the Discount specified in Table 1, on page 6 of this Appendix E-4.
E-4.6.B The discount applicable to the nonrecurring charge Base Price for a SBL
Feature shall be no less than *.
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<TABLE>
<CAPTION>
TABLE 1
DISCOUNTS APPLICABLE TO MONTHLY CHARGES FOR SBL FEATURES
- --------------------------------------------------------------------------------
FEATURE TYPE & Discount for 1st year Discount for
BASE PRICE RANGE after Service Remaining Term of
acceptance Service
- --------------------------------------------------------------------------------
<S> <C> <C>
Custom Calling Features or Feature
Packages
- --------------------------------------------------------------------------------
$0 to .59 * *
- --------------------------------------------------------------------------------
$.60 to 1.19 * *
- --------------------------------------------------------------------------------
$1.20 to 2.99 * *
- --------------------------------------------------------------------------------
>= $3.00 * *
- --------------------------------------------------------------------------------
CLASS Features or Feature Packages
- --------------------------------------------------------------------------------
$0 to 1.99 * *
- --------------------------------------------------------------------------------
$2.00 to 2.99 * *
- --------------------------------------------------------------------------------
$3.00 to 4.99 * *
- --------------------------------------------------------------------------------
>= $5.00 * *
- --------------------------------------------------------------------------------
Voice Messaging Features or Feature
Packages
- --------------------------------------------------------------------------------
$0 to 9.99 * *
- --------------------------------------------------------------------------------
$10.00 to 14.99 * *
- --------------------------------------------------------------------------------
>= $15.00 * *
- --------------------------------------------------------------------------------
</TABLE>
*Indicates that such portions of the contract has been omitted pursuant to a
request for confidential treatment and that such portions have been filed with
the Commission separately.
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PRICING PRINCIPLES: LOCAL CALLING SERVICE
E-5.1 Introduction
E-5.1.A This Appendix E-5 sets forth the pricing principles under which the
Prices for Local Calling Service will be initially determined and subsequently
adjusted.
E-5.1.B Appendix E-1 supplements this Appendix E-5, and sets forth, among other
things, certain conditions under which Prices for Local Calling Service will be
adjusted.
E-5.2 General Pricing Principles for Local Calling Service
E-5.2.A The Prices for Local Calling Service shall be determined using the three
basic pricing operations described in Section E-1.3 of this Agreement: (1)
determine the Base Price, (2) determine any applicable Discount, and (3) apply
any required adjustments, as set forth in Appendix E-1.
E-5.2.B AT&T and TWComm will mutually agree to the various bundling options that
will be offered to AT&T by TWComm within each Current Serving Area for the
following Services: Subscriber Lines; SBL Features; and Local Calling options,
if any (e.g., extended calling area or call measurement).
E-5.3 Determination of Base Prices for Local Calling Service
E-5.3.A The Base Price for Local Calling Service * and amount as a Similar
Local Call. A Similar Local Call is a call that *. However, under no
circumstances shall *.
E-5.3.A.i If the * is measured in per-minute increments, then the
Base Price for Local Calling Service *.
E-5.3.A.ii If the * is measured in per-call increments, then the Base
Price for Local Calling Service *.
E-5.3.A.iii If * are provided on an unlimited basis, then the Base Price
for Local Calling Service is a *
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Service; and Local Calling Service is provided *.
E-5.3.B * apply to Local Calling Service.
E-5.4 Determination of Discounts for Local Calling Service
E-5.4.A Unless AT&T and TWComm otherwise mutually agree, the Discount applicable
to Local Calling Service is determined by time period as follows:
E-5.4.A.i From the Effective Date of the Agreement through the fifth
anniversary of the Effective Date of the Agreement, the Discount
applicable to Local Calls in all Selected MSAs *.
E-5.4.A.ii From the commencement of the Switched Services Ramp-Up Period
for the first such Expected Serving Area through the second anniversary of
the end of the Switched Services Ramp-Up Period for the last such Expected
Serving Area, the Discount applicable to Local Calls within such Selected
MSA is *.
E-5.4.A.iii Following the fifth anniversary of the Effective Date of the
Agreement or the second anniversary of the end of the Switched Services
Ramp-Up Period for the last such Expected Serving Area, whichever occurs
later, the Discount applicable to Local Calls is *.
E-5.4.A.iv During any period when any two of the conditions described in
this Section E-5.4.A of this Appendix E-5 are both applicable, the higher
Discount shall apply.
* Indicates that such portions of the contract has been omitted pursuant
to a request for confidential treatment and that such portions have
been filed with the Commission separately.
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DETERMINATION OF DISCOUNTS
FOR DEDICATED SERVICES AND SWITCHED ACCESS SERVICES
E-6.1 Introduction
E-6.1.A This Appendix E-6 sets forth the methods under which Discounts
applicable to the Base Prices for Dedicated Services, Switched Access Transport
and Switched Access Call Delivery will be determined.
E-6.1.B Appendixes E-1, E-2, and E-3 supplement this Appendix E-6, and set
forth, among other things, the pricing principles, under which Base Prices are
determined, and certain conditions under which Prices will be adjusted.
E-6.1.C * within the potential MSAs set forth in Appendix B, and AT&T's
estimates of its projected need for Services in the future.
E-6.2 General Discounting Principles
E-6.2.A With respect to Dedicated Services, Switched Access Transport and Call
Delivery, the Discount applicable to the Base Price of eligible Services or
Service Elements is the sum of the applicable Local Discount and National
Discount as determined in accordance with the methods set forth in this Appendix
E-6. The Local Discount is determined with respect to each Selected MSA and is
applied to AT&T's purchases of such Services within the respective Selected MSA.
The National Discount is determined with respect to all Selected MSAs and
applies to AT&T's purchases of such Services within all Selected MSAs.
E-6.2.B As described in further detail in this Appendix E-6, Discounts
applicable to Dedicated Services, Switched Access Transport and Call Delivery
are determined based on (1) AT&T's actual purchase volumes and Imputed Purchase
Volumes (as defined in Section E-6.23) (collectively "Purchase Volumes") of
Dedicated Services, (2) AT&T's Purchase Volumes of Subscriber Lines, and (3) the
price of * .
E-6.2.C AT&T shall not be liable for any penalty, true-up, credit, lump sum
payments, or any other remedies if AT&T does not achieve the Volume Targets set
forth in this Appendix E-6 during the Ramp-Up Period (defined in Section
E-6.3.A.ii) and the Plateau Period (defined in Section E-6.3.A.iii). The only
consequence of AT&T's not achieving such Volume Targets is the application of
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the appropriate Discount, if any, applicable to AT&T's Purchase Volumes, as set
forth in this Appendix E-6.
E-6.2.D With respect to Dedicated Services, the eligibility of a Service or its
Service Elements for a Discount is set forth in the pricing principles
applicable to Dedicated Services (Appendix E-2 of this Agreement) and is a
function of the Provisioning Type (as described in Section 15 of this Agreement)
used by TWComm to furnish the Service.
E-6.3 General Discount Periods
E-6.3.A The Discount methods set forth in this Appendix E-6 have been divided
into three general discount periods that correspond to TWComm's ability to offer
Services and AT&T's ability to purchase Services:
E-6.3.A.i Initial Period - The period when TWComm is deploying its network
and infrastructure and AT&T is performing evaluations of such. TWComm may
be offering Services during this period, and AT&T may be making purchases,
but the Ramp-Up Period described below will not have commenced. During
this period, the Discounts are determined based on * AT&T's Purchase
Volumes have exceeded the highest Volume Target for the applicable
Service.
E-6.3.A.ii Ramp-Up Period - The period following (1) TWComm's completion
of its network and infrastructure deployment for a certain Expected
Serving Area; and (2) the parties' mutual agreement that each of the
Preconditions set forth in Sections E-6.10 and E-6.11 of this Appendix E-6
have been satisfied (or waived or deferred pursuant to Section E-6.10.B)
for such Expected Serving Area. During this period the applicable
Discounts are based on AT&T's achievement of predetermined purchase volume
targets ("Volume Targets") with respect to each Expected Serving Area.
Unless the Ramp-Up is suspended pursuant to Section E-6.20.A, the Volume
Targets increase at the Ramp-Up Percentages set forth in Table 3 of this
Appendix E-6 in calendar quarter-year increments. Accordingly,
progressively higher AT&T Purchase Volumes are necessary for AT&T to meet
correspondingly higher Volume Targets and thus maintain the same Discount
Level (as defined in Section E-6.4.A).
E-6.3.A.iii Plateau Period - The period from the end of Ramp-Up Period,
when the Volume Targets have reached their highest level, through the term
of this Agreement. Subject to a certain Discount adjustments specified in
Section E-6.20.F, the applicable Discounts during this period are
determined based upon AT&T's achievement of certain Volume Target levels,
which shall remain constant throughout such period.
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E-6.3.B Dedicated Services and Switched Services are governed separately with
respect to the general discount periods described above. The parties anticipate
that Dedicated Services will progress from the Initial Period to the Ramp-Up
Period before Switched Services.
E-6.3.C Each Expected Serving Area is governed separately with respect to the
general discount periods described above.
E-6.4 Discount Levels
E-6.4.A For purposes of determining Local and National Discounts, discount
percentages have been grouped into three ranges of Discounts ("Discount
Levels"): Level 1; Level 2; and Level 3.
E-6.5 Inter-relationship of Discounts
E-6.5.A Discounts applicable to Dedicated Services, Switched Access Transport
and Call Delivery are determined, in part, by a combination of the Dedicated
Discount Level and Switched Discount Level achieved for a quarterly period.
Accordingly, an increase or decrease in AT&T's purchases of Dedicated Services
will directly affect the Discount applicable to Call Delivery. Likewise, an
increase or decrease in AT&T's purchases of Subscriber Lines will directly
affect the Discount applicable to Dedicated Services (but not the Discount for
Subscriber Lines themselves, which is determined pursuant to Appendix E-4 of
this Agreement). Table 1 on page 4 of this Appendix E-6, provides an
illustrative example of this inter-relationship.
TABLE 1
ILLUSTRATIVE EXAMPLE OF DISCOUNT RELATIONSHIPS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SWITCHED DEDICATED DISCOUNT LEVELS
DISCOUNT --------------------------------------------------------------
LEVELS Level 1 Level 2 Level 3
- ------------------==============================================================
<S> <C> <C> <C>
Level 1 *
- --------------------------------------------------------------------------------
Level 2 *
- --------------------------------------------------------------------------------
Level 3 *
- --------------------------------------------------------------------------------
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E-6.6 Reference Prices
E-6.6.A Discounts applicable to Dedicated Services, Switched Access Transport
and Call Delivery are determined, * . The price of the * is referred to herein
as the "Reference Price." The relationship between the Reference Price and the
Discount is the following: the higher the Reference Price, the higher the
Discount; and the lower the Reference Price, the lower the Discount. Local
Discounts are determined, in part, by where the Reference Price falls within
the Reference Price Ranges (as set forth in Table 2 of this Appendix E-6.
(National Discounts are determined without regard to the Reference Price
Ranges.)
E-6.6.B The Reference Price for each Dedicated Service Product is calculated
from the Base Price of a hypothetical five-mile service within the Selected MSA,
assuming both network interfaces for such service are the transmission bit rate
of the respective Service for the applicable Dedicated Service Product (e.g., a
DS-1 Service would have two DS-1 network interfaces).
E-6.6.C The Switched Access Local Transport Reference Price is the Base Price of
either a hypothetical five-mile DS-1 or DS-3 Switched Access Transport trunk
group, depending upon the applicable Network Interface.
E-6.6.D The Reference Price for Call Delivery is the Base Price of a Call
Delivery minute of use.
E-6.6.E Table 2, on page 24 of this Appendix E-6, sets forth the Reference Price
Ranges applicable to each Dedicated Service Product, Switched Access
Transport and Call Delivery.
E-6.7 Anticipated Volume Targets
E-6.7.A Each MSA Schedule sets forth the minimum Volume Targets necessary for
AT&T to achieve each Discount Level during the Plateau Period ("Anticipated
Volume Targets" or "AVTs"). There are 3 Dedicated Services Discount Levels which
correspond to three Dedicated Services AVTs ("D-AVTs"). There are three Switched
Services Discount Levels which correspond to three Switched Services AVTs
("S-AVTs"). D-AVTs are specified in DS-1 Equivalents, and S-AVTs are specified
in Lines (each of which is described more fully in Section E-6.16 of this
Appendix E-6).
E-6.7.B Although Discounts are not determined on an Expected Serving Area basis,
Anticipated Volume Targets are specified for each Expected Serving Area in the
applicable MSA Schedule. Volume Targets applicable to that Expected
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Serving Area are then calculated pursuant to Section E-6.13 of this Appendix
E-6. Optional Serving Areas shall have no AVTs.
E-6.7.C The Volume Targets applicable to each Selected MSA ("MSA Volume Targets"
or "MVTs") are calculated pursuant to Section E-6.14 of this Appendix E-6. Local
Discounts are determined based upon MVTs.
E-6.7.D The Volume Targets applicable to all Selected MSAs ("National Volume
Targets" or "NVTs") are calculated pursuant to Section E-6.15 of this Appendix
E-6. National Discounts are determined based upon NVTs.
E-6.8 Ramp-Up Schedules
E-6.8.A During the Ramp-Up Period for each Expected Serving Area, the Volume
Targets begin at * of the AVT and ramp-up in accordance with the specific
ramp-up mechanisms set forth in Sections E-6.8.B through E-6.8.D, until
reaching * of the AVT.
E-6.8.B Each Dedicated Ramp-Up Period is composed of 12 quarter-year intervals
("Ramp-Up Intervals"). Each Switched Ramp-Up Period is composed of 20
quarter-year Ramp-Up Intervals. Ramp-Up Intervals shall correspond to calendar
quarter-year periods. Once a Ramp-Up Period has commenced, one Ramp-Up Interval
will automatically progress to the next Ramp-Up Interval each calendar quarter
year unless the progression is interrupted by a suspension as further described
in Section E-6.20 of this Appendix E-6. The quarterly progression of Ramp-Up
Intervals shall be referred to as the Ramp-Up Schedule.
E-6.8.C A Ramp-Up Percentage is associated with each Ramp-Up Interval. The
Ramp-Up Percentage specifies the percentage of each AVT that determines the
Volume Target during that Ramp-Up Interval. The Ramp-Up Percentage associated
with the final Ramp-Up Interval is * ; thus, at the end of the Ramp-Up Period
and during the Plateau Period, * .
E-6.8.D Each increase of the Volume Target, pursuant to this Section E-6.8,
shall be deemed to accrue upon the last day of the respective quarter-year
period. Accordingly, the Volume Target associated with the first Ramp-Up
Interval * until such last day. Upon the last day of the first Ramp-Up Interval,
the Volume Target shall increase through the application of the Ramp-Up
Percentage. The resulting increased Volume Target shall be in effect during
the second Ramp-Up Interval.
E-6.8.E Table 3, on page 24 of this Appendix E-6, specifies the Ramp-Up
Percentages associated with the Dedicated Services Ramp-Up Schedule and Switched
Services Ramp-Up Schedule.
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E-6.9 Commencement of Ramp-Up Periods; Sole Remedies
E-6.9.A Subject to Section E-6.9.A.i through E-6.9.A.iii, with respect to each
Expected Serving Area, the applicable Ramp-Up Period (either Dedicated or
Switched) shall commence upon the first day of the next calendar quarter-year
period following the date when TWComm notifies AT&T in writing that TWComm has
satisfied each of the applicable Preconditions set forth in Sections E-6.10 and
E-6.11 of this Appendix E-6 ("Preconditions Notice").
E-6.9.A.i AT&T may dispute the Preconditions Notice by giving TWComm
written notice of such ("Preconditions Dispute Notice") within 60 days of
receipt of the Precondition Notice. AT&T shall provide a detailed
description of all its grounds for such dispute. The parties shall
immediately make every practical effort to resolve any such dispute, to
avoid delay of commencement of the Ramp-up Schedule.
E-6.9.A.ii If TWComm and AT&T do not reach mutual agreement regarding
whether TWComm has satisfied the disputed Precondition(s) either party may
seek to have the dispute resolved though the Alternative Dispute
Resolution process ("ADR Process") described in Section 39 of the
Agreement.
E-6.9.A.iii The Initial Period shall continue and the Discounts determined
accordingly until the parties mutually agree (whether through the ADR
Process under Section 39, or otherwise), that any disputed Preconditions
have been met, or until an arbitrator under the ADR Process determines
that any such Preconditions have been met.
E-6.9.A.iv If it is determined that TWComm had met the disputed
Precondition(s), then AT&T will within 30 days reimburse TWComm, with
immediately available funds, for the full amount of any difference between
prices paid by it during the Initial Period for Services, and the prices
AT&T would have paid for Services purchased if the Ramp-Up Period had been
in effect (together with interest thereon at the Late Factor (as defined
in Appendix G-1) rate per diem for the period beginning with the date
TWComm was entitled to such price difference to the Bill Date of such bill
adjustment; and for all other purposes the Ramp-Up Schedule shall be
deemed to have begun on the date it was determined to have begun through
the dispute resolution process.
E-6.9.A.v Notwithstanding any other provision hereof, failure of the Ramp-Up
Periods to commence or application of the Remedies described in Section E-6.20,
together with other remedies set forth in Section 20 of the Agreement, shall be
AT&T's sole remedies with respect to TWComm's failure to satisfy or comply
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APPENDIX E-6
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with any requirements that are reflected in Dedicated Services Preconditions or
Switched Services Preconditions.
E-6.10 Dedicated Services Preconditions
E-6.10.A The Dedicated Services Ramp-Up Period for each Expected Serving Area
will commence, as set forth in Section E-6.9 above, after each of the following
Dedicated Services Preconditions have been met for that Expected Serving Area:
E-6.10.A.i Appropriate interconnection agreements have been executed
between TWComm * for the LSO serving the Expected Serving Area
consistent with Section G.5 in Appendix G of this Agreement;
E-6.10.A.ii TWComm has obtained all legally required regulatory
certifications, authorizations, and permits necessary to offer Dedicated
Services and TWComm's Dedicated Services tariffs, if required with regard
to this Agreement, have gone into effect for such Expected Serving Area;
E-6.10.A.iii TWComm is offering each of the Dedicated Service Products,
excluding 2.048 Mbps Service, to all locations within the Expected Serving
Area;
E-6.10.A.iv TWComm has deployed its Dedicated Services network for such
Expected Serving Area materially in accordance with the network
specifications set forth in Section 13 and Appendix F of this Agreement,
the Technical Plan which TWComm previously submitted to AT&T pursuant to
Section 13B, and the applicable Network Design Plan;
E-6.10.A.v AT&T has completed its evaluation of TWComm's Dedicated Service
delivery and performance capabilities for such Expected Serving Area in
accordance with the procedures, standards and time frames governing such
evaluations as set forth in Section 14 of this Agreement;
E-6.10.A.vi TWComm has the capability of providing Dedicated Services via
Type I provisioning to each of the Initial Type I Locations set forth in
the applicable MSA Schedule for such Expected Serving Area; and
E-6.10.A.vii If TWComm is then currently offering Dedicated Services in
that Selected MSA, TWComm has provided Satisfactory Performance with
respect to Dedicated Services within the Selected MSA for the previous
Performance Evaluation Period, as measured and defined by Appendix K of
this Agreement.
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E-6.10.A.viii TWComm is continuing to offer each Dedicated Service Product
that it has commenced offering in an Expected Serving Area, in accordance
with Section 33.B of this Agreement.
E-6.10.B AT&T and TWComm may mutually agree to waive or defer any Dedicated
Service Precondition. Notwithstanding any waiver or deferral, AT&T may elect to
enforce a Dedicated Service Precondition as an Ongoing Condition, pursuant to
Section E-6.21 of this Appendix E-6.
E-6.11 Switched Services Preconditions
E-6.11.A The Switched Services Ramp-Up Period for each Expected Serving Area
will commence, as set forth in Section E-6.9 of this Appendix E-6, after each of
the following Switched Services Preconditions have been met for such Expected
Serving Area:
E-6.11.A.i Each of the Dedicated Preconditions set forth in Section E-6.1O
of this Appendix E-6 have been satisfied.
E-6.11.A.ii TWComm has obtained all legally required regulatory
certifications, authorizations, and permits necessary offer Switched
Services, and TWComm's Switched Services tariffs, if required with regard
to this Agreement, have gone into effect;
E-6.11.A.iii TWComm is offering all Switched Service Products, excluding
Digital Business Exchange Lines, to all locations within the Expected
Serving Area;
E-6.11.A.iv TWComm has deployed its Switched Services network for such
Expected Serving Area materially in accordance with the network
specifications set forth in Section 13 and Appendix F of this Agreement
and the Technical Plan which TWComm previously submitted to AT&T and the
applicable Network Design Plan;
E-6.11.A.v AT&T has completed its evaluation of TWComm's Switched Service
delivery and performance capabilities for such Expected Serving Area in
accordance with the procedures, standards and time frames governing such
evaluations as set forth in Section 14 of this Agreement;
E-6.11.A.vi If TWComm is then currently offering Switched Services in that
Selected MSA, TWComm has provided Satisfactory Performance with respect to
Switched Services within the Selected MSA for the previous Performance
Evaluation Period as measured and defined by Appendix K of this Agreement;
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E-6.11.A.vii Number portability, or a reasonable substitute as mutually
determined by AT&T and TWComm, is generally available throughout the
applicable Selected MSA; and
E-6.11.A.viii Local loops between the LEC LSO and Served Premises within
such Expected Serving Area are available to TWComm for resale at
reasonable terms and conditions, as determined by TWComm.
E-6.11.A.ix TWComm is continuing to offer each Switched Service Product
that it has commenced offering in an Expected Serving Area, in accordance
with Section 33.B of this Agreement.
E-6.11.B AT&T and TWComm may mutually agree to waive or defer any Switched
Service Precondition. Notwithstanding any waiver or deferral, AT&T may elect to
enforce a Switched Service Precondition as an Ongoing Condition pursuant to
Section E-6.21 of this Appendix E-6.
E-6.12 Deadlines for Accomplishing Preconditions
E-6.12.A Notwithstanding Section E-6.9, if (1) TWComm has not delivered a
Preconditions Notice, in which AT&T subsequently concurs, for either Dedicated
or Switched Services, within nine months of the respective Date of Expected
Availability set forth in the applicable MSA Schedule for a specific Expected
Serving Area, and (2) TWComm's failure to meet such deadline was not caused
primarily by its inability (despite exercise of reasonable commercial efforts)
to meet one or more Preconditions set forth in Sections E-6.10.A.i, E-6.10.A.ii,
E-6.10.A.v (due to failure of AT&T to meet its obligations under Section 14),
E-6.11.A.ii, E-6.11.A.iii (due to lack of appropriate interconnection
arrangements), E-6.11.A.v (due to failure of AT&T to meet its obligations under
Section 14), E-6.11.A.vii or E-6.11.A.viii; then the applicable Ramp-Up Period
for such Expected Serving Area shall not commence regardless of whether the
applicable Preconditions are satisfied at a later date, unless AT&T provides its
express written consent.
E-6.12.B If (i) TWComm has not delivered a Preconditions Notice, in which AT&T
subsequently concurs, for either Dedicated or Switched Services,) within one
year of the respective Date of Expected Availability set forth in the Applicable
MSA Schedule for a specific Expected Serving Area, and (ii) TWComm's failure to
meet such deadline was not caused primarily by its inability (despite exercise
of reasonable commercial efforts) to meet one or more Preconditions set forth in
Sections E-6.10.A.i, E-6.10.A.ii, E-6.10.A.v (due to failure of AT&T to meet its
obligations under Section 14), E-6.11.A.ii, E-6.11.A.iii (due to lack of
appropriate interconnection arrangements), E-6.11.A.v (due to failure of AT&T to
meet its obligations under Section 14), E-6.11.A.vii or E-6.11.A.viii; then AT&T
and TWComm shall mutually agree to the future status of
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such Expected Serving Area as set forth within this Section E-6.12.B. Such
mutual agreement may include the following options:
E-6.12.B.i Such Expected Serving Area shall commence its respective
Ramp-Up Period upon the satisfaction of the applicable Preconditions,
regardless of the length of time required to accomplish such
Preconditions;
E-6.12.B.ii Such Expected Serving Area shall commence its respective
Ramp-Up Period upon a date certain to be specified by mutual agreement of
the parties; or
E-6.12.B.iii Such Expected Serving Area shall be deemed to be an Optional
Serving Area (Optional Serving Areas have no AVTs).
E-6.12.C In the absence of a mutual agreement otherwise by AT&T and TWComm, such
Expected Serving Area shall be deemed to be an Optional Serving Area.
E-6.12.D If one year from (1) the date that Dedicated Services are first offered
within the Selected MSA, or (2) the Effective Date of the applicable MSA
Schedule, whichever is later, the Dedicated Ramp-Up Period has not commenced in
at least one-half of the Expected Serving Areas, then TWComm may elect to
terminate the applicable MSA Schedule pursuant to Section 31, which begins a
Transition Period as described in Section E-6.22 of this Appendix
E-6.
E-6.12.E If one year from (1) the date that Switched Services are first offered
within the Selected MSA, or (2) the Effective Date of the applicable MSA
Schedule, whichever is later, the Switched Ramp-Up Period has not commenced in
at least one-half of the Expected Serving Areas, then TWComm may elect to
immediately cease offering additional Switched Services within such MSA. AT&T
shall be provided a two-year period to transition existing Switched Services
within such MSA to another supplier before TWComm may cease providing existing
Switched Services. If TWComm makes such an election, then all S-AVTs for such
MSA shall immediately be deemed to be zero for the term of such MSA Schedule.
E-6.13 Determination of Expected Serving Area Volume Targets
E-6.13.A With respect to Dedicated Services, during the Initial Period, the
applicable Dedicated Services Expected Serving Area Volume Target ("D-XVT")
shall be deemed to be zero, regardless of the D-AVT quantities specified in the
applicable MSA Schedule.
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E-6.13.B With respect to Switched Services, during the Initial Period, the
applicable Switched Services Expected Serving Area Volume Target ("S-XVT") shall
be deemed to be zero, regardless of the S-AVT quantities specified in the
applicable MSA Schedule.
E-6.13.C With respect to Dedicated Services, during the Ramp-Up Period for each
Expected Serving Area, each respective D-XVT shall be determined by the
applicable formula:
*
*
*
E-6.13.D With respect to Switched Services, during the Ramp-Up Period for each
Expected Serving Area, each respective S-XVT shall be determined by the
applicable formula:
*
*
*
E-6.13.E With respect to both Dedicated Services and Switched Services, during
the respective Plateau Period, each respective XVT shall equal its corresponding
AVT specified in the MSA Schedule for such Expected Serving Area.
E-6.14 Determination of the MSA Volume Targets
E-6.14.A There are three Dedicated MSA Volume Targets ("D-MVTs") associated with
the three Dedicated Discount Levels; and there are three Switched MSA Volume
Targets ("S-MVTs") associated with the three Switched Discount Levels. The D-MVT
is equal to the sum of the Dedicated XVTs of each Expected Serving Area within
the Selected MSA. As described in Section D-6.3 of this Appendix D-6, the date
when each Ramp-Up Period and Plateau Period begins may vary among the Expected
Serving Areas within a Selected MSA; therefore, the amount of the XVT that each
Expected Serving Area contributes towards the MVT shall vary accordingly.
E-6.14.B Each Dedicated MVT shall be determined pursuant to the applicable
formula set forth below:
*
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D-MVT 2 = *
D-MVT 3 = *
E-6.14.C Each Switched MVT shall be determined pursuant to the applicable
formula set forth below:
S-MVT 1 = *
S-MVT 2 = *
S-MVT 3 = *
E-6.15 Determination of the National Volume Targets
E-6.15.A There are three Dedicated National Volume Targets ("D-NVTs") associated
with the three Dedicated Discount Levels, and there are three Switched National
Volume Targets ("S-NVTs") associated with the three Switched Discount Levels.
E-6.15.B Each Dedicated NVT shall be determined pursuant to the applicable
formula set forth below:
D-NVT 1 = *
D-NVT 2 = *
D-NVT 3 = *
E-6.15.B.i The Adjustment Factor shall vary by calendar year as follows:
E-6.15.B.i.(a) The Adjustment Factor for 1996 shall be 1.06.
E-6.15.B.i.(b) The Adjustment Factor for 1997 shall be 1.12.
E-6.15.B.i.(c) The Adjustment Factor for 1998 and through the term
of this Agreement shall be 1.19.
E-6.15.C Each Switched NVT shall be determined pursuant to the applicable
formula set forth below:
S-NVT 1 = *
S-NVT 2 = *
S-NVT 3 = *
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E-6.16 Determination of Local Discount Levels Achieved by AT&T
E-6.16.A The Dedicated Local Discount Level and the Switched Local Discount
Level that AT&T has achieved is determined once each calendar quarter-year
period. This determination is made based on billing information for Services in
effect as of the first Bill Date of the current quarter. Such billing
information, along with records of Imputed Volumes, shall be used to determine
AT&T's Purchase Volume for the then current quarterly period ("Current Purchase
Volume").
E-6.16.A.i Dedicated Services Purchase Volume is measured in DS-1
Equivalents and is composed of: (1) all categories of Dedicated Services;
(2) both categories of Switched Access Transport; and (3) the DS-1
Switched Business Line Service Product. For the purposes of this Appendix
E-6 Table 4,on page 26, specifies the DS-1 Equivalent for each Dedicated
Service Product and Switched Access Transport. A Dedicated Service Full
Service Arrangement shall not be measured a second time if such Service
was previously provided as Transport Arrangement.
E-6.16.A.ii Switched Services Purchase Volume is measured in Lines. For
the purposes of this Appendix E-6, each SBL Service Product shall have the
following value as specified in Lines:
E-6.16.A.ii.(a) Each Analog Business Exchange Line shall equal one
Line.
E-6.16.A.ii.(b) Each Digital Business Exchange Line having a 56 kbps
or 64 kbps Network Interface shall equal one Line.
E-6.16.A.ii.(c) Each Digital Business Exchange Line having a 160
kbps Network Interface shall equal two Lines.
E-6.16.A.ii.(d) Each Analog Business Exchange Trunk shall equal one
Line.
E-6.16.A.ii.(e) Each Digital Business Exchange Trunk having a 56
kbps or 64 kbps Network Interface shall equal one Line.
E-6.16.A.ii.(f) With regard to Digital Business Exchange Trunks
having 1.544 Mbps Network Interface, each active voice channel and
active DS-O channel (an active channel is capable of originating or
terminating calls) shall equal one Line.
E-6.16.B AT&T's Current Purchase Volume of Dedicated Services shall be compared
to the then current Dedicated MSA Volume Target. The Dedicated
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Local Discount Level throughout the then current calendar quarter is the level
corresponding to the highest Dedicated MSA Volume Target (D-MVT3, D-MVT2, or
D-MVT1) that AT&T's Current Purchase Volume of Dedicated Services within such
Selected MSA meets or exceeds.
E-6.16.C AT&T's Current Purchase Volume of Subscriber Lines shall be compared to
the then current Switched MSA Volume Target. The Switched Local Discount Level
throughout the then current calendar quarter is the level corresponding to the
highest Switched MSA Volume Target (S-MVT3, S-MVT2, or S-MVT1) that AT&T's
Current Purchase Volume of Subscriber Lines within such MSA meets or exceeds.
E-6.17 Determination of National Discount Levels Achieved by AT&T
E-6.17.A The Dedicated National Discount Level and the Switched National
Discount Level that AT&T has achieved is determined once each calendar
quarter-year period.
E-6.17.B The aggregate Current Purchase Volume of Dedicated Services across all
Selected MSAs shall be compared to the then current Dedicated National Volume
Target. The Dedicated National Discount Level throughout the then current
calendar quarter is the level corresponding to the highest Dedicated National
Volume Target (D-NVT3, D-NVT2, or D-NVT1) that AT&T's aggregate Current Purchase
Volume of Dedicated Services meets or exceeds.
E-6.17.C The aggregate Current Purchase Volume of Subscriber Lines across all
Selected MSAs shall be compared to the then current Switched National Volume
Target. The Switched National Discount Level throughout the then current
calendar quarter is the level corresponding to the highest Switched National
Volume Target (S-NVT3, S-NVT2, or S-NVT1) that AT&T's aggregate Current Purchase
Volume of Switched Services meets or exceeds.
E-6.18 Determination of Local Discounts
E-6.18.A The Local Discount applicable to Dedicated Services and Switched Access
Transport shall be determined by the following method;
E-6.18.A.i Determine the Dedicated Local Discount Level which AT&T
achieved in the Selected MSA for the then current quarterly period.
E-6.18.A.ii Determine the Switched Local Discount Level which AT&T
achieved in the Selected MSA for the then current quarterly period.
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E-6.18.A.iii Determine the then current Reference Price for the applicable
Service Product within the Expected Serving Area pursuant to Section
E-6.6.
E-6.18.A.iv Determine the applicable Discount by identifying the cell on
Table 5, on page 27 of this Appendix E-6, corresponding to the Dedicated
Discount Level, Switched Discount Level and Reference Price determined in
accordance with the methods set forth in this Appendix E-6.
E-6.18.B The Local Discount applicable to Call Delivery shall be based on the
same method set forth in Section E-6.18.A, above, except that the applicable
Discount shall be determined from Table 6 on page 28 of this Appendix E-6.
E-6.19 Determination of National Discounts
E-6.19.A The National Discount applicable to Dedicated Services and Switched
Access Transport shall be determined by applying the Dedicated National Discount
Level which AT&T achieved for the then current quarterly period to Table 7, on
page 29 of this Appendix E-6.
E-6.19.B The National Discount applicable to Call Delivery shall be determined
by applying the Switched National Discount Level which AT&T achieved for the
then current quarterly period to Table 8, on page 29 of this Appendix E-6.
E-6.20 Provisions for Adjusting the Discount; Sole Remedies
E-6.20.A The purchases that AT&T expects to make under this Agreement are
contingent upon the quality of TWComm's service performance and certain other
conditions. Accordingly, various provisions of this Agreement ("Ongoing
Conditions") have been specified in this Appendix E-6 which, if not met, may
result in an adjustment of the Discount. Additionally, if any such cause for an
adjustment to the Discount occurs during a Ramp-Up Period, the automatic
progression of Ramp-Up Intervals shall be suspended, as described in further
detail in this Section E-6.20. The adjustment of the Discount and suspension of
the Ramp-Up Intervals are collectively referred to as "Remedies." Such Remedies,
together with the other remedies set forth in Section 20 of this Agreement shall
be AT&T's sole remedy with respect to TWComm's failure to satisfy or comply with
any requirements that are reflected in any Ongoing Condition.
E-6.20.B [Intentionally omitted.]
E-6.20.C AT&T and TWComm may mutually agree to waive any Ongoing Condition.
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E-6.20.D If a failure to meet an Ongoing Condition applies solely to Dedicated
Services in an Expected Serving Area, then AT&T may apply Remedies only to
Dedicated Services in such Expected Serving Area (i.e., Dedicated Services
Discount Levels and Dedicated Ramp-Up Intervals) with respect to that Ongoing
Condition. If a failure to meet an Ongoing Condition applies solely to Switched
Services in an Expected Serving Area, then AT&T may apply Remedies only to
Switched Services in such Expected Serving Area (i.e., Switched Services
Discount Levels and Switched Ramp-Up Intervals) with respect to that Ongoing
Condition.
E-6.20.E If AT&T, in its reasonable discretion, determines that an Ongoing
Condition is not being met, AT&T will provide TWComm written notice of such
("Ongoing Condition Deficiency Notice"). If a cure period is applicable to that
Ongoing Condition (as set forth in Section E-6.21), the cure period will
commence upon TWComm's receipt of the Ongoing Condition Deficiency Notice. If
following the prescribed cure period, AT&T, in its reasonable discretion,
determines that the Ongoing Condition remains deficient, AT&T will provide
TWComm written notice of such deficiency and will indicate whether AT&T is
electing to apply Remedies ("Ongoing Condition Remedies Notice"). (If no cure
period is applicable to that Ongoing Condition, AT&T may provide an Ongoing
Condition Remedies Notice to TWComm when AT&T first so determines that an
Ongoing Condition is not being met.) The Remedies are effective upon TWComm's
receipt of an Ongoing Condition Remedies Notice.
E-6.20.E.i TWComm may dispute a Ongoing Condition Deficiency Notice or an
Ongoing Condition Remedies Notice by advising AT&T in writing of its
reasons for dispute. If TWComm and AT&T do not reach mutual agreement
regarding whether an Ongoing Condition is being met, either party may seek
to have the dispute resolved through the ADR Process under Section 39 of
the Agreement.
E-6.20.E.ii The Remedies shall take effect and continue until the parties
mutually agree (whether through the ADR Process under Section 39, or
otherwise) that any disputed Ongoing Condition has been met, or until an
arbitrator under the ADR Process determines that any such Ongoing
Condition has been met.
E-6.20.E.iii If it is determined that TWComm had not failed to meet the
Ongoing Condition, or that its failure was excused under Section 38 of
this Agreement, then AT&T will within 30 days reimburse TWComm, with
immediately available funds, for the full amount of any difference in
prices paid by it during the period Remedies were in effect for Services,
and the prices AT&T would have paid during such period for Services
purchased if the Remedies had not been in effect (together with interest
thereon at the
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Late Factor (as defined in Appendix G-1) rate per diem for the period
beginning with the date TWComm was entitled to such price difference to
the Bill Date of such bill adjustment.
E-6.20.F With respect to a suspension of the Ramp-Up Schedule, upon the
effective date of the Remedies, the accrual of the then current Ramp-Up Interval
is suspended and the Ramp-Up Percentage applicable to that Ramp-Up Interval will
not be added at the end of the then current quarterly period. Consequently, upon
a suspension, the ramp-up progression is suspended for at least one quarterly
period, even if an Ongoing Condition is corrected within such quarterly period.
E-6.20.G If Remedies are invoked by AT&T for TWComm's failure to meet an Ongoing
Condition and such failure relates solely to Dedicated Services, the D-XVT for
each Expected Serving Area to which Remedies apply shall be deemed to be zero.
If Remedies are invoked by AT&T for TWComm's failure to meet an Ongoing
Condition and such failure relates solely to Switched Services, the S-XVT for
each Expected Serving Area to which Remedies apply shall be deemed to be zero.
If Remedies are invoked by AT&T for TWComm's failure to meet an Ongoing
Condition and such failure relates to both Dedicated Services and Switched
Services, both the D-XVT and S-XVT for each Expected Serving Area to which
Remedies apply shall be deemed to be zero. TWComm acknowledges that if Remedies
are invoked with respect to the Ongoing Conditions set forth in Sections
E-6.21.B, E-6.21.D or E-6.21.G that such Remedies apply to all Expected Serving
Areas within such Selected MSA. If TWComm fails to meet the Ongoing Condition
specified in E-6.21.B both the D-XVT and S-XVT for each Expected Serving Area to
which Remedies apply shall be deemed to be zero.
E-6.20.H Subject to Section E-6.20.H.i through E-6.20.H.iii, Remedies shall
cease upon the first day of the calendar quarter following the date when TWComm
notifies AT&T in writing that it is meeting each of the Ongoing Conditions
("Ongoing Conditions Satisfaction Notice") except with respect to the Ongoing
Condition specified in Section E-6.21.B, which shall be governed by the
provisions set forth in such Section E-6.21.B and Appendix J rather than this
Section E-6.20.H.
E-6.20.H.i AT&T may dispute the Ongoing Conditions Satisfaction Notice by
giving TWComm written notice of such, specifying the reasons for such
dispute ("Ongoing Conditions Dispute Notice") within 30 days of the AT&T's
receipt of the Ongoing Conditions Satisfaction Notice.
E-6.20.H.ii If TWComm and AT&T do not reach mutual agreement regarding
whether TWComm has satisfied the disputed Ongoing Condition(s), either
party may seek to have the dispute resolved though the ADR Process under
Section 39.
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E-6.20.H.iii The Remedies shall continue until the parties mutually agree
(whether through the ADR Process under Section 39, or otherwise) that any
disputed Ongoing Condition has been met, or until an arbitrator under the
ADR Process determines that any such Ongoing Condition has been met.
E-6.20.H.iv If it is determined that TWComm had properly issued the
Ongoing Conditions Satisfaction Notice, then AT&T will within 30 days
reimburse TWComm, with immediately available funds, for the full amount of
any difference in prices paid for Services by it during the portion of the
period Remedies were in effect after such Notice would otherwise have
rescinded the Remedies under Section D-6.20.G, and the prices AT&T would
have paid during such period for Services purchased if the Remedies had
not been in effect (together with interest thereon at the Late Factor (as
defined in Appendix G-1) rate per diem for the period beginning with the
date TWComm was entitled to such price difference to the Bill Date of such
bill adjustment.
E-6.20.I Whenever the Ramp-Up Schedule resumes after a Ramp-Up suspension, the
Ramp-Up Interval that would have accrued had the Remedies not been invoked will
accrue in the following quarterly period.
E-6.20.J If certain Remedies are in effect for extended periods for a majority
of Expected Serving Areas, as set forth below, then TWComm shall have the
following options:
E-6.20.J.i Notwithstanding Sections 33.A and 33.B of this Agreement and
Section E-6.21.H of this Appendix E-6, if Remedies applicable solely to
Dedicated Services are in effect for at least one-half of the Expected
Serving Areas in a MSA for more than 12 consecutive months, then TWComm
may elect to immediately withdraw its offering of additional Dedicated
Services in such MSA, and with two years notice to permit AT&T to
transition existing Dedicated Services to another supplier, elect to
withdraw its offering of existing Dedicated Services. Upon such an
election the Dedicated MSA Volume Target (D-MVT) for such MSA shall be
deemed to be zero for the term of such MSA Schedule.
E-6.20.J.ii Notwithstanding Sections 33.A and 33.B of this Agreement and
Section E-6.21.H of this Appendix E-6, if Remedies applicable solely to
Switched Services are in effect for at least one-half of the Expected
Serving Areas in a MSA for more than 12 consecutive months, then TWComm
may elect to immediately withdraw its offering of additional Switched
Services within such MSA, and with two years notice to permit AT&T to
transition existing Switched Services to another supplier, elect to
withdraw its offering of existing Switched Services. Upon such an election
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the Switched MSA Volume Target (S-MVT) for such MSA shall be deemed to be
zero for the term of such MSA Schedule.
E-6.20.J.iii If Remedies applicable to both Dedicated Services and
Switched Services are in effect for at least one-half of the Expected
Serving Areas for more than 12 consecutive months, then TWComm may elect
to terminate the applicable MSA Schedule pursuant to Section 32 of this
Agreement.
E-6.21 Ongoing Conditions
E-6.21.A AT&T may elect to enforce a Dedicated Precondition or Switched
Precondition which it had previously waived, subject to a 60 day cure period.
E-6.21.B TWComm shall provide Satisfactory Performance pursuant to Section 18
and Appendix K. TWComm shall be deemed to have failed this Ongoing Condition if
TWComm's Service Performance is determined to be Less Than Satisfactory in any
three Performance Evaluation Periods out of a period of five consecutive
Performance Evaluation Periods, as defined in Appendix K. TWComm shall be deemed
to have met this Ongoing Condition at the time TWComm has two consecutive
Performance Evaluation Periods of Satisfactory Performance.
E-6.21.C TWComm shall have the capability to provide each of the Service
Products set forth below to all locations within the applicable Expected Serving
Area:
E-6.21.C.i Each of the Service Products set forth in Section E-6.10.A.iii
and E-6.11.A.iii. No cure period shall apply to these Service Products..
E-6.21.C.ii 2.048 Mbps Dedicated Service and Digital Business Exchange
Line Service subject to a 90 day cure period.
E-6.21.D TWComm shall be capable of providing Type I provisioning pursuant to
Section 15 and Appendix H of this Agreement. No cure period shall be provided
for this Ongoing Condition.
E-6.21.E TWComm shall maintain all regulatory certifications, authorizations,
and permits needed to offer the Services listed in the applicable MSA Schedule.
No cure period shall apply to this Ongoing Condition.
E-6.21.F TWComm shall maintain interconnection agreements with the LEC that are
consistent with the principles set forth for such agreements in Appendix I. A
cure period of 60 days shall apply to this Ongoing Condition.
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E-6.21.G TWComm shall upgrade its network and infrastructure with
functionalities and capabilities that are no less than those generally available
in the applicable Selected MSA from the LEC or a Similarly Situated CAP and that
are based on technology that is generally available on a commercially reasonable
basis, and which AT&T generally expects from Similarly Situated CAPs in that
MSA. A cure period of six months shall apply to this Ongoing Condition.
E-21.H TWComm shall continue offering all Service Products that it has commenced
offering in an Expected Serving Area, in accordance with Section 33.B of this
Agreement.
E-6.22 Transition Period
E-6-22.A Various provisions of this Agreement provide either AT&T or TWComm an
election to begin a "Transition Period," in which AT&T will transition the
affected Services it is then obtaining from TWComm in a Selected MSA to an
alternative source of supply without receiving lower Discounts as the volume of
Services purchased from TWComm decreases during such transition.
E-6.22.B During any such Transition Period the Discounts applicable to Dedicated
Services, Switched Access Transport and Call Delivery shall be * (1) the
Discounts that applied * of the then current quarter-year period based on
AT&T's Current Purchase Volume, or (2) the Discounts AT&T * .
E-6.22.C The maximum time period for a Transition Period, with respect to a
Selected MSA, shall be two years.
E-6.23 Imputed Volumes
E-6.23.A Various provisions of this Agreement provide for AT&T to receive credit
towards its * as a result of actions * .
E-6.23.B If AT&T issues a Service request to TWComm for any Service Product that
TWComm is then offering within the Current Serving Area and (i) TWComm declines
the request, or (ii) fails to confirm AT&T's requested due date such that AT&T
then fills the request with another supplier, then AT&T shall receive Imputed
Volumes as follows:
E-6.23.B.i The Imputed Volume * for a period of three years thereafter.
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APPENDIX E-6
Page 21 of 28
E-6.23.B.ii The quantity of the * shall be counted as if * .
E-6.23.B.iii * shall not be credited if (1) AT&T's requested due date
did not allow TWComm a reasonably sufficient provisioning interval, (2)
TWComm's failure to fulfill such Service request was due to an act or
omission of AT&T or AT&T's customer, or (3) if AT&T's Service request
specifies Type II provisioning to a location for which TWComm is capable
of Type I provisioning.
E-6.23.C AT&T shall receive * for sales that TWComm makes directly to end-user
customers as follows:
E-6.23.C.i With respect to each Similar Service to Dedicated Services that
TWComm provides directly to an end-user customer within an Expected
Serving Area during the respective Dedicated Ramp-Up Period and Plateau
Period (excluding sales to common carriers and sales to other TWComm
customers for the purpose of resale), AT&T * the applicable DS-1
Equivalent for each such Similar Service * so long as TWComm provides
such Similar Service to such end-user customer.
E-6.23.C.ii With respect to each Similar Service to Subscriber Lines that
TWComm provides directly to an end-user customer within an Expected
Serving Area during the first two years of the Switched Ramp-Up Period
(excluding sales to common carriers and sales to other TWComm customers
for the purpose of resale), AT&T * for each such Similar Service
(measured in Lines) * so long as TWComm provides such Similar Service
to such end-user customer, provided that such end-user customer elects
AT&T as its Primary Interexchange Carrier for such Similar Service.
E-6.24 TWComm's Election Not To Lower Base Prices
E-6.24.A If TWComm elects to charge AT&T the Base Price provided for in Section
E-2.7 of Appendix E-2, and Sections E-3.3.F or E-3.5.D of Appendix E-3, then
Discounts for all Dedicated Services, Switched Access Transport and Call
Delivery within the applicable Selected MSA shall be the Discounts applicable to
such Services during the Initial Period.
E-6.24.A.i. If, however, TWComm's election is with regard to a Switched
Service, and AT&T's actual purchases for Switched Services are, at that
time, * of the sum of the S-AVTs for each Expected Serving area then
within a Switched Ramp-Up Period or Plateau Period, then the Dedicated
Discount Level for the affected Selected MSA shall be
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APPENDIX E-6
Page 22 of 28
Dedicated Discount Level 2, unless AT&T is actually achieving a higher
Discount Level.
E-6.24.A ii If, however, TWComm's election is with regard to a Dedicated
Service and AT&T's actual purchases for Dedicated Services are, at that
time, * of the sum of the D-AVTs for each Expected Serving area then
within a Dedicated Ramp-Up Period or Plateau Period, then the Switched
Discount Level for the affected Selected MSA shall be Switched Discount
Level 2, unless AT&T is actually achieving a higher Discount Level.
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APPENDIX E-6
Page 23 of 28
TABLE 2
DEDICATED SERVICES AND SWITCHED ACCESS REFERENCE PRICE RANGES
(All amounts shown are in dollars)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Service Reference Price Ranges
-------------------------------------------------------------------------------------------------------------------
Products Range D' Range C' Range B' Range A' Range A Range B Range C Range D Range E
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DS-3 Service *
- ------------------------------------------------------------------------------------------------------------------------------------
DS-1 Service *
- ------------------------------------------------------------------------------------------------------------------------------------
Fractional *
DS-1 Service
- ------------------------------------------------------------------------------------------------------------------------------------
DS-0 Service *
- ------------------------------------------------------------------------------------------------------------------------------------
Digital *
Subrate
Service
- ------------------------------------------------------------------------------------------------------------------------------------
Voice Grade *
Service
- ------------------------------------------------------------------------------------------------------------------------------------
2.048 Mbps *
Service
====================================================================================================================================
DS-3 S.A. *
Transport
- ------------------------------------------------------------------------------------------------------------------------------------
DS-1 S.A. *
Transport
- ------------------------------------------------------------------------------------------------------------------------------------
Call Delivery *
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------
Service Reference Price Ranges
------------------------
Products Range F Range G
<S> <C> <C>
- -----------------------------------------
DS-3 Service *
- -----------------------------------------
DS-1 Service *
- -----------------------------------------
Fractional *
DS-1 Service
- -----------------------------------------
DS-0 Service *
- -----------------------------------------
Digital *
Subrate
Service
- -----------------------------------------
Voice Grade *
Service
- -----------------------------------------
2.048 Mbps *
Service
=========================================
DS-3 S.A. *
Transport
- -----------------------------------------
DS-1 S.A. *
Transport
- -----------------------------------------
Call Delivery *
- -----------------------------------------
</TABLE>
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APPENDIX E-6
Page 24 of 28
TABLE 3
DEDICATED SERVICES AND SWITCHED SERVICES
RAMP-UP SCHEDULE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Ramp-Up Interval Ramp-Up Percentages
-----------------------------------------------------
Dedicated Services Switched Services
- --------------------------------------------------------------------------------
<S> <C> <C>
1. *
- --------------------------------------------------------------------------------
2. *
- --------------------------------------------------------------------------------
3. *
- --------------------------------------------------------------------------------
4. *
- --------------------------------------------------------------------------------
5. *
- --------------------------------------------------------------------------------
6. *
- --------------------------------------------------------------------------------
7. *
- --------------------------------------------------------------------------------
8. *
- --------------------------------------------------------------------------------
9. *
- --------------------------------------------------------------------------------
10. *
- --------------------------------------------------------------------------------
11. *
- --------------------------------------------------------------------------------
12. *
- --------------------------------------------------------------------------------
13. *
- --------------------------------------------------------------------------------
14. *
- --------------------------------------------------------------------------------
15. *
- --------------------------------------------------------------------------------
16. *
- --------------------------------------------------------------------------------
17. *
- --------------------------------------------------------------------------------
18. *
- --------------------------------------------------------------------------------
19. *
- --------------------------------------------------------------------------------
20. *
- --------------------------------------------------------------------------------
</TABLE>
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APPENDIX E-6
Page 25 of 28
TABLE 4
DS-1 EQUIVALENTS
(for determining Dedicated Service Purchase Volumes)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SERVICE PRODUCT DS-1 EQUIVALENT
- --------------------------------------------------------------------------------
<S> <C>
Dedicated Services (both Whole Services
and Transport Services)
- --------------------------------------------------------------------------------
DS-3 Service 28
- --------------------------------------------------------------------------------
DS-1 Service 1
- --------------------------------------------------------------------------------
Fractional DS-1 Service .042 per 64 kbps portion
- --------------------------------------------------------------------------------
DS-0 Service .042
- --------------------------------------------------------------------------------
Digital Subrate Service .042
- --------------------------------------------------------------------------------
Voice Grade Service .042
- --------------------------------------------------------------------------------
2.048 Mbps Service 2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Switched Access Service
- --------------------------------------------------------------------------------
(DS-3) Local Transport 28
- --------------------------------------------------------------------------------
(DS-1) Local Transport 1
- --------------------------------------------------------------------------------
</TABLE>
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APPENDIX E-6
Page 26 of 28
TABLE 5
DEDICATED SERVICES LOCAL DISCOUNTS
Then Current Dedicated
Services Discount Level
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Then Current Switched Services Purchase Volumes are below Discount Level 1
- --------------------------------------------------------------------------------
Range D' Range C' Range B' Range A' Range A
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Level 1 *
- --------------------------------------------------------------------------------
Level 2 *
- --------------------------------------------------------------------------------
Level 3 *
- --------------------------------------------------------------------------------
<CAPTION>
Then Current Switched Services Discount Level is Level 1
- --------------------------------------------------------------------------------
Range D' Range C' Range B' Range A' Range A
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Level 1 *
- --------------------------------------------------------------------------------
Level 2 *
- --------------------------------------------------------------------------------
Level 3 *
- --------------------------------------------------------------------------------
<CAPTION>
Then Current Switched Services Discount Level is Level 2
- --------------------------------------------------------------------------------
Range D' Range C' Range B' Range A' Range A
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Level 1 *
- --------------------------------------------------------------------------------
Level 2 *
- --------------------------------------------------------------------------------
Level 3 *
- --------------------------------------------------------------------------------
<CAPTION>
Then Current Switched Services Discount Level is Level 3
- --------------------------------------------------------------------------------
Range D' Range C' Range B' Range A' Range A
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Level 1 *
- --------------------------------------------------------------------------------
Level 2 *
- --------------------------------------------------------------------------------
Level 3 *
- --------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------
Then Current Switched Services Purchase Volumes are below Discount Level 1
- -----------------------------------------------------------------------------------------
Range B Range C Range D Range E Range F Range G
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Level 1 *
- -----------------------------------------------------------------------------------------
Level 2 *
- -----------------------------------------------------------------------------------------
Level 3 *
- -----------------------------------------------------------------------------------------
<CAPTION>
Then Current Switched Services Discount Level is Level 1
- -----------------------------------------------------------------------------------------
Range B Range C Range D Range E Range F Range G
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Level 1 *
- -----------------------------------------------------------------------------------------
Level 2 *
- -----------------------------------------------------------------------------------------
Level 3 *
- -----------------------------------------------------------------------------------------
<CAPTION>
Then Current Switched Services Discount Level is Level 2
- -----------------------------------------------------------------------------------------
Range B Range C Range D Range E Range F Range G
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Level 1 *
- -----------------------------------------------------------------------------------------
Level 2 *
- -----------------------------------------------------------------------------------------
Level 3 *
- -----------------------------------------------------------------------------------------
<CAPTION>
Then Current Switched Services Discount Level is Level 3
- -----------------------------------------------------------------------------------------
Range B Range C Range D Range E Range F Range G
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Level 1 *
- -----------------------------------------------------------------------------------------
Level 2 *
- -----------------------------------------------------------------------------------------
Level 3 *
- -----------------------------------------------------------------------------------------
</TABLE>
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APPENDIX E-6
Page 27 of 28
TABLE 6
SWITCHED ACCESS SERVICE LOCAL DISCOUNTS
Then Current
Switched Services
Discount Level
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Then Current Dedicated Services Discount Level is Level 1
- --------------------------------------------------------------------------------
Range D' Range C' Range B' Range A' Range A
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Level 1 *
- --------------------------------------------------------------------------------
Level 2 *
- --------------------------------------------------------------------------------
Level 3 *
- --------------------------------------------------------------------------------
<CAPTION>
Then Current Dedicated Services Discount Level is Level 2
- --------------------------------------------------------------------------------
Range D' Range C' Range B' Range A' Range A
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Level 1 *
- --------------------------------------------------------------------------------
Level 2 *
- --------------------------------------------------------------------------------
Level 3 *
- --------------------------------------------------------------------------------
<CAPTION>
Then Current Dedicated Services Discount Level is Level 3
- --------------------------------------------------------------------------------
Range D' Range C' Range B' Range A' Range A
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Level 1 *
- --------------------------------------------------------------------------------
Level 2 *
- --------------------------------------------------------------------------------
Level 3 *
- --------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------
Then Current Dedicated Services Discount Level is Level 1
- -----------------------------------------------------------------------------------------
Range B Range C Range D Range E Range F Range G
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Level 1 *
- -----------------------------------------------------------------------------------------
Level 2 *
- -----------------------------------------------------------------------------------------
Level 3 *
- -----------------------------------------------------------------------------------------
<CAPTION>
Then Current Dedicated Services Discount Level is Level 2
- -----------------------------------------------------------------------------------------
Range B Range C Range D Range E Range F Range G
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Level 1 *
- -----------------------------------------------------------------------------------------
Level 2 *
- -----------------------------------------------------------------------------------------
Level 3 *
- -----------------------------------------------------------------------------------------
<CAPTION>
Then Current Dedicated Services Discount Level is Level 3
- -----------------------------------------------------------------------------------------
Range B Range C Range D Range E Range F Range G
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Level 1 *
- -----------------------------------------------------------------------------------------
Level 2 *
- -----------------------------------------------------------------------------------------
Level 3 *
- -----------------------------------------------------------------------------------------
</TABLE>
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APPENDIX E-6
Page 28 of 28
TABLE 7
DEDICATED SERVICES AND SWITCHED ACCESS TRANSPORT
NATIONAL DISCOUNTS
<TABLE>
<S> <C>
- --------------------------------------------------------------
Then Current Dedicated Services National Discount
National Discount Level
- --------------------------------------------------------------
Level 1 *
- --------------------------------------------------------------
Level 2 *
- --------------------------------------------------------------
Level 3 *
- --------------------------------------------------------------
</TABLE>
TABLE 8
CALL DELIVERY NATIONAL DISCOUNTS
<TABLE>
<S> <C>
- --------------------------------------------------------------
Then Current Switched National National Discount
Discount Level
- --------------------------------------------------------------
Level 1 *
- --------------------------------------------------------------
Level 2 *
- --------------------------------------------------------------
Level 3 *
- --------------------------------------------------------------
</TABLE>
<PAGE>
<PAGE>
APPENDIX F
Page 1 of 3
NETWORK SPECIFICATIONS
F.1 Introduction
F.1.A This Appendix F sets forth requirements related to the deployment of
TWComm's network (the "Network") in each Selected MSA. Such requirements do not
apply to LEC facilities associated with Type II provisioning.
F.1.B Unless mutually agreed to by AT&T and TWComm, the Network in each Selected
MSA shall adhere to the requirements set forth in this Appendix F and the
Network Design Plan applicable to such Selected MSA.
F.1.C AT&T acknowledges that TWComm is under no obligation to comply with the
network requirements set forth in this Appendix F in any MSA, except to the
extent that TWComm is providing Services under this Agreement to AT&T.
F.2 Network Design Plan
F.2.A The design of the Network in each Selected MSA shall be set forth in a
Network Design Plan acceptable to AT&T. Each Network Design Plan shall provide,
at a minimum, a logical, physical and design-rule diagram of the Network which
shows the interconnection between all Network elements from the AT&T Serving
Office to each Served Premises, as well as the engineering rules for Network
growth.
F.3 Network Capabilities
F.3.A With respect to the portion of the Network supporting Dedicated Services,
such Network shall be capable of providing all Dedicated Services Products
described in Appendix D-1 of this Agreement.
F.3.B With respect to the portion of the Network supporting Switched Services,
such Network shall be capable of providing all Switched Services Products
described in Appendixes D-2 through D-4 of this Agreement.
F.4 Network Requirements
F.4.A All equipment from the TWComm Node in the AT&T Serving Office to the
TWComm Node in the common space in the Served Premises (or Transport Premises
with respect to Transport Arrangements) shall consist exclusively of equipment
incorporating SONET platform technology and shall be on fiber-based self-healing
rings.
F.4.B With respect to Dedicated Services Primary Channel Terminations, the
Network shall be capable of providing a DS-3 Network Interface or other Network
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APPENDIX F
Page 2 of 3
Interfaces AT&T may designate in accordance with Appendixes D-1, D-2 and D-3 of
this Agreement.
F.4.C TWComm shall collocate in, and interconnect with, the LEC LSO within each
Expected Serving Area in accordance with the applicable requirements of this
Appendix F and Appendix I.
F.4.D The Network shall not permit traffic of any other interexchange carrier to
be routed through any AT&T Serving Office, nor shall it permit AT&T's traffic to
be routed through the serving office of any other interexchange carrier.
F.4.E Except for terminating traffic and Class 5 switching functionality, or for
Facilities beyond the add-drop multiplexor in a Customer Premises, the Network
shall contain 100 percent redundancy in electronics and transmission paths so
that in the event of a failure, Services are interrupted only for the time
required to activate the redundant capacity. Redundant systems shall have the
capacity to transport all applicable Services.
F.4.F The Network shall incorporate automatic restoration for all network
elements which the then current, state-of-the-art technology supports (subject
to Section E-6.21.G of Appendix E-6 of this Agreement).
F.4.G With respect to each Served Premises (for Full Service Arrangements) or
Transport Premises (for Transport Arrangements), if the LEC then provides or had
ever provided a dual-entrance facility arrangement, then the Network shall also
provide a dual-entrance facility arrangement.
F.4.H The Network shall conform to AT&T's inside and outside plant standards as
set forth in the then current version of each of the following AT&T technical
references, a copy of which has been provided to TWComm:
F.4.H.i "TR-NWT-000063, Network Equipment Building System (NEBS), Generic
Equipment Requirements;"
F.4.H.ii "AT&T 900-200-210, Lightguide Cable Systems Outside Plant
Standards Handbook;"
F.4.H.iii "Redundancy & Diversity Requirements for OC-n (i.e., 48,12,3...)
Equipment" (AT&T internal memorandum);
F.4.H.iv "Outside Plant Physical Diversity Criteria" (AT&T internal
memorandum); and
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APPENDIX F
Page 3 of 3
F.4.H.v "AT&T 803-500-410, Grounding Practices Isolated Ground Planes
Engineering and Application Information Criteria for Analog & Digital
Switches."
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AT&T and TWComm Proprietary: Subject to Nondisclosure Agreement
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
APPENDIX G-1
Page 1 of 7
BILLING AND PAYMENT
G-1.1 Introduction
G-1.1.A This Appendix G-1 sets forth the terms and conditions applicable to
TWComm's billing of AT&T for all Services except POP to POP Services (as defined
in Section G-2.1.A of Appendix G-2). Certain provisions of this Appendix G-1 are
also incorporated by reference in Appendix G-2 and thereby made applicable to
such POP to POP Facilities.
G-1.1.B Except as provided in Section G-1.1.C, TWComm shall comply with the
requirements set forth in this Appendix G-1 as of the Effective Date of this
Agreement.
G-1.1.C TWComm shall satisfy the requirements set forth in the most current
version of AT&T's Competitive Access Standard Billing Requirements ("CASBR")
document in its entirety on an ongoing basis starting as of the Effective Date
of this Agreement. In the event of a discrepancy between this Appendix G-1 and
AT&T's CASBR document, AT&T's CASBR document will govern.
G-1.2 General Billing Responsibilities
G-1.2.A TWComm shall issue monthly bills. TWComm intends to conform to the
format, generic contents (including without limitation jurisdictional
information), itemization detail, billing date, and transmission medium for the
bills as specified in Section G-1.3 and Section G-1.4 of this Appendix G-1 and
in AT&T's CASBR document.
G-1.2.B The monthly bills issued by TWComm shall be timely, accurate, and
consistent with AT&T's DMOQs as described in Section 18 of this Agreement.
G-1.2.C TWComm will participate in the AT&T Supplier Quality Certification (SQC)
process as described in Special Access Certification Handbook and Switched
Access Certification Toolkit which has been previously provided to TWComm by
AT&T. The parties will negotiate in good faith the proposed SQC operating
agreement called for by the SQC process.
G-1.3 Bill Specifications
G-1.3.A TWComm's bills shall be provided to AT&T in a mechanized industry
standard format agreed to by AT&T. TWComm shall provide Small Exchange Carrier
Access Billing (SECAB) formatted bills.
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APPENDIX G-1
Page 2 of 7
G-1.3.A.i AT&T's SECAB billing format requirements will be those record
layouts specified in the Mechanized Format Appendix of the most current
version of SECAB document SROPP-001856 and TWComm-specific billing records
as described in CASBR.
G-1.3.A.ii TWComm shall obtain and implement in a timely manner all
updates to the SECAB industry standard guidelines.
G-1.3.B Except as otherwise provided in Section G-1.3.C of this Appendix G-1,
TWComm shall transmit bills via a data transmission network based on Network
DataMover ("Connect Direct(1)") technology (or such similar data transfer system
designated by AT&T), to the location designated by AT&T. The specifications for
this transmission are set forth in AT&T's CASBR document.
G-1.3.C TWComm's interconnection to, and use of, a data transmission network
based on Connect Direct technology (or such similar data transfer system
designated by AT&T) will be subject to a separate contract, and AT&T shall have
no obligation under this Agreement to make interconnection to, and use of,
Connect Direct or such network (or such similar data transfer system) available
to TWComm. If TWComm is unable, for any reason, to obtain the use of Connect
Direct or such network (or such similar data transfer system), or to
successfully transmit bills via Connect Direct and such network (or such similar
data transfer system), to the location designated by AT&T, TWComm shall, at
TWComm's expense, provide bills to AT&T within the time period prescribed by
Section G-1.4.B of this Appendix G-1, using an alternative mechanized medium
(e.g., electronic, magnetic, or optical) that is satisfactory to AT&T. At
minimum, such alternative medium must provide AT&T with bills that (i) meet
AT&T's SECAB billing format requirements referenced in Section G-1.3.A of this
Appendix G-1, or such other format requirements as specified by AT&T; (ii) are
accurate as to content; and (iii) provide sufficient detail to allow AT&T to
perform booking and verification.
G-1.4 Bill Receipt
G-1.4.A AT&T and TWComm will mutually agree to the monthly bill date ("Bill
Date") that shall appear on the face page of TWComm's bills in the bill date
field. TWComm will not change the Bill Date without the express written consent
of AT&T.
G-1.4.B TWComm will transmit bills on a timely basis to enable AT&T to receive
and accept the bill no later than 10 days of the Bill Date. A bill will be
deemed accepted by AT&T when it passes all up-front format edits (i.e., all
critical fields
- ----------
(1) Network DataMover and Connect Direct are registered trademarks of Sterling
Software, Inc.
- --------------------------------------------------------------------------------
AT&T and TWComm Proprietary: Subject to Nondisclosure Agreement
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
APPENDIX G-1
Page 3 of 7
have been duly completed in accordance with the CASBR document, including the
vendor-specific appendixes applicable to TWComm that has been approved by
TWComm) by AT&T's billing systems.
G-1.4.C If AT&T does not receive and accept a bill until more than 10 days after
the Bill Date, the bill will be considered late and payment will be extended in
accordance with the specifications set forth in Section G-1.5.B of this Appendix
G-1.
G-1.4.C.i Subject to Section G-1.4.C.iii, if the bill does not clear the
initial edits in AT&T's bill payment system, the bill may be considered
late subject to Sections G-1.4.C.ii and G-1.4.C.iii below.
G-1.4.C.ii If the bill cannot be initially accepted by AT&T and requires
retransmission by TWComm, it will be considered late if the bill is
ultimately accepted more than 10 days after the Bill Date.
G-1.4.C.iii If a bill does not clear the initial edits but is subsequently
found to be free of error, the bill will not be considered late.
G-1.4.D At AT&T's direction, TWComm will establish multiple Bill Dates and
segregate the bills as reasonably specified by AT&T. It shall not be deemed to
be unreasonable for AT&T to direct any degree of bill segregation to the extent
that the LEC or another Similarly Situated CAP offers such degree of bill
segregation.
G-1.5 Bill Payment
G-1.5.A The date on which AT&T's bill payment will be due ("Payment Due Date")
shall be determined in accordance with this Section G-1.5, and such Payment Due
Date shall be controlling regardless of whether any different payment due date
is specified from time to time on the bill or otherwise by TWComm.
G-1.5.B For bills accepted by AT&T within 10 days or less after the Bill Date,
the Payment Due Date will be 30 days after the Bill Date.
G-1.5.C For bills accepted by AT&T more than 10 days after the Bill Date, the
Payment Due Date will be 20 days after the date the bill was accepted by AT&T.
AT&T will not be subject to late payment charges from TWComm to the extent this
delay in payment was due to the late bill.
G-1.5.D TWComm will participate with AT&T in a monthly bill period closure which
will close the period to further financial analysis and transactions. The bill
period closure specifications are set forth in a separate agreement (the "Bill
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- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
APPENDIX G-1
Page 4 of 7
Period Closure Agreement") which shall be negotiated in good faith between AT&T
and TWComm. This closure will take place within the time frame specified in
AT&T's DMOQs as described in Section 18 of this Agreement.
G-1.5.E AT&T retains the right to withhold all, or a portion, of the payment
because of disputes over all, or a portion, of the bill, respectively. AT&T may
only withhold that portion of the bill that is being disputed. Disputed charges
will be subject to the terms and conditions stated in the Bill Period Closure
Agreement referenced in Section G-1.5.D of this Appendix G-1.
G-1.5.F AT&T will make payment to a designated bank account of TWComm (to be
provided by TWComm) by electronic funds transfer or, at AT&T's option, any other
means reasonably designated by AT&T that provide for funds to be available to
TWComm no later than the Payment Due Date. If TWComm does not receive the
electronic funds transfer, or other means of payment from AT&T, TWComm will
promptly contact AT&T.
G-1.5.G If the Payment Due Date for any month falls on a Sunday or on an AT&T or
bank holiday which is observed on a Monday, payment will be made on the first
non-holiday day following such Sunday or holiday. If such Payment Due Date falls
on a Saturday or on an AT&T or bank holiday which is observed on a Tuesday,
Wednesday, Thursday, or Friday, payment will be made on the last non-holiday
preceding such Saturday or holiday. Upon TWComm's request AT&T shall provide for
each Selected MSA a list of AT&T holidays for the then current year.
G-1.5.H Any payment received by TWComm after the Payment Due Date will be
subject to a late payment charge, except as provided for in Section G-1.5.C. and
Section G-1.5.G of this Appendix G-1. The per diem late payment charge shall be
the portion of the billed amount that remains due and unpaid after the Payment
Due Date, multiplied by a Late Factor.
G-1.5.H.i To the extent permitted by law, the Late Factor shall be based
on an annual interest rate calculated as 2 percent above the interest rate
reported as the "prime rate" in the eastern edition of the Wall Street
Journal for the first day following the Payment Due Date. Such interest
rate shall be divided by 365 days to determine the Late Factor.
G-1.5.H.ii The Late Factor shall be applied to the number of days from the
Payment Due Date to and including the date that AT&T actually makes
payment to TWComm.
G-1.5.I Any billing in excess of amounts actually due by TWComm shall be subject
to a credit. The per diem credit shall be the amount in excess of amounts
actually due that TWComm billed to AT&T, multiplied by the Late
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APPENDIX G-1
Page 5 of 7
Factor. The credit shall be applied to the number of days from the Payment Due
Date of the billed excess amounts to and including the Payment Due Date of the
bill that contains the credits for such amounts billed in excess.
G-1.5.J AT&T will have no liability for late payment charges arising from delays
due to bank errors caused through no fault of AT&T or arising from delays caused
by TWComm. Rather, the discrepancy will be resolved by the banks involved. AT&T
and TWComm will work cooperatively to notify the banks involved and for
coordinating the resolution of the discrepancy.
G-1.6 Additional Billing Specifications
G-1.6.A TWComm shall bill AT&T for the Switched Services minutes of use in the
first monthly bill following the actual usage date. For example, a April 1, 1996
Bill Date should reflect the Switched Services minutes of use charges for the
period of March 1, 1996 through March 31, 1996.
G-1.6.B TWComm shall bill AT&T for Dedicated Services nonrecurring installation
charges and the applicable portion of the first month's recurring charges in the
first monthly bill after the Dedicated Service has been accepted by AT&T. For
example, a April 1, 1996 Bill Date should reflect the nonrecurring charges for
Dedicated Services accepted by AT&T during the period of March 1, 1996 through
March 31, 1996.
G-1.6.C TWComm shall bill AT&T for the Dedicated Services monthly recurring
charges one month in advance of the actual usage. For example, a April 1, 1996
Bill Date should reflect the Dedicated Services monthly recurring charges for
the period of April 1, 1996 through April 30, 1996.
G-1.6.D Notwithstanding Section G-1.6.B and Section G-1.6.C of this Appendix
G-1, TWComm will not bill, nor will AT&T be obligated to pay for, any service
prior to the due date requested by AT&T on the Access Service Request ("ASR") or
the date AT&T accepts the service in accordance with Section 17 of this
Agreement, whichever is later.
G-1.6.E TWComm shall bill AT&T for Local Calling Services in accordance with the
format and specifications set forth in this Appendix G-1. In addition, TWComm
shall provide unique values in the Service/Feature Group ID field and other
fields designated by AT&T to ensure AT&T's proper identification of Local
Calling Services charges. All such fields will be standard fields per the format
specified in this Appendix G-1. The specifications for the appropriate fields
and their values are set forth in the IntraLATA Billing section of AT&T's CASBR
Document.
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APPENDIX G-1
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G-1.6.F With respect to TWComm bill errors, TWComm will provide billing
adjustments within 30 days after the date AT&T provides written notification to
TWComm identifying the error.
G-1.6.G Notwithstanding specified time periods set forth above, TWComm may bill
AT&T for amounts due for any Services that were rendered not more than one year
prior to the date of billing, provided, that such retroactive billing is
consistent with law and regulation, the SQC agreement specified in Section
G-1.2.C of this Appendix G-1, and the CASBR document.
G-1.6.H TWComm will provide written notification to AT&T of any proposed
adjustments to billing before such billing adjustments appear on the bill to
AT&T.
G-1.6.I TWComm shall provide additional billing information to AT&T in the
format and time frame reasonably requested by AT&T.
G-1.7 Billing Specifications for Changing Requirements
G-1.7.A TWComm shall implement in the time frame specified in SECAB guidelines
all updates and changes to the SECAB industry standard guidelines.
G-1.7.A.i TWComm shall identify, document, and communicate to AT&T all
changes, modifications, and new services required of TWComm to maintain
the access billing format in accordance with the current SECAB guidelines.
TWComm shall notify AT&T in writing not less than 60 days prior to the
effective date of any such changes, modifications, and new services.
TWComm shall send such notice to the AT&T contact specified in AT&T's
CASBR document.
G-1.7.A.ii TWComm will implement all changes, modifications, and new
services to maintain the access billing format in accordance with the
current SECAB industry standard guidelines. TWComm must implement all
SECAB modifications within 120 days of the issue date of the SECAB
industry document update for the modification.
G-1.7.A.iii Not less than 30 days prior to the effective date of any
change, modification, or new service, TWComm will provide test data
demonstrating to AT&T's satisfaction that TWComm's billing system will
continue to issue bills of acceptable quality, as defined in Section
G-1.3.C.i of this Appendix G-1. TWComm shall transmit such test data to
the AT&T contact specified in AT&T's CASBR document.
G-1.7.B TWComm shall use commercially reasonable efforts to satisfy all
additional billing data and format requirements, and shall deploy modifications
to its billing systems, including without limitation deploying Carrier Access
Billing
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Standards or other mechanized formats, as reasonably designated by AT&T (subject
to Section D-4.1.D.ii of Appendix D-4). Such modifications and additional
billing data and format requirements will supplement or replace the standard
SECAB guidelines. Subject to the foregoing:
G-1.7.B.i AT&T will provide notification of all such requested
modifications and additions in AT&T's CASBR document.
G-1.7.B.ii TWComm will implement all modifications and additions requested
by AT&T within 120 days of the issue date of the request from AT&T.
G-1.7.B.iii TWComm shall notify AT&T in writing not less than 60 days
prior to the effective date of any such modifications and additions.
G-1.7.B.iv Not less than 30 days prior to the effective date of any such
modification or addition, TWComm will provide test data demonstrating to
AT&T's satisfaction that TWComm's billing system will continue to issue
bills of acceptable quality, as defined in Section G-1.3.C.i of this
Appendix G-1. TWComm shall transmit such test data to the AT&T contact
specified in AT&T's CASBR document.
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APPENDIX G-2
Page 1 of 4
POP TO POP SERVICE BILLING AND PAYMENT
G-2.1 Introduction
G-2.1.A This Appendix G-2 sets forth the terms and conditions applicable to
TWComm's billing of POP to POP Services, which are Dedicated Services furnished
to AT&T between AT&T Serving Offices ("POP to POP Services"). POP to POP
Services include, but are not limited to, DS-3 or DS-1 Services identified by
the "PP" designation in the Access Facility Provisioning ("AFP") field of the
Access Service Request ("ASR").
G-2.2 General POP to POP Service Billing Responsibilities
G-2.2.A TWComm shall issue monthly bills for POP to POP Services ordered by AT&T
from TWComm. TWComm will conform to the format, generic contents, billing date,
and transmission medium for the bill as specified in Section G-2.3 of this
Appendix G-2.
G-2.2.B TWComm shall implement the requirements set forth in this Appendix G-2
starting as of the Effective Date of this Agreement.
G-2.3 POP to POP Service Bill Receipt
G-2.3.A TWComm shall provide POP to POP Service bills in a paper format
delivered via the United States Postal Service to the contact specified by AT&T.
G-2.3.B AT&T and TWComm will mutually agree to the monthly bill date ("Bill
Date") that shall appear on the face page of TWComm's bills in the bill field.
G-2.3.C TWComm shall provide bills of acceptable quality that are received
within 10 days after the Bill Date. For the purpose of this Appendix G-2, a bill
will be deemed of acceptable quality if it is determined by AT&T to be prepared
in accordance with this Appendix G-2.
G-2.3.C.i Bills not received by AT&T in acceptable condition until more
than 10 days after the Bill Date will be considered late, and the Payment
Due Date will be extended in the manner described in Section G-1.4.C and
Section G-1.5 of Appendix G-1.
G-2.3.D The customer account number on TWComm's bill to AT&T for POP to POP
Services shall be unique to AT&T and to the POP to POP Service organization as
designated by AT&T.
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APPENDIX G-2
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G-2.3.E The POP to POP Services for each state shall be billed by TWComm on a
separate POP to POP Service bill carrying a separate invoice number.
G-2.3.E.i For POP to POP Services which have termination points in
different states, TWComm will include the Service charges on the state
bill corresponding to the "A" location of the Service in question. The "A"
location is determined by selecting the end point city location of the
Service which precedes the other in an alphabetical comparison. For
example, Albany would be considered the "A" location for a POP to POP
Service that runs between Boston and Albany.
G-2.3.E.ii Notwithstanding Section G-2.3.E.i, in the case of a multiplexed
arrangement, TWComm shall consider the location of the multiplexed
arrangement as the "A" location for billing purposes.
G-2.4 POP to POP Service Billing Data Requirements
G-2.4.A TWComm shall initially provide AT&T with the following data on the
monthly POP to POP Service bills in addition to such other data as AT&T may
reasonably request:
G-2.4.A.i Legal name and address of TWComm or the Local Entity providing
the POP to POP Services.
G-2.4.A.ii TWComm electronic funds transfer information: bank name, bank
address, and bank account number.
G-2.4.A.iii Invoice number and customer account number.
G-2.4.A.iv TWComm account inquiry contact name and number.
G-2.4.A.v A full description of the following items:
G-2.4.A.v.(a) Services provided: the location identifiers as
specified by AT&T for the Service and the addresses for those
locations.
G-2.4.A.v.(b) Service transmission rate: identify the transmission
rate of the Service. For example, DS-1 or DS-3.
G-2.4.A.v.(c) Service quantities: designate the number of DS-1 or
DS-3 Services at each AT&T POP.
G-2.4.A.v.(d) Service identification: the TWComm Service
identification and the associated AT&T Service identification
provided on the Access Service Request (ASR).
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APPENDIX G-2
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G-2.4.A.v.(e) Service Elements for Service: list each rate element
and its price. Separate and designate the channel termination
charges and mileage charges.
G-2.4.A.vi Monthly amount due TWComm.
G-2.4.A.vii Bill Date.
G-2.4.A.viii Payment date: (This date shall be provided for informational
purposes only; the actual Payment Due Date shall be determined in
accordance with Section G-1.5 of Appendix G-1.)
G-2.5 POP to POP Service Bill Payment
G-2.5.A AT&T will make payment to TWComm subject to the terms and conditions set
forth in Section G-1.5 of Appendix G-1, which are incorporated herein by
reference.
G-2.6 POP to POP Service Claims Process
G-2.6.A If AT&T disputes an amount billed by TWComm under this Appendix G-2,
AT&T shall make payment of any undisputed amount but may withhold payment of the
disputed amount pending resolution of the dispute. When AT&T withholds payment
under this Section G-2.6.A, AT&T shall notify TWComm in writing of the dispute
prior to the Payment Due Date of the bill. Such notice shall include a
description of AT&T's claim and any available supporting documentation. AT&T may
also submit a claim to TWComm under this Appendix G-2 after having paid a
particular billed amount.
G-2.6.A.i The parties shall work together to resolve the dispute within 60
days.
G-2.6.A.ii If the dispute is ultimately resolved in AT&T's favor for the
amount that AT&T withheld, then no further action is needed. If the
dispute is ultimately resolved in AT&T's favor for greater than the amount
withheld by AT&T, or if AT&T made the claim after making payment in full,
TWComm shall remit payment of the overpaid amount to AT&T plus interest on
such amount, at the interest rate calculated in accordance with Section
G-1.5.H.i of Appendix G-1.
G-2.6.A.iii If the dispute is ultimately resolved in TWComm's favor and
AT&T withheld payment of the disputed amount, or, if the dispute is
resolved in AT&T's favor for less than the amount which AT&T withheld,
AT&T shall remit payment of the appropriate amount plus interest
calculated in accordance with Section G-1.5.H.i of Appendix G-1.
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APPENDIX G-2
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G-2.6.B TWComm shall acknowledge within 10 days any POP to POP Service claims
filed by AT&T. TWComm shall process the claim and notify AT&T of the claim
status within 30 days after the notification date, or other mutually agreed upon
time period. TWComm may request an automatic extension of 30 days to process the
claim further.
G-2.6.C Should TWComm issue an inaccurate charge on the POP to POP Service bill,
TWComm shall be limited to an adjustment period of 6 months from the Bill Date,
and no interest charge will be applied unless AT&T overpaid, in which case
TWComm shall remit payment of the overpaid amount to AT&T plus interest on such
amount, at the interest rate calculated in accordance with Section G-1.5.H.i of
Appendix G-1.
G-2.6.D For purposes of Section G-2.6.A.ii and Section G-2.6.C of this Appendix
G-2, interest shall be applied to the sustained claim amount based on the number
of days from the date of overpayment to and including the actual day TWComm
makes payment to AT&T.
G-2.6.E TWComm shall retain, for at least 180 days and during the pendency of
any dispute, such detailed information as may reasonably be required to resolve
disputes about billed amounts.
G-2.7 Ongoing POP to POP Service Billing Requirements
G-2.7.A Within 90 days after written notice from AT&T, TWComm shall implement
any additional or changed POP to POP Service billing requirements reasonably
designated by AT&T.
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APPENDIX H
Page 1 of 7
TYPE I PROVISIONING REQUIREMENTS
H.1 Introduction
H.1.A This Appendix H sets forth requirements governing TWComm's use of Type I
provisioning; and a method for recalculating the DS-1 Equivalent thresholds
required for a building to be deemed a Mandatory Type I Building.
H.2 Type I Provisioning Requirements
H.2.A Within * after TWComm begins offering Services in a Selected MSA
under this Agreement, TWComm will have the capability (i.e., will have
Facilities installed and operational) to provide * of all De dicated Services
and Switched Business Line Services (as measured in terms of DS-1 Equivalents)
that AT&T is purchasing from TWComm to Mandatory Type I Buildings by means of
Type I provisioning.
H.2.B Within * after TWComm begins offering Services in a Selected MSA under
this Agreement, TWComm will have the capability to provide * of all Dedicated
Services and Switched Business Line Services that AT&T is purchasing from
TWComm to Mandatory Type I Buildings by means of Type I provisioning.
H.2.C Within * after TWComm begins offering Services in a Selected MSA under
this Agreement, TWComm will have the capability to provide * of all Dedicated
Services and Switched Business Line Services that AT&T is purchasing from
TWComm to Mandatory Type I Buildings by means of Type I provisioning.
H.2.D Except as provided for in Section H.2.E and H.4.A of this Appendix H, a
building shall be deemed to be a Mandatory Type I Building if any one of the
conditions specified below are met:
H.2.D.i Any building to which AT&T purchases from TWComm at least four
DS-1 Equivalents for a period of at least six consecutive months, provided
that at least two of the applicable DS-1 Equivalents are composed of
Services having digital Network Interfaces at such location for the full
six month period;
H.2.D.ii Any building to which AT&T purchases from TWComm at least five
DS-1 Equivalents for a period of at least six consecutive months
regardless of whether such Services have digital Network Interfaces at
such location; or
H.2.D.iii Any building that TWComm has at any time been capable of serving
via Type I provisioning.
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*Indicates that such portions of the contract have been omitted pursuant to a
request for confidential treatment and that such portions have been filed with
the Commission separately.
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APPENDIX H
Page 2 of 7
H.2.E The applicable threshold of AT&T purchases from TWComm necessary for a
building to be deemed a Mandatory Type I Building shall be referred to as the
Type I Threshold. The Type I Threshold may vary building by building (as
described in Section H.2.D above) and may vary year by year (as described in
Section H.4.A below).
H.2.F All Services that AT&T purchases from TWComm shall be applied towards the
Type I Threshold regardless of the Service Arrangement (as described in Section
7 of this Agreement) and regardless of the Provisioning Type (as described in
Section 15 of this Agreement) utilized. With respect to Transport Arrangements,
the applicable DS-1 Equivalents shall apply to the Type I Threshold for the AT&T
customer buildings (not the Transport Premises) where such AT&T services
ultimately terminate.
H.2.G The following buildings will not be deemed Mandatory Type I Buildings,
regardless of the quantity of Services being purchased by AT&T at such
buildings, provided that TWComm has not at any time been capable of serving such
location via Type I provisioning:
H.2.G.i Buildings that are excluded from being deemed a Mandatory Type I
Building by mutual agreement of the parties.
H.2.G.ii Buildings that are within Expected Serving Areas, but outside of
TWComm's franchise area.
H.2.G.iii Buildings that are within Optional Serving Areas.
H.2.H TWComm's satisfaction of the requirements specified in Sections H.2.A,
H.2.B and H.2.C above, that TWComm be capable * shall be determined using the
following formula:
*
where "A" means the number of Dedicated Services and Switched Business Line
Services (as measured in DS-1 Equivalents) that TWComm is then currently capable
of providing to AT&T via Type I provisioning at Mandatory Type I Buildings
within the MSA; and "B" means the total number of Dedicated Services and
Switched Business Line Services (as measured in DS-1 Equivalents) that TWComm is
then currently providing to AT&T to Mandatory Type I Buildings within the MSA.
The quantity of DS-1 Equivalents in "B" may be subject to adjustment pursuant to
Part 3 below.
H.2.I AT&T and TWComm will work cooperatively to (1) identify those buildings
that would provide the best opportunity to convert Services to Full Service
Arrangements via Type I provisioning; (2) prioritize building penetrations; and
(3)
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APPENDIX H
Page 3 of 7
address the concerns or objections AT&T's customers may have regarding
transition of their AT&T services to Full Service Arrangements via Type I
provisioning.
H.2.J As soon as is reasonably feasible, TWComm shall advise AT&T when TWComm is
capable of serving any location via Type I provisioning.
H.2.K If AT&T elects not to purchase the Type I capability offered by TWComm at
a Mandatory Type I Building, then the number of buildings which TWComm otherwise
must be capable of serving via Type I provisioning, pursuant to Sections H.2.A,
H.2.B and H.2.C above shall be reduced as described below.
H.2.K.i Within * from the date that (1) TWComm notifies AT&T that
it is then capable of serving a building via Type I provisioning or (2)
that TWComm begins offering Services in a Selected MSA under this
Agreement, whichever is later, AT&T may request * terminated at such
building to be provided as Full Service Arrangements via Type I
provisioning. AT&T will be deemed to have made such a request by placing
any type of Service request (e.g., new start, move or conversion of
Provisioning Type) that results in the achievement of * Full Service
Arrangements via Type I provisioning. AT&T will be deemed to have made
such a request within the * so long as the due dates requested for such
orders by AT&T are prior to * set forth herein.
H.2.K.ii If AT&T does not request * (or such * at a specific building that
became a Mandatory Type I Building pursuant only to Section H.2.D.iii) as
Full Service Arrangements via Type I provisioning at a specific building
within the time frame set forth in Section H.2.K.i above, then the total
number of Dedicated Services and Switched Business Line Services (as
measured in DS-1 Equivalents) that TWComm is then or thereafter providing
to AT&T at such building will be excluded from the variable "B" in the
formula set forth in Section H.2.G of this Appendix H.
H.2.K.iii At such time that TWComm is providing to AT&T * Full Service
Arrangements via Type I provisioning at a building which AT&T had
previously failed to achieve the Type I requirement describe in Section
H.2.K.ii above, then the total number of Dedicated Services and Switched
Business Line Services (as measured in DS-1 Equivalents) that TWComm is
then currently providing to AT&T at such building will again be included
in the variable "B" in the formula set forth in Section H.2.G of this
Appendix H.
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APPENDIX H
Page 4 of 7
H.3 DS-1 Equivalent Conversion Table
H.3.A For the purpose of determining Type I Thresholds, Table 1 below, sets
forth the factors for converting Services to DS-1 Equivalents.
TABLE 1
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SERVICE CATEGORY DS-1 EQUIVALENT
- --------------------------------------------------------------------------------
<S> <C>
Dedicated Services
- --------------------------------------------------------------------------------
DS-3 Service 7.4
- --------------------------------------------------------------------------------
DS-1 Service 1
- --------------------------------------------------------------------------------
Fractional DS-1 Service .17 per 64 kbps
portion
- --------------------------------------------------------------------------------
DS-0 Service .17
- --------------------------------------------------------------------------------
Digital Subrate Service .17
- --------------------------------------------------------------------------------
Voice Grade Service .13
- --------------------------------------------------------------------------------
2.048 Mbps Service 2
- --------------------------------------------------------------------------------
Self-Healing Ring Access Service 7.4 per each DS-3
portion of the Ring
Capacity
- --------------------------------------------------------------------------------
Switched Business Line Services
- --------------------------------------------------------------------------------
Analog Business Exchange Line .02
- --------------------------------------------------------------------------------
Digital Business Exchange Line .06
- --------------------------------------------------------------------------------
Analog Business Exchange Trunk .02
- --------------------------------------------------------------------------------
Digital Business Exchange Trunk
- --------------------------------------------------------------------------------
64 kbps Service .06
- --------------------------------------------------------------------------------
1.544 Mbps Service 1
- --------------------------------------------------------------------------------
</TABLE>
H.4 Recalculation of Mandatory Type I Building Threshold
H.4.A On August 1 of each year (the "Threshold Anniversary") throughout the term
of this Agreement, either AT&T or TWComm may, at its discretion, elect to have
the Type I Threshold recalculated for each eligible MSA. The recalculation will
be based upon the principle that as Base Prices for Services decrease, the Type
I Threshold will increase; and as Base Prices for Services increase, the Type I
Threshold will decrease. A Selected MSA will be eligible for a recalculation of
the Type I Threshold if (i) the MSA Schedule Effective Date is prior to February
1 of the then current year; and (ii) if the Type I Threshold had been previously
recalculated, such recalculation occurred prior to February 1 of the then
current year. Written notice of a party's election to recalculate the Type I
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APPENDIX H
Page 5 of 7
Threshold must be given to the other party no later than July 15 of the then
current year.
H.4.B The basis for determining whether Base Prices have increased or decreased
since the previous Threshold Anniversary shall be a hypothetical "basket" of
Services. The hypothetical basket of Services shall be as set forth in Table 2.
Each of the Services listed in Table 2 are deemed to be Full Service
Arrangements using Type I provisioning.
TABLE 2
HYPOTHETICAL BASKET OF SERVICES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
QUANTITY SERVICE
- --------------------------------------------------------------------------------
<S> <C>
2 DS-1 Dedicated Service having 5 miles of Channel Mileage
- --------------------------------------------------------------------------------
8 DS-0 Dedicated Services having 5 miles of Channel Mileage
- --------------------------------------------------------------------------------
1 1.544Mbps Digital Business Exchange Trunk
- --------------------------------------------------------------------------------
50 Analog Business Exchange Lines
- --------------------------------------------------------------------------------
</TABLE>
H.4.C Any recalculation of Type I Thresholds shall be done using the following
two-step process:
H.4.C.i Step 1 - Determine the value of the Adjustment Factor using the
following formula:
*
where "A" equals the *; and "B" * . The Step 1 result shall be carried to
three decimal places.
H.4.C.ii Step 2 - Determine the new Type I Threshold using the following
formula:
(X / Adjustment Factor) = Y
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APPENDIX H
Page 6 of 7
where "X" *; and "Y" * . The result of such calculation shall be rounded
to two decimal points.
H.4.D This section provides an illustrative example of calculating a new Type I
Threshold. For purposes of this illustrative example, the following assumptions
will be made:
H.4.D.i On the Effective Date of the illustrative MSA Schedule, the
aggregate Base Prices for the hypothetical basket of Services are shown on
Table 3 below.
TABLE 3
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AGGREGATE
QUANTITY SERVICE BASE PRICE
- --------------------------------------------------------------------------------
<S> <C> <C>
2 DS-1 Dedicated Service having 5 *
miles of Channel Mileage
- --------------------------------------------------------------------------------
8 DS-0 Dedicated Services having 5 *
miles of Channel Mileage
- --------------------------------------------------------------------------------
1 1.544Mbps Digital Business *
Exchange Trunk
- --------------------------------------------------------------------------------
50 Analog Business Exchange Line *
- --------------------------------------------------------------------------------
TOTAL *
- --------------------------------------------------------------------------------
</TABLE>
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APPENDIX H
Page 7 of 7
H.4.D.ii On the first eligible Threshold Anniversary the aggregate Base
Prices for the hypothetical basket of Services are shown on Table 4 below.
TABLE 4
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AGGREGATE
QUANTITY SERVICE BASE PRICE
- --------------------------------------------------------------------------------
<S> <C> <C>
2 DS-1 Dedicated Service having 5 *
miles of Channel Mileage
- --------------------------------------------------------------------------------
8 DS-0 Dedicated Service having 5 *
miles of Channel Mileage
- --------------------------------------------------------------------------------
1 1.544Mbps Digital Business *
Exchange Trunk
- --------------------------------------------------------------------------------
50 Analog Switched Business Line *
- --------------------------------------------------------------------------------
TOTAL *
- --------------------------------------------------------------------------------
</TABLE>
H.4.D.iii The illustrative Adjustment Factor would be calculated as
follows:
*
H.4.D.iv The Type I Threshold as of the first Threshold Anniversary of the
illustrative MSA would be calculated as follows:
*
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APPENDIX I
Page 1 of 18
TWCOMM ACTIVITIES AT SERVED PREMISES
I.1 Introduction
I.1.A This Appendix I sets forth terms and conditions applicable to TWComm's
activities in and around the premises to which AT&T orders services from TWComm
(collectively "Served Premises").
I.1.B Served Premises may include, without limitation, (i) the premises of
AT&T's customers and other Secondary Locations ("Customer Premises"), and (ii)
AT&T Serving Offices. Transport Premises will not be deemed "Served Premises"
except where noted herein.
I.1.C To the extent not prohibited by law, this Appendix I shall supplement, and
shall not be superseded by, the terms and conditions of TWComm's tariffs for the
provision of services to AT&T.
I.2 General Provisioning Responsibilities
I.2.A Except as otherwise provided herein, TWComm, at its own sole expense, and
at its sole discretion, shall:
I.2.A.i design, engineer, provision, furnish, construct, install, test,
maintain, repair, operate, and administer all equipment, cable, apparatus,
and other materials required to provide each of the Services that are
subject to this Agreement (such equipment, cable, apparatus and other
materials which are located in or around Served Premises are referred to
herein collectively as "Facilities"); and
I.2.A.ii procure all necessary rights-of-way, easements, franchises,
licenses, conduit rights, building entrance rights, landlord consents, and
other rights and grants of authority.
I.2.B At AT&T's sole discretion, AT&T may (1) authorize TWComm to exercise any
other rights-of-way AT&T has obtained from third parties with respect to Served
Premises that AT&T is permitted to extend to its contractors, to facilitate the
provision of Services to AT&T customers; and (2) assist TWComm, on TWComm's
reasonable request, in obtaining any additional rights-of-way, authorizations or
licenses that are necessary to serve AT&T's customers.
I.2.C Selection of AC or DC power at each Served Premises will be a matter of
mutual agreement between TWComm and AT&T.
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I.2.D To the extent that AT&T has the right to approve any Facilities or other
matters hereunder, AT&T shall not withhold its approval or consent due solely to
TWComm's provisioning or use of Facilities from a vendor other than AT&T.
I.3 Installation and Maintenance at AT&T Serving Offices
I.3.A Upon reasonable advance notice, and subject to the terms and conditions of
this Appendix I, AT&T will allow authorized TWComm Personnel to enter into each
AT&T Serving Office at any reasonable time for the limited purpose of performing
TWComm's obligations under this Agreement.
I.3.B Except as otherwise provided herein, TWComm shall be responsible for
installing and maintaining all Facilities in each AT&T Serving Office. TWComm
shall not be obligated to repair or maintain any other equipment or facilities
owned or controlled by another vendor or carrier. AT&T shall be liable for any
loss or damage, including theft, to TWComm's Facilities arising from AT&T's sole
negligence, intentional act, willful misconduct or unauthorized maintenance. In
the event of such loss or damage to TWComm's Facilities, AT&T will reimburse
TWComm for the reasonable cost of repair or replacement thereof within 30 days
after receipt by AT&T of a written request for reimbursement.
I.3.0 Upon at least 10 days' notice to TWComm, AT&T may, at its option, elect to
require that TWComm's cable in the AT&T Serving Office be installed and
maintained by AT&T at TWComm's sole risk and expense. AT&T shall use reasonable
commercial standards and practices in such installation and maintenance, and
shall charge TWComm reasonable amounts for such services.
I.3.D AT&T will determine the point of interface for each Service, and the
location of all Facilities, within the AT&T Serving Office. AT&T will provide to
TWComm a floor plan identifying the planned route and locations for the
Facilities therein.
I.3.E TWComm shall obtain AT&T's prior written approval of all Facilities before
delivery of such Facilities to the AT&T Serving Office for installation. TWComm
may, at its option, seek AT&T's advance approval of additional Facilities
sufficient to meet TWComm's reasonably anticipated future requirements for the
provision of services to the AT&T Serving Office.
I.3.F TWComm shall install its Facilities as soon as practicable after their
delivery to the AT&T Serving Office, and shall comply with specifications
furnished by AT&T for such installation.
I.3.G TWComm shall provide to AT&T, upon request, copies of TWComm's equipment
utilization records to enable AT&T to verify TWComm's utilization of the
Facilities at each AT&T Serving Office. If AT&T determines that the
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equipment exceeds that needed for the provision of current or forecasted
services to AT&T, AT&T may require TWComm to remove the excess equipment from
the AT&T Serving Office under Section 1.14 of this Appendix I.
I.3.H If TWComm desires to construct a new conduit for entrance to the cable
vault of an AT&T Serving Office, TWComm shall submit to AT&T, in writing,
detailed plans identifying the proposed location of the new conduit, the
construction methods and materials to be used, the anticipated timing of work,
and any other relevant information reasonably requested by AT&T. TWComm shall
obtain AT&T's written consent to the construction and written approval of
TWComm's plans before beginning the work. AT&T will respond within 15 days of
any such submission, and if consent is denied, AT&T will specify the reasons for
such denial. Any such conduit between the line manhole and the cable vault shall
become the property of AT&T to the extent required under Section I.16 of this
Appendix I.
I.3.I Except to the extent TWComm has obtained AT&T's advance approval for
additional Facilities under Section I.3.E of this Appendix I, TWComm shall not,
without AT&T's prior written consent, make any alterations, additions, or
improvements to Facilities in an AT&T Serving Office, other than maintenance and
repair of the Facilities.
I.3.J AT&T may change the authorized location for TWComm's Facilities within any
AT&T Serving Office upon 30 days' prior written notice to TWComm. In that event,
TWComm will cooperate with AT&T to minimize any disruption of service in
connection with such relocation. Upon such notice, TWComm shall relocate the
Facilities to the new location except to the extent that AT&T, at its option,
requires that TWComm's cable be relocated by AT&T. The expenses of such
relocation (including, without limitation, the reasonable cost of additional or
replacement cabling and reasonable labor costs of TWComm in performing such
relocation) shall be borne by AT&T.
I.3.K AT&T may change the location of an AT&T Serving Office. In that event,
TWComm will cooperate with AT&T to minimize any disruption of service in
connection with such relocation, and TWComm will be responsible for any of its
costs associated with the transfer of Facilities to such new location.
I.4 Installation and Maintenance at Customer Premises
I.4.A Except as otherwise provided herein, TWComm shall be responsible for
installing and maintaining all Facilities in the Customer Premises. TWComm shall
not be obligated to repair or maintain any other equipment or facilities owned
or controlled by another vendor or carrier.
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I.4.B Unless otherwise directed by AT&T, TWComm shall schedule all work
performed pursuant to this Agreement at Customer Premises through AT&T, and
shall otherwise comply with Section 16.I of this Agreement. At TWComm's request,
AT&T shall schedule such work with the customer. TWComm will not be liable for
any delayed installation credits pursuant to Section J.2 of Appendix J and will
not otherwise have any adverse consequences under this Agreement if (1) AT&T
failed to schedule such work with the customer as reasonably requested by
TWComm; or (2) AT&T's customer failed to provide TWComm necessary access to the
Customer Premises to conduct such work.
I.4.C The Network Interface location for each service in each Customer Premises
will be as set forth in the applicable Service Description Appendix D-1 through
D-4.
I.4.D As soon as practicable after issuance of a firm order confirmation, TWComm
shall perform a site survey of the Customer Premises.
I.4.E On the basis of the site survey, TWComm shall furnish to AT&T a design
layout record identifying the Facilities that TWComm proposes to install. In
addition, TWComm shall identify to AT&T, in writing, TWComm's anticipated
building space, electrical power, and environmental requirements in the Customer
Premises. AT&T will notify TWComm orally within 5 days if the design layout
record or other information furnished by TWComm specified in this Section I.4.E
is unacceptable to AT&T, and will specify the reasons why the design is
unacceptable. If AT&T so notifies TWComm of unacceptability, the firm order
confirmation shall be deemed canceled without liability or any adverse
consequence hereunder to either party, unless the parties otherwise agree to
revisions to the design layout record.
I.4.F After initial installation of Facilities at a Customer Premises. TWComm
shall not change the Facilities (other than component changes for the sole
purpose of maintenance or repair) without first submitting to AT&T a revised
design layout record for AT&T's concurrence in accordance with Section I.4.E of
this Appendix I.
I.4.G Absent objection by AT&T pursuant to Section I.4.E of this Appendix I,
TWComm's design layout record shall be deemed approved by AT&T and TWComm shall
install its Facilities in conformity with the design layout record in the
location designated by AT&T in the Customer Premises.
I.5 Installation and Maintenance at Transport Premises
I.5.A TWComm agrees that all agreements that TWComm enters into with a LEC for
physical collocation in a Transport Premises for the provision of Services
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under this Agreement shall include terms and conditions which conform to the
following principles:
I.5.A.i TWComm shall have access to its Facilities within such Transport
Premises 24 hours a day, 7 days a week;
I.5.A.ii TWComm's Facilities shall be installed in a secure enclosure that
provides a suitable physical environment for such Facilities (e.g.,
temperature and humidity are maintained at appropriate levels);
I.5.A.iii The term of such agreement (including any renewal options) shall
be of a sufficient length to cover the term of the applicable MSA
Schedule; and
I.5.A.iv The amount of physical space provided under such agreement shall
be sufficient to accommodate Facilities that have the capacity to deliver
at least 150 percent of the Dedicated Services and Switched Services AVTs
(as described in Appendix E-6) for the Exchange Areas being served by such
Transport Premises (such agreement could also provide TWComm with an
irrevocable option to obtain the required amount of space).
I.5.B TWComm agrees that all agreements that TWComm enters into with a LEC for
virtual collocation in a Transport Premises for the provision of Services under
this Agreement shall include terms and conditions which conform to the following
principles:
I.5.B.i The collocated facilities shall be installed in a secure enclosure
that provides a suitable physical environment for such facilities (e.g.,
temperature and humidity are maintained at appropriate levels);
I.5.B.ii The term of such agreement (including any renewal options) shall
be of a sufficient length to cover the term of the applicable MSA
Schedule; and
I.5.B.iii The facilities provided under such agreement shall have the
capacity to deliver at least 150 percent of the Dedicated Services and
Switched Services AVTs for the Exchange Areas being served by such
Transport Premises (such agreement could also provide TWComm with an
irrevocable option to obtain facilities with such capacity).
I.5.C TWComm shall be solely responsible for installing and maintaining all
Facilities in each Transport Premises.
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I.5.D With respect to collocation agreements that TWComm may enter into with the
LEC, TWComm will not incur any expense on AT&T's behalf, order Services from the
LEC on behalf of AT&T, or represent itself as AT&T or AT&T's agent without
AT&T's prior written consent.
I.6 Compliance With Applicable Laws
I.6.A TWComm agrees to comply, and to cause TWComm's employees, agents,
delegates and their employees, contractors, and their employees, and
subcontractors and their employees (collectively "TWComm's Personnel") to
comply, with all applicable requirements of law pertaining to TWComm's
activities in connection with this Agreement, including without limitation:
I.6.A.i all requirements of law affecting safety and health, including
without limitation the Occupational Safety and Health Act of 1970 (as
amended) and any applicable Right to Know statutes;
I.6.A.ii all requirements of law prohibiting discrimination against any
employee or applicant for employment because of race, color, religion,
sex, national origin, age, sexual preference, or handicap;
I.6.A.iii all requirements of law necessary to make TWComm a qualified
subcontractor for AT&T's provision of services to federal, state, and
local governmental entities; such obligation to apply, however, only to
TWComm's activities in connection with contracts that have been identified
to TWComm in writing (in the Service request, or contemporaneously with
the Service request) as involving customers that are federal, state or
local governmental entities, and where such obligation is based on certain
applicable terms and conditions of such contract, only to the extent that
such applicable terms and conditions have been provided to TWComm in
writing (in the Service request, or contemporaneously with the Service
request);
I.6.A.iv workers compensation laws, unemployment compensation laws,
sickness and disability laws, social security laws, the Fair Labor
Standards Act of 1938 (as amended), and all other requirements of law
relating to employment of TWComm's Personnel;
I.6.A.v requirements imposed by the Communications Act of 1934 (as
amended), and by any other applicable federal, state, and local laws,
ordinances, and regulations; and
I.6.A.vi requirements imposed by the Federal Communications Commission,
and by any other federal, state, and local regulatory bodies
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having jurisdiction over TWComm's activities in connection with this
Agreement.
I.6.B TWComm shall furnish certificates of compliance where required by law or
requested by AT&T. With regard to TWComm's Personnel that are not affiliated
with TWComm, TWComm shall be entitled to rely on certificates of compliance from
such persons or entities to meet its obligations under this Section I.6.B.
I.6.C TWComm shall not be deemed to have failed in its obligations under this
Section I.6 if such failure is the result of any failure of AT&T to meet any of
its obligations under the laws specified in this Section I.6.
I.7 TWComm Duty of Care
I.7.A Upon execution of this Agreement, TWComm shall furnish to AT&T a list of
TWComm's Personnel whom TWComm authorizes to enter Served Premises on TWComm's
behalf, together with samples of the identifying credentials that must be
carried by such persons. TWComm shall keep such list up-to-date by furnishing
AT&T with supplements or updates as necessary, and shall promptly remove from
such list any persons who are no longer employed by TWComm. If AT&T reasonably
determines that any of TWComm's Personnel should not enter or perform work in
Served Premises under this Agreement, AT&T may require TWComm to exclude such
persons from the Served Premises, provided that AT&T notifies TWComm of the
reasons for such required exclusion.
I.7.B While in an AT&T Serving Office, TWComm's Personnel shall comply at all
times with AT&T's security and safety procedures and requirements (provided
that TWComm has received reasonable notice of the application thereof),
including without limitation sign-in, identification, and escort requirements.
While in a Customer Premises, TWComm's Personnel shall comply at all times with
all security and safety procedures and requirements reasonably imposed by AT&T's
customer or the building owner (provided that TWComm has received reasonable
notice of the application thereof). AT&T or AT&T's customer may refuse entry to,
or require the departure of, any person who is disorderly or who has failed to
comply with such security and safety procedures and requirements after being
notified of them. AT&T shall promptly advise TWComm of any such incident and
AT&T's opinion as to the cause of the problem, to the extent AT&T has knowledge
of such an incident.
I.7.C TWComm's Personnel shall use commercially reasonable care to avoid
damaging any Served Premises, the building and surrounding real property, and
the persons and property contained therein. TWComm shall not be deemed to have
breached this provision due to ordinary and reasonable installation or
maintenance procedures such as drilling of holes, the attachment of Facilities,
or the like.
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I.7.D AT&T and its designees may inspect or observe any work performed by TWComm
in a Served Premises, while in progress or after completion, and may inspect the
Facilities at any time. AT&T may suspend all or any portion of TWComm's work at
any time, and may reject any service, work, equipment, or material that AT&T
determines not to be in accordance with this Agreement. AT&T shall notify TWComm
within 24 hours of the reasons for such rejection or suspension.
I.7.E TWComm shall refrain from using any Facilities, equipment, tools,
materials, apparatus, or methods that, in AT&T's sole judgment, might cause
damage to a Served Premises (or to the personnel or property therein), impair
the privacy of communications, disrupt the AT&T network, or otherwise interfere
with the business operations of AT&T or of AT&T's customer. To the extent
reasonably feasible, AT&T will provide TWComm with at least 60 days' advance
written notice of any determination by it under the preceding sentence with
regard to Facilities, equipment, tools, materials, apparatus, or methods that it
is aware TWComm is using or will use; and, at AT&T's sole discretion, AT&T will
assist TWComm in devising reasonable, cost-effective alternatives to any of the
foregoing that AT&T has so prohibited. Upon receipt of notice under this
subsection, TWComm will take prompt action to comply with its obligations under
this subsection; however, AT&T may take any reasonable actions necessary to
cease, mitigate or prevent any such harm referenced above in this Section I.7.E.
I.7.F If TWComm has received notice from AT&T of a hazardous condition and does
not diligently pursue rectifying such condition, AT&T may, upon oral or written
notice to TWComm, perform the work on TWComm's behalf. TWComm agrees to
reimburse AT&T's reasonable costs and expenses for the work performed.
I.7.G TWComm shall not make any alterations, additions, deletions, or
improvements to any part of a Served Premises (excluding any space that TWComm
has contracted for directly with the building owner) in connection with this
Agreement without AT&T's prior written consent.
I.7.H In addition to the Facilities, TWComm may bring into a Served Premises any
tools and test equipment reasonably needed for the performance of work for which
TWComm is responsible under this Agreement. TWComm will be solely responsible
for the care and safeguarding of all such tools and test equipment.
I.7.1 Other than the Facilities, and the tools and test equipment described in
Section I.7.H of this Appendix I, TWComm and TWComm's Personnel shall not bring
any material, apparatus, facilities, or equipment into an AT&T Serving Office
without AT&T's prior written consent. In particular, and without limiting the
foregoing, TWComm and TWComm's Personnel shall not bring into an AT&T
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Serving Office any of the following: wet cell batteries, explosives, flammable
liquids or gases, alcohol, controlled substances, weapons, cameras, tape
recorders, and similar equipment and materials.
I.8 Labor Relations
I.8.A AT&T and TWComm each shall be responsible for labor relations with its own
employees.
I.8.B TWComm agrees to notify AT&T immediately whenever TWComm has knowledge
that a labor dispute concerning TWComm's Personnel is delaying or threatens to
delay TWComm's timely performance of work under this Agreement.
I.8.C If AT&T determines that TWComm's activities in the AT&T Serving Office are
causing or will cause labor difficulties for AT&T or its affiliates, TWComm
agrees to discontinue those activities until AT&T notifies TWComm that the labor
difficulties have been resolved.
I.8.D If labor difficulties of either party prevent TWComm from providing timely
performance of its work in any AT&T Serving Office, AT&T may, at its option,
perform such work for TWComm until the labor difficulties are resolved. In
addition to any other remedies available to AT&T in accordance with this
Agreement (unless otherwise excused in accordance with the terms of this
Agreement), TWComm agrees to reimburse AT&T's reasonable costs and expenses for
any labor and materials provided by AT&T.
I.9 Responsibility for TWComm's Personnel
I.9.A This Agreement and the work performed hereunder shall not be deemed to
create a relationship of employment between AT&T and TWComm's Personnel, or
TWComm and AT&T's personnel.
I.9.B TWComm shall be responsible for the safety of all-work performed by
TWComm's Personnel. If TWComm or any of TWComm's Personnel is found to be in
violation of any federal, state, or local requirement of law pertaining to
safety or health, TWComm shall immediately remedy the condition at its own
expense.
I.9.C TWComm shall maintain a high level of safety awareness in TWComm's
Personnel, and shall comply with industry practices and any additional AT&T
requirements for safety that have been disclosed to TWComm in writing. TWComm
shall use commercially reasonable efforts to ensure that TWComm's Personnel have
been instructed in the proper use of all power equipment, chemicals, materials,
and tools. TWComm shall also provide at its own expense, and shall require
TWComm's Personnel to use, safety apparel or protective
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clothing where required by law, by industry practices, or by AT&T's safety
requirements, provided that such safety requirements have been disclosed in
writing to TWComm.
I.9.D TWComm agrees to Indemnity AT&T against any Damages for any of the
following Actions that are brought by third parties against AT&T:
I.9.D.i Actions alleging, or resulting from, negligence, willful
misconduct, or breach of contract by TWComm or TWComm's Personnel in
connection with or relating to this Agreement;
I.9.D.ii Actions (including but not limited to suits or actions in tort,
breach of contract, breach of warranties, and strict liability) on account
of any property damage, personal injury, or death resulting from TWComm's
provision of Services to AT&T (under this Agreement and any applicable MSA
Schedule, or under any tariff governing the provision of Services
hereunder), or TWComm's performance of this Agreement;
I.9.D.iii Actions by any of TWComm's Personnel arising from the suspension
or termination of work or of employment in connection with this Agreement;
or
I.9.D.iv Subject to Appendix E-1, Section E-1.1.7, and Table 9 of the
applicable MSA Schedule, Actions alleging or resulting from TWComm's
failure to pay amounts due TWComm's Personnel or third parties for labor,
equipment, materials, taxes, and other obligations.
I.10 Ownership of Facilities
I.10.A Subject to Section I.14.C and Section I.15.C of this Appendix I, the
parties intend that TWComm's Facilities, whether or not physically affixed to a
Served Premises, shall remain the personal property of TWComm, and shall not be
construed to be fixtures. Unless Sections I.15.C or I.16.C have been applied to
transfer ownership thereof to AT&T, TWComm shall report its Facilities as
TWComm's personal property whenever required by applicable laws or regulations,
and TWComm shall cause payment of all taxes levied upon such property.
I.11 Encumbrances Upon Facilities
I.11.A For purposes of this Section I.11, a "Third Party Interest" means, with
respect to Facilities, any right, title, or interest held by or benefiting a
person or entity other than TWComm or any of its affiliates, including without
limitation any ownership interest, leasehold interest, possessory interest,
right to use, lien, trust, pledge, or security interest.
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I.11.B TWComm agrees not to cause or allow the Facilities to become or remain
subject to a Third Party Interest (through TWComm's actions or failures to act)
without AT&T's prior written consent. AT&T may condition its consent upon the
third party's written agreement to terms specified by AT&T, in substantially the
same form as that attached to this Appendix I as Schedule I-1.
I.11.C Under no circumstances shall TWComm cause or permit its cable in the AT&T
Serving Office to become subject to a Third Party Interest (through TWComm's
actions or failures to act), except the conveyance of cable to AT&T pursuant to
Section I.16 of this Appendix I.
I.11.D If Facilities become encumbered by a Third Party Interest in violation of
Section I.11.B or I.11.C, TWComm shall discharge its obligation to the Third
Party and thereby remove the encumbrance within 20 days after learning of the
encumbrance.
I.11.E TWComm shall not, by its acts or omissions, cause or permit any third
party to foreclose upon an obligation secured by any of the Facilities, or to
levy upon any Facilities.
I.11.F TWComm agrees to Indemnify AT&T against Damages arising from any Actions
concerning any of the Facilities by a person with a Third Party Interest,
including without limitation any attempt by such third party to take title to or
possession of Facilities.
I.11.G Except to the extent provided under Sections I.15.C or I.16.C, AT&T will
not tamper with, remove or conceal any plates, tags or labels identifying
TWComm's or its affiliates' ownership of the Facilities. AT&T will not cause the
Facilities to become or remain subject to a Third Party Interest.
I.12 Responsibility for Facilities
I.12.A TWComm warrants to AT&T that those Facilities and other materials
furnished by TWComm that are not purchased by TWComm from AT&T do not contain
any hazardous substances or hazardous wastes as those terms are defined on the
date of this Agreement, respectively, at Section 101(24) of the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. ss.ss. 9601, et seq. ("CERCLA"); and Section 1004 (5) of the Resource
Conservation and Recovery Act of 1976, as amended, 42 U.S.C. ss.ss. 6901, et
seq. ("RCRA"). So long as any Facilities remain in a Served Premises, TWComm
shall use reasonable efforts to determine whether any of the Facilities contains
materials that require disposal as a hazardous waste in compliance with Subtitle
C of RCRA or as a hazardous chemical in compliance with the Toxic Substances
Control Act, 15 U.S.C. ss. 2601, et seq. Such reasonable efforts shall be
limited to those efforts TWComm takes in the ordinary
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course of its business to monitor environmental law compliance. Should TWComm
become aware of any change in the law or in the materials contained in the
Facilities so as to require that the Facilities be disposed of as hazardous
waste or as a hazardous chemical, TWComm shall promptly notify AT&T of any such
change. TWComm agrees to Indemnify AT&T for any additional Damages AT&T may
incur by reason of any (1) recall by any governmental agency or manufacturer of,
(2) prohibition by any governmental agency against continued use or disposal of,
or (3) remedial action pursuant to CERCLA or equivalent state environmental
cleanup law that is caused by, the Facilities or materials furnished by TWComm
that were not purchased by TWComm from AT&T.
I.12.B TWComm agrees to Indemnify AT&T against Damages arising from any Actions
by any third party on the basis of property damage, personal injury, or death
attributed to a defect, failure, malfunction, or harmful characteristic of any
Facilities (other than Facilities purchased by TWComm from AT&T); or attributed
to TWComm's use, maintenance, repair, or replacement of its Facilities and
materials; or the presence of TWComm's Facilities and materials in the Served
Premises or other location.
I.12.C AT&T agrees to Indemnify TWComm against Damages arising from Actions by
any third party on the basis of property damage, personal injury, or death
attributed solely to a defect, failure, malfunction, or harmful characteristic
of any of AT&T facilities, materials or equipment located in an AT&T Serving
Office at which TWComm is providing Services under this Agreement; or attributed
solely to AT&T's use, maintenance, repair, or replacement of its facilities,
materials or equipment in an AT&T Serving Office at which TWComm is providing
Services under this Agreement.
I.12.D TWComm agrees to Indemnify AT&T against Damages arising from Actions by
any third party alleging that the operation or installation of TWComm's
Facilities (other than Facilities purchased by TWComm from AT&T) infringes any
United States patent, trademark or copyright. If any Facilities installed or
operated in connection with this Agreement are found to be so infringing, or if
TWComm has reason to believe that Facilities are likely to be found infringing,
TWComm will, at its option:
I.12.D.i procure the necessary rights to permit continued sale to AT&T of
the Services associated with such Facilities under this Agreement;
I.12.D.ii modify or replace the Facilities to render them functionally
equivalent and non-infringing; or
I.12.D.iii if the steps described in (i) and (ii) above cannot be
accomplished at a reasonable expense, or within a time period acceptable
to AT&T, remove the Facilities.
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I.13 Indemnification Procedures
I.13.A Whenever a party ("Indemnitor") is obligated to "Indemnify" the other
party ("Indemnitee") pursuant to the terms of this Agreement, the following
provisions shall apply:
I.13.A.i Indemnitor's obligation to Indemnify Indemnitee shall also apply
to Indemnitee's affiliates, and the officers, directors, employees,
stockholders, partners, and agents, as applicable, of Indemnitee and its
affiliates.
I.13.A.ii Indemnitor shall hold Indemnitee harmless against all claims,
demands, losses, liabilities, judgments, fines, settlements, and costs of
any nature, including but not limited to reasonable attorneys' fees
(collectively, "Damages") arising from any and all claims, demands,
actions, suits, proceedings, or causes of action (collectively, "Actions")
relating to or arising out of the indemnifiable incident.
I.13.A.iii Indemnitee shall give Indemnitor prompt written notice of any
Action.
I.13.A.iv If Indemnitor is obligated to defend Indemnitee:
I.13.A.iv.(a) At Indemnitor's option, Indemnitor shall either (1)
defend Indemnitee against or settle the Action by counsel reasonably
acceptable to Indemnitee, or (2) permit Indemnitee to so defend the
Action and indemnify Indemnitee for Indemnitee's Damages.
I.13.A.iv.(b) If Indemnitor chooses to defend the Action, Indemnitee
shall give Indemnitor proper and full information and assistance in
connection with Indemnitor's defense of the Action. Indemnitor may,
at its sole option, settle the Action on terms and conditions
reasonably acceptable to Indemnitee. Indemnitee, at Indemnitee's
sole expense, may have its own counsel participate in the Action,
but Indemnitor's counsel shall have final decision making authority
with respect to all aspects of the Action.
I.13.A.iv.(c) If Indemnitor chooses to permit Indemnitee to defend
the Action, Indemnitee shall not agree to pay Damages or settle or
otherwise compromise the Action without the prior written consent of
Indemnitor, which consent shall not be unreasonably withheld.
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I.14 Removal of Facilities by TWComm
I.14.A Subject to Section I.15 and I.16 of this Appendix I, and unless the
parties otherwise mutually agree, TWComm shall remove any Facilities used
exclusively for Services under this Agreement from each Customer Premises within
30 days after cancellation of such Services provided over such Facilities.
TWComm shall also restore the space occupied by the Facilities to its original
condition, normal wear and tear excepted. All such work shall be performed by
TWComm at its sole expense.
I.14.B Within 30 days after written request by AT&T, TWComm shall, at its own
expense, remove from each AT&T Serving Office any equipment not needed for the
provision of current or forecasted Services to AT&T at that location.
I.14.C Within 60 days after disconnection of all TWComm Services to an AT&T
Serving Office in connection with the termination of this Agreement or an
applicable MSA Schedule, TWComm shall, at its own expense, remove any Facilities
used exclusively for Services under this Agreement (other than cable and
conduit) from the AT&T Serving Office and restore the equipment space to its
original condition, normal wear and tear excepted.
I.15 Removal of Facilities by AT&T
I.15.A If TWComm defaults upon any of its obligations under Section I.14 of this
Appendix I, AT&T may, at its option, upon 10 days' written notice to TWComm, if
TWComm has not cured such default within such 10-day period,
I.15.A.i perform the removal and restoration work itself at TWComm's sole
risk and expense, or
I.15.A.ii take ownership of the Facilities pursuant to Section I.15.C of
this Appendix I.
I.15.B Any Facilities removed by AT&T under this Section I.15 shall be
delivered, at TWComm's sole risk and expense, to a location reasonably
designated at that time by TWComm, provided that TWComm has paid AT&T in advance
for the costs of such removal and delivery. If TWComm fails to make such payment
within 10 days of written request therefor and to designate a location for
delivery, AT&T may, at its option, take ownership of such Facilities in
accordance with Section I.15.C, below
I.15.C If AT&T, pursuant to this Section I.15, elects to take ownership of
Facilities that TWComm has failed to remove, AT&T shall give notice thereof to
TWComm. Such Facilities will be deemed abandoned in place and automatically
conveyed to AT&T and will become the property of AT&T, free of any interest or
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APPENDIX I
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lien of any kind by TWComm (or by any person claiming through TWComm). At AT&T's
request, TWComm will promptly execute and deliver to AT&T a bill of conveyance
or such other assurances as may be requisite to confirm or perfect the transfer
of equipment to AT&T.
I.16 Obligation to Convey Cable and Conduit
I.16.A Because removal of installed cable could cause damage to other cables,
TWComm agrees to retire its cable in place at the AT&T Serving Offices. Cable no
longer used by TWComm at the AT&T Serving Office to provide Services in
connection with this Agreement shall be deemed abandoned in place and
automatically conveyed to AT&T pursuant to Section I.16.C of this Appendix I.
This Section I.16.A does not apply to cabling being used by TWComm to provide
services under a separate agreement with AT&T (e.g., a Shared Customer-Provided
Access agreement). The provisions of such separate agreement shall govern
TWComm's abandonment of cabling that is no longer used to provide services under
such separate agreement.
I.16.B Any entrance conduit constructed by TWComm between the line manhole and
the cable vault of the AT&T Serving Office shall be deemed abandoned in place
and automatically conveyed to AT&T pursuant to Section I.16.C of this Appendix I
upon the termination of this Agreement or a MSA Schedule. This Section I.16.B
does not apply to entrance conduit being used by TWComm to provide services
under a separate agreement with AT&T (e.g., Shared Customer-Provided Access
agreement). The provisions of such separate agreement shall govern TWComm's
abandonment of conduit that is no longer used to provide services under such
separate agreement.
I.16.C Upon the conveyance of TWComm's cable or conduit to AT&T pursuant to this
Section I.16, the conveyed property will thereupon become the property of AT&T,
free of any interest or lien of any kind by TWComm (or by any person claiming
through TWComm). At AT&T's request, TWComm will promptly execute and deliver to
AT&T a bill of conveyance or such other assurances as may be requisite to
confirm or perfect the transfer of cable and conduit to AT&T.
I.17 Availability of Security Enclosures
I.17.A TWComm may, for added security, request that AT&T separately enclose
TWComm's equipment within partition walls, chain link fencing, or such other
barrier materials as may be feasible at the AT&T Serving Office. If AT&T
consents to construct such enclosure, TWComm agrees:
I.17.A.i to reimburse AT&T's costs and expenses for the work performed;
and
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I.17.A.ii to furnish AT&T with all keys, entry codes, lock combinations,
or other materials and information needed for entry into the enclosure,
and to permit AT&T to enter the enclosure at all times to fulfill the
purposes of this Agreement.
I.17.B AT&T shall use commercially reasonable efforts similar to those it uses
with regard to its own restricted areas to ensure that entry into TWComm's
enclosure is only obtained by AT&T's duly authorized personnel, and only to
fulfill the purposes of this Agreement.
I.17.C AT&T's consent to construct such enclosure shall not relieve TWComm of
its insurance obligations under Section I.18 of this Appendix I.
I.18 Required Insurance
I.18.A Except as otherwise provided in Section I.18.B, below, TWComm shall carry
insurance in accordance with this Section I.18 until all Facilities (other than
cable and conduit) have been removed from the AT&T Serving Office or until
TWComm has ceased to perform work under this Agreement, whichever is later.
I.18.B TWComm shall carry products/completed operations coverage for an
additional period of 2 years after the date described in Section I.18.A, above.
I.18.C TWComm's insurance shall be provided by companies reasonably acceptable
to AT&T and shall cover the following amounts and types of liability with
respect to TWComm's obligations under this Agreement:
<TABLE>
<CAPTION>
worker's compensation statutory amount
<S> <C>
employer's liability occupational $1 million each accident
disease and bodily injury $1 million disease each employee
$1 million disease-policy limit
comprehensive general liability combined single limit personal injury
including premises-operations, and property damage on an occurrence
products/ completed operations, policy form with policy amounts of (i)
independent contractors, contractual not less than $ 15 million per
(blanket), broad form property damage, occurrence (without a limitation on
with umbrella excess liability aggregate amount); or (ii) not less
(collectively, "Comprehensive than $ 40 million per occurrence with
Coverage") an aggregate annual amount of not less
than $ 40 million
automobile liability for owned, hired $2 million
and non-owned autos ("Automobile combined single limit bodily
Liability Coverage") injury/property damage
</TABLE>
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APPENDIX I
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<TABLE>
<S> <C>
all risk insurance with standard full replacement value of TWComm's
extended coverage, replacement value, Facilities and any of TWComm's
without co-insurance factor, with one equipment, tools, and personal property
month's extra expenses coverage ("All located in the AT&T Serving Office
Risk Coverage")
</TABLE>
I.18.D Notwithstanding the foregoing, TWComm may self-insure transmission and
distribution lines to fulfill its obligations under this Section I.18.
I.18.E TWComm shall include any Local Entity as a named insured on each TWComm
insurance policy unless TWComm and AT&T otherwise mutually agree in writing.
I.18.F TWComm will require each of its subcontractors that will be undertaking
work that TWComm would otherwise be obligated to perform under this Agreement on
or about any Served Premises to carry insurance in conformity with the
requirements of this Section I.18, provided that the required coverage for (1)
Comprehensive Coverage shall be limited to not less than $2 million per
occurrence, with an aggregate annual amount of not less than $4 million; and (2)
Automobile Liability Coverage shall be limited to not less than $2 million; and
provided further that All Risk Coverages shall not be required.
I.18.G Each policy evidencing the insurance described in this Section I.18 must
contain a provision that the insurance policy, and the coverage it provides,
shall be primary and noncontributing with respect to any policies carried by
AT&T and its affiliates, and that any policies carried by AT&T and its
affiliates shall be excess insurance.
I.18.H The worker's compensation, employer's liability, and occupational disease
and bodily injury policies each shall contain a waiver by TWComm's insurer of
any right of subrogation against AT&T, AT&T's parent, subsidiaries, and
affiliates, and each of their respective officers, directors, employees, agents,
contractors, and suppliers (collectively "AT&T's Affiliates and Personnel").
TWComm hereby releases AT&T and AT&T's Affiliates and Personnel from any, and
all claims within the scope of coverage of such insurance, regardless of the
form of action (including without limitation claims alleging negligence or other
fault by AT&T, or by any of AT&T's Affiliates and Personnel).
I.18.I The Comprehensive Coverage policies of TWComm and its subcontractors that
will be undertaking work that TWComm would otherwise be obligated to perform
under this Agreement on or about any Served Premises each shall contain a
provision including AT&T, AT&T's Affiliates and Personnel, and any other parties
in interest designated by AT&T, as additional insureds.
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I.18.J Prior to the start of any work under this Agreement, TWComm must furnish
to AT&T, and obtain AT&T's approval of, certificates of insurance
I.18.J.i evidencing the waivers of subrogation and additional insured
provisions required by this Section I.18; and
I.18.J.ii stating that the insurer will use best efforts to notify AT&T at
least 30 days prior to cancellation of, or any material change in, the
coverage provided.
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SCHEDULE I-1
Page 1 of 6
MODEL LIENHOLDER'S AGREEMENT
_____________________ ("Local Entity") and AT&T Communications,
Inc., as agent for AT&T Corp. and its affiliated AT&T Communications companies
("AT&T"), and Time Warner Communications ("TWComm") have entered into a MSA
Schedule for [MSA NAME ] effective ___________________, and AT&T and TWComm have
entered into a national business telecommunications services agreement,
effective September 15, 1995 (hereinafter both agreements shall be referred to
as "Agreement"). To fulfill its obligations under the Agreement, Local Entity
may be required to install certain apparatuses, transmission media and other
physical plant ("Equipment") and/or fiber optic, metallic, coaxial or similar
transmission media ("Cabling") in various AT&T serving offices identified in
AT&T Tariff F.C.C. No. 10 or equivalent intrastate tariffs ("AT&T Central
Offices") or at AT&T's customers' locations ("Customer Premises").
The undersigned Declarant has the following interest in the
Equipment and Cabling ("Terminating Facilities"):
A perfected security interest.
For good and valuable consideration, receipt of which is hereby
acknowledged:
1. Without prejudice to any rights or claims Declarant may lawfully
have against Local Entity, and any rights or claims Local Entity may lawfully
have against AT&T, Declarant hereby releases AT&T and its affiliates and
customers from any and all damages, claims, demands, or liabilities, including
without limitation, claims or liabilities based on AT&T's or AT&T's customers'
fault or negligence, with respect to the Terminating Facilities located in AT&T
Central Offices or at Customer Premises.
2. Prior to transferring, assigning or granting any interest in the
Terminating Facilities or in any contract or instrument related to the
Terminating Facilities to a third party ("Transferee"), Declarant agrees to
obtain the prior written agreement of Transferee to be bound by all of the
rights and obligations of Declarant under this Lienholder's Agreement. In the
event any of Declarant's interest in the Terminating Facilities, or in any
contract or instrument related to the Terminating Facilities, is transferred,
assigned, or granted to a Transferee, Declarant covenants to release, indemnify,
defend, and hold AT&T and its affiliates and AT&T's customers harmless against
all losses, costs (including reasonable attorneys fees), damages, expenses,
claims, demands, or liabilities arising from any suit or action brought by
Transferee, including without limitation suits or actions based on AT&T's or
AT&T's customers' fault or negligence, in connection with the Terminating
Facilities.
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3. Declarant hereby waives any right to inspect or obtain access to
the Terminating Facilities, so long as the Terminating Facilities remain in an
AT&T Central Office or at any Customer Premises.
4. Notwithstanding the provisions of Paragraph 3 above, if Local
Entity must surrender possession of the Equipment to Declarant, Declarant will
make no more than one inspection of the Equipment at an AT&T Central Office or
at the premises of any AT&T customer ("Customer Premises"). Any inspection at a
Customer Premises is expressly conditioned upon prior approval by AT&T's
customer. Any inspection of Equipment that may be conducted by Declarant will be
coordinated by AT&T, such coordination will include all contacts with AT&T's
customer, and at AT&T's option, an AT&T employee or AT&T agent to escort
Declarant or Declarant's agent during the inspection. Any inspection of
Equipment at Customer Premises will be conducted at a time that is mutually
agreed upon by Declarant, AT&T and AT&T's customer. Any inspection of equipment
at an AT&T Central Office will be conducted at a time that is mutually agreed
upon by Declarant and AT&T.
5. If Local Entity ceases to use the Terminating Facilities located
in any AT&T Central Office to provide Services under the Agreement, Declarant
agrees that Local Entity shall remove the Terminating Facilities pursuant to
Section I.14 of Appendix I of the Agreement. Declarant also agrees that,
pursuant to Section I.15 of Appendix I of the Agreement, AT&T may at its option,
upon 10 days' written notice to Local Entity, (1) perform the removal of the
Terminating Facilities itself at Local Entity's sole risk and expense, or (2)
take ownership of the Terminating Facilities that Local Entity has failed to
remove in accordance with the requirements of Section I.14 of Appendix I of the
Agreement. Any Terminating Facilities removed by AT&T under Section I.15 of
Appendix I of the Agreement, shall be delivered at Local Entity's sole risk and
expense, to a location reasonably designated at that time by Local Entity,
provided that Local Entity has paid AT&T in advance for the costs of such
removal and delivery. If Local Entity fails to make such payment and designate a
location for delivery, AT&T will tender the Equipment to Declarant and Declarant
may make such payment to AT&T and designate a location for delivery on Local
Entity's behalf. If both Local Entity and Declarant fail to make such payment or
designate a location for delivery, AT&T may, at its option, take ownership of
the Terminating Facilities in accordance with Section I.16 of Appendix I of the
Agreement.
6. Notwithstanding the provisions of Paragraph 5 above, this
Paragraph 6 applies if, and only if, Local Entity must surrender possession of
the Terminating Facilities to Declarant. Declarant and Local Entity agree that
upon six months prior written notice to AT&T, Local Entity shall remove the
Terminating Facilities pursuant to Section I.14 of Appendix I of the Agreement.
Declarant also agrees that, pursuant to Section I.15 of Appendix I of the
Agreement, AT&T may at its option, upon 10 days' written notice to Local Entity
and Declarant, perform the removal of the Terminating Facilities itself at Local
Entity's sole risk and expense. Any Terminating
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Facilities removed by AT&T under Section I.15 of Appendix I of the Agreement,
shall be delivered at Local Entity's sole risk and expense, to a location
reasonably designated at that time by Declarant, provided that Local Entity has
paid AT&T in advance for the costs of such removal and delivery. If Local Entity
fails to make such payment, AT&T will tender the Equipment to Declarant and
Declarant may make such payment to AT&T on Local Entity's behalf. If both Local
Entity and Declarant fail to make such payment or Declarant fails to designate a
location for delivery, AT&T may, at its option, take ownership of the
Terminating Facilities in accordance with Section I.16 of Appendix I of the
Agreement.
7. If AT&T takes ownership of such Terminating Facilities in
accordance with Section I.16 of Appendix I of the Agreement, such Terminating
Facilities will be deemed abandoned in place and automatically conveyed to AT&T
and will become the property of AT&T, free of any interest or lien of any kind
by Local Entity, Declarant (or by any person claiming through Local Entity or
Declarant). Declarant further agrees that upon AT&T's request, Declarant will
execute and deliver to AT&T a bill of conveyance or such other assurances as may
be requisite to confirm or perfect the transfer of such Terminating Facilities
to AT&T.
8. Notwithstanding the provisions of Paragraphs 5 and 6 above, if by
reason of the termination of the Agreement for any cause or reason, Local Entity
ceases to use the Cabling located in any AT&T Central Office to provide
Communications Services under the Agreement, Declarant agrees to retire the
Cabling in place at the AT&T Central Offices. Declarant also agrees, pursuant to
Section I.16 of Appendix I of the Agreement, that any Cabling no longer used by
the Local Entity to provide Communications Services under the Agreement shall be
deemed abandoned in place at the AT&T Central Offices and automatically conveyed
to AT&T. Declarant further agrees to execute and deliver to AT&T a bill of
conveyance or such other assurances as may be requisite to confirm or perfect
the transfer of such Cabling to AT&T.
9. If Local Entity defaults in its obligations under the Agreement,
AT&T and Local Entity agree that Declarant as Secured Party may, but shall not
be obligated to, cure such default or defaults within the applicable notice and
cure periods provided thereunder, and, at Declarant's option (provided Declarant
cures all such defaults within such periods and notifies AT&T in writing that it
has cured such defaults) assume all rights and obligations of Local Entity under
the Agreement. If Declarant cures Local Entity's default or defaults pursuant to
this Paragraph 9, AT&T will recognize Declarant as a collateral assignee under
the Agreement, having all right, title, interest and obligations of the Local
Entity thereunder with the same force and effect as if Declarant had been an
original party thereto. Notwithstanding any other provisions of this Paragraph
9, Declarant and Local Entity agree that Declarant shall have no right to assign
any right or obligation which it may assume under the Agreement without the
express written consent of AT&T, that any such assignment of rights or
obligations
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SCHEDULE I-1
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under the Agreement without AT&T's express written consent shall be void, and
that AT&T may immediately terminate any services purchased from Local Entity by
AT&T without incurring any termination charges or other charges for early
termination. Declarant and Local Entity also agree that any payment for
Communications Services purchased by AT&T under the Agreement will continue to
be made to Local Entity pursuant to the terms of the Agreement until Declarant
notifies AT&T in writing that it has assumed all rights and obligations of Local
Entity under the Agreement pursuant to this Paragraph 9. Upon such written
notification, Local Entity expressly waives all rights and interest it may
otherwise have under the Agreement, including without limitations, the right to
receive payments for Communications Services provided to AT&T under the
Agreement.
10. All notices to be provided under this Lienholder's Agreement
shall be provided to AT&T at the following address (or such address as AT&T may
designate in writing):
AT&T
--------------------------------
--------------------------------
--------------------------------
--------------------------------
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SCHEDULE I-1
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11. Neither AT&T, Local Entity nor Declarant shall disclose the
existence and terms of this Lienholder's Agreement or of the Agreement to any
party without the express written consent of the other parties to this
Lienholder's Agreement. Before making any disclosure to a Transferee, Declarant
shall obtain AT&T's prior written consent to the disclosure as well as
Transferee's written agreement not to make further disclosure without AT&T's
prior written consent. The obligation of all parties to protect the
confidentiality of this Lienholder's Agreement and of the Agreement shall
survive the term of this Lienholder's Agreement.
12. If the provisions of any other contracts or agreements between
the parties to this Lienholder's Agreement conflict with any of the provisions
of this Lienholder's Agreement, the provisions of this Lienholder's Agreement
shall govern the rights and obligations of the parties.
13. This Lienholder's Agreement is binding upon the parties and
their permitted successors and assigns.
14. This Lienholder's Agreement will terminate upon expiration of
Declarant's perfected security interest in the Terminating Facilities, or until
the Agreement is terminated, whichever comes first. Declarant agrees to notify
AT&T in writing, within ten (10) days, when Declarant's perfected security
interest in the Terminating Facilities has expired.
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SCHEDULE I-1
Page 6 of 6
The Undersigned parties by their duly authorized representatives,
hereby execute this Lienholder's Agreement with intent to be bound hereby and
with the purpose that they will rely upon the covenants herein.
Accepted and Agreed to as aforesaid:
DECLARANT: BY:
---------------------------------
------------------------------------
(Name)
------------------------------------
(Title)
------------------------------------
(Date)
LOCAL ENTITY: BY:
---------------------------------
------------------------------------
(Name)
------------------------------------
(Title)
------------------------------------
(Date)
AT&T COMMUNICATIONS, INC. BY:
---------------------------------
------------------------------------
(Name)
------------------------------------
(Title)
------------------------------------
(Date)
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APPENDIX J
Page 1 of 3
SERVICE ASSURANCE WARRANTIES
J.1 Introduction
The Service Assurance Warranties ("SAWs") described in this Appendix J apply to
Dedicated Services, Switched Access Transport, and Switched Business Line
Services.
J.2 Delayed Installation SAW
J.2.A Under the delayed installation SAW, TWComm will apply a delayed
installation credit for any Service that is not provided by the confirmed due
date. The confirmed due date will be the date specified on TWComm's firm order
confirmation form, or other form of order acceptance.
J.2.A.i Except as otherwise provided in Section J.2.A.ii, the amount of
the delayed installation credit will be * (a) an amount no less than * ;
or (b) an amount no less than * .
J.2.A.ii For any Service that is not provided by the confirmed due date
because of a delay in the installation of a Service Element furnished by
Type II provisioning, the amount of the delayed installation credit will
be no less than * .
J.2.B Notwithstanding the foregoing, except as provided in Section J.2.E, a
delayed installation credit will not be applied, nor shall there be any other
adverse effects to TWComm under this Agreement, under the following
circumstances:
J.2.B.i installation is delayed at AT&T's request; or
J.2.B.ii installation is delayed at the premises where installation is
scheduled to be made (a) at the request of AT&T's customer, (b) because
AT&T's customer has not given TWComm necessary access to the premises
where installation is to be made, or (c) because AT&T's customer is not
ready to accept the Service until after the confirmed due date.
J.2.C The reasons stated in Section J.2.B.ii of this Appendix J shall not be
deemed the cause of an installation delay unless TWComm has:
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J.2.C.i made reasonable efforts to consult with the appropriate AT&T work
center (or such other contact specified by AT&T) by telephone; and
J.2.C.ii taken such further reasonable actions in an attempt to make
installation as AT&T may direct in the course of such consultation.
J.2.D If TWComm's reasonable efforts to consult with AT&T as required under
Section J.2.C.i of this Appendix J are unsuccessful, TWComm shall notify AT&T
of the reason for the delay as soon as reasonably possible.
J.2.E Notwithstanding the provisions of Section J.2.B of this Appendix J, a
delayed installation credit will be applied if TWComm fails to comply with any
of the requirements of Sections J.2.C or J.2.D of this Appendix J.
J.2.F Such delayed installation credits, and any other applicable remedy
pursuant to Section 20 and Appendix E-6 of this Agreement, shall constitute
AT&T's sole remedy for a delayed installation under this Agreement.
J.3 Service Interruption SAW
J.3.A Under the Service interruption SAW, TWComm will apply credits against
monthly recurring charges on an end-to-end Service basis, however, the
determination of the credit allowance shall be based upon the Provisioning Type
associated with the Service Element to which the interruption is sectionalized.
A Type I credit, as set forth in Section J.3.D.i of this Appendix J, is applied
to the entire Service whenever a Service experiences an interruption that is
sectionalized to a Type I Service Element. A Type II credit, as set forth in
Section J.3.D.ii of this Appendix J, is applied to the entire Service whenever a
Service experiences an interruption that is sectionalized to a Type II Service
Element. If TWComm is unable to sectionalize an outage to a particular Service
Element, then TWComm will apply a Type I credit to the entire Service.
J.3.B A Service is considered to be interrupted when * . TWComm and AT&T agree
that the Service is unfit if it * .
J.3.C An interruption is deemed to begin when the interruption is first detected
by AT&T or TWComm (whichever is earlier), and will be deemed to end when
* . When a Service that has experienced an interruption that has been restored
by TWComm and AT&T received notice of restoration pursuant to Section 17.B of
this Agreement, AT&T shall test the Service with reasonable promptness and,
if the Service has been
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APPENDIX J
Page 3 of 3
properly restored, will acknowledge that the Service has been restored pursuant
to this Section J.3.C.
J.3.D In the event of a Service interruption, the following credits against
monthly recurring charges will apply:
J.3.D.i Except as otherwise provided in Section J.3.D.ii, the amount of
the interruption credit will be the greater of (a) an amount no less than
* , or (b) an amount no less than the * .
J.3.D.ii For any interruption of a Service Element furnished by Type II
provisioning, the amount of interruption credit will be no less than
the * .
J.3.E Such interruption credits, and any other applicable remedy pursuant to
Section 20 and Appendix E-6 of this Agreement, shall constitute AT&T's sole
remedy for a Service interruption under this Agreement.
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SERVICE PERFORMANCE EVALUATION PROCESS
K.1 Introduction
K.1.A This Appendix K sets forth the process to be used by the parties to
evaluate TWComm's overall Service performance. The performance evaluation
process is composed of two elements as follows:
K.1.A.i The attributes and administration of Direct Measures of Quality
("DMOQs") used to evaluate TWComm's Service performance for each specific
Service operation are described in Sections K.2, K.3 and K.4 of this
Appendix K.
K.1.A.ii The method to be used to determine TWComm's overall performance
on DMOQs across the United States and in each MSA that TWComm is offering
Services to AT&T is described in Sections K.5 through K.1 1 of this
Appendix K.
K.2 CAP Performance and Quality Requirements Document
K.2.A AT&T has previously provided to TWComm a document that contains a set of
DMOQs (referred to herein as "CAP Performance and Quality Requirements") which
is hereby incorporated by reference to this Agreement.
K.2.B The CAP Performance and Quality Requirements may supplement, but do not
amend or replace, other Service obligations contained elsewhere in the
Agreement.
K.2.C The CAP Performance and Quality Requirements may be modified by AT&T from
time to time as set forth in Section K.4 of this Appendix K.
K.3 DMOQs
K.3.A Each DMOQ described in the CAP Performance and Quality Requirements
contains performance standards, which are referred to as DMOQ Standards.
K.3.B Each DMOQ will have a minimum of two and a maximum of five DMOQ Standards.
These DMOQ Standards, in descending order, are:
EXCEEDS (is provided for some or all DMOQs);
MEETS (is provided for every DMOQ);
APPROACHES (is provided for some or all DMOQs);
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DOES NOT MEET (is provided for every DMOQ);
SIGNIFICANTLY DEFICIENT (is provided for some or all DMOQs).
K.3.C Each DMOQ has been assigned a weight ("Weight") reflecting its relative
criticality to AT&T. The higher the Weight the greater the impact a DMOQ will
have on TWComm's overall performance measurement.
K.3.D By their nature, some DMOQs measure performance on a national basis (e.g.,
Timeliness of Bill). These DMOQs will be labeled "National DMOQs" in the CAP
Performance and Quality Requirements, and TWComm's nationwide performance of
National DMOQs will be used in lieu of specific MSA performance information for
each MSA being evaluated.
K.3.E An illustrative example of a DMOQ, its Weight and Performance Standards as
each may appear in the CAP Performance and Quality Requirements is shown below:
E.5.A DUE DATE MET (WEIGHT 3)
The Supplier shall provide Access Services on the date requested by AT&T.
This standard measures the occurrences where the Supplier DOES NOT provide
Access Service(s) on the date requested by AT&T.
DMOQ STANDARDS
MEETS: *
DOES NOT MEET: *
SIGNIFICANTLY *
DEFICIENT:
K.4 Adjustments to Performance Specifications
K.4.A AT&T may *
K.4.B AT&T will provide TWComm written notification of any change to the CAP
Performance and Quality Requirements as soon as possible and in any event at
least 30 days before a new or revised DMOQ will become a performance
requirement. Measurements and assessments of revised or new DMOQs may start in
the Performance Evaluation Period (as this term is defined in Section 1(9 of
this Appendix K) following the 30-day notice period.
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K.5 Numerical Measurement of Quality
K.5.A TWComm's Service quality will be measured for each MSA by a numerical
composite of TWComm's performance on all DMOQs applicable to the Services
provided in such MSA. This numerical measurement is referred to as TWComm's
Composite Performance. The DMOQs on which the Composite Performance is based are
set forth in the then current CAP Performance and Quality Requirements.
K.5.B TWComm's Service quality will also be measured across the United States
for all Services using Composite Performance. TWComm's national performance
shall be for informational purposes only; accordingly, except as otherwise
expressly stated in Sections 16.E and 28.C of this Agreement, AT&T shall have no
remedies against TWComm with respect to TWComm's national Composite
Performance.
K.5.C The Composite Performance for each MSA will be calculated independently of
the calculation for every other MSA and for the United States.
K.5.D The method for calculating Composite Performance is set forth in Section
K.7 of this Appendix K.
K.5.E Based upon the Composite Performance achieved by TWComm, TWComm's
overall performance ("Service Performance") for the applicable area (MSA or
national) will fall within one of the following two categories: Satisfactory
Performance or Less Than Satisfactory Performance, as defined in Section K.8 of
this Appendix K.
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K.6 DMOQ Standards
K.6.A As set forth in Section K.3, each DM00 has a minimum of two and a maximum
of five levels of DMOQ Standards. Each DMOQ Standard is assigned the point value
shown to its right in Table 1 below:
TABLE I
DMOQ STANDARD POINT VALUES
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DMOQ STANDARD POINT VALUE
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EXCEEDS *
MEETS *
APPROACHES *
DOES NOT MEET *
SIGNIFICANTLY DEFICIENT *
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K.7 Method to Calculate Composite Performance
K.7:A As further described in Sections K.9 and K.10, the party responsible for
the preparation of the Performance Evaluation will assess the available
performance data, and will determine in accordance with the then current CAP
Performance and Quality Requirements which DMOQ Standard has been achieved by
TWComm for each DMOQ to be evaluated for each MSA and for the United States.
K.7.B For each DM0Q to be evaluated, the Weight set forth in the then current
CAP Performance and Quality Requirements for each such DM0Q will be converted to
its Percentage Weight. The Percentage Weight of a DM0Q is determine by the
following formula:
<TABLE>
<S> <C>
*
</TABLE>
K.7.C For each DM0Q to be evaluated, the Percentage Weight is multiplied by the
point value specified in Table 1 of this Appendix K for the DM0Q Standard
achieved by TWComm. The resulting product is the DM0Q Value for each
DM0Q.
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K.7.D The sum of the DMOQ Values for all the DMOQs evaluated in the MSA or the
United States is the Composite Performance for that area.
K.8 Determination of Service Performance
K.8.A TWComm's Composite Performance for each MSA and the United States will be
categorized into one of two Service Performance categories reflecting AT&T's
performance expectations. Such categories are: Satisfactory Performance and Less
Than Satisfactory Performance. Table 2 below sets forth TWComm's Composite
Performance thresholds for each Service Performance category.
TABLE 2
THRESHOLDS FOR SERVICE PERFORMANCE
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COMPOSITE SERVICE PERFORMANCE
PERFORMANCE
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* SATISFACTORY PERFORMANCE
* LESS THAN SATISFACTORY PERFORMANCE
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K.9-Data Collection and Reporting
K.9.A AT&T will determine, in its reasonable discretion, the periodic intervals
for which TWComm's performance on DMOQs will be evaluated (each a "Performance
Evaluation Period"), which shall not be less than one month. Initially, the
Performance Evaluation Period will be each calendar month. AT&T will provide
TWComm reasonable advance written notice of any change in the Performance
Evaluation Period.
K.9.B AT&T, in its reasonable discretion, may elect to have TWComm's Composite
Performance determined on the basis of performance data recorded and compiled by
AT&T; performance data recorded and compiled by TWComm; or any combination
thereof.
K.9.B.i AT&T may designate to TWComm those DMOQs for which TWComm will
report performance data (the "Self-Reported DMOQs"). In the absence of any
designation otherwise by AT&T, the Self-Reported DMOQs shall include all
DMOQs set forth in the then current CAP
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Performance and Quality Requirements (excluding the DMOQs which apply
solely to Services which are not provided to AT&T by TWComm in that MSA).
K.9.B.ii TWComm shall compile performance data concerning each
Self-Reported DM0Q for each MSA and for the United States for each
Performance Evaluation Period, and shall report the data to AT&T within 10
days after the end of such Performance Evaluation Period, except as
otherwise provided in Section K.9.B.vi of this Appendix K.
K.9.B.iii For each Performance Evaluation Period, AT&T shall compile
performance data concerning each DM00 that is not a Self-Reported DMOQ for
each MSA and for the United States, and shall report the data to TWComm
within 20 days after the end of such Performance Evaluation Period.
K.9.B.iv For each Self Reported DMOQ, AT&T may reasonably designate the
method by which TWComm shall measure performance, and the format in which
TWComm shall report its performance to AT&T.
K.9.B.v With respect to AT&T's DMOQs that are applicable as of the
Effective Date of this Agreement, TWComm agrees that such DMOQs shall be
deemed Self-Reported DMOQs, if AT&T so designates.
K.9.B.vi With respect to any amendments to or additional DMOQs that apply
after the Effective Date of this Agreement, if it is not reasonably
feasible for TWComm to provide performance data relating to such DMOQs, or
if it is not reasonably feasible for TWComm to provide performance data
relating to such DMOQs by the method and/or form requested by AT&T for
Self-Reported DMOQs, TWComm will promptly notify AT&T. Unless AT&T and
TWComm mutually agree that it is reasonably feasible for TWComm to measure
or report such performance data for such DMOQs, the applicable DM0Q will
not be considered a Self-Reported DMOQ but will be incorporated into the
Composite Performance measures based on AT&T's performance data compiled
in accordance with Section K.9.B.iii of this Appendix K.
K.9.C If TWComm fails to report performance data on a Self-Reported DM0Q to AT&T
within 10 days as described in Section K.9.B.ii of this Appendix K after the end
of any Performance Evaluation Period (or such shorter period as mutually agreed
upon by AT&T and TWComm) the performance during such Performance Evaluation
Period for the affected area will be assumed to be the lowest DM0Q Standard
available for that DMOQ.
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K.9.D If AT&T fails to report performance data on a DMOQ to TWComm that is not a
Self-Reported DMOQ within 20 days after the end of any Performance Evaluation
Period (or such shorter period as mutually agreed upon by AT&T and TWComm) the
performance during such Performance Evaluation Period for the affected area
will be assumed to be MEETS for that DMOQ.
K.1O Performance Evaluation
K.1O.A With respect to each MSA and the United States, AT&T may (1) elect to
prepare a report of TWComm's performance ("Performance Evaluation") for each
Performance Evaluation Period; (2) direct TWComm to prepare a Performance
Evaluation for each Performance Evaluation Period; or (3) not require
Performance Evaluations. Initially, AT&T requests that TWComm prepare and
provide to AT&T a monthly Performance Evaluation for each MSA in which TWComm is
then offering Service to AT&T and for the United States.
K.1O.B Each Performance Evaluation will provide the following details with
respect to each DMOQ applicable to the Services provided by TWComm within the
area being evaluated: the DMOQ identifier; the DMOQ Standard achieved by TWComm
(as determined with respect to the performance data); the Percentage Weight; and
the DMOQ Value. Each Performance Evaluation will provide the resulting Composite
Performance and Service Performance achieved by TWComm for the area being
evaluated for the Performance Evaluation Period.
K.10.C If AT&T has elected to prepare and report the Performance Evaluation,
such Performance Evaluation will be provided to TWComm within 23 days after
the end of the Performance Evaluation Period.
K.1O.C.i If AT&T fails to provide TWComm the Performance Evaluation within
23 days after the end of the Performance Evaluation Period; and TWComm's
Service Performance is Less Than Satisfactory for the ) Performance
Evaluation Period; and if that evaluation is the first or second Less Than
Satisfactory Performance evaluation in any 5 consecutive month period,
such evaluation will not be a cause for which AT&T may elect a Remedy (as
this term is described in Appendix E-6 of this Agreement).
K.1 0.C.ii If AT&T fails to provide a Performance Evaluation within 30 )
days after the end of the Performance Evaluation Period, then TWComm's
Service Performance will be deemed to be Satisfactory for such Performance
Evaluation Period.
K.10.D If AT&T has directed TWComm to prepare and report the Performance
Evaluation, such Performance Evaluation will be provided to AT&T within (i)
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three business days following date on which AT&T provides to TWComm all
performance data that AT&T is to report, or (ii) 23 days after the end of the
Performance Evaluation Period, which ever occurs first. (However, TWComm will
not be required to produce a Performance Evaluation earlier than 13 days after
the end of the Performance Evaluation Period.) If TWComm fails to provide AT&T
the Performance Evaluation within three business days of the required time
frame, *.
K.11 TWComm Self-Reporting Processes
K.11.A TWComm shall establish systems and procedures for measuring and
reporting its performance (herein referred to as TWComm's self-reporting
processes) as set forth in Sections K.9 and K.10 of this Appendix K. TWComm
will take all reasonable steps necessary to ensure the accuracy of such
self-reporting processes. TWComm will afford AT&T the opportunity to evaluate
TWComm's self-reporting processes for DMOQs that apply to Dedicated Services and
Switched Services, respectively. Deployment and evaluation of TWComm's
self-reporting processes shall include the following steps:
K.11.B.i TWComm will establish accurate and reliable self-reporting
processes, including controls to identify and prevent performance
reporting process defects.
K.11.B.ii TWComm will afford AT&T the opportunity to review and assess
TWComm's performance reporting processes.
K.11.B.iii TWComm will make all necessary improvements to its
self-reporting process, as reasonably requested by AT&T.
K.11.B.iv TWComm will afford AT&T the opportunity to verify that TWComm's
self-reporting processes are capable of collecting and reporting accurate
data for purposes of meeting the Dedicated Services Preconditions and
Switched Services Preconditions set forth in Appendix E-6 of this
Agreement.
K.11.C. TWComm will afford AT&T the opportunity to review and audit TWComm's
processes, periodically or upon AT&T's request, to verify that such processes
continue to satisfy AT&T's requirements.
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ALTERNATIVE DISPUTE RESOLUTION
L.1 Purpose
L.1.A This Appendix L is intended to provide for the expeditious, economical,
and equitable resolution of disputes between TWComm and AT&T arising under this
Agreement.
L.2 Exclusive Remedy
L.2.A For all disputes between TWComm and AT&T arising out of this Agreement or
its breach, negotiation and arbitration under the procedures provided herein
shall be the exclusive remedy. Except as permitted under Section 41 of this
Agreement, TWComm and AT&T agree not to resort to any court, agency, or private
group with respect to such disputes except in accordance with this Appendix L. A
party that resorts to any court, agency or private group in violation of the
foregoing shall be liable to the other party for all costs and expenses
(including reasonable attorneys' fees) incurred by the other party in staying
such action or compelling arbitration hereunder.
L.2.B The Arbitrator (as defined in Section L.6.A below) appointed hereunder
shall determine whether any claim or dispute is required to be arbitrated
hereunder, or any other issue regarding arbitrability of a claim or dispute. It
for any reason, certain claims or disputes are deemed by the arbitrator to be
nonarbitrable, the non-arbitrability of those claims or disputes shall in no way
affect the arbitrability of any other claims or disputes.
L.2.C If, for any reason, the Federal Communications Commission or any other
federal or state regulatory agency exercises jurisdiction over and decides any
dispute related to this Agreement or to any Tariff and, as a result, a claim is
adjudicated in both an agency proceeding and an arbitration proceeding under
this Appendix L, the following provisions shall apply:
L.2.C.i To the extent required by law, the agency ruling shall be binding
upon the parties for the limited purposes of regulation within the
jurisdiction and authority of such agency.
L.2.C.ii The arbitration ruling rendered pursuant to this Appendix L shall
be binding upon the parties for purposes of establishing their respective
contractual rights and obligations under this Agreement, and for all other
purposes not expressly precluded by such agency ruling.
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L.3 Informal Resolution of Disputes
L.3.A Prior to initiating an arbitration pursuant to the Commercial Rules of
Arbitration ("Rules") of the American Arbitration Association ("AAA"), the
parties to this Agreement shall submit any dispute between TWComm and AT&T for
resolution to an Inter-Company Review Board consisting of one representative
from AT&T at the Director-or-above level and one representative from TWComm at
the Vice-President-or-above level (or at such lower level as each party may
designate).
L.3.B The parties may enter into a settlement of any dispute at any time. The
settlement agreement shall be in writing, and must identify how the Arbitrator's
fee for the particular proceeding, if any, will be apportioned.
L.3.C At no time, for any purposes, may a party introduce in evidence or inform
the Arbitrator of any statement or other action of a party in connection with
negotiations between the parties pursuant to Section L.3.A or Section L.3.B of
this Appendix L.
L.4 Initiation of an Arbitration
L.4.A If the Inter-Company Review Board is unable to resolve the dispute within
30 days (or such longer period as agreed to in writing by the parties) of such
submission, and the parties have not otherwise entered into a settlement of
their dispute, either party may initiate an arbitration in accordance with the
AAA Rules.
L.5 Governing Rules for Arbitration
L.5.A The rules set forth below and the Rules of the AAA, including all
expedited procedures prescribed therein, shall govern all arbitration
proceedings initiated pursuant to this Appendix L; however, such arbitration
proceedings shall not be conducted under the auspices of the AAA unless the
parties mutually agree or the conditions set forth in Section L.6.F of this
Appendix L apply. Where any of the rules set forth herein conflict with the
Rules of the AAA, the rules set forth in this Appendix L shall prevail.
L.6 Appointment and Removal of Arbitrator
L.6.A A sole arbitrator (the "Arbitrator") will preside over each dispute
submitted for arbitration under this Agreement.
L.6.B The parties shall appoint an Arbitrator who will serve for the term of
this Agreement, unless removed pursuant to Section L.6.D of this Appendix L.
Unless the parties otherwise agree, the Arbitrator shall be a person with at
least 10 years' experience in the local telecommunications business, long
distance
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access arrangements. The appointment will be made by mutual agreement in writing
within 30 days after a party has initiated an arbitration proceeding (or such
longer period as the parties may mutually agree to in writing).
L.6.C In the event that multiple arbitration proceedings are in progress
simultaneously under this Agreement, the Arbitrator may request, in writing, the
appointment of one or more additional Arbitrators. The parties shall appoint
such additional Arbitrators meeting the qualifications set forth in Section
L.6.B within 30 days after receipt of such request (or within such longer period
as the Arbitrator's request designates). The Arbitrator may assign arbitration
proceedings to the additional Arbitrators in his or her sole discretion, and
provided that each such proceeding shall be presided over by a single
arbitrator. Additional Arbitrators shall have all the powers and
responsibilities of the Arbitrator in proceedings over which they preside, but
shall serve only for the duration of the disputes for which they were retained.
L.6.D The parties may, by mutual written agreement, remove an Arbitrator at any
time, and shall provide prompt written notice of removal to such Arbitrator.
L.6.E In the event that an Arbitrator resigns, is removed pursuant to Section
L.6.D of this Appendix L, or becomes unable to discharge his or her duties, the
parties shall, by mutual written agreement, appoint a replacement Arbitrator
within 30 days after such resignation, removal, or inability, unless a different
time period is mutually agreed upon in writing by the parties. Any matters
pending before the Arbitrator at the time he or she resigns, is removed, or
becomes unable to discharge his or her duties, will be assigned to the
replacement Arbitrator as soon as the replacement Arbitrator is appointed.
L.6.F In the event that the parties do not appoint an Arbitrator within the time
limit set forth in Section L.6.B of this Appendix L, an additional Arbitrator
within the time limit set forth in Section L.6.C of this Appendix L, or a
replacement Arbitrator within the time limit set forth in Section L.6.E of this
Appendix L, either party may apply to AAA for appointment of such Arbitrator. If
any proceeding must be conducted under the auspices of the AAA in order for the
AAA to appoint the Arbitrator, the parties agree that such proceeding shall be
so conducted. Prior to filing an application with the AAA, the party filing such
application shall provide 10 days' prior written notice to the other party to
this Agreement.
L.7 Duties and Powers of the Arbitrator
L.7.A The Arbitrator shall receive complaints and other permitted pleadings,
oversee discovery, administer oaths and subpoena witnesses pursuant to the
United States Arbitration Act, hold hearings, issue decisions, and maintain a
record of proceedings. The Arbitrator shall have the power to award any remedy
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or relief that a court with jurisdiction over this Agreement could order or
grant, including, without limitation, the awarding of damages, pre-judgment
interest, specific performance of any obligation created under the Agreement,
issuance of an injunction, or imposition of sanctions for abuse or frustration
of the arbitration process, except that the Arbitrator may not award:
L.7.A.i punitive damages; or
L.7.A.ii any remedy rendered unavailable to the parties pursuant to this
Agreement, including without limitation Section 35 of this Agreement.
L.7.B The Arbitrator shall not have the authority to limit, expand, or otherwise
modify the terms of this Agreement.
L.8 Discovery
L.8.A TWComm and AT&T shall attempt, in good faith, to agree on a plan for
document discovery. Should they fail to agree, either TWComm or AT&T may request
a joint meeting or conference call with the Arbitrator. The Arbitrator shall
resolve any disputes between TWComm and AT&T, and such resolution with respect
to the scope, manner, and timing of discovery shall be final and binding.
L.9 Privileges
L.9.A Although conformity to certain legal rules of evidence may not be
necessary in connection with arbitration initiated pursuant to this Appendix,
the Arbitrator shall, in all cases, apply the attorney-client privilege and the
work product immunity.
L.10 Location of Hearing
L.1O.A Unless both parties agree otherwise, hearings must take place in New
York, New York at a time and place designated by the Arbitrator.
L.11 Decision
L.11.A The Arbitrator's decision and award shall be final and binding, and shall
be in writing. Judgment upon the award rendered by the Arbitrator may be entered
in any court having jurisdiction thereof. Either party may apply to the United
States District Court for the district in which the hearing occurred for an
order enforcing the decision.
L.12 Fees
L.12.A The Arbitrator's fees and expenses that are directly related to a
particular proceeding shall be paid by the losing party. In cases where the
Arbitrator
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determines that neither party has, in some material respect, completely
prevailed or lost in a proceeding the Arbitrator shall, in his or her
discretion, apportion expenses to reflect the relative success of each party.
Those fees and expenses not directly related to a particular proceeding shall be
shared equally. In accordance with Section L.3.B of this Appendix L, in the
event that the parties settle a dispute before the Arbitrator reaches a decision
with respect to that dispute, the settlement agreement must specify how the
Arbitrator's fees and expenses for the particular proceeding will be
apportioned.
L.12.B In an action to enforce or confirm a decision of the Arbitrator, the
prevailing party shall be entitled to its reasonable attorneys' fees, expert
fees, costs, and expenses without regard to the local rules of the district in
which the suit is brought.
L.13 Confidentiality
L.13.A TWComm, AT&T, and the Arbitrator will treat the arbitration proceeding,
including the hearing and any conferences, discovery, or other related events,
as confidential, except as necessary in connection with a judicial challenge to
or enforcement of an award, or unless otherwise required by an order or lawful
process of a court or governmental body.
L.13.B In order to maintain the privacy of all arbitration conferences and
hearings, the Arbitrator shall have the power to require the exclusion of any
person, other than a party, counsel thereto, or other essential person.
L.13.C To the extent that any information or materials disclosed in the course
of an arbitration proceeding contains proprietary or confidential Information of
either party, it shall be safeguarded in accordance with Section 41 of this
Agreement. However, nothing in Section 41 of this Agreement shall be construed
to prevent either party from disclosing the other party's Information to the
Arbitrator in connection with or in anticipation of an arbitration proceeding.
In addition, the Arbitrator may issue orders to protect the confidentiality of
proprietary information, trade secrets, or other sensitive information.
L.14 Service of Process
L.14.A Service may be made by submitting one copy of all pleadings and
attachments and any other documents requiring service to each party and one copy
to the Arbitrator. Service shall be deemed made (i) upon receipt if delivered by
hand; (ii) after five business days if sent by certified U.S. mail; (iii) the
next business day if sent by overnight courier service; (iv) upon confirmed
receipt if transmitted by facsimile. If service is by facsimile, a copy shall be
sent the same day by hand delivery, first class U.S. mail, or overnight courier
service.
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L.14.B Service by AT&T to Time Warner Communications at the address designated
for delivery of notices in Appendix M shall be deemed to be service to TWComm
or any applicable Local Entity. Service by TWComm to AT&T ) Communications,
Inc. at the address designated for delivery of notices in Appendix M shall be
deemed to be service to AT&T.
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NOTICES
M.1 Introduction
M.1.A This Appendix M specifies the person and address for either party to
provide written notices or written consents to the other party as required by
this Agreement.
M.2 Notices
M.2.A Notices to each party under this Agreement shall be given in writing to
the following individual or such individual's designated agent. Unless otherwise
provided in the Agreement notices may be sent by hand delivery, United States
first class mail, facsimile, overnight courier service, electronic mail, or
other means mutually agreed to by the parties.
M.2.B Notice shall be deemed received (i) upon receipt if delivered by hand;
(ii) after five business days if sent by U.S. mail; (iii) upon electronic
confirmation of receipt if transmitted by facsimile; (iv) the next business day
if sent by overnight courier service; (v) upon electronic confirmation of
receipt if transmitted by electronic mail; and (vi) upon actual receipt if sent
by other means.
M.2.C If to AT&T:
Division Manager - Competitive Access Planning and
Management
Route 202/206 North, Room 4C244
Bedminster, New Jersey 07921
Telephone number: 908 234 7104
Facsimile number: 908 234 3527
M.2.D If to TWComm:
Director of National Accounts - AT&T
Time Warner Communications
160 Inverness Drive West
Denver, Colorado 80112
Telephone number: 303 799 5600
Facsimile number: 303 799 3317
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M.2.E All notices with respect to the ADR procedures set forth in Appendix L of
this Agreement shall also be sent to the parties' respective law departments.
M.2.E.i If to AT&T:
General Attorney - Network Services Division
295 North Maple Avenue, Room 3253C2
Basking Ridge, New Jersey 07920
Telephone number: 908 234 7178
Facsimile number: 908 953 8360
M.2.E.ii If to TWComm:
General Counsel
Time Warner Communications
300 First Stamford Place
Stamford, Connecticut 06902
Telephone number: 203 328 0600
Facsimile number: 203 328 4840
M.2.F By mutual written agreement, the parties may amend this Appendix M so that
notices of various types can be sent directly to the representative for any
applicable job functions.
M.2.G Either party may unilaterally change its (i) designated representative
and/or (ii) the address, telephone number, or facsimile number for the receipt
of notices by giving seven days' prior written notice to the other party in
accordance with the terms and conditions of this Appendix M.
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ADDENDUM I
Page 1 of 2
SERVICE CREDITS FOR TRANSITION OF EMBEDDED SERVICES
A Introduction
A.1 This Addendum shall control the accrual and payment of billing credits
("Service Credits") that TWComm shall grant to AT&T under certain conditions in
return for AT&T's transitioning of Embedded Services to TWComm.
A.2 This Addendum applies only to Embedded Services contracted by AT&T prior to
January 9,1995. Service Credits shall not apply to any other Embedded Services
unless AT&T and TWComm expressly agree otherwise.
B Offered Services
B.1 If TWComm offers to provide AT&T any Embedded Service under the terms,
conditions and pricing principles of this Agreement, it shall provide AT&T
Service Credits with respect to such Embedded Service pursuant to this Addendum
1.
C Requirements
C.1 If AT&T elects to transition an Embedded Service to TWComm, AT&T shall work
cooperatively with TWComm to minimize any LEC termination liabilities associated
with such Embedded Service. Such cooperative efforts may include use of "fresh
look" under FCC Docket 91-141, utilization of LEC portability programs, and
sequencing of such transition activities.
C.2 AT&T shall not be required to rearrange (i.e., groom) LEC services to
minimize LEC termination liabilities unless TWComm elects to also grant Service
Credits to AT&T for the LEC nonrecurring charges associated with such
rearranging activity.
C.3 AT&T will use reasonable commercial efforts to accurately estimate LEC
nonrecurring charges associated with such transition activities, and at TWComm's
request, will provide TWComm with supporting documentation that is reasonably
available to AT&T at such time.
D Credit Accrual
D.1 At such time as AT&T elects to transition an Embedded Service to TWComm,
AT&T will provide TWComm with supporting documentation as to the LEC termination
liability that AT&T will incur as a result of such transition. * applicable to
the Embedded Service *.
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ADDENDUM 1
Page 2 of 2
D.2 * (as determined pursuant to Section C.3 above) * upon the transition of
the respective Service to TWComm.
D.3 If a Service for which AT&T has accrued a Service Credit under this Addendum
1 is disconnected without cause during 1996, the Service Credit for such Service
shall immediately be extinguished. A Service will be deemed to be disconnected
with cause if TWComm fails to meet any one of the Ongoing Conditions set forth
in Appendix E-6 within the applicable Serving Area at the time the Service is
disconnected, provided that such failure was not caused by AT&T and that any
cure period applicable to such Ongoing Condition has elapsed.
E Credit Application
E.1 Service Credits shall be applied to each monthly AT&T bill *
whichever occurs first, subject to the limitation set forth in Section E.4
below.
E.2 Any Service Credit accrued but remaining after the issuance of the last bill
rendered in 1996 shall be extinguished subject to the adjustment process
described in Section F below.
E.3 The amount of Service Credit in any one billing period shall be equal to *.
E.4 The maximum aggregate amount of Service Credits shall not exceed
*.
F Credit Adjustments
F.1 If (a) TWComm encounters delays in the satisfaction of the Dedicated
Preconditions or has failed any Ongoing Conditions (as these terms are described
in Appendix E-6), such failure was not caused by AT&T, and such delay or failure
by TWComm materially affects AT&T's ability to recover all of its accrued
Service Credits in 1996; or (b) TWComm has declined to provide Embedded Services
for reasons other than bona fide operations or contractual concerns, such that
it has prevented AT&T from obtaining the benefit of the maximum Service Credits
hereunder, then AT&T and TWComm shall cooperatively develop an alternative
procedure that negates the effect of TWComm's delay, failure, or refusal in (a)
or (b) above, on AT&T's ability to obtain Service Credits.
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AMENDMENT ONE
Page 1 of 13
AMENDMENT ONE TO THE AGREEMENT
between
TIME WARNER COMMUNICATIONS
and
AT&T COMMUNICATIONS, INC.
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The effective date of this Amendment One is:
June 1, 1997
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Pursuant to Section 48 of the Agreement between AT&T Communications, Inc. (AT&T)
and Time Warner Communications (TWComm) dated September 15, 1995 (Agreement),
the parties hereby agree to enter into this Amendment One to the Agreement and
to incorporate the following changes: (i) to add supplemental provisions to
the Agreement which cover AT&T Wireless Services, Inc.'s purchase of Services
under the Agreement; (ii) the pricing and billing of certain POP to POP
Services; and (iii) the application of less stringent network requirements under
certain conditions.
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PART I AT&T WIRELESS SERVICES
1. AT&T Wireless Services, Inc. of 50400 Carillon Point in Kirkland, Washington
98033, and all of its divisions and affiliates (herinafter referred to
collectively as "AWS") shall be included in the definition of "AT&T" within the
terms and conditions of the Agreement, and any MSA Schedules entered into
pursuant to the Agreement, and, accordingly, all terms and conditions of the
Agreement and all MSA Schedules as well as the terms of this Amendment shall
apply to TWComm and AWS.
2. The "AT&T Wireless Services: Dedicated Access Service Lever Requirements
dated January 1, 1997," a copy of which has been provided to TWComm, and as
modified from time to time (the "AWS Requirements Document"), shall be
incorporated into the "AT&T-CAP Infrastructure Requirements" document and made a
part thereof. Accordingly, notwithstanding
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AMENDMENT ONE
Page 2 of 13
anything to the contrary in the Agreement, the provisions set forth in the AWS
Requirements Document shall apply to any On Net Services provided to AWS under
the Agreement and any applicable MSA Schedules. The provisions governing AT&T's
right to modify the AT&T-CAP Infrastructure Requirements document shall also
govern AT&T's right to modify the AWS Requirements Document.
3. Notwithstanding Section 13.D, with respect to each AWS region, AWS may
designate any reasonable requirements (e.g., manual or mechanized interfaces and
process) necessary for the provisioning, maintenance and billing for Services
provided to AWS within such region.
4. Notwithstanding Sections 15.C.i.(b), 15.C.i.(c) and 15.01(d), the network
expansion requirements set forth in Appendix H are waived solely for Services
provided to AWS.
5. Notwithstanding Appendixes E-1, E-2 and E-6, as amended, any Service
provided by TWComm to AWS for which AWS requires that TWComm provide such
Service via Type I Provisioning shall be priced on an individual case basis,
provided that: (1) such location is not, by that time, served by TWComm's
network; and (2) such location is not deemed to be a Mandatory Type I Building
(as described in Appendix H).
6. Within 15 days after the end of each billing period, TWComm will send all
bills, along with a national summary of such bills, to AWS for payment for all
Services provided by TWComm to AWS pursuant to the Agreement for that billing
period. Such bills shall be delivered to the address designated by the AWS
representative ordering Service from TWComm. Also, within such 15 day period,
TWComm shall forward a copy of such national summary to:
AT&T Manager - Contract Management
One Oak Way Room 2WC127
Berkeley Heights, New Jersey 07922-2724
7. At AWS sole discretion, Services for AWS may be ordered by a regional AWS
representative from the designated local TWComm representative for such Selected
MSA. Table 1, attached hereto and made a part hereof, provides a list of
TWComm's current designated representatives for each MSA for which TWComm is
offering telecommunications services as of June 1, 1997. In accordance with
Section 48 of this Agreement, Table-1 may be amended by written notice from
TWComm to AT&T.
8. Table 2, attached hereto and made a part hereof, contains a list of current
AWS divisions and affiliates. In accordance with Section 48 of this Agreement,
Table 2 may be amended by written notice from AT&T to TWComm.
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AMENDMENT ONE
Page 3 of 13
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PART II POP TO POP SERVICES
9. Notwithstanding Appendixes E-2 and E-6 of the Agreement as amended, with
respect to any DS-3 Services provided by TWComm to AT&T between the Served
Premises indicated in Table 3, attached hereto and made a part hereof:
9.a the non-recurring installation charge is * per DS-3 Service;
9.b the monthly recurring charge for each DS-3 Service shall be the lesser
of the applicable monthly recurring charge specified in Table 3 of this
Amendment One or the monthly recurring charge determined for such DS-3
Service based upon the pricing principles set forth in Appendixes E-1, E-2
and E-6, as amended; and
9.c notwithstanding AT&T's ordering and accepting DS-3 Service pursuant to
this Section 2, TWComm shall not begin to impose monthly recurring charges
until the corresponding services provided by other suppliers for such
specific DS-3 project (i.e., the distant-end access service and the
inter-city service) have also been accepted by AT&T. AT&T will notify
TWComm of the date of such acceptance.
10. Pursuant to Section 48 of the Agreement, Table 3 of this Amendment One may
be modified by letter agreement executed by authorized representatives of AT&T
and TWComm.
11. In accordance with Appendix G 2 of the Agreement, with respect to such
specific DS-3 Services provided by TWComm to AT&T between the Served Premises
indicated in Table 3 of this Amendment One:
11.a unless otherwise directed by AT&T, TWComm shall use a separate and
distinct Billing Account Number (BAN) for such Services; and
11.b unless otherwise directed by AT&T, TWComm shall deliver the bills for
such Services to the following address:
AT&T
Billing Supervisor
1200 Peachtree Street
Promenade II, Room 15W42
Atlanta GA, 30309.
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AMENDMENT ONE
Page 4 of 13
PART III NETWORK REQUIREMENTS
12. Notwithstanding Sections F.4.A and F.4.E. of Appendix F of the Agreement,
TWComm may provide a Service utilizing a network that meets the less stringent
requirements set forth in Section 14 of this Amendment One, provided that, with
respect to such Service, none of the conditions set forth in Section 13 of this
Amendment One are applicable.
13. TWComm shall provide Services that meet all of the network requirements set
forth in Appendix F of the Agreement if any one of the following conditions
apply:
13.a the Secondary Location is within a building that is designated in the
applicable MSA Schedule as an "Initial Type I location" pursuant to
Section 15.B.i of the Agreement;
13.b the Secondary Location is within a building to which AT&T purchases
from TWComm at least five DS-1 Equivalents for a period of at least six
consecutive months; or
13.c AT&T designates that such Service is customer-critical (i.e., AT&T in
its sole discretion determines that the Service provided by TWComm to AT&T
for such AT&T customer is critical to that customer).
14. The network requirements that shall be applicable to Services provided by
TWComm to AT&T in lieu of the requirements set forth in Sections F.4.A and F.4.E
of Appendix F are as follows:
14.a All equipment and facilities between the TWComm Node serving such
Served Premises and the TWComm Node nearest to the Served Premises that is
equipped with SONET platform technology shall consist exclusively of fiber
optic technology; and
14.b TWComm shall provide fully redundant fiber optic strands between the
TWComm Node serving the Served Premises and the nearest SONET-equipped
TWComm Node, although the redundant fiber optic strands need not be
geographically diverse from the primary transmission path (e.g., all four
fiber optic strands may be located within the same cable sheath).
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AMENDMENT ONE
Page 5 of 13
In witness whereof, the parties have executed this Amendment One through their
authorized representatives.
TIME WARNER COMMUNICATIONS AT&T COMMUNICATIONS, INC.
By: /s/ LARISSA HERDA By: /s/ SALLY MUSCARELLA
-------------------------------- -------------------------------------
Larissa Herda Sally Muscarella
- ----------------------------------- -------------------------------------
Name Name
Local & Access Business Development
Senior Vice President - Sales Vice President
- ----------------------------------- -------------------------------------
July 31, 1997 July 5, 1997
- ----------------------------------- -------------------------------------
Date Date
*Indicates that such portions of the contract has been omitted pursuant to a
request for confidential treatment and that such portions have been filed with
the Commission separately.
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<PAGE>
EXHIBIT 21
SUBSIDIARIES OF TIME WARNER TELECOM LLC
Set forth below are the names of certain subsidiaries, at least 50% owned,
directly or indirectly, of Time Warner Telecom LLC as of April 1999. Certain
subsidiaries which when considered in the aggregate would not constitute a
significant subsidiary are omitted from the list below.
<TABLE>
<CAPTION>
State or Other
Jurisdiction of
Incorporation or
Organization of
Subsidiary Formation D/B/As
- ---------- ---------------- ------
<S> <C> <C>
Time Warner Telecom Inc. Delaware
Time Warner Telecom Holdings Inc. Delaware
Time Warner Telecom of California, L.P. Delaware Time Warner Telecom (CA)
MetroComm AxS, L.P. Delaware
Time Warner Telecom of Florida, L.P. Delaware Time Warner Telecom
Time Warner Telecom-NY, L.P. Delaware Time Warner Telecom (NY)
Time Warner AxS of New Jersey, L.P. Delaware
Time Warner Telecom Holdings II LLC Delaware
Time Warner Telecom General Partnership Delaware
Time Warner Telecom of Texas, L.P. Delaware
Time Warner Telecom of Hawaii, L.P. Delaware Oceanic Communications (HI)
Time Warner Telecom (HI)
Time Warner Telecom of Indiana, L.P. Delaware Time Warner Telecom (IN)
</TABLE>
<PAGE>
<PAGE>
2
<TABLE>
<CAPTION>
State or Other
Jurisdiction of
Incorporation or
Organization of
Subsidiary Formation D/B/As
- ---------- ---------------- ------
<S> <C> <C>
Time Warner Telecom of Wisconsin, L.P. Delaware Time Warner Communications of
Milwaukee, Limited Partnership
(WI)
Time Warner Telecom (WI)
Time Warner Telecom of North Carolina, L.P. Delaware Time Warner Telecom (NC)
Time Warner Telecom of Ohio, L.P. Delaware
Time Warner Telecom of the Mid-South, L.P. Delaware Time Warner Telecom (MS)
Time Warner Telecom (TN)
Internet Connect, Inc. Wisconsin
</TABLE>
<PAGE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions 'Experts' and
'Selected Combined Financial and Other Operating Data' and to the use of our
reports dated February 5, 1999 (except Notes 1, 2 and 3 as to which the date is
, 1999), in Amendment No. 6 to the Registration Statement (Form
S-1) and related Prospectus of Time Warner Telecom Inc. for the registration of
shares of its Class A Common Stock.
Denver, Colorado
March , 1999
The foregoing consent is in the form that will be signed upon the effective
date of the Company's registration of Class A Common Stock in this registration
statement and the concurrent change in the Company's operating and legal
structure from a limited liability company to a corporation.
/s/ ERNST & YOUNG LLP
Denver, Colorado
May 5, 1999
<PAGE>
